SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11c or Section 240.14a-12
THE LAMSON & SESSIONS CO.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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LAMSON & SESSIONS
25701 Science Park Drive
Cleveland, Ohio 44122
(216) 464-3400
March 29, 2004
To Our Shareholders:
On behalf of the Board of Directors and management of Lamson & Sessions, I
cordially invite you to attend the 2004 Annual Meeting of Lamson's shareholders
to be held on Friday, April 30, 2004, at 9:00 a.m., local time, at the Wyndham
Cleveland Hotel, 1260 Euclid Avenue, Cleveland, Ohio 44115.
At this meeting, shareholders are expected to elect four directors for a
three-year term ending in 2007 and to approve Lamson's 1998 Incentive Equity
Plan (As Amended and Restated as of April 30, 2004).
In addition, there will be a report on current developments in the Company
and an opportunity for questions of general interest to shareholders.
It is extremely important that your shares be represented at the meeting.
Whether or not you plan to attend in person, you are requested to mark, sign,
date and return the enclosed proxy promptly in the envelope provided or give
your proxy by telephone or over the Internet by following the instructions on
the proxy card.
Sincerely,
/s/ John B. Schulze
JOHN B. SCHULZE
Chairman of the Board
and Chief Executive Officer
LAMSON & SESSIONS
25701 Science Park Drive
Cleveland, Ohio 44122
(216) 464-3400
NOTICE OF 2004 ANNUAL MEETING OF SHAREHOLDERS
APRIL 30, 2004
Notice is hereby given that the Annual Meeting of Shareholders of The
Lamson & Sessions Co. will be held at the Wyndham Cleveland Hotel, 1260 Euclid
Avenue, Cleveland, Ohio 44115 on April 30, 2004, beginning at 9:00 a.m., local
time, for the purpose of considering and acting upon the following:
1. The election of four directors in Class I for three-year terms expiring
in 2007;
2. Approval of The Lamson & Sessions Co. 1998 Incentive Equity Plan (As
Amended and Restated as of April 30, 2004); and
3. Any other business as may properly come before the Annual Meeting or any
adjournment thereof.
If you were a shareholder of record at the close of business on March 4,
2004, you are entitled to notice of and to vote at the Annual Meeting and any
adjournment thereof.
By order of the Board of Directors.
/s/ John B. Schulze
JOHN B. SCHULZE
Chairman of the Board
and Chief Executive Officer
March 29, 2004
---------------------
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND, SO THAT YOUR VOTE WILL BE
COUNTED AT THE ANNUAL MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED
PROXY PROMPTLY, USING THE RETURN ENVELOPE ENCLOSED, OR GIVE YOUR PROXY BY
TELEPHONE OR OVER THE INTERNET BY FOLLOWING THE INSTRUCTIONS ON THE PROXY CARD.
LAMSON & SESSIONS
25701 Science Park Drive
Cleveland, Ohio 44122
(216) 464-3400
---------------------------------
PROXY STATEMENT
---------------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 30, 2004
DATE OF THE PROXY STATEMENT -- MARCH 29, 2004
GENERAL INFORMATION
INFORMATION ABOUT THE ANNUAL MEETING
Our Annual Meeting will be held on Friday, April 30, 2004, at 9:00 a.m.,
local time, at the Wyndham Cleveland Hotel, 1260 Euclid Avenue, Cleveland, Ohio
44115.
INFORMATION ABOUT THIS PROXY STATEMENT
We sent you this Proxy Statement and the enclosed proxy card because
Lamson's Board of Directors is soliciting your proxy to vote your shares at the
Annual Meeting. If you own Lamson common stock in more than one account, such as
individually and also jointly with your spouse, you may receive more than one
set of these proxy materials. To assist us in saving money and to provide you
with better shareholder services, we encourage you to have all your accounts
registered in the same name and address. You may do this by contacting Lamson's
Shareholder Relations Department at (216) 464-3400. This Proxy Statement
summarizes information that we are required to provide to you under the rules of
the Securities and Exchange Commission and which is designed to assist you in
voting your shares. On or about March 29, 2004, we began mailing these proxy
materials to all shareholders of record at the close of business on March 4,
2004.
WHAT YOU MAY VOTE ON AT THE ANNUAL MEETING
1. The election of four directors in Class I, with terms expiring in 2007;
and
2. Approval of The Lamson & Sessions Co. 1998 Incentive Equity Plan (As
Amended and Restated as of April 30, 2004), (the "1998 Plan").
The Board recommends that you vote FOR each of the nominees for director
and FOR the 1998 Plan (As Amended and Restated as of April 30, 2004).
1
INFORMATION ABOUT VOTING
Shareholders can vote on matters presented at the Annual Meeting in four
ways:
(a) By Proxy. You can vote by signing, dating and returning the enclosed
proxy card. If you do this, the individuals named on the card (your
"proxies") will vote your shares in the manner you indicate. You may
specify on your proxy card whether your shares should be voted for all,
some or none of the nominees for director. If you do not indicate
instructions on the card, your shares will be voted FOR the election of
the directors.
(b) By Telephone. After reading the proxy materials and with your proxy and
voting instruction form in front of you, you may call the toll-free
number 1-800-542-1160 using a touch-tone telephone. You will be
prompted to enter your Control Number from your proxy and voting
instruction form. This number will identify you and the Company. Then
you can follow the simple instructions that will be given to you to
record your vote.
(c) Over the Internet. After reading the proxy materials and with your
proxy and voting instruction form in front of you, you may use your
computer to access the Web site http://www.votefast.com. You will be
prompted to enter your Control Number from your proxy and voting
instruction form. This number will identify you and the Company. Then
you can follow the simple instructions that will be given to you to
record your vote.
(d) In Person. You may come to the Annual Meeting and cast your vote there.
The Internet and telephone voting procedures have been set up for your
convenience and have been designed to authenticate your identity, allow you to
give voting instructions and confirm that those instructions have been recorded
properly.
You may revoke your proxy at any time before it is exercised by sending a
written notice of revocation to Lamson's Secretary, James J. Abel, prior to the
Annual Meeting.
Each share of Lamson common stock is entitled to one vote. As of March 4,
2004, there were 13,787,145 shares of common stock outstanding.
CUMULATIVE VOTING
Notice that cumulative voting is desired must be given to the President, a
Vice President or the Secretary of Lamson at least forty-eight hours before the
Annual Meeting. At the start of the Annual Meeting, Lamson's Chairman or
Secretary or the shareholder giving such notice must announce notice was given
that cumulative voting is desired. If the notice is properly given, each
shareholder will have the right to cumulate his or her voting power and cast all
of his or her votes for one or more of the nominees. If voting for the election
of directors is cumulative, the persons named in the enclosed proxy will vote
the shares represented thereby and by other proxies held by them so as to elect
as many as possible of the four nominees for Class I.
INFORMATION REGARDING TABULATION OF THE VOTE
Lamson's policy is that all proxies, ballots and votes tabulated at a
meeting of the shareholders are confidential. Representatives of National City
Bank will tabulate votes and act as Inspectors of Election at the Annual
Meeting.
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QUORUM REQUIREMENT
A quorum of shareholders is necessary to hold a valid meeting. Under
Lamson's Amended Code of Regulations, if shareholders holding 75% of the voting
power are present in person or by proxy, a quorum will exist to elect directors
at the meeting. For all other business that may be properly conducted at the
Annual Meeting, the holders of common stock entitled to exercise two-thirds of
the voting power of the Company, present in person or by proxy, shall constitute
a sufficient quorum. Abstentions are counted as present for establishing a
quorum but broker non-votes are not. A broker non-vote occurs when a broker
votes on some matters on the proxy card but not on others because the broker
does not have the authority to do so.
The holders of a majority of the voting power represented at the Annual
Meeting, whether or not a quorum is present, may adjourn the meeting without
notice other than by announcement at the meeting of the date, time and location
at which the meeting will be reconvened.
INFORMATION ABOUT VOTES NECESSARY FOR ACTION TO BE TAKEN
Election of Directors
The four nominees for director receiving the greatest number of votes will
be elected at the meeting. Abstentions and broker non-votes will have no effect
on the result of the vote on the election of directors.
Amendment to the 1998 Plan
Two-thirds (or 66.67%) of all the votes cast at the meeting will be
required to approve the amendment to the 1998 Plan.
OTHER MATTERS
The Board of Directors does not know of any other matter which will be
presented at the Annual Meeting other than the election of directors discussed
in this Proxy Statement. The Proxy Statement for our Annual Meeting of
Shareholders held on April 30, 2003 stated that any shareholder proposal
intended to be presented at the 2004 Annual Meeting must be received by the
Company not later than November 28, 2003 for inclusion in this Proxy Statement.
However, if any other matter properly comes before the Annual Meeting, your
proxies will act on such proposal in their discretion.
REVOCATION OF PROXY
If you give a proxy (either by mailing your proxy card, by telephone or
over the Internet), you may revoke it at any time before it is exercised by
giving notice to Lamson's Secretary in writing prior to the Annual Meeting.
COSTS OF PROXY SOLICITATION
Lamson will pay all the costs of soliciting these proxies. In addition to
solicitation by mail, proxies may be solicited personally, by telegram,
telephone or personal interview by an officer or regular employee of the
Company. Lamson will also ask banks, brokers and other institutions, nominees
and fiduciaries to forward the proxy material to their principals and to obtain
authority to execute proxies, and reimburse them for expenses. In addition,
Lamson has also retained Georgeson Shareholder Communications, Inc.
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to aid in the distribution and solicitation of proxies and has agreed to pay
Georgeson a fee of approximately $6,500, plus reasonable expenses.
INFORMATION ABOUT LAMSON COMMON STOCK OWNERSHIP
The following table sets forth as of December 31, 2003 (except as otherwise
noted), all persons we know to be "beneficial owners" of more than five percent
of Lamson's common stock. This information is based on Schedules 13G/A, Schedule
13F and Form 4 reports filed with the Securities and Exchange Commission ("SEC")
by each of the individuals or firms listed in the table below. If you wish, you
may obtain these reports from the SEC.
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
------------------- ------------ --------
Gabelli Funds, Inc., et al 2,067,800(2) 14.99%
c/o Gabelli Asset Management, Inc.
One Corporate Center
Rye, New York 10580
Farhad Fred Ebrahimi 1,633,500(3) 11.85%
475 Circle Drive
Denver, Colorado 80206
Dimensional Fund Advisors Inc. 897,400(4) 6.51%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
The Lamson & Sessions Co. Investment 860,856(5) 6.24%
Trust for Retirement Trusts
25701 Science Park Drive
Cleveland, Ohio 44122
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(1) "Beneficial Ownership" is a technical term broadly defined by the SEC to
mean more than ownership in the usual sense. So, for example, you
"beneficially" own Lamson common stock not only if you hold it directly, but
also if you indirectly (through a relationship, a position as a director or
trustee or a contract or understanding), have (or share) the power to vote
the stock, or to sell it, or you have the right to acquire it within 60
days.
(2) Mario J. Gabelli, Marc J. Gabelli and various entities which either one
directly or indirectly controls or for which either one acts as chief
investment officer reported the ownership of such shares on a Schedule 13F,
which was filed with the SEC on February 17, 2004.
(3) Farhad Fred Ebrahimi reported the beneficial ownership of such shares on a
Form 4, which was filed with the SEC on January 8, 2004. The reporting
person claims beneficial ownership of all such shares.
(4) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, reported the beneficial ownership of such shares on a Schedule
13G/A which was filed with the SEC on February 6, 2004. All of such shares
are held in four investment companies and certain other commingled group
trusts and separate accounts, as to all of which Dimensional serves as
investment advisor or manager. Dimensional disclaims beneficial ownership of
all such shares.
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(5) INVESCO Asset Management Limited and INVESCO North American Holdings, Inc.,
on behalf of The Lamson & Sessions Co. Investment Trust for Retirement
Trusts reported the ownership of such shares on a Schedule 13G/A, which was
filed with the SEC on March 18, 2004.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
Nominees for Directors
The Board of Directors has ten members and is divided into three classes.
At least a majority of the Board must satisfy the independence criteria
established by the SEC and the New York Stock Exchange (the "NYSE"). Class I
currently consists of four members, and Classes II and III currently consist of
three members each. A single class of directors is elected by the shareholders
annually for a three-year term. The terms of the following Class I directors
expire at the Annual Meeting: James T. Bartlett, Francis H. Beam, Jr., Martin J.
Cleary and D. Van Skilling. For election as Class I directors at the Annual
Meeting, the Governance, Nominating and Compensation Committee has recommended,
and the Board of Directors has approved, the re-nomination of Mr. Bartlett, Mr.
Beam, Mr. Cleary and Mr. Skilling to serve as directors for the three-year term
of office which will expire at the Annual Meeting of Shareholders in 2007.
Although Mr. Skilling has reached the Company's mandatory retirement age of 70,
the Board has asked Mr. Skilling to serve for an additional term so that the
Company may continue to benefit from his knowledge and background. Each director
elected will serve until the term of office of the class to which he is elected
expires and until the election and qualification of his successor.
The directors to be elected will be elected by a plurality of the votes
cast for directors. It is the intention of the persons named in the enclosed
proxy to vote such proxy as specified and, if no specification is made, to vote
such proxy for the election of Messrs. Bartlett, Beam, Cleary and Skilling as
Class I directors. The Board of Directors recommends that you vote FOR the four
nominees for director.
The Board of Directors has no reason to believe that the persons nominated
will not be available to serve. In the event that a vacancy among such original
nominees occurs prior to the Annual Meeting, shares of common stock of Lamson
(the "Common Shares") represented by the proxies so appointed will be voted for
a substitute nominee or nominees designated by the Board of Directors and for
the remaining nominees.
Listed below are the names of the four nominees for election to the Board
of Directors in Class I, and those continuing directors in Classes III and II,
who have previously been elected to terms which will expire in 2005 and 2006,
respectively. Also listed is the year in which each individual first became a
director of the Company, the individual's principal occupation, information
relating to the individual's beneficial ownership of Common Shares of the
Company as of March 19, 2004 and certain other information, based in part on
data submitted by the directors. Except for Mr. Schulze and Mr. Abel, who
beneficially own 5.80% and 2.83%, respectively, of the Company's Common Shares,
no director or nominee beneficially owns as much as one percent of the Company's
Common Shares. All directors and officers as a group beneficially own 16.27% of
the Company's Common Shares.
5
NOMINEES FOR ELECTION AT THE MEETING
COMMON
NAME, AGE YEAR FIRST SHARES
PRINCIPAL OCCUPATION BECAME A BENEFICIALLY
AND BUSINESS(1) OTHER DIRECTORSHIPS DIRECTOR OWNED(2)
-------------------- ------------------- ---------- ------------
CLASS I: TERM EXPIRES IN 2007 IF ELECTED AT THE ANNUAL MEETING
James T. Bartlett (66) Keithley Instruments, Inc. 1997 57,660
Advising Director, Primus Oglebay Norton Company
Venture Partners (Private
investment firm)
Francis H. Beam, Jr. (68) None 1990 35,857
Retired President, Pepper
Capital Corp. (Venture capital
firm)
Martin J. Cleary (68) Guardian Life Insurance 1989 43,000
Retired President and Chief Company of America
Operating Officer, The Richard CBL & Associates Properties, Inc.
E. Jacobs Group (Real estate
developer)
D. Van Skilling (70) First American Corporation 1989 90,628
Retired Chairman and Chief American Business Bank
Executive Officer, Experian McDATA Corporation
Information Solutions, Inc.
(Supplier of credit, marketing
and real estate information and
decision support systems)
CONTINUING DIRECTORS
CLASS III: TERM EXPIRES IN 2005
James J. Abel (58) None 2002 450,217
Executive Vice President,
Secretary, Treasurer and Chief
Financial Officer of the Company
A. Malachi Mixon, III (63) Invacare Corporation 1990 109,654
Chairman of the Board and Chief The Sherwin Williams Company
Executive Officer, Invacare Cleveland Clinic Foundation
Corporation (Manufacturer and
distributor of home healthcare
products)
John B. Schulze (66) None 1984 924,057(3)
Chairman of the Board, President
and Chief Executive Officer of
the Company
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CONTINUING DIRECTORS
COMMON
NAME, AGE YEAR FIRST SHARES
PRINCIPAL OCCUPATION BECAME A BENEFICIALLY
AND BUSINESS(1) OTHER DIRECTORSHIPS DIRECTOR OWNED(2)
-------------------- ------------------- ---------- ------------
CLASS II: TERM EXPIRES IN 2006
John C. Dannemiller (65) US Bancorp 1988 76,964
Retired Chairman, Applied
Industrial Technologies
(Distributor of bearings, power
transmission components and
related products)
George R. Hill (62) None 1990 79,804
Senior Vice President, The
Lubrizol Corporation (Full
service supplier of performance
chemicals and systems to
worldwide transportation and
industrial markets)
William H. Coquillette (54) None 1997 43,010
Partner, Jones Day (Law firm)
All present directors and 2,593,099
executive officers as a group
(17 persons)
---------------
(1) Each director and nominee either has held the position shown or has had
other executive positions with the same employer or its subsidiary for more
than five years.
(2) Includes the following number of Common Shares which are not owned of record
but which could be acquired by the individual within 60 days after January
20, 2004 upon the exercise of outstanding options under the Company's stock
option plans: Mr. Schulze -- 635,000; Mr. Abel -- 284,000 and all other
directors and executive officers as a group -- 627,252.
