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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-23378
THERMADYNE HOLDINGS CORPORATION
(Exact name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 74-2482571
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
</TABLE>
COMMISSION FILE NUMBER 333-57457
THERMADYNE MFG. LLC
(Exact name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 74-2878452
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
</TABLE>
COMMISSION FILE NUMBER 333-57457
THERMADYNE CAPITAL CORP.
(Exact name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 74-2878453
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
</TABLE>
<TABLE>
<S> <C>
101 S. HANLEY, SUITE 300 63105
ST. LOUIS, MISSOURI (Zip Code)
(Address of Principal Executive Offices)
</TABLE>
Registrant's telephone number, including area code: (314) 721-5573
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF CLASS
Common Stock, par value $0.01 per share
Indicate by checkmark whether the registrants: (1) have 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
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by checkmark 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 registrants' knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant: approximately $5.2 million based on the closing sales price
of the Common Stock, on March 20, 2000.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 3,590,326 shares of
Common Stock, outstanding at March 20, 2000.
Thermadyne Mfg. LLC and Thermadyne Capital Corp. meet the conditions set
forth in General Instruction I of Form 10-K and are therefore filing this form
with the reduced disclosure format.
DOCUMENTS INCORPORATED BY REFERENCE:
NONE
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
The statements in this Annual Report on Form 10-K that relate to future
plans, events or performance are forward-looking statements. Actual results
could differ materially due to a variety of factors and the other risks
described in this Annual Report and the other documents the Company files from
time to time with the Securities and Exchange Commission. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof. The Company undertakes no obligation to publicly
release the result of any revisions to these forward-looking statements that may
be made to reflect events or circumstances after the date hereof or that reflect
the occurrence of unanticipated events.
PART I
ITEM 1. BUSINESS.
GENERAL
Thermadyne Holdings Corporation, a Delaware corporation ("Thermadyne" or
the "Company"), is a leading global manufacturer of cutting and welding products
and accessories. The Company manufactures a broad range of gas (oxy-fuel) and
electric arc cutting and welding products that are ultimately sold to end-user
customers principally engaged in the aerospace, automotive, construction, metal
fabrication, mining, mill and foundry, petroleum and shipbuilding industries.
Thermadyne Mfg. LLC ("Thermadyne LLC") is a wholly owned and the principal
operating subsidiary of the Company and Thermadyne Capital Corp. ("Thermadyne
Capital") is a wholly owned subsidiary of Thermadyne LLC.
BACKGROUND
In 1999 the Company made the following two acquisitions. On March 11, the
Company acquired all the issued and outstanding capital stock of Soltec S.A.
("Soltec"), a manufacturer of manual electrodes and tubular wires for hardfacing
and special applications, located in Santiago, Chile. On April 14, the Company
acquired all the issued and outstanding capital stock of Tecmo Srl ("Tecmo"), a
manufacturer of torches and plasma and laser consumables, located in Rastignano,
Italy. The aggregate consideration paid for these two acquisitions was
approximately $6 million and was financed through existing bank facilities.
These transactions were accounted for as purchases.
On May 22, 1998, the Company consummated (i) the merger (the "Merger") of
Mercury Acquisition Corporation ("Mercury"), a corporation organized by DLJ
Merchant Banking Partners II, L.P. ("DLJMB") and affiliated funds and entities
(the "DLJMB Funds"), with and into the Company and (ii) the associated
recapitalization of the Company (collectively, the "Recapitalization"). The
DLJMB Funds acquired approximately 80.6% of the outstanding common stock, par
value $0.01 per share ("Common Stock") of the Company pursuant to such
transactions.
PRINCIPAL PRODUCTS
The Company manufactures a broad range of both gas (oxy-fuel) and arc
cutting and welding equipment (including a line of advanced plasma arc cutting
systems and oxy-fuel apparatus), accessories and consumables, including repair
parts used in the cutting and welding industry. Gas cutting and welding torches
burn a mixture of oxygen and fuel gas, typically acetylene. Arc cutting and
welding systems are powered by electricity. The major arc cutting and welding
systems are plasma, stick, metal inert gas ("MIG") and tungsten inert gas
("TIG"). Arc technology is more sophisticated than gas technology and can be
used on more types of metals. In addition, arc equipment produces less
distortion in the surrounding metal and it cuts and welds faster, reducing labor
costs. However, gas technology is more portable and generally less expensive
than arc technology and therefore remains important in many industries.
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The Company conducts its operations through the following subsidiaries:
Thermal Dynamics -- Plasma Arc Cutting Products. Thermal Dynamics
Corporation ("Thermal Dynamics"), located in West Lebanon, New Hampshire and
founded in 1957, developed many of the early plasma cutting systems and
maintains its position as a leading manufacturer of plasma cutting systems and
replacement parts. Thermal Dynamics' product line ranges from a portable 12-amp
unit to large 1,000-amp units. Thermal Dynamics' end users are engaged primarily
in fabrication and repair of sheet metal and plate products found in fabricated
structural steel and nonferrous metals, automotive products, appliances, sheet
metal, heating, ventilation and air conditioning ("HVAC"), general fabrication,
shipbuilding and general maintenance.
Advantages of the plasma cutting process over other methods include faster
cutting speeds, the ability to cut ferrous and nonferrous alloys and minimum
heat distortion on the material being cut. Plasma cutting also permits metal
cutting using only compressed air and electricity.
Tweco -- Electric Arc Products and Arc Gouging Systems. Tweco Products,
Inc. ("Tweco"), located in Wichita, Kansas and founded in 1936, manufactures a
line of arc welding replacement parts and accessories, including electrode
holders, ground clamps, cable connectors, terminal connectors and lugs and cable
splicers, and a variety of automatic and semiautomatic welding guns and cable
assemblies utilized in the arc welding process. Tweco also manufactures manual
stick electrode holders, ground clamps and accessories. Manual stick welding is
one of the oldest forms of welding and is used primarily by smaller welding
shops which perform general repair, maintenance and fabrication work. Tweco's
end users are primarily engaged in the manufacture or repair and maintenance of
transportation equipment, including automobiles, trucks, aircraft, trains and
ships; the manufacture of a broad range of machinery; and the production of
fabricated metal products, including structural metal, hand tools and general
hardware.
Tweco is a leading domestic manufacturer of MIG welding guns. The MIG
process is an arc welding process utilized in the fabrication of steel,
aluminum, stainless steel and other metal products and structures. In the MIG
process, a small diameter consumable electrode wire is continuously fed into the
arc. The welding arc area is protected from the atmosphere by a "shielding" gas.
The welding guns and cable assemblies manufactured by Tweco carry the continuous
wire electrode, welding current and shielding gas to the welding arc. Tweco
manufactures a related line of robotic welding accessory products. This new
accessory line includes, but is not limited to, a robotic torch with patented
consumables, a robotic deflection mount, a robotic cleaning station, robotic
arms and an anti-splatter misting system.
Through its Arcair product line, Tweco manufactures equipment and related
consumable materials for "gouging," a technique that liquefies metal in a narrow
groove and then removes it using compressed air. Gouging products are often used
in joint preparation prior to a welding process. Numerous other applications
exist for these gouging systems, such as removal of defective welds, removal of
trim in foundries and repair of track, switches and freight cars in the railroad
industry. Arcair also manufactures a line of underwater welding and gouging
equipment.
In addition to gouging products, Arcair produces a patented exothermic
cutting system, SLICE(R). This system generates temperatures in excess of 7000
degrees F and can quickly cut through steel, concrete and other materials.
SLICE(R) has many applications, including opening clogged steel furnaces and
providing rapid entry in fire and rescue operations. Arcair has developed an
underwater version of the SLICE(R) cutting system for use in the marine repair
and salvage industry.
Arcair also manufactures TIG torches and accessories. The TIG process can
be used to fuse metals of almost all alloys and in thicknesses down to foil
size. TIG welding is used for pressure vessels, such as tanks, valves and pipes
and is relied on heavily in welding nuclear components. Fabrications involving
aluminum, magnesium and other specialty metals for use in aircraft, ships and
weapon systems also utilize the TIG process.
Arcair provides a complete line of chemicals used in the welding industry.
Chemicals are used for weld cleaning and as agents to reduce splatter adherence
on the metal being welded. Chemicals are also used to reduce splatter adherence
in welding nozzles in MIG applications.
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Victor -- Oxy-Fuel Gas Products. Victor Equipment Company ("Victor") has
plants in Abilene and Denton, Texas and Gallman, Mississippi, and was founded in
1913. Victor is a leading domestic manufacturer of gas-operated cutting and
welding torches and gas and flow pressure regulation equipment. Victor's torches
are used to cut ferrous metals and to weld, heat, solder and braze a variety of
metals, and its regulation equipment is used to control pressure and flow of
most industrial and specialty gases. In addition, Victor manufactures a variety
of replacement parts, including welding nozzles and cutting tips of various
types and sizes and a line of specialty gas regulators purchased by end users in
the process control, electronics and other industries. Victor also manufactures
a wide range of medical regulation equipment serving the oxygen therapy market,
including home health care and hospitals.
The torches produced by Victor are commonly referred to as oxy-fuel
torches. These torches combine a mixture of oxygen and a fuel gas, typically
acetylene, to produce a high-temperature flame. These torches are designed for
maximum durability, repairability and performance utilizing patented built-in
reverse flow check valves and flash arresters in several models. Victor also
manufactures lighter-duty handheld heating, soldering and brazing torches.
Pressure regulators, which are basically diaphragm valves, serve a broad range
of industrial and specialty gas process control operations.
The principal uses of the Victor torch are cutting steel in metal
fabricating applications such as shipbuilding, construction of oil refineries,
power plants and manufacturing facilities, and welding, heating, brazing and
cutting in connection with maintenance of machinery, equipment and facilities.
Victor sells its lighter-duty products to end-user customers principally
engaged in the plumbing, refrigeration and heating, ventilation and air
conditioning industries. The relative low cost, mobility and ease of use of
Victor torches make them suitable for a wide variety of uses.
Cigweld -- Electric Arc Products, Oxy-Fuel Products, Filler Metals, Gas
Control Products and Safety Products. The business now known as Cigweld, located
in Melbourne, Australia, and founded in 1922, is the leading Australian
manufacturer of gas equipment and welding products.
Cigweld manufactures arc welding equipment products for both the automatic
arc and manual arc welding markets. The Cigweld range of automatic welding
equipment includes packages specifically designed for particular market
segments. End users of this product range include the rural market and the
vehicle repair, metal fabrication, shipbuilding, general maintenance and heavy
industries. Manual arc equipment products range from small welders designed for
the home handyman to units designed for heavy industry.
Cigweld manufactures a range of consumable products (filler metals) for
manual and automatic arc and gas welding. The range of manual arc electrodes
includes over 50 individual electrodes for different applications. Cigweld
markets its manual arc electrodes under such brand names as Satincraft,
Weldcraft, Ferrocraft(R), Alloycraft(R), Satincrome, Cobalarc(R), Castcraft and
Weldall(R).
For automatic and semiautomatic welding applications, Cigweld manufactures
a significant range of solid and flux-cored wires, principally under the
Autocraft(R), Verti-Cor, Satin-Cor, Metal-Cor and Cobalarc(R) brand names. For
gas and TIG welding, Cigweld manufactures and supplies approximately 40
individual types of wires and solders for use in different applications.
Cigweld's filler metals are manufactured to standards appropriate for their
intended use, with the majority of products approved by agencies such as Lloyd's
Register of Shipping, American Bureau of Shipping, De Norske Veritas and U.S.
Naval Ships.
Cigweld manufactures a comprehensive range of equipment for gas welding and
cutting and ancillary products such as gas manifolds, gas regulators and
flowmeters. Gas welding and cutting equipment is sold in kit form or as
individual products. Kits are manufactured for various customer groups and their
components include combinations of oxygen and acetylene regulators, blowpipes,
cutting attachments, mixers, welding and heating tips, cutting nozzles, roller
guides, twin welding hoses, goggles, flint lighters and tip cleaners,
combination spanners and cylinder keys. In addition to its kits, Cigweld
manufactures and/or distributes a complete range of gas equipment, including a
range of blowpipes and attachments, regulators (for oxygen, acetylene, argon and
carbon dioxide), flashback arrestors, cutting nozzles, welding and heating tips,
hoses and fittings, gas manifolds and accessories.
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Cigweld also manufactures a range of gas control equipment including
specialty regulators (for use with different gases, including oxygen, acetylene,
liquefied petroleum gas, argon, carbon dioxide, nitrogen, air, helium, hydrogen,
carbon monoxide, ethylene, ethane and nitrous oxide), manifold systems, cylinder
valves and spares and natural gas regulators. Cigweld's gas control items are
primarily sold to gas companies.
Cigweld manufactures and/or distributes a range of safety products for use
in welding and complementary industries. The product range includes welding
helmets and accessories, respirators and masks, breathing apparatus, earmuffs
and earplugs, safety spectacles, safety goggles and gas welding goggles, safety
helmets, faceshields, flashields (see-through welding curtains and screens) and
welding apparel.
Medical products are also manufactured by Cigweld in its manufacturing
plant in Melbourne, Australia. These products are sold through distributors in
the Australian market and exported through third-party distributors and related
entities. The product range includes regulators, flowmeters, suction units,
oxygen therapy, resuscitation and outlet valves for medical gas systems.
C&G Systems -- Cutting Tables. C&G Systems Inc. ("C&G"), located in Itasca,
Illinois, and founded in 1968, manufactures a line of mechanized cutting tables
for fabricating sheet metal and metal plate. The machines utilize either
oxy-fuel or plasma cutting torches produced by other divisions of the Company.
C&G has a wide range of cutting tables from the relatively inexpensive
cantilever type used in general fabrication and job shops to the large precision
gantry type found in steel service centers and specialty cutting applications.
These metal cutting tables can be used in virtually any metal fabrication plant.
Stoody -- Hardfacing Products. Stoody Company ("Stoody"), located in
Bowling Green, Kentucky and with operations founded in 1921, is a recognized
world leader in the development and manufacture of hardfacing welding wires,
electrodes and rods. While Stoody's primary product line is iron-based welding
wires, Stoody also participates in the markets for cobalt-based and nickel-based
electrodes, rods and wires, which are essentially protective overlays, deposited
on softer base materials by various welding processes. This procedure, referred
to as "hardfacing" or "surface treatment," adds a more resistant surface,
thereby increasing the component's useful life. Lower initial costs, the ability
to treat large parts, and ease and speed of repairs in the field are some of the
advantages of hardfacing over solid wear resistant components. A variety of
products have been developed for hardfacing applications in industries utilizing
earth-moving equipment, agricultural tools, crushing components, and steel mill
rolls, and in virtually all applications where metal is exposed to external wear
factors.
Thermal Arc -- Arc Welders, Plasma Welders and Wire Feeders. In 1997, the
inverter and plasma arc welder business of Thermal Dynamics and the welding
division of Prestolite Power Corporation ("Arcsys"), were combined to form
Thermal Arc, Inc. ("Thermal Arc"). The combined operation is located in Troy,
Ohio and produces a full line of inverter and transformer-based electric arc
welders, plasma welders, engine-driven welders and wire feeders. Thermal Arc
products compete in the marketplace for construction, industrial and automated
applications, and serve a large and diverse user base.
The inverter arc welding power machines use high-frequency power
transistors to provide welding machines that are extremely portable and
power-efficient when compared to conventional welding power sources. Plasma
welding dramatically improves productivity for the end user. Additionally,
conventional transformer-based machines provide a cost-effective alternative for
markets where low cost and simplicity of maintenance are a high priority.
GenSet -- Engine-Driven Welders and Generators. GenSet S.p.A. ("GenSet"),
which was acquired by the Company in January 1997 and is located in Pavia,
Italy, commenced operations in 1976 with the production of small generating
sets. In 1976, it developed its first engine-driven welder and, in 1977,
obtained its first patent for the synchronous alternator designed for welding
purposes. It now offers a full range of technologically advanced generators and
engine-driven welders that are sold throughout the world. These products are
used both where main power is not available and for stand-by power where
continuous power supply is a key requirement.
Victor Gas Systems -- Cryogenic Pumps, Ambient and Electric Vaporizers and
Automatic Cylinder Filling Systems. The operations of Victor Gas Systems, Inc.
("Victor Gas"), formerly known as Woodland
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Cryogenics Company, commenced in 1986, and were acquired by the Company in
November 1997. Victor Gas is a leading manufacturer, distributor and installer
of cryogenic and high-pressure gas fill plants, vaporizers and pumps, and its
products are used to control, mix and package both cryogenic and high-pressure
gases into containment vessels such as gas cylinders.
The principal uses of Victor Gas products are for the filling of cryogenic
and high-pressure gases for applications in industrial, medical and specialty
gas markets served by gas distributors and producers. Victor Gas has developed
computerized filling equipment to maximize productivity while also offering
conventional or manual filling equipment.
Victor Brazil -- Oxy-Fuel Products and Cutting Tables. Thermadyne Victor
Ltda. ("Victor Brazil"), with offices and manufacturing facilities located in
Rio de Janeiro, Brazil, was acquired by the Company in 1998. Victor Brazil is
the leading manufacturer of oxy-fuel products for industrial and medical use and
of mechanized cutting tables for shaping and fabricating sheet metal and metal
plate in South America.
Victor Brazil primarily serves the Latin American market. The oxy-fuel
product line is very competitive in the region and offers the customer a broad
range of gas cutting and welding equipment. Metal fabricators of all sizes,
including applications such as shipbuilding, steel construction, machinery
manufacturing, pressure vessel producers, and steel mills, use the industrial
oxy-fuel products. Hospitals, home care, and doctors' offices use the medical
oxy-fuel products.
The cutting table line of products uses either oxy-fuel or plasma cutting
systems produced by Victor Brazil or other divisions of the Company. The line of
products is oriented to the needs of the Latin American market. Inexpensive
cantilever tables and higher-precision, computer numeric-controlled tables are
produced by Victor Brazil. These products are used in all types of metal
fabricating plants.
INTERNATIONAL BUSINESS
The Company had aggregate international sales from continuing operations of
approximately $198.9 million, $199.4 million and $220.2 million for the fiscal
years ended December 31, 1999, 1998 and 1997, respectively, or approximately
38%, 37% and 42%, respectively, of net sales in each such period. The Company's
international sales are influenced by fluctuations in exchange rates of foreign
currencies, foreign economic conditions and other risks associated with foreign
trade. Additionally, as a result of the recent downturn in the Asian and certain
South American economies, there may be a decrease in infrastructure development
in these regions or an overall worldwide contraction of industrial development.
The impact of decreased development could have a material adverse effect on the
Company's business, financial condition or results of operations. The Company's
international sales consist of (a) export sales of Thermadyne products
manufactured at domestic manufacturing facilities and, to a limited extent,
products manufactured by third parties, sold through overseas field
representatives of Thermadyne International Corporation ("Thermadyne
International"), a subsidiary of Thermadyne, and (b) sales of Thermadyne
products manufactured at international manufacturing facilities, sold by
Thermadyne's foreign subsidiaries. For further information concerning the
international operations of the Company, see the notes to the consolidated
financial statements of the Company included elsewhere herein.
Thermadyne International was formed in 1980 to coordinate Thermadyne's
efforts to increase international sales and sells cutting and welding products
through independent distributors in more than 80 countries. In support of this
effort, the Company operates distribution centers in Canada, Australia, Italy,
Mexico, Japan, Singapore, Brazil, the Philippines, Malaysia, Indonesia and the
United Kingdom and employs salespeople located in 23 additional countries.
COMPETITION
The Company competes principally with a number of domestic manufacturers of
cutting and welding products, the majority of which compete only in limited
segments of the overall market. Management believes that competition is based
primarily on product quality and brand name, breadth and depth of product lines,
effectiveness of distribution channels, a knowledgeable sales force capable of
solving customer application
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problems, price and quality of customer service. To date, the Company has
experienced little direct foreign competition in its U.S. markets due to the
relatively limited size of such markets, the inability of foreign manufacturers
to establish effective distribution channels and the relatively
non-labor-intensive nature of the cutting and welding product manufacturing
process. The Company also competes in certain international markets in which it
faces substantial competition from foreign manufacturers of cutting and welding
products.
DISTRIBUTION
The Company's cutting and welding products are distributed through a
domestic network of approximately 1,100 independent cutting and welding products
distributors with over 2,800 locations that carry one or more of its product
lines. Relationships with the distributors are maintained by a separate sales
force for each of the Company's principal product lines. In addition, a national
accounts group exists to support the sale of all of the Company's product lines
to its major distributors. The Company's products are distributed
internationally through a direct sales force and independent distributors.
RAW MATERIALS
The Company has not experienced any difficulties in obtaining raw materials
for its operations because its principal raw materials, copper, brass, steel and
plastic, are widely available and need not be specially manufactured for use by
the Company. Certain of the raw materials used in hardfacing products, such as
cobalt and chromium, are available primarily from sources outside the United
States, some of which are located in countries that may be subject to economic
and political conditions which could affect pricing and disrupt supply. Although
the Company has historically been able to obtain adequate supplies of these
materials at acceptable prices and has been able to recover the costs of any
increases in the price of raw materials in the form of higher unit sales prices,
restrictions in supply or significant fluctuations in the prices of cobalt,
chromium and other raw materials could adversely affect the Company's business.
The Company also purchases certain products which it either uses in its
manufacturing processes or resells. These products include, but are not limited
to, electronic components, circuit boards, semiconductors, motors, engines,
pressure gauges, springs, switches, lenses and chemicals. The Company believes
its sources of such products are adequate to meet foreseeable demand.
RESEARCH AND DEVELOPMENT
The Company has research and development groups for each of its product
lines that primarily conduct process and product development to meet market
needs. As of December 31, 1999, the Company employed approximately 125 persons
in its research and development groups, most of whom are engineers.
EMPLOYEES
As of December 31, 1999, the Company employed 3,196 people, of whom
approximately 587 were engaged in sales and marketing activities, 173 were
engaged in administrative activities, 2,342 were engaged in manufacturing
activities and 94 were engaged in engineering activities. Labor unions represent
none of the Company's workforce in the United States and virtually all of the
manufacturing employees in its foreign operations. The Company believes that its
employee relations are good. The Company has not experienced any significant
work stoppages.
PATENTS, LICENSES AND TRADEMARKS
The Company's products are sold under a variety of trademarks and trade
names. The Company owns trademark registrations or has filed trademark
applications for all trademarks and has registered all trade names that the
Company believes are material to the operation of its businesses. The Company
also owns various patents and from time to time acquires licenses from owners of
patents to apply such patents to its operations. The Company does not believe
any single patent or license is material to the operation of its businesses
taken as a whole.
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ITEM 2. PROPERTIES.
The Company operates 17 manufacturing facilities in the United States,
Italy, the Philippines, Brazil, Indonesia, Malaysia and Australia. All domestic
manufacturing facilities, leases and leasehold interests are encumbered by liens
securing the Company's obligations under its senior credit facility. The Company
considers its plants and equipment to be modern and well-maintained and believes
its plants have sufficient capacity to meet future anticipated expansion needs.
The Company leases and maintains a 43,600-square-foot facility located in
St. Louis, Missouri, which houses the executive offices of the Company and its
operating subsidiaries, as well as all centralized services.
The following table describes the location and general character of the
Company's principal properties:
<TABLE>
<CAPTION>
SUBSIDIARY/ BUILDING SPACE/ PROPERTY
LOCATION OF FACILITY NUMBER OF BUILDINGS SIZE
- -------------------- ------------------- --------
<S> <C> <C>
Thermal Dynamics/West Lebanon, New
Hampshire............................ 187,000 sq. ft 8.0 acres
5 buildings (office, manufacturing,
sales training, future expansion)
Tweco/Wichita, Kansas.................. 220,816 sq. ft 21.7 acres
3 buildings (office, manufacturing,
storage space)
Victor/Denton, Texas................... 222,403 sq. ft 30.0 acres
4 buildings (office, manufacturing,
storage, sales training center)
Victor/Abilene, Texas.................. 123,740 sq. ft 32.0 acres
1 building (office, manufacturing)
Victor Brazil/Rio de Janeiro, Brazil... 200,000 sq. ft 6.0 acres
6 buildings (office, manufacturing,
warehouse)
Thermadyne Canada/Oakville, Ontario,
Canada............................... 57,000 sq. ft 8.3 acres
1 building (office, warehouse)
Modern Engineering Company/Gallman,
Mississippi.......................... 60,000 sq. ft 9.0 acres
1 building (office, manufacturing)
Thermadyne Australia/Melbourne,
Australia............................ 588,000 sq. ft 32.4 acres
8 buildings (office, manufacturing,
storage, research)
Comweld Philippines/Cebu,
Philippines.......................... 41,380 sq. ft 1.2 acres
1 building (office, manufacturing)
Comweld Indonesia/Jakarta, Indonesia... 52,500 sq. ft 2.1 acres
1 building (office, manufacturing)
Comweld Malaysia/Kuala Lumpur,
Malaysia............................. 56,000 sq. ft, 2.2 acres
1 building (office, manufacturing,
warehouse)
C&G/Itasca, Illinois................... 38,000 sq. ft 2.0 acres
1 building (office, manufacturing,
future expansion)
Stoody/Bowling Green, Kentucky......... 185,000 sq. ft 37.0 acres
1 building (office, manufacturing)
</TABLE>
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<TABLE>
<CAPTION>
SUBSIDIARY/ BUILDING SPACE/ PROPERTY
LOCATION OF FACILITY NUMBER OF BUILDINGS SIZE
- -------------------- ------------------- --------
<S> <C> <C>
GenSet/Pavia, Italy.................... 193,000 sq. ft 7.9 acres
2 buildings (office, manufacturing,
warehouse)
OCIM/Milan, Italy...................... 10,000 sq. ft 0.5 acre
1 building (office, manufacturing)
Thermal Arc/Troy, Ohio................. 120,000 sq. ft 6.5 acres
1 building (office, manufacturing,
warehouse, sales training)
Victor Gas/Conshohocken,
Pennsylvania......................... 18,000 sq. ft 7.0 acres
1 building (office, manufacturing)
</TABLE>
All of the above facilities are leased, except for the facilities located
in Melbourne, Cebu, Pavia, Rio de Janeiro and Gallman, which are owned. The
facility in Gallman is unoccupied and currently listed for sale. The Company
also has additional assembly and warehouse facilities in Canada, the United
Kingdom, Italy, Japan, Singapore, Mexico, the Philippines, Indonesia, Brazil and
Australia.
In addition, the Company has subleased 295,000 square feet of its
325,000-square-foot facility in City of Industry, California, which formerly was
the manufacturing facility for certain products now manufactured at the
Company's Bowling Green, Kentucky facility.
ITEM 3. LEGAL PROCEEDINGS.
The Company is a party to ordinary litigation incidental to its businesses,
including a number of product liability cases seeking substantial damages. The
Company maintains insurance against any product liability claims. Coverage for
most years has a $500,000 self insured retention with $500,000 of primary
insurance per claim. In addition, the Company maintains umbrella policies
providing an aggregate of $50,000,000 in coverage for product liability claims.
Although it is difficult to predict the outcome of litigation with any
certainty, the Company believes that the liabilities which might reasonably
result from such lawsuits, to the extent not covered by insurance, will not have
a material adverse effect on the Company's financial condition or results of
operations.
The Company's operations are subject to federal, state, local and foreign
laws and regulations relating to the storage, handling, generation, treatment,
emission, release, discharge and disposal of certain substances and wastes. The
Company is currently not aware of any citations or claims filed against it by
any local, state, federal and foreign governmental agencies, which, if
successful, would have a material adverse effect on the Company's financial
condition or results of operations.
The Company may be required to incur costs relating to remediation of
properties, including properties at which the Company disposes waste, and
environmental conditions could lead to claims for personal injury, property
damage or damages to natural resources. The Company is aware of environmental
conditions at certain properties which it now owns or leases or previously owned
or leased which are undergoing remediation. The Company does not believe that
the cost of such remediation will have a material adverse effect on the
Company's business, financial condition or results of operations.
Certain environmental laws, including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act and the
equivalent state laws, provide for strict, joint and several liability for
investigation and remediation of spills or other releases of hazardous
substances. Such laws may apply to conditions at properties presently or
formerly owned or operated by the Company or by its predecessors or previously
owned business entities, as well as to conditions at properties at which wastes
or other contamination attributable to the Company or its predecessors or
previously owned business entities come to be located. The Company has in the
past and may in the future be named a potentially responsible party at off-site
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<PAGE> 10
disposal sites to which it has sent waste. The Company does not believe that the
ultimate cost relating to such sites will have a material adverse effect on the
Company's financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the shareholders during the fourth
quarter of 1999.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Common Stock began trading on The NASDAQ Stock Market
("NASDAQ") on May 17, 1994. On October 15, 1998 the NASDAQ delisted the Common
Stock. Following its delisting from NASDAQ, the Common Stock traded in the over
the counter market. The following table shows, for the periods indicated, the
high and low sale prices of a share of the Common Stock for the fiscal years
1998 and 1999 as reported by published financial sources.
<TABLE>
<CAPTION>
CLOSING SALE
PRICE($)
-------------
HIGH LOW
---- ---
<S> <C> <C>
1998
First Quarter............................................. 34 1/4 28
Second Quarter............................................ 47 37 3/8
Third Quarter............................................. 40 5/8 24
Fourth Quarter............................................ 29 1/16 15
1999
First Quarter............................................. 20 13
Second Quarter............................................ 20 16
Third Quarter............................................. 22 7/8 18 3/4
Fourth Quarter............................................ 23 1/2 19 1/2
</TABLE>
On March 20, 2000 the last reported bid price for the Common Stock as
reported by published financial sources was $19.50 per share. As of March 10,
2000 there were approximately 84 holders of record of Common Stock.
The Company has historically not paid any cash dividends on Common Stock
and it does not have any present intention to commence payment of any cash
dividends. The Company intends to retain earnings to provide funds for the
operation and expansion of the Company's business and to repay outstanding
indebtedness. The Company's debt agreements contain certain covenants
restricting the payment of dividends on, or repurchases of, Common Stock. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."
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<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data for and as of each of the years in the
five-year period ended December 31, 1999 set forth below has been derived from
the audited consolidated financial statements of the Company. The selected
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
consolidated financial statements including the notes thereto in each case
included elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
-----------------------------------------------
1995(1) 1996(1) 1997 1998 1999
------- ------- ------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Operating Results Data:
Net sales.................................. $ 316.8 $ 439.7 $ 520.4 $ 532.8 $ 521.1
Cost of goods sold......................... 176.0 259.8 320.0 340.2 342.2
Selling, general and administrative
expenses................................ 72.4 95.9 110.7 102.6 99.2
Amortization of goodwill(2)................ 92.9 83.0 1.6 1.5 1.6
Amortization of intangibles(3)............. 48.4 12.4 6.8 2.4 3.0
Net periodic postretirement benefits....... 2.1 2.7 2.8 2.6 3.2
Special charges............................ 2.3 -- -- 50.5 21.9
------- ------- ------- ------- -------
Operating income (loss).................... (77.3) (14.1) 78.5 33.0 50.0
Interest expense........................... 41.3 45.7 45.3 62.2 72.4
Other expense, net......................... 4.8 3.7 4.6 5.6 3.1
Income (loss) from continuing operations
available to common shares.............. (131.8) (62.9) 15.1 (46.2) (34.3)
Income (loss) per share from continuing
operations:
Basic................................... (12.97) (5.83) 1.36 (7.95) (11.68)
Diluted................................. (12.97) (5.83) 1.33 (7.95) (11.68)
Consolidated Balance Sheet Data:
Working capital(4)......................... $ 52.3 $ 67.6 $ 88.5 $ 121.2 $ 121.3
Total assets............................... 416.4 353.4 354.5 420.2 400.4
Total debt................................. 456.5 421.3 358.1 710.7 729.4
Total shareholders' equity (deficit)....... (132.2) (185.3) (162.8) (496.3) (534.1)
Consolidated Cash Flow Data:
Net cash provided by (used in) operating
activities.............................. $ 31.2 $ 21.5 $ 15.0 $ (50.3) $ 53.9
Net cash provided by (used in) investing
activities.............................. (15.7) 18.7 36.8 (39.5) (17.1)
Net cash provided by (used in) financing
activities.............................. (20.9) (40.6) (51.7) 89.7 (24.8)
Other Data:
Adjusted EBITDA(5)......................... $ 74.6 $ 95.7 $ 102.1 $ 105.1 $ 98.6
Depreciation............................... 8.5 11.7 12.5 15.1 18.9
Capital expenditures....................... 7.2 11.4 16.3 17.5 10.2
</TABLE>
- ---------------
(1) In 1996 the Company announced plans to sell, and in 1997 consummated the
sale of, its wear resistance business and in late 1995 announced its plans
to sell, and in 1996 consummated the sale of, its gas containment and floor
maintenance businesses. These businesses are accounted for as discontinued
operations in the Company's consolidated financial statements.
(2) In conjunction with the Restructuring, the Company's assets and liabilities
were revalued at the effective date thereof. The assets and liabilities were
stated at their reorganization value. The portion of the reorganization
value not attributable to specific assets was amortized over a three-year
period.
(3) Includes $33.0 million in 1995 related to the write-down of intangible
assets in accordance with Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS) No. 121.
(4) Excludes net assets of discontinued operations.
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<PAGE> 12
(5) "Adjusted EBITDA" is defined as operating income plus depreciation,
amortization of goodwill, amortization of intangibles, net periodic
postretirement benefits expense and special charges and is a key financial
measure but should not be construed as an alternative to operating income or
cash flows from operating activities (as determined in accordance with
generally accepted accounting principles). Adjusted EBITDA is also one of
the financial measures by which the Company's compliance with its covenants
is calculated under its debt agreements. The Company believes that Adjusted
EBITDA is a useful supplement to net income (loss) and other consolidated
statement of operations data in understanding cash flows generated from
operations that are available for taxes, debt service and capital
expenditures. However, the Company's method of computation may or may not be
comparable to other similarly titled measures of other companies. In
addition, Adjusted EBITDA is not necessarily indicative of amounts that may
be available for discretionary uses and does not reflect any legal or
contractual restrictions on the Company's use of funds.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
OVERVIEW
Thermadyne, through its subsidiaries, is engaged in the design, manufacture
and distribution of cutting and welding products and accessories. Since 1994,
the Company has embarked on a strategy designed to focus its business
exclusively on the cutting and welding industry and enhance the Company's market
position within that industry.
The following is a discussion and analysis of the consolidated financial
statements of the Company. The Company conducts its operations through its
wholly owned subsidiary Thermadyne LLC. The accompanying consolidated financial
statements for the Company and Thermadyne LLC are substantially the same except
for certain debt and equity securities issued by the Company, and therefore, a
separate discussion of Thermadyne LLC is not presented.
Included in the following discussions are comparisons of Adjusted EBITDA
which is defined as operating income plus depreciation, amortization of
goodwill, amortization of intangibles, net periodic postretirement benefits
expense and special charges and is a key financial measure but should not be
construed as an alternative to operating income or cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles). Adjusted EBITDA is also one of the financial measures by which the
Company's compliance with its covenants is calculated under its debt agreements.
The Company believes that Adjusted EBITDA is a useful supplement to net income
(loss) and other consolidated statement of operations data in understanding cash
flows generated from operations that are available for taxes, debt service and
capital expenditures. However, the Company's method of computation may or may
not be comparable to other similarly titled measures of other companies. In
addition, Adjusted EBITDA is not necessarily indicative of amounts that may be
available for discretionary uses and does not reflect any legal or contractual
restrictions on the Company's use of funds.
RESULTS OF OPERATIONS
The following discussion of results of operations is presented for the
fiscal years ended December 31, 1997, 1998 and 1999. The results of operations
of the Company include the operations of GenSet, Arcsys, Victor Gas, Pro-tip,
Mid-America, OCIM, Victor Brazil, Tecmo and Soltec from their respective dates
of acquisition.
1999 COMPARED TO 1998
Net Sales
Net sales for the year ended December 31, 1999 were $521.1 million compared
to net sales of $532.8 million for the year ended December 31, 1998, a decrease
of $11.7 million, or 2.2%. Domestic sales were $322.2 million, a decrease of
$11.2 million from 1998 domestic sales of $333.4 million. This 3.4% decrease is
the result of the continued weak demand in most of the Company's domestic
industrial markets. International sales were $198.9 million in 1999 which is
essentially equal to 1998 international sales of $199.4 million. Excluding the
results of businesses acquired in Europe and South America in 1999,
international sales decreased $17.1 million, or 8.6%. Sales in Asia and Canada
increased in 1999, up 11.2% and 6.0%, respectively, over 1998 sales. Sales in
Australia continue to decline, down 9.0% in 1999, as the
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<PAGE> 13
Australian economy remains weakened from the economic crisis that hit Asia and
Australia in late 1997. Sales in Latin America increased 26.0% in a comparison
of 1999 and 1998 due to acquisitions in the area since September 1998. Excluding
the results of these acquired businesses, sales in Latin America decreased 14.4%
in 1999. This decrease resulted from weak economic conditions prevalent
throughout the region and unfavorable currency fluctuations, particularly the
Brazilian real against the U.S. dollar. The increase in sales reported for
Europe was 3.3%, but when excluding the results of an April 1999 acquisition,
sales in Europe in 1999 actually decreased 8.1% due in large part to weak demand
in many of the industrial sectors of the European market.
Costs and Expenses
Cost of goods sold as a percentage of sales was 65.7% and 63.9% for the
years ended December 31, 1999 and 1998, respectively. A major Company initiative
in 1999 was to reduce working capital levels. This included eliminating a large
number of low-volume, nonstrategic items from the Company's product offerings
and liquidating slow-moving and excess inventory. In addition, lower sales
brought on by a depressed industrial economy have resulted in a more
competitive, price-driven market. The focus on working capital and a decrease in
sales have combined to lower the volume of product flowing through the factories
and the related absorption of fixed factory overhead.
Selling, general and administrative expenses were $99.2 million in 1999, a
decrease of $3.4 million, or 3.3%, from $102.6 million in 1998. Excluding the
incremental expenses related to acquisitions, this decrease is 5.7%. As a
percentage of sales, selling, general and administrative expenses were 19.0% and
19.2% for the years ended December 31, 1999 and 1998, respectively. Cost
reduction programs implemented in the past two years continue to produce
positive results for the Company.
Special charges of $21.9 million were recorded in 1999. These charges
related to the reorganization of the Company's Australian and Asian operations,
the consolidation of two domestic facilities and detachable warrants issued in
conjunction with junior subordinated notes. In 1998, special charges of $50.5
million were recorded related to the Merger and headcount reductions.
Interest expense was $72.4 million in 1999, an increase of $10.3 million,
or 16.6%, from interest expense of $62.2 million in 1998. The average level of
debt outstanding in 1999 was higher than that in 1998 as a result of the Merger
in May 1998. Related amortization of deferred financing costs was also higher in
1999 as a result of the Merger, increasing $0.9 million to $3.6 million in 1999
compared to $2.7 million in 1998.
An income tax provision of $8.8 million was recorded in 1999 on a pre-tax
loss of $25.5 million. The 1999 income tax provision differs from that
determined by applying the U.S. federal statutory rate primarily due to the
issuance of warrants for the purchase of the Company's common stock, the
disallowance of foreign losses and an increase in the valuation allowance for
deferred tax assets. In 1998, an income tax provision of $11.4 million was
reported on a pre-tax loss of $34.8 million. Non-deductible expenses recorded in
connection with the Merger and an increase in the valuation allowance for
deferred tax assets result in an income tax provision different than that
determined by applying the U.S. federal statutory rate.
Adjusted EBITDA
Adjusted EBITDA in 1999 was $98.6 million, or 18.9% of net sales. In 1998,
Adjusted EBITDA was $105.1 million, or 19.7% of net sales.
1998 COMPARED TO 1997
Net Sales
Net sales from continuing operations for the year ended December 31, 1998
were $532.8 million, an increase of $12.3 million, or 2.4%, over net sales from
continuing operations of $520.4 million for the year ended December 31, 1997.
Domestic sales increased 10.6% in 1998, including $13.9 million related to
acquisitions. Excluding acquisitions, domestic sales increased 6.0% in 1998,
which is largely the result of successful new product introductions and
marketing programs. International sales decreased 9.0% in a
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<PAGE> 14
comparison of 1998 and 1997. Results in Asia and Australia continue to
significantly impact consolidated results. Combined sales in those regions
decreased 27.4% in 1998. Approximately 70% of this decrease related to changes
in currency exchange rates. Also included in the overall 9.0% international
sales decrease is $4.5 million in sales attributable to a recently acquired
company in Brazil. Excluding the effects of the decreases in Asia and Australia,
and the acquisition in Brazil, international sales increased 7.7% in 1998
compared to 1997.
Costs and Expenses
Cost of goods sold from continuing operations as a percentage of sales for
the year ended December 31, 1998 was 63.9% compared to 61.5% for the year ended
December 31, 1997. Acquisitions continue to put downward pressure on gross
margins as the Company expands its product line in the cutting and welding
industry which often includes adding lower gross margin businesses. Current
sales mix is also influencing the gross margin percentage as the Company is
experiencing growth in some of it's lower margin product lines, which results in
a lower overall gross margin percentage. Cost of goods sold as a percentage of
sales would have been 63.3%, excluding the effect of acquisitions.
Selling, general and administrative expenses from continuing operations
decreased $8.1 million, or 7.4%, from $110.7 million for the year ended December
31, 1997 to $102.6 million for the year ended December 31, 1998. As a percentage
of sales, selling, general and administrative expenses were 19.2% for the year
ended December 31, 1998 compared to 21.3% for the year ended December 31, 1997.
This decrease in costs is primarily the result of a broad cost reduction program
implemented by the Company in 1998.
Amortization of other intangibles decreased 65.2%, or $4.4 million, to $2.4
million for the year ended December 31, 1998 compared to the year ended December
31, 1997. This decrease results from events that occurred during 1997, including
the recognition of net operating loss carryforward benefits and the sale of the
wear resistance business.
Special charges of $50.5 million in 1998 are the result of the Merger and
headcount reductions in the third and fourth quarters. The amounts applicable to
these two events were $44.2 million, and $6.3 million, respectively.
Interest expense increased $16.8 million in 1998 to $62.2 million, from
$45.3 million in 1997. This 37.1% increase resulted from increased debt levels
as a result of the Merger.
Amortization of deferred financing costs was $2.7 million for the year
ended December 31, 1998 compared to $1.6 million for the year ended December 31,
1997. This $1.1 million, or 70.1%, increase is a result of Merger-related debt
placement costs.
An income tax provision of $11.4 million was reported for the year ended
December 31, 1998 on a pre-tax loss of $34.8 million. An income tax provision of
$13.5 million was reported for the year ended December 31, 1997 on pre-tax
income of $28.5 million. The 1998 income tax provision differs from the amount
determined by applying the U.S. federal statutory rate to pre-tax loss primarily
as a result of certain non-deductible expenses recorded in connection with the
Merger as well as an increase in the valuation allowance for deferred tax
assets. The 1997 income tax provision differs from the amount determined by
applying the U.S. federal statutory rate to pre-tax income primarily as a result
of non-deductible goodwill amortization and other non-deductible expenses.
Adjusted EBITDA
Adjusted EBITDA was $105.1 million, or 19.7% of net sales, for the year
ended December 31, 1998. This compares to Adjusted EBITDA from continuing
operations of $102.1 million for the year ended December 31, 1997, which is
19.6% of net sales.
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<PAGE> 15
Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is required to be adopted in years
beginning after June 15, 2000. The Statement permits early adoption as of the
beginning of any fiscal quarter after its issuance. The Company expects to adopt
the new statement effective January 1, 2001. The Statement will require the
Company to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If a derivative is a hedge, depending on the nature of the hedge, changes in the
fair value of the derivative will either be offset against the change in fair
value of the hedged asset, liability, or firm or forecasted commitment through
earnings, or recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portion of a derivative's change in fair
value will be immediately recognized in earnings. The Company does not
anticipate that the adoption of this Statement will have a significant effect on
its results of operations or financial position.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital and Cash Flows. Cash provided by operating activities was
$53.9 million for the year ended December 31, 1999, an increase of $104.2
million over cash used by operating activities of $50.3 million for the year
ended December 31, 1998. This increase in cash provided by operating activities
is the result of an increase in earnings, adjusted for non-cash expenses, of
$44.5 million plus a net decrease in operating assets and liabilities of $59.7
million in 1999 compared to 1998. The net loss reported in 1999 was $27.0
million less than that reported in 1998 primarily due to a decrease in special
charges and extraordinary items of $43.8 million partially offset by increases
in certain other expenses and non-cash items. A focus on reducing working
capital provided a significant amount of cash in 1999. Net increases in cash
flow in 1999, as compared to 1998, as a result of this initiative were $27.5
million in accounts receivable, $44.9 million in inventory and $7.9 million in
accounts payable. Prepaid expenses and accrued interest were also net providers
of cash in the amounts of $0.9 million and $2.4 million, respectively. These
cash inflows were partially offset by increases in the use of cash of $13.3
million in accrued liabilities, $9.7 million in income taxes payable and $0.9
million in other long-term liabilities. The use of cash by accrued liabilities
is the result of lower rebate and bonus accruals at December 31, 1999, compared
to the prior year and the reduction of the severance and restructuring accruals
due to payments throughout 1999. Net cash used in investing activities was $17.1
million in 1999, down $22.4 million from a $39.5 million use of cash in 1998.
This decrease is primarily the result of the Company spending $13.1 million less
on acquisitions and $7.3 million less on capital expenditures. Financing
activities used $24.8 million in cash in the twelve months ended December 31,
1999, compared to providing cash of $89.7 million in the twelve months of the
prior year. In 1999, $23.8 million was used in terminating the Company's
accounts receivable securitization and an additional $0.9 million was used for
financing fees. These uses of cash were offset by cash provided by net
borrowings of $3.4 million, including $25.0 million in proceeds from the
issuance of Junior Subordinated Notes, and other financing activities of $6.1
million. In 1998, the issuance of debt and equity securities in conjunction with
the Merger provided $116.7 million in cash. This was partially offset by cash
used for financing fees of $23.8 million and cash used in the accounts
receivable securitization of $4.5 million.
Capital Expenditures. The Company had $10.2 million of capital expenditures
related to continuing operations in 1999. The Company's new senior secured loan
facility (the "New Credit Facility") contains restrictions on the Company's
ability to make capital expenditures. Based on present estimates, management
believes that the amount of capital expenditures permitted to be made under the
New Credit Facility will be adequate to maintain the properties and businesses
of the Company's continuing operations.
Liquidity. The Company's principal sources of liquidity are cash flow from
operations and borrowings under the New Credit Facility. The Company's principal
uses of cash will be debt service requirements, capital expenditures,
acquisitions and working capital. The Company expects that ongoing requirements
for debt service, capital expenditures and working capital will be funded from
operating cash flow and borrowings under the New Credit Facility. In connection
with future acquisitions, the Company may require additional funding which may
be provided in the form of additional debt, equity financing or a combination
thereof. There can be no assurance that any such additional financing will be
available to the Company on acceptable terms, if at all.
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The term loan facility under the New Credit Facility consists of (i) a $100
million Term A loan, (ii) a $115 million Term B loan, and (iii) a $115 million
Term C loan. The Term A loan will mature in 2004, the Term B loan will mature in
2005 and the Term C loan will mature in 2006. The New Credit Facility also
includes a $100 million revolving credit facility, which is subject to increase
by up to $25 million upon request by Thermadyne LLC and which will terminate six
years after the closing date.
On November 10, 1999, the Company amended the New Credit Facility to allow
the restructuring of certain of its manufacturing operations and to adjust its
financial covenants. In accordance with the amendment, the rate at which the New
Credit Facility bears interest was adjusted to, at Thermadyne LLC's option, the
administrative agent's alternative base rate or the reserve-adjusted London
Interbank Offered Rate ("LIBOR") plus, in each case, applicable margins of (i)
in the case of alternative base rate loans, (x) 1.50% for revolving and Term A
loans, (y) 1.75% for Term B loans and (z) 2.00% for Term C loans and (ii) in the
case of LIBOR loans, (x) 2.75% for revolving and Term A loans, (y) 3.00% for
Term B loans and (z) 3.25% for Term C loans. The applicable margin may vary
based on Thermadyne LLC's ratio of consolidated indebtedness to Adjusted EBITDA.
In addition, the amendment required the issuance of $25.0 million of Junior
Subordinated Notes with detachable warrants for the purchase of the Company's
common stock.
Thermadyne LLC's obligations under the New Credit Facility are secured by
substantially all of the assets of Thermadyne LLC, including a pledge of the
capital stock of all of its subsidiaries, subject to certain limitations with
respect to foreign subsidiaries. In addition, the Company has guaranteed the
obligations of Thermadyne LLC under the New Credit Facility. Such guarantee is
the only recourse to the Company's pledge of all of the outstanding capital
stock of Thermadyne LLC to secure Thermadyne LLC's obligations under the New
Credit Facility. The New Credit Facility contains customary covenants and events
of default including substantial restrictions on Thermadyne LLC's ability to
make dividends or other distributions to the Company.
Mercury issued 12 1/2% Senior Discount Debentures (the "Debentures") which
became obligations of the Company following the Merger and are not guaranteed by
Thermadyne LLC or any of its consolidated subsidiaries. The debentures will
mature in 2008 and will not require cash interest payments until 2003. The
debentures contain customary covenants and events of default, including
covenants that limit the ability of the Company and its subsidiaries to incur
debt, pay dividends and make certain investments.
Thermadyne LLC and Thermadyne Capital issued 9 7/8% Senior Subordinated
Notes due 2008 (the "Senior Subordinated Notes"), which were guaranteed by
certain of the Company's domestic subsidiaries. Interest on the Senior
Subordinated Notes will be payable semiannually in cash. The Senior Subordinated
Notes contain customary covenants and events of default, including covenants
that limit the ability of Thermadyne LLC and its subsidiaries to incur debt, pay
dividends and make certain investments.
The Company anticipates that its operating cash flow, together with
borrowings under the New Credit Facility, will be sufficient to meet its
anticipated future operating expenses and capital expenditures and to service
its debt requirements as they become due. However, the Company's ability to make
scheduled payments of principal of, to pay interest on or to refinance its
indebtedness and to satisfy its other debt obligations will depend upon its
future operating performance, which will be affected by general economic,
financial, competitive, legislative, regulatory, business and other factors
beyond its control.
MARKET RISK AND RISK MANAGEMENT POLICIES
The Company's earnings and cash flow are subject to fluctuations due to
changes in foreign currency exchange rates. The Company is also exposed to
changes in interest rates from its long-term debt arrangements. See Item 7A
"Quantitative and Qualitative Disclosures About Market Risk" for further
discussion.
EFFECT OF INFLATION; SEASONALITY
Inflation has not been a material factor affecting the Company's business.
In recent years, the cost of electronic components has remained relatively
stable due to competitive pressures within the industry, which
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<PAGE> 17
has enabled the Company to contain its service costs. The Company's general
operating expenses, such as salaries, employee benefits, and facilities costs,
are subject to normal inflationary pressures.
The operations of the Company are generally not subject to seasonal
fluctuations.
YEAR 2000 COMPLIANCE
Year 2000 Issue
To date, the Company has not experienced any material Year 2000 problems in
products that it sells or in its internal systems. While we are not currently
aware of any internal or external Year 2000 failures impacting our operations or
those of our customers due to Year 2000 failures of our products, we continue to
monitor the compliance of our products and internal systems, as well as third
party software purchased from suppliers prior to January 1, 2000.
Although we believe that we have successfully modified our products,
services and internal systems as necessary to be Year 2000-compliant, we cannot
be sure that our products or our internal systems do not contain undetected
errors or defects associated with Year 2000 functions that may manifest
themselves over time and may result in a material adverse impact on the
Company's business, financial condition, or results of operations.
With regard to the Company's products, the most likely worst-case scenario
with respect to any Year 2000 problems will be insignificant given the
mechanical nature of the vast majority of the products. With regard to the
Company's internal systems, and products and services acquired from third-party
suppliers, the most likely worst-case scenario will be a delayed Year
2000-related failure. Information technology staff have continued testing
internal systems after the rollover date of January 1, 2000, and as of the date
hereof, have detected no errors or malfunctions resulting from Year 2000 issues.
Information technology staff will continue to monitor internal systems and
investigate reports of Year 2000-related errors or failures in our products well
into the future.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
A substantial portion of the Company's operations consist of manufacturing
and sales activities in foreign regions, particularly Europe, Australia/Asia,
Canada and South America. As a result, the Company's financial results could be
significantly affected by factors such as changes in foreign currency exchange
rates or weak economic conditions in the foreign markets in which the Company
distributes its products. The Company's exposure to foreign currency
transactions is partially mitigated by having manufacturing locations in
Australia, Italy, Indonesia, Malaysia, the Philippines and Brazil as well as in
the United States. A substantial portion of the product manufactured in these
regions is sold locally and denominated in the local currency. A significant
amount of the export sales from the U.S. are denominated in U.S. dollars which
further limits the Company's exposure to changes in the exchange rates. The
Company is most susceptible to a strengthening U.S. dollar and the negative
effect when local currency financial statements are translated into U.S.
dollars, the Company's reporting currency.
The Company does not believe its exposure to transaction gains or losses
resulting from changes in foreign currency exchange rates is material to its
financial results. As a result, the Company does not actively try to manage its
exposure through foreign currency forward or option contracts.
The Company is also exposed to changes in interest rates primarily from its
long-term financial arrangements which are predominantly denominated in U.S.
dollars. At December 31, 1999, the Company had approximately $294.8 million of
variable rate U.S. debt. The Company limited its exposure to variations in the
interest rate by entering into an interest rate swap arrangement effective
January 1, 1999, with respect to approximately $61.5 million of this debt. The
Company also has approximately $19.9 million and $10.5 million of variable rate
debt denominated in Australian dollars and Italian lira, respectively. A
hypothetical 100 basis point increase in the Company's variable borrowing rates
would result in an increase in interest expense of approximately $2.6 million
for the year ended December 31, 1999.
17
<PAGE> 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements that are filed as part of this Annual Report on
Form 10-K are set forth in the Index to Consolidated Financial Statements at
page F-1 hereof and are included at pages F-2 to F-54 thereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth certain information concerning the current
directors and executive officers of the Company. Each officer of the Company
serves in the same capacity for Thermadyne LLC and Thermadyne Capital.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ---- --- -----------
<S> <C> <C>
Randall E. Curran...................... 45 Director of the Company, Thermadyne LLC and Thermadyne
Capital, Chairman of the Board, President and Chief
Executive Officer
James H. Tate.......................... 52 Director of the Company, Thermadyne LLC and Thermadyne
Capital, Senior Vice President and Chief Financial
Officer
Peter T. Grauer........................ 54 Director of the Company, Thermadyne LLC and Thermadyne
Capital
William F. Dawson, Jr. ................ 35 Director of the Company, Thermadyne LLC and Thermadyne
Capital
John F. Fort III....................... 58 Director of the Company
Harold A. Poling....................... 74 Director of the Company
Lawrence M.v.D. Schloss................ 45 Director of the Company
Stephanie N. Josephson................. 46 Vice President, General Counsel and Corporate
Secretary
Thomas C. Drury........................ 43 Vice President, Human Resources
Robert D. Maddox....................... 40 Vice President and Corporate Controller
</TABLE>
Mr. Curran has been a Director of the Company since February 1994 and was
elected Chairman of the Board and Chief Executive Officer in February 1995,
having previously served as President of the Company from August 1994 and as
Executive Vice President and Chief Operating Officer of the Company from
February 1994. From 1992 to 1994 Mr. Curran was President of the cutting and
welding division of the Company. From 1986 to 1992, Mr. Curran was Chief
Financial Officer of the Company and/or its predecessors. Prior to 1986, Mr.
Curran held various executive positions with Cooper Industries, Inc. Mr. Curran
presently serves on the boards of directors of Insilco Holding Co. and the
Whitfield School.
Mr. Tate has been a Director of the Company since October 1995. He was
elected Senior Vice President and Chief Financial Officer of the Company in
February 1995, having previously served as Vice President of the Company and
Vice President and Chief Financial Officer of the Company's subsidiaries since
April 1993. Prior to joining the Company, Mr. Tate was employed by the
accounting firm of Ernst & Young LLP for eighteen years, the last six of which
he was a partner. Mr. Tate currently serves on the board of directors of Rowe
International, Inc.
Mr. Grauer has been a Director of the Company since May 1998. Mr. Grauer
has been a Managing Director of DLJ Merchant Banking II, Inc. ("DLJMB II Inc.")
(and its predecessor) since September 1992. Mr. Grauer is a director of Doane
Pet Care Enterprises, Inc., Total Renal Care Holdings, Inc., Formica Corporation
and Bloomberg, Inc.
18
<PAGE> 19
Mr. Dawson has been a Director of the Company since May 1998. Mr. Dawson
has been a Principal of DLJMB II Inc. since August 1997. From December 1995 to
August 1997, he was a Senior Vice President in Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJSC") High Yield Capital Markets Group. Prior thereto
Mr. Dawson was a Vice President in the Leveraged Finance Group within DLJSC's
Investment Banking Group. Mr. Dawson serves as a director of Von Hoffmann
Corporation and Insilco Holding Co.
Mr. Fort has been a Director of the Company since May 1998. Mr. Fort is
currently Chairman of the Board of Mueller-Grinnel Corp. and Insilco Corp. Mr.
Fort retired as Chairman of the Board of Tyco International Ltd. in January of
1993. In 1964, after receiving degrees in Aeronautical Engineering and
Industrial Management from Princeton and the MIT Sloan School, respectively, he
joined the Simplex Wire & Cable Company (now a subsidiary of Tyco). Mr. Fort
held a broad range of positions throughout his thirty years at Tyco. He
currently holds directorships at Tyco International, Ltd., Roper Industries,
Manufacturers Services, Ltd. and DeCrane Aircraft Holding Co. He is an active
participant on advisory boards at MIT, Princeton University, Full Circle
Investments and the Appalachian Mountain Club.
Mr. Poling has been a Director of the Company since May 1998. Mr. Poling
retired as Chairman of the Board and Chief Executive Officer of Ford Motor
Company on January 1, 1994, a position he held since 1990. Mr. Poling is a
director of Shell Oil Company, Flint Ink Corporation, the Kellogg Company and
Meritor Automotive, Inc. He is a board consultant for the LTV Corporation, a
member of the DLJ Executive Advisory Board and a member of the board of
directors and trustee of William Beaumont Hospital. Mr. Poling is a director of
the Monmouth (Ill.) College Senate and a member of the Dean's Advisory Council
for the Indiana University School of Business. He was national chairman of
Indiana University's Annual Fund campaigns from 1986-88.
Mr. Schloss has been a Director of the Company since May 1998. Mr. Schloss
has been the Managing Partner of DLJMB II Inc. since November 1995. Prior to
November 1995, he was the Chief Operating Officer and a Managing Director of DLJ
Merchant Banking, Inc. Mr. Schloss currently serves as Chairman of the Board of
McCulloch Corporation and as a director of Merrill Corporation.
Ms. Josephson, having previously been elected Corporate Counsel and
Corporate Secretary of the Company in March 1995, was elected Vice President and
General Counsel in April 1995. Prior to joining the Company, Ms. Josephson was
Corporate Counsel for Mills & Partners, Inc. from 1993 to 1995 and an Adjunct
Professor at Saint Louis University School of Business in the MBA program from
1991 to 1993. Prior thereto, Ms. Josephson was employed in Houston, Texas as
Counsel for Cooper Industries, Inc. and in private practice with the law firms
Andrews & Kurth and Weycer and Kaplan from 1979 to 1991.
Mr. Drury was elected Vice President -- Human Resources of the Company in
March 1995. Prior to that time, Mr. Drury served as Director of Human Resources
for the Company since November 1991. Prior to joining the Company, Mr. Drury was
Manager -- Human Resources at McDonnell Douglas Systems Integration Company from
1988 through 1991.
Mr. Maddox was elected Vice President and Corporate Controller of the
Company in April 1996. Prior to that time, Mr. Maddox served as Vice President
and Controller of the Company's operating subsidiaries from April 1995 to April
1996 and Controller from May 1992 to April 1995. Prior to joining the Company,
Mr. Maddox was a senior audit manager with the accounting firm of Ernst & Young
LLP.
19
<PAGE> 20
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth information in respect of the compensation
of the Chief Executive Officer and each of the other four most highly
compensated executive officers of the Company (collectively, the "Named
Executive Officers") for services in all capacities to the Company and its
subsidiaries for the years ended December 31, 1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES ALL OTHER
-------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION(S) YEAR SALARY($) BONUS($) OPTIONS(#) ($)(1)
- ------------------------------ ---- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Randall E. Curran........................ 1999 564,724 134,600 -- 37,289
Chairman of the Board, President and 1998 538,400 506,634 99,397 36,282
Chief Executive Officer 1997 517,847 538,400 30,600 33,807
James H. Tate............................ 1999 316,962 58,313 -- 19,590
Director, Senior Vice President and
Chief 1998 294,741 219,488 51,686 19,230
Financial Officer 1997 275,093 188,614 27,000 18,039
Stephanie N. Josephson................... 1999 208,962 28,188 -- 10,833
Vice President, General Counsel and 1998 181,577 94,935 10,603 10,248
Corporate Secretary 1997 168,719 84,625 10,000 10,210
Thomas C. Drury.......................... 1999 173,269 23,375 -- 8,275
Vice President -- Human Resources 1998 150,481 78,279 10,603 7,292
1997 132,206 66,479 10,000 7,444
Robert D. Maddox......................... 1999 173,269 23,375 -- 6,955
Vice President and Controller 1998 150,481 78,279 10,603 6,854
1997 134,254 67,417 5,000 7,749
</TABLE>
- ---------------
(1) All other compensation includes group life insurance premiums paid by the
Company and contributions made on behalf of the Named Executive Officers to
the Company's 401(k) retirement and profit sharing plan. The amounts of
insurance premiums paid and 401(k) contributions made on behalf of the Named
Executive Officers for 1999 are as follows: Mr. Curran $5,148 and $32,141,
respectively; Mr. Tate, $3,497 and $16,093, respectively; Ms. Josephson,
$1,716 and $9,117, respectively; Mr. Drury, $859 and $7,416, respectively;
and Mr. Maddox, $389 and $6,566, respectively.
OPTION GRANTS IN LAST FISCAL YEAR
No stock options were granted to the Named Executive Officers in 1999.
20
<PAGE> 21
The following table provides information related to the number and value of
options held by the Named Executive Officers at the end of 1999. On December 31,
1999, the last reported close price for the Common Stock was $19.50.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR-END AT FISCAL YEAR-END
---------------------------- ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) (#) ($) ($)
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Randall E. Curran.......................... 17,891 81,506 -- --
James H. Tate.............................. 9,303 42,383 -- --
Stephanie N. Josephson..................... 1,908 8,695 -- --
Thomas C. Drury............................ 1,908 8,695 -- --
Robert D. Maddox........................... 1,908 8,695 -- --
</TABLE>
All options currently outstanding were granted under the Management
Incentive Plan. For a discussion of the Management Incentive Plan, see
"Employment Arrangements".
EMPLOYMENT ARRANGEMENTS
Employment Contracts. The employment agreements with Messrs. Curran, Tate,
Drury and Maddox and Ms. Josephson have an original termination date of May 22,
2001; however, such agreements automatically renew for an additional year on
each May 22 beginning in 1999 so that a new three-year term begins upon each
extension (unless the agreements are earlier terminated as provided therein).
Messrs. Curran, Tate, Drury and Maddox and Ms. Josephson serve in their current
executive capacities with the Company as a requirement of their respective
employment agreements.
Messrs. Curran, Tate, Drury and Maddox and Ms. Josephson are entitled to
annual base salaries (subject to increase at the Board of Directors' discretion)
of $575,000, $326,500, $178,500, $178,500 and $215,300, respectively. In
addition, Messrs. Curran, Tate, Drury and Maddox and Ms. Josephson are eligible
to participate in an annual bonus plan providing for an annual bonus opportunity
of not less than 100%, 75%, 55%, 55% and 55%, respectively, of such executive's
base salary. Each executive is also entitled to such benefits as are customarily
provided to the executives of the Company and its subsidiaries. All five
executives are required to devote all of their business time and attention to
the business of the Company and its subsidiaries.
Each employment agreement provides that if the executive's employment
ceases as a result of disability or death, the executive or the executive's
estate, heirs or beneficiaries, as the case may be, will continue to receive the
executive's then current salary for a period of 24 months from the date of his
or her disability or death. If the executive's employment is terminated by the
Company for Cause (as defined in each employment agreement) or voluntarily by
the executive for any reason other than death, disability or upon a constructive
termination (which includes, among other things, reduction of compensation,
title, position or duties) the executive will not be entitled to receive
compensation or any accrued benefits after the date of termination. If the
executive's employment is terminated by the Company without Cause or is
terminated by the executive upon a constructive termination, the executive will
continue to receive his or her then current salary and other benefits provided
by the agreement during the unexpired term of the agreement.
Management Incentive Plan. The Management Incentive Plan provides for the
granting of options to acquire up to 500,000 shares of Common Stock to certain
officers and employees of the Company. All options are non-qualified stock
options granted at 100% of the fair market value on the grant date. In fiscal
1999, options to purchase approximately 19,700 shares of Common Stock were
granted under the Management Incentive Plan to certain officers and employees of
the Company at an exercise price of $34.50 per option share. These options vest
pro rata over five years. Pursuant to the terms of the Management Incentive
Plan,
21
<PAGE> 22
options granted to certain members of senior management provide for both a "Time
Vesting Option" and a "Cliff Vesting Option." Under the Time Vesting Option, the
option vests and is exercisable with respect to 20% of the shares subject to the
option on the day it was granted. Then, on each of the first five anniversaries
from that date the Time Vesting Option was granted, an additional 16% of the
shares subject to the option vests and becomes exercisable as long as the option
recipient is still employed by the Company or its subsidiaries. The Cliff
Vesting Option becomes vested and exercisable with respect to 20% of the shares
on the thirtieth day after the availability of the audited financial statements
for each of the fiscal years ended December 31, 1998 through December 31, 2002,
provided that the option recipient is still employed by the Company or its
subsidiaries on such date of determination, and further provided, that the
targeted implied common equity value of the Company was met for such fiscal
year. If the targeted implied common equity value of the Company is not attained
for any fiscal year ending on or before December 31, 2002, the Cliff Vesting
Option will be treated as vested and exercisable if the target is attained for
any subsequent year as long as the option recipient is still employed by the
Company or its subsidiaries on such date of determination. If, after eight years
from receipt of the Cliff Vesting Option, all shares subject to such option have
not vested, such shares shall become fully vested and exercisable as long as the
option recipient is still employed by the Company or its subsidiaries on such
date.
The following table sets forth the number of shares of Common Stock
issuable upon the exercise of options granted to each Named Executive Officer
under the Management Incentive Plan.
MANAGEMENT INCENTIVE PLAN OPTION GRANTS
<TABLE>
<CAPTION>
NAME TIME VESTING SHARES CLIFF VESTING SHARES
- ---- ------------------- --------------------
<S> <C> <C>
Randall E. Curran................................. 49,699 49,698
James H. Tate..................................... 25,843 25,843
Stephanie N. Josephson............................ 5,302 5,301
Thomas C. Drury................................... 5,302 5,301
Robert D. Maddox.................................. 5,302 5,301
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee of the Board of Directors served as
an officer or employee of the Company or any of its subsidiaries during 1999.
