<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 three months ended March 31, 2000 Commission File No. 0-1402
LINCOLN ELECTRIC HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Ohio 34-1860551
(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 class of common stock as of
March 31, 2000 was 42,527,771.
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LINCOLN ELECTRIC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands of dollars, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------------
2000 1999
-------------- -----------
<S> <C> <C>
Net sales $281,804 $282,868
Cost of goods sold 185,689 186,301
--------- ---------
Gross profit 96,115 96,567
Selling, general & administrative expenses 56,679 58,483
Loss on disposal of motor business -- 32,015
--------- ---------
Operating income 39,436 6,069
Other income / (expense):
Interest income 136 312
Other income 772 709
Interest expense (1,971) (1,429)
--------- ---------
Total other income / (expense) (1,063) (408)
--------- ---------
Income before income taxes 38,373 5,661
Income taxes 13,975 1,354
--------- ---------
Net income $ 24,398 $ 4,307
========= =========
Basic earnings per share $ 0.56 $ 0.09
Diluted earnings per share $ 0.56 $ 0.09
Cash dividends declared per share $ 0.14 $ 0.12
</TABLE>
See notes to these consolidated financial statements.
2
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LINCOLN ELECTRIC HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of dollars)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- -----------
(UNAUDITED) (NOTE A)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 10,712 $ 8,675
Accounts receivable (less allowances of $3,577 in 2000; $3,687 in 1999) 181,930 169,986
Inventories:
Raw materials and in-process 81,076 82,451
Finished goods 110,940 109,161
---------- ----------
192,016 191,612
Deferred income taxes 25,294 23,311
Other current assets 31,162 33,011
---------- ----------
TOTAL CURRENT ASSETS 441,114 426,595
PROPERTY, PLANT AND EQUIPMENT
Land 11,960 11,050
Buildings 131,077 119,519
Machinery, tools and equipment 418,949 419,831
--------- ---------
561,986 550,400
Less: accumulated depreciation and amortization 283,410 279,610
--------- ---------
278,576 270,790
OTHER ASSETS
Goodwill - net 42,119 33,263
Other 59,757 44,751
--------- ---------
101,876 78,014
---------- ---------
TOTAL ASSETS $821,566 $775,399
======== ========
</TABLE>
See notes to these consolidated financial statements.
3
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LINCOLN ELECTRIC HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of dollars, except share data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------------ -----------
(UNAUDITED) (NOTE A)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks $ 19,909 $ 16,425
Trade accounts payable 68,250 64,482
Accrued employee compensation and benefits 46,109 32,326
Accrued expenses 14,163 15,202
Taxes, including income taxes 54,592 41,326
Dividend payable 5,954 6,228
Other current liabilities 29,674 28,882
Current portion of long-term debt 12,404 11,503
--------- ----------
TOTAL CURRENT LIABILITIES 251,055 216,374
Long-term debt, less current portion 86,663 47,207
Deferred income taxes 27,832 28,771
Other long-term liabilities 30,561 31,532
SHAREHOLDERS' EQUITY
Preferred Shares, without par value - at stated capital amount:
Authorized - 5,000,000 shares in 2000 and 1999;
Issued and Outstanding - none in 2000 and 1999 -- --
Common Shares, without par value - at stated capital amount:
Authorized - 120,000,000 shares in 2000 and 1999; Issued - 49,283,950
shares in 2000 and 1999;
Outstanding - 42,527,771 shares in 2000 and 44,483,366 shares in 1999 4,928 4,928
Additional paid-in capital 104,903 104,891
Retained earnings 501,907 483,463
Accumulated other comprehensive income (50,326) (43,524)
Treasury shares, at cost - 6,756,179 shares in 2000 and 4,800,584 shares
in 1999 (135,957) (98,243)
--------- ----------
TOTAL SHAREHOLDERS' EQUITY 425,455 451,515
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $821,566 $775,399
======== ========
</TABLE>
See notes to these consolidated financial statements.
4
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LINCOLN ELECTRIC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of dollars)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
2000 1999
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 24,398 $ 4,307
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 8,403 7,280
(Gain) loss on disposal of fixed assets and motor business (18) 31,982
Changes in operating assets and liabilities:
(Increase) in accounts receivable (15,664) (14,824)
Decrease (increase) in inventories 2,907 (9,577)
Decrease (increase) in other current assets 1,973 (466)
(Decrease) increase in accounts payable (519) 6,030
Increase in other current liabilities 28,645 8,314
Gross change in other non-current assets and liabilities 1,843 3,308
Other - net (766) (5,363)
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 51,202 30,991
INVESTING ACTIVITIES
Capital expenditures (11,068) (23,685)
Acquisitions of businesses and equity investment (19,107) --
Proceeds from maturities of marketable securities 5 164
Proceeds from sale of fixed assets and motor business 102 536
---------- ----------
NET CASH (USED) BY INVESTING ACTIVITIES (30,068) (22,985)
FINANCING ACTIVITIES
Proceeds from short-term borrowings 13,496 17,544
Payments on short-term borrowings (15,123) (11,302)
Notes payable to banks - net 5,205 11,632
Proceeds from long-term borrowings 48,526 15,016
Payments on long-term borrowings (27,014) (5,010)
Purchase of shares for treasury (37,714) (57,883)
Cash dividends paid (6,228) (5,770)
Other -- (125)
---------- ----------
NET CASH (USED) BY FINANCING ACTIVITIES (18,852) (35,898)
Effect of exchange rate changes on cash and cash equivalents (245) (447)
---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,037 (28,339)
Cash and cash equivalents at beginning of period 8,675 39,095
---------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,712 $ 10,756
========== ==========
</TABLE>
See notes to these consolidated financial statements.
5
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LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
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 Form 10-Q and Article 10 of
Regulation S-X. Accordingly, these consolidated financial statements do not
include all of the information and notes required by generally accepted
accounting principles for complete financial statements. However, in the opinion
of management, these consolidated financial statements contain all the
adjustments (consisting of normal recurring accruals) considered necessary to
present fairly the financial position, results of operations and changes in cash
flows for the interim periods. Operating results for the three-months ended
March 31, 2000 are not necessarily indicative of the results to be expected for
the year ending December 31, 2000.
The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date, but does not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements.
The Company has reclassified distribution costs from selling, general &
administrative expenses to cost of goods sold. Those two line items on the
consolidated income statement have been restated for 1999 to conform to current
year classification.
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, 1999.
NOTE B - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
(Dollars and shares in thousands, THREE MONTHS ENDED
except per share amounts) ------------------
MARCH 31,
---------
2000 1999
-------- -------
Numerator:
Net income $ 24,398 $ 4,307
======== =======
Denominator:
Denominator for basic earnings per share -
Weighted-average shares 43,690 46,575
Effect of dilutive securities -
Employee stock options 32 165
------ ------
Denominator for diluted earnings per share -
Adjusted weighted-average shares 43,722 46,740
====== ======
Basic earnings per share $0.56 $0.09
Diluted earnings per share $0.56 $0.09
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NOTE C - COMPREHENSIVE INCOME
The components of comprehensive income follow:
THREE MONTHS ENDED MARCH 31,
----------------------------
(Dollars in thousands)
2000 1999
-------- --------
Net income $ 24,398 $ 4,307
Other comprehensive income:
Change in currency translation adjustment (6,802) (8,299)
-------- --------
Comprehensive income $ 17,596 $ (3,992)
======== ========
NOTE D - 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 final year-end
LIFO inventory calculations.
NOTE E - ACCRUED EMPLOYEE COMPENSATION AND BENEFITS
Accrued employee compensation and benefits at March 31, 2000 include provisions
for year-end bonuses and related payroll taxes of approximately $19 million
related to Lincoln employees worldwide. The payment of bonuses is discretionary
and is subject to approval by the Board of Directors.
NOTE F - SEGMENT INFORMATION
<TABLE>
<CAPTION>
(Dollars in thousands) UNITED OTHER
STATES EUROPE COUNTRIES ELIMINATIONS CONSOLIDATED
--------- ---------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Three months ended March 31, 2000:
Net sales to unaffiliated customers $192,236 $ 47,641 $ 41,927 $ -- $281,804
Inter-segment sales 18,522 3,005 5,979 (27,506) ---
---------- ---------- ---------- ---------- --------
Total $210,758 $ 50,646 $ 47,906 $ (27,506) $281,804
======== ======== ======== ========= ========
Income before interest and income taxes $ 34,598 $ 3,336 $ 2,356 $ (82) $ 40,208
Interest income 136
Interest expense (1,971)
---------
Income before income taxes $ 38,373
=========
Total assets $550,230 $193,866 $158,356 $(80,886) $821,566
Three months ended March 31, 1999:
Net sales to unaffiliated customers $194,728 $ 48,970 $ 39,170 $ -- $282,868
Inter-segment sales 16,217 1,713 3,592 (21,522) ---
---------- ----------- ---------- --------- ---------
Total $210,945 $ 50,683 $ 42,762 $(21,522) $282,868
======== ========= ======== ======== =========
Income (loss) before interest and
income taxes $ (786) $ 4,063 $ 2,757 $ 744 $ 6,778
Interest income 312
Interest expense (1,429)
---------
Income before income taxes $ 5,661
=========
Total assets $ 532,476 $ 177,246 $127,040 $ (68,252) $ 768,510
</TABLE>
Included in the United States segment for the three months ended March 31, 1999
was a $32 million pre-tax charge related to the disposal of the motor business.
See Note H to these consolidated financial statements.
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NOTE G - ACQUISITIONS
In January 2000, the Company purchased a 35% interest in Kuang Tai, the leading
welding wire producer in the Taiwan and mainland Chinese welding markets, for
$16.6 million in cash. The Company accounts for its investment in Kuang Tai
under the equity method.
In February 2000, the Company purchased 100% of the Italian-based C.I.F.E. Spa,
the market leader in Europe in the production of MIG wire for the arc welding
industry. The total cost of this acquisition was $2.5 million, plus debt assumed
of $10.1 million, and was accounted for as a purchase.
