10-K 1 THE LINCOLN ELECTRIC COMPANY 10-K 1 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 1994 COMMISSION FILE NUMBER 0-1402 THE LINCOLN ELECTRIC COMPANY ---------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) OHIO ------------------------------------------ (State or other jurisdiction of incorporation or organization) 34-0359955 ------------------------------------------ (I.R.S. Employer Identification No.) 22801 St. Clair Ave., Cleveland, Ohio ------------------------------------------ (Address of principal executive offices) 44117 ------------------------------------------ (Zip Code) (216) 481-8100 (Registrant's telephone number including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Shares, without par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting common stock held by non-affiliates as of February 15, 1995 was $131,480,925. (Affiliates, for this purpose, have been deemed to be Directors of the Company, certain significant shareholders and employees participating in the Employees' Stock Purchase Plan and Employee Stock Ownership Plan). The number of shares outstanding of the issuer's classes of common stock as of February 15, 1995 was as follows: Common Stock, without par value 10,514,324 Class A Common Stock, without par value 499,840 ---------- Total outstanding shares 11,014,164 ==========
DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's proxy statement for the annual meeting of shareholders to be held on May 23, 1995 are hereby incorporated by reference into Part III. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 2 PART I Item 1. BUSINESS As used in Item 1 of this report, the term "Company", except as otherwise indicated by the context, means The Lincoln Electric Company and its subsidiaries. The Lincoln Electric Company was incorporated under the laws of the State of Ohio in 1906. The Company is a full-line manufacturer of welding products and integral horsepower industrial electric motors. Welding products include arc welding machines, power sources, automated wire feeding systems and arc welding consumable electrodes. The Company also sells industrial gases, regulators and torches used in oxy-fuel welding and cutting. Sales of arc welding and other welding products accounted for 93% of the Company's net sales in 1994. The arc welding machines, power sources and automated wire feeding systems manufactured by the Company range in technology from basic units used for light manufacturing and maintenance to highly sophisticated machines for robotic applications, high production welding and fabrication. Three primary types of arc welding electrodes are produced: (1) coated manual or stick electrodes, (2) solid electrodes produced in coil form for continuous feeding in mechanized welding, and (3) cored electrodes produced in coil form for continuous feeding in mechanized welding. The integral horsepower electric motors manufactured by the Company range in size from 1/3 to 1,250 horsepower. The Company's products are sold in both domestic and international markets. In the domestic market, they are sold directly by the Company's own sales organization as well as by distributors. In the international markets, the Company's products are sold principally by foreign subsidiary companies. The Company also has an international sales organization comprised of international direct sales distributors, agents and dealers that operate in more than eighty-six countries. The Company has manufacturing facilities located in the United States, Australia, Canada, Mexico, England, France, Ireland, Italy, The Netherlands, Norway and Spain. See Note G to the consolidated financial statements with respect to geographic area information. The Company is not dependent on a single customer or a few customers. The loss of any one customer would not have a material adverse effect on its business. The Company's business is not seasonal. Conditions in the arc welding industry are highly competitive. The Company believes that it is one of the largest manufacturers of consumables and machinery in a field of three or four major domestic competitors and numerous smaller competitors covering the industry. The Company continues to pursue strategies to heighten its competitiveness in international markets. Competition in the electric arc welding industry is on the basis of price, brand preference, product quality and performance, warranty, delivery, service and technical support. All of these factors have contributed to the Company's position as one of the leaders in the industry. Virtually all of the Company's products may be classified as standard commercial articles and are manufactured for stock. The Company believes its products are unique because of its highly trained technical sales force and the support of its welding research and development staff which allow it to uniquely assist the consumers of its products in solving their welding application problems. The Company utilizes this technical expertise to present its Guaranteed Cost Reduction Program to end users in which the Company guarantees that the user will save money in its manufacturing process when it utilizes the Company's products. This allows the Company to introduce its products to new users and to establish and maintain very close relationships with the consumers. This close relationship between the technical sales force and the direct consumers, together with its supportive relationship with its distributors, who are particularly interested in handling the broad breadth of the Company's products, is an important element of the Company's market success and a valuable asset of the Company. The principal raw materials essential to the Company's business are various chemicals, steel, copper and aluminum, all of which are normally available for purchase in the open market. The Company's operations are not materially dependent upon patents, licenses, franchises or concessions. 2 3 The Company's facilities are subject to federal, state and local environmental control regulations. To date, compliance with these environmental regulations has not had a material effect on the Company's earnings nor has it required the Company to make significant capital expenditures. The Company conducts a significant amount of its business and has a number of operating facilities in countries outside the United States. As a result, the Company is subject to business risks inherent in non-U.S. activities, including political uncertainty, import and export limitations, exchange controls and currency fluctuations. The Company believes risks related to its foreign operations are mitigated due to the political and economic stability of the countries in which its largest foreign operations are located. Research activities relating to the development of new products and the improvement of existing products in 1994 were all Company-sponsored. These activities were primarily related to the development of new products utilizing the latest electronic technology. The number of professional employees engaged full-time in these research activities was 113. Refer to Note A to the consolidated financial statements with respect to total costs of research and development. The number of persons employed by the Company worldwide at December 31, 1994 was 5,693. Effects of plant closures have reduced worldwide employment levels in 1994. Refer to Note C to the consolidated financial statements with respect to restructuring activities. The table below sets forth consolidated net sales by product line for the most recent three years:
1994 1993 1992 -------- -------- -------- (IN THOUSANDS OF DOLLARS) Arc Welding and Other Welding Products..... $843,643 $795,072 $816,389 93% 94% 96% All Other.................................. 62,961 50,927 36,618 7% 6% 4% -------- -------- -------- $906,604 $845,999 $853,007 ======== ======== ========
Item 2. PROPERTIES The Company's corporate headquarters and principal United States manufacturing facilities are located in the Cleveland, Ohio area. Total Cleveland area property consists of 230 acres, of which present manufacturing facilities comprise an area of approximately 2,658,410 square feet. While current utilization of existing facilities is high, the Company is adding capacity as necessary. In addition to the principal facilities in Ohio, the Company operates two other manufacturing locations in the United States plus 12 manufacturing locations in 10 foreign countries, the locations of which are as follows: Unites States: Gainesville, Georgia; Monterey Park, California. Australia: Sydney. Canada: Toronto. England: Sheffield. France: Grand-Quevilly Ireland: Rathnew. Italy: Pianoro; Milano. Mexico: Mexico City. Netherlands: Nijmegen. Norway: Skjelland; Stavern. Spain: Barcelona.
Manufacturing facilities located in Germany, Venezuela, Japan and Brazil were closed in early 1994 under the Company's restructuring program. 3 4 All property relating to the Company's Cleveland, Ohio headquarters and manufacturing facilities is owned outright by the Company. In addition, the Company maintains operating leases for its distribution centers and many sales offices throughout the world. See Note J to the consolidated financial statements with respect to leases. Most of the Company's foreign subsidiaries own manufacturing facilities in the foreign country where they are located. At December 31, 1994, $7.9 million of indebtedness was secured by property, plant and equipment. Item 3. LEGAL PROCEEDINGS The Company is subject, from time to time, to a variety of civil and administrative proceedings arising out of its normal operations, including, without limitation, employment-related actions, product liability claims, and health, safety and environmental claims. Included in such proceedings are the cases summarily described below, in which claimants seek recovery for injuries allegedly resulting from exposure to fumes and gases in the welding environment. The Company is a co-defendant in eighteen cases alleging that exposure to manganese contained in arc welding electrode products caused the plaintiffs to develop a neurological condition known as manganism. The plaintiffs seek compensatory and, in most instances, punitive damages, usually for unspecified sums. Two similar cases have been tried, both to defense verdicts. The Company is also a defendant in one case, and one of several co-defendants in three other cases, alleging that exposure to welding fumes generally impaired the respiratory system of the plaintiffs. The plaintiffs seek compensatory and punitive damages, in most cases for unspecified sums. During the preceding five years, thirty-eight similar cases have resulted in ten voluntary dismissals, seven defense verdicts or summary judgments and twenty-one settlements for immaterial amounts. Claims pending against the Company alleging asbestos induced illness total nine thousand seven hundred fifty-eight (9,758); in each instance, the Company is one of a large number of defendants. Approximately (4,416) of these asbestos claims are pending in Orange County, Texas and a motion to certify a class action, which is being contested vigorously, is pending. The asbestos claimants seek compensatory and punitive damages, in most cases for unspecified sums. Twenty cases have been tried, all to defense verdicts. Voluntary dismissals on such claims total fourteen thousand one hundred sixty-eight (14,168); summary judgments for the defense total fifty-nine. The Company, together with the hundreds of other co-defendants, is a defendant in state court in Morris County, Texas, in litigation on behalf of three thousand forty-two (3,042) claimants, all prior employees of a local pipe fabricator, alleging that occupational exposures caused a wide variety of illnesses. The plaintiffs seek compensatory and punitive damages of unspecified sums. The Company bears the costs of defending those of its product liability cases arising and filed after 1990. In many cases where there are multiple defendants, cost sharing efficiencies are arranged. Subject to the Company's per claim retention under its insurance coverage, the Company has tendered the manganese, fume, asbestos and Morris County, Texas cases to its insurance carrier which has accepted such tender for all situations except those where liability would result solely from asbestos; no such situations have arisen to date. The Company believes that resolution of the pending cases referred to above, individually or in the aggregate, will not have a material effect upon the Company. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the quarter ended December 31, 1994. 4 5 PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS The Company's Common Stock is traded on the over-the-counter market. The number of record holders of Common Stock at December 31, 1994 was 2,545. There is no public trading market for Class A Common Stock, which has only been issued to the Company's Employee Stock Ownership Plan. Quarterly high and low stock prices, based on end of month quotes, and dividends paid for the last two years were:
1994 1993 ----------------------------- ----------------------------------- CASH CASH BID PRICE* DIVIDENDS BID PRICE* DIVIDENDS ---------------- --------- ---------------------- --------- QUARTER ENDED HIGH LOW PAID HIGH LOW PAID ----------------------------------- ------ ------ --------- --------- --------- --------- March 31........................... $18.25 $17.25 $ .18 $ 21.00 $ 19.20 $ .18 June 30............................ 27.25 18.75 .18 20.50 19.20 .18 September 30....................... 35.50 30.00 .18 20.50 17.00 .18 December 31........................ 39.00 34.50 .20** 18.00 16.25 .18
--------------- * Source: Ohio Dealers' Data Service ** Includes special dividend of $.02 per share. Future dividends, which are subject to limitations under the Credit Agreement and the Senior Note Agreement, will be based on financial performance of the Company (see Note D to the consolidated financial statements for a further description of these limitations.) Item 6. SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER 31 ------------------------------------------------------------ 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) Net sales......................... $906,604 $845,999 $853,007 $833,892 $796,671 Income (loss) before cumulative effect of accounting change..... 48,008 (40,536) (45,800) 14,365 11,052 Cumulative effect of accounting change.......................... 2,468 -------- -------- -------- -------- -------- Net income (loss)................. $ 48,008 $(38,068) $(45,800) $ 14,365 $ 11,052 ======== ======== ======== ======== ======== Per common share: Income (loss) before cumulative effect of accounting change..... $ 4.38 $ (3.74) $ (4.24) $ 1.33 $ 1.03 Cumulative effect of accounting change.......................... .23 -------- -------- -------- -------- -------- Net income (loss)................. $ 4.38 $ (3.51) $ (4.24) $ 1.33 $ 1.03 ======== ======== ======== ======== ======== Cash dividends declared........... $ .76 $ .72 $ .72 $ .61 $ 1.26 Total assets...................... $556,857 $559,543 $603,347 $640,261 $572,230 Long-term debt.................... 194,831 216,915 221,470 155,547 110,940
See Note C to the consolidated financial statements with respect to restructuring activities in 1993 and 1992. 5 6 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company is engaged primarily in the design, manufacture and sale of arc welding and other welding products, which represented 93% of the Company's 1994 net sales. The Company is one of the world's largest manufacturers of arc welding products. The Company also designs, manufactures and sells integral horsepower industrial electric motors. In 1994, the Company reported the highest net sales, net income and net income per common share in its history. This sales increase was broadly based and was primarily attributable to increased volume, higher selling prices and improved economic conditions in the United States, Canada and Europe. The Company believes that the high quality of its products, advanced engineering expertise and strong distributor network coupled with its large technically trained sales force, has permitted the Company to increase global market share. The Company's 1992 and 1993 earnings were negatively affected by restructuring charges taken by the Company to consolidate and reorganize foreign operations. In 1992, the Company recorded a restructuring charge of $23.9 million (without tax benefit, or $2.21 per share) as a result of decisions by management at that time to downsize and streamline certain non-U.S. operations (principally in Europe). The 1992 restructuring charge was primarily for severance pay, redundancies and other liabilities relating to the reorganization of the sales and distribution operations. In 1993, the Company decided to terminate operations in early 1994 of its Messer Lincoln subsidiary in Germany (the "German Subsidiary") as well as manufacturing operations in Brazil, Venezuela and Japan. Sales, marketing and distribution activities continue in these countries. The 1993 restructuring resulted in a charge of $70.1 million ($40.9 million after-tax, or $3.77 per share). The elements of this charge were: (i) asset writedowns in the amount of $45.9 million including goodwill of $8.9 million; (ii) severance and other redundancy costs of $27.5 million; and (iii) a net credit of $3.3 million comprised of a claim settlement and other restructuring liabilities including estimated losses through the final facility closing dates in 1994. To date, approximately 1,400 employees have been terminated as a result of the 1992 and 1993 restructuring programs. The remaining cash outlays to complete the restructuring are expected to be incurred in 1995 and 1996. Management believes it has adequately provided for costs and expenses of the restructuring. Although European sales and profitability remained constrained in 1994, the 1992 and 1993 restructuring programs have returned the Company's European operations to profitability. Research and development expenditures by the Company, exluding the German Subsidiary expenditures, increased approximately 16.5% to $17.6 million in 1993 and increased 5.2% to $18.5 million in 1994. The Company believes that, over the past three years, expenditures for research and development activities have been adequate to maintain the Company's product lines and to introduce new products at an appropriate rate to sustain future growth. Expenditures on research and development are expected to increase in 1995. 6 7 RESULTS OF OPERATIONS The following table shows the Company's results of operations for the years ended December 31, 1994, 1993 and 1992:
YEAR ENDED DECEMBER 31, ------------------------------------------------------------- 1994 1993 1992 ----------------- ----------------- ----------------- % OF % OF % OF AMOUNT SALES AMOUNT SALES AMOUNT SALES ------ ------ ------ ------ ------ ------ (IN MILLIONS OF DOLLARS) Net Sales.......................... $906.6 100.0% $846.0 100.0% $853.0 100.0% Cost of Goods Sold................. 556.2 61.3% 532.8 63.0% 553.1 64.8% ------ ------ ------ ------ ------ ------ Gross Profit..................... 350.4 38.7% 313.2 37.0% 299.9 35.2% Distribution Cost/Selling General & Administrative Expenses...................... 261.7 28.9% 277.0 32.7% 299.2 35.1% ------ ------ ------ ------ ------ ------ Operating Income before Restructuring................. 88.7 9.8% 36.2 4.3% 0.7 0.1% Restructuring Charge (income)...... (2.7) -0.3% 70.1 8.3% 23.9 2.8% ------ ------ ------ ------ ------ ------ Operating Income (loss).......... 91.4 10.1% (33.9) -4.0% (23.2) -2.7% Other Income....................... 3.1 0.3% 2.9 0.3% 4.4 0.5% Interest Expense, Net.............. (14.3) -1.6% (16.0) -1.9% (15.6) -1.8% ------ ------ ------ ------ ------ ------ Income (loss) before Income Taxes......................... 80.2 8.8% (47.0) -5.6% (34.4) -4.0% Income Taxes (benefit)............. 32.2 3.5% (6.4) -0.8% 11.4 1.3% ------ ------ ------ ------ ------ ------ Net Income (loss) before Cumula- tive effect of Accounting Change........................ $ 48.0 5.3% $(40.6) -4.8% $(45.8) -5.3% Cumulative effect to January 1, 1993 of change in method of accounting for income taxes...... 2.5 .3% ------ ------ ------ ------ ------ ------ Net Income (loss).................. $ 48.0 5.3% $(38.1) -4.5% $(45.8) -5.3% ====== ====== ====== ====== ====== ======
1994 COMPARED TO 1993 Net Sales. Net sales for 1994 were $906.6 million, an increase of $60.6 million or 7.2% from $846.0 million for 1993. Net sales for 1993 include the sales of manufacturing operations (principally in Germany) that were closed in early 1994. Excluding the 1993 sales of the closed operations, sales for 1994 increased 17.0%. A portion of this increase was due to the absorption by the Company's other manufacturing operations of the sales formerly made by the closed operations. Sales from the Company's U.S. operations were $641.6 million in 1994 or 18.1% higher than 1993 sales of $543.5 million, attributable to volume and price increases. Non-U.S. sales in 1994 were $265.0 million compared to $302.5 million in 1993, a decrease of 12.4%. Excluding the 1993 sales of the closed operations, non-U.S. sales for 1994 increased 14.7% over non-U.S. sales for 1993 reflecting improved economic conditions in Europe and elsewhere in the world. A portion of this increase was also due to the absorption by the Company's other manufacturing operations of the sales formerly made by the Company's closed German Subsidiary. Total U.S. export sales were $105.3 million in 1994, an increase of $18.1 million or 20.8% from $87.2 million in 1993. This increase in export sales largely reflects improved worldwide economic conditions. In 1994, sales of certain new products were restricted by capacity limitations inherent in tooling up production which have now been resolved. Gross Profit. Gross profit increased to $350.4 million in 1994 as compared with $313.2 million in 1993. Gross profit as a percentage of sales improved to 38.7% in 1994 from 37.0% in 1993. This improvement in gross profit is largely attributable to a greater percentage of total sales coming from the higher margin U.S. operations in 1994. In addition, 1993 gross profit was unfavorably affected as it included lower gross profit levels for the manufacturing operations that were closed in early 1994. Gross profit for the Company's U.S. operations in 1994 remained substantially consistent with 1993 at 40.2%. 7 8 Distribution Cost/Selling, General and Administrative Expenses. Distribution cost/selling, general and administrative expenses were $261.7 million in 1994, or 28.9% of sales (28.6% at the Company's U.S. operations), as compared to $277.0 million, or 32.7% of sales in 1993 (29.9% at the Company's U.S. operations). The decrease in these expenses as a percentage of sales evidences the effects of the closing of the German Subsidiary, the Company's restructuring program and management's initiatives to control operating costs throughout the Company. The higher expense level in 1993 was principally due to the inclusion of the operating results of the Company's closed German Subsidiary. Included in distribution cost/selling, general and administrative expenses are the costs ($68.4 million in 1994 and $61.9 million in 1993) related to the Company's discretionary employee bonus program. Interest Expense, Net. Interest expense, net was $14.3 million in 1994 as compared with $16.0 million in 1993, a decrease which reflects the effect of lower debt levels offset partially by higher interest rates. Income Taxes. Income taxes in 1994 were $32.2 million on income before income taxes of $80.2 million, an effective rate of 40.1%, as compared to a tax benefit of $6.4 million on a loss before income taxes of $47.0 million in 1993. The 1993 tax benefit principally reflects the tax benefits attributable to the plant closure and liquidation of the German Subsidiary. Results from 1993 also benefited from the cumulative effect of a change in accounting for income taxes, which decreased the net loss by $2.5 million or $0.23 per share. Net Income. As a result of the restructuring programs in 1992 and 1993 and the improvement in economic conditions in Europe, the United States and Canada, net income for 1994 was $48.0 million as compared to a net loss of $38.1 million in 1993. Results in 1993 were adversely affected by a $40.9 million net-of-tax restructuring charge. 1994 results benefited from a net reversal of $2.7 million of restructuring charges recorded previously. 1993 COMPARED TO 1992 Net Sales. Net sales for 1993 were $846.0 million, a decrease of $7.0 million or less than 1.0% from 1992 sales of $853.0 million. Excluding the 1993 and 1992 sales of the operations closed in early 1994, sales increased 5.7%. Sales from the Company's U.S. operations in 1993 were $543.5 million or 11.6% higher than 1992 sales of $487.1 million, attributable to volume and price increases. Non-U.S. sales in 1993 were $302.5 million compared to $365.9 million in 1992, a decrease of 17.3%. Excluding the sales of operations closed in early 1994, non-U.S. sales for 1993 decreased 5.8% from 1992 non-U.S. sales. Currency translation adversely affected these 1993 sales by $23.5 million. Total U.S. export sales were $87.2 million in 1993, a decrease of $10.4 million or 10.6% from $97.6 million in 1992. This decrease in export sales reflects the depressed economic conditions in Europe and lower intercompany export sales due to inventory reductions at the Company's foreign subsidiaries. Gross Profit. Gross profit increased to $313.2 million in 1993 as compared with $299.9 million in 1992. Gross profit as a percentage of sales improved to 37.0% in 1993 (40.3% at the Company's U.S. operations) from 35.2% in 1992 (37.1% at the Company's U.S. operations). This improvement in gross profit was largely attributable to U.S. sales volume increases and improved absorption of manufacturing costs. Gross profit in 1993 was also favorably impacted by reduced overhead costs as a result of restructurings in 1992 and reduced price pressures in Europe. In 1992, gross profit was adversely affected by inventory adjustments as a result of management's decisions to reduce certain inventory. Distribution Cost/Selling, General and Administrative Expenses. Distribution cost/selling, general and administrative expenses were $277.0 million in 1993, or 32.7% of sales (29.9% at the Company's U.S. operations), as compared to $299.2 million, or 35.1% of sales in 1992 (31.3% at the Company's U.S. operations). Expenses for 1993 include $3.7 million for asset disposals and other non-recurring costs as compared to expenses for 1992 which include $18.9 million relating to certain one-time costs at the Company's closed German Subsidiary, asset disposals and certain other non-recurring costs. Included in distribution cost/selling, general and administrative expenses are the costs ($61.9 million in 1993 and $55.3 million in 1992) related to the Company's discretionary employee bonus program. 8 9 Interest Expense, Net. Interest expense, net was $16.0 million in 1993 as compared with $15.6 million in 1992, reflecting the use of credit facilities with more favorable terms in 1993, offset by lower interest income in 1993. Income Taxes. The 1993 tax benefit of $6.4 million on a loss before income taxes of $47.0 million compares to the 1992 provision for income taxes of $11.4 million on a loss before income taxes of $34.4 million. The 1993 tax benefit principally reflects the tax benefits attributable to the plant closure and liquidation of the German Subsidiary. The higher effective rate experienced in 1992 was principally due to losses from non-U.S. subsidiaries that were in net operating loss carryover positions. Results from 1993 also benefited from the cumulative effect of a change in accounting for income taxes, which decreased the net loss by $2.5 million or $0.23 per share. Net Loss. The net loss for 1993 was $38.1 million as compared to a net loss of $45.8 million in 1992. Results were adversely affected by restructuring charges of $40.9 million net-of-tax and $23.9 million without tax benefit in 1993 and 1992, respectively. LIQUIDITY AND CAPITAL RESOURCES During the three years ended December 31, 1994, the Company has relied primarily on cash flow from operations and borrowings to finance working capital, investments, capital expenditures and the payment of dividends. Cash provided from operating activities during 1994 amounted to $68.7 million, an increase of $40.0 million over 1993. This increase in cash flow resulted primarily from the Company's increase in net income; partially offset by increased working capital requirements associated with increased sales volume. Cash provided from operating activities amounted to $28.7 million in 1993 and $23.6 million in 1992 despite net losses of $38.1 million and $45.8 million, respectively. In 1993, the Company acquired the outstanding minority interest in its subsidiary in Spain for $8.5 million. In 1992, the Company acquired the outstanding minority interest in its subsidiary Lincoln Norweld and a small Mexican Company for a total of $37.3 million. In October 1994, the Company amended its unsecured, multi-currency Credit Agreement and reduced its committed line under the Credit Agreement from $230.0 million to $200.0 million. The amended Credit Agreement also permits the establishment of an accounts receivable facility of up to $50 million. See Note D to the consolidated financial statements for additional information regarding the terms and financial covenants of the Company's borrowing arrangements. Under such covenants, the Company's ability to borrow under the Credit Agreement at December 31, 1994 was limited to aggregate borrowings of $176.9 million. At December 31, 1994, $100.9 million was outstanding under the Credit Agreement. Total debt at December 31, 1994 was $212.9 million compared to $250.3 million at December 31, 1993 reflecting the significantly improved 1994 financial results and cash flow from operating activities. At December 31, 1994, total debt was 52.3% of total capitalization compared with 64.0% at year end 1993. Capital expenditures for property, plant and equipment totaled $37.4 million in 1994 and $19.1 million in 1993. These expenditures for property, plant and equipment represent the Company's continued commitment to support and develop advanced technologies, support new products, expand current capacity and reduce future manufacturing costs. The Company is continuing the modernization and expansion of its motor division, has established a separate facility in Cleveland dedicated to motor manufacturing and is increasing its testing and design capacity to be able to reduce costs, increase output, and meet scheduled higher industry efficiency standards. The Company continues to closely monitor its capital expenditures and is adding to capacity and modernizing facilities as necessary. While the financial covenants of the Company's debt agreements place limitations on capital expenditures, capital expenditures for 1995 are expected to increase over 1994 expenditures. 9 10 A total of $8.1 million in dividends, including a special dividend, was paid in 1994. Although the Company paid a special dividend of $.02 per share in the fourth quarter of 1994, management expressed its intention of not continuing such a practice in the future. The Company's amended credit facility and 8.98% Senior Note Agreement contain various financial covenants that place limitations on the payments of dividends, the purchase of unrestricted stock, capital expenditures, and the incurrence of additional indebtedness. The losses of 1993 and 1992 placed constraints on the Company's financial flexibility, the impact of which was reduced, but not eliminated, by the strong 1994 performance. The Company's Board of Directors believes that the Company's future growth and success would be enhanced by a reduction in the Company's leverage and access to greater capital. The Company has explored a variety of alternative forms of equity financings, both private and public. On March 30, 1995, the Board of Directors authorized presentation to the Company's shareholders of amendments to the Company's Articles of Incorporation that would provide the basis for a plan of recapitalization to include the creation of a new class of non-voting common stock. If the Company's shareholders approve the amendments to the Articles of Incorporation, the Company anticipates that the Board of Directors would declare a dividend of one share of non-voting common stock for each outstanding share of common stock. The Company anticipates that concurrently with such dividend, it would engage in a public offering of non-voting common stock. The size and timing of such offering is dependent on a variety of factors, many of which are outside the Company's control. There is no certainty that such offering will be accomplished. In the event such offering is not accomplished, the Company would reconsider alternative sources of equity financing. There is no certainty that any such alternatives will be approved by the Company's Board of Directors or, if so approved, be available. While additional capital resources would allow a higher rate of capital expenditures and provide more flexibility for growth, management believes that the current financing arrangements and the cash flows generated from operations will provide adequate funds to support the existing operations of the Company and satisfy both its capital requirements and regular dividend practices throughout the term of the Credit Agreement. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The response to this item is submitted in a separate section of this report following the signature page. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III A definitive proxy statement will be filed pursuant to Regulation 14A of the Securities Exchange Act prior to April 29, 1995. Therefore, information required under this part, unless set forth below, is incorporated herein by reference from such definitive proxy statement.
NAME AGE POSITION ---------------------------- --- ------------------------------------------------- Donald F. Hastings 66 Chairman of the Board and Chief Executive Officer of the Company since 1992; President of the Company 1987-1992. Frederick W. Mackenbach 64 President and Chief Operating Officer of the Company since 1992; President of Latin America 1991-1992; District Manager 1976-1991. Harry Carlson 60 Vice Chairman of the Company since 1987. David J. Fullen 63 Senior Vice President, Machine and Motor Division since 1994; Vice President - Machine and Motor Division 1989-1994.
10 11
NAME AGE POSITION ---------------------------- --- ------------------------------------------------- John M. Stropki 44 Senior Vice President, Sales since 1994; General Sales Manager 1992-1994; District Manager 1986-1992. Richard C. Ulstad 55 Senior Vice President, Consumable Division since 1994; Vice President - Manufacturing Electrode Division 1992-1994; Superintendent - Electrode Division 1984-1992. Frederick W. Anderson 42 Vice President, Manufacturing - Machine Division since 1994; Plant Manager Machine and Motor Division 1993-1994; Plant Superintendent 1989-1993. Paul J. Beddia 61 Vice President, Human Resources since 1989. Dennis D. Crockett 52 Vice President, Consumable Research and Development since 1993; Chief Engineer, Consumables Research and Development 1987 - 1993. James R. Delaney 46 Corporate Vice President and President Lincoln Latin America since 1994; President Lincoln Electric South America 1993-1994; Vice President of Lincoln Latin America 1992; Vice President of Lincoln Mexicana 1988-1992. H. Jay Elliott 53 Vice President, Chief Financial Officer, and Treasurer since 1994; International Chief Financial Officer 1993-1994; prior thereto, Assistant Comptroller of The Goodyear Tire & Rubber Company responsible at various times for Corporate Strategic Planning, Finance Director of North American Tires and International Vice President-Finance. Paul F. Fantelli 50 Vice President, Business Development since 1994; Assistant to the Chief Executive Officer 1992-1994; President and Chief Executive Officer of the Company's subsidiary, Harris Calorific 1990-1992. Anthony Massaro 51 Corporate Vice President and President Lincoln Europe since 1994; Director of International Operations 1993-1994; prior thereto, as a corporate officer with Westinghouse Electric Corporation, served as Vice President and then as President and a Member of the Management Committee with responsibilities worldwide. Ronald A. Nelson 45 Vice President, Machine Research and Development since 1994; Chief Engineer - Machine and Motor Division 1993-1994; Service Manager 1989-1993. Richard J. Seif 47 Vice President, Marketing since 1994; Director of Marketing 1991-1994; Project Manager 1989-1991. Frederick G. Stueber 41 Vice President, General Counsel and Secretary since February 1995; prior thereto, partner in the law firm of Jones, Day, Reavis and Pogue. John H. Weaver 56 Vice President, Export Sales since 1994; International Sales Manager 1987-1994.
11 12 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) FINANCIAL STATEMENTS The following consolidated financial statements of the Company are included in a separate section of this report following the signature page: Statements of Consolidated Financial Condition -- December 31, 1994 and 1993 Statements of Consolidated Operations -- Year ended December 31, 1994, 1993 and 1992 Statements of Consolidated Shareholders' Equity -- Year ended December 31, 1994, 1993 and 1992 Statements of Consolidated Cash Flows -- Year ended December 31, 1994, 1993 and 1992 Notes to Consolidated Financial Statements -- December 31, 1994 Reports of Independent Auditors (a) (2) FINANCIAL STATEMENT SCHEDULES The following consolidated financial statement schedule of the Company is included in a separate section of this report following the signature page: Schedule II -- Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore, have been omitted. (a) (3) EXHIBITS
EXHIBIT NO. DESCRIPTION ----------- -------------------------------------------------------------------------- 3(a) Amended and Restated Articles of Incorporation of The Lincoln Electric Company (filed as Exhibit 3(a) to Form 10-K of The Lincoln Electric Company for the year ended December 31, 1993, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof). 3(b) Amended and Restated Code of Regulations of The Lincoln Electric Company filed herewith. 4(a) Note Agreement dated November 20, 1991 between The Prudential Insurance Company of America and the Company (filed as Exhibit 4 to Form 10-K of The Lincoln Electric Company for the year ended December 31, 1991, SEC File No. 0-1402 and incorporated by reference and made a part hereof), as amended by letter dated March 18, 1993; 8.98% Senior Note Due November 26, 2003 (filed as Exhibit 4(a) to Form 10-K of The Lincoln Electric Company for the year ended December 31, 1992, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof); as further amended by letter dated as of November 19, 1993; 8.98% Senior Note Due November 26, 2003 (filed as Exhibit 4(a) to Form 10K of The Lincoln Electric Company for the year ended December 31, 1993, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof), and as further amended by letter dated October 31, 1994 (filed as Exhibit 4(a) to Form 10Q of The Lincoln Electric Company for the period ended September 30, 1994, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof).
12 13
EXHIBIT NO. DESCRIPTION ----------- -------------------------------------------------------------------------- 4(b) Credit Agreement dated March 18, 1993 among the Company, the Banks listed on the signature page thereof, and Society National Bank, as Agent (filed as Exhibit 4 (b) to Form 10-K of The Lincoln Electric Company for the year ended December 31, 1992, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof), as amended by Amendment No.1 to Credit Agreement dated November 19, 1993; 8.98% Senior Note Due November 26, 2003 (filed as Exhibit 4(b) to Form 10K of The Lincoln Electric Company for the year ended December 31, 1993, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof), and as further amended by Amendment No. 2 to Credit Agreement dated October 31, 1994 (filed as Exhibit 4(b) to Form 10Q of The Lincoln Electric Company for the period ended September 30, 1994, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof). 9 Voting Trust Agreement filed herewith. 10(a)* The Lincoln Electric Company 1988 Incentive Equity Plan (filed as Exhibit 28 to the Form S-8 Registration Statement of The Lincoln Electric Company, SEC File No. 33-25209 and incorporated herein by reference and made a part hereof). 10(b) Form of Indemnification Agreement filed herewith. 10(c) Supplemental Executive Retirement Plan dated as of January 1, 1994. 10(d) The Lincoln Electric Company Deferred Compensation Plan dated as of November 10, 1994. 10(e) Employment Agreement between the Company and Anthony A. Massaro dated July 14, 1993, as amended on January 1, 1994. 10(f) Employment Agreement between the Company and H. Jay Elliott dated June 22, 1993. 10(g) Employment Agreement between the Company and Frederick G. Stueber dated February 22, 1995. 10(h) Severance Agreement between the Company and Roger F. Young dated August 11, 1994. 10(i) Severance Agreement between the Company and John Gonzalez dated November 22, 1994. 11 Computation of earnings per share. 21 Subsidiaries of the Registrant. 23 Consents of Independent Auditors. 27 Financial Data Schedule.
* Reflects executive compensatory arrangement required to be filed as an Exhibit pursuant to Item 14(c) of this Report. Upon request, The Lincoln Electric Company will furnish to security holders copies of any exhibit to the Form 10-K report upon payment of a reasonable fee. Any requests should be made in writing to: Mr. H. Jay Elliott, Vice President, Chief Financial Officer and Treasurer, The Lincoln Electric Company, 22801 St. Clair Avenue, Cleveland, Ohio 44117, Phone: (216) 481-8100. 13 14 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The Lincoln Electric Company ------------------------------------ (Registrant) /s/ H. JAY ELLIOTT ------------------------------------ H. Jay Elliott Vice President, Chief Financial Officer and Treasurer (principal financial and accounting officer) 14 15 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 31, 1995. /s/ DONALD F. HASTINGS /s/ FREDERICK W. MACKENBACH ----------------------------------------- ----------------------------------------- Donald F. Hastings, Chairman of the Frederick W. Mackenbach, President, Board and Chief Executive Officer Chief Operating Officer and Director (principal executive officer) /s/ HARRY CARLSON /s/ DAVID H. GUNNING ----------------------------------------- ----------------------------------------- Harry Carlson, Vice Chairman and David H. Gunning, Director Director /s/ EDWARD E. HOOD, JR. /s/ PAUL E. LEGO ----------------------------------------- ----------------------------------------- Edward E. Hood, Jr., Director Paul E. Lego, Director /s/ HUGH L. LIBBY /s/ DAVID C. LINCOLN ----------------------------------------- ----------------------------------------- Hugh L. Libby, Director David C. Lincoln, Director /s/ EMMA S. LINCOLN /s/ G. RUSSELL LINCOLN ----------------------------------------- ----------------------------------------- Emma S. Lincoln, Director G. Russell Lincoln, Director /s/ HENRY L.MEYER III /s/ LAWRENCE O. SELHORST ----------------------------------------- ----------------------------------------- Henry L. Meyer, III, Director Lawrence O. Selhorst, Director /s/ CRAIG R. SMITH /s/ FRANK STEINGASS ----------------------------------------- ----------------------------------------- Craig R. Smith, Director Frank Steingass, Director /s/ H. JAY ELLIOTT ----------------------------------------- H. Jay Elliott, Vice President, Chief Financial Officer and Treasurer (principal financial and accounting officer)
15 16 ANNUAL REPORT ON FORM 10-K ITEM 8, ITEM 14(a)(1) AND (2) AND ITEM 14(d) FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA FINANCIAL STATEMENT SCHEDULES YEAR ENDED DECEMBER 31, 1994 THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES 16 17 REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Directors The Lincoln Electric Company We have audited the consolidated financial statements of The Lincoln Electric Company and subsidiaries listed in the accompanying index to financial statements Item 14 (a1). Our audits also included the financial statement schedule listed in the Index at Item 14 (a2). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We did not audit the consolidated financial statements of The Lincoln Electric Company (Australia) Proprietary Limited and subsidiaries and, for 1992, the consolidated financial statements of Lincoln-Norweld B.V. and subsidiaries and the consolidated financial statements of Messer Lincoln GmbH and subsidiary, all consolidated subsidiaries, which statements reflect total assets constituting 7% in 1994 and 5% in 1993 and total revenues constituting 5% in 1994 and 1993 and 36% in 1992 of the related consolidated totals. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to data included for The Lincoln Electric Company (Australia) Proprietary Limited and subsidiaries and, for 1992, Lincoln Norweld B.V. and subsidiaries and Messer Lincoln GmbH and subsidiary, is based solely on the reports of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Lincoln Electric Company and subsidiaries at December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Note A to the consolidated financial statements, effective January 1, 1993, the Company changed its method of accounting for income taxes. ERNST & YOUNG LLP Cleveland, Ohio March 3, 1995 17 18 To the Board of Directors of The Lincoln Electric Company REPORT OF INDEPENDENT ACCOUNTANTS In our opinion, the consolidated balance sheets and the related consolidated statements of income and retained earnings and of cash flows (none of which are presented separately herein) present fairly, in all material respects, the financial position of The Lincoln Electric Company (Australia) Proprietary Limited and its subsidiaries at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Parramatta, Australia March 27, 1995 18 19 INDEPENDENT AUDITORS' REPORT The Board of Directors of Messer Lincoln GmbH We have audited the consolidated balance sheet of Messer Lincoln GmbH and its subsidiary as of December 31, 1992 and the balance sheet of Messer Lincoln GmbH as of December 31, 1991 and the related (consolidated) statements of income, retained earnings, and cash flows for the year ended December 31, 1992 and the period ended December 31, 1991. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements (none of which are presented separately herein) based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The Company is a subsidiary of The Lincoln Electric Company based in Cleveland, Ohio, USA, which is responsible for management of the Company. The financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered considerable losses in 1992 and 1991 and is dependent on the continued support of The Lincoln Electric Company for the continuance of its operations. The Lincoln Electric Company has confirmed that it will provide financial and other support to enable the Company to continue to trade as a viable and solvent business entity at least through December 31, 1993. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Messer Lincoln GmbH and its subsidiary as of December 31, 1992 and of Messer Lincoln GmbH as of December 31, 1991, and the results of its operations and its cash flows for the year ended December 31, 1992 and the period ended December 31, 1991 in conformity with generally accepted accounting principles. Dusseldorf, March 12, 1993 KPMG KLYNVELD PEAT MARWICK GOERDELER Gesellschaft mit beschrankter Haftung Wirtschaftsprufungsgesellschaft 19 20 To the board of directors of Lincoln-Norweld B.V. INDEPENDENT AUDITORS' REPORT We have audited the consolidated balance sheet of Lincoln-Norweld B.V. and subsidiaries as of December 31, 1992, and the related consolidated statement of income, retained earnings and cash flows for the year ended December 31, 1992 (none of which are presented separately herein). These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet and statement of income are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Lincoln-Norwald B.V. and subsidiaries as of December 31, 1992, and the results of its operations and its cash flows for the year then ended in conformity with United States generally accepted accounting principles. Arnhem, The Netherlands March 23, 1993 20 21 STATEMENTS OF CONSOLIDATED FINANCIAL CONDITION THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
DECEMBER 31 1994 1993 -------- -------- (IN THOUSANDS OF DOLLARS) ASSETS CURRENT ASSETS Cash and cash equivalents............................................ $ 10,424 $ 20,381 Accounts receivable (less allowances of $4,251 in 1994; $6,258 in 1993)............................................................. 126,007 110,504 Inventories Raw materials and in-process...................................... 72,302 66,987 Finished goods.................................................... 82,974 76,698 -------- -------- 155,276 143,685 Deferred income taxes -- Note E...................................... 11,601 42,960 Prepaid expenses..................................................... 2,899 3,241 Other current assets................................................. 7,220 4,937 -------- -------- TOTAL CURRENT ASSETS................................................... 313,427 325,708 OTHER ASSETS Notes receivable from employees...................................... 3,151 4,747 Goodwill -- Note C................................................... 39,213 39,732 Other................................................................ 16,855 19,665 -------- -------- 59,219 64,144 PROPERTY, PLANT AND EQUIPMENT Land................................................................. 12,655 12,802 Buildings............................................................ 118,903 113,927 Machinery, tools and equipment....................................... 312,957 279,933 -------- -------- 444,515 406,662 Less allowances for depreciation and amortization.................... 260,304 236,971 -------- -------- 184,211 169,691 -------- -------- TOTAL ASSETS........................................................... $556,857 $559,543 ======== ========
21 22 STATEMENTS OF CONSOLIDATED FINANCIAL CONDITION THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
DECEMBER 31, 1994 1993 -------- -------- (IN THOUSANDS OF DOLLARS) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Trade accounts payable............................................... $ 54,766 $ 43,471 Notes payable to banks -- Note D..................................... 15,843 23,198 Salaries, wages and amounts withheld................................. 12,405 12,779 Taxes, including income taxes -- Note E.............................. 21,783 23,061 Dividend payable..................................................... 2,203 1,959 Current portion of long-term debt -- Note D.......................... 2,272 10,200 Accrued restructuring charges -- Note C.............................. 8,968 29,618 Other current liabilities............................................ 25,877 31,569 -------- -------- TOTAL CURRENT LIABILITIES.............................................. 144,117 175,855 LONG-TERM DEBT, less current portion -- Note D......................... 194,831 216,915 DEFERRED INCOME TAXES -- Note E........................................ 6,631 6,128 OTHER LONG-TERM LIABILITIES............................................ 10,337 9,221 MINORITY INTEREST IN SUBSIDIARIES...................................... 6,808 7,929 SHAREHOLDERS' EQUITY Common Stock, without par value -- at stated capital amount -- Note B: Authorized -- 15,000,000 shares Outstanding -- 10,514,324 shares in 1994 and 10,381,450 shares in 1993, exclusive of 4,346,516 shares in 1994 and 4,479,390 shares in 1993 held in treasury................................ 2,103 2,076 Class A Common Stock, without par value -- at stated capital amount -- Note B: Authorized -- 2,000,000 Outstanding -- 499,840 shares................................... 100 100 Additional paid-in capital........................................... 25,447 22,926 Retained earnings.................................................... 176,965 137,307 Cumulative translation adjustments................................... (10,482) (18,914) -------- -------- 194,133 143,495 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............................. $556,857 $559,543 ======== ========
See notes to consolidated financial statements. 22 23 STATEMENTS OF CONSOLIDATED OPERATIONS THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
YEAR ENDED DECEMBER 31 1994 1993 1992 -------- -------- -------- (IN THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA) Net sales.................................................. $906,604 $845,999 $853,007 Cost of goods sold......................................... 556,259 532,795 553,103 -------- -------- -------- Gross Profit............................................... 350,345 313,204 299,904 Distribution cost/selling, general & administrative expenses................................................. 261,681 277,003 299,195 Restructuring charges (income) -- Note C................... (2,735) 70,079 23,897 -------- -------- -------- Operating income (loss).................................... 91,399 (33,878) (23,188) Other income (expense): Interest income.......................................... 1,442 1,627 3,061 Other income............................................. 3,067 2,922 4,433 Interest expense......................................... (15,740) (17,621) (18,736) -------- -------- -------- (11,231) (13,072) (11,242) -------- -------- -------- Income (loss) before income taxes and cumulative effect of accounting change........................................ 80,168 (46,950) (34,430) Income taxes (benefit) -- Note E........................... 32,160 (6,414) 11,370 -------- -------- -------- Income (loss) before cumulative effect of accounting change................................................... 48,008 (40,536) (45,800) Cumulative effect to January 1, 1993 of change in method of accounting for income taxes -- Note A.................... 2,468 -------- -------- -------- Net income (loss).......................................... $ 48,008 $(38,068) $(45,800) ======== ======== ======== Per share: Income (loss) before cumulative effect of accounting change................................................ 4.38 (3.74) (4.24) Cumulative effect of accounting change................... .23 -------- -------- -------- Net income (loss)........................................ $ 4.38 $ (3.51) $ (4.24) ======== ======== ========
See notes to consolidated financial statements. 23 24 STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES YEAR ENDED DECEMBER 31, 1994, 1993 AND 1992
CLASS A COMMON COMMON STOCK STOCK ADDITIONAL CUMULATIVE ------------------- ---------------- PAID IN RETAINED TRANSLATION SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENTS TOTAL ---------- ------ ------- ------ ---------- -------- ----------- ----------- (IN THOUSANDS OF DOLLARS) Balance, January 1, 1992............. 1,039,142 $ 208 35,794 $ 7 $ 20,845 $238,412 $ 4,664 $ 264,136 Net loss........................... (45,800) (45,800) Cash dividends declared -- $.72 per share............................ (7,762) (7,762) Purchases of Common Stock.......... (16,841) (3) (2,473) (1,667) (4,143) Shares sold to employees........... 9,979 2 2,373 2,375 Shares issued to ESOP.............. 9,268 2 2,058 2,060 Shares issued under Incentive Equity Plan...................... 1,066 264 264 Adjustment for the year............ (12,407) (12,407) ---------- ------ ------- ------ ---------- -------- ----------- ----------- Balance December 31, 1992............ 1,033,346 207 45,062 9 23,067 183,183 (7,743) 198,723 Net loss........................... (38,068) (38,068) Cash dividends declared -- $.72 per share............................ (7,808) (7,808) Shares sold to employees........... 3,648 1 678 679 Shares issued under Incentive Equity Plan...................... 1,151 224 224 Ten-for-one stock split............ 9,343,305 1,868 405,558 81 (1,949) Shares issued to ESOP.............. 49,220 10 906 916 Adjustment for the year............ (11,171) (11,171) ---------- ------ ------- ------ ---------- -------- ----------- ----------- Balance December 31, 1993............ 10,381,450 2,076 499,840 100 22,926 137,307 (18,914) 143,495 Net income......................... 48,008 48,008 Cash dividends declared -- $.76 per share............................ (8,350) (8,350) Shares sold to employees........... 107,520 22 2,063 2,085 Shares issued under Incentive Equity Plan...................... 25,354 5 458 463 Adjustment for the year............ 8,432 8,432 ---------- ------ ------- ------ ---------- -------- ----------- ----------- Balance December 31, 1994............ 10,514,324 $2,103 499,840 $100 $ 25,447 $176,965 $ (10,482) $ 194,133 ========= ======= ======= ======= ========= ======== ========== ========
See notes to consolidated financial statements. 24 25 STATEMENTS OF CONSOLIDATED CASH FLOWS THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
YEAR ENDED DECEMBER 31 1994 1993 1992 -------- -------- -------- (IN THOUSANDS OF DOLLARS) OPERATING ACTIVITIES Net income (loss).......................................... $ 48,008 $(38,068) $(45,800) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization....................... 27,960 30,545 31,511 Deferred income taxes............................... 31,862 (32,501) 538 Cumulative effect of accounting change.............. (2,468) Foreign exchange loss (gain)........................ 4,047 (348) 957 Employee Stock Ownership Plan....................... 916 2,060 Minority interest................................... 416 (358) (2,158) Provision for restructuring......................... (2,735) 68,370 18,356 Changes in operating assets and liabilities net of effects from acquisitions: (Increase) in accounts receivable.............. (14,003) (6,228) (739) (Increase) decrease in inventories............. (6,476) 10,654 22,939 (Increase) decrease in other current assets.... (1,447) (1,331) 695 Increase in accounts payable................... 9,929 2,856 171 (Decrease) in other current liabilities.......... (31,026) (2,928) (4,060) Gross change in other noncurrent assets........ 1,368 (3,112) (2,699) Other--net..................................... 763 2,734 1,853 -------- -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES.................. 68,666 28,733 23,624 INVESTING ACTIVITIES Purchases of property, plant and equipment............... (37,366) (19,090) (34,847) Sales of property, plant and equipment................... 5,099 2,599 4,448 Acquisitions, net of cash acquired....................... (8,518) (37,288) -------- -------- -------- NET CASH USED BY INVESTING ACTIVITIES...................... (32,267) (25,009) (67,687) FINANCING ACTIVITIES Proceeds from the sale of Common Stock................... 2,085 679 2,375 Purchase of Common Stock................................. (4,143) Proceeds from short-term borrowings, maturities greater than three months..................................... 56,405 305 11,674 Payments on short-term borrowings, maturities greater than three months..................................... (59,293) (12,736) Notes payable to banks--net.............................. (5,122) (9,470) (33,416) Proceeds from long-term borrowings....................... 317,669 603,405 287,317 Payment on long-term borrowings.......................... (351,793) (576,445) (212,111) Dividends paid........................................... (8,106) (7,791) (7,756) Other.................................................... 838 (210) 321 -------- -------- -------- NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES........... (47,317) (2,263) 44,261 Effect of exchange rate changes on cash and cash equivalents.............................................. 961 (1,707) 170 -------- -------- -------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........... (9,957) (246) 368 Cash and cash equivalents at beginning of year............. 20,381 20,627 20,259 -------- -------- -------- CASH AND CASH EQUIVALENTS AT END OF YEAR................... $ 10,424 $ 20,381 $ 20,627 ======== ======== ========
See notes to consolidated financial statements. 25 26 THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA) DECEMBER 31, 1994 NOTE A -- ACCOUNTING POLICIES Principles of Consolidation: The consolidated financial statements include the accounts of The Lincoln Electric Company and its subsidiaries (the "Company") after elimination of all significant intercompany accounts, transactions and profits. Cash Equivalents: The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Inventories: Inventories are valued at the lower of cost or market. For domestic inventories, cost is determined principally by the last-in, first-out (LIFO) method, and for foreign inventories cost is determined by the first-in, first-out (FIFO) method. At December 31, 1994 and 1993, approximately 62% and 60%, respectively, of total inventories were valued using the LIFO method. The excess of current cost over LIFO cost amounted to $51,739 at December 31, 1994 and $48,876 at December 31, 1993. During 1992, certain LIFO inventories were reduced, resulting in liquidations of LIFO inventory quantities carried at the lower costs of prior years, as compared with their 1992 costs. The effect of these liquidations was to reduce the 1992 net loss after tax, by $1,018 ($.09 per share). Property, Plant and Equipment: Property, plant and equipment, including facilities and equipment under capital leases (not material), are stated at cost and include improvements which significantly extend the useful lives of existing plant and equipment. Depreciation and amortization are computed by both accelerated and straight-line methods. Research and Development: Research and development costs, which are expensed as incurred, were $18,473 in 1994, $19,210 in 1993 and $19,364 in 1992. Goodwill: The excess of the purchase price over the fair value of net assets acquired (goodwill) is amortized by the straight-line basis over periods not exceeding 40 years. Amounts are stated net of accumulated amortization of $5,784 and $2,363 in 1994 and 1993, respectively. The carrying value of goodwill is reviewed if facts and circumstances indicate a potential impairment of carrying value utilizing relevant cash flow and profitability information. Translation of Foreign Currencies: For subsidiaries in countries which do not have highly inflationary economies, asset and liability accounts are translated into U.S. dollars using exchange rates in effect at the balance sheet date and revenue and expense accounts are translated at average monthly exchange rates. Translation adjustments are reflected as a component of shareholders' equity. For subsidiaries in countries with highly inflationary economies (Venezuela and Brazil) inventories, property, plant and equipment and related depreciation are translated into U.S. dollars at historical exchange rates. Other asset and liability accounts are translated at exchange rates in effect at the balance sheet date and revenues and expenses, excluding depreciation, are translated at average monthly exchange rates. Translation adjustments for these subsidiaries, as well as transaction gains and losses of all other subsidiaries, are included in the statements of consolidated operations in distribution cost/selling, general and administrative expenses. The Company recorded transaction losses of $3,746 in 1994, $228 in 1993 and $859 in 1992. The increase in transaction losses in 1994 is attributable to the effect of the devaluation of the Mexican peso on a U.S. dollar denominated debt obligation. 26 27 THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE A -- ACCOUNTING POLICIES -- (CONTINUED) Financial Instruments: The Company on a limited basis has used forward exchange contracts to hedge exposure to exchange rate fluctuations on anticipated future purchase and sales transactions and certain intercompany transactions. Any contracts that are entered into are written on a short-term basis, are not held for trading purposes, and are not held for purposes of speculation. Gains and losses on forward exchange contracts described herein are recognized in the statements of consolidated operations in the periods the exchange rates change. At December 31, 1994, the Company had no outstanding forward exchange contracts. Accounting Change: Effective January 1, 1993, the Company adopted FASB Statement No. 109, "Accounting for Income Taxes." Under Statement No. 109, the liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Prior to the adoption of Statement No. 109, income tax expense was determined using the deferred method under which deferred tax expense was based on items of income and expense that were reported in different years in the financial statements and tax returns and were measured at the tax rate in effect in the year the difference originated. As permitted by Statement No. 109, the Company elected not to restate the financial statements of any prior year. The cumulative effect of the change decreased the net loss for 1993 by $2,468 or $.23 per share. Net Income (Loss) per Share: Net income (loss) per share is based on the average number of all shares outstanding during the year (10,969,991 in 1994; 10,851,991 in 1993 and 10,796,410 in 1992). Other: Included in Distribution cost/selling, general & administrative expenses are the costs related to the Company's discretionary employee bonus ($68,370 in 1994; $61,883 in 1993; and $55,282 in 1992.) Notes receivable from employees are secured by Company Common Stock owned by the employee. Reclassification: Certain reclassifications have been made to prior year financial statements to conform to current year classifications. NOTE B -- SHAREHOLDERS' EQUITY The Lincoln Electric Company Employees' Stock Purchase Plan ("Plan") which provided that employees could purchase shares of the Company's Common Stock, when offered, at its estimated fair value, was terminated by the Board of Directors in February 1995 effective March 30, 1995. Under the Plan, the Company had the option to repurchase the shares, but in 1992 the Company suspended the repurchase of all shares and the employees were permitted to sell their shares on the open market. Upon termination of the Plan, all shares issued under the Plan (1,639,686) became unrestricted shares. The Lincoln Electric Company 1988 Incentive Equity Plan ("Incentive Equity Plan") provides for the award or sale of Common Stock to officers and other key employees of the Company and its subsidiaries. Distribution of shares is based on certain specified performance and other conditions being satisfied. As a result of conditions being fulfilled in 1991 with respect to certain of the Company's subsidiaries, the Company awarded 32,524 shares (including 524 shares issued for dividends accrued during the deferral period) of which 10,660 shares were distributed in 1992, 11,510 shares in 1993, and 10,354 shares in 1994. These shares, along with 15,000 shares issued to a former officer of the Company, are restricted as to resale rights with the Company having a right of first refusal at a purchase price based on the book value of the shares. Additionally, in 1994, 15,000 shares were issued to certain officers of the Company. Such shares vest equally over a three-year period, commencing in 1995 and ending in 1997. At December 31, 1994, there were no other outstanding awards under the Plan, and 952,476 shares are reserved for future issuance under the Incentive Equity Plan. 27 28 THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE B -- SHAREHOLDERS' EQUITY -- (CONTINUED) The Lincoln Electric Company Employee Stock Ownership Plan (the "ESOP") is a non-contributory profit-sharing plan established to provide deferred compensation benefits for all eligible employees. The cost of the plan is borne by the Company through contributions to an employee stock ownership trust as determined annually by the Board of Directors. In May 1989, shareholders authorized 2,000,000 shares of Class A Common Stock ("Class A Common Stock"), without par value. The Company's Common Stock and Class A Common Stock are identical in all respects, except that holders of Class A Common Stock are subject to certain transfer restrictions and the Class A Common Stock is only issued to the ESOP. In 1994, no shares of stock were issued to the ESOP. In 1993, the Company issued 49,220 shares (92,680 shares in 1992) to the ESOP with an estimated fair value of $916 ($2,060 in 1992) which was recorded as compensation expense. The difference between the total stated capital amount of $.20 per share and the estimated fair value was recorded as additional paid-in-capital. At December 31, 1994 and 1993, 1,500,160 authorized but unissued shares are available for future issuance to the ESOP. NOTE C -- RESTRUCTURING CHARGES In 1993, the Company substantially completed its plan to downsize and streamline its foreign operations (principally in Europe) and close manufacturing facilities in Germany, Japan and South America. Management's decisions resulted in a restructuring charge in 1993 of $70,100 ($40,900 after tax or $3.77 per share) which was comprised of (1) asset write-downs in the amount of $45,900 including goodwill of $8,900; (2) severance and other redundancy costs of $27,500; and (3) a net credit of $3,300 comprised of a claim settlement and other restructuring liabilities including estimated losses through the final facility closing dates in 1994. In 1992, the Company recorded a restructuring charge of $23,900 (without tax benefit, or $2.21 per share) as a result of decisions by management at that time to downsize and streamline certain foreign operations (principally in Europe). This charge was primarily for severance pay, redundancies and other liabilities relating to the reorganization of the sales and distribution operations in Europe. In 1994, all of the planned facility closings were completed and one of the facilities was disposed of. In total, approximately 1,400 employees were terminated as a result of the 1992 and 1993 restructuring programs. In 1994 the restructuring accruals were adjusted to reflect management's current cost estimates to complete the program which resulted in a credit to income of $2,735. Included in property, plant and equipment, are facilities held for sale with a net carrying value of $4,700. The remaining expenditures, which include costs related to the sale of real estate and holding costs to be incurred through the estimated date of disposal, are anticipated to be incurred in 1995 and 1996. 28 29 THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE D -- SHORT-TERM AND LONG-TERM DEBT
1994 1993 -------- -------- Short-term debt: Notes payable to banks at interest rates from 5.6625% to 11.25% (4.125% to 23.25% in 1993)........................ $ 15,843 $ 23,198 ======== ======== Long-term debt: Multi-currency Credit Agreement, due October 1, 1997........ $100,947 $126,457 8.98% Senior Note due 2003 (equal annual principal payments commencing in 1996)...................................... 75,000 75,000 Other borrowings due through 2023, interest at 2.00% to 13.74% (3.00% to 13.74% in 1993)......................... 21,156 25,658 -------- -------- $197,103 $227,115 Less current portion........................................ 2,272 10,200 -------- -------- Total $194,831 $216,915 ======== ========
In October 1994, the Company amended its unsecured, multi-currency Credit Agreement with ten banks and reduced its committed line under the Credit Agreement from $230,000 to $200,000 which the Company believes is sufficient to meet future financing needs. Under the terms of the amended agreement which expires October 1, 1997, but provides for a mechanism for annual extensions, the interest rate on outstanding borrowings is determined based upon defined leverage rates for the pricing option selected. The interest rate can range from the LIBOR plus .375% to LIBOR plus 1.125% depending upon the defined leverage rate. The agreement also provides for commitment fees ranging from .2% to .375% per annum on the unused credit lines based upon the defined leverage rate. Prior to the amendment, the interest rates ranged from LIBOR plus 1% to LIBOR plus 2%, and the commitment fees were from .375% to .5%. Simultaneously, with the signing of the Credit Agreement, the $75,000 8.98% Senior Note due in 2003 was amended to change the financial covenants to conform with the financial covenants of the amended Credit Agreement, which requires a 1.35 to 1 consolidated current ratio and the maintenance of consolidated tangible net worth of $125,000 plus 50% of net income subsequent to January 1, 1995. In addition, there are requirements with respect to interest coverage and funded debt to capital ratios (.60 to 1 decreasing to .50 to 1 after December 31, 1995), and limitations on capital expenditures. Purchases of unrestricted stock and the payment of dividends are limited to 50% of cumulative net income from January 1, 1993, plus $25,000. At December 31, 1994, the Company was in compliance with all of its financial covenants and $13,800 was available for dividends and the purchase of unrestricted stock. The limitations on capital expenditures, purchases of unrestricted common stock and payment of dividends can be waived based on the achievement of a certain interest coverage ratio for three consecutive quarters. Maturities of long-term debt for the five years succeeding December 31, 1994 are $2,272 in 1995, $10,652 in 1996, $120,884 in 1997, $9,861 in 1998; $9,612 in 1999 and $43,822 thereafter. At December 31, 1994, certain loans ($7,900) were collateralized by property and equipment. Interest expense capitalized to property, plant and equipment was $244 in 1994, $71 in 1993 and $320 in 1992. Total interest paid was $17,400 in 1994, $19,000 in 1993 and $17,500 in 1992. Weighted average interest rates on notes payable to banks at December 31, 1994 and 1993 were 6.8% and 9.1%, respectively. In 1992, the Company terminated an interest rate swap agreement with a notional borrowing amount of $75,000 and received $2,586 which was amortized ($904 in 1994; $986 in 1993 and $696 in 1992) over the original swap term as a yield adjustment to interest expense on the underlying $75,000 debt. 29 30 THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE D -- SHORT-TERM AND LONG-TERM DEBT -- (CONTINUED) In connection with the expansion of its motor plant, the Company received in 1994 $6,000 of low interest rate loans from certain governmental entities. The Company also received in 1994 $1,750 of government grants which were recorded as a reduction in property, plant and equipment. NOTE E -- INCOME TAXES The components of income (loss) before income taxes and cumulative effect of accounting change are as follows:
1994 1993 1992 ------- -------- -------- U.S.................................................. $70,703 $ 43,345 $ 24,120 Non-U.S.............................................. 9,465 (90,295) (58,550) ------- -------- -------- Total...................................... $80,168 $(46,950) $(34,430) ======= ======== ========
Components of income tax expense (benefit) are as follows:
DEFERRED LIABILITY METHOD METHOD -------------------- -------- 1994 1993 1992 -------- -------- -------- Current: Federal........................................... $ (8,379) $ 21,032 $ 8,295 Non-U.S........................................... 4,143 2,227 1,310 State and local................................... 4,534 2,828 1,227 -------- -------- -------- 298 26,087 10,832 Deferred: Federal........................................... 31,223 (32,980) 1,232 Non-U.S........................................... 639 479 (694) -------- -------- -------- 31,862 (32,501) 538 -------- -------- -------- Total..................................... $ 32,160 $ (6,414) $ 11,370 ======== ======== ========
The components of the provision for deferred income taxes for 1992 were as follows: Inventory adjustments....................................................... $ 201 Incentive equity plan....................................................... 87 Depreciation................................................................ 204 Other asset adjustments..................................................... (88) Pension adjustments......................................................... (299) Employee stock ownership plan............................................... (149) Other....................................................................... 582 ----- Total............................................................. $ 538 =====
30 31 THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE E -- INCOME TAXES -- (CONTINUED) The differences between total income tax expense (benefit) and the amount computed by applying the statutory Federal income tax rate to income (loss) before income taxes and cumulative effect of accounting change are as follows:
DEFERRED LIABILITY METHOD METHOD ------------------- -------- 1994 1993 1992 ------- -------- -------- Statutory rate applied............................... 35% 35% 34% to pre-tax income (loss)........................... $28,059 $(16,432) $(11,706) Effect of state and local income taxes, net of Federal tax benefit................................ 2,947 1,838 810 Differences in income taxes on non-U.S. earnings and remittances........................................ (1,158) 336 (502) Non-U.S. losses and unrecognized tax benefits........ 2,113 8,308 22,650 Foreign Sales Corporation............................ (838) (703) (630) Other -- net......................................... 1,037 239 748 ------- -------- -------- Total...................................... $32,160 $ (6,414) $ 11,370 ======= ======== ========
Total income tax payments, net of refunds, were $6,115 in 1994, $19,400 in 1993 and $16,500 in 1992. At December 31, 1994, the Company's foreign subsidiaries have net operating loss carryforwards of approximately $61,100 which expire in various years from 1995 through 2002, except for $5,000 for which there is no expiration date. Significant components of the Company's deferred tax assets and liabilities at December 31, 1994 and 1993, are as follows:
1994 1993 -------- -------- Deferred tax assets: Net operating loss carryforwards........................... $ 20,015 $ 15,709 Restructuring activities................................... 33,446 Inventory adjustments...................................... 3,274 2,772 Other accrual accounts..................................... 4,273 1,685 Employee benefits.......................................... 1,269 (172) Other asset adjustments.................................... 3,350 3,245 Pension adjustments........................................ 2,417 2,085 Other deferred tax assets.................................. 2,844 7,406 -------- -------- 37,442 66,176 Valuation allowance........................................ (18,987) (15,709) -------- -------- 18,455 50,467 Deferred tax liabilities: Depreciation............................................... (8,136) $ (3,390) Pension adjustments........................................ (2,690) (618) Other deferred tax liabilities............................. (2,659) (9,627) -------- -------- (13,485) (13,635) -------- -------- Total.............................................. $ 4,970 $ 36,832 ======== ========
31 32 THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE E -- INCOME TAXES -- (CONTINUED) Income taxes currently payable amounted to approximately $10,100 and $12,200 at December 31, 1994 and 1993, respectively. The Company does not provide deferred income taxes on unremitted earnings of foreign subsidiaries as such funds are deemed permanently reinvested to finance foreign expansion and meet operational needs on an ongoing basis. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes subject to an adjustment for foreign tax credits and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable because of the complexities associated with its calculation; however, unrecognized non-U.S. tax credits and non-U.S. withholding taxes paid upon distribution would be available to reduce some portion of the U.S. liability. NOTE F -- RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS The Company and its subsidiaries maintain a number of defined benefit and defined contribution plans to provide retirement benefits for their employees in the United States as well as their employees in foreign countries. These plans are maintained and contributions are made in accordance with the Employee Retirement Income Security Act of 1974, local statutory law or as determined by the Board of Directors. The plans generally provide benefits based upon years of service and compensation. Pension costs accrued are funded except for the cost associated with a supplemental employee retirement plan for certain key employees. A summary of the components of total pension expense is as follows:
1994 1993 1992 -------- -------- -------- U.S. Plans: Service cost -- benefits earned during the year.......... $ 7,155 $ 6,115 $ 5,571 Interest cost on projected benefit obligation............ 19,601 18,158 17,207 Actual return on plan assets............................. (18,795) (19,569) (16,812) Net amortization and deferral............................ (528) 1,441 (1,404) -------- -------- -------- Net pension cost of defined benefit plans................ 7,433 6,145 4,562 Defined contribution plans............................... 258 193 225 -------- -------- -------- Total U.S. plans................................. 7,691 6,338 4,787 Non-U.S. Plans: Service cost -- benefits earned during the year.......... 1,524 1,422 1,555 Interest cost on projected benefit obligation............ 2,207 2,253 2,472 Actual return on plan assets............................. (932) (4,506) (2,800) Net amortization and deferral............................ (1,717) 2,000 289 -------- -------- -------- Net pension cost of defined benefit plans................ 1,082 1,169 1,516 Defined contribution plans............................... 702 1,326 905 -------- -------- -------- Total Non-U.S. plans............................. 1,784 2,495 2,421 -------- -------- -------- Total pension expense............................ $ 9,475 $ 8,833 $ 7,208 ======== ======== ========
32 33 THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE F -- RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS -- (CONTINUED) The funded status of the U.S. and Non-U.S. plans at December 31, 1994 and 1993 is as follows:
U.S. NON-U.S. 1994 1993 1994 1993 -------- -------- -------- -------- Actuarial present value of accumulated benefit obligations: Vested..................................... $218,754 $222,588 $ 24,902 $ 23,881 Nonvested.................................. 9,797 8,463 881 1,136 -------- -------- -------- -------- $228,551 $231,051 $ 25,783 $ 25,017 ======== ======== ======== ======== Actuarial present value of projected benefit obligations................................... $258,661 $254,295 $ 29,020 $ 28,396 Plan assets at fair value....................... 243,802 228,014 32,272 28,191 -------- -------- -------- -------- Excess of projected benefit obligations over plan assets................................... (14,859) (26,281) 3,252 (205) Unrecognized net (gain) loss............... 155 13,788 (1,410) (1,593) Unrecognized prior service cost............ 13,839 10,835 389 540 Unrecognized net assets at January 1, 1994 and 1993, net of amortization............ (2,910) (3,239) (1,519) (1,449) Minimum Liability.......................... (2,183) (480) (351) -------- -------- -------- -------- Accrued retirement annuity expense recognized in the balance sheet.......... $ (5,958) $ (4,897) $ 232 $ (3,058) ======== ======== ======== ========
The decrease in the actuarial present value of accumulated benefit obligations ("ABO") for the U.S. plans is largely due to the change in the discount rate from 7.5% to 8.25%, offset by the addition of a new non-qualified Supplemental Executive Retirement Plan, as well as the normal one year's additional accrual of benefit under all plans. In addition, the increase in the ABO for the foreign plans is largely due to the restructuring of some of the plans, as well as the normal one year's accrual of additional benefits, offset by a change in the weighted average discount rate from 7.5% to 8.2% in 1994. Assumptions used in accounting for the defined benefit plans as of December 31, 1994 and 1993 for both the U.S. and Non-U.S. plans were as follows:
U.S. NON-U.S. PLANS PLANS ------------- ------------- 1994 1993 1994 1993 ---- ---- ---- ---- Weighted-average discount rates............................... 8.25% 7.5 % 8.2 % 7.5 % Projected rates of increase in compensation................... 5.50% 4.1 % 4.8 % 4.2 % Expected rates of return on plan assets....................... 9.00% 9.0 % 8.5 % 9.1 %
Plan assets for the U.S. plans consist principally of deposit administration contracts and an investment contract with an insurance company. Other assets held by the U.S. plans not under insurance contracts are invested in equity and fixed income securities. Plan assets for the non-U.S. plans are invested in non-U.S. insurance contracts and non-U.S. equity and fixed income securities. The Company does not have and does not provide for any postretirement or postemployment benefits other than pensions. 33 34 THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE F -- RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS -- (CONTINUED) The Cleveland, Ohio area operations have a Guaranteed Continuous Employment Plan covering substantially all employees, which, in general, provides that the Company will provide work for at least 75% of every standard work week (presently 40 hours). This plan does not guarantee employment when the Company's ability to continue normal operations is seriously restricted by events beyond the control of the Company. The Company has reserved the right to terminate this plan effective at the end of a calendar year by giving notice of such termination not less than six months prior to the end of such year. NOTE G -- INDUSTRY AND GEOGRAPHIC SEGMENT INFORMATION The Company's primary business is the design, manufacture and sale, in the domestic and international markets of arc and other welding products and related gases used in the welding process. The Company also designs, manufactures and sells integral horsepower industrial electric motors. Financial information by geographic areas follows:
UNITED OTHER STATES EUROPE COUNTRIES ELIMINATIONS TOTAL -------- -------- --------- ------------ -------- 1994: Net sales to unaffiliated customers................. $641,607 $156,803 $108,194 $ $906,604 Inter-geographic sales....... 40,876 10,558 7,060 (58,494) -- -------- -------- --------- ------------ -------- Total................ $682,483 $167,361 $115,254 $(58,494) $906,604 ======== ======== ======== =========== ======== Pre-tax profit (loss)........ $ 71,650 $ 3,945 $ 5,520 $ (947) $ 80,168 Identifiable assets.......... 350,012 165,722 76,129 (35,006) 556,857 1993: Net sales to unaffiliated customers................. $543,458 $211,268 $ 91,273 $ $845,999 Inter-geographic sales....... 29,077 6,663 4,806 (40,546) -- -------- -------- --------- ------------ -------- Total................ $572,535 $217,931 $ 96,079 $(40,546) $845,999 ======== ======== ======== =========== ======== Pre-tax profit (loss)........ $ 42,570 $(68,865) $(22,903 ) $ 2,248 $(46,950) Identifiable assets.......... 389,247 172,136 69,871 (71,711) 559,543 1992: Net sales to unaffiliated customers................. $487,145 $275,520 $ 90,342 $ $853,007 Inter-geographic sales....... 30,466 6,811 4,944 (42,221) -- -------- -------- --------- ------------ -------- Total................ $517,611 $282,331 $ 95,286 $(42,221) $853,007 ======== ======== ======== =========== ======== Pre-tax profit (loss)........ $ 24,860 $(52,828) $ (7,183 ) $ 721 $(34,430) Identifiable assets.......... 294,730 246,457 86,839 (24,679) 603,347
Intercompany sales between geographic regions are accounted for at prices comparable to normal, customer sales and are eliminated in consolidation. Export sales (excluding intercompany sales) from the United States were $64,400 in 1994, $58,100 in 1993 and $67,100 in 1992. 34 35 THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE H -- ACQUISITIONS In June 1993, the Company purchased the outstanding minority interest in its subsidiary in Spain for approximately $8,500. In January and May of 1992, respectively, the Company purchased the remaining 29 percent interest in Lincoln Norweld and a small Mexican company for an aggregate of $37,300. These transactions were accounted for as purchases and their results of operations and the increased interest in their results of operations, were included in the consolidated statements of operations from the respective transaction dates. NOTE I -- FAIR VALUES OF FINANCIAL INSTRUMENTS The Company has various financial instruments, including cash, cash equivalents and short and long-term debt. The Company has determined the estimated fair value of these financial instruments by using available market information and appropriate valuation methodologies which require judgment. Accordingly, the use of different market assumptions or estimation methodologies could have a material effect on the estimated fair value amounts. The Company believes the carrying values of its financial instruments approximate their fair value. NOTE J -- OPERATING LEASES The Company leases sales offices, warehouses, office equipment and data processing equipment. Such leases, some of which are noncancellable, and in many cases, include renewals, expire at various dates. The Company pays most maintenance, insurance and tax expenses relating to leased assets. Rental expense was $9,226 in 1994, $9,864 in 1993 and $9,840 in 1992. At December 31, 1994, total minimum lease payments for noncancellable operating leases are as follows: 1995 $ 8,624 1996 6,855 1997 4,626 1998 3,887 1999 2,723 Thereafter 4,176 ------- Total $30,891 =======
NOTE K -- CONTINGENCIES The Company and its subsidiaries are involved in various litigation in the ordinary conduct of its business. Based on information known to the Company, Management believes the outcome of all pending litigation will not have a material effect upon the financial position of the Company. 35 36 THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE L -- QUARTERLY FINANCIAL DATA (UNAUDITED)
1994 MAR 31 JUN 30 SEP 30 DEC 31 --------------------------------------------- -------- -------- -------- --------- Net sales.................................... $210,525 $234,173 $230,752 $ 231,154 Gross profit................................. 81,966 90,316 89,904 88,159 Income before income taxes................... 17,785 21,494 21,499 19,390(a) Net income................................... 10,407 12,307 11,669 13,625(a) Net income per share......................... $ 0.96 $ 1.12 $ 1.06 $ 1.24
1993 MAR 31 JUN 30 SEP 30 DEC 31 --------------------------------------------- -------- -------- -------- --------- Net sales.................................... $211,168 $215,441 $209,173 $ 210,217 Gross profit................................. 79,756 79,415 80,300 73,733 Income (loss) before income taxes and cumulative effect of accounting change..... 10,106 7,167 10,459 (74,682)(c) Income (loss) before cumulative effect of accounting change.......................... 4,806 995 3,706 (50,043)(c) Net income (loss)............................ 7,274(b) 995 3,706 (50,043)(c) Per share data: Income (loss) before cumulative effect of accounting change.......................... $ 0.44 $ 0.09 $ 0.34 $ (4.61) Net income (loss)............................ $ 0.67 $ 0.09 $ 0.34 $ (4.61) --------------- (a) - Includes $2,500 of net adjustments to various expense accruals and $3,140 for the devaluation of the Mexican peso, offset partially by net favorable inventory adjustments of $1,900 and adjustments to restructuring accruals of $3,235. Also includes a favorable $2,000 adjustment to income taxes to reflect the annual effective income tax rate. (b) - The first quarter of 1993 includes an increase in net income of $2,468 ($.23 per share) for the cumulative effect on prior years for a change in accounting principle effective January 1, 1993. (c) - Includes a $70,100 ($40,900 after tax or 3.77 per share) charge for restructuring and other pretax adjustments of $6,365.
36 37 SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES (IN THOUSANDS OF DOLLARS) --------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E ----------------------------------------------------------------------------------------------------- ADDITIONS (1) CHARGED BALANCE AT TO BEGINNING COSTS (2) BALANCE OF AND CHARGED TO OTHER NOTE A AT END OF DESCRIPTION PERIOD EXPENSES ACCOUNTS-DESCRIBE DEDUCTIONS- PERIOD --------------------------------- ---------- ------- ----------------- ----------- --------- Allowance for doubtful accounts: Year ended December 31, 1994... $6,258 $ 995 $ 117(2) $ 3,119(1) $ 4,251 Year ended December 31, 1993... $5,434 $2,037 $ (723)(2) $ 490 $ 6,258 Year ended December 31, 1992... $4,720 $2,842 $ (1,450)(2) $ 678 $ 5,434 --------------- (1) - Includes $2,480 relating to accounts written off during 1994 in connection with the Company's restructuring activities. (2) - FAS #52 adjustment. Note A - Uncollectible accounts written-off, net of recoveries.
37 38 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ------------------------------------------------------------------ 3(a) Amended and Restated Articles of Incorporation of The Lincoln Electric Company (filed as Exhibit 3(a) to Form 10-K of The Lincoln Electric Company for the year ended December 31, 1993, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof). 3(b) Amended and Restated Code of Regulations of The Lincoln Electric Company filed herewith. 4(a) Note Agreement dated November 20, 1991 between The Prudential Insurance Company of America and the Company (filed as Exhibit 4 to Form 10-K of The Lincoln Electric Company for the year ended December 31, 1991, SEC File No. 0-1402 and incorporated by reference and made a part hereof), as amended by letter dated March 18, 1993; 8.98% Senior Note Due November 26, 2003 (filed as Exhibit 4(a) to Form 10-K of The Lincoln Electric Company for the year ended December 31, 1992, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof); as further amended by letter dated as of November 19, 1993; 8.98% Senior Note Due November 26, 2003 (filed as Exhibit 4(a) to Form 10K of The Lincoln Electric Company for the year ended December 31, 1993, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof), and as further amended by letter dated October 31, 1994 (filed as Exhibit 4(a) to Form 10Q of The Lincoln Electric Company for the period ended September 30, 1994, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof). 4(b) Credit Agreement dated March 18, 1993 among the Company, the Banks listed on the signature page thereof, and Society National Bank, as Agent (filed as Exhibit 4(b) to Form 10-K of The Lincoln Electric Company for the year ended December 31, 1992, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof), as amended by Amendment No. 1 to Credit Agreement dated November 19, 1993; 8.98% Senior Note Due November 26, 2003 (filed as Exhibit 4(b) to Form 10K of The Lincoln Electric Company for the year ended December 31, 1993, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof), and as further amended by Amendment No. 2 to Credit Agreement dated October 31, 1994 (filed as Exhibit 4(b) to Form 10Q of The Lincoln Electric Company for the period ended September 30, 1994, SEC File No. 0-1402 and incorporated herein by reference and made a part hereof.) 9 Voting Trust Agreement filed herewith. 10(a) The Lincoln Electric Company 1988 Incentive Equity Plan (filed as Exhibit 28 to the Form S-8 Registration Statement of The Lincoln Electric Company, SEC File No. 33-25209 and incorporated herein by reference and made a part hereof). 10(b) Form of Indemnification Agreement filed herewith. 10(c) Supplemental Executive Retirement Plan dated as of January 1, 1994. 10(d) The Lincoln Electric Company Deferred Compensation Plan dated as of November 10, 1994. 10(e) Employment Agreement between the Company and Anthony A. Massaro dated July 14, 1993, as amended on January 1, 1994.
38 39
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ------------------------------------------------------------------ 10(f) Employment Agreement between the Company and H. Jay Elliott dated June 22, 1993. 10(g) Employment Agreement between the Company and Frederick G. Stueber dated February 22, 1995. 10(h) Severance Agreement between the Company and Roger F. Young dated August 11, 1994 10(i) Severance Agreement between the Company and John Gonzalez dated November 22, 1994 11 Computation of earnings per share. 21 Subsidiaries of the Registrant. 23 Consents of Independent Auditors. 27 Financial Data Schedule.
39 EX-3.B 2 EXHIBIT 3.B 1 EXHIBIT 3(b) THE LINCOLN ELECTRIC COMPANY AMENDED AND RESTATED 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 on the fourth Tuesday of the month of May each year at the principal office of the Corporation, if not a legal holiday, and if a legal holiday, then on the next day not a legal holiday, 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 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 a 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 in writing 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 2 2 served or mailed 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. If mailed, it shall be directed 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 written assent of every shareholder entitled to notice, filed with or entered upon the records of the meeting, either before or after the holding thereof. 5. 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. 6. 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. Proxies shall be in writing but need not be sealed, witnessed or acknowledged and shall be filed with the Secretary at or before the meeting. 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 3 3 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. 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 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 CANDIDATE -------------------------------- 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 4 4 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 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 ---------- EXECUTIVE COMMITTEE ------------------- 1. Number and Election. The Board of Directors may elect from its own number an Executive Committee consisting of three or more members. The Chairman of the Board and the President shall be members of such committee and the officer designated as Chief Executive Officer shall act as the Chairman thereof. The Board of Directors shall fill vacancies in the Executive Committee by election from the Directors and at all times it shall be the duty of the Board of Directors to keep the membership of such committee full. 2. Powers of Executive Committee. During the intervals between the meetings of the Board of Directors, the Executive Committee shall possess and may exercise all of the powers of the Board of Directors, in the management of the usual and ordinary affairs of the Corporation, subject, however, at all times to the control and direction of the Board of Directors. 3. Quorum. A majority of the Executive Committee shall be necessary to constitute a quorum and in every case the affirmative vote of a majority of the members shall be necessary to pass any resolution. A resolution, in writing, signed by all the members, shall be deemed the action of the Committee, although not formally convened, and record thereof shall be kept in the record book of the Committee under its proper date. The Committee shall keep a record of its proceedings and shall fix its own rules. 5 5 ARTICLE VII ----------- OFFICERS -------- 1. Officers. The Directors shall, immediately after the adjournment of the meeting of shareholders at which they were elected, or as soon thereafter as is convenient, meet for organization and the election of officers, and for the transaction of such other business as may come before the meeting. No notice of such meeting shall be required. The Board of Directors shall, from its own number, annually elect a President and may elect a Chairman of the Board, each of whom shall hold office for one year and until their respective successors are chosen and qualified, and shall designate either the Chairman of the Board or the President as Chief Executive Officer of the Corporation. The Board of Directors may also from time to time choose such other officers (who need not be members of the Board) as it may deem necessary and fix the duties and authority thereof. Any two or more offices may be held by the same person, but no officer shall execute, acknowledge, or verify any instrument in more than one capacity, if such instrument is required by law or by the Articles, the Regulations, or the By-Laws to be executed, acknowledged, or verified by two or more officers. 2. Removal. The Board of Directors shall have the power, by a vote of three-fourths of the entire membership of the Board, to remove any officer of the Company and to fill any vacancy in any office for the unexpired term. ARTICLE VIII ------------ DUTIES OF OFFICERS ------------------ 1. Chairman of the Board. The Chairman of the Board, when such Chairman is elected, when present, shall preside at meetings of Directors and shareholders and perform such other duties as may be designated by the Board of Directors. If designated by the Board of Directors as Chief Executive officer of the Corporation he shall have general control and management of the affairs of the Corporation, subject, however, to the direction and control of the Board of Directors, and shall be an ex officio member of all standing committees of the Board of Directors. 2. President. If designated by the Board of Directors as Chief Executive Officer of the Corporation, the President shall have general control and management of the affairs of the Corporation, subject, however, to the direction and control of the Board of Directors, and shall be an ex officio member of all standing committees of the Board of Directors. If not so designated, the President shall have such duties as the Board of Directors or the Chief Executive officer may from time to time prescribe. In the absence of the Chairman of the Board, the President shall preside at meetings of Directors and shareholders. 3. Vice President. In the absence or disability of the Chairman of the Board, the President shall exercise the powers and perform the duties of the Chairman of the Board and in the absence or disability of the President a Vice President designated by the Board of Directors shall exercise the powers and perform the duties of the President. Each Vice President shall perform such other duties as shall from time to time be imposed upon him by the Chief Executive Officer or the Board of Directors. The performance of any such duty by any Vice President shall be conclusive evidence, to anyone dealing with the Corporation, of his authority to act. 4. Secretary. The Secretary shall keep the minutes of the proceedings of shareholders, Directors and committees and make proper record of the same, which shall be attested by him. He shall keep such books as may be required by the Board of Directors. He shall have charge of the seal, and until a Transfer Agent or Agents is appointed for the shares of the Corporation, he shall have charge of the certificate books of the Corporation, shall issue all certificates of shares, shall keep a record thereof, and shall prepare and furnish lists thereof when required by the Board of Directors, or at any meeting of shareholders. He shall also perform such other duties as may be required of him by the Board of Directors or Executive Committee. 6 6 5. Treasurer. The Treasurer shall keep and maintain full and accurate accounts of all receipts and disbursements of the Corporation. He shall prepare and lay before shareholders such statements of profit and loss and such balance sheets as are required to be laid before such meetings, and shall mail, on request, a copy of such statement and balance sheet as required by law. He shall deposit all monies, checks and other obligations to the credit of the Corporation in such depositary or depositories as may be designated by the Board of Directors, to be disbursed on signature of such officers and or agents as the Board of Directors may designate. He shall render a statement of his accounts and transactions whenever required by the Board of Directors, and generally perform all duties incident to the office of Treasurer, subject to the control of the Chief Executive Officer, and also perform such other duties as may be required of him by the Chief Executive Officer or Board of Directors. In case the Treasurer shall die, resign, retire or be removed from office, all books, papers, vouchers, money and other property of whatsoever kind in his possession or under his control belonging to the Corporation shall be delivered to the Chief Executive Officer or as such Chief Executive officer may direct. 6. Surety Bonds. If required by the Board of Directors, any officer of the Corporation shall give the Corporation a bond in such sum and with sureties satisfactory to the Board for the faithful performance of the duties of his office, the premium therefor to be paid by the Corporation. 7. Absence or Disability. In the absence or disability of any officer of the Corporation, the Board of Directors may delegate his powers and duties to any other executive officer or to any Director during such absence or disability, and the person so delegated shall for the time being be the officer whose powers and duties he so assumes. ARTICLE IX ---------- 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 X --------- 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-9 3 EXHIBIT 9 1 EXHIBIT 9 VOTING TRUST AGREEMENT THIS VOTING TRUST AGREEMENT (the "Agreement"), made as of the 21st day of July, 1988, by and among The Lincoln Electric Company, an Ohio corporation (the "Company"), each individual who from time to time executes a form of this Agreement and deposits Shares hereunder (each herein referred to as a "Depositing Shareholder") and George E. Willis, Donald F. Hastings and Harry Carlson (herein referred to collectively as the "Trustees"): WITNESSETH: WHEREAS, the Depositing Shareholders own beneficially and of record the number of shares of Common Stock of the Company (the "Shares"), as indicated next to the signature of each Depositing Shareholder at the end of this Agreement, that each desires to make subject to the terms of this Agreement; WHEREAS, all of the Shares are subject to the terms and conditions of The Lincoln Electric Company Employees' Stock Purchase Plan, as amended (the "Plan"), a copy of which is attached hereto as Exhibit A; and WHEREAS, the Trustees have agreed to accept the obligations of voting trustees under a statutory voting trust created pursuant to the provisions of Section 1701.49 of the Ohio General Corporation Law. NOW, THEREFORE, the parties hereto agree as follows: 1. DEPOSIT OF SHARES. For the purpose of vesting in the Trustees the voting and consenting rights hereinafter specified, each Depositing Shareholder shall, promptly after the execution of this Agreement, cause the certificate or certificates for the Shares to be transferred upon the books of the Company and a new certificate or certificates to be issued in lieu thereof registered in the names of "George E. Willis, Donald F. Hastings and Harry Carlson, Trustees under Voting Trust Agreement dated as of July 21, 1988 for Shares of The Lincoln Electric Company" and shall promptly thereafter cause the new certificate or certificates so issued to be deposited with the Company. 2. ISSUANCE OF VOTING TRUST CERTIFICATES. Upon the deposit of the certificates for the Shares, the Company shall issue and deliver to each Depositing Shareholder a Voting Trust Certificate for the Shares substantially in the form, marked Exhibit B, which is attached hereto and made a part hereof. Voting Trust Certificates issued hereunder and transferred in accordance with Section 6 hereof may be transferred upon the books maintained by the Company at its principal office by the registered holder of such Certificate in person or by the duly authorized attorney of such registered holder, upon surrender thereof, properly endorsed and payment of any requisite transfer tax, and upon compliance with the terms and provisions of this Agreement and such rules and regulations governing transfers as the Company may adopt. If any Voting Trust Certificate is transferred upon the books of the Company, the Company shall issue and deliver to the transferee another Voting Trust Certificate or Certificates, in the form above-prescribed, for the Shares represented by the Certificate surrendered. Until any Voting Trust Certificate is so transferred upon the books of the Company, the Trustees and the Company may treat the registered holder thereof, as shown by the books of the Company, as the absolute and unqualified owner of such Certificate for all purposes, and shall not be affected by any notice to the contrary. Voting Trust Certificates issued hereunder shall in all respects be subject to the provisions of the laws of the State of Ohio, and the Trustees and the Company shall have the same immunities with respect thereto as are granted to a corporation with respect to its securities by the provisions of Sections 1701.24 and 1701.28 of the Ohio General Corporation Law and Chapter 1308 of the Ohio Revised Code. 3. POWER AND AUTHORITY OF TRUSTEES. Until the termination of this Agreement, the Trustees shall possess and shall be entitled to exercise, in their sole and absolute discretion, all the voting and consenting rights (but no other rights) with respect to the Shares, including, without limitation of the foregoing, the right to attend, in person or by proxy, any and all meetings of the shareholders of the Company which may be held during the term of this Agreement, to receive or waive any and all notices of shareholders' meetings, to vote 2 such Shares, either in person or by duly appointed proxy or agent, for the election of Directors of the Company (including for the election of the Trustees as Directors), and for or against any other matter, business or thing of whatever nature that may be brought before any of said meetings or any adjournments thereof, and to take or join in taking, without a meeting of shareholders, any shareholders' action of any kind whatsoever; and no holder of a Voting Trust Certificate issued hereunder, unless authorized by proxy issued by the Trustees, shall have any right or power to exercise any of the foregoing rights with respect to the Shares. The Trustees may vote the Shares hereunder in the same manner as if they were the absolute owners thereof. In taking any action pursuant to the terms of this Agreement, only the act or action of at least a majority of the Trustees shall be deemed to be the act or action of the Trustees, and the Company and the holders of the Voting Trust Certificates issued hereunder shall be entitled to rely upon any such act or action. The Trustees may act as directors, officers or employees of the Company and may be interested in or deal with the Company in the same manner as if they were not Trustees hereunder. The Trustees shall receive no compensation for their services hereunder. As used in this Agreement, the term "Trustees" means the Trustees or any successor Trustees acting hereunder. 4. DIVIDENDS AND OTHER DISTRIBUTIONS. Except as otherwise provided in Section 6 hereof, each holder of a Voting Trust Certificate shall possess and shall be entitled to enjoy any and all rights of ownership with respect to the Shares represented by such Voting Trust Certificate, other than the voting and consenting rights expressly granted to the Trustees hereunder; but such rights of ownership, and any Voting Trust Certificate issued hereunder, shall be held subject to the provisions of this Agreement. Except as otherwise provided below, any and all dividends and other distributions of any kind upon or with respect to Shares represented by any Voting Trust Certificate issued hereunder shall be distributed directly by the Company to the registered holder of such Voting Trust Certificate as shown by the books of the Company on the record date fixed by the Company with respect to each such dividend or other distribution. In the event any Common Shares of the Company shall be distributed by the Company upon or with respect to the Shares represented by any Voting Trust Certificate issued hereunder, the Company shall issue a new certificate for such shares registered in the name of the Trustees which shall be retained by the Company, and shall issue and deliver an additional Voting Trust Certificate or Certificates for such shares to the registered holder of the Voting Trust Certificate upon which such distribution was made, as shown by the books of the Company on the record date fixed by the Company with respect to such distribution. The Trustees hereby irrevocably authorize and direct the Company to make the foregoing distributions directly to the registered holders of Voting Trust Certificates, as hereinbefore provided. The Trustees agree to execute and deliver to the Company from time to time any and all further dividend orders or other documents, if any, which the Company may require in order to comply with this provision. 5. IRREVOCABLE NATURE OF AGREEMENT; TERMINATION AND AMENDMENT. This Agreement shall be irrevocable until the tenth anniversary date of this Agreement, unless earlier terminated as provided herein. After such tenth anniversary date, this Agreement may be revoked and terminated by each Depositing Shareholder as to such Depositing Shareholder, or by the Trustees as to any or all of the Depositing Shareholders, unless the term of the Agreement has been extended as provided below. This Agreement shall terminate automatically as to a Depositing Shareholder upon the death of such person. This Agreement may also be terminated at any time by an instrument or instruments executed by the Company, at least a majority of the Trustees and by the Depositing Shareholder who so requests such termination in respect of his/her Shares. This irrevocable grant of rights in respect of the Shares as set forth herein may be extended for additional periods of not more than ten years each (measured from the date of extension) at any time by an instrument or instruments executed by the Company, at least a majority of the Trustees and by the beneficial owners of a majority of the Shares then deposited under this Agreement. 3 This Agreement may be amended from time to time by the Trustees in their sole discretion, provided, however, that no amendment shall adversely affect, without his/her consent, the rights of any Depositing Shareholder with respect to the Shares deposited under this Agreement. Upon any termination of this Agreement (through expiration, death of a Depositing Shareholder or otherwise), the Company shall have the right and option, within ninety (90) days from the date of termination, to purchase the Shares that are subject to the particular terminating event and are represented by the Voting Trust Certificate or Certificates issued hereunder in accordance with the provisions of paragraph VIII of the Plan at a purchase price determined in accordance with paragraph VII of the Plan. In the event a purchase occurs upon the death of a Depositing Shareholder, the purchase price shall be payable to the Executor of the Depositing Shareholder's estate or, at the Depositing Shareholder's option, to any other person or persons designated by him/her in a revocable writing delivered to the Company prior to his/her death (with the instrument of latest date given effect). Upon any termination of this Agreement (through expiration, death of the Depositing Shareholder or otherwise) resulting in the purchase by the Company of the Shares represented by the Voting Trust Certificate or Certificates issued hereunder, or resulting in the release of any Shares from the operation of this Agreement, the Company shall cause the Shares represented by each Voting Trust Certificate to be transferred upon the books of the Company, or, in the case of a release, to be so transferred into a certificate registered in the name of the registered holder of such Voting Trust Certificate as shown by the books of the Company on the date of any such release, and shall promptly thereafter cause such certificates to be delivered to the Company, or, in the case of a release, to be delivered to such registered holder; provided, however, that, in any event, no Shares need be so transferred or no such certificate need be so delivered unless and until the Voting Trust Certificate representing the same is surrendered to the Company for cancellation and any requisite transfer tax on the transfer of such Shares is paid. For the purpose of empowering the Company to make such transfers of Shares, the registered holder of such Shares shall deliver to the Company properly executed stock powers or assignments in blank covering such Shares. 6. TRANSFERABILITY OF VOTING TRUST CERTIFICATES. No Depositing Shareholder shall sell, assign, pledge, hypothecate, transfer or otherwise dispose of any Voting Trust Certificate or Certificates until the Depositing Shareholder has first complied with the provisions of paragraph VIII of the Plan (which provides for the Company to have the right to purchase the Voting Trust Certificates and the underlying Shares in the event of any intended or attempted transfer to a third party). The Depositing Shareholder may, at any time, upon written notice to the Company and each of the Trustees, offer to sell to the Company his Voting Trust Certificate or Certificates and the underlying Shares. Voting Trust Certificates transferred (to any person other than the Company) pursuant to the terms of this Section 6 and paragraph VIII of the Plan shall continue to be subject to the terms and conditions of this Agreement in the hands of the transferee and in the hands of any subsequent Depositing Shareholder. 7. DUTIES AND RESPONSIBILITIES OF THE COMPANY. The Company shall have no duty to inquire into the acts of the Trustees hereunder, and shall be fully protected in taking any action authorized or directed by the Trustees. 8. SUCCESSOR TRUSTEES. Any Trustee may be removed by the Board of Directors of the Company at any time by delivery to said Trustee and to the other Trustees written notice of such removal, effective on the date stated therein. Any Trustee may at any time resign by delivering to the other Trustees and to the Company his resignation in writing to take effect on the date stated therein. In case of the death, resignation, removal or inability to act (through mental or physical incapacity) of any Trustee, a successor Trustee shall be appointed by the Board of Directors of the Company. Any successor Trustee appointed in accordance with the foregoing shall from the time of such appointment be deemed a Trustee hereunder, and shall have all the title, rights and powers of a Trustee hereunder, and all acts shall be done and all instruments shall be executed which shall be necessary or reasonably requested for the purpose of effecting such succession and of constituting such successor Trustee at the time of his or her appointment as one of the owners of record of all of the Shares deposited hereunder. 4 9. NOTICES. Any distribution to be made to the holders of Voting Trust Certificates issued hereunder, or any communication addressed to such holders, may be made by mailing the same, postage prepaid, to the registered holders of such Certificates at their addresses as shown by the books of the Depositary at the time of such mailing. 10. CHANGES IN STOCK REGISTRATION. The Company may, at any time or from time to time, make such changes in the registration of the stock certificates deposited hereunder as may be required to reflect amendments hereto or changes in the Trustees hereunder. 11. LOST CERTIFICATES. Any person claiming a Voting Trust Certificate to have been lost, stolen or destroyed shall furnish the Company with an affidavit of that fact and a bond of indemnity satisfactory to the Company, whereupon a new Voting Trust Certificate may be executed and delivered by the Company of the same tenor and for the same number of Shares as the one alleged to have been lost, stolen or destroyed. 12. COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. 13. GOVERNING LAW. This Agreement shall be construed in accordance with, and governed by, the laws of the State of Ohio. IN WITNESS WHEREOF, the Company, the Depositing Shareholders and the Trustees have executed this Agreement all as of the day and year first above written. THE LINCOLN ELECTRIC COMPANY By: ________________________________ George E. Willis, Chairman of the Board and Chief Executive Officer DEPOSITING SHAREHOLDER NUMBER OF SHARES: ----------------- -------------------------------- TRUSTEES -------------------------------- George E. Willis -------------------------------- Donald F. Hastings -------------------------------- Harry Carlson 5 THIS CERTIFICATE IS SUBJECT TO CERTAIN TRANSFER RESTRICTIONS AS SET FORTH IN A CERTAIN VOTING TRUST AGREEMENT AMONG THE LINCOLN ELECTRIC COMPANY, AND GEORGE E. WILLIS, DONALD F. HASTINGS AND HARRY CARLSON, AS TRUSTEES, DATED AS OF JULY 21, 1988, AND AS SET FORTH IN THE LINCOLN ELECTRIC COMPANY EMPLOYEES' STOCK PURCHASE PLAN, AS AMENDED, COPIES OF WHICH ARE AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE LINCOLN ELECTRIC COMPANY. (Front Side of Certificate) No. Shares ----------------------- ------------------- THE LINCOLN ELECTRIC COMPANY (An Ohio corporation) VOTING TRUST CERTIFICATE This evidences that is the owner of Shares of Common Stock, without par value, of The Lincoln Electric Company, an Ohio corporation, and held by the undersigned subject and pursuant to the terms and conditions of (i) a Voting Trust Agreement for Stock of The Lincoln Electric Company dated July 21, 1988, among The Lincoln Electric Company, George E. Willis, Donald F. Hastings, and Harry Carlson, as Trustees, and , as Depositing Shareholder (the "Voting Trust Agreement"), and (ii) The Lincoln Electric Company Employees' Stock Purchase Plan, as amended (the "Plan"), and will be entitled to receive a certificate or certificates for such shares upon the termination of such Voting Trust Agreement, and upon surrender of this Certificate and payment of any requisite transfer tax. This Certificate is subject to certain transfer restrictions set forth in Sections 5 and 6 of the Voting Trust Agreement and paragraph VIII of the Plan. Certificates transferred in accordance with those provisions may be transferred upon the books of the Company at its principal office by the registered holder in person or by his duly authorized representative upon surrender of this Certificate properly endorsed and payment of any requisite transfer tax and upon compliance with the terms and provisions of the aforesaid Voting Trust Agreement and the Plan and such rules and regulations governing transfers as the Company may adopt. Until this Certificate is so transferred upon the books of the Company, the Trustees and the Company may treat the registered holder hereof as the absolute and unqualified owner of this Certificate for all purposes, and shall not be affected by any notice to the contrary. The registered holder of this Certificate and any transferee hereof shall take and hold this Certificate subject to all the terms and conditions of the aforesaid Voting Trust Agreement and the Plan, reference to each of which is hereby made. Copies of such Agreement and such Plan are on file at the principal office of the Company, where they may be inspected, during usual business hours, by the registered Depositing Shareholder hereof or by any person duly authorized by him. IN WITNESS WHEREOF, the undersigned has executed this Certificate at Cleveland, Ohio, this day of , 19 . THE LINCOLN ELECTRIC COMPANY By -------------------------------- EX-10.B 4 EXHIBIT 10.B 1 EXHIBIT 10(b) INDEMNIFICATION AGREEMENT This Indemnification Agreement ("Agreement") is made as of the day of , 19 , by and between The Lincoln Electric Company, an Ohio corporation (the "Company"), and (the "Indemnitee"), an Officer of the Company. RECITALS A. The Indemnitee is presently serving as an Officer of the Company and the Company desires the Indemnitee to continue in that capacity. The Indemnitee is willing, subject to certain conditions, including, without limitation, the execution and performance of this Agreement by the Company, to continue in that capacity. B. In addition to the indemnification to which the Indemnitee is entitled under the Code of Regulations, as amended, of the Company (the "Regulations"), the Company has obtained, at its sole expense, insurance protecting the Company and its officers and directors including the Indemnitee against certain losses arising out of actual or threatened actions, suits or proceedings to which such persons may be made or threatened to be made parties. However, as a result of circumstances having no relation to, and beyond the control of, the Company and the Indemnitee, there can be no assurance of the continuation or renewal of that insurance, and the additional protection offered by this Agreement is therefore appropriate. Accordingly, and in order to induce the Indemnitee to continue to serve in his present capacity, the Company and the Indemnitee agree as follows: 1. CONTINUED SERVICE. The Indemnitee shall continue to serve at the will of the Company as an Officer of the Company so long as he is duly elected and qualified in accordance with the Regulations or until he resigns in writing in accordance with applicable law. 2. INITIAL INDEMNITY. (a) The Company shall indemnify the Indemnitee, if or when he 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 (other than an action by or in the right of the Company), by reason of the fact that he is or was an Officer of the Company or is or was serving at the request of the Company 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, or by reason of any action alleged to have been taken or omitted in any such capacity, against any and all costs, charges, expenses (including without limitation fees and expenses of attorneys and/or others; all such costs, charges and expenses being herein jointly referred to as "Expenses"), judgments, fines and amounts paid in settlement, actually and reasonably incurred by the Indemnitee in connection therewith including any appeal of or from any judgment or decision, unless it is proved by clear and convincing evidence in a court of competent jurisdiction that the Indemnitee's action or failure to act involved an act or omission undertaken with deliberate intent to cause injury to the Company or undertaken with reckless disregard for the best interests of the Company. In addition, with respect to any criminal action or proceeding, indemnification hereunder shall be made only if the Indemnitee had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of "nolo contendere" or its equivalent, shall not, of itself, create a presumption that the Indemnitee did not satisfy the foregoing standard of conduct to the extent applicable thereto. (b) The Company shall indemnify the Indemnitee, if or when he is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by or in the right of the Company to procure a judgment in its favor, by reason of the fact that the Indemnitee is or was an officer of the Company or is or was serving at the request of the Company 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 2 and all Expenses actually and reasonably incurred by the Indemnitee in connection with the defense or settlement thereof or any appeal of or from any judgment or decision, unless it is proved by clear and convincing evidence in a court of competent jurisdiction that the Indemnitee's action or failure to act involved an act or omission undertaken with deliberate intent to cause injury to the Company or undertaken with reckless disregard for the best interests of the Company, except that no indemnification shall be made in respect of any action or suit in which the only liability asserted against the Indemnitee is pursuant to Section 1701.95 of the Ohio Revised Code (the "ORC"). (c) Any indemnification under Section 2(a) or 2(b) (unless ordered by a court) shall be made by the Company only as authorized in the specific case upon a determination that indemnification of the Indemnitee is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 2(a) or 2(b). Such authorization shall be made (i) by the Officers of the Company (the "Board") by a majority vote of a quorum consisting of Officers who were not and are not parties to or threatened with such action, suit or proceeding, or (ii) if such a quorum of disinterested Officers is not available or if a majority of such quorum so directs, in a written opinion by independent legal counsel (designated for such purpose by the Board) which shall not be an attorney, or a firm having associated with it an attorney, who has been retained by or who has performed services for the Company, or any person to be indemnified, within the five years preceding such determination, or (iii) by the shareholders of the Company (the "Shareholders"), or (iv) by the court in which such action, suit or proceeding was brought. (d) To the extent that the Indemnitee has been successful on the merits or otherwise, including without limitation the dismissal of an action without prejudice, in defense of any action, suit or proceeding referred to in Section 2(a) or 2(b), or in defense of any claim, issue or matter therein, he shall be indemnified against Expenses actually and reasonably incurred by him in connection therewith. Expenses actually and reasonably incurred by the Indemnitee in defending any such action, suit or proceeding shall be paid by the Company as they are incurred in advance of the final disposition of such action, suit or proceeding under the procedure set forth in Section 4(b) hereof. (e) For purposes of this Agreement, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on the Indemnitee with respect to any employee benefit plan; references to "serving at the request of the Company" shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, the Indemnitee with respect to an employee benefit plan, its participants or beneficiaries; references to the masculine shall include the feminine; and references to the singular shall include the plural and vice versa. 3. ADDITIONAL INDEMNIFICATION. Pursuant to Section 1701.13(E)(6) of the ORC, without limiting any right which the Indemnitee may have pursuant to Section 2 hereof or any other provision of this Agreement or the Articles of Incorporation, as amended, of the Company (the "Articles"), the Regulations, the ORC, any policy of insurance or otherwise, but subject to any limitation on the maximum permissible indemnity which may exist under applicable law at the time of any request for indemnity hereunder and subject to the following provisions of this Section 3, the Company shall indemnify the Indemnitee against any amount which he is or becomes obligated to pay relating to or arising out of any claim made against him because of an act, failure to act or neglect or breach of duty, including any actual or alleged error, misstatement or misleading statement, which he commits, suffers, permits or acquiesces in while acting in his capacity as an officer of the Company. The payments which the Company is obligated to make pursuant to this Section 3 shall include, without limitation, judgments, fines and amounts paid in settlement and any and all Expenses actually and reasonably incurred by the Indemnitee in connection therewith including any appeal of or from any judgment or decision; provided, however, that the Company shall not be obligated under this Section 3 to make any payment in connection with any claim against the Indemnitee: A-2 3 (a) to the extent of any fine or similar governmental imposition which the Company is prohibited by applicable law from paying which results from a final, nonappealable order; or (b) to the extent based upon or attributable to the Indemnitee having actually realized a personal gain or profit to which he was not legally entitled, including without limitation profit from the purchase and sale by the Indemnitee of equity securities of the Company which are recoverable by the Company pursuant to Section 16(b) of the Securities Exchange Act of 1934, or profit arising from transactions in publicly traded securities of the Company which were effected by the Indemnitee in violation of Section 10(b) of the Securities Exchange Act of 1934, or Rule l0b-5 promulgated thereunder. A determination as to whether the Indemnitee shall be entitled to indemnification under this Section 3 shall be made in accordance with Section 4(a) hereof. Expenses incurred by the Indemnitee in defending any claim to which this Section 3 applies shall be paid by the Company as they are actually and reasonably incurred in advance of the final disposition of such claim under the procedure set forth in Section 4(b) hereof. 4. CERTAIN PROCEDURES RELATING TO INDEMNIFICATION. (a) For purposes of pursuing his rights to indemnification under Section 3 hereof, the Indemnitee shall (i) submit to the Board a sworn statement of request for indemnification substantially in the form of Exhibit 1 attached hereto and made a part hereof (the "Indemnification Statement") averring that he is entitled to indemnification hereunder; and (ii) present to the Company reasonable evidence of all amounts for which indemnification is requested. Submission of an Indemnification Statement to the Board shall create a presumption that the Indemnitee is entitled to indemnification hereunder, and the Company shall, within sixty (60) calendar days after submission of the Indemnification Statement, make the payments requested in the Indemnification Statement to or for the benefit of the Indemnitee, unless (i) within such 60-calendar-day period the Board shall resolve by vote of a majority of the Officers at a meeting at which a quorum is present that the Indemnitee is not entitled to indemnification under Section 3 hereof, (ii) such vote shall be based upon clear and convincing evidence (sufficient to rebut the foregoing presumption) and (iii) the Indemnitee shall have received within such period notice in writing of such vote, which notice shall disclose with particularity the evidence upon which the vote is based. The foregoing notice shall be sworn to by all persons who participated in the vote and voted to deny indemnification. The provisions of this Section 4(a) are intended to be procedural only and shall not affect the right of Indemnitee to indemnification under Section 3 of this Agreement so long as Indemnitee follows the prescribed procedure, and any determination by the Board that Indemnitee is not entitled to indemnification and any failure to make the payments requested in the Indemnification Statement shall be subject to judicial review by any court of competent jurisdiction. (b) For purposes of obtaining payments of Expenses in advance of final disposition pursuant to the second sentence of Section 2(d) or the last sentence of Section 3 hereof, the Indemnitee shall submit to the Company a sworn request for advancement of Expenses substantially in the form of Exhibit 2 attached hereto and made a part hereof (the "Undertaking"), averring that he has reasonably incurred actual Expenses in defending an action, suit or proceeding referred to in Section 2(a) or 2(b) or any claim referred to in Section 3, or pursuant to Section 7 hereof. Unless at the time of the Indemnitee's act or omission at issue, the Articles or Regulations of the Company prohibit such advances by specific reference to ORC Section 1701.13(E)(5)(a) and unless the only liability asserted against the Indemnitee in the subject action, suit or proceeding is pursuant to ORC Section 1701.95, the Indemnitee shall be eligible to execute Part A of the Undertaking by which he undertakes to (a) repay such amount if it is proved by clear and convincing evidence in a court of competent jurisdiction that the Indemnitee's action or failure to act involved an act or omission undertaken with deliberate intent to cause injury to the Company or undertaken with reckless disregard for the best interests of the Company and (b) reasonably cooperate with the Company concerning the action, suit, proceeding or claim. In all cases, the Indemnitee shall be eligible to execute Part B of the Undertaking by which he undertakes to repay such amount if it ultimately is determined that he is not entitled to be A-3 4 indemnified by the Company under this Agreement or otherwise. In the event that the Indemnitee is eligible to and does execute both Part A and Part B of the Undertaking, the Expenses which are paid by the Company pursuant thereto shall be required to be repaid by the Indemnitee only if he is required to do so under the terms of both Part A and Part B of the Undertaking. Upon receipt of the Undertaking, the Company shall thereafter promptly pay such Expenses of the Indemnitee as are noticed to the Company in writing and in reasonable detail arising out of the matter described in the Undertaking. No security shall be required in connection with any Undertaking. 5. LIMITATION ON INDEMNITY. Notwithstanding anything contained herein to the contrary, the Company shall not be required hereby to indemnify the Indemnitee with respect to any action, suit or proceeding that was initiated by the Indemnitee unless (i) such action, suit or proceeding was initiated by the Indemnitee to enforce any rights to indemnification arising hereunder and such person shall have been formally adjudged to be entitled to indemnity by reason hereof, (ii) authorized by another agreement to which the Company is a party whether heretofore or hereafter entered or (iii) otherwise ordered by the court in which the suit was brought. 6. SUBROGATION; DUPLICATION OF PAYMENTS. (a) In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights. (b) The Company shall not be liable under this Agreement to make any payment in connection with any claim made against the Indemnitee to the extent the Indemnitee has actually received payment (under any insurance policy, the Company's Regulations or otherwise) of the amounts otherwise payable hereunder. 7. FEES AND EXPENSES OF ENFORCEMENT. It is the intent of the Company that the Indemnitee not be required to incur the expenses associated with the enforcement of his rights under this Agreement by litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Indemnitee hereunder. Accordingly, if it should appear to the Indemnitee that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any action, suit or proceeding to deny, or to recover from, the Indemnitee the benefits intended to be provided to the Indemnitee hereunder, the Company irrevocably authorizes the Indemnitee from time to time to retain counsel of his choice, at the expense of the Company as hereafter provided, to represent the Indemnitee in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company or any director, officer, shareholder or other person affiliated with the Company, in any jurisdiction. Regardless of the outcome thereof, the Company shall pay and be solely responsible for any and all costs, charges and expenses, including without limitation fees and expenses of attorneys and others, reasonably incurred by the Indemnitee pursuant to this Section 7. 8. MERGER OR CONSOLIDATION. In the event that the Company shall be a constituent corporation in a consolidation, merger or other reorganization, the Company, if it shall not be the surviving, resulting or acquiring corporation therein, shall require as a condition thereto that the surviving, resulting or acquiring corporation agree to assume all of the obligations of the Company hereunder and to indemnify the Indemnitee to the full extent provided herein. Whether or not the Company is the resulting, surviving or acquiring corporation in any such transaction, the Indemnitee shall also stand in the same position under this Agreement with respect to the resulting, surviving or acquiring corporation as he would have with respect to the Company if its separate existence had continued. 9. NONEXCLUSIVITY AND SEVERABILITY. (a) The rights to indemnification provided by this Agreement shall not be exclusive of any other rights of indemnification to which the Indemnitee may be entitled under the Articles, the Regulations, the ORC or any other statute, any insurance policy, agreement A-4 5 or vote of shareholders or directors or otherwise, as to any actions or failures to act by the Indemnitee, and shall continue after he has ceased to be a Director, officer, employee or agent of the Company or other entity for which his service gives rise to a right hereunder, and shall inure to the benefit of his heirs, executors and administrators. (b) If any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement and the application of such provision to other persons or circumstances shall not be affected, and the provision so held to be invalid, unenforceable or otherwise illegal shall be reformed to the extent (and only to the extent) necessary to make it enforceable, valid and legal. 10. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio, without giving effect to the principles of conflict of laws thereof. 11. MODIFICATION. This Agreement and the rights and duties of the Indemnitee and the Company hereunder may be modified only by an instrument in writing signed by both parties hereto. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. THE LINCOLN ELECTRIC COMPANY By ------------------------------- Donald F. Hastings Chairman and Chief Executive Officer By ------------------------------- A-5 6 EXHIBIT 1 INDEMNIFICATION STATEMENT STATE OF SS COUNTY OF I, , being first duly sworn, do depose and say as follows: 1. This Indemnification Statement is submitted pursuant to the Indemnification Agreement, dated , 19 , between The Lincoln Electric Company (the "Company"), an Ohio corporation, and the undersigned. 2. I am requesting indemnification against costs, charges, expenses (which may include fees and expenses of attorneys and/or others), judgments, fines and amounts paid in settlement (collectively, "Liabilities"), which have been actually and reasonably incurred by me in connection with a claim referred to in Section 3 of the aforesaid Indemnification Agreement. 3. With respect to all matters related to any such claim, I am entitled to be indemnified as herein contemplated pursuant to the aforesaid Indemnification Agreement. 4. Without limiting any other rights which I have or may have, I am requesting indemnification against Liabilities which have or may arise out of ________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ ------------------------------------ (Signature of Indemnitee) Subscribed and sworn to before me, a Notary Public in and for said County and State, this day of , 19 . [SEAL] ------------------------------------ My commission expires the day of , 19 . 7 EXHIBIT 2 UNDERTAKING STATE OF SS COUNTY OF I, being first duly sworn, do depose and say as follows: 1. This Undertaking is submitted pursuant to the Indemnification Agreement, dated , 19 , between The Lincoln Electric Company (the "Company"), an Ohio corporation, and the undersigned. 2. I am requesting payment of costs, charges and expenses which I have reasonably incurred or will reasonably incur in defending an action, suit or proceeding, referred to in Section 2(a) or 2(b) or any claim referred to in Section 3, or pursuant to Section 7, of the aforesaid Indemnification Agreement. 3. The costs, charges, and expenses for which payment is requested are, in general, all expenses related to 4. PART A I hereby undertake to (a) repay all amounts paid pursuant hereto if it is proved by clear and convincing evidence in a court of competent jurisdiction that my action or failure to act which is the subject of the matter described herein involved an act or omission undertaken with deliberate intent to cause injury to the Company or undertaken with reckless disregard for the best interests of the Company and (b) reasonably cooperate with the Company concerning the action, suit, proceeding or claim. ------------------------------------ (Signature of Indemnitee) PART B I hereby undertake to repay all amounts paid pursuant hereto if it ultimately is determined that I am not entitled to be indemnified by the Company under the aforesaid Indemnification Agreement or otherwise. ------------------------------------ (Signature of Indemnitee) Subscribed and sworn to before me, a Notary Public in and for said County and State, this day of , 19 . [SEAL] ------------------------------------ My commission expires the day of , 19 . EX-10.C 5 EXHIBIT 10.C 1 EXHIBIT 10(c) ERNST & YOUNG PHONE: 216 861 5000 HUMAN REOURCE FAX: 216 861 8131 CONSULTING SERVICES 1300 HUNTINGTON BUILDING 925 EUCLID AVENUE CLEVELAND, OHIO 44115-1405 February 22, 1995 Mr. Harry Carlson Vice Chairman The Lincoln Electric Company 22801 St. Clair Avenue Cleveland, Ohio 44117-1199 The Lincoln Electric Company Supplemental Executive Retirement Plan Dear Harry: Enclosed in final form is The Lincoln Electric Company Supplemental Executive Retirement Plan (the "SERP"), with changes made to reflect a "Normal Retirement Date" based on attainment of age 60, and clarification of the "Social Security Benefit" definition and its calculation relative to early retirements. These changes and the draft document have been reviewed with John Cornell of JDR&P and accepted, with such changes marked for your reference from the prior draft dated December 5, 1994. Please call me with any further comments or questions regarding these matters. Yours truly yours, /s/ Thomas J. Laubenthal --------------------------- Thomas J. Laubenthal Partner Enclosures Copy to Mr. Donald F. Hastings Mr. H. Jay Elliot Mr. David H. Gunning, Capital American Financial Corporation Mr. John R. Cornell, JDR&P Mr. G. Russell Lincoln Mr. Robert N. Gudbranson Mr. Philip Katzan, The Wyatt Company 2 THE LINCOLN ELECTRIC COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN 3 THE LINCOLN ELECTRIC COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
TABLE OF CONTENTS PAGE ----------------------------------------------------------------------------- ---- ARTICLE I -- GENERAL Section 1.1 Effective Date................................................. 1 Section 1.2 Intent......................................................... 1 ARTICLE II -- DEFINITIONS AND USAGE Section 2.1 Definitions.................................................... 1 Section 2.2 Usage.......................................................... 4 ARTICLE III -- ELIGIBILITY AND PARTICIPATION Section 3.1 Eligibility.................................................... 4 Section 3.2 Participation.................................................. 4 ARTICLE IV -- RETIREMENT BENEFIT Section 4.1 Retirement Benefit............................................. 5 Section 4.2 Early Retirement Benefit....................................... 5 Section 4.3 Vesting........................................................ 6 Section 4.4 Other Retirement Benefits...................................... 6 ARTICLE V -- PAYMENT OF RETIREMENT BENEFIT Section 5.1 Payment of Retirement Benefits................................. 6 Section 5.2 Form of Retirement Benefits.................................... 7 Section 5.3 Payment Procedure.............................................. 7 ARTICLE VI -- PAYMENT OF BENEFIT ON OR AFTER DEATH OR DISABILITY Section 6.1 Commencement of Benefit Payments............................... 7 Section 6.2 Designation of Beneficiary..................................... 8 ARTICLE VII -- ADMINISTRATION Section 7.1 General........................................................ 8 Section 7.2 Administrative Rules........................................... 8 Section 7.3 Duties......................................................... 8 Section 7.4 Fees........................................................... 9 Section 7.5 Limitation of Actions.......................................... 9 ARTICLE VIII- CLAIMS PROCEDURE Section 8.1 General........................................................ 9 Section 8.2 Denials........................................................ 9 Section 8.3 Appeals Procedure.............................................. 10 Section 8.4 Review......................................................... 10 ARTICLE IX -- MISCELLANEOUS PROVISIONS Section 9.1 Amendment and Termination...................................... 10 Section 9.2 No Assignment.................................................. 10 Section 9.3 Successors and Assigns......................................... 11 Section 9.4 Governing Law.................................................. 11 Section 9.5 No Guarantee of Employment..................................... 11 Section 9.6 Severability................................................... 11 Section 9.7 Notification of Addresses...................................... 11 Section 9.8 Bonding........................................................ 11 Section 9.9 Withdrawal of Employer......................................... 11 ARTICLE X -- FUNDING................................................................... 12
