<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 1995
REGISTRATION NO. 33-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
THE LINCOLN ELECTRIC COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 34-0359955
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR IDENTIFICATION NUMBER)
ORGANIZATION)
22801 ST. CLAIR AVENUE
CLEVELAND, OHIO 44117
(216) 481-8100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
FREDERICK G. STUEBER, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
THE LINCOLN ELECTRIC COMPANY
22801 ST. CLAIR AVENUE
CLEVELAND, OHIO 44117
(216) 481-8100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
DAVID P. PORTER, ESQ.
JONES, DAY, REAVIS & POGUE
901 LAKESIDE AVENUE
CLEVELAND, OHIO 44114
(216) 586-3939
DAVID A. SCHUETTE, ESQ.
MAYER, BROWN & PLATT
190 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60603
(312) 701-7363
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement has become effective.
------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
<TABLE>
CALCULATION OF REGISTRATION FEE
============================================================================================================
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE
TITLE OF EACH CLASS AMOUNT TO OFFERING PRICE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(3) PRICE(3) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Shares, without par value.... (2) $(2) $130,000,000 $44,828
============================================================================================================
</TABLE>
(1) Includes shares to cover over-allotment options granted by the
Company and Selling Shareholders to the Underwriters.
(2) To be filed by amendment following shareholder approval of the Class A
Common Shares to be registered hereby.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a).
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
===============================================================================
<PAGE> 2
THE RECAPITALIZATION
THE COMPANY IS PURSUING A RECAPITALIZATION AUTHORIZING A NEW CLASS OF
NON-VOTING COMMON SHARES (THE "CLASS A COMMON SHARES") THAT WILL INCLUDE THE
CLASS A COMMON SHARES CONTAINED IN THE OFFERING TO WHICH THIS REGISTRATION
STATEMENT APPLIES. THE AUTHORIZATION OF THE CLASS A COMMON SHARES IS SUBJECT TO
SHAREHOLDER APPROVAL, WHICH IS BEING SOLICITED IN CONNECTION WITH THE COMPANY'S
ANNUAL MEETING SCHEDULED TO BE HELD ON MAY 23, 1995. THE RECAPITALIZATION
ANTICIPATES A DISTRIBUTION SHORTLY BEFORE THE CONSUMMATION OF THE OFFERING TO
WHICH THIS REGISTRATION STATEMENT APPLIES OF A DIVIDEND OF ONE CLASS A COMMON
SHARE FOR EACH OUTSTANDING SHARE OF THE COMPANY'S VOTING COMMON STOCK. UNLESS
OTHERWISE SPECIFIED, THE FORM OF PROSPECTUS CONTAINED HEREIN ASSUMES THAT THE
AUTHORIZATION OF THE CLASS A COMMON SHARES HAS OCCURRED.
[NOT PART OF THE PROSPECTUS]
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED APRIL 27, 1995
PROSPECTUS
[ ] SHARES
[LOGO] THE LINCOLN ELECTRIC COMPANY
CLASS A COMMON SHARES
------------------------
Of the Class A Common Shares, without par value, offered hereby,
are being sold by The Lincoln Electric Company, an Ohio corporation
(the "Company"), and are being sold by certain selling shareholders
(the "Selling Shareholders"). The Company will not receive any of the proceeds
from the sale of Class A Common Shares by the Selling Shareholders. See "Selling
Shareholders."
Prior to the Offering, there has been only a limited public market for
securities of the Company, and no public market for the Class A Common Shares.
It is currently estimated that the initial public offering price will be between
$ and $ per share. See "Underwriting" for a discussion of the factors
considered in determining the initial public offering price.
The Class A Common Shares are a newly created class of non-voting shares.
The Class A Common Shares are substantially identical to the voting common
shares of the Company, except that holders of Class A Common Shares have no
voting rights other than upon the occurrence of certain events described in the
Company's Amended and Restated Articles of Incorporation ("Articles of
Incorporation") and as required by Ohio law. See "Description of Capital Stock."
The Company has applied to have the Class A Common Shares approved for
quotation, subject to official notice of issuance, on the NASDAQ National Market
under the symbol "LECOA."
SEE "INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A COMMON SHARES
OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=========================================================================================================
<S> <C> <C> <C> <C>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDERS(2)
- ---------------------------------------------------------------------------------------------------------
Per Share................. $ $ $ $
- ---------------------------------------------------------------------------------------------------------
Total(3).................. $ $ $ $
=========================================================================================================
</TABLE>
(1) The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters against certain liabilities under the Securities Act of
1933. See "Underwriting."
(2) Before deducting expenses estimated at $ and $ payable by the
Company and by the Selling Shareholders, respectively.
(3) The Company and the Selling Shareholders have granted to the several
Underwriters options, exercisable within 30 days of the date hereof, to
purchase up to an additional Class A Common Shares from the Company
and an additional Class A Common Shares from the Selling Shareholders
solely to cover over-allotments, if any. If such options are exercised in
full, the total Price to Public, Underwriting Discount, Proceeds to Company
and Proceeds to Selling Shareholders will be $ , $ , $ and $ ,
respectively. See "Underwriting."
------------------------
The Class A Common Shares are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the Class A Common Shares will be made in New York, New York on or
about , 1995.
------------------------
MERRILL LYNCH & CO.
J.P. MORGAN SECURITIES INC.
MCDONALD & COMPANY
SECURITIES, INC.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1995.
<PAGE> 4
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON
SHARES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, THE
OVER-THE-COUNTER MARKET, OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
located at Seven World Trade Center, 13th Floor, New York, New York 10048 and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may be obtained at prescribed rates by writing the Commission, Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company has filed with the Commission a registration statement (the
"Registration Statement," which term shall include any amendments thereto) on
Form S-3 under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Class A Common Shares offered hereby. This Prospectus does
not contain all the information set forth in the Registration Statement and the
exhibits and schedules thereto, certain parts of which are omitted in accordance
with the rules and regulations of the Commission, and to which reference is
hereby made. For further information, reference is hereby made to the
Registration Statement and the exhibits and schedules thereto.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
pursuant to the Exchange Act are incorporated by reference in this Prospectus
and shall be deemed to be a part hereof:
1. The Company's Annual Report on Form 10-K for the year ended December 31,
1994.
2. The description of the Company's Class A Common Shares set forth in the
Company's Registration Statement on Form 8-A filed under Section 12 of
the Exchange Act on .
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of the Offering shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from their respective
dates of filing. Any statement contained herein or in any document incorporated
or deemed to be incorporated shall be deemed to be modified or superseded for
all purposes of this Prospectus to the extent that a statement contained in this
Prospectus or in any subsequently filed document which also is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON TO
WHOM A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, UPON WRITTEN OR ORAL REQUEST
OF SUCH PERSON, A COPY OF ANY AND ALL OF THE INFORMATION THAT HAS BEEN
INCORPORATED BY REFERENCE IN THIS PROSPECTUS (OTHER THAN EXHIBITS TO THE
INFORMATION THAT ARE INCORPORATED BY REFERENCE UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE INTO THE INFORMATION THAT THIS PROSPECTUS
INCORPORATES). REQUESTS SHOULD BE DIRECTED TO FREDERICK G. STUEBER, ESQ., VICE
PRESIDENT, GENERAL COUNSEL AND SECRETARY, THE LINCOLN ELECTRIC COMPANY, AT THE
COMPANY'S PRINCIPAL EXECUTIVE OFFICES, 22801 ST. CLAIR AVENUE, CLEVELAND, OHIO
44117, TELEPHONE NUMBER (216) 481-8100. PERSONS REQUESTING COPIES OF EXHIBITS TO
SUCH DOCUMENTS THAT WERE NOT SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH
DOCUMENTS WILL BE CHARGED THE COSTS OF REPRODUCTION AND MAILING.
2
<PAGE> 5
[Photos to come]
<PAGE> 6
[Photos to come]
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the consolidated
financial statements and related notes thereto appearing elsewhere in this
Prospectus. All share amounts and per share financial information presented in
this Prospectus (except within the consolidated financial statements and related
notes and as expressly indicated otherwise) have been adjusted to assume the
reclassification of the Company's voting common shares, the creation of the
Class A Common Shares and the issuance of a dividend of one Class A Common Share
for each outstanding share of the Company's voting common shares. Such dividend
will have the same effect on the total number of common shares outstanding as a
two-for-one share split. Unless otherwise indicated, the information in this
Prospectus assumes that the Underwriters' over-allotment options are not
exercised. See "Underwriting."
THE COMPANY
The Lincoln Electric Company is one of the world's largest designers and
manufacturers of arc welding products, manufacturing a full line of arc welding
equipment and consumable welding products. The Company, now entering its second
century of operations, also manufactures a broad line of integral horsepower
industrial electric motors. The Company's welding products are used in a wide
range of industrial applications, including the manufacturing of automobiles,
trucks, heavy machinery, railcars and ships, and the construction of buildings,
bridges, oil platforms and pipelines. The Company distributes its products
through a large, technically trained sales force and a broad distribution
network.
According to market estimates, the Company believes that it maintains a
market leading 42% share of the United States arc welding consumables business
and a top-tiered share of the United States arc welding equipment business. The
Company also believes that it is the low-cost full line producer in the
approximately $750 million United States arc welding consumable products
business. To retain its leading position in the United States, the Company has
made substantial investments in facilities and equipment to improve production
efficiencies and further achieve manufacturing cost reductions.
The Company's welding products business, which in 1994 contributed over 93%
of the Company's net sales, primarily involves the design, manufacture and
distribution of arc welding equipment and consumable welding products. Arc
welding, which today is the most common industrial welding process, uses the
concentrated heat of an electric arc to join metal by fusion with a deposit of
molten metal, typically from a consumable electrode. The Company's arc welding
equipment products include welding machines, power sources and automated welding
systems and range from basic units used for light manufacturing and maintenance
to highly sophisticated machines used in robotic applications, high production
welding and fabrication. The Company's consumable products, designed for use
with arc welding equipment, include a full line of manual electrodes, fluxes and
wires. The Company also participates in businesses that are closely related to
its arc welding business, including the manufacture of oxy-fuel welding and
cutting torches, gas flow control devices (regulators) and industrial gases.
The Company also designs, manufactures and sells a broad line of steel,
aluminum and cast iron frame integral horsepower electric motors for use in
industrial applications. In 1992, the Company acquired the industrial electric
motor operations of the Delco division of General Motors Corporation in Dayton,
Ohio, substantially expanding its market position and broadening its product
line. Presently, the Company's line of steel and aluminum frame industrial
electric motors ranges from 1/3 to 250 horsepower and up to 1,250 horsepower for
cast iron motors.
The Company expects to build on its position as a leader in the domestic
arc welding industry with continued market penetration facilitated by a broad
range of new product offerings and further capacity additions. Furthermore,
management believes that long-term growth requires a strong global presence.
From 1985 to 1992, the Company expanded its international business by completing
12 acquisitions with operations in 13 foreign countries. In 1992, the Company,
under the leadership of newly promoted chief executive and chief operating
officers, refocused and redirected its global strategy and initiated a major
restructuring to downsize and streamline certain unprofitable operations in
Europe, South America and Japan. While in 1992 and 1993 the Company experienced
losses, primarily as the result of restructuring charges, the Company's domestic
arc welding operations maintained strong net sales and operating profitability.
In 1994, the Company reported the highest net sales, net income and net income
per common share in its history. In that same year, the Company's foreign
operations returned to profitability.
3
<PAGE> 8
The Company was founded in 1895 by John C. Lincoln and originally
manufactured electric motors and generators. The Company entered the arc welding
business, then in its infancy, in 1911. The Company is widely recognized for its
implementation of the "incentive management system" developed by John C.
Lincoln's brother, James F. Lincoln, who headed the Company from 1914 to 1965.
Current practices of the system include an emphasis on piecework and an annual
bonus system based on individual performance and Company results, with employee
stock ownership plans and guaranteed employment as described herein. The Company
believes that the corporate culture resulting from its incentive management
system has increased productivity, led to enhanced operating flexibility and
contributed to the Company's industry leadership position.
The Company's business strategy is to continue to strengthen its operations
in the United States and internationally, and to exploit opportunities for
growth. Key elements of the Company's business strategy include:
- Manufacturing High Quality Products. The Company enjoys a worldwide
reputation for manufacturing consistently high quality, state of the art
products that are robust and rugged. Manufacturing efficiencies,
flexibility and quality are enhanced by the Company's high degree of
vertical integration. All of the Company's worldwide consumable
manufacturing facilities and its domestic machine and motor facilities
meet ISO 9002 standards. A key element of the Company's incentive
management system is the individual employee's responsibility for the
quality of the product produced.
- Highly Productive and Motivated Workforce. The Company believes its
incentive management system has increased productivity, led to enhanced
operating flexibility and contributed to the Company's industry
leadership position. In the core United States operations, absenteeism of
less than 2%, and turnover rates among employees with more than 180 days
of service of approximately 4%, help drive productivity, while
management's ability to reassign employees to where they are most needed
provides greater operating flexibility.
- Advanced Engineering Expertise. The Company is a leader in the
development of innovative, value added products. The efforts of its
engineers, many of whom have been granted patents and awards for their
contributions to welding technology, have helped the Company gain a
global leadership role in the design of welding products for such
critical applications as gas and oil pipelines, offshore drilling
platforms and nuclear submarines.
- Strong Distribution Network. In the United States, the Company supports
the most extensive distribution network in the domestic welding industry.
The Company's domestic distribution network includes 1,000 welding
distributors, 1,050 motor distributors, and seven strategically located
distribution centers designed to deliver 95 percent of all standard
products within 48 hours. The Company and its foreign subsidiaries have
approximately 1,250 distributors outside the United States.
- Large, Technically Trained Sales Force. The Company's domestic sales
force primarily consists of engineers experienced in welding who, with
support from the Company's Welding Technology Center and Research and
Development and Engineering departments, can provide the customer with
practical, timely and cost-saving solutions to problems. Located in 34
district offices, the Company's highly trained domestic sales force
numbers approximately 260 individuals, each with the ability to conduct
welding demonstrations and train distributor personnel in the use of the
Company's products. The Company's foreign subsidiaries have a sales force
that totals more than 265 individuals, with approximately 130 operating
out of the Company's various European subsidiaries.
- Focused Growth in New Markets. The Company believes that international
markets will provide expanded opportunities for increased sales of both
basic and advanced technology products. Part of the Company's growth
strategy is focused on marketing its existing products into Central
Europe, Asia, Latin America and other developing economies to take
advantage of the significant number of infrastructure projects planned in
these economies in the next decade. The Company's strategy to gain entry
in new markets includes formation of joint ventures with local partners
and the use of licensing or private labeling arrangements to build market
share before engaging in capital intensive projects such as construction
of local manufacturing facilities. Also as part of its growth strategy,
the Company is expanding its integral horsepower industrial electric
motor facility and anticipates continued development of this business.
4
<PAGE> 9
THE RECAPITALIZATION
The Company is pursuing a recapitalization plan (the "Recapitalization")
that includes the authorization of the Class A Common Shares, which is a new
class of non-voting common shares (the "Class A Common Shares"). The
Recapitalization anticipates a distribution payable on [ , 1995] (the
"Distribution Date"), to holders of record of the Company's outstanding voting
common shares as of , 1995, of a dividend of one Class A Common Share for
each outstanding share of the Company's voting common shares (the
"Distribution"). Prior to the adoption of the Recapitalization, the Company had
two authorized and outstanding classes of voting common shares. Following the
Recapitalization, the Company's authorized capital consists of two voting
classes, the Common Shares, without par value (the "Common Shares"), and the
Class B Common Shares, without par value (the "Class B Common Shares"), and one
non-voting class, the Class A Common Shares. The Common Shares, the Class A
Common Shares and the Class B Common Shares are collectively referred to herein
as the "Common Equity." See "Description of Capital Stock."
The Lincoln Family (as defined herein) owns approximately 48% of the
Company's Common Equity. In addition, as the Company's incentive management
system has strongly favored employee stock ownership, the Employee Constituency
(as defined herein) beneficially owns approximately 28% of the Company's Common
Equity. The remaining 24% of the Company's outstanding Common Equity is held by
the public.
<TABLE>
THE OFFERING
<S> <C>
Class A Common Shares offered by
the Company...................... x,xxx,xxx shares
Class A Common Shares offered by
the Selling Shareholders......... x,xxx,xxx shares
Common Equity outstanding after the
Offering:
Common Shares................. xx,xxx,xxx
Class A Common Shares......... xx,xxx,xxx
Class B Common Shares......... x,xxx,xxx
----------
Total Common Equity......... xx,xxx,xxx
Rights of Class A Common Shares.... The Class A Common Shares offered hereby have no voting
rights, other than upon the occurrence of certain events
described in the Company's Articles of Incorporation and
as required by Ohio law; the Common Shares and Class B
Common Shares each have one vote per share. Each Class A
Common Share has rights equal to those of the Common
Shares and Class B Common Shares with respect to cash
dividends, stock splits, consideration payable in a
merger or consolidation and distributions upon
liquidation. See "Dividend Policy" and "Description of
Capital Stock."
Class A Common Share Protection
Feature.......................... Holders of Class A Common Shares will have the
opportunity to participate in any premium paid in the
future for a significant block (15% or more) of the
voting Common Shares by a buyer who has not acquired a
proportionate share of the Class A Common Shares (unless
such acquiror forgoes voting rights with respect to all
Common Shares held by such acquiror). See "Description
of Capital Stock -- Class A Protection."
Use of Proceeds.................... The proceeds of the Offering to be received by the
Company will be used to reduce outstanding indebtedness
and for general corporate and working capital purposes.
See "Use of Proceeds."
Proposed NASDAQ National Market
symbols:(1)
Common Shares................. LECO
Class A Common Shares......... LECOA
<FN>
- ---------------
(1) The Class B Common Shares do not trade on any organized market.
</TABLE>
5
<PAGE> 10
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
Set forth below is summary financial data of the Company for the years 1990
through 1994 derived from the Company's audited consolidated financial
statements for those years. All share and per share information is adjusted for
the Recapitalization. The information presented below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Capitalization," and the consolidated financial
statements and related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales....................................... $906,604 $845,999 $853,007 $833,892 $796,671
Gross profit.................................... 350,345 313,204 299,904 312,063 286,176
Operating income before restructuring........... 88,664 36,201 709 40,348 26,965
Restructuring charges (income).................. (2,735) 70,079 23,897 -- --
Operating income (loss)......................... 91,399 (33,878) (23,188) 40,348 26,965
Income (loss) before income taxes and cumulative
effect of accounting change................... 80,168 (46,950) (34,430) 34,411 30,360
Net income (loss)............................... 48,008 (38,068) (45,800) 14,365 $ 11,052
Net income (loss) per common share.............. 2.19 (1.75) (2.12) .67 .52
Weighted average number of common shares
outstanding (000's)........................... 21,940 21,704 21,593 21,580 21,389
PRO FORMA OPERATING RESULTS:(1)
Net income per common share.....................
Weighted average number of common shares
outstanding (000's)...........................
OPERATING DATA:
Net sales:
United States................................. $641,607 $543,458 $487,145 $459,768 $494,016
Non-United States............................. 264,997 302,541 365,862 374,124 302,655
Pre-tax profit (loss):
United States................................. $ 71,650 $ 42,570 $ 24,860 $ 45,742 $ 36,946
Non-United States............................. 9,465 (91,768) (60,011) (11,474) (6,396)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
---------------------------------
AS ADJUSTED
ACTUAL (2)
-------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.................................................. $169,310
Total assets..................................................... 556,857
Total debt....................................................... 212,946
Total liabilities................................................ 362,724
Shareholders' equity............................................. 194,133
Ratio of total debt to total capitalization...................... 52.3%
<FN>
- ---------------
(1) The unaudited pro forma net income per common share gives effect to the
Offering and the application of the estimated net proceeds therefrom as set
forth under "Use of Proceeds" as if the same had occurred on January 1,
1994. The pro forma net income per common share does not purport to be
indicative of the results of operations that actually would have been
achieved if the transactions described above had actually occurred on
January 1, 1994, or that may be achieved in the future.
(2) The unaudited as adjusted balance sheet data gives effect to the Offering
and the application of the estimated net proceeds therefrom as set forth
under "Use of Proceeds" as if the same had occurred on December 31, 1994.
</TABLE>
6
<PAGE> 11
INVESTMENT CONSIDERATIONS
Prospective investors should consider, in addition to the information set
forth elsewhere in this Prospectus, the following matters in evaluating the
Company and the Class A Common Shares offered hereby.
CYCLICALITY AND MATURITY OF THE WELDING INDUSTRY
The arc welding industry in the United States is a mature industry that is
cyclical in nature. The substitution of plastic, concrete and other materials
impacts the use of fabricated metal parts in many products and structures.
Increased offshore manufacturing by United States companies has contributed to
slow growth rates in the domestic manufacturing industry and in turn has led to
slower growth in the United States arc welding industry. During periods of
economic expansion the welding industry has grown at double digit rates but has
experienced contraction during periods of slowing industrial activity. There can
be no assurance that during future periods of economic expansion the welding
industry will experience the same double digit growth rates as it has in the
past. Based on market estimates, the United States arc welding industry as a
whole has grown at a compound annual nominal rate of approximately 3.4 percent
over the past five years. Although the Company believes that its exposure to
cyclical downturns is moderated by its broad customer base and the diversity of
the industries it serves, cyclical downturns could have an adverse effect on
period-to-period results.
INTERNATIONAL MARKETS
Due to the limited long-term growth potential of the overall United States
arc welding market, the Company's growth strategy is to increase the marketing
of existing products into Central Europe, Asia, Latin America and other
developing economies, and to increase its share in its current international
markets. However, there can be no certainty that the Company will be successful
in its expansion efforts. Manufacturing expansion by the Company in the last
decade in Germany, Brazil, Venezuela and Japan did not prove successful, and
resulted in losses, including restructuring charges of $70.1 million in 1993 and
$23.9 million in 1992. Although the Company's foreign operations returned to
profitability in 1994, there can be no assurance that such profitability will
continue. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Approximately 36% of the Company's net sales in 1994 (including its United
States third party export sales) were made to purchasers located in foreign
countries. Because of its foreign operations, the Company's business is subject
to the currency risks of doing business abroad, including exchange rate
fluctuations and limits on repatriation of funds.
Further, many developing economies have a significant degree of political
and economic uncertainty. Social unrest, the absence of trained labor pools and
the uncertainty of entering into joint ventures or other partnership
arrangements with local organizations have slowed business activities in some
large developing economies. The political and economic uncertainties present in
these promising growth markets may adversely impact the Company's ability to
implement and achieve its foreign growth objectives.
COMPETITION
The arc welding industry is highly competitive. While the Company believes
it is one of only a few worldwide broad line manufacturers of both arc welding
equipment and consumable products, the Company competes in each of its
businesses with other broad line manufacturers and numerous smaller competitors
specializing in particular products.
In recent years, the United States arc welding industry has been subject to
increased levels of foreign competition. While the Company believes that it is
the leader in the domestic consumable welding products business, this business
has become more competitive, primarily in the commodity-type consumables
segment, as low cost imports are occasionally available depending upon market
conditions. The intensity of foreign competition is substantially affected by
fluctuations in the value of the United States dollar against other currencies.
The attractiveness of the United States welding marketplace to foreign exporters
may be diminished by the recent substantial decline in the value of the United
States dollar relative to certain foreign
7
<PAGE> 12
currencies. However, foreign exchange rates are subject to substantial
fluctuations and there can be no assurance that this condition will continue to
exist.
Steel manufacturers have not traditionally been significant competitors in
the domestic arc welding industry. There is competition in the arc welding
consumables business in some foreign countries, such as Japan, from integrated
steel producers who manufacture selected consumable products. If this practice
were to occur in countries in which the Company is a more active participant,
the Company could be adversely affected by increased competition from such
integrated steel producers. The Company's expansion into some foreign countries
also could be adversely affected if steel manufacturers in those countries
become more active in the arc welding consumables business.
NON-VOTING SHARES
The Class A Common Shares have no voting rights other than upon the
occurrence of certain events described in the Company's Articles of
Incorporation and as required by Ohio law, generally relating to proposals that
would change the par value of the Class A Common Shares, alter or change the
express terms of those shares, or otherwise affect them in a substantially
prejudicial manner. Consequently, holders of Class A Common Shares will not be
entitled to elect directors or vote on other matters customarily decided by
shareholders, such as mergers, consolidations or the sale of all or
substantially all of the Company's assets. See "Description of Capital Stock."
CONTROL BY LINCOLN FAMILY AND EMPLOYEES
Upon completion of the Offering (assuming no exercise of the Underwriters'
over-allotment options), the Lincoln Family (as defined herein) will
beneficially own approximately % of the Company's outstanding shares,
including % of the Company's voting shares. In addition, the Company estimates
that the Employee Constituency (as defined herein) will beneficially own
approximately % of the Company's outstanding shares, including % of the
Company's voting shares. Under Ohio law and the Company's Articles of
Incorporation, certain transactions, including certain mergers or
consolidations, and amendments to the Company's Articles of Incorporation,
require the approval of at least two-thirds of the voting power of the Company.
Consequently, in the event the Lincoln Family and/or the Employee Constituency
vote together, they will have the effective ability to direct the affairs of the
Company or to block approval of certain transactions. Holders of Common Shares
who also hold Class A Common Shares can sell Class A Common Shares without
adversely affecting their voting power. See "Selling Shareholders" and
"Description of Capital Stock."
As used herein, the term "Lincoln Family" means any person who is a
descendant of, or who is related by blood or marriage to a descendant of, James
F. Lincoln or John C. Lincoln, any trusts or similar arrangements for any of the
foregoing, any foundations established by any of the foregoing, the Estate of
Helen C. Lincoln (and any executor or administrator thereof) and any corporation
(other than the Company) or partnership in which a majority of the outstanding
shares or partnership interests are owned by any of the foregoing. As used
herein, the term "Employee Constituency" means current and former employees of
the Company and their relatives (including the Company's Employee Stock
Ownership Plan, the "ESOP").
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of Common Shares or Class A Common Shares by the Company or
its existing shareholders could adversely affect the prevailing market price of
the Class A Common Shares. The Company, its directors and executive officers,
the Selling Shareholders and certain other of its existing shareholders have
agreed that they will not for a period of 180 days following the date of this
Prospectus, without the prior written consent of the representatives of the
Underwriters, offer, sell, contract to sell or otherwise dispose of any Common
Shares or Class A Common Shares or any security convertible or exchangeable into
or exercisable for Common Shares or Class A Common Shares. Following the
Offering, the Company's directors and executive officers, the Selling
Shareholders and such other of its existing shareholders will hold in the
aggregate approximately % of the Company's Common Shares and % of the
Company's Class A Common Shares.
8
<PAGE> 13
Although there is only a limited trading market for the Common Shares,
virtually all of the Common Shares, other than Common Shares held by affiliates
of the Company, are freely tradable. The Class B Common Shares are only issued
to the ESOP and are not freely tradable. In addition to the Class A Common
Shares offered hereby, the Board of Directors has declared a dividend consisting
of one Class A Common Share for each outstanding Common Share and Class B Common
Share. All of such Class A Common Shares, other than those held by affiliates of
the Company, a small number subject to certain contractual transfer restrictions
and those covered by agreements described in the preceding paragraph, will be
freely tradable. Shares held by affiliates of the Company are subject to certain
restrictions on resale under the Securities Act, but may be resold in accordance
with the volume and manner of sale restrictions of Rule 144 under the Securities
Act. Accordingly, sales of substantial amounts of Class A Common Shares or
Common Shares in the public market, or the perception that such sales may occur,
may adversely affect the trading price of the Class A Common Shares.
ANTI-TAKEOVER PROVISIONS AND STATE ANTI-TAKEOVER LAWS
Certain provisions of the Company's Articles of Incorporation and Code of
Regulations, as well as provisions of Ohio law, may have the effect of deterring
hostile takeovers or delaying or preventing changes in control or management of
the Company. As a result, shareholders may be denied an otherwise available
opportunity to receive a premium for their shares. See "Description of Capital
Stock -- Anti-Takeover Provisions and State Anti-Takeover Laws."
ABSENCE OF PUBLIC TRADING MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Class A
Common Shares and only a limited trading market for the Common Shares. The
Company has applied for listing of the Class A Common Shares and the Common
Shares for quotation on the NASDAQ National Market. However, there can be no
assurances that an active trading market for either class of shares will develop
or be sustained after the Offering. Accordingly, no assurance can be given as to
the liquidity of the market for the Class A Common Shares or the price at which
any sales may occur, which price will depend upon the number of holders thereof,
the interest of securities dealers in maintaining a market in the Class A Common
Shares and other factors beyond the control of the Company. The initial public
offering price was determined solely by negotiations among the Company and the
representatives of the Underwriters based on several factors and does not
necessarily reflect the market price of the Class A Common Shares after the
Offering. The market price of the Class A Common Shares could be subject to
significant fluctuations in response to the Company's operating results and
other factors, and there can be no assurance that the market price of the Class
A Common Shares will not decline below the initial public offering price. See
"Underwriting." The Class A Common Shares may trade at prices above, below or
the same as the prices at which the Common Shares trade. It is currently
anticipated that there will be a greater number of Class A Common Shares
available in the market than Common Shares; however, there can be no certainty
that such will always be the case and a substantial increase in the number of
Common Shares available in the market may adversely affect the trading price of
the Class A Common Shares.
9
<PAGE> 14
THE COMPANY
The Company was founded in 1895 by John C. Lincoln and originally
manufactured electric motors and generators. The Company entered the arc welding
business, then in its infancy, in 1911. The Company is widely recognized for its
implementation of the "incentive management system" developed by John C.
Lincoln's brother, James F. Lincoln, who headed the Company from 1914 to 1965.
This system currently extends to substantially all full-time employees at the
Company's core United States operations (consisting of its arc welding products
and industrial electric motors production facilities located near Cleveland,
Ohio) as well as to employees in its long established operations in Canada and
Australia. The system is based on several key concepts including (i) shared
benefits from increased productivity and performance-based pay; (ii) fair
treatment for all constituents, including valuing the employee as an individual,
open communications between employees and managers, and service to the customer
as a primary constituent; and (iii) displaying the highest integrity and ethics
in all aspects of doing business. The Company currently implements these
principles through several practices:
- Piece Rate Pay -- Production employees receive no base salary but are
instead compensated on a piecework basis (i.e., the number of quality
units produced times a per unit price). There is no limit to the amount
of piecework compensation that can be earned.
- Guaranteed Employment -- The Company guarantees that each employee who
has been employed by the Company's core United States operations for at
least three years and who continues to maintain a satisfactory
performance level will have the opportunity to work a minimum of 75
percent (or 30 hours) of a normal work week, but does not guarantee the
rate of compensation. The Company has the right to transfer employees to
other jobs as needed and to require them to work overtime as required,
which contributes to a flexible response to production needs. The Company
has reserved the right to terminate the guarantee by giving notice of
such termination not less than six months prior to the end of any given
year.
- Open Communications -- Employees are encouraged to bring new ideas
forward and, through the bonus, share in the rewards of producing better
products. Open communications are furthered by a formal advisory board
that focuses on increasing Company productivity, efficiency and quality
control. The advisory board meets semi-monthly with the Chairman of the
Board or President, maintaining a tradition started in 1914.
- Promotion From Within -- The Company maintains a policy of promotion from
within for qualified applicants. Any employee is entitled to apply for
open jobs that are posted on employee bulletin boards.
- Merit Rating System -- Employees are rated semiannually on four
categories: ideas and cooperation, output, dependability and quality. An
employee's rating determines his/her share of any results-based bonus
money available. This system provides incentive for individual
achievement while recognizing the value of teamwork.
- Bonus -- Employees share in the results of increased operating
efficiency. Since 1934, workers have received year-end bonuses based on
their performance and Company results. During the last ten years these
bonuses have in the aggregate averaged 70 percent of pay.
The Company believes that the incentive management system results in many
benefits to overall Company performance, including high quality products, higher
productivity, substantial employee participation in manufacturing decisions,
flexibility to assign employees where they are most needed, retention of
employees, low employee absenteeism and improved control of expenditures in a
business downturn.
The Company's principal executive offices are located at 22801 St. Clair
Avenue, Cleveland, Ohio 44117.
10
<PAGE> 15
USE OF PROCEEDS
The net proceeds to be received by the Company from the Offering, after
deducting the underwriting discount and estimated offering expenses, are
estimated to be approximately $ million (approximately $ million if the
over-allotment option granted by the Company to the Underwriters is exercised in
full), assuming an initial public offering price of $ per share. The Company
will not receive any proceeds from the sale of Class A Common Shares by the
Selling Shareholders. The Company expects to apply all of the net proceeds to
reduce its outstanding indebtedness including amounts outstanding under the
existing multi-currency credit agreement ("Credit Agreement") and various
short-term bank obligations. Borrowings under the Credit Agreement and the
various short-term bank obligations have been used for a variety of general
corporate purposes, including capital expenditures and working capital.
The Credit Agreement permits borrowings of up to $200 million on a
revolving basis and currently expires on October 1, 1997, unless extended.
Interest on such borrowings can range from LIBOR (as defined in the Credit
Agreement) plus .375% to LIBOR plus 1.125%, depending on the defined leverage
rate. At March 31, 1995, borrowings under the Credit Agreement had a weighted
average interest rate of 6.8%. At March 31, 1995, borrowings under these
short-term bank obligations had a weighted average interest rate of %. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and Note D of Notes to
Consolidated Financial Statements.
DIVIDEND POLICY
The Company has paid an annual dividend since 1915. Payment of future
dividends, however, will be at the discretion of the Company's Board of
Directors after taking into account various factors, including the Company's
financial condition, operating results, current and anticipated cash needs and
plans for expansion.
A total of $8.1 million in dividends was paid in 1994, including a special
dividend of $.02 per share ($0.2 million in the aggregate) in the fourth quarter
of 1994. Management has expressed its intention of not continuing the practice
of declaring special dividends in the future.
The Company's existing long-term debt agreements contain financial
covenants that place restrictions on the payments of dividends. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and Note D of Notes to
Consolidated Financial Statements.
11
<PAGE> 16
<TABLE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at
December 31, 1994, and as adjusted to give effect to the Recapitalization and
the Offering and the application of the estimated net proceeds therefrom. See
"Use of Proceeds." The information presented below should be read in conjunction
with the consolidated financial statements and related notes appearing elsewhere
in this Prospectus and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<CAPTION>
DECEMBER 31, 1994
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Notes payable to banks............................................ $ 15,843
Current portion of long-term debt................................. 2,272
-------- -----------
Total short-term debt.......................................... 18,115
Long-term debt:
Multi-currency Credit Agreement................................... 100,947
8.98% Senior Note due 2003........................................ 75,000
Other borrowings due through 2023, interest at 2.00% to 13.74%.... 21,156
Less current portion of long-term debt............................ (2,272)
-------- -----------
Total long-term debt........................................... 194,831
--------
Total debt..................................................... 212,946
Shareholders' equity:
Common Shares (1)................................................. 2,103
Class A Common Shares............................................. --
Class B Common Shares (2)......................................... 100
Additional paid-in capital........................................ 25,447
Retained earnings................................................. 176,965
Cumulative translation adjustments................................ (10,482)
-------- -----------
Total shareholders' equity..................................... 194,133
--------
Total capitalization......................................... $407,079 $
======== ===========
<FN>
- ---------------
(1) Formerly designated as Common Stock.
(2) Formerly designated as Class A Common Stock.
