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SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549
FORM 10-K THE SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NUMBER 0-1402
THE LINCOLN ELECTRIC COMPANY (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 34-0359955 ------(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
22801 St. Clair Ave., Cleveland, Ohio 44117 ------(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (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 Class A 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 March 13, 1996 was $130,443,063. (Affiliates, for this purpose, have been deemed to be Directors of the Company, and certain significant shareholders.)
The number of shares outstanding of the issuer's classes of common stock as of March 13, 1996 were as follows:
Common Shares...... 10,520,987 Class A Common Shares...... 13,880,171 Class B Common Shares...... 487,117 ------Total outstanding shares...... 24,888,275 ======
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's proxy statement for the annual meeting of shareholders to be held on May 28, 1996 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, environmental fume 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 1995.
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 salesmen, 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 primarily manufactured for stock. The Company believes its product offerings 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, trademarks, licenses, franchises or concessions.
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The Company's facilities are subject to 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 1995 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 109. 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, 1995 was approximately 6,000.
The table below sets forth consolidated net sales by product line for the most recent three years:
1995 1994 1993 ------(IN THOUSANDS OF DOLLARS)
Arc Welding and Other Welding Products...... $ 956,642 $843,643 $795,072 93% 93% 94% All Other...... 75,756 62,961 50,927 7% 7% 6% ------$1,032,398 $906,604 $845,999 ======
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 223 acres, of which present manufacturing facilities comprise an area of approximately 2,587,000 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:
United 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.
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
2 4 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, 1995, $5.2 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 seventeen cases involving 26 plaintiffs 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. Four similar cases have been tried, all resulting in 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 nineteen plaintiffs. The plaintiffs seek compensatory and punitive damages, in most cases for unspecified sums. During the preceding five years, forty-one similar cases have resulted in thirteen 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 approximately 19,000; in each instance, the Company is one of a large number of defendants. Approximately 4,407 of these asbestos claims are pending in Orange County, Texas where a motion to certify a class action was recently denied. The asbestos claimants seek compensatory and punitive damages, in most cases for unspecified sums. Twenty-one cases have been tried to defense verdicts. Voluntary dismissals on such claims total approximately 15,000; summary judgments for the defense total 78.
Included within the foregoing asbestos claims are approximately 930 claims pending in the Circuit Court of Kanawha County, West Virginia. On September 12, 1995, a jury returned a special interrogatory in that action finding that products manufactured and/or sold by the Company and three other welding companies were defective in certain respects at the time of manufacture and/or sale. Issues relating to whether or not claimants were exposed to Company products and, if so, whether Company products caused any injury, have not been addressed. Nor has there been any discovery relating to the plaintiffs and their potential compensatory damage claims. The court has dismissed punitive damage claims in that action.
The Company, together with hundreds of other co-defendants, is a defendant in state court in Morris County, Texas, in litigation on behalf of three thousand twenty five (3,025) 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. A dispute exists between the Company and its insurer as to the appropriate policies to which these claims should be applied, and the resolution of this dispute may provide additional coverage for such claims.
Ellis F. Smolik filed a proposed class action on April 27, 1995 in Common Pleas Court, Cuyahoga County, Ohio, alleging that the Company breached the terms of incentive stock award agreements with him and 49 others. According to the complaint, under those agreements these individuals were entitled to, but did not receive, an aggregate of approximately 530,000 shares of common stock of the Company based on what the complaint says was the Company's financial performance in the years 1989 through 1991. The complaint
3 5 also alleges that the Company breached fiduciary duties owed to these individuals. The complaint seeks compensatory damages of $31 million and punitive damages of eight times that amount. The Company believes that the allegations are without merit.
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, 1995.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's Common Shares (LECO) and Class A Common Shares (LECOA) began trading on the NASDAQ market exchange in June 1995. The number of record holders of Common Shares and Class A Common Shares at December 31, 1995 was 2,669 and 2,566 respectively.
There is no public trading market for Class B Common Shares, which are only issued to the Company's Employee Stock Ownership Plan.
Quarterly high and low stock prices and dividends declared for the last two years were:
1995** 1994** ------LECO* LECOA DIVIDENDS LECO* DIVIDENDS HIGH LOW HIGH LOW DECLARED HIGH LOW DECLARED ------
March 31...... $25.00 $17.00 $0.10 $ 9.13 $ 8.63 $0.09 June 30...... 38.00 24.25 $37.25 $29.50 0.10 13.63 9.38 0.09 September 30...... 34.00 26.50 31.00 27.38 0.10 17.75 15.00 0.09 December 31...... 27.50 21.00 28.25 21.50 0.12 19.50 17.25 0.11
------* Source: NASDAQ; Ohio Dealers' Data Service prior to NASDAQ registration.
** On June 12, 1995, holders of record of the Company's outstanding voting common shares as of June 5, 1995, received a dividend of one Class A Common Share for each outstanding share of the Company's voting common shares. Retroactive effect has been given to the stock dividend in the above per share data.
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ITEM 6. SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER 31 ------1995 1994 1993 1992 1991 ------(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
Net sales...... $1,032,398 $906,604 $845,999 $853,007 $833,892 Income (loss) before cumulative effect of accounting change...... 61,475 48,008 (40,536) (45,800) 14,365 Cumulative effect of accounting change...... 2,468 ------Net income (loss)...... $ 61,475 $ 48,008 $(38,068) $(45,800) $ 14,365 ======Per share: Income (loss) before cumulative effect of accounting change... $ 2.63 $ 2.19 $ (1.87) $ (2.12) $ .67 Cumulative effect of accounting change...... 12 ------Net income (loss)...... $ 2.63 $ 2.19 $ (1.75) $ (2.12) $ .67 ======Cash dividends declared...... $ .42 $ .38 $ .36 $ .36 $ .30 ======Total assets...... $ 617,760 $556,857 $559,543 $603,347 $640,261 ======Long-term debt...... $ 93,582 $194,831 $216,915 $221,470 $155,547 ======
See Note C to the consolidated financial statements with respect to restructuring activities.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company, now in its second century of operations, is one of the world's largest designers and manufacturers of arc welding products, manufacturing a full line of arc welding equipment, consumable welding products and other welding products which represented 93% of the Company's 1995 net sales. The Company also manufactures a broad line of integral horsepower industrial electric motors.
For the second consecutive year, in 1995, the Company reported its highest net sales and net income in its history. The sales increase was broadly based and was primarily attributable to increased volume and higher selling prices as a result of continued economic growth in served markets. 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 enabled the Company to be a key participant in the global market place.
The Company is one of only a few worldwide broad line manufacturers of both arc welding equipment and consumable products. With highly competitive conditions in the welding industry, the Company will continue to emphasize its status as a single-source supplier, which it believes is most capable of meeting the broadest range of its customers' welding needs.
In 1995, the Company completed a recapitalization and stock distribution, resulting in changes to the existing classes of stock, authorization of a new class of non-voting shares and an increase in the total number of authorized common shares. The recapitalization modified the capital structure of the Company while maintaining, subject to certain limitations, the voting power of existing shareholders, thus allowing for increased flexibility in the Company's long-term strategy. See Note B to the consolidated financial statements.
Research and development expenditures by the Company increased 6.5% to $19.7 million in 1995 from $18.5 million in 1994. These activities were primarily related to the development of new products. The Company believes that over the past three years, expenditures for research and development activities have been adequate to maintain the Company's leadership position in its product lines and to introduce new
5 7 products at an appropriate rate to sustain future growth. Expenditures on research and development are expected to increase again in 1996.
RESULTS OF OPERATIONS
The following table shows the Company's results of operations for the years ended December 31, 1995, 1994 and 1993:
YEAR ENDED DECEMBER 31, ------1995 1994 1993 ------AMOUNT % OF SALES AMOUNT % OF SALES AMOUNT % OF SALES ------
Net Sales...... $1,032.4 100.0% $906.6 100.0% $846.0 100.0% Cost of Goods Sold...... 634.6 61.5% 556.2 61.3% 532.8 63.0% ------Gross Profit...... 397.8 38.5% 350.4 38.7% 313.2 37.0% Distribution Cost/Selling General & Administrative Expenses...... 289.8 28.0% 261.7 28.9% 277.0 32.7% ------Operating Income before Restructuring Charges (income)...... 108.0 10.5% 88.7 9.8% 36.2 4.3% Restructuring Charges (income)...... (2.7 ) (0.3)% 70.1 8.3% ------Operating Income (loss)...... 108.0 10.5% 91.4 10.1% (33.9 ) (4.0)% Other Income...... 2.2 .2% 3.1 0.3% 2.9 0.3% Interest Expense, Net...... (10.6) (1.0)% (14.3 ) (1.6)% (16.0 ) (1.9)% ------Income (loss) before Income Taxes...... 99.6 9.7% 80.2 8.8% (47.0 ) (5.6)% Income Taxes (benefit)...... 38.1 3.7% 32.2 3.5% (6.4 ) (0.8)% ------Net Income (loss) before Cumulative effect of Accounting Change...... 61.5 6.0% 48.0 5.3% (40.6 ) (4.8)% Cumulative effect to January 1, 1993 of change in method of accounting for income taxes... 2.5 0.3% ------Net Income (loss)...... $ 61.5 6.0% $ 48.0 5.3% $(38.1) (4.5)% ======
1995 COMPARED TO 1994
Net Sales. Net sales for 1995 were $1,032.4 million, an increase of $125.8 million or 13.9% from $906.6 million for 1994. Third-party sales from the Company's U.S. operations were $711.9 million in 1995 or 11.0% higher than 1994 sales of $641.6 million, attributable to volume and price increases in both the domestic and export markets. Non-U.S. third-party sales in 1995 were $320.5 million compared to $265.0 million in 1994, an increase of 20.9%. This increase was the result of improvement in the Company's international operations as well as improved economic conditions in the markets served, and the strengthening of certain foreign currencies against the U.S. dollar. Strengthening foreign currencies against the U.S. dollar increased non-U.S. sales by approximately $15.3 million or 5.8% during the year. European sales benefited from the previously reported restructuring of the Company's operations, increased customer focus and a general improvement in local economies which appeared to soften during the latter months in 1995. U.S. third-party export sales were $81.8 million in 1995, an increase of $17.4 million or 27.0% from $64.4 million in 1994. This increase in export sales largely reflects improved worldwide economic conditions and an increased sales focus by the Company in the non-U.S. market.
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Gross Profit. Gross profit increased to $397.8 million in 1995 as compared with $350.4 million in 1994. Gross profit as a percentage of sales was flat in 1995 compared to 1994. Increased raw material and manufacturing overhead costs plus start-up costs associated with the opening of a new motor plant were offset by greater absorption of manufacturing expenses as a result of higher production volumes in both the U.S. and Europe, selected price increases and cost decreases by volume purchases.
Distribution Cost/Selling, General and Administrative (S, G & A) Expenses. Distribution cost/selling, general and administrative expenses were $289.8 million in 1995 or 28.0% of sales, as compared to $261.7 million or 28.9% of sales in 1994. The decrease in S, G & A expenses as a percentage of sales is due to improved economies of scale achieved by higher worldwide sales volume. S, G & A for 1995 was affected by the devaluation of the Mexican peso, resulting in a charge to operations without tax benefit of approximately $2.3 million ($3.1 million in 1994). In addition, 1995 expenses included $4.0 million of severance costs recorded for retiring executives. Included in S, G & A expenses are the costs related to the Company's discretionary employee bonus program, net of hospitalization costs deducted therefrom ($66.4 million in 1995 and $59.6 million in 1994, or an increase of 11.4%).
Interest Expense, Net. Interest expense, net, was $10.6 million in 1995 as compared with $14.3 million in 1994, a decrease which reflects the effect of lower debt levels as a result of the recapitalization and lower interest rates. The overall effective interest rate is higher than the prior year because a greater proportion of the remaining debt is comprised of higher-rate senior debt.
Income Taxes. Income taxes in 1995 were $38.1 million on income before income taxes of $99.6 million, an effective rate of 38.3%, as compared with income taxes of $32.2 million in 1994 on income before income taxes of $80.2 million or an effective tax rate of 40.1%. The decrease in the effective tax rate from the prior year is principally the result of lower non-U.S. losses without tax benefit and a lower effective tax rate on non-U.S. income.
Net Income. Net income for 1995 was $61.5 million as compared to net income of $48.0 million in 1994, or an increase of 28.1%. 1994 net income benefited from a net reversal of $2.7 million of restructuring charges recorded previously.
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. Third-party 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. third-party 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. U.S. third-party export sales were $64.4 million in 1994, an increase of $6.3 million or 10.8% from $58.1 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 by lower gross profit levels for the manufacturing operations closed in early 1994.
Distribution Cost/Selling, General and Administrative (S, G & A) Expenses. Distribution cost/selling, general and administrative expenses were $261.7 million in 1994 or 28.9% of sales, as compared to $277.0
7 9 million or 32.7% of sales in 1993. 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 S, G & A expenses are the costs related to the Company's discretionary employee bonus program, net of hospitalization costs deducted therefrom ($59.6 million in 1994 and $53.5 million in 1993 or an increase of 11.4%).
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 $0.12 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 after-tax restructuring charge. 1994 results benefited from a net reversal of $2.7 million of restructuring charges recorded previously.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial position significantly improved during 1995 as a result of positive operating cash flow as well as the recapitalization. The Company anticipates that it will be able to satisfy its ongoing cash requirements for the foreseeable future primarily with cash generated by operations and borrowings under its existing credit facilities.
Cash provided from operations was $65.5 million in 1995 versus $68.7 million in 1994, a decrease of $3.2 million or 4.7%. This decrease in cash flow resulted from increased working capital offset by the Company's increase in net income. Accounts receivable balances increased due to higher sales and a slight increase in collection periods. Although the increase in inventory balance reflects higher sales volume, management plans to reduce overall inventory levels by the utilization of more "just-in-time" inventory methods and changes in production planning methodology.
Capital expenditures for property, plant and equipment amounted to $48.4 million in 1995 as compared to $37.4 million in 1994, or an increase of $11.0 million. 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. In particular, the Company has modernized and expanded its motor division by establishing a separate facility in Cleveland, Ohio, which is dedicated to motor manufacturing and increased testing and design capacity to be able to reduce costs and increase output. Investments to meet scheduled higher industry efficiency standards will continue. The Company expects to add capacity and modernize facilities selectively in the domestic market, and it also expects measured investment to encourage overseas growth.
The Company completed its recapitalization in 1995 which included the authorization of Class A Common Shares, a new class of non-voting common shares. The recapitalization included a distribution payable on June 12, 1995, to holders of record of the Company's outstanding voting common shares as of June 5, 1995, of a dividend of one Class A Common Share for each outstanding share of the Company's voting common shares. Prior to the adoption of the recapitalization, the Company had two authorized and outstanding classes of voting common shares. As a result, the Company's authorized capital consists of two voting classes, the Common Shares, without par value (formerly the "Common Stock"), and the Class B Common Shares, without par value (formerly the "Class A Common Stock"), and one non-voting class, the Class A Common Shares (the new "Class A Common Shares"). In addition, the recapitalization included an
8 10 increase in the total number of authorized common shares of all classes from 17 million to 62 million shares consisting of 30 million Common Shares, 30 million Class A Common Shares and 2 million Class B Common Shares.
In 1995, the Company successfully completed a public offering by selling 2,863,507 Class A Common Shares and realized $81.2 million in proceeds, net of the underwriters' discount. The proceeds from the offering were used to reduce debt, which has improved the Company's leverage and enhanced its financial position.
In December 1995, the Company entered into a new $200 million unsecured, multi-currency Credit Agreement ("Credit Agreement"). The Credit Agreement provides more favorable pricing levels, and the financial covenants which require interest coverage and funded debt to capital ratios are less restrictive, a result of the Company's improved liquidity and financial position. See Note D to the consolidated financial statements for additional information regarding the terms and financial covenants of the Company's borrowing arrangements. The Company's available borrowings under the Credit Agreement as of December 31, 1995 amounted to $190 million. At December 31, 1995, $10 million was outstanding under the Credit Agreement.
Total debt at December 31, 1995 was $123.4 million compared to $212.9 million at December 31, 1994, reflecting the reduction in debt from funds generated by the public offering and cash flow from operating activities. At December 31, 1995, total debt was 27.2% of total capitalization compared with 52.3% at year-end 1994.
A total of $9.1 million in dividends was paid in 1995. In addition, the Board of Directors has declared a cash dividend of $0.12 per share, payable on April 15, 1996, to shareholders of record on March 29, 1996.
CHANGES IN ACCOUNTING STANDARDS
In March 1995, Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," was issued. SFAS No. 121 requires long-lived assets, primarily property, plant and equipment, identified intangible assets, and excess of cost over net assets of businesses acquired, to be reviewed for impairment losses whenever events or changes in circumstances indicate the carrying amount may not be recovered through future net cash flows generated by the assets. The Company will adopt SFAS No. 121 in 1996 and believes the effect of adoption will not be material.
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 30, 1996. 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 67 Chairman of the Board and Chief Executive Officer of the Company since 1992; President of the Company 1987-1992. Frederick W. Mackenbach 65 President, Chief Operating Officer and Director of the Company between 1992 and March 31, 1996; President of Latin America 1991-1992; District Manager 1976-1991.
9 11
NAME AGE POSITION ------
Anthony Massaro 52 President Elect and Chief Operating Officer of the Company, effective April 1, 1996; 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. David J. Fullen 64 Executive Vice President, Engineering and Marketing since 1995; Senior Vice President, Machine and Motor Division 1994; Vice President -- Machine and Motor Division 1989-1994. John M. Stropki 45 Executive Vice President, North America since 1995; Senior Vice President, Sales 1994-1995; General Sales Manager 1992-1994; District Manager 1986-1992. Richard C. Ulstad 56 Senior Vice President, Manufacturing effective March 19, 1996; Senior Vice President, Consumable Division 1994-1996; Vice President -- Manufacturing Electrode Division 1992-1994; Superintendent -- Electrode Division 1984-1992. H. Jay Elliott 54 Senior Vice President, Chief Financial Officer, and Treasurer effective January 24, 1996; Vice President, Chief Financial Officer, and Treasurer 1994-1995; 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. Frederick G. Stueber 42 Senior Vice President, General Counsel and Secretary effective January 24, 1996; Vice President, General Counsel and Secretary since February 1995; prior thereto, partner in the law firm of Jones, Day, Reavis & Pogue. Frederick W. Anderson 43 Vice President, Manufacturing -- Machine Division since 1994; Plant Manager Machine and Motor Division 1993-1994; Plant Superintendent 1989-1993. Paul J. Beddia 62 Vice President, Government and Public Affairs since 1996; Vice President, Human Resources 1989-1996. Dennis D. Crockett 53 Vice President, Consumable Research and Development since 1993; Chief Engineer, Consumables Research and Development 1987-1993. James R. Delaney 47 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. Joseph G. Doria 46 Vice President of the Company since 1995; President and Chief Executive Officer, Lincoln Electric Company of Canada since 1992; Executive Vice President and Chief Operating Officer 1990-1992; Assistant to the President 1986-1990. Paul F. Fantelli 51 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.
10 12
NAME AGE POSITION ------
Ronald A. Nelson 46 Vice President, Machine Research and Development since 1994; Chief Engineer -- Machine and Motor Division 1993-1994; Service Manager 1989-1993. Gary M. Schuster 40 Vice President, Motor Division since 1995; General Manager, Motor Division 1993-1994; Manager, Factory of the Future 1991-1993. Richard J. Seif 48 Vice President, Marketing since 1994; Director of Marketing 1991-1994; Project Manager 1989-1991. S. Peter Ullman 46 Vice President of the Company since 1995; President and Chief Executive Officer, Harris Calorific Division of Lincoln Electric since 1995; President and COO, Harris Calorific Division 1992-1995. John H. Weaver 57 Vice President, Export Sales since 1994: International Sales Manager 1987-1994.
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, 1995 and 1994
Statements of Consolidated Operations -- Years ended December 31, 1995, 1994 and 1993
Statements of Consolidated Shareholders' Equity -- Years ended December 31, 1995, 1994 and 1993
Statements of Consolidated Cash Flows -- Years ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements -- December 31, 1995
Report 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) Restated Articles of Incorporation of The Lincoln Electric Company (filed as exhibit 4.1 to the Registration Statement on Form S-3 of The Lincoln Electric Company, as filed and amended on June 26, 1995, SEC Registration No. 33-58881 and incorporated herein by reference and made a part hereof).
11 13
EXHIBIT NO. DESCRIPTION
------3(b) Restated Code of Regulations of The Lincoln Electric Company (filed as Exhibit 2 to the Registration Statement on Form 8-A for the Class A Common Shares of The Lincoln Electric Company filed on June 5, 1995 and incorporated herein by reference and made a part hereof). 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 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); as further amended by letter dated October 31, 1994 (filed as Exhibit 4(a) to Form 10-Q 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); and as further amended by letter dated December 20, 1995 filed herewith. 4(b) Credit Agreement dated December 20, 1995 among the Company, the Banks listed on the signature page thereof, and Society National Bank, as Agent, and 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 as Exhibit 10(b) to Form 10-K of the Lincoln Electric Company for the year ended December 31, 1994, SEC File No. 0-1402 and incorporated herein by reference). 10(c) The Lincoln Electric Company Supplemental Executive Retirement Plan, as amended, filed herewith. 10(d) The Lincoln Electric Company Deferred Compensation Plan, as amended, filed herewith. 10(e) Description of Management Incentive Plan, filed herewith. 10(f) Description of Non-Employee Directors' Restricted Stock Plan, filed herewith as set forth in resolutions of the Board of Directors dated March 30, 1995. 10(g) The Lincoln Electric Company Non-Employee Directors' Deferred Compensation Plan, filed herewith. 10(h) Retirement Agreement between the Company and Frederick W. Mackenbach dated November 8, 1995, filed herewith. 10(i) Employment Agreement between the Company and Anthony A. Massaro dated July 14, 1993, as amended on January 1, 1994 (filed as Exhibit 10(e) to Form 10-K of The Lincoln Electric Company for the year ended December 31, 1994, SEC File No. 0-1402, and incorporated herein by reference). 10(j) Employment Agreement between the Company and H. Jay Elliott dated June 22, 1993 (filed as Exhibit 10(f) to Form 10-K of The Lincoln Electric Company for the year ended December 31, 1994, SEC File No. 0-1402, and incorporated herein by reference). 10(k) Employment Agreement between the Company and Frederick G. Stueber dated February 22, 1995 (filed as Exhibit 10(g) to Form 10-K of The Lincoln Electric Company for the year ended December 31, 1994, SEC File No. 0-1402, and incorporated herein by reference). 10(l) The Lincoln Electric Company Employee Savings Plan (filed on Form S-8 Registration Statement of The Lincoln Electric Company, SEC File No. 33-64187 and incorporated herein by reference and made a part hereof).
12 14
EXHIBIT NO. DESCRIPTION ------
10(m) 1995 Lincoln Stock Purchase Plan (filed on Form S-8 Registration Statement of The Lincoln Electric Company, SEC File No. 33-64189 and incorporated herein by reference and made a part hereof). 11 Computation of earnings per share. 21 Subsidiaries of the Registrant. 23 Consent of Independent Auditors. 27 Financial Data Schedule.
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, Senior Vice President, Chief Financial Officer and Treasurer, The Lincoln Electric Company, 22801 St. Clair Avenue, Cleveland, Ohio 44117, Phone: (216) 481-8100.
(B) NO REPORTS ON FORM 8-K WERE FILED DURING THE LAST QUARTER OF THE PERIOD COVERED BY THIS REPORT.
13 15
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)
By: /s/ H. JAY ELLIOTT ------H. Jay Elliott Senior Vice President, Chief Financial Officer and Treasurer (principal financial and accounting officer)
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 15, 1996.
/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/ H. JAY ELLIOTT /s/ HARRY CARLSON ------H. Jay Elliott, Senior Vice President, Harry Carlson, Director Chief Financial Officer and Treasurer (principal financial and accounting officer)
/s/ EDWARD E. HOOD ------David H. Gunning, Director Edward E. Hood, Jr., Director
/s/ PAUL E. LEGO /s/ HUGH L. LIBBY ------Paul E. Lego, Director Hugh L. Libby, Director
/s/ DAVID C. LINCOLN /s/ EMMA S. LINCOLN ------David C. Lincoln, Director Emma S. Lincoln, Director
/s/ KATHRYN JO LINCOLN ------G. Russell Lincoln, Director Kathryn Jo Lincoln, Director
/s/ HENRY L. MEYER III ------Henry L. Meyer III, Director Lawrence O. Selhorst, Director
/s/ CRAIG R. SMITH /s/ FRANK L. STEINGASS ------Craig R. Smith, Director Frank L. Steingass, Director
/s/ HENRY L. MEYER III ------Henry L. Meyer III, Director
/s/ CRAIG R. SMITH ------Craig R. Smith, Director
14 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 SCHEDULE
YEAR ENDED DECEMBER 31, 1995
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
15 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 at 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 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.