NOTE H - DISPOSAL OF MOTOR BUSINESS
On May 28, 1999, the Company sold its motor business to Regal-Beloit, Inc. The
Company recorded a pre-tax charge of $32 million ($19.7 million after-tax, or
$0.42 per diluted share) in the first quarter of 1999 reflecting the loss on the
sale of motor business assets. Sales attributable to the motor business for the
three-month period ended March 31, 1999 were $13.1 million. The operating
results of the motor business for the quarter-ended March 31, 1999 were not
material.
NOTE I - NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. This statement will become effective for the Company for
fiscal year 2001. The Company is evaluating the effect of this Statement on its
accounting and reporting policies, but does not presently expect adoption to
have a material impact on the Company's consolidated financial statements.
NOTE J - SUBSEQUENT EVENT
On April 26, 2000, the Company made a recommended cash offer in the United
Kingdom to purchase all of the outstanding shares of Charter plc, a British
industrial holding company, for approximately $765 million in cash (using an
estimated exchange rate of $1.62 to GBP 1). The total cost of the
transaction, including refinanced debt, is expected to be approximately $1.2
billion and will be financed by committed bank facilities. Should the
acquisition occur, the Company would be obligated to cease dividend payments
pursuant to the new credit agreements until such time that acquisition debt was
reduced to appropriate levels. The Company has also suspended its share
repurchase program, pending the outcome of the proposed acquisition. The closing
date of this transaction is dependent upon a number of conditions, including
regulatory approval.
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Part 1 - Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following table sets forth the Company's results of operations for the
three-month periods ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
Three months ended March 31,
(dollars in millions)
2000 1999
----------------------- ----------------------
AMOUNT % OF SALES AMOUNT % OF SALES
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Net sales $281.8 100.0% $282.9 100.0%
Cost of goods sold 185.7 65.9% 186.3 65.9%
------ --------- ------ -------
Gross profit 96.1 34.1% 96.6 34.1%
Selling, general & administrative expenses 56.7 20.1% 58.5 20.7%
Loss on disposal of motor business -- -- 32.0 11.3%
----------- ------------ ------- -------
Operating income 39.4 14.0% 6.1 2.1%
Interest income 0.1 0.0% 0.3 0.1%
Other income 0.8 0.3% 0.7 0.3%
Interest expense (1.9) (0.7%) (1.4) (0.5%)
-------- ------- -------- -------
Income before income taxes 38.4 13.6% 5.7 2.0%
Income taxes 14.0 4.9% 1.4 0.5%
-------- ------- -------- -------
Net income $ 24.4 8.7% $ 4.3 1.5%
======= ======= ======= =======
</TABLE>
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
- --------------------------------------------------------------------------------
NET SALES. Net sales for the first quarter 2000 were $281.8 million, a $1.1
million or 0.4% decline from $282.9 million last year. Prior year's net sales
included $13.1 million in sales from the divested motor business. Excluding
these sales from the prior year, sales from continuing businesses increased
$12.0 million or 4.4%. Net sales from U.S. operations were $192.2 million for
the quarter, down 1.3% from $194.7 million for the first quarter last year.
Excluding sales of the divested motor business, U.S. sales in the first quarter
1999 would have been $181.6 million, a year-over-year increase of 5.8%. This
increase reflects higher U.S. demand, primarily in the consumables product line.
Export sales from the U.S. of $15.2 million were down $2.0 million or 11.6% from
last year. U.S. exports have declined primarily because the Company has shifted
some product sourcing of the Latin American market to its new plant in Torreon,
Mexico. U.S. exports to other world regions were flat or higher compared with
last year. Non-U.S. sales increased 1.6% to $89.6 million in the first quarter
2000, compared with $88.1 million last year. The strengthening of the U.S.
dollar had a significant negative impact on non-U.S. sales, particularly in
Europe, where exchange rate movements impacted sales by more than 11.0% compared
with last year. In local currencies, European sales increased 9.4%. European
sales were supplemented by increased MIG wire capacity with the February 2000
acquisition of C.I.F.E. Spa. In the rest of the world, the Company's sales
increased 7.0%.
GROSS PROFIT. Gross profit of $96.1 million for the first quarter 2000 declined
0.5% or $0.5 million from last year. Gross profit as a percentage of net sales
was flat compared with the first quarter last year. Gross profit percentage was
higher in the U.S. in 2000 due to the absence of lower margin motor sales.
Non-U.S. gross margins were down year-over-year due to a change in sales mix to
lower margin products and by increasing raw material prices.
SELLING, GENERAL & ADMINISTRATIVE (SG&A) EXPENSES. SG&A expenses decreased $1.8
million or 3.1% to $56.7 million for the first quarter 2000, compared with
$58.5 million for 1999. SG&A expense as a percentage of net sales declined to
20.1% from 20.7% in the 1999 period. The reduction in SG&A expenses were due to
planned reductions in selling, administrative and research and development
costs. SG&A expenses include costs related to the Company's discretionary year-
end employee bonus program, net of hospitalization costs. The final 2000 bonus
payout will be subject to approval by the Company's Board of Directors during
the fourth quarter.
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<PAGE> 10
LOSS ON DISPOSAL OF MOTOR BUSINESS. On May 28, 1999, the Company sold its motor
business. The Company recorded a pre-tax charge of $32 million ($19.7 million
after-tax, or $0.42 per diluted share) in the first quarter of 1999 reflecting
the loss on the sale of its motor business assets. Sales of the motor business
for the first quarter of 1999 were $13.1 million. The operating results of the
motor business for the first quarter 1999 were not material.
INTEREST EXPENSE. Interest expense increased to $1.9 million in the first
quarter 2000 from $1.4 million for the same period last year. The increase in
interest expense was commensurate with increased short- and long-term borrowings
to fund the share repurchase program and the acquisitions of C.I.F.E Spa and a
35% stake in Kuang Tai.
INCOME TAXES. Income taxes for the first quarter 2000 were $14.0 million on
income before income taxes of $38.4 million, an effective rate of 36.4%, as
compared with income taxes of $1.4 million on income before income taxes of $5.7
million, or an effective rate of 23.9% for the same period in 1999. Excluding
the motor charge from 1999, the first quarter 1999 effective tax rate was 36.3%.
NET INCOME. Net income for the first quarter 2000 of $24.4 million was $20.1
million higher than last year. Excluding the motor charge from the prior year,
net income for 1999 would have been $24.0 million. Diluted earnings per share
for 2000 increased to $0.56 per share from $0.09 per share in 1999 (or $0.51
excluding the motor charge). The effect of foreign currency exchange rate
movements on net income was not significant.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operating activities for the three months ended March 31,
2000 was $51.2 million compared with $31.0 million for 1999. Higher cash flow
from operations is due to improvements in working capital management,
particularly inventory, the timing of income tax payments and higher deferred
tax liabilities.
The Company's ratio of total debt to total capitalization increased to 21.9% at
March 31, 2000 from 14.3% at December 31, 1999. Debt was accumulated during the
first quarter to fund the share repurchases and acquisitions. The stock
repurchase program has continued to lower the Company's equity base. During the
first quarter of 2000, the Company purchased 1,960,930 shares of its common
stock at a cost of $37.7 million. Since the share repurchase program was first
begun in September 1998, the Company has purchased a total of 6,908,180 shares
of its common stock on the open market at a cost of $138.7 million through March
31, 2000. On May 2, 2000, the share repurchase program was suspended, pending
completion of the proposed acquisition.
Capital expenditures decreased $12.6 million to $11.1 million in the first
quarter of 2000, compared with $23.7 million in 1999. This decline was
predominantly related to spending on information systems in the U.S. and Europe
in 1999 that did not recur in 2000. During the first quarter 2000, the Company
acquired a 35% interest in Kuang Tai, a Taiwan-based manufacturer of welding
wire for $16.6 million and 100% of C.I.F.E. Spa, an Italian-based manufacturer
of MIG wire for $2.5 million, plus assumed debt of $10.1 million.
The Company paid cash dividends of $6.2 million or $0.14 per share during the
first three months of 2000, a 7.9% increase over the $5.8 million paid in the
first quarter 1999. Cash dividends declared per share increased 16.7%
year-over-year.
The quarterly dividend of $0.14 per share was paid April 14, 2000, to holders of
record on March 31, 2000. On May 2, 2000, a dividend of $0.14 per share was
declared which will be payable on July 14, 2000 to shareholders of record as of
June 30, 2000.
As part of the proposed acquisition of Charter plc, the Company announced that
dividend payments would cease indefinitely and that the share repurchase program
would be suspended.
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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:
- - Business Acquisition. The Company currently plans to complete its
acquisition of the stock of Charter plc toward the end of the third quarter
of 2000. While management believes the acquisition presents an excellent
strategic business opportunity, there is also a significant degree of
uncertainty involved in major acquisitions, particularly given that Charter
plc holds two different business units, ESAB and Howden. The Company
expects to dedicate significant resources towards a successful acquisition.
To finance the acquisition, the Company will initially be highly leveraged
and there are restrictions in the applicable credit agreements on uses of
cash for capital spending and shareholder dividends.
- - 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 3. Legal Proceedings" within the Company's annual
report on Form 10-K for the year-ended December 31, 1999, as well as the
update in this report. See also Note K to the consolidated financial
statements for the year-ended December 31, 1999.
- - 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 (particularly where foreign
currencies have been significantly devalued) 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.
- - 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 in the Company's largest market.
- - 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.
11
<PAGE> 12
Part II - Other Information
Item 1. Legal Proceedings
Defense and indemnity costs of the Company in product liability cases involving
injuries allegedly resulting from exposure to fumes and gases in the welding
environment may be affected by the outcome of pending litigation with the St.
Paul Fire and Marine Insurance Company ("St. Paul"), in which St. Paul and the
Company disagree about the allocation among various liability insurance policies
of defense and indemnity costs of welding fume cases. Following the April, 1998
trial of the Company's case against St. Paul, the United States District Court
for the Northern District of Ohio (Akron) ordered St. Paul to pay the Company
compensatory damages plus prejudgment interest for misallocating past expenses
related to welding fume cases. Additionally, the Court held that the Company may
utilize St. Paul occurrence-based policies sold prior to 1985 for defense and
verdict costs of various pending and potential future fume cases. St. Paul
appealed the decision to the U.S. Court of Appeals for the Sixth Circuit.
On April 27, 2000, the Sixth Circuit rendered a decision that affirmed in part
and reversed in part the lower court decision. The Sixth Circuit affirmed the
lower court's decision on liability, i.e., that St. Paul is liable to the
Company for misallocating past expenses related to welding fume cases. The Sixth
Circuit also affirmed the lower court's decision that the Company may use St.
Paul occurrence-based policies sold prior to 1985 for certain defense and
verdict costs of various pending and potential future fume cases. The Sixth
Circuit reversed the lower court decision on (a) the method for allocating
expenses between and among occurrence policies, and (b) the accrual date from
which prejudgment interest should be calculated. The Court of Appeals remanded
the case to the District Court for further proceedings on the issues that were
the subject of reversal.
Item 2. Changes in Securities - None.
Item 3. Defaults Upon Senior Securities - None.
Item 4. Submission of Matters to a Vote of Security Holders - None.
Item 5. Other Information - None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit No. 2(b) - Recommended Cash Offer for Charter plc dated
April 26, 2000
Exhibit No. 3(b) - Amended Code of Regulations of Lincoln Electric
Holdings, Inc.
Exhibit No. 10(p) - Stock Option Plan for Non-employee Directors
Exhibit No. 27 - Financial Data Schedule.
(b) Reports on Form 8-K - None.
12
<PAGE> 13
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.
LINCOLN ELECTRIC HOLDINGS, INC.
/S/ H. JAY ELLIOTT
- ------------------------------------------
H. Jay Elliott
Senior Vice President,
Chief Financial Officer and Treasurer
May 12, 2000
13
<PAGE> 1
Exhibit 2(b)
[Lincoln Electric Logo]
Not for release, publication or distribution in or
into the United States, Canada, Australia or Japan.
For Immediate Release
26 April, 2000
LINCOLN ELECTRIC HOLDINGS, INC. ("LINCOLN ELECTRIC")
RECOMMENDED CASH OFFER FOR
CHARTER PLC ("CHARTER")
- - The boards of Lincoln Electric and Charter announce that they have agreed
the terms of a recommended cash offer, to be made by CSFB on behalf of a
wholly-owned subsidiary of Lincoln Electric, to acquire the entire issued
and to be issued share capital of Charter.
- - Lincoln Electric is a global designer and manufacturer of arc welding
products, manufacturing a full line of arc welding equipment and consumable
welding products.
- - The Offer will be 500 pence in cash for each Charter Share and values
Charter's entire issued share capital at approximately GBP 471 million.
- - The Offer represents a premium of 105 per cent. to Charter's share price of
243.5 pence at the close of business on 25 April, 2000, the last dealing
day before this announcement, and a premium of 128 per cent. to the three
month average share price of Charter of 219.7 pence.
- - Charter shareholders will also be entitled to the final Charter dividend in
respect of the year ended 31 December, 1999 of 10.5 pence (net) per Charter
Share, payable on 15 May, 2000 to Charter shareholders on the register on
24 March, 2000.
- - Lincoln Electric believes that the acquisition of Charter will:
- allow Lincoln Electric to extend its international reach, permitting
it to service all major geographic regions
- provide a more complete product portfolio for the enlarged customer
base and substantially expand its distribution channels
- create an organisation which is at the leading edge in all aspects of
welding and cutting technology
- create an organisation which builds on the strength of leadership,
expertise and working practices of both companies to further improve
efficiencies
- - Lincoln Electric has received irrevocable undertakings to accept the Offer
from Charter shareholders in relation to approximately 30.8 per cent. of
the issued share capital of Charter.
<PAGE> 2
2
COMMENTS
Commenting on the Offer, Anthony A. Massaro, Chairman and Chief Executive
Officer of Lincoln Electric said:
"This is an excellent transaction for the shareholders and customers of both
companies. It allows significant extension of Lincoln Electric's reach in terms
of geography, products and technology, and represents a significant step forward
in line with our objectives of achieving profitable growth through enhancing our
product offering and international expansion.
"After the acquisition, Lincoln Electric will have the scale, reach,
manufacturing and research capabilities to better serve our customers
world-wide.
"We will be led by an experienced and customer-focused management team
comprising managers from both companies, and I am confident that the excellent
fit of the two companies will ensure a smooth and orderly transition period."
Commenting on the Offer, Jeffrey Herbert, Chairman of Charter said:
"Charter's management team has made strong progress in recent years in its
programme to reform the group and improve performance. We are therefore pleased
to recommend this Offer from Lincoln Electric which represents a significant
premium over the current market value of our shares. It is also a unique
opportunity for our employees to be associated with Lincoln Electric."
This summary should be read in conjunction with the full text of the following
announcement and the definitions in Appendix 2.
ENQUIRIES
LINCOLN ELECTRIC HOLDINGS INC. Via Financial
Anthony Massaro Dynamics
Jim Schilling Tel: 020 7831 3113
CSFB (FINANCIAL ADVISOR TO LINCOLN ELECTRIC AND LINCOLN
ELECTRIC GLOBAL) Tel: 020 7888 8888
Timon Drakesmith
FINANCIAL DYNAMICS (PUBLIC RELATIONS ADVISERS
FOR LINCOLN ELECTRIC) Tel: 020 7831 3113
Richard Mountain
CHARTER PLC Tel: 020 7838 7000
Nigel Smith
Nigel Robson
Neil Jamieson
LAZARD (FINANCIAL ADVISER TO CHARTER) Tel: 020 7588 2721
Marcus Agius
Paul Jameson
BRUNSWICK Tel: 020 7404 5959
Andrew Fenwick
Katie Hall
<PAGE> 3
3
The Offer will not be made, directly, or indirectly, in or into or by the use of
the mails or by any means or instrumentality (including, without limitation,
facsimile transmission, telex and telephone) of interstate or foreign commerce
of, or any facilities of a national securities exchange of Canada, Japan or
Australia. Copies of this announcement are not being, and must not be, mailed,
or otherwise distributed or sent in or into or from the United States, Canada,
Japan or Australia and persons receiving this announcement (including
custodians, nominees and trustees) must not distribute or send it into or from
the United States, Canada, Japan or Australia.
CSFB, which is regulated in the United Kingdom by The Securities and Futures
Authority Limited, is acting for Lincoln Electric and Lincoln Electric Global
and no one else in connection with the Offer and will not be responsible to
anyone other than Lincoln Electric and Lincoln Electric Global for providing the
protections afforded to customers of CSFB nor for giving advice in relation to
the Offer.
Lazard, which is regulated in the United Kingdom by The Securities and Futures
Authority Limited, is acting for Charter and no one else in connection with the
Offer and will not be responsible to anyone other than Charter for providing the
protections afforded to customers of Lazard nor for giving advice in relation to
the Offer.
<PAGE> 4
4
Not for release, publication or distribution in or into the United States,
Canada, Australia or Japan.
For Immediate Release
26 April, 2000
LINCOLN ELECTRIC HOLDINGS, INC. ("LINCOLN ELECTRIC")
RECOMMENDED CASH OFFER FOR
CHARTER PLC ("CHARTER")
1. INTRODUCTION
The boards of Lincoln Electric and Charter announce that agreement has been
reached on the terms of a recommended cash offer to be made by CSFB on behalf of
Lincoln Electric Global Limited ("Lincoln Electric Global"), a wholly owned
subsidiary of Lincoln Electric, for the entire issued and to be issued share
capital of Charter. The Offer is 500 pence in cash for each Charter Share and
values the entire issued share capital of Charter at approximately GBP 471
million.
The Offer represents a premium of 105 per cent. to Charter's share price of
243.5 pence at the close of business on 25 April, 2000, the last dealing day
before this announcement, and a premium of 128 per cent. to the three month
average share price of Charter of 219.7 pence.
Lincoln Electric Global has received irrevocable undertakings to accept the
Offer in respect of 14,460,354 Charter Shares (15.4 per cent. of Charter's
issued share capital) held by UBS Brinson Limited, 9,725,303 Charter Shares
(10.3 per cent.) held by Phillips & Drew Fund Management Limited and 4,740,000
Charter Shares (5.0 per cent.) held by Sterling Investment Group Limited
representing, in aggregate, 30.7 per cent. of Charter's issued share capital.
The circumstances in which the undertakings will cease to be binding are set out
in paragraph 10 below.
In addition, Lincoln Electric Global has received irrevocable undertakings to
accept the Offer from those directors of Charter who own Charter Shares in
respect of, in aggregate, 95,512 Charter Shares, representing approximately 0.1
per cent. of Charter's issued share capital. The undertakings do not allow the
Directors to accept another offer unless the Offer lapses or is withdrawn. In
aggregate, therefore, Lincoln Electric Global has received undertakings to
accept the Offer in respect of 29,021,169 Charter Shares, representing 30.8 per
cent. of Charter's issued share capital.
The Board of Charter, which has been so advised by Lazard, considers the terms
of the Offer to be fair and reasonable. In providing advice to the Board of
Charter, Lazard has taken into account the commercial assessments of the
directors of Charter. Accordingly, the Board of Charter unanimously recommends
all Charter shareholders to accept the Offer, as the directors have undertaken
to do with respect to their beneficial holdings.
<PAGE> 5
5
2. THE OFFER
The Offer, which will be subject, inter alia, to the conditions and further
terms set out below and in Appendix 1 to this announcement and to be set out in
full in the Offer Document, will be made on the following basis:
For each Charter Share 500 pence in cash
Charter shareholders on the register on 24 March, 2000 will also be entitled to
receive the final Charter dividend in respect of the year ended 31 December,
1999 of 10.5 pence (net) per Charter Share payable on 15 May, 2000.
3. FURTHER DETAILS OF THE OFFER
The Charter Shares will be acquired by Lincoln Electric Global fully paid and
free from all liens, equities, charges, encumbrances and other interests and
together with all rights now or hereafter attaching thereto, including the right
to receive and retain all dividends and other distributions declared, made or
paid hereafter other than the right to receive and retain the final dividend of
10.5 pence (net) per Charter Share payable on 15 May, 2000, to Charter
shareholders on the register on 24 March, 2000.
The Offer will be extended to all existing issued Charter Shares and to any
Charter Shares which are unconditionally allotted or issued prior to the date on
which the Offer closes (or such other date, as Lincoln Electric Global may,
subject to the provisions of the City Code, decide) including Charter Shares
issued as a result of the exercise of options under the Share Schemes.
The conditions and certain further terms of the Offer are set out in Appendix 1.
4. BACKGROUND TO AND STRATEGIC RATIONALE FOR THE OFFER
The acquisition of Charter represents a major step in line with Lincoln
Electric's corporate objectives of global growth and increased competitiveness
in the welding production industry. On a combined basis, the two companies had
total proforma sales of approximately USD 2537.4 million in 1999, USD 2,016.7
million in welding and cutting products and USD 520.7 million in air and gas
handling and other engineered products.
Welding and Cutting
The potential of the combination of Lincoln Electric's welding business with
Charter's ESAB welding business is the key rationale for the transaction; the
combined welding and cutting businesses will constitute a leading global welding
supplier as a result of Lincoln Electric and ESAB's complementary fit in
geography, products and technology.
Geography
For the year ended 31 December, 1999, 68.5 per cent. of Lincoln
Electric's revenues were generated from North America, 17.2 per cent.
from Europe and 14.3 per cent. from the rest of the world. The
combined welding and cutting businesses would be better balanced
geographically: 49.0 per cent. of 1999 proforma revenues would have
been achieved from North America, 35.9 per cent. from Europe and 15.1
per cent. from the rest of the world.
<PAGE> 6
6
The world-wide locations of the Lincoln Electric and ESAB manufacturing
facilities complement each other in nearly all regions. In Europe, ESAB
has extensive facilities in Scandinavia and the Eastern European
countries, areas where Lincoln Electric's presence is limited. In the
Western hemisphere Lincoln Electric has its main facilities in the USA,
Canada and Mexico, while ESAB has significant manufacturing facilities
in the two key South American markets of Brazil and Argentina.
In the Asia-Pacific region, the facilities of the combined welding and
cutting businesses would be able to serve all the major markets, with
the Lincoln Electric key operations in China, Taiwan and Australia and
ESAB's interests in South Korea and India.
Considered together the two businesses would have a combined
manufacturing and distribution presence able to serve all major welding
customers world-wide.
Products
The combined product programmes of the two welding and cutting
businesses would provide a more extensive product line to better serve
the total needs of customers. ESAB is a leader in large metal cutting
systems, a product area not now offered by Lincoln Electric. Lincoln
Electric manufactures the most complete welding machine line in the
world, which will now be available for supply by ESAB to its customers.
Lincoln Electric is a leader in the supply of welding robotics
equipment and systems, which will be able to take advantage of
complementary ESAB welding technology.
Technology
The technology and research and development strengths of the two
welding and cutting businesses are also highly complementary. ESAB has
a particularly strong welding research and development program in
speciality consumables and certain welding technologies, such as
friction stir welding. Lincoln Electric is a technology leader in
"state of the art" welding machines, with more than 50 per cent. of its
current equipment sales coming from equipment that has been introduced
in the last 5 years. Combined, the technology capabilities of the two
businesses represent the leading edge in all the aspects of welding
products, both consumables and machines.
Financial benefits
Lincoln Electric expects to achieve meaningful synergies and operating
efficiencies by integrating the two welding businesses. The benefits of
combined global purchasing, warehousing, logistics, and administration,
as well as large scale production efficiencies should provide immediate
cost saving opportunities. Synergies will also provide the potential
for reduced capital expenditure requirements. Equally important are the
opportunities to improve combined revenues as a result of offering
broadened product lines through the existing Lincoln Electric and ESAB
sales and distribution channels.
Air and Gas Handling
Lincoln Electric appreciates that there has been significant recent
restructuring in the Howden business and that there is underlying value in that
business. Howden is a leading global manufacturer of air and gas handling
equipment. It has significant experience of air and gas handling technology and
a comprehensive product portfolio.
<PAGE> 7
7
5. INFORMATION RELATING TO LINCOLN ELECTRIC
Lincoln Electric is a leading world-wide manufacturer of welding and cutting
products. Lincoln Electric's products include arc welding power sources, wire
feeding systems, robotic welding packages, fume extraction equipment, consumable
electrodes and fluxes. Lincoln Electric's products are sold in the United
States, Europe and other international markets. Approximately 70 per cent. of
Lincoln Electric's sales are into the United States. Lincoln Electric's
customers primarily comprise distributors and original equipment manufacturers
with a wide range of industrial applications, including the manufacturing of
automobiles, trucks, heavy machinery, railcars and ships and the construction of
buildings, bridges, oil platforms and pipelines. Lincoln Electric has 23
manufacturing facilities in 16 countries (3 of which are located in the United
States) and employs approximately 6,400 people world-wide.
For the financial year ended 31 December, 1999, Lincoln Electric's results under
US GAAP comprised consolidated net income before exceptional items of USD
73.9million (1998 USD 93.7million) on net revenues of USD 1,086.2million (1998
USD 1,186.7million). As at 31 December, 1999 Lincoln Electric had net assets of
USD 451.5million (1998 USD 490.9million) and net borrowings of USD 75.1million
(1998 USD 60.7million). Lincoln Electric's common stock is traded on NASDAQ with
a current equity market capitalisation of approximately USD 849 million.
6. INFORMATION RELATING TO CHARTER
Charter has two principal groupings of operating subsidiaries: ESAB and Howden.
ESAB is a leading world-wide manufacturer of welding and cutting products.
ESAB's welding products include welding power sources, cutting systems and
consumable electrodes and fluxes. ESAB's products are sold in the United States,
Europe and other international markets. Approximately 49 per cent. of ESAB's
sales are into Europe. ESAB has a number of manufacturing facilities with a
presence in over 30 countries worldwide and is represented in all major markets.
ESAB employs approximately 7,400 people world-wide.
Howden is one of the global market leaders in the manufacture of air and gas
handling equipment. Howden designs, manufactures and services industrial fans,
compressors and heat exchangers for customers across a wide range of industries
world-wide.
For the financial year ended 31 December, 1999 Charter's results under UK GAAP
comprised profit before interest and tax from continuing operations of GBP 61.9
million (1998 GBP 83.5 million) on net revenues from continuing operations of
GBP 896.9 million (1998 GBP 975.2 million). As at 31 December, 1999 Charter had
net assets of GBP 40.7 million (1998 net deficit of GBP 96.5 million) and net
borrowings of GBP 193.5 million (1998 GBP 357.1 million).
7. REGULATORY APPROVALS
The Offer is subject to regulatory approvals being obtained in the US and
certain European and other countries. Both Lincoln Electric and Charter are
committed to working together to obtain the necessary approvals, and Lincoln
Electric has given Charter certain assurances in relation to fulfilment of the
regulatory conditions to the Offer.
At the request of Lincoln Electric Global and Charter the Panel has agreed that
in view of the required regulatory process the period allowed for posting of the
Offer Document should be extended by 30 days until 23 June, 2000.
<PAGE> 8
8
Lincoln Electric Global has agreed that, in the event that the Offer were to
lapse as a result of Lincoln Electric Global invoking the regulatory conditions
as set out in Part A of Appendix 1 to this document, Lincoln Electric Global
will pay GBP 6 million in cash to Charter.
8. MANAGEMENT AND EMPLOYEES
Lincoln Electric attaches great importance to the skills and experience of the
existing management and employees of Charter and believes that as a result of
the acquisition there will be greater opportunities. Lincoln Electric Global has
given assurances to the Board of Charter that the existing rights of employees
of Charter, including pension rights, will be fully safeguarded.
9. FINANCING
The cash required by Lincoln Electric Global to satisfy the consideration
payable to Charter shareholders under the Offer will be provided from committed
bank facilities provided by Credit Suisse First Boston and JP Morgan.
10. GENERAL
The undertaking by UBS Brinson Limited representing approximately 15.4 per cent.
of the issued Charter Shares and the undertaking by Phillips & Drew Fund
Management Limited representing approximately 10.3 per cent. of the issued
Charter Shares will each be suspended if, within 7 days of the date of despatch
of the Offer Document, a third party makes a Higher Competing Offer to acquire
Charter. The undertaking by Sterling Investment Group Limited, representing
approximately 5.0 per cent. of the issued Charter Shares will be suspended if,
within 21 days of despatch of the Offer Document, a third party makes a Higher
Competing Offer to acquire Charter. For all of these undertakings, if, within 7
days of such Higher Competing Offer, Lincoln Electric Global raises its offer on
terms no less favourable than the Higher Competing Offer, the suspension will
end and the undertakings will become binding again. For the purposes of this
paragraph "Higher Competing Offer" means any higher offer made in respect of the
issued ordinary shares of Charter which is at the date of its announcement equal
to, or greater than, 550 pence per ordinary share.
Save in respect of those Charter Shares for which Lincoln Electric Global has
received irrevocable undertakings to accept the Offer, neither Lincoln Electric
Global, nor, so far as Lincoln Electric Global is aware, any person deemed to be
acting in concert with Lincoln Electric Global, owns or controls any Charter
Shares or has any option to acquire any Charter Shares or derivatives referenced
thereto.
The Offer will be on the terms and will be subject to the conditions which are
set out in Appendix 1 of this announcement and in the Offer Document (and such
further terms as may be required to comply with the provisions of the City
Code).
Charter has committed to make a payment of GBP 4.7 million in cash to Lincoln
Electric in the event that a third party offeror makes a bid for Charter which
becomes or is declared unconditional.
A copy of this announcement is being posted to Charter shareholders.