</TABLE>
12
<PAGE> 17
<TABLE>
SELECTED CONSOLIDATED FINANCIAL DATA
Set forth below are selected financial data of the Company for fiscal years
1990 through 1994, which have been derived from the Company's audited
consolidated financial statements for these years. All share and per share
information is adjusted for the Recapitalization. This information presented
below should be read in conjunction with the consolidated financial statements
and related notes appearing elsewhere in this Prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
INCOME STATEMENT DATA: 1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales..................................... $906,604 $845,999 $853,007 $833,892 $796,671
Cost of goods sold............................ 556,259 532,795 553,103 521,829 510,495
-------- -------- -------- -------- --------
Gross profit................................ 350,345 313,204 299,904 312,063 286,176
Distribution cost/selling, general &
administrative expenses..................... 261,681 277,003 299,195 271,715 259,211
-------- -------- -------- -------- --------
Operating income before restructuring....... 88,664 36,201 709 40,348 26,965
Restructuring charges (income)................ (2,735) 70,079 23,897 -- --
-------- -------- -------- -------- --------
Operating income (loss)..................... 91,399 (33,878) (23,188) 40,348 26,965
Interest income............................... 1,442 1,627 3,061 5,992 11,359
Other income.................................. 3,067 2,922 4,433 3,803 3,128
Interest expense.............................. (15,740) (17,621) (18,736) (15,732) (11,092)
-------- -------- -------- -------- --------
Income (loss) before income taxes and
cumulative effect of accounting change.... 80,168 (46,950) (34,430) 34,411 30,360
Income taxes (benefit)........................ 32,160 (6,414) 11,370 20,046 19,308
-------- -------- -------- -------- --------
Income (loss) before cumulative effect of
accounting change......................... 48,008 (40,536) (45,800) 14,365 11,052
Cumulative effect of accounting change........ -- 2,468 -- -- --
-------- -------- -------- -------- --------
Net income (loss)........................... $ 48,008 $(38,068) $(45,800) $ 14,365 $ 11,052
========= ========= ========= ========= =========
Net income (loss) per common share.......... $ 2.19 $ (1.75) $ (2.12) $ .67 $ .52
========= ========= ========= ========= =========
Weighted average number of common shares
outstanding (000's)......................... 21,940 21,704 21,593 21,580 21,389
PRO FORMA OPERATING RESULTS:(1)
Net income per common share...................
Weighted average number of common shares
outstanding (000's).........................
OPERATING DATA:
Net sales:
United States............................... $641,607 $543,458 $487,145 $459,768 $494,016
Non-United States........................... 264,997 302,541 365,862 374,124 302,655
Pre-tax profit (loss):
United States............................... $ 71,650 $ 42,570 $ 24,860 $ 45,742 $ 36,946
Non-United States........................... 9,465 (91,768) (60,011) (11,474) (6,396)
</TABLE>
13
<PAGE> 18
<TABLE>
<CAPTION>
DECEMBER 31, 1994
---------------------------------
ACTUAL AS ADJUSTED(2)
-------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.................................................... $169,310
Total assets....................................................... 556,857
Total debt......................................................... 212,946
Total liabilities.................................................. 362,724
Shareholders' equity............................................... 194,133
Ratio of total debt to total capitalization........................ 52.3%
<FN>
- ---------------
(1) The unaudited pro forma net income per common share gives effect to the
Offering and the application of the estimated net proceeds therefrom as set
forth under "Use of Proceeds" as if the same had occurred on January 1,
1994. The pro forma net income per common share does not purport to be
indicative of the results of operations that would have been achieved if the
transactions described above had actually occurred on January 1, 1994, or
that may be achieved in the future.
(2) The unaudited as adjusted balance sheet data gives effect to the Offering
and the application of the estimated net proceeds therefrom as set forth
under "Use of Proceeds" as if the same had occurred on December 31, 1994.
</TABLE>
14
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is engaged primarily in the design, manufacture and sale of arc
welding and other welding products, which represented 93% of the Company's 1994
net sales. The Company is one of the world's largest manufacturers of arc
welding products. The Company also designs, manufactures and sells integral
horsepower industrial electric motors.
In 1994, the Company reported the highest net sales, net income and net
income per common share in its history. This sales increase was broadly based
and was primarily attributable to increased volume, higher selling prices and
improved economic conditions in the United States, Canada and Europe. The
Company believes that the high quality of its products, advanced engineering
expertise and strong distributor network coupled with its large technically
trained sales force, has permitted the Company to increase global market share.
The Company's 1992 and 1993 earnings were negatively affected by
restructuring charges taken by the Company to consolidate and reorganize foreign
operations. In 1992, the Company recorded a restructuring charge of $23.9
million (without tax benefit, or $2.21 per share) as a result of decisions at
that time by management to downsize and streamline certain non-United States
operations (principally in Europe). The 1992 restructuring charge was primarily
for severance pay, redundancies and other liabilities relating to the
reorganization of the sales and distribution operations.
The Company decided in late 1993 to further restructure its European, South
American and Far Eastern operations. This resulted in the decision in early 1994
to terminate the operations of its Messer Lincoln subsidiary in Germany (the
"German Subsidiary") as well as manufacturing operations in Brazil, Venezuela
and Japan. Sales, marketing and distribution activities continue to be carried
on in these countries, other than Venezuela, by other affiliates of the Company.
The 1993 restructuring resulted in a charge of $70.1 million ($40.9 million
after-tax, or $3.77 per share). The elements of this charge were: (i) asset
writedowns in the amount of $45.9 million including goodwill of $8.9 million;
(ii) severance and other redundancy costs of $27.5 million; and (iii) a net
credit of $3.3 million comprised of a claim settlement and other restructuring
liabilities including estimated losses through the final facility closing dates
in 1994. To date, approximately 1,400 employees have been terminated as a result
of the 1992 and 1993 restructuring programs. The remaining cash outlays to
complete the restructuring are expected to be incurred in 1995 and 1996.
Management believes it has adequately provided for costs and expenses of the
restructuring. Although European sales and profitability remained constrained in
1994, the 1992 and 1993 restructuring programs have returned the Company's
European operations to profitability.
Research and development expenditures by the Company, excluding the German
Subsidiary expenditures, increased approximately 16.5% to $17.6 million in 1993
and increased 5.2% to $18.5 million in 1994. The Company believes that, over the
past three years, expenditures for research and development activities have been
adequate to maintain the Company's product lines and to introduce new products
at an appropriate rate to sustain future growth. Expenditures on research and
development are expected to increase in 1995.
15
<PAGE> 20
<TABLE>
RESULTS OF OPERATIONS
The following table shows the Company's results of operations for the years
ended December 31, 1994, 1993 and 1992:
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1994 1993 1992
--------------- --------------- ---------------
% OF % OF % OF
AMOUNT SALES AMOUNT SALES AMOUNT SALES
------ ----- ------ ----- ------ -----
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Net Sales........................................ $906.6 100.0% $846.0 100.0% $853.0 100.0%
Cost of Goods Sold............................... 556.2 61.3% 532.8 63.0% 553.1 64.8%
------ ----- ------ ----- ------ -----
Gross Profit................................... 350.4 38.7% 313.2 37.0% 299.9 35.2%
Distribution Cost/Selling
General & Administrative Expenses.............. 261.7 28.9% 277.0 32.7% 299.2 35.1%
------ ----- ------ ----- ------ -----
Operating Income before Restructuring.......... 88.7 9.8% 36.2 4.3% 0.7 0.1%
Restructuring Charges (income)................... (2.7 ) -0.3% 70.1 8.3% 23.9 2.8%
------ ----- ------ ----- ------ -----
Operating Income (loss)........................ 91.4 10.1% (33.9 ) -4.0% (23.2 ) -2.7%
Other Income..................................... 3.1 0.3% 2.9 0.3% 4.4 0.5%
Interest Expense, Net............................ (14.3 ) -1.6% (16.0 ) -1.9% (15.6 ) -1.8%
------ ----- ------ ----- ------ -----
Income (loss) before Income Taxes.............. 80.2 8.8% (47.0 ) -5.6% (34.4 ) -4.0%
Income Taxes (benefit)........................... 32.2 3.5% (6.4 ) -0.8% 11.4 1.3%
Income (loss) before Cumulative effect of
Accounting Change............................ $48.0 5.3% $(40.6) -4.8% $(45.8) -5.3%
Cumulative effect to January 1, 1993 of change in
method of accounting for income taxes.......... 2.5 .3%
------ ----- ------ ----- ------ -----
Net Income (loss)................................ $48.0 5.3% $(38.1) -4.5% $(45.8) -5.3%
======== ===== ======== ===== ======== =====
</TABLE>
1994 COMPARED TO 1993
Net Sales. Net sales for 1994 were $906.6 million, an increase of $60.6
million or 7.2% from $846.0 million for 1993. Net sales for 1993 include the
sales of manufacturing operations (principally in Germany) that were closed in
early 1994. Excluding the 1993 sales of the closed operations, sales for 1994
increased 17.0%. A portion of this increase was due to the absorption by the
Company's other manufacturing operations of the sales formerly made by the
closed operations. Sales from the Company's United States 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-United States 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-United States sales for 1994 increased
14.7% over non-United States sales for 1993 reflecting improved economic
conditions in Europe and elsewhere in the world. A portion of this increase was
also due to the absorption by the Company's other manufacturing operations of
the sales formerly made by the Company's closed German Subsidiary. Total United
States export sales were $105.3 million in 1994, an increase of $18.1 million or
20.8% from $87.2 million in 1993. This increase in export sales largely reflects
improved worldwide economic conditions. In 1994, sales of certain new products
were restricted by capacity limitations inherent in tooling up production which
have now been resolved.
Gross Profit. Gross profit increased to $350.4 million in 1994 as compared
with $313.2 million in 1993. Gross profit as a percentage of sales improved to
38.7% in 1994 from 37.0% in 1993. This improvement in gross profit is largely
attributable to a greater percentage of total sales coming from the higher
margin United States operations in 1994. In addition, 1993 gross profit was
unfavorably affected as it included lower gross profit levels for the
manufacturing operations that were closed in early 1994. Gross profit for the
Company's United States operations in 1994 remained substantially consistent
with 1993 at 40.2%.
Distribution Cost/Selling, General & Administrative Expenses. Distribution
cost/selling, general & administrative expenses were $261.7 million in 1994, or
28.9% of sales (28.6% at the Company's United States
16
<PAGE> 21
operations), as compared to $277.0 million, or 32.7% of sales in 1993 (29.9% at
the Company's United States operations). The decrease in these expenses as a
percentage of sales evidences the effects of the closing of the German
Subsidiary, the Company's restructuring program and management's initiatives to
control operating costs throughout the Company. The higher expense level in 1993
was principally due to the inclusion of the operating results of the Company's
closed German Subsidiary. Included in distribution cost/selling, general &
administrative expenses are the costs ($68.4 million in 1994 and $61.9 million
in 1993) related to the Company's discretionary employee bonus program.
Interest Expense, Net. Interest expense, net was $14.3 million in 1994 as
compared with $16.0 million in 1993, a decrease which reflects the effect of
lower debt levels offset partially by higher interest rates.
Income Taxes. Income taxes in 1994 were $32.2 million on income before
income taxes of $80.2 million, an effective rate of 40.1%, as compared to a tax
benefit of $6.4 million on a loss before income taxes of $47.0 million in 1993.
The 1993 tax benefit principally reflects the tax benefits attributable to the
plant closure and liquidation of the German Subsidiary. Results from 1993 also
benefited from the cumulative effect of a change in accounting for income taxes,
which decreased the net loss by $2.5 million or $0.23 per share.
Net Income. As a result of the restructuring programs in 1992 and 1993 and
the improvement in economic conditions in Europe, the United States and Canada,
net income for 1994 was $48.0 million as compared to a net loss of $38.1 million
in 1993. Results in 1993 were adversely affected by a $40.9 million net-of-tax
restructuring charge. 1994 results benefited from a net reversal of $2.7 million
of restructuring charges recorded previously.
1993 COMPARED TO 1992
Net Sales. Net sales for 1993 were $846.0 million, a decrease of $7.0
million or less than 1.0% from 1992 sales of $853.0 million. Excluding the 1993
and 1992 sales of the operations closed in early 1994, sales increased 5.7%.
Sales from the Company's United States operations in 1993 were $543.5 million or
11.6% higher than 1992 sales of $487.1 million, attributable to volume and price
increases. Non-United States sales in 1993 were $302.5 million compared to
$365.9 million in 1992, a decrease of 17.3%. Excluding the sales of operations
closed in early 1994, non-United States sales for 1993 decreased 5.8% from 1992
non-United States sales. Currency translation adversely affected these 1993
sales by $23.5 million. Total United States export sales were $87.2 million in
1993, a decrease of $10.4 million or 10.6% from $97.6 million in 1992. This
decrease in export sales reflects the depressed economic conditions in Europe
and lower intercompany export sales due to inventory reductions at the Company's
foreign subsidiaries.
Gross Profit. Gross profit increased to $313.2 million in 1993 as compared
with $299.9 million in 1992. Gross profit as a percentage of sales improved to
37.0% in 1993 (40.3% at the Company's United States operations) from 35.2% in
1992 (37.1% at the Company's United States operations). This improvement in
gross profit was largely attributable to United States sales volume increases
and improved absorption of manufacturing costs. Gross profit in 1993 was also
favorably impacted by reduced overhead costs as a result of restructurings in
1992 and reduced price pressures in Europe. In 1992, gross profit was adversely
affected by inventory adjustments as a result of management's decisions to
reduce certain inventory.
Distribution Cost/Selling, General & Administrative Expenses. Distribution
cost/selling, general & administrative expenses were $277.0 million in 1993, or
32.7% of sales (29.9% at the Company's United States operations), as compared to
$299.2 million, or 35.1% of sales in 1992 (31.3% at the Company's United States
operations). Expenses for 1993 include $3.7 million for asset disposals and
other non-recurring costs as compared to expenses for 1992 which include $18.9
million relating to certain one-time costs at the Company's closed German
Subsidiary, asset disposals and certain other non-recurring costs. Included in
distribution cost/selling, general & administrative expenses are the costs
($61.9 million in 1993 and $55.3 million in 1992) related to the Company's
discretionary employee bonus program.
Interest Expense, Net. Interest expense, net was $16.0 million in 1993 as
compared with $15.6 million in 1992, reflecting the use of credit facilities
with more favorable terms in 1993, offset by lower interest income in 1993.
17
<PAGE> 22
Income Taxes. The 1993 tax benefit of $6.4 million on a loss before income
taxes of $47.0 million compares to the 1992 provision for income taxes of $11.4
million on a loss before income taxes of $34.4 million. The 1993 tax benefit
principally reflects the tax benefits attributable to the plant closure and
liquidation of the German Subsidiary. The higher effective rate experienced in
1992 was principally due to losses from non-United States subsidiaries that were
in net operating loss carryover positions. Results from 1993 also benefited from
the cumulative effect of a change in accounting for income taxes, which
decreased the net loss by $2.5 million or $0.23 per share.
Net Loss. The net loss for 1993 was $38.1 million as compared to a net
loss of $45.8 million in 1992. Results were adversely affected by restructuring
charges of $40.9 million net-of-tax and $23.9 million without tax benefit in
1993 and 1992, respectively.
LIQUIDITY AND CAPITAL RESOURCES
During the three years ended December 31, 1994, the Company has relied
primarily on cash flow from operations and borrowings to finance working
capital, investments, capital expenditures and the payment of dividends. Cash
provided from operating activities during 1994 amounted to $68.7 million, an
increase of $40.0 million over 1993. This increase in cash flow resulted
primarily from the Company's increase in net income; partially offset by
increased working capital requirements associated with increased sales volume.
Cash provided from operating activities amounted to $28.7 million in 1993 and
$23.6 million in 1992 despite net losses of $38.1 million and $45.8 million,
respectively.
In 1993, the Company acquired the outstanding minority interest in its
subsidiary in Spain for $8.5 million. In 1992, the Company acquired the
outstanding minority interest in its subsidiary Lincoln Norweld and a small
Mexican Company for a total of $37.3 million.
In October 1994, the Company amended its unsecured, multi-currency Credit
Agreement and reduced its committed line under the Credit Agreement from $230.0
million to $200.0 million. The amended Credit Agreement also permits the
establishment of an accounts receivable facility of up to $50 million. See Note
D to the consolidated financial statements for additional information regarding
the terms and financial covenants of the Company's borrowing arrangements. Under
such covenants, the Company's ability to borrow under the Credit Agreement at
December 31, 1994 was limited to aggregate borrowings of $176.9 million. At
December 31, 1994, $100.9 million was outstanding under the Credit Agreement.
Total debt at December 31, 1994 was $212.9 million compared to $250.3
million at December 31, 1993 reflecting the significantly improved 1994
financial results and cash flow from operating activities. At December 31, 1994,
total debt was 52.3% of total capitalization compared with 63.6% at year end
1993.
Capital expenditures for property, plant and equipment totaled $37.4
million in 1994 and $19.1 million in 1993. These expenditures for property,
plant and equipment represent the Company's continued commitment to support and
develop advanced technologies, support new products, expand current capacity and
reduce future manufacturing costs. The Company is continuing the modernization
and expansion of its motor division, has established a separate facility in
Cleveland dedicated to motor manufacturing and is increasing its testing and
design capacity to be able to reduce costs, increase output, and meet scheduled
higher industry efficiency standards.
The Company continues to closely monitor its capital expenditures and is
adding to capacity and modernizing facilities as necessary. While the financial
covenants of the Company's debt agreements place limitations on capital
expenditures, capital expenditures for 1995 are expected to increase over 1994
expenditures.
A total of $8.1 million in dividends, including a special dividend, was
paid in 1994. Although the Company paid a special dividend of $.02 per share in
the fourth quarter of 1994, management expressed its intention of not continuing
such a practice in the future. The Company's Credit Agreement and 8.98% Senior
Note Agreement contain various financial covenants that place limitations on the
payments of dividends, the purchase of unrestricted stock, capital expenditures,
and the incurrence of additional indebtedness. The losses of 1993 and 1992
placed constraints on the Company's financial flexibility, the impact of which
was reduced, but not eliminated, by the strong 1994 performance.
18
<PAGE> 23
BUSINESS
GENERAL
The Company is one of the world's largest designers and manufacturers of
arc welding products, manufacturing a full line of arc welding equipment and
consumable welding products. The Company, now entering its second century of
operations, also manufactures a broad line of integral horsepower industrial
electric motors. The Company's welding products are used in a wide range of
industrial applications, including the manufacturing of automobiles, trucks,
heavy machinery, railcars and ships, and the construction of buildings, bridges,
oil platforms and pipelines. The Company distributes its products through a
large, technically trained sales force and a broad distribution network.
According to market estimates, the Company believes that it maintains a
market leading 42% share of the United States arc welding consumables business
and a top-tiered share of the United States arc welding equipment business. The
Company also believes that it is the low-cost full line producer in the
approximately $750 million United States arc welding consumable products
business. To retain its leading position in the United States, the Company has
made substantial investments in facilities and equipment to improve production
efficiencies and further achieve manufacturing cost reductions.
The Company expects to build on its position as a leader in the domestic
arc welding industry with continued market penetration facilitated by a broad
range of new product offerings and further capacity additions. Furthermore,
management believes that long-term growth requires a strong global presence.
From 1985 to 1992, the Company expanded its international business by completing
12 acquisitions with operations in 13 foreign countries. In 1992, the Company,
under the leadership of newly promoted chief executive and chief operating
officers, refocused and redirected its global strategy and initiated a major
restructuring to downsize and streamline certain unprofitable operations in
Europe, South America and Japan. While in 1992 and 1993 the Company experienced
losses, primarily as the result of restructuring charges, the Company's domestic
arc welding operations maintained strong net sales and operating profitability.
In 1994, the Company reported the highest net sales, net income and net income
per common share in its history. In that same year, the Company's foreign
operations returned to profitability.
BUSINESS STRATEGY
The Company's business strategy is to continue to strengthen its operations
in the United States and internationally, and to exploit opportunities for
growth. Key elements of the Company's business strategy include:
- Manufacturing High Quality Products. The Company enjoys a worldwide
reputation for manufacturing consistently high quality, state of the art
products that are robust and rugged. Manufacturing efficiencies,
flexibility and quality are enhanced by the Company's high degree of
vertical integration. All of the Company's worldwide consumable
manufacturing facilities and its domestic machine and motor facilities
meet ISO 9002 standards. A key element of the Company's incentive
management system is the individual employee's responsibility for the
quality of the product produced. To support this quality accountability
system, the Company has established a sophisticated procedure to track
product output and quality at its plants.
- Highly Productive and Motivated Workforce. The Company's employees and
incentive management system are essential components of the Company's
century of success. The Company believes its incentive management system
has increased productivity, led to enhanced operating flexibility and
contributed to the Company's industry leadership position. In the core
United States operations, absenteeism of less than 2%, and turnover rates
among employees with more than 180 days of service of approximately 4%,
help drive productivity, while management's ability to reassign employees
to where they are most needed provides greater operating flexibility. All
employees are encouraged and empowered to make suggestions for
improvements in quality, safety and cost reduction.
- Advanced Engineering Expertise. The Company is a leader in the
development of innovative, value added products. An example of the
Company's emphasis on advanced technology is its Consumables Research and
Development Department, which employs 61 engineers and technicians in the
design of manual electrodes, submerged arc electrodes and fluxes,
self-shielded cored electrodes, and gas-
19
<PAGE> 24
shielded solid and cored electrodes. All of the Company's research and
development departments provide technical support to the Company's
domestic and foreign operations. The efforts of its engineers, many of
whom have been granted patents and awards for their contributions to
welding technology, have helped the Company gain a global leadership role
in the design of welding products for such critical applications as gas
and oil pipelines, offshore drilling platforms and nuclear submarines.
- Strong Distribution Network. In the United States, the Company supports
the most extensive distribution network in the domestic welding industry.
The Company's domestic distribution network includes 1,000 welding
distributors, 1,050 motor distributors, and seven strategically located
distribution centers designed to deliver 95 percent of all standard
products within 48 hours. The Company has two distribution centers in
Canada that are fully integrated into the domestic sales and distribution
system. Although the Company restructured certain of its international
operations beginning in 1992, the Company has a substantial international
presence and a broad distribution network. The Company and its foreign
subsidiaries have approximately 1,250 distributors outside the United
States.
- Large, Technically Trained Sales Force. The Company's domestic sales
force primarily consists of engineers experienced in welding who, with
support from the Company's Welding Technology Center and Research and
Development and Engineering Departments, can provide the customer with
practical, timely and cost-saving solutions to problems. Located in 34
district offices, the Company's highly trained domestic sales force
numbers approximately 260 individuals, each with the ability to conduct
welding demonstrations and train distributor personnel in the use of the
Company's products. The Company utilizes this technical expertise to
present to end users its Guaranteed Cost Reduction Program in which the
Company guarantees that the user will save money in its manufacturing
process when it utilizes the Company's products. This close relationship
between the technical sales force and the end users, together with the
Company's supportive relationship with its distributors, who are
particularly interested in handling the Company's broad line of products,
is an important element of the Company's market success and a valuable
asset of the Company. The Company's foreign subsidiaries have a sales
force that totals more than 265 individuals, with approximately 130
operating out of the Company's various European subsidiaries. In
addition, the Company has an international export sales force that
functions overseas in more than 86 countries, primarily where the Company
does not have foreign subsidiaries. The Company maintains 20
international sales offices located in 17 countries.
- Focused Growth in New Markets. The Company believes that international
markets will provide expanded opportunities for increased sales of both
basic and advanced technology products. The Company recently received the
President's "E" Award for excellence in exporting. Part of the Company's
growth strategy is focused on marketing its existing products into
Central Europe, Asia, Latin America and other developing economies to
take advantage of the significant number of infrastructure projects
planned in these economies in the next decade. The Company believes that
the restructuring of its continuing European operations has provided it a
sound base for current and future distribution and sales growth in the
European market, including expansion into new markets in Central Europe.
The Company also believes that its long established presence in Australia
will continue to facilitate growing export sales to Indonesia and
Southeast Asia. While the Company maintains a sales organization in
Brazil, the Company's strong North American presence, including
manufacturing facilities in Canada and Mexico as well as the core United
States operations, will serve as the Company's principal base for
expansion into Latin America. The Company's strategy to gain entry in new
markets includes formation of joint ventures with local partners and the
use of licensing or private labeling arrangements to build market share
before engaging in capital intensive projects such as construction of
local manufacturing facilities.
Also as part of its growth strategy, the Company is expanding its
integral horsepower industrial electric motor facility and anticipates
continued development of this business. The Company is continuing the
modernization and expansion of its motor division, has established a
separate, world-class facility dedicated to motor manufacturing, and is
increasing its testing and design capacity to be able to reduce costs,
increase output, and meet scheduled higher industry efficiency standards.
20
<PAGE> 25
INDUSTRY BACKGROUND
Welding
Welding is a technique used for joining metallic parts usually through
applying intense heat supplied by electricity or by gas flame. Virtually any two
metal items can be joined by welding. There are many welding processes, with the
most common being arc welding, oxy-fuel welding and resistance welding. Arc
welding, which was first introduced at the end of the 19th century and today is
the most common industrial welding process, uses the concentrated heat of an
electric arc to join metal by fusion with a deposit of molten metal, typically
from a consumable electrode. The Company believes it is a worldwide leader among
arc welding manufacturers.
As part of the arc welding process, it is necessary to shield the molten
metal supplied by the electrode from oxygen or other gases in the atmosphere
that might otherwise react with the molten metal, creating undesirable
weaknesses in the weld. Process variations using different types of electrodes
have been developed to accomplish this objective, including "stick" electrodes
(the oldest form of arc electrode), metal inert gas ("MIG") wire electrodes,
tungsten inert gas ("TIG") wire electrodes, and submerged arc electrodes and
flux cored wire electrodes.
The MIG process, which may be the most utilized process in the United
States today involves a continuous, small diameter, consumable, metallic
electrode wire fed through a gun into the electric arc. An inert gas contained
in a high-pressure cylinder is also introduced by the gun and creates a shield
around the weld to prevent contamination. The gas pressure is limited with a
regulator that feeds a controlled amount of gas through a separate hose
integrated into the wire-feed tube. The process limits heat input to the
specific welding area to prevent distortion. MIG welding is especially useful
when joining sheetmetal as it limits distortion and warpage. Power for the arc
is provided by a power source integrated with electronic controls that allow the
user to adjust both wire speed and arc length. The thickness of the material to
be welded and the size of the weld dictate the amount of current to be used.
Arc welding is commonly used in light and heavy industry. Oxy-fuel welding
is more commonly used in maintenance repairs and in home workshops. The
Company's welding products are used in a wide range of industrial applications,
including the manufacturing of automobiles, trucks, heavy machinery, railcars
and ships, and the construction of buildings, bridges, oil platforms and
pipelines, and are also sold widely for non-industrial uses such as construction
and equipment repairs.
The Company believes the world market for welding and cutting equipment,
consumables and accessories was in excess of $8 billion in 1994. The United
States, Western Europe and Japan, as the three largest areas, account for
roughly 45% of that total market. Newly industrialized or developing areas
represent sizable welding products markets. For example, China's total welding
products market is believed to be rapidly approaching the size of the United
States welding products market.
The United States welding market in 1994 was estimated to exceed $1.5
billion, with approximately $1.4 billion constituting the arc welding business.
Of this amount, consumables represent $750 million and arc welding equipment
represents $620 million. The Company believes that, based on industry estimates,
it maintains a market leading 42% share of the United States consumables
business and a top-tiered share of the United States arc welding equipment
business.
Cutting
Virtually all users of welding products also utilize one or more processes
to cut and shape metal. Cutting processes include plasma, oxy-fuel and laser
cutting systems. The plasma cutting process involves a stream of ionized gas
that carries an electric arc through a small opening, resulting in high
concentrations of heat at the cut. The oxy-fuel process is a low-cost and highly
versatile process in which steel is preheated and a concentrated, high-velocity
stream of oxygen is introduced which can cut steel of unlimited thicknesses via
the exothermic process of oxidation. The Company participates in the cutting
industry in arc and plasma cutting equipment, and through its Harris Calorific
Division ("Harris") designs, manufactures and sells equipment and accessories
for the oxy-fuel cutting business.
21
<PAGE> 26
Industrial Electric Motors
The Company's Electric Motor Division operates in a $2.0 billion industrial
motor market. The Company estimates that it competes in a business segment of
$1.3 billion within this larger market. The industrial motor market will be
significantly impacted by federally legislated efficiency requirements which go
into effect at the end of 1997. The Company is currently redesigning its entire
product line in order to meet these federal efficiency standards.
PRODUCTS
Welding and Cutting
The Company's full line of arc welding equipment includes welding machines,
power sources and automated welding systems and ranges from basic units used for
light manufacturing, maintenance and farm use to highly sophisticated or heavy
duty machines used in robotic applications, high production welding and
fabrication. The Company manufactures arc welding products at facilities located
in the United States (2), Australia, Canada, Mexico, England, France, the
Netherlands, Norway (2) and Spain.
The Company is a leader in the development of welding equipment with
sophisticated applications. New welding equipment produced by the Company
provides end users with better control of the welding process, is easier for
less-experienced welders to operate and provides greater versatility, in many
cases at reduced cost. For example, high power solid state electronic switching
circuits for use in static welding power sources permit the control of the
welding current to produce optimum arc characteristics. New advanced
computer-based circuits now control the output of welding power sources to
develop customized welding wave shapes, making machines such as the Company's
Power Wave(TM) more user-friendly by storing specific applications in memory and
assisting the operator in selecting the proper process and welding procedure.
Certain of the Company's recently developed products have enabled the use
of the welding process in applications that were not previously feasible. For
example, the Company recently introduced the surface-tension-transfer
("STT(TM)") power source which was developed to enable the welding of
light-gauge materials that were not suited for the traditional welding process.
The Company is currently the only manufacturer to offer the technology provided
by the STT in a reliable form. Such technology is the result of the Company's
commitment to product development and its strategy to be on the leading-edge of
welding technology with broad customer application. This strategy has also
resulted in an increased focus on welding automation, including the increasing
growth of the Company's robot welding systems. The Company offers automation
systems through its worldwide sales and distribution network.
The Company's consumable products, designed for use in conjunction with arc
welding equipment, include a full line of manual electrodes, fluxes and wires.
The Company's consumable products are used in light to heavy fabrication of mild
and alloy steels and in hardfacing applications. Hardfacing involves coating
metal surfaces with alloys to increase durability. Three primary types of arc
welding electrodes are produced: (i) coated manual or stick electrodes, (ii)
solid wire electrodes produced in coil form for continuous feeding in mechanized
welding, and (iii) cored wire electrodes produced in coil form for continuous
feeding in mechanized welding. Cored electrodes are used with no external
shielding (self-shielded), with gas shielding or with a granular flux for
submerged arc applications. The Company is the recognized leader in the
development of the self-shielded cored electrodes (Innershield(R)) which require
no external gas shielding. The unique technology embodied in these electrode
designs is used to great advantage in applications ranging from the high speed
welding of sheet metal for automotive applications to the fabrication of
offshore drilling platforms. In building construction, the Innershield process
is widely used because of its productivity and because the process is not
affected by wind conditions.
Low cost imports, when they are available due to market conditions, are a
threat in commodity-type consumables, such as MIG wire electrodes. See
"Investment Considerations -- Competition." The Company, therefore, is focused
on the development, manufacturing and marketing of value added products. The
Company's current consumables focus centers on premium MIG products while
long-term efforts will stress flux-cored wire and hardfacing. The Company
anticipates that premium MIG wire and flux-cored wire consumables will generate
continued growth, while stick and submerged arc products are expected to
22
<PAGE> 27
decrease, particularly in established economies such as the United States and
Western Europe. Stick arc technology is still prevalent in developing economies.
Focusing on higher technology products such as flux-cored wires and certain
welding subarc fluxes will offer the Company greater export opportunities as the
Company currently holds a significant technology advantage over local producers
in the target developing countries markets.
The Company also manufactures and sells regulators and torches used in
oxy-fuel welding and cutting, principally through its Harris division which has
been a recognized leader in the industry since 1905. Products offered by Harris
include regulators used in industrial and medical gas applications, torches used
in oxy-fuel welding and cutting and gas seals. Harris manufactures its products
domestically at facilities located in Gainesville, Georgia and Monterey Park,
California and internationally in Ireland and Italy. Harris' business in North
America has grown 30% since 1992. The Company attributes this growth to several
factors: (i) market penetration due to the synergy with the Company's core
marketing strength, since Harris and the Company share largely the same markets
and virtually 100% of the distribution channels, (ii) Harris regulator products
which are used in all of the gas-shielded arc welding processes, and (iii)
continuing improvements in quality and productivity through the sharing of
manufacturing technology and the incorporation of the Company's incentive
management principles. The Company believes that Harris' growth will largely
parallel that of the arc welding business.
Industrial Electric Motors
The Company designs, manufactures and sells a broad line of steel, aluminum
and cast iron frame integral horsepower electric motors for use in industrial
applications. In 1992, the Company acquired the industrial electric motor
operations of the Delco division of General Motors Corporation in Dayton, Ohio,
substantially expanding its market position and broadening its product line.
Presently, the Company's line of steel and aluminum frame industrial electric
motors ranges from 1/3 to 250 horsepower and up to 1,250 horsepower for cast
iron motors. The Company is continuing the modernization and expansion of its
motor division, has established a separate, world-class facility near Cleveland,
Ohio dedicated to motor manufacturing, and is increasing its testing and design
capacity to reduce costs, increase output and meet scheduled higher industry
efficiency standards. The Company anticipates that the growth of its industrial
motor business will reduce the impact of downturns in the arc welding industry.
The industrial electric motor industry's emphasis on increased system
efficiencies and lower maintenance costs has led to greater demand for AC motor
drives and variable speed motors. The Company is actively participating in the
AC motor business and seeks to expand its business in AC motor drives.
Custom designing value added products to meet particular applications,
especially with larger motors, is also a priority of the Company. Historically,
the Company participated primarily in that portion of the industrial motor
market that was the most competitive, with fairly standard products. The
addition of a cast iron product line in 1992, together with the recent addition
of new plant capacity and engineering expertise, has increased the Company's
ability to compete in a broader range of these value added products.
RESEARCH AND DEVELOPMENT
While arc welding has been used industrially since the late 19th century,
both equipment and consumables continue to experience technological advances
that improve the efficiency of welding equipment and processes, resulting in
improved quality and user savings on gas, energy, welding time and manpower
needs. The Company introduces a variety of new or updated products each year.
Special applications have created a market for value-engineered products that
can create a competitive advantage in markets, such as the United States, where
some welding products are reaching commodity status. The Company anticipates
continued growth in sales of automated welding systems as well as continuing
refinements to basic units.
The Company views excellence in product development as a continuing key
factor in its future success. The Company has greatly expanded the size of its
engineering staff at its core United States operations over the last ten years.
The Company invested approximately $18.5 million in research and development in
1994. These activities were primarily related to the development of new products
utilizing the latest available
23
<PAGE> 28
technology. As of December 31, 1994, the number of engineering employees engaged
full-time in these research and development activities was 113, supported by
more than 320 additional engineers and technical staff who assist in developing
new products through the manufacturing process.
SALES AND DISTRIBUTION; MARKETING
The Company's products are sold in both domestic and international markets.
Domestically, they are sold by distributors as well as directly by the Company's
own sales organization. The Company has an extensive arc welding distribution
network in the United States. In 1994, approximately 85% of the Company's arc
welding sales were through the Company's 1,000 distributors. The Company
maintains 34 district sales offices, all of which include training centers, and
seven distribution centers to provide for expedited delivery to customers. The
Company's highly trained domestic sales force numbers approximately 260
individuals, each with the ability to conduct welding demonstrations and train
distributor personnel in the use of the Company's products.
The Company believes its welding products have particular value because of
its highly trained technical sales force and the support of its research and
development staff which allow it to assist the consumers of its welding products
in solving their welding application problems. The Company utilizes this
technical expertise to present to end users its Guaranteed Cost Reduction
Program, in which the Company guarantees that the user will save money in its
manufacturing process when it utilizes the Company's products. The Company
evaluates a customer's current manufacturing operation as it relates to welded
fabrication. Based on the analysis of these details and the production targets
of the customer, a variety of cost reduction opportunities are presented. If the
customer implements these cost reduction ideas, the Company will "guarantee" a
specific dollar savings to be achieved on an annualized basis. If the customer
does not realize these savings, the Company will pay the customer for the
difference between the savings actually achieved and the "guarantee." In 1994,
the program contributed $14.8 million in new domestic sales without any claims
under the guarantee. The Guaranteed Cost Reduction Program allows the Company to
introduce its products to new users and to establish and maintain close
relationships with the consumers. This close relationship between the technical
sales force and the end users, together with the Company's supportive
relationship with its distributors, who are particularly interested in handling
the Company's broad line of products, is an important element of the Company's
market success and a valuable asset of the Company.
Although the Company restructured certain of its international operations
beginning in 1992, the Company has a substantial international presence and a
broad distribution network. The Company and its foreign subsidiaries have
approximately 1,250 distributors outside the United States. The Company's
foreign subsidiaries have a sales force that totals more than 265 individuals,
with approximately 130 operating out of the Company's various European
subsidiaries. In addition, the Company has an international export sales force
that functions overseas in more than 86 countries, primarily where the Company
does not have foreign subsidiaries. The Company maintains 20 international sales
offices located in 17 countries.
The Company enjoys substantial name brand recognition in its worldwide
markets. Much of its product recognition may be attributed to the Company's
active role in training welding operators and supervisors. Since 1917, the
Company's welding school has trained over 70,000 students, and its training
publications on welding are broadly distributed.