COMPENSATION OF DIRECTORS
Other than Messrs. Curran, Tate, Dawson, Schloss and Grauer, each director
of the Company is entitled to receive a $12,000 annual retainer plus a $1,000
fee for each regular meeting of the Board of Directors attended and a $500 fee
for each meeting of a board committee attended. Additionally, certain
non-employee directors (as described in the Thermadyne Holdings Corporation 1998
Non-Employee Directors Stock Option Plan (the "Directors Plan")) are eligible to
receive options under the Directors Plan. The Directors Plan provides that
certain non-employee directors shall receive options to purchase 3,000 shares of
Common Stock upon becoming a director and options to purchase 500 shares of
Common Stock each year thereafter. All options are non-qualified stock options
granted at 100% of the fair market value on the grant date. During 1999, the
Board of Directors awarded each of Messrs. Fort and Poling options to purchase
500 shares of Common Stock at $34.50 per share pursuant to the Directors Plan.
Directors also are reimbursed for all reasonable travel and other expenses of
attending meetings of the Board of Directors or committees of the Board of
Directors.
22
<PAGE> 23
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of March 2, 2000, certain information
regarding the ownership of Common Stock (i) by each person known by the Company
to be the beneficial owner of more than 5% of the outstanding Common Stock, (ii)
by each director or director nominee of the Company, (iii) by each executive
officer named in the Summary Compensation Table included elsewhere in this
Annual Report on Form 10-K and (iv) by all current directors and executive
officers of the Company as a group. Other than as set forth below, no director,
director nominee, or executive officer of the Company is the beneficial owner of
any shares of Common Stock. The Company believes that, unless otherwise noted,
each person shown in the following table has sole voting and sole investment
power with respect to the shares indicated.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF
COMMON STOCK
------------------------
NAME OF NUMBER PERCENT OF
BENEFICIAL OWNER OF SHARES CLASS(1)
- ---------------- ---------- -----------
<S> <C> <C>
DLJ Merchant Banking Partners II, L.P. and related
investors(2).............................................. 3,399,089 84.4%
Magten Asset Management Corp................................ 267,339 7.4%
35 East 21st Street
New York, NY 10010(3)
Randall E. Curran(4)........................................ 75,117 2.1%
James H. Tate(5)............................................ 27,930 *
Peter T. Grauer(6).......................................... -- *
William F. Dawson, Jr.(6)................................... -- *
John F. Fort III(7)......................................... 8,500 *
Harold A. Poling(8)......................................... 55,400 1.5%
Lawrence M.v.D. Schloss(6).................................. -- *
Stephanie N. Josephson(9)................................... 14,126 *
Thomas C. Drury(10)......................................... 11,556 *
Robert D. Maddox(11)........................................ 12,124 *
All directors and executive officers as a group (10
persons)(6)(12)........................................... 204,753 5.6%
</TABLE>
- ---------------
* Represents less than 1%.
(1) Based on 3,590,326 shares of Common Stock outstanding at March 2, 2000 and
calculated in accordance with Rule 13d-3 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
(2) Consists of shares held directly by DLJMB and the following investors
related to DLJMB: DLJ Offshore Partners II, C.V. ("Offshore"), a
Netherlands Antilles limited partnership, DLJ Diversified Partners, L.P.
("Diversified"), a Delaware limited partnership, DLJMB Funding II, Inc.
("Funding"), a Delaware corporation, DLJ Merchant Banking Partners II-A,
L.P. ("DLJMBPIIA"), a Delaware limited partnership, DLJ Diversified
Partners-A, L.P. ("Diversified A"), a Delaware limited partnership, DLJ
Millennium Partners, L.P. ("Millennium"), a Delaware limited partnership,
DLJ Millennium Partners-A, L.P. ("Millennium A"), a Delaware limited
partnership, DLJ EAB Partners, L.P. ("EAB"), a Delaware limited
partnership, UK Investment Plan 1997 Partners ("UK Partners"), a Delaware
partnership, DLJ First ESC L.P. ("DLJ First ESC"), a Delaware limited
partnership, and DLJ ESC II, L.P. ("DLJ ESC II"), a Delaware limited
partnership. DLJMB, Offshore, Diversified, Funding, DLJMBPIIA, Diversified
A, Millennium, Millennium A, EAB, DLJ First ESC and DLJ ESC II are herein
referred to as the "DLJ Funds."The address of each of DLJMB, Diversified,
Funding, DLJMBPIIA, Diversified A, Millennium, Millennium A, EAB, DLJ First
ESC and DLJ ESC II is 277 Park Avenue, New York, New York 10172. The
address of Offshore is John B. Gorsiraweg, 14 Willemstad, Curacao,
Netherlands Antilles. The address of UK Partners is 2121 Avenue of the
Stars, Fox Plaza, Suite 3000, Los Angeles, California 90067. Includes
436,965 shares of Common Stock issuable upon exercise of warrants that are
currently exercisable.
(3) The following information is based on a Schedule 13D, dated July 25, 1996,
as amended on September 25, 1996, on February 12, 1998, on March 9, 1998,
and on June 10, 1998, filed with the
23
<PAGE> 24
Securities and Exchange Commission (the "Commission") by Magten Asset
Management Corp. ("Magten"), an investment adviser registered under the
Investment Advisers Act of 1940, as amended (the "Investment Advisers
Act"). Magten has (i) shared voting power over 227,897 of the shares and no
voting power over 39,442 of the shares and (ii) shared investment power
over all 267,339 shares.
(4) Includes 25,843 shares of Common Stock issuable to Mr. Curran upon the
exercise of vested stock options or stock options that will vest within 60
days.
(5) Includes 13,438 shares of Common Stock issuable to Mr. Tate upon the
exercise of vested stock options or stock options that will vest within 60
days.
(6) Messrs. Grauer, Dawson and Schloss are officers of DLJMB II Inc., the
general partner of DLJMB. Share data shown for such individuals excludes
shares shown as held by the DLJMB Funds, as to which such individuals
disclaim beneficial ownership.
(7) Includes 3,500 shares of Common Stock issuable to Mr. Fort upon the
exercise of vested stock options or stock options that will vest within 60
days.
(8) Includes 3,500 shares of Common Stock issued to Mr. Poling upon the
exercise of vested stock options or stock options that will vest within 60
days.
(9) Includes 2,756 shares of Common Stock issuable to Ms. Josephson upon the
exercise of vested stock options or stock options that will vest within 60
days.
(10) Includes 2,756 shares of Common Stock issuable to Mr. Drury upon the
exercise of vested stock options or stock options that will vest within 60
days.
(11) Includes 2,756 shares of Common Stock issuable to Mr. Maddox upon the
exercise of vested stock options or stock options that will vest within 60
days.
(12) Includes 54,549 shares of Common Stock issuable upon the exercise of vested
stock options or stock options that will vest within 60 days.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On December 22, 1999, the DLJ Funds purchased, for an aggregate purchase
price of $25,000,000, pursuant to a Subscription Agreement ("Subscription
Agreement") among the Company, Thermadyne Mfg. LLC (the "Subsidiary") and the
DLJ Funds [defined elsewhere] dated December 22, 1999, a principal amount of
$25,000,000 Junior Subordinated Notes due 2009 (the "Notes") of the Subsidiary
and warrants to purchase 436,965 shares ("Warrants"). Each Warrant is
exercisable at a price of $0.01 per Warrant Share (as defined below), subject to
adjustment. The investment of additional capital in the Company and the
Subsidiary was used for general corporate purposes.
The Company, the Subsidiary and the DLJ Funds have entered into a
Registration Rights Agreement which grants the holders of 50% or more of the
Notes or Warrants the right to demand the Company or the Subsidiary, as the case
may be, to effect a registration of the Notes or Warrants under the Securities
Act of 1933, as amended (the "Act"). The Company is obliged to effect one demand
registration for the Warrants and the Subsidiary is obliged to effect up to two
demand registrations for the Notes. If any Warrants are included in a demand
registration, the Company must prepare a shelf registration statement under Rule
415 of the Act permitting the resale of Warrants and the shares issuable upon
exercise of the warrants ("Warrant Shares") and must use its best efforts to
cause the warrant shelf registration statement to be declared effective within
90 days of the time such demand registration is effected. The Company must keep
the warrant shelf registration statement effective until the earlier of (i) two
years following the date as of which no Warrants remain outstanding and (ii) if
all of the Warrants expire unexercised, December 15, 2009.
The Company's registration obligations in respect of the Warrants shall
expire on the earlier of (i) the date on which each Warrant or Warrant Share has
been disposed of in accordance with a warrant registration statement or when
such Warrant Share is issued upon exercise of a Warrant in accordance with a
registration statement and (ii) the date on which each Warrant or Warrant Share
is distributed to the public pursuant to Rule 144 under the Act. The
Subsidiary's registration obligations in respect of the Notes shall expire on
the
24
<PAGE> 25
earlier of (i) the date on which each Note has been disposed in accordance with
a note registration statement and (ii) the date on which each Note is
distributed to the public pursuant to Rule 144 under the Act.
The Registration Rights Agreement also grants "piggy-back" rights to the
DLJ Funds to participate in certain registration statements filed by Thermadyne
in respect of any equity securities of the Company. The Registration Rights
Agreement also contains a "lock-up" provision pursuant to which the DLJ Funds
may be restricted from transferring Notes or Warrants in public sales during an
underwriter's public offering of Notes or Warrants.
Pursuant to a letter agreement dated January 16, 1998 (the "Engagement
Letter"), DLJMB engaged DLJSC to act as DLJMB's exclusive financial advisor for
a period of five years (the "Engagement Period") with respect to the review and
analysis of financial and structural alternatives available to the Company.
DLJMB's obligations under the Engagement Letter have since been assumed by the
Company.
As compensation for the services to be provided by DLJSC under the
Engagement Letter, DLJSC is entitled to receive an annual advisory fee of
$300,000, payable quarterly in equal installments of $75,000. DLJSC is also
entitled to reimbursement for all of its out-of-pocket expenses incurred in
connection with its engagement.
During the Engagement Period, DLJSC is also entitled to act as the
Company's exclusive financial advisor, sole placement agent, sole initial
purchaser, sole managing underwriter or sole dealer-manager, as the case may be,
with respect to any Transaction (as hereinafter defined) the Company determines
to pursue. The term "Transaction" includes the following: (i) the sale, merger,
consolidation or any other business combination, in one or a series of
transactions, involving any portion of the business, securities or assets of the
Company; (ii) the acquisition (and any related matters such as financings,
divestitures, etc.) in one or a series of transactions, of all or a portion of
the business, securities or assets of another entity or person; (iii) any
recapitalization, refinancing, repurchase or restructuring of the Company's
equity or debt securities or indebtedness or any amendments or modifications to
the Company's debt securities or indentures whether or not in connection
therewith, involving, by or on behalf of the Company, an offer to purchase or
exchange for cash, property, securities, indebtedness or other consideration, or
a solicitation of consents, waivers of authorizations with respect thereto; (iv)
any spin-off, split-off or other extraordinary dividend of cash, securities or
other assets to stockholders of the Company; or (v) any sale of securities of
the Company effected pursuant to a private sale or an underwritten public
offering.
The Company has agreed to indemnify and hold harmless DLJSC and its
affiliates, and the respective directors, officers, agents and employees of
DLJSC and its affiliates (each, an "Indemnified Person") from and against any
losses, claims, damages, judgments, assessments, costs and other liabilities and
will reimburse such Indemnified Persons for all fees and expenses (including the
reasonable fees and expenses of counsel) as they are incurred in investigating,
preparing, pursuing or defending any claim, action, proceeding or investigation
arising out of or in connection with advice or services rendered or to be
rendered by any Indemnified Person pursuant to the Engagement Letter, the
transactions contemplated by the Engagement Letter or any Indemnified Person's
action or inactions in connection with any such advice, services or
transactions, other than liabilities or expenses that are determined by a
judgment of a court of competent jurisdiction to have resulted solely from such
Indemnified Person's gross negligence or willful misconduct.
The Engagement Letter makes available the resources of DLJSC concerning a
variety of financial and operational matters. The services that have been and
will continue to be provided by DLJSC could not otherwise be obtained by the
Company without the addition of personnel or the engagement of outside
professional advisors. In the opinion of management, the fees provided for under
the Engagement Letter reasonably reflect the benefits received and to be
received by the Company.
Messrs. Grauer, Dawson and Schloss, directors of the Company, are officers
of DLJMB II Inc., which is an affiliate of each of DLJMB, DLJSC, DLJ Capital
Funding, Inc. and DLJ Bridge Finance, Inc.
The Company has entered into the Investors' Agreement with the DLJMB Funds
and the senior executive officers of the Company. The Investors' Agreement,
among other things, contains provisions regarding the composition of the Board
of Directors of the Company, grants the parties thereto certain
25
<PAGE> 26
registration rights and contains provisions requiring the senior executive
officers parties thereto to sell their shares of Common Stock in connection with
certain sales of the Common Stock by the DLJMB Funds and granting the senior
executive officers parties thereto the right to include a portion of their
shares of Common Stock in certain sales of the Common Stock by the DLJMB Funds.
In 1998, Messrs. Curran, Tate, Maddox and Drury and Ms. Josephson received
secured, non-recourse loans from the Company in the amount of $1,249,890,
$367,606, $237,630, $223,222 and $288,413, respectively, to purchase shares of
the Company. The current principal balances of the loans are $1,284,957,
$377,920, $244,297, $229,485 and $296,505, respectively. The loans bear interest
at the rate of 5.69% per annum and are due in full on May 22, 2006. Upon the
termination of a participant's employment with the Company, other than as a
result of the participant's death, any outstanding loan will become due and
payable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
FINANCIAL STATEMENT SCHEDULES
Report of Ernst & Young LLP, Independent Auditors is included at page S-1
hereof.
Schedule II -- Valuation and Qualifying Accounts is included at page S-2
hereof.
All other schedules for which provision is made in the applicable
accounting regulation of the Commission are not required under the related
instructions or are inapplicable and therefore have been omitted.
REPORTS ON FORM 8-K
None.
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
2.1 -- First Amended and Restated Plan of Reorganization of TDII
Company under Chapter 11 of the Bankruptcy Code,
confirmed by the United States Bankruptcy Court, District
of Delaware, on January 18, 1994.(1)
2.2 -- Agreement and Plan of Merger, dated as of January 20,
1998, between Thermadyne Holdings Corporation and Mercury
Acquisition Corporation.(2)
2.3 -- Amendment No. 1 to Agreement and Plan of Merger between
Thermadyne Holdings Corporation and Mercury Acquisition
Corporation.(3)
2.4 -- Certificate of Merger of Mercury Acquisition Corporation
with and into Thermadyne Holdings Corporation.(3)
3.1 -- Certificate of Incorporation of Thermadyne Holdings
Corporation.(included in Exhibit 2.4)
3.2 -- Bylaws of Thermadyne Holdings Corporation.(3)
3.3 -- Certificate of Incorporation of Thermadyne Capital
Corp.(4)
3.4 -- Bylaws of Thermadyne Capital Corp.(4)
3.5 -- Limited Liability Company Agreement of Thermadyne Mfg.
LLC.(4)
4.1 -- Indenture, dated as of May 22 1998, between Mercury
Acquisition Corporation and IBJ Schroder Bank & Trust
Company, as Trustee.(3)
4.2 -- First Supplemental Indenture, dated as of May 22, 1998,
between Thermadyne Holdings Corporation and IBJ Schroder
Bank & Trust Company, as Trustee.(3)
</TABLE>
26
<PAGE> 27
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
4.3 -- Form of 12 1/2% Senior Discount Debenture.(3)
4.4 -- A/B Exchange Registration Rights Agreement dated as of
May 22, 1998, among Mercury Acquisition Corporation and
Donaldson, Lufkin & Jenrette Securities Corporation.(3)
4.5 -- Amendment to Registration Rights Agreement dated May 22,
1998, among Thermadyne Holdings Corporation and
Donaldson, Lufkin & Jenrette Securities Corporation.(3)
4.6 -- Indenture, dated as of February 1, 1994, between
Thermadyne Holdings Corporation and Chemical Bank, as
Trustee, with respect to $179,321,000 principal amount of
the Senior Subordinated Notes Due November 1, 2003.(1)
4.7 -- Form of Senior Subordinated Note (included in Exhibit
4.3).(1)
4.8 -- Indenture, dated May 22, 1998, among Thermadyne Mfg. LLC,
Thermadyne Capital Corp., the guarantors named therein
and State Street Bank and Trust Company, as Trustee.(3)
4.9 -- Form of 9 7/8% Senior Subordinated Notes.(3)
4.10 -- A/B Exchange Registration Rights Agreement dated as of
May 22, 1998, among Thermadyne Mfg. LLC, Thermadyne
Capital Corp., the guarantors named therein and
Donaldson, Lufkin & Jenrette Securities Corporation.(3)
4.11+ -- Subscription Agreement dated December 22, 1999, among
Thermadyne Mfg. LLC, Thermadyne Holdings Corporation, and
the buyers named therein.
4.12+ -- Registration Rights Agreement dated December 22, 1999,
among Thermadyne Mfg. LLC, Thermadyne Holdings
Corporation, and the buyers named therein.
4.13+ -- Form of Indenture relating to Junior Subordinated Notes.
4.14+ -- Form of Warrants (included in Exhibit 4.11).
4.15+ -- Form of Junior Subordinated Notes (included in Exhibit
4.11).
10.1 -- Omnibus Agreement, dated as of June 3, 1988, among Palco
Acquisition Company (now Thermadyne Holdings Corporation)
and its subsidiaries and National Warehouse Investment
Company.(5)
10.2 -- Escrow Agreement, dated as of August 11, 1988, among
National Warehouse Investment Company, Palco Acquisition
Company (now Thermadyne Holdings Corporation) and Title
Guaranty Escrow Services, Inc.(5)
10.3 -- Amended and Restated Industrial Real Property Lease dated
as of August 11, 1988, between National Warehouse
Investment Company and Tweco Products, Inc., as amended
by First Amendment to Amended and Restated Industrial
Real Property Lease dated as of January 20, 1989.(5)
10.4 -- Schedule of substantially identical lease agreements.(5)
10.5 -- Amended and Restated Continuing Lease Guaranty, made as
of August 11, 1988, by Palco Acquisition Company (now
Thermadyne Holdings Corporation) for the benefit of
National Warehouse Investment Company.(5)
10.6 -- Schedule of substantially identical lease guaranties.(5)
10.7 -- Lease Agreement, dated as of October 10, 1990, between
Stoody Deloro Stellite and Bowling Green-Warren County
Industrial Park Authority, Inc.(5)
10.8 -- Lease Agreement, dated as of February 15, 1985, as
amended, between Stoody Deloro Stellite, Inc. and
Corporate Property Associates 6.(5)
</TABLE>
27
<PAGE> 28
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
10.9 -- Receivables Purchase Agreement, dated as of December 28,
1994, among Thermadyne Receivables, Inc., as Transferor,
and NationsBank of Virginia, N.A., as Trustee.(6)
10.10 -- Purchase Agreement, dated as of August 2, 1994, between
Coyne Cylinder Company and BA Credit Corporation.(6)
10.11 -- Sublease Agreement, dated as of April 7, 1994, between
Stoody Deloro Stellite, Inc., and Swat, Inc.(6)
10.12 -- Share Sale Agreement dated as of November 18, 1995, among
certain scheduled persons and companies, Rosny Pty
Limited, Byron Holdings Limited, Thermadyne Holdings
Corporation, and Thermadyne Australia Pty Limited
relating to the sale of the Cigweld Business.(7)
10.13 -- Rights Agreement dated as of May 1, 1997, between
Thermadyne Holdings Corporation and BankBoston, N.A., as
Rights Agent.(8)
10.14 -- First Amendment to Rights Agreement, dated January 20,
1998, between Thermadyne Holdings Corporation and
BankBoston, N.A.(2)
10.15+ -- Executive Employment Agreement dated May 22, 1998,
between Thermadyne Holdings Corporation and Randall E.
Curran.(3)
10.16+ -- Executive Employment Agreement dated May 22, 1998,
between Thermadyne Holdings Corporation and James H.
Tate.(3)
10.17+ -- Executive Employment Agreement dated May 22, 1998,
between Thermadyne Holdings Corporation and Stephanie N.
Josephson.(3)
10.18+ -- Executive Employment Agreement dated May 22, 1998,
between Thermadyne Holdings Corporation and Thomas C.
Drury.(3)
10.19+ -- Executive Employment Agreement dated May 22, 1998,
between Thermadyne Holdings Corporation and Robert D.
Maddox.(3)
10.20+ -- Award Agreement dated May 22, 1998, between Thermadyne
Holdings Corporation and Randall E. Curran.(3)
10.21+ -- Award Agreement dated May 22, 1998, between Thermadyne
Holdings Corporation and James H. Tate.(3)
10.22+ -- Award Agreement dated May 22, 1998, between Thermadyne
Holdings Corporation and Stephanie N. Josephson.(3)
10.23+ -- Award Agreement dated May 22, 1998, between Thermadyne
Holdings Corporation and Thomas C. Drury.(3)
10.24+ -- Award Agreement dated May 22, 1998, between Thermadyne
Holdings Corporation and Robert D. Maddox.(3)
10.25+ -- Thermadyne Holdings Corporation Management Incentive
Plan.(3)
10.26+ -- Thermadyne Holdings Corporation Direct Investment
Plan.(3)
10.27 -- Investors' Agreement dated as of May 22, 1998, between
Thermadyne Holdings Corporation, the DLJ Entities (as
defined therein) and the Management Stockholders (as
defined therein).(3)
10.28 -- Credit Agreement dated as of May 22, 1998, between
Thermadyne Mfg. LLC, Comweld Group Pty. Ltd., GenSet
S.P.A. and Thermadyne Welding Products Canada Limited, as
Borrowers, Various Financial Institutions, as Lenders,
DLJ Capital Funding, Inc., as Syndication Agent, Societe
Generale, as Documentation Agent, and ABN Amro Bank N.V.,
as Administrative Agent.(3)
</TABLE>
28
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
10.29+ -- First Amendment to Credit Agreement, dated as of November
10, 1999, among Thermadyne Mfg. LLC., Comweld Group Pty.
Ltd., GenSet S.P.A. and Thermadyne Welding Products
Canada Limited, as Borrowers, Various Financial
Institutions, as Lenders, DLJ Capital Funding, Inc., as
Syndication Agent, Societe Generale, as Documentation
Agent, and ABN Amro N.V., as Administrative Agent.
10.30 -- Letter Agreement dated as of January 16, 1998, between
Donaldson, Lufkin & Jenrette Securities Corporation and
DLJ Merchant Banking II, Inc.(3)
10.31 -- Assignment and Assumption Agreement dated as of May 22,
1998, between DLJ Merchant Banking II, Inc. and
Thermadyne Holdings Corporation.(3)
21.1 -- Subsidiaries of Thermadyne Holdings Corporation.*
23.1 -- Consent of Ernst & Young LLP, Independent Auditors.*
27.1 -- Financial Data Schedule.*
</TABLE>
- ---------------
+ Indicates a management contract or compensatory plan or arrangement.
* Filed herewith.
(1) Incorporated by reference to the Company's Registration Statement on Form 10
(File No. 0-23378) filed under Section 12(g) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), on February 7, 1994.
(2) Incorporated by reference to the Company's Current Report on Form 8-K (File
No. 0-23378) filed under Section 12(g) of the Exchange Act on January 21,
1998.
(3) Incorporated by reference to the Company's Registration Statement on Form
S-1, (File No. 333-57455) filed on June 23, 1998.
(4) Incorporated by reference to Thermadyne LLC and Thermadyne Capital's
Registration Statement on Form S-1 (File No. 333-57457) filed on June 23,
1998.
(5) Incorporated by reference to the Company's Registration Statement on Form
10/A, Amendment No. 2 (File No. 0-23378) filed under Section 12(g) of the
Exchange Act, on April 28, 1994.
(6) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994.
(7) Incorporated by reference to the Company's Current Report on Form 8-K (File
No. 0-23378) filed under Section 12(g) of the Exchange Act on January 18,
1996.
(8) Incorporated by reference to the Company's Current Report on Form 8-K (File
No. 0-23378) filed under Section 12(g) of the Exchange Act on May 12, 1997.
29
<PAGE> 30
THERMADYNE HOLDINGS CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Thermadyne Holdings Corporation
Report of Ernst & Young LLP, Independent Auditors......... F-2
Consolidated Balance Sheets at December 31, 1999 and
1998................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998, and 1997...................... F-4
Consolidated Statements of Shareholders' Equity (Deficit)
for the years ended December 31, 1999, 1998, and
1997................................................... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998, and 1997...................... F-6
Notes to Consolidated Financial Statements................ F-7
Thermadyne Mfg. LLC
Report of Ernst & Young LLP, Independent Auditors......... F-26
Consolidated Balance Sheets at December 31, 1999 and
1998................................................... F-27
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998, and 1997...................... F-28
Consolidated Statements of Shareholder's Equity (Deficit)
for the years ended December 31, 1999, 1998, and
1997................................................... F-29
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998, and 1997...................... F-30
Notes to Consolidated Financial Statements................ F-31
</TABLE>
F-1
<PAGE> 31
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Thermadyne Holdings Corporation
We have audited the accompanying consolidated balance sheets of Thermadyne
Holdings Corporation and subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of operations, shareholders' equity (deficit),
and cash flows for each of the three years in the period ended December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Thermadyne
Holdings Corporation and subsidiaries at December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
St. Louis, Missouri
February 11, 2000
F-2
<PAGE> 32
THERMADYNE HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 13,321 $ 1,319
Accounts receivable, less allowance for doubtful accounts
of $3,275 and $2,852, respectively..................... 94,731 87,905
Inventories............................................... 100,831 122,733
Prepaid expenses and other................................ 5,954 7,365
--------- ---------
Total current assets.............................. 214,837 219,322
Property, plant and equipment, at cost, net................. 93,811 104,997
Deferred financing costs, net............................... 20,459 23,118
Intangibles, at cost, net................................... 40,170 39,159
Deferred income taxes....................................... 29,105 32,402
Other assets................................................ 2,014 1,251
--------- ---------
Total assets...................................... $ 400,396 $ 420,249
========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable.......................................... $ 41,773 $ 44,170
Accrued and other liabilities............................. 27,052 36,444
Accrued interest.......................................... 3,080 3,154
Income taxes payable...................................... 9,575 5,211
Current maturities of long-term obligations............... 12,080 9,180
--------- ---------
Total current liabilities......................... 93,560 98,159
Long-term obligations, less current maturities.............. 717,322 701,529
Other long-term liabilities................................. 62,172 62,834
Redeemable preferred stock (paid in kind), $0.01 par value,
15,000,000 shares authorized and 2,000,000 shares issued
and outstanding at December 31, 1999 and 1998............. 61,430 54,053
Shareholders' equity (deficit):
Common stock, $.01 par value, 30,000,000 and 25,000,000
shares authorized, 3,590,326 and 3,236,898 shares
issued and outstanding, at December 31, 1999 and 1998,
respectively........................................... 36 32
Additional paid-in capital................................ (111,444) (116,551)
Accumulated deficit....................................... (394,819) (360,520)
Management loans.......................................... (3,966) (3,753)
Accumulated other comprehensive loss...................... (23,895) (15,534)
--------- ---------
Total shareholders' deficit....................... (534,088) (496,326)
--------- ---------
Total liabilities and shareholders' deficit....... $ 400,396 $ 420,249
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 33
THERMADYNE HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net sales............................................... $521,115 $532,777 $520,440
Operating expenses:
Cost of goods sold.................................... 342,250 340,236 320,120
Selling, general and administrative expenses.......... 99,151 102,554 110,696
Amortization of goodwill.............................. 1,575 1,524 1,591
Amortization of other intangibles..................... 3,047 2,360 6,776
Net periodic postretirement benefits.................. 3,200 2,550 2,750
Special charges....................................... 21,886 50,523 --
-------- -------- --------
Operating income........................................ 50,006 33,030 78,507
Other income (expense):
Interest expense...................................... (72,439) (62,151) (45,325)
Amortization of deferred financing costs.............. (3,590) (2,700) (1,587)
Other................................................. 531 (2,939) (3,051)
-------- -------- --------
Income (loss) from continuing operations before income
taxes and extraordinary item.......................... (25,492) (34,760) 28,544
Income tax provision.................................... 8,807 11,415 13,475
-------- -------- --------
Income (loss) from continuing operations before
extraordinary item.................................... (34,299) (46,175) 15,069
Discontinued operations:
Gain on sale of discontinued operations, net of income
taxes of $12,623................................... -- -- 16,015
Income from discontinued operations, net of income
taxes.............................................. -- -- 3,173
-------- -------- --------
Income (loss) before extraordinary item................. (34,299) (46,175) 34,257
Extraordinary item -- loss on early extinguishment of
long-term debt, net of income tax benefit of $8,151... -- (15,137) --
-------- -------- --------
Net income (loss)....................................... (34,299) (61,312) 34,257
Preferred stock dividends (paid in kind)................ 7,377 4,053 --
-------- -------- --------
Net income (loss) applicable to common shares........... $(41,676) $(65,365) $ 34,257
======== ======== ========
Basic earnings (loss) per share amounts applicable to
common shares:
Income (loss) from continuing operations.............. $ (11.68) $ (7.95) $ 1.36
Net income (loss)..................................... $ (11.68) $ (10.35) $ 3.09
Diluted earnings (loss) per share amounts applicable to
common shares:
Income (loss) from continuing operations.............. $ (11.68) $ (7.95) $ 1.33
Net income (loss)..................................... $ (11.68) $ (10.35) $ 3.01
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 34
THERMADYNE HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
ADDITIONAL COMPREHENSIVE
COMMON PAID-IN ACCUMULATED MANAGEMENT INCOME
STOCK CAPITAL DEFICIT LOANS (LOSS) TOTAL
------ ---------- ----------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
January 1, 1997.................. $110 $ 143,237 $(333,465) $ -- $ 4,849 $(185,269)
Comprehensive income (loss):
Net income..................... -- -- 34,257 -- -- 34,257
Other comprehensive
loss -- foreign currency
translation................. -- -- -- -- (17,623) (17,623)
---------
Comprehensive income............. 16,634
---------
Exercise of stock options........ 1 1,498 -- -- -- 1,499
Stock issued under employee stock
purchase plan.................. 1 1,993 -- -- -- 1,994
Recognition of net operating loss
carryforwards.................. -- 2,295 -- -- -- 2,295
---- --------- --------- ------- -------- ---------
December 31, 1997................ 112 149,023 (299,208) -- (12,774) (162,847)
Comprehensive loss:
Net loss....................... -- -- (61,312) -- -- (61,312)
Other comprehensive
loss -- foreign currency
translation................. -- -- -- -- (4,150) (4,150)
---------
Comprehensive loss............... (65,462)
---------
Exercise of stock options........ -- 624 -- -- -- 624
Merger........................... (80) (262,145) -- (3,632) 1,390 (264,467)
Interest on management loans..... -- -- -- (121) -- (121)
Accretion of preferred stock..... -- (4,053) -- -- -- (4,053)
---- --------- --------- ------- -------- ---------
December 31, 1998................ 32 (116,551) (360,520) (3,753) (15,534) (496,326)
Comprehensive loss:
Net loss....................... -- -- (34,299) -- -- (34,299)
Other comprehensive
loss -- foreign currency
translation................. -- -- -- -- (8,361) (8,361)
---------
Comprehensive loss............... (42,660)
---------
Exercise of warrants............. 4 (4) -- -- -- --
Issuance of warrants............. -- 9,175 -- -- -- 9,175
Interest on management loans..... -- -- -- (213) -- (213)
Accretion of preferred stock..... -- (7,377) -- -- -- (7,377)
Recognition of net operating loss
carryforwards.................. -- 3,313 -- -- -- 3,313
---- --------- --------- ------- -------- ---------
December 31, 1999................ $ 36 $(111,444) $(394,819) $(3,966) $(23,895) $(534,088)
==== ========= ========= ======= ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 35
THERMADYNE HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Cash flows provided by (used in) operating
activities:
Net income (loss)................................. $(34,299) $(61,312) $ 34,257
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Net periodic postretirement benefits.......... 3,200 2,550 2,750
Depreciation.................................. 18,860 15,089 12,448
Amortization of goodwill...................... 1,575 1,524 1,591
Amortization of other intangibles............. 3,047 2,360 6,776
Non-cash interest expense..................... 13,134 7,270 --
Amortization of deferred financing costs...... 3,590 2,700 1,587
Recognition of net operating loss
carryforwards............................... 3,313 -- 2,343
Deferred income taxes......................... 3,468 3,185 (1,836)
Loss on asset disposal........................ 2,740 -- --
Issuance of stock warrants.................... 9,175 12,190 --
Non-cash portion of extraordinary item........ -- (2,272) --
Non-cash charges for discontinued
operations.................................. -- -- 1,621
Gain on sale of discontinued operations....... -- -- (16,015)
Changes in operating assets and liabilities:
Accounts receivable........................... 19,239 (8,251) (19,905)
Inventories................................... 25,425 (19,487) (17,228)
Prepaid expenses and other.................... 1,638 728 (1,628)
Accounts payable.............................. (3,751) (11,610) 20,605
Accrued and other liabilities................. (10,453) 2,809 (5,757)
Accrued interest.............................. (71) (2,429) (258)
Income taxes payable.......................... (1,818) 7,920 (3,498)
Other long-term liabilities................... (4,126) (3,272) (3,152)
Discontinued operations....................... -- -- 285
-------- -------- --------
Total adjustments........................ 88,185 11,004 (19,271)
-------- -------- --------
Net cash provided by (used in) operating
activities............................. 53,886 (50,308) 14,986
-------- -------- --------
Cash flows provided by (used in) investing
activities:
Capital expenditures, net....................... (10,168) (17,506) (16,339)
Change in other assets.......................... (1,046) (3,046) 4,162
Acquisitions, net of cash....................... (5,886) (18,953) (37,895)
Investing activities of discontinued
operations.................................... -- -- (1,680)
Proceeds from sale of discontinued operations... -- -- 88,543
-------- -------- --------
Net cash provided by (used in) investing
activities............................. (17,100) (39,505) 36,791
-------- -------- --------
Cash flows provided by (used in) financing
activities:
Change in long-term receivables................. (353) 638 170
Repayment of long-term obligations.............. (23,166) (408,970) (131,486)
Borrowing of long-term obligations.............. 26,535 753,865 72,855
Issuance of common stock........................ 4 90,624 3,069
Issuance of preferred stock..................... -- 50,000 --
Repurchase of common stock...................... -- (368,815) --
Change in accounts receivable securitization.... (23,843) (4,462) 5,676
Financing fees.................................. (901) (23,824) --
Financing activities of discontinued
operations.................................... -- -- (2,808)
Other........................................... (3,060) 595 808
-------- -------- --------
Net cash provided by (used in) financing
activities............................. (24,784) 89,651 (51,716)
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents..................................... 12,002 (162) 61
Cash and cash equivalents at beginning of year.... 1,319 1,481 1,420
-------- -------- --------
Cash and cash equivalents at end of year.......... $ 13,321 $ 1,319 $ 1,481
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 36
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
1. THE COMPANY
Thermadyne Holdings Corporation ("Thermadyne" or the "Company"), a Delaware
corporation, is a global manufacturer of cutting and welding products and
accessories.
As used in this report, the term "Mercury" means Mercury Acquisition
Corporation, the term "Issuer" means Mercury before the Merger and Thermadyne
Holdings Corporation after the Merger (as defined in Note 2), the term
"Holdings" means Thermadyne Holdings Corporation, the terms "Thermadyne" and the
"Company" mean Thermadyne Holdings Corporation, its predecessors and
subsidiaries, the term "Thermadyne LLC" means Thermadyne Mfg. LLC, a wholly
owned and the principal operating subsidiary of Thermadyne Holdings Corporation,
and the term "Thermadyne Capital" means Thermadyne Capital Corp., a wholly owned
subsidiary of Thermadyne LLC.
2. RECENT EVENTS
Special Charges
Special charges of $21.9 million were recorded in 1999 and relate to the
reorganization of the Company's Australian and Asian operations, the
consolidation of two domestic facilities and detachable warrants issued in
conjunction with junior subordinated notes. In 1998, special charges of $50.5
million were recorded related to the merger of the Company and headcount
reductions.
Merger with Mercury Acquisition Corporation
On May 22, 1998, Holdings consummated the merger of Mercury, a corporation
organized by DLJ Merchant Banking Partners II, L.P. ("DLJMB") and affiliated
funds and entities (the "DLJMB Funds"), with and into Holdings, with Holdings
continuing as the surviving corporation (the "Merger").
The funding required to pay cash for common stock not receiving the right
to retain Holdings common stock; to pay cash in lieu of each previously
outstanding employee stock option; to pay cash in lieu of the right to purchase
common stock under the Company's employee stock purchase plan; to refinance
and/or retire outstanding indebtedness of the Company; and to pay expenses
incurred in connection with the Merger was approximately $808 million. These
cash requirements were funded with the proceeds obtained from concurrent equity
and debt financings. Thermadyne LLC and Thermadyne Capital issued $207 million
principal amount of 9 7/8% Senior Subordinated Notes due 2008 (the "Senior
Subordinated Notes") and Thermadyne LLC entered into a syndicated senior secured
loan facility providing for term loan borrowings in the aggregate principal
amount of $330 million and revolving loan borrowings of $100 million (the "New
Credit Facility"). In connection with the Merger, Thermadyne LLC borrowed all
term loans available under the New Credit Facility plus $25 million of revolving
loans, which were subsequently repaid. The revolving loans are available to fund
the working capital requirements of Thermadyne LLC. The proceeds of such
financings were distributed to Holdings in the form of a dividend.
Mercury issued approximately $94.6 million aggregate proceeds of 12 1/2%
Senior Discount Debentures due 2008 (the "Debentures"). In connection with the
Merger, Holdings succeeded to the obligations of Mercury with respect to the
Debentures. The DLJMB Funds also purchased 2,608,696 shares of common stock of
Mercury ("Mercury Common Stock"), 2,000,000 shares of preferred stock of Mercury
("Mercury Preferred Stock") and warrants to purchase 353,428 shares of Mercury
Common Stock at an exercise price of $0.01 per share (the "DLJMB Warrants") for
approximately $140 million. As a result of the Merger, the proceeds of such
purchases became an asset of Holdings, each share of Mercury Common Stock became
a share of Holdings Common Stock, each share of Mercury Preferred Stock became a
share of exchangeable preferred stock of Holdings ("Holdings Preferred Stock")
and each DLJMB Warrant to acquire Mercury Common Stock became exercisable for an
equal number of shares of Holdings Common Stock. In addition, in
F-7
<PAGE> 37
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
connection with the Merger, certain members of senior management purchased
143,192 shares of Holdings Common Stock for approximately $4.9 million (the
"Management Share Purchase"), of which approximately $3.6 million was provided
through non-recourse loans from Holdings (the "Management Loans"). The
Management Loans have a term of eight years and bear interest at the rate of
5.69% compounded annually.
As a result of these transactions, the Company experienced an approximate
85% ownership change, the DLJMB Funds obtained ownership of approximately 80.6%
of the Company's outstanding common stock, and the Company became highly
leveraged. The Merger and related transactions have been treated as a leveraged
recapitalization in which the issuance and retirement of debt have been
accounted for as financing transactions, the sales and purchases of the
Company's common stock have been accounted for as capital transactions at
amounts paid to or received from stockholders, and no changes were made to the
carrying values of the Company's assets and liabilities that were not directly
affected by the transaction.
In connection with the Merger, the Company incurred special charges of
approximately $44.2 million, consisting of expenses of approximately $18.5
million related to employee stock options and related plans and $25.7 million of
non-capitalizable transaction fees. In addition, the Company recorded an
extraordinary loss in the amount of $23.3 million due to the early
extinguishment of long-term debt. The Company paid DLJMB approximately $20
million for professional services in connection with the Merger.
Acquisitions
In 1999 the Company made the following two acquisitions. On March 11, the
Company acquired all the issued and outstanding capital stock of Soltec S.A., a
manufacturer of manual electrodes and tubular wires for hardfacing and special
applications, located in Santiago, Chile. On April 14, the Company acquired all
the issued and outstanding capital stock of Tecmo Srl, a manufacturer of torches
and plasma and laser consumables, located in Rastignano, Italy. The aggregate
consideration paid for these two acquisitions was approximately $6 million and
was financed through existing bank facilities. These transactions were accounted
for as purchases.
In 1998 the Company made the following four acquisitions. On September 1,
the Company acquired all the issued and outstanding capital stock of Thermadyne
Victor Ltda. (formerly known as Equi Solda SA), a leading manufacturer of gas
cutting apparatus in Brazil. On July 24, the Company acquired substantially all
the assets of Mid-America Cryogenics Company, which specializes in the design,
installation and service of cryogenic equipment and is located in Indianapolis,
Indiana. On May 21, the Company acquired substantially all the assets of OCIM
Srl, a manufacturer of a variety of arc welding accessories including MIG and
TIG torches and consumables, located in Milan, Italy. On February 1, the Company
acquired substantially all the assets of Pro-tip, a division of Settles Ground
Support, Inc., a producer of low-cost oxygen fuel cutting tips in Cuthbert,
Georgia. The aggregate consideration paid for these four acquisitions was
approximately $19 million and was financed through existing bank facilities.
These transactions were all accounted for as purchases.
In 1997 the Company completed three acquisitions. On November 25, the
Company acquired substantially all of the assets of Woodland Cryogenics,
Incorporated, a manufacturer of cryogenic pumps, ambient and electric vaporizers
and automatic cylinder filling systems located in Philadelphia, Pennsylvania. On
September 26, the Company acquired substantially all of the assets of the
welding division of Prestolite Power Corporation, a manufacturer of arc welders,
plasma welders and wire feeders, located in Troy, Ohio. On January 31, the
Company acquired all of the issued and outstanding capital stock of GenSet
S.p.A., a leading manufacturer of engine-driven welders and generators in Italy.
The aggregate consideration paid for these three acquisitions was approximately
$38 million and was financed through existing bank facilities. These
transactions were all accounted for as purchases.
The operating results of the acquired companies have been included in the
Consolidated Statements of Operations from their respective dates of
acquisition. Pro forma unaudited results of operations for the twelve
F-8
<PAGE> 38
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
months ended December 31, 1999, 1998 and 1997 have not been presented, since
they would not have differed materially from actual results.
Sale of Discontinued Operations
On September 30, 1997, the Company completed the sale of its Wear
Resistance business for $96,000 which consisted of $88,500 in cash and $7,500 in
the assumption of long-term liabilities. The Company realized a net gain of
$16,015 on this transaction, net of income taxes of $12,623. The net proceeds
were used to reduce debt. The financial results of the Wear Resistance
operations were reported separately as discontinued operations in the
Consolidated Statements of Operations.
Sales from the discontinued business totaled $76,163 for the year ended
December 31, 1997. Certain expenses were allocated to discontinued operations
including interest expense, which was allocated on a ratio of earnings before
interest, taxes, depreciation and amortization for the year presented. Interest
expense allocated to discontinued operations was $2,048 for the year ended
December 31, 1997. Income (loss) from discontinued operations included in the
accompanying Consolidated Statements of Operations includes immaterial amounts
of income taxes.
3. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Thermadyne
and its wholly owned subsidiaries. All material intercompany balances and
transactions have been eliminated in consolidation. Certain amounts from prior
years have been reclassified to conform to current year presentation.
Preparation of financial statements in conformity with generally accepted
accounting principles requires certain estimates and assumptions be made that
affect the reported amounts of 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.
Inventories. Inventories are valued at the lower of cost or market. Cost is
determined using the last-in, first-out ("LIFO") method for domestic
subsidiaries and the first-in, first-out ("FIFO") method for foreign
subsidiaries. Inventories at foreign subsidiaries amounted to approximately
$42,179 and $56,183 at December 31, 1999 and 1998, respectively.
Property, Plant and Equipment. Property, plant and equipment are carried at
cost and are depreciated using the straight-line method. The average estimated
lives utilized in calculating depreciation are as follows: buildings -- 25
years; and machinery and equipment -- two to ten years. Property, plant and
equipment recorded under capital leases is depreciated using the lower of either
the lease term or the underlying assets useful life.
Deferred Financing Costs. The Company capitalizes loan origination fees and
other costs incurred arranging long-term financing. These costs are amortized
over the respective lives of the obligations using the effective interest
method.
Intangibles. The excess of costs over the net tangible assets of businesses
acquired consists of assembled workforces, customer and distributor
relationships, patented and unpatented technology, and goodwill. Identified
intangible assets are amortized on a straight-line basis over the various
estimated useful lives of such assets, which generally range from three to 25
years. Goodwill related to acquisitions is amortized over 40 years. The Company
records impairment losses on long-lived assets including goodwill or related
intangibles when events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amounts of those assets.
Income Taxes. Deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to temporary differences between
the carrying value of assets and liabilities for financial
F-9
<PAGE> 39
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
reporting purposes and their tax bases and carryforward items. The measurement
of current and deferred tax assets and liabilities is based on provisions of the
enacted tax law; the effects of future changes in tax laws or rates are not
anticipated. The measurement of deferred tax assets is reduced, if necessary, by
the amount of any tax benefits that, based on available evidence, are not
expected to be realized.
Revenue Recognition. Revenue from the sale of cutting and welding products
is recognized upon shipment to the customer. Costs and related expenses to
manufacture cutting and welding products are recorded as cost of sales when the
related revenue is recognized.
Comprehensive Income. As of January 1, 1998, the Company adopted Financial
Accounting Standards Board Statement No. 130, "Reporting Comprehensive Income"
("FASB 130"). FASB 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of this statement
had no impact on the Company's net income or shareholders' equity. FASB 130
requires foreign currency translation adjustments, which prior to adoption were
reported separately in shareholders' equity to be included in other
comprehensive income. Prior year financial statements have been reclassified to
conform to the requirements of FASB 130.
During 1999, 1998 and 1997, total comprehensive income (loss) amounted to
$(42,660), $(65,462) and $16,634, respectively.
Earnings Per Share. Basic and diluted earnings per share is calculated in
accordance with the Financial Accounting Standards Board Statement No. 128,
"Earnings per Share". All earnings per share amounts for all periods have been
presented to conform to the requirements of Statement 128. The effects of
options, warrants and convertible securities have not been considered for the
years ended December 31, 1999 and 1998 because the result would be
anti-dilutive.
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- -----------
<S> <C> <C> <C>
Basic earnings (loss) per share amounts applicable to
common shares:
Income (loss) from continuing operations before
extraordinary item................................. $ (11.68) $ (7.95) $ 1.36
Discontinued operations............................... -- -- 1.73
---------- ---------- -----------
Income (loss) before extraordinary item............... (11.68) (7.95) 3.09
Extraordinary item -- loss on early extinguishment of
long-term debt..................................... -- (2.40) --
---------- ---------- -----------
Net income (loss)....................................... $ (11.68) $ (10.35) $ 3.09
========== ========== ===========
Diluted earnings (loss) per share amounts applicable to
common shares:
Income (loss) from continuing operations before
extraordinary item................................. $ (11.68) $ (7.95) $ 1.33
Discontinued operations............................... -- -- 1.68
---------- ---------- -----------
Income (loss) before extraordinary item............... (11.68) (7.95) 3.01
Extraordinary item -- loss on early extinguishment of
long-term debt..................................... -- (2.40) --
---------- ---------- -----------
Net income (loss)............................. $ (11.68) $ (10.35) $ 3.01
========== ========== ===========
Weighted average shares -- basic earnings per share..... 3,567,087 6,317,568 11,072,088
Effect of dilutive securities:
Employee stock options.................................. -- -- 296,109
---------- ---------- -----------
Weighted average shares -- diluted earnings per share... 3,567,087 6,317,568 11,368,197
========== ========== ===========
</TABLE>
F-10
<PAGE> 40
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock-Based Compensation. The Company grants stock options for a fixed
number of shares to employees with an exercise price equal to the fair value of
the shares at the date of grant. The Company accounts for these stock option
grants in accordance with Accounting Principles Board Opinion No. 25 --
"Accounting for Stock Issued to Employees" ("APB 25"), and, accordingly,
recognizes no compensation expense for the stock option grants.
Statements of Cash Flows. For purposes of the statements of cash flows,
Thermadyne considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents. The carrying value of cash and cash
equivalents approximates fair value because of the short maturity of these
investments.
The following table shows the interest and taxes paid (refunded) during the
periods presented in the accompanying Consolidated Statements of Cash Flows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Interest........................................ $53,071 $57,407 $48,683
Taxes........................................... 2,663 (989) 12,276
</TABLE>
Foreign Currency Translation. Local currencies have been designated as the
functional currencies for all subsidiaries. Accordingly, assets and liabilities
of foreign subsidiaries are translated at the rates of exchange at the balance
sheet date. Income and expense items of these subsidiaries are translated at
average monthly rates of exchange. The resultant translation gains or losses are
included in other comprehensive income in the component of shareholders' equity
(deficit) designated "Foreign currency translation." The effect on the
consolidated statements of operations of transaction gains and losses is
insignificant for all years presented. The Company's foreign operations are
discussed in Note 13.
Interest Rate Swap. The Company uses an interest rate swap to manage its
cost of borrowing on a portion of its floating rate debt, as required by its
credit facility.
Recent Accounting Pronouncements. In June 1998, the FASB issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities," which
is required to be adopted in years beginning after June 15, 2000. The Statement
permits early adoption as of the beginning of any fiscal quarter after its
issuance. The Company expects to adopt the new Statement effective January 1,
2001. The Statement will require the Company to recognize all derivatives on the
balance sheet at fair value. Derivatives that are not hedges must be adjusted to
fair value through income. If a derivative is a hedge, depending on the nature
of the hedge, changes in the fair value of the derivative will either be offset
against the change in fair value of the hedged asset, liability, or firm or
forecasted commitment through earnings, or recognized in other comprehensive
income until the hedged item is recognized in earnings. The ineffective portion
of a derivative's change in fair value will be immediately recognized in
earnings. The Company does not anticipate that the adoption of this Statement
will have a significant effect on its results of operations or financial
position.
4. ACCOUNTS RECEIVABLE
The Company was party to a trade accounts receivable securitization
agreement whereby it sold on an ongoing basis, through November 15, 1999,
participation interests in up to $50,000 of designated accounts receivable. The
amount of participation interests sold under this financing arrangement was
subject to change based on the level of eligible receivables and restrictions on
concentrations of receivables, and was approximately $23,843 at December 31,
1998. The sold accounts receivable are reflected as a reduction of accounts
receivable on the Consolidated Balance Sheets. Interest expense was incurred on
participation interests at the rate of one-month LIBOR plus 50 basis points, per
annum.
F-11
<PAGE> 41
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On January 31, 2000, the Company entered into a similar accounts receivable
securitization agreement for a three year period, whereby it will sell
participation interests in up to $45,000 of designated accounts receivable. The
terms, eligibility criteria and accounting treatment have not materially
changed. Interest expense will be incurred at the rate of one-month LIBOR plus
65 basis points, per annum.
5. INVENTORIES
The composition of inventories at December 31, is as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Raw materials............................................... $ 26,707 $ 31,189
Work-in-process............................................. 23,718 27,414
Finished goods.............................................. 51,278 65,623
-------- --------
101,703 124,226
LIFO reserve................................................ (872) (1,493)
-------- --------
$100,831 $122,733
======== ========
</TABLE>
6. PROPERTY, PLANT AND EQUIPMENT
The composition of property, plant and equipment at December 31, is as
follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Land........................................................ $ 15,148 $ 15,478
Building.................................................... 35,080 41,555
Machinery and equipment..................................... 102,428 91,372
-------- --------
152,656 148,405
Accumulated depreciation.................................... (58,845) (43,408)
-------- --------
$ 93,811 $104,997
======== ========
</TABLE>
Assets recorded under capitalized leases were $19,245 ($13,835 net of
accumulated depreciation) and $17,556 ($13,619 net of accumulated depreciation)
at December 31, 1999 and 1998, respectively.
7. INTANGIBLES
The composition of intangibles at December 31, is as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Goodwill.................................................... $ 36,673 $ 35,795
Other....................................................... 14,399 12,914
-------- --------
51,072 48,709
Accumulated amortization.................................... (10,902) (9,550)
-------- --------
$ 40,170 $ 39,159
======== ========
</TABLE>
F-12
<PAGE> 42
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. LONG-TERM OBLIGATIONS
The composition of long-term obligations at December 31, is as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Revolving Credit Facility................................... $ -- $ 14,000
Term A Facility -- United States............................ 68,250 70,000
Term A Facility -- Australia................................ 19,943 19,480
Term A Facility -- Italy.................................... 8,771 10,410
Term B Facility............................................. 113,275 114,425
Term C Facility............................................. 113,275 114,425
Senior subordinated notes, due June 1, 2008, 9 7/8% interest
payable semiannually on June 1 and December 1............. 207,000 207,000
Debentures, due June 1, 2008, 12 1/2% interest payable
semiannually on June 1 and December 1..................... 115,015 101,881
Subordinated notes, due November 1, 2003, 10.75% interest
payable semiannually on May 1 and November 1.............. 37,060 37,060
Junior subordinated notes due December 15, 2009, 15%
interest payable quarterly on March 15, June 15, September
15 and December 15........................................ 25,000 --
Capital leases.............................................. 18,333 17,804
Other....................................................... 3,480 4,224
-------- --------
729,402 710,709
Current maturities.......................................... (12,080) (9,180)
-------- --------
$717,322 $701,529
======== ========
</TABLE>
At December 31, 1999, the schedule of principal payments on long-term debt,
excluding capital lease obligations, is as follows:
<TABLE>
<S> <C>
2000..................................................... $ 11,854
2001..................................................... 17,661
2002..................................................... 25,014
2003..................................................... 71,825
2004..................................................... 75,678
Thereafter............................................... 509,037
</TABLE>
New Credit Facility
The New Credit Facility includes a $330 million term loan facility (the
"Term Loan Facility") and a $100 million revolving credit facility (subject to
adjustment as provided below), which provides for revolving loans and up to $50
million of letters of credit (the "Revolving Credit Facility"). The Term Loan
Facility is comprised of a term A facility of $100 million (the "Term A
Facility"), which has a maturity of six years, a term B facility of $115 million
(the "Term B Facility"), which has a maturity of seven years, and a term C
facility of $115 million (the "Term C Facility"), which has a maturity of eight
years. The Revolving Credit Facility terminates six years after the date of
initial funding of the New Credit Facility and is subject to a potential, but
uncommitted, increase of up to $25 million at Thermadyne LLC's request at any
time prior to such sixth anniversary. Such increase is available only if one or
more financial institutions agrees, at the time of Thermadyne LLC's request, to
provide it. At December 31, 1999, the Company had $10,323 of standby letters of
credit outstanding under the Revolving Credit Facility. Unused borrowing
capacity under the Revolving Credit Facility was $89,677.
F-13
<PAGE> 43
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On November 10, 1999, the Company amended the New Credit Facility to allow
the restructuring of certain of its manufacturing operations and to adjust its
financial covenants. In accordance with the amendment, the rate at which the New
Credit Facility bears interest was adjusted to, at Thermadyne LLC's option, the
administrative agent's alternative base rate or the reserve-adjusted London
Interbank Offered Rate ("LIBOR") plus, in each case, applicable margins of (i)
in the case of alternative base rate loans, (x) 1.50% for revolving and Term A
loans, (y) 1.75% for Term B loans and (z) 2.00% for Term C loans and (ii) in the
case of LIBOR loans, (x) 2.75% for revolving and Term A loans, (y) 3.00% for
Term B loans and (z) 3.25% for Term C loans. The applicable margin may vary
based on Thermadyne LLC's ratio of consolidated indebtedness to Adjusted EBITDA.
In addition, the amendment required the issuance of $25.0 million of Junior
Subordinated Notes with detachable warrants for the purchase of the Company's
common stock. At December 31, 1999, the prime rate was 8.5%.
Prior to the amendment of the New Credit Facility applicable margins were
(i) in the case of alternative base rate loans, (x) 1.00% for revolving and Term
A loans, (y) 1.25% for Term B loans and (z) 1.50% for Term C loans and (ii) in
the case of LIBOR loans, (x) 2.25% for revolving and Term A loans, (y) 2.50% for
Term B loans and (z) 2.75% for Term C loans.
Thermadyne LLC pays a commitment fee calculated at a rate of 0.50% per
annum on the daily average unused commitment under the Revolving Credit Facility
(whether or not then available). Such fee is payable quarterly in arrears and
upon termination of the Revolving Credit Facility (whether at stated maturity or
otherwise).
The applicable margin for the Term A Facility and the Revolving Credit
Facility, as well as the commitment fee and letter of credit fee, is subject to
possible reductions based on the ratio of consolidated Debt to EBITDA (each as
defined in the New Credit Facility).
Thermadyne LLC pays a letter of credit fee calculated (i) in the case of
standby letters of credit, at a rate per annum equal to the then applicable
margin for LIBOR loans under the Revolving Credit Facility minus 0.125% and (ii)
in the case of documentary letters of credit, at a rate per annum equal to 1.25%
plus, in each case, a fronting fee on the stated amount of each letter of
credit. Such fees are payable quarterly in arrears. In addition, Thermadyne LLC
pays customary transaction charges in connection with any letters of credit.
The Term Loan Facility is subject to the following amortization schedule:
<TABLE>
<CAPTION>
YEAR TERM LOAN A TERM LOAN B TERM LOAN C
- ---- ----------- ----------- -----------
<S> <C> <C> <C>
1............................................... 0.0% 1.0% 1.0%
2............................................... 5.0% 1.0% 1.0%
3............................................... 10.0% 1.0% 1.0%
4............................................... 20.0% 1.0% 1.0%
5............................................... 25.0% 1.0% 1.0%
6............................................... 40.0% 1.0% 1.0%
7............................................... -- 94.0% 1.0%
8............................................... -- -- 93.0%
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
The Term Loan Facility is subject to mandatory prepayment: (i) with 100% of
the net cash proceeds from the issuance of debt, subject to certain exceptions,
(ii) with 100% of the net cash proceeds of asset sales and casualty events,
subject to certain exceptions, (iii) with 50% of Thermadyne LLC's excess cash
flow (as defined in the New Credit Facility) to the extent that the Leverage
Ratio (as defined in the New Credit Facility) exceeds 3.5 to 1.0, and (iv) with
50% of the net cash proceeds from the issuance of equity to the extent that the
Leverage Ratio exceeds 4.0 to 1.0. Thermadyne LLC's obligations under the New
Credit
F-14
<PAGE> 44
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Facility are secured by a first-priority perfected lien on: (i) substantially
all domestic property and assets, tangible and intangible (other than accounts
receivable sold or to be sold into the accounts receivable program and
short-term real estate leases), of Thermadyne LLC and its domestic subsidiaries
(other than the special purpose subsidiaries involved in the accounts receivable
program); (ii) the capital stock of (a) Thermadyne LLC held by Holdings and (b)
all subsidiaries of Thermadyne LLC (provided that no more than 65% of the equity
interest in non-U.S. subsidiaries held by Thermadyne LLC and its domestic
subsidiaries and no equity interests in subsidiaries held by foreign
subsidiaries are required to be pledged); and (iii) all intercompany
indebtedness. Holdings has guaranteed the obligations of Thermadyne LLC under
the New Credit Facility. In addition, obligations under the New Credit Facility
are guaranteed by all domestic subsidiaries.
The New Credit Facility contains customary covenants and restrictions on
Thermadyne LLC's ability to engage in certain activities, including, but not
limited to: (i) limitations on the incurrence of liens and indebtedness, (ii)
restrictions on sale lease-back transactions, consolidations, mergers, sale of
assets, capital expenditures, transactions with affiliates and investments, and
(iii) severe restrictions on dividends, and other similar distributions.
The New Credit Facility contains financial covenants requiring Thermadyne
LLC to maintain a minimum level of Adjusted EBITDA (as defined in the New Credit
Facility); a minimum Interest Coverage Ratio (as defined in the New Credit
Facility); a minimum Fixed Charge Coverage Ratio (as defined in the New Credit
Facility); and a maximum Leverage Ratio (as defined in the New Credit Facility).
Interest Rate Swap
At December 31, 1999, the Company has an interest rate swap agreement
outstanding with a notional amount of $61,500, which matures in January of 2000,
under which the Company pays a fixed rate of interest and receives a floating
rate of interest over the term of the interest rate swap agreement without the
exchange of the underlying notional amount. The interest rate swap agreement
converted a portion of the credit facility from a floating rate obligation to a
fixed rate obligation. The fair market value of the interest rate swap is
estimated based on current interest rates, and was $1,419 at December 31, 1999.
The Company is subject to loss if the counterparty to this agreement does not
perform. Interest differentials to be paid or received because of the swap
agreement are reflected as an adjustment to interest expense over the related
debt period. This agreement is accounted for on the accrual basis.
Senior Subordinated Notes
Thermadyne LLC and Thermadyne Capital have outstanding $207 million
aggregate principal amount of the Senior Subordinated Notes. The Senior
Subordinated Notes are general unsecured obligations of Thermadyne LLC and
Thermadyne Capital and will be subordinated in right of payment to all existing
and future senior indebtedness of Thermadyne LLC and Thermadyne Capital
(including borrowings under the New Credit Facility). The Senior Subordinated
Notes are unconditionally guaranteed on a senior subordinated basis by certain
of Thermadyne LLC's existing domestic subsidiaries (the "Guarantor
Subsidiaries"). The note guarantees will be general unsecured obligations of the
Guarantor Subsidiaries, are subordinated in right of payment to all existing and
future senior indebtedness of the Guarantor Subsidiaries, including indebtedness
under the New Credit Facility, and will rank senior in right of payment to any
future subordinated indebtedness of the Guarantor Subsidiaries.
Debentures
Holdings has outstanding $115,015 of Debentures. The Debentures initially
are limited in aggregate principal amount at maturity to $174 million. The
Debentures were issued at $94.6 million, a substantial discount from their
principal amount at maturity. Until June 1, 2003, no interest will accrue on the
F-15
<PAGE> 45
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Debentures, but the accreted value will increase (representing amortization of
original issue discount) between the date of original issuance and June 1, 2003,
on a semiannual bond equivalent basis using a 360-day year comprised of twelve
30-day months, such that the accreted value shall be equal to the full principal
amount at maturity of the Debentures on June 1, 2003. Beginning on June 1, 2003,
interest on the Debentures will accrue at the rate of 12 1/2% per annum and will
be payable in cash semiannually in arrears on June 1 and December 1, commencing
on December 1, 2003, to holders of record on the immediately preceding May 15
and November 15. Interest on the Debentures will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from June
1, 2003. Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months. Subject to certain covenants, additional notes may be
issued under the Indenture having the same terms in all respects as the
Debentures.
The indentures governing the Senior Subordinated Notes, the Debentures and
the subordinated notes restrict, subject to certain exceptions, the Company and
its subsidiaries from incurring additional debt, paying dividends or making
other distributions on or redeeming or repurchasing capital stock, making
investments, loans or advances, disposing of assets, creating liens on assets
and engaging in transactions with affiliates.
Junior Subordinated Notes
Thermadyne LLC has outstanding $25.0 million of Junior Subordinated Notes
(the "Junior Notes") with detachable warrants for the purchase of the Company's
common stock. The Junior Notes are general unsecured obligations of Thermadyne
LLC and will be subordinated in right of payment to all existing and future
senior and senior subordinated indebtedness of Thermadyne LLC. Thermadyne LLC,
at its option, may pay interest in additional Junior Notes between the date of
original issuance and December 15, 2004 on each March 15, June 15, September 15
and December 15 at the rate of 15%. Beginning December 15, 2004, interest will
accrue at the rate of 15% per annum on each interest payment date, provided that
if and for so long as payment of interest on the Junior Notes is prohibited
under the terms of the New Credit Facility, interest shall be paid by the
issuance of additional Junior Notes.
The estimated fair value amounts of the Company's long-term obligations
have been determined by the Company using available market information and
appropriate valuation methodologies. Considerable judgment is required to
develop the estimates of fair value; thus, the estimates provided herein are not
necessarily indicative of the amounts that could be realized in a current market
exchange. The use of different market assumptions or valuation methodologies may
have a material effect on the estimated fair value amounts. The fair values of
the Senior Subordinated Notes, the Debentures and the subordinated notes were
based on the most recent market information available, and are estimated to be
86%, 68.8% and 92.25% of their current carrying values at December 31, 1999, or
$178,020, $79,130 and $34,188, respectively. The fair value of the Junior Notes
is estimated to be their carrying value since these notes have not traded since
their issuance in December 1999. The fair values of the credit agreement and the
Company's other long-term obligations are estimated at their current carrying
values since these obligations are fully secured and have varying interest
charges based on current market rates.
9. REDEEMABLE PREFERRED STOCK
Holdings has outstanding 2,000,000 shares of Holdings Preferred Stock, par
value $0.01 per share, with an initial liquidation preference of $25.00 per
share. Holdings Preferred Stock accrues dividends at a rate equal to 13% per
annum, computed on the basis of a 360-day year. Such dividends are payable
quarterly on March 31, June 30, September 30, and December 31 of each year.
Prior to the fifth anniversary of the issuance of the Holdings Preferred Stock,
dividends are payable through increases in the liquidation preference of the
Holdings Preferred Stock or, at the election of the holders, dividends may be
payable by the issuance of additional shares. Following the fifth anniversary of
the issuance, dividends shall be payable in cash. The Holdings Preferred Stock
is mandatorily redeemable on May 15, 2010 at a redemption price of 100% of the
F-16
<PAGE> 46
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
liquidation preference plus accrued and unpaid dividends. In the event of a
change in control, the Holdings Preferred Stock is mandatorily redeemable at a
redemption price of 101% of the liquidation preference plus accrued and unpaid
dividends. The Holdings Preferred Stock may be redeemed by Holdings prior to May
15, 2001, in whole, at a redemption price per share equal to 113% of the
liquidation preference per share plus accrued and unpaid dividends with the
proceeds of a public equity offering. In addition, the Holdings Preferred Stock
may be redeemed at any time on or after May 15, 2003, in whole, at certain
established redemption prices. Holders of a majority of the outstanding shares
of Holdings Preferred Stock will have the right to elect two members to the
board of directors of Holdings upon the failure of Holdings to pay cash
dividends for more than four consecutive quarters or six quarters, satisfy
mandatory redemption obligations, provide required notices or comply with
certain other specified provisions relating to the Holdings Preferred Stock.
This right terminates and the term of the additional directors ceases upon cure.
In addition, Holdings cannot amend, alter or repeal any provision that would
adversely affect the preferences, rights or powers of the Holdings Preferred
Stock or create, authorize or issue any class of stock ranking prior to or on a
parity with the Holdings Preferred Stock without the written consent of a
majority of the holders.
10. STOCK OPTIONS
The Company has elected to follow APB 25 and related Interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under Financial Accounting
Standards Board Statement No. 123, "Accounting for Stock-Based Compensation"
("FASB 123"), requires use of option valuation models that were not developed
for use in valuing employee stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by FASB 123, which also requires that the information be determined as
if the Company has accounted for its employee stock options granted subsequent
to December 31, 1994 under the fair value method of that statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1999,
1998 and 1997, respectively: risk-free interest rates of 5.3%, 5.6% and 6.1%; a
dividend yield of 0.0% for each year presented; volatility factors of the
expected market price of the Company's common stock of 0.65, 0.35, and 0.38; and
a weighted-average expected life of the options of six years for each year
presented.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Pro forma net income (loss) applicable to common
shares.......................................... $(42,476) $(66,166) $32,239
Pro forma net income (loss) per share:
Basic........................................... (11.91) (10.47) 2.91
Diluted......................................... (11.91) (10.47) 2.84
</TABLE>
F-17
<PAGE> 47
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has two option plans for the grant of options to its employees
and directors. The 1998 Management Incentive Plan (the "1998 Management Plan")
provides for the grant of options to acquire up to 500,000 shares of common
stock to key officers and employees of the Company or its affiliates. Grants
under the 1998 Management Plan vest either a) immediately on the date of grant,
b) ratably over five years from the date of grant, c) upon the attainment of
yearly targeted implied common equity values of the Company or, d) if yearly
targeted implied common equity values are not attained, after an eight-year
period. The Non-Employee Directors Stock Option Plan (the "1998 Directors Plan")
provides for the grant of options to acquire up to 20,000 shares of common stock
to non-employee directors of the Company. Grants under the 1998 Directors Plan
vest immediately on the date of grant. All options granted under the two plans
described above are non-qualified stock options granted at 100% of the fair
market value on the grant dates. In connection with the Merger, the 1993
Management Option Plan (the "1993 Management Plan"), the Non-Employee Directors
Plan (the "1995 Directors Plan") and the 1996 Employee Stock Option Plan (the
"1996 Employee Plan") were terminated. At that time, the option holders received
a cash payment with respect to each option and the underlying options were
canceled.
Information regarding stock options is summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------- ------------------------------ -----------------------------
WEIGHTED-AVERAGE WEIGHTED-AVERAGE WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
-------- ---------------- ----------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding -- beginning of
year......................... 326,566 $34.50 1,061,217 $16.91 963,055 $14.27
Granted........................ 20,700 34.50 328,866 34.50 217,200 27.00
Exercised...................... -- -- (27,549) 12.17 (87,255) 12.38
Canceled or forfeited.......... (3,910) 34.50 (1,035,968) 17.08 (31,783) 18.32
-------- ----------- ----------
Outstanding-end of year........ 343,356 34.50 326,566 34.50 1,061,217 16.91
======== =========== ==========
Exercisable at end of year:
1993 Management Plan......... -- -- 430,399
1995 Directors Plan.......... -- -- 23,000
1996 Employee Plan........... -- -- 39,355
1998 Management Plan......... 57,354 30,213 --
1998 Directors Plan.......... 7,000 6,000 --
Reserved for future grants:
1993 Management Plan......... -- -- 15,704
1995 Directors Plan.......... -- -- 22,000
1996 Employee Plan........... -- -- 470,500
1998 Management Plan......... 163,644 179,434 --
1998 Directors Plan.......... 13,000 14,000 --
Weighted-average fair value of
options granted during the
year......................... $ 11.83 $ 15.16 $ 13.14
Weighted-average remaining
contractual life of options
(years)...................... 8.5 9.4 7.2
</TABLE>
F-18
<PAGE> 48
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. LEASES
Future minimum lease payments related to continuing operations under leases
with initial or remaining noncancelable lease terms in excess of one year at
December 31, 1999 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
2000........................................................ $ 3,884 $ 7,171
2001........................................................ 3,776 6,321
2002........................................................ 3,813 5,420
2003........................................................ 4,056 4,869
2004........................................................ 4,477 4,209
Thereafter.................................................. 41,969 23,841
--------
Total minimum lease payments...................... 61,975
Amount representing interest................................ (43,642)
--------
Present value of net minimum lease payments, including
current obligations of $226............................... $ 18,333
========
</TABLE>
Rent expense under operating leases from continuing operations amounted to
$7,347, $9,528 and $9,358 for the years ended December 31, 1999, 1998 and 1997,
respectively.
12. INCOME TAXES
Pre-tax income (loss) from continuing operations was taxed under the
following jurisdictions:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Domestic............................ $ (7,228) $(27,450) $ 31,104
Foreign............................. (18,264) (7,310) (2,560)
-------- -------- --------
Income (loss) before income
taxes.......................... $(25,492) $(34,760) $ 28,544
======== ======== ========
</TABLE>
The provision (benefit) for income taxes charged to continuing operations
is as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Current:
Federal........................... $ 240 $ (768) $11,014
Foreign........................... 2,206 1,458 1,064
State and local................... 400 350 927
------ ------- -------
Total current............. 2,846 1,040 13,005
------ ------- -------
Deferred............................ 5,961 10,375 470
------ ------- -------
$8,807 $11,415 $13,475
====== ======= =======
</TABLE>
F-19
<PAGE> 49
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The composition of deferred tax assets and liabilities attributable to
continuing operations at December 31 is as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Deferred tax assets:
Post-employment benefits.................................. $ 9,126 $ 8,862
Accrued liabilities....................................... 4,685 7,482
Intangibles............................................... 8,535 8,781
Deferred interest......................................... 6,770 2,412
Other..................................................... 480 1,489
Fixed assets.............................................. 7,090 6,769
Net operating loss carryforwards.......................... 37,711 35,654
-------- --------
Total deferred tax assets......................... 74,397 71,449
Valuation allowance for deferred tax assets............... (41,493) (35,519)
-------- --------
Net deferred tax assets........................... 32,904 35,930
-------- --------
Deferred tax liabilities:
Inventories............................................... 3,800 3,528
-------- --------
Total deferred tax liabilities.................... 3,800 3,528
-------- --------
Net deferred tax asset............................ $ 29,104 $ 32,402
======== ========
</TABLE>
The provision (benefit) for income taxes differs from the amount of income
tax determined by applying the applicable U.S. statutory federal income tax rate
to pretax income from continuing operations as a result of the following
differences:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Tax at U.S. statutory rates......... $(8,922) $(12,166) $ 9,991
Nondeductible goodwill amortization
and other nondeductible
expenses.......................... 1,032 2,660 2,048
Change in valuation allowance....... 5,000 12,000 --
Foreign tax rate differences and
nonrecognition of foreign tax loss
benefits.......................... 8,225 1,032 833
Issuance of warrants................ 3,212 -- --
Nondeductible merger costs.......... -- 7,662 --
State income taxes, net of federal
tax benefit....................... 260 227 603
------- -------- -------
$ 8,807 $ 11,415 $13,475
======= ======== =======
</TABLE>
At December 31, 1999, the Company had net operating loss carryforwards of
approximately $108,000 available for U.S. federal income tax purposes which
expire beginning 2001. Utilization of the majority of these net operating loss
carryforwards is subject to various limitations because of previous changes in
control of ownership (as defined in the Internal Revenue Code) of the Company.
Pursuant to the requirements of the American Institute of Certified Public
Accountants Statement of Position No. 90-7, "Financial Entities in
Reorganization Under the Bankruptcy Code," the tax benefit resulting from the
utilization of net operating loss carryforwards that existed on the effective
date of the Company's financial reorganization will be reported as a direct
addition to paid-in capital.
F-20
<PAGE> 50
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's foreign subsidiaries have undistributed earnings at December
31, 1999. Those earnings are considered to be indefinitely reinvested and,
accordingly, no provision for U.S. federal and state income taxes has been
provided thereon. Upon distribution of those earnings in the form of dividends
or otherwise, the Company would be subject to both U.S. income taxes (subject to
an adjustment for foreign tax credits) and withholding taxes payable to the
various foreign countries. Determination of the amount of unrecognized deferred
U.S. income tax liability is not practicable because of the complexities
associated with its hypothetical calculation.
13. EMPLOYEE BENEFIT PLANS
401(k) Retirement Plan. The 401(k) Retirement Plan covers the majority of
the Company's domestic employees. The Company, at its discretion, can make a
base contribution of 1% of each employee's compensation and an additional
contribution equal to as much as 4% of the employee's compensation. At the
employee's discretion, an additional 1% to 15% voluntary employee contribution
can be made. The plan requires the Company to make a matching contribution of
50% of the first 6% of the voluntary employee contribution. Total expense for
this plan related to continuing operations was approximately $2,223, $2,115, and
$2,628 for the years ended December 31, 1999, 1998 and 1997, respectively.
Employee Stock Purchase Plan. The Employee Stock Purchase Plan was canceled
in connection with the Merger. For the plan year ended December 31, 1997, 1,098
employee participants purchased 82,085 shares at an aggregate purchase price of
$1,989.
Pension Plans. The Company's subsidiaries have had various noncontributory
defined benefit pension plans which covered substantially all U.S. employees.
The Company froze and combined its three noncontributory defined benefit pension
plans through amendments to such plans effective December 31, 1989. All former
participants of these plans became eligible to participate in the 401(k)
Retirement Plan effective January 1, 1990. There was no prepaid benefit cost at
December 31, 1999 or 1998. Accrued benefit liabilities at December 31, 1999 and
1998 were $192 and $336, respectively. In addition, the Company's Australian
subsidiary has a Superannuation Fund established by a Trust Deed which operates
on a lump sum scheme to provide benefits for its employees. Prepaid benefit cost
at December 31, 1999 and 1998 was $6 and $5, respectively. There were no accrued
benefit liabilities at December 31, 1999 or 1998.
Other Postretirement Benefits. The Company has a retirement plan covering
both salaried and nonsalaried retired employees, which provides postretirement
health care benefits (medical and dental) and life insurance benefits. The
postretirement health care portion is contributory, with retiree contributions
adjusted annually as determined by the Company based on claim costs. The
postretirement life insurance portion is noncontributory. The Company recognizes
the cost of postretirement benefits on the accrual basis as employees render
service to earn the benefit. The Company continues to fund the cost of health
care and life insurance benefits in the year incurred.
F-21
<PAGE> 51
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table provides a reconciliation of benefit obligations, plan
assets and status of the Pension and Other Postretirement Benefit Plans as
recognized in the Company's Consolidated Balance Sheet for the years ended
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
OTHER
POSTRETIREMENT
PENSION BENEFITS BENEFITS
----------------- -------------------
1999 1998 1999 1998
------- ------- -------- --------
<S> <C> <C> <C> <C>
Change in Benefit Obligation:
Benefit obligation at beginning of year............ $41,702 $44,439 $ 12,774 $ 12,010
Service cost....................................... 989 1,057 761 1,218
Participant contributions............................ 732 795 -- --
Interest cost........................................ 2,514 2,424 842 1,330
Actuarial (gain) loss................................ (209) (266) 872 (870)
Foreign currency exchange rate changes............... 1,643 (1,507) -- --
Benefits paid........................................ (6,889) (5,240) (2,244) (914)
------- ------- -------- --------
Benefit obligation at end of year.................... $40,482 $41,702 $ 13,005 $ 12,774
======= ======= ======== ========
Change in plan assets:
Fair value of plan assets at beginning of year..... $45,266 $44,399
Actual return on plan assets......................... 8,040 3,968
Sponsor contributions................................ 798 3,086
Participant contributions............................ 732 795
Benefits paid........................................ (6,889) (5,240)
Foreign currency exchange rate changes............... 1,890 (1,632)
Administrative expenses.............................. (118) (110)
------- -------
Fair value of plan assets at end of year............. $49,719 $45,266
======= =======
Funded status of the plan (underfunded).............. $ 9,237 $ 3,564 $(13,005) $(12,774)
Unrecognized net actuarial loss (gain)............. (3,333) 989 (10,807) (9,426)
Unrecognized prior service cost.................... 76 99 (1,272) (1,927)
------- ------- -------- --------
Prepaid (accrued) benefit cost..................... $ 5,980 $ 4,652 $(25,084) $(24,127)
======= ======= ======== ========
Weighted-average assumptions as of December 31:
Discount rate...................................... 8% 7% 8% 7%
Expected return on plan assets..................... 8% 8% N/A N/A
Rate of compensation increase...................... 3% 3% N/A N/A
</TABLE>
Net periodic pension and other postretirement benefit costs include the
following components:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
--------------------------- -------------------------
1999 1998 1997 1999 1998 1997
------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Components of the net periodic
benefit cost:
Service cost....................... $ 989 $ 1,057 $ 1,259 $ 761 $1,218 $1,255
Interest cost...................... 2,514 2,424 3,045 842 1,330 1,496
Expected return on plan assets..... (3,733) (3,366) (3,644) -- -- --
Recognized (gain) loss............. -- -- -- 1,698 2 (1)
Amortization of prior service
cost............................ -- 2 3 -- -- --
Prior service cost recognized...... 23 23 23 (101) -- --
------- ------- ------- ------- ------ ------
Benefit cost (credit)................ $ (207) $ 140 $ 686 $ 3,200 $2,550 $2,750
======= ======= ======= ======= ====== ======
</TABLE>
F-22
<PAGE> 52
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 9.5% in 1999, declining gradually to 6.0%
in 2012. The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation was 9.5% in 1998 and 10.5% in
1997. A one percentage point change in the assumed health care cost trend rate
would have the following effects:
<TABLE>
<CAPTION>
1-PERCENTAGE 1-PERCENTAGE
POINT INCREASE POINT DECREASE
-------------- --------------
<S> <C> <C>
Effect on total of service and interest cost components in
1999.................................................... $ 309 $ (240)
Effect on postretirement benefit obligation as of December
31, 1999................................................ 1,436 (1,188)
</TABLE>
14. SEGMENT INFORMATION
The Company reports its segment information by geographic region. Although
the Company's domestic operation is comprised of several individual business
units, similarity of products, paths to market, end users, and production
processes results in performance evaluation and decisions regarding allocation
of resources being made on a combined basis. The Company's reportable geographic
regions are the United States, Europe and Australia/Asia.
The Company evaluates performance and allocates resources based principally
on operating income net of any special charges or significant one-time charges.
The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies. Intersegment sales
are based on market prices.
F-23
<PAGE> 53
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Summarized financial information concerning the Company's reportable
segments is shown in the following table. The "Other" column includes the
elimination of intersegment sales and profits, corporate related items and other
costs not allocated to the reportable segments.
<TABLE>
<CAPTION>
ALL OTHER
UNITED GEOGRAPHIC
STATES EUROPE AUSTRALIA/ASIA REGIONS OTHER CONSOLIDATED
-------- ------- -------------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
1999
Revenue from external
customers............... $343,521 $56,449 $ 76,763 $44,382 $ -- $521,115
Intersegment revenues..... 34,290 15,678 2,819 414 (53,201) --
Depreciation and
amortization of
intangibles............. 11,164 2,737 4,603 590 4,388 23,482
Operating income (loss)... 71,941 3,109 (5,576) (1,460) (118,020) (50,006)
Identifiable assets....... 146,860 54,756 91,949 32,213 74,618 400,396
Capital Expenditures...... 5,047 644 2,623 1,317 537 10,168
1998
Revenue from external
customers............... 363,371 54,657 82,238 32,511 -- 532,777
Intersegment revenues..... 39,715 14,355 4,447 -- (58,517) --
Depreciation and
amortization of
intangibles............. 9,562 2,682 3,979 646 2,104 18,973
Operating income (loss)... 90,691 3,953 (1,549) (48) (60,017) 33,030
Identifiable assets....... 174,272 57,539 107,991 31,686 48,761 420,249
Capital expenditures...... 7,965 1,114 7,091 420 916 17,506
1997
Revenue from external
customers............... 333,871 51,900 109,984 24,685 -- 520,440
Intersegment revenues..... 35,503 4,699 2,700 -- (42,902) --
Depreciation and
amortization of
intangibles............. 12,190 2,333 4,677 57 1,558 20,815
Operating income (loss)... 85,279 3,416 2,304 1,148 (13,640) 78,507
Identifiable assets....... 158,038 48,684 102,342 9,285 36,178 354,527
Capital expenditures...... 7,843 2,464 4,828 78 1,126 16,339
</TABLE>
Product Line Information
The Company manufactures a variety of products, substantially all of which
are used in the cutting, welding or fabrication of metal. End users of the
Company's products are engaged in various applications including construction,
automobile manufacturing, repair and maintenance and shipbuilding. The following
table shows sales for each of the Company's key product lines:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Gas apparatus....................... $186,279 $183,688 $183,253
Arc welding equipment............... 104,857 103,803 90,440
Arc welding consumables............. 149,693 162,696 171,922
Plasma and automated cutting
equipment......................... 71,083 71,742 61,685
All other........................... 9,203 10,848 13,140
-------- -------- --------
$521,115 $532,777 $520,440
======== ======== ========
</TABLE>
F-24
<PAGE> 54
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. CONTINGENCIES
Thermadyne and certain of its wholly owned subsidiaries are defendants in
various legal actions, primarily in the product liability area. While there is
uncertainty relating to any litigation, management is of the opinion that the
outcome of such litigation will not have a material adverse effect on the
Company's financial condition or results of operations.
F-25
<PAGE> 55
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Thermadyne Mfg. LLC
We have audited the accompanying consolidated balance sheets of Thermadyne
Mfg. LLC and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations, shareholder's equity (deficit), and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Thermadyne Mfg.
LLC and subsidiaries at December 31, 1999 and 1998, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
/s/ ERNST & YOUNG LLP
St. Louis, Missouri
February 11, 2000
F-26
<PAGE> 56
THERMADYNE MFG. LLC
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 13,321 $ 1,319
Accounts receivable, less allowance for doubtful accounts
of $3,275 and $2,852 respectively...................... 94,731 87,905
Inventories............................................... 100,831 122,733
Prepaid expenses and other................................ 5,954 7,365
--------- ---------
Total current assets.............................. 214,837 219,322
Property, plant and equipment, at cost, net................. 93,811 104,997
Deferred financing costs, net............................... 17,289 19,572
Intangibles, at cost, net................................... 40,170 39,159
Deferred income taxes....................................... 25,838 29,135
Other assets................................................ 2,014 1,251
--------- ---------
Total assets...................................... $ 393,959 $ 413,436
========= =========
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Accounts payable.......................................... $ 41,773 $ 44,170
Accrued and other liabilities............................. 27,052 36,444
Accrued interest.......................................... 2,416 498
Income taxes payable...................................... 9,575 5,211
Current maturities of long-term obligations............... 12,080 9,180
--------- ---------
Total current liabilities......................... 92,896 95,503
Long-term obligations, less current maturities.............. 565,247 562,588
Other long-term liabilities................................. 62,172 62,834
Shareholder's deficit:
Accumulated deficit....................................... (385,425) (368,408)
Accumulated other comprehensive loss...................... (23,895) (15,534)
--------- ---------
Total shareholder's deficit....................... (409,320) (383,942)
Net equity and advances to/from parent.................... 82,964 76,453
--------- ---------
Total liabilities and shareholder's deficit....... $ 393,959 $ 413,436
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-27
<PAGE> 57
THERMADYNE MFG. LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net sales............................................. $521,115 $532,777 $520,440
Operating expenses:
Cost of goods sold.................................. 342,250 340,236 320,120
Selling, general and administrative expenses........ 99,151 102,554 110,696
Amortization of goodwill............................ 1,575 1,524 1,591
Amortization of other intangibles................... 3,047 2,360 6,776
Net periodic postretirement benefits................ 3,200 2,550 2,750
Special charges..................................... 21,886 50,523 --
-------- -------- --------
Operating income...................................... 50,006 33,030 78,507
Other income (expense):
Interest expense.................................... (55,321) (52,545) (45,325)
Amortization of deferred financing costs............ (3,214) (2,480) (1,587)
Other............................................... 319 (3,059) (3,051)
-------- -------- --------
Income (loss) from continuing operations before income
taxes and extraordinary item........................ (8,210) (25,054) 28,544
Income tax provision.................................. 8,807 14,682 13,475
-------- -------- --------
Income (loss) from continuing operations before
extraordinary item.................................. (17,017) (39,736) 15,069
Discontinued operations:
Gain on sale of discontinued operations, net of
income taxes of $12,623.......................... -- -- 16,015
Income from discontinued operations, net of income
taxes............................................ -- -- 3,173
-------- -------- --------
Income (loss) before extraordinary item............... (17,017) (39,736) 34,257
Extraordinary item-loss on early extinguishment of
long-term debt, net of income tax benefit of
$8,151.............................................. -- (15,137) --
-------- -------- --------
Net income (loss)..................................... $(17,017) $(54,873) $ 34,257
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-28
<PAGE> 58
THERMADYNE MFG. LLC
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
ACCUMULATED COMPREHENSIVE
DEFICIT INCOME (LOSS) TOTAL
----------- ------------- ---------
<S> <C> <C> <C>
January 1, 1997......................................... $(333,465) $ 4,849 $(328,616)
Comprehensive income (loss):
Net income............................................ 34,257 -- 34,257
Other comprehensive loss -- foreign currency
translation........................................ -- (17,623) (17,623)
---------
Comprehensive income.................................... 16,634
--------- -------- ---------
December 31, 1997....................................... (299,208) (12,774) (311,982)
Comprehensive loss:
Net income............................................ (54,873) -- (54,873)
Other comprehensive loss -- foreign currency
translation........................................ -- (4,150) (4,150)
---------
Comprehensive loss...................................... (59,023)
Merger.................................................. (14,327) 1,390 (12,937)
--------- -------- ---------
December 31, 1998....................................... (368,408) (15,534) (383,942)
Comprehensive loss
Net income............................................ (17,017) -- (17,017)
Other comprehensive loss -- foreign currency
translation........................................ -- (8,361) (8,361)
---------
Comprehensive loss...................................... (25,378)
--------- -------- ---------
December 31, 1999....................................... $(385,425) $(23,895) $(409,320)
========= ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-29
<PAGE> 59
THERMADYNE MFG. LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows provided by (used in) operating activities:
Net income (loss)....................................... $(17,017) $ (54,873) $ 34,257
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Net periodic postretirement benefits............... 3,200 2,550 2,750
Depreciation....................................... 18,860 15,089 12,448
Amortization of goodwill........................... 1,575 1,524 1,591
Amortization of other intangibles.................. 3,047 2,360 6,776
Amortization of deferred financing costs........... 3,214 2,480 1,587
Recognition of net operating loss carryforwards.... 3,313 -- 2,343
Deferred income taxes.............................. 3,468 6,452 (1,836)
Loss on asset disposal............................. 2,739 -- --
Non-cash portion of extraordinary item............. -- (2,272) --
Non-cash charges for discontinued operations....... -- -- 1,621
Gain on sale of discontinued operations............ -- -- (16,015)
Changes in operating assets and liabilities:
Accounts receivable................................ 19,239 (8,251) (19,905)
Inventories........................................ 25,425 (19,487) (17,228)
Prepaid expenses and other......................... 1,638 728 (1,628)
Accounts payable................................... (3,751) (11,610) 20,605
Accrued and other liabilities...................... (10,453) 2,809 (5,757)
Accrued interest................................... 1,921 (5,085) (258)
Income taxes payable............................... (1,818) 7,920 (3,498)
Other long-term liabilities........................ (4,126) (3,272) (3,152)
Discontinued operations............................ -- -- 285
-------- --------- ---------
Total adjustments............................. 67,491 (8,065) (19,271)
-------- --------- ---------
Net cash provided by (used in) operating
activities.................................. 50,474 (62,938) 14,986
-------- --------- ---------
Cash flows provided by (used in) investing activities:
Capital expenditures, net............................. (10,168) (17,506) (16,339)
Change in other assets................................ (1,046) (3,046) 4,162
Acquisitions, net of cash............................. (5,886) (18,953) (37,895)
Investing activities of discontinued operations....... -- -- (1,680)
Proceeds from sale of discontinued operations......... -- -- 88,543
-------- --------- ---------
Net cash provided by (used in) investing
activities.................................. (17,100) (39,505) 36,791
-------- --------- ---------
Cash flows provided by (used in) financing activities:
Change in long-term receivables....................... (353) 638 170
Repayment of long-term obligations.................... (23,166) (408,970) (131,486)
Borrowing of long-term obligations.................... 26,535 622,194 72,855
Change in accounts receivable securitization.......... (23,843) (4,462) 5,676
Financing fees........................................ (901) (20,058) --
Change in net equity of parent........................ 3,198 (87,010) --
Issuance of common stock.............................. -- -- 3,069
Financing activities of discontinued operations....... -- -- (2,808)
Other................................................. (2,842) (51) 808
-------- --------- ---------
Net cash provided by (used in) financing
activities.................................. (21,372) 102,281 (51,716)
-------- --------- ---------
Net increase (decrease) in cash and cash equivalents.... 12,002 (162) 61
Cash and cash equivalents at beginning of year.......... 1,319 1,481 1,420
-------- --------- ---------
Cash and cash equivalents at end of year................ $ 13,321 $ 1,319 $ 1,481
======== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-30
<PAGE> 60
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
1. THE COMPANY
As used in this report, the term "Mercury" means Mercury Acquisition
Corporation, the term "Issuer" means Mercury before the Merger and Thermadyne
Holdings Corporation after the Merger (as defined in Note 2), the term
"Holdings" means Thermadyne Holdings Corporation, the terms "Thermadyne" and the
"Company" mean Thermadyne Holdings Corporation, its predecessors and
subsidiaries, the term "Thermadyne LLC" means Thermadyne Mfg. LLC, a wholly
owned and the principal operating subsidiary of Thermadyne Holdings Corporation,
and the term "Thermadyne Capital" means Thermadyne Capital Corp., a wholly owned
subsidiary of Thermadyne LLC. The Company is a global manufacturer of cutting
and welding products and accessories.
Thermadyne Capital, a wholly owned subsidiary of Thermadyne LLC, was formed
solely for the purpose of serving as co-issuer of the 9 7/8% Senior Subordinated
Notes due 2008 (the "Senior Subordinated Notes"). Thermadyne Capital has no
substantial assets or liabilities and no operations of any kind and the
Indenture pursuant to which the Senior Subordinated Notes were issued limits
Thermadyne Capital's ability to acquire or hold any significant assets, incur
any liabilities or engage in any business activities, other than in connection
with the issuance of the Senior Subordinated Notes.
2. RECENT EVENTS
Special Charges
Special charges of $21.9 million were recorded in 1999 and relate to the
reorganization of the Company's Australian and Asian operations, the
consolidation of two domestic facilities and detachable warrants issued in
conjunction with junior subordinated notes. In 1998, special charges of $50.5
million were recorded related to the merger of the Company and headcount
reductions.
Merger with Mercury Acquisition Corporation
On May 22, 1998, Holdings consummated the merger of Mercury, a corporation
organized by DLJ Merchant Banking Partners II, L.P. ("DLJMB") and affiliated
funds and entities (the "DLJMB Funds"), with and into Holdings, with Holdings
continuing as the surviving corporation (the "Merger").
The funding required to pay cash for common stock not receiving the right
to retain Holdings common stock; to pay cash in lieu of each previously
outstanding employee stock option; to pay cash in lieu of the right to purchase
common stock under the Company's employee stock purchase plan; to refinance
and/or retire outstanding indebtedness of the Company; and to pay expenses
incurred in connection with the Merger was approximately $808 million. These
cash requirements were funded with the proceeds obtained from concurrent equity
and debt financings. Thermadyne LLC and Thermadyne Capital issued the Senior
Subordinated Notes and Thermadyne LLC entered into a syndicated senior secured
loan facility providing for term loan borrowings in the aggregate principal
amount of $330 million and revolving loan borrowings of $100 million (the "New
Credit Facility"). In connection with the Merger, Thermadyne LLC borrowed all
term loans available under the New Credit Facility plus $25 million of revolving
loans, which were subsequently repaid. The revolving loans are available to fund
the working capital requirements of Thermadyne LLC. The proceeds of such
financings were distributed to Holdings in the form of a dividend.
Mercury issued approximately $94.6 million aggregate proceeds of 12 1/2%
Senior Discount Debentures due 2008 (the "Debentures"). In connection with the
Merger, Holdings succeeded to the obligations of Mercury with respect to the
Debentures. The DLJMB Funds also purchased 2,608,696 shares of common stock of
Mercury ("Mercury Common Stock"), 2,000,000 shares of preferred stock of Mercury
("Mercury Preferred Stock") and warrants to purchase 353,428 shares of Mercury
Common Stock at an exercise price of $0.01 per share (the "DLJMB Warrants") for
approximately $140 million. As a result of the Merger, the
F-31
<PAGE> 61
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
proceeds of such purchases became an asset of Holdings, each share of Mercury
Common Stock became a share of Holdings Common Stock, each share of Mercury
Preferred Stock became a share of exchangeable preferred stock of Holdings
("Holdings Preferred Stock") and each DLJMB Warrant to acquire Mercury Common
Stock became exercisable for an equal number of shares of Holdings Common Stock.
In addition, in connection with the Merger, certain members of senior management
purchased 143,192 shares of Holdings Common Stock for approximately $4.9 million
(the "Management Share Purchase"), of which approximately $3.6 million was
provided through non-recourse loans from Holdings (the "Management Loans"). The
Management Loans have a term of eight years and bear interest at the rate of
5.69% compounded annually.
As a result of these transactions, the Company experienced an approximate
85% ownership change, the DLJMB Funds obtained ownership of approximately 80.6%
of the Company's outstanding common stock, and the Company became highly
leveraged. The Merger and related transactions have been treated as a leveraged
recapitalization in which the issuance and retirement of debt have been
accounted for as financing transactions, the sales and purchases of the
Company's common stock have been accounted for as capital transactions at
amounts paid to or received from stockholders, and no changes were made to the
carrying values of the Company's assets and liabilities that were not directly
affected by the transaction.
In connection with the Merger, the Company incurred special charges of
approximately $44.2 million, consisting of expenses of approximately $18.5
million related to employee stock options and related plans and $25.7 million of
non-capitalizable transaction fees. In addition, the Company recorded an
extraordinary loss in the amount of $23.3 million due to the early
extinguishment of long-term debt. The Company paid DLJMB approximately $20
million for professional services in connection with the Merger.
Acquisitions
In 1999 the Company made the following two acquisitions. On March 11, the
Company acquired all the issued and outstanding capital stock of Soltec S.A., a
manufacturer of manual electrodes and tubular wires for hardfacing and special
applications, located in Santiago, Chile. On April 14, the Company acquired all
the issued and outstanding capital stock of Tecmo Srl, a manufacturer of torches
and plasma and laser consumables located in Rastignano, Italy. The aggregate
consideration paid for these two acquisitions was approximately $6 million and
was financed through existing bank facilities. These transactions were accounted
for as purchases.
In 1998 the Company made the following four acquisitions. On September 1,
the Company acquired all the issued and outstanding capital stock of Thermadyne
Victor Ltda. (formerly known as Equi Solda SA), a leading manufacturer of gas
cutting apparatus in Brazil. On July 24, the Company acquired substantially all
the assets of Mid-America Cryogenics Company, which specializes in the design,
installation and service of cryogenic equipment and is located in Indianapolis,
Indiana. On May 21, the Company acquired substantially all the assets of OCIM
Srl, a manufacturer of a variety of arc welding accessories including MIG and
TIG torches and consumables, located in Milan, Italy. On February 1, the Company
acquired substantially all the assets of Pro-tip, a division of Settler Ground
Support, Inc., a producer of low-cost oxygen fuel cutting tips in Cuthbert,
Georgia. The aggregate consideration paid for these four acquisitions was
approximately $19 million and was financed through existing bank facilities.
These transactions were all accounted for as purchases.
In 1997 the Company completed three acquisitions. On November 25, the
Company acquired substantially all of the assets of Woodland Cryogenics,
Incorporated, a manufacturer of cryogenic pumps, ambient and electric vaporizers
and automatic cylinder filling systems located in Philadelphia, Pennsylvania. On
September 26, the Company acquired substantially all of the assets of the
welding division of Prestolite Power Corporation, a manufacturer of arc welders,
plasma welders and wire feeders, located in Troy, Ohio. On January 31, the
Company acquired all of the issued and outstanding capital stock of GenSet
S.p.A., a leading manufacturer of engine-driven welders and generators in Italy.
The aggregate consideration paid for these
F-32
<PAGE> 62
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
three acquisitions was approximately $38 million and was financed through
existing bank facilities. These transactions were all accounted for as
purchases.
The operating results of the acquired companies have been included in the
Consolidated Statements of Operations from their respective dates of
acquisition. Pro forma unaudited results of operations for the twelve months
ended December 31, 1999, 1998 and 1997 have not been presented since they would
not have differed materially from actual results.
Sale of Discontinued Operations
On September 30, 1997, the Company completed the sale of its Wear
Resistance business for $96,000 which consisted of $88,500 in cash and $7,500 in
the assumption of long-term liabilities. The Company realized a net gain of
$16,015 on this transaction, net of income taxes of $12,623. The net proceeds
were used to reduce debt. The financial results of the Wear Resistance
operations were reported separately as discontinued operations in the
Consolidated Statements of Operations.
Sales from the discontinued business totaled $76,163 for the year ended
December 31, 1997. Certain expenses were allocated to discontinued operations
including interest expense, which was allocated on a ratio of earnings before
interest, taxes, depreciation and amortization for the year presented. Interest
expense allocated to discontinued operations was $2,048 for the year ended
December 31, 1999. Income from discontinued operations included in the
accompanying Consolidated Statements of Operations includes immaterial amounts
of income taxes.
3. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Thermadyne
and its wholly owned subsidiaries. All material intercompany balances and
transactions have been eliminated in consolidation. Certain amounts from prior
years have been reclassified to conform to current year presentation.
Preparation of financial statements in conformity with generally accepted
accounting principles requires certain estimates and assumptions be made that
affect the reported amounts of 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.
Inventories. Inventories are valued at the lower of cost or market. Cost is
determined using the last-in, first-out ("LIFO") method for domestic
subsidiaries and the first-in, first-out ("FIFO") method for foreign
subsidiaries. Inventories at foreign subsidiaries amounted to approximately
$42,179 and $56,183 at December 31, 1999 and 1998, respectively.
Property, Plant and Equipment. Property, plant and equipment are carried at
cost and are depreciated using the straight-line method. The average estimated
lives utilized in calculating depreciation are as follows: buildings -- 25
years; and machinery and equipment -- two to ten years. Property, plant and
equipment recorded under capital leases is depreciated using the lower of either
the lease term or the underlying asset's useful life.
Deferred Financing Costs. The Company capitalizes loan origination fees and
other costs incurred arranging long-term financing. These costs are amortized
over the respective lives of the obligations using the effective interest
method.
Intangibles. The excess of costs over the net tangible assets of businesses
acquired consists of assembled workforces, customer and distributor
relationships, patented and unpatented technology, and goodwill. Identified
intangible assets are amortized on a straight-line basis over the various
estimated useful lives of such assets, which generally range from three to 25
years. Goodwill related to acquisitions is amortized over 40 years. The Company
records impairment losses on long-lived assets including goodwill or related
F-33
<PAGE> 63
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
intangibles when events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amounts of those assets.
Income Taxes. Deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to temporary differences between
the carrying value of assets and liabilities for financial reporting purposes
and their tax bases and carryforward items. The measurement of current and
deferred tax assets and liabilities is based on provisions of the enacted tax
law; the effects of future changes in tax laws or rates are not anticipated. The
measurement of deferred tax assets is reduced, if necessary, by the amount of
any tax benefits that, based on available evidence, are not expected to be
realized.
Revenue Recognition. Revenue from the sale of cutting and welding products
is recognized upon shipment to the customer. Costs and related expenses to
manufacture cutting and welding products are recorded as cost of sales when the
related revenue is recognized.
Comprehensive Income. As of January 1, 1998, the Company adopted Financial
Accounting Standards Board Statement No. 130, "Reporting Comprehensive Income"
("FASB 130"). FASB 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of this statement
had no impact on the Company's net income or shareholders' equity. FASB 130
requires foreign currency translation adjustments, which prior to adoption were
reported separately in shareholders' equity to be included in other
comprehensive income. Prior year financial statements have been reclassified to
conform to the requirements of FASB 130.
During 1999, 1998 and 1997, total comprehensive income (loss) amounted to
$(25,378), $(59,023) and $16,634, respectively.
Statements of Cash Flows. For purposes of the statements of cash flows,
Thermadyne considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents. The carrying value of cash and cash
equivalents approximates fair value because of the short maturity of these
investments.
The following table shows the interest and taxes paid (refunded) during the
periods presented in the accompanying Consolidated Statements of Cash Flows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Interest............................ $52,407 $57,722 $48,683
Taxes............................... 2,663 (989) 12,276
</TABLE>
Foreign Currency Translation. Local currencies have been designated as the
functional currencies for all subsidiaries. Accordingly, assets and liabilities
of foreign subsidiaries are translated at the rates of exchange at the balance
sheet date. Income and expense items of these subsidiaries are translated at
average monthly rates of exchange. The resultant translation gains or losses are
included in other comprehensive income in the component of shareholders' equity
(deficit) designated "Foreign currency translation." The effect on the
consolidated statements of operations of transaction gains and losses is
insignificant for all years presented. The Company's foreign operations are
discussed in Note 12.
Interest Rate Swap. The Company uses an interest rate swap to manage its
cost of borrowing on a portion of its floating rate debt, as required by its
credit facility.
Recent Accounting Pronouncements. In June 1998, the FASB issued Statement
No. 133 "Accounting for Derivative Instruments and Hedging Activities," which is
required to be adopted in years beginning after June 15, 2000. The Statement
permits early adoption as of the beginning of any fiscal quarter after its
issuance. The Company expects to adopt the new Statement effective January 1,
2001. The Statement will require the Company to recognize all derivatives on the
balance sheet at fair value. Derivatives that are not
F-34
<PAGE> 64
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
hedges must be adjusted to fair value through income. If a derivative is a
hedge, depending on the nature of the hedge, changes in the fair value of the
derivative will either be offset against the change in fair value of the hedged
asset, liability or firm or forecasted commitment through earnings, or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. The Company does not anticipate that the
adoption of this Statement will have a significant effect on its results of
operations or financial position.
4. ACCOUNTS RECEIVABLE
The Company was party to a trade accounts receivable securitization
agreement whereby it sold on an ongoing basis, through November 15, 1999,
participation interests in up to $50,000 of designated accounts receivable. The
amount of participation interests sold under this financing arrangement was
subject to change based on the level of eligible receivables and restrictions on
concentrations of receivables, and was approximately $23,843 at December 31,
1998. The sold accounts receivable are reflected as a reduction of accounts
receivable on the Consolidated Balance Sheets. Interest expense was incurred on
participation interests at the rate of one-month LIBOR plus 50 basis points, per
annum.
On January 31, 2000, the Company entered into a similar accounts receivable
securitization agreement for a three year period, whereby it will sell
participation interests in up to $45,000 of designated accounts receivable. The
terms, eligibility criteria and accounting treatment have not materially
changed. Interest expense will be incurred at the rate of one-month LIBOR plus
65 basis points, per annum.
5. INVENTORIES
The composition of inventories at December 31, is as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Raw materials........................................... $ 26,707 $ 31,189
Work-in-process......................................... 23,718 27,414
Finished goods.......................................... 51,278 65,623
-------- --------
101,703 124,226
LIFO reserve............................................ (872) (1,493)
-------- --------
$100,831 $122,733
======== ========
</TABLE>
6. PROPERTY, PLANT AND EQUIPMENT
The composition of property, plant and equipment at December 31, is as
follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Land.................................................... $ 15,148 $ 15,478
Building................................................ 35,080 41,555
Machinery and equipment................................. 102,428 91,372
-------- --------
152,656 148,405
Accumulated depreciation................................ (58,845) (43,408)
-------- --------
$ 93,811 $104,997
======== ========
</TABLE>
Assets recorded under capitalized leases were $19,245 ($13,835 net of
accumulated depreciation) and $17,556 ($13,619 net of accumulated depreciation)
at December 31, 1999 and 1998, respectively.
F-35
<PAGE> 65
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INTANGIBLES
The composition of intangibles at December 31, is as follows:
<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Goodwill................................................. $ 36,673 $35,795
Other.................................................... 14,399 12,914
-------- -------
51,072 48,709
Accumulated amortization................................. (10,902) (9,550)
-------- -------
$ 40,170 $39,159
======== =======
</TABLE>
8. LONG-TERM OBLIGATIONS
The composition of long-term obligations at December 31, is as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Revolving Credit Facility............................... $ -- $ 14,000
Term A Facility -- United States........................ 68,250 70,000
Term A Facility -- Australia............................ 19,943 19,480
Term A Facility -- Italy................................ 8,771 10,410
Term B Facility......................................... 113,275 114,425
Term C Facility......................................... 113,275 114,425
Senior subordinated notes, due June 1, 2008, 9 7/8%
interest payable semiannually on June 1 and December
1..................................................... 207,000 207,000
Junior subordinated notes, due December 15, 2009,
interest payable quarterly on March 15, June 15,
September 15, and December 15......................... 25,000 --
Capital leases.......................................... 18,333 17,804
Other................................................... 3,480 4,224
-------- --------
577,327 571,768
Current maturities...................................... (12,080) (9,180)
-------- --------
$565,247 $562,588
======== ========
</TABLE>
At December 31, 1999, the schedule of principal payments on long-term debt,
excluding capital lease obligations, is as follows:
<TABLE>
<S> <C>
2000..................................................... $ 11,854
2001..................................................... 17,661
2002..................................................... 25,014
2003..................................................... 34,765
2004..................................................... 75,678
Thereafter............................................... 394,022
</TABLE>
New Credit Facility
The New Credit Facility includes a $330 million term loan facility (the
"Term Loan Facility") and a $100 million revolving credit facility (subject to
adjustment as provided below), which provides for revolving loans and up to $50
million of letters of credit (the "Revolving Credit Facility"). The Term Loan
Facility is comprised of a term A facility of $100 million (the "Term A
Facility"), which has a maturity of six years, a term B facility of $115 million
(the "Term B Facility"), which has a maturity of seven years, and a term C
F-36
<PAGE> 66
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
facility of $115 million (the "Term C Facility"), which has a maturity of eight
years. The Revolving Credit Facility terminates six years after the date of
initial funding of the New Credit Facility and is subject to a potential, but
uncommitted, increase of up to $25 million at Thermadyne LLC's request at any
time prior to such sixth anniversary. Such increase is available only if one or
more financial institutions agrees, at the time of Thermadyne LLC's request, to
provide it. At December 31, 1999, the Company had $10,323 of standby letters of
credit outstanding under the Revolving Credit Facility. Unused borrowing
capacity under the Revolving Credit Facility was $89,677.
On November 10, 1999, the Company amended the New Credit Facility to allow
the restructuring of certain of its manufacturing operations and to adjust its
financial covenants. In accordance with the amendment, the rate at which the New
Credit Facility bears interest was adjusted to, at Thermadyne LLC's option, the
administrative agent's alternative base rate or the reserve-adjusted London
Interbank Offered Rate ("LIBOR") plus, in each case, applicable margins of (i)
in the case of alternative base rate loans, (x) 1.50% for revolving and Term A
loans, (y) 1.75% for Term B loans and (z) 2.00% for Term C loans and (ii) in the
case of LIBOR loans, (x) 2.75% for revolving and Term A loans, (y) 3.00% for
Term B loans and (z) 3.25% for Term C loans. The applicable margin may vary
based on Thermadyne LLC's ratio of consolidated indebtedness to Adjusted EBITDA.
In addition, the amendment required the issuance of $25.0 million of Junior
Subordinated Notes with detachable warrants for the purchase of the Company's
common stock. At December 31, 1999, the prime rate was 8.5%.
Prior to the amendment of the New Credit Facility applicable margins were
(i) in the case of alternative base rate loans, (x) 1.00% for revolving and Term
A loans, (y) 1.25% for Term B loans and (z) 1.50% for Term C loans and (ii) in
the case of LIBOR loans, (x) 2.25% for revolving and Term A loans, (y) 2.50% for
Term B loans and (z) 2.75% for Term C loans.
Thermadyne LLC pays a commitment fee calculated at a rate of 0.50% per
annum on the daily average unused commitment under the Revolving Credit Facility
(whether or not then available). Such fee is payable quarterly in arrears and
upon termination of the Revolving Credit Facility (whether at stated maturity or
otherwise).
The applicable margin for the Term A Facility and the Revolving Credit
Facility, as well as the commitment fee and letter of credit fee, is subject to
possible reductions based on the ratio of consolidated Debt to EBITDA (each as
defined in the New Credit Facility).
Thermadyne LLC pays a letter of credit fee calculated (i) in the case of
standby letters of credit, at a rate per annum equal to the then applicable
margin for LIBOR loans under the Revolving Credit Facility minus 0.125% and (ii)
in the case of documentary letters of credit, at a rate per annum equal to 1.25%
plus, in each case, a fronting fee on the stated amount of each letter of
credit. Such fees are payable quarterly in arrears. In addition, Thermadyne LLC
pays customary transaction charges in connection with any letters of credit.
The Term Loan Facility is subject to the following amortization schedule:
<TABLE>
<CAPTION>
YEAR TERM LOAN A TERM LOAN B TERM LOAN C
- ---- ----------- ----------- -----------
<S> <C> <C> <C>
1....................................... 0.0% 1.0% 1.0%
2....................................... 5.0% 1.0% 1.0%
3....................................... 10.0% 1.0% 1.0%
4....................................... 20.0% 1.0% 1.0%
5....................................... 25.0% 1.0% 1.0%
6....................................... 40.0% 1.0% 1.0%
7....................................... -- 94.0% 1.0%
8....................................... -- -- 93.0%
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
F-37
<PAGE> 67
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Term Loan Facility is subject to mandatory prepayment: (i) with 100% of
the net cash proceeds from the issuance of debt, subject to certain exceptions,
(ii) with 100% of the net cash proceeds of asset sales and casualty events,
subject to certain exceptions, (iii) with 50% of Thermadyne LLC's excess cash
flow (as defined in the New Credit Facility) to the extent that the Leverage
Ratio (as defined in the New Credit Facility) exceeds 3.5 to 1.0, and (iv) with
50% of the net cash proceeds from the issuance of equity to the extent that the
Leverage Ratio exceeds 4.0 to 1.0. Thermadyne LLC's obligations under the New
Credit Facility are secured by a first-priority perfected lien on: (i)
substantially all domestic property and assets, tangible and intangible (other
than accounts receivable sold or to be sold into the accounts receivable program
and short-term real estate leases), of Thermadyne LLC and its domestic
subsidiaries (other than the special purpose subsidiaries involved in the
accounts receivable program); (ii) the capital stock of (a) Thermadyne LLC held
by Holdings and (b) all subsidiaries of Thermadyne LLC (provided that no more
than 65% of the equity interest in non-U.S. subsidiaries held by Thermadyne LLC
and its domestic subsidiaries and no equity interests in subsidiaries held by
foreign subsidiaries are required to be pledged); and (iii) all intercompany
indebtedness. Holdings has guaranteed the obligations of Thermadyne LLC under
the New Credit Facility. In addition, obligations under the New Credit Facility
are guaranteed by all domestic subsidiaries.
The New Credit Facility contains customary covenants and restrictions on
Thermadyne LLC's ability to engage in certain activities, including, but not
limited to: (i) limitations on the incurrence of liens and indebtedness, (ii)
restrictions on sale lease-back transactions, consolidations, mergers, sale of
assets, capital expenditures, transactions with affiliates and investments, and
(iii) severe restrictions on dividends, and other similar distributions.
The New Credit Facility contains financial covenants requiring Thermadyne
LLC to maintain a minimum level of Adjusted EBITDA (as defined in the New Credit
Facility); a minimum Interest Coverage Ratio (as defined in the New Credit
Facility); a minimum Fixed Charge Coverage Ratio (as defined in the New Credit
Facility); and a maximum Leverage Ratio (as defined in the New Credit Facility).
Interest Rate Swap
At December 31, 1999, the Company has an interest rate swap agreement
outstanding with a notional amount of $61,500, which matures in January of 2002,
under which the Company pays a fixed rate of interest and receives a floating
rate of interest over the term of the interest rate swap agreement without the
exchange of the underlying notional amount. The interest rate swap agreement
converted a portion of the Credit Facility from a floating rate obligation to a
fixed rate obligation. The fair market value of the interest rate swap is
estimated based on current interest rates, and was $1,419 at December 31, 1999.
The Company is subject to loss if the counterparty to this agreement does not
perform. Interest differentials to be paid or received because of the swap
agreement are reflected as an adjustment to interest expense over the related
debt provided. This agreement is accounted for on the accrual basis.
Senior Subordinated Notes
Thermadyne LLC and Thermadyne Capital have outstanding $207 million
aggregate principal amount of the Senior Subordinated Notes. The Senior
Subordinated Notes are general unsecured obligations of Thermadyne LLC and
Thermadyne Capital and will be subordinated in right of payment to all existing
and future senior indebtedness of Thermadyne LLC and Thermadyne Capital
(including borrowings under the New Credit Facility). The Senior Subordinated
Notes are unconditionally guaranteed on a senior subordinated basis by certain
of Thermadyne LLC's existing domestic subsidiaries (the "Guarantor
Subsidiaries"). The note guarantees will be general unsecured obligations of the
Guarantor Subsidiaries, are subordinated in right of payment to all existing and
future senior indebtedness of the Guarantor Subsidiaries, including
F-38
<PAGE> 68
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
indebtedness under the New Credit Facility, and will rank senior in right of
payment to any future subordinated indebtedness of the Guarantor Subsidiaries.
The indentures governing the Senior Subordinated Notes restrict, subject to
certain exceptions, the Company and its subsidiaries from incurring additional
debt, paying dividends or making other distributions on or redeeming or
repurchasing capital stock, making investments, loans or advances, disposing of
assets, creating liens on assets and engaging in transactions with affiliates.
Junior Subordinated Notes
Thermadyne LLC has outstanding $25.0 million of Junior Subordinated Notes
(the "Junior Notes") with detachable warrants for the purchase of the Company's
common stock. The Junior Notes are general unsecured obligations of Thermadyne
LLC and will be subordinated in right of payment to all existing and future
senior and senior subordinated indebtedness of Thermadyne LLC. Thermadyne LLC,
at its option, may pay interest in additional Junior Notes between the date of
original issuance and December 15, 2004 on each March 15, June 15, September 15
and December 15 at the rate of 15%. Beginning December 15, 2004, interest will
accrue at the rate of 15% per annum on each interest payment date, provided that
if and for so long as payment of interest on the Junior Notes is prohibited
under the terms of the New Credit Facility, interest shall be paid by the
issuance of additional Junior Notes.
The estimated fair value amounts of the Company's long-term obligations
have been determined by the Company using available market information and
appropriate valuation methodologies. Considerable judgment is required to
develop the estimates of fair value; thus, the estimates provided herein are not
necessarily indicative of the amounts that could be realized in a current market
exchange. The use of different market assumptions or valuation methodologies may
have a material effect on the estimated fair value amounts. The fair value of
the Senior Subordinated Notes was based on the most recent market information
available, and is estimated to be 86% of their current carrying value at
December 31, 1999, or $178,020. The fair value of the Junior Notes is estimated
to be their carrying value since these notes have not traded since their
issuance in December 1999. The fair values of the credit agreement and the
Company's other long-term obligations are estimated at their current carrying
values since these obligations are fully secured and have varying interest
charges based on current market rates.
9. LEASES
Future minimum lease payments related to continuing operations under leases
with initial or remaining noncancelable lease terms in excess of one year at
December 31, 1999 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
2000........................................................ $ 3,884 $7,171
2001........................................................ 3,776 6,321
2002........................................................ 3,813 5,420
2003........................................................ 4,056 4,869
2004........................................................ 4,477 4,209
Thereafter.................................................. 41,969 23,841
--------
Total minimum lease payments...................... 61,975
Amount representing interest................................ (43,642)
--------
Present value of net minimum lease payments, including
current obligations of $226............................... $ 18,333
========
</TABLE>
F-39
<PAGE> 69
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Rent expense under operating leases from continuing operations amounted to
$7,347, $9,528 and $9,358 for the years ended December 31, 1999, 1998 and 1997,
respectively.
10. INCOME TAXES
Pre-tax income (loss) from continuing operations was taxed under the
following jurisdictions:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Domestic............................ $ 10,054 $(17,744) $31,104
Foreign............................. (18,264) (7,310) (2,560)
-------- -------- -------
Income (loss) before income
taxes.......................... $ (8,210) $(25,054) $28,544
======== ======== =======
</TABLE>
The provision (benefit) for income taxes charged to continuing operations
is as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Current:
Federal........................... $ 314 $ (768) $11,014
Foreign........................... 2,206 1,458 1,064
State and local................... 400 350 927
------- ------- -------
Total current............. 2,920 1,040 13,005
------- ------- -------
Deferred.......................... 11,696 13,642 470
------- ------- -------
$14,616 $14,682 $13,475
======= ======= =======
</TABLE>
The composition of deferred tax assets and liabilities attributable to
continuing operations at December 31 is as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Deferred tax assets:
Post-employment benefits.................................. $ 9,126 $ 8,862
Accrued liabilities....................................... 4,685 7,482
Intangibles............................................... 8,535 8,781
Other..................................................... (100) 1,488
Fixed assets.............................................. 7,090 6,769
Net operating loss carryforwards and AMT credits.......... 30,184 27,658
-------- --------
Total deferred tax assets......................... 59,520 61,040
Valuation allowance for deferred tax assets............... (33,966) (28,377)
-------- --------
Net deferred tax assets........................... $ 25,554 $ 32,663
-------- --------
Deferred tax liabilities:
Inventories............................................... 3,800 3,528
-------- --------
Total deferred tax liabilities.................... 3,800 3,528
-------- --------
Net deferred tax asset............................ $ 21,754 $ 29,135
======== ========
</TABLE>
F-40
<PAGE> 70
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision (benefit) for income taxes differs from the amount of income
tax determined by applying the applicable U.S. statutory federal income tax rate
to pretax income from continuing operations as a result of the following
differences:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Tax at U.S. statutory rates..................... $(2,874) $(8,767) $ 9,991
Nondeductible goodwill amortization and other
nondeductible expenses........................ 793 2,528 2,048
Change in valuation allowance................... 5,000 12,000 --
Foreign tax rate differences and nonrecognition
of foreign tax loss benefits.................. 8,225 1,032 833
Issuance of warrants............................ 3,212 -- --
Non-deductible merger costs..................... -- 7,662 --
State income taxes, net of federal tax
benefit....................................... 260 227 603
------- ------- -------
$14,616 $14,682 $13,475
======= ======= =======
</TABLE>
At December 31, 1999, the Company had net operating loss carryforwards of
approximately $86,000 available for U.S. federal income tax purposes which
expire beginning 2001. Utilization of the majority of these net operating loss
carryforwards is subject to various limitations because of previous changes in
control of ownership (as defined in the Internal Revenue Code) of the Company.
Pursuant to the requirements of the American Institute of Certified Public
Accountants Statement of Position No. 90-7, "Financial Entities in
Reorganization Under the Bankruptcy Code," the tax benefit resulting from the
utilization of net operating loss carryforwards that existed on the effective
date of the Company's financial reorganization will be reported as a direct
addition to paid-in capital.
The Company's foreign subsidiaries have undistributed earnings at December
31, 1999. Those earnings are considered to be indefinitely reinvested and,
accordingly, no provision for U.S. federal and state income taxes has been
provided thereon. Upon distribution of those earnings in the form of dividends
or otherwise, the Company would be subject to both U.S. income taxes (subject to
an adjustment for foreign tax credits) and withholding taxes payable to the
various foreign countries. Determination of the amount of unrecognized deferred
U.S. income tax liability is not practicable because of the complexities
associated with its hypothetical calculation.
11. EMPLOYEE BENEFIT PLANS
401(k) Retirement Plan. The 401(k) Retirement Plan covers the majority of
the Company's domestic employees. The Company, at its discretion, can make a
base contribution of 1% of each employee's compensation and an additional
contribution equal to as much as 4% of the employee's compensation. At the
employee's discretion, an additional 1% to 15% voluntary employee contribution
can be made. The plan requires the Company to make a matching contribution of
50% of the first 6% of the voluntary employee contribution. Total expense for
this plan related to continuing operations was approximately $2,223, $2,115, and
$2,628 for the years ended December 31, 1999, 1998 and 1997, respectively.
Employee Stock Purchase Plan. The Employee Stock Purchase Plan was canceled
in connection with the Merger. For the plan year ended December 31, 1997, 1,098
employee participants purchased 82,085 shares at an aggregate purchase price of
$1,989.
Pension Plans. The Company's subsidiaries have had various noncontributory
defined benefit pension plans which covered substantially all U.S. employees.
The Company froze and combined its three noncontrib-
F-41
<PAGE> 71
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
utory defined benefit pension plans through amendments to such plans effective
December 31, 1989. All former participants of these plans became eligible to
participate in the 401(k) Retirement Plan effective January 1, 1990. There was
no prepaid benefit cost at December 31, 1999 or 1998. Accrued benefit
liabilities at December 31, 1999 and 1998 were $192 and $336, respectively. In
addition, the Company's Australian subsidiary has a Superannuation Fund
established by a Trust Deed which operates on a lump sum scheme to provide
benefits for its employees. Prepaid benefit cost at December 31, 1999 and 1998
was $6 and $5, respectively. There were no accrued benefit liabilities at
December 31, 1999 or 1998.
Other Postretirement Benefits. The Company has a retirement plan covering
both salaried and nonsalaried retired employees, which provides postretirement
health care benefits (medical and dental) and life insurance benefits. The
postretirement health care portion is contributory, with retiree contributions
adjusted annually as determined by the Company based on claim costs. The
postretirement life insurance portion is noncontributory. The Company recognizes
the cost of postretirement benefits on the accrual basis as employees render
service to earn the benefit. The Company continues to fund the cost of health
care and life insurance benefits in the year incurred.
The following tables provide a reconciliation of benefit obligations, plan
assets and status of the Pension and Other Postretirement Benefit Plans as
recognized in the Company's Consolidated Balance Sheet for the years ended
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT
----------------- -------------------
1999 1998 1999 1998
------- ------- -------- --------
<S> <C> <C> <C> <C>
Change in Benefit Obligation:
Benefit obligation at beginning of year.... $41,702 $44,439 $ 12,774 $ 12,010
Service cost............................... 989 1,057 761 1,218
Participant contributions.................. 732 795 -- --
Interest cost.............................. 2,514 2,424 842 1,330
Actuarial (gain) loss...................... (209) (266) 872 (870)
Foreign currency exchange rate changes..... 1,643 (1,507) -- --
Benefits paid.............................. (6,889) (5,240) (2,244) (914)
------- ------- -------- --------
Benefit obligation at end of year.......... $40,482 $41,702 $ 13,005 $ 12,774
======= ======= ======== ========
Change in plan assets:
Fair value of plan assets at beginning of
year.................................... $45,266 $44,399
Actual return on plan assets............... 8,040 3,968
Sponsor contributions...................... 798 3,086
Participant contributions.................. 732 795
Benefits paid.............................. (6,889) (5,240)
Foreign currency exchange rate changes..... 1,890 (1,632)
Administrative expenses.................... (118) (110)
------- -------
Fair value of plan assets at end of year... $49,719 $45,266
======= =======
Funded status of the plan (underfunded)...... $ 9,237 $ 3,564 $(13,005) $(12,774)
Unrecognized net actuarial loss (gain)..... (3,333) 989 (10,807) (9,426)
Unrecognized prior service cost............ 76 99 (1,272) (1,927)
------- ------- -------- --------
Prepaid (accrued) benefit cost............. $ 5,980 $ 4,652 $(25,084) $(24,127)
======= ======= ======== ========
Weighted-average assumptions as of December
31:
Discount rate.............................. 8% 7% 8% 7%
Expected return on plan assets............. 8% 8% N/A N/A
Rate of compensation increase.............. 3% 3% N/A N/A
</TABLE>
F-42
<PAGE> 72
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net periodic pension and other postretirement benefit costs include the
following components:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
--------------------------- ------------------------
1999 1998 1997 1999 1998 1997
------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Components of the net periodic benefit
cost:
Service cost......................... $ 989 $ 1,057 $ 1,259 $ 761 $1,218 $1,255
Interest cost........................ 2,514 2,424 3,045 842 1,330 1,496
Expected return on plan assets....... (3,733) (3,366) (3,644) -- -- --
Recognized (gain) loss............... -- -- -- 1,698 2 (1)
Amortization of prior service cost... -- 2 3 -- -- --
Prior service cost recognized........ 23 23 23 (101) -- --
------- ------- ------- ------ ------ ------
Benefit cost (credit).................. $ (207) $ 140 $ 686 $3,200 $2,550 $2,750
======= ======= ======= ====== ====== ======
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 9.5% in 1999, declining gradually to 6.0%
in 2012. The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation was 9.5% in 1998 and 10.5% in
1997. A one percentage point change in the assumed health care cost trend rate
would have the following effects:
<TABLE>
<CAPTION>
1-PERCENTAGE 1-PERCENTAGE
POINT INCREASE POINT DECREASE
-------------- --------------
<S> <C> <C>
Effect on total of service and interest cost components in
1999.................................................... $ 309 $ (240)
Effect on postretirement benefit obligation as of December
31, 1999................................................ 1,436 (1,188)
</TABLE>
12. SEGMENT INFORMATION
The Company reports its segment information by geographic region. Although
the Company's domestic operation is comprised of several individual business
units, similarity of products, paths to market, end users, and production
processes results in performance evaluation and decisions regarding allocation
of resources being made on a combined basis. The Company's reportable geographic
regions are the United States, Europe and Australia/Asia.
The Company evaluates performance and allocates resources based principally
on operating income net of any special charges or significant one-time charges.
The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies. Intersegment sales
are based on market prices.
F-43
<PAGE> 73
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Summarized financial information concerning the Company's reportable
segments is shown in the following table. The "Other" column includes the
elimination of intersegment sales and profits, corporate related items and other
costs not allocated to the reportable segments.
<TABLE>
<CAPTION>
ALL OTHER
UNITED GEOGRAPHIC
STATES EUROPE AUSTRALIA/ASIA REGIONS OTHER CONSOLIDATED
-------- ------- -------------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
1999
Revenue from external
customers.................... $343,521 $56,449 $ 76,763 $44,382 $ -- $521,115
Intersegment revenues.......... 34,290 15,678 2,819 414 (53,201) --
Depreciation and amortization
of intangibles............... 11,164 2,737 4,603 590 4,388 23,482
Operating income (loss)........ 71,941 3,109 (5,576) (1,460) (118,020) (50,006)
Identifiable assets............ 140,423 54,756 91,949 32,213 74,618 393,959
Capital expenditures........... 5,047 644 2,623 1,317 537 10,168
1998
Revenue from external
customers.................... 363,371 54,657 82,238 32,511 -- 532,777
Intersegment revenues.......... 39,715 14,355 4,447 -- (58,517) --
Depreciation and amortization
of intangibles............... 9,562 2,682 3,979 646 2,104 18,973
Operating income (loss)........ 90,691 3,953 (1,549) (48) (60,017) 33,030
Identifiable assets............ 174,272 57,539 107,991 31,686 41,948 413,436
Capital expenditures........... 7,965 1,114 7,091 420 916 17,506
1997
Revenue from external
customers.................... 333,871 51,900 109,984 24,685 -- 520,440
Intersegment revenues.......... 35,503 4,699 2,700 -- (42,902) --
Depreciation and amortization
of intangibles............... 12,190 2,333 4,677 57 1,558 20,815
Operating income (loss)........ 85,279 3,416 2,304 1,148 (13,640) 78,507
Identifiable assets............ 158,038 48,684 102,342 9,285 36,178 354,527
Capital expenditures........... 7,843 2,464 4,828 78 1,126 16,339
</TABLE>
Product Line Information
The Company manufactures a variety of products, substantially all of which
are used in the cutting, welding or fabrication of metal. End users of the
Company's products are engaged in various applications including construction,
automobile manufacturing, repair and maintenance and shipbuilding. The following
table shows sales for each of the Company's key product lines:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Gas apparatus................................... $186,279 $183,688 $183,253
Arc welding equipment........................... 104,857 103,803 90,440
Arc welding consumables......................... 149,693 162,696 171,922
Plasma and automated cutting equipment.......... 71,083 71,742 61,685
All other....................................... 9,203 10,848 13,140
-------- -------- --------
$521,115 $532,777 $520,440
======== ======== ========
</TABLE>
F-44
<PAGE> 74
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. CONTINGENCIES
Thermadyne and certain of its wholly owned subsidiaries are defendants in
various legal actions, primarily in the product liability area. While there is
uncertainty relating to any litigation, management is of the opinion that the
outcome of such litigation will not have a material adverse effect on the
Company's financial condition or results of operations.
14. GUARANTOR SUBSIDIARIES
In connection with the merger of Holdings and Mercury, Thermadyne LLC and
Thermadyne Capital, both wholly owned subsidiaries of Holdings, issued $207
million of Senior Subordinated Notes. Holdings received all of the net proceeds
from the issuance of the Senior Subordinated Notes and Thermadyne LLC and
Thermadyne Capital are jointly and severally liable for all payments under the
Senior Subordinated Notes. Additionally, the Senior Subordinated Notes are fully
and unconditionally (as well as jointly and severally) guaranteed on an
unsecured senior subordinated basis by certain subsidiaries of the Company (the
"Guarantor Subsidiaries"). Each of the Guarantor Subsidiaries is wholly owned by
Thermadyne LLC.
The following condensed consolidating financial information of Thermadyne
LLC includes the accounts of Thermadyne LLC, the combined accounts of the
Guarantor Subsidiaries and the combined accounts of the non-guarantor
subsidiaries for the periods indicated. Separate financial statements of each of
the Guarantor Subsidiaries are not presented because management has determined
that such information is not material in assessing the Guarantor Subsidiaries.
F-45
<PAGE> 75
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1999
ASSETS
<TABLE>
<CAPTION>
THERMADYNE TOTAL TOTAL
LLC GUARANTORS NON-GUARANTORS ELIMINATIONS TOTAL
---------- ---------- -------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents..... $ -- $ 2,566 $ 10,755 $ -- $ 13,321
Accounts receivable........... -- 51,895 42,836 -- 94,731
Inventories................... -- 59,042 41,789 -- 100,831
Prepaid expenses and other.... -- 2,853 3,101 -- 5,954
--------- --------- -------- --------- ---------
Total current
assets.............. -- 116,356 98,481 -- 214,837
Property, plant and equipment,
at cost, net............... -- 43,985 49,826 -- 93,811
Deferred financing costs,
net........................ 17,020 -- 269 -- 17,289
Intangibles, at cost, net..... -- 11,937 28,233 -- 40,170
Deferred income taxes......... -- 25,046 792 -- 25,838
Investment in and advances
to/from subsidiaries....... 209,719 -- -- (209,719) --
Other assets.................. -- 692 1,322 -- 2,014
--------- --------- -------- --------- ---------
Total assets.......... $ 226,739 $ 198,016 $178,923 $(209,719) $ 393,959
========= ========= ======== ========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable.............. $ -- $ 18,141 $ 23,632 $ -- $ 41,773
Accrued and other
liabilities................ -- 18,060 8,992 -- 27,052
Accrued interest.............. 2,400 -- 16 -- 2,416
Income taxes payable.......... -- 11,725 (2,150) -- 9,575
Current maturities of
long-term obligations...... 9,800 253 2,027 -- 12,080
--------- --------- -------- --------- ---------
Total current
liabilities......... 12,200 48,179 32,517 -- 92,896
Long-term obligations, less
current maturities............ 517,000 16,906 31,341 -- 565,247
Other long-term liabilities..... -- 51,797 10,375 -- 62,172
Shareholders' equity (deficit):
Retained earnings (accumulated
deficit)................... (385,425) (279,825) (46,716) 326,541 (385,425)
Accumulated other
comprehensive loss......... -- (7,742) (16,153) -- (23,895)
--------- --------- -------- --------- ---------
Total shareholders'
equity (deficit).... (385,425) (287,567) (62,869) 326,541 (409,320)
Net equity and advances to/from
subsidiaries.................. 82,964 368,701 167,559 (536,260) 82,964
--------- --------- -------- --------- ---------
Total liabilities and
shareholders' equity
(deficit)........... $ 226,739 $ 198,016 $178,923 $(209,719) $ 393,959
========= ========= ======== ========= =========
</TABLE>
F-46
<PAGE> 76
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
ASSETS
<TABLE>
<CAPTION>
THERMADYNE TOTAL TOTAL
LLC GUARANTORS NON-GUARANTORS ELIMINATIONS TOTAL
---------- ---------- -------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents..... $ -- $ (1,051) $ 2,370 $ -- $ 1,319
Restricted cash............... -- -- 26,646 (26,646) --
Accounts receivable........... -- 13,682 96,606 (22,383) 87,905
Inventories................... -- 68,742 53,991 -- 122,733
Prepaid expenses and other.... -- 1,259 6,325 (219) 7,365
--------- --------- -------- --------- ---------
Total current
assets.............. -- 82,632 185,938 (49,248) 219,322
Property, plant and equipment,
at cost, net............... -- 48,023 56,974 -- 104,997
Deferred financing costs,
net........................ 19,001 -- 571 -- 19,572
Intangibles, at cost, net..... -- 10,561 28,598 -- 39,159
Deferred income taxes......... -- 26,470 2,665 -- 29,135
Investment in and advances
to/from subsidiaries....... 209,369 9,969 -- (219,338) --
Other assets.................. -- (55) 1,306 -- 1,251
--------- --------- -------- --------- ---------
Total assets.......... $ 228,370 $ 177,600 $276,052 $(268,586) $ 413,436
========= ========= ======== ========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable.............. $ -- $ 21,003 $ 23,167 $ -- $ 44,170
Accrued and other
liabilities................ -- 26,060 10,384..... -- 36,444
Accrued interest.............. 275 6 217 -- 498
Income taxes payable.......... -- 7,927 (2,716) -- 5,211
Current maturities of
long-term obligations...... 5,000 60 4,120 -- 9,180
--------- --------- -------- --------- ---------
Total current
liabilities......... 5,275 55,056 35,172 -- 95,503
Long-term obligations, less
current maturities............ 515,050 16,101 81,437 (50,000) 562,588
Other long-term liabilities..... -- 52,116 10,718 -- 62,834
Shareholders' equity (deficit):
Retained earnings (accumulated
deficit)................... (368,408) (295,702) (16,201) 311,903 (368,408)
Accumulated other
comprehensive (loss)....... -- 224 (15,758) -- (15,534)
--------- --------- -------- --------- ---------
Total shareholders'
equity (deficit).... (368,408) (295,478) (31,959) 311,903 (383,942)
Net equity and advances to/from
subsidiaries.................. 76,453 349,805 180,684 (530,489) 76,453
--------- --------- -------- --------- ---------
Total liabilities and
shareholders' equity
(deficit)........... $ 228,370 $ 177,600 $276,052 $(268,586) $ 413,436
========= ========= ======== ========= =========
</TABLE>
F-47
<PAGE> 77
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
THERMADYNE TOTAL TOTAL
LLC GUARANTORS NON-GUARANTORS ELIMINATIONS TOTAL
---------- ---------- -------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Net sales....................... $ -- $408,406 $200,827 $(88,118)(a) $521,115
Operating expenses:
Cost of goods sold............ -- 262,185 169,780 (89,715)(a) 342,250
Selling, general and
administrative expenses.... -- 66,766 32,385 -- 99,151
Amortization of goodwill...... -- 97 1,478 -- 1,575
Amortization of other
intangibles................ -- 1,931 1,116 -- 3,047
Net periodic postretirement
benefits................... -- 3,200 -- -- 3,200
Special charges............... -- 12,524 9,362 -- 21,886
-------- -------- -------- -------- --------
Operating income (loss)......... -- 61,703 (13,294) 1,597 50,006
Other income (expense):
Interest expense.............. -- (49,808) (8,243) 2,730 (55,321)
Amortization of deferred
financing costs............ -- (2,973) (241) -- (3,214)
Equity in net loss of
subsidiaries............... (17,017) -- -- 17,017 --
Other......................... -- 11,277 (4,252) (6,706) 319
-------- -------- -------- -------- --------
Income (loss) before income tax
provision..................... (17,017) 20,199 (26,030) 14,638 (8,210)
Income tax provision............ -- 4,322 4,485 -- 8,807
-------- -------- -------- -------- --------
Net income (loss)............... $(17,017) $ 15,877 $(30,515) $ 14,638 $(17,017)
======== ======== ======== ======== ========
</TABLE>
- ---------------
(a) Reflects the elimination of intercompany sales among all of the Company's
subsidiaries.
F-48
<PAGE> 78
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
TOTAL
THERMADYNE TOTAL NON-
LLC GUARANTORS GUARANTORS ELIMINATIONS TOTAL
---------- ---------- -------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Net sales......................... $ -- $438,013 $195,940 $(101,176)(a) $532,777
Operating expenses:
Cost of goods sold.............. -- 279,470 161,817 (101,051)(a) 340,236
Selling, general and
administrative expenses...... -- 73,081 29,473 -- 102,554
Amortization of goodwill........ -- 72 1,452 -- 1,524
Amortization of other
intangibles.................. -- 1,520 840 -- 2,360
Net periodic postretirement
benefits..................... -- 2,550 -- -- 2,550
Special charges................. -- 46,448 4,075 -- 50,523
-------- -------- -------- --------- --------
Operating income (loss)........... -- 34,872 (1,717) (125) 33,030
Other income (expense):
Interest expense................ -- (46,447) (9,583) 3,485 (52,545)
Amortization of deferred
financing costs.............. -- (2,276) (204) -- (2,480)
Equity in net loss of
subsidiaries................. (54,873) -- -- 54,873 --
Other........................... -- 2,276 (775) (4,560) (3,059)
-------- -------- -------- --------- --------
Income (loss) before income tax
provision and extraordinary
item............................ (54,873) (11,575) (12,279) 53,673 (25,054)
Income tax provision.............. -- 14,428 254 -- 14,682
-------- -------- -------- --------- --------
Income (loss) before extraordinary
item............................ (54,873) (26,003) (12,533) 53,673 (39,736)
Extraordinary item, net of tax.... -- (15,137) -- -- (15,137)
-------- -------- -------- --------- --------
Net income (loss)................. $(54,873) $(41,140) $(12,533) $ 53,673 $(54,873)
======== ======== ======== ========= ========
</TABLE>
- ---------------
(a) Reflects the elimination of intercompany sales among all of the Company's
subsidiaries.
F-49
<PAGE> 79
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
THERMADYNE TOTAL TOTAL
LLC GUARANTORS NON-GUARANTORS ELIMINATIONS TOTAL
---------- ---------- -------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Net sales....................... $ -- $405,039 $210,462 $(95,061)(a) $520,440
Operating expenses:
Cost of goods sold............ -- 246,794 167,430 (94,104)(a) 320,120
Selling, general and
administrative expenses.... -- 76,676 34,020 -- 110,696
Amortization of goodwill...... -- 86 1,505 -- 1,591
Amortization of other
intangibles................ -- 6,137 639 -- 6,776
Net periodic postretirement
benefits................... -- 2,750 -- -- 2,750
------- -------- -------- -------- --------
Operating income (loss)......... -- 72,596 6,868 (957) 78,507
Other income (expense):
Interest expense.............. -- (39,641) (10,823) 5,139 (45,325)
Amortization of deferred
financing
costs...................... -- (1,346) (241) -- (1,587)
Equity in net loss of
subsidiaries............... 15,069 -- -- (15,069) --
Other......................... -- 1,889 1,882 (6,822) (3,051)
------- -------- -------- -------- --------
Income (loss) from continuing
operations before income tax
provision..................... 15,069 33,498 (2,314) (17,709) 28,544
Income tax provision............ -- 13,012 463 -- 13,475
------- -------- -------- -------- --------
Income (loss) from continuing
operations.................... 15,069 20,486 (2,777) (17,709) 15,069
Discontinued operations:
Gain on sale of discontinued
operations, net of income
taxes of $12,623........... 16,015 -- -- -- 16,015
Income from discontinued
operations, net of income
taxes...................... 3,173 -- -- -- 3,173
------- -------- -------- -------- --------
Net income (loss)............... $34,257 $ 20,486 $ (2,777) $(17,709) $ 34,257
======= ======== ======== ======== ========
</TABLE>
- ---------------
(a) Reflects the elimination of intercompany sales among all of the Company's
subsidiaries.
F-50
<PAGE> 80
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
THERMADYNE TOTAL TOTAL
LLC GUARANTORS NON-GUARANTORS ELIMINATIONS TOTAL
---------- ---------- -------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities.............. $(14,892) $ 47,751 $ 2,977 $ 14,638 $ 50,474
Cash flows used in investing
activities:
Capital expenditures, net......... -- (7,003) (3,165) -- (10,168)
Change in other assets............ -- (488) (558) -- (1,046)
Acquisitions, net of cash......... -- (3,000) (2,886) -- (5,886)
-------- -------- ------- -------- --------
Net cash used in investing
activities........................ -- (10,491) (6,609) -- (17,100)
Cash flows provided by (used in)
financing activities:
Change in long-term receivables... -- (530) 177 -- (353)
Repayment of long-term
obligations.................... (4,049) -- (19,117) -- (23,166)
Borrowing of long-term
obligations.................... 10,799 998 14,738 -- 26,535
Change in accounts receivable
securitization................. -- (23,843) -- -- (23,843)
Financing fees.................... -- (901) -- -- (901)
Changes in net equity and advances
to/from subsidiaries........... 8,142 (6,110) 15,804 (14,638) 3,198
Other............................. -- (3,257) 415 -- (2,842)
-------- -------- ------- -------- --------
Net cash provided by (used in)
financing activities.............. 14,892 (33,643) 12,017 (14,638) (21,372)
-------- -------- ------- -------- --------
Net increase in cash and cash
equivalents....................... -- 3,617 8,385 -- 12,002
Cash and cash equivalents at
beginning of year................. -- (1,051) 2,370 -- 1,319
-------- -------- ------- -------- --------
Cash and cash equivalents at end of
year.............................. $ -- $ 2,566 $10,755 $ -- $ 13,321
======== ======== ======= ======== ========
</TABLE>
F-51
<PAGE> 81
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
THERMADYNE TOTAL TOTAL
LLC GUARANTORS NON-GUARANTORS ELIMINATIONS TOTAL
---------- ---------- -------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities.............. $ (60,028) $(36,628) $(19,955) $ 53,673 $(62,938)
Cash flows used in investing
activities:
Capital expenditures, net......... -- (8,227) (9,279) -- (17,506)
Change in other assets............ -- (2,592) (454) -- (3,046)
Acquisitions, net of cash......... -- (1,125) (17,828) -- (18,953)
--------- -------- -------- -------- --------
Net cash used in investing
activities........................ -- (11,944) (27,561) -- (39,505)
Cash flows provided by (used in)
financing activities:
Change in long-term receivables... -- -- 638 -- 638
Repayment of long-term
obligations.................... (408,810) (160) -- -- (408,970)
Borrowing of long-term
obligations.................... 608,751 -- 13,443 -- 622,194
Change in accounts receivable
securitization................. -- (4,462) -- -- (4,462)
Financing fees.................... (20,058) -- -- -- (20,058)
Changes in net equity and advances
to/from subsidiaries........... (119,855) 51,835 34,683 (53,673) (87,010)
Other............................. -- -- (51) -- (51)
--------- -------- -------- -------- --------
Net cash provided by (used in)
financing activities.............. 60,028 47,213 48,713 (53,673) 102,281
--------- -------- -------- -------- --------
Net increase (decrease) in cash and
cash equivalents.................. -- (1,359) 1,197 -- (162)
Cash and cash equivalents at
beginning of year................. -- 308 1,173 -- 1,481
--------- -------- -------- -------- --------
Cash and cash equivalents at end of
year.............................. $ -- $ (1,051) $ 2,370 $ -- $ 1,319
========= ======== ======== ======== ========
</TABLE>
F-52
<PAGE> 82
THERMADYNE MFG. LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
THERMADYNE TOTAL TOTAL
LLC GUARANTORS NON-GUARANTORS ELIMINATIONS TOTAL
---------- ---------- -------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities............... $ 17,369 $ 15,561 $ (235) $(17,709) $ 14,986
Cash flows provided by (used in)
investing activities:
Capital expenditures, net.......... -- (9,084) (7,255) -- (16,339)
Change in other assets............. -- 2,722 1,440 -- 4,162
Acquisitions, net of cash.......... -- (10,140) (27,755) -- (37,895)
Investing activities of
discontinued operations......... -- -- (1,680) -- (1,680)
Proceeds from sale of discontinued
operations...................... 88,543 -- -- -- 88,543
--------- -------- -------- -------- ---------
Net cash provided by (used in)
investing activities............... 88,543 (16,502) (35,250) -- 36,791
Cash flows provided by (used in)
financing activities:
Change in long-term receivables.... -- 170 -- -- 170
Repayment of long-term
obligations..................... (123,450) -- (8,036) -- (131,486)
Borrowing of long-term
obligations..................... 63,950 301 8,604 -- 72,855
Change in accounts receivable
securitization.................. -- 5,676 -- -- 5,676
Issuance of common stock........... 3,069 -- -- -- 3,069
Changes in net equity and advances
to/from subsidiaries............ (49,821) (7,346) 39,458 17,709 --
Financing activities of
discontinued operations......... -- -- (2,808) -- (2,808)
Other.............................. 340 1,758 (1,290) -- 808
--------- -------- -------- -------- ---------
Net cash provided by (used in)
financing activities............... (105,912) 559 35,928 17,709 (51,716)
--------- -------- -------- -------- ---------
Net increase (decrease) in cash and
cash equivalents................... -- (382) 443 -- 61
Cash and cash equivalents at
beginning of year.................. -- 690 730 -- 1,420
--------- -------- -------- -------- ---------
Cash and cash equivalents at end of
year............................... $ -- $ 308 $ 1,173 $ -- $ 1,481
========= ======== ======== ======== =========
</TABLE>
F-53
<PAGE> 83
SIGNATURES
Pursuant to the requirement 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.
THERMADYNE HOLDINGS CORPORATION
By: /s/ JAMES H. TATE
------------------------------------
James H. Tate
Senior Vice President and Chief
Financial Officer
Date: March 27, 2000
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.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ RANDALL E. CURRAN Chairman of the Board, President, March 27, 2000
- ----------------------------------------------------- and Chief Executive Officer
Randall E. Curran (principal executive officer)
/s/ JAMES H. TATE Director, Senior Vice President, March 27, 2000
- ----------------------------------------------------- and Chief Financial Officer
James H. Tate (principal financial and
accounting officer)
/s/ PETER T. GRAUER Director March 27, 2000
- -----------------------------------------------------
Peter T. Grauer
/s/ WILLIAM F. DAWSON Director March 27, 2000
- -----------------------------------------------------
William F. Dawson
/s/ JOHN F. FORT III Director March 27, 2000
- -----------------------------------------------------
John F. Fort III
/s/ HAROLD A. POLING Director March 27, 2000
- -----------------------------------------------------
Harold A. Poling
/s/ LAWRENCE M.V.D. SCHLOSS Director March 27, 2000
- -----------------------------------------------------
Lawrence M.V.D. Schloss
</TABLE>
<PAGE> 84
SIGNATURES
Pursuant to the requirement 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.
THERMADYNE MFG. LLC
By: /s/ JAMES H. TATE
----------------------------------
James H. Tate
Senior Vice President and Chief
Financial Officer
Date: March 27, 2000
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.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ RANDAL E. CURRAN Chairman of the Board, March 27, 2000
- ----------------------------------------------------- President, and Chief
Randall E. Curran Executive Officer (principal
executive officer)
/s/ JAMES H. TATE Director, Senior Vice March 27, 2000
- ----------------------------------------------------- President, and Chief
James H. Tate Financial Officer (principal
financial and accounting
officer)
/s/ PETER T. GRAUER Director March 27, 2000
- -----------------------------------------------------
Peter T. Grauer
/s/ WILLIAM F. DAWSON Director March 27, 2000
- -----------------------------------------------------
William F. Dawson
</TABLE>
<PAGE> 85
SIGNATURES
Pursuant to the requirement 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.
THERMADYNE CAPITAL CORP.
By: /s/ JAMES H. TATE
----------------------------------
James H. Tate
Senior Vice President and Chief
Financial Officer
Date: March 27, 2000
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.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ RANDALL E. CURRAN Chairman of the Board, March 27, 2000
- ----------------------------------------------------- President, and Chief
Randall E. Curran Executive Officer (principal
executive officer)
/s/ JAMES H. TATE Director, Senior Vice March 27, 2000
- ----------------------------------------------------- President, and Chief
James H. Tate Financial Officer (principal
financial and accounting
officer)
/s/ PETER T. GRAUER Director March 27, 2000
- -----------------------------------------------------
Peter T. Grauer
/s/ WILLIAM F. DAWSON Director March 27, 2000
- -----------------------------------------------------
William F. Dawson
</TABLE>
<PAGE> 86
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Thermadyne Holdings Corporation
We have audited the consolidated financial statements of Thermadyne
Holdings Corporation and Thermadyne Mfg. LLC as of December 31, 1999 and 1998,
and for each of the three years in the period ended December 31, 1999 and have
issued our report thereon dated February 11, 2000. Our audits also included the
financial statement schedule, Schedule II, Valuation and Qualifying Accounts.
This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ ERNST & YOUNG LLP
St. Louis, Missouri
February 11, 2000
S-1
<PAGE> 87
SCHEDULE II
THERMADYNE HOLDINGS CORPORATION
THERMADYNE MFG. LLC
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLLECTION
BALANCE AT OF PREVIOUSLY BALANCE AT
BEGINNING OF WRITTEN OFF END OF
ALLOWANCE FOR DOUBTFUL ACCOUNTS PERIOD PROVISION WRITEOFFS ACCOUNTS PERIOD
- ------------------------------- ------------ --------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1999........... $2,852 $ 916 $916 $423 $3,275
Year ended December 31, 1998........... 2,217 1,267 632 0 2,852
Year ended December 31, 1997........... 1,649 875 315 8 2,217
</TABLE>
S-2
<PAGE> 88
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
2.1 -- First Amended and Restated Plan of Reorganization of TDII
Company under Chapter 11 of the Bankruptcy Code,
confirmed by the United States Bankruptcy Court, District
of Delaware, on January 18, 1994.(1)
2.2 -- Agreement and Plan of Merger, dated as of January 20,
1998, between Thermadyne Holdings Corporation and Mercury
Acquisition Corporation.(2)
2.3 -- Amendment No. 1 to Agreement and Plan of Merger between
Thermadyne Holdings Corporation and Mercury Acquisition
Corporation.(3)
2.4 -- Certificate of Merger of Mercury Acquisition Corporation
with and into Thermadyne Holdings Corporation.(3)
3.1 -- Certificate of Incorporation of Thermadyne Holdings
Corporation.(included in Exhibit 2.4)
3.2 -- Bylaws of Thermadyne Holdings Corporation.(3)
3.3 -- Certificate of Incorporation of Thermadyne Capital
Corp.(4)
3.4 -- Bylaws of Thermadyne Capital Corp.(4)
3.5 -- Limited Liability Company Agreement of Thermadyne Mfg.
LLC.(4)
4.1 -- Indenture, dated as of May 22 1998, between Mercury
Acquisition Corporation and IBJ Schroder Bank & Trust
Company, as Trustee.(3)
4.2 -- First Supplemental Indenture, dated as of May 22, 1998,
between Thermadyne Holdings Corporation and IBJ Schroder
Bank & Trust Company, as Trustee.(3)
4.3 -- Form of 12 1/2% Senior Discount Debenture.(3)
4.4 -- A/B Exchange Registration Rights Agreement dated as of
May 22, 1998, among Mercury Acquisition Corporation and
Donaldson, Lufkin & Jenrette Securities Corporation.(3)
4.5 -- Amendment to Registration Rights Agreement dated May 22,
1998, among Thermadyne Holdings Corporation and
Donaldson, Lufkin & Jenrette Securities Corporation.(3)
4.6 -- Indenture, dated as of February 1, 1994, between
Thermadyne Holdings Corporation and Chemical Bank, as
Trustee, with respect to $179,321,000 principal amount of
the Senior Subordinated Notes Due November 1, 2003.(1)
4.7 -- Form of Senior Subordinated Note (included in Exhibit
4.3).(1)
4.8 -- Indenture, dated May 22, 1998, among Thermadyne Mfg. LLC,
Thermadyne Capital Corp., the guarantors named therein
and State Street Bank and Trust Company, as Trustee.(3)
4.9 -- Form of 9 7/8% Senior Subordinated Notes.(3)
4.10 -- A/B Exchange Registration Rights Agreement dated as of
May 22, 1998, among Thermadyne Mfg. LLC, Thermadyne
Capital Corp., the guarantors named therein and
Donaldson, Lufkin & Jenrette Securities Corporation.(3)
4.11+ -- Subscription Agreement dated December 22, 1999, among
Thermadyne Mfg. LLC, Thermadyne Holdings Corporation, and
the buyers named therein.
4.12+ -- Registration Rights Agreement dated December 22, 1999,
among Thermadyne Mfg. LLC, Thermadyne Holdings
Corporation, and the buyers named therein.
4.13+ -- Form of Indenture relating to Junior Subordinated Notes.
4.14+ -- Form of Warrants (included in Exhibit 4.11).
4.15+ -- Form of Junior Subordinated Notes (included in Exhibit
4.11).
</TABLE>
<PAGE> 89
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
10.1 -- Omnibus Agreement, dated as of June 3, 1988, among Palco
Acquisition Company (now Thermadyne Holdings Corporation)
and its subsidiaries and National Warehouse Investment
Company.(5)
10.2 -- Escrow Agreement, dated as of August 11, 1988, among
National Warehouse Investment Company, Palco Acquisition
Company (now Thermadyne Holdings Corporation) and Title
Guaranty Escrow Services, Inc.(5)
10.3 -- Amended and Restated Industrial Real Property Lease dated
as of August 11, 1988, between National Warehouse
Investment Company and Tweco Products, Inc., as amended
by First Amendment to Amended and Restated Industrial
Real Property Lease dated as of January 20, 1989.(5)
10.4 -- Schedule of substantially identical lease agreements.(5)
10.5 -- Amended and Restated Continuing Lease Guaranty, made as
of August 11, 1988, by Palco Acquisition Company (now
Thermadyne Holdings Corporation) for the benefit of
National Warehouse Investment Company.(5)
10.6 -- Schedule of substantially identical lease guaranties.(5)
10.7 -- Lease Agreement, dated as of October 10, 1990, between
Stoody Deloro Stellite and Bowling Green-Warren County
Industrial Park Authority, Inc.(5)
10.8 -- Lease Agreement, dated as of February 15, 1985, as
amended, between Stoody Deloro Stellite, Inc. and
Corporate Property Associates 6.(5)
10.9 -- Receivables Purchase Agreement, dated as of December 28,
1994, among Thermadyne Receivables, Inc., as Transferor,
and NationsBank of Virginia, N.A., as Trustee.(6)
10.10 -- Purchase Agreement, dated as of August 2, 1994, between
Coyne Cylinder Company and BA Credit Corporation.(6)
10.11 -- Sublease Agreement, dated as of April 7, 1994, between
Stoody Deloro Stellite, Inc., and Swat, Inc.(6)
10.12 -- Share Sale Agreement dated as of November 18, 1995, among
certain scheduled persons and companies, Rosny Pty
Limited, Byron Holdings Limited, Thermadyne Holdings
Corporation, and Thermadyne Australia Pty Limited
relating to the sale of the Cigweld Business.(7)
10.13 -- Rights Agreement dated as of May 1, 1997, between
Thermadyne Holdings Corporation and BankBoston, N.A., as
Rights Agent.(8)
10.14 -- First Amendment to Rights Agreement, dated January 20,
1998, between Thermadyne Holdings Corporation and
BankBoston, N.A.(2)
10.15+ -- Executive Employment Agreement dated May 22, 1998,
between Thermadyne Holdings Corporation and Randall E.
Curran.(3)
10.16+ -- Executive Employment Agreement dated May 22, 1998,
between Thermadyne Holdings Corporation and James H.
Tate.(3)
10.17+ -- Executive Employment Agreement dated May 22, 1998,
between Thermadyne Holdings Corporation and Stephanie N.
Josephson.(3)
10.18+ -- Executive Employment Agreement dated May 22, 1998,
between Thermadyne Holdings Corporation and Thomas C.
Drury.(3)
10.19+ -- Executive Employment Agreement dated May 22, 1998,
between Thermadyne Holdings Corporation and Robert D.
Maddox.(3)
10.20+ -- Award Agreement dated May 22, 1998, between Thermadyne
Holdings Corporation and Randall E. Curran.(3)
10.21+ -- Award Agreement dated May 22, 1998, between Thermadyne
Holdings Corporation and James H. Tate.(3)
</TABLE>
<PAGE> 90
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
10.22+ -- Award Agreement dated May 22, 1998, between Thermadyne
Holdings Corporation and Stephanie N. Josephson.(3)
10.23+ -- Award Agreement dated May 22, 1998, between Thermadyne
Holdings Corporation and Thomas C. Drury.(3)
10.24+ -- Award Agreement dated May 22, 1998, between Thermadyne
Holdings Corporation and Robert D. Maddox.(3)
10.25+ -- Thermadyne Holdings Corporation Management Incentive
Plan.(3)
10.26+ -- Thermadyne Holdings Corporation Direct Investment
Plan.(3)
10.27 -- Investors' Agreement dated as of May 22, 1998, between
Thermadyne Holdings Corporation, the DLJ Entities (as
defined therein) and the Management Stockholders (as
defined therein).(3)
10.28 -- Credit Agreement dated as of May 22, 1998, between
Thermadyne Mfg. LLC, Comweld Group Pty. Ltd., GenSet
S.P.A. and Thermadyne Welding Products Canada Limited, as
Borrowers, Various Financial Institutions, as Lenders,
DLJ Capital Funding, Inc., as Syndication Agent, Societe
Generale, as Documentation Agent, and ABN Amro Bank N.V.,
as Administrative Agent.(3)
10.29+ -- First Amendment to Credit Agreement, dated as of November
10, 1999, among Thermadyne Mfg. LLC., Comweld Group Pty.
Ltd., GenSet S.P.A. and Thermadyne Welding Products
Canada Limited, as Borrowers, Various Financial
Institutions, as Lenders, DLJ Capital Funding, Inc., as
Syndication Agent, Societe Generale, as Documentation
Agent, and ABN Amro N.V., as Administrative Agent.
10.30 -- Letter Agreement dated as of January 16, 1998, between
Donaldson, Lufkin & Jenrette Securities Corporation and
DLJ Merchant Banking II, Inc.(3)
10.31 -- Assignment and Assumption Agreement dated as of May 22,
1998, between DLJ Merchant Banking II, Inc. and
Thermadyne Holdings Corporation.(3)
21.1 -- Subsidiaries of Thermadyne Holdings Corporation.*
23.1 -- Consent of Ernst & Young LLP, Independent Auditors.*
27.1 -- Financial Data Schedule.*
</TABLE>
- ---------------
+ Indicates a management contract or compensatory plan or arrangement.
* Filed herewith.
(1) Incorporated by reference to the Company's Registration Statement on Form 10
(File No. 0-23378) filed under Section 12(g) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), on February 7, 1994.
(2) Incorporated by reference to the Company's Current Report on Form 8-K (File
No. 0-23378) filed under Section 12(g) of the Exchange Act on January 21,
1998.
(3) Incorporated by reference to the Company's Registration Statement on Form
S-1, (File No. 333-57455) filed on June 23, 1998.
(4) Incorporated by reference to Thermadyne LLC and Thermadyne Capital's
Registration Statement on Form S-1 (File No. 333-57457) filed on June 23,
1998.
(5) Incorporated by reference to the Company's Registration Statement on Form
10/A, Amendment No. 2 (File No. 0-23378) filed under Section 12(g) of the
Exchange Act, on April 28, 1994.
(6) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994.
(7) Incorporated by reference to the Company's Current Report on Form 8-K (File
No. 0-23378) filed under Section 12(g) of the Exchange Act on January 18,
1996.
(8) Incorporated by reference to the Company's Current Report on Form 8-K (File
No. 0-23378) filed under Section 12(g) of the Exchange Act on May 12, 1997.
<PAGE> 1
EXHIBIT 4.11
SUBSCRIPTION AGREEMENT
dated as of
December 22, 1999
by and among
DLJ MERCHANT BANKING PARTNERS II, L.P.,
DLJ MERCHANT BANKING PARTNERS II-A, L.P.,
DLJ OFFSHORE PARTNERS II, C.V.,
DLJ DIVERSIFIED PARTNERS, L.P.,
DLJ DIVERSIFIED PARTNERS-A, L.P.,
DLJMB FUNDING II, INC.,
DLJ MILLENNIUM PARTNERS, L.P.,
DLJ MILLENNIUM PARTNERS-A, L.P.,
DLJ EAB PARTNERS, L.P.,
DLJ ESC II L.P.,
DLJ FIRST ESC, L.P.,
THERMADYNE HOLDINGS CORPORATION
and
THERMADYNE MFG. LLC
relating to the purchase and sale
of
Junior Subordinated Notes due 2009 of Thermadyne Mfg. LLC
and
Warrants to Purchase Shares of Common Stock
of Thermadyne Holdings Corporation
<PAGE> 2
TABLE OF CONTENTS
----------------------
<TABLE>
<CAPTION>
PAGE
----
ARTICLE 1
DEFINITIONS
<S> <C> <C>
SECTION 1.01. Definitions......................................................................1
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale................................................................5
SECTION 2.02. Closing..........................................................................5
SECTION 2.03. Purchase Price Allocation........................................................5
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE ISSUERS
SECTION 3.01. Corporate Existence and Power....................................................6
SECTION 3.02. Corporate Authorization..........................................................6
SECTION 3.03. Noncontravention.................................................................6
SECTION 3.04. Capitalization; Indebtedness.....................................................7
SECTION 3.05. Subsidiaries.....................................................................8
SECTION 3.06. Parent 34 Act Reports............................................................8
SECTION 3.07. Litigation.......................................................................8
SECTION 3.08. Environmental Matters............................................................8
SECTION 3.09. Licenses and Permits.............................................................9
SECTION 3.10. Financial Statements.............................................................9
SECTION 3.11. Investment Company Act...........................................................9
SECTION 3.12. Registration Obligations........................................................10
SECTION 3.13. No Violation of Regulation G, T, U or X.........................................10
SECTION 3.14. No Ratings Decline..............................................................10
SECTION 3.15. No Material Change..............................................................10
SECTION 3.16. No Solicitation.................................................................10
SECTION 3.17. Labor Matters...................................................................11
SECTION 3.18. Accounting Controls.............................................................11
SECTION 3.19. Intellectual Property...........................................................11
SECTION 3.20. Indenture.......................................................................12
SECTION 3.21. No Registration.................................................................12
SECTION 3.22. Certificates....................................................................12
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
<S> <C> <C>
SECTION 4.01. Corporate/Partnership Existence and Power.......................................12
SECTION 4.02. Corporate/Partnership Authorization.............................................12
SECTION 4.03. Governmental Authorization......................................................12
SECTION 4.04. Noncontravention................................................................13
SECTION 4.05. Purchase for Investment.........................................................13
SECTION 4.06. Litigation......................................................................13
SECTION 4.07. Finders' Fees...................................................................13
ARTICLE 5
COVENANTS OF THE PARTIES
SECTION 5.01. Best Efforts; Further Assurances................................................14
SECTION 5.02. Certain Filings.................................................................14
SECTION 5.03. Public Announcements............................................................14
ARTICLE 6
CONDITIONS TO CLOSING
SECTION 6.01. Conditions to Obligations of each Party.........................................14
SECTION 6.02. Conditions to Obligation of the Buyers..........................................15
SECTION 6.03. Conditions to Obligation of the Issuers.........................................16
ARTICLE 7
SURVIVAL; INDEMNIFICATION
SECTION 7.01. Survival........................................................................17
SECTION 7.02. Indemnification.................................................................18
SECTION 7.03. Procedures......................................................................18
ARTICLE 8
MISCELLANEOUS
SECTION 8.01. Notices.........................................................................19
SECTION 8.02. Amendments and Waivers..........................................................20
SECTION 8.03. Expenses........................................................................20
SECTION 8.04. Successors and Assigns..........................................................20
SECTION 8.05. Governing Law...................................................................20
SECTION 8.06. Jurisdiction....................................................................21
SECTION 8.07. WAIVER OF JURY TRIAL............................................................21
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 8.08. Counterparts; Third Party Beneficiaries.........................................21
SECTION 8.09. Appointment of Agent............................................................21
SECTION 8.10. Entire Agreement................................................................22
SECTION 8.11. Captions........................................................................22
SECTION 8.12. Enforcement of Voting Rights....................................................22
EXHIBITS
Exhibit A-- Form of Notes, including attached Form of Indenture
Exhibit B-- Form of Registration Rights Agreement
Exhibit C-- Form of Warrants
SCHEDULE
Schedule 3.05 -- Subsidiaries
</TABLE>
<PAGE> 5
SUBSCRIPTION AGREEMENT
AGREEMENT dated as of December 22, 1999 by and among DLJ Merchant
Banking Partners II, L.P., DLJ Merchant Banking Partners II-A, L.P., DLJ
Offshore Partners II, C.V., DLJ Diversified Partners, L.P., DLJ Diversified
Partners-A, L.P., DLJMB Funding II, Inc., DLJ Millennium Partners, L.P., DLJ
Millennium Partners-A, L.P., DLJ EAB Partners, L.P., DLJ ESC II L.P. and DLJ
First ESC, L.P., (each of the foregoing, a "DLJ BUYER", and collectively, the
"DLJ BUYERS" and sometimes referred to as the "BUYERS"), Thermadyne Holdings
Corporation, a Delaware corporation ("PARENT"), and Thermadyne Mfg. LLC, a
Delaware limited liability company and a wholly-owned subsidiary of Parent (the
"COMPANY").
W I T N E S S E T H :
WHEREAS, the Buyers desire to purchase, and Parent and the Company
desire to issue and sell to the Buyers, the Securities (as defined below), upon
the terms and subject to the conditions hereinafter set forth.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein,
have the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person; provided that no securityholder of Parent shall be deemed an
Affiliate of any other securityholder of Parent or any Subsidiary solely by
reason of any investment in Parent. For the purpose of this definition, the term
"control" (including with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
<PAGE> 6
"CLOSING DATE" means the date of the Closing.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" means the Common Stock, par value $0.01 per share, of
Parent.
"CREDIT AGREEMENT" means the Credit Agreement dated as of May 22, 1998
among the Company, Comweld Group Pty. Ltd., GenSet S.p.A., Thermadyne Welding
Products Canada Limited, the various financial institutions party thereto from
time to time, DLJ Capital Funding, Inc., as syndication agent, Societe Generale,
as documentation agent and ABN AMRO Bank N.V., as administrative agent, as
amended from time to time, together with the related documents thereto
(including, without limitation, the term loans, revolving loans and swingline
loans thereunder, the letters of credit issued pursuant thereto and any
guarantees and security documents).
"FEDERAL TAX" means any Tax imposed under Subtitle A of the Code.
"FINAL DETERMINATION" shall mean (i) any final determination of
liability in respect of a Tax that, under applicable law, is not subject to
further appeal, review or modification through proceedings or otherwise
(including the expiration of a statute of limitations or a period for the filing
of claims for refunds, amended returns or appeals from adverse determinations),
including a "determination" as defined in Section 1313(a) of the Code or
execution of an Internal Revenue Service Form 870AD or (ii) the payment of Tax
by the Buyers, Parent or a Subsidiary, whichever is responsible for payment of
such Tax under applicable law, with respect to any item disallowed or adjusted
by a Taxing Authority, provided that such responsible party determines that no
action should be taken to recoup such payment and the other party agrees.
"INDENTURE" means the Indenture relating to the Notes, substantially in
the form attached to Exhibit A hereto.
"LIEN" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance or other adverse claim of
any kind in respect of such property or asset. For the purposes of this
Agreement, a Person shall be deemed to own subject to a Lien any property or
asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such property or asset.
2
<PAGE> 7
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
condition (financial or otherwise), business, assets or results of operations of
Parent and the Subsidiaries, taken as whole.
"1933 ACT" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
"1934 ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"NOTES" means the Junior Subordinated Notes of the Company due 2009, a
specimen certificate substantially the form of which is attached hereto as
Exhibit A.
"PARENT 1934 ACT REPORTS" means the reports filed by Parent in
compliance with the 1934 Act during Parent's most recent fiscal year and, in any
event, Parent's annual report on Form 10-K for the year ended December 31, 1998.
"PERSON" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, substantially in the form attached hereto as Exhibit B.
"SECURITIES" means, collectively, the Notes and the Warrants.
"SUBSIDIARY" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by Parent (including, without limitation, the Company).
"TAX" means (i) any tax, governmental fee or other like assessment or
charge of any kind whatsoever (including, but not limited to, withholding on
amounts paid to or by any Person), together with any interest, penalty, addition
to tax or additional amount imposed by any governmental authority (a "TAXING
AUTHORITY") responsible for the imposition of any such tax (domestic or
foreign), (ii) in the case of Parent or any Subsidiary, liability for the
payment of any amount of the type described in clause (i) as a result of being
or having been before the Closing Date a member of an affiliated, consolidated,
combined or unitary group, or a party to any agreement or arrangement, as a
result of which liability of Parent or any Subsidiary to a Taxing Authority is
determined or taken into account with
3
<PAGE> 8
reference to the liability of any other Person, and (iii) liability of Parent or
any Subsidiary for the payment of any amount as a result of being party to any
Tax Sharing Agreement or with respect to the payment of any amount of the type
described in (i) or (ii) as a result of any existing express or implied
obligation (including, but not limited to, an indemnification obligation).
"TAX SHARING AGREEMENTS" means all existing agreements or arrangements
(whether or not written) binding Parent or any Subsidiary that provide for the
allocation, apportionment, sharing or assignment of any Tax liability or
benefit, or the transfer or assignment of income, revenues, receipts, or gains
for the principal purpose of determining any person's Tax liability.
"TRANSACTION DOCUMENTS" means this Agreement, the Notes, the Warrants,
the Indenture and the Registration Rights Agreement.
"TRANSACTIONS" means the transactions contemplated by the Transaction
Documents.
"WARRANTS" means warrants to purchase an aggregate of 436,965 shares of
Common Stock, a specimen certificate substantially the form of which is attached
hereto as Exhibit C.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
<TABLE>
<CAPTION>
TERM SECTION
<S> <C>
Authorizations 3.09
Buyers recitals
Closing 2.02
Company recitals
Damages 7.02
DLJ Buyers recitals
Environmental Laws 3.08(a)
ERISA 3.08(a)
Indemnified Party 7.03
Indemnifying Party 7.03
intellectual property 3.19
Issuer 2.01
Parent recitals
Parent Securities 3.04
Purchase Price 2.01
</TABLE>
4
<PAGE> 9
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, Parent and the Company (each, an "ISSUER") agree
to issue and sell to each Buyer, and each Buyer agrees, severally and not
jointly, to purchase from the applicable Issuer at the Closing such Notes and
Warrants as are set forth opposite such Buyer's name on Schedule 2.01. The
aggregate purchase price (the "PURCHASE PRICE") for the Notes and the Warrants
applicable to each Buyer is set forth opposite such Buyer's name on Schedule
2.01. The aggregate Purchase Price payable by all Buyers shall be paid at
Closing as provided in Section 2.02.
SECTION 2.02. Closing. The closing (the "CLOSING") of the purchase and
sale of the Securities hereunder shall take place at the offices of Davis Polk &
Wardwell, 450 Lexington Avenue, New York, New York, as soon as possible after
satisfaction of the conditions set forth in Article 6, or at such other time or
place as the parties hereto may agree. At the Closing:
(a) Each Buyer shall deliver to the applicable Issuer the amounts set
forth opposite its name on Schedule 2.01 with respect to the Notes and the
Warrants to be purchased by it, in immediately available funds by wire transfer
to an account of the applicable Issuer designated by such Issuer, by notice to
the Buyers, not later than two business days prior to the Closing Date.
(b) The applicable Issuer shall deliver to each Buyer duly-executed
Notes and Warrants, as the case may be, in the amounts set forth opposite such
Buyer's name on Schedule 2.01.
SECTION 2.03. Purchase Price Allocation. The Issuers and the Buyers
agree that the Purchase Price shall be allocated to the Notes and the Warrants
for U.S. federal income tax purposes in a manner to be mutually agreed by the
Issuers and the Buyers.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE ISSUERS
Parent and the Company jointly and severally represent and warrant to
the Buyers as of the Closing Date that:
5
<PAGE> 10
SECTION 3.01. Corporate Existence and Power. (a) Each Issuer is a
corporation duly incorporated or a limited liability company duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, as the case may be, and has all requisite power
and authority to carry on its business as now conducted. Each Issuer is duly
qualified to do business as a foreign corporation or foreign limited liability
company, as the case may be, and is in good standing in each jurisdiction where
such qualification is necessary, except for those jurisdictions where failure to
be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect.
(b) All equity interests of each of the Issuers have been duly
authorized and validly issued and are fully paid, non-assessable and not subject
to any preemptive or similar rights.
(c) Neither Issuer nor any of its subsidiaries is in violation of its
respective organizational documents or in default in the performance of any
obligation, agreement, covenant or condition contained in any indenture, loan
agreement, mortgage, lease or other agreement or instrument to which such Issuer
or any of its subsidiaries is a party or by which such Issuer or any of its
subsidiaries or their respective property is bound, except for such defaults
which, singly or in the aggregate, would not have a Material Adverse Effect.
SECTION 3.02. Corporate Authorization. The execution, delivery and
performance by each Issuer of the Transaction Documents to which such Issuer is
a party and the consummation of the transactions contemplated thereby are within
such Issuer's powers and have been duly authorized by all necessary action on
the part of such Issuer. This Agreement constitutes (and, when executed and
delivered, each other Transaction Document to which each Issuer is a party will
constitute) a valid and binding agreement of each Issuer, enforceable against
each of the Issuers in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally, (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability and (iii) rights to indemnity and contribution thereunder
may be limited by applicable law.
SECTION 3.03. Noncontravention. The execution, delivery and performance
by each Issuer of the Transaction Documents to which such Issuer is a party and
the consummation of the transactions contemplated thereby do not and will not
(i) require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except such as may
be required under federal securities or Blue Sky laws of the various states or
have been or will be obtained prior to the Closing Date), (ii) conflict with or
constitute a breach of any of the terms or provisions of, or a default under,
(A) the charter or
6
<PAGE> 11
bylaws or limited liability company agreement of such Issuer or any of its
subsidiaries or (B) any indenture, loan agreement, mortgage, lease or other
agreement or instrument that is material to such Issuer and its subsidiaries,
taken as a whole, to which such Issuer or any of its subsidiaries is a party or
by which such Issuer or any of its subsidiaries or their respective property is
bound, (iii) violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental body or
agency having jurisdiction over such issuer any of its subsidiaries or their
respective property, (iv) result in the imposition or creation of (or the
obligation to create or impose) a Lien under, any agreement or instrument to
which such Issuer or any of its subsidiaries is a party or by which such Issuer
or any of its subsidiaries or their respective property is bound, or (v) result
in the termination, suspension or revocation of any Authorization (as defined
below) of such Issuer or any of its subsidiaries or result in any other
impairment of the rights of the holder of any such Authorization, except, in the
case of clauses (i), (ii)(B), (iv) and (v), as would not, singly or in the
aggregate, have a Material Adverse Effect.
SECTION 3.04. Capitalization; Indebtedness. (a) The authorized capital
stock of Parent consists of 30,000,000 shares of Common Stock and 15,000,000
shares of Preferred Stock. After giving effect to the Closing, there will be
outstanding (i) 3,590,326 shares of Common Stock and 2,000,000 shares of
Preferred Stock, (ii) options to purchase 342,356 shares of Common Stock, (iii)
the rights associated with Parent's rights plan in place as of the date hereof
and (iv) the Warrants.
(b) All outstanding shares of capital stock of Parent have been duly
authorized and validly issued and are fully paid and non-assessable. Other than
the Parent Securities, there are no outstanding (i) shares of capital stock or
voting securities of Parent, (ii) securities of Parent convertible into or
exchangeable for shares of capital stock or voting securities of Parent or (iii)
options or other rights to acquire from Parent, or other obligation of Parent to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Parent (the items in
clauses 3.04(B)(I), 3.04(B)(II), 3.04(B)(III) and 3.04(b)(iv) being referred to
collectively as the "PARENT SECURITIES"). There are no outstanding obligations
of Parent or any Subsidiary to repurchase, redeem or otherwise acquire any
Parent Securities, except the obligation of Parent to redeem its Preferred Stock
in accordance with the terms thereof.
(c) When executed and delivered pursuant to this Agreement, the Notes
and the Warrants will constitute valid and binding obligations of the applicable
Issuer. Upon the consummation of the Closing, the shares of Common Stock
issuable upon the exercise of the Warrants will have been duly authorized and
reserved for issuance upon exercise of the Warrants and, when issued upon such
7
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exercise and payment of the exercise price thereof, will be validly issued,
fully paid and non-assessable, and the issuance of such shares is not subject to
any preemptive or similar rights.
SECTION 3.05. Subsidiaries. (a) The entities listed on Schedule 3.05
hereto are the only subsidiaries, direct or indirect, of Parent. Except as
otherwise set forth on such Schedule, all of the outstanding equity interests of
each of Parent's subsidiaries have been duly authorized and validly issued and
are fully paid and non-assessable, as applicable, and are owned by Parent,
directly or indirectly through one or more subsidiaries, free and clear of any
Lien.
SECTION 3.06. Parent 34 Act Reports. Parent has made all required
filings under the 1934 Act. All of the information contained in the Parent 34
Act Reports is correct in all material respects as of the date thereof and not
misleading.
SECTION 3.07. Litigation. (a) No action has been taken and no law,
statute, rule or regulation or order has been enacted, adopted or issued by any
governmental agency or body which prevents the execution, delivery and
performance of any of the Transaction Documents, or suspends the sale of the
Notes or the Warrants in any jurisdiction and no injunction, restraining order
or other order or relief of any nature by a federal or state court or other
tribunal of competent jurisdiction has been issued with respect to any Issuer
which would prevent or suspend the issuance or sale of the Notes or the Warrants
in any jurisdiction.
(b) There are no legal or governmental proceedings pending or
threatened to which either Issuer or any of its subsidiaries is or could be a
party or to which any of their respective property is or could be subject, which
might result, singly or in the aggregate, in a Material Adverse Effect.
SECTION 3.08. Environmental Matters. (a) Neither Issuer nor any of its
subsidiaries has violated any foreign, federal, state or local law or regulation
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("ENVIRONMENTAL LAWS"), any provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or any provisions of the Foreign
Corrupt Practices Act or the rules and regulations promulgated thereunder,
except for such violations which, singly or in the aggregate, would not have a
Material Adverse Effect.
(b) Except as otherwise set forth in the Parent 1934 Act Reports, there
are no costs or liabilities associated with Environmental Laws (including,
without
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limitation, any capital or operating expenditures required for clean-up, closure
of properties or compliance with Environmental Laws or any Authorization, any
related constraints on operating activities and any potential liabilities to
third parties) which would, singly or in the aggregate, have a Material Adverse
Effect.
SECTION 3.09. Licenses and Permits. Each Issuer and its subsidiaries
has such permits, licenses, consents, exemptions, franchises, authorizations and
other approvals (each, an "AUTHORIZATION") of, and has made all filings with and
notices to, all governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including without limitation,
under any applicable Environmental Laws, as are necessary to own, lease, license
and operate its respective properties and to conduct its business, except where
the failure to have any such Authorization or to make any such filing or notice
would not, singly or in the aggregate, have a Material Adverse Effect. Each such
Authorization is valid and in full force and effect and each Issuer and its
subsidiaries is in compliance with all the terms and conditions thereof and with
the rules and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has occurred (including, without
limitation, the receipt of any notice from any authority or governing body)
which allows or, after notice or lapse of time or both, would allow, revocation,
suspension or termination of any such Authorization or results or, after notice
or lapse of time or both, would result in any other impairment of the rights of
the holder of any such Authorization; and such Authorizations contain no
restrictions that are burdensome to such Issuer or any of its subsidiaries;
except, in each case, where such failure to be valid and in full force and
effect or to be in compliance, the occurrence of any such event or the presence
of any such restriction would not, singly or in the aggregate, have a Material
Adverse Effect.
SECTION 3.10. Financial Statements. The historical financial
statements, together with related notes forming part of the Parent 34 Act
Reports (and any amendment or supplement thereto), present fairly the
consolidated financial position, results of operations and changes in financial
position of Parent and its subsidiaries on the basis stated in the Parent 34 Act
Reports at the respective dates or for the respective periods to which they
apply; such statements and related schedules and notes have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; and the other
financial and statistical information and data set forth in the Parent 34 Act
Reports (and any amendment or supplement thereto) are, in all material respects,
accurately presented and prepared on a basis consistent with such financial
statements and the books and records of Parent.
SECTION 3.11. Investment Company Act. None of the Issuers is or, after
giving effect to the offering and sale of the Securities and the application of
the
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net proceeds thereof will be, and "investment company," as such term is defined
in the Investment Company Act of 1940 as amended.
SECTION 3.12. Registration Obligations. There are no contracts,
agreements or understanding between any Issuer and any person granting such
person the right to require such Issuer to file a registration statement under
the 1933 Act with respect to any securities of such Issuer or to require such
Issuer to include such securities with the securities registered pursuant to any
Issuer registration statement, except as contemplated in the Registration Rights
Agreement and the Investors' Agreement dated as of May 22, 1998 among Parent and
the investors and stockholders party thereto.
SECTION 3.13. No Violation of Regulation G, T, U or X. Neither Issuer
nor any agent thereof acting on the behalf of them has taken, and none of them
will take, any action that may cause the Transaction Agreements or the issuance
or sale of the Securities to violate Regulation G (12 C.F.R. Part 207),
Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or
Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal
Reserve System.
SECTION 3.14. No Ratings Decline. No "nationally recognized statistical
rating organization" (as such term is defined for purposes of Rule 436(g)(2)
under the 1933 Act (i) has imposed (or has informed any Issuer that it is
considering imposing) any condition (financial or otherwise) on such Issuer's
retaining any rating assigned to such Issuer or any securities of such Issuer or
(ii) has indicated to such Issuer that it is considering (A) the downgrading
suspension, or withdrawal of, or any review for a possible change that does not
indicate the direction of the possible change in, any rating so assigned or (B)
any change in the outlook for any rating of such Issuer or any securities of
such Issuer.
SECTION 3.15. No Material Change. Since the respective dates as of
which information is given in the Parent 34 Act Reports other than as set forth
in the Parent 34 Act Reports (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement), (i) there has not occurred any
material adverse change or any development involving a prospective material
adverse change in the condition, financial or otherwise, or the earnings,
business, management or operations of Parent and its subsidiaries, taken as a
whole, (ii) there has not been any material adverse change or any development
involving a prospective material adverse change in the capital stock or in the
long-term debt of Parent or any of its subsidiaries and (iii) neither Parent nor
any of its subsidiaries has incurred any material liability or obligation,
direct or contingent.
SECTION 3.16. No Solicitation. No form of general solicitation or
general advertising (as defined in Regulation D under the 1933 Act) was used by
any
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Issuer or any of its representatives (other than the DLJ Buyers, as to whom the
Issuers make no representation) in connection with the offer and sale of the
Securities contemplated here, including, but not limited to, articles, notices
or other communications published in any newspaper, magazine or similar medium
or broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising. No
securities of the same class as the Notes or the Warrants have been issued and
sold by any Issuer within the six-month period immediately prior to the date
hereof.
SECTION 3.17. Labor Matters. There is no (i) material unfair labor
practice complaint, grievance or arbitration proceeding pending or threatened
against either Issuer before the National Labor Relations Board or any state or
local labor relations board or (ii) strike, labor dispute, slowdown or stoppage
pending or threatened against either Issuer, except for such actions specified
in clause (i) or (ii) above, which, singly or in the aggregate, would not have a
Material Adverse Effect. To the best of the Issuers' knowledge, no collective
bargaining organizing activities are taking place with respect to either Issuer,
which, singly or in the aggregate, would have a Material Adverse Effect.
SECTION 3.18. Accounting Controls. Each Issuer maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
SECTION 3.19. Intellectual Property. Except as otherwise set forth in
the Parent 34 Act Reports, Parent and its subsidiaries own or possess, or can
acquire on reasonable terms, all patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names ("INTELLECTUAL PROPERTY") currently
employed by them in connection with the business now operated by them, except
where the failure to own or possess or otherwise be able to acquire such
intellectual property would not, singly or in the aggregate, have a Material
Adverse Effect; and, to the best of the Issuers' knowledge, neither Parent nor
any of its subsidiaries has received any notice of infringement of or conflict
with asserted rights of others with respect to any of such intellectual property
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a Material Adverse Effect.
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SECTION 3.20. Indenture. Prior to the effectiveness of any registration
statement relating to the Notes, the Indenture is not required to be qualified
under the TIA.
SECTION 3.21. No Registration. No registration under the 1933 Act of
the Securities is required for the sale of the Securities to the Buyers as
contemplated hereby or for exempt resales assuming the accuracy of the Buyers'
representations and warranties and agreements set forth in Article 4.
SECTION 3.22. Certificates. Each certificate signed by an officer of
any Issuer and delivered to the Buyers or counsel for the Buyers shall be deemed
to be a representation and warranty by such Issuer to the Buyers as to the
matters covered thereby.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
Each Buyer, severally as to itself and not jointly, represents and
warrants to Parent and the Company as of the Closing Date that:
SECTION 4.01. Corporate/Partnership Existence and Power. Such Buyer is
a partnership duly organized or a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
organization.
SECTION 4.02. Corporate/Partnership Authorization. The execution,
delivery and performance by such Buyer of the Transaction Documents to which it
is a party and the consummation of the transactions contemplated thereby are
within the powers (corporate, partnership or otherwise) of such Buyer and have
been duly authorized by all necessary action on the part of such Buyer. This
Agreement constitutes (and, when executed and delivered, each other Transaction
Document to which such Buyer is a party will constitute) a valid and binding
agreement of such Buyer.
SECTION 4.03. Governmental Authorization. The execution, delivery and
performance by such Buyer of the Transaction Documents to which it is a party
and the consummation of the transactions contemplated thereby require no action
by or in respect of, or filing with, any governmental body, agency or official
(other than any filing pursuant to the HSR Act that may be required by a holder
of the Warrants in connection with the exercise of the Warrants).
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SECTION 4.04. Noncontravention. The execution, delivery and performance
by such Buyer of the Transaction Documents to which it is a party and the
consummation of the transactions contemplated thereby do not and will not (i)
violate the partnership agreement or certificate of incorporation or bylaws, as
the case may be, of such Buyer, (ii) violate any material indenture, agreement
or mortgage to which such Buyer is a party or by which such Buyer is bound, or
(iii) assuming compliance with the matters referred to in Section 4.03, violate
any applicable material law, rule, regulation, judgment, injunction, order or
decree or require any material consent of any other Person.
SECTION 4.05. Purchase for Investment. Such Buyer acknowledges that the
Securities have not been registered under the 1933 Act or any state securities
laws and that the purchase and sale of the Securities contemplated hereby is to
be effected pursuant to an exemption from the registration requirements imposed
by such laws. In this regard, such Buyer is purchasing the Securities to be
purchased by it hereunder for its own account and not with a view to, or for
sale in connection with, any distribution thereof in violation of the 1933 Act.
Such Buyer (either alone or together with its advisors) is an "accredited
investor" (as defined in Regulation D under the 1933 Act), has sufficient
knowledge and experience in financial and business matters so as to be capable
of evaluating the merits and risks of its investment in such Securities and is
capable of bearing the economic risks of such investment. Such Buyer has been
given the opportunity to ask questions of, and receive answers from, management
of Parent concerning its investment in the Issuers.
SECTION 4.06. Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of such Buyer threatened against
or affecting, such Buyer before any court or arbitrator or any governmental
body, agency or official which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay the Transactions.
SECTION 4.07. Finders' Fees. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of such Buyer who might be entitled to any fee or commission from such
Buyer or from Parent or any of its Affiliates upon consummation of the
Transactions.
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ARTICLE 5
COVENANTS OF THE PARTIES
Each party hereto agrees that:
SECTION 5.01. Best Efforts; Further Assurances. Subject to the terms
and conditions of this Agreement, such party will use its best efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all things
necessary or desirable under applicable laws and regulations to consummate the
Transactions. Such party agrees to execute and deliver such other documents,
certificates, agreements and other writings and to take such other actions as
may be necessary or desirable in order to consummate or implement expeditiously
the Transactions.
SECTION 5.02. Certain Filings. The parties hereto shall cooperate with
one another (i) in determining whether any action by or in respect of, or filing
with, any governmental body, agency, official or authority is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any material contracts, in connection with the consummation of the
Transactions and (ii) in taking such actions or making any such filings,
furnishing information required in connection therewith and seeking timely to
obtain any such actions, consents, approvals or waivers.
SECTION 5.03. Public Announcements. The parties agree to consult with
each other before issuing any press release or making any public statement with
respect to any Transaction Document or the Transactions and, except as may be
required by applicable law or any listing agreement with any national securities
exchange, will not issue any such press release or make any such public
statement prior to such consultation.
ARTICLE 6
CONDITIONS TO CLOSING
SECTION 6.01. Conditions to Obligations of each Party. The obligations
of each party to consummate the Closing are subject to the satisfaction of the
following conditions:
(a) No provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation
of the Closing.
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(b) No proceeding challenging this Agreement or any of the
Transactions or seeking to prohibit, alter, prevent or materially delay
the Closing shall have been instituted by any Person before any court,
arbitrator or governmental body, agency or official and be pending,
where, in the reasonable judgment of the Buyers, on the one hand, or
the Issuers, on the other hand, there is a significant possibility of a
determination in accordance with the plaintiff's demand.
SECTION 6.02. Conditions to Obligation of the Buyers. The obligation of
the Buyers to consummate the Closing is subject to the satisfaction of the
following further conditions:
(a) (i) The Issuers shall have performed in all material
respects all of their obligations hereunder required to be performed by
them on or prior to the Closing Date and (ii) the representations and
warranties of the Issuers contained in this Agreement and in any
certificate or other writing delivered by either of them pursuant
hereto shall be true in all material respects at and as of the Closing
Date (it being understood that where any such representation and
warranty already includes a material adverse effect or materiality
exception, no further materiality exception is to be permitted by this
Section 6.02(a)(ii)).
(b) There shall not be threatened, instituted or pending any
action or proceeding by any Person before any court or governmental
authority or agency, domestic or foreign, (i) seeking to restrain,
prohibit or otherwise interfere with the ownership or operation by
Parent or any of its Affiliates of all or any material portion of the
business or assets of Parent or any Subsidiary, or to compel Parent or
any of its Affiliates to dispose of all or any material portion of such
businesses or assets, (ii) seeking to impose or confirm limitations on
the ability of any Buyer or any of its Affiliates effectively to
exercise full rights of ownership of its Securities or (iii) seeking to
require divestiture by any Buyer or any of its Affiliates of any of its
Securities.
(c) There shall not be any action taken, or any statute, rule,
regulation, injunction, order or decree proposed (where, in the
reasonable judgment of the Buyers, there is a significant possibility
that such proposal will be enacted), enacted, enforced, promulgated,
issued or deemed applicable to the purchase of their Securities, by any
court, government or governmental authority or agency, domestic or
foreign, that, in the reasonable judgment of any Buyer has a
significant possibility of, directly
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or indirectly, resulting in any of the consequences referred to in
clauses 6.02(b)(i) through 6.02(b)(iii) above.
(d) Each of the Transaction Documents (other than the
Indenture) shall have been executed and delivered by the parties
thereto other than the Buyers, the conditions to closing of each of the
parties to the Transaction Documents (other than the Buyers) as set
forth in such Transaction Documents shall have been satisfied or waived
and, assuming due execution and delivery by the Buyers, each such
Transaction Document shall be in full force and effect.
(e) The costs and expenses of the Buyers referred to in
Section 8.03, shall have been paid by the Issuers.
(f) The Buyers shall have received an opinion or opinions of
Weil, Gotshal & Manges (or other counsel reasonably satisfactory to the
Buyers), counsel to the Issuers, dated the Closing Date, in form and
substance reasonably satisfactory to the Buyers. In rendering such
opinion, such counsel may rely upon certificates of public officers
and, as to matters of fact, upon certificates of officers of the
Issuers, copies of which certificates shall be contemporaneously
delivered to the Buyers.
(g) The Buyers shall have received all documents they may
reasonably request relating to the existence of each Issuer and the
authority of each Issuer for each of the Transaction Documents, all in
form and substance reasonably satisfactory to the Buyers.
SECTION 6.03. Conditions to Obligation of the Issuers. The obligation
of the Issuers to consummate the Closing is subject to the satisfaction of the
following further conditions:
(a) (i) The Buyers shall have performed in all material
respects all of their obligations hereunder required to be performed by
them at or prior to the Closing Date and (ii) the representations and
warranties of the Buyers contained in this Agreement and in any
certificate or other writing delivered by the Buyers pursuant hereto
shall be true in all material respects at and as of the Closing Date
(it being understood that where any such representation and warranty
already includes a material adverse effect or materiality exception, no
further materiality exception is to be permitted by this Section
6.03(a)(ii)).
(b) There shall not be threatened, instituted or pending any
action or proceeding by any Person before any court or governmental
authority or
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agency, domestic or foreign, seeking to restrain or prohibit the
ownership or operation by Parent or its Affiliates of all or any
material portion of the business or assets of Parent or any Subsidiary,
or to compel Parent or its Affiliates to dispose of all or any material
portion of such businesses or assets.
(c) There shall not be any action taken, or any statute, rule,
regulation, injunction, order or decree proposed (where, in the
reasonable judgment of the Issuers, there is a significant possibility
that such proposal will be enacted), enacted, enforced, promulgated,
issued or deemed applicable to the sale of Securities, by any court,
government or governmental authority or agency, domestic or foreign
that, in the reasonable judgment of the Issuers has a significant
possibility of, directly or indirectly, resulting in any of the
consequences referred to in Section 6.03(b) above.
(d) Each of the Transaction Documents (other than the
Indenture) shall have been executed and delivered by the parties
thereto other than the Issuers and, assuming due execution and delivery
by the Issuers, each such Transaction Document shall be in full force
and effect.
(e) The Issuers shall have received all documents they may
reasonably request relating to the existence of the Buyers and the
authority of such Persons for each of the Transaction Documents, all in
form and substance reasonably satisfactory to the Issuers.
ARTICLE 7
SURVIVAL; INDEMNIFICATION
SECTION 7.01. Survival. The covenants, agreements, representations and
warranties of the parties hereto contained in this Agreement or in any
certificate or other writing delivered pursuant hereto or in connection herewith
shall survive the Closing until eighteen months after the Closing Date; provided
that the representations and warranties contained in Sections 3.04, 3.05, 3.08,
and the covenants and agreements set forth in Articles 7 and 8 shall survive
indefinitely. Notwithstanding the preceding sentence, any covenant, agreement,
representation or warranty in respect of which indemnity may be sought under
this Agreement shall survive the time at which it would otherwise terminate
pursuant to the preceding sentence, if notice of the inaccuracy or breach
thereof giving rise to such right of indemnity shall have been given to the
party against whom such indemnity may be sought prior to such time.
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SECTION 7.02. Indemnification. (a) Parent and the Company, without
duplication, hereby jointly and severally indemnify each Buyer against and agree
to hold such Buyer harmless from any and all damage, loss, liability and expense
(including, without limitation, reasonable expenses of investigation and
reasonable attorneys' fees and expenses in connection with any action, suit or
proceeding) ("DAMAGES") incurred or suffered by such Buyer arising out of any
misrepresentation or breach of warranty, covenant or agreement made or to be
performed by Parent or the Company pursuant to this Agreement.
(b) Each Buyer, severally but not jointly, hereby indemnifies Parent
and the Company, without duplication, against and agrees to hold each of them
harmless from any and all Damages incurred or suffered by them arising out of
any misrepresentation or breach of warranty, covenant or agreement made or to be
performed by such Buyer pursuant to this Agreement.
(c) Any amount paid by Parent, any Subsidiary or the Buyers under
Article 7 will be treated as an adjustment to the Purchase Price unless a Final
Determination causes any such amount not to constitute an adjustment to the
Purchase Price for Federal Tax purposes. In the event of such a Final
Determination, the Buyers, Parent or any Subsidiary, as the case may be, shall
pay an amount that reflects the hypothetical Tax consequences of the receipt or
accrual of such payment, using the maximum statutory rate (or rates, in the case
of an item that affects more than one Tax) applicable to the recipient of such
payment for the relevant year, reflecting for example, the effect of deductions
available for interest paid or accrued and for Taxes such as state and local
income Taxes.
SECTION 7.03. Procedures. The party seeking indemnification under
Section 7.02 (the "INDEMNIFIED PARTY") agrees to give prompt notice to the party
against whom indemnity is sought (the "INDEMNIFYING PARTY") of the assertion of
any claim, or the commencement of any suit, action or proceeding in respect of
which indemnity may be sought under such Section. The Indemnifying Party may at
the request of the Indemnified Party participate in and control the defense of
any such suit, action or proceeding at its own expense. The Indemnifying Party
shall not be liable under Section 7.02 for any settlement effected without its
consent of any claim, litigation or proceeding in respect of which indemnity may
be sought hereunder.
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ARTICLE 8
MISCELLANEOUS
SECTION 8.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile transmission)
and shall be given,
if to the DLJ Buyers, to:
c/o DLJ Merchant Banking Partners II, L.P.
277 Park Avenue
New York, NY 10172
Attention: William F. Dawson, Jr.
Fax: (212) 892-7272
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: Richard D. Truesdell, Jr.
Fax: (212) 450-4800
if to the Issuers, to:
Thermadyne Holdings Corporation
101 South Hanley Road
St. Louis, Missouri 63105
Attention: Jim Tate or Stephanie Josephson
Fax: (314) 746-2374
(314) 746-2327
with a copy to:
R. Scott Cohen, Esq.
Weil, Gotshal & Manges LLP
100 Crescent Court
Suite 1300
Dallas, TX 75201-6950
Fax: (214) 746-7777
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All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
SECTION 8.02. Amendments and Waivers. (a) Any provision of this
Agreement may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed, in the case of an amendment, by each party to this
Agreement, or in the case of a waiver, by the party against whom the waiver is
to be effective, provided that the DLJ Buyers agree that DLJ Merchant Banking
Partners II, L.P. may agree to an amendment or waiver on behalf of, and as agent
for, all DLJ Buyers.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 8.03. Expenses. All costs and expenses incurred in connection
with the Transaction Documents shall be paid by the party incurring such cost or
expense; provided that (i) any costs and expenses (including fees and expenses
of counsel) of each Buyer shall be reimbursed by the Issuers at the Closing and
(ii) all transfer, documentary, sales, use, stamp, registration, value added and
other such Taxes and fees (including any penalties and interest) incurred in
connection with transactions contemplated by this Agreement shall be paid by
Parent when due, and Parent will, at its own expense, file all necessary Tax
returns and other documentation with respect to all such Taxes and fees, and, if
required by applicable law, the Buyers will join in the execution of any such
Tax returns and other documentation.
SECTION 8.04. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto.
SECTION 8.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York, without regard to
the conflicts of law rules of such state.
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SECTION 8.06. Jurisdiction. Except as otherwise expressly provided in
this Agreement, the parties hereto agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby may be
brought in the United States District Court for the Southern District of New
York or any other New York State court sitting in New York City, and each of the
parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 8.01 shall be deemed
effective service of process on such party.
SECTION 8.07. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 8.08. Counterparts; Third Party Beneficiaries. This Agreement
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. No provision of this Agreement is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.
SECTION 8.09. Appointment of Agent. Each of the DLJ Buyers hereby
irrevocably constitutes and appoints DLJ Merchant Banking Partners II, L.P. as
its agent and true and lawful attorney in fact with full power and discretion,
in the name of and for and on behalf of each of the DLJ Buyers, in connection
with all matters arising from, contemplated by or relating to the Transaction
Documents. The powers of DLJ Merchant Banking Partners II, L.P. include, without
limitation, the power to represent each of the DLJ Buyers with respect to all
aspects of the Transaction Documents, which power shall include, without
limitation, the power to (i) waive any conditions of the Transaction Documents,
(ii) amend the Transaction Documents in any respect, (iii) receive notices or
other communications, (iv) deliver any notices, certificates or other documents
required and (v) take all such other action and to do all such other things as
DLJ Merchant Banking Partners II, L.P. deems necessary or advisable with respect
to the Transaction Documents. The Issuers shall have the right to rely upon the
acts
21
<PAGE> 26
taken or omitted to be taken by DLJ Merchant Banking Partners II, L.P. on behalf
of the DLJ Buyers, and shall have no duty to inquire as to the acts and
omissions of DLJ Merchant Banking Partners II, L.P.
SECTION 8.10. Entire Agreement. The Transaction Documents constitute
the entire agreement between the parties with respect to the subject matter of
the Transaction Documents and supersede all prior agreements and understandings,
both oral and written, between the parties with respect to the subject matter of
the Transaction Documents.
SECTION 8.11. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
SECTION 8.12. Enforcement of Voting Rights. In the event that after
December 15, 2004 the Company does not pay interest in cash on four consecutive
Interest Payment Dates (as defined in the Indenture) or on six Interest Payment
Dates, each of the DLJ Buyers agrees to cause, to the extent such DLJ Buyers and
their affiliates shall have the power to cause, two people selected by the
Holders (as defined in the Indenture) of a majority of the Accreted Value (as
defined in the Indenture) of the Notes, voting as a single class, to be elected
to the Board of Directors of Parent. Further, each of the DLJ Buyers agrees to
cause, to the extent such DLJ Buyers shall have the power to cause, such
directors to serve on the Board of Directors of Parent until such time as the
Company pays interest in cash on four consecutive Interest Payment Dates
following their election.
22
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
THERMADYNE HOLDINGS CORPORATION.
By: /s/ JAMES H. TATE
-------------------------------------------
Name: JAMES H. TATE
Title: SR. VP & CFO
THERMADYNE MFG. LLC
By: /s/ JAMES H. TATE
-------------------------------------------
Name: JAMES H. TATE
Title: SR. VP & CFO
DLJ MERCHANT BANKING PARTNERS II, L.P.
By: /s/ WILLIAM F. DAWSON, JR.
-------------------------------------------
Name: William F. Dawson, Jr.
Title: Principal
DLJ MERCHANT BANKING PARTNERS II-A,
L.P.
By: /s/ WILLIAM F. DAWSON, JR.
-------------------------------------------
Name: William F. Dawson, Jr.
Title: Principal
DLJ OFFSHORE PARTNERS II, C.V.
By: /s/ WILLIAM F. DAWSON, JR.
-------------------------------------------
Name: William F. Dawson, Jr.
Title: Principal
23
<PAGE> 28
DLJ DIVERSIFIED PARTNERS, L.P.
By: /s/ IVY DODES
--------------------------------------------
Name: IVY DODES
Title: Vice President
DLJ DIVERSIFIED PARTNERS-A, L.P.
By: /s/ IVY DODES
--------------------------------------------
Name: IVY DODES
Title: Vice President
DLJM FUNDING II, INC.
By: /s/ IVY DODES
--------------------------------------------
Name: IVY DODES
Title: Vice President
DLJ MILLENNIUM PARTNERS, L.P.
By: /s/ WILLIAM F. DAWSON, JR.
-------------------------------------------
Name: William F. Dawson, Jr.
Title: Principal
DLJ MILLENNIUM PARTNERS-A, L.P.
By: /s/ WILLIAM F. DAWSON, JR.
-------------------------------------------
Name: William F. Dawson, Jr.
Title: Principal
DLJ EAB PARTNERS, L.P.
By: /s/ IVY DODES
-------------------------------------------
Name: IVY DODES
Title: Vice President
24
<PAGE> 29
DLJ ESC II L.P.
By: /s/ IVY DODES
-------------------------------------------
Name: IVY DODES
Title: Vice President
DLJ FIRST ESC, L.P.
By: /s/ IVY DODES
-------------------------------------------
Name: IVY DODES
Title: Vice President
25
<PAGE> 30
Schedule 2.01
Notes to be Purchased from the Company
and
Warrants to be Purchased from Parent
<TABLE>
<CAPTION>
BUYERS SECURITIES PURCHASE PRICE
- ----------------------------------------------------------------------------------------
<S> <C> <C>
DLJ Merchant Banking (1) $15,748,000 Initial Accreted $15,748,000
Partners II, L.P. Value of Notes
(2) Warrants to purchase 275,255
shares of Common Stock
- ----------------------------------------------------------------------------------------
DLJ Merchant Banking (1) $627,000 Initial Accreted $ 627,000
Partners II-A, L.P. Value of Notes
(2) Warrants to purchase 10,962
shares of Common Stock
- ----------------------------------------------------------------------------------------
DLJ Offshore Partners (1) $774,000 Initial Accreted $ 774,000
II, C.V. Value of Notes
(2) Warrants to purchase 13,536
shares of Common Stock
- ----------------------------------------------------------------------------------------
DLJ Diversified (1) $921,000 Initial Accreted $ 921,000
Partners, L.P. Value of Notes
(2) Warrants to purchase 16,093
shares of Common Stock
- ----------------------------------------------------------------------------------------
DLJ Diversified (1) $342,000 Initial Accreted $ 342,000
Partners-A, L.P. Value of Notes
(2) Warrants to purchase 5,976
shares of Common Stock
- ----------------------------------------------------------------------------------------
DLJMB Funding II, Inc. (1) $3,212,000 Initial Accreted $ 3,212,000
Value of Notes
(2) Warrants to purchase 56,152
shares of Common Stock
- ----------------------------------------------------------------------------------------
DLJ Millennium (1) $255,000 Initial Accreted $ 255,000
Partners, L.P. Value of Notes
(2) Warrants to purchase 4,451
shares of Common Stock
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
BUYERS SECURITIES PURCHASE PRICE
- ----------------------------------------------------------------------------------------
<S> <C> <C>
DLJ Millennium (1) $50,000 Initial Accreted Value $ 50,000
Partners-A, L.P. amount at maturity of Notes
(2) Warrants to purchase 868
shares of Common Stock
- ----------------------------------------------------------------------------------------
DLJ EAB Partners, L.P. (1) $71,000 Initial Accreted Value $ 71,000
amount at maturity of Notes
(2) Warrants to purchase 1,236
shares of Common Stock
- ----------------------------------------------------------------------------------------
DLJ ESC II L.P. (1) $2,970,000 Initial Accreted $2,970,000
Value of Notes
(2) Warrants to purchase 51,906
shares of Common Stock
- ----------------------------------------------------------------------------------------
DLJ First ESC, L.P. (1) $30,000 Initial Accreted Value $ 30,000
of Notes
(2) Warrants to purchase 530
shares of Common Stock
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
TOTALS 1) $25,000,000 Initial Accreted $25,000,000
Value of Notes
(2) Warrants to purchase 436,965
shares of Common Stock
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE> 32
Schedule 3.05
<TABLE>
<CAPTION>
NAME JURISDICTION OF ORGANIZATION
- ---- -----------------------------
<S> <C>
Arcair Stoody Europe S.A Belgium
BBM Srl* Italy
C&G Systems Holding, Inc. Delaware
C&G Systems, Inc. Illinois
Canadian Cylinder Company Canada
Comet Property Holdings, Inc. Philippines
Comweld Group Pty. Ltd Australia
Comweld Malaysia SDN BHD Malaysia
Comweld Philippines Inc. Philippines
Coyne Natural Gas Systems, Inc. Missouri
Duxtech Pty. Ltd. Australia
Genset SpA Italy
Marison Cylinder Company Delaware
MECO Holding Company Delaware
Metalservice SA Chile
Modern Engineering Company, Inc. Missouri
Ocim Srl* Italy
Palco Trading Company* Dubai
Philippine Welding Equipment Inc.* Philippines
PT Thermadyne Utama Indonesia Indonesia
PT Comweld Indonesia Indonesia
Quetack Pty. Ltd Australia
Quetala Pty. Ltd. Australia
Quetala Unit Trust Australia
Soltec SA Chile
Stoody Company Delaware
TAG Realty, Inc. Texas
Tecmo Srl Italy
Tec. Mo. Cut Srl* Italy
Tec. Mo. Control Srl* Italy
THC Italia Srl Italy
Thermadyne Asia/Pacific PTE Ltd. Singapore
Thermadyne Asia SDN BHD Malaysia
</TABLE>
<PAGE> 33
<TABLE>
<CAPTION>
NAME JURISDICTION OF ORGANIZATION
- ---- ----------------------------
<S> <C>
Thermadyne Australia Pty. Ltd. Australia
Thermadyne Brazil Holdings, Ltd. Cayman Islands
Thermadyne Capital Corp. Delaware
Thermadyne Chile Holdings, Ltd. Cayman Islands
Thermadyne Cylinder Company California
Thermadyne de Brasil S.C. Ltda Brazil
Thermadyne de Mexico S.A. de C.V Mexico
Thermadyne Foreign Sales Corporation Barbados
Thermadyne Hong Kong Limited Hong Kong
Thermadyne Industries, Inc. Delaware
Thermadyne Industries Limited United Kingdom
Thermadyne International Corp. Delaware
Thermadyne Italia Srl Italy
Thermadyne Japan, K.K Japan
Thermadyne Korea, Limited Korea
Thermadyne Receivables, Inc. Delaware
Thermadyne South America Holdings, Ltd. Cayman Islands
Thermadyne Thailand Co. Ltd.* Thailand
Thermadyne Victor Ltda Brazil
Thermadyne Welding Products Canada, Ltd. Canada
Thermal Arc, Inc. Delaware
Thermal Arc Philippines, Inc. Philippines
Thermal Dynamics Corp. Delaware
Tweco Products, Inc. Delaware
Victor Coyne International, Inc. Delaware
Victor Equipment Company Delaware
Victor Gas Systems, Inc. Delaware
Wichita Warehouse Corp. Kansas
</TABLE>
100% of the stock of all domestic subsidiaries are pledged pursuant to the
Credit Agreement.
65% of the stock of all foreign subsidiaries are pledged pursuant to the Credit
Agreement.
*These subsidiaries are not 100% owned.
<PAGE> 34
EXHIBIT A
THIS NOTE IS SUBJECT TO, AND IS TRANSFERABLE ONLY UPON COMPLIANCE WITH,
THE PROVISIONS OF A SUBSCRIPTION AGREEMENT DATED AS OF DECEMBER 22, 1999. COPIES
OF THE ABOVE REFERENCED AGREEMENT ARE ON FILE AT THE OFFICE OF THE COMPANY AT
101 SOUTH HANLEY ROAD, ST. LOUIS, MISSOURI 63105.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE U.S. OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR"),
OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES
THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(k) UNDER THE
SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR
OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE SECURITIES ACT, (C) INSIDE THE U.S. TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE COMPANY A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
COMPANY), AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE ACCRETED VALUE OF
NOTES OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY
THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE
U.S. IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 903 OR RULE 904, AS
APPLICABLE, UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY
<PAGE> 35
RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (G) PURSUANT TO ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH SECTION 3.14(J) OF THE INDENTURE AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE
WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE
BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE COMPANY. IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR OR A NON-U.S. PERSON THAT, IN EITHER CASE, IS
NOT A QUALIFIED INSTITUTIONAL BUYER, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION
AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING
MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "U.S." AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE COMPANY TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
THERMADYNE MFG. LLC.
Junior Subordinated Note due 2009
Initial Accreted Value
No. ___ $__________
THERMADYNE MFG. LLC, a Delaware limited liability company (the
"COMPANY"), which term includes any successor Persons under the Indenture
hereinafter referred to), for value received, promises to pay to __________, or
its registered assigns, the Accreted Value (as defined below) of this Note, on
December 15, 2009.
2
<PAGE> 36
"ACCRETED VALUE" means with respect to this Note, as of any date of
determination, the sum of: (a) the Accreted Value of such Note on the
immediately preceding Interest Payment Date (in the event such date of
determination falls before the first Interest Payment Date, the "Initial
Accreted Value" specified on the face hereof) plus (b) an amount determined by
multiplying (i) the amount referred to in clause (a) by (ii) 15% (provided that
the accretion rate applicable to any period or portion of a period during which
no interest accrues that occurs after December 15, 2004 shall be 16%) by (iii)
the number of days in the period from and including the preceding Interest
Payment Date to such date of determination divided by 360, less (c) any interest
that accrues with respect to such period in accordance with the terms of the
Note.
Interest Rate:
Prior to December 15, 2004, unless a Cash Payment Notice (as defined
below) is properly delivered by the Company, no interest shall accrue
or be payable with respect to the Notes. If the Company elects to pay
interest on any Interest Payment Date prior to December 15, 2004, the
Company shall give written notice (each such notice a "CASH PAYMENT
NOTICE") of such election to Holders five business days prior to the
immediately preceding Interest Payment Date. Commencing on such
immediately preceding Interest Payment Date until such Interest Payment
Date for which a Cash Payment Notice has been properly delivered,
interest will accrue and be payable at a rate of 15% per annum to
Holders of record of the Notes at the close of business on the Regular
Record Date immediately preceding the Interest Payment Date for which
such Cash Payment Notice has been properly delivered, whether or not a
Business Day. Failure to pay interest after proper delivery of a Cash
Payment Notice for any reason shall not constitute a breach of this
Note or the Indenture and the Accreted Value shall be determined as if
such Cash Payment Notice had not been delivered. On or after December
15, 2004 interest will accrue and be payable at a rate of 15% per annum
on each Interest Payment Date to Holders of record of the Notes at the
close of business on the immediately preceding Regular Record Date;
provided, that if and for so long as payment of interest on the Notes
is prohibited under the terms of the Credit Agreement (as defined in
the Indenture) interest shall not accrue or be payable with respect to
the Notes.
Interest Payment Dates: March 15, June 15, September 15 and
December 15 of each year.
Regular Record Dates: March 1, June 1, September 1 and
December 1 of each year.
3
<PAGE> 37
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Date: December 22, 1999
THERMADYNE MFG. LLC, as Issuer
By:
--------------------------------
Name:
Title:
4
<PAGE> 38
THERMADYNE MFG. LLC
Junior Subordinated Note due 2009
This Note is one of a duly authorized issue of Notes of the Company
consisting of other Junior Subordinated Notes due 2009 of the Company issued on
December 22, 1999 and any replacement Notes issued in exchange for, or in lieu
of, the foregoing in accordance with the Indenture. The Notes are limited in
aggregate principal at maturity to the Accreted Value attributable to
$25,000,000. All of such Notes shall be treated as a single issue and vote
together as one class for all purposes of this Note and the Indenture.
1. Incorporation by Reference of Provisions of the Indenture.
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Indenture (as amended in accordance herewith, the "INDENTURE")
attached hereto as Exhibit A. At all times during which an indenture is not
required to be qualified under the TIA with respect to the Notes or the
Indenture has not otherwise been executed and delivered, to the extent not
inconsistent with any other terms of the Notes set forth herein, all of the
terms and conditions of the Indenture shall be and are hereby incorporated by
this reference in the Notes as if fully set forth herein, and shall be binding
upon the Company and, by accepting a Note, each Holder, and inure to the benefit
of the Holders of the Notes, except that, to the extent that the Indenture
requires (i) any notices, certificates or other items to be delivered by the
Company to the Trustee or any Paying Agent, such notices, certificates or other
items shall be delivered instead to each Holder, (ii) any notices, certificates
or other items to be delivered to the Trustee shall be delivered instead to the
Company (and shall be delivered by the Company to each Holder), (iii) any
notices, certificates or other items to be delivered by the Trustee to the
Holders, such notices, certificates or other items shall be delivered instead by
the Company to the Holders, (iv) any payments to be made by the Company to the
Trustee or Paying Agent for payment to Holders, such payments shall instead be
paid directly by the Company to the applicable Holder in the same manner as set
forth in Section 3 below, (v) approval of the form of Notes or notations,
legends or endorsements thereon by the Trustee, the Holders of a majority in
outstanding principal amount of the Notes shall instead approve such form and
notations, legends or endorsements (the form of Notes delivered to the initial
Holders on the date of original issuance of the Notes and notations, legends and
endorsements thereon being deemed to have been so approved) , (vi) any Note to
be authenticated by the Trustee or an Authenticating Agent, the Notes shall
instead be authenticated by the Company (the execution and delivery of any Note
by manual signature of the Company to be deemed to constitute such
authentication for all purposes), (vii) that a Person other than the Company and
5
<PAGE> 39
any Affiliate thereof act as Paying Agent for presentation or surrender of Notes
for payment, the Company or any Affiliate thereof may nonetheless so act, (viii)
the Company to initially appoint the Trustee as Registrar or Paying Agent (to
the extent of acting as agent for receiving surrender or presentations of, but
not deposits of payments on, Notes) and agents for service of demands and
notices in connection with the Notes, the Company instead hereby appoints its
office at 101 South Hanley Road, Suite 300, St. Louis, MO 63105 for such purpose
(with Section 4.02 of the Indenture not to apply thereto), (ix) Notes to be
canceled by the Trustee, such Notes shall instead be canceled by the Company,
(x) the Opinions of Counsel to be delivered to the Trustee pursuant to the
Indenture shall instead be delivered to the Holders, (xi) any Notes to be
surrendered or forwarded to the Trustee or any Paying Agent or Registrar, such
Notes shall be surrendered or forwarded instead to the Company, (xii) any
notices, certificates or other items to be delivered by the Holders to the
Registrar or Paying Agent, such notices, certificates or other items shall be
delivered instead to the Company and (xiii) Notes to be redeemed upon a partial
redemption to be selected by the Trustee, such Notes shall be selected instead
by the Company.
2. Accreted Value and Interest; Subordination. The Company agrees to
pay the Accreted Value of this Note on December 15, 2009.
The Company agrees to pay interest on the Accreted Value of this Note
at the rate and in the manner specified below.
"ACCRETED VALUE" means with respect to this Note, as of any date of
determination, the sum of: (a) the Accreted Value of such Note on the
immediately preceding Interest Payment Date (in the event such date of
determination falls before the first Interest Payment Date, the "Initial
Accreted Value" specified on the face hereof) plus (b) an amount determined by
multiplying (i) the amount referred to in clause (a) by (ii) 15% (provided that
the accretion rate applicable to any period or portion of a period during which
no interest accrues on the Notes that occurs after December 15, 2004 shall be
16%) by (iii) the number of days in the period from and including the preceding
Interest Payment Date to such date of determination divided by 360, less (c) any
interest that accrues with respect to such period in accordance with the terms
of the Note.
Interest Rate:
Prior to December 15, 2004, unless a Cash Payment Notice (as defined
below) is properly delivered by the Company, no interest shall accrue
or be payable with respect to the Notes. If the Company elects to pay
interest on any Interest Payment Date prior to December 15, 2004, the
Company shall give written notice (each such notice a "CASH PAYMENT
NOTICE") of such
6
<PAGE> 40
election to Holders five business days prior to the immediately
preceding Interest Payment Date. Commencing on such immediately
preceding Interest Payment Date until such Interest Payment Date for
which a Cash Payment Notice has been properly delivered, interest will
accrue and be payable at a rate of 15% per annum to Holders of record
of the Notes at the close of business on the Regular Record Date
immediately preceding the Interest Payment Date for which such Cash
Payment Notice has been properly delivered, whether or not a Business
Day. Failure to pay interest after proper delivery of a Cash Payment
Notice for any reason shall not constitute a branch of this Note or the
Indenture and the Accreted Value shall be determined as if such Cash
Payment Notice had not been delivered. On or after December 15, 2004
interest will accrue and be payable at a rate of 15% per annum on each
Interest Payment Date to Holders of record of the Notes at the close of
business on the immediately preceding Regular Record Date; provided,
that if and for so long as payment of interest on the Notes is
prohibited under the terms of the Credit Agreement (as defined in the
Indenture) interest shall not accrue or be payable with respect to the
Notes.
Interest on this Note will accrue as and to the extent set forth above;
provided that, after December 15, 2004 if there is no failure or delay in the
payment of interest and if this Note is authenticated between a Regular Record
Date and the next succeeding Interest Payment Date, interest shall accrue from
such Interest Payment Date. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
The Company shall pay interest on overdue payments of interest and
Accreted Value, to the extent lawful, at a rate per annum equal to 1% per annum
in excess of the rate of interest applicable to the Notes.
The indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, subordinate and junior in right of payment to
the prior payment in full of all Senior Indebtedness and all Senior Subordinated
Indebtedness, and this Note is issued subject to such provisions. Each Holder of
this Note, by accepting the same, agrees to and shall be bound by such
provisions and agrees to take such action as may be necessary or appropriate to
effectuate the subordination as provided in the Indenture.
3. Method of Payment. The Company will pay interest on the Notes on
each Interest Payment Date for which interest is to be paid to the Persons who
are Holders (as reflected in the Register at the close of business on the
Regular Record Date immediately preceding the Interest Payment Date), in each
case, even if the Note is canceled on registration of transfer or registration
of exchange after
7
<PAGE> 41
such Regular Record Date; provided that, with respect to the payment of Accreted
Value at maturity, the Company will make payment to the Holder that surrenders
this Note to any Paying Agent (which is initially the Company) on or after
December 15, 2009.
The Company will make all payments hereunder in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. The Company will make all payments hereunder by wire transfer of
immediately available funds to the accounts specified by the Holder hereof or,
if no such account is specified, by mailing a check to the Holder's registered
address. If a payment date is a date other than a Business Day, payment may be
made at that place on the next succeeding day that is a Business Day and no
interest shall accrue for the intervening period.
4. Paying Agent and Registrar. Initially, the Company will act as
Paying Agent and Registrar. The Company may change any Paying Agent or Registrar
upon written notice to the Holders. The Company, any Subsidiary or any Affiliate
of any of them may act as Paying Agent, Registrar or co-registrar.
5. Indenture; Limitations. In the event an indenture is required to be
qualified under the Trust Indenture Act of 1939 (U.S. Code Section
77aaa-77bbbb), as amended from time to time (the "TIA"), with respect to the
Notes, or at any time upon the request of Holders of in excess of 25% in
aggregate principal amount of the outstanding Notes, the Company shall, and at
any other time the Company, in its sole discretion, may, appoint a trustee (the
"TRUSTEE") who satisfies the eligibility requirements set forth in Section 7.10
of the Indenture and, in any such event, the Company shall take whatever actions
are necessary to cause an Indenture substantially in the form of Exhibit A
attached hereto to be executed and delivered by the Company and the Trustee and
to be qualified under the TIA. In such event, (i) this Note shall be deemed to
be one of an issue of Notes of the Company issued under the Indenture; (ii) the
terms of the Notes shall be deemed to include those stated in the Indenture and
those made part of the Indenture by reference to the TIA, as amended from time
to time; and (iii) the Notes shall be subject to all such terms. Holders of
Notes are referred to the Indenture and the TIA for a statement of all such
terms. In such event, the Company may require holders of the Notes, and each
Holder by his or her acceptance hereof agrees upon the Company's request, to
surrender to the Trustee all Notes in the form hereof in exchange for
replacement Notes substantially in the form of Exhibit A to the Indenture.
The Notes are unsecured junior subordinated obligations of the Company.
8
<PAGE> 42
6. Optional Redemption. The Notes may be redeemed at the option of the
Company, in whole, at any time and from time to time, on and prior to maturity
at the following Redemption Prices (expressed in percentages of the Accreted
Value thereof on the relevant Redemption Date), plus accrued and unpaid
interest, if any, to the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date to receive interest due on the
relevant Interest Payment Date); provided that the Company shall not optionally
redeem any Notes except and to the extent permitted by the Credit Agreement,
(a) if redeemed prior to December 15, 2004 at a redemption
price equal to 115% of the Accreted Value of the Notes; and
(b) if redeemed during the 12-month period commencing December
15 of each of the years set forth below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2004 .................... 107.5%
2005 .................... 105.0%
2006 .................... 102.5%
2007 and thereafter ..... 100%
</TABLE>
Notice of a redemption will be mailed, first-class postage prepaid, at
least 30 days but not more than 60 days before the Redemption Date to each
Holder's registered address. On and after the Redemption Date, interest ceases
to accrue on, and the Accreted Value shall cease to increase with respect to,
Notes or portions of Notes called for redemption, unless the Company defaults in
the payment of the Redemption Price.
7. Repurchase upon a Change in Control. Upon the occurrence of a Change
in Control, each Holder shall have the right to require that the Company
repurchase such Holder's Notes at a purchase price in cash equal to 101% of the
Accreted Value thereof on the date of purchase, plus, if applicable, accrued and
unpaid interest, if any, to the date of purchase (subject to the right of
Holders of record on the relevant Regular Record Date to receive interest due on
the relevant Interest Payment Date); provided, that the Company shall not be
required to repurchase Notes upon a Change of Control if the Company is unable
to obtain all necessary consents under the Credit Agreement for such repurchase.
9
<PAGE> 43
8. Denominations; Transfer; Exchange. The Notes are in fully registered
form without coupons, in denominations of $1,000 and any integral multiples of
$1,000. A Holder may register the transfer or exchange of Notes in accordance
with the Indenture. The Company may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture.
9. Persons Deemed Owners. A Holder may be treated as the owner of a
Note for all purposes.
10. Discharge Prior to Redemption or Maturity. If the Company
irrevocably deposits, or causes to be deposited, with a trustee who could
qualify to serve as Trustee under the Indenture money or U.S. Government
Obligations sufficient to pay the then outstanding Accreted Value of and accrued
interest, if any, on the Notes (a) to redemption or maturity, the Company will
be discharged from the Indenture and the Notes, except in certain circumstances
for certain sections thereof, and (b) to redemption or maturity, the Company
will be discharged from certain covenants set forth in the Indenture.
11. Amendment; Supplement; Waiver. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in aggregate Accreted Value of the Notes then
Outstanding. Without notice to or the consent of any Holder, the Company may
amend the Indenture or the Notes to the extent set forth in the Indenture.
12. Restrictive Covenants. The Indenture contains certain covenants,
including, without limitation, covenants with respect to the following matters:
(i) redemption of or payments on Junior Securities and Parity Securities; (ii)
dividends on Junior Securities; (iii) transactions with Affiliates; and (iv)
repurchase of Notes upon a Change in Control. Within 120 days after the end of
each fiscal year, the Company must report to the Holders on compliance with such
limitations.
13. Voting. The Subscription Agreement dated as of December 22, 1999
relating to the initial purchase of this Note provides that in the event that
after December 15, 2004 the Company does not pay interest in cash on four
consecutive Interest Payment Dates or on six Interest Payment Dates, the
Principal and its affiliates who are signatories to the Subscription Agreement
shall cause, to the extent that they shall have the power to so cause, two
members selected by the Holders of a majority of the Accreted Value of the
Notes, voting as a single class, to be elected to the Board of Directors of
Parent. Further, the Principal and such affiliates shall cause, to the extent
that they shall have the power to so cause, such directors to serve on the Board
of Directors until such time as the Company pays
10
<PAGE> 44
interest in cash on four consecutive Interest Payment Dates following their
election.
14. Successor Persons. When a successor person or other entity (other
than a Subsidiary of the Company) assumes all the obligations of its predecessor
under the Notes and the Indenture, the predecessor person will be released from
those obligations.
15. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts
to Minors Act).
16. Provisions of Indenture. Each Holder, by accepting a Note, agrees,
subject to Section 1 above, to be bound by all of the terms and provisions of
the Indenture, as the same may be amended from time to time.
17. Notices. Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by commercial courier service, by telex, by telecopier or registered
or certified mail, postage prepaid, return receipt requested, addressed as
follows:
if to the Company:
Thermadyne Holdings Corporation
101 South Hanley Road
St. Louis, Missouri 63105
Facsimile No: (314) 746-2374
(314) 746-2327
Attn: Jim Tate or Stephanie Josephson
with a copy to:
R. Scott Cohen, Esq.
Weil, Gotshal & Manges LLP
100 Crescent Court
Suite 1300
Dallas, TX 75201-6950
Fax: (214) 746-7777
11
<PAGE> 45
Any notice required to be given to a Holder shall be deemed to have
been given upon the mailing by first class mail, postage prepaid, of such
notices to Holders at their registered address as recorded in the Register and
shall be sufficiently given to a Holder if so mailed within the time prescribed.
In any case where notice to Holders is given by mail, neither the
failure to mail such notice nor any defect in any notice so mailed to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
12
<PAGE> 46
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- --------------------------------------------------------------------------------
(Please print or typewrite name and address including zip code of assignee)
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting
and appointing
- --------------------------------------------------------------------------------
attorney to transfer such Note on the books of the Company with full power of
substitution in the premises.
13
<PAGE> 47
In connection with any transfer of this Note occurring prior to the
Resale Restriction Termination Date for this Note, the undersigned confirms that
without utilizing any general solicitation or general advertising that:
Check One
(a) [ ] this Note is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended, provided by Rule
144A thereunder.
or
(b) [ ] this Note is being transferred other than in accordance with
(a) above and documents are being furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Company shall not be
obligated to register this Note in the name of any Person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 3.10 of the Indenture shall have been satisfied.
Date:
------------------------
- ----------------------------
NOTICE: The signature to this assignment must correspond
with the name as written upon the face of the
within-mentioned instrument in every particular, without
alteration or any change whatsoever.
Signature Guarantee:
----------------------------------------------
Signatures must be guaranteed by an "ELIGIBLE GUARANTOR INSTITUTION"
meeting the requirements of the Company, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "SIGNATURE GUARANTEE PROGRAM" as may be determined by the Company in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
14
<PAGE> 48
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "QUALIFIED
INSTITUTIONAL BUYER" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
-------------------------
- -----------------------------------------
To be executed by an executive officer
15
<PAGE> 49
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 4.10 of the Indenture, check the box: [ ]
If you wish to have a portion of this Note purchased by the Company
pursuant to 4.10 of the Indenture, state the amount (in Accreted Value) below:
$---------------------.
Date:
------------------------
Your Signature:
---------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
----------------------------
Signatures must be guaranteed by an "ELIGIBLE GUARANTOR INSTITUTION"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "SIGNATURE GUARANTEE PROGRAM" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
<PAGE> 50
EXHIBIT A
Form of Indenture
[see Exhibit 4.13]
<PAGE> 51
EXHIBIT B
Registration Rights Agreement
[see Exhibit 4.12]
<PAGE> 52
EXHIBIT C
THERMADYNE HOLDINGS CORPORATION
WARRANT FOR THE PURCHASE OF SHARES OF
THERMADYNE HOLDINGS CORPORATION
NO. ___ WARRANT TO PURCHASE
_____ SHARES OF
COMMON STOCK
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED OR SOLD EXCEPT IN COMPLIANCE THEREWITH.
FOR VALUE RECEIVED, THERMADYNE HOLDINGS CORPORATION, a Delaware
corporation (the "COMPANY"), hereby certifies that __________, its successor or
permitted assigns (the "HOLDER"), is entitled, subject to the provisions of this
Warrant, to purchase from the Company, at the times specified herein, __________
fully paid and non-assessable shares of Common Stock of the Company, par value
$0.01 per share (the "WARRANT SHARES"), at a purchase price per share equal to
the Exercise Price (as hereinafter defined). The number of Warrant Shares to be
received upon the exercise of this Warrant and the price to be paid for a
Warrant Share are subject to adjustment from time to time as hereinafter set
forth.
(a) DEFINITIONS.
The following terms, as used herein, have the following meanings:
"AFFILIATE" shall have the meaning given to such term in Rule 12b-2
promulgated under the Securities and Exchange Act of 1934, as amended.
<PAGE> 53
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized by law to close.
"COMMON STOCK" means the Common Stock, par value $0.01 per share, of
the Company or any other security for which this Warrant may be exercised
pursuant to paragraph (i) hereof after the occurrence of any of the transactions
described in such paragraph.
"EXERCISE PRICE" means $0.01 per Warrant Share, such Exercise Price to
be adjusted from time to time as provided herein.
"EXPIRATION DATE" means December 15, 2009 at 5:00 p.m. New York City
time.
"FAIR MARKET VALUE" means, with respect to one share of Common Stock on
any date, the Current Market Price Per Common Share as defined in paragraph
(h)(3) hereof.
"PERSON" means an individual, partnership, corporation, limited
liability company, association, trust, or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"PRINCIPAL HOLDERS" means, on any date, the Holders of at least 50% of
the Warrants.
"SUBSCRIPTION AGREEMENT" means the Subscription Agreement dated as of
the date hereof between the Company, Thermadyne Mfg. LLC and the investors party
thereto.
"WARRANTS" means the Warrants issued pursuant to the Subscription
Agreement.
(b) EXERCISE OF WARRANT.
(1) The Holder is entitled to exercise this Warrant
in whole or in part at any time, or from time to time, until
the Expiration Date or, if such day is not a Business Day,
then on the next succeeding day that shall be a Business Day.
To exercise this Warrant, the Holder shall execute and deliver
to the Company a Warrant Exercise Notice substantially in the
form annexed hereto. No earlier than ten days after delivery
of the Warrant Exercise Notice, the Holder shall deliver to
the Company this Warrant Certificate duly executed by the
Holder, together with payment of
2
<PAGE> 54
the applicable Exercise Price. Upon such delivery and payment,
the Holder shall be deemed to be the holder of record of the
Warrant Shares subject to such exercise, notwithstanding that
the stock transfer books of the Company shall then be closed
or that certificates representing such Warrant Shares shall
not then be actually delivered to the Holder. Notwithstanding
anything herein to the contrary, in lieu of payment in cash of
the applicable Exercise Price, the Holder may elect (i) to
receive upon exercise of this Warrant, the number of Warrant
Shares reduced by a number of shares of Common Stock having
the aggregate Fair Market Value equal to the aggregate
Exercise Price for the Warrant Shares, (ii) to deliver as
payment, in whole or in part of the aggregate Exercise Price,
shares of Common Stock having the aggregate Fair Market Value
equal to the applicable portion of the aggregate Exercise
Price for the Warrant Shares or (iii) to deliver as payment,
in whole or in part of the aggregate Exercise Price, such
number of Warrants which, if exercised, would result in a
number of shares of Common Stock having an aggregate Fair
Market Value equal to the applicable portion of the aggregate
Exercise Price for the Warrant Shares. Notwithstanding
anything to the contrary in this paragraph (b)(1), if the
aggregate Fair Market Value of the Common Stock applied or
delivered pursuant to (i), (ii) or (iii) above exceeds the
aggregate Exercise Price, in no event shall the Holder be
entitled to receive any amounts from the Company.
(2) The Exercise Price may be paid in cash or by
certified or official bank check or bank cashier's check
payable to the order of the Company or by any combination of
such cash or check. The Company shall pay any and all
documentary, stamp or similar issue or transfer taxes payable
in respect of the issue or delivery of the Warrant Shares.
(3) If the Holder exercises this Warrant in part,
this Warrant Certificate shall be surrendered by the Holder to
the Company and a new Warrant Certificate of the same tenor
and for the unexercised number of Warrant Shares shall be
executed by the Company. The Company shall register the new
Warrant Certificate in the name of the Holder or in such name
or names of its transferee pursuant to paragraph (f) hereof as
may be directed in writing by the Holder and deliver the new
Warrant Certificate to the Person or Persons entitled to
receive the same.
3
<PAGE> 55
(4) Upon surrender of this Warrant Certificate in
conformity with the foregoing provisions, the Company shall
transfer to the Holder of this Warrant Certificate appropriate
evidence of ownership of the shares of Common Stock or other
securities or property (including any money) to which the
Holder is entitled, registered or otherwise placed in, or
payable to the order of, the name or names of the Holder or
such transferee as may be directed in writing by the Holder,
and shall deliver such evidence of ownership and any other
securities or property (including any money) to the Person or
Persons entitled to receive the same, together with an amount
in cash in lieu of any fraction of a share as provided in
paragraph (e) below.
(c) RESTRICTIVE LEGEND. Certificates representing shares of Common
Stock issued pursuant to this Warrant shall bear a legend substantially in the
form of the legend set forth on the first page of this Warrant Certificate to
the extent that and for so long as such legend is applicable.
(d) RESERVATION OF SHARES. The Company hereby agrees that at all times
it shall reserve for issuance and delivery upon exercise of this Warrant such
number of its authorized but unissued shares of Common Stock or other securities
of the Company from time to time issuable upon exercise of this Warrant as will
be sufficient to permit the exercise in full of this Warrant. All such shares
shall be duly authorized and, when issued upon such exercise, shall be validly
issued, fully paid and non-assessable, free and clear of all liens, security
interests, charges and other encumbrances or restrictions on sale and free and
clear of all preemptive rights.
(e) FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant and in lieu
of delivery of any such fractional share upon any exercise hereof, the Company
shall pay to the Holder an amount in cash equal to such fraction multiplied by
the Current Market Price Per Common Share (as defined in paragraph (h)(3)) at
the date of such exercise.
The Company further agrees that it will not change the par value of the
Common Stock from par value $0.01 per share to any higher par value which
exceeds the Exercise Price then in effect, and will reduce the par value of the
Common Stock upon any event described in paragraph (h) that would, but for this
provision, reduce the Exercise Price below the par value of the Common Stock.
4
<PAGE> 56
(f) EXCHANGE, TRANSFER OR ASSIGNMENT OF WARRANT.
(1) This Warrant and the Warrant Shares are subject
to the provisions of a Registration Rights Agreement dated as
of December 22, 1999. Each holder of this Warrant Certificate
by holding the same, consents and agrees that the registered
holder hereof may be treated by the Company and all other
persons dealing with this Warrant Certificate as the absolute
owner hereof for any purpose and as the person entitled to
exercise the rights represented hereby. The Holder, by its
acceptance of this Warrant, will be subject to the provisions
of, and will have the benefits of, the Registration Rights
Agreement.
(2) Upon surrender of this Warrant to the Company,
together with the attached Warrant Assignment Form duly
executed, the Company shall, without charge, execute and
deliver a new Warrant in the name of the assignee or assignees
named in such instrument of assignment (and, if the Holder's
entire interest is not being assigned, in the name of the
Holder) and this Warrant shall promptly be cancelled.
(g) LOSS OR DESTRUCTION OF WARRANT. Upon receipt by the Company of
evidence satisfactory to it (in the exercise of its reasonable discretion) of
the loss, theft, destruction or mutilation of this Warrant Certificate, and (in
the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Warrant
Certificate, if mutilated, the Company shall execute and deliver a new Warrant
Certificate of like tenor and date.
(h) ANTI-DILUTION PROVISIONS. The Exercise Price of this Warrant and
the number of shares of Common Stock for which this Warrant may be exercised
shall be subject to adjustment from time to time upon the occurrence of certain
events as provided in this paragraph (h); provided that notwithstanding anything
to the contrary contained herein, the Exercise Price shall not be less than the
par value of the Common Stock, as such par value may be reduced from time to
time in accordance with paragraph (e).
(1) In case the Company shall at any time after the
date hereof (i) declare a dividend or make a distribution on
Common Stock payable in Common Stock, (ii) subdivide or split
the outstanding Common Stock, (iii) combine or reclassify the
outstanding Common Stock into a smaller number of shares, or
(iv) issue any shares of its capital stock in a
reclassification of
5
<PAGE> 57
Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company
is the surviving corporation), the Exercise Price in effect at
the time of the record date for such dividend or distribution
or of the effective date of such subdivision, split,
combination or reclassification shall be proportionately
adjusted so that, after giving effect to paragraph (h)(5), the
exercise of this Warrant after such time shall entitle the
holder to receive the aggregate number of shares of Common
Stock or other securities of the Company (or shares of any
security into which such shares of Common Stock have been
reclassified pursuant to clause (iii) or (iv) above) which, if
this Warrant had been exercised immediately prior to such
time, such holder would have owned upon such exercise and been
entitled to receive by virtue of such dividend, distribution,
subdivision, split, combination or reclassification. Such
adjustment shall be made successively whenever any event
listed above shall occur.
(2) In case the Company shall fix a record date for
the making of a distribution to holders of Common Stock
(including any such distribution made in connection with a
consolidation or merger in which the Company is the surviving
corporation) of evidences of indebtedness, cash, assets or
other property (other than dividends payable in Common Stock),
the Exercise Price to be in effect after such record date
shall be determined by multiplying the Exercise Price in
effect immediately prior to such record date by a fraction,
the numerator of which shall be the Current Market Price Per
Common Share on such record date, less the fair market value
(determined as set forth below) of the portion of the
evidences of indebtedness, cash, assets or other property so
to be distributed which is applicable to one share of Common
Stock, and the denominator of which shall be such Current
Market Price Per Common Share. Such adjustments shall be made
successively whenever such a record date is fixed; and in the
event that such distribution is not so made, the Exercise
Price shall again be adjusted to be the Exercise Price which
would then be in effect if such record date had not been
fixed. The fair market value of any such evidences of
indebtedness, assets or other property shall be determined by
the Board of Directors of the Company; provided that if the
Principal Holders shall object to any such determination, the
Board of Directors shall retain an independent appraiser
reasonably satisfactory to the Principal Holders to determine
such fair market value. The Holder shall be notified promptly
of any
6
<PAGE> 58
such distribution and furnished with a description and the
fair market value thereof, as determined by the Board of
Directors.
(3) For the purpose of any computation under
paragraph (e) or paragraph (h)(2) hereof, on any determination
date, the Current Market Price Per Common Share shall be
deemed to be the average (weighted by daily trading volume) of
the Daily Prices (as defined below) per share of the Common
Stock for the 20 consecutive trading days ending three days
prior to such date. "DAILY PRICE" means (1) if the shares of
Common Stock then are listed and traded on the New York Stock
Exchange, Inc. ("NYSE"), the closing price on such day as
reported on the NYSE Composite Transactions Tape; (2) if the
shares of Common Stock then are not listed and traded on the
NYSE, the closing price on such day as reported by the
principal national securities exchange on which the shares are
listed and traded; (3) if the shares of Common Stock then are
not listed and traded on any such securities exchange, the
last reported sale price on such day on the National Market of
the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ"); (4) if the shares of Common Stock
then are not listed and traded on any such securities exchange
and not traded on the NASDAQ National Market, the average of
the highest reported bid and lowest reported asked price on
such day as reported by NASDAQ; or (5) if such shares are not
listed and traded on any such securities exchange, not traded
on the NASDAQ National Market and bid and asked prices are not
reported by NASDAQ, then the average of the closing bid and
asked prices, as reported by The Wall Street Journal for the
over-the-counter market. If on any determination date the
shares of Common Stock are not quoted by any such
organization, the Current Market Price Per Common Share shall
be the fair market value of such shares on such determination
date as determined by the Board of Directors, without regard
to considerations of the lack of liquidity or applicable
regulatory restrictions. If the Principal Holders shall object
to any determination by the Board of Directors of the Current
Market Price Per Common Share, the Current Market Price Per
Common Share shall be the fair market value per share of
Common Stock as determined by an independent appraiser
retained by the Company and reasonably acceptable to the
Principal Holders. The expenses of such independent appraiser
shall be paid by (x) the Principal Holders, if the fair market
value determined by such appraiser is less than that
determined by the Board of Directors, and otherwise
7
<PAGE> 59
(y) by the Company. For purposes of any computation under this
paragraph (h), the number of shares of Common Stock
outstanding at any given time shall not include shares owned
or held by or for the account of the Company or its
subsidiaries.
(4) In the event that, at any time as a result of the
provisions of this paragraph (h), the holder of this Warrant
upon subsequent exercise shall become entitled to receive any
shares of capital stock or other securities of the Company
other than Common Stock, the number of such other shares so
receivable upon exercise of this Warrant shall thereafter be
subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions
contained herein.
(5) Upon each adjustment of the Exercise Price as a
result of the calculations made in paragraphs (h)(1) or (h)(2)
hereof, the number of shares for which this Warrant is
exercisable immediately prior to the making of such adjustment
shall thereafter evidence the right to purchase, at the
adjusted Exercise Price, that number of shares of Common Stock
obtained by (i) multiplying the number of shares covered by
this Warrant immediately prior to this adjustment of the
number of shares by the Exercise Price in effect immediately
prior to such adjustment of the Exercise Price and (ii)
dividing the product so obtained by the Exercise Price in
effect immediately after such adjustment of the Exercise
Price.
(6) The Company shall notify all Holders of the
fixing of a record date for the purpose of payment of a cash
dividend to holders of Common Stock as soon as reasonably
practicable, but in no event less than 20 days prior to any
such record date.
(7) Not less than 10 nor more than 30 days prior to
the record date or effective date, as the case may be, of any
action which requires or might require an adjustment or
readjustment pursuant to this paragraph (h), the Company shall
forthwith file in the custody of the secretary or any
assistant secretary at its principal executive office and with
its stock transfer agent or its warrant agent, if any, an
officers' certificate showing the adjusted Exercise Price
determined as herein provided, setting forth in reasonable
detail the facts requiring such adjustment and the manner of
computing such adjustment. Each such officers' certificate
shall be signed by the chairman, president or chief financial
officer of the Company and by the secretary or any
8
<PAGE> 60
assistant secretary of the Company. Each such officers'
certificate shall be made available at all reasonable times
for inspection by the Holder or any holder of a Warrant
executed and delivered pursuant to paragraph (f) and the
Company shall, forthwith after each such adjustment, mail a
copy, by first-class mail, of such certificate to the Holder.
(8) The Holder shall, at its option, be entitled to
receive, in lieu of the adjustment pursuant to paragraph
(h)(2) otherwise required thereof, on the date of exercise of
the Warrants, the evidences of indebtedness, other securities,
cash, property or other assets which such Holder would have
been entitled to receive if it had exercised its Warrants for
shares of Common Stock immediately prior to the record date
with respect to such distribution. The Holder may exercise its
option under this paragraph (h)(8) by delivering to the
Company a written notice of such exercise within seven days of
its receipt of the certificate of adjustment required pursuant
to paragraph (h)(7) to be delivered by the Company in
connection with such distribution.
(i) CONSOLIDATION, MERGER, OR SALE OF ASSETS. In case of any
consolidation of the Company with, or merger of the Company into, any other
Person, any merger of another Person into the Company (other than a merger which
does not result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock) or any sale or transfer of all or
substantially all of the assets of the Company or of the Person formed by such
consolidation or resulting from such merger or which acquires such assets, as
the case may be, the Holder shall have the right thereafter to exercise this
Warrant for the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer by a holder of the
number of shares of Common Stock for which this Warrant may have been exercised
immediately prior to such consolidation, merger, sale or transfer, assuming (i)
such holder of Common Stock is not a Person with which the Company consolidated
or into which the Company merged or which merged into the Company or to which
such sale or transfer was made, as the case may be ("CONSTITUENT PERSON"), or an
Affiliate of a constituent Person and (ii) in the case of a consolidation,
merger, sale or transfer which includes an election as to the consideration to
be received by the holders, such holder of Common Stock failed to exercise its
rights of election, as to the kind or amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer (provided
that if the kind or amount of securities, cash and other property receivable
upon such consolidation, merger, sale or transfer is not the same for each share
of Common Stock held immediately prior to such consolidation, merger, sale or
transfer by other than a
9
<PAGE> 61
constituent Person or an Affiliate thereof and in respect of which such rights
of election shall not have been exercised ("NON-ELECTING SHARE"), then for the
purpose of this paragraph (i) the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer by each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares). Adjustments for events
subsequent to the effective date of such a consolidation, merger and sale of
assets shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Warrant. In any such event, effective provisions shall be
made in the certificate or articles of incorporation of the resulting or
surviving corporation, in any contract of sale, conveyance, lease or transfer,
or otherwise so that the provisions set forth herein for the protection of the
rights of the Holder shall thereafter continue to be applicable; and any such
resulting or surviving corporation shall expressly assume the obligation to
deliver, upon exercise, such shares of stock, other securities, cash and
property. The provisions of this paragraph (i) shall similarly apply to
successive consolidations, mergers, sales, leases or transfers.
(j) NOTICES. Any notice, demand or delivery authorized by this Warrant
Certificate shall be in writing and shall be given to the Holder or the Company
as the case may be, at its address (or telecopier number) set forth below, or
such other address (or telecopier number) as shall have been furnished to the
party giving or making such notice, demand or delivery:
If to the Company: Thermadyne Holdings Corporation
101 South Hanley Road
St. Louis, Missouri 63105
Fax: (314) 746-2374
(314) 746-2327
Attention: Jim Tate or Stephanie Josephson
If to the Holder: c/o DLJ Merchant Banking Partners II, L.P.
277 Park Avenue
New York, NY 10172
Telecopy: (212) 892-7272
Attention: William F. Dawson, Jr.
Each such notice, demand or delivery shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified
herein and the intended recipient confirms the receipt of such telecopy or (ii)
if given by any other means, when received at the address specified herein.
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(k) RIGHTS OF THE HOLDER. Prior to the exercise of any Warrant, the
Holder shall not, by virtue hereof, be entitled to any rights of a shareholder
of the Company, including, without limitation, the right to vote, to receive
dividends or other distributions or to receive any notice of meetings of
shareholders or any notice of any proceedings of the Company except as may be
specifically provided for herein.
(l) GOVERNING LAW. THIS WARRANT CERTIFICATE AND ALL RIGHTS ARISING
HEREUNDER SHALL BE CONSTRUED AND DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF NEW YORK, AND THE PERFORMANCE THEREOF SHALL BE GOVERNED AND
ENFORCED IN ACCORDANCE WITH SUCH LAWS.
(m) AMENDMENTS; WAIVERS. Any provision of this Warrant Certificate may
be amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Principal Holders and the Company,
or in the case of a waiver, by the party against whom the waiver is to be
effective. No failure or delay by either party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
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IN WITNESS WHEREOF, the Company has duly caused this Warrant
Certificate to be signed by its duly authorized officer and to be dated as of
December 22, 1999.
THERMADYNE HOLDINGS CORPORATION
By:
------------------------------------
Name:
Title:
Acknowledged and Agreed:
[HOLDER]
By:
-----------------------------
Name:
Title:
<PAGE> 64
WARRANT EXERCISE NOTICE
To: Thermadyne Holding Corporation
The undersigned hereby notifies you of its intention to exercise the
Warrant to purchase shares of Common Stock, par value $.01 per share, of
Thermadyne Holdings Corporation. The undersigned intends to exercise the Warrant
to purchase ___________ shares (the "SHARES") at $______ per Share (the Exercise
Price currently in effect pursuant to the Warrant). The undersigned intends to
pay the aggregate Exercise Price for the Shares by __________ [specify any
method permitted by paragraph (b) of the Warrant].
Date:
-----------------
---------------------------------
(Signature of Owner)
---------------------------------
(Street Address)
---------------------------------
(City) (State) (Zip Code)
<PAGE> 65
WARRANT ASSIGNMENT FORM
Dated ___________ ___, _____
FOR VALUE RECEIVED, _______________________ hereby sells, assigns and
transfers unto ______________________________________(the "ASSIGNEE"),
(please type or print in block letters)
- --------------------------------------------------------------------------------
(insert address)
its right to purchase up to ______ shares of Common Stock represented by this
Warrant and does hereby irrevocably constitute and appoint __________________
Attorney, to transfer the same on the books of the Company, with full power of
substitution in the premises.
Signature:
----------------------------------
<PAGE> 1
EXHIBIT 4.12
REGISTRATION RIGHTS AGREEMENT
Dated as of December 22, 1999
by and among
THERMADYNE HOLDINGS CORPORATION,
THERMADYNE MFG. LLC,
DLJ MERCHANT BANKING PARTNERS II, L.P.,
DLJ MERCHANT BANKING PARTNERS II-A, L.P.,
DLJ OFFSHORE PARTNERS II, C.V.,
DLJ DIVERSIFIED PARTNERS, L.P.,
DLJ DIVERSIFIED PARTNERS-A, L.P.,
DLJMB FUNDING II, INC.,
DLJ MILLENNIUM PARTNERS, L.P.,
DLJ MILLENNIUM PARTNERS-A, L.P.,
DLJ EAB PARTNERS, L.P.,
DLJ ESC II L.P.
and
DLJ FIRST ESC, L.P.
relating to the registration of
Junior Subordinated Notes due 2009 of Thermadyne Mfg. LLC
and
Warrants for the Purchase of Shares of Common Stock of
Thermadyne Holdings Corporation
<PAGE> 2
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of December 22, 1999, by and among Thermadyne Mfg. LLC, a
Delaware limited liability company (the "COMPANY"), Thermadyne Holdings
Corporation, a Delaware corporation ("PARENT"), DLJ Merchant Banking Partners
II, L.P., DLJ Merchant Banking Partners II-A, L.P., DLJ Offshore Partners II,
C.V., DLJ Diversified Partners, L.P., DLJ Diversified Partners-A, L.P., DLJMB
Funding II, Inc., DLJ Millennium Partners, L.P., DLJ Millennium Partners-A,
L.P., DLJ EAB Partners, L.P., DLJ ESC II L.P. and DLJ First ESC, L.P. (each a
"DLJ BUYER" and, collectively, the "DLJ BUYERS" and sometimes referred to as the
"BUYERS"), each of whom has agreed to purchase the Company's Junior Subordinated
Notes due 2009 (the "NOTES") and Warrants for the Purchase of Shares of Common
Stock of Parent (the "WARRANTS") pursuant to the Subscription Agreement (as
defined below).
This Agreement is made pursuant to the Subscription Agreement, dated
December 22, 1999 (the "SUBSCRIPTION AGREEMENT"), by and among the Company,
Parent and the Buyers. In order to induce the Buyers to purchase the Notes and
the Warrants, the Company and Parent have agreed to provide the registration
rights set forth in this Agreement. The execution and delivery of this Agreement
is a condition to the obligations of the Buyers set forth in Section 2 of the
Subscription Agreement. Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them in the Indenture, attached as Exhibit A
to the Notes (the "INDENTURE").
The parties hereby agree as follows:
SECTION 1. (a) Definitions.
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACCRETED VALUE: Shall have the meaning assigned to it in the Indenture.
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
AFFILIATED MARKET MAKER: A Broker-Dealer who is deemed to be an
Affiliate of the Company and/or Parent and who is, therefore, required to
deliver a prospectus in connection with sales or market making activities.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
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<PAGE> 3
COMMON STOCK: The common stock, par value $0.01 per share, of Parent.
COMMISSION: The Securities and Exchange Commission.
DEMAND REGISTRATION: As defined in Section 4 hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXPIRATION DATE: 5:00 p.m. New York City time on December 15, 2009.
NOTE REGISTRATION STATEMENT: Any registration statement of the Company
relating to the registration of Transfer Restricted Notes, in each case, (i)
that is filed pursuant to the provisions of this Agreement and (ii) including
the Prospectus included therein, all amendments and supplements thereto
(including post-effective amendments) and all exhibits and material incorporated
by reference therein.
PARENT SECURITIES: The Common Stock and securities convertible into or
exchangeable for Common Stock and options, warrants or other rights to acquire
Common Stock or any other equity security issued by Parent.
PROSPECTUS: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
PUBLIC OFFERING: An underwritten public offering of Transfer Restricted
Securities of the Company or Parent pursuant to an effective registration
statement under the Act.
REGISTRATION STATEMENT: Any Note Registration Statement or Warrant
Registration Statement.
RULE 144: Rule 144 promulgated under the Act.
SECURITIES: shall mean the Notes, the Warrants and the Warrant Shares.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
TRANSFER RESTRICTED NOTES: Each Note, until the earliest to occur of
(a) the date on which such Note has been disposed of in accordance with a Note
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<PAGE> 4
Registration Statement, or (b) the date on which such Note is distributed to the
public pursuant to Rule 144 under the Act.
TRANSFER RESTRICTED SECURITIES: Each Transfer Restricted Note and each
Transfer Restricted Warrant Security.
TRANSFER RESTRICTED WARRANT SECURITIES: (a) Each Warrant and Warrant
Share until the earlier to occur of (i) the date on which such Warrant or
Warrant Share has been disposed of in accordance with a Warrant Registration
Statement or the date on which such Warrant Share is issued upon exercise of a
Warrant in accordance with a registration statement filed under the Act and (ii)
the date on which such Warrant or Warrant Share is distributed to the public
pursuant to Rule 144 under the Act.
WARRANT AGENT: The warrant agent, if any, with respect to the Warrants.
WARRANT SHARE: The Common Stock of Parent issuable on the exercise of
the Warrants.
WARRANT REGISTRATION STATEMENT: Any registration statement of Parent
relating to the registration of Transfer Restricted Warrant Securities,
including any Warrant Shelf Registration Statement, in each case, (i) that is
filed pursuant to the provisions of this Agreement and (ii) including the
Prospectus included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
(b) Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
Applicable Holdback Period 6
Demand Registration 4(a)
Demand Registration Reguest 3(a)
Holder 2
Incidental Registration 5(a)
indemnified party 10(c)
indemnifying person 10(c)
Inspectors 8(a)
Losses 10(a)
Maximum Offering Size 4(e)
Recommencement Date 8(c)
Records 8(a)
Selling Holders 4(a)
Suspension Notice 8(c)
Warrant Shelf Registration Statement 7(a)
</TABLE>
4
<PAGE> 5
SECTION 2. Holders.
A person is deemed to be a holder of Transfer Restricted Securities
whenever such person is the record holder of Transfer Restricted Securities. As
used herein, "HOLDER" refers to the holder of a Transfer Restricted Note or a
Transfer Restricted Warrant Security, or both, as the context may require.
SECTION 3. Demand Registration Rights. (a) Notes: At any time after
Parent has filed its annual report on Form 10-K for the year ended December 31,
1999, if the Company or Parent, as the case may be, shall receive a written
request (a "DEMAND REGISTRATION REQUEST") from the Holders of 50% or more of the
aggregate Accreted Value of Transfer Restricted Notes then outstanding to effect
the registration of such Transfer Restricted Notes, then the Company or Parent,
as the case may be, shall effect the registration under the Act of such Transfer
Restricted Notes in accordance with Section 4 hereof.
(b) Warrant Securities: At any time after Parent has filed its annual
report on Form 10-K for the year ended December 31, 1999 if Parent shall receive
a Demand Registration Request from the Holders of 50% or more of the aggregate
Transfer Restricted Warrant Securities then outstanding to effect the
registration of such Transfer Restricted Warrant Securities, then Parent shall
effect the registration under the Act of such Transfer Restricted Warrant
Securities in accordance with Section 4 and Section 7 hereof.
SECTION 4. Demand Registration. (a) If the Company or Parent, as the
case may be shall receive a Demand Registration Request from the Holders (the
"SELLING HOLDERS") of Transfer Restricted Securities that the Company or Parent,
as the case may be, effect the registration under the Act of all or a portion of
such Selling Holders' Transfer Restricted Securities, and specifying the
intended method of disposition thereof, then the Company or Parent, as the case
may be, shall promptly give written notice of such requested registration (a
"DEMAND REGISTRATION") at least 30 days prior to the anticipated filing date of
the registration statement relating to such Demand Registration to all Holders
and thereupon will use its best efforts to effect, as expeditiously as possible,
the registration under the Act of:
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<PAGE> 6
(i) the Transfer Restricted Securities which the Company or
Parent, as the case may be, has been so requested to register by the
Selling Holders, then held by such Selling Holders; and
(ii) subject to the restrictions set forth in Section 4(e),
all other Transfer Restricted Securities of the same type as that to
which the request by the Selling Holders relates which any other person
entitled to request Parent to effect an Incidental Registration (as
such term is defined in Section 5) pursuant to Section 5 has requested
Parent to register by written request received by Parent within 15 days
after the receipt by such Holders of such written notice given by
Parent,
all to the extent necessary to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Transfer Restricted Securities so
to be registered; provided that, (A) the Company shall not be obligated to
effect more than two Demand Registrations with respect to Transfer Restricted
Notes, and (B) Parent shall not be obligated to effect more than one Demand
Registration with respect to Transfer Restricted Warrant Securities in addition
to its obligations under Section 7; provided, further that the Company shall not
be obligated to effect any shelf registration of Transfer Restricted Notes and
neither the Company nor Parent shall be obligated to effect a Demand
Registration unless the aggregate proceeds expected to be received from the sale
of the Transfer Restricted Securities to be included in such Demand
Registration, in the reasonable opinion of DLJ Merchant Banking Partners II,
L.P. exercised in good faith, equals or exceeds $15,000,000. In no event will
the Company or Parent be required to effect more than one Demand Registration
within any four-month period.
(b) Promptly after the expiration of the 15-day period referred to in
Section 4(a)(ii) hereof, Parent will notify all of the Selling Holders of the
other Holders who have requested to include their Transfer Restricted Warrant
Securities in the registration and the number of Transfer Restricted Securities
requested to be included therein. The Selling Holders requesting a registration
under this Section 4 may, at any time prior to the effective date of the
registration statement relating to such registration, revoke such request,
without liability to any of the other Holders, by providing a written notice to
the Company or Parent, as the case may be, revoking such request, in which case
such request, so revoked, shall be considered an effected Demand Registration
unless the Selling Holders reimburse the Company or Parent, as the case may be,
for all costs incurred by the Company or Parent, as the case may be, in
connection with such registration, or unless such revocation arose out of the
fault of the Company or Parent, as the case may be, in which case such request
shall not be considered an effected Demand Registration.
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<PAGE> 7
(c) The Company or Parent, as the case may be, will pay all
registration expenses as set forth in Section 9 hereof.
(d) A registration made pursuant to this Section 4 shall not be deemed
to have been effected (i) unless the registration statement relating thereto (A)
has become effective under the Act and (B) has remained effective for a period
of at least 180 days (or such shorter period in which all Transfer Restricted
Securities of the Holders included in such registration have actually been sold
thereunder); provided that if after any registration statement filed pursuant to
this Section 4 becomes effective (x) such registration statement is interfered
with by any stop order, injunction or other order or requirement of the
Commission or other governmental agency or court and (y) less than 75% of the
Transfer Restricted Securities included in such registration statement has been
sold thereunder, such registration statement shall not be considered an effected
Demand Registration or (ii) if the Maximum Offering Size (as defined below) is
reduced in accordance with Section 5.01(e) or 5.01(f) such that less than
66 2/3% of the Transfer Restricted Securities of the Selling Holders sought to
be included in such registration are included.
(e) If a Demand Registration involves an underwritten Public Offering
and the managing underwriter shall advise the Company or Parent, as the case may
be, and the Selling Holders that, in its view, (i) the number of Transfer
Restricted Securities requested to be included in such registration (including
any securities which the Company or Parent, as the case may be, proposes to be
included which are not Transfer Restricted Securities) or (ii) the inclusion of
some or all of the Transfer Restricted Securities owned by the Holders, in any
such case, exceeds the largest number of securities which can be sold without
having an adverse effect on such offering, including the price at which such
securities can be sold (the "MAXIMUM OFFERING SIZE"), the Company or Parent, as
the case may be, will include in such registration, in the priority listed
below, up to the Maximum Offering Size:
(i) first, the Transfer Restricted Securities requested to be
included in such registration pursuant to Section 4(a)(i) and pursuant
to Section 5 by the Holders, allocated (if necessary) pro rata among
such Holders on the basis of the relative number of Transfer Restricted
Securities each such Holder has requested to be included in such
registrations; and
(ii) second, securities to be sold for the account of other
persons (including the Company or Parent, as the case may be), with
such priorities
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<PAGE> 8
among them as the Company or Parent, as the case may be, shall
determine.
(f) Registration Statement Form. Registrations under this Section 4
shall be on such appropriate registration form of the Commission (i) as shall be
selected by the Company or Parent, as the case may be, and as shall be
reasonably acceptable to the Holders and (ii) as shall permit the disposition of
Transfer Restricted Securities in accordance with the method or methods of
disposition intended on the part of the Holders. Notwithstanding anything herein
to the contrary, if, pursuant to a registration pursuant to this Section 4, the
Company or Parent, as the case may be, proposes to effect registration by filing
of a registration statement on Form S-3 (or any successor or similar short-form
registration statement) and any managing underwriter shall advise the Company or
Parent, as the case may be, in writing that, in its opinion, the use of another
form of registration statement is of material importance to the success of such
proposed offering, then such registration shall be effected on such other form.
SECTION 5. Incidental Registration. (a) If Parent proposes to register
any Parent Securities under the Act (other than a registration (A) on Form S-8
or S-4 or any successor or similar forms, (B) relating to Common Stock issuable
upon exercise of employee stock options or in connection with any employee
benefit or similar plan of Parent or (C) in connection with a direct or indirect
acquisition by Parent of another company, whether or not for sale for its own
account), it will each such time, subject to the provisions of Section 5(b),
give prompt written notice at least 40 days prior to the anticipated filing date
of the registration statement relating to such registration to each Holder of
Transfer Restricted Warrant Securities, which notice shall set forth such
Holder's rights under this Section 5 and shall offer such Holders the
opportunity to include in such registration statement such number of Transfer
Restricted Warrant Securities as each such Holder may request (an "INCIDENTAL
REGISTRATION"). Upon the written request of any such Holder made within 20 days
after the receipt of notice from Parent (which request shall specify the number
of Transfer Restricted Warrant Securities intended to be disposed of by such
Holder), Parent will use its best efforts to effect the registration under the
Act of all Transfer Restricted Warrant Securities which Parent has been so
requested to register by such Holders, to the extent required to permit the
disposition of the Transfer Restricted Warrant Securities so to be registered;
provided that (I) if such registration involves a Public Offering, all such
Holders requesting to be included in Parent's registration must sell their
Transfer Restricted Warrant Securities to the underwriters on the same terms and
conditions as apply to Parent and (II) if, at any time after giving written
notice of its intention to register any Parent Securities pursuant to this
Section 5 and prior to the effective date of the registration statement filed in
connection with such registration, Parent shall determine for any reason not to
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<PAGE> 9
register such securities, Parent shall give written notice to all such Holders
of Transfer Restricted Warrant Securities and, thereupon, shall be relieved of
its obligation to register any Transfer Restricted Warrant Securities in
connection with such registration. No registration effected under this Section 5
shall relieve Parent of its obligations to effect a Demand Registration to the
extent required by Section 4. Parent will pay all Registration Expenses in
connection with each registration of Transfer Restricted Warrant Securities
requested pursuant to this Section 5.
(b) If a registration pursuant to this Section 5 involves a Public
Offering (other than in the case of a Public Offering requested under Section 3
by the Holders in a Demand Registration, in which case the provisions with
respect to priority of inclusions in such offering as set forth in Section 4(e)
shall apply) and the managing underwriter advises Parent that, in its view, the
number of Parent Securities and Transfer Restricted Warrant Securities that
Parent and Holders intend to include in such registration exceeds the Maximum
Offering Size, Parent will include in such registration, in the following
priority, up to the Maximum Offering Size:
(i) first, so much of the Parent Securities proposed to be
registered by Parent as would not cause the offering to exceed the
Maximum Offering Size;
(ii) second, all Transfer Restricted Warrant Securities
requested to be included in such registration by the Holders pursuant
to this Section 5 (allocated, if necessary for the offering not to
exceed the Maximum Offering Size, pro rata among such Holders on the
basis of the relative number of Transfer Restricted Warrant Securities
so requested to be included in such registration); and
(iii) third, securities to be sold for the account of other
persons, with such priorities among them as Parent shall determine.
SECTION 6. Holdback Agreements. If any registration of Transfer
Restricted Securities shall be in connection with a Public Offering, the Holders
agree not to effect any public sale or distribution, including any sale pursuant
to Rule 144, or any successor provision, under the Act, of any Transfer
Restricted Securities, and not to effect any such public sale or distribution of
any other securities of the Company or Parent or of any stock convertible into
or exchangeable or exercisable for any securities of the Company or Parent (in
each case, other than as part of such Public Offering) during the 14 days prior
to the effective date of such registration statement (except as part of such
registration) or during the period after such effective date equal to the lesser
of (i) such period of
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<PAGE> 10
time as agreed between such managing underwriter, the Company and Parent and
(ii) 180 days (such lesser period, the "APPLICABLE HOLDBACK PERIOD").
SECTION 7. Warrant Shelf Registration. (a) If any Warrants are included
in a Demand Registration, Parent shall prepare and cause to be filed with the
Commission on or prior to 30 days (or, if the Warrants are not at such time of
the same class as securities listed on a national securities exchange or quoted
in a U.S. automated system (as determined pursuant to Rule 144A under the Act,
90 days)) after the date of the Demand Registration Request, pursuant to Rule
415 under the Act, a Registration Statement (each a "WARRANT SHELF REGISTRATION
STATEMENT") on the appropriate form relating to resales of Transfer Restricted
Warrant Securities by the Holders thereof. Parent shall use its best efforts to
cause the Warrant Shelf Registration Statement to be declared effective by the
Commission on or before 90 days (or, if the Warrants are not at such time of the
same class as securities listed on a national securities exchange or quoted in a
U.S. automated system (as determined pursuant to Rule 144A under the Act, 180
days), after the date the Demand Registration is effected.
To the extent necessary to ensure that the Warrant Shelf Registration
Statement is available for sales of Transfer Restricted Warrant Securities by
the Holders thereof entitled to the benefit of this Section 7(a), Parent shall
use its best efforts to keep any Warrant Shelf Registration Statement required
by this Section 7(a) continuously effective, supplemented, amended and current
as required by and subject to the provisions of Section 8(b) hereof and in
conformity with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, until
the earlier of (i) two years following the first date as of which no Warrants
remain outstanding and (ii) if all of the Warrants expire unexercised, the
Expiration Date; provided that such obligation shall expire before such date if
Parent delivers to the Warrant Agent (if there is a Warrant Agent at such time,
or, if there is no Warrant Agent, to the Holders) a written opinion of counsel
to Parent (which opinion of counsel shall be satisfactory to Parent) that all
Holders (other than Affiliates of Parent) of Warrants and Warrant Shares may
resell the Warrants and the Warrant Shares without registration under the Act
and without restriction as to the manner, timing or volume of any such sale and
instruct the Warrant Agent to (or if there is no Warrant Agent, Parent shall)
remove the private placement legend from all Warrants and Warrant Shares;
provided, further, that notwithstanding the foregoing, any Affiliate of Parent
may, with notice to Parent, require Parent to keep the Registration Statement
continuously effective for resales by such Affiliate for so long as such
Affiliate holds Warrants or Warrant Shares, including as a result of any
market-making activities or other trading activities of such Affiliate.
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<PAGE> 11
(b) Provision by Holders of Certain Information in Connection with the
Warrant Shelf Registration Statement. No Holder of Transfer Restricted Warrant
Securities may include any of its Transfer Restricted Warrant Securities in any
Warrant Shelf Registration Statement pursuant to this Agreement unless and until
such Holder furnishes to Parent in writing the information specified in Item 507
or 508 of Regulation S-K, as applicable, of the Act for use in connection with
any Warrant Shelf Registration Statement or Prospectus or preliminary Prospectus
included therein. Each Selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to Parent by such Holder not materially misleading.
Parent will promptly prepare and file a Prospectus supplement including
such information provided by any Holder to the extent that such Holder
reasonably determines that a Prospectus supplement is required in connection
with such Holder's sale of Transfer Restricted Warrant Securities under the
Warrant Shelf Registration Statement and so notifies Parent.
(c) Parent shall have no registration obligations under this Agreement
with respect to any Warrants or Warrant Shares except as provided in Section
3(b) or this Section 7. References herein to the Warrants, Warrant Shares and
Transfer Restricted Warrant Securities shall only refer to such securities to
the extent that Parent has registration obligations therefor.
SECTION 8. Registration Procedures. (a) Whenever Holders request that
any Transfer Restricted Securities be registered pursuant to Sections 3, 4 or 5,
the Company or Parent, as the case may be, will, subject to the provisions of
such Sections, use its best efforts to effect the registration and the sale of
such Transfer Restricted Securities in accordance with the intended method of
disposition thereof as quickly as practicable, and in connection with any such
request:
(i) The Company or Parent, as the case may be, will as
expeditiously as possible prepare and file with the Commission a
registration statement on any form, subject to Section 4(f), for which
the Company or Parent, as the case may be, then qualifies or which
counsel for the Company or Parent, as the case may be, shall deem
appropriate and which form shall be available for the sale of the
Transfer Restricted Securities to be registered thereunder in
accordance with the intended method of distribution thereof, and use
its best efforts to cause such filed registration statement to become
and remain effective for a period of not less than 180 days.
(ii) The Company or Parent, as the case may be, will, if
requested, prior to filing a registration statement or prospectus or
any
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<PAGE> 12
amendment or supplement thereto, furnish to participating Holder and
each underwriter, if any, of the Transfer Restricted Securities covered
by such registration statement copies of such registration statement as
proposed to be filed, and thereafter the Company or Parent, as the case
may be, will furnish to such Holder and underwriter, if any, such
number of copies of such registration statement, each amendment and
supplement thereto (in each case including all exhibits thereto and
documents incorporated by reference therein), the prospectus included
in such registration statement (including each preliminary prospectus)
and such other documents as such Holder or underwriter may reasonably
request in order to facilitate the disposition of the Transfer
Restricted Securities owned by such Holder.
(iii) After the filing of the registration statement, the
Company or Parent, as the case may be, will promptly notify each Holder
holding Transfer Restricted Securities covered by such registration
statement of any stop order issued or threatened by the Commission and
take all reasonable actions required to prevent the entry of such stop
order or to remove it if entered.
(iv) The Company or Parent, as the case may be, will use its
best efforts to (A) register or qualify the Transfer Restricted
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions in the United States
as any Holder holding such Transfer Restricted Securities reasonably
(in light of such Holder's intended plan of distribution) requests and
(B) cause such Transfer Restricted Securities to be registered with or
approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company or
Parent, as the case may be, and do any and all other acts and things
that may be reasonably necessary or advisable to enable such Holder to
consummate the disposition of the Transfer Restricted Securities owned
by such Holder; provided that the Company or Parent, as the case may
be, will not be required to (1) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but
for this paragraph (d), (2) subject itself to taxation in any such
jurisdiction or (3) consent to general service of process in any such
jurisdiction.
(v) The Company or Parent, as the case may be, will
immediately notify each Holder holding such Transfer Restricted
Securities, at any time when a prospectus relating thereto is required
to be delivered under the Act, of the occurrence of an event requiring
the preparation of a supplement or amendment to such prospectus so
that, as thereafter
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delivered to the purchasers of such Transfer Restricted Securities,
such prospectus will not contain an untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and promptly
prepare and make available to each such Holder any such supplement or
amendment.
(vi) The Holder will have the right, in its sole discretion,
to select an underwriter or underwriters in connection with any Public
Offering, which underwriter or underwriters may include any Affiliate
of DLJ Merchant Banking Partners II, L.P. In connection with any Public
Offering, the Company or Parent, as the case may be, will enter into
customary agreements (including an underwriting agreement in customary
form) and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of Transfer Restricted
Securities in any such Public Offering, including the engagement of a
"qualified independent underwriter" in connection with the
qualification of the underwriting arrangements with the NASD.
(vii) Upon the execution of confidentiality agreements in form
and substance satisfactory to the Company or Parent, as the case may
be, the Company or Parent, as the case may be, will make available for
inspection by any Holder and any underwriter participating in any
disposition pursuant to a registration statement being filed by the
Company or Parent, as the case may be, pursuant to this Section 8 and
any attorney, accountant or other professional retained by any such
Holder or underwriter (collectively, the "INSPECTORS"), all financial
and other records, pertinent corporate documents and properties of the
Company or Parent, as the case may be, (collectively, the "RECORDS") as
shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's or Parent's, as the
case may be, officers, directors and employees to supply all
information reasonably requested by any Inspectors in connection with
such registration statement. Records that the Company or Parent, as the
case may be, determines, in good faith, to be confidential and that it
notifies the Inspectors are confidential shall not be disclosed by the
Inspectors unless (A) the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in such registration
statement or (B) the release of such Records is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction. Each
Holder agrees that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as
the basis for any market transactions in Company's or Parent's
securities unless and until such information is made generally
available to the public. Each Holder further agrees that it will, upon
learning that
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<PAGE> 14
disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company or Parent, as the case may be,
and allow the Company or Parent, as the case may be, at its expense, to
undertake appropriate action to prevent disclosure of the Records
deemed confidential.
(viii) The Company or Parent, as the case may be, will furnish
to each such Holder and to each such underwriter, if any, a signed
counterpart, addressed to such underwriter, of (A) an opinion or
opinions of counsel to the Company or Parent, as the case may be, and
(B) a comfort letter or comfort letters from the Company's or Parent's,
as the case may be, independent public accountants, each in customary
form and covering such matters of the type customarily covered by
opinions or comfort letters, as the case may be, as a majority of such
Holders or the managing underwriter therefor reasonably requests.
The Company or Parent, as the case may be, may require each such Holder
to promptly furnish in writing to the Company or Parent, as the case may be,
such information regarding the distribution of the Transfer Restricted
Securities as the Company or Parent, as the case may be, may from time to time
reasonably request and such other information as may be legally required in
connection with such registration.
Each such Holder agrees that, upon receipt of any notice from the
Company or Parent, as the case may be, of the happening of any event of the kind
described in Section 8(a)(v), such Holder will forthwith discontinue disposition
of Transfer Restricted Securities pursuant to the registration statement
covering such Transfer Restricted Securities until such Holder's receipt of the
copies of the supplemented or amended prospectus contemplated by Section
8(a)(v), and, if so directed by the Company or Parent, as the case may be, such
Holder will deliver to the Company or Parent, as the case may be, all copies,
other than any permanent file copies then in such Holder's possession, of the
most recent prospectus covering such Transfer Restricted Securities at the time
of receipt of such notice. In the event that the Company or Parent, as the case
may be, shall give such notice, the Company or Parent, as the case may be, shall
extend the period during which such registration statement shall be maintained
effective (including the period referred to in Section 8(a)(i)) by the number of
days during the period from and including the date of the giving of notice
pursuant to Section 8(a)(v) to the date when the Company or Parent, as the case
may be, shall make available to such Holder a prospectus supplemented or amended
to conform with the requirements of Section 8(a)(v).
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<PAGE> 15
(b) Special Warrant Shelf Registration Procedures. In connection with
any Warrant Shelf Registration Statement and any related Prospectus required by
this Agreement, Parent shall:
(i) use its best efforts to keep such Warrant Shelf
Registration Statement continuously effective and provide all requisite
financial statements for the period specified in Section 7 of this
Agreement. Upon the occurrence of any event that would cause any such
Warrant Shelf Registration Statement or the Prospectus contained
therein (A) to contain an untrue statement of material fact or omit to
state any material fact necessary to make the statements therein not
misleading or (B) not to be effective and usable for resale of the
relevant Transfer Restricted Warrant Securities during the period
required by this Agreement, Parent shall file promptly an appropriate
amendment to such Warrant Shelf Registration Statement curing such
defect, and, if Commission review is required, use best efforts to
cause such amendment to be declared effective as soon as practicable.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Warrant Shelf Registration Statement
as may be necessary to keep such Warrant Shelf Registration Statement
effective for the period set forth in Section 7 hereof; cause the
Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the Act,
and to comply fully with Rules 424, 430A and 462, as applicable, under
the Act in a timely manner; and comply with the provisions of the Act
with respect to the disposition of all securities covered by such
Warrant Shelf Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Warrant Shelf Registration Statement
or supplement to the Prospectus;
(iii) advise each Holder who is an Affiliated Market Maker
promptly and, if requested by such person, confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Warrant Shelf Registration Statement or any post-effective amendment
thereto, when the same has become effective, (B) of any request by the
Commission for amendments to the Warrant Shelf Registration Statement
or amendments or supplements to the Prospectus or for additional
information relating thereto, (C) of the issuance by the Commission of
any stop order suspending the effectiveness of the Warrant Shelf
Registration Statement under the Act or of the suspension by any state
securities commission of
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<PAGE> 16
the qualification of the relevant Transfer Restricted Warrant
Securities for offering or sale in any jurisdiction, or the initiation
of any proceeding for any of the preceding purposes, and (D) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Warrant Shelf Registration
Statement, the Prospectus, any amendment or supplement thereto or any
document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in the Warrant Shelf Registration
Statement in order to make the statements therein not misleading, or
that requires the making of any additions to or changes in the
Prospectus in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If at any
time the Commission shall issue any stop order suspending the
effectiveness of the Warrant Shelf Registration Statement, or any state
securities commission or other regulatory authority shall issue an
order suspending the qualification or exemption from qualification of
the relevant Transfer Restricted Warrant Securities under state
securities or Blue Sky laws, Parent shall use best efforts to obtain
the withdrawal or lifting of such order at the earliest possible time;
(iv) subject to Section 8(b)(i), if any fact or event
contemplated by Section 8(b)(iii)(D) above shall exist or have
occurred, prepare a supplement or post-effective amendment to the
Warrant Shelf Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the
relevant Transfer Restricted Warrant Securities, the Prospectus will
not contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
(v) furnish to each Holder and each Affiliated Market Maker in
connection with such exchange or sale, if any, before filing with the
Commission, copies of any Warrant Shelf Registration Statement or any
Prospectus included therein or any amendments or supplements to any
such Warrant Shelf Registration Statement or Prospectus (including all
documents incorporated by reference after the initial filing of such
Warrant Shelf Registration Statement), which documents will be subject
to the review and comment of such persons in connection with such sale,
if any, for a period of at least five business days, and Parent will
not file any such Warrant Shelf Registration Statement or Prospectus or
any amendment or supplement to any such Warrant Shelf Registration
Statement or Prospectus (including all such documents incorporated by
reference) to which such persons shall reasonably object within five
business days after
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<PAGE> 17
the receipt thereof. Such person shall be deemed to have reasonably
objected to such filing if such Warrant Shelf Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be
filed, contains an untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not
misleading or fails to comply with the applicable requirements of the
Act;
(vi) promptly prior to the filing of any document that is to
be incorporated by reference into a Warrant Shelf Registration
Statement or Prospectus, provide copies of such document to each Holder
and each Affiliated Market Maker in connection with such exchange or
sale, if any, make Parent's representatives available for discussion of
such document and other customary due diligence matters, and include
such information in such document prior to the filing thereof as such
persons may reasonably request;
(vii) make available, at reasonable times, for inspection by
each Holder and each Affiliated Market Maker and any attorney or
accountant retained by such persons, all financial and other records,
pertinent corporate documents of Parent and cause Parent's officers,
directors and employees to supply all information reasonably requested
by any such persons, attorney or accountant in connection with such
Warrant Shelf Registration Statement or any post-effective amendment
thereto subsequent to the filing thereof and prior to its
effectiveness;
(viii) if requested by any Holders in connection with such
exchange or sale or any Affiliated Market Maker, promptly include in
any Warrant Shelf Registration Statement or Prospectus, pursuant to a
supplement or post-effective amendment if necessary, such information
as such persons may reasonably request to have included therein,
including, without limitation, information relating to the "Plan of
Distribution" of the relevant Transfer Restricted Warrant Securities
and the use of the Warrant Shelf Registration Statement or Prospectus
for market making activities; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as
practicable after Parent is notified of the matters to be included in
such Prospectus supplement or post-effective amendment;
(ix) furnish to each Holder in connection with such exchange
or sale and each Affiliated Market Maker, without charge, at least one
copy of the Warrant Shelf Registration Statement, as first filed with
the Commission, and of each amendment thereto, including all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
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<PAGE> 18
(x) deliver to each Holder and each Affiliated Market Maker
without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
persons reasonably may request; Parent hereby consents to the use (in
accordance with law) of the Prospectus and any amendment or supplement
thereto by each selling person in connection with the offering and the
sale of the Transfer Restricted Warrant Securities covered by the
Prospectus or any amendment or supplement thereto and all market making
activities of such Affiliated Market Maker, as the case may be;
(xi) upon the request of any Holder, enter into such
agreements (including underwriting agreements) and make such
representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition
of the Transfer Restricted Warrant Securities pursuant to any
applicable Warrant Shelf Registration Statement contemplated by this
Agreement as may be reasonably requested by any Holder in connection
with any sale or resale pursuant to any applicable Warrant Shelf
Registration Statement. In such connection, and also in connection with
market making activities by any Affiliated Market Maker, Parent shall:
(A) upon request of any person, furnish (or in the case
of Sections 8(b)(xi)(A)(2) and 8(b)(xi)(A)(3), use best
efforts to cause to be furnished) to each person, upon the
effectiveness of the Warrant Shelf Registration Statement or
in connection with any sale of the Warrants (or Warrant
Shares) pursuant to the Warrant Shelf Registration Statement:
(1) a certificate, dated such date, signed on
behalf of Parent by (x) the chief executive officer
and (y) the principal financial or accounting officer
of Parent confirming, as of the date thereof, the
matters set forth in Section 6.02(a) of the
Subscription Agreement and such other matters as are
customary in connection with public offerings of
securities similar to the Warrants (or Warrant
Shares) as such person may reasonably request;
(2) an opinion, dated the date of effectiveness
of the Warrant Shelf Registration Statement or the
closing date of such sale of Warrants (or Warrant
Shares) of counsel for Parent covering matters as are
customary for public offerings of securities similar
to the Warrants (or
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<PAGE> 19
Warrant Shares) and such other matters as such person
may reasonably request, and in any event including a
statement to the effect that such counsel has
participated in conferences with officers and other
representatives of Parent and representatives of the
independent public accountants for Parent and have
considered the matters required to be stated therein
and the statements contained therein, although such
counsel has not independently verified the accuracy,
completeness or fairness of such statements; and that
such counsel advises that, on the basis of the
foregoing (relying as to materiality to the extent
such counsel deems appropriate upon the statements of
officers and other representatives of Parent and
without independent check or verification), no facts
came to such counsel's attention that caused such
counsel to believe that the applicable Warrant Shelf
Registration Statement, at the time such Warrant
Shelf Registration Statement or any post-effective
amendment thereto became effective and, in the case
of any sale pursuant to a Warrant Shelf Registration
Statement, as of the date of the purchase agreement
for such sale and the closing date therefor,
contained an untrue statement of a material fact or
omitted to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading, or that the Prospectus
contained in such Warrant Shelf Registration
Statement as of its date and, in the case of the
opinion dated the closing date of a sale, as of the
closing date of such sale, as applicable, contained
an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the
statements therein, in the light of the circumstances
under which they were made, not misleading. Without
limiting the foregoing, such counsel may state
further that such counsel assumes no responsibility
for, and has not independently verified, the
accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial
data included in any Warrant Shelf Registration
Statement contemplated by this Agreement or the
related Prospectus; and
(3) a customary comfort letter, dated the date
of effectiveness of the Warrant Shelf Registration
Statement, or as of the date of closing of a sale
pursuant to the Warrant
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<PAGE> 20
Shelf Registration Statement, as the case may be,
from the independent accountants for Parent in the
customary form and covering matters of the type
customarily covered in comfort letters to
underwriters in connection with underwritten
offerings; and
(B) deliver such other documents and certificates as may
be reasonably requested by the selling such persons to
evidence compliance with the matters covered in Section
8(b)(xi)(A) above and with any customary conditions contained
in any agreement entered into by Parent pursuant to this
Section 8(b)(xi);
(xii) prior to any public offering of Transfer Restricted
Warrant Securities, cooperate with the selling Holders and their
counsel in connection with the registration and qualification of the
Transfer Restricted Warrant Securities under the securities or Blue Sky
laws of such jurisdictions as the selling Holders may request and do
any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Warrant
Securities covered by the applicable Warrant Shelf Registration
Statement; provided, however, that Parent shall not be required to
register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service of
process in suits or to taxation, other than as to matters and
transactions relating to the Warrant Shelf Registration Statement, in
any jurisdiction where it is not now so subject;
(xiii) in connection with any sale of Transfer Restricted
Warrant Securities that will result in such securities no longer being
Transfer Restricted Warrant Securities, cooperate with the Holders to
facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Warrant Securities to be sold and not
bearing any restrictive legends; and to register such Transfer
Restricted Warrant Securities in such denominations and such names as
the selling Holders may request at least two business days prior to
such sale of Transfer Restricted Warrant Securities;
(xiv) use their respective best efforts to cause the
disposition of the Transfer Restricted Warrant Securities covered by
the Warrant Shelf Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to consummate the
disposition of such Transfer Restricted Warrant Securities, subject to
the proviso contained in Section 8(b)(xii) above;
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(xv) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable Warrant
Shelf Registration Statement, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need not
be audited) covering a twelve-month period beginning after the
effective date of the Warrant Shelf Registration Statement (as such
term is defined in paragraph (c) of Rule 158 under the Act);
(xvi) provide promptly to each Holder and Affiliated Market
Maker, upon request, each document filed with the Commission pursuant
to the requirements of Section 13 or Section 15(d) of the Exchange Act.
(c) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security and each Affiliated Market Maker agrees that, upon
receipt of the notice referred to in Section 8(b)(iii)(C) or any notice from the
Company (in the case of a Note Registration Statement) or Parent (in the case of
a Warrant Registration Statement) of the existence of any fact of the kind
described in Section 8(b)(iii)(D) hereof (in each case, a "SUSPENSION NOTICE"),
such person will forthwith discontinue disposition of Transfer Restricted
Securities pursuant to the applicable Registration Statement until (i) such
person has received copies of the supplemented or amended Prospectus
contemplated by Section 8(b)(iv) hereof, or (ii) such person is advised in
writing by the Company or Parent, as applicable, that the use of the Prospectus
may be resumed, and has received copies of any additional or supplemental
filings that are incorporated by reference in the Prospectus (in each case, the
"RECOMMENCEMENT DATE"). Each person receiving a Suspension Notice hereby agrees
that it will either (i) destroy any Prospectuses, other than permanent file
copies, then in such person's possession which have been replaced by the Company
or Parent, as applicable with more recently dated Prospectuses or (ii) deliver
to the Company or Parent, as applicable(at the Company's or Parent's expense)
all copies, other than permanent file copies, then in such person's possession
of the Prospectus covering such Transfer Restricted Securities that was current
at the time of receipt of the Suspension Notice. The time period regarding the
effectiveness of such Registration Statement set forth in Section 4 or Section 7
hereof, as applicable, shall be extended by a number of days equal to the number
of days in the period from and including the date of delivery of the Suspension
Notice to the date of delivery of the Recommencement Date.
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SECTION 9. Registration Expenses.
(a) All expenses incident to the Company's and Parent's performance of
or compliance with this Agreement will be borne by the Company or Parent, as the
case may be, regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and expenses;
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws (including without limitation the costs and expenses of
any Trustee selected pursuant to the requirements of the Trust Indenture Act);
(iii) all expenses of printing (including printing of Prospectuses whether for
sales, market making or otherwise), messenger and delivery services and
telephone; (iv) all fees and disbursements of counsel for the Company, Parent
and the Holders of Transfer Restricted Securities; (v) all application and
filing fees in connection with listing the Warrants or the Warrant Shares on a
national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company and Parent (including the expenses
of any special audit and comfort letters required by or incident to such
performance).
The Company and Parent will each, in any event, bear its respective
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expenses
of any annual audit and the fees and expenses of any person, including special
experts, retained by the Company or Parent.
The Holders will bear any underwriting discounts and commissions
incurred in connection with the resale of any of their securities.
(b) In connection with any Registration Statement required by this
Agreement, the Company or Parent, as the case may be, will reimburse the Buyers
and the Holders of Transfer Restricted Securities who are selling or reselling
Transfer Restricted Notes pursuant to the "Plan of Distribution" contained in a
Note Registration Statement or selling or reselling Warrants or Warrant Shares
pursuant to a Warrant Registration Statement, as applicable, for the reasonable
fees and disbursements of not more than one counsel, who shall be Davis Polk &
Wardwell, unless another firm shall be chosen by the Holders of a majority in
principal amount of the Transfer Restricted Securities for whose benefit such
Registration Statement is being prepared.
SECTION 10. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Holder, its
directors, officers and each person, if any, who controls such Holder (within
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<PAGE> 23
the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from
and against any and all losses, claims, damages, liabilities, judgments,
(including without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action that
could give rise to any such losses, claims, damages, liabilities or judgments)
(collectively, "LOSSES") caused by any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto)
provided by the Company to any Holder or any prospective purchaser of Notes or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such Losses are caused by an untrue statement or
omission or alleged untrue statement or omission that is based upon information
relating to any of the Holders furnished in writing to the Company by any of the
Holders; provided that the Company shall not be liable to any Holder, its
directors, officers and any controlling person for any Losses that are caused by
any untrue statement or alleged untrue statement of a material fact if (i) such
Holder was required by law to send or deliver, and failed to send or deliver, a
copy of the Prospectus with or prior to delivery of written confirmation of the
sale by such Holder to the person asserting the claims from which such Losses
arise and (ii) the Prospectus would have corrected such untrue statement or
alleged untrue statement or omission or alleged omission.
Parent agrees to indemnify and hold harmless each Holder, its
directors, officers and each person, if any, who controls such Holder (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from
and against any and all Losses caused by any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto)
provided by Parent to any Holder or any prospective purchaser of registered
Warrants or Warrant Shares, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such Losses are caused
by an untrue statement or omission or alleged untrue statement or omission that
is based upon information relating to any of the Holders furnished in writing to
Parent by any of the Holders; provided that Parent shall not be liable to any
Holder, its directors, officers and any controlling person for any Losses that
are caused by any untrue statement or alleged untrue statement of a material
fact if (i) such Holder was required by law to send or deliver, and failed to
send or deliver, a copy of the Prospectus with or prior to delivery of written
confirmation of the sale by such Holder to the person asserting the claims from
which such Losses arise and (ii) the Prospectus would have corrected such untrue
statement or alleged untrue statement or omission or alleged omission.
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(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company (in the case of any Note
Registration Statement) or Parent (in the case of any Warrant Registration
Statement), and their respective directors and officers, and each person, if
any, who controls (within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act) the Company or Parent, as applicable, to the same extent as
the foregoing indemnity from the Company or Parent, as applicable, set forth in
Section 10(a) above, but only with reference to information relating to such
Holder furnished in writing to the Company or Parent, as applicable, by such
Holder expressly for use in such Registration Statement. In no event shall any
Holder, its directors, officers or any person who controls such Holder be liable
or responsible for any amount in excess of the amount by which the total amount
received by such Holder with respect to its sale of Transfer Restricted
Securities pursuant to a Registration Statement exceeds (i) the amount paid by
such Holder for such Transfer Restricted Securities and (ii) the amount of any
damages that such Holder, its directors, officers or any person who controls
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 10(a) or 10(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 10(a) and 10(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 10(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the
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indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified parties
and all such fees and expenses shall be reimbursed as they are incurred. Such
firm shall be designated in writing by a majority of the Holders, in the case of
the parties indemnified pursuant to Section 10(a), and by the Company or Parent,
as applicable, in the case of parties indemnified pursuant to Section 10(b). The
indemnifying party shall indemnify and hold harmless the indemnified party from
and against any and all losses, claims, damages, liabilities and judgments by
reason of any settlement of any action (i) effected with its written consent or
(ii) effected without its written consent if the settlement is entered into more
than twenty business days after the indemnifying party shall have received a
request from the indemnified party for reimbursement for the fees and expenses
of counsel (in any case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the indemnifying
party shall have failed to comply with such reimbursement request. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement or compromise of, or consent to the entry of
judgment with respect to, any pending or threatened action in respect of which
the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section
10 is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company (in the
case of any Note Registration Statement) or Parent (in the case of any Warrant
Registration Statement), on the one hand, and the Holders, on the other hand,
from their sale of Transfer Restricted Securities or (ii) if the allocation
provided by clause 10(d)(i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause 10(d)(i) above but also the relative fault of the Company or
Parent, as applicable, on the one hand, and of the Holder, on the other hand, in
connection with the statements or omissions which resulted
25
<PAGE> 26
in such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative fault of the Company or Parent,
as applicable, on the one hand, and of the Holder, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or Parent, as
applicable, on the one hand, or by the Holder, on the other hand, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company, Parent and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 10(d) were determined by pro
rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 10, no Holder, its
directors, its officers or any person, if any, who controls such Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the total received by such Holder with respect to the sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Holder for such Transfer Restricted Securities and (ii) the
amount of any damages which such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute pursuant to this Section 10(d) are several in
proportion to the respective principal amount of Transfer Restricted Securities
held by each Holder hereunder and not joint.
(e) The Company and Parent agree that the indemnity and contribution
provisions of this Section 10 shall apply to Affiliated Market Makers to the
same extent, on the same conditions, as it applies to Holders.
SECTION 11. Rule 144A and Rule 144.
Each of the Company and Parent agrees with each Holder, for so long as
any Transfer Restricted Securities remain outstanding and during any period in
26
<PAGE> 27
which such person (i) is not subject to Section 13 or 15(d) of the Exchange Act,
to make available, upon request of any Holder, to such Holder or beneficial
owner of Transfer Restricted Securities in connection with any sale thereof and
any prospective purchaser of such Transfer Restricted Securities designated by
such Holder or beneficial owner, the information required by Rule 144A(d)(4)
under the Act in order to permit resales of such Transfer Restricted Securities
pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the
Exchange Act, to make all filings required thereby in a timely manner in order
to permit resales of such Transfer Restricted Securities pursuant to Rule 144.
SECTION 12. Miscellaneous.
(a) Remedies. The Company and Parent acknowledge and agree that any
failure by the Company and/or Parent to comply with their respective obligations
under Section 4 or Section 7 hereof may result in material irreparable injury to
the Buyers, the Holders or any Affiliated Market Makers for which there is no
adequate remedy at law, that it will not be possible to measure damages for such
injuries precisely and that, in the event of any such failure, the Buyers, any
Holder or any Affiliated Market Makers may obtain such relief as may be required
to specifically enforce the Company's obligations under Section 4 hereof and
Parent's obligations under Section 4 and Section 7 hereof. The Company and
Parent further agree to waive the defense in any action for specific performance
that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor Parent will, on
or after the date of this Agreement, enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the Holders in
this Agreement or otherwise conflicts with the provisions hereof. Neither the
Company nor Parent has previously entered into any agreement granting any
registration rights with respect to its securities to any person other than the
Investors' Agreement dated as of May 22, 1998 among Parent and the investors and
stockholders party thereto as in effect on the date hereof. The rights granted
to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's and
Parent's securities under any agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of this clause
12(c)(i), the Company and Parent have obtained the written consent of Holders of
all outstanding Transfer Restricted Securities, (ii) in the case of all other
provisions hereof with respect to the Transfer Restricted Notes, the Company has
obtained the written consent of Holders of a majority of the
27
<PAGE> 28
outstanding principal amount of Transfer Restricted Notes and (iii) in the case
of all other provisions hereof with respect to the Transfer Restricted Warrant
Securities, Parent has obtained the written consent of Holders of a majority of
the outstanding principal amount of Transfer Restricted Warrant Securities
(excluding in each case Transfer Restricted Securities held by Parent, the
Company and any Affiliate of the Company or Parent other than the Buyers).
(d) Third Party Beneficiary. The Holders and any Affiliated Market
Makers shall be third party beneficiaries to the agreements made hereunder
between the Company and Parent, on the one hand, and the Buyers, on the other
hand, and shall have the right to enforce such agreements directly to the extent
they may deem such enforcement necessary or advisable to protect their rights or
the rights of Holders and Affiliated Market Makers hereunder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder of Notes: at the address set forth on the
records of the Registrar under the Indenture or the Notes, as
applicable, with a copy to the Registrar (if other than the Company)
under the Indenture;
(ii) if to a Holder of Warrants and/or Warrant Shares, at the
address set forth on the records of the Company; and
(iii) if to the DLJ Buyers, to:
c/o DLJ Merchant Banking Partners II, L.P.
277 Park Avenue
New York, NY 10172
Attention: William F. Dawson, Jr.
Fax: (212) 892-7272
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: Richard D. Truesdell, Jr.
Fax: (212) 450-4800
28
<PAGE> 29
(iv) if to the Company and/or Parent
Thermadyne Holdings Corporation
101 South Hanley Road
St. Louis, Missouri 63105
Attention: Jim Tate or Stephanie Josephson
Fax: (314) 746-2374
(314) 746-2327
with a copy to:
R. Scott Cohen, Esq.
Weil, Gotshal & Manges LLP
100 Crescent Court
Suite 1300
Dallas, TX 75201-6950
Fax: (214) 746-7777
All such notices and communications shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the person giving the same to the Trustee (if there is
a Trustee as of such date) and the Warrant Agent (if there is a Warrant Agent as
of such date) at the address specified in the Indenture and in the terms of the
Warrant, respectively.
Upon the date of filing of any Registration Statement, notice shall be
delivered to any Affiliated Market Makers at the addresses specified by such
Affiliated Market Makers in writing to Parent.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders; provided, that nothing herein shall be deemed to permit any
assignment, transfer or other disposition of Transfer Restricted Securities in
violation of the terms hereof or of the Subscription Agreement, the Indenture or
the Warrants. If any transferee of any Holder shall acquire Transfer Restricted
Securities in any manner, whether by operation of law or otherwise, such
Transfer Restricted Securities shall be held subject to all of the terms of this
Agreement, and by taking
29
<PAGE> 30
and holding such Transfer Restricted Securities such person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement and such person shall be entitled to
receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
30
<PAGE> 31
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
THERMADYNE HOLDINGS CORPORATION.
By: /s/ JAMES H. TATE
-----------------------------------------
Name: JAMES H. TATE
Title: SR. VP & CFO
THERMADYNE MFG. LLC
By: /s/ JAMES H. TATE
-----------------------------------------
Name: JAMES H. TATE
Title: SR. VP & CFO
DLJ MERCHANT BANKING PARTNERS II, L.P.
By: /s/ WILLIAM F. DAWSON, JR.
-----------------------------------------
Name: William F. Dawson, Jr.
Title: Principal
DLJ MERCHANT BANKING PARTNERS II-A, L.P.
By: /s/ WILLIAM F. DAWSON, JR.
-----------------------------------------
Name: William F. Dawson, Jr.
Title: Principal
DLJ OFFSHORE PARTNERS II, C.V.
By: /s/ WILLIAM F. DAWSON, JR.
-----------------------------------------
Name: William F. Dawson, Jr.
Title: Principal
31
<PAGE> 32
DLJ DIVERSIFIED PARTNERS, L.P.
By: /s/ IVY DODES
-----------------------------------------
Name: IVY DODES
Title: Vice President
DLJ DIVERSIFIED PARTNERS-A, L.P.
By: /s/ IVY DODES
-----------------------------------------
Name: IVY DODES
Title: Vice President
DLJMB FUNDING II, INC.
By: /s/ IVY DODES
-----------------------------------------
Name: IVY DODES
Title: Vice President
DLJ MILLENNIUM PARTNERS, L.P.
By: /s/ WILLIAM F. DAWSON, JR.
-----------------------------------------
Name: William F. Dawson, Jr.
Title: Principal
DLJ MILLENNIUM PARTNERS-A, L.P.
By: /s/ WILLIAM F. DAWSON, JR.
-----------------------------------------
Name: William F. Dawson, Jr.
Title: Principal
DLJ EAB PARTNERS, L.P.
By: /s/ IVY DODES
-----------------------------------------
Name: IVY DODES
Title: Vice President
32
<PAGE> 33
DLJ ESC II L.P.
By: /s/ IVY DODES
-----------------------------------------
Name: IVY DODES
Title: Vice President
DLJ FIRST ESC, L.P.
By: /s/ IVY DODES
-----------------------------------------
Name: IVY DODES
Title: Vice President
33
<PAGE> 1
EXHIBIT 4.13
THERMADYNE MFG. LLC,
AS ISSUER
AND
[TRUSTEE],
AS TRUSTEE
--------------
INDENTURE
DATED AS OF [_______]
--------------
JUNIOR SUBORDINATED NOTES DUE 2009
<PAGE> 2
TABLE OF CONTENTS
----------------------
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01. Definitions......................................................................1
SECTION 1.02. Other Definitions...............................................................10
SECTION 1.03. Rules of Construction...........................................................10
SECTION 1.04. Incorporation by Reference of TIA...............................................11
SECTION 1.05. Conflict with TIA...............................................................11
SECTION 1.06. Compliance Certificates and Opinions............................................11
SECTION 1.07. Form of Documents Delivered to Trustee..........................................12
SECTION 1.08. Acts of Noteholders; Record Dates...............................................12
SECTION 1.09. Notices, Etc., to Trustee and Company...........................................14
SECTION 1.10. Notices to Holders; Waivers.....................................................14
SECTION 1.11. Effect of Headings and Table of Contents........................................15
SECTION 1.12. Successors and Assigns..........................................................15
SECTION 1.13. Separability Clause.............................................................15
SECTION 1.14. Benefits of Indenture...........................................................15
SECTION 1.15. Governing Law...................................................................15
SECTION 1.16. Legal Holidays..................................................................15
SECTION 1.17. No Personal Liability of Directors, Officers, Employees,
Incorporators and Stockholders........................................................16
SECTION 1.18. Exhibits and Schedules..........................................................16
SECTION 1.19. Counterparts....................................................................16
ARTICLE 2
NOTE FORMS
SECTION 2.01. Forms Generally.................................................................16
SECTION 2.02. Form of Trustee' Certificate of Authentication..................................16
SECTION 2.03. Restrictive Legends.............................................................17
ARTICLE 3
THE NOTES
SECTION 3.01. Title and Terms.................................................................18
SECTION 3.02. Denominations...................................................................20
SECTION 3.03. Execution, Authentication and Delivery and Dating...............................20
SECTION 3.04. Registration, Registration of Transfer and Exchange.............................20
SECTION 3.05. Mutilated, Destroyed, Lost and Stolen Notes.....................................21
SECTION 3.06. Payment of Interest Rights Preserved............................................22
SECTION 3.07. Persons Deemed Owners...........................................................22
SECTION 3.08. Cancellation....................................................................22
SECTION 3.09. Computation of Interest and Accretion...........................................23
SECTION 3.10. Transfer Provisions.............................................................23
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Accreted Value and Interest..........................................25
SECTION 4.02. Maintenance of Office or Agency.................................................25
SECTION 4.03. Taxes...........................................................................25
SECTION 4.04. Stay, Extension and Usury Laws..................................................25
SECTION 4.05. Certificates to Trustee.........................................................25
SECTION 4.06. Limitation on Certain Indebtedness..............................................26
SECTION 4.07. Limitation on Redemption of Parity Securities and Junior
Securities............................................................................26
SECTION 4.08. Transactions with Affiliates....................................................26
SECTION 4.09. Corporate Existence.............................................................27
SECTION 4.10. Offer to Repurchase upon Change of Control......................................28
ARTICLE 5
CONSOLIDATION, MERGER OR SALE OF ASSETS
SECTION 5.01. Consolidation, Merger or Sale of Assets.........................................29
SECTION 5.02. Opinion of Counsel to Trustee...................................................29
ARTICLE 6
REMEDIES
SECTION 6.01. Control by Majority.............................................................29
SECTION 6.02. Limitation on Suits.............................................................30
SECTION 6.03. Rights of Holders to Receive Payment............................................30
SECTION 6.04. Trustee May File Proofs of Claim................................................30
SECTION 6.05. Priorities......................................................................31
SECTION 6.06. Undertaking for Costs...........................................................31
SECTION 6.07. Restoration of Rights and Remedies..............................................31
SECTION 6.08. Rights and Remedies Cumulative..................................................31
ARTICLE 7
THE TRUSTEE
SECTION 7.01. Certain Duties and Responsibilities.............................................32
SECTION 7.02. Certain Rights of Trustees......................................................32
SECTION 7.03. Not Responsible for Recitals or Issuance of Notes...............................33
SECTION 7.04. Trustee's Disclaimer............................................................34
SECTION 7.05. May Hold Notes..................................................................34
SECTION 7.06. Money Held in Trust.............................................................34
SECTION 7.07. Compensation and Reimbursement..................................................34
SECTION 7.08. Conflicting Interests...........................................................34
SECTION 7.09. Corporate Trustee Required; Eligibility.........................................35
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
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<S> <C>
SECTION 7.10. Resignation and Removal; Appointment of Successor...............................35
SECTION 7.11. Acceptance of Appointment by Successor..........................................36
SECTION 7.12. Merger, Conversion, Consolidation or Succession to Business.....................37
SECTION 7.13. Preferential Collection of Claims Against the Company...........................37
SECTION 7.14. Appointment of Authenticating Agent.............................................37
ARTICLE 8
HOLDERS' LIST AND REPORTS BY TRUSTEE AND THE COMPANY
SECTION 8.01. The Company to Furnish Trustee Names and Addresses of
Holders...............................................................................37
SECTION 8.02. Preservation of Information; Communications to Holders..........................38
SECTION 8.03. Reports by Trustee..............................................................38
ARTICLE 9
AMENDMENT, SUPPLEMENT OR WAIVER
SECTION 9.01. Without Consent of the Holders..................................................38
SECTION 9.02. With Consent of Holders.........................................................39
SECTION 9.03. Execution of Amendments, Supplements or Waivers.................................40
SECTION 9.04. Revocation and Effect of Consents...............................................40
SECTION 9.05. Conformity with TIA.............................................................41
SECTION 9.06. Notation on or Exchange of Notes................................................41
ARTICLE 10
REDEMPTION OF NOTES
SECTION 10.01. Right of Redemption............................................................41
SECTION 10.02. Applicability of Article.......................................................42
SECTION 10.03. Notice of Redemption...........................................................42
SECTION 10.04. Deposit of Redemption Price....................................................43
SECTION 10.05. Notes Payable on Redemption Date...............................................43
ARTICLE 11
SATISFACTION AND DISCHARGE
SECTION 11.01. Satisfaction and Discharges of Indenture.......................................43
SECTION 11.02. Application of Trust Money.....................................................44
ARTICLE 12
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 12.01. Option of the Company to Effect Defeasance or Covenant
Defeasance............................................................................45
SECTION 12.02. Legal Defeasance and Discharge.................................................45
SECTION 12.03. Covenant Defeasance............................................................45
</TABLE>
iii
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<TABLE>
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<S> <C>
SECTION 12.04. Conditions to Legal or Covenant Defeasance.....................................46
SECTION 12.05. Deposited Money and Government Securities to Be Held in
Trust; Other Miscellaneous Provisions.................................................47
SECTION 12.06. Repayment to Company...........................................................48
SECTION 12.07. Reinstatement..................................................................48
ARTICLE 13
SUBORDINATION
SECTION 13.01. Agreement to Subordinate.......................................................48
SECTION 13.02. Liquidation; Dissolution; Bankruptcy...........................................49
SECTION 13.03. Default on Designated Senior Indebtedness......................................49
SECTION 13.04. When Distributions Must Be Paid Over...........................................50
SECTION 13.05. Notice.........................................................................51
SECTION 13.06. Subrogation....................................................................51
SECTION 13.07. Relative Rights................................................................52
SECTION 13.08. The Company and Holders May Not Impair Subordination...........................52
SECTION 13.09. Distribution or Notice to Representative.......................................53
SECTION 13.10. Rights of Trustee and Paying Agent.............................................53
SECTION 13.11. Authorization to Effect Subordination..........................................53
SECTION 13.12. Payment........................................................................54
</TABLE>
EXHIBIT A - Form of Note
EXHIBIT B - Form of Regulation S Certificate
EXHIBIT C - Form of Accredited Investor Certificate
iv
<PAGE> 6
INDENTURE, dated as of [________] (as amended, supplemented or otherwise
modified from time to time, the "INDENTURE"), between Thermadyne Mfg. LLC, a
Delaware limited liability company, as Issuer (the "COMPANY"), and [TRUSTEE], a
[________] banking corporation, as trustee (the "TRUSTEE").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of Junior Subordinated Notes due 2009 of
the Company in an initial aggregate principal amount at maturity of the Accreted
Value attributable to $25,000,000 (the "NOTES") issuable as provided in this
Indenture. All things necessary to make the Notes, when duly issued, executed
and delivered by the Company and authenticated and delivered by the Trustee
hereunder, the valid obligation of the Company, and to make this Indenture a
valid agreement of the Company as of the date hereof, in accordance with the
terms of the Notes and this Indenture, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes by
the Holders thereof, it is mutually agreed, for the equal and ratable benefit of
all Holders, as follows:
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01. Definitions.
"AFFILIATE" means, as applied to any Person, (i) any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise or (ii) without
limiting the foregoing, the beneficial ownership of 10% or more of the voting
power of the Voting Stock of such Person (on a fully diluted basis) or of
warrants or rights to acquire such Voting Stock whether or not presently
exercisable.
"AUTHENTICATING AGENT" means any Person authorized by the Trustee pursuant
to Section 7.14 to act on behalf of the Trustee to authenticate Notes of one or
more series.
"BANK INDEBTEDNESS" means all Obligations, and all other obligations
(monetary or otherwise) pursuant to the Credit Agreement and all Hedging
Obligations payable to a lender or an Affiliate thereof or to a Person that was
a lender or an Affiliate thereof at the time the contract was entered into under
the Credit Agreement or any of its Affiliates (including, without limitation,
all interest accruing on or after, or which would accrue
<PAGE> 7
but for, the filing of any petition in bankruptcy or for reorganization, whether
or not allowed thereby).
"BOARD OF DIRECTORS" means, with respect to any Person, the board of
directors or board of managers of such Person or any committee thereof duly
authorized to act on behalf of such board. Unless the context otherwise
requires, "BOARD OF DIRECTORS" refers to the Board of Directors of the Company.
"BOARD RESOLUTION" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by its Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee. Unless the context otherwise requires, "BOARD RESOLUTION" refers to a
Board Resolution of the Company.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized by law to close.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (a) in the case of a corporation, corporate stock,
(b) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (c) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited) and (d) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
"CEDEL" means Cedel Bank, societe anonyme.
"CHANGE OF CONTROL" means (i) the failure of Parent at any time to own,
directly or indirectly, free and clear of all Liens and encumbrances (other than
Liens of the types permitted to exist under clauses (b), (f) and (i) of Section
7.2.3 of the Credit Agreement), all right, title and interest in 100% of the
Capital Stock of the Company; (ii) the failure of DLJMB to own at least 51% (on
a fully diluted basis) of the economic and voting interest in the Voting Stock
of Parent; or (iii) the failure of DLJMB at any time to have the right to
designate or nominate at least 51% of the Board of Directors of Parent.
"CLOSING DATE" means the date on which the Notes are originally issued.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" means, with respect to any Person, any and all shares of
such Person's Capital Stock (excluding Preferred Stock of such Person),
including, without limitation, all series and classes of such common stock.
2
<PAGE> 8
"COMPANY" means Thermadyne Mfg. LLC, a Delaware limited liability company,
and any successor in interest thereto.
"COMPANY REQUEST," "COMPANY ORDER" and "COMPANY CONSENT" mean,
respectively, a written request, order or consent signed in the name of the
Company by an Officer of the Company.
"CONTINUING MEMBERS" means, as of any date of determination, any member of
the Board of Directors of the Company who (a) was a member of such Board of
Directors immediately after the issuance of the Notes or (b) was nominated for
election or elected to such Board of Directors with the approval of, or whose
election to the Board of Directors was ratified by, at least a majority of the
Continuing Members who were members of such Board of Directors at the time of
such nomination or election.
"CORPORATE TRUST OFFICE" means the principal office of the Trustee, at
which at any particular time its corporate trust business shall be administered,
which office on the Closing Date is located at [_____________].
"CREDIT AGREEMENT" means that certain Credit Agreement, dated as of May 22,
1998, by and among the Company and certain of its foreign subsidiaries,
Donaldson, Lufkin & Jenrette Securities Corporation, as arranger, DLJ Capital
Funding, Inc., as syndication agent, and ABN AMRO Bank N.V., Chicago Branch, as
administrative agent, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and, in
each case, as amended, modified, renewed, refunded, replaced or refinanced from
time to time, including, without limitation, any agreement (i) extending or
shortening the maturity of any Indebtedness incurred thereunder or contemplated
thereby, (ii) adding or deleting borrowers or guarantors thereunder, (iii)
increasing the amount of Indebtedness incurred thereunder or available to be
borrowed thereunder, or (iv) otherwise altering the terms and conditions
thereof.
"DESIGNATED SENIOR INDEBTEDNESS" means the Bank Indebtedness and the High
Yield Notes.
"DLJMB" means DLJ Merchant Banking Partners II, L.P. and its Affiliates.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect on the Closing Date, including without limitation, those
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 approved by a significant segment of the
accounting profession.
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<PAGE> 9
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit or
reimbursement agreements in respect thereof), of all or any party of any
Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (a) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (b) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"HIGH YIELD NOTES" means the 9 7/8% Senior Subordinated Notes due 2008 of
the Company and Thermadyne Capital Corporation.
"HOLDER" or "NOTEHOLDERS" means the Person in whose name a Note is
registered on the Registrar's books.
"INCUR" means, with respect to any Indebtedness, to incur, create, issue,
assume, guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Indebtedness;
provided that (i) the Indebtedness of a Person existing at the time such Person
became a Subsidiary shall be deemed to have been Incurred by such Subsidiary and
(ii) that neither the accrual of interest, the accretion of original issue
discount or the payment-in-kind of interest shall be considered an Incurrence of
Indebtedness.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person in respect of borrowed money or evidenced by bonds, notes, debentures or
similar instruments or letters of credit (or reimbursement agreements in respect
thereof) or banker's acceptances or representing Capital Lease Obligations or
the balance deferred and unpaid of the purchase price of any property or
representing any Hedging Obligations, except any such balance that constitutes
an accrued expense or trade payable, if and to the extent any of the foregoing
Indebtedness (other than letters of credit and Hedging Obligations) would appear
as a liability upon a balance sheet of such Person prepared in accordance with
GAAP, as well as Indebtedness of others secured by a Lien on any asset of such
Person (whether or not such Indebtedness is assumed by such Person) and, to the
extent not otherwise included, the guarantee by such Person of any Indebtedness
of any other Person. The amount of any Indebtedness outstanding as of any date
shall be (a) the accreted value thereof (together with any interest thereon that
is more than 30 days past due), in the case of any Indebtedness that does not
require current payments of interest, and (b) the principal amount thereof, in
the case of any other Indebtedness.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"INTEREST PAYMENT DATES" means each of the payment dates specified as
Interest Payment Dates on the face of the Notes.
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<PAGE> 10
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"JUNIOR SECURITIES" means with respect to the Company any equity securities
of the Company or Parent and any debt of the Company or Parent which is by its
terms junior in right of payment to the Notes.
"MANAGEMENT LOANS" means one or more loans by the Company or Parent to
officers and/or directors of the Company and any of its Subsidiaries to finance
the purchase by such officers and directors of common stock of Parent; provided,
however, that the aggregate principal amount of all such Management Loans
outstanding at any time shall not exceed $6.0 million.
"NON-U.S. PERSON" means a Person who is not a U.S. person, as defined in
Regulation S.
"NOTES" means the Company's Junior Subordinated Notes Due 2009, issued on
the Closing Date.
"OBLIGATIONS" means all obligations (whether in existence on the Closing
Date or arising thereafter) for, or guaranteeing the payment of, principal,
premium, interest (including, without limitation, all interest accrued or
accruing after the commencement of any Reorganization of any Person obligated
with respect thereto in accordance with and at the contract rate (including,
without limitation, any rate applicable upon default) specified in the agreement
or instrument creating, evidencing or governing any Indebtedness, whether or
not, pursuant to applicable law or otherwise, the claim for such interest is
allowed as a claim in such case or proceeding), penalties, fees,
indemnifications, reimbursements and other amounts in respect of any
Indebtedness, and any amendment, extension or refunding of any of the foregoing,
without duplication.
"OFFICER" means, with respect to the Company or any other obligor upon the
Notes, the Chairman of the Board, the President, the Chief Executive Officer,
the Chief Financial Officer or any Vice President (a) of such Person or (b) if
such Person is owned or managed by a single entity, of each such entity.
"OFFICER'S CERTIFICATE" means, with respect to the Company or any other
obligor upon the Notes, a certificate signed by an Officer of each such Person.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
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<PAGE> 11
"OUTSTANDING" when used with respect to Notes means, as of the date of
determination, all Notes theretofore authenticated and delivered under this
Indenture, except:
(i) Notes theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Notes for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
in trust for the Holders of such Notes, provided that, if such Notes are to
be redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor reasonably satisfactory to the Trustee has
been made; and
(iii) Notes in exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to this Indenture.
A Note does not cease to be Outstanding because the Company or any
Affiliate of the Company holds the Note, provided that in determining whether
the Holders of the requisite amount of Outstanding Notes have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, Notes
owned by the Company or any Affiliate of the Company shall be disregarded and
deemed not to be Outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such request, demand,
authorization, direction, notice, consent or waiver, only Notes which the
Trustee actually knows are so owned shall be so disregarded. Notes so owned that
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the reasonable satisfaction of the Trustee the pledgee's right to
act with respect to such Notes and that the pledgee is not the Company or an
Affiliate of the Company.
"PARITY SECURITIES" means, with respect to the Company, any debt that ranks
pari passu in right of payment with the Notes.
"PAYING AGENT" means any Person authorized by the Company to pay the
Accreted Value of or interest, if any, on any Notes on behalf of the Company.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency, instrumentality or political
subdivision thereof (including any subdivision or ongoing business of any such
entity or substantially all of the assets of any such entity, subdivision or
business).
"PLACE OF PAYMENT" means a city or any political subdivision thereof
referred to in Article 3 and initially designated under Section 4.02.
"PREDECESSOR NOTES" of any particular Note means every previous Note
evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under
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<PAGE> 12
Section 3.05 in lieu of a mutilated, destroyed, lost or stolen Note shall be
deemed to evidence the same debt as the mutilated, destroyed, lost or stolen
Note.
"PREFERRED STOCK" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non- voting) of such Person's preferred or preference stock, whether
now outstanding or hereafter issued, including, without limitation, all series
and classes of such preferred or preference stock.
"PRINCIPAL" means DLJMB.
"QIB", or "QUALIFIED INSTITUTIONAL BUYER" means a "qualified institutional
buyer," as the term is defined in Rule 144A under the Securities Act.
"RECEIVABLES FACILITY" means one or more receivables financing facilities,
as amended from time to time, pursuant to which the Company or any of its
Subsidiaries sells its accounts receivable.
"REDEMPTION DATE" when used with respect to any Note to be redeemed or
purchased means the date fixed or such redemption or purchase by or pursuant to
this Indenture and the Notes.
"REDEMPTION PRICE" when used with respect to any Note to be redeemed or
purchased means the price at which it is to be redeemed or purchased pursuant to
this Indenture and the Notes.
"REFINANCE" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated as of the Closing Date among the Company and the buyers party thereto, as
such agreement may be amended from time to time.
"REGISTRATION STATEMENT" means any Note Registration Statement as defined
in the Registration Rights Agreement.
"REGULAR RECORD DATE" means each of the record dates specified as a Regular
Record Date on the face of the Notes.
"REGULATION S" means Regulation S under the Securities Act.
"RELATED PARTY" means, with respect to the Principal, (i) any controlling
stockholder or partner of the Principal on the date the Notes are first issued,
or (ii) any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding (directly or
through one or more Subsidiaries) a
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<PAGE> 13
51% or more controlling interest of which consist of the Principal and/or such
other Persons referred to in the immediately preceding clauses (i) or (ii).
"REORGANIZATION" means, with respect to any Person, any reorganization,
bankruptcy, insolvency, receivership or other similar statutory or common law
proceedings or arrangements, including without limitation any proceeding under
Title 11, United States Code or any similar federal, state or foreign law for
the relief of debtors, involving such Person or the readjustment of such
Person's liabilities or any assignment for the benefit of creditors or any
marshaling of the assets or liabilities of such Person.
"REPRESENTATIVE" means any trustee, agent or representative (if any) for an
issue of Senior Indebtedness of the Company.
"RESALE RESTRICTION TERMINATION DATE" means, with respect to any Note, the
date that is two years (or such other period as may hereafter be provided under
Rule 144(k) under the Securities Act or any successor provision thereto as
permitting the resale by non- affiliates of Restricted Securities without
restriction) after the later of the original issue date in respect of such Note
and the last date on which the Company or any Affiliate of the Company was the
owner of such Note (or any Predecessor Note thereto).
"RESPONSIBLE OFFICER" when used with respect to the Trustee means any
officer in the corporate trust department of the Trustee, and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his or her knowledge of and familiarity with the
particular subject.
"RESTRICTED PERIOD" means, with respect to any Notes, the 40-day
distribution compliance period as defined in Regulation S with respect to such
Notes.
"RESTRICTED SECURITY" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; provided, however, that the Trustee shall be
entitled to receive, at its request, and conclusively rely on an Opinion of
Counsel with respect to whether any Note constitutes a Restricted Security.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR INDEBTEDNESS" means, with respect to any Person, (a) all
Obligations of such Person outstanding under (i) the High Yield Notes and (ii)
the Credit Agreement and all Hedging Obligations payable to a lender or an
Affiliate thereof or to a Person that was a lender or an Affiliate thereof at
the time the contract was entered into under the Credit Agreement or any of its
Affiliates, including, without limitation, interest accruing subsequent to the
filing of, or which would have accrued but for the filing of, a petition for
bankruptcy, whether or not such interest is an allowable claim in such
bankruptcy proceeding, (b) any other Indebtedness, unless the instrument under
which such Indebtedness is incurred expressly provides that it is subordinated
in right of payment to any other Senior Indebtedness of such Person and (c) all
Obligations with respect to the
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<PAGE> 14
foregoing. Notwithstanding anything to the contrary in the foregoing, Senior
Indebtedness will not include (i) any liability for federal, state, local or
other taxes, (ii) any Indebtedness of such Person (other than pursuant to the
Credit Agreement) to any of its Subsidiaries or other Affiliates, (iii) any
trade payables or (iv) any Indebtedness that is incurred in violation of this
Indenture.
"SPECIAL RECORD DATE" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.06.
"STATED MATURITY" means (i) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final installment
of principal or Accreted Value of such debt security is due and payable and (ii)
with respect to any scheduled installment of principal or Accreted Value of or
interest on any debt security, the date specified in such debt security as the
fixed date on which such installment is due and payable, in each case, as set
forth in the original documentation governing such debt security.
"SUBSIDIARY" means, with respect to any Person, (a) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (b) any partnership or limited liability company (i) the sole
general partner or the managing general partner or managing member of which is
such Person or a Subsidiary or such Person or (ii) the only general partners or
managing members of which are such Person or of one or more Subsidiaries of such
Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. sections
77aaa-77bbbb) as in effect on the date of this Indenture.
"TRUSTEE" means the Person named as the "Trustee" in the first paragraph of
this Indenture until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Trustee.
"U.S. GOVERNMENT OBLIGATIONS" means securities issued or directly and fully
guaranteed or insured by the United States of America or any agent or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof).
"VOTING STOCK" means with respect to any Person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
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<PAGE> 15
SECTION 1.02. Other Definitions.
<TABLE>
<CAPTION>
DEFINED
TERM IN SECTION
<S> <C>
Accreted Value 3.01
Act 1.08
Affiliate Transaction 4.08
Authentication Order 3.03
Blockage Notice 13.03
Cash Payment Notice 3.01
Change of Control Offer 4.10(a)
Change of Control Payment 4.10(a)
Change of Control Payment Date 4.10(a)
Covenant Defeasance 12.03
Defaulted Interest 3.06
Expiration Date 1.08
Interest Payment Date 3.01
Junior Securities Distribution 4.07
Legal Defeasance 12.02
pay the Notes 13.03
Payment Blockage Period 13.03
Place of Payment 3.01
Private Placement Legend 2.03
Redemption Amount 10.01
Regular Record Date 3.01
Successor Company 5.01
</TABLE>
SECTION 1.03. Rules of Construction. For all purposes of this Indenture,
except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Indenture have the meanings assigned to them
in this Indenture;
(b) "or" is not exclusive;
(c) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP and, unless expressly provided
otherwise, all determinations and computations made pursuant to any provision
hereof shall be made in accordance with GAAP;
(d) the words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision;
(e) all references to "$" or "dollars" shall refer to the lawful currency
of the United States of America;
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<PAGE> 16
(f) the words "include," "included" and "including" as used herein shall be
deemed in each case to be followed by the phrase "without limitation," if not
expressly followed by such phrase or the phrase "but not limited to";
(g) words in the singular include the plural, and words in the plural
include the singular; and
(h) any reference to a Section or Article refers to such Section or Article
of this Indenture unless otherwise indicated.
SECTION 1.04. Incorporation by Reference of TIA. Whenever this Indenture
refers to a provision of the TIA, the provision is incorporated by reference in
and made a part of this Indenture. This Indenture is subject to the mandatory
provisions of the TIA, which are incorporated by reference in and made a part of
this Indenture. Any terms incorporated by reference in this Indenture that are
defined by the TIA, defined by any TIA reference to another statute or defined
by SEC rule under the TIA, have the meanings so assigned to them therein. The
following TIA terms have the following meanings:
"INDENTURE SECURITIES" means the Notes.
"INDENTURE SECURITY HOLDER" means a Holder or Noteholders.
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee.
"OBLIGOR" on the indenture securities means the Company and any other
obligor on the indenture securities.
SECTION 1.05. Conflict with TIA. If any provision hereof limits, qualifies
or conflicts with a provision of the TIA that is required under the TIA to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the TIA that
may be so modified or excluded, the latter provision shall be deemed (a) to
apply to this Indenture as so modified or (b) to be excluded, as the case may
be.
SECTION 1.06. Compliance Certificates and Opinions. Upon any application or
request by the Company or by any other obligor upon the Notes to the Trustee to
take any action under any provision of this Indenture, the Company or such other
obligor upon the Notes, as the case may be, shall furnish to the Trustee such
certificates and opinions as may be required under the TIA. Each such
certificate or opinion shall be given in the form of one or more Officer's
Certificates, if to be given by an Officer, or an Opinion of Counsel, if to be
given by counsel, and shall comply with the requirements of the TIA and any
other requirements set forth in this Indenture. Notwithstanding the foregoing,
in the case of any such request or application as to which the furnishing of any
Officer's Certificate or Opinion of Counsel is specifically required by any
provision of
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<PAGE> 17
this Indenture relating to such particular request or application, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (except for certificates provided for in
Section 4.05) shall include:
(a) a statement that the individual signing such certificate or opinion has
read such covenant or condition and the definitions herein relating thereto;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such individual, he or she made
such examination or investigation as is necessary to enable him or her to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(d) a statement as to whether, in the opinion of such individual, such
condition or covenant has been complied with.
SECTION 1.07. Form of Documents Delivered to Trustee. In any case where
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
Any certificate or opinion of an Officer may be based, insofar as it
relates to legal matters, upon a certificate or opinion of, or representations
by, counsel, unless such Officer knows that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or opinion of counsel may
be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an Officer or Officers to the effect that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.08. Acts of Noteholders; Record Dates. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such Holders
in person or by agent duly appointed in writing; and, except as herein otherwise
expressly provided, such
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<PAGE> 18
action shall become effective when such instrument or instruments are delivered
to the Trustee, and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "ACT" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 7.01) conclusive in favor of the Trustee, the
Company and any other obligor upon the Notes, if made in the manner provided in
this Section 1.08.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by
the certificate of any notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
an officer of a corporation or a member of a partnership or other entity, on
behalf of such corporation or partnership or other entity, such certificate or
affidavit shall also constitute sufficient proof of such Person's authority. The
fact and date of the execution of any such instrument or writing, or the
authority of the person executing the same, may also be proved in any other
manner that the Trustee deems sufficient.
(c) The ownership of Notes shall be proved by the Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Note shall bind the Holder of every Note
issued upon the transfer thereof or in exchange therefor or in lieu thereof, in
respect of anything done or suffered to be done by the Trustee, the Company or
any other obligor upon the Notes in reliance thereon, whether or not notation of
such action is made upon such Note.
(e) (i) The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Notes entitled to give, make or take any
request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Indenture to be given, made or taken by
Holders, provided that the Company may not set a record date for, and the
provisions of this paragraph shall not apply with respect to, the giving or
making of any notice, declaration, request or direction referred to in Section
1.08(e)(ii). If any record date is set pursuant to this paragraph, the Holders
of Outstanding Notes on such record date (or their duly designated proxies), and
no other Holders, shall be entitled to take the relevant action, whether or not
such Persons remain Holders after such record date; provided that no such action
shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite Accreted Value of Outstanding Notes
on such record date. Nothing in this paragraph shall be construed to prevent the
Company from setting a new record date for any action for which a record date
has previously been set pursuant to this paragraph (whereupon the record date
previously set shall automatically and with no action by any Person be canceled
and of no effect), and nothing in this paragraph shall be construed to render
ineffective any action taken by Holders of the requisite Accreted Value of
Outstanding Notes on the date such action is taken. Promptly after any record
date is set pursuant to this paragraph, the Company, at its own expense, shall
cause notice of such record date, the proposed action by Holders and the
applicable Expiration
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<PAGE> 19
Date to be given to the Trustee in writing and to each Holder in the manner set
forth in Section 1.10.
(ii) With respect to any record date set pursuant to this Section 1.08,
the party hereto that sets such record dates may designate any day as the
"EXPIRATION DATE" and from time to time may change the Expiration Date to any
earlier or later day; provided that no such change shall be effective unless
notice of the proposed new Expiration Date is given to the Company or the
Trustee, whichever such party is not setting a record date pursuant to this
Section 1.08(e) in writing, and to each Holder in the manner set forth in
Section 1.10, on or prior to the existing Expiration Date. If an Expiration Date
is not designated with respect to any record date set pursuant to this Section,
the party hereto that set such record date shall be deemed to have initially
designated the 90th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 90th day after the applicable record date.
(iii) Without limiting the foregoing, a Holder entitled hereunder to
take any action hereunder with regard to any particular Note may do so with
regard to all or any part of the Accreted Value of such Note or by one or more
duly appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such Accreted Value.
SECTION 1.09. Notices, Etc., to Trustee and Company. Any request, demand,
authorization, direction, notice, consent, waiver or Act of Holders or other
document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(a) the Trustee by any Holder or by the Company or any other obligor upon
the Notes shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at [____________]
(telephone: [____________]; facsimile: [____________]), or at any other address
furnished in writing to the Company by the Trustee, or
(b) the Company by the Trustee or by any Holder shall be sufficient for
every purpose hereunder if in writing and delivered in person or mailed,
first-class postage prepaid, to the Company at [___________________________], or
at any other address previously furnished in writing to the Trustee by the
Company.
SECTION 1.10. Notices to Holders; Waivers. Where this Indenture provides
for notice to Holders of any event, such notice shall be deemed to have been
given upon the mailing by first class mail, postage prepaid, of such notices to
Holders at their registered addresses as recorded in the Register, not later
than the latest date, and not earlier than the earliest date, prescribed herein
for the giving of such notice. In any case where notice to Holders is given by
mail, neither the failure to mail such notice, nor any defect in any notice so
mailed, to any particular Holder shall affect the sufficiency of such notice
with respect to other Holders.
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Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case, by reason of the suspension of regular mail service, or by reason
of any other cause, it shall be impossible to mail notice of any event as
required by any provision of this Indenture, then such notification as shall be
made with the approval of the Trustee (such approval not to be unreasonably
withheld) shall constitute a sufficient notification for every purpose
hereunder.
SECTION 1.11. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 1.12. Successors and Assigns. All covenants and agreements in this
Indenture by the Company shall bind its successors and assigns, whether so
expressed or not.
SECTION 1.13. Separability Clause. In case any provision in this Indenture
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 1.14. Benefits of Indenture. Nothing in this Indenture or in the
Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, any Paying Agent and the Holders, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 1.15. Governing Law. THIS INDENTURE, THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ANY PRINCIPLES OF CONFLICT OF LAWS TO THE EXTENT THAT THE
APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. THE
TRUSTEE, THE COMPANY, ANY OTHER OBLIGORS IN RESPECT OF THE NOTES AND (BY THEIR
ACCEPTANCE OF THE NOTES) THE HOLDERS, AGREE TO SUBMIT TO THE JURISDICTION OF ANY
UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE
CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
INDENTURE OR THE NOTES.
SECTION 1.16. Legal Holidays. In any case where any Interest Payment Date,
Redemption Date or Stated Maturity of any Note shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Notes) payment
of interest or Accreted Value need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
the Interest Payment Date or Redemption Date, or at the Stated Maturity.
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SECTION 1.17. No Personal Liability of Directors, Officers, Employees,
Incorporators and Stockholders. No director, officer, employee, incorporator,
member or stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the Notes.
SECTION 1.18. Exhibits and Schedules. All exhibits and schedules attached
hereto are by this reference made a part hereof with the same effect as if
herein set forth in full.
SECTION 1.19. Counterparts. This Indenture may be executed in any number of
counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
ARTICLE 2
NOTE FORMS
SECTION 2.01. Forms Generally. The Notes and the Trustee's certificate of
authentication relating thereto shall be in substantially the forms set forth,
or referenced, in Exhibit A, annexed hereto and in this Article 2. The Notes may
have such appropriate insertions, omissions, substitutions, notations, legends,
endorsements, identifications and other variations as are required or permitted
by law, stock exchange rule or depository rule or usage, agreements to which the
Company are subject, if any, or other customary usage, or as may consistently
herewith be determined by the Officers of the Company executing such Notes, as
evidenced by such execution (provided always that any such notation, legend,
endorsement, identification or variation is in a form acceptable to the
Company). Each Note shall be dated the date of its authentication.
The Notes shall be issued in the form of permanent certificated Notes
substantially in the form set forth in Exhibit A.
SECTION 2.02. Form of Trustee' Certificate of Authentication. The Trustee's
certificate of authentication shall be in substantially the following form:
This is one of the Notes referred to in the within-mentioned Indenture.
-----------------------------------------
as Trustee
Dated: By:
---------------------- --------------------------------------
Authorized Signatory
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If an appointment of an Authenticating Agent is made pursuant to Section
7.14, the Notes may have endorsed thereon, in lieu of the Trustee's certificate
of authentication, an alternative certificate of authentication in the following
form:
This is one of the Notes referred to in the within-mentioned Indenture.
------------------------------
As Trustee
By
---------------------------------------
As Authenticating Agent
By
---------------------------------------
Authorized Signatory
Dated:
SECTION 2.03. Restrictive Legends. Unless and until a Note is sold pursuant
to an effective Registration Statement pursuant to the Registration Rights
Agreement, such Note shall bear the following legend set forth below (the
"PRIVATE PLACEMENT LEGEND") on the face thereof:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE U.S. OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501 (a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR"), OR (C) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN
THE TIME PERIOD REFERRED TO IN RULE 144(k) UNDER THE SECURITIES ACT AS IN EFFECT
ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
INSIDE THE U.S. TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), AND IF SUCH
TRANSFER IS IN RESPECT OF AN AGGREGATE ACCRETED VALUE OF NOTES OF LESS THAN
$100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH
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TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE U.S. IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR (G) PURSUANT TO ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH SECTION
3.14(J) OF THE INDENTURE AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD
REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR OR A NON-U.S. PERSON THAT, IN EITHER CASE, IS NOT A
QUALIFIED INSTITUTIONAL BUYER, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH
TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "U.S." AND "U.S. PERSON"
HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
ARTICLE 3
THE NOTES
SECTION 3.01. Title and Terms. (a) The aggregate principal amount at
maturity of Notes that may be authenticated and delivered under this Indenture
on the Closing Date is limited to the Accreted Value attributable to
$25,000,000. All the Notes shall vote and consent together on all matters as one
class, and none of the Notes will have the right to vote or consent as a class
separate from one another on any matter.
The Notes shall be known and designated as the "JUNIOR SUBORDINATED NOTES
DUE 2009" of the Company. The final Stated Maturity of the Notes shall be
December 15, 2009. The Company agrees to pay interest on the Accreted Value of
the Notes at the rate and in the manner specified below.
"ACCRETED VALUE" means with respect to any Note, as of any date of
determination, the sum of (a) the Accreted Value of such Note on the immediately
preceding Interest Payment Date (in the event such date of determination falls
before the
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<PAGE> 24
first Interest Payment Date, the "Initial Accreted Value" specified on the face
of such Note) plus (b) an amount determined by multiplying (i) the amount
referred to in clause (a) by (ii) 15% (provided that the accretion rate
applicable to any period or portion of a period during which no interest accrues
that occurs after December 15, 2004 shall be 16%) by (iii) the number of days in
the period from an including the preceding Interest Payment Date to such date of
determination divided by 360, less (c) any interest that accrues with respect to
such period in accordance with the terms of the Note.
Interest Rate:
Prior to December 15, 2004, unless a Cash Payment Notice (as
defined below) is properly delivered by the Company, no interest
shall accrue or be payable with respect to the Notes. If the
Company elects to pay interest on any Interest Payment Date prior
to December 15, 2004, the Company shall give written notice (each
such notice a "CASH PAYMENT NOTICE") of such election to Holders
five business days prior to the immediately preceding Interest
Payment Date. Commencing on such immediately preceding Interest
Payment Date until such Interest Payment Date for which a Cash
Payment Notice has been properly delivered, interest will accrue
and be payable at a rate of 15% per annum to Holders of record of
the Notes at the close of business on the Regular Record Date
immediately preceding such Interest Payment Date for which a Cash
Payment Notice has been properly delivered, whether or not a
Business Day. Failure to pay interest after proper delivery of a
Cash Payment Notice for any reason shall not constitute a breach
of the Indenture and the Accreted Value shall be determined as if
such Cash Payment Notice had not been delivered. On or after
December 15, 2004 interest will accrue and be payable at a rate of
15% per annum on each Interest Payment Date to Holders of record
of the Notes at the close of business on the immediately preceding
Regular Record Date; provided, that if and for so long as payment
of interest on the Notes is prohibited under the terms of the
Credit Agreement (as defined in the Indenture) interest shall not
accrue or be payable with respect to the Notes.
(b) The Company will pay interest on overdue payments of interest and
Accreted Value, to the extent lawful at a rate of 1% per annum in excess of the
interest rate referred to above.
(c) The Accreted Value of and interest, if any, on the Notes shall be
payable at the Corporate Trust Office or at the office or agency of the Company
maintained for that purpose in the Borough of Manhattan, The City of New York
(each, a "PLACE OF PAYMENT") in the manner provided in Section 4.01(b);
provided, however, that, under the circumstances set forth in Section 4.01(b),
payment of interest on a Note may be made by check mailed to the address of the
Person entitled thereto as such address shall appear in the Register.
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SECTION 3.02. Denominations. The Notes shall be issuable only in registered
form without coupons and only in denominations of $1,000 and any integral
multiple thereof.
SECTION 3.03. Execution, Authentication and Delivery and Dating. The Notes
shall be executed on behalf of the Company by an Officer of the Company. The
signature of such Officer on the Notes may be manual or facsimile.
Notes bearing the manual or facsimile signature of an individual who was at
any time a proper Officer of the Company shall bind the Company, notwithstanding
that such individual has ceased to hold such office prior to the authentication
and delivery of such Notes or did not hold such office at the date of such
Notes.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Notes executed by the Company to the Trustee
for authentication; and the Trustee shall authenticate and deliver (i) Notes for
original issue in the aggregate principal amount not to exceed the Accreted
Value attributable to $25,000,000, which is the initial aggregate offering price
of the Notes upon a written order of the Company in the form of an Officer's
Certificate of the Company (an "AUTHENTICATION ORDER"). Such Officer's
Certificates shall specify the amount of Notes to be authenticated and the date
on which the Notes are to be authenticated, whether the Notes are to include the
Private Placement Legend, that the issuance of such Notes does not contravene
any provision of Article 4 of this Indenture and such other information as the
Company may include or the Trustee may reasonably request.
All Notes shall be dated the date of their authentication.
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for herein executed by the
Trustee by manual signature, and such certificate upon any Note shall be
conclusive evidence, and the only evidence, that such Note has been duly
authenticated and delivered hereunder.
SECTION 3.04. Registration, Registration of Transfer and Exchange. The
Company shall cause to be kept at the Corporate Trust Office of the Trustee a
register (the register maintained in such office and in any other office or
agency of the Company in a Place of Payment being herein sometimes collectively
referred to as the "REGISTER") in which, subject to such reasonable regulations
as it may prescribe, the Company shall provide for the registration of Notes and
of transfers of Notes. The Trustee is hereby appointed "REGISTRAR" for the
purpose of registering Notes and transfers of Notes as herein provided.
Upon surrender for transfer of any Note at the office or agency of the
Company in a Place of Payment, in compliance with all applicable requirements of
this Indenture and applicable law, the Company shall execute, and the Trustee
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes, of any authorized denominations and of a
like tenor and aggregate Accreted Value.
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At the option of the Holder, Notes may be exchanged for other Notes, of any
authorized denominations and of a like tenor and aggregate Accreted Value, upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange, the Company shall execute, and the
Trustee shall authenticate and deliver, the Notes that the Holder making the
exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall (if so required by the Company or the Registrar) be duly
endorsed, or be accompanied by a written instrument of transfer, in form
satisfactory to the Company and the Registrar duly executed, by the Holder
thereof or such Holder's attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange or redemption of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes under this
Section 3.04.
SECTION 3.05. Mutilated, Destroyed, Lost and Stolen Notes. If (a) any
mutilated Note is surrendered to the Trustee, or the Company and the Trustee
receive evidence to their satisfaction of the destruction, loss or theft of any
Note, and (b) there is delivered to the Company and the Trustee such security or
indemnity as may be required by them to save each of them harmless, then, in the
absence of notice to the Company or the Trustee that such Note has been acquired
by a bona fide purchaser, the Company shall execute and upon receipt of an
Authentication Order the Trustee shall authenticate and deliver, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen Note, a new Note of
like tenor and Accreted Value, bearing a number not contemporaneously
Outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become or is
about to become due and payable, the Company in its discretion may, instead of
issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section 3.05, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section 3.05 in lieu of any
mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and ratably with
any and all other Notes duly issued hereunder.
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The provisions of this Section 3.05 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 3.06. Payment of Interest Rights Preserved. Interest on any Note
that is payable, and is punctually paid or duly provided for, on any Interest
Payment Date shall be paid to the Person in whose name that Note (or one or more
Predecessor Notes) is registered at the close of business on the Regular Record
Date for such interest specified in Section 3.01.
SECTION 3.07. Persons Deemed Owners. Prior to due presentment of a Note for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name such Note is registered as the
owner of such Note for the purpose of receiving payment of Accreted Value of and
(subject to Section 3.06) interest on such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and none of the Company, the
Trustee or any agent of the Company or the Trustee shall be affected by notice
to the contrary.
SECTION 3.08. Cancellation. All Notes surrendered for payment, redemption,
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and, if not already canceled,
shall be promptly canceled by it. The Company may at any time deliver to the
Trustee for cancellation any Notes previously authenticated and delivered
hereunder that the Company may have acquired in any manner whatsoever, and all
Notes so delivered shall be promptly canceled by the Trustee. No Notes shall be
authenticated in lieu of or in exchange for any Notes canceled as provided in
this Section 3.08, except as expressly permitted by this Indenture. All canceled
Notes held by the Trustee shall be disposed of as directed by a Company Order.
SECTION 3.09. Computation of Interest and Accretion. Interest and accretion
on the Notes shall be computed on the basis of a 360-day year of twelve 30-day
months.
SECTION 3.10. Transfer Provisions. Unless and until a Note is sold pursuant
to an effective Registration Statement, the following provisions shall apply:
(a) General. The provisions of this Section 3.10 shall apply to all
transfers involving any Note.
(b) Transfers to Non-QIB Institutional Accredited Investors. With respect
to the registration of any proposed transfer of a Note that is a Restricted
Security to any Institutional Accredited Investor which is not a QIB, the
Registrar shall register such transfer if it complies with all other applicable
requirements of this Indenture (including Section 3.04) and, if (i) such
transfer is after the relevant Resale Restriction Termination Date with respect
to such Note, or (ii) the proposed transferee has delivered to the Registrar a
Certificate substantially in the form of Exhibit C, and, if such transfer is in
respect of an aggregate Accreted Value of Notes of less than $100,000, the
Trustee and the Company have received an opinion of counsel, certifications and
other information satisfactory to the Company and the Trustee, the Registrar
shall reflect on its books and
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records the date of the transfer, and the Trustee shall cancel the Note so
transferred and the Company shall execute and the Trustee shall authenticate and
deliver one or more Notes of like tenor and amount.
(c) Transfers to QIBs. With respect to the registration of any proposed
transfer of a Note that is a Restricted Security to a QIB (excluding transfers
to Non-U.S. Persons), the Registrar shall register such transfer if it complies
with all other applicable requirements of this Indenture (including Section
3.04) and, if such transfer is being made by a proposed transferor who has
checked the box provided for on the form of such Note stating, or has otherwise
certified to the Company and the Registrar in writing, that the sale has been
made in compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of such Note stating, or has
otherwise certified to the Company and the Registrar in writing, that it is
purchasing such Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a QIB
within the meaning of Rule 144A, and is aware that the sale to it is being made
in reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as it has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A, the Registrar shall reflect
on its books and records the date of the transfer, and the Trustee shall cancel
the Note so transferred.
(d) Transfers to Non-U.S. Persons. The following provisions shall apply
with respect to any transfer of a Note to a Non-U.S. Person:
(i) prior to the end of the Restricted Period, the Registrar shall
register any proposed transfer of a Note to a Non-U.S. Person upon receipt
of a certificate substantially in the form of Exhibit B hereto from the
proposed transferor.
(ii) after the end of the Restricted Period, the Registrar shall
register any proposed transfer to any Non-U.S. Person upon receipt of a
certificate substantially in the form of Exhibit B from the proposed
transferor.
(e) Execution, Authentication and Delivery of Notes. In any case in which
the Registrar is required to deliver a Note to a transferee or transferor, the
Company shall execute, and the Trustee shall authenticate and make available for
delivery, such Note.
(f) Private Placement Legend. Upon the transfer, exchange or replacement of
Notes not bearing the Private Placement Legend, the Registrar shall deliver
Notes that do not bear the Private Placement Legend. Upon the transfer, exchange
or replacement of Notes bearing the Private Placement Legend, the Registrar
shall deliver only Notes that bear the Private Placement Legend, unless (i) the
requested transfer is after the relevant Resale Restriction Termination Date
with respect to such Notes, (ii) upon written request of the Company after there
is delivered to the Registrar an opinion of counsel (which opinion and counsel
are satisfactory to the Company and the Trustee) to the effect that neither such
legend nor the related restrictions on transfer are required in order to
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maintain compliance with the provisions of the Securities Act, or (iii) such
Notes are sold or exchanged pursuant to an effective Registration Statement
under the Securities Act.
(g) Other Transfers. The Registrar shall effect and register, upon receipt
of a written request from the Company to do so, a transfer not otherwise
permitted by this Section 3.10, such registration to be done in accordance with
the otherwise applicable provisions of this Section 3.10, upon the furnishing by
the proposed transferor or transferee of a written opinion of counsel (which
opinion and counsel are satisfactory to the Company and the Trustee) to the
effect that, and such other certifications or information as the Company may
require to confirm that, the proposed transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act.
A Note that is a Restricted Security may not be transferred other than as
provided in this Section 3.10.
(h) General. By its acceptance of any Note bearing the Private Placement
Legend, each Holder of such a Note acknowledges the restrictions on transfer of
such Note set forth in this Indenture and in the Private Placement Legend and
agrees that it will transfer such Note only as provided in this Indenture.
The Registrar shall retain copies of all letters, notices and other written
communications received pursuant to this Section 3.10 (including all Notes
received for transfer pursuant to this Section 3.10). The Company shall have the
right to require the Registrar to deliver to the Company, at the Company's
expense, copies of all such letters, notices or other written communications at
any reasonable time upon the giving of reasonable written notice to the
Registrar.
In connection with any transfer of any Note, the Trustee, the Registrar and
the Company shall be entitled to receive, shall be under no duty to inquire
into, may conclusively presume the correctness of, and shall be fully protected
in relying upon the certificates, opinions and other information referred to
herein (or in the forms provided herein, attached hereto or to the Notes, or
otherwise) received from any Holder and any transferee of any Note regarding the
validity, legality and due authorization of any such transfer, the eligibility
of the transferee to receive such Note and any other facts and circumstances
related to such transfer.
(i) Certain Additional Terms. Any transferee entitled to receive a Note may
request that the Accreted Value thereof be evidenced by one or more Notes in any
authorized denomination or denominations and the Registrar shall comply with
such request if all other transfer restrictions are satisfied.
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ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Accreted Value and Interest. (a) The Company will
duly and punctually pay the Accreted Value of and interest, if any, on the Notes
in accordance with the terms of the Notes and this Indenture. An installment of
Accreted Value or interest shall be considered paid on the date it is due if the
Trustee or Paying Agent or Paying Agents hold on that date money designated for
and sufficient to pay the installment.
(b) The Company will make all payments of Accreted Value and interest, if
any, by wire transfer of immediately available funds to the accounts specified
by the Holders thereof or, if no such account is specified, by mailing a check
to each such Holder's registered address.
SECTION 4.02. Maintenance of Office or Agency. The Company will maintain in
the Borough of Manhattan, The City of New York an office or agency where Notes
may be presented or surrendered for payment, where Notes may be surrendered for
transfer or exchange and where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Company will give
prompt written notice to the Trustee of the location, and of any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain such office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office of the Trustee. The Company hereby
designates the Corporate Trust Office as an initial Place of Payment and as such
office of the Company in the Borough of Manhattan, the City of New York, and
appoint the Trustee as its agent to receive all such presentations, surrenders,
notices and demands so long as such Corporate Trust Office remains a Place of
Payment.
SECTION 4.03. Taxes. The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Notes.
SECTION 4.04. Stay, Extension and Usury Laws. The Company covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, that may affect the covenants or the performance of this Indenture;
and the Company (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law, and covenant that it shall not,
by resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Trustee, but shall suffer and permit the execution of
every such power as though no such law has been enacted.
SECTION 4.05. Certificates to Trustee. (a) The Company will deliver to the
Trustee within 90 days after the end of each fiscal year of the Company a
certificate from the principal executive, financial or accounting officer of the
Company stating that such
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officer has conducted or supervised a review of the activities of the Company
and the Company's performance under this Indenture and stating, to the best of
such officer's knowledge, based upon such review, whether or not the Company has
fulfilled all obligations thereunder.
(b) The Company will deliver to the Trustee within 90 days after the end of
each fiscal year of the Company a written statement by the Company's independent
public accountants stating that their audit examination has included a review of
the terms of Section 4.07 of this Indenture as they relate to financial and
accounting matters.
SECTION 4.06. Limitation on Certain Indebtedness. The Company will not
Incur any Indebtedness that is subordinate or junior in right of payment to the
High Yield Notes and senior in right of payment to the Notes.
SECTION 4.07. Limitation on Redemption of Parity Securities and Junior
Securities.
(a) So long as any Notes are outstanding, no Parity Securities shall be
redeemed, purchased or otherwise acquired for any consideration (or any moneys
be paid to or made available for a sinking fund for the redemption of any shares
of any such Parity Securities) by the Company, directly or indirectly, unless,
in each case, the Company simultaneously redeems, purchases or otherwise
acquires the Notes on a pro rata basis except that Parity Securities may be
Refinanced with Parity Securities or Junior Securities.
(b) So long as any Notes are outstanding, no dividends (other than
dividends or distributions paid in shares of, or options, warrants or rights to
subscribe for or purchase shares of, Junior Securities) shall be declared or
paid or set apart for payment or other distribution declared or made upon Junior
Securities, nor shall any Junior Securities be redeemed, purchased or otherwise
acquired (other than a redemption, purchase or other acquisition of shares of
Common Stock made for purposes of an employee incentive or benefit plan of the
Company or any Subsidiary) (all such dividends, distributions, redemptions or
purchases being hereinafter referred to as a "JUNIOR SECURITIES DISTRIBUTION")
for any consideration (or any moneys be paid to or made available for a sinking
fund for the redemption of any shares of any such Junior Securities) by the
Company, directly or indirectly (except by conversion into or exchange for
Junior Securities).
The foregoing provisions will not prohibit any Junior Securities
Distribution that would be permitted by terms of the indenture governing the
High Yield Notes as in effect as of the date of this Indenture.
SECTION 4.08. Transactions with Affiliates. The Company shall not, and will
not permit any of its Subsidiaries to, make any payment to, or sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or purchase
any property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate of the Company (each of the foregoing, an "AFFILIATE
TRANSACTION"), unless (a) such Affiliate
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Transaction is on terms that are no less favorable to the Company or such
Subsidiary than those that would have been obtained in a comparable transaction
by the Company or such Subsidiary with an unrelated Person and (b) the Company
delivers to the Trustee, with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess of
$7.5 million, either (i) a resolution of the board of directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (a) above and that such Affiliate Transaction has been approved by a
majority of the disinterested members of the Board of Directors or (ii) an
opinion as to the fairness to the Holders of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment banking
firm of national standing.
Notwithstanding the foregoing, the following items shall not be deemed to
be Affiliate Transactions: (a) customary directors' fees, indemnification or
similar arrangements or any employment agreement or other compensation plan or
arrangement entered into by the Company or any of its Subsidiaries in the
ordinary course of business (including ordinary course loans to employees not to
exceed (i) $5.0 million outstanding in the aggregate at any time and (ii) $2.0
million to any one employee) and consistent with the past practice of the
Company or such Subsidiary; (b) transactions between or among the Company and/or
its Subsidiaries; (c) payments of customary fees by the Company or any of its
Subsidiaries to DLJMB and its Affiliates made for any financial advisory,
financing, underwriting or placement services or in respect of other investment
banking activities, including, without limitation, in connection with
acquisitions or divestitures which are approved by a majority of the board of
directors in good faith; (d) any agreement as in effect on the date of this
Indenture or any amendment thereto (so long as such amendment is not
disadvantageous to the Holders of the Notes in any material respect) or any
transaction contemplated thereby; (e) payments and transactions in connection
with the Credit Agreement (including commitment, syndication and arrangement
fees payable thereunder) and under any future underwritten offerings led by the
Principal or any of its Affiliates (including underwriting discounts and
commissions in connection therewith) and the application of the proceeds
thereof, and the payment of the fees and expenses with respect thereto; (f)
sales of accounts receivable, or participations therein, in connection with any
Receivables Facility; and (g) transactions pursuant to the Management Loans.
SECTION 4.09. Corporate Existence. Subject to Article 5 hereof, the Company
shall do or cause to be done all things necessary to preserve and keep in full
force and effect (i) the corporate, partnership or other existence of itself and
each of its Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Subsidiary and (ii) the rights (charter and statutory), licenses and
franchises of the Company and its Subsidiaries; provided, however, that the
Company shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of itself and any of its
Subsidiaries, if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in
any material respect to the Holders of the Notes.
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SECTION 4.10. Offer to Repurchase upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of Notes will
have the right to require the Company to repurchase all or any part (equal to
$1,000 of Accreted Value or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "CHANGE OF CONTROL OFFER") at an
offer price in cash equal to 101% of the aggregate Accreted Value thereof, plus
accrued and unpaid interest, if any, thereon to the date of repurchase (the
"CHANGE OF CONTROL PAYMENT"). Within 60 days following any Change of Control,
the Company will (or will cause the Trustee to) mail a notice to each Holder
describing the transaction or transactions that constitute the Change of Control
and offering to repurchase Notes on the date specified in such notice, which
date shall be no earlier than 30 days and no later than 60 days from the date
such notice is mailed (the "CHANGE OF CONTROL PAYMENT DATE"), pursuant to the
procedures required by this Indenture and described in such notice. The Company
will comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of this Indenture
relating to such Change of Control Offer, the Company will comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations described in this Indenture by virtue thereof.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate Accreted Value of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book-entry) to each Holder
a new Note equal in Accreted Value to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will have an Accreted
Value of $1,000 or an integral multiple thereof; provided that each such new
Note will have an Accreted Value of $1,000 or an integral multiple thereof
provided further, that the Company shall not be required to repurchase Notes
upon a Change of Control if the Company is unable to obtain all necessary
consents under the Credit Agreement for such repurchase. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(b) Notwithstanding anything to the contrary in this Section 4.10, the
Company will not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in this
Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
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ARTICLE 5
CONSOLIDATION, MERGER OR SALE OF ASSETS
SECTION 5.01. Consolidation, Merger or Sale of Assets. (a) The Company
shall not consolidate with, merge with or into, or sell, convey, transfer, or
otherwise dispose of all or substantially all of its property and assets (as an
entirety or substantially an entirety in one transaction or a series of related
transactions) to, any Person nor permit any Person to merge with or into the
Company unless:
(i) the Company shall be the continuing Person, or the Person (if
other than the Company) formed by such consolidation or into which the
Company is merged or that acquired such property and assets of the Company
shall be a corporation organized and validly existing under the laws of the
United States of America or any jurisdiction thereof and shall expressly
assume, by a supplemental indenture, executed and delivered to the Trustee,
all of the obligations of the Company on all of the Notes and under the
Indenture; and
(ii) the Company delivers to the Trustee an Officers' Certificate and
opinion of counsel, in each case stating that such consolidation, merger or
transfer and such supplemental indenture complies with this Article 5 and
the terms of the Indenture.
(b) Notwithstanding the foregoing, in no event shall any (i) consolidation
or merger by the Company with or into or (ii) sale, assignment, transfer,
conveyance or other disposition by the Company of all or substantially all of
its property or assets to, one or more Subsidiaries of the Company relieve the
Company from any of its obligations under the Indenture and the Notes.
(c) The Company shall not lease all or substantially all of its property
and assets (as an entirety or substantially an entirety in one transaction or a
series of related transactions) to, any Person other than to a wholly-owned
Subsidiary.
SECTION 5.02. Opinion of Counsel to Trustee. The Trustee, subject to the
provisions of Sections 7.01 and 7.02, may receive an Opinion of Counsel as
conclusive evidence that any such consolidation, merger, conveyance, sale,
transfer, lease, exchange or other disposition referred to in Section 5.01
complies with the applicable provisions of this Indenture.
ARTICLE 6
REMEDIES
SECTION 6.01. Control by Majority. The Holders of at least a majority in
aggregate Accreted Value of the Outstanding Notes may direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture,
that may involve the Trustee in
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personal liability, or that the Trustee determines in good faith may be unduly
prejudicial to the rights of Holders not joining in the giving of such direction
and may take any other action it deems proper that is not inconsistent with any
such direction received from the Holders.
SECTION 6.02. Limitation on Suits. A Holder may not pursue any remedy with
respect to this Indenture or the Notes unless:
(a) the Holder gives the Trustee written notice of its intent to pursue a
remedy;
(b) the Holders of at least 25% in aggregate Accreted Value of Outstanding
Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder or Holders offer the Trustee reasonable security or
indemnity against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt thereof and the offer of security or indemnity; and
(e) during such 60 day period, the Holders of at least a majority in
aggregate Accreted Value of the Outstanding Notes do not give the Trustee a
direction inconsistent with the request.
SECTION 6.03. Rights of Holders to Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder to receive payment of
Accreted Value and interest, if any, on the Note, on or after the respective due
dates expressed in the Note, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of the Holder.
SECTION 6.04. Trustee May File Proofs of Claim. The Trustee is authorized
to file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and the Holders allowed in any judicial
proceedings relative to the Company (or any other obligor upon the Notes), their
creditors or their property and shall be entitled and empowered to collect,
receive and distribute any money or other property payable or deliverable on any
such claims and any custodian in any such judicial proceeding is hereby
authorized by each Holder to make such payments to the Trustee, and in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07. To the
extent that the payment of any such compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 out of the estate in any such proceeding, shall be
denied for any reason, payment of the same shall be secured by a Lien on, and
shall be paid out of, any and all distributions, dividends, money, securities
and other properties which the Holders may be entitled to receive in such
proceeding whether in liquidation or under any plan of reorganization or
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arrangement or otherwise. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.05. Priorities. Subject to Article 13, if the Trustee collects
any money pursuant to this Article, it shall pay out the money in the following
order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07, including payment of all compensation, expense and liabilities
incurred, and all advances made, by the Trustee and the costs and expenses of
collection;
Second: to Holders for amounts due and unpaid on the Notes for Accreted
Value and interest, if any, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for Accreted Value and
interest, if any, respectively; and
Third: to the Company or to such party as a court of competent jurisdiction
shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section 6.05 upon five Business Days prior notice to
the Company.
SECTION 6.06. Undertaking for Costs. In any suit for the enforcement of any
right or remedy under this Indenture or in any suit against the Trustee for any
action taken or omitted by it as a Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees and expenses, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section does not apply to a
suit by the Trustee, a suit by a Holder pursuant to Section 6.02, or a suit by
Holders of more than 10% in aggregate Accreted Value of the then Outstanding
Notes.
SECTION 6.07. Restoration of Rights and Remedies. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture or any Note and such proceeding has been discontinued or abandoned for
any reason, or has been deter mined adversely to the Trustee or to such Holder,
then and in every such case the Company, any other obligor upon the Notes, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 6.08. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment
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of any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
ARTICLE 7
THE TRUSTEE
SECTION 7.01. Certain Duties and Responsibilities. (a)
(i) The Trustee need perform only those duties that are specifically
set forth in this Indenture and no others and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture (but need
not confirm or investigate the accuracy of mathematical calculations or
other facts stated therein).
(b) The Trustee shall exercise such of the rights and powers vested in it
by this Indenture, and use the same degree of care and skill in their exercise,
as a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that (i) this paragraph does not
limit the effect of Section 7.01(a); (ii) the Trustee shall not be liable for
any error of judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts; and (iii)
the Trustee shall not be liable with respect to any action it takes or omits to
take in good faith in accordance with a direction received by it pursuant to
Section 6.02.
(d) The Trustee may refuse to perform any duty or exercise any right or
power or expend or risk its own funds or otherwise incur any financial liability
unless it receives indemnity satisfactory to it against any loss, liability or
expense.
(e) Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of Sections 7.01
and 7.02 hereof.
SECTION 7.02. Certain Rights of Trustees. (a) Subject to the provisions of
Section 7.01:
(i) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion,
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report, notice, request, direction, consent, order, bond, note, other
evidence of indebtedness or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties;
(ii) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or a Company Order thereof, and
any resolution of any Person's board of directors shall be sufficiently
evidenced if certified by an Officer of such Person as having been duly
adopted and being in full force and effect on the date of such certificate;
(iii) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon the Officer's Certificates of the Company;
(iv) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(v) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against any
loss, liability or expense which might be incurred by it in compliance with
such request or direction;
(vi) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, note, other evidence of indebtedness or other paper or document; and
(vii) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
SECTION 7.03. Not Responsible for Recitals or Issuance of Notes. (a) The
recitals contained herein and in the Notes, except the Trustee's certificates of
authentication, shall be taken as the statements of the Company, and neither the
Trustee nor any Authenticating Agent assumes any responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Notes, except that the Trustee
represents that it is duly authorized to execute and deliver this Indenture,
authenticate the Notes and perform its obligations hereunder and that the
statements made by it in a Statement of Eligibility and Qualification on Form
T-1 supplied to the Company in connection with the registration of any Notes
issued hereunder are and will be true and accurate subject to the qualifications
set forth therein.
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Neither the Trustee nor any Authenticating Agent shall be accountable for the
use or application by the Company of the Notes or the proceeds thereof.
SECTION 7.04. Trustee's Disclaimer. The Trustee makes no representation as
to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes, it shall not
be responsible for any statement in the offering memorandum for the Notes or in
the Indenture or the Notes (other than its certificate of authentication), the
acts of a prior Trustee hereunder, or the determination as to which beneficial
owners are entitled to receive any notices hereunder.
SECTION 7.05. May Hold Notes. (a) The Trustee, any Authenticating Agent,
any Paying Agent, any Registrar or any other agent of the Company, in its
individual or any other capacity, may become the owner or pledgee of Notes and,
subject to Section 7.08 and Section 7.13, may otherwise deal with the Company or
their Affiliates with the same rights it would have if it were not Trustee,
Authenticating Agent, Paying Agent, Registrar or such other agent.
SECTION 7.06. Money Held in Trust. Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed with the Company.
SECTION 7.07. Compensation and Reimbursement. The Company agrees:
(a) to pay to the Trustee from time to time such compensation as the
Company and the Trustee shall from time to time agree in writing for all
services rendered by it hereunder (which compensation shall not be limited by
any provision of law in regard to the compensation of a trustee of an express
trust);
(b) to reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any provision of this Indenture (including the reasonable compensation and the
expenses, advances and disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to its negligence or bad
faith; and
(c) to indemnify the Trustee for, and to hold it harmless against, any
loss, damage, claims, liability or expense incurred without negligence or bad
faith on its part, arising out of or in connection with the acceptance or
administration of this trust, including the reasonable costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder.
The Company's payment obligations pursuant to this Section 7.07 shall
survive the discharge of this Indenture.
SECTION 7.08. Conflicting Interests. If the Trustee has or shall acquire a
conflicting interest within the meaning of the TIA, the Trustee shall either
eliminate such
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conflicting interest, apply to the SEC for permission to continue as Trustee
with such conflicting interest, or resign, to the extent and in the manner
provided by, and subject to the provisions of, the TIA and this Indenture. To
the extent permitted by such Act, the Trustee shall not be deemed to have a
conflicting interest by virtue of being a trustee under this Indenture with
respect to Notes, or a trustee under any other indenture between the Company and
the Trustee.
SECTION 7.09. Corporate Trustee Required; Eligibility. (a) There shall at
all times be one (and only one) Trustee hereunder. The Trustee shall be a Person
that is eligible pursuant to the TIA to act as such and has a combined capital
and surplus of at least $100,000,000. If any such Person publishes reports of
condition at least annually, pursuant to law or to the requirements of its
supervising or examining authority, then for the purposes of this Section 7.09
and to the extent permitted by the TIA, the combined capital and surplus of such
Person shall be deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section
7.09, it shall resign immediately in the manner and with the effect hereinafter
specified in this Article.
SECTION 7.10. Resignation and Removal; Appointment of Successor. (a) No
resignation or removal of the Trustee and no appointment of a successor Trustee
pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the applicable
requirements of Section 7.11.
(b) The Trustee may resign at any time by giving written notice thereof to
the Company. If the instrument of acceptance by a successor Trustee required by
Section 7.11 shall not have been delivered to the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in Accreted Value of the Outstanding Notes, delivered to the Trustee
and to the Company.
If at any time:
(i) the Trustee shall fail to comply with Section 7.08 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder for at least six months, or
(ii) the Trustee shall cease to be eligible under Section 7.09 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(iii) the Trustee shall become incapable of acting or shall be
adjudged bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
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then, in any such case, (A) the Company may remove the Trustee, or (B) subject
to Section 6.06, any Holder who has been a bona fide Holder for at least six
months may, on behalf of itself and all others similarly situated, petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee or Trustees.
(d) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, the Company
shall promptly appoint a successor Trustee and shall comply with the applicable
requirements of Section 7.11. If, within one year after such resignation,
removal or incapability, or the occurrence of such vacancy, a successor Trustee
shall be appointed by Act of the Holders of a majority in Accreted Value of the
Outstanding Notes delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment in accordance with the applicable requirements of Section 7.11,
become the successor Trustee and to that extent supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner required by
Section 7.11, then, subject to Section 6.06, any Holder who has been a bona fide
Holder for at least six months may, on behalf of itself and all others similarly
situated, petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(e) The Company shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee to all Holders in the
manner provided in Section 1.10. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
SECTION 7.11. Acceptance of Appointment by Successor. (a) In case of the
appointment hereunder of a successor Trustee, every such successor Trustee so
appointed shall execute, acknowledge and deliver to the Company and to the
retiring Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Trustee;
but, on the request of the Company or the successor Trustee, such retiring
Trustee shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the
retiring Trustee and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder.
(b) Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to above.
(c) No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article 7.
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SECTION 7.12. Merger, Conversion, Consolidation or Succession to Business.
(a) Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article 7,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Notes shall have been authenticated, but
not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Notes so authenticated with the same effect as if
such successor Trustee had itself authenticated such Notes.
SECTION 7.13. Preferential Collection of Claims Against the Company. (a) If
and when the Trustee shall be or become a creditor of the Company (or any other
obligor upon the Notes), the Trustee shall be subject to the provisions of the
TIA regarding the collection of claims against the Company (or any such other
obligor).
SECTION 7.14. Appointment of Authenticating Agent. The Trustee may appoint
an Authenticating Agent acceptable to the Company to authenticate the Notes. Any
such appointment shall be evidenced by an instrument in writing signed by a
Trust Officer, a copy of which instrument shall be promptly furnished to the
Company. Unless limited by the terms of such appointment, an Authenticating
Agent may authenticate Notes whenever the Trustee may do so. Each reference in
this Indenture to authentication (or execution of a certificate of
authentication) by the Trustee includes authentication (or execution of a
certificate of authentication) by such Authenticating Agent. An Authenticating
Agent has the same rights as any Registrar, Paying Agent or agent for service of
notices and demands.
ARTICLE 8
HOLDERS' LIST AND REPORTS BY TRUSTEE AND THE COMPANY
SECTION 8.01. The Company to Furnish Trustee Names and Addresses of
Holders. (a) The Company will furnish or cause to be furnished to the Trustee
(i) semi-annually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date, and
(ii) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
provided, however, that if and so long as the Trustee shall be the Registrar, no
such list need be furnished pursuant to this Section 8.01.
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SECTION 8.02. Preservation of Information; Communications to Holders. (a)
The Trustee shall preserve, in as current a form as is reasonably practicable,
the names and addresses of Holders contained in the most recent list, if any,
furnished to the Trustee as provided in Section 8.01 and the names and addresses
of Holders received by the Trustee in its capacity as Registrar; provided,
however, that if and so long as the Trustee shall be the Registrar, the Register
shall satisfy the requirements relating to such list. None of the Company, the
Trustee or any other Person shall be under any responsibility with regard to the
accuracy of such list. The Trustee may destroy any list furnished to it as
provided in Section 8.01 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Notes, and the corresponding
rights and privileges of the Trustee, shall be as provided by the TIA.
(c) Every Holder, by receiving and holding the same, agrees with the
Company and the Trustee that neither the Company nor the Trustee nor any agent
of either of them shall be held accountable by reason of any disclosure of
information as to names and addresses of Holders made pursuant to the TIA.
SECTION 8.03. Reports by Trustee. (a) The Trustee shall transmit to Holders
such reports concerning the Trustee and its actions under this Indenture as may
be required pursuant to the TIA at the times and in the manner provided pursuant
thereto. A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which any Notes
are listed, with the SEC and with the Company. The Company will notify the
Trustee when any Notes are listed on any stock exchange and of any delisting
thereof.
ARTICLE 9
AMENDMENT, SUPPLEMENT OR WAIVER
SECTION 9.01. Without Consent of the Holders. Without the consent of any
Holder, the Company and the Trustee may enter into one or more indentures
supplemental hereto, for any of the following purposes:
(i) to cure any ambiguity, omission, defect or inconsistency,
(ii) to provide for the assumption by a successor of the obligations
of the Company under this Indenture,
(iii) to provide for uncertificated Notes in addition to or in place
of certificated Notes; provided that the uncertified Notes are issued in
registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated Notes are described in Section 163(f)(2)(B) of
the Code,
(iv) to add guarantees with respect to the Notes, to secure the Notes,
to confirm and evidence the release, termination or discharge of any
guarantee or
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Lien with respect to or securing the Notes when such release, termination
or discharge is provided for under this Indenture,
(v) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power conferred upon the Company,
(vi) to make any change that does not adversely affect the rights of
any Holder under the Notes or this Indenture, or
(vii) to comply with any requirement of the SEC in connection with the
qualification of this Indenture under the TIA or otherwise.
SECTION 9.02. With Consent of Holders. (a) Subject to Section 6.03, the
Company and the Trustee may amend or supplement this Indenture or the Notes with
the written consent of the Holders of not less than a majority in aggregate
Accreted Value of the Outstanding Notes (including consents obtained in
connection with a tender offer or exchange offer for Notes), and compliance with
any provisions may also be waived with the written consent of the Holders of not
less than a majority in aggregate Accreted Value of the Outstanding Notes
(including consents obtained in connection with a tender offer or exchange offer
for Notes).
(b) Notwithstanding the provisions of this Section 9.02, without the
consent of each Holder affected, an amendment or waiver may not (with respect to
any Notes held by a non-consenting Holder):
(i) reduce the amount of Notes whose holders must consent to an
amendment,
(ii) reduce the rate of accretion of any Note,
(iii) reduce the rate of or extend the time for payment of interest on
any Note,
(iv) reduce the Accreted Value or extend the Stated Maturity of any
Note,
(v) reduce the amount payable upon the redemption of any Note or
change the time at which any Note may be redeemed
(vi) make any Note payable in money other than that stated in the
Note,
(vii) impair the right of any holder of the Notes to receive payment
of Accreted Value of and interest, if any, on such holder's Notes, on or
after the due dates therefor or to institute suit for the enforcement of
any payment on or with respect to such holder's Notes,
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<PAGE> 45
(viii) make any change in the amendment provisions which require each
holder's consent or in the waiver provisions, or
(ix) make any change to Article 13 of the Indenture that would
adversely affect the Noteholders.
provided that no modification or change may be made to any provision of this
Indenture adversely affecting the rights of any holder of Senior Indebtedness
then outstanding unless the holders of such Senior Indebtedness (or their
Representative) consent to such modification or change.
(c) It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
(d) After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders of each Note affected
thereby, with a copy to the Trustee, a notice briefly describing the amendment,
supplement or waiver. Any failure of the Company to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any supplemental indenture or the effectiveness of any such amendment,
supplement or waiver.
SECTION 9.03. Execution of Amendments, Supplements or Waivers. The Trustee
shall sign any amendment, supplement or waiver authorized pursuant to this
Article 9 if the amendment, supplement or waiver does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing or refusing to sign such
amendment, supplement or waiver, the Trustee shall be entitled to receive, and
shall be fully protected in relying upon, an Officer's Certificate and an
Opinion of Counsel to the effect that the execution of such amendment,
supplement or waiver has been duly authorized, executed and delivered by the
Company and that, subject to applicable bankruptcy, insolvency, fraudulent
transfer, fraudulent conveyance, reorganization, moratorium and other laws now
or hereinafter in effect affecting creditors' rights or remedies generally and
the general principles of equity (including, without limitation, standards of
materiality, good faith, fair dealing and reasonableness), whether considered in
a proceeding at law or at equity, such amendment, supplement or waiver is a
valid and binding agreement of the Company, enforceable against it in accordance
with its terms.
SECTION 9.04. Revocation and Effect of Consents. (a) Until an amendment,
supplement or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder of that Note or any
Note that evidences all or any part of the same debt as the consenting Holder's
Note, even if notation of the consent is not made on any Note. Subject to the
following paragraph of this Section 9.04, any such Holder or subsequent Holder
may revoke the consent as to such Holder's Note by notice to the Trustee or the
Company received by the Trustee or the Company, as the case may be, before the
date on which the Trustee receives an Officer's Certificate certifying that the
Holders of the requisite Accreted Value of Notes have consented (and not
theretofore revoked such consent) to the amendment,
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supplement or waiver. The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Holders entitled to consent to
any amendment, supplement or waiver as set forth in Section 1.08.
(b) After an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (i)
through (viii) of the second paragraph of Section 9.02. In that case, the
amendment, supplement or waiver shall bind each Holder of a Note who has
consented to it and every subsequent Holder of such Note or any Note that
evidences all or any part of the same debt as the consenting Holder's Note.
SECTION 9.05. Conformity with TIA. (a) Every amendment or supplemental
indenture executed pursuant to this Article shall conform to the requirements of
the TIA as then in effect.
SECTION 9.06. Notation on or Exchange of Notes. (a) If an amendment,
supplement or waiver changes the terms of a Note, the Trustee shall (if required
by the Company and in accordance with the specific direction of the Company)
request the Holder to deliver its Note to the Trustee. The Trustee shall (if
required by the Company and in accordance with the specific direction of the
Company) place an appropriate notation on the Note about the changed terms and
return it to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms. Failure to make
the appropriate notation or issue a new Note shall not affect the validity and
effect of such amendment, supplement or waiver.
ARTICLE 10
REDEMPTION OF NOTES
SECTION 10.01. Right of Redemption. Optional Redemption. The Notes will be
redeemable, at the option of the Company, in whole at any time and from time to
time, on and prior to maturity. Such redemption may be made upon notice mailed
by first-class mail to each Holder's registered address in accordance with
Section 10.03. The Notes will be so redeemable at the following Redemption
Prices (expressed as a percentage of the Accreted Value thereof on the relevant
Redemption Date), plus accrued and unpaid interest, if any, to the relevant
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date to receive interest due on the relevant Interest Payment
Date); provided that the Company shall not optionally redeem any Notes except
and to the extent permitted by the Credit Agreement,
(i) if redeemed prior to December 15, 2004 at a redemption price equal
to 115% of the Accreted Value of the Notes; and
(ii) if redeemed during the 12-month period commencing December 15 of
each of the years set forth below:
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<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
<S> <C>
2004......................... 107.5%
2005......................... 105.0%
2006......................... 102.5%
2007 and thereafter.......... 100%
</TABLE>
SECTION 10.02. Applicability of Article. Redemption or purchase of Notes as
permitted by Section 10.01 shall be made in accordance with this Article 10.
SECTION 10.03. Notice of Redemption. (a) Notice of redemption or purchase
as provided in Section 10.01 shall be deemed to have been given upon the mailing
by first class mail, postage prepaid, of such notice to each Holder of Notes to
be redeemed, at its registered address as recorded in the Register, not later
than 30 nor more than 60 days prior to the Redemption Date.
Any such notice shall state:
(i) the expected Redemption Date,
(ii) the Redemption Price,
(iii) that on the Redemption Date the Redemption Price will become due
and payable upon each such Note, and that, unless the Company defaults in
making such redemption payment or any Paying Agent is prohibited from
making such payment pursuant to the terms of this Indenture, interest
thereon shall cease to accrue from and after said date,
(iv) the place where such Notes are to be surrendered for payment of
the Redemption Price and the name and address of the Paying Agent or Paying
Agents,
(v) the section of this Indenture pursuant to which the Notes are to
be redeemed.
(b) Notice of such redemption or purchase of Notes to be so redeemed or
purchased at the election of the Company shall be given by the Company or, at
the written request of the Company delivered at least 30 days prior to the date
proposed for the mailing of such notice, by the Trustee in the name and at the
expense of the Company.
(c) The notice if mailed in the manner herein provided shall be
conclusively presumed to have been given, whether or not the Holder receives
such notice. In any case, failure to give such notice by mail or any defect in
the notice to the Holder of any
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Note designated for redemption as a whole shall not affect the validity of the
proceedings for the redemption of any other Note.
SECTION 10.04. Deposit of Redemption Price. On or prior to 10:00 a.m., New
York City time any Redemption Date, the Company shall deposit with the Trustee
or with a Paying Agent (or, if the Company is acting as its own Paying Agent,
the Company shall segregate and hold in trust) an amount of money sufficient to
pay the Redemption Price of, and any accrued and unpaid interest on, all the
Notes or portions thereof which are to be redeemed on that date.
SECTION 10.05. Notes Payable on Redemption Date. (a) Notice of redemption
having been given as provided in this Article 10, the Notes so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
herein specified and from and after such date (unless the Company shall default
in the payment of the Redemption Price or any Paying Agent is prohibited from
paying the Redemption Price pursuant to the terms of this Indenture) such Notes
shall cease to bear interest. Upon surrender of such Notes for redemption in
accordance with such notice, such Notes shall be paid by the Company at the
Redemption Price. Installments of interest whose Interest Payment Date is on or
prior to the Redemption Date shall be payable to the Holders of such Notes
registered as such on the relevant Regular Record Dates according to their terms
and the provisions of Section 3.06.
(b) On and after any Redemption Date, if money sufficient to pay the
Redemption Price of and any accrued and unpaid interest on Notes called for
redemption shall have been made available in accordance with Section 10.04, the
Notes called for redemption will cease to accrue interest and the only right of
the Holders of such Notes will be to receive payment of the Redemption Price of,
and subject to the last sentence of Section 10.05(a), any accrued and unpaid
interest on such Notes to the Redemption Date. If any Note called for redemption
shall not be so paid upon surrender thereof for redemption, the Accreted Value
shall, until paid, bear interest or accrete from the Redemption Date at the rate
borne by the Note (or portion thereof).
ARTICLE 11
SATISFACTION AND DISCHARGE
SECTION 11.01. Satisfaction and Discharges of Indenture. (a) This Indenture
shall cease to be of further effect (except as to any surviving rights of
transfer or exchange of Notes herein provided for), and the Trustee, on demand
of and at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, when
(i) either
(A) all Notes theretofore authenticated and delivered (other than
(y) Notes that have been destroyed, lost or stolen and that have been
replaced or paid as provided in Section 3.05, and (z) Notes for whose
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<PAGE> 49
payment money has theretofore been deposited in trust or segregated
and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee
canceled or for cancellation; or
(B) all such Notes not theretofore delivered to the Trustee
canceled or for cancellation
(x) have become due and payable, or
(y) will become due and payable at their Stated Maturity
within one year, or
(z) are to be called for redemption within one year under
arrangements reasonably satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name, and at
the expense, of the Company,
(ii) the Company has irrevocably deposited or caused to be deposited
with the Trustee an amount in United States dollars, U.S. Government
Obligations, or a combination thereof, sufficient to pay and discharge the
entire Indebtedness on such Notes not theretofore delivered to the Trustee
canceled or for cancellation, for Accreted Value and interest, if any, to
the date of such deposit (in the case of Notes that have become due and
payable), or the Accreted Value to the Stated Maturity or Redemption Date
assuming for this purpose that the Notes accrete and do not pay interest
until such date, as the case may be;
(iii) the Company has paid or caused to be paid all other sums then
payable hereunder by the Company; and
(iv) the Company has delivered to the Trustee an Officer's Certificate
and an Opinion of Counsel each to the effect that all conditions precedent
provided for in this Section 11.01 relating to the satisfaction and
discharge of this Indenture have been complied with; provided that any such
counsel may rely on any Officer's Certificate as to matters of fact
(including as to compliance with the foregoing clauses (i), (ii) and
(iii)).
(b) Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 7.07 and, if money shall
have been deposited with the Trustee pursuant to clause (ii) of Section
11.01(a), the obligations of the Trustee under Section 11.02, shall survive.
SECTION 11.02. Application of Trust Money. All money deposited with the
Trustee pursuant to Section 11.01 shall be held in trust and applied by it, in
accordance with the provisions of the Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as its
own Paying Agent) as the Trustee may determine, to the Persons entitled thereto,
of the Accreted Value and
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interest, if any, on the Notes; but such money need not be segregated from other
funds except to the extent required by law.
ARTICLE 12
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 12.01. Option of the Company to Effect Defeasance or Covenant
Defeasance. The Company may at its option by a Board Resolution, at any time,
elect to have either Section 12.02 or Section 12.03 applied to the Outstanding
Notes upon compliance with the conditions set forth below in this Article 12.
SECTION 12.02. Legal Defeasance and Discharge. Upon the exercise by the
Company under Section 12.01 of the option applicable to this Section 12.02, the
Company shall be deemed to have been discharged from any and all Obligations
with respect to all Outstanding Notes on the date which is the 123rd day after
the deposit referred to in Section 12.04(a); provided that all of the conditions
set forth below are satisfied (hereinafter, "LEGAL DEFEASANCE"). For this
purpose, such Legal Defeasance means that the Company shall be deemed to have
paid and discharged the entire Indebtedness represented by the Outstanding
Notes, which shall thereafter be deemed to be "outstanding" only for the
purposes of Section 12.05 hereof and the other Sections of this Indenture
referred to in clauses (i) and (ii) of this Section 12.02, and to have satisfied
all its other obligations under such Notes and this Indenture (and the Trustee,
on demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (i) the rights of Holders of
Outstanding Notes to receive solely from the trust fund described in Section
12.04 hereof, and as more fully set forth in such Section, payments in respect
of the Accreted Value of, and interest, if any, on such Notes when such payments
are due, (ii) the obligations of the Company with respect to such Notes under
Sections 1.06, 2.03, 3.03, 3.04, 3.05, 3.10, 4.01, 4.02 and 12.05 hereof, (iii)
the rights, powers, trusts, duties and immunities of the Trustee hereunder,
including, without limitation, the Trustee's rights under Section 7.07 hereof,
and the obligations of the Company in connection therewith and with this Article
12. Subject to compliance with this Article 12, the Company may exercise its
option under this Section 12.02 notwithstanding the prior exercise of their
option under Section 12.03 hereof with respect to the Notes.
SECTION 12.03. Covenant Defeasance. Upon the exercise by the Company under
Section 12.01 of the option applicable to this Section 12.03, the Company shall
be released from their obligations under the covenants contained in Sections
4.06 through 4.10 hereof with respect to the Outstanding Notes on the date which
is the 123rd day after the deposit referred to in Section 12.04(a); provided
that all of the conditions set forth below are satisfied (hereinafter, "COVENANT
DEFEASANCE"), and the Notes shall thereafter be deemed not Outstanding for the
purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed Outstanding for all other purposes hereunder. For this
purpose, such Covenant Defeasance means that, with respect to the
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<PAGE> 51
Outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document, but, except as specified
above, the remainder of this Indenture and such Notes shall be unaffected
thereby.
SECTION 12.04. Conditions to Legal or Covenant Defeasance. The following
shall be the conditions to application of either Section 12.02 or Section 12.03
to the Outstanding Notes:
(a) the Company has deposited with the Trustee, in trust, money and/or U.S.
Government Obligations that through the payment of interest and principal in
respect thereof in accordance with their terms will provide money in an amount
sufficient, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, to pay (i) the Accreted Value of and accrued interest, if any, on the
Notes when such payments are in accordance with the terms of this Indenture and
the Notes or (ii) accrued interest, if any, on the Notes through a scheduled
redemption date and the Accreted Value of, the Notes on such redemption date;
provided that, at the time of deposit, the Company irrevocably authorizes the
Trustee to issue a timely notice of redemption and to take such other steps
reasonably requested by the Trustee to ensure that such redemption will be
effectuated;
(b) in the case of an election under Section 12.02, the Company has
delivered to the Trustee (i) either (x) an Opinion of Counsel to the effect that
Holders will not recognize income, gain or loss for Federal income tax purposes
as a result of the exercise by the Company of their option under this Article 12
and will be subject to Federal income tax on the same amount and in the same
manner and at the same times as would have been the case if such deposit,
defeasance and discharge had not occurred, which Opinion of Counsel must be
based upon (and accompanied by a copy of) a ruling of the Internal Revenue
Service to the same effect unless there has been a change in applicable Federal
income tax law after the date of this Indenture such that a ruling is no longer
required or (y) a ruling directed to the Trustee received from the Internal
Revenue Service to the same effect as the aforementioned Opinion of Counsel and
(ii) an Opinion of Counsel to the effect that, as a result of the creation of
the defeasance trust, the Company will not be required to register under the
Investment Company Act of 1940 and after the passage of 123 days following the
deposit, the trust fund will not be subject to the effect of Section 547 of the
United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor
Law;
(c) in the case of an election under Section 12.03, the delivery by the
Company to the Trustee of (i) an Opinion of Counsel to the effect that, among
other things, the Holders will not recognize income, gain or loss for Federal
income tax purposes as a result of such deposit and defeasance and will be
subject to Federal income tax on the same amount and in the same manner and at
the same times as would have been the case if such deposit and defeasance had
not occurred and (ii) an Opinion of Counsel to the effect that, as a result of
the creation of the defeasance trust, the Company will not be required to
register under the Investment Company Act of 1940 and after the
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passage of 123 days following the deposit, the trust fund will not be subject to
the effect of Section 547 of the United States Bankruptcy Code or Section 15 of
the New York Debtor and Creditor Law;
(d) such deposit shall not result in a breach or violation of, or
constitute a default under, any other agreement or instrument to which the
Company is a party or by which the Company is bound;
(e) if at such time the Notes are listed on a national securities exchange,
the Company has delivered to the Trustee an Opinion of Counsel to the effect
that the Notes will not be delisted as a result of such deposit, defeasance and
discharge;
(f) the Company shall have delivered to the Trustee Officer's Certificates
stating that the deposit made by the Company pursuant to its election under
Sections 12.02 or 12.03 was not made by the Company with the intent of
preferring the Holders over the other creditors of the Company with the intent
of defeating, hindering, delaying or defrauding creditors of the Company or
others; and
(g) the Company shall have delivered to the Trustee Officer's Certificates
and an Opinion of Counsel, each stating that all conditions precedent provided
for relating to either the Legal Defeasance under Section 12.02 or the Covenant
Defeasance under Section 12.03 (as the case may be) have been complied with as
contemplated by this Section 12.04.
SECTION 12.05. Deposited Money and Government Securities to Be Held in
Trust; Other Miscellaneous Provisions. Subject to Section 12.06, all money and
U.S. Government Obligations (including the proceeds thereof) deposited with the
Trustee pursuant to Section 12.04 in respect of the Outstanding Notes shall be
held in trust and applied by the Trustee, in accordance with the provisions of
such Notes and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as Paying Agent) as the Trustee may
determine, to the Holders of such Notes of all sums due and to become due
thereon in respect of Accreted Value and interest, if any, but such money need
not be segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the money or U.S. Government
Obligations deposited pursuant to Section 12.04 hereof or the Accreted Value and
interest, if any, received in respect thereof other than any such tax, fee or
other charge which by law is for the account of the Holders of the Outstanding
Notes.
Anything in this Article 12 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or U.S. Government Obligations held by it as provided in
Section 12.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
12.04(a) hereof), are in excess of the amount thereof
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<PAGE> 53
which would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
SECTION 12.06. Repayment to Company. Any money deposited with the Trustee
or any Paying Agent, or then held by the Company, in trust for the payment of
the Accreted Value of or interest, if any, on any Note and remaining unclaimed
for two years after such Accreted Value or interest, if any, has become due and
payable shall be paid to the Company on its written request or (if then held by
the Company) shall be discharged from such trust; and the Holder of such Note
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in The New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to the Company.
SECTION 12.07. Reinstatement. If the Trustee or Paying Agent is unable to
apply any money or U.S. Government Obligations in accordance with Section 12.02
or 12.03, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the obligations of the Company under this Indenture and the
Notes shall be revived and reinstated as though no deposit had occurred pursuant
to Section 12.02 or 12.03 until such time as the Trustee or Paying Agent is
permitted to apply all such amounts in accordance with Section 12.02 or 12.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of Accreted Value of or interest, if any, on any Note following the
reinstatement of its Obligations, the Company shall be subrogated to the rights
of the Holder of such Note to receive such payment from the amounts held by the
Trustee or Paying Agent.
ARTICLE 13
SUBORDINATION
SECTION 13.01. Agreement to Subordinate. The Company agrees, and each
Holder by accepting a Note agrees, any provision of this Indenture or the Note
to the contrary notwithstanding, that all obligations owed under and in respect
of the Notes are subordinated in right of payment, to the extent and in the
manner provided in this Article 13, to the prior payment in full of all Senior
Indebtedness of the Company, and that the subordination of the Notes pursuant to
this Article 13 is for the benefit of all holders of all Senior Indebtedness of
the Company whether outstanding on the Closing Date or incurred thereafter. For
purposes of this Article, "payment in full", as used with respect to Senior
Indebtedness, means the payment in full of cash to the Holders of such Senior
Indebtedness.
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<PAGE> 54
SECTION 13.02. Liquidation; Dissolution; Bankruptcy. Upon any payment or
distribution of the assets of the Company upon a total or partial liquidation or
dissolution or reorganization of or similar proceeding relating to the Company
or its property, the holders of Senior Indebtedness of the Company will be
entitled to receive payment in full of such Senior Indebtedness before the
Noteholders are entitled to receive any payment from the Company, and until such
Senior Indebtedness is paid in full, any payment or distribution to which
Noteholders would be entitled but for the subordination provisions of the
Indenture will be made to holders of such Senior Indebtedness as their interests
may appear except that Noteholders may receive shares of stock (other than any
shares of stock which, by their terms or the terms of any security into which
they are convertible or for which they are exchangeable, or upon the happening
of any event, mature or are mandatorily redeemable or are redeemable at the
option of the holder thereof, in whole or in part) and any debt securities that
are subordinated to such Senior Indebtedness to at least the same extent as the
Notes; provided that such stock and debt securities are provided for by a plan
of reorganization or readjustment authorized by an order or decree of a court of
competent jurisdiction in a reorganization proceeding under any applicable
bankruptcy, insolvency or other similar law. If a distribution is made to
Noteholders that, due to the subordination provisions, should not have been made
to them, such Noteholders are required to hold it in trust for the holders of
the relevant Senior Indebtedness and pay it over to them to the extent due and
payable to the them.
SECTION 13.03. Default on Designated Senior Indebtedness. (a) No direct or
indirect payment, deposit or distribution of any kind or character, whether in
cash, property or securities (including any payment made to the Holders under
the terms of Indebtedness subordinated to the Notes), may be made by set-off or
otherwise, by or on behalf of the Company of Accreted Value of or interest (if
any) on, or any other obligation in respect of, the Notes, whether pursuant to
the terms of the Notes by way of repurchase, redemption, defeasance or otherwise
(the making of all such payments, deposits and distributions being referred to
herein, individually and collectively, as to, "PAY THE NOTES") if any Designated
Senior Indebtedness of the Company is not paid when due, whether at maturity, on
account of mandatory redemption or prepayment, acceleration or otherwise, unless
the default has been cured or waived and any acceleration resulting therefrom
has been rescinded or such Designated Senior Indebtedness has been paid in full.
However, the Company may pay the Notes without regard to the foregoing if it and
the Trustee receive written notice approving such payment from the
Representative of the Designated Senior Indebtedness with respect to which the
events set forth in the immediately preceding sentence have occurred and is
continuing. During the continuance of any default (other than a default
described in the second preceding sentence) with respect to any Designated
Senior Indebtedness of the Company pursuant to which the maturity thereof may be
accelerated immediately without further notice (except such notice as may be
required to effect such acceleration) or upon the expiration of any applicable
grace periods, the Company may not pay the Notes for a period (a "PAYMENT
BLOCKAGE PERIOD") commencing upon the receipt by the Trustee (with a copy to the
Company) of written notice (a "BLOCKAGE NOTICE") of such default from the
Representative of the holders of such Designated Senior Indebtedness specifying
an election to effect a Payment Blockage Period and ending 179 days thereafter
(or earlier if such Payment Blockage Period is terminated (i) by written notice
to the Trustee and the Company from the Person or Persons who gave such Blockage
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<PAGE> 55
Notice, (ii) because the default giving rise to such Blockage Notice is no
longer continuing or (iii) because such Designated Senior Indebtedness has been
repaid in full). Notwithstanding the provisions described in the immediately
preceding sentence (but subject to the provisions described in the first
sentence of this Section 13.03), unless the holders of such Designated Senior
Indebtedness or the Representative of such holders have accelerated the maturity
of such Designated Senior Indebtedness, the Company may resume payments on the
Notes after the end of such Payment Blockage Period. The Notes shall not be
subject to more than one Payment Blockage Period in any consecutive 360-day
period, irrespective of the number of defaults with respect to Designated Senior
Indebtedness during such period.
To the extent any payment of Senior Indebtedness (whether by or on behalf
of the Company, as proceeds of security or enforcement of any right of setoff or
otherwise) is declared to be fraudulent or preferential, set aside or required
to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or
other similar Person under any bankruptcy, insolvency, receivership, fraudulent
conveyance or similar law, then if such payment is recovered by, or paid over
to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar Person, the Senior Indebtedness or part thereof originally intended to
be satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred. To the extent the obligation to repay any Senior Indebtedness
is declared to be fraudulent, invalid, or otherwise set aside under any
bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then
the obligation so declared fraudulent, invalid or otherwise set aside (and all
other amounts that would come due with respect thereto had such obligation not
been so affected) shall be deemed to be reinstated and outstanding as Senior
Indebtedness for all purposes hereof as if such declaration, invalidity or
setting aside had not occurred.
(b) Notwithstanding anything to the contrary in Section 13.02 or this
Section 13.03, Holders may continue to receive payments from any trust
established pursuant to Section 12.04 prior to occurrence of an event
prohibiting payment of or on the Notes.
SECTION 13.04. When Distributions Must Be Paid Over. If the Company shall
make any payment to the Trustee on account of the Accreted Value of or interest,
if any, on, the Notes, or the Holders shall receive from any source any payment
on account of the Accreted Value of or interest, if any, on, the Notes or any
obligation in respect of the Notes, at a time when such payment is prohibited by
this Article 13, the Trustee or such Holders shall hold such payment in trust
for the benefit of, and shall pay over and deliver to, the holders of the Senior
Indebtedness of the Company (pro rata as to each of such holders on the basis of
the respective amounts of such Senior Indebtedness held by them) or their
Representative, to the extent due and payable to them, for application to the
payment of all outstanding Senior Indebtedness of the Company until all such
Senior Indebtedness has been paid in full, after giving effect to all other
payments or distributions to, or provisions made for, the holders of Senior
Indebtedness of the Company.
With respect to the holders of Senior Indebtedness of the Company, the
Trustee undertakes to perform only such obligations on its part as are
specifically set forth in this Article 13, and no implied covenants or
obligations with respect to any holders of the
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<PAGE> 56
Senior Indebtedness of the Company shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of the Senior Indebtedness of the Company, and shall not be liable to
any holders of such Senior Indebtedness if the Trustee shall pay over or
distribute to, or on behalf of, Holders, the Company or any other Person, money
or assets to which any holders of such Senior Indebtedness are entitled pursuant
to this Article 13, except if such payment is made at a time when a Responsible
Officer has actual knowledge that the terms of this Article 13 prohibit such
payment.
SECTION 13.05. Notice. Neither the Trustee nor the Paying Agent shall at
any time be charged with the knowledge of the existence of any facts that would
prohibit the making of any payment to or by the Trustee or Paying Agent under
this Article 13 unless and until the Trustee or Paying Agent shall have received
written notice thereof from the Company or one or more holders of the Senior
Indebtedness of the Company or a representative of any holders of such Senior
Indebtedness; and, prior to the receipt of any such written notice, the Trustee
or Paying Agent shall be entitled to assume conclusively that no such facts
exist; provided that if a Responsible Officer of the Trustee shall not have
received the notice provided for in this Section 13.05 at least one Business Day
prior to the date such payment is due pursuant to the terms hereof, then,
notwithstanding anything herein to the contrary, the Trustee shall have full
power and authority to make such payment and shall not be affected by any notice
to the contrary which may be received by it within one Business Day prior to
such date (it being understood that nothing contained in this Section 13.05
shall limit the rights of the holders of the Senior Indebtedness of the Company
to recover any payment pursuant to Section 13.04). The Trustee shall be entitled
to rely on the delivery to it of written notice by a Person representing itself
to be a holder of the Senior Indebtedness of the Company (or a Representative
thereof) to establish that such notice has been given. In the event that the
Trustee determines in good faith that further evidence is required with respect
to the right of any person as a holder of Senior Indebtedness of the Company to
participate in any payment or distribution pursuant to this Article, the Trustee
may request such person to furnish evidence to the reasonable satisfaction of
the Trustee as to the amount of such Senior Indebtedness held by such person,
the extent to which such person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such person under
this Article, and if such evidence is not furnished, the Trustee may defer any
payment which it may be required to make for the benefit of such person pursuant
to the terms of this Indenture pending judicial determination as to the rights
of such person to receive such payment.
The Company shall promptly notify the Trustee and the Paying Agent in
writing of any facts it knows that would cause a payment of Accreted Value of or
interest, if any, on, the Notes or any other obligation in respect of the Notes
to violate this Article 13, but failure to give such notice shall not affect the
subordination of the Notes to the Senior Indebtedness of the Company provided in
this Article 13 or the rights of holders of such Senior Indebtedness under this
Article 13.
