Form of Stock Option Agreement for Executive Officers
Lincoln Electric Holdings, Inc.
2015 equity AND incentive compensation plan
Stock Option Agreement
WHEREAS, Lincoln Electric Holdings, Inc. maintains the Company’s 2015 Equity and Incentive Compensation Plan, as may be amended from time to time (the “Plan”), pursuant to which the Company may grant Option Rights to officers and certain key employees of the Company and its Subsidiaries (as defined in the Plan);
WHEREAS, the Optionee, whose name is set forth on the “Dashboard” tab on the Morgan Stanley StockPlan Connect portal, a secure third-party vendor website used by the Company (to be referred to herein as the “Grant Summary”), is an employee of the Company or one of its Subsidiaries; and
WHEREAS, the Optionee was granted an Option Right under the Plan by the Compensation and Executive Development Committee (the “Committee”) of the Board of Directors (the “Board”) of the Company on the Date of Grant in 2022 as set forth on the Grant Summary (the “Date of Grant”), and the Evidence of Award in the form hereof (the “Agreement”) has been authorized by a resolution of the Committee duly adopted on such date.
NOW, THEREFORE, pursuant to the Plan and subject to the terms and conditions thereof and the terms and conditions hereinafter set forth, the Company hereby confirms to the Optionee the grant of an Option Right (“Option”) to purchase the number of Common Shares of the Company set forth on the Grant Summary, at the exercise price per Common Share set forth on the Grant Summary, which exercise price is the closing price of a Common Share as reported on the NASDAQ Global Market on the Date of Grant (the “Option Price”).
|(i)||by certified or bank check or other cash equivalent acceptable to the Company;|
|(ii)||by transfer to the Company of nonforfeitable, unrestricted Common Shares of the Company that have been owned by the Optionee for at least six (6) months prior to the date of exercise;|
|(iii)||pursuant to a net exercise arrangement as described in the Plan; or|
|(iv)||by any combination of these methods.|
Nonforfeitable, unrestricted Common Shares that are transferred by the Optionee or Common Shares that are withheld in payment of all or any part of the Option Price shall be valued on the basis of their Market Value per Share on the date of exercise.
Notwithstanding anything in this Agreement to the contrary, unless otherwise determined by the Company, if the Optionee, either during employment by the Company or a Subsidiary or within six (6) months after termination of such employment, (i) shall become an employee of a competitor of the Company or a Subsidiary or (ii) shall engage in any other conduct that is competitive with the Company or a Subsidiary, in each case as reasonably determined by the Company (“Competition”), then the Option shall terminate automatically and without further notice at the time of such Company determination. In addition, if the Company shall so determine, the Optionee shall, promptly upon notice of such determination, (x) return to the Company, in exchange for payment by the Company of the Option Price paid therefor, all the Common Shares that the Optionee has not disposed of that were purchased pursuant to this Agreement within a period of one (1) year prior to the date of the commencement of such Competition, and (y) with respect to any Common Shares so purchased that the Optionee has disposed of, pay to the Company in cash the difference between (i) the Option Price and (ii) the Market Value per Share of the Common Shares on the date of exercise, in each case as reasonably determined by the Company. To the extent that such amounts are not promptly paid to the Company, the Company may set off the amounts so payable to it against any amounts (other than amounts of non-qualified deferred compensation as so defined under Section 409A of the Code) that may be owing from time to time by the Company or a Subsidiary to the Optionee, whether as wages or vacation pay or in the form of any other benefit or for any other reason.
The Optionee hereby acknowledges receipt of this Agreement and accepts the right to receive the Options evidenced hereby subject to the terms and conditions of the Plan and the terms and conditions herein above set forth and represents that the Optionee understands the acceptance of this Agreement through an on-line or electronic system, if applicable, carries the same legal significance as if the Optionee manually signed this Agreement.
THIS AGREEMENT is executed by the Company on the Date of Grant.
LINCOLN ELECTRIC HOLDINGS, INC.
Christopher L. Mapes
President and Chief Executive Officer
For purposes of this Agreement, the following terms shall have the following meanings:
|1.||“Cause”: For an Optionee who is a party to a Severance Agreement, a termination for “Cause” (or similar term) shall have the meaning set forth in such agreement. For all other Optionees, a termination for “Cause” shall mean that, prior to termination of employment, the Optionee shall have:|
|(a)||committed a criminal violation involving fraud, embezzlement or theft in connection with the Optionee’s duties or in the course of the Optionee’s employment with the Company or any Subsidiary;|
|(b)||committed an intentional violation of the Lincoln Electric Code of Corporate Conduct and Ethics, or any successor document, in effect at the relevant time;|
|(c)||committed intentional wrongful damage to property of the Company or any Subsidiary;|
|(d)||committed intentional wrongful disclosure of secret processes or confidential information of the Company or any Subsidiary; or|
|(e)||committed intentional wrongful engagement in any of the activities set forth in any confidentiality, non-competition or non-solicitation arrangement with the Company to which the Optionee is a party;|
and, in each case, any such act shall have been demonstrably and materially harmful (including financially or reputationally harmful) to the Company. For purposes of this Agreement, no act or failure to act on the part of the Optionee will be deemed “intentional” if it was due primarily to an error in judgment or negligence, but will be deemed “intentional” only if done or omitted to be done by the Optionee not in good faith and without reasonable belief that the Optionee’s action or omission was in the best interest of the Company.
|2.||“Disabled” means that the Optionee is disabled within the meaning of, and begins actually to receive disability benefits pursuant to, the long-term disability plan in effect for, or applicable to, the Optionee at the relevant time. In the event that the Company does not maintain a long-term disability plan at any relevant time, the Committee shall determine, in its sole discretion, that an Optionee is “Disabled” if the Optionee meets one of the following requirements: (a) the Optionee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, (b) the Optionee is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under the Company’s accident and health or long-term disability plan or any similar plan maintained by a third party, but excluding governmental plans, or (c) the Social Security Administration determines the Optionee to be totally disabled.|
|3.||“Good Reason”: For an Optionee who is a party to a Severance Agreement, a termination “for Good Reason” (or similar term) shall have the meaning set forth in such agreement. For all other Optionees, “for Good Reason” shall mean the Optionee’s termination of employment with the Company as a result of the initial occurrence, without the Optionee’s consent, of one or more of the following events:|
|(a)||A material diminution in the Optionee’s base compensation;|
|(b)||A material diminution in the Optionee’s authority, duties, or responsibilities;|
|(c)||A material reduction in the Optionee’s opportunity regarding annual bonus, incentive or other payment of compensation, in addition to base compensation, made or to be made in regard to services rendered in any year or other period pursuant to any bonus, incentive, profit-sharing, performance, discretionary pay or similar agreement, policy, plan, program or arrangement (whether or not funded) of the Company;|
|(d)||A material change in the geographic location at which the Optionee must perform the services, which adds fifty (50) miles or more to the Optionee’s one-way daily commute; and|
|(e)||Any other action or inaction that constitutes a material breach by the Company of the Optionee’s employment agreement, if any, under which the Optionee provides services, or Optionee’s Severance Agreement, if any.|
Notwithstanding the foregoing, a termination of employment by the Optionee for one of the reasons set forth in clauses (a) through (e) above will not constitute “Good Reason” unless the Optionee provides, within 90 days of the initial occurrence of such condition or conditions, written notice to the Optionee’s employer of the existence of such condition or conditions and the Optionee’s employer has not remedied such condition or conditions within 30 days of the receipt of such notice.
|4.||“Incumbent Directors”: For purposes of applying the definition of Change in Control in the Plan, “Incumbent Directors” means the individuals who, as of the Effective Date, are Directors and any individual becoming a Director subsequent to the Effective Date whose election, nomination for election by the Company’s shareholders, or appointment, was approved by a vote of at least two-thirds of the then Incumbent Directors (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination); provided, however, that an individual will not be an Incumbent Director if such individual’s election or appointment to the Board occurs as a result of (including the settlement of) an actual or threatened election contest (as described in Rule 14a-12(c) of the Exchange Act) with respect to the election or removal of Directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board.|
|5.||“Replacement Award” means an award: (a) of the same type (time-based stock option) as the Replaced Award; (b) that has a value at least equal to the value of the Replaced Award; (c) that relates to publicly traded equity securities of the Company or another entity that is affiliated with the Company following a Change in Control; (d) if the Optionee holding the Replaced Award is subject to U.S. federal income tax under the|
|Code, the tax consequences of which to such Optionee under the Code are not less favorable to such Optionee than the tax consequences of the Replaced Award; and (e) the other terms and conditions of which are not less favorable to the Optionee holding the Replaced Award than the terms and conditions of the Replaced Award (including the provisions that would apply in the event of a subsequent Change in Control). A Replacement Award may be granted only to the extent it does not result in the Replaced Award or Replacement Award failing to comply with or be exempt from Section 409A of the Code. Without limiting the generality of the foregoing, the Replacement Award may take the form of a continuation of the Replaced Award if the requirements of the two preceding sentences are satisfied. The determination of whether the conditions of this Exhibit A, Section 5 are satisfied will be made by the Committee, as constituted immediately before the Change in Control, in its sole discretion.|