-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NRh4PypYseLnxndQ42gxNbNgr2P57yl3HYILnFiJF5gt/m9LqQLzuaujrWTjuOdx 9rt6HgBKErpVCpWzKrc8Ag== 0000950152-00-004002.txt : 20000515 0000950152-00-004002.hdr.sgml : 20000515 ACCESSION NUMBER: 0000950152-00-004002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LINCOLN ELECTRIC HOLDINGS INC CENTRAL INDEX KEY: 0000059527 STANDARD INDUSTRIAL CLASSIFICATION: METALWORKING MACHINERY & EQUIPMENT [3540] IRS NUMBER: 340359955 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-55406 FILM NUMBER: 628838 BUSINESS ADDRESS: STREET 1: 22801 ST CLAIR AVE CITY: CLEVELAND STATE: OH ZIP: 44117 BUSINESS PHONE: 2164818100 FORMER COMPANY: FORMER CONFORMED NAME: LINCOLN ELECTRIC CO DATE OF NAME CHANGE: 19920703 10-Q 1 LINCOLN ELECTRIC HOLDINGS, INC. 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the three months ended March 31, 2000 Commission File No. 0-1402 LINCOLN ELECTRIC HOLDINGS, INC. (Exact name of registrant as specified in its charter) Ohio 34-1860551 (State of incorporation) (I.R.S. Employer Identification No.) 22801 St. Clair Avenue, Cleveland, Ohio 44117 (Address of principal executive offices) (Zip Code) (216) 481-8100 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares outstanding of the issuer's class of common stock as of March 31, 2000 was 42,527,771. 1 2 LINCOLN ELECTRIC HOLDINGS, INC. CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands of dollars, except per share data) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, ---------------------------------- 2000 1999 -------------- ----------- Net sales $281,804 $282,868 Cost of goods sold 185,689 186,301 --------- --------- Gross profit 96,115 96,567 Selling, general & administrative expenses 56,679 58,483 Loss on disposal of motor business -- 32,015 --------- --------- Operating income 39,436 6,069 Other income / (expense): Interest income 136 312 Other income 772 709 Interest expense (1,971) (1,429) --------- --------- Total other income / (expense) (1,063) (408) --------- --------- Income before income taxes 38,373 5,661 Income taxes 13,975 1,354 --------- --------- Net income $ 24,398 $ 4,307 ========= ========= Basic earnings per share $ 0.56 $ 0.09 Diluted earnings per share $ 0.56 $ 0.09 Cash dividends declared per share $ 0.14 $ 0.12
See notes to these consolidated financial statements. 2 3 LINCOLN ELECTRIC HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (Amounts in thousands of dollars)
MARCH 31, DECEMBER 31, 2000 1999 ----------- ----------- (UNAUDITED) (NOTE A) ASSETS CURRENT ASSETS Cash and cash equivalents $ 10,712 $ 8,675 Accounts receivable (less allowances of $3,577 in 2000; $3,687 in 1999) 181,930 169,986 Inventories: Raw materials and in-process 81,076 82,451 Finished goods 110,940 109,161 ---------- ---------- 192,016 191,612 Deferred income taxes 25,294 23,311 Other current assets 31,162 33,011 ---------- ---------- TOTAL CURRENT ASSETS 441,114 426,595 PROPERTY, PLANT AND EQUIPMENT Land 11,960 11,050 Buildings 131,077 119,519 Machinery, tools and equipment 418,949 419,831 --------- --------- 561,986 550,400 Less: accumulated depreciation and amortization 283,410 279,610 --------- --------- 278,576 270,790 OTHER ASSETS Goodwill - net 42,119 33,263 Other 59,757 44,751 --------- --------- 101,876 78,014 ---------- --------- TOTAL ASSETS $821,566 $775,399 ======== ========
See notes to these consolidated financial statements. 3 4 LINCOLN ELECTRIC HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (Amounts in thousands of dollars, except share data)
MARCH 31, DECEMBER 31, 2000 1999 ------------ ----------- (UNAUDITED) (NOTE A) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable to banks $ 19,909 $ 16,425 Trade accounts payable 68,250 64,482 Accrued employee compensation and benefits 46,109 32,326 Accrued expenses 14,163 15,202 Taxes, including income taxes 54,592 41,326 Dividend payable 5,954 6,228 Other current liabilities 29,674 28,882 Current portion of long-term debt 12,404 11,503 --------- ---------- TOTAL CURRENT LIABILITIES 251,055 216,374 Long-term debt, less current portion 86,663 47,207 Deferred income taxes 27,832 28,771 Other long-term liabilities 30,561 31,532 SHAREHOLDERS' EQUITY Preferred Shares, without par value - at stated capital amount: Authorized - 5,000,000 shares in 2000 and 1999; Issued and Outstanding - none in 2000 and 1999 -- -- Common Shares, without par value - at stated capital amount: Authorized - 120,000,000 shares in 2000 and 1999; Issued - 49,283,950 shares in 2000 and 1999; Outstanding - 42,527,771 shares in 2000 and 44,483,366 shares in 1999 4,928 4,928 Additional paid-in capital 104,903 104,891 Retained earnings 501,907 483,463 Accumulated other comprehensive income (50,326) (43,524) Treasury shares, at cost - 6,756,179 shares in 2000 and 4,800,584 shares in 1999 (135,957) (98,243) --------- ---------- TOTAL SHAREHOLDERS' EQUITY 425,455 451,515 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $821,566 $775,399 ======== ========
See notes to these consolidated financial statements. 4 5 LINCOLN ELECTRIC HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands of dollars) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, ------------------------------ 2000 1999 ----------- ----------- OPERATING ACTIVITIES Net income $ 24,398 $ 4,307 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,403 7,280 (Gain) loss on disposal of fixed assets and motor business (18) 31,982 Changes in operating assets and liabilities: (Increase) in accounts receivable (15,664) (14,824) Decrease (increase) in inventories 2,907 (9,577) Decrease (increase) in other current assets 1,973 (466) (Decrease) increase in accounts payable (519) 6,030 Increase in other current liabilities 28,645 8,314 Gross change in other non-current assets and liabilities 1,843 3,308 Other - net (766) (5,363) ---------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES 51,202 30,991 INVESTING ACTIVITIES Capital expenditures (11,068) (23,685) Acquisitions of businesses and equity investment (19,107) -- Proceeds from maturities of marketable securities 5 164 Proceeds from sale of fixed assets and motor business 102 536 ---------- ---------- NET CASH (USED) BY INVESTING ACTIVITIES (30,068) (22,985) FINANCING ACTIVITIES Proceeds from short-term borrowings 13,496 17,544 Payments on short-term borrowings (15,123) (11,302) Notes payable to banks - net 5,205 11,632 Proceeds from long-term borrowings 48,526 15,016 Payments on long-term borrowings (27,014) (5,010) Purchase of shares for treasury (37,714) (57,883) Cash dividends paid (6,228) (5,770) Other -- (125) ---------- ---------- NET CASH (USED) BY FINANCING ACTIVITIES (18,852) (35,898) Effect of exchange rate changes on cash and cash equivalents (245) (447) ---------- ---------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,037 (28,339) Cash and cash equivalents at beginning of period 8,675 39,095 ---------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,712 $ 10,756 ========== ==========
See notes to these consolidated financial statements. 5 6 LINCOLN ELECTRIC HOLDINGS, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 2000 NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these consolidated financial statements do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. However, in the opinion of management, these consolidated financial statements contain all the adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position, results of operations and changes in cash flows for the interim periods. Operating results for the three-months ended March 31, 2000 are not necessarily indicative of the results to be expected for the year ending December 31, 2000. The balance sheet at December 31, 1999 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by generally accepted accounting principles for complete financial statements. The Company has reclassified distribution costs from selling, general & administrative expenses to cost of goods sold. Those two line items on the consolidated income statement have been restated for 1999 to conform to current year classification. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. NOTE B - EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share: (Dollars and shares in thousands, THREE MONTHS ENDED except per share amounts) ------------------ MARCH 31, --------- 2000 1999 -------- ------- Numerator: Net income $ 24,398 $ 4,307 ======== ======= Denominator: Denominator for basic earnings per share - Weighted-average shares 43,690 46,575 Effect of dilutive securities - Employee stock options 32 165 ------ ------ Denominator for diluted earnings per share - Adjusted weighted-average shares 43,722 46,740 ====== ====== Basic earnings per share $0.56 $0.09 Diluted earnings per share $0.56 $0.09 6 7 NOTE C - COMPREHENSIVE INCOME The components of comprehensive income follow: THREE MONTHS ENDED MARCH 31, ---------------------------- (Dollars in thousands) 2000 1999 -------- -------- Net income $ 24,398 $ 4,307 Other comprehensive income: Change in currency translation adjustment (6,802) (8,299) -------- -------- Comprehensive income $ 17,596 $ (3,992) ======== ======== NOTE D - INVENTORY VALUATION The valuation of inventory under the Last-In, First-Out (LIFO) method is made at the end of each year based on inventory levels and costs at that time. Accordingly, interim LIFO calculations, by necessity, are based on estimates of expected year-end inventory levels and costs and are subject to final year-end LIFO inventory calculations. NOTE E - ACCRUED EMPLOYEE COMPENSATION AND BENEFITS Accrued employee compensation and benefits at March 31, 2000 include provisions for year-end bonuses and related payroll taxes of approximately $19 million related to Lincoln employees worldwide. The payment of bonuses is discretionary and is subject to approval by the Board of Directors. NOTE F - SEGMENT INFORMATION
(Dollars in thousands) UNITED OTHER STATES EUROPE COUNTRIES ELIMINATIONS CONSOLIDATED --------- ---------- --------- ----------- ------------ Three months ended March 31, 2000: Net sales to unaffiliated customers $192,236 $ 47,641 $ 41,927 $ -- $281,804 Inter-segment sales 18,522 3,005 5,979 (27,506) --- ---------- ---------- ---------- ---------- -------- Total $210,758 $ 50,646 $ 47,906 $ (27,506) $281,804 ======== ======== ======== ========= ======== Income before interest and income taxes $ 34,598 $ 3,336 $ 2,356 $ (82) $ 40,208 Interest income 136 Interest expense (1,971) --------- Income before income taxes $ 38,373 ========= Total assets $550,230 $193,866 $158,356 $(80,886) $821,566 Three months ended March 31, 1999: Net sales to unaffiliated customers $194,728 $ 48,970 $ 39,170 $ -- $282,868 Inter-segment sales 16,217 1,713 3,592 (21,522) --- ---------- ----------- ---------- --------- --------- Total $210,945 $ 50,683 $ 42,762 $(21,522) $282,868 ======== ========= ======== ======== ========= Income (loss) before interest and income taxes $ (786) $ 4,063 $ 2,757 $ 744 $ 6,778 Interest income 312 Interest expense (1,429) --------- Income before income taxes $ 5,661 ========= Total assets $ 532,476 $ 177,246 $127,040 $ (68,252) $ 768,510
Included in the United States segment for the three months ended March 31, 1999 was a $32 million pre-tax charge related to the disposal of the motor business. See Note H to these consolidated financial statements. 7 8 NOTE G - ACQUISITIONS In January 2000, the Company purchased a 35% interest in Kuang Tai, the leading welding wire producer in the Taiwan and mainland Chinese welding markets, for $16.6 million in cash. The Company accounts for its investment in Kuang Tai under the equity method. In February 2000, the Company purchased 100% of the Italian-based C.I.F.E. Spa, the market leader in Europe in the production of MIG wire for the arc welding industry. The total cost of this acquisition was $2.5 million, plus debt assumed of $10.1 million, and was accounted for as a purchase. NOTE H - DISPOSAL OF MOTOR BUSINESS On May 28, 1999, the Company sold its motor business to Regal-Beloit, Inc. The Company recorded a pre-tax charge of $32 million ($19.7 million after-tax, or $0.42 per diluted share) in the first quarter of 1999 reflecting the loss on the sale of motor business assets. Sales attributable to the motor business for the three-month period ended March 31, 1999 were $13.1 million. The operating results of the motor business for the quarter-ended March 31, 1999 were not material. NOTE I - NEW ACCOUNTING PRONOUNCEMENT In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities. This statement will become effective for the Company for fiscal year 2001. The Company is evaluating the effect of this Statement on its accounting and reporting policies, but does not presently expect adoption to have a material impact on the Company's consolidated financial statements. NOTE J - SUBSEQUENT EVENT On April 26, 2000, the Company made a recommended cash offer in the United Kingdom to purchase all of the outstanding shares of Charter plc, a British industrial holding company, for approximately $765 million in cash (using an estimated exchange rate of $1.62 to GBP 1). The total cost of the transaction, including refinanced debt, is expected to be approximately $1.2 billion and will be financed by committed bank facilities. Should the acquisition occur, the Company would be obligated to cease dividend payments pursuant to the new credit agreements until such time that acquisition debt was reduced to appropriate levels. The Company has also suspended its share repurchase program, pending the outcome of the proposed acquisition. The closing date of this transaction is dependent upon a number of conditions, including regulatory approval. 8 9 Part 1 - Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table sets forth the Company's results of operations for the three-month periods ended March 31, 2000 and 1999:
Three months ended March 31, (dollars in millions) 2000 1999 ----------------------- ---------------------- AMOUNT % OF SALES AMOUNT % OF SALES ------ ---------- ------ ---------- Net sales $281.8 100.0% $282.9 100.0% Cost of goods sold 185.7 65.9% 186.3 65.9% ------ --------- ------ ------- Gross profit 96.1 34.1% 96.6 34.1% Selling, general & administrative expenses 56.7 20.1% 58.5 20.7% Loss on disposal of motor business -- -- 32.0 11.3% ----------- ------------ ------- ------- Operating income 39.4 14.0% 6.1 2.1% Interest income 0.1 0.0% 0.3 0.1% Other income 0.8 0.3% 0.7 0.3% Interest expense (1.9) (0.7%) (1.4) (0.5%) -------- ------- -------- ------- Income before income taxes 38.4 13.6% 5.7 2.0% Income taxes 14.0 4.9% 1.4 0.5% -------- ------- -------- ------- Net income $ 24.4 8.7% $ 4.3 1.5% ======= ======= ======= =======
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999 - -------------------------------------------------------------------------------- NET SALES. Net sales for the first quarter 2000 were $281.8 million, a $1.1 million or 0.4% decline from $282.9 million last year. Prior year's net sales included $13.1 million in sales from the divested motor business. Excluding these sales from the prior year, sales from continuing businesses increased $12.0 million or 4.4%. Net sales from U.S. operations were $192.2 million for the quarter, down 1.3% from $194.7 million for the first quarter last year. Excluding sales of the divested motor business, U.S. sales in the first quarter 1999 would have been $181.6 million, a year-over-year increase of 5.8%. This increase reflects higher U.S. demand, primarily in the consumables product line. Export sales from the U.S. of $15.2 million were down $2.0 million or 11.6% from last year. U.S. exports have declined primarily because the Company has shifted some product sourcing of the Latin American market to its new plant in Torreon, Mexico. U.S. exports to other world regions were flat or higher compared with last year. Non-U.S. sales increased 1.6% to $89.6 million in the first quarter 2000, compared with $88.1 million last year. The strengthening of the U.S. dollar had a significant negative impact on non-U.S. sales, particularly in Europe, where exchange rate movements impacted sales by more than 11.0% compared with last year. In local currencies, European sales increased 9.4%. European sales were supplemented by increased MIG wire capacity with the February 2000 acquisition of C.I.F.E. Spa. In the rest of the world, the Company's sales increased 7.0%. GROSS PROFIT. Gross profit of $96.1 million for the first quarter 2000 declined 0.5% or $0.5 million from last year. Gross profit as a percentage of net sales was flat compared with the first quarter last year. Gross profit percentage was higher in the U.S. in 2000 due to the absence of lower margin motor sales. Non-U.S. gross margins were down year-over-year due to a change in sales mix to lower margin products and by increasing raw material prices. SELLING, GENERAL & ADMINISTRATIVE (SG&A) EXPENSES. SG&A expenses decreased $1.8 million or 3.1% to $56.7 million for the first quarter 2000, compared with $58.5 million for 1999. SG&A expense as a percentage of net sales declined to 20.1% from 20.7% in the 1999 period. The reduction in SG&A expenses were due to planned reductions in selling, administrative and research and development costs. SG&A expenses include costs related to the Company's discretionary year- end employee bonus program, net of hospitalization costs. The final 2000 bonus payout will be subject to approval by the Company's Board of Directors during the fourth quarter. 9 10 LOSS ON DISPOSAL OF MOTOR BUSINESS. On May 28, 1999, the Company sold its motor business. The Company recorded a pre-tax charge of $32 million ($19.7 million after-tax, or $0.42 per diluted share) in the first quarter of 1999 reflecting the loss on the sale of its motor business assets. Sales of the motor business for the first quarter of 1999 were $13.1 million. The operating results of the motor business for the first quarter 1999 were not material. INTEREST EXPENSE. Interest expense increased to $1.9 million in the first quarter 2000 from $1.4 million for the same period last year. The increase in interest expense was commensurate with increased short- and long-term borrowings to fund the share repurchase program and the acquisitions of C.I.F.E Spa and a 35% stake in Kuang Tai. INCOME TAXES. Income taxes for the first quarter 2000 were $14.0 million on income before income taxes of $38.4 million, an effective rate of 36.4%, as compared with income taxes of $1.4 million on income before income taxes of $5.7 million, or an effective rate of 23.9% for the same period in 1999. Excluding the motor charge from 1999, the first quarter 1999 effective tax rate was 36.3%. NET INCOME. Net income for the first quarter 2000 of $24.4 million was $20.1 million higher than last year. Excluding the motor charge from the prior year, net income for 1999 would have been $24.0 million. Diluted earnings per share for 2000 increased to $0.56 per share from $0.09 per share in 1999 (or $0.51 excluding the motor charge). The effect of foreign currency exchange rate movements on net income was not significant. LIQUIDITY AND CAPITAL RESOURCES Cash provided from operating activities for the three months ended March 31, 2000 was $51.2 million compared with $31.0 million for 1999. Higher cash flow from operations is due to improvements in working capital management, particularly inventory, the timing of income tax payments and higher deferred tax liabilities. The Company's ratio of total debt to total capitalization increased to 21.9% at March 31, 2000 from 14.3% at December 31, 1999. Debt was accumulated during the first quarter to fund the share repurchases and acquisitions. The stock repurchase program has continued to lower the Company's equity base. During the first quarter of 2000, the Company purchased 1,960,930 shares of its common stock at a cost of $37.7 million. Since the share repurchase program was first begun in September 1998, the Company has purchased a total of 6,908,180 shares of its common stock on the open market at a cost of $138.7 million through March 31, 2000. On May 2, 2000, the share repurchase program was suspended, pending completion of the proposed acquisition. Capital expenditures decreased $12.6 million to $11.1 million in the first quarter of 2000, compared with $23.7 million in 1999. This decline was predominantly related to spending on information systems in the U.S. and Europe in 1999 that did not recur in 2000. During the first quarter 2000, the Company acquired a 35% interest in Kuang Tai, a Taiwan-based manufacturer of welding wire for $16.6 million and 100% of C.I.F.E. Spa, an Italian-based manufacturer of MIG wire for $2.5 million, plus assumed debt of $10.1 million. The Company paid cash dividends of $6.2 million or $0.14 per share during the first three months of 2000, a 7.9% increase over the $5.8 million paid in the first quarter 1999. Cash dividends declared per share increased 16.7% year-over-year. The quarterly dividend of $0.14 per share was paid April 14, 2000, to holders of record on March 31, 2000. On May 2, 2000, a dividend of $0.14 per share was declared which will be payable on July 14, 2000 to shareholders of record as of June 30, 2000. As part of the proposed acquisition of Charter plc, the Company announced that dividend payments would cease indefinitely and that the share repurchase program would be suspended. 10 11 CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS From time to time, information provided by the Company, statements by its employees or information included in its filings with the Securities and Exchange Commission (including those portions of this Management's Discussion and Analysis that refer to the future) may contain forward-looking statements that are not historical facts. Those statements are "forward-looking" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, and the Company's future performance, operating results, financial position and liquidity, are subject to a variety of factors that could materially affect results, including: - - Business Acquisition. The Company currently plans to complete its acquisition of the stock of Charter plc toward the end of the third quarter of 2000. While management believes the acquisition presents an excellent strategic business opportunity, there is also a significant degree of uncertainty involved in major acquisitions, particularly given that Charter plc holds two different business units, ESAB and Howden. The Company expects to dedicate significant resources towards a successful acquisition. To finance the acquisition, the Company will initially be highly leveraged and there are restrictions in the applicable credit agreements on uses of cash for capital spending and shareholder dividends. - - Litigation. The Company, like other manufacturers, is subject to a variety of lawsuits and potential lawsuits that arise in the ordinary course of business. See "Item 3. Legal Proceedings" within the Company's annual report on Form 10-K for the year-ended December 31, 1999, as well as the update in this report. See also Note K to the consolidated financial statements for the year-ended December 31, 1999. - - Competition. The Company operates in a highly competitive global environment and is subject to a variety of competitive factors such as pricing, the actions and strength of its competitors, and the Company's ability to maintain its position as a recognized leader in welding technology. The intensity of foreign competition is substantially affected by fluctuations in the value of the United States dollar against other currencies. The Company's competitive position could also be adversely affected should new or emerging entrants (particularly where foreign currencies have been significantly devalued) become more active in the arc welding business. - - International Markets. The Company's long-term strategy is to increase its share in growing international markets, particularly Asia, Latin America, Central Europe and other developing markets. However, there can be no certainty that the Company will be successful in its expansion efforts. The Company is subject to the currency risks of doing business abroad, and expansion poses challenging demands within the Company's infrastructure. - - Cyclicality and Maturity of the Welding Industry. The United States arc welding industry is both mature and cyclical. The growth of the domestic arc welding industry has been and continues to be constrained by numerous factors, including the substitution of plastics and other materials in place of fabricated metal parts in many products and structures. Increased offshore production of fabricated steel structures has also cut into the domestic demand for arc welding products in the Company's largest market. - - Operating Factors. The Company is highly dependent on its skilled workforce and efficient production facilities, which could be adversely affected by its labor relations, business interruptions at its domestic facilities and short-term or long-term interruptions in the availability of supplies or raw materials or in transportation of finished goods. - - Research and Development. The Company's continued success depends, in part, on its ability to continue to meet customer welding needs through the introduction of new products and the enhancement of existing product design and performance characteristics. There can be no assurances that new products or product improvements, once developed, will meet with customer acceptance and contribute positively to the operating results of the Company, or that product development will continue at a pace to sustain future growth. 