CSFB, the financial adviser to Lincoln Electric and Lincoln Electric Global,
will despatch the formal Offer Document, containing the full terms and
conditions of the Offer. The contents of this announcement do not constitute an
offer to acquire, or invitation to sell shares in Charter.
<PAGE> 9
9
The availability of the Offer to persons not resident in the United Kingdom may
be affected by the laws of the relevant jurisdictions. Persons who are not
resident in the United Kingdom should inform themselves about and observe any
applicable requirements.
The Offer will not be made, directly, or indirectly, in or into or by the use of
the mails or by any means or instrumentality (including, without limitation,
facsimile transmission, telex and telephone) of interstate or foreign commerce
of, or any facilities or a national securities exchange of Canada, Japan or
Australia. Copies of this announcement are not being, and must not be, mailed,
or otherwise distributed or sent in or into or from the United States, Canada,
Japan or Australia and persons receiving this announcement (including
custodians, nominees and trustees) must not distribute or send it into or from
the United States, Canada, Japan or Australia.
This announcement contains certain forward-looking statements with respect to
the financial condition, results of operations and the businesses of Lincoln
Electric and Charter, cost savings, dividends and management's plans and
objectives regarding Charter. These statements and forecasts involve risk and
uncertainty because they relate to events and depend on circumstances that will
occur in the future.
Such statements should not be interpreted to mean that earnings per share will
necessarily be greater than those for the relevant preceding financial period.
There are a number of factors that could cause actual results and developments
to differ materially from those expressed or implied by these forward-looking
statements and forecasts, such as ability to integrate the two welding
businesses and realise synergies and achieve cost savings, difficulties of
obtaining governmental approvals for new products, delays in new product
launches, exposure to fluctuations in exchange rates for foreign currencies, the
risk that research and development will not yield new products that achieve
commercial success, the risk of substantial product liability claims, exposure
to environmental liability, the impact of competition, price controls and price
reductions and inflation, adverse economic conditions, interruptions in
production, inability of the company to market existing and new products
effectively and the risk of loss or expiration of patents and trademarks.
The issue of this announcement by Lincoln Electric, Lincoln Electric Global and
Charter has been approved for the purposes of section 57 of the Financial
Services Act 1986 by CSFB and Lazard, each of which is regulated by The
Securities and Futures Authority Limited.
In this document unless otherwise stated GBP has been converted to USD at an
exchange rate of GBP1:USD1.618.
<PAGE> 10
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APPENDIX 1
CONDITIONS AND CERTAIN FURTHER TERMS OF THE OFFER
PART A: CONDITIONS OF THE OFFER
The Offer will be made in compliance with the applicable rules of the London
Stock Exchange and the City Code and is subject to the following conditions:
(a) valid acceptances being received (and not, where permitted, withdrawn)
by 3.00 p.m. on the first closing date of the Offer (the "FIRST CLOSING
DATE") or such later time(s) and/or date(s) as Lincoln Electric Global
may, subject to the Code, decide in respect of not less than 90 per
cent. (or such lesser percentage as Lincoln Electric Global may decide)
of the Charter Shares to which the Offer relates, provided that this
condition will not be satisfied unless Lincoln Electric and its
wholly-owned subsidiaries shall have acquired, or agreed to acquire,
pursuant to the Offer or otherwise, Charter shares carrying more than
50 per cent. of the voting rights normally exercisable at a general
meeting of Charter, including for this purpose (to the extent, if any,
required by the Panel) any voting rights attaching to any Charter
shares that are unconditionally allotted or issued before the Offer
becomes or is declared unconditional as to acceptances pursuant to the
exercise of any outstanding subscription or conversion rights or
otherwise and for the purposes of this condition: (i) shares which have
been unconditionally allotted shall be deemed to carry the voting
rights they will carry on issue; and (ii) the expression "CHARTER
SHARES TO WHICH THE OFFER RELATES" shall be construed in accordance
with sections 428 to 430F of the Companies Act 1985;
(b) it being established, in terms reasonably satisfactory to Lincoln
Electric Global, that the proposed acquisition of Charter by Lincoln
Electric Global or any matter arising from that acquisition will not be
referred to the Competition Commission;
(c) all filings having been made and all applicable waiting periods under
the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976
and the regulations thereunder having expired, lapsed or been
terminated as appropriate in each case in connection with the Offer and
the proposed acquisition of any shares in, or control of, Charter by
Lincoln Electric Global;
(d) all merger control or similar approvals, clearances or consents having
been obtained in any jurisdiction in which there is a requirement for
such approval, clearance or consent before the Offer and the proposed
acquisition of any shares in, or control of, Charter by Lincoln
Electric Global may be implemented or voting rights in respect of
Charter shares may be exercised by Lincoln Electric Global;
(e) no government or governmental, quasi-governmental, supranational,
statutory or regulatory body or association or agency (including any
trade agency) or any court or other body (including any professional or
environmental body) or person in any jurisdiction (a "THIRD PARTY")
having instituted or threatened any action, proceeding, suit,
investigation or enquiry or enacted, made or proposed and there not
continuing to be outstanding any statute, regulation, order or decision
that would or might be reasonably expected to:
<PAGE> 11
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(i) make the Offer or the acquisition of any Charter shares, or
control of Charter, by any member of the Wider Lincoln
Electric Group void, unenforceable or illegal or directly or
indirectly restrict, prohibit, delay or otherwise interfere
with the implementation of, or impose additional conditions or
obligations with respect to, or otherwise challenge, the Offer
or the acquisition of any Charter shares, or control of
Charter, by Lincoln Electric in a way which is material in the
context of the Offer;
(ii) require, prevent or delay the divestiture (or alter the terms
of any proposed divestiture) by the Wider Lincoln Electric
Group or the Wider Charter Group of all or any part of their
respective businesses, assets or properties or impose any
limitation on their ability to conduct their respective
businesses and to own any of their respective assets or
properties in each case to an extent which is material in the
context of the Wider Lincoln Electric Group taken as a whole
or (as the case may be) the Wider Charter Group taken as a
whole;
(iii) impose any limitation on the ability of any member of the
Wider Lincoln Electric Group to acquire or hold or to exercise
effectively, directly or indirectly, all or any rights of
ownership of shares in any member of the Wider Charter Group
or on the ability of any member of the Wider Charter Group to
hold or exercise effectively, directly or indirectly, all or
any rights of ownership of shares in any other member of the
Wider Charter Group in each case to an extent which is
material in the context of the Wider Lincoln Electric Group
taken as a whole or (as the case may be) the Wider Charter
Group taken as a whole;
(iv) require any member of the Wider Lincoln Electric Group or the
Wider Charter Group to offer to acquire any shares in any
member of the Wider Charter Group owned by any third party in
each case to an extent which is material in the context of the
Wider Lincoln Electric Group taken as a whole or (as the case
may be) the Wider Charter taken as a whole;
(v) otherwise adversely affect the business, profits or prospects
of any member of the Wider Lincoln Electric Group or of the
Wider Charter Group in each case to an extent which is
material in the context of the Wider Lincoln Electric Group
taken as a whole or (as the case may be) the Wider Charter
Group taken as a whole,
and all applicable waiting periods during which any such Third Party
could institute or threaten any such action, proceeding, suit,
investigation or enquiry having expired, lapsed or been terminated;
(f) all necessary filings having been made and all appropriate waiting
periods under any applicable legislation or regulations of any
jurisdiction having expired, lapsed or been terminated in each case in
respect of the Offer or the acquisition of any shares in, or control
of, Charter by Lincoln Electric Global or any member of the Wider
Lincoln Electric Group and all authorisations, orders, grants,
recognitions, confirmations, licences, consents, clearances,
permissions and approvals ("AUTHORISATIONS") necessary or appropriate
in any jurisdiction for or in respect of the Offer and the proposed
acquisition of any shares in, or control of, Charter by Lincoln
Electric Global being obtained in terms and in a form reasonably
satisfactory to Lincoln Electric Global from appropriate Third Parties
or from any persons or bodies with whom any member of the Wider Lincoln
Electric Group or the Wider Charter Group has entered into contractual
arrangements, in each case where absence of such
<PAGE> 12
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authorisations would have a material adverse effect on the Wider
Charter Group taken as a whole, and such authorisations together with
all authorisations necessary for any member of the Wider Charter Group
to carry on its business (where such business is material in the
context of the Wider Charter Group taken as a whole and where the
absence of such authorisations would have a material adverse affect on
the Wider Charter Group taken as a whole) remaining in full force and
effect and no intimation of any intention to revoke or not to renew any
of the same having been made under the laws or regulations of any
jurisdiction and all necessary statutory or regulatory obligations in
any jurisdiction having been complied with, and which, in each case, is
material in the context of the Wider Charter Group taken as a whole;
(g) save as fairly disclosed in writing since 1 January, 2000 and on or
before 24 April, 2000 by Charter and/or its advisers to Lincoln
Electric and/or its advisers in the context of the Offer there being no
provision of any arrangement, agreement, licence or other instrument to
which any member of the Wider Charter Group is a party or by or to
which any such member or any of their assets may be bound or be subject
which, as a result of the making or implementation of the Offer or the
acquisition by Lincoln Electric Global of the share capital of Charter
or any part thereof or because of a change in the control or management
of Charter would or might reasonably be expected to result in (to an
extent which is materially adverse in the context of the Wider Charter
Group taken as a whole):
(i) any moneys borrowed by or any indebtedness (actual or
contingent) of any such member becoming repayable or capable
of being declared repayable immediately or earlier than the
stated repayment date or the ability of such member to borrow
monies or incur any indebtedness being withdrawn or inhibited
or any such arrangement, agreement, licence or instrument
being terminated or modified or any onerous obligation arising
or any action being taken or arising thereunder;
(ii) the creation or enforcement of any mortgage, charge or other
security whether existing or having arisen over the whole or
any part of the business, property or assets of any such
member;
(iii) the interests or business of any such member in or with any