In our opinion, 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, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1995 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 February 27, 1996
16 18
STATEMENTS OF CONSOLIDATED FINANCIAL CONDITION
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
DECEMBER 31 ------1995 1994 ------(IN THOUSANDS OF DOLLARS)
ASSETS CURRENT ASSETS Cash and cash equivalents...... $ 10,087 $ 10,424 Accounts receivable (less allowances of $3,916 in 1995; $4,251 in 1994)...... 140,833 126,007 Inventories Raw materials and in-process...... 86,335 72,302 Finished goods...... 96,530 82,974 ------182,865 155,276 Deferred income taxes -- Note E...... 9,738 11,601 Prepaid expenses...... 6,713 2,899 Other current assets...... 6,847 7,220 ------TOTAL CURRENT ASSETS...... 357,083 313,427 OTHER ASSETS Notes receivable from employees...... 287 3,151 Goodwill...... 39,154 39,213 Other...... 15,642 16,855 ------55,083 59,219 PROPERTY, PLANT AND EQUIPMENT Land...... 12,396 12,655 Buildings...... 123,360 118,903 Machinery, tools and equipment...... 354,855 312,957 ------490,611 444,515 Less allowances for depreciation and amortization...... 285,017 260,304 ------205,594 184,211 ------TOTAL ASSETS...... $617,760 $556,857 ======
17 19
STATEMENTS OF CONSOLIDATED FINANCIAL CONDITION
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
DECEMBER 31 ------1995 1994 ------(IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Trade accounts payable...... $ 53,882 $ 54,766 Notes payable to banks -- Note D...... 28,541 15,843 Salaries, wages and amounts withheld...... 17,080 12,405 Taxes, including income taxes -- Note E...... 33,160 21,783 Dividend payable...... 2,988 2,203 Current portion of long-term debt -- Note D...... 1,269 2,272 Other current liabilities...... 31,729 34,845 ------TOTAL CURRENT LIABILITIES...... 168,649 144,117 LONG-TERM DEBT, less current portion -- Note D...... 93,582 194,831 DEFERRED INCOME TAXES -- Note E...... 7,063 6,631 OTHER LONG-TERM LIABILITIES...... 13,021 10,337 MINORITY INTEREST IN SUBSIDIARIES...... 5,499 6,808 SHAREHOLDERS' EQUITY -- Note B Common Shares, without par value -- at stated capital amount: Authorized -- 30,000,000 shares; Outstanding -- 10,520,987 shares in 1995 and 10,514,324 shares in 1994, net of 4,346,516 treasury shares at December 31, 1994...... 2,104 2,103 Class A Common Shares (non-voting), without par value -- at stated capital amount: Authorized -- 30,000,000 shares; Outstanding -- 13,880,171 shares...... 2,776 Class B Common Shares, without par value -- at stated capital amount: Authorized -- 2,000,000 shares; Outstanding -- 487,117 shares at December 31, 1995 and 499,840 shares at December 31, 1994...... 97 100 Additional paid-in capital...... 102,652 25,447 Retained earnings...... 228,555 176,965 Cumulative translation adjustments...... (6,238) (10,482) ------329,946 194,133 ------TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...... $617,760 $556,857 ======
Share amounts reflect the recapitalization (see Note B).
See notes to consolidated financial statements.
18 20
STATEMENTS OF CONSOLIDATED OPERATIONS
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
YEAR ENDED DECEMBER 31 ------1995 1994 1993 ------(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
Net sales...... $1,032,398 $906,604 $845,999 Cost of goods sold...... 634,551 556,259 532,795 ------Gross profit...... 397,847 350,345 313,204 Distribution cost/selling, general & administrative expenses...... 289,812 261,681 277,003 Restructuring charges (income) -- Note C...... (2,735) 70,079 ------Operating income (loss)...... 108,035 91,399 (33,878) Other income (expense): Interest income...... 1,664 1,442 1,627 Other income...... 2,231 3,067 2,922 Interest expense...... (12,346) (15,740) (17,621) ------(8,451) (11,231) (13,072) ------Income (loss) before income taxes and cumulative effect of accounting change...... 99,584 80,168 (46,950) Income taxes (benefit) -- Note E...... 38,109 32,160 (6,414) ------Income (loss) before cumulative effect of accounting change...... 61,475 48,008 (40,536) Cumulative effect to January 1, 1993 of change in method of accounting for income taxes--Note A...... 2,468 ------Net income (loss)...... $ 61,475 $ 48,008 $(38,068) ======Per share: Income (loss) before cumulative effect of accounting change...... $ 2.63 $ 2.19 $ (1.87) Cumulative effect of accounting change...... 12 ------Net income (loss)...... $ 2.63 $ 2.19 $ (1.75) ======
Per share amounts reflect the June 12, 1995 stock dividend (see Note B).
See notes to consolidated financial statements.
19 21
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES YEAR ENDED DECEMBER 31, 1995, 1994 AND 1993
CLASS A COMMON CLASS B COMMON COMMON SHARES SHARES SHARES ADDITIONAL CUMULATIVE ------PAID IN RETAINED TRANSLATION SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT TOTAL ------(IN THOUSANDS OF DOLLARS EXCEPT SHARE DATA.)
BALANCE, JANUARY 1, 1993...... 1,033,346 $ 207 45,062 $ 9 $ 23,067 $183,183 $(7,743) $198,723 Net loss.... (38,068) (38,068) Cash Dividends Declared - $ .36 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 - $ .38 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 Net Income.... 61,475 61,475 Cash Dividends Declared - $ .42 per share..... (9,885) (9,885) Shares Issued Under Incentive Equity Plan...... 2,500 99 99 Stock Dividend... 11,016,664 $2,203 (2,203) Shares Sold in Public Offering, net of expenses... 2,863,507 573 79,296 79,869 Repurchase of Class B Shares.... (12,723) (3) (111) (114) Shares Issued to Non-Employee Directors... 4,163 1 124 125 Adjustment for the Year...... 4,244 4,244 ------BALANCE, DECEMBER 31, 1995...... 10,520,987 $2,104 13,880,171 $2,776 487,117 $ 97 $102,652 $228,555 $(6,238) $329,946 ======
See notes to consolidated financial statements.
20 22
STATEMENTS OF CONSOLIDATED CASH FLOWS THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
YEAR ENDED DECEMBER 31 ------1995 1994 1993 ------(IN THOUSANDS OF DOLLARS)
OPERATING ACTIVITIES Net income (loss)...... $ 61,475 $ 48,008 $(38,068) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization...... 29,742 27,960 30,545 Deferred income taxes...... 2,810 31,862 (32,501) Cumulative effect of accounting change...... (2,468) Foreign exchange loss (gain)...... 1,558 4,047 (348) Minority interest...... (333) 416 (358) Provision for restructuring...... (2,735) 68,370 Changes in operating assets and liabilities net of effects from acquisitions: (Increase) in accounts receivable...... (13,082) (14,003) (6,228) (Increase) decrease in inventories...... (25,648) (6,476) 10,654 (Increase) in other current assets...... (2,879) (1,447) (1,331) Increase (decrease) in accounts payable...... (1,375) 9,929 2,856 Increase (decrease) in other current liabilities...... 11,045 (31,026) (2,928) Gross change in other noncurrent assets and liabilities...... 1,991 2,458 (1,124) Other--net...... 152 (327) 1,662 ------NET CASH PROVIDED BY OPERATING ACTIVITIES...... 65,456 68,666 28,733 INVESTING ACTIVITIES Purchases of property, plant and equipment...... (48,351) (37,366) (19,090) Sales of property, plant and equipment...... 2,909 5,099 2,599 Acquisition of minority interest...... (8,518) ------NET CASH USED BY INVESTING ACTIVITIES...... (45,442) (32,267) (25,009) FINANCING ACTIVITIES Proceeds from the sale of Common Shares...... 81,180 2,085 679 Proceeds from short-term borrowings...... 39,774 56,405 305 Payments on short-term borrowings...... (39,991) (59,293) (12,736) Notes payable to banks -- net...... 11,966 (5,122) (9,470) Proceeds from long-term borrowings...... 204,476 317,669 603,405 Payment on long-term borrowings...... (309,111) (351,793) (576,445) Dividends paid...... (9,100) (8,106) (7,791) Other...... 562 838 (210) ------NET CASH USED BY FINANCING ACTIVITIES...... (20,244) (47,317) (2,263) Effect of exchange rate changes on cash and cash equivalents...... (107) 961 (1,707) ------DECREASE IN CASH AND CASH EQUIVALENTS...... (337) (9,957) (246) Cash and cash equivalents at beginning of year...... 10,424 20,381 20,627 ------CASH AND CASH EQUIVALENTS AT END OF YEAR...... $ 10,087 $ 10,424 $ 20,381 ======
See notes to consolidated financial statements.
21 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
DECEMBER 31, 1995 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, 1995 and 1994, approximately 63% and 62%, respectively, of total inventories were valued using the LIFO method. The excess of current cost over LIFO cost amounted to $55,300 at December 31, 1995 and $51,739 at December 31, 1994.
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 over useful lives ranging from 3 to 20 years for machinery, tools and equipment, and up to 50 years for buildings. Net gains or losses related to asset dispositions are recognized in earnings in the period in which dispositions occur.
Research and Development: Research and development costs, which are expensed as incurred, were $19,736 in 1995, $18,473 in 1994 and $19,210 in 1993.
Goodwill: The excess of the purchase price over the fair value of net assets acquired (goodwill) is amortized on a straight-line basis over periods not exceeding 40 years. Amounts are stated net of accumulated amortization of $6,750 and $5,784 in 1995 and 1994, 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: Asset and liability accounts are translated into U.S. dollars using exchange rates in effect at the balance sheet date; revenue and expense accounts are translated at average monthly exchange rates. Translation adjustments are reflected as a component of shareholders' equity.
Transaction gains and losses are included in the statements of consolidated operations in distribution cost/selling, general and administrative expenses. The Company recorded transaction losses of $1,930 in 1995, $3,746 in 1994 and $228 in 1993. The higher level of transaction losses in 1995 and 1994 is attributable to the effect of the devaluation of the Mexican peso on a U.S. dollar denominated debt obligation which was less in 1995 than it was in 1994. This U.S. dollar denominated debt was settled in 1995.
Financial Instruments: The Company utilizes forward exchange contracts to hedge exposure to exchange rate fluctuations on certain intercompany loans, purchase and sales transactions and other intercompany commitments. 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 all forward exchange contracts described herein are not material and are recognized in the statements of consolidated operations in the periods the exchange rates change. At December 31, 1995, the Company had $35 million of outstanding forward exchange contracts. These forward exchange contracts are principally denominated in the French Franc ($7,134), British Pound ($6,127), Dutch Guilder ($18,231) and Norwegian Krone ($2,885).
22 24
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company is exposed to credit-related losses in the event of nonperformance by counterparties to financial instruments. No counterparties are expected to fail to meet their obligations given their high credit ratings, so the Company usually does not obtain collateral for these instruments.
Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions in certain circumstances that affect the amounts reported in the accompanying consolidated financial statements and notes. Actual results could differ from these estimates.
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. 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 $.12 per share.
In March 1995, Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", was issued. SFAS No. 121 requires long-lived assets, primarily property, plant and equipment, identified intangible assets, and excess of cost over net assets of businesses acquired, to be reviewed for impairment losses whenever events or changes in circumstances indicate the carrying amount may not be recovered through future net cash flows generated by the assets. The Company will adopt SFAS No. 121 in 1996 and believes the effect of adoption will not be material.
Net Income (Loss) per Share: Net income (loss) per share is based on the average number of all shares outstanding during the year (23,350,254 in 1995; 21,939,982 in 1994 and 21,703,982 in 1993).
Supplemental Earnings per Share: In 1995, the Company sold Class A Common Shares in an underwritten public offering (see Note B). The proceeds of the offering were used to reduce the Company's outstanding indebtedness. Had the proceeds been received and applied to reduce indebtedness as of January 1, 1995, net income per share for 1995 would have been $2.54, compared to $2.06 for 1994, if the proceeds were received and applied to reduce indebtedness as of January 1, 1994.
Other: Included in distribution cost/selling, general & administrative expenses are the costs related to the Company's discretionary employee bonus, net of hospitalization costs deducted therefrom ($66,357 in 1995; $59,559 in 1994; and $53,450 in 1993.) Certain reclassifications have been made to prior year financial statements to conform to current year classifications.
NOTE B -- RECAPITALIZATION AND OTHER EQUITY TRANSACTIONS
The Company completed a recapitalization in 1995 that included the authorization of Class A Common Shares, which is a new class of non-voting common shares. The recapitalization included a distribution payable on June 12, 1995, to holders of record of the Company's outstanding voting common shares as of June 5, 1995, of a dividend of one Class A Common Share for each outstanding share of the Company's voting common shares. Retroactive effect has been given to the stock dividend in the computation of all per share data in these financial statements.
Prior to the adoption of the recapitalization, the Company had two authorized and outstanding classes of voting common shares. As a result of the recapitalization, the Company's authorized capital consists of two voting classes, the Common Shares, without par value (formerly the "Common Stock"), and the Class B Common Shares, without par value (formerly the "Class A Common Stock"), and one non-voting class, the Class A Common Shares (the new "Class A Common Shares").
23 25
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The recapitalization included an increase in the total number of authorized common shares of all classes from 17 million to 62 million shares consisting of 30 million Common Shares, 30 million Class A Common Shares and 2 million Class B Common Shares.
On June 29, 1995, the Company sold in an underwritten public offering 2,796,914 Class A Common Shares for $28.35 per share, net of the underwriting discount. The closing date for the transaction was July 6, 1995 at which time the Company received the net proceeds of $79.3 million which were used to reduce debt of the Company. On August 2, 1995, the Company sold an additional 66,593 Class A Common Shares for $28.35 per share under an over allotment provision of the Underwriting Agreement and received additional net proceeds of $1.9 million which were also used to reduce debt of the Company.
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 book value, was terminated by the Board of Directors 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 under the Plan. Upon termination of the Plan, all shares issued under the Plan (1,639,686) became unrestricted shares. In May 1995, the shareholders approved the 1995 Lincoln Stock Purchase Plan ("Purchase Plan"), which provides employees the ability to purchase open market shares on a commission free basis up to a limit of ten thousand dollars annually. There were no purchases during 1995 under this Purchase Plan.
The Lincoln Electric Company 1988 Incentive Equity Plan ("Incentive Equity Plan") provides for the award or sale of Common Shares and Class A Common Shares to officers and other key employees of the Company and its subsidiaries. Following grants of deferred stock in 1989, the terms of which were satisfied in 1991, the Company distributed a total of 32,524 Common Shares (including 524 Shares issued for dividends accrued during the deferral period) of which 10,660 Common Shares were distributed in 1992, 11,510 Common Shares in 1993, and 10,354 Common Shares in 1994 (and a corresponding number of Class A Common Shares were distributed at the time of the 1995 stock dividend). These shares, along with 15,000 Common Shares issued to a former officer of the Company and corresponding Class A Common Shares received in the 1995 stock dividend, 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 of restricted stock (after the stock dividend, 30,000 shares) were issued to two officers of the Company, with scheduled vesting that will be satisfied over time and completed in January 1997. In 1995, 5,000 shares of restricted stock were issued to another officer with vesting over a six year period. At December 31, 1995, there were no other outstanding awards under the Plan, and 1,899,952 shares (949,976 Common Shares and 949,976 Class A Common Shares) are reserved for future issuance under the Incentive Equity Plan.
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 B Common Shares (formerly the "Class A Common Stock"), without par value. The Company's Common Shares and Class B Common Shares are identical in all respects, except that holders of Class B Common Shares are subject to certain transfer restrictions and the Class B Common Shares are only issued to the ESOP. In 1995 and 1994, no shares were issued to the ESOP. In 1993, the Company issued 49,220 shares to the ESOP with an estimated fair value of $916 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, 1995 and 1994, 1,500,160 authorized but unissued shares are available for future issuance to the ESOP. In 1995, the Company repurchased 12,723 Class B Common Shares for $114.
In May 1995, the shareholders approved The Lincoln Non-Employee Directors' Restricted Stock Plan ("Non-Employee Directors' Plan"). The Non-Employee Directors' Plan provides for distributions of ten
24 26
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) thousand dollars worth of Common Shares to each non-employee Director as part of an annual retainer. During 1995, 4,163 shares were issued to 13 non-employee Directors under this Plan.
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 $1.88 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 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 1993 program and prior year program. 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.
In 1995, an additional facility was sold. The restructuring accrual at December 31, 1995 (included in other current liabilities) is $5,555. The remaining expenditures, which include costs related to the sale of the remaining facilities closed and holding costs to be incurred through the estimated date of disposal, are anticipated to be incurred in 1996.
NOTE D -- SHORT-TERM AND LONG-TERM DEBT
DECEMBER 31, ------1995 1994 ------
Short-term debt: Notes payable to banks at interest rates from 5.36% to 12.50% (5.6625% to 11.25% in 1994)...... $28,541 $ 15,843 ======Long-term debt: Multi-currency Credit Agreement, due October 1, 1997...... $100,947 Multi-currency Credit Agreement, due December 20, 2000 (5.975%)...... $10,000 8.73% Senior Note due 2003 (eight equal annual principal payments commencing in 1996)...... 75,000 75,000 Other borrowings due through 2023, interest at 2.00% to 6.20% (2.00% to 13.74% in 1994)...... 9,850 21,156 ------94,850 197,103 Less current portion...... 1,268 2,272 ------Total...... $93,582 $194,831 ======
In December 1995, the Company entered into a new $200 million unsecured, multi-currency Credit Agreement. The terms of the new Credit Agreement which expires December 20, 2000, provide for annual extensions. The new Credit Agreement provides more favorable pricing levels and less restrictive covenants. The interest rate on outstanding borrowings is determined based upon defined leverage rates for the pricing options selected. The interest rate can range from LIBOR plus .20% to LIBOR plus .30% depending upon the defined leverage rate. The agreement also provides for a facility fee ranging from .10% to .15% per annum based upon the daily aggregate amount of the commitment. Simultaneously, with the signing of the Credit Agreement, the $75,000 8.73% Senior Note due in 2003 was amended to conform with the financial covenants of the new Credit Agreement, which requires interest coverage and funded debt to capital ratios.
25 27
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The principal payment due in 1996 ($9,375,000) on the 8.73% Senior Note is classified as long-term debt as the Company intends to refinance the amount on a long-term basis under the Multi-currency Credit Agreement.
Maturities of long-term debt for the five years succeeding December 31, 1995 are $1,268 in 1996, $10,510 in 1997, $10,117 in 1998, $9,752 in 1999, $29,002 in 2000 and $34,201 thereafter.
At December 31, 1995, loans amounting to $5,177 were collateralized by property and equipment.
Total interest paid was $12,606 in 1995, $17,400 in 1994 and $19,000 in 1993. Weighted average interest rates on notes payable to bank at December 31, 1995 and 1994 were 6.4% and 6.8%, respectively.
NOTE E -- INCOME TAXES
The components of income (loss) before income taxes and cumulative effect of accounting change are as follows:
1995 1994 1993 ------
U.S...... $80,351 $70,703 $ 43,345 Non-U.S...... 19,233 9,465 (90,295) ------Total...... $99,584 $80,168 $(46,950) ======
Components of income tax expense (benefit) for the years ended December 31, are as follows:
1995 1994 1993 ------
Current: Federal...... $24,605 $(8,379) $ 21,032 Non-U.S...... 5,465 4,143 2,227 State and local...... 5,229 4,534 2,828 ------35,299 298 26,087 Deferred: Federal...... 2,576 31,223 (32,980) Non-U.S...... 234 639 479 ------2,810 31,862 (32,501) ------Total...... $38,109 $32,160 $ (6,414) ======
26 28
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (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:
1995 1994 1993 ------
Statutory rate of 35% applied to pre-tax income (loss)...... $34,854 $28,059 $(16,432) Effect of state and local income taxes, net of Federal tax benefit...... 3,399 2,947 1,838 Differences in income taxes on non-U.S. earnings and remittances...... (2,175) (1,158) 336 Non-U.S. losses and unrecognized tax benefits...... 1,570 2,113 8,308 Foreign sales corporation...... (961) (838) (703) Other -- net...... 1,422 1,037 239 ------Total...... $38,109 $32,160 $ (6,414) ======
Total income tax payments, net of refunds, were $22,428 in 1995, $6,115 in 1994 and $19,400 in 1993.
At December 31, 1995, the Company's foreign subsidiaries had net operating loss carryforwards of approximately $61,000 which expire in various years from 1996 through 2002, except for $20,000 for which there is no expiration date.
Significant components of the Company's deferred tax assets and liabilities at December 31, 1995 and 1994, are as follows:
1995 1994 ------
Deferred tax assets: Net operating loss carryforwards...... $ 20,917 $ 20,898 U.S. foreign tax credits...... 1,797 954 State income taxes...... 926 1,220 Inventory adjustments...... (1,003) 3,279 Other accrual accounts...... 5,826 4,394 Employee benefits...... 1,983 1,269 Other asset adjustments...... 4,996 3,756 Pension adjustments...... 2,038 2,417 Other deferred tax assets...... 3,021 1,092 ------40,501 39,279 Valuation allowance...... (21,955) (20,824) ------18,546 18,455 Deferred tax liabilities: Depreciation...... (11,820) (9,325) Pension adjustments...... (1,401) (3,004) Other deferred tax liabilities...... (2,650) (1,156) ------(15,871) (13,485) ------Total...... $ 2,675 $ 4,970 ======
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
27 29
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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:
1995 1994 1993 ------
U.S. Plans: Service cost -- benefits earned during the year... $ 7,375 $ 7,155 $ 6,115 Interest cost on projected benefit obligation..... 21,847 19,601 18,158 Actual return on plan assets...... (37,696) (18,795) (19,569) Net amortization and deferral...... 17,819 (528) 1,441 ------Net pension cost of defined benefit plans...... 9,345 7,433 6,145 Defined contribution plans...... 154 258 193 ------Total U.S. plans...... 9,499 7,691 6,338 Non-U.S. Plans: Service cost -- benefits earned during the year... 1,476 1,524 1,422 Interest cost on projected benefit obligation..... 2,291 2,207 2,253 Actual return on plan assets...... (3,186) (932) (4,506) Net amortization and deferral...... 374 (1,717) 2,000 ------Net pension cost of defined benefit plans...... 955 1,082 1,169 Defined contribution plans...... 687 702 1,326 ------Total Non-U.S. plans...... 1,642 1,784 2,495 ------Total pension expense...... $ 11,141 $ 9,475 $ 8,833 ======
28 30
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The funded status of the U.S. and Non-U.S. plans at December 31, 1995 and 1994 is as follows:
U.S. NON-U.S. ------1995 1994 1995 1994 ------
Actuarial present value of accumulated benefit obligations: Vested...... $261,132 $218,754 $ 26,659 $ 24,902 Nonvested...... 9,407 9,797 1,080 881 ------$270,539 $228,551 $ 27,739 $ 25,783 ======Actuarial present value of projected benefit obligations...... $309,359 $258,661 $ 31,153 $ 29,020 Plan assets at fair value...... 282,843 243,802 35,270 32,272 ------Plan assets in excess of (less than) projected benefit obligations...... (26,516) (14,859) 4,117 3,252 Unrecognized net (gain) loss...... 16,725 155 (1,759) (1,410) Unrecognized prior service cost..... 12,651 13,839 505 389 Unrecognized net assets at January 1, 1994 and 1993, net of amortization...... (2,581) (2,910) (1,359) (1,519) Minimum Liability...... (1,208) (2,183) (321) (480) ------Accrued retirement annuity expense recognized in the balance sheet... $ (929) $ (5,958) $ 1,183 $ 232 ======
The increase in the actuarial present value of accumulated benefit obligations ("ABO") for the domestic plans is largely due to the change in the discount rate from 8.25% to 7.5% as well as the normal one year's additional accrual of benefit under all plans. The increase in the ABO for the foreign plans is largely due to the normal one year's accrual of additional benefits.
Assumptions used in accounting for the defined benefit plans as of December 31, 1995 and 1994 for both the U.S. and Non-U.S. plans were as follows:
NON-U.S. U.S. PLANS PLANS ------1995 1994 1995 1994 ------
Weighted-average discount rates...... 7.5% 8.25% 8.1% 8.2% Projected rates of increase in compensation...... 5.5% 5.5% 4.8% 4.8% Expected rates of return on plan assets...... 9.0% 9.0% 8.4% 8.5%
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.
The Cleveland, Ohio area operations have a Guaranteed Continuous Employment Plan covering substantially all employees, which, in general, states 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
29 31
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 ------
1995: Net sales to unaffiliated customers...... $711,940 $201,672 $118,786 $1,032,398 Inter-geographic sales...... 53,347 15,662 9,092 $(78,101) ------Total...... $765,287 $217,334 $127,878 $(78,101) $1,032,398 ======Pre-tax profit (loss)...... $ 79,737 $ 10,172 $ 10,956 $ (1,281) $ 99,584 Identifiable assets.... 404,972 194,319 80,921 (62,452) 617,760 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)...... $ 68,316 $ 7,891 $ 4,062 $ (101) $ 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
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 $81,770 in 1995, $64,400 in 1994 and $58,100 in 1993.
NOTE H -- ACQUISITIONS
In June 1993, the Company purchased the outstanding minority interest in its subsidiary in Spain for approximately $8,500. The transaction was accounted for as a purchase and the increased interest in the results of operations was included in the consolidated statements of operations from the transaction date.
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
30 32
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 total notional value of forward currency exchange contracts at December 31, 1995 is $35 million.
The carrying amounts and estimated fair value of the Company's significant other financial instruments at December 31, 1995 are as follows:
CARRYING FAIR AMOUNTS VALUE ------
Cash and Cash Equivalents...... $10,087 $ 10,087 Notes Payable to Banks...... 28,541 28,541 Long-Term Debt...... 94,850 101,026 Forward Contracts...... (167 ) (167)
NOTE J -- OPERATING LEASES
The Company leases sales offices, warehouses and distribution centers, 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 $8,852 in 1995, $9,226 in 1994 and $9,864 in 1993.
At December 31, 1995, total minimum lease payments for noncancellable operating leases are as follows:
1996...... $ 8,022 1997...... 6,467 1998...... 5,187 1999...... 4,422 2000...... 2,991 Thereafter...... 4,620 ------Total...... $31,709 ======
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.
31 33
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE L -- QUARTERLY FINANCIAL DATA (UNAUDITED)
1995 MAR 31 JUN 30 SEP 30 DEC 31 ------
Net sales...... $263,407 $268,199 $249,525 $251,267 Gross profit...... 101,862 107,215 93,530 95,240 Income before income taxes...... 26,856 27,962 23,473 21,293 Net income...... 16,054 17,385 14,710 13,326 Net income per share (a) (b)...... $ 0.73 $ 0.79 $ 0.59 $ 0.54
DEC 1994 MAR 31 JUN 30 SEP 30 31(C) ------
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 Net income...... 10,407 12,307 11,669 13,625 Net income per share (b)...... $ 0.48 $ 0.56 $ 0.53 $ 0.62
------
(a) Net income per share is computed independently for each of the quarters presented. Therefore, the sum of the quarterly earnings per share in 1995 does not equal the total computed for the year due to stock transactions which occurred during 1995.
(b) Per share amounts reflect the June 12, 1995 stock dividend (see Note B).
(c) 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.
32 34
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 ------BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING COSTS AND OTHER ACCOUNTS (2) END OF DESCRIPTION OF PERIOD EXPENSES DESCRIBE(1) DEDUCTIONS PERIOD
------Allowance for doubtful accounts: Year ended December 31, 1995...... $4,251 $ 944 $ 194(1) $1,473 $3,916 Year ended December 31, 1994...... $6,258 $ 995 $ 117(1) $3,119(3) $4,251 Year ended December 31, 1993...... $5,434 $2,037 $ (723)(1) $ 490 $6,258
------
(1) Currency translation adjustment.
(2) Uncollectible accounts written-off, net of recoveries.
(3) Includes $2,480 relating to accounts written off during 1994 in connection with the Company's restructuring activities.
33 35
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------
3(a) Restated Articles of Incorporation of The Lincoln Electric Company (filed as Exhibit 4.1 to the Registration Statement on Form S-3 of The Lincoln Electric Company, as filed and amended on June 26, 1995, SEC Registration No. 33-58881 and incorporated herein by reference and made a part hereof). 3(b) Restated Code of Regulations of The Lincoln Electric Company (filed as Exhibit 2 to the Registration Statement on Form 8-A for the Class A Common Shares of The Lincoln Electric Company filed on June 5, 1995 and incorporated herein by reference and made a part hereof). 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 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); as further amended by letter dated October 31, 1994 (filed as Exhibit 4(a) to Form 10-Q 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); and as further amended by letter dated December 20, 1995 filed herewith. 4(b) Credit Agreement dated December 20, 1995 among the Company, the Banks listed on the signature page thereof, and Society National Bank, as Agent, and 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 as Exhibit 10(b) to Form 10-K of The Lincoln Electric Company for the year ended December 31, 1994, SEC File No. 0-1402 and incorporated herein by reference). 10(c) The Lincoln Electric Company Supplemental Executive Retirement Plan, as amended, filed herewith. 10(d) The Lincoln Electric Company Deferred Compensation Plan, as amended, filed herewith. 10(e) Description of Management Incentive Plan, filed herewith. 10(f) Description of Non-Employee Directors' Restricted Stock Plan, filed herewith as set forth in resolutions of the Board of Directors dated March 30, 1995. 10(g) The Lincoln Electric Company Non-Employee Directors' Deferred Compensation Plan, filed herewith. 10(h) Retirement Agreement between the Company and Frederick W. Mackenbach dated November 8, 1995, filed herewith. 10(i) Employment Agreement between the Company and Anthony A. Massaro dated July 14, 1993, as amended on January 1, 1994 (filed as Exhibit 10(e) to Form 10-K of The Lincoln Electric Company for the year ended December 31, 1994, SEC File No. 0-1402, and incorporated herein by reference).
34 36
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------
10(j) Employment Agreement between the Company and H. Jay Elliott dated June 22, 1993 (filed as Exhibit 10(f) to Form 10-K of The Lincoln Electric Company for the year ended December 31, 1994, SEC File No. 0-1402, and incorporated herein by reference). 10(k) Employment Agreement between the Company and Frederick G. Stueber dated February 22, 1995 (filed as Exhibit 10(g) to Form 10-K of The Lincoln Electric Company for the year ended December 31, 1994, SEC File No. 0-1402, and incorporated herein by reference). 10(l) The Lincoln Electric Company Employee Savings Plan (filed on Form S-8 Registration Statement of The Lincoln Electric Company, SEC File No. 33-64187 and incorporated herein by reference and made a part hereof). 10(m) 1995 Lincoln Stock Purchase Plan (filed on Form S-8 Registration Statement of The Lincoln Electric Company, SEC File No. 33-64189 and incorporated herein by reference and made a part hereof). 11 Computation of earnings per share. 21 Subsidiaries of the Registrant. 23 Consent of Independent Auditors. 27 Financial Data Schedule.
35 1
[LOGO] LEONARD H. LILLARD, IV, CFA Vice President
PRUDENTIAL CAPITAL GROUP Two Prudential Plaza, Suite 5600 Chicago, Il 60601-6716 312 540-4216 Fax: 312 540-4222
EXHIBIT 4A
December 20, 1995
The Lincoln Electric Company 22801 St. Clair Avenue Cleveland, Ohio 44117
Attention: Chief Financial Officer
Ladies and Gentlemen:
Reference is made to that certain Note Agreement dated November 20, 1991 (as amended from time to time, the "Note Agreement") between The Lincoln Electric Company, an Ohio corporation (the "Company"), and The Prudential Insurance Company of America ("Prudential"), pursuant to which the Company issued and sold and Prudential purchased the Company's 8.73% senior note in the original principal amount of $75,000,000, due November 26, 2003 (the "Note"). Pursuant to that certain letter agreement dated March 18, 1993, the interest rate on the Note was increased to 8.98% per annum and, as of August 28, 1995, the interest rate on the Note was returned to 8.73% per annum as described in more detail below. Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned to such terms in the Note Agreement.
The Company has advised Prudential that it proposes to enter into an Amended and Restated Credit Agreement dated as of December 20, 1995 (the "Credit Agreement") among the Company, the banks listed therein (the "Banks") and Society National Bank, as agent (the "Agent"). In order to satisfy a condition to closing under the Credit Agreement and the requirements of the Note Agreement, the Company desires to modify the terms of the Note Agreement in accordance with this letter. A copy of the Credit Agreement is attached hereto as EXHIBIT E.
Pursuant to the request of the Company and in accordance with the provisions of paragraph 11C of the Note Agreement, Prudential and the Company hereby agree as follows:
SECTION 1. AMENDMENT. From and after the date this letter becomes effective in accordance with its terms, the Note Agreement and the Note are amended as follows:
1.1 REFERENCES TO BANK AGREEMENT AND CREDIT AGREEMENT. Paragraph 10B of the Note Agreement is amended to delete the defined terms "Bank Agreement" and "Credit Agreement" appearing therein and to add thereto the following definition in alphabetical order: 2 The Lincoln Electric Company December 20, 1995 Page 2
"BANK AGREEMENT" and "CREDIT AGREEMENT" shall mean and refer to that certain Credit Agreement dated as of December 20, 1995 among the Company, the banks listed therein and Society National Bank, as agent.
1.2 CERTAIN COVENANTS. It is hereby acknowledged and agreed that Sections 5.12 through 5.17 have been deleted from the Credit Agreement and accordingly the Company shall not be required to comply with such deleted sections of the Credit Agreement notwithstanding anything to the contrary set forth in the letter agreement dated March 18, 1993 between the Company and Prudential. It is further agreed and acknowledged that (i) the reference to "Section 5.14" of the Credit Agreement contained in paragraph 6C(1) of the Note Agreement shall mean and be a reference to "Section 5.09" of the Credit Agreement and (ii) the reference to "Section 5.17" of the Credit Agreement contained in subparagraph 7A(iii) of the Note Agreement shall mean and be a reference to "Section 5.11" of the Credit Agreement.
1.3 RATE OF INTEREST. Effective as of August 28, 1995, the rate of interest accruing on the indebtedness evidenced by the Note which is not overdue was reduced to 8.73% per annum and the rate of interest accruing on indebtedness evidenced by the Note which is overdue was reduced to 10.73% per annum. Consequently, in order to fully effect the foregoing, (i) the references to "8.98%" on the cover page of the Note Agreement AND in paragraph 1 of the Note Agreement AND each reference to "8.98%" appearing in the Note is hereby deleted and a reference to "8.73%" is hereby substituted therefor and (ii) the reference to "10.98%" appearing in the Note is hereby deleted and a reference to "10.73%" is hereby substituted therefor.
1.4 SUBSTITUTION OF EXHIBIT E. The Note Agreement is hereby amended to delete in its entirety Exhibit E attached thereto and substitute therefor Exhibit E attached hereto.
SECTION 2. EFFECT OF CHANGES TO CREDIT AGREEMENT. All references herein to sections of the Credit Agreement and the Company's compliance with the terms thereof as required hereunder and under the Note Agreement shall be based upon the Credit Agreement as in effect on December 20, 1995 without giving effect to any other amendment, waiver or other modification of the Credit Agreement unless the Company shall have obtained the written consent of the Required Holder(s) to any such amendment, waiver or modification. No termination of the Credit Agreement in whole or in part shall affect the continued applicability of the sections of the Credit Agreement referred to herein.
SECTION 3. REPRESENTATION AND WARRANTY. The Company hereby represents and warrants that this letter is a legally valid and binding obligation of the Company, enforceable against the Company in accordance with its terms except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect relating to creditors' rights generally or general principles of equity.
SECTION 4. CONDITIONS PRECEDENT. This letter shall become effective only on the first date on which all of the following conditions precedent shall have been satisfied:
(i) Prudential shall have received a duly executed counterpart of this letter signed by the Company; and 3 The Lincoln Electric Company December 20, 1995 Page 3
(ii) Prudential shall have received a copy of the duly executed Credit Agreement which Credit Agreement shall be in full force and effect.
SECTION 5. GOVERNING LAW. This letter amendment shall be governed by the internal laws and decisions of the State of Ohio.
[This space intentionally left blank] 4 The Lincoln Electric Company December 20, 1995 Page 4
SECTION 6. MISCELLANEOUS. Except as specifically set forth in this letter, the Company's obligations under the Note Agreement and the Note are neither altered nor amended, and all terms and conditions of the Note Agreement and the Note remain in full force and effect. Upon the effectiveness of this letter, each reference to the Note Agreement and the Note shall mean and be a reference to the Note Agreement and the Note as amended by this letter. This letter may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement.
Sincerely,
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: /s/ Leonard H. Lillard ------Vice President
Acknowledged and Agreed:
THE LINCOLN ELECTRIC COMPANY
By: /s/ Donald F. Hastings ------Its: Chairman and Chief Executive Officer
By: /s/ H. Jay Elliott ------Its: Vice President, Chief Financial Officer and Treasurer 1
[EXECUTION COPY]
EXHIBIT 4B
$200,000,000
CREDIT AGREEMENT
dated as of
December 20, 1995
among
The Lincoln Electric Company,
The Banks Listed Herein
and
Society National Bank, as Agent 2 TABLE OF CONTENTS*
Page ----
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions ...... 1 SECTION 1.02. Accounting Terms and Determinations ...... 16 SECTION 1.03. Types of Borrowings ...... 16
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend ...... 17 SECTION 2.02. Notice of Committed Borrowing ...... 17 SECTION 2.03. Notice to Banks; Funding of Loans ...... 18 SECTION 2.04. Notes ...... 19 SECTION 2.07. Facility Fee ...... 24 SECTION 2.08. Optional Termination or Reduction of Commitments ...... 25 SECTION 2.09. Mandatory Termination or Reduction of Commitments ...... 25 SECTION 2.10. Optional Prepayments ...... 25 SECTION 2.11. General Provisions as to Payments ...... 26 SECTION 2.12. Funding Losses ...... 27 SECTION 2.13. Computation of Interest and Fees ...... 27 SECTION 2.14. Alternative Currency Advances ...... 27 SECTION 2.15. Money Market Borrowings ...... 30 SECTION 2.16. Withholding Tax Exemption ...... 35 SECTION 2.17. Judgment Currency ...... 36 SECTION 2.18. Foreign Withholding Taxes and Other Costs ...... 36 SECTION 2.19. Maximum Interest Rate ...... 37 SECTION 2.20. Extension of Termination Date ...... 38
______
*The Table of Contents is not a part of this Agreement.
i 3 ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness ...... 39 SECTION 3.02. Borrowings ...... 40 SECTION 3.03. First Borrowing by Each Eligible Subsidiary ...... 41
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Corporate Existence and Power ...... 41 SECTION 4.02. Corporate and Governmental Authorization; No Contravention ...... 42 SECTION 4.03. Binding Effect ...... 42 SECTION 4.04. Financial Information ...... 42 SECTION 4.05. Litigation ...... 43 SECTION 4.06. Compliance with ERISA ...... 43 SECTION 4.07. Environmental Matters ...... 44 SECTION 4.08. Taxes ...... 44 SECTION 4.09. Subsidiaries ...... 45 SECTION 4.10. Not an Investment Company ...... 45 SECTION 4.11. Full Disclosure ...... 45
ARTICLE V
COVENANTS
SECTION 5.01. Information ...... 45 SECTION 5.02. Payment of Obligations ...... 48 SECTION 5.03. Maintenance of Property; Insurance ...... 49 SECTION 5.04. Conduct of Business and Maintenance of Existence ...... 49 SECTION 5.05. Compliance with Laws ...... 49 SECTION 5.06. Inspection of Property, Books and Records ...... 50 SECTION 5.07. Interest Coverage Ratio ...... 50 SECTION 5.08. Funded Debt to Capital Ratio ...... 50 SECTION 5.09. Negative Pledge ...... 50 SECTION 5.10. Consolidations, Mergers and Sales of Assets ...... 51 SECTION 5.11. Use of Proceeds ...... 52
ii 4
Page ------ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default ...... 52 SECTION 6.02. Notice of Default ...... 55
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization ...... 55 SECTION 7.02. Agent and Affiliates ...... 55 SECTION 7.03. Action by Agent ...... 55 SECTION 7.04. Consultation with Experts ...... 55 SECTION 7.05. Liability of Agent ...... 55 SECTION 7.06. Indemnification ...... 56 SECTION 7.07. Credit Decision ...... 56 SECTION 7.08. Successor Agent ...... 56 SECTION 7.09. Agent's Fee ...... 57
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair ...... 57 SECTION 8.02. Illegality ...... 58 SECTION 8.03. Increased Cost and Reduced Return ...... 59 SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate Loans ...... 60 SECTION 8.05. HLT Classification ...... 61
ARTICLE IX
REPRESENTATIONS AND WARRANTIES OF ELIGIBLE SUBSIDIARIES
SECTION 9.01. Corporate Existence and Power ...... 62 SECTION 9.02. Corporate and Governmental Authorization; Contravention ...... 62 SECTION 9.03. Binding Effect ...... 62 SECTION 9.04. Taxes ...... 62
iii 5
Page ---- ARTICLE X
GUARANTY
SECTION 10.01. The Guaranty ...... 63 SECTION 10.02. Guaranty Unconditional ...... 63 SECTION 10.03. Discharge Only Upon Payment In Full; Reinstatement In Certain Circumstances ...... 64 SECTION 10.04. Waiver by the Company ...... 64 SECTION 10.05. Subrogation ...... 64 SECTION 10.06. Stay of Acceleration ...... 65
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Notices ...... 65 SECTION 11.02. No Waivers ...... 65 SECTION 11.03. Expenses; Documentary Taxes; Indemnification ...... 66 SECTION 11.04. Sharing of Set-Offs ...... 66 SECTION 11.05. Amendments and Waivers ...... 67 SECTION 11.06. Successors and Assigns ...... 67 SECTION 11.07. Collateral ...... 69 SECTION 11.08. Governing Law; Submission to Jurisdiction ...... 69 SECTION 11.09. Counterparts; Integration ...... 70 SECTION 11.10. WAIVER OF JURY TRIAL ...... 70 SECTION 11.11. Existing Credit Agreement ...... 70 SECTION 11.12. Eligible Subsidiaries ...... 71
iv 6
Exhibit A - Note
Exhibit B - Form of Alternative Currency Quote Request
Exhibit C - Form of Invitation for Alternative Currency Quote
Exhibit D - Form of Alternative Currency Quote
Exhibit E - Opinion of Frederick G. Stueber, Senior Vice President and General Counsel for the Company
Exhibit F - Opinion of Davis Polk & Wardwell, Special Counsel for the Agent
Exhibit G - Form of Election to Participate
Exhibit H - Form of Election to Terminate
Exhibit I-1 - Opinion of Counsel for the Borrower (Borrowings by Eligible Subsidiaries)
Exhibit I-2 - Opinion of Counsel for the Company (Borrowings by Eligible Subsidiaries)
Exhibit J - Assignment and Assumption Agreement
Exhibit K - Extension Agreement
Exhibit L - Form of Money Market Quote Request
Exhibit M - Form of Invitation for Money Market Quotes
Exhibit N - Form of Money Market Quote
v 7
CREDIT AGREEMENT
AGREEMENT dated as of December 20, 1995 among THE LINCOLN ELECTRIC COMPANY, the BANKS listed on the signature pages hereof and SOCIETY NATIONAL BANK, as Agent.
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. The following terms, as used herein, have the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.15.
"Adjusted CD Rate" has the meaning set forth in Section 2.06(b).
"Adjusted London Interbank Offered Rate" has the meaning set forth in Section 2.06(c).
"Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire in the form prepared by the Agent and submitted to the Agent (with a copy to the Company) duly completed by such Bank.
"Agent" means Society National Bank in its capacity as agent for the Banks hereunder, and its successors in such capacity.
"Alternative Currency" means any currency other than Dollars which is freely transferable and convertible into Dollars.
"Alternative Currency Advance" means an advance made by a Bank to any Borrower in an Alternative Currency pursuant to Section 2.14.
"Alternative Currency Advance Report" has the meaning set forth in Section 2.14(f).
8 "Alternative Currency Lending Office" means, as to each Bank with respect to each Alternative Currency Advance made by such Bank, its office, branch or affiliate identified in the Alternative Currency Quote relating to such Alternative Currency Advance as its Alternative Currency Lending Office, or such other office, branch or affiliate as such Bank may thereafter designate as its Alternative Currency Lending Office by notice to the Company and the Agent.
"Alternative Currency Outstandings" means at any time an amount equal to the aggregate Dollar Equivalents of all Alternative Currency Advances outstanding at such time.
"Alternative Currency Quote" means an offer by a Bank to make an Alternative Currency Advance in accordance with Section 2.14.
"Applicable Alternative Currency Business Day" means, with respect to any Alternative Currency Advance, a Euro-Dollar Business Day on which commercial banks are open for international business (including the clearing of currency transfers in the Alternative Currency of such Alternative Currency Advance) in the principal financial center of the home country of such Alternative Currency.
"Applicable Interest Coverage Ratio" means, on any day, the ratio of EBIT to Consolidated Interest Expense for the period of four fiscal quarters of the Company most recently ended prior to such day for which the Company has delivered financial statements pursuant to Section 5.01(a) or 5.01(b), as the case may be.
"Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its Alternative Currency Advances, its Alternative Currency Advance Lending Office and (iv) in the case of its Money Market Loans, its Money Market Lending Office.
"Assessment Rate" has the meaning set forth in Section 2.06(b).
"Assignee" has the meaning set forth in Section 11.06(c).
"Bank" means each institution listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 11.06(c), and their respective successors.
2 9 "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day.
"Base Rate Loan" means a Loan to be made by a Bank as a Base Rate Loan in accordance with the applicable Notice of Committed Borrowing or pursuant to Article VIII.
"Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group.
"Borrower" means the Company or any Eligible Subsidiary, as the context may require, and their respective successors, and "Borrowers" means all of the foregoing.
"Borrowing" has the meaning set forth in Section 1.03.
"CD Base Rate" has the meaning set forth in Section 2.06(b).
"CD Loan" means a Loan to be made by a Bank as a CD Loan in accordance with the applicable Notice of Committed Borrowing.
"CD Margin" has the meaning set forth in Section 2.06(b).
"CD Reference Banks" means Morgan Guaranty Trust Company of New York and Society National Bank.
"Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof, as such amount may be reduced from time to time pursuant to Section 2.08.
"Committed Loan" means a loan made by a Bank pursuant to Section 2.01.
"Company" means The Lincoln Electric Company, an Ohio corporation, and its successors.
"Company's 1994 Form 10-K" means the Company's annual report on Form 10-K for 1994, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934.
3 10 "Consolidated Interest Expense" means, for any period, the sum of (i) the interest expense of the Company and its Consolidated Subsidiaries and (ii) with respect of any Receivables Financing which constitutes Debt solely by virtue of clause (vi) of the definition of Debt, interest-equivalent financing charges, in each case determined on a consolidated basis for such period.
"Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Company in its consolidated financial statements if such statements were prepared as of such date.
"Consolidated Tangible Net Worth" means at any date the consolidated stockholders' equity (excluding the cumulative foreign currency translation adjustment) of the Company and its Consolidated Subsidiaries MINUS their consolidated Intangible Assets, all determined as of such date. For purposes of this definition "Intangible Assets" means the amount (to the extent reflected in determining such consolidated stockholders' equity) of (i) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of assets of a going concern business made within twelve months after the acquisition of such business) subsequent to September 30, 1995 in the book value of any asset owned by the Company or a Consolidated Subsidiary, (ii) all Investments in unconsolidated Subsidiaries and all equity investments in Persons which are not Subsidiaries and (iii) all unamortized debt discount and expense, unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, anticipated future benefit of tax loss carry-forwards, copyrights, organization or developmental expenses and other intangible assets.
"Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all non-contingent obligations of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit or similar instrument, (vi) any Receivables Financing entered into by such Person as transferor, (vii) all Debt secured by a Lien on any asset of such Person, whether or not such Debt is otherwise an obligation of such Person, and (viii) all Debt of others
4 11 Guaranteed by such Person. The aggregate amount of Debt described in clause (vi) of this definition at any time shall be the aggregate Receivables Financing Amount with respect to such Debt at such time.
"Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.
"Dollar Equivalent" means in respect of any Alternative Currency Advance the amount of Dollars that would be obtained by converting the outstanding amount of currency of such Alternative Currency Advance, as specified in the then most recent Alternative Currency Advance Report in respect of such Alternative Currency Advance, into Dollars at the spot rate for the purchase of Dollars with such currency as quoted by Society National Bank at approximately 9:00 A.M. (Cleveland, Ohio time) on the second Applicable Alternative Currency Business Day prior to the date of such Alternative Currency Advance Report.
"Dollars" and the sign "$" mean lawful money of the United States of America.
"Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City or Cleveland, Ohio, are authorized by law to close.
"Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Company and the Agent; PROVIDED that any Bank may so designate separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and its CD Loans, on the other hand, in which case all references herein to the Domestic Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section 2.06(b).
"EBIT" means, for any period, the sum of (i) the consolidated net income of the Company and its Consolidated
5 12 Subsidiaries for such period PLUS (ii) to the extent deducted in determining such consolidated net income, (A) Consolidated Interest Expense, (B) consolidated income taxes, and (C) for any fiscal quarter ending on or before December 31, 1994, redundancy costs and other non-recurring charges.
"Effective Date" means the date of effectiveness of this Agreement, determined in accordance with Section 3.01.
"Election to Participate" means an Election to Participate substantially in the form of Exhibit G hereto.
"Election to Terminate" means an Election to Terminate substantially in the form of Exhibit H hereto.
"Eligible Subsidiary" means any Wholly-Owned Consolidated Subsidiary of the Company as to which an Election to Participate shall have been delivered to the Agent and as to which an Election to Terminate shall not have been delivered to the Agent. Each such Election to Participate and Election to Terminate shall be duly executed on behalf of such Wholly-Owned Consolidated Subsidiary and the Company in such number of copies as the Agent may request. The delivery of an Election to Terminate shall not affect any obligation of an Eligible Subsidiary theretofore incurred. The Agent shall promptly give notice to the Banks of the receipt of any Election to Participate or Election to Terminate.
"Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to the environment, the effect of the environment on human health or to emissions, discharges or releases of pollutants, contaminants, Hazardous Substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Hazardous Substances or wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute.
6 13 "ERISA Group" means the Company, any Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Company or any Subsidiary, are treated as a single employer under Section 414 of the Internal Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in Dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Company and the Agent.
"Euro-Dollar Loan" means a Loan to be made by a Bank as a Euro-Dollar Loan in accordance with the applicable Notice of Committed Borrowing.
"Euro-Dollar Margin" has the meaning set forth in Section 2.06(c).
"Euro-Dollar Reference Banks" means the principal London offices of Morgan Guaranty Trust Company of New York and Dresdner Bank and the Cayman Islands office of Society National Bank.
"Euro-Dollar Reserve Percentage" has the meaning set forth in Section 2.06(c).
"Event of Default" has the meaning set forth in Section 6.01.
"Existing Credit Agreement" means the Credit Agreement dated as of March 18, 1993 among the Company, the banks party thereto and Society National Bank, as agent, as in effect immediately prior to the effectiveness of this Agreement.
"Facility Fee Rate" has the meaning set forth in Section 2.07.
"Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the
7 14 Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, PROVIDED that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Society National Bank on such day on such transactions as determined by the Agent.
"Fixed Rate Loans" means CD Loans, Euro-Dollar Loans, Alternative Currency Advances or Money Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate pursuant to Section 8.01(a)) or any combination of the foregoing.
"Funded Debt" means at any date the Debt of the Company and its Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"Funded Debt to Capital Ratio" means, at any date, the ratio of (i) Funded Debt at such date to (ii) the sum of (A) Funded Debt at such date PLUS (B) the stockholders' equity of the Company and its Consolidated Subsidiaries at such date determined on a consolidated basis.
"Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), PROVIDED that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning.
"Hazardous Substances" means any toxic, radioactive, caustic or otherwise hazardous substance, including petroleum, its derivatives, by-products and other
8 15 hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics.
"Indemnitee" has the meaning set forth in Section 11.03(b).
"Interest Period" means: (1) with respect to each Euro-Dollar Borrowing, the period commencing on the date of such Borrowing and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable Notice of Committed Borrowing; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date.
(2) with respect to each CD Borrowing, the period commencing on the date of such Borrowing and ending 30, 60, 90 or 180 days thereafter, as the Borrower may elect in the applicable Notice of Committed Borrowing; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date.
(3) with respect to each Base Rate Borrowing, the period commencing on the date of such Borrowing and ending 30 days thereafter; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall
9 16 be extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date.
(4) with respect to each Alternative Currency Advance, the period commencing on the day of such Alternative Currency Advance and ending on the date specified by the Borrower in the Alternative Currency Quote Request relating to such Alternative Currency Advance; PROVIDED that no Interest Period shall end after the Termination Date.
(5) with respect to each Money Market LIBOR Borrowing, the period commencing on the date of such Borrowing and ending such whole number of months thereafter as the Borrower may elect in accordance with Section 2.15; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date.
(6) with respect to each Money Market Absolute Rate Borrowing, the period commencing on the date of such Borrowing and ending on such number of days thereafter (but not less than 30 days) as the Borrower may elect in accordance with Section 2.15; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and
10 17 (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute.
"Investment" means any investment in any Person, whether by means of share purchase, capital contribution, loan, time deposit or otherwise.
"Level I Pricing" exists on any day if (i) the Applicable Interest Coverage Ratio for such day is greater than or equal to 5.0 to 1 AND (ii) the Applicable Interest Coverage Ratio on four consecutive days (I.E., with respect to four consecutive periods of four fiscal quarters) is or has been greater than or equal to 5.0 to 1. The days on which the Applicable Interest Coverage Ratio shall be measured for purposes of clause (ii) of the immediately preceding sentence shall be the date on which delivery of financial statements pursuant to Section 5.01(b) is required for the fiscal quarter ended September 30, 1995 and each day after the Effective Date on which the Company has delivered financial statements as required pursuant to Section 5.01(a) or 5.01(b), as the case may be. For example, the Borrower will qualify for Level I Pricing if the Applicable Interest Coverage Ratio with respect to each of September 30, 1995, December 31, 1995, March 31, 1996 and June 30, 1996 is greater than or equal to 5.0 to 1. Once Borrower qualifies for Level I Pricing, Level IA Pricing shall be eliminated.