11 12 Part II - Other Information Item 1. Legal Proceedings Defense and indemnity costs of the Company in product liability cases involving injuries allegedly resulting from exposure to fumes and gases in the welding environment may be affected by the outcome of pending litigation with the St. Paul Fire and Marine Insurance Company ("St. Paul"), in which St. Paul and the Company disagree about the allocation among various liability insurance policies of defense and indemnity costs of welding fume cases. Following the April, 1998 trial of the Company's case against St. Paul, the United States District Court for the Northern District of Ohio (Akron) ordered St. Paul to pay the Company compensatory damages plus prejudgment interest for misallocating past expenses related to welding fume cases. Additionally, the Court held that the Company may utilize St. Paul occurrence-based policies sold prior to 1985 for defense and verdict costs of various pending and potential future fume cases. St. Paul appealed the decision to the U.S. Court of Appeals for the Sixth Circuit. On April 27, 2000, the Sixth Circuit rendered a decision that affirmed in part and reversed in part the lower court decision. The Sixth Circuit affirmed the lower court's decision on liability, i.e., that St. Paul is liable to the Company for misallocating past expenses related to welding fume cases. The Sixth Circuit also affirmed the lower court's decision that the Company may use St. Paul occurrence-based policies sold prior to 1985 for certain defense and verdict costs of various pending and potential future fume cases. The Sixth Circuit reversed the lower court decision on (a) the method for allocating expenses between and among occurrence policies, and (b) the accrual date from which prejudgment interest should be calculated. The Court of Appeals remanded the case to the District Court for further proceedings on the issues that were the subject of reversal. Item 2. Changes in Securities - None. Item 3. Defaults Upon Senior Securities - None. Item 4. Submission of Matters to a Vote of Security Holders - None. Item 5. Other Information - None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibit No. 2(b) - Recommended Cash Offer for Charter plc dated April 26, 2000 Exhibit No. 3(b) - Amended Code of Regulations of Lincoln Electric Holdings, Inc. Exhibit No. 10(p) - Stock Option Plan for Non-employee Directors Exhibit No. 27 - Financial Data Schedule. (b) Reports on Form 8-K - None. 12 13 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LINCOLN ELECTRIC HOLDINGS, INC. /S/ H. JAY ELLIOTT - ------------------------------------------ H. Jay Elliott Senior Vice President, Chief Financial Officer and Treasurer May 12, 2000 13 EX-2.B 2 EXHIBIT 2(B) 1 Exhibit 2(b) [Lincoln Electric Logo] Not for release, publication or distribution in or into the United States, Canada, Australia or Japan. For Immediate Release 26 April, 2000 LINCOLN ELECTRIC HOLDINGS, INC. ("LINCOLN ELECTRIC") RECOMMENDED CASH OFFER FOR CHARTER PLC ("CHARTER") - - The boards of Lincoln Electric and Charter announce that they have agreed the terms of a recommended cash offer, to be made by CSFB on behalf of a wholly-owned subsidiary of Lincoln Electric, to acquire the entire issued and to be issued share capital of Charter. - - Lincoln Electric is a global designer and manufacturer of arc welding products, manufacturing a full line of arc welding equipment and consumable welding products. - - The Offer will be 500 pence in cash for each Charter Share and values Charter's entire issued share capital at approximately GBP 471 million. - - The Offer represents a premium of 105 per cent. to Charter's share price of 243.5 pence at the close of business on 25 April, 2000, the last dealing day before this announcement, and a premium of 128 per cent. to the three month average share price of Charter of 219.7 pence. - - Charter shareholders will also be entitled to the final Charter dividend in respect of the year ended 31 December, 1999 of 10.5 pence (net) per Charter Share, payable on 15 May, 2000 to Charter shareholders on the register on 24 March, 2000. - - Lincoln Electric believes that the acquisition of Charter will: - allow Lincoln Electric to extend its international reach, permitting it to service all major geographic regions - provide a more complete product portfolio for the enlarged customer base and substantially expand its distribution channels - create an organisation which is at the leading edge in all aspects of welding and cutting technology - create an organisation which builds on the strength of leadership, expertise and working practices of both companies to further improve efficiencies - - Lincoln Electric has received irrevocable undertakings to accept the Offer from Charter shareholders in relation to approximately 30.8 per cent. of the issued share capital of Charter. 2 2 COMMENTS Commenting on the Offer, Anthony A. Massaro, Chairman and Chief Executive Officer of Lincoln Electric said: "This is an excellent transaction for the shareholders and customers of both companies. It allows significant extension of Lincoln Electric's reach in terms of geography, products and technology, and represents a significant step forward in line with our objectives of achieving profitable growth through enhancing our product offering and international expansion. "After the acquisition, Lincoln Electric will have the scale, reach, manufacturing and research capabilities to better serve our customers world-wide. "We will be led by an experienced and customer-focused management team comprising managers from both companies, and I am confident that the excellent fit of the two companies will ensure a smooth and orderly transition period." Commenting on the Offer, Jeffrey Herbert, Chairman of Charter said: "Charter's management team has made strong progress in recent years in its programme to reform the group and improve performance. We are therefore pleased to recommend this Offer from Lincoln Electric which represents a significant premium over the current market value of our shares. It is also a unique opportunity for our employees to be associated with Lincoln Electric." This summary should be read in conjunction with the full text of the following announcement and the definitions in Appendix 2. ENQUIRIES LINCOLN ELECTRIC HOLDINGS INC. Via Financial Anthony Massaro Dynamics Jim Schilling Tel: 020 7831 3113 CSFB (FINANCIAL ADVISOR TO LINCOLN ELECTRIC AND LINCOLN ELECTRIC GLOBAL) Tel: 020 7888 8888 Timon Drakesmith FINANCIAL DYNAMICS (PUBLIC RELATIONS ADVISERS FOR LINCOLN ELECTRIC) Tel: 020 7831 3113 Richard Mountain CHARTER PLC Tel: 020 7838 7000 Nigel Smith Nigel Robson Neil Jamieson LAZARD (FINANCIAL ADVISER TO CHARTER) Tel: 020 7588 2721 Marcus Agius Paul Jameson BRUNSWICK Tel: 020 7404 5959 Andrew Fenwick Katie Hall 3 3 The Offer will not be made, directly, or indirectly, in or into or by the use of the mails or by any means or instrumentality (including, without limitation, facsimile transmission, telex and telephone) of interstate or foreign commerce of, or any facilities of a national securities exchange of Canada, Japan or Australia. Copies of this announcement are not being, and must not be, mailed, or otherwise distributed or sent in or into or from the United States, Canada, Japan or Australia and persons receiving this announcement (including custodians, nominees and trustees) must not distribute or send it into or from the United States, Canada, Japan or Australia. CSFB, which is regulated in the United Kingdom by The Securities and Futures Authority Limited, is acting for Lincoln Electric and Lincoln Electric Global and no one else in connection with the Offer and will not be responsible to anyone other than Lincoln Electric and Lincoln Electric Global for providing the protections afforded to customers of CSFB nor for giving advice in relation to the Offer. Lazard, which is regulated in the United Kingdom by The Securities and Futures Authority Limited, is acting for Charter and no one else in connection with the Offer and will not be responsible to anyone other than Charter for providing the protections afforded to customers of Lazard nor for giving advice in relation to the Offer. 4 4 Not for release, publication or distribution in or into the United States, Canada, Australia or Japan. For Immediate Release 26 April, 2000 LINCOLN ELECTRIC HOLDINGS, INC. ("LINCOLN ELECTRIC") RECOMMENDED CASH OFFER FOR CHARTER PLC ("CHARTER") 1. INTRODUCTION The boards of Lincoln Electric and Charter announce that agreement has been reached on the terms of a recommended cash offer to be made by CSFB on behalf of Lincoln Electric Global Limited ("Lincoln Electric Global"), a wholly owned subsidiary of Lincoln Electric, for the entire issued and to be issued share capital of Charter. The Offer is 500 pence in cash for each Charter Share and values the entire issued share capital of Charter at approximately GBP 471 million. The Offer represents a premium of 105 per cent. to Charter's share price of 243.5 pence at the close of business on 25 April, 2000, the last dealing day before this announcement, and a premium of 128 per cent. to the three month average share price of Charter of 219.7 pence. Lincoln Electric Global has received irrevocable undertakings to accept the Offer in respect of 14,460,354 Charter Shares (15.4 per cent. of Charter's issued share capital) held by UBS Brinson Limited, 9,725,303 Charter Shares (10.3 per cent.) held by Phillips & Drew Fund Management Limited and 4,740,000 Charter Shares (5.0 per cent.) held by Sterling Investment Group Limited representing, in aggregate, 30.7 per cent. of Charter's issued share capital. The circumstances in which the undertakings will cease to be binding are set out in paragraph 10 below. In addition, Lincoln Electric Global has received irrevocable undertakings to accept the Offer from those directors of Charter who own Charter Shares in respect of, in aggregate, 95,512 Charter Shares, representing approximately 0.1 per cent. of Charter's issued share capital. The undertakings do not allow the Directors to accept another offer unless the Offer lapses or is withdrawn. In aggregate, therefore, Lincoln Electric Global has received undertakings to accept the Offer in respect of 29,021,169 Charter Shares, representing 30.8 per cent. of Charter's issued share capital. The Board of Charter, which has been so advised by Lazard, considers the terms of the Offer to be fair and reasonable. In providing advice to the Board of Charter, Lazard has taken into account the commercial assessments of the directors of Charter. Accordingly, the Board of Charter unanimously recommends all Charter shareholders to accept the Offer, as the directors have undertaken to do with respect to their beneficial holdings. 5 5 2. THE OFFER The Offer, which will be subject, inter alia, to the conditions and further terms set out below and in Appendix 1 to this announcement and to be set out in full in the Offer Document, will be made on the following basis: For each Charter Share 500 pence in cash Charter shareholders on the register on 24 March, 2000 will also be entitled to receive the final Charter dividend in respect of the year ended 31 December, 1999 of 10.5 pence (net) per Charter Share payable on 15 May, 2000. 3. FURTHER DETAILS OF THE OFFER The Charter Shares will be acquired by Lincoln Electric Global fully paid and free from all liens, equities, charges, encumbrances and other interests and together with all rights now or hereafter attaching thereto, including the right to receive and retain all dividends and other distributions declared, made or paid hereafter other than the right to receive and retain the final dividend of 10.5 pence (net) per Charter Share payable on 15 May, 2000, to Charter shareholders on the register on 24 March, 2000. The Offer will be extended to all existing issued Charter Shares and to any Charter Shares which are unconditionally allotted or issued prior to the date on which the Offer closes (or such other date, as Lincoln Electric Global may, subject to the provisions of the City Code, decide) including Charter Shares issued as a result of the exercise of options under the Share Schemes. The conditions and certain further terms of the Offer are set out in Appendix 1. 4. BACKGROUND TO AND STRATEGIC RATIONALE FOR THE OFFER The acquisition of Charter represents a major step in line with Lincoln Electric's corporate objectives of global growth and increased competitiveness in the welding production industry. On a combined basis, the two companies had total proforma sales of approximately USD 2537.4 million in 1999, USD 2,016.7 million in welding and cutting products and USD 520.7 million in air and gas handling and other engineered products. Welding and Cutting The potential of the combination of Lincoln Electric's welding business with Charter's ESAB welding business is the key rationale for the transaction; the combined welding and cutting businesses will constitute a leading global welding supplier as a result of Lincoln Electric and ESAB's complementary fit in geography, products and technology. Geography For the year ended 31 December, 1999, 68.5 per cent. of Lincoln Electric's revenues were generated from North America, 17.2 per cent. from Europe and 14.3 per cent. from the rest of the world. The combined welding and cutting businesses would be better balanced geographically: 49.0 per cent. of 1999 proforma revenues would have been achieved from North America, 35.9 per cent. from Europe and 15.1 per cent. from the rest of the world. 