(3) Includes shares held jointly or in the name of the director's spouse, minor
children, or relatives sharing his home, reporting of which is required by
applicable rules of the SEC. Unless otherwise indicated, or in the case of
joint ownership, the listed individuals possess sole voting power and sole
investment power with respect to such shares. The figure for Mr. Schulze
includes 30,700 shares owned by his wife, to which he has disclaimed
beneficial ownership. No other director or executive officer has disclaimed
beneficial ownership of any shares.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors oversees the business and affairs of Lamson and
monitors the performance of management. The independent directors meet in
executive session without management on a regular basis. The Board met six times
during 2003.
The Board has two committees: the Audit Committee and the Governance,
Nominating and Compensation Committee. Each committee reports to the Board at
the next meeting of the Board following a committee meeting. The Audit Committee
and the Governance, Nominating and Compensation Committee held five and two
meetings, respectively, in 2003.
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STANDING COMMITTEES OF THE BOARD OF DIRECTORS
THE AUDIT COMMITTEE: The Audit Committee consists solely of independent
directors (as currently required by the NYSE listing standards). Messrs. Beam
(Chairman) and Cleary and Dr. Hill currently are the members of the Audit
Committee. The functions of the Audit Committee include (i) appointing,
retaining, overseeing and terminating the Company's independent auditors, both
external and internal, and pre-approving all auditing and non-auditing services
to be performed by the independent auditors, (ii) reviewing the independence of
the independent auditors, (iii) reviewing the proposed audit programs (including
both independent and internal audits) and the results of the independent and
internal audits, (iv) reviewing and evaluating the adequacy of the Company's
systems of internal accounting controls, (v) reviewing the recommendations of
the independent auditors, (vi) reviewing the quarterly and annual financial
statements of the Company prior to the filing of such statements with the SEC
and, (vii) reviewing such other matters in relation to the accounting, auditing
and financial reporting practices and procedures of the Company as the Audit
Committee, in its own discretion, may deem desirable in connection with the
review functions described above. The functions of the Audit Committee are more
fully described in its charter (which was approved by the Board of Directors),
the full text of which is attached as Appendix A to this Proxy Statement. Before
the date of the Annual Meeting, the Company will post the Committee's charter on
its Web site at www.lamson-sessions.com via the Investor Relations page. The
Audit Committee meets privately with the independent auditor groups for both
internal and external audits and, the Company's management at each of its
meetings.
THE GOVERNANCE, NOMINATING AND COMPENSATION COMMITTEE: The Governance,
Nominating and Compensation Committee consists solely of independent directors
(as currently required by NYSE listing standards). Messrs. Skilling (Chairman),
Bartlett, Beam, Dannemiller and Mixon currently are the members of the
Governance, Nominating and Compensation Committee. The Governance, Nominating
and Compensation Committee considers all material matters relating to the
compensation policies and practices of the Company, and administers the
Company's incentive plans and base salary policies as they relate to the
executive officers of the Company. The Governance, Nominating and Compensation
Committee also (i) reviews and recommends candidates for election to the Board
of Directors, (ii) recommends whether incumbent directors should be nominated
for re-election to the Board, and (iii) recommends directors for appointment to
any committee of the Board.
The Governance, Nominating and Compensation Committee will consider any
nominee recommended by a shareholder of the Company. A resume of the candidate's
business experience and background should be directed in writing to the
attention of Lamson's Secretary, 25701 Science Park Drive, Cleveland, OH 44122.
The Company requires that at least a majority of its directors satisfy the
independence criteria established by the NYSE and any applicable SEC rules. The
Governance, Nominating and Compensation Committee also is responsible for
developing and recommending corporate governance principles applicable to the
Board in compliance with rules and regulations of the NYSE and the SEC. The
functions of the Governance, Nominating and Compensation Committee are more
fully described in its charter (which was approved by the Board of Directors).
Before the date of the Annual Meeting, the Company will post the Committee's
charter on its Web site at www.lamson-sessions.com via the Investor Relations
page.
COMMUNICATIONS WITH THE BOARD
Shareholders may communicate with the Board or any of the directors by
sending written communications addressed to the Board or any of the directors,
c/o Secretary, The Lamson & Sessions Co.,
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25701 Science Park Drive, Cleveland, OH 44122. The mailing envelope should
contain a clear notation indicating that the enclosed letter is a
"Shareholder-Board Communication" or "Shareholder-Director Communication." All
communications are compiled by the Secretary and forwarded to the Board or, if
appropriate, a committee of the Board or the individual director(s).
COMPENSATION OF LAMSON'S DIRECTORS
Directors who are employees of Lamson do not receive any separate fees or
other remuneration for serving as a director of the Board. For fiscal year 2003,
non-employee directors were each paid an annual retainer of $15,000 for their
service on the Board of Directors, and received an additional fee of $1,500 for
each Board meeting and $2,500 for each Board Committee meeting attended. Each of
the Chairmen of the Audit Committee and the Governance, Nominating and
Compensation Committee received an additional annual fee of $5,000. Directors
may also participate in the Company's Deferred Compensation Plan for
Non-Employee Directors (the "Plan"), under which directors may elect to defer
their annual retainers and meeting fees. Under this Plan, deferred fees may be
invested by the trustee, at a director's option, in either a money market fund
or Common Shares of the Company. If a director elects to have this deferred
compensation invested in Common Shares of the Company, the director will receive
an additional sum equal to 25% of the deferred amount in the form of restricted
shares issued from the 1998 Plan.
Lamson's non-employee directors are provided with certain retirement and
death benefits under the Company's Outside Directors' Benefit Program (the
"Program"). All non-employee directors who have completed an aggregate of one
year of continuous service are eligible to participate. The Program generally
provides for normal retirement benefits payable upon retirement and completion
of five years of continuous service. The Program also contains provisions for
early retirement benefits, vested deferred retirement benefits, a "change in
control" of the Company, disability retirement benefits and survivors' benefits
upon the death of a participant. Participants in the Program or their
beneficiaries are eligible to receive benefits in an amount equal to the annual
retainer being paid to the participant for service as a non-employee director at
the time he ceases to be a non-employee director, with such adjustments as are
necessary based on the date of retirement or death. Retirement or death benefits
under the Program are payable for a ten-year period on a quarterly basis,
commencing upon the date of retirement or death. Either the participant, the
participant's beneficiary or the Company can elect that such retirement or death
benefits be paid in an actuarially-equivalent, lump-sum payment.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN: Lamson's Non-Employee Directors
Stock Option Plan (the "Directors Plan"), approved by the Company's shareholders
in 1994, authorizes the grant of options to non-employee directors for the
purchase of Common Shares. The Directors Plan provided that each year on the
Monday following the Annual Meeting of Shareholders, each individual elected,
re-elected or continuing as a non-employee director automatically would receive
a nonqualified option to purchase 2,000 Common Shares. The exercise price for
such options was the average of the high and low prices at which the Common
Shares traded on the NYSE on the date of grant. Options became exercisable one
year after the date of grant and would expire ten years after the date of the
grant. The Directors Plan will expire on April 22, 2004, and the proposed
amendment to the 1998 Plan would provide for future grants to directors. As of
January 3, 2004, there were options outstanding under the Directors Plan
representing 123,000 shares of the Company's Common Stock. The options
outstanding under the Directors Plan may be exercised pursuant to the terms of
the stock option agreements, which expire on or before May 5, 2013.
9
Options granted under the Directors Plan to a non-employee director must be
exercised within 36 months of retirement as a director or within 12 months from
the date a director resigns due to disability. Upon the death of a non-employee
director, the director's legal representative or heirs will have twelve months
from the date of death to exercise his stock options. However, in no event will
options be exercisable after the expiration of the 10-year option period.
If a director resigns, or ceases to serve as a non-employee director for
any reason other than retirement, disability or death, only those options
exercisable on the date of termination will be exercisable. Such options may be
exercised within ninety days after termination.
In the event of a "change in control" of the Company (as defined in the
Directors Plan), all stock options fully vest and become exercisable.
Pursuant to the Directors Plan, on May 5, 2003 each non-employee director
was granted a non-qualified stock option to purchase 2,000 Common Shares at an
exercise price of $4.175 per share. These stock options are scheduled to become
exercisable on May 5, 2004.
EXECUTIVE COMPENSATION
The following table summarizes the compensation earned by the Company's
five most highly compensated executive officers (the "Named Executive Officers")
with respect to the fiscal year shown for services rendered to the Company and
its subsidiaries.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- ----------------------- -----------
OTHER RESTRICTED SECURITIES PERFORMANCE ALL OTHER
NAME AND ANNUAL STOCK UNDERLYING UNIT COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS(3) OPTIONS(#) PAYOUTS (1)(2)
------------------ ---- -------- -------- ------------ ---------- ---------- ----------- ------------
John B. Schulze............... 2003 $450,000 $ -- $ -- $ -- 100,000 $ -- $31,080
Chairman of the Board, 2002 450,000 232,280 -- -- 100,000 -- 30,652
President and 2001 450,000 -- -- -- 80,000 -- 34,630
Chief Executive Officer
James J. Abel................. 2003 302,000 -- -- -- 40,000 -- 14,242
Executive Vice President, 2002 302,000 97,425 -- 6,495 40,000 -- 46,031(3)
Secretary, Treasurer and 2001 290,000 -- -- -- 35,000 -- 16,938
Chief Financial Officer
Donald A. Gutierrez(4)........ 2003 221,000 -- -- -- 25,000 -- 16,531
Senior Vice President 2002 221,000 67,077 -- 1,491 25,000 -- 23,316(3)
2001 210,000 -- -- -- 20,000 -- 16,768
Norman P. Sutterer(4)......... 2003 195,000 -- -- -- 20,000 -- 16,244
Senior Vice President 2002 185,000 57,294 -- 1,273 20,000 -- 21,887(3)
2001 175,000 -- -- -- 15,000 -- 18,814
Albert J. Catani, II(4)....... 2003 173,000 -- -- -- 12,000 -- 16,001
Vice President 2002 173,000 38,205 -- 2,547 12,000 -- 28,675(3)
2001 165,000 -- -- -- 10,000 -- 20,194
---------------
(1) Includes split dollar life insurance premium payments paid for Mr. Schulze,
Mr. Abel, Mr. Gutierrez, Mr. Sutterer and Mr. Catani in 2003 of $22,080,
$5,242, $7,531, $7,514 and $14,417, respectively; in 2002 of $22,402,
$5,306, $7,613, $7,560 and $14,653, respectively; and in 2001 of $23,410,
$5,718, $6,598, $7,594, and $13,001, respectively.
10
(2) Includes matching contributions up to 75% of the first 6% of an employee's
compensation contributed to the Company's 401(k) Deferred Savings Plan with
an additional 25% match based on the Company's profitability, which is
available to all salaried employees. The matching contributions made by the
Company under the Plan to the accounts of: Mr. Schulze, Mr. Abel, Mr.
Gutierrez, Mr. Sutterer and Mr. Catani in 2003 totaled $9,000, $9,000,
$9,000, $7,730 and $1,584, respectively; in 2002 totaled $8,250, $8,250,
$8,250, $7,961 and $1,287, respectively; and in 2001 totaled $11,220,
$11,220, $10,170, $11,220 and $7,193, respectively.
(3) Includes deferred compensation pursuant to Stock Ownership Guidelines for
Executive Officers implemented by the Governance, Nominating and
Compensation Committee of the Board of Directors. Pursuant to the Stock
Ownership Guidelines, officers may elect to defer income earned in a fiscal
year. However, the deferral for which the election is made does not occur
until February following the end of the fiscal year specified by the
officer's election, since bonuses for any fiscal year most recently ended
are not approved by the Governance, Nominating and Compensation Committee
until then. For fiscal years 2003 and 2001, there were no bonuses paid,
therefore, no deferrals were possible in February 2004 and February 2002,
respectively. For fiscal year 2002, the income amounts deferred by Mr. Abel,
Mr. Gutierrez, Mr. Sutterer and Mr. Catani were $32,475, $7,453, $6,366 and
$12,735, respectively, which were deferred in February 2003, upon approval
of bonuses for fiscal year 2002 by the Governance, Nominating and
Compensation Committee. In addition, for those officers who elect to defer a
portion of their bonuses, the Company matches 20% of the deferred amounts in
the form of restricted shares to these executives, issued from the 1998
Plan.
(4) Mr. Gutierrez and Mr. Sutterer are responsible for the business segments of
Carlon and Lamson Home Products, respectively. Mr. Catani is responsible for
the manufacturing operations of the Company.
STOCK OPTIONS
The following table sets forth information concerning stock option grants
made to the Named Executive Officers during fiscal year 2003 pursuant to the
1998 Incentive Equity Plan ("1998 Plan").
OPTION GRANTS IN LAST FISCAL YEAR
GRANT DATE
INDIVIDUAL GRANTS VALUE
-------------------------------------------------- ----------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANT
OPTIONS GRANTED TO EXERCISE DATE
GRANTED EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME (#)(1) FISCAL YEAR ($/SH) DATE VALUE(2)
---- ----------- ------------ -------- ---------- ----------
John B. Schulze..................... 100,000 24.85% $3.44 2/18/13 $181,000
James J. Abel....................... 40,000 9.94% 3.44 2/18/13 72,400
Donald A. Gutierrez................. 25,000 6.21% 3.44 2/18/13 45,250
Norman P. Sutterer.................. 20,000 4.97% 3.44 2/18/13 36,200
Albert J. Catani, II................ 12,000 2.98% 3.44 2/18/13 21,720
---------------
(1) Options are exercisable after February 18, 2004 and then only as follows:
one-third on each anniversary of the grant date over three years, with the
number of shares vested in each year
11
rounded to the nearest whole share. In the event of a "change in control" of
the Company (as defined in the 1998 Plan), all stock options fully vest and
become exercisable and all awards of stock may be cashed out on the basis of
the highest price paid or offered for Common Shares during the preceding
60-day period.
(2) The present value determinations in this column were made pursuant to rules
promulgated by the SEC using a Black-Scholes option pricing model and,
therefore, are not intended to forecast possible future appreciation, if
any, of the Company's Common Shares. The actual value, if any, an executive
officer may realize will depend on the excess of the stock price over the
exercise price on the date the option is exercised, so that there is no
assurance that the value realized by an executive officer will be at or near
the value estimated by the Black-Scholes model. The estimated values under
that model are based on arbitrary assumptions as to variables such as
interest rates, stock price volatility, time of exercise and dividend yield.
The Company determined the estimated values using volatility assumptions
based on 105 months of stock prices; interest rate assumptions based on the
five-year Treasury Strip Yield, as reported in The Wall Street Journal; a
dividend yield assumption of zero; and an assumed time of exercise of the
option of five years.
STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information about stock options exercised
during fiscal year 2003 by the Named Executive Officers and the fiscal year-end
values of unexercised options held by the Named Executive Officers. All of such
options were granted under the Company's 1988 Incentive Equity Performance Plan
and the 1998 Plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS HELD AT OPTIONS HELD AT
SHARES JANUARY 3, 2004 (#) JANUARY 3, 2004(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ----------- -------------
John B. Schulze........ -- $ -- 601,666 193,334 $89,226 $299,334
James J. Abel.......... -- -- 275,667 78,333 39,946 119,734
Donald A. Gutierrez.... -- -- 93,666 48,334 22,306 74,834
Norman P. Sutterer..... -- -- 116,667 38,333 18,910 59,866
Albert J. Catani, II... -- -- 73,167 23,333 11,984 35,920
---------------
(1) Based on the closing price on the NYSE -- Composite Transactions of the
Company's Common Shares on January 2, 2004 (the last trading day in fiscal
year 2003) of $5.50.
12
PENSION BENEFITS
The following table shows the estimated annual pension benefits under The
Lamson & Sessions Co. Salaried Employees' Retirement Plan ("Lamson & Sessions
Plan"), that would be payable to employees in various compensation
classifications upon retirement at age sixty-five during the year 2003.
ANNUAL NORMAL RETIREMENT BENEFITS
FOR YEARS OF CREDITED SERVICE INDICATED
AVERAGE ANNUAL -----------------------------------------
COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS
-------------- -------- -------- -------- --------
$100,000 $ 25,000 $ 33,333 $ 41,667 $ 50,000
150,000 37,500 50,000 62,500 75,000
200,000 50,000 66,667 83,333 100,000
250,000 62,500 83,333 104,167 125,000
300,000 75,000 100,000 125,000 150,000
350,000 87,500 116,667 145,833 175,000
400,000 100,000 133,333 166,667 200,000
450,000 112,500 150,000 187,500 225,000
500,000 125,000 166,668 208,333 250,000
550,000 137,500 183,335 229,166 275,000
600,000 150,000 200,000 250,000 300,000
650,000 162,500 216,668 270,833 325,000
700,000 175,000 233,335 291,666 350,000
750,000 187,500 250,000 312,500 375,000
800,000 200,000 266,668 333,333 400,000
850,000 212,500 283,335 354,166 425,000
900,000 225,000 300,000 375,000 450,000
The amounts listed in the table are computed on a straight-life annuity
basis and are subject to an offset for Social Security benefits. These amounts
have been determined without regard to the maximum benefit limitations for
defined benefit plans and the limitations on compensation imposed by the
Internal Revenue Code of 1986, as amended (the "Code"). The Code places
limitations on the amount of compensation that may be taken into account in
calculating pension benefits and on the amount of pensions that may be paid
under federal income tax qualified plans such as the Lamson & Sessions Plan. For
benefits accruing in plan years beginning after 1999, no more than $205,000
(indexed for inflation) in annual compensation may be taken into account.