"Level IA Pricing" exists on any day if the Applicable Interest Coverage Ratio for such day is greater than or equal to 5.0 to 1 and Level I Pricing does not exist on such day. Once Borrower qualifies for Level I Pricing, Level IA Pricing shall be eliminated.
"Level II Pricing" exists on any day if the Applicable Interest Coverage Ratio for such day is greater than or equal to 4.0 to 1 but less than 5.0 to 1.
"Level III Pricing" exists on any day if none of Level I Pricing, Level IA Pricing nor Level II Pricing exists on such day.
"LIBOR Auction" means a solicitation of Money Market Quotes setting forth Money Market Margins based on the London Interbank Offered Rate pursuant to Section 2.15.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or
11 18 encumbrance of any kind, or any other type of preferential arrangement that has the practical effect of creating a security interest, in respect of such asset. For the purposes of this Agreement, the Company or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan or an Alternative Currency Advance or a Money Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Alternative Currency Advances or Money Market Loans or any combination of the foregoing.
"London Interbank Offered Rate" has the meaning set forth in Section 2.06(c).
"Material Debt" means Debt (other than the Notes) of the Company and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, in an aggregate principal amount exceeding $5,000,000.
"Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $1,000,000.
"Money Market Absolute Rate" has the meaning set forth in Section 2.15(d).
"Money Market Absolute Rate Loan" means a loan to be made by a Bank pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its Domestic Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Money Market Lending Office by notice to the Company and the Agent; PROVIDED that any Bank may from time to time by notice to the Company and the Agent designate separate Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require.
"Money Market LIBOR Loan" means a loan to be made pursuant to a LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant to Section 8.01(a)).
12 19 "Money Market Loan" means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section 2.15(d).
"Money Market Quote" means an offer by a Bank to make a Money Market Loan in accordance with Section 2.15.
"Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period.
"Notes" means promissory notes of a Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of such Borrower to repay the Loans made to it, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section 2.15).
"Original Credit Agreement" has the meaning set forth in the first WHEREAS clause.
"Parent" means, with respect to any Bank, any Person controlling such Bank.
"Participant" has the meaning set forth in Section 11.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any
13 20 member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group.
"Prime Rate" means the rate of interest established from time to time by Society National Bank in Cleveland, Ohio as its Prime Rate, whether or not such rate is publicly announced; the Prime Rate may not be the lowest interest rate charged by Society National Bank for commercial or other extensions of credit.
"Receivables" means all accounts, contract rights, chattel paper, instruments, general intangibles and other rights to payment arising out of a sale or lease of goods or the rendering of services by the Company or any of its Subsidiaries.
"Receivables Financing" means any transaction involving the transfer (by way of sale, pledge or otherwise) by the Company or any of its Subsidiaries of Receivables (or interest therein) and associated assets to any Person other than the Company or any of its Subsidiaries (other than any such transfer in bulk as part of a sale of a line or division of business).
"Receivables Financing Amount" means, at any time, (i) with respect to any Receivables Financing that constitutes Debt (other than solely pursuant to clause (vi) of the definition of Debt), the outstanding principal amount thereof at such time and (ii) with respect to any Receivables Financing that constitutes Debt solely pursuant to clause (vi) of the definition of Debt, the amount of the proceeds received by the transferor to the extent the transferee is entitled at such time to the recovery of such amount out of the proceeds of the assets transferred.
"Reference Banks" means the CD Reference Banks or the Euro-Dollar Reference Banks, as the context may require, and "Reference Bank" means any one of such Reference Banks.
"Refunding Borrowing" means a Borrowing which, after application of the proceeds thereof, results in no net increase in the outstanding principal amount of Loans made by any Bank to any Borrower.
"Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time.
14 21 "Required Banks" means at any time Banks having at least 66 2/3% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing at least 66 2/3% of the aggregate unpaid principal amount of the Loans.
"Significant Subsidiary" means a "significant subsidiary" within the meaning of Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange Commission.
"Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Company.
"Termination Date" means December 20, 2000 or such later date to which the Commitments shall have been extended pursuant to Section 2.20 or, if any such day is not a Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day unless such succeeding Euro-Dollar Business Day falls in another calendar month, in which case the Termination Date shall be the next preceding Euro-Dollar Business Day.
"Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the value of all benefit liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA.
"Wholly-Owned Consolidated Subsidiary" means any Consolidated Subsidiary all of the shares of capital stock or other ownership interests of which (except (i) all nominal and directors qualifying shares, (ii) shares of such Consolidated Subsidiary owned by any Person who is or was a director, an officer, an employee or is related by blood or marriage to any of the foregoing PROVIDED that, the number of shares excepted pursuant to this clause (ii) shall not exceed at any time in the aggregate 10% of the capital stock or other ownership interests of such Consolidated Subsidiary, and (iii) with respect to Messer-Lincoln GmbH, shares of Messer-Lincoln GmbH owned by Hans Messer or
15 22 Messer-Griesheim GmbH) are at the time directly or indirectly owned by the Company.
SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Company's independent public accountants) with the most recent audited consolidated financial statements of the Company and its Consolidated Subsidiaries delivered to the Banks; PROVIDED that, if the Company notifies the Agent that the Company wishes to amend any covenant in Article V to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Agent notifies the Company that the Required Banks wish to amend Article V for such purpose), then, with the consent of the Required Banks, the Company's compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Company and the Required Banks.
SECTION 1.03. TYPES OF BORROWINGS. The term "Borrowing" denotes the aggregation of Loans of one or more Banks to be made to a single Borrower pursuant to Article II on a single date, for a single Interest Period and, if applicable, in a single Alternative Currency. Borrowings are classified for purposes of this Agreement by reference to the pricing of Loans comprising such Borrowing (E.G., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of Article II under which participation therein is determined (I.E., a "Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks participate in proportion to their Commitments, while an "Alternative Currency Borrowing" is a Borrowing under Section 2.14 in which the Bank participants are determined by the Borrower on the basis of their bids in accordance therewith and a "Money Market Borrowing" is a Borrowing under Section 2.15 in which the Bank participants are determined by the Borrower on the basis of their bids in accordance therewith) or by reference to both.
16 23 ARTICLE II
THE CREDITS
SECTION 2.01. COMMITMENTS TO LEND. Each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans in Dollars to any Borrower from time to time in amounts such that the aggregate principal amount of Committed Loans by such Bank at any one time outstanding to all Borrowers shall not exceed the amount of its Commitment. Each Borrowing under this Section 2.01 shall be in an aggregate principal amount of $5,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02(c)) and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, a Borrower may borrow, repay, or, to the extent permitted by Section 2.10, prepay Loans and reborrow at any time.
SECTION 2.02. NOTICE OF COMMITTED BORROWING. The relevant Borrower shall give the Agent notice (a "Notice of Committed Borrowing") not later than 10:00 A.M. (Cleveland, Ohio time) on (x) the date of each Base Rate Borrowing, (y) the second Domestic Business Day before each CD Borrowing and (z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are to be CD Loans, Base Rate Loans or Euro-Dollar Loans, and
(iv) in the case of a Committed Fixed Rate Borrowing, the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period.
Notwithstanding the foregoing, no more than ten Committed Fixed Rate Borrowings shall be outstanding at any one time, and any Borrowing that would exceed such limitation shall be made as a Base Rate Borrowing.
17 24 SECTION 2.03. NOTICE TO BANKS; FUNDING OF LOANS. (a) Upon receipt of a Notice of Committed Borrowing, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's share of such Committed Borrowing and such Notice of Committed Borrowing shall not thereafter be revocable by any Borrower.
(b) Not later than 12:00 Noon (Cleveland, Ohio time) on the date of each Committed Borrowing, each Bank shall (except as provided in subsection (c) of this Section) make available its share of such Committed Borrowing, in Federal or other funds immediately available in Cleveland, Ohio, to the Agent at its address referred to in Section 11.01. Unless the Agent determines that any applicable condition specified in Article III has not been satisfied, the Agent will make the funds so received from the Banks available to the relevant Borrower at the Agent's aforesaid address.
(c) If any Bank makes a new Committed Loan hereunder to a Borrower on a day on which such Borrower is to repay all or any part of an outstanding Loan from such Bank, such Bank shall apply the proceeds of its new Committed Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed by such Borrower and the amount being repaid shall be made available by such Bank to the Agent as provided in subsection (b) of this Section, or remitted by such Borrower to the Agent as provided in Section 2.11, as the case may be.
(d) Unless the Agent shall have received notice from a Bank prior to 12:00 Noon (Cleveland, Ohio time) on the date of any Committed Borrowing that such Bank will not make available to the Agent such Bank's share of such Committed Borrowing, the Agent may assume that such Bank has made such share available to the Agent on the date of such Committed Borrowing in accordance with subsections (b) and (c) of this Section 2.03 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Agent, such Bank and the relevant Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount, together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.06 and (ii) in the case of such Bank,
18 25 the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Committed Loan included in such Borrowing for purposes of this Agreement.
SECTION 2.04. NOTES. (a) The Loans of each Bank to each Borrower shall be evidenced by a single Note of such Borrower payable to the order of such Bank for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Bank's Loans to such Borrower.
(b) Each Bank may, by notice to a Borrower and the Agent, request that its Loans of a particular type to such Borrower be evidenced by a separate Note of such Borrower in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant type. Each reference in this Agreement to a "Note" or the "Notes" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(b) or 3.03(a), the Agent shall mail such Note to such Bank. Each Bank shall record the date, amount, type, Alternative Currency (if applicable) and maturity of each Loan made by it to each Borrower and the date and amount of each payment of principal made with respect thereto, and prior to any transfer of its Note of any Borrower shall endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan to such Borrower then outstanding; PROVIDED that the failure of any Bank to make any such recordation or endorsement shall not affect the obligations of any Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by each Borrower so to endorse its Notes and to attach to and make a part of any Note a continuation of any such schedule as and when required.
SECTION 2.05. MATURITY OF LOANS. Each Loan included in any Borrowing shall mature, and the principal amount thereof shall be due and payable, on the last day of the Interest Period applicable to such Borrowing.
SECTION 2.06. INTEREST RATES. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base
19 26 Rate for such day. Such interest shall be payable for each Interest Period on the last day thereof. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the rate otherwise applicable to Base Rate Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding principal amount thereof, for each day of the Interest Period applicable thereto, at a rate per annum equal to the sum of the CD Margin for the first day of such Interest Period plus the applicable Adjusted CD Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 90 days, at intervals of 90 days after the first day thereof. Any overdue principal of or interest on any CD Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the higher of (i) the sum of the CD Margin for such day plus the Adjusted CD Rate applicable to such Loan and (ii) the rate applicable to Base Rate Loans for such day.
"CD Margin" means for any day the percentage set forth below in the applicable row under the column corresponding to the "Pricing Level" that exists on such day:
Level I IA II III
CD Margin .325% .350% .375% .425%
; PROVIDED that (A) if the Company shall fail to timely deliver the information required to be delivered by it pursuant to Section 5.01(a) or Section 5.01(b), as the case may be (and such failure shall not have been waived by the Required Banks in accordance with Section 11.05), Level III Pricing shall apply for each day from and including the day on which such information is required to be delivered to but excluding the day on which such information is delivered and (B) the effective date of any increase or decrease in the CD Margin (other than any increase pursuant to clause (A) of this proviso) shall be the fifth Domestic Business Day after the Company shall have delivered financial statements pursuant to Section 5.01(a) or 5.01(b), as the case may be, on the basis of which statements any such increase or decrease is calculated.
The "Adjusted CD Rate" applicable to any Interest Period means a rate per annum determined pursuant to the following formula:
20 27
[ CDBR ]* ACDR = [ ------] + AR [ 1.00 - DRP ]
ACDR = Adjusted CD Rate CDBR = CD Base Rate DRP = Domestic Reserve Percentage AR = Assessment Rate
______* The amount in brackets being rounded upward, if necessary, to the next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of interest determined by the Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid at 10:00 A.M. (Cleveland, Ohio time) (or as soon thereafter as practicable) on the first day of such Interest Period by two or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each CD Reference Bank of its certificates of deposit in an amount comparable to the principal amount of the CD Loan of such CD Reference Bank to which such Interest Period applies and having a maturity comparable to such Interest Period.
"Domestic Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any basic, supplemental or emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of new non-personal time deposits in dollars in New York City having a maturity comparable to the related Interest Period and in an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund classified as adequately capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. Section 327.4(a) (or any successor provision) to the Federal Deposit Insurance Corporation (or any successor) for such Corporation's (or such successor's) insuring time deposits at offices of such institution in the United States. The Adjusted CD Rate shall be adjusted
21 28 automatically on and as of the effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day of the Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for the first day of such Interest Period plus the applicable Adjusted London Interbank Offered Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof.
"Euro-Dollar Margin" means for any day the percentage set forth below in the applicable row under the column corresponding to the "Pricing Level" that exists on such day:
Level I IA II III
Euro-Dollar Margin .20% .225% .25% .30%
; PROVIDED that (A) if the Company shall fail to timely deliver the information required to be delivered by it pursuant to Section 5.01(a) or Section 5.01(b), as the case may be (and such failure shall not have been waived by the Required Banks in accordance with Section 11.05), Level III Pricing shall apply for each day from and including the day on which such information is required to be delivered to but excluding the day on which such information is delivered and (B) the effective date of any increase or decrease in the Euro-Dollar Margin (other than any increase pursuant to clause (A) of this proviso) shall be the fifth Domestic Business Day after the Company shall have delivered financial statements pursuant to Section 5.01(a) or 5.01(b), as the case may be, on the basis of which statements any such increase or decrease is calculated.
The "Adjusted London Interbank Offered Rate" applicable to any Interest Period means a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in Dollars are offered to each of the Euro-Dollar Reference Banks in the London
22 29 interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). The Adjusted London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Euro-Dollar Reserve Percentage.
(d) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus the higher of (i) the sum of the Euro-Dollar Margin for such day plus the Adjusted London Interbank Offered Rate applicable to such Loan and (ii) the Euro-Dollar Margin for such day plus the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than six months as the Agent may select) deposits in Dollars in an amount approximately equal to such overdue payment due to each of the Euro-Dollar Reference Banks are offered to such Euro-Dollar Reference Bank in the London interbank market for the applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 2% plus the rate applicable to Base Rate Loans for such day).
(e) Subject to Section 8.01(a), each Money Market LIBOR Loan shall bear interest on the outstanding principal
23 30 amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.06(c) as if the related Money Market LIBOR Borrowing were a Committed Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the Bank making such Loan in accordance with Section 2.15. Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Bank making such Loan in accordance with Section 2.15. Such interest shall be payable for each Interest Period on the last day thereof and if, such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or interest on any Money Market Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Base Rate for such day.
(f) The Agent shall determine each interest rate applicable to the Loans hereunder. The Agent shall give prompt notice to the Borrower and the participating Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish quotations to the Agent as contemplated hereby. If any Reference Bank does not furnish a timely quotation, the Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply.
SECTION 2.07. FACILITY FEE. The Company shall pay to the Agent for the account of the Banks ratably a facility fee at the Facility Fee Rate (determined daily as described below). Such facility fee shall accrue (i) from and including the Effective Date to but excluding the Termination Date (or earlier date of termination of the Commitments in their entirety), on the daily aggregate amount of the Commitments (whether used or unused) and (ii) from and including the Termination Date or such earlier date of termination to but excluding the date the Loans shall be repaid in their entirety, on the daily aggregate outstanding principal amount of the Loans, and shall be payable quarterly in arrears on the last day of each March, June, September and December and on the Termination Date (and, if applicable, such later date of repayment).
24 31 "Facility Fee Rate" means for any day the percentage set forth below in the applicable row under the column corresponding to the "Pricing Level" that exists on such day:
Level I IA II III
Facility Fee Rate .10% .105% .125% .15%
SECTION 2.08. OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS. The Company may, upon at least three Domestic Business Days' notice to the Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $25,000,000 or any larger multiple of $1,000,000, the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans. If the Commitments are terminated in their entirety, all accrued facility fees shall be payable on the effective date of such termination.
SECTION 2.09. MANDATORY TERMINATION OR REDUCTION OF COMMITMENTS. The Commitments shall terminate on the Termination Date, and any Loans then outstanding (together with accrued interest thereon) shall be due and payable on such date.
SECTION 2.10. OPTIONAL PREPAYMENTS. (a) The Borrower may (i) upon at least one Domestic Business Day's notice to the Agent, prepay any Base Rate Borrowing (or any Money Market Borrowing bearing interest at the Base Rate pursuant to Section 8.01(a)), (ii) upon three Domestic Business Days' notice to the Agent, subject to Section 2.12, prepay any CD Borrowing and (iii) upon at least three Euro-Dollar Business Days' notice to the Agent, subject to Section 2.12, prepay any Euro-Dollar Borrowing, in each case in whole at any time, or from time to time in part in amounts aggregating $5,000,000 or any larger multiple of $1,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Borrowing.
(b) Except as provided in clause (i) of Section 2.10(a), no Borrower may prepay all or any portion of the principal amount of any Money Market Loan prior to the maturity thereof.
25 32 (c) Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower.
SECTION 2.11. GENERAL PROVISIONS AS TO PAYMENTS. (a) The Borrowers shall make each payment of principal of, and interest on, the Committed Loans and of fees hereunder, not later than 12:00 Noon (Cleveland, Ohio time) on the date when due, in Federal or other funds immediately available in Cleveland, Ohio to the Agent at its address referred to in Section 11.01. The Agent will promptly distribute to each Bank its ratable share of each such payment received by the Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Domestic Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of, or interest on, the Money Market Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time.
(b) All payments to be made by any Borrower hereunder or under the Notes in an Alternative Currency pursuant to Section 2.14 shall be made in such Alternative Currency in such funds as may then be customary for the settlement of international transactions in such Alternative Currency for the account of the relevant Bank, at such time and at such place as shall have been notified by such Bank to the relevant Borrower by not less than four Euro-Dollar Business Days' notice prior to the day on which any such payment is due.
(c) Unless the Agent shall have received notice from a Borrower prior to the date on which any payment is due from such Borrower to the Banks hereunder with respect to Committed Loans or any fees hereunder, that such Borrower
26 33 will not make such payment in full, the Agent may assume that such Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that such Borrower shall not have so made such payment, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate.
SECTION 2.12. FUNDING LOSSES. If a Borrower makes any payment of principal with respect to any Fixed Rate Loan (pursuant to Article II, VI or VIII or otherwise, (except pursuant to Section 2.14(g)) on any day other than the last day of the Interest Period applicable thereto, or the last day of an applicable period fixed pursuant to Section 2.06(d), or if a Borrower fails to borrow or prepay any Fixed Rate Loans after notice has been given to any Bank in accordance with Section 2.03(a) or 2.10(c), the Company shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or failure to borrow, PROVIDED that such Bank shall have delivered to the Company a certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error.
SECTION 2.13. COMPUTATION OF INTEREST AND FEES. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day).
SECTION 2.14. ALTERNATIVE CURRENCY ADVANCES.
(a) ALTERNATIVE CURRENCY OPTION. From time to time prior to the Termination Date any Borrower may, as set forth in this Section, request the Banks to make offers to make Alternative Currency Advances to such Borrower. Any Bank may, but shall have no obligation to, make such offers, and such Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this
27 34 Section; PROVIDED that no Borrower may accept any offer if, after giving effect to the Alternative Currency Advance to be made pursuant to such offer and any other outstanding accepted offers, the Alternative Currency Outstandings would exceed 40% of the aggregate Commitments at such time.
(b) ALTERNATIVE CURRENCY QUOTE REQUEST. When any Borrower wishes to request offers to make Alternative Currency Advances under this Section, it shall transmit to the Agent by telex or facsimile transmission an Alternative Currency Quote Request substantially in the form of Exhibit B hereto so as to be received no later than 10:00 A.M. (Cleveland, Ohio time) on the fifth Applicable Alternative Currency Business Day prior to the date of borrowing proposed therein of the Alternative Currency Advance requested therein (or such other time or date as the relevant Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Alternative Currency Quote Request for the first Alternative Currency Advance for which such change is to be effective) specifying:
(i) the proposed date of the Alternative Currency Advance, which shall be an Applicable Alternative Currency Business Day with respect to the Alternative Currency in which such Alternative Currency Advance is requested;
(ii) the Alternative Currency in which such Alternative Currency Advance is requested;
(iii) the aggregate principal amount of such Alternative Currency Advance (in such Alternative Currency); and
(iv) the duration of the Interest Period applicable to such Alternative Currency Advance, subject to the provisions of the definition of Interest Period.
The relevant Borrower may request offers to make Alternative Currency Advances with more than one Interest Period and in more than one Alternative Currency in a single Alternative Currency Quote Request. No Alternative Currency Quote Request shall be given within five Euro- Dollar Business Days (or such other number of days as the Company and the Agent may agree) of any other Alternative Currency Quote Request.
(c) INVITATION FOR ALTERNATIVE CURRENCY QUOTES. Promptly upon receipt of an Alternative Currency Quote Request, the Agent shall send to the Banks by telex or
28 35 facsimile transmission an Invitation for Alternative Currency Quotes substantially in the form of Exhibit C hereto, which shall constitute an invitation by the relevant Borrower to each Bank to submit to such Borrower Alternative Currency Quotes offering to make the Alternative Currency Advances to which such Alternative Currency Quote Request relates in accordance with this Section.
(d) SUBMISSION AND CONTENTS OF ALTERNATIVE CURRENCY QUOTES. Each Bank may submit to the Borrower an Alternative Currency Quote containing an offer or offers to make Alternative Currency Advances in response to an Invitation for Alternative Currency Quotes. Each Alternative Currency Quote shall be in substantially the form of Exhibit D hereto and must be submitted to the relevant Borrower by telex or facsimile transmission at its offices specified in or pursuant to Section 11.01 not later than 2:00 P.M. (Cleveland, Ohio time) on the fourth Applicable Alternative Currency Business Day prior to the proposed date of the Alternative Currency Advance (or such other time or date as the relevant Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Alternative Currency Quote Request for the first Alternative Currency Advance for which such change is to be effective).
(e) ACCEPTANCE AND NOTICE BY BORROWER. Not later than 10:00 A.M. (Cleveland, Ohio time) on the third Applicable Alternative Currency Business Day prior to the proposed date of any Alternative Currency Advance (or such other time or date as the relevant Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Alternative Currency Request for the first Alternative Currency Advance for which such change is to be effective), the relevant Borrower shall notify the Agent and each of the Banks which submitted an Alternative Currency Quote of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (d). In the case of acceptance, such notice shall specify the aggregate principal amount of offers for each Interest Period and each Alternative Currency that are accepted. The relevant Borrower may accept any Alternative Currency Quote in whole or in part; PROVIDED that:
(i) the aggregate principal amount of each may not exceed the applicable amount set forth in the related Alternative Currency Quote Request, and
(ii) no Borrower may accept any offer that would cause it to violate the proviso to subsection (a) above.
29 36 Each Bank whose Alternative Currency Quote has been accepted in whole or in part by the relevant Borrower shall promptly notify the Agent of such acceptance.
(f) REPORTS TO AGENT. The Company shall deliver to the Agent and each of the Banks a report in respect of each Alternative Currency Advance (an "Alternative Currency Advance Report") (i) on the date on which such Alternative Currency Advance is made, (ii) on the date on which any principal amount thereof is repaid, and (iii) on any other date required pursuant to Section 3.02(b), specifying for such Alternative Currency Advance:
(A) the date such Alternate Currency Advance was or is being made or on which such amount of principal is repaid;
(B) the Alternative Currency of such Alternate Currency Advance;
(C) the principal amount of such Alternate Currency Advance or principal payment (in such Alternative Currency); and
(D) the Dollar Equivalent of the Alternate Currency Advance then made or remaining after such principal repayment and the Alternative Currency Outstandings on such date after giving effect to such Alternate Currency Advance or principal payment.
PROVIDED that, any Alternative Currency Advance Report delivered by the Company pursuant to clause (iii) need only specify the Alternative Currency Outstandings on the date of such Alternative Currency Advance Report.
(g) MANDATORY PREPAYMENTS. If on any date the sum of (i) the aggregate principal amount of the Committed Loans outstanding on such date, (ii) the Alternative Currency Outstandings on such date and (iii) the aggregate principal amount of Money Market Loans outstanding on such date exceeds the aggregate amount of the Commitments, the Borrower shall prepay Alternative Currency Advances in an aggregate amount equal to such excess. Each such prepayment shall be with respect to such Alternative Currency Advances as the Borrower shall designate (or, failing such designation, as determined by the Agent).
SECTION 2.15. MONEY MARKET BORROWINGS.
(a) THE MONEY MARKET OPTION. From time to time prior to the Termination Date, any Borrower may, as set
30 37 forth in this Section, request the Banks to make offers to make Money Market Loans to such Borrower. Any Bank may, but shall have no obligation to, make such offers and any Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section; PROVIDED that no Borrower may accept any offer if, immediately after giving effect to the Money Market Loan to be made pursuant to such offer and any other outstanding accepted offers, the aggregate outstanding principal amount of Money Market Loans would exceed 60% of the aggregate Commitments at such time.
(b) MONEY MARKET QUOTE REQUEST. When any Borrower wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Agent by telex or facsimile transmission a Money Market Quote Request substantially in the form of Exhibit L hereto so as to be received no later than 10:00 A.M. (Cleveland, Ohio time) on (x) the fifth Euro-Dollar Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the relevant Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be $5,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and
(iv) whether the Money Market Quotes requested are to set forth a Money Market Margin or a Money Market Absolute Rate.
The relevant Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Money Market Quote Request. No Money Market Quote Request shall be given within five Euro-Dollar Business Days (or
31 38 such other number of days as the Company and Agent may agree) of any other Money Market Quote Request.
(c) INVITATION FOR MONEY MARKET QUOTES. Promptly upon receipt of a Money Market Quote Request, the Agent shall send to the Banks by telex or facsimile transmission an Invitation for Money Market Quotes substantially in the form of Exhibit M hereto, which shall constitute an invitation by the relevant Borrower to each Bank to submit Money Market Quotes offering to make the Money Market Loans to which such Money Market Quote relates in accordance with this Section.
(d) SUBMISSION AND CONTENTS OF MONEY MARKET QUOTES. (i) Each Bank may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 11.01 not later than (x) 2:00 P.M. (Cleveland, Ohio time) on the fourth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or by (y) 9:30 A.M. (Cleveland, Ohio time) in the case of an Absolute Rate Auction (or, in either case, such other time or date as the relevant Borrower and the Agent shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); PROVIDED that Money Market Quotes submitted by the Agent (or any affiliate of the Agent) in the capacity of a Bank may be submitted, and may only be submitted, if the Agent or such Affiliate notifies the relevant Borrower of the terms of the offer or offers contained therein not later than (x) one hour prior to the deadline for the other Banks, in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the other Banks, in the case of an Absolute Rate Auction. Subject to Articles III and VI, any Money Market Quote so made shall be irrevocable except with the written consent of the Agent given on the instructions of the relevant Borrower.
(ii) Each Money Market Quote shall be in substantially the form of Exhibit N hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which each offer is being made, which principal amount (w) may be greater than or less than the
32 39 Commitment of the quoting Bank, (x) must be $5,000,000 or a larger multiple of $1,000,000, (y) may not exceed the principal amount of Money Market Loans for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Bank may be accepted,
(C) in the case of LIBOR Auction, the margin above or below the applicable London Interbank Offered Rate (the "Money Market Margin") offered for each such Money Market Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate,
(D) in the case of an Absolute Base Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the "Money Market Absolute Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit N hereto or does not specify all of the information required by subsection (d)(ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quote; or
(D) arrives after the time set forth in subsection (d)(i).
PROVIDED that a Money Market Quote shall not be disregarded pursuant to clause (B) or (C) above solely because it contains an indication that an allocation that might otherwise be made to such Bank pursuant to Section 2.15(g) would be unacceptable.
33 40
(e) NOTICE TO BORROWER. The Agent shall promptly notify the relevant Borrower of the terms of (x) of any Money Market Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Agent's notice to the relevant Borrower shall specify (A) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (B) the respective principal amounts and Money Market Margins or Money Market Absolute Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted.
(f) ACCEPTANCE AND NOTICE BY BORROWER. Not later than 10:30 A.M. (Cleveland, Ohio time) on (x) the third Euro-Dollar Business Day prior to the proposed date of the Borrowing, in the case of a LIBOR Auction or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the relevant Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the relevant Borrower shall notify the Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a "Notice of Money Market Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The relevant Borrower may accept any Money Market Quote in whole or in part; PROVIDED that:
(i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote request,
(ii) the principal amount of each Money Market Borrowing must be $5,000,000 or a larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be, and
34 41 (iv) the relevant Borrower may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement.
(g) ALLOCATION BY AGENT. If offers are made by two or more Banks with the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Agent among such Banks as nearly as possible (in multiples of $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amount of such offers. Determinations by the Agent of the amounts of Money Market Loans shall be conclusive in the absence of manifest error.
SECTION 2.16. WITHHOLDING TAX EXEMPTION. At least five Domestic Business Days prior to the first date on which interest or fees are payable hereunder for the account of any Bank, each Bank that is not incorporated under the laws of the United States of America or a state thereof agrees that it will deliver to each of the Company and the Agent two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, certifying in either case that such Bank is entitled to receive payments from the Company under this Agreement and the Notes without deduction or withholding of any United States federal income taxes. Each Bank which so delivers a Form 1001 or 4224 further undertakes to deliver to each of the Company and the Agent two additional copies of such form (or a successor form) on or before the date that such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by the Company or the Agent, in each case certifying that such Bank is entitled to receive payments from the Company under this Agreement and the Notes without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Bank from duly completing and delivering any such form with respect to it and such Bank advises the Company and the Agent that it is not capable of receiving such payments without any deduction or withholding of United States federal income tax.
35 42
SECTION 2.17. JUDGMENT CURRENCY. If for the purpose of obtaining judgment in any court it is necessary to convert a sum due from any Borrower hereunder or under any of the Notes in the currency expressed to be payable herein or under the Notes (the "specified currency") into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Agent could purchase the specified currency with such other currency at the Cleveland, Ohio office of Society National Bank on the Euro-Dollar Business Day preceding that on which final judgment is given. The obligations of each Borrower in respect of any sum due to any Bank or the Agent hereunder or under any Note shall, notwithstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Euro-Dollar Business Day following receipt by such Bank or the Agent (as the case may be) of any sum adjudged to be so due in such other currency such Bank or the Agent (as the case may be) may in accordance with normal banking procedures purchase the specified currency with such other currency; if the amount of the specified currency so purchased is less than the sum originally due to such Bank or the Agent, as the case may be, in the specified currency, each Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify such Bank or the Agent, as the case may be, against such loss, and if the amount of the specified currency so purchased exceeds (a) the sum originally due to any Bank or the Agent, as the case may be, and (b) any amounts shared with other Banks as a result of allocations of such excess as a disproportionate payment to such Bank under Section 11.04, such Bank or the Agent, as the case may be, agrees to remit such excess to the appropriate Borrower.
SECTION 2.18. FOREIGN WITHHOLDING TAXES AND OTHER COSTS. (a) Except as contemplated by the next sentence of this Section 2.18(a), all payments by an Eligible Subsidiary of principal of and interest on its Notes and of all other amounts payable under this Agreement are payable without deduction for or on account of any present or future taxes, duties or other charges levied or imposed by the government of any jurisdiction outside the United States of America or by any political subdivision or taxing authority thereof or therein through withholding or deduction with respect to any such payments. If any such taxes, duties or other charges are so levied or imposed, such Eligible Subsidiary will pay additional interest or will make additional payments in such amounts so that every net payment of principal of and interest on its Notes and of
36 43 all other amounts payable by it under this Agreement, after withholding or deduction for or on account of any such present or future taxes, duties or other charges, will not be less than the amount provided for herein. Such Eligible Subsidiary shall furnish promptly to the Agent official receipts evidencing such withholding or deduction.
(b) If the cost to any Bank of making or maintaining any Committed Loan to an Eligible Subsidiary is increased, or the amount of any sum received or receivable by any Bank (or its Applicable Lending Office) is reduced by an amount deemed by such Bank to be material, by reason of the fact that such Eligible Subsidiary is incorporated in, or conducts business in, a jurisdiction outside the United States of America, the Company shall indemnify such Bank for such increased cost or reduction within 15 days after demand by such Bank (with a copy to the Agent). A certificate of such Bank claiming compensation under this subsection (b) and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error.
(c) Each Bank will promptly notify the Company and the Agent of any event of which it has knowledge that will entitle such Bank to additional interest or payments pursuant to subsection (b) and will designate a different Applicable Lending Office, if, in the judgment of such Bank, such designation will avoid the need for, or reduce the amount of, such compensation and will not be otherwise disadvantageous to such Bank.
SECTION 2.19. MAXIMUM INTEREST RATE. (a) Nothing contained in this Agreement or the Notes shall require any Borrower to pay interest at a rate exceeding the maximum rate permitted by applicable law. Neither this Section nor Section 11.08 is intended to limit the rate of interest payable for the account of any Bank to the maximum rate permitted by the laws of the State of New York if a higher rate is permitted with respect to such Bank by supervening provisions of U.S. federal law.
(b) If the amount of interest payable by any Borrower for the account of any Bank on any interest payment date in respect of the immediately preceding interest computation period, computed pursuant to Section 2.06, would exceed the maximum amount permitted by applicable law to be charged to such Borrower by such Bank, the amount of interest payable by such Borrower for its account on such interest payment date shall be automatically reduced to such maximum amount.
37 44 (c) If the amount of interest payable by any Borrower for the account of any Bank in respect of any interest computation period is reduced pursuant to clause (b) of this Section and the amount of interest payable by such Borrower for its account in respect of any subsequent interest computation period, computed pursuant to Section 2.06, would be less than the maximum amount permitted by applicable law to be charged to such Borrower by such Bank, then the amount of interest payable by such Borrower for its account in respect of such subsequent interest computation period shall be automatically increased to such maximum permissible amount; PROVIDED that at no time shall the aggregate amount by which interest paid by any Borrower for the account of any Bank has been increased pursuant to this clause (c) exceed the aggregate amount by which interest paid by such Borrower for its account has theretofore been reduced pursuant to clause (b) of this Section.
SECTION 2.20. EXTENSION OF TERMINATION DATE. The Termination Date may be extended, in the manner set forth in this Section, on the 45th day after receipt, for each fiscal year of the Company, of the financial statements referred to in Section 5.01(a), the certificate with respect thereto referred to in Section 5.01(c) and the statement with respect thereto referred to in Section 5.01(d) (each such date, as specified by the Company in connection with the delivery of such items, an "Extension Date") for a period of one year after the then current Termination Date. If the Company wishes to request an extension of the Termination Date on any Extension Date, it shall give written notice to that effect to the Agent not less than 45 nor more than 120 days prior to such Extension Date, whereupon the Agent shall notify each of the Banks of such notice. Each Bank will use its best efforts to respond to such request, whether affirmatively or negatively, within 45 days after receipt of the relevant financial statements referred to in Section 5.01(a), the certificate with respect thereto referred to in Section 5.01(c) and the statement with respect thereto referred to in Section 5.01(d). If all Banks respond affirmatively, then, subject to receipt by the Agent prior to such Extension Date of counterparts of an Extension Agreement in substantially the form of Exhibit K duly completed and signed by all of the parties hereto, the Termination Date shall be extended, effective on such Extension Date, to the date stated in such Extension Agreement.
38 45
ARTICLE III
CONDITIONS
SECTION 3.01. EFFECTIVENESS. This Agreement shall become effective on the date that each of the following conditions shall have been satisfied (or waived in accordance with Section 11.05):
(a) receipt by the Agent of counterparts hereof signed by the Company, the Banks and the Agent (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party);
(b) receipt by the Agent for the account of each Bank of a duly executed Note of the Company dated on or before the Effective Date complying with the provisions of Section 2.04;
(c) receipt by the Agent of an opinion of Frederick G. Stueber, Vice President, General Counsel and Secretary for the Company, substantially in the form of Exhibit E hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request;
(d) receipt by the Agent of an opinion of Davis Polk & Wardwell, special counsel for the Agent, substantially in the form of Exhibit F hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request;
(e) receipt by the Agent of evidence reasonably satisfactory to the Agent that the Company and the Prudential Insurance Company of America shall have entered into an amendment to the Note Agreement dated as of November 1, 1991 with respect to the $75,000,000 8.73% Senior Notes due 2003 of the Company in form and substance reasonably satisfactory to the Agent;
(f) receipt by the Agent of evidence satisfactory to it that the commitments under the Existing Credit Agreement have terminated, all loans thereunder have been repaid in full (all Banks hereunder which are also banks under the Existing Credit Agreement hereby agreeing that such repayment may be made, whether at the end of interest periods under the Existing Credit
39 46 Agreement or not) or constitute Loans hereunder and all accrued fees and other amounts payable thereunder have been paid in full; and
(g) receipt by the Agent of all documents it may reasonably request relating to the existence of the Company, the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Agent;
PROVIDED that this Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied not later than January 31, 1996.
SECTION 3.02. BORROWINGS. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions:
(a) receipt by the Agent of a Notice of Committed Borrowing as required by Section 2.02, if such Borrowing is a Committed Borrowing;
(b) receipt by the Agent of an Alternative Currency Advance Report dated no more than fourteen days prior to the date of such Borrowing if, immediately after such Borrowing, the sum of (i) the aggregate principal amount of the Committed Loans outstanding on such date, (ii) the Alternative Currency Outstandings on such date and (iii) the aggregate principal amount of Money Market Loans on such date would exceed 80% of the aggregate amount of the Commitments;
(c) the fact that, immediately after such Borrowing, the sum of (i) the aggregate principal amount of Committed Loans outstanding on such date, (ii) the Alternative Currency Outstandings on such date and (iii) the aggregate principal amount of Money Market Loans outstanding on such date will not exceed the aggregate amount of the Commitments;
(d) the fact that, immediately before and after such Borrowing, no Default shall have occurred and be continuing; and
(e) the fact that the representations and warranties of the Borrowers contained in this Agreement (except, in the case of a Refunding Borrowing, the representation and warranty set forth in Section
40 47 4.04(c)) shall be true on and as of the date of such Borrowing.
Each Borrowing hereunder shall be deemed to be a representation and warranty by the Company and the relevant Borrower on the date of such Borrowing as to the facts specified in clauses (c), (d) and (e) of this Section.
SECTION 3.03. FIRST BORROWING BY EACH ELIGIBLE SUBSIDIARY. The obligation of each Bank to make a Loan on the occasion of the first Borrowing by each Eligible Subsidiary is subject to the satisfaction of the following further conditions:
(a) receipt by the Agent for the account of each Bank of a duly executed Note of such Eligible Subsidiary, dated on or before the date of such Borrowing complying with the provisions of Section 2.04;
(b) receipt by the Agent of opinions of counsel for the Company and such Eligible Subsidiary (which may be in-house counsel for the Company) acceptable to the Agent, substantially to the effect of Exhibit I-1 or I-2 hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; and
(c) receipt by the Agent of all documents which it may reasonably request relating to the existence of such Eligible Subsidiary, the corporate authority for and the validity of the Election to Participate of such Eligible Subsidiary, this Agreement and the Notes of such Eligible Subsidiary, and any other matters relevant thereto, all in form and substance satisfactory to the Agent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants that:
SECTION 4.01. CORPORATE EXISTENCE AND POWER. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Ohio, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted.
41 48 SECTION 4.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO CONTRAVENTION. (a) The execution, delivery and performance by the Company of this Agreement and its Notes are within the Company's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the articles of incorporation or regulations of the Company or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Company or any of its Subsidiaries or result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries.
(b) The execution and delivery by each Eligible Subsidiary of its Election to Participate and its Notes, and the performance by such Eligible Subsidiary of this Agreement and its Notes do not contravene, or constitute a default under, any provision of any agreement, judgment, injunction, order, decree or other instrument binding upon the Company or result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries.
SECTION 4.03. BINDING EFFECT. This Agreement constitutes a valid and binding agreement of the Company and its Notes, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Company, in each case enforceable in accordance with their respective terms except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability.
SECTION 4.04. FINANCIAL INFORMATION.
(a) The statement of consolidated financial condition of the Company and its Consolidated Subsidiaries as of December 31, 1994 and the related statements of consolidated income, consolidated shareholders' equity and consolidated cash flows for the fiscal year then ended, reported on by Ernst & Young and set forth in the Company's 1994 Form 10-K, a copy of which has been delivered to each of the Banks, fairly present in all material respects, in conformity with generally accepted accounting principles, the consolidated financial position of the Company and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year.
42 49 (b) The unaudited statement of consolidated financial condition of the Company and its Consolidated Subsidiaries as of September 30, 1995 and the related unaudited statements of consolidated income and consolidated cash flow for the nine months then ended, set forth in the Company's quarterly report for the fiscal quarter ended September 30, 1995 as filed with the Securities and Exchange Commission on Form 10-Q, a copy of which has been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles applied on a basis consistent with the financial statements referred to in subsection (a) of this Section, the consolidated financial position of the Company and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such nine month period (subject to normal year-end adjustments).
(c) Since September 30, 1995 there has been no material adverse change in the business, financial position, results of operations or prospects of the Company and its Consolidated Subsidiaries, considered as a whole, and no event has taken place which is reasonably likely to have such a material adverse effect in the future.
SECTION 4.05. LITIGATION. There is no action, suit or proceeding pending against, or to the knowledge of the Company threatened against or affecting, the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official which would reasonably be expected to result in any material adverse change in the business, consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries or which in any manner draws into question the validity of this Agreement or the Notes.
SECTION 4.06. COMPLIANCE WITH ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (iii) incurred any liability
43 50 under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA.
SECTION 4.07. ENVIRONMENTAL MATTERS. (a) In the ordinary course of its business, the Company conducts an ongoing review of the effect of Environmental Laws on the business, operations and properties of the Company and its Subsidiaries, in the course of which it identifies and evaluates associated liabilities and costs (including, without limitation, any capital or operating expenditures required for clean-up or closure of properties presently or previously owned, any capital or operating expenditures required to achieve or maintain compliance with environmental protection standards imposed by law or as a condition of any license, permit or contract, any related constraints on operating activities, including any periodic or permanent shutdown of any facility or reduction in the level of or change in the nature of operations conducted thereat, any costs or liabilities in connection with off-site disposal of wastes or Hazardous Substances, and any actual or potential liabilities to third parties, including employees, and any related costs and expenses). On the basis of this review, the Company has reasonably concluded that such associated liabilities and costs, including the costs of compliance with Environmental Laws, are unlikely to have a material adverse effect on the business, financial condition, results of operations or prospects of the Company and its Consolidated Subsidiaries, considered as a whole.
(b) No demand, claim, suit, order, citation, administrative action, investigation or proceeding made, brought or initiated by any Person arising under, relating to or in connection with Environmental Laws is pending or threatened against the Company or any of its Subsidiaries which would reasonably be expected to result in any material adverse change in the business, consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries, taken as a whole.
SECTION 4.08. TAXES. United States Federal income tax returns of the Company and its Subsidiaries have been examined and closed through the fiscal year ended December 31, 1987. The Company and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Company or any Subsidiary. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Company, adequate.
44 51 SECTION 4.09. SUBSIDIARIES. Each of the Company's corporate Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted.
SECTION 4.10. NOT AN INVESTMENT COMPANY. The Company is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended.
SECTION 4.11. FULL DISCLOSURE. All information (other than financial projections) heretofore furnished by any Borrower to the Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information (other than any financial projections) hereafter furnished by any Borrower to the Agent or any Bank will be, taken as a whole, true and accurate in all material respects on the date as of which such information is stated or certified. All financial projections heretofore furnished by any Borrower to the Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby have been, and all such financial projections hereafter furnished by any Borrower to the Agent or any Banks will be, made in good faith and on the basis of reasonable assumptions. Each Borrower has disclosed to the Banks in writing any and all facts which materially and adversely affect or may affect (to the extent the Company can now reasonably foresee), the business, operations or financial condition of the Company and its Consolidated Subsidiaries, taken as a whole, or the ability of any Borrower to perform its obligations under this Agreement.
ARTICLE V
COVENANTS
The Company agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid:
SECTION 5.01. INFORMATION. The Company will deliver to each of the Banks:
(a) as soon as available and in any event within 90 days after the end of each fiscal year of the Company, an audited statement of consolidated financial
45 52 condition of the Company and its Consolidated Subsidiaries as of the end of such fiscal year and the related audited statements of consolidated income, consolidated shareholders' equity and consolidated cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the Securities and Exchange Commission by Ernst & Young or other independent public accountants of nationally recognized standing;
(b) as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Company, a statement of consolidated financial condition of the Company and its Consolidated Subsidiaries as of the end of such quarter and the related statements of consolidated income and consolidated cash flows for such quarter and for the portion of the Company's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the Company's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by the chief financial officer or the chief accounting officer of the Company;
(c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer or the chief accounting officer of the Company (i) setting forth in reasonable detail the calculations required to establish (i) whether the Company was in compliance with the requirements of Sections 5.07 to 5.08, inclusive, on the date of such financial statements and (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Company is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial statements referred to in clause (a) above, a statement of the firm of independent public accountants which reported on such statements (i) whether anything has come to their attention to cause them to believe that any Default, with respect to any covenant contained in Sections 5.07 to 5.08, inclusive, existed on the date of such statements and (ii) confirming the calculations set forth in the
46 53 officer's certificate delivered simultaneously therewith pursuant to clause (c) above;
(e) within two days after any officer of the Company obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer or the chief accounting officer of the Company setting forth the details thereof and the action which the Company is taking or proposes to take with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the Company generally, copies of all financial statements, reports and proxy statements so mailed;
(g) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Company shall have filed with the Securities and Exchange Commission;
(h) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or
47 54 Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Company setting forth details as to such occurrence and the action, if any, which the Company or applicable member of the ERISA Group is required or proposes to take;
(i) as soon as available and in any event within 30 days after the beginning of each fiscal year of the Company, a projected statement of consolidated financial condition of the Company and its Consolidated Subsidiaries as of the end of such fiscal year and related projected statements of consolidated income, consolidated shareholders' equity and consolidated cash flows for such fiscal year, in each case based on the Company's best estimates, information and assumptions at the time;
(j) promptly and in any event within five Domestic Business Days after receipt thereof, copies of any notice of any demand, claim, suit, order, citation, administrative action, investigation or proceeding made, brought or initiated by any Person arising under, relating to or in connection with Environmental Laws which would reasonably be expected to result in any material adverse change in the business, consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries, taken as a whole; and
(k) from time to time such additional information regarding the financial position or business of the Company and its Subsidiaries (including, without limitation, consolidating financial statements of the Company or any of its Subsidiaries and projected statements of consolidated income of the Company and its Subsidiaries) as the Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. PAYMENT OF OBLIGATIONS. The Company will pay and discharge, and will cause each Subsidiary to pay and discharge, at or before maturity, all their respective material obligations and liabilities, including, without limitation, tax liabilities, except where the same may be contested in good faith by appropriate proceedings, and will maintain, and will cause each Subsidiary to maintain, in accordance with generally accepted accounting principles, appropriate reserves for the accrual of any of the same.
48 55 SECTION 5.03. MAINTENANCE OF PROPERTY; INSURANCE. (a) The Company will keep, and will cause each Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted.
(b) The Company will maintain, and will cause each Subsidiary to maintain, (i) insurance with respect to such risks and in amounts as specified in the Existing Credit Agreement and (ii) such other insurance coverage in such amounts and with respect to such risks as the Required Banks may reasonably request. All insurance maintained pursuant to clause (ii) above shall be provided by insurers having A.M. Best policyholders ratings comparable to those of the insurers listed on Schedule I to the Existing Credit Agreement or such other insurers as the Required Banks may approve in writing. The Company will deliver to the Banks (i) upon request of any Bank through the Agent from time to time full information as to the insurance carried, (ii) within five days of receipt of notice from any insurer a copy of any notice of cancellation or material change in coverage from that existing on the date of this Agreement and (iii) forthwith, notice of any cancellation or nonrenewal of coverage by the Company.
SECTION 5.04. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The Company will continue, and will cause each Subsidiary to continue, to engage in business of the same general type as now conducted by the Company and its Subsidiaries, and will preserve, renew and keep in full force and effect, and will cause each Subsidiary to preserve, renew and keep in full force and effect their respective corporate existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business; PROVIDED that nothing in this Section 5.04 shall prohibit (i) the merger of a Subsidiary into the Company or the merger or consolidation of a Subsidiary with or into another Person if the corporation surviving such consolidation or merger is a Subsidiary and if, in each case, after giving effect thereto, no Default shall have occurred and be continuing or (ii) the termination of the corporate existence of any Subsidiary, so long as such Subsidiary is not a Significant Subsidiary and so long as the Company in good faith determines that such termination is in the best interest of the Company and is not otherwise materially disadvantageous to the interests of the Banks hereunder.
SECTION 5.05. COMPLIANCE WITH LAWS. The Company will comply, and cause each Subsidiary to comply, in all material respects with all applicable laws, ordinances,
49 56 rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder), except where the necessity of compliance therewith is contested in good faith by appropriate proceedings.
SECTION 5.06. INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Company will keep, and will cause each Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit, and will cause each Subsidiary to permit, representatives of any Bank at such Bank's expense to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all at such reasonable times and as often as may reasonably be desired.
SECTION 5.07. INTEREST COVERAGE RATIO. The ratio of EBIT to Consolidated Interest Expense, in each case for the period of four fiscal quarters of the Company then most recently ended, shall at all times exceed 2.5 to 1.
SECTION 5.08. FUNDED DEBT TO CAPITAL RATIO. The Funded Debt to Capital Ratio will at no time exceed .55 to 1.
SECTION 5.09. NEGATIVE PLEDGE. Neither the Company nor any Subsidiary will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt outstanding on the date of this Agreement in an aggregate principal amount not exceeding $15,000,000;
(b) any Lien existing on any asset of any corporation at the time such corporation becomes a Subsidiary and not created in contemplation of such event;
(c) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset, PROVIDED that such Lien attaches to such asset concurrently with or within 90 days after the acquisition thereof;
50 57 (d) any Lien on any asset of any corporation existing at the time such corporation is merged or consolidated with or into the Company or a Subsidiary, and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof, by the Company or a Subsidiary and not created in contemplation of such acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses of this Section, PROVIDED that such Debt is not increased and is not secured by any additional assets;
(g) Liens arising in the ordinary course of its business which (i) do not secure Debt, (ii) do not secure obligations in amounts exceeding, in the aggregate, $25,000,000 and (iii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business;
(h) Liens on Receivables of the Company and its Subsidiaries in connection with Receivable Financings with respect to such Receivables; PROVIDED that the aggregate outstanding Receivables Financing Amount will at no time exceed $50,000,000; and
(i) Liens (other than Liens on Receivables pursuant to a Receivables Financing) not otherwise permitted by the foregoing clauses of this Section securing Debt in an aggregate principal amount at any time outstanding not to exceed 10% of Consolidated Tangible Net Worth.
SECTION 5.10. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. (a) The Company will not consolidate or merge with or into any other Person unless (i) the Company is the corporation surviving such merger and (ii) immediately after giving effect to such merger, no Default shall have occurred and be continuing.
(b) No Borrower will sell, lease or otherwise transfer, directly or indirectly, all or any substantial part of the assets of such Borrower and its Subsidiaries, taken as a whole, to any Person (other than the Company or any of its Subsidiaries). For purposes of this Section 5.10(b), any Significant Subsidiary and the assets of a business operation which if separately counted, would constitute a Significant Subsidiary, shall be deemed to
51 58 constitute a "substantial part of the assets" of such Borrower and its Subsidiaries, taken as a whole.
(c) Neither the Company nor any of its Subsidiaries will sell, lease or otherwise transfer, directly or indirectly, any of its accounts receivable to any Person (other than the Company or any of its Subsidiaries), except (i) in connection with a Receivables Financing and (ii) if, immediately after giving effect to any such Financing, the aggregate outstanding Receivables Financing Amount does not exceed $50,000,000.
SECTION 5.11. USE OF PROCEEDS. The proceeds of the Loans made under this Agreement will be used by the Borrowers for general corporate purposes. None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any "margin stock" within the meaning of Regulation U.