6 6 The world-wide locations of the Lincoln Electric and ESAB manufacturing facilities complement each other in nearly all regions. In Europe, ESAB has extensive facilities in Scandinavia and the Eastern European countries, areas where Lincoln Electric's presence is limited. In the Western hemisphere Lincoln Electric has its main facilities in the USA, Canada and Mexico, while ESAB has significant manufacturing facilities in the two key South American markets of Brazil and Argentina. In the Asia-Pacific region, the facilities of the combined welding and cutting businesses would be able to serve all the major markets, with the Lincoln Electric key operations in China, Taiwan and Australia and ESAB's interests in South Korea and India. Considered together the two businesses would have a combined manufacturing and distribution presence able to serve all major welding customers world-wide. Products The combined product programmes of the two welding and cutting businesses would provide a more extensive product line to better serve the total needs of customers. ESAB is a leader in large metal cutting systems, a product area not now offered by Lincoln Electric. Lincoln Electric manufactures the most complete welding machine line in the world, which will now be available for supply by ESAB to its customers. Lincoln Electric is a leader in the supply of welding robotics equipment and systems, which will be able to take advantage of complementary ESAB welding technology. Technology The technology and research and development strengths of the two welding and cutting businesses are also highly complementary. ESAB has a particularly strong welding research and development program in speciality consumables and certain welding technologies, such as friction stir welding. Lincoln Electric is a technology leader in "state of the art" welding machines, with more than 50 per cent. of its current equipment sales coming from equipment that has been introduced in the last 5 years. Combined, the technology capabilities of the two businesses represent the leading edge in all the aspects of welding products, both consumables and machines. Financial benefits Lincoln Electric expects to achieve meaningful synergies and operating efficiencies by integrating the two welding businesses. The benefits of combined global purchasing, warehousing, logistics, and administration, as well as large scale production efficiencies should provide immediate cost saving opportunities. Synergies will also provide the potential for reduced capital expenditure requirements. Equally important are the opportunities to improve combined revenues as a result of offering broadened product lines through the existing Lincoln Electric and ESAB sales and distribution channels. Air and Gas Handling Lincoln Electric appreciates that there has been significant recent restructuring in the Howden business and that there is underlying value in that business. Howden is a leading global manufacturer of air and gas handling equipment. It has significant experience of air and gas handling technology and a comprehensive product portfolio. 7 7 5. INFORMATION RELATING TO LINCOLN ELECTRIC Lincoln Electric is a leading world-wide manufacturer of welding and cutting products. Lincoln Electric's products include arc welding power sources, wire feeding systems, robotic welding packages, fume extraction equipment, consumable electrodes and fluxes. Lincoln Electric's products are sold in the United States, Europe and other international markets. Approximately 70 per cent. of Lincoln Electric's sales are into the United States. Lincoln Electric's customers primarily comprise distributors and original equipment manufacturers with a wide range of industrial applications, including the manufacturing of automobiles, trucks, heavy machinery, railcars and ships and the construction of buildings, bridges, oil platforms and pipelines. Lincoln Electric has 23 manufacturing facilities in 16 countries (3 of which are located in the United States) and employs approximately 6,400 people world-wide. For the financial year ended 31 December, 1999, Lincoln Electric's results under US GAAP comprised consolidated net income before exceptional items of USD 73.9million (1998 USD 93.7million) on net revenues of USD 1,086.2million (1998 USD 1,186.7million). As at 31 December, 1999 Lincoln Electric had net assets of USD 451.5million (1998 USD 490.9million) and net borrowings of USD 75.1million (1998 USD 60.7million). Lincoln Electric's common stock is traded on NASDAQ with a current equity market capitalisation of approximately USD 849 million. 6. INFORMATION RELATING TO CHARTER Charter has two principal groupings of operating subsidiaries: ESAB and Howden. ESAB is a leading world-wide manufacturer of welding and cutting products. ESAB's welding products include welding power sources, cutting systems and consumable electrodes and fluxes. ESAB's products are sold in the United States, Europe and other international markets. Approximately 49 per cent. of ESAB's sales are into Europe. ESAB has a number of manufacturing facilities with a presence in over 30 countries worldwide and is represented in all major markets. ESAB employs approximately 7,400 people world-wide. Howden is one of the global market leaders in the manufacture of air and gas handling equipment. Howden designs, manufactures and services industrial fans, compressors and heat exchangers for customers across a wide range of industries world-wide. For the financial year ended 31 December, 1999 Charter's results under UK GAAP comprised profit before interest and tax from continuing operations of GBP 61.9 million (1998 GBP 83.5 million) on net revenues from continuing operations of GBP 896.9 million (1998 GBP 975.2 million). As at 31 December, 1999 Charter had net assets of GBP 40.7 million (1998 net deficit of GBP 96.5 million) and net borrowings of GBP 193.5 million (1998 GBP 357.1 million). 7. REGULATORY APPROVALS The Offer is subject to regulatory approvals being obtained in the US and certain European and other countries. Both Lincoln Electric and Charter are committed to working together to obtain the necessary approvals, and Lincoln Electric has given Charter certain assurances in relation to fulfilment of the regulatory conditions to the Offer. At the request of Lincoln Electric Global and Charter the Panel has agreed that in view of the required regulatory process the period allowed for posting of the Offer Document should be extended by 30 days until 23 June, 2000. 8 8 Lincoln Electric Global has agreed that, in the event that the Offer were to lapse as a result of Lincoln Electric Global invoking the regulatory conditions as set out in Part A of Appendix 1 to this document, Lincoln Electric Global will pay GBP 6 million in cash to Charter. 8. MANAGEMENT AND EMPLOYEES Lincoln Electric attaches great importance to the skills and experience of the existing management and employees of Charter and believes that as a result of the acquisition there will be greater opportunities. Lincoln Electric Global has given assurances to the Board of Charter that the existing rights of employees of Charter, including pension rights, will be fully safeguarded. 9. FINANCING The cash required by Lincoln Electric Global to satisfy the consideration payable to Charter shareholders under the Offer will be provided from committed bank facilities provided by Credit Suisse First Boston and JP Morgan. 10. GENERAL The undertaking by UBS Brinson Limited representing approximately 15.4 per cent. of the issued Charter Shares and the undertaking by Phillips & Drew Fund Management Limited representing approximately 10.3 per cent. of the issued Charter Shares will each be suspended if, within 7 days of the date of despatch of the Offer Document, a third party makes a Higher Competing Offer to acquire Charter. The undertaking by Sterling Investment Group Limited, representing approximately 5.0 per cent. of the issued Charter Shares will be suspended if, within 21 days of despatch of the Offer Document, a third party makes a Higher Competing Offer to acquire Charter. For all of these undertakings, if, within 7 days of such Higher Competing Offer, Lincoln Electric Global raises its offer on terms no less favourable than the Higher Competing Offer, the suspension will end and the undertakings will become binding again. For the purposes of this paragraph "Higher Competing Offer" means any higher offer made in respect of the issued ordinary shares of Charter which is at the date of its announcement equal to, or greater than, 550 pence per ordinary share. Save in respect of those Charter Shares for which Lincoln Electric Global has received irrevocable undertakings to accept the Offer, neither Lincoln Electric Global, nor, so far as Lincoln Electric Global is aware, any person deemed to be acting in concert with Lincoln Electric Global, owns or controls any Charter Shares or has any option to acquire any Charter Shares or derivatives referenced thereto. The Offer will be on the terms and will be subject to the conditions which are set out in Appendix 1 of this announcement and in the Offer Document (and such further terms as may be required to comply with the provisions of the City Code). Charter has committed to make a payment of GBP 4.7 million in cash to Lincoln Electric in the event that a third party offeror makes a bid for Charter which becomes or is declared unconditional. A copy of this announcement is being posted to Charter shareholders. CSFB, the financial adviser to Lincoln Electric and Lincoln Electric Global, will despatch the formal Offer Document, containing the full terms and conditions of the Offer. The contents of this announcement do not constitute an offer to acquire, or invitation to sell shares in Charter. 9 9 The availability of the Offer to persons not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions. Persons who are not resident in the United Kingdom should inform themselves about and observe any applicable requirements. The Offer will not be made, directly, or indirectly, in or into or by the use of the mails or by any means or instrumentality (including, without limitation, facsimile transmission, telex and telephone) of interstate or foreign commerce of, or any facilities or a national securities exchange of Canada, Japan or Australia. Copies of this announcement are not being, and must not be, mailed, or otherwise distributed or sent in or into or from the United States, Canada, Japan or Australia and persons receiving this announcement (including custodians, nominees and trustees) must not distribute or send it into or from the United States, Canada, Japan or Australia. This announcement contains certain forward-looking statements with respect to the financial condition, results of operations and the businesses of Lincoln Electric and Charter, cost savings, dividends and management's plans and objectives regarding Charter. These statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. Such statements should not be interpreted to mean that earnings per share will necessarily be greater than those for the relevant preceding financial period. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements and forecasts, such as ability to integrate the two welding businesses and realise synergies and achieve cost savings, difficulties of obtaining governmental approvals for new products, delays in new product launches, exposure to fluctuations in exchange rates for foreign currencies, the risk that research and development will not yield new products that achieve commercial success, the risk of substantial product liability claims, exposure to environmental liability, the impact of competition, price controls and price reductions and inflation, adverse economic conditions, interruptions in production, inability of the company to market existing and new products effectively and the risk of loss or expiration of patents and trademarks. The issue of this announcement by Lincoln Electric, Lincoln Electric Global and Charter has been approved for the purposes of section 57 of the Financial Services Act 1986 by CSFB and Lazard, each of which is regulated by The Securities and Futures Authority Limited. In this document unless otherwise stated GBP has been converted to USD at an exchange rate of GBP1:USD1.618. 