However, under the Supplemental Executive Retirement Plan agreements ("SERPs"),
described below, participating executives will receive the amounts to which they
otherwise would have been entitled under the Lamson & Sessions Plan provided
they meet the terms of the applicable SERP.
The amounts shown in the column under the heading "Average Annual
Compensation" are based on the highest five consecutive years of compensation
during the last ten years prior to retirement and include salary, overtime and
bonuses, but exclude commissions and stock option awards. Normal retirement
benefits under the Lamson & Sessions Plan are equal to the greater of (a) 50% of
a participant's average annual compensation based on the highest five
consecutive years during the last ten years prior to retirement less 50% of the
participant's primary Social Security benefit or (b) $3,600 times a fraction,
the denominator of which is 30 and the numerator of which is the participant's
number of years of service up to 30.
Messrs. Schulze, Abel, Gutierrez, Sutterer and Catani are participants in
the Lamson & Sessions Plan with 16, 13, 7, 15 and 8 years of credited service,
respectively, under the Lamson & Sessions Plan. The
13
Company has entered into amended and restated SERPs with Messrs. Schulze and
Abel. Messrs. Schulze and Abel will not be able to achieve thirty years of
service on their normal retirement dates.
The SERPs provide that the executive will receive, upon normal retirement,
a supplemental retirement benefit equal to the difference between (i) the amount
that would have been payable to the executive under the Lamson & Sessions Plan,
without regard to any federal statutory limitation on the annual amount of
benefits payable under the Lamson & Sessions Plan and the amount of compensation
taken into account in calculating benefits under the Lamson & Sessions Plan, as
if the executive had completed thirty years of service with the Company, and
(ii) the amount actually payable to the executive under the Lamson & Sessions
Plan or under any other applicable plan for which the executive meets the
eligibility requirements. The SERPs also provide for, among other things,
disability benefits and benefits in the event the executive's employment with
the Company is terminated under certain circumstances prior to retirement and in
the event of the executive's death prior to retirement under certain
circumstances.
AGREEMENTS WITH CERTAIN OFFICERS
Lamson has entered into agreements with Messrs. Schulze, Abel, Gutierrez,
Sutterer and Catani (as amended, the "Executive Change-in-Control Agreements"),
which specify certain financial arrangements that the Company will provide upon
the termination of such individuals' employment with the Company under
circumstances involving a "change in control" (as defined in the Executive
Change-in-Control Agreements) of the Company. The Executive Change-in-Control
Agreements are intended to ensure continuity and stability of senior management
of the Company.
Each of the Executive Change-in-Control Agreements provides that, in the
event of a "change in control" of the Company, the individual would continue
employment with the Company in the individual's then current position for a term
of three years for Mr. Schulze and two years for Messrs. Abel, Gutierrez,
Sutterer and Catani following the "change in control." Following a "change in
control" the individual would be entitled during the ensuing period of
employment to receive base compensation and to continue to participate in
incentive and employee benefit plans consistent with past practices. Upon the
occurrence of a "change in control" followed by (i) a significant adverse change
in the nature or scope of the individual's duties or compensation, (ii) the
individual's determination of being unable effectively to carry out the current
duties and responsibilities, (iii) relocation of the individual's principal work
location to a place more than fifty miles from the principal work location
immediately prior to the "change in control," (iv) the liquidation, merger or
sale of the Company (unless the new entity assumes the Executive
Change-in-Control Agreement) or (v) a material breach of the Executive
Change-in-Control Agreement, the individual would be entitled to resign and
would be entitled to receive a lump sum payment equal to the present value of
the then current base compensation and incentive compensation (based on
historical experience). The individual would also be entitled to continue to
participate in employee benefit plans consistent with past practices for the
remaining period of employment provided in his Executive Change-in-Control
Agreement. In the case of a "change in control," the Executive Change-
in-Control Agreements also provide for protection of certain retirement benefits
which would have been earned during the years for which severance was paid and
reimbursement for any additional tax liability incurred as a result of excise
taxes imposed or payments deemed to be attributable to the "change in control."
14
The Executive Change-in-Control Agreements do not create employment
obligations for the Company unless a "change in control" has occurred, prior to
which time the Company and the individual each reserves the right to terminate
the employment relationship. Both before and after the occurrence of a "change
in control" the Company may terminate the employment of any of such individuals
for "cause."
The Company has established trust agreements pursuant to which amounts
payable under the SERPs, the Executive Change-in-Control Agreements and certain
expenses incurred by the officers in enforcing their rights under these
arrangements, must be deposited by the Company in trust and expended by the
trustee for such purposes. Such trusts are revocable, but upon the occurrence of
certain "change in control" events affecting the Company, will become
irrevocable. The trusts are currently nominally funded, but the Company is
obligated to fund them fully upon the occurrence of the "change in control"
events.
The Company has also entered into Indemnification Agreements with each
current member of the Board of Directors as well as each of the Company's
executive officers. These agreements provide that, to the extent permitted by
Ohio law, the Company will indemnify the director or officer against all
expenses, costs, liabilities and losses (including attorneys' fees, judgments,
fines or settlements) incurred or suffered by the director or officer in
connection with any suit in which the director or officer is a party or
otherwise involved as a result of the individual's service as a member of the
Board of Directors or as an officer if the individual's conduct that gave rise
to such liability meets certain prescribed standards.
GOVERNANCE, NOMINATING AND COMPENSATION COMMITTEE REPORT
OVERVIEW AND PHILOSOPHY
The Governance, Nominating and Compensation Committee of the Board of
Directors (the "Committee") is composed entirely of non-employee directors and
has been delegated the responsibility of approving the cash and non-cash
compensation of all executive officers of the Company and making recommendations
to the Board of Directors with respect to the establishment of the Company's
executive compensation plans. No member of the Committee has interlocking
relationships, reporting of which is required by applicable rules of the SEC.
In administering the various executive compensation plans, the aim of the
Committee is to attract and retain key executives critical to the long-term
success of the Company, to create incentives for executives to achieve long-term
strategic management objectives that enhance shareholder value, to provide a
balance between annual and long-term forms of compensation and, above all, to
ensure that total compensation is performance-oriented and related to Company
goals and objectives, using measurable criteria to the extent possible.
The Committee has considered the impact of Section 162(m) of the Code,
which disallows a deduction to publicly-held companies for compensation paid to
any executive officer whose compensation exceeds $1 million per year. Qualified
performance-based compensation is excluded from this deduction limitation if
certain requirements are met. The Committee believes that Section 162(m) should
not cause the Company to be denied a deduction for compensation paid to any
executive officer in 2003.
15
EXECUTIVE OFFICER BASE COMPENSATION
Each executive officer's base salary is reviewed by the Committee at the
time of the officer's annual performance review. The base salary is recommended
to the Committee by the Chairman of the Board and Chief Executive Officer (the
"Chairman") and falls within a salary range for each officer's job function that
has been established by an independent executive compensation consultant, based,
in part, on information collected by the consultant concerning compensation for
executives with similar responsibilities at companies with comparable size and
geographic location. Typically, salaries fall throughout the range and are not
based on an arbitrary percentage of the highest salary within the range. In each
case, the Committee reviews the recommendation of the Chairman and approves the
salary only after making an independent assessment of the individual executive's
performance.
Mr. Schulze's compensation is based upon the same factors considered with
regard to executive officer compensation generally. The components making up his
2003 compensation included base salary, short-term incentive compensation and
stock options. Under the Short-Term Incentive Plan for 2003, seventy-two percent
of Mr. Schulze's base salary represents his target award, the achievement of
which was contingent upon the attainment of specific financial performance
goals. The Committee's award of stock options to Mr. Schulze under the 1998 Plan
was based on the same methodology used to calculate the awards of options to
other executive officers under the 1998 Plan and designed to further align Mr.
Schulze's interests with those of other shareholders of the Company.
In determining Mr. Schulze's compensation, the Committee considered the
Company's performance. The Committee discusses and determines priorities with
Mr. Schulze at the beginning of the year and discusses his performance with
respect to these priorities periodically during the year and at the end of the
year.
Mr. Schulze is not present when the Committee reviews his performance and
determines his compensation.
SHORT-TERM INCENTIVE COMPENSATION
Under the Company's Short-Term Incentive Plan, target award levels are
established annually by the Committee for each executive officer of the Company.
In 2003, Mr. Schulze's award is based solely on the financial performance of the
Company expressed in terms of earnings before interest, taxes, depreciation and
amortization (EBITDA). Other executive officers' achievement of target awards is
based 80 percent on the financial performance of the Company and 20 percent on
the achievement of specific personal goals and objectives. In 2003, the
Company's Short-Term Incentive Plan provided target award opportunities for
executive officers that ranged from 42 to 72 percent of base salary, although
amounts could vary above and below that range depending upon Company performance
and individual accomplishment.
STOCK OPTIONS AND LONG-TERM INCENTIVE COMPENSATION
The Committee also is charged with the responsibility of administering the
1998 Plan, under which stock options are granted to executive officers and other
employees of the Company. The Committee believes that stock options align the
interests of the executive officers with those of the shareholders, providing a
way in which the executive officers can build a meaningful stake in the Company.
Accordingly, the Committee has approved the implementation of stock ownership
guidelines for the executive officers that are to be achieved over a fixed
period of time. The guidelines are based on each
16
executive officer's respective salary compensation level and they will be
reviewed by the Committee at appropriate intervals.
The Committee fixes the terms, vesting requirements and the size of the
grants of stock options awarded to the executive officers without regard to the
amount of options or the expiration dates of options already held by executive
officers. The size of each grant is based on the duties, responsibilities,
performance and experience of the executive officer and his anticipated
contribution to the Company. Options granted to executive officers vest
one-third on each anniversary over three years, with the number of shares vested
in each year rounded to the nearest whole share.
Because stock options under the 1998 Plan and grants under the Company's
Long-Term Incentive Plan are both forms of long-term executive compensation,
grants under both plans are generally considered at the same time. Awards under
the Long-Term Incentive Plan are made in the form of performance units payable
upon the achievement of three-year corporate goals, currently expressed in terms
of financial performance. The Committee determines the goals under which these
awards are made from year to year. The Committee did not approve the grant of
performance units to executive officers for 2003.
GOVERNANCE, NOMINATING AND COMPENSATION
COMMITTEE
D. Van Skilling, Chairman John C. Dannemiller
James T. Bartlett A. Malachi Mixon, III
Francis H. Beam, Jr.
17
COMPANY STOCK PERFORMANCE
The following performance graph compares the five-year cumulative return,
including reinvestment of dividends, from investing $100 on December 31, 1998 in
each of the Company's Common Shares, the Russell 2000 Index and Standard &
Poor's Small Industrials Index.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
[GRAPH]
------------------------------------------------------------------------------------------------------------------
12/98 12/99 12/00 12/01 12/02 12/03
------------------------------------------------------------------------------------------------------------------
Lamson & Sessions 100.00 95.12 204.88 102.44 62.83 112.59
------------------------------------------------------------------------------------------------------------------
Russell 2000 100.00 121.26 117.59 120.52 95.83 141.11
------------------------------------------------------------------------------------------------------------------
Standard & Poor's Small Cap 600
Industrials 100.00 107.11 127.33 139.02 126.06 167.11
------------------------------------------------------------------------------------------------------------------
There can be no assurances that the Company's stock performance will
continue into the future with the same or similar trends depicted in the
performance graph above. The Company does not make or endorse any predictions as
to future stock performance.
18
SECURITY OWNERSHIP OF MANAGEMENT
Each of the Named Executive Officers beneficially owned the number of
Common Shares indicated opposite his name as of January 20, 2004. Except for Mr.
Schulze who beneficially owns 5.80% and Mr. Abel who beneficially owns 2.83% of
the Company's Common Shares, none of the other Named Executive Officers
beneficially owns as much as one percent of the Company's Common Shares.
AMOUNT AND NATURE
OF BENEFICIAL
NAME OWNERSHIP(1)(2)
---- -----------------
John B. Schulze................................... 924,057
James J. Abel..................................... 450,217
Donald A. Gutierrez............................... 140,274
Norman P. Sutterer................................ 155,205
Albert J. Catani, II.............................. 112,127
---------------
(1) Includes the following number of Common Shares which are not owned of record
but which could be acquired by the individual within 60 days after January
20, 2004 upon the exercise of outstanding options under the Company's stock
option plans: Mr. Schulze -- 635,000; Mr. Abel -- 284,000; Mr.
Gutierrez -- 117,000; Mr. Sutterer -- 128,001 and Mr. Catani -- 84,500.
(2) Includes shares held jointly or in the name of the officer's spouse, minor
children, or relatives sharing his home, reporting of which is required by
applicable rules of the SEC. Unless otherwise indicated, or in the case of
joint ownership, the listed individuals possess sole voting power and sole
investment power with respect to such shares. The figure for Mr. Schulze
includes 30,700 shares owned by his wife, as to which he has disclaimed
beneficial ownership. No other Named Executive Officer has disclaimed
beneficial ownership of any shares.
CERTAIN BUSINESS RELATIONSHIPS
During the past fiscal year, the Company, in the normal course of business,
utilized the services of the law firm of Jones Day in which Mr. Coquillette is a
partner. The Company plans to continue using the services of the firm in 2004.
PROPOSED APPROVAL OF THE COMPANY'S
1998 INCENTIVE EQUITY PLAN
(AS AMENDED AND RESTATED AS OF APRIL 30, 2004)
(PROPOSAL NO. 2)
GENERAL
The Lamson & Sessions Co. 1998 Incentive Equity Plan ("Original Plan") was
approved by the Company's shareholders on April 24, 1998. An amendment ("First
Amendment") increasing the shares available from 650,000 to 1,300,000 and
updating the definition of "Change in Control" was approved by the Company's
shareholders on April 28, 2000. A second amendment ("Second Amendment")
increasing the shares available from 1,300,000 to 1,950,000 and providing that
no participant in the Original Plan can be granted Option Rights and
Appreciation Rights (each as defined in the Original Plan) in the aggregate for
more than 350,000 shares of the Company's common stock, without par value
19
("Common Shares"), during any three-year period was approved by the Company's
shareholders on April 27, 2001. As of January 3, 2004, 77,532 Common Shares have
been issued, 1,685,075 Common Shares are subject to outstanding awards and
187,393 Common Shares remain available for future awards under the Original
Plan, as amended by the First Amendment and the Second Amendment ("Current
Plan"). In order to continue the Company's ability to develop and maintain
strong management, on February 19, 2004, the Board of Directors of the Company
(the "Board") approved amendments to the Current Plan by adopting the Lamson &
Sessions Co. 1998 Incentive Equity Plan (As Amended and Restated as of April 30,
2004) ("Amended Plan"), subject to shareholder approval at the 2004 Annual
Meeting. The principal reasons for amending the Current Plan are to (i) increase
the number of shares to be issued under the Original Plan by 620,000 (so that
2,570,000 Common Shares would be available) and (ii) permit grants under the
Amended Plan to Non-Employee Directors of the Company. The additional shares
represent less than five percent of the issued and outstanding capital stock of
the Company.
A summary description of the Amended Plan is set forth below. The full text
of the Amended Plan is annexed to this Proxy Statement as Appendix B, and the
following summary is qualified in its entirety by reference to Appendix B. If
the Amended Plan is not approved, the Current Plan remains in effect.
SUMMARY OF CHANGES
Available Shares. The Amended Plan increases the total number of Common
Shares available by 620,000 Common Shares so that 2,570,000 Common Shares are
available under the Plan (1,762,607 of such shares have already been granted).
Limits on Restricted Shares and Deferred Shares. The Amended Plan
increases the aggregate number of Restricted Shares that are not conditioned on
the attainment of Management Objectives and Deferred Shares (after taking any
forfeitures into account) so that of the 807,393 Common Shares available for
grant under the Plan, up to 620,000 (less the number of Restricted Shares and
Deferred Shares previously granted) of such shares may be granted in Restricted
Shares and Deferred Shares.
Awards to Non-Employee Directors. The Amended Plan provides for automatic
annual awards of Non-Qualified Stock Options to Non-Employee Directors. Unless
otherwise determined by the Committee, each Non-Employee Director will receive a
Non-Qualified Stock Option to purchase 4,000 Common Shares on the Monday
following each Annual Meeting, beginning with the 2004 Annual Meeting. An annual
grant of a non-qualified stock option for 2,000 Common Shares is currently
provided for in the Company's Non-Employee Directors Stock Option Plan
("Directors Option Plan"). However, no options may be granted under the
Directors Option Plan after April 22, 2004. Rather than adopt a separate new
plan for the grant of options to the Directors, the annual grant is provided for
in the Amended Plan. The Amended Plan also gives the Committee the flexibility
to determine grants to Non-Employee Directors of Non-Qualified Stock Options and
Restricted Shares.
Administration of the Plan. The Amended Plan adds a provision requiring
that members of the Committee administering the Amended Plan meet all applicable
independence requirements of the New York Stock Exchange or, if the Common
Shares are not traded on the New York Stock Exchange, the principal national
securities exchange on which the Common Shares are traded, and requiring that
members be "outside directors" with the meaning of 162(m) of the Internal
Revenue Code of 1986, as amended ("Code").
20
SUMMARY OF THE PLAN
General. Under the Amended Plan, the Governance, Nominating and
Compensation Committee ("Committee") is authorized to make awards of options to
purchase Common Shares ("Option Rights"), awards of Tandem Appreciation Rights
and/or Free-Standing Appreciation Rights ("Appreciation Rights"), awards of
restricted shares ("Restricted Shares"), awards of deferred shares ("Deferred
Shares") and awards of performance shares ("Performance Shares") and performance
units ("Performance Units"). The terms applicable to awards of the various
types, including those terms that may be established by the Committee when
making or administering particular awards, are set forth in detail in the
Amended Plan.