4 THE LINCOLN ELECTRIC COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN PREAMBLE WHEREAS, The Lincoln Electric Company (the "Company") has established one or more qualified retirement plans that place limitations on the amount of retirement benefits available to certain key management or highly compensated employees; and WHEREAS, the Company recognizes the unique qualifications of such employees and the valuable services they provide and desires to establish an unfunded plan to provide retirement benefits to eligible key employees that supplement what is available under such qualified plans and Social Security; and WHEREAS, the Company has determined that the implementation of such a plan will best serve its interest in retaining key employees and ensuring benefit equity among all employees; NOW, THEREFORE, the Company hereby establishes The Lincoln Electric Company Supplemental Executive Retirement Plan as hereinafter provided: ARTICLE I GENERAL Section 1.1 Effective Date. This Plan shall be effective as of January 1, 1994. The rights, if any, of any person whose status as an employee of an Employer has terminated shall be determined pursuant to the Plan as in effect on the date such employee terminated, unless a subsequently adopted provision of the Plan is made specifically applicable to such person. Section 1.2 Intent. The Plan is intended to be an unfunded plan primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees, as such group is described under Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA. ARTICLE II DEFINITIONS AND USAGE Section 2.1 Definitions. Wherever used in the Plan, the following words and phrases, when capitalized, shall have the meaning set forth below unless the context plainly requires a different meaning: "Account" means the account established on behalf of the Participant as described in Section 5.3. "Administrator" means the committee established by the Company pursuant to Section 7.1 to administer the Plan. "Board" means the Board of Directors of the Company. "Code" means the Internal Revenue Code of 1986, as amended from time to time. Any reference to a particular Code section shall include any provision that modifies, replaces or supersedes it. "Committee" means the Compensation Committee of the Board. "Company" means The Lincoln Electric Company, a corporation organized under the laws of the state of Ohio, and any successor thereto. "Compensation" means the amount of a Participant's compensation as defined in Section 415(c)(3) of the Code paid by the Controlled Group, but including any salary reduction contributions that are excluded from his gross income under Sections 125, 129 or 402(a)(8) of the Code, and including any compensation which the Participant defers under any nonqualified deferred compensation plan of the Controlled Group. 2 5 "Controlled Group" or "Controlled Group Member" means the Company and any and all other corporations, trades or businesses the employees of which are required by Section 414 of the Code to be treated as a single employer. An entity will only be considered as a Controlled Group Member during the period that it is or was a member of the Company's Controlled Group. "Disability" or "Disabled" means a physical or mental condition of a Participant resulting from a bodily injury, disease or mental disorder that renders him incapable of continuing his position of employment with the Employer. Such Disability shall be determined by the Committee based upon appropriate medical advice and examination, and taking into account the ability of the Participant to continue in his same, or similar, position with his Employer. "Early Retirement Date" means the date the Participant has both attained age fifty-five (55) and completed twenty-five (25) Years of Service. "Employer" means the Company or any other Controlled Group Member that adopts the Plan with the Company's consent. Any Controlled Group Member that adopts the Plan and thereafter ceases to exist, ceases to be a member of the Controlled Group or withdraws from the Plan shall no longer be considered an Employer unless otherwise determined by the Committee. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. Any reference to a particular ERISA section shall include any provision that modifies, replaces, or supersedes it. "Final Average Pay" means, with respect to any Participant, the average of his annual Compensation over the three (3) full Years of Service within his final consecutive full Years of Service (not to exceed seven (7) Years) that produce the highest such average; provided, however, that if a Participant has fewer than three (3) full Years of Service, "Final Average Compensation" shall mean the average of his annual Compensation during all his Years of Service. "Normal Retirement Date" means the date a Participant attains age sixty (60). "Participant" means an eligible employee of an Employer who is participating in the Plan in accordance with Section 3.2. "Participation Factor" means the ratio determined based on active participation under the Plan. Each employee, upon becoming a Participant, shall be credited with a Participation Factor of two-tenths (.20) or such greater factor for such Participant determined by the Committee, in its sole discretion. Thereafter, a Participant will be credited with an additional one-tenth (.10) Participation Factor for each Year of Service earned while an active Participant; fractional credits shall apply for partial Years of Service. Notwithstanding the foregoing, no Participation Factor shall exceed one (1.00), and Years of Service earned after the last day of the Plan Year in which a Participant attains age sixty-seven (67) shall be disregarded for purposes of determining his Participation Factor. The Committee may, in its sole discretion, increase or authorize an increase in a Participant's Participation Factor for any reason deemed appropriate by the Committee (including, but not limited to, in consideration of the Participant's execution of a release of all claims against the Company and its affiliates in a form satisfactory to the Committee). "Plan" means The Lincoln Electric Company Supplemental Executive Retirement Plan, as it may be amended from time to time. "Plan Year" means the calendar year. "Qualified Plan Benefit" means the annual benefit, expressed in the form of a single life annuity that can be derived from the sum of all employer-provided benefits under all plans intended to be qualified under Section 401(a) of the Code that are maintained by the Controlled Group. The amount of the single life annuity determined for any such plan which does not provide for annuity payments shall be based on a reasonable mortality assumption and an assumed interest rate of eight percent (8%). For purposes of this definition, "employer-provided benefits" means all qualified retirement benefits funded 3 6 exclusively by employer contributions (and earnings thereon), and shall include any previous distribution of such benefits made prior to a Participant's Normal Retirement Date, including, but not limited to, in- service withdrawals, retirement and disability benefits, or distributions pursuant to any domestic relations order. However, Participants' salary-reduction contributions described in Section 402(a)(8) of the Code (and any earnings thereon) shall not be treated as benefits funded exclusively by Employer contributions. Notwithstanding the foregoing, if the Committee grants additional Years of Service to a Participant for purposes of determining his Retirement Benefit, "Qualified Plan Benefit" shall also include the annual benefit, determined as above, to which such Participant is entitled from all previous employers. "Retirement Benefit" or "Benefit" means the vested benefit determined under Article IV. "Social Security Benefit" means the maximum annual benefit payable under the Social Security Act, relating to Old-Age and Disability benefits, determined as of a Participant's Normal Retirement Date, or upon his actual retirement date, if later. "Termination for Cause" means the termination of a Participant's employment due to any act by the Participant which the Committee, in its complete discretion, determines to be inimical to the best interests of the Controlled Group, including, but not limited to: (i) serious, willful misconduct in respect of his duties for his Employer, (ii) conviction of a felony or perpetration of a common law fraud, (iii) willful failure to comply with applicable laws with respect to the execution of his Employer's business operations, (iv) theft, fraud, embezzlement, dishonesty or other conduct that has resulted or is likely to result in material economic damage to the Controlled Group, or (v) failure to comply with requirements of his Employer's drug and alcohol abuse policies, if any. "Years of Service" means each full and partial calendar-year (in increments of one-twelfth (1/12th) for each full month) of active employment with the Controlled Group during which substantial services were rendered as an employee, commencing on the date the Participant was first employed by the Controlled Group and ending on the date he ceases to perform services for the Controlled Group. At the discretion of the Committee, a Participant may be granted additional Years of Service for purposes of determining his Retirement Benefit. Section 2.2 Usage. Except where otherwise indicated by the context, any masculine terminology used herein shall also include the feminine and vice versa, and the definition of any term herein in the singular shall also include the plural and vice versa. ARTICLE III ELIGIBILITY AND PARTICIPATION Section 3.1 Eligibility. An employee of an Employer shall be eligible to participate in the Plan only to the extent, and for the period, that he is a member of a select group of management or highly compensated employees, as such group is described under Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA. Section 3.2 Participation. An employee who is eligible to participate in the Plan pursuant to Section 3.1 shall become a Participant at such time and for such period he is designated as such by the Committee. ARTICLE IV RETIREMENT BENEFIT Section 4.1 Retirement Benefit. Except for Participants described in Section 4.4, the Retirement Benefit for a Participant who retires from the employ of his Employer and all Controlled Group Members on or after his Normal Retirement Date shall be an annual benefit, expressed as a single life annuity payable over 4 7 the Participant's life, in an amount equal to (a) minus (b), multiplied by the Participant's Participation Factor, where: (a) = one and four hundred forty-five thousandths percent (1.445%) of such Participant's Final Average Pay multiplied by his Years of Service, but not greater than sixty-five percent (65%) of the Participant's Final Average Pay; and (b) = (i) the Social Security Benefit; plus (ii) the Participant's Qualified Plan Benefit, determined as of the valuation date(s) under the applicable plans that immediately precede the date the Participant retires and becomes entitled to the distribution of his Benefit under Article V or Article VI. For purposes of making the calculation in Subsection (a) of this Section, Years of Service earned after the last day of the Plan Year in which the Participant attains age sixty-five (65) shall not be counted. Section 4.2 Early Retirement Benefit. Except for Participants described in Section 4.4, the Retirement Benefit for a Participant who retires from the employ of his Employer and all Controlled Group Members on or after his Early Retirement Date (but prior to his Normal Retirement Date) shall be the annual benefit computed under Section 4.1, but based on a projected Social Security Benefit equal to the maximum annual benefit payable under the provisions of the Social Security Act as in effect on the date of such retirement indexed forward to the Participant's Normal Retirement Date, and the annual Benefit so computed shall be reduced based on the Participant's attained age when his Benefit hereunder commences, according to the following table:
PARTICIPANT'S ATTAINED AGE PERCENT REDUCTION AT BENEFIT COMMENCEMENT IN BENEFIT --------------------------- ----------------- 55 36% 56 30% 57 24% 58 17% 59 9% 60 or later 0%
Section 4.3 Vesting. (a) Except as provided below or as otherwise provided in Section 4.4, a Participant who is in the active employ of an Employer shall have a vested right to his Benefit only upon the occurrence of any of the following: (i) with approval by the Committee, the attainment of his Early Retirement Date; (ii) the attainment of his Normal Retirement Date; (iii) his death prior to actual retirement; or (iv) his Disability prior to actual retirement.
(b) Notwithstanding the preceding, a Participant's Benefits hereunder shall be forfeited, and no Benefits shall be payable hereunder with respect to him or his beneficiaries, in the event of: (i) his Termination for Cause prior to receiving all or a portion of his Benefit; or (ii) his termination of employment with all Controlled Group Members prior to satisfying the requirements for vesting set forth in Subsection (a) of this Section.
5 8 Section 4.4 Other Retirement Benefits. In lieu of the Benefit provided under Section 4.1 or 4.2, the Committee may, in its sole discretion, determine to provide a Participant with an alternative supplemental pension benefit under this Plan, provided that the Company and such Participant negotiate or have previously negotiated a supplemental pension arrangement that provides for amounts to be paid other than the Benefits otherwise provided pursuant to the other terms hereof. The amount of such Participant's supplemental pension, the manner of payment thereof and any other terms or conditions applicable thereto shall be as set forth in the agreement between the Company and the Participant with respect to such arrangement. Articles VII, VIII and IX of the Plan shall apply to the supplemental pension payable pursuant to any such arrangement to the extent such Articles do not conflict with the provisions of such agreement. ARTICLE V PAYMENT OF RETIREMENT BENEFIT Section 5.1 Payment of Retirement Benefits. A Participant who retires under this Plan from the employ of his Employer and all Controlled Group Members on or after his Normal Retirement Date or Early Retirement Date shall then be entitled to, and shall receive, a Retirement Benefit, determined in accordance with Section 4.1 or 4.2, as applicable. Such Benefit shall commence to be paid not later than ninety (90) days following the date the Participant's retirement from his Employer becomes effective. Section 5.2 Form of Retirement Benefits. To the extent a Benefit is payable to a Participant under Section 5.1, it shall be paid in the form of a single life annuity, or any actuarially equivalent survivor annuity (determined using a mortality assumption selected by the Committee in its sole discretion). Notwithstanding the preceding, at the discretion of the Committee, such Benefit may be paid in the form of a single lump sum that is the actuarially equivalent to such single life annuity. Such actuarial equivalence shall be determined using a mortality assumption selected by the Committee in its sole discretion and an assumed interest rate of eight percent (8%). Section 5.3 Payment Procedure. The Employer shall establish and maintain an Account for each Participant and beneficiary who is receiving a Benefit under the Plan. Immediately prior to any distribution hereunder to any Participant or beneficiary, the Employer shall credit the amount of such distribution to such Account and then immediately distribute or commence to distribute the amount so credited to the Participant, or as applicable, to his beneficiary. Neither the Participant nor his beneficiary(s) shall have any interest or right in any such Account at any time. All amounts credited to the Accounts established under the Plan shall be credited solely for the purpose of effecting distributions hereunder and shall remain assets of the Employer subject to the claims of such Employer's general creditors. ARTICLE VI PAYMENT OF BENEFIT ON OR AFTER DEATH OR DISABILITY Section 6.1 Commencement of Benefit Payments. If a Participant dies or becomes Disabled while employed by his Employer but prior to becoming entitled to a Retirement Benefit under Section 5.1 of this Plan, he or his beneficiary or beneficiaries shall then be entitled to, and shall receive, a Benefit computed under Section 4.2, as if the Participant had retired immediately prior to his death or Disability and, if such death or Disability occurred prior to his attainment of age fifty-five (55), as if he had attained such age. The Committee may, in its sole discretion, provide that the amount of the such Retirement Benefit shall be enhanced (including, but limited to, an enhancement that takes into account projected additional Years of Service or increases in Compensation that would have occurred absent the Participant's death or Disability). Any Benefit payable under this paragraph shall be paid in a single lump sum (as determined in accordance with Section 5.2) within ninety (90) days following the date the Administrator is notified of the Participant's death or Disability and the Committee has determined that such Benefit is payable. 6 9 If a Participant dies or becomes Disabled after becoming entitled to a Retirement Benefit under Section 5.1 but prior to receiving his entire Benefit under the Plan, the remaining Benefit otherwise payable with respect to the Participant shall be paid to him or his beneficiary or beneficiaries in a single lump-sum amount within ninety (90) days following the date on which the Administrator is notified of the Participant's death or Disability, as applicable, unless such remaining Benefit is to be paid in the form of a survivor annuity. If such remaining benefit is payable in the form of a survivor annuity, the Participant's beneficiary shall begin to receive such payments within ninety (90) days following the date on which the Administrator is notified of the Participant's death. Section 6.2 Designation of Beneficiary. A Participant may, by written instruction delivered to the Administrator during the Participant's lifetime, designate one or more primary and contingent beneficiaries to receive the Retirement Benefit which may be payable hereunder following the Participant's death, and may designate the proportions in which such beneficiaries are to receive such payments. A Participant may change such designations from time to time, and the last written designation filed with the Administrator prior to the Participant's death shall control. If a Participant fails to specifically designate a beneficiary, or if no designated beneficiary survives the Participant, payment shall be made by the Administrator in the following order of priority: (a) to the Participant's surviving spouse; or if none, (b) to the Participant's children, per stirpes; or if none, (c) to the Participant's estate. ARTICLE VII ADMINISTRATION Section 7.1 General. The Company shall appoint the Administrator, consisting of two or more individuals who have accepted appointment thereto. The members of the Administrator shall serve at the discretion of the Company and may resign by written notice to the Company. Vacancies in the Administrator shall be filled by the Company. Except as otherwise specifically provided in the Plan, the Administrator shall be responsible for administration of the Plan. The Administrator shall be the "named fiduciary" within the meaning of Section 402(c)(2) of ERISA. Section 7.2 Administrative Rules. The Administrator may adopt such rules of procedure as it deems desirable for the conduct of its affairs, except to the extent that such rules conflict with the provisions of the Plan. Section 7.3 Duties. The Administrator shall have the following rights, powers and duties: (a) The decision of the Administrator in matters within its jurisdiction shall be final, binding and conclusive upon the Employers and upon any other person affected by such decision, subject to the claims procedure hereinafter set forth. (b) The Administrator shall have the sole and absolute duty and authority to interpret and construe the provisions of the Plan, to determine eligibility for Benefits and the appropriate amount of any Benefits, to decide any question which may arise regarding the rights of employees, Participants and beneficiaries and the amounts of their respective interests, to construe any ambiguous provision of the Plan, to correct any defect, supply any omission or reconcile any inconsistency, to adopt such rules and to exercise such powers as the Administrator may deem necessary for the administration of the Plan, and to exercise any other rights, powers or privileges granted to the Administrator by the terms of the Plan. (c) The Administrator may appoint such agents, counsel, accountants, consultants and other persons as it deems necessary to assist in the administration of the Plan, including, without limitation, employees of an Employer. 7 10 (d) The Administrator shall periodically report to the Board with respect to the status of the Plan. Section 7.4 Fees. No fee or compensation shall be paid to any person for services as the Administrator. Section 7.5 Limitation of Actions. No individual acting on behalf of the Administrator pursuant to this Article shall have any right to vote upon or decide any matters relating solely to his own rights under the Plan. ARTICLE VIII CLAIMS PROCEDURE Section 8.1 General. Any claim for Benefits under the Plan shall be filed by the Participant or beneficiary ("claimant") on the form prescribed for such purpose with the Administrator. A decision on a claim shall be made within ninety (90) days after receipt of the claim by the Administrator, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered within a reasonable period of time, but not later than one hundred and eighty (180) days after receipt of the claim. Section 8.2 Denials. If a claim under the Plan is wholly or partially denied, written notice of the decision shall be furnished to the claimant by the Administrator. Such notice shall be written in a manner calculated to be understood by the claimant and shall set forth: (a) the specific reason or reasons for the denial; (b) specific reference to the pertinent provision of the Plan upon which the denial is based; (c) a description of any additional material or information necessary for the claimant to perfect the claim; and (d) an explanation of the claim review procedure under Sections 8.3 and 8.4. Section 8.3 Appeals Procedure. In order that a claimant may appeal a denial of a claim, the claimant or the claimant's duly authorized representative may: (a) request a review by written application to the Administrator, or its designate, no later than sixty (60) days after receipt by the claimant of written notification of denial of a claim; (b) review pertinent documents; and (c) submit issues and comments in writing. Section 8.4 Review. A decision on review of a denied claim shall be made not later than sixty (60) days after receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered within a reasonable period of time, but not later than one hundred and twenty (120) days after receipt of a request for review. The decision on review shall be in writing, shall be written in a manner calculated to be understood by the claimant, shall include the specific reason(s) for the decision and the specific reference(s) to the pertinent provisions of the Plan on which the decision is based and shall, to the extent permitted by law, be final and binding on all interested persons. ARTICLE IX MISCELLANEOUS PROVISIONS Section 9.1 Amendment and Termination. The Company reserves the right to amend or terminate the Plan in any manner that it deems advisable and at any time, by a resolution of the Board. Notwithstanding the preceding, no amendment or termination of the Plan shall reduce the vested Benefit of any Participant determined as of the day immediately preceding the effective date of such amendment or termination. 8 11 Section 9.2 No Assignment. A Participant shall not have the power, without the consent of the Administrator, to pledge, transfer, assign, anticipate, mortgage or otherwise encumber or dispose of in advance any interest in amounts payable hereunder or any of the payments provided for herein, nor shall any interest in amounts payable hereunder or in any payments be subject to seizure for payments of any debts, judgments, alimony or separate maintenance, or be reached or transferred by operation of law in the event of bankruptcy, insolvency or otherwise. If a Participant (or beneficiary) attempts to pledge, transfer, assign, anticipate, mortgage or otherwise encumber or dispose of in advance any interest in a Participant's (or beneficiary's) Benefit, or if by reason of his bankruptcy or other event that would permit any other individual to obtain his right to his Benefit, he would not be able to enjoy his Benefit, the Administrator may, in its sole discretion, terminate the Participant's (or beneficiary's) interest in any Benefit to the extent the Administrator considers it necessary or advisable to prevent or limit the effects of such occurrence. Such termination shall be effected by filing a declaration with the Company and delivering a copy of such declaration to the Participant (or beneficiary). Any Benefit affected by such termination of interests shall be retained by the Company and, in the Administrator's sole discretion, may be paid or expended for the benefit of the affected Participant (or beneficiary), his spouse, his children or any other person dependent upon him, in such manner as the Administrator determines is proper. Section 9.3 Successors and Assigns. The provisions of the Plan are binding upon and inure to the benefit of each Employer, its successors and assigns, and the Participant, his beneficiaries, heirs, legal representatives and assigns. Section 9.4 Governing Law. The Plan shall be subject to and construed in accordance with the laws of the State of Ohio, except to the extent pre-empted by applicable Federal law. Section 9.5 No Guarantee of Employment. Nothing contained in the Plan shall be construed as a contract of employment or deemed to give any Participant the right to be retained in the employ of any Controlled Group Member or any equity or other interest in the assets, business or affairs of a Controlled Group Member. No Participant hereunder shall have a security interest in assets of an Employer used to make contributions or pay benefits. Section 9.6 Severability. If any provision of the Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Plan, but the Plan shall be construed and enforced as if such illegal or invalid provision had never been included herein. Section 9.7 Notification of Addresses. Each Participant and each beneficiary shall file with the Administrator, from time to time, in writing, the post office address of the Participant, the post office address of each beneficiary, and each change of post office address. Any communication, statement or notice addressed to the last post office address filed with the Administrator (or if no address was filed, then to the last post office address of the Participant or beneficiary as shown on the Employer's records) shall be binding on the Participant and each beneficiary for all purposes of the Plan and neither the Administrator nor any Employer shall be obligated to search for or ascertain the whereabouts of any Participant or beneficiary. Section 9.8 Bonding. The Administrator and all agents and advisors employed by it shall not be required to be bonded. Section 9.9 Withdrawal of Employer. An Employer (other than the Company) may withdraw from participation in the Plan and such withdrawal shall constitute a termination of the Plan as to that Employer; provided, however, that the Employer shall continue to be treated as an Employer under the Plan with respect to those Participants (and beneficiaries) to whom the Employer owes a continuing obligation under the Plan. An Employer may withdraw by executing a written instrument of withdrawal, approved by its board of directors, and such withdrawal shall be effective on the date designated in the instrument or, if no date is specified, on the date of execution of the instrument. 9 12 ARTICLE X FUNDING The entire cost of this Plan shall be paid from the general assets of the Employer. No liability for the payment of benefits under the Plan shall be imposed upon any officer, trustee, employee, or agent of an Employer. --------------- The undersigned, pursuant to the approval of the Board on July 21, 1994, does herewith execute The Lincoln Electric Company Supplemental Executive Retirement Plan. ------------------------------------ Chairman of the Board of Directors 10 EX-10.D 6 EXHIBIT 10.D 1 THE LINCOLN ELECTRIC COMPANY DEFERRED COMPENSATION PLAN 2 TABLE OF CONTENTS
PAGE ---------- ARTICLE I. PURPOSE.................................................................. 1 ARTICLE II. DEFINITIONS AND CONSTRUCTION............................................ 1 Section 2.1. Definitions....................................................... 1 Section 2.2. Construction...................................................... 3 ARTICLE III. PARTICIPATION AND DEFERRALS............................................ 4 Section 3.1. Eligibility and Participation..................................... 4 (a) Eligibility........................................................... 4 (b) Participation......................................................... 4 (c) Initial Year of Participation......................................... 4 (d) Termination of Participation.......................................... 4 Section 3.2. Ineligible Participant............................................ 4 Section 3.3. Amount of Deferral................................................ 5 Section 3.4. Matching Amounts.................................................. 5 Section 3.5. Modification of Deferral Commitments.............................. 5 ARTICLE IV. PARTICIPANTS' ACCOUNTS.................................................. 5 Section 4.1. Establishment of Accounts......................................... 5 Section 4.2. Elective Deferred Compensation.................................... 5 Section 4.3. Determination of Accounts......................................... 6 (a) Determination of Accounts............................................. 6 (b) Accounting............................................................ 6 Section 4.4. Adjustments to Accounts........................................... 6 Section 4.5. Statement of Accounts............................................. 6 Section 4.6. Vesting of Accounts............................................... 6 ARTICLE V. FINANCING OF BENEFITS.................................................... 7 Section 5.1. Financing of Benefits............................................. 7 Section 5.2. Security For Benefits............................................. 7 Section 5.3. Investments....................................................... 7 ARTICLE VI. DISTRIBUTION OF BENEFITS................................................ 8 Section 6.1. Settlement Date................................................... 8 Section 6.2. Amount to be Distributed.......................................... 8 Section 6.3. In-Service Distribution........................................... 8 Section 6.4. Form of Distribution.............................................. 8 Section 6.5. Beneficiary Designation........................................... 9 Section 6.6. Facility of Payment............................................... 9 Section 6.7. Hardship Distributions............................................ 10 ARTICLE VII. ADMINISTRATION, AMENDMENT AND TERMINATION.............................. 10 Section 7.1. Administration.................................................... 10 Section 7.2. Plan Administrator................................................ 10 Section 7.3. Amendment, Termination and Withdrawal............................. 11 Section 7.4. Successors........................................................ 11 Section 7.5. Claims............................................................ 11 Section 7.6. Expenses.......................................................... 11 ARTICLE VIII. MISCELLANEOUS......................................................... 11 Section 8.1. No Guarantee of Employment........................................ 11 Section 8.2. Applicable Law.................................................... 12 Section 8.3. Interests Not Transferable........................................ 12 Section 8.4. Severability...................................................... 12 Section 8.5. Withholding of Taxes.............................................. 12 Section 8.6. Top-Hat Plan...................................................... 12
i 3 THE LINCOLN ELECTRIC COMPANY DEFERRED COMPENSATION PLAN The Lincoln Electric Company Deferred Compensation Plan is made and executed as of the day of November, 1994 and is effective as of November 15, 1994. ARTICLE I PURPOSE THE LINCOLN ELECTRIC COMPANY DEFERRED COMPENSATION PLAN (the "Plan"), is hereby established by The Lincoln Electric Company to allow designated management and highly compensated employees to defer a portion of their current salary. It is intended that the Plan will aid in attracting and retaining employees of exceptional ability by providing these benefits. The terms and conditions of the Plan are set forth below. ARTICLE II DEFINITIONS AND CONSTRUCTION Section 2.1. Definitions. Whenever the following terms are used in this Plan they shall have the meanings specified below unless the context clearly indicates to the contrary: (a) "Account": The bookkeeping account maintained for each Participant showing his interest under the Plan. (b) "Accounting Date": December 31 of each year and the last day of any calendar quarter in which a Participant's Settlement Date occurs. (c) "Accounting Period": The period beginning on the day immediately following an Accounting Date and ending on the next following Accounting Date. (d) "Administrator": The committee established pursuant to the provisions of Section 7.1. (e) "Base Salary": The base earnings paid by the Corporation to a Participant without regard to any increases or decreases in base earnings as a result of an election to defer base earnings under this Plan, or an election between benefits or cash provided under a plan of the Corporation maintained pursuant to Section 125 or 401(k) of the Code. (f) "Beneficiary": The person or persons (natural or otherwise), within the meaning of Section 6.5, who are entitled to receive distribution of the Participant's Account balance in the event of the Participant's death. (g) "Board": The Board of Directors of the Corporation. (h) "Bonus": Any bonus paid by the Corporation to a Participant without regard to any decreases as a result of an election to defer all or any portion of a bonus under this Plan, or an election between benefits or cash provided under a plan of the Corporation maintained pursuant to Section 125 or 401(k) of the Code. (i) "Code": The Internal Revenue Code of 1986, as amended from time to time; any reference to a provision of the Code shall also include any successor provision thereto. (j) "Committee": The Compensation Committee of the Board. (k) "Compensation": The amount of Base Salary plus Bonuses paid for the Plan Year by the Corporation to a Participant. (l) "Corporation": The Lincoln Electric Company or any successor or successors thereto. 4 (m) "Deferral Commitment": An agreement by a Participant to have a specified percentage or dollar amount of his Compensation deferred under the Plan for a specified period in the future. (n) "Deferral Period": Means the Plan Year for which a Participant has elected to defer a portion of his Compensation. (o) "Disability": The occurrence, while a Participant is an Employee, of a physical or mental incapacity which is likely to be permanent and which prevents a Participant from engaging in any occupation or performing any work for compensation or profit for which he is qualified by education, training or experience, as determined by the Administrator in its sole discretion on the basis of medical evidence certified by a physician or physicians designated by it. (p) "Effective Date": November 15, 1994. (q) "Employee": Any employee of the Corporation who is, as determined by the Committee, a member of a "select group of management or highly compensated employees" of the Corporation, within the meaning of Sections 201, 301 and 401 of ERISA, and who is designated by the Committee as an Employee eligible to participate in the Plan. (r) "ERISA": The Employee Retirement Income Security Act of 1974, as amended from time to time; any reference to a provision of ERISA shall also include any successor provision thereto. (s) "Financial Hardship": An unforeseeable financial emergency of the Participant, determined by the Administrator on the basis of information supplied by the Participant, arising from an illness, disability, casualty loss, sudden financial reversal or other such unforeseeable occurrence, but not including foreseeable events such as the purchase of a house or education expenses for children. (t) "Matching Amount": The amount credited to a Participant's Matching Account under Section 3.4. (u) "Participant": An Employee participating in the Plan in accordance with the provisions of Section 3.1 or a former Employee retaining benefits under the Plan that have not been fully paid. (v) "Participation Agreement": The Agreement submitted by a Participant to the Administrator with respect to one or more Deferral Commitments. (w) "Plan": The Plan set forth in this instrument as it may, from time to time, be amended. (x) "Plan Year": The 12-month period beginning January 1 through December 31; provided that the first plan year shall begin on November 15, 1994 and end on December 31, 1994. (y) "Retirement": Termination of employment with the Corporation on or after attainment of age 60. (z) "Settlement Date": The date on which a Participant terminates employment with the Corporation. Leaves of absence granted by the Corporation will not be considered as termination of employment during the term of such leave. Settlement Date shall also include with respect to any Deferral Period the date prior or subsequent to termination of employment selected by a Participant in a Participation Agreement for distribution of all or a portion of the amounts deferred during such Deferral Period. Section 2.2. Construction. The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender, and the singular may include the plural, unless the context clearly indicates to the contrary. The words "hereof," "herein," "hereunder," and other similar compounds of the word "here" shall mean and refer to the entire Plan, and not to any particular provision or Section. 