10 10 APPENDIX 1 CONDITIONS AND CERTAIN FURTHER TERMS OF THE OFFER PART A: CONDITIONS OF THE OFFER The Offer will be made in compliance with the applicable rules of the London Stock Exchange and the City Code and is subject to the following conditions: (a) valid acceptances being received (and not, where permitted, withdrawn) by 3.00 p.m. on the first closing date of the Offer (the "FIRST CLOSING DATE") or such later time(s) and/or date(s) as Lincoln Electric Global may, subject to the Code, decide in respect of not less than 90 per cent. (or such lesser percentage as Lincoln Electric Global may decide) of the Charter Shares to which the Offer relates, provided that this condition will not be satisfied unless Lincoln Electric and its wholly-owned subsidiaries shall have acquired, or agreed to acquire, pursuant to the Offer or otherwise, Charter shares carrying more than 50 per cent. of the voting rights normally exercisable at a general meeting of Charter, including for this purpose (to the extent, if any, required by the Panel) any voting rights attaching to any Charter shares that are unconditionally allotted or issued before the Offer becomes or is declared unconditional as to acceptances pursuant to the exercise of any outstanding subscription or conversion rights or otherwise and for the purposes of this condition: (i) shares which have been unconditionally allotted shall be deemed to carry the voting rights they will carry on issue; and (ii) the expression "CHARTER SHARES TO WHICH THE OFFER RELATES" shall be construed in accordance with sections 428 to 430F of the Companies Act 1985; (b) it being established, in terms reasonably satisfactory to Lincoln Electric Global, that the proposed acquisition of Charter by Lincoln Electric Global or any matter arising from that acquisition will not be referred to the Competition Commission; (c) all filings having been made and all applicable waiting periods under the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the regulations thereunder having expired, lapsed or been terminated as appropriate in each case in connection with the Offer and the proposed acquisition of any shares in, or control of, Charter by Lincoln Electric Global; (d) all merger control or similar approvals, clearances or consents having been obtained in any jurisdiction in which there is a requirement for such approval, clearance or consent before the Offer and the proposed acquisition of any shares in, or control of, Charter by Lincoln Electric Global may be implemented or voting rights in respect of Charter shares may be exercised by Lincoln Electric Global; (e) no government or governmental, quasi-governmental, supranational, statutory or regulatory body or association or agency (including any trade agency) or any court or other body (including any professional or environmental body) or person in any jurisdiction (a "THIRD PARTY") having instituted or threatened any action, proceeding, suit, investigation or enquiry or enacted, made or proposed and there not continuing to be outstanding any statute, regulation, order or decision that would or might be reasonably expected to: 11 11 (i) make the Offer or the acquisition of any Charter shares, or control of Charter, by any member of the Wider Lincoln Electric Group void, unenforceable or illegal or directly or indirectly restrict, prohibit, delay or otherwise interfere with the implementation of, or impose additional conditions or obligations with respect to, or otherwise challenge, the Offer or the acquisition of any Charter shares, or control of Charter, by Lincoln Electric in a way which is material in the context of the Offer; (ii) require, prevent or delay the divestiture (or alter the terms of any proposed divestiture) by the Wider Lincoln Electric Group or the Wider Charter Group of all or any part of their respective businesses, assets or properties or impose any limitation on their ability to conduct their respective businesses and to own any of their respective assets or properties in each case to an extent which is material in the context of the Wider Lincoln Electric Group taken as a whole or (as the case may be) the Wider Charter Group taken as a whole; (iii) impose any limitation on the ability of any member of the Wider Lincoln Electric Group to acquire or hold or to exercise effectively, directly or indirectly, all or any rights of ownership of shares in any member of the Wider Charter Group or on the ability of any member of the Wider Charter Group to hold or exercise effectively, directly or indirectly, all or any rights of ownership of shares in any other member of the Wider Charter Group in each case to an extent which is material in the context of the Wider Lincoln Electric Group taken as a whole or (as the case may be) the Wider Charter Group taken as a whole; (iv) require any member of the Wider Lincoln Electric Group or the Wider Charter Group to offer to acquire any shares in any member of the Wider Charter Group owned by any third party in each case to an extent which is material in the context of the Wider Lincoln Electric Group taken as a whole or (as the case may be) the Wider Charter taken as a whole; (v) otherwise adversely affect the business, profits or prospects of any member of the Wider Lincoln Electric Group or of the Wider Charter Group in each case to an extent which is material in the context of the Wider Lincoln Electric Group taken as a whole or (as the case may be) the Wider Charter Group taken as a whole, and all applicable waiting periods during which any such Third Party could institute or threaten any such action, proceeding, suit, investigation or enquiry having expired, lapsed or been terminated; (f) all necessary filings having been made and all appropriate waiting periods under any applicable legislation or regulations of any jurisdiction having expired, lapsed or been terminated in each case in respect of the Offer or the acquisition of any shares in, or control of, Charter by Lincoln Electric Global or any member of the Wider Lincoln Electric Group and all authorisations, orders, grants, recognitions, confirmations, licences, consents, clearances, permissions and approvals ("AUTHORISATIONS") necessary or appropriate in any jurisdiction for or in respect of the Offer and the proposed acquisition of any shares in, or control of, Charter by Lincoln Electric Global being obtained in terms and in a form reasonably satisfactory to Lincoln Electric Global from appropriate Third Parties or from any persons or bodies with whom any member of the Wider Lincoln Electric Group or the Wider Charter Group has entered into contractual arrangements, in each case where absence of such 12 12 authorisations would have a material adverse effect on the Wider Charter Group taken as a whole, and such authorisations together with all authorisations necessary for any member of the Wider Charter Group to carry on its business (where such business is material in the context of the Wider Charter Group taken as a whole and where the absence of such authorisations would have a material adverse affect on the Wider Charter Group taken as a whole) remaining in full force and effect and no intimation of any intention to revoke or not to renew any of the same having been made under the laws or regulations of any jurisdiction and all necessary statutory or regulatory obligations in any jurisdiction having been complied with, and which, in each case, is material in the context of the Wider Charter Group taken as a whole; (g) save as fairly disclosed in writing since 1 January, 2000 and on or before 24 April, 2000 by Charter and/or its advisers to Lincoln Electric and/or its advisers in the context of the Offer there being no provision of any arrangement, agreement, licence or other instrument to which any member of the Wider Charter Group is a party or by or to which any such member or any of their assets may be bound or be subject which, as a result of the making or implementation of the Offer or the acquisition by Lincoln Electric Global of the share capital of Charter or any part thereof or because of a change in the control or management of Charter would or might reasonably be expected to result in (to an extent which is materially adverse in the context of the Wider Charter Group taken as a whole): (i) any moneys borrowed by or any indebtedness (actual or contingent) of any such member becoming repayable or capable of being declared repayable immediately or earlier than the stated repayment date or the ability of such member to borrow monies or incur any indebtedness being withdrawn or inhibited or any such arrangement, agreement, licence or instrument being terminated or modified or any onerous obligation arising or any action being taken or arising thereunder; (ii) the creation or enforcement of any mortgage, charge or other security whether existing or having arisen over the whole or any part of the business, property or assets of any such member; (iii) the interests or business of any such member in or with any other person, firm or company (or any arrangements relating to such interest or business) being terminated or adversely affected; (iv) any such member ceasing to be able to carry on business under any name under which it presently does so; (v) any material assets or interests of any such member being or falling to be disposed of or charged or any right arising under which any such asset or interest could be required to be disposed of or charged otherwise than in the ordinary course of business; or (vi) the value of any such member or its financial or trading position or prospects being prejudiced or adversely affected; 13 13 (h) save as fairly disclosed in writing since 1 January, 2000 by Charter and/or its advisers to Lincoln Electric and/or its advisers in the context of the Offer and on or before 24 April, 2000, and except as disclosed in the Annual Report and Accounts of Charter for the year ended 31 December, 1999 or as publicly announced to the London Stock Exchange Company Announcements Office by or on behalf of Charter on or before 24 April, 2000 no member of the Wider Charter Group having since 31 December, 1999: (i) save as between Charter and wholly-owned subsidiaries of Charter or upon the issue of options pursuant to or the exercise of rights to subscribe for Charter shares pursuant to options granted under the Charter Share Option Schemes, issued or agreed to issue or authorised or proposed the issue of additional shares of any class, or securities convertible into, or rights, warrants or options to subscribe for or acquire, any such shares or convertible securities; (ii) save for the final dividend of 10.5p per share payable on 15 May, 2000, declared, paid or made or proposed to declare, pay or make any bonus, dividend or other distribution whether payable in cash or otherwise other than a distribution by any wholly-owned subsidiary of Charter; (iii) made, authorised or proposed or announced an intention to propose any merger, demerger, acquisition, disposal or transfer of assets (other than in the ordinary course of business) or shares where any of the foregoing is material in the context of the Wider Charter Group taken as a whole; (iv) made, authorised or proposed or announced its intention to propose any change in its share or loan capital; (v) issued, authorised or proposed the issue of any debentures or (save in the ordinary course of business) incurred any indebtedness or contingent liability which is, in any case, material in the context of the Wider Charter Group taken as a whole; (vi) entered into, varied or terminated, or authorised, proposed or announced its intention to enter into, vary or terminate any arrangement, contract or commitment (whether in respect of capital expenditure or otherwise) otherwise than in the ordinary course of business and which involves or could involve an obligation of a nature or magnitude which is material in the context of the Wider Charter Group; (vii) entered into or varied the terms of any service agreement with any director of Charter; (viii) otherwise in the ordinary course of business, disposed of or transferred, mortgaged or encumbered any assets or any right, title or interest in any asset which is material in the context of the Wider Charter Group taken as a whole or entered into any contract, transaction, reconstruction, amalgamation or arrangement otherwise than in the ordinary course of business; (ix) entered into any contract or other transaction otherwise than in the ordinary course of business and which is material in the context of the Wider Charter Group taken as a whole; 14 14 (x) proposed any voluntary winding up or had any order made for its winding-up (voluntary or otherwise), dissolution or reorganisation or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of all or a substantial part of its assets and revenues; (xi) waived or compromised any claim, which is material in the context of the Wider Charter Group taken as a whole; (xii) made or agreed or consented to any significant change to the terms of the trust deeds constituting the pension schemes established for its directors and/or employees and/or their dependants or to the benefits which accrue, or to the pensions which are payable thereunder, or to the basis on which qualification for or accrual or entitlement to such benefits or pensions are calculated or determined, or to the basis upon which the liabilities (including pensions) of such pension schemes are funded or made, or agreed or consented to, any change to the trustees, in each case which is material in the context of the wider Charter Group taken as a whole; (xiii) entered into an agreement which will result in the restriction of the scope of the business of the Wider Charter Group and will have a material adverse affect on the Wider Charter Group taken as a whole; or (xiv) entered into any contract, commitment or agreement or passed any resolution in general meeting with respect to any of the transactions, matters or events referred to in this paragraph; and for the purpose of this condition "MATERIAL" shall mean material in the context of the Wider Charter Group taken as a whole; (i) save as fairly disclosed in writing since 1 January, 2000 and on or before 24 April, 2000 by Charter and/or its advisers to Lincoln Electric and/or its advisers in the context of the Offer (or as disclosed in the Annual Report and Accounts of Charter for the year ended 31 December, 1999 or the Interim Financial Statements of Charter for the six months ended 30 June, 1999 or as publicly announced to the London Stock Exchange Company Announcements Office by or on behalf of Charter on or before 24 April, 2000 since 31 December, 1999: (i) no material adverse change in the business, financial or trading position or profits or prospects of any member of the Wider Charter Group having occurred which is materially adverse in the context of the Wider Charter Group taken as a whole; (ii) no material litigation, arbitration proceedings, prosecution, awards, judgements or other legal proceedings having been threatened, announced, instituted or remaining outstanding by, against or in respect of any member of the Wider Charter Group or to which any member of the Wider Charter