Shares Available Under the Plan. Subject to adjustment as provided in the
Amended Plan, the number of Common Shares that may be issued or transferred (a)
upon the exercise of Option Rights or Appreciation Rights, (b) as Restricted
Shares, (c) as Deferred Shares, (d) in payment of Performance Shares or
Performance Units that have been earned, or (e) in payment of dividend
equivalents paid with respect to awards made under the Amended Plan may not
exceed 2,570,000 (650,000 of which were approved by shareholders in 1998,
650,000 of which were approved by the shareholders in 2000, 650,000 of which
were approved by the shareholders in 2001 and 620,000 of which are being added
as of April 30, 2004) in the aggregate. Such Common Shares may be shares of
original issuance or treasury shares or a combination of both. Upon the payment
of any option price by the transfer to the Company of Common Shares or upon
satisfaction of any withholding amount by means of transfer or relinquishment of
Common Shares, only the net number of Common Shares actually issued or
transferred by the Company will be deemed to have been issued or transferred
under the Amended Plan.
Limitations on Specific Kinds of Awards. In addition to the general
limitation on the number of Common Shares available under the Amended Plan, the
Amended Plan specifically limits (i) the number of Common Shares actually issued
and transferred by the Company upon the exercise of an Incentive Stock Option to
650,000 in the aggregate subject to adjustment, and (ii) the number of
Restricted Shares that are not conditioned on attainment of Management
Objectives (described below) plus the number of Deferred Shares (after taking
forfeitures into account) to 845,000 in the aggregate subject to adjustment.
Additionally, the Amended Plan provides for certain specific limits and other
requirements in order that awards of Option Rights, Appreciation Rights,
Performance Shares and Performance Units may qualify as performance-based
compensation for the purpose of Section 162(m) of the Code. No participant may
be granted Option Rights and Appreciation Rights, in the aggregate, for more
than 350,000 Common Shares during any period of three years subject to
adjustment. Moreover, no participant may receive in any calendar year an award
of Performance Shares or Performance Units having an aggregate maximum value as
of their respective dates of grant over $500,000.
Eligibility. Officers, including officers who are members of the Board,
and other key employees of the Company and its subsidiaries may be selected by
the Committee to receive benefits under the Amended Plan. The Committee may also
make awards under the Amended Plan to a person who has agreed to commence
serving in any such capacity within 90 days of the date of grant. Non-Employee
Directors will be eligible to receive grants of Option Rights and Restricted
Shares under the Amended Plan.
Option Rights. The Committee may grant Option Rights, which entitle the
optionee to purchase a specified number of Common Shares at a price equal to or
greater than market value at the date of grant. The option price is payable in
cash, by the transfer to the Company of nonforfeitable unrestricted Common
Shares owned by the optionee for at least six months having a value at the time
of exercise equal to the option price, by any other legal consideration the
Committee may deem appropriate, or by a combination of such payment methods. To
the extent permitted by law, any grant may provide for
21
deferred payment of the option price from the proceeds of sale through a bank or
broker of some or all of the Common Shares to which the exercise relates.
Option Rights granted under the Amended Plan may be Option Rights that are
intended to qualify as incentive stock options ("Incentive Stock Options")
within the meaning of Section 422 of the Code or Option Rights that are not
intended to so qualify or combinations thereof. Incentive Stock Options may only
be granted to participants who meet the definition of "employees" under Section
3401(c) of the Code. The Committee may, at or after the date of grant of any
Option Rights (other than Incentive Stock Options), provide for the payment of
dividend equivalents to the optionee in cash or additional Common Shares on a
current, deferred or contingent basis or may provide that such equivalents be
credited against the option price. The Committee may condition the exercise of
Option Rights on the achievement of Management Objectives.
No Option Right may be exercised more than ten years from the date of
grant. Each grant must specify the period of continuous employment with the
Company or any subsidiary that is necessary before the Option Rights will become
exercisable and may provide for the earlier exercise of such Option Rights in
the event of a "change of control" of the Company. Successive grants may be made
to the same optionee whether or not Option Rights previously granted remain
unexercised. The exercise of an Option Right cancels, on a share-for-share
basis, any Tandem Appreciation Right.
Appreciation Rights. Appreciation Rights provide participants an
alternative means of realizing the benefits of Option Rights. A Tandem
Appreciation Right is a right to receive from the Company up to 100 percent of
the spread between the option price and the current value of the Common Shares
underlying the option. The amount is determined by the Committee and the right
is exercisable only when the related Option Right is also exercisable, the
spread is positive and the recipient surrenders the related Option Right for
cancellation. A Free-Standing Appreciation Right is the right to receive a
percentage of the spread at the time of exercise. When computing the spread for
a Free-Standing Appreciation Right, the base price must be equal to or greater
than the market value of the underlying Common Shares on the date of grant.
Successive grants may be made to the same recipient even if that individual
already has unexercised Free-Standing Appreciation Rights. No Free-Standing
Appreciation Right may be exercised more than ten years from the date of grant.
Any grant of Appreciation Rights may specify any or all of the following:
(1) that the amount payable on exercise of an Appreciation Right may be paid by
the Company in cash, in Common Shares, or in any combination thereof, and the
right to elect among those alternatives may be given to the participant or
retained by the Committee, (2) a maximum amount payable on exercise, (3) waiting
periods before exercise, (4) permissible exercise dates or periods, (5) whether
the Appreciation Right may be exercised only on or after a change in control of
the Company, (6) whether dividend equivalents may be paid in cash or in Common
Shares, and (7) Management Objectives that must be achieved as a condition to
exercise such rights.
Restricted Shares. An award of Restricted Shares involves the immediate
transfer by the Company to a participant of ownership of a specific number of
Common Shares in consideration of the performance of services. The participant
is entitled immediately to voting, dividend and other ownership rights in such
shares, but the Committee may require that any dividends be automatically
deferred and reinvested in additional Restricted Shares. The transfer may be
made without additional consideration or in consideration of a payment by the
participant that is less than current market value, as the Committee may
determine. The Committee may condition the award on the achievement of
Management Objectives.
22
Restricted Shares must be subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code for a period of not less than three
years to be determined by the Committee. An example would be a provision that
the Restricted Shares would be forfeited if the participant ceased to serve the
Company as an officer or key employee during a specified period of years. In
order to enforce these forfeiture provisions, the transferability of Restricted
Shares will be prohibited or restricted in a manner and to the extent prescribed
by the Committee for the period during which the forfeiture provisions are to
continue. The Committee may provide for a shorter period during which the
forfeiture provisions are to apply in the event of a change in control of the
Company.
Deferred Shares. An award of Deferred Shares constitutes an agreement by
the Company to deliver Common Shares to the participant in the future in
consideration of the performance of services, but subject to the fulfillment of
such conditions during the deferral period as the Committee may specify. During
the deferral period, the participant has no right to transfer any rights under
his or her award, has no rights of ownership in the Deferred Shares and no right
to vote them, but the Committee may, at or after the date of grant, authorize
the payment of dividend equivalents on such shares on a current, deferred or
contingent basis, either in cash or additional Common Shares. Awards of Deferred
Shares may be made without additional consideration or in consideration of a
payment by the participant that is less than the market value per share at the
date of grant.
Deferred Shares must be subject to a deferral period, as determined by the
Committee at the date of grant, except that the Committee may provide for the
earlier termination of such period in the event of a change in control of the
Company.
Performance Shares and Performance Units. A Performance Share is the
equivalent of one Common Share, and a Performance Unit is the equivalent of
$1.00. The number of Performance Shares or Performance Units is specified by the
Committee and may be adjusted to reflect changes in compensation or other
factors (unless the adjustment for certain participants would cause an award to
lose its Section 162(m) exemption).
A recipient must meet one or more Management Objectives within a specified
performance period. Such performance period may be subject to earlier
termination in the event of a change in control of the Company. A minimum level
of acceptable achievement may also be established by the Committee. If by the
end of the performance period the participant has achieved the specified
Management Objectives, he or she will be deemed to have fully earned the
Performance Shares or Performance Units. If the participant has not achieved the
Management Objectives, but has attained or exceeded the predetermined minimum,
he or she will be deemed to have partly earned the Performance Shares and/or
Performance Units (the amount earned to be determined in accordance with a
formula).
To the extent earned, the Performance Shares and/or Performance Units will
be paid to the participant at the time and in the manner determined by the
Committee in cash, Common Shares or in any combination thereof (the Committee
may give either the participant or the Committee the right to choose the form of
payment). Dividend equivalents on Performance Shares may be paid in cash or
additional Common Shares on a current, deferred or contingent basis. The
Committee may specify a maximum amount payable under any grant of Performance
Shares or Performance Units.
Awards to Non-Employee Directors. The Committee may authorize the grant of
Option Rights and may also authorize the grant or sale of Restricted Shares to
Non-Employee Directors. Any grant of Option Rights will be upon terms and
conditions discussed above under "Option Rights." Any grant of Restricted Shares
will be on terms and conditions as discussed above under "Restricted Shares."
23
In addition to such other grants as may be made by the Committee from time
to time, each year on the Monday following the Company's annual meeting of
shareholders, each individual elected, re-elected or continuing as a
Non-Employee Director will automatically be granted an Option Right to purchase
4,000 Common Shares. Each such Option Right will become exercisable one year
after the date of grant, unless otherwise specified by the Committee on the date
of grant. In the event of termination of a director's service on the Board,
other than by reason of retirement, disability or death, the then outstanding
Option Rights held by such director may be exercised to the extent that they
would be exercisable on such date of termination and will expire 90 days after
termination, or on their stated expiration date, whichever comes first. In the
event of termination of service on the Board by the holder of any such Option
Rights by reason of retirement after a Non-Employee Director has completed a
specified period of service and attained a specified age, each of the then
outstanding Option Rights of such holder (whether or not previously exercisable)
may be exercised at any time within 36 months after the date of such retirement,
or on their stated expiration date, whichever occurs first. In the event of the
death or disability of the holder of any such Option Rights, each of the then
outstanding Option Rights of such holder (whether or not previously exercisable)
may be exercised at any time within one year after such death or disability, but
in no event after the expiration date of the term of such Option Rights. If a
Non-Employee Director subsequently becomes an employee of the Company or a
Subsidiary while remaining a member of the Board, any Option Rights held under
the Amended Plan by such individual at the time of such commencement of
employment will not be affected thereby. Option Rights may be exercised by a
Non-Employee Director only upon payment to the Company in full of the Option
Price of the Common Shares to be delivered. Such payment will be made in cash or
in Common Shares then owned by the optionee for at least six months, or in a
combination of cash and such Common Shares.
Management Objectives. The Committee may establish performance objectives
for participants who have received awards of Performance Shares or Performance
Units or, if so determined, Option Rights, Appreciation Rights, Restricted
Shares or dividend credits. Section 162(m) of the Code requires that the Amended
Plan and the performance measures which must be attained to earn compensation
under performance-based awards be disclosed to and approved by shareholders.
Such performance measures, or "Management Objectives" may be described either in
terms of Company-wide objectives or objectives that are related to performance
of the individual participant or the division, subsidiary, department or
function within the Company or a subsidiary in which the participant is
employed. The Management Objectives applicable to any award to a participant who
is or is likely to become a "covered employee" within the meaning of Section
162(m) of the Code will be based on specified levels of, or growth in, one or
more of the following criteria:
(1) cash flow/net assets ratio;
(2) debt/capital ratio;
(3) return on total capital;
(4) return on equity;
(5) earnings per share growth;
(6) revenue growth;
(7) total return to shareholders; and
(8) financial performance of the Company expressed in terms of EBITDA
(earnings before interest, taxes, depreciation and amortization).
24
If the Committee determines that a change in the business, operations,
corporate structure or capital structure of the Company, or the manner in which
it conducts its business, or other events or circumstances render the Management
Objectives unsuitable, the Committee may modify such Management Objectives or
the related minimum acceptable level of achievement, in whole or in part, as the
Committee deems appropriate and equitable, except in the case of a "covered
employee" where such action would result in the loss of the otherwise available
exemption of the award under Section 162(m) of the Code.
Transferability. Except as otherwise determined by the Committee, no
Option Right, Appreciation Right or other award under the Amended Plan is
transferable by a participant other than by will or the laws of descent and
distribution. Except as otherwise determined by the Committee, only the
participant (or the participant's guardian or legal representative in the event
of the participant's legal incapacity) may exercise Option Rights or
Appreciation Rights during the participant's lifetime.
The Committee may specify at or after the date of grant that Option Rights,
Appreciation Rights, Restricted Shares, Deferred Shares, Performance Shares and
Performance Units are transferable by a participant to members of the
participant's immediate family, without payment by the transferee, if reasonable
prior notice of the transfer was given to the Company, and the transfer was made
according to the terms and conditions specified by the Committee or the Company.
Any transferee will be subject to the same terms and conditions under the
Amended Plan as the participant.
The Committee may specify that part or all of the Common Shares that are
(i) to be issued or transferred by the Company upon exercise of Option Rights or
Appreciation Rights, upon termination of the deferral period applicable to
Deferred Shares or upon payment under any grant of Performance Shares or
Performance Units or (ii) no longer subject to the substantial risk of
forfeiture and restrictions on transfer in the case of Restricted Shares, shall
be subject to further restrictions on transfer.
Adjustments. The number, kind, and price of shares covered by outstanding
Option Rights, Appreciation Rights, Deferred Shares and Performance Shares and
the prices per share applicable thereto, are subject to adjustment in the event
of stock dividends, splits and combinations, changes in capital structure of the
Company, mergers, spin-offs, partial or complete liquidation, and similar
events. If any such event occurs, the Committee has discretion to substitute for
any or all outstanding awards under the Amended Plan such alternative
consideration as it, in good faith, may determine to be equitable in the
circumstances and may require the surrender of all awards so replaced. The
Committee may also make or provide for such adjustments in the numbers of shares
available under the Amended Plan and available for specific kinds of awards
under the Amended Plan as the Committee may determine appropriate to reflect any
such transaction or event.
Change in Control. A definition of "Change in Control" is specifically
included in the Amended Plan. This definition can be found in the full text of
the Amended Plan attached hereto as Appendix B.
Certain Terminations of Employment. If a participant holding (a) an Option
Right or Appreciation Right that is not fully and immediately exercisable, (b)
Restricted Shares where the restrictions on transfer have not yet lapsed, (c)
Deferred Shares where the deferral period is not complete, (d) Performance
Shares or Performance Units that have not been fully earned, or (e) Common
Shares distributed under the Amended Plan and subject to continuing
restrictions, terminates employment by reason of death, disability, normal
retirement, early retirement approved by the Company, entry into public service
or leave of absence approved by the Company, or in the event of hardship or
other special circumstances, the Committee may take any action it deems
equitable or in the Company's best interest.
25
Foreign Employees. The Committee may provide for special terms for awards
to participants who are foreign nationals or who are employed by the Company or
any of its subsidiaries outside of the United States of America, as the
Committee may consider necessary or appropriate to accommodate differences in
local law, tax policy or custom.
Administration and Amendments. The Amended Plan will be administered by a
committee of the Board (or subcommittee thereof) consisting of not less than
three members of the Board, each of whom shall (i) meet all applicable
independence requirements of the New York Stock Exchange, or if the Common
Shares are not traded on the New York Stock Exchange, the principal national
securities exchange on which the Common Stock is traded, (ii) be a "Non-Employee
Director" within the meaning of Rule 16b-3 and (iii) be an "outside director"
within the meaning of Section 162(m) of the Code.
The Committee's interpretation of the Amended Plan and related agreements
and documents is final and conclusive. The Amended Plan may be amended from time
to time by the Committee. However, any amendment which must be approved by the
shareholders of the Company in order to comply with applicable law or the rules
of any national securities exchange upon which the Common Shares are traded or
quoted will not be effective unless and until such approval has been obtained in
compliance with such applicable law or rules. Presentation of the Amended Plan
or any amendment thereof for shareholder approval is not to be construed to
limit the Company's authority to offer similar or dissimilar benefits through
plans that are not subject to shareholder approval.
Consistent with the Company policy against repricing "underwater" options,
the Committee may not, without the further approval of the shareholders of the
Company, authorize the amendment of any outstanding Option Right to reduce the
option price. Furthermore, no Option Right may be canceled and replaced with
awards having a lower option price without further approval of the shareholders.
The Committee may require participants, or permit participants to elect, to
defer issuance of shares or the settlement of cash awards and may provide for
payment of interest or dividend equivalents on the deferred amounts. The
Committee may also condition any award on the surrender or deferral by a
participant of his or her right to receive a cash bonus or other compensation.
Termination. No grant under the Amended Plan may be made more than 10
years after the Amended Plan is approved by the shareholders, but all grants
made on or before the 10th anniversary will continue in effect after that date
subject the terms of those grants and this Amended Plan.
General. The closing price of the Common Shares on January 2, 2004 (the
last trading day in 2003 fiscal year-end), on the New York Stock Exchange was
$5.50 per share.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain of the Federal income tax
consequences of certain transactions under the Amended Plan based on Federal
income tax laws in effect on January 1, 2004. This summary is not intended to be
complete and does not describe state or local tax consequences.