2 5 ARTICLE III PARTICIPATION AND DEFERRALS Section 3.1. Eligibility and Participation. (a) Eligibility. Eligibility to participate in the Plan for any Deferral Period is limited to those management and/or highly compensated Employees of the Corporation (i) who are designated, from time to time, by the Committee, and (ii) who have elected to make the maximum elective contributions permitted them under the terms of the Corporation's Employee Savings Plan for such Deferral Period. (b) Participation. An eligible Employee may elect to participate in the Plan with respect to any Deferral Period by submitting a Participation Agreement to the Administrator by the last business day immediately preceding the applicable Deferral Period. (c) Initial Year of Participation. In the event that an individual first becomes eligible to participate during a Deferral Period and wishes to elect a Deferral Commitment with respect to the Compensation earned by and payable to the individual during such Deferral Period, a Participation Agreement must be submitted to the Administrator no later than 30 days following such individual's initial eligibility. Any Deferral Commitments elected in such Participation Agreement shall be effective only with regard to Compensation earned following the submission of the Participation Agreement to the Administrator. If an eligible Employee does not submit a Participation Agreement within such period of time, such individual will not be eligible to participate in the Plan until the first day of a Deferral Period subsequent to the Deferral Period in which the individual initially became eligible to participate. (d) Termination of Participation. Participation in the Plan shall continue as long as the Participant is eligible to receive benefits under the Plan. Section 3.2. Ineligible Participant. Notwithstanding any other provisions of this Plan to the contrary, if the Administrator determines that any Participant may not qualify as a "management or highly compensated employee" within the meaning of ERISA, or regulations thereunder, the Administrator may determine, in its sole discretion, that such Participant shall cease to be eligible to participate in this Plan. Upon such determination, the Corporation shall make an immediate lump sum payment to the Participant equal to the amount credited to his Account. Upon such payment no benefit shall thereafter be payable under this Plan either to the Participant or any Beneficiary of the Participant, and all of the Participant's elections as to the time and manner of payment of his Account will be deemed to be cancelled. Section 3.3 Amount of Deferral. With respect to each Plan Year, a Participant may elect to defer a specified dollar amount or percentage of his or her Compensation, provided the amount the Participant elects to defer under this Plan and the Corporation's Employee Savings Plan shall not exceed 25% of his Compensation for the Plan Year. A Participant may choose to have amounts deferred under this Plan deducted from his Base Salary, Bonus or a combination of both. For the first Plan Year, a Participant may elect to defer all or any portion of his or her Compensation earned or payable after the later of the effective date of the Participation Agreement or the date of filing the Participation Agreement with the Administrator, provided the total deferred amount for such Plan Year does not exceed the annual limitation under this Section 3.3 computed for the calendar year. A Participant may change the dollar amount or percentage of his or her Compensation to be deferred by filing a written notice thereof with the Administrator. Any such change shall be effective as of the first day of the Plan Year immediately succeeding the Plan Year in which such notice is filed with the Administrator. Section 3.4. Matching Amounts. The Corporation may, in its discretion, provide Matching Amounts under this Plan with respect to each Participant. Section 3.5. Modification of Deferral Commitments. A Deferral Commitment shall be irrevocable, except that the Administrator may, in its sole discretion, permit a Participant to terminate, prospectively, any Deferral Commitment for a Deferral Period. If a Participant terminates a Deferral Commitment during a 3 6 Deferral Period, such Participant will not be permitted to enter into a new Deferral Commitment until the following Deferral Period. ARTICLE IV PARTICIPANTS' ACCOUNTS Section 4.1. Establishment of Accounts. The Corporation, through its accounting records, shall establish an Account for each Participant. In addition, the Corporation may establish one or more subaccounts of a Participant's Account, if the Corporation determines that such subaccounts are necessary or appropriate in administering the Plan. Section 4.2. Elective Deferred Compensation. A Participant's Compensation that is deferred pursuant to a Deferral Commitment shall be credited to the Participant's Account within thirty days following the date the corresponding non-deferred portion of his Compensation would have been paid to the Participant. Any Matching Amount provided pursuant to Section 3.4 shall be credited at the time designated by the Corporation. Any withholding of taxes or other amounts with respect to deferred Compensation which is required by state, federal or local law shall be withheld from the Participant's non-deferred Compensation. Section 4.3. Determination of Accounts. (a) Determination of Accounts. The amount credited to each Participant's Account as of a particular date shall equal the deemed balance of such Account as of such date. The balance in the Account shall equal the amount credited pursuant to Section 4.2, and shall be adjusted in the manner provided in Section 4.4. (b) Accounting. The Corporation, through its accounting records, shall maintain a separate and distinct record of the amount in each Account as adjusted to reflect income, gains, losses, withdrawals and distributions. Section 4.4. Adjustments to Accounts. (a) Each Participant's Account shall be debited with the amount of any distributions under the Plan to or on behalf of the Participant or, in the event of his death, his Beneficiary during the Accounting Period ending on such Accounting Date. (b) The Participant's Account shall next be credited or debited, as the case may be, with an income (loss) factor equal to an amount determined by multiplying (i) the balance credited to the Participant's Account as of the immediately preceding Accounting Date (as adjusted pursuant to Section 4.2(a) for the current Accounting Date) by (ii) the rate of return for the Accounting Period ending on such Accounting Date on deemed investments provided for in Section 5.3. Section 4.5. Statement of Accounts. As soon as practicable after the end of each Plan Year, a statement shall be furnished to each Participant or, in the event of his death, to his Beneficiary showing the status of his Account as of the end of the Plan Year, any changes in his Account since the end of the immediately preceding Plan Year, and such other information as the Administrator shall determine. Section 4.6. Vesting of Accounts. Subject to Section 5.1, each Participant shall at all times have a nonforfeitable interest in his Account balance. ARTICLE V FINANCING OF BENEFITS Section 5.1. Financing of Benefits. Benefits payable under the Plan to a Participant or, in the event of his death, to his Beneficiary shall be paid by the Corporation from its general assets. The payment of benefits 4 7 under the Plan represents an unfunded, unsecured obligation of the Corporation. Notwithstanding the fact that the Participants' Accounts may be adjusted by an amount that is measured by reference to the performance of any deemed investments as provided in Section 5.3, no person entitled to payment under the Plan shall have any claim, right, security interest or other interest in any fund, trust, account, insurance contract, or asset of the Corporation which may be responsible for such payment. Section 5.2. Security for Benefits. Notwithstanding the provisions of Section 5.1, nothing in this Plan shall preclude the Corporation from setting aside amounts in trust (the "Trust") pursuant to one or more trust agreements between a trustee and the Corporation. However, no Participant or Beneficiary shall have any secured interest or claim in any assets or property of the Corporation or the Trust and all funds contained in the Trust shall remain subject to the claims of the Corporation's general creditors. Section 5.3. Investments. The Committee may designate one or more separate investment funds or vehicles, including, without limitation, certificates of deposit, mutual funds, money market accounts or funds, limited partnerships, or debt or equity securities, including equity securities of the Corporation (measured by market value, book value or any formula selected by the Committee), in which the amount credited to a Participant's Account will be deemed to be invested. Each Participant shall file an investment preference request ("Request") to be effective as of the date of such Request with respect to the amounts credited to his Account as of such date and amounts subsequently credited to his Account. A Request will advise the Administrator as to the Participant's preference with respect to investment vehicles for all or some portion of the amounts credited to a Participant's Account in specified multiples of 10%. A Request may be changed prospectively by a Participant only as of January 1, April 1, July 1 and October 1 by giving the Administrator prior written notice. The Administrator may, but is under no obligation to, deem the amounts credited to a Participant's Account to be invested in accordance with the Request made by the Participant, or the Committee may, instead, in its sole discretion, deem such Account to be invested in any deemed investment funds selected by the Committee. Earnings on any amounts deemed to have been invested in any deemed investment fund shall be deemed to have been reinvested in such fund. ARTICLE VI DISTRIBUTION OF BENEFITS Section 6.1. Settlement Date. A Participant or, in the event of his death, his Beneficiary shall be entitled to distribution of the balance of his Account, as provided in this Article VI, following his Settlement Date or Dates. Section 6.2. Amount to be Distributed. The amount to which a Participant or, in the event of his death, his Beneficiary is entitled in accordance with the following provisions of this Article shall be based on the Participant's adjusted account balance determined as of the Accounting Date coincident with or next following his Settlement Date or Dates. Section 6.3. In-Service Distribution. A Participant may elect to commence to receive an in-service distribution of his or her deferred Compensation for any Deferral Period beginning at any time at least two years after the date such Compensation otherwise would have been first payable. A Participant's election of an in-service distribution shall be filed in writing with the Administrator at the same time as is filed his election to participate as provided in Section 3.1. The Participant may elect to receive such Compensation as an in-service distribution under one of the forms provided in Section 6.4. Any benefits paid to the Participant as an in-service distribution shall reduce the Participant's Account. Section 6.4. Form of Distribution. As soon as practicable after the end of the Accounting Period in which a Participant's Settlement Date occurs, but in no event later than thirty days following the end of such Accounting Period, the Corporation shall commence distribution or cause distribution to be commenced, to the Participant or, in the event of his death, to his Beneficiary, of the balance of the Participant's Account, as determined under Section 6.2, under one of the forms provided in this Section. Notwithstanding the foregoing, 5 8 if elected by the Participant, the distribution of all or a portion of the Participant's Account may commence on a date between the Settlement Date and the date the Participant attains age sixty-five. Distribution of a Participant's Account with respect to any Deferral Period shall be made in one of the following forms as elected by the Participant: (a) by payment in cash in five (5) annual installments; or (b) by payment in cash in ten (10) annual installments; or (c) by payment in cash in fifteen (15) annual installments. The Participant's election of the form of distribution shall be made by written notice filed with the Administrator at least one (1) year prior to the Participant's voluntary termination of employment with, or retirement from, the Corporation. Any such election may be changed by the Participant at any time and from time to time without the consent of any other person by filing a later signed written election with the Administrator; provided that any election made less than one (1) year prior to the Participant's voluntary termination of employment or retirement shall not be valid, and in such case payment shall be made in accordance with the Participant's prior election. The amount of each installment shall be equal to the quotient obtained by dividing the Participant's Account balance as of the date of such installment payment by the number of installment payments remaining to be made to or in respect of such Participant at the time of calculation. If a Participant fails to make an election in a timely manner as provided in this Section 6.4, distribution shall be made in cash in ten (10) annual installments. Section 6.5. Beneficiary Designation. As used in the Plan the term "Beneficiary" means: (a) The last person designated as Beneficiary by the Participant in a written notice on a form prescribed by the Administrator; (b) If there is no designated Beneficiary or if the person so designated shall not survive the Participant, such Participant's spouse; or (c) If no such designated Beneficiary and no such spouse is living upon the death of a Participant, or if all such persons die prior to the full distribution of the Participant's Account balance, then the legal representative of the last survivor of the Participant and such persons, or, if the Administrator shall not receive notice of the appointment of any such legal representative within one year after such death, the heirs-at-law of such survivor (in the proportions in which they would inherit his intestate personal property) shall be the Beneficiaries to whom the then remaining balance of the Participant's Account shall be distributed. Any Beneficiary designation may be changed from time to time by like notice similarly delivered. No notice given under this Section shall be effective unless and until the Administrator actually receives such notice. Section 6.6. Facility of Payment. Whenever and as often as any Participant or his Beneficiary entitled to payments hereunder shall be under a legal disability or, in the sole judgment of the Administrator, shall otherwise be unable to apply such payments to his own best interests and advantage, the Administrator in the exercise of its discretion may direct all or any portion of such payments to be made in any one or more of the following ways: (i) directly to him; (ii) to his legal guardian or conservator; or (iii) to his spouse or to any other person, to be expended for his benefit; and the decision of the Administrator, shall in each case be final and binding upon all persons in interest. Section 6.7. Hardship Distributions. Upon a finding by the Administrator that a Participant has suffered a Financial Hardship, the Administrator may, in its sole discretion, distribute, or direct the Trustee to distribute, to the Participant an amount which does not exceed the amount required to meet the immediate financial needs created by the Financial Hardship and not reasonably available from other sources of the 6 9 Participant; provided, however, that in no event shall any amount attributable to a Deferral Commitment be distributed less than six months after the date of the applicable Participation Agreement. No distributions pursuant to this Section 6.4 may be made in excess of the value of the Participant's Account at the time of such distribution. ARTICLE VII. ADMINISTRATION, AMENDMENT AND TERMINATION Section 7.1. Administration. The Plan shall be administered by an Administrator consisting of one or more persons who shall be appointed by and serve at the pleasure of the Board. The Administrator shall have such powers as may be necessary to discharge its duties hereunder, including, but not by way of limitation, to construe and interpret the Plan and determine the amount and time of payment of any benefits hereunder. The Administrator may, from time to time, employ agents and delegate to them such administrative duties as it sees fit, and may from time to time consult with legal counsel who may be counsel to the Corporation. The Administrator shall have no power to add to, subtract from or modify any of the terms of the Plan, or to change or add to any benefits provided under the Plan, or to waive or fail to apply any requirements of eligibility for a benefit under the Plan. No member of the Administrator shall act in respect of his own Account. All decisions and determinations by the Administrator shall be final and binding on all parties. All decisions of the Administrator shall be made by the vote of the majority, including actions in writing taken without a meeting. All elections, notices and directions under the Plan by a Participant shall be made on such forms as the Administrator shall prescribe. Section 7.2. Plan Administrator. The Corporation shall be the "administrator" under the Plan for purposes of ERISA. Section 7.3. Amendment, Termination and Withdrawal. The Plan may be amended from time to time or may be terminated at any time by the Board. No amendment or termination of the Plan, however, may adversely affect the amount or timing of payment of any person's benefits accrued under the Plan to the date of amendment or termination without such person's written consent. Section 7.4. Successors. The Corporation shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business and/or assets of the Corporation expressly to assume and to agree to perform this Plan in the same manner and to the same extent the Corporation would be required to perform if no such succession had taken place. This Plan shall be binding upon and inure to the benefit of the Corporation and any successor of or to the Corporation, including without limitation any persons acquiring directly or indirectly all or substantially all of the business and/or assets of the Corporation whether by sale, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the "Corporation" for the purposes of this Plan), and the heirs, beneficiaries, executors and administrators of each Participant. Section 7.5. Claims. The Administrator will provide to any Participant or Beneficiary whose claim for benefits under the Plan has been fully or partially denied a written notice setting forth (i) the specific reasons for such denial, (ii) a designation of any additional material or information required and (iii) an explanation of the Plan's claim review procedure. Such notice shall state that the Participant or Beneficiary is entitled to request a review in writing, by the Administrator, of the decision denying the claim. The claim will be reviewed by the Administrator who may, but need not, grant the claimant a hearing. On review, the claimant may have legal representation, examine pertinent documents and submit issues and comments in writing. The decision on review will be made within 120 days following the request, will be provided in writing to the claimant and will be final and binding on all parties concerned. Section 7.6. Expenses. All expenses of the Plan shall be paid by the Corporation from funds other than those deemed investments as provided in Section 5.3, except that brokerage commissions and other 7 10 transaction fees and expenses relating to the investment of deemed assets and investment fees attributable to commingled investment of such assets shall be paid from or charged to such assets or earnings thereon. ARTICLE VIII. MISCELLANEOUS Section 8.1. No Guarantee of Employment. Nothing contained in the Plan shall be construed as a contract of employment between the Corporation and any Employee, or as a right of any Employee, to be continued in the employment of the Corporation, or as a limitation of the right of the Corporation to discharge any of its Employees, with or without cause. Section 8.2. Applicable Law. All questions arising in respect of the Plan, including those pertaining to its validity, interpretation and administration, shall be governed, controlled and determined in accordance with the applicable provisions of federal law and, to the extent not preempted by federal law, the laws of the State of Ohio. Section 8.3. Interests Not Transferable. No person shall have any right to commute, encumber, pledge or dispose of any interest herein or right to receive payments hereunder, nor shall such interests or payments be subject to seizure, attachment or garnishment for the payments of any debts, judgments, alimony or separate maintenance obligations or be transferable by operation of law in the event of bankruptcy, insolvency or otherwise, all payments and rights hereunder being expressly declared to be nonassignable and nontransferable. Section 8.4. Severability. Each section, subsection and lesser section of this Plan constitutes a separate and distinct undertaking, covenant and/or provision hereof. Whenever possible, each provision of this Plan shall be interpreted in such manner as to be effective and valid under applicable law. In the event that any provision of this Plan shall finally be determined to be unlawful, such provision shall be deemed severed from this Plan, but every other provision of this Plan shall remain in full force and effect, and in substitution for any such provision held unlawful, there shall be substituted a provision of similar import reflecting the original intention of the parties hereto to the extent permissible under law. Section 8.5. Withholding of Taxes. The Corporation may withhold or cause to be withheld from any amounts payable under this Plan all federal, state, local and other taxes as shall be legally required. Section 8.6. Top-Hat Plan. The Plan is intended to be a plan which is unfunded and maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees within the meaning of Sections 201, 301 and 401 of ERISA, and therefore to be exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA. Accordingly, notwithstanding any other provision of the Plan, the Plan will terminate and no further benefits will accrue hereunder in the event it is determined by a court of competent jurisdiction or by an opinion of counsel based upon a change in law that the Plan constitutes an employee pension benefit plan within the meaning of Section 3(2) of ERISA, which is not so exempt. In addition and notwithstanding any other provision of the Plan, in the absolute discretion of the Committee, the amount credited to each Participant's Account under the Plan as of the date of termination, which shall be an Accounting Date for purposes of the Plan, will be paid immediately to such Participant in a single lump sum cash payment. 8 11 IN WITNESS WHEREOF, The Lincoln Electric Company has caused this instrument to be executed in its name as of the date first above written. THE LINCOLN ELECTRIC COMPANY By: ------------------------------------ Its: ------------------------------------ Attest: ------------------------------------------------------ 9 EX-10.E 7 EXHIBIT 10.E 1 EXHIBIT 10(e) [LINCOLN ELECTRIC LOGO] THE LINCOLN ELECTRIC COMPANY 22801 St. Clair Avenue Cleveland, Ohio 44117-1199 U.S.A. (216) 481-8100 July 14, 1993 Mr. Anthony A. Massaro 701 Osage Road Pittsburgh, PA 15243 Dear Tony: It is with pleasure that we extend to you an offer to join the Lincoln Electric Company on August 1, 1993. Your position is Director, International Operations, and you will report to me. Your compensation will include an annual base salary of $240,000, payable according to our standard payroll schedule. Such salary will be subject to our normal area wage index except for any periods during which the then current indexed salary would be reduced. For such periods, the salary paid will be unchanged until the multiplier causes the indexed salary to exceed the salary being paid. Lincoln Electric will provide you with $50,000 of term life insurance. You will be eligible for participation in our Employee Stock Purchase Plan in the same manner as other Lincoln Electric employees. You will participate in the Lincoln Electric retirement annuity program in the same manner as other employees of the company. Additionally, you will participate in a non-qualified, non-funded Supplemental Employee Retirement Plan (SERP), which includes a requirement for forty years of service with the company and retirement at age 65 or later. In this regard, we will credit you with twenty-four years at your starting date. The plan is designed to provide at age 65, 65% of the average income of the three best years out of the previous seven. The 65% will be made up of: our qualified plan, social security and retirement benefits under any retirement or annuity program provided by previous employers and our non-qualified plan. The SERP will be protected by a "Rabbi-Trust". The SERP becomes payable should you leave for reasons other than cause. Its payment amount if paid prior to age 65 will be at 56% through 1994, rising by one percentage point each following year until it reaches 65%, and with a reduction for service short of 40 years based upon multiplying the payable amount by the ratio of qualified service to forty years, and actuarily reduced based on age. It is understood that should you voluntarily leave the Company prior to age 65, no entitlements to the SERP exist. The twenty-four years' credit relative to the Supplemental Employee Retirement Plan and vacation schedule will also be credited to other applicable benefit programs, except for Quarter Century Club membership and service pin entitlements. Normally, we provide two weeks of paid vacation after one year of full time employment, three weeks after thirteen years, four weeks after twenty years, and five weeks after twenty-five years. In your case, we will credit you with the same twenty-four year period referenced above; thus, you will be entitled to four weeks of vacation during your first year. We will cover your moving expenses from your home to the Cleveland area, including all closing costs, through June 1, 1994 in accordance with the Lincoln Electric Domestic Moving Policy. On your third anniversary with Lincoln, we will review with you the terms of your employment for the purpose of developing a salary base and incentive bonus compensation package as it applies to all other Lincoln Electric employees. Total compensation at that point will be at least equal to your then existing base salary. 2 Although we fully expect a long and productive relationship, you will be covered by an executive severance equal to one year's base salary if you are asked to leave the Company, for reasons other than for cause, or your duties are substantially reduced. Our employment offer is contingent upon resolution of the following issues: That you will not be in breach of any obligations to prior employers or other third parties by entering into employment with the Lincoln Electric Company in the position and manner discussed, and that you agree that you will, under no circumstances use or disclose information which is confidential or proprietary to your previous employer while in the employ of Lincoln Electric. Yours very truly, /s/ D. F. Hastings ----------------------------------- Chairman and Chief Executive Officer D. F. Hastings:ds Accepted: /s/ Anthony A. Massaro ----------------------------------- Anthony A. Massaro July 14, 1993 ----------------------------------- Date 3 EXHIBIT 10(e) THE LINCOLN ELECTRIC COMPANY INTERNATIONAL ASSIGNMENT CONTRACT ANTHONY A. MASSARO ASSIGNMENT LETTER This letter confirms our mutual understanding of the terms and conditions applying to your employment with the company as President & CEO, LE Europe in U.K. subject to your acceptance of the terms and conditions as outlined in this letter. The effective date of your international assignment is January 1, 1994. Your home country has been designated as Pittsburgh, PA, USA. Your assignment is expected to last 2 years, but not more than 5 years, except as mutually agreed. Your base salary and benefits have been designed to provide you with a level of income and benefits comparable to those you would have received in your home country. The terms and conditions outlined in this letter will be in effect only for the period of this assignment. When you return home at the completion of your assignment, you will stop receiving any premiums, allowances, and/or differentials provided under this program. ELEMENTS OF COMPENSATION BASE SALARY Your base salary is currently $240,000 per year. This will be increased to $288,000 beginning January 1, 1994. The Compensation Committee may consider a bonus based on the results in Europe and the financial health of the company as a whole. TAXES In order to equalize your tax bill with that of your counterpart in your home country while you are on international assignment, hypothetical U.S. state and local taxes will be deducted periodically from your total salary. At year end, the company will reimburse the difference between a theoretical home country tax and taxes actually paid in both the U.S. and the assignment country. The accounting firm Ernst & Young will prepare your foreign and U.S. tax returns and will assist the company by providing the information necessary to compute your tax reimbursement. You are responsible for providing all your tax information to Ernst & Young on a timely basis by completing their questionnaire and for ultimate filing of all your tax returns. COST OF LIVING An annual cost of living differential of $48,000 will be used to equalize the costs of goods and services in your international assignment country with those in your home country. HOUSING The company will pay your actual cost of rental housing up to a maximum of 45,000 English Pounds annually in England including all utilities. FOREIGN ASSIGNMENT PREMIUM You will receive a foreign assignment premium of 10 percent of base salary, or $2,400 per month. The company provides you with this incentive in recognition of your dedication in undertaking your international assignment. You will receive the first year's premium of $28,800 as a lump sum payment prior to January 1, 1994. 4 METHOD OF TIMING OF PAYMENTS Your total compensation will probably be paid partially in U.S. dollars and partially in the foreign currency of your country of assignment. In general, your cost of living differential will be remitted to you in foreign currency, when possible. All other amounts will be deposited in U.S. dollars via wire transfer to the account you designate (local or U.S.). Note that in special circumstances U.S. and/or foreign tax considerations may influence the timing and method of payment. In these cases, the company may work with tax consultants in order to minimize taxes wherever possible without undue inconvenience to you. RELOCATION ALLOWANCE A one-time relocation allowance of $20,000 will be paid to you before January 1, 1994. This allowance is designed to aid you with the purchase of luggage, hardware, and other incidental expenses related to your move. SHIPPING/STORAGE The company will assume all reasonable expenses incurred for insuring and shipping your personal effects to your final destination. The company will also pay for any import duties and other expenses necessary for the actual delivery of these goods, as well as for storage of goods that remain in the home country. EDUCATION FOREIGN LANGUAGE The company will reimburse you and your spouse for appropriate language courses. DEPENDENTS The company will pay education allowance in order to provide elementary education for your child which is equivalent to that of public education in your home country. AUTOMOBILES The company will protect you on the loss resulting from the forced sale of your domestic auto prior to your transfer to your country of assignment. When on assignment, a leased car will be provided for you. HOME LEAVE You are eligible for two home leaves per year. The actual cost of business class air fare for you and your family will be paid by the company for round-trip travel from U.K. to Pittsburgh, PA. Incidental expenses en route will also be covered. REPATRIATION Normally, employees returning from international assignments will return to their home-country department for reassignment. Relocation (travel, shipping, and temporary living expenses) policies as noted above will apply to repatriation. TERMINATION If you terminate while abroad either at your own or the company's option, the company will pay moving expenses in accordance with the company's domestic and foreign policy for yourself, your family and your household belongings. Expenses to your home country will be paid, provided you return within 30 days of termination. If a company-initiated termination occurs, you will receive adequate advance notice. Similarly, if you voluntarily terminate, you are expected to give appropriate notice. If you are provided with leased housing, you must agree to vacate within 30 days of termination. Termination will require immediate settlement of all 5 outstanding tax, travel, and other advances. Other conditions included in your original offer letter dated July 14, 1993 will continue to apply. CONDUCT Each employee on international assignment is expected to conduct business affairs with the highest level of integrity. In general, domestic guidelines should always be followed. With respect to tax compliance, please note the following: - The company regards compliance with U.S. and foreign income tax requirements as a mandatory obligation of the expatriate. - Expatriates must conduct themselves at all times so as to avoid charges of tax evasion or abuse, or of violation of local law, which could jeopardize in any way their standing personally or as a representative of the company. - Expatriates are expected to exercise care and attention in minimizing their liability for U.S. and foreign taxes in accordance with appropriate principles of tax planning. Expatriates must cooperate with both the company and the outside tax consultants to ensure that their tax returns are filed on a timely basis and in such a manner as to produce the lowest possible tax permitted by law. AGREEMENT This agreement is made at Cleveland, Ohio and is subject to all applicable laws thereof. In the event that any provision of this letter shall be held invalid or unenforceable by reason of law, such invalidity or unenforceability shall attach only to such provisions and shall not affect or render invalid or unenforceable any other provision of this letter. ______________________________________ Donald F. Hastings, Chairman and Chief Executive Officer ______________________________________ Date I agree and accept this assignment as outlined above. ______________________________________ Anthony A. Massaro ______________________________________ Date EX-10.F 8 EXHIBIT 10.F 1 EXHIBIT 10(F) June 22, 1993 Mr. Jay Elliott 72 Cohasset Hudson, OH 44236 Dear Jay: It is with pleasure that we extend to you an offer to join the Lincoln Electric Company at the earliest possible date. Your position would be Chief Financial Officer by the end of the first quarter of 1994, and you would report to me. Initially, you will serve as International Chief Financial Officer. Your compensation will include an annual base salary of $220,000, payable according to our standard payroll schedule. Such salary will be subject to our normal area wage index except for any periods during which the then current indexed salary would be reduced. For such periods, the salary paid will be unchanged until the multiplier causes the indexed salary to exceed the salary being paid. Basic medical insurance as offered to Lincoln Electric employees, will be paid by the Lincoln Electric Company. A Blue Cross/Blue Shield family contract through February 28, 1994 is valued at $453.18 per month. Lincoln Electric will provide you with $10,000 of term life insurance. You may optionally subscribe to an additional $40,000 of term life at your expense and at the rate available to other Lincoln Electric employees. Our employees pay for the accidental death and dismemberment provision on the company paid life insurance as well as any contributory insurance. In your case, this would amount to approximately $18.50 per month. You will be eligible for participation in our Employee Stock Purchase Plan in the same manner as other Lincoln Electric employees. You will participate in the Lincoln Electric retirement annuity program in the same manner as other employees of the company. Additionally, you will participate in a non-qualified, non-funded Supplemental Employee Retirement Plan (SERP), which includes a requirement for forty years of service with the company and retirement at age 65 or later. In this regard, we will credit you with twenty-seven years, at your starting date. The plan is designed to provide at age 65, 65% of the average income of the three best years out of the previous seven. The 65% will be made up of: our qualified plan, social security and retirement benefits under any retirement or annuity program provided by previous employers and our non-qualified plan. The SERP will be protected by a "Rabbi-Trust". The SERP becomes payable should you leave for reasons other than cause. Its payment amount if paid prior to age 65 will be at 56% through 1994, rising by one percentage point each following year until it reaches 65%, and with a reduction for service short of 40 years based upon multiplying the payable amount by the ratio of qualified service to forty years, and actuarily reduced based on age. It is understood that should you voluntarily leave the Company prior to age 65, no entitlements to the SERP exist. The twenty-seven years' credit relative to the Supplemental Employee Retirement Plan and vacation schedule will also be credited to other applicable benefit programs except for Quarter Century Club membership and service pin entitlements. Normally, we provide two weeks of paid vacation after one year of full time employment, three weeks after thirteen years, four weeks after twenty years, and five weeks after twenty-five years. In your case, we will credit you with the same twenty-seven year period referenced above; thus, you will be entitled to five weeks of vacation during your first year. On your third anniversary with Lincoln, we will review with you the terms of your employment for the purpose of developing a salary base and incentive bonus compensation package as it applies to all other Lincoln Electric employees. Total compensation at that point will be at least equal to your then existing base salary. 