ARTICLE VI
DEFAULTS
SECTION 6.01. EVENTS OF DEFAULT. If one or more of the following events ("Events of Default") shall have occurred and be continuing:
(a) any principal of any Loan, or any interest, any fees or any other amount payable hereunder, shall not be paid when due;
(b) the Company shall fail to observe or perform any covenant contained in Sections 5.07 to 5.11 inclusive;
(c) any Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 10 days after written notice thereof has been given to the Company by the Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made by any Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made);
52 59 (e) the Company or any Subsidiary shall fail to make any payment in respect of any Material Debt when due or within any applicable grace period;
(f) any event or condition shall occur which results in the acceleration of the maturity of any Material Debt or enables (or, with the giving of notice or lapse of time or both, would enable) the holder of such Material Debt or any Person acting on such holder's behalf to accelerate the maturity thereof;
(g) the Company or any Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced against the Company or any Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Company or any Subsidiary under the federal bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $1,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for
53 60 premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $1,000,000;
(j) a judgment or order for the payment of money in excess of $5,000,000 shall be rendered against the Company or any Subsidiary and such judgment or order shall continue unsatisfied and unstayed for a period of 30 days; or
(k) 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 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; then, and in every such event, the Agent shall (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Company terminate the Commitments and they shall thereupon terminate, and (ii) if requested by Banks holding Notes evidencing more than 50% in aggregate principal amount of the Loans, by notice to the Company declare the Notes (together with accrued interest thereon) to be, and the Notes shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower; PROVIDED that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to any Borrower, without any notice to any Borrower or any other act by the Agent or the Banks, the Commitments shall thereupon terminate and the Notes (together with accrued interest thereon) shall become immediately due and payable without presentment, demand,
54 61 protest, dishonor or other notice of any kind, all of which are hereby waived by each Borrower.
SECTION 6.02. NOTICE OF DEFAULT. The Agent shall give notice to the Company under Section 6.01(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENT
SECTION 7.01. APPOINTMENT AND AUTHORIZATION. Each Bank irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to the Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto.
SECTION 7.02. AGENT AND AFFILIATES. Society National Bank shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Agent, and Society National Bank and its affiliates may accept deposits from, lend money to and generally engage in any kind of business with any Borrower or any Subsidiary or affiliate of any Borrower as if it were not the Agent hereunder.
SECTION 7.03. ACTION BY AGENT. The obligations of the Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article VI.
SECTION 7.04. CONSULTATION WITH EXPERTS. The Agent may consult with legal counsel (who may be counsel for any Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts.
SECTION 7.05. LIABILITY OF AGENT. Neither the Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or
55 62 willful misconduct. Neither the Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of any Borrower; (iii) the satisfaction of any condition specified in Article III, except receipt of items required to be delivered to the Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. The Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it to be genuine or to be signed by the proper party or parties.
SECTION 7.06. INDEMNIFICATION. Each Bank shall, ratably in accordance with its Commitment, indemnify the Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrowers) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or in connection with any action taken or omitted by such indemnitees hereunder.
SECTION 7.07. CREDIT DECISION. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement.
SECTION 7.08. SUCCESSOR AGENT. The Agent may resign at any time by giving notice thereof to the Banks and the Company. Upon any such resignation, the Required Banks shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be any Bank or a commercial
56 63 bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $50,000,000. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent.
SECTION 7.09. AGENT'S FEE. The Company shall pay to the Agent for its own account fees in the amounts and at the times previously agreed upon between the Company and the Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR. If on or prior to the first day of any Interest Period for any Fixed Rate Borrowing:
(a) the Agent is advised by the Reference Banks that deposits in Dollars (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period, or
(b) Banks having 50% or more of the aggregate amount of the Commitments advise the Agent that the Adjusted CD Rate or the Adjusted London Interbank Offered Rate, as the case may be, as determined by the Agent will not adequately and fairly reflect the cost to such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may be, for such Interest Period, the Agent shall forthwith give notice thereof to the Company and the Banks, whereupon until the Agent notifies the Company that the circumstances giving rise to such suspension no longer exist, the obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the case may be, shall be suspended and the obligations of any Bank to make any Alternative Currency Advances pursuant to an Alternative Currency Quote accepted by the relevant Borrower in accordance with Section 2.14(e) and requiring such Alternative Currency Advance to bear interest at a rate calculated on the basis of the Adjusted London Interbank
57 64 Offered Rate shall be suspended. Unless the Borrower notifies the Agent at least two Domestic Business Days before the date of any Committed Fixed Rate Borrowing for which a Notice of Committed Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day.
SECTION 8.02. ILLEGALITY. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans to any Borrower and such Bank shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Banks and the Company, whereupon until such Bank notifies the Company and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans to such Borrower shall be suspended. Before giving any notice to the Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans to such Borrower to maturity and shall so specify in such notice, such Borrower shall immediately prepay in full the then outstanding principal amount of each such Euro-Dollar Loan, together with accrued interest thereon. Concurrently with prepaying each such Euro-Dollar Loan, such Borrower shall borrow a Base Rate Loan in an equal principal amount from such Bank (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate Loan.
58 65 SECTION 8.03. INCREASED COST AND REDUCED RETURN. (a) If on or after (x) the date hereof, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of the related Alternative Currency Quote, in the case of any Alternative Currency Advance or (z) the date of the related Money Market Quote in the case of any Money Market Loan, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency:
(i) shall subject any Bank (or its Applicable Lending Office) to any tax, duty or other charge with respect to its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans, or shall change the basis of taxation of payments to any Bank (or its Applicable Lending Office) of the principal of or interest on its Fixed Rate Loans or any other amounts due under this Agreement in respect of its Fixed Rate Loans or its obligation to make Fixed Rate Loans (except for changes in the rate of tax on the overall net income of such Bank or its Applicable Lending Office imposed by the jurisdiction in which such Bank's principal executive office or Applicable Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding (A) with respect to any CD Loan any such requirement included in an applicable Domestic Reserve Percentage and (B) with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage), special deposit, insurance assessment (excluding, with respect to any CD Loan, any such requirement related in an applicable Assessment Rate) or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans;
59 66 and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction.
(c) Each Bank will promptly notify the Company and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods.
SECTION 8.04. BASE RATE LOANS SUBSTITUTED FOR AFFECTED FIXED RATE LOANS. If (i) the obligation of any Bank to make Euro-Dollar Loans to any Borrower has been
60 67 suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03(a) and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Company that the circumstances giving rise to such suspension or demand for compensation no longer exist:
(a) all Loans to such Borrower which would otherwise be made by such Bank as CD Loans or Euro-Dollar Loans, as the case may be, shall be made instead as Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Fixed Rate Loans of the other Banks), and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case may be, to such Borrower has been repaid, all payments of principal which would otherwise be applied to repay such Fixed Rate Loans shall be applied to repay its Base Rate Loans instead.
SECTION 8.05. HLT CLASSIFICATION. If, after the date hereof, the Agent determines that, or the Agent is advised by any Bank that such Bank has received notice from any governmental authority, central bank or comparable agency having jurisdiction over such Bank that, Loans hereunder are classified as a "highly leveraged transaction" (an "HLT Classification"), the Agent shall promptly give notice of such HLT Classification to the Company and the other Banks. The Agent, the Banks and the Borrowers shall commence negotiations in good faith to agree on the extent to which fees, interest rates and/or margins hereunder should be increased so as to reflect such HLT Classification. If the Borrowers and Banks having more than 50% in aggregate amount of the Commitments agree on the amount of such increase or increases, this Agreement may be amended to give effect to such increase or increases as provided in Section 11.05. If the Borrowers and Banks having more than 50% in aggregate amount of the Commitments fail to so agree within 45 days after notice is given by the Agent as provided above, then the Agent shall, if requested by Banks having 50% or more in aggregate amount of the Commitments, by notice to the Borrowers terminate the Commitments and they shall thereupon terminate and the Borrowers shall repay each outstanding Loan at the end of the Interest Period applicable thereto. The Banks acknowledge that an HLT Classification is not a Default or an Event of Default hereunder.
61 68 ARTICLE IX
REPRESENTATIONS AND WARRANTIES OF ELIGIBLE SUBSIDIARIES
Each Eligible Subsidiary shall be deemed by the execution and delivery of its Election to Participate to have represented and warranted as of the date thereof (or, in the case of any Existing Eligible Subsidiary, as defined in Section 11.12, represents and warrants as of the date hereof) that:
SECTION 9.01. CORPORATE EXISTENCE AND POWER. It is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and is a Wholly-Owned Consolidated Subsidiary of the Company.
SECTION 9.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION. The execution and delivery by it of its Election to Participate and its Notes, and the performance by it of this Agreement and its Notes, are within its corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of its certificate of incorporation or by-laws or of any agreement, judgment, injunction, order, decree or other instrument binding upon such Eligible Subsidiary or result in the creation or imposition of any Lien on any asset of such Eligible Subsidiary or any of its Subsidiaries.
SECTION 9.03. BINDING EFFECT. This Agreement constitutes a valid and binding agreement of such Eligible Subsidiary and its Notes, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of such Eligible Subsidiary, in each case enforceable in accordance with their respective terms except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability.
SECTION 9.04. TAXES. Except as disclosed in the opinions of counsel delivered by such Eligible Subsidiary pursuant to Section 3.03(b), there is no income, stamp or other tax of any country, or any taxing authority thereof or therein, imposed by or in the nature of withholding or otherwise, which is imposed on any payment to be made by
62 69 such Eligible Subsidiary pursuant hereto or on its Notes, or is imposed on or by virtue of the execution, delivery or enforcement of its Election to Participate or of its Notes.
ARTICLE X
GUARANTY
SECTION 10.01. THE GUARANTY. The Company hereby unconditionally guarantees the full and punctual payment (whether at stated maturity, upon acceleration or otherwise) of the principal of and interest on each Note issued by any Eligible Subsidiary pursuant to this Agreement, and the full and punctual payment of all other amounts payable by any Eligible Subsidiary under this Agreement. Upon failure by any Eligible Subsidiary to pay punctually any such amount, the Company shall forthwith on demand pay the amount not so paid at the place and in the manner specified in this Agreement.
SECTION 10.02. GUARANTY UNCONDITIONAL. The obligations of the Company hereunder shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by the occurrence, one or more times, of any of the following:
(i) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of any Eligible Subsidiary under this Agreement or any Note, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to this Agreement or any Note;
(iii) any release, non-perfection or invalidity of any direct or indirect security for any obligation of any Eligible Subsidiary under this Agreement or any Note;
(iv) any change in the corporate existence, structure or ownership of any Eligible Subsidiary or any insolvency, bankruptcy, reorganization or other similar proceeding affecting any Eligible Subsidiary or its assets or any resulting release or discharge of any obligation of any Eligible Subsidiary contained in this Agreement or any Note;
63 70 (v) the existence of any claim, set-off or other rights which the Company may have at any time against any Eligible Subsidiary, the Agent, any Bank or any other Person, whether in connection herewith or any unrelated transactions, PROVIDED that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against any Eligible Subsidiary for any reason of this Agreement or any Note, or any provision of applicable law or regulation purporting to prohibit the payment by any Eligible Subsidiary of the principal of or interest on any Note or any other amount payable by it under this Agreement; or
(vii) any other act or omission to act or delay of any kind by any Eligible Subsidiary, the Agent, any Bank or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the Company's obligations hereunder.
SECTION 10.03. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN CERTAIN CIRCUMSTANCES. The Company's obligations hereunder shall remain in full force and effect until the Commitments shall have terminated and the principal of and interest on the Notes and all other amounts payable by the Company and each Eligible Subsidiary under this Agreement shall have been paid in full. If at any time any payment of the principal of or interest on any Note or any other amount payable by any Eligible Subsidiary under this Agreement is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of any Eligible Subsidiary or otherwise, the Company's obligations hereunder with respect to such payment shall be reinstated at such time as though such payment had been due but not made at such time.
SECTION 10.04. WAIVER BY THE COMPANY. The Company irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against any Eligible Subsidiary or any other Person.
SECTION 10.05. SUBROGATION. Upon making any payment hereunder, the Company shall be subrogated to the rights of the payee against an Eligible Subsidiary with respect to such payment; PROVIDED that the Company shall not enforce any payment by way of subrogation until all amounts
64 71 of principal of and interest on the Notes and all other amounts payable by all Borrowers under this Agreement have been paid in full.
SECTION 10.06. STAY OF ACCELERATION. In the event that acceleration of the time for payment of any amount payable by any Eligible Subsidiary under this Agreement or its Notes is stayed upon insolvency, bankruptcy or reorganization of such Eligible Subsidiary, all such amounts otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable by the Company hereunder forthwith on demand by the Agent made at the request of the Required Banks.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. NOTICES. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of any Borrower or the Agent, at its address or facsimile number set forth on the signature pages hereof (or in the case of an Eligible Subsidiary, its Election to Participate), (y) in the case of any Bank, at its address or telex number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address or telex or facsimile number as such party may hereafter specify for the purpose by notice to the Agent and the Company. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in or pursuant to this Section and the appropriate answerback is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when delivered at the address specified in or pursuant to this Section; PROVIDED that notices to the Agent under Article II or Article VIII shall not be effective until received.
SECTION 11.02. NO WAIVERS. No failure or delay by the Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
65 72 SECTION 11.03. EXPENSES; DOCUMENTARY TAXES; INDEMNIFICATION. (a) The Company shall pay (i) all out-of-pocket expenses of the Agent, including fees and disbursements of special counsel for the Agent, in connection with the preparation and administration of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the Agent and each Bank, including fees and disbursements of counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom. The Company shall indemnify each Bank against any transfer taxes, documentary taxes, assessments or charges made by any governmental authority by reason of the execution and delivery of this Agreement, any Election to Participate or Election to Terminate or any Note.
(b) The Company agrees to indemnify the Agent and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; PROVIDED that no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct as determined by a court of competent jurisdiction.
SECTION 11.04. SHARING OF SET-OFFS. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Committed Loan made by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to any Committed Loan made by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Committed Loans made by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Committed Loans shall be shared by the Banks pro rata; PROVIDED that nothing in this Section shall impair the right of any Bank
66 73 to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of a Borrower other than its Committed Loans. Each Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of such Borrower in the amount of such participation.
SECTION 11.05. AMENDMENTS AND WAIVERS. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Company and the Required Banks (and, if the rights or duties of the Agent are affected thereby, by the Agent); PROVIDED that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, except as provided below, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder or for the termination of any Commitment, (iv) amend any provision of Article X hereof or (v) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement; PROVIDED FURTHER, that this Agreement may be amended to give effect to any increased fees, interest rates and/or margins agreed upon pursuant to Section 8.05 or to reduce or rescind any such increases previously agreed upon pursuant to Section 8.05, if such amendment is in writing and is signed by the Company and Banks having more than 50% in aggregate amount of the Commitments and PROVIDED FURTHER that no such amendment, waiver or modification shall, unless signed by an Eligible Subsidiary, (w) subject such Eligible Subsidiary to any additional obligation, (x) increase the principal of or rate of interest on any outstanding Loan of such Eligible Subsidiary, (y) accelerate the stated maturity of any outstanding Loan of such Eligible Subsidiary or (z) change this PROVISO.
SECTION 11.06. SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that no Borrower may assign
67 74 or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Company and the Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrowers and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrowers hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; PROVIDED that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 11.05 without the consent of the Participant. The Borrowers agree that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article VIII, with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part of all, of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit J hereto executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Agent and, unless such Assignee is a Bank or an affiliate of a Bank, the Company; PROVIDED that, unless such Assignee is an affiliate of such transferor Bank or is another Bank, no such assignment shall be in an amount less than $10,000,000 and PROVIDED FURTHER that such assignment may, but need not, include rights of the transferor Bank in respect of outstanding Money Market Loans. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and
68 75 shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Agent and each Borrower shall make appropriate arrangements so that, if required, new Notes are issued to the Assignee. In connection with any such assignment, the transferor Bank shall pay to the Agent an administrative fee for processing such assignment in the amount of $2,000. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to the Company and the Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 2.16.
(d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.03 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Company's prior written consent or by reason of the provisions of Section 8.02 or 8.03 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist.
SECTION 11.07. COLLATERAL. Each of the Banks represents to the Agent and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement.
SECTION 11.08. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York. Each Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. Each Borrower irrevocably waives, to the fullest extent permitted
69 76 by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.
SECTION 11.09. COUNTERPARTS; INTEGRATION. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.
SECTION 11.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 11.11. EXISTING CREDIT AGREEMENT. Each Borrower, Society National Bank, as Agent hereunder and as agent under the Existing Credit Agreement and each of the Banks, as a bank hereunder and as a bank party to the Existing Credit Agreement (the banks party to the Existing Credit Agreement, the "Existing Credit Agreement Banks"), agree that, notwithstanding anything to the contrary herein or in the Existing Credit Agreement:
(i) the "Commitments" (as defined therein) of the Existing Credit Agreement Banks under the Existing Credit Agreement shall terminate on the Effective Date (any advance notice of such termination being hereby waived by each Bank which is an Existing Credit Agreement Bank); and
(ii) on the Effective Date, the Banks shall, provided the conditions to borrowing hereunder are met on such day, fund Loans hereunder or shall continue to hold or purchase outstanding Loans under the Existing Credit Agreement and the Borrower shall repay "Loans" under the Existing Credit Agreement, in each case as set forth on Schedule 1 such that, effective as of the Effective Date, the Loans of the Banks hereunder shall be as set forth on Schedule 1.
Any "Loans" under the Existing Credit Agreement continued to be held or purchased hereunder shall, effective on the Effective Date, be Loans hereunder, bearing interest at the interest rates provided for in the Existing Credit Agreement, except that the margin applicable to the pricing of any such Loan shall be, for the period on or after the
70 77 Effective Date, the margin applicable under this Agreement. If any purchase or prepayment of "Loans" under the Existing Credit Agreement is made pursuant to clause (ii) above, the Borrower agrees that it will reimburse each Existing Credit Agreement Bank for any funding losses incurred in connection therewith pursuant to the Existing Credit Agreement as if such "Loans" had been prepaid on the Effective Date.
SECTION 11.12. ELIGIBLE SUBSIDIARIES. Any Person who was an "Eligible Subsidiary" under the Existing Credit Agreement (an "Existing Eligible Subsidiary") immediately prior to the effectiveness of this Agreement shall, effective as of the Effective Date, without any further action, be an Eligible Subsidiary under this Agreement, and the "Election to Participate" executed by such Subsidiary under the Existing Credit Agreement shall constitute the Election to Participate hereunder with respect to such Subsidiary for all purposes hereunder. The notes of each Existing Eligible Subsidiary held by each Existing Credit Agreement Bank shall, effective as of the Effective Date, be amended by substituting the date "December 20, 1995" for the date "March 18, 1993" set forth in the third paragraph of each such note and shall, effective as of the Effective Date, be a "Note" hereunder. Upon request of any Existing Credit Agreement Bank, each Existing Eligible Subsidiary shall execute a Note substantially in the form of Exhibit A payable to the order of such Bank. Upon receipt by such Bank of such new Note, such Bank shall cancel its original Note (if any) and return it to the appropriate Existing Eligible Subsidiary promptly. No failure of an Existing Credit Agreement Bank so to cancel and return its original Note shall affect the validity of its new Note.
71 78 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
THE LINCOLN ELECTRIC COMPANY
By /s/ D.F. Hastings ------Title: Chairman and Chief Executive Officer
By /s/ H. Jay Elliott ------Title: Vice President, Chief Financial Officer and Treasurer
22801 St. Clair Avenue Cleveland, Ohio 44117-1199 U.S.A. Telephone: (216) 383-2201 Fax: (216) 486-6476 Attention: Michael J. O'Connor
72 79 Commitments
$42,000,000 SOCIETY NATIONAL BANK
By /s/ William J. Kysela ------Title: Vice President
$20,000,000 ABN AMRO BANK N.V.
By /s/ R.W. Hasbrook ------Title: Group Vice President
By /s/ Kathryn C. Toth ------Title: Vice President
$20,000,000 DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES
By /s/ D Slusanczyk ------Title: Vice President
By /s/ J. Curtin Beaudouin ------Title: First Vice President
$20,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By /s/ Timothy S. Broadbent ------Title: Vice President
73 80
$20,000,000 NBD BANK
By /s/ Winfred S. Pinet ------Title: Vice President
$20,000,000 NATIONAL CITY BANK
By /s/ A.J. DiMare ------Title: Vice President
$14,500,000 BANK OF AMERICA ILLINOIS
By /s/ Lynn W. Stetson ------Title: Vice President
$14,500,000 CIBC INC.
By /s/ John Mach ------Title: Director
74 81
$14,500,000 CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By /s/ Mary Ann Klemm ------Title: Vice President and Group Head
CREDIT LYONNAIS CHICAGO BRANCH
By /s/ Mary Ann Klemm ------Title: Vice President and Group Head
$14,500,000 PNC BANK, NATIONAL ASSOCIATION
By /s/ Christopher S. Helmeci ------Title: Assistant Vice President
Total Commitments
$200,000,000 ======
75 82 SOCIETY NATIONAL BANK, as Agent
By /s/ William J. Kysela ------Title: Vice President
127 Public Square Cleveland, Ohio 44114-1306 U.S.A. Telephone: (216) 689-5654 Fax: (216) 689-4981 Attention: William J. Kysela
76 83 Schedule 1
EXISTING AND CONTINUING LOANS
None
77 84 EXHIBIT A
NOTE
New York, New York , 199_
For value received, [name of Borrower], a [jurisdiction of incorporation] corporation (the "Borrower"), promises to pay to the order of ______(the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the last day of the Interest Period relating to such Loan. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in or pursuant to the Credit Agreement. All such payments of principal and interest with respect to Committed Loans shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Society National Bank, 127 Public Square, Cleveland, Ohio 44114-1306 U.S.A. All such payments of principal and interest with respect to Alternative Currency Advances shall be made in the Alternative Currency in which such Alternative Currency Advance was made, in funds customary for the settlement of international transactions in such Alternative Currency at the time of any such payment, at the time and place notified by the Bank to the Borrower.
All Loans made by the Bank, the respective types, maturities and Alternative Currencies (if applicable) thereof and all repayments of the principal thereof shall be recorded by the Bank and, prior to any transfer hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding shall be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; PROVIDED that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement.
85 This note is one of the Notes referred to in the Credit Agreement dated as of December 20, 1995 among The Lincoln Electric Company, the banks listed on the signature pages thereof and Society National Bank, as Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof.
[The Lincoln Electric Company has, pursuant to the provisions of the Credit Agreement, unconditionally guaranteed the payment in full of the principal of and interest on this note.]*
[NAME OF BORROWER]
By______Name: Title:
[By______Name: Title:]**
______
*To be deleted in case of Notes executed and delivered by The Lincoln Electric Company.
**To be included in case of Notes executed and delivered by The Lincoln Electric Company.
2 86 LOANS AND PAYMENTS OF PRINCIPAL
______
Amount Type Alternative Amount of of of Currency Principal Maturity Notation Date Loan Loan (if applicable) Repaid Date Made By ------
______
______
______
______
______
______
______
______
______
______
______
______
______
______
______
______
______
______
3 87 EXHIBIT B
Form of Alternative Currency Quote Request ------
[Date]
To: Society National Bank (the "Agent")
From: [Name of Borrower]
Re: Credit Agreement (the "Credit Agreement") dated as of December 20, 1995 among The Lincoln Electric Company, the Banks listed on the signature pages thereof and the Agent
We hereby give notice pursuant to Section 2.14 of the Credit Agreement that we request Alternative Currency Quotes for the following proposed Alternative Currency Advance(s):
Date of Alternative Currency Advance(s): ______
Principal Amount Alternative Currency Interest Period ------
88 Terms used herein have the meanings assigned to them in the Credit Agreement.
[NAME OF BORROWER]
By ______Name: Title:
[By ______Name:] Title: *
______
*To be included in case of an Alternative Currency Quote Request delivered by The Lincoln Electric Company.
2 89 EXHIBIT C
Form of Invitation for Alternative Currency Quote ------
To: [Name of Bank]
Re: Invitation for Alternative Currency Quotes to [Name of Borrower] (the "Borrower")
Pursuant to Section 2.14 of the Credit Agreement dated as of December 20, 1995 among The Lincoln Electric Company, the Banks parties thereto and the undersigned, as Agent, we are pleased on behalf of the Borrower to invite you to submit Alternative Currency Quotes to the Borrower for the following proposed Alternative Currency Advance(s):
Date of Alternative Currency Advance(s): ______
Principal Amount Alternative Currency Interest Period ------
Please respond to this invitation to the Borrower by no later than 2:00 P.M. (Cleveland, Ohio time) on [date].
SOCIETY NATIONAL BANK
By ______Authorized Officer
90 EXHIBIT D
Form of Alternative Currency Quote
To: [Name of Borrower] (the "Borrower")
Re: Alternative Currency Quote
In response to the invitation by Society National Bank on your behalf dated ______, 199_, we hereby make the following Alternative Currency Quote on the following terms:
1. Quoting Bank: ______
2. Person to contact at Quoting Bank:
______
3. Date of Alternative Currency Advance(s): ______*
4. Alternative Currency Lending Office: ______**
______
*As specified in the related Invitation.
** Specify Alternative Currency Lending Office with respect to each Alternative Currency.
91 5. We hereby offer to make Alternative Currency Advance(s) in the following principal amounts, for the following Interest Periods and at the following rates:
Principal Alternative Interest Interest ------Amount* Currency Period Rate ------
Very truly yours,
[NAME OF BANK]
Dated: ______By: ______Authorized Officer
______
*Principal amount bid for each Interest Period and each Alternative Currency may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend.
2 92 EXHIBIT E
OPINION OF FREDERICK G. STUEBER COUNSEL FOR THE COMPANY
[Effective Date]
To the Banks and the Agent Referred to Below c/o Society National Bank 127 Public Square Cleveland, Ohio 44114-1306 U.S.A.
Re: The Lincoln Electric Company
Ladies and Gentlemen:
I have acted as counsel for The Lincoln Electric Company, an Ohio corporation (the "Company"), in connection with the Credit Agreement (the "Credit Agreement") dated as of December 20, 1995 among the Company, the banks listed on the signature pages thereof and Society National Bank, as Agent, providing for the establishment of a revolving credit facility in the aggregate principal amount of $200,000,000. This opinion letter is furnished to you at the request of the Company pursuant to Section 3.01(c) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined.