TAX CONSEQUENCES TO PARTICIPANTS
Non-qualified Stock Options. In general, (i) no income will be recognized
by an optionee at the time a non-qualified Option Right is granted; (ii) at the
time of exercise of a non-qualified Option Right, ordinary income will be
recognized by the optionee in an amount equal to the difference between the
option price paid for the shares and the fair market value of the shares, if
unrestricted, on the date of
26
exercise; and (iii) at the time of sale of shares acquired pursuant to the
exercise of a non-qualified Option Right, appreciation (or depreciation) in
value of the shares after the date of exercise will be treated as a capital gain
(or loss).
Incentive Stock Options. No income generally will be recognized by an
optionee upon the grant or exercise of an Incentive Stock Option. The exercise
of an Incentive Stock Option, however, may result in an alternative minimum tax
liability. If Common Shares are issued to the optionee pursuant to the exercise
of an Incentive Stock Option, and if no disqualifying disposition of such shares
is made by such optionee within two years after the date of grant or within one
year after the transfer of such shares to the optionee, then upon sale of such
shares, any amount realized in excess of the option price will be taxed to the
optionee as a capital gain and any loss sustained will be a capital loss.
If Common Shares acquired upon the exercise of an Incentive Stock Option
are disposed of prior to the expiration of either holding period described
above, the optionee generally will recognize ordinary income in the year of
disposition in an amount equal to the excess (if any) of the fair market value
of such shares at the time of exercise (or, if less, the amount realized on the
disposition of such shares if a sale or exchange) over the option price paid for
such shares. Any further gain (or loss) realized by the participant generally
will be taxed as a capital gain (or loss).
Appreciation Rights. No income will be recognized by a participant in
connection with the grant of a Tandem Appreciation Right or a Free-Standing
Appreciation Right. When the Appreciation Right is exercised, the participant
normally will be required to include as taxable ordinary income in the year of
exercise an amount equal to the amount of cash received and the fair market
value of any unrestricted Common Shares received on the exercise.
Restricted Shares. The recipient of Restricted Shares generally will be
subject to tax at ordinary income rates on the fair market value of the
Restricted Shares (reduced by any amount paid by the participant for such
Restricted Shares) at such time as the shares are no longer subject to
forfeiture or restrictions on transfer for purposes of Section 83 of the Code
("Restrictions"). However, a recipient who so elects under Section 83(b) of the
Code within 30 days of the date of transfer of the shares will have taxable
ordinary income on the date of transfer of the shares equal to the excess of the
fair market value of such shares (determined without regard to the Restrictions)
over the purchase price, if any, of such Restricted Shares. If a Section 83(b)
election has not been made, any dividends received with respect to Restricted
Shares that are subject to the Restrictions generally will be treated as
compensation that is taxable as ordinary income to the participant.
Deferred Shares. No income generally will be recognized upon the award of
Deferred Shares. The recipient of a Deferred Share award generally will be
subject to tax at ordinary income rates on the fair market value of
non-restricted Common Shares on the date that such shares are transferred to the
participant under the award (reduced by any amount paid by the participant for
such Deferred Shares).
Performance Shares and Performance Units. No income generally will be
recognized upon the grant of Performance Shares or Performance Units. Upon
payment of the earn-out of Performance Shares or Performance Units, the
recipient generally will be required to include as taxable ordinary income in
the year of receipt an amount equal to the amount of cash received and the fair
market value of any non-restricted Common Shares received.
27
TAX CONSEQUENCES TO THE COMPANY OR SUBSIDIARY
To the extent that a participant recognizes ordinary income in the
circumstances described above, the Company or subsidiary for which the
participant performs services will be entitled to a corresponding deduction
provided that, among other things, the income meets the test of reasonableness,
is an ordinary and necessary business expense, is not an "excess parachute
payment" within the meaning of Section 280G of the Code and is not disallowed by
the $1 million limitation on certain executive compensation under Section 162(m)
of the Code.
REQUIRED VOTE
The approval of the Amended Plan requires the affirmative vote of the
holders of two-thirds of the Common Shares issued and outstanding and entitled
to vote at the meeting, whether present in person or by proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THIS PROPOSAL.
EQUITY COMPENSATION PLAN INFORMATION
The table below sets forth certain information regarding the following
equity compensation plans of the Company as of January 3, 2004: 1988 Incentive
Equity Performance Plan (As Amended as of October 19, 2000) (the "1988 Plan"),
1998 Incentive Equity Plan (As Amended and Restated as of April 27, 2001) (the
"1998 Plan"), Non-Employee Directors Stock Option Plan (As Amended and Restated
as of July 19, 2001) (the "Directors Option Plan"), Deferred Compensation Plan
for Non-Employee Directors (As Amended and Restated as of October 18, 2001) (the
"Directors Deferred Plan") and Deferred Compensation Plan for Executive Officers
(As Amended and Restated as of October 18, 2001) (the "Executive Officers
Deferred Plan"). All of those plans have been approved by shareholders, except
the Directors Deferred Plan and the Executive Officers Deferred Plan.
NUMBER OF
SECURITIES
REMAINING AVAILABLE
NUMBER OF FOR FUTURE ISSUANCE
SECURITIES TO BE UNDER EQUITY
ISSUED UPON WEIGHTED-AVERAGE COMPENSATION PLANS
EXERCISE OF EXERCISE PRICE OF (EXCLUDING
OUTSTANDING OUTSTANDING SECURITIES
OPTIONS, WARRANTS OPTIONS, WARRANTS REFLECTED IN
PLAN CATEGORY AND RIGHTS AND RIGHTS COLUMN (a)
------------- ----------------- -------------------- -------------------
(a) (b) (c)
Equity compensation plans approved by
security holders.................... 2,612,525 $6.21 187,393(1)
Equity compensation plans not approved
by security holders................. 0 N/A 0(2)
Total............................... 2,612,525 $6.21 187,393
---------------
(1) Reflects 187,393 Common Shares remaining available under the 1998 Plan,
which authorizes the Governance, Nominating and Compensation Committee to
make awards of Option Rights, Appreciation Rights, Restricted Shares,
Deferred Shares, Performance Shares and Performance Units (including up to
187,393 Restricted Shares or Deferred Shares).
28
(2) The Directors Deferred Plan and the Executive Officers Deferred Plan provide
for the issuance of Common Shares, but do not provide for a specific amount
available under the plans. Descriptions of those plans are set forth below.
DIRECTORS DEFERRED PLAN
The Directors Deferred Plan provides Directors the opportunity to defer
their annual retainers and meeting fees. Such deferred fees may be invested, at
each Directors election, in either a money market fund or in Common Shares of
the Company. If a Director elects to have this deferred compensation invested in
Common Shares, the director will receive an additional sum, also invested in
Common Shares, equal to 25% of the deferred amount. The Directors Deferred Plan
is being amended to provide that if a Director elects to have this deferred
compensation invested in Common Shares, the Company will issue Restricted Shares
under the 1998 Plan to such director in an amount equal to 25% of the deferred
amount. This amendment will be effective as of April 30, 2004 if and when the
amendment and restatement of the 1998 Plan is approved by Shareholders.
Non-Employee Directors will then be permitted to receive grants of Restricted
Shares under the 1998 Plan, as discussed on page 9.
EXECUTIVE OFFICERS DEFERRED PLAN
The Executive Officers Deferred Plan provides designated executive officers
and other key employees of the Company the opportunity to defer bonus
compensation payable to them under the Company's annual incentive compensation
program. Such deferred compensation is invested in deferred Common Shares of the
Company. If a participant elects to have his or her bonus deferred, the Company
will issue Restricted Shares under the 1998 Plan to such participant in the
amount equal to 20% deferred annual incentive compensation.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Lamson's executive officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the SEC, the NYSE and the Pacific Stock Exchange, and to provide
Lamson with copies of such reports.
Based solely on review of the copies of such reports furnished to the
Company, or written representation that no forms were required to be filed, the
Company believes that during the year ended January 3, 2004, all Section 16(a)
filing requirements applicable to its executive officers, directors and greater
than ten percent beneficial owners were complied with, except that a Form 4
filed on December 30, 2003 on behalf of James T. Bartlett was late. The Form 4
was misfiled on December 16, 2003, due to an electronic transmission failure,
when Form 4s were filed on behalf of other non-employee directors. Mr.
Bartlett's Form 4 had to be re-transmitted and filed on December 30, 2003.
AUDIT COMMITTEE REPORT
The Board of Directors of the Company adopted a written Audit Committee
Charter. All members of the Audit Committee are independent as required by the
NYSE's current listing standards. The Audit Committee has implemented procedures
through which it devotes the attention that it deems necessary
29
and appropriate to carry out its responsibilities, during a fiscal year, in each
of the matters assigned to it under the Audit Committee Charter, a copy of which
is attached as Appendix A to this Proxy Statement.
The Audit Committee has reviewed and discussed with the Company's
management and Ernst & Young LLP, ("Ernst & Young") the Company's independent
auditors, the audited financial statements of the Company contained in the
Company's Annual Report to Shareholders for the year ended January 3, 2004. The
Audit Committee has also discussed with the Company's independent auditors the
matters required to be discussed pursuant to SAS No. 61 (Codification of
Statements on Auditing Standards, Communication with Audit Committees) and SAS
No. 90 (Audit Committee Communications).
The Audit Committee has received and reviewed the written disclosures and
the letter from Ernst & Young required by Independence Standards Board Standard
No. 1 (titled, "Independence Discussions with Audit Committees"), and has
discussed with Ernst & Young their independence. The Audit Committee has also
considered whether the provision of non-audit services to the Company by Ernst &
Young is compatible with maintaining their independence and has pre-approved all
non-audit services.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
January 3, 2004, filed with the U.S. Securities and Exchange Commission.
AUDIT COMMITTEE
Francis H. Beam, Jr., Chairman
Martin J. Cleary
George R. Hill
INDEPENDENT AUDITORS
For many years the firm of Ernst & Young in Cleveland, Ohio, has served as
independent auditors to the Company. In February 2003, Ernst & Young was
reappointed by the Board of Directors of the Company, on the recommendation of
the Audit Committee, as the Company's independent auditors for the fiscal year
ended January 3, 2004. The Audit Committee has retained Ernst & Young for the
Company"s 2004 fiscal year. Representatives of Ernst & Young are expected to be
present at the meeting and will have the opportunity to make a statement if they
so desire. They are expected to be available to respond to proper questions
regarding the independent auditors' responsibilities.
AUDIT FEES
Fees for audit services totaled $360,000 in 2003 and $330,000 in 2002,
including fees associated with the annual audit and reviews of the Company's
quarterly reports on Form 10-Q.
AUDIT-RELATED FEES
Fees for audit-related services totaled $11,500 in 2003 and $196,029 in
2002. Audit-related services principally include accounting consultations and in
2002 internal audit services. The Audit Committee approved one hundred percent
of such fees in 2003.
30
TAX FEES
Fees for tax services, including tax compliance, tax advice and tax
planning totaled $37,025 in 2003 and $34,850 in 2002. The Audit Committee
approved one hundred percent of such fees in 2003.
ALL OTHER FEES
Fees for all other services not included above total $0 in 2003 and $9,513
in 2002, principally for litigation assistance.
AUDIT COMMITTEE FINANCIAL EXPERT
The Board has determined that one member of the Audit Committee, Francis H.
Beam, Jr., has the qualifications to be an "audit committee financial expert" as
defined in the SEC's rules and regulations and also meets the standards of
independence adopted by the SEC for membership on an audit committee.
AUDIT COMMITTEE PRE-APPROVAL POLICY
Provisions of the Sarbanes-Oxley Act of 2002 which require Audit Committee
pre-approval of all services to be performed by the independent auditor became
effective during the Company's 2003 fiscal year. Since the effectiveness of such
provisions, the Audit Committee approved, prior to engagement, all audit and
non-audit services provided by the Company's independent auditors and all fees
to be paid for such services. The Audit Committee has pre-approved all audit
services to be provided by the Company's independent auditors related to the
review of the Company's quarterly financial reports on Form 10-Q for the
Company's 2004 fiscal year. All other services are considered and approved on an
individual basis.
SHAREHOLDER PROPOSALS
Any shareholder proposal intended to be presented at the Annual Meeting of
Shareholders to be held in 2005, must be received by the Company's Secretary at
its principal office in Cleveland, Ohio, not later than November 29, 2004 for
inclusion in the Company's Proxy Statement and Form of Proxy relating to the
Annual Meeting of Shareholders in 2005. Each proposal submitted should be
accompanied by the name and address of the shareholder submitting the proposal
and the number of Common Shares owned. If the proponent is not a shareholder of
record, proof of beneficial ownership should also be submitted. All proposals
must be a proper subject for consideration and comply with the proxy rules of
the SEC.
CODE OF ETHICS
As of the date of this Proxy Statement, the Company has adopted a Code of
Corporate Conduct and Ethics that applies to its directors and associates,
including the Company's principal executive officer, principal financial
officer, principal accounting officer and any person performing a similar
function with the Company. Before the date of the Annual Meeting, the Company
will post the Code of Corporate Conduct and Ethics on its Web site at
www.lamson-sessions.com via the Investor Relations page. In addition, the
Company will provide, free of charge to any person, a copy of the Code of
Corporate
31
Conduct and Ethics. Requests should be sent to: Secretary, The Lamson & Sessions
Co., 25701 Science Park Drive, Cleveland, OH 44122.
OTHER MATTERS
The Board of Directors of the Company is not aware of any matter to come
before the Annual Meeting other than as herein presented. However, if any other
matter is properly brought before the Annual Meeting, the persons appointed as
proxies in the accompanying proxy will have discretion to vote or act hereon
according to their best judgment.
The Company's 2003 Annual Report, including financial statements, has been
mailed contemporaneously with this Proxy Statement.
By Order of the Board of Directors.
/s/ James J. Abel
JAMES J. ABEL
Executive Vice President, Secretary,
Treasurer and Chief Financial
Officer
32
APPENDIX A
THE LAMSON & SESSIONS CO.
AUDIT COMMITTEE CHARTER
PURPOSES
The purposes of the Audit Committee (the "Committee") are to (a) assist the
Board of Directors (the "Board") of The Lamson & Sessions Co. (the "Company") in
fulfilling the Board's oversight responsibilities with respect to (i) the
integrity of the Company's financial statements, (ii) the Company's compliance
with legal and regulatory requirements, (iii) the independent auditors'
qualifications and independence, and (iv) the performance of the independent
auditors and the Company's internal audit function; (b) be directly responsible
for the appointment, termination, compensation, retention, evaluation and
oversight of the work of the Company's independent auditors; and (c) prepare the
Committee's report, made pursuant to the Securities Exchange Act of 1934 (the
"Exchange Act"), to be included in the Company's annual proxy statement (the
"Audit Committee Report").
COMPOSITION OF THE COMMITTEE
NUMBER. The Committee shall consist of no fewer than three members.
QUALIFICATIONS. Each Committee member shall have all of the following
qualifications:
1) Each Committee member shall meet the independence criteria established
by the New York Stock Exchange, Inc. ("NYSE") and the Securities and
Exchange Commission ("SEC"), as such requirements are interpreted by the
Board in its business judgment.
2) Each Committee member shall be financially literate or shall become
financially literate within a reasonable period of time after his or her
appointment to the Committee. Additionally, at least one member of the
Committee shall have accounting or related financial management
expertise. The Board shall determine, in its business judgment and upon
the recommendation of the Governance, Nominating and Compensation
Committee, whether a member is financially literate and whether at least
one member has the requisite accounting or financial management
expertise. The designation or identification of a person as an audit
committee financial expert shall not (a) impose on such person any
duties, obligations or liability that are greater than the duties,
obligations and liability imposed on such person as a member of the
Committee and Board in the absence of such designation or
identification, or (b) affect the duties, obligations or liability of
any other member of the Committee or Board.
3) Each Committee member shall receive as compensation from the Company
only permitted compensation, which includes (a) director's fees (which
includes all forms of compensation paid to directors of the Company for
service as a director or member of a Board committee) and/or (b) fixed
amounts of compensation under a retirement plan (including deferred
compensation) for prior service with the Company provided that such
compensation is not contingent in any way on continued service.
Additional directors' fees may be paid to Committee members to
compensate them for the significant time and effort they expend in
performing their duties as Committee members.
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4) If a Committee member simultaneously serves on the audit committee of
more than three public companies (including the Company), the Board must
determine that such simultaneous service would not impair the ability of
such member to effectively serve on the Committee. The Company shall
disclose any such determination in its annual proxy statement.
APPOINTMENT. The Board will appoint the members and the Chairman of the
Committee based on nominations made by the Company's Governance, Nominating and
Compensation Committee. Committee members shall serve at the pleasure of the
Board and for a term of one year or such other terms as the Board may determine
or until such Committee member is no longer a Board member.
DUTIES AND RESPONSIBILITIES OF THE COMMITTEE
The Committee is responsible for overseeing the Company's financial
reporting process on behalf of the Board. Management is responsible for the
preparation, presentation, and integrity of the Company's financial statements
and for the appropriateness of the accounting principles and reporting policies
that are used by the Company. The independent auditors are responsible for
auditing the Company's financial statements and for reviewing the Company's
interim financial statements.
The Committee is directly responsible for the appointment, termination,
compensation, retention, evaluation and oversight of the work of the Company's
independent auditors (including resolution of disagreements between management
and the auditors regarding financial reporting) for the purpose of preparing or
issuing an audit report or performing other audit, review or attest services for
the Company.