1 2 Although we fully expect a long and productive relationship, you will be covered by an executive severance equal to one year's base salary if you are asked to leave the Company, for reasons other than for cause, or your duties are substantially reduced. Our employment offer is contingent upon resolution of the following issues: That you will not be in breach of any obligations to prior employers or other third parties by entering into employment with the Lincoln Electric Company in the position and manner discussed, and that you agree that you will, under no circumstances use or disclose information which is confidential or proprietary to your previous employer while in the employ of Lincoln Electric. Yours very truly, DONALD F. HASTINGS Chairman & Chief Executive Officer ACCEPTED: --------------------------------------------------------- Jay Elliott --------------------------------------------------------- Date 2 EX-10.G 9 EXHIBIT 10.G 1 EXHIBIT 10(G) February 22, 1995 Frederick G. Stueber, Esq. 2253 Delamere Drive Cleveland Heights, Ohio 44106 Dear Fred: It is with pleasure that we extend to you an offer to join The Lincoln Electric Company. Your position would be Vice President, General Counsel and Secretary and you would report to me. Your compensation will include an annual base salary of $200,000, payable according to our standard payroll schedule. Such salary will be subject to our normal area wage index, except for any periods during which the then current indexed salary would be reduced. For such periods, the salary paid will be unchanged until the multiplier causes the indexed salary to exceed the salary being paid. The monthly premiums for basic medical insurance as offered to Lincoln employees generally will be paid by the Company. All employees of the Company, unless they are on a spousal waiver, may select from one of the following plans: (Super Blue) Blue Cross/Blue Shield, QualChoice, HMO Health Ohio, or Kaiser. At the present time, the monthly premiums for family plans vary from $367.84 to $462.24 depending on the plan selected. The Lincoln Electric Company will provide you with $10,000 of term life insurance. You may optionally subscribe to an additional $40,000 of term life at your expense and at a rate available to other Lincoln Electric employees. Our employees pay the accidental death and dismemberment provision of the company-paid life insurance, as well as any contributory insurance. In your case this would amount to $18.50 per month in the form of a payroll deduction. You will also be included in a $750,000 accidental death insurance program, with lesser payments for other consequences as a result of an accident. You will participate in the Lincoln Electric retirement annuity program in the same manner as other employees of the Company. Additionally, you will participate in a non-qualified, non-funded Supplemental Executive Retirement Plan (SERP), which includes an accrual opportunity for forty years of service with the Company and normal retirement at age 65 or later. In this regard, we will credit you with seventeen years at your starting date. The plan is designed to provide at age 65, 65 percent of the average income of the three best years out of the previous seven. The 65 percent will be made up of: our qualified plan, social security and retirement benefits under any retirement or annuity program provided by previous employers (but not including self-employment) and our non-qualified plan. The applicable terms and conditions of the Plan, as approved by the Board of Directors in September 1994, will be made available to you. We will also credit you with the same seventeen year period referenced above for purposes of the Company's vacation program. Normally, we provide two weeks of paid vacation after one year of full time employment, three weeks after thirteen years, four weeks after twenty years, and five weeks after twenty-five years. Thus, you will be entitled to three weeks of vacation during your first year. The seventeen years' credit relating to the Supplemental Executive Retirement Plan and vacation schedule will also be credited to all other applicable benefit programs (excluding Quarter Century Club membership and service pin entitlements). You will be eligible to participate in the Company Employee Stock Purchase Plan and ESOP in the same manner as other qualified Lincoln Electric employees, i.e., any service and eligibility requirements shall be deemed satisfied from the first day of employment. You will also be eligible to participate in the recently adopted 401(k) plan and top-hat deferred compensation plan each in accordance with its terms. You have indicated that the ability to participate meaningfully in equity ownership plans is an important term of your employment, and you will receive an initial award of 2,500 shares of Restricted Stock under the Company's 1988 Incentive Equity Plan. The award will vest in installments of 25 percent each on the third 1 2 through sixth anniversaries of your employment date and will be on the other terms contained in the form of award agreement attached as Appendix A. Although the Company will not be obligated to continue your employment for any period, you will be entitled to severance pay if the Company terminates your employment without cause. "Cause" for purposes of this paragraph means commission of an act that constitutes a felony. The amount of severance pay will be equal to three times your base salary as in effect at the time of termination (increased by any bonus paid in the preceding year) if that termination occurs before the Restricted Stock is fully vested. Thereafter, through your tenth anniversary, the amount of severance pay will be equal to your base salary as in effect at the time of termination (increased by any bonus paid in the preceding year). However, any amount payable will be subject to reduction as necessary so that no amount you receive from the Company will be subject to the excise tax imposed on "parachute payments" by Section 4999 of the Internal Revenue Code. This severance pay arrangement will also apply if there is a Change in Control (as defined in the attached form of Restricted Stock Agreement) of the Company and your employment is terminated before the tenth anniversary of your employment date, but only if your employment is terminated by the Company or its successor without cause (as defined above) or if you decide to terminate your employment because of a significant reduction in your compensation, position or duties or because the principal location of your work is moved more than 25 miles from Cleveland. Should the Board of Directors decide in the future that other change in control provisions are necessary in certain employment agreements to ensure continuity of management, you will be considered a key officer for possible inclusion in lieu of the foregoing arrangement if you so desire. You will also be entitled to the benefits of the Company's standard Indemnification Agreement for officers in the form attached as Appendix B. On or before your second anniversary with Lincoln, we will review with you the terms of your employment for the purpose of developing a new base salary and incentive compensation package that is consistent with the incentive policies applicable to Lincoln Electric officers and employees generally. At that time, it will be determined whether it would be appropriate for you to join in the Lincoln cash bonus program that is available to other employees or participate in some other incentive compensation arrangement. Our expectation is that we would work out a new overall compensation package, but that your total expected cash compensation at that point will be at least equal to your then existing base salary. If you join the bonus program at that time, medical insurance will cease to be paid by the Company; rather, the cost will be deducted from your bonus, as is the case with our employees who receive a bonus who are not otherwise covered by a spousal waiver. You have indicated that your ability to perform as an effective General Counsel will be facilitated by the availability of various support services that are itemized on Appendix C. The Company agrees with your assessment and authorizes you, effective upon your employment, to arrange for such services. Naturally, this offer of employment is subject to approval of its terms by the Compensation Committee and to action by the Board of Directors electing you to the offices specified above. It is contemplated that your employment would begin upon receipt of these approvals in February and that the award of Restricted Stock and Indemnification Agreement would thereupon be immediately effective. We look forward to a long and productive relationship. Sincerely, Chairman and Chief Executive Officer ACCEPTED: ------------------------------------------------------ ------------------------------------------------------ Date 2 3 APPENDIX C LEGAL SUPPORT SERVICES 1. The employment of a legal secretary who meets both the standards of the General Counsel as well as prevailing Company standards. Approximate base salary of $30,000, with two weeks paid vacation. 2. Adequate LAN word processing and computer systems for in-house lawyers, compatible with existing Company systems and reasonably priced. 3. The employment, at a competitive rate, of at least one additional part-time lawyer, experienced in private practice, to facilitate efficient in-house services. 4. Funds to provide basic in-house reference materials, as determined by the General Counsel. 1 4 APPENDIX A THE LINCOLN ELECTRIC COMPANY RESTRICTED STOCK AGREEMENT WHEREAS, Frederick G. Stueber (hereinafter called the "Grantee") is a key employee of The Lincoln Electric Company, (hereinafter called the "Company"); and WHEREAS, this award of Restricted Stock to the Grantee pursuant to the Company's 1988 Incentive Equity Plan (the "Plan") and the execution of a Restricted Stock Agreement (hereinafter called the "Agreement") substantially in the form hereof were authorized previously by the Compensation Committee of the Company's Board of Directors, effective on the date of execution (the "Date of Grant"). NOW, THEREFORE, the Company, pursuant to its 1988 Incentive Equity Plan (the "Plan"), has this day granted (the "Date of Grant") to the Grantee, a total of Two Thousand Five Hundred (2,500) shares of Common Stock, without par value ("Common Stock"), of the Company subject to the terms and conditions of the Plan and the following terms, conditions, limitations and restrictions: 1. The Common Stock subject to this grant shall be fully paid and nonassessable and shall be represented by a certificate or certificates registered in the Grantee's name, endorsed with an appropriate legend referring to the restrictions hereinafter set forth. The Grantee shall have all the rights of a stockholder with respect to such stock, including the right to vote the stock and to receive all dividends paid thereon, provided that such stock, together with any additional stock which the Grantee may become entitled to receive by virtue of a stock dividend, a merger or reorganization in which the Company is the surviving company or any other change in the capital structure shall be subject to the restrictions hereinafter set forth. As long as any of the shares of Common Stock subject to this grant are subject to the risk of forfeiture referred to in Section 2 hereof, the Company may, at its option, require the Grantee to exchange any of the shares received pursuant to this Agreement (together with any such additional shares) for shares of any other class of common equity of the Company having the same aggregate fair market value. 2. The Common Stock subject to this grant shall be subject to forfeiture in the event of the termination of the Grantee's employment with the Company. Such risk of forfeiture shall lapse as to one fourth of the Shares of Common Stock covered hereby upon the third, fourth, fifth and sixth anniversaries of the Date of Grant. Shares of Common Stock that are subject to such risk of forfeiture may not be sold, exchanged, assigned, transferred, pledged or otherwise disposed of by the Grantee except to the Company. Any purported transfer in violation of the provisions of this section shall be void, and the purported transferee shall obtain no rights with respect to such stock. 3. If the Grantee's employment with the Company is terminated before the sixth anniversary of the Date of Grant other than as a result of the Grantee's death or disability, the shares of Common Stock subject to this grant with respect to which the restrictions referred to in Section 2 hereof remain in effect shall be forfeited to the Company. If the Grantee's employment with the Company is terminated before the sixth anniversary of the Date of Grant as a result of the Grantee's death or Disability, the restrictions referred to in Section 2 hereof shall immediately thereupon lapse and terminate. 4. During the period in which the transferability and forfeiture restrictions provided in Section 2 hereof are in effect, the certificates representing the Common Stock covered by this grant shall be retained by the Company, together with the accompanying stock power signed by the Grantee and endorsed in blank. 5. In the event of a "Change in Control" as hereinafter defined, the restrictions on the Common Stock subject to this grant provided in Section 2 hereof shall thereupon lapse and terminate. For the purposes of this section, a Change in Control shall occur upon the happening of any of the following events: (a) The Company is merged or consolidated or reorganized into or with another company or other legal person, and as a result of such merger, consolidation or reorganization less than a majority of the 1 5 combined voting power of the then-outstanding securities of such company or person immediately after such transaction is held in the aggregate by the holders of the then outstanding securities entitled to vote generally in election of the directors of the Company ("Voting Stock") of the Company immediately prior to such transaction; (b) The Company sells or otherwise transfers all or substantially all of its assets to any other company or other legal person, and as a result of such sale or transfer less than a majority of the combined voting power of the then-outstanding securities of such company or person immediately after such sale or transfer is held in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale or transfer; or (c) Any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 30% or more of the outstanding capital stock of the Company having voting power in the general election of directors, excluding (i) any Person or group of Persons who are officers, directors or employees of the Company or any Subsidiary as of the date hereof or are related by blood or marriage to the descendants of James F. or John C. Lincoln, including any trusts or similar arrangements for any of the foregoing and any foundations established by any of the foregoing and (ii) any underwriter or syndicate of underwriters acting on behalf of the Company in a public offering of the Company's securities and any of their transferees. 6. The Grantee hereby acknowledges that federal and state income, payroll or other applicable taxes may apply with respect to this grant. If the Company determines, in its sole discretion, that withholding is required, the Grantee agrees by the acceptance of this grant that such withholding may be accomplished through withholding from the cash compensation due to the Grantee from the Company an amount sufficient to satisfy the full withholding obligation. If withholding pursuant to the foregoing sentence is insufficient (in the sole judgment of the Company) to satisfy the full withholding obligation, the Grantee agrees that either (a) the Grantee will pay over to the Company the amount of cash necessary to satisfy such remaining withholding obligation by the time thereafter specified in writing by the Company, or (b) the Company may retain such number of shares of Common Stock covered by this grant as shall be equal in value to the amount of the remaining withholding obligation. Upon due notice from the Grantee, the Company may (in its discretion) satisfy the entire withholding obligation by retaining stock as provided in (b) above in lieu of withholding from the Grantee's cash compensation. 7. For purposes of this Agreement, the employment of the Grantee with the Company shall not be deemed interrupted, and the Grantee shall not be deemed to have ceased to be an employee of the Company, by reason of the transfer of his or her employment among the Company and its Subsidiaries. 8. Nothing contained in this Agreement shall limit whatever right the Company or a Subsidiary might otherwise have to terminate the employment of the Grantee. 9. Any economic or other benefit to the Grantee under this Agreement or the Plan shall not be taken into account in determining any benefits to which the Grantee may be entitled under any profit-sharing, retirement or other benefit or compensation plan maintained by the Company or a Subsidiary and shall not affect the amount of any life insurance coverage available to any beneficiary under any life insurance plan covering employees of the Company or a Subsidiary. 10. Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment shall adversely affect the rights of the Grantee with respect to the shares of Common Stock or other securities covered by this Agreement without the Grantee's consent. 11. In the event that one or more of the provisions of this Agreement shall be invalidated for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed to be separable from the other provisions hereof, and the remaining provisions hereof shall continue to be valid and fully enforceable. 2 6 12. This Agreement is made under, and shall be construed in accordance with, the internal substantive laws of the State of Ohio. 13. This Agreement is subject to the terms and conditions of the Plan. Capitalized terms used herein without definition shall have the meanings assigned to them in the Plan. EXECUTED as of the 22nd day of February, 1995. THE LINCOLN ELECTRIC COMPANY By: ________________________ Title: The undersigned Grantee hereby acknowledges receipt of an executed original of this Restricted Stock Agreement and accepts the Restricted Stock granted thereunder. Dated: __________________________ ____________________________ (Grantee) 3 7 EXHIBIT B TO THIS AGREEMENT IS THE FORM OF INDEMNIFICATION AGREEMENT SUBMITTED HEREWITH AS EXHIBIT 10(B) AND HAS NOT BEEN REFILED WITH THIS AGREEMENT. 1 EX-10.H 10 EXHIBIT 10.H 1 EXHIBIT 10(H) RELEASE AND SETTLEMENT AGREEMENT THIS RELEASE AND SETTLEMENT AGREEMENT (this "Agreement") is made and entered into by and between THE LINCOLN ELECTRIC COMPANY (the "Company," a term which in this Agreement shall include its predecessors, parents, subsidiaries, divisions, related or affiliated companies, officers, directors, stockholders, members, employees, heirs, successors, assigns, representatives, agents and counsel, unless the context otherwise clearly requires), and ROGER F. YOUNG ("Young"), WITNESSETH: WHEREAS, Young is an employee of the Company and currently serves as Senior Vice President, Administration and as a Director of the Company; WHEREAS, the Company and Young have determined that Young shall resign and retire from any and all positions he may hold as an officer, director and employee of, and any other positions he may hold with respect to, the Company, effective July 31, 1994 (the "Effective Date"); WHEREAS, the Company and Young desire to make provision for the payments and benefits that Young will be entitled to receive from the Company in consideration for Young's obligations and actions under this Agreement and in connection with such resignations and retirement and the cessation of his employment with the Company; and WHEREAS, the Company and Young wish to resolve, settle and/or compromise any and all matters, claims and issues between them arising from or relating to Young's service and employment with the Company, including the termination thereof; NOW THEREFORE, in consideration of the promises and agreements contained herein and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, and intending to be legally bound, the Company and Young agree as follows: 1. RESIGNATION. Young hereby resigns and retires from his employment with the Company, and its subsidiaries and related or affiliated companies, as of the Effective Date. Young also resigns, as of the Effective Date, (a) from the Board of Directors of the Company, and from the Board of Directors of any entity that is a subsidiary of, or is otherwise related to or affiliated with, the Company, (b) from all offices of the Company to which he has been elected by the Board of Directors of the Company (or to which he has otherwise been appointed), (c) from all offices of any entity that is a subsidiary of, or is otherwise related to or affiliated with, the Company and (d) from all administrative, fiduciary or other positions he may hold with respect to arrangements or plans for, of or relating to the Company. The Company hereby consents to and accepts said resignations as of the Effective Date, and the Company records shall so reflect. 2. PAYMENTS. (a) In consideration of the promises of Young in this Agreement and subject to the conditions hereof, the Company shall: (i) Pay Young (X) on the 15th and last day of each month for five (5) months commencing on August 15, 1994 and ending on December 31, 1994 a gross amount of FOUR THOUSAND EIGHT HUNDRED FORTY-THREE DOLLARS ($4,843.00) and (Y) on the 15th and last day of each month for twenty-four (24) months commencing on January 15, 1995 and ending on December 31, 1996 a gross amount of EIGHT THOUSAND, SIX HUNDRED SIX & 89/100 DOLLARS ($8,606.89); provided that the continuance of such payments is contingent upon Young's compliance with the requirements of this Agreement applicable to him; and provided further that if Young dies before the completion of the payments described in this subparagraph 2(a)(i), the remaining payments described in this subparagraph 2(a)(i) following his death shall be made to his estate. 1 2 (ii) Pay Young (or his estate in the event of his death before December 31, 1994) on December 31, 1994 a lump sum gross amount equal to TWO HUNDRED SIX THOUSAND, FIVE HUNDRED SIXTY-FIVE & 22/100 DOLLARS ($206,565.22) reduced by the sum of the gross salary received by Young from the Company in 1994 and the payments described in subparagraph 2(a)(i)(X) of this Agreement; (iii) Pay Young a supplemental pension of NINETEEN THOUSAND, TWO HUNDRED TWENTY-FIVE DOLLARS ($19,225.00) per year in equal monthly installments, payable in the form of a single life annuity, commencing with a payment on January 1, 1997 and ending with a payment on the first day of the month in which Young dies (the "Pension"); provided that in the event the Company adopts a supplemental executive retirement plan or similar arrangement, the Pension may, at the option of the Company, be paid through such plan or arrangement (but no other benefit shall be payable to or with respect to Young under any such plan or arrangement); and provided further that if the Company adopts such a plan or arrangement and if such plan or arrangement provides for an actuarially equivalent survivor annuity in lieu of a straight life annuity, Young may elect to receive the Pension in the form of such actuarially equivalent survivor annuity (such actuarial equivalence being determined in accordance with the terms of such plan or arrangement). (iv) Continue to permit Young to participate in the Company's life insurance programs, on the same basis that Young has participated in such life insurance programs prior to the termination of his employment with the Company, until the earlier of December 31, 1996, or the date on which Young becomes eligible for other employer-provided life insurance. Young acknowledges and agrees that he currently is eligible for Medicare and that, accordingly, his rights to continuation of coverage under the Company's group health plan pursuant to Part 6 of Subtitle B of Title I of the Employee Retirement Income Security Act of 1974, as amended ("COBRA"), will cease upon his resignation and retirement under this Agreement. However, Young will be entitled to participate in the Company program through which retirees, at their cost (as determined by the Company), may elect to have coverage under the Company's medical program that is secondary to Medicare. (b) Young acknowledges and agrees that he shall be responsible for his share of any and all Federal, State and/or local taxes applicable to the payments made, and benefits provided or made available, to Young pursuant to this Paragraph 2 and further agrees to indemnify the Company against any liability as a result of those taxes. (c) The payments to Young pursuant to subparagraphs 2(a)(i), 2(a)(ii) and 2(a)(iii) of this Agreement shall be made by check or direct deposit to an account designated by Young, and shall be reduced by any applicable Federal, State and local tax or other required withholding. The payments to Young pursuant to subparagraph 2(a)(i) of this Agreement (and, with respect to medical insurance for 1994, pursuant to subparagraph 2(a)(ii) of this Agreement) shall be reduced by any applicable deductions resulting from Young's election to participate in the Company's medical and/or life insurance programs as described in subparagraph 2(a)(iv) of this Agreement. (d) Young acknowledges and agrees that the consideration provided by the Company to Young under this Agreement, including, without limitation, the payments and benefits to be made or provided by the Company to Young pursuant to this Agreement, is greater than and in addition to anything of value to which he otherwise would be entitled from the Company and that the release by Young set forth in Paragraph 4 of this Agreement and the obligations of and actions taken by Young under this Agreement are given and undertaken in consideration of, and adequately supported by, the payments and benefits to be made or provided to Young by the Company under and pursuant to this Agreement. 3. PROFESSIONAL FEES. The Company and Young acknowledge and agree that each shall be responsible for the payment of their respective legal fees and costs (and related disbursements) incurred in connection with Young's termination and resignation and all matters relating to the negotiation and execution of this Agreement. 2 3 4. RELEASE BY YOUNG. (a) Young, for himself and his dependents, successors, assigns, heirs, executors and administrators (and his and their legal representatives of every kind), hereby releases, dismisses, remises and forever discharges the Company from any and all arbitrations, claims, including claims for attorney's fees, demands, damages, suits, proceedings, actions and/or causes of action of any kind and every description, whether known or unknown, which Young now has or may have had for, upon, or by reason of any cause whatsoever (except that this release shall not apply to the obligations of the Company arising under this Agreement) ("claims"), against the Company, including but not limited to: (i) any and all claims arising out of or relating to Young's employment by or service with the Company and his termination from the Company; (ii) any and all claims of discrimination, including but not limited to claims of discrimination on the basis of sex, race, age, national origin, marital status, religion or handicap, including, specifically, but without limiting the generality of the foregoing, any claims under Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act, Ohio Revised Code Section 4101.17 and Ohio Revised Code Chapter 4112, including Sections 4112.02 and 4112.99 thereof; and (iii) any and all claims of wrongful or unjust discharge or breach of any contract or promise, express or implied. (b) Young understands and acknowledges that the Company does not admit any violation of law, liability or invasion of any of his rights and that any such violation, liability or invasion is expressly denied. The consideration provided under this Agreement is made for the purpose of settling and extinguishing all claims and rights (and every other similar or dissimilar matter) that Young ever had or now may have against the Company to the extent provided in this Paragraph 4. Young further agrees and acknowledges that no representations, promises or inducements have been made by the Company other than as appear in this Agreement. (c) Young further agrees and acknowledges that: (i) The release provided for in this Paragraph 4 releases claims to and including the date of this Agreement; (ii) He fully understands the terms of this Agreement, and enters into this Agreement freely, voluntarily and intending to be bound; and (iii) He has been given a reasonable period of time in which to review and consider the terms of this Agreement, and the release contained herein, prior to its execution. (d) Young agrees that he will never file a lawsuit or other complaint asserting any claim that is released in this Paragraph 4. (e) It is understood and agreed that Young's resignation and retirement are by mutual agreement between the Company and Young, and that Young waives and releases any claim that he has or may have to reemployment. 5. CONFIDENTIAL INFORMATION. (a) Young acknowledges and agrees that in the performance of his duties as an officer and employee of the Company he was brought into frequent contact with, had or may have had access to, and/or became informed of confidential and proprietary information of the Company and/or information which is a trade secret of the Company (collectively, "Confidential Information"), as more fully described in subparagraph (b) of this Paragraph 5. Young acknowledges and agrees that the Confidential Information of the Company gained by Young during his association with the Company was developed by and/or for the Company through substantial expenditure of time, effort and money and constitutes valuable and unique property of the Company. (b) Young will keep in strict confidence, and will not, directly or indirectly, at any time, disclose, furnish, disseminate, make available, use or suffer to be used in any manner any Confidential Information of the Company (except as may be necessary in connection with the discharge of Young's obligations pursuant to 3 4 Paragraph 8 of this Agreement) without limitation as to when or how Young may have acquired such Confidential Information. Young specifically acknowledges that Confidential Information includes any and all information, whether reduced to writing (or in a form from which information can be obtained, translated, or derived into reasonably usable form), or maintained in the mind or memory of Young and whether compiled or created by the Company, which derives independent economic value from not being readily known to or ascertainable by proper means by others who can obtain economic value from the disclosure or use of such information, that reasonable efforts have been put forth by the Company to maintain the secrecy of Confidential Information, that such Confidential Information is and will remain the sole property of the Company, and that any retention or use by Young of Confidential Information after the termination of Young's employment with and services for the Company shall constitute a misappropriation of the Company's Confidential Information. (c) Young further agrees that he shall return (to the extent he has not already returned), within ten (10) days of the Effective Date, in good condition, all property of the Company, including, without limitation, (i) property, documents and/or all other materials (including copies, reproductions, summaries and/or analyses) which constitute, refer or relate to Confidential Information of the Company, (ii) keys to Company property, (iii) files and (iv) blueprints or other drawings. (d) Young further acknowledges and agrees that his obligation of confidentiality shall survive, regardless of any other breach of this Agreement or any other agreement, by any party hereto, until and unless such Confidential Information of the Company shall have become, through no fault of Young, generally known to the public or Young is required by law (after providing the Company with notice and opportunity to contest such requirement) to make disclosure. Young's obligations under this Paragraph 5 are in addition to, and not in limitation or preemption of, all other obligations of confidentiality which Young may have to the Company under general legal or equitable principles or statutes. 6. NON-COMPETITION. (a) Young agrees that for a period of two (2) years from and after the Effective Date, within the Territory (as described in subparagraph (b)(i) of this Paragraph 6) (and, as to subparagraph (a)(iii) of this Paragraph 6, any place), he shall not, directly or indirectly, do or suffer any of the following: (i) Own, manage, control or participate in the ownership, management, or control of, or be employed or engaged by or otherwise affiliated or associated as a consultant, independent contractor or otherwise with, any other corporation, partnership, proprietorship, firm, association, or other business entity, or otherwise engage in any business, which is in competition with the Company's business (as described in subparagraph (b)(ii) of this Paragraph 6); provided, however, that the ownership of not more than one percent (1%) of any class of publicly-traded securities of any entity shall not be deemed a violation of this Agreement. (ii) Employ, assist in employing, or otherwise associate in business with any person who presently is an employee, officer or agent of the Company, or any of its affiliated, related or subsidiary entities. (iii) Induce any person who is an employee, officer or agent of the Company, or any of its affiliated, related, or subsidiary entities to terminate such relationship. (b) For purposes of this Agreement: (i) "Territory" shall mean the countries identified in Exhibit A hereto. (ii) The Company's business shall mean the design, manufacture, distribution and sale of the products identified in Exhibit B hereto. (c) In the event Young shall violate any provision of this Paragraph 6 as to which there is a specific time period during which he is prohibited from taking certain actions or from engaging in certain activities, as set forth in such provision, then, in such event, such violation shall toll the running of such time period from the date of such violation until such violation shall cease. (d) Young has carefully considered the nature and extent of the restrictions upon him and the rights and remedies conferred upon the Company under this Paragraph 6 and this Agreement, and hereby acknowledges 4 5 and agrees that the same are reasonable in time and territory, are designed to eliminate competition which otherwise would be unfair to the Company, do not stifle the inherent skill and experience of Young, would not operate as a bar to Young's sole means of support, are fully required to protect the legitimate interests of the Company and do not confer a benefit upon the Company disproportionate to the detriment to Young. 7. DISCLOSURE. Young, for a period of two (2) years from and after the Effective Date, agrees to communicate the contents of Paragraphs 5, 6, 8(b), 9 and 11 of this Agreement to any person, firm, association, or corporation which he intends to be employed by, associated in business with, or represent. 8. BREACH. (a) If Young breaches any of the provisions of this Agreement, then the Company may, at its sole option, (1) immediately terminate all remaining payments and benefits described in subparagraphs 2(a)(i), 2(a)(ii) and 2(a)(iv) of this Agreement and (2) obtain reimbursement from Young of all payments and benefits already provided pursuant to subparagraphs 2(a)(i), 2(a)(ii) and 2(a)(iv) of this Agreement, plus any expenses and damages incurred as a result of the breach, with the remainder of this Agreement, and all promises and covenants herein, remaining in full force and effect. (b) Young acknowledges and agrees that the remedy at law available to the Company for breach by Young of any of his obligations under Paragraphs 5 and 6 of this Agreement would be inadequate and that damages flowing from such a breach would not readily be susceptible to being measured in monetary terms. Accordingly, Young acknowledges, consents and agrees that, in addition to any other rights or remedies which the Company may have at law, in equity or under this Agreement, upon adequate proof of Young's violation of any provision of Paragraph 5 or 6 of this Agreement, the Company shall be entitled to immediate injunctive relief and may obtain a temporary order restraining any threatened or further breach, without the necessity of proof of actual damage. 9. CONTINUED AVAILABILITY AND COOPERATION. (a) Young shall cooperate fully with the Company and with the Company's counsel in connection with any present and future actual or threatened litigation or administrative proceeding involving the Company that relates to events, occurrences or conduct occurring (or claimed to have occurred) during the period of Young's employment by the Company. This cooperation by Young shall include, but not be limited to: (i) making himself reasonably available for interviews and discussions with the Company's counsel as well as for depositions and trial testimony; (ii) if depositions or trial testimony are to occur, making himself reasonably available and cooperating in the preparation therefor as and to the extent that the Company or the Company's counsel reasonably requests; (iii) refraining from impeding in any way the Company's prosecution or defense of such litigation or administrative proceeding; and (iv) cooperating fully in the development and presentation of the Company's prosecution or defense of such litigation or administrative proceeding. (b) For two (2) years from and after the Effective Date, Young shall continue to provide cooperation to the Company with respect to projects undertaken by the Company where Young's prior knowledge with respect to, or prior involvement in, such or similar projects would be relevant to the advancement of such projects; provided that such cooperation shall not require more than twenty (20) days of Young's time per calendar year. (c) Young shall be reimbursed by the Company for reasonable travel, lodging, telephone and similar expenses incurred in connection with such cooperation, which the Company shall reasonably endeavor to schedule at times not conflicting with the reasonable requirements of any future employer of Young, or with the requirements of any third party with whom Young has a business relationship that provides remuneration to Young. Young shall not unreasonably withhold his availability for such cooperation. 5 6 10. SUCCESSORS AND BINDING AGREEMENT. (a) This Agreement shall be binding upon and inure to the benefit of the Company and any successor of or to the Company, including, without limitation, any persons acquiring directly or indirectly all or substantially all of the business and/or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed included in the definition of "the Company" for purposes of this Agreement), but shall not otherwise be assignable or delegable by the Company. (b) This Agreement shall inure to the benefit of and be enforceable by Young's personal or legal representatives, executors, administrators, successors, heirs, distributees and/or legatees. (c) This Agreement is personal in nature and none of the parties hereto shall, without the consent of the other parties, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in subparagraphs (a) and (b) of this Paragraph 10. (d) This Agreement is intended to be for the exclusive benefit of the parties hereto, and except as provided in subparagraphs (a) and (b) of this Paragraph 10, no third party shall have any rights hereunder. 11. NON-DISCLOSURE; STATEMENTS TO THIRD PARTIES. (a) Except to the extent that this Agreement or the terms hereof become publicly known or available because of legally mandated disclosure and filing requirements of the Securities and Exchange Commission, or because of any other legal requirement that this Agreement or the terms hereof be disclosed or filed with a governmental instrumentality or agency, all provisions of this Agreement and the circumstances giving rise hereto are and shall remain confidential and shall not be disclosed to any person not a party hereto (other than (i) Young's spouse, (ii) each party's attorney, financial advisor and/or tax advisor to the extent necessary for such advisor to render appropriate legal, financial and tax advice, and (iii) persons or entities that fall within the scope of Paragraph 7 of this Agreement, but only to the extent required thereby), except as necessary to carry out the provisions of this Agreement, and except as may be required by law. (b) Because the purpose of this Agreement is to settle amicably any and all potential disputes or claims among the parties, neither Young nor the Company shall, directly or indirectly, make or cause to be made any statements to any third parties criticizing or disparaging the other or commenting on the character or business reputation of the other. Young further hereby agrees not (1) to comment to others concerning the status, plans or prospects of the business of the Company, or (2) to engage in any act or omission that would be detrimental, financially or otherwise, to the Company, or that would subject the Company to public disrespect, scandal or ridicule. 