other person, firm or company (or any arrangements relating to
such interest or business) being terminated or adversely
affected;
(iv) any such member ceasing to be able to carry on business under
any name under which it presently does so;
(v) any material assets or interests of any such member being or
falling to be disposed of or charged or any right arising
under which any such asset or interest could be required to be
disposed of or charged otherwise than in the ordinary course
of business; or
(vi) the value of any such member or its financial or trading
position or prospects being prejudiced or adversely affected;
<PAGE> 13
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(h) save as fairly disclosed in writing since 1 January, 2000 by Charter
and/or its advisers to Lincoln Electric and/or its advisers in the
context of the Offer and on or before 24 April, 2000, and except as
disclosed in the Annual Report and Accounts of Charter for the year
ended 31 December, 1999 or as publicly announced to the London Stock
Exchange Company Announcements Office by or on behalf of Charter on or
before 24 April, 2000 no member of the Wider Charter Group having since
31 December, 1999:
(i) save as between Charter and wholly-owned subsidiaries of
Charter or upon the issue of options pursuant to or the
exercise of rights to subscribe for Charter shares pursuant to
options granted under the Charter Share Option Schemes, issued
or agreed to issue or authorised or proposed the issue of
additional shares of any class, or securities convertible
into, or rights, warrants or options to subscribe for or
acquire, any such shares or convertible securities;
(ii) save for the final dividend of 10.5p per share payable on 15
May, 2000, declared, paid or made or proposed to declare, pay
or make any bonus, dividend or other distribution whether
payable in cash or otherwise other than a distribution by any
wholly-owned subsidiary of Charter;
(iii) made, authorised or proposed or announced an intention to
propose any merger, demerger, acquisition, disposal or
transfer of assets (other than in the ordinary course of
business) or shares where any of the foregoing is material in
the context of the Wider Charter Group taken as a whole;
(iv) made, authorised or proposed or announced its intention to
propose any change in its share or loan capital;
(v) issued, authorised or proposed the issue of any debentures or
(save in the ordinary course of business) incurred any
indebtedness or contingent liability which is, in any case,
material in the context of the Wider Charter Group taken as a
whole;
(vi) entered into, varied or terminated, or authorised, proposed or
announced its intention to enter into, vary or terminate any
arrangement, contract or commitment (whether in respect of
capital expenditure or otherwise) otherwise than in the
ordinary course of business and which involves or could
involve an obligation of a nature or magnitude which is
material in the context of the Wider Charter Group;
(vii) entered into or varied the terms of any service agreement with
any director of Charter;
(viii) otherwise in the ordinary course of business, disposed of or
transferred, mortgaged or encumbered any assets or any right,
title or interest in any asset which is material in the
context of the Wider Charter Group taken as a whole or entered
into any contract, transaction, reconstruction, amalgamation
or arrangement otherwise than in the ordinary course of
business;
(ix) entered into any contract or other transaction otherwise than
in the ordinary course of business and which is material in
the context of the Wider Charter Group taken as a whole;
<PAGE> 14
14
(x) proposed any voluntary winding up or had any order made for
its winding-up (voluntary or otherwise), dissolution or
reorganisation or for the appointment of a receiver,
administrator, administrative receiver, trustee or similar
officer of all or a substantial part of its assets and
revenues;
(xi) waived or compromised any claim, which is material in the
context of the Wider Charter Group taken as a whole;
(xii) made or agreed or consented to any significant change to the
terms of the trust deeds constituting the pension schemes
established for its directors and/or employees and/or their
dependants or to the benefits which accrue, or to the pensions
which are payable thereunder, or to the basis on which
qualification for or accrual or entitlement to such benefits
or pensions are calculated or determined, or to the basis upon
which the liabilities (including pensions) of such pension
schemes are funded or made, or agreed or consented to, any
change to the trustees, in each case which is material in the
context of the wider Charter Group taken as a whole;
(xiii) entered into an agreement which will result in the restriction
of the scope of the business of the Wider Charter Group and
will have a material adverse affect on the Wider Charter Group
taken as a whole; or
(xiv) entered into any contract, commitment or agreement or passed
any resolution in general meeting with respect to any of the
transactions, matters or events referred to in this paragraph;
and for the purpose of this condition "MATERIAL" shall mean material in
the context of the Wider Charter Group taken as a whole;
(i) save as fairly disclosed in writing since 1 January, 2000 and on or
before 24 April, 2000 by Charter and/or its advisers to Lincoln
Electric and/or its advisers in the context of the Offer (or as
disclosed in the Annual Report and Accounts of Charter for the year
ended 31 December, 1999 or the Interim Financial Statements of Charter
for the six months ended 30 June, 1999 or as publicly announced to the
London Stock Exchange Company Announcements Office by or on behalf of
Charter on or before 24 April, 2000 since 31 December, 1999:
(i) no material adverse change in the business, financial or
trading position or profits or prospects of any member of the
Wider Charter Group having occurred which is materially
adverse in the context of the Wider Charter Group taken as a
whole;
(ii) no material litigation, arbitration proceedings, prosecution,
awards, judgements or other legal proceedings having been
threatened, announced, instituted or remaining outstanding by,
against or in respect of any member of the Wider Charter Group
or to which any member of the Wider Charter Group is a party
(whether as plaintiff or defendant or otherwise) and no
investigation by any Third Party or other investigative body
against or in respect of any member of the Wider Charter Group
having been threatened, announced, instituted or remaining
outstanding by, against or in respect of any member of the
Wider Charter Group which is likely to materially and
adversely affect the Wider Charter Group taken as a whole; and
<PAGE> 15
15
(iii) no contingent or other liability having arisen which might be
likely adversely to affect any member of the Wider Charter
Group which is materially adverse in the context of the Wider
Charter Group taken as a whole;
(j) Lincoln Electric Global not having discovered that:
(i) any financial, business or other information publicly
disclosed at any time by any member of the Wider Charter Group
is misleading, contains a misrepresentation of fact or omits
to state a fact necessary to make the information contained
therein not misleading which in any case is material and
adverse to the financial or trading position of the Wider
Charter Group taken as a whole;
(ii) any member of the Wider Charter Group is subject to any
liability, contingent or otherwise, which is not disclosed in
the Annual Report and Accounts of Charter for the year ended
31 December, 1999, or the Interim Financial Statements of
Charter for the six months ended 30 June, 1999 and which is
material in the context of the Wider Charter Group taken as a
whole;
(iii) any past or present member of the Wider Charter Group has not
complied with all applicable legislation or regulations of any
jurisdiction with regard to the disposal, discharge, spillage,
leak or emission of any waste or hazardous or harmful
substance or any substance likely to impair the environment or
harm human health or otherwise relating to environmental
matters, which non-compliance would be likely to give rise to
any liability (whether actual or contingent) or cost on the
part of any member of the Wider Charter Group which is
material in the context of the wider Charter Group taken as a
whole; or
(iv) there is or is likely to be any liability (whether actual or
contingent) to make good, repair, re-instate or clean up any
property now or previously owned, occupied or made use of by
any past or present member of the Wider Charter Group under
any environmental legislation, regulation, notice, circular or
order of any Third Party and which is material in the context
of the Wider Charter Group taken as a whole;
Lincoln Electric Global reserves the right to waive all or any of conditions (b)
to (j) inclusive, in whole or in part. The Offer will lapse unless all the above
conditions are fulfilled or (if capable of waiver) waived or, where appropriate,
determined by Lincoln Electric to have been or remain satisfied by midnight on
the day which is 21 days after the later of the First Closing Date and the date
on which the Offer becomes or is declared unconditional as to acceptances (or
such later date as Lincoln Electric Global may, with the consent of the Panel,
decide). Lincoln Electric shall be under no obligation to waive or treat as
fulfilled any of conditions (b) to (j) inclusive by a date earlier than the date
specified above for the fulfilment thereof notwithstanding that the other
conditions of the Offer may at such earlier date have been waived or fulfilled
and that there are at such earlier date no circumstances indicating that any of
such conditions may not be capable of fulfilment.
If Lincoln Electric Global is required by the Panel to make an offer or offers
for any Charter Shares under Rule 9 of the Code, Lincoln Electric Global may
make such alterations to the above conditions as are necessary to comply with
that Rule.
If before the First Closing Date or the date when the Offer becomes
unconditional as to acceptances (whichever is the later) the acquisition of
Charter is referred to the Competition Commission, the Offer will lapse.
<PAGE> 16
16
As used in this Part A:
"WIDER LINCOLN ELECTRIC GROUP" means Lincoln Electric and its
subsidiary undertakings, associated undertakings and any other
undertakings in which Lincoln Electric and such undertakings
(aggregating their interests) have a substantial interest;
"WIDER CHARTER GROUP" means Charter and its subsidiary undertakings,
associated undertakings and any other undertakings in which Charter and
such undertakings (aggregating their interests) have a substantial
interest; and
for these purposes "SUBSIDIARY UNDERTAKING", "ASSOCIATED UNDERTAKING"
and "UNDERTAKING" have the meanings given by the Companies Act 1985
(but for this purposes ignoring paragraph 20(1)(b) of Schedule 4A to
the Companies Act 1985) and "SUBSTANTIAL INTEREST" means a direct or
indirect interest in 20 per cent. or more of the equity capital of an
undertaking.
PART B: CERTAIN FURTHER TERMS OF THE OFFER
The Charter Shares will be acquired by Lincoln Electric Global fully paid and
free from all liens, equities, charges, encumbrances, rights of pre-emption and
any other third party right of any nature whatsoever and together with all
rights attaching thereto including the right to receive in full all dividends
and other distributions declared, paid or made other than the dividend of 10.5
pence (net) payable on 15 May, 2000.
The Offer is not being made, directly or indirectly, in or into the USA, Canada,
Australia or Japan, or by use of the mails of, or by any means or
instrumentality of interstate or foreign commerce of, or any facilities of a
national securities exchange of, any of these jurisdictions. Such means or
instrumentalities include, but are not limited to, facsimile transmission, telex
and telephone. Accordingly, copies of this announcement are not being, and must
not be, mailed or otherwise distributed or sent in or into the USA, Canada,
Australia or Japan.
<PAGE> 17
17
APPENDIX 2
DEFINITIONS
The following definitions apply throughout this press release unless the context
requires otherwise.