In performing its responsibilities, the Committee shall:
1) Retain the Independent Auditors: The Committee has the sole authority
to (a) retain and terminate the Company's independent auditors, (b)
approve all audit engagement fees, terms and services, and (c) approve
any non-audit engagements with the Company's independent auditors. The
Committee may delegate the authority to grant any pre-approvals
required by such sections to one or more members of the Committee as it
designates, subject to the delegated member or members reporting any
such pre-approvals to the Committee at its next scheduled meeting.
2) Review and Discuss the Auditors' Quality Control: The Committee is to,
at least annually, obtain and review a report by the independent
auditors describing (a) the audit firm's internal quality control
procedures, and (b) any material issues raised by the most recent
internal quality control review, or peer review, of the firm, or by any
inquiry or investigation by governmental or professional authorities,
within the preceding five years, respecting one or more independent
audits carried out by the firm, and any steps taken to deal with any
such issues.
3) Review and Discuss the Independence of the Auditors: In connection
with the retention of the Company's independent auditors, the Committee
is to, at least annually, review and discuss the information provided
by management and the auditors relating to the independence of the
audit firm, including, among other things, information related to the
non-audit services provided and expected to be provided by the
auditors. The Committee is responsible for (a) ensuring that the
independent auditors submit at least annually to the Committee a formal
written statement delineating all relationships between the auditors
and the Company consistent with applicable independence standards, (b)
actively engaging in a dialogue with the auditors with respect to
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any disclosed relationship or services that may impact the objectivity
and independence of the auditors, and (c) taking appropriate action in
response to the auditors' report to satisfy itself of the auditors'
independence. In connection with the Committee's evaluation of the
auditors' independence, the Committee shall also review and evaluate the
lead partner of the independent auditors and take such steps as may be
required by law with respect to the identification and regular rotation
of the audit partners serving on the Company's audit engagement team.
4) Set Hiring Policies: The Committee is to set hiring policies for
employees or former employees of the independent auditors.
5) Review and Discuss the Audit Plan: The Committee is to review and
discuss with the independent auditors the plans for, and the scope of,
the annual audit and other examinations, including the adequacy of
staffing and compensation.
6) Review and Discuss Conduct of the Audit: The Committee is to review
and discuss with the independent auditors the matters required to be
discussed by generally accepting auditing standards or other rules
relating to the conduct of the audit, as well as any audit problems or
difficulties and management's response, including (a) any restriction
on audit scope or on access to requested information, (b) any
disagreements with management, (c) any accounting adjustments that were
noted or proposed but were "passed" and (d) significant issues
discussed with the independent auditors' national office. The Committee
is to decide all unresolved disagreements between management and the
independent auditors regarding financial reporting.
7) Review and Discuss Financial Statements and Disclosures: The Committee
is to review and discuss with appropriate officers of the Company and
the independent auditors the annual audited and quarterly financial
statements of the Company (prior to their filing with the SEC),
including (a) the Company's disclosures under "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and (b)
disclosures regarding internal controls and other matters.
8) Review and Discuss Earnings Press Releases: The Committee is to review
and discuss earnings and other financial press releases (including any
use of "pro forma" or "adjusted" non-GAAP information), as well as
financial information and earnings guidance provided to analysts and
rating agencies (which review may occur after issuance and may be done
generally as a review of the types of information to be disclosed and
the form of presentation to be made).
9) Review and Discuss Internal Audit Plans: The Committee is to review
and discuss with the senior internal auditing executive and appropriate
members of the staff of the internal auditing department, or the firm
handling the internal audit function on an outsource basis, the plans
for and the scope of their ongoing audit activities, including adequacy
of staffing and compensation.
10) Review and Discuss Internal Audit Reports: The Committee is to review
and discuss with the senior internal auditing executive and appropriate
members of the staff of the internal auditing department, or the firm
handling the internal audit function on an outsource basis, the annual
report of the audit activities, examinations and results thereof of the
internal auditing department, or the firm handling the internal audit
function on an outsource basis.
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11) Review and Discuss the Systems of Internal Controls: The Committee is
to review and discuss with the management, independent auditors, the
senior internal auditing executive, or the firm handling the internal
audit function on an outsource basis, and, if and to the extent deemed
appropriate by the Chairman of the Committee, members of their
respective staffs the adequacy and effectiveness of the Company's
internal controls (including any significant deficiencies and changes
in internal controls), the Company's financial, auditing and accounting
organizations and personnel, and the Company's policies and compliance
procedures with respect to business practices which shall include (a)
the disclosures regarding internal controls and matters required and
(b) a review with the independent auditors of their opinion on the
effectiveness of management's assessment of internal controls over
financial reporting and the independent auditors' analysis of matters
requiring modification to management's certifications.
12) Review and Discuss the Recommendations of Independent Auditors: The
Committee is to review and discuss with the senior internal auditing
executive and the appropriate members of the staff of the internal
auditing department, or the firm handling the internal audit function
on an outsource basis, recommendations made by the independent auditors
and the senior internal auditing executive, as well as such other
matters, if any, as such persons or other officers of the Company may
desire to bring to the attention of the Committee.
13) Review and Discuss the Audit Results: The Committee is to review and
discuss with the independent auditors (A) the report of their annual
audit, or proposed report of their annual audit, (B) the accompanying
management letter, if any, (C) the results of their reviews of the
Company's interim financial statements conducted in accordance with
Statement on Auditing Standards No. 100, and (D) the reports of the
results of such other examinations outside of the course of the
independent auditors' normal audit procedures that the independent
auditors may from time to time undertake. The foregoing shall, as
appropriate, include a review of (a) major issues regarding (i)
accounting principles and financial statement presentations, including
any significant changes in the Company's selection or application of
accounting principles, and (ii) the adequacy of the Company's internal
controls and any special audit steps adopted in light of material
control deficiencies, (b) analyses prepared by management and/or the
independent auditors setting forth significant financial reporting
issues and judgments made in connection with the preparation of the
financial statements, including analyses of the effects of alternative
GAAP methods on the financial statements, and (c) the effect of
regulatory and accounting initiatives, as well as off-balance sheet
structures, on the financial statements of the Company.
14) Obtain Assurances under Section 10A(b) of the Exchange Act: The
Committee is to obtain assurance from the independent auditors that in
the course of conducting the audit, there have been no acts detected or
that have otherwise come to the attention of the audit firm that
require disclosure to the Committee under Section 10A(b) of the
Exchange Act.
15) Discuss Risk Management Policies: The Committee is to discuss
guidelines and policies with respect to risk assessment and risk
management to assess and manage the Company's exposure to risk. The
Committee should discuss the Company's major financial risk exposures
and the steps management has taken to monitor and control these
exposures. The Committee should periodically review the Company's
contingency plans for protection of vital information and business
conduct in the event of an operations interruption.
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16) Obtain Reports Regarding Conformity With the Company's Code of
Corporate Conduct and Ethics: The Committee is to periodically obtain
reports from management, the Company's senior internal auditing
executive, or the firm handling the internal audit function on an
outsource basis, and the independent auditor that the Company is in
conformity with the Company's Code of Corporate Conduct and Ethics. The
Committee is to review and discuss reports and disclosures of insider
and affiliated party transactions. The Committee should advise the
Board with respect to the Company's policies and procedures regarding
compliance with applicable laws and regulations and with the Company's
Code of Corporate Conduct.
17) Establish Procedures for Complaints Regarding Financial Statements or
Accounting Policies: The Committee is to establish procedures for (A)
the receipt, retention, and treatment of complaints received by the
Company regarding accounting, internal accounting controls, or auditing
matters, (B) the confidential, anonymous submission by employees of the
Company of concerns regarding questionable accounting or auditing
matters, and (C) the confidential receipt, retention and consideration
of any report of evidence of a material violation ("Material
Violations").
18) Discuss With Outside Counsel Matters Regarding Financial Statements or
Compliance Policies: The Committee should discuss with the Company's
outside counsel legal matters that may have a material impact on the
financial statements or the Company's compliance policies.
19) Review and Discuss Other Matters: The Committee is empowered to review
and discuss such other matters that relate to the accounting, auditing
and financial reporting practices and procedures of the Company as the
Committee may, in its own discretion, deem desirable in connection with
the review functions described above. The Committee, in carrying out
its responsibilities, policies and procedures should remain flexible,
in order to best react to changing conditions and circumstances.
20) Make Board Reports: The Committee should report its activities
regularly to the Board in such manner and at such times as the
Committee and the Board deem appropriate, but in no event less than
once a year. Such report should include a review of any issues that
arise with respect to the quality or integrity of the Company's
financial statements, the Company's compliance with legal or regulatory
requirements, the performance and independence of the Company's
independent auditors or the performance of the internal audit function.
21) Perform Functions of a Qualified Legal Compliance Committee. The
Committee shall also function as a qualified legal compliance committee
(a "QLCC") within the meaning of Rule 205 of the Rules of Practice of
the SEC. In its capacity as a QLCC, the Committee shall receive any
reports of Material Violations governed by such rule from attorneys
representing the Company ("QLCC Reports"). The Committee shall take
such actions as may be permitted or required of a QLCC under applicable
law, which may include the making of inquiries and investigations in
response to any QLCC Reports, making such reports and giving such
notices to the Company's officers and Board as may be necessary or
appropriate, recommending that the Company take such remedial action as
the Committee shall deem necessary or appropriate, and providing such
notifications to the SEC as may be permitted or required by law. The
performance by the Committee of the functions of a QLCC shall not
increase the liability of any member of this Committee under state law.
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MEETINGS OF THE COMMITTEE
The Committee shall meet in person or telephonically at least quarterly, or
more frequently as it may determine necessary, to comply with its
responsibilities as set forth herein. The Chairman of the Committee shall, in
consultation with the other members of the Committee, the Company's independent
auditors and the appropriate officers of the Company, be responsible for calling
meetings of the Committee, establishing agenda therefor and supervising the
conduct thereof. A majority of the members of the Committee shall constitute a
quorum for the transaction of business and the act of a majority of the
Committee members at any meeting of the Committee at which there is a quorum
shall be the act of the Committee. The Committee may also take any action
permitted hereunder by unanimous written consent.
The Committee may request any officer or employee of the Company or the
Company's outside legal counsel or independent auditors to attend a meeting of
the Committee or to meet with any members of, or consultants to, the Committee.
The Committee shall meet with the Company's management, the internal auditors,
or the firm handling the internal audit function on an outsource basis, and the
independent auditors periodically in separate private sessions to discuss any
matter that the Committee, management, the independent auditors or such other
persons believe should be discussed privately.
RESOURCES AND AUTHORITY OF THE COMMITTEE
The Committee shall have the resources and authority appropriate to
discharge its responsibilities as required by law, including the authority to
engage independent counsel and other advisors as the Committee deems necessary
to carry out its duties. The Committee may also, to the extent it deems
necessary or appropriate and upon notice to the Board, meet with the Company's
investment bankers or financial analysts who follow the Company.
The Company will provide for appropriate funding, as determined by the
Committee, for payment of (i) compensation to the Company's independent auditors
engaged for the purpose of rendering or issuing an audit report or related work
or performing other audit, review or attest services for the Company, (ii)
compensation to independent counsel or any other advisors employed by the
Committee, and (iii) ordinary administrative expenses of the Audit Committee
that are necessary or appropriate in carrying out its duties.
AUDIT COMMITTEE REPORT
The Committee will prepare, with the assistance of management, the
independent auditors and outside legal counsel, the Audit Committee Report.
ANNUAL REVIEW OF CHARTER
The Committee will conduct and review with the Board annually an evaluation
of this Charter and recommend any changes to the Board. The Committee may
conduct the Charter evaluation in such manner as the Committee, in its business
judgment, deems appropriate.
ANNUAL PERFORMANCE EVALUATION
The Committee will conduct and review with the Board annually an evaluation
of the Committee's performance with respect to the requirements of this Charter.
This evaluation should also set forth the
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goals and objectives of the Committee for the upcoming year. The Committee may
conduct this performance evaluation in such manner as the Committee, in its
business judgment, deems appropriate.
AVAILABILITY OF CHARTER
Consistent with NYSE listing requirements, this Charter will be included on
the Company's Web site and will be made available upon request sent to the
Company's Secretary. The Company's annual report to shareholders will state that
this Charter is available on the Company's Web site and will be available upon
request sent to the Company's Secretary.
February 19, 2004
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APPENDIX B
THE LAMSON & SESSIONS CO.
1998 INCENTIVE EQUITY PLAN
(AS AMENDED AND RESTATED AS OF APRIL 30, 2004)
SECTION 1. PURPOSE.
The Lamson & Sessions Co. 1998 Incentive Equity Plan (the "Plan") is
intended to encourage directors, key executives and managerial employees of The
Lamson & Sessions Co. (the "Company") and its subsidiaries to become owners of
stock of the Company in order to increase their interest in the Company's
long-term success, to provide incentive equity opportunities that are
competitive with other similarly situated corporations and to stimulate the
efforts of such persons by giving suitable recognition for services that
contribute materially to the Company's success.
SECTION 2. DEFINITIONS.
For purposes of the Plan, the following terms are defined as set forth
below:
"APPRECIATION RIGHT" means a right granted pursuant to Section 5 of this
Plan, and includes both Tandem Appreciation Rights and Free-Standing
Appreciation Rights.
"BASE PRICE" means the price to be used as the basis for determining the
Spread upon the exercise of a Free-Standing Appreciation Right and a Tandem
Appreciation Right.
"BOARD" means the Board of Directors of the Company.
"CHANGE IN CONTROL" has the meaning provided in Section 14 of this Plan.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.
"COMMITTEE" means the committee (or subcommittee) described in Section
18(a) of this Plan.
"COMMON SHARES" means (i) common shares, without par value, of the Company
and (ii) any security into which such common shares may be converted by reason
of any transaction or event of the type referred to in Section 12 of this Plan.
"COVERED EMPLOYEE" means a Participant who is, or is determined by the
Committee to be likely to become, a "covered employee" within the meaning of
Section 162(m) of the Code (or any successor provision).
"DATE OF GRANT" means the date specified by the Committee on which a grant
of Option Rights, Appreciation Rights, Performance Shares or Performance Units
or a grant or sale of Restricted Shares or Deferred Shares becomes effective
(which date may not be earlier than the date on which the Committee takes action
with respect thereto).
"DEFERRAL PERIOD" means the period of time during which Deferred Shares are
subject to deferral limitations under Section 7 of this Plan.
"DEFERRED SHARES" means an award made pursuant to Section 7 of this Plan of
the right to receive Common Shares at the end of a specified Deferral Period.
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"DIRECTOR" means a member of the Board of Directors of the Company.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder, as such law, rules and regulations may be
amended from time to time.
"FREE-STANDING APPRECIATION RIGHT" means an Appreciation Right granted
pursuant to Section 5 of this Plan that is not granted in tandem with an Option
Right.
"INCENTIVE STOCK OPTIONS" means Option Rights that are intended to qualify
as "incentive stock options" under Section 422 of the Code or any successor
provision.
"IMMEDIATE FAMILY" has the meaning stated in Rule 16a-1(e) of the
Securities and Exchange Commission promulgated under Section 16 of the Exchange
Act (or any successor rule to the same effect), as in effect from time to time.
"MANAGEMENT OBJECTIVES" means any performance objectives established by the
Committee pursuant to Section 10 of this Plan for Participants who have received
grants of Performance Shares or Performance Units or, when so determined by the
Committee, Option Rights, Appreciation Rights, Restricted Shares or dividend
credits pursuant to this Plan.
"MARKET VALUE PER SHARE" means, as of any particular date, the fair market
value of the Common Shares as determined by the Committee. Unless otherwise
determined by the Committee, "Market Value Per Share" shall mean an amount equal
to the mean between the high and low selling prices of the Common Shares on the
New York Stock Exchange, or if the Common Shares are not traded on the New York
Stock Exchange, the principal national securities exchange on which the Common
Stock is traded, on the Date of Grant.
"NON-EMPLOYEE DIRECTOR" means a person who is a "non-employee director"
within the meaning of Rule 16b-3 of the Exchange Act.
"OPTIONEE" means the optionee named in an agreement evidencing an
outstanding Option Right.
"OPTION PRICE" means the purchase price payable upon the exercise of an
Option Right.
"OPTION RIGHT" means the right to purchase Common Shares upon exercise of
an option granted pursuant to Section 4 of this Plan.
"PARTICIPANT" means a person who is selected by the Committee to receive
benefits under this Plan and who is at the time an officer, including without
limitation an officer who may also be a member of the Board, or other key
employee of the Company or any one or more of its Subsidiaries, or who has
agreed to commence serving in any of such capacities within 90 days of the Date
of Grant, and will also include each Non-Employee Director who receives an award
of Option Rights or Restricted Shares under this Plan.
"PERFORMANCE PERIOD" means, in respect of a Performance Share or
Performance Unit, a period of time established pursuant to Section 8 of this
Plan within which the Management Objectives relating to such Performance Share
or Performance Unit are to be achieved.
"PERFORMANCE SHARE" means a bookkeeping entry that records the equivalent
of one Common Share awarded pursuant to Section 8 of this Plan.
"PERFORMANCE UNIT" means a bookkeeping entry that records a unit equivalent
to $1.00 awarded pursuant to Section 8 of this Plan.
B-2
"RESTRICTED SHARES" means Common Shares granted or sold pursuant to Section
6 of this Plan as to which neither the substantial risk of forfeiture nor the
prohibition on transfers referred to in such Section 6 has expired.
"RULE 16b-3" means Rule 16b-3 of the Securities and Exchange Commission
promulgated under Section 16 of the Exchange Act (or any successor rule to the
same effect), as in effect from time to time.
