<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
THE LINCOLN ELECTRIC COMPANY
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FREDERICK G. STUEBER
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: Not
Applicable
(2) Aggregate number of securities to which transaction applies: Not
Applicable
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): Not
Applicable
(4) Proposed maximum aggregate value of transaction: Not Applicable
(5) Total fee paid: Not Applicable
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: Not Applicable
(2) Form, Schedule or Registration Statement No.: Not Applicable
(3) Filing Party: Not Applicable
(4) Date Filed: Not Applicable
================================================================================
<PAGE> 2
LOGO
Dear Shareholder:
You are cordially invited to attend the 1997 Annual Meeting of
Shareholders, which will be held on May 27, 1997 at 4:00 p.m. at Landerhaven,
6111 Landerhaven Drive, Mayfield Heights, Ohio 44124. A map showing the location
of the Landerhaven is on the back cover. No admission tickets are necessary.
The Notice of and the Proxy Statement for the Annual Meeting are enclosed.
Holders of Common Shares and Class B Common Shares will find enclosed a proxy
card and an envelope in which to return it. If you cannot attend, or if you plan
to be present but want the proxy holders to vote your shares, please sign, date
and return the card at your earliest convenience.
Although the Class A Common Shares vote only on certain matters specified
in the charter, none of which arise this year, we encourage the holders of such
shares to attend the meeting and to review the enclosed information.
Participants in each of the Company's Employee Stock Ownership Plan and
Employee Savings Plan are also encouraged to return the voting direction forms
applicable to such Plans, which are enclosed with materials being sent to such
participants.
In addition to the election of Directors and the other matters set forth in
the accompanying Proxy Statement, voting shareholders are being asked to approve
an amendment to the Company's Restated Articles of Incorporation to eliminate
the Class B Common Shares, with the consequence that existing Class B Common
Shares will be changed into Common Shares. You are also being asked to approve
an increase in the authorized Common Shares and Class A Common Shares of the
Company. We are also proposing amendments to the Company's Code of Regulations
that modernize certain provisions relating to the Company's Annual Meeting and
meetings of the Company's Board of Directors. Your Board of Directors recommends
a vote "FOR" the Reclassification Amendment. The Board of Directors believes
that the more simplified capital structure is in the best interests of the
Company and its shareholders. Your Board of Directors also recommends a vote
"FOR" the increase in authorized Common Shares and Class A Common Shares and the
Regulations Amendments.
As announced previously, I am retiring as Chairman this year and thus will
not be standing for reelection to the Board. I will, however, preside at the
Annual Meeting of Shareholders and look forward to seeing you there. Your
support during my tenure as an Officer and Director of Lincoln Electric has been
greatly appreciated.
Sincerely,
Donald F. Hastings
DONALD F. HASTINGS
Chairman
The Lincoln Electric Company
April 28, 1997
<PAGE> 3
LOGO
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO SHAREHOLDERS OF THE LINCOLN ELECTRIC COMPANY
Notice is hereby given that the Annual Meeting of Shareholders of The Lincoln
Electric Company will be held at Landerhaven, 6111 Landerhaven Drive, Mayfield
Heights, Ohio 44124 on Tuesday, May 27, 1997 at 4:00 p.m. The principal business
of the meeting will be:
(a) To elect four directors, each to serve for a term of three years and
until his or her successor shall have been elected and qualified.
(b) To consider and act upon the Reclassification of the Company's Class
B Common Shares as set forth in the accompanying Proxy Statement.
(c) To consider and act upon proposed amendments to Article Fourth of
the Company's Articles to increase the number of authorized Common
Shares and Class A Common Shares.
(d) To consider and act upon proposed amendments to Article II and
Article III of the Company's Code of Regulations.
(e) To ratify and approve the selection of Ernst & Young LLP as
independent auditors of the Company for the year 1997.
(f) To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on April 18, 1997 as the
record date for the determination of those holders of Common Shares and Class B
Common Shares entitled to notice of, and to vote at, the meeting or any
adjournment thereof.
FREDERICK G. STUEBER
Senior Vice President, General
Counsel and Secretary
The Lincoln Electric Company
22801 St. Clair Avenue
Cleveland, Ohio 44117-1199
April 28, 1997
IMPORTANT -- THE PROXY FOR HOLDERS OF COMMON SHARES
AND CLASS B COMMON SHARES IS ENCLOSED
PLEASE SIGN, DATE AND RETURN YOUR ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE.
<PAGE> 4
THE LINCOLN ELECTRIC COMPANY
22801 St. Clair Avenue
Cleveland, Ohio 44117-1199
(216) 481-8100
---------------------------
PROXY STATEMENT
-------------------------
The Board of Directors of The Lincoln Electric Company (the "Company") is
furnishing this proxy statement to the Company's shareholders in connection with
our solicitation of proxies to be used at the Annual Meeting of Shareholders of
the Company to be held on May 27, 1997.
If you sign and return the enclosed proxy card, the shares represented by
the card will be voted as indicated thereon. Without affecting any vote
previously taken, you may revoke your proxy by delivery to the Company of a new,
later dated proxy with respect to the same shares, or by giving written notice
to the Company before or at the Annual Meeting. Your presence at the Annual
Meeting will not in and of itself revoke your proxy appointment.
At the close of business on April 18, 1997, the record date for the
determination of shareholders entitled to notice of, and to vote at, the Annual
Meeting, the Company had outstanding and entitled to vote 10,488,212 Common
Shares and 486,772 Class B Common Shares. Each Common Share and Class B Common
Share is entitled to one vote on each matter brought before the meeting. The
Company also had 13,837,697 Class A Common Shares outstanding on the record
date. Pursuant to the terms of the Class A Common Shares, holders thereof do not
participate in the election of directors and are not entitled to vote on the
other matters proposed for action at the Annual Meeting.
In addition to the solicitation of proxies by the use of the mails, the
Company may solicit the return of proxies in person and by telephone and
telecopy. Brokerage houses, banks and other custodians, nominees and fiduciaries
will be requested to forward soliciting material to the beneficial owners of
shares and will be reimbursed for their expenses. The cost of the solicitation
of proxies will be borne by the Company.
At the Annual Meeting, the results of shareholder voting will be tabulated
by the inspector of elections appointed for the Annual Meeting. Under Ohio law
and the Company's Restated Articles of Incorporation (the "Articles") and Code
of Regulations (the "Regulations"), properly signed proxies that are marked
"abstain" or are held in "street name" by brokers and not voted on one or more
of the items before the meeting (if otherwise voted on at least one item) will
be counted for purposes of determining whether a quorum has been achieved at the
Annual Meeting. Votes withheld in respect of the election of Directors will not
be counted in determining the election of Directors. Abstentions and broker
non-votes in respect of Items 2, 3, 4 and 5 will have the same effect as votes
against such item.
If you are receiving multiple copies of the Company's Annual Report, you
may call the Company's Shareholder Services at 1-800-942-5909 to request that
one copy be sent to you for all of your accounts. Shareholders owning shares
beneficially may give permission to their nominees to request the discontinuance
of multiple mailings. You may resume mailing of an Annual Report to an account
by calling the Company's Shareholder Services. The elimination of duplicate
mailings will not affect the mailing of dividends, dividend reinvestment
statements, proxy materials and special notices.
ELECTION OF DIRECTORS
Item No. 1
The Company's Regulations provide for three classes of Directors whose
terms expire in different years. The class of Directors to be elected in 1997,
who will hold their positions for a term of three years and until the
<PAGE> 5
election of their successors, has been fixed at four. Unless otherwise directed,
proxies in the accompanying form will be voted in favor of electing to that
class: David C. Lincoln, G. Russell Lincoln, Henry L. Meyer, III, and Frank L.
Steingass, all of whom have been previously elected as Directors by the
shareholders. If any of the Director nominees should become unavailable, it is
intended that the proxies will be voted as the Board of Directors shall
determine. The Company has no reason to believe that any of the Director
nominees will be unavailable. Ohio's General Corporation Law provides that, a
quorum being present, the four Director nominees receiving the greatest number
of votes will be elected as Directors of the Company.
The following table sets forth information concerning the Director nominees
and the Directors whose terms of office will continue after the meeting. Hugh L.
Libby, whose term is expiring this year, is not standing for re-election.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOMINEES FOR TERMS ENDING IN 2000 CURRENT OCCUPATION
<S> <C>
- ---------------------------------------------------------------------------------------------
David C. Lincoln President, Arizona Oxides LLC
Director since 1958 (manufacturer of iron oxide pigments);
Member -- Compensation Committee, Chairman of the Board of Lincoln Laser Co.
Finance Committee, and (manufacturer of laser scanning equipment)
Nominating Committee
Age -- 71
- ---------------------------------------------------------------------------------------------
G. Russell Lincoln President of N.A.S.T. Inc. (financial
Director since 1989 consultants); Former Chairman of the Board
Member -- Compensation Committee and and Chief Executive Officer of Algan, Inc.
Nominating Committee (manufacturer of industrial coatings and
chemicals for the printing industry)
Age -- 50
- ---------------------------------------------------------------------------------------------
Henry L. Meyer, III Vice Chairman of the Board and Chief
Director since 1994 Operating Officer of KeyCorp (banking)
Member -- Compensation Committee and
Nominating Committee
Age -- 47
Mr. Meyer was elected Vice Chairman of the Board and Chief Operating Officer of KeyCorp in
September, 1996. Prior to his election as Vice Chairman and Chief Operating Officer of
KeyCorp (formerly known as Society Corporation), Mr. Meyer served in senior executive
positions with KeyBank (formerly Society National Bank), a subsidiary of KeyCorp, including
most recently as Chairman of the Board and Chief Executive Officer.
- ---------------------------------------------------------------------------------------------
Frank L. Steingass Chairman of the Board and President of
Director since 1971 Buehler/Steingass, Inc. (commercial printers)
Member -- Audit Committee and Nominating
Committee
Age -- 57
- ---------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 6
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIRECTORS WHOSE TERMS END IN 1999 CURRENT OCCUPATION
<S> <C>
- ---------------------------------------------------------------------------------------------
Harry Carlson Former Vice Chairman of the Company
Director since 1973
Member -- Finance Committee and
Audit Committee
Age -- 62
Mr. Carlson retired on June 30, 1995. Prior to that time, he served as Vice Chairman of the
Company.
- ---------------------------------------------------------------------------------------------
David H. Gunning Principal of Encinitos Ventures; Former
Director since 1987 Chairman, President and Chief Executive
Member -- Finance Committee and Officer of Capitol American Financial Corp.
Audit Committee (insurance company)
Age -- 54
Mr. Gunning served as Chairman, President and Chief Executive Officer of Capitol American
Financial Corp. from 1993 until its sale in early 1997. Prior to that time, he was a partner
in the law firm of Jones, Day, Reavis & Pogue.
- ---------------------------------------------------------------------------------------------
Edward E. Hood, Jr. Former Vice Chairman of the Board and
Director since 1993 Executive Officer of The General Electric
Member -- Compensation Committee and Company
Finance Committee
Age -- 66
Mr. Hood retired from The General Electric Company in 1993. Mr. Hood is a director of
Lockheed Martin Corporation and Gerber Scientific Inc.
- ---------------------------------------------------------------------------------------------
Paul E. Lego President of Intelligent Enterprises, Inc.
Director since 1993 (consulting)
Member -- Compensation Committee and
Finance Committee
Age -- 66
Mr. Lego has served as President of Intelligent Enterprises, Inc. since 1993. Prior to that
time, he was Chairman and Chief Executive Officer of Westinghouse Electric Corporation. Mr.
Lego is Chairman of Commonwealth Aluminum Corp. and is a director of Consolidated Natural Gas
Company, PNC Bank Realty Holding Company and USX Corporation.
- ---------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 7
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIRECTORS WHOSE TERMS END IN 1998 CURRENT OCCUPATION
<S> <C>
- ---------------------------------------------------------------------------------------------
Kathryn Jo Lincoln Chairman of The Lincoln Institute of Land
Director since 1995 Policy and Vice President of The Lincoln
Member -- Audit Committee and Foundation, Inc. (non-profit corporations for
Nominating Committee educational purposes)
Age -- 42
- ---------------------------------------------------------------------------------------------
Frederick W. Mackenbach Former President and Chief Operating Officer
Director since 1992 of the Company
Member -- Finance Committee
Age -- 66
Mr. Mackenbach retired on March 31, 1996. He served as President of the Company from August
1, 1992 through his retirement date (and as Chief Operating Officer from November 1, 1992
until his retirement).
- ---------------------------------------------------------------------------------------------
Anthony A. Massaro President and Chief Executive Officer of the
Director since April 1, 1996 Company (effective November 1, 1996)
Member -- Finance Committee
Age -- 53
Mr. Massaro was elected President and Chief Executive Officer on November 1, 1996. From April
1 through October 31, 1996, Mr. Massaro served as President and Chief Operating Officer. From
September, 1995 through March 31, 1996, he served as Executive Vice President of the Company
directing international operations. Prior to that time he was President and Chief Executive
Officer of Lincoln Electric Europe. Mr. Massaro joined the Company in August 1993. His
previous business experience includes service as a President and an Executive Vice President
of Westinghouse Electric Corporation.
- ---------------------------------------------------------------------------------------------
Lawrence O. Selhorst Chairman of the Board and Chief Executive
Director since 1992 Officer of American Spring Wire Corporation
Member -- Audit Committee and (manufacturer of specialty wires)
Nominating Committee
Age -- 64
Mr. Selhorst is a director of Park-Ohio Industries, Inc.
- ---------------------------------------------------------------------------------------------
Craig R. Smith Former Chairman and Chief Executive Officer
Director since 1992 of Ameritrust Corporation (banking)
Member -- Audit Committee and Finance
Committee
Age -- 71
Mr. Smith was Chairman and Chief Executive Officer of Ameritrust Corporation from 1990 until
his retirement in 1992; Retired Chairman and Chief Executive Officer, The Warner & Swasey
Company; Retired Chairman and prior thereto interim Chief Executive Officer, Ransburg
Corporation.
- ---------------------------------------------------------------------------------------------
</TABLE>
Except as otherwise indicated, each of the Directors and Director nominees
has had the principal occupation indicated for more than five years.
4
<PAGE> 8
FAMILY RELATIONSHIPS
The Company was founded by John C. Lincoln, and managed for many years by
his brother, James F. Lincoln. David C. Lincoln is the son of John C. Lincoln
and the father of Kathryn Jo Lincoln. G. Russell Lincoln and Frank L. Steingass
are the grandsons of James F. Lincoln, and first cousins; Harry Carlson is
married to a granddaughter of James F. Lincoln and is therefore related to Frank
L. Steingass and G. Russell Lincoln as a first cousin by marriage.
BOARD COMMITTEES
The Board of Directors maintains, among other committees, an Audit
Committee, a Finance Committee, a Nominating Committee and a Compensation
Committee, the members of which are identified on pages 2, 3 and 4 of this Proxy
Statement.
The Audit Committee met five times in 1996. The Audit Committee recommends
engagement of the independent auditors, reviews the arrangement and scope of the
audit, reviews the financial statements and performance of the independent
auditors, reviews the activities and recommendations of the Company's internal
auditors, considers comments made by the independent auditors with respect to
the Company's system of internal accounting control, reviews internal accounting
procedures and controls with the Company's financial and accounting staff and
reviews non-audit services provided by the Company's independent auditors.
The Compensation Committee met eight times in 1996. The Compensation
Committee reviews the salary levels of the executive officers and administrative
personnel of the Company, including all compensation arrangements, the
Retirement Annuity Program and all other employee benefit programs, other than
health and welfare programs.
The Nominating Committee met six times in 1996. The Committee evaluates the
composition of the Board of Directors and makes recommendations to the Board of
Directors as to nominees (including any nomination of qualified candidates
submitted in writing by shareholders to the Secretary of the Company) for
Director to be submitted to the shareholders. The second function of the
Nominating Committee is to advise and make recommendations with respect to
executive officer positions in the Company.
The Finance Committee met six times in 1996. The Finance Committee
considers in more detail than is possible in full Board of Director meetings
matters relating to the financial operation of the Company. Deliberations of the
Finance Committee result in (i) a report to the Board of Directors accompanied
by any recommendations the Finance Committee deems appropriate; (ii) interaction
with management on matters under the purview of the Finance Committee; and (iii)
discussions with management on changes in such matters, which if appropriate are
reported to the Board of Directors.
COMPENSATION OF DIRECTORS
Directors who are not Company employees are paid an annual retainer of
$20,000, $10,000 of which is payable in restricted voting shares pursuant to the
Non-Employee Directors' Restricted Stock Plan. Such shares vest at the earlier
of three years, death or retirement from the Board of Directors. Pursuant to the
Plan, the Company during January 1996 issued 417 Common Shares to each of the
thirteen non-employee directors serving at such time. The Company also issued
313 Common Shares to Mr. Mackenbach in partial satisfaction of his annual
retainer for the last nine months of 1996, following his retirement on March 31,
1996.
Non-employee Directors are also paid the following fees: Board meeting fee,
$1,000; annual retainer for each committee membership, $2,000; and committee
meeting fee, $800. Each committee chair is also paid an annual fee of $2,000.
During 1996 a committee of four non-employee directors participated in a special
assignment at the request of the full Board and served on an advisory committee
addressing succession issues. The non-employee directors serving on the advisory
committee received $2,000 a month. The committee was discontinued at the end of
1996.
5
<PAGE> 9
Pursuant to the Non-Employee Directors' Deferred Compensation Plan adopted
in 1995, non-employee Directors of the Company have the opportunity to defer
payment of all or a portion of their annual cash compensation. Each Director may
elect to defer a specified dollar amount or percentage of his or her fees. The
deferral will be credited to his or her account and deemed invested in either an
obligation of the Company adjusted in accordance with the return of Standard &
Poor's 500 Composite Stock Index, as calculated quarterly, and/or an obligation
of the Company earning interest at a rate equal to the Moody's Corporate Average
Bond Index, adjusted on a quarterly basis. Payment of fees deferred under the
Plan, with earnings, will commence, as elected by the Director, as of the
earlier of termination of services as a Director, death or a date not less than
2 years after such fees are deferred. At December 31, 1996 two Directors had
elected to defer compensation pursuant to such Plan.
The Company has established a Directors' Charitable Award Program for
non-employee Directors, funded through insurance policies on the lives of the
participating Directors. In 1996 the Company paid $215,656 in premiums on such
policies. Upon the death of a participating Director, the Company will donate an
aggregate of $500,000 (in ten annual installments) to one or more qualified
charitable organizations recommended by such Director and approved by the
Company. The Directors derive no financial benefit from the Program since all
charitable deductions and cash surrender value of life insurance policies accrue
solely to the Company. All non-employee Directors, other than David C. Lincoln,
Henry Meyer and Frank Steingass, currently participate in the Program. Five
years of service as a Director are required to vest benefits under the Program.
Eight meetings of the Board of Directors were held during 1996. Every
Director attended at least 75% of the aggregate number of meetings of the Board
of Directors and meetings of the committees of the Board of Directors on which
such Director served.
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding ownership of
the Company's equity securities as of March 31, 1997 by the Directors and
Director nominees, each of the Executive Officers named in the Summary
Compensation Table on page 10 and all Directors and Executive Officers as a
group. Also set forth on the next page is information with respect to any person
(including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934) known to the Company as of March 31, 1997 to be
an owner of more than 5% of any class of the Company's voting securities. Except
as otherwise indicated, voting and investment power with respect to shares
reported in this table is not shared with others.
The Company currently has two classes of voting securities, Common Shares
and Class B Common Shares, which vote together as one class on all matters
unless otherwise provided by law. If the Reclassification is approved, the Class
B Common Shares will be changed into Common Shares. See "Reclassification --
Item No. 2." The Company also has one class of equity securities that only votes
in certain specified situations, Class A Common Shares. The rights of the three
classes of common equity are identical except as otherwise specified in the
Company's Articles. Class B Common Shares have been issued by the Company only
to the trust established by the Company's profit-sharing plan, The Lincoln
Electric Company Employee Stock Ownership Plan (the "ESOP"). Aside from a small
number of shares distributed in kind to employees upon separation from the
Company, the trust holds of record all of the Class B Common Shares. Percentages
of equity ownership are set forth in the following table, including percentage
ownership by class for each of the three classes, and percentage ownership of
all outstanding voting shares, aggregating the Common Shares and Class B Common
Shares.
6
<PAGE> 10
BENEFICIAL OWNERSHIP TABLE
<TABLE>
<CAPTION>
VOTING SHARES NON-VOTING SHARES
--------------------------------------------- ----------------------------
NON-OFFICER NUMBER OF NUMBER OF
DIRECTORS AND VOTING SHARES PERCENT PERCENT OF NON-VOTING SHARES PERCENT
DIRECTOR NOMINEES OWNED(1)(2) OF CLASS VOTING SHARES OWNED(1) OF CLASS
- --------------------------------- ------------- -------- ------------- ----------------- --------
<S> <C> <C> <C> <C> <C>
Harry Carlson.................... 141,783(3) 1.35% 1.29% 130,354(4) *
David H. Gunning................. 4,555 * * 0 *
Edward E. Hood, Jr............... 2,055 * * 1,000 *
Paul E. Lego..................... 2,555 * * 1,500 *
Hugh L. Libby.................... 14,125 * * 13,070 *
David C. Lincoln................. 2,417,355(5) 23.04% 22.02% 979,807(6) 7.08%
G. Russell Lincoln............... 73,241(7) * * 70,890(8) *
Kathryn Jo Lincoln............... 3,755 * * 2,700 *
Frederick W. Mackenbach.......... 50,768(9) * * 50,150(10) *
Henry L. Meyer, III.............. 2,555(11) * * 1,500(12) *
Lawrence O. Selhorst............. 2,055 * * 1,000 *
Craig R. Smith................... 4,605(13) * * 3,550(14) *
Frank L. Steingass............... 109,529(15) 1.04% * 114,919(16) *
NAMED EXECUTIVE OFFICERS
Donald F. Hastings............... 64,780(17) * * 67,580(19) *
Anthony A. Massaro............... 1,763 * * 1,000 *
H. Jay Elliott................... 7,878(18) * * 7,308 *
John M. Stropki, Jr.............. 4,550(20) * * 7,381(21) *
David J. Fullen.................. 2,300 * * 2,300 *
Frederick G. Stueber............. 2,538(18)(22) * * 2,500(22) *
Richard C. Ulstad................ 1,200 * * 9,269(23) *
All Directors and Executive
Officers as a group (34
persons)....................... 2,953,440 28.16% 26.91% 1,494,444 10.8%
OTHER PERSONS
The Lincoln Electric Company
Employee Stock Ownership Plan
22801 St. Clair Avenue
Cleveland, Ohio 44117-1199....... 479,686(18) 98.54%** 4.37% 518,436 3.75%
</TABLE>
- ---------------
* indicates less than 1%.
** indicates percentage ownership of Class B Common Shares
(1) Reported in accordance with the beneficial ownership rules of the
Securities and Exchange Commission (the "Commission"), under which a person
is deemed to be the beneficial owner of a security, for these purposes, if
he or she has or shares voting power or investment power in respect of such
security or has the right to acquire such security within 60 days.
(2) Includes Common Shares subject to forfeiture and restrictions on transfer
issued pursuant to the Company's Non-Employee Directors' Restricted Stock
Plan.
(3) Of the 141,783 shares, Mr. Carlson holds of record 67,691 shares and the
remaining 74,092 shares are held of record by his spouse. Mr. Carlson
disclaims beneficial ownership of the shares held by his spouse.
7
<PAGE> 11
(4) Of the 130,354 shares, Mr. Carlson holds of record 65,982 shares and the
remaining 64,372 shares are held of record by his spouse. Mr. Carlson
disclaims beneficial ownership of the shares held by his spouse.
(5) Of the 2,417,355 shares, David C. Lincoln and his wife hold of record an
aggregate of 368,805 shares. The remaining 2,048,600 shares are held of
record as follows: 998,550 shares by The Lincoln Foundation, Inc., of which
Mr. Lincoln is President and a member of the Board of Trustees, as to which
shares Mr. Lincoln disclaims beneficial ownership; 349,520 shares by the
Estate of Helen C. Lincoln, of which Mr. Lincoln is a co-administrator, as
to which shares Mr. Lincoln disclaims beneficial ownership; 75,240 shares
by a trust for which Mr. Lincoln serves as a trustee and in which he has a
lifetime pecuniary interest and as to which he otherwise disclaims
beneficial ownership; 75,240 shares by a trust for which Mr. Lincoln serves
as a trustee and in which his sister has a lifetime pecuniary interest, as
to which shares Mr. Lincoln disclaims beneficial ownership; 500,000 shares
by LFM, Inc., a corporation of which Mr. Lincoln is President, as to which
shares Mr. Lincoln disclaims beneficial ownership; 30,000 shares by The
Lincoln Fund, a Lincoln family partnership of which Mr. Lincoln is Managing
Director; and 20,000 shares by a trust of which Mr. Lincoln is a trustee,
for the benefit of his nephew, as to which shares Mr. Lincoln disclaims
beneficial ownership.
(6) Of the 979,807 shares, David C. Lincoln and his wife hold of record an
aggregate of 367,750 shares. The remaining 612,107 shares are held of
record as follows: 109,572 shares by The Lincoln Foundation, Inc., of which
Mr. Lincoln is president and a member of the Board of Trustees, as to which
shares Mr. Lincoln disclaims beneficial ownership; 54,866 shares by the
Estate of Helen C. Lincoln, of which Mr. Lincoln is a co-administrator, as
to which shares Mr. Lincoln disclaims beneficial ownership; 397,619 shares
by LFM, Inc., a corporation of which Mr. Lincoln is President, as to which
shares Mr. Lincoln disclaims beneficial ownership; 30,000 shares by The
Lincoln Fund, a Lincoln family partnership of which Mr. Lincoln is Managing
Director; and 20,000 shares by a trust of which Mr. Lincoln is a trustee,
for the benefit of his nephew, as to which shares Mr. Lincoln disclaims
beneficial ownership.
(7) Of the 73,241 shares, G. Russell Lincoln holds of record 58,555 shares and
5,996 shares are held of record by three trusts, as to each of which Mr.
Lincoln is a trustee, for the benefit of his minor children. Mr. Lincoln is
also a trustee of 8,690 shares for the Laura P. Heath Family Trust. Mr.
Lincoln disclaims beneficial ownership of the shares held by the trusts.
(8) Of the 70,890 shares, Mr. Lincoln holds of record 57,500 shares. The
balance are held by four trusts, as set forth in footnote 7.
(9) Of the 50,768 shares, 618 shares are held of record by Mr. Mackenbach and
the remaining 50,150 shares are held of record by Mr. Mackenbach and his
spouse, as Trustees of the Mackenbach Community Trust.
(10) Held of record by Mr. Mackenbach and his spouse, as Trustees of the
Mackenbach Community Trust.
(11) Held of record by a trust established by Mr. Meyer and his spouse under
which Mr. Meyer may be deemed to share voting and investment power.
(12) Held of record by a trust established by Mr. Meyer and his spouse under
which Mr. Meyer may be deemed to share voting and investment power.
(13) Held of record by a trust established by Mr. Smith, under which he has sole
voting authority and shared investment authority.
(14) Held of record by a trust established by Mr. Smith, under which he has sole
voting authority and shared investment authority.
(15) Of the 109,529 shares, Mr. Steingass holds of record 102,830 shares. The
remaining 6,699 shares are held of record as follows: 1,200 shares by
Buehler/Steingass, Inc., a corporation of which Mr. Steingass is Chairman
of the Board and President, as to which shares Mr. Steingass disclaims
beneficial ownership; and 5,499 shares by Mr. Steingass' spouse, as to
which shares Mr. Steingass disclaims beneficial ownership.
8
<PAGE> 12
(16) Of the 114,919 shares, Mr. Steingass holds of record 103,556 shares. The
remaining 11,363 shares are held of record as follows: 564 shares by
Buehler/Steingass, Inc., a corporation of which Mr. Steingass is Chairman
of the Board and President, as to which shares Mr. Steingass disclaims
beneficial ownership; and 10,799 shares by Mr. Steingass' spouse, as to
which shares Mr. Steingass disclaims beneficial ownership.
(17) Of the 64,780 shares, Mr. Hastings holds of record 64,720 shares and the
remaining 60 shares are held of record by his spouse. Mr. Hastings
disclaims beneficial ownership of the shares held by his spouse.
(18) The shares indicated for Messrs. Elliott and Stueber do not include the
479,686 Class B Common Shares or the 518,436 Class A Common Shares held of
record by the trustee of the ESOP, National City Bank, for the benefit of
participants and beneficiaries in the ESOP. Key Trust Company of Ohio, N.A.
has been named as special trustee of the ESOP for purposes of voting the
Class B Common Shares held by the ESOP at the 1997 Annual Meeting. See
"Reclassification -- Item No. 2." Generally, participants and beneficiaries
are entitled to direct the voting of Class B Common Shares allocated to
their respective accounts. The ESOP is administered by an Administrative
Committee appointed by the Board of Directors of the Company. In certain
limited circumstances, the Administrative Committee votes on matters
concerning the exercise of appraisal or dissenters' rights and the choice
of consideration to be received by shareholders in any transaction
involving the Class B Common Shares. The Administrative Committee will not,
however, vote on the Reclassification proposal. See
"Reclassification -- Item No. 2." Messrs. Elliott and Stueber have been
appointed by the Board of Directors as members of the Administrative
Committee and disclaim beneficial ownership of such shares.
(19) Of the 67,580 shares, Mr. Hastings holds of record (or through Company
plans) 67,520 shares and the remaining 60 shares are held of record by his
spouse. Mr. Hastings disclaims beneficial ownership of the shares held by
his spouse.
(20) Of the 4,550 shares, Mr. Stropki holds of record 2,800 shares and the
remaining 1,750 shares are held of record by his spouse. Mr. Stropki
disclaims beneficial ownership of the shares held by his spouse.
(21) Of the 7,381 shares, Mr. Stropki holds of record 2,800 shares, 1,750 shares
are held of record by his spouse and Mr. Stropki has or had the right to
acquire 2,831 shares upon the exercise of stock options within 60 days
after December 31, 1996. Mr. Stropki disclaims beneficial ownership of the
shares held by his spouse.
(22) Includes 2,500 Common Shares and 2,500 Class A Common Shares subject to
forfeiture and restrictions on transfer pursuant to the Company's Incentive
Equity Plan and the employment agreement with Mr. Stueber.
(23) Of the 9,269 shares, Mr. Ulstad holds of record 1,200 shares. Mr. Ulstad
has or had the right to acquire 8,069 shares upon the exercise of stock
options within 60 days after December 31, 1996.
9
<PAGE> 13
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------- --------------------------------------
OTHER RESTRICTED SECURITIES LONG-TERM
NAME AND ANNUAL STOCK UNDERLYING INCENTIVE PLAN ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
------------------ ---- -------- -------- ------------ ---------- ---------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald F. Hastings 1996 550,000 400,000 100,000 1,978,496(2)
Chairman of the Board (1) 1995 550,000 350,000 32,475(3)
1994 702,400 100,000 207(4) 182,500 18,794(3)
Anthony A. Massaro 1996 380,833 300,000 50,000
President and 1995 300,000 75,000 108,528(6) 9,749(7)
Chief Executive Officer (5) 1994 288,000 60,000 69,841(8) 49,371(9)
H. Jay Elliott 1996 255,000 125,000 15,000
Senior Vice President, 1995 225,000 75,000
Chief Financial 1994 218,016 40,000
Officer and Treasurer
John M. Stropki, Jr. 1996 175,000 175,000 20,000
Executive Vice President
President, North America (10)
David J. Fullen 1996 200,000 150,000 8,000 230,840(11)
Executive Vice President 1995 164,580 115,000
Engineering and Marketing 1994 144,982 144,684
Frederick G. Stueber 1996 200,000 75,000 10,000
Senior Vice President,
General Counsel and Secretary
(10)
Richard C. Ulstad 1996 145,000 120,000 8,000
Senior Vice President,
Manufacturing (10)
</TABLE>
- ---------------
(1) Indicated amounts for 1996 include compensation as Chief Executive Officer
through October 31, 1996.
(2) Indicated amount reflects amounts accrued for the following non-pension
arrangements. Mr. Hastings resigned as Chief Executive Officer on October
31, 1996. He is to resign as Chairman of the Board and retire from
employment with the Company effective May 27, 1997. The Company entered
into an Employment, Retirement and Consulting Agreement pursuant to which
the Company agreed to continue his compensation at his base salary until
July 2, 1997 at the same rate paid in 1996, with bonus eligibility up to
$200,000 if 1997 performance targets are achieved. In addition the Company
is to retain Mr. Hastings for consulting services over a seven year period
following his retirement, during which period Mr. Hastings will also be
subject to non-competition covenants. Mr. Hastings will receive $500,000
annually for the first two years of consulting following his retirement;
thereafter he will receive $100,000 annually for such services through May
31, 2004. Certain adjustments were also made in Mr. Hastings' pension
benefits. See "Pension Benefits." The Company will also provide a limited
amount of off-site office space and secretarial support for Mr. Hastings
through December 31, 1999. The amount also includes life insurance premiums
paid by the Company totaling $22,526 and reimbursements of $30,970 relating
to office furnishings that were purchased by Mr. Hastings in 1993 but
retained by the Company upon his retirement.
(3) Indicated amounts reflect life insurance premiums paid by the Company.
(4) Indicated amount reflects state and local taxes and social security
payments made on behalf of Mr. Hastings with respect to taxable income that
relates to a purchase of shares in May 1994 under the Employee Stock
Purchase Plan. All participants in the Plan who purchased shares in 1994
were treated identically with respect to these tax payments.
(5) Indicated amounts for 1996 include compensation as Chief Executive Officer
from November 1, 1996.
(6) Indicated amount is the aggregate, net of tax adjustments, of payments made
to Mr. Massaro under his expatriate agreement, including cost of living
adjustments and housing payments. The agreement ended in 1995.
10
<PAGE> 14
(7) Indicated amount reflects moving expenses and payments related thereto.
(8) Indicated amounts reflect the following payments by the Company to or on
behalf of Mr. Massaro in 1994: housing payments in the amount of $49,585
and tax equalization payments in the amount of $20,256.
(9) Indicated amounts reflect the following payments by the Company to or on
behalf of Mr. Massaro in 1994: cost of living payment in the amount of
$49,155; life insurance premium payment in the amount of $216.
(10) The individuals were not among the five most highly compensated executive
officers prior to 1996.
(11) Mr. Fullen resigned as Executive Vice President -- Engineering/Marketing on
December 31, 1996. He is to retire from employment with the Company
effective June 30, 1997. The Company entered into an Employment and
Retirement Agreement pursuant to which the Company agreed to pay base
salary through June 30, 1997 at the same rate paid in 1996. In addition,
the Company is to pay up to $40,700 in relocation expenses and $90,140 in
exchange for the cancellation of stock options granted to Mr. Fullen in
1996 as part of a settlement arising from incentive plan litigation. See
note 3 to Option Grants in Last Fiscal Year. Certain adjustments were also
made in Mr. Fullen's pension benefits. See "Pension Benefits."
11
<PAGE> 15
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information relating to stock option grants
for the year 1996 for the named executive officers of the Company. No stock
appreciation rights were granted to the named executive officers or other
optionees during 1996.
<TABLE>
<CAPTION>
NO. OF SHARES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE EXPIRATION GRANT DATE
NAME OPTIONS TO EMPLOYEES PRICE ($/SH) DATE VALUE(4)
- ---------------------- ------------- --------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Donald F. Hastings.... Common Shares 50,000 11.0% $30.00 5/27/2000 (1) $642,500
Class A Common Shares 50,000 11.0% 27.25 5/27/2000 (1) 484,500
Anthony A. Massaro.... Common Shares 25,000 5.6% 30.00 10/1/2006 321,250
Class A Common Shares 25,000 5.6% 27.25 10/1/2006 242,250
H. Jay Elliott........ Common Shares 7,500 1.7% 30.00 10/1/2006 96,375
Class A Common Shares 7,500 1.7% 27.25 10/1/2006 72,675
John M. Stropki,
Jr.................. Common Shares 10,000 2.2% 30.00 10/1/2006 128,500
Class A Common Shares 10,000 2.2% 27.25 10/1/2006 96,900
1,463(2) 0.3% 34.00 4/3/2006 15,815
1,368(2) 0.3% 30.00 4/3/2006 15,814
David J. Fullen....... Common Shares 4,000 0.9% 30.00 6/30/2000 (1) 51,400
Class A Common Shares 4,000(3) 0.9% 27.25 6/30/2000 (1) 38,760
Frederick G.
Stueber............. Common Shares 5,000 1.1% 30.00 10/1/2006 64,250
Class A Common Shares 5,000 1.1% 27.25 10/1/2006 48,450
Richard C. Ulstad..... Common Shares 4,000 0.9% 30.00 10/1/2006 51,400
Class A Common Shares 4,000 0.9% 27.25 10/1/2006 38,760
3,899(2) 0.9% 30.00 4/3/2006 45,072
4,170(2) 0.9% 34.00 4/3/2006 45,077
</TABLE>
- ---------------
(1) The options are valid for three years from the date of retirement.
(2) Reflects options for Class A Common Shares that were granted in settlement
of class action litigation arising from an incentive plan of the Company
that existed between 1989 and 1991. The grants were made on April 3, 1996.
The value shown is based on the Black-Scholes option pricing model. The
model assumes (a) a stock price of $26 which was the fair market value of
the Class A Common Shares when settlement discussions commenced; (b)
volatility calculated using the trading information for the Class A Common
Shares during the 50 week period ending March 20, 1996 (37%); (c) a
risk-free rate of return based on the 10-year Treasury Bill rate at March
20, 1996 (6.77%); and (d) a dividend yield of 1.8%.
(3) Excluded from such amount are options for 11,828 Class A Common Shares that
were awarded in settlement of class action litigation arising from an
incentive plan of the Company that existed between 1989 and 1991. The
options have been cancelled. See note 11 to the Summary Compensation Table.
(4) Except for the options referred to in footnote (2), all options were granted
at an exercise price equal to fair market value of the Common Shares
($30.00) and the Class A Common Shares ($27.25) at the date of Grant. The
value shown is based on the Black-Scholes option pricing model. The model
assumes (a) volatility calculated using the trading information for the
Company Common Shares and Class A Common Shares during the 50 week period
ending February 7, 1997 (31.4% for the Common Shares and 21.1% for the Class
A Common Shares); (b) a risk-free rate of return based on the 10-year
Treasury Bill rate at February 11, 1997 (6.85%); and (c) a dividend yield
for the Company's Common Shares of 2.0% and Class A Common Shares of 2.1%.
12
<PAGE> 16
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table provides information relating to stock option exercises
for the year 1996 and exercisable and unexercisable stock options at December
31, 1996 for the named executive officers of the Corporation. No stock
appreciation rights were awarded to such individuals during the last fiscal
year, and no stock appreciation rights were exercised or remained unexercised
during the last fiscal year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AT FY-END (#) MONEY OPTIONS AT FY-END ($)
------------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Donald F. Hastings....... Common Shares 0 50,000 $ 0 $ 143,750
Class A Common Shares 0 50,000 0 150,000
Anthony A. Massaro....... Common Shares 0 25,000 0 71,875
Class A Common Shares 0 25,000 0 75,000
H. Jay Elliott........... Common Shares 0 7,500 0 21,563
Class A Common Shares 0 7,500 0 22,500
John M. Stropki, Jr...... Common Shares 0 10,000 0 28,750
Class A Common Shares 2,831 10,000 3,933 12,000
David J. Fullen.......... Common Shares 0 4,000 0 11,500
Class A Common Shares 0 4,000 0 12,000
Frederick G. Stueber..... Common Shares 0 5,000 0 14,375
Class A Common Shares 0 5,000 0 15,000
Richard C. Ulstad........ Common Shares 0 4,000 0 11,500
Class A Common Shares 8,069 4,000 11,210 12,000
</TABLE>
13
<PAGE> 17
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors consists solely of
non-employee Directors. Its primary charge is to determine and report to the
Board of Directors on the compensation (or method of calculation thereof) for
the Chairman and Chief Executive Officer and each other executive who is among
the five highest paid executives. In addition, the Compensation Committee makes
recommendations to the Board of Directors concerning the Company's employee
benefits programs, other than health and welfare programs. The Chief Executive
Officer determines the compensation of the other executives officers, subject to
Compensation Committee oversight.
EXECUTIVE COMPENSATION POLICY
The executive compensation policy of the Company is based on the Company's
longstanding commitment to incentive based compensation generally for all
employees, including officers. This commitment is exemplified by the cash bonus
program. For many years the Company has administered a discretionary employee
bonus program featuring a cash distribution determined on the basis of a formula
that takes into account individual earnings and the results of a merit review
process. Virtually all domestic employees participate in the program, and
efforts have been made to include employees of foreign subsidiaries, where
appropriate. The costs of this program, net of hospitalization costs but
inclusive of payroll taxes, were $66.7 million in 1996, $66.4 million in 1995
and $59.6 million in 1994.
In 1996 the Committee directed, and management completed, a comprehensive
review of the Incentive Management System that has served the Company so well
for many years. The study reaffirmed the Company's commitment across the board
to premium pay for premium performance and recognized the continuing importance
of the piecework system to the Company's production employees. The study also
acknowledged, however, the need for more vigorous performance management review
and productivity gains among salaried employees and certain hourly employees; it
also sought to define more clearly the connection between Company performance on
the one hand and the size and equitable distribution of the cash bonus payments
on the other hand.
Concurrent with the reconfiguration of the Company's Incentive Management
System (which has been renamed the Incentive Performance System), the Committee
recommended a reevaluation of the Company's executive compensation policy. The
Committee had begun to refine the theory of its incentive-oriented executive
compensation in 1995, when it first introduced a Management Incentive Plan
("MIP") for officers. One purpose of the MIP as introduced was to benchmark base
salary and cash bonus opportunities against comparable opportunities at
comparable companies. As first introduced, the MIP focused on establishing
individual base salaries at the median of comparable companies, with a maximum
incentive target, assuming achievement of predetermined financial targets,
placing individuals at approximately the 75th percentile for comparable
companies. The MIP was also segmented to reflect the responsibilities of
individual officers, with weighing on corporate or regional results accordingly.
In early 1996 the Committee set the financial performance and individual award
targets for the MIP participants, including those applicable to the executive
officers named in the Summary Compensation Table, on that basis. The Committee
recognized later in 1996, however, as the Incentive Management System review was
completed, the need for additional improvements in the MIP and in executive
compensation strategy generally.
Consistent with the overall philosophy of the Company's compensation
system, the Committee decided that the base salaries of MIP participants should
as a norm be set at the 40th percentile, rather than the median, i.e. base
salaries will be somewhat below average. The Committee has reaffirmed, however,
that cash bonus opportunities should be above average, with the 75th percentile
retained as the maximum target for total cash compensation. The Committee also
recognized, however, that individual circumstances and performance should be a
factor in incentive awards, both positively and negatively -- notwithstanding
the performance of the Company against financial targets. The financial targets
for 1997 are based on earnings before interest, taxes and the cash bonus
referred to above. Financial targets were set on the same basis in
14
<PAGE> 18
1996. An individual performance element, based upon the achievement of personal
objectives, has been added to the MIP. These improvements to the MIP are
effective in 1997.
The Committee also noted in its review of executive compensation that the
Company had not emphasized long-term equity incentive compensation as an element
of total compensation, notwithstanding the existence of the 1988 Incentive
Equity Plan (the "IEP"), which the Committee administers. Awards under the IEP,
which are made only to officers and other key employees responsible for or
contributing to the management, growth and/or profitability of the Company, may
be of four types: (i) stock options; (ii) stock appreciation rights attached to
stock options; (iii) restricted stock; and (iv) deferred stock. In early 1996
the Committee approved, on a one-time basis, option grants for a total of
167,590 shares to 31 individuals in settlement of litigation arising from
earlier awards under the IEP. The options were premium priced at the time of
grant, with exercise prices of $30 and $34 per share. The Committee also
approved in September 1996 non-qualified option grants at market for a total of
278,000 shares to 21 individuals in order to address the longer-term incentive
compensation program. The Committee expects that equity compensation will be an
important part of incentive compensation going forward. As of December 1996,
1,454,362 shares remained available for grant under the IEP.
CEO COMPENSATION
1996 was a year of transition for Company management. Mr. Hastings stepped
down as Chief Executive Officer on October 31, 1996. His base compensation for
1996, $550,000, was unchanged from 1995; his maximum cash incentive
compensation, earned due to the Company's performance, increased $50,000 to a
total of $400,000. Mr. Hastings also received option grants for 100,000 shares
during 1996, which vest on his retirement in May 1997. The grants address in
part the absence during Mr. Hastings' tenure as an officer of a long-term
incentive compensation program. The Committee also reached an agreement with Mr.
Hastings relating to his retirement which is described elsewhere (See Note 2 to
the Summary Compensation Table). In reaching this agreement both the Committee
and Mr. Hastings were advised by independent consultants.
Mr. Massaro was elected Chief Executive Officer effective November 1, 1996.
His base salary was increased from $325,000 to $375,000. His maximum incentive
cash award, earned due to the Company's performance, was increased from $175,000
to $300,000. He also received option grants for 50,000 shares, in recognition of
the Committee's decision to emphasize long-term Company performance and total
return to shareholders.
OTHER EXECUTIVE OFFICERS
The base salaries of Messrs. Elliott, Stropki, Fullen, Stueber and Ulstad
were established under the 1996 Management Incentive Plan, as discussed above.
An aggregate of $595,000 was paid in 1996 to Messrs. Elliott, Stropki, Fullen,
Stueber and Ulstad as the maximum target award, thus 38% of their total
compensation was at risk. Aggregate option grants for 61,000 shares were made to
these individuals under the IEP.
1993 TAX ACT
The Compensation Committee's general philosophy will be to "qualify" future
long-term incentive plans for tax deductibility wherever appropriate,
recognizing that, under certain circumstances, the limitations imposed by the
Omnibus Budget Reconciliation Act of 1993 may be exceeded.
The foregoing report has been furnished by the Compensation Committee.
Edward E. Hood, Jr., Chairman
Paul E. Lego
Hugh L. Libby
David C. Lincoln
G. Russell Lincoln
Henry L. Meyer, III
15
<PAGE> 19
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and Officers to file reports of ownership and changes in ownership
with respect to the securities of the Company with the Commission and to furnish
copies of these reports to the Company. Based on a review of these reports, the
Company believes that for 1996 all filing requirements were met on a timely
basis.
PENSION BENEFITS
Pension benefits for the Executive Officers of the Company are provided
under two defined benefit programs: the retirement annuity program (the
"Retirement Annuity Program"), which has been in effect since 1936; and a
supplemental executive retirement plan (the "SERP"), which became effective
January 1, 1994. Participation in the SERP is limited to individuals who have
been chosen for participation by the Compensation Committee.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The following table shows the estimated annual pension benefits provided
under the SERP (inclusive of benefits payable under the Company's qualified
plans and previous employer plans) which would be payable to employees in
various compensation classifications upon retirement on December 31, 1996, at
age 60 after selected periods of service:
<TABLE>
<CAPTION>
AVERAGE ANNUAL
COMPENSATION FOR
3 HIGHEST YEARS YEARS OF SERVICE
IN 7-YEAR PERIOD ---------------------------------------------------------------------------------------------------------
PRECEDING
RETIREMENT 25 YRS. 30 YRS. 35 YRS. 40 YRS. 45 YRS.
- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
$ 125,000 $ 30,180 $ 39,212 $ 48,243 $ 57,274 $ 66,274
150,000 39,212 50,049 60,887 71,724 82,524
175,000 48,243 60,887 73,530 86,174 98,774
200,000 57,274 71,724 86,174 100,624 115,024
225,000 66,305 82,562 98,818 115,074 131,274
250,000 75,337 93,399 111,462 129,524 147,524
300,000 93,399 115,074 136,749 158,424 180,024
400,000 129,524 158,424 187,324 216,224 245,024
500,000 165,649 201,774 237,899 274,024 310,024
600,000 201,774 245,124 288,474 331,824 375,024
700,000 237,899 288,474 339,049 389,624 440,024
800,000 274,024 331,824 389,624 447,424 505,024
900,000 310,149 375,174 440,199 505,224 570,024
1,000,000 346,274 418,524 490,774 563,024 635,024
</TABLE>
The compensation covered by the SERP is salary and bonus. The compensation
covered by the SERP is the same as the amounts shown in the salary and bonus
columns of the Summary Compensation Table on page 10. Credited service for SERP
purposes for Messrs. Hastings, Massaro, Elliott, Stropki, Fullen, Stueber and
Ulstad is 40 (5/12), 27 (5/12), 30 (5/12), 24 (6/12), 41 (6/12), 18 (10/12) and
26 (2/12) years respectively.
Benefits under the SERP are based upon 1.445% of the average annual
compensation for the 3 highest years in the 7-year period preceding retirement
multiplied by the covered employee's years of service (including, in certain
circumstances, service with previous employers) until the end of the year in
which age 65 is attained, except that the maximum benefit may not exceed 65% of
the average annual compensation for the 3 highest years used in the calculation
and service after age 65 is not included. The benefits payable under the SERP
are reduced by the maximum Social Security benefit payable in the year of
retirement and the table
16
<PAGE> 20
reflects such reduction. The amounts reflected in the table will be reduced by
the single life benefits payable under the Retirement Annuity Program, the life
time benefit equivalence of any account balance under the ESOP and any employer
match under the Company's 401(k) plan and (if additional service is granted)
other qualified plan benefits paid by previous employers. Benefits under the
plan are also reduced if the covered employee has participated in the plan for
fewer than 8 years at the time of retirement. Unless a different factor is set
by the Compensation Committee, participants are credited with only 20% of the
net amount of the benefit otherwise payable under the plan when they first
become participants, and in each of the next seven years an additional 10% of
the net amount of the benefit will become payable upon retirement. Years of
service after the end of the year in which age 67 is attained are disregarded
for this purpose. In conjunction with the retirements of Mr. Hastings and Mr.
Fullen, the Compensation Committee increased their participation factors to
80% and 60%, respectively, from the factors of 40% and 55% that would otherwise
have applied. The table reflects the benefits payable on a single life basis
without reduction for the participation factor or offsets from the Company's
plans or previous employer plans.
RETIREMENT ANNUITY PROGRAM
Under the Retirement Annuity Program, each employee accumulates 2.5% of
each year's base compensation up to Internal Revenue Code limitations in the
form of an annuity payable at normal retirement age (age 60). In addition to the
2.5% accumulation each year, the Company has granted, on a number of occasions,
additional past service benefits. The Program also provides accumulated benefits
to eligible spouses of deceased employees or former employees, and to eligible
employees who terminate employment. Benefits under the Program are in addition
to those payable under Social Security.
The anticipated retirement benefits under the Retirement Annuity Program
for the named Executive Officers with the highest compensation for 1996 are as
follows:
<TABLE>
<CAPTION>
ANNUAL RETIREMENT
NAME ANNUITY PROGRAM BENEFITS
-------------------------------------------------------- ------------------------
<S> <C>
1. Donald F. Hastings................................... $ 102,384(1)
2. Anthony A. Massaro................................... 40,896(2)
3. H. Jay Elliott....................................... 31,274(2)
4. John M. Stropki, Jr.................................. 84,714(2)
5. David J. Fullen...................................... 77,501(3)
6. Frederick G. Stueber................................. 66,563(2)
7. Richard C. Ulstad.................................... 45,883(2)
</TABLE>
(1) The benefits shown for Mr. Hastings are the amounts currently being received
on a 100% joint and survivor basis.
(2) Messrs. Massaro, Elliott, Stropki, Stueber and Ulstad are currently under
normal retirement age. The amounts shown represent those anticipated at
normal retirement age assuming current compensation continues unchanged to
that date and the benefits are payable on a single life basis.
(3) The benefits shown for Mr. Fullen are the amounts currently being received
on a 50% joint and survivor basis.
EMPLOYMENT AGREEMENTS
Messrs. Massaro, Elliott and Stueber entered into employment agreements in
July 1993, June 1993 and February 1995, respectively, pursuant to which they
received credited service for purposes of the SERP of 24, 27 and 17 years,
respectively, assuming a normal retirement age of 65 for Messrs. Massaro and
Elliott and service of 40 years for all. The agreements for Messrs. Massaro and
Elliott also provide for severance pay equal to one year's base salary if they
are terminated without cause. The agreement for Mr. Stueber provides that if he
is terminated without cause, or a change in control of the Company reduces his
responsibilities, prior to his sixth anniversary, he will be entitled to
severance pay equal to three times his total compensation (base and bonus) for
the preceding year. Thereafter, through his tenth anniversary, severance pay
equals one year's total compensation.
17
<PAGE> 21
CUMULATIVE SHAREHOLDER
RETURN AND PERFORMANCE PRESENTATION
Shown below is a line graph comparing the yearly percentage change in the
cumulative total shareholder return on the Company's Common Shares against the
cumulative total return of the S&P Composite -- 500 Stock Index and The Russell
2000 Stock Index for the five-year calendar period commencing January 1, 1992
and ending December 31, 1996. A compatible peer-group index for the welding
industry, in general, was not readily available because the industry is
comprised of a relatively small number of competitors, many of which either are
based overseas and/or are divisions of larger companies, privately-held or not
actively traded in the United States. The Russell 2000 represents a developed
index based on a concentration of companies having relatively small market
capitalization, published by the Frank Russell Company. The return on the
Company's Common Shares does not include payment of dividends with respect to
the Class A Common Shares issued in connection with the Recapitalization in
1995.
Five-Year Performance Comparison [GRAPH]
<TABLE>
<S> <C> <C> <C>
CALENDAR YEAR ENDED DECEMBER 31 LINCOLN S&P 500 RUSSELL 2000
1991 100.00 100.00 100.00
1992 93.68 107.59 118.42
1993 79.02 118.37 140.80
1994 177.92 119.98 138.27
1995 245.56 164.95 177.59
1996 327.52 203.02 206.87
</TABLE>
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<PAGE> 22
TRANSACTIONS
Buehler/Steingass, Inc., of which Frank L. Steingass, a Director of the
Company, is President and a principal shareholder, received approximately
$1,073,518 for printing catalogs and other materials for the Company during
1996. It is anticipated that Buehler/Steingass, Inc. will continue to provide
printing services to the Company in 1997 on miscellaneous matters.
Henry L. Meyer, III, a Director of the Company, is Vice Chairman and Chief
Operating Officer of KeyCorp. KeyBank, a subsidiary of KeyCorp, serves as the
agent bank for the Company's $200 million Credit Agreement, a principal credit
facility of the Company in which ten institutions participate. KeyBank has made
the largest commitment thereunder, in the amount of $42 million. Key Trust
Company of Ohio, N.A. ("Key Trust"), another subsidiary of KeyCorp, is the
Trustee of The Lincoln Electric Company Employee Savings Plan and is also acting
as special trustee of the ESOP for purposes of voting the Class B Common Shares
held by the ESOP at the 1997 Annual Meeting. See "Reclassification -- Item No.
2."
All of the transactions reported above were carried out in the ordinary
course of business upon terms no less favorable to the Company than would apply
to similar transactions with unrelated companies.
RECLASSIFICATION
ITEM NO. 2
SUMMARY DESCRIPTION OF THE RECLASSIFICATION
At the annual meeting, the shareholders of the Company will be asked to
consider and vote upon a proposal to amend the Company's Articles to eliminate
the Class B Common Shares from the Company's authorized capital and change the
issued and outstanding Class B Common Shares into a number of Common Shares to
be determined by the formula described below. These proposals are referred to
collectively as the "Reclassification" and were approved by the Board of
Directors of the Company on April 2, 1997 for submission to shareholders.
As of April 18, 1997, the record date for the meeting, the ESOP held
479,686 Class B Common Shares and 7,086 Class B Common Shares were held by
individuals. The dividends on the Class B Common Shares have been currently paid
and there are no arrearages.
The express terms of the Class B Common Shares provide that no Class B
Common Share may be sold or otherwise transferred (other than as a distribution
from the ESOP) without offering the Company the opportunity to repurchase such
share at a price equal to the book value of such share, plus any accrued but
unpaid dividends with respect to such share, rounded to the nearest dollar.
Currently, the book value per share for this purpose is $16.00 per share.
In the Reclassification, Class B Common Shares would be changed into a
number of Common Shares determined by multiplying Class B Common Shares by a
"Change Ratio" determined as follows: if the fair market value of a Common Share
on the date of the Annual Meeting is less than or equal to $36.75, the Change
Ratio will be 0.60 and if the fair market value of a Common Share on the date of
the Annual Meeting exceeds $36.75, the Change Ratio will be the fraction
resulting from dividing $22.00 by the fair market value of a Common Share on the
date of the Annual Meeting. The fair market value of a Common Share will be the
average of the highest price and the lowest price at which sales of Common
Shares took place in regular trading reported on the NASDAQ National Market on
the date of the Annual Meeting. If no trades occur on the date of the Annual
Meeting, the next date preceding such date on which trades were made will be
used. Shareholders would receive cash for any fractional Common Shares they are
entitled to receive in connection with the Reclassification determined by
multiplying the fraction by the fair market value of a Common Share (as defined
above).
Based on the closing price of $36.75 for the Common Shares on April 1,
1997, the price used by the Board of Directors in establishing the Change Ratio
discussed below, each Class B Common Share would be
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<PAGE> 23
changed into .60 Common Shares, which would represent a fair market value (as
defined above) of $22.00 for each Class B Common Shares, and which would result
in the issuance of approximately 292,000 Common Shares. The Change Ratio will,
however, be determined as described above.
The Company adopted the methodology discussed above after review of a
valuation of the Class B Common Shares by a third party and subsequent
discussion of the valuation of the Class B Common Shares between the Company and
Key Trust.
The Company has appointed Key Trust as special trustee of the ESOP for the
limited purpose of voting the Class B Common Shares held by the ESOP at the
Annual Meeting. The ESOP has been amended to provide that Key Trust, not the
Trustee or the Administrative Committee, will have the sole responsibility for
voting the Class B Common Shares held by the ESOP at the Annual Meeting. The
ESOP was further amended to provide that each participant (or beneficiary of a
deceased participant) who has Class B Common Shares allocated to his or her
account under the ESOP on the record date for the Annual Meeting will be a
"named fiduciary" within the meaning of Section 402(a) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and in his or her
capacity as a named fiduciary will have the right to direct Key Trust as to the
manner in which Class B Common Shares allocated to his or her account are to be
voted with respect to all items to be presented at the Annual Meeting.
Fiduciaries under ERISA (including persons designated as "named fiduciaries")
are required to act prudently, solely in the interest of ESOP participants and
beneficiaries, and for the exclusive purpose of providing benefits to ESOP
participants and beneficiaries.
Upon timely receipt of a voting direction form properly completed by a
participant (or a beneficiary of a deceased participant), Key Trust will vote
the Class B Common Shares allocated to such participant's account as directed,
unless Key Trust determines, as provided under ERISA, that such directions are
not proper, are not made in accordance with the terms of the ESOP or are
contrary to ERISA. Finally, the ESOP has been amended to provide that in the
event that Key Trust determines that any participant directions are not proper,
are not made in accordance with the terms of the ESOP or are contrary to ERISA,
or in the event that Key Trust does not receive timely voting directions with
respect to any Class B Common Shares, and with respect to any Class B Common
Shares that are not allocated to any participant's account under the Plan, Key
Trust will vote such Class B Common Shares in a manner that Key Trust determines
satisfies the requirements of ERISA. Key Trust's vote in favor of the
Reclassification is necessary for its adoption. If Key Trust votes against the
Reclassification or withholds its votes, the Reclassification cannot be
approved. As of the date of this Proxy Statement, Key Trust has not determined
whether it will vote in favor of the Reclassification.
If the Reclassification is approved by the shareholders (see "Vote
Required" below), the Board of Directors intends to file the Amendment to
Restated Articles of Incorporation reflecting the amendments set forth in
Appendix A promptly with the Secretary of State of Ohio. The Amendment to
Restated Articles of Incorporation will be effective immediately upon acceptance
of that filing by the Secretary of State of Ohio.
Upon the filing of the Amendment to Restated Articles of Incorporation, the
Class B Common Shares would automatically be changed into Common Shares. Upon
the change into Common Shares, shareholders either may retain their certificates
for Class B Common Shares because those certificates would then represent Common
Shares, or may surrender such certificates to the Company's transfer agent in
exchange for new certificates representing Common Shares. Cash in lieu of
fractional shares will be paid within 30 days after the filing of the Amendment
to the Restated Articles.
REASONS FOR THE RECLASSIFICATION/RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company believes, after careful consideration
of the potential advantages and disadvantages of the Reclassification, that the
Reclassification is in the best interests of the Company and its shareholders.
- SIMPLIFIED CAPITAL STRUCTURE. Approval of the Reclassification would
allow the Company to simplify its capital structure by eliminating a
class of authorized and outstanding shares, thereby decreasing
administrative and other burdens on the Company resulting from its
complex capital structure.
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<PAGE> 24
- MARKET VALUE AND SHAREHOLDER LIQUIDITY. The holders of the Class B Common
Shares will have greater marketability and liquidity as a result of the
Reclassification. The Common Shares which the holders of the Class B
Common Shares will receive are designated for trading on the NASDAQ
National Market System and are not subject to a right of first refusal at
book value by the Company under the Articles. To the contrary, the Class
B Common Shares have no established trading market and are subject to the
right of first refusal described above.
COMPARISON OF COMMON SHARES AND CLASS B COMMON SHARES
The express terms of the Common Shares and the Class B Common Shares are
set forth in Article Fourth of the Company's Articles. See Appendix A. The
rights of the Common Shares and the Class B Common Shares are identical except
with respect to transferability. The Common Shares are designated for quotation
on the NASDAQ National Market System and are freely transferable. The Class B
Common Shares have no established trading market and are subject to the
restrictions or transfer described above.
CERTAIN EFFECTS OF THE RECLASSIFICATION
EFFECTS ON RELATIVE OWNERSHIP INTEREST, DIVIDENDS AND VOTING POWER. As part
of the Reclassification, Class B Common Shares will be changed into a number of
Common Shares determined by multiplying Class B Common Shares by the Change
Ratio discussed above. Shareholders will receive cash for any fractional Common
Shares they are entitled to receive in connection with the Reclassification.
While the Class B Common Shares currently receive the same per share cash
dividends as the Common Shares, the aggregate cash dividends payable to the
holders of Class B Common Shares will decline because the change into Common
Shares will be on less than a one-to-one ratio. Similarly, while both the Class
B Common Shares and Common Shares have identical voting rights, the voting power
of the holders of Class B Common Shares will be diluted because the change into
Common Shares will be on less than a one-to-one ratio. In addition, holders of
Class B Common Shares will no longer have a class vote in those situations where
such rights previously have been required by law.
EFFECT ON MARKET PRICE. Upon the effectiveness of the Reclassification,
additional Common Shares will be issued and outstanding. The Company cannot
predict what impact the Reclassification will have on the market prices of the
Common Shares and the Class A Common Shares.
EMPLOYEE PLANS. The ESOP is the primary holder of the Class B Common
Shares. As a result of the Reclassification, the ESOP will hold Common Shares
instead of Class B Common Shares. The Common Shares are not subject to
restrictions on transfer contained in the Articles as are the Class B Common
Shares. Following the Reclassification, employees who elect to receive shares
upon separation will receive shares that have an established trading market and
that are not subject to restrictions on transfer.
TAX CONSEQUENCES. The Company has been advised by tax counsel with respect
to the principal federal income tax consequences resulting from the
Reclassification of Class B Common Shares as Common Shares. No taxable income,
gain or loss will be recognized by the Company or by a holder of Class B Common
Shares as a result of the Reclassification of Class B Common Shares as Common
Shares except, in the case of a holder of Class B Common Shares, to the extent
of cash received in lieu of a fractional Common Share. The cost or other basis
for tax purposes of each block of Class B Common Shares held immediately before
the Reclassification by a holder of Class B Common Shares will become the basis
of the corresponding Common Shares received in exchange therefor. The holding
period for each resulting Common Share will be the same as the holding period of
the corresponding Class B Common Share. Any cash received from the Company as
payment for a fractional Common Share will be considered to have been received
in exchange for such fractional Common Share; the resulting gain or loss will be
characterized as capital gain or loss, provided the Class B Common Shares were a
capital asset to the exchanging holder of the Class B Common Shares; and any
such capital gain or loss will be treated as a long-term capital gain or loss,
provided the Class B Common Shares exchanged in the Reclassification were held
by the exchanging holder of the Class B Common Shares for more than one year
prior to the date of the annual meeting.
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<PAGE> 25
VOTE REQUIRED
The affirmative vote of holders of two-thirds of the outstanding Common
Shares and Class B Common Shares voting together as a single class and the
affirmative vote of the holders of two-thirds of the outstanding Class B Common
Shares voting separately as a class are required to approve the
Reclassification.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE TO APPROVE THE
RECLASSIFICATION.
INCREASE IN AUTHORIZED SHARES
ITEM NO. 3
On April 2, 1997, the Board of Directors adopted resolutions recommending
the submission to a vote of the shareholders of the Company of a proposal to
amend Article Fourth of the Company's Articles so that additional authorized
Common Shares and Class A Common Shares will be available for issuance in order
to meet possible future developments for which the issuance of shares may be in
the interest of the Company. The following should be read in conjunction with,
and is qualified in its entirety by reference to, Appendix A.
Presently, the Company's Articles provide that the total number of shares
authorized is 62,000,000, consisting of 30,000,000 Common Shares, without par
value, 30,000,000 Class A Common Shares, without par value, and 2,000,000 Class
B Common Shares, without par value. The Board of Directors has determined that
the Company's Articles should be amended to increase the authorized number of
Common Shares to 60,000,000 and the authorized number of Class A Common Shares
to 60,000,000. If the shareholders approve both the Reclassification and this
Item 3, the total number of authorized shares under the Company's Articles would
be 120,000,000. If the shareholders do not approve the Reclassification but
approve this Item 3, the total number of authorized shares under the Company's
Articles would be 122,000,000.
The purpose of the increase in authorized shares is to provide additional
Common Shares and Class A Common Shares that could be issued for corporate
purposes without further shareholder approval unless required by applicable law,
rule or regulation. Future purposes for additional shares could include paying
stock dividends, subdividing outstanding shares through stock splits, affecting
acquisitions of other businesses or properties, securing additional financing
through the issuance of additional shares or for general corporate purposes. The
Company has no definite plan, commitment or understanding at this time to issue
any shares of the proposed additional Common Shares or Class A Common Shares.
The Company's purpose in increasing the number of authorized Common Shares
and Class A Common Shares available for issuance is described in the paragraph
above. Nevertheless, the additional authorized and unissued shares might be
considered as having the effect of discouraging an attempt by another entity,
through the acquisition of a substantial percentage of the Company's Common
Shares or Class A Common Shares, to acquire control of the Company with a view
of affecting a merger, sale of the Company's assets or similar transaction,
since the issuance of Common Shares or Class A Common Shares could be used to
dilute the share ownership or voting rights of such entity. Further, any of such
authorized but unissued Common Shares or Class A Common Shares could be
privately placed with purchasers who might support incumbent management, making
a change in control of the Company more difficult.
The Board of Directors does not intend to issue any shares to be authorized
under the amendment except upon terms that the Board of Directors deems to be in
the best interests of the Company. The issuance of additional Common Shares or
Class A Common Shares may, among other thing, have a dilutive effect on earnings
per share and on the equity and voting rights of the present holders of Common
Shares and Class A Common Shares. The shareholders do not presently have
preemptive rights to subscribe for any of the Company's securities and will not
have any such rights to subscribe for the additional Common Shares and Class A
Common Shares proposed to be authorized.
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<PAGE> 26
The Company intends to apply for listing on the NASDAQ National Market
System of any additional Common Shares and Class A Common Shares if and when
such shares are issued.
The affirmative vote of holders of two-thirds of the outstanding Common
Shares and Class B Common Shares voting together as a single class is required
to approve the proposed increase in authorized shares.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE TO APPROVE THE
INCREASE IN AUTHORIZED COMMON SHARES AND CLASS A COMMON SHARES.
AMENDMENTS TO CODE OF REGULATIONS
ITEM NO. 4
On April 2, 1997, the Board of Directors adopted resolutions recommending
that certain amendments to Article II and Article III of the Regulations be
presented to the shareholders for approval (the "Regulations Amendments"). The
proposed versions of Article II and Article III reflecting the Regulations
Amendments are set forth in Appendix B to this proxy statement and incorporated
herein by reference. The following should be read in conjunction with, and is
qualified in its entirety by reference to, Appendix B.
The Regulations Amendments would accomplish several purposes. First, the
Regulations Amendments would give the Board of Directors flexibility in
determining the date, time and the place of the annual meeting of the
shareholders to meet the needs of the Company and the shareholders. The current
Regulations require the Annual Meeting to be held on the fourth Tuesday of May.
The Board of Directors believes greater flexibility in fixing the date, place
and time of the Annual Meeting will reduce burdens that may be experienced in
coordinating the meeting with required proxy procedures and proxy solicitation
time frames. Second, the Regulations Amendments would limit who may call special
meetings of the shareholders to the President, any Executive or Senior Vice
President, the Chairman of the Board of Directors, the Executive Committee and a
majority of the Board of Directors. This amendment has the effect of excluding
Vice Presidents other than Senior and Executive Vice Presidents from calling a
special meeting. Finally, the Regulations Amendments would give the Board of
Directors more flexibility by permitting a special meeting of the Board of
Directors to be called by giving the Directors one day prior notice of the
meeting. Since the Regulations are currently silent on the notice period for
special meetings of the Board of Directors, Ohio law requires two days prior
notice of a special meeting, which would be shortened by the Regulations
Amendments. The Board of Directors believes that modern communications provide
ample means to ensure shorter notice to Directors, and that a shorter notice
provision will facilitate timely response to emergencies should any occur.
The affirmative vote of holders of a majority of the outstanding Common
Shares and Class B Common Shares voting together as a single class is required
to approve the Regulations Amendments.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE TO APPROVE THE
REGULATIONS AMENDMENTS.
APPOINTMENT OF INDEPENDENT AUDITORS
ITEM NO. 5
A proposal will be presented at the Annual Meeting to ratify the
appointment of the firm of Ernst & Young LLP as independent auditors to examine
the books of account and other records of the Company for the fiscal year ending
December 31, 1997. Representatives of Ernst & Young LLP are expected to be
present at the Annual Meeting. Such representatives will have an opportunity to
make a statement if they so desire and are expected to be available to respond
to appropriate questions. Although such ratification is not required by law, the
Board of Directors believes that shareholders should be given this opportunity
to express their views on the subject. While not binding on the Board of
Directors, the failure of the shareholders to ratify the appointment of Ernst &
Young LLP as the Company's independent auditors would be considered by
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<PAGE> 27
the Board of Directors in determining whether or not to continue the engagement
of Ernst & Young LLP. Ratification requires the affirmative vote of the majority
of the Common Shares and Class B Common Shares present or represented, and
entitled to vote on the matter at the Annual Meeting, taken together as a single
class. Unless otherwise directed, proxies in the accompanying form will be voted
for ratification of the appointment of Ernst & Young LLP.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE TO RATIFY THE
APPOINTMENT OF ERNST & YOUNG LLP AS YOUR COMPANY'S INDEPENDENT AUDITORS.
OTHER MATTERS
The Board of Directors knows of no other matters which are likely to be
brought before the meeting, but if any such matters properly come before the
meeting, the persons named in the enclosed proxy, or their substitutes, will
vote the proxy in accordance with their best judgment.
SHAREHOLDER PROPOSALS
Any proposal by shareholders intended to be presented at next year's Annual
Meeting of Shareholders must be received by the Company, addressed to its
principal executive offices at 22801 St. Clair Avenue, Cleveland, Ohio
44117-1199, Attention: Secretary, for inclusion in the Proxy Statement of the
Company relating to such meeting on or before December 29, 1997.
THE LINCOLN ELECTRIC COMPANY
Frederick G. Stueber
Secretary
By Order of the Board of Directors
Cleveland, Ohio
April 28, 1997
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<PAGE> 28
APPENDIX A
ARTICLE FOURTH
OF THE
RESTATED ARTICLES OF INCORPORATION
OF
THE LINCOLN ELECTRIC COMPANY
AS MODIFIED IN ACCORDANCE WITH THE RECLASSIFICATION
ARTICLE FOURTH: Section 1. The maximum number of shares which the
Corporation is authorized to have outstanding is sixty million (60,000,000) [one
hundred twenty million (120,000,000)]*, consisting of thirty million
(30,000,000) [sixty million (60,000,000)]* Common Shares, without par value
("Common Shares"), and thirty million (30,000,000) [sixty million (60,000,000)]*
Class A Common Shares, without par value ("Class A Common Shares"). The shares
of each class shall have the express terms set forth in this Article Fourth.
Upon the Certificate of Adoption of Amendment to Restated Articles of
Incorporation setting forth these amendments becoming effective pursuant to
Section 1701.73 the Ohio Revised Code (the "Reclassification Effective Time"),
and without any further action on the part of the Corporation or its
shareholders, (i) each whole Class B Common Share, without par value ("Class B
Common Shares"), then issued shall automatically be changed and converted into
fully paid and nonassessable Common Share and (ii) certificates
representing Class B Common Shares outstanding prior to the Reclassification
Effective Time shall be deemed to represent the same number of Common Shares
multiplied by [rounded to four places past the decimal]. No fractional
shares shall be issued; instead, any fractional share shall become a right to
receive cash in an amount equal to such fraction multiplied by .
The powers, preferences and rights of the Common Shares and Class A Common
Shares (collectively, the "Common Equity") and the qualifications, limitations
and restrictions thereof, shall in all respects be identical, except as
otherwise required by law or as expressly provided in these Restated Articles of
Incorporation. The "Effective Time" means June 7, 1995.
Section 2. Voting.
Section 2.1. Each shareholder of the Corporation shall be entitled to one
vote for each Common Share standing in such shareholder's name on the books of
the Corporation.
Section 2.2. The holders of Class A Common Shares shall not be entitled to
vote on any matter submitted to shareholders for their vote, consent, waiver,
release or other action except as required by statute.
Section 3. Dividends. Dividends may be declared and paid to the holders
of Common Shares and Class A Common Shares in cash, property, or other
securities of the Corporation (including shares of any class whether or not
shares of such class are already outstanding) out of funds legally available
therefor. No dividend shall be paid on the outstanding Common Shares or Class A
Common Shares unless an equal dividend per share is paid on each of the
outstanding Common Shares and Class A Common Shares subject to the following:
(a) no cash dividend shall be declared or paid on one class of Common
Equity unless a cash dividend of the same amount per share is
simultaneously declared and paid on the other class of Common Equity;
(b) dividends payable on the Common Equity in capital stock shall be
made to all holders of Common Equity provided that: (i) such a dividend on
Class A Common Shares shall be paid or made only in Class A Common Shares
and (ii) a dividend on Class A Common Shares paid or made in
- ---------------
* Reflects changes to Article Fourth that will be made if the proposal to
increase the authorized shares is adopted. See Item 3 -- "Increase in
Authorized Shares."
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<PAGE> 29
Class A Common Shares and a dividend on Common Shares paid or made in
either Common Shares or Class A Common Shares shall be deemed an equal
dividend per share within the meaning of this Section 3 if paid in the same
proportion regardless of the fair market value of such shares received in
payment of such dividend.
Section 4. Merger, Consolidation, Combination or Dissolution of the
Corporation. In the event of merger, consolidation or combination of the
Corporation with another entity (whether or not the Corporation is the surviving
entity) or in the event of dissolution of the Corporation, holders of Class A
Common Shares shall be entitled to receive in respect of each Class A Common
Share the same indebtedness, other securities, cash, rights, or any other
property, or any combination of shares, evidences of indebtedness, securities,
cash, rights or any other property, as holders of Common Shares shall be
entitled to receive in respect to each share.
Section 5. Splits or Combinations of Shares. If the Corporation shall in
any manner split, subdivide or combine the outstanding Common Shares or Class A
Common Shares, the outstanding shares of the other such class shall be
proportionately split, subdivided or combined in the same manner and on the same
basis as the outstanding shares of the other class that have been split,
subdivided or combined.
Section 6. Change in Number of Authorized Class A Common Shares. The
number of authorized Class A Common Shares may be increased or decreased (but
not below the number then outstanding) by the affirmative vote of the holders of
a majority of the aggregate number of outstanding Common Shares entitled to vote
in the election of directors.
Section 7. No Preemptive Rights. No shareholder of the Corporation shall
have any preemptive right as such shareholder to subscribe for or purchase
shares of the Corporation.
Section 8. Class A Common Shares Protection Provisions.
Section 8.1. If, after the Effective Time, a Person or group, as defined
in Section 8.11, acquires beneficial ownership of shares representing 15% or
more of the number of then outstanding Common Shares and such Person or group (a
"Significant Shareholder") does not then beneficially own an equal or greater
percentage of all then outstanding Class A Common Shares, all of which Class A
Common Shares must have been acquired by such Significant Shareholder after the
first issuance by the Corporation of Class A Common Shares (the "Distribution
Date"), such Significant Shareholder must, within a ninety (90) day period
beginning the day after becoming a Significant Shareholder, make a public cash
tender offer in compliance with all applicable laws and regulations to acquire
additional Class A Common Shares as provided in this Section 8 of Article Fourth
(a "Class A Protection Transaction").
Section 8.2. In each Class A Protection Transaction, the Significant
Shareholder must make a public tender offer to acquire that number of additional
Class A Common Shares determined by (i) multiplying the percentage of the number
of outstanding Common Shares beneficially owned and acquired after the Effective
Time by such Significant Shareholder by the total number of Class A Common
Shares outstanding on the date such Person or group became a Significant
Shareholder, and (ii) subtracting therefrom the excess (if any) of the number of
Class A Common Shares beneficially owned by such Significant Shareholder on the
date such Person or group became a Significant Shareholder (including shares
acquired at or prior to the time such Person or group became a Significant
Shareholder) over the number of Class A Common Shares beneficially owned on the
Distribution Date (as adjusted for stock splits, stock dividends and similar
recapitalization). The Significant Shareholder must acquire all shares validly
tendered; or if the number of Class A Common Shares tendered to the Significant
Shareholder exceeds the number of shares required to be acquired pursuant to
this Section 8.2, the number of Class A Common Shares acquired from each
tendering holder shall be pro rata based on the percentage that the number of
shares tendered by such shareholder bears to the total number of shares tendered
by all tendering holders.
Section 8.3. The offer price for any Class A Common Shares required to be
purchased by the Significant Shareholder pursuant to this Section 8 shall be the
greatest of (i) the highest price per share paid by the Significant Shareholder
for any Common Shares or Class A Common Shares during the six-month period
ending on the date such Person or group became a Significant Shareholder, (ii)
the highest reported sale price of a Common Share or Class A Common Share on the
National Association of Securities Dealers,
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<PAGE> 30
Inc. Automated Quotation System ("NASDAQ") National Market System (or such other
securities exchange or quotation system as is then the principal trading market
for such shares) during the 30 day period preceding such Person or group
becoming a Significant Shareholder, and (iii) the highest reported sale price of
a Common Share or Class A Common Share on the NASDAQ National Market System (or
such other securities exchange or quotation system as is then the principal
trading market for such shares) on the business day preceding the date the
Significant Shareholder makes the tender offer required by this Section 8. For
purposes of Section 8.4, the applicable date for each calculation required by
clauses (i) and (ii) of the preceding sentence shall be the date on which the
Significant Shareholder becomes required to engage in the subsequent Class A
Protection Transaction for which such calculation is required. In the event that
the Significant Shareholder has acquired Common Shares or Class A Common Shares
in the six month period ending on the date such Person or group becomes a
Significant Shareholder for consideration other than cash, the value of such
consideration per Common Share or Class A Common Share shall be as determined in
good faith by the Board of Directors.
Section 8.4. A Class A Protection Transaction shall also be required to be
effected by any Significant Shareholder each time that the Significant
Shareholder acquires after the Effective Time beneficial ownership of additional
Common Shares equal to or greater than the next higher integral multiple of 5%
in excess of 15% (e.g., 20%, 25%, 30%, etc.) of the number of outstanding Common
Shares if such Significant Shareholder does not then own an equal or greater
percentage of the Class A Common Shares (all of which Class A Common Shares must
have been acquired by such Significant Shareholder after the Distribution Date).
Such Significant Shareholder shall be required to make a public cash tender
offer to acquire that number of Class A Common Shares prescribed by the formula
set forth in Section 8.2, and must acquire all shares validly tendered or a pro
rata portion thereof, as specified in Section 8.2, at the price determined
pursuant to Section 8.3, even if a previous Class A Protection Transaction
resulted in fewer Class A Common Shares being tendered than required in the
previous offer.
Section 8.5. If any Significant Shareholder fails to make an offer
required by this Section 8, or to purchase shares validly tendered and not
withdrawn (after proration, if any), such Significant Shareholder shall not be
entitled to vote any Common Shares beneficially owned by such Significant
Shareholder unless and until such requirements are complied with or unless and
until all Common Shares causing such offer requirement to be effective are no
longer beneficially owned by such Significant Shareholder. The requirement to
engage in a Class A Protection Transaction is satisfied by the making of the
requisite offer and purchasing validly tendered shares pursuant to this Section
8, even if the number of shares tendered is less than the number of shares
included in the required offer.
Section 8.6. The Class A Protection Transaction requirement shall not
apply to any increase in percentage beneficial ownership of Common Shares
resulting solely from a change in the aggregate number of Common Shares
outstanding, provided that any acquisition after such change which results in
any Person or group beneficially owning fifteen percent (15%) or more of the
number of outstanding Common Shares (or an additional 5% or more of the number
of Common Shares after the last acquisition which triggered the requirement for
a Class A Protection Transaction) shall be subject to any Class A Protection
Transaction requirement that would be imposed pursuant to this Section 8.
Section 8.7. In connection with Sections 8.1 through 8.4 of this Section
8, the following Common Shares shall be excluded for the purpose of determining
the shares beneficially owned by such Person or group but not for the purpose of
determining shares outstanding:
(a) shares beneficially owned by such Person or group at the Effective
Time;
(b) shares acquired by will or by the laws of descent and
distribution, or by gift that is made in good faith and not for the purpose
of circumventing this Section 8 or by foreclosure of a bona fide loan;
(c) shares acquired upon issuance or sale by the Corporation;
(d) shares acquired by operation of law (including a merger or
consolidation effected for the purpose of recapitalizing such Person or
reincorporating such Person in another jurisdiction but excluding a merger
or consolidation effected for the purpose of acquiring another Person);
27
<PAGE> 31
(e) shares acquired in exchange for Class A Common Shares by a holder
of Class A Common Shares (or by a parent, lineal descendant or donee of
such holder of Class A Common Shares who received such Class A Common
Shares from such holder) if the Class A Common Shares so exchanged were
acquired by such holder directly from the Corporation as a dividend on
Common Shares; and
(f) shares acquired by a plan of the Corporation qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended, or any
successor provision thereto, or acquired by reason of a distribution from
such a plan.
Section 8.8. In connection with Sections 8.1 through 8.4 of this Section
8, for purposes of calculating the number of Class A Common Shares beneficially
owned by any Persons or group:
(a) Class A Common Shares acquired by gift shall be deemed to be
beneficially owned by such Person or member of a group if such gift was
made in good faith and not for the purpose of circumventing the operations
of this Section 8; and
(b) only Class A Common Shares owned of record by such Person or
member of a group or held by others as nominees of such Person or member of
a group and identified as such to the Corporation shall be deemed to be
beneficially owned by such Person or group (provided that Class A Common
Shares with respect to which such Person or member of a group has sole
investment and voting power shall be deemed to be beneficially owned
thereby).
Section 8.9. To the extent that the voting power of any Common Share
cannot be exercised pursuant to this Section 8, that Common Share shall not be
included in the determination of the voting power of the Corporation for any
purpose under these Restated Articles of Incorporation or the Ohio Revised Code.
Section 8.10. All calculations with respect to percentage beneficial
ownership of issued and outstanding shares of either Common Shares or Class A
Common Shares will be based upon the numbers of issued and outstanding shares
reflected in either the records of or a certificate from the Corporation's stock
transfer agent or reported by the Corporation on the last to be filed of (i) the
Corporation's most recent Annual Report on Form 10-K, (ii) its most recent
Quarterly Report on Form 10-Q, (iii) its most recent Current Report on Form 8-K,
(iv) its most recent report on Form 10-C, and (v) its most recent definitive
proxy statement filed with the Securities and Exchange Commission.
Section 8.11. For purposes of this Section 8, the term "Person" means any
individual, partnership, corporation, association, trust, or other entity (other
than the Corporation). Subject to Sections 8.7 and 8.8, "beneficial ownership"
shall be determined pursuant to Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), or any successor regulation
and the formation or existence of a "group" shall be determined pursuant to Rule
13d-5(b) under the 1934 Act or any successor regulation, subject to the
following qualifications:
(a) relationships by blood or marriage between or among any Persons
will not constitute any of such Persons as a member of a group with such
other Person, absent affirmative attributes of concerted action; and
(b) any Person acting in his official capacity as a director or
officer of the Corporation shall not be deemed to beneficially own shares
where such ownership exists solely by virtue of such Person's status as a
trustee (or similar position) with respect to shares held by plans or
trusts for the general benefit of employees or former employees of the
Corporation, and actions taken or agreed to be taken by a Person in such
Person's official capacity as an officer or director of the Corporation
will not cause such Person to become a member of a group with any other
Person.
Section 9. Conversion of Class A Common Shares. Each Class A Common Share
(whether or not then issued) shall convert automatically into one Common Share
upon the earliest to occur of:
(a) any time the aggregate number of the outstanding Common Shares as
reflected on the stock transfer records of the Corporation is less than 20%
of the aggregate number of outstanding Common Shares and Class A Common
Shares. For purposes of the immediately preceding sentence, any Common
28
<PAGE> 32
Shares or Class A Common Shares repurchased by the Corporation and held as
treasury shares or cancelled by the Corporation shall not be deemed
"outstanding" from and after the date of repurchase;
(b) the date ("Conversion Date") which shall be ten years from the
Distribution Date of the Class A Common Shares as defined in Section 8.1;
provided, however, that the Board of Directors by resolution adopted by
two-thirds of the entire number of Directors then in office no earlier than
thirty months and no later than twenty-four months prior to the initial or
any subsequently established Conversion Date may extend the Conversion Date
for an additional five years. Any such new Conversion Date and all
subsequently extended Conversion Dates may be extended in like manner and
for a like period; and
(c) upon resolution by the Board of Directors if, as a result of the
existence of the Class A Common Shares, either the Common Shares or Class A
Common Shares is, or both are, excluded from quotation on the NASDAQ
National Market System, and all other national quotation systems then in
existence and are excluded from trading on all the principal national
securities exchanges then in existence.
Upon such conversion, the total number of Common Shares the Corporation shall
have authority to issue shall be 60,000,000 [120,000,000]* shares, and the total
number of Class A Common Shares shall be zero (0) shares and all references to
Class A Common Shares shall be of no further force or effect. In making the
determination referred to in (a) or (c) of this Section 9, the Board of
Directors may conclusively rely on any information or documentation available to
it, including but not limited to filings made with the United States Securities
and Exchange Commission, any stock exchange, the National Association of
Securities Dealers, Inc. or any national quotation system or any other
government or regulatory agency, or the records of or certification from the
Corporation's stock transfer agent. At such time as set forth in (a), (b) or (c)
of this Section 9, the Class A Common Shares shall be deemed to be automatically
converted into Common Shares and stock certificates formerly representing Class
A Common Shares shall thereupon and thereafter be deemed to represent a like
number of Common Shares. The determination of the Board of Directors that either
(a) or (c) of this Section 9 has occurred shall be conclusive and binding and
the conversion of each Class A Common Share into one Common Share shall remain
effective regardless of whether either (a) or (c) has occurred in fact.
29
<PAGE> 33
APPENDIX B
ARTICLES II AND III OF THE CODE OF REGULATIONS OF
THE LINCOLN ELECTRIC COMPANY
AS MODIFIED IN ACCORDANCE WITH THE REGULATIONS AMENDMENTS
ARTICLE II
MEETINGS OF SHAREHOLDERS
1. ANNUAL MEETING. The Annual Meeting of shareholders shall be held at such
date, time and place as may be designated from time to time by the Board of
Directors, for the election of Directors and the consideration of reports to
be laid before the meeting. Upon due notice there may also be considered and
acted upon at the Annual Meeting any matter which can properly be considered
and acted upon at a special meeting, in which case and for which purpose the
Annual Meeting shall also be considered as, and shall be, a special meeting.
When an Annual Meeting is not held or Directors are not elected thereat, they
may be elected at a special meeting called for that purpose.
2. SPECIAL MEETINGS. Special meetings of the shareholders may be called by the
President, or an Executive or Senior Vice-President, or the Chairman of the
Board of Directors, or by the Executive Committee, or by a majority of the
Board of Directors, acting with or without a meeting, or by persons who hold
twenty-five percent of all the shares outstanding and entitled to vote
thereat, at such place or places as may be designated in the call therefore,
and notice thereof; provided, however, that a meeting for the election of
Directors may be held only within the State of Ohio.
3. NOTICE OF MEETINGS. Notice of meetings of shareholders shall be given in
writing by the Secretary, or in his absence by the Chairman of the Board or
President or a Vice-President, and such notice shall state the purpose or
purposes for which the meeting is called, and the time and place where it is
to be held, and shall be served or mailed to each shareholder of record
entitled to vote at such meeting or entitled to notice thereof, at least ten
(10) days prior to the meeting. If mailed, it shall be directed to the
shareholder at his address as it appears upon the records of the Corporation.
In the event of the transfer of shares after notice has been given and prior
to the holding of the meeting, it shall not be necessary to serve notice upon
the transferee. Notice of the time, place and purpose of any meeting of
shareholders may be waived by the written assent of every shareholder
entitled to notice, filed with or entered upon the records of the meeting,
either before or after the holding thereof.
5. QUORUM. The holders of a majority of the shares issued and outstanding,
entitled to vote, present either in person or by proxy, shall constitute a
quorum, unless a larger number is required by the laws of Ohio, in which case
the number required by the laws of Ohio, present either in person or by
proxy, shall constitute a quorum, but any less number may adjourn the meeting
from time to time, until a quorum is obtained, and no further notice of such
adjourned meeting need be given other than by announcement at the meeting at
which such adjournment is taken.
6. PROXIES. Each shareholder entitled to vote shall be entitled to one vote,
either in person or by proxy, for each share of the Corporation standing in
his name at the time of the closing of the books for such meeting. No proxy
shall be valid after the expiration of eleven (11) months from the date
thereof, unless a longer time be specified therein. Proxies shall be in
writing but need not be sealed, witnessed or acknowledged and shall be filed
with the Secretary at or before the meeting.
ARTICLE III
BOARD OF DIRECTORS
1. NUMBER AND ELECTION. The powers and authority of the Corporation shall be
exercised and its business managed and controlled by a Board of Directors.
The election of Directors shall be by ballot and shall be held at the Annual
Meeting of shareholders or at a special meeting called for that purpose. The
maximum
30
<PAGE> 34
number of the Directors of the Corporation shall be eighteen. Subject to such
maximum, the number of Directors may be fixed or changed (a) at a meeting of
the shareholders called for the purpose of electing Directors at which a
quorum is present, by the affirmative vote of the holders of a majority of
the shares that are represented at the meeting and entitled to vote on the
proposal, and (b) by the Directors, by the vote of a majority of their
number, who may also fill any Director's office that is created by an
increase in the number of Directors. The Directors shall be divided into
three classes, as nearly equal in number as possible, as determined by the
Board of Directors of the Corporation. A separate election shall be held for
each class of Directors as hereinafter provided. Directors elected at the
first election for the first class shall hold office for the term of one year
from the date of their election and until the election of their successors,
Directors elected at the first election for the second class shall hold
office for the term of two years from the date of their election and until
the election of their successors, and Directors elected at the first election
for the third class shall hold office for the term of three years from the
date of their election and until the election of their successors. At each
annual election, the successors to the Directors of each class whose terms
shall expire in that year shall be elected to hold office for the term of
three years from the date of their election and until the election of their
successors. In case of any increase in the number of Directors of any class,
any additional Directors elected to such class shall hold office for a term
which shall coincide with the term of such class.
2. VACANCY AND REMOVAL. All Directors, for whatever terms elected, shall hold
office subject to applicable statutory provisions as to the creation of
vacancies and removal; provided, however, that all Directors, all the
Directors of a particular class or any individual Director may be removed
from office, without assigning any cause, only by the affirmative vote of the
holders of at least two-thirds of the voting power of the outstanding shares
of stock entitled to vote generally on the election of Directors.
3. RESIGNATION. Any Director may resign at any time. Such resignation shall be
made in writing and shall take effect at the time specified therein. If no
time is specified, it shall become effective from the time of its receipt by
the Corporation, and the Secretary shall record such resignation, noting the
day, hour and minute of its reception. The acceptance of a resignation shall
not be necessary to make it effective.
4. MEETINGS. Directors may meet at such times and at such places within or
without the State of Ohio as they may determine. Special meetings of the
Board of Directors may be called by the Chairman of the Board of Directors or
the President on one day's notice to each Director by whom such notice is not
waived, given either personally or by mail, telephone, telegram, telex,
facsimile or similar medium of communication, and will be called by the
Chairman of the Board of Directors or the President, in like manner and on
like notice, on the written request of not less than one-third of the Board
of Directors. A majority of the Board of Directors shall be necessary to
constitute a quorum for the transaction of business, and the act of a
majority of Directors present at a meeting at which a quorum is present shall
be the act of the Board of Directors.
5. BY-LAWS. The Board of Directors may adopt By-Laws for its own government not
inconsistent with the Articles of Incorporation or Regulations of the
Corporation.
31
<PAGE> 35
THE LINCOLN ELECTRIC COMPANY EMPLOYEE STOCK OWNERSHIP PLAN
VOTING DIRECTION STATEMENT
APRIL 28, 1997
<PAGE> 36
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction.......................................................................... 1
Voting Directions to the Trustee...................................................... 1
Confidentiality of Directions to the Trustee and ERISA................................ 4
</TABLE>
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<PAGE> 37
INTRODUCTION
This Voting Direction Statement is being furnished to employees and former
employees of The Lincoln Electric Company, an Ohio corporation (the "Company"),
and to beneficiaries of deceased former employees of the Company who have
accounts in The Lincoln Electric Company Employee Stock Ownership Plan (the
"Plan"). These employees, former employees, and beneficiaries of deceased former
employees are referred to as "Participants" in this Voting Direction Statement.
This Voting Direction Statement is being furnished by Key Trust Company of
Ohio, N.A., as a trustee of the Plan (the "Trustee"). The Trustee has been
allocated responsibility under the Plan for the sole purpose of exercising
voting rights at the 1997 annual meeting of the Company with respect to the
Class B Common Shares, without par value, of the Company (the "Shares" or "Class
B Common Shares") held by the Plan. National City Bank, a national banking
association, is the trustee of the Plan for all other purposes.
Enclosed in each Participant's packet is a Voting Direction Form for the
Shares presently allocated to the Participant's account under the Plan and as to
which the Participant has the authority to direct the Trustee how to vote. Also
enclosed in each Participant's packet is a copy of the Company's Notice of its
1997 Annual Meeting of Shareholders and Proxy Statement that describes the
matters to be voted on at the Annual Meeting (the "Proxy Materials").
ALL PARTICIPANTS ARE URGED TO MARK, SIGN AND DATE THE ENCLOSED VOTING
DIRECTION FORM AND RETURN IT USING THE ENCLOSED ENVELOPE FOR RECEIPT PRIOR TO
5:00 P.M., LOCAL TIME, ON MAY 20, 1997.
The annual meeting of the shareholders of the Company (the "Annual
Meeting") is scheduled to be held at 4:00 P.M., local time, on May 27, 1997 (the
"Meeting Date"), at Landerhaven, 6111 Landerhaven Drive, Mayfield Heights, Ohio.
At the Annual Meeting, the holders of the Shares will be asked to consider and
vote upon certain matters described in this Voting Direction Statement and in
the enclosed Proxy Materials.
Participants are not shareholders with respect to the Shares in their Plan
accounts. However, the Plan allows each Participant to direct the Trustee how to
vote the Shares allocated to his or her Plan account. Under the Plan each
Participant is a "named fiduciary" within the meaning of Section 402(a) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), for
purposes of directing the Trustee how to vote the Shares allocated to his or her
Plan account.
All Shares represented by the accompanying Voting Direction Form, if the
Voting Direction Form is properly executed and returned, will be voted by the
Trustee as directed by the Participant on such Direction Form, unless the
Trustee determines that such directions are not proper, are not made in
accordance with the terms of the Plan, or are contrary to ERISA. (See the last
section of this Voting Direction Statement for a discussion of certain
provisions of ERISA.)
Any Shares with respect to which a Voting Direction Form is not received
prior to 5:00 P.M., local time, on May 20, 1997, may be voted by the Trustee in
its discretion, in the exercise of its fiduciary duties under ERISA.
VOTING DIRECTIONS TO THE TRUSTEE
This Voting Direction Statement is being furnished by the Trustee to each
Participant who had Shares allocated to his or her Plan account as of the Record
Date (as defined below) in connection with the Participant's right under the
Plan to direct the Trustee with respect to the voting of such Shares at the
Annual Meeting.
The Trustee does not know of any matters, other than the matters
hereinafter described, that are to be presented at the Annual Meeting. If,
however, any other matters should be properly brought before the meeting, it is
the intention of the Trustee to vote the Shares in accordance with its best
judgment and its fiduciary duties under ERISA.
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<PAGE> 38
Neither the Plan nor the Trustee makes any recommendation to the
Participants as to how to direct the Trustee to vote, and each Participant is
urged to direct the voting of the Shares allocated to his or her Plan account in
accordance with his or her sole judgment and discretion.
As described in the Proxy Materials, the Board of Directors of the Company
has fixed April 18, 1997, as the record date (the "Record Date") for determining
the shareholders who will be entitled to vote their Shares at the Annual
Meeting. At the close of business on the Record Date, there were 10,488,212
Common Shares and 486,772 Class B Common Shares issued and outstanding and
entitled to vote at the Annual Meeting. The number of Class B Common Shares in
each Participant's account as of the Record Date is as set forth on the Voting
Direction Form enclosed in the packet for each individual Participant.
Each Participant is allowed to direct the Trustee to cast one vote for each
Class B Common Share (and a fractional vote for any fractional Share) allocated
to his or her account on the matters to be presented at the Annual Meeting. All
Shares that are represented by a Voting Direction Form will be voted by the
Trustee as directed, unless the Trustee determines that the directions are not
proper, are not made in accordance with the terms of the Plan, or are contrary
to ERISA. Any Shares for which a Voting Direction Form is not received may be
voted by the Trustee in its discretion, in the exercise of its fiduciary duties
under ERISA.
Any Participant may revoke a prior Voting Direction Form by executing a new
Voting Direction Form and returning it prior to 5:00 P.M., local time, on May
20, 1997. Any Voting Direction Form so revoked without a new properly completed
Voting Direction Form being received may result in those Shares being voted by
the Trustee in its discretion, in the exercise of its fiduciary duties under
ERISA. A new Voting Direction Form and postage prepaid envelope may be obtained
by contacting the Trustee's tabulating agent, Harris Trust and Savings Bank, at
1-800-942-5909.
Any Voting Direction Form received after 5:00 P.M., local time, on May 20,
1997, may be disregarded. Delivery of the Voting Direction Form is to be made by
using the enclosed postage-prepaid envelope.
It is anticipated that the following will be voted upon at the Annual
Meeting:
(1) Election of Directors. Please refer to the Proxy Materials for a
description of this item.
(2) Reclassification. At the Annual Meeting, the holders of the Shares will
be asked to consider and vote upon a proposal (i) to amend the Company's
Articles of Incorporation to eliminate the Class B Common Shares from the
Company's authorized capital and (ii) to change the outstanding Class B Common
Shares into Common Shares. These proposals are referred to collectively as the
"Reclassification."
The affirmative vote of holders of two-thirds of the outstanding Common
Shares and Class B Common Shares voting together as a single class and the
affirmative vote of the holders of two-thirds of the outstanding Class B Common
Shares voting separately as a class are required to approve the
Reclassification.
As of the record date, the Plan held 479,686 Class B Common Shares, which
is 98.54% of the outstanding Class B Common Shares and 7,086 Class B Common
Shares were held by individuals. The dividends on the Class B Common Shares have
been currently paid and there are no arrearages.
Class B Common Shares currently receive the same per share cash dividends
as the Common Shares. Class B Common Shares also currently have the same voting
rights as Common Shares.
The express terms of the Class B Common Shares provide that no Class B
Common Share may be sold or otherwise transferred (other than as a distribution
from the ESOP) without offering the Company the opportunity to repurchase such
share at a price equal to the book value of such share, plus any accrued but
unpaid dividends on such share, rounded to the nearest dollar. Effective May 1,
1997, the book value per share for this purpose is $16.00 per share.
If the Reclassification occurs, each Class B Common Share would be changed
into a fraction of a Common Share based on the fair market value of a Common
Share on the date of the Annual Meeting (May 27, 1997). If the fair market value
of a Common Share is $36.75 or less, each Class B Common Share would be changed
into .60 of a Common Share. If the fair market value of a Common Share is more
than $36.75, each Class B Common Share would be changed into a fraction of a
Common Share resulting from
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<PAGE> 39
dividing $22.00 by the fair market value of a Common Share on the date of the
Annual Meeting (May 27, 1997). The fair market value of a Common Share would be
the average of the highest price and the lowest price at which sales of Common
Shares took place in regular trading reported on the NASDAQ National Market on
the date of the Annual Meeting. If no trades occur on the date of the Annual
Meeting, the next date preceding the date of the Annual Meeting on which trades
occurred would be used.
If the Reclassification occurs, the aggregate cash dividends payable on
Class B Common Shares will decline because the change into Common Shares will be
on less than a one-to-one ratio. Similarly, the voting power of the holders of
the Class B Common Shares will be diluted because the change into Common Shares
will be on less than a one-to-one ratio. In addition, holders of Class B Common
Shares will no longer have a class vote in those situations where a class vote
previously has been required by law.
The following table sets forth, as examples, the numbers of Common Shares
into which 100 Class B Common Shares would be changed at various levels of the
market price of the Common Shares, and the resulting fair market value (as
described above) of the Common Shares received at the various market price
levels of the Common Shares.
<TABLE>
<CAPTION>
FAIR MARKET
FAIR MARKET NUMBER OF VALUE OF
VALUE OF A COMMON SHARES COMMON SHARES
COMMON SHARE EXCHANGE RATE RECEIVED RECEIVED
- ------------- ------------- ------------- -------------
<S> <C> <C> <C>
$ 25.00 .60 60 $1,500.00
$ 30.00 .60 60 $1,800.00
$ 35.00 .60 60 $2,100.00
$ 36.75 .60 60 $2,200.00
$ 40.00 .55 55 $2,200.00
$ 45.83 .48 48 $2,200.00
</TABLE>
If the market price of the Common Shares at the time the Trustee votes is
at an amount that the Trustee determines would cause the Reclassification to
violate ERISA, the Trustee will be required by ERISA to, and will, vote all
Shares held in the Plan against the Reclassification, regardless of any
Participant's instructions to the contrary.
If the Reclassification occurs, the Class B Common Shares allocated to the
Participant's Plan account (including fractional shares) will be changed into
the number of Common Shares (including fractional shares) determined by the
method described above. The Reclassification will not affect the timing of any
distributions to a Participant from the Plan.
Please refer to the Proxy Materials for a more detailed discussion of the
Reclassification.
(3) Increase in Authorized Common Shares and Class A Common Shares. Please
refer to the Proxy Materials for a description of this item.
(4) Amendments to the Company's Code of Regulations. Please refer to the
Proxy Materials for a description of this item.
(5) Appointment of Independent Auditors. Please refer to the Proxy
Materials for a description of this item.
THIS VOTING DIRECTION STATEMENT CONTAINS A VERY GENERAL AND BRIEF SUMMARY
OF THE MATTERS EXPECTED TO BE PRESENTED AT THE ANNUAL MEETING. THIS SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED DISCUSSION IN THE PROXY
MATERIALS. EACH PARTICIPANT IS URGED TO READ THE PROXY MATERIALS.
-3-
<PAGE> 40
CONFIDENTIALITY OF DIRECTIONS TO THE TRUSTEE AND ERISA
ERISA, the Federal law referred to earlier in this Voting Direction
Statement, requires the Trustee and any other fiduciary of the Plan to act
prudently and solely in the interests of Participants and beneficiaries of the
Plan.
With regard to the matters discussed in this Voting Direction Statement,
the Trustee has followed procedures designed to assure that the Plan's
provisions are fairly implemented, that Participants have not been subjected to
coercion or pressure in making their decisions as to whether and how to direct
the Trustee to vote Shares, that necessary information has been provided to
Participants, and that any clearly false information or misleading information
has not been distributed to Participants (or that any false or misleading
information that may have been distributed by the parties is corrected).
If, however, you, as a Participant, believe that any of the foregoing has
occurred, you should notify the Trustee in writing at the following address:
Key Trust Company of Ohio, N.A.
Attention: The Lincoln Electric Company ESOP
127 Public Square
14th Floor
OH-01-27-1402
Cleveland, OH 44114
Please send any such communication to the Trustee as soon as possible by
first-class mail. Any such communication to the Trustee from a Participant will
be kept confidential by the Trustee to the extent permitted by law. You should
also be aware that your employer is prohibited under ERISA from discriminating
against you for exercising any right that you have under ERISA.
To the extent permitted by law, the Trustee will maintain the
confidentiality of the Voting Direction Forms submitted by the Participants. The
Voting Direction Forms will be received and reviewed only by the Trustee and its
tabulating agent, Harris Trust and Savings Bank. Prior to the Annual Meeting,
neither the Company nor any Participant or employee of the Company will have
access to the Voting Direction Forms submitted by the Participants or any list
of voting directions received from the Participants. The Trustee may make copies
of the Voting Direction Forms available to its legal counsel. After the Annual
Meeting, the Voting Direction Forms and any list of voting directions will be
maintained as part of the permanent records of the Plan. Access to the Voting
Direction Forms and any list of voting directions will be limited to those
persons who must have access to such records in connection with the
administration of the Plan.
PLEASE MARK, SIGN, AND DATE THE ENCLOSED VOTING DIRECTION FORM AND RETURN
IT AS DESCRIBED ON PAGE 2 FOR RECEIPT PRIOR TO 5:00 P.M., LOCAL TIME, ON MAY 20,
1997. NO POSTAGE STAMP IS NECESSARY IF THE VOTING DIRECTION FORM IS MAILED IN
THE UNITED STATES WITH THE ENCLOSED ENVELOPE.
-4-
<PAGE> 41
<TABLE>
<S> <C>
THE LINCOLN ELECTRIC COMPANY
PROXY FOR 1997 ANNUAL MEETING OF SHAREHOLDERS
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS)
P The undersigned hereby appoints Donald F. Hastings, H. Jay Elliott and Frederick
R G. Stueber, and each of them, as Proxies, with full power of substitution, to
O vote and act on behalf of the undersigned at the Annual Meeting of Shareholders
X of The Lincoln Electric Company to be held at Landerhaven, 6111 Landerhaven
Y Drive, Mayfield Heights, Ohio on May 27, 1997, at 4:00 p.m., or at any
adjournment thereof, on all matters coming before the meeting.
Election of Directors for term ending 2000, Nominees: (change of address)
______________________________________
David C. Lincoln, G. Russell Lincoln, ______________________________________
Henry L. Meyer, III, and Frank L. Steingass ______________________________________
______________________________________
(If you have written in the above
space, please mark the corresponding
box on the reverse side of this card.)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE DIRECTOR NOMINEES LISTED ABOVE, FOR THE
RECLASSIFICATION (Item 2), FOR THE INCREASE IN AUTHORIZED SHARES (Item 3), FOR
THE REGULATIONS AMENDMENTS (Item 4), AND FOR RATIFICATION OF THE INDEPENDENT
AUDITORS (Item 5).
_______________
| |
| SEE REVERSE |
| SIDE |
|_______________|
- ---------------------------------------------------------------------------------------------------------
DETACH CARD
</TABLE>
<PAGE> 42
<TABLE>
<S> <C>
[ X ] PLEASE MARK YOUR SHARES IN YOUR NAME
VOTES AS IN THIS
EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2, 3, 4 AND 5.
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Reclassification [ ] [ ] [ ] 3. Increase in [ ] [ ] [ ]
Directors Authorized
(see reverse) Shares
For, except vote withheld from the following nominee(s):
________________________________________________________
FOR AGAINST ABSTAIN
4. Regulations [ ] [ ] [ ]
Amendments
FOR AGAINST ABSTAIN
5. Ratification [ ] [ ] [ ]
of Independent
Auditors
Change
of [ ]
Address
SIGNATURE(S)_________________________________________________________ DATE __________ In their discretion, the Proxies are
authorized to vote upon
SIGNATURE(S)_________________________________________________________ DATE __________ such other business as may properly
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. come before this meeting.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
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THE LINCOLN ELECTRIC COMPANY EMPLOYEE STOCK OWNERSHIP PLAN
VOTING DIRECTION FORM FOR 1997 ANNUAL MEETING OF
SHAREHOLDERS OF THE LINCOLN ELECTRIC COMPANY
Election of Directors for term ending 2000, Nominees:
David C. Lincoln, G. Russell Lincoln, Henry L. Meyer, III, and
Frank L. Steingass
The Trustee of the ESOP will vote upon such other business as may properly come
before the meeting in its discretion.
________________
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| SEE REVERSE |
| SIDE |
|________________|
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[ X ] PLEASE MARK YOUR CLASS B SHARES ALLOCATED TO YOUR ACCOUNT
DIRECTIONS AS IN THIS
EXAMPLE.
To Key Trust Company of Ohio, N.A., as Trustee:
I am a participant in the ESOP and I have received a copy of the Voting Direction Statement provided to Participants and the
Proxy Statement of The Lincoln Electric Company for its 1997 Annual Meeting of Shareholders enclosed with the Voting Direction
Statement. I hereby direct you as follows with respect to the Class B Common Shares allocated to my account under the ESOP.
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Reclassification [ ] [ ] [ ] 3. Increase in [ ] [ ] [ ]
Directors Authorized
(see reverse) Shares
For, except vote withheld from the following nominee(s):
________________________________________________________ FOR AGAINST ABSTAIN
4. Regulations [ ] [ ] [ ]
Amendments
FOR AGAINST ABSTAIN
5. Ratification [ ] [ ] [ ]
of Independent
Auditors
I have read and understand the Proxy Statement and the Voting Direction Statement provided. I hereby direct Key
Trust Company of Ohio, N.A., as special trustee of the ESOP, to follow the direction set forth above. I acknowledge and
agree that I am acting as a "named fiduciary" in providing this direction.
SIGNATURE___________________________________________________________________________ DATE ___________________
NOTE: This voting direction form must be properly completed and signed if it is to be followed. If the form
is not signed, the directions indicated will not be accepted. Please return this voting direction form
in the enclosed envelope for receipt by 5:00 p.m., Eastern Standard Time, May 20, 1997.
Your directions on this voting direction form will be kept confidential as described in the Voting Direction
Statement.
If you do not return this form by the deadline, Key Trust Company of Ohio, N.A., will vote the Class B Common Shares
allocated to your account in its discretion.
You will be a "named fiduciary" with respect to all shares for which you are entitled to give instructions.
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THE LINCOLN ELECTRIC EMPLOYEE SAVINGS PLAN
VOTING DIRECTION FORM FOR 1997 ANNUAL MEETING OF
SHAREHOLDERS OF THE LINCOLN ELECTRIC COMPANY
Election of Directors for term ending 2000, Nominees:
David C. Lincoln, G. Russell Lincoln, Henry L. Meyer, III, and
Frank L. Steingass
THIS VOTING DIRECTION FORM, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED PARTICIPANT OR BENEFICIARY.
In its discretion, the Trustee of the Employee Savings Plan is authorized to
vote upon such other business as may properly come before this meeting.
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| SEE REVERSE |
| SIDE |
|________________|
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[ X ] PLEASE MARK YOUR SHARES ALLOCATED TO YOUR ACCOUNT
INSTRUCTIONS AS IN THIS
EXAMPLE.
DIRECTORS RECOMMEND A VOTE FOR DIRECTORS RECOMMEND A VOTE FOR DIRECTORS RECOMMEND A VOTE FOR
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Reclassification [ ] [ ] [ ] 3. Increase in [ ] [ ] [ ]
Directors Authorized
(see reverse) Shares
For, except vote withheld from the following nominee(s):
________________________________________________________ DIRECTORS RECOMMEND A VOTE FOR
FOR AGAINST ABSTAIN
4. Regulations [ ] [ ] [ ]
Amendments
DIRECTORS RECOMMEND A VOTE FOR
FOR AGAINST ABSTAIN
5. Ratification [ ] [ ] [ ]
of Independent
Auditors
SIGNATURE(S)__________________________________________________________________________________ DATE _________________
NOTE: PLEASE SIGN AND MAIL THIS VOTING DIRECTION FORM IN THE ENCLOSED ENVELOPE -- NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES. PLEASE RETURN THIS VOTING DIRECTION FORM IN THE ENCLOSED ENVELOPE FOR RECEIPT BY 5:00 P.M., EASTERN
STANDARD TIME, MAY 20, 1997.
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