Lincoln Electric Lincoln Electric Holdings, Inc.
Lincoln Electric Global Lincoln Electric Global Limited
Board of Charter The board of directors of Charter
"City Code" or "Code" The City Code on Takeovers and Mergers
CSFB Credit Suisse First Boston (Europe) Limited,
financial adviser to Lincoln Electric
Charter Charter plc
Charter shareholders Holders of Charter Shares
Charter Shares Ordinary shares of two pence each in the capital
of Charter
Lazard Lazard Brothers & Co., Limited, financial adviser
to Charter
Offer The recommended offer to be made by CSFB, on
behalf of Lincoln Electric Global, to acquire all
of the Charter Shares on the terms and subject to
the conditions set out or referred to in the Offer
Document, including, where the context so
requires, any subsequent revision, variation,
extension or renewal thereof
Offer Document The offer document to be addressed to Charter
shareholders in connection with the Offer
Panel The Panel on Takeovers and Mergers
Share Schemes Charter plc Equity Partnership Plan;
Charter plc Unapproved Executive Share Option
Scheme; Charter plc Approved Executive Share
Option Scheme; Charter Consolidated PLC Share
Option Scheme 1983; Charter plc 1994 Employee
Share Participation Plan and Charter plc 2000
Annual Incentive Scheme.
<PAGE> 1
Exhibit 3(b)
Amended May 2, 2000
LINCOLN ELECTRIC HOLDINGS, INC.
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.
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
<PAGE> 2
special meeting, in which case and for which purpose the Annual Meeting shall
also be considered as, and shall be, a special meeting. When an Annual Meeting
is not held or Directors are not elected thereat, they may be elected at a
special meeting called for that purpose.
2. SPECIAL MEETINGS. Special meetings of the shareholders may be called by
the President, or an Executive or Senior Vice-President, or the Chairman of the
Board of Directors, or by the Executive Committee, or by a majority of the Board
of Directors, acting with or without a meeting, or by persons who hold
twenty-five percent of all the shares outstanding and entitled to vote thereat,
at such place or places as may be designated in the call therefore, and notice
thereof; provided, however, that a meeting for the election of Directors may be
held only within the State of Ohio.
3. NOTICE OF MEETINGS. Notice of meetings of shareholders shall be given 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 given 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. Notice
may be given 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 assent of every shareholder
entitled to notice, filed with or entered upon the records of the meeting,
either before or after the holding thereof.
4. 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.
5. 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.
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<PAGE> 3
ARTICLE III
BOARD OF DIRECTORS
1. NUMBER AND ELECTION. The powers and authority of the Corporation shall
be exercised and its business managed and controlled by a Board of Directors.
The election of Directors shall be by ballot and shall be held at the Annual
Meeting of shareholders or at a special meeting called for that purpose. The
maximum number of the Directors of the Corporation shall be eighteen. Subject to
such maximum, the number of Directors may be fixed or changed (a) at a meeting
of the shareholders called for the purpose of electing Directors at which a
quorum is present, by the affirmative vote of the holders of a majority of the
shares that are represented at the meeting and entitled to vote on the proposal,
and (b) by the Directors, by the vote of a majority of their number, who may
also fill any Director's office that is created by an increase in the number of
Directors. The Directors shall be divided into three classes, as nearly equal in
number as possible, as determined by the Board of Directors of the Corporation.
A separate election shall be held for each class of Directors as hereinafter
provided. Directors elected at the first election for the first class shall hold
office for the term of one year from the date of their election and until the
election of their successors. Directors elected at the first election for the
second class shall hold office for the term of two years from the date of their
election and until the election of their successors, and Directors elected at
the first election for the third class shall hold office for the term of three
years from the date of their election and until the election of their
successors. At each annual election, the successors to the Directors of each
class whose terms shall expire in that year shall be elected to hold office for
the term of three years from the date of their election and until the election
of their successors. In case of any increase in the number of Directors of any
class, any additional Directors elected to such class shall hold office for a
term which shall coincide with the term of such class.
2. VACANCY AND REMOVAL. All Directors, for whatever terms elected, shall
hold office subject to applicable statutory provisions as to the creation of
vacancies and removal; provided, however, that all Directors, all the Directors
of a particular class or any individual Director may be removed from office,
without assigning any cause, only by the affirmative vote of the holders of at
least two-thirds of the voting power of the outstanding shares of stock entitled
to vote generally on the election of Directors.
3. RESIGNATION. Any Director may resign at any time. Such resignation shall
be made in writing and shall take effect at the time specified therein. If no
time is specified, it shall become effective from the time of its receipt by the
Corporation, and the Secretary shall record such resignation, noting the day,
hour and minute of its reception. The acceptance of a resignation shall not be
necessary to make it effective.
4. MEETINGS. Directors may meet at such times and at such places within or
without the State of Ohio as they may determine. Special meetings of the Board
of Directors may be called by the Chairman of the Board of Directors or the
President on
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<PAGE> 4
one day's notice to each Director by whom such notice is not waived, given
either personally or by mail, telephone, telegram, telex, facsimile or similar
medium of communication, and will be called by the Chairman of the Board of
Directors or the President, in like manner and on like notice, on the written
request of not less than one-third of the Board of Directors. A majority of the
Board of Directors shall be necessary to constitute a quorum for the transaction
of business, and the act of a majority of Directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors.
5. BY-LAWS. The Board of Directors may adopt By-Laws for its own government
not inconsistent with the Articles of Incorporation or Regulations of the
Corporation.
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 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
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<PAGE> 5
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
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 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
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<PAGE> 6
designate a substitute nominee upon delivery, not fewer than five days prior to
the date of the meeting for the election of such nominee of a written notice to
the Secretary setting forth such information regarding such substitute nominee
as would have been required to be delivered to the Secretary pursuant to
paragraph 1 above had such substitute nominee been initially proposed as a
nominee. Such notice shall include a signed consent to serve as a Director of
the Corporation, if elected, of each such substitute nominee.
3. COMPLIANCE WITH PROCEDURES. If the chairman of the meeting for the
election of Directors determines that a nomination of any candidate for election
as a Director at such meeting was not made in accordance with the applicable
provisions of paragraphs 1 and 2 above, such nomination shall be void.
ARTICLE VI
COMMITTEES
1. CREATION AND ELECTION. The Board of Directors may create, from time to
time and from its own number, an Executive Committee or any other committee or
committees of the Board of Directors to act in the intervals between meetings of
the Board of Directors and may delegate to such committee or committees any of
the authority of the Board of Directors other than that of filling vacancies
among the Board of Directors or in any committee of the Board of Directors.
Committees shall consist of one or more Directors as appointed by the Board of
Directors. The Board of Directors may appoint one or more Directors as alternate
members of any such committee, who may take the place of any absent member or
members at a meeting of such committee. Except as above provided and except to
the extent that its powers are limited by the Directors, the Executive Committee
during the intervals between meetings of the Directors shall possess and may
exercise, subject to the control and direction of the Directors, all of the
powers of the Directors in the management and control of the business of the
Corporation, regardless of whether such powers are specifically conferred by
these Regulations. All action taken by the Executive Committee shall be reported
to the Directors at their first meeting thereafter.
2. QUORUM AND ACTION. Unless otherwise ordered by the Board of Directors, a
majority of the members of any committee appointed by the Board of Directors
pursuant to this 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.
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<PAGE> 7
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
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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<PAGE> 1
Exhibit 10(p)
Adopted May 2, 2000
LINCOLN ELECTRIC HOLDINGS, INC.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSES. The purposes of this Plan are to: (i) encourage the
non-employee Directors of Lincoln Electric Holdings, Inc. (the "Company") to own
shares of the Company and thereby to align their interests more closely with the
interests of the Company's other shareholders; (ii) encourage the highest level
of Director performance by providing the Directors with a vested interest in the
Company's attainment of its financial goals; and (iii) provide financial
incentives that will help attract and retain the most qualified non-employee
Directors.
2. DEFINITIONS. As used in this Plan:
"BOARD" means the Board of Directors of the Company.
"CHANGE IN CONTROL" shall have the meaning defined in the
agreement or notification evidencing the grant of an Option.
"COMMITTEE" means the Committee described in Section 4 of the
Plan.
"COMMON SHARES" means (i) shares of the Company's common stock,
without par value, and (ii) any securities into which common shares may be
converted by reason of any transaction or event described in Section 7 of the
Plan.
"DATE OF GRANT" means the date as of which an Option is granted as
provided in Section 5 of the Plan.
"DIRECTOR" means a member of the Board.
"DISABILITY" means permanent and total disability as determined
under the Company's long-term disability program.
"EFFECTIVE DATE." This Plan shall be effective immediately;
provided, however, that the effectiveness of the Plan is conditioned upon its
approval by the Company's shareholders at a meeting held in accordance with Ohio
law within 12 months after the date the Plan is adopted by the Board. Any awards
made under the Plan prior to shareholder approval shall be null and void if the
Plan is not approved by shareholders within a 12-month period.
"ELIGIBLE DIRECTOR" means a Director who is not an employee of the
Company. For purposes of the Plan, an employee is an individual whose wages are
subject to the withholding of Federal income tax under Sections 3401 and 3402 of
the Internal Revenue Code.
"FAIR MARKET VALUE" means the closing price of a share of the
Company's common stock on The NASDAQ Stock Market on the day before the day the
value determination is being made, whether for an Option grant or exercise; or
if there was no closing price reported on that day, then the reported closing
price on the nearest date before the date of grant or exercise; or if the shares
are not listed or admitted to trading on The NASDAQ Stock Market on the day as
of which the determination is being made, the amount determined by the Committee
to be the Fair Market Value of a share on that day.
<PAGE> 2
"NEWLY ELIGIBLE DIRECTOR" means a Director whose first term as a
Director begins after December 31, 1999.
"OPTIONEE" means a Director who has been granted an Option under
the Plan.
"OPTION PRICE" means the purchase price payable upon the exercise
of an Option.
