Document:

Exhibit 10.2

 

Exhibit 10.2

SHARE PURCHASE AGREEMENT

BY AND AMONG

LINCOLN ELECTRIC HOLDINGS, INC.

AND ALL OF THE

SHAREHOLDERS OF

J.W. HARRIS CO., INC.,

AUTOBRAZE, INC., AND

HARRIS-EURO CORP.

IDENTIFIED HEREIN

April 29, 2005

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	ARTICLE I.	 	PURCHASE AND SALE	 	 	1	 
	 
	 	 	 	 	 	 	 	 
	 
	 	1.1	 	Purchase and Sale of Shares	 	 	1	 
	 
	 	 	 	 	 	 	 	 
	 
	 	1.2	 	Purchase Price	 	 	2	 
	 
	 	 	 	 	 	 	 	 
	 
	 	1.3	 	Closing	 	 	3	 
	 
	 	 	 	 	 	 	 	 
	 
	 	1.4	 	Post-Closing Purchase Price Adjustment	 	 	4	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE II.	 	REPRESENTATIONS AND WARRANTIES OF LINCOLN ELECTRIC	 	 	6	 
	 
	 	 	 	 	 	 	 	 
	 
	 	2.1	 	Organization and Standing	 	 	6	 
	 
	 	 	 	 	 	 	 	 
	 
	 	2.2	 	Authority	 	 	6	 
	 
	 	 	 	 	 	 	 	 
	 
	 	2.3	 	Conflicts, Consents and Approval	 	 	7	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE III.	 	REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL SHAREHOLDERS	 	 	7	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.1	 	Organization and Standing	 	 	7	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.2	 	Subsidiaries	 	 	8	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.3	 	Authority	 	 	10	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.4	 	Capitalization of the Companies	 	 	10	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.5	 	Conflicts, Consents and Approvals	 	 	12	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.6	 	Absence of Certain Changes	 	 	12	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.7	 	Financial Statements	 	 	14	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.8	 	Undisclosed Liabilities	 	 	15	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.9	 	Taxes	 	 	15	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.10	 	Compliance with Law; Permits; Ethical Practices	 	 	18	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.11	 	Intellectual Property	 	 	19	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.12	 	Title to and Condition of Properties	 	 	21	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.13	 	Environmental Matters	 	 	22	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.14	 	Litigation	 	 	23	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.15	 	Brokerage and Finder’s Fees	 	 	24	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.16	 	Employee Benefit Matters	 	 	24	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.17	 	Officers, Employees and Compensation	 	 	28	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.18	 	Contracts	 	 	29	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.19	 	Accounts Receivable; Inventories	 	 	30	 

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	 	 	 	 	 	 	Page	 
	 
	 	3.20	 	Labor Matters	 	 	31	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.21	 	Operation of the Companies’ Business; Relationships	 	 	31	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.22	 	Product Warranties and Liabilities	 	 	31	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.23	 	Insurance	 	 	32	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.24	 	Books of Account; Records; Bank Accounts	 	 	32	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.25	 	Disclosures	 	 	33	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IIIA.	 	REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS	 	 	33	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3A.1	 	Authority	 	 	33	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3A.2	 	Capitalization; Title to Shares	 	 	34	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3A.3	 	Conflicts, Consents and Approvals	 	 	34	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3A.4	 	Shareholder Indebtedness	 	 	34	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IV.	 	COVENANTS OF THE PARTIES	 	 	34	 
	 
	 	 	 	 	 	 	 	 
	 
	 	4.1	 	Public Announcements	 	 	34	 
	 
	 	 	 	 	 	 	 	 
	 
	 	4.2	 	Certain Tax Matters	 	 	34	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE V.	 	CONDITIONS	 	 	36	 
	 
	 	 	 	 	 	 	 	 
	 
	 	5.1	 	Mutual Conditions	 	 	36	 
	 
	 	 	 	 	 	 	 	 
	 
	 	5.2	 	Conditions to Obligations of the Shareholders	 	 	36	 
	 
	 	 	 	 	 	 	 	 
	 
	 	5.3	 	Conditions to Obligations of Lincoln Electric	 	 	37	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VI.	 	No TERMINATION; AMENDMENT	 	 	40	 
	 
	 	 	 	 	 	 	 	 
	 
	 	6.1	 	No Termination	 	 	40	 
	 
	 	 	 	 	 	 	 	 
	 
	 	6.2	 	Amendment	 	 	40	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VII.	 	INDEMNIFICATION	 	 	40	 
	 
	 	 	 	 	 	 	 	 
	 
	 	7.1	 	Survival of Representations, Warranties and Agreements	 	 	40	 
	 
	 	 	 	 	 	 	 	 
	 
	 	7.2	 	Indemnification	 	 	40	 
	 
	 	 	 	 	 	 	 	 
	 
	 	7.3	 	Limitations on Indemnification	 	 	42	 
	 
	 	 	 	 	 	 	 	 
	 
	 	7.4	 	Procedure for Indemnification with Respect to Third Party Claims	 	 	43	 
	 
	 	 	 	 	 	 	 	 
	 
	 	7.5	 	Procedure for Indemnification with Respect to Non-Third Party Claims	 	 	44	 
	 
	 	 	 	 	 	 	 	 
	 
	 	7.6	 	Shareholders’ Representative	 	 	44	 
	 
	 	 	 	 	 	 	 	 
	 
	 	7.7	 	Termination of the Companies’ Warranties	 	 	45	 
	 
	 	 	 	 	 	 	 	 
	 
	 	7.8	 	Arbitration	 	 	45	 
	 
	 	 	 	 	 	 	 	 
	 
	 	7.9	 	Adjustment to Aggregate Consideration	 	 	46	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VIII.	 	DEFINITIONS	 	 	46	 

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	 	 	 	 	 	 	Page	 
	 
	 	8.1	 	Terms Not Defined Elsewhere	 	 	46	 
	 
	 	 	 	 	 	 	 	 
	 
	 	8.2	 	Index of Defined Terms	 	 	49	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IX.	 	MISCELLANEOUS	 	 	52	 
	 
	 	 	 	 	 	 	 	 
	 
	 	9.1	 	Notices	 	 	52	 
	 
	 	 	 	 	 	 	 	 
	 
	 	9.2	 	Interpretation	 	 	53	 
	 
	 	 	 	 	 	 	 	 
	 
	 	9.3	 	Counterparts; Facsimiles	 	 	53	 
	 
	 	 	 	 	 	 	 	 
	 
	 	9.4	 	Entire Agreement; Modification	 	 	53	 
	 
	 	 	 	 	 	 	 	 
	 
	 	9.5	 	Third Party Beneficiaries	 	 	53	 
	 
	 	 	 	 	 	 	 	 
	 
	 	9.6	 	Governing Law	 	 	53	 
	 
	 	 	 	 	 	 	 	 
	 
	 	9.7	 	Assignment	 	 	53	 
	 
	 	 	 	 	 	 	 	 
	 
	 	9.8	 	Expenses	 	 	53	 

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SHARE PURCHASE AGREEMENT

DISCLOSURES SCHEDULES

	 
	Schedule 3.1(a) — J.W. Harris Qualifications to Conduct Business

	Schedule 3.1(b) — Autobraze Qualifications to Conduct Business

	Schedule 3.1(c) — Harris-Euro Qualifications to Conduct Business

	Schedule 3.2(a) — J.W. Harris Subsidiaries

	Schedule 3.2(c) — Harris-Euro Subsidiaries

	Schedule 3.4(a) — J.W. Harris Capitalization

	Schedule 3.4(b) — Autobraze Capitalization

	Schedule 3.4(c) — Harris-Euro Capitalization

	Schedule 3.5 — Conflicts, Consents and Approvals

	Schedule 3.6 — Absence of Certain Changes

	Schedule 3.8 — Liabilities

	Schedule 3.9(a) — Tax Returns

	Schedule 3.9(b) — Tax Deficiencies and Audits

	Schedule 3.9(c) — Tax Group Memberships

	Schedule 3.9(d) — Miscellaneous Tax Information

	Schedule 3.9(f) — S Corporation Elections

	Schedule 3.10(a) — Compliance with Laws

	Schedule 3.10(b) — Written Notice of Actions

	Schedule 3.10(c) — Permits

	Schedule 3.11(a) — Intellectual Property

	Schedule 3.11(b) — Intellectual Property Agreements

	Schedule 3.11(c) — Infringements or Violations of Proprietary Rights

	Schedule 3.12(a) — Liens; Real Property Locations

	Schedule 3.12(b) — Real Property Leases

	Schedule 3.12(c) — Equipment Condition; Real Property Compliance with Laws

	Schedule 3.13(b) — Environmental Matters

	Schedule 3.13(c) — Hazardous Materials

	Schedule 3.13(d) — Underground Storage Tanks

	Schedule 3.13(e) — Environmental Permits

	Schedule 3.13(f) — Asbestos

	Schedule 3.13(g) — Notices from Governmental Authorities

	Schedule 3.14 — Litigation

	Schedule 3.16(a)(ii) — Plans

	Schedule 3.16(a)(iii) — Qualified Plan Status Exceptions

	Schedule 3.16(a)(iv) — Plan Contributions

	Schedule 3.16(a)(v) — ERISA Compliance

	Schedule 3.16(a)(vii) — Controlled Group Liability

	Schedule 3.16(a)(viii) — Former Employee Life, Health, Medical or Welfare Benefit Liabilities

	Schedule 3.16(a)(ix) — Plan Excess Payments

	Schedule 3.16(a)(xi) — Plan Investments

	Schedule 3.16(b) — Mexican Employee Benefit Plans

	Schedule 3.17 — Directors, Officers and Employees

	Schedule 3.18(a) — Contracts

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	Schedule 3.18(b) — Contract Required Consents

	Schedule 3.20 — Labor Matters

	Schedule 3.21 — Material Contract Terminations and Non-Renewals

	Schedule 3.22 — Product Warranties and Liabilities

	Schedule 3.23 — Insurance

	Schedule 3.24 — Bank Accounts

	Schedule 3A.1 — Shareholder Trusts

	Schedule 3A.2 — Title to Shares

	Schedule 3A.3 — Shareholder Conflicts, Consents and Approvals

	Schedule 4.2(e) — Section 338(h)(10) Elections

	Schedule 5.3(e) — Consents, Approvals and Estoppel Certificates

	Schedule 5.3(j) — Actions Regarding Certain Plans

	Schedule 5.3(k) — Notices From Customers

	Schedule 7.2(a)(iv) — Indemnification

EXHIBITS

Exhibit A —  Form of Escrow Agreement

Exhibit B —  Form of Projected Closing Statement

Exhibit C —  Combined Statement of Assets and Liabilities

Exhibit D —  Financial Statements

Exhibit E —  Working Capital Calculation

Exhibit F —  Allocation of Aggregate Consideration Among Assets

Exhibit G —  Form of Opinion of Lincoln Electric’s counsel

Exhibit H —  Form of Opinion of the Companies’ counsel

Exhibit I —  Form of Shareholder Release

Exhibit J —  Form of Noncompetition Agreement

Exhibit K —  Mason Property Legal Description

Exhibit L —  Conticast Property Legal Description

Exhibit M —  Form of Employment Agreement

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SHARE PURCHASE AGREEMENT

     This Share Purchase Agreement (this “Agreement”) is made and entered into as of April 29,
2005, by and among Lincoln Electric Holdings, Inc., an Ohio corporation or its designee (“Lincoln
Electric”), and the shareholders, identified on the signature pages hereto, of the following
corporations: J.W. Harris Co., Inc., an Ohio corporation (“J.W. Harris”), Autobraze Inc., a Rhode
Island corporation (“Autobraze”), and Harris-Euro Corp., an Ohio corporation (“Harris-Euro”).

PRELIMINARY STATEMENTS:

     A. The shareholders of J.W. Harris (the “J.W. Harris Shareholders”) own all of the outstanding
capital stock of J.W. Harris, the shareholders of Autobraze (the “Autobraze Shareholders”) own all
of the outstanding capital stock of Autobraze and the shareholders of Harris-Euro (the “Harris-Euro
Shareholders”) own all of the outstanding capital stock of Harris-Euro.

     B. Lincoln Electric desires to acquire from the J.W. Harris Shareholders, the Autobraze
Shareholders and the Harris-Euro Shareholders (collectively, the “Shareholders”), and the
Shareholders desire to sell and transfer to Lincoln Electric, all of the outstanding capital stock
of J.W. Harris, Autobraze and Harris-Euro (each a “Company” and collectively, the “Companies”), on
the terms and subject to the conditions set forth in this Agreement. In addition, Beate Surmann
has previously owned all of the equity interests in Harris-Euro SL, a Spanish limited liability
company (“Harris Spain”), that were not owned by Harris-Euro, and Beate Surmann has sold all of her
equity interest in Harris Spain to Harris-Euro immediately prior to the Closing.

     C. Unless defined elsewhere herein, capitalized terms used herein are defined in Article VIII
hereof. Article VIII also identifies the respective Sections in this Agreement where capitalized
terms are defined.

AGREEMENT:

     NOW, THEREFORE, in consideration of these premises and the mutual and dependent promises
hereinafter set forth, the Parties, intending to be legally bound, agree as follows:

ARTICLE I. PURCHASE AND SALE

     1.1 Purchase and Sale of Shares. Upon the terms and subject to the conditions set
forth in this Agreement, at the Closing, (a) the J.W. Harris Shareholders shall sell, assign,
transfer and deliver to Lincoln Electric all of the J.W. Harris Shares, free and clear of any and
all Liens; (b) the Autobraze Shareholders shall sell, assign, transfer and deliver to Lincoln
Electric all of the Autobraze Shares, free and clear of any and all Liens; and (c) the Harris-Euro
Shareholders shall sell, assign, transfer and deliver to Lincoln Electric all of the Harris-Euro
Shares, free and clear of any and all Liens. In consideration for the sale of all of the Shares by
the Shareholders, Lincoln Electric shall pay to the Shareholders the consideration provided for in
Section 1.2.

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     1.2 Purchase Price.

          (a) For purposes of this Section 1.2, the following terms have the following meanings:

     “Aggregate Consideration” means $86,950,000 less the Debt Adjustment Amount, subject to
adjustment pursuant to Sections 1.2(c) and 1.4.

     “Debt Adjustment Amount” means the aggregate amount of the following, without
duplication, as of 11:59 p.m. EST on the Closing Date, as set forth in the Projected Closing
Statement prepared and delivered pursuant to Section 1.2(c): (i) all indebtedness of the
Companies and the Subsidiaries for borrowed money, including any interest accrued thereon;
(ii) all indebtedness of the Companies and the Subsidiaries for the deferred purchase price
of property or services, including any interest accrued thereon (except any trade payable in
the Ordinary Course of Business that is a current account payable, i.e., not overdue under
applicable vendor terms); (iii) all face amounts of any outstanding letters of credit issued
by/or on behalf of any of the Companies or the Subsidiaries; (iv) all obligations of any of
the Companies and the Subsidiaries arising under acceptance facilities; (v) all guaranties,
endorsements and other contingent obligations of any of the Companies and the Subsidiaries
to purchase, to provide funds for payment, to supply funds to invest in any other entity, or
otherwise to assure a creditor against loss; (vi) all obligations of the Companies and the
Subsidiaries under any interest rate protection, foreign currency exchange, or other
interest or exchange rate swap or hedging agreement or arrangement, or other derivative
product; (vii) all obligations of the Companies and the Subsidiaries secured by any
encumbrance on property; (viii) all obligations of the Companies and the Subsidiaries as
lessee under any lease which has been or should be capitalized in accordance with generally
accepted accounting principles in the United States (“GAAP”); (ix) all negative cash
positions of the Companies or the Subsidiaries; (x) any unpaid transaction expenses of
Shareholders required to be paid by Shareholders pursuant to Section 9.8 which will require
payment by any of the Companies or Subsidiaries subsequent to the Closing Date; (xi) any
unpaid Taxes as of the Closing Date; and (xii) amounts received for products and/or services
not yet rendered (i.e., deferred revenue); provided, however, that the letter agreement
between J.W. Harris and PNC Bank, National Association, dated as of June 3, 1999, relating
to an interest rate swap in the notional or nominal principal amount of $6,500,000 shall not
be included in the calculation of the Debt Adjustment Amount.

          (b) The Aggregate Consideration shall be payable as follows:

          (i) The Escrow Amount shall be deposited by Lincoln Electric in escrow pursuant to an
escrow agreement in substantially the form attached hereto as Exhibit A (the “Escrow
Agreement”). The Escrow Amount shall provide security for the payment required by the
Shareholders pursuant to Section 1.4(b), if any, and partial security for the
indemnification obligations and the covenants of the Shareholders set forth herein. As
provided in the Escrow Agreement, the Working Capital Escrow Amount, less the amount of any
Lincoln Working Capital Payment made pursuant to Section 1.4(b)(i), is to be released to the
Shareholders on the sixth day after the final

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determination of the Closing Date Working Capital, and the General Escrow Amount is to
be released to the Shareholders on the second anniversary of the Closing Date, in each case
on the terms and subject to the conditions contained herein and in the Escrow Agreement.

          (ii) In exchange for the Shares, Lincoln Electric shall pay The Fifth Third Bank, on
behalf of and for the benefit of the Shareholders, the Net Consideration, subject to
adjustment pursuant to Section 1.2(c). The Shareholders acknowledge and agree that the
payment by Lincoln Electric to The Fifth Third Bank of the Net Consideration pursuant to
this Section 1.2(b)(ii) (a) shall be deemed to be payment in full to the Shareholders for
the Shares and (b) is being made by Lincoln Electric at the Shareholders’ request for their
administrative convenience and to facilitate the payment of fees and expenses that are the
responsibility of the Shareholders.

          (c) Estimated Working Capital.

          (i) At least two (2) business days prior to the Closing Date, the Companies shall have
delivered to Lincoln Electric a certificate signed on its behalf by its President
substantially in the illustrative form attached hereto as Exhibit B (the “Projected
Closing Statement”) (i) setting forth in detail the Companies’ reasonable, good faith
estimate of the amount of the April Working Capital, which estimate will be determined based
upon preliminary information believed to be in accordance with the definition of April
Working Capital and the accounting policies, practices and methods of estimation used in
determining the Benchmark, provided that such policies, practices and methods of estimation
and the amounts resulting therefrom are in accordance with GAAP, and as derived from an
estimated consolidated balance sheet of the Companies and the Subsidiaries as of the close
of business on April 1, 2005 attached thereto that was prepared using the most recent
preliminary financial information available (the “Estimated Working Capital Amount”), (ii)
setting forth in detail the preliminary Debt Adjustment Amount and (iii) certifying that the
Estimated Working Capital Amount was determined in good faith based upon preliminary
information believed to be consistent with the definition of the April Working Capital and
the accounting policies, practices and methods of estimation used in determining the
Benchmark, provided that such policies, practices and methods of estimation and the amounts
resulting therefrom are in accordance with GAAP.

          (ii) If the Estimated Working Capital Amount is less than the Adjusted Benchmark, then
the Net Consideration payable at the Closing pursuant to Section 1.2(b)(ii) shall be reduced
by the amount, if any, by which the Adjusted Benchmark exceeds the Estimated Working Capital
Amount.

     1.3 Closing. The closing of the Transactions (the “Closing”) shall be held at the
offices of Taft, Stettinius & Hollister LLP, 1800 Walnut Street, Cincinnati, Ohio 45202, or such
other place as the Parties may agree, on the date hereof (the “Closing Date”). At the Closing,
concurrently with the deliveries required to be made by the Parties pursuant to Article V: (a)
each Shareholder shall deliver to Lincoln Electric the certificate or certificates representing the
Shares owned by such Shareholder, duly endorsed or accompanied by duly executed stock

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powers for transfer to Lincoln Electric or its nominee, (b) Lincoln Electric shall pay the
Escrow Amount to the escrow agent pursuant to the Escrow Agreement, and (c) Lincoln Electric shall
pay to The Fifth Third Bank, on behalf of and for the benefit of the Shareholders, the Net
Consideration, subject to adjustment pursuant to Section 1.2(c), by wire transfer of immediately
available funds, The Fifth Third Bank as paying agent for the Shareholders. Once it has occurred,
the Closing shall be deemed effective for all purposes as of 12:01 a.m. on the Closing Date.

     1.4 Post-Closing Purchase Price Adjustment.

          (a) As promptly as practicable (but in no event later than sixty (60) days after the Closing
Date), Lincoln Electric shall deliver to the Shareholders’ Representative a consolidated balance
sheet of the Companies and the Subsidiaries as of the close of business on the Closing Date (the
“Closing Balance Sheet”), together with a statement (the “Closing Statement”) setting forth a
calculation, with supporting detail, of the Closing Date Working Capital and any objections Lincoln
Electric has to the preliminary Debt Adjustment Amount as reflected in the Projected Closing
Statement. The Closing Balance Sheet and the Closing Date Working Capital shall reflect a
consolidation of J.W. Harris and the J.W. Harris Subsidiaries, Harris-Euro and the Harris Euro
Subsidiaries and Autobraze, all as of the Closing Date, prepared in accordance with GAAP, as
consistently applied in determining the Benchmark. The parties acknowledge and agree that the
accounting policies, practices and methods of estimation used in determining the Benchmark shall be
used in determining the Closing Date Working Capital, provided that such policies, practices and
methods of estimation and the amounts resulting therefrom are in accordance with GAAP. The Closing
Date Working Capital will include all current assets and current liabilities of the Companies and
the Subsidiaries, including those items set forth on Exhibit C, but exclude items
considered within the Debt Adjustment Amount pursuant to Section 1.2 or Section 1.4(c) and LIFO
reserves. The Closing Balance Sheet as finally determined pursuant to and in accordance with this
Section 1.4 shall be used solely for the purpose of determining the change in net working capital
of the Company as of the Closing Date from the Estimated Working Capital Amount and the Benchmark,
each of which was derived from the net working capital of the Companies and the Subsidiaries as of
the dates of the Benchmark or April 1, 2005, as the case may be, as a basis for adjusting the
Aggregate Consideration, and the balance sheet of the Companies and the Subsidiaries prepared by
Lincoln Electric as its opening date balance sheet need not be prepared by Lincoln Electric in
accordance with the principles used to prepare the Closing Balance Sheet. None of the preparation
by Lincoln Electric of the Closing Balance Sheet, the determination by Lincoln Electric of the
amount of any line item therein, or the resolution by Lincoln Electric of any disputes related
thereto shall in any way affect the right of Lincoln Electric to assert any claim for a breach of
representation or warranty under this Agreement and to seek indemnification on account thereof;
neither the review and acceptance by the Shareholders of the Closing Balance Sheet or the amount of
any line item therein, nor the resolution by the Shareholders of any disputes related thereto shall
in any way affect the right of the Shareholders to assert any defense to any claim for a breach of
representation or warranty under this Agreement. During the 60 day period referenced in the first
sentence of this subsection, Lincoln Electric shall be permitted to review the preliminary Debt
Adjustment Amount and may give written notice of any objections specifying in reasonable detail the
nature and dollar amount of any such objections. If the Shareholders’ Representative has any
objections to the Closing Balance Sheet or the Closing

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Statement as prepared by Lincoln Electric, the Shareholders’ Representative must, within sixty
(60) days after the Shareholders’ Representative’s receipt thereof, give written notice to Lincoln
Electric specifying in reasonable detail the nature and dollar amount of any such objections. If
the Shareholders’ Representative does not deliver such notice within such 60-day period, Lincoln
Electric’s determination of the Closing Date Working Capital shall be final, binding and conclusive
on the Shareholders and Lincoln Electric. During the same 60-day period, the Shareholders’
Representative shall review any objections raised by Lincoln Electric with respect to the
preliminary Debt Adjustment Amount. With respect to any disputed amounts pertaining to either the
Closing Date Working Capital or Debt Adjustment Amount, the Shareholders’ Representative and
Lincoln Electric shall negotiate in good faith during the 30-day period (the “Resolution Period”)
after the date of Lincoln Electric’s receipt of the notice referred to in the preceding two
sentences to resolve any such disputes. If the Shareholders’ Representative and Lincoln Electric
are unable to resolve all such disputes within the Resolution Period, then within five (5) business
days after the expiration of the Resolution Period, all disputes shall be submitted to Deloitte &
Touche LLP (or if Deloitte & Touche LLP cannot or is unwilling to serve in such capacity, a
nationally recognized, independent public accounting firm selected by mutual agreement of the
Shareholders’ Representative and Lincoln Electric, or if they cannot agree, selected by mutual
agreement of the independent public accounting firms regularly used by the Shareholders’
Representative and Lincoln Electric in the conduct of their respective businesses) (the
“Accountant”), who shall be engaged to provide a final and conclusive resolution of all unresolved
disputes within thirty (30) business days after such engagement. In selecting Deloitte & Touche
LLP or such other firm as may be selected in accordance with the foregoing sentence as the
Accountant for purposes of this Agreement, Lincoln Electric and the Shareholders hereby waive any
conflict or potential conflict arising from any services performed by such firm for the
Shareholders, Lincoln Electric or the Companies or any of their respective Affiliates. The
Accountant shall act as an arbitrator to determine only those issues that remain in dispute, and
such determination shall be based solely on a review of the factual materials presented by the
Shareholders’ Representative and Lincoln Electric, either on their own initiative or at the
specific request of the Accountant, and such accounting principles and literature as the Accountant
shall deem appropriate. The determination of the Accountant shall be final, binding and conclusive
on the Shareholders and Lincoln Electric. The fees and expenses of the Accountant shall be
allocated by the Accountant between Lincoln Electric and the Shareholders based on the aggregate
percentage which the portions of the contested amounts not awarded to each party bear to the
aggregate amounts contested by such party.

          (b) Working Capital Payments.

          (i) If the Closing Date Working Capital, as set forth on the Closing Statement as
finally determined pursuant to Section 1.4(a), is less than the Estimated Working Capital
Amount, Lincoln Electric will be entitled to a payment (the “Lincoln Working Capital
Payment”) equal to the difference between the Estimated Working Capital Amount and the
Closing Date Working Capital. The Lincoln Working Capital Payment shall be made first from
the Working Capital Escrow Amount and if the Working Capital Escrow Amount is insufficient
therefor, then from the General Escrow Amount. If the Lincoln Working Capital Payment is
greater than the Escrow Amount, then the Principal Shareholders shall pay Lincoln Electric
an amount equal to the difference between the Lincoln Working Capital Payment and the Escrow
Amount.

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          (ii) If the Closing Date Working Capital, as set forth on the Closing Statement as
finally determined pursuant to Section 1.4(a), is greater than the Estimated Working Capital
Amount, then Lincoln Electric shall make a payment to the Escrow Account to increase the
Working Capital Escrow Amount equal to the lesser of (A) the difference between the Closing
Date Working Capital and the Estimated Working Capital Amount and (B) the difference between
the Estimated Working Capital Amount and the Adjusted Benchmark (the “Shareholders Working
Capital Payment”).

          (iii) Any payment required pursuant to this Section 1.4(b) shall be made within five
(5) business days after final determination of the Closing Date Working Capital by wire
transfer of immediately available funds to (A) in the case of the Lincoln Working Capital
Payment, a bank account designated in writing by Lincoln Electric or (B) in the case of the
Shareholders Working Capital Payment, to the escrow account pursuant to the Escrow
Agreement.

          (c) Any adjustment determined to be required to the Debt Adjustment Amount shall be paid on a
dollar for dollar basis by Principal Shareholders or Lincoln Electric, as appropriate, to adjust
the preliminary Debt Adjustment Amount (as set forth in the Projected Closing Statement) to the
final Debt Adjustment Amount (as finally determined pursuant to Section 1.4(a)). If it is
determined that the Principal Shareholders are required to pay any amount to Lincoln Electric to
adjust the preliminary Debt Adjustment Amount to the final Debt Adjustment Amount, any such amount
shall be made first from the Working Capital Escrow Amount and if the Working Capital Escrow Amount
is insufficient therefor, then from the General Escrow Amount, and if there still remains an
additional adjustment from the Principal Shareholders.

ARTICLE II. REPRESENTATIONS AND WARRANTIES

OF LINCOLN ELECTRIC

     In order to induce the Shareholders to enter into this Agreement, Lincoln Electric hereby
represents and warrants to the Shareholders that the statements contained in this Article II are
true, correct and complete as of the date hereof and shall be true, correct and complete as of the
Closing.

     2.1 Organization and Standing. Lincoln Electric Holdings, Inc. is a corporation duly
organized, validly existing and in good standing under the laws of the State of Ohio with full
power and authority (corporate and other) to own, lease, use and operate its properties and to
conduct its business as and where now owned, leased, used, operated and conducted.

     2.2 Authority. Lincoln Electric has all requisite power and authority to enter into
this Agreement and the Additional Documents to which Lincoln Electric is a party and to consummate
the Transactions. The execution and delivery of this Agreement and the Additional Documents to
which Lincoln Electric is a party and the consummation of the Transactions have been duly
authorized by all necessary corporate action on the part of Lincoln Electric. This Agreement has
been duly executed and delivered by Lincoln Electric, and constitutes the legal, valid and binding
obligation of Lincoln Electric enforceable against it in accordance with its terms. The Additional
Documents to which Lincoln Electric is a party, when duly executed by

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Lincoln Electric, will constitute the legal, valid and binding obligations of Lincoln
Electric, enforceable against Lincoln Electric in accordance with their respective terms.

     2.3 Conflicts, Consents and Approval. Neither the execution and delivery by Lincoln
Electric of this Agreement or any Additional Document to which Lincoln Electric is a party nor the
consummation by Lincoln Electric of the Transactions will:

          (a) conflict with, or result in a breach of any provision of, the Restated Articles of
Incorporation or Amended Code of Regulations of Lincoln Electric;

          (b) violate, or conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with the giving of notice, the passage of time or otherwise, would
constitute a default) under, any note, bond, mortgage, indenture, deed of trust, license, contract,
undertaking, agreement, lease or other instrument or obligation to which Lincoln Electric or any of
its subsidiaries is a party and which is material to Lincoln Electric and its subsidiaries
considered as one enterprise;

          (c) violate any order, writ, injunction, decree, statute, rule or regulation applicable to
Lincoln Electric or any of its subsidiaries or their respective properties or assets; or

          (d) require any action or consent or approval of, or review by, or registration or filing by
Lincoln Electric or any of its Affiliates with, any third party or Governmental Authority, other
than any that have been taken, obtained or made. Lincoln Electric has filed all Notification and
Report Forms required pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the “HSR Act”) with respect to the
Transactions and has received early termination of the waiting period under the HSR Act with
respect thereto.

ARTICLE III. REPRESENTATIONS AND WARRANTIES

OF THE PRINCIPAL SHAREHOLDERS

     In order to induce Lincoln Electric to enter into this Agreement, Joseph W. Harris, Gordon L.
Harris, the Joseph W. Harris Revocable Trust, dated June 10, 1997, as amended or restated, Joseph
W. Harris Grantor Retained Annuity Trust I, dated July 15, 1998, Joseph W. Harris Grantor Retained
Annuity Trust II, dated July 15, 1998, and Gordon L. Harris, Trustee U/A, dated October 10, 1997,
as amended or restated (collectively, the “Principal Shareholders”) hereby jointly and severally
represent and warrant to Lincoln Electric that the statements contained in this Article III are
true, correct and complete as of the Closing.

     3.1 Organization and Standing.

          (a) J.W. Harris. J.W. Harris is a corporation duly organized, validly existing and in
good standing under the laws of the State of Ohio with full power and authority (corporate and
other) to own, lease, use and operate its properties and to conduct its business as and where now
owned, leased, used, operated and conducted. J.W. Harris is duly qualified to do business and in
good standing in each jurisdiction listed in Section 3.1(a) of the disclosure schedule delivered to
Lincoln Electric and dated the date hereof (the “Disclosure Schedule”), is not qualified to do
business in any other jurisdiction and neither the nature of the business conducted

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by it nor the property it owns, leases or operates requires it to qualify to do business as a
foreign corporation in any other jurisdiction, except where the failure to be so qualified or in
good standing in such jurisdiction would not have a Material Adverse Effect on J.W. Harris or the
Companies, taken together.

          (b) Autobraze. Autobraze is a corporation duly organized, validly existing and in
good standing under the laws of the State of Rhode Island with full power and authority (corporate
and other) to own, lease, use and operate its properties and to conduct its business as and where
now owned, leased, used, operated and conducted. Autobraze is duly qualified to do business and in
good standing in each jurisdiction listed in Section 3.1(b) of the Disclosure Schedule, is not
qualified to do business in any other jurisdiction and neither the nature of the business conducted
by it nor the property it owns, leases or operates requires it to qualify to do business as a
foreign corporation in any other jurisdiction, except where the failure to be so qualified or in
good standing in such jurisdiction would not have a Material Adverse Effect on Autobraze or the
Companies taken together.

          (c) Harris-Euro. Harris-Euro is a corporation duly organized, validly existing and in
good standing under the laws of the State of Ohio with full power and authority (corporate and
other) to own, lease, use and operate its properties and to conduct its business as and where now
owned, leased, used, operated and conducted. Harris-Euro is duly qualified to do business and in
good standing in each jurisdiction listed in Section 3.1(c) of the Disclosure Schedule, is not
qualified to do business in any other jurisdiction and neither the nature of the business conducted
by it nor the property it owns, leases or operates requires it to qualify to do business as a
foreign corporation in any other jurisdiction, except where the failure to be so qualified or in
good standing in such jurisdiction would not have a Material Adverse Effect on Harris-Euro or the
Companies taken together.

     3.2 Subsidiaries.

          (a) Subsidiaries of J.W. Harris. Section 3.2(a) of the Disclosure Schedule sets forth
(i) a correct and complete list of the name, type of entity and relationship to J.W. Harris of each
direct or indirect subsidiary of J.W. Harris (the “J.W. Harris Subsidiaries”) and (ii) a true and
complete listing of each class of authorized capital stock or equity interests of each J.W. Harris
Subsidiary and the number of issued and outstanding shares or interests thereof, all of which
outstanding shares or interests are validly issued, fully paid and non-assessable and are owned
beneficially and of record by J.W. Harris or by a wholly owned subsidiary of J.W. Harris which, in
each case, hold their respective interests in the capital stock or other equity interests of each
J.W. Harris Subsidiary free and clear of any and all Liens, and no other Person has a beneficial or
other interest in such capital stock or other equity interests. No capital stock or equity
interests in any J.W. Harris Subsidiary are reserved for issuance upon the exercise of any options
or securities convertible into capital stock or equity interests in any J.W. Harris Subsidiary, and
no capital stock of or equity interests in any J.W. Harris Subsidiary are issued and held in
treasury. There are no outstanding contractual obligations of J.W. Harris or any J.W. Harris
Subsidiary to repurchase, redeem or otherwise acquire any shares of capital stock or other equity
interests of any Person, or to make any material investment (in the form of a loan, capital
contribution or otherwise) in any Person. The issuance and sale of all capital stock or other
equity interests in each J.W. Harris Subsidiary has been in compliance with all applicable federal

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and state securities laws. No J.W. Harris Subsidiary has agreed to register any securities
under the Securities Act of 1933, as amended (the “Securities Act”), or under any state securities
law or granted registration rights to any other Person. There are no accrued but unpaid dividends
on the capital stock or other equity interests of any J.W. Harris Subsidiary. Each J.W. Harris
Subsidiary has full power and authority to own, lease, use and operate its respective properties
and to conduct its respective businesses as and where now owned, leased, used, operated and
conducted. Each J.W. Harris Subsidiary is duly qualified or licensed as a foreign corporation to
do business and is in good standing in each jurisdiction set forth in Section 3.2(a) of the
Disclosure Schedule, which jurisdictions constitute all jurisdictions in which the character or
location of the property owned, leased or operated by it or the nature of the business conducted by
such J.W. Harris Subsidiary makes such qualification necessary, except where the failure to be so
qualified or licensed would not have a Material Adverse Effect on J.W. Harris or the Companies
taken together.

          (b) Subsidiaries of Autobraze. Autobraze does not own, directly or indirectly, any
equity or other ownership interest in any corporation, partnership, joint venture or other entity
or enterprise. Autobraze is not subject to any obligation or requirement to provide funds to or
make any investment (in the form of a loan, capital contribution or otherwise) in any such entity.

          (c) Subsidiaries of Harris-Euro. Section 3.2(c) of the Disclosure Schedule sets forth
(i) a correct and complete list of the name, type of entity and relationship to Harris-Euro of each
direct or indirect subsidiary of Harris-Euro (the “Harris-Euro Subsidiaries”) and (ii) a true and
complete listing of each class of authorized capital stock or equity interests of each Harris-Euro
Subsidiary and the number of issued and outstanding shares or interests thereof, all of which
outstanding shares or interests are validly issued, fully paid and non-assessable and, except as
set forth in Section 3.2(c) of the Disclosure Schedule, are owned beneficially and of record by
Harris-Euro or by a wholly owned subsidiary of Harris-Euro which, in each case, hold their
respective interests in the capital stock or other equity interests of each Harris-Euro Subsidiary
free and clear of any Liens, and no other Person has a beneficial or other interest in such capital
stock or other equity interests. No capital stock or equity interests in any Harris-Euro
Subsidiary are reserved for issuance upon the exercise of any options or securities convertible
into capital stock or equity interests in any Harris-Euro Subsidiary, and no capital stock of or
equity interests in any Harris-Euro Subsidiary are issued and held in treasury. There are no
outstanding contractual obligations of Harris-Euro or any Harris-Euro Subsidiary to repurchase,
redeem or otherwise acquire any shares of capital stock or other equity interests of any Person, or
to make any material investment (in the form of a loan, capital contribution or otherwise) in any
Person. The issuance and sale of all capital stock or other equity interests in each Harris-Euro
Subsidiary has been in compliance with all applicable federal, state and foreign securities laws.
No J.W. Harris-Euro Subsidiary has agreed to register any securities under the Securities Act or
under any state securities law or granted registration rights to any other Person. There are no
accrued but unpaid dividends on the capital stock or other equity interests of any Harris-Euro
Subsidiary. Each Harris-Euro Subsidiary has full power and authority to own, lease, use and
operate its respective properties and to conduct its respective businesses as and where now owned,
leased, used, operated and conducted. Each Harris-Euro Subsidiary is duly qualified or licensed as
a foreign corporation to do business and is in good standing in each jurisdiction set forth in
Section 3.2(c) of the Disclosure Schedule, which jurisdictions constitute

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all jurisdictions in which the character or location of the property owned, leased or operated
by it or the nature of the business conducted by such Harris-Euro Subsidiary makes such
qualification necessary, except where the failure to be so qualified or licensed would not have a
Material Adverse Effect on Harris-Euro or any of the Companies.

     3.3 Authority. Each of the Companies has all requisite power and authority to enter
into the Additional Documents to which such Company is a party and to consummate the transactions
contemplated thereby. The execution and delivery of the Additional Documents to which such Company
is a party and the consummation of the Transactions have been duly authorized by all necessary
corporate action on the part of each Company. Each Shareholder has the legal capacity and
authority to execute and deliver this Agreement and the Additional Documents to which such
Shareholder is a party and to consummate the transactions contemplated hereby and thereby. This
Agreement has been duly executed and delivered by each Shareholder and constitutes the legal, valid
and binding obligation of each Shareholder, enforceable against such Shareholder in accordance with
its terms. The Additional Documents to which any Company or Shareholder is a party constitute the
legal, valid and binding obligations of such Company or Shareholder, as the case may be,
enforceable against such Person in accordance with their respective terms.

     3.4 Capitalization of the Companies.

          (a) Capitalization of J.W. Harris. J.W. Harris’ authorized equity securities consist
solely of 50,000 Class A common shares and 50,000 Class B common shares, no par value, of which
31,700 Class A common and 31,700 Class B common shares are issued and outstanding and constitute
the “J.W. Harris Shares.” No shares of J.W. Harris are issued and held in treasury. Each
outstanding J.W. Harris Share is duly authorized and validly issued, fully paid and nonassessable,
and has not been issued in violation of any preemptive or similar rights. Except as set forth in
Section 3.4(a) of the Disclosure Schedule, there are no outstanding subscriptions, options,
warrants, puts, calls, conversion rights, rights of exchange, agreements, understandings, claims or
other commitments or rights of any type relating to the issuance, sale or transfer of any
securities of J.W. Harris or any J.W. Harris Subsidiary, and J.W. Harris has no obligation of any
kind to issue any additional securities or to pay for securities of J.W. Harris or any predecessor.
The issuance and sale of all of the J.W. Harris Shares has been in compliance with all applicable
federal and state securities laws. Section 3.4(a) of the Disclosure Schedule contains a correct
and complete list of the names and addresses of (y) the J.W. Harris Shareholders, who constitute
all of the holders of all the outstanding J.W. Harris Shares, and (z) the spouses of each married
J.W. Harris Shareholder, as well as the number of J.W. Harris Shares owned beneficially and of
record by each J.W. Harris Shareholder. The J.W. Harris Shareholders hold their respective
interests in the J.W. Harris Shares free and clear of any Liens and, except as set forth in Section
3.4(a) of the Disclosure Schedule, no other Person has a beneficial or other interest in any
Shares. J.W. Harris has not agreed to register any securities under the Securities Act or under
any state securities law or granted registration rights to any Person. There are no accrued but
unpaid dividends on any J.W. Harris Shares, nor are there are any voting trusts, proxies or other
agreements or understandings with respect to the capital stock of J.W. Harris, except as set forth
in Section 3.4(a) of the Disclosure Schedule.

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          (b) Capitalization of Autobraze. Autobraze’s authorized equity securities consist
solely of 200,000 shares of common capital stock, no par value, of which 110,000 shares are issued
and outstanding and constitute the “Autobraze Shares.” No shares of capital stock of Autobraze are
issued and held in treasury. Each outstanding Autobraze Share is duly authorized and validly
issued, fully paid and nonassessable, and has not been issued in violation of any preemptive or
similar rights. Except as set forth in Section 3.4(b) of the Disclosure Schedule, there are no
outstanding subscriptions, options, warrants, puts, calls, conversion rights, rights of exchange,
agreements, understandings, claims or other commitments or rights of any type relating to the
issuance, sale or transfer of any securities of Autobraze or any Autobraze Subsidiary, and
Autobraze has no obligation of any kind to issue any additional securities or to pay for securities
of Autobraze or any predecessor. The issuance and sale of all of the Autobraze Shares has been in
compliance with all applicable federal and state securities laws. Section 3.4(b) of the Disclosure
Schedule contains a correct and complete list of the names and addresses of (y) the Autobraze
Shareholders, who constitute all of the holders of all the outstanding Autobraze Shares, and (z)
the spouses of each married Autobraze Shareholder, as well as the number of Autobraze Shares owned
beneficially and of record by each Autobraze Shareholder. The Autobraze Shareholders hold their
respective interests in the Autobraze Shares free and clear of any Liens and, except as set forth
in Section 3.4(b) of the Disclosure Schedule, no other Person has a beneficial or other interest in
any Shares. Autobraze has not agreed to register any securities under the Securities Act or under
any state securities law or granted registration rights to any Person. There are no accrued but
unpaid dividends on any Autobraze Shares, nor are there are any voting trusts, proxies or other
agreements or understandings with respect to the capital stock of Autobraze, except as set forth in
Section 3.4(b) of the Disclosure Schedule.

          (c) Capitalization of Harris-Euro. Harris-Euro’s authorized equity securities consist
solely of 750 common shares, no par value, of which 100 shares are issued and outstanding and
constitute the “Harris-Euro Shares.” No shares of Harris-Euro are issued and held in treasury.
Each outstanding Harris-Euro Share is duly authorized and validly issued, fully paid and
nonassessable, and has not been issued in violation of any preemptive or similar rights. There are
no outstanding subscriptions, options, warrants, puts, calls, conversion rights, rights of
exchange, agreements, understandings, claims or other commitments or rights of any type relating to
the issuance, sale or transfer of any securities of Harris-Euro or any Harris-Euro Subsidiary, and
Harris-Euro has no obligation of any kind to issue any additional securities or to pay for
securities of Harris-Euro or any predecessor. The issuance and sale of all of the Harris-Euro
Shares has been in compliance with all applicable federal and state securities laws. Section
3.4(c) of the Disclosure Schedule contains a correct and complete list of the names and addresses
of (y) the Harris-Euro Shareholders, who constitute all of the holders of all the outstanding
Harris-Euro Shares, and (z) the spouses of each married Harris-Euro Shareholder, as well as the
number of Harris-Euro Shares owned beneficially and of record by each Harris-Euro Shareholder. The
Harris-Euro Shareholders hold their respective interests in the Harris-Euro Shares free and clear
of any Liens and, except as set forth in Section 3.4(c) of the Disclosure Schedule, no other Person
has a beneficial or other interest in any Harris-Euro Shares. Harris-Euro has not agreed to
register any securities under the Securities Act or under any state securities law or granted
registration rights to any Person. There are no accrued but unpaid dividends on any Harris-Euro
Shares, nor are there are any voting trusts, proxies or other agreements or understandings with
respect to the capital stock of Harris-Euro.

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     3.5 Conflicts, Consents and Approvals. Except as set forth in Section 3.5 of the
Disclosure Schedule, neither the execution and delivery by the Shareholders of this Agreement or
the execution and delivery by the Shareholders or the Companies of the Additional Documents to
which such Person is a party nor the consummation by the Companies and the Shareholders of the
Transactions will:

          (a) conflict with, or result in a breach of any provision of, any of the Companies’ articles
of incorporation, regulations or by-laws or the organizational documents of any of the
Subsidiaries;

          (b) violate, or conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with or without the giving of notice, the passage of time or otherwise,
would constitute a default) under, or entitle any party (with the giving of notice, the passage of
time or otherwise) to terminate, accelerate, modify or call a default under, or result in the
creation of any Lien upon any of the properties or assets of the Companies or any Subsidiaries or
require any consent of any third party under any of the terms, conditions or provisions of any
Contract to which any of the Companies or any of the Subsidiaries is a party;

          (c) violate any order, writ, injunction, decree, statute, rule or regulation applicable to any
of the Companies or any of the Subsidiaries; or

          (d) require any action or consent or approval of, or review by, or registration or filing by
any of the Companies, any Subsidiaries, any Shareholder or any of their respective Affiliates with,
any third party or any Governmental Authority, other than any that have been taken, obtained or
made. The Shareholders and the Companies have filed all Notification and Report Forms required
pursuant to the HSR Act with respect to the Transactions and have received early termination of the
waiting period under the HSR Act with respect thereto.

     3.6 Absence of Certain Changes.

          (a) Except as set forth in Section 3.6(a) of the Disclosure Schedule, since September 24,
2004, there has not been:

          (i) any labor dispute or disturbance adversely affecting the business operations,
prospects or condition (financial or otherwise) of any Company or Subsidiary, including the
filing of any petition or charge of unfair labor practice with any Governmental Authority,
efforts to effect a union representation election, actual or threatened employee strike,
work stoppage or slowdown;

          (ii) any (A) adjustment, split, combination or reclassification the capital stock of
any Company or Subsidiary; (B) declaration or payment of any dividend or distribution on, or
direct or indirect redemption, purchase or other acquisition of, any Shares or any
securities or obligations convertible into or exchangeable for any Shares; (C) grant to any
Person any right or option to acquire any Shares; (D) issuance, delivery or sale or
agreement to issue, deliver or sell any additional Shares or any securities or obligations
convertible into or exchangeable or exercisable for any Shares or such securities; or (E)
any agreement, understanding or arrangement made with respect to the sale or voting of
Shares;

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          (iii) any direct or indirect sale, transfer, lease, pledge, mortgage, encumbrance or
other disposition of any of any material property or assets of any Company or Subsidiary,
other than in the Ordinary Course of Business for fair equivalent value to Persons other
than directors, officers, shareholders or other Affiliates of any Company or Subsidiary;

          (iv) any changes in the articles of incorporation, regulations, bylaws or the
organizational documents of any Company or Subsidiary;

          (v) any merger or consolidation of any Company or Subsidiary with any other Person or
acquisition of the assets (other than the acquisition of inventory, supplies and equipment
in the Ordinary Course of Business) or capital stock of any other Person, or any
confidentiality agreement entered into with any Person in contemplation of any of the
foregoing;

          (vi) any change in any method or principle of accounting by any Company or Subsidiary
in a manner that is inconsistent with past practice;

          (vii) any settlement of Actions by any Company or Subsidiary involving an amount in
excess of $100,000 without the prior written consent of Lincoln Electric, which shall not be
unreasonably withheld;

          (viii) any write-up, write-down or write-off of the book value of any assets by any
Company or Subsidiary, individually or in the aggregate, in excess of $100,000, except for
depreciation and amortization in accordance with GAAP;

          (ix) any purchase of assets by any Company or Subsidiary (other than purchases in the
Ordinary Course of Business of an amount not in excess of $50,000 for any one purchase or
$100,000 for all such purchases) or any lease of capital assets with payments over the term
of the lease to be made by any Company or Subsidiary exceeding the aggregate amount of
$100,000;

          (x) any action taken by any Company or Subsidiary to exempt, or make not subject to any
other state takeover law or state law that purports to limit or restrict business
combinations or the ability to acquire or vote shares, any Person (other than Lincoln
Electric or its subsidiaries) or any action taken thereby, which Person or action would have
otherwise been subject to the restrictive provisions thereof and not exempt therefrom; or

          (xi) any agreement in writing or otherwise to take any of the foregoing actions.

          (b) Except as set forth in Section 3.6(b) of the Disclosure Schedule, since September 24,
2004, to the Knowledge of the Shareholders, there has not been:

          (i) any event, occurrence, development or state of circumstances or facts which,
individually or in the aggregate, has had or could reasonably be expected to have a Material
Adverse Effect on any Company;

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          (ii) any damage, destruction, loss or casualty to property or assets owned or used by
any Company or Subsidiary with a value in excess of $100,000, whether or not covered by
insurance;

          (iii) any action of a Company or Subsidiary outside of the Ordinary Course of Business,
except as expressly contemplated by this Agreement and the Transactions;

          (iv) any incurrence, creation, assumption of any indebtedness by any Company or
Subsidiary for borrowed money; assumption, guarantee, endorsement or other responsibility or
liability for the obligations of any other Person, other than in the Ordinary Course of
Business not in excess of $100,000 in the aggregate; or any loan or advance made by any
Company or Subsidiary to any Person, other than credit extended to customers of any Company
or Subsidiary in the Ordinary Course of Business not exceeding $50,000, in the aggregate, to
any customer;

          (v) any subsidiaries created or formed by any Company or Subsidiary;

          (vi) any employment, severance, termination or similar agreements or arrangements
entered into or modified by any Company or Subsidiary, or any bonuses, salary increases,
severance or termination pay made or granted by any Company or Subsidiary to, any officer,
director, consultant or employee or other increase in the compensation or benefits provided
to any officer, director, consultant or employee, except for salary increases granted in the
Ordinary Course of Business to employees who are not officers or directors of any Company or
Subsidiary, and except as may be required by Applicable Law or a binding written contract in
effect on the date of this Agreement and disclosed in Section 3.18(a) of the Disclosure
Schedule;

          (vii) any bonus, stock option, profit-sharing, pension, retirement, severance, deferred
compensation, group health, insurance, or other employee benefit or similar plan entered
into, adopted or amended by any Company or Subsidiary, other than as may be required under
this Agreement;

          (viii) any material change in the method of doing business;

          (ix) any modification, amendment or termination, or waiver, release or assignment by
any Company or Subsidiary of any material rights or claims with respect to, any Contract
listed in Section 3.18(a) of the Disclosure Schedule, any other material Contract to which
any Company or Subsidiary is a party or any confidentiality agreement to which any Company
or Subsidiary is a party; or

          (x) any agreement in writing or otherwise to take any of the foregoing actions.

     3.7 Financial Statements. The Shareholders have furnished to Lincoln Electric the
unaudited combined (with consolidating adjustments) statement of assets and liabilities of (a)(i)
J.W. Harris and the J.W. Harris Subsidiaries as of September 24, 2004, (ii) Harris-Euro and the
Harris-Euro Subsidiaries as of December 31, 2004, and (iii) Autobraze as of December 31, 2004,

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and the related combined (with consolidating adjustments) statements of revenues, expenses,
and retained earnings, and cash flows for the fiscal years then ended, copies of which are attached
as Exhibit D; (b) the audited consolidated statement of assets and liabilities of J.W.
Harris and the J.W Harris Subsidiaries as of September 24, 2004, and the related consolidated
statements of revenues, expenses, and retained earnings, and cash flows for the fiscal year then
ended, including the related notes, which are accompanied by the unqualified opinion of Ernst &
Young (the “Audited Financial Statements”); (c) the unaudited statement of assets and liabilities
of Autobraze as of December 31, 2004, and the related combined consolidated statements of revenues,
expenses, and retained earnings, and cash flows for the year then ended; and (d) the unaudited
consolidated statement of assets and liabilities of Harris-Euro and the Harris-Euro Subsidiaries as
of December 31, 2004, and the related combined consolidated statements of revenues, expenses, and
retained earnings, and cash flows for the year then ended (the financial statements referred to in
Sections 3.7(a)-(d), the “Financial Statements”). The Companies have also furnished to Lincoln
Electric the combined consolidated statement of assets and liabilities of the Companies and the
Subsidiaries as of December 31, 2004 (the “December Balance Sheet”), and the related combined
consolidated statements of revenues, expenses, and retained earnings, and cash flows for the
twelve-month period then ended (collectively with the December Balance Sheet, the “December
Statements”). The Financial Statements and the December Statements (x) have been prepared from and
are in accordance with the books and records of the Companies and the Subsidiaries, and (y) fairly
and accurately present the financial condition of the Companies and the Subsidiaries as of the
respective dates stated therein and the related results of its operations and changes in cash flows
for the periods then ended, and (z) with respect to all unaudited financial statements, have been
prepared in conformity with GAAP, except for (i) the absence of notes and (ii) the treatment of
combining entities with different year end dates. The Audited Financial Statements have been
prepared in conformity with GAAP. The Companies have also furnished to Lincoln Electric the
working capital schedule which was used to derive the Benchmark and a reconciliation to the related
unaudited financial information referred to above, which is attached hereto as Exhibit E.

     3.8 Undisclosed Liabilities. No Company or Subsidiary has any liabilities or
obligations of any nature, whether known or unknown, absolute, accrued, contingent or otherwise and
whether due or to become due, except (i) those disclosed or reserved against on the December
Balance Sheet, (ii) current liabilities incurred after the date of the December Balance Sheet in
the Ordinary Course of Business, (iii) those set forth in Section 3.8 of the Disclosure Schedule,
or (iv) those incurred in connection with the execution of this Agreement or any of the Additional
Documents.

     3.9 Taxes.

          (a) Except as disclosed in Section 3.9(a) of the Disclosure Schedule, the Companies and the
Subsidiaries have duly filed all Tax Returns required to have been filed by the Companies and the
Subsidiaries prior to the date hereof. Section 3.9(a) of the Disclosure Schedule describes all Tax
Returns filed on a consolidated, combined, or unitary basis, along with a list of entities whose
activities are included with such filings. Except as set forth in Section 3.9(a) of the Disclosure
Schedule, no Tax Return of the Company or of any Subsidiary is required to be filed on or before
the date that is sixty (60) days after the Closing. All of the foregoing Tax Returns filed by the
Companies and the Subsidiaries are true, correct and complete, and the

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Companies or their respective Subsidiaries have paid prior to the Closing Date all Taxes
required to be paid in respect of the periods covered by such returns or reports or otherwise due
to any federal, state, foreign, local or other taxing Governmental Authority. The unpaid Taxes of
the Companies and the Subsidiaries do not, as of the Closing Date, exceed the reserve for Tax
liability (as distinguished from any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the December Balance Sheet (as
distinguished from in any notes thereto). The Companies and the Subsidiaries will not have any
liability for any Taxes in excess of the amounts so paid or reserves so established and the
Companies and the Subsidiaries are not delinquent in the payment of any Tax, assessment or
governmental charge.

          (b) Except as disclosed in Section 3.9(b) of the Disclosure Schedule, no deficiencies for any
Tax, assessment or governmental charge have been proposed in writing, asserted or assessed
(tentatively or definitely), by any taxing Governmental Authority against the Companies or the
Subsidiaries. Except as set forth in Section 3.9(b) of the Disclosure Schedule, no Company or
Subsidiary is the subject of any Tax audit. As of the date of this Agreement, there are no pending
requests for waivers of the time to assess any such Tax. Except as set forth in Section 3.9(b) of
the Disclosure Schedule, with respect to any taxable period ended prior to December 31, 2001, all
Tax Returns of the Companies and the Subsidiaries have been audited by a Governmental Authority or
are closed by the applicable statute of limitations. No Company or Subsidiary has waived any
statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency. There are no Liens with respect to Taxes upon any of the properties or
assets, real or personal, tangible or intangible of the Companies or the Subsidiaries (other than
Liens for Taxes not yet due and payable). Except as disclosed in Section 3.9(b) of the Disclosure
Schedule, no Company or Subsidiary is subject to any Tax liability in any jurisdiction where the
Companies or the Subsidiaries do not file Tax Returns, and no claim has ever been made or
reasonably could be made by a Governmental Authority in any such jurisdiction that any Company or
Subsidiary is or may be subject to Taxation by that jurisdiction. No Company or Subsidiary is or
has ever been a “United States Real Property Holding Corporation” (as defined in Section 897(c)(2)
of the Code).

          (c) No Company or Subsidiary is obligated by any contract, agreement, governing document or
other arrangement to indemnify any other Person with respect to Taxes. No Company or Subsidiary is
now or has during the last four (4) years been a party to or bound by any contract, agreement,
governing document or other arrangement (whether or not written and including any arrangement
required or permitted by law) which (i) requires any Company or Subsidiary to make any Tax payment
to or for the account of any other Person, (ii) affords any other Person the benefit of any net
operating loss, net capital loss, investment Tax credit, foreign Tax credit, charitable deduction
or any other Tax credit or Tax attribute (including deductions and credits related to alternative
minimum Taxes), (iii) requires or permits the transfer or assignment of income, revenues, receipts
or gains to any Company or Subsidiary, or (iv) grants any power of attorney with respect to any
matter relating to Taxes. No Company or Subsidiary has ever been a member of any affiliated,
consolidated, combined or unitary group for any Tax purpose other than as disclosed in Section
3.9(c) of the Disclosure Schedule. No Company or Subsidiary has any liability or potential
liability for Taxes of any Person under Treasury Regulation Section 1.1502-6.

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          (d) Section 3.9(d) of the Disclosure Schedule sets forth (i) a list of all jurisdictions
(whether foreign or domestic) to which any Tax is or has been properly payable by any Company or
Subsidiary during the past five (5) years, (ii) all sales for which gain has been reported under
the installment method of accounting for Tax purposes and for which gain is required to be
recognized for Tax purposes by any Company or Subsidiary from or after the Closing Date and any
other transactions entered into by any Company or Subsidiary before the Closing Date which may
result in Tax owed by any Company or Subsidiary after the Closing Date, (iii) all rulings or
determinations obtained by any Company or Subsidiary from any Governmental Authority responsible
for the imposition of any Tax that may affect any Company or Subsidiary from or after the Closing
Date, (iv) all Tax Returns of the Companies and the Subsidiaries for periods ending after December
31, 2001 and all other Tax Returns with respect to which the applicable period for assessment under
Applicable Laws, after giving effect to extensions or waivers, has not expired, (v) all material
items of income, gain, deduction or loss, or similar items, whether or not recognized or incurred,
resulting from any intercompany transaction to which any Company or Subsidiary is a party, (vi) a
list of all pending Tax audits or inquiries, and (vii) any Tax reserves included in the “Deferred
Taxes” or similar line item in any balance sheets of the Companies or the Subsidiaries included in
the Financial Statements and the December Statements, separately identified and itemized by dollar
amount.

          (e) Each Company and Subsidiary has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee, independent contractor,
creditor, shareholder or other third party.

          (f) Each Company is now and has been at all times since the date set forth on Section 3.9(f)
of the Disclosure Schedule an S Corporation for federal income Tax purposes within the meaning of
Section 1361(a) of the Code pursuant to a valid election to be an S Corporation filed by such
Company with the Internal Revenue Service. Section 3.9(f) of the Disclosure Schedule sets forth
(i) each jurisdiction in which a valid S corporation election for each Company is in effect or such
Company is otherwise treated as an S corporation for state or local Tax purposes and the date
beginning with such election or treatment has been continuously in effect, and (ii) each
jurisdiction listed in Section 3.9(d)(i) of the Disclosure Schedule in which each Company is not or
has not at all times since its inception been treated as an S corporation not subject to tax for
state or local Tax purposes.

          (g) No Company has any subsidiary that is a “qualified subchapter S subsidiary” within the
meaning of Code §1361(b)(3)(B).

          (h) No Company or Subsidiary has, in the past ten (10) years, (i) acquired assets from another
corporation in a transaction in which such Company’s or Subsidiary’s, Tax basis, as the case may
be, for the acquired assets was determined, in whole or in part, by reference to the Tax basis of
the acquired assets (or any other property) in the hands of the transferor or (ii) acquired the
stock of any corporation which is a qualified subchapter S Subsidiary.

          (i) Inventory and receivables are accurately valued for Tax purposes. No income in excess of
$10,000 that has been accrued for financial reporting purposes in the books and records of any
Company has not been accrued for Tax purposes prior to the Closing Date.

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          (j) None of the Company, any Subsidiary, or any Shareholder has participated in or cooperated
with an international boycott within the meaning of Section 999 of the Code or has been requested
to do so in connection with any transaction or proposed transaction.

          (k) To the Knowledge of the Shareholders, no sales or transfer tax will be due as a result of
the Transactions or the Section 338(h)(10) Elections. The Shareholders will obtain any sales tax
certificate of authority or other governmental approval required in connection with the transfer of
stock and deemed transfer of assets in connection with the Transactions and the Section 338(h)(10)
Elections.

          (l) Section 3.18(a) of the Disclosure Schedule lists all Tax abatement or reduction agreements
or programs to which any Company or Subsidiary is party.

          (m) The only Subsidiaries of J.W. Harris, as described in Section 3.2(a) of the Disclosure
Schedule, are J.W. Harris International LLC (“J.W. Harris International”), an Ohio limited
liability company owned entirely by J.W. Harris, and Harris Corporation S. de R.L. de C.V., a
Mexican limited liability company, owned ninety-nine percent (99%) by J.W. Harris and one percent
(1%) by J.W. Harris International. J.W. Harris International is treated as a disregarded entity
and division of J.W. Harris for all Tax purposes. Harris Corporation S. de R.L. de C.V. is treated
as a limited liability company (sociedad de responsabilidad limitada) for Tax purposes in Mexico
and as a disregarded entity for Tax purposes in the United States.

          (n) The only Subsidiary of Harris-Euro, as described in Section 3.2(c) of the Disclosure
Schedule, is Harris-Euro SL, a Spanish limited liability company, wholly-owned as of the Closing by
Harris-Euro. Harris-Euro SL is treated as a corporation for Tax purposes in Spain, and as a
corporation for Tax purposes in the United States.

     3.10 Compliance with Law; Permits; Ethical Practices.

          (a) Except as set forth in Section 3.10(a) of the Disclosure Schedule, each Company and
Subsidiary is in compliance with, and at all times since January 1, 1999, has been in compliance
with, all applicable laws, statutes, orders, rules, regulations, policies or guidelines
promulgated, or judgments, decisions, consent decrees or orders entered by any Governmental
Authority (collectively, “Applicable Laws”) relating to such Company or any of its respective
Subsidiaries or their business or properties. To the Knowledge of the Shareholders, the Companies
and the Subsidiaries have heretofore made available to Lincoln Electric copies of all material
correspondence from and to all Governmental Authorities and inspectors.

          (b) Except as set forth in Section 3.10(b) of the Disclosure Schedule, since January 1, 1999,
no Company or Subsidiary has received any written communication of any Action pending or, to the
Knowledge of the Shareholders, threatened, including warning letter, consent decree, memorandum of
understanding, prosecution, injunction, seizure, civil fine or recall, alleging that it is not in
compliance with any and all Applicable Laws, regulations or orders implemented by any relevant
state, local or international Governmental Authority. To the Knowledge of the Shareholders, no
employee of any Company or Subsidiary is or has been the subject of any similar pending or
threatened Action.

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          (c) Each Company and Subsidiary is in possession of all material franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate their respective properties and to carry
on their business as it is now being conducted (collectively, the “Company Permits”). Section
3.10(c) of the Disclosure Schedule sets forth a true and complete list of all the material Company
Permits, and there is no Action pending or, to the Knowledge of the Shareholders, threatened
regarding any of the Company Permits. No Company nor Subsidiary is in default or violation of any
of the Company Permits. Except as set forth in Section 3.10(c) of the Disclosure Schedule, during
the period commencing January 1, 1999, and ending on the date hereof, no Company nor Subsidiary has
received any written notification with respect to possible conflicts, defaults or violations of
Applicable Laws. To the Knowledge of the Shareholders, except as set forth in Section 3.10(c) of
the Disclosure Schedule, no consent, approval, registration or filing with any third party or
Governmental Authority pursuant to any Company Permits is required as a result of the Transactions.

          (d) No Company, Subsidiary or any of their respective agents or representatives has offered or
given, and to the Knowledge of the Shareholders, no other Person has offered or given on its
behalf, anything of value to: (A) any official of a Governmental Authority, any political party or
official thereof, or any candidate for political office, (B) any customer or member of any
government, or (C) any other Person, in any such case while knowing or having reason to know that
all or a portion of such money or thing of value may be offered, given or promised, directly or
indirectly, to any customer, member of the government or candidate for political office for the
purpose of the following: (x) influencing any action or decision of such Person, in such Person’s
official capacity, including a decision to fail to perform such Person’s official function, (y)
inducing such Person to use such Person’s influence with any government or instrumentality thereof
to affect or influence any act or decision of such government or instrumentality to assist any
Company or Subsidiary in obtaining or retaining business for, or with, or directing business to,
any Person, or (z) where such payment would constitute a bribe, kickback or illegal or improper
payment to assist any Company or Subsidiary in obtaining or retaining business for, or with, or
directing business to, any Person.

     3.11 Intellectual Property.

          (a) Section 3.11(a) of the Disclosure Schedule sets forth a true, correct and complete list of
all of the patents, internet domain names, URL addresses, trademarks, trade names, service marks
and copyrights, and all applications, registrations, licenses, sublicenses and agreements related
to the foregoing, necessary to conduct the business of the Companies and the Subsidiaries as it is
currently conducted (collectively, the “Proprietary Rights”). The Companies and the Subsidiaries
own or are licensed to use the Proprietary Rights, free and clear of any and all Liens, except as
set forth in Section 3.11(a) of the Disclosure Schedule. Except as set forth in Section 3.11(a) of
the Disclosure Schedule, the Companies and the Subsidiaries own or are licensed to use and have the
exclusive right to make, use, sell and license the Proprietary Rights. None of the Proprietary
Rights is subject to any outstanding order, and no Action is pending or, to the Knowledge of the
Shareholders, threatened, that challenges the validity, enforceability, ownership, use or licensing
of such Proprietary Rights.

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          (b) Section 3.11(b) of the Disclosure Schedule sets forth all material licenses, sublicenses,
assignments and other agreements under which any Company or Subsidiary is either a licensor,
licensee, sublicensor, sublicense, assignor or assignee of any Proprietary Rights. To the
Knowledge of the Shareholders, no Company, Subsidiary, nor, any other party thereto, is in breach
of or default thereunder, nor is there any event that, with notice or lapse of time or both, would
constitute a default thereunder. To the Knowledge of the Shareholders, all of the licenses,
assignments and other agreements listed in Section 3.11(b) of the Disclosure Schedule are valid and
enforceable against the parties thereto in accordance with their respective terms, and will
continue to be so on the same terms immediately following the Closing.

          (c) Except as set forth in Section 3.11(c) of the Disclosure Schedule, no Company or
Subsidiary has infringed upon or unlawfully or wrongfully used any Proprietary Rights, mask work,
design right, computer software, trade secret, invention or other intellectual property or
proprietary right owned or claimed by another Person, and no Company or Subsidiary has received any
notice of any claim of infringement or any other claim or proceeding relating to any such
Proprietary Rights, mask work, design right, computer software, trade secret, invention or other
intellectual property or proprietary right. Except as set forth in Section 3.11(c) of the
Disclosure Schedule, to the Knowledge of the Shareholders, no Person is infringing upon or
otherwise violating the Proprietary Rights. To the Knowledge of the Shareholders, no employee or
consultant of any Company or Subsidiary is in violation of any requirement of law applicable to
such employee or consultant, or any term of any employment or consulting agreement, any patent or
invention disclosure agreement, any non-competition or non-disclosure agreement, or any other
contract or agreement relating to the relationship of such employee or consultant with any Company
or Subsidiary.

          (d) To the Knowledge of the Shareholders, since January 1, 1999, none of the designs, plans,
trade secrets, source codes, inventions, processes, procedures, research records, know-how and
formulae of the Companies or any of the Subsidiaries, the value of which is contingent upon
maintenance of confidentiality thereof, has been disclosed, or is required to be disclosed, to any
Person other than employees, consultants, representatives and agents of the Companies or the
Subsidiaries, all of whom are bound by confidentiality or non-disclosure agreements.

          (e) The computer software of the Companies and the Subsidiaries (the “Software”) is suitable
for the purpose or purposes for which it is being used. Proprietary, customized, and/or modified
Software used by the Companies and the Subsidiaries is in machine readable form, and includes all
object code, source code, programs, disks, and other materials necessary to use such Software. The
Companies and the Subsidiaries are the sole owners of or are licensed to use the Software. No
Company or Subsidiary has an obligation to compensate any Person for the development, use, sale or
exploitation of the Software, nor has any Company or Subsidiary granted to any other Person or
entity any license, option or other rights to develop, use, sell or exploit in any manner the
Software, whether requiring the payment of royalties or not.

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     3.12 Title to and Condition of Properties.

          (a) Except as set forth in Section 3.12(a) of the Disclosure Schedule, the Companies and the
Subsidiaries have good, valid and indefeasible title, free and clear of all Liens other than
Permitted Liens, to all of their material assets and properties of every kind, nature and
description, real or personal, tangible or intangible, wherever located. As of the Closing, J.W.
Harris will have good, valid and indefeasible title to the Mason Property, free and clear of all
Liens other than Permitted Liens. As of the Closing, Conticast Corporation will have good, valid
and indefeasible title to the Conticast Property, free and clear of all Liens other than Permitted
Liens. Such assets and properties constitute all of the assets and property now used in and
necessary for the conduct of their businesses as presently conducted (including all material
property and assets shown or reflected on the Financial Statements or the December Statements, when
delivered, except assets sold in the Ordinary Course of Business). All such assets and properties
are usable for their current uses without violating any Applicable Laws, or any applicable private
restriction. Except as set forth in Section 3.12(a) of the Disclosure Schedule, no financing
statement under the Uniform Commercial Code or similar Applicable Law naming any Company or
Subsidiary or any of their predecessors is on file in any jurisdiction in which such Company or
Subsidiary owns property or does business, and no Company or Subsidiary is a party to or bound
under any agreement or legal obligation authorizing any party to file any such financing statement.
Section 3.12(a) of the Disclosure Schedule contains a complete and accurate list of the location
of all real property that is or has been owned, leased or operated by any Company or Subsidiary
during the last ten years and describes the nature of such Company’s or Subsidiary’s interest or
prior interest in that real property.

          (b) Section 3.12(b) of the Disclosure Schedule lists all leases and subleases of real
property, whether any Company or Subsidiary is lessor or lessee, including all amendments thereto,
to which any Company or Subsidiary is a party or has been a party within the past five years. Each
real estate lease to which any Company or Subsidiary is currently a party is in full force and
effect and such Company or Subsidiary holds a valid, existing and insurable interest therein.

          (c) Except as set forth in Section 3.12(c) of the Disclosure Schedule, all machinery and
equipment and tangible personal property owned, leased or used by any Company or Subsidiary and
material to the operation of their businesses are suitable for the purpose or purposes for which
they are being used (including compliance in all material respects with all Applicable Laws) and
are in good condition and repair, ordinary wear-and-tear excepted. Except as set forth in Section
3.12(c) of the Disclosure Schedule, all real property owned, leased or used by any Company or
Subsidiary, including the Transferred Properties (collectively, the “Real Property”), is in
compliance with all Applicable Laws of the jurisdiction relating to building and zoning matters in
which it is located and conform in all material respects to all such Applicable Laws on a current
basis without reliance on any variance or other special limitation or conditional or special use
permit and, to the Knowledge of the Shareholders, there are no such Applicable Laws or other
building or use restrictions to which any Real Property is subject that would prohibit any
Company’s or Subsidiary’s use of such Real Property. All gas, electricity, water, sanitary and
storm sewer, and telephone facilities required for the operation of the Real Property as currently
used are available within the jurisdiction and control of either public utility companies or local
Governmental Authorities, and no Real Property utilizes any private sewer,

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water, or utility plant. Except as set forth in Section 3.12(c) of the Disclosure Schedule,
there is no real estate Tax abatement or reduction program in effect with respect to the Real
Property, and the Real Property Transfers will not result in any recoupment or increase in real
estate taxes for periods prior to the Closing. There is no material defect in any of the
structural components of any buildings or other improvement on any Real Property or its electrical,
plumbing, HVAC, life safety or other building systems. No Company or Subsidiary has received
notice from any insurance company that it will require alterations of any Real Property for
continuance of a policy insuring such property or the maintenance of rates with respect thereto
(other than notices of alterations that have been completed). There are no pending or, to the
Knowledge of the Shareholders, threatened or contemplated Actions regarding condemnation or other
eminent domain actions or proceedings affecting any Real Property or any part thereof or of any
sale or other disposition of any Real Property or any part thereof in lieu of condemnation. No
portion of the Real Property has suffered any material damage by fire or other casualty that has
not heretofore been completely repaired and restored.

          (d) None of the Real Property is subject to any purchase options, rights of first refusal,
first option or other rights, and all such rights existing prior to the date hereof have been fully
and finally terminated and waived and are of no further force or effect.

     3.13 Environmental Matters.

          (a) As used herein, the term “Environmental Laws” means all past and present federal, state,
local or foreign Applicable Laws relating to pollution or protection of human health or the
environment (including ambient air, surface water, groundwater, land surface or subsurface strata),
including Applicable Laws relating to emissions, discharges, releases or threatened releases of
chemicals, petroleum, pollutants, contaminants, or industrial, toxic or hazardous substances or
wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations
issued, entered, promulgated or approved thereunder.

          (b) Except as set forth in Section 3.13(b) of the Disclosure Schedule, there are, with respect
to the Companies, the Subsidiaries and their respective predecessors, (i) no past or present
violations of Environmental Laws and (ii) no releases or threats of releases of any Hazardous
Materials into the environment or actions, activities, circumstances, conditions, events,
incidents, or contractual obligations which may give rise to any state common law environmental
liability or any liability under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 or any other Environmental Law and no Company or Subsidiary has received any
notice with respect to any of the foregoing, nor is any Action pending or, to the Knowledge of the
Shareholders, threatened in writing in connection with any of the foregoing.

          (c) Except as disclosed in Section 3.13(c) of the Disclosure Schedule, no Hazardous Materials
were or are contained on or about any real property currently or previously owned or leased by any
Company or Subsidiary or their respective predecessors. No Hazardous Materials were released on or
about any real property currently or previously owned or leased by

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any Company or Subsidiary or their respective predecessors during the period the real property
is or was owned or leased by any Company or Subsidiary or their respective predecessors, except in
quantities that would not result in a violation of Environmental Laws or that would not subject or
expose the Companies and the Subsidiaries to claims or liability under common law or under any
Environmental Laws. To the extent any Company or Subsidiary or their respective predecessors
currently use or previously used real property which any Company or Subsidiary or their respective
predecessors never owned or leased, (i) no Hazardous Materials, except as disclosed in Section
3.13(c) of the Disclosure Schedule, were or are contained on or about the portion of such real
property currently or previously used by any Company or Subsidiary or their respective predecessors
and (ii) no Hazardous Materials were released on or about any such portion of real property
previously used by any Company or Subsidiary or their respective predecessors during the period the
real property was used by any Company or Subsidiary or their respective predecessors, except in the
normal course of business of the Companies and the Subsidiaries which is otherwise in compliance
with all applicable Environmental Laws.

          (d) Except as set forth in Section 3.13(d) of the Disclosure Schedule, there are no
underground storage tanks on or under any real property currently or previously owned, leased or
used by any Company or Subsidiary.

          (e) The Companies and the Subsidiaries have obtained all permits, licenses and other
authorizations (“Environmental Permits”) required under the Environmental Laws relating to the real
property owned, leased or used by any Company or Subsidiary and any Company’s or Subsidiary’s use
thereof. The Environmental Permits are in full force and effect and the Companies and the
Subsidiaries are and have been in material compliance with them since the dates of their issuance.
Section 3.13(e) of the Disclosure Schedule lists all Environmental Permits.

          (f) Except as set forth in Section 3.13(f) of the Disclosure Schedule, no asbestos-containing
materials are located on the real property owned, leased or used by any Company or Subsidiary.

          (g) Except as set forth in Section 3.13(g) of the Disclosure Schedule, no Company or
Subsidiary has received any written notice from any Governmental Authority or private entity
advising or asserting that (i) any real property owned, leased or used by any Company or
Subsidiary, (ii) any real property previously owned, leased or used by any Company or Subsidiary,
or (iii) any Company or Subsidiary, is the subject of any Action relating to the environmental
condition of such property or any Company or Subsidiary. No such property is listed in CERCLIS,
the federal National Priorities List or any similar state or federal lists of suspected
contaminated property and, except as set forth in Section 3.13(b) of the Disclosure Schedule, no
off-site disposal location currently or formerly used by any Company or Subsidiary or their
respective predecessors is so listed.

     3.14 Litigation. Except as set forth in Section 3.14 of the Disclosure Schedule,
there is no suit, claim, action, arbitration, hearing, investigation, charge, complaint, demand or
proceeding (each, an “Action”) pending or, to the Knowledge of the Shareholders, threatened by or
against any Company or Subsidiary or any officer or director of any Company or Subsidiary. No
Company or Subsidiary is subject to any outstanding order, writ, injunction or decree which,

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individually or in the aggregate, insofar as can be reasonably foreseen, could have a Material
Adverse Effect on any Company or Subsidiary. Except as set forth in Section 3.14 of the Disclosure
Schedule, since January 1, 1999, (a) there has not been any Action asserted, or to the Knowledge of
the Shareholders, threatened against any Company or Subsidiary relating to any Company’s or
Subsidiary’s products or services or method of doing business or its relationship with past,
existing or future users or purchasers of any products or services of any Company or Subsidiary and
(b) no Company or Subsidiary has been subject to any outstanding order, writ, injunction or decree
relating to any Company’s or Subsidiary’s products or services or its method of doing business or
its relationship with past, existing or future customers, lessees, users, purchasers or licensees
of any Intellectual Property, goods or services of any Company or Subsidiary.

     3.15 Brokerage and Finder’s Fees. Except with respect to the agreement between J.W.
Harris and Gulf Capital Partners, Inc., all negotiations relating to this Agreement and the
Transactions have been carried on by or on behalf of the Companies and the Shareholders in such a
manner as not to give rise to any claim against any Company, Subsidiary, or Lincoln Electric for a
finder’s fee, brokerage commission, advisory fee or other similar payment.

     3.16 Employee Benefit Matters.

          (a) U.S. Employee Benefits.

          (i) For purposes of this Section 3.16, the following terms have the definitions given
below:

     “Controlled Group Liability” means any and all liabilities under (i) Title IV of ERISA,
(ii) Section 302 of ERISA, (iii) Sections 412 and 4971 of the Code, (iv) the continuation
coverage requirements of Sections 601 et seq. of ERISA and Section 4980B of
the Code and the portability and nondiscrimination requirements of Sections 701 et
seq. of ERISA and Sections 9801 et seq. of the Code, or (v) Section
4975 of the Code.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the
regulations promulgated thereunder.

     “ERISA Affiliate” means, with respect to any entity, trade or business, any other
entity, trade or business that is or was a member of a group described in Section 414(b),
(c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes the first entity,
trade or business, or that is or was a member of the same “controlled group” as the first
entity, trade or business pursuant to Section 4001(a)(14) of ERISA.

     “Plans” means all employee benefit plans, programs, policies, practices, and other
arrangements providing benefits to any employee or former employee or beneficiary or
dependent thereof, or to any present or former director, consultant or agent or dependent
thereof, whether or not written, and whether covering one person or more than one person,
sponsored or maintained by any Company, any Subsidiary or any ERISA Affiliate or to which
any Company, any Subsidiary or any ERISA Affiliate contributes or is obligated to contribute
or under which any current or former employee, director, consultant or agent is entitled to
any benefits (whether or not contingent or a result of

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service to any Company, Subsidiary or ERISA Affiliate). Without limiting the
generality of the foregoing, the term “Plans” includes all employee welfare benefit plans
within the meaning of Section 3(1) of ERISA and all employee pension benefit plans within
the meaning of Section 3(2) of ERISA and all employee stock option or stock purchase plans,
bonus or incentive plans or programs, deferred compensation arrangements, vacation policies,
sick policies, severance pay plans, practices or agreements, fringe benefits, employment
agreements, consulting agreements and change in control or retention arrangements.

     “Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as those terms are defined in
Part I of Subtitle E of Title IV of ERISA.

          (ii) Section 3.16(a)(ii) of the Disclosure Schedule lists all Plans sponsored,
maintained or contributed to, or required to be contributed to, by any Company, any
Subsidiary or by any ERISA Affiliate within the last six (6) years. With respect to each
Plan, the Companies have made available to Lincoln Electric a true, correct and complete
copy of: (i) each writing constituting a part of such Plan, including all plan documents
and amendments thereto, benefit schedules, trust agreements, and insurance contracts and
other funding vehicles, (ii) the three (3) most recent Annual Reports (Form 5500 Series) and
accompanying schedules, if any, (iii) the current summary plan description, if any; (iv) the
most recent annual financial report, if any, (v) the most recent determination letter from
the Internal Revenue Service, if any, (vi) the most recent actuarial/valuation, if any,
(vii) any notices provided either to any participants in any Plan or to any governmental
agency, commission or regulatory body relative to any Plan in the past five years; (viii)
all contracts with third party administrators, actuaries, investment managers, consultants,
or others that relate to the Plan; and (ix) all compliance reports provided by third party
administrators, actuaries or others relative to the Plan during the past three years. No
Company, Subsidiary nor any ERISA Affiliate has any plan or commitment to create any
additional Plan or to modify or change any existing Plan that would affect any employee,
former employee, director, former director, consultant, former consultant, agent or former
agent of any Company, any Subsidiary or any ERISA Affiliate.

          (iii) The Internal Revenue Service has issued a favorable determination letter with
respect to each Plan that is intended to be a “qualified plan” within the meaning of Section
401(a) of the Code (a “Qualified Plan”) evidencing the Plan’s compliance with the so-called
“GUST” amendments, a copy of which has been provided to Lincoln Electric and, except as set
forth in Section 3.16(a)(iii) of the Disclosure Schedule, there are no existing
circumstances nor any events that have occurred that could adversely affect the qualified
status of any Qualified Plan or the related trust and there has been no termination or
partial termination of such plan.

          (iv) Except as set forth in Section 3.16(a)(iv) of the Disclosure Schedule, all
contributions required to be made to any Plan by Applicable Laws or by any plan document or
other contractual undertaking, and all premiums due or payable with respect to insurance
policies funding any Plan, for any period through the Closing Date

-25-

 

have been paid in full or, to the extent not required to be made or paid before the
Closing Date have been or will be fully reflected in the Financial Statements and the
December Statements.

          (v) Except as set forth in Section 3.16(a)(v) of the Disclosure Schedule, the
Companies, the Subsidiaries and all ERISA Affiliates have materially complied and are in
material compliance with all provisions of ERISA, the Code and all laws and regulations
applicable to the Plans. Each Plan has been operated in material compliance with its terms
and in accordance with all Applicable Laws. There is not now, and there are no existing,
circumstances that could give rise to, any requirement for the posting of security with
respect to a Plan or the imposition of any Lien on the assets of any Company, any Subsidiary
or any ERISA Affiliate under ERISA or the Code. Each Plan includes provisions which
effectively reserve the rights of the sponsor of the Plan to amend or terminate the Plan.

          (vi) No Plan is subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of
the Code. No Plan is a “multiemployer plan” within the meaning of Section 4001(a)(3) of
ERISA (a “Multiemployer Plan”) or a plan that has two or more contributing sponsors at least
two of whom are not under common control, within the meaning of Section 4063 of ERISA (a
“Multiple Employer Plan”), nor has any Company, any Subsidiary or any of their respective
ERISA Affiliates, at any time within five years before the date hereof, contributed to or
been obligated to contribute to any Multiemployer Plan or Multiple Employer Plan.

          (vii) Except as set forth in Section 3.16(a)(vii) of the Disclosure Schedule, there
does not now exist, and there are no existing, circumstances that could result in, any
Controlled Group Liability that would be a liability of any Company or Subsidiary following
the Closing Date. Without limiting the generality of the foregoing, no Company, Subsidiary
nor any of their respective ERISA Affiliates has engaged in any transaction described in
Section 4069 of ERISA or any transaction that constitutes a withdrawal under Section 4201
et seq. of ERISA.

          (viii) Except as set forth in Section 3.16(a)(viii) of the Disclosure Schedule and
except for health continuation coverage as required by Section 4980B of the Code or Part 6
of Title I of ERISA, no Company or Subsidiary has liability for life, health, medical or
other welfare benefits to former employees or beneficiaries or dependents thereof. To the
Knowledge of the Shareholders, there has been no communication to employees of any Company,
any Subsidiary or ERISA Affiliates that could reasonably be expected or interpreted to
promise or guarantee such employees retiree health or life insurance benefits or other
retiree death benefits on a permanent basis.

          (ix) Except as set forth in Section 3.16(a)(ix) of the Disclosure Schedule, no Plan
obligates any Company or Subsidiary to pay separation, severance, termination, bonus or
similar benefits as a result of the Transactions and neither the execution and delivery of
this Agreement nor the consummation of the Transactions will result in, cause the
accelerated vesting or delivery of, or increase the amount or value of,

-26-

 

any payment or benefit to any employee, officer, director or consultant of any Company
or Subsidiary, and Section 3.16(a)(ix) of the Disclosure Schedule specifies the amount of
any such payment or benefit. Without limiting the generality of the foregoing, no amount
paid or payable any Company or Subsidiary in connection with the Transactions either solely
as a result thereof or as a result of such Transactions in conjunction with any other events
will be an “excess parachute payment” within the meaning of Section 280G of the Code.

          (x) There are no Actions pending or, to the Knowledge of the Shareholders, threatened
(other than claims for benefits in the ordinary course), which have been asserted or
instituted against the Plans, any fiduciaries thereof with respect to their duties to the
Plans or the assets of any of the trusts under any of the Plans which could reasonably be
expected to result in any material liability of any Company or Subsidiary.

          (xi) Except as set forth in Section 3.16(a)(xi) of the Disclosure Schedule, none of the
assets of any Plan are invested in employer securities or employer real property.

          (b) Mexico Employee Benefits.

          (i) Except as set forth in Section 3.16(b) of the Disclosure Schedule, none of the
Companies or the Subsidiaries maintains or contributes to any benefit plan in Mexico which
provides health, accident or life insurance benefits to employees, their spouses or
dependents, other than pursuant to applicable Mexican Labor Regulations. Each employee
benefit plan under Mexican labor and social security laws and regulations (“Mexican Labor
Regulations”) and each other material employee benefit plan, policy or arrangement whether
oral or in writing maintained by each of the Subsidiaries primarily in connection with its
operations in Mexico comply in form and in operation with the requirements of applicable
laws and regulations, including Mexican Labor Regulations, and is listed and described in
Section 3.16(b) of the Disclosure Schedule.

          (ii) Each Company and Subsidiary is now, and has been since the commencement of any
prescription period related to compliance with Mexican Labor Regulations that continues to
run as of the date hereof, in compliance with all provisions of applicable Mexican Labor
Regulations and all payments due thereunder from each Company and Subsidiary have been made
when due, including, without limitation, contributions to the Mexican Social Security
Institute (Instituto Mexicano del Seguro Social), mandatory retirement fund (SAR) and the
Mexican Housing Institute (INFONAVIT).

          (c) Spain Employee Benefits.

          (i) Harris-Spain has complied timely and with the applicable formalities with all its
Tax and Social Security obligations. In particular, the Spanish Subsidiary has withheld from
each one of the payments made to its employees, the amount corresponding to personal income
tax withholdings and social security

-27-

 

contributions, and has deposited such amounts when due with the competent bodies. The
Spanish Subsidiary is also up-to-date with all payments owed for the employer’s National
Insurance contribution.

               (ii) Except as mandated by the Spanish government, the Spanish Subsidiary does not have
any private accident, life, health or other insurance for the employees, nor has it arranged
pension plans. Nor are any payments in kind, benefits or other advantages (stock option
plans, incentives, bonuses, car, golden parachutes, etc.) made, pending payment or promised
to the employees.

               (iii) The Spanish Subsidiary fulfills all applicable occupational health and safety and
occupational hazard regulations. The work centers are equipped with the facilities and
equipment required by Law to prevent accidents in the workplace, the employees work suitably
equipped (in terms of clothing, equipment, protection, etc.) in accordance with the
provisions of the Law.

               (iv) The Spanish Subsidiary has complied in time and with the applicable formalities
with all its Tax obligations corresponding to fiscal periods which are not prescribed under
Spanish General Taxation Act (Act 58/2003), articles 66 to 70.

               (v) The financial documentation and tax declarations presented to the Authorities has
been filed according to the legal previsions applicable in the moment of their presentation,
and the data included are correct, complete and truly reflects the tax status of the Spanish
Subsidiary.

     3.17 Officers, Employees and Compensation. Section 3.17 of the Disclosure Schedule
sets forth the names of all directors and officers of each Company and Subsidiary, the total
salary, bonus, fringe benefits and perquisites each received from the Companies and the
Subsidiaries in the year ended December 31, 2004, and any changes to the foregoing which have
occurred subsequent to December 31, 2004. Section 3.17 of the Disclosure Schedule also lists and
describes the current compensation of any employee of any Company or Subsidiary whose total current
salary and bonus exceeds $75,000. Except as disclosed in Section 3.17 of the Disclosure Schedule,
there are no other forms of compensation paid to any such director, officer or employee of any
Company or Subsidiary. The amounts accrued on the books and records of the Companies and the
Subsidiaries for all commissions and other fees payable to agents, salesmen and representatives,
vacation pay and sick pay will be adequate to cover the Companies’ and the Subsidiaries’
liabilities for all such items. Except as set forth in Section 3.17 of the Disclosure Schedule, no
Company or Subsidiary has become obligated, directly or indirectly, to any shareholder, director or
officer of any Company or Subsidiary or any person related to such person by blood or marriage,
except for current liability for such compensation. Except as set forth in Section 3.17 of the
Disclosure Schedule, no shareholder, director, officer, agent or, to the Knowledge of the
Shareholders, employee of any Company or Subsidiary, or any person related to any such person by
blood or marriage, holds any position or office with or has any material financial interest, direct
or indirect, in any supplier, customer or account of, or other outside business which has or has
had material transactions with, any Company or Subsidiary. No Company or Subsidiary has an
agreement or understanding with any shareholder, director, officer, employee or representative of
any Company or Subsidiary that would influence any such

-28-

 

person not to become associated with Lincoln Electric from and after the Closing or from
serving any Company or Subsidiary after the Closing in a capacity similar to the capacity presently
held.

     3.18 Contracts.

          (a) Section 3.18(a) of the Disclosure Schedule lists all written or oral contracts,
agreements, guarantees, leases and executory commitments (each a “Contract”) to which any Company
or Subsidiary is a party and which fall within any of the following categories:

               (i) Contracts not entered into in the Ordinary Course of Business,

               (ii) joint venture, partnership and similar agreements,

               (iii) Contracts which are service contracts or equipment leases involving payments by
any Company or Subsidiary of more than $100,000 per year,

               (iv) Contracts containing covenants purporting to limit the freedom of any Company or
Subsidiary to compete in any line of business in any geographic area or to hire any
individual or group of individuals, or requiring any Company or Subsidiary to deal
exclusively with, grant exclusive rights to, or refrain from dealing with products that are
competitive with any other party’s products,

               (v) Contracts which after the Closing would have the effect of limiting the freedom of
Lincoln Electric or its subsidiaries (other than the Companies and the Subsidiaries) to
compete in any line of business in any geographic area or to hire any individual or group of
individuals, or requiring Lincoln Electric or its subsidiaries (other than the Companies and
the Subsidiaries) to deal exclusively with, grant exclusive rights to, or refrain from
dealing with products that are competitive with any other party’s products,

               (vi) Contracts that contain minimum purchase conditions or requirements or other terms
that restrict or limit the purchasing relationships of any Company or Subsidiary or their
respective Affiliates, or any customer, licensee or lessee thereof,

               (vii) Contracts relating to any outstanding commitment for capital expenditures in
excess of $100,000,

               (viii) Contracts relating to the lease or sublease of or sale or purchase of real or
personal property involving any annual expense or price in excess of $100,000 and not
cancelable by any Company or Subsidiary (without premium or penalty) with ninety or fewer
days’ notice,

               (ix) Contracts with any labor organization,

               (x) indentures, mortgages, promissory notes, loan agreements, guarantees of amounts in
excess of $100,000, letters of credit or other agreements or

-29-

 

instruments of any Company or Subsidiary or commitments for the borrowing or the
lending of money by any Company or Subsidiary or providing for the creation of any Lien upon
any of the assets of any Company or Subsidiary,

               (xi) Contracts that are fixed price or other risk sharing agreements with customers not
cancelable by any Company or Subsidiary (without premium or penalty) at any time with thirty
or fewer days notice,

               (xii) Contracts involving annual revenues of, or expenditures by any Company or
Subsidiary in excess of $100,000,

               (xiii) Contracts providing for “earn-outs” or other contingent payments potentially
involving more than $100,000 over the term of the Contract,

               (xiv) Contracts with or for the benefit of any holder of capital stock or options to
purchase capital stock of any Company, any Subsidiary, any affiliate (as such term is
defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended) of
any Company or Subsidiary or any such holder or immediate family member thereof,

               (xv) all Tax abatement or reduction agreements or programs and all related documents
which are material, and

               (xvi) all other Contracts not called for above that are material to the business of any
Company or Subsidiary as it is currently being or proposed to be conducted.

All such Contracts are valid and binding obligations of the Companies or the Subsidiaries, as
applicable, and, to the Knowledge of the Shareholders, the valid and binding obligation of each
other party thereto. Except as set forth in Section 3.18(a) of the Disclosure Schedule, no
Company, Subsidiary nor, to the Knowledge of the Shareholders, any other party thereto is in
violation of or in default in respect of, nor has there occurred an event or condition which with
the passage of time or giving of notice (or both) would constitute a default under or permit the
termination of, any Contract to which any Company or Subsidiary is a party.

          (b) Except as set forth in Section 3.18(b) of the Disclosure Schedule, no consent, permission,
waiver or approval is required to be obtained from, and no penalty, assessment or special payment
is required to be paid to, and no notice is required to be sent to, any third party or Governmental
Authority in order to preserve for the Companies or the Subsidiaries after the Closing the benefits
of the Contracts.

     3.19 Accounts Receivable; Inventories.

          (a) All accounts and notes receivable (including lease and finance notes receivable) and
accrued interest receivable of each Company and each Subsidiary represent valid obligations arising
from sales actually made or services actually performed and have arisen in the Ordinary Course of
Business, and the accounts receivable reserves reflected on the balance sheet included in the
Financial Statements and the December Statements are as of the date thereof

-30-

 

established in accordance with GAAP procedures applied on a consistent basis with those used
to prepare the Audited Financial Statements.

          (b) The inventories reflected on the balance sheet included in the Financial Statements and
the December Statements have been valued in accordance with GAAP procedures applied on a consistent
basis with those used to prepare the Audited Financial Statements, prior to the reflection of the
LIFO reserve. Physical adjustments since the date of the most recent Financial Statements have
been correctly recorded in the Ordinary Course of Business. Such inventories (i) are carried at an
amount not in excess of the lower of cost or net realizable value, and (ii) do not include any
inventory which is obsolete, surplus or not usable or salable in the Ordinary Course of Business,
in each case net of reserves provided therefor. Such inventories consist of items of quality and
quantity that are adequate for the conduct of the business of the Companies and the Subsidiaries
and inventory levels are not in excess of normal operating requirements of the Companies and the
Subsidiaries.

     3.20 Labor Matters. Except as set forth in Section 3.20 of the Disclosure Schedule,
no Company or Subsidiary is a party to any labor contracts, collective bargaining agreements or
employment or consulting agreements with any persons employed by any Company or Subsidiary or any
Persons otherwise performing services primarily for any Company or Subsidiary (the “Business
Personnel”). No Company or Subsidiary has engaged in any unfair labor practice with respect to
Business Personnel, and there is no unfair labor practice complaint pending or, to the Knowledge of
the Shareholders, threatened, against any Company or Subsidiary with respect to Business Personnel.
There is no labor strike, dispute, slowdown or stoppage pending or, to the Knowledge of the
Shareholders, threatened against any Company or Subsidiary, and no Company or Subsidiary has
experienced any labor strike, dispute, slowdown or stoppage or other labor difficulty involving its
employees since January 1, 2001.

     3.21 Operation of the Companies’ Business; Relationships. To the Knowledge of the
Shareholders, the relationships of the Companies and the Subsidiaries with their customers and
suppliers are satisfactory, and the execution of this Agreement, and the consummation of the
Transactions will not materially adversely affect the relationships of any Company or Subsidiary
with such customers or suppliers. Section 3.21 of the Disclosure Schedule describes each
termination or non-renewal that has occurred with respect to any material Contract with any
customer or supplier from January 1, 2003 to the date of this Agreement.

     3.22 Product Warranties and Liabilities. Except as set forth on Section 3.22 of the
Disclosure Schedule, the Companies and the Subsidiaries have made no warranties, guaranties, return
policies or assurances of products and services that are in effect or proposed. Section 3.22 of
the Disclosure Schedule sets forth a description of each pending or, to the Knowledge of the
Shareholders, threatened Action under any warranty or guaranty against any Company or Subsidiary.
Except as set forth in Section 3.22 of the Disclosure Schedule, no Company or Subsidiary has
incurred, nor, to the Knowledge of the Shareholders, is there any basis for alleging, any
liability, damage, loss, cost or expense as a result of any defect or other deficiency (whether of
design, materials, workmanship, labeling instructions or otherwise) (“Product Liability”) with
respect to any product sold or services rendered by or on behalf of any Company or Subsidiary
(including any licensee thereof) prior to the Closing, whether such Product Liability is incurred
by reason of any express or implied warranty (including any warranty of

-31-

 

merchantability or fitness), any doctrine of common law (tort, contract or other), any
statutory provision or otherwise and irrespective of whether such Product Liability is covered by
insurance.

     3.23 Insurance.

          (a) Section 3.23 of the Disclosure Schedule contains a true, correct and complete list of all
of the past and current general-liability insurance policies known by the Companies and the
Subsidiaries to have been issued to them before April 1, 2003, and all insurance policies known by
the Companies and the Subsidiaries to have been issued to them for the periods from April 1, 2003,
through March 31, 2005. Copies of all such policies (or, where complete policies are unavailable,
all remaining evidence of such policies) that are in the possession of the Companies and the
Subsidiaries have been made available to Lincoln Electric.

          (b) Except as set forth in Section 3.23 of the Disclosure Schedule, no Person other than the
Companies and the Subsidiaries claims rights as an insured under any insurance policy identified
therein. The Shareholders shall take no action that extinguishes or otherwise adversely affects
the rights of the Companies and the Subsidiaries under the insurance policies and shall cooperate
with Lincoln Electric in preserving all such rights.

          (c) All policies indicated as being current in Section 3.23 of the Disclosure Schedule are in
full force and effect in accordance with their terms; no notice of cancellation thereof or default
thereunder has been received; and there is no existing default or event which, with the giving of
notice by the insurer or lapse of time or both, would constitute a default thereunder. Except as
set forth in Section 3.23 of the Disclosure Schedule, no Company or Subsidiary has been refused any
insurance, nor has its coverage been limited, by any insurance carrier to which it has applied for
insurance or with which it has carried insurance during the past five (5) years.

          (d) Except as set forth in Section 3.23 of the Disclosure Schedule, the policies of fire,
theft, liability, professional practice and other insurance currently maintained with respect to
the assets or businesses of the Companies and the Subsidiaries may be continued by the Companies
and the Subsidiaries without modification or premium increase after the Closing and for the
duration of their current terms, which terms expire as set forth in Section 3.23 of the Disclosure
Schedule.

     3.24 Books of Account; Records; Bank Accounts. The Companies’ and the Subsidiaries’
general ledgers, stock record books, minute books and other material records relating to the
assets, properties, contracts and outstanding legal obligations of the Companies and the
Subsidiaries are, in all material respects, complete and correct, and have been maintained in
accordance with good business practices and the matters contained therein are appropriate and
accurately reflected in the Financial Statements and the December Statements. Section 3.24 of the
Disclosure Schedule sets forth (i) a list of each bank or other financial institution in which any
Company or Subsidiary has an account, safe deposit box or custodial arrangement, (ii) the numbers
of such accounts and (iii) the names of all persons authorized to draw on such accounts or have
access to any such safe deposit box.

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     3.25 Disclosures. Neither this Agreement nor the Disclosure Schedules contain any
untrue statement of a material fact or omits to state a material fact necessary in order to make
the statements contained herein and therein not misleading.

ARTICLE IIIA. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS

     In order to induce Lincoln Electric to enter into this Agreement, each Shareholder, on a
several and individual basis, represents and warrants to Lincoln Electric that the statements
contained in this Article IIIA with respect to such Shareholder are true, correct and complete as
of the Closing.

     3A.1 Authority.

          (a) The Shareholder has the legal capacity and authority to execute and deliver this Agreement
and the Additional Documents to which he, she or it is a party and to consummate the transactions
contemplated hereby and thereby. This Agreement has been duly executed and delivered by the
Shareholder and constitutes the legal, valid and binding obligation of the Shareholder, enforceable
against the Shareholder in accordance with its terms. The Additional Documents to which the
Shareholder is a party constitute the legal, valid and binding obligations of the Shareholder,
enforceable against the Shareholder in accordance with their respective terms.

          (b) Each Shareholder that is a trust (each, a “Trust”) hereby, on a several and individual
basis, represents and warrants to Lincoln Electric that: (i) the Trust was duly created pursuant to
the laws of the State of Ohio; (ii) the Trust has its situs in and is governed by the laws of the
State of Ohio; (iii) the Trust is valid, has not terminated and has not been revoked and is not
supervised by any court; (iv) the Trust (with the exception of the Joseph W. Harris Revocable
Trust) is irrevocable and not subject to amendment; (v) no other proceedings on the part of the
Trust or the trustee of the Trust are necessary to authorize the execution and delivery of this
Agreement and the Additional Documents to which the Trust is a party or the transactions
contemplated hereby and thereby; (vi) no beneficiary of the Trust has any right to distribution
with respect to the capital stock of any Company owned by the Trust, and all of the capital stock
of any Company owned by the Trust is held free and clear of any Liens or claims by any beneficiary
of the Trust; and (vii) this Agreement and the Additional Documents to which the Trust is a party
have been duly executed and delivered by the trustee of the Trust, and constitute legal, valid and
binding obligations of the Trust, enforceable against the Trust and the trust estate of the Trust
in accordance with their terms. Lincoln Electric has received complete and correct copies of the
Trust Instrument and any related documents and there have been no amendments to the Trust
Instrument since delivery to Lincoln Electric. Set forth opposite the Trust in Section 3A.1 of the
Disclosure Schedule is (A) the individual who is the sole grantor under the Trust; (B) the
individual who is the duly appointed and sole acting trustee of the Trust; (C) the only Person
required by the agreement governing the Trust (the “Trust Instrument”) to act on behalf of the
Trust; and (D) the individual who is authorized by the Trust Instrument to execute and deliver this
Agreement and the Additional Documents to which the Trust is a party, and to consummate the
transactions and perform the obligations contemplated hereby and thereby.

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     3A.2 Capitalization; Title to Shares. The Shareholder is the sole lawful owner of
record, and beneficially, of the capital stock of each Company set forth opposite the Shareholder’s
name in Section 3A.2 of the Disclosure Schedule, free and clear of any Liens, and, except as set
forth in Section 3A.2 of the Disclosure Schedule, no other Person has a beneficial or other
interest in the capital stock of any Company owned by the Shareholder. The Shareholder is not a
party to any Contract relating to the transfer, sale, assignment, purchase, pledge, conveyance or
other disposition of any of the capital stock of any Company owned by the Shareholder.

     3A.3 Conflicts, Consents and Approvals. Except as set forth in Section 3A.3 of the
Disclosure Schedule, neither the execution and delivery by the Shareholder of this Agreement or the
execution and delivery by the Shareholder of the Additional Documents to which he, she or it is a
party nor the consummation by the Shareholder of the Transactions will:

          (a) violate, or conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with or without the giving of notice, the passage of time or otherwise,
would constitute a default) under, or entitle any party (with the giving of notice, the passage of
time or otherwise) to terminate, accelerate, modify or call a default under, or result in the
creation of any Lien upon any of the capital stock of any Company owned by the Shareholder or
require any consent of any third party under, any of the terms, conditions or provisions of any
Contract to which the Shareholder is a party;

          (b) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the
Shareholder; or

          (c) require any action or consent or approval of, or review by, or registration or filing by
the Shareholder or any of its Affiliates with, any third party or any Governmental Authority, other
than any that have been taken, obtained or made.

     3A.4 Shareholder Indebtedness. Except as may be set forth on the Projected Closing
Statement, there is no indebtedness of any Shareholder outstanding, payable or owed to any Company
or Subsidiary.

ARTICLE IV. COVENANTS OF THE PARTIES

     4.1 Public Announcements. No Party shall issue any press release or announcement
relating to the subject matter of this Agreement without the prior written approval of the other
Parties, unless such Party determines in good faith that such disclosure is necessary pursuant to
Applicable Laws or the rules and regulations governing the NASDAQ National Market.

     4.2 Certain Tax Matters.

          (a) The J.W. Harris Shareholders, the Autobraze Shareholders, and the Harris-Euro Shareholders
shall reimburse Lincoln Electric for the Taxes of the Company or Subsidiary owned by the respective
Shareholders for any taxable period ending on or before the Closing Date and the portion through
the end of the Closing Date for any Taxable period that includes (but does not end on) the Closing
Date to the extent (i) such Taxes exceed the amount reserved for such Taxes (excluding any reserve
for deferred Taxes established to reflect timing differences

-34-

 

between book and Tax income) and (ii) such Taxes were not properly accounted for in the Debt
Adjustment Amount.

          (b) In the case of any taxable period that includes (but does not end on) the Closing Date,
the amount of any Taxes shall be determined based on an interim closing of the books as of the
close of business on the Closing Date.

          (c) For each taxable period of any Company or Subsidiary that ends on or before the Closing
Date, the Shareholders shall cause to be timely prepared, submitted to Lincoln Electric for review,
and then filed by the Shareholders with the appropriate authorities (with copies provided to
Lincoln Electric) all Tax Returns of such Company or Subsidiary. Lincoln Electric shall cause to
be prepared and will file all Tax Returns for the Companies and the Subsidiaries for Tax periods
not described in the foregoing sentence of this Section 4.2(c).

          (d) The Shareholders and Lincoln Electric reasonably and in good faith shall cooperate with
each other in preparing and filing all Tax Returns, including maintaining and making available to
each other all records necessary in connection with the preparation and filing of such Tax Returns.
The Shareholders will obtain any sales tax certificate of authority or other governmental approval
required in connection with the transfer of stock and deemed transfer of assets in connection with
the Transactions and the Section 338(h)(10) Elections. The Shareholders and Lincoln Electric
further agree, upon request, to use reasonable best efforts to obtain any certificate or other
document from any Governmental Authority or any other person as may be necessary to mitigate,
reduce, or eliminate any Tax, fee, or other charge that could be imposed in connection with the
Transactions and the Section 338(h)(10) Elections.

          (e) The Companies and the Shareholders will join with Lincoln Electric in making a timely and
irrevocable election under Section 338(h)(10) of the Code (and any corresponding election permitted
under state or local tax law), as identified in Section 4.2(e) of the Disclosure Schedule with
respect to the Transactions (the “Section 338(h)(10) Elections”). At or prior to the Closing,
Lincoln Electric shall prepare and deliver to the Shareholders for signature Internal Revenue
Service Form 8023 and any other state or local forms required for the Section 338(h)(10) Elections
(collectively, the “Section 338 Forms”), subject to approval of the Shareholders, which approval
shall not be unreasonably withheld. At the Closing, each of the Section 338 Forms shall be signed
by each Shareholder and any other Person required to sign. The Shareholders shall at any time and
from time to time after the Closing cooperate with Lincoln Electric in connection with the Section
338(h)(10) Elections, including the signing by them or other Persons of any forms that Lincoln
Electric may reasonably request in order to accomplish the Section 338(h)(10) Elections. The
Shareholders shall include all income, gain, loss, deduction, or other tax item resulting from the
Section 338(h)(10) Elections on their Tax returns. Lincoln Electric shall be responsible for the
preparation and delivery to the Shareholders for signature and for the timely filing of the Section
338 Forms. The allocation for tax purposes of the Aggregate Consideration among the assets of the
Companies shall be as set forth on Exhibit F.

          (f) Notwithstanding any other provision of this Agreement to the contrary, as provided in
Section 7.2(a), the Shareholders shall indemnify Lincoln Electric and the Companies, and hold them
harmless from and against, all liability of the Companies for Taxes

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and other costs and expenses related thereto (including reasonable attorneys’ fees)
attributable to the failure of any Company to be an “S” corporation within the meaning of Section
1361(a)(1) of the Code at all times since its inception with respect to all Companies other than
J.W. Harris, and since April 1, 1985 with respect to J.W. Harris, through the Closing, and for all
Taxes and all other costs and expenses related thereto (including reasonable attorneys’ fees)
attributable to any such failure of any Company to be an S corporation not subject to Tax for state
or local Tax purposes at all times during such period under any Applicable Law of any jurisdiction
listed as an S corporation jurisdiction in Section 3.9(f) of the Disclosure Schedule.

          (g) The Companies and the Shareholders have not revoked any Company’s election to be taxed as
an S corporation within the meaning of Code Sections 1361 and 1362. The Companies and the
Shareholders have not taken any action that would result in, or fail to have taken any action or
allowed the failure of any action to be taken that would prevent, the termination of any Company’s
status as a validly electing S corporation within the meaning of Code Sections 1361 and 1362.

ARTICLE V. CONDITIONS

     5.1 Mutual Conditions. The obligations of the Parties to consummate the Transactions
are subject to fulfillment of the following conditions:

          (a) No Adverse Order. No temporary restraining order, preliminary or permanent
injunction or other order or decree which prevents the consummation of the Transactions shall have
been issued and remain in effect, and no statute, rule or regulation shall have been enacted by any
Governmental Authority which prevents the consummation of the Transactions.

          (b) No Government Action. No Action shall be instituted by any Governmental Authority
which seeks to prevent consummation of the Transactions or seeks material damages in connection
with the Transactions which continues to be outstanding.

     5.2 Conditions to Obligations of the Shareholders. The obligations of the
Shareholders to consummate the Transactions are subject to the fulfillment of the following
conditions unless waived by the Shareholders:

          (a) Representations and Warranties. Each of the representations and warranties of
Lincoln Electric set forth in this Agreement shall be true and correct.

          (b) Performance of Agreement. Lincoln Electric shall have performed each obligation
and agreement and shall have complied with each covenant to be performed and complied with by it
hereunder at or prior to the Closing.

          (c) Certificates. Lincoln Electric shall have furnished the Companies with a
certificate dated as of the Closing Date signed on behalf of it by the Chairman, President or any
Vice President to the effect that the conditions set forth in Sections 5.2(a) and (b) have been
satisfied.

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          (d) Opinion of Counsel. The Companies shall have received the legal opinion, dated
the Closing Date, of Baker & Hostetler LLP, counsel to Lincoln Electric, substantially in
the form attached hereto as Exhibit G.

          (e) Escrow Agreement. The Escrow Agreement shall have been executed and delivered by
Lincoln Electric and the escrow agent.

          (f) Noncompetition Agreements. Lincoln Electric shall have executed and delivered
each Noncompetition Agreement to which it is a party.

     5.3 Conditions to Obligations of Lincoln Electric. The obligations of Lincoln
Electric to consummate the Transactions are subject to the fulfillment of the following conditions
unless waived by Lincoln Electric:

          (a) Representations and Warranties. Each of the representations and warranties of the
Companies and the Shareholders set forth in this Agreement shall be true and correct.

          (b) Performance of Agreement. The Companies and the Shareholders shall have performed
each obligation and agreement and shall have complied with each covenant to be performed and
complied with by them hereunder at or prior to the Closing.

          (c) Certificate. Each Shareholder shall have furnished Lincoln Electric with a
certificate dated the Closing Date, to the effect that the conditions set forth in Sections 5.3(a)
and (b) have been satisfied.

          (d) Opinion of Counsel. Lincoln Electric shall have received the legal opinion, dated
the Closing Date, of Taft, Stettinius & Hollister LLP, counsel to the Companies and the
Shareholders, substantially in the form attached hereto as Exhibit H.

          (e) Consents and Approvals. The Companies shall have received and delivered to
Lincoln Electric all customer, vendor, lessee, licensee, licensor and other third party consents,
approvals and estoppel certificates listed in Section 5.3(e) of the Disclosure Schedule, each in
form and substance reasonably satisfactory to Lincoln Electric.

          (f) Shareholder Releases. Each Shareholder shall have executed and delivered to
Lincoln Electric a Shareholder Release, dated as of the Closing Date, in the form of Exhibit
I attached hereto.

          (g) Officer and Director Resignations. Each officer and director of each Company and
each Subsidiary (except Beate Surmann) shall have executed and delivered to Lincoln Electric a
resignation from such position and termination of signing authority in a form reasonably
satisfactory to Lincoln Electric.

          (h) Noncompetition Agreements. Each of Joe Harris, Gordon Harris, Robin Harris, Doug
Sprague, Steve Sprague and Terry Howard, shall have executed and delivered to Lincoln Electric a
Noncompetition Agreement substantially in the form attached hereto as Exhibit J but with
such modifications as the parties agree (collectively, the “Noncompetition

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Agreements”). Each Company shall have executed and delivered each Noncompetition Agreement to
which it is a party.

          (i) [Intentionally Omitted]

          (j) Actions Regarding Certain Plans. As of or prior to the Closing, the actions
specified in Section 5.3(j) of the Disclosure Schedule shall have been taken.

          (k) No Notice from Customers. No Company or Subsidiary shall have received notice
from any of the customers of any Company or Subsidiary set forth in Section 5.3(k) of the
Disclosure Schedule that it has terminated or intends to terminate its relationship with any
Company or Subsidiary.

          (l) Projected Closing Statement. At least two (2) business days prior to the Closing,
the Companies shall have delivered to Lincoln Electric the Projected Closing Statement pursuant to
Section 1.2(c)(i).

          (m) Real Property Transfers.

               (i) For purposes of this Section 5.3(m), the following terms have the following
meanings:

    “Mason Property” means the real property in Mason, Ohio, commonly known as 4501 Quality
Place, Mason, Ohio, and more particularly described in Exhibit K, including the land
and all buildings and other improvements located thereon and all appurtenant rights,
privileges and easements.

    “Conticast Property” means the real property in Barberton, Ohio, commonly known as 1045
Eagon Street, Barberton, Ohio, and more particularly described in Exhibit L hereto,
including the land and any buildings or other improvements located thereon and all
appurtenant rights, privileges and easements.

    “Transferred Properties” means, collectively, the Mason Property and the Conticast
Property.

               (ii) Prior to the date hereof, the Shareholders have caused J.W. Harris Development,
Ltd., an Affiliate of J.W. Harris and owner of the Mason Property to convey the Mason
Property to J.W. Harris by transferable and recordable general warranty deeds, granting and
warranting good, marketable and insurable fee-simple title to the Mason Property free and
clear of all Liens other than Permitted Liens;

               (iii) Prior to the date hereof, the Shareholders have caused J.W. Harris, owner of the
Conticast Property, to convey the Conticast Property to Conticast Corporation as partial
payment of the current liability of J.W. Harris due to Conticast Corporation by transferable
and recordable general warranty deeds, granting and warranting good, marketable and
insurable fee-simple title to the Conticast Property free and clear of all Liens other than
Permitted Liens (the transfers referred to in (ii) and (iii) collectively, the “Real
Property Transfers”).

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               (iv) In addition to the deeds described above, J.W. Harris has obtained the following
in connection with the transfer of the Mason Property (such documents and instruments,
together with such deeds, collectively, the “Transfer Documents”):

                    (1) an ALTA Form B owner’s policy of title insurance in the name of J.W. Harris
(the “Title Policy”) covering the Mason Property in a face amount equal to the fair
market value of the Mason Property, with any “printed” exceptions set forth in any
policy commitment relating to the Title Policy relating to parties in possession,
mechanics’ and materialmens’ liens or matters that would be shown by a survey of the
Mason Property having been deleted prior to the issuance of the Title Policy;

                    (2) a survey of the Mason Property prepared by a surveyor duly licensed or
registered in the State of Ohio, certified by such surveyor in accordance with the
current “Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys” as
adopted by the American Land Title Association and American Congress on Surveying
and Mapping, each of which shall include a legal description of the Mason Property,
a flood plain designation, the location of all easements affecting the Mason
Property, any encroachments onto or from the Mason Property, the location of all
buildings or other improvements on the Mason Property and the number of square feet
and acres in the Mason Property;

                    (3) all resolutions, consents, affidavits or other documents necessary to
confirm the acceptability of all off-record title matters or requested by the title
companies issuing the Title Policy; and

                    (4) any other instruments or documents reasonably required by Lincoln Electric
or the title companies issuing the Title Policy to effect or otherwise document the
Real Property Transfers.

All Transfer Documents shall be in form and substance reasonably acceptable to counsel for
J.W. Harris and Lincoln Electric.

          (n) Escrow Agreement. The Shareholders and each of the Shareholders shall have
executed and delivered the Escrow Agreement.

          (o) Transfer of Surmann’s Shares. The Shareholders shall have delivered to Lincoln
Electric fully executed documentation of the transfer to Harris-Euro of the shares of Harris Spain
held by Beate Surmann, in form and substance reasonably acceptable to Lincoln Electric.

          (p) Employment Agreements. Each of Doug Sprague and Terry Howard shall have executed
and delivered to Lincoln Electric an Employment Agreement substantially in the form attached hereto
as Exhibit M (collectively, the “Employment Agreements”). Autobraze shall have executed
and delivered to Lincoln Electric the Employment Agreements.

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ARTICLE VI. NO TERMINATION; AMENDMENT

     6.1 No Termination. The Parties acknowledge and agree that the execution and delivery
of this Agreement and the Closing of the Transactions are occurring simultaneously. Accordingly,
this Agreement shall not be deemed to be executed and delivered unless and until all of the
conditions to Closing have been satisfied or waived and, once the Closing has occurred and the
Agreement has been executed and delivered, no Party will have any right to terminate this
Agreement.

     6.2 Amendment. This Agreement may be amended only by a written instrument duly
authorized and signed on behalf of each of the Parties.

ARTICLE VII. INDEMNIFICATION

     7.1 Survival of Representations, Warranties and Agreements.

          (a) Subject to the limitations set forth in Section 7.3 below, and notwithstanding any
investigation conducted at any time by or on behalf of Lincoln Electric or the Companies, all
representations, warranties, covenants and agreements of Lincoln Electric and the Shareholders in
this Agreement and in any other agreements, documents or certificates executed or delivered by
Lincoln Electric or the Shareholders pursuant to this Agreement or in connection with the
transactions contemplated by this Agreement (the “Additional Documents”) shall survive the
execution, delivery and performance of this Agreement and the Additional Documents. This Section
7.1 shall not limit any covenant or agreement of the Parties which by its terms contemplates
performance after the Closing or after the termination of this Agreement.

          (b) As used in this Article VII, any reference to a representation, warranty or covenant
contained in any section of this Agreement shall include the section of the Disclosure Schedule
relating to such section.

     7.2 Indemnification.

          (a) Subject to the limitations set forth in this Article VII, the Principal Shareholders,
jointly and severally, shall indemnify and hold harmless Lincoln Electric and its Affiliates,
subsidiaries, officers, directors, agents and employees (each, a “Lincoln Electric Indemnified
Party”) from and against any and all losses, liabilities, damages, demands, claims, suits, actions,
judgments or causes of action, assessments, costs and expenses (including interest, penalties,
attorneys’ fees, any and all expenses incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim), and any and all amounts paid in settlement of
any claim or litigation (collectively, “Damages”), asserted against, resulting to, imposed upon, or
incurred or suffered by any Lincoln Electric Indemnified Party, directly or indirectly, as a result
of or arising from any of the following (individually an “Indemnifiable Claim” and collectively
“Indemnifiable Claims” when used in the context of a Lincoln Electric Indemnified Party as the
Indemnified Party):

               (i) any inaccuracy in or breach or nonfulfillment of, or any alleged inaccuracy in or
breach or nonfulfillment of, any of the representations or warranties made in Article III or
Article IIIA of this Agreement or in the Additional Documents;

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               (ii) any breach or non-performance of, or any alleged breach or non-performance of, any
covenant, agreement or obligation to be performed by the Shareholders pursuant to this
Agreement or the Additional Documents, including any such covenants, agreements or
obligations with respect to the Tax matters pursuant to Section 4.2;

               (iii) except for Welding Fumes Litigation, any and all liabilities related to products
manufactured, sold or delivered by or any services provided by any Company or Subsidiary
prior to the Closing Date; or

               (iv) any liabilities described in Section 7.2(a)(iv) of the Disclosure Schedule net of
any proceeds of insurance coverage of the Companies in effect prior to the Closing Date
actually received by the Companies with respect to such Indemnifiable Claim.

          (b) Subject to the limitations set forth in this Article VII, Lincoln Electric hereby
covenants and agrees to indemnify and hold harmless the Shareholders and their respective heirs,
executors, successors, representatives and assigns (each, a “Shareholder Indemnified Party”), from
and after the Closing, from and against any and all Damages asserted against, resulting to, imposed
upon, or incurred or suffered by any Shareholder Indemnified Party, directly or indirectly, as a
result of or arising from any of the following (individually, an “Indemnifiable Claim” and
collectively, “Indemnifiable Claims” when used in the context of a Shareholder Indemnified Party as
the Indemnified Party):

               (i) any inaccuracy in or breach or nonfulfillment of, or any alleged inaccuracy in or
breach or nonfulfillment of, any of the representations or warranties made by Lincoln
Electric in this Agreement or the Additional Documents; or

               (ii) Any breach or non-performance of, or any alleged breach or non-performance of, any
covenant, agreement or obligation to be performed by Lincoln Electric pursuant to this
Agreement or the Additional Documents, including any such covenants, agreements or
obligations with respect to Tax matters pursuant to Section 4.2.

          (c) Subject to the limitations set forth in this Article VII, each Shareholder, severally and
not jointly, shall indemnify and hold harmless each Lincoln Electric Indemnified Party from and
against any and all Damages, asserted against, resulting to, imposed upon, or incurred or suffered
by any Lincoln Electric Indemnified Party, directly or indirectly, as a result of or arising from
any of the following (individually an “Indemnifiable Claim” and collectively “Indemnifiable Claims”
when used in the context of a Lincoln Electric Indemnified Party as the Indemnified Party):

               (i) any inaccuracy in or breach or nonfulfillment of, or any alleged inaccuracy in or
breach or nonfulfillment of, any of the representations or warranties made by such
Shareholder in Article IIIA of this Agreement or the Additional Documents; and

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               (ii) any breach or non-performance of, or any alleged breach or non-performance of, any
covenant, agreement or obligation to be performed by such Shareholder pursuant to this
Agreement or the Additional Documents.

          (d) Lincoln Electric shall be deemed to have suffered Damages arising out of or resulting from
the matters referred to in Section 7.2(a) or Section 7.2(c) if the same shall be suffered by any
parent, subsidiary or Affiliate of Lincoln Electric, including any Company or Subsidiary, after the
Closing.

     7.3 Limitations on Indemnification. The Parties’ respective rights to indemnification
under this Article VII are subject to the following limitations:

          (a) No Lincoln Electric Indemnified Party, on the one hand, or any Shareholder Indemnified
Party, on the other hand, shall be entitled to indemnification hereunder with respect to an
Indemnifiable Claim pursuant to Section 7.2(a)(i) or Section 7.2(b)(i), as applicable (or, if more
than one such Indemnifiable Claim is asserted, with respect to all such Indemnifiable Claims),
unless the aggregate amount of Damages with respect to such Indemnifiable Claim or Claims of all
Lincoln Electric Indemnified Parties or Shareholder Indemnified Parties, as the case may be,
exceeds $500,000 (the “Threshold”), in which event such Lincoln Electric Indemnified Party or
Shareholder Indemnified Party, as the case may be, shall be entitled to indemnification hereunder
for all Damages with respect to all of its Indemnifiable Claims without regard to the Threshold.
Furthermore, the maximum aggregate liability of the Shareholders with respect to all Indemnifiable
Claims pursuant to Section 7.2(a)(i) and the maximum aggregate liability of Lincoln Electric with
respect to all Indemnifiable Claims pursuant to Section 7.2(b)(i) shall be fifty percent (50%) of
the Aggregate Consideration (the “Cap”). Notwithstanding the above, any Damages with respect to an
Indemnifiable Claim of any Lincoln Electric Indemnified Party or Shareholder Indemnified Party, as
the case may be, arising from (x) any breach or inaccuracy of any Unlimited Representation or (y)
any Controlled Group Liability, in each case shall not be subject to or applied toward the
Threshold or the Cap, and such Lincoln Electric Indemnified Party shall be entitled to
indemnification for the entire amount of said Damages without regard to the Threshold or Cap.

          (b) The indemnification obligations of the parties with respect to any Indemnifiable Claims
pursuant to Section 7.2(a)(i), Section 7.2(b)(i) and Section 7.2(c)(i), as applicable, shall
terminate upon the second anniversary of the Closing Date, except that:

               (i) The following indemnification obligations shall continue indefinitely: (A) those of
the Principal Shareholders with respect to any inaccuracy or breach of any representation or
warranty set forth in Section 3.3 (Authority), Section 3.4 (Capitalization), the second
sentence of Section 3.11(a) (Title to the Proprietary Rights), the first two sentences of
Section 3.12(a) (Title to Property), and Section 3.12(d) (Rights of First Refusal); (B)
those of the Shareholders with respect to any inaccuracy or breach of any representation or
warranty set forth in Section 3A.1 (Authority) and Section 3A.2 (Capitalization; Title to
Shares); and (C) those of Lincoln Electric with respect to any inaccuracy or breach of any
representation or warranty set forth in Section 2.2 (Authority) (collectively, the
“Unlimited Representations”); and

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               (ii) The indemnification obligations of the Shareholders with respect to any inaccuracy
or breach of any representation or warranty set forth in Section 3.9 (Taxes), Section 3.13
(Environmental Matters) and Section 3.16 (Employee Benefits) shall terminate ninety (90)
days after the expiration of the statutes of limitation applicable to the items contained
therein.

          (c) The indemnification obligations of the Shareholders with respect to Section 7.2(a)(iii)
shall terminate upon the sixth anniversary of the Closing Date.

          (d) The foregoing provisions of this Section 7.3 notwithstanding, if, prior to the termination
of any obligation to indemnify, written notice of a claimed breach or other occurrence or matter
giving rise to a claim of indemnification is given by the party seeking indemnification (the
“Indemnified Party”) to the party from whom indemnification is sought (the “Indemnifying Party”),
or a suit or action based upon a claimed breach is commenced against the Indemnifying Party, the
Indemnified Party shall not be precluded from pursuing such claimed breach, occurrence, other
matter, or suit or action, or from recovering from the Indemnifying Party (whether through the
courts or otherwise) on the claim, suit or action, by reason of the termination otherwise provided
for above.

     7.4 Procedure for Indemnification with Respect to Third Party Claims.

          (a) If the Indemnified Party determines to seek indemnification under this Article VII with
respect to Indemnifiable Claims resulting from the assertion of liability by third parties, it
shall give notice to the Indemnifying Party promptly following the Indemnified Party’s becoming
aware of any such Indemnifiable Claim (a “Claim Notice”), which notice shall set forth such
material information with respect to such Indemnifiable Claim as is then reasonably available to
the Indemnified Party, provided that the failure to so notify the Indemnifying Party shall not
relieve the Indemnifying Party of any liability that it may have to any Indemnified Party, except
to the extent the Indemnifying Party is materially prejudiced thereby. If any such liability is
asserted against the Indemnified Party and the Indemnified Party notifies the Indemnifying Party of

such liability, the Indemnifying Party shall be entitled, if it so elects by written notice
delivered to the Indemnified Party within twenty (20) days after receiving the Claim Notice, to
assume the defense of such asserted liability (other than any asserted liability (i) relating to
Taxes matters or matters referred to in Section 3.13 (Environmental Matters), or (ii) where the
Indemnifying Party is also a party to the Action underlying such Indemnifiable Claim and the
Indemnified Party has one or more legal or equitable defenses available to it that are different
from or in addition to those available to the Indemnifying Party and, in the reasonable opinion of
the Indemnified Party, counsel for the Indemnifying Party could not adequately represent the
interests of the Indemnified Party because such interests could be in conflict with those of the
Indemnifying Party) with counsel reasonably satisfactory to the Indemnified Party unless the
Indemnifying Party fails to provide reasonable assurance to the Indemnified Party of its financial
capacity to assume such defense. If the Indemnifying Party elects to assume the defense of such
asserted liability, the claims made by such third party shall be conclusively established as being
within the scope of and subject to the indemnification provisions of this Agreement.
Notwithstanding the foregoing: (i) the Indemnified Party shall have the right to employ its own
counsel in any such case, but the fees and expenses of such counsel shall be payable by the
Indemnified Party and (ii) the Indemnified Party shall not have any obligation to

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give any notice of any assertion of liability by a third party unless such assertion is in
writing. With respect to any assertion of liability by a third party that results in an
Indemnifiable Claim, the Parties shall make available to each other all relevant information in
their possession which is material to any such assertion.

          (b) If the Indemnifying Party disputes its liability with respect to such Indemnifiable Claim,
it shall, within twenty (20) days after receiving the Claim Notice with respect to such
Indemnifiable Claim, give written notice of such dispute to the Indemnifying Party and such dispute
shall be resolved pursuant to Section 7.8. Pending resolution of any such dispute, the Indemnified
Party shall have the right to defend, compromise or settle such Indemnifiable Claim at the risk of
the Indemnifying Party.

          (c) Notwithstanding anything in this Section 7.4 to the contrary, (i) if there is a reasonable
probability that an Indemnifiable Claim may materially and adversely affect the Indemnified Party,
its corporate parent, if any, its subsidiaries or Affiliates, including any Company after the
Closing if a Lincoln Electric Indemnified Party is the Indemnified Party, other than as a result of
money damages or other money payments, including in the case of matters relating to Taxes matters
or matters referred to Section 3.13 (Environmental Matters), then the Indemnified Party shall have
the right, at the cost and expense of the Indemnifying Party, to defend, compromise or settle such
Indemnifiable Claim; and (ii) the Indemnifying Party shall not, without the Indemnified Party’s
prior written consent, settle or compromise any Indemnifiable Claim or consent to entry of any
judgment in respect of any Indemnifiable Claim unless such settlement, compromise or consent (A)
includes as an unconditional term the giving by the claimant or the plaintiff to the Indemnified

Party (and its corporate parent, if any, its subsidiaries and Affiliates including any Company or
Subsidiary after the Closing if Lincoln Electric is the Indemnified Party) a release from all
liability in respect of such Indemnifiable Claim and (B) does not include a finding or admission by
any Company or Lincoln Electric of any violation of Applicable Laws or any violation of the rights
of any Person.

     7.5 Procedure for Indemnification with Respect to Non-Third Party Claims.

          (a) If the Indemnified Party asserts the existence of an Indemnifiable Claim giving rise to
Damages (but excluding Indemnifiable Claims resulting from the assertion of liability by third
parties), it shall give written notice to the Indemnifying Party specifying the nature and amount
of the Indemnifiable Claim asserted (also, a “Claim Notice”). If the Indemnifying Party, within
twenty (20) days after receiving such Claim Notice, has not given written notice to the Indemnified
Party announcing its intent to contest such assertion by the Indemnified Party, such assertion
shall be deemed accepted and the amount of Indemnifiable Claim shall be deemed a valid
Indemnifiable Claim.

          (b) If, however, that the Indemnifying Party contests the assertion of an Indemnifiable Claim
by giving such written notice to the Indemnified Party within such 20-day period, then the
contested assertion of the claim shall resolved according to Section 7.8.

     7.6 Shareholders’ Representative. The Shareholders hereby irrevocably appoint Robin
Harris (the “Shareholders’ Representative”) to act on behalf of the Shareholders with respect to
all matters relating to this Article VII and the Escrow Agreement, including in

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considering and certifying the amount of any indemnification hereunder, in determining the
post-closing purchase price adjustment pursuant to Section 1.4 hereof, in communicating with the
Shareholders in appointing a successor escrow agent under the Escrow Agreement, in considering and
acting with respect to any amendment or termination of this Agreement, and generally in performing
all acts expressly required or permitted to be performed by the Shareholders’ Representative
pursuant hereto and pursuant to the Escrow Agreement. Lincoln Electric on the one hand, and
Lincoln Electric and the escrow agent on the other hand, shall have the right to deal exclusively
with the Shareholders’ Representative with respect to all matters hereunder and under the Escrow
Agreement, respectively, and neither Lincoln Electric nor the escrow agent shall have any liability
to any Shareholder for any acts or omissions of the Shareholders’ Representative, or any acts or
omissions taken or not taken by Lincoln Electric or the escrow agent at the direction of the
Shareholders’ Representative. Upon any distribution of funds to the Shareholders’ Representative
(or to one or more of the Shareholders upon written instruction of the Shareholders’
Representative) in accordance with the Agreement, the escrow agent and Lincoln Electric shall be
deemed to have fully satisfied any and all obligations to the Shareholders under this Agreement and
the Escrow Agreement with respect to the amount of such distribution. The Shareholders’
Representative shall have no liability to the Companies or the Shareholders with respect to actions
taken or omitted to be taken in her capacity as the Shareholders’ Representative, except with
respect to any liability resulting primarily from the Shareholders’ Representative’s gross
negligence or willful misconduct. The Shareholders’ Representative shall be entitled to rely upon
any directions received from holders (the “Majority Holders”) of a majority of the Shares. If the
Shareholders’ Representative is unable or unwilling to perform her duties required under this
Agreement and the Escrow Agreement, the Majority Holders shall promptly appoint a successor
Shareholders’ Representative.

     7.7 Termination of the Companies’ Warranties. Notwithstanding any provisions of this
Agreement to the contrary: (a) all representations, warranties and covenants made by the Companies
in the Additional Documents shall terminate as to the Companies (but only as to the Companies, and
not as to the Shareholders) as of the Closing; and (b) after the Closing, the Companies shall not
have any obligation or liability to any Shareholder as a direct or indirect result of any
misrepresentation, breach of covenant or other occurrence or circumstance for which the
Shareholders have or may have liability to Lincoln Electric under this Agreement.

     7.8 Arbitration.

          (a) All disputes under this Article VII shall be settled by arbitration in Cincinnati, Ohio,
before a panel of three arbitrators pursuant to the rules of the American Arbitration Association.
Arbitration may be commenced by the Indemnifying Party as provided for in Section 7.4(b) or Section
7.5(b), as applicable, by giving written notice to the Indemnified Party that such dispute has been
referred to arbitration under this Section 7.8; provided, however, that such
arbitration shall not be commenced until the expiration of the 20-day period following the date of
such notice, during which time the Shareholders’ Representative and a representative of Lincoln
Electric shall meet and use all commercially reasonable efforts to resolve such dispute in a
mutually agreeable manner. If such efforts fail, the panel of arbitrators shall be selected as
follows: one arbitrator shall be selected by each of the Shareholders’ Representative and Lincoln
Electric within twenty (20) days following the expiration of the 30 day period described in the
preceding sentence, and the third arbitrator shall be selected by agreement of the first two

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arbitrators. Any award rendered by the arbitrators shall be conclusive and binding upon the
parties hereto; provided, however, that any such award shall be accompanied by a
written opinion of the arbitrators giving the reasons for the award. This provision for
arbitration shall be specifically enforceable by the parties and the decision of the arbitrators in
accordance herewith shall be final and binding and there shall be no right of appeal therefrom.
Each party shall pay its own expenses of arbitration and the expenses of the arbitrators shall be
shared 50% by the Shareholders and 50% by Lincoln Electric; provided, however, that
if in the opinion of the arbitrators any claim for indemnification or any defense or objection
thereto was unreasonable, the arbitrators may assess, as part of their award, all or any part of
the arbitration expenses of the other party (including reasonable attorneys’ fees) and of the
arbitrators against the party raising such unreasonable claim, defense or objection.

          (b) To the extent that arbitration may not be legally permitted hereunder and the parties to
any dispute hereunder may not at the time of such dispute mutually agree to submit such dispute to
arbitration, any party may commence a civil action in a court of appropriate jurisdiction to solve
disputes hereunder. Nothing contained in this Section 7.8 shall prevent the parties from settling
any dispute by mutual agreement at any time.

     7.9 Adjustment to Aggregate Consideration. All indemnification payments pursuant to
this Article VII shall be deemed to be adjustments to the Aggregate Consideration.

ARTICLE VIII. DEFINITIONS

     8.1 Terms Not Defined Elsewhere. The following terms, as used herein, have the
following meanings:

          “Adjusted Benchmark” means the amount equal to the sum of the Benchmark and Two
Million Dollars ($2,000,000), which amount equals Thirty-Three Million Three Hundred
Twenty-Eight Thousand Dollars ($33,328,000).

          “Affiliate” shall mean, with respect to any specified Person, any other Person
that directly, or indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, such specified Person.

          “April Working Capital” means the difference between the total consolidated
current assets and total consolidated current liabilities of the Companies and the
Subsidiaries as of the close of business on April 1, 2005, in each case as such items would
be reflected on a consolidated balance sheet of the Companies, (i) prepared as if it were a
year-end balance sheet (including typical year-end adjustments customarily made by the
Companies, (ii) prepared from and in accordance with the books and records of the Companies
and the Subsidiaries and (iii) prepared in conformity with the accounting policies,
practices and methods of estimation used in determining the Benchmark, provided that such
policies, practices and methods of estimation and the amounts resulting therefrom are in
accordance with GAAP; provided, however, that the April Working Capital
shall not (A) include the amount of any indebtedness or other items to be included in the
calculation of the Debt Adjustment Amount, including the

-46-

 

indebtedness reflected on Exhibit B attached hereto or (B) be reduced by the
LIFO reserve.

          “Benchmark” means the amount of net working capital derived from the unaudited
combined (with consolidating adjustments) statement of assets and liabilities of (i) J.W.
Harris and the J.W. Harris Subsidiaries as of September 24, 2004, (ii) Harris-Euro and the
Harris-Euro Subsidiaries as of December 31, 2004 and (iii) Autobraze as of December 31,
2004, as further detailed on attached Exhibit E, which amount equals Thirty-One
Million Three Hundred Twenty-Eight Thousand Dollars ($31,328,000).

          “Closing Date Working Capital” means the difference between the total
consolidated current assets and total consolidated current liabilities of the Companies and
the Subsidiaries as of the Closing Date, in each case as such items would be reflected on a
consolidated balance sheet of the Companies, (i) prepared as if it were a year-end balance
sheet (including typical year-end adjustments customarily made by the Companies), (ii)
prepared from and in accordance with the books and records of the Companies and the
Subsidiaries and (iii) prepared in conformity with the accounting policies, practices and
methods of estimation used in determining the Benchmark, provided that such policies,
practices and methods of estimation and the amounts resulting therefrom are in accordance
with GAAP; provided, however, that the Closing Date Working Capital shall
not (A) include the amount of any indebtedness or other items to be included in the
calculation of the Debt Adjustment Amount, including the indebtedness reflected on
Exhibit B attached hereto or (B) be reduced by the LIFO reserve.

          “Code” means the U.S. Internal Revenue Code of 1986, as amended.

          “Company Transaction Expenses” means all costs, fees and expenses incurred or
payable by the Companies and the Shareholders in connection with this Agreement, the
Additional Agreements and the Transactions.

          “Escrow Amount” means the General Escrow Amount plus the Working Capital Escrow
Amount.

          “General Escrow Amount” means $3,000,000.

          “Governmental Authority” means any domestic, foreign or multi-national federal,
state, provincial, regional, municipal or local governmental or administrative authority,
including any court, tribunal, agency, bureau, committee, board, regulatory body,
administration, commission or instrumentality constituted or appointed by any such
authority.

          “Knowledge of the Shareholders” means the actual knowledge of facts, matters or
circumstances of Joe Harris, Robin Harris, Gordon Harris, Terry Howard, Jack Valentine, Ann
Elliot, Dan Arthur, David Jacobs, Bob Henson, John Pandorf and Donna Wiggins.

          “Lien” means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance, restriction, tenancy or other possessory
interest,

-47-

 

conditional sale or other title retention agreement, assessment, easement, right of
way, covenant, right of first refusal, defect in title, or any other claim of any kind in
respect of such property or asset. For the purposes of this Agreement, a Person shall be
deemed to own a property or asset that is subject to a Lien if it has acquired or holds such
property or asset subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such property or
asset.

          “Material Adverse Effect” means, with respect to any party, any state of facts,
change, event, effect or occurrence that is or may, individually or in the aggregate, be
reasonably likely to (i) be materially adverse to the business, financial condition, results
of operations, prospects, properties, assets or liabilities (including contingent
liabilities) of such party and its subsidiaries consolidated as one enterprise, or (ii)
prevent or materially delay consummation of the transaction or otherwise prevent Lincoln
Electric or its subsidiaries from performing their obligations under this Agreement.

          “Net Consideration” means the Aggregate Consideration less the Escrow Amount,
as adjusted pursuant to Section 1.2(c).

          “Ordinary Course of Business” means the ordinary course of business consistent
with past custom and practice (including with respect to quantity and frequency).

          “Parties” means Lincoln Electric and the Shareholders.

          “Permitted Liens” means (a) Liens consisting of recorded restrictions,
easements, encroachments, permits and other restrictions, conditions or limitations relating
to the use of real property or irregularities in title thereto that do not materially
detract from the value of, or impair the use of, such property by any Company or Subsidiary
in the operation of their respective businesses; (b) Liens for current Taxes, assessments or
governmental charges or levies on real property not yet due and payable; or (c) Liens
recorded by The Fifth Third Bank against the Mason Property.

          “Person” means an individual, corporation, partnership, limited liability
company, association, trust or any other entity or organization, including a Governmental
Authority.

          “Shares” means the J.W. Harris Shares, the Autobraze Shares and the Harris-Euro
Shares.

          “Subsidiaries” means the J.W. Harris Subsidiaries and the Harris-Euro
Subsidiaries.

          “Subsidiary” means any of the Subsidiaries.

          “Tax” means (i) any income, gross receipts, capital gains, license, occupancy,
payroll, employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including Taxes under Section 59A of the Code), customs duties, capital
stock, franchise, unincorporated business, profits, withholding, information, social
security (or similar), unemployment, disability, workers’ compensation, real property,
personal property, unclaimed property, ad valorem, sales, use, transfer, registration, value

-48-

 

added, alternative or add-on minimum, accumulated earnings, personal holding company,
estimated, or other tax, report or assessment of any kind whatsoever imposed by any
Governmental Authority, including any interest, penalty, assessment, or addition thereto,
whether disputed or not; and (ii) any obligations under any agreements or arrangements with
respect to any Taxes described in clause (i) above.

          “Tax Return” means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including all schedules or attachments
thereto, and including any amendment thereof.

          “Transactions” means, collectively, the transactions contemplated by this
Agreement and the Additional Documents.

          “Welding Fumes Litigation” means all pending, threatened and future claims
(including previously dismissed claims that may be refiled) arising from fumes that are
created by or otherwise related to the use of metals or cleaning chemicals in welding,
soldering, brazing or other joining processes.

          “Working Capital Escrow Amount” means $2,000,000, plus any additional amount
which may be paid by Lincoln Electric in accordance with Section 1.4(b).

     8.2 Index of Defined Terms. Each of the following capitalized terms has the meaning
ascribed to it in the Section of this Agreement set forth opposite such term:

	 	 	 
	Term:	 	Defined In:
	Accountant

	 	1.4(a)

	Action

	 	3.14

	Additional Documents

	 	7.1(a)

	Adjusted Benchmark

	 	8.1

	Affiliate

	 	8.1

	Aggregate Consideration

	 	1.2(a)

	Agreement, this

	 	Preamble

	Applicable Laws

	 	3.10(a)

	April Working Capital

	 	8.1

	Audited Financial Statements

	 	3.7

	Autobraze

	 	Preamble

	Autobraze Shareholders

	 	Preamble

	Autobraze Shares

	 	3.4(b)

	Benchmark

	 	8.1

	Business Personnel

	 	3.20

	Cap

	 	7.3(a)

	Claim Notice

	 	7.4(a) and 7.5(a)

	Closing

	 	1.3

	Closing Balance Sheet

	 	1.4(a)

	Closing Date

	 	1.3

	Closing Date Working Capital

	 	8.1

-49-

 

	 	 	 
	Term:	 	Defined In:
	Closing Statement

	 	1.4(a)

	Code

	 	8.1

	Company

	 	Preamble

	Company Permits

	 	3.10(e)

	Company Transaction Expenses

	 	8.1

	Conticast Property

	 	5.3(m)(i)

	Contract

	 	3.18(a)

	Controlled Group Liability

	 	3.16(a)(i)

	Damages

	 	7.2(a)

	Debt Adjustment Amount

	 	1.2(a)

	December Balance Sheet

	 	3.7

	December Statements

	 	3.7

	Disclosure Schedule

	 	3.1(a)

	Employment Agreements

	 	5.3(p)

	Environmental Laws

	 	3.13(a)

	Environmental Permits

	 	3.13(e)

	ERISA

	 	3.16(a)(i)

	ERISA Affiliate

	 	3.16(a)(i)

	Escrow Agreement

	 	1.2(b)(i)

	Escrow Amount

	 	8.1

	Estimated Working Capital Amount

	 	1.2(c)(i)

	Financial Statements

	 	3.7

	GAAP

	 	1.2(a)

	General Escrow Amount

	 	8.1

	Governmental Authority

	 	8.1

	Harris-Euro

	 	Preamble

	Harris-Euro Shareholders

	 	Preamble

	Harris-Euro Shares

	 	3.4(c)

	Harris-Euro Subsidiaries

	 	3.2(c)

	Harris Spain

	 	Preamble

	Hazardous Materials

	 	3.13(a)

	HSR Act

	 	2.3(d)

	Indemnifiable Claim(s)

	 	7.2(a), (b) and (c)

	Indemnified Party

	 	7.3(d)

	Indemnifying Party

	 	7.3(d)

	J.W. Harris

	 	Preamble

	J.W. Harris International

	 	3.9(m)

	J.W. Harris Shares

	 	3.4(a)

	J.W. Harris Shareholders

	 	Preamble

	J.W. Harris Subsidiaries

	 	3.2(a)

	Knowledge of the Shareholders

	 	8.1

	Lien

	 	8.1

	Lincoln Working Capital Payment

	 	1.4(b)(i)

	Lincoln Electric

	 	Preamble

	Lincoln Electric Indemnified Party

	 	7.2(a)

	Majority Holders

	 	7.6

-50-

 

	 	 	 
	Term:	 	Defined In:
	Mason Property

	 	5.3(m)(i)

	Material Adverse Effect

	 	8.1

	Mexican Labor Regulations

	 	3.16(b)(i)

	Multiemployer Plan

	 	3.16(a)(vi)

	Multiple Employer Plan

	 	3.16(a)(vi)

	Net Consideration

	 	8.1

	Noncompetition Agreements

	 	5.3(h)

	Ordinary Course of Business

	 	8.1

	Parties

	 	8.1

	Permitted Liens

	 	8.1

	Person

	 	8.1

	Plans

	 	3.16(a)(i)

	Principal Shareholders

	 	Preamble to Article III

	Product Liability

	 	3.22

	Projected Closing Statement

	 	1.2(c)(i)

	Proprietary Rights

	 	3.11(a)

	Qualified Plan

	 	3.16(a)(iii)

	Real Property

	 	3.12(c)

	Real Property Transfers

	 	5.3(m)(iii)

	Resolution Period

	 	1.4(a)

	Section 338(h)(10) Elections

	 	4.2(e)

	Section 338 Forms

	 	4.2(e)

	Securities Act

	 	3.2(a)

	Shareholder Indemnified Party

	 	7.2(b)

	Shareholders’ Representative

	 	7.6

	Shareholders

	 	Preamble

	Shareholders Working Capital Payment

	 	1.4(b)(ii)

	Shares

	 	8.1

	Software

	 	3.11(e)

	Subsidiaries

	 	8.1

	Subsidiary

	 	8.1

	Tax

	 	8.1

	Tax Return

	 	8.1

	Threshold

	 	7.3(a)

	Title Policy

	 	5.3(m)(iv)(1)

	Transactions

	 	8.1

	Transfer Documents

	 	5.3(m)(iv)

	Transferred Properties

	 	5.3(m)(i)

	Trust

	 	3A.1(b)

	Trust Instrument

	 	3A.1(b)

	Unlimited Representations

	 	7.3(b)(i)

	Welding Fumes Litigation

	 	8.1

	Withdrawal Liability

	 	3.16(a)(i)

	Working Capital Escrow Amount

	 	8.1

-51-

 

ARTICLE IX. MISCELLANEOUS

     9.1 Notices. All notices, requests, demands, letters, waivers and other
communications required or permitted to be given under this Agreement shall be in writing and shall
be deemed to have been duly given if (a) delivered personally, (b) mailed, certified or registered
mail with postage prepaid, (c) sent by next-day or overnight mail or delivery or (d) sent by fax,
as follows:

     if to Lincoln Electric:

	 	 	 
	 

	 	Lincoln Electric Holdings, Inc.
	 

	 	22801 St. Clair Avenue
	 

	 	Cleveland, Ohio 44117-1199
	 

	 	Attention: General Counsel
	 

	 	Facsimile No.: (216) 383-8125

               with a copy to:

	 	 	 
	 

	 	John M. Gherlein, Esq.
	 

	 	Baker & Hostetler LLP
	 

	 	3200 National City Center
	 

	 	1900 East Ninth Street
	 

	 	Cleveland, Ohio 44114-3485
	 

	 	Facsimile No.: (216) 696-0740

     if to any Shareholder:

	 	 	 
	 

	 	Shareholders’ Representative
	 

	 	c/o Robin Harris
	 

	 	9274 Witherbone Court
	 

	 	Cincinnati, Ohio 45242
	 

	 	Facsimile No.: (513) 891-8235

               with a copy to:

	 	 	 
	 

	 	Steven M. Nechemias, Esq.
	 

	 	Taft, Stettinius & Hollister LLP
	 

	 	425 Walnut Street, Suite 1800
	 

	 	Cincinnati, Ohio 45202-3957
	 

	 	Facsimile No.: (513) 381-0205

or to such other Person or address as any party shall specify by notice in writing to the party
entitled to notice. All such notices, requests, demands, letters, waivers and other communications
shall be deemed to have been received (w) if by personal delivery, on the day after such delivery,
(x) if by certified or registered mail, on the fifth (5th) business day after the
mailing thereof, (y) if by next-day or overnight mail or delivery, on the day delivered or (z) if
by fax, on the day following the day on which such fax was sent, provided that a copy is also sent
by certified, registered or overnight mail.

-52-

 

     9.2 Interpretation. When a reference is made in this Agreement to an Article or
Section, such reference shall be to an Article or Section of this Agreement unless otherwise
indicated. The headings and the table of contents contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the context requires, words used in the singular shall be construed to mean or include the
plural and vice versa, and pronouns of any gender shall be deemed to include and designate the
masculine, feminine or neuter gender. The word “including” shall mean “including without
limitation.”

     9.3 Counterparts; Facsimiles. This Agreement may be executed in counterparts, which
together shall constitute one and the same Agreement. The Parties may execute more than one copy
of the Agreement, each of which shall constitute an original. Signatures to this Agreement
transmitted by facsimile transmission, by electronic mail in “portable document format” (“.pdf”)
form, or by any other electronic means intended to preserve the original graphic and pictorial
appearance of a document, will have the same effect as physical delivery of the paper document
bearing an original signature.

     9.4 Entire Agreement; Modification. This Agreement (including the documents and the
instruments referred to herein), constitutes the entire agreement among the Parties and supersede
all prior agreements and understandings, agreements or representations by or among the Parties,
written and oral, with respect to the subject matter hereof and thereof.

     9.5 Third Party Beneficiaries. Nothing in this Agreement, express or implied, is
intended or shall be construed to create any third party beneficiaries.

     9.6 Governing Law. Except to the extent that the laws of the jurisdiction of
organization of any party hereto, or any other jurisdiction, are mandatorily applicable to matters
arising under or in connection with this Agreement, this Agreement shall be governed by the laws of
the State of Ohio, without regard to principles of conflicts of laws. Subject to Section 7.8, all
actions and proceedings arising out of or relating to this Agreement shall be heard and determined
in any Ohio state or federal court sitting in the City of Cincinnati, and each party hereto waives
any objection based on forum non conveniens, jurisdiction or venue to the bringing of any action or
proceeding in accordance with this sentence.

     9.7 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the Parties (whether by operation of law or
otherwise) without the prior written consent of the other Parties, except that Lincoln Electric may
assign any of its rights (but not any of its obligations) under this Agreement to any of its
subsidiaries. Subject to the preceding sentence, this Agreement, including, without limitation,
the indemnification obligations of the Shareholders (including the Principal Shareholders) shall be
binding upon, inure to the benefit of and be enforceable by the Parties and their respective
successors and assigns.

     9.8 Expenses. Lincoln Electric shall be responsible for all costs, fees and expenses
incurred by Lincoln Electric in connection with this Agreement and the Transactions. The
Shareholders shall be responsible for all costs, fees and expenses incurred or payable by the

-53-

 

Companies, the Subsidiaries and the Shareholders in connection with this Agreement, the
Additional Agreements and the Transactions.

[signature page follows]

-54-

 

[Signature
page to Share Purchase Agreement.]

     IN WITNESS WHEREOF, Lincoln Electric, the Companies and the Shareholders have signed this
Agreement as of the date first written above.

	 	 	 	 	 	 	 
	 	 	LINCOLN ELECTRIC HOLDINGS, INC.
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	   Name:	 	 
	 

	 	 	 	 	 
	 
	 	 	 	   Title:	 	 
	 

	 	 	 	 	 

	 	 	 	 	 
	 	  SHAREHOLDERS:
	 
	 	 	 	 
	 

	 	 	 	JOSEPH W. HARRIS
	 

	 	 	 	REVOCABLE TRUST dated 6/10/97, as amended or restated.
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Joseph W. Harris, Trustee
	 
	 	 	 	 
	 

	 	 	 	JOSEPH W. HARRIS GRANTOR
	 

	 	 	 	RETAINED ANNUITY TRUST I dated 7/15/98.
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Joseph W. Harris, Trustee
	 
	 	 	 	 
	 

	 	 	 	JOSEPH W. HARRIS GRANTOR
	 

	 	 	 	RETAINED ANNUITY TRUST II dated 7/15/98.
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Joseph W. Harris, Trustee
	 
	 	 	 	 
	 

	 	 	 	GORDON L. HARRIS TRUST
	 

	 	 	 	dated 10/10/97, as amended or restated.
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Gordon L. Harris, Trustee

-1-

 

	 	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Gordon L. Harris
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Robin R. Harris-Justice
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Jolie Harris
	 
	 	 	 	 
	 

	 	 	 	The Fifth Third Bank, as trustee under
	 

	 	 	 	arrangement with Joseph W. Harris for the
	 

	 	 	 	benefit of Robin Harris

	 	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 
	 

	 	Name: 	 
	 

	 	 	 	 

	 	 	 
	 

	 	The Fifth Third Bank, as trustee under
	 

	 	arrangement with Joseph W. Harris for the
	 

	 	benefit of Jolie Harris

	 	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 
	 

	 	Name: 	 
	 

	 	 	 	 

	 	 	 
	 

	 	The Fifth Third Bank, as trustee under
	 

	 	arrangement with Joseph W. Harris for the
	 

	 	benefit of Mark Harris

	 	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 
	 

	 	Name: 	 
	 

	 	 	 	 

	 	 	 
	 

	 	The Fifth Third Bank, as trustee under
	 

	 	arrangement with Joseph W. Harris for the
	 

	 	benefit of Scott Harris

	 	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 
	 

	 	Name: 	 
	 

	 	 	 	 

-2-

 

	 	 	 
	 

	 	The Fifth Third Bank, as trustee under
	 

	 	arrangement with Gordon L. Harris for the
	 

	 	benefit of Jill Rae Harris

	 	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 
	 

	 	Name: 	 
	 

	 	 	 	 

	 	 	 
	 

	 	The Fifth Third Bank, as trustee under
	 

	 	arrangement with Gordon L. Harris for the
	 

	 	benefit of Gordon Lee Harris, II

	 	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 
	 

	 	Name: 	 
	 

	 	 	 	 

	 	 	 
	 

	 	 
	 

	 	Kevin Grace
	 
	 	 
	 

	 	 
	 

	 	Terry Howard
	 
	 	 
	 

	 	 
	 

	 	Stephen W. Sprague
	 
	 	 
	 

	 	 
	 

	 	Douglas F. Sprague
	 
	 	 
	 

	 	 
	 

	 	Joseph W. Harris

-3-EX-10.1 2005 Omnibus Equity Plan

 

Exhibit 10.1

DATATRAK INTERNATIONAL, INC.

2005 OMNIBUS EQUITY PLAN

ARTICLE 1

General Purpose of Plan; Definitions

     
1.1     Name and Purposes. The
name of this plan is the DATATRAK International, Inc. 2005
Omnibus Equity Plan. The purpose of this Plan is to enable
DATATRAK International, Inc. and its Affiliates to:
(i) attract and retain skilled and qualified officers,
employees and directors who are expected to contribute to the
Company’s success by providing long-term incentive
compensation opportunities competitive with those made available
by other companies; (ii) motivate participants to achieve
the long-term success and growth of the Company;
(iii) facilitate ownership of shares of the Company; and
(iv) align the interests of the participants with those of
the Company’s Shareholders.

     
1.2     Certain Definitions.
Unless the context otherwise indicates, the following words used
herein shall have the following meanings whenever used in this
instrument:

		
	 	     
    (a) “Affiliate” means any corporation,
    partnership, joint venture or other entity, directly or
    indirectly, through one or more intermediaries, controlling,
    controlled by, or under common control with the Company as
    determined by the Board of Directors in its discretion.
	 
	 	     
    (b) “Award” means any grant under this Plan of a
    Common Share, Stock Option, Stock Appreciation Right, Restricted
    Share, Restricted Share Unit or Performance Share to any Plan
    participant.
	 
	 	     
    (c) “Board of Directors” mean the Board of
    Directors of the Company, as constituted from time to time.
	 
	 	     
    (d) “Code” means the Internal Revenue Code of
    1986, as amended, and any lawful regulations or guidance
    promulgated thereunder. Whenever reference is made to a specific
    Internal Revenue Code section, such reference shall be deemed to
    be a reference to any successor Internal Revenue Code section or
    sections with the same or similar purpose.
	 
	 	     
    (e) “Committee” means the entity administering
    this Plan as provided in Section 2.1.
	 
	 	     
    (f) “Common Shares” mean the common shares,
    without par value, of the Company.
	 
	 	     
    (g) “Company” means DATATRAK International, Inc.,
    a corporation organized under the laws of the State of Ohio and,
    except for purposes of determining whether a Change in Control
    has occurred, any corporation or entity that is a successor to
    DATATRAK International, Inc. or substantially all of the assets
    of DATATRAK International, Inc. and that assumes the obligations
    of DATATRAK International, Inc. under this Plan by operation of
    law or otherwise.
	 
	 	     
    (h) “Date of Grant” means the date on which the
    Committee grants an Award.
	 
	 	     
    (i) “Director” means a member of the Board of
    Directors.
	 
	 	     
    (j) “Disability” means a medically determinable
    physical or mental impairment which can be expected to result in
    death or can be expected to last for a continuous period of not
    less than 12 months which: (i) renders a participant
    unable to engage in any substantial gainful activity; or
    (ii) results in a participant receiving income replacement
    benefits for at least 3 months under an accident and health
    plan sponsored by the Company or an Affiliate.
	 
	 	     
    (k) “Early Retirement” means a participant’s
    retirement from active employment or active directorship with
    the Company or an Affiliate on and after the later of attainment
    of age 62 or the completion of 20 years of service.

 

 

		
	 	     
    (l) “Eligible Director” is defined in
    Article 4.
	 
	 	     
    (m) “Exchange Act” means the Securities Exchange
    Act of 1934, as amended, and any lawful regulations or guidance
    promulgated thereunder.
	 
	 	     
    (n) “Exercise Price” means the purchase price of
    a Share pursuant to a Stock Option.
	 
	 	     
    (o) “Fair Market Value” means the last closing
    price of a Share as reported on The Nasdaq Stock Market, or, if
    applicable, on another national securities exchange on which the
    Common Shares are principally traded, on the date for which the
    determination of Fair Market Value is made, or, if there are no
    sales of Common Shares on such date, then on the most recent
    immediately preceding date on which there were any sales of
    Common Shares. If the Common Shares are not, or cease to be,
    traded on The Nasdaq Stock Market or another national securities
    exchange, the “Fair Market Value” of Common Shares
    shall be determined pursuant to a reasonable valuation method
    prescribed by the Committee. Notwithstanding the foregoing, as
    of any date, the “Fair Market Value” of Common Shares
    shall be determined in a manner consistent with Code
    Section 409A and the guidance then-existing thereunder. In
    addition, “Fair Market Value” with respect to ISOs and
    related SARs shall be determined in accordance with
    Section 6.2(f).
	 
	 	     
    (p) “Incentive Stock Option” and “ISO”
    mean a Stock Option that is identified as such and which meets
    the requirements of Section 422 of the Code.
	 
	 	     
    (q) “Non-Qualified Stock Option” and
    “NQSO” mean a Stock Option that: (i) is governed
    by Section 83 of the Code; and (ii) does not meet the
    requirements of Section 422 of the Code.
	 
	 	     
    (r) “Normal Retirement” means retirement from
    active employment or active directorship with the Company or an
    Affiliate on or after attainment of age 65.
	 
	 	     
    (s) “Outside Director” means a Director who meets
    the definitions of the terms “outside director” set
    forth in Section 162(m) of the Code, “independent
    director” set forth in The Nasdaq Stock Market, Inc. rules,
    and “non-employee director” set forth in
    Rule 16b-3, or any successor definitions adopted by the
    Internal Revenue Service, The Nasdaq Stock Market, Inc. and
    Securities and Exchange Commission, respectively, and similar
    requirements under any other applicable laws and regulations.
	 
	 	     
    (t) “Parent” means any corporation which
    qualifies as a “parent corporation” of the Company
    under Section 424(e) of the Code.
	 
	 	     
    (u) “Performance Shares” is defined in
    Article 9.
	 
	 	     
    (v) “Plan” means this DATATRAK International,
    Inc. 2005 Omnibus Equity Plan, as amended from time to time.
	 
	 	     
    (w) “Restricted Share Units” is defined in
    Article 8.
	 
	 	     
    (x) “Restricted Shares” is defined in
    Article 8.
	 
	 	     
    (y) “Retirement” means Normal Retirement or Early
    Retirement.
	 
	 	     
    (z) “Rule 16b-3” is defined in
    Article 17.
	 
	 	     
    (aa) “Section 16 Person” means a person
    subject to potential liability under Section 16(b) of the
    Exchange Act with respect to transactions involving equity
    securities of the Company.
	 
	 	     
    (bb) “Section 162(m) Person” means, for any
    taxable year, a person who is a “covered employee”
    within the meaning of Section 162(m)(3) of the Code.
	 
	 	     
    (cc) “Share” or “Shares” mean one or
    more of the Common Shares.
	 
	 	     
    (dd) “Shareholder” means an individual or entity
    that owns one or more Shares.
	 
	 	     
    (ee) “Stock Appreciation Rights” and
    “SARs” mean any right pursuant to an Award granted
    under Article 7.

 

 

		
	 	     
    (ff) “Stock Option” means any right to purchase a
    specified number of Shares at a specified price which is granted
    pursuant to Article 5 and may be an Incentive Stock Option
    or a Non-Qualified Stock Option.
	 
	 	     
    (gg) “Stock Power” means a power of attorney
    executed by a participant and delivered to the Company which
    authorizes the Company to transfer ownership of Restricted
    Shares, Performance Shares or Common Shares from the participant
    to the Company or a third party.
	 
	 	     
    (hh) “Subsidiary” means any corporation which
    qualifies as a “subsidiary corporation” of the Company
    under Section 424(f) of the Code.
	 
	 	     
    (ii) “Vested” means, with respect to a Common
    Share, when the Common Share has been awarded; with respect to a
    Stock Option, that the time has been reached when the option to
    purchase Shares first becomes exercisable; with respect to a
    Stock Appreciation Right, when the Stock Appreciation Right
    first becomes exercisable for payment; with respect to
    Restricted Shares, when the Shares are no longer subject to
    forfeiture and restrictions on transferability; with respect to
    Restricted Share Units and Performance Shares, when the units or
    Shares are no longer subject to forfeiture and are convertible
    to Shares. The words “Vest” and “Vesting”
    have meanings correlative to the foregoing.

ARTICLE 2

Administration

     
2.1.     Authority and Duties of the
Committee.

     
(a) The Plan shall be administered by a Committee of at
least three Directors who are appointed by the Board of
Directors. Unless otherwise determined by the Board of
Directors, the Compensation Committee shall serve as the
Committee, and all of the members of the Committee shall be
Outside Directors. Notwithstanding the requirement that the
Committee consist exclusively of Outside Directors, no action or
determination by the Committee or an individual then considered
to be an Outside Director shall be deemed void because a member
of the Committee or such individual fails to satisfy the
requirements for being an Outside Director, except to the extent
required by applicable law.

     
(b) The Committee has the power and authority to grant
Awards pursuant to the terms of this Plan to officers, employees
and Eligible Directors.

     
(c) The Committee has the sole and exclusive authority,
subject to any limitations specifically set forth in this Plan,
to:

		
	 	     
    (i) select the officers, employees and Eligible Directors
    to whom Awards are granted;
	 
	 	     
    (ii) determine the types of Awards granted and the timing
    of such Awards;
	 
	 	     
    (iii) determine the number of Shares to be covered by each
    Award granted hereunder;
	 
	 	     
    (iv) determine whether an Award is, or is intended to be,
    “performance-based compensation” within the meaning of
    Section 162(m) of the Code;
	 
	 	     
    (v) determine the other terms and conditions, not
    inconsistent with the terms of this Plan and any operative
    employment or other agreement, of any Award granted hereunder;
    such terms and conditions include, but are not limited to, the
    Exercise Price, the time or times when Options or Stock
    Appreciation Rights may be exercised (which may be based on
    performance objectives), any Vesting, acceleration or waiver of
    forfeiture restrictions, any performance criteria (including any
    performance criteria as described in Section 162(m)(4)(C)
    of the Code) applicable to an Award, and any restriction or
    limitation regarding any Option or Stock Appreciation Right or
    the Common Shares relating thereto, based in each case on such
    factors as the Committee, in its sole discretion, shall
    determine;
	 
	 	     
    (vi) determine whether any conditions or objectives related
    to Awards have been met, including any such determination
    required for compliance with Section 162(m) of the Code;

 

 

		
	 	     
    (vii) subsequently modify or waive any terms and conditions
    of Awards, not inconsistent with the terms of this Plan and any
    operative employment or other agreement;
	 
	 	     
    (viii) adopt, alter and repeal such administrative rules,
    guidelines and practices governing this Plan as it deems
    advisable from time to time;
	 
	 	     
    (ix) promulgate such administrative forms as they from time
    to time deem necessary or appropriate for administration of the
    Plan;
	 
	 	     
    (x) construe, interpret, administer and implement the terms
    and provisions of this Plan, any Award and any related
    agreements;
	 
	 	     
    (xi) correct any defect, supply any omission and reconcile
    any inconsistency in or between the Plan, any Award and any
    related agreements;
	 
	 	     
    (xii) prescribe any legends to be affixed to certificates
    representing Shares or other interests granted or issued under
    the Plan; and
	 
	 	     
    (xiii) otherwise supervise the administration of this Plan.

     
(d) The Committee shall confer with the Board of Directors
regarding the Committee’s intentions prior to making grants
under this Plan. Notwithstanding the foregoing, all decisions
made by the Committee pursuant to the provisions of this Plan
are final and binding on all persons, including the Company, its
Shareholders and participants, but may be made by their terms
subject to ratification or approval by, the Board of Directors,
another committee of the Board of Directors or Shareholders.

     
(e) The Company shall furnish the Committee with such
clerical and other assistance as is necessary for the
performance of the Committee’s duties under the Plan.

     
2.2     Delegation of Duties.
The Committee may delegate ministerial duties to any other
person or persons, and it may employ attorneys, consultants,
accountants or other professional advisers for purposes of plan
administration at the expense of the Company.

     
2.3     Limitation of Liability.
Members of the Board of Directors, members of the Committee and
Company employees who are their designees acting under this Plan
shall be fully protected in relying in good faith upon the
advice of counsel and shall incur no liability except for gross
or willful misconduct in the performance of their duties
hereunder.

ARTICLE 3

Stock Subject to Plan

     
3.1     Total Shares Limitation.
Subject to the provisions of this Article, the maximum number of
Shares that may be issued pursuant to Awards granted under this
Plan is 350,000, which may be treasury or authorized but
unissued Shares.

     
3.2     Other Limitations.

		
	 	     
    (a) ISO Limitations. The maximum number of Shares
    available with respect to all Stock Options (whether Incentive
    Stock Options or Non-Qualified Stock Options) granted under this
    Plan is 350,000 Shares.
	 
	 	     
    (b) Participant Limitation. The aggregate number of
    Shares underlying Awards granted under this Plan to any
    participant in any fiscal year (including but not limited to
    Awards of Options and SARs), regardless of whether such Awards
    are thereafter canceled, forfeited or terminated, shall not
    exceed 35,000 Shares. The foregoing annual limitation is
    intended to include the grant of all Awards, including but not
    limited to, Awards representing “performance-based
    compensation” as described in Section 162(m)(4)(C) of
    the Code.

 

 

     
3.3     Awards Not Exercised; Effect
of Receipt of Shares. If any outstanding Award, or portion
thereof, expires, or is terminated, canceled or forfeited, the
Shares that would otherwise be issuable with respect to the
unexercised portion of such expired, terminated, canceled or
forfeited Award shall be available for subsequent Awards under
this Plan. If the Exercise Price of an Award is paid in Shares,
the Shares received by the Company in connection therewith shall
not be added to the maximum aggregate number of Shares which may
be issued under Section 3.1.

     
3.4     Dilution and Other
Adjustments. In the event that the Committee determines that
any dividend or other distribution (whether in the form of cash,
Shares, other securities or other property), recapitalization,
stock split, reverse stock split, reorganization, redesignation,
reclassification, merger, consolidation, liquidation, split-up,
reverse split, spin-off, combination, repurchase or exchange of
Shares or other securities of the Company, issuance of warrants
or other rights to purchase Shares or other securities of the
Company or other similar corporate transaction or event affects
the Shares such that an adjustment is determined by the
Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be
made available under this Plan, then the Committee may, in such
manner as it deems equitable, adjust any or all of (i) the
number and type of Shares (or other securities or other
property) which thereafter may be made the subject of Awards,
(ii) the number and type of Shares (or other securities or
other property) subject to outstanding Awards, (iii) the
limitations set forth above and (iv) the purchase or
exercise price or any performance objective with respect to any
Award; provided, however, that the number of Shares or
other securities covered by any Award or to which such Award
relates is always a whole number. Notwithstanding the foregoing,
the foregoing adjustments shall be made in compliance with:
(i) Sections 422 and 424 of the Code with respect to
ISOs; (ii) Treasury Department
Regulation Section 1.424-1 (and any successor) with
respect to NQSOs, applied as if the NQSOs were ISOs;
(iii) Section 409A of the Code, to the extent
necessary to avoid its application or avoid adverse tax
consequences thereunder; and (iv) Section 162(m) of
the Code with respect to Awards granted to Section 162(m)
Persons that are intended to be “performance-based
compensation,” unless specifically determined otherwise by
the Committee.

ARTICLE 4

Participants

     
4.1     Eligibility. Officers,
all other active common law employees of the Company or any of
its Affiliates and Directors (each an “Eligible
Director”) who are selected by the Committee in its sole
discretion are eligible to participate in this Plan. (See
Article 14 and Article 18 with respect to the
Shareholder approval requirement.)

     
4.2     Plan Agreements. Awards
are contingent upon the participant’s execution of a
written agreement in a form prescribed by the Committee.
Execution of a plan agreement shall constitute the
participant’s irrevocable agreement to, and acceptance of,
the terms and conditions of the Award set forth in such
agreement and of the terms and conditions of the Plan applicable
to such Award. Plan agreements may differ from time to time and
from participant to participant.

ARTICLE 5

Stock Option Awards

     
5.1     Option Grant. Each Stock
Option granted under this Plan will be evidenced by minutes of a
meeting, or by a unanimous written consent without a meeting, of
the Committee and by a written agreement dated as of the Date of
Grant and executed by the Company and by the appropriate
participant.

     
5.2     Terms and Conditions of
Grants. Stock Options granted under this Plan are subject to
the following terms and conditions and may contain such
additional terms, conditions, restrictions and contingencies
with respect to exercisability and/or with respect to the Shares
acquired upon exercise as may be provided in the relevant
agreement evidencing the Stock Options, so long as such terms
and conditions are not

 

 

inconsistent with the terms of this Plan and any operative
employment or other agreement, as the Committee deems desirable:

		
	 	     
    (a) Exercise Price. Subject to Section 3.4, the
    Exercise Price will never be less than 100% of the Fair Market
    Value of the Shares on the Date of Grant. If a variable Exercise
    Price is specified at the time of grant, the Exercise Price may
    vary pursuant to a formula or other method established by the
    Committee; provided, however, that such formula or method
    will provide for a minimum Exercise Price equal to the Fair
    Market Value of the Shares on the Date of Grant. Except as
    otherwise provided in Section 3.4, no subsequent amendment
    of an outstanding Stock Option may reduce the Exercise Price to
    less than 100% of the Fair Market Value of the Shares on the
    Date of Grant. Nothing in this Section 5.2(a) shall be
    construed as limiting the Committee’s authority to grant
    premium price Stock Options which do not become exercisable
    until the Fair Market Value of the underlying Shares exceeds a
    specified percentage (e.g., 110%) of the Exercise Price;
    provided, however, that such percentage will never be
    less than 100%.
	 
	 	     
    (b) Option Term. Any unexercised portion of a Stock
    Option granted hereunder shall expire at the end of the stated
    term of the Stock Option. The Committee shall determine the term
    of each Stock Option at the time of grant, which term shall not
    exceed 10 years from the Date of Grant. The Committee may
    extend the term of a Stock Option, in its discretion, but not
    beyond the date immediately prior to the tenth anniversary of
    the original Date of Grant. If a definite term is not specified
    by the Committee at the time of grant, then the term is deemed
    to be 10 years. Nothing in this Section 5.2(b) shall
    be construed as limiting the Committee’s authority to grant
    Stock Options with a term shorter than 10 years.
	 
	 	     
    (c) Vesting. Stock Options, or portions thereof, are
    exercisable at such time or times as determined by the Committee
    in its discretion at or after grant. If the Committee provides
    that any Stock Option becomes Vested over a period of time, in
    full or in installments, the Committee may waive or accelerate
    such Vesting provisions at any time.
	 
	 	     
    (d) Method of Exercise. Vested portions of any Stock
    Option may be exercised in whole or in part at any time during
    the option term by giving written notice of exercise to the
    Company specifying the number of Shares to be purchased. The
    notice must be given by or on behalf of a person entitled to
    exercise the Stock Option, accompanied by payment in full of the
    Exercise Price, along with any projected tax withholding
    pursuant to Article 16. Subject to the approval of the
    Committee, the Exercise Price may be paid:

		
	 	     
    (i) in cash in any manner satisfactory to the Committee;
	 
	 	     
    (ii) by tendering (by either actual delivery of Shares or
    by attestation) unrestricted Shares that are owned on the date
    of exercise by the person entitled to exercise the Stock Option
    having an aggregate Fair Market Value on the date of exercise
    equal to the Exercise Price applicable to such Stock Option
    exercise, and, with respect to the exercise of NQSOs, including
    Restricted Shares;
	 
	 	     
    (iii) by a combination of cash and unrestricted Shares that
    are owned on the date of exercise by the person entitled to
    exercise the Stock Option; and
	 
	 	     
    (iv) by another method permitted by law and affirmatively
    approved by the Committee which assures full and immediate
    payment or satisfaction of the Exercise Price.
	 
	 	     
    The Committee may withhold its approval for any method of
    payment for any reason, in its sole discretion, including but
    not limited to concerns that the proposed method of payment will
    result in adverse financial accounting treatment, adverse tax
    treatment for the Company or a participant or a violation of the
    Sarbanes-Oxley Act of 2002, as amended from time to time, and
    related regulations and guidance.
	 
	 	     
    If the Exercise Price of an NQSO is paid by tendering Restricted
    Shares, then the Shares received upon the exercise will contain
    identical restrictions as the Restricted Shares so tendered.

 

 

		
	 	
    Except as otherwise provided by law and in the Committee’s
    sole discretion, projected tax withholding may be paid only by
    cash or through a same day sale transaction.

		
	 	     
    (e) Issuance of Shares. The Company will issue or
    cause to be issued Shares as soon as practicable upon exercise
    of the Option. No Shares will be issued until full payment has
    been made. Until the issuance (as evidenced by the appropriate
    entry on the books of the Company or of a duly authorized
    transfer agent of the Company) of the stock certificate
    evidencing such Shares, no right to vote or receive dividends or
    any other rights as a Shareholder will exist with respect to the
    Shares, notwithstanding the exercise of the Option.
	 
	 	     
    (f) Limitation on Gain. Nothing in this
    Article 5 shall be construed as prohibiting the Committee
    from granting Stock Options subject to a limit on the gain that
    may be realized upon exercise of such Stock Options. Any such
    limit shall be explicitly provided for in the relevant plan
    agreement.
	 
	 	     
    (g) Form. Unless the grant of a Stock Option is
    designated at the time of grant as an ISO, it is deemed to be an
    NQSO. ISOs are subject to the additional terms and conditions in
    Article 6.
	 
	 	     
    (h) Special Limitations on Stock Option Awards.
    Unless an Award agreement approved by the Committee provides
    otherwise, Stock Options awarded under this Plan are intended to
    meet the requirements for exclusion from coverage under Code
    Section 409A and all Stock Option Awards shall be construed
    and administered accordingly.

     
5.3     Termination of Grants Prior
to Expiration. Unless otherwise provided in an employment or
other agreement entered into between the optionee and the
Company and approved by the Committee, either before or after
the Date of Grant, and subject to Article 6 with respect to
ISOs, the following early termination provisions apply to all
Stock Options:

		
	 	     
    (a) Termination by Death. If an optionee’s
    employment or directorship with the Company or its Affiliates
    terminates by reason of his or her death, all Stock Options held
    by such optionee will immediately become Vested, but thereafter
    may only be exercised (by the legal representative of the
    optionee’s estate, or by the legatee or heir of the
    optionee pursuant to a will or the laws of descent and
    distribution) for a period of one year (or such other period as
    the Committee may specify at or after the time of grant) from
    the date of such death, or until the expiration of the original
    term of the Stock Option, whichever period is shorter.
	 
	 	     
    (b) Termination by Reason of Disability. If an
    optionee’s employment or directorship with the Company or
    its Affiliates terminates by reason of his or her Disability,
    all Stock Options held by such optionee will immediately become
    Vested, but thereafter may only be exercised for a period of one
    year (or such other period as the Committee may specify at or
    after the time of grant) from the date of such termination of
    employment, or until the expiration of the original term of the
    Stock Option, whichever period is shorter. If the optionee dies
    within such one year period (or such other period as
    applicable), any unexercised Stock Option held by such optionee
    will thereafter be exercisable by the legal representative of
    the optionee’s estate, or by the legatee or heir of the
    optionee pursuant to a will or the laws of descent and
    distribution, for the greater of the remainder of the one year
    period (or other period as applicable) or for a period of
    12 months from the date of such death, but in no event
    shall any portion of the Stock Option be exercisable after its
    original stated expiration date.
	 
	 	     
    (c) Termination by Reason of Retirement. If an
    optionee’s employment or directorship with the Company or
    its Affiliates terminates by reason of his or her Retirement,
    all Stock Options held by such optionee immediately become
    Vested but thereafter may only be exercised for a period of two
    years (or such other period as the Committee may specify at or
    after the time of grant) from the date of such Retirement, or
    until the expiration of the original term of the Stock Option,
    whichever period is shorter. If the optionee dies within such
    two year period (or such other period as applicable), any
    unexercised Stock Option held by such optionee will thereafter
    be exercisable by the legal representative of the
    optionee’s estate, or by the legatee or heir of the
    optionee pursuant to a will or the laws of descent and
    distribution, for the greater of the remainder of the two year
    period (or such other period as applicable)

 

 

		
	 	
    or for a period of 12 months from the date of such death,
    but in no event shall any portion of the Stock Option be
    exercisable after its original stated expiration date.
	 
	 	     
    (d) Other Terminations. If an optionee’s
    employment or directorship with the Company or its Affiliates is
    terminated for reasons other than his or her death, Disability
    or Retirement, all Stock Options (or portions thereof) which
    have not been exercised, whether Vested or not, are
    automatically forfeited immediately upon termination, except as
    otherwise provided in the relevant agreement evidencing the
    Stock Options.

ARTICLE 6

Special Rules Applicable to Incentive Stock Options

     
6.1     Eligibility.
Notwithstanding any other provision of this Plan to the
contrary, an ISO may only be granted to full or part-time
employees (including officers and Directors who are also
employees) of the Company or of an Affiliate, provided that the
Affiliate is a Parent or Subsidiary.

     
6.2     Special ISO Rules.

		
	 	     
    (a) Term. No ISO may be exercisable on or after the
    tenth anniversary of the Date of Grant, and no ISO may be
    granted under this Plan on or after the tenth anniversary of the
    effective date of this Plan. (See Article 18.)
	 
	 	     
    (b) Ten Percent Shareholder. No grantee may receive
    an ISO under this Plan if such grantee, at the time the Award is
    granted, owns (after application of the rules contained in
    Section 424(d) of the Code) equity securities possessing
    more than 10% of the total combined voting power of all classes
    of equity securities of the Company, its Parent or any
    Subsidiary, unless (i) the option price for such ISO is at
    least 110% of the Fair Market Value of the Shares as of the Date
    of Grant, and (ii) such ISO is not exercisable on or after
    the fifth anniversary of the Date of Grant.
	 
	 	     
    (c) Limitation on Grants. The aggregate Fair Market
    Value (determined with respect to each ISO at the time of grant)
    of the Shares with respect to which ISOs are exercisable for the
    first time by a grantee during any calendar year (under this
    Plan or any other plan adopted by the Company or its Parent or
    its Subsidiary) shall not exceed $100,000. If such aggregate
    Fair Market Value shall exceed $100,000, such number of ISOs as
    shall have an aggregate Fair Market Value equal to the amount in
    excess of $100,000 shall be treated as NQSOs.
	 
	 	     
    (d) Non-Transferability. Notwithstanding any other
    provision herein to the contrary, no ISO granted hereunder (and,
    if applicable, related Stock Appreciation Right) may be
    transferred except by will or by the laws of descent and
    distribution, nor may such ISO (or related Stock Appreciation
    Right) be exercisable during a grantee’s lifetime other
    than by him (or his guardian or legal representative to the
    extent permitted by applicable law).
	 
	 	     
    (e) Termination of Employment. No ISO may be
    exercised more than three months following termination of
    employment for any reason (including retirement) other than
    death or disability, nor more than one year following
    termination of employment for the reason of death or disability
    (as defined in Section 422 of the Code), or such option
    will no longer qualify as an ISO and shall thereafter be, and
    receive the tax treatment applicable to, an NQSO. For this
    purpose, a termination of employment is cessation of employment
    such that no employment relationship exists between the
    participant and the Company, a Parent or a Subsidiary.
	 
	 	     
    (f) Fair Market Value. For purposes of any ISO
    granted hereunder (or, if applicable, related Stock Appreciation
    Right), the Fair Market Value of Shares shall be determined in
    the manner required by Section 422 of the Code.

     
6.3     Subject to Code
Amendments. The foregoing limitations are designed to comply
with the requirements of Section 422 of the Code and shall
be automatically amended or modified to comply with amendments
or modifications to Section 422 of the Code. Any ISO which
fails to comply with Section 422 of

 

 

the Code is automatically treated as an NQSO appropriately
granted under this Plan provided it otherwise meets the
Plan’s requirements for NQSOs.

ARTICLE 7

Stock Appreciation Rights

     
7.1     SAR Grant and Agreement.
Stock Appreciation Rights may be granted under this Plan, either
independently or in conjunction with the grant of a Stock
Option. Each SAR granted under this Plan will be evidenced by
minutes of a meeting, or by a unanimous written consent without
a meeting, of the Committee and by a written agreement dated as
of the Date of Grant and executed by the Company and by the
appropriate participant.

     
7.2     SARs Granted in Conjunction
with Option. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under
this Plan, either at the same time or after the grant of the
Stock Option, and will be subject to the following terms and
conditions:

		
	 	     
    (a) Term. Each Stock Appreciation Right, or
    applicable portion thereof, granted with respect to a given
    Stock Option or portion thereof terminates and is no longer
    exercisable upon the termination or exercise of the related
    Stock Option, or applicable portion thereof.
	 
	 	     
    (b) Exercisability. A Stock Appreciation Right is
    exercisable only at such time or times and to the extent that
    the Stock Option to which it relates is Vested and exercisable
    in accordance with the provisions of Article 5 or otherwise
    as the Committee may determine at or after the time of grant.
	 
	 	     
    (c) Method of Exercise. A Stock Appreciation Right
    may be exercised by the surrender of the applicable portion of
    the related Stock Option. Stock Options which have been so
    surrendered, in whole or in part, are no longer exercisable to
    the extent the related Stock Appreciation Rights have been
    exercised and are deemed to have been exercised for the purpose
    of the limitation set forth in Article 3 on the number of
    Shares to be issued under this Plan, but only to the extent of
    the number of Shares actually issued under the Stock
    Appreciation Right at the time of exercise. Upon the exercise of
    a Stock Appreciation Right, subject to satisfaction of projected
    tax withholding requirements pursuant to Article 16, the
    holder of the Stock Appreciation Right is entitled to receive
    Shares equal in value to the excess of the Fair Market Value of
    a Share on the exercise date over the Exercise Price per Share
    specified in the related Stock Option, multiplied by the number
    of Shares in respect of which the Stock Appreciation Right is
    exercised. At any time the Exercise Price per Share of the
    related Stock Option exceeds the Fair Market Value of
    one Share, the holder of the Stock Appreciation Right shall not
    be permitted to exercise such right.

     
7.3     Independent SARs. Stock
Appreciation Rights may be granted without related Stock
Options, and independent Stock Appreciation Rights will be
subject to the following terms and conditions:

		
	 	     
    (a) Term. Any unexercised portion of an independent
    Stock Appreciation Right granted hereunder shall expire at the
    end of the stated term of the Stock Appreciation Right. The
    Committee shall determine the term of each Stock Appreciation
    Right at the time of grant, which term shall not exceed ten
    years from the Date of Grant. The Committee may extend the term
    of a Stock Appreciation Right, in its discretion, but not beyond
    the date immediately prior to the tenth anniversary of the
    original Date of Grant. If a definite term is not specified by
    the Committee at the time of grant, then the term is deemed to
    be ten years.
	 
	 	     
    (b) Exercisability. A Stock Appreciation Right is
    exercisable, in whole or in part, at such time or times as
    determined by the Committee at or after the time of grant.
	 
	 	     
    (c) Method of Exercise. A Stock Appreciation Right
    may be exercised in whole or in part during the term by giving
    written notice of exercise to the Company specifying the number
    of Shares in respect of which the Stock Appreciation Right is
    being exercised. The notice must be given by or on behalf of a
    person entitled to exercise the Stock Appreciation Right. Upon
    the exercise of a Stock Appreciation

 

 

		
	 	
    Right, subject to satisfaction of projected tax withholding
    requirements pursuant to Article 16, the holder of the
    Stock Appreciation Right is entitled to receive Shares equal in
    value to the excess of the Fair Market Value of a Share on the
    exercise date over the Fair Market Value of a Share on the Date
    of Grant multiplied by the number of Stock Appreciation Rights
    being exercised. At any time the Fair Market Value of a Share on
    a proposed exercise date does not exceed the Fair Market Value
    of a Share on the Date of Grant, the holder of the Stock
    Appreciation Right shall not be permitted to exercise such right.
	 
	 	     
    (d) Early Termination Prior to Expiration. Unless
    otherwise provided in an employment or other agreement entered
    into between the holder of the Stock Appreciation Right and the
    Company and approved by the Committee, either before or after
    the Date of Grant, the early termination provisions set forth in
    Section 5.3 as applied to Non-Qualified Stock Options will
    apply to independent Stock Appreciation Rights.

     
7.4     Other Terms and Conditions
of SAR Grants. Stock Appreciation Rights are subject to such
other terms and conditions, not inconsistent with the provisions
of this Plan and any operative employment or other agreement, as
are determined from time to time by the Committee.

     
7.5     Special Limitations on SAR
Awards. Unless an Award agreement approved by the Committee
provides otherwise, Stock Appreciation Rights awarded under this
Plan are intended to meet the requirements for exclusion from
coverage under Code Section 409A and all Stock Appreciation
Rights Awards shall be construed and administered accordingly.

ARTICLE 8

Restricted Share and Restricted Share Unit Awards

     
8.1     Restricted Share Grants and
Agreements. Restricted Share Awards consist of Shares which
are issued by the Company to a participant at no cost or at a
purchase price determined by the Committee which may be below
their Fair Market Value but which are subject to forfeiture and
restrictions on their sale or other transfer by the participant.
Each Restricted Share Award granted under this Plan will be
evidenced by minutes of a meeting, or by a unanimous written
consent without a meeting, of the Committee and by a written
agreement dated as of the Date of Grant and executed by the
Company and by the participant. The timing of Restricted Share
Awards and the number of Shares to be issued (subject to
Section 3.2) are to be determined by the Committee in its
discretion. By accepting a grant of Restricted Shares, the
participant consents to any projected tax withholding as
provided in Article 16.

     
8.2     Terms and Conditions of
Restricted Share Grants. Restricted Shares granted under
this Plan are subject to the following terms and conditions,
which, except as otherwise provided herein, need not be the same
for each participant, and may contain such additional terms,
conditions, restrictions and contingencies not inconsistent with
the terms of this Plan and any operative employment or other
agreement, as the Committee deems desirable:

		
	 	     
    (a) Purchase Price. The Committee shall determine
    the prices, if any, at which Restricted Shares are to be issued
    to a participant, which may vary from time to time and from
    participant to participant and which may be below the Fair
    Market Value of such Restricted Shares at the Date of Grant.
	 
	 	     
    (b) Restrictions. All Restricted Shares issued under
    this Plan will be subject to such restrictions as the Committee
    may determine, which may include, without limitation, the
    following:

		
	 	     
    (i) a prohibition against the sale, transfer, pledge or
    other encumbrance of the Restricted Shares, such prohibition to
    lapse at such time or times as the Committee determines (whether
    in installments, at the time of the death, Disability or
    Retirement of the holder of such shares, or otherwise, but
    subject to the Change in Control provisions in Article 12);
	 
	 	     
    (ii) a requirement that the participant forfeit such
    Restricted Shares in the event of termination of the
    participant’s employment or directorship with the Company
    or its Affiliates prior to Vesting;

 

 

		
	 	     
    (iii) a prohibition against employment or retention of the
    participant by any competitor of the Company or its Affiliates,
    or against dissemination by the participant of any secret or
    confidential information belonging to the Company or an
    Affiliate;
	 
	 	     
    (iv) any applicable requirements arising under the
    Securities Act of 1933, as amended, other securities laws, the
    rules and regulations of The Nasdaq Stock Market or any other
    stock exchange or transaction reporting system upon which such
    Restricted Shares are then listed or quoted and any state laws,
    rules and regulations, including “blue sky”
    laws; and
	 
	 	     
    (v) such additional restrictions as are required to avoid
    adverse tax consequences under Code Section 409A.