I have examined such documents, records and matters of law as I have deemed necessary for purposes of this opinion. Upon the basis of the foregoing and subject to the qualifications, limitations, exceptions and assumptions hereinafter set forth, I am of the opinion that:
1. The Company is a corporation duly formed, validly existing and in good standing under the laws of the State of Ohio, with corporate power and authority to own its own properties and conduct its business as now conducted.
2. The Credit Agreement has been duly authorized, executed, and delivered by the Company,
93 is a valid and binding agreement of the Company and is enforceable against the Company in accordance with its terms.
3. The Notes have been duly authorized, executed, and delivered by the Company, are valid and binding obligations of the Company and are enforceable against the Company in accordance with their terms.
4. No registration with or approval by any governmental agency is required of the Company as a condition to the valid execution and delivery or the performance of the Credit Agreement, including the issuance of the Notes.
5. Neither the execution and delivery by the Company of the Credit Agreement nor the performance of the transactions therein contemplated, including the issuance of the Notes, will result in the violation of any statute or regulation or any order or decree known to us of any court or governmental authority binding upon the Company or its property, or conflict with or result in a default under any of the provisions of the Company's Amended Articles of Incorporation, as amended, or Regulations or any indenture, loan agreement or other agreement known to us by which the Company or any of its Subsidiaries is bound, or result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries.
6. The Credit Agreement constitutes a valid and binding agreement of each Subsidiary Borrower and is enforceable against each Subsidiary Borrower, respectively, in accordance with its terms and the Notes of each Subsidiary Borrower constitute valid and binding obligations under New York law of such Subsidiary Borrower and are enforceable against each Subsidiary Borrower, respectively, in accordance with their terms.
7. The choice of New York law to govern the Credit Agreement and the Notes in which such choice is stipulated is a valid and effective choice of law under the laws of the State of Ohio and adherence to existing judicial precedents would require a court sitting in the State of Ohio to abide by such choice of law.
2 94 My opinion that the Credit Agreement and the Notes are enforceable against the Company and the Borrower Subsidiaries in accordance with their terms, is subject to the qualification that enforceability is subject to, and may be limited or affected by (i) bankruptcy, insolvency, reorganization and other similar laws affecting the rights or remedies of creditors generally and (ii) general principles of equity regardless of whether such enforceability is considered in a proceeding in equity or at law.
My opinions herein are limited to the laws of the State of Ohio and the federal laws of the United States. This opinion letter is furnished by me, as counsel for the Company, to you solely for your benefit in connection with Loans made under the Credit Agreement upon the understanding that we are not hereby assuming any professional responsibility to any other person whatsoever.
Very truly yours,
3 95 EXHIBIT F
OPINION OF DAVIS POLK & WARDWELL, SPECIAL COUNSEL FOR THE AGENT
[Effective Date]
To the Banks and the Agent Referred to Below c/o Society National Bank 127 Public Square Cleveland, Ohio 44114-1306 U.S.A.
Ladies and Gentlemen:
We have participated in the preparation of the Credit Agreement (the "Credit Agreement") dated as of December 20, 1995 among The Lincoln Electric Company, an Ohio corporation (the "Company"), the banks listed on the signature pages thereof (the "Banks") and Society National Bank, as Agent (the "Agent"), and have acted as special counsel for the Agent for the purpose of rendering this opinion pursuant to Section 3.01(d) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that the Credit Agreement constitutes a valid and binding agreement of the Company and its Notes constitute valid and binding obligations of the Company, in each case enforceable in accordance with their respective terms except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability.
96 We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York and the federal laws of the United States of America. In giving the foregoing opinion, (i) we have relied, without independent investigation, as to all matters governed by the law of the State of Ohio, on the opinion of Frederick G. Stueber, Vice President, General Counsel and Secretary for the Company, dated today's date, copies of which have been delivered to you and, (ii) we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect.
This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by or furnished to any other person without our prior written consent.
Very truly yours,
2 97 EXHIBIT G
FORM OF ELECTION TO PARTICIPATE
, 199__
SOCIETY NATIONAL BANK, as Agent for the Banks named in the Credit Agreement dated as of December 20, 1995 among The Lincoln Electric Company, such Banks and such Agent (the "Credit Agreement")
Ladies and Gentlemen:
Reference is made to the Credit Agreement described above. Terms not defined herein which are defined in the Credit Agreement shall have for the purposes hereof the meaning provided therein.
The undersigned, [name of Eligible Subsidiary], a [jurisdiction of incorporation] corporation, hereby elects to be an Eligible Subsidiary for purposes of the Credit Agreement, effective from the date hereof until an Election to Terminate shall have been delivered on behalf of the undersigned in accordance with the Credit Agreement. The undersigned confirms that the representations and warranties set forth in Article IX of the Credit Agreement (other than the representation and warranty set forth in Section 9.04) are true and correct as to the undersigned as of the date hereof, and the undersigned hereby agrees to perform all the obligations of an Eligible Subsidiary under, and to be bound in all respects by the terms of, the Credit Agreement, including without limitation Section 11.08 thereof, as if the undersigned were a signatory party thereto.
98 The address to which all notices to the undersigned under the Credit Agreement should be directed is: ______.
This instrument shall be construed in accordance with and governed by the laws of the State of New York. This instrument may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
Very truly yours,
[NAME OF ELIGIBLE SUBSIDIARY]
By______Name: Title:
The undersigned hereby confirms that (i) [name of Eligible Subsidiary] is an Eligible Subsidiary for purposes of the Credit Agreement described above and (ii) the representation and warranty set forth in Section 4.02(b) of the Credit Agreement is true and correct as to [name of Eligible Subsidiary] as of the date hereof.
THE LINCOLN ELECTRIC COMPANY
By______Name: Title:
By______Name: Title:
2 99
Receipt of the above Election to Participate is hereby acknowledged on and as of the date set forth above.
SOCIETY NATIONAL BANK, as Agent
By______Name: Title:
3 100 EXHIBIT H
FORM OF ELECTION TO TERMINATE
, 199_
SOCIETY NATIONAL BANK, as Agent for the Banks named in the Credit Agreement dated as of ______, 1995 among The Lincoln Electric Company, such Banks and such Agent (the "Credit Agreement")
Ladies and Gentlemen:
Reference is made to the Credit Agreement described above. Terms not defined herein which are defined in the Credit Agreement shall have for the purposes hereof the meaning provided therein.
The undersigned, [name of Eligible Subsidiary], a [jurisdiction of incorporation] corporation, hereby elects to terminate its status as an Eligible Subsidiary for purposes of the Credit Agreement, effective as of the date hereof. The undersigned hereby represents and warrants that all principal and interest on all Notes of the undersigned and all other amounts payable by the undersigned pursuant to the Credit Agreement have been paid in full on or prior to the date hereof. Notwithstanding the foregoing, this Election to Terminate shall not affect any obligation of the undersigned under the Credit Agreement or under any Note heretofore incurred.
101 This instrument shall be construed in accordance with and governed by the laws of the State of New York.
This instrument may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
Very truly yours,
[NAME OF ELIGIBLE SUBSIDIARY]
By______Name: Title:
The undersigned hereby confirms that the status of [name of Eligible Subsidiary] as an Eligible Subsidiary for purposes of the Credit Agreement described above is terminated as of the date hereof.
THE LINCOLN ELECTRIC COMPANY
By______Name: Title:
By______Name: Title:
Receipt of the above Election to Terminate is hereby acknowledged on and as of the date set forth above.
SOCIETY NATIONAL BANK, as Agent
By______Name: Title:
2 102 EXHIBIT I-1
OPINION OF COUNSEL FOR THE BORROWER (BORROWINGS BY ELIGIBLE SUBSIDIARIES)
[Dated as provided in Section 3.03 of the Credit Agreement]
To the Banks and the Agent Referred to Below c/o Society National Bank, as Agent 127 Public Square Cleveland, Ohio 44114-1306 U.S.A.
Ladies and Gentlemen:
I am counsel to [name of Eligible Subsidiary], a [jurisdiction of incorporation] corporation (the "Borrower"), and give this opinion at the request of the Borrower pursuant to Section 3.03(b) of the Credit Agreement (the "Credit Agreement") dated as of December 20, 1995 among The Lincoln Electric Company (the "Company"), the banks listed on the signature pages thereof and Society National Bank, as Agent. Terms defined in the Credit Agreement are used herein as therein defined.
I have examined originals or copies, certified or otherwise identified to my satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as I have deemed necessary or advisable for purposes of this opinion.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of [jurisdiction of incorporation], and is a Wholly-Owned Consolidated Subsidiary of the Company.
103 2. The execution and delivery by the Borrower of its Election to Participate and its Notes and the performance by the Borrower of the Credit Agreement and its Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Subsidiaries or result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries.
3. The Credit Agreement constitutes a valid and binding agreement of the Borrower and its Notes constitute valid and binding obligations of the Borrower.
4. [Other than as set forth in paragraph 5 hereof,] there is no income, stamp or other tax of [jurisdiction of incorporation and, if different, principal place of business], or any taxing authority thereof or therein, imposed by or in the nature of withholding or otherwise, which is imposed on any payment to be made by the Borrower pursuant to the Credit Agreement or its Notes, or is imposed on or by virtue of the execution, delivery or enforcement of its Election to Participate or of its Notes.
[5. Tax disclosure]
Very truly yours,
2 104 EXHIBIT I-2
OPINION OF COUNSEL FOR THE COMPANY (BORROWINGS BY ELIGIBLE SUBSIDIARIES)
[Dated as provided in Section 3.03 of the Credit Agreement]
To the Banks and the Agent Referred to Below c/o Society National Bank, as Agent 127 Public Square Cleveland, Ohio 44114-1306 U.S.A.
Ladies and Gentlemen:
I am counsel to The Lincoln Electric Company, an Ohio corporation (the "Company"), and give this opinion at the request of the Company pursuant to Section 3.03(b) of the Credit Agreement (the "Credit Agreement") dated as of December 20, 1995 among the Company, the banks listed on the signature pages thereof and Society National Bank, as Agent. Terms defined in the Credit Agreement are used herein as therein defined.
I have examined originals or copies, certified or otherwise identified to my satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as I have deemed necessary or advisable for purposes of this opinion.
Upon the basis of the foregoing, I am of the opinion that the execution and delivery by the [name of Eligible Subsidiary] (the "Borrower") of its Election to Participate and its Notes and the performance by the Borrower of the Credit Agreement and its Notes do not contravene, or constitute a default under, any provision of any agreement, judgment, injunction, order, decree or other instrument binding upon the Company or any of its Subsidiaries or result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries.
Very truly yours,
105 EXHIBIT J
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of ______, 199_ among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"), [THE LINCOLN ELECTRIC COMPANY (the "Company")] and SOCIETY NATIONAL BANK, as Agent (the "Agent").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the Credit Agreement dated as of December 20, 1995 among [The Lincoln Electric Company (the "Company")]/[the Company], the Assignor and the other Banks party thereto, as Banks, and the Agent (as amended, the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans in an aggregate principal amount at any time outstanding not to exceed $______;
WHEREAS, Committed Loans made by the Assignor under the Credit Agreement in the aggregate principal amount of $______are outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $______(the "Assigned Amount"), together with a corresponding portion of its outstanding Committed Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement.
106 SECTION 2. ASSIGNMENT. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Committed Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee[, the Company] and the Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor.
SECTION 3. PAYMENTS. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them.* It is understood that facility fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party.
SECTION 4. CONSENT OF [THE COMPANY AND] THE AGENT. This Agreement is conditioned upon the consent of [the Company and] the Agent pursuant to Section 11.06(c) of the Credit Agreement. The execution of this Agreement by [the Company and] the Agent is evidence of this consent.
______
* Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum.
2 107 Pursuant to Section 11.06(c) the Company agrees to execute and deliver a Note [and to cause each Eligible Subsidiary to execute and deliver a Note] payable to the order of the Assignee to evidence the assignment and assumption provided for herein.
SECTION 5. NON-RELIANCE ON ASSIGNOR. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or financial or other statements of any Borrower, or the validity and enforceability of the obligations of any Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrowers.
SECTION 6. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.
SECTION 7. COUNTERPARTS. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written.
[ASSIGNOR]
By______Name: Title:
[ASSIGNEE]
By______Name: Title:
3 108 [THE LINCOLN ELECTRIC COMPANY
By______Name: Title:
By______Name: Title:]
SOCIETY NATIONAL BANK, as Agent
By______Name: Title:
4 109 EXHIBIT K
EXTENSION AGREEMENT
The Lincoln Electric Company 22801 St. Clair Avenue Cleveland, Ohio 44117-1199
Society National Bank, as Agent under the Credit Agreement referred to below
Gentlemen:
The undersigned hereby agree to extend, effective [Extension Date], the Termination Date under the Credit Agreement dated as of December 20, 1995 among The Lincoln Electric Company, the Banks listed therein and Society National Bank, as Agent (as amended, the "Credit Agreement") for one year to [date to which the Termination Date is extended]. Terms defined in the Credit Agreement are used herein as therein defined.
This Extension Agreement shall be construed in accordance with and governed by the law of the State of New York.
[NAME OF BANK]
By______Title:
Agreed and accepted:
THE LINCOLN ELECTRIC COMPANY
By______Title:
SOCIETY NATIONAL BANK, as Agent
By______Title:
110 EXHIBIT L
Form of Money Market Quote Request
[Date]
To: Society National Bank (the "Agent")
From: [Name of Borrower]
Re: Credit Agreement (as amended, the "Credit Agreement") dated as of December 20, 1995 among The Lincoln Electric Company, the Banks listed on the signature pages thereof and the Agent
We hereby give notice pursuant to Section 2.15 of the Credit Agreement that we request Money Market Quotes for the following proposed Money Market Borrowing(s):
Date of Borrowing: ______
Principal Amount* Interest Period**
$
Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.]
______
*Amount must be $______or a larger multiple of $______.
**Not less than one month (LIBOR Auction or not less than 30 days (Absolute Rate Auction), subject to the provisions of the definition of Interest Period.
111 Terms used herein have the meanings assigned to them in the Credit Agreement.
[NAME OF BORROWER]
By______Title:
2 112 EXHIBIT M
Form of Invitation for Money Market Quotes ------
To: [Name of Bank]
Re: Invitation for Money Market Quotes to [Name of Borrower] (the "Borrower")
Pursuant to Section 2.15 of the Credit Agreement dated as of December 20, 1995 among The Lincoln Electric Company, the Banks parties thereto and the undersigned, as Agent, we are pleased on behalf of the Borrower to invite you to submit Money Market Quotes to the Borrower for the following proposed Money Market Borrowing(s):
Date of Borrowing: ______
Principal Amount Interest Period ------
$
Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.]
Please respond to this invitation by no later than [2:00 P.M.] (Cleveland, Ohio time) on [date].
SOCIETY NATIONAL BANK
By______Authorized Officer
113 EXHIBIT N
Form of Money Market Quote ------
To: Society National Bank
Re: Money Market Quote to [Name of Borrower] (the "Borrower")
In response to your invitation on behalf of the Borrower dated ______, 19___, we hereby make the following Money Market Quote on the following terms:
1. Quoting Bank: ______
2. Person to contact at Quoting Bank:
______
3. Date of Borrowing: ______*
4. We hereby offer to make Money Market Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market Amount** Period*** [Margin****] [Absolute Rate*****] ------
$
$
[Provided, that the aggregate principal amount of Money Market Loans for which the above offers may be accepted shall not exceed $______.]**
______
*As specified in the related Invitation.
**Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend. Bids must be made for $5,000,000 or a larger multiple of $1,000,000.
1 EXHIBIT 10C
AMENDMENT NO. 2 to THE LINCOLN ELECTRIC COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Lincoln Electric Company Supplemental Executive Retirement Plan, effective January 1, 1994, is hereby amended, effective September 28, 1995, pursuant to Section 9.1 thereof, as follows:
1. Section 2.1 shall be amended by adding thereto the following:
"SPOUSE" means the person to whom a Participant is legally married at the specified time.
2. Article VI shall be amended to read as follows:
ARTICLE VI PAYMENT OF BENEFIT ON OR AFTER DEATH OR DISABILITY
Section 6.1 Commencement of Benefit Payments Before Vesting. ------
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, the Committee may provide that the Participant or his surviving Spouse 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.
Section 6.2 Commencement of Benefit Payments After Vesting. ------
If a Participant dies or becomes Disabled while employed by his Employer after becoming entitled to a Retirement Benefit under Section 5.1 but prior to commencing the receipt of his Benefit, he or his surviving Spouse shall receive a Benefit computed under Section 4.2 as if the Participant had retired immediately prior to his death or Disability at his then attained Age.
Section 6.3 Form of Payment. ------
Any Benefit payable under this Article VI to a Participant who is Disabled shall be paid in any form permitted under and determined in accordance with Section 5.2. Any Benefit payable under this Article to the Spouse of a Participant who has died prior to commencing the receipt of his Benefit shall be paid 2 2 in the form of a 100% pre-retirement spouse annuity based upon the Participant's Benefit as though he had retired the day before his death and elected a 100% joint and survivor annuity form of benefit with his Spouse as the survivor beneficiary and determined in accordance with Section 5.2.
Section 6.4 Committee Action. ------
The Committee may, in its sole discretion, provide that the amount of the Retirement Benefit payable on death or Disability 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).
The undersigned, pursuant to the approval of the Board on September 28, 1995, does herewith execute this Amendment No. 2 to The Lincoln Electric Company Supplemental Executive Retirement Plan.
/s/ Donald F. Hastings ------Chairman of the Board of Directors
3
Amendment No. 1 to The Lincoln Electric company Supplemental Executive Retirement Plan
The Lincoln Electric Company Supplemental Executive Retirement Plan, effective January 1, 1994, is hereby amended, pursuant to Section 9.1 thereof, as follows:
1. A new Section 4.5 shall be added to the Plan to read as follows:
Section 4.5 MAXIMUM RETIREMENT BENEFIT. Anything in this Plan to the contrary notwithstanding, the maximum Retirement Benefit payable under this Plan for a Participant shall not exceed $300,000, expressed as a single life annuity payable over the Participant's life, unless otherwise determined by the Committee.
2. The definition of "compensation" in Section 2.1 shall be amended and restated to read as follows:
"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 EXCLUDING ANY COMPENSATION RELATED TO EQUITY SECURITIES OF THE COMPANY (INCLUDING COMPENSATION RESULTING FROM SECTION 83(B) ELECTIONS UNDER THE CODE) AND 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 non-qualified
4
deferred compensation plan of the Controlled Group. (new language underlined)
3. The third sentence of the definition of "Qualified Plan Benefit" in Section 2.1 shall be amended and restated as follows:
For purposes of this definition, "employer-provided benefits" means all qualified retirement benefits funded exclusively by employer contributions (and earnings thereon), and shall include any previous distribution of such benefits made prior to a Participant's ATTAINMENT OF AGE 65 OR THE ACTUAL RETIREMENT DATE, IF EARLIER, including, but not limited to, in-service withdrawals, retirement and disability benefits, or distributions pursuant to any domestic relations order. (new language underlined)
The undersigned, pursuant to the approval of the Board on May 24, 1995, does herewith execute this Amendment No. 1 to The Lincoln Electric Company Supplemental Executive Retirement Plan.
/s/ D. F. Hastings ------Chairman of the Board of Directors
5
THE LINCOLN ELECTRIC COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Working Copy, including Amendments Nos. 1 and 2
6
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 ...... 5 Section 3.2 Participation ...... 5
ARTICLE IV - RETIREMENT BENEFIT Section 4.1 Retirement Benefit ...... 5 Section 4.2 Early Retirement Benefit ...... 6 Section 4.3 Vesting ...... 6 Section 4.4 Other Retirement Benefits ...... 7 Section 4.5 Maximum Retirement Benefit ...... 7
ARTICLE V - PAYMENT OF RETIREMENT BENEFIT Section 5.1 Payment of Retirement Benefits ...... 7 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 Before Vesting ...... 8 Section 6.2 Commencement of Benefit Payments After Vesting ...... 8 Section 6.3 Form of Payment ...... 8 Section 6.4 Committee Action ...... 8
ARTICLE VII - ADMINISTRATION Section 7.1 General ...... 8 Section 7.2 Administrative Rules ...... 9 Section 7.3 Duties ...... 9 Section 7.4 Fees ...... 9 Section 7.5 Limitation of Actions ...... 9
7
Page ----
ARTICLE VIII- CLAIMS PROCEDURE Section 8.1 General ...... 10 Section 8.2 Denials ...... 10 Section 8.3 Appeals Procedure ...... 10 Section 8.4 Review ...... 10
ARTICLE IX - MISCELLANEOUS PROVISIONS Section 9.1 Amendment and Termination ...... 11 Section 9.2 No Assignment ...... 11 Section 9.3 Successors and Assigns ...... 11 Section 9.4 Governing Law ...... 11 Section 9.5 No Guarantee of Employment ...... 12 Section 9.6 Severability ...... 12 Section 9.7 Notification of Addresses ...... 12 Section 9.8 Bonding ...... 12 Section 9.9 Withdrawal of Employer ...... 12
ARTICLE X - FUNDING ...... 12
3 8 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:
9 "ACCOUNT" means the account established on behalf of the Participant as described in Section 5.3.
2 10 "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 excluding any compensation related to equity securities of the Company (including compensation resulting from Section 83(b) elections under the Code) and 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.
"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.
3 11 "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
4 12 this definition, "employer-provided benefits" means all qualified retirement benefits funded exclusively by employer contributions (and earnings thereon), and shall include any previous distribution of such benefits made prior to a Participant's attainment of age 65 or the actual retirement date, if earlier, 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.
"SPOUSE" means the person to whom a Participant is legally married at the specified time.
"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.
5 13 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 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.
6 14 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
7 15 (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.
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.
SECTION 4.5 MAXIMUM RETIREMENT BENEFIT. Anything in this Plan to the contrary notwithstanding, the maximum Retirement Benefit payable under this Plan for a Participant shall not exceed $300,000, expressed as a single life annuity payable over the Participant's life, unless otherwise determined by the Committee.
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%).
8 16 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 BEFORE VESTING. 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, the Committee may provide that the Participant or his surviving Spouse 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.
SECTION 6.2 COMMENCEMENT OF BENEFIT PAYMENTS AFTER VESTING. If a Participant dies or becomes Disabled while employed by his Employer after becoming entitled to a Retirement Benefit under Section 5.1 but prior to commencing the receipt of his Benefit, he or his surviving Spouse shall receive a Benefit computed under Section 4.2 as if the Participant had retired immediately prior to his death or Disability at his then attained age.
SECTION 6.3 FORM OF PAYMENT. Any Benefit payable under this Article VI to a Participant who is Disabled shall be paid in any form permitted under and determined in accordance with Section 5.2. Any Benefit payable under this Article to the Spouse of a Participant who has died prior to commencing the receipt of his Benefit shall be paid in the form of a 100% pre-retirement spouse annuity based upon the Participant's Benefit as though he had retired the day before his death and elected a 100% joint and survivor annuity form of benefit with his Spouse as the survivor beneficiary and determined in accordance with Section 5.2.
SECTION 6.4 COMMITTEE ACTION. The Committee may, in its sole discretion, provide that the amount of the Retirement Benefit payable on death or Disability shall be enhanced (including, but limited to, an enhancement that takes into account projected additional Years of Service or increases in Compensation that
9 17 would have occurred absent the Participant's death or Disability).
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.
10 18 (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
11 19 (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.
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
12 20 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
13 21 date designated in the instrument or, if no date is specified, on the date of execution of the instrument.
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.
/s/ Donald F. Hastings ------Chairman of the Board of Directors
14
1 EXHIBIT 10D
[WORKING COPY INCORPORATING AMENDMENTS NOS. 1, 2 AND 3]
DECEMBER 31, 1995
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 ...... 4 ------
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 ...... 5 ------Section 3.3 Amount of Deferral ...... 5 ------...... 5 Section 3.4. Modification of Deferral Commitments ...... 5 ------
ARTICLE IV. PARTICIPANTS' ACCOUNTS ...... 5 Section 4.1. Establishment of Accounts ...... 5 ------Section 4.2. Elective Deferred Compensation; Employment Agreement Contributions ...... 6 ------...... 6 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 ...... 7 ------
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 ...... 10 ------Section 6.7. Hardship Distributions ...... 10 ------
i 3
ARTICLE VII. ADMINISTRATION, AMENDMENT AND TERMINATION ...... 10 Section 7.1. Administration ...... 10 ------Section 7.2. Plan Administrator ...... 11 ------Section 7.3. Amendment, Termination and Withdrawal ...... 11 ------Section 7.4. Successors ...... 11 ------Section 7.5. Claims ...... 11 ------Section 7.6. Expenses ...... 12 ------...... 12
ARTICLE VIII. MISCELLANEOUS ...... 12 Section 8.1. No Guarantee of Employment ...... 12 ------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 ...... 13 ------
ii 4
[Working Copy Incorporating Amendments Nos. 1, 2, and 3] December 31, 1995
THE LINCOLN ELECTRIC COMPANY DEFERRED COMPENSATION PLAN
The Lincoln Electric Company Deferred Compensation Plan is made and executed as of the 10th 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 earned by a Participant and payable to him by the Corporation with respect to a Plan Year 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.
5 (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 earned by a Participant and payable to him by the Corporation with respect to any bonus plan year ending within a Plan Year 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 earned by a Participant and payable to him by the Corporation with respect to a Plan Year.
(l) "Corporation": The Lincoln Electric Company or any successor or successors thereto.
(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
2 6 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) "Employment Agreement": A written agreement between the Corporation and an Employee that provides for the deferral of compensation, and that may also provide for vesting, the crediting of earnings and other terms and conditions with respect to such deferred compensation.
(s) "Employment Agreement Contribution": Any amount contributed to the Plan by the Corporation pursuant to an Employment Agreement.
(t) "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.
(u) "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.
(v) "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.
(w) "Participation Agreement": The Agreement submitted by a Participant to the Administrator with respect to one or more Deferral Commitments.
(x) "Plan": The Plan set forth in this instrument as it may, from time to time, be amended.
(y) "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.
(z) "Retirement": Termination of employment with the Corporation on or after attainment of age 60.
(aa) "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
3 7 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.
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.
4 8 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 with respect to such 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. Notwithstanding the foregoing, any Employment Agreement Contribution shall be deferred in accordance with the terms of the Employment Agreement.
Section 3.4. 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 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
5 9 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; EMPLOYMENT AGREEMENT CONTRIBUTIONS. 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. The amount of the Employment Agreement Contribution contributed for a Participant (if any) shall be credited by the Corporation to the Participant's Account in accordance with the terms of the Employment Agreement. Any withholding of taxes or other amounts with respect to Deferred Compensation or with respect to an Employment Agreement which is required by state, federal or local laws shall be withheld from the Participant's Deferred Compensation or Employment Agreement Contribution.