The industrial motor business is divided roughly equally between sales to
original equipment manufacturers ("OEMs") and to distributors. The Company's
domestic distribution network includes 1,050 motor distributors. In 1994,
approximately 60% of the Company's motor sales were through distributors and 40%
were sold directly to OEMs. Because over 50% of the Company's sales are for
replacement motors, the Company believes that its sales are less subject to an
economic downturn.
The Company markets its industrial electric motors to small and medium size
companies, while many of the Company's larger competitors focus on sales to the
larger OEMs. The Company believes it is well positioned to serve small and
medium size companies because of its large field sales force and distribution
system. Concentrating sales to specific targeted segments of the industrial
motor business is consistent with the Company's strategy of developing a niche
for offering high quality industrial motors with an emphasis on value
engineering.
24
<PAGE> 29
CUSTOMERS
The Company sells its products to a broad range of end users. Approximately
85% of its domestic sales are made through distributors and 15% by direct sales
to customers. The Company is not dependent on a single end-use customer. The
loss of any one end-use customer would not have a material adverse effect on its
business. The Company's business is not seasonal.
COMPETITION
Conditions in the arc welding industry are highly competitive. The Company
believes that it is one of only a few worldwide broad line manufacturers of both
arc welding equipment and consumables products. The industry also includes
numerous smaller competitors specializing in particular products. 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. The Company believes that its position as an industry leader
demonstrates that it competes effectively in these areas. See "Investment
Considerations -- Competition."
The marketplace for industrial electric motors is also very competitive.
The Company competes domestically with approximately nine other manufacturers.
According to industry sources, four competitors (Baldor, Reliance Electric,
Emerson/United States and General Electric) command approximately 60% of the
business. The remaining 40% is believed to be divided among the remaining six
companies, including the Company.
EMPLOYEES
As of December 31, 1994, the Company had 5,693 employees. None of the
employees at the Company's Australian, Canadian or United States operations are
unionized. Employees at the operations of the Company's Mexico and European
subsidiaries are unionized or are members of local work councils.
The Company's incentive management system today applies to substantially
all full-time employees at the Company's United States operations and in Canada
and Australia. Harris' domestic operations and the Company's operations in
Mexico have adopted portions of the system, and the Company is exploring methods
to bring the system to its operations in Europe, where workplace rules impede
adoption of certain aspects of the system.
LEGAL PROCEEDINGS
The Company is involved in various civil lawsuits and administrative
hearings arising in the ordinary course of business. Current litigation
involving the Company includes the following cases, in which claimants seek
recovery for injuries allegedly resulting from exposure to fumes and gases in
the welding environment. In management's opinion, the outcome of these matters
will not have a material adverse effect on the Company's financial condition,
liquidity or results of operations.
The Company is a co-defendant in nineteen cases alleging that exposure to
manganese contained in arc welding electrode products caused the plaintiffs to
develop a neurological condition known as manganism. The total number of
claimants in these cases is 27. The complaint in one of the cases pending in
Illinois was amended in late March 1995 to include class action allegations,
which the Company intends to contest. The plaintiffs seek compensatory and, in
most instances, punitive damages, usually for unspecified sums. Two similar
cases have been tried, both to defense verdicts.
The Company is also a defendant in one case, and one of several
co-defendants in four other cases, alleging that exposure to welding fumes
generally impaired the respiratory system of the plaintiffs. The plaintiffs seek
compensatory and punitive damages, in most cases for unspecified sums. During
the preceding five years, 38 similar cases have resulted in ten voluntary
dismissals, seven defense verdicts or summary judgments and 21 settlements for
immaterial amounts.
Claims pending against the Company alleging asbestos induced illness total
9,798; in each instance, the Company is one of a large number of defendants.
Approximately 4,407 of these asbestos claims are pending in
25
<PAGE> 30
Orange County, Texas and a motion to certify a class action, which is being
contested vigorously, is pending. The asbestos claimants seek compensatory and
punitive damages, in most cases for unspecified sums. 20 cases have been tried,
all to defense verdicts. Voluntary dismissals on such claims total 13,921;
summary judgments for the defense total 71.
The Company, together with the hundreds of co-defendants, is a defendant in
state court in Morris County, Texas, in litigation on behalf of 3,026 claimants,
all prior employees of a local pipe fabricator, alleging that occupational
exposures caused a wide variety of illnesses. The prayers 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.
26
<PAGE> 31
<TABLE>
MANAGEMENT
DIRECTORS
The Company's Board of Directors currently consists of 15 members elected
for terms of three years, classified into three classes. See "Investment
Considerations -- Anti-Takeover Provisions and State Anti-Takeover Laws" and
"Description of Capital Stock -- Anti-Takeover Provisions and State
Anti-Takeover Laws." The following table sets forth certain information
regarding the Company's directors.
<CAPTION>
NAME AGE POSITION
- ------------------------- --- --------------------------------------------------------
<S> <C> <C>
Harry Carlson 60 Vice Chairman of the Company since 1987 -- term expires
1997.
David H. Gunning 52 Director since 1987 -- term expires 1996. Chairman,
President and Chief Executive Officer of Capitol
American Financial Corp. (insurance company).
Donald F. Hastings 66 Chairman of the Board and Chief Executive Officer of the
Company since 1992; President of the Company 1987-1992
-- term expires 1996.
Edward E. Hood, Jr. 64 Director since 1993 -- term expires 1996. Former Vice
Chairman of the Board and Executive Officer of The
General Electric Company.
Paul E. Lego 64 Director since 1993 -- term expires 1996. President of
Intelligent Enterprises (consulting). Former Chairman
and Chief Executive Officer of Westinghouse Corp.
Hugh L. Libby 69 Director since 1985 -- term expires in 1997. Chairman of
the Board and Chief Executive Officer of Libby Corp.
(manufacturer of diesel/gas turbine generator sets and
aircraft ground power units).
David C. Lincoln 69 Director since 1958 -- term expires in 1997. Chairman of
the Board and Chief Executive Officer of Lincoln Laser
Co. (manufacturer of laser scanning equipment).
Emma S. Lincoln 72 Director since 1989 -- term expires 1996. Retired from
the practice of law for the past five years.
G. Russell Lincoln 48 Director since 1989 -- term expires 1997. Chairman of
the Board and Chief Executive Officer of Algan, Inc.
(manufacturer of industrial coatings and chemicals for
the printing industry).
Kathryn Jo Lincoln 40 Director -- term expires 1998. Vice Chair of The Lincoln
Institute of Land Policy and Vice President of The
Lincoln Foundation, Inc. (non-profit corporations for
educational purposes).
Frederick W. Mackenbach 64 President and Chief Operating Officer of the Company
since 1992; President of Lincoln Latin America
1991-1992; District Manager 1976-1991 -- term expires
1998.
Henry L. Meyer, III 45 Director since 1994 -- term expires 1997. Chairman of
the Board and Chief Executive Officer of Society
National Bank.
Lawrence O. Selhorst 62 Director since 1992 -- term expires 1998. Chairman of
the Board and Chief Executive Officer of American Spring
Wire Corporation (manufacturer of specialty wires).
Craig R. Smith 69 Director since 1992 -- term expires 1998. Former
Chairman and Chief Executive Officer of Ameritrust
Corporation (banking).
Frank L. Steingass 55 Director since 1971 -- term expires 1997. Chairman of
the Board and President of Buehler/Steingass, Inc.
(commercial printers).
</TABLE>
27
<PAGE> 32
<TABLE>
EXECUTIVE OFFICERS (EXCLUDING DIRECTORS)
The following table sets forth certain information about the Company's
executive officers (excluding Messrs. Hastings, Carlson and Mackenbach):
<CAPTION>
NAME AGE POSITION
- ------------------------- --- --------------------------------------------------------
<S> <C> <C>
David J. Fullen 63 Senior Vice President, Machine and Motor Division since
1994; Vice President -- Machine and Motor Division
1989-1994.
John M. Stropki 44 Senior Vice President, Sales since 1994; General Sales
Manager 1992-1994; District Manager 1986-1992.
Richard C. Ulstad 55 Senior Vice President, Consumable Division since 1994;
Vice President -- Manufacturing Electrode Division
1992-1994; Superintendent -- Electrode Division
1984-1992.
Frederick W. Anderson 42 Vice President, Manufacturing -- Machine and Motor
Division since 1994; Plant Manager Machine and Motor
Division 1993-1994; Plant Superintendent 1989-1993.
Paul J. Beddia 61 Vice President, Human Resources since 1989.
Dennis D. Crockett 52 Vice President, Consumable Research and Development
since 1993; Chief Engineer, Consumables Research and
Development 1987-1993.
James R. Delaney 46 Corporate Vice President and President Lincoln Latin
America since 1994; President Lincoln South America
1993-1994; Vice President of Lincoln Latin America 1992;
Vice President of Lincoln Mexicana 1988-1992.
H. Jay Elliott 53 Vice President, Chief Financial Officer, and Treasurer
since 1994; International Chief Financial Officer
1993-1994; prior thereto, Assistant Comptroller of The
Goodyear Tire & Rubber Company responsible at various
times for Corporate Strategic Planning, Finance Director
of North American Tires and International Vice
President-Finance.
Paul F. Fantelli 50 Vice President, Business Development since 1994;
Assistant to the Chief Executive Officer 1992-1994;
President and Chief Executive Officer of the Company's
subsidiary, Harris Calorific 1990-1992.
Anthony Massaro 51 Corporate Vice President and President Lincoln Europe
since 1994; Director of International Operations
1993-1994; prior thereto, as a corporate officer with
Westinghouse Electric Corporation, served as Vice
President and then as President and a Member of the
Management Committee with responsibilities worldwide.
Ronald A. Nelson 45 Vice President, Machine Research and Development since
1994; Chief Engineer -- Machine and Motor Division
1993-1994; Service Manager 1989-1993.
Richard J. Seif 47 Vice President, Marketing since 1994; Director of
Marketing 1991-1994; Project Manager 1989-1991.
Frederick G. Stueber 41 Vice President, General Counsel and Secretary since
February 1995; prior thereto, partner in the law firm of
Jones, Day, Reavis and Pogue.
John H. Weaver 56 Vice President, Export Sales since 1994; International
Sales Manager 1987-1994.
</TABLE>
28
<PAGE> 33
<TABLE>
SELLING SHAREHOLDERS
The Selling Shareholders listed in the following table are offering the
number of Class A Common Shares shown opposite their names, and have granted to
the several Underwriters options, exercisable within 30 days of the date hereof,
to purchase up to Class A Common Shares solely to cover over-
allotments, if any. The amounts shown as being beneficially owned by the Selling
Shareholders prior to the Offering are as of March 31, 1995.
<CAPTION>
CLASS A
COMMON SHARES COMMON SHARES
NUMBER OF NUMBER OF BENEFICIALLY OWNED BENEFICIALLY OWNED
CLASS A COMMON SHARES CLASS A AFTER THE OFFERING(1) AFTER THE OFFERING
BENEFICIALLY OWNED COMMON SHARES ------------------------ ------------------------
NAME OF BENEFICIAL OWNER PRIOR TO THE OFFERING OFFERED NUMBER PERCENTAGE NUMBER PERCENTAGE
- ------------------------ ------------------------- ------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
<FN>
- ---------------
* Less than one percent
(1) If the over-allotment options are exercised by the Underwriter in full, the number and percentage
of Class A Common Shares beneficially owned after the Offering will be: .
</TABLE>
29
<PAGE> 34
DESCRIPTION OF CAPITAL STOCK
COMMON EQUITY
The Company is authorized to issue up to a maximum of sixty-two million
(62,000,000) shares of Common Equity, consisting of thirty million (30,000,000)
Common Shares, thirty million (30,000,000) Class A Common Shares and two million
(2,000,000) Class B Common Shares. Following the Offering, the Company will have
outstanding Common Shares, Class A Common Shares and
Class B Common Shares. The shares of each class have the express terms
set forth in Article Fourth of the Company's Articles of Incorporation.
The powers, preferences and rights of the Common Shares, Class A Common
Shares and Class B Common Shares, and the qualifications, limitations and
restrictions thereof, will in all respects be identical, except as otherwise
required by law or as expressly provided in the Company's Articles of
Incorporation.
Voting. The holders of Class A Common Shares are entitled to vote only
under those circumstances set forth in the Ohio General Corporation Law,
generally relating to proposals that would change the par value of the Class A
Common Shares, alter or change the express terms of those shares, or otherwise
affect them in a substantially prejudicial manner. The non-voting status of the
Class A Common Shares is subject to the convertibility provisions described
below.
Subject to the Class A Protection provision described below, each Common
Share entitles the holder thereof to vote on all matters on which shareholders
are entitled to vote, including the election of directors. Similarly, each Class
B Common Share entitles the holder thereof to vote on all matters on which
shareholders are entitled to vote, including the election of directors. Except
as otherwise required by the Ohio General Corporation Law, the holders of Common
Shares and Class B Common Shares vote together as one class on all matters.
The holders of Common Shares and Class B Common Shares are entitled to
elect the entire Board of Directors. In addition, the holders of the Common
Shares and Class B Common Shares could vote to amend the Articles of
Incorporation in order to increase or decrease the number of authorized Class A
Common Shares (but not below the number of such shares outstanding).
Convertibility. None of the Common Shares, the Class A Common Shares or
the Class B Common Shares are convertible into another class of Common Equity or
any other security of the Company, except that all then outstanding Class A
Common Shares will convert into Common Shares on a share-for-share basis (i)
automatically on , 2005 (the date ten years from the
date of first distribution of the Class A Common Shares, which is anticipated to
be the payment date of the Distribution), unless the Board of Directors, acting
by a two-thirds majority and no earlier than 30 months and no later than 24
months prior to the initial or any subsequently established conversion date,
elects to extend the conversion of the Class A Common Shares for five years from
and after such conversion date, and any new conversion date and all subsequently
extended conversion dates which may be extended in a like manner and for a like
period; (ii) automatically at any time when the number of outstanding Common
Shares and Class B Common Shares falls below 20% of the aggregate number of
outstanding Common Shares, Class A Common Shares and Class B Common Shares; and
(iii) upon resolution of the Board of Directors if, as a result of the existence
of the Class A Common Shares, either the Common Shares or Class A Common Shares
are, or both are, excluded from quotation on the NASDAQ National Market and all
other national quotation systems then in existence and are excluded from trading
on all principal national securities exchanges then in existence. To the extent
that the market price of the Common Shares is higher or lower than the market
price of the Class A Common Shares immediately prior to such conversion, the
market price of the shares held by particular holders may be adversely affected
by the conversion.
Dividends. The Articles of Incorporation provide that no dividend will be
paid on any of the three classes of Common Equity unless an equal dividend is
paid on all three classes, subject to the following (i) if a cash dividend is
paid on one class of Common Equity, the dividend paid on the other two classes
will also be in cash; (ii) stock dividends on Class A Common Shares will be paid
only in shares of Class A Common Shares;
30
<PAGE> 35
(iii) a stock dividend on Class B Common Shares will be paid in the same class
of Common Equity as the stock dividend on Common Shares; and (iv) subject to the
limitations in (ii) and (iii), a stock dividend on Class A Common Shares paid in
Class A Common Shares will be considered equal to a stock dividend on Common
Shares and Class B Common Shares paid in any of the other classes of Common
Equity as long as the proportion is the same and regardless of any differences
in fair market value among the classes.
Mergers and Consolidations. In the event of a merger, consolidation or
combination of the Company with another entity (whether or not the Company is
the surviving entity) or in the event of dissolution of the Company, the holders
of Class A Common Shares will be entitled to receive the same per share
consideration as the per share consideration, if any, received by holders of
Common Shares and Class B Common Shares in that transaction. Accordingly, if
holders of Common Shares and Class B Common Shares receive shares of voting
stock as consideration in a merger, the holders of Class A Common Shares will
also be entitled to receive shares of such voting stock.
Stock Splits and Combinations. If the Company in any manner splits,
subdivides or combines the outstanding Common Shares, Class A Common Shares or
Class B Common Shares, the outstanding shares of the other such classes will be
proportionately split, subdivided or combined in the same manner and on the same
basis as the outstanding shares of the other classes that have been split,
subdivided or combined.
Class A Protection. It is possible that voting rights disproportionate to
equity ownership could be acquired through acquisitions of Common Shares without
corresponding purchases of Class A Common Shares. In order to reduce somewhat
the likelihood of Common Shares and Class A Common Shares trading at
significantly different market prices and to give holders of Class A Common
Shares the opportunity to participate in any premium paid in the future relating
to the acquisition of 15% or more of the Common Shares by a buyer who has not
acquired a proportionate number of Class A Common Shares, the Articles of
Incorporation include a "Class A Protection" feature, as described below. The
Class A Protection feature might have an anti-takeover effect by making the
Company a less attractive target for a takeover bid. See "Investment
Considerations -- Anti-Takeover Provisions and State Anti-Takeover Laws."
(Although Class B Common Shares have voting rights, Article Fourth of the
Articles of Incorporation contains restrictions on transfer of such shares. The
lack of an organized trading market in Class B Common Shares is therefore likely
to continue, making it unlikely that a significant number of Class B Common
Shares could be acquired in the market. Therefore, the Class A Protection
feature does not apply to acquisitions of Class B Common Shares.)
If any person or group, as defined below (excluding the Company, but
including members of the Lincoln Family), acquires beneficial ownership of 15%
or more of the then outstanding Common Shares, other than the Excluded Shares
(defined below), after , 1995, and such person or group
(a "Significant Shareholder") does not then own an equal or greater percentage
of all then outstanding Class A Common Shares, the Class A Protection provision
requires such Significant Shareholder to commence within a 90-day period
beginning the day after becoming a Significant Shareholder a public cash tender
offer to acquire additional Class A Common Shares, as described below (a "Class
A Protection Transaction"). The 15% ownership threshold of the number of Common
Shares which triggers a Class A Protection Transaction may not be waived by the
Board of Directors, nor may the Board of Directors amend this threshold in the
Articles of Incorporation without shareholder approval, including, under current
Ohio law, a two-thirds vote of the outstanding Class A Common Shares voting
separately as a class.
For purposes of determining the shares owned by a Significant Shareholder,
but not for the purposes of determining shares outstanding, the following Common
Shares will be excluded: (i) shares beneficially owned at
, 1995; (ii) shares acquired by will, by laws of
descent and distribution, by gift, or by foreclosure of a bona fide loan; (iii)
shares acquired from the Company; (iv) shares acquired by operation of law
(including a merger or consolidation effected for the purpose of recapitalizing
or reincorporating such person but not for the purpose of acquiring another
Person); (v) Common Shares received in exchange for Class A Common Shares if the
Class A Common Shares were acquired by the exchanging party directly from the
Company as a dividend on Common Shares; and (vi) shares acquired by or from a
qualified employee benefit plan of the Company (collectively, (i) through (vi),
"Excluded Shares").
31
<PAGE> 36
In a Class A Protection Transaction, the Significant Shareholder must offer
to acquire from holders of the Class A Common Shares at least that number of
additional Class A Common Shares (the "Additional Shares") determined by (i)
multiplying the percentage of the number of outstanding Common Shares that are
beneficially owned by such Significant Shareholder, and were acquired after
, 1995, by the total number of Class A Common Shares
outstanding on the date such Person or group became a Significant Shareholder;
and (ii) subtracting therefrom the excess (if any) of the number of Class A
Common Shares beneficially owned on such date over the number of Class A Common
Shares beneficially owned on , 1995, the date of the
Distribution. The Significant Shareholder must acquire all Class A Common Shares
validly tendered or, if the number of shares tendered exceeds the number
determined pursuant to such formula, a pro-rata number from each tendering
holder (based on the number of shares tendered by each tendering shareholder).
The offer price for any shares required to be purchased by the Significant
Shareholder pursuant to this provision would be the greatest of: (i) the highest
price per share paid by the Significant Shareholder for any Common Share or
Class A Common Share in the six-month period ending on the date such Person or
group became a Significant Shareholder; (ii) the highest sale price of a Common
Share or Class A Common Share on the NASDAQ National Market (or such other
securities exchange or quotation system as is then the principal trading market
for such class of Common Equity) during the thirty-day period preceding the date
such person or group became a Significant Shareholder; or (iii) the highest
reported sale price for a Common Share or Class A Common Share on the NASDAQ
National Market (or such other securities exchange or quotation system
constituting the principal trading market for such class of Common Equity) on
the business day preceding the date the Significant Shareholder commences the
required tender offer.
If a Significant Shareholder fails to undertake a Class A Protection
Transaction within the time provided therefor, the voting rights of all of the
Common Shares beneficially owned by such Significant Shareholder, regardless of
when such shares were acquired, would be automatically suspended until
completion of a Class A Protection Transaction or until divestiture of the
excess Common Shares that triggered such requirement. To the extent that the
voting power of any Common Shares is so suspended, such shares will not be
included in the determination of aggregate voting shares for any purpose.
A Class A Protection Transaction would also be required of any Significant
Shareholder that acquires (other than any Excluded Shares) an amount equal to or
greater than the next highest integral multiple of 5% (e.g., 20%, 25%, 30%,
etc.) of the outstanding Common Shares after , 1995 and
such Significant Shareholder does not own an equal or greater percentage of all
then outstanding Class A Common Shares that such Significant Shareholder
acquired after , 1995, the date of the Distribution.
Such Significant Shareholder would be required to offer to buy that number of
Additional Shares prescribed by the formula set forth above; provided that, for
purposes of such formula, the date on which the Significant Shareholder acquired
the next highest integral multiple of 5% of the outstanding Common Shares will
be deemed to be the date on which such person or group became a Significant
Shareholder.
The requirement to engage in a Class A Protection Transaction will be
satisfied by making the requisite offer and purchasing validly tendered shares,
even if the number of shares tendered is less than the number of shares included
in the required offer. If any Significant Shareholder fails to make the required
tender offer, or to purchase shares validly tendered (after proration, if any),
the voting rights of all Common Shares owned by such Significant Shareholder
will be automatically suspended until consummation of an offer as required by
the terms of the Class A Protection feature or until divestiture of the excess
Common Shares that triggered the tender offer requirement.
Neither the Class A Protection Transaction requirement nor the related
possibility of suspension of voting rights applies to any increase in percentage
ownership of Common Shares resulting solely from a change in the total number of
Common Shares outstanding. All calculations with respect to percentage ownership
of outstanding shares of either class of Common Equity are to be based upon the
number of outstanding shares reflected in either the records of or a certificate
from the Company's stock transfer agent or reported in the last to be filed of
the Company's Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current
Report on Form 8-K, Form 10-C or definitive proxy statement.
32
<PAGE> 37
Since the definition of Significant Shareholder is based on the beneficial
ownership percentage of Common Shares acquired after , 1995, a
person or group who is a shareholder of the Company at , 1995 will
not become a Significant Shareholder unless such person or group acquires an
additional 15% of the then outstanding Common Shares, regardless of the number
of Common Shares owned prior to , 1995.
The Class A Protection provision does not prevent any person or group from
acquiring a significant or controlling interest in the Company, provided such
person or group acquires a proportionate percentage of the Class A Common
Shares, undertakes a Class A Protection Transaction or incurs suspension of the
voting rights of Common Shares as provided by the Class A Protection feature. If
a Class A Protection Transaction is required, the purchase price to be paid in
such offer may be higher than the price at which a Significant Shareholder might
otherwise be able to acquire an identical number of Class A Common Shares. Such
requirement could make an acquisition of a significant or controlling interest
in the Company more expensive and, if the Class A Protection Transaction is
required, more time consuming, than if such requirement did not exist.
Consequently, a person or group might be deterred from acquiring a significant
or controlling interest in the Company as a result of such requirement.
Moreover, by restricting the ability of an acquiror to acquire a significant
interest in the Common Shares by paying a "control premium" for such shares
without acquiring, or paying a similar premium for, Class A Common Shares, the
Class A Protection feature is designed to help reduce or eliminate any discount
on either of these classes of Common Equity.
There can be no assurance that a person or group will be readily
identifiable as a Significant Shareholder. Although the Federal securities laws
currently require persons or groups holding 5% or more of the Common Shares or
the Class A Common Shares to file reports with the Commission and the Company
specifying the level of their ownership, there can be no assurance that a person
or group will comply with such laws or that alternative methods of identifying
such holders will be available. Accordingly, the benefits of the Class A
Protection feature may be difficult to enforce.
Preemptive Rights. None of the Common Shares, the Class A Common Shares or
the Class B Common Shares will carry any preemptive rights enabling a holder to
subscribe for or receive shares of the Company of any class or any other
securities convertible into any class of the Company's shares.
Sales and Repurchases. The Articles of Incorporation expressly permit the
Board of Directors to authorize the sale of a class of shares even though a
higher price could be obtained by selling shares of another class. The Articles
of Incorporation also expressly permit the Board of Directors to repurchase
shares of any class even though a lower price could be obtained by repurchasing
the shares of another class.
Transferability. The Common Shares and the Class A Common Shares will be
freely transferable, subject to the existing Incentive Equity Plan ("IEP")
restrictions on shares issued pursuant to such plan (and to certain contractual
restrictions with respect to 15,000 Common Shares and a like number of Class A
Common Shares to be received with respect thereto, held by a former officer of
the Company). There is no established trading market for the Class B Common
Shares because such shares are subject to the Company's right to repurchase
contained in the Articles of Incorporation in the event of the death of the
holder of Class B Common Shares or upon certain determinations by a holder of
Class B Common Shares to dispose of such shares.
Shareholder Information. The Company will deliver to the holders of Class
A Common Shares the same proxy statements (without proxies except as required by
law), annual reports and other information and reports as it delivers to holders
of Common Shares and Class B Common Shares.
Class B Repurchase Provision. The Articles of Incorporation grant the
Company a first right to purchase Class B Common Shares from any holder of Class
B Common Shares who makes certain determinations to dispose of or in any manner
encumber such shares or upon the death of any holder. No sale, assignment,
transfer, pledge, encumbrance or any other disposition of any Class B Common
Shares may be made unless such Class B Common Shares are first offered to the
Company. Class B Common Shares may be freely disposed of by the holder only if
the Company does not exercise its option to purchase any or all of the
33
<PAGE> 38
Class B Common Shares offered to it. Any Class B Common Shares disposed of
pursuant to this procedure continue to be subject to the terms and conditions of
the Class B Repurchase Provision contained in the Company's Articles of
Incorporation.
ANTI-TAKEOVER PROVISIONS AND STATE ANTI-TAKEOVER LAWS
Control of the Company by the Lincoln Family and employees of the Company,
as well as certain statutory provisions of Ohio law and the Company's Articles
of Incorporation and Code of Regulations may have the effect of deterring
hostile takeovers or delaying or preventing changes in control or management of
the Company, including transactions in which shareholders might otherwise
receive a premium for their shares over the then current market prices. In
particular, Article Eighth of the Company's Articles of Incorporation, which
contains requirements for approval of certain business combinations by
"Disinterested Shareholders," and the Class A Protection feature contained in
Article Fourth of the Company's Articles of Incorporation, which requires any
person or group who acquires beneficial ownership of 15% or more of the
outstanding Common Shares after , 1995, acquire an equal or
greater percentage of all then outstanding Class A Common Shares, might have an
anti-takeover effect by making the Company a less attractive target for a
takeover bid. Also, the Company's Board of Directors is classified, so that only
one-third of the Directors are subject to election at any one annual meeting of
the shareholders. In addition to having a potential anti-takeover effect,
classification reduces the ability to alter the composition of the Board of
Directors.
Further, Ohio law prohibits any person who owns 10% or more of a company's
stock from engaging in mergers, consolidations, majority share acquisitions,
asset sales, loans and certain other transactions with the corporation for a
three-year period after acquiring the 10% ownership, unless approval is first
obtained from the corporation's board of directors. After the three-year waiting
period, the 10% shareholder can complete the transaction only if, among other
things: (i) approval is received from two-thirds of all voting shares and from a
majority of shares not held by the 10% shareholder or certain affiliated
persons; or (ii) the transaction meets certain criteria designed to ensure
fairness to all remaining shareholders.
In addition, the acquisition of shares entitling the holder to exercise
certain levels of voting power of the Company (one-fifth or more, one-third or
more, or a majority) can be made only with the prior authorization of (i) the
holders of at least a majority of the total voting power and (ii) the holders of
at least a majority of the total voting power held by shareholders other than
the proposed acquirer, officers of the Company elected or appointed by the
Directors, and Directors of the Company who are also employees and excluding
certain shares that are transferred after the announcement of the proposed
acquisition and prior to the vote with respect to the proposed acquisition. In
light of the fact that, upon completion of the Offerings, the current
shareholders of the Company will own % of the Company's outstanding Common
Shares and Class B Common Shares, acquisitions of the foregoing levels of voting
power by third parties may not be possible unless the current shareholders of
the Company vote in favor thereof.
TRANSFER AGENT AND REGISTRAR
KeyCorp Shareholder Services, Inc., Cleveland, Ohio, serves as the Transfer
Agent and Registrar for the Common Shares, and is expected to be the Transfer
Agent and Registrar for the Class A Common Shares.
34
<PAGE> 39
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement"), the Company and the Selling Shareholders have agreed to
sell to each of the Underwriters named below, and each of the Underwriters, for
whom Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), J.P.
Morgan Securities Inc. and McDonald & Company Securities, Inc. are acting as
representatives (the "Representatives"), have severally agreed to purchase from
the Company and the Selling Shareholders, the respective number of Class A
Common Shares set forth opposite its name below at the initial public offering
price less the underwriting discount set forth on the cover page of this
Prospectus. In the Purchase Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
Class A Common Shares offered hereby if any of such shares are purchased. In the
event of default by an Underwriter, the Purchase Agreement provides that, in
certain circumstances, the purchase commitments of the nondefaulting
Underwriters may be increased or the Purchase Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.........................................
J.P. Morgan Securities Inc........................................
McDonald & Company Securities, Inc................................
---------
Total................................................
==========
</TABLE>
The Representatives have advised the Company and the Selling Shareholders
that the Underwriters propose initially to offer the Class A Common Shares to
the public at the initial public offering price set forth on the cover page of
this Prospectus, and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per share to certain other
dealers. After the initial public offering, the offering price and other selling
terms may be changed by the Representatives.
The Company and the Underwriters have agreed to reserve up to
of the Class A Common Shares offered hereby for sale by the Underwriters to
certain eligible employees and other designees of the Company at the initial
public offering price set forth on the cover page of this Prospectus. Any
reserved Class A Common Shares not purchased by such persons will be offered by
the Underwriters to the public on the same basis as the other Class A Common
Shares offered hereby. Participants in the reserved share program have agreed
not to make any disposition of such Class A Common Shares for a period of
days after the date of this Prospectus without the consent of Merrill Lynch.
The Company and the Selling Shareholders have each granted to the
Underwriters options, exercisable for 30 days after the date of this Prospectus,
to purchase up to an additional Class A Common Shares from the
Company and Class A Common Shares from the Selling Shareholders at the
initial public offering price set forth on the cover page hereof, less the
underwriting discount. The Underwriters may exercise such options only to cover
over-allotments, if any, made in connection with the sale of Class A Common
Shares offered hereby. To the extent that the Underwriters exercise these
options, each Underwriter will have a firm commitment, subject to certain
conditions, to purchase approximately the same percentage of such shares that
the number of Class A Common Shares to be purchased by it shown in the foregoing
table bears to the total number of Class A Common Shares initially offered by
the Underwriters hereby. If purchased, the Underwriters will offer such
additional shares on the same terms as those on which the initial shares are
being offered.
The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including certain liabilities under
the Securities Act.
35
<PAGE> 40
The Company, its directors and executive officers, the Selling Shareholders
and certain other of its existing shareholders have agreed that they will not
for a period of 180 days from the date of this Prospectus, without the prior
written consent of the Representatives, offer, sell, contract to sell or
otherwise dispose of any Common Shares or Class A Common Shares, or any security
convertible or exchangeable into or exercisable for Common Shares or Class A
Common Shares, except that the Company may, without such consent, issue Common
Shares or Class A Common Shares pursuant to reservations, agreements or employee
benefit plans referred to herein. Following the Offering, the Company's
directors and executive officers, the Selling Shareholders and such other of its
existing shareholders will hold in the aggregate approximately % of the
Company's Common Shares and % of the Company's Class A Common Shares.
Prior to the offering, there has been no public market for the Class A
Common Shares. Consequently, the initial public offering price for a Class A
Common Share has been determined by negotiations between the Company and the
Representatives. Among the factors considered in such negotiations were
prevailing market conditions, the results of operations of the Company in recent
periods, the market capitalizations of other companies which the Company and the
representatives believe to be comparable to the Company, estimates of the
business potential of the Company, the prospects for earnings, and other factors
deemed relevant.
Morgan Guaranty Trust Company of New York, an affiliate of J. P. Morgan
Securities Inc., is a participant under the Credit Agreement.
LEGAL MATTERS
The validity of the Class A Common Shares offered hereby will be passed
upon for the Company by Jones, Day, Reavis & Pogue, Cleveland, Ohio. Certain
legal matters will be passed upon for the Underwriters by Mayer, Brown & Platt,
Chicago, Illinois.
EXPERTS
The consolidated financial statements of The Lincoln Electric Company at
December 31, 1994 and 1993, and for each of the three years in the period ended
December 31, 1994, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing elsewhere herein which, as to the years 1994, 1993 and
1992, are based in part on the reports of Price Waterhouse, independent
auditors, and as to the year 1992, are based in part on the reports of KPMG
Accountants N.V., independent auditors, and KPMG Klynveld Peat Marwick
Goerdeler, independent auditors. The consolidated financial statements referred
to above are included in reliance upon such reports given upon the authority of
such firms as experts in accounting and auditing.
36
<PAGE> 41
<TABLE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<CAPTION>
PAGE
-----
<S> <C>
The Lincoln Electric Company and Subsidiaries:
Independent Auditors' Reports....................................................... F-2
Statements of Consolidated Financial Condition
as of December 31, 1994 and 1993................................................. F-6
Statements of Consolidated Operations for the year
ended December 31, 1994, 1993 and 1992........................................... F-8
Statements of Consolidated Shareholders' Equity for
the year ended December 31, 1994, 1993 and 1992.................................. F-9
Statements of Consolidated Cash Flows for the
year ended December 31, 1994, 1993 and 1992...................................... F-10
Notes to Consolidated Financial Statements.......................................... F-11
</TABLE>
F-1
<PAGE> 42
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
The Lincoln Electric Company
We have audited the accompanying statements of consolidated financial
condition of The Lincoln Electric Company and subsidiaries as of December 31,
1994 and 1993, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the consolidated
financial statements of The Lincoln Electric Company (Australia) Proprietary
Limited and subsidiaries and, for 1992, the consolidated financial statements of
Lincoln Norweld B.V. and subsidiaries and the consolidated financial statements
of Messer Lincoln GmbH and subsidiary, all consolidated subsidiaries, which
statements reflect total assets constituting 7% in 1994 and 5% in 1993 and total
revenues constituting 5% in 1994 and 1993 and 36% in 1992 of the related
consolidated totals. Those statements were audited by other auditors whose
reports have been furnished to us, and our opinion, insofar as it relates to
data included for The Lincoln Electric Company (Australia) Proprietary Limited
and subsidiaries and, for 1992, Lincoln Norweld B.V. and subsidiaries and Messer
Lincoln GmbH and subsidiary, is based solely on the reports of the other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of The Lincoln Electric
Company and subsidiaries at December 31, 1994 and 1993, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles.
As discussed in Note A to the consolidated financial statements, effective
January 1, 1993, the Company changed its method of accounting for income taxes.
ERNST & YOUNG LLP
Cleveland, Ohio
March 3, 1995
F-2
<PAGE> 43
To the Board of Directors of
The Lincoln Electric Company
REPORT OF INDEPENDENT ACCOUNTANTS
In our opinion, the consolidated balance sheets and the related
consolidated statements of income and retained earnings and of cash flows (none
of which are presented separately herein) present fairly, in all material
respects, the financial position of The Lincoln Electric Company (Australia)
Proprietary Limited and its subsidiaries at December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Parramatta, Australia
March 27, 1995
F-3
<PAGE> 44
INDEPENDENT AUDITORS' REPORT
The Board of Directors
of Messer Lincoln GmbH
We have audited the consolidated balance sheet of Messer Lincoln GmbH and
its subsidiary as of December 31, 1992 and the balance sheet of Messer Lincoln
GmbH as of December 31, 1991 and the related (consolidated) statements of
income, retained earnings, and cash flows for the year ended December 31, 1992
and the period ended December 31, 1991. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements (none of which are presented separately
herein) based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The Company is a subsidiary of The Lincoln Electric Company based in
Cleveland, Ohio, USA, which is responsible for management of the Company. The
financial statements have been prepared assuming that the Company will continue
as a going concern. The Company has suffered considerable losses in 1992 and
1991 and is dependent on the continued support of The Lincoln Electric Company
for the continuance of its operations. The Lincoln Electric Company has
confirmed that it will provide financial and other support to enable the Company
to continue to trade as a viable and solvent business entity at least through
December 31, 1993.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Messer Lincoln GmbH and its
subsidiary as of December 31, 1992 and of Messer Lincoln GmbH as of December 31,
1991, and the results of its operations and its cash flows for the year ended
December 31, 1992 and the period ended December 31, 1991 in conformity with
generally accepted accounting principles.