The Committee may at any time waive such restrictions or
accelerate the date or dates on which the restrictions will
lapse. However, if the Committee determines that restrictions
lapse upon the attainment of specified performance objectives,
then the provisions of Sections 9.2 and 9.3 will apply. If
the written agreement governing an Award to a
Section 162(m) Person provides that such Award is intended
to be “performance-based compensation,” the provisions
of Section 9.4(d) will also apply.

		
	 	     
    (c) Delivery of Shares. Restricted Shares will be
    registered in the name of the participant and deposited,
    together with a Stock Power, with the Company. Each such
    certificate will bear a legend in substantially the following
    form:

		
	 	
    “The transferability of this certificate and the Common
    Shares represented by it are subject to the terms and conditions
    (including conditions of forfeiture) contained in the DATATRAK
    International, Inc. 2005 Omnibus Equity Plan and an agreement
    entered into between the registered owner and the Company. A
    copy of this Plan and agreement are on file in the office of the
    Secretary of the Company.”
	 
	 	
    At the end of any time period during which the Restricted Shares
    are subject to forfeiture and restrictions on transfer, and
    after any projected tax withholding, such Shares will be
    delivered free of all restrictions (except for any pursuant to
    Section 15.2) to the participant or other appropriate
    person and with the foregoing legend removed.

		
	 	     
    (d) Forfeiture of Shares. If a participant who holds
    Restricted Shares fails to satisfy the restrictions, Vesting
    requirements and other conditions relating to the Restricted
    Shares prior to the lapse, satisfaction or waiver of such
    restrictions and conditions, except as may otherwise be
    determined by the Committee, the participant shall forfeit the
    Shares and transfer them back to the Company in exchange for a
    refund of any consideration paid by the participant or such
    other amount which may be specifically set forth in the Award
    agreement. A participant shall execute and deliver to the
    Company one or more Stock Powers with respect to Restricted
    Shares granted to such participant.
	 
	 	     
    (e) Voting and Other Rights. Except as otherwise
    required for compliance with Section 162(m) of the Code and
    the terms of the applicable Restricted Share Agreement, during
    any period in which Restricted Shares are subject to forfeiture
    and restrictions on transfer, the participant holding such
    Restricted Shares shall have all the rights of a Shareholder
    with respect to such Shares, including, without limitation, the
    right to vote such Shares and the right to receive any dividends
    paid with respect to such Shares.

     
8.3     Restricted Share Unit Awards
and Agreements. Restricted Share Unit Awards consist of
Shares that will be issued to a participant at a future time or
times at no cost or at a purchase price determined by the
Committee which may be below their Fair Market Value if
continued employment, continued directorship and/or other terms
and conditions specified by the Committee are satisfied. Each
Restricted Share Unit Award granted under this Plan will be
evidenced by minutes of a meeting, or by a unanimous written
consent without a meeting, of the Committee and by a written
agreement dated as of the Date of Grant and executed by the
Company and the Plan participant. The timing of Restricted Share
Unit Awards and the number of Restricted Share Units to be
awarded (subject to Section 3.2) are to be determined by
the Committee in its

 

 

sole discretion. By accepting a Restricted Share Unit Award, the
participant agrees to remit to the Company when due any
projected tax withholding as provided in Article 16.

     
8.4     Terms and Conditions of
Restricted Share Unit Awards. Restricted Share Unit Awards
are subject to the following terms and conditions, which, except
as otherwise provided herein, need not be the same for each
participant, and may contain such additional terms, conditions,
restrictions and contingencies not inconsistent with the terms
of this Plan and any operative employment or other agreement, as
the Committee deems desirable:

		
	 	     
    (a) Purchase Price. The Committee shall determine
    the prices, if any, at which Shares are to be issued to a
    participant after Vesting of Restricted Share Units, which may
    vary from time to time and among participants and which may be
    below the Fair Market Value of Shares at the Date of Grant.
	 
	 	     
    (b) Restrictions. All Restricted Share Units awarded
    under this Plan will be subject to such restrictions as the
    Committee may determine, which may include, without limitation,
    the following:

		
	 	     
    (i) a prohibition against the sale, transfer, pledge or
    other encumbrance of the Restricted Share Unit;
	 
	 	     
    (ii) a requirement that the participant forfeit such
    Restricted Share Unit in the event of termination of the
    participant’s employment or directorship with the Company
    or its Affiliates prior to Vesting;
	 
	 	     
    (iii) a prohibition against employment of the participant
    by, or provision of services by the participant to, any
    competitor of the Company or its Affiliates, or against
    dissemination by the participant of any secret or confidential
    information belonging to the Company or an Affiliate;
	 
	 	     
    (iv) any applicable requirements arising under the
    Securities Act of 1933, as amended, other securities laws, the
    rules and regulations of The Nasdaq Stock Market or any other
    stock exchange or transaction reporting system upon which the
    Common Shares are then listed or quoted and any state laws,
    rules and interpretations, including “blue sky”
    laws; and
	 
	 	     
    (v) such additional restrictions as are required to avoid
    adverse tax consequences under Code Section 409A.

		
	 	
    The Committee may at any time waive such restrictions or
    accelerate the date or dates on which the restrictions will
    lapse.

		
	 	     
    (c) Performance-Based Restrictions. The Committee
    may, in its sole discretion, provide restrictions that lapse
    upon the attainment of specified performance objectives. In such
    case, the provisions of Sections 9.2 and 9.3 will apply
    (including, but not limited to, the enumerated performance
    objectives). If the written agreement governing an Award to a
    Section 162(m) Person provides that such Award is intended
    to be “performance-based compensation,” the provisions
    of Section 9.4(d) will also apply.
	 
	 	     
    (d) Voting and Other Rights. A participant holding
    Restricted Share Units shall not be deemed to be a Shareholder
    solely because of such units. Such participant shall have no
    rights of a Shareholder with respect to such units; provided,
    however, that an Award agreement may provide for payment of
    an amount of money (or Shares with a Fair Market Value
    equivalent to such amount) equal to the dividends paid from time
    to time on the number of Common Shares that would become payable
    upon vesting of a Restricted Share Unit Award.
	 
	 	     
    (e) Lapse of Restrictions. If a participant who
    holds Restricted Share Units satisfies the restrictions and
    other conditions relating to the Restricted Share Units prior to
    the lapse or waiver of such restrictions and conditions, the
    Restricted Share Units shall be converted to, or replaced with,
    Shares which are free of all restrictions except for any
    restrictions pursuant to Section 15.2.
	 
	 	     
    (f) Forfeiture of Restricted Share Units. If a
    participant who holds Restricted Share Units fails to satisfy
    the restrictions, Vesting requirements and other conditions
    relating to the Restricted Share Units

 

 

		
	 	
    prior to the lapse, satisfaction or waiver of such restrictions
    and conditions, except as may otherwise be determined by the
    Committee, the participant shall forfeit the Restricted Share
    Units.
	 
	 	     
    (g) Termination. A Restricted Share Unit Award or
    unearned portion thereof will terminate without the issuance of
    Shares on the termination date specified on the Date of Grant or
    upon the termination of employment or directorship of the
    participant during the time period or periods specified by the
    Committee during which any performance objectives must be met
    (the “Performance Period”). If a participant’s
    employment or directorship with the Company or its Affiliates
    terminates by reason of his or her death, Disability or
    Retirement, the Committee in its discretion at or after the Date
    of Grant may determine that the participant (or the heir,
    legatee or legal representative of the participant’s
    estate) will receive a distribution of Shares in an amount which
    is not more than the number of Shares which would have been
    earned by the participant if 100% of the performance objectives
    for the current Performance Period had been achieved prorated
    based on the ratio of the number of months of active employment
    in the Performance Period to the total number of months in the
    Performance Period. However, with respect to Awards intended to
    be performance-based compensation (as described in
    Section 9.4(d)), distribution of the Shares shall not be
    made prior to attainment of the relevant performance objectives.
	 
	 	     
    (h) Special Limitations on Restricted Share Unit
    Awards. Unless an Award agreement approved by the Committee
    provides otherwise, Restricted Share Units awarded under this
    Plan are intended to meet the requirements for exclusion from
    coverage under Code Section 409A and all Restricted Share
    Unit Awards shall be construed and administered accordingly.

     
8.5     Time Vesting of Restricted
Share and Restricted Share Unit Awards. Restricted Shares or
Restricted Share Units, or portions thereof, are exercisable at
such time or times as determined by the Committee in its
discretion at or after grant, subject to the restrictions on
time Vesting set forth in this Section. If the Committee
provides that any Restricted Shares or Restricted Share Unit
Awards become Vested over time (with or without a performance
component), the Committee may waive or accelerate such Vesting
provisions at any time, subject to the restrictions on time
Vesting set forth in this Section.

ARTICLE 9

Performance Share Awards

     
9.1     Performance Share Awards and
Agreements. A Performance Share Award is a right to receive
Shares in the future conditioned upon the attainment of
specified performance objectives and such other conditions,
restrictions and contingencies as the Committee may determine.
Each Performance Share Award granted under this Plan will be
evidenced by minutes of a meeting, or by a unanimous written
consent without a meeting, of the Committee and by a written
agreement dated as of the Date of Grant and executed by the
Company and by the Plan participant. The timing of Performance
Share Awards and the number of Shares covered by each Award
(subject to Section 3.2) are to be determined by the
Committee in its discretion. By accepting a grant of Performance
Shares, the participant agrees to remit to the Company when due
any projected tax withholding as provided in Article 16.

     
9.2     Performance Objectives.
At the time of grant of a Performance Share Award, the Committee
will specify the performance objectives which, depending on the
extent to which they are met, will determine the number of
Shares that will be distributed to the participant. The
Committee will also specify the time period or periods (the
“Performance Period”) during which the performance
objectives must be met. With respect to awards to
Section 162(m) Persons intended to be “performance
based compensation,” the Committee may use performance
objectives based on one or more of the following: stock price,
market share, sales, earnings per share, return on equity,
costs, earnings, capital adjusted pre-tax earnings (economic
profit), net income, operating income, performance profit
(operating income minus an allocated charge approximating the
Company’s cost of capital, before or after tax), gross
margin, revenue, working capital, total assets, net assets,
stockholders’ equity and cash flow. The Committee may
designate a single goal criterion or multiple goal criteria for
performance measurement purposes. Performance measurement may be
based on absolute Company, business unit or divisional
performance and/or on performance as compared with that of other

 

 

publicly-traded companies. The performance objectives and
periods need not be the same for each participant nor for each
Award.

     
9.3     Adjustment of Performance
Objectives. The Committee may modify, amend or otherwise
adjust the performance objectives specified for outstanding
Performance Share Awards if it determines that an adjustment
would be consistent with the objectives of this Plan and taking
into account the interests of the participants and the public
Shareholders of the Company and such adjustment complies with
the requirements of Section 162(m) of the Code for
Section 162(m) Persons, to the extent applicable, unless
the Committee indicates a contrary intention. The types of
events which could cause an adjustment in the performance
objectives include, without limitation, accounting changes which
substantially affect the determination of performance
objectives, changes in applicable laws or regulations which
affect the performance objectives, and divisive corporate
reorganizations, including spin-offs and other distributions of
property or stock.

     
9.4     Other Terms and
Conditions. Performance Share Awards granted under this Plan
are subject to the following terms and conditions and may
contain such additional terms, conditions, restrictions and
contingencies not inconsistent with the terms of this Plan and
any operative employment or other agreement as the Committee
deems desirable:

		
	 	     
    (a) Delivery of Shares. As soon as practicable after
    the applicable Performance Period has ended, the participant
    will receive a distribution of the number of Shares earned
    during the Performance Period, depending upon the extent to
    which the applicable performance objectives were achieved. Such
    Shares will be registered in the name of the participant and
    will be free of all restrictions except for any restrictions
    pursuant to Section 15.2.
	 
	 	     
    (b) Termination. A Performance Share Award or
    unearned portion thereof will terminate without the issuance of
    Shares on the termination date specified at the time of grant or
    upon the termination of employment or directorship of the
    participant during the Performance Period. If a
    participant’s employment or directorship with the Company
    or its Affiliates terminates by reason of his or her death,
    Disability or Retirement (except with respect to
    Section 162(m) Persons), the Committee in its discretion at
    or after the time of grant may determine, notwithstanding any
    Vesting requirements under Section 9.4(a), that the
    participant (or the heir, legatee or legal representative of the
    participant’s estate) will receive a distribution of a
    portion of the participant’s then-outstanding Performance
    Share Awards in an amount which is not more than the number of
    shares which would have been earned by the participant if 100%
    of the performance objectives for the current Performance Period
    had been achieved prorated based on the ratio of the number of
    months of active employment in the Performance Period to the
    total number of months in the Performance Period. However, with
    respect to Awards intended to be “performance-based
    compensation” (as described in Section 9.4(e)),
    distribution of the Shares shall not be made prior to attainment
    of the relevant performance objective.
	 
	 	     
    (c) Voting and Other Rights. Awards of Performance
    Shares do not provide the participant with voting rights or
    rights to dividends prior to the participant becoming the holder
    of record of Shares issued pursuant to an Award; provided,
    however, that an Award agreement may provide for payment of
    an amount of money (or Shares with a Fair Market Value
    equivalent to such amount) equal to the dividends paid from time
    to time on the number of Common Shares that would become payable
    upon vesting of a Performance Share Award. Prior to the issuance
    of Shares, Performance Share Awards may not be sold,
    transferred, pledged, assigned or otherwise encumbered.
	 
	 	     
    (d) Performance-Based Compensation. The Committee
    may designate Performance Share Awards as being
    “remuneration payable solely on account of the attainment
    of one or more performance goals” as described in
    Section 162(m)(4)(C) of the Code. Such Awards shall be
    automatically amended or modified to comply with amendments to
    Section 162 of the Code to the extent applicable, unless
    the Committee indicates a contrary intention.

     
9.5     Time Vesting of Performance
Share Awards. Performance Share Awards, or portions thereof,
are exercisable at such time or times as determined by the
Committee in its discretion at or after grant, subject to

 

 

the restrictions on time Vesting set forth in this Section. If
the Committee provides that any Performance Shares become Vested
over time (accelerated by a performance component), the
Committee may waive or accelerate such Vesting provisions at any
time, subject to the restrictions on time Vesting set forth in
this Section.

     
9.6     Special Limitations on
Performance Share Awards. Unless an Award agreement approved
by the Committee provides otherwise, Performance Shares awarded
under this Plan are intended to meet the requirements for
exclusion from coverage under Code Section 409A and all
Performance Share Awards shall be construed and administered
accordingly.

ARTICLE 10

Common Share Awards

     
10.1     Eligibility.
Notwithstanding any other provision of this Plan to the
contrary, a Common Share may only be granted to an Eligible
Director.

     
10.2     Terms and Conditions of
Common Share Awards.

		
	 	     
    (a) Purpose. Common Shares may be granted in
    consideration of services rendered to the Company by Eligible
    Directors in their capacity as Directors.
	 
	 	     
    (b) Vesting. Common Shares shall be fully-vested.

ARTICLE 11

Transfers and Leaves of Absence

     
11.1     Transfer of
Participant. For purposes of this Plan, the transfer of a
participant among the Company and its Affiliates is deemed not
to be a termination of employment.

     
11.2     Effect of Leaves of
Absence. For purposes of this Plan, the following leaves of
absence are deemed not to be a termination of employment:

		
	 	     
    (a) a leave of absence, approved in writing by the Company,
    for military service, sickness or any other purpose approved by
    the Company, if the period of such leave does not exceed
    90 days;
	 
	 	     
    (b) a leave of absence in excess of 90 days, approved
    in writing by the Company, but only if the employee’s right
    to reemployment is guaranteed either by a statute or by
    contract, and provided that, in the case of any such leave of
    absence, the employee returns to work within 30 days after
    the end of such leave; and
	 
	 	     
    (c) any other absence determined by the Committee in its
    discretion not to constitute a termination of employment.

ARTICLE 12

Effect of Change in Control

     
12.1     Change in Control
Defined. “Change in Control” means the occurrence
of any of the following: (i) the receipt by the Company of
a Schedule 13D or other advice indicating that a person, or
any member of a “group,” is the “beneficial
owner” (as those terms are defined in Rule 13d-3 under
the Exchange Act) of twenty percent (20%) or more of the voting
power of the Company; (ii) the first purchase of shares
pursuant to a tender offer or exchange (other than a tender
offer of exchange by the Company or its Affiliates) for all or
any amount of Common Shares or any class or any securities
convertible into such Common Shares, the results of which would
make the offeror and/or its affiliates the beneficial owners of
twenty percent (20%) or more of the voting power of the Company;
(iii) the date of the approval by Shareholders of an
agreement providing for any consolidation or merger of the
Company in which the Company will not be the continuing or

 

 

surviving corporation or pursuant to which shares of capital
stock of any class, or any securities convertible into such
capital stock, of the Company would be converted into cash,
securities, or other property, other than a merger or
consolidation of the Company with an Affiliate or in which the
holders of all of the Shares of all classes of the
Company’s capital stock immediately prior to the merger or
consolidation would own at least a majority of the voting power
of the surviving corporation (or the direct or indirect parent
company of the surviving corporation) immediately after the
merger or consolidation; (iv) the date of the approval by
Shareholders of any sale, lease, exchange, or other transfer (in
one transaction or a series of related transactions) of all or
substantially all the assets of the Company; (v) the
adoption of any plan or proposal for the liquidation (but not a
partial liquidation) or dissolution of the Company; or
(vi) such other event as the Committee shall, in its sole
and absolute discretion, deem to be a “Change in
Control.”

     
12.2     Acceleration of Award.
Except as otherwise provided in this Plan or an Award agreement,
immediately upon the occurrence of a Change in Control:

		
	 	     
    (a) all outstanding Stock Options automatically become
    fully exercisable;
	 
	 	     
    (b) all Restricted Share Awards automatically become fully
    Vested;
	 
	 	     
    (c) all Restricted Share Unit Awards automatically become
    fully Vested (or, if such Restricted Share Unit Awards are
    subject to performance-based restrictions, shall become Vested
    on a pro-rated basis as described in Section 12.2(d)) and,
    to the extent Vested, convertible to Shares at the election of
    the holder;
	 
	 	     
    (d) all participants holding Performance Share Awards
    become entitled to receive a partial payout in an amount which
    is the number of Shares which would have been earned by the
    participant if 100% of the performance objectives for the
    current Performance Period had been achieved pro-rated based on
    the ratio of the number of months of active employment in the
    Performance Period to the total number of months in the
    Performance Period; and
	 
	 	     
    (e) Stock Appreciation Rights automatically become fully
    Vested and fully exercisable.

ARTICLE 13

Transferability of Awards

     
13.1     Awards Are
Non-Transferable. Except as provided in Sections 13.2
and 13.3, Awards are non-transferable and any attempts to
assign, pledge, hypothecate or otherwise alienate or encumber
(whether by operation of law or otherwise) any Award shall be
null and void.

     
13.2     Inter-Vivos Exercise of
Awards. During a participant’s lifetime, Awards are
exercisable only by the participant or, as permitted by
applicable law and notwithstanding Section 13.1 to the
contrary, the participant’s guardian or other legal
representative.

     
13.3     Limited Transferability of
Certain Awards. Notwithstanding Section 13.1 to the
contrary, Awards may be transferred by will and by the laws of
descent and distribution. Moreover, the Committee, in its
discretion, may allow at or after the time of grant the
transferability of Awards which are Vested, provided that the
permitted transfer is made (a) if the Award is an Incentive
Stock Option, the transfer is consistent with Section 422
of the Code; (b) to the Company (for example in the case of
forfeiture of Restricted Shares), an Affiliate or a person
acting as the agent of the foregoing or which is otherwise
determined by the Committee to be in the interests of the
Company; or (c) by the participant for no consideration to
Immediate Family Members or to a bona fide trust, partnership or
other entity controlled by and for the benefit of one or more
Immediate Family Members. “Immediate Family Members”
means the participant’s spouse, children, stepchildren,
parents, stepparents, siblings (including half brothers and
sisters), in-laws and other individuals who have a relationship
to the participant arising because of a legal adoption. No
transfer may be made to the extent that transferability would
cause Form S-8 or any successor form thereto not to be
available to register Shares related to an Award. The Committee
in its discretion may impose additional terms and conditions
upon transferability.

 

 

ARTICLE 14

Amendment and Discontinuation

     
14.1     Amendment or
Discontinuation of this Plan. The Board of Directors may
amend, alter, or discontinue this Plan at any time, provided
that no amendment, alteration, or discontinuance may be made:

		
	 	     
    (a) which would materially and adversely affect the rights
    of a participant under any Award granted prior to the date such
    action is adopted by the Board of Directors without the
    participant’s written consent thereto; and
	 
	 	     
    (b) without Shareholder approval, if Shareholder approval
    is required under applicable laws, regulations or exchange
    requirements (including Section 422 of the Code with
    respect to ISOs, and for the purpose of qualification as
    “performance-based compensation” under
    Section 162(m) of the Code).

Notwithstanding the foregoing, this Plan may be amended without
affecting participants’ consent to: (i) comply with
any law; (ii) preserve any intended favorable tax effects
for the Company, the Plan or participants; or (iii) avoid
any unintended unfavorable tax effects for the Company, the Plan
or participants.

     
14.2     Amendment of Grants.
The Committee may amend, prospectively or retroactively, the
terms of any outstanding Award, provided that no such amendment
may be inconsistent with the terms of this Plan (specifically
including the prohibition on granting Stock Options with an
Exercise Price less than 100% of the Fair Market Value of the
Common Shares on the Date of Grant) or would materially and
adversely affect the rights of any holder without his or her
written consent.

ARTICLE 15

Share Certificates

     
15.1     Delivery of Share
Certificates. The Company is not required to issue or
deliver any certificates for Shares issuable with respect to
Awards under this Plan prior to the fulfillment of all of the
following conditions:

		
	 	     
    (a) payment in full for the Shares and for any projected
    tax withholding (See Article 16);
	 
	 	     
    (b) completion of any registration or other qualification
    of such Shares under any Federal or state laws or under the
    rulings or regulations of the Securities and Exchange Commission
    or any other regulating body which the Committee in its
    discretion deems necessary or advisable;
	 
	 	     
    (c) admission of such Shares to listing on The Nasdaq Stock
    Market or any stock exchange on which the Shares are listed;
	 
	 	     
    (d) in the event the Shares are not registered under the
    Securities Act of 1933, qualification as a private placement
    under said Act;
	 
	 	     
    (e) obtaining of any approval or other clearance from any
    Federal or state governmental agency which the Committee in its
    discretion determines to be necessary or advisable; and
	 
	 	     
    (f) the Committee is fully satisfied that the issuance and
    delivery of Shares under this Plan is in compliance with
    applicable Federal, state or local law, rule, regulation or
    ordinance or any rule or regulation of any other regulating
    body, for which the Committee may seek approval of counsel for
    the Company.

     
15.2     Applicable Restrictions on
Shares. Shares issued with respect to Awards may be subject
to such stock transfer orders and other restrictions as the
Committee may determine necessary or advisable under any
applicable Federal or state securities law rules, regulations
and other requirements, the rules, regulations and other
requirements of The Nasdaq Stock Market or any stock exchange
upon which the Shares are then-listed, and any other applicable
Federal or state law and will include any restrictive legends
the Committee may deem appropriate to include.

 

 

     
15.3     Book Entry. In lieu of
the issuance of stock certificates evidencing Shares, the
Company may use a “book entry” system in which a
computerized or manual entry is made in the records of the
Company to evidence the issuance of such Shares. Such Company
records are, absent manifest error, binding on all parties.

ARTICLE 16

Satisfaction of Projected Tax Liabilities

     
16.1     In General. The
Committee shall cause the Company to withhold any taxes which it
determines it is required by law or required by the terms of
this Plan to withhold in connection with any payments incident
to this Plan. The participant or other recipient shall provide
the Committee with such Stock Powers and additional information
or documentation as may be necessary for the Committee to
discharge its obligations under this Section.

     
16.2     Withholding from Share
Distributions. With respect to a distribution in Shares
pursuant to Restricted Share, Restricted Share Unit and
Performance Share Awards under the Plan, the Committee shall
cause the Company to sell the fewest number of such Shares for
the proceeds of such sale to equal (or exceed by not more than
that actual sale price of a single Share) the participant’s
or other recipient’s projected tax liability resulting from
such distribution. The Committee shall withhold the proceeds of
such sale for purposes of satisfying such projected tax
liability.

     
16.3     Delivery of Withholding
Proceeds. The Committee shall cause the Company to deliver
withholding proceeds to the Internal Revenue Service and/or
other taxing authority in satisfaction of a participant’s
or other recipient’s tax liability arising from a payment.

     
16.4     Projected Tax
Liability. For purposes of this Article 16, the term
“projected tax liability” means the product of:
(i) the aggregate maximum marginal federal and applicable
state and local income tax rates on the date of a payment
pursuant to the Plan; and (ii) the Fair Market Value of the
Shares distributable to the participant or other recipient
determined as of the date of payment.

ARTICLE 17

General Provisions

     
17.1     No Implied Rights to
Awards, Employment or Directorship. No potential participant
has any claim or right to be granted an Award under this Plan,
and there is no obligation of uniformity of treatment of
participants under this Plan. Neither this Plan nor any Award
thereunder shall be construed as giving any individual any right
to continued employment or continued directorship with the
Company or any Affiliate. The Plan does not constitute a
contract of employment, and the Company and each Affiliate
expressly reserve the right at any time to terminate employees
free from liability, or any claim, under this Plan, except as
may be specifically provided in this Plan or in an Award
agreement.

     
17.2     Other Compensation
Plans. Nothing contained in this Plan prevents the Board of
Directors from adopting other or additional compensation
arrangements, subject to Shareholder approval if such approval
is required, and such arrangements may be either generally
applicable or applicable only in specific cases.

     
17.3     Rule 16b-3
Compliance. The Plan is intended to comply with all
applicable conditions of Rule 16b-3 of the Exchange Act, as
such rule may be amended from time to time
(“Rule 16b-3”). All transactions involving any
participant subject to Section 16(a) shall be subject to
the conditions set forth in Rule 16b-3, regardless of
whether such conditions are expressly set forth in this Plan.
Any provision of this Plan that is contrary to Rule 16b-3
does not apply to such participants.

     
17.4     Code Section 162(m)
Compliance. The Plan is intended to comply with all
applicable requirements of Section 162(m) of the Code with
respect to “performance-based compensation” for
Section 162(m) Persons. Unless the Committee expressly
determines otherwise, any provision of this Plan that is
contrary to such requirements does not apply to such
“performance-based compensation.”

 

 

     
17.5     Successors. All
obligations of the Company with respect to Awards granted under
this Plan are binding on any successor to the Company, whether
as a result of a direct or indirect purchase, merger,
consolidation or otherwise of all or substantially all of the
business and/or assets of the Company.

     
17.6     Severability. In the
event any provision of this Plan, or the application thereof to
any person or circumstances, is held illegal or invalid for any
reason, the illegality or invalidity shall not affect the
remaining parts of this Plan, or other applications, and this
Plan is to be construed and enforced as if the illegal or
invalid provision had not been included.

     
17.7     Governing Law. To the
extent not preempted by Federal law, this Plan and all Award
agreements pursuant thereto are construed in accordance with and
governed by the laws of the State of Ohio. This Plan is not
intended to be governed by the Employee Retirement Income
Security Act and shall be so construed and administered.

ARTICLE 18

Effective Date

     
18.1     Effective Date. The
effective date of this DATATRAK International, Inc. 2005 Omnibus
Equity Plan is the date on which the shareholders of the Company
approve it at a duly held stockholders’ meeting.

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