<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NUMBER 0-1402
THE LINCOLN ELECTRIC COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 34-0359955
------------------------------- ---------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
22801 St. Clair Ave., Cleveland, Ohio 44117
---------------------------------------- ------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(216) 481-8100
-----------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Shares, without par value
Class A Common Shares, without par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the voting common stock held by
non-affiliates as of March 13, 1996 was $130,443,063. (Affiliates, for this
purpose, have been deemed to be Directors of the Company, and certain
significant shareholders.)
The number of shares outstanding of the issuer's classes of common stock as
of March 13, 1996 were as follows:
<TABLE>
<S> <C>
Common Shares........................... 10,520,987
Class A Common Shares................... 13,880,171
Class B Common Shares................... 487,117
----------
Total outstanding shares........... 24,888,275
==========
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's proxy statement for the annual meeting of
shareholders to be held on May 28, 1996 are hereby incorporated by reference
into Part III.
<PAGE> 2
PART I
ITEM 1. BUSINESS
As used in Item 1 of this report, the term "Company", except as otherwise
indicated by the context, means The Lincoln Electric Company and its
subsidiaries. The Lincoln Electric Company was incorporated under the laws of
the State of Ohio in 1906. The Company is a full-line manufacturer of welding
products and integral horsepower industrial electric motors. Welding products
include arc welding machines, power sources, automated wire feeding systems,
environmental fume systems, and arc welding consumable electrodes. The Company
also sells industrial gases, regulators and torches used in oxy-fuel welding and
cutting. Sales of arc welding and other welding products accounted for 93% of
the Company's net sales in 1995.
The arc welding machines, power sources and automated wire feeding systems
manufactured by the Company range in technology from basic units used for light
manufacturing and maintenance to highly sophisticated machines for robotic
applications, high production welding and fabrication. Three primary types of
arc welding electrodes are produced: (1) coated manual or stick electrodes, (2)
solid electrodes produced in coil form for continuous feeding in mechanized
welding, and (3) cored electrodes produced in coil form for continuous feeding
in mechanized welding. The integral horsepower electric motors manufactured by
the Company range in size from 1/3 to 1,250 horsepower.
The Company's products are sold in both domestic and international markets.
In the domestic market, they are sold directly by the Company's own sales
organization as well as by distributors. In the international markets, the
Company's products are sold principally by foreign subsidiary companies. The
Company also has an international sales organization comprised of international
salesmen, direct sales distributors, agents and dealers that operate in more
than eighty-six countries. The Company has manufacturing facilities located in
the United States, Australia, Canada, Mexico, England, France, Ireland, Italy,
the Netherlands, Norway and Spain. See Note G to the consolidated financial
statements with respect to geographic area information.
The Company is not dependent on a single customer or a few customers. The
loss of any one customer would not have a material adverse effect on its
business. The Company's business is not seasonal.
Conditions in the arc welding industry are highly competitive. The Company
believes that it is one of the largest manufacturers of consumables and
machinery in a field of three or four major domestic competitors and numerous
smaller competitors covering the industry. The Company continues to pursue
strategies to heighten its competitiveness in international markets. Competition
in the electric arc welding industry is on the basis of price, brand preference,
product quality and performance, warranty, delivery, service and technical
support. All of these factors have contributed to the Company's position as one
of the leaders in the industry.
Virtually all of the Company's products may be classified as standard
commercial articles and are primarily manufactured for stock. The Company
believes its product offerings are unique because of its highly trained
technical sales force and the support of its welding research and development
staff which allow it to uniquely assist the consumers of its products in solving
their welding application problems. The Company utilizes this technical
expertise to present its Guaranteed Cost Reduction Program to end users in which
the Company guarantees that the user will save money in its manufacturing
process when it utilizes the Company's products. This allows the Company to
introduce its products to new users and to establish and maintain very close
relationships with the consumers. This close relationship between the technical
sales force and the direct consumers, together with its supportive relationship
with its distributors, who are particularly interested in handling the broad
breadth of the Company's products, is an important element of the Company's
market success and a valuable asset of the Company.
The principal raw materials essential to the Company's business are various
chemicals, steel, copper and aluminum, all of which are normally available for
purchase in the open market.
The Company's operations are not materially dependent upon patents,
trademarks, licenses, franchises or concessions.
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The Company's facilities are subject to environmental control regulations.
To date, compliance with these environmental regulations has not had a material
effect on the Company's earnings nor has it required the Company to make
significant capital expenditures.
The Company conducts a significant amount of its business and has a number
of operating facilities in countries outside the United States. As a result, the
Company is subject to business risks inherent in non-U.S. activities, including
political uncertainty, import and export limitations, exchange controls and
currency fluctuations. The Company believes risks related to its foreign
operations are mitigated due to the political and economic stability of the
countries in which its largest foreign operations are located.
Research activities relating to the development of new products and the
improvement of existing products in 1995 were all Company-sponsored. These
activities were primarily related to the development of new products utilizing
the latest electronic technology. The number of professional employees engaged
full-time in these research activities was 109. Refer to Note A to the
consolidated financial statements with respect to total costs of research and
development.
The number of persons employed by the Company worldwide at December 31,
1995 was approximately 6,000.
The table below sets forth consolidated net sales by product line for the
most recent three years:
<TABLE>
<CAPTION>
1995 1994 1993
---------- -------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Arc Welding and Other Welding Products.......... $ 956,642 $843,643 $795,072
93% 93% 94%
All Other....................................... 75,756 62,961 50,927
7% 7% 6%
---------- -------- --------
$1,032,398 $906,604 $845,999
========= ======== ========
</TABLE>
ITEM 2. PROPERTIES
The Company's corporate headquarters and principal United States
manufacturing facilities are located in the Cleveland, Ohio area. Total
Cleveland area property consists of 223 acres, of which present manufacturing
facilities comprise an area of approximately 2,587,000 square feet. While
current utilization of existing facilities is high, the Company is adding
capacity as necessary.
In addition to the principal facilities in Ohio, the Company operates two
other manufacturing locations in the United States plus 12 manufacturing
locations in 10 foreign countries, the locations of which are as follows:
<TABLE>
<S> <C>
United States: Gainesville, Georgia; Monterey Park, California.
Australia: Sydney.
Canada: Toronto.
England: Sheffield.
France: Grand-Quevilly.
Ireland: Rathnew.
Italy: Pianoro; Milano.
Mexico: Mexico City.
Netherlands: Nijmegen.
Norway: Skjelland; Stavern.
Spain: Barcelona.
</TABLE>
Manufacturing facilities located in Germany, Venezuela, Japan and Brazil
were closed in early 1994 under the Company's restructuring program.
All property relating to the Company's Cleveland, Ohio headquarters and
manufacturing facilities is owned outright by the Company. In addition, the
Company maintains operating leases for its distribution
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<PAGE> 4
centers and many sales offices throughout the world. See Note J to the
consolidated financial statements with respect to leases. Most of the Company's
foreign subsidiaries own manufacturing facilities in the foreign country where
they are located. At December 31, 1995, $5.2 million of indebtedness was secured
by property, plant and equipment.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject, from time to time, to a variety of civil and
administrative proceedings arising out of its normal operations, including,
without limitation, employment-related actions, product liability claims, and
health, safety and environmental claims. Included in such proceedings are the
cases summarily described below, in which claimants seek recovery for injuries
allegedly resulting from exposure to fumes and gases in the welding environment.
The Company is a co-defendant in seventeen cases involving 26 plaintiffs
alleging that exposure to manganese contained in arc welding electrode products
caused the plaintiffs to develop a neurological condition known as manganism.
The plaintiffs seek compensatory and, in most instances, punitive damages,
usually for unspecified sums. Four similar cases have been tried, all resulting
in defense verdicts.
The Company is also a defendant in one case, and one of several
co-defendants in three other cases, alleging that exposure to welding fumes
generally impaired the respiratory system of nineteen plaintiffs. The plaintiffs
seek compensatory and punitive damages, in most cases for unspecified sums.
During the preceding five years, forty-one similar cases have resulted in
thirteen voluntary dismissals, seven defense verdicts or summary judgments and
twenty-one settlements for immaterial amounts.
Claims pending against the Company alleging asbestos induced illness total
approximately 19,000; in each instance, the Company is one of a large number of
defendants. Approximately 4,407 of these asbestos claims are pending in Orange
County, Texas where a motion to certify a class action was recently denied. The
asbestos claimants seek compensatory and punitive damages, in most cases for
unspecified sums. Twenty-one cases have been tried to defense verdicts.
Voluntary dismissals on such claims total approximately 15,000; summary
judgments for the defense total 78.
Included within the foregoing asbestos claims are approximately 930 claims
pending in the Circuit Court of Kanawha County, West Virginia. On September 12,
1995, a jury returned a special interrogatory in that action finding that
products manufactured and/or sold by the Company and three other welding
companies were defective in certain respects at the time of manufacture and/or
sale. Issues relating to whether or not claimants were exposed to Company
products and, if so, whether Company products caused any injury, have not been
addressed. Nor has there been any discovery relating to the plaintiffs and their
potential compensatory damage claims. The court has dismissed punitive damage
claims in that action.
The Company, together with hundreds of other co-defendants, is a defendant
in state court in Morris County, Texas, in litigation on behalf of three
thousand twenty five (3,025) claimants, all prior employees of a local pipe
fabricator, alleging that occupational exposures caused a wide variety of
illnesses. The plaintiffs seek compensatory and punitive damages of unspecified
sums.
The Company bears the costs of defending those of its product liability
cases arising and filed after 1990. In many cases where there are multiple
defendants, cost sharing efficiencies are arranged. Subject to the Company's per
claim retention under its insurance coverage, the Company has tendered the
manganese, fume, asbestos and Morris County, Texas cases to its insurance
carrier which has accepted such tender for all situations except those where
liability would result solely from asbestos; no such situations have arisen to
date. A dispute exists between the Company and its insurer as to the appropriate
policies to which these claims should be applied, and the resolution of this
dispute may provide additional coverage for such claims.
Ellis F. Smolik filed a proposed class action on April 27, 1995 in Common
Pleas Court, Cuyahoga County, Ohio, alleging that the Company breached the terms
of incentive stock award agreements with him and 49 others. According to the
complaint, under those agreements these individuals were entitled to, but did
not receive, an aggregate of approximately 530,000 shares of common stock of the
Company based on what the complaint says was the Company's financial performance
in the years 1989 through 1991. The complaint
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<PAGE> 5
also alleges that the Company breached fiduciary duties owed to these
individuals. The complaint seeks compensatory damages of $31 million and
punitive damages of eight times that amount. The Company believes that the
allegations are without merit.
The Company believes that resolution of the pending cases referred to
above, individually or in the aggregate, will not have a material effect upon
the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter
ended December 31, 1995.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The Company's Common Shares (LECO) and Class A Common Shares (LECOA) began
trading on the NASDAQ market exchange in June 1995. The number of record holders
of Common Shares and Class A Common Shares at December 31, 1995 was 2,669 and
2,566 respectively.
There is no public trading market for Class B Common Shares, which are only
issued to the Company's Employee Stock Ownership Plan.
Quarterly high and low stock prices and dividends declared for the last two
years were:
<TABLE>
<CAPTION>
1995** 1994**
--------------------------------------------- ---------------------------
LECO* LECOA DIVIDENDS LECO* DIVIDENDS
HIGH LOW HIGH LOW DECLARED HIGH LOW DECLARED
------- ------- ------- ------- --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
March 31..................... $25.00 $17.00 $0.10 $ 9.13 $ 8.63 $0.09
June 30...................... 38.00 24.25 $37.25 $29.50 0.10 13.63 9.38 0.09
September 30................. 34.00 26.50 31.00 27.38 0.10 17.75 15.00 0.09
December 31.................. 27.50 21.00 28.25 21.50 0.12 19.50 17.25 0.11
</TABLE>
- ---------------
* Source: NASDAQ; Ohio Dealers' Data Service prior to NASDAQ registration.
** On June 12, 1995, holders of record of the Company's outstanding voting
common shares as of June 5, 1995, received a dividend of one Class A Common
Share for each outstanding share of the Company's voting common shares.
Retroactive effect has been given to the stock dividend in the above per
share data.
4
<PAGE> 6
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------
1995 1994 1993 1992 1991
---------- -------- -------- -------- --------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales.......................... $1,032,398 $906,604 $845,999 $853,007 $833,892
Income (loss) before cumulative
effect of accounting change...... 61,475 48,008 (40,536) (45,800) 14,365
Cumulative effect of accounting
change........................... 2,468
---------- -------- -------- -------- --------
Net income (loss).................. $ 61,475 $ 48,008 $(38,068) $(45,800) $ 14,365
========= ======== ======== ======== ========
Per share:
Income (loss) before cumulative
effect of accounting change... $ 2.63 $ 2.19 $ (1.87) $ (2.12) $ .67
Cumulative effect of accounting
change........................ .12
---------- -------- -------- -------- --------
Net income (loss)................ $ 2.63 $ 2.19 $ (1.75) $ (2.12) $ .67
========= ======== ======== ======== ========
Cash dividends declared.......... $ .42 $ .38 $ .36 $ .36 $ .30
========= ======== ======== ======== ========
Total assets....................... $ 617,760 $556,857 $559,543 $603,347 $640,261
========= ======== ======== ======== ========
Long-term debt..................... $ 93,582 $194,831 $216,915 $221,470 $155,547
========= ======== ======== ======== ========
</TABLE>
See Note C to the consolidated financial statements with respect to
restructuring activities.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company, now in its second century of operations, is one of the world's
largest designers and manufacturers of arc welding products, manufacturing a
full line of arc welding equipment, consumable welding products and other
welding products which represented 93% of the Company's 1995 net sales. The
Company also manufactures a broad line of integral horsepower industrial
electric motors.
For the second consecutive year, in 1995, the Company reported its highest
net sales and net income in its history. The sales increase was broadly based
and was primarily attributable to increased volume and higher selling prices as
a result of continued economic growth in served markets. The Company believes
that the high quality of its products, advanced engineering expertise and strong
distributor network, coupled with its large technically trained sales force, has
enabled the Company to be a key participant in the global market place.
The Company is one of only a few worldwide broad line manufacturers of both
arc welding equipment and consumable products. With highly competitive
conditions in the welding industry, the Company will continue to emphasize its
status as a single-source supplier, which it believes is most capable of meeting
the broadest range of its customers' welding needs.
In 1995, the Company completed a recapitalization and stock distribution,
resulting in changes to the existing classes of stock, authorization of a new
class of non-voting shares and an increase in the total number of authorized
common shares. The recapitalization modified the capital structure of the
Company while maintaining, subject to certain limitations, the voting power of
existing shareholders, thus allowing for increased flexibility in the Company's
long-term strategy. See Note B to the consolidated financial statements.
Research and development expenditures by the Company increased 6.5% to
$19.7 million in 1995 from $18.5 million in 1994. These activities were
primarily related to the development of new products. The Company believes that
over the past three years, expenditures for research and development activities
have been adequate to maintain the Company's leadership position in its product
lines and to introduce new
5
<PAGE> 7
products at an appropriate rate to sustain future growth. Expenditures on
research and development are expected to increase again in 1996.
RESULTS OF OPERATIONS
The following table shows the Company's results of operations for the years
ended December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1995 1994 1993
--------------------- -------------------- -------------------
AMOUNT % OF SALES AMOUNT % OF SALES AMOUNT % OF SALES
-------- ---------- ------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales....................... $1,032.4 100.0% $906.6 100.0% $846.0 100.0%
Cost of Goods Sold.............. 634.6 61.5% 556.2 61.3% 532.8 63.0%
-------- ---------- ------- ---------- ------ ----------
Gross Profit.................. 397.8 38.5% 350.4 38.7% 313.2 37.0%
Distribution Cost/Selling
General & Administrative
Expenses................... 289.8 28.0% 261.7 28.9% 277.0 32.7%
-------- ---------- ------- ---------- ------ ----------
Operating Income before
Restructuring Charges
(income)...................... 108.0 10.5% 88.7 9.8% 36.2 4.3%
Restructuring Charges
(income)...................... (2.7 ) (0.3)% 70.1 8.3%
-------- ---------- ------- ---------- ------ ----------
Operating Income (loss)....... 108.0 10.5% 91.4 10.1% (33.9 ) (4.0)%
Other Income.................... 2.2 .2% 3.1 0.3% 2.9 0.3%
Interest Expense, Net........... (10.6) (1.0)% (14.3 ) (1.6)% (16.0 ) (1.9)%
-------- ---------- ------- ---------- ------ ----------
Income (loss) before Income
Taxes...................... 99.6 9.7% 80.2 8.8% (47.0 ) (5.6)%
Income Taxes (benefit).......... 38.1 3.7% 32.2 3.5% (6.4 ) (0.8)%
-------- ---------- ------- ---------- ------ ----------
Net Income (loss) before
Cumulative effect of
Accounting Change.......... 61.5 6.0% 48.0 5.3% (40.6 ) (4.8)%
Cumulative effect to January 1,
1993 of change in method of
accounting for income taxes... 2.5 0.3%
-------- ---------- ------- ---------- ------ ----------
Net Income (loss)............... $ 61.5 6.0% $ 48.0 5.3% $(38.1) (4.5)%
======= ========= ======= ========= ======= =========
</TABLE>
1995 COMPARED TO 1994
Net Sales. Net sales for 1995 were $1,032.4 million, an increase of $125.8
million or 13.9% from $906.6 million for 1994. Third-party sales from the
Company's U.S. operations were $711.9 million in 1995 or 11.0% higher than 1994
sales of $641.6 million, attributable to volume and price increases in both the
domestic and export markets. Non-U.S. third-party sales in 1995 were $320.5
million compared to $265.0 million in 1994, an increase of 20.9%. This increase
was the result of improvement in the Company's international operations as well
as improved economic conditions in the markets served, and the strengthening of
certain foreign currencies against the U.S. dollar. Strengthening foreign
currencies against the U.S. dollar increased non-U.S. sales by approximately
$15.3 million or 5.8% during the year. European sales benefited from the
previously reported restructuring of the Company's operations, increased
customer focus and a general improvement in local economies which appeared to
soften during the latter months in 1995. U.S. third-party export sales were
$81.8 million in 1995, an increase of $17.4 million or 27.0% from $64.4 million
in 1994. This increase in export sales largely reflects improved worldwide
economic conditions and an increased sales focus by the Company in the non-U.S.
market.
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<PAGE> 8
Gross Profit. Gross profit increased to $397.8 million in 1995 as compared
with $350.4 million in 1994. Gross profit as a percentage of sales was flat in
1995 compared to 1994. Increased raw material and manufacturing overhead costs
plus start-up costs associated with the opening of a new motor plant were offset
by greater absorption of manufacturing expenses as a result of higher production
volumes in both the U.S. and Europe, selected price increases and cost decreases
by volume purchases.
Distribution Cost/Selling, General and Administrative (S, G & A)
Expenses. Distribution cost/selling, general and administrative expenses were
$289.8 million in 1995 or 28.0% of sales, as compared to $261.7 million or 28.9%
of sales in 1994. The decrease in S, G & A expenses as a percentage of sales is
due to improved economies of scale achieved by higher worldwide sales volume. S,
G & A for 1995 was affected by the devaluation of the Mexican peso, resulting in
a charge to operations without tax benefit of approximately $2.3 million ($3.1
million in 1994). In addition, 1995 expenses included $4.0 million of severance
costs recorded for retiring executives. Included in S, G & A expenses are the
costs related to the Company's discretionary employee bonus program, net of
hospitalization costs deducted therefrom ($66.4 million in 1995 and $59.6
million in 1994, or an increase of 11.4%).
Interest Expense, Net. Interest expense, net, was $10.6 million in 1995 as
compared with $14.3 million in 1994, a decrease which reflects the effect of
lower debt levels as a result of the recapitalization and lower interest rates.
The overall effective interest rate is higher than the prior year because a
greater proportion of the remaining debt is comprised of higher-rate senior
debt.
Income Taxes. Income taxes in 1995 were $38.1 million on income before
income taxes of $99.6 million, an effective rate of 38.3%, as compared with
income taxes of $32.2 million in 1994 on income before income taxes of $80.2
million or an effective tax rate of 40.1%. The decrease in the effective tax
rate from the prior year is principally the result of lower non-U.S. losses
without tax benefit and a lower effective tax rate on non-U.S. income.
Net Income. Net income for 1995 was $61.5 million as compared to net income
of $48.0 million in 1994, or an increase of 28.1%. 1994 net income benefited
from a net reversal of $2.7 million of restructuring charges recorded
previously.
1994 COMPARED TO 1993
Net Sales. Net sales for 1994 were $906.6 million, an increase of $60.6
million or 7.2% from $846.0 million for 1993. Net sales for 1993 include the
sales of manufacturing operations (principally in Germany) that were closed in
early 1994. Excluding the 1993 sales of the closed operations, sales for 1994
increased 17.0%. A portion of this increase was due to the absorption by the
Company's other manufacturing operations of the sales formerly made by the
closed operations. Third-party sales from the Company's U.S. operations were
$641.6 million in 1994 or 18.1% higher than 1993 sales of $543.5 million,
attributable to volume and price increases. Non-U.S. third-party sales in 1994
were $265.0 million compared to $302.5 million in 1993, a decrease of 12.4%.
Excluding the 1993 sales of the closed operations, non-U.S. sales for 1994
increased 14.7% over non-U.S. sales for 1993 reflecting improved economic
conditions in Europe and elsewhere in the world. U.S. third-party export sales
were $64.4 million in 1994, an increase of $6.3 million or 10.8% from $58.1
million in 1993. This increase in export sales largely reflects improved
worldwide economic conditions. In 1994, sales of certain new products were
restricted by capacity limitations inherent in tooling up production which have
now been resolved.
Gross Profit. Gross profit increased to $350.4 million in 1994 as compared
with $313.2 million in 1993. Gross profit as a percentage of sales improved to
38.7% in 1994 from 37.0% in 1993. This improvement in gross profit is largely
attributable to a greater percentage of total sales coming from the
higher-margin U.S. operations in 1994. In addition, 1993 gross profit was
unfavorably affected by lower gross profit levels for the manufacturing
operations closed in early 1994.
Distribution Cost/Selling, General and Administrative (S, G & A)
Expenses. Distribution cost/selling, general and administrative expenses were
$261.7 million in 1994 or 28.9% of sales, as compared to $277.0
7
<PAGE> 9
million or 32.7% of sales in 1993. The decrease in these expenses as a
percentage of sales evidences the effects of the closing of the German
subsidiary, the Company's restructuring program and management's initiatives to
control operating costs throughout the Company. The higher expense level in 1993
was principally due to the inclusion of the operating results of the Company's
closed German subsidiary. Included in S, G & A expenses are the costs related to
the Company's discretionary employee bonus program, net of hospitalization costs
deducted therefrom ($59.6 million in 1994 and $53.5 million in 1993 or an
increase of 11.4%).
Interest Expense, Net. Interest expense, net, was $14.3 million in 1994 as
compared with $16.0 million in 1993, a decrease which reflects the effect of
lower debt levels offset partially by higher interest rates.
Income Taxes. Income taxes in 1994 were $32.2 million on income before
income taxes of $80.2 million, an effective rate of 40.1%, as compared to a tax
benefit of $6.4 million on a loss before income taxes of $47.0 million in 1993.
The 1993 tax benefit principally reflects the tax benefits attributable to the
plant closure and liquidation of the German subsidiary. Results from 1993 also
benefited from the cumulative effect of a change in accounting for income taxes,
which decreased the net loss by $2.5 million or $0.12 per share.
Net Income. As a result of the restructuring programs in 1992 and 1993 and
the improvement in economic conditions in Europe, the United States and Canada,
net income for 1994 was $48.0 million as compared to a net loss of $38.1 million
in 1993. Results in 1993 were adversely affected by a $40.9 million after-tax
restructuring charge. 1994 results benefited from a net reversal of $2.7 million
of restructuring charges recorded previously.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial position significantly improved during 1995 as a
result of positive operating cash flow as well as the recapitalization. The
Company anticipates that it will be able to satisfy its ongoing cash
requirements for the foreseeable future primarily with cash generated by
operations and borrowings under its existing credit facilities.
Cash provided from operations was $65.5 million in 1995 versus $68.7
million in 1994, a decrease of $3.2 million or 4.7%. This decrease in cash flow
resulted from increased working capital offset by the Company's increase in net
income. Accounts receivable balances increased due to higher sales and a slight
increase in collection periods. Although the increase in inventory balance
reflects higher sales volume, management plans to reduce overall inventory
levels by the utilization of more "just-in-time" inventory methods and changes
in production planning methodology.
Capital expenditures for property, plant and equipment amounted to $48.4
million in 1995 as compared to $37.4 million in 1994, or an increase of $11.0
million. These expenditures for property, plant and equipment represent the
Company's continued commitment to support and develop advanced technologies,
support new products, expand current capacity and reduce future manufacturing
costs. In particular, the Company has modernized and expanded its motor division
by establishing a separate facility in Cleveland, Ohio, which is dedicated to
motor manufacturing and increased testing and design capacity to be able to
reduce costs and increase output. Investments to meet scheduled higher industry
efficiency standards will continue. The Company expects to add capacity and
modernize facilities selectively in the domestic market, and it also expects
measured investment to encourage overseas growth.
The Company completed its recapitalization in 1995 which included the
authorization of Class A Common Shares, a new class of non-voting common shares.
The recapitalization included a distribution payable on June 12, 1995, to
holders of record of the Company's outstanding voting common shares as of June
5, 1995, of a dividend of one Class A Common Share for each outstanding share of
the Company's voting common shares. Prior to the adoption of the
recapitalization, the Company had two authorized and outstanding classes of
voting common shares. As a result, the Company's authorized capital consists of
two voting classes, the Common Shares, without par value (formerly the "Common
Stock"), and the Class B Common Shares, without par value (formerly the "Class A
Common Stock"), and one non-voting class, the Class A Common Shares (the new
"Class A Common Shares"). In addition, the recapitalization included an
8
<PAGE> 10
increase in the total number of authorized common shares of all classes from 17
million to 62 million shares consisting of 30 million Common Shares, 30 million
Class A Common Shares and 2 million Class B Common Shares.
In 1995, the Company successfully completed a public offering by selling
2,863,507 Class A Common Shares and realized $81.2 million in proceeds, net of
the underwriters' discount. The proceeds from the offering were used to reduce
debt, which has improved the Company's leverage and enhanced its financial
position.
In December 1995, the Company entered into a new $200 million unsecured,
multi-currency Credit Agreement ("Credit Agreement"). The Credit Agreement
provides more favorable pricing levels, and the financial covenants which
require interest coverage and funded debt to capital ratios are less
restrictive, a result of the Company's improved liquidity and financial
position. See Note D to the consolidated financial statements for additional
information regarding the terms and financial covenants of the Company's
borrowing arrangements. The Company's available borrowings under the Credit
Agreement as of December 31, 1995 amounted to $190 million. At December 31,
1995, $10 million was outstanding under the Credit Agreement.
Total debt at December 31, 1995 was $123.4 million compared to $212.9
million at December 31, 1994, reflecting the reduction in debt from funds
generated by the public offering and cash flow from operating activities. At
December 31, 1995, total debt was 27.2% of total capitalization compared with
52.3% at year-end 1994.
A total of $9.1 million in dividends was paid in 1995. In addition, the
Board of Directors has declared a cash dividend of $0.12 per share, payable on
April 15, 1996, to shareholders of record on March 29, 1996.
CHANGES IN ACCOUNTING STANDARDS
In March 1995, Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," was issued. SFAS No. 121 requires long-lived assets, primarily
property, plant and equipment, identified intangible assets, and excess of cost
over net assets of businesses acquired, to be reviewed for impairment losses
whenever events or changes in circumstances indicate the carrying amount may not
be recovered through future net cash flows generated by the assets. The Company
will adopt SFAS No. 121 in 1996 and believes the effect of adoption will not be
material.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted in a separate section of this report
following the signature page.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
A definitive proxy statement will be filed pursuant to Regulation 14A of
the Securities Exchange Act prior to April 30, 1996. Therefore, information
required under this part, unless set forth below, is incorporated herein by
reference from such definitive proxy statement.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------- --- --------------------------------------------------------
<S> <C> <C>
Donald F. Hastings 67 Chairman of the Board and Chief Executive Officer of the
Company since 1992; President of the Company 1987-1992.
Frederick W. Mackenbach 65 President, Chief Operating Officer and Director of the
Company between 1992 and March 31, 1996; President of
Latin America 1991-1992; District Manager 1976-1991.
</TABLE>
9
<PAGE> 11
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------- --- --------------------------------------------------------
<S> <C> <C>
Anthony Massaro 52 President Elect and Chief Operating Officer of the
Company, effective April 1, 1996; Corporate Vice
President and President Lincoln Europe since 1994;
Director of International Operations 1993-1994; prior
thereto, as a corporate officer with Westinghouse
Electric Corporation, served as Vice President and then
as President and a Member of the Management Committee
with responsibilities worldwide.
David J. Fullen 64 Executive Vice President, Engineering and Marketing
since 1995; Senior Vice President, Machine and Motor
Division 1994; Vice President -- Machine and Motor
Division 1989-1994.
John M. Stropki 45 Executive Vice President, North America since 1995;
Senior Vice President, Sales 1994-1995; General Sales
Manager 1992-1994; District Manager 1986-1992.
Richard C. Ulstad 56 Senior Vice President, Manufacturing effective March 19,
1996; Senior Vice President, Consumable Division
1994-1996; Vice President -- Manufacturing Electrode
Division 1992-1994; Superintendent -- Electrode Division
1984-1992.
H. Jay Elliott 54 Senior Vice President, Chief Financial Officer, and
Treasurer effective January 24, 1996; Vice President,
Chief Financial Officer, and Treasurer 1994-1995;
International Chief Financial Officer 1993-1994; prior
thereto, Assistant Comptroller of The Goodyear Tire &
Rubber Company responsible at various times for
Corporate Strategic Planning, Finance Director of North
American Tires and International Vice President --
Finance.
Frederick G. Stueber 42 Senior Vice President, General Counsel and Secretary
effective January 24, 1996; Vice President, General
Counsel and Secretary since February 1995; prior
thereto, partner in the law firm of Jones, Day, Reavis &
Pogue.
Frederick W. Anderson 43 Vice President, Manufacturing -- Machine Division since
1994; Plant Manager Machine and Motor Division
1993-1994; Plant Superintendent 1989-1993.
Paul J. Beddia 62 Vice President, Government and Public Affairs since
1996; Vice President, Human Resources 1989-1996.
Dennis D. Crockett 53 Vice President, Consumable Research and Development
since 1993; Chief Engineer, Consumables Research and
Development 1987-1993.
James R. Delaney 47 Corporate Vice President and President Lincoln Latin
America since 1994; President Lincoln Electric South
America 1993-1994; Vice President of Lincoln Latin
America 1992; Vice President of Lincoln Mexicana
1988-1992.
Joseph G. Doria 46 Vice President of the Company since 1995; President and
Chief Executive Officer, Lincoln Electric Company of
Canada since 1992; Executive Vice President and Chief
Operating Officer 1990-1992; Assistant to the President
1986-1990.
Paul F. Fantelli 51 Vice President, Business Development since 1994;
Assistant to the Chief Executive Officer 1992-1994;
President and Chief Executive Officer of the Company's
subsidiary, Harris Calorific 1990-1992.
</TABLE>
10
<PAGE> 12
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------- --- --------------------------------------------------------
<S> <C> <C>
Ronald A. Nelson 46 Vice President, Machine Research and Development since
1994; Chief Engineer -- Machine and Motor Division
1993-1994; Service Manager 1989-1993.
Gary M. Schuster 40 Vice President, Motor Division since 1995; General
Manager, Motor Division 1993-1994; Manager, Factory of
the Future 1991-1993.
Richard J. Seif 48 Vice President, Marketing since 1994; Director of
Marketing 1991-1994; Project Manager 1989-1991.
S. Peter Ullman 46 Vice President of the Company since 1995; President and
Chief Executive Officer, Harris Calorific Division of
Lincoln Electric since 1995; President and COO, Harris
Calorific Division 1992-1995.
John H. Weaver 57 Vice President, Export Sales since 1994: International
Sales Manager 1987-1994.
</TABLE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) (1) FINANCIAL STATEMENTS
The following consolidated financial statements of the Company are included
in a separate section of this report following the signature page:
Statements of Consolidated Financial Condition -- December 31, 1995 and
1994
Statements of Consolidated Operations -- Years ended December 31, 1995,
1994 and 1993
Statements of Consolidated Shareholders' Equity -- Years ended December 31,
1995, 1994 and 1993
Statements of Consolidated Cash Flows -- Years ended December 31, 1995,
1994 and 1993
Notes to Consolidated Financial Statements -- December 31, 1995
Report of Independent Auditors
(A) (2) FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedule of the Company is
included in a separate section of this report following the signature page:
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore,
have been omitted.
(A) (3) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- --------------------------------------------------------------------------------
<C> <S>
3(a) Restated Articles of Incorporation of The Lincoln Electric Company (filed as
exhibit 4.1 to the Registration Statement on Form S-3 of The Lincoln Electric
Company, as filed and amended on June 26, 1995, SEC Registration No. 33-58881
and incorporated herein by reference and made a part hereof).
</TABLE>
11
<PAGE> 13
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
- ----------- --------------------------------------------------------------------------------
3(b) Restated Code of Regulations of The Lincoln Electric Company (filed as Exhibit 2
to the Registration Statement on Form 8-A for the Class A Common Shares of The
Lincoln Electric Company filed on June 5, 1995 and incorporated herein by
reference and made a part hereof).
4(a) Note Agreement dated November 20, 1991 between The Prudential Insurance Company
of America and the Company (filed as Exhibit 4 to Form 10-K of The Lincoln
Electric Company for the year ended December 31, 1991, SEC File No. 0-1402 and
incorporated by reference and made a part hereof), as amended by letter dated
March 18, 1993; 8.98% Senior Note Due November 26, 2003 (filed as Exhibit 4(a)
to Form 10-K of The Lincoln Electric Company for the year ended December 31,
1992, SEC File No. 0-1402 and incorporated herein by reference and made a part
hereof); as further amended by letter dated as of November 19, 1993; 8.98%
Senior Note Due November 26, 2003 (filed as Exhibit 4(a) to Form 10-K of The
Lincoln Electric Company for the year ended December 31, 1993, SEC File No.
0-1402 and incorporated herein by reference and made a part hereof); as further
amended by letter dated October 31, 1994 (filed as Exhibit 4(a) to Form 10-Q of
The Lincoln Electric Company for the period ended September 30, 1994, SEC File
No. 0-1402 and incorporated herein by reference and made a part hereof); and as
further amended by letter dated December 20, 1995 filed herewith.
4(b) Credit Agreement dated December 20, 1995 among the Company, the Banks listed on
the signature page thereof, and Society National Bank, as Agent, and filed
herewith.
10(a) The Lincoln Electric Company 1988 Incentive Equity Plan (filed as Exhibit 28 to
the Form
S-8 Registration Statement of The Lincoln Electric Company, SEC File No.
33-25209 and incorporated herein by reference and made a part hereof).
10(b) Form of Indemnification Agreement (filed as Exhibit 10(b) to Form 10-K of the
Lincoln Electric Company for the year ended December 31, 1994, SEC File No.
0-1402 and incorporated herein by reference).
10(c) The Lincoln Electric Company Supplemental Executive Retirement Plan, as amended,
filed herewith.
10(d) The Lincoln Electric Company Deferred Compensation Plan, as amended, filed
herewith.
10(e) Description of Management Incentive Plan, filed herewith.
10(f) Description of Non-Employee Directors' Restricted Stock Plan, filed herewith as
set forth in resolutions of the Board of Directors dated March 30, 1995.
10(g) The Lincoln Electric Company Non-Employee Directors' Deferred Compensation Plan,
filed herewith.
10(h) Retirement Agreement between the Company and Frederick W. Mackenbach dated
November 8, 1995, filed herewith.
10(i) Employment Agreement between the Company and Anthony A. Massaro dated July 14,
1993, as amended on January 1, 1994 (filed as Exhibit 10(e) to Form 10-K of The
Lincoln Electric Company for the year ended December 31, 1994, SEC File No.
0-1402, and incorporated herein by reference).
10(j) Employment Agreement between the Company and H. Jay Elliott dated June 22, 1993
(filed as Exhibit 10(f) to Form 10-K of The Lincoln Electric Company for the
year ended December 31, 1994, SEC File No. 0-1402, and incorporated herein by
reference).
10(k) Employment Agreement between the Company and Frederick G. Stueber dated February
22, 1995 (filed as Exhibit 10(g) to Form 10-K of The Lincoln Electric Company
for the year ended December 31, 1994, SEC File No. 0-1402, and incorporated
herein by reference).
10(l) The Lincoln Electric Company Employee Savings Plan (filed on Form S-8
Registration Statement of The Lincoln Electric Company, SEC File No. 33-64187
and incorporated herein by reference and made a part hereof).
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- --------------------------------------------------------------------------------
<S> <C>
10(m) 1995 Lincoln Stock Purchase Plan (filed on Form S-8 Registration Statement of
The Lincoln Electric Company, SEC File No. 33-64189 and incorporated herein by
reference and made a part hereof).
11 Computation of earnings per share.
21 Subsidiaries of the Registrant.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
</TABLE>
Upon request, The Lincoln Electric Company will furnish to security holders
copies of any exhibit to the Form 10-K report upon payment of a reasonable fee.
Any requests should be made in writing to: Mr. H. Jay Elliott, Senior Vice
President, Chief Financial Officer and Treasurer, The Lincoln Electric Company,
22801 St. Clair Avenue, Cleveland, Ohio 44117, Phone: (216) 481-8100.
(B) NO REPORTS ON FORM 8-K WERE FILED DURING THE LAST QUARTER OF THE PERIOD
COVERED BY THIS REPORT.
13
<PAGE> 15
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
THE LINCOLN ELECTRIC COMPANY
(Registrant)
By: /s/ H. JAY ELLIOTT
--------------------
H. Jay Elliott
Senior Vice President, Chief
Financial Officer
and Treasurer
(principal financial and
accounting officer)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED ON MARCH 15, 1996.
<TABLE>
<S> <C>
/s/ DONALD F. HASTINGS /s/ FREDERICK W. MACKENBACH
- --------------------------- ----------------------------
Donald F. Hastings, Chairman of the Frederick W. Mackenbach, President,
Board and Chief Executive Officer Chief Operating Officer and Director
(principal executive officer)
/s/ H. JAY ELLIOTT /s/ HARRY CARLSON
- --------------------------- ---------------------------
H. Jay Elliott, Senior Vice President, Harry Carlson, Director
Chief Financial Officer and Treasurer
(principal financial and accounting officer)
/s/ EDWARD E. HOOD
- --------------------------- ---------------------------
David H. Gunning, Director Edward E. Hood, Jr., Director
/s/ PAUL E. LEGO /s/ HUGH L. LIBBY
- --------------------------- ---------------------------
Paul E. Lego, Director Hugh L. Libby, Director
/s/ DAVID C. LINCOLN /s/ EMMA S. LINCOLN
- --------------------------- ---------------------------
David C. Lincoln, Director Emma S. Lincoln, Director
/s/ KATHRYN JO LINCOLN
- --------------------------- ---------------------------
G. Russell Lincoln, Director Kathryn Jo Lincoln, Director
/s/ HENRY L. MEYER III
- --------------------------- ---------------------------
Henry L. Meyer III, Director Lawrence O. Selhorst, Director
/s/ CRAIG R. SMITH /s/ FRANK L. STEINGASS
- --------------------------- ---------------------------
Craig R. Smith, Director Frank L. Steingass, Director
/s/ HENRY L. MEYER III
- ---------------------------
Henry L. Meyer III, Director
/s/ CRAIG R. SMITH
- ---------------------------
Craig R. Smith, Director
</TABLE>
14
<PAGE> 16
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(A)(1) AND (2) AND ITEM 14(D)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL STATEMENT SCHEDULE
YEAR ENDED DECEMBER 31, 1995
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
15
<PAGE> 17
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
The Lincoln Electric Company
We have audited the consolidated financial statements of The Lincoln
Electric Company and subsidiaries listed in the accompanying Index to financial
statements at Item 14 (a1). Our audits also included the financial statement
schedule listed in the Index at Item 14 (a2). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
The Lincoln Electric Company and subsidiaries at December 31, 1995 and 1994, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Note A to the consolidated financial statements, effective
January 1, 1993, the Company changed its method of accounting for income taxes.
ERNST & YOUNG LLP
Cleveland, Ohio
February 27, 1996
16
<PAGE> 18
STATEMENTS OF CONSOLIDATED FINANCIAL CONDITION
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1995 1994
-------- --------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................................ $ 10,087 $ 10,424
Accounts receivable (less allowances of $3,916 in 1995; $4,251 in
1994)............................................................. 140,833 126,007
Inventories
Raw materials and in-process...................................... 86,335 72,302
Finished goods.................................................... 96,530 82,974
-------- --------
182,865 155,276
Deferred income taxes -- Note E...................................... 9,738 11,601
Prepaid expenses..................................................... 6,713 2,899
Other current assets................................................. 6,847 7,220
-------- --------
TOTAL CURRENT ASSETS................................................... 357,083 313,427
OTHER ASSETS
Notes receivable from employees...................................... 287 3,151
Goodwill............................................................. 39,154 39,213
Other................................................................ 15,642 16,855
-------- --------
55,083 59,219
PROPERTY, PLANT AND EQUIPMENT
Land................................................................. 12,396 12,655
Buildings............................................................ 123,360 118,903
Machinery, tools and equipment....................................... 354,855 312,957
-------- --------
490,611 444,515
Less allowances for depreciation and amortization.................... 285,017 260,304
-------- --------
205,594 184,211
-------- --------
TOTAL ASSETS........................................................... $617,760 $556,857
======== ========
</TABLE>
17
<PAGE> 19
STATEMENTS OF CONSOLIDATED FINANCIAL CONDITION
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1995 1994
-------- --------
(IN THOUSANDS OF
DOLLARS, EXCEPT SHARE
DATA)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable............................................... $ 53,882 $ 54,766
Notes payable to banks -- Note D..................................... 28,541 15,843
Salaries, wages and amounts withheld................................. 17,080 12,405
Taxes, including income taxes -- Note E.............................. 33,160 21,783
Dividend payable..................................................... 2,988 2,203
Current portion of long-term debt -- Note D.......................... 1,269 2,272
Other current liabilities............................................ 31,729 34,845
-------- --------
TOTAL CURRENT LIABILITIES.............................................. 168,649 144,117
LONG-TERM DEBT, less current portion -- Note D......................... 93,582 194,831
DEFERRED INCOME TAXES -- Note E........................................ 7,063 6,631
OTHER LONG-TERM LIABILITIES............................................ 13,021 10,337
MINORITY INTEREST IN SUBSIDIARIES...................................... 5,499 6,808
SHAREHOLDERS' EQUITY -- Note B
Common Shares, without par value -- at stated capital amount:
Authorized -- 30,000,000 shares; Outstanding -- 10,520,987
shares in 1995 and 10,514,324 shares in 1994, net of 4,346,516
treasury shares at December 31, 1994........................... 2,104 2,103
Class A Common Shares (non-voting), without par value -- at stated
capital amount:
Authorized -- 30,000,000 shares; Outstanding -- 13,880,171
shares..................................................... 2,776
Class B Common Shares, without par value -- at stated capital amount:
Authorized -- 2,000,000 shares; Outstanding -- 487,117 shares at
December 31, 1995 and 499,840 shares at December 31, 1994...... 97 100
Additional paid-in capital........................................... 102,652 25,447
Retained earnings.................................................... 228,555 176,965
Cumulative translation adjustments................................... (6,238) (10,482)
-------- --------
329,946 194,133
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............................. $617,760 $556,857
======== ========
</TABLE>
Share amounts reflect the recapitalization (see Note B).
See notes to consolidated financial statements.
18
<PAGE> 20
STATEMENTS OF CONSOLIDATED OPERATIONS
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------
1995 1994 1993
---------- -------- --------
(IN THOUSANDS OF DOLLARS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales................................................. $1,032,398 $906,604 $845,999
Cost of goods sold........................................ 634,551 556,259 532,795
---------- -------- --------
Gross profit.............................................. 397,847 350,345 313,204
Distribution cost/selling, general & administrative
expenses................................................ 289,812 261,681 277,003
Restructuring charges (income) -- Note C.................. (2,735) 70,079
---------- -------- --------
Operating income (loss)................................... 108,035 91,399 (33,878)
Other income (expense):
Interest income......................................... 1,664 1,442 1,627
Other income............................................ 2,231 3,067 2,922
Interest expense........................................ (12,346) (15,740) (17,621)
---------- -------- --------
(8,451) (11,231) (13,072)
---------- -------- --------
Income (loss) before income taxes and cumulative effect of
accounting change....................................... 99,584 80,168 (46,950)
Income taxes (benefit) -- Note E.......................... 38,109 32,160 (6,414)
---------- -------- --------
Income (loss) before cumulative effect of accounting
change.................................................. 61,475 48,008 (40,536)
Cumulative effect to January 1, 1993 of change in method
of accounting for income taxes--Note A.................. 2,468
---------- -------- --------
Net income (loss)......................................... $ 61,475 $ 48,008 $(38,068)
========== ======== ========
Per share:
Income (loss) before cumulative effect of accounting
change............................................... $ 2.63 $ 2.19 $ (1.87)
Cumulative effect of accounting change.................. .12
---------- -------- --------
Net income (loss)....................................... $ 2.63 $ 2.19 $ (1.75)
========== ======== ========
</TABLE>
Per share amounts reflect the June 12, 1995 stock dividend (see Note B).
See notes to consolidated financial statements.
19
<PAGE> 21
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
CLASS A COMMON CLASS B COMMON
COMMON SHARES SHARES SHARES ADDITIONAL CUMULATIVE
-------------------- -------------------- ---------------- PAID IN RETAINED TRANSLATION
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT TOTAL
----------- ------ ----------- ------ ------- ------ ---------- -------- ----------- --------
(IN THOUSANDS OF DOLLARS EXCEPT SHARE DATA.)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY
1, 1993....... 1,033,346 $ 207 45,062 $ 9 $ 23,067 $183,183 $(7,743) $198,723
Net loss.... (38,068) (38,068)
Cash
Dividends
Declared -
$ .36 per
share..... (7,808) (7,808)
Shares Sold
to
Employees... 3,648 1 678 679
Shares
Issued
under
Incentive
Equity
Plan...... 1,151 224 224
Ten-For-One
Stock
Split..... 9,343,305 1,868 405,558 81 (1,949)
Shares
Issued to
ESOP...... 49,220 10 906 916
Adjustment
for the
Year...... (11,171) (11,171)
----------- ------ ------- ------ ---------- -------- ----------- --------
BALANCE,
DECEMBER 31,
1993.......... 10,381,450 2,076 499,840 100 22,926 137,307 (18,914) 143,495
Net
Income.... 48,008 48,008
Cash
Dividends
declared -
$ .38 per
share..... (8,350) (8,350)
Shares Sold
to
Employees... 107,520 22 2,063 2,085
Shares
Issued
Under
Incentive
Equity
Plan...... 25,354 5 458 463
Adjustment
for the
Year...... 8,432 8,432
----------- ------ ------- ------ ---------- -------- ----------- --------
BALANCE,
DECEMBER 31,
1994.......... 10,514,324 2,103 499,840 100 25,447 176,965 (10,482) 194,133
Net
Income.... 61,475 61,475
Cash
Dividends
Declared -
$ .42 per
share..... (9,885) (9,885)
Shares
Issued
Under
Incentive
Equity
Plan...... 2,500 99 99
Stock
Dividend... 11,016,664 $2,203 (2,203)
Shares Sold
in Public
Offering,
net of
expenses... 2,863,507 573 79,296 79,869
Repurchase
of Class B
Shares.... (12,723) (3) (111) (114)
Shares
Issued to
Non-Employee
Directors... 4,163 1 124 125
Adjustment
for the
Year...... 4,244 4,244
----------- ------ ----------- ------ ------- ------ ---------- -------- ----------- --------
BALANCE,
DECEMBER 31,
1995.......... 10,520,987 $2,104 13,880,171 $2,776 487,117 $ 97 $102,652 $228,555 $(6,238) $329,946
========== ======= ========== ======= ======= ======= ========= ======== ========== ========
</TABLE>
See notes to consolidated financial statements.
20
<PAGE> 22
STATEMENTS OF CONSOLIDATED CASH FLOWS
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).......................................... $ 61,475 $ 48,008 $(38,068)
Adjustments to reconcile net income (loss) to net cash
provided
by operating activities:
Depreciation and amortization....................... 29,742 27,960 30,545
Deferred income taxes............................... 2,810 31,862 (32,501)
Cumulative effect of accounting change.............. (2,468)
Foreign exchange loss (gain)........................ 1,558 4,047 (348)
Minority interest................................... (333) 416 (358)
Provision for restructuring......................... (2,735) 68,370
Changes in operating assets and liabilities net of
effects from
acquisitions:
(Increase) in accounts receivable.............. (13,082) (14,003) (6,228)
(Increase) decrease in inventories............. (25,648) (6,476) 10,654
(Increase) in other current assets............. (2,879) (1,447) (1,331)
Increase (decrease) in accounts payable........ (1,375) 9,929 2,856
Increase (decrease) in other current
liabilities................................. 11,045 (31,026) (2,928)
Gross change in other noncurrent assets and
liabilities................................. 1,991 2,458 (1,124)
Other--net..................................... 152 (327) 1,662
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES.................. 65,456 68,666 28,733
INVESTING ACTIVITIES
Purchases of property, plant and equipment............... (48,351) (37,366) (19,090)
Sales of property, plant and equipment................... 2,909 5,099 2,599
Acquisition of minority interest......................... (8,518)
-------- -------- --------
NET CASH USED BY INVESTING ACTIVITIES...................... (45,442) (32,267) (25,009)
FINANCING ACTIVITIES
Proceeds from the sale of Common Shares.................. 81,180 2,085 679
Proceeds from short-term borrowings...................... 39,774 56,405 305
Payments on short-term borrowings........................ (39,991) (59,293) (12,736)
Notes payable to banks -- net............................ 11,966 (5,122) (9,470)
Proceeds from long-term borrowings....................... 204,476 317,669 603,405
Payment on long-term borrowings.......................... (309,111) (351,793) (576,445)
Dividends paid........................................... (9,100) (8,106) (7,791)
Other.................................................... 562 838 (210)
-------- -------- --------
NET CASH USED BY FINANCING ACTIVITIES...................... (20,244) (47,317) (2,263)
Effect of exchange rate changes on cash and cash
equivalents.............................................. (107) 961 (1,707)
-------- -------- --------
DECREASE IN CASH AND CASH EQUIVALENTS...................... (337) (9,957) (246)
Cash and cash equivalents at beginning of year............. 10,424 20,381 20,627
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR................... $ 10,087 $ 10,424 $ 20,381
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
DECEMBER 31, 1995
NOTE A -- ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include
the accounts of The Lincoln Electric Company and its subsidiaries (the
"Company") after elimination of all significant intercompany accounts,
transactions and profits.
Cash Equivalents: The Company considers all highly liquid investments with
a maturity of three months or less when purchased to be cash equivalents.
Inventories: Inventories are valued at the lower of cost or market. For
domestic inventories, cost is determined principally by the last-in, first-out
(LIFO) method, and for foreign inventories cost is determined by the first-in,
first-out (FIFO) method. At December 31, 1995 and 1994, approximately 63% and
62%, respectively, of total inventories were valued using the LIFO method. The
excess of current cost over LIFO cost amounted to $55,300 at December 31, 1995
and $51,739 at December 31, 1994.
Property, Plant and Equipment: Property, plant and equipment, including
facilities and equipment under capital leases (not material), are stated at cost
and include improvements which significantly extend the useful lives of existing
plant and equipment. Depreciation and amortization are computed by both
accelerated and straight-line methods over useful lives ranging from 3 to 20
years for machinery, tools and equipment, and up to 50 years for buildings. Net
gains or losses related to asset dispositions are recognized in earnings in the
period in which dispositions occur.
Research and Development: Research and development costs, which are
expensed as incurred, were $19,736 in 1995, $18,473 in 1994 and $19,210 in 1993.
Goodwill: The excess of the purchase price over the fair value of net
assets acquired (goodwill) is amortized on a straight-line basis over periods
not exceeding 40 years. Amounts are stated net of accumulated amortization of
$6,750 and $5,784 in 1995 and 1994, respectively.
The carrying value of goodwill is reviewed if facts and circumstances
indicate a potential impairment of carrying value utilizing relevant cash flow
and profitability information.
Translation of Foreign Currencies: Asset and liability accounts are
translated into U.S. dollars using exchange rates in effect at the balance sheet
date; revenue and expense accounts are translated at average monthly exchange
rates. Translation adjustments are reflected as a component of shareholders'
equity.
Transaction gains and losses are included in the statements of consolidated
operations in distribution cost/selling, general and administrative expenses.
The Company recorded transaction losses of $1,930 in 1995, $3,746 in 1994 and
$228 in 1993. The higher level of transaction losses in 1995 and 1994 is
attributable to the effect of the devaluation of the Mexican peso on a U.S.
dollar denominated debt obligation which was less in 1995 than it was in 1994.
This U.S. dollar denominated debt was settled in 1995.
Financial Instruments: The Company utilizes forward exchange contracts to
hedge exposure to exchange rate fluctuations on certain intercompany loans,
purchase and sales transactions and other intercompany commitments. Any
contracts that are entered into are written on a short-term basis, are not held
for trading purposes, and are not held for purposes of speculation. Gains and
losses on all forward exchange contracts described herein are not material and
are recognized in the statements of consolidated operations in the periods the
exchange rates change. At December 31, 1995, the Company had $35 million of
outstanding forward exchange contracts. These forward exchange contracts are
principally denominated in the French Franc ($7,134), British Pound ($6,127),
Dutch Guilder ($18,231) and Norwegian Krone ($2,885).
22
<PAGE> 24
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company is exposed to credit-related losses in the event of
nonperformance by counterparties to financial instruments. No counterparties are
expected to fail to meet their obligations given their high credit ratings, so
the Company usually does not obtain collateral for these instruments.
Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions in certain circumstances that affect the amounts reported in the
accompanying consolidated financial statements and notes. Actual results could
differ from these estimates.
Accounting Change: Effective January 1, 1993, the Company adopted FASB
Statement No. 109, "Accounting for Income Taxes." Under Statement No. 109, the
liability method is used in accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse. As permitted by Statement No. 109, the Company elected
not to restate the financial statements of any prior year. The cumulative effect
of the change decreased the net loss for 1993 by $2,468 or $.12 per share.
In March 1995, Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of", was issued. SFAS No. 121 requires long-lived assets, primarily
property, plant and equipment, identified intangible assets, and excess of cost
over net assets of businesses acquired, to be reviewed for impairment losses
whenever events or changes in circumstances indicate the carrying amount may not
be recovered through future net cash flows generated by the assets. The Company
will adopt SFAS No. 121 in 1996 and believes the effect of adoption will not be
material.
Net Income (Loss) per Share: Net income (loss) per share is based on the
average number of all shares outstanding during the year (23,350,254 in 1995;
21,939,982 in 1994 and 21,703,982 in 1993).
Supplemental Earnings per Share: In 1995, the Company sold Class A Common
Shares in an underwritten public offering (see Note B). The proceeds of the
offering were used to reduce the Company's outstanding indebtedness. Had the
proceeds been received and applied to reduce indebtedness as of January 1, 1995,
net income per share for 1995 would have been $2.54, compared to $2.06 for 1994,
if the proceeds were received and applied to reduce indebtedness as of January
1, 1994.
Other: Included in distribution cost/selling, general & administrative
expenses are the costs related to the Company's discretionary employee bonus,
net of hospitalization costs deducted therefrom ($66,357 in 1995; $59,559 in
1994; and $53,450 in 1993.) Certain reclassifications have been made to prior
year financial statements to conform to current year classifications.
NOTE B -- RECAPITALIZATION AND OTHER EQUITY TRANSACTIONS
The Company completed a recapitalization in 1995 that included the
authorization of Class A Common Shares, which is a new class of non-voting
common shares. The recapitalization included a distribution payable on June 12,
1995, to holders of record of the Company's outstanding voting common shares as
of June 5, 1995, of a dividend of one Class A Common Share for each outstanding
share of the Company's voting common shares. Retroactive effect has been given
to the stock dividend in the computation of all per share data in these
financial statements.
Prior to the adoption of the recapitalization, the Company had two
authorized and outstanding classes of voting common shares. As a result of the
recapitalization, the Company's authorized capital consists of two voting
classes, the Common Shares, without par value (formerly the "Common Stock"), and
the Class B Common Shares, without par value (formerly the "Class A Common
Stock"), and one non-voting class, the Class A Common Shares (the new "Class A
Common Shares").
23
<PAGE> 25
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The recapitalization included an increase in the total number of authorized
common shares of all classes from 17 million to 62 million shares consisting of
30 million Common Shares, 30 million Class A Common Shares and 2 million Class B
Common Shares.
On June 29, 1995, the Company sold in an underwritten public offering
2,796,914 Class A Common Shares for $28.35 per share, net of the underwriting
discount. The closing date for the transaction was July 6, 1995 at which time
the Company received the net proceeds of $79.3 million which were used to reduce
debt of the Company. On August 2, 1995, the Company sold an additional 66,593
Class A Common Shares for $28.35 per share under an over allotment provision of
the Underwriting Agreement and received additional net proceeds of $1.9 million
which were also used to reduce debt of the Company.
The Lincoln Electric Company Employees' Stock Purchase Plan ("Plan") which
provided that employees could purchase shares of the Company's Common Stock,
when offered, at its book value, was terminated by the Board of Directors
effective March 30, 1995. Under the Plan, the Company had the option to
repurchase the shares, but in 1992 the Company suspended the repurchase of all
shares under the Plan. Upon termination of the Plan, all shares issued under the
Plan (1,639,686) became unrestricted shares. In May 1995, the shareholders
approved the 1995 Lincoln Stock Purchase Plan ("Purchase Plan"), which provides
employees the ability to purchase open market shares on a commission free basis
up to a limit of ten thousand dollars annually. There were no purchases during
1995 under this Purchase Plan.
The Lincoln Electric Company 1988 Incentive Equity Plan ("Incentive Equity
Plan") provides for the award or sale of Common Shares and Class A Common Shares
to officers and other key employees of the Company and its subsidiaries.
Following grants of deferred stock in 1989, the terms of which were satisfied in
1991, the Company distributed a total of 32,524 Common Shares (including 524
Shares issued for dividends accrued during the deferral period) of which 10,660
Common Shares were distributed in 1992, 11,510 Common Shares in 1993, and 10,354
Common Shares in 1994 (and a corresponding number of Class A Common Shares were
distributed at the time of the 1995 stock dividend). These shares, along with
15,000 Common Shares issued to a former officer of the Company and corresponding
Class A Common Shares received in the 1995 stock dividend, are restricted as to
resale rights with the Company having a right of first refusal at a purchase
price based on the book value of the shares. Additionally in 1994, 15,000 shares
of restricted stock (after the stock dividend, 30,000 shares) were issued to two
officers of the Company, with scheduled vesting that will be satisfied over time
and completed in January 1997. In 1995, 5,000 shares of restricted stock were
issued to another officer with vesting over a six year period. At December 31,
1995, there were no other outstanding awards under the Plan, and 1,899,952
shares (949,976 Common Shares and 949,976 Class A Common Shares) are reserved
for future issuance under the Incentive Equity Plan.
The Lincoln Electric Company Employee Stock Ownership Plan (the "ESOP") is
a non-contributory profit-sharing plan established to provide deferred
compensation benefits for all eligible employees. The cost of the plan is borne
by the Company through contributions to an employee stock ownership trust as
determined annually by the Board of Directors. In May 1989, shareholders
authorized 2,000,000 shares of Class B Common Shares (formerly the "Class A
Common Stock"), without par value. The Company's Common Shares and Class B
Common Shares are identical in all respects, except that holders of Class B
Common Shares are subject to certain transfer restrictions and the Class B
Common Shares are only issued to the ESOP. In 1995 and 1994, no shares were
issued to the ESOP. In 1993, the Company issued 49,220 shares to the ESOP with
an estimated fair value of $916 which was recorded as compensation expense. The
difference between the total stated capital amount of $.20 per share and the
estimated fair value was recorded as additional paid-in-capital. At December 31,
1995 and 1994, 1,500,160 authorized but unissued shares are available for future
issuance to the ESOP. In 1995, the Company repurchased 12,723 Class B Common
Shares for $114.
In May 1995, the shareholders approved The Lincoln Non-Employee Directors'
Restricted Stock Plan ("Non-Employee Directors' Plan"). The Non-Employee
Directors' Plan provides for distributions of ten
24
<PAGE> 26
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
thousand dollars worth of Common Shares to each non-employee Director as part of
an annual retainer. During 1995, 4,163 shares were issued to 13 non-employee
Directors under this Plan.
NOTE C -- RESTRUCTURING CHARGES
In 1993 the Company substantially completed its plan to downsize and
streamline its foreign operations (principally in Europe) and close
manufacturing facilities in Germany, Japan and South America. Management's
decisions resulted in a restructuring charge in 1993 of $70,100 ($40,900 after
tax or $1.88 per share) which was comprised of (1) asset write-downs in the
amount of $45,900 including goodwill of $8,900; (2) severance and other
redundancy costs of $27,500; and (3) a net credit of $3,300 comprised of a claim
settlement and other restructuring liabilities including estimated losses
through the final facility closing dates in 1994.
In 1994 all of the planned facility closings were completed and one of the
facilities was disposed of. In total, approximately 1,400 employees were
terminated as a result of the 1993 program and prior year program. In 1994 the
restructuring accruals were adjusted to reflect management's current cost
estimates to complete the program which resulted in a credit to income of
$2,735.
In 1995, an additional facility was sold. The restructuring accrual at
December 31, 1995 (included in other current liabilities) is $5,555. The
remaining expenditures, which include costs related to the sale of the remaining
facilities closed and holding costs to be incurred through the estimated date of
disposal, are anticipated to be incurred in 1996.
NOTE D -- SHORT-TERM AND LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1994
------- --------
<S> <C> <C>
Short-term debt:
Notes payable to banks at interest rates from 5.36% to 12.50%
(5.6625% to 11.25% in 1994)................................. $28,541 $ 15,843
======= ========
Long-term debt:
Multi-currency Credit Agreement, due October 1, 1997........... $100,947
Multi-currency Credit Agreement, due December 20, 2000
(5.975%).................................................... $10,000
8.73% Senior Note due 2003 (eight equal annual principal
payments commencing in 1996)................................ 75,000 75,000
Other borrowings due through 2023, interest at 2.00% to 6.20%
(2.00% to 13.74% in 1994)................................... 9,850 21,156
------- --------
94,850 197,103
Less current portion........................................... 1,268 2,272
------- --------
Total.................................................. $93,582 $194,831
======= ========
</TABLE>
In December 1995, the Company entered into a new $200 million unsecured,
multi-currency Credit Agreement. The terms of the new Credit Agreement which
expires December 20, 2000, provide for annual extensions. The new Credit
Agreement provides more favorable pricing levels and less restrictive covenants.
The interest rate on outstanding borrowings is determined based upon defined
leverage rates for the pricing options selected. The interest rate can range
from LIBOR plus .20% to LIBOR plus .30% depending upon the defined leverage
rate. The agreement also provides for a facility fee ranging from .10% to .15%
per annum based upon the daily aggregate amount of the commitment.
Simultaneously, with the signing of the Credit Agreement, the $75,000 8.73%
Senior Note due in 2003 was amended to conform with the financial covenants of
the new Credit Agreement, which requires interest coverage and funded debt to
capital ratios.
25
<PAGE> 27
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The principal payment due in 1996 ($9,375,000) on the 8.73% Senior Note is
classified as long-term debt as the Company intends to refinance the amount on a
long-term basis under the Multi-currency Credit Agreement.
Maturities of long-term debt for the five years succeeding December 31,
1995 are $1,268 in 1996, $10,510 in 1997, $10,117 in 1998, $9,752 in 1999,
$29,002 in 2000 and $34,201 thereafter.
At December 31, 1995, loans amounting to $5,177 were collateralized by
property and equipment.
Total interest paid was $12,606 in 1995, $17,400 in 1994 and $19,000 in
1993. Weighted average interest rates on notes payable to bank at December 31,
1995 and 1994 were 6.4% and 6.8%, respectively.
NOTE E -- INCOME TAXES
The components of income (loss) before income taxes and cumulative effect
of accounting change are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- --------
<S> <C> <C> <C>
U.S................................................... $80,351 $70,703 $ 43,345
Non-U.S............................................... 19,233 9,465 (90,295)
------- ------- --------
Total....................................... $99,584 $80,168 $(46,950)
======= ======= ========
</TABLE>
Components of income tax expense (benefit) for the years ended December 31,
are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- --------
<S> <C> <C> <C>
Current:
Federal............................................. $24,605 $(8,379) $ 21,032
Non-U.S............................................. 5,465 4,143 2,227
State and local..................................... 5,229 4,534 2,828
------- ------- --------
35,299 298 26,087
Deferred:
Federal............................................. 2,576 31,223 (32,980)
Non-U.S............................................. 234 639 479
------- ------- --------
2,810 31,862 (32,501)
------- ------- --------
Total....................................... $38,109 $32,160 $ (6,414)
======= ======= ========
</TABLE>
26
<PAGE> 28
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The differences between total income tax expense (benefit) and the amount
computed by applying the statutory Federal income tax rate to income (loss)
before income taxes and cumulative effect of accounting change are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- --------
<S> <C> <C> <C>
Statutory rate of 35% applied to pre-tax income
(loss).............................................. $34,854 $28,059 $(16,432)
Effect of state and local income taxes, net of Federal
tax benefit......................................... 3,399 2,947 1,838
Differences in income taxes on non-U.S. earnings and
remittances......................................... (2,175) (1,158) 336
Non-U.S. losses and unrecognized tax benefits......... 1,570 2,113 8,308
Foreign sales corporation............................. (961) (838) (703)
Other -- net.......................................... 1,422 1,037 239
------- ------- --------
Total....................................... $38,109 $32,160 $ (6,414)
======= ======= ========
</TABLE>
Total income tax payments, net of refunds, were $22,428 in 1995, $6,115 in
1994 and $19,400 in 1993.
At December 31, 1995, the Company's foreign subsidiaries had net operating
loss carryforwards of approximately $61,000 which expire in various years from
1996 through 2002, except for $20,000 for which there is no expiration date.
Significant components of the Company's deferred tax assets and liabilities
at December 31, 1995 and 1994, are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............................ $ 20,917 $ 20,898
U.S. foreign tax credits.................................... 1,797 954
State income taxes.......................................... 926 1,220
Inventory adjustments....................................... (1,003) 3,279
Other accrual accounts...................................... 5,826 4,394
Employee benefits........................................... 1,983 1,269
Other asset adjustments..................................... 4,996 3,756
Pension adjustments......................................... 2,038 2,417
Other deferred tax assets................................... 3,021 1,092
-------- --------
40,501 39,279
Valuation allowance........................................... (21,955) (20,824)
-------- --------
18,546 18,455
Deferred tax liabilities:
Depreciation................................................ (11,820) (9,325)
Pension adjustments......................................... (1,401) (3,004)
Other deferred tax liabilities.............................. (2,650) (1,156)
-------- --------
(15,871) (13,485)
-------- --------
Total............................................... $ 2,675 $ 4,970
======== ========
</TABLE>
The Company does not provide deferred income taxes on unremitted earnings of
foreign subsidiaries as such funds are deemed permanently reinvested to finance
foreign expansion and meet operational needs on an
27
<PAGE> 29
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ongoing basis. Upon distribution of those earnings in the form of dividends or
otherwise, the Company would be subject to both U.S. income taxes subject to an
adjustment for foreign tax credits and withholding taxes payable to the various
foreign countries. Determination of the amount of unrecognized deferred U.S.
income tax liability is not practicable because of the complexities associated
with its calculation; however, unrecognized non-U.S. tax credits and non-U.S.
withholding taxes paid upon distribution would be available to reduce some
portion of the U.S. liability.
NOTE F -- RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS
The Company and its subsidiaries maintain a number of defined benefit and
defined contribution plans to provide retirement benefits for their employees in
the United States as well as their employees in foreign countries. These plans
are maintained and contributions are made in accordance with the Employee
Retirement Income Security Act of 1974, local statutory law or as determined by
the Board of Directors. The plans generally provide benefits based upon years of
service and compensation. Pension costs accrued are funded except for the cost
associated with a supplemental employee retirement plan for certain key
employees.
A summary of the components of total pension expense is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
U.S. Plans:
Service cost -- benefits earned during the year... $ 7,375 $ 7,155 $ 6,115
Interest cost on projected benefit obligation..... 21,847 19,601 18,158
Actual return on plan assets...................... (37,696) (18,795) (19,569)
Net amortization and deferral..................... 17,819 (528) 1,441
-------- -------- --------
Net pension cost of defined benefit plans......... 9,345 7,433 6,145
Defined contribution plans........................ 154 258 193
-------- -------- --------
Total U.S. plans.......................... 9,499 7,691 6,338
Non-U.S. Plans:
Service cost -- benefits earned during the year... 1,476 1,524 1,422
Interest cost on projected benefit obligation..... 2,291 2,207 2,253
Actual return on plan assets...................... (3,186) (932) (4,506)
Net amortization and deferral..................... 374 (1,717) 2,000
-------- -------- --------
Net pension cost of defined benefit plans......... 955 1,082 1,169
Defined contribution plans........................ 687 702 1,326
-------- -------- --------
Total Non-U.S. plans...................... 1,642 1,784 2,495
-------- -------- --------
Total pension expense..................... $ 11,141 $ 9,475 $ 8,833
======== ======== ========
</TABLE>
28
<PAGE> 30
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The funded status of the U.S. and Non-U.S. plans at December 31, 1995 and
1994 is as follows:
<TABLE>
<CAPTION>
U.S. NON-U.S.
-------------------- --------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Actuarial present value of accumulated
benefit obligations:
Vested.............................. $261,132 $218,754 $ 26,659 $ 24,902
Nonvested........................... 9,407 9,797 1,080 881
-------- -------- -------- --------
$270,539 $228,551 $ 27,739 $ 25,783
======== ======== ======== ========
Actuarial present value of projected
benefit obligations.................... $309,359 $258,661 $ 31,153 $ 29,020
Plan assets at fair value................ 282,843 243,802 35,270 32,272
-------- -------- -------- --------
Plan assets in excess of (less than)
projected benefit obligations.......... (26,516) (14,859) 4,117 3,252
Unrecognized net (gain) loss........ 16,725 155 (1,759) (1,410)
Unrecognized prior service cost..... 12,651 13,839 505 389
Unrecognized net assets at January
1, 1994 and 1993, net of
amortization...................... (2,581) (2,910) (1,359) (1,519)
Minimum Liability................... (1,208) (2,183) (321) (480)
-------- -------- -------- --------
Accrued retirement annuity expense
recognized in the balance sheet... $ (929) $ (5,958) $ 1,183 $ 232
======== ======== ======== ========
</TABLE>
The increase in the actuarial present value of accumulated benefit
obligations ("ABO") for the domestic plans is largely due to the change in the
discount rate from 8.25% to 7.5% as well as the normal one year's additional
accrual of benefit under all plans. The increase in the ABO for the foreign
plans is largely due to the normal one year's accrual of additional benefits.
Assumptions used in accounting for the defined benefit plans as of December
31, 1995 and 1994 for both the U.S. and Non-U.S. plans were as follows:
<TABLE>
<CAPTION>
NON-U.S.
U.S. PLANS PLANS
------------- ------------
1995 1994 1995 1994
---- ----- ---- ----
<S> <C> <C> <C> <C>
Weighted-average discount rates....................... 7.5% 8.25% 8.1% 8.2%
Projected rates of increase in compensation........... 5.5% 5.5% 4.8% 4.8%
Expected rates of return on plan assets............... 9.0% 9.0% 8.4% 8.5%
</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.
The Cleveland, Ohio area operations have a Guaranteed Continuous Employment
Plan covering substantially all employees, which, in general, states that the
Company will provide work for at least 75% of every standard work week
(presently 40 hours). This plan does not guarantee employment when the Company's
ability to continue normal operations is seriously restricted by events beyond
the control of the
29
<PAGE> 31
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company. The Company has reserved the right to terminate this plan effective at
the end of a calendar year by giving notice of such termination not less than
six months prior to the end of such year.
NOTE G -- INDUSTRY AND GEOGRAPHIC SEGMENT INFORMATION
The Company's primary business is the design, manufacture and sale, in the
domestic and international markets of arc and other welding products and related
gases used in the welding process. The Company also designs, manufactures and
sells integral horsepower industrial electric motors. Financial information by
geographic areas follows:
<TABLE>
<CAPTION>
UNITED OTHER
STATES EUROPE COUNTRIES ELIMINATIONS TOTAL
-------- -------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
1995:
Net sales to
unaffiliated
customers........... $711,940 $201,672 $118,786 $1,032,398
Inter-geographic
sales............... 53,347 15,662 9,092 $(78,101)
-------- -------- --------- ------------ ----------
Total.......... $765,287 $217,334 $127,878 $(78,101) $1,032,398
======== ======== ======== =========== =========
Pre-tax profit
(loss).............. $ 79,737 $ 10,172 $ 10,956 $ (1,281) $ 99,584
Identifiable assets.... 404,972 194,319 80,921 (62,452) 617,760
1994:
Net sales to
unaffiliated
customers........... $641,607 $156,803 $108,194 $ 906,604
Inter-geographic
sales............... 40,876 10,558 7,060 $(58,494)
-------- -------- --------- ------------ ----------
Total.......... $682,483 $167,361 $115,254 $(58,494) $ 906,604
======== ======== ======== =========== =========
Pre-tax profit
(loss).............. $ 68,316 $ 7,891 $ 4,062 $ (101) $ 80,168
Identifiable assets.... 350,012 165,722 76,129 (35,006) 556,857
1993:
Net sales to
unaffiliated
customers........... $543,458 $211,268 $ 91,273 $ 845,999
Inter-geographic
sales............... 29,077 6,663 4,806 $(40,546)
-------- -------- --------- ------------ ----------
Total.......... $572,535 $217,931 $ 96,079 $(40,546) $ 845,999
======== ======== ======== =========== =========
Pre-tax profit
(loss).............. $ 42,570 $(68,865) $(22,903 ) $ 2,248 $ (46,950)
Identifiable assets.... 389,247 172,136 69,871 (71,711) 559,543
</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
$81,770 in 1995, $64,400 in 1994 and $58,100 in 1993.
NOTE H -- ACQUISITIONS
In June 1993, the Company purchased the outstanding minority interest in
its subsidiary in Spain for approximately $8,500. The transaction was accounted
for as a purchase and the increased interest in the results of operations was
included in the consolidated statements of operations from the transaction date.
NOTE I -- FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company has various financial instruments, including cash, cash
equivalents and short and long-term debt. The Company has determined the
estimated fair value of these financial instruments by using available
30
<PAGE> 32
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
market information and appropriate valuation methodologies which require
judgment. Accordingly, the use of different market assumptions or estimation
methodologies could have a material effect on the estimated fair value amounts.
The total notional value of forward currency exchange contracts at December 31,
1995 is $35 million.
The carrying amounts and estimated fair value of the Company's significant
other financial instruments at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNTS VALUE
-------- --------
<S> <C> <C>
Cash and Cash Equivalents..................................... $10,087 $ 10,087
Notes Payable to Banks........................................ 28,541 28,541
Long-Term Debt................................................ 94,850 101,026
Forward Contracts............................................. (167 ) (167)
</TABLE>
NOTE J -- OPERATING LEASES
The Company leases sales offices, warehouses and distribution centers,
office equipment and data processing equipment. Such leases, some of which are
noncancellable, and in many cases, include renewals, expire at various dates.
The Company pays most maintenance, insurance and tax expenses relating to leased
assets. Rental expense was $8,852 in 1995, $9,226 in 1994 and $9,864 in 1993.
At December 31, 1995, total minimum lease payments for noncancellable
operating leases are as follows:
<TABLE>
<S> <C>
1996.................................... $ 8,022
1997.................................... 6,467
1998.................................... 5,187
1999.................................... 4,422
2000.................................... 2,991
Thereafter.............................. 4,620
-------
Total......................... $31,709
=======
</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.
31
<PAGE> 33
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE L -- QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1995 MAR 31 JUN 30 SEP 30 DEC 31
----------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales................................ $263,407 $268,199 $249,525 $251,267
Gross profit............................. 101,862 107,215 93,530 95,240
Income before income taxes............... 26,856 27,962 23,473 21,293
Net income............................... 16,054 17,385 14,710 13,326
Net income per share (a) (b)............. $ 0.73 $ 0.79 $ 0.59 $ 0.54
</TABLE>
<TABLE>
<CAPTION>
DEC
1994 MAR 31 JUN 30 SEP 30 31(C)
----------------------------------------- -------- -------- -------- --------
<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
Net income............................... 10,407 12,307 11,669 13,625
Net income per share (b)................. $ 0.48 $ 0.56 $ 0.53 $ 0.62
</TABLE>
- ---------------
(a) Net income per share is computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share in 1995
does not equal the total computed for the year due to stock transactions
which occurred during 1995.
(b) Per share amounts reflect the June 12, 1995 stock dividend (see Note B).
(c) Includes $2,500 of net adjustments to various expense accruals and $3,140
for the devaluation of the Mexican peso, offset partially by net favorable
inventory adjustments of $1,900 and adjustments to restructuring accruals of
$3,235. Also includes a favorable $2,000 adjustment to income taxes to
reflect the annual effective income tax rate.
32
<PAGE> 34
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
(IN THOUSANDS OF DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- -----------------------------------------------------------------------------------------------------
ADDITIONS
----------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER ACCOUNTS (2) END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE(1) DEDUCTIONS PERIOD
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Allowance for doubtful
accounts:
Year ended December 31,
1995....................... $4,251 $ 944 $ 194(1) $1,473 $3,916
Year ended December 31,
1994....................... $6,258 $ 995 $ 117(1) $3,119(3) $4,251
Year ended December 31,
1993....................... $5,434 $2,037 $ (723)(1) $ 490 $6,258
</TABLE>
- ---------------
(1) Currency translation adjustment.
(2) Uncollectible accounts written-off, net of recoveries.
(3) Includes $2,480 relating to accounts written off during 1994 in connection
with the Company's restructuring activities.
33
<PAGE> 35
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ---------------------------------------------------------------------------------
<C> <S>
3(a) Restated Articles of Incorporation of The Lincoln Electric Company (filed as
Exhibit 4.1 to the Registration Statement on Form S-3 of The Lincoln Electric
Company, as filed and amended on June 26, 1995, SEC Registration No. 33-58881 and
incorporated herein by reference and made a part hereof).
3(b) Restated Code of Regulations of The Lincoln Electric Company (filed as Exhibit 2
to the Registration Statement on Form 8-A for the Class A Common Shares of The
Lincoln Electric Company filed on June 5, 1995 and incorporated herein by
reference and made a part hereof).
4(a) Note Agreement dated November 20, 1991 between The Prudential Insurance Company
of America and the Company (filed as Exhibit 4 to form 10-K of The Lincoln
Electric Company for the year ended December 31, 1991, SEC File No. 0-1402 and
incorporated by reference and made a part hereof), as amended by letter dated
March 18, 1993; 8.98% Senior Note Due November 26, 2003 (filed as Exhibit 4(a) to
Form 10-K of The Lincoln Electric Company for the year ended December 31, 1992,
SEC File No. 0-1402 and incorporated herein by reference and made a part hereof);
as further amended by letter dated as of November 19, 1993; 8.98% Senior Note Due
November 26, 2003 (filed as Exhibit 4(a) to Form 10-K of The Lincoln Electric
Company for the year ended December 31, 1993, SEC File No. 0-1402 and
incorporated herein by reference and made a part hereof); as further amended by
letter dated October 31, 1994 (filed as Exhibit 4(a) to Form 10-Q of The Lincoln
Electric Company for the period ended September 30, 1994, SEC File No. 0-1402 and
incorporated herein by reference and made a part hereof); and as further amended
by letter dated December 20, 1995 filed herewith.
4(b) Credit Agreement dated December 20, 1995 among the Company, the Banks listed on
the signature page thereof, and Society National Bank, as Agent, and filed
herewith.
10(a) The Lincoln Electric Company 1988 Incentive Equity Plan (filed as Exhibit 28 to
the Form S-8 Registration Statement of The Lincoln Electric Company, SEC File No.
33-25209 and incorporated herein by reference and made a part hereof).
10(b) Form of Indemnification Agreement (filed as Exhibit 10(b) to Form 10-K of The
Lincoln Electric Company for the year ended December 31, 1994, SEC File No.
0-1402 and incorporated herein by reference).
10(c) The Lincoln Electric Company Supplemental Executive Retirement Plan, as amended,
filed herewith.
10(d) The Lincoln Electric Company Deferred Compensation Plan, as amended, filed
herewith.
10(e) Description of Management Incentive Plan, filed herewith.
10(f) Description of Non-Employee Directors' Restricted Stock Plan, filed herewith as
set forth in resolutions of the Board of Directors dated March 30, 1995.
10(g) The Lincoln Electric Company Non-Employee Directors' Deferred Compensation Plan,
filed herewith.
10(h) Retirement Agreement between the Company and Frederick W. Mackenbach dated
November 8, 1995, filed herewith.
10(i) Employment Agreement between the Company and Anthony A. Massaro dated July 14,
1993, as amended on January 1, 1994 (filed as Exhibit 10(e) to Form 10-K of The
Lincoln Electric Company for the year ended December 31, 1994, SEC File No.
0-1402, and incorporated herein by reference).
</TABLE>
34
<PAGE> 36
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ---------------------------------------------------------------------------------
<C> <S>
10(j) Employment Agreement between the Company and H. Jay Elliott dated June 22, 1993
(filed as Exhibit 10(f) to Form 10-K of The Lincoln Electric Company for the year
ended December 31, 1994, SEC File No. 0-1402, and incorporated herein by
reference).
10(k) Employment Agreement between the Company and Frederick G. Stueber dated February
22, 1995 (filed as Exhibit 10(g) to Form 10-K of The Lincoln Electric Company for
the year ended December 31, 1994, SEC File No. 0-1402, and incorporated herein by
reference).
10(l) The Lincoln Electric Company Employee Savings Plan (filed on Form S-8
Registration Statement of The Lincoln Electric Company, SEC File No. 33-64187 and
incorporated herein by reference and made a part hereof).
10(m) 1995 Lincoln Stock Purchase Plan (filed on Form S-8 Registration Statement of The
Lincoln Electric Company, SEC File No. 33-64189 and incorporated herein by
reference and made a part hereof).
11 Computation of earnings per share.
21 Subsidiaries of the Registrant.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
</TABLE>
35
<PAGE> 1
[LOGO] LEONARD H. LILLARD, IV, CFA
Vice President
PRUDENTIAL CAPITAL GROUP
Two Prudential Plaza, Suite 5600
Chicago, Il 60601-6716
312 540-4216 Fax: 312 540-4222
EXHIBIT 4A
December 20, 1995
The Lincoln Electric Company
22801 St. Clair Avenue
Cleveland, Ohio 44117
Attention: Chief Financial Officer
Ladies and Gentlemen:
Reference is made to that certain Note Agreement dated November 20, 1991 (as
amended from time to time, the "Note Agreement") between The Lincoln Electric
Company, an Ohio corporation (the "Company"), and The Prudential Insurance
Company of America ("Prudential"), pursuant to which the Company issued and
sold and Prudential purchased the Company's 8.73% senior note in the original
principal amount of $75,000,000, due November 26, 2003 (the "Note"). Pursuant
to that certain letter agreement dated March 18, 1993, the interest rate on the
Note was increased to 8.98% per annum and, as of August 28, 1995, the interest
rate on the Note was returned to 8.73% per annum as described in more detail
below. Unless otherwise defined herein, capitalized terms used herein shall
have the meanings assigned to such terms in the Note Agreement.
The Company has advised Prudential that it proposes to enter into an Amended
and Restated Credit Agreement dated as of December 20, 1995 (the "Credit
Agreement") among the Company, the banks listed therein (the "Banks") and
Society National Bank, as agent (the "Agent"). In order to satisfy a condition
to closing under the Credit Agreement and the requirements of the Note
Agreement, the Company desires to modify the terms of the Note Agreement in
accordance with this letter. A copy of the Credit Agreement is attached hereto
as EXHIBIT E.
Pursuant to the request of the Company and in accordance with the provisions of
paragraph 11C of the Note Agreement, Prudential and the Company hereby agree as
follows:
SECTION 1. AMENDMENT. From and after the date this letter
becomes effective in accordance with its terms, the Note Agreement and the Note
are amended as follows:
1.1 REFERENCES TO BANK AGREEMENT AND CREDIT AGREEMENT. Paragraph
10B of the Note Agreement is amended to delete the defined terms "Bank
Agreement" and "Credit Agreement" appearing therein and to add thereto the
following definition in alphabetical order:
<PAGE> 2
The Lincoln Electric Company
December 20, 1995
Page 2
"BANK AGREEMENT" and "CREDIT AGREEMENT" shall mean
and refer to that certain Credit Agreement dated as of
December 20, 1995 among the Company, the banks listed therein
and Society National Bank, as agent.
1.2 CERTAIN COVENANTS. It is hereby acknowledged and agreed that
Sections 5.12 through 5.17 have been deleted from the Credit Agreement and
accordingly the Company shall not be required to comply with such deleted
sections of the Credit Agreement notwithstanding anything to the contrary set
forth in the letter agreement dated March 18, 1993 between the Company and
Prudential. It is further agreed and acknowledged that (i) the reference to
"Section 5.14" of the Credit Agreement contained in paragraph 6C(1) of the Note
Agreement shall mean and be a reference to "Section 5.09" of the Credit
Agreement and (ii) the reference to "Section 5.17" of the Credit Agreement
contained in subparagraph 7A(iii) of the Note Agreement shall mean and be a
reference to "Section 5.11" of the Credit Agreement.
1.3 RATE OF INTEREST. Effective as of August 28, 1995, the rate
of interest accruing on the indebtedness evidenced by the Note which is not
overdue was reduced to 8.73% per annum and the rate of interest accruing on
indebtedness evidenced by the Note which is overdue was reduced to 10.73% per
annum. Consequently, in order to fully effect the foregoing, (i) the
references to "8.98%" on the cover page of the Note Agreement AND in paragraph
1 of the Note Agreement AND each reference to "8.98%" appearing in the Note is
hereby deleted and a reference to "8.73%" is hereby substituted therefor and
(ii) the reference to "10.98%" appearing in the Note is hereby deleted and a
reference to "10.73%" is hereby substituted therefor.
1.4 SUBSTITUTION OF EXHIBIT E. The Note Agreement is hereby
amended to delete in its entirety Exhibit E attached thereto and substitute
therefor Exhibit E attached hereto.
SECTION 2. EFFECT OF CHANGES TO CREDIT AGREEMENT. All
references herein to sections of the Credit Agreement and the Company's
compliance with the terms thereof as required hereunder and under the Note
Agreement shall be based upon the Credit Agreement as in effect on December 20,
1995 without giving effect to any other amendment, waiver or other modification
of the Credit Agreement unless the Company shall have obtained the written
consent of the Required Holder(s) to any such amendment, waiver or
modification. No termination of the Credit Agreement in whole or in part shall
affect the continued applicability of the sections of the Credit Agreement
referred to herein.
SECTION 3. REPRESENTATION AND WARRANTY. The Company hereby
represents and warrants that this letter is a legally valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to creditors' rights generally or general principles of equity.
SECTION 4. CONDITIONS PRECEDENT. This letter shall become
effective only on the first date on which all of the following conditions
precedent shall have been satisfied:
(i) Prudential shall have received a duly executed counterpart of
this letter signed by the Company; and
<PAGE> 3
The Lincoln Electric Company
December 20, 1995
Page 3
(ii) Prudential shall have received a copy of the duly executed
Credit Agreement which Credit Agreement shall be in full force
and effect.
SECTION 5. GOVERNING LAW. This letter amendment shall be
governed by the internal laws and decisions of the State of Ohio.
[This space intentionally left blank]
<PAGE> 4
The Lincoln Electric Company
December 20, 1995
Page 4
SECTION 6. MISCELLANEOUS. Except as specifically set forth in
this letter, the Company's obligations under the Note Agreement and the Note
are neither altered nor amended, and all terms and conditions of the Note
Agreement and the Note remain in full force and effect. Upon the effectiveness
of this letter, each reference to the Note Agreement and the Note shall mean
and be a reference to the Note Agreement and the Note as amended by this
letter. This letter may be executed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement.
Sincerely,
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Leonard H. Lillard
----------------------------
Vice President
Acknowledged and Agreed:
THE LINCOLN ELECTRIC COMPANY
By: /s/ Donald F. Hastings
---------------------------------
Its: Chairman and
Chief Executive Officer
By: /s/ H. Jay Elliott
---------------------------------
Its: Vice President, Chief Financial Officer
and Treasurer
<PAGE> 1
[EXECUTION COPY]
EXHIBIT 4B
$200,000,000
CREDIT AGREEMENT
dated as of
December 20, 1995
among
The Lincoln Electric Company,
The Banks Listed Herein
and
Society National Bank,
as Agent
<PAGE> 2
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS
<S> <C> <C>
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.03. Types of Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.02. Notice of Committed Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.03. Notice to Banks; Funding of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.04. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.07. Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.08. Optional Termination or Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.09. Mandatory Termination or Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.10. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.11. General Provisions as to Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.12. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.13. Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.14. Alternative Currency Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.15. Money Market Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.16. Withholding Tax Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.17. Judgment Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.18. Foreign Withholding Taxes and Other Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.19. Maximum Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.20. Extension of Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
__________________________________
*The Table of Contents is not a part of this Agreement.
i
<PAGE> 3
ARTICLE III
CONDITIONS
<TABLE>
<S> <C> <C>
SECTION 3.01. Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.02. Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 3.03. First Borrowing by Each Eligible Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.02. Corporate and Governmental Authorization; No Contravention . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.03. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.04. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.05. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.06. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.07. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.08. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.09. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 4.10. Not an Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 4.11. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE V
COVENANTS
SECTION 5.01. Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 5.02. Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 5.03. Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.04. Conduct of Business and Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.05. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.06. Inspection of Property, Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.07. Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.08. Funded Debt to Capital Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.09. Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.10. Consolidations, Mergers and Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.11. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION> Page
------
ARTICLE VI
DEFAULTS
<S> <C> <C>
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.02. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.02. Agent and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.03. Action by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.04. Consultation with Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.05. Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.06. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.07. Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.08. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.09. Agent's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair . . . . . . . . . . . . . . . . . . . . 57
SECTION 8.02. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 8.03. Increased Cost and Reduced Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate Loans . . . . . . . . . . . . . . . . . . . . 60
SECTION 8.05. HLT Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE IX
REPRESENTATIONS AND WARRANTIES
OF ELIGIBLE SUBSIDIARIES
SECTION 9.01. Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 9.02. Corporate and Governmental Authorization; Contravention . . . . . . . . . . . . . . . . . . . . . 62
SECTION 9.03. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 9.04. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
ARTICLE X
GUARANTY
<S> <C> <C>
SECTION 10.01. The Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 10.02. Guaranty Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 10.03. Discharge Only Upon Payment In Full; Reinstatement In Certain Circumstances . . . . . . . . . . . 64
SECTION 10.04. Waiver by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 10.05. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 10.06. Stay of Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 11.02. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 11.03. Expenses; Documentary Taxes; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 11.04. Sharing of Set-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 11.05. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 11.06. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 11.07. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 11.08. Governing Law; Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 11.09. Counterparts; Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 11.10. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 11.11. Existing Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 11.12. Eligible Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
</TABLE>
iv
<PAGE> 6
Exhibit A - Note
Exhibit B - Form of Alternative Currency Quote Request
Exhibit C - Form of Invitation for Alternative Currency
Quote
Exhibit D - Form of Alternative Currency Quote
Exhibit E - Opinion of Frederick G. Stueber, Senior Vice
President and General Counsel for the Company
Exhibit F - Opinion of Davis Polk & Wardwell, Special
Counsel for the Agent
Exhibit G - Form of Election to Participate
Exhibit H - Form of Election to Terminate
Exhibit I-1 - Opinion of Counsel for the Borrower
(Borrowings by Eligible Subsidiaries)
Exhibit I-2 - Opinion of Counsel for the Company
(Borrowings by Eligible Subsidiaries)
Exhibit J - Assignment and Assumption Agreement
Exhibit K - Extension Agreement
Exhibit L - Form of Money Market Quote Request
Exhibit M - Form of Invitation for Money Market Quotes
Exhibit N - Form of Money Market Quote
v
<PAGE> 7
CREDIT AGREEMENT
AGREEMENT dated as of December 20, 1995 among THE LINCOLN ELECTRIC
COMPANY, the BANKS listed on the signature pages hereof and SOCIETY NATIONAL
BANK, as Agent.
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. The following terms, as used herein,
have the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market
Quotes setting forth Money Market Absolute Rates pursuant to Section 2.15.
"Adjusted CD Rate" has the meaning set forth in Section 2.06(b).
"Adjusted London Interbank Offered Rate" has the meaning set forth
in Section 2.06(c).
"Administrative Questionnaire" means, with respect to each Bank,
an administrative questionnaire in the form prepared by the Agent and submitted
to the Agent (with a copy to the Company) duly completed by such Bank.
"Agent" means Society National Bank in its capacity as agent for
the Banks hereunder, and its successors in such capacity.
"Alternative Currency" means any currency other than Dollars which
is freely transferable and convertible into Dollars.
"Alternative Currency Advance" means an advance made by a Bank to
any Borrower in an Alternative Currency pursuant to Section 2.14.
"Alternative Currency Advance Report" has the meaning set forth in
Section 2.14(f).
<PAGE> 8
"Alternative Currency Lending Office" means, as to each Bank with
respect to each Alternative Currency Advance made by such Bank, its office,
branch or affiliate identified in the Alternative Currency Quote relating to
such Alternative Currency Advance as its Alternative Currency Lending Office,
or such other office, branch or affiliate as such Bank may thereafter designate
as its Alternative Currency Lending Office by notice to the Company and the
Agent.
"Alternative Currency Outstandings" means at any time an amount
equal to the aggregate Dollar Equivalents of all Alternative Currency Advances
outstanding at such time.
"Alternative Currency Quote" means an offer by a Bank to make an
Alternative Currency Advance in accordance with Section 2.14.
"Applicable Alternative Currency Business Day" means, with respect
to any Alternative Currency Advance, a Euro-Dollar Business Day on which
commercial banks are open for international business (including the clearing of
currency transfers in the Alternative Currency of such Alternative Currency
Advance) in the principal financial center of the home country of such
Alternative Currency.
"Applicable Interest Coverage Ratio" means, on any day, the ratio
of EBIT to Consolidated Interest Expense for the period of four fiscal quarters
of the Company most recently ended prior to such day for which the Company has
delivered financial statements pursuant to Section 5.01(a) or 5.01(b), as the
case may be.
"Applicable Lending Office" means, with respect to any Bank, (i)
in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the
case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the
case of its Alternative Currency Advances, its Alternative Currency Advance
Lending Office and (iv) in the case of its Money Market Loans, its Money Market
Lending Office.
"Assessment Rate" has the meaning set forth in Section 2.06(b).
"Assignee" has the meaning set forth in Section 11.06(c).
"Bank" means each institution listed on the signature pages
hereof, each Assignee which becomes a Bank pursuant to Section 11.06(c), and
their respective successors.
2
<PAGE> 9
"Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus
the Federal Funds Rate for such day.
"Base Rate Loan" means a Loan to be made by a Bank as a Base Rate
Loan in accordance with the applicable Notice of Committed Borrowing or
pursuant to Article VIII.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrower" means the Company or any Eligible Subsidiary, as the
context may require, and their respective successors, and "Borrowers" means all
of the foregoing.
"Borrowing" has the meaning set forth in Section 1.03.
"CD Base Rate" has the meaning set forth in Section 2.06(b).
"CD Loan" means a Loan to be made by a Bank as a CD Loan in
accordance with the applicable Notice of Committed Borrowing.
"CD Margin" has the meaning set forth in Section 2.06(b).
"CD Reference Banks" means Morgan Guaranty Trust Company of New
York and Society National Bank.
"Commitment" means, with respect to each Bank, the amount set
forth opposite the name of such Bank on the signature pages hereof, as such
amount may be reduced from time to time pursuant to Section 2.08.
"Committed Loan" means a loan made by a Bank pursuant to Section
2.01.
"Company" means The Lincoln Electric Company, an Ohio corporation,
and its successors.
"Company's 1994 Form 10-K" means the Company's annual report on
Form 10-K for 1994, as filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934.
3
<PAGE> 10
"Consolidated Interest Expense" means, for any period, the sum of
(i) the interest expense of the Company and its Consolidated Subsidiaries and
(ii) with respect of any Receivables Financing which constitutes Debt solely by
virtue of clause (vi) of the definition of Debt, interest-equivalent financing
charges, in each case determined on a consolidated basis for such period.
"Consolidated Subsidiary" means at any date any Subsidiary or
other entity the accounts of which would be consolidated with those of the
Company in its consolidated financial statements if such statements were
prepared as of such date.
"Consolidated Tangible Net Worth" means at any date the
consolidated stockholders' equity (excluding the cumulative foreign currency
translation adjustment) of the Company and its Consolidated Subsidiaries MINUS
their consolidated Intangible Assets, all determined as of such date. For
purposes of this definition "Intangible Assets" means the amount (to the extent
reflected in determining such consolidated stockholders' equity) of (i) all
write-ups (other than write-ups resulting from foreign currency translations
and write-ups of assets of a going concern business made within twelve months
after the acquisition of such business) subsequent to September 30, 1995 in the
book value of any asset owned by the Company or a Consolidated Subsidiary, (ii)
all Investments in unconsolidated Subsidiaries and all equity investments in
Persons which are not Subsidiaries and (iii) all unamortized debt discount and
expense, unamortized deferred charges, goodwill, patents, trademarks, service
marks, trade names, anticipated future benefit of tax loss carry-forwards,
copyrights, organization or developmental expenses and other intangible assets.
"Debt" of any Person means at any date, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee which are
capitalized in accordance with generally accepted accounting principles, (v)
all non-contingent obligations of such Person to reimburse any bank or other
Person in respect of amounts paid under a letter of credit or similar
instrument, (vi) any Receivables Financing entered into by such Person as
transferor, (vii) all Debt secured by a Lien on any asset of such Person,
whether or not such Debt is otherwise an obligation of such Person, and (viii)
all Debt of others
4
<PAGE> 11
Guaranteed by such Person. The aggregate amount of Debt described in clause
(vi) of this definition at any time shall be the aggregate Receivables
Financing Amount with respect to such Debt at such time.
"Default" means any condition or event which constitutes an Event
of Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Dollar Equivalent" means in respect of any Alternative Currency
Advance the amount of Dollars that would be obtained by converting the
outstanding amount of currency of such Alternative Currency Advance, as
specified in the then most recent Alternative Currency Advance Report in
respect of such Alternative Currency Advance, into Dollars at the spot rate for
the purchase of Dollars with such currency as quoted by Society National Bank
at approximately 9:00 A.M. (Cleveland, Ohio time) on the second Applicable
Alternative Currency Business Day prior to the date of such Alternative
Currency Advance Report.
"Dollars" and the sign "$" mean lawful money of the United States
of America.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City or Cleveland, Ohio, are
authorized by law to close.
"Domestic Lending Office" means, as to each Bank, its office
located at its address set forth in its Administrative Questionnaire (or
identified in its Administrative Questionnaire as its Domestic Lending Office)
or such other office as such Bank may hereafter designate as its Domestic
Lending Office by notice to the Company and the Agent; PROVIDED that any Bank
may so designate separate Domestic Lending Offices for its Base Rate Loans, on
the one hand, and its CD Loans, on the other hand, in which case all references
herein to the Domestic Lending Office of such Bank shall be deemed to refer to
either or both of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section
2.06(b).
"EBIT" means, for any period, the sum of (i) the consolidated net
income of the Company and its Consolidated
5
<PAGE> 12
Subsidiaries for such period PLUS (ii) to the extent deducted in determining
such consolidated net income, (A) Consolidated Interest Expense, (B)
consolidated income taxes, and (C) for any fiscal quarter ending on or before
December 31, 1994, redundancy costs and other non-recurring charges.
"Effective Date" means the date of effectiveness of this
Agreement, determined in accordance with Section 3.01.
"Election to Participate" means an Election to Participate
substantially in the form of Exhibit G hereto.
"Election to Terminate" means an Election to Terminate
substantially in the form of Exhibit H hereto.
"Eligible Subsidiary" means any Wholly-Owned Consolidated
Subsidiary of the Company as to which an Election to Participate shall have
been delivered to the Agent and as to which an Election to Terminate shall not
have been delivered to the Agent. Each such Election to Participate and
Election to Terminate shall be duly executed on behalf of such Wholly-Owned
Consolidated Subsidiary and the Company in such number of copies as the Agent
may request. The delivery of an Election to Terminate shall not affect any
obligation of an Eligible Subsidiary theretofore incurred. The Agent shall
promptly give notice to the Banks of the receipt of any Election to Participate
or Election to Terminate.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating
to the environment, the effect of the environment on human health or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into the environment including, without limitation,
ambient air, surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, or any successor statute.
6
<PAGE> 13
"ERISA Group" means the Company, any Subsidiary and all members of
a controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Company or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on
which commercial banks are open for international business (including dealings
in Dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Company and the Agent.
"Euro-Dollar Loan" means a Loan to be made by a Bank as a
Euro-Dollar Loan in accordance with the applicable Notice of Committed
Borrowing.
"Euro-Dollar Margin" has the meaning set forth in Section 2.06(c).
"Euro-Dollar Reference Banks" means the principal London offices
of Morgan Guaranty Trust Company of New York and Dresdner Bank and the Cayman
Islands office of Society National Bank.
"Euro-Dollar Reserve Percentage" has the meaning set forth in
Section 2.06(c).
"Event of Default" has the meaning set forth in Section 6.01.
"Existing Credit Agreement" means the Credit Agreement dated as of
March 18, 1993 among the Company, the banks party thereto and Society National
Bank, as agent, as in effect immediately prior to the effectiveness of this
Agreement.
"Facility Fee Rate" has the meaning set forth in Section 2.07.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the
7
<PAGE> 14
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, PROVIDED that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Society National Bank on such day on
such transactions as determined by the Agent.
"Fixed Rate Loans" means CD Loans, Euro-Dollar Loans, Alternative
Currency Advances or Money Market Loans (excluding Money Market LIBOR Loans
bearing interest at the Base Rate pursuant to Section 8.01(a)) or any
combination of the foregoing.
"Funded Debt" means at any date the Debt of the Company and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"Funded Debt to Capital Ratio" means, at any date, the ratio of
(i) Funded Debt at such date to (ii) the sum of (A) Funded Debt at such date
PLUS (B) the stockholders' equity of the Company and its Consolidated
Subsidiaries at such date determined on a consolidated basis.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in
any other manner the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part), PROVIDED that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Hazardous Substances" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives,
by-products and other
8
<PAGE> 15
hydrocarbons, or any substance having any constituent elements displaying any
of the foregoing characteristics.
"Indemnitee" has the meaning set forth in Section 11.03(b).
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending one,
two, three or six months thereafter, as the Borrower may elect in the
applicable Notice of Committed Borrowing; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(2) with respect to each CD Borrowing, the period commencing on
the date of such Borrowing and ending 30, 60, 90 or 180 days thereafter, as
the Borrower may elect in the applicable Notice of Committed Borrowing;
PROVIDED that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(3) with respect to each Base Rate Borrowing, the period
commencing on the date of such Borrowing and ending 30 days thereafter;
PROVIDED that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall
9
<PAGE> 16
be extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(4) with respect to each Alternative Currency Advance, the period
commencing on the day of such Alternative Currency Advance and ending on the
date specified by the Borrower in the Alternative Currency Quote Request
relating to such Alternative Currency Advance; PROVIDED that no Interest Period
shall end after the Termination Date.
(5) with respect to each Money Market LIBOR Borrowing, the period
commencing on the date of such Borrowing and ending such whole number of months
thereafter as the Borrower may elect in accordance with Section 2.15; PROVIDED
that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(6) with respect to each Money Market Absolute Rate Borrowing,
the period commencing on the date of such Borrowing and ending on such number
of days thereafter (but not less than 30 days) as the Borrower may elect in
accordance with Section 2.15; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
10
<PAGE> 17
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended, or any successor statute.
"Investment" means any investment in any Person, whether by means
of share purchase, capital contribution, loan, time deposit or otherwise.
"Level I Pricing" exists on any day if (i) the Applicable Interest
Coverage Ratio for such day is greater than or equal to 5.0 to 1 AND (ii) the
Applicable Interest Coverage Ratio on four consecutive days (I.E., with respect
to four consecutive periods of four fiscal quarters) is or has been greater
than or equal to 5.0 to 1. The days on which the Applicable Interest Coverage
Ratio shall be measured for purposes of clause (ii) of the immediately
preceding sentence shall be the date on which delivery of financial statements
pursuant to Section 5.01(b) is required for the fiscal quarter ended September
30, 1995 and each day after the Effective Date on which the Company has
delivered financial statements as required pursuant to Section 5.01(a) or
5.01(b), as the case may be. For example, the Borrower will qualify for Level I
Pricing if the Applicable Interest Coverage Ratio with respect to each of
September 30, 1995, December 31, 1995, March 31, 1996 and June 30, 1996 is
greater than or equal to 5.0 to 1. Once Borrower qualifies for Level I Pricing,
Level IA Pricing shall be eliminated.
"Level IA Pricing" exists on any day if the Applicable Interest
Coverage Ratio for such day is greater than or equal to 5.0 to 1 and Level I
Pricing does not exist on such day. Once Borrower qualifies for Level I
Pricing, Level IA Pricing shall be eliminated.
"Level II Pricing" exists on any day if the Applicable Interest
Coverage Ratio for such day is greater than or equal to 4.0 to 1 but less than
5.0 to 1.
"Level III Pricing" exists on any day if none of Level I Pricing,
Level IA Pricing nor Level II Pricing exists on such day.
"LIBOR Auction" means a solicitation of Money Market Quotes
setting forth Money Market Margins based on the London Interbank Offered Rate
pursuant to Section 2.15.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or
11
<PAGE> 18
encumbrance of any kind, or any other type of preferential arrangement that has
the practical effect of creating a security interest, in respect of such asset.
For the purposes of this Agreement, the Company or any Subsidiary shall be
deemed to own subject to a Lien any asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan or an
Alternative Currency Advance or a Money Market Loan and "Loans" means Domestic
Loans or Euro-Dollar Loans or Alternative Currency Advances or Money Market
Loans or any combination of the foregoing.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.06(c).
"Material Debt" means Debt (other than the Notes) of the Company
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, in an aggregate principal amount exceeding $5,000,000.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $1,000,000.
"Money Market Absolute Rate" has the meaning set forth in Section
2.15(d).
"Money Market Absolute Rate Loan" means a loan to be made by a
Bank pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the Company
and the Agent; PROVIDED that any Bank may from time to time by notice to the
Company and the Agent designate separate Money Market Lending Offices for its
Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate
Loans, on the other hand, in which case all references herein to the Money
Market Lending Office of such Bank shall be deemed to refer to either or both
of such offices, as the context may require.
"Money Market LIBOR Loan" means a loan to be made pursuant to a
LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant
to Section 8.01(a)).
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<PAGE> 19
"Money Market Loan" means a Money Market LIBOR Loan or a Money
Market Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section
2.15(d).
"Money Market Quote" means an offer by a Bank to make a Money
Market Loan in accordance with Section 2.15.
"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
"Notes" means promissory notes of a Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of such Borrower to repay
the Loans made to it, and "Note" means any one of such promissory notes issued
hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as
defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in
Section 2.15).
"Original Credit Agreement" has the meaning set forth in the first
WHEREAS clause.
"Parent" means, with respect to any Bank, any Person controlling
such Bank.
"Participant" has the meaning set forth in Section 11.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Internal Revenue Code
and either (i) is maintained, or contributed to, by any
13
<PAGE> 20
member of the ERISA Group for employees of any member of the ERISA Group or
(ii) has at any time within the preceding five years been maintained, or
contributed to, by any Person which was at such time a member of the ERISA
Group for employees of any Person which was at such time a member of the ERISA
Group.
"Prime Rate" means the rate of interest established from time to
time by Society National Bank in Cleveland, Ohio as its Prime Rate, whether or
not such rate is publicly announced; the Prime Rate may not be the lowest
interest rate charged by Society National Bank for commercial or other
extensions of credit.
"Receivables" means all accounts, contract rights, chattel paper,
instruments, general intangibles and other rights to payment arising out of a
sale or lease of goods or the rendering of services by the Company or any of
its Subsidiaries.
"Receivables Financing" means any transaction involving the
transfer (by way of sale, pledge or otherwise) by the Company or any of its
Subsidiaries of Receivables (or interest therein) and associated assets to any
Person other than the Company or any of its Subsidiaries (other than any such
transfer in bulk as part of a sale of a line or division of business).
"Receivables Financing Amount" means, at any time, (i) with
respect to any Receivables Financing that constitutes Debt (other than solely
pursuant to clause (vi) of the definition of Debt), the outstanding principal
amount thereof at such time and (ii) with respect to any Receivables Financing
that constitutes Debt solely pursuant to clause (vi) of the definition of Debt,
the amount of the proceeds received by the transferor to the extent the
transferee is entitled at such time to the recovery of such amount out of the
proceeds of the assets transferred.
"Reference Banks" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "Reference Bank" means any one
of such Reference Banks.
"Refunding Borrowing" means a Borrowing which, after application
of the proceeds thereof, results in no net increase in the outstanding
principal amount of Loans made by any Bank to any Borrower.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
14
<PAGE> 21
"Required Banks" means at any time Banks having at least 66 2/3%
of the aggregate amount of the Commitments or, if the Commitments shall have
been terminated, holding Notes evidencing at least 66 2/3% of the aggregate
unpaid principal amount of the Loans.
"Significant Subsidiary" means a "significant subsidiary" within
the meaning of Rule 1-02 of Regulation S-X promulgated by the Securities and
Exchange Commission.
"Subsidiary" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by the Company.
"Termination Date" means December 20, 2000 or such later date to
which the Commitments shall have been extended pursuant to Section 2.20 or, if
any such day is not a Euro-Dollar Business Day, the next succeeding Euro-Dollar
Business Day unless such succeeding Euro-Dollar Business Day falls in another
calendar month, in which case the Termination Date shall be the next preceding
Euro-Dollar Business Day.
"Unfunded Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the value of all benefit liabilities
under such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such liabilities under Title
IV of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA
Group to the PBGC or any other Person under Title IV of ERISA.
"Wholly-Owned Consolidated Subsidiary" means any Consolidated
Subsidiary all of the shares of capital stock or other ownership interests of
which (except (i) all nominal and directors qualifying shares, (ii) shares of
such Consolidated Subsidiary owned by any Person who is or was a director, an
officer, an employee or is related by blood or marriage to any of the foregoing
PROVIDED that, the number of shares excepted pursuant to this clause (ii) shall
not exceed at any time in the aggregate 10% of the capital stock or other
ownership interests of such Consolidated Subsidiary, and (iii) with respect to
Messer-Lincoln GmbH, shares of Messer-Lincoln GmbH owned by Hans Messer or
15
<PAGE> 22
Messer-Griesheim GmbH) are at the time directly or indirectly owned by the
Company.
SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from time
to time, applied on a basis consistent (except for changes concurred in by the
Company's independent public accountants) with the most recent audited
consolidated financial statements of the Company and its Consolidated
Subsidiaries delivered to the Banks; PROVIDED that, if the Company notifies the
Agent that the Company wishes to amend any covenant in Article V to eliminate
the effect of any change in generally accepted accounting principles on the
operation of such covenant (or if the Agent notifies the Company that the
Required Banks wish to amend Article V for such purpose), then, with the
consent of the Required Banks, the Company's compliance with such covenant
shall be determined on the basis of generally accepted accounting principles in
effect immediately before the relevant change in generally accepted accounting
principles became effective, until either such notice is withdrawn or such
covenant is amended in a manner satisfactory to the Company and the Required
Banks.
SECTION 1.03. TYPES OF BORROWINGS. The term "Borrowing" denotes
the aggregation of Loans of one or more Banks to be made to a single Borrower
pursuant to Article II on a single date, for a single Interest Period and, if
applicable, in a single Alternative Currency. Borrowings are classified for
purposes of this Agreement by reference to the pricing of Loans comprising such
Borrowing (E.G., a "Euro-Dollar Borrowing" is a Borrowing comprised of
Euro-Dollar Loans) or by reference to the provisions of Article II under which
participation therein is determined (I.E., a "Committed Borrowing" is a
Borrowing under Section 2.01 in which all Banks participate in proportion to
their Commitments, while an "Alternative Currency Borrowing" is a Borrowing
under Section 2.14 in which the Bank participants are determined by the
Borrower on the basis of their bids in accordance therewith and a "Money Market
Borrowing" is a Borrowing under Section 2.15 in which the Bank participants are
determined by the Borrower on the basis of their bids in accordance therewith)
or by reference to both.
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<PAGE> 23
ARTICLE II
THE CREDITS
SECTION 2.01. COMMITMENTS TO LEND. Each Bank severally agrees,
on the terms and conditions set forth in this Agreement, to make loans in
Dollars to any Borrower from time to time in amounts such that the aggregate
principal amount of Committed Loans by such Bank at any one time outstanding to
all Borrowers shall not exceed the amount of its Commitment. Each Borrowing
under this Section 2.01 shall be in an aggregate principal amount of $5,000,000
or any larger multiple of $1,000,000 (except that any such Borrowing may be in
the aggregate amount available in accordance with Section 3.02(c)) and shall be
made from the several Banks ratably in proportion to their respective
Commitments. Within the foregoing limits, a Borrower may borrow, repay, or, to
the extent permitted by Section 2.10, prepay Loans and reborrow at any time.
SECTION 2.02. NOTICE OF COMMITTED BORROWING. The relevant
Borrower shall give the Agent notice (a "Notice of Committed Borrowing") not
later than 10:00 A.M. (Cleveland, Ohio time) on (x) the date of each Base Rate
Borrowing, (y) the second Domestic Business Day before each CD Borrowing and
(z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing,
specifying:
(i) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business
Day in the case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are to be CD
Loans, Base Rate Loans or Euro-Dollar Loans, and
(iv) in the case of a Committed Fixed Rate Borrowing, the
duration of the Interest Period applicable thereto, subject to the
provisions of the definition of Interest Period.
Notwithstanding the foregoing, no more than ten Committed Fixed
Rate Borrowings shall be outstanding at any one time, and any Borrowing that
would exceed such limitation shall be made as a Base Rate Borrowing.
17
<PAGE> 24
SECTION 2.03. NOTICE TO BANKS; FUNDING OF LOANS. (a) Upon
receipt of a Notice of Committed Borrowing, the Agent shall promptly notify
each Bank of the contents thereof and of such Bank's share of such Committed
Borrowing and such Notice of Committed Borrowing shall not thereafter be
revocable by any Borrower.
(b) Not later than 12:00 Noon (Cleveland, Ohio time) on the date
of each Committed Borrowing, each Bank shall (except as provided in subsection
(c) of this Section) make available its share of such Committed Borrowing, in
Federal or other funds immediately available in Cleveland, Ohio, to the Agent
at its address referred to in Section 11.01. Unless the Agent determines that
any applicable condition specified in Article III has not been satisfied, the
Agent will make the funds so received from the Banks available to the relevant
Borrower at the Agent's aforesaid address.
(c) If any Bank makes a new Committed Loan hereunder to a
Borrower on a day on which such Borrower is to repay all or any part of an
outstanding Loan from such Bank, such Bank shall apply the proceeds of its new
Committed Loan to make such repayment and only an amount equal to the
difference (if any) between the amount being borrowed by such Borrower and the
amount being repaid shall be made available by such Bank to the Agent as
provided in subsection (b) of this Section, or remitted by such Borrower to the
Agent as provided in Section 2.11, as the case may be.
(d) Unless the Agent shall have received notice from a Bank prior
to 12:00 Noon (Cleveland, Ohio time) on the date of any Committed Borrowing
that such Bank will not make available to the Agent such Bank's share of such
Committed Borrowing, the Agent may assume that such Bank has made such share
available to the Agent on the date of such Committed Borrowing in accordance
with subsections (b) and (c) of this Section 2.03 and the Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so
made such share available to the Agent, such Bank and the relevant Borrower
severally agree to repay to the Agent forthwith on demand such corresponding
amount, together with interest thereon, for each day from the date such amount
is made available to the Borrower until the date such amount is repaid to the
Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher
of the Federal Funds Rate and the interest rate applicable thereto pursuant to
Section 2.06 and (ii) in the case of such Bank,
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<PAGE> 25
the Federal Funds Rate. If such Bank shall repay to the Agent such
corresponding amount, such amount so repaid shall constitute such Bank's
Committed Loan included in such Borrowing for purposes of this Agreement.
SECTION 2.04. NOTES. (a) The Loans of each Bank to each
Borrower shall be evidenced by a single Note of such Borrower payable to the
order of such Bank for the account of its Applicable Lending Office in an
amount equal to the aggregate unpaid principal amount of such Bank's Loans to
such Borrower.
(b) Each Bank may, by notice to a Borrower and the Agent, request
that its Loans of a particular type to such Borrower be evidenced by a separate
Note of such Borrower in an amount equal to the aggregate unpaid principal
amount of such Loans. Each such Note shall be in substantially the form of
Exhibit A hereto with appropriate modifications to reflect the fact that it
evidences solely Loans of the relevant type. Each reference in this Agreement
to a "Note" or the "Notes" of such Bank shall be deemed to refer to and include
any or all of such Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(b)
or 3.03(a), the Agent shall mail such Note to such Bank. Each Bank shall
record the date, amount, type, Alternative Currency (if applicable) and
maturity of each Loan made by it to each Borrower and the date and amount of
each payment of principal made with respect thereto, and prior to any transfer
of its Note of any Borrower shall endorse on the schedule forming a part
thereof appropriate notations to evidence the foregoing information with
respect to each such Loan to such Borrower then outstanding; PROVIDED that the
failure of any Bank to make any such recordation or endorsement shall not
affect the obligations of any Borrower hereunder or under the Notes. Each Bank
is hereby irrevocably authorized by each Borrower so to endorse its Notes and
to attach to and make a part of any Note a continuation of any such schedule as
and when required.
SECTION 2.05. MATURITY OF LOANS. Each Loan included in any
Borrowing shall mature, and the principal amount thereof shall be due and
payable, on the last day of the Interest Period applicable to such Borrowing.
SECTION 2.06. INTEREST RATES. (a) Each Base Rate Loan shall
bear interest on the outstanding principal amount thereof, for each day from
the date such Loan is made until it becomes due, at a rate per annum equal to
the Base
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<PAGE> 26
Rate for such day. Such interest shall be payable for each Interest Period on
the last day thereof. Any overdue principal of or interest on any Base Rate
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 2% plus the rate otherwise applicable to Base
Rate Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for each day of the Interest Period applicable thereto, at a
rate per annum equal to the sum of the CD Margin for the first day of such
Interest Period plus the applicable Adjusted CD Rate. Such interest shall be
payable for each Interest Period on the last day thereof and, if such Interest
Period is longer than 90 days, at intervals of 90 days after the first day
thereof. Any overdue principal of or interest on any CD Loan shall bear
interest, payable on demand, for each day until paid at a rate per annum equal
to the sum of 2% plus the higher of (i) the sum of the CD Margin for such day
plus the Adjusted CD Rate applicable to such Loan and (ii) the rate applicable
to Base Rate Loans for such day.
"CD Margin" means for any day the percentage set forth below in
the applicable row under the column corresponding to the "Pricing Level" that
exists on such day:
<TABLE>
<CAPTION>
Level I IA II III
<S> <C> <C> <C> <C>
CD Margin .325% .350% .375% .425%
</TABLE>
; PROVIDED that (A) if the Company shall fail to timely deliver the information
required to be delivered by it pursuant to Section 5.01(a) or Section 5.01(b),
as the case may be (and such failure shall not have been waived by the Required
Banks in accordance with Section 11.05), Level III Pricing shall apply for each
day from and including the day on which such information is required to be
delivered to but excluding the day on which such information is delivered and
(B) the effective date of any increase or decrease in the CD Margin (other than
any increase pursuant to clause (A) of this proviso) shall be the fifth
Domestic Business Day after the Company shall have delivered financial
statements pursuant to Section 5.01(a) or 5.01(b), as the case may be, on the
basis of which statements any such increase or decrease is calculated.
The "Adjusted CD Rate" applicable to any Interest Period means a
rate per annum determined pursuant to the following formula:
20
<PAGE> 27
<TABLE>
<S> <C> <C>
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
</TABLE>
__________
* The amount in brackets being rounded upward, if
necessary, to the next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate
of interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum
bid at 10:00 A.M. (Cleveland, Ohio time) (or as soon thereafter as practicable)
on the first day of such Interest Period by two or more New York certificate of
deposit dealers of recognized standing for the purchase at face value from each
CD Reference Bank of its certificates of deposit in an amount comparable to the
principal amount of the CD Loan of such CD Reference Bank to which such
Interest Period applies and having a maturity comparable to such Interest
Period.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation, any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of new non-personal time deposits in dollars in New York City having a
maturity comparable to the related Interest Period and in an amount of $100,000
or more. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. Section 327.4(a) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the
United States. The Adjusted CD Rate shall be adjusted
21
<PAGE> 28
automatically on and as of the effective date of any change in the Assessment
Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day of the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for the
first day of such Interest Period plus the applicable Adjusted London Interbank
Offered Rate. Such interest shall be payable for each Interest Period on the
last day thereof and, if such Interest Period is longer than three months, at
intervals of three months after the first day thereof.
"Euro-Dollar Margin" means for any day the percentage set forth
below in the applicable row under the column corresponding to the "Pricing
Level" that exists on such day:
<TABLE>
<CAPTION>
Level I IA II III
<S> <C> <C> <C> <C>
Euro-Dollar Margin .20% .225% .25% .30%
</TABLE>
; PROVIDED that (A) if the Company shall fail to timely deliver the information
required to be delivered by it pursuant to Section 5.01(a) or Section 5.01(b),
as the case may be (and such failure shall not have been waived by the Required
Banks in accordance with Section 11.05), Level III Pricing shall apply for each
day from and including the day on which such information is required to be
delivered to but excluding the day on which such information is delivered and
(B) the effective date of any increase or decrease in the Euro-Dollar Margin
(other than any increase pursuant to clause (A) of this proviso) shall be the
fifth Domestic Business Day after the Company shall have delivered financial
statements pursuant to Section 5.01(a) or 5.01(b), as the case may be, on the
basis of which statements any such increase or decrease is calculated.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the
applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar
Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Interest
Period means the average (rounded upward, if necessary, to the next higher 1/16
of 1%) of the respective rates per annum at which deposits in Dollars are
offered to each of the Euro-Dollar Reference Banks in the London
22
<PAGE> 29
interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar
Business Days before the first day of such Interest Period in an amount
approximately equal to the principal amount of the Euro-Dollar Loan of such
Euro-Dollar Reference Bank to which such Interest Period is to apply and for a
period of time comparable to such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of any Bank to
United States residents). The Adjusted London Interbank Offered Rate shall be
adjusted automatically on and as of the effective date of any change in the
Euro-Dollar Reserve Percentage.
(d) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day from and including the
date payment thereof was due to but excluding the date of actual payment, at a
rate per annum equal to the sum of 2% plus the higher of (i) the sum of the
Euro-Dollar Margin for such day plus the Adjusted London Interbank Offered Rate
applicable to such Loan and (ii) the Euro-Dollar Margin for such day plus the
quotient obtained (rounded upward, if necessary, to the next higher 1/100 of
1%) by dividing (x) the average (rounded upward, if necessary, to the next
higher 1/16 of 1%) of the respective rates per annum at which one day (or, if
such amount due remains unpaid more than three Euro-Dollar Business Days, then
for such other period of time not longer than six months as the Agent may
select) deposits in Dollars in an amount approximately equal to such overdue
payment due to each of the Euro-Dollar Reference Banks are offered to such
Euro-Dollar Reference Bank in the London interbank market for the applicable
period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve
Percentage (or, if the circumstances described in clause (a) or (b) of Section
8.01 shall exist, at a rate per annum equal to the sum of 2% plus the rate
applicable to Base Rate Loans for such day).
(e) Subject to Section 8.01(a), each Money Market LIBOR Loan
shall bear interest on the outstanding principal
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<PAGE> 30
amount thereof, for the Interest Period applicable thereto, at a rate per annum
equal to the sum of the London Interbank Offered Rate for such Interest Period
(determined in accordance with Section 2.06(c) as if the related Money Market
LIBOR Borrowing were a Committed Euro-Dollar Borrowing) plus (or minus) the
Money Market Margin quoted by the Bank making such Loan in accordance with
Section 2.15. Each Money Market Absolute Rate Loan shall bear interest on the
outstanding principal amount thereof, for the Interest Period applicable
thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by
the Bank making such Loan in accordance with Section 2.15. Such interest shall
be payable for each Interest Period on the last day thereof and if, such
Interest Period is longer than three months, at intervals of three months after
the first day thereof. Any overdue principal of or interest on any Money
Market Loan shall bear interest, payable on demand, for each day until paid at
a rate per annum equal to the sum of 2% plus the Base Rate for such day.
(f) The Agent shall determine each interest rate applicable to
the Loans hereunder. The Agent shall give prompt notice to the Borrower and
the participating Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated hereby. If any Reference Bank does not
furnish a timely quotation, the Agent shall determine the relevant interest
rate on the basis of the quotation or quotations furnished by the remaining
Reference Bank or Banks or, if none of such quotations is available on a timely
basis, the provisions of Section 8.01 shall apply.
SECTION 2.07. FACILITY FEE. The Company shall pay to the Agent
for the account of the Banks ratably a facility fee at the Facility Fee Rate
(determined daily as described below). Such facility fee shall accrue (i) from
and including the Effective Date to but excluding the Termination Date (or
earlier date of termination of the Commitments in their entirety), on the daily
aggregate amount of the Commitments (whether used or unused) and (ii) from and
including the Termination Date or such earlier date of termination to but
excluding the date the Loans shall be repaid in their entirety, on the daily
aggregate outstanding principal amount of the Loans, and shall be payable
quarterly in arrears on the last day of each March, June, September and
December and on the Termination Date (and, if applicable, such later date of
repayment).
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<PAGE> 31
"Facility Fee Rate" means for any day the percentage set forth
below in the applicable row under the column corresponding to the "Pricing
Level" that exists on such day:
<TABLE>
<CAPTION>
Level I IA II III
<S> <C> <C> <C> <C>
Facility Fee Rate .10% .105% .125% .15%
</TABLE>
SECTION 2.08. OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS.
The Company may, upon at least three Domestic Business Days' notice to the
Agent, (i) terminate the Commitments at any time, if no Loans are outstanding
at such time or (ii) ratably reduce from time to time by an aggregate amount of
$25,000,000 or any larger multiple of $1,000,000, the aggregate amount of the
Commitments in excess of the aggregate outstanding principal amount of the
Loans. If the Commitments are terminated in their entirety, all accrued
facility fees shall be payable on the effective date of such termination.
SECTION 2.09. MANDATORY TERMINATION OR REDUCTION OF COMMITMENTS.
The Commitments shall terminate on the Termination Date, and any Loans then
outstanding (together with accrued interest thereon) shall be due and payable
on such date.
SECTION 2.10. OPTIONAL PREPAYMENTS. (a) The Borrower may (i)
upon at least one Domestic Business Day's notice to the Agent, prepay any Base
Rate Borrowing (or any Money Market Borrowing bearing interest at the Base Rate
pursuant to Section 8.01(a)), (ii) upon three Domestic Business Days' notice to
the Agent, subject to Section 2.12, prepay any CD Borrowing and (iii) upon at
least three Euro-Dollar Business Days' notice to the Agent, subject to Section
2.12, prepay any Euro-Dollar Borrowing, in each case in whole at any time, or
from time to time in part in amounts aggregating $5,000,000 or any larger
multiple of $1,000,000, by paying the principal amount to be prepaid together
with accrued interest thereon to the date of prepayment. Each such optional
prepayment shall be applied to prepay ratably the Loans of the several Banks
included in such Borrowing.
(b) Except as provided in clause (i) of Section 2.10(a), no
Borrower may prepay all or any portion of the principal amount of any Money
Market Loan prior to the maturity thereof.
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(c) Upon receipt of a notice of prepayment pursuant to this
Section, the Agent shall promptly notify each Bank of the contents thereof and
of such Bank's ratable share (if any) of such prepayment and such notice shall
not thereafter be revocable by the Borrower.
SECTION 2.11. GENERAL PROVISIONS AS TO PAYMENTS. (a) The
Borrowers shall make each payment of principal of, and interest on, the
Committed Loans and of fees hereunder, not later than 12:00 Noon (Cleveland,
Ohio time) on the date when due, in Federal or other funds immediately
available in Cleveland, Ohio to the Agent at its address referred to in Section
11.01. The Agent will promptly distribute to each Bank its ratable share of
each such payment received by the Agent for the account of the Banks. Whenever
any payment of principal of, or interest on, the Domestic Loans or of fees
shall be due on a day which is not a Domestic Business Day, the date for
payment thereof shall be extended to the next succeeding Domestic Business Day.
Whenever any payment of principal of, or interest on, the Euro-Dollar Loans
shall be due on a day which is not a Euro-Dollar Business Day, the date for
payment thereof shall be extended to the next succeeding Euro-Dollar Business
Day unless such Euro-Dollar Business Day falls in another calendar month, in
which case the date for payment thereof shall be the next preceding Euro-Dollar
Business Day. Whenever any payment of principal of, or interest on, the Money
Market Loans shall be due on a day which is not a Euro-Dollar Business Day, the
date for payment thereof shall be extended to the next succeeding Euro-Dollar
Business Day unless such Euro-Dollar Business Day falls in another calendar
month, in which case the date for payment thereof shall be the next preceding
Euro-Dollar Business Day. If the date for any payment of principal is extended
by operation of law or otherwise, interest thereon shall be payable for such
extended time.
(b) All payments to be made by any Borrower hereunder or under
the Notes in an Alternative Currency pursuant to Section 2.14 shall be made in
such Alternative Currency in such funds as may then be customary for the
settlement of international transactions in such Alternative Currency for the
account of the relevant Bank, at such time and at such place as shall have been
notified by such Bank to the relevant Borrower by not less than four
Euro-Dollar Business Days' notice prior to the day on which any such payment is
due.
(c) Unless the Agent shall have received notice from a Borrower
prior to the date on which any payment is due from such Borrower to the Banks
hereunder with respect to Committed Loans or any fees hereunder, that such
Borrower
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will not make such payment in full, the Agent may assume that such Borrower has
made such payment in full to the Agent on such date and the Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent
that such Borrower shall not have so made such payment, each Bank shall repay
to the Agent forthwith on demand such amount distributed to such Bank together
with interest thereon, for each day from the date such amount is distributed to
such Bank until the date such Bank repays such amount to the Agent, at the
Federal Funds Rate.
SECTION 2.12. FUNDING LOSSES. If a Borrower makes any payment of
principal with respect to any Fixed Rate Loan (pursuant to Article II, VI or
VIII or otherwise, (except pursuant to Section 2.14(g)) on any day other than
the last day of the Interest Period applicable thereto, or the last day of an
applicable period fixed pursuant to Section 2.06(d), or if a Borrower fails to
borrow or prepay any Fixed Rate Loans after notice has been given to any Bank
in accordance with Section 2.03(a) or 2.10(c), the Company shall reimburse each
Bank within 15 days after demand for any resulting loss or expense incurred by
it (or by an existing or prospective Participant in the related Loan),
including (without limitation) any loss incurred in obtaining, liquidating or
employing deposits from third parties, but excluding loss of margin for the
period after any such payment or failure to borrow, PROVIDED that such Bank
shall have delivered to the Company a certificate as to the amount of such loss
or expense, which certificate shall be conclusive in the absence of manifest
error.
SECTION 2.13. COMPUTATION OF INTEREST AND FEES. Interest based
on the Prime Rate hereunder shall be computed on the basis of a year of 365
days (or 366 days in a leap year) and paid for the actual number of days
elapsed (including the first day but excluding the last day). All other
interest and fees shall be computed on the basis of a year of 360 days and paid
for the actual number of days elapsed (including the first day but excluding
the last day).
SECTION 2.14. ALTERNATIVE CURRENCY ADVANCES.
(a) ALTERNATIVE CURRENCY OPTION. From time to time prior to
the Termination Date any Borrower may, as set forth in this Section, request
the Banks to make offers to make Alternative Currency Advances to such
Borrower. Any Bank may, but shall have no obligation to, make such offers, and
such Borrower may, but shall have no obligation to, accept any such offers in
the manner set forth in this
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Section; PROVIDED that no Borrower may accept any offer if, after giving effect
to the Alternative Currency Advance to be made pursuant to such offer and any
other outstanding accepted offers, the Alternative Currency Outstandings would
exceed 40% of the aggregate Commitments at such time.
(b) ALTERNATIVE CURRENCY QUOTE REQUEST. When any Borrower
wishes to request offers to make Alternative Currency Advances under this
Section, it shall transmit to the Agent by telex or facsimile transmission an
Alternative Currency Quote Request substantially in the form of Exhibit B
hereto so as to be received no later than 10:00 A.M. (Cleveland, Ohio time) on
the fifth Applicable Alternative Currency Business Day prior to the date of
borrowing proposed therein of the Alternative Currency Advance requested
therein (or such other time or date as the relevant Borrower and the Agent
shall have mutually agreed and shall have notified to the Banks not later than
the date of the Alternative Currency Quote Request for the first Alternative
Currency Advance for which such change is to be effective) specifying:
(i) the proposed date of the Alternative Currency Advance,
which shall be an Applicable Alternative Currency Business Day with respect
to the Alternative Currency in which such Alternative Currency Advance is
requested;
(ii) the Alternative Currency in which such Alternative Currency
Advance is requested;
(iii) the aggregate principal amount of such Alternative Currency
Advance (in such Alternative Currency); and
(iv) the duration of the Interest Period applicable to such
Alternative Currency Advance, subject to the provisions of the definition
of Interest Period.
The relevant Borrower may request offers to make Alternative Currency Advances
with more than one Interest Period and in more than one Alternative Currency in
a single Alternative Currency Quote Request. No Alternative Currency Quote
Request shall be given within five Euro- Dollar Business Days (or such other
number of days as the Company and the Agent may agree) of any other Alternative
Currency Quote Request.
(c) INVITATION FOR ALTERNATIVE CURRENCY QUOTES. Promptly upon
receipt of an Alternative Currency Quote Request, the Agent shall send to the
Banks by telex or
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facsimile transmission an Invitation for Alternative Currency Quotes
substantially in the form of Exhibit C hereto, which shall constitute an
invitation by the relevant Borrower to each Bank to submit to such Borrower
Alternative Currency Quotes offering to make the Alternative Currency Advances
to which such Alternative Currency Quote Request relates in accordance with
this Section.
(d) SUBMISSION AND CONTENTS OF ALTERNATIVE CURRENCY QUOTES.
Each Bank may submit to the Borrower an Alternative Currency Quote containing
an offer or offers to make Alternative Currency Advances in response to an
Invitation for Alternative Currency Quotes. Each Alternative Currency Quote
shall be in substantially the form of Exhibit D hereto and must be submitted to
the relevant Borrower by telex or facsimile transmission at its offices
specified in or pursuant to Section 11.01 not later than 2:00 P.M. (Cleveland,
Ohio time) on the fourth Applicable Alternative Currency Business Day prior to
the proposed date of the Alternative Currency Advance (or such other time or
date as the relevant Borrower and the Agent shall have mutually agreed and
shall have notified to the Banks not later than the date of the Alternative
Currency Quote Request for the first Alternative Currency Advance for which
such change is to be effective).
(e) ACCEPTANCE AND NOTICE BY BORROWER. Not later than 10:00
A.M. (Cleveland, Ohio time) on the third Applicable Alternative Currency
Business Day prior to the proposed date of any Alternative Currency Advance (or
such other time or date as the relevant Borrower and the Agent shall have
mutually agreed and shall have notified to the Banks not later than the date of
the Alternative Currency Request for the first Alternative Currency Advance for
which such change is to be effective), the relevant Borrower shall notify the
Agent and each of the Banks which submitted an Alternative Currency Quote of
its acceptance or non-acceptance of the offers so notified to it pursuant to
subsection (d). In the case of acceptance, such notice shall specify the
aggregate principal amount of offers for each Interest Period and each
Alternative Currency that are accepted. The relevant Borrower may accept any
Alternative Currency Quote in whole or in part; PROVIDED that:
(i) the aggregate principal amount of each may not exceed the
applicable amount set forth in the related Alternative Currency Quote
Request, and
(ii) no Borrower may accept any offer that would cause it to
violate the proviso to subsection (a) above.
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Each Bank whose Alternative Currency Quote has been accepted in whole or in
part by the relevant Borrower shall promptly notify the Agent of such
acceptance.
(f) REPORTS TO AGENT. The Company shall deliver to the Agent
and each of the Banks a report in respect of each Alternative Currency Advance
(an "Alternative Currency Advance Report") (i) on the date on which such
Alternative Currency Advance is made, (ii) on the date on which any principal
amount thereof is repaid, and (iii) on any other date required pursuant to
Section 3.02(b), specifying for such Alternative Currency Advance:
(A) the date such Alternate Currency Advance was or is being
made or on which such amount of principal is repaid;
(B) the Alternative Currency of such Alternate Currency
Advance;
(C) the principal amount of such Alternate Currency Advance or
principal payment (in such Alternative Currency); and
(D) the Dollar Equivalent of the Alternate Currency Advance
then made or remaining after such principal repayment and the Alternative
Currency Outstandings on such date after giving effect to such Alternate
Currency Advance or principal payment.
PROVIDED that, any Alternative Currency Advance Report delivered by the Company
pursuant to clause (iii) need only specify the Alternative Currency
Outstandings on the date of such Alternative Currency Advance Report.
(g) MANDATORY PREPAYMENTS. If on any date the sum of (i) the
aggregate principal amount of the Committed Loans outstanding on such date,
(ii) the Alternative Currency Outstandings on such date and (iii) the aggregate
principal amount of Money Market Loans outstanding on such date exceeds the
aggregate amount of the Commitments, the Borrower shall prepay Alternative
Currency Advances in an aggregate amount equal to such excess. Each such
prepayment shall be with respect to such Alternative Currency Advances as the
Borrower shall designate (or, failing such designation, as determined by the
Agent).
SECTION 2.15. MONEY MARKET BORROWINGS.
(a) THE MONEY MARKET OPTION. From time to time prior to the
Termination Date, any Borrower may, as set
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forth in this Section, request the Banks to make offers to make Money Market
Loans to such Borrower. Any Bank may, but shall have no obligation to, make
such offers and any Borrower may, but shall have no obligation to, accept any
such offers in the manner set forth in this Section; PROVIDED that no Borrower
may accept any offer if, immediately after giving effect to the Money Market
Loan to be made pursuant to such offer and any other outstanding accepted
offers, the aggregate outstanding principal amount of Money Market Loans would
exceed 60% of the aggregate Commitments at such time.
(b) MONEY MARKET QUOTE REQUEST. When any Borrower wishes to
request offers to make Money Market Loans under this Section, it shall transmit
to the Agent by telex or facsimile transmission a Money Market Quote Request
substantially in the form of Exhibit L hereto so as to be received no later
than 10:00 A.M. (Cleveland, Ohio time) on (x) the fifth Euro-Dollar Day prior
to the date of Borrowing proposed therein, in the case of a LIBOR Auction or
(y) the Domestic Business Day next preceding the date of Borrowing proposed
therein, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the relevant Borrower and the Agent shall have mutually
agreed and shall have notified to the Banks not later than the date of the
Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction
for which such change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a
Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic
Business Day in the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$5,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable
thereto, subject to the provisions of the definition of Interest Period,
and
(iv) whether the Money Market Quotes requested are to set forth a
Money Market Margin or a Money Market Absolute Rate.
The relevant Borrower may request offers to make Money Market Loans for more
than one Interest Period in a single Money Market Quote Request. No Money
Market Quote Request shall be given within five Euro-Dollar Business Days (or
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such other number of days as the Company and Agent may agree) of any other
Money Market Quote Request.
(c) INVITATION FOR MONEY MARKET QUOTES. Promptly upon receipt of
a Money Market Quote Request, the Agent shall send to the Banks by telex or
facsimile transmission an Invitation for Money Market Quotes substantially in
the form of Exhibit M hereto, which shall constitute an invitation by the
relevant Borrower to each Bank to submit Money Market Quotes offering to make
the Money Market Loans to which such Money Market Quote relates in accordance
with this Section.
(d) SUBMISSION AND CONTENTS OF MONEY MARKET QUOTES. (i) Each
Bank may submit a Money Market Quote containing an offer or offers to make
Money Market Loans in response to any Invitation for Money Market Quotes. Each
Money Market Quote must comply with the requirements of this subsection (d) and
must be submitted to the Agent by telex or facsimile transmission at its
offices specified in or pursuant to Section 11.01 not later than (x) 2:00 P.M.
(Cleveland, Ohio time) on the fourth Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or by (y) 9:30 A.M.
(Cleveland, Ohio time) in the case of an Absolute Rate Auction (or, in either
case, such other time or date as the relevant Borrower and the Agent shall have
notified to the Banks not later than the date of the Money Market Quote Request
for the first LIBOR Auction or Absolute Rate Auction for which such change is
to be effective); PROVIDED that Money Market Quotes submitted by the Agent (or
any affiliate of the Agent) in the capacity of a Bank may be submitted, and may
only be submitted, if the Agent or such Affiliate notifies the relevant
Borrower of the terms of the offer or offers contained therein not later than
(x) one hour prior to the deadline for the other Banks, in the case of a LIBOR
Auction or (y) 15 minutes prior to the deadline for the other Banks, in the
case of an Absolute Rate Auction. Subject to Articles III and VI, any Money
Market Quote so made shall be irrevocable except with the written consent of
the Agent given on the instructions of the relevant Borrower.
(ii) Each Money Market Quote shall be in substantially the form
of Exhibit N hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which each
offer is being made, which principal amount (w) may be greater than or less
than the
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Commitment of the quoting Bank, (x) must be $5,000,000 or a larger multiple
of $1,000,000, (y) may not exceed the principal amount of Money Market
Loans for which offers were requested and (z) may be subject to an
aggregate limitation as to the principal amount of Money Market Loans for
which offers being made by such quoting Bank may be accepted,
(C) in the case of LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin")
offered for each such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or subtracted
from such base rate,
(D) in the case of an Absolute Base Rate Auction, the rate of
interest per annum (specified to the nearest 1/10,000th of 1%) (the "Money
Market Absolute Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit N
hereto or does not specify all of the information required by subsection
(d)(ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth
in the applicable Invitation for Money Market Quote; or
(D) arrives after the time set forth in subsection (d)(i).
PROVIDED that a Money Market Quote shall not be disregarded pursuant to clause
(B) or (C) above solely because it contains an indication that an allocation
that might otherwise be made to such Bank pursuant to Section 2.15(g) would be
unacceptable.
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(e) NOTICE TO BORROWER. The Agent shall promptly notify the
relevant Borrower of the terms of (x) of any Money Market Quote submitted by a
Bank that is in accordance with subsection (d) and (y) of any Money Market
Quote that amends, modifies or is otherwise inconsistent with a previous Money
Market Quote submitted by such Bank with respect to the same Money Market Quote
Request. Any such subsequent Money Market Quote shall be disregarded by the
Agent unless such subsequent Money Market Quote is submitted solely to correct
a manifest error in such former Money Market Quote. The Agent's notice to the
relevant Borrower shall specify (A) the aggregate principal amount of Money
Market Loans for which offers have been received for each Interest Period
specified in the related Money Market Quote Request, (B) the respective
principal amounts and Money Market Margins or Money Market Absolute Rates, as
the case may be, so offered and (C) if applicable, limitations on the aggregate
principal amount of Money Market Loans for which offers in any single Money
Market Quote may be accepted.
(f) ACCEPTANCE AND NOTICE BY BORROWER. Not later than 10:30 A.M.
(Cleveland, Ohio time) on (x) the third Euro-Dollar Business Day prior to the
proposed date of the Borrowing, in the case of a LIBOR Auction or (y) the
proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in
either case, such other time or date as the relevant Borrower and the Agent
shall have mutually agreed and shall have notified to the Banks not later than
the date of the Money Market Quote Request for the first LIBOR Auction or
Absolute Rate Auction for which such change is to be effective), the relevant
Borrower shall notify the Agent of its acceptance or non-acceptance of the
offers so notified to it pursuant to subsection (e). In the case of
acceptance, such notice (a "Notice of Money Market Borrowing") shall specify
the aggregate principal amount of offers for each Interest Period that are
accepted. The relevant Borrower may accept any Money Market Quote in whole or
in part; PROVIDED that:
(i) the aggregate principal amount of each Money Market Borrowing
may not exceed the applicable amount set forth in the related Money Market
Quote request,
(ii) the principal amount of each Money Market Borrowing must be
$5,000,000 or a larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the case
may be, and
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(iv) the relevant Borrower may not accept any offer that is
described in subsection (d)(iii) or that otherwise fails to comply with the
requirements of this Agreement.
(g) ALLOCATION BY AGENT. If offers are made by two or more Banks
with the same Money Market Margins or Money Market Absolute Rates, as the case
may be, for a greater aggregate principal amount than the amount in respect of
which such offers are accepted for the related Interest Period, the principal
amount of Money Market Loans in respect of which such offers are accepted shall
be allocated by the Agent among such Banks as nearly as possible (in multiples
of $1,000,000, as the Agent may deem appropriate) in proportion to the
aggregate principal amount of such offers. Determinations by the Agent of the
amounts of Money Market Loans shall be conclusive in the absence of manifest
error.
SECTION 2.16. WITHHOLDING TAX EXEMPTION. At least five Domestic
Business Days prior to the first date on which interest or fees are payable
hereunder for the account of any Bank, each Bank that is not incorporated under
the laws of the United States of America or a state thereof agrees that it will
deliver to each of the Company and the Agent two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224, certifying in either
case that such Bank is entitled to receive payments from the Company under this
Agreement and the Notes without deduction or withholding of any United States
federal income taxes. Each Bank which so delivers a Form 1001 or 4224 further
undertakes to deliver to each of the Company and the Agent two additional
copies of such form (or a successor form) on or before the date that such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form so delivered by it, and such amendments thereto
or extensions or renewals thereof as may be reasonably requested by the Company
or the Agent, in each case certifying that such Bank is entitled to receive
payments from the Company under this Agreement and the Notes without deduction
or withholding of any United States federal income taxes, unless an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Bank from duly completing and delivering any such form with respect to it and
such Bank advises the Company and the Agent that it is not capable of receiving
such payments without any deduction or withholding of United States federal
income tax.
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SECTION 2.17. JUDGMENT CURRENCY. If for the purpose of obtaining
judgment in any court it is necessary to convert a sum due from any Borrower
hereunder or under any of the Notes in the currency expressed to be payable
herein or under the Notes (the "specified currency") into another currency, the
parties hereto agree, to the fullest extent that they may effectively do so,
that the rate of exchange used shall be that at which in accordance with normal
banking procedures the Agent could purchase the specified currency with such
other currency at the Cleveland, Ohio office of Society National Bank on the
Euro-Dollar Business Day preceding that on which final judgment is given. The
obligations of each Borrower in respect of any sum due to any Bank or the Agent
hereunder or under any Note shall, notwithstanding any judgment in a currency
other than the specified currency, be discharged only to the extent that on the
Euro-Dollar Business Day following receipt by such Bank or the Agent (as the
case may be) of any sum adjudged to be so due in such other currency such Bank
or the Agent (as the case may be) may in accordance with normal banking
procedures purchase the specified currency with such other currency; if the
amount of the specified currency so purchased is less than the sum originally
due to such Bank or the Agent, as the case may be, in the specified currency,
each Borrower agrees, to the fullest extent that it may effectively do so, as a
separate obligation and notwithstanding any such judgment, to indemnify such
Bank or the Agent, as the case may be, against such loss, and if the amount of
the specified currency so purchased exceeds (a) the sum originally due to any
Bank or the Agent, as the case may be, and (b) any amounts shared with other
Banks as a result of allocations of such excess as a disproportionate payment
to such Bank under Section 11.04, such Bank or the Agent, as the case may be,
agrees to remit such excess to the appropriate Borrower.
SECTION 2.18. FOREIGN WITHHOLDING TAXES AND OTHER COSTS. (a)
Except as contemplated by the next sentence of this Section 2.18(a), all
payments by an Eligible Subsidiary of principal of and interest on its Notes
and of all other amounts payable under this Agreement are payable without
deduction for or on account of any present or future taxes, duties or other
charges levied or imposed by the government of any jurisdiction outside the
United States of America or by any political subdivision or taxing authority
thereof or therein through withholding or deduction with respect to any such
payments. If any such taxes, duties or other charges are so levied or imposed,
such Eligible Subsidiary will pay additional interest or will make additional
payments in such amounts so that every net payment of principal of and interest
on its Notes and of
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all other amounts payable by it under this Agreement, after withholding or
deduction for or on account of any such present or future taxes, duties or
other charges, will not be less than the amount provided for herein. Such
Eligible Subsidiary shall furnish promptly to the Agent official receipts
evidencing such withholding or deduction.
(b) If the cost to any Bank of making or maintaining any
Committed Loan to an Eligible Subsidiary is increased, or the amount of any sum
received or receivable by any Bank (or its Applicable Lending Office) is
reduced by an amount deemed by such Bank to be material, by reason of the fact
that such Eligible Subsidiary is incorporated in, or conducts business in, a
jurisdiction outside the United States of America, the Company shall indemnify
such Bank for such increased cost or reduction within 15 days after demand by
such Bank (with a copy to the Agent). A certificate of such Bank claiming
compensation under this subsection (b) and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error.
(c) Each Bank will promptly notify the Company and the Agent of
any event of which it has knowledge that will entitle such Bank to additional
interest or payments pursuant to subsection (b) and will designate a different
Applicable Lending Office, if, in the judgment of such Bank, such designation
will avoid the need for, or reduce the amount of, such compensation and will
not be otherwise disadvantageous to such Bank.
SECTION 2.19. MAXIMUM INTEREST RATE.
(a) Nothing contained in this Agreement or the Notes shall
require any Borrower to pay interest at a rate exceeding the maximum rate
permitted by applicable law. Neither this Section nor Section 11.08 is
intended to limit the rate of interest payable for the account of any Bank to
the maximum rate permitted by the laws of the State of New York if a higher
rate is permitted with respect to such Bank by supervening provisions of U.S.
federal law.
(b) If the amount of interest payable by any Borrower for the
account of any Bank on any interest payment date in respect of the immediately
preceding interest computation period, computed pursuant to Section 2.06, would
exceed the maximum amount permitted by applicable law to be charged to such
Borrower by such Bank, the amount of interest payable by such Borrower for its
account on such interest payment date shall be automatically reduced to such
maximum amount.
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(c) If the amount of interest payable by any Borrower for the
account of any Bank in respect of any interest computation period is reduced
pursuant to clause (b) of this Section and the amount of interest payable by
such Borrower for its account in respect of any subsequent interest computation
period, computed pursuant to Section 2.06, would be less than the maximum
amount permitted by applicable law to be charged to such Borrower by such Bank,
then the amount of interest payable by such Borrower for its account in respect
of such subsequent interest computation period shall be automatically increased
to such maximum permissible amount; PROVIDED that at no time shall the
aggregate amount by which interest paid by any Borrower for the account of any
Bank has been increased pursuant to this clause (c) exceed the aggregate amount
by which interest paid by such Borrower for its account has theretofore been
reduced pursuant to clause (b) of this Section.
SECTION 2.20. EXTENSION OF TERMINATION DATE.
The Termination Date may be extended, in the manner set forth in this Section,
on the 45th day after receipt, for each fiscal year of the Company, of the
financial statements referred to in Section 5.01(a), the certificate with
respect thereto referred to in Section 5.01(c) and the statement with respect
thereto referred to in Section 5.01(d) (each such date, as specified by the
Company in connection with the delivery of such items, an "Extension Date") for
a period of one year after the then current Termination Date. If the Company
wishes to request an extension of the Termination Date on any Extension Date,
it shall give written notice to that effect to the Agent not less than 45 nor
more than 120 days prior to such Extension Date, whereupon the Agent shall
notify each of the Banks of such notice. Each Bank will use its best efforts
to respond to such request, whether affirmatively or negatively, within 45 days
after receipt of the relevant financial statements referred to in Section
5.01(a), the certificate with respect thereto referred to in Section 5.01(c)
and the statement with respect thereto referred to in Section 5.01(d). If all
Banks respond affirmatively, then, subject to receipt by the Agent prior to
such Extension Date of counterparts of an Extension Agreement in substantially
the form of Exhibit K duly completed and signed by all of the parties hereto,
the Termination Date shall be extended, effective on such Extension Date, to
the date stated in such Extension Agreement.
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ARTICLE III
CONDITIONS
SECTION 3.01. EFFECTIVENESS. This Agreement shall become
effective on the date that each of the following conditions shall have been
satisfied (or waived in accordance with Section 11.05):
(a) receipt by the Agent of counterparts hereof signed by the
Company, the Banks and the Agent (or, in the case of any party as to which
an executed counterpart shall not have been received, receipt by the Agent
in form satisfactory to it of telegraphic, telex or other written
confirmation from such party of execution of a counterpart hereof by such
party);
(b) receipt by the Agent for the account of each Bank of a duly
executed Note of the Company dated on or before the Effective Date
complying with the provisions of Section 2.04;
(c) receipt by the Agent of an opinion of Frederick G. Stueber,
Vice President, General Counsel and Secretary for the Company,
substantially in the form of Exhibit E hereto and covering such additional
matters relating to the transactions contemplated hereby as the Required
Banks may reasonably request;
(d) receipt by the Agent of an opinion of Davis Polk & Wardwell,
special counsel for the Agent, substantially in the form of Exhibit F
hereto and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
(e) receipt by the Agent of evidence reasonably satisfactory to
the Agent that the Company and the Prudential Insurance Company of America
shall have entered into an amendment to the Note Agreement dated as of
November 1, 1991 with respect to the $75,000,000 8.73% Senior Notes due
2003 of the Company in form and substance reasonably satisfactory to the
Agent;
(f) receipt by the Agent of evidence satisfactory to it that the
commitments under the Existing Credit Agreement have terminated, all loans
thereunder have been repaid in full (all Banks hereunder which are also
banks under the Existing Credit Agreement hereby agreeing that such
repayment may be made, whether at the end of interest periods under the
Existing Credit
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Agreement or not) or constitute Loans hereunder and all accrued fees and
other amounts payable thereunder have been paid in full; and
(g) receipt by the Agent of all documents it may reasonably
request relating to the existence of the Company, the corporate authority
for and the validity of this Agreement and the Notes, and any other matters
relevant hereto, all in form and substance satisfactory to the Agent;
PROVIDED that this Agreement shall not become effective or be binding on any
party hereto unless all of the foregoing conditions are satisfied not later
than January 31, 1996.
SECTION 3.02. BORROWINGS. The obligation of any Bank to make a
Loan on the occasion of any Borrowing is subject to the satisfaction of the
following conditions:
(a) receipt by the Agent of a Notice of Committed Borrowing as
required by Section 2.02, if such Borrowing is a Committed Borrowing;
(b) receipt by the Agent of an Alternative Currency Advance
Report dated no more than fourteen days prior to the date of such Borrowing
if, immediately after such Borrowing, the sum of (i) the aggregate
principal amount of the Committed Loans outstanding on such date, (ii) the
Alternative Currency Outstandings on such date and (iii) the aggregate
principal amount of Money Market Loans on such date would exceed 80% of the
aggregate amount of the Commitments;
(c) the fact that, immediately after such Borrowing, the sum of
(i) the aggregate principal amount of Committed Loans outstanding on such
date, (ii) the Alternative Currency Outstandings on such date and (iii) the
aggregate principal amount of Money Market Loans outstanding on such date
will not exceed the aggregate amount of the Commitments;
(d) the fact that, immediately before and after such Borrowing,
no Default shall have occurred and be continuing; and
(e) the fact that the representations and warranties of the
Borrowers contained in this Agreement (except, in the case of a Refunding
Borrowing, the representation and warranty set forth in Section
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4.04(c)) shall be true on and as of the date of such Borrowing.
Each Borrowing hereunder shall be deemed to be a representation
and warranty by the Company and the relevant Borrower on the date of such
Borrowing as to the facts specified in clauses (c), (d) and (e) of this
Section.
SECTION 3.03. FIRST BORROWING BY EACH ELIGIBLE SUBSIDIARY. The
obligation of each Bank to make a Loan on the occasion of the first Borrowing
by each Eligible Subsidiary is subject to the satisfaction of the following
further conditions:
(a) receipt by the Agent for the account of each Bank of a
duly executed Note of such Eligible Subsidiary, dated on or before the date
of such Borrowing complying with the provisions of Section 2.04;
(b) receipt by the Agent of opinions of counsel for the
Company and such Eligible Subsidiary (which may be in-house counsel for the
Company) acceptable to the Agent, substantially to the effect of Exhibit
I-1 or I-2 hereto and covering such additional matters relating to the
transactions contemplated hereby as the Required Banks may reasonably
request; and
(c) receipt by the Agent of all documents which it may
reasonably request relating to the existence of such Eligible Subsidiary,
the corporate authority for and the validity of the Election to Participate
of such Eligible Subsidiary, this Agreement and the Notes of such Eligible
Subsidiary, and any other matters relevant thereto, all in form and
substance satisfactory to the Agent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants that:
SECTION 4.01. CORPORATE EXISTENCE AND POWER. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Ohio, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
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SECTION 4.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO
CONTRAVENTION. (a) The execution, delivery and performance by the Company of
this Agreement and its Notes are within the Company's corporate powers, have
been duly authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the articles of incorporation or regulations of the Company
or of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Company or any of its Subsidiaries or result in the creation
or imposition of any Lien on any asset of the Company or any of its
Subsidiaries.
(b) The execution and delivery by each Eligible Subsidiary of its
Election to Participate and its Notes, and the performance by such Eligible
Subsidiary of this Agreement and its Notes do not contravene, or constitute a
default under, any provision of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Company or result in the creation
or imposition of any Lien on any asset of the Company or any of its
Subsidiaries.
SECTION 4.03. BINDING EFFECT. This Agreement constitutes a valid
and binding agreement of the Company and its Notes, when executed and delivered
in accordance with this Agreement, will constitute valid and binding
obligations of the Company, in each case enforceable in accordance with their
respective terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally
and (ii) rights of acceleration and the availability of equitable remedies may
be limited by equitable principles of general applicability.
SECTION 4.04. FINANCIAL INFORMATION.
(a) The statement of consolidated financial condition of the
Company and its Consolidated Subsidiaries as of December 31, 1994 and the
related statements of consolidated income, consolidated shareholders' equity
and consolidated cash flows for the fiscal year then ended, reported on by
Ernst & Young and set forth in the Company's 1994 Form 10-K, a copy of which
has been delivered to each of the Banks, fairly present in all material
respects, in conformity with generally accepted accounting principles, the
consolidated financial position of the Company and its Consolidated
Subsidiaries as of such date and their consolidated results of operations and
cash flows for such fiscal year.
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(b) The unaudited statement of consolidated financial condition
of the Company and its Consolidated Subsidiaries as of September 30, 1995 and
the related unaudited statements of consolidated income and consolidated cash
flow for the nine months then ended, set forth in the Company's quarterly
report for the fiscal quarter ended September 30, 1995 as filed with the
Securities and Exchange Commission on Form 10-Q, a copy of which has been
delivered to each of the Banks, fairly present, in conformity with generally
accepted accounting principles applied on a basis consistent with the financial
statements referred to in subsection (a) of this Section, the consolidated
financial position of the Company and its Consolidated Subsidiaries as of such
date and their consolidated results of operations and cash flows for such nine
month period (subject to normal year-end adjustments).
(c) Since September 30, 1995 there has been no material adverse
change in the business, financial position, results of operations or prospects
of the Company and its Consolidated Subsidiaries, considered as a whole, and no
event has taken place which is reasonably likely to have such a material
adverse effect in the future.
SECTION 4.05. LITIGATION. There is no action, suit or proceeding
pending against, or to the knowledge of the Company threatened against or
affecting, the Company or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official which would reasonably
be expected to result in any material adverse change in the business,
consolidated financial position or consolidated results of operations of the
Company and its Consolidated Subsidiaries or which in any manner draws into
question the validity of this Agreement or the Notes.
SECTION 4.06. COMPLIANCE WITH ERISA. Each member of the ERISA
Group has fulfilled its obligations under the minimum funding standards of
ERISA and the Internal Revenue Code with respect to each Plan and is in
compliance in all material respects with the presently applicable provisions of
ERISA and the Internal Revenue Code with respect to each Plan. No member of
the ERISA Group has (i) sought a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to
make any contribution or payment to any Plan or Multiemployer Plan or in
respect of any Benefit Arrangement, or made any amendment to any Plan or
Benefit Arrangement, which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Internal
Revenue Code or (iii) incurred any liability
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under Title IV of ERISA other than a liability to the PBGC for premiums under
Section 4007 of ERISA.
SECTION 4.07. ENVIRONMENTAL MATTERS. (a) In the ordinary course
of its business, the Company conducts an ongoing review of the effect of
Environmental Laws on the business, operations and properties of the Company
and its Subsidiaries, in the course of which it identifies and evaluates
associated liabilities and costs (including, without limitation, any capital or
operating expenditures required for clean-up or closure of properties presently
or previously owned, any capital or operating expenditures required to achieve
or maintain compliance with environmental protection standards imposed by law
or as a condition of any license, permit or contract, any related constraints
on operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted thereat, any costs or liabilities in connection with off-site
disposal of wastes or Hazardous Substances, and any actual or potential
liabilities to third parties, including employees, and any related costs and
expenses). On the basis of this review, the Company has reasonably concluded
that such associated liabilities and costs, including the costs of compliance
with Environmental Laws, are unlikely to have a material adverse effect on the
business, financial condition, results of operations or prospects of the
Company and its Consolidated Subsidiaries, considered as a whole.
(b) No demand, claim, suit, order, citation, administrative
action, investigation or proceeding made, brought or initiated by any Person
arising under, relating to or in connection with Environmental Laws is pending
or threatened against the Company or any of its Subsidiaries which would
reasonably be expected to result in any material adverse change in the
business, consolidated financial position or consolidated results of operations
of the Company and its Consolidated Subsidiaries, taken as a whole.
SECTION 4.08. TAXES. United States Federal income tax returns of
the Company and its Subsidiaries have been examined and closed through the
fiscal year ended December 31, 1987. The Company and its Subsidiaries have
filed all United States Federal income tax returns and all other material tax
returns which are required to be filed by them and have paid all taxes due
pursuant to such returns or pursuant to any assessment received by the Company
or any Subsidiary. The charges, accruals and reserves on the books of the
Company and its Subsidiaries in respect of taxes or other governmental charges
are, in the opinion of the Company, adequate.
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SECTION 4.09. SUBSIDIARIES. Each of the Company's corporate
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
SECTION 4.10. NOT AN INVESTMENT COMPANY. The Company is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 4.11. FULL DISCLOSURE. All information (other than
financial projections) heretofore furnished by any Borrower to the Agent or any
Bank for purposes of or in connection with this Agreement or any transaction
contemplated hereby is, and all such information (other than any financial
projections) hereafter furnished by any Borrower to the Agent or any Bank will
be, taken as a whole, true and accurate in all material respects on the date as
of which such information is stated or certified. All financial projections
heretofore furnished by any Borrower to the Agent or any Bank for purposes of
or in connection with this Agreement or any transaction contemplated hereby
have been, and all such financial projections hereafter furnished by any
Borrower to the Agent or any Banks will be, made in good faith and on the basis
of reasonable assumptions. Each Borrower has disclosed to the Banks in writing
any and all facts which materially and adversely affect or may affect (to the
extent the Company can now reasonably foresee), the business, operations or
financial condition of the Company and its Consolidated Subsidiaries, taken as
a whole, or the ability of any Borrower to perform its obligations under this
Agreement.
ARTICLE V
COVENANTS
The Company agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid:
SECTION 5.01. INFORMATION. The Company will deliver to each of
the Banks:
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of the Company, an audited statement of
consolidated financial
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condition of the Company and its Consolidated Subsidiaries as of the end of
such fiscal year and the related audited statements of consolidated income,
consolidated shareholders' equity and consolidated cash flows for such
fiscal year, setting forth in each case in comparative form the figures for
the previous fiscal year, all reported on in a manner acceptable to the
Securities and Exchange Commission by Ernst & Young or other independent
public accountants of nationally recognized standing;
(b) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the
Company, a statement of consolidated financial condition of the Company and
its Consolidated Subsidiaries as of the end of such quarter and the related
statements of consolidated income and consolidated cash flows for such
quarter and for the portion of the Company's fiscal year ended at the end
of such quarter, setting forth in each case in comparative form the figures
for the corresponding quarter and the corresponding portion of the
Company's previous fiscal year, all certified (subject to normal year-end
adjustments) as to fairness of presentation, generally accepted accounting
principles and consistency by the chief financial officer or the chief
accounting officer of the Company;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
chief financial officer or the chief accounting officer of the Company (i)
setting forth in reasonable detail the calculations required to establish
(i) whether the Company was in compliance with the requirements of Sections
5.07 to 5.08, inclusive, on the date of such financial statements and (ii)
stating whether any Default exists on the date of such certificate and, if
any Default then exists, setting forth the details thereof and the action
which the Company is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i)
whether anything has come to their attention to cause them to believe that
any Default, with respect to any covenant contained in Sections 5.07 to
5.08, inclusive, existed on the date of such statements and (ii) confirming
the calculations set forth in the
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officer's certificate delivered simultaneously therewith pursuant to clause
(c) above;
(e) within two days after any officer of the Company obtains
knowledge of any Default, if such Default is then continuing, a certificate
of the chief financial officer or the chief accounting officer of the
Company setting forth the details thereof and the action which the Company
is taking or proposes to take with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or
their equivalents) which the Company shall have filed with the Securities
and Exchange Commission;
(h) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined
in Section 4043 of ERISA) with respect to any Plan which might constitute
grounds for a termination of such Plan under Title IV of ERISA, or knows
that the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC; (ii) receives
notice of complete or partial withdrawal liability under Title IV of ERISA
or notice that any Multiemployer Plan is in reorganization, is insolvent or
has been terminated, a copy of such notice; (iii) receives notice from the
PBGC under Title IV of ERISA of an intent to terminate, impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or
appoint a trustee to administer any Plan, a copy of such notice; (iv)
applies for a waiver of the minimum funding standard under Section 412 of
the Internal Revenue Code, a copy of such application; (v) gives notice of
intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such
notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or
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Benefit Arrangement which has resulted or could result in the imposition of
a Lien or the posting of a bond or other security, a certificate of the
chief financial officer or the chief accounting officer of the Company
setting forth details as to such occurrence and the action, if any, which
the Company or applicable member of the ERISA Group is required or proposes
to take;
(i) as soon as available and in any event within 30 days after
the beginning of each fiscal year of the Company, a projected statement of
consolidated financial condition of the Company and its Consolidated
Subsidiaries as of the end of such fiscal year and related projected
statements of consolidated income, consolidated shareholders' equity and
consolidated cash flows for such fiscal year, in each case based on the
Company's best estimates, information and assumptions at the time;
(j) promptly and in any event within five Domestic Business Days
after receipt thereof, copies of any notice of any demand, claim, suit,
order, citation, administrative action, investigation or proceeding made,
brought or initiated by any Person arising under, relating to or in
connection with Environmental Laws which would reasonably be expected to
result in any material adverse change in the business, consolidated
financial position or consolidated results of operations of the Company and
its Consolidated Subsidiaries, taken as a whole; and
(k) from time to time such additional information regarding the
financial position or business of the Company and its Subsidiaries
(including, without limitation, consolidating financial statements of the
Company or any of its Subsidiaries and projected statements of consolidated
income of the Company and its Subsidiaries) as the Agent, at the request of
any Bank, may reasonably request.
SECTION 5.02. PAYMENT OF OBLIGATIONS. The Company will pay and
discharge, and will cause each Subsidiary to pay and discharge, at or before
maturity, all their respective material obligations and liabilities, including,
without limitation, tax liabilities, except where the same may be contested in
good faith by appropriate proceedings, and will maintain, and will cause each
Subsidiary to maintain, in accordance with generally accepted accounting
principles, appropriate reserves for the accrual of any of the same.
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SECTION 5.03. MAINTENANCE OF PROPERTY; INSURANCE. (a) The
Company will keep, and will cause each Subsidiary to keep, all property useful
and necessary in its business in good working order and condition, ordinary
wear and tear excepted.
(b) The Company will maintain, and will cause each Subsidiary to
maintain, (i) insurance with respect to such risks and in amounts as specified
in the Existing Credit Agreement and (ii) such other insurance coverage in such
amounts and with respect to such risks as the Required Banks may reasonably
request. All insurance maintained pursuant to clause (ii) above shall be
provided by insurers having A.M. Best policyholders ratings comparable to
those of the insurers listed on Schedule I to the Existing Credit Agreement or
such other insurers as the Required Banks may approve in writing. The Company
will deliver to the Banks (i) upon request of any Bank through the Agent from
time to time full information as to the insurance carried, (ii) within five
days of receipt of notice from any insurer a copy of any notice of cancellation
or material change in coverage from that existing on the date of this Agreement
and (iii) forthwith, notice of any cancellation or nonrenewal of coverage by
the Company.
SECTION 5.04. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE.
The Company will continue, and will cause each Subsidiary to continue, to
engage in business of the same general type as now conducted by the Company and
its Subsidiaries, and will preserve, renew and keep in full force and effect,
and will cause each Subsidiary to preserve, renew and keep in full force and
effect their respective corporate existence and their respective rights,
privileges and franchises necessary or desirable in the normal conduct of
business; PROVIDED that nothing in this Section 5.04 shall prohibit (i) the
merger of a Subsidiary into the Company or the merger or consolidation of a
Subsidiary with or into another Person if the corporation surviving such
consolidation or merger is a Subsidiary and if, in each case, after giving
effect thereto, no Default shall have occurred and be continuing or (ii) the
termination of the corporate existence of any Subsidiary, so long as such
Subsidiary is not a Significant Subsidiary and so long as the Company in good
faith determines that such termination is in the best interest of the Company
and is not otherwise materially disadvantageous to the interests of the Banks
hereunder.
SECTION 5.05. COMPLIANCE WITH LAWS. The Company will comply, and
cause each Subsidiary to comply, in all material respects with all applicable
laws, ordinances,
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rules, regulations, and requirements of governmental authorities (including,
without limitation, Environmental Laws and ERISA and the rules and regulations
thereunder), except where the necessity of compliance therewith is contested in
good faith by appropriate proceedings.
SECTION 5.06. INSPECTION OF PROPERTY, BOOKS AND RECORDS. The
Company will keep, and will cause each Subsidiary to keep, proper books of
record and account in which full, true and correct entries shall be made of all
dealings and transactions in relation to its business and activities; and will
permit, and will cause each Subsidiary to permit, representatives of any Bank
at such Bank's expense to visit and inspect any of their respective properties,
to examine and make abstracts from any of their respective books and records
and to discuss their respective affairs, finances and accounts with their
respective officers, employees and independent public accountants, all at such
reasonable times and as often as may reasonably be desired.
SECTION 5.07. INTEREST COVERAGE RATIO. The ratio of EBIT to
Consolidated Interest Expense, in each case for the period of four fiscal
quarters of the Company then most recently ended, shall at all times exceed 2.5
to 1.
SECTION 5.08. FUNDED DEBT TO CAPITAL RATIO. The Funded Debt to
Capital Ratio will at no time exceed .55 to 1.
SECTION 5.09. NEGATIVE PLEDGE. Neither the Company nor any
Subsidiary will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt
outstanding on the date of this Agreement in an aggregate principal amount
not exceeding $15,000,000;
(b) any Lien existing on any asset of any corporation at the time
such corporation becomes a Subsidiary and not created in contemplation of
such event;
(c) any Lien on any asset securing Debt incurred or assumed for
the purpose of financing all or any part of the cost of acquiring such
asset, PROVIDED that such Lien attaches to such asset concurrently with or
within 90 days after the acquisition thereof;
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(d) any Lien on any asset of any corporation existing at the time
such corporation is merged or consolidated with or into the Company or a
Subsidiary, and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition
thereof, by the Company or a Subsidiary and not created in contemplation of
such acquisition;
(f) any Lien arising out of the refinancing, extension, renewal
or refunding of any Debt secured by any Lien permitted by any of the
foregoing clauses of this Section, PROVIDED that such Debt is not increased
and is not secured by any additional assets;
(g) Liens arising in the ordinary course of its business which
(i) do not secure Debt, (ii) do not secure obligations in amounts
exceeding, in the aggregate, $25,000,000 and (iii) do not in the aggregate
materially detract from the value of its assets or materially impair the
use thereof in the operation of its business;
(h) Liens on Receivables of the Company and its Subsidiaries in
connection with Receivable Financings with respect to such Receivables;
PROVIDED that the aggregate outstanding Receivables Financing Amount will
at no time exceed $50,000,000; and
(i) Liens (other than Liens on Receivables pursuant to a
Receivables Financing) not otherwise permitted by the foregoing clauses of
this Section securing Debt in an aggregate principal amount at any time
outstanding not to exceed 10% of Consolidated Tangible Net Worth.
SECTION 5.10. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. (a)
The Company will not consolidate or merge with or into any other Person unless
(i) the Company is the corporation surviving such merger and (ii) immediately
after giving effect to such merger, no Default shall have occurred and be
continuing.
(b) No Borrower will sell, lease or otherwise transfer, directly
or indirectly, all or any substantial part of the assets of such Borrower and
its Subsidiaries, taken as a whole, to any Person (other than the Company or
any of its Subsidiaries). For purposes of this Section 5.10(b), any
Significant Subsidiary and the assets of a business operation which if
separately counted, would constitute a Significant Subsidiary, shall be deemed
to
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constitute a "substantial part of the assets" of such Borrower and its
Subsidiaries, taken as a whole.
(c) Neither the Company nor any of its Subsidiaries will sell,
lease or otherwise transfer, directly or indirectly, any of its accounts
receivable to any Person (other than the Company or any of its Subsidiaries),
except (i) in connection with a Receivables Financing and (ii) if, immediately
after giving effect to any such Financing, the aggregate outstanding
Receivables Financing Amount does not exceed $50,000,000.
SECTION 5.11. USE OF PROCEEDS. The proceeds of the Loans made
under this Agreement will be used by the Borrowers for general corporate
purposes. None of such proceeds will be used, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of buying or carrying any
"margin stock" within the meaning of Regulation U.
ARTICLE VI
DEFAULTS
SECTION 6.01. EVENTS OF DEFAULT. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) any principal of any Loan, or any interest, any fees or any
other amount payable hereunder, shall not be paid when due;
(b) the Company shall fail to observe or perform any covenant
contained in Sections 5.07 to 5.11 inclusive;
(c) any Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause
(a) or (b) above) for 10 days after written notice thereof has been given
to the Company by the Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made
by any Borrower in this Agreement or in any certificate, financial
statement or other document delivered pursuant to this Agreement shall
prove to have been incorrect in any material respect when made (or deemed
made);
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(e) the Company or any Subsidiary shall fail to make any payment
in respect of any Material Debt when due or within any applicable grace
period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables (or, with the
giving of notice or lapse of time or both, would enable) the holder of such
Material Debt or any Person acting on such holder's behalf to accelerate
the maturity thereof;
(g) the Company or any Subsidiary shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of
a trustee, receiver, liquidator, custodian or other similar official of it
or any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against the Company or any Subsidiary seeking liquidation, reorganization
or other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed
for a period of 60 days; or an order for relief shall be entered against
the Company or any Subsidiary under the federal bankruptcy laws as now or
hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $1,000,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to
terminate a Material Plan shall be filed under Title IV of ERISA by any
member of the ERISA Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA
to terminate, to impose liability (other than for
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premiums under Section 4007 of ERISA) in respect of, or to cause a trustee
to be appointed to administer any Material Plan; or a condition shall exist
by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or there shall
occur a complete or partial withdrawal from, or a default, within the
meaning of Section 4219(c)(5) of ERISA, with respect to, one or more
Multiemployer Plans which could cause one or more members of the ERISA
Group to incur a current payment obligation in excess of $1,000,000;
(j) a judgment or order for the payment of money in excess of
$5,000,000 shall be rendered against the Company or any Subsidiary and such
judgment or order shall continue unsatisfied and unstayed for a period of
30 days; or
(k) any person or group of persons (within the meaning of Section
13 or 14 of the Securities Exchange Act of 1934, as amended) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated
by the Securities and Exchange Commission under said Act) of 30% or more of
the outstanding capital stock of the Company having voting power in the
general election of directors, excluding any Person or group of Persons who
are officers, directors or employees of the Company or any Subsidiary as of
the date hereof or are related by blood or marriage to the descendants of
James F. or John C. Lincoln, including any trusts or similar arrangements
for any of the foregoing and any foundations established by any of the
foregoing;
then, and in every such event, the Agent shall (i) if requested by Banks having
more than 50% in aggregate amount of the Commitments, by notice to the Company
terminate the Commitments and they shall thereupon terminate, and (ii) if
requested by Banks holding Notes evidencing more than 50% in aggregate
principal amount of the Loans, by notice to the Company declare the Notes
(together with accrued interest thereon) to be, and the Notes shall thereupon
become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by each Borrower;
PROVIDED that in the case of any of the Events of Default specified in clause
(g) or (h) above with respect to any Borrower, without any notice to any
Borrower or any other act by the Agent or the Banks, the Commitments shall
thereupon terminate and the Notes (together with accrued interest thereon)
shall become immediately due and payable without presentment, demand,
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protest, dishonor or other notice of any kind, all of which are hereby waived
by each Borrower.
SECTION 6.02. NOTICE OF DEFAULT. The Agent shall give notice to
the Company under Section 6.01(c) promptly upon being requested to do so by any
Bank and shall thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENT
SECTION 7.01. APPOINTMENT AND AUTHORIZATION. Each Bank
irrevocably appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement and the Notes as
are delegated to the Agent by the terms hereof or thereof, together with all
such powers as are reasonably incidental thereto.
SECTION 7.02. AGENT AND AFFILIATES. Society National Bank shall
have the same rights and powers under this Agreement as any other Bank and may
exercise or refrain from exercising the same as though it were not the Agent,
and Society National Bank and its affiliates may accept deposits from, lend
money to and generally engage in any kind of business with any Borrower or any
Subsidiary or affiliate of any Borrower as if it were not the Agent hereunder.
SECTION 7.03. ACTION BY AGENT. The obligations of the Agent
hereunder are only those expressly set forth herein. Without limiting the
generality of the foregoing, the Agent shall not be required to take any action
with respect to any Default, except as expressly provided in Article VI.
SECTION 7.04. CONSULTATION WITH EXPERTS. The Agent may consult
with legal counsel (who may be counsel for any Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
SECTION 7.05. LIABILITY OF AGENT. Neither the Agent nor any of
its affiliates nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or not taken by it in connection
herewith (i) with the consent or at the request of the Required Banks or (ii)
in the absence of its own gross negligence or
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willful misconduct. Neither the Agent nor any of its affiliates nor any of
their respective directors, officers, agents or employees shall be responsible
for or have any duty to ascertain, inquire into or verify (i) any statement,
warranty or representation made in connection with this Agreement or any
borrowing hereunder; (ii) the performance or observance of any of the covenants
or agreements of any Borrower; (iii) the satisfaction of any condition
specified in Article III, except receipt of items required to be delivered to
the Agent; or (iv) the validity, effectiveness or genuineness of this
Agreement, the Notes or any other instrument or writing furnished in connection
herewith. The Agent shall not incur any liability by acting in reliance upon
any notice, consent, certificate, statement, or other writing (which may be a
bank wire, telex or similar writing) believed by it to be genuine or to be
signed by the proper party or parties.
SECTION 7.06. INDEMNIFICATION. Each Bank shall, ratably in
accordance with its Commitment, indemnify the Agent, its affiliates and their
respective directors, officers, agents and employees (to the extent not
reimbursed by the Borrowers) against any cost, expense (including counsel fees
and disbursements), claim, demand, action, loss or liability (except such as
result from such indemnitees' gross negligence or willful misconduct) that such
indemnitees may suffer or incur in connection with this Agreement or in
connection with any action taken or omitted by such indemnitees hereunder.
SECTION 7.07. CREDIT DECISION. Each Bank acknowledges that it
has, independently and without reliance upon the Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
SECTION 7.08. SUCCESSOR AGENT. The Agent may resign at any time
by giving notice thereof to the Banks and the Company. Upon any such
resignation, the Required Banks shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30 days after the
retiring Agent gives notice of resignation, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent, which shall be any Bank or a
commercial
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bank organized or licensed under the laws of the United States of America or of
any State thereof and having a combined capital and surplus of at least
$50,000,000. Upon the acceptance of its appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Article
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent.
SECTION 7.09. AGENT'S FEE. The Company shall pay to the Agent
for its own account fees in the amounts and at the times previously agreed upon
between the Company and the Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR
UNFAIR. If on or prior to the first day of any Interest Period for any Fixed
Rate Borrowing:
(a) the Agent is advised by the Reference Banks that deposits in
Dollars (in the applicable amounts) are not being offered to the Reference
Banks in the relevant market for such Interest Period, or
(b) Banks having 50% or more of the aggregate amount of the
Commitments advise the Agent that the Adjusted CD Rate or the Adjusted
London Interbank Offered Rate, as the case may be, as determined by the
Agent will not adequately and fairly reflect the cost to such Banks of
funding their CD Loans or Euro-Dollar Loans, as the case may be, for such
Interest Period,
the Agent shall forthwith give notice thereof to the Company and the Banks,
whereupon until the Agent notifies the Company that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to make
CD Loans or Euro-Dollar Loans, as the case may be, shall be suspended and the
obligations of any Bank to make any Alternative Currency Advances pursuant to
an Alternative Currency Quote accepted by the relevant Borrower in accordance
with Section 2.14(e) and requiring such Alternative Currency Advance to bear
interest at a rate calculated on the basis of the Adjusted London Interbank
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Offered Rate shall be suspended. Unless the Borrower notifies the Agent at
least two Domestic Business Days before the date of any Committed Fixed Rate
Borrowing for which a Notice of Committed Borrowing has previously been given
that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is
a Committed Borrowing, such Borrowing shall instead be made as a Base Rate
Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR
Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear
interest for each day from and including the first day to but excluding the
last day of the Interest Period applicable thereto at the Base Rate for such
day.
SECTION 8.02. ILLEGALITY. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall make it unlawful or
impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain
or fund its Euro-Dollar Loans to any Borrower and such Bank shall so notify the
Agent, the Agent shall forthwith give notice thereof to the other Banks and the
Company, whereupon until such Bank notifies the Company and the Agent that the
circumstances giving rise to such suspension no longer exist, the obligation of
such Bank to make Euro-Dollar Loans to such Borrower shall be suspended.
Before giving any notice to the Agent pursuant to this Section, such Bank shall
designate a different Euro-Dollar Lending Office if such designation will avoid
the need for giving such notice and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. If such Bank shall determine that it
may not lawfully continue to maintain and fund any of its outstanding
Euro-Dollar Loans to such Borrower to maturity and shall so specify in such
notice, such Borrower shall immediately prepay in full the then outstanding
principal amount of each such Euro-Dollar Loan, together with accrued interest
thereon. Concurrently with prepaying each such Euro-Dollar Loan, such Borrower
shall borrow a Base Rate Loan in an equal principal amount from such Bank (on
which interest and principal shall be payable contemporaneously with the
related Euro-Dollar Loans of the other Banks), and such Bank shall make such a
Base Rate Loan.
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SECTION 8.03. INCREASED COST AND REDUCED RETURN. (a) If on or
after (x) the date hereof, in the case of any Committed Loan or any obligation
to make Committed Loans or (y) the date of the related Alternative Currency
Quote, in the case of any Alternative Currency Advance or (z) the date of the
related Money Market Quote in the case of any Money Market Loan, the adoption
of any applicable law, rule or regulation, or any change in any applicable law,
rule or regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by any
Bank (or its Applicable Lending Office) with any request or directive (whether
or not having the force of law) of any such authority, central bank or
comparable agency:
(i) shall subject any Bank (or its Applicable Lending Office) to
any tax, duty or other charge with respect to its Fixed Rate Loans, its
Note or its obligation to make Fixed Rate Loans, or shall change the basis
of taxation of payments to any Bank (or its Applicable Lending Office) of
the principal of or interest on its Fixed Rate Loans or any other amounts
due under this Agreement in respect of its Fixed Rate Loans or its
obligation to make Fixed Rate Loans (except for changes in the rate of tax
on the overall net income of such Bank or its Applicable Lending Office
imposed by the jurisdiction in which such Bank's principal executive office
or Applicable Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any such requirement imposed by the Board
of Governors of the Federal Reserve System, but excluding (A) with respect
to any CD Loan any such requirement included in an applicable Domestic
Reserve Percentage and (B) with respect to any Euro-Dollar Loan any such
requirement included in an applicable Euro-Dollar Reserve Percentage),
special deposit, insurance assessment (excluding, with respect to any CD
Loan, any such requirement related in an applicable Assessment Rate) or
similar requirement against assets of, deposits with or for the account of,
or credit extended by, any Bank (or its Applicable Lending Office) or shall
impose on any Bank (or its Applicable Lending Office) or on the United
States market for certificates of deposit or the London interbank market
any other condition affecting its Fixed Rate Loans, its Note or its
obligation to make Fixed Rate Loans;
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and the result of any of the foregoing is to increase the cost to such Bank (or
its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or
to reduce the amount of any sum received or receivable by such Bank (or its
Applicable Lending Office) under this Agreement or under its Note with respect
thereto, by an amount deemed by such Bank to be material, then, within 15 days
after demand by such Bank (with a copy to the Agent), the Company shall pay to
such Bank such additional amount or amounts as will compensate such Bank for
such increased cost or reduction.
(b) If any Bank shall have determined that, after the date
hereof, the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change in any such law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on capital of such Bank (or its Parent) as a consequence of such Bank's
obligations hereunder to a level below that which such Bank (or its Parent)
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Bank to be material, then from time to time, within 15 days
after demand by such Bank (with a copy to the Agent), the Company shall pay to
such Bank such additional amount or amounts as will compensate such Bank (or
its Parent) for such reduction.
(c) Each Bank will promptly notify the Company and the Agent of
any event of which it has knowledge, occurring after the date hereof, which
will entitle such Bank to compensation pursuant to this Section and will
designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. A
certificate of any Bank claiming compensation under this Section and setting
forth the additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. In determining such amount, such
Bank may use any reasonable averaging and attribution methods.
SECTION 8.04. BASE RATE LOANS SUBSTITUTED FOR AFFECTED FIXED RATE
LOANS. If (i) the obligation of any Bank to make Euro-Dollar Loans to any
Borrower has been
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suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation
under Section 8.03(a) and the Borrower shall, by at least five Euro-Dollar
Business Days' prior notice to such Bank through the Agent, have elected that
the provisions of this Section shall apply to such Bank, then, unless and until
such Bank notifies the Company that the circumstances giving rise to such
suspension or demand for compensation no longer exist:
(a) all Loans to such Borrower which would otherwise be made by
such Bank as CD Loans or Euro-Dollar Loans, as the case may be, shall be
made instead as Base Rate Loans (on which interest and principal shall be
payable contemporaneously with the related Fixed Rate Loans of the other
Banks), and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case
may be, to such Borrower has been repaid, all payments of principal which
would otherwise be applied to repay such Fixed Rate Loans shall be applied
to repay its Base Rate Loans instead.
SECTION 8.05. HLT CLASSIFICATION. If, after the date hereof, the
Agent determines that, or the Agent is advised by any Bank that such Bank has
received notice from any governmental authority, central bank or comparable
agency having jurisdiction over such Bank that, Loans hereunder are classified
as a "highly leveraged transaction" (an "HLT Classification"), the Agent shall
promptly give notice of such HLT Classification to the Company and the other
Banks. The Agent, the Banks and the Borrowers shall commence negotiations in
good faith to agree on the extent to which fees, interest rates and/or margins
hereunder should be increased so as to reflect such HLT Classification. If the
Borrowers and Banks having more than 50% in aggregate amount of the Commitments
agree on the amount of such increase or increases, this Agreement may be
amended to give effect to such increase or increases as provided in Section
11.05. If the Borrowers and Banks having more than 50% in aggregate amount of
the Commitments fail to so agree within 45 days after notice is given by the
Agent as provided above, then the Agent shall, if requested by Banks having 50%
or more in aggregate amount of the Commitments, by notice to the Borrowers
terminate the Commitments and they shall thereupon terminate and the Borrowers
shall repay each outstanding Loan at the end of the Interest Period applicable
thereto. The Banks acknowledge that an HLT Classification is not a Default or
an Event of Default hereunder.
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ARTICLE IX
REPRESENTATIONS AND WARRANTIES
OF ELIGIBLE SUBSIDIARIES
Each Eligible Subsidiary shall be deemed by the execution and
delivery of its Election to Participate to have represented and warranted as of
the date thereof (or, in the case of any Existing Eligible Subsidiary, as
defined in Section 11.12, represents and warrants as of the date hereof) that:
SECTION 9.01. CORPORATE EXISTENCE AND POWER. It is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is a Wholly-Owned Consolidated Subsidiary of
the Company.
SECTION 9.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION;
CONTRAVENTION. The execution and delivery by it of its Election to Participate
and its Notes, and the performance by it of this Agreement and its Notes, are
within its corporate powers, have been duly authorized by all necessary
corporate action, require no action by or in respect of, or filing with, any
governmental body, agency or official and do not contravene, or constitute a
default under, any provision of applicable law or regulation or of its
certificate of incorporation or by-laws or of any agreement, judgment,
injunction, order, decree or other instrument binding upon such Eligible
Subsidiary or result in the creation or imposition of any Lien on any asset of
such Eligible Subsidiary or any of its Subsidiaries.
SECTION 9.03. BINDING EFFECT. This Agreement constitutes a valid
and binding agreement of such Eligible Subsidiary and its Notes, when executed
and delivered in accordance with this Agreement, will constitute valid and
binding obligations of such Eligible Subsidiary, in each case enforceable in
accordance with their respective terms except as (i) the enforceability thereof
may be limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability.
SECTION 9.04. TAXES. Except as disclosed in the opinions of
counsel delivered by such Eligible Subsidiary pursuant to Section 3.03(b),
there is no income, stamp or other tax of any country, or any taxing authority
thereof or therein, imposed by or in the nature of withholding or otherwise,
which is imposed on any payment to be made by
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such Eligible Subsidiary pursuant hereto or on its Notes, or is imposed on or
by virtue of the execution, delivery or enforcement of its Election to
Participate or of its Notes.
ARTICLE X
GUARANTY
SECTION 10.01. THE GUARANTY. The Company hereby unconditionally
guarantees the full and punctual payment (whether at stated maturity, upon
acceleration or otherwise) of the principal of and interest on each Note issued
by any Eligible Subsidiary pursuant to this Agreement, and the full and
punctual payment of all other amounts payable by any Eligible Subsidiary under
this Agreement. Upon failure by any Eligible Subsidiary to pay punctually any
such amount, the Company shall forthwith on demand pay the amount not so paid
at the place and in the manner specified in this Agreement.
SECTION 10.02. GUARANTY UNCONDITIONAL. The obligations of the
Company hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by the occurrence, one or more times, of any of the following:
(i) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of any Eligible Subsidiary under this
Agreement or any Note, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to this
Agreement or any Note;
(iii) any release, non-perfection or invalidity of any direct or
indirect security for any obligation of any Eligible Subsidiary under this
Agreement or any Note;
(iv) any change in the corporate existence, structure or
ownership of any Eligible Subsidiary or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting any Eligible
Subsidiary or its assets or any resulting release or discharge of any
obligation of any Eligible Subsidiary contained in this Agreement or any
Note;
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(v) the existence of any claim, set-off or other rights which the
Company may have at any time against any Eligible Subsidiary, the Agent,
any Bank or any other Person, whether in connection herewith or any
unrelated transactions, PROVIDED that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against
any Eligible Subsidiary for any reason of this Agreement or any Note, or
any provision of applicable law or regulation purporting to prohibit the
payment by any Eligible Subsidiary of the principal of or interest on any
Note or any other amount payable by it under this Agreement; or
(vii) any other act or omission to act or delay of any kind by
any Eligible Subsidiary, the Agent, any Bank or any other Person or any
other circumstance whatsoever which might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of the Company's
obligations hereunder.
SECTION 10.03. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT
IN CERTAIN CIRCUMSTANCES. The Company's obligations hereunder shall remain in
full force and effect until the Commitments shall have terminated and the
principal of and interest on the Notes and all other amounts payable by the
Company and each Eligible Subsidiary under this Agreement shall have been paid
in full. If at any time any payment of the principal of or interest on any
Note or any other amount payable by any Eligible Subsidiary under this
Agreement is rescinded or must be otherwise restored or returned upon the
insolvency, bankruptcy or reorganization of any Eligible Subsidiary or
otherwise, the Company's obligations hereunder with respect to such payment
shall be reinstated at such time as though such payment had been due but not
made at such time.
SECTION 10.04. WAIVER BY THE COMPANY. The Company irrevocably
waives acceptance hereof, presentment, demand, protest and any notice not
provided for herein, as well as any requirement that at any time any action be
taken by any Person against any Eligible Subsidiary or any other Person.
SECTION 10.05. SUBROGATION. Upon making any payment hereunder,
the Company shall be subrogated to the rights of the payee against an Eligible
Subsidiary with respect to such payment; PROVIDED that the Company shall not
enforce any payment by way of subrogation until all amounts
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of principal of and interest on the Notes and all other amounts payable by all
Borrowers under this Agreement have been paid in full.
SECTION 10.06. STAY OF ACCELERATION. In the event that
acceleration of the time for payment of any amount payable by any Eligible
Subsidiary under this Agreement or its Notes is stayed upon insolvency,
bankruptcy or reorganization of such Eligible Subsidiary, all such amounts
otherwise subject to acceleration under the terms of this Agreement shall
nonetheless be payable by the Company hereunder forthwith on demand by the
Agent made at the request of the Required Banks.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. NOTICES. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telex, facsimile transmission or similar writing) and shall be given to such
party: (x) in the case of any Borrower or the Agent, at its address or
facsimile number set forth on the signature pages hereof (or in the case of an
Eligible Subsidiary, its Election to Participate), (y) in the case of any Bank,
at its address or telex number set forth in its Administrative Questionnaire or
(z) in the case of any party, such other address or telex or facsimile number
as such party may hereafter specify for the purpose by notice to the Agent and
the Company. Each such notice, request or other communication shall be
effective (i) if given by telex, when such telex is transmitted to the telex
number specified in or pursuant to this Section and the appropriate answerback
is received, (ii) if given by mail, 72 hours after such communication is
deposited in the mails with first class postage prepaid, addressed as aforesaid
or (iii) if given by any other means, when delivered at the address specified
in or pursuant to this Section; PROVIDED that notices to the Agent under
Article II or Article VIII shall not be effective until received.
SECTION 11.02. NO WAIVERS. No failure or delay by the Agent or
any Bank in exercising any right, power or privilege hereunder or under any
Note shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
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SECTION 11.03. EXPENSES; DOCUMENTARY TAXES; INDEMNIFICATION. (a)
The Company shall pay (i) all out-of-pocket expenses of the Agent, including
fees and disbursements of special counsel for the Agent, in connection with the
preparation and administration of this Agreement, any waiver or consent
hereunder or any amendment hereof or any Default or alleged Default hereunder
and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by
the Agent and each Bank, including fees and disbursements of counsel, in
connection with such Event of Default and collection, bankruptcy, insolvency
and other enforcement proceedings resulting therefrom. The Company shall
indemnify each Bank against any transfer taxes, documentary taxes, assessments
or charges made by any governmental authority by reason of the execution and
delivery of this Agreement, any Election to Participate or Election to
Terminate or any Note.
(b) The Company agrees to indemnify the Agent and each Bank,
their respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in
connection with any investigative, administrative or judicial proceeding
(whether or not such Indemnitee shall be designated a party thereto) brought or
threatened relating to or arising out of this Agreement or any actual or
proposed use of proceeds of Loans hereunder; PROVIDED that no Indemnitee shall
have the right to be indemnified hereunder for such Indemnitee's own gross
negligence or willful misconduct as determined by a court of competent
jurisdiction.
SECTION 11.04. SHARING OF SET-OFFS. Each Bank agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount of principal and interest due
with respect to any Committed Loan made by it which is greater than the
proportion received by any other Bank in respect of the aggregate amount of
principal and interest due with respect to any Committed Loan made by such
other Bank, the Bank receiving such proportionately greater payment shall
purchase such participations in the Committed Loans made by the other Banks,
and such other adjustments shall be made, as may be required so that all such
payments of principal and interest with respect to the Committed Loans shall be
shared by the Banks pro rata; PROVIDED that nothing in this Section shall
impair the right of any Bank
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to exercise any right of set-off or counterclaim it may have and to apply the
amount subject to such exercise to the payment of indebtedness of a Borrower
other than its Committed Loans. Each Borrower agrees, to the fullest extent it
may effectively do so under applicable law, that any holder of a participation
in a Note, whether or not acquired pursuant to the foregoing arrangements, may
exercise rights of set-off or counterclaim and other rights with respect to
such participation as fully as if such holder of a participation were a direct
creditor of such Borrower in the amount of such participation.
SECTION 11.05. AMENDMENTS AND WAIVERS. Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by the Company and the Required Banks
(and, if the rights or duties of the Agent are affected thereby, by the Agent);
PROVIDED that no such amendment or waiver shall, unless signed by all the
Banks, (i) increase or decrease the Commitment of any Bank (except for a
ratable decrease in the Commitments of all Banks) or subject any Bank to any
additional obligation, (ii) reduce the principal of or rate of interest on any
Loan or any fees hereunder, except as provided below, (iii) postpone the date
fixed for any payment of principal of or interest on any Loan or any fees
hereunder or for the termination of any Commitment, (iv) amend any provision of
Article X hereof or (v) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes, or the number of Banks, which
shall be required for the Banks or any of them to take any action under this
Section or any other provision of this Agreement; PROVIDED FURTHER, that this
Agreement may be amended to give effect to any increased fees, interest rates
and/or margins agreed upon pursuant to Section 8.05 or to reduce or rescind any
such increases previously agreed upon pursuant to Section 8.05, if such
amendment is in writing and is signed by the Company and Banks having more than
50% in aggregate amount of the Commitments and PROVIDED FURTHER that no such
amendment, waiver or modification shall, unless signed by an Eligible
Subsidiary, (w) subject such Eligible Subsidiary to any additional obligation,
(x) increase the principal of or rate of interest on any outstanding Loan of
such Eligible Subsidiary, (y) accelerate the stated maturity of any outstanding
Loan of such Eligible Subsidiary or (z) change this PROVISO.
SECTION 11.06. SUCCESSORS AND ASSIGNS. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that no Borrower may
assign
67
<PAGE> 74
or otherwise transfer any of its rights under this Agreement without the prior
written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment
or any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Company and the Agent, such Bank shall remain responsible for the performance
of its obligations hereunder, and the Borrowers and the Agent shall continue to
deal solely and directly with such Bank in connection with such Bank's rights
and obligations under this Agreement. Any agreement pursuant to which any Bank
may grant such a participating interest shall provide that such Bank shall
retain the sole right and responsibility to enforce the obligations of the
Borrowers hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement; PROVIDED
that such participation agreement may provide that such Bank will not agree to
any modification, amendment or waiver of this Agreement described in clause
(i), (ii) or (iii) of Section 11.05 without the consent of the Participant.
The Borrowers agree that each Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of Article VIII, with
respect to its participating interest. An assignment or other transfer which
is not permitted by subsection (c) or (d) below shall be given effect for
purposes of this Agreement only to the extent of a participating interest
granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part of all, of its
rights and obligations under this Agreement and the Notes, and such Assignee
shall assume such rights and obligations, pursuant to an Assignment and
Assumption Agreement in substantially the form of Exhibit J hereto executed by
such Assignee and such transferor Bank, with (and subject to) the subscribed
consent of the Agent and, unless such Assignee is a Bank or an affiliate of a
Bank, the Company; PROVIDED that, unless such Assignee is an affiliate of such
transferor Bank or is another Bank, no such assignment shall be in an amount
less than $10,000,000 and PROVIDED FURTHER that such assignment may, but need
not, include rights of the transferor Bank in respect of outstanding Money
Market Loans. Upon execution and delivery of such instrument and payment by
such Assignee to such transferor Bank of an amount equal to the purchase price
agreed between such transferor Bank and such Assignee, such Assignee shall be a
Bank party to this Agreement and
68
<PAGE> 75
shall have all the rights and obligations of a Bank with a Commitment as set
forth in such instrument of assumption, and the transferor Bank shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the
consummation of any assignment pursuant to this subsection (c), the transferor
Bank, the Agent and each Borrower shall make appropriate arrangements so that,
if required, new Notes are issued to the Assignee. In connection with any such
assignment, the transferor Bank shall pay to the Agent an administrative fee
for processing such assignment in the amount of $2,000. If the Assignee is not
incorporated under the laws of the United States of America or a state thereof,
it shall, prior to the first date on which interest or fees are payable
hereunder for its account, deliver to the Company and the Agent certification
as to exemption from deduction or withholding of any United States federal
income taxes in accordance with Section 2.16.
(d) Any Bank may at any time assign all or any portion of its
rights under this Agreement and its Notes to a Federal Reserve Bank. No such
assignment shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section 8.03 than
such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Company's prior written
consent or by reason of the provisions of Section 8.02 or 8.03 requiring such
Bank to designate a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
SECTION 11.07. COLLATERAL. Each of the Banks represents to the
Agent and each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 11.08. GOVERNING LAW; SUBMISSION TO JURISDICTION. This
Agreement and each Note shall be governed by and construed in accordance with
the laws of the State of New York. Each Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. Each Borrower irrevocably
waives, to the fullest extent permitted
69
<PAGE> 76
by law, any objection which it may now or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any claim that any
such proceeding brought in such a court has been brought in an inconvenient
forum.
SECTION 11.09. COUNTERPARTS; INTEGRATION. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof.
SECTION 11.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE
AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 11.11. EXISTING CREDIT AGREEMENT. Each Borrower, Society
National Bank, as Agent hereunder and as agent under the Existing Credit
Agreement and each of the Banks, as a bank hereunder and as a bank party to the
Existing Credit Agreement (the banks party to the Existing Credit Agreement,
the "Existing Credit Agreement Banks"), agree that, notwithstanding anything to
the contrary herein or in the Existing Credit Agreement:
(i) the "Commitments" (as defined therein) of the Existing Credit
Agreement Banks under the Existing Credit Agreement shall terminate on the
Effective Date (any advance notice of such termination being hereby waived by
each Bank which is an Existing Credit Agreement Bank); and
(ii) on the Effective Date, the Banks shall, provided the
conditions to borrowing hereunder are met on such day, fund Loans hereunder or
shall continue to hold or purchase outstanding Loans under the Existing Credit
Agreement and the Borrower shall repay "Loans" under the Existing Credit
Agreement, in each case as set forth on Schedule 1 such that, effective as of
the Effective Date, the Loans of the Banks hereunder shall be as set forth on
Schedule 1.
Any "Loans" under the Existing Credit Agreement continued to be held or
purchased hereunder shall, effective on the Effective Date, be Loans hereunder,
bearing interest at the interest rates provided for in the Existing Credit
Agreement, except that the margin applicable to the pricing of any such Loan
shall be, for the period on or after the
70
<PAGE> 77
Effective Date, the margin applicable under this Agreement. If any purchase or
prepayment of "Loans" under the Existing Credit Agreement is made pursuant to
clause (ii) above, the Borrower agrees that it will reimburse each Existing
Credit Agreement Bank for any funding losses incurred in connection therewith
pursuant to the Existing Credit Agreement as if such "Loans" had been prepaid
on the Effective Date.
SECTION 11.12. ELIGIBLE SUBSIDIARIES. Any Person who was an
"Eligible Subsidiary" under the Existing Credit Agreement (an "Existing
Eligible Subsidiary") immediately prior to the effectiveness of this Agreement
shall, effective as of the Effective Date, without any further action, be an
Eligible Subsidiary under this Agreement, and the "Election to Participate"
executed by such Subsidiary under the Existing Credit Agreement shall
constitute the Election to Participate hereunder with respect to such
Subsidiary for all purposes hereunder. The notes of each Existing Eligible
Subsidiary held by each Existing Credit Agreement Bank shall, effective as of
the Effective Date, be amended by substituting the date "December 20, 1995" for
the date "March 18, 1993" set forth in the third paragraph of each such note
and shall, effective as of the Effective Date, be a "Note" hereunder. Upon
request of any Existing Credit Agreement Bank, each Existing Eligible
Subsidiary shall execute a Note substantially in the form of Exhibit A payable
to the order of such Bank. Upon receipt by such Bank of such new Note, such
Bank shall cancel its original Note (if any) and return it to the appropriate
Existing Eligible Subsidiary promptly. No failure of an Existing Credit
Agreement Bank so to cancel and return its original Note shall affect the
validity of its new Note.
71
<PAGE> 78
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
THE LINCOLN ELECTRIC COMPANY
By /s/ D.F. Hastings
----------------------------
Title: Chairman and
Chief Executive Officer
By /s/ H. Jay Elliott
----------------------------
Title: Vice President,
Chief Financial Officer
and Treasurer
22801 St. Clair Avenue
Cleveland, Ohio 44117-1199
U.S.A.
Telephone: (216) 383-2201
Fax: (216) 486-6476
Attention: Michael J. O'Connor
72
<PAGE> 79
Commitments
$42,000,000 SOCIETY NATIONAL BANK
By /s/ William J. Kysela
-------------------------
Title: Vice President
$20,000,000 ABN AMRO BANK N.V.
By /s/ R.W. Hasbrook
--------------------------
Title: Group Vice President
By /s/ Kathryn C. Toth
--------------------------
Title: Vice President
$20,000,000 DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
By /s/ D Slusanczyk
--------------------------
Title: Vice President
By /s/ J. Curtin Beaudouin
--------------------------
Title: First Vice President
$20,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Timothy S. Broadbent
--------------------------
Title: Vice President
73
<PAGE> 80
$20,000,000 NBD BANK
By /s/ Winfred S. Pinet
-----------------------
Title: Vice President
$20,000,000 NATIONAL CITY BANK
By /s/ A.J. DiMare
-----------------------
Title: Vice President
$14,500,000 BANK OF AMERICA ILLINOIS
By /s/ Lynn W. Stetson
-----------------------
Title: Vice President
$14,500,000 CIBC INC.
By /s/ John Mach
-----------------------
Title: Director
74
<PAGE> 81
$14,500,000 CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By /s/ Mary Ann Klemm
-------------------------
Title: Vice President and
Group Head
CREDIT LYONNAIS CHICAGO BRANCH
By /s/ Mary Ann Klemm
-------------------------
Title: Vice President and
Group Head
$14,500,000 PNC BANK, NATIONAL ASSOCIATION
By /s/ Christopher S. Helmeci
-------------------------
Title: Assistant Vice
President
Total Commitments
$200,000,000
=================
75
<PAGE> 82
SOCIETY NATIONAL BANK,
as Agent
By /s/ William J. Kysela
-------------------------
Title: Vice President
127 Public Square
Cleveland, Ohio 44114-1306
U.S.A.
Telephone: (216) 689-5654
Fax: (216) 689-4981
Attention: William J. Kysela
76
<PAGE> 83
Schedule 1
EXISTING AND CONTINUING LOANS
None
77
<PAGE> 84
EXHIBIT A
NOTE
New York, New York
, 199_
For value received, [name of Borrower], a [jurisdiction of
incorporation] corporation (the "Borrower"), promises to pay to the order of
____________ (the "Bank"), for the account of its Applicable Lending Office,
the unpaid principal amount of each Loan made by the Bank to the Borrower
pursuant to the Credit Agreement referred to below on the last day of the
Interest Period relating to such Loan. The Borrower promises to pay interest
on the unpaid principal amount of each such Loan on the dates and at the rate
or rates provided for in or pursuant to the Credit Agreement. All such
payments of principal and interest with respect to Committed Loans shall be
made in lawful money of the United States in Federal or other immediately
available funds at the office of Society National Bank, 127 Public Square,
Cleveland, Ohio 44114-1306 U.S.A. All such payments of principal and interest
with respect to Alternative Currency Advances shall be made in the Alternative
Currency in which such Alternative Currency Advance was made, in funds
customary for the settlement of international transactions in such Alternative
Currency at the time of any such payment, at the time and place notified by the
Bank to the Borrower.
All Loans made by the Bank, the respective types, maturities and
Alternative Currencies (if applicable) thereof and all repayments of the
principal thereof shall be recorded by the Bank and, prior to any transfer
hereof, appropriate notations to evidence the foregoing information with
respect to each such Loan then outstanding shall be endorsed by the Bank on the
schedule attached hereto, or on a continuation of such schedule attached to and
made a part hereof; PROVIDED that the failure of the Bank to make any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
<PAGE> 85
This note is one of the Notes referred to in the Credit Agreement
dated as of December 20, 1995 among The Lincoln Electric Company, the banks
listed on the signature pages thereof and Society National Bank, as Agent (as
the same may be amended from time to time, the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the prepayment
hereof and the acceleration of the maturity hereof.
[The Lincoln Electric Company has, pursuant to the provisions of
the Credit Agreement, unconditionally guaranteed the payment in full of the
principal of and interest on this note.]*
[NAME OF BORROWER]
By____________________
Name:
Title:
[By_____________________
Name:
Title:]**
__________________________________
*To be deleted in case of Notes executed and delivered by The Lincoln
Electric Company.
**To be included in case of Notes executed and delivered by The Lincoln
Electric Company.
2
<PAGE> 86
LOANS AND PAYMENTS OF PRINCIPAL
__________________________________________________________________________
Amount Type Alternative Amount of
of of Currency Principal Maturity Notation
Date Loan Loan (if applicable) Repaid Date Made By
- --------------------------------------------------------------------------
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
3
<PAGE> 87
EXHIBIT B
Form of Alternative Currency Quote Request
------------------------------------------
[Date]
To: Society National Bank
(the "Agent")
From: [Name of Borrower]
Re: Credit Agreement (the "Credit Agreement") dated as of December 20,
1995 among The Lincoln Electric Company, the Banks listed on
the signature pages thereof and the Agent
We hereby give notice pursuant to Section 2.14 of the Credit
Agreement that we request Alternative Currency Quotes for the following
proposed Alternative Currency Advance(s):
Date of Alternative Currency Advance(s): _________________
Principal Amount Alternative Currency Interest Period
- ---------------- -------------------- ---------------
<PAGE> 88
Terms used herein have the meanings assigned to them in the Credit Agreement.
[NAME OF BORROWER]
By __________________________
Name:
Title:
[By __________________________
Name:]
Title: *
__________________________________
*To be included in case of an Alternative Currency Quote Request delivered
by The Lincoln Electric Company.
2
<PAGE> 89
EXHIBIT C
Form of Invitation for Alternative Currency Quote
-------------------------------------------------
To: [Name of Bank]
Re: Invitation for Alternative Currency Quotes to [Name of Borrower]
(the "Borrower")
Pursuant to Section 2.14 of the Credit Agreement dated as of
December 20, 1995 among The Lincoln Electric Company, the Banks parties thereto
and the undersigned, as Agent, we are pleased on behalf of the Borrower to
invite you to submit Alternative Currency Quotes to the Borrower for the
following proposed Alternative Currency Advance(s):
Date of Alternative Currency Advance(s): _______________
Principal Amount Alternative Currency Interest Period
- ---------------- -------------------- ---------------
Please respond to this invitation to the Borrower by no later than
2:00 P.M. (Cleveland, Ohio time) on [date].
SOCIETY NATIONAL BANK
By _________________________
Authorized Officer
<PAGE> 90
EXHIBIT D
Form of Alternative Currency Quote
To: [Name of Borrower]
(the "Borrower")
Re: Alternative Currency Quote
In response to the invitation by Society National Bank on your
behalf dated ____________, 199_, we hereby make the following Alternative
Currency Quote on the following terms:
1. Quoting Bank: ________________________
2. Person to contact at Quoting Bank:
________________________
3. Date of Alternative Currency Advance(s):
______________*
4. Alternative Currency Lending Office:
________________**
__________________________________
*As specified in the related Invitation.
** Specify Alternative Currency Lending Office with respect to each
Alternative Currency.
<PAGE> 91
5. We hereby offer to make Alternative Currency Advance(s) in the
following principal amounts, for the following Interest Periods and
at the following rates:
Principal Alternative Interest Interest
--------- ----------- -------- --------
Amount* Currency Period Rate
------ -------- ------ ----
Very truly yours,
[NAME OF BANK]
Dated: ___________________
By: ___________________
Authorized Officer
__________________________________
*Principal amount bid for each Interest Period and each Alternative
Currency may not exceed principal amount requested. Specify aggregate
limitation if the sum of the individual offers exceeds the amount the Bank is
willing to lend.
2
<PAGE> 92
EXHIBIT E
OPINION OF
FREDERICK G. STUEBER
COUNSEL FOR THE COMPANY
[Effective Date]
To the Banks and the Agent
Referred to Below
c/o Society National Bank
127 Public Square
Cleveland, Ohio 44114-1306
U.S.A.
Re: The Lincoln Electric Company
Ladies and Gentlemen:
I have acted as counsel for The Lincoln Electric Company, an
Ohio corporation (the "Company"), in connection with the Credit Agreement (the
"Credit Agreement") dated as of December 20, 1995 among the Company, the banks
listed on the signature pages thereof and Society National Bank, as Agent,
providing for the establishment of a revolving credit facility in the aggregate
principal amount of $200,000,000. This opinion letter is furnished to you at
the request of the Company pursuant to Section 3.01(c) of the Credit Agreement.
Terms defined in the Credit Agreement are used herein as therein defined.
I have examined such documents, records and matters of law as
I have deemed necessary for purposes of this opinion. Upon the basis of the
foregoing and subject to the qualifications, limitations, exceptions and
assumptions hereinafter set forth, I am of the opinion that:
1. The Company is a corporation duly formed,
validly existing and in good standing under the laws of the
State of Ohio, with corporate power and authority to own its
own properties and conduct its business as now conducted.
2. The Credit Agreement has been duly
authorized, executed, and delivered by the Company,
<PAGE> 93
is a valid and binding agreement of the Company and is
enforceable against the Company in accordance with its terms.
3. The Notes have been duly authorized,
executed, and delivered by the Company, are valid and binding
obligations of the Company and are enforceable against the
Company in accordance with their terms.
4. No registration with or approval by any
governmental agency is required of the Company as a condition
to the valid execution and delivery or the performance of the
Credit Agreement, including the issuance of the Notes.
5. Neither the execution and delivery by the
Company of the Credit Agreement nor the performance of the
transactions therein contemplated, including the issuance of
the Notes, will result in the violation of any statute or
regulation or any order or decree known to us of any court or
governmental authority binding upon the Company or its
property, or conflict with or result in a default under any of
the provisions of the Company's Amended Articles of
Incorporation, as amended, or Regulations or any indenture,
loan agreement or other agreement known to us by which the
Company or any of its Subsidiaries is bound, or result in the
creation or imposition of any Lien on any asset of the Company
or any of its Subsidiaries.
6. The Credit Agreement constitutes a valid and
binding agreement of each Subsidiary Borrower and is
enforceable against each Subsidiary Borrower, respectively, in
accordance with its terms and the Notes of each Subsidiary
Borrower constitute valid and binding obligations under New
York law of such Subsidiary Borrower and are enforceable
against each Subsidiary Borrower, respectively, in accordance
with their terms.
7. The choice of New York law to govern the Credit
Agreement and the Notes in which such choice is stipulated is
a valid and effective choice of law under the laws of the
State of Ohio and adherence to existing judicial precedents
would require a court sitting in the State of Ohio to abide by
such choice of law.
2
<PAGE> 94
My opinion that the Credit Agreement and the Notes are
enforceable against the Company and the Borrower Subsidiaries in accordance
with their terms, is subject to the qualification that enforceability is
subject to, and may be limited or affected by (i) bankruptcy, insolvency,
reorganization and other similar laws affecting the rights or remedies of
creditors generally and (ii) general principles of equity regardless of whether
such enforceability is considered in a proceeding in equity or at law.
My opinions herein are limited to the laws of the State of
Ohio and the federal laws of the United States. This opinion letter is
furnished by me, as counsel for the Company, to you solely for your benefit in
connection with Loans made under the Credit Agreement upon the understanding
that we are not hereby assuming any professional responsibility to any other
person whatsoever.
Very truly yours,
3
<PAGE> 95
EXHIBIT F
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
[Effective Date]
To the Banks and the Agent
Referred to Below
c/o Society National Bank
127 Public Square
Cleveland, Ohio 44114-1306
U.S.A.
Ladies and Gentlemen:
We have participated in the preparation of the Credit
Agreement (the "Credit Agreement") dated as of December 20, 1995 among The
Lincoln Electric Company, an Ohio corporation (the "Company"), the banks listed
on the signature pages thereof (the "Banks") and Society National Bank, as
Agent (the "Agent"), and have acted as special counsel for the Agent for the
purpose of rendering this opinion pursuant to Section 3.01(d) of the Credit
Agreement. Terms defined in the Credit Agreement are used herein as therein
defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that
the Credit Agreement constitutes a valid and binding agreement of the Company
and its Notes constitute valid and binding obligations of the Company, in each
case enforceable in accordance with their respective terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability.
<PAGE> 96
We are members of the Bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York and the
federal laws of the United States of America. In giving the foregoing opinion,
(i) we have relied, without independent investigation, as to all matters
governed by the law of the State of Ohio, on the opinion of Frederick G.
Stueber, Vice President, General Counsel and Secretary for the Company, dated
today's date, copies of which have been delivered to you and, (ii) we express
no opinion as to the effect (if any) of any law of any jurisdiction (except the
State of New York) in which any Bank is located which limits the rate of
interest that such Bank may charge or collect.
This opinion is rendered solely to you in connection with the
above matter. This opinion may not be relied upon by you for any other purpose
or relied upon by or furnished to any other person without our prior written
consent.
Very truly yours,
2
<PAGE> 97
EXHIBIT G
FORM OF ELECTION TO PARTICIPATE
, 199__
SOCIETY NATIONAL BANK, as Agent for
the Banks named in the
Credit Agreement dated as of December 20, 1995
among The Lincoln Electric Company,
such Banks and such Agent (the
"Credit Agreement")
Ladies and Gentlemen:
Reference is made to the Credit Agreement described above.
Terms not defined herein which are defined in the Credit Agreement shall have
for the purposes hereof the meaning provided therein.
The undersigned, [name of Eligible Subsidiary], a
[jurisdiction of incorporation] corporation, hereby elects to be an Eligible
Subsidiary for purposes of the Credit Agreement, effective from the date hereof
until an Election to Terminate shall have been delivered on behalf of the
undersigned in accordance with the Credit Agreement. The undersigned confirms
that the representations and warranties set forth in Article IX of the Credit
Agreement (other than the representation and warranty set forth in Section
9.04) are true and correct as to the undersigned as of the date hereof, and the
undersigned hereby agrees to perform all the obligations of an Eligible
Subsidiary under, and to be bound in all respects by the terms of, the Credit
Agreement, including without limitation Section 11.08 thereof, as if the
undersigned were a signatory party thereto.
<PAGE> 98
The address to which all notices to the undersigned under the
Credit Agreement should be directed is: _____________.
This instrument shall be construed in accordance with and
governed by the laws of the State of New York. This instrument may be signed
in any number of counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument.
Very truly yours,
[NAME OF ELIGIBLE SUBSIDIARY]
By____________________________
Name:
Title:
The undersigned hereby confirms that (i) [name of Eligible
Subsidiary] is an Eligible Subsidiary for purposes of the Credit Agreement
described above and (ii) the representation and warranty set forth in Section
4.02(b) of the Credit Agreement is true and correct as to [name of Eligible
Subsidiary] as of the date hereof.
THE LINCOLN ELECTRIC COMPANY
By____________________________
Name:
Title:
By____________________________
Name:
Title:
2
<PAGE> 99
Receipt of the above Election to Participate is hereby
acknowledged on and as of the date set forth above.
SOCIETY NATIONAL BANK,
as Agent
By____________________________
Name:
Title:
3
<PAGE> 100
EXHIBIT H
FORM OF ELECTION TO TERMINATE
, 199_
SOCIETY NATIONAL BANK, as Agent for
the Banks named in the Credit
Agreement dated as of __________ __, 1995
among The Lincoln Electric Company,
such Banks and such Agent (the
"Credit Agreement")
Ladies and Gentlemen:
Reference is made to the Credit Agreement described above.
Terms not defined herein which are defined in the Credit Agreement shall have
for the purposes hereof the meaning provided therein.
The undersigned, [name of Eligible Subsidiary], a
[jurisdiction of incorporation] corporation, hereby elects to terminate its
status as an Eligible Subsidiary for purposes of the Credit Agreement,
effective as of the date hereof. The undersigned hereby represents and
warrants that all principal and interest on all Notes of the undersigned and
all other amounts payable by the undersigned pursuant to the Credit Agreement
have been paid in full on or prior to the date hereof. Notwithstanding the
foregoing, this Election to Terminate shall not affect any obligation of the
undersigned under the Credit Agreement or under any Note heretofore incurred.
<PAGE> 101
This instrument shall be construed in accordance with and
governed by the laws of the State of New York.
This instrument may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
Very truly yours,
[NAME OF ELIGIBLE SUBSIDIARY]
By___________________________
Name:
Title:
The undersigned hereby confirms that the status of [name of
Eligible Subsidiary] as an Eligible Subsidiary for purposes of the Credit
Agreement described above is terminated as of the date hereof.
THE LINCOLN ELECTRIC COMPANY
By__________________________
Name:
Title:
By__________________________
Name:
Title:
Receipt of the above Election to Terminate is hereby
acknowledged on and as of the date set forth above.
SOCIETY NATIONAL BANK,
as Agent
By____________________________
Name:
Title:
2
<PAGE> 102
EXHIBIT I-1
OPINION OF
COUNSEL FOR THE BORROWER
(BORROWINGS BY ELIGIBLE SUBSIDIARIES)
[Dated as provided
in Section 3.03 of
the Credit Agreement]
To the Banks and the Agent
Referred to Below
c/o Society National Bank,
as Agent
127 Public Square
Cleveland, Ohio 44114-1306
U.S.A.
Ladies and Gentlemen:
I am counsel to [name of Eligible Subsidiary], a [jurisdiction
of incorporation] corporation (the "Borrower"), and give this opinion at the
request of the Borrower pursuant to Section 3.03(b) of the Credit Agreement
(the "Credit Agreement") dated as of December 20, 1995 among The Lincoln
Electric Company (the "Company"), the banks listed on the signature pages
thereof and Society National Bank, as Agent. Terms defined in the Credit
Agreement are used herein as therein defined.
I have examined originals or copies, certified or otherwise
identified to my satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as I have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of [jurisdiction of
incorporation], and is a Wholly-Owned Consolidated Subsidiary of the Company.
<PAGE> 103
2. The execution and delivery by the Borrower of its Election
to Participate and its Notes and the performance by the Borrower of the Credit
Agreement and its Notes are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws of the Borrower
or of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Borrower or any of its Subsidiaries or result in the creation
or imposition of any Lien on any asset of the Borrower or any of its
Subsidiaries.
3. The Credit Agreement constitutes a valid and binding
agreement of the Borrower and its Notes constitute valid and binding
obligations of the Borrower.
4. [Other than as set forth in paragraph 5 hereof,] there is
no income, stamp or other tax of [jurisdiction of incorporation and, if
different, principal place of business], or any taxing authority thereof or
therein, imposed by or in the nature of withholding or otherwise, which is
imposed on any payment to be made by the Borrower pursuant to the Credit
Agreement or its Notes, or is imposed on or by virtue of the execution,
delivery or enforcement of its Election to Participate or of its Notes.
[5. Tax disclosure]
Very truly yours,
2
<PAGE> 104
EXHIBIT I-2
OPINION OF
COUNSEL FOR THE COMPANY
(BORROWINGS BY ELIGIBLE SUBSIDIARIES)
[Dated as provided
in Section 3.03 of
the Credit Agreement]
To the Banks and the Agent
Referred to Below
c/o Society National Bank,
as Agent
127 Public Square
Cleveland, Ohio 44114-1306
U.S.A.
Ladies and Gentlemen:
I am counsel to The Lincoln Electric Company, an Ohio
corporation (the "Company"), and give this opinion at the request of the
Company pursuant to Section 3.03(b) of the Credit Agreement (the "Credit
Agreement") dated as of December 20, 1995 among the Company, the banks listed
on the signature pages thereof and Society National Bank, as Agent. Terms
defined in the Credit Agreement are used herein as therein defined.
I have examined originals or copies, certified or otherwise
identified to my satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as I have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, I am of the opinion that the
execution and delivery by the [name of Eligible Subsidiary] (the "Borrower") of
its Election to Participate and its Notes and the performance by the Borrower
of the Credit Agreement and its Notes do not contravene, or constitute a
default under, any provision of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Company or any of its Subsidiaries
or result in the creation or imposition of any Lien on any asset of the Company
or any of its Subsidiaries.
Very truly yours,
<PAGE> 105
EXHIBIT J
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, 199_ among [ASSIGNOR] (the
"Assignor"), [ASSIGNEE] (the "Assignee"), [THE LINCOLN ELECTRIC COMPANY (the
"Company")] and SOCIETY NATIONAL BANK, as Agent (the "Agent").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the
"Agreement") relates to the Credit Agreement dated as of December 20, 1995
among [The Lincoln Electric Company (the "Company")]/[the Company], the
Assignor and the other Banks party thereto, as Banks, and the Agent (as
amended, the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor
has a Commitment to make Loans in an aggregate principal amount at any time
outstanding not to exceed $__________;
WHEREAS, Committed Loans made by the Assignor under the Credit
Agreement in the aggregate principal amount of $__________ are outstanding at
the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all
of the rights of the Assignor under the Credit Agreement in respect of a
portion of its Commitment thereunder in an amount equal to $__________ (the
"Assigned Amount"), together with a corresponding portion of its outstanding
Committed Loans, and the Assignee proposes to accept assignment of such rights
and assume the corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Credit
Agreement.
<PAGE> 106
SECTION 2. ASSIGNMENT. The Assignor hereby assigns and sells
to the Assignee all of the rights of the Assignor under the Credit Agreement to
the extent of the Assigned Amount, and the Assignee hereby accepts such
assignment from the Assignor and assumes all of the obligations of the Assignor
under the Credit Agreement to the extent of the Assigned Amount, including the
purchase from the Assignor of the corresponding portion of the principal amount
of the Committed Loans made by the Assignor outstanding at the date hereof.
Upon the execution and delivery hereof by the Assignor, the Assignee[, the
Company] and the Agent and the payment of the amounts specified in Section 3
required to be paid on the date hereof (i) the Assignee shall, as of the date
hereof, succeed to the rights and be obligated to perform the obligations of a
Bank under the Credit Agreement with a Commitment in an amount equal to the
Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date
hereof, be reduced by a like amount and the Assignor released from its
obligations under the Credit Agreement to the extent such obligations have been
assumed by the Assignee. The assignment provided for herein shall be without
recourse to the Assignor.
SECTION 3. PAYMENTS. As consideration for the assignment and
sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor
on the date hereof in Federal funds the amount heretofore agreed between them.*
It is understood that facility fees accrued to the date hereof are for the
account of the Assignor and such fees accruing from and including the date
hereof are for the account of the Assignee. Each of the Assignor and the
Assignee hereby agrees that if it receives any amount under the Credit
Agreement which is for the account of the other party hereto, it shall receive
the same for the account of such other party to the extent of such other
party's interest therein and shall promptly pay the same to such other party.
SECTION 4. CONSENT OF [THE COMPANY AND] THE AGENT. This
Agreement is conditioned upon the consent of [the Company and] the Agent
pursuant to Section 11.06(c) of the Credit Agreement. The execution of this
Agreement by [the Company and] the Agent is evidence of this consent.
__________________________________
* Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any portion
of any upfront fee to be paid by the Assignor to the Assignee. It may be
preferable in an appropriate case to specify these amounts generically or by
formula rather than as a fixed sum.
2
<PAGE> 107
Pursuant to Section 11.06(c) the Company agrees to execute and deliver a Note
[and to cause each Eligible Subsidiary to execute and deliver a Note] payable
to the order of the Assignee to evidence the assignment and assumption provided
for herein.
SECTION 5. NON-RELIANCE ON ASSIGNOR. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition, or financial or other
statements of any Borrower, or the validity and enforceability of the
obligations of any Borrower in respect of the Credit Agreement or any Note.
The Assignee acknowledges that it has, independently and without reliance on
the Assignor, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement and will continue to be responsible for making its own independent
appraisal of the business, affairs and financial condition of the Borrowers.
SECTION 6. GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York.
SECTION 7. COUNTERPARTS. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their duly authorized officers as of the date
first above written.
[ASSIGNOR]
By_________________________
Name:
Title:
[ASSIGNEE]
By__________________________
Name:
Title:
3
<PAGE> 108
[THE LINCOLN ELECTRIC COMPANY
By__________________________
Name:
Title:
By__________________________
Name:
Title:]
SOCIETY NATIONAL BANK,
as Agent
By__________________________
Name:
Title:
4
<PAGE> 109
EXHIBIT K
EXTENSION AGREEMENT
The Lincoln Electric Company
22801 St. Clair Avenue
Cleveland, Ohio 44117-1199
Society National Bank, as Agent
under the Credit Agreement
referred to below
Gentlemen:
The undersigned hereby agree to extend, effective [Extension
Date], the Termination Date under the Credit Agreement dated as of December 20,
1995 among The Lincoln Electric Company, the Banks listed therein and Society
National Bank, as Agent (as amended, the "Credit Agreement") for one year to
[date to which the Termination Date is extended]. Terms defined in the Credit
Agreement are used herein as therein defined.
This Extension Agreement shall be construed in accordance with
and governed by the law of the State of New York.
[NAME OF BANK]
By_________________________
Title:
Agreed and accepted:
THE LINCOLN ELECTRIC COMPANY
By__________________________
Title:
SOCIETY NATIONAL BANK, as Agent
By_____________________________
Title:
<PAGE> 110
EXHIBIT L
Form of Money Market Quote Request
[Date]
To: Society National Bank (the "Agent")
From: [Name of Borrower]
Re: Credit Agreement (as amended, the "Credit Agreement") dated as
of December 20, 1995 among The Lincoln Electric Company, the
Banks listed on the signature pages thereof and the Agent
We hereby give notice pursuant to Section 2.15 of the Credit
Agreement that we request Money Market Quotes for the following proposed Money
Market Borrowing(s):
Date of Borrowing: ______________________
Principal Amount* Interest Period**
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
__________________________________
*Amount must be $____________ or a larger multiple of $______________.
**Not less than one month (LIBOR Auction or not less than 30 days
(Absolute Rate Auction), subject to the provisions of the definition of
Interest Period.
<PAGE> 111
Terms used herein have the meanings assigned to them
in the Credit Agreement.
[NAME OF BORROWER]
By_____________________________
Title:
2
<PAGE> 112
EXHIBIT M
Form of Invitation for Money Market Quotes
------------------------------------------
To: [Name of Bank]
Re: Invitation for Money Market Quotes to [Name of Borrower] (the
"Borrower")
Pursuant to Section 2.15 of the Credit Agreement dated as of December
20, 1995 among The Lincoln Electric Company, the Banks parties thereto and the
undersigned, as Agent, we are pleased on behalf of the Borrower to invite you
to submit Money Market Quotes to the Borrower for the following proposed Money
Market Borrowing(s):
Date of Borrowing: ______________________
Principal Amount Interest Period
- ---------------- ---------------
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Please respond to this invitation by no later than [2:00 P.M.]
(Cleveland, Ohio time) on [date].
SOCIETY NATIONAL BANK
By_____________________
Authorized Officer
<PAGE> 113
EXHIBIT N
Form of Money Market Quote
--------------------------
To: Society National Bank
Re: Money Market Quote to [Name of Borrower] (the "Borrower")
In response to your invitation on behalf of the Borrower dated
_____________, 19___, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank: _________________________________
2. Person to contact at Quoting Bank:
_________________________________
3. Date of Borrowing: ______________________*
4. We hereby offer to make Money Market Loan(s) in the following
principal amounts, for the following Interest Periods and at the
following rates:
<TABLE>
<CAPTION>
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
------ ------ ------- --------------
<S> <C>
$
$
[Provided, that the aggregate principal amount of Money Market
Loans for which the above offers may be accepted shall not exceed
$_______________.]**
</TABLE>
__________________________________
*As specified in the related Invitation.
**Principal amount bid for each Interest Period may not exceed
principal amount requested. Specify aggregate limitation if the sum of the
individual offers exceeds the amount the Bank is willing to lend. Bids must be
made for $5,000,000 or a larger multiple of $1,000,000.
<PAGE> 1
EXHIBIT 10C
AMENDMENT NO. 2
to
THE LINCOLN ELECTRIC COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Lincoln Electric Company Supplemental Executive Retirement Plan,
effective January 1, 1994, is hereby amended, effective September 28, 1995,
pursuant to Section 9.1 thereof, as follows:
1. Section 2.1 shall be amended by adding thereto the following:
"SPOUSE" means the person to whom a Participant is legally married at
the specified time.
2. Article VI shall be amended to read as follows:
ARTICLE VI
PAYMENT OF BENEFIT ON OR AFTER DEATH OR DISABILITY
Section 6.1 Commencement of Benefit Payments Before Vesting.
-----------------------------------------------
If a Participant dies or becomes Disabled while employed by his
Employer but prior to becoming entitled to a Retirement Benefit under Section
5.1, the Committee may provide that the Participant or his surviving Spouse
shall receive a Benefit computed under Section 4.2, as if the Participant had
retired immediately prior to his death or Disability and, if such death or
Disability occurred prior to his attainment of age fifty-five (55), as if he
had attained such age.
Section 6.2 Commencement of Benefit Payments After Vesting.
----------------------------------------------
If a Participant dies or becomes Disabled while employed by his
Employer after becoming entitled to a Retirement Benefit under Section 5.1 but
prior to commencing the receipt of his Benefit, he or his surviving Spouse
shall receive a Benefit computed under Section 4.2 as if the Participant had
retired immediately prior to his death or Disability at his then attained Age.
Section 6.3 Form of Payment.
---------------
Any Benefit payable under this Article VI to a Participant who is
Disabled shall be paid in any form permitted under and determined in accordance
with Section 5.2. Any Benefit payable under this Article to the Spouse of a
Participant who has died prior to commencing the receipt of his Benefit shall
be paid
<PAGE> 2
2
in the form of a 100% pre-retirement spouse annuity based upon the
Participant's Benefit as though he had retired the day before his death and
elected a 100% joint and survivor annuity form of benefit with his Spouse as
the survivor beneficiary and determined in accordance with Section 5.2.
Section 6.4 Committee Action.
----------------
The Committee may, in its sole discretion, provide that the amount of
the Retirement Benefit payable on death or Disability shall be enhanced
(including, but limited to, an enhancement that takes into account projected
additional Years of Service or increases in Compensation that would have
occurred absent the Participant' s death or Disability).
The undersigned, pursuant to the approval of the Board on September
28, 1995, does herewith execute this Amendment No. 2 to The Lincoln Electric
Company Supplemental Executive Retirement Plan.
/s/ Donald F. Hastings
----------------------------------
Chairman of the Board of Directors
<PAGE> 3
Amendment No. 1
to
The Lincoln Electric company
Supplemental Executive Retirement Plan
The Lincoln Electric Company Supplemental Executive Retirement Plan,
effective January 1, 1994, is hereby amended, pursuant to Section 9.1 thereof,
as follows:
1. A new Section 4.5 shall be added to the Plan to read as follows:
Section 4.5 MAXIMUM RETIREMENT BENEFIT. Anything in this Plan to the
contrary notwithstanding, the maximum Retirement Benefit payable under
this Plan for a Participant shall not exceed $300,000, expressed as a
single life annuity payable over the Participant's life, unless otherwise
determined by the Committee.
2. The definition of "compensation" in Section 2.1 shall be amended and
restated to read as follows:
"COMPENSATION" means the amount of a Participant's compensation as
defined in Section 415 (c)(3) of the Code paid by the Controlled Group,
but EXCLUDING ANY COMPENSATION RELATED TO EQUITY SECURITIES OF THE
COMPANY (INCLUDING COMPENSATION RESULTING FROM SECTION 83(B) ELECTIONS
UNDER THE CODE) AND including any salary reduction contributions that are
excluded from his gross income under Sections 125, 129 or 402 (a)(8) of
the Code, and including any compensation which the Participant defers
under any non-qualified
<PAGE> 4
deferred compensation plan of the Controlled Group. (new language
underlined)
3. The third sentence of the definition of "Qualified Plan Benefit"
in Section 2.1 shall be amended and restated as follows:
For purposes of this definition, "employer-provided benefits" means
all qualified retirement benefits funded exclusively by employer
contributions (and earnings thereon), and shall include any previous
distribution of such benefits made prior to a Participant's ATTAINMENT OF
AGE 65 OR THE ACTUAL RETIREMENT DATE, IF EARLIER, including, but not
limited to, in-service withdrawals, retirement and disability benefits, or
distributions pursuant to any domestic relations order. (new language
underlined)
The undersigned, pursuant to the approval of the Board on May 24,
1995, does herewith execute this Amendment No. 1 to The Lincoln Electric
Company Supplemental Executive Retirement Plan.
/s/ D. F. Hastings
-----------------------------------
Chairman of the Board of Directors
<PAGE> 5
THE LINCOLN ELECTRIC COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Working Copy, including Amendments Nos. 1 and 2
<PAGE> 6
THE LINCOLN ELECTRIC COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<TABLE>
<CAPTION>
Table of Contents
-----------------
Page
----
<S> <C> <C>
ARTICLE I - GENERAL
Section 1.1 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - DEFINITIONS AND USAGE
Section 2.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.2 Usage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III - ELIGIBILITY AND PARTICIPATION
Section 3.1 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.2 Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV - RETIREMENT BENEFIT
Section 4.1 Retirement Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.2 Early Retirement Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.3 Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.4 Other Retirement Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.5 Maximum Retirement Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V - PAYMENT OF RETIREMENT BENEFIT
Section 5.1 Payment of Retirement Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5.2 Form of Retirement Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5.3 Payment Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VI - PAYMENT OF BENEFIT ON OR AFTER DEATH OR DISABILITY
Section 6.1 Commencement of Benefit Payments
Before Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6.2 Commencement of Benefit Payments
After Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6.3 Form of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6.4 Committee Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE VII - ADMINISTRATION
Section 7.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 7.2 Administrative Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 7.3 Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 7.4 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 7.5 Limitation of Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VIII- CLAIMS PROCEDURE
Section 8.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 8.2 Denials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 8.3 Appeals Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 8.4 Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IX - MISCELLANEOUS PROVISIONS
Section 9.1 Amendment and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 9.2 No Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 9.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 9.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 9.5 No Guarantee of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 9.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 9.7 Notification of Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 9.8 Bonding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 9.9 Withdrawal of Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE X - FUNDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
3
<PAGE> 8
THE LINCOLN ELECTRIC COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
PREAMBLE
WHEREAS, The Lincoln Electric Company (the "Company") has established one or
more qualified retirement plans that place limitations on the amount of
retirement benefits available to certain key management or highly compensated
employees; and
WHEREAS, the Company recognizes the unique qualifications of such employees and
the valuable services they provide and desires to establish an unfunded plan to
provide retirement benefits to eligible key employees that supplement what is
available under such qualified plans and Social Security; and
WHEREAS, the Company has determined that the implementation of such a plan will
best serve its interest in retaining key employees and ensuring benefit equity
among all employees;
NOW, THEREFORE, the Company hereby establishes The Lincoln Electric Company
Supplemental Executive Retirement Plan as hereinafter provided:
ARTICLE I
GENERAL
SECTION 1.1 EFFECTIVE DATE. This Plan shall be effective as of January 1,
1994. The rights, if any, of any person whose status as an employee of an
Employer has terminated shall be determined pursuant to the Plan as in effect
on the date such employee terminated, unless a subsequently adopted provision
of the Plan is made specifically applicable to such person.
SECTION 1.2 INTENT. The Plan is intended to be an unfunded plan primarily for
the purpose of providing deferred compensation to a select group of management
or highly compensated employees, as such group is described under Sections
201(2), 301(a)(3), and 401(a)(1) of ERISA.
ARTICLE II
DEFINITIONS AND USAGE
SECTION 2.1 DEFINITIONS. Wherever used in the Plan, the following words and
phrases, when capitalized, shall have the meaning set forth below unless the
context plainly requires a different meaning:
<PAGE> 9
"ACCOUNT" means the account established on behalf of the Participant as
described in Section 5.3.
2
<PAGE> 10
"ADMINISTRATOR" means the committee established by the Company pursuant to
Section 7.1 to administer the Plan.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended from time to time.
Any reference to a particular Code section shall include any provision that
modifies, replaces or supersedes it.
"COMMITTEE" means the Compensation Committee of the Board.
"COMPANY" means The Lincoln Electric Company, a corporation organized under the
laws of the state of Ohio, and any successor thereto.
"COMPENSATION" means the amount of a Participant's compensation as defined in
Section 415(c)(3) of the Code paid by the Controlled Group, but excluding any
compensation related to equity securities of the Company (including
compensation resulting from Section 83(b) elections under the Code) and
including any salary reduction contributions that are excluded from his gross
income under Sections 125, 129 or 402(a)(8) of the Code, and including any
compensation which the Participant defers under any nonqualified deferred
compensation plan of the Controlled Group.
"CONTROLLED GROUP" OR "CONTROLLED GROUP MEMBER" means the Company and any and
all other corporations, trades or businesses the employees of which are
required by Section 414 of the Code to be treated as a single employer. An
entity will only be considered as a Controlled Group Member during the period
that it is or was a member of the Company's Controlled Group.
"DISABILITY" or "DISABLED" means a physical or mental condition of a
Participant resulting from a bodily injury, disease or mental disorder that
renders him incapable of continuing his position of employment with the
Employer. Such Disability shall be determined by the Committee based upon
appropriate medical advice and examination, and taking into account the ability
of the Participant to continue in his same, or similar, position with his
Employer.
"EARLY RETIREMENT DATE" means the date the Participant has both attained age
fifty-five (55) and completed twenty-five (25) Years of Service.
"EMPLOYER" means the Company or any other Controlled Group Member that adopts
the Plan with the Company's consent. Any Controlled Group Member that adopts
the Plan and thereafter ceases to exist, ceases to be a member of the
Controlled Group or withdraws from the Plan shall no longer be considered an
Employer unless otherwise determined by the Committee.
3
<PAGE> 11
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time. Any reference to a particular ERISA section shall include
any provision that modifies, replaces, or supersedes it.
"FINAL AVERAGE PAY" means, with respect to any Participant, the average of his
annual Compensation over the three (3) full Years of Service within his final
consecutive full Years of Service (not to exceed seven (7) Years) that produce
the highest such average; provided, however, that if a Participant has fewer
than three (3) full Years of Service, "Final Average Compensation" shall mean
the average of his annual Compensation during all his Years of Service.
"NORMAL RETIREMENT DATE" means the date a Participant attains age sixty (60).
"PARTICIPANT" means an eligible employee of an Employer who is participating in
the Plan in accordance with Section 3.2.
"PARTICIPATION FACTOR" means the ratio determined based on active participation
under the Plan. Each employee, upon becoming a Participant, shall be credited
with a Participation Factor of two-tenths (.20) or such greater factor for such
Participant determined by the Committee, in its sole discretion. Thereafter, a
Participant will be credited with an additional one-tenth (.10) Participation
Factor for each Year of Service earned while an active Participant; fractional
credits shall apply for partial Years of Service. Notwithstanding the
foregoing, no Participation Factor shall exceed one (1.00), and Years of
Service earned after the last day of the Plan Year in which a Participant
attains age sixty-seven (67) shall be disregarded for purposes of determining
his Participation Factor. The Committee may, in its sole discretion, increase
or authorize an increase in a Participant's Participation Factor for any reason
deemed appropriate by the Committee (including, but not limited to, in
consideration of the Participant's execution of a release of all claims against
the Company and its affiliates in a form satisfactory to the Committee).
"PLAN" means The Lincoln Electric Company Supplemental Executive Retirement
Plan, as it may be amended from time to time.
"PLAN YEAR" means the calendar year.
"QUALIFIED PLAN BENEFIT" means the annual benefit, expressed in the form of a
single life annuity that can be derived from the sum of all employer-provided
benefits under all plans intended to be qualified under Section 401(a) of the
Code that are maintained by the Controlled Group. The amount of the single
life annuity determined for any such plan which does not provide for annuity
payments shall be based on a reasonable mortality assumption and an assumed
interest rate of eight percent (8%). For purposes of
4
<PAGE> 12
this definition, "employer-provided benefits" means all qualified retirement
benefits funded exclusively by employer contributions (and earnings thereon),
and shall include any previous distribution of such benefits made prior to a
Participant's attainment of age 65 or the actual retirement date, if earlier,
including, but not limited to, in-service withdrawals, retirement and
disability benefits, or distributions pursuant to any domestic relations order.
However, Participants' salary-reduction contributions described in Section
402(a)(8) of the Code (and any earnings thereon) shall not be treated as
benefits funded exclusively by Employer contributions. Notwithstanding the
foregoing, if the Committee grants additional Years of Service to a Participant
for purposes of determining his Retirement Benefit, "Qualified Plan Benefit"
shall also include the annual benefit, determined as above, to which such
Participant is entitled from all previous employers.
"RETIREMENT BENEFIT" or "BENEFIT" means the vested benefit determined under
Article IV.
"SOCIAL SECURITY BENEFIT" means the maximum annual benefit payable under the
Social Security Act, relating to Old-Age and Disability benefits, determined as
of a Participant's Normal Retirement Date, or upon his actual retirement date,
if later.
"SPOUSE" means the person to whom a Participant is legally married at the
specified time.
"TERMINATION FOR CAUSE" means the termination of a Participant's employment due
to any act by the Participant which the Committee, in its complete discretion,
determines to be inimical to the best interests of the Controlled Group,
including, but not limited to: (i) serious, willful misconduct in respect of
his duties for his Employer, (ii) conviction of a felony or perpetration of a
common law fraud, (iii) willful failure to comply with applicable laws with
respect to the execution of his Employer's business operations, (iv) theft,
fraud, embezzlement, dishonesty or other conduct that has resulted or is likely
to result in material economic damage to the Controlled Group, or (v) failure
to comply with requirements of his Employer's drug and alcohol abuse policies,
if any.
"YEARS OF SERVICE" means each full and partial calendar-year (in increments of
one-twelfth (1/12th) for each full month) of active employment with the
Controlled Group during which substantial services were rendered as an
employee, commencing on the date the Participant was first employed by the
Controlled Group and ending on the date he ceases to perform services for the
Controlled Group. At the discretion of the Committee, a Participant may be
granted additional Years of Service for purposes of determining his Retirement
Benefit.
5
<PAGE> 13
SECTION 2.2 USAGE. Except where otherwise indicated by the context, any
masculine terminology used herein shall also include the feminine and vice
versa, and the definition of any term herein in the singular shall also include
the plural and vice versa.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
SECTION 3.1 ELIGIBILITY. An employee of an Employer shall be eligible to
participate in the Plan only to the extent, and for the period, that he is a
member of a select group of management or highly compensated employees, as such
group is described under Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA.
SECTION 3.2 PARTICIPATION. An employee who is eligible to participate in the
Plan pursuant to Section 3.1 shall become a Participant at such time and for
such period he is designated as such by the Committee.
ARTICLE IV
RETIREMENT BENEFIT
SECTION 4.1 RETIREMENT BENEFIT. Except for Participants described in Section
4.4, the Retirement Benefit for a Participant who retires from the employ of
his Employer and all Controlled Group Members on or after his Normal Retirement
Date shall be an annual benefit, expressed as a single life annuity payable
over the Participant's life, in an amount equal to (a) minus (b), multiplied by
the Participant's Participation Factor, where:
(a) = one and four hundred forty-five thousandths percent
(1.445%) of such Participant's Final Average Pay
multiplied by his Years of Service, but not greater
than sixty-five percent (65%) of the Participant's
Final Average Pay; and
(b) = (i) the Social Security Benefit; plus
(ii) the Participant's Qualified Plan Benefit,
determined as of the valuation date(s) under
the applicable plans that immediately precede
the date the Participant retires and becomes
entitled to the distribution of his Benefit
under Article V or Article VI.
6
<PAGE> 14
For purposes of making the calculation in Subsection (a) of this Section, Years
of Service earned after the last day of the Plan Year in which the Participant
attains age sixty-five (65) shall not be counted.
SECTION 4.2 EARLY RETIREMENT BENEFIT. Except for Participants described in
Section 4.4, the Retirement Benefit for a Participant who retires from the
employ of his Employer and all Controlled Group Members on or after his Early
Retirement Date (but prior to his Normal Retirement Date) shall be the annual
benefit computed under Section 4.1, but based on a projected Social Security
Benefit equal to the maximum annual benefit payable under the provisions of the
Social Security Act as in effect on the date of such retirement indexed forward
to the Participant's Normal Retirement Date, and the annual Benefit so computed
shall be reduced based on the Participant's attained age when his Benefit
hereunder commences, according to the following table:
<TABLE>
<CAPTION>
Participant's Attained Age Percent Reduction
at Benefit Commencement in Benefit
-------------------------- -----------------
<S> <C>
55 36%
56 30%
57 24%
58 17%
59 9%
60 or later 0%
</TABLE>
SECTION 4.3 VESTING.
(a) Except as provided below or as otherwise provided in Section
4.4, a Participant who is in the active employ of an Employer
shall have a vested right to his Benefit only upon the
occurrence of any of the following:
(i) with approval by the Committee, the attainment of his
Early Retirement Date;
(ii) the attainment of his Normal Retirement Date;
(iii) his death prior to actual retirement; or
(iv) his Disability prior to actual retirement.
(b) Notwithstanding the preceding, a Participant's Benefits
hereunder shall be forfeited, and no Benefits shall be payable
hereunder with respect to him or his beneficiaries, in the
event of:
(i) his Termination for Cause prior to receiving all or a
portion of his Benefit; or
7
<PAGE> 15
(ii) his termination of employment with all Controlled
Group Members prior to satisfying the requirements
for vesting set forth in Subsection (a) of this
Section.
SECTION 4.4 OTHER RETIREMENT BENEFITS. In lieu of the Benefit provided under
Section 4.1 or 4.2, the Committee may, in its sole discretion, determine to
provide a Participant with an alternative supplemental pension benefit under
this Plan, provided that the Company and such Participant negotiate or have
previously negotiated a supplemental pension arrangement that provides for
amounts to be paid other than the Benefits otherwise provided pursuant to the
other terms hereof the amount of such Participant's supplemental pension, the
manner of payment thereof and any other terms or conditions applicable thereto
shall be as set forth in the agreement between the Company and the Participant
with respect to such arrangement. Articles VII, VIII and IX of the Plan shall
apply to the supplemental pension payable pursuant to any such arrangement to
the extent such Articles do not conflict with the provisions of such agreement.
SECTION 4.5 MAXIMUM RETIREMENT BENEFIT. Anything in this Plan to the contrary
notwithstanding, the maximum Retirement Benefit payable under this Plan for a
Participant shall not exceed $300,000, expressed as a single life annuity
payable over the Participant's life, unless otherwise determined by the
Committee.
ARTICLE V
PAYMENT OF RETIREMENT BENEFIT
SECTION 5.1 PAYMENT OF RETIREMENT BENEFITS. A Participant who retires under
this Plan from the employ of his Employer and all Controlled Group Members on
or after his Normal Retirement Date or Early Retirement Date shall then be
entitled to, and shall receive, a Retirement Benefit, determined in accordance
with Section 4.1 or 4.2, as applicable. Such Benefit shall commence to be paid
not later than ninety (90) days following the date the Participant's retirement
from his Employer becomes effective.
SECTION 5.2 FORM OF RETIREMENT BENEFITS. To the extent a Benefit is payable
to a Participant under Section 5.1, it shall be paid in the form of a single
life annuity, or any actuarially equivalent survivor annuity (determined using
a mortality assumption selected by the Committee in its sole discretion).
Notwithstanding the preceding, at the discretion of the Committee, such Benefit
may be paid in the form of a single lump sum that is the actuarially equivalent
to such single life annuity. Such actuarial equivalence shall be determined
using a mortality assumption selected by the Committee in its sole discretion
and an assumed interest rate of eight percent (8%).
8
<PAGE> 16
SECTION 5.3 PAYMENT PROCEDURE. The Employer shall establish and maintain an
Account for each Participant and beneficiary who is receiving a Benefit under
the Plan. Immediately prior to any distribution hereunder to any Participant
or beneficiary, the Employer shall credit the amount of such distribution to
such Account and then immediately distribute or commence to distribute the
amount so credited to the Participant, or as applicable, to his beneficiary.
Neither the Participant nor his beneficiary(s) shall have any interest or right
in any such Account at any time. All amounts credited to the Accounts
established under the Plan shall be credited solely for the purpose of
effecting distributions hereunder and shall remain assets of the Employer
subject to the claims of such Employer's general creditors.
ARTICLE VI
PAYMENT OF BENEFIT ON OR AFTER DEATH OR DISABILITY
SECTION 6.1 COMMENCEMENT OF BENEFIT PAYMENTS BEFORE VESTING. If a Participant
dies or becomes Disabled while employed by his Employer but prior to becoming
entitled to a Retirement Benefit under Section 5.1, the Committee may provide
that the Participant or his surviving Spouse shall receive a Benefit computed
under Section 4.2, as if the Participant had retired immediately prior to his
death or Disability and, if such death or Disability occurred prior to his
attainment of age fifty-five (55), as if he had attained such age.
SECTION 6.2 COMMENCEMENT OF BENEFIT PAYMENTS AFTER VESTING. If a Participant
dies or becomes Disabled while employed by his Employer after becoming entitled
to a Retirement Benefit under Section 5.1 but prior to commencing the receipt
of his Benefit, he or his surviving Spouse shall receive a Benefit computed
under Section 4.2 as if the Participant had retired immediately prior to his
death or Disability at his then attained age.
SECTION 6.3 FORM OF PAYMENT. Any Benefit payable under this Article VI to a
Participant who is Disabled shall be paid in any form permitted under and
determined in accordance with Section 5.2. Any Benefit payable under this
Article to the Spouse of a Participant who has died prior to commencing the
receipt of his Benefit shall be paid in the form of a 100% pre-retirement
spouse annuity based upon the Participant's Benefit as though he had retired
the day before his death and elected a 100% joint and survivor annuity form of
benefit with his Spouse as the survivor beneficiary and determined in
accordance with Section 5.2.
SECTION 6.4 COMMITTEE ACTION. The Committee may, in its sole discretion,
provide that the amount of the Retirement Benefit payable on death or
Disability shall be enhanced (including, but limited to, an enhancement that
takes into account projected additional Years of Service or increases in
Compensation that
9
<PAGE> 17
would have occurred absent the Participant's death or Disability).
ARTICLE VII
ADMINISTRATION
SECTION 7.1 GENERAL. The Company shall appoint the Administrator, consisting
of two or more individuals who have accepted appointment thereto. The members
of the Administrator shall serve at the discretion of the Company and may
resign by written notice to the Company. Vacancies in the Administrator shall
be filled by the Company. Except as otherwise specifically provided in the
Plan, the Administrator shall be responsible for administration of the Plan.
The Administrator shall be the "named fiduciary" within the meaning of Section
402(c)(2) of ERISA.
SECTION 7.2 ADMINISTRATIVE RULES. The Administrator may adopt such rules of
procedure as it deems desirable for the conduct of its affairs, except to the
extent that such rules conflict with the provisions of the Plan.
SECTION 7.3 DUTIES. The Administrator shall have
the following rights, powers and duties:
(a) The decision of the Administrator in matters within its
jurisdiction shall be final, binding and conclusive upon the
Employers and upon any other person affected by such decision,
subject to the claims procedure hereinafter set forth.
(b) The Administrator shall have the sole and absolute duty and
authority to interpret and construe the provisions of the
Plan, to determine eligibility for Benefits and the
appropriate amount of any Benefits, to decide any question
which may arise regarding the rights of employees,
Participants and beneficiaries and the amounts of their
respective interests, to construe any ambiguous provision of
the Plan, to correct any defect, supply any omission or
reconcile any inconsistency, to adopt such rules and to
exercise such powers as the Administrator may deem necessary
for the administration of the Plan, and to exercise any other
rights, powers or privileges granted to the Administrator by
the terms of the Plan.
(c) The Administrator may appoint such agents, counsel,
accountants, consultants and other persons as it deems
necessary to assist in the administration of the Plan,
including, without limitation, employees of an Employer.
10
<PAGE> 18
(d) The Administrator shall periodically report to the Board with
respect to the status of the Plan.
SECTION 7.4 FEES. No fee or compensation shall be paid to any person for
services as the Administrator.
SECTION 7.5 LIMITATION OF ACTIONS. No individual acting on behalf of the
Administrator pursuant to this Article shall have any right to vote upon or
decide any matters relating solely to his own rights under the Plan.
ARTICLE VIII
CLAIMS PROCEDURE
SECTION 8.1 GENERAL. Any claim for Benefits under the Plan shall be filed by
the Participant or beneficiary ("claimant") on the form prescribed for such
purpose with the Administrator. A decision on a claim shall be made within
ninety (90) days after receipt of the claim by the Administrator, unless
special circumstances require an extension of time for processing, in which
case a decision shall be rendered within a reasonable period of time, but not
later than one hundred and eighty (180) days after receipt of the claim.
SECTION 8.2 DENIALS. If a claim under the Plan is wholly or partially denied,
written notice of the decision shall be furnished to the claimant by the
Administrator. Such notice shall be written in a manner calculated to be
understood by the claimant and shall set forth:
(a) the specific reason or reasons for the denial;
(b) specific reference to the pertinent provision of the Plan upon
which the denial is based;
(c) a description of any additional material or information
necessary for the claimant to perfect the claim; and
(d) an explanation of the claim review procedure under Sections
8.3 and 8.4.
SECTION 8.3 APPEALS PROCEDURE. In order that a claimant may appeal a denial of
a claim, the claimant or the claimant's duly authorized representative may:
(a) request a review by written application to the Administrator,
or its designate, no later than sixty (60) days after receipt
by the claimant of written notification of denial of a claim;
(b) review pertinent documents; and
11
<PAGE> 19
(c) submit issues and comments in writing.
SECTION 8.4 REVIEW. A decision on review of a denied claim shall be made not
later than sixty (60) days after receipt of a request for review, unless
special circumstances require an extension of time for processing, in which
case a decision shall be rendered within a reasonable period of time, but not
later than one hundred and twenty (120) days after receipt of a request for
review. The decision on review shall be in writing, shall be written in a
manner calculated to be understood by the claimant, shall include the specific
reason(s) for the decision and the specific reference(s) to the pertinent
provisions of the Plan on which the decision is based and shall, to the extent
permitted by law, be final and binding on all interested persons.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1 AMENDMENT AND TERMINATION. The Company reserves the right to
amend or terminate the Plan in any manner that it deems advisable and at any
time, by a resolution of the Board. Notwithstanding the preceding, no amendment
or termination of the Plan shall reduce the vested Benefit of any Participant
determined as of the day immediately preceding the effective date of such
amendment or termination.
SECTION 9.2 NO ASSIGNMENT. A Participant shall not have the power, without
the consent of the Administrator, to pledge, transfer, assign, anticipate,
mortgage or otherwise encumber or dispose of in advance any interest in amounts
payable hereunder or any of the payments provided for herein, nor shall any
interest in amounts payable hereunder or in any payments be subject to seizure
for payments of any debts, judgments, alimony or separate maintenance, or be
reached or transferred by operation of law in the event of bankruptcy,
insolvency or otherwise. If a Participant (or beneficiary) attempts to pledge,
transfer, assign, anticipate, mortgage or otherwise encumber or dispose of in
advance any interest in a Participant's (or beneficiary's) Benefit, or if by
reason of his bankruptcy or other event that would permit any other individual
to obtain his right to his Benefit, he would not be able to enjoy his Benefit,
the Administrator may, in its sole discretion, terminate the Participant's (or
beneficiary's) interest in any Benefit to the extent the Administrator
considers it necessary or advisable to prevent or limit the effects of such
occurrence. Such termination shall be effected by filing a declaration with
the Company and delivering a copy of such declaration to the Participant (or
beneficiary).
Any Benefit affected by such termination of interests shall be retained by the
Company and, in the Administrator's sole discretion, may be paid or expended
for the benefit of the
12
<PAGE> 20
affected Participant (or beneficiary), his spouse, his children or any other
person dependent upon him, in such manner as the Administrator determines is
proper.
SECTION 9.3 SUCCESSORS AND ASSIGNS. The provisions of the Plan are binding
upon and inure to the benefit of each Employer, its successors and assigns, and
the Participant, his beneficiaries, heirs, legal representatives and assigns.
SECTION 9.4 GOVERNING LAW. The Plan shall be subject to and construed in
accordance with the laws of the State of Ohio, except to the extent pre-empted
by applicable Federal law.
SECTION 9.5 NO GUARANTEE OF EMPLOYMENT. Nothing contained in the Plan shall
be construed as a contract of employment or deemed to give any Participant the
right to be retained in the employ of any Controlled Group Member or any equity
or other interest in the assets, business or affairs of a Controlled Group
Member. No Participant hereunder shall have a security interest in assets of an
Employer used to make contributions or pay benefits.
SECTION 9.6 SEVERABILITY. If any provision of the Plan shall be held illegal
or invalid for any reason, such illegality or invalidity shall not affect the
remaining provisions of the Plan, but the Plan shall be construed and enforced
as if such illegal or invalid provision had never been included herein.
SECTION 9.7 NOTIFICATION OF ADDRESSES. Each Participant and each beneficiary
shall file with the Administrator, from time to time, in writing, the post
office address of the Participant, the post office address of each beneficiary,
and each change of post office address. Any communication, statement or notice
addressed to the last post office address filed with the Administrator (or if
no address was filed, then to the last post office address of the Participant
or beneficiary as shown on the Employer's records) shall be binding on the
Participant and each beneficiary for all purposes of the Plan and neither the
Administrator nor any Employer shall be obligated to search for or ascertain
the whereabouts of any Participant or beneficiary.
SECTION 9.8 BONDING. The Administrator and all agents and advisors employed
by it shall not be required to be bonded.
SECTION 9.9 WITHDRAWAL OF EMPLOYER. An Employer (other than the Company) may
withdraw from participation in the Plan and such withdrawal shall constitute a
termination of the Plan as to that Employer; provided, however, that the
Employer shall continue to be treated as an Employer under the Plan with
respect to those Participants (and beneficiaries) to whom the Employer owes a
continuing obligation under the Plan. An Employer may withdraw by executing a
written instrument of withdrawal, approved by its board of directors, and such
withdrawal shall be effective on the
13
<PAGE> 21
date designated in the instrument or, if no date is specified, on the date of
execution of the instrument.
ARTICLE X
FUNDING
The entire cost of this Plan shall be paid from the general assets of the
Employer. No liability for the payment of benefits under the Plan shall be
imposed upon any officer, trustee, employee, or agent of an Employer.
************
The undersigned, pursuant to the approval of the Board on July 21, 1994, does
herewith execute The Lincoln Electric Company Supplemental Executive Retirement
Plan.
/s/ Donald F. Hastings
----------------------------------
Chairman of the Board of Directors
14
<PAGE> 1
EXHIBIT 10D
[WORKING COPY INCORPORATING
AMENDMENTS NOS. 1, 2 AND 3]
DECEMBER 31, 1995
THE LINCOLN ELECTRIC COMPANY
DEFERRED COMPENSATION PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. DEFINITIONS AND CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-----------
Section 2.2. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
------------
ARTICLE III. PARTICIPATION AND DEFERRALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.1. Eligibility and Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-----------------------------
(a) Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-----------
(b) Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-------------
(c) Initial Year of Participation . . . . . . . . . . . . . . . . . . . . . . . . 4
-----------------------------
(d) Termination of Participation . . . . . . . . . . . . . . . . . . . . . . . . . 4
----------------------------
Section 3.2. Ineligible Participant . . . . . . . . . . . . . . . . . . . . . . . . . 5
----------------------
Section 3.3 Amount of Deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
------------------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.4. Modification of Deferral Commitments . . . . . . . . . . . . . . . . . . 5
------------------------------------
ARTICLE IV. PARTICIPANTS' ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.1. Establishment of Accounts . . . . . . . . . . . . . . . . . . . . . . . 5
-------------------------
Section 4.2. Elective Deferred Compensation; Employment Agreement Contributions . . . . . . . . . . . 6
------------------------------------------------------------------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.3. Determination of Accounts . . . . . . . . . . . . . . . . . . . . . . . 6
-------------------------
(a) Determination of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-------------------------
(b) Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
----------
Section 4.4. Adjustments to Accounts . . . . . . . . . . . . . . . . . . . . . . . . 6
-----------------------
Section 4.5. Statement of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 6
---------------------
Section 4.6. Vesting of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-------------------
ARTICLE V. FINANCING OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5.1. Financing of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . 7
---------------------
Section 5.2. Security For Benefits . . . . . . . . . . . . . . . . . . . . . . . . . 7
---------------------
Section 5.3. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-----------
ARTICLE VI. DISTRIBUTION OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6.1. Settlement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
---------------
Section 6.2. Amount to be Distributed . . . . . . . . . . . . . . . . . . . . . . . . 8
------------------------
Section 6.3. In-Service Distribution . . . . . . . . . . . . . . . . . . . . . . . . 8
-----------------------
Section 6.4. Form of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 8
--------------------
Section 6.5. Beneficiary Designation . . . . . . . . . . . . . . . . . . . . . . . . 9
-----------------------
Section 6.6. Facility of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 10
-------------------
Section 6.7. Hardship Distributions . . . . . . . . . . . . . . . . . . . . . . . . . 10
----------------------
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE VII. ADMINISTRATION, AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 7.1. Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--------------
Section 7.2. Plan Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
------------------
Section 7.3. Amendment, Termination and Withdrawal . . . . . . . . . . . . . . . . . . 11
-------------------------------------
Section 7.4. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
----------
Section 7.5. Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
------
Section 7.6. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 8.1. No Guarantee of Employment . . . . . . . . . . . . . . . . . . . . . . . . 12
--------------------------
Section 8.2. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--------------
Section 8.3. Interests Not Transferable . . . . . . . . . . . . . . . . . . . . . . . . 12
--------------------------
Section 8.4. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
------------
Section 8.5. Withholding of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--------------------
Section 8.6. Top-Hat Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
------------
</TABLE>
ii
<PAGE> 4
[Working Copy Incorporating
Amendments Nos. 1, 2, and 3]
December 31, 1995
THE LINCOLN ELECTRIC COMPANY
DEFERRED COMPENSATION PLAN
The Lincoln Electric Company Deferred Compensation Plan is made and executed
as of the 10th day of November, 1994 and is effective as of November 15, 1994.
ARTICLE I. PURPOSE
THE LINCOLN ELECTRIC COMPANY DEFERRED COMPENSATION PLAN (the "Plan"), is
hereby established by The Lincoln Electric Company to allow designated
management and highly compensated employees to defer a portion of their current
salary. It is intended that the Plan will aid in attracting and retaining
employees of exceptional ability by providing these benefits. The terms and
conditions of the Plan are set forth below.
ARTICLE II. DEFINITIONS AND CONSTRUCTION
Section 2.1. DEFINITIONS. Whenever the following terms are used in this
Plan they shall have the meanings specified below unless the context clearly
indicates to the contrary:
(a) "Account": The bookkeeping account maintained for each Participant
showing his interest under the Plan.
(b) "Accounting Date": December 31 of each year and the last day of any
calendar quarter in which a Participant's Settlement Date occurs.
(c) "Accounting Period": The period beginning on the day immediately
following an Accounting Date and ending on the next following Accounting
Date.
(d) "Administrator": The committee established pursuant to the provisions
of Section 7.1.
(e) "Base Salary": The base earnings earned by a Participant and payable
to him by the Corporation with respect to a Plan Year without regard to any
increases or decreases in base earnings as a result of an election to defer
base earnings under this Plan, or an election between benefits or cash
provided under a plan of the Corporation maintained pursuant to Section 125
or 401(k) of the Code.
<PAGE> 5
(f) "Beneficiary": The person or persons (natural or otherwise), within
the meaning of Section 6.5, who are entitled to receive distribution of the
Participant's Account balance in the event of the Participant's death.
(g) "Board": The Board of Directors of the Corporation.
(h) "Bonus": Any bonus earned by a Participant and payable to him by the
Corporation with respect to any bonus plan year ending within a Plan Year
without regard to any decreases as a result of an election to defer all or
any portion of a bonus under this Plan, or an election between benefits or
cash provided under a plan of the Corporation maintained pursuant to Section
125 or 401(k) of the Code.
(i) "Code": The Internal Revenue Code of 1986, as amended from time to
time; any reference to a provision of the Code shall also include any
successor provision thereto.
(j) "Committee": The Compensation Committee of the Board.
(k) "Compensation": The amount of Base Salary plus Bonuses earned by a
Participant and payable to him by the Corporation with respect to a Plan
Year.
(l) "Corporation": The Lincoln Electric Company or any successor or
successors thereto.
(m) "Deferral Commitment": An agreement by a Participant to have a
specified percentage or dollar amount of his Compensation deferred under the
Plan for a specified period in the future.
(n) "Deferral Period": Means the Plan Year for which a Participant has
elected to defer a portion of his Compensation.
(o) "Disability": The occurrence, while a Participant is an Employee, of
a physical or mental incapacity which is likely to be permanent and which
prevents a Participant from engaging in any occupation or performing any work
for compensation or profit for which he is qualified by education, training
or experience, as determined by the Administrator in its sole discretion on
the basis of medical evidence certified by a physician or physicians
designated by it.
(p) "Effective Date": November 15, 1994.
(q) "Employee": Any employee of the Corporation who is, as determined by
the Committee, a member of a "select
2
<PAGE> 6
group of management or highly compensated employees" of the Corporation,
within the meaning of Sections 201, 301 and 401 of ERISA, and who is
designated by the Committee as an Employee eligible to participate in the
Plan.
(r) "Employment Agreement": A written agreement between the Corporation
and an Employee that provides for the deferral of compensation, and that may
also provide for vesting, the crediting of earnings and other terms and
conditions with respect to such deferred compensation.
(s) "Employment Agreement Contribution": Any amount contributed to the
Plan by the Corporation pursuant to an Employment Agreement.
(t) "ERISA": The Employee Retirement Income Security Act of 1974, as
amended from time to time; any reference to a provision of ERISA shall also
include any successor provision thereto.
(u) "Financial Hardship": An unforeseeable financial emergency of the
Participant, determined by the Administrator on the basis of information
supplied by the Participant, arising from an illness, disability, casualty
loss, sudden financial reversal or other such unforeseeable occurrence, but
not including foreseeable events such as the purchase of a house or education
expenses for children.
(v) "Participant": An Employee participating in the Plan in accordance
with the provisions of Section 3.1 or a former Employee retaining benefits
under the Plan that have not been fully paid.
(w) "Participation Agreement": The Agreement submitted by a Participant
to the Administrator with respect to one or more Deferral Commitments.
(x) "Plan": The Plan set forth in this instrument as it may, from time to
time, be amended.
(y) "Plan Year": The 12-month period beginning January 1 through December
31; provided that the first plan year shall begin on November 15, 1994 and
end on December 31, 1994.
(z) "Retirement": Termination of employment with the Corporation on or
after attainment of age 60.
(aa) "Settlement Date": The date on which a Participant terminates
employment with the Corporation. Leaves of absence granted by the
Corporation will not be considered as termination of employment during the
term of such leave. Settlement Date shall also include with respect
3
<PAGE> 7
to any Deferral Period the date prior or subsequent to termination of
employment selected by a Participant in a Participation Agreement for
distribution of all or a portion of the amounts deferred during such Deferral
Period.
Section 2.2. CONSTRUCTION. The masculine gender, where appearing in the
Plan, shall be deemed to include the feminine gender, and the singular may
include the plural, unless the context clearly indicates to the contrary. The
words "hereof," "herein," "hereunder," and other similar compounds of the word
"here" shall mean and refer to the entire Plan, and not to any particular
provision or Section.
ARTICLE III. PARTICIPATION AND DEFERRALS
Section 3.1. Eligibility and Participation.
-----------------------------
(a) ELIGIBILITY. Eligibility to participate in the Plan for any Deferral
Period is limited to those management and/or highly compensated Employees of
the Corporation (i) who are designated, from time to time, by the Committee,
and (ii) who have elected to make the maximum elective contributions
permitted them under the terms of the Corporation's Employee Savings Plan for
such Deferral Period.
(b) PARTICIPATION. An eligible Employee may elect to participate in the
Plan with respect to any Deferral Period by submitting a Participation
Agreement to the Administrator by the last business day immediately preceding
the applicable Deferral Period.
(c) INITIAL YEAR OF PARTICIPATION. In the event that an individual first
becomes eligible to participate during a Deferral Period and wishes to elect
a Deferral Commitment with respect to the Compensation earned by and payable
to the individual during such Deferral Period, a Participation Agreement must
be submitted to the Administrator no later than 30 days following such
individual's initial eligibility. Any Deferral Commitments elected in such
Participation Agreement shall be effective only with regard to Compensation
earned following the submission of the Participation Agreement to the
Administrator. If an eligible Employee does not submit a Participation
Agreement within such period of time, such individual will not be eligible to
participate in the Plan until the first day of a Deferral Period subsequent
to the Deferral Period in which the individual initially became eligible to
participate.
(d) TERMINATION OF PARTICIPATION. Participation in the Plan shall
continue as long as the Participant is eligible to receive benefits under the
Plan.
4
<PAGE> 8
Section 3.2. INELIGIBLE PARTICIPANT. Notwithstanding any other provisions
of this Plan to the contrary, if the Administrator determines that any
Participant may not qualify as a "management or highly compensated employee"
within the meaning of ERISA, or regulations thereunder, the Administrator may
determine, in its sole discretion, that such Participant shall cease to be
eligible to participate in this Plan. Upon such determination, the Corporation
shall make an immediate lump sum payment to the Participant equal to the amount
credited to his Account. Upon such payment no benefit shall thereafter be
payable under this Plan either to the Participant or any Beneficiary of the
Participant, and all of the Participant's elections as to the time and manner
of payment of his Account will be deemed to be cancelled.
Section 3.3 AMOUNT OF DEFERRAL. With respect to each Plan Year, a
Participant may elect to defer a specified dollar amount or percentage of his
or her Compensation, provided the amount the Participant elects to defer under
this Plan and the Corporation's Employee Savings Plan shall not exceed 25% of
his Compensation with respect to such Plan Year. A Participant may choose to
have amounts deferred under this Plan deducted from his Base Salary, Bonus or a
combination of both. For the first Plan Year, a Participant may elect to defer
all or any portion of his or her Compensation earned or payable after the later
of the effective date of the Participation Agreement or the date of filing the
Participation Agreement with the Administrator, provided the total deferred
amount for such Plan Year does not exceed the annual limitation under this
Section 3.3 computed for the calendar year. A Participant may change the
dollar amount or percentage of his or her Compensation to be deferred by filing
a written notice thereof with the Administrator. Any such change shall be
effective as of the first day of the Plan Year immediately succeeding the Plan
Year in which such notice is filed with the Administrator. Notwithstanding the
foregoing, any Employment Agreement Contribution shall be deferred in
accordance with the terms of the Employment Agreement.
Section 3.4. MODIFICATION OF DEFERRAL COMMITMENTS. A Deferral Commitment
shall be irrevocable, except that the Administrator may, in its sole
discretion, permit a Participant to terminate, prospectively, any Deferral
Commitment for a Deferral Period. If a Participant terminates a Deferral
Commitment during a Deferral Period, such Participant will not be permitted to
enter into a new Deferral Commitment until the following Deferral Period.
ARTICLE IV. PARTICIPANTS' ACCOUNTS
Section 4.1. ESTABLISHMENT OF ACCOUNTS. The Corporation, through its
accounting records, shall establish an Account for each Participant. In
addition, the Corporation may
5
<PAGE> 9
establish one or more subaccounts of a Participant's Account, if the
Corporation determines that such subaccounts are necessary or appropriate in
administering the Plan.
Section 4.2. ELECTIVE DEFERRED COMPENSATION; EMPLOYMENT AGREEMENT
CONTRIBUTIONS. A Participant's Compensation that is deferred pursuant to a
Deferral Commitment shall be credited to the Participant's Account within
thirty days following the date the corresponding non-deferred portion of his
Compensation would have been paid to the Participant. The amount of the
Employment Agreement Contribution contributed for a Participant (if any) shall
be credited by the Corporation to the Participant's Account in accordance with
the terms of the Employment Agreement. Any withholding of taxes or other
amounts with respect to Deferred Compensation or with respect to an Employment
Agreement which is required by state, federal or local laws shall be withheld
from the Participant's Deferred Compensation or Employment Agreement
Contribution.
Section 4.3. Determination of Accounts.
--------------------------
(a) DETERMINATION OF ACCOUNTS. The amount credited to each Participant's
Account as of a particular date shall equal the deemed balance of such
Account as of such date. The balance in the Account shall equal the amount
credited pursuant to Section 4.2, and shall be adjusted in the manner
provided in Section 4.4.
(b) ACCOUNTING. The Corporation, through its accounting records, shall
maintain a separate and distinct record of the amount in each Account as
adjusted to reflect income, gains, losses, withdrawals and distributions.
Section 4.4. Adjustments to Accounts.
-----------------------
(a) Each Participant's Account shall be debited with the amount of any
distributions under the Plan to or on behalf of the Participant or, in the
event of his death, his Beneficiary during the Accounting Period ending on
such Accounting Date.
(b) The Participant's Account shall next be credited or debited, as the
case may be, with an income (loss) factor equal to an amount determined by
multiplying (i) the balance credited to the Participant's Account as of the
immediately preceding Accounting Date (as adjusted pursuant to Section 4.2(a)
for the current Accounting Date) by (ii) the rate of return for the
Accounting Period ending on such Accounting Date on deemed investments
provided for in Section 5.3.
Section 4.5. STATEMENT OF ACCOUNTS. As soon as practicable after the end
of each Plan Year, a statement shall be
6
<PAGE> 10
furnished to each Participant or, in the event of his death, to his Beneficiary
showing the status of his Account as of the end of the Plan Year, any changes
in his Account since the end of the immediately preceding Plan Year, and such
other information as the Administrator shall determine.
Section 4.6. VESTING OF ACCOUNTS. Subject to Section 5.1, each Participant
shall at all times have a nonforfeitable interest in his Account balance.
ARTICLE V. FINANCING OF BENEFITS
Section 5.1. FINANCING OF BENEFITS. Benefits payable under the Plan to a
Participant or, in the event of his death, to his Beneficiary shall be paid by
the Corporation from its general assets. The payment of benefits under the
Plan represents an unfunded, unsecured obligation of the Corporation.
Notwithstanding the fact that the Participants' Accounts may be adjusted by an
amount that is measured by reference to the performance of any deemed
investments as provided in Section 5.3, no person entitled to payment under the
Plan shall have any claim, right, security interest or other interest in any
fund, trust, account, insurance contract, or asset of the Corporation which may
be responsible for such payment.
Section 5.2. SECURITY FOR BENEFITS. Notwithstanding the provisions of
Section 5.1, nothing in this Plan shall preclude the Corporation from setting
aside amounts in trust (the "Trust") pursuant to one or more trust agreements
between a trustee and the Corporation. However, no Participant or Beneficiary
shall have any secured interest or claim in any assets or property of the
Corporation or the Trust and all funds contained in the Trust shall remain
subject to the claims of the Corporation's general creditors.
Section 5.3. INVESTMENTS. The Committee may designate one or more separate
investment funds or vehicles, including, without limitation, certificates of
deposit, mutual funds, money market accounts or funds, limited partnerships, or
debt or equity securities, including equity securities of the Corporation
(measured by market value, book value or any formula selected by the
Committee), in which the amount credited to a Participant's Account will be
deemed to be invested. Each Participant shall file an investment preference
request ("Request") to be effective as of the date of such Request with respect
to the amounts credited to his Account as of such date and amounts subsequently
credited to his Account. A Request will advise the Administrator as to the
Participant's preference with respect to investment vehicles for all or some
portion of the amounts credited to a Participant's Account in specified
multiples of 10%. A Request may be changed prospectively by a Participant only
as of January 1, April 1, July 1 and October 1 by giving the
7
<PAGE> 11
Administrator prior written notice. The Administrator may, but is under no
obligation to, deem the amounts credited to a Participant's Account to be
invested in accordance with the Request made by the Participant, or the
Committee may, instead, in its sole discretion, deem such Account to be
invested in any deemed investment funds selected by the Committee. Earnings on
any amounts deemed to have been invested in any deemed investment fund shall be
deemed to have been reinvested in such fund.
ARTICLE VI. DISTRIBUTION OF BENEFITS
Section 6.1. SETTLEMENT DATE. A Participant or, in the event of his death,
his Beneficiary shall be entitled to distribution of the balance of his
Account, as provided in this Article VI, following his Settlement Date or
Dates.
Section 6.2. AMOUNT TO BE DISTRIBUTED. The amount to which a Participant
or, in the event of his death, his Beneficiary is entitled in accordance with
the following provisions of this Article shall be based on the Participant's
adjusted account balance determined as of the Accounting Date coincident with
or next following his Settlement Date or Dates.
Section 6.3. IN-SERVICE DISTRIBUTION. A Participant may elect to commence
to receive an in-service distribution of his or her deferred Compensation for
any Deferral Period beginning at any time at least two years after the date
such Compensation otherwise would have been first payable. A Participant's
election of an in-service distribution shall be filed in writing with the
Administrator at the same time as is filed his election to participate as
provided in Section 3.1. The Participant may elect to receive such
Compensation as an in-service distribution under one of the forms provided in
Section 6.4. Any benefits paid to the Participant as an in-service
distribution shall reduce the Participant's Account.
Section 6.4. FORM OF DISTRIBUTION. As soon as practicable after the end of
the Accounting Period in which a Participant's Settlement Date occurs, but in
no event later than thirty days following the end of such Accounting Period,
the Corporation shall commence distribution or cause distribution to be
commenced, to the Participant or, in the event of his death, to his
Beneficiary, of the balance of the Participant's Account, as determined under
Section 6.2, under one of the forms provided in this Section. Notwithstanding
the foregoing, if elected by the Participant, the distribution of all or a
portion of the Participant's Account may commence on a date between the
Settlement Date and the date the Participant attains age sixty-five.
Distribution of a Participant's Account with respect to any Deferral Period
shall be made in one of the following forms as elected by the Participant:
8
<PAGE> 12
(a) by payment in cash in five (5) annual installments; or
(b) by payment in cash in ten (10) annual installments; or
(c) by payment in cash in fifteen (15) annual installments.
The Participant's election of the form of distribution shall be made by written
notice filed with the Administrator at least one (1) year prior to the
Participant's voluntary termination of employment with, or retirement from, the
Corporation. Any such election may be changed by the Participant at any time
and from time to time without the consent of any other person by filing a later
signed written election with the Administrator; provided that any election made
less than one (1) year prior to the Participant's voluntary termination of
employment or retirement shall not be valid, and in such case payment shall be
made in accordance with the Participant's prior election.
The amount of each installment shall be equal to the quotient obtained by
dividing the Participant's Account balance as of the date of such installment
payment by the number of installment payments remaining to be made to or in
respect of such Participant at the time of calculation.
If a Participant fails to make an election in a timely manner as provided in
this Section 6.4, distribution shall be made in cash in ten (10) annual
installments.
Section 6.5. BENEFICIARY DESIGNATION. As used in the Plan the term
"Beneficiary" means:
(a) The last person designated as Beneficiary by the Participant in a
written notice on a form prescribed by the Administrator;
(b) If there is no designated Beneficiary or if the person so
designated shall not survive the Participant, such Participant's spouse; or
(c) If no such designated Beneficiary and no such spouse is living upon
the death of a Participant, or if all such persons die prior to the full
distribution of the Participant's Account balance, then the legal
representative of the last survivor of the Participant and such persons, or,
if the Administrator shall not receive notice of the appointment of any such
legal representative within one year after such death, the heirs-at-law of
such survivor (in the proportions in which they would inherit his intestate
personal property) shall be the Beneficiaries to whom the then
9
<PAGE> 13
remaining balance of the Participant's Account shall be distributed.
Any Beneficiary designation may be changed from time to time by like notice
similarly delivered. No notice given under this Section shall be effective
unless and until the Administrator actually receives such notice.
Section 6.6. FACILITY OF PAYMENT. Whenever and as often as any Participant
or his Beneficiary entitled to payments hereunder shall be under a legal
disability or, in the sole judgment of the Administrator, shall otherwise be
unable to apply such payments to his own best interests and advantage, the
Administrator in the exercise of its discretion may direct all or any portion
of such payments to be made in any one or more of the following ways: (i)
directly to him; (ii) to his legal guardian or conservator; or (iii) to his
spouse or to any other person, to be expended for his benefit; and the decision
of the Administrator, shall in each case be final and binding upon all persons
in interest.
Section 6.7. HARDSHIP DISTRIBUTIONS. Upon a finding by the Administrator
that a Participant has suffered a Financial Hardship, the Administrator may, in
its sole discretion, distribute, or direct the Trustee to distribute, to the
Participant an amount which does not exceed the amount required to meet the
immediate financial needs created by the Financial Hardship and not reasonably
available from other sources of the Participant; provided, however, that in no
event shall any amount attributable to a Deferral Commitment be distributed
less than six months after the date of the applicable Participation Agreement.
No distributions pursuant to this Section 6.4 may be made in excess of the
value of the Participant's Account at the time of such distribution.
ARTICLE VII. ADMINISTRATION, AMENDMENT AND TERMINATION
Section 7.1. ADMINISTRATION. The Plan shall be administered by an
Administrator consisting of one or more persons who shall be appointed by and
serve at the pleasure of the Board. The Administrator shall have such powers
as may be necessary to discharge its duties hereunder, including, but not by
way of limitation, to construe and interpret the Plan and determine the amount
and time of payment of any benefits hereunder. The Administrator may, from
time to time, employ agents and delegate to them such administrative duties as
it sees fit, and may from time to time consult with legal counsel who may be
counsel to the Corporation. The Administrator shall have no power to add to,
subtract from or modify any of the terms of the Plan, or to change or add to
any benefits provided under the Plan, or to waive or fail to apply any
requirements of eligibility for a benefit under the Plan. No member of the
10
<PAGE> 14
Administrator shall act in respect of his own Account. All decisions and
determinations by the Administrator shall be final and binding on all parties.
All decisions of the Administrator shall be made by the vote of the majority,
including actions in writing taken without a meeting. All elections, notices
and directions under the Plan by a Participant shall be made on such forms as
the Administrator shall prescribe.
Section 7.2. PLAN ADMINISTRATOR. The Corporation shall be the
"administrator" under the Plan for purposes of ERISA.
Section 7.3. AMENDMENT, TERMINATION AND WITHDRAWAL. The Plan may be
amended from time to time or may be terminated at any time by the Board. No
amendment or termination of the Plan, however, may adversely affect the amount
or timing of payment of any person's benefits accrued under the Plan to the
date of amendment or termination without such person's written consent.
Section 7.4. SUCCESSORS. The Corporation shall require any successor
(whether direct or indirect, by purchase, merger, consolidation, reorganization
or otherwise) to all or substantially all of the business and/or assets of the
Corporation expressly to assume and to agree to perform this Plan in the same
manner and to the same extent the Corporation would be required to perform if
no such succession had taken place. This Plan shall be binding upon and inure
to the benefit of the Corporation and any successor of or to the Corporation,
including without limitation any persons acquiring directly or indirectly all
or substantially all of the business and/or assets of the Corporation whether
by sale, merger, consolidation, reorganization or otherwise (and such successor
shall thereafter be deemed the "Corporation" for the purposes of this Plan),
and the heirs, beneficiaries, executors and administrators of each Participant.
Section 7.5. CLAIMS. The Administrator will provide to any Participant or
Beneficiary whose claim for benefits under the Plan has been fully or partially
denied a written notice setting forth (i) the specific reasons for such denial,
(ii) a designation of any additional material or information required and (iii)
an explanation of the Plan's claim review procedure. Such notice shall state
that the Participant or Beneficiary is entitled to request a review in writing,
by the Administrator, of the decision denying the claim. The claim will be
reviewed by the Administrator who may, but need not, grant the claimant a
hearing. On review, the claimant may have legal representation, examine
pertinent documents and submit issues and comments in writing. The decision on
review will be made within 120 days following the request, will be provided in
writing to the claimant and will be final and binding on all parties concerned.
11
<PAGE> 15
Section 7.6. EXPENSES. All expenses of the Plan shall be paid by the
Corporation from funds other than those deemed investments as provided in
Section 5.3, except that brokerage commissions and other transaction fees and
expenses relating to the investment of deemed assets and investment fees
attributable to commingled investment of such assets shall be paid from or
charged to such assets or earnings thereon.
ARTICLE VIII. MISCELLANEOUS
Section 8.1. NO GUARANTEE OF EMPLOYMENT. Nothing contained in the Plan
shall be construed as a contract of employment between the Corporation and any
Employee, or as a right of any Employee, to be continued in the employment of
the Corporation, or as a limitation of the right of the Corporation to
discharge any of its Employees, with or without cause.
Section 8.2. APPLICABLE LAW. All questions arising in respect of the Plan,
including those pertaining to its validity, interpretation and administration,
shall be governed, controlled and determined in accordance with the applicable
provisions of federal law and, to the extent not preempted by federal law, the
laws of the State of Ohio.
Section 8.3. INTERESTS NOT TRANSFERABLE. No person shall have any right to
commute, encumber, pledge or dispose of any interest herein or right to receive
payments hereunder, nor shall such interests or payments be subject to seizure,
attachment or garnishment for the payments of any debts, judgments, alimony or
separate maintenance obligations or be transferable by operation of law in the
event of bankruptcy, insolvency or otherwise, all payments and rights hereunder
being expressly declared to be nonassignable and nontransferable.
Section 8.4. SEVERABILITY. Each section, subsection and lesser section of
this Plan constitutes a separate and distinct undertaking, covenant and/or
provision hereof. Whenever possible, each provision of this Plan shall be
interpreted in such manner as to be effective and valid under applicable law.
In the event that any provision of this Plan shall finally be determined to be
unlawful, such provision shall be deemed severed from this Plan, but every
other provision of this Plan shall remain in full force and effect, and in
substitution for any such provision held unlawful, there shall be substituted a
provision of similar import reflecting the original intention of the parties
hereto to the extent permissible under law.
Section 8.5. WITHHOLDING OF TAXES. The Corporation may withhold or cause
to be withheld from any amounts payable under this Plan all federal, state,
local and other taxes as shall be legally required.
12
<PAGE> 16
Section 8.6. TOP-HAT PLAN. The Plan is intended to be a plan which is
unfunded and maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
within the meaning of Sections 201, 301 and 401 of ERISA, and therefore to be
exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA.
Accordingly, notwithstanding any other provision of the Plan, the Plan will
terminate and no further benefits will accrue hereunder in the event it is
determined by a court of competent jurisdiction or by an opinion of counsel
based upon a change in law that the Plan constitutes an employee pension
benefit plan within the meaning of Section 3(2) of ERISA, which is not so
exempt. In addition and notwithstanding any other provision of the Plan, in
the absolute discretion of the Committee, the amount credited to each
Participant's Account under the Plan as of the date of termination, which shall
be an Accounting Date for purposes of the Plan, will be paid immediately to
such Participant in a single lump sum cash payment.
IN WITNESS WHEREOF, The Lincoln Electric Company has caused this instrument
to be executed in its name as of the date first above written.
THE LINCOLN ELECTRIC COMPANY
By: /s/ H. Jay Elliott
--------------------------
Its: Senior Vice President,
--------------------------
Chief Financial Officer and Treasurer
Attest:
/s/ Gabriel Bruno
- ------------------
13
<PAGE> 1
EXHIBIT 10E
Management Incentive Plan
The Company maintains an annual Management Incentive Plan in which the
Company's senior executive officers participate. Pursuant to this Plan, cash
awards are made annually based on the level of achievement of pre-determined
financial performance targets established by the Chief Executive Officer and
the Compensation Committee of the Board of Directors. Each participant's award
is segmented to reflect that individual's responsibilities, with weighting on
corporate or regional results accordingly. A maximum target award fund is
established yearly. Maximum awards, if achieved, are designed to place
individual participants at a specified percentile in the market for their
respective positions as determined by the Compensation Committee. The awards
for the five most highly compensated executive officers are subject to
determination by the Compensation Committee, with the balance of the awards
determined upon recommendation by the CEO and review by the Compensation
Committee.
<PAGE> 1
EXHIBIT 10F
NON-EMPLOYEE DIRECTORS RESTRICTED STOCK PLAN
--------------------------------------------
RESOLVED, that immediately after the earlier of (i) [June 12, 1995], or
(ii) August 1, 1995, and on January 1, of each year thereafter, each
non-employee Director of the Company ("Director") shall be automatically
granted $10,000 worth of Common Shares, without par value, of the Company
("Voting Shares") subject to the transfer restrictions and risk of forfeiture
hereinafter described ("Restricted Shares").
RESOLVED, that the value of Voting Shares for the purposes hereof shall
be equal to the last reported trading price for the Voting Shares, and if no
price has been reported within the 30 days before any award, the value shall be
equal to the last reported trading price of the Class A Common Shares.
RESOLVED, that the aggregate number of Voting Shares that may be awarded
as Restricted Shares and released from substantial risk of forfeiture shall not
exceed 100,000 Voting Shares, which may be shares of original issuance or
treasury share or a combination.
RESOLVED, that Restricted Shares held by a Director may not be sold or
otherwise disposed of until, and shall be forfeited if such Director ceases to
serve as a Director of the Company before, the restrictions lapse as provided
below.
RESOLVED, that the restrictions on each award of Restricted Shares shall
lapse when the Director has served continuously as a Director of the Company
for a period of three years after the award; provided, however, that the
restrictions shall lapse earlier if the Director (1) dies or (2) completes the
term in which the award was received and is not elected to another term by the
shareholders, or (3) in the event of a change in control of the Company as set
forth in Appendix A to these resolutions.
RESOLVED, that Directors shall have all the rights of shareholders with
respect to such Restricted Shares, provided that such Restricted Shares,
together with any additional shares of the Company that a Director may receive
by virtue of any share dividend, merger, reorganization or other change in
capital structure, shall be subject to the restrictions set forth above.
RESOLVED, that the automatic awards of Restricted Shares herein provided
for may be referred to as "The Lincoln Non-Employee Directors' Restricted Stock
Plan" and shall continue, subject to availability of shares, until such
automatic awards are discontinued by resolution of this Board.
<PAGE> 2
RESOLVED, that effectiveness of the foregoing resolutions shall be
subject to approval of this plan by the Company's shareholders, and such plan
shall be subject to Rule 16b-3 under the Securities Exchange Act of 1934 as in
effect prior to May 1, 1991 until otherwise determined by this Board or its
Compensation Committee.
RESOLVED, that the plan as set forth above shall be subject to
shareholder approval at the 1995 annual meeting, and the notice and proxy
material set forth above shall be modified to include the foregoing proposal.
Appendix A
----------
A "change in control" shall occur upon the happening of any of the following
events:
(a) The Company is merged or consolidated or reorganized into or with
another company or other legal person, and as a result of such merger,
consolidation or reorganization less than a majority of the combined
voting power of the then-outstanding securities of such Company or
person immediately after such transaction is held in the aggregate by
the holders of the then outstanding securities entitled to vote
generally in election of the Directors of the Company ("Voting Stock")
of the Company immediately prior to such transaction;
(b) The Company sells or otherwise transfers all or substantially all of its
assets to any other company or other legal person, and as a result of
such sale or transfer less than a majority of the combined voting
power of the then-outstanding securities of such Company or person
immediately after such sale or transfer is held in the aggregate by the
holders of Voting Stock of the Company immediately prior to such sale or
transfer; or
(c) Any person or group of persons (within the meaning of Section 13 or 14
of the Securities Exchange Act of 1934) shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under said Act) of 30% or more of the
outstanding Voting Stock, excluding (i) any person or group of persons
who are officers, Directors, or employees of the Company or any
subsidiary as of the date hereof or are related by blood or marriage to
the descendants of James F. or John C. Lincoln, including any trusts or
similar arrangements for any of the foregoing and any foundations
established by any of the foregoing and (ii) any underwriter or
syndicate of underwriters acting on behalf of the Company in a public
offering of the Company's securities and any of their transferees.
<PAGE> 1
EXHIBIT 10G
THE LINCOLN ELECTRIC COMPANY
NON-EMPLOYEE DIRECTORS'
DEFERRED COMPENSATION PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. DEFINITIONS AND CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-----------
Section 2.2. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
------------
ARTICLE III. PARTICIPATION AND DEFERRALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3.1. Eligibility and Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-----------------------------
(a) Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-----------
(b) Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-------------
(c) Initial Year of Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-----------------------------
(d) Termination of Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
----------------------------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3.2 Amount of Deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
------------------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.3. No Modification of Deferral Commitments . . . . . . . . . . . . . . . . . . . 4
---------------------------------------
ARTICLE IV. DIRECTORS' ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.1. Establishment of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-------------------------
Section 4.2. Crediting of Deferred Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 4
--------------------------
Section 4.3. Determination of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-------------------------
(a) Determination of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-------------------------
(b) Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
----------
Section 4.4. Adjustments to Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-----------------------
Section 4.5. Statement of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
---------------------
Section 4.6. Vesting of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-------------------
ARTICLE V. FINANCING OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 5.1. Financing of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
---------------------
Section 5.2. Security for Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
---------------------
Section 5.3. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-----------
ARTICLE VI. DISTRIBUTION OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 6.1. Settlement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
---------------
Section 6.2. Amount to Be Distributed . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
------------------------
Section 6.3. In-Service Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-----------------------
Section 6.4. Form of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
--------------------
Section 6.5. Beneficiary Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-----------------------
Section 6.6. Facility of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-------------------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE VII. ADMINISTRATION, AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 7.1. Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
--------------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 7.2. Amendment, Termination and Withdrawal . . . . . . . . . . . . . . . . . . . . 8
-------------------------------------
Section 7.3. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
----------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 7.4. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
--------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 8.1. No Continuing Right as Director . . . . . . . . . . . . . . . . . . . . . . . 9
-------------------------------
Section 8.2. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
--------------
Section 8.3. Interests Not Transferable . . . . . . . . . . . . . . . . . . . . . . . . . . 9
--------------------------
Section 8.4. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
------------
Section 8.5. Withholding of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--------------------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
ii
<PAGE> 4
THE LINCOLN ELECTRIC COMPANY
NON-EMPLOYEE DIRECTORS'
DEFERRED COMPENSATION PLAN
The Lincoln Electric Company Non-Employee Directors'
Deferred Compensation Plan is made and executed as of the 24th day of May, 1995
and is effective as of May 24, 1995.
ARTICLE I. PURPOSE
THE LINCOLN ELECTRIC COMPANY NON-EMPLOYEE DIRECTORS'
DEFERRED COMPENSATION PLAN is hereby established by The Lincoln Electric
Company to allow directors of the Corporation to defer a portion of their
Directors' Fees. It is intended that the Plan will aid in attracting and
retaining Directors of exceptional ability by providing this benefit. The
terms and conditions of the Plan are set forth below.
ARTICLE II. DEFINITIONS AND CONSTRUCTION
Section 2.1. DEFINITIONS. Whenever the following
terms are used in this Plan they shall have the meanings specified below unless
the context clearly indicates to the contrary:
(a) "Account": The bookkeeping account maintained
for each Director showing his interest under the Plan.
(b) "Accounting Date": December 31 of each year
and the last day of any calendar quarter in which a Director's
Settlement Date occurs.
(c) "Accounting Period": The period beginning on
the day immediately following an Accounting Date and ending on
the next following Accounting Date.
(d) "Administrator": The Board.
(e) "Annual Retainer": The annual cash retainer
earned by a Director for services as a Director of the
Corporation.
(f) "Beneficiary": The person or persons (natural
or otherwise), within the meaning of Section 6.5, who are
entitled to receive distribution of the Director's Account
balance in the event of the Director's death.
(g) "Board": The Board of Directors of the
Corporation.
<PAGE> 5
(h) "Corporation": The Lincoln Electric Company or
any successor or successors thereto.
(i) "Deferral Commitment": An agreement by a
Director to have a specified percentage or dollar amount of his
Fees deferred under the Plan for a specified period in the
future.
(j) "Deferral Period": Means the Plan Year for
which a Director has elected to defer a portion of his Fees.
(k) "Director": An individual duly elected or
chosen as a director of the Corporation who is not also an
employee of the Corporation or its subsidiaries.
(l) "Effective Date": May 24, 1995.
(m) "Fees": The Annual Retainer and Other
Compensation.
(n) "Other Compensation": The meeting and other
cash fees earned by a Director for services as a Director of the
Corporation, other than the Annual Retainer.
(o) "Participation Agreement": The Agreement
submitted by a Director to the Administrator with respect to one
or more Deferral Commitments.
(p) "Plan": The Plan set forth in this instrument
as it may, from time to time, be amended.
(q) "Plan Year": The 12-month period beginning
January 1 through December 31; provided that the first plan year
shall begin on the Effective Date and end on December 31, 1995.
(r) "Request": The meaning set forth in Section
5.3.
(s) "Settlement Date": The date on which a
Director terminates as a Director. Settlement Date shall also
include with respect to any Deferral Period the date prior or
subsequent to termination as a Director selected by a Director
in a Participation Agreement for distribution of all or a
portion of the amounts deferred during such Deferral Period.
(t) "Trust": The meaning set forth in Section 5.2
Section 2.2. CONSTRUCTION. The masculine gender,
where appearing in the Plan, shall be deemed to include the feminine gender,
and the singular may include the plural, unless the context clearly indicates
to the contrary. The words "hereof," "herein," "hereunder," and other similar
compounds of
2
<PAGE> 6
the word "here" shall mean and refer to the entire Plan, and not to any
particular provision or Section.
ARTICLE III. PARTICIPATION AND DEFERRALS
Section 3.1. ELIGIBILITY AND PARTICIPATION.
(a) ELIGIBILITY. Eligibility to participate in the
Plan for any Deferral Period is limited to Directors.
(b) PARTICIPATION. A Director may elect to
participate in the Plan with respect to any Deferral Period by
submitting a Participation Agreement to the Administrator by the
last business day immediately preceding the applicable Deferral
Period.
(c) INITIAL YEAR OF PARTICIPATION. In the event
that an individual first becomes a Director during a Deferral
Period and wishes to elect a Deferral Commitment with respect to
the Fees earned by and payable to the individual during such
Deferral Period, and with respect to the first Plan Year, a
Participation Agreement must be submitted to the Administrator
no later than 30 days following such individual's becoming a
Director, or following the beginning of such Plan Year,
respectively. Any Deferral Commitment elected in such
Participation Agreement shall be effective only with regard to
Fees earned following the submission of the Participation
Agreement to the Administrator. If a Director does not submit a
Participation Agreement within such period of time, such
individual will not be eligible to participate in the Plan until
the first day of a Deferral Period subsequent to the Deferral
Period in which the individual became a Director.
(d) TERMINATION OF PARTICIPATION. Participation in
the Plan shall continue as long as the Director is eligible to
receive benefits under the Plan.
Section 3.2 AMOUNT OF DEFERRAL. With respect to each
Plan Year, a Director may elect to defer a specified dollar amount or
percentage of his Fees. For the first Plan Year, a Director may elect to defer
all or any portion of his Fees earned or payable after the later of the
effective date of the Participation Agreement or the date of filing the
Participation Agreement with the Administrator. A Director may change the
dollar amount or percentage of his Fees to be deferred by filing a written
notice thereof with the Administrator. Any such change shall be effective as
of the first day of the Plan Year immediately succeeding the Plan Year in which
such notice is filed with the Administrator.
3
<PAGE> 7
Section 3.3. NO MODIFICATION OF DEFERRAL COMMITMENTS.
A Deferral Commitment shall be irrevocable with respect to the Deferral Period
for which it is made.
ARTICLE IV. DIRECTORS' ACCOUNTS
Section 4.1. ESTABLISHMENT OF ACCOUNTS. The
Corporation, through its accounting records, shall establish an Account for
each Director who elects to participate in the Plan. In addition, the
Corporation may establish one or more subaccounts of a Director's Account, if
the Corporation determines that such subaccounts are necessary or appropriate
in administering the Plan.
Section 4.2. CREDITING OF DEFERRED FEES. A Director's
Fees that are deferred pursuant to a Deferral Commitment shall be credited to
the Director's Account within 30 days following the date the corresponding
non-deferred portion of his Fees would have been paid to the Director. Any
withholding of taxes or other amounts with respect to any deferred Fees that is
required by state, federal or local law shall be withheld from the Director's
non-deferred Fees, or if none, then the Director's Deferred Commitment shall be
reduced by the amount of such withholding.
Section 4.3. DETERMINATION OF ACCOUNTS.
(a) DETERMINATION OF ACCOUNTS. The amount credited
to each Director's Account as of a particular date shall equal
the deemed balance of such Account as of such date. The balance
in the Account shall equal the amount credited pursuant to
Section 4.2, and shall be adjusted in the manner provided in
Section 4.4.
(b) ACCOUNTING. The Corporation, through its
accounting records, shall maintain a separate and distinct
record of the amount in each Account as adjusted to reflect
income, gains, losses, withdrawals and distributions.
Section 4.4. ADJUSTMENTS TO ACCOUNTS.
(a) Each Director's Account shall be debited with
the amount of any distributions under the Plan to or on behalf
of the Director or, in the event of his death, his Beneficiary
during the Accounting Period ending on such Accounting Date.
(b) The Director's Account shall next be credited
or debited, as the case may be, with an income (loss) factor
equal to an amount determined by multiplying (i) the balance
credited to the Director's Account as of the immediately
preceding Accounting Date (as adjusted pursuant to Section
4.4(a) for the current Accounting Date) by (ii) the
4
<PAGE> 8
rate of return for the Accounting Period ending on such
Accounting Date on deemed investments provided for in
Section 5.3.
Section 4.5. STATEMENT OF ACCOUNTS. As soon as
practicable after the end of each Plan Year, a statement shall be furnished to
each Director or, in the event of his death, to his Beneficiary showing the
status of his Account as of the end of the Plan Year, any changes in his
Account since the end of the immediately preceding Plan Year, and such other
information as the Administrator shall determine.
Section 4.6. VESTING OF ACCOUNTS. Subject to Section
5.1, each Director shall at all times have a nonforfeitable interest in his
Account balance.
ARTICLE V. FINANCING OF BENEFITS
Section 5.1. FINANCING OF BENEFITS. Benefits payable
under the Plan to a Director or, in the event of his death, to his Beneficiary
shall be paid by the Corporation from its general assets. The payment of
benefits under the Plan represents an unfunded, unsecured obligation of the
Corporation. Notwithstanding the fact that the Directors' Accounts may be
adjusted by an amount that is measured by reference to the performance of any
deemed investments as provided in Section 5.3, no person entitled to payment
under the Plan shall have any claim, right, security interest or other interest
in any fund, trust, account, insurance contract or asset of the Corporation
which may be responsible for such payment.
Section 5.2. SECURITY FOR BENEFITS. Notwithstanding
the provisions of Section 5.1, nothing in this Plan shall preclude the
Corporation from setting aside amounts in trust (the "Trust") pursuant to one
or more trust agreements between a trustee and the Corporation. However, no
Director or Beneficiary shall have any security interest or claim in any assets
or property of the Corporation or the Trust and all funds contained in the
Trust shall remain subject to the claims of the Corporation's general
creditors.
Section 5.3. INVESTMENTS. The Board may designate one
or more separate investment funds or vehicles, including, without limitation,
certificates of deposit, mutual funds, money market accounts or funds, limited
partnerships, or debt or equity securities, other than equity securities of the
Corporation, in which the amount credited to a Director's Account will be
deemed to be invested. Each Director shall file an investment preference
request ("Request") to be effective as of the date of such Request with respect
to the amounts credited to his Account as of such date and amounts subsequently
credited to his Account. A Request will advise the Administrator as to the
Director's preference with respect to investment vehicles for all or some
5
<PAGE> 9
portion of the amounts credited to a Director's Account in specified multiples
of 10%. A Request may be changed prospectively by a Director only as of
January 1, April 1, July 1 and October 1 by giving the Administrator prior
written notice. The Administrator may, but is under no obligation to, deem the
amounts credited to a Director's Account to be invested in accordance with the
Request made by the Director, or the Board may, instead, in its sole
discretion, deem such Account to be invested in any deemed investment funds
selected by the Board. Earnings on any amounts deemed to have been invested in
any deemed investment fund shall be deemed to have been reinvested in such
fund.
ARTICLE VI. DISTRIBUTION OF BENEFITS
Section 6.1. SETTLEMENT DATE. A Director or, in the
event of his death, his Beneficiary shall be entitled to distribution of the
balance of his Account, as provided in this Article VI, following his
Settlement Date or Dates.
Section 6.2. AMOUNT TO BE DISTRIBUTED. The amount to
which a Director or, in the event of his death, his Beneficiary is entitled in
accordance with the following provisions of this Article shall be based on the
Director's adjusted account balance determined as of the Accounting Date
coincident with or next following his Settlement Date or Dates.
Section 6.3. IN-SERVICE DISTRIBUTION. A Director may
elect to commence to receive an in-service distribution of his deferred Fees
for any Deferral Period beginning at any time at least two years after the date
such Fees otherwise would have been first payable. A Director's election of an
in-service distribution shall be filed in writing with the Administrator at the
same time as is filed his election to participate as provided in Section 3.1.
The Director may elect to receive such Fees as an in-service distribution under
one of the forms provided in Section 6.4. Any benefits paid to the Director as
an in-service distribution shall reduce the Director's Account. In the event
of a Director's death, the balance of his Account shall be distributed to his
Beneficiary in a lump sum.
Section 6.4. FORM OF DISTRIBUTION. As soon as
practicable after the end of the Accounting Period in which a Director's
Settlement Date occurs, but in no event later than thirty days following the
end of such Accounting Period, the Corporation shall commence distribution or
cause distribution to be commenced, to the Director or, in the event of his
death, to his Beneficiary, of the balance of the Director's Account, as
determined under Section 6.2, under one of the forms provided in this Section.
Notwithstanding the foregoing, if elected by the Director, the distribution of
all or a portion of the Director's Account may commence at the beginning of the
Plan Year next following his Settlement Date.
6
<PAGE> 10
Distribution of a Director's Account with respect to
any Deferral Period shall be made in one of the following forms as elected by
the Director:
(a) by payment in cash in a single lump sum;
(b) by payment in cash in not greater than ten (10)
annual installments; or
(c) a combination of (a) and (b) above. The
Director shall designate the percentage payable under each
option.
The Director's election of the form of distribution shall be made by written
notice filed with the Administrator at least 1 year prior to the Director's
voluntary termination as a Director. Any such election may be changed by the
Director at any time and from time to time without the consent of any other
person by filing a later signed written election with the Administrator;
provided that any election made less than 1 year prior to the Director's
voluntary termination as a Director shall not be valid, and in such case
payment shall be made in accordance with the Director's prior election.
The amount of each installment shall be equal to the quotient obtained by
dividing the Director's Account balance as of the date of such installment
payment by the number of installment payments remaining to be made to or in
respect of such Director at the time of calculation.
If a Director fails to make an election in a timely
manner as provided in this Section 6.4, distribution shall be made in cash in a
lump sum.
Section 6.5. BENEFICIARY DESIGNATION. As used in
the Plan the term "Beneficiary" means:
(a) The last person designated as
Beneficiary by the Director in a written notice on a
form prescribed by the Administrator;
(b) If there is no designated
Beneficiary or if the person so designated shall not
survive the Director, such Director's spouse; or
(c) If no such designated Beneficiary and no
such spouse is living upon the death of a Director, or
if all such persons die prior to the full distribution
of the Director's Account balance, then the legal
representative of the last survivor of the Director and
such persons, or, if the Administrator shall not
receive notice of the appointment of any such legal
representative within one year after such death, the
heirs-at-law of such survivor (in the proportions in
which they would inherit his intestate personal
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property) shall be the Beneficiaries to whom the then
remaining balance of the Director's Account shall be
distributed.
Any Beneficiary designation may be changed from time to time by like notice
similarly delivered. No notice given under this Section shall be effective
unless and until the Administrator actually receives such notice.
Section 6.6. FACILITY OF PAYMENT. Whenever and as
often as any Director or his Beneficiary entitled to payments hereunder shall
be under a legal disability or, in the sole judgment of the Administrator,
shall otherwise be unable to apply such payments to his own best interests and
advantage, the Administrator in the exercise of its discretion may direct all
or any portion of such payments to be made in any one or more of the following
ways: (i) directly to him; (ii) to his legal guardian or conservator; or (iii)
to his spouse or to any other person, to be expended for his benefit; and the
decision of the Administrator, shall in each case be final and binding upon all
persons in interest.
ARTICLE VII. ADMINISTRATION, AMENDMENT AND TERMINATION
Section 7.1. ADMINISTRATION. The Plan shall be
administered by an Administrator. The Administrator shall have such powers as
may be necessary to discharge its duties hereunder. The Administrator may,
from time to time, employ agents and delegate to them such administrative
duties as it sees fit, and may from time to time consult with legal counsel who
may be counsel to the Corporation. The Administrator shall have no power to
add to, subtract from or modify any of the terms of the Plan, or to change or
add to any benefits provided under the Plan, or to waive or fail to apply any
requirements of eligibility for a benefit under the Plan. No member of the
Administrator shall act in respect of his own Account. All decisions and
determinations by the Administrator shall be final and binding on all parties.
All decisions of the Administrator shall be made by the vote of the majority,
including actions in writing taken without a meeting. All elections, notices
and directions under the Plan by a Director shall be made on such forms as the
Administrator shall prescribe.
Section 7.2. AMENDMENT, TERMINATION AND WITHDRAWAL.
The Plan may be amended from time to time or may be terminated at any time by
the Board. No amendment or termination of the Plan, however, may adversely
affect the amount or timing of payment of any person's benefits accrued under
the Plan to the date of amendment or termination without such person's written
consent.
Section 7.3. SUCCESSORS. The Corporation shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization or otherwise) to all or
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<PAGE> 12
substantially all of the business and/or assets of the Corporation expressly to
assume and to agree to perform this Plan in the same manner and to the same
extent the Corporation would be required to perform if no such succession had
taken place. This Plan shall be binding upon and inure to the benefit of the
Corporation and any successor of or to the Corporation, including without
limitation any persons acquiring directly or indirectly all or substantially
all of the business and/or assets of the Corporation whether by sale, merger,
consolidation, reorganization or otherwise (and such successor shall thereafter
be deemed the "Corporation" for the purposes of this Plan), and the heirs,
beneficiaries, executors and administrators of each Director.
Section 7.4. EXPENSES. All expenses of the Plan shall
be paid by the Corporation from funds other than those deemed investments as
provided in Section 5.3, except that brokerage commissions and other
transaction fees and expenses relating to the investment of deemed assets and
investment fees attributable to commingled investment of such assets shall be
paid from or charged to such assets or earnings thereon.
ARTICLE VIII. MISCELLANEOUS
Section 8.1. NO CONTINUING RIGHT AS DIRECTOR. Neither
the adoption or operation of this Plan, nor any document describing or
referring to this Plan, or any part thereof, shall confer upon any Director any
right to continue as a Director of the Corporation or any subsidiary of the
Corporation.
Section 8.2. APPLICABLE LAW. All questions arising in
respect of the Plan, including those pertaining to its validity, interpretation
and administration, shall be governed, controlled and determined in accordance
with the applicable provisions of federal law and, to the extent not preempted
by federal law, the internal substantive laws of the State of Ohio.
Section 8.3. INTERESTS NOT TRANSFERABLE. No person
shall have any right to commute, encumber, pledge or dispose of any interest
herein or right to receive payments hereunder, nor shall such interests or
payments be subject to seizure, attachment or garnishment for the payments of
any debts, judgments, alimony or separate maintenance obligations or be
transferable by operation of law in the event of bankruptcy, insolvency or
otherwise, all payments and rights hereunder being expressly declared to be
nonassignable and nontransferable.
Section 8.4. SEVERABILITY. Each section, subsection
and lesser section of this Plan constitutes a separate and distinct
undertaking, covenant and/or provision hereof. Whenever possible, each
provision of this Plan shall be interpreted in such manner as to be effective
and valid under applicable law. In the event that any provision of this Plan
shall finally be
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<PAGE> 13
determined to be unlawful, such provision shall be deemed severed from this
Plan, but every other provision of this Plan shall remain in full force and
effect, and in substitution for any such provision held unlawful, there shall
be substituted a provision of similar import reflecting the original intention
of the parties hereto to the extent permissible under law.
Section 8.5. WITHHOLDING OF TAXES. The Corporation
may withhold or cause to be withheld from any amounts payable under this Plan
all federal, state, local and other taxes as shall be legally required.
IN WITNESS WHEREOF, The Lincoln Electric Company has
caused this instrument to be executed in its name as of the date first above
written.
THE LINCOLN ELECTRIC COMPANY
By: /s/ H. Jay Elliott
-------------------------
Its: Senior Vice President,
Chief Financial Officer and
Treasurer
-------------------------
Attest:
/s/ Dorothy L. Hodnichak
- ---------------------------
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<PAGE> 1
EXHIBIT 10H
RETIREMENT AGREEMENT
--------------------
THIS RETIREMENT AGREEMENT (this "Agreement") is made and entered into by and
between THE LINCOLN ELECTRIC COMPANY (the "Company," a term which in this
Agreement shall include its predecessors, parents, subsidiaries, divisions,
related or affiliated companies, officers, directors, stockholders, members,
employees, heirs, successors, assigns, representatives, agents and counsel,
unless the context otherwise clearly requires), and FREDERICK W. MACKENBACH
("Executive"), on the 8th day of November, 1995.
WITNESSETH:
----------
WHEREAS, Executive is a Director of the Company and currently serves as
President and Chief Operating Officer of the Company;
WHEREAS, the Company and Executive have determined that Executive shall
resign and retire from any and all positions he may hold an officer of, and any
other positions (other than his position as a Director) he may hold with
respect to, the Company, effective March 31, 1996, and that Executive shall
resign and retire as an employee of the Company and its subsidiaries and
related or affiliated companies effective March 31, 1996;
<PAGE> 2
WHEREAS, the Company and Executive desire to make provision for the payments
and benefits that Executive will be entitled to receive from the Company in
consideration for Executive's obligations and actions under this Agreement and
in connection with such resignations and retirement and the cessation of his
employment with the Company; and
WHEREAS, the Company and Executive wish to resolve, settle and/or compromise
any and all matters, claims and issues between them arising from or relating to
Executive's service and employment with the Company, including the termination
thereof;
NOW THEREFORE, in consideration of the premises and agreements contained
herein and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, and intending to be legally bound, the
Company and Executive agree as follows:
1. RESIGNATION. Executive hereby resigns and retires from his employment
with the Company, and its subsidiaries and related or affiliated companies, as
of March 31, 1996. Executive also resigns, as of March 31, 1996, (a) from the
Board of Directors of any entity that is a subsidiary of or is otherwise
related to or affiliated with the Company, (b) from all offices of the Company
to which he has been elected by the Board of Directors of the Company (or to
which he has otherwise been
2
<PAGE> 3
appointed), (c) from all offices of any entity that is a subsidiary of or is
otherwise related to or affiliated with the Company and (d) from all
administrative, fiduciary or other positions he may hold with respect to
arrangements or plans for, of or relating to the Company. The Company hereby
consents to and accepts said resignations, and the Company records shall so
reflect. The Company and Executive recognize and acknowledge that Executive
shall continue to serve as a Director of the Company through his current term,
unless and until Executive decides otherwise. During the remainder of 1995
Executive shall receive his current base salary, which is $338,750, plus any
amount payable to him under the terms of the Management Incentive Plan of the
Company (the maximum plan award for 1995 being $175,000). Effective January 1,
1996 through March 31, 1996, Executive shall receive a gross amount monthly of
$42,813. In 1996 Executive will not be eligible for any bonus or any
additional equity or cash incentive compensation.
2. PAYMENTS. (a) In consideration of the promises of Executive in this
Agreement and subject to the conditions hereof, including without limitation
Paragraph 4 of this Agreement, the Company shall:
(i) Pay Executive on the 15th and last day of each month for
thirty-six (36) months commencing on
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<PAGE> 4
April 1, 1996 and ending on March 31, 1999 a gross amount annually of
TWO HUNDRED NINETY-SIX THOUSAND, TWO HUNDRED FIFTY FIVE DOLLARS
($296,255); PROVIDED that (a) no such payment shall be made unless and
until the conditions in Paragraph 4 below have been satisfied, (b) the
continuance of such payments is contingent upon Executive's compliance
with the requirements of this Agreement applicable to him and (c) if
Executive dies before the completion of the payments described in this
subparagraph 2(a)(i), the remaining payments described in this
subparagraph 2(a)(i) following his death shall be made to his estate.
(ii) Pay Executive a supplemental pension of ONE HUNDRED AND
THIRTY THOUSAND, SEVEN HUNDRED AND TWENTY-ONE DOLLARS ($130,721) per
year, in equal monthly installments, payable in the form of a single
life annuity, commencing with a payment on April 1, 1996 and ending
with a payment on the first day of the month in which Executive dies
(the "Pension"); PROVIDED that no such payment shall be made unless
the conditions in Paragraph 4 of this Agreement have been satisfied;
and PROVIDED FURTHER that the Pension shall be paid through the
Company's Supplemental Executive Retirement Plan
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<PAGE> 5
(but no other benefit shall be payable to or with respect to Executive
under such plan); and PROVIDED FURTHER that Executive may elect to
receive the Pension in the form of an actuarially equivalent joint
survivor annuity in lieu of a straight life annuity (such actuarial
equivalence being determined in accordance with the terms of the
Company's Supplemental Executive Retirement Plan).
(iii) Waive the forfeiture restrictions set forth in Section 3
of the Restricted Stock Agreement dated January 25, 1994 between the
Company and Executive with respect to 6668 shares of the Company
(comprised of 3334 unrestricted Common Shares and 3334 unrestricted
Class A Common Shares). The effect of such waiver will be to vest
unconditionally such shares as of the Executive's retirement date.
The Company agrees to deliver the certificates for such shares in such
form as Executive requests on or before his retirement date. The
Company intends to exercise its repurchase rights relating to 10,164
Common Shares and 10,164 Class A Common Shares issued to Executive
under the Deferred Stock Award Agreement dated April 13, 1989 within
ninety (90) days following Executive's retirement.
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<PAGE> 6
Executive acknowledges and agrees that he will tender such shares
issued under the Deferred Stock Award Agreement for repurchase
by the Company pursuant to the terms of such Agreement within ninety
(90) days following his retirement.
(iv) Continue to permit Executive to participate in the
Company's medical and life insurance programs, on the same basis that
Executive has participated in such medical and life insurance programs
prior to the termination of his employment with the Company, until the
earlier of March 30, 1999, or the date on which Executive becomes
eligible for other employer-provided medical insurance or life
insurance (whether through a subsequent employer of Executive or
through an employer of Executive's spouse), or, in the case of medical
insurance, the date on which Executive becomes eligible for Medicare.
Executive acknowledges and agrees that his rights hereunder with
respect to medical insurance satisfy his rights to continuation of
coverage under the Company's group health plan pursuant to Part 6 of
Subtitle B of Title I of the Employee Retirement Income Security Act
of 1974, as amended ("COBRA"), PROVIDED that if Executive revokes his
acceptance of this
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<PAGE> 7
Agreement pursuant to Paragraph 4 of this Agreement, the Company shall
be obligated to provide Executive only with the opportunity to
purchase medical insurance pursuant to the requirements of COBRA. In
addition, following the time that Executive becomes eligible for
Medicare, he will be entitled to participate in the Company's program
through which retirees, at their cost (as determined by the Company),
may elect to have coverage under the Company's medical program that is
secondary to Medicare.
(b) Executive acknowledges and agrees that he shall be responsible
for his share of any and all Federal, State and/or local taxes applicable to
the payments made, and benefits provided or made available, to Executive
pursuant to this Paragraph 2 and further agrees to indemnify the Company
against any liability as a result of those taxes.
(c) The payments to Executive pursuant to subparagraphs 2(a)(i) and
2(a)(ii) of this Agreement shall be made by check or direct deposit to an
account designated by Executive, and shall be reduced by any applicable
Federal, State and local tax or other required withholding. The payments to
Executive pursuant to subparagraph 2(a)(i) of this Agreement shall be reduced
by any applicable
7
<PAGE> 8
deductions resulting from Executive's election to participate in the
Company's medical and/or life insurance programs as described in
subparagraph 2(a)(iv) of this Agreement.
(d) Executive acknowledges and agrees that the consideration provided
by the Company to Executive under this Agreement, including, without
limitation, the payments and benefits to be made or provided by the Company
to Executive pursuant to this Agreement, is greater than and in addition to
anything of value to which he otherwise would be entitled from the Company
and that the release by Executive set forth in Paragraph 4 of this Agreement
and the obligations of and actions taken by Executive under this Agreement
are given and undertaken in consideration of, and adequately supported by,
the payments and benefits to be made or provided to Executive by the Company
under and pursuant to this Agreement.
3. PROFESSIONAL FEES. The Company and Executive acknowledge and agree that
each shall be responsible for the payment of their respective legal fees and
costs (and related disbursements) incurred in connection with Executive's
termination and resignation and all matters relating to the negotiation and
execution of this Agreement.
8
<PAGE> 9
4. RELEASE BY EXECUTIVE. (a) Executive, for himself and his dependents,
successors, assigns, heirs, executors and administrators (and his and their
legal representatives of every kind), hereby releases, dismisses, remises and
forever discharges the Company from any and all arbitrations, claims, including
claims for attorney's fees, demands, damages, suits, proceedings, actions
and/or causes of action of any kind and every description, whether known or
unknown, which Executive now has or may have had for, upon, or by reason of any
cause whatsoever (except that this release shall not apply to the obligations
of the Company arising under this Agreement) ("Claims"), against the Company,
including but not limited to:
(i) any and all Claims arising out of or relating to Executive's employment
by or service with the Company and his termination from the Company;
(ii) any and all Claims arising out of or relating to the matter of ELLIS
F. SMOLIK VS. THE LINCOLN ELECTRIC COMPANY, Case No. 288514 in the Common
Pleas Court of Cuyahoga County, Ohio;
(iii) any and all Claims of discrimination, including but not limited to
Claims of discrimination on the basis of sex, race, age, national origin,
marital status, religion or handicap, including, specifically, but without
limiting the
9
<PAGE> 10
generality of the foregoing, any Claims under the Age Discrimination in
Employment Act, as amended, Title VII of the Civil Rights Act of 1964, as
amended, the Americans with Disabilities Act, Ohio Revised Code Section
4101.17 and Ohio Revised Code Chapter 4112, including Sections 4112.02 and
4112.99 thereof; and
(iv) any and all Claims of wrongful or unjust discharge or breach of any
contract or promise, express or implied.
(b) Executive understands and acknowledges that the Company does not admit
any violation of law, liability or invasion of any of his rights and that any
such violation, liability or invasion is expressly denied. The consideration
provided under this Agreement is made for the purpose of settling and
extinguishing all Claims and rights (and every other similar or dissimilar
matter) that Executive ever had or now may have against the Company to the
extent provided in this Paragraph 4. Executive further agrees and acknowledges
that no representations, promises or inducements have been made by the Company
other than as appear in this Agreement.
(c) Executive further agrees and acknowledges that:
(i) The release provided for in this Paragraph 4 releases Claims to
and including the date of this Agreement;
10
<PAGE> 11
(ii) He has been advised by the Company to consult with legal counsel
prior to executing this Agreement and the release provided for in this
Paragraph 4, has had an opportunity to consult with and to be advised by
legal counsel of his choice, fully understands the terms of this Agreement,
and enters into this Agreement freely, voluntarily and intending to be bound;
(iii) He has been given a period of twenty-one (21) days to review and
consider the terms of this Agreement, and the release contained herein, prior
to its execution and that he may use as much of the twenty-one (21) day
period as he desires; and
(iv) He may, within seven (7) days after execution, revoke this
Agreement. Revocation shall be made by delivering a written notice of
revocation to the Vice President of Human Resources at the Company. For such
revocation to be effective, written notice must be actually received by the
Vice President of Human Resources at the Company no later than the close of
business on the seventh (7th) day after Executive executes this Agreement.
If Executive does exercise his right to revoke this Agreement, all of the
terms and conditions of the Agreement shall be of no force and effect and the
Company shall not have any
11
<PAGE> 12
obligation to make payments or provide benefits to Executive as set forth in
Paragraph 2 of this Agreement, except as may be required under COBRA.
(d) Executive agrees that he will never file a lawsuit or other complaint
asserting any Claim that is released in this Paragraph 4.
(e) It is understood and agreed that Executive's resignation and retirement
are by mutual agreement between the Company and Executive, and that Executive
waives and releases any Claim that he has or may have to reemployment.
5. CONFIDENTIAL INFORMATION. (a) Executive acknowledges and agrees that
in the performance of his duties as an officer and employee of the Company he
was brought into frequent contact with, had or may have had access to, and/or
became informed of confidential and proprietary information of the Company
and/or information which is a trade secret of the Company (collectively,
"Confidential Information"), as more fully described in subparagraph (b) of
this Paragraph 5. Executive acknowledges and agrees that the Confidential
Information of the Company gained by Executive during his association with the
Company was developed by and/or for the Company through substantial expenditure
of time, effort and money and constitutes valuable and unique property of the
Company.
12
<PAGE> 13
(b) Executive will keep in strict confidence, and will not, directly or
indirectly, at any time, disclose, furnish, disseminate, make available, use or
suffer to be used in any manner any Confidential Information of the Company
(except as may be necessary in connection with the discharge of Executive's
obligations pursuant to Paragraph 8 of this Agreement) without limitation as to
when or how Executive may have acquired such Confidential Information.
Executive specifically acknowledges that Confidential Information includes any
and all information, whether reduced to writing (or in a form from which
information can be obtained, translated, or derived into reasonably usable
form), or maintained in the mind or memory of Executive and whether compiled or
created by the Company, which derives independent economic value from not being
readily known to or ascertainable by proper means by others who can obtain
economic value from the disclosure or use of such information, that reasonable
efforts have been put forth by the Company to maintain the secrecy of
Confidential Information, that such Confidential Information is and will remain
the sole property of the Company, and that any retention or use by Executive of
Confidential Information after the termination of Executive's employment with
and services for the Company shall constitute a misappropriation of the
Company's Confidential Information.
13
<PAGE> 14
(c) Executive further agrees that he shall return (to the extent he has not
already returned), within ten (10) days of the Effective Date, in good
condition, all property of the Company, including, without limitation, (i)
property, documents and/or all other materials (including copies,
reproductions, summaries and/or analyses) which constitute, refer or relate to
Confidential Information of the Company, (ii) keys to Company property, (iii)
files and (iv) blueprints or other drawings.
(d) Executive further acknowledges and agrees that his obligation of
confidentiality shall survive, regardless of any other breach of this Agreement
or any other agreement, by any party hereto, until and unless such Confidential
Information of the Company shall have become, through no fault of Executive,
generally known to the public or Executive is required by law (after providing
the Company with notice and opportunity to contest such requirement) to make
disclosure. Executive's obligations under this Paragraph 5 are in addition to,
and not in limitation or preemption of, all other obligations of
confidentiality which Executive may have to the Company under general legal or
equitable principles or statutes.
6. NON-COMPETITION. (a) Executive agrees that for a period of two (2)
years from and after the date of this Agreement, within the Territory (as
described in subparagraph
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<PAGE> 15
(b)(i) of this Paragraph 6) (and, as to subparagraph (a)(iii) of this Paragraph
6, any place), he shall not, directly or indirectly, do or suffer any of the
following:
(i) Own, manage, control or participate in the ownership, management, or
control of, or be employed or engaged by or otherwise affiliated or
associated as a consultant, independent contractor or otherwise with, any
other corporation, partnership, proprietorship, firm, association, or other
business entity, or otherwise engage in any business, which is in competition
with the Company's business (as described in subparagraph (b)(ii) of this
Paragraph 6); PROVIDED, however, that the ownership of not more than one
percent (1%) of any class of publicly-traded securities of any entity shall
not be deemed a violation of this Agreement.
(ii) Employ, assist in employing, or otherwise associate in business with
any person who presently is an employee, officer or agent of the Company, or
any of its affiliated, related or subsidiary entities.
(iii) Induce any person who is an employee, officer or agent of the
Company, or any of its affiliated, related, or subsidiary entities to
terminate such relationship.
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<PAGE> 16
(b) For purposes of this Agreement:
(i) "Territory" shall mean the countries identified in Exhibit A hereto.
(ii) The Company's business shall mean the design, manufacture,
distribution and sale of the products identified in Exhibit B hereto.
(c) In the event Executive shall violate any provision of this Paragraph 6
as to which there is a specific time period during which he is prohibited from
taking certain actions or from engaging in certain activities, as set forth in
such provision, then, in such event, such violation shall toll the running of
such time period from the date of such violation until such violation shall
cease.
(d) Executive has carefully considered the nature and extent of the
restrictions upon him and the rights and remedies conferred upon the Company
under this Paragraph 6 and this Agreement, and hereby acknowledges and agrees
that the same are reasonable in time and territory, are designed to eliminate
competition which otherwise would be unfair to the Company, do not stifle the
inherent skill and experience of Executive, would not operate as a bar to
Executive's sole means of support, are fully required to protect the legitimate
interests of the Company
16
<PAGE> 17
and do not confer a benefit upon the Company disproportionate to the detriment
to Executive.
7. DISCLOSURE. Executive, for a period of two (2) years from and after the
date of this Agreement, agrees to communicate the contents of Paragraphs 5, 6,
8(b), 9 and 11 of this Agreement to any person, firm, association, or
corporation which he intends to be employed by, associated in business with, or
represent.
8. BREACH. (a) If Executive breaches any of the provisions of this
Agreement, then the Company may, at its sole option, (1) immediately terminate
all remaining payments and benefits described in subparagraphs 2(a)(i) and
2(a)(iv) of this Agreement and (2) obtain reimbursement from Executive of all
payments and benefits already provided pursuant to subparagraphs 2(a)(i) and
2(a)(iv) of this Agreement, plus any expenses and damages incurred as a result
of the breach, with the remainder of this Agreement, and all promises and
covenants herein, remaining in full force and effect.
(b) Executive acknowledges and agrees that the remedy at law available to
the Company for breach by Executive of any of his obligations under Paragraphs
5 and 6 of this Agreement would be inadequate and that damages flowing from
such a breach would not readily be susceptible to being measured in monetary
terms.
17
<PAGE> 18
Accordingly, Executive acknowledges, consents and agrees that, in addition to
any other rights or remedies which the Company may have at law, in equity or
under this Agreement, upon adequate proof of Executive's violation of any
provision of Paragraph 5 or 6 of this Agreement, the Company shall be entitled
to immediate injunctive relief and may obtain a temporary order restraining any
threatened or further breach, without the necessity of proof of actual damage.
9. CONTINUED AVAILABILITY AND COOPERATION. (a) Executive shall cooperate
fully with the Company and with the Company's counsel in connection with any
present and future actual or threatened litigation or administrative proceeding
involving the Company that relates to events, occurrences or conduct occurring
(or claimed to have occurred) during the period of Executive's employment by
the Company. This cooperation by Executive shall include, but not be limited
to:
(i) making himself reasonably available for interviews and discussions with
the Company's counsel as well as for depositions and trial testimony;
(ii) if depositions or trial testimony are to occur, making himself
reasonably available and cooperating in the preparation therefor as and to
the extent that the Company or the Company's counsel reasonably requests;
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<PAGE> 19
(iii) refraining from impeding in any way the Company's prosecution or
defense of such litigation or administrative proceeding; and
(iv) cooperating fully in the development and presentation of the
Company's prosecution or defense of such litigation or administrative
proceeding.
(b) For two (2) years from and after the date of this Agreement, Executive
shall continue to provide cooperation to the Company with respect to projects
undertaken by the Company where Executive's prior knowledge with respect to, or
prior involvement in, such or similar projects would be relevant to the
advancement of such projects; PROVIDED that such cooperation shall not require
more than forty-five (45) days of Executive's time per calendar year.
(c) Executive shall be reimbursed by the Company for reasonable travel,
lodging, telephone and similar expenses incurred in connection with such
cooperation, which the Company shall reasonably endeavor to schedule at times
not conflicting with the reasonable requirements of any future employer of
Executive, or with the requirements of any third party with whom Executive has
a business relationship that provides remuneration to Executive. Executive
shall not unreasonably withhold his availability for such cooperation.
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<PAGE> 20
10. SUCCESSORS AND BINDING AGREEMENT. (a) This Agreement shall be
binding upon and inure to the benefit of the Company and any successor of or to
the Company, including, without limitation, any persons acquiring directly or
indirectly all or substantially all of the business and/or assets of the
Company whether by purchase, merger, consolidation, reorganization or otherwise
(and such successor shall thereafter be deemed included in the definition of
"the Company" for purposes of this Agreement), but shall not otherwise be
assignable or delegable by the Company.
(b) This Agreement shall inure to the benefit of and be enforceable by
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and/or legatees.
(c) This Agreement is personal in nature and none of the parties hereto
shall, without the consent of the other parties, assign, transfer or delegate
this Agreement or any rights or obligations hereunder except as expressly
provided in subparagraphs (a) and (b) of this Paragraph 10.
(d) This Agreement is intended to be for the exclusive benefit of the
parties hereto, and except as provided in subparagraphs (a) and (b) of this
Paragraph 10, no third party shall have any rights hereunder.
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<PAGE> 21
11. NON-DISCLOSURE; STATEMENTS TO THIRD PARTIES. (a) Except to the extent
that this Agreement or the terms hereof become publicly known or available
because of legally mandated disclosure and filing requirements of the
Securities and Exchange Commission, or because of any other legal requirement
that this Agreement or the terms hereof be disclosed or filed with a
governmental instrumentality or agency, all provisions of this Agreement and
the circumstances giving rise hereto are and shall remain confidential and
shall not be disclosed to any person not a party hereto (other than (i)
Executive's spouse, (ii) each party's attorney, financial advisor and/or tax
advisor to the extent necessary for such advisor to render appropriate legal,
financial and tax advice, and (iii) persons or entities that fall within the
scope of Paragraph 7 of this Agreement, but only to the extent required
thereby), except as necessary to carry out the provisions of this Agreement,
and except as may be required by law; PROVIDED, HOWEVER, that Executive may
disclose to prospective employers the circumstances of his departure from the
Company so long as all such disclosures are made in a manner not injurious to
the reputation or business of the Company.
(b) Because the purpose of this Agreement is to settle amicably any and all
potential disputes or claims among the parties, neither Executive nor the
Company shall, directly or
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<PAGE> 22
indirectly, make or cause to be made any statements to any third parties
criticizing or disparaging the other or commenting on the character or business
reputation of the other. Executive further hereby agrees not (1) to comment to
others concerning the status, plans or prospects of the business of the
Company, or (2) to engage in any act or omission that would be detrimental,
financially or otherwise, to the Company, or that would subject the Company to
public disrespect, scandal or ridicule.
12. NOTICES. For all purposes of this Agreement, all communications
provided for herein shall be in writing and shall be deemed to have been duly
given when delivered, addressed to the Company (to the attention of the Vice
President of Human Resources) at its principal executive offices and to
Executive at his principal residence, 1 Bratenahl Place, Suite 1003, Cleveland,
Ohio 44108-1155, or to such other address as any party may have furnished to
the other in writing and in accordance herewith. Notices of change of address
shall be effective only upon receipt.
13. MISCELLANEOUS. The death or disability of Executive following the
execution of this Agreement shall not affect or revoke this Agreement or any of
the obligations of the parties hereto. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or
22
<PAGE> 23
discharge is agreed to in writing signed by Executive and the Company. No
waiver by either party hereto at any time of any breach by the other party
hereto or compliance with any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, expressed or implied with
respect to the subject matter hereof have been made by any of the parties that
are not set forth expressly in this Agreement and every one of them (if, in
fact, there have been any) is hereby terminated without liability or any other
legal effect whatsoever.
14. ENTIRE AGREEMENT. This Agreement shall constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and shall
supersede all prior verbal or written agreements, covenants, communications,
understandings, commitments, representations or warranties, whether oral or
written, by any party hereto or any of its representatives pertaining to such
subject matter.
23
<PAGE> 24
15. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the substantive laws of the
State of Ohio, without giving effect to the principles of conflict of laws of
such state.
16. VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement which shall nevertheless remain in full force and
effect.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same Agreement.
18. CAPTIONS AND PARAGRAPH HEADINGS. Captions and paragraph headings used
herein are for convenience and are not part of this Agreement and shall not be
used in construing it.
19. FURTHER ASSURANCES. Each party hereto shall execute such additional
documents, and do such additional things, as may reasonably be requested by the
other party to effectuate the purposes and provisions of this Agreement.
24
<PAGE> 25
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
on November 8, 1995.
THE LINCOLN ELECTRIC COMPANY
By: /s/ Donald F. Hastings
--------------------------
Donald F. Hastings
Chairman of the Board and
Chief Executive Officer
Witness: /s/ Frances V. Zalar /s/ Frederick W. Mackenbach
-------------------- ------------------------------
FREDERICK W. MACKENBACH
25
<PAGE> 26
EXHIBIT A
---------
United States
Canada
Mexico
Brazil
Venezuela
England
France
Germany
Ireland
Italy
Japan
Netherlands
Norway
Spain
Australia
26
<PAGE> 27
EXHIBIT B
---------
I. Arc Welding Machines ranging from light duty models for light
industrial and farm use to heavy duty models for commercial and
industrial use in manual, semi-automatic, automatic and robotic
welding.
II. Arc Welding Consumables: Welding rods, fluxes and wires used in
light to heavy manufacturing of mild steel, alloy and hard surface
applications; coated manual or stick electrodes; solid electrodes
produced in coil form for continuous feeding in mechanized welding;
cored electrodes produced in coil form for continuous feeding in
mechanized welding; submerged arc electrodes and fluxes;
self-shielded cored electrodes; gas-shielded solid and cored
electrodes.
III. Arc Welding Power Sources and Automated Wire Feeding Systems.
IV. Integral horsepower electric motors ranging principally from 1/3 to
250 horsepower, but including cast iron motors of 1,250 horsepower.
27
<PAGE> 1
EXHIBIT (11)
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1995 1994 1993
------- ------- --------
<S> <C> <C> <C>
Primary and fully diluted:
Average shares outstanding.................................. 23,350 21,940 21,704
======= ======= ========
Income (loss) before cumulative effect of accounting
change.................................................... $61,475 $48,008 $(40,536)
Cumulative effect to January 1, 1993 in method of accounting
for income taxes.......................................... 2,468
------- ------- --------
Net income (loss)........................................... $61,475 $48,008 $(38,068)
======= ======= ========
Per share amounts:
Income (loss) before cumulative effect of accounting
change.................................................... $ 2.63 $ 2.19 $ (1.87)
Cumulative effect to January 1, 1993 in method of accounting
for income taxes.......................................... .12
------- ------- --------
Net income (loss)........................................... $ 2.63 $ 2.19 $ (1.75)
======= ======= ========
</TABLE>
36
<PAGE> 1
EXHIBIT (21)
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
The Company's significant subsidiaries, all of which are included in its
consolidated financial statements, are listed in the following table:
<TABLE>
<CAPTION>
COUNTRY OF CONSOLIDATED
NAME INCORPORATION PERCENT OWNERSHIP
- ---------------------------------------------- ---------------- -----------------
<S> <C> <C>
Lincoln Electric (U.K.) Limited............... United Kingdom 100
Lincoln-Norweld A/S........................... Norway 100
Lincoln Electric France S.A................... France 100
Lincoln Smitweld B.V.......................... The Netherlands 100
Lincoln K.D.S.A............................... Spain 100
Lincoln Electric Company
(Australia) Proprietary Limited.......... Australia 100
Lincoln Electric Company of
Canada Limited........................... Canada 100
Lincoln Big Three, Inc........................ United States 51
Big Three Lincoln Alaska, Inc................. United States 100
Lincoln Electric Do Brasil Ltda............... Brazil 100
Lincoln Electric Mexicana, S.A. de C.V........ Mexico 100
</TABLE>
The Company has omitted the names of its subsidiaries which, considered in the
aggregate as a single subsidiary, would not constitute a "significant
subsidiary" within the meaning of Rule 1-02 contained in Regulation S-X.
37
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
of The Lincoln Electric Company (Form S-8 No. 33-25209) pertaining to The
Lincoln Electric Company 1988 Incentive Equity Plan, (Form S-8 No. 33-64189)
pertaining to The Lincoln Stock Purchase Plan and (Form S-8 No. 33-64187)
pertaining to The Lincoln Electric Company Employee Savings Plan of our report
dated February 27, 1996, with respect to the consolidated financial statements
and schedule of The Lincoln Electric Company and subsidiaries included in the
Annual Report (Form 10-K) for the year ended December 31, 1995.
ERNST & YOUNG LLP
Cleveland, Ohio
March 22, 1996
38
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 10,087
<SECURITIES> 0
<RECEIVABLES> 144,749
<ALLOWANCES> 3,916
<INVENTORY> 182,865
<CURRENT-ASSETS> 357,083
<PP&E> 490,611
<DEPRECIATION> 285,017
<TOTAL-ASSETS> 617,760
<CURRENT-LIABILITIES> 168,649
<BONDS> 93,582
<COMMON> 4,977
0
0
<OTHER-SE> 324,969
<TOTAL-LIABILITY-AND-EQUITY> 617,760
<SALES> 1,032,398
<TOTAL-REVENUES> 1,036,293
<CGS> 634,551
<TOTAL-COSTS> 634,551
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,346
<INCOME-PRETAX> 99,584
<INCOME-TAX> 38,109
<INCOME-CONTINUING> 61,475
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61,475
<EPS-PRIMARY> 2.63
<EPS-DILUTED> 2.63
</TABLE>