Dusseldorf, March 12, 1993
KPMG KLYNVELD PEAT MARWICK GOERDELER
Gesellschaft mit beschrankter Haftung
Wirtschaftsprufungsgesellschaft
W. Schweiger
T. te Dorsthorst
F-4
<PAGE> 45
To the board of directors of
Lincoln-Norweld B.V.
INDEPENDENT AUDITORS' REPORT
We have audited the consolidated balance sheet of Lincoln-Norweld B.V. and
subsidiaries as of December 31, 1992, and the related consolidated statement of
income, retained earnings and cash flows for the year ended December 31, 1992
(none of which are presented separately herein). These financial statements are
the responsibility of the company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the balance sheet and
statement of income are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Lincoln-Norweld B.V. and subsidiaries as of December 31, 1992, and the results
of its operations and its cash flows for the year then ended in conformity with
United States generally accepted accounting principles.
KPMG Accountants N.V.
Arnhem, The Netherlands
March 23, 1993
F-5
<PAGE> 46
<TABLE>
STATEMENTS OF CONSOLIDATED FINANCIAL CONDITION
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
<CAPTION>
DECEMBER 31
1994 1993
-------- --------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................................ $ 10,424 $ 20,381
Accounts receivable (less allowances of $4,251 in 1994; $6,258 in
1993)............................................................. 126,007 110,504
Inventories
Raw materials and in-process...................................... 72,302 66,987
Finished goods.................................................... 82,974 76,698
-------- --------
155,276 143,685
Deferred income taxes -- Note E...................................... 11,601 42,960
Prepaid expenses..................................................... 2,899 3,241
Other current assets................................................. 7,220 4,937
-------- --------
TOTAL CURRENT ASSETS................................................... 313,427 325,708
OTHER ASSETS
Notes receivable from employees...................................... 3,151 4,747
Goodwill -- Note C................................................... 39,213 39,732
Other................................................................ 16,855 19,665
-------- --------
59,219 64,144
PROPERTY, PLANT AND EQUIPMENT
Land................................................................. 12,655 12,802
Buildings............................................................ 118,903 113,927
Machinery, tools and equipment....................................... 312,957 279,933
-------- --------
444,515 406,662
Less allowances for depreciation and amortization.................... 260,304 236,971
-------- --------
184,211 169,691
-------- --------
TOTAL ASSETS........................................................... $556,857 $559,543
======== ========
</TABLE>
F-6
<PAGE> 47
<TABLE>
STATEMENTS OF CONSOLIDATED FINANCIAL CONDITION
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
<CAPTION>
DECEMBER 31,
1994 1993
-------- --------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable............................................... $ 54,766 $ 43,471
Notes payable to banks -- Note D..................................... 15,843 23,198
Salaries, wages and amounts withheld................................. 12,405 12,779
Taxes, including income taxes -- Note E.............................. 21,783 23,061
Dividend payable..................................................... 2,203 1,959
Current portion of long-term debt -- Note D.......................... 2,272 10,200
Accrued restructuring charges -- Note C.............................. 8,968 29,618
Other current liabilities............................................ 25,877 31,569
-------- --------
TOTAL CURRENT LIABILITIES.............................................. 144,117 175,855
LONG-TERM DEBT, less current portion -- Note D......................... 194,831 216,915
DEFERRED INCOME TAXES -- Note E........................................ 6,631 6,128
OTHER LONG-TERM LIABILITIES............................................ 10,337 9,221
MINORITY INTEREST IN SUBSIDIARIES...................................... 6,808 7,929
SHAREHOLDERS' EQUITY
Common Stock, without par value -- at stated
capital amount -- Note B:
Authorized -- 15,000,000 shares
Outstanding -- 10,514,324 shares in 1994 and 10,381,450 shares
in 1993, exclusive of 4,346,516 shares in 1994 and 4,479,390
shares in 1993 held in treasury................................ 2,103 2,076
Class A Common Stock, without par value -- at stated capital
amount --
Note B:
Authorized -- 2,000,000
Outstanding -- 499,840 shares................................... 100 100
Additional paid-in capital........................................... 25,447 22,926
Retained earnings.................................................... 176,965 137,307
Cumulative translation adjustments................................... (10,482) (18,914)
-------- --------
194,133 143,495
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............................. $556,857 $559,543
======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
F-7
<PAGE> 48
<TABLE>
STATEMENTS OF CONSOLIDATED OPERATIONS
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
<CAPTION>
YEAR ENDED DECEMBER 31
1994 1993 1992
-------- -------- --------
(IN THOUSANDS OF DOLLARS EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Net sales.................................................. $906,604 $845,999 $853,007
Cost of goods sold......................................... 556,259 532,795 553,103
-------- -------- --------
Gross Profit............................................... 350,345 313,204 299,904
Distribution cost/selling, general & administrative
expenses................................................. 261,681 277,003 299,195
Restructuring charges (income) -- Note C................... (2,735) 70,079 23,897
-------- -------- --------
Operating income (loss).................................... 91,399 (33,878) (23,188)
Other income (expense):
Interest income.......................................... 1,442 1,627 3,061
Other income............................................. 3,067 2,922 4,433
Interest expense......................................... (15,740) (17,621) (18,736)
-------- -------- --------
(11,231) (13,072) (11,242)
-------- -------- --------
Income (loss) before income taxes and cumulative effect of
accounting change........................................ 80,168 (46,950) (34,430)
Income taxes (benefit) -- Note E........................... 32,160 (6,414) 11,370
-------- -------- --------
Income (loss) before cumulative effect of accounting
change................................................... 48,008 (40,536) (45,800)
Cumulative effect to January 1, 1993 of change in method of
accounting for income taxes -- Note A.................... 2,468
-------- -------- --------
Net income (loss).......................................... $ 48,008 $(38,068) $(45,800)
======== ======== ========
Per share:
Income (loss) before cumulative effect of accounting
change................................................ 4.38 (3.74) (4.24)
Cumulative effect of accounting change................... .23
-------- -------- --------
Net income (loss)........................................ $ 4.38 $ (3.51) $ (4.24)
======== ======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
F-8
<PAGE> 49
<TABLE>
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 1994, 1993 AND 1992
<CAPTION>
CLASS A COMMON
COMMON STOCK STOCK ADDITIONAL CUMULATIVE
------------------- ---------------- PAID IN RETAINED TRANSLATION
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENTS TOTAL
---------- ------ ------- ------ ---------- -------- ----------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1992............. 1,039,142 $ 208 35,794 $ 7 $ 20,845 $238,412 $ 4,664 $ 264,136
Net loss........................... (45,800) (45,800)
Cash dividends declared -- $.72 per
share............................ (7,762) (7,762)
Purchases of Common Stock.......... (16,841) (3) (2,473) (1,667) (4,143)
Shares sold to employees........... 9,979 2 2,373 2,375
Shares issued to ESOP.............. 9,268 2 2,058 2,060
Shares issued under Incentive
Equity Plan...................... 1,066 264 264
Adjustment for the year............ (12,407) (12,407)
---------- ------ ------- ------ ---------- -------- ----------- -----------
Balance December 31, 1992............ 1,033,346 207 45,062 9 23,067 183,183 (7,743) 198,723
Net loss........................... (38,068) (38,068)
Cash dividends declared -- $.72 per
share............................ (7,808) (7,808)
Shares sold to employees........... 3,648 1 678 679
Shares issued under Incentive
Equity Plan...................... 1,151 224 224
Ten-for-one stock split............ 9,343,305 1,868 405,558 81 (1,949)
Shares issued to ESOP.............. 49,220 10 906 916
Adjustment for the year............ (11,171) (11,171)
---------- ------ ------- ------ ---------- -------- ----------- -----------
Balance December 31, 1993............ 10,381,450 2,076 499,840 100 22,926 137,307 (18,914) 143,495
Net income......................... 48,008 48,008
Cash dividends declared -- $.76 per
share............................ (8,350) (8,350)
Shares sold to employees........... 107,520 22 2,063 2,085
Shares issued under Incentive
Equity Plan...................... 25,354 5 458 463
Adjustment for the year............ 8,432 8,432
---------- ------ ------- ------ --------- -------- ---------- ----------
Balance December 31, 1994............ 10,514,324 $2,103 499,840 $100 $ 25,447 $176,965 $ (10,482) $ 194,133
========== ====== ======= ====== ========= ======== ========= ==========
<FN>
See notes to consolidated financial statements.
</TABLE>
F-9
<PAGE> 50
<TABLE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
<CAPTION>
YEAR ENDED DECEMBER 31
1994 1993 1992
-------- -------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).......................................... $ 48,008 $(38,068) $(45,800)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization....................... 27,960 30,545 31,511
Deferred income taxes............................... 31,862 (32,501) 538
Cumulative effect of accounting change.............. (2,468)
Foreign exchange loss (gain)........................ 4,047 (348) 957
Employee Stock Ownership Plan....................... 916 2,060
Minority interest................................... 416 (358) (2,158)
Provision for restructuring......................... (2,735) 68,370 18,356
Changes in operating assets and liabilities net of
effects from acquisitions:
(Increase) in accounts receivable.............. (14,003) (6,228) (739)
(Increase) decrease in inventories............. (6,476) 10,654 22,939
(Increase) decrease in other current assets.... (1,447) (1,331) 695
Increase in accounts payable................... 9,929 2,856 171
(Decrease) in other current liabilities........ (31,026) (2,928) (4,060)
Gross change in other noncurrent assets........ 1,368 (3,112) (2,699)
Other--net..................................... 763 2,734 1,853
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES.................. 68,666 28,733 23,624
INVESTING ACTIVITIES
Purchases of property, plant and equipment............... (37,366) (19,090) (34,847)
Sales of property, plant and equipment................... 5,099 2,599 4,448
Acquisitions, net of cash acquired....................... (8,518) (37,288)
-------- -------- --------
NET CASH USED BY INVESTING ACTIVITIES...................... (32,267) (25,009) (67,687)
FINANCING ACTIVITIES
Proceeds from the sale of Common Stock................... 2,085 679 2,375
Purchase of Common Stock................................. (4,143)
Proceeds from short-term borrowings, maturities greater
than three months..................................... 56,405 305 11,674
Payments on short-term borrowings, maturities greater
than three months..................................... (59,293) (12,736)
Notes payable to banks--net.............................. (5,122) (9,470) (33,416)
Proceeds from long-term borrowings....................... 317,669 603,405 287,317
Payment on long-term borrowings.......................... (351,793) (576,445) (212,111)
Dividends paid........................................... (8,106) (7,791) (7,756)
Other.................................................... 838 (210) 321
-------- -------- --------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES........... (47,317) (2,263) 44,261
Effect of exchange rate changes on cash and cash
equivalents.............................................. 961 (1,707) 170
-------- -------- --------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........... (9,957) (246) 368
Cash and cash equivalents at beginning of year............. 20,381 20,627 20,259
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR................... $ 10,424 $ 20,381 $ 20,627
======== ======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
F-10
<PAGE> 51
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
DECEMBER 31, 1994
NOTE A -- ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include
the accounts of The Lincoln Electric Company and its subsidiaries (the
"Company") after elimination of all significant intercompany accounts,
transactions and profits.
Cash Equivalents: The Company considers all highly liquid investments with
a maturity of three months or less when purchased to be cash equivalents.
Inventories: Inventories are valued at the lower of cost or market. For
domestic inventories, cost is determined principally by the last-in, first-out
(LIFO) method, and for foreign inventories cost is determined by the first-in,
first-out (FIFO) method. At December 31, 1994 and 1993, approximately 62% and
60%, respectively, of total inventories were valued using the LIFO method. The
excess of current cost over LIFO cost amounted to $51,739 at December 31, 1994
and $48,876 at December 31, 1993. During 1992, certain LIFO inventories were
reduced, resulting in liquidations of LIFO inventory quantities carried at the
lower costs of prior years, as compared with their 1992 costs. The effect of
these liquidations was to reduce the 1992 net loss after tax, by $1,018 ($.09
per share).
Property, Plant and Equipment: Property, plant and equipment, including
facilities and equipment under capital leases (not material), are stated at cost
and include improvements which significantly extend the useful lives of existing
plant and equipment. Depreciation and amortization are computed by both
accelerated and straight-line methods.
Research and Development: Research and development costs, which are
expensed as incurred, were $18,473 in 1994, $19,210 in 1993 and $19,364 in 1992.
Goodwill: The excess of the purchase price over the fair value of net
assets acquired (goodwill) is amortized by the straight-line basis over periods
not exceeding 40 years. Amounts are stated net of accumulated amortization of
$5,784 and $2,363 in 1994 and 1993, respectively.
The carrying value of goodwill is reviewed if facts and circumstances
indicate a potential impairment of carrying value utilizing relevant cash flow
and profitability information.
Translation of Foreign Currencies: For subsidiaries in countries which do
not have highly inflationary economies, asset and liability accounts are
translated into U.S. dollars using exchange rates in effect at the balance sheet
date and revenue and expense accounts are translated at average monthly exchange
rates. Translation adjustments are reflected as a component of shareholders'
equity.
For subsidiaries in countries with highly inflationary economies (Venezuela
and Brazil) inventories, property, plant and equipment and related depreciation
are translated into U.S. dollars at historical exchange rates. Other asset and
liability accounts are translated at exchange rates in effect at the balance
sheet date and revenues and expenses, excluding depreciation, are translated at
average monthly exchange rates. Translation adjustments for these subsidiaries,
as well as transaction gains and losses of all other subsidiaries, are included
in the statements of consolidated operations in distribution cost/selling,
general & administrative expenses. The Company recorded transaction losses of
$3,746 in 1994, $228 in 1993 and $859 in 1992. The increase in transaction
losses in 1994 is attributable to the effect of the devaluation of the Mexican
peso on a U.S. dollar denominated debt obligation.
F-11
<PAGE> 52
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE A -- ACCOUNTING POLICIES -- (CONTINUED)
Financial Instruments: The Company on a limited basis has used forward
exchange contracts to hedge exposure to exchange rate fluctuations on
anticipated future purchase and sales transactions and certain intercompany
transactions. Any contracts that are entered into are written on a short-term
basis, are not held for trading purposes, and are not held for purposes of
speculation. Gains and losses on forward exchange contracts described herein are
recognized in the statements of consolidated operations in the periods the
exchange rates change. At December 31, 1994, the Company had no outstanding
forward exchange contracts.
Accounting Change: Effective January 1, 1993, the Company adopted FASB
Statement No. 109, "Accounting for Income Taxes." Under Statement No. 109, the
liability method is used in accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse. Prior to the adoption of Statement No. 109, income tax
expense was determined using the deferred method under which deferred tax
expense was based on items of income and expense that were reported in different
years in the financial statements and tax returns and were measured at the tax
rate in effect in the year the difference originated. As permitted by Statement
No. 109, the Company elected not to restate the financial statements of any
prior year. The cumulative effect of the change decreased the net loss for 1993
by $2,468 or $.23 per share.
Net Income (Loss) per Share: Net income (loss) per share is based on the
average number of all shares outstanding during the year (10,969,991 in 1994;
10,851,991 in 1993 and 10,796,410 in 1992).
Other: Included in Distribution cost/selling, general & administrative
expenses are the costs related to the Company's discretionary employee bonus
($68,370 in 1994; $61,883 in 1993; and $55,282 in 1992.)
Notes receivable from employees are secured by Company Common Stock owned
by the employee.
Reclassification: Certain reclassifications have been made to prior year
financial statements to conform to current year classifications.
NOTE B -- SHAREHOLDERS' EQUITY
The Lincoln Electric Company Employees' Stock Purchase Plan ("Plan") which
provided that employees could purchase shares of the Company's Common Stock,
when offered, at its estimated fair value, was terminated by the Board of
Directors in February 1995 effective March 30, 1995. Under the Plan, the Company
had the option to repurchase the shares, but in 1992 the Company suspended the
repurchase of all shares and the employees were permitted to sell their shares
on the open market. Upon termination of the Plan, all shares issued under the
Plan (1,639,686) became unrestricted shares.
The Lincoln Electric Company 1988 Incentive Equity Plan ("Incentive Equity
Plan") provides for the award or sale of Common Stock to officers and other key
employees of the Company and its subsidiaries. Distribution of shares is based
on certain specified performance and other conditions being satisfied. As a
result of conditions being fulfilled in 1991 with respect to certain of the
Company's subsidiaries, the Company awarded 32,524 shares (including 524 shares
issued for dividends accrued during the deferral period) of which 10,660 shares
were distributed in 1992, 11,510 shares in 1993, and 10,354 shares in 1994.
These shares, along with 15,000 shares issued to a former officer of the
Company, are restricted as to resale rights with the Company having a right of
first refusal at a purchase price based on the book value of the shares.
Additionally, in 1994, 15,000 shares were issued to certain officers of the
Company. Such shares vest equally over a three-year period, commencing in 1995
and ending in 1997. At December 31, 1994, there were no other outstanding awards
under the Plan, and 952,476 shares are reserved for future issuance under the
Incentive Equity Plan.
F-12
<PAGE> 53
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE B -- SHAREHOLDERS' EQUITY -- (CONTINUED)
The Lincoln Electric Company Employee Stock Ownership Plan (the "ESOP") is
a non-contributory profit-sharing plan established to provide deferred
compensation benefits for all eligible employees. The cost of the plan is borne
by the Company through contributions to an employee stock ownership trust as
determined annually by the Board of Directors. In May 1989, shareholders
authorized 2,000,000 shares of Class A Common Stock ("Class A Common Stock"),
without par value. The Company's Common Stock and Class A Common Stock are
identical in all respects, except that holders of Class A Common Stock are
subject to certain transfer restrictions and the Class A Common Stock is only
issued to the ESOP. In 1994, no shares of stock were issued to the ESOP. In
1993, the Company issued 49,220 shares (92,680 shares in 1992) to the ESOP with
an estimated fair value of $916 ($2,060 in 1992) which was recorded as
compensation expense. The difference between the total stated capital amount of
$.20 per share and the estimated fair value was recorded as additional
paid-in-capital. At December 31, 1994 and 1993, 1,500,160 authorized but
unissued shares are available for future issuance to the ESOP.
NOTE C -- RESTRUCTURING CHARGES
In 1993, the Company substantially completed the formulation of its plan,
which was subsequently implemented principally in 1994, to downsize and
streamline its foreign operations (primarily in Europe) and close manufacturing
facilities in Germany, Japan and South America. Management's decisions resulted
in a restructuring charge for 1993 of $70,100 ($40,900 after tax or $3.77 per
share) which was comprised of (1) asset write-downs in the amount of $45,900
including goodwill of $8,900; (2) severance and other redundancy costs of
$27,500; and (3) a net credit of $3,300 comprised of a claim settlement and
other restructuring liabilities including estimated losses through the final
facility closing dates in 1994.
In 1992, the Company recorded a restructuring charge of $23,900 (without
tax benefit, or $2.21 per share) as a result of decisions by management at that
time to downsize and streamline certain foreign operations (principally in
Europe). This charge was primarily for severance pay, redundancies and other
liabilities relating to the reorganization of the sales and distribution
operations in Europe.
In 1994, all of the planned facility closings were completed and one of the
facilities was disposed of. In total, approximately 1,400 employees were
terminated as a result of the 1992 and 1993 restructuring programs. In 1994 the
restructuring accruals were adjusted to reflect management's current cost
estimates to complete the program which resulted in a credit to income of
$2,735. Included in property, plant and equipment, are facilities held for sale
with a net carrying value of $4,700. The remaining expenditures, which include
costs related to the sale of real estate and holding costs to be incurred
through the estimated date of disposal, are anticipated to be incurred in 1995
and 1996.
F-13
<PAGE> 54
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE D -- SHORT-TERM AND LONG-TERM DEBT
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Short-term debt:
Notes payable to banks at interest rates from 5.6625% to
11.25% (4.125% to 23.25% in 1993)........................ $ 15,843 $ 23,198
======== ========
Long-term debt:
Multi-currency Credit Agreement, due October 1, 1997........ $100,947 $126,457
8.98% Senior Note due 2003 (equal annual principal payments
commencing in 1996)...................................... 75,000 75,000
Other borrowings due through 2023, interest at 2.00% to
13.74% (3.00% to 13.74% in 1993)......................... 21,156 25,658
-------- --------
$197,103 $227,115
Less current portion........................................ 2,272 10,200
-------- --------
Total .............................................. $194,831 $216,915
======== ========
</TABLE>
In October 1994, the Company amended its unsecured, multi-currency Credit
Agreement with ten banks and reduced its committed line under the Credit
Agreement from $230,000 to $200,000 which the Company believes is sufficient to
meet future financing needs. Under the terms of the amended agreement which
expires October 1, 1997, but provides for a mechanism for annual extensions, the
interest rate on outstanding borrowings is determined based upon defined
leverage rates for the pricing option selected. The interest rate can range from
the LIBOR plus .375% to LIBOR plus 1.125% depending upon the defined leverage
rate. The agreement also provides for commitment fees ranging from .2% to .375%
per annum on the unused credit lines based upon the defined leverage rate. Prior
to the amendment, the interest rates ranged from LIBOR plus 1% to LIBOR plus 2%,
and the commitment fees were from .375% to .5%.
Simultaneously, with the signing of the Credit Agreement, the $75,000 8.98%
Senior Note due in 2003 was amended to change the financial covenants to conform
with the financial covenants of the amended Credit Agreement, which requires a
1.35 to 1 consolidated current ratio and the maintenance of consolidated
tangible net worth of $125,000 plus 50% of net income subsequent to January 1,
1995. In addition, there are requirements with respect to interest coverage and
funded debt to capital ratios (.60 to 1 decreasing to .50 to 1 after December
31, 1995), and limitations on capital expenditures. Purchases of unrestricted
stock and the payment of dividends are limited to 50% of cumulative net income
from January 1, 1993, plus $25,000. At December 31, 1994, the Company was in
compliance with all of its financial covenants and $13,800 was available for
dividends and the purchase of unrestricted stock. The limitations on capital
expenditures, purchases of unrestricted common stock and payment of dividends
can be waived based on the achievement of a certain interest coverage ratio for
three consecutive quarters.
Maturities of long-term debt for the five years succeeding December 31,
1994 are $2,272 in 1995, $10,652 in 1996, $120,884 in 1997, $9,861 in 1998;
$9,612 in 1999 and $43,822 thereafter.
At December 31, 1994, certain loans ($7,900) were collateralized by
property and equipment.
Interest expense capitalized to property, plant and equipment was $244 in
1994, $71 in 1993 and $320 in 1992. Total interest paid was $17,400 in 1994,
$19,000 in 1993 and $17,500 in 1992. Weighted average interest rates on notes
payable to banks at December 31, 1994 and 1993 were 6.8% and 9.1%, respectively.
In 1992, the Company terminated an interest rate swap agreement with a
notional borrowing amount of $75,000 and received $2,586 which was amortized
($904 in 1994; $986 in 1993 and $696 in 1992) over the original swap term as a
yield adjustment to interest expense on the underlying $75,000 debt.
F-14
<PAGE> 55
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE D -- SHORT-TERM AND LONG-TERM DEBT -- (CONTINUED)
In connection with the expansion of its motor plant, the Company received
in 1994 $6,000 of low interest rate loans from certain governmental entities.
The Company also received in 1994 $1,750 of government grants which were
recorded as a reduction in property, plant and equipment.
NOTE E -- INCOME TAXES
<TABLE>
The components of income (loss) before income taxes and cumulative effect
of accounting change are as follows:
<CAPTION>
1994 1993 1992
------- -------- --------
<S> <C> <C> <C>
U.S.................................................. $70,703 $ 43,345 $ 24,120
Non-U.S.............................................. 9,465 (90,295) (58,550)
------- -------- --------
Total...................................... $80,168 $(46,950) $(34,430)
======= ======== ========
</TABLE>
<TABLE>
Components of income tax expense (benefit) are as follows:
<CAPTION>
DEFERRED
LIABILITY METHOD METHOD
-------------------- --------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal........................................... $ (8,379) $ 21,032 $ 8,295
Non-U.S........................................... 4,143 2,227 1,310
State and local................................... 4,534 2,828 1,227
-------- -------- --------
298 26,087 10,832
Deferred:
Federal........................................... 31,223 (32,980) 1,232
Non-U.S........................................... 639 479 (694)
-------- -------- --------
31,862 (32,501) 538
-------- -------- --------
Total..................................... $ 32,160 $ (6,414) $ 11,370
======== ======== ========
</TABLE>
<TABLE>
The components of the provision for deferred income taxes for 1992 were as
follows:
<S> <C>
Inventory adjustments........................................... $ 201
Incentive equity plan........................................... 87
Depreciation.................................................... 204
Other asset adjustments......................................... (88)
Pension adjustments............................................. (299)
Employee stock ownership plan................................... (149)
Other........................................................... 582
-----
Total................................................. $ 538
=====
</TABLE>
F-15
<PAGE> 56
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE E -- INCOME TAXES -- (CONTINUED)
<TABLE>
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:
<CAPTION>
DEFERRED
LIABILITY METHOD METHOD
------------------- --------
1994 1993 1992
------- -------- --------
<S> <C> <C> <C>
Statutory rate applied............................... 35% 35% 34%
to pre-tax income (loss)........................... $28,059 $(16,432) $(11,706)
Effect of state and local income taxes, net of
Federal tax benefit................................ 2,947 1,838 810
Differences in income taxes on non-U.S. earnings and
remittances........................................ (1,158) 336 (502)
Non-U.S. losses and unrecognized tax benefits........ 2,113 8,308 22,650
Foreign Sales Corporation............................ (838) (703) (630)
Other -- net......................................... 1,037 239 748
------- -------- --------
Total...................................... $32,160 $ (6,414) $ 11,370
======= ======== ========
</TABLE>
Total income tax payments, net of refunds, were $6,115 in 1994, $19,400 in
1993 and $16,500 in 1992.
At December 31, 1994, the Company's foreign subsidiaries have net operating
loss carryforwards of approximately $61,100 which expire in various years from
1995 through 2002, except for $5,000 for which there is no expiration date.
<TABLE>
Significant components of the Company's deferred tax assets and liabilities
at December 31, 1994 and 1993, are as follows:
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........................... $ 20,015 $ 15,709
Restructuring activities................................... 33,446
Inventory adjustments...................................... 3,274 2,772
Other accrual accounts..................................... 4,273 1,685
Employee benefits.......................................... 1,269 (172)
Other asset adjustments.................................... 3,350 3,245
Pension adjustments........................................ 2,417 2,085
Other deferred tax assets.................................. 2,844 7,406
-------- --------
37,442 66,176
Valuation allowance........................................ (18,987) (15,709)
-------- --------
18,455 50,467
Deferred tax liabilities:
Depreciation............................................... (8,136) $ (3,390)
Pension adjustments........................................ (2,690) (618)
Other deferred tax liabilities............................. (2,659) (9,627)
-------- --------
(13,485) (13,635)
-------- --------
Total.............................................. $ 4,970 $ 36,832
======== ========
</TABLE>
F-16
<PAGE> 57
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE E -- INCOME TAXES -- (CONTINUED)
Income taxes currently payable amounted to approximately $10,100 and
$12,200 at December 31, 1994 and 1993, respectively.
The Company does not provide deferred income taxes on unremitted earnings
of foreign subsidiaries as such funds are deemed permanently reinvested to
finance foreign expansion and meet operational needs on an ongoing basis. Upon
distribution of those earnings in the form of dividends or otherwise, the
Company would be subject to both U.S. income taxes subject to an adjustment for
foreign tax credits and withholding taxes payable to the various foreign
countries. Determination of the amount of unrecognized deferred U.S. income tax
liability is not practicable because of the complexities associated with its
calculation; however, unrecognized non-U.S. tax credits and non-U.S. withholding
taxes paid upon distribution would be available to reduce some portion of the
U.S. liability.
NOTE F -- RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS
The Company and its subsidiaries maintain a number of defined benefit and
defined contribution plans to provide retirement benefits for their employees in
the United States as well as their employees in foreign countries. These plans
are maintained and contributions are made in accordance with the Employee
Retirement Income Security Act of 1974, local statutory law or as determined by
the Board of Directors. The plans generally provide benefits based upon years of
service and compensation. Pension costs accrued are funded except for the cost
associated with a supplemental employee retirement plan for certain key
employees.
<TABLE>
A summary of the components of total pension expense is as follows:
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
U.S. Plans:
Service cost -- benefits earned during the year.......... $ 7,155 $ 6,115 $ 5,571
Interest cost on projected benefit obligation............ 19,601 18,158 17,207
Actual return on plan assets............................. (18,795) (19,569) (16,812)
Net amortization and deferral............................ (528) 1,441 (1,404)
-------- -------- --------
Net pension cost of defined benefit plans................ 7,433 6,145 4,562
Defined contribution plans............................... 258 193 225
-------- -------- --------
Total U.S. plans................................. 7,691 6,338 4,787
Non-U.S. Plans:
Service cost -- benefits earned during the year.......... 1,524 1,422 1,555
Interest cost on projected benefit obligation............ 2,207 2,253 2,472
Actual return on plan assets............................. (932) (4,506) (2,800)
Net amortization and deferral............................ (1,717) 2,000 289
-------- -------- --------
Net pension cost of defined benefit plans................ 1,082 1,169 1,516
Defined contribution plans............................... 702 1,326 905
-------- -------- --------
Total Non-U.S. plans............................. 1,784 2,495 2,421
-------- -------- --------
Total pension expense............................ $ 9,475 $ 8,833 $ 7,208
======== ======== ========
</TABLE>
F-17
<PAGE> 58
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE F -- RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT
PLANS -- (CONTINUED)
<TABLE>
The funded status of the U.S. and Non-U.S. plans at December 31, 1994 and
1993 is as follows:
<CAPTION>
U.S. NON-U.S.
--------------------- ---------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Actuarial present value of accumulated benefit
obligations:
Vested..................................... $218,754 $222,588 $ 24,902 $ 23,881
Nonvested.................................. 9,797 8,463 881 1,136
-------- -------- -------- --------
$228,551 $231,051 $ 25,783 $ 25,017
======== ======== ======== ========
Actuarial present value of projected benefit
obligations................................... $258,661 $254,295 $ 29,020 $ 28,396
Plan assets at fair value....................... 243,802 228,014 32,272 28,191
-------- -------- -------- --------
Excess of projected benefit obligations over
plan assets................................... (14,859) (26,281) 3,252 (205)
Unrecognized net (gain) loss............... 155 13,788 (1,410) (1,593)
Unrecognized prior service cost............ 13,839 10,835 389 540
Unrecognized net assets at January 1, 1994
and 1993, net of amortization............ (2,910) (3,239) (1,519) (1,449)
Minimum Liability.......................... (2,183) (480) (351)
-------- -------- -------- --------
Accrued retirement annuity expense
recognized in the balance sheet.......... $ (5,958) $ (4,897) $ 232 $ (3,058)
======== ======== ======== ========
</TABLE>
The decrease in the actuarial present value of accumulated benefit
obligations ("ABO") for the U.S. plans is largely due to the change in the
discount rate from 7.5% to 8.25%, offset by the addition of a new non-qualified
Supplemental Executive Retirement Plan, as well as the normal one year's
additional accrual of benefit under all plans. In addition, the increase in the
ABO for the foreign plans is largely due to the restructuring of some of the
plans, as well as the normal one year's accrual of additional benefits, offset
by a change in the weighted average discount rate from 7.5% to 8.2% in 1994.
<TABLE>
Assumptions used in accounting for the defined benefit plans as of December
31, 1994 and 1993 for both the U.S. and Non-U.S. plans were as follows:
<CAPTION>
U.S. NON-U.S.
PLANS PLANS
------------- -------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted-average discount rates............................... 8.25% 7.5 % 8.2 % 7.5 %
Projected rates of increase in compensation................... 5.50% 4.1 % 4.8 % 4.2 %
Expected rates of return on plan assets....................... 9.00% 9.0 % 8.5 % 9.1 %
</TABLE>
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.
F-18
<PAGE> 59
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE F -- RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT
PLANS -- (CONTINUED)
The Cleveland, Ohio area operations have a Guaranteed Continuous Employment
Plan covering substantially all employees, which, in general, provides that the
Company will provide work for at least 75% of every standard work week
(presently 40 hours). This plan does not guarantee employment when the Company's
ability to continue normal operations is seriously restricted by events beyond
the control of the Company. The Company has reserved the right to terminate this
plan effective at the end of a calendar year by giving notice of such
termination not less than six months prior to the end of such year.
NOTE G -- INDUSTRY AND GEOGRAPHIC SEGMENT INFORMATION
<TABLE>
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:
<CAPTION>
UNITED OTHER
STATES EUROPE COUNTRIES ELIMINATIONS TOTAL
-------- -------- --------- ------------ --------
<S> <C> <C> <C> <C> <C>
1994:
Net sales to unaffiliated
customers................. $641,607 $156,803 $108,194 $ $906,604
Inter-geographic sales....... 40,876 10,558 7,060 (58,494) --
-------- -------- --------- ------------ --------
Total................ $682,483 $167,361 $115,254 $(58,494) $906,604
======== ======== ======== =========== ========
Pre-tax profit (loss)........ $ 71,650 $ 3,945 $ 5,520 $ (947) $ 80,168
Identifiable assets.......... 350,012 165,722 76,129 (35,006) 556,857
1993:
Net sales to unaffiliated
customers................. $543,458 $211,268 $ 91,273 $ $845,999
Inter-geographic sales....... 29,077 6,663 4,806 (40,546) --
-------- -------- --------- ------------ --------
Total................ $572,535 $217,931 $ 96,079 $(40,546) $845,999
======== ======== ======== =========== ========
Pre-tax profit (loss)........ $ 42,570 $(68,865) $(22,903 ) $ 2,248 $(46,950)
Identifiable assets.......... 389,247 172,136 69,871 (71,711) 559,543
1992:
Net sales to unaffiliated
customers................. $487,145 $275,520 $ 90,342 $ $853,007
Inter-geographic sales....... 30,466 6,811 4,944 (42,221) --
-------- -------- --------- ------------ --------
Total................ $517,611 $282,331 $ 95,286 $(42,221) $853,007
======== ======== ======== =========== ========
Pre-tax profit (loss)........ $ 24,860 $(52,828) $ (7,183 ) $ 721 $(34,430)
Identifiable assets.......... 294,730 246,457 86,839 (24,679) 603,347
</TABLE>
Intercompany sales between geographic regions are accounted for at prices
comparable to normal, customer sales and are eliminated in consolidation.
Export sales (excluding intercompany sales) from the United States were
$64,400 in 1994, $58,100 in 1993 and $67,100 in 1992.
F-19
<PAGE> 60
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE H -- ACQUISITIONS
In June 1993, the Company purchased the outstanding minority interest in
its subsidiary in Spain for approximately $8,500. In January and May of 1992,
respectively, the Company purchased the remaining 29 percent interest in Lincoln
Norweld and a small Mexican company for an aggregate of $37,300. These
transactions were accounted for as purchases and their results of operations and
the increased interest in their results of operations, were included in the
consolidated statements of operations from the respective transaction dates.
NOTE I -- FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company has various financial instruments, including cash, cash
equivalents and short and long-term debt. The Company has determined the
estimated fair value of these financial instruments by using available market
information and appropriate valuation methodologies which require judgment.
Accordingly, the use of different market assumptions or estimation methodologies
could have a material effect on the estimated fair value amounts. The Company
believes the carrying values of its financial instruments approximate their fair
value.
NOTE J -- OPERATING LEASES
The Company leases sales offices, warehouses, office equipment and data
processing equipment. Such leases, some of which are noncancellable, and in many
cases, include renewals, expire at various dates. The Company pays most
maintenance, insurance and tax expenses relating to leased assets. Rental
expense was $9,226 in 1994, $9,864 in 1993 and $9,840 in 1992.
<TABLE>
At December 31, 1994, total minimum lease payments for noncancellable
operating leases are as follows:
<S> <C>
1995 $ 8,624
1996 6,855
1997 4,626
1998 3,887
1999 2,723
Thereafter 4,176
-------
Total $30,891
=======
</TABLE>
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.
F-20
<PAGE> 61
<TABLE>
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE L -- QUARTERLY FINANCIAL DATA (UNAUDITED)
<CAPTION>
1994 MAR 31 JUN 30 SEP 30 DEC 31
- --------------------------------------------- -------- -------- -------- ---------
<S> <C> <C> <C> <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(a)
Net income................................... 10,407 12,307 11,669 13,625(a)
Net income per share......................... $ 0.96 $ 1.12 $ 1.06 $ 1.24
<CAPTION>
1993 MAR 31 JUN 30 SEP 30 DEC 31
- --------------------------------------------- -------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net sales.................................... $211,168 $215,441 $209,173 $ 210,217
Gross profit................................. 79,756 79,415 80,300 73,733
Income (loss) before income taxes and
cumulative effect of accounting change..... 10,106 7,167 10,459 (74,682)(c)
Income (loss) before cumulative effect of
accounting change.......................... 4,806 995 3,706 (50,043)(c)
Net income (loss)............................ 7,274(b) 995 3,706 (50,043)(c)
Per share data:
Income (loss) before cumulative effect of
accounting change.......................... $ 0.44 $ 0.09 $ 0.34 $ (4.61)
Net income (loss)............................ $ 0.67 $ 0.09 $ 0.34 $ (4.61)
<FN>
- ---------------
(a) - Includes $2,500 of net adjustments to various expense accruals and $3,140
for the devaluation of the Mexican peso, offset partially by net favorable
inventory adjustments of $1,900 and adjustments to restructuring accruals
of $3,235. Also includes a favorable $2,000 adjustment to income taxes to
reflect the annual effective income tax rate.
(b) - The first quarter of 1993 includes an increase in net income of $2,468
($.23 per share) for the cumulative effect on prior years for a change in
accounting principle effective January 1, 1993.
(c) - Includes a $70,100 ($40,900 after tax or 3.77 per share) charge for
restructuring and other pretax adjustments of $6,365.
</TABLE>
F-21
<PAGE> 62
<TABLE>
<CAPTION>
<S> <C>
==============================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING SHAREHOLDERS, OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY, THE CLASS A COMMON SHARES IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN A CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF
THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
PAGE
----
Available Information................... 2
Incorporation of Certain
Documents by Reference................ 2
Prospectus Summary...................... 3
Investment Considerations............... 7
The Company............................. 10
Use of Proceeds......................... 11
Dividend Policy......................... 11
Capitalization.......................... 12
Selected Consolidated Financial Data.... 13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 15
Business................................ 19
Management.............................. 27
Selling Shareholders.................... 29
Description of Capital Stock............ 30
Underwriting............................ 35
Legal Matters........................... 36
Experts................................. 36
Index to Consolidated Financial
Statements............................ F-1
==============================================================================
==============================================================================
SHARES
[LOGO]
THE LINCOLN
ELECTRIC COMPANY
CLASS A COMMON SHARES
------------------------
PROSPECTUS
------------------------
MERRILL LYNCH & CO.
J.P. MORGAN SECURITIES INC.
MCDONALD & COMPANY
SECURITIES, INC.
, 1995
==============================================================================
</TABLE>
<PAGE> 63
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
<TABLE>
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a list of the estimated expenses to be incurred by the
Company in connection with the issuance and distribution of the Class A Common
Shares being registered hereby, other than underwriting discounts and
commissions. Such expenses will be borne by the Company and the Selling
Shareholders in proportion to the number of Class A Common Shares offered by
each.
<S> <C>
Securities and Exchange Commission registration fee............. $44,828
National Association of Securities Dealers, Inc. filing fee..... 13,500
Transfer Agent's and Registrar's fees........................... *
Printing and engraving costs.................................... *
Accounting fees and expenses.................................... *
Legal fees and expenses (not including Blue Sky)................ *
Blue Sky fees and expenses...................................... *
Miscellaneous expenses.......................................... *
-------
Total........................................................... $ *
=======
<FN>
- ---------------
* To be filed by amendment
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under certain circumstances provided in Article IV of the Company's Amended
and Restated Code of Regulations, as amended, and subject to Section 1701.13 of
the Ohio Revised Code (which sets forth certain conditions and limitations
governing the indemnification of officers, directors and other persons), the
Company will indemnify any director or officer or any former director or officer
of the Company to the fullest extent permitted by Ohio law for claims arising
because he is or was such director or officer of the Company or served in
certain capacities at the request of the Company in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative. A copy of Article IV of the Company's
Amended and Restated Code of Regulations, as amended, is included herein as
Exhibit 4.2.
The Company has entered into indemnity agreements (the "Indemnity
Agreements") with the current directors of the Company and expects to enter into
similar agreements with any director elected or appointed in the future at the
time of their election or appointment.
Pursuant to the Indemnity Agreements, the Company will, upon the
authorization by either a majority of disinterested directors (or a legal
opinion in the absence of a quorum), shareholders or a judicial body, indemnify
a director of the Company (the "Indemnitee") if the Indemnitee is a party to any
threatened, completed or pending legal proceeding by reason of the fact that the
Indemnitee is or was a director of the Company, or is or was serving at the
request of the Company in certain capacities with another entity, against all
expenses, judgments, settlements and fines, actually and reasonably incurred by
the Indemnitee in connection with the defense or settlement of such proceeding.
Indemnification will not be available if it is proved by clear and convincing
evidence that the Indemnitee's action or failure to act involved an act or
omission undertaken with deliberate intent to cause injury to the Company or
undertaken with reckless disregard for the best interests of the Company.
Indemnification in criminal actions will only be available if the Indemnitee had
no reasonable cause to believe his conduct was unlawful. The same coverage is
provided whether or not the suit or proceeding is brought by or in the right of
the Company, except that no
II-1
<PAGE> 64
indemnification will be made for any action in which the only liability asserted
against the Indemnitee is pursuant to Section 1701.95 of the Ohio Revised Code.
The Indemnity Agreements provide that in addition to the indemnification
provisions in the proceeding paragraph the Company will, absent a procedural
determination by a majority of the directors that the Indemnitee is not entitled
to indemnification, indemnify the Indemnitee against any amount which he is or
becomes obligated to pay relating to or arising out of any claim against him
because of an act, failure to act or neglect or breach of duty, including any
actual or alleged error, misstatement or misleading statement, which he commits,
suffers, permits or acquiesces in while acting in his capacity as a director.
The Company will not be obligated to make any payment in connection with any
claim against the Indemnitee to the extent of any fine or similar governmental
imposition which the Company is prohibited by law from paying or to the extent
such claim is based upon the Indemnitee having actually realized a personal gain
or profit to which he was not legally entitled, including without limitation
profit from transactions which are recoverable or effected by Sections 16(b) and
10(b) of the Exchange Act, or Rule 10b-5 promulgated thereunder.
The Indemnity Agreements mandate advancement of expenses to the Indemnitee
if the Indemnitee provides the Company with a written promise to repay the
advanced amounts in the event that it is determined that the conduct of the
Indemnitee has not met the applicable standard of conduct. In addition, the
Indemnity Agreements provide various procedures and presumptions in favor of the
Indemnitee's right to receive indemnification under the Indemnity Agreement.
Reference is made to Section 6 of the Underwriting Agreements (Exhibit 1 to
this Registration Statement) which provides for indemnification of the Company's
officers, directors and controlling persons by the Underwriters against certain
civil liabilities, including liabilities under the Securities Act.
Under the Company's director and officer liability insurance policy, each
director and certain officers of the Company are insured against certain
liabilities.
II-2
<PAGE> 65
<TABLE>
ITEM 16. EXHIBITS.
The following Exhibits are filed herewith and made a part hereof:
<CAPTION>
PAGINATION BY
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF EXHIBIT NUMBERING SYSTEM
- ------ ----------------------------------------------------------------- -----------------
<C> <S> <C>
1 Form of the Purchase Agreement.
4.1 Form of Amended and Restated Articles of Incorporation of The
Lincoln Electric Company, as amended.
4.2 Form of Amended and Restated Code of Regulations of The Lincoln
Electric Company, as amended.
4.3 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), and 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 of hereof).
4.4 Credit Agreement dated March 18, 1993 among the Company, the
Banks listed on the signature page thereof, and Society National
Bank, as Agent (filed as Exhibit 4(b) to Form 10-K of The Lincoln
Electric Company for the year ended December 31, 1992, SEC File
No. 0-1402 and incorporated herein by reference and made a part
hereof), as amended by Amendment No. 1 to Credit Agreement dated
November 19, 1993; 8.98% Senior Note Due November 26, 2003 (filed
as Exhibit 4(b) to Form 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), and as
further amended by Amendment No. 2 to Credit Agreement dated
October 31, 1994 (filed as Exhibit 4(b) 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).
*5 Opinion of Jones, Day, Reavis & Pogue.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Price Waterhouse.
23.3 Consent of KPMG Klynveld Peat Marwick Goerdeler.
23.4 Consent of KPMG Accountants N.V.
*23.5 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5).
24 Powers of Attorney.
<FN>
- ---------------
* To be filed by Amendment
</TABLE>
II-3
<PAGE> 66
ITEM 17. UNDERTAKINGS.
The undersigned Company hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the Company's annual
report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Company hereby undertakes that:
(1) For the purpose of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide public offering thereof.
II-4
<PAGE> 67
<TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Company certifies
that it has reasonable grounds to believe that it meets the requirements for
filing on Form S-3 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Cleveland, State of Ohio, on April 27, 1995.
THE LINCOLN ELECTRIC COMPANY
By: /s/ H. JAY ELLIOTT
--------------------------------
H. Jay Elliott
Vice President, Chief Financial
Officer and Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<CAPTION>
SIGNATURE TITLE DATE
----------- ------- ------
<S> <C> <C>
* DONALD F. HASTINGS Chairman of the Board, President April 27, 1995
- ---------------------------------------- and Chief Executive Officer
Donald F. Hastings (Principal Executive Officer)
* FREDERICK W. MACKENBACH President, Chief Operating Officer, April 27, 1995
- ---------------------------------------- and Director
Frederick W. Mackenbach
* HARRY CARLSON Vice Chairman April 27, 1995
- ----------------------------------------
Harry Carlson
* DAVID H. GUNNING Director April 27, 1995
- ----------------------------------------
David H. Gunning
* EDWARD E. HOOD, JR. Director April 27, 1995
- ----------------------------------------
Edward E. Hood, Jr.
* PAUL E. LEGO Director April 27, 1995
- ----------------------------------------
Paul E. Lego
* HUGH L. LIBBY Director April 27, 1995
- ----------------------------------------
Hugh L. Libby
* DAVID C. LINCOLN Director April 27, 1995
- ----------------------------------------
David C. Lincoln
* EMMA S. LINCOLN Director April 27, 1995
- ----------------------------------------
Emma S. Lincoln
* G. RUSSELL LINCOLN Director April 27, 1995
- ----------------------------------------
G. Russell Lincoln
II-5
<PAGE> 68
<CAPTION>
SIGNATURE TITLE DATE
----------- -------- -------
<S> <C> <C>
* HENRY L. MEYER III Director April 27, 1995
- ------------------------------------------
Henry L. Meyer III
* LAWRENCE O. SELHORST Director April 27, 1995
- ------------------------------------------
Lawrence O. Selhorst
* CRAIG R. SMITH Director April 27, 1995
- ------------------------------------------
Craig R. Smith
* FRANK STEINGASS Director April 27, 1995
- ------------------------------------------
Frank Steingass
/s/ H. JAY ELLIOTT Vice President, Chief Financial April 27, 1995
- ------------------------------------------ Officer and Treasurer (principal
H. Jay Elliott financial and accounting officer)
* The undersigned, by signing his name hereto, does hereby sign and execute this
Registration Statement pursuant to the Powers of Attorney executed by the
above-named officers and directors of the Company and which have been filed with
the Securities and Exchange Commission on behalf of such officers and directors.
/s/ H. JAY ELLIOTT April 27, 1995
- ------------------------------------------
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 69
<TABLE>
EXHIBIT INDEX
<CAPTION>
PAGINATION BY
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF EXHIBIT NUMBERING SYSTEM
- ------ ----------------------------------------------------------------- -----------------
<C> <S> <C>
1 Form of the Purchase Agreement.
4.1 Form of Amended and Restated Articles of Incorporation of The
Lincoln Electric Company, as amended.
4.2 Form of Amended and Restated Code of Regulations of The Lincoln
Electric Company, as amended.
4.3 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), and 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 of hereof).
4.4 Credit Agreement dated March 18, 1993 among the Company, the
Banks listed on the signature page thereof, and Society National
Bank, as Agent (filed as Exhibit 4(b) to Form 10-K of The Lincoln
Electric Company for the year ended December 31, 1992, SEC File
No. 0-1402 and incorporated herein by reference and made a part
hereof), as amended by Amendment No. 1 to Credit Agreement dated
November 19, 1993; 8.98% Senior Note Due November 26, 2003 (filed
as Exhibit 4(b) to Form 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), and as
further amended by Amendment No. 2 to Credit Agreement dated
October 31, 1994 (filed as Exhibit 4(b) 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).
*5 Opinion of Jones, Day, Reavis & Pogue.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Price Waterhouse.
23.3 Consent of KPMG Klynveld Peat Marwick Goerdeler.
23.4 Consent of KPMG Accountants N.V.
*23.5 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5).
24 Powers of Attorney.
<FN>
- ---------------
* To be filed by Amendment
</TABLE>
<PAGE> 1
Exhibit 1
DRAFT 4/25/95
__________ Shares
THE LINCOLN ELECTRIC COMPANY
(an Ohio corporation)
Class A Common Shares
(Without Par Value)
PURCHASE AGREEMENT
------------------
__________, 1995
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
J.P. MORGAN SECURITIES INC.
MCDONALD & COMPANY SECURITIES, INC.
as Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281
Dear Sirs:
The Lincoln Electric Company, an Ohio corporation (the "Company"), and
each of the Shareholders of the Company as named in Schedule B hereto (the
"Sellers"), confirm their respective agreements with Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities
Inc., McDonald & Company Securities, Inc., and each of the other Underwriters
named in Schedule A hereto (collectively, the "Underwriters," which term shall
also include any underwriter substituted as hereinafter provided in Section
10), for whom Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, J.P. Morgan Securities Inc. and McDonald & Company Securities,
Inc.. are acting as representatives (in such capacity, the "Representatives"),
with respect to (i) the sale by the Company and the purchase by the
Underwriters, acting severally and not jointly, of the respective number of
Class A Common Shares, without par value, of the Company (the "Class A
1
42091330
<PAGE> 2
Common Shares") set forth in said Schedule A, (ii) the sale by the Sellers,
acting severally and not jointly, and the purchase by the Underwriters, acting
severally and not jointly, of the respective number of Class A Common Shares
set forth opposite such Seller's name in Schedule B; and (iii) the grant by the
Company and the Sellers, acting severally and not jointly, to the Underwriters,
acting severally and not jointly, of the option described in Section 2(b)
hereof to purchase all or any part of _______ additional Class A Common Shares
to cover over-allotments, in each case except as may otherwise be provided in
the Pricing Agreement, as hereinafter defined. The aforesaid ____________
Class A Common Shares (the "Initial Securities") to be purchased by the
Underwriters and all or any part of the _________ Class A Common Shares subject
to the option described in Section 2(b) hereof (the "Option Securities") are
collectively hereinafter called the "Securities".
Prior to the purchase and public offering of the Securities by the
several Underwriters, the Company, the Sellers and the Representatives, acting
on behalf of the several Underwriters, shall enter into an agreement
substantially in the form of Exhibit A hereto (the "Pricing Agreement"). The
Pricing Agreement may take the form of an exchange of any standard form of
written telecommunication among the Company, the Sellers and the
Representatives and shall specify such applicable information as is indicated
in Exhibit A hereto. The offering of the Securities will be governed by this
Agreement, as supplemented by the Pricing Agreement. From and after the date
of the execution and delivery of the Pricing Agreement, this Agreement shall be
deemed to incorporate the Pricing Agreement.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 33- _____) and a
related preliminary prospectus for the registration of the Securities under the
Securities Act of 1933 (the "1933 Act"), has filed such amendments thereto, if
any, and such amended preliminary prospectuses as may have been required to the
date hereof, and will file such additional amendments thereto and such amended
prospectuses as may hereafter be required. Such registration statement (as
amended, if applicable) and the prospectus constituting a part thereof
(including in each case the information, if any, deemed to be part thereof
pursuant to Rule 430A(b) of the rules and regulations of the Commission under
the 1933 Act (the "1933 Act Regulations")), as from time to time amended or
supplemented pursuant to the 1933 Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act") or otherwise, are hereinafter referred to as the
"Registration Statement" and the "Prospectus", respectively, except that if any
revised prospectus shall be provided to the Underwriters by the Company for use
in connection with the offering of the Securities which differs from the
2
42091330
<PAGE> 3
Prospectus on file at the Commission at the time the Registration Statement
becomes effective (whether or not such revised prospectus is required to be
filed by the Company pursuant to Rule 424(b) of the 1933 Act Regulations), the
term "Prospectus" shall refer to such revised prospectus from and after the
time it is first provided to the Underwriters for such use. All references in
this Agreement to financial statements and schedules and other information
which is "contained," "included" or "stated" in the Registration Statement or
the Prospectus (and all other references of like import) shall be deemed to
mean and include all such financial statements and schedules and other
information which is or is deemed to be incorporated by reference in the
Registration Statement or the Prospectus, as the case may be; and all
references in this Agreement to amendments or supplements to the Registration
Statement or the Prospectus shall be deemed to mean and include the filing of
any document under the 1934 Act which is or is deemed to be incorporated by
reference in the Registration Statement or the Prospectus, as the case may be.
The Company and the Sellers understand that the Underwriters propose
to make a public offering of the Securities as soon as the Representatives deem
advisable after the Registration Statement becomes effective and the Pricing
Agreement has been executed and delivered.
The Company and the Underwriters agree that up to _________ shares of
the Securities to be purchased by the Underwriters (the "Reserved Shares")
shall be reserved for sale by the Underwriters to certain eligible employees of
the Company, as part of the distribution of the Securities by the Underwriters,
in accordance with the terms of this Agreement, the applicable rules,
regulations and interpretations of the National Association of Securities
Dealers, Inc. ("NASD") and all other applicable laws, rules and regulations.
To the extent that such Reserved Shares are not so purchased by such eligible
employees, such Reserved Shares may be offered to the public as part of the
public offering contemplated hereby.
SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) The Company represents and warrants to each Underwriter as of the
date hereof and as of the date of the Pricing Agreement (such latter date being
hereinafter referred to as the "Representation Date") as follows:
(i) At the time the Registration Statement becomes effective
and at the Representation Date, the Registration Statement will comply
in all material respects with the requirements of the 1933 Act and the
1933 Act Regulations and will not contain an untrue statement of a
material fact
3
42091330
<PAGE> 4
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading. The Prospectus, at the
Representation Date (unless the term "Prospectus" refers to a prospectus which
has been provided to the Underwriters by the Company for use in connection with
the offering of the Securities which differs from the Prospectus on file at the
Commission at the time the Registration Statement becomes effective, in which
case at the time it is first provided to the Underwriters for such use) and at
Closing Time referred to in Section 2 hereof, will not include an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; PROVIDED, HOWEVER, that the
representations and warranties in this subsection shall not apply to statements
in or omissions from the Registration Statement or Prospectus made in reliance
upon and in conformity with information furnished to the Company in writing by
any Underwriter through the Representatives expressly for use in the
Registration Statement or Prospectus.
(ii) The accountants who certified the financial statements
and supporting schedules included in the Registration Statement are independent
public accountants as required by the 1933 Act and the 1933 Act Regulations.
(iii) The financial statements included in the Registration Statement
and the Prospectus present fairly the financial position of the Company and its
consolidated subsidiaries as of the dates indicated and the results of their
operations for the periods specified; except as otherwise stated in the
Registration Statement, said financial statements have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis; and the supporting schedules included in the Registration Statement
present fairly the information required to be stated therein.
(iv) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as otherwise stated
therein, (A) there has been no material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business, (B) there have been
no transactions entered into by the Company or any of its subsidiaries, other
than those in the ordinary course of business, which are material with respect
to the Company and its subsidiaries considered as one enterprise, and (C) there
4
42091330
<PAGE> 5
has been no dividend or distribution of any kind declared,
paid or made by the Company on any class of its capital stock.
(v) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Ohio with
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus and to enter into and
perform its obligations under this Agreement and the Pricing Agreement; and the
Company is duly qualified as a foreign corporation to transact business and is
in good standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure to so qualify would not have a material
adverse effect on the condition, financial or otherwise, or the earnings,
business affairs or business prospects of the Company and its subsidiaries
considered as one enterprise.
(vi) Each subsidiary of the Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has corporate power and authority to own,
lease and operate its properties and to conduct its business as described in
the Prospectus and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to so qualify
would not have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise; all of the issued
and outstanding capital stock of each such subsidiary has been duly authorized
and validly issued, is fully paid and non-assessable and, except as disclosed
in the Registration Statement, is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity.
(vii) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus under "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement or pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectus); all of the issued and outstanding shares of capital stock of the
Company (including the Securities to be sold by the Sellers) have been duly
authorized and validly issued and are fully paid and non-assessable; the
Securities
5
42091330
<PAGE> 6
to be sold by the Company have been duly authorized for issuance and sale to the
Underwriters pursuant to this Agreement and, when issued and delivered by the
Company pursuant to this Agreement against payment of the consideration set
forth in the Pricing Agreement, will be validly issued and fully paid and non-
assessable; the capital stock of the Company conforms to all statements
relating thereto contained in the Prospectus; and the issuance of the
Securities to be sold by the Company is not subject to preemptive or other
similar rights.
(viii) Neither the Company nor any of its subsidiaries is in
violation of its charter or by-laws or in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease or
other instrument to which the Company or any of its subsidiaries is a party or
by which it or any of them may be bound, or to which any of the property or
assets of the Company or any of its subsidiaries is subject; and the execution,
delivery and performance of this Agreement and the Pricing Agreement and the
consummation of the transactions contemplated herein and therein and compliance
by the Company with its obligations hereunder and thereunder have been duly
authorized by all necessary corporate action and will not conflict with or
constitute a breach of, or default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of
the Company or any of its subsidiaries pursuant to, any contract, indenture,
mortgage, loan agreement, note, lease or other instrument to which the Company
or any of its subsidiaries is a party or by which it or any of them may be
bound, or to which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such action result in any violation of the
provisions of the charter or by-laws of the Company or any applicable law,
administrative regulation or administrative or court decree.
(ix) No labor dispute with the employees of the Company or any of its
subsidiaries exists or, to the knowledge of the Company, is imminent; and the
Company is not aware of any existing or imminent labor disturbance by the
employees of any of its principal suppliers, manufacturers or contractors which
might be expected to result in any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise.
(x) There is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or
6
42091330
<PAGE> 7
foreign, now pending, or, to the knowledge of the Company, threatened, against
or affecting the Company or any of its subsidiaries, which is required to be
disclosed in the Registration Statement (other than as disclosed therein), or
which might result in any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, or which might
materially and adversely affect the properties or assets thereof or which might
materially and adversely affect the consummation of this Agreement; all pending
legal or governmental proceedings to which the Company or any subsidiary is a
party or of which any of their respective property or assets is the subject
which are not described in the Registration Statement, including ordinary
routine litigation incidental to the business, are, considered in the aggregate,
not material; and there are no contracts or documents of the Company or any of
its subsidiaries which are required to be filed as exhibits to the Registration
Statement by the 1933 Act or by the 1933 Act Regulations which have not been
so filed.
(xi) The Company and its subsidiaries own or possess, or can acquire
on reasonable terms, the patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names (collectively, "patent and
proprietary rights") presently employed by them in connection with the business
now operated by them, and neither the Company nor any of its subsidiaries has
received any notice or is otherwise aware of any infringement of or conflict
with asserted rights of others with respect to any patent or proprietary
rights, or of any facts which would render any patent and proprietary rights
invalid or inadequate to protect the interest of the Company or any of its
subsidiaries therein, and which infringement or conflict (if the subject of any
unfavorable decision, ruling or finding) or invalidity or inadequacy, singly
or in the aggregate, would result in any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise.
(xii) No authorization, approval or consent of any court or
governmental authority or agency is necessary in connection with the offering,
issuance or sale of the Securities hereunder, except such as may be required
under the 1933 Act or the 1933 Act Regulations or state securities laws.
7
42091330
<PAGE> 8
(xiii) The Company and its subsidiaries possess such
certificates, authorities or permits issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary to conduct
the business now operated by them, and neither the Company nor any of
its subsidiaries has received any notice of proceedings relating to
the revocation or modification of any such certificate, authority or
permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially and
adversely affect the condition, financial or otherwise, or the
earnings, business affairs or business prospects of the Company and
its subsidiaries considered as one enterprise.
(xiv) This Agreement has been, and, at the Representation Date, the
Pricing Agreement will have been, duly authorized, executed and
delivered by the Company.
(xv) There are no persons with registration or other similar rights
to have any securities registered pursuant to the Registration
Statement or otherwise registered by the Company under the 1933 Act.
(xvi) The Company has obtained and delivered to the Representatives
the agreements of the persons named in Schedule C annexed hereto to
the effect that each such person will not, for a period of 180 days
from the date of the Prospectus, without the prior written consent of
the Representatives, sell, offer to sell, grant any option for the
sale of, or otherwise dispose of, directly or indirectly, any of the
Company's Common Shares, without par value, or Class A Common Shares
(collectively, "Common Equity") or any security convertible or
exchangeable into or exercisable for any shares of Common Equity owned
by such person or entity or with respect to which such person has the
power of disposition.
(xvii) The documents incorporated or deemed to be incorporated by
reference in the Prospectus, at the time they were or hereafter are
filed with the Commission, complied and will comply in all material
respects with the requirements of the 1934 Act and the rules and
regulations of the Commission under the 1934 Act (the "1934 Act
Regulations"), and, when read together with the other information in
the Prospectus, at the time the Registration Statement become
effective and at the Closing Time, will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.
8
42091330
<PAGE> 9
(xviii) The Company and its subsidiaries (A) are in compliance with
any and all applicable federal, state, local or foreign or other laws
and regulations relating to the protection of human health and safety,
the environment or hazardous or toxic substances or wastes, pollutants
or contaminants ("Environmental Laws"), (B) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (C) are
in compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with
Environmental Law, failure to receive required permits, licenses or
other approvals or failure to comply with the terms and conditions of
such permits, licenses or approvals would not, singly or in the
aggregate, have a material adverse effect on the condition, financial
or otherwise, or the earnings, business affairs or business prospects
of the Company and its subsidiaries considered as one enterprise.
(xix) The Company has not taken and will not take, directly or
indirectly, any action which is designed to or which has constituted
or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale of the Securities; and the Company has
not distributed and will not distribute any prospectus (as such term
is defined in the 1933 Act and the 1933 Act Regulations) in connection
with the offering and sale of the Securities other than any
preliminary prospectus filed with the Commission or the Prospectus or
other material permitted by the 1933 Act or the 1933 Act Regulations.
(xx) Neither the Company nor any of its subsidiaries has violated
any federal or state law relating to discrimination in the hiring,
promotion or pay of employees nor any applicable federal or state
wages and hours laws, nor any provisions of the Employee Retirement
Income Security Act or the rules and regulations promulgated
thereunder, which in each case might have a material adverse effect on
the condition, financial or otherwise, or the earnings, business
affairs or business prospects of the Company and its subsidiaries
considered as one enterprise.
(xxi) The Class A Common Shares have been approved for
listing on the National Association of Securities Dealers Automated
Quotation System-National Market System.
(b) Each of the Sellers, severally and not jointly, represents and
warrants to, and agrees with, each Underwriter as of the date hereof and as of
the Representation Date, as follows:
9
42091330
<PAGE> 10
(i) The execution, delivery and performance of this
Agreement and the Pricing Agreement and the consummation of the
transactions contemplated herein and therein and compliance by such
Seller with its obligations hereunder and thereunder have been duly
authorized, where appropriate, by all necessary corporate action and
will not conflict with or constitute a breach of, or default under, or
result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of such Seller pursuant to,
any contract, indenture, mortgage, loan agreement, note, lease or
other instrument to which such Seller is a party or by which it may be
bound, or to which any of the property or assets of such Seller is
subject, nor will such action result in any violation of the
provisions of the charter or by-laws of such Seller or any applicable
law, judgement, order, administrative regulation or administrative or
court decree.
(ii) Such Seller has and will have, at the Closing Time
referred to in Section 2(c), good and marketable title to the
Securities to be sold by such Seller hereunder, free and clear of any
pledge, lien, security interest, encumbrance, claim or equity, created
by or arising through the Seller other than pursuant to this
Agreement; such Seller has full right, power and authority to sell,
transfer and deliver the Securities to be sold by such Seller
hereunder; and upon delivery of the Securities to be sold by such
Seller hereunder and payment of the purchase price therefor as herein
contemplated, each of the Underwriters will receive good and
marketable title to its ratable share of the Securities purchased by
it from such Seller, free and clear of any pledge, lien, security
interest, encumbrance, claim or equity.
(iii) Such Seller has duly executed and delivered in the form
heretofore furnished by the Underwriters, a power of attorney and
custody agreement (the "Power of Attorney and Custody Agreement") with
_______________________, as the attorney-in-fact and the custodian
(the "Attorney-in-Fact" and the "Custodian", respectively); the
Attorney-in-Fact is authorized to execute and deliver this Agreement,
the Pricing Agreement and the certificates referred to in Section 5(d)
or that may be required pursuant to Section 5(h) on behalf of such
Seller, to determine the purchase price to be paid by the Underwriters
to such Seller as provided in Section 2(a) hereof, to authorize the
delivery of the Securities to be sold by such Seller hereunder, to
duly endorse (in blank or otherwise) the certificate or certificates
representing such Securities, to accept payment therefor, and
otherwise to act on behalf of such Seller in connection with this
Agreement and the Pricing Agreement.
10
42091330
<PAGE> 11
(iv) All authorizations, approvals and consents necessary for
the execution and delivery by such Seller of the Power of Attorney and
Custody Agreement, the execution and delivery by or on behalf of such
Seller of this Agreement, and the Pricing Agreement, and the sale and
delivery of the Securities to be sold by such Seller hereunder and
thereunder (other than, at the time of the execution hereof, the
issuance of the order of the Commission declaring the Registration
Statement effective and such authorizations, approvals or consents as
may be necessary under state securities laws), have been obtained and
are in full force and effect; and such Seller has the full right,
power and authority to enter into this Agreement and the Pricing
Agreement and such Power of Attorney and Custody Agreement and to
sell, transfer and deliver the Securities to be sold by such Seller
hereunder.
(v) For a period of 180 days from the date of the Prospectus,
such Seller will not, without the prior written consent of the
Representatives, sell, offer to sell, grant any option for the sale
of, or otherwise dispose of, directly or indirectly, any shares of
Common Equity or any security convertible or exchangeable into or
exercisable for Common Equity owned by such Seller or with respect to
which such Seller has the power of disposition, other than to the
Underwriters pursuant to this Agreement.
(vi) Such Seller has not taken, and will not take, directly
or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result
in stabilization or manipulation of the price of any security of the
Company to facilitate the sale of the Securities; and such Seller has
not distributed and will not distribute any prospectus (as such term
is defined in the 1933 Act and the 1933 Act Regulations) in connection
with the offering and sale of the Securities other than any
preliminary prospectus filed with the Commission or the Prospectus or
other material permitted by the 1933 Act or the 1933 Act Regulations.
(vii) Such Seller is not prompted to sell the Class A Common
Shares by any information concerning the Company or its subsidiaries
that is not set forth in the Prospectus or other documents filed by
the Company with the Commission pursuant to the periodic reporting and
other information requirements of the 1934 Act.
(viii) When the Registration Statement shall become
effective, and at all times subsequent thereto up to the Closing Time,
such parts of the Registration Statement and any amendments and
supplements thereto as specifically refer
11
42091330
<PAGE> 12
to the Sellers will not contain an untrue statement of a material fact
or omit to state a material fact necessary in order to make statements
therein, in light of the circumstances under which they were made, not
misleading.
(ix) Neither such Seller nor any of its affiliates directly,
or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, or has any other
association with (within the meaning of Article 1, paragraph (m) of
the By-laws of the NASD), any member firm of the NASD.
(x) Such Seller agrees to deliver to the Representatives at
or prior to the Closing Time a properly completed and executed United
States Treasury Department Form W-9 (or other applicable form or
statement specified by Treasury Department regulations in lieu
thereof).
[(xii) Certificates in negotiable form for all Securities to
be sold by such Seller hereunder have been placed in custody with the
Custodian by or for the benefit of such Seller for the purposes or
effecting delivery by such Seller hereunder.]
(c) Any certificate signed by any officer of the Company and
delivered to the Representatives or to counsel for the Underwriters shall be
deemed a representation and warranty by the Company to each Underwriter as to
the matters covered thereby; and any certificate signed by or on behalf of any
Seller and delivered to the Representatives or to counsel for the Underwriters
shall be deemed a representation and warranty by such Seller to each
Underwriter as to matters covered thereby.
SECTION 2. SALE AND DELIVERY TO UNDERWRITERS: CLOSING.
(a) On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, (i) the
Company agrees to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Company, at
the price per share set forth in the Pricing Agreement, that proportion of the
number of Initial Securities set forth in Schedule B opposite the name of the
Company which the number of Initial Securities, set forth in Schedule A
opposite the name of such Underwriter (plus any additional number of Initial
Securities that such Underwriter may become obligated to purchase pursuant to
the provisions of Section 10 hereof), bears to the total number of Initial
Securities; and (ii) each of the Sellers, severally and not jointly, agrees to
sell to each Underwriter, severally and not jointly, and each Underwriter,
severally and not jointly, agrees to purchase from each of the Sellers,
severally and not
12
42091330
<PAGE> 13
jointly, at such price per share to be paid by the Underwriters to the Company,
that proportion of the number of Initial Securities being sold by such Seller
set forth in Schedule B opposite the name of such Seller which the number of
Initial Securities set forth in Schedule A opposite the name of such
Underwriter (plus any additional number of Initial Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof) bears to the total number of Initial Securities, subject, in
each case, to such adjustments as the Underwriters in their discretion shall
make to eliminate any sales or purchases of fractional securities.
(1) If the Company has elected not to rely upon Rule 430A
under the 1933 Act Regulations, the initial public offering price and
the purchase price per share to be paid by the several Underwriters
for the Securities have each been determined and set forth in the
Pricing Agreement, dated the date hereof, and an amendment to the
Registration Statement and the Prospectus containing such information
will be filed before the Registration Statement becomes effective.
(2) If the Company has elected to rely upon Rule 430A under
the 1933 Act Regulations, the initial public offering price and the
purchase price per share to be paid by the several Underwriters for
the Securities shall be determined by agreement among the
Representatives, the Company and the Sellers. The initial public
offering price and the purchase price, when so determined, shall be
set forth in the Pricing Agreement. In the event that such prices
have not been agreed upon and the Pricing Agreement has not been
executed and delivered by all parties thereto by the close of business
on the fourth business day following the date of this Agreement, this
Agreement shall terminate forthwith, without liability of any party to
any other party, unless otherwise agreed to by the Company, the
Sellers and the Representatives.
(b) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company and the Sellers, acting severally and not jointly, hereby grant an
option to the Underwriters, severally and not jointly, to purchase up to an
additional _________ shares of Common Stock at the price per share set forth in
the Pricing Agreement. The option hereby granted will expire 30 days after (i)
the date the Registration Statement becomes effective, if the Company has
elected not to rely on Rule 430A under the 1933 Act Regulations, or (ii) the
Representation Date, if the Company has elected to rely on Rule 430A under the
1933 Act Regulations, and may be exercised in whole or in part from time to
time only for the purpose of
13
42091330
<PAGE> 14
covering over-allotments which may be made in connection with the offering and
distribution of the Initial Securities upon notice by the Representatives to
the Company and the Sellers setting forth the number of Option Securities as to
which the several Underwriters are then exercising the option and the time and
date of payment and delivery for such Option Securities. Any such time and
date of delivery (a "Date of Delivery") shall be determined by the
Representatives, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Time, as
hereinafter defined, unless otherwise agreed by the Representatives, the
Company and the Sellers. If the option is exercised as to all or any portion
of the Option Securities, the Option Securities to be sold by the Company and
the Sellers shall be in proportion to the number of Initial Securities being
sold by the Company and the Sellers and each of the Underwriters, acting
severally and not jointly, will purchase that proportion of the total number of
Option Securities then being purchased which the number of Initial Securities
set forth in Schedule A opposite the name of such Underwriter bears to the
total number of Initial Securities (except as otherwise provided in the Pricing
Agreement), subject in each case to such adjustments as the Representatives in
their discretion shall make to eliminate any sales or purchases of fractional
shares.