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
6 10 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 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
7 11 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, 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:
8 12 (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
9 13 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 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
10 14 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.
11 15 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 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.
12 16 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.
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: /s/ H. Jay Elliott ------Its: Senior Vice President, ------Chief Financial Officer and Treasurer
Attest:
/s/ Gabriel Bruno ------
13 1 EXHIBIT 10E
Management Incentive Plan
The Company maintains an annual Management Incentive Plan in which the Company's senior executive officers participate. Pursuant to this Plan, cash awards are made annually based on the level of achievement of pre-determined financial performance targets established by the Chief Executive Officer and the Compensation Committee of the Board of Directors. Each participant's award is segmented to reflect that individual's responsibilities, with weighting on corporate or regional results accordingly. A maximum target award fund is established yearly. Maximum awards, if achieved, are designed to place individual participants at a specified percentile in the market for their respective positions as determined by the Compensation Committee. The awards for the five most highly compensated executive officers are subject to determination by the Compensation Committee, with the balance of the awards determined upon recommendation by the CEO and review by the Compensation Committee.
1 EXHIBIT 10F
NON-EMPLOYEE DIRECTORS RESTRICTED STOCK PLAN ------
RESOLVED, that immediately after the earlier of (i) [June 12, 1995], or (ii) August 1, 1995, and on January 1, of each year thereafter, each non-employee Director of the Company ("Director") shall be automatically granted $10,000 worth of Common Shares, without par value, of the Company ("Voting Shares") subject to the transfer restrictions and risk of forfeiture hereinafter described ("Restricted Shares").
RESOLVED, that the value of Voting Shares for the purposes hereof shall be equal to the last reported trading price for the Voting Shares, and if no price has been reported within the 30 days before any award, the value shall be equal to the last reported trading price of the Class A Common Shares.
RESOLVED, that the aggregate number of Voting Shares that may be awarded as Restricted Shares and released from substantial risk of forfeiture shall not exceed 100,000 Voting Shares, which may be shares of original issuance or treasury share or a combination.
RESOLVED, that Restricted Shares held by a Director may not be sold or otherwise disposed of until, and shall be forfeited if such Director ceases to serve as a Director of the Company before, the restrictions lapse as provided below.
RESOLVED, that the restrictions on each award of Restricted Shares shall lapse when the Director has served continuously as a Director of the Company for a period of three years after the award; provided, however, that the restrictions shall lapse earlier if the Director (1) dies or (2) completes the term in which the award was received and is not elected to another term by the shareholders, or (3) in the event of a change in control of the Company as set forth in Appendix A to these resolutions.
RESOLVED, that Directors shall have all the rights of shareholders with respect to such Restricted Shares, provided that such Restricted Shares, together with any additional shares of the Company that a Director may receive by virtue of any share dividend, merger, reorganization or other change in capital structure, shall be subject to the restrictions set forth above.
RESOLVED, that the automatic awards of Restricted Shares herein provided for may be referred to as "The Lincoln Non-Employee Directors' Restricted Stock Plan" and shall continue, subject to availability of shares, until such automatic awards are discontinued by resolution of this Board. 2 RESOLVED, that effectiveness of the foregoing resolutions shall be subject to approval of this plan by the Company's shareholders, and such plan shall be subject to Rule 16b-3 under the Securities Exchange Act of 1934 as in effect prior to May 1, 1991 until otherwise determined by this Board or its Compensation Committee.
RESOLVED, that the plan as set forth above shall be subject to shareholder approval at the 1995 annual meeting, and the notice and proxy material set forth above shall be modified to include the foregoing proposal.
Appendix A ------
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 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) 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 Voting Stock, 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. 1 EXHIBIT 10G
THE LINCOLN ELECTRIC COMPANY NON-EMPLOYEE DIRECTORS' 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 ...... 2 ------
ARTICLE III. PARTICIPATION AND DEFERRALS ...... 3 Section 3.1. Eligibility and Participation ...... 3 ------(a) Eligibility ...... 3 ------(b) Participation ...... 3 ------(c) Initial Year of Participation ...... 3 ------(d) Termination of Participation ...... 3 ------...... 3 Section 3.2 Amount of Deferral ...... 3 ------...... 4 Section 3.3. No Modification of Deferral Commitments ...... 4 ------
ARTICLE IV. DIRECTORS' ACCOUNTS ...... 4 Section 4.1. Establishment of Accounts ...... 4 ------Section 4.2. Crediting of Deferred Fees ...... 4 ------Section 4.3. Determination of Accounts ...... 4 ------(a) Determination of Accounts ...... 4 ------(b) Accounting ...... 4 ------Section 4.4. Adjustments to Accounts ...... 4 ------Section 4.5. Statement of Accounts ...... 5 ------Section 4.6. Vesting of Accounts ...... 5 ------
ARTICLE V. FINANCING OF BENEFITS ...... 5 Section 5.1. Financing of Benefits ...... 5 ------Section 5.2. Security for Benefits ...... 5 ------Section 5.3. Investments ...... 5 ------
ARTICLE VI. DISTRIBUTION OF BENEFITS ...... 6 Section 6.1. Settlement Date ...... 6 ------Section 6.2. Amount to Be Distributed ...... 6 ------Section 6.3. In-Service Distribution ...... 6 ------Section 6.4. Form of Distribution ...... 6 ------Section 6.5. Beneficiary Designation ...... 7 ------Section 6.6. Facility of Payment ...... 8 ------...... 8
i 3
Page ----
ARTICLE VII. ADMINISTRATION, AMENDMENT AND TERMINATION ...... 8 Section 7.1. Administration ...... 8 ------...... 8 Section 7.2. Amendment, Termination and Withdrawal ...... 8 ------Section 7.3. Successors ...... 8 ------...... 9 Section 7.4. Expenses ...... 9 ------...... 9
ARTICLE VIII. MISCELLANEOUS ...... 9 Section 8.1. No Continuing Right as Director ...... 9 ------Section 8.2. Applicable Law ...... 9 ------Section 8.3. Interests Not Transferable ...... 9 ------Section 8.4. Severability ...... 9 ------Section 8.5. Withholding of Taxes ...... 10 ------...... 10
ii 4
THE LINCOLN ELECTRIC COMPANY NON-EMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN
The Lincoln Electric Company Non-Employee Directors' Deferred Compensation Plan is made and executed as of the 24th day of May, 1995 and is effective as of May 24, 1995.
ARTICLE I. PURPOSE
THE LINCOLN ELECTRIC COMPANY NON-EMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN is hereby established by The Lincoln Electric Company to allow directors of the Corporation to defer a portion of their Directors' Fees. It is intended that the Plan will aid in attracting and retaining Directors of exceptional ability by providing this benefit. 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 Director 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 Director'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 Board.
(e) "Annual Retainer": The annual cash retainer earned by a Director for services as a Director of the Corporation.
(f) "Beneficiary": The person or persons (natural or otherwise), within the meaning of Section 6.5, who are entitled to receive distribution of the Director's Account balance in the event of the Director's death.
(g) "Board": The Board of Directors of the Corporation. 5 (h) "Corporation": The Lincoln Electric Company or any successor or successors thereto.
(i) "Deferral Commitment": An agreement by a Director to have a specified percentage or dollar amount of his Fees deferred under the Plan for a specified period in the future.
(j) "Deferral Period": Means the Plan Year for which a Director has elected to defer a portion of his Fees.
(k) "Director": An individual duly elected or chosen as a director of the Corporation who is not also an employee of the Corporation or its subsidiaries.
(l) "Effective Date": May 24, 1995.
(m) "Fees": The Annual Retainer and Other Compensation.
(n) "Other Compensation": The meeting and other cash fees earned by a Director for services as a Director of the Corporation, other than the Annual Retainer.
(o) "Participation Agreement": The Agreement submitted by a Director to the Administrator with respect to one or more Deferral Commitments.
(p) "Plan": The Plan set forth in this instrument as it may, from time to time, be amended.
(q) "Plan Year": The 12-month period beginning January 1 through December 31; provided that the first plan year shall begin on the Effective Date and end on December 31, 1995.
(r) "Request": The meaning set forth in Section 5.3.
(s) "Settlement Date": The date on which a Director terminates as a Director. Settlement Date shall also include with respect to any Deferral Period the date prior or subsequent to termination as a Director selected by a Director in a Participation Agreement for distribution of all or a portion of the amounts deferred during such Deferral Period.
(t) "Trust": The meaning set forth in Section 5.2
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
2 6 the word "here" shall mean and refer to the entire Plan, and not to any particular provision or Section.
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 Directors.
(b) PARTICIPATION. A Director 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 a Director during a Deferral Period and wishes to elect a Deferral Commitment with respect to the Fees earned by and payable to the individual during such Deferral Period, and with respect to the first Plan Year, a Participation Agreement must be submitted to the Administrator no later than 30 days following such individual's becoming a Director, or following the beginning of such Plan Year, respectively. Any Deferral Commitment elected in such Participation Agreement shall be effective only with regard to Fees earned following the submission of the Participation Agreement to the Administrator. If a Director 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 became a Director.
(d) TERMINATION OF PARTICIPATION. Participation in the Plan shall continue as long as the Director is eligible to receive benefits under the Plan.
Section 3.2 AMOUNT OF DEFERRAL. With respect to each Plan Year, a Director may elect to defer a specified dollar amount or percentage of his Fees. For the first Plan Year, a Director may elect to defer all or any portion of his Fees 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. A Director may change the dollar amount or percentage of his Fees 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.
3 7 Section 3.3. NO MODIFICATION OF DEFERRAL COMMITMENTS. A Deferral Commitment shall be irrevocable with respect to the Deferral Period for which it is made.
ARTICLE IV. DIRECTORS' ACCOUNTS
Section 4.1. ESTABLISHMENT OF ACCOUNTS. The Corporation, through its accounting records, shall establish an Account for each Director who elects to participate in the Plan. In addition, the Corporation may establish one or more subaccounts of a Director's Account, if the Corporation determines that such subaccounts are necessary or appropriate in administering the Plan.
Section 4.2. CREDITING OF DEFERRED FEES. A Director's Fees that are deferred pursuant to a Deferral Commitment shall be credited to the Director's Account within 30 days following the date the corresponding non-deferred portion of his Fees would have been paid to the Director. Any withholding of taxes or other amounts with respect to any deferred Fees that is required by state, federal or local law shall be withheld from the Director's non-deferred Fees, or if none, then the Director's Deferred Commitment shall be reduced by the amount of such withholding.
Section 4.3. DETERMINATION OF ACCOUNTS.
(a) DETERMINATION OF ACCOUNTS. The amount credited to each Director'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 Director's Account shall be debited with the amount of any distributions under the Plan to or on behalf of the Director or, in the event of his death, his Beneficiary during the Accounting Period ending on such Accounting Date.
(b) The Director'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 Director's Account as of the immediately preceding Accounting Date (as adjusted pursuant to Section 4.4(a) for the current Accounting Date) by (ii) the
4 8 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 Director 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 Director 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 Director or, in the event of his death, to his Beneficiary shall be paid by the Corporation from its general assets. The payment of benefits under the Plan represents an unfunded, unsecured obligation of the Corporation. Notwithstanding the fact that the Directors' 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 Director or Beneficiary shall have any security 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 Board 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, other than equity securities of the Corporation, in which the amount credited to a Director's Account will be deemed to be invested. Each Director 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 Director's preference with respect to investment vehicles for all or some
5 9 portion of the amounts credited to a Director's Account in specified multiples of 10%. A Request may be changed prospectively by a Director 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 Director's Account to be invested in accordance with the Request made by the Director, or the Board may, instead, in its sole discretion, deem such Account to be invested in any deemed investment funds selected by the Board. 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 Director 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 Director 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 Director'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 Director may elect to commence to receive an in-service distribution of his deferred Fees for any Deferral Period beginning at any time at least two years after the date such Fees otherwise would have been first payable. A Director'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 Director may elect to receive such Fees as an in-service distribution under one of the forms provided in Section 6.4. Any benefits paid to the Director as an in-service distribution shall reduce the Director's Account. In the event of a Director's death, the balance of his Account shall be distributed to his Beneficiary in a lump sum.
Section 6.4. FORM OF DISTRIBUTION. As soon as practicable after the end of the Accounting Period in which a Director'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 Director or, in the event of his death, to his Beneficiary, of the balance of the Director's Account, as determined under Section 6.2, under one of the forms provided in this Section. Notwithstanding the foregoing, if elected by the Director, the distribution of all or a portion of the Director's Account may commence at the beginning of the Plan Year next following his Settlement Date.
6 10 Distribution of a Director's Account with respect to any Deferral Period shall be made in one of the following forms as elected by the Director:
(a) by payment in cash in a single lump sum;
(b) by payment in cash in not greater than ten (10) annual installments; or
(c) a combination of (a) and (b) above. The Director shall designate the percentage payable under each option.
The Director's election of the form of distribution shall be made by written notice filed with the Administrator at least 1 year prior to the Director's voluntary termination as a Director. Any such election may be changed by the Director 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 1 year prior to the Director's voluntary termination as a Director shall not be valid, and in such case payment shall be made in accordance with the Director's prior election.
The amount of each installment shall be equal to the quotient obtained by dividing the Director'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 Director at the time of calculation.
If a Director fails to make an election in a timely manner as provided in this Section 6.4, distribution shall be made in cash in a lump sum.
Section 6.5. BENEFICIARY DESIGNATION. As used in the Plan the term "Beneficiary" means:
(a) The last person designated as Beneficiary by the Director 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 Director, such Director's spouse; or
(c) If no such designated Beneficiary and no such spouse is living upon the death of a Director, or if all such persons die prior to the full distribution of the Director's Account balance, then the legal representative of the last survivor of the Director 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
7 11 property) shall be the Beneficiaries to whom the then remaining balance of the Director'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 Director 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.
ARTICLE VII. ADMINISTRATION, AMENDMENT AND TERMINATION
Section 7.1. ADMINISTRATION. The Plan shall be administered by an Administrator. The Administrator shall have such powers as may be necessary to discharge its duties 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 Director shall be made on such forms as the Administrator shall prescribe.
Section 7.2. 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 7.3. SUCCESSORS. The Corporation shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or
8 12 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 Director.
Section 7.4. 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 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 CONTINUING RIGHT AS DIRECTOR. Neither the adoption or operation of this Plan, nor any document describing or referring to this Plan, or any part thereof, shall confer upon any Director any right to continue as a Director of the Corporation or any subsidiary of the Corporation.
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 internal substantive 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
9 13 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.
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: /s/ H. Jay Elliott ------Its: Senior Vice President, Chief Financial Officer and Treasurer ------Attest:
/s/ Dorothy L. Hodnichak ------
10 1 EXHIBIT 10H
RETIREMENT AGREEMENT ------
THIS RETIREMENT 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 FREDERICK W. MACKENBACH ("Executive"), on the 8th day of November, 1995.
WITNESSETH: ------WHEREAS, Executive is a Director of the Company and currently serves as President and Chief Operating Officer of the Company;
WHEREAS, the Company and Executive have determined that Executive shall resign and retire from any and all positions he may hold an officer of, and any other positions (other than his position as a Director) he may hold with respect to, the Company, effective March 31, 1996, and that Executive shall resign and retire as an employee of the Company and its subsidiaries and related or affiliated companies effective March 31, 1996; 2 WHEREAS, the Company and Executive desire to make provision for the payments and benefits that Executive will be entitled to receive from the Company in consideration for Executive'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 Executive wish to resolve, settle and/or compromise any and all matters, claims and issues between them arising from or relating to Executive's service and employment with the Company, including the termination thereof;
NOW THEREFORE, in consideration of the premises 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 Executive agree as follows:
1. RESIGNATION. Executive hereby resigns and retires from his employment with the Company, and its subsidiaries and related or affiliated companies, as of March 31, 1996. Executive also resigns, as of March 31, 1996, (a) 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
2 3 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. The Company and Executive recognize and acknowledge that Executive shall continue to serve as a Director of the Company through his current term, unless and until Executive decides otherwise. During the remainder of 1995 Executive shall receive his current base salary, which is $338,750, plus any amount payable to him under the terms of the Management Incentive Plan of the Company (the maximum plan award for 1995 being $175,000). Effective January 1, 1996 through March 31, 1996, Executive shall receive a gross amount monthly of $42,813. In 1996 Executive will not be eligible for any bonus or any additional equity or cash incentive compensation.
2. PAYMENTS. (a) In consideration of the promises of Executive in this Agreement and subject to the conditions hereof, including without limitation Paragraph 4 of this Agreement, the Company shall:
(i) Pay Executive on the 15th and last day of each month for thirty-six (36) months commencing on
3 4 April 1, 1996 and ending on March 31, 1999 a gross amount annually of TWO HUNDRED NINETY-SIX THOUSAND, TWO HUNDRED FIFTY FIVE DOLLARS ($296,255); 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 Executive's compliance with the requirements of this Agreement applicable to him and (c) if Executive 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.
(ii) Pay Executive a supplemental pension of ONE HUNDRED AND THIRTY THOUSAND, SEVEN HUNDRED AND TWENTY-ONE DOLLARS ($130,721) per year, in equal monthly installments, payable in the form of a single life annuity, commencing with a payment on April 1, 1996 and ending with a payment on the first day of the month in which Executive dies (the "Pension"); PROVIDED that no such payment shall be made unless the conditions in Paragraph 4 of this Agreement have been satisfied; and PROVIDED FURTHER that the Pension shall be paid through the Company's Supplemental Executive Retirement Plan
4 5 (but no other benefit shall be payable to or with respect to Executive under such plan); and PROVIDED FURTHER that Executive may elect to receive the Pension in the form of an actuarially equivalent joint 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) Waive the forfeiture restrictions set forth in Section 3 of the Restricted Stock Agreement dated January 25, 1994 between the Company and Executive with respect to 6668 shares of the Company (comprised of 3334 unrestricted Common Shares and 3334 unrestricted Class A Common Shares). The effect of such waiver will be to vest unconditionally such shares as of the Executive's retirement date. The Company agrees to deliver the certificates for such shares in such form as Executive requests on or before his retirement date. The Company intends to exercise its repurchase rights relating to 10,164 Common Shares and 10,164 Class A Common Shares issued to Executive under the Deferred Stock Award Agreement dated April 13, 1989 within ninety (90) days following Executive's retirement.
5 6 Executive acknowledges and agrees that he will tender such shares issued under the Deferred Stock Award Agreement for repurchase by the Company pursuant to the terms of such Agreement within ninety (90) days following his retirement.
(iv) Continue to permit Executive to participate in the Company's medical and life insurance programs, on the same basis that Executive has participated in such medical and life insurance programs prior to the termination of his employment with the Company, until the earlier of March 30, 1999, or the date on which Executive becomes eligible for other employer-provided medical insurance or life insurance (whether through a subsequent employer of Executive or through an employer of Executive's spouse), or, in the case of medical insurance, the date on which Executive becomes eligible for Medicare. Executive 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 Executive revokes his acceptance of this
6 7 Agreement pursuant to Paragraph 4 of this Agreement, the Company shall be obligated to provide Executive only with the opportunity to purchase medical insurance pursuant to the requirements of COBRA. In addition, following the time that Executive 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.
(b) Executive 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 Executive 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 Executive pursuant to subparagraphs 2(a)(i) and 2(a)(ii) of this Agreement shall be made by check or direct deposit to an account designated by Executive, and shall be reduced by any applicable Federal, State and local tax or other required withholding. The payments to Executive pursuant to subparagraph 2(a)(i) of this Agreement shall be reduced by any applicable
7 8 deductions resulting from Executive'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) Executive acknowledges and agrees that the consideration provided by the Company to Executive under this Agreement, including, without limitation, the payments and benefits to be made or provided by the Company to Executive 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 Executive set forth in Paragraph 4 of this Agreement and the obligations of and actions taken by Executive under this Agreement are given and undertaken in consideration of, and adequately supported by, the payments and benefits to be made or provided to Executive by the Company under and pursuant to this Agreement.
3. PROFESSIONAL FEES. The Company and Executive 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 Executive's termination and resignation and all matters relating to the negotiation and execution of this Agreement.
8 9 4. RELEASE BY EXECUTIVE. (a) Executive, 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 Executive 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 Executive's employment by or service with the Company and his termination from the Company;
(ii) any and all Claims arising out of or relating to the matter of ELLIS F. SMOLIK VS. THE LINCOLN ELECTRIC COMPANY, Case No. 288514 in the Common Pleas Court of Cuyahoga County, Ohio;
(iii) 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
9 10 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
(iv) any and all Claims of wrongful or unjust discharge or breach of any contract or promise, express or implied.
(b) Executive 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 Executive ever had or now may have against the Company to the extent provided in this Paragraph 4. Executive further agrees and acknowledges that no representations, promises or inducements have been made by the Company other than as appear in this Agreement.
(c) Executive further agrees and acknowledges that:
(i) The release provided for in this Paragraph 4 releases Claims to and including the date of this Agreement;
10 11 (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;
(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 he may use as much of the twenty-one (21) day period as he desires; 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 Executive executes this Agreement. If Executive 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
11 12 obligation to make payments or provide benefits to Executive as set forth in Paragraph 2 of this Agreement, except as may be required under COBRA.
(d) Executive 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 Executive's resignation and retirement are by mutual agreement between the Company and Executive, and that Executive waives and releases any Claim that he has or may have to reemployment.
5. CONFIDENTIAL INFORMATION. (a) Executive 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. Executive acknowledges and agrees that the Confidential Information of the Company gained by Executive 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.
12 13 (b) Executive 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 Executive's obligations pursuant to Paragraph 8 of this Agreement) without limitation as to when or how Executive may have acquired such Confidential Information. Executive 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 Executive 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 Executive of Confidential Information after the termination of Executive's employment with and services for the Company shall constitute a misappropriation of the Company's Confidential Information.
13 14 (c) Executive 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) Executive 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 Executive, generally known to the public or Executive is required by law (after providing the Company with notice and opportunity to contest such requirement) to make disclosure. Executive's obligations under this Paragraph 5 are in addition to, and not in limitation or preemption of, all other obligations of confidentiality which Executive may have to the Company under general legal or equitable principles or statutes.
6. NON-COMPETITION. (a) Executive agrees that for a period of two (2) years from and after the date of this Agreement, within the Territory (as described in subparagraph
14 15 (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.
15 16 (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 Executive 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) Executive 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 Executive, would not operate as a bar to Executive's sole means of support, are fully required to protect the legitimate interests of the Company
16 17 and do not confer a benefit upon the Company disproportionate to the detriment to Executive.
7. DISCLOSURE. Executive, for a period of two (2) years from and after the date of this Agreement, 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 Executive 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) and 2(a)(iv) of this Agreement and (2) obtain reimbursement from Executive of all payments and benefits already provided pursuant to subparagraphs 2(a)(i) 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) Executive acknowledges and agrees that the remedy at law available to the Company for breach by Executive 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.
17 18 Accordingly, Executive 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 Executive'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) Executive 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 Executive's employment by the Company. This cooperation by Executive 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;
18 19 (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 date of this Agreement, Executive shall continue to provide cooperation to the Company with respect to projects undertaken by the Company where Executive'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 Executive's time per calendar year.
(c) Executive 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 Executive, or with the requirements of any third party with whom Executive has a business relationship that provides remuneration to Executive. Executive shall not unreasonably withhold his availability for such cooperation.
19 20 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 Executive'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.
20 21 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) Executive'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 Executive 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.
(b) Because the purpose of this Agreement is to settle amicably any and all potential disputes or claims among the parties, neither Executive nor the Company shall, directly or
21 22 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. Executive 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 Executive at his principal residence, 1 Bratenahl Place, Suite 1003, Cleveland, Ohio 44108-1155, 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 Executive 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
22 23 discharge is agreed to in writing signed by Executive 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.
23 24 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.
24 25
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on November 8, 1995.
THE LINCOLN ELECTRIC COMPANY
By: /s/ Donald F. Hastings ------Donald F. Hastings Chairman of the Board and Chief Executive Officer
Witness: /s/ Frances V. Zalar /s/ Frederick W. Mackenbach ------FREDERICK W. MACKENBACH
25 26 EXHIBIT A ------
United States Canada Mexico Brazil Venezuela England France Germany Ireland Italy Japan Netherlands Norway Spain Australia
26 27 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.
IV. Integral horsepower electric motors ranging principally from 1/3 to 250 horsepower, but including cast iron motors of 1,250 horsepower.
27 1
EXHIBIT (11)
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31 ------1995 1994 1993 ------
Primary and fully diluted: Average shares outstanding...... 23,350 21,940 21,704 ======Income (loss) before cumulative effect of accounting change...... $61,475 $48,008 $(40,536) Cumulative effect to January 1, 1993 in method of accounting for income taxes...... 2,468 ------Net income (loss)...... $61,475 $48,008 $(38,068) ======Per share amounts: Income (loss) before cumulative effect of accounting change...... $ 2.63 $ 2.19 $ (1.87) Cumulative effect to January 1, 1993 in method of accounting for income taxes...... 12 ------Net income (loss)...... $ 2.63 $ 2.19 $ (1.75) ======
36 1
EXHIBIT (21)
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:
COUNTRY OF CONSOLIDATED NAME INCORPORATION PERCENT OWNERSHIP ------
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 100 Lincoln Big Three, Inc...... United States 51 Big Three Lincoln Alaska, Inc...... United States 100 Lincoln Electric Do Brasil Ltda...... Brazil 100 Lincoln Electric Mexicana, S.A. de C.V...... Mexico 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.
37 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements of The Lincoln Electric Company (Form S-8 No. 33-25209) pertaining to The Lincoln Electric Company 1988 Incentive Equity Plan, (Form S-8 No. 33-64189) pertaining to The Lincoln Stock Purchase Plan and (Form S-8 No. 33-64187) pertaining to The Lincoln Electric Company Employee Savings Plan of our report dated February 27, 1996, 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, 1995.
ERNST & YOUNG LLP
Cleveland, Ohio March 22, 1996
38
5 1,000
YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 10,087 0 144,749 3,916 182,865 357,083 490,611 285,017 617,760 168,649 93,582 4,977 0 0 324,969 617,760 1,032,398 1,036,293 634,551 634,551 0 0 12,346 99,584 38,109 61,475 0 0 0 61,475 2.63 2.63