SECTION 13.06. Subrogation. After all Senior Indebtedness of the Company
has been paid in full and until the Notes are paid in full, Holders shall be
subrogated (equally and ratably with all other Indebtedness pari passu with the
Notes) to the rights of holders
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<PAGE> 57
of such Senior Indebtedness to receive distributions applicable to such Senior
Indebtedness to the extent that distributions otherwise payable to the Holders
have been applied to the payment of such Senior Indebtedness. A distribution
made under this Article 13 to holders of the Senior Indebtedness of the Company
that otherwise would have been made to Holders is not, as between the Company
and the Holders, a payment by the Company on its Senior Indebtedness.
SECTION 13.07. Relative Rights. This Article 13 defines the relative rights
of Holders and holders of the Senior Indebtedness of the Company. Nothing in
this Indenture shall: (1) impair, as between the Company and Holders, the
obligations of the Company, which are absolute and unconditional, to pay
Accreted Value of and interest, if any, on the Notes in accordance with their
terms; or (2) affect the relative rights of Holders and the creditors of the
Company other than their rights in relation to holders of the Senior
Indebtedness of the Company.
SECTION 13.08. The Company and Holders May Not Impair Subordination. (a) No
right of any holder of the Senior Indebtedness of the Company to enforce the
subordination as provided in this Article 13 shall at any time or in any way be
prejudiced or impaired by any act or failure to act by the Company or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture or the Notes or any other agreement regardless of any knowledge
thereof with which any such holder may have or be otherwise charged.
(b) Without in any way limiting Section 13.08(a), the holders of any Senior
Indebtedness of the Company may, at any time and from time to time to the extent
not otherwise prohibited by this Indenture, without the consent of or notice to
any Holders, without incurring any liabilities to any Holder and without
impairing or releasing the subordination and other benefits provided in this
Indenture or the Holders' obligations to the holders of such Senior
Indebtedness, even if any Holder's right of reimbursement or subrogation or
other right or remedy is affected, impaired or extinguished thereby, do any one
or more of the following: (i) amend, renew, exchange, extend, modify, increase
or supplement in any manner such Senior Indebtedness or any instrument
evidencing or guaranteeing or securing such Senior Indebtedness or any agreement
under which such Senior Indebtedness is outstanding (including, but not limited
to, changing the manner, place or terms of payment or changing or extending the
time of payment of, or renewing, exchanging, amending, increasing or altering,
(A) the terms of such Senior Indebtedness, (B) any security for, or any
guarantee of, such Senior Indebtedness, (C) any liability of any obligor on such
Senior Indebtedness (including any guarantor) or any liability incurred in
respect of such Senior Indebtedness); (ii) sell, exchange, release, surrender,
realize upon, enforce or otherwise deal with in any manner and in any order any
property pledged, mortgaged or otherwise securing such Senior Indebtedness or
any liability of any obligor thereon, to such holder, or any liability incurred
in respect thereof; (iii) settle or compromise any such Senior Indebtedness or
any other liability of any obligor of such Senior Indebtedness to such holder or
any security therefor or any liability incurred in respect thereof and apply any
sums by whomsoever paid and however realized to any liability (including,
without limitation, payment of any of the Senior Indebtedness of the Company) in
any manner or order; and (iv) fail to take or to record or otherwise perfect,
for any reason or for no reason, any lien or security interest securing such
Senior
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<PAGE> 58
Indebtedness by whomsoever granted, exercise or delay in or refrain from
exercising any right or remedy against any obligor or any guarantor or any other
Person, elect any remedy and otherwise deal freely with any obligor and any
security for such Senior Indebtedness or any liability of any obligor to the
holders of such Senior Indebtedness or any liability incurred in respect of such
Senior Indebtedness.
(c) Each Holder by accepting a Note agrees not to compromise, release,
forgive or otherwise discharge the obligations with respect to such Holder's
Note unless holders of a majority of the outstanding amount of each class of
Senior Indebtedness of the Company consent to such compromise, release,
forgiveness or discharge.
SECTION 13.09. Distribution or Notice to Representative. Whenever a
distribution is to be made, or a notice given, to holders of Senior Indebtedness
of the Company, the distribution may be made and the notice given to their
Representative, if any. If any payment or distribution of the assets of the
Company is required to be made to holders of any of the Senior Indebtedness of
the Company pursuant to this Article 13, the Trustee and the Holders shall be
entitled to rely upon any order or decree of any court of competent
jurisdiction, or upon any certificate of a representative of such Senior
Indebtedness or a custodian, in ascertaining the holders of such Senior
Indebtedness entitled to participate in any such payment or distribution, the
amount to be paid or distributed to holders of such Senior Indebtedness and all
other facts pertinent to such payment or distribution or to this Article 13.
SECTION 13.10. Rights of Trustee and Paying Agent. The Trustee or Paying
Agent may continue to make payments on the Notes unless prior to any payment
date it has received written notice of facts that would cause a payment of
Accreted Value of or interest, if any, on, the Notes to violate this Article 13.
Only the Company, a Representative of Senior Indebtedness of the Company, or a
holder of Senior Indebtedness of the Company that has no Representative may give
such notice.
To the extent permitted by the TIA, the Trustee in its individual or any
other capacity may hold Indebtedness of the Company (including Senior
Indebtedness) with the same rights it would have if it were not Trustee. Any
agent of the Trustee may do the same with like rights.
Nothing in this Article 13 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.07.
SECTION 13.11. Authorization to Effect Subordination. Each Holder by its
acceptance thereof authorizes and directs the Trustee on its behalf to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in this Article 13, and appoints the Trustee as such Holder's
attorney-in-fact for any and all such purposes (including, without limitation,
the timely filing of a claim for the unpaid balance of the Note that such Holder
holds in the form required in any insolvency or liquidation proceeding and
causing such claim to be approved).
If a proper claim or proof of debt in the form required in such proceeding
is not filed by or on behalf of all Holders prior to 30 days before the
expiration of the time to
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<PAGE> 59
file such claims or proofs, then the holders or a Representative of any Senior
Indebtedness of the Company is hereby authorized, and shall have the right
(without any duty), to file an appropriate claim for and on behalf of the
Holders.
SECTION 13.12. Payment. A payment on account of or with respect to any Note
shall include, without limitation, Accreted Value or interest, if any, with
respect to or in connection with any optional redemption or purchase provisions,
any direct or indirect payment payable by reason of any other Indebtedness or
obligation being subordinated to the Notes, and any direct or indirect payment
or recovery on any claim as a Holder relating to or arising out of this
Indenture or any Note, or the issuance of any Note, or the transactions
contemplated by this Indenture or referred to herein.
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<PAGE> 60
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
THERMADYNE MFG. LLC, as Issuer
By:
--------------------------------------
Name:
Title:
[TRUSTEE], as Trustee
By:
--------------------------------------
Name:
Title:
<PAGE> 61
EXHIBIT A
[FORM OF ORIGINAL NOTE]
THERMADYNE MFG. LLC
Junior Subordinated Note due 2009
No.________
Initial Accreted Value
$
-------------
THERMADYNE MFG. LLC, a Delaware limited liability company (the "COMPANY") which
term includes any successor Persons under the Indenture hereinafter referred
to), for value received, promises to pay to __________, or its registered
assigns, the Accreted Value (as defined below) of this Note, on December 15,
2009.
"ACCRETED VALUE" means with respect to this Note, as of any date of
determination, the sum of: (a) the Accreted Value of such Note on the
immediately preceding Interest Payment Date (in the event such date of
determination falls before the first Interest Payment Date, the "Initial
Accreted Value" specified above) plus (b) an amount determined by multiplying
(i) the amount referred to in clause (a) by (ii) 15% (provided that the
accretion rate applicable to any period or portion of a period during which no
interest accrues that occurs after December 15, 2004 shall be 16%) by (iii) the
number of days in the period from and including the preceding Interest Payment
Date to such date of determination divided by 360, less (c) any interest that
accrues with respect to such period in accordance with the terms of the Note.
Interest Rate:
Prior to December 15, 2004, unless a Cash Payment Notice (as defined below)
is properly delivered by the Company, no interest shall accrue or be
payable with respect to the Notes. If the Company elects to pay interest on
any Interest Payment Date prior to December 15, 2004, the Company shall
give written notice (each such notice a "CASH PAYMENT NOTICE") of such
election to Holders five business days prior to the immediately preceding
Interest Payment Date. Commencing on such immediately preceding Interest
Payment Date until such Interest Payment Date for which a Cash Payment
Notice has been properly delivered, interest will accrue and be payable at
a rate of 15% per annum to Holders of record of the Notes at the close of
business on the Regular Record Date immediately preceding the Interest
Payment Date for which such Cash Payment Notice has been properly
delivered, whether or not a Business Day.
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<PAGE> 62
Failure to pay interest after proper delivery of a Cash Payment Notice for
any reason shall not constitute a breach of this Note or the Indenture and
the Accreted Value shall be determined as if such Cash Payment Notice had
not been delivered. On or after December 15, 2004 interest will accrue and
be payable at a rate of 15% per annum on each Interest Payment Date to
Holders of record of the Notes at the close of business on the immediately
preceding Regular Record Date; provided, that if and for so long as payment
of interest on the Notes is prohibited under the terms of the Credit
Agreement (as defined in the Indenture) interest shall not accrue or be
payable with respect to the Notes.
Interest Payment Dates: March 15, June 15, September 15
and December 15 of each year.
Regular Record Dates: March 1, June 1, September 1
and December 1 of each year.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
A-2
<PAGE> 63
IN WITNESS WHEREOF, the Company has caused this Note to be signed manually
or by facsimile by its duly authorized officers.
Date:
------------------
THERMADYNE MFG. LLC, as Issuer
By:
--------------------------------------
Name:
Title:
A-3
<PAGE> 64
(Form of Trustee's Certificate of Authentication)
This is one of the Junior Subordinated Notes due 2009 referred to in the
within-mentioned Indenture.
[TRUSTEE], as Trustee
Dated: By:
----------------------------- --------------------------------------
Authorized Signatory
A-4
<PAGE> 65
[REVERSE SIDE OF NOTE]
THERMADYNE MFG. LLC
Junior Subordinated Note due 2009
This Note is one of a duly authorized issue of Notes of the Company
consisting of other Junior Subordinated Notes due 2009 of the Company issued on
December 22, 1999 and any replacement Notes issued in exchange for, or in lieu
of, the foregoing in accordance with the Indenture. The Notes are limited in
aggregate principal at maturity to the Accreted Value attributable to
$25,000,000. All of such Notes shall be treated as a single issue and vote
together as one class for all purposes of this Note and the Indenture.
(1) Accreted Value and Interest; Subordination. The Company agrees to pay
the Accreted Value of this Note on December 15, 2009.
The Company agrees to pay interest on the Accreted Value of this Note at
the rate and in the manner specified below.
"ACCRETED VALUE" means with respect to this Note, as of any date of
determination, the sum of: (a) the Accreted Value of such Note on the
immediately preceding Interest Payment Date (in the event such date of
determination falls before the first Interest Payment Date, the "Initial
Accreted Value" specified on the face hereof) plus (b) an amount determined by
multiplying (i) the amount referred to in clause (a) by (ii) 15% (provided that
the accretion rate applicable to any period or portion of a period during which
no interest accrues that occurs after December 15, 2004 shall be 16%) by (iii)
the number of days in the period from and including the preceding Interest
Payment Date to such date of determination divided by 360, less (c) any interest
that accrues with respect to such period in accordance with the terms of the
Note.
Interest Rate:
Prior to December 15, 2004, unless a Cash Payment Notice (as defined below)
is properly delivered by the Company, no interest shall accrue or be
payable with respect to the Notes. If the Company elects to pay interest on
any Interest Payment Date prior to December 15, 2004, the Company shall
give written notice (each such notice a "CASH PAYMENT NOTICE") of such
election to Holders five business days prior to the immediately preceding
Interest Payment Date. Commencing on such immediately preceding Interest
Payment Date until such Interest Payment Date for which a Cash Payment
Notice has been properly delivered, interest will accrue and be payable at
a rate of 15% per annum to Holders of record of the Notes at the close of
business on the Regular Record Date immediately preceding such Interest
Payment Date for which a Cash Payment Notice has been properly delivered,
whether or not a Business Day. Failure to pay interest after proper
delivery of a Cash Payment Notice for any reason shall not constitute a
breach of this Note or the Indenture and the
A-5
<PAGE> 66
Accreted Value shall be determined as if such Cash Payment Notice had not
been delivered. On or after December 15, 2004 interest will accrue and be
payable at a rate of 15% per annum on each Interest Payment Date to Holders
of record of the Notes at the close of business on the immediately
preceding Regular Record Date; provided, that if and for so long as payment
of interest on the Notes is prohibited under the terms of the Credit
Agreement (as defined in the Indenture) interest shall not accrue or be
payable with respect to the Notes.
The Holder of this Note is entitled to the benefits of the Registration
Rights Agreement, dated as of December 22, 1999, among the Company and the
buyers party thereto (the "Registration Rights Agreement").
Interest on this Note will accrue as and to the extent set forth above;
provided that, after December 15, 2004 if there is no failure or delay in the
payment of interest and if this Note is authenticated between a Regular Record
Date and the next succeeding Interest Payment Date, interest shall accrue from
such Interest Payment Date. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
The Company shall pay interest on overdue payments of interest and Accreted
Value, to the extent lawful, at a rate per annum equal to 1% per annum in excess
of the rate of interest applicable to the Notes.
The indebtedness evidenced by the Notes is, to the extent and in the manner
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full of all Senior Indebtedness and all Senior Subordinated
Indebtedness, and this Note is issued subject to such provisions. Each Holder of
this Note, by accepting the same, agrees to and shall be bound by such
provisions and agrees to take such action as may be necessary or appropriate to
effectuate the subordination as provided in the Indenture.
(2) Method of Payment. The Company will pay interest on the Notes on each
Interest Payment Date for which interest is to be paid to the Persons who are
Holders (as reflected in the Register at the close of business on the Regular
Record Date immediately preceding the Interest Payment Date), in each case, even
if the Note is canceled on registration of transfer or registration of exchange
after such Regular Record Date; provided that, with respect to the payment of
Accreted Value at maturity, the Company will make payment to the Holder that
surrenders this Note to any Paying Agent (which is initially the Company) on or
after December 15, 2009.
The Company will make all payments hereunder in money of the United States
that at the time of payment is legal tender for payment of public and private
debts. The Company will make all payments hereunder by wire transfer of
immediately available funds to the accounts specified by the Holder hereof or,
if no such account is specified, by mailing a check to the Holder's registered
address. If a payment date is a date other than a Business Day, payment may be
made at that place on the next succeeding day that is a Business Day and no
interest shall accrue for the intervening period.
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<PAGE> 67
(3) Paying Agent and Registrar. Initially, the Trustee will act as Paying
Agent and Registrar. The Company may change any Paying Agent or Registrar upon
written notice thereto. The Company, any Subsidiary or any Affiliate of any of
them may act as Paying Agent, Registrar or co-registrar.
(4) Indenture; Limitations. The Company issued the Notes under an Indenture
dated as of ______________, _____ (the "INDENTURE"), among the Company and
[__________], as trustee (the "TRUSTEE"). Capitalized terms herein are used as
defined in the Indenture unless otherwise indicated. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (the "TIA"). The Notes are subject
to all such terms and Holders are referred to the Indenture and the TIA for a
statement of all such terms. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Note and the terms of the
Indenture, the terms of the Indenture shall control.
The Notes are unsecured junior subordinated obligations of the Company.
(5) Optional Redemption. The Notes may be redeemed at the option of the
Company, in whole, at any time and from time to time, on and prior to maturity
at the following Redemption Prices (expressed in percentages of the Accreted
Value thereof on the relevant Redemption Date), plus accrued and unpaid
interest, if any, to the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date to receive interest due on the
relevant Interest Payment Date); provided that the Company shall not optionally
redeem any Notes except and to the extent permitted by the Credit Agreement,
(a) if redeemed prior to December 15, 2004 at a redemption price equal
to 115% of the Accreted Value of the Notes; and
(b) if redeemed during the 12-month period commencing December 15 of
each of the years set forth below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
<S> <C>
2004............................ 107.5%
2005............................ 105.0%
2006............................ 102.5%
2007 and thereafter............. 100%
</TABLE>
Notice of a redemption will be mailed, first-class postage prepaid, at
least 30 days but not more than 60 days before the Redemption Date to each
Holder's registered address. On and after the Redemption Date, interest ceases
to accrue on, and the Accreted Value shall cease to increase with respect to,
Notes or portions of Notes called for redemption, unless the Company defaults in
the payment of the Redemption Price.
A-7
<PAGE> 68
(6) Repurchase upon a Change in Control. Upon the occurrence of a Change in
Control, each Holder shall have the right to require that the Company repurchase
such Holder's Notes at a purchase price in cash equal to 101% of the Accreted
Value thereof on the date of purchase, plus, if applicable, accrued and unpaid
interest, if any, to the date of purchase (subject to the right of Holders of
record on the relevant Regular Record Date to receive interest due on the
relevant Interest Payment Date); provided, that the Company shall not be
required to repurchase Notes upon a Change of Control if the Company is unable
to obtain all necessary consents under the Credit Agreement for such repurchase.
(7) Denominations; Transfer; Exchange. The Notes are in fully registered
form without coupons, in denominations of $1,000 and any integral multiples of
$1,000. A Holder may register the transfer or exchange of Notes in accordance
with the Indenture. The Company may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture.
(8) Persons Deemed Owners. A Holder may be treated as the owner of a Note
for all purposes.
(9) Discharge Prior to Redemption or Maturity. If the Company irrevocably
deposits, or causes to be deposited, with a trustee who could qualify to serve
as Trustee under the Indenture money or U.S. Government Obligations sufficient
to pay the then outstanding Accreted Value of, and accrued interest, if any, on
the Notes (a) to redemption or maturity, the Company will be discharged from the
Indenture and the Notes, except in certain circumstances for certain sections
thereof, and (b) to redemption or maturity, the Company will be discharged from
certain covenants set forth in the Indenture.
(10) Amendment; Supplement; Waiver. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in aggregate Accreted Value of the Notes then
Outstanding. Without notice to or the consent of any Holder, the Company may
amend the Indenture or the Notes to the extent set forth in the Indenture.
(11) Restrictive Covenants. The Indenture contains certain covenants,
including, without limitation, covenants with respect to the following matters:
(i) redemption of or payments on Junior Securities and Parity Securities; (ii)
dividends on Junior Securities; (iii) transactions with Affiliates; and (iv)
repurchase of Notes upon a Change in Control. Within 120 days after the end of
each fiscal year, the Company must report to the Holders on compliance with such
limitations.
(12) Voting. The Subscription Agreement dated as of December 22, 1999
relating to the initial purchase of this Note provides that in the event that
after December 15, 2004 the Company does not pay interest in cash on four
consecutive Interest Payment Dates or on six Interest Payment Dates, the
Principal and its affiliates who are signatories to the Subscription Agreement
shall cause, to the extent that they shall have the power to so cause, two
members selected by the Holders of a majority of
A-8
<PAGE> 69
the Accreted Value of the Notes, voting as a single class, to be elected to the
Board of Directors of Parent. Further, the Principal and such affiliates shall
cause, to the extent that they shall have the power to so cause, such directors
to serve on the Board of Directors until such time as the Company pays interest
in cash on four consecutive Interest Payment Dates following their election.
(13) Successor Persons. When a successor person or other entity (other than
a Subsidiary of the Company) assumes all the obligations of its predecessor
under the Notes and the Indenture, the predecessor person will be released from
those obligations.
(14) Trustee Dealings with Company. The Trustee under the Indenture, in its
individual or any other capacity, may become the owner or pledgee of Notes and
may make loans to, accept deposits from, perform services for, and otherwise
deal with, the Company and its Affiliates as if it were not the Trustee.
(15) Authentication. This Note shall not be valid until the Trustee signs
the certificate of authentication on this Note.
(16) Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts
to Minors Act).
(17) Provisions of Indenture. Each Holder, by accepting a Note, agrees,
subject to Section 1 above to be bound by all of the terms and provisions of the
Indenture, as the same may be amended from time to time.
(18) Notices. Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by commercial courier service, by telex, by telecopier or registered
or certified mail, postage prepaid, return receipt requested, addressed as
follows:
if to the Company:
Thermadyne Holdings Corporation
101 South Hanley Road
St. Louis, Missouri 63105
Facsimile No: (314) 746-2374
(314) 746-2327
Attn: Jim Tate or Stephanie Josephson
A-9
<PAGE> 70
with a copy to:
R. Scott Cohen, Esq.
Weil, Gotshal & Manges LLP
100 Crescent Court
Suite 1300
Dallas, TX 75201-6950
Facsimile No: (214) 746-7777
Any notice required to be given to a Holder shall be deemed to have been
given upon the mailing by first class mail, postage prepaid, of such notices to
Holders at their registered address as recorded in the Register and shall be
sufficiently given to a Holder if so mailed within the time prescribed.
In any case where notice to Holders is given by mail, neither the failure
to mail such notice nor any defect in any notice so mailed to any particular
Holder shall affect the sufficiency of such notice with respect to other
Holders. If a notice or communication is mailed in the manner provided above, it
is duly given, whether or not the addressee receives it.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to the Company.
A-10
<PAGE> 71
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- --------------------------------------------------------------------------------
(Please print or typewrite name and address including zip code of assignee)
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
- --------------------------------------------------------------------------------
attorney to transfer such Note on the books of the Company with full power of
substitution in the premises.
A-11
<PAGE> 72
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES BEARING A PRIVATE PLACEMENT LEGEND]
In connection with any transfer of this Note occurring prior to the Resale
Restriction Termination Date for this Note, the undersigned confirms that
without utilizing any general solicitation or general advertising that:
Check One
(a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act of 1933, as amended, provided by Rule 144A
thereunder.
or
(b) this Note is being transferred other than in accordance with (a) above
and documents are being furnished which comply with the conditions of transfer
set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Registrar
shall not be obligated to register this Note in the name of any Person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 3.10 of the Indenture shall have
been satisfied.
Date:
-----------------------------
- ----------------------------------
NOTICE: The signature to this assignment must
correspond with the name as written upon the face
of the within-mentioned instrument in every
particular, without alteration or any change
whatsoever.
Signature Guarantee:
---------------------------------------
Signatures must be guaranteed by an "ELIGIBLE GUARANTOR INSTITUTION"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "SIGNATURE GUARANTEE PROGRAM" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Note for
its own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a "QUALIFIED INSTITUTIONAL BUYER"
within the meaning
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<PAGE> 73
of Rule 144A under the Securities Act of 1933, as amended, and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as the undersigned has requested
pursuant to Rule 144A or has determined not to request such information and that
it is aware that the transferor is relying upon the undersigned's foregoing
representations in order to claim the exemption from registration provided by
Rule 144A.
Dated:
------------------------
- ---------------------------------------
To be executed by an executive officer
A-13
<PAGE> 74
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to Section
4.10 of the Indenture, check the box: |_|
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.10 of the Indenture, state the amount (in Accreted Value)
below:
$ .
---------------------
Date:
-----------------
Your Signature:
-----------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
-------------------------------------
Signatures must be guaranteed by an "ELIGIBLE GUARANTOR INSTITUTION"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "SIGNATURE GUARANTEE PROGRAM" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
A-14
<PAGE> 75
EXHIBIT B
Form of Certificate to be Delivered
in Connection with Transfers
Pursuant to Regulation S
--------------------------------------------
---------, ----
[Trustee]
Attention: Corporate Trust Administration
Re: Thermadyne Mfg. LLC
Junior Subordinated Notes due 2009 (the "Notes")
Dear Sirs:
In connection with our proposed sale of U.S.$________ aggregate Accreted
Value of the Notes as of __________________, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the Securities
Act of 1933, as amended, and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United States;
(2) at the time the buy order was originated, the transferee was outside
the United States or we and any person acting on our behalf reasonably believed
that the transferee was outside the United States;
(3) no directed selling efforts have been made by us in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation
S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act of 1933.
B-1
<PAGE> 76
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
--------------------------------------
Authorized Signatory
B-2
<PAGE> 77
EXHIBIT C
FORM OF ACCREDITED INVESTOR CERTIFICATE
TRANSFEREE LETTER OF REPRESENTATION
[Trustee]
Attention: Corporate Trust Administration
Ladies and Gentlemen:
In connection with our proposed purchase of $[ ] aggregate Accreted Value
as of ____________ of the Junior Subordinated Notes due 2009 (the "NOTES") of
Thermadyne Mfg. LLC (the "COMPANY"), we confirm that:
1. We are an institutional "ACCREDITED INVESTOR" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), purchasing for our own account or for the
account of such an institutional "ACCREDITED INVESTOR" as to which we exercise
sole investment discretion, and we have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of our investment in the Notes, and we and any account for which we are
acting are each able to bear the economic risk of our or its investment.
2. We understand and acknowledge that the Notes have not been registered
under the Securities Act or any other applicable securities law, and that the
Notes may not be offered or sold except as permitted in the following sentence.
We agree, on our own behalf and on behalf of any account for which we are
acting, that if we should sell any Notes within the time period referred to in
Rule 144(k) of the Securities Act, we will do so only (A) to the Company or any
subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to
a "QUALIFIED INSTITUTIONAL BUYER" (as defined therein), (C) to an institutional
"ACCREDITED INVESTOR" (as defined above) that, prior to such transfer, furnishes
to the Trustee under the Indenture a signed letter containing certain
representations and agreements relating to the restrictions on transfer of the
Notes (the form of which letter can be obtained from the Trustee) and, if such
transfer is in respect of an aggregate Accreted Value of less than $100,000, an
opinion of counsel acceptable to the Company that such transfer is in compliance
with the Securities Act, (D) outside the Untied States in accordance with Rule
904 of Regulation S under the Securities Act, (E) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available) or (F)
pursuant to an effective registration statement under the Securities Act, and we
further agree to provide to any person purchasing any of the Notes from us a
notice advising such purchaser that resales of the Notes are restricted as
stated herein.
3. We understand that, on any proposed resale of any Notes, we will be
required to furnish to the Company and the Trustee such certifications, legal
opinions and other information as the Company and the Trustee may reasonably
require to
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<PAGE> 78
confirm that the proposed sale complies with the foregoing restrictions. We
further understand that the Notes purchased by us will bear a legend to the
foregoing effect.
4. We are acquiring the Notes for investment purposes and not with a view
to distribution thereof or with any present intention of offering or selling any
Notes, except as permitted above; provided that the disposition of our property
and property of any accounts for which we are acting as fiduciary will remain at
all times within our control.
You and the Company are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereto to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
THIS LETTER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PRINCIPLES THEREOF, OTHER THAN ANY MANDATING THE APPLICATION OF SUCH LAWS).
Very truly yours,
(Name of Purchaser)
By:
--------------------------------------
Name:
Title:
Date:
------------------------------------
Upon transfer, the Notes would be registered in the name of the new owner
as follows:
By:
--------------------------------
Date:
------------------------------
Taxpayer ID number:
----------------
C-2
<PAGE> 1
EXHIBIT 10.29
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of November 10, 1999
(this "First Amendment"), is among Thermadyne Mfg. LLC, a Delaware limited
liability company (the "Company"), Comweld Group Pty. Ltd. (the "Initial
Australian Borrower"), GenSet S.p.A. (the "Initial Italian Borrower"),
Thermadyne Welding Products Canada Limited (the "Initial Canadian Borrower"),
the various financial institutions listed on the signature pages hereto
(collectively, the "Lenders"), DLJ Capital Funding, Inc. ("DLJ"), as syndication
agent for the Lenders (the "Syndication Agent"), Societe Generale, as
documentation agent for the Lenders (the "Documentation Agent"), and ABN AMRO
Bank N.V. ("ABN AMRO"), as administrative agent for the Lenders (the
"Administrative Agent"; the Syndication Agent and the Administrative Agent are
sometimes referred to herein as the "Agents" and each as an "Agent").
WITNESSETH:
WHEREAS, the Borrowers, the Lenders, the Syndication Agent, the
Administrative Agent and the Documentation Agent are parties to a Credit
Agreement, dated as of May 22, 1998 (as heretofore amended, waived or modified,
the "Existing Credit Agreement"); and
WHEREAS, the Borrowers have requested that the Required Lenders amend the
Existing Credit Agreement in certain respects to, among other things, allow the
Company to restructure certain of its and its Subsidiaries' manufacturing
operations, including the establishment of certain new Foreign Subsidiaries and
the relocation of such operations to locations in Mexico and Asia; and
WHEREAS, the Required Lenders have agreed, subject to the terms and
conditions hereinafter set forth, to so amend the Existing Credit Agreement as
set forth below (the Existing Credit Agreement, as so amended by this First
Amendment, being referred to as the "Credit Agreement");
NOW, THEREFORE, in consideration of the agreements herein contained, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
<PAGE> 2
PART I
DEFINITIONS
SUBPART 1.1. Certain Definitions. Unless otherwise defined herein or the
context otherwise requires, terms used in this First Amendment, including its
preamble and recitals, have the following meanings (such meanings to be equally
applicable to the singular and plural forms thereof):
"Credit Agreement" is defined in the third recital.
"Existing Credit Agreement" is defined in the first recital.
SUBPART 1.2. Other Definitions. Unless otherwise defined herein or the
context otherwise requires, terms used in this First Amendment, including its
preamble and recitals, have the meanings ascribed thereto in the Existing Credit
Agreement.
PART II
AMENDMENTS TO
THE EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the First Amendment
Effective Date, and in reliance upon the representations and warranties made
herein, the Existing Credit Agreement is hereby amended in accordance with this
Part II. Except as expressly so amended, the Existing Credit Agreement shall
continue in full force and effect in accordance with its terms.
SUBPART 2.1. Amendments to Section 1.1. Section 1.1 of the Existing Credit
Agreement is hereby amended by inserting the following definitions in such
Section in the appropriate alphabetical sequence:
"Asian Relocation" means the closure and/or disposition of certain
manufacturing operations of Duxtech Pty, Ltd. and its Subsidiaries
(collectively, "Cigweld") and the relocation of such operations to Indonesia
and/or Malaysia and shall include the establishment of and transfer of any such
operations to a Foreign Subsidiary in connection therewith.
"Existing Capitalized Lease" means each of those certain domestic
capitalized leases listed on Schedule I hereto for the current term of such
lease, but shall not include any renewal, continuation, extension or replacement
of any such lease.
-2-
<PAGE> 3
"First Amendment" means the First Amendment to the Credit Agreement, dated
as of November 10, 1999, among the Borrowers, the Lenders signatory thereto, and
the Agents.
"First Amendment Effective Date" is defined in Subpart 3.1 of the First
Amendment.
"Junior Subordinated Debt" means junior subordinated debt of the Company
issued pursuant to the New Securities Purchase Agreement, which debt shall have
terms and conditions substantially as set forth in Exhibit A to the First
Amendment and shall have such other terms and conditions and be in a form
satisfactory to the Syndication Agent and the Administrative Agent.
"Mexican Relocation" means the (i) closure and/or disposition of certain
manufacturing operations of the Mexican Relocation Subsidiaries, (ii) formation
of a Mexican corporation that is a wholly owned Subsidiary of Tweco Products,
Inc., (iii) acquisition, development and construction of a manufacturing
facility by such Subsidiary in or near Hermosillo, Mexico, (iv) relocation of
the operations and equipment of Tweco Products, Inc. to such facility, and (v)
other related transactions incidental thereto.
"Mexican Relocation Subsidiaries" means each of Tweco Products, Inc., a
Delaware corporation, and its Subsidiaries.
"New Securities Purchase Agreement" means that certain securities purchase
agreement entered into by and among Holdco, the Company and the purchasers party
thereto, pursuant to which such purchasers agree to purchase (a) (i) Junior
Subordinated Debt or (ii) with the consent of the Administrative Agent and the
Syndication Agent, preferred and/or common stock of a corporate holding company
parent of the Company (such holding company to be formed on terms and conditions
satisfactory to the Administrative Agent and the Syndication Agent), and (b) New
Warrants, which purchase shall result in gross proceeds to the Company of at
least $25,000,000 on or prior to December 31, 1999.
"New Warrants" means warrants to acquire common stock of Holdco issued
pursuant to the New Securities Purchase Agreement, which warrants shall have
terms and conditions substantially as set forth in Exhibit B to the First
Amendment and shall have such other terms and conditions and be in a form
satisfactory to the Syndication Agent and the Administrative Agent.
"Relocation Capital Expenditures" means capital expenditures made by the
Company or its Subsidiaries in connection with the Mexican Relocation and the
Asian Relocation, in an aggregate amount not to exceed (i) $16,500,000 in the
case of the Mexican Relocation (less the amount of Relocation Expenses related
to the Mexican Relocation) and (ii) $19,500,000 in the case of the Asian
Relocation (less the amount of Relocation Expenses related to the Asian
Relocation).
"Relocation Expenses" means costs, expenses and charges not capitalized or
classified as
-3-
<PAGE> 4
capital expenditures incurred by the Company or its Subsidiaries in connection
with the Mexican Relocation and the Asian Relocation, in an aggregate amount not
to exceed (i) $16,500,000 in the case of the Mexican Relocation (less the amount
of Relocation Capital Expenditures related to the Mexican Relocation) and (ii)
$19,500,000 in the case of the Asian Relocation (less the amount of Relocation
Capital Expenditures related to the Mexican Relocation).
SUBPART 2.2. Amendment to Definition of Applicable Margin. The definition
of Applicable Margin in the Existing Credit Agreement is hereby amended and
restated to read in its entirety as follows:
"Applicable Margin" means at all times during the applicable periods set
forth below,
(a) with respect to the unpaid principal amount of each Term-B Loan
maintained as a (i) Base Rate Loan, (A) for each day prior to the First
Amendment Effective Date, 1.25% and (B) for each day on or after the First
Amendment Effective Date, 1.75% per annum and (ii) LIBO Rate Loan, (A) for each
day prior to the First Amendment Effective Date, 2.5% and (B) for each day on or
after the First Amendment Effective Date, 3.0% per annum;
(b) with respect to the unpaid principal amount of each Term-C Loan
maintained as a (i) Base Rate Loan, (A) for each day prior to the First
Amendment Effective Date, 1.5% and (B) for each day on or after the First
Amendment Effective Date, 2.0% per annum, and (ii) LIBO Rate Loan, (A) for each
day prior to the First Amendment Effective Date, 2.75% and (B) for each day on
or after the First Amendment Effective Date, 3.25% per annum;
(c) from the Closing Date through (but excluding) the date upon which the
Compliance Certificate for the second full Fiscal Quarter ending after the
Closing Date is delivered by the Company to the Administrative Agent pursuant to
clause (c) of Section 7.1.1, with respect to the unpaid principal amount of each
(i) Swing Line Loan (which shall be borrowed and maintained only as a U.S.
Dollar denominated Base Rate Loan) and each Committed Revolving Loan and Term-A
Loan maintained as a Base Rate Loan, 1.00% per annum, and (ii) Committed
Revolving Loan and Term-A Loan maintained as a LIBO Rate Loan, 2.25% per annum;
and
(d) at all times after the date of such delivery of the Compliance
Certificate described in clause (c) above, with respect to the unpaid principal
amount of each Swing Line Loan (which shall be borrowed and maintained only as a
U.S. Dollar denominated Base Rate Loan) and each Committed Revolving Loan and
Term-A Loan, by reference to the applicable Leverage Ratio and at the applicable
percentage per annum (i) for each day prior to the First Amendment Effective
Date, as set forth in the Existing Credit Agreement and (ii) for each day on or
after the First Amendment Effective Date, as set forth below under the column
entitled "Applicable Margin for Base Rate Loans", in the case of Base Rate
Loans, or by reference to the applicable Leverage Ratio and at the applicable
percentage per annum set forth below under the column entitled "Applicable
Margin for LIBO Rate Loans", in the case
-4-
<PAGE> 5
of LIBO Rate Loans:
APPLICABLE MARGIN FOR COMMITTED REVOLVING LOANS,
SWING LINE LOANS AND TERM-A LOANS
<TABLE>
<CAPTION>
APPLICABLE APPLICABLE
MARGIN FOR BASE MARGIN FOR LIBO
LEVERAGE RATIO RATE LOANS RATE LOANS
-------------- --------------- ---------------
<S> <C> <C>
GREATER THAN OR EQUAL TO 5.0:1 1.5% 2.75%
GREATER THAN OR EQUAL TO 4.0:1
AND LESS THAN 5.0:1 1.25% 2.5%
GREATER THAN OR EQUAL TO 3.0:1
AND LESS THAN 4.0:1 0.75% 2.0%
LESS THAN 3.0:1 0.25% 1.5%
</TABLE>
The Leverage Ratio used to compute the Applicable Margin for Swing Line
Loans, Committed Revolving Loans and Term-A Loans for any day referred to in
clause (d) above shall be the Leverage Ratio set forth in the Compliance
Certificate most recently delivered by the Company to the Administrative Agent
on or prior to such day pursuant to clause (c) of Section 7.1.1. Changes in the
Applicable Margin for Swing Line Loans, Committed Revolving Loans and Term-A
Loans resulting from a change in the Leverage Ratio shall become effective (as
of the first day following the Fiscal Quarter in respect of which such
Compliance Certificate was required to be delivered) upon delivery by the
Company to the Administrative Agent of a new Compliance Certificate pursuant to
clause (c) of Section 7.1.1. In the event such Compliance Certificate indicates
a Leverage Ratio that would result in an Applicable Margin which is greater or
lesser than the Applicable Margin theretofore in effect, then (A) such greater
or lesser Applicable Margin shall be deemed to be in effect for all purposes of
this Agreement from the first day following the Fiscal Quarter in respect of
which such Compliance Certificate was required to be delivered by the Company to
the Administrative Agent pursuant to clause (c) of Section 7.1.1 and (B) if any
Borrower shall have theretofore made any payment of interest in respect of Swing
Line Loans, Committed Revolving Loans or Term-A Loans, or of Letter of Credit
fees pursuant to the first sentence of Section 3.3.3, in any such case in
respect of the period from the first day following the Fiscal Quarter in respect
of which such Compliance Certificate was required to be delivered to the actual
date of delivery of such Compliance Certificate, then, on the next Quarterly
Payment Date, either (x) if the new Applicable Margin is greater than the
Applicable Margin theretofore in effect, such Borrower shall pay as a
supplemental payment of interest and/or Letter of Credit fees, an amount which
equals the difference between the amount of interest and Letter of Credit fees
that would otherwise have been paid based on such new Leverage Ratio and the
amount of such interest and Letter of Credit fees actually so paid, or (y) if
the new Applicable Margin is less than the Applicable Margin theretofore in
effect, an amount shall be deducted from the interest on Committed Revolving
Loans, commitment fees and Letter of Credit fees (in the case of differences in
respect of interest on
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<PAGE> 6
Committed Revolving Loans and Letter of Credit fees) or from the interest on
Term-A Loans (in the case of differences in respect of interest on Term-A Loans)
thereafter payable by such Borrower in an amount which equals the difference
between the amount of interest and Letter of Credit fees so paid and the amount
of interest and Letter of Credit fees that would otherwise have been paid based
on such new Leverage Ratio (or, if no payment by such Borrower to the Revolving
Lenders or Term-A Lenders, as the case may be, will thereafter accrue hereunder,
or if the amount that so accrues is less than such difference, the Revolving
Lenders or the Term-A Lenders, as the case may be, will promptly pay to such
Borrower an amount equal to such difference less the amount, if any, of such
accrued and unpaid payments); provided, that if the Company shall fail to
deliver a Compliance Certificate within the number of days required pursuant to
clause (c) of Section 7.1.1 (without giving effect to any grace period), the
Applicable Margin for all Committed Revolving Loans, Term-A Loans and Letters of
Credit from and including the first day after the date on which such Compliance
Certificate was required to be delivered to but not including the date the
Company delivers to the Administrative Agent a Compliance Certificate shall
conclusively equal the highest Applicable Margin for the relevant type of Loan
set forth in clause (d) above."
SUBPART 2.3. Amendment to Definition of Change of Control. Clause (i) of
the definition of Change of Control is hereby amended and restated as follows:
"(i) the failure of Holdco at any time to own, directly or indirectly, free
and clear of all Liens and encumbrances (other than Liens of the types permitted
to exist under clauses (b), (f) and (i) of Section 7.2.3), all right, title and
interest in 100% of the Capital Stock of the Company other than Capital Stock
issued pursuant to the New Securities Purchase Agreement;"
SUBPART 2.4. Amendment to Definition of EBITDA. The existing paragraphs (f)
and (g) of the definition of EBITDA of the Existing Credit Agreement are hereby
relettered as paragraphs (g) and (h), respectively, the word "minus" shall be
deleted immediately following clause (e) thereof and a new paragraph is hereby
added to read as follows:
"plus
(f) the amount deducted in determining Net Income representing
expenses and charges incurred on account of Relocation Expenses,
minus"
SUBPART 2.5. Amendment to Definition of Excluded Equity Proceeds. The
definition of Excluded Equity Proceeds is hereby amended by (i) adding, at the
end of clause (v) thereof and before the word "or", the phrase "or the issuance
of the New Warrants" and (ii) adding, following the word "Warrants" in clause
(vi) thereof, the expression ", the New Warrants".
-6-
<PAGE> 7
SUBPART 2.6. Amendment to Definition of Fixed Charge Coverage Ratio. Paragraph
(b)(i) of the definition of Fixed Charge Coverage Ratio is hereby amended and
restated as follows:
"(b) the sum (without duplication) of
(i) Capital Expenditures actually made during all such Fiscal Quarters
pursuant to clause (a) of Section 7.2.7 (excluding (x) Relocation Capital
Expenditures, (y) Capital Expenditures constituting Capitalized Lease
Liabilities and (z) Capital Expenditures made by way of the incurrence of
Indebtedness permitted pursuant to Section 7.2.2(c) to a vendor of any
assets permitted to be acquired pursuant to Section 7.2.7 to finance the
acquisition of such assets);"
SUBPART 2.7. Amendment to Definition of Indebtedness. (a) Clause (c) of the
definition of Indebtedness is hereby amended and restated to read as follows:
"(c) all Capitalized Lease Liabilities; provided that, for the purpose of
calculating the Leverage Ratio, the total amount of Capitalized Lease
Liabilities shall be reduced by an amount equal to the lesser of (x) the amount
of Indebtedness related to Existing Capitalized Leases and (y) $3,800,000;"
(b) The final sentence of the definition of Indebtedness is hereby amended
and restated to read as follows:
"For all purposes of this Agreement, (i) the Indebtedness of any Person
shall include the Indebtedness of any partnership or joint venture in which
such Person is a general partner or a joint venturer (to the extent such
Person is liable for such Indebtedness), and (ii) the Junior Subordinated
Debt shall not constitute Indebtedness."
SUBPART 2.8. Amendment to Definition of Interest Expense. The definition of
Interest Expense is hereby amended and restated to read as follows:
"Interest Expense" means, for any period, the aggregate consolidated
interest expense of the Company and its Subsidiaries for such period, as
determined in accordance with GAAP, including (a) financing costs in respect of
any Receivables Transaction and (b) the portion of any payments made in respect
of Capitalized Lease Liabilities allocable to interest expense, but excluding
(to the extent included in interest expense) (x) up-front fees and expenses and
the amortization of all deferred financing costs and (y) for purposes other than
calculating Excess Cash Flow and EBITDA, payments made in respect of Capitalized
Lease Liabilities allocable to interest expense incurred in respect of the
Existing Capitalized Leases."
SUBPART 2.9. Amendment to Definition of Material Documents. The definition
of Material Documents is hereby amended and restated to read as follows:
-7-
<PAGE> 8
"'Material Documents' means the Merger Agreement, the Organic Documents of
the Company, the Investors' Agreement and the New Securities Purchase Agreement,
each as amended, supplemented, amended and restated or otherwise modified from
time to time as permitted in accordance with the terms hereof or of any other
Loan Document."
SUBPART 2.10. Amendment to Article 7.1. Article 7.1 of the Existing Credit
Agreement is hereby amended and restated by adding a new Section 7.1.14 to read
as follows:
"SECTION 7.1.14. Mexican Relocation. Within 30 days (or, if the Borrowers
shall have commenced such actions within such 30-day period and diligently
pursued the same, such longer period of time as shall be reasonably necessary to
complete such actions) of the date when inventory and equipment of the Mexican
Relocation Subsidiaries having an aggregate value in an amount equal to or
greater than $500,000 have arrived in Mexico, the Borrowers:
(a) shall have delivered to the Agents all supplements and other documents
necessary in the judgment of the Agents and their counsel to perfect the Liens
granted to the Administrative Agent pursuant to the Security Agreements in
equipment and inventory owned or leased by the Mexican Relocation Subsidiaries
and located or to be located in Mexico;
(b) shall have caused to be delivered to the Agents from each Mexican
Relocation Subsidiary which owns a Mexican Subsidiary, (i) certificates
evidencing 65% of the issued and outstanding shares of Capital Stock of each
such Mexican Subsidiary, which certificates shall in each case be accompanied by
undated stock powers duly executed in blank and shall be pledged pursuant to a
Pledge Agreement, and (ii) any and all other documents or instruments of further
assurance required to be filed or customarily provided in respect thereof in the
local jurisdiction of each such Mexican Subsidiary, including but not limited to
opinions of foreign counsel; provided, however, that no Subsidiary shall be
required to pledge in excess of 65% of the outstanding voting stock of any
Non-U. S. Subsidiary. If any securities pledged pursuant to a Pledge Agreement
are uncertificated securities, the Agents shall have received confirmation and
evidence satisfactory to each of them that appropriate book entries have been
made in the relevant books or records of a financial intermediary or the issuer
of such securities, as the case may be, or other appropriate steps have been
taken under applicable law resulting in the perfection of the security interest
granted in favor of the Administrative Agent in such securities pursuant to the
terms of the applicable Pledge Agreement; and
(c) shall have delivered to the Agents an opinion, on or prior to such 30th
day and addressed to the Agents and all Lenders, from Davis Polk & Wardwell,
special New York counsel to the Obligors, in form and substance satisfactory to
the Agents."
SUBPART 2.11. Amendment to Section 7.2.2. Clause (e) of Section 7.2.2 of
the Existing Credit Agreement is hereby amended and restated to read as follows:
-8-
<PAGE> 9
"(e) intercompany Indebtedness (i) (x) of any U.S. Subsidiary of the
Company owing to the Company or any Subsidiary or (y) of the Company owing to
any of its U.S. Subsidiaries, and (ii) of any Non-U.S. Subsidiary of the Company
owing to the Company or any U.S. Subsidiary of the Company; provided that in
respect of (A) any such Indebtedness described in this clause (ii), the U.S.
Dollar Equivalent of such Indebtedness (other than any such intercompany
Indebtedness, (w) into which any Investment by the Company or a U.S. Subsidiary
in a Non-U.S. Subsidiary that was outstanding on the First Amendment Effective
Date was converted, (x) incurred to finance any acquisition permitted hereunder,
(y) outstanding on the First Amendment Effective Date or (z) incurred as part
of, or to finance, Relocation Capital Expenditures or Relocation Expenses
incurred by Non-U.S. Subsidiaries) shall not exceed, when taken together with
the aggregate amount at such time of all outstanding Investments made pursuant
to clause (i) of Section 7.2.5 (other than any such Investments (1) into which
any Indebtedness of any Non-U.S. Subsidiary owing to the Company or any U.S.
Subsidiary that was outstanding on the First Amendment Effective Date was
converted, (2) made as part of, or to finance, any acquisition permitted
hereunder, (3) outstanding on the First Amendment Effective Date, (4) made as
part of, or to finance, Relocation Capital Expenditures or Relocation Expenses
incurred by Non-U.S. Subsidiaries or (5) consisting of the contribution by U.S.
Subsidiaries of equipment used at the manufacturing facilities referred to in
clause (iii) of the definition of Mexican Relocation to the Non-U. S.
Subsidiaries that operate such facilities, but only to the extent, in the case
of this clause (5), required or determined by the Company in good faith to be
advisable to avoid adverse Mexican tax consequences) $20,000,000 at any time
outstanding and (B) any such Indebtedness described in this clause (e) which is
owing to the Company or any of its U.S. Subsidiaries, (1) to the extent
requested by the Administrative Agent, such Indebtedness shall be evidenced by
one or more promissory notes in form and substance satisfactory to the Agents
which (except in the case of any such notes held by a Receivables Subsidiary in
connection with a Receivables Transaction) shall be duly executed and delivered
to (and indorsed to the order of) the Administrative Agent in pledge pursuant to
a Pledge Agreement and (2) in the case of any such Indebtedness owed by a Person
other than the Company or a Subsidiary Co-Obligor, such Indebtedness shall not
be forgiven or otherwise discharged for any consideration other than payment
(Dollar for Dollar or, if denominated in a Foreign Currency, the applicable
Currency) in cash unless the Agents otherwise consent;"
SUBPART 2.12. Amendment to Section 7.2.4. Section 7.2.4 of the Existing
Credit Agreement is hereby amended and restated to read as follows:
"SECTION 7.2.4. Financial Covenants.
(a) EBITDA. The Company will not permit EBITDA for the period of four
consecutive Fiscal Quarters ending on the last day of any Fiscal Quarter
occurring during any period set forth below to be less than the amount set forth
opposite such period:
-9-
<PAGE> 10
<TABLE>
<CAPTION>
Period EBITDA
------ ------
<S> <C>
Closing Date to 12/30/01 $ 90,000,000
12/31/01 to 12/30/02 $100,000,000
12/31/02 to 12/30/03 $105,000,000
12/31/03 to 12/30/04 $110,000,000
12/31/04 to 12/30/05 $120,000,000
12/31/05 to 12/30/06 $125,000,000
12/31/06 to 12/30/07 $130,000,000
12/31/07 and thereafter $135,000,000
</TABLE>
provided, that, to the extent the amount of EBITDA for the immediately
preceding four consecutive Fiscal Quarter period exceeds the amount of
EBITDA required to be maintained for such four consecutive Fiscal
Quarter period pursuant to this clause (a), an amount equal to 50% of
such excess amount may be carried forward to (but only to) the then
current Fiscal Quarter (any such amount to be certified to the
Administrative Agent in the Compliance Certificate delivered for the
last Fiscal Quarter of such four consecutive Fiscal Quarter period).
(b) Leverage Ratio. The Company will not permit the Leverage Ratio as of
the end of any Fiscal Quarter ending after the Closing Date and occurring during
any period set forth below to be greater than the ratio set forth opposite such
period:
<TABLE>
<CAPTION>
Period Leverage Ratio
------ --------------
<S> <C>
Closing Date to 12/30/00 6:00:1:00
12/31/00 to 12/30/01 5.75:1.00
12/31/01 to 12/30/02 5.25:1.00
12/31/02 to 12/30/03 4.25:1.00
12/31/03 to 12/30/04 3.50:1.00
12/31/04 and thereafter 3.00:1.00
</TABLE>
(c) Interest Coverage Ratio. The Company will not permit the Interest
Coverage Ratio as of the end of any Fiscal Quarter ending after the Closing Date
and occurring during any period set forth below to be less than the ratio set
forth opposite such period:
<TABLE>
<CAPTION>
Interest Coverage
Period Ratio
------ -----------------
<S> <C>
Closing Date to 12/30/00 1.55:1.00
12/31/00 to 12/30/01 1.55:1.00
12/31/01 to 12/30/02 1.85:1.00
12/31/02 to 12/30/03 2.25:1.00
12/31/03 to 12/30/04 2.70:1.00
12/31/04 to 12/30/05 3.00:1.00
12/31/05 to 12/30/06 4.00:1.00
12/31/06 to 12/30/07 4.50:1.00
12/31/07 and thereafter 5.00:1.00
</TABLE>
-10-
<PAGE> 11
(d) Fixed Charge Coverage Ratio. The Company will not permit the Fixed
Charge Coverage Ratio as of the end of any Fiscal Quarter ending after the
Closing Date to be less than 1.10:1.00."
SUBPART 2.13. Amendment to Section 7.2.5. Clause (l) of Section 7.2.5 of
the Existing Credit Agreement is hereby amended and restated to read as follows:
"(l) equity Investments of the Company or any U.S. Subsidiary in Non-U.S.
Subsidiaries (x) outstanding as of the First Amendment Effective Date or (y)
incurred on or after the First Amendment Effective Date, in an aggregate amount
(in the case of this clause (y)) at any time outstanding not to exceed
(exclusive of any such Investments (w) made as part of, or to finance, any
acquisition permitted hereunder, (x) into which any Indebtedness of a Non-U.S.
Subsidiary to the Company or a U.S. Subsidiary that was outstanding on the First
Amendment Effective Date was converted, (y) made as part of, or to finance, the
Asian Relocation or the Mexican Relocation or Relocation Capital Expenditures or
Relocation Expenses incurred by Non-U.S. Subsidiaries or (z) consisting of the
contribution by U.S. Subsidiaries of equipment used at the manufacturing
facilities referred to in clause (iii) of the definition of Mexican Relocation
to the Non-U.S. Subsidiaries that operate such facilities, but only to the
extent, in the case of this clause (z), required or determined by the Company in
good faith to be advisable to avoid adverse Mexican tax consequences)
$20,000,000 less the aggregate principal amount outstanding at such time of
Indebtedness permitted under clause (e)(ii) of Section 7.2.2 (other than any
such intercompany Indebtedness (A) incurred to finance any acquisition permitted
hereunder, (B) into which any Investment by the Company or a U.S. Subsidiary in
a Non-U.S. Subsidiary that was outstanding on the First Amendment Effective Date
was converted, (C) outstanding on the First Amendment Effective Date, and (D)
incurred as part of, or to finance, the Relocation Capital Expenditures or
Relocation Expenses incurred by Non-U.S. Subsidiaries);"
SUBPART 2.14. Amendment to Section 7.2.6. Clauses (a) and (b) of Section
7.2.6 of the Existing Credit Agreement are hereby amended and restated to read
as follows:
"(a) the Company will not, and will not permit any of its Subsidiaries to,
declare, pay or make any dividend, distribution or exchange (in cash, property
or obligations) on or in respect of any shares of any class of Capital Stock
(now or hereafter outstanding) of the Company or on any warrants, options or
other rights with respect to any shares of any class of Capital Stock (now or
hereafter outstanding) of the Company (other than (i) dividends or distributions
payable in its common stock or warrants to purchase its common stock, (ii)
dividends or distributions on preferred stock issued
-11-
<PAGE> 12
pursuant to the New Securities Purchase Agreement payable in additional shares
of such preferred stock as provided for in the certificate of designation for
such preferred stock as in effect on the First Amendment Effective Date and
(iii) splits or reclassifications of its stock into additional or other shares
of its common stock) or apply, or permit any of its Subsidiaries to apply, any
of its funds, property or assets to the purchase, redemption, exchange, sinking
fund or other retirement of, or agree or permit any of its Subsidiaries to
purchase, redeem or exchange, any shares of any class of Capital Stock (now or
hereafter outstanding) of the Company or warrants, options or other rights with
respect to any shares of any class of Capital Stock (now or hereafter
outstanding) of the Company;
(b) the Company will not, and will not permit any of its Subsidiaries to
(i) directly or indirectly, make any payment or prepayment of principal of, or
make any payment of interest on, any Subordinated Note or Junior Subordinated
Debt, on any day other than the stated, scheduled date for such payment or
prepayment set forth in the documents and instruments memorializing such
Subordinated Note or Junior Subordinated Debt, or which would violate the
subordination provisions of such Subordinated Note or Junior Subordinated Debt,
(ii) redeem, purchase or defease any Subordinated Note, Junior Subordinated Debt
or Discount Debenture, or (iii) make any payment of interest on any Junior
Subordinated Debt prior to the maturity date of such Junior Subordinated Debt
other than in additional Junior Subordinated Debt or through accretion to the
principal amount thereof (the foregoing prohibited acts referred to in clauses
(a) and (b) above are herein collectively referred to as "Restricted
Payments");"
SUBPART 2.15. Amendment to Section 7.2.7. Clause (a) of Section 7.2.7 is
hereby amended and restated to read as follows:
"(a) The Company will not, and will not permit any of its Subsidiaries to,
make or commit to make Capital Expenditures, except (i) Relocation Capital
Expenditures, plus (ii) in any Fiscal Year, Capital Expenditures which do not
aggregate in excess of $25,000,000 in such Fiscal Year, plus (iii) an additional
aggregate amount equal to $20,000,000 over the term of this Agreement; provided,
however, that to the extent the amount of Capital Expenditures permitted to be
made in any Fiscal Year pursuant to clause (a)(ii) of this Section exceeds the
aggregate amount of Capital Expenditures actually made during such Fiscal Year,
such excess amount (up to an aggregate of 50% of the amount of Capital
Expenditures permitted for such Fiscal Year, without giving effect to this
proviso) may be carried forward to (but only to) the next succeeding Fiscal Year
(any such amount to be certified by the Company to the Agents in the Compliance
Certificate delivered for the last Fiscal Quarter of such Fiscal Year, and any
such amount carried forward to a succeeding Fiscal Year shall be deemed to be
used prior to the Company and its Subsidiaries using the amount of Capital
Expenditures permitted by this Section in such succeeding Fiscal Year, without
giving effect to such carry-forward)."
-12-
<PAGE> 13
PART III
CONDITIONS TO EFFECTIVENESS
SUBPART 3.1. Effective Date. This First Amendment (and the amendments and
modifications contained herein) shall become effective as of November 10, 1999
and shall have retroactive effect from said date, and shall thereafter be
referred to as the "First Amendment," on the date (the "First Amendment
Effective Date") when all of the conditions set forth in this Subpart 3.1 have
been satisfied.
SUBPART 3.1.1. Execution of Counterparts. The Agents shall have received
counterparts of this First Amendment executed on behalf of the Borrowers, and
the Administrative Agent shall have confirmed to the Borrowers and the
Syndication Agent that it has received from the Required Lenders their
respective executed counterparts hereto.
SUBPART 3.1.2. Delivery of New Securities Purchase Agreement. The Agents
shall have received counterparts of the New Securities Purchase Agreement, dated
on or before the First Amendment Effective Date, duly executed and delivered by
an Authorized Officer of the Company and the Purchasers, in form and substance
and containing such terms and conditions as are reasonably satisfactory to the
Agents.
SUBPART 3.1.3. Affirmation and Consent. The Agents shall have received an
affirmation and consent in form and substance satisfactory to them, executed and
delivered by an Authorized Officer of each Obligor (other than the Borrowers)
under the Existing Credit Agreement and related Loan Documents.
SUBPART 3.1.4. Amendment Fee. The Agents shall have received, for the
account of each Lender signatory hereto on or prior to November 10, 1999 (the
"Fee Calculation Date"), an amendment fee equal to .25% of each such Lender's
Percentage of the Total Exposure Amount as of the Fee Calculation Date and all
other fees, costs and expenses due and payable pursuant to Section 11.3 of the
Credit Agreement, if then invoiced.
SUBPART 3.1.5. Legal Details, etc. All documents executed or submitted
pursuant hereto shall be satisfactory in form and substance to the Agents and
their counsel. The Agents and their counsel shall have received all information
and such counterpart originals or such certified or other copies or such
materials, as the Agents or their counsel may reasonably request, and all legal
matters incident to the transactions contemplated by this First Amendment shall
be satisfactory to the Agents and their counsel.
-13-
<PAGE> 14
PART IV
REPRESENTATIONS AND WARRANTIES, ETC.
SUBPART 4.1. Representations and Warranties; No Default. In order to induce
the Required Lenders to enter into this First Amendment, the Borrowers hereby
jointly and severally (a) confirm, reaffirm and restate that the representations
and warranties set forth in Article VI of the Existing Credit Agreement and in
each other Loan Document are true and correct in all material respects as of the
date hereof after giving effect to this First Amendment (unless such
representations and warranties are stated to relate to an earlier date, in which
case such representations and warranties shall have been true and correct in all
material respects as of such earlier date) and (b) represent and warrant that,
after giving effect to the First Amendment set forth herein, no Default or Event
of Default has occurred and is continuing.
PART V
MISCELLANEOUS
SUBPART 5.1. Cross-References. References in this First Amendment to any
Part or Subpart are, unless otherwise specified, to such Part or Subpart of this
First Amendment. References in this First Amendment to any Article or Section
are, unless otherwise specified, to such Article or Section of the Credit
Agreement.
SUBPART 5.2. Loan Document Pursuant to Credit Agreement. This First
Amendment is a Loan Document executed pursuant to the Credit Agreement and shall
(unless otherwise expressly indicated therein) be construed, administered and
applied in accordance with the terms and provisions of the Credit Agreement,
including Article XI thereof.
SUBPART 5.3. Counterparts, etc. This First Amendment may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
Agreement.
SUBPART 5.4. Governing Law. THIS FIRST AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SUBPART 5.5. Successors and Assigns. This First Amendment shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
-14-
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be executed by their respective officers hereunto duly authorized as of the day
and year first above written.
THERMADYNE MFG. LLC
By: /s/ JAMES H. TATE
-----------------------------
Title: Senior Vice President &
Chief Financial Officer
COMWELD GROUP PTY. LTD.
By: /s/ JAMES H. TATE
-----------------------------
Title:
GENSET S.P.A.
By: /s/ JAMES H. TATE
-----------------------------
Title:
THERMADYNE WELDING PRODUCTS
CANADA LIMITED
By: /s/ JAMES H. TATE
-----------------------------
Title:
<PAGE> 16
DLJ CAPITAL FUNDING, INC.,
as the Syndication Agent and as a Lender
By: /s/ DANA F. KLIEN
-----------------------------
Title: Vice President
ABN AMRO BANK N.V.,
as the Administrative Agent and as a
Lender
By: /s/ TOM COMFORT
-----------------------------
Title: Group Vice President
By: /s/ MARY HONDA
-----------------------------
Title: Vice President
SOCIETE GENERALE,
as the Documentation Agent and as a
Lender
By: /s/ CYNTHIA A. JAY
-----------------------------
Title: Managing Director
<PAGE> 17
Schedule I: Existing Capitalized Leases
<TABLE>
<CAPTION>
Lessor Lessee Effective Date
- --------------------------------- --------------------- --------------
<S> <C> <C>
National Warehouse Investment Co. Tweco Products, Inc. June 6, 1988
(Amended and
restated on
August 11, 1988)
</TABLE>
<PAGE> 18
EXHIBIT A
JUNIOR SUBORDINATED DEBT
[see Exhibit 4.15]
<PAGE> 19
EXHIBIT B
NEW WARRANTS
[see Exhibit 4.14]
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THERMADYNE HOLDINGS CORPORATION
<TABLE>
<CAPTION>
JURISDICTION OF
NAME ORGANIZATION
---- --------------------
<S> <C>
Arcair Stoody Europe S.A. .................................. Belgium
BBM Srl..................................................... Italy
C&G Systems Holding, Inc. .................................. Delaware
C&G Systems, Inc. .......................................... Illinois
Canadian Cylinder Company................................... Canada
Comet Property Holdings, Inc. .............................. Philippines
Comweld Group Pty. Ltd. .................................... Australia
Comweld Philippines Inc. ................................... Philippines
Comweld Malaysia SDN BHD.................................... Malaysia
Coyne Natural Gas Systems, Inc. ............................ Missouri
Duxtech Pty. Ltd. .......................................... Australia
GenSet SpA.................................................. Italy
Marison Cylinder Company.................................... Delaware
MECO Holding Company........................................ Delaware
MetalService S.A. .......................................... Chile
Modern Engineering Company, Inc. ........................... Missouri
OCIM Srl.................................................... Italy
Palco Trading Company....................................... United Arab Emirates
Philippine Welding Equipment Inc. .......................... Philippines
PT Comweld Indonesia........................................ Indonesia
PT Thermadyne Utama Indonesia................................ Indonesia
Quetack Pty. Ltd. .......................................... Australia
Quetala Pty. Ltd. .......................................... Australia
Quetala Unit Trust.......................................... Australia
Soltec S.A. ................................................ Chile
Stoody Company.............................................. Delaware
TAG Realty, Inc. ........................................... Texas
Tecmo Srl................................................... Italy
Tec. Mo. Cut Srl............................................ Italy
Tec. Mo. Control Srl........................................ Italy
THC Italia Srl.............................................. Italy
Thermadyne Asia/Pacific Pte. Ltd. .......................... Singapore
Thermadyne Asia SDN BHD..................................... Malaysia
Thermadyne Australia Pty. Ltd. ............................. Australia
Thermadyne Brazil Holdings, Ltd. ........................... Cayman Islands
Thermadyne Capital Corp. ................................... Delaware
Thermadyne Chile Holdings, Ltd. ............................ Cayman Islands
Thermadyne Cylinder Company................................. California
Thermadyne do Brasil Ltda. ................................. Brazil
Thermadyne de Mexico S.A. de C.V. .......................... Mexico
Thermadyne Foreign Sales Corporation........................ Barbados
Thermadyne Hong Kong Limited................................ Hong Kong
Thermadyne Industries, Inc. ................................ Delaware
Thermadyne Industries Limited............................... United Kingdom
Thermadyne International Corp. ............................. Delaware
Thermadyne Italia Srl ...................................... Italy
Thermadyne Japan K.K. ...................................... Japan
Thermadyne Korea, Ltd. ..................................... Korea
Thermadyne Mfg. LLC......................................... Delaware
Thermadyne Receivables, Inc. ............................... Delaware
Thermadyne South America Holdings, Ltd. .................... Cayman Islands
Thermadyne Thailand Co. Ltd. ............................... Thailand
Thermadyne Victor Ltda. .................................... Brazil
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
JURISDICTION OF
NAME ORGANIZATION
---- --------------------
<S> <C>
Thermadyne Welding Products Canada, Ltd. ................... Canada
Thermal Arc, Inc. .......................................... Delaware
Thermal Arc Philippines Inc. ............................... Philippines
Thermal Dynamics Corp. ..................................... Delaware
Tweco Products, Inc. ....................................... Delaware
Tweco de Mexico S.A. de C.V. ............................... Mexico
Victor Coyne International, Inc. ........................... Delaware
Victor Equipment Company.................................... Delaware
Victor Equipment de Mexico S.A. de C.V. .................... Mexico
Victor Gas Systems, Inc. ................................... Delaware
Wichita Warehouse Corporation............................... Kansas
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-69181) pertaining to the 1998 Management Incentive Plan and
the 1998 Non-Employee Directors Stock Option Plan and in the Registration
Statement (Form S-3 No. 333-57455) pertaining to the 12 1/2% Senior Discount
Debentures due 2008 of our reports dated February 11, 2000, with respect to the
consolidated financial statements and schedule of Thermadyne Holdings
Corporation and to the incorporation by reference in the Registration Statement
(Form S-3 No. 333-57457) pertaining to the 9 7/8% Senior Subordinated Notes due
2008 of our report dated February 11, 2000, with respect to the consolidated
financial statements of Thermadyne Mfg. LLC included in the Annual Report (Form
10-K) for the year ended December 31, 1999.
St. Louis, Missouri
March 27, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH ANNUAL REPORT
</LEGEND>
<MULTIPLIER> 1,000
<CIK> 0000850660
<NAME> THERMADYNE HOLDINGS CORP
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 13,321
<SECURITIES> 0
<RECEIVABLES> 94,731
<ALLOWANCES> 3,275
<INVENTORY> 100,831
<CURRENT-ASSETS> 214,837
<PP&E> 93,811
<DEPRECIATION> 0
<TOTAL-ASSETS> 400,396
<CURRENT-LIABILITIES> 93,560
<BONDS> 729,402
61,430
0
<COMMON> 36
<OTHER-SE> (534,124)
<TOTAL-LIABILITY-AND-EQUITY> 400,396
<SALES> 521,115
<TOTAL-REVENUES> 521,115
<CGS> 342,250
<TOTAL-COSTS> 342,250
<OTHER-EXPENSES> 128,859
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,439
<INCOME-PRETAX> (25,492)
<INCOME-TAX> 8,807
<INCOME-CONTINUING> (34,299)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (34,299)
<EPS-BASIC> (11.68)
<EPS-DILUTED> (11.68)
</TABLE>