(c) Payment of the purchase price for, and delivery of certificates
for, the Initial Securities shall be made at the office of
______________________, or at such other place as shall be agreed upon by the
Company, the Sellers and the Representatives, at 10:00 A.M. on the [fifth]
business day (unless postponed in accordance with the provisions of Sections 10
or 11) following the date the Registration Statement becomes effective (or, if
the Company has elected to rely upon Rule 430A of the 1933 Act Regulations, the
fifth business day after execution of the Pricing Agreement), or such other
time not later than ten business days after such date as shall be agreed upon
by the Company, the Sellers and the Representatives (such time and date of
payment and delivery being herein called "Closing Time"). In addition, in the
event that any or all of the Option Securities are purchased by the
Underwriters, payment of the purchase price for, and delivery of certificates
for, such Option Securities shall be made at the above-mentioned offices of
________________, or at such other place as shall be agreed upon by the
Representatives, the Company and the Sellers, on each Date of Delivery as
specified in the notice from the Representatives to the Company and the
Sellers. Payment shall be made to the Company and the Sellers by certified or
official bank check or checks drawn in New York Clearing House funds or similar
next day funds payable to the order of the Company and the Custodian pursuant
to each Seller's Power of Attorney and Custody Agreement, or directly to each
of the Sellers, if so instructed by the Custodian against delivery to the
Representatives, for the
14
42091330
<PAGE> 15
respective accounts of the Underwriters of certificates for the Securities to
be purchased by them. Certificates for the Initial Securities and the Option
Securities, if any, shall be in such denominations and registered in such names
as the Representatives may request in writing at least two business days before
the Closing Time or the relevant Date of Delivery, as the case may be. It is
understood that each Underwriter has authorized the Representatives, for its
account, to accept delivery of, receipt for, and make payment of the purchase
price for, the Initial Securities and the Option Securities, if any, which it
has agreed to purchase. Merrill Lynch, Pierce, Fenner & Smith Incorporated,
individually and not as representative of the Underwriters, may (but shall not
be obligated to) make payment of the purchase price for the Initial Securities
or the Option Securities, if any, to be purchased by any Underwriter whose
check has not been received by the Closing Time or the relevant Date of
Delivery, as the case may be, but such payment shall not relieve such
Underwriter from its obligations hereunder. The certificates for the Initial
Securities and the Option Securities, if any, will be made available for
examination and packaging by the Representatives not later than 10:00 A.M. on
the last business day prior to the Closing Time or the relevant Date of
Delivery, as the case may be.
SECTION 3. COVENANTS OF THE COMPANY. The Company covenants with each
Underwriter as follows:
(a) The Company will notify the Representatives immediately,
and confirm the notice in writing, (i) of the effectiveness of the
Registration Statement and any amendment thereto (including any
post-effective amendment), (ii) of the receipt of any comments from
the Commission, (iii) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement
to the Prospectus or for additional information, and (iv) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of any preliminary prospectus, or the initiation of
any proceedings for that purpose, and (v) of the suspension of the
qualification of the Securities for offering or sale in any
jurisdiction, or the initiation or threatening of any proceeding for
any such purpose. The Company will make every reasonable effort to
prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.
(b) The Company will give the Representatives notice of its
intention to file or prepare any amendment to the Registration
Statement (including any post-effective amendment) or any amendment or
supplement to the Prospectus
15
42091330
<PAGE> 16
(including any revised prospectus which the Company proposes for use
by the Underwriters in connection with the offering of the Securities
which differs from the prospectus on file at the Commission at the
time the Registration Statement becomes effective, whether or not such
revised prospectus is required to be filed pursuant to Rule 424(b) of
the 1933 Act Regulations), whether pursuant to the 1933 Act, the 1934
Act or otherwise, will furnish the Representatives with copies of any
such amendment or supplement a reasonable amount of time prior to such
proposed filing or use, as the case may be, and will not file any such
amendment or supplement or use any such prospectus to which the
Representatives or counsel for the Underwriters shall reasonably
object.
(c) The Company will deliver to the Representatives as many
signed copies of the Registration Statement as originally filed and of
each amendment thereto (including exhibits filed therewith or
incorporated by reference therein and documents incorporated or deemed
to be incorporated by reference therein) as the Representatives may
reasonably request and will also deliver to the Representatives a
conformed copy of the Registration Statement as originally filed and
of each amendment thereto (without exhibits) for each of the
Underwriters.
(d) The Company will furnish to each Underwriter, from time
to time during the period when the Prospectus is required to be
delivered under the 1933 Act or the 1934 Act, such number of copies of
the Prospectus (as amended or supplemented) as such Underwriter may
reasonably request for the purposes contemplated by the 1933 Act or
the 1934 Act or the respective applicable rules and regulations of the
Commission thereunder.
(e) If any event shall occur as a result of which it is
necessary, in the opinion of counsel for the Underwriters, to amend or
supplement the Prospectus in order to make the Prospectus not
misleading in the light of the circumstances existing at the time it
is delivered to a purchaser, or if for any other reason it shall be
necessary to amend or supplement the Prospectus in order to comply
with the 1933 Act or 1933 Act Regulations, the Company will forthwith
amend or supplement the Prospectus (in form and substance satisfactory
to counsel for the Underwriters) so that, as so amended or
supplemented, the Prospectus will not include an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances
existing at the time it is delivered to a purchaser, not misleading,
and the Company will furnish to the Underwriters
16
42091330
<PAGE> 17
a reasonable number of copies of such amendment or supplement.
(f) The Company will endeavor, in cooperation with the
Underwriters, to qualify the Securities for offering and sale under
the applicable securities laws of such states and other jurisdictions
of the United States as the Representatives may designate; PROVIDED,
HOWEVER, that the Company shall not be obligated to qualify as a
foreign corporation in any jurisdiction in which it is not so
qualified. In each jurisdiction in which the Securities have been so
qualified, the Company will file such statements and reports as may be
required by the laws of such jurisdiction to continue such
qualification in effect for a period of not less than one year from
the effective date of the Registration Statement.
(g) The Company will make generally available to its security
holders as soon as practicable, but not later than 60 days after the
close of the period covered thereby, an earnings statement (in form
complying with the provisions of Rule 158 of the 1933 Act Regulations)
covering a twelve month period beginning not later than the first day
of the Company's fiscal quarter next following the "effective date"
(as defined in said Rule 158) of the Registration Statement.
(h) The Company will use the net proceeds received by it from
the sale of the Securities in the manner specified in the Prospectus
under "Use of Proceeds".
(i) If, at the time that the Registration Statement becomes
effective, any information shall have been omitted therefrom in
reliance upon Rule 430A of the 1933 Act Regulations, then immediately
following the execution of the Pricing Agreement, the Company will
prepare, and file or transmit for filing with the Commission in
accordance with such Rule 430A and Rule 424(b) of the 1933 Act
Regulations, copies of an amended Prospectus, or, if required by such
Rule 430A, a post-effective amendment to the Registration Statement
(including an amended Prospectus), containing all information so
omitted.
(j) The Company, during the period when the Prospectus is
required to be delivered under the 1933 Act or the 1934 Act, will file
all documents required to be filed with the Commission pursuant to
Section 13, 14 or 15 of the 1934 Act within the time periods required
by the 1934 Act and the 1934 Act Regulations.
(k) The Company will file with the NASD all documents and
notices required by the NASD of companies that have
17
42091330
<PAGE> 18
issued securities that are traded in the over-the-counter market and
quotations for which are reported by the National Association of
Securities Dealers Automated Quotation System-National Market System.
(l) During a period of 180 days from the date of the
Prospectus, the Company will not, without the Representatives' prior
written consent, sell, offer to sell, grant any option for the sale
of, or otherwise dispose of, directly or indirectly, any shares of
Common Equity or any security convertible or exchangeable into or
exercisable for Common Equity (except for Common Equity issued
pursuant to reservations, agreements or employee benefit plans
referred to in Section 1(a)(vii) hereof).
(m) If the Company has elected to rely upon Rule 430A, it
will take such steps as it deems necessary to ascertain promptly
whether the form of prospectus transmitted for filing under Rule
424(b) under the 1933 Act was actually received for filing by the
Commission and, in the event that they were not, it will promptly file
such prospectus.
SECTION 4. PAYMENT OF EXPENSES. The Company will pay all expenses
incident to the performance of the obligations of the Company and the Sellers
under this Agreement, including (i) the printing and filing of the Registration
Statement as originally filed and of each amendment thereto, (ii) the
reproduction of this Agreement and the Pricing Agreement, (iii) the
preparation, issuance and delivery of the certificates for the Securities to
the Underwriters, including any stock transfer taxes payable upon the issuance,
sale and delivery of certificates for the Securities to the Underwriters, (iv)
the fees and disbursements of the Company's counsel and accountants, (v) the
qualification of the Securities under securities laws in accordance with the
provisions of Section 3(f) hereof, including filing fees and the fees and
disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of the
Registration Statement as originally filed and of each amendment thereto, of
each preliminary prospectus, and of the Prospectus and any amendments or
supplements thereto, (vii) the printing and delivery to the Underwriters of
copies of the Blue Sky Survey and any supplement thereto, (viii) the fee of the
National Association of Securities Dealers, Inc., (ix) the fees and expenses
incurred in connection with the listing of the Securities on the National
Association of Securities Dealers Automated Quotation System-National Market
System, and (x) the fee and disbursements of counsel for the Underwriters in
connection with matters related to Securities which are
18
42091330
<PAGE> 19
designated by the Company for sale to employees and others having a business
relationship with the Company.
If this Agreement is terminated by the Representatives in accordance
with the provisions of Section 5, Section 9(a)(i) or Section 11 hereof, the
Company shall reimburse the Underwriters for all of their out-of-pocket
expenses, including the reasonable fees and disbursements of counsel for the
Underwriters.
SECTION 5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations
of the Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company and the Sellers herein contained,
to the performance by the Company and the Sellers of their obligations
hereunder, and to the following further conditions:
(a) The Registration Statement shall have become effective
not later than 5:30 P.M. on the date hereof, or with the consent of
the Representatives, at a later time and date, not later, however,
than 5:30 P.M. on the first business day following the date hereof, or
at such later time and date as may be approved by a majority in
interest of the Underwriters; and at Closing Time no stop order
suspending the effectiveness of the Registration Statement shall have
been issued under the 1933 Act or proceedings therefor initiated or
threatened by the Commission. If the Company has elected to rely upon
Rule 430A of the 1933 Act Regulations, the price of the Securities and
any price-related information previously omitted from the effective
Registration Statement pursuant to such Rule 430A shall have been
transmitted to the Commission for filing pursuant to Rule 424(b) of
the 1933 Act Regulations within the prescribed time period and prior
to Closing Time the Company shall have provided evidence satisfactory
to the Representatives of such timely filing, or a post-effective
amendment providing such information shall have been promptly filed
and declared effective in accordance with the requirements of Rule
430A of the 1933 Act Regulations.
(b) At Closing Time the Representatives shall have received:
(1) The favorable opinion, dated as of Closing Time,
of Jones, Day, Reavis & Pogue, counsel for the Company, in
form and substance satisfactory to counsel for the
Underwriters, to the effect that:
(i) The Company has been duly incorporated
and is validly existing as a corporation in good
standing under the laws of the State of Ohio.
19
42091330
<PAGE> 20
(ii) The Company has corporate power and
authority to own, lease and operate its properties
and to conduct its business as described in the
Registration Statement and to enter into and perform
its obligations under this Agreement and the Pricing
Agreement.
(iii) To the best of their knowledge and
information, the Company is duly qualified as a
foreign corporation to transact business and is in
good standing in each jurisdiction in which such
qualification is required.
(iv) The authorized, issued and outstanding
capital stock of the Company is as set forth in the
Prospectus under "Capitalization" (except for
subsequent issuances, if any, pursuant to
reservations, agreements or employee benefit plans
referred to in the Prospectus), all the issued and
outstanding shares of capital stock of the Company
(including the Securities to be sold by the Sellers)
have been duly authorized and validly issued and are
fully paid and non-assessable.
(v) The Securities to be sold by the Company
have been duly authorized for issuance and sale to
the Underwriters pursuant to this Agreement and, when
issued and delivered by the Company pursuant to this
Agreement against payment of the consideration set
forth in the Pricing Agreement, will be validly
issued and fully paid and non-assessable.
(vi) The issuance of the Securities to be
sold by the Company is not subject to preemptive or
other similar rights arising by operation of law,
under the charter or by-laws of the Company or, to
the best of their knowledge and information,
otherwise.
(vii) Each subsidiary of the Company has
been duly incorporated and is validly existing as a
corporation in good standing under the laws of the
jurisdiction of its incorporation, has corporate
power and authority to own, lease and operate its
properties and to conduct its business as described
in the Registration Statement and, to the best of
their knowledge and information, is duly qualified as
a foreign corporation to transact business and is in
good standing in each jurisdiction in which such
qualification is
20
42091330
<PAGE> 21
required; all of the issued and outstanding
capital stock of each such subsidiary has been duly
authorized and validly issued, is fully paid and
non-assessable and, to the best of their knowledge
and information and other than as disclosed in the
Registration Statement, is owned by the Company,
directly or through subsidiaries, free and clear of
any security interest, mortgage, pledge, lien,
encumbrance, claim or equity.
(viii) This Agreement and the Pricing
Agreement have each been duly authorized, executed
and delivered by the Company.
(ix) The Registration Statement is effective
under the 1933 Act and, to the best of their
knowledge and information, no stop order suspending
the effectiveness of the Registration Statement has
been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission.
(x) At the time the Registration Statement
became effective and at the Representation Date, the
Registration Statement (other than the financial
statements and supporting schedules included therein,
as to which no opinion need be rendered) complied as
to form in all material respects with the
requirements of the 1933 Act and the 1933 Act
Regulations.
(xi) The capital stock of the Company
conforms to the description thereof contained in the
Prospectus, and the form of certificate used to
evidence the Class A Common Shares is in due and
proper form and complies with all applicable
statutory requirements.
(xii) To the best of their knowledge and
information, there are no legal or governmental
proceedings pending or threatened which are required
to be disclosed in the Registration Statement, other
than those disclosed therein, and all pending legal
or governmental proceedings to which the Company or
any subsidiary is a party or to which any of their
property is subject which are not described in the
Registration Statement, including ordinary routine
litigation incidental to the business, are,
considered in the aggregate, not material.
21
42091330
<PAGE> 22
(xiii) The information in the Prospectus
under "Description of Capital Stock," "Legal
Proceedings," and "Patents and Trademarks," to the
extent that it constitutes matters of law, summaries
of legal matters, documents or proceedings, or legal
conclusions, has been reviewed by them and is correct
in all material respects.
(xiv) To the best of their knowledge and
information, there are no contracts, indentures,
mortgages, loan agreements, notes, leases or other
instruments required to be described or referred to
in the Registration Statement or to be filed as
exhibits thereto other than those described or
referred to therein or filed as exhibits thereto, the
descriptions thereof or references thereto are
correct, and no default exists in the due performance
or observance of any material obligation, agreement,
covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or
other instrument so described, referred to or filed.
(xv) No authorization, approval, consent or
order of any court or governmental authority or
agency is required in connection with the offering,
issuance or sale of the Securities to the
Underwriters, except such as may be required under
the 1933 Act or the 1933 Act Regulations or state
securities law; and, to the best of their knowledge
and information, the execution, delivery and
performance of this Agreement and the Pricing
Agreement and the consummation of the transactions
contemplated herein and therein and compliance by the
Company with its obligations hereunder and thereunder
will not conflict with or constitute a breach of, or
default under, or result in the creation or
imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any of its
subsidiaries pursuant to, any contract, indenture,
mortgage, loan agreement, note, lease or other
instrument to which the Company or any of its
subsidiaries is a party or by which it or any of them
may be bound, or to which any of the property or
assets of the Company or any of its subsidiaries is
subject, nor will such action result in any violation
of the provisions of the charter or by-laws of the
Company, or any applicable law, administrative
regulation or administrative or court decree.
22
42091330
<PAGE> 23
(xvi) To the best of their knowledge and
information, there are no persons with registration
or other similar rights to have any securities
registered pursuant to the Registration Statement or
otherwise registered by the Company under the 1933
Act.
(xvii) Each document filed pursuant to the
1934 Act (other than the financial statements and
supporting schedules included therein, as to which no
opinion need be rendered) and incorporated or deemed
to be incorporated by reference in the Prospectus
complied when so filed as to form in all material
respects with the 1934 Act and the 1934 Act
Regulations.
(2) The favorable opinion, dated as of Closing
Time, of ____________________________, counsel for the
Sellers, in form and substance satisfactory to counsel for the
Underwriters, to the effect that:
(i) This Agreement and the Pricing
Agreement each have been duly authorized, executed
and delivered by or on behalf of each of the Sellers.
(ii) The Power of Attorney and Custody
Agreement has been duly authorized, executed and
delivered by each of the Sellers and constitutes the
valid and binding obligations of each such Seller in
accordance with its terms.
(iii) Each of the Sellers has good and
marketable title to the Securities to be sold by such
Seller hereunder and full power, right and authority
to sell such Securities as herein contemplated, and
each of the Underwriters will receive good and
marketable title to the Securities purchased by it
from the Sellers, free and clear of any mortgage,
pledge, lien, security interest, encumbrance, claim
or equity created by or arising through the Seller.
In rendering such opinion, counsel may assume that
the Underwriters are without notice of any defect in
the title of the Sellers to the Securities being
purchased from the Sellers.
(iv) No authorization, approval, consent, or
order of any court or governmental authority or
agency is required in connection with the sale of the
Securities from each of the Sellers to the
Underwriters, except such as may be required under
23
42091330
<PAGE> 24
the 1933 Act of the 1933 Act Regulations or
state securities law; and, to the best of their
knowledge and information, the execution, delivery
and performance of this Agreement and the Pricing
Agreement and the consummation of the transactions
contemplated herein and therein and compliance by
each Seller with its obligations hereunder and
thereunder will not conflict with or constitute a
breach of, or default under, or result in the
creation or imposition of any lien, charge or
encumbrance upon any property or assets of such
Seller pursuant to, any contract, indenture,
mortgage, loan agreement, note, lease or other
instrument to which such Seller is a party or by
which it may be bound, or to which any of the
property or assets of such Seller is subject, nor
will such action result in any violation of the
provisions of the charter or by-laws of such Seller,
or any applicable law, judgment, order,
administrative regulation or administrative or court
decree.
(3) The favorable opinion, dated as of Closing Time,
of Mayer, Brown & Platt, counsel for the Underwriters, with
respect to the matters set forth in (i), (ii), (v), (vi)
(solely as to preemptive rights arising by operation of law or
under the charter or by-laws of the Company) and (viii) to
(xi), inclusive, of subsection (b)(1) of this Section. In
rendering such opinion, Mayer, Brown & Platt may rely as to
matters of Ohio law upon the opinion of Jones, Day, Reavis &
Pogue set forth in subsection (b)(1) of this Section.
(4) In giving their opinions required by subsections
(b)(1) and (b)(3), respectively, of this Section, Jones, Day,
Reavis & Pogue and Mayer, Brown & Platt shall each
additionally state that nothing has come to their attention
that would lead them to believe that the Registration
Statement (except for financial statements and schedules and
other financial or statistical data included therein, as to
which counsel need express no opinion), at the time it became
effective or at the Representation Date, contained an untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus
(except for financial statements and schedules and other
financial or statistical data included therein, as to which
counsel need express no opinion), at the Representation Date
(unless the term "Prospectus" refers to a prospectus which has
been
24
42091330
<PAGE> 25
provided to the Underwriters by the Company for use in
connection with the offering of the Securities which differs
from the Prospectus on file at the Commission at the time the
Registration Statement becomes effective, in which case at the
time it is first provided to the Underwriters for such use) or
at Closing Time, included or includes an untrue statement of a
material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading.
(c) At Closing Time there shall not have been, since the date
hereof or since the respective dates as of which information is given
in the Prospectus, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as
one enterprise, whether or not arising in the ordinary course of
business, and the Representatives shall have received a certificate of
the President or a Vice President of the Company and of the chief
financial or chief accounting officer of the Company, dated as of
Closing Time, to the effect that (i) there has been no such material
adverse change, (ii) the representations and warranties of the Company
contained in Section 1(a) are true and correct with the same force and
effect as though expressly made at and as of Closing Time, (iii) the
Company has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied hereunder at or prior to
Closing Time, and (iv) no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that
purpose have been initiated or threatened by the Commission. As used
in this Section 5(c), the term "Prospectus" means the Prospectus in
the form first used to confirm sales of the Securities.
(d) At Closing Time the Representatives shall have
received a certificate of the Attorney-in-Fact for each of the
Sellers, dated as of Closing Time, to the effect that (i) the
representations and warranties of each Seller contained in Section
1(b) are true and correct with the same force and effect as though
expressly made at and as of Closing Time and (ii) each Seller has
complied with all agreements and satisfied all conditions on its part
to be performed or satisfied hereunder at or prior to Closing Time.
The Attorney-in-Fact shall be entitled to rely upon certificates of
the Sellers in giving its certificate.
(e) At the time of the execution of this Agreement, the
Representatives shall have received from Ernst & Young
25
42091330
<PAGE> 26
LLP a letter dated such date, in form and substance satisfactory to
the Representatives, to the effect that (i) they are independent
public accountants with respect to the Company and its subsidiaries
within the meaning of the 1933 Act and the 1933 Act Regulations; (ii)
it is their opinion that the financial statements and supporting
schedules included in the Registration Statement and covered by their
opinions therein comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the 1933 Act
Regulations; (iii) based upon limited procedures set forth in detail
in such letter, nothing has come to their attention which causes them
to believe that (A) the unaudited financial statements and supporting
schedules of the Company and its subsidiaries included in the
Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act
and the 1933 Act Regulations or are not presented in conformity with
generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial statements
included in the Registration Statement, (B) the unaudited amounts of
revenues, net income and net income per share set forth under
"[Selected Financial Information]" in the Prospectus were not
determined on a basis substantially consistent with that used in
determining the corresponding amounts in the audited financial
statements included in the Registration Statement, or (C) at a
specified date not more than five days prior to the date of this
Agreement, there has been any change in the capital stock of the
Company or any increase in the consolidated long term debt of the
Company and its subsidiaries or any decrease in consolidated net
current assets or net assets as compared with the amounts shown in the
March 31, 1995 balance sheet included in the Registration Statement
or, during the period from March 31, 1995 to a specified date not more
than five days prior to the date of this Agreement, there were any
decreases, as compared with the corresponding period in the preceding
year, in consolidated revenues, net income or net income per share of
the Company and its subsidiaries, except in all instances for changes,
increases or decreases which the Registration Statement and the
Prospectus disclose have occurred or may occur; and (iv) in addition
to the examination referred to in their opinions and the limited
procedures referred to in clause (iii) above, they have carried out
certain specified procedures, not constituting an audit, with respect
to certain amounts, percentages and financial information which are
included in the Registration Statement and Prospectus and which are
specified by the Representatives, and have found such amounts,
percentages and financial information to be in agreement with the
26
42091330
<PAGE> 27
relevant accounting, financial and other records of the Company and its
subsidiaries identified in such letter.
(f) At Closing Time the Representatives shall have received
from Ernst & Young LLP a letter, dated as of Closing Time, to the
effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (e) of this Section, except that the specified
date referred to shall be a date not more than five days prior to
Closing Time and, if the Company has elected to rely on Rule 430A of
the 1933 Act Regulations, to the further effect that they have carried
out procedures as specified in clause (iv) of subsection (d) of this
Section with respect to certain amounts, percentages and financial
information specified by the Representatives and deemed to be a part
of the Registration Statement pursuant to Rule 430(A)(b) and have
found such amounts, percentages and financial information to be in
agreement with the records specified in such clause (iv).
(g) At the time of the execution of this Agreement and at
Closing Time, the Representatives shall have received from Price
Waterhouse LLP, letters dated as of such respective dates, covering
such specified financial statement items and procedures as the
Representatives may reasonably request, in form and substance
satisfactory to the Representatives.
(h) At Closing Time and at each Date of Delivery, if any,
counsel for the Underwriters shall have been furnished with such
documents and opinions as they may require for the purpose of enabling
them to pass upon the issuance and sale of the Securities as herein
contemplated and related proceedings, or in order to evidence the
accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all
proceedings taken by the Company and the Sellers in connection with
the issuance and sale of the Securities as herein contemplated shall
be satisfactory in form and substance to the Representatives and
counsel for the Underwriters.
(i) In the event that the Underwriters exercise their option
provided in Section 2(b) hereof to purchase all or any portion of the
Option Securities, the representations and warranties of the Company
and the Sellers contained herein and the statements in any
certificates furnished by the Company and the Sellers hereunder shall
be true and correct as of each Date of Delivery and, at the relevant
Date of Delivery, the Representatives shall have received:
27
42091330
<PAGE> 28
(1) Certificates, dated such Date of Delivery, of
(x) the President or a Vice President of the Company and of
the chief financial or chief accounting officer of the Company
and (y) the Attorney-in-Fact for each of the Sellers
confirming that the certificates delivered at the Closing Time
pursuant to Section 5(c) and 5(d) hereof, respectively, remain
true and correct as of such Date of Delivery.
(2) The favorable opinion of Jones, Day, Reavis &
Pogue, counsel for the Company, in form and substance
satisfactory to counsel for the Underwriters, dated such Date
of Delivery, relating to the Option Securities to be purchased
on such Date of Delivery and otherwise to the same effect as
the opinion required by Sections 5(b)(1) and 5(b)(4) hereof.
(3) The favorable opinion of _______________ counsel
for the Sellers, in form and substance satisfactory to counsel
for the Underwriters, dated such Date of Delivery, relating to
the Option Securities to be purchased on such Date of Delivery
and otherwise to the same effect as the opinion required by
Section 5(b)(2) hereof.
(4) The favorable opinion of Mayer, Brown & Platt,
counsel for the Underwriters, dated such Date of Delivery,
relating to the Option Securities to be purchased on such Date
of Delivery and otherwise to the same effect as the opinion
required by Sections 5(b)(2) and 5(b)(4) hereof.
(5) A letter from Ernst & Young LLP, in form and
substance satisfactory to the Representatives and dated such
Date of Delivery, substantially the same in form and substance
as the letter furnished to the Representatives pursuant to
Section 5(e) hereof, except that the "specified date" in the
letter furnished pursuant to this Section 5(i)(5) shall be a
date not more than five days prior to such Date of Delivery.
(6) A letter from Price Waterhouse LLP, in form and
substance satisfactory to the Representatives and dated such
Date of Delivery, substantially the same in form and substance
as the letter furnished to the Representatives pursuant to
Section 5(g) hereof.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be
terminated by the Representatives by notice to the Company and the Sellers at
any time at or prior to Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section 4
hereof.
28
42091330
<PAGE> 29
SECTION 6. INDEMNIFICATION.
(a) The Company and the Sellers agree to jointly and severally
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act as
follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the
information deemed to be part of the Registration Statement pursuant
to Rule 430A(b) of the 1933 Act Regulations, if applicable, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus
or the Prospectus (or any amendment or supplement thereto) or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage or
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of
the Company; and
(iii) against any and all expense whatsoever, as incurred
(including, subject to Section 6(c) hereof, the fees and disbursements
of counsel chosen by the Representatives), reasonably incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or
(ii) above;
PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through the Representatives expressly for use in the Registration
Statement (or any amendment thereto) or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto). Without limiting any
obligation of the
29
42091330
<PAGE> 30
Company, the liability of each Seller under this Section 6 shall not exceed the
product of the number of Securities sold by such Seller times the initial
public offering price per share appearing on the cover page of the Prospectus.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, its directors, each of its officers who signed the Registration
Statement, each person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act and each Seller against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection
(a) of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto) or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such
Underwriter through the Representatives expressly for use in the Registration
Statement (or any amendment thereto) or such preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure
to so notify an indemnifying party shall not relieve such indemnifying party
from any liability which it may have otherwise than on account of this
indemnity agreement. An indemnifying party may participate at its own expense
in the defense of any such action. In no event shall the indemnifying parties
be liable for fees and expenses of more than one counsel (in addition to any
local counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances.
SECTION 7. CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 6 hereof is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms, the Company, the
Sellers and the Underwriters shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by said
indemnity agreement incurred by the Company, the Sellers and one or more of the
Underwriters, as incurred, in such proportions that the Underwriters are
responsible for that portion represented by the percentage that the
underwriting discount appearing on the cover page of the Prospectus bears to
the initial public offering price appearing thereon and the Company and the
Sellers are jointly and severally responsible for the balance; PROVIDED,
HOWEVER, that no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any
30
42091330
<PAGE> 31
person who was not guilty of such fraudulent misrepresentation.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amounts in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
exceeds the amount of any damages of the kind described in Section 6(a) which
such Underwriter has otherwise paid in respect of such losses, liabilities,
claims, damages and expenses. For purposes of this Section, each person, if
any, who controls an Underwriter within the meaning of Section 15 of the 1933
Act shall have the same rights to contribution as such Underwriter, and each
director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as the Company and the Sellers.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement and the Pricing Agreement, or contained in certificates of officers
of the Company or the Sellers submitted pursuant hereto, shall remain operative
and in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter or controlling person, or by or on behalf of the
Company or the Sellers, and shall survive delivery of the Securities to the
Underwriters.
SECTION 9. TERMINATION OF AGREEMENT.
(a) The Representatives may terminate this Agreement, by notice to
the Company and the Sellers, at any time at or prior to Closing Time (i) if
there has been, since the date of this Agreement or since the respective dates
as of which information is given in the Prospectus, any material adverse change
in the condition, financial or otherwise, or in the earnings, business affairs
or business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, or (ii)
if there has occurred any material adverse change in the financial markets in
the United States or elsewhere or any outbreak of hostilities or escalation
thereof or other calamity or crisis the effect of which is such as to make it,
in the judgment of the Representatives, impracticable to market the Securities
or to enforce contracts for the sale of the Securities, or (iii) if trading in
the Class A Common Shares has been suspended by the Commission, or if trading
generally on the New York Stock Exchange has been suspended, or minimum or
maximum prices for trading have been fixed, or maximum ranges for prices for
securities have been required, by said Exchange or by order of the Commission
or any other governmental authority, or if a banking moratorium has been
declared by either Federal, New York or Ohio authorities. As used in this
Section 9(a), the term "Prospectus" means the Prospectus in the form first used
to confirm sales of the Securities.
31
42091330
<PAGE> 32
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party except
as provided in Section 4 hereof. Notwithstanding any such termination, the
provisions of Sections 6 and 7 hereof shall remain in effect.
SECTION 10. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS. If one or
more of the Underwriters shall fail at Closing Time to purchase the Initial
Securities which it or they are obligated to purchase under this Agreement and
the Pricing Agreement (the "Defaulted Securities"), the Representatives shall
have the right, within 24 hours thereafter, to make arrangements for one or
more of the non-defaulting Underwriters, or any other underwriters, to purchase
all, but not less than all, of the Defaulted Securities in such amounts as may
be agreed upon and upon the terms herein set forth; if, however, the
Representatives shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the number of Initial Securities, the non-defaulting Underwriters
shall be obligated to purchase the full amount thereof in the
proportions that their respective underwriting obligations hereunder
bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
number of Initial Securities, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either the Representatives or the Company shall
have the right to postpone Closing Time for a period not exceeding seven days
in order to effect any required changes in the Registration Statement or
Prospectus or in any other documents or arrangements.
SECTION 11. DEFAULT BY ONE OR MORE SELLERS OR THE COMPANY. If one or
more of the Sellers shall fail at Closing Time to sell and deliver the number
of Securities which such Seller or Sellers are obligated to sell hereunder,
then the Representatives may, at their option, by notice to the Company and the
non-defaulting Sellers, either (a) terminate this Agreement without liability
on the part of any non-defaulting party or (b) elect to purchase the
Securities which the Company and the non-defaulting Sellers, if any, have
agreed to sell hereunder.
In the event of a default by any Seller as referred to in this Section
11, the Underwriters, the Company and the non-defaulting Sellers, if any, shall
have the right to postpone
32
42091330
<PAGE> 33
Closing Time for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or the Prospectus or in any
other documents or arrangements.
If the Company shall fail at Closing Time or at the Date of Delivery
to sell and deliver the number of Securities that it is obligated to sell
hereunder, then this Agreement shall terminate without any liability on the
part of any non-defaulting party.
No action taken pursuant to this Section 11 shall relieve the Company
or any Seller from liability, if any, in respect of such default.
SECTION 12. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives at Merrill Lynch World
Headquarters, North Tower, World Financial Center, New York, New York
10281-1201, attention of ____________, Vice President; notices to the Company
shall be directed to it at 22801 St. Clair Ave., Cleveland, Ohio, attention of
Frederick G. Stueber, Esq., Vice President, General Counsel and Secretary; and,
notices to the Sellers shall be directed to ______________,
____________________, ______________________.
SECTION 13. PARTIES. This Agreement and the Pricing Agreement shall
each inure to the benefit of and be binding upon the Underwriters, the Company
and the Sellers and their respective successors[, heirs and legal
representatives]. Nothing expressed or mentioned in this Agreement or the
Pricing Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Underwriters, the Company and the Sellers and their
respective successors[, heirs and legal representatives] and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
respective successors, heirs and legal representatives, any legal or equitable
right, remedy or claim under or in respect of this Agreement or the Pricing
Agreement or any provision herein or therein contained. This Agreement and the
Pricing Agreement and all conditions and provisions hereof and thereof are
intended to be for the sole and exclusive benefit of the Underwriters, the
Company and the Sellers and their respective successors[, heirs and legal
representatives,] and said controlling persons and officers and directors and
their respective successors, heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities
from any Underwriter shall be deemed to be a successor by reason merely of such
purchase.
SECTION 14. GOVERNING LAW AND TIME. This Agreement and the Pricing
Agreement shall be governed by and construed in accordance with the laws of the
State of New York applicable to
33
42091330
<PAGE> 34
agreements made and to be performed in said State. Specified times of day
refer to New York City time.
34
42091330
<PAGE> 35
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to each of the Company and the
Attorney-in-Fact a counterpart hereof, whereupon this instrument, along with
all counterparts, will become a binding agreement among the Underwriters, the
Company and each Seller in accordance with its terms.
Very truly yours,
THE LINCOLN ELECTRIC COMPANY
By:______________________________
Title:
THE SELLERS
By:____________________________
As Attorney-in-Fact, acting on
behalf of each of the Sellers named
in Schedule B hereto.
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
J.P. MORGAN SECURITIES INC.
MCDONALD & COMPANY SECURITIES, INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:____________________________
Authorized Signatory
For themselves and as Representatives of the other
Underwriters named in Schedule A hereto.
35
42091330
<PAGE> 36
SCHEDULE A
<TABLE>
<CAPTION>
Number
Name of Underwriter of Securities
------------------- -------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated. . . . . . . . . .
J.P. Morgan Securities Inc . . . . . . . .
McDonald & Company Securities, Inc. . . . .
_____________
Total. . . . . . . . . . . . . . . . . _____________
</TABLE>
Sch A - 1
42091330
<PAGE> 37
<TABLE>
SCHEDULE B
<CAPTION>
Maximum
Number of Number of
Initial Option
Securities Securities
Name to be sold to be sold
---- ---------- ----------
<S> <C>
The Lincoln Electric Company . . . . . . .
[Sellers]
Total. . . . . . . . . . . . . . . .
---------- ----------
</TABLE>
Sch B - 1
42091330
<PAGE> 38
SCHEDULE C
Shareholders who have agreed to 180-day lock-up pursuant to Section
1(a)(xvi):
Sch C - 1
42091330
<PAGE> 39
Exhibit A
_________ Shares
THE LINCOLN ELECTRIC COMPANY
(an Ohio corporation)
Class A Common Shares
(Without Par Value)
PRICING AGREEMENT
-----------------
_____________, 1995
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
J.P. MORGAN SECURITIES INC.