"SPREAD" means the excess of the Market Value per Share on the date when an
Appreciation Right is exercised over the Option Price or Base Price provided for
in the related Option Right or Free-Standing Appreciation Right, respectively.
"SUBSIDIARY" means a corporation, partnership, joint venture,
unincorporated association or other entity in which the Company has a direct or
indirect ownership or other equity interest except that for purposes of
determining whether any person may be a Participant for purposes of any grant of
Incentive Stock Options "Subsidiary" means any corporation in which the Company
owns or controls, directly or indirectly, more than 50 percent of the total
combined voting power represented by all classes of stock issued by such
corporation at the time of such grant.
"TANDEM APPRECIATION RIGHT" means an Appreciation Right granted pursuant to
Section 5 of this Plan that is granted in tandem with an Option Right.
"VOTING POWER" means, at any time, the total votes relating to the
then-outstanding securities entitled to vote generally in the election of
Directors.
"VOTING STOCK" means, at any time, then-outstanding securities entitled to
vote generally in the election of Directors.
SECTION 3. SHARES AVAILABLE UNDER THE PLAN.
(a) Subject to adjustment as provided in Section 12 of this Plan, the
number of Common Shares that may be issued or transferred (i) upon the
exercise of Option Rights or Appreciation Rights, (ii) as Restricted Shares
and released from substantial risks of forfeiture thereof, (iii) as
Deferred Shares, (iv) in payment of Performance Shares or Performance Units
that have been earned, or (v) in payment of dividend equivalents paid with
respect to awards made under this Plan may not exceed in the aggregate
2,570,000 (650,000 of which were approved by the shareholders in 1998;
650,000 of which were approved by the shareholders in 2000; 650,000 of
which were approved by the shareholders in 2001; and 620,000 of which are
being added as of April 30, 2004) Common Shares. Such shares may be shares
of original issuance or treasury shares or a combination of the foregoing.
Upon the payment of any Option Price by the transfer to the Company of
Common Shares or upon satisfaction of any withholding amount by means of
transfer or relinquishment of Common Shares, there will be deemed to have
been issued or transferred under this Plan only the net number of Common
Shares actually issued or transferred by the Company.
(b) Notwithstanding anything in this Section 3 or elsewhere in this
Plan to the contrary, and subject to adjustment as provided in Section 12
of this Plan, (i) the aggregate number of Common Shares actually issued or
transferred by the Company upon the exercise of Incentive Stock Options may
not exceed 650,000 Common Shares, (ii) the number of Restricted Shares that
are not conditioned on the attainment of Management Objectives plus the
number of Deferred Shares may not (after taking any forfeitures into
account) exceed in the aggregate 845,000 Common Shares
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and (iii) no Participant shall be granted Option Rights and Appreciation
Rights, in the aggregate, for more than 350,000 Common Shares during any
period of three years.
(c) Notwithstanding any other provision of this Plan to the contrary,
in no event shall any Participant in any calendar year receive an award of
Performance Shares or Performance Units having an aggregate maximum value
as of their respective Dates of Grant in excess of $500,000.
SECTION 4. OPTION RIGHTS.
The Committee may from time to time authorize grants to Participants of
options to purchase Common Shares upon such terms and conditions as the
Committee may determine in accordance with the following provisions:
(a) Each grant will specify the number of Common Shares to which it
pertains subject to the limitations set forth in Section 3 of this Plan.
(b) Each grant will specify an Option Price per Common Share, which
will be equal to or greater than the Market Value per Share on the Date of
Grant.
(c) Each grant will specify the form of consideration to be paid in
satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of currency or check
or other cash equivalent acceptable to the Company, (ii) nonforfeitable,
unrestricted Common Shares that are already owned by the Optionee for at
least six months and have a value at the time of exercise that is equal to
the Option Price, (iii) any other legal consideration that the Committee
may deem appropriate, including without limitation any form of
consideration authorized under Section 4(d) below, on such basis as the
Committee may determine in accordance with this Plan and (iv) any
combination of the foregoing. For purposes of this Section 4, constructive
delivery of shares will be deemed equivalent to actual delivery.
(d) On or after the Date of Grant, the Committee may determine that
payment of the Option Price of any Option Right (other than an Incentive
Stock Option) may also be made in whole or in part in the form of
Restricted Shares or other Common Shares that are subject to risk of
forfeiture or restrictions on transfer. Unless otherwise determined by the
Committee on or after the Date of Grant, whenever any Option Price is paid
in whole or in part by means of any of the forms of consideration specified
in this Section 4(d), the Common Shares received by the Optionee upon the
exercise of the Option Rights will be subject to the same risks of
forfeiture or restrictions on transfer as those that applied to the
consideration surrendered by the Optionee except that such risks of
forfeiture and restrictions on transfer will apply only to the same number
of Common Shares received by the Optionee as applied to the forfeitable or
restricted Common Shares surrendered by the Optionee.
(e) To the extent permitted by law, any grant may provide for deferred
payment of the Option Price from the proceeds of sale through a bank or
broker on a date satisfactory to the Company of some or all of the Common
Shares to which the exercise relates.
(f) Successive grants may be made to the same Participant regardless
of whether any Option Rights previously granted to such Participant under
the Plan or any similar predecessor plan remain unexercised.
(g) Each grant will specify the period or periods of continuous
employment of the Optionee by the Company or any Subsidiary that are
necessary before the Option Rights or installments thereof
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will become exercisable, and any grant may provide for the earlier exercise
of such Option Rights in the event of a "Change in Control."
(h) Any grant of Option Rights may specify Management Objectives that
must be achieved as a condition to the exercise of such rights.
(i) Option Rights granted under this Plan may be (i) options,
including without limitation Incentive Stock Options, that are intended to
qualify under particular provisions of the Code (ii) options that are not
intended so to qualify, or (iii) combinations of the foregoing. Incentive
Stock Options may only be granted to Participants who meet the definition
of "employees" under Section 3401(c) of the Code.
(j) On or after the Date of Grant of any Option Rights other than
Incentive Stock Options, the Committee may provide for the payment to the
Optionee of dividend equivalents on such Option Rights in cash or Common
Shares on a current, deferred or contingent basis, or the Committee may
provide that such equivalents will be credited against the Option Price.
(k) The exercise of an Option Right will result in the cancellation on
a share-for-share basis of any Tandem Appreciation Right authorized under
Section 5 of this Plan.
(l) No Option Right granted under this Plan may be exercised more than
10 years from the Date of Grant.
(m) Each grant of Option Rights will be evidenced by an agreement
executed on behalf of the Company by any officer of the Company and
delivered to and accepted by the Optionee and containing such terms and
provisions, consistent with this Plan, as the Committee may approve.
SECTION 5. APPRECIATION RIGHTS.
(a) The Committee may authorize the granting (i) to any Optionee, of
Tandem Appreciation Rights in respect of Option Rights granted under this
Plan, and (ii) to any Participant, of Free-Standing Appreciation Rights. A
Tandem Appreciation Right is a right of the Optionee, exercisable by
surrender of the related Option Right, to receive from the Company an
amount determined by the Committee, which will be expressed as a percentage
of the Spread (not exceeding 100 percent) at the time of exercise. Tandem
Appreciation Rights may be granted at any time prior to the exercise or
termination of the related Option Rights except that a Tandem Appreciation
Right awarded in relation to an Incentive Stock Option must be granted
concurrently with such Incentive Stock Option. A Free-Standing Appreciation
Right is a right of the Participant to receive from the Company an amount
determined by the Committee, which will be expressed as a percentage of the
Spread (not exceeding 100 percent) at the time of exercise.
(b) Each grant of Appreciation Rights may utilize any or all of the
authorizations, and will be subject to all of the requirements contained in
the following provisions:
(i) Any grant may specify that the amount payable on exercise of an
Appreciation Right may be paid by the Company in cash, in Common Shares
or in any combination of the foregoing and may either grant to the
Participant or retain in the Committee the right to elect among those
alternatives.
(ii) Any grant may specify that the amount payable on exercise of
an Appreciation Right may not exceed a maximum specified by the
Committee on the Date of Grant.
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(iii) Any grant may specify waiting periods before exercise and
permissible exercise dates or periods.
(iv) Any grant may specify that such Appreciation Right may be
exercised only in the event of, or earlier in the event of, a "Change in
Control."
(v) Any grant may provide for the payment to the Participant of
dividend equivalents on the grant in cash or Common Shares on a current,
deferred or contingent basis.
(vi) Any grant may specify Management Objectives that must be
achieved as a condition of the exercise of such rights.
(vii) Each grant of Appreciation Rights will be evidenced by an
agreement executed on behalf of the Company by an officer of the Company
and delivered to and accepted by the Participant, which agreement will
describe such Appreciation Rights, identify the related Option Rights
(if applicable), state that such Appreciation Rights are subject to all
the terms and conditions of this Plan, and contain such other terms and
provisions, consistent with this Plan, as the Committee may approve.
(c) Any grant of Tandem Appreciation Rights will provide that such
Rights may be exercised only at a time when the related Option Right is
also exercisable and at a time when the Spread is positive, and by
surrender of the related Option Right for cancellation.
(d) Regarding Free-Standing Appreciation Rights only:
(i) Each grant will specify in respect of each Free-Standing
Appreciation Right a Base Price, which will be equal to or greater than
the Market Value per Share on the Date of Grant;
(ii) Successive grants may be made to the same Participant
regardless of whether any Free-Standing Appreciation Rights previously
granted to the Participant remain unexercised; and
(iii) No Free-Standing Appreciation Right granted under this Plan
may be exercised more than 10 years from the Date of Grant.
SECTION 6. RESTRICTED SHARES.
The Committee may also authorize the grant or sale of Restricted Shares to
Participants upon such terms and conditions as the Committee may determine in
accordance with the following provisions:
(a) Each such grant or sale will constitute an immediate transfer of
the ownership of Common Shares to the Participant in consideration of the
performance of services, entitling such Participant to dividend, voting and
other ownership rights, subject to the substantial risk of forfeiture and
restrictions on transfer referred to below.
(b) Each such grant or sale may be made without additional
consideration from the Participant or in consideration of a payment by the
Participant that is less than the Market Value per Share on the Date of
Grant.
(c) Each such grant or sale will provide that the Restricted Shares
covered by such grant or sale will be subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code,
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except (if the Committee so determines) in the event of a "Change in
Control," for a period of not less than three years to be determined by the
Committee on the Date of Grant.
(d) Each such grant or sale will provide that, during the period for
which such substantial risk of forfeiture is to continue, the
transferability of the Restricted Shares will be prohibited or restricted
in the manner and to the extent prescribed by the Committee on the Date of
Grant. Such restrictions may include, without limitation, rights of
repurchase or first refusal in the Company or provisions subjecting the
Restricted Shares to a continuing substantial risk of forfeiture in the
hands of any transferee.
(e) Any such grant or sale may be further conditioned upon the
attainment of Management Objectives that, if achieved, will result in
termination or early termination of the restrictions applicable to such
shares. Each grant may specify, in respect of such Management Objectives, a
minimum acceptable level of achievement and may set forth a formula for
determining the number of Restricted Shares on which restrictions will
terminate if performance is at or above the minimum level, but falls short
of full achievement of the specified Management Objectives.
(f) Any such grant or sale may require that any or all dividends or
other distributions paid on the Restricted Shares during the period of such
restrictions be automatically deferred and reinvested in additional
Restricted Shares, which may be subject to the same restrictions as the
underlying award or such other restrictions as the Committee may determine.
(g) Each such grant or sale will be evidenced by an agreement executed
on behalf of the Company by any officer of the Company and delivered to and
accepted by the Participant and containing such terms and provisions,
consistent with this Plan, as the Committee may approve. Unless otherwise
directed by the Committee, all certificates representing Restricted Shares,
together with a stock power endorsed in blank by the Participant with
respect to such shares, will be held in custody by the Company until all
restrictions on such Restricted Shares lapse.
SECTION 7. DEFERRED SHARES.
The Committee may also authorize grants or sales of Deferred Shares to
Participants upon such terms and conditions as the Committee may determine in
accordance with the following provisions:
(a) Each such grant or sale will constitute the agreement by the
Company to deliver Common Shares to the Participant in the future in
consideration of the performance of services, subject to the fulfillment
during the Deferral Period of such conditions as the Committee may specify.
(b) Each such grant or sale may be made without additional
consideration from the Participant or in consideration of a payment by the
Participant that is less than the Market Value per Share on the Date of
Grant.
(c) Each such grant or sale will be subject to a Deferral Period fixed
by the Committee on the Date of Grant, and any such grant or sale may
provide for the earlier termination of such period in the event of a
"Change in Control."
(d) During the Deferral Period, the Participant will not have any
right to transfer any rights under the subject award, will not have any
rights of ownership in the Deferred Shares and will not have any right to
vote such shares, but the Committee may on or after the Date of Grant
authorize
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the payment of dividend equivalents on such shares in cash or additional
Common Shares on a current, deferred or contingent basis.
(e) Each such grant or sale will be evidenced by an agreement executed
on behalf of the Company by any officer of the Company and delivered to and
accepted by the Participant and containing such terms and provisions,
consistent with this Plan, as the Committee may approve.
SECTION 8. PERFORMANCE SHARES AND PERFORMANCE UNITS.
The Committee may also authorize grants of Performance Shares and
Performance Units that will become payable to a Participant upon achievement of
specified Management Objectives upon such terms and conditions as the Committee
may determine in accordance with the following provisions:
(a) Each such grant will specify the number of Performance Shares or
Performance Units to which it pertains, which number may be subject to
adjustment to reflect changes in compensation or other factors, except that
no such adjustment will be made in the case of a Covered Employee where
such action would result in the loss of the otherwise available exemption
of the award under Section 162(m) of the Code.
(b) The Performance Period with respect to each Performance Share or
Performance Unit will be determined by the Committee on the Date of Grant,
and may be subject to earlier termination in the event of a "Change in
Control" except that no such acceleration will be made in the case of a
Covered Employee where such action would result in the loss of the
otherwise available exemption of the award under Section 162(m) of the
Code.
(c) Each grant of Performance Shares or Performance Units will specify
Management Objectives that, if achieved, will result in payment or early
payment of the award, and each grant may specify in respect of such
specified Management Objectives a minimum acceptable level of achievement
below which no payment will be made and will set forth a formula for
determining the amount of any payment to be made if performance is at or
above such minimum level, but falls short of full achievement of the
specified Management Objectives.
(d) Each such grant will specify the time and manner of payment of
Performance Shares or Performance Units that have been earned. Any grant
may specify that any such amount may be paid by the Company in cash, Common
Shares or any combination of cash and Common Shares and may either grant to
the Participant or reserve to the Committee the right to elect among those
alternatives.
(e) Any grant of Performance Shares may specify that the amount
payable with respect to such grant may not exceed a maximum specified by
the Committee on the Date of Grant. Any grant of Performance Units may
specify that the amount payable, or the number of Common Shares issued,
with respect to the grant may not exceed maximums specified by the
Committee on the Date of Grant.
(f) On or after the Date of Grant of Performance Shares, the Committee
may provide for the payment to the Participant of dividend equivalents on
such Performance Shares in cash or additional Common Shares on a current,
deferred or contingent basis.
(g) Each grant of Performance Shares or Performance Units will be
evidenced by an agreement executed on behalf of the Company by any officer
of the Company and delivered to and
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accepted by the Participant and stating that the Performance Shares or
Performance Units are subject to all of the terms and conditions of this
Plan and such other terms and provisions, consistent with this Plan, as the
Committee may approve.
SECTION 9. AWARDS TO NON-EMPLOYEE DIRECTORS.
The Committee may, from time to time and upon such terms and conditions as
it may determine, authorize the granting to Non-Employee Directors of Option
Rights and may also authorize the grant or sale of Restricted Shares to
Non-Employee Directors.
(a) Each grant of Option Rights awarded pursuant to this Section 9
will be upon terms and conditions consistent with Section 4 of this Plan
and will be evidenced by an agreement in such form as will be approved by
the Committee. Each grant will specify an Option Price per share, which
will not be less than the Market Value per Share on the Date of Grant. Each
such Option Right granted under the Plan will expire not more than ten
years from the Date of Grant and will be subject to earlier termination as
hereinafter provided. Unless otherwise determined by the Committee, such
Option Rights will be subject to the following additional terms and
conditions:
(i) Each grant will specify the number of Common Shares to which it
pertains subject to the limitations set forth in Section 3 of this Plan.
In addition to such other grants as may be made by the Committee from
time to time, each year on the Monday following the Company's annual
meeting of shareholders, each individual elected, re-elected or
continuing as a Non-Employee Director will automatically be granted an
Option Right to purchase 4,000 Common Shares.
(ii) Each such Option Right will become fully exercisable one year
after the Date of Grant, unless otherwise specified by the Committee on
the Date of Grant. Such Option Rights will become exercisable in full
immediately in the event of a Change in Control.
(iii) In the event of the termination of service on the Board by
the holder of any such Option Rights, other than by reason of
retirement, disability or death, the then outstanding Option Rights of
such holder may be exercised to the extent that they would be
exercisable on the date of such termination and will expire 90 days
after such termination, or on their stated expiration date, whichever
occurs first.
(iv) In the event of termination of service on the Board by the
holder of any such Option Rights by reason of retirement after a
Non-Employee Director has completed a specified period of service and
attained a specified age, each of the then outstanding Option Rights of
such holder (whether or not previously exercisable) may be exercised at
any time within 36 months after the date of such retirement, or on their
stated expiration date, whichever occurs first.