12. NOTICES. For all purposes of this Agreement, all communications provided for herein shall be in writing and shall be deemed to have been duly given when delivered, addressed to the Company (to the attention of the Vice President of Human Resources) at its principal executive offices and to Young at his principal residence, 33960 Meadow Lane, Chagrin Falls, OH 44022, or to such other address as any party may have furnished to the other in writing and in accordance herewith. Notices of change of address shall be effective only upon receipt. 13. MISCELLANEOUS. The death or disability of Young following the execution of this Agreement shall not affect or revoke this Agreement or any of the obligations of the parties hereto. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by Young and the Company. No waiver by either party hereto at any time of any breach by the other party hereto or compliance with any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, expressed or implied with respect to the subject matter hereof have been made by any of the parties that are not set forth expressly in this Agreement and every one of them (if, in fact, there have been any) is hereby terminated without liability or any other legal effect whatsoever. 14. ENTIRE AGREEMENT. This Agreement shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof and shall supersede all prior verbal or written agreements, covenants, 6 7 communications, understandings, commitments, representations or warranties, whether oral or written, by any party hereto or any of its representatives pertaining to such subject matter. 15. GOVERNING LAW. The validity, interpretation, construction and performance of this Agreement shall be governed by the substantive laws of the State of Ohio, without giving effect to the principles of conflict of laws of such state. 16. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement which shall nevertheless remain in full force and effect. 17. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same Agreement. 18. CAPTIONS AND PARAGRAPH HEADINGS. Captions and paragraph headings used herein are for convenience and are not part of this Agreement and shall not be used in construing it. 19. FURTHER ASSURANCES. Each party hereto shall execute such additional documents, and do such additional things, as may reasonably be requested by the other party to effectuate the purposes and provisions of this Agreement. [This space intentionally left blank.] IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on the last date set forth below. THE LINCOLN ELECTRIC COMPANY By: _________________________ Donald F. Hastings Chairman of the Board and Chief Executive Officer Date: ___________________ Witness: ________________________ _________________________ ROGER F. YOUNG Date: ___________________ 7 8 EXHIBIT A United States Canada Mexico Brazil Venezuela England France Germany Ireland Italy Japan Netherlands Norway Spain Australia 1 9 EXHIBIT B I. Arc Welding Machines ranging from light duty models for light industrial and farm use to heavy duty models for commercial and industrial use in manual, semi-automatic, automatic and robotic welding. II. Arc Welding Consumables: Welding rods, fluxes and wires used in light to heavy manufacturing of mild steel, alloy and hard surface applications; coated manual or stick electrodes; solid electrodes produced in coil form for continuous feeding in mechanized welding; cored electrodes produced in coil form for continuous feeding in mechanized welding; submerged arc electrodes and fluxes; self-shielded cored electrodes; gas-shielded solid and cored electrodes. III. Arc Welding Power Sources and Automated Wire Feeding Systems. 1 EX-10.I 11 EXHIBIT 10.I 1 EXHIBIT 10(i) RELEASE AND SETTLEMENT AGREEMENT THIS RELEASE AND SETTLEMENT AGREEMENT (this "Agreement") is made and entered into by and between THE LINCOLN ELECTRIC COMPANY (the "Company," a term which in this Agreement shall include its predecessors, parents, subsidiaries, divisions, related or affiliated companies, officers, directors, stockholders, members, employees, heirs, successors, assigns, representatives, agents and counsel, unless the context otherwise clearly requires), and JOHN GONZALEZ ("Gonzalez"), WITNESSETH: WHEREAS, Gonzalez is an employee of, and serves as a Director of the Company; WHEREAS, the Company and Gonzalez have determined that Gonzalez shall resign and retire from any and all positions he may hold as an officer or director of, and any other positions he may hold with respect to, the Company, effective August 31, 1994, and that Gonzalez shall resign and retire as an employee of the Company and its subsidiaries and related or affiliated companies effective November 15, 1994; WHEREAS, the Company and Gonzalez desire to make provision for the payments and benefits that Gonzalez will be entitled to receive from the Company in consideration for Gonzalez's obligations and actions under this Agreement and in connection with such resignations and retirement and the cessation of his employment with the Company; and WHEREAS, the Company and Gonzalez wish to resolve, settle and/or compromise any and all matters, claims and issues between them arising from or relating to Gonzalez's service and employment with the Company, including the termination thereof; NOW THEREFORE, in consideration of the promises and agreements contained herein and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, and intending to be legally bound, the Company and Gonzalez agree as follows: 1. RESIGNATION. Gonzalez hereby resigns and retires from his employment with the Company, and its subsidiaries and related or affiliated companies, as of November 15, 1994. Gonzalez also resigns, as of August 31, 1994, (a) from the Board of Directors of the Company, and from the Board of Directors of any entity that is a subsidiary of, or is otherwise related to or affiliated with the Company (and Gonzalez hereby waives notice of any meeting of any such Board of Directors after August 31, 1994), (b) from all offices of the Company to which he has been elected by the Board of Directors of the Company (or to which he has otherwise been appointed), (c) from all offices of any entity that is a subsidiary of, or is otherwise related to or affiliated with, the Company and (d) from all administrative, fiduciary or other positions he may hold with respect to arrangements or plans for, of or relating to the Company. The Company hereby consents to and accepts said resignations, and the Company records shall so reflect. 2. PAYMENTS. (a) In consideration of the promises of Gonzalez in this Agreement and subject to the conditions hereof, including without limitation Paragraph 4 of this Agreement, the Company shall: (i) Pay Gonzalez a gross total amount of FOUR HUNDRED EIGHTY-ONE THOUSAND DOLLARS ($481,000) in accordance with the following schedule: November 30, 1994.................... $ 10,000 December 15, 1994.................... $ 10,000 December 31, 1994.................... $161,000 July 1, 1995......................... $300,000
provided that (a) no such payment shall be made unless and until the conditions in Paragraph 4 below have been satisfied, (b) the continuance of such payments is contingent upon Gonzalez's compliance with the requirements of this Agreement applicable to him and (c) if Gonzalez dies before the 1 2 completion of the payments described in this subparagraph 2(a)(i), the remaining payments described in this subparagraph 2(a)(i) following his death shall be made to his estate. (ii) Pay Gonzalez a supplemental pension of TWENTY-EIGHT THOUSAND, NINE HUNDRED FORTY-EIGHT DOLLARS ($28,948.00) per year, in equal monthly installments, payable in the form of a single life annuity, commencing with a payment on January 1, 1997 and ending with a payment on the first day of the month in which Gonzalez dies (the "Pension"); provided that (a) no such payment shall be made unless the conditions in Paragraph 4 of this Agreement have been satisfied, (b) the continuance of such payments is contingent upon Gonzalez's compliance with the requirements of this Agreement applicable to him, and (c) that the Pension may, at the option of the Company, be paid through the Company's Supplemental Executive Retirement Plan (but no other benefit shall be payable to or with respect to Gonzalez under such plan); and provided further that Gonzalez may elect to receive the Pension in the form of an actuarially equivalent survivor annuity in lieu of a straight life annuity (such actuarial equivalence being determined in accordance with the terms of the Company's Supplemental Executive Retirement Plan). (iii) Pay Gonzalez, eight days after the execution of this Agreement, a lump sum amount equal to FIFTY THOUSAND DOLLARS ($50,000), provided that if Gonzalez dies before receiving the payment described in this subparagraph 2(a)(iii), such payment shall be made to his estate. (iv) Continue to permit Gonzalez to participate in the Company's medical and life insurance programs until the earlier of December 31, 1996, or the date on which Gonzalez becomes eligible for other employer-provided medical insurance or life insurance (whether through a subsequent employer of Gonzalez or through an employer of Gonzalez's spouse), or, in the case of medical insurance, the date on which Gonzalez becomes eligible for Medicare, on the following bases: (i) Gonzalez will be permitted to continue to participate in the Company's life insurance programs on the same basis that Gonzalez has participated in such life insurance programs prior to the termination of his employment with the Company; (ii) Gonzalez will be permitted to continue to participate in the Company's medical insurance program through December 31, 1994 on the same basis that Gonzalez has participated in such medical insurance program prior to the termination of his employment with the Company; and (iii) after December 31, 1994 and until Gonzalez's participation in the Company's medical insurance program terminates as provided herein, Gonzalez will be required, in order to continue such medical insurance, to make payments to the Company each month equal to the cost (not to exceed the Company's COBRA premium rate) of such medical insurance, failure to make timely monthly payments by Gonzalez resulting in the termination of such medical insurance. Gonzalez acknowledges and agrees that his rights hereunder with respect to medical insurance satisfy his rights to continuation of coverage under the Company's group health plan pursuant to Part 6 of Subtitle B of Title I of the Employee Retirement Income Security Act of 1974, as amended ("COBRA"), provided that if Gonzalez revokes his acceptance of this Agreement pursuant to Paragraph 4 of this Agreement, the Company shall be obligated to provide Gonzalez only with the opportunity to purchase medical insurance pursuant to the requirements of COBRA. In addition, following the time that Gonzalez becomes eligible for Medicare, he will be entitled to participate in the Company's program through which retirees, at their cost (as determined by the Company), may elect to have coverage under the Company's medical program that is secondary to Medicare. (v) Reimburse Gonzalez, for a period of three months, for the costs of an outplacement service reasonably acceptable to the Company. (b) Gonzalez acknowledges and agrees that he shall be responsible for his share of any and all Federal, State and/or local taxes applicable to the payments made, and benefits provided or made available, to Gonzalez pursuant to this Paragraph 2 and further agrees to indemnify the Company against any liability as a result of those taxes. (c) The payments to Gonzalez pursuant to subparagraphs 2(a)(i), 2(a)(ii) and 2(a)(iii) of this Agreement shall be made by check or direct deposit to an account designated by Gonzalez. Although the Company understands that Gonzalez maintains these payments are not subject to any withholding for Federal, 2 3 State or local tax, it retains the right to withhold any federal, state or local tax amounts which it believes appropriate at the time of such payment. For 1994, the payments to Gonzalez pursuant to subparagraph 2(a)(i) of this Agreement shall be reduced by any applicable deductions resulting from Gonzalez's election to participate in the Company's medical and/or life insurance programs as described in subparagraph 2(a)(iv) of this Agreement. (d) Gonzalez acknowledges and agrees that the consideration provided by the Company to Gonzalez under this Agreement, including, without limitation, the payments and benefits to be made or provided by the Company to Gonzalez pursuant to this Agreement, is greater than and in addition to anything of value to which he otherwise would be entitled from the Company and that the release by Gonzalez set forth in Paragraph 4 of this Agreement and the obligations of and actions taken by Gonzalez under this Agreement are given and undertaken in consideration of, and adequately supported by, the payments and benefits to be made or provided to Gonzalez by the Company under and pursuant to this Agreement. 3. PROFESSIONAL FEES. The Company and Gonzalez acknowledge and agree that each shall be responsible for the payment of their respective legal fees and costs (and related disbursements) incurred in connection with Gonzalez's termination and resignation and all matters relating to the negotiation and execution of this Agreement. 4. RELEASE BY GONZALEZ. (a) Gonzalez, for himself and his dependents, successors, assigns, heirs, executors and administrators (and his and their legal representatives of every kind), hereby releases, dismisses, remises and forever discharges the Company from any and all arbitrations, claims, including claims for attorney's fees, demands, damages, suits, proceedings, actions and/or causes of action of any kind and every description, whether known or unknown, which Gonzalez now has or may have had for, upon, or by reason of any cause whatsoever (except that this release shall not apply to the obligations of the Company arising under this Agreement) ("claims"), against the Company, including but not limited to: (i) any and all claims arising out of or relating to Gonzalez's employment by or service with the Company and his termination from the Company; (ii) any and all claims of discrimination, including but not limited to claims of discrimination on the basis of sex, race, age, national origin, marital status, religion or handicap, including, specifically, but without limiting the generality of the foregoing, any claims under the Age Discrimination in Employment Act, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act, Ohio Revised Code Section 4101.17 and Ohio Revised Code Chapter 4112, including Sections 4112.02 and 4112.99 thereof; and (iii) any and all claims of wrongful or unjust discharge or breach of any contract or promise, express or implied. (b) Gonzalez understands and acknowledges that the Company does not admit any violation of law, liability or invasion of any of his rights and that any such violation, liability or invasion is expressly denied. The consideration provided under this Agreement is made for the purpose of settling and extinguishing all claims and rights (and every other similar or dissimilar matter) that Gonzalez ever had or now may have against the Company to the extent provided in this Paragraph 4. Gonzalez further agrees and acknowledges that no representations, promises or inducements have been made by the Company other than as appear in this Agreement. (c) Gonzalez further agrees and acknowledges that: (i) The release provided for in this Paragraph 4 releases claims to and including the date of this Agreement; (ii) He has been advised by the Company to consult with legal counsel prior to executing this Agreement and the release provided for in this Paragraph 4, has had an opportunity to consult with and to be advised by legal counsel of his choice, fully understands the terms of this Agreement, and enters into this Agreement freely, voluntarily and intending to be bound; 3 4 (iii) He has been given a period of twenty-one (21) days to review and consider the terms of this Agreement, and the release contained herein, prior to its execution and that any terms included in this Agreement that differ from the written proposal made to Gonzalez on August 23, 1994 are consistent with that written proposal; and (iv) He may, within seven (7) days after execution, revoke this Agreement. Revocation shall be made by delivering a written notice of revocation to the Vice President of Human Resources at the Company. For such revocation to be effective, written notice must be actually received by the Vice President of Human Resources at the Company no later than the close of business on the seventh (7th) day after Gonzalez executes this Agreement. If Gonzalez does exercise his right to revoke this Agreement, all of the terms and conditions of the Agreement shall be of no force and effect and the Company shall not have any obligation to make payments or provide benefits to Gonzalez as set forth in Paragraph 2 of this Agreement, except as may be required under COBRA. (d) Gonzalez agrees that he will never file a lawsuit or other complaint asserting any claim that is released in this Paragraph 4. (e) It is understood and agreed that Gonzalez's resignation and retirement are by mutual agreement between the Company and Gonzalez, and that Gonzalez waives and releases any claim that he has or may have to reemployment. 5. CONFIDENTIAL INFORMATION. (a) Gonzalez acknowledges and agrees that in the performance of his duties as an officer and employee of the Company he was brought into frequent contact with, had or may have had access to, and/or became informed of confidential and proprietary information of the Company and/or information which is a trade secret of the Company (collectively, "Confidential Information"), as more fully described in subparagraph (b) of this Paragraph 5. Gonzalez acknowledges and agrees that the Confidential Information of the Company gained by Gonzalez during his association with the Company was developed by and/or for the Company through substantial expenditure of time, effort and money and constitutes valuable and unique property of the Company. (b) Gonzalez will keep in strict confidence, and will not, directly or indirectly, at any time, disclose, furnish, disseminate, make available, use or suffer to be used in any manner any Confidential Information of the Company (except as may be necessary in connection with the discharge of Gonzalez's obligations pursuant to Paragraph 8 of this Agreement) without limitation as to when or how Gonzalez may have acquired such Confidential Information. Gonzalez specifically acknowledges that Confidential Information includes any and all information, whether reduced to writing (or in a form from which information can be obtained, translated, or derived into reasonably usable form), or maintained in the mind or memory of Gonzalez and whether compiled or created by the Company, which derives independent economic value from not being readily known to or ascertainable by proper means by others who can obtain economic value from the disclosure or use of such information, that reasonable efforts have been put forth by the Company to maintain the secrecy of Confidential Information, that such Confidential Information is and will remain the sole property of the Company, and that any retention or use by Gonzalez of Confidential Information after the termination of Gonzalez's employment with and services for the Company shall constitute a misappropriation of the Company's Confidential Information. (c) Gonzalez further agrees that he shall return (to the extent he has not already returned), within ten (10) days of the Effective Date, in good condition, all property of the Company, including, without limitation, (i) property, documents and/or all other materials (including copies, reproductions, summaries and/or analyses) which constitute, refer or relate to Confidential Information of the Company, (ii) keys to Company property, (iii) files and (iv) blueprints or other drawings. (d) Gonzalez further acknowledges and agrees that his obligation of confidentiality shall survive, regardless of any other breach of this Agreement or any other agreement, by any party hereto, until and unless such Confidential Information of the Company shall have become, through no fault of Gonzalez, generally known to the public or Gonzalez is required by law (after providing the Company with notice and opportunity to contest such requirement) to make disclosure. Gonzalez's obligations under this Paragraph 5 are in addition 4 5 to, and not in limitation or preemption of, all other obligations of confidentiality which Gonzalez may have to the Company under general legal or equitable principles or statutes. 6. NON-COMPETITION. (a) Gonzalez agrees that from and after the date of this Agreement through August 31, 1996, within the Territory (as described in subparagraph (b)(i) of this Paragraph 6) (and, as to subparagraph (a)(iii) of this Paragraph 6, any place), he shall not, directly or indirectly, do or suffer any of the following: (i) Own, manage, control or participate in the ownership, management, or control of, or be employed or engaged by or otherwise affiliated or associated as a consultant, independent contractor or otherwise with, any other corporation, partnership, proprietorship, firm, association, or other business entity, or otherwise engage in any business, which is in competition with the Company's business (as described in subparagraph (b)(ii) of this Paragraph 6); provided, however, that the ownership of not more than one percent (1%) of any class of publicly-traded securities of any entity shall not be deemed a violation of this Agreement. (ii) Employ, assist in employing, or otherwise associate in business with any person who presently is an employee, officer or agent of the Company, or any of its affiliated, related or subsidiary entities. (iii) Induce any person who is an employee, officer or agent of the Company, or any of its affiliated, related, or subsidiary entities to terminate such relationship. (b) For purposes of this Agreement: (i) "Territory" shall mean the countries identified in Exhibit A hereto. (ii) The Company's business shall mean the design, manufacture, distribution and sale of the products identified in Exhibit B hereto. (c) In the event Gonzalez shall violate any provision of this Paragraph 6 as to which there is a specific time period during which he is prohibited from taking certain actions or from engaging in certain activities, as set forth in such provision, then, in such event, such violation shall toll the running of such time period from the date of such violation until such violation shall cease. (d) Gonzalez has carefully considered the nature and extent of the restrictions upon him and the rights and remedies conferred upon the Company under this Paragraph 6 and this Agreement, and hereby acknowledges and agrees that the same are reasonable in time and territory, are designed to eliminate competition which otherwise would be unfair to the Company, do not stifle the inherent skill and experience of Gonzalez, would not operate as a bar to Gonzalez's sole means of support, are fully required to protect the legitimate interests of the Company and do not confer a benefit upon the Company disproportionate to the detriment to Gonzalez. 7. DISCLOSURE. Gonzalez, from and after the date of this Agreement through August 31, 1996, agrees to communicate the contents of Paragraphs 5, 6, 8(b), 9 and 11 of this Agreement to any person, firm, association, or corporation which he intends to be employed by, associated in business with, or represent. 8. BREACH. (a) If Gonzalez breaches any of the provisions of this Agreement, then the Company may, at its sole option, (1) immediately terminate all remaining payments and benefits described in subparagraphs 2(a)(i), 2(a)(ii) and 2(a)(iv) of this Agreement and (2) obtain reimbursement from Gonzalez of all payments and benefits already provided pursuant to subparagraphs 2(a)(i), 2(a)(ii), 2(a)(iii) and 2(a)(iv) of this Agreement, plus any expenses and damages incurred as a result of the breach, with the remainder of this Agreement, and all promises and covenants herein, remaining in full force and effect. (b) Gonzalez acknowledges and agrees that the remedy at law available to the Company for breach by Gonzalez of any of his obligations under Paragraphs 5 and 6 of this Agreement would be inadequate and that damages flowing from such a breach would not readily be susceptible to being measured in monetary terms. Accordingly, Gonzalez acknowledges, consents and agrees that, in addition to any other rights or remedies 5 6 which the Company may have at law, in equity or under this Agreement, upon adequate proof of Gonzalez's violation of any provision of Paragraph 5 or 6 of this Agreement, the Company shall be entitled to immediate injunctive relief and may obtain a temporary order restraining any threatened or further breach, without the necessity of proof of actual damage. 9. CONTINUED AVAILABILITY AND COOPERATION. (a) Gonzalez shall cooperate fully with the Company and with the Company's counsel in connection with any present and future actual or threatened litigation or administrative proceeding involving the Company that relates to events, occurrences or conduct occurring (or claimed to have occurred) during the period of Gonzalez's employment by the Company. This cooperation by Gonzalez shall include, but not be limited to: (i) making himself reasonably available for interviews and discussions with the Company's counsel as well as for depositions and trial testimony; (ii) if depositions or trial testimony are to occur, making himself reasonably available and cooperating in the preparation therefor as and to the extent that the Company or the Company's counsel reasonably requests; (iii) refraining from impeding in any way the Company's prosecution or defense of such litigation or administrative proceeding; and (iv) cooperating fully in the development and presentation of the Company's prosecution or defense of such litigation or administrative proceeding. (b) From and after the date of this Agreement through August 31, 1996, Gonzalez shall continue to provide cooperation to the Company with respect to projects undertaken by the Company where Gonzalez's prior knowledge with respect to, or prior involvement in, such or similar projects would be relevant to the advancement of such projects; provided that such cooperation shall not require more than forty-five (45) days of Gonzalez's time per calendar year. (c) Gonzalez shall be reimbursed by the Company for reasonable travel, lodging, telephone and similar expenses incurred in connection with such cooperation, which the Company shall reasonably endeavor to schedule at times not conflicting with the reasonable requirements of any future employer of Gonzalez, or with the requirements of any third party with whom Gonzalez has a business relationship that provides remuneration to Gonzalez. Gonzalez shall not unreasonably withhold his availability for such cooperation. 10. SUCCESSORS AND BINDING AGREEMENT. (a) This Agreement shall be binding upon and inure to the benefit of the Company and any successor of or to the Company, including, without limitation, any persons acquiring directly or indirectly all or substantially all of the business and/or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed included in the definition of "the Company" for purposes of this Agreement), but shall not otherwise be assignable or delegable by the Company. (b) This Agreement shall inure to the benefit of and be enforceable by Gonzalez's personal or legal representatives, executors, administrators, successors, heirs, distributees and/or legatees. (c) This Agreement is personal in nature and none of the parties hereto shall, without the consent of the other parties, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in subparagraphs (a) and (b) of this Paragraph 10. (d) This Agreement is intended to be for the exclusive benefit of the parties hereto, and except as provided in subparagraphs (a) and (b) of this Paragraph 10, no third party shall have any rights hereunder. 11. NON-DISCLOSURE; STATEMENTS TO THIRD PARTIES. (a) Except to the extent that this Agreement or the terms hereof become publicly known or available because of legally mandated disclosure and filing requirements of the Securities and Exchange Commission, or because of any other legal requirement that this Agreement or the terms hereof be disclosed or filed with a governmental instrumentality or agency, all provisions of this Agreement and the circumstances giving rise hereto are and shall remain confidential and 6 7 shall not be disclosed to any person not a party hereto (other than (i) Gonzalez's spouse, (ii) each party's attorney, financial advisor and/or tax advisor to the extent necessary for such advisor to render appropriate legal, financial and tax advice, and (iii) persons or entities that fall within the scope of Paragraph 7 of this Agreement, but only to the extent required thereby), except as necessary to carry out the provisions of this Agreement, and except as may be required by law; provided, however, that Gonzalez may disclose to prospective employers the circumstances of his departure from the Company so long as all such disclosures are made in a manner not injurious to the reputation or business of the Company, and any such disclosure which is accurate and made in a professional manner will be appropriate under this Paragraph. (b) Because the purpose of this Agreement is to settle amicably any and all potential disputes or claims among the parties, neither Gonzalez nor the Company shall, directly or indirectly, make or cause to be made any statements to any third parties criticizing or disparaging the other or commenting on the character or business reputation of the other. Gonzalez further hereby agrees not (1) to comment to others concerning the status, plans or prospects of the business of the Company, or (2) to engage in any act or omission that would be detrimental, financially or otherwise, to the Company, or that would subject the Company to public disrespect, scandal or ridicule. 12. NOTICES. For all purposes of this Agreement, all communications provided for herein shall be in writing and shall be deemed to have been duly given when delivered, addressed to the Company (to the attention of the Vice President of Human Resources) at its principal executive offices and to Gonzalez at his principal residence, 441 Medway Road, Highland Heights, OH 44143, or to such other address as any party may have furnished to the other in writing and in accordance herewith. Notices of change of address shall be effective only upon receipt. 13. MISCELLANEOUS. The death or disability of Gonzalez following the execution of this Agreement shall not affect or revoke this Agreement or any of the obligations of the parties hereto. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by Gonzalez and the Company. No waiver by either party hereto at any time of any breach by the other party hereto or compliance with any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, expressed or implied with respect to the subject matter hereof have been made by any of the parties that are not set forth expressly in this Agreement and every one of them (if, in fact, there have been any) is hereby terminated without liability or any other legal effect whatsoever. 14. ENTIRE AGREEMENT. This Agreement shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof and shall supersede all prior verbal or written agreements, covenants, communications, understandings, commitments, representations or warranties, whether oral or written, by any party hereto or any of its representatives pertaining to such subject matter. 15. GOVERNING LAW. The validity, interpretation, construction and performance of this Agreement shall be governed by the substantive laws of the State of Ohio, without giving effect to the principles of conflict of laws of such state. 16. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement which shall nevertheless remain in full force and effect. 17. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same Agreement. 18. CAPTIONS AND PARAGRAPH HEADINGS. Captions and paragraph headings used herein are for convenience and are not part of this Agreement and shall not be used in construing it. 7 8 19. FURTHER ASSURANCES. Each party hereto shall execute such additional documents, and do such additional things, as may reasonably be requested by the other party to effectuate the purposes and provisions of this Agreement. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on the last date set forth below. THE LINCOLN ELECTRIC COMPANY By: _________________________ Donald F. Hastings Chairman of the Board and Chief Executive Officer Date: ___________________ Witness: ________________________ _________________________ JOHN GONZALEZ Date: ___________________ 8 9 EXHIBIT A United States Canada Mexico Brazil Venezuela England France Germany Ireland Italy Japan Netherlands Norway Spain Australia 1 10 EXHIBIT B I. Arc Welding Machines ranging from light duty models for light industrial and farm use to heavy duty models for commercial and industrial use in manual, semi-automatic, automatic and robotic welding. II. Arc Welding Consumables: Welding rods, fluxes and wires used in light to heavy manufacturing of mild steel, alloy and hard surface applications; coated manual or stick electrodes; solid electrodes produced in coil form for continuous feeding in mechanized welding; cored electrodes produced in coil form for continuous feeding in mechanized welding; submerged arc electrodes and fluxes; self-shielded cored electrodes; gas-shielded solid and cored electrodes. III. Arc Welding Power Sources and Automated Wire Feeding Systems. 1 EX-11 12 EXHIBIT 11 1 EXHIBIT (11) THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31 --------------------------------- 1994 1993 1992 ------- -------- -------- Primary and fully diluted: Average shares outstanding................................ 10,970 10,852 10,796 ======= ======== ======== Income (loss) before cumulative effect of accounting change................................................. $48,008 $(40,536) $(45,800) Cumulative effect to January 1, 1993 in method of accounting for income taxes............................ 2,468 ------- -------- -------- Net income (loss)......................................... $48,008 $(38,068) $(45,800) ======= ======== ======== Per share amounts: Income (loss) before cumulative effect of accounting change................................................. $ 4.38 $ (3.74) $ (4.24) Cumulative effect to January 1, 1993 in method of accounting for income taxes............................ .23 ------- -------- -------- Net income (loss)......................................... $ 4.38 $ (3.51) $ (4.24) ======= ======== ========
40 EX-22 13 EXHIBIT 22 1 EXHIBIT (22) THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES SUBSIDIARIES OF THE REGISTRANT The Company's significant subsidiaries, all of which are included in its consolidated financial statements, are listed in the following table:
CONSOLIDATED COUNTRY OF PERCENT NAME INCORPORATION OWNERSHIP -------------------------------------------------------------------------- ------------ Lincoln Norweld B.V. The Netherlands 100 Lincoln Electric (U.K.) Limited United Kingdom 100 Lincoln-Norweld A/S Norway 100 Lincoln Electric France S.A. France 100 Lincoln Smitweld B.V. The Netherlands 100 Lincoln K.D. S.A. Spain 100 Lincoln Electric Company (Australia) Proprietary Limited Australia 100 Lincoln Electric Company of Canada Limited Canada 96 Lincoln Big Three, Inc. United States 51 Big Three Lincoln Alaska, Inc. United States 100 Lincoln Electric Do Brasil Ltda. Brazil 100
The Company has omitted the names of its subsidiaries which, considered in the aggregate as a single subsidiary, would not constitute a "significant subsidiary" within the meaning of Rule 1-02 contained in Regulation S-X. 41 EX-23 14 EXHIBIT 23 1 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-25209) pertaining to The Lincoln Electric Company 1988 Incentive Equity Plan of our report dated March 3, 1995, with respect to the consolidated financial statements and schedule of The Lincoln Electric Company and subsidiaries included in the Annual Report (Form 10-K) for the year ended December 31, 1994. ERNST & YOUNG LLP Cleveland, Ohio March 30, 1995 2 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement Form S-8 (No. 33-25209) of The Lincoln Electric Company of our report dated March 27, 1995 relating to the consolidated financial statements of The Lincoln Electric Company (Australia) Proprietary Limited and subsidiaries appearing on page 18 of this Form 10-K. /s/ Price Waterhouse ----------------------------------- Price Waterhouse Parramatta, Australia March 27, 1995 3 EXHIBIT 23 KPMG KLYNVELD PEAT MARWICK GOERDELER Ernst & Young Attn: Mr. J. Katzenmeyer 1300 Huntington Building Cleveland, Ohio 44115 USA CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in Forms S-8 of our independent auditors' report dated March 12, 1993 on the consolidated financial statements and schedules of Messer Lincoln GmbH and its subsidiary as at December 31, 1992 referred to in the annual report on Form 10-K of The Lincoln Electric Company for the year ended December 31, 1994. Dusseldorf, March 21, 1995 KPMG KLYNVELD PEAT MARWICK GOERDELER Gesellschaft mit beschrankter Haftung Wirtschaftsprufungsgesellschaft /s/ R. Kassing /s/ T. te Dorsthorst ---------------------------- ------------------------------ R. Kassing T. te Dorsthorst 4 EXHIBIT 23 KPMG ACCOUNTANTS CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in Forms S-8 of our report on the consolidated financial statements and schedules of Lincoln-Norweld B.V. and its subsidiaries referred to in the annual report on Form 10-K of The Lincoln Electric Company for the year ended December 31, 1994. Arnhem, The Netherlands March 28, 1995 /s/ KPMG Accounts N.V. ------------------------------- KPMG Accountants N.V. EX-27 15 EXHIBIT 27
5 1,000 YEAR DEC-31-1994 JAN-01-1994 DEC-31-1994 10,424 0 130,258 4,251 155,276 313,427 444,515 260,304 556,857 144,117 194,831 2,203 0 0 191,930 556,857 906,604 911,113 556,259 556,259 258,946 0 15,740 80,168 32,160 48,008 0 0 0 48,008 4.38 4.38