MCDONALD & COMPANY SECURITIES, INC.
as Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1209
Dear Sirs:
Reference is made to the Purchase Agreement dated , 1995 (the
"Purchase Agreement") relating to the purchase by the several Underwriters
named in Schedule A thereto, for whom Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities Inc. and McDonald &
Company Securities, Inc. are acting as representatives (the "Representatives"),
of the above Class A Common Shares (the "Securities"), of The Lincoln Electric
Company, an Ohio corporation (the "Company").
Pursuant to Section 2 of the Purchase Agreement, the Company and each
of the Sellers named in Schedule B to the Purchase Agreement (the "Sellers"),
severally and not jointly, agree with each Underwriter as follows:
1. The initial public offering price per share for the
Securities, determined as provided in said Section 2, shall be $ .
1
42091330
<PAGE> 40
2. The purchase price per share for the Securities to be paid
by the several Underwriters shall be $ , being an amount
equal to the initial public offering price set forth above less
$ per share.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Attorney-in-Fact for
the Sellers a counterpart hereof, whereupon this instrument, along with all
counterparts, will become a binding agreement among the Underwriters, the
Company and the Sellers in accordance with its terms.
Very truly yours,
THE LINCOLN ELECTRIC COMPANY
By:_______________________________
Title:
THE SELLERS
By:____________________________
As Attorney-in-Fact, acting on
behalf of each of the Sellers named
in Schedule B hereto.
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
J.P. MORGAN SECURITIES INC.
MCDONALD & COMPANY SECURITIES, INC.
By:________________________________
Authorized Signatory
For themselves and as Representatives of the
other Underwriters named in the Purchase Agreement
2
42091330
<PAGE> 1
EXHIBIT 4.1
FORM OF
THE LINCOLN ELECTRIC COMPANY
AMENDED AND RESTATED ARTICLES OF INCORPORATION
AS PROPOSED TO BE AMENDED
ARTICLE FIRST: The name of the Corporation shall be THE
LINCOLN ELECTRIC COMPANY.
ARTICLE SECOND: The place in the State of Ohio where its
principal office is located is the City of Cleveland, Cuyahoga County.
ARTICLE THIRD: The Corporation is formed for the purpose of
manufacturing, repairing, buying, selling and dealing in all varieties and
kinds of electrical machinery, tools and appliances, and doing all things
necessary and incident thereto.
ARTICLE FOURTH: Section 1. The maximum number of shares
which the Corporation is authorized to have outstanding is sixty-two million
(62,000,000), consisting of thirty million (30,000,000) Common Shares, without
par value ("Common Shares"), thirty million (30,000,000) Class A Common Shares,
without par value ("Class A Common Shares") and two million (2,000,000) Class B
Common Shares, without par value ("Class B Common Shares"). The shares of each
class shall have the express terms set forth in this Article Fourth.
Upon the Certificate of Amended and Restated Articles of Incorporation
setting forth these amendments becoming effective pursuant to the Ohio General
Corporation Law (the "Effective Time"), and without any further action on the
part of the Corporation or its shareholders, (i) each whole share of Common
Stock, without par value ("Old Common Stock") then issued shall automatically
be changed and converted into one fully paid and nonassessable Common Share,
(ii) each whole share of Class A Common Stock, without par value ("Old Class A
Common Stock") then issued shall automatically be changed and converted into
one fully paid and nonassessable Class B Common Share, (iii) certificates
representing Old Common Stock outstanding prior to the Effective Time shall be
deemed to represent the same number of Common Shares, and (iv) certificates
representing Old Class A Common Stock outstanding prior to the Effective Time
shall be deemed to represent the same number of Class B Common Shares.
The powers, preferences and rights of the Common Shares, Class A
Common Shares and Class B Common Shares (collectively, from and after the
Effective Time, the "Common Equity") and the qualifications, limitations and
restrictions thereof, shall in all respects be identical, except as otherwise
required by law or as expressly provided in these Amended and Restated Articles
of Incorporation.
<PAGE> 2
Page 2
Section 2. Voting.
Section 2.1. Each shareholder of the Corporation shall be
entitled to one vote for each Common Share and each Class B Common Share
standing in such shareholder's name on the books of the Corporation. Except as
otherwise required by statute, the holders of Common Shares and Class B Common
Shares shall vote together as one class on all matters.
Section 2.2. The holders of Class A Common Shares shall not
be entitled to vote on any matter submitted to shareholders for their vote,
consent, waiver, release or other action except as required by statute.
Section 3. Dividends. Dividends may be declared and paid to
the holders of Common Shares, Class A Common Shares and Class B Common Shares
in cash, property, or other securities of the Corporation (including shares of
any class whether or not shares of such class are already outstanding) out of
funds legally available therefor. No dividend shall be paid on the outstanding
Common Shares, Class A Common Shares or Class B Common Shares unless an equal
dividend per share is paid on each of the outstanding Common Shares, Class A
Common Shares and Class B Common Shares subject to the following:
(a) no cash dividend shall be declared or paid on
one class of Common Equity unless a cash
dividend of the same amount per share is
simultaneously declared and paid on the other
classes of Common Equity;
(b) dividends payable on the Common Equity in
capital stock shall be made to all holders of
Common Equity provided that: (i) such a
dividend on Class A Common Shares shall be
paid or made only in Class A Common Shares;
(ii) such a dividend on Class B Common Shares
shall be paid or made only in the same class
of Common Equity as paid on the Common
Shares; and (iii) a dividend on Class A
Common Shares paid or made in Class A Common
Shares and a dividend on Common Shares and
Class B Common Shares paid or made in either
Common Shares, Class A Common Shares or Class
B Common Shares (consistent with (ii) above)
shall be deemed an equal dividend per share
within the meaning of this Section 3 if paid
in the same proportion regardless of the fair
market value of such shares received in
payment of such dividend.
<PAGE> 3
Page 3
Section 4. Merger, Consolidation, Combination or Dissolution
of the Corporation. In the event of merger, consolidation or combination of
the Corporation with another entity (whether or not the Corporation is the
surviving entity) or in the event of dissolution of the Corporation, holders of
Class A Common Shares shall be entitled to receive in respect of each Class A
Common Share the same indebtedness, other securities, cash, rights, or any
other property, or any combination of shares, evidences of indebtedness,
securities, cash, rights or any other property, as holders of Common Shares and
Class B Common Shares shall be entitled to receive in respect to each share.
Section 5. Splits or Combinations of Shares. If the
Corporation shall in any manner split, subdivide or combine the outstanding
Common Shares, Class A Common Shares or Class B Common Shares, the outstanding
shares of the other such classes shall be proportionately split, subdivided or
combined in the same manner and on the same basis as the outstanding shares of
the other classes that have been split, subdivided or combined.
Section 6. Change in Number of Authorized Class A Common
Shares. The number of authorized Class A Common Shares may be increased or
decreased (but not below the number then outstanding) by the affirmative vote
of the holders of a majority of the aggregate number of outstanding Common
Shares and Class B Common Shares entitled to vote in the election of directors
voting as a single class.
Section 7. No Preemptive Rights. No shareholder of the
Corporation shall have any preemptive right as such shareholder to subscribe
for or purchase shares of the Corporation.
Section 8. Restrictions on Transfer of Class B Common Shares.
Section 8.1. No sale, assignment, transfer, pledge,
encumbrance or any other disposition of any Class B Common Shares may be made,
except upon compliance with the provisions of Sections 8.1 through 8.4 of this
Article Fourth (or the exception set forth in Section 8.2(b) below). Any
purported or attempted disposition of the Class B Common Shares other than as
permitted by this Article Fourth shall be void, and the last shareholder of
record who acquired such shares in a manner not contrary to this Article Fourth
shall be recognized as the holder of such shares for all purposes.
Section 8.2. The Corporation shall have the sole, exclusive
and unrestricted right, option and privilege to purchase, upon the occurrence
of any of the events set forth below, any or all of the Class B Common Shares
in a manner and at
<PAGE> 4
Page 4
a price per share current at the time of the purchase of said shares as
determined pursuant to the terms and provisions of Section 8.3 and 8.4 of this
Article Fourth. The events are:
(a) the death of a holder of Class B Common Shares; and
(b) the determination of a holder of Class B Common
Shares to sell, assign, transfer, pledge, give,
encumber or in any other way dispose of all or any of
said shares, except for any such disposition in the
form of a distribution from The Lincoln Electric
Company Employee Stock Ownership Plan ("Plan")
pursuant to the terms and conditions of the Plan.
Section 8.3. Upon the occurrence of either of the events
specified in Section 8.2 above, the holder of Class B Common Shares, or the
personal representative of said holder's estate, as the case may be, shall
notify the Corporation in writing of the occurrence of any such event. If the
Corporation shall elect to exercise any such right, option or privilege, it
shall, not later than ninety (90) days after it shall have received written
notice from the holder of Class B Common Shares or the personal representative
of said holder's estate, as the case may be, of the occurrence of any such
event, send written notice thereof to said holder or the personal
representative of said holder's estate, as the case may be, of such shares at
his or her last address as shown on the stock transfer records of the
Corporation, or, in the event of the death of said holder, to such other
address as may be so specified in the notice. The Corporation shall pay the
purchase price (as determined pursuant to the terms and provisions of Section
8.4 of this Article Fourth) to the holder of such shares, or in the event of
the death of said holder, to the personal representative of said holder's
estate, immediately upon the delivery to the Corporation of the certificate or
certificates representing the Class B Common Shares, duly endorsed for transfer
and delivery to the Corporation, its successors, assigns or nominees. Upon
delivery of the Corporation's written notice, all rights in and to the Class B
Common Shares shall be vested solely in the Corporation, its successors,
assigns or nominees. If the Corporation does not exercise its right to
purchase any or all of the Class B Common Shares pursuant to the terms and
provisions of this Article Fourth, such shares may be freely disposed of by the
holder thereof or the personal representative of said holder's estate, as the
case may be, not more than ninety (90) days after the expiration of the
Corporation's repurchase period; provided, however, that any such Class B
Common Shares so disposed of shall continue to be subject to the terms and
provisions of this Article Fourth. Any Class B Common Shares not so disposed
of
<PAGE> 5
Page 5
shall continue to be subject in all respects to the restrictions and provisions
contained in this Article Fourth.
Section 8.4. The price, rounded to the nearest dollar, at
which any Class B Common Share shall be bought or sold pursuant to the terms
and provisions of this Article Fourth shall be:
(a) the book value of such share in effect on the date of
receipt by the Corporation of the above-described
written notice, plus
(b) the accrued unpaid dividends with respect to such
share which were considered liabilities in
determining book value.
The book value used for this purpose shall be established each April 30 for the
12-month period, May 1 - April 30, following that date and shall be the book
value as of the immediately preceding December 31 as shown in the Corporation's
Audited Consolidated Financial Statements.
Section 8.5. Any Class B Common Shares purchased by the
Corporation pursuant to this Article Fourth shall be retired and restored to
the status of authorized and unissued shares.
Section 8.6. All share certificates representing Class B
Common Shares shall contain a reference to the restrictions and provisions
contained in this Article Fourth.
Section 9. Class A Common Shares Protection Provisions.
Section 9.1. If, after the Effective Time, a Person or group,
as defined in Section 9.11, acquires beneficial ownership of shares
representing 15% or more of the number of then outstanding Common Shares and
such Person or group (a "Significant Shareholder") does not then beneficially
own an equal or greater percentage of all then outstanding Class A Common
Shares, all of which Class A Common Shares must have been acquired by such
Significant Shareholder after the first issuance by the Corporation of Class A
Common Shares (the "Distribution Date"), such Significant Shareholder must,
within a ninety (90) day period beginning the day after becoming a Significant
Shareholder, make a public cash tender offer in compliance with all applicable
laws and regulations to acquire additional Class A Common Shares as provided in
this Section 9 of Article Fourth (a "Class A Protection Transaction").
Section 9.2. In each Class A Protection Transaction, the
Significant Shareholder must make a public tender offer to acquire that number
of additional Class A Common Shares
<PAGE> 6
Page 6
determined by (i) multiplying the percentage of the number of outstanding
Common Shares beneficially owned and acquired after the Effective Time by such
Significant Shareholder by the total number of Class A Common Shares
outstanding on the date such Person or group became a Significant Shareholder,
and (ii) subtracting therefrom the excess (if any) of the number of Class A
Common Shares beneficially owned by such Significant Shareholder on the date
such Person or group became a Significant Shareholder (including shares
acquired at or prior to the time such Person or group became a Significant
Shareholder) over the number of Class A Common Shares beneficially owned on the
Distribution Date (as adjusted for stock splits, stock dividends and similar
recapitalization). The Significant Shareholder must acquire all shares validly
tendered; or if the number of Class A Common Shares tendered to the Significant
Shareholder exceeds the number of shares required to be acquired pursuant to
this Section 9.2, the number of Class A Common Shares acquired from each
tendering holder shall be pro rata based on the percentage that the number of
shares tendered by such shareholder bears to the total number of shares
tendered by all tendering holders.
Section 9.3. The offer price for any Class A Common Shares
required to be purchased by the Significant Shareholder pursuant to this
Section 9 shall be the greatest of (i) the highest price per share paid by the
Significant Shareholder for any Common Shares or Class A Common Shares during
the six-month period ending on the date such Person or group became a
Significant Shareholder, (ii) the highest reported sale price of a Common Share
or Class A Common Share on the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") National Market System (or such other
securities exchange or quotation system as is then the principal trading market
for such shares) during the 30 day period preceding such Person or group
becoming a Significant Shareholder, and (iii) the highest reported sale price
of a Common Share or Class A Common Share on the NASDAQ National Market System
(or such other securities exchange or quotation system as is then the principal
trading market for such shares) on the business day preceding the date the
Significant Shareholder makes the tender offer required by this Section 9. For
purposes of Section 9.4, the applicable date for each calculation required by
clauses (i) and (ii) of the preceding sentence shall be the date on which the
Significant Shareholder becomes required to engage in the subsequent Class A
Protection Transaction for which such calculation is required. In the event
that the Significant Shareholder has acquired Common Shares or Class A Common
Shares in the six month period ending on the date such Person or group becomes
a Significant Shareholder for consideration other than cash, the value of such
consideration per Common Share or Class A Common Share shall be as determined
in good faith by the Board of Directors.
<PAGE> 7
Page 7
Section 9.4. A Class A Protection Transaction shall also be
required to be effected by any Significant Shareholder each time that the
Significant Shareholder acquires after the Effective Time beneficial ownership
of additional Common Shares equal to or greater than the next higher integral
multiple of 5% in excess of 15% (e.g., 20%, 25%, 30%, etc.) of the number of
outstanding Common Shares if such Significant Shareholder does not then own an
equal or greater percentage of the Class A Common Shares (all of which Class A
Common Shares must have been acquired by such Significant Shareholder after the
Distribution Date). Such Significant Shareholder shall be required to make a
public cash tender offer to acquire that number of Class A Common Shares
prescribed by the formula set forth in Section 9.2, and must acquire all shares
validly tendered or a pro rata portion thereof, as specified in Section 9.2, at
the price determined pursuant to Section 9.3, even if a previous Class A
Protection Transaction resulted in fewer Class A Common Shares being tendered
than required in the previous offer.
Section 9.5. If any Significant Shareholder fails to make an
offer required by this Section 9, or to purchase shares validly tendered and
not withdrawn (after proration, if any), such Significant Shareholder shall not
be entitled to vote any Common Shares beneficially owned by such Significant
Shareholder unless and until such requirements are complied with or unless and
until all Common Shares causing such offer requirement to be effective are no
longer beneficially owned by such Significant Shareholder. The requirement to
engage in a Class A Protection Transaction is satisfied by the making of the
requisite offer and purchasing validly tendered shares pursuant to this Section
9, even if the number of shares tendered is less than the number of shares
included in the required offer.
Section 9.6. The Class A Protection Transaction requirement
shall not apply to any increase in percentage beneficial ownership of Common
Shares resulting solely from a change in the aggregate number of Common Shares
outstanding, provided that any acquisition after such change which results in
any Person or group beneficially owning fifteen percent (15%) or more of the
number of outstanding Common Shares (or an additional 5% or more of the number
of Common Shares after the last acquisition which triggered the requirement for
a Class A Protection Transaction) shall be subject to any Class A Protection
Transaction requirement that would be imposed pursuant to this Section 9.
Section 9.7. In connection with Sections 9.1 through 9.4 of
this Section 9, the following Common Shares shall be excluded for the purpose
of determining the shares beneficially owned by such Person or group but not
for the purpose of determining shares outstanding:
<PAGE> 8
Page 8
(a) shares beneficially owned by such Person or group at
the Effective Time;
(b) shares acquired by will or by the laws of descent and
distribution, or by gift that is made in good faith
and not for the purpose of circumventing this Section
9 or by foreclosure of a bona fide loan;
(c) shares acquired upon issuance or sale by the
Corporation;
(d) shares acquired by operation of law (including a
merger or consolidation effected for the purpose of
recapitalizing such Person or reincorporating such
Person in another jurisdiction but excluding a merger
or consolidation effected for the purpose of
acquiring another Person);
(e) shares acquired in exchange for Class A Common Shares
by a holder of Class A Common Shares (or by a parent,
lineal descendant or donee of such holder of Class A
Common Shares who received such Class A Common Shares
from such holder) if the Class A Common Shares so
exchanged were acquired by such holder directly from
the Corporation as a dividend on Common Shares; and
(f) shares acquired by a plan of the Corporation
qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended, or any successor
provision thereto, or acquired by reason of a
distribution from such a plan.
Section 9.8. In connection with Sections 9.1 through 9.4 of
this Section 9, for purposes of calculating the number of Class A Common Shares
beneficially owned by any Persons or group:
(a) Class A Common Shares acquired by gift shall be
deemed to be beneficially owned by such Person or
member of a group if such gift was made in good faith
and not for the purpose of circumventing the
operations of this Section 9; and
(b) only Class A Common Shares owned of record by such
Person or member of a group or held by others as
nominees of such Person or member of a group and
identified as such to the Corporation shall be deemed
to be beneficially owned by such Person or group
(provided that Class A Common Shares with respect to
which such Person or member of a group
<PAGE> 9
Page 9
has sole investment and voting power shall be
deemed to be beneficially owned thereby).
Section 9.9. To the extent that the voting power of any
Common Share cannot be exercised pursuant to this Section 9, that Common Share
shall not be included in the determination of the voting power of the
Corporation for any purpose under these Amended and Restated Articles of
Incorporation or the Ohio Revised Code.
Section 9.10. All calculations with respect to percentage
beneficial ownership of issued and outstanding shares of either Common Shares
or Class A Common Shares will be based upon the numbers of issued and
outstanding shares reflected in either the records of or a certificate from the
Corporation's stock transfer agent or reported by the Corporation on the last
to be filed of (i) the Corporation's most recent Annual Report on Form 10-K,
(ii) its most recent Quarterly Report on Form 10-Q, (iii) its most recent
Current Report on Form 8-K, (iv) its most recent report on Form 10-C, and (v)
its most recent definitive proxy statement filed with the Securities and
Exchange Commission.
Section 9.11. For purposes of this Section 9, the term
"Person" means any individual, partnership, corporation, association, trust, or
other entity (other than the Corporation). Subject to Sections 9.7 and 9.8,
"beneficial ownership" shall be determined pursuant to Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "1934 Act"), or any
successor regulation and the formation or existence of a "group" shall be
determined pursuant to Rule 13d-5(b) under the 1934 Act or any successor
regulation, subject to the following qualifications:
(a) relationships by blood or marriage between or among
any Persons will not constitute any of such Persons
as a member of a group with such other Person, absent
affirmative attributes of concerted action; and
(b) any Person acting in his official capacity as a
director or officer of the Corporation shall not be
deemed to beneficially own shares where such
ownership exists solely by virtue of such Person's
status as a trustee (or similar position) with
respect to shares held by plans or trusts for the
general benefit of employees or former employees of
the Corporation, and actions taken or agreed to be
taken by a Person in such Person's official capacity
as an officer or director of the Corporation will not
cause such Person to become a member of a group with
any other Person.
<PAGE> 10
Page 10
Section 10. Conversion of Class A Common Shares. Each
outstanding Class A Common Share (whether or not then issued) shall convert
automatically into one Common Share upon the earliest to occur of:
(a) any time the aggregate of the outstanding Common
Shares and Class B Common Shares as reflected on the
stock transfer records of the Corporation is less
than 20% of the aggregate number of outstanding
Common Shares, Class A Common Shares and Class B
Common Shares. For purposes of the immediately
preceding sentence, any Common Shares, Class A Common
Shares or Class B Common Shares repurchased by the
Corporation and held as treasury shares or cancelled
by the Corporation shall not be deemed "outstanding"
from and after the date of repurchase;
(b) the date ("Conversion Date") which shall be ten years
from the Distribution Date of the Class A Common
Shares as defined in Section 9.1; provided, however,
that the Board of Directors by resolution adopted by
two-thirds of the entire number of Directors then in
office no earlier than thirty months and no later
than twenty-four months prior to the initial or any
subsequently established Conversion Date may extend
the Conversion Date for an additional five years.
Any such new Conversion Date and all subsequently
extended Conversion Dates may be extended in like
manner and for a like period; and
(c) upon resolution by the Board of Directors if, as a
result of the existence of the Class A Common Shares,
either the Common Shares or Class A Common Shares is,
or both are, excluded from quotation on the NASDAQ
National Market System, and all other national
quotation systems then in existence and are excluded
from trading on all the principal national securities
exchanges then in existence.
Upon such conversion, the total number of Common Shares the Corporation shall
have authority to issue shall be 60,000,000 shares, and the total number of
Class A Common Shares shall be zero (0) shares and all references to Class A
Common Shares shall be of no further force or effect. In making the
determination referred to in (a) or (c) of this Section 10, the Board of
Directors may conclusively rely on any information or documentation available
to it, including but not limited to filings made with the United States
Securities and Exchange Commission, any stock exchange, the National
Association of Securities Dealers, Inc. or any national quotation system or any
<PAGE> 11
Page 11
other government or regulatory agency, or the records of or certification from
the Corporation's stock transfer agent. At such time as set forth in (a), (b)
or (c) of this Section 10, the Class A Common Shares shall be deemed to be
automatically converted into Common Shares and stock certificates formerly
representing Class A Common Shares shall thereupon and thereafter be deemed to
represent a like number of Common Shares. The determination of the Board of
Directors that either (a) or (c) of this Section 10 has occurred shall be
conclusive and binding and the conversion of each Class A Common Share into one
Common Share shall remain effective regardless of whether either (a) or (c) has
occurred in fact.
ARTICLE FIFTH: The Board of Directors of the Corporation is
hereby authorized to fix in its discretion at any time and from time to time
the amount of consideration for which the Corporation may from time to time
issue its shares whether now or hereafter authorized, and whether or not
greater consideration could be received upon the issue and sale of the same
number of shares of another class and as otherwise permitted by law.
ARTICLE SIXTH: The Corporation may from time to time pursuant
to authorization by the Board of Directors and without action by the
shareholders, purchase or otherwise acquire shares of the Corporation of any
class or classes in such manner, upon such terms and in such amounts as the
Board of Directors shall determine without regard to whether less consideration
could be paid upon the purchase of the same number of shares of another class,
subject, however, to such limitation or restriction, if any, as is contained in
the express terms of any class of shares of the Corporation outstanding at the
time of the purchase or acquisition in question.
ARTICLE SEVENTH: The holders of shares of the Corporation
shall not be entitled to cumulative voting rights in elections of Directors.
ARTICLE EIGHTH: Section 1. A higher than majority
shareholder vote for certain Business Combinations (as defined below) shall be
required as follows:
A. In addition to any affirmative vote required by law or
these Articles or the terms of any series of Preferred Stock
or any other securities of the Corporation and except as
otherwise expressly provided in Section 2 of this Article
Eighth:
(1) any merger or consolidation of the
Corporation or any Subsidiary with (i) any Interested
Shareholder or with (ii) any other corporation
(whether or not itself an Interested
<PAGE> 12
Page 12
Shareholder) which is, or after such merger or
consolidation would be, an Affiliate or Associate
of an Interested Shareholder;
(2) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or
a series of transactions whether or not related) to
an Interested Shareholder (or an Affiliate or
Associate of an Interested Shareholder) of any assets
of the Corporation or a Subsidiary having an
aggregate Fair Market Value of $1,000,000 or more;
(3) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or
a series of transactions whether or not related) to
or with the Corporation or a Subsidiary of any assets
of an Interested Shareholder (or an Affiliate or
Associate of an Interested Shareholder) having an
aggregate Fair Market Value of $1,000,000 or more;
(4) the issuance or sale by the Corporation or any
Subsidiary (in one transaction or a series of
transactions whether or not related) of any
securities of the Corporation or of any Subsidiary to
an Interested Shareholder or any Affiliate or
Associate of an Interested Shareholder in exchange
for cash, securities or other consideration (or a
combination thereof) having an aggregate Fair Market
Value of $1,000,000 or more except an issuance of
securities upon conversion of convertible securities
of the Corporation or of a Subsidiary which were not
acquired by such Interested Shareholder (or such
Affiliate or Associate) from the Corporation or a
Subsidiary;
(5) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation
proposed by or on behalf of an Interested Shareholder
or an Affiliate or Associate of an Interested
Shareholder; or
(6) any reclassification of securities (including
any reverse stock split) or recapitalization of the
Corporation or a Subsidiary or any other transaction
(whether or not with or into or otherwise involving
an Interested Shareholder) which has the effect,
directly or indirectly, of increasing the
proportionate share of the outstanding shares of any
class of equity securities or securities convertible
into equity
<PAGE> 13
Page 13
securities of the Corporation or a Subsidiary which
is directly or indirectly owned by any Interested
Shareholder or an Affiliate or Associate of an
Interested Shareholder;
shall require the affirmative vote of (i) the holders of at
least two-thirds of the combined voting power of the then
outstanding shares of capital stock of the Corporation
entitled to vote generally in an annual election of Directors
or entitled by law or by the terms of the capital stock to
vote on the transaction in question (the "Voting Shares") and
(ii) the holders of at least two-thirds of the combined voting
power of the then outstanding Voting Shares held by
Disinterested Shareholders, in each case voting together as a
single class. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that
a lesser percentage may be specified, by law, by any other
provisions of these Articles or by the terms of any series of
Preferred Stock or any other securities of the Corporation.
B. The term "Business Combination" as used in this Article
Eighth shall mean any transaction which is referred to in any
one or more of clauses (1) through (6) of paragraph A of
Section 1 of this Article Eighth.
Section 2. The provisions of Section 1 of this Article Eighth
shall not be applicable to any Business Combination, and such Business
Combination shall require only such affirmative vote (if any) as is required by
law, any other provisions of these Articles, the terms of any of the classes or
series of Common Equity of the Corporation or of any of the classes or series
of capital stock of the Corporation entitled to a preference over the Common
Equity as to dividends or upon liquidation, or the terms of any other
securities of the Corporation, if all of the conditions specified in either of
the following paragraphs A or B are met:
A. The Business Combination shall have been approved by
a majority of the Disinterested Directors; or
B. All the following six conditions shall have been met:
(1) The transaction constituting the Business
Combination shall provide for a consideration to be
received by holders of Common Equity in exchange for
their Common Equity, and the aggregate amount of the
cash and the Fair Market Value as of the date of the
consummation of the Business Combination of
consideration other than
<PAGE> 14
Page 14
cash to be received per share by holders of Common
Equity in such Business Combination shall be at least
equal to the highest of the following:
(a) (if applicable) the highest per share
price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees)
paid in order to acquire any shares of Common
Equity beneficially owned by the Interested
Shareholder which were acquired (x) within
the two-year period immediately prior to the
first public announcement of the proposed
Business Combination (the "Announcement
Date") or (y) in the transaction in which it
became an Interested Shareholder, whichever
is higher;
(b) the Fair Market Value per share of
Common Equity on the Announcement Date or on
the date on which the Interested Shareholder
became an Interested Shareholder (the
"Determination Date"), whichever is higher;
and
(c) (if applicable) the price per share
equal to the Fair Market Value per share of
Common Equity determined pursuant to clause
(b) immediately preceding, multiplied by the
ratio of (x) the highest per share price
(including any brokerage commissions,
transfer taxes and soliciting dealers' fees)
paid in order to acquire any shares of Common
Equity beneficially owned by the Interested
Shareholder which were acquired within the
two-year period immediately prior to the
Announcement Date to (y) the Fair Market
Value per share of Common Equity on the first
day in such two-year period on which the
Interested Shareholder beneficially owned any
shares of Common Equity, whether or not such
Shareholder was an Interested Shareholder on
that day.
(2) If the transaction constituting the Business
Combination shall provide for a consideration to be
received by holders of any class of outstanding
Voting Shares other than Common Equity, the aggregate
amount of the cash and the Fair Market Value as of
the date of the consummation of the Business
Combination of consideration other than cash to be
received per share by holders of such Voting Shares
shall be at least equal to the
<PAGE> 15
Page 15
highest of the following (it being intended that the requirements of
this clause B(2) shall be required to be met with respect to every
class of outstanding Voting Shares, whether or not the Interested
Shareholder beneficially owns any shares of a particular class of
Voting Shares):
(a) (if applicable) the highest per share
price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees)
paid in order to acquire any shares of such
class of Voting Shares beneficially owned by
the Interested Shareholder which were
acquired (x) within the two-year period
immediately prior to the Announcement Date or
(y) in the transaction in which it became an
Interested Shareholder, whichever is higher;
(b) (if applicable) the highest preferential
amount per share to which the holders of
shares of such class of Voting Shares are
entitled in the event of any voluntary or
involuntary liquidation, dissolution or
winding up of the Corporation;
(c) the Fair Market Value per share of such
class of Voting Shares on the Announcement
Date or on the Determination Date, whichever
is higher; and
(d) (if applicable) the price per share
equal to the Fair Market Value per share of
such class of Voting Shares determined
pursuant to clause (c) immediately preceding,
multiplied by the ratio of (x) the highest
per share price (including any brokerage
commissions, transfer taxes and soliciting
dealers' fees) paid in order to acquire any
shares of such class of Voting Shares
beneficially owned by the Interested
Shareholder which were acquired within the
two-year period immediately prior to the
Announcement Date to (y) the Fair Market
Value per share of such class of Voting
Shares on the first day in such two-year
period on which the Interested Shareholder
beneficially owned any shares of such class
of Voting Shares, whether or not such
Shareholder was an Interested Shareholder on
that day.
<PAGE> 16
Page 16
(3) The consideration to be received by holders of a
particular class of Voting Shares or Common Equity
shall be in cash or in the same form as was
previously paid in order to acquire shares of such
class of shares which are beneficially owned by the
Interested Shareholder and, if the Interested
Shareholder beneficially owns shares of any class of
shares which were acquired with varying forms of
consideration, the form of consideration to be
received by the holders of such class of shares shall
be either cash or the form used to acquire the
largest number of shares of such class of Voting
Shares beneficially owned by it. The prices
determined in accordance with clauses (1) and (2) of
paragraph B of this Section 2 shall be subject to an
appropriate adjustment in the event of any stock
dividend, stock split, subdivision, combination of
shares or similar event.
(4) After such Interested Shareholder has become an
Interested Shareholder and prior to the consummation
of such Business Combination:
(a) except as approved by a majority of the
Disinterested Directors, there shall have
been no failure to declare and pay at the
regular date therefor any full quarterly
dividends (whether or not cumulative) on any
outstanding Preferred Stock or other capital
stock entitled to a preference over the
Common Equity as to dividends or upon
liquidation;
(b) except as approved by a majority of the
Disinterested Directors, there shall have
been (x) no reduction in the annual amount of
dividends paid on the Common Equity (except
as necessary to reflect any subdivision of
the Common Equity) and (y) no failure to
increase the annual amount of dividends as
necessary to prevent any such reduction in
the event of any reclassification (including
any reverse stock split), recapitalization,
reorganization or similar transaction which
has the effect of reducing the number of
outstanding shares of the Common Equity;
(c) such Interested Shareholder shall not
have become the beneficial owner of any
additional Voting Shares except as part of
the transaction in which it became an
Interested Shareholder; and
<PAGE> 17
Page 17
(d) there shall have always been at least
four (4) Disinterested Directors on
the Board of Directors.
(5) After such Interested Shareholder has become an
Interested Shareholder, such Interested Shareholder
shall not have received the benefit, directly or
indirectly (except proportionately as a shareholder),
of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax
advantages provided by the Corporation, whether in
anticipation of or in connection with such Business
Combination or otherwise.
(6) A proxy or information statement describing the
proposed Business Combination and complying with the
requirements of the Securities Exchange Act of 1934
and the rules and regulations thereunder (or any
subsequent provisions replacing such Act, rules or
regulations) shall be mailed to shareholders at least
thirty (30) days prior to the consummation of such
Business Combination (whether or not such proxy or
information statement is required to be mailed
pursuant to such Act, rules, regulations or
subsequent provisions).
Section 3. For purposes of this Article Eighth:
A. A "person" shall mean any individual, a partnership,
a corporation, an association, a trust or other entity.
B. "Interested Shareholder" at any particular time shall
mean any person (other than the Corporation or any Subsidiary
or any employee benefit plan or trust of the Corporation or
any Subsidiary) who or which:
(1) is at such time the beneficial owner, directly
or indirectly, of five percent (5%) or more of the
voting power of the Voting Shares;
(2) is an Affiliate of the Corporation and at any
time within the two-year period immediately prior to
the date in question was the beneficial owner,
directly or indirectly, of five percent (5%) or more
of the voting power of the Voting Shares; or
(3) is at such time an assignee of or has otherwise
succeeded to the beneficial ownership of any Voting
Shares which were at any time within
<PAGE> 18
Page 18
the two-year period immediately prior to the date in
question beneficially owned by an Interested
Shareholder (as defined in (1) and (2) above), if
such assignment or succession shall have occurred in
the course of a transaction or series of transactions
not involving a public offering within the meaning of
the Securities Act of 1933.
C. "Disinterested Shareholder" shall mean a shareholder
of the Corporation who is not an Interested Shareholder (or an
Affiliate or an Associate of an Interested Shareholder) who is
involved, directly or indirectly, in the proposed Business
Combination in question, except that as used in Section 6 of
this Article Eighth, the term "Disinterested Shareholder"
shall mean a shareholder of the Company who is not an
Interested Shareholder.
D. A person shall be a "beneficial owner" of any Voting
Shares:
(1) which such person or any of its Affiliates
or Associates beneficially owns, directly or
indirectly;
(2) which such person or any of its Affiliates or
Associates has (i) the right to acquire (whether or
not such right is exercisable immediately) pursuant
to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange
rights, warrants or options or otherwise or (ii) the
right to vote pursuant to any agreement, arrangement
or understanding; or
(3) which are beneficially owned, directly or
indirectly, by any other person with which such
person or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of
any Voting Shares.
E. For the purpose of determining whether a person is an
Interested Shareholder pursuant to paragraph B of this Section
3, the number of Voting Shares deemed to be outstanding shall
include shares deemed owned by an Interested Shareholder
through application of paragraph D of this Section 3 but shall
not include any other Voting Shares which may be issuable
pursuant to any agreement, arrangement or understanding, or
upon the exercise of conversion rights, exchange rights,
warrants or options or otherwise.
<PAGE> 19
Page 19
F. "Affiliate" means a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled
by, or is under common control with, the person specified.
"Associate", which is used to indicate a relationship with any
person, means (1) any corporation or organization (other than
the Corporation or a majority-owned subsidiary of the
Corporation) of which such person is an officer or partner or
is, directly or indirectly, the beneficial owner of ten
percent (10%) or more of any class of equity securities, (2)
any trust or other estate in which such person has a
substantial beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity, and (3)
any relative or spouse of such person, or any relative of such
spouse, who has the same home as such person or who is a
director or officer of the Corporation or any of its parents
or subsidiaries.
G. "Subsidiary" means any corporation of which a majority of
any class of equity security is owned, directly or indirectly,
by the Corporation; provided, however, that for the purposes
of the definition of Interested Shareholder set forth in
paragraph B of this Section 3, the term "Subsidiary" shall
mean only a corporation of which a majority of each class of
equity security is owned, directly or indirectly, by the
Corporation.
H. "Disinterested Director" means any member of the Board of
Directors who is unaffiliated with, and not a representative
or nominee of, the Interested Shareholder who is involved,
directly or indirectly, in the proposed Business Combination
in question, and was (a) a member of the Board prior to the
time that such Interested Shareholder became an Interested
Shareholder or (b) recommended to succeed a Disinterested
Director by a majority of the Disinterested Directors then on
the Board.