(v) In the event of the death or disability of the holder of any
such Option Rights, each of the then outstanding Option Rights of such
holder (whether or not previously exercisable) may be exercised at any
time within one year after such death or disability, but in no event
after the expiration date of the term of such Option Rights.
(vi) If a Non-Employee Director subsequently becomes an employee of
the Company or a Subsidiary while remaining a member of the Board, any
Option Rights held under the Plan by such individual at the time of such
commencement of employment will not be affected thereby.
B-9
(vii) Option Rights may be exercised by a Non-Employee Director
only upon payment to the Company in full of the Option Price of the
Common Shares to be delivered. Such payment will be made in cash or in
Common Shares then owned by the optionee for at least six months, or in
a combination of cash and such Common Shares.
(b) Each grant or sale of Restricted Shares pursuant to this Section 9
will be upon terms and conditions consistent with Section 6 of this Plan.
SECTION 10. MANAGEMENT OBJECTIVES.
(a) Management Objectives may be described in terms of Company-wide
objectives or objectives that are related to the performance of the
individual Participant or the Subsidiary, division, department or function
within the Company or Subsidiary in which the Participant is employed. The
Management Objectives applicable to any award to a Covered Employee will be
based on specified levels of or growth in one or more of the following
criteria:
(i) cash flow/net assets ratio;
(ii) debt/capital ratio;
(iii) return on total capital;
(iv) return on equity;
(v) earnings per share growth;
(vi) revenue growth;
(vii) total return to shareholders; and
(viii) financial performance of the Company expressed in terms of
EBITDA (earnings before interest, taxes, depreciation and amortization).
(b) If the Committee determines that a change in the business,
operations, corporate structure or capital structure of the Company, or the
manner in which it conducts its business, or other events or circumstances
render the Management Objectives unsuitable, the Committee may in its
discretion modify such Management Objectives or the related minimum
acceptable level of achievement, in whole or in part, as the Committee
deems appropriate and equitable, except in the case of a Covered Employee
where such action would result in the loss of the otherwise available
exemption of the award under Section 162(m) of the Code. In such case, the
Committee shall not make any modification of the Management Objectives or
minimum acceptable level of achievement.
SECTION 11. TRANSFERABILITY.
(a) Except as otherwise determined by the Committee, no Option Right,
Appreciation Right or other award granted under this Plan may be
transferred by a Participant other than by will or the laws of descent and
distribution. Except as otherwise determined by the Committee, Option
Rights and Appreciation Rights may be exercised during a Participant's
lifetime only by the Participant or, in the event of the Participant's
legal incapacity, by the Participant's guardian or legal representative
acting in a fiduciary capacity on behalf of the Participant under state law
and court supervision.
(b) Any grant or award made under this Plan may provide that all or
any part of the Common Shares that are (i) to be issued or transferred by
the Company upon the exercise of Option Rights or Appreciation Rights, upon
the termination of the Deferral Period applicable to Deferred Shares, or
upon payment under a grant of Performance Shares or Performance Units, or
(ii) no longer subject
B-10
to the substantial risk of forfeiture and restrictions on transfer referred
to in Section 6 of this Plan, will be subject to further restrictions upon
transfer.
(c) Notwithstanding the provisions of Section 11(a), if so determined
by the Committee in its discretion on or after the Date of Grant, Option
Rights, Appreciation Rights, Restricted Shares, Deferred Shares,
Performance Shares and Performance Units will be transferable by a
Participant, without payment of consideration therefor by the transferee,
to any one or more members of the Participant's Immediate Family (or to one
or more trusts established solely for the benefit of one or more members of
the Participant's Immediate Family or to one or more partnerships in which
the only partners are members of the Participant's Immediate Family),
except that (i) no such transfer will be effective unless reasonable prior
notice of such transfer is delivered to the Company and such transfer is
thereafter effected in accordance with any terms and conditions that have
been made applicable to such transfer by the Company or the Committee and
(ii) any such transferee will be subject to the same terms and conditions
under this Plan as the Participant.
SECTION 12. ADJUSTMENTS.
The Committee may make or provide for such adjustments in the (a) number of
Common Shares covered by outstanding Option Rights, Appreciation Rights,
Deferred Shares and Performance Shares granted under this Plan, (b) Option Price
or Base Price provided in any outstanding Option Right or Appreciation Right,
and (c) kind of shares covered by such awards, as the Committee in its sole
discretion may in good faith determine to be equitably required in order to
prevent dilution or enlargement of the rights of Participants that otherwise
would result from (i) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company, (ii)
any merger, consolidation, spin-off, spin-out, split-off, split-up,
reorganization, partial or complete liquidation of the Company or other
distribution of assets, issuance of rights or warrants to purchase securities of
the Company, or (iii) any other corporate transaction or event having an effect
similar to any of the foregoing. In the event of any such transaction or event,
the Committee, in its discretion, may provide in substitution for any or all
outstanding awards under this Plan such alternative consideration as it may in
good faith determine to be equitable under the circumstances and may require in
connection therewith the surrender of all awards so replaced. Moreover, the
Committee may on or after the Date of Grant provide in the agreement evidencing
any award under this Plan that the holder of the award may elect to receive an
equivalent award in respect of securities of the surviving entity of any merger,
consolidation or other transaction or event having a similar effect, or the
Committee may provide that the holder will automatically be entitled to receive
such an equivalent award. The Committee may also make or provide for such
adjustments in the number of shares specified in Section 3 of this Plan as the
Committee in its sole discretion may in good faith determine to be appropriate
in order to reflect any transaction or event described in this Section 12 except
that any such adjustment to the number specified in Section 3(b)(i) may be made
only if and to the extent that such adjustment would not cause any Option Right
intended to qualify as an Incentive Stock Option to fail so to qualify. This
Section 12 may not be construed to permit the re-pricing of any Option Right in
the absence of any of the circumstances described above in contravention of
Section 19(b) of this Plan.
SECTION 13. FRACTIONAL SHARES.
The Company will not be required to issue any fractional Common Shares
pursuant to this Plan. The Committee may provide for the elimination of
fractions or for the settlement of fractions in cash.
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SECTION 14. CHANGE IN CONTROL.
For purposes of this Plan, a "Change in Control" shall be deemed to have
occurred if any of the following events shall occur:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
15% or more of either: (i) the then-outstanding shares of common stock of
the Company (the "Company Common Stock") or (ii) the combined voting power
of the then-outstanding voting securities of the Company entitled to vote
generally in the election of directors ("Voting Stock"); provided, however,
that for purposes of this subsection (a), the following acquisitions shall
not constitute a Change of Control: (1) any acquisition directly from the
Company, (2) any acquisition by the Company, (3) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any Subsidiary of the Company, or (4) any acquisition by any
Person pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of subsection (c) of this Section 14; or
(b) Individuals who, as of the date hereof, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason
(other than death or disability) to constitute at least a majority of the
Board of Directors of the Company; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by a
vote of at least a majority of the directors then comprising the Incumbent
Board (either by a specific vote or by approval of the proxy statement of
the Company in which such person is named as a nominee for director,
without objection to such nomination) shall be considered as though such
individual were a member of the Incumbent Board, but excluding for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest (within the meaning of
Rule 14a-11 of the Exchange Act) with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board of Directors of the
Company; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Company
Common Stock and Voting Stock immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then-outstanding shares of common stock and the combined
voting power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the entity
resulting from such Business Combination (including, without limitation, an
entity which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or
more subsidiaries) in substantially the same proportions relative to each
other as their ownership, immediately prior to such Business Combination,
of the Company Common Stock and Voting Stock of the Company, as the case
may be, (ii) no Person (excluding any entity resulting from such Business
Combination or any employee benefit plan (or related trust) sponsored or
maintained by the Company or such entity resulting from such Business
Combination) beneficially owns, directly or indirectly, 15% or more of,
respectively, the then-outstanding shares of common stock of the entity
resulting from such Business Combination, or
B-12
the combined voting power of the then-outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the
Board of Directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board of
Directors of the Company, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
SECTION 15. WITHHOLDING TAXES.
To the extent that the Company is required to withhold federal, state,
local or foreign taxes in connection with any payment made or benefit realized
by a Participant or other person under this Plan, and the amounts available to
the Company for such withholding are insufficient, it will be a condition to the
receipt of such payment or the realization of such benefit that the Participant
or such other person make arrangements satisfactory to the Company for payment
of the balance of such taxes required to be withheld. At the discretion of the
Committee, such arrangements may include relinquishment of a portion of such
benefit. The Company and any Participant or such other person may also make
similar arrangements with respect to the payment of any taxes with respect to
which withholding is not required.
SECTION 16. CERTAIN TERMINATIONS OF EMPLOYMENT, HARDSHIP AND APPROVED LEAVES OF
ABSENCE.
Notwithstanding any other provision of this Plan to the contrary, in the
event of termination of employment by reason of death, disability, normal
retirement, early retirement with the consent of the Company, leave of absence
to enter public service with the consent of the Company or other leave of
absence approved by the Company, or in the event of hardship or other special
circumstances, of a Participant who holds an Option Right or Appreciation Right
that is not immediately and fully exercisable, any Restricted Shares as to which
the substantial risk of forfeiture or the prohibition or restriction on transfer
has not lapsed, any Deferred Shares as to which the Deferral Period is not
complete, any Performance Shares or Performance Units that have not been fully
earned, or any Common Shares that are subject to any transfer restriction
pursuant to Section 11(b) of this Plan, the Committee may, in its sole
discretion, take any action that it deems to be equitable under the
circumstances or in the best interests of the Company, including without
limitation waiving or modifying any limitation or requirement with respect to
any award under this Plan.
SECTION 17. FOREIGN EMPLOYEES.
In order to facilitate the making of any grant or combination of grants
under this Plan, the Committee may provide for such special terms for awards to
Participants who are foreign nationals, or who are employed by the Company or
any Subsidiary outside of the United States of America, as the Committee may
consider necessary or appropriate to accommodate differences in local law, tax
policy or custom. Moreover, the Committee may approve such supplements to, or
amendments, restatements or alternative versions of, this Plan as it may
consider necessary or appropriate for such purposes without thereby affecting
the terms of this Plan as in effect for any other purpose, and the Secretary or
other appropriate officer of the Company may certify any such document as having
been approved and adopted in the same manner as this Plan. No such special
terms, supplements, amendments, restatements or
B-13
alternative versions may include any provisions that are inconsistent with the
terms of this Plan, as then in effect, unless this Plan could have been amended
to eliminate such inconsistency without further approval by the shareholders of
the Company.
SECTION 18. ADMINISTRATION OF THE PLAN.
(a) This Plan will be administered by a committee of the Board (or a
subcommittee thereof) composed of not less than three members of the Board,
each of whom shall (i) meet all applicable independence requirements of the
New York Stock Exchange, or if the Common Shares are not traded on the New
York Stock Exchange, the principal national securities exchange on which
the Common Stock is traded, (ii) be a "non-employee director" within the
meaning of Rule 16b-3 and (iii) be an "outside director" within the meaning
of Section 162(m) of the Code. A majority of the Committee will constitute
a quorum, and the acts of the members of the Committee who are present at
any meeting of the Committee at which a quorum is present, or acts
unanimously approved by the members of the Committee in writing, will be
the acts of the Committee.
(b) The interpretation and construction by the Committee of any
provision of this Plan or of any agreement, notification or document
evidencing the grant of Option Rights, Appreciation Rights, Restricted
Shares, Deferred Shares, Performance Shares or Performance Units and any
determination by the Committee pursuant to any provision of this Plan or of
any such agreement, notification or document will be final and conclusive.
No member of the Committee will be liable for any such action taken or
determination made in good faith.
SECTION 19. AMENDMENTS AND OTHER MATTERS.
(a) This Plan may be amended from time to time by the Committee except
that any amendment that must be approved by the shareholders of the Company
in order to comply with applicable law or the rules of any national
securities exchange upon which the Common Shares are traded or quoted will
not be effective unless and until such approval has been obtained in
compliance with such applicable law or rules. Presentation of this Plan or
any amendment of this Plan for shareholder approval will not be construed
to limit the Company's authority to offer similar or dissimilar benefits
under other plans without shareholder approval.
(b) The Committee shall not, without the further approval of the
shareholders of the Company, authorize the amendment of any outstanding
Option Right to reduce the Option Price. Furthermore, no Option Right may
be cancelled and replaced with awards having a lower Option Price without
further approval of the shareholders of the Company. This Section 19(b) is
intended to prohibit the re-pricing of "underwater" Option Rights and shall
not be construed to prohibit the adjustments provided for in Section 12 of
this Plan.
(c) The Committee may require Participants, or may permit Participants
to elect, to defer the issuance of Common Shares or the settlement of
awards in cash under the Plan pursuant to such rules, procedures or
programs as it may establish for purposes of this Plan. The Committee may
also provide that deferred issuances and settlements include the payment or
crediting of interest on the deferred amounts, or the payment or crediting
of dividend equivalents where the deferred amounts are denominated in
Common Shares.
(d) This Plan will not confer upon any Participant any right with
respect to continuance of employment or other service with the Company or
any Subsidiary and will not interfere in any way
B-14
with any right that the Company or any Subsidiary would otherwise have to
terminate any Participant's employment or other service at any time.
(e) To the extent that any provision of this Plan would prevent any
Option Right that was intended to qualify under particular provisions of
the Code from so qualifying, such provision of this Plan will be null and
void with respect to such Option Right except that such provision will
remain in effect with respect to other Option Rights, and there will be no
further effect on any provision of this Plan.
(f) The Committee may condition the grant of any award or combination
of awards authorized under this Plan on the surrender or deferral by the
Participant of his or her right to receive a cash bonus or other
compensation otherwise payable by the Company or a Subsidiary to the
Participant.
SECTION 20. TERMINATION.
No grant may be made under this Plan more than 10 years after the date on
which this Plan is first approved by the shareholders of the Company, but all
grants made on or prior to such date will continue in effect after that date
subject to the terms of those grants and of this Plan.
SECTION 21. GOVERNING LAW.
This Plan shall be construed and enforced in accordance with and governed
by the laws of the State of Ohio.
B-15
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VOTE BY TELEPHONE
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Have your proxy card available when you call
the TOLL-FREE NUMBER 1-800-542-1160 using
a touch-tone telephone. You will be
prompted to enter your Control Number.
Please follow the simple prompts that will be
presented to you to record your vote.
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VOTE BY INTERNET
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Have your proxy card available when you
access the Web site HTTP://WWW.VOTEFAST.COM.
You will be prompted to enter your Control
Number. Please follow the simple prompts
that will be presented to you to record your
vote.
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VOTE BY MAIL
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Please mark, sign and date your proxy card
and return it in the POSTAGE-PAID ENVELOPE
provided or return it to: Stock Transfer Dept.
(LS) National City Bank, P.O. Box 92301,
Cleveland, OH 44193-0900.
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VOTE BY TELEPHONE VOTE BY INTERNET VOTE BY MAIL
Call TOLL-FREE using a Access the WEB SITE and Return your proxy
Touch-Tone phone: Cast your vote: in the POSTAGE-PAID
1-800-542-1160 HTTP://WWW.VOTEFAST.COM envelope provided
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VOTE 24 HOURS A DAY, 7 DAYS A WEEK!
YOUR TELEPHONE OR INTERNET VOTE MUST BE RECEIVED BY 11:59 P.M. EASTERN TIME
ON APRIL 29, 2004 TO BE COUNTED IN THE FINAL TABULATION.
IF YOU VOTE BY TELEPHONE OR INTERNET, PLEASE DO NOT SEND YOUR PROXY BY MAIL.
====================================================
YOUR CONTROL NUMBER IS:
====================================================
PROXY MUST BE SIGNED AND DATED BELOW.
- PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING. -
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[LAMSONS & SESSIONS LOGO]
25701 Science Park Drive
Cleveland, Ohio 44122
The undersigned hereby appoints James J. Abel and Lori L. Spencer, and each of them, as proxies, each with the
power to appoint a substitute. The undersigned hereby authorizes the proxies to represent and to vote, as
designated on the reverse side, all the Common Shares of The Lamson & Sessions Co. held of record by the
undersigned on March 4, 2004, at the Annual Meeting of Shareholders to be held on April 30, 2004 or any
adjournment(s) thereof. THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS.
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Signature(s)
--------------------------------------------------------
Signature(s)
Date: , 2004
---------------------------------------------
Please sign exactly as name appears. When signing as
attorney, executor, administrator, trustee, guardian,
etc., give full title as such. If a corporation,
please sign in corporate name by authorized officer
and give title. If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE
- PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING. -
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LAMSON & SESSIONS PROXY
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES FOR THE ELECTION OF DIRECTORS, WITH DISCRETION TO VOTE UPON SUCH OTHER MATTERS AS
MAY BE BROUGHT BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT(S) OR POSTPONEMENT(S) THEREOF.
1. ELECTION OF CLASS I DIRECTORS
Nominees:
(01) James T. Bartlett (02) Francis H. Beam, Jr. (03) Martin J. Cleary (04) D. Van Skilling
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY
(except as listed to the contrary below) for all nominees listed above
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE LISTED ABOVE, WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW:
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2. APPROVE THE LAMSON & SESSIONS CO. 1998 INCENTIVE EQUITY PLAN (AS AMENDED AND RESTATED AS OF APRIL 30, 2004).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
[ ] PLEASE CHECK THIS BOX IF YOU PLAN TO ATTEND THE ANNUAL MEETING OF SHAREHOLDERS.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)