"OPTION" means the right to purchase Common Shares of the Company
upon the exercise of an initial Option or an annual Option granted pursuant to
the Plan. Options may be evidenced by agreements or notifications, in written or
electronic form, containing terms and conditions not inconsistent with the Plan.
"PLAN" means the Lincoln Electric Holdings, Inc. Stock Option Plan
for Non-Employee Directors, as amended from time to time.
"RETIREMENT" means a Termination of Service as a Director
occurring as a result of the Optionee's completion of his or her three-year term
of service as a Director of the Company.
"TERMINATION OF SERVICE" means the time at which the Optionee
ceases to serve as a Director for any reason, with or without cause, which
includes termination by resignation, removal, death or retirement.
3. SHARES AVAILABLE UNDER THE PLAN.
(a) Subject to adjustments as provided in Sections 3(b) and 7 of
the Plan, the total number of Common Shares that may be issued and the Options
granted pursuant to the Plan shall not exceed 500,000. These shares may be
treasury shares or shares of original issue or a combination of both.
Notwithstanding any other provision of the Plan to the contrary, if the number
of Common Shares authorized under the Plan is insufficient for all Options to be
granted automatically on a specific date, Options shall be granted pro rata
among all Eligible Directors entitled to be granted an Option on that date. In
connection with the issuance or transfer of Common Shares pursuant to the Plan,
the Company may repurchase Common Shares in the open market or otherwise.
(b) In the event that any Option granted under the Plan shall
terminate prior to its exercise, the underlying Common Shares shall again be
available for the grant of Options without again being charged against the
maximum share limitation set forth in Section 3(a) of the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) This Plan shall be administered by the Nominating and
Corporate Governance Committee of the Board (the "Committee"). The members of
the Committee shall be "non-employee directors" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934 (or any successor rule) as in effect
from time to time. A majority of the Committee members shall constitute a
quorum, and any action taken by a majority of the members present at any
Committee meeting at which a quorum is present, or any actions of the Committee
that are unanimously approved by the members in writing, shall be acts of the
Committee. The Committee shall have full authority, discretion and power to
determine the terms and conditions of Options to be granted pursuant to the
Plan, the number of Common Shares to be issued
-2-
<PAGE> 3
under the Plan, and the duration and nature of the Options, consistent with the
provisions of the Plan.
(b) Subject to Section 9 of the Plan, the interpretation and
construction by the Committee of any provision of the Plan or any agreement or
notification evidencing the grant of Options, and any determination by the
Committee pursuant to any provision of the Plan or any agreement or
notification, shall be final and conclusive. No Committee member shall be liable
for any action taken or determination made in good faith.
5. OPTION AWARDS. The Committee may, from time to time and upon such
terms and conditions as it may determine, authorize the granting of Options to
Eligible Directors and may fix the number of Common Shares to be covered by each
Option. The Option Price of each Option shall be equal to the Fair Market Value
of the Common Shares on the Date of Grant, unless the Committee shall specify a
higher Option Price. No Option shall be exercisable more than 10 years from the
Date of Grant. Unless otherwise determined by the Committee, the following
awards shall be made automatically under the Plan, without further action of the
Committee, except as hereinafter specifically provided:
(a) An initial Option to purchase 6,000 Common Shares shall be
granted to each Newly Eligible Director upon his or her election to the Board.
(b) An Option to purchase 2,000 Common Shares shall be granted
after each annual meeting of the Company's shareholders, and before the end of
that calendar year, to each Eligible Director serving as a Director on the Date
of Grant. The Date of Grant shall be the last business day in November, unless
the Committee specifies a different date.
6. TERMS AND CONDITIONS OF THE OPTIONS. In addition to the terms
specified pursuant to Section 5 of the Plan, unless otherwise determined by the
Committee, all Options granted under the Plan shall have the following terms and
conditions:
(a) Each Option, until terminated as provided in Section 6(e) of
the Plan, shall become exercisable to the extent of 100% of the underlying
Common Shares when the Optionee has continuously served as a Director for one
year from the Date of Grant. If an Optionee ceases to be a Director by reason of
death, Disability or Retirement, or upon a Change in Control of the Company, all
Options held by that Optionee shall become immediately exercisable in full.
(b) An Optionee may exercise an Option in whole or in part at any
time and from time to time during the period within which an Option may be
exercised. To exercise an Option, an Optionee shall give notice to the Company
in either written or electronic form, specifying the number of Common Shares to
be purchased and provide payment of the Option Price and any other documentation
that may be required by the Company.
(c) The Option Price shall be payable (i) in cash or by other
consideration acceptable to the Company, (ii) at the discretion of the
Committee, by the actual or constructive transfer to the Company of Common
Shares owned by the Optionee for at least six months, having a Fair Market Value
at the time of exercise equal to the Option Price, or (iii) by a combination of
both methods of payment.
-3-
<PAGE> 4
(d) Any grant may provide for deferred payment of the Option Price
from the proceeds of sale through a broker on a date satisfactory to the Company
of some or all of the Common Shares to which the exercise relates.
(e) Each Option shall terminate on the earliest to occur of the
following dates:
(i) The date on which the Optionee ceases to be a Director,
unless the Optionee ceases to be a Director after completion of one
year of continuous service as a Director, on account of death,
Disability or Retirement, or following a Change in Control of the
Company;
(ii) One year after the death of the Optionee;
(iii) Three years after the Optionee's Termination of
Service becomes effective; provided, however, that this Section
6(e)(iii) shall only apply where (x) the Termination of Service occurs
after the Optionee has served continuously as a Director for less than
six years and (y) the Termination of Service does not occur following a
Change in Control of the Company; or
(iv) Ten years from the Date of Grant.
(f) An Optionee shall be treated for all purposes as the owner of
record of the number of Common Shares purchased pursuant to the exercise of the
Option (in whole or in part) as of the date the conditions set forth in Section
6(b) of the Plan are satisfied. Upon the effective exercise of an Option (in
whole or in part), the Company shall deliver to the Optionee the number of
Common Shares for which the Option is exercised, adjusted for any Common Shares
sold or withheld in connection with the exercise.
(g) Except as otherwise determined by the Committee, no Option
shall be transferable other than by will or the laws of descent and
distribution, or pursuant to a qualified domestic relations order, and each
Option may be exercised, during an Optionee's lifetime, only by the Optionee or,
in the event of the Optionee's incapacity, including incapacity arising from a
Disability, by the Optionee's guardian or legal representative acting in a
fiduciary capacity.
(h) The Committee may permit Optionees to elect, or may require
Optionees, to defer the issuance of Common Shares under the Plan pursuant to the
rules, procedures or programs as it may establish for purposes of the Plan. The
Committee also may provide that deferred issuances and settlements include the
payment or crediting of dividend equivalents or interest on the deferral
amounts.
(i) On receipt of written or electronic notice to exercise, the
Committee may, in its sole discretion, elect to cash out all or part of the
portion of the Option(s) to be exercised by paying the Optionee an amount, in
cash or Common Shares, equal to the excess of the Fair Market Value of the
Common Shares over the Option Price on the effective date of the cash-out.
-4-
<PAGE> 5
7. ADJUSTMENTS. The Committee, in good faith, shall make or provide for
adjustments in the number of Common Shares covered by outstanding Options and
the Option Price per Common Share applicable to any Options determined to be
equitably required in order to prevent dilution or enlargement of the rights of
Optionees that otherwise would result from (i) any stock dividend, stock split,
combination of shares, recapitalization or other change in the capital structure
of the Company, or (ii) any merger, consolidation, separation, reorganization,
partial or complete liquidation or other distribution of assets, issuance of
warrants or other rights to purchase securities or any other corporate
transaction or event having an effect similar to any of the foregoing. Moreover,
in the event of any such transaction or event, the Committee, in its discretion,
may provide in substitution for any and all outstanding Options under the Plan
such alternative consideration as it, in good faith, may determine to be
equitable in the circumstances and may require in that connection the surrender
of all Options so replaced. The Committee, in good faith, may also make or
provide for adjustments in the number of Common Shares specified in Sections 3
and 5 of the Plan determined to be appropriate in order to reflect any
transaction or event described in this Section 7.
8. FRACTIONAL SHARES. The Company shall not be required to issue any
fractional Common Shares pursuant to the Plan. Whenever a fractional Common
Share would otherwise be required to be issued, an amount in lieu thereof shall
be paid in cash, based upon the Fair Market Value of the fractional Common
Share.
9. AMENDMENTS AND OTHER MATTERS. This Plan may be amended from time to
time by the Committee; provided, however, that any amendment which must be
approved by the Company's shareholders in order to comply with (i) Federal
securities laws, (ii) other legal or regulatory requirements or (iii) the rules
of The NASDAQ Stock Market, or if the Common Shares are not quoted on NASDAQ,
the principal securities exchange upon which the Shares are traded or quoted,
shall not be effective unless and until shareholder approval has been obtained.
Presentation of the Plan or any amendment for shareholder approval shall not be
construed to limit the Company's authority to offer similar or dissimilar
benefits under other plans without shareholder approval. Furthermore, no
amendment, alteration or discontinuation of this Plan shall be made which would
impair the rights of an Optionee with respect to any outstanding Option under
the Plan without the Optionee's consent, or which, without approval of the
Company's shareholders would, except as expressly provided in the Plan, increase
the total number of Shares reserved for the Plan or extend the maximum Option
period applicable under the Plan.
The Company shall have the right to require, prior to the delivery of
Common Shares upon exercise of an Option, payment of any taxes required by law
to be withheld with respect to the exercise.
10. NO ADDITIONAL RIGHTS. Nothing contained in the Plan or in any
Option granted under the Plan shall confer upon any Director any right to
continue in the service of the Company.
11. GOVERNING LAW. The Plan and all Options granted and actions taken
hereunder shall be governed by and construed in accordance with the internal
substantive laws of the State of Ohio.
-5-
<PAGE> 6
12. DURATION. No Option shall be granted pursuant to the Plan on or
after the 10th anniversary of the Effective Date, but awards granted prior to
the 10th anniversary may extend beyond that.
-6-
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