I. "Fair Market Value" means: (a) in the case of stock, the
highest closing sale price (or closing bid price for any day
on which a closing sale price is not available) during the
30-day period immediately preceding the date in question of a
share of such stock on the Composite Tape for New York Stock
Exchange Listed Stocks, or, if such stock is not quoted on the
Composite Tape, on the New York Stock Exchange, or if such
stock is not listed on such Exchange, on the principal United
States securities exchange registered under the Securities
Exchange Act of 1934 on which such stock is listed, or if such
stock is not listed on any
<PAGE> 20
Page 20
such exchange, the highest closing bid quotation with respect
to a share of such stock during the 30-day period preceding
the date in question on the NASDAQ or any other system then in
use, or if no such quotations are available, the fair market
value on the date in question of a share of such stock as
determined by a majority of the Disinterested Directors in
good faith; and (b) in the case of property other than cash or
stock, the fair market value of such property on the date in
question as determined by a majority of the Disinterested
Directors in good faith. If different classes of Common
Equity of the Corporation have different Fair Market Values
based on the determinations to be made under subsection (a),
then the term "Fair Market Value" of Common Equity shall mean
the highest value then ascribed to a share of any of the
various classes of Common Equity.
J. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than
cash to be received" as used in paragraph B of Section 2 of
this Article Eighth shall include the shares of Common Equity
and the shares of any other class of outstanding Voting Shares
retained by the holders of such shares.
Section 4. A majority of the Disinterested Directors of the
Corporation shall have the power and duty to determine for the purpose of this
Article Eighth, on the basis of information known to them after reasonable
inquiry, (1) whether a person is an Interested Shareholder, (2) the number of
Voting Shares beneficially owned by any person, (3) whether a person is an
Affiliate or Associate of another, (4) whether the requirements of Section 2 of
this Article Eighth have been met with respect to any Business Combination, and
(5) whether the assets which are subject to any Business Combination have, or
the consideration to be received for the issuance or transfer of securities by
this Corporation or any Subsidiary in any Business Combination has, an
aggregate Fair Market Value of $1,000,000 or more. Any such determination made
in good faith shall be binding and conclusive on all parties.
Section 5. Nothing contained in this Article Eighth shall be
construed to relieve any Interested Shareholder from any fiduciary obligation
imposed by law.
Section 6. In addition to any requirements of law and any
other provisions of these Articles or the terms of any class or series of
capital stock of the Corporation entitled to a preference over the Common
Equity as to dividends or upon liquidation, or the terms of any other
securities of the Corporation (and notwithstanding the fact that a lesser
<PAGE> 21
Page 21
percentage may be specified by law, these Articles or any such terms), the
affirmative vote of
A. the holders of two-thirds or more of the combined voting
power of the Voting Shares, voting together as a single class,
and
B. two-thirds of the combined voting power of the Voting
Shares held by the Disinterested Shareholders, voting together
as a single class, shall be required to amend, alter or repeal
or adopt any provision inconsistent with, this Article Eighth.
ARTICLE NINTH: The foregoing Amended and Restated Articles of
Incorporation hereby supersede existing Amended Articles of Incorporation as
heretofore amended.
<PAGE> 1
EXHIBIT 4.2
FORM OF
-------
T H E L I N C O L N E L E C T R I C C O M P A N Y
-------------------------------------------------------
AMENDED AND RESTATED
CODE OF REGULATIONS
-------------------
AS PROPOSED TO BE AMENDED
ARTICLE I
---------
SHARES
------
1. REGISTRATION AND TRANSFER OF CERTIFICATES. Each shareholder of the
Corporation whose shares have been fully paid for shall be entitled to
a certificate or certificates showing the number of shares registered
in his name on the books of the Corporation. Each certificate shall
be signed by the Chairman of the Board or the President or
Vice-President of the Corporation and the Secretary or Assistant
Secretary or the Treasurer or an Assistant Treasurer. Shares shall be
transferred only on the books of the Corporation by the holder
thereof, in person or by Attorney, upon surrender and cancellation of
certificates for a like number of shares.
2. SUBSTITUTED CERTIFICATES. The Board of Directors may authorize the
issuance of a new certificate in place of any certificate theretofore
issued by the Corporation alleged to have been lost or destroyed; in
its discretion requiring the owner of the lost or destroyed
certificate, or the legal representative, to give the Corporation a
bond in such sum as the Board of Directors may direct as indemnity
against any claim that may be made against the Corporation; or, if in
the judgment of the Board it is proper to do so, a new certificate may
be issued without requiring any bond.
<PAGE> 2
2
3. SHAREHOLDERS ENTITLED TO NOTICE AND TO VOTE. The Board of Directors
may fix a time not exceeding forty-five (45) days preceding the date
of any meeting of shareholders, or any dividend payment date, or any
date for the allotment of rights, as a record date for the
determination of the shareholders entitled to notice of such meeting,
or to vote thereat, or to receive such dividends or rights, as the
case may be, or in lieu thereof, the Board of Directors may close the
books of the Corporation against the transfer of shares during the
whole or any part of such period.
ARTICLE II
----------
MEETINGS OF SHAREHOLDERS
------------------------
1. ANNUAL MEETING. The Annual Meeting of shareholders shall be held on
the fourth Tuesday of the month of May each year at the principal
office of the Corporation, if not a legal holiday, and if a legal
holiday, then on the next day not a legal holiday, for the election of
Directors and the consideration of reports to be laid before the
meeting. Upon due notice there may also be considered and acted upon
at the Annual Meeting any matter which can properly be considered and
acted upon at a special meeting, in which case and for which purpose
the Annual Meeting shall also be considered as, and shall be, a
special meeting. When an Annual Meeting is not held or Directors are
not elected thereat, they may be elected at a special meeting called
for that purpose.
<PAGE> 3
3
2. SPECIAL MEETINGS. Special meetings of the shareholders may be called
by the President, or a Vice-President, or the Chairman of the Board of
Directors, or by the Executive Committee, or by a majority of the
Board of Directors, acting with or without a meeting, or by persons
who hold twenty-five percent of all the shares outstanding and
entitled to vote thereat, at such place or places as may be designated
in the call therefore, and notice thereof; provided, however, that a
meeting for the election of Directors may be held only within the
State of Ohio.
3. NOTICE OF MEETINGS. Notice of meetings of shareholders shall be given
in writing by the Secretary, or in his absence by the Chairman of the
Board or President or a Vice-President, and such notice shall state
the purpose or purposes for which the meeting is called, and the time
and place where it is to be held, and shall be served or mailed to
each shareholder of record entitled to vote at such meeting or
entitled to notice thereof, at least ten (10) days prior to the
meeting. If mailed, it shall be directed to the shareholder at his
address as it appears upon the records of the Corporation. In the
event of the transfer of shares after notice has been given and prior
to the holding of the meeting, it shall not be necessary to serve
notice upon the transferee. Notice of the time, place and purpose of
any meeting of shareholders may be waived by the written assent of
every shareholder entitled to notice, filed with
<PAGE> 4
4
or entered upon the records of the meeting, either before or after
the holding thereof.
5. QUORUM. The holders of a majority of the shares issued and
outstanding, entitled to vote, present either in person or by proxy,
shall constitute a quorum, unless a larger number is required by the
laws of Ohio, in which case the number required by the laws of Ohio,
present either in person or by proxy, shall constitute a quorum, but
any less number may adjourn the meeting from time to time, until a
quorum is obtained, and no further notice of such adjourned meeting
need be given other than by announcement at the meeting at which such
adjournment is taken.
6. PROXIES. Each shareholder entitled to vote shall be entitled to one
vote, either in person or by proxy, for each share of the Corporation
standing in his name at the time of the closing of the books for such
meeting. No proxy shall be valid after the expiration of eleven (11)
months from the date thereof, unless a longer time be specified
therein. Proxies shall be in writing but need not be sealed,
witnessed or acknowledged and shall be filed with the Secretary at or
before the meeting.
<PAGE> 5
5
ARTICLE III
-----------
BOARD OF DIRECTORS
------------------
1. NUMBER AND ELECTION. The powers and authority of the Corporation
shall be exercised and its business managed and controlled by a Board
of Directors. The election of Directors shall be by ballot and shall
be held at the Annual Meeting of shareholders or at a special meeting
called for that purpose. The maximum number of the Directors of the
Corporation shall be eighteen. Subject to such maximum, the number of
Directors may be fixed or changed (a) at a meeting of the shareholders
called for the purpose of electing Directors at which a quorum is
present, by the affirmative vote of the holders of a majority of the
shares that are represented at the meeting and entitled to vote on the
proposal, and (b) by the Directors, by the vote of a majority of their
number, who may also fill any Director's office that is created by an
increase in the number of Directors. The Directors shall be divided
into three classes, as nearly equal in number as possible, as
determined by the Board of Directors of the Corporation. A separate
election shall be held for each class of Directors as hereinafter
provided. Directors elected at the first election for the first class
shall hold office for the term of one year from the date of their
election and until the election of their successors, Directors elected
at the first election for the second class shall hold office for the
term of two years from the date of their election and until the
election of their successors, and Directors elected at the
<PAGE> 6
6
first election for the third class shall hold office for the term of
three years from the date of their election and until the election of
their successors. At each annual election, the successors to the
Directors of each class whose terms shall expire in that year shall be
elected to hold office for the term of three years from the date of
their election and until the election of their successors. In case of
any increase in the number of Directors of any class, any additional
Directors elected to such class shall hold office for a term which
shall coincide with the term of such class.
2. VACANCY AND REMOVAL. All Directors, for whatever terms elected, shall
hold office subject to applicable statutory provisions as to the
creation of vacancies and removal; provided, however, that all
Directors, all the Directors of a particular class or any individual
Director may be removed from office, without assigning any cause, only
by the affirmative vote of the holders of at least two-thirds of the
voting power of the outstanding shares of stock entitled to vote
generally on the election of Directors.
3. RESIGNATION. Any Director may resign at any time. Such resignation
shall be made in writing and shall take effect at the time specified
therein. If no time is specified, it shall become effective from the
time of its receipt by the Corporation, and the Secretary shall record
such resignation, noting the day, hour and minute of its
<PAGE> 7
7
reception. The acceptance of a resignation shall not be necessary to
make it effective.
4. MEETINGS. Directors may meet at such times and at such places within
or without the State of Ohio as they may determine. A majority of the
Board of Directors shall be necessary to constitute a quorum for the
transaction of business, and the act of a majority of Directors
present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
5. BY-LAWS. The Board of Directors may adopt By-Laws for its own
government not inconsistent with the Articles of Incorporation or
Regulations of the Corporation.
ARTICLE IV
----------
INDEMNIFICATION AND INSURANCE
-----------------------------
1. INDEMNIFICATION. (a) The Corporation shall indemnify any person who
was or is a party or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the
fact that he is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as
a Director, trustee, officer, employee or agent of another
corporation, domestic or foreign, nonprofit or for profit,
partnership, joint venture, trust or other enterprise, to the full
extent permitted from time to time under the laws
<PAGE> 8
8
of the State of Ohio; provided, however, that the Corporation shall
indemnify any such agent (as opposed to any Director, officer or
employee) of the Corporation to an extent greater than that required
by law only if and to the extent that the Directors may, in their
discretion, so determine.
(b) The indemnification authorized by this Article shall
not be exclusive of, and shall be in addition to, any other rights
granted to those seeking indemnification hereunder or under the
Articles or any agreement, vote of shareholders or disinterested
Directors, or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a Director,
trustee, officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such a person.
(c) No amendment, termination or repeal of this Article
IV shall affect or impair in any way the rights of any Director or
officer of the Corporation to indemnification under the provisions
hereof with respect to any action, suit or proceeding arising out of,
or relating to, any actions, transactions or facts occurring prior to
the final adoption of such amendment, termination or repeal.
2. LIABILITY INSURANCE. The Corporation may purchase and maintain
insurance or furnish similar protection, including but not limited to
trust funds, letters of credit or self-insurance, on behalf of or for
any person who is or was a
<PAGE> 9
9
Director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a Director, trustee,
officer, employee or agent of another corporation, domestic or
foreign, nonprofit or for profit, partnership, joint venture, trust or
other enterprise, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify
him against such liability under this Article. Insurance may be
purchased from or maintained with a person in which the Corporation
has a financial interest.
ARTICLE V
---------
NOMINATION OF DIRECTOR CANDIDATES
---------------------------------
1. NOTIFICATION OF NOMINEES. Nominations for the election of Directors
may be made by the Board of Directors or a committee appointed by the
Board of Directors or by any shareholder entitled to vote in the
election of Directors generally. However, any shareholder entitled to
vote in the election of Directors generally may nominate one or more
persons for election as Directors at a meeting only if written notice
of such shareholder's intent to make such nomination or nominations
has been received by the Secretary of the Corporation not less than 80
days in advance of such meeting; provided, however, that in the event
that the date of the meeting was not publicly announced by the
Corporation by mail, press release or otherwise more than 90 days
prior to the meeting, notice by the shareholder to be timely must
<PAGE> 10
10
be delivered to the Secretary of the Corporation not later than the
close of business on the tenth day following the day on which such
announcement of the date of the meeting was communicated to
shareholders. Each such notice shall set forth: (a) the name and
address of the shareholder who intends to make the nomination and of
the person or persons to be nominated; (b) a representation that the
shareholder is a holder of record of stock of the Corporation entitled
to vote for the election of Directors on the date of such notice and
intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (c) a description of all
arrangements or understandings between the shareholder and each
nominee and any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are to be
made by the shareholder; (d) such other information regarding each
nominee proposed by such shareholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission, had the nominee been nominated, or
intended to be nominated, by the Board of Directors; and (e) the
consent of each nominee to serve as a Director of the Corporation if
so elected.
2. SUBSTITUTION OF NOMINEES. In the event that a person is validly
designated as a nominee in accordance with paragraph 1 above, and
shall thereafter become unable or unwilling to stand for election to
the Board of Directors, the Board of
<PAGE> 11
11
Directors or the shareholder who proposed such nominee, as the case
may be, may designate a substitute nominee upon delivery, not fewer
than five days prior to the date of the meeting for the election of
such nominee of a written notice to the Secretary setting forth such
information regarding such substitute nominee as would have been
required to be delivered to the Secretary pursuant to paragraph 1
above had such substitute nominee been initially proposed as a
nominee. Such notice shall include a signed consent to serve as a
Director of the Corporation, if elected, of each such substitute
nominee.
3. COMPLIANCE WITH PROCEDURES. If the chairman of the meeting for the
election of Directors determines that a nomination of any candidate
for election as a Director at such meeting was not made in accordance
with the applicable provisions of paragraphs 1 and 2 above, such
nomination shall be void.
ARTICLE VI
----------
COMMITTEES
----------
1. CREATION AND ELECTION. The Board of Directors may create, from time
to time and from its own number, an Executive Committee or any other
committee or committees of the Board of Directors to act in the
intervals between meetings of the Board of Directors and may delegate
to such committee or committees any of the authority of the Board of
Directors other than that of filling vacancies among the Board of
<PAGE> 12
12
Directors or in any committee of the Board of Directors. No committee
shall consist of less than three Directors. The Board of Directors
may appoint one or more Directors as alternate members of any such
committee, who may take the place of any absent member or members at a
meeting of such committee. Except as above provided and except to the
extent that its powers are limited by the Directors, the Executive
Committee during the intervals between meetings of the Directors shall
possess and may exercise, subject to the control and direction of the
Directors, all of the powers of the Directors in the management and
control of the business of the Corporation, regardless of whether such
powers are specifically conferred by these Regulations. All action
taken by the Executive Committee shall be reported to the Directors at
their first meeting thereafter.
2. QUORUM AND ACTION. Unless otherwise ordered by the Board of
Directors, a majority of the members of any committee appointed by the
Board of Directors pursuant to this section shall constitute a quorum
at any meeting thereof, and the act of a majority of the members
present at a meeting at which a quorum is present shall be the act of
such committee. Action may be taken by any such committee without a
meeting by a writing or writings signed by all of its members. Any
such committee shall prescribe its own rules for calling and holding
meetings and its method of procedure, subject to any rules prescribed
by the Board of
<PAGE> 13
13
Directors, and shall keep a written record of all action taken by it.
ARTICLE VII
-----------
OFFICERS
--------
1. OFFICERS. The Corporation may have a Chairman of the Board and shall
have a President (both of whom shall be Directors), a Secretary and a
Chief Financial Officer (who shall serve as Treasurer under Ohio law).
The Corporation may also have one or more Vice Presidents and such
other officers and assistant officers as the Board of Directors may
deem necessary. All of the officers and assistant officers shall be
elected by the Board of Directors.
2. AUTHORITY AND DUTIES OF OFFICERS. The officers of the Corporation
shall have such authority and shall perform such duties as are
customarily incident to their respective offices, or as may be
specified from time to time by the Board of Directors regardless of
whether such authority and duties are customarily incident to such
office.
ARTICLE VIII
------------
COMPENSATION OF DIRECTORS AND OFFICERS
--------------------------------------
The compensation of the Directors and officers of the Corporation shall be such
as the Board of Directors may from time to time designate.
<PAGE> 14
14
ARTICLE IX
----------
AMENDMENTS
----------
These regulations may be altered, changed, amended or repealed by the written
consent of the holders of record of shares entitling them to exercise not less
than two-thirds of the voting power of the Corporation, or at a meeting called
and held for that purpose, by the affirmative vote of the holders of record of
shares entitling them to exercise not less than a majority of the voting power
of the Corporation; provided, however, that paragraphs 1 and 2 of Article III
and all of Article V shall not be altered, changed, amended or repealed, nor
shall any provision inconsistent with such provisions be adopted, without the
affirmative vote of the holders of record of shares entitling them to exercise
not less than two-thirds of the voting power of the Corporation entitled to
vote generally in the election of Directors.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "EXPERTS" in the
Registration Statement (Form S-3) and related Prospectus of The Lincoln Electric
Company for the registration of its Class A Common Shares and to the
incorporation by reference therein of our report dated March 3, 1995, with
respect to the consolidated financial statements and schedule of The Lincoln
Electric Company and subsidiaries included in its Annual Report (Form 10-K) for
the year ended December 31, 1994, filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
Cleveland, Ohio
April 27, 1995
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
March 27, 1995 relating to the consolidated financial statements of The Lincoln
Electric Company (Australia) Proprietary Limited and subsidiaries (not presented
separately herein) appearing on page 18 of The Lincoln Electric Company's Annual
Report on Form 10-K for the year ended December 31, 1994. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
Price Waterhouse
Parramatta, Australia
April 25, 1995
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Form S-3 of our independent
auditors' report dated March 12, 1993 on the consolidated financial statements
and schedules of Messer Lincoln GmbH and its subsidiary as at December 31, 1992
referred to in the annual report on Form 10-K of The Lincoln Electric Company
for the year ended December 31, 1994, and to the reference to our firm under the
heading "EXPERTS" in the prospectus.
Dusseldorf, April 27, 1995
KPMG KLYNVELD PEAT MARWICK GOERDELER
Gesellschaft mit beschrankter Haftung
Wirtschaftsprufungsgesellschaft
W. Schweiger T. te Dorsthorst
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Form S-3 of our independent
auditors' report dated March 23, 1993 on the consolidated financial statements
and schedules of Lincoln-Norweld B.V. and its subsidiaries as at December 31,
1992 referred to in the annual report on Form 10-K of The Lincoln Electric
Company for the year ended December 31, 1994, and to the reference to our firm
under the heading "EXPERTS" in the prospectus.
Arnhem, The Netherlands
KPMG Accountants N.V.
April 27, 1995
<PAGE> 1
Exhibit 24
DIRECTOR AND/OR OFFICER OF
THE LINCOLN ELECTRIC COMPANY
REGISTRATION STATEMENT ON FORM S-3
POWER OF ATTORNEY
The undersigned director and/or officer of The Lincoln
Electric Company, an Ohio corporation (the "Corporation"), hereby constitutes
and appoints Donald F. Hastings, H. Jay Elliott and Frederick G. Stueber, or
any of them, with full power of substitution and resubstitution, as attorneys
or attorney of the undersigned, for him or her and in his or her name, place
and stead, to sign and file under the Securities Act of 1933 one or more
Registration Statement(s) on Form S-3 relating to the registration for sale of
the Corporation's proposed class of nonvoting Common Shares (tentatively known
as the Class A Common Shares), and any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements, and any and all applications or other documents to be filed with
the Securities and Exchange Commission pertaining to such registration(s), with
full power and authority to do and perform any and all acts and things
whatsoever required and necessary to be done in the premises, hereby ratifying
and approving the act of said attorneys and any of them and any such
substitute.
EXECUTED as of March 30, 1995.
/s/ Donald F. Hastings
___________________________________________________
Signature
Chairman of the Board, President
and Chief Executive Officer
Donald F. Hastings (Principal Executive Officer)
_______________________________________________________
Name and Title
<PAGE> 2
Exhibit 24
DIRECTOR AND/OR OFFICER OF
THE LINCOLN ELECTRIC COMPANY
REGISTRATION STATEMENT ON FORM S-3
POWER OF ATTORNEY
The undersigned director and/or officer of The Lincoln
Electric Company, an Ohio corporation (the "Corporation"), hereby constitutes
and appoints Donald F. Hastings, H. Jay Elliott and Frederick G. Stueber, or
any of them, with full power of substitution and resubstitution, as attorneys
or attorney of the undersigned, for him or her and in his or her name, place
and stead, to sign and file under the Securities Act of 1933 one or more
Registration Statement(s) on Form S-3 relating to the registration for sale of
the Corporation's proposed class of nonvoting Common Shares (tentatively known
as the Class A Common Shares), and any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements, and any and all applications or other documents to be filed with
the Securities and Exchange Commission pertaining to such registration(s), with
full power and authority to do and perform any and all acts and things
whatsoever required and necessary to be done in the premises, hereby ratifying
and approving the act of said attorneys and any of them and any such
substitute.
EXECUTED as of March 30, 1995.
/s/ Frederick W. Mackenbach
___________________________________________________
Signature
President, Chief Operating
Frederick W. Mackenbach Officer, and Director
______________________________________________________
Name and Title
<PAGE> 3
Exhibit 24
DIRECTOR AND/OR OFFICER OF
THE LINCOLN ELECTRIC COMPANY
REGISTRATION STATEMENT ON FORM S-3
POWER OF ATTORNEY
The undersigned director and/or officer of The Lincoln
Electric Company, an Ohio corporation (the "Corporation"), hereby constitutes
and appoints Donald F. Hastings, H. Jay Elliott and Frederick G. Stueber, or
any of them, with full power of substitution and resubstitution, as attorneys
or attorney of the undersigned, for him or her and in his or her name, place
and stead, to sign and file under the Securities Act of 1933 one or more
Registration Statement(s) on Form S-3 relating to the registration for sale of
the Corporation's proposed class of nonvoting Common Shares (tentatively known
as the Class A Common Shares), and any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements, and any and all applications or other documents to be filed with
the Securities and Exchange Commission pertaining to such registration(s), with
full power and authority to do and perform any and all acts and things
whatsoever required and necessary to be done in the premises, hereby ratifying
and approving the act of said attorneys and any of them and any such
substitute.
EXECUTED as of March 30, 1995.
/s/ Harry Carlson
___________________________________________________
Signature
Harry Carlson Vice Chairman
___________________________________________________
Name and Title
<PAGE> 4
Exhibit 24
DIRECTOR AND/OR OFFICER OF
THE LINCOLN ELECTRIC COMPANY
REGISTRATION STATEMENT ON FORM S-3
POWER OF ATTORNEY
The undersigned director and/or officer of The Lincoln
Electric Company, an Ohio corporation (the "Corporation"), hereby constitutes
and appoints Donald F. Hastings, H. Jay Elliott and Frederick G. Stueber, or
any of them, with full power of substitution and resubstitution, as attorneys
or attorney of the undersigned, for him or her and in his or her name, place
and stead, to sign and file under the Securities Act of 1933 one or more
Registration Statement(s) on Form S-3 relating to the registration for sale of
the Corporation's proposed class of nonvoting Common Shares (tentatively known
as the Class A Common Shares), and any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements, and any and all applications or other documents to be filed with
the Securities and Exchange Commission pertaining to such registration(s), with
full power and authority to do and perform any and all acts and things
whatsoever required and necessary to be done in the premises, hereby ratifying
and approving the act of said attorneys and any of them and any such
substitute.
EXECUTED as of March 30, 1995.
/s/ David H. Gunning
___________________________________________________
Signature
David H. Gunning Director
___________________________________________________
Name and Title
<PAGE> 5
Exhibit 24
DIRECTOR AND/OR OFFICER OF
THE LINCOLN ELECTRIC COMPANY
REGISTRATION STATEMENT ON FORM S-3
POWER OF ATTORNEY
The undersigned director and/or officer of The Lincoln
Electric Company, an Ohio corporation (the "Corporation"), hereby constitutes
and appoints Donald F. Hastings, H. Jay Elliott and Frederick G. Stueber, or
any of them, with full power of substitution and resubstitution, as attorneys
or attorney of the undersigned, for him or her and in his or her name, place
and stead, to sign and file under the Securities Act of 1933 one or more
Registration Statement(s) on Form S-3 relating to the registration for sale of
the Corporation's proposed class of nonvoting Common Shares (tentatively known
as the Class A Common Shares), and any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements, and any and all applications or other documents to be filed with
the Securities and Exchange Commission pertaining to such registration(s), with
full power and authority to do and perform any and all acts and things
whatsoever required and necessary to be done in the premises, hereby ratifying
and approving the act of said attorneys and any of them and any such
substitute.
EXECUTED as of March 30, 1995.
/s/ Edward E. Hood, Jr.
___________________________________________________
Signature
Edward E. Hood, Jr. Director
___________________________________________________
Name and Title
<PAGE> 6
Exhibit 24
DIRECTOR AND/OR OFFICER OF
THE LINCOLN ELECTRIC COMPANY
REGISTRATION STATEMENT ON FORM S-3
POWER OF ATTORNEY
The undersigned director and/or officer of The Lincoln
Electric Company, an Ohio corporation (the "Corporation"), hereby constitutes
and appoints Donald F. Hastings, H. Jay Elliott and Frederick G. Stueber, or
any of them, with full power of substitution and resubstitution, as attorneys
or attorney of the undersigned, for him or her and in his or her name, place
and stead, to sign and file under the Securities Act of 1933 one or more
Registration Statement(s) on Form S-3 relating to the registration for sale of
the Corporation's proposed class of nonvoting Common Shares (tentatively known
as the Class A Common Shares), and any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements, and any and all applications or other documents to be filed with
the Securities and Exchange Commission pertaining to such registration(s), with
full power and authority to do and perform any and all acts and things
whatsoever required and necessary to be done in the premises, hereby ratifying
and approving the act of said attorneys and any of them and any such
substitute.
EXECUTED as of March 30, 1995.
/s/ Paul E. Lego
___________________________________________________
Signature
Paul E. Lego Director
___________________________________________________
Name and Title
<PAGE> 7
Exhibit 24
DIRECTOR AND/OR OFFICER OF
THE LINCOLN ELECTRIC COMPANY
REGISTRATION STATEMENT ON FORM S-3
POWER OF ATTORNEY
The undersigned director and/or officer of The Lincoln
Electric Company, an Ohio corporation (the "Corporation"), hereby constitutes
and appoints Donald F. Hastings, H. Jay Elliott and Frederick G. Stueber, or
any of them, with full power of substitution and resubstitution, as attorneys
or attorney of the undersigned, for him or her and in his or her name, place
and stead, to sign and file under the Securities Act of 1933 one or more
Registration Statement(s) on Form S-3 relating to the registration for sale of
the Corporation's proposed class of nonvoting Common Shares (tentatively known
as the Class A Common Shares), and any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements, and any and all applications or other documents to be filed with
the Securities and Exchange Commission pertaining to such registration(s), with
full power and authority to do and perform any and all acts and things
whatsoever required and necessary to be done in the premises, hereby ratifying
and approving the act of said attorneys and any of them and any such
substitute.
EXECUTED as of March 30, 1995.
/s/ Hugh L. Libby
___________________________________________________
Signature
Hugh L. Libby Director
___________________________________________________
Name and Title
<PAGE> 8
Exhibit 24
DIRECTOR AND/OR OFFICER OF
THE LINCOLN ELECTRIC COMPANY
REGISTRATION STATEMENT ON FORM S-3
POWER OF ATTORNEY
The undersigned director and/or officer of The Lincoln
Electric Company, an Ohio corporation (the "Corporation"), hereby constitutes
and appoints Donald F. Hastings, H. Jay Elliott and Frederick G. Stueber, or
any of them, with full power of substitution and resubstitution, as attorneys
or attorney of the undersigned, for him or her and in his or her name, place
and stead, to sign and file under the Securities Act of 1933 one or more
Registration Statement(s) on Form S-3 relating to the registration for sale of
the Corporation's proposed class of nonvoting Common Shares (tentatively known
as the Class A Common Shares), and any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements, and any and all applications or other documents to be filed with
the Securities and Exchange Commission pertaining to such registration(s), with
full power and authority to do and perform any and all acts and things
whatsoever required and necessary to be done in the premises, hereby ratifying
and approving the act of said attorneys and any of them and any such
substitute.
EXECUTED as of March 30, 1995.
/s/ David C. Lincoln
___________________________________________________
Signature
David C. Lincoln Director
___________________________________________________
Name and Title
<PAGE> 9
Exhibit 24
DIRECTOR AND/OR OFFICER OF
THE LINCOLN ELECTRIC COMPANY
REGISTRATION STATEMENT ON FORM S-3
POWER OF ATTORNEY
The undersigned director and/or officer of The Lincoln
Electric Company, an Ohio corporation (the "Corporation"), hereby constitutes
and appoints Donald F. Hastings, H. Jay Elliott and Frederick G. Stueber, or
any of them, with full power of substitution and resubstitution, as attorneys
or attorney of the undersigned, for him or her and in his or her name, place
and stead, to sign and file under the Securities Act of 1933 one or more
Registration Statement(s) on Form S-3 relating to the registration for sale of
the Corporation's proposed class of nonvoting Common Shares (tentatively known
as the Class A Common Shares), and any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements, and any and all applications or other documents to be filed with
the Securities and Exchange Commission pertaining to such registration(s), with
full power and authority to do and perform any and all acts and things
whatsoever required and necessary to be done in the premises, hereby ratifying
and approving the act of said attorneys and any of them and any such
substitute.
EXECUTED as of March 30, 1995.
/s/ Emma S. Lincoln
___________________________________________________
Signature
Emma S. Lincoln Director
___________________________________________________
Name and Title
<PAGE> 10
Exhibit 24
DIRECTOR AND/OR OFFICER OF
THE LINCOLN ELECTRIC COMPANY
REGISTRATION STATEMENT ON FORM S-3
POWER OF ATTORNEY
The undersigned director and/or officer of The Lincoln
Electric Company, an Ohio corporation (the "Corporation"), hereby constitutes
and appoints Donald F. Hastings, H. Jay Elliott and Frederick G. Stueber, or
any of them, with full power of substitution and resubstitution, as attorneys
or attorney of the undersigned, for him or her and in his or her name, place
and stead, to sign and file under the Securities Act of 1933 one or more
Registration Statement(s) on Form S-3 relating to the registration for sale of
the Corporation's proposed class of nonvoting Common Shares (tentatively known
as the Class A Common Shares), and any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements, and any and all applications or other documents to be filed with
the Securities and Exchange Commission pertaining to such registration(s), with
full power and authority to do and perform any and all acts and things
whatsoever required and necessary to be done in the premises, hereby ratifying
and approving the act of said attorneys and any of them and any such
substitute.
EXECUTED as of March 30, 1995.
/s/ G. Russell Lincoln
___________________________________________________
Signature
G. Russell Lincoln Director
___________________________________________________
Name and Title
<PAGE> 11
Exhibit 24
DIRECTOR AND/OR OFFICER OF
THE LINCOLN ELECTRIC COMPANY
REGISTRATION STATEMENT ON FORM S-3
POWER OF ATTORNEY
The undersigned director and/or officer of The Lincoln
Electric Company, an Ohio corporation (the "Corporation"), hereby constitutes
and appoints Donald F. Hastings, H. Jay Elliott and Frederick G. Stueber, or
any of them, with full power of substitution and resubstitution, as attorneys
or attorney of the undersigned, for him or her and in his or her name, place
and stead, to sign and file under the Securities Act of 1933 one or more
Registration Statement(s) on Form S-3 relating to the registration for sale of
the Corporation's proposed class of nonvoting Common Shares (tentatively known
as the Class A Common Shares), and any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements, and any and all applications or other documents to be filed with
the Securities and Exchange Commission pertaining to such registration(s), with
full power and authority to do and perform any and all acts and things
whatsoever required and necessary to be done in the premises, hereby ratifying
and approving the act of said attorneys and any of them and any such
substitute.
EXECUTED as of March 30, 1995.
/s/ Henry L. Meyer III
___________________________________________________
Signature
Henry L. Meyer III Director
___________________________________________________
Name and Title
<PAGE> 12
Exhibit 24
DIRECTOR AND/OR OFFICER OF
THE LINCOLN ELECTRIC COMPANY
REGISTRATION STATEMENT ON FORM S-3
POWER OF ATTORNEY
The undersigned director and/or officer of The Lincoln
Electric Company, an Ohio corporation (the "Corporation"), hereby constitutes
and appoints Donald F. Hastings, H. Jay Elliott and Frederick G. Stueber, or
any of them, with full power of substitution and resubstitution, as attorneys
or attorney of the undersigned, for him or her and in his or her name, place
and stead, to sign and file under the Securities Act of 1933 one or more
Registration Statement(s) on Form S-3 relating to the registration for sale of
the Corporation's proposed class of nonvoting Common Shares (tentatively known
as the Class A Common Shares), and any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements, and any and all applications or other documents to be filed with
the Securities and Exchange Commission pertaining to such registration(s), with
full power and authority to do and perform any and all acts and things
whatsoever required and necessary to be done in the premises, hereby ratifying
and approving the act of said attorneys and any of them and any such
substitute.
EXECUTED as of March 30, 1995.
/s/ Lawrence O. Selhorst
___________________________________________________
Signature
Lawrence O. Selhorst Director
___________________________________________________
Name and Title
<PAGE> 13
Exhibit 24
DIRECTOR AND/OR OFFICER OF
THE LINCOLN ELECTRIC COMPANY
REGISTRATION STATEMENT ON FORM S-3
POWER OF ATTORNEY
The undersigned director and/or officer of The Lincoln
Electric Company, an Ohio corporation (the "Corporation"), hereby constitutes
and appoints Donald F. Hastings, H. Jay Elliott and Frederick G. Stueber, or
any of them, with full power of substitution and resubstitution, as attorneys
or attorney of the undersigned, for him or her and in his or her name, place
and stead, to sign and file under the Securities Act of 1933 one or more
Registration Statement(s) on Form S-3 relating to the registration for sale of
the Corporation's proposed class of nonvoting Common Shares (tentatively known
as the Class A Common Shares), and any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements, and any and all applications or other documents to be filed with
the Securities and Exchange Commission pertaining to such registration(s), with
full power and authority to do and perform any and all acts and things
whatsoever required and necessary to be done in the premises, hereby ratifying
and approving the act of said attorneys and any of them and any such
substitute.
EXECUTED as of March 30, 1995.
/s/ Craig R. Smith
___________________________________________________
Signature
Craig R. Smith Director
___________________________________________________
Name and Title
<PAGE> 14
Exhibit 24
DIRECTOR AND/OR OFFICER OF
THE LINCOLN ELECTRIC COMPANY
REGISTRATION STATEMENT ON FORM S-3
POWER OF ATTORNEY
The undersigned director and/or officer of The Lincoln
Electric Company, an Ohio corporation (the "Corporation"), hereby constitutes
and appoints Donald F. Hastings, H. Jay Elliott and Frederick G. Stueber, or
any of them, with full power of substitution and resubstitution, as attorneys
or attorney of the undersigned, for him or her and in his or her name, place
and stead, to sign and file under the Securities Act of 1933 one or more
Registration Statement(s) on Form S-3 relating to the registration for sale of
the Corporation's proposed class of nonvoting Common Shares (tentatively known
as the Class A Common Shares), and any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements, and any and all applications or other documents to be filed with
the Securities and Exchange Commission pertaining to such registration(s), with
full power and authority to do and perform any and all acts and things
whatsoever required and necessary to be done in the premises, hereby ratifying
and approving the act of said attorneys and any of them and any such
substitute.
EXECUTED as of March 30, 1995.
/s/ Frank Steingass
___________________________________________________
Signature
Frank Steingass Director
___________________________________________________
Name and Title