Group is a party (whether as plaintiff or defendant or otherwise) and no investigation by any Third Party or other investigative body against or in respect of any member of the Wider Charter Group having been threatened, announced, instituted or remaining outstanding by, against or in respect of any member of the Wider Charter Group which is likely to materially and adversely affect the Wider Charter Group taken as a whole; and 15 15 (iii) no contingent or other liability having arisen which might be likely adversely to affect any member of the Wider Charter Group which is materially adverse in the context of the Wider Charter Group taken as a whole; (j) Lincoln Electric Global not having discovered that: (i) any financial, business or other information publicly disclosed at any time by any member of the Wider Charter Group is misleading, contains a misrepresentation of fact or omits to state a fact necessary to make the information contained therein not misleading which in any case is material and adverse to the financial or trading position of the Wider Charter Group taken as a whole; (ii) any member of the Wider Charter Group is subject to any liability, contingent or otherwise, which is not disclosed in the Annual Report and Accounts of Charter for the year ended 31 December, 1999, or the Interim Financial Statements of Charter for the six months ended 30 June, 1999 and which is material in the context of the Wider Charter Group taken as a whole; (iii) any past or present member of the Wider Charter Group has not complied with all applicable legislation or regulations of any jurisdiction with regard to the disposal, discharge, spillage, leak or emission of any waste or hazardous or harmful substance or any substance likely to impair the environment or harm human health or otherwise relating to environmental matters, which non-compliance would be likely to give rise to any liability (whether actual or contingent) or cost on the part of any member of the Wider Charter Group which is material in the context of the wider Charter Group taken as a whole; or (iv) there is or is likely to be any liability (whether actual or contingent) to make good, repair, re-instate or clean up any property now or previously owned, occupied or made use of by any past or present member of the Wider Charter Group under any environmental legislation, regulation, notice, circular or order of any Third Party and which is material in the context of the Wider Charter Group taken as a whole; Lincoln Electric Global reserves the right to waive all or any of conditions (b) to (j) inclusive, in whole or in part. The Offer will lapse unless all the above conditions are fulfilled or (if capable of waiver) waived or, where appropriate, determined by Lincoln Electric to have been or remain satisfied by midnight on the day which is 21 days after the later of the First Closing Date and the date on which the Offer becomes or is declared unconditional as to acceptances (or such later date as Lincoln Electric Global may, with the consent of the Panel, decide). Lincoln Electric shall be under no obligation to waive or treat as fulfilled any of conditions (b) to (j) inclusive by a date earlier than the date specified above for the fulfilment thereof notwithstanding that the other conditions of the Offer may at such earlier date have been waived or fulfilled and that there are at such earlier date no circumstances indicating that any of such conditions may not be capable of fulfilment. If Lincoln Electric Global is required by the Panel to make an offer or offers for any Charter Shares under Rule 9 of the Code, Lincoln Electric Global may make such alterations to the above conditions as are necessary to comply with that Rule. If before the First Closing Date or the date when the Offer becomes unconditional as to acceptances (whichever is the later) the acquisition of Charter is referred to the Competition Commission, the Offer will lapse. 16 16 As used in this Part A: "WIDER LINCOLN ELECTRIC GROUP" means Lincoln Electric and its subsidiary undertakings, associated undertakings and any other undertakings in which Lincoln Electric and such undertakings (aggregating their interests) have a substantial interest; "WIDER CHARTER GROUP" means Charter and its subsidiary undertakings, associated undertakings and any other undertakings in which Charter and such undertakings (aggregating their interests) have a substantial interest; and for these purposes "SUBSIDIARY UNDERTAKING", "ASSOCIATED UNDERTAKING" and "UNDERTAKING" have the meanings given by the Companies Act 1985 (but for this purposes ignoring paragraph 20(1)(b) of Schedule 4A to the Companies Act 1985) and "SUBSTANTIAL INTEREST" means a direct or indirect interest in 20 per cent. or more of the equity capital of an undertaking. PART B: CERTAIN FURTHER TERMS OF THE OFFER The Charter Shares will be acquired by Lincoln Electric Global fully paid and free from all liens, equities, charges, encumbrances, rights of pre-emption and any other third party right of any nature whatsoever and together with all rights attaching thereto including the right to receive in full all dividends and other distributions declared, paid or made other than the dividend of 10.5 pence (net) payable on 15 May, 2000. The Offer is not being made, directly or indirectly, in or into the USA, Canada, Australia or Japan, or by use of the mails of, or by any means or instrumentality of interstate or foreign commerce of, or any facilities of a national securities exchange of, any of these jurisdictions. Such means or instrumentalities include, but are not limited to, facsimile transmission, telex and telephone. Accordingly, copies of this announcement are not being, and must not be, mailed or otherwise distributed or sent in or into the USA, Canada, Australia or Japan. 17 17 APPENDIX 2 DEFINITIONS The following definitions apply throughout this press release unless the context requires otherwise. Lincoln Electric Lincoln Electric Holdings, Inc. Lincoln Electric Global Lincoln Electric Global Limited Board of Charter The board of directors of Charter "City Code" or "Code" The City Code on Takeovers and Mergers CSFB Credit Suisse First Boston (Europe) Limited, financial adviser to Lincoln Electric Charter Charter plc Charter shareholders Holders of Charter Shares Charter Shares Ordinary shares of two pence each in the capital of Charter Lazard Lazard Brothers & Co., Limited, financial adviser to Charter Offer The recommended offer to be made by CSFB, on behalf of Lincoln Electric Global, to acquire all of the Charter Shares on the terms and subject to the conditions set out or referred to in the Offer Document, including, where the context so requires, any subsequent revision, variation, extension or renewal thereof Offer Document The offer document to be addressed to Charter shareholders in connection with the Offer Panel The Panel on Takeovers and Mergers Share Schemes Charter plc Equity Partnership Plan; Charter plc Unapproved Executive Share Option Scheme; Charter plc Approved Executive Share Option Scheme; Charter Consolidated PLC Share Option Scheme 1983; Charter plc 1994 Employee Share Participation Plan and Charter plc 2000 Annual Incentive Scheme. EX-3.B 3 EXHIBIT 3(B) 1 Exhibit 3(b) Amended May 2, 2000 LINCOLN ELECTRIC HOLDINGS, INC. CODE OF REGULATIONS ARTICLE I SHARES 1. REGISTRATION AND TRANSFER OF CERTIFICATES. Each shareholder of the Corporation whose shares have been fully paid for shall be entitled to a certificate or certificates showing the number of shares registered in his name on the books of the Corporation. Each certificate shall be signed by the Chairman of the Board or the President or Vice-President of the Corporation and the Secretary or Assistant Secretary or the Treasurer or an Assistant Treasurer. Shares shall be transferred only on the books of the Corporation by the holder thereof, in person or by Attorney, upon surrender and cancellation of certificates for a like number of shares. 2. SUBSTITUTED CERTIFICATES. The Board of Directors may authorize the issuance of a new certificate in place of any certificate theretofore issued by the Corporation alleged to have been lost or destroyed; in its discretion requiring the owner of the lost or destroyed certificate, or the legal representative, to give the Corporation a bond in such sum as the Board of Directors may direct as indemnity against any claim that may be made against the Corporation; or, if in the judgment of the Board it is proper to do so, a new certificate may be issued without requiring any bond. 3. SHAREHOLDERS ENTITLED TO NOTICE AND TO VOTE. The Board of Directors may fix a time not exceeding forty-five (45) days preceding the date of any meeting of shareholders, or any dividend payment date, or any date for the allotment of rights, as a record date for the determination of the shareholders entitled to notice of such meeting, or to vote thereat, or to receive such dividends or rights, as the case may be, or in lieu thereof, the Board of Directors may close the books of the Corporation against the transfer of shares during the whole or any part of such period. ARTICLE II MEETINGS OF SHAREHOLDERS 1. ANNUAL MEETING. The Annual Meeting of shareholders shall be held at such date, time and place as may be designated from time to time by the Board of Directors, for the election of Directors and the consideration of reports to be laid before the meeting. Upon due notice there may also be considered and acted upon at the Annual Meeting any matter which can properly be considered and acted upon at a 2 special meeting, in which case and for which purpose the Annual Meeting shall also be considered as, and shall be, a special meeting. When an Annual Meeting is not held or Directors are not elected thereat, they may be elected at a special meeting called for that purpose. 2. SPECIAL MEETINGS. Special meetings of the shareholders may be called by the President, or an Executive or Senior Vice-President, or the Chairman of the Board of Directors, or by the Executive Committee, or by a majority of the Board of Directors, acting with or without a meeting, or by persons who hold twenty-five percent of all the shares outstanding and entitled to vote thereat, at such place or places as may be designated in the call therefore, and notice thereof; provided, however, that a meeting for the election of Directors may be held only within the State of Ohio. 3. NOTICE OF MEETINGS. Notice of meetings of shareholders shall be given by the Secretary, or in his absence by the Chairman of the Board or President or a Vice-President, and such notice shall state the purpose or purposes for which the meeting is called, and the time and place where it is to be held, and shall be given to each shareholder of record entitled to vote at such meeting or entitled to notice thereof, at least ten (10) days prior to the meeting. Notice may be given to the shareholder at his address as it appears upon the records of the Corporation. In the event of the transfer of shares after notice has been given and prior to the holding of the meeting, it shall not be necessary to serve notice upon the transferee. Notice of the time, place and purpose of any meeting of shareholders may be waived by the assent of every shareholder entitled to notice, filed with or entered upon the records of the meeting, either before or after the holding thereof. 4. QUORUM. The holders of a majority of the shares issued and outstanding, entitled to vote, present either in person or by proxy, shall constitute a quorum, unless a larger number is required by the laws of Ohio, in which case the number required by the laws of Ohio, present either in person or by proxy, shall constitute a quorum, but any less number may adjourn the meeting from time to time, until a quorum is obtained, and no further notice of such adjourned meeting need be given other than by announcement at the meeting at which such adjournment is taken. 5. PROXIES. Each shareholder entitled to vote shall be entitled to one vote, either in person or by proxy, for each share of the Corporation standing in his name at the time of the closing of the books for such meeting. No proxy shall be valid after the expiration of eleven (11) months from the date thereof, unless a longer time be specified therein. -2- 3 ARTICLE III BOARD OF DIRECTORS 1. NUMBER AND ELECTION. The powers and authority of the Corporation shall be exercised and its business managed and controlled by a Board of Directors. The election of Directors shall be by ballot and shall be held at the Annual Meeting of shareholders or at a special meeting called for that purpose. The maximum number of the Directors of the Corporation shall be eighteen. Subject to such maximum, the number of Directors may be fixed or changed (a) at a meeting of the shareholders called for the purpose of electing Directors at which a quorum is present, by the affirmative vote of the holders of a majority of the shares that are represented at the meeting and entitled to vote on the proposal, and (b) by the Directors, by the vote of a majority of their number, who may also fill any Director's office that is created by an increase in the number of Directors. The Directors shall be divided into three classes, as nearly equal in number as possible, as determined by the Board of Directors of the Corporation. A separate election shall be held for each class of Directors as hereinafter provided. Directors elected at the first election for the first class shall hold office for the term of one year from the date of their election and until the election of their successors. Directors elected at the first election for the second class shall hold office for the term of two years from the date of their election and until the election of their successors, and Directors elected at the first election for the third class shall hold office for the term of three years from the date of their election and until the election of their successors. At each annual election, the successors to the Directors of each class whose terms shall expire in that year shall be elected to hold office for the term of three years from the date of their election and until the election of their successors. In case of any increase in the number of Directors of any class, any additional Directors elected to such class shall hold office for a term which shall coincide with the term of such class. 2. VACANCY AND REMOVAL. All Directors, for whatever terms elected, shall hold office subject to applicable statutory provisions as to the creation of vacancies and removal; provided, however, that all Directors, all the Directors of a particular class or any individual Director may be removed from office, without assigning any cause, only by the affirmative vote of the holders of at least two-thirds of the voting power of the outstanding shares of stock entitled to vote generally on the election of Directors. 3. RESIGNATION. Any Director may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein. If no time is specified, it shall become effective from the time of its receipt by the Corporation, and the Secretary shall record such resignation, noting the day, hour and minute of its reception. The acceptance of a resignation shall not be necessary to make it effective. 4. MEETINGS. Directors may meet at such times and at such places within or without the State of Ohio as they may determine. Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors or the President on -3- 4 one day's notice to each Director by whom such notice is not waived, given either personally or by mail, telephone, telegram, telex, facsimile or similar medium of communication, and will be called by the Chairman of the Board of Directors or the President, in like manner and on like notice, on the written request of not less than one-third of the Board of Directors. A majority of the Board of Directors shall be necessary to constitute a quorum for the transaction of business, and the act of a majority of Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. 5. BY-LAWS. The Board of Directors may adopt By-Laws for its own government not inconsistent with the Articles of Incorporation or Regulations of the Corporation. ARTICLE IV INDEMNIFICATION AND INSURANCE 1. INDEMNIFICATION. (a) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, trustee, officer, employee or agent of another corporation, domestic or foreign, nonprofit or for profit, partnership, joint venture, trust or other enterprise, to the full extent permitted from time to time under the laws of the State of Ohio; provided, however, that the Corporation shall indemnify any such agent (as opposed to any Director, officer or employee) of the Corporation to an extent greater than that required by law only if and to the extent that the Directors, may, in their discretion, so determine. (b) The indemnification authorized by this Article shall not be exclusive of, and shall be in addition to, any other rights granted to those seeking indemnification hereunder or under the Articles or any agreement, vote of shareholders or disinterested Directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a Director, trustee, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (c) No amendment, termination or repeal of this Article IV shall affect or impair in any way the rights of any Director or officer of the Corporation to indemnification under the provisions hereof with respect to any action, suit or proceeding arising out of, or relating to, any actions, transactions or facts occurring prior to the final adoption of such amendment, termination or repeal. 2. LIABILITY INSURANCE. The Corporation may purchase and maintain insurance or furnish similar protection, including but not limited to trust funds, letters of -4- 5 credit or self-insurance, on behalf of or for any person who is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, trustee, officer, employee or agent of another corporation, domestic or foreign, nonprofit or for profit, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under this Article. Insurance may be purchased from or maintained with a person in which the Corporation has a financial interest. ARTICLE V NOMINATION OF DIRECTOR CANDIDATES 1. NOTIFICATION OF NOMINEES. Nominations for the election of Directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any shareholder entitled to vote in the election of Directors generally. However, any shareholder entitled to vote in the election of Directors generally may nominate one or more persons for election as Directors at a meeting only if written notice of such shareholder's intent to make such nomination or nominations has been received by the Secretary of the Corporation not less than 80 days in advance of such meeting; provided, however, that in the event that the date of the meeting was not publicly announced by the Corporation by mail, press release or otherwise more than 90 days prior to the meeting, notice by the shareholder to be timely must be delivered to the Secretary of the Corporation not later than the close of business on the tenth day following the day on which such announcement of the date of the meeting was communicated to shareholders. Each such notice shall set forth: (a) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the shareholder is a holder of record of stock of the Corporation entitled to vote for the election of Directors on the date of such notice and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (d) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the Board of Directors; and (e) the consent of each nominee to serve as a Director of the Corporation if so elected. 2. SUBSTITUTION OF NOMINEES. In the event that a person is validly designated as a nominee in accordance with paragraph 1 above, and shall thereafter become unable or unwilling to stand for election to the Board of Directors, the Board of Directors or the shareholder who proposed such nominee, as the case may be, may -5- 6 designate a substitute nominee upon delivery, not fewer than five days prior to the date of the meeting for the election of such nominee of a written notice to the Secretary setting forth such information regarding such substitute nominee as would have been required to be delivered to the Secretary pursuant to paragraph 1 above had such substitute nominee been initially proposed as a nominee. Such notice shall include a signed consent to serve as a Director of the Corporation, if elected, of each such substitute nominee. 3. COMPLIANCE WITH PROCEDURES. If the chairman of the meeting for the election of Directors determines that a nomination of any candidate for election as a Director at such meeting was not made in accordance with the applicable provisions of paragraphs 1 and 2 above, such nomination shall be void. ARTICLE VI COMMITTEES 1. CREATION AND ELECTION. The Board of Directors may create, from time to time and from its own number, an Executive Committee or any other committee or committees of the Board of Directors to act in the intervals between meetings of the Board of Directors and may delegate to such committee or committees any of the authority of the Board of Directors other than that of filling vacancies among the Board of Directors or in any committee of the Board of Directors. Committees shall consist of one or more Directors as appointed by the Board of Directors. The Board of Directors may appoint one or more Directors as alternate members of any such committee, who may take the place of any absent member or members at a meeting of such committee. Except as above provided and except to the extent that its powers are limited by the Directors, the Executive Committee during the intervals between meetings of the Directors shall possess and may exercise, subject to the control and direction of the Directors, all of the powers of the Directors in the management and control of the business of the Corporation, regardless of whether such powers are specifically conferred by these Regulations. All action taken by the Executive Committee shall be reported to the Directors at their first meeting thereafter. 2. QUORUM AND ACTION. Unless otherwise ordered by the Board of Directors, a majority of the members of any committee appointed by the Board of Directors pursuant to this Article VI shall constitute a quorum at any meeting thereof, and the act of a majority of the members present at a meeting at which a quorum is present shall be the act of such committee. Action may be taken by any such committee without a meeting by a writing or writings signed by all of its members. Any such committee shall prescribe its own rules for calling and holding meetings and its method of procedure, subject to any rules prescribed by the Board of Directors, and shall keep a written record of all action taken by it. -6- 7 ARTICLE VII OFFICERS 1. OFFICERS. The Corporation may have a Chairman of the Board and shall have a President (both of whom shall be Directors), a Secretary and a Chief Financial Officer (who shall serve as Treasurer under Ohio law). The Corporation may also have one or more Vice-Presidents and such other officers and assistant officers as the Board of Directors may deem necessary. All of the officers and assistant officers shall be elected by the Board of Directors. 2. AUTHORITY AND DUTIES OF OFFICERS. The officers of the Corporation shall have such authority and shall perform such duties as are customarily incident to their respective offices, or as may be specified from time to time by the Board of Directors regardless of whether such authority and duties are customarily incident to such office. ARTICLE VIII COMPENSATION OF DIRECTORS AND OFFICERS The compensation of the Directors and officers of the Corporation shall be such as the Board of Directors may from time to time designate. ARTICLE IX AMENDMENTS These regulations may be altered, changed, amended or repealed by the written consent of the holders of record of shares entitling them to exercise not less than two-thirds of the voting power of the Corporation, or at a meeting called and held for that purpose, by the affirmative vote of the holders of record of shares entitling them to exercise not less than a majority of the voting power of the Corporation; provided, however, that paragraphs 1 and 2 of Article III and all of Article V shall not be altered, changed, amended or repealed, nor shall any provision inconsistent with such provisions be adopted, without the affirmative vote of the holders of record of shares entitling them to exercise not less than two-thirds of the voting power of the Corporation entitled to vote generally in the election of Directors. -7- EX-10.P 4 EXHIBIT 10(P) 1 Exhibit 10(p) Adopted May 2, 2000 LINCOLN ELECTRIC HOLDINGS, INC. STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS 1. PURPOSES. The purposes of this Plan are to: (i) encourage the non-employee Directors of Lincoln Electric Holdings, Inc. (the "Company") to own shares of the Company and thereby to align their interests more closely with the interests of the Company's other shareholders; (ii) encourage the highest level of Director performance by providing the Directors with a vested interest in the Company's attainment of its financial goals; and (iii) provide financial incentives that will help attract and retain the most qualified non-employee Directors. 2. DEFINITIONS. As used in this Plan: "BOARD" means the Board of Directors of the Company. "CHANGE IN CONTROL" shall have the meaning defined in the agreement or notification evidencing the grant of an Option. "COMMITTEE" means the Committee described in Section 4 of the Plan. "COMMON SHARES" means (i) shares of the Company's common stock, without par value, and (ii) any securities into which common shares may be converted by reason of any transaction or event described in Section 7 of the Plan. "DATE OF GRANT" means the date as of which an Option is granted as provided in Section 5 of the Plan. "DIRECTOR" means a member of the Board. "DISABILITY" means permanent and total disability as determined under the Company's long-term disability program. "EFFECTIVE DATE." This Plan shall be effective immediately; provided, however, that the effectiveness of the Plan is conditioned upon its approval by the Company's shareholders at a meeting held in accordance with Ohio law within 12 months after the date the Plan is adopted by the Board. Any awards made under the Plan prior to shareholder approval shall be null and void if the Plan is not approved by shareholders within a 12-month period. "ELIGIBLE DIRECTOR" means a Director who is not an employee of the Company. For purposes of the Plan, an employee is an individual whose wages are subject to the withholding of Federal income tax under Sections 3401 and 3402 of the Internal Revenue Code. "FAIR MARKET VALUE" means the closing price of a share of the Company's common stock on The NASDAQ Stock Market on the day before the day the value determination is being made, whether for an Option grant or exercise; or if there was no closing price reported on that day, then the reported closing price on the nearest date before the date of grant or exercise; or if the shares are not listed or admitted to trading on The NASDAQ Stock Market on the day as of which the determination is being made, the amount determined by the Committee to be the Fair Market Value of a share on that day. 2 "NEWLY ELIGIBLE DIRECTOR" means a Director whose first term as a Director begins after December 31, 1999. "OPTIONEE" means a Director who has been granted an Option under the Plan. "OPTION PRICE" means the purchase price payable upon the exercise of an Option. "OPTION" means the right to purchase Common Shares of the Company upon the exercise of an initial Option or an annual Option granted pursuant to the Plan. Options may be evidenced by agreements or notifications, in written or electronic form, containing terms and conditions not inconsistent with the Plan. "PLAN" means the Lincoln Electric Holdings, Inc. Stock Option Plan for Non-Employee Directors, as amended from time to time. "RETIREMENT" means a Termination of Service as a Director occurring as a result of the Optionee's completion of his or her three-year term of service as a Director of the Company. "TERMINATION OF SERVICE" means the time at which the Optionee ceases to serve as a Director for any reason, with or without cause, which includes termination by resignation, removal, death or retirement. 3. SHARES AVAILABLE UNDER THE PLAN. (a) Subject to adjustments as provided in Sections 3(b) and 7 of the Plan, the total number of Common Shares that may be issued and the Options granted pursuant to the Plan shall not exceed 500,000. These shares may be treasury shares or shares of original issue or a combination of both. Notwithstanding any other provision of the Plan to the contrary, if the number of Common Shares authorized under the Plan is insufficient for all Options to be granted automatically on a specific date, Options shall be granted pro rata among all Eligible Directors entitled to be granted an Option on that date. In connection with the issuance or transfer of Common Shares pursuant to the Plan, the Company may repurchase Common Shares in the open market or otherwise. (b) In the event that any Option granted under the Plan shall terminate prior to its exercise, the underlying Common Shares shall again be available for the grant of Options without again being charged against the maximum share limitation set forth in Section 3(a) of the Plan. 4. ADMINISTRATION OF THE PLAN. (a) This Plan shall be administered by the Nominating and Corporate Governance Committee of the Board (the "Committee"). The members of the Committee shall be "non-employee directors" within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (or any successor rule) as in effect from time to time. A majority of the Committee members shall constitute a quorum, and any action taken by a majority of the members present at any Committee meeting at which a quorum is present, or any actions of the Committee that are unanimously approved by the members in writing, shall be acts of the Committee. The Committee shall have full authority, discretion and power to determine the terms and conditions of Options to be granted pursuant to the Plan, the number of Common Shares to be issued -2- 3 under the Plan, and the duration and nature of the Options, consistent with the provisions of the Plan. (b) Subject to Section 9 of the Plan, the interpretation and construction by the Committee of any provision of the Plan or any agreement or notification evidencing the grant of Options, and any determination by the Committee pursuant to any provision of the Plan or any agreement or notification, shall be final and conclusive. No Committee member shall be liable for any action taken or determination made in good faith. 5. OPTION AWARDS. The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting of Options to Eligible Directors and may fix the number of Common Shares to be covered by each Option. The Option Price of each Option shall be equal to the Fair Market Value of the Common Shares on the Date of Grant, unless the Committee shall specify a higher Option Price. No Option shall be exercisable more than 10 years from the Date of Grant. Unless otherwise determined by the Committee, the following awards shall be made automatically under the Plan, without further action of the Committee, except as hereinafter specifically provided: (a) An initial Option to purchase 6,000 Common Shares shall be granted to each Newly Eligible Director upon his or her election to the Board. (b) An Option to purchase 2,000 Common Shares shall be granted after each annual meeting of the Company's shareholders, and before the end of that calendar year, to each Eligible Director serving as a Director on the Date of Grant. The Date of Grant shall be the last business day in November, unless the Committee specifies a different date. 6. TERMS AND CONDITIONS OF THE OPTIONS. In addition to the terms specified pursuant to Section 5 of the Plan, unless otherwise determined by the Committee, all Options granted under the Plan shall have the following terms and conditions: (a) Each Option, until terminated as provided in Section 6(e) of the Plan, shall become exercisable to the extent of 100% of the underlying Common Shares when the Optionee has continuously served as a Director for one year from the Date of Grant. If an Optionee ceases to be a Director by reason of death, Disability or Retirement, or upon a Change in Control of the Company, all Options held by that Optionee shall become immediately exercisable in full. (b) An Optionee may exercise an Option in whole or in part at any time and from time to time during the period within which an Option may be exercised. To exercise an Option, an Optionee shall give notice to the Company in either written or electronic form, specifying the number of Common Shares to be purchased and provide payment of the Option Price and any other documentation that may be required by the Company. (c) The Option Price shall be payable (i) in cash or by other consideration acceptable to the Company, (ii) at the discretion of the Committee, by the actual or constructive transfer to the Company of Common Shares owned by the Optionee for at least six months, having a Fair Market Value at the time of exercise equal to the Option Price, or (iii) by a combination of both methods of payment. -3- 4 (d) Any grant may provide for deferred payment of the Option Price from the proceeds of sale through a broker on a date satisfactory to the Company of some or all of the Common Shares to which the exercise relates. (e) Each Option shall terminate on the earliest to occur of the following dates: (i) The date on which the Optionee ceases to be a Director, unless the Optionee ceases to be a Director after completion of one year of continuous service as a Director, on account of death, Disability or Retirement, or following a Change in Control of the Company; (ii) One year after the death of the Optionee; (iii) Three years after the Optionee's Termination of Service becomes effective; provided, however, that this Section 6(e)(iii) shall only apply where (x) the Termination of Service occurs after the Optionee has served continuously as a Director for less than six years and (y) the Termination of Service does not occur following a Change in Control of the Company; or (iv) Ten years from the Date of Grant. (f) An Optionee shall be treated for all purposes as the owner of record of the number of Common Shares purchased pursuant to the exercise of the Option (in whole or in part) as of the date the conditions set forth in Section 6(b) of the Plan are satisfied. Upon the effective exercise of an Option (in whole or in part), the Company shall deliver to the Optionee the number of Common Shares for which the Option is exercised, adjusted for any Common Shares sold or withheld in connection with the exercise. (g) Except as otherwise determined by the Committee, no Option shall be transferable other than by will or the laws of descent and distribution, or pursuant to a qualified domestic relations order, and each Option may be exercised, during an Optionee's lifetime, only by the Optionee or, in the event of the Optionee's incapacity, including incapacity arising from a Disability, by the Optionee's guardian or legal representative acting in a fiduciary capacity. (h) The Committee may permit Optionees to elect, or may require Optionees, to defer the issuance of Common Shares under the Plan pursuant to the rules, procedures or programs as it may establish for purposes of the Plan. The Committee also may provide that deferred issuances and settlements include the payment or crediting of dividend equivalents or interest on the deferral amounts. (i) On receipt of written or electronic notice to exercise, the Committee may, in its sole discretion, elect to cash out all or part of the portion of the Option(s) to be exercised by paying the Optionee an amount, in cash or Common Shares, equal to the excess of the Fair Market Value of the Common Shares over the Option Price on the effective date of the cash-out. -4- 5 7. ADJUSTMENTS. The Committee, in good faith, shall make or provide for adjustments in the number of Common Shares covered by outstanding Options and the Option Price per Common Share applicable to any Options determined to be equitably required in order to prevent dilution or enlargement of the rights of Optionees that otherwise would result from (i) any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, or (ii) any merger, consolidation, separation, reorganization, partial or complete liquidation or other distribution of assets, issuance of warrants or other rights to purchase securities or any other corporate transaction or event having an effect similar to any of the foregoing. Moreover, in the event of any such transaction or event, the Committee, in its discretion, may provide in substitution for any and all outstanding Options under the Plan such alternative consideration as it, in good faith, may determine to be equitable in the circumstances and may require in that connection the surrender of all Options so replaced. The Committee, in good faith, may also make or provide for adjustments in the number of Common Shares specified in Sections 3 and 5 of the Plan determined to be appropriate in order to reflect any transaction or event described in this Section 7. 8. FRACTIONAL SHARES. The Company shall not be required to issue any fractional Common Shares pursuant to the Plan. Whenever a fractional Common Share would otherwise be required to be issued, an amount in lieu thereof shall be paid in cash, based upon the Fair Market Value of the fractional Common Share. 9. AMENDMENTS AND OTHER MATTERS. This Plan may be amended from time to time by the Committee; provided, however, that any amendment which must be approved by the Company's shareholders in order to comply with (i) Federal securities laws, (ii) other legal or regulatory requirements or (iii) the rules of The NASDAQ Stock Market, or if the Common Shares are not quoted on NASDAQ, the principal securities exchange upon which the Shares are traded or quoted, shall not be effective unless and until shareholder approval has been obtained. Presentation of the Plan or any amendment for shareholder approval shall not be construed to limit the Company's authority to offer similar or dissimilar benefits under other plans without shareholder approval. Furthermore, no amendment, alteration or discontinuation of this Plan shall be made which would impair the rights of an Optionee with respect to any outstanding Option under the Plan without the Optionee's consent, or which, without approval of the Company's shareholders would, except as expressly provided in the Plan, increase the total number of Shares reserved for the Plan or extend the maximum Option period applicable under the Plan. The Company shall have the right to require, prior to the delivery of Common Shares upon exercise of an Option, payment of any taxes required by law to be withheld with respect to the exercise. 10. NO ADDITIONAL RIGHTS. Nothing contained in the Plan or in any Option granted under the Plan shall confer upon any Director any right to continue in the service of the Company. 11. GOVERNING LAW. The Plan and all Options granted and actions taken hereunder shall be governed by and construed in accordance with the internal substantive laws of the State of Ohio. -5- 6 12. DURATION. No Option shall be granted pursuant to the Plan on or after the 10th anniversary of the Effective Date, but awards granted prior to the 10th anniversary may extend beyond that. -6- EX-27 5 EXHIBIT 27
5 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 10,712 0 185,507 3,577 192,016 441,114 561,986 283,410 821,566 251,055 86,663 0 0 4,928 420,527 821,566 281,804 281,804 185,689 185,689 55,771 0 1,971 38,373 13,975 24,398 0 0 0 24,398 .56 .56
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