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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Check the appropriate box: |
o Preliminary Proxy Statement | |
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
x Definitive Proxy Statement | |
o Definitive Additional Materials | |
o Soliciting Material Pursuant to §240.14a-12 |
(Name of Registrant as Specified In Its Charter)
Lennox International Inc.
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Sincerely, | |
John W. Norris, Jr. | |
Chairman of the Board |
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• | Elect five Directors to hold office for a three-year term to expire at the 2008 Annual Meeting of Stockholders; | |
• | Consider and vote upon a proposal for approval of the LII Amended and Restated 1998 Incentive Plan; and | |
• | Transact any other business that may properly come before the Annual Meeting of Stockholders. |
By Order of the Board of Directors, | |
William F. Stoll, Jr. | |
Corporate Secretary |
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Thomas W. Booth, 47, has served as a Director of the Company since 1999. Mr. Booth became Vice President of Corporate Technology for the Company in 2002. In 2000, he was appointed Vice President, Advanced Heat Transfer of Heatcraft Inc., a subsidiary of the Company. Previously, he was the Director, Business Development of Heatcraft Inc. from 1997 to 1999. Mr. Booth joined the Company in 1984 and has served in various capacities including the District Manager for the Baltimore/Virginia sales branch of Lennox Industries Inc. from 1994 to 1997. He currently serves on the Board of Directors of Employers Mutual Casualty Company, a casualty insurance company. |
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James J. Byrne, 69, has served as a Director of the Company since 1990. He has been Chairman of Byrne Technology Partners, Ltd., a firm that provides interim management at the CEO and senior executive level for high technology companies, since 1995. Mr. Byrne also serves as a Director of Healthaxis Inc., a claims processing outsourcing company for the health care benefits industry, and is a Fellow and Director of the Legacy Center for Public Policy. In addition, Mr. Byrne will assist his clients by assuming executive responsibility with their investments and in that regard served as Chairman and Chief Executive Officer of OpenConnect Systems Incorporated, a developer of computer software products, from 1999 to 2001. Prior to his current role, he held a number of positions in the technology industry including President of Harris Adacom Corporation, a network products and services company, Senior Vice President of United Technologies Corporation’s Semiconductor Operation and President of the North American group of Mohawk Data Sciences, a manufacturer of distributed computer products. Mr. Byrne began his career in high technology with General Electric Company. | ||
John W. Norris III, 47, has served as a Director since 2001. Mr. Norris is the Associate Director of Philanthropy for the Maine Chapter of The Nature Conservancy. Prior to his current position, he was Co-Founder and President of Borealis, Inc., an outdoor products manufacturer, from 1988 to 2000. He served as an economic development Peace Corps Volunteer in Jamaica, West Indies from 1985 to 1987. Before joining the Peace Corps, Norris completed a graduate school internship at Lennox Industries Inc. in Dallas in 1983. He has been on the Board of Trustees for GlobalQuest, an international experiential educational organization, since 1999. Mr. Norris served on the Board of Advisors for Businesses for the Northern Forest, a 350-member advocacy group working to protect wildlands, improve forest stewardship, and foster sustainable economic development, from 1997 through 2001. | ||
John W. Norris, Jr., 69, was elected Chairman of the Board of Directors of the Company in 1991. He has served as a Director of the Company since 1966. After joining the Company in 1960, Mr. Norris held a variety of key positions including Vice President of Marketing, President of Lennox Industries (Canada) Ltd., a subsidiary of the Company, and Corporate Senior Vice President. He became President of the Company in 1977 and was appointed President and Chief Executive Officer of the Company in 1980 and served through 2001. Mr. Norris is on the Board of Directors of the Air-Conditioning & Refrigeration Institute, of which he was Chairman in 1986. He is also an active board member of the Gas Appliance Manufacturers Association, where he was Chairman from 1980 to 1981. He is a past Chairman of The Nature Conservancy of Texas board of trustees and also serves as a Director of AmerUs Group Co., a life insurance and annuity company. |
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Paul W. Schmidt, 60, began serving as a Director of the Company in 2005. Mr. Schmidt is currently Corporate Controller of General Motors Corporation (“GM”). He began his career in 1969 as an analyst with the Chevrolet Motor Division of GM. He has since served in a wide variety of senior leadership roles for GM, including financial, product, and factory management, business planning, investor relations, and international operations. Mr. Schmidt also served as director of capital, performance, and overseas analysis in GM’s New York Treasurer’s Office. |
Linda G. Alvarado, 53, has served as a Director of the Company since 1987. She is President and Chief Executive Officer of Alvarado Construction, Inc., a general contracting firm specializing in commercial, government and industrial construction and commercial development firm. She currently serves on the Boards of Directors of Qwest Communications International Inc, a telecommunications company; Pepsi Bottling Group, a soft drink and beverage company; 3M Company, a diversified technology company; and Pitney Bowes Inc., an office equipment and services company. Ms. Alvarado is also a partner in the Colorado Rockies Baseball Club. | ||
Steven R. Booth, 45, has served as a Director of the Company since 2002. He became the President and CEO of Polytech Molding Inc., a plastic injection molding company serving the industrial, health care and automotive markets, in 2001. From 1994 to 2001, Mr. Booth was employed by Process Science Inc., a designer and manufacturer of equipment and products using hydrostatic extrusion technology. | ||
David V. Brown, 57, has served as a Director of the Company since 1989. Dr. Brown owns the Plantation Farm Camp, Inc., a working 500-acre ranch with livestock that provides learning in a farm setting for children. He is currently serving on the Strategic Planning Board of the Western Association of Independent Camps, an educational organization for training camp directors and owners. |
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John E. Major, 59, has served as a Director of the Company since 1993. