<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the six months ended June 30, 1997 Commission File No. 0-1402
THE LINCOLN ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
Ohio 34-0359955
(State of incorporation) (I.R.S. Employer Identification No.)
22801 St. Clair Avenue, Cleveland, Ohio 44117
(Address of principal executive offices) (Zip Code)
(216) 481-8100
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of the issuer's classes of common stock as of
June 30, 1997 were as follows:
<TABLE>
<S> <C>
Common Shares................................10,770,959
Class A Common Shares........................13,837,697
----------
Total outstanding shares.....................24,608,656
==========
</TABLE>
1
<PAGE> 2
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands of dollars, except share data)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------- ----------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $299,635 $284,508 $580,356 $563,220
Cost of goods sold 185,632 174,751 358,590 346,909
-------- -------- -------- --------
Gross profit 114,003 109,757 221,766 216,311
Distribution cost/selling, general &
administrative expenses 77,728 77,552 151,138 156,012
-------- -------- -------- --------
Operating income 36,275 32,205 70,628 60,299
Other income/(expense):
Interest income 1,321 895 2,244 1,306
Other income 125 929 329 1,386
Interest expense (1,681) (1,908) (3,304) (4,119)
-------- -------- -------- --------
Total other income/(expense) (235) (84) (731) (1,427)
-------- -------- -------- --------
Income before income taxes 36,040 32,121 69,897 58,872
Income taxes 13,389 11,898 26,197 22,092
-------- -------- -------- --------
Net income $ 22,651 $ 20,223 $ 43,700 $ 36,780
======== ======== ======== ========
Net income per share $ 0.92 $ 0.81 $ 1.76 $ 1.48
Cash dividends declared per share $ 0.15 $ 0.12 $ 0.30 $ 0.24
Average number of shares outstanding
(in thousands) 24,736 24,870 24,774 24,882
</TABLE>
See notes to these consolidated financial statements.
2
<PAGE> 3
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of dollars)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
--------- ---------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 57,894 $ 40,491
Marketable securities 47,320 109
Accounts receivable (less allowance for doubtful accounts of
$2,878 in 1997 and 1996) 170,476 151,287
Inventories:
Raw materials and in-process 69,050 79,100
Finished goods 93,005 91,555
--------- ---------
162,055 170,655
Deferred income taxes 11,026 10,579
Other current assets 14,595 10,088
--------- ---------
TOTAL CURRENT ASSETS 463,366 383,209
OTHER ASSETS
Goodwill - net 35,651 37,440
Other 25,767 25,311
--------- ---------
61,418 62,751
PROPERTY, PLANT AND EQUIPMENT
Land 11,689 11,710
Buildings 112,097 114,640
Machinery, tools and equipment 337,178 335,738
--------- ---------
460,964 462,088
Less: accumulated depreciation (262,386) (260,849)
--------- ---------
198,578 201,239
--------- ---------
TOTAL ASSETS $ 723,362 $ 647,199
========= =========
</TABLE>
3
<PAGE> 4
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of dollars, except share data)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Notes payable to banks $ 738 $ 2,607
Trade accounts payable 60,864 58,157
Salaries, wages and amounts withheld 50,642 18,983
Taxes, including income taxes 40,830 36,297
Dividend payable 3,691 2,977
Other current liabilities 56,250 39,976
Current portion of long-term debt 10,310 10,528
--------- ---------
TOTAL CURRENT LIABILITIES 223,325 169,525
Long-term debt, less current portion 63,905 64,148
Deferred income taxes 3,479 3,643
Other long-term liabilities 19,114 18,107
SHAREHOLDERS' EQUITY
Common Shares, without par value -- at stated capital amount: Authorized --
60,000,000 shares in 1997 and 30,000,000 shares in 1996;
Outstanding -- 10,770,959 shares in 1997 and 10,484,247 shares in 1996 2,154 2,097
Class A Common Shares (non-voting), without par value --
at stated capital amount:
Authorized -- 60,000,000 shares in 1997 and 30,000,000 shares in 1996;
Outstanding -- 13,837,697 shares in 1997 and 1996 2,768 2,768
Class B Common Shares, without par value -- at stated capital amount:
Authorized -- none in 1997 and 2,000,000 shares in 1996;
Outstanding -- none in 1997 and 486,772 shares in 1996 - 97
Additional paid-in capital 103,890 103,720
Retained earnings 326,539 290,252
Cumulative translation adjustments (21,812) (7,158)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 413,539 391,776
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 723,362 $ 647,199
========= =========
</TABLE>
See notes to these consolidated financial statements.
4
<PAGE> 5
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of dollars)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 43,700 $ 36,780
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 13,965 15,967
Changes in operating assets and liabilities:
(Increase) in accounts receivable (25,545) (16,570)
Decrease (increase) in inventories 2,359 (9,110)
(Increase) in other current assets (5,464) (8,893)
Increase in accounts payable 5,031 1,529
Increase in other current liabilities 54,541 41,323
Gross change in other noncurrent assets and liabilities (514) (858)
Other - net (98) 3,054
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 87,975 63,222
INVESTING ACTIVITIES
Purchases of property, plant and equipment (15,739) (18,443)
Purchase of marketable securities (47,222) -
Proceeds from sale of property, plant and equipment 706 1,349
-------- --------
NET CASH (USED) BY INVESTING ACTIVITIES (62,255) (17,094)
FINANCING ACTIVITIES
Short-term borrowings - net (1,778) (26,499)
Long-term borrowings - net (400) (10,676)
Dividends paid (6,699) (5,975)
Other 128 (550)
-------- --------
NET CASH (USED) BY FINANCING ACTIVITIES (8,749) (43,700)
Effect of exchange rate changes on cash and cash equivalents 432 1,726
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 17,403 4,154
Cash and cash equivalents at beginning of period 40,491 10,087
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 57,894 $ 14,241
======== ========
</TABLE>
See notes to these consolidated financial statements.
5
<PAGE> 6
THE LINCOLN ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1997
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to the preparation of the
quarterly report on Form 10-Q. Accordingly, these consolidated financial
statements do not include all of the information and notes required for complete
financial statements. These consolidated financial statements contain all the
adjustments (consisting of normal recurring accruals) necessary to fairly
present the financial position, results of operations and changes in cash flows
for the interim period. Operating results for the three and six months ended
June 30, 1997 are not necessarily indicative of the results to be expected for
the year ending December 31, 1997. For further information, refer to the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
NOTE B - INVENTORY VALUATION
The valuation of inventory under the Last-In, First-Out (LIFO) method is made at
the end of each year based on inventory levels and costs at that time.
Accordingly, interim LIFO calculations, by necessity, are based on estimates of
expected year-end inventory levels and costs and are subject to the final
year-end LIFO inventory calculation.
NOTE C - SALARIES, WAGES AND AMOUNTS WITHHELD
Salaries, wages and amounts withheld at June 30, 1997 include provisions for
year-end bonuses and related payroll taxes of $35.6 million. The payment of
bonuses is discretionary and is subject to approval by the Board of Directors.
NOTE D - CHANGES IN CAPITAL STRUCTURE
Effective May 28, 1997, certain changes in the Company's capital structure were
implemented. Class B Common Shares were eliminated and the 486,772 outstanding
Class B Common Shares were converted into 282,747 Common Shares. Additionally,
the authorized capital was increased to 60 million Common Shares and 60 million
Class A Common Shares.
NOTE E - NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS
128"), which simplifies the computation of earnings per share (EPS),
specifically focusing on the computation of weighted average shares outstanding.
SFAS 128 is required to be adopted in the fourth quarter of 1997. The Company
expects the adoption of SFAS 128 to result in immaterial changes in the amounts
currently reported for weighted average shares outstanding. Accordingly, no
impact on EPS is expected.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, Disclosures About Segments of an Enterprise and Related Information. This
statement requires disclosure of selected financial and descriptive information
for each operating segment based on management's internal organizational
decision-making structure. Additional information is required on a company-wide
basis for revenues by product or service, revenues and identifiable assets by
geographic location and information about significant customers. As required by
the statement, the Company will begin presenting such information in its
financial statements for the year-ending December 31, 1998.
6
<PAGE> 7
Part 1 - Item 2
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ------------------------------------------------------------------------
The following table sets forth the Company's results of operations for the three
and six month periods ended June 30, 1997 and 1996:
<TABLE>
<CAPTION>
Three months ended June 30,
-----------------------------------------------
(amounts in millions of dollars) 1997 1996
---------------------- ---------------------
Amount % of Sales Amount % of Sales
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Net sales $299.6 100.0% $284.5 100.0%
Cost of goods sold 185.6 61.9% 174.7 61.4%
------ ------ ------ ------
Gross profit 114.0 38.1% 109.8 38.6%
Distribution cost/selling, general and
administrative expenses 77.7 26.0% 77.6 27.3%
------ ------ ------ ------
Operating income 36.3 12.1% 32.2 11.3%
Other income 0.1 0.0% 0.9 0.3%
Interest expense, net (0.4) (0.1%) (1.0) (0.3%)
------ ------ ------ ------
Income before income taxes 36.0 12.0% 32.1 11.3%
Income taxes 13.3 4.4% 11.9 4.2%
------ ------ ------ ------
Net income $ 22.7 7.6% $ 20.2 7.1%
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Six months ended June 30,
-----------------------------------------------
(amounts in millions of dollars) 1997 1996
---------------------- ---------------------
Amount % of Sales Amount % of Sales
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Net sales $580.4 100.0% $563.2 100.0%
Cost of goods sold 358.6 61.8% 346.9 61.6%
------ ------ ------ ------
Gross profit 221.8 38.2% 216.3 38.4%
Distribution cost/selling, general and
administrative expenses 151.2 26.1% 156.0 27.7%
------ ------ ------ ------
Operating income 70.6 12.1% 60.3 10.7%
Other income 0.3 0.1% 1.4 0.2%
Interest expense, net (1.0) (0.2%) (2.8) (0.5%)
------ ------ ------ ------
Income before income taxes 69.9 12.0% 58.9 10.4%
Income taxes 26.2 4.5% 22.1 3.9%
------ ------ ------ ------
Net income $ 43.7 7.5% $ 36.8 6.5%
====== ====== ====== ======
</TABLE>
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
- -----------------------------------------------------------------------------
NET SALES. Net sales for the quarter ended June 30, 1997 increased $15.1 million
or 5.3% to $299.6 million from $284.5 million for the same period last year. Net
sales from the Company's U.S. operations totaled $203.1 million for the quarter
ended June 30, 1997, an increase of 4.8% or $9.2 million over the prior year.
1996 U.S. sales included incremental sales of $5.3 million for the Company's gas
distribution businesses, sold during the third quarter of 1996. Sales growth
from U.S. operations was due to growth in both domestic and export sales. U.S.
export sales increased $3.4 million or 14.6% to $27.0 million for the second
quarter of 1997, from $23.6 million last year. Non-U.S. sales increased 6.5% to
$96.5 million for the second quarter 1997, compared to $90.6 million last year,
despite a decline in the relative strength of foreign currencies against the
U.S. dollar. For the second quarter 1997 changes in exchange rates, primarily
caused by weakening European currencies, had an overall negative impact on
non-U.S. sales of $6.1 million. Company-wide, sales growth was achieved largely
through increased volume.
7
<PAGE> 8
GROSS PROFIT. Gross profit of $114.0 million for the second quarter 1997
increased 3.8% or $4.2 million from the prior year. Gross profit as a percentage
of net sales declined to 38.1% compared with 38.6% for the second quarter last
year. Margin percentages have been affected by increased product liability
defense costs, increases in sales in non-U.S. markets with lower margins and by
the incremental loss of higher margin gas distribution sales.
DISTRIBUTION COST/SELLING, GENERAL & ADMINISTRATIVE (SG&A) EXPENSES. SG&A
expenses increased $0.1 million to $77.7 million for the second quarter 1997 as
compared with 1996. The Company's ongoing efforts at cost reduction and control
have resulted in the lower SG&A expense as a percentage of sales.
Included in SG&A expenses are costs related to the Company's discretionary
year-end employee bonus program, net of hospitalization costs, of $18.4 million
in the second quarter 1997 compared with $16.6 million in the 1996 period. The
bonus payout is subject to approval by the Company's Board of Directors during
the fourth quarter.
INTEREST EXPENSE, NET. Interest expense, net was $0.4 million for the quarter
ended June 30, 1997 compared to $1.0 million for the second quarter 1996, a
decrease of 60.0%. This decrease is a result of lower interest expense on
reduced debt levels and higher cash and marketable securities balances which
have resulted in increased interest income.
INCOME TAXES. Income taxes for the quarter ended June 30, 1997 were $13.3
million on income before income taxes of $36.0 million, an effective rate of
37.1%, as compared with income taxes of $11.9 million on income before income
taxes of $32.1 million, or an effective rate of 37.0% for the same period in
1996. The effective tax rate for the year ended December 31, 1996 was 37.0%.
NET INCOME. Net income increased 12.0% to $22.7 million or $0.92 per share from
$20.2 million or $0.81 per share for the second quarter 1996. The effect of the
strengthening U.S. dollar against foreign currencies on net income was not
significant.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
- -------------------------------------------------------------------------
NET SALES. Net sales for the six months ended June 30, 1997 increased $17.2
million or 3.0% to $580.4 million from $563.2 million for the same period last
year. Net sales from the Company's U.S. operations totaled $396.4 million for
the first six months of 1997, an increase of 3.0% or $11.5 million over the
prior year. 1996 U.S. sales included incremental sales of $10.1 million for the
Company's gas distribution businesses, sold during the third quarter of 1996.
U.S. export sales increased 17.1% to $53.8 million for the first half of 1997,
compared with $46.0 million in 1996. Non-U.S. sales were $184.0 million for the
six months ended June 1997, compared to $178.3 million in 1996, an increase of
3.2%. The strengthening of the U.S. dollar, predominantly against European
currencies, had an adverse impact on non-U.S. sales of $10.1 million on a
year-over-year basis. Sales increases were primarily due to volume gains.
GROSS PROFIT. Gross profit increased 2.5% or $5.5 million to $221.8 million for
the first half of 1997 from $216.3 million in 1996. Margin percentages have been
impacted by increased product liability defense costs, increases in sales in
non-U.S. markets with lower margins and by the loss of higher margin gas
distribution sales.
DISTRIBUTION COST/SELLING, GENERAL & ADMINISTRATIVE (SG&A) EXPENSES. SG&A
expenses decreased $4.8 million or 3.1% to $151.2 million for the first half of
1997 as compared with 1996. SG&A expenses for 1996 include a $3.4 million charge
($2.1 million after tax, or $0.08 per share) for costs related to a litigation
settlement. The exclusion of the gas distribution businesses resulted in a
reduction of reported SG&A costs of $4.5 million on a year-over-year basis.
8
<PAGE> 9
The effect of exchange rate changes served to reduce SG&A expenses by $2.3
million. The decline in SG&A expenses as a percentage of sales reflects
continuing cost control initiatives.
Included in SG&A expenses are costs related to the Company's discretionary
year-end employee bonus program, net of hospitalization costs, of $35.7 million
in the first half 1997 compared with $33.7 million in the 1996 period.
INTEREST EXPENSE, NET. Interest expense, net was $1.0 million for the six months
ended June 30, 1997 compared to $2.8 million for the first half 1996, a decrease
of 64.3%. This decrease is a result of lower interest expense on reduced debt
levels and higher cash and marketable securities balances resulting in increased
interest income.
INCOME TAXES. Income taxes for the six months ended June 30, 1997 were $26.2
million on income before income taxes of $69.9 million, an effective rate of
37.5%, as compared with income taxes of $22.1 million on income before income
taxes of $58.9 million, or an effective rate of 37.5% for the same period in
1996. The effective tax rate for the year ended December 31, 1996 was 37.0%.
NET INCOME. Net income increased 18.8% to $43.7 million or $1.76 per share from
$36.8 million or $1.48 per share for the first half of 1996. Net income for the
six months ended June 30, 1996 reflects a charge for a legal settlement
amounting to $2.1 million or $0.08 per share. The effect of the strengthening
U.S. dollar against other currencies on net income was not significant.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash provided from operating activities for the six months ended June 30, 1997
increased 39.2% to $88.0 million from $63.2 million for the first six months of
1996. Working capital management and higher earnings has resulted in the
improved cash flow.
Capital expenditures for property, plant and equipment decreased $2.7 million as
compared with the same period in 1996 due to the timing of joint venture
investments being somewhat delayed. The Company continues to invest to maintain
and improve capacity and infrastructure as supported by market requirements.
The Company's ratio of total debt to total capitalization decreased to 15.3% at
June 30, 1997 from 16.5% at December 31, 1996.
The quarterly dividend, increased to $0.15 per share or $3.7 million, was paid
on April 15, 1997. The Company paid a cash dividend of $3.0 million or $0.12 per
share in January 1997.
NEW ACCOUNTING PRONOUNCEMENTS
- -----------------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"), which
simplifies the computation of earnings per share (EPS), including the
computation of weighted average shares outstanding. SFAS 128 is required to be
adopted in the fourth quarter of 1997. The Company expects the adoption of SFAS
128 to result in immaterial changes in the amounts currently reported for
weighted average shares outstanding, and accordingly, no impact on EPS is
expected.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, Disclosures About Segments of an Enterprise and Related Information. This
statement requires disclosure of selected financial and descriptive information
for each operating segment based on management's internal organizational
decision-making structure. Additional information is required on a company-wide
basis for revenues by product or service, revenues and
9
<PAGE> 10
identifiable assets by geographic location and information about significant
customers. As required by the statement, the Company will begin presenting such
information in its financial statements for the year-ending December 31, 1998.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
- ----------------------------------------------
From time to time, information provided by the Company, statements by its
employees or information included in its filings with the Securities and
Exchange Commission (including those portions of this Management's Discussion
and Analysis that refer to the future) may contain forward-looking statements
that are not historical facts. Those statements are "forward-looking" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements, and the Company's future performance, operating
results, financial position and liquidity, are subject to a variety of factors
that could materially affect results, including:
- - Competition. The Company operates in a highly competitive global
environment, and is subject to a variety of competitive factors such as
pricing, the actions and strength of its competitors, and the Company's
ability to maintain its position as a recognized leader in welding
technology. The intensity of foreign competition is substantially affected
by fluctuations in the value of the United States dollar against other
currencies. The Company's competitive position could also be adversely
affected should new or emerging entrants become more active in the arc
welding business.
- - International Markets. The Company's long term strategy is to increase its
share in growing international markets, particularly Asia, Latin America,
Central Europe and other developing markets. However, there can be no
certainty that the Company will be successful in its expansion efforts. The
Company is subject to the currency risks of doing business abroad and
expansion poses challenging demands within the Company's infrastructure.
Further, many developing economies have a significant degree of political
and economic instability, which may adversely affect the Company's
international operations.
- - Cyclicality and Maturity of the Welding Industry. The United States arc
welding industry is both mature and cyclical. The growth of the domestic
arc welding industry has been and continues to be constrained by numerous
factors, including the substitution of plastics and other materials in
place of fabricated metal parts in many products and structures. Increased
offshore production of fabricated steel structures has also cut into the
domestic demand for arc welding products.
- - Litigation. The Company, like other manufacturers, is subject to a variety
of lawsuits and potential lawsuits that arise in the ordinary course of
business. See "Item 1. Legal Proceedings" within the Company's Annual
Report on Form 10-K, as well as the update in this report. While historical
litigation costs have not been material to the Company, there can be no
assurance that this will remain the case, or that insurance coverage will
be adequate.
- - Operating Factors. The Company is highly dependent on its skilled workforce
and efficient production facilities, which could be adversely affected by
its labor relations, business interruptions at its domestic facilities and
short-term or long-term interruptions in the availability of supplies or
raw materials or in transportation of finished goods.
- - Research and Development. The Company's continued success depends, in part,
on its ability to continue to meet customer welding needs through the
introduction of new products and the enhancement of existing product design
and performance characteristics. There can be no assurances that new
products or product improvements, once developed, will meet with customer
acceptance and contribute positively to the operating results of the
Company, or that product development will continue at a pace to sustain
future growth.
- - Motor Division. The Company has made substantial capital investments to
modernize and expand its production of electric motors. While management
believes that the profitability of this investment will improve, success is
largely dependent on increased market penetration. The Company is in the
process of revising its sales and marketing programs.
10
<PAGE> 11
Part II - Other Information
Item 1. Legal Proceedings
As described in periodic reports previously filed with the Commission, the
Company has been named, in filings made on or after May 1996 in the Superior
Court of California, as a defendant or co-defendant in lawsuits filed by
building owners in Los Angeles County arising from alleged property damage
claimed to have been discovered after the Northridge earthquake of 1994, and
seeking compensatory damages and in some instances punitive damages relating to
the sale and use of the E70T-4 category of welding electrode. Substantial
discovery has occurred in only one of the cases, SAINT JOHN'S MEDICAL PLAZA v.
DILLINGHAM CONSTRUCTION ET. AL., and a trial date for that case has been set for
October 7, 1997.
Item 2. Changes in Securities
On May 28, 1997, the Company amended its Restated Articles of Incorporation to
(1) change each issued and outstanding Class B Common Share into .5809 Common
Share and (2) increase the total number of authorized shares to 120,000,000,
consisting of 60,000,000 Common Shares and 60,000,000 Class A Common Shares.
The effect of the change in Class B Common Shares into Common Shares was to
eliminate the Class B Common Shares and increase the number of Common Shares
outstanding.
Item 3. Defaults Upon Senior Securities -- None.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting was held on May 27, 1997.
(b) No response required.
(c) The following matters were voted upon by security-holders:
(i) ELECTION OF DIRECTORS: The shareholders voted in favor of
electing the following persons as Directors of the Company
whose terms end in 2000:
<TABLE>
<CAPTION>
Votes for Votes Withheld
--------- --------------
<S> <C> <C>
David C. Lincoln 9,341,153 101,693
G. Russell Lincoln 9,340,392 102,454
Henry L. Meyer, III 9,299,049 143,797
Frank L. Steingass 9,339,695 103,151
</TABLE>
(ii) RECAPITALIZATION AMENDMENT: The shareholders approved a
proposal to amend the Company's Restated Articles of
Incorporation to change the existing class of Class B Common
Shares into Common Shares.
11
<PAGE> 12
<TABLE>
<CAPTION>
(a) Common Shares and Class B Common Shares
voting together as a single class:
<S> <C>
Votes For 8,609,202
Votes Against 330,251
Shares Abstain 63,094
Broker Non-Votes 440,299
</TABLE>
<TABLE>
<CAPTION>
(b) Class B Common Shares voting as a single
class:
<S> <C>
Votes For 462,175
Votes Against 16,116
Shares Abstain 4,522
Broker Non-Vote 0
</TABLE>
(iii) INCREASE IN AUTHORIZED SHARES. The shareholders approved
an amendment to the Company's Restated Articles of
Incorporation to increase the number of authorized shares from
62,000,000 to 120,000,000, consisting of 60,000,000 Common
Shares and 60,000,000 Class A Common Shares.
<TABLE>
<S> <C>
Votes For 8,266,716
Votes Against 1,072,386
Shares Abstain 71,417
Broker Non-Votes 32,327
</TABLE>
(iv) AMENDMENTS TO CODE OF REGULATIONS
The shareholders approved a proposal to amend Article II and
Article III of the Regulations of the Company. The Regulations
Amendment provided greater flexibility in fixing the date,
place and time of the Annual Meeting of shareholders; limited
the persons able to call the meetings of the shareholders, and
provided greater flexibility in the calling of special
meetings of the Board of Directors.
<TABLE>
<S> <C>
Votes For 8,842,686
Votes Against 344,732
Shares Abstain 180,447
Broker Non-Votes 74,981
</TABLE>
(vi) APPOINTMENT OF INDEPENDENT AUDITORS: The shareholders
ratified 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.
<TABLE>
<S> <C>
Votes For 9,357,446
Votes Against 53,772
Shares Abstain 31,628
Broker Non-Votes 0
</TABLE>
Item 5. Other Information -- None.
12
<PAGE> 13
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit No Description
---------- -----------
(3) (i) Second Restated Articles of Incorporation of
The Lincoln Electric Company
(3) (ii) Second Restated Code of Regulations of The
Lincoln Electric Company
(27) Financial Data Schedule.
(b) Reports on Form 8-K -- None.
13
<PAGE> 14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE LINCOLN ELECTRIC COMPANY
/s/ H. JAY ELLIOTT
- --------------------------
H. Jay Elliott
Senior Vice President,
Chief Financial Officer and Treasurer
August 12, 1997
14
<PAGE> 1
Exhibit 3(i)
CERTIFICATE OF ADOPTION
OF
SECOND RESTATED ARTICLES OF INCORPORATION
OF
THE LINCOLN ELECTRIC COMPANY
H. Jay Elliott, Senior Vice President, and Frederick G.
Stueber, Secretary, of The Lincoln Electric Company, an Ohio corporation with
its principal office in the City of Cleveland, Cuyahoga County, Ohio (the
"Corporation"), do hereby certify that:
1. A meeting of the Directors of the Corporation was duly
called and held on May 28, 1997, at which meeting a quorum of the Directors of
the Corporation was present, and, by the unanimous vote of such Directors of the
Corporation, the following resolutions were adopted:
RESOLVED, that the officers of the Company (and each of them),
acting in accordance with O.R.C. sec.1701.73, are authorized to execute
for and on behalf of the Company, a Certificate of Amendment to the
Company's Restated Articles of Incorporation setting forth the
amendments to such Articles as approved by the Company's shareholders
at the Company's 1997 Annual Meeting (the "1997 Amendments") and to
cause the same to be filed with the Secretary of State of Ohio and to
do all acts and things whatsoever which may be necessary or appropriate
to make the 1997 Amendments effective.
FURTHER RESOLVED, that upon the effectiveness of the 1997
Amendments, the Restated Articles of Incorporation of the Company, as
amended, be restated in their entirety to consolidate all prior
amendments to such Articles by replacing the current Restated Articles
of Incorporation, as amended, with Second Restated Articles of
Incorporation of the Company, a copy of which has been presented to the
Board of Directors, and the officers of the Company (and each of them)
are hereby authorized to execute for and on behalf of the Company, a
Certificate setting forth such Second Restated Articles of
Incorporation of the Company and to cause the same to be filed with the
Secretary of State of Ohio and to do all acts and things whatsoever
necessary or appropriate to make such Second Restated Articles of
Incorporation effective.
2. The Second Restated Articles of Incorporation of the
Corporation were adopted by the Directors for the purpose of consolidating the
existing Restated Articles of Incorporation of
<PAGE> 2
2
the Corporation and all previously adopted amendments to the Restated Articles
of Incorporation of the Corporation pursuant to Section 1701.72(B) of the Ohio
Revised Code.
3. The Second Restated Articles of Incorporation of the
Corporation are attached hereto as EXHIBIT A and supersede all previous Restated
Articles of Incorporation, and amendments thereof, of the Corporation.
IN WITNESS WHEREOF, the undersigned have executed this
Certificate of Adoption of Second Restated Articles of Incorporation this __ day
of May, 1997.
-----------------------------------
H. Jay Elliott, Senior Vice
President
-----------------------------------
Frederick G. Stueber, Secretary
<PAGE> 3
EXHIBIT A
---------
THE LINCOLN ELECTRIC COMPANY
SECOND RESTATED ARTICLES OF INCORPORATION
ARTICLE FIRST: The name of the Corporation shall be THE
LINCOLN ELECTRIC COMPANY.
ARTICLE SECOND: The place in the State of Ohio where its
principal office is located is the City of Cleveland, Cuyahoga County.
ARTICLE THIRD: The Corporation is formed for the purpose of
manufacturing, repairing, buying, selling and dealing in all varieties and kinds
of electrical machinery, tools and appliances, and doing all things necessary
and incident thereto.
ARTICLE FOURTH: Section 1. The maximum number of shares which
the Corporation is authorized to have outstanding is one hundred twenty million
(120,000,000), consisting of sixty million (60,000,000) Common Shares, without
par value ("Common Shares"), and 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 of 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
0.5809 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 0.5809. 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 $37.875.
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.
<PAGE> 4
Page 2
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 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.
<PAGE> 5
Page 3
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.
<PAGE> 6
Page 4
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, 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
<PAGE> 7
Page 5
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);
(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
<PAGE> 8
Page 6
(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
<PAGE> 9
Page 7
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 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
<PAGE> 10
Page 8
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 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.
ARTICLE FIFTH: The Board of Directors of the Corporation is
hereby authorized to fix at any time and from time to time the amount of
consideration for which the Corporation may from time to time issue its shares
without par value, whether now or hereafter authorized and whether or not
greater consideration could be received upon the issue or sale of the same
number of shares of another class.
ARTICLE SIXTH: The Corporation may from time to time pursuant
to authorization by the Board of Directors and without action by the
shareholders, purchase or otherwise acquire shares of the Corporation of any
class or classes in such manner, upon such terms and in such amounts as the
Board of Directors shall determine without regard to whether less consideration
could be paid upon the purchase of the same number of shares of another class,
subject, however, to such limitation or restriction, if any, as is contained in
the express terms of any class of shares of the Corporation outstanding at the
time of the purchase or acquisition in question.
ARTICLE SEVENTH: The holders of shares of the Corporation
shall not be entitled to cumulative voting rights in elections of Directors.
ARTICLE EIGHTH: Section 1. A higher than majority
<PAGE> 11
Page 9
shareholder vote for certain Business Combinations (as defined below) shall be
required as follows:
A. In addition to any affirmative vote required by law or
these Articles or the terms of any series of Preferred Stock
or any other securities of the Corporation and except as
otherwise expressly provided in Section 2 of this Article
Eighth:
(1) any merger or consolidation of the Corporation or
any Subsidiary with (i) any Interested Shareholder or
with (ii) any other corporation (whether or not
itself an Interested Shareholder) which is, or after
such merger or consolidation would be, an Affiliate
or Associate of an Interested Shareholder;
(2) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or
a series of transactions whether or not related) to
an Interested Shareholder (or an Affiliate or
Associate of an Interested Shareholder) of any assets
of the Corporation or a Subsidiary having an
aggregate Fair Market Value of $1,000,000 or more;
(3) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or
a series of transactions whether or not related) to
or with the Corporation or a Subsidiary of any assets
of an Interested Shareholder (or an Affiliate or
Associate of an Interested Shareholder) having an
aggregate Fair Market Value of $1,000,000 or more;
(4) the issuance or sale by the Corporation or any
Subsidiary (in one transaction or a series of
transactions whether or not related) of any
securities of the Corporation or of any Subsidiary to
an Interested Shareholder or any Affiliate or
Associate of an Interested Shareholder in exchange
for cash, securities or other consideration (or a
combination thereof) having an aggregate Fair Market
Value of $1,000,000 or more except an issuance of
securities upon conversion of convertible securities
of the Corporation or of a Subsidiary which were not
acquired by such Interested Shareholder (or such
Affiliate or Associate) from the Corporation or a
Subsidiary;
(5) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation
proposed by or on behalf of an Interested Shareholder
or an Affiliate or Associate of an Interested
Shareholder; or
<PAGE> 12
Page 10
(6) any reclassification of securities (including any
reverse stock split) or recapitalization of the
Corporation or a Subsidiary or any other transaction
(whether or not with or into or otherwise involving
an Interested Shareholder) which has the effect,
directly or indirectly, of increasing the
proportionate share of the outstanding shares of any
class of equity securities or securities convertible
into equity securities of the Corporation or a
Subsidiary which is directly or indirectly owned by
any Interested Shareholder or an Affiliate or
Associate of an Interested Shareholder;
shall require the affirmative vote of (i) the holders of at
least two-thirds of the combined voting power of the then
outstanding shares of capital stock of the Corporation
entitled to vote generally in an annual election of Directors
or entitled by law or by the terms of the capital stock to
vote on the transaction in question (the "Voting Shares") and
(ii) the holders of at least two-thirds of the combined voting
power of the then outstanding Voting Shares held by
Disinterested Shareholders, in each case voting together as a
single class. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that
a lesser percentage may be specified, by law, by any other
provisions of these Articles or by the terms of any series of
Preferred Stock or any other securities of the Corporation.
B. The term "Business Combination" as used in this Article
Eighth shall mean any transaction which is referred to in any
one or more of clauses (1) through (6) of paragraph A of
Section 1 of this Article Eighth.
Section 2. The provisions of Section 1 of this Article Eighth
shall not be applicable to any Business Combination, and such Business
Combination shall require only such affirmative vote (if any) as is required by
law, any other provisions of these Articles, the terms of any of the classes or
series of Common Equity of the Corporation or of any of the classes or series of
capital stock of the Corporation entitled to a preference over the Common Equity
as to dividends or upon liquidation, or the terms of any other securities of the
Corporation, if all of the conditions specified in either of the following
paragraphs A or B are met:
A. The Business Combination shall have been approved
by a majority of the Disinterested Directors; or
B. All the following six conditions shall have been
met:
<PAGE> 13
Page 11
(1) The transaction constituting the Business
Combination shall provide for a consideration to be
received by holders of Common Equity in exchange for
their Common Equity, and the aggregate amount of the
cash and the Fair Market Value as of the date of the
consummation of the Business Combination of
consideration other than cash to be received per
share by holders of Common Equity in such Business
Combination shall be at least equal to the highest of
the following:
(a) (if applicable) the highest per share
price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees)
paid in order to acquire any shares of
Common Equity beneficially owned by the
Interested Shareholder which were acquired
(x) within the two-year period immediately
prior to the first public announcement of
the proposed Business Combination (the
"Announcement Date") or (y) in the
transaction in which it became an Interested
Shareholder, whichever is higher;
(b) the Fair Market Value per share of
Common Equity on the Announcement Date or on
the date on which the Interested Shareholder
became an Interested Shareholder (the
"Determination Date"), whichever is higher;
and
(c) (if applicable) the price per share
equal to the Fair Market Value per share of
Common Equity determined pursuant to clause
(b) immediately preceding, multiplied by the
ratio of (x) the highest per share price
(including any brokerage commissions,
transfer taxes and soliciting dealers' fees)
paid in order to acquire any shares of
Common Equity beneficially owned by the
Interested Shareholder which were acquired
within the two-year period immediately prior
to the Announcement Date to (y) the Fair
Market Value per share of Common Equity on
the first day in such two-year period on
which the Interested Shareholder
beneficially owned any shares of Common
Equity, whether or not such Shareholder was
an Interested Shareholder on that day.
(2) If the transaction constituting the Business
Combination shall provide for a consideration to be
received by holders of any class of outstanding
Voting Shares other than Common Equity, the aggregate
amount of the cash and the Fair Market
<PAGE> 14
Page 12
Value as of the date of the consummation of the
Business Combination of consideration other than cash
to be received per share by holders of such Voting
Shares shall be at least equal to the highest of the
following (it being intended that the requirements of
this clause B(2) shall be required to be met with
respect to every class of outstanding Voting Shares,
whether or not the Interested Shareholder
beneficially owns any shares of a particular class of
Voting Shares):
(a) (if applicable) the highest per share
price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees)
paid in order to acquire any shares of such
class of Voting Shares beneficially owned by
the Interested Shareholder which were
acquired (x) within the two-year period
immediately prior to the Announcement Date
or (y) in the transaction in which it became
an Interested Shareholder, whichever is
higher;
(b) (if applicable) the highest preferential
amount per share to which the holders of
shares of such class of Voting Shares are
entitled in the event of any voluntary or
involuntary liquidation, dissolution or
winding up of the Corporation;
(c) the Fair Market Value per share of such
class of Voting Shares on the Announcement
Date or on the Determination Date, whichever
is higher; and
(d) (if applicable) the price per share
equal to the Fair Market Value per share of
such class of Voting Shares determined
pursuant to clause (c) immediately
preceding, multiplied by the ratio of (x)
the highest per share price (including any
brokerage commissions, transfer taxes and
soliciting dealers' fees) paid in order to
acquire any shares of such class of Voting
Shares beneficially owned by the Interested
Shareholder which were acquired within the
two-year period immediately prior to the
Announcement Date to (y) the Fair Market
Value per share of such class of Voting
Shares on the first day in such two-year
period on which the Interested Shareholder
beneficially owned any shares of such class
of Voting Shares, whether or not such
Shareholder was an Interested Shareholder on
that day.
<PAGE> 15
Page 13
(3) The consideration to be received by holders of a
particular class of Voting Shares or Common Equity
shall be in cash or in the same form as was
previously paid in order to acquire shares of such
class of shares which are beneficially owned by the
Interested Shareholder and, if the Interested
Shareholder beneficially owns shares of any class of
shares which were acquired with varying forms of
consideration, the form of consideration to be
received by the holders of such class of shares shall
be either cash or the form used to acquire the
largest number of shares of such class of Voting
Shares beneficially owned by it. The prices
determined in accordance with clauses (1) and (2) of
paragraph B of this Section 2 shall be subject to an
appropriate adjustment in the event of any stock
dividend, stock split, subdivision, combination of
shares or similar event.
(4) After such Interested Shareholder has become an
Interested Shareholder and prior to the consummation
of such Business Combination:
(a) except as approved by a majority of the
Disinterested Directors, there shall have
been no failure to declare and pay at the
regular date therefor any full quarterly
dividends (whether or not cumulative) on any
outstanding Preferred Stock or other capital
stock entitled to a preference over the
Common Equity as to dividends or upon
liquidation;
(b) except as approved by a majority of the
Disinterested Directors, there shall have
been (x) no reduction in the annual amount
of dividends paid on the Common Equity
(except as necessary to reflect any
subdivision of the Common Equity) and (y) no
failure to increase the annual amount of
dividends as necessary to prevent any such
reduction in the event of any
reclassification (including any reverse
stock split), recapitalization,
reorganization or similar transaction which
has the effect of reducing the number of
outstanding shares of the Common Equity;
(c) such Interested Shareholder shall not
have become the beneficial owner of any
additional Voting Shares except as part of
the transaction in which it became an
Interested Shareholder; and
(d) there shall have always been at least
four (4) Disinterested Directors on the
Board
<PAGE> 16
Page 14
of Directors.
(5) After such Interested Shareholder has become an
Interested Shareholder, such Interested Shareholder
shall not have received the benefit, directly or
indirectly (except proportionately as a shareholder),
of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax
advantages provided by the Corporation, whether in
anticipation of or in connection with such Business
Combination or otherwise.
(6) A proxy or information statement describing the
proposed Business Combination and complying with the
requirements of the Securities Exchange Act of 1934
and the rules and regulations thereunder (or any
subsequent provisions replacing such Act, rules or
regulations) shall be mailed to shareholders at least
thirty (30) days prior to the consummation of such
Business Combination (whether or not such proxy or
information statement is required to be mailed
pursuant to such Act, rules, regulations or
subsequent provisions).
Section 3. For purposes of this Article Eighth:
A. A "person" shall mean any individual, a partnership, a
corporation, an association, a trust or other entity.
B. "Interested Shareholder" at any particular time shall mean
any person (other than the Corporation or any Subsidiary or
any employee benefit plan or trust of the Corporation or any
Subsidiary) who or which:
(1) is at such time the beneficial owner, directly or
indirectly, of five percent (5%) or more of the
voting power of the Voting Shares;
(2) is an Affiliate of the Corporation and at any
time within the two-year period immediately prior to
the date in question was the beneficial owner,
directly or indirectly, of five percent (5%) or more
of the voting power of the Voting Shares; or
(3) is at such time an assignee of or has otherwise
succeeded to the beneficial ownership of any Voting
Shares which were at any time within the two-year
period immediately prior to the date in question
beneficially owned by an Interested Shareholder (as
defined in (1) and (2) above), if such assignment or
succession shall have occurred in the course of a
transaction or series of
<PAGE> 17
Page 15
transactions not involving a public offering within
the meaning of the Securities Act of 1933.
C. "Disinterested Shareholder" shall mean a shareholder of the
Corporation who is not an Interested Shareholder (or an
Affiliate or an Associate of an Interested Shareholder) who is
involved, directly or indirectly, in the proposed Business
Combination in question, except that as used in Section 6 of
this Article Eighth, the term "Disinterested Shareholder"
shall mean a shareholder of the Company who is not an
Interested Shareholder.
D. A person shall be a "beneficial owner" of any Voting
Shares:
(1) which such person or any of its Affiliates or
Associates beneficially owns, directly or
indirectly;
(2) which such person or any of its Affiliates or
Associates has (i) the right to acquire (whether or
not such right is exercisable immediately) pursuant
to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange
rights, warrants or options or otherwise or (ii) the
right to vote pursuant to any agreement, arrangement
or understanding; or
(3) which are beneficially owned, directly or
indirectly, by any other person with which such
person or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of
any Voting Shares.
E. For the purpose of determining whether a person is an
Interested Shareholder pursuant to paragraph B of this Section
3, the number of Voting Shares deemed to be outstanding shall
include shares deemed owned by an Interested Shareholder
through application of paragraph D of this Section 3 but shall
not include any other Voting Shares which may be issuable
pursuant to any agreement, arrangement or understanding, or
upon the exercise of conversion rights, exchange rights,
warrants or options or otherwise.
F. "Affiliate" means a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled
by, or is under common control with, the person specified.
"Associate", which is used to indicate a relationship with any
person, means (1) any corporation or organization (other than
the Corporation or a majority-owned subsidiary of the
Corporation) of which such person is an officer or
<PAGE> 18
Page 16
partner or is, directly or indirectly, the beneficial owner of
ten percent (10%) or more of any class of equity securities,
(2) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity, and (3)
any relative or spouse of such person, or any relative of such
spouse, who has the same home as such person or who is a
director or officer of the Corporation or any of its parents
or subsidiaries.
G. "Subsidiary" means any corporation of which a majority of
any class of equity security is owned, directly or indirectly,
by the Corporation; provided, however, that for the purposes
of the definition of Interested Shareholder set forth in
paragraph B of this Section 3, the term "Subsidiary" shall
mean only a corporation of which a majority of each class of
equity security is owned, directly or indirectly, by the
Corporation.
H. "Disinterested Director" means any member of the Board of
Directors who is unaffiliated with, and not a representative
or nominee of, the Interested Shareholder who is involved,
directly or indirectly, in the proposed Business Combination
in question, and was (a) a member of the Board prior to the
time that such Interested Shareholder became an Interested
Shareholder or (b) recommended to succeed a Disinterested
Director by a majority of the Disinterested Directors then on
the Board.
I. "Fair Market Value" means: (a) in the case of stock, the
highest closing sale price (or closing bid price for any day
on which a closing sale price is not available) during the
30-day period immediately preceding the date in question of a
share of such stock on the Composite Tape for New York Stock
Exchange Listed Stocks, or, if such stock is not quoted on the
Composite Tape, on the New York Stock Exchange, or if such
stock is not listed on such Exchange, on the principal United
States securities exchange registered under the Securities
Exchange Act of 1934 on which such stock is listed, or if such
stock is not listed on any such exchange, the highest closing
bid quotation with respect to a share of such stock during the
30-day period preceding the date in question on the NASDAQ or
any other system then in use, or if no such quotations are
available, the fair market value on the date in question of a
share of such stock as determined by a majority of the
Disinterested Directors in good faith; and (b) in the case of
property other than cash or stock, the fair market value of
such property on the date in question as determined by a
majority of the Disinterested Directors in good faith. If
different
<PAGE> 19
Page 17
classes of Common Equity of the Corporation have different
Fair Market Values based on the determinations to be made
under subsection (a), then the term "Fair Market Value" of
Common Equity shall mean the highest value then ascribed to a
share of any of the various classes of Common Equity.
J. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than
cash to be received" as used in paragraph B of Section 2 of
this Article Eighth shall include the shares of Common Equity
and the shares of any other class of outstanding Voting Shares
retained by the holders of such shares.
Section 4. A majority of the Disinterested Directors of the
Corporation shall have the power and duty to determine for the purpose of this
Article Eighth, on the basis of information known to them after reasonable
inquiry, (1) whether a person is an Interested Shareholder, (2) the number of
Voting Shares beneficially owned by any person, (3) whether a person is an
Affiliate or Associate of another, (4) whether the requirements of Section 2 of
this Article Eighth have been met with respect to any Business Combination, and
(5) whether the assets which are subject to any Business Combination have, or
the consideration to be received for the issuance or transfer of securities by
this Corporation or any Subsidiary in any Business Combination has, an aggregate
Fair Market Value of $1,000,000 or more. Any such determination made in good
faith shall be binding and conclusive on all parties.
Section 5. Nothing contained in this Article Eighth shall be
construed to relieve any Interested Shareholder from any fiduciary obligation
imposed by law.
Section 6. In addition to any requirements of law and any
other provisions of these Articles or the terms of any class or series of
capital stock of the Corporation entitled to a preference over the Common Equity
as to dividends or upon liquidation, or the terms of any other securities of the
Corporation (and notwithstanding the fact that a lesser percentage may be
specified by law, these Articles or any such terms), the affirmative vote of
A. the holders of two-thirds or more of the combined
voting power of the Voting Shares, voting together as a
single class, and
B. two-thirds of the combined voting power of the
Voting Shares held by the Disinterested Shareholders,
voting together as a single class,
shall be required to amend, alter or repeal or adopt any provision inconsistent
with, this Article Eighth.
<PAGE> 20
Page 18
ARTICLE NINTH: The foregoing Second Restated Articles of
Incorporation hereby supersede existing Restated Articles of Incorporation as
heretofore amended.
<PAGE> 1
Exhibit 3(ii)
T H E L I N C O L N E L E C T R I C C O M P A N Y
-------------------------------------------------------
SECOND RESTATED CODE OF REGULATIONS
-----------------------------------
ARTICLE I
---------
SHARES
------
1. REGISTRATION AND TRANSFER OF CERTIFICATES. Each shareholder of the
Corporation whose shares have been fully paid for shall be entitled to
a certificate or certificates showing the number of shares registered
in his name on the books of the Corporation. Each certificate shall be
signed by the Chairman of the Board or the President or Vice-President
of the Corporation and the Secretary or Assistant Secretary or the
Treasurer or an Assistant Treasurer. Shares shall be transferred only
on the books of the Corporation by the holder thereof, in person or by
Attorney, upon surrender and cancellation of certificates for a like
number of shares.
2. SUBSTITUTED CERTIFICATES. The Board of Directors may authorize the
issuance of a new certificate in place of any certificate theretofore
issued by the Corporation alleged to have been lost or destroyed; in
its discretion requiring the owner of the lost or destroyed
certificate, or the legal representative, to give the Corporation a
bond in such sum as the Board of Directors may direct as indemnity
against any claim that may be made against the Corporation; or, if in
the judgment of the Board it is proper to do so, a new certificate may
be issued without requiring any bond.
<PAGE> 2
-2-
3. SHAREHOLDERS ENTITLED TO NOTICE AND TO VOTE. The Board of Directors may
fix a time not exceeding forty-five (45) days preceding the date of any
meeting of shareholders, or any dividend payment date, or any date for
the allotment of rights, as a record date for the determination of the
shareholders entitled to notice of such meeting, or to vote thereat, or
to receive such dividends or rights, as the case may be, or in lieu
thereof, the Board of Directors may close the books of the Corporation
against the transfer of shares during the whole or any part of such
period.
ARTICLE II
----------
MEETINGS OF SHAREHOLDERS
------------------------
1. ANNUAL MEETING. The Annual Meeting of shareholders shall be held 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.
<PAGE> 3
-3-
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
<PAGE> 4
-4-
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.
<PAGE> 5
-5-
ARTICLE III
-----------
BOARD OF DIRECTORS
------------------
1. NUMBER AND ELECTION. The powers and authority of the Corporation shall
be exercised and its business managed and controlled by a Board of
Directors. The election of Directors shall be by ballot and shall be
held at the Annual Meeting of shareholders or at a special meeting
called for that purpose. The maximum number of the Directors of the
Corporation shall be eighteen. Subject to such maximum, the number of
Directors may be fixed or changed (a) at a meeting of the shareholders
called for the purpose of electing Directors at which a quorum is
present, by the affirmative vote of the holders of a majority of the
shares that are represented at the meeting and entitled to vote on the
proposal, and (b) by the Directors, by the vote of a majority of their
number, who may also fill any Director's office that is created by an
increase in the number of Directors. The Directors shall be divided
into three classes, as nearly equal in number as possible, as
determined by the Board of Directors of the Corporation. A separate
election shall be held for each class of Directors as hereinafter
provided. Directors elected at the first election for the first class
shall hold office for the term of one year from the date of their
election and until the election of their successors, Directors elected
at the first
<PAGE> 6
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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
<PAGE> 7
-7-
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
<PAGE> 8
-8-
Incorporation or Regulations of the Corporation.
ARTICLE IV
----------
INDEMNIFICATION AND INSURANCE
-----------------------------
1. INDEMNIFICATION. (a) The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party, to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that
he is or was a Director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a Director,
trustee, officer, employee or agent of another corporation, domestic or
foreign, nonprofit or for profit, partnership, joint venture, trust or
other enterprise, to the full extent permitted from time to time under
the laws of the State of Ohio; provided, however, that the Corporation
shall indemnify any such agent (as opposed to any Director, officer or
employee) of the Corporation to an extent greater than that required by
law only if and to the extent that the Directors may, in their
discretion, so determine.
(b) The indemnification authorized by this Article shall not
be exclusive of, and shall be in addition to, any other rights granted
to those seeking indemnification hereunder or under the Articles or any
agreement, vote of shareholders or disinterested Directors, or
otherwise, both
<PAGE> 9
-9-
as to action in his official capacity and as to action in another
capacity while holding such office, and shall continue as to a person
who has ceased to be a Director, trustee, officer, employee or agent
and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(c) No amendment, termination or repeal of this Article IV
shall affect or impair in any way the rights of any Director or officer
of the Corporation to indemnification under the provisions hereof with
respect to any action, suit or proceeding arising out of, or relating
to, any actions, transactions or facts occurring prior to the final
adoption of such amendment, termination or repeal.
2. LIABILITY INSURANCE. The Corporation may purchase and maintain
insurance or furnish similar protection, including but not limited to
trust funds, letters of credit or self-insurance, on behalf of or for
any person who is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as
a Director, trustee, officer, employee or agent of another corporation,
domestic or foreign, nonprofit or for profit, partnership, joint
venture, trust or other enterprise, against any liability asserted
against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power
to
<PAGE> 10
-10-
indemnify him against such liability under this Article. Insurance may
be purchased from or maintained with a person in which the Corporation
has a financial interest.
ARTICLE V
---------
NOMINATION OF DIRECTOR CANDIDATES
---------------------------------
1. NOTIFICATION OF NOMINEES. Nominations for the election of Directors may
be made by the Board of Directors or a committee appointed by the Board
of Directors or by any shareholder entitled to vote in the election of
Directors generally. However, any shareholder entitled to vote in the
election of Directors generally may nominate one or more persons for
election as Directors at a meeting only if written notice of such
shareholder's intent to make such nomination or nominations has been
received by the Secretary of the Corporation not less than 80 days in
advance of such meeting; provided, however, that in the event that the
date of the meeting was not publicly announced by the Corporation by
mail, press release or otherwise more than 90 days prior to the
meeting, notice by the shareholder to be timely must be delivered to
the Secretary of the Corporation not later than the close of business
on the tenth day following the day on which such announcement of the
date of the meeting was communicated to shareholders. Each such notice
shall set forth: (a) the name and address of the shareholder who
intends to make the nomination and of the person or persons
<PAGE> 11
-11-
to be nominated; (b) a representation that the shareholder is a holder
of record of stock of the Corporation entitled to vote for the election
of Directors on the date of such notice and intends to appear in person
or by proxy at the meeting to nominate the person or persons specified
in the notice; (c) a description of all arrangements or understandings
between the shareholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder; (d) such
other information regarding each nominee proposed by such shareholder
as would be required to be included in a proxy statement filed pursuant
to the proxy rules of the Securities and Exchange Commission, had the
nominee been nominated, or intended to be nominated, by the Board of
Directors; and (e) the consent of each nominee to serve as a Director
of the Corporation if so elected.
2. SUBSTITUTION OF NOMINEES. In the event that a person is validly
designated as a nominee in accordance with paragraph 1 above, and shall
thereafter become unable or unwilling to stand for election to the
Board of Directors, the Board of Directors or the shareholder who
proposed such nominee, as the case may be, may designate a substitute
nominee upon delivery, not fewer than five days prior to the date of
the meeting for the election of such nominee of a written notice
<PAGE> 12
-12-
to the Secretary setting forth such information regarding such
substitute nominee as would have been required to be delivered to the
Secretary pursuant to paragraph 1 above had such substitute nominee
been initially proposed as a nominee. Such notice shall include a
signed consent to serve as a Director of the Corporation, if elected,
of each such substitute nominee.
3. COMPLIANCE WITH PROCEDURES. If the chairman of the meeting for the
election of Directors determines that a nomination of any candidate for
election as a Director at such meeting was not made in accordance with
the applicable provisions of paragraphs 1 and 2 above, such nomination
shall be void.
ARTICLE VI
----------
COMMITTEES
----------
1. CREATION AND ELECTION. The Board of Directors may create, from time to
time and from its own number, an Executive Committee or any other
committee or committees of the Board of Directors to act in the
intervals between meetings of the Board of Directors and may delegate
to such committee or committees any of the authority of the Board of
Directors other than that of filling vacancies among the Board of
Directors or in any committee of the Board of Directors. No committee
shall consist of less than three Directors. The Board of Directors may
appoint one or more Directors as
<PAGE> 13
-13-
alternate members of any such committee, who may take the place of any
absent member or members at a meeting of such committee. Except as
above provided and except to the extent that its powers are limited by
the Directors, the Executive Committee during the intervals between
meetings of the Directors shall possess and may exercise, subject to
the control and direction of the Directors, all of the powers of the
Directors in the management and control of the business of the
Corporation, regardless of whether such powers are specifically
conferred by these Regulations. All action taken by the Executive
Committee shall be reported to the Directors at their first meeting
thereafter.
2. QUORUM AND ACTION. Unless otherwise ordered by the Board of Directors,
a majority of the members of any committee appointed by the Board of
Directors pursuant to this Article VI shall constitute a quorum at any
meeting thereof, and the act of a majority of the members present at a
meeting at which a quorum is present shall be the act of such
committee. Action may be taken by any such committee without a meeting
by a writing or writings signed by all of its members. Any such
committee shall prescribe its own rules for calling and holding
meetings and its method of procedure, subject to any rules prescribed
by the Board of Directors, and shall keep a written record of all
action taken by it.
<PAGE> 14
-14-
ARTICLE VII
-----------
OFFICERS
--------
1. OFFICERS. The Corporation may have a Chairman of the Board and shall
have a President (both of whom shall be Directors), a Secretary and a
Chief Financial Officer (who shall serve as Treasurer under Ohio law).
The Corporation may also have one or more Vice-Presidents and such
other officers and assistant officers as the Board of Directors may
deem necessary. All of the officers and assistant officers shall be
elected by the Board of Directors.
2. AUTHORITY AND DUTIES OF OFFICERS. The officers of the Corporation shall
have such authority and shall perform such duties as are customarily
incident to their respective offices, or as may be specified from time
to time by the Board of Directors regardless of whether such authority
and duties are customarily incident to such office.
ARTICLE VIII
------------
COMPENSATION OF DIRECTORS AND OFFICERS
--------------------------------------
The compensation of the Directors and officers of the Corporation shall be such
as the Board of Directors may from time to time designate.
ARTICLE IX
----------
<PAGE> 15
-15-
AMENDMENTS
----------
These regulations may be altered, changed, amended or repealed by the written
consent of the holders of record of shares entitling them to exercise not less
than two-thirds of the voting power of the Corporation, or at a meeting called
and held for that purpose, by the affirmative vote of the holders of record of
shares entitling them to exercise not less than a majority of the voting power
of the Corporation; provided, however, that paragraphs 1 and 2 of Article III
and all of Article V shall not be altered, changed, amended or repealed, nor
shall any provision inconsistent with such provisions be adopted, without the
affirmative vote of the holders of record of shares entitling them to exercise
not less than two-thirds of the voting power of the Corporation entitled to vote
generally in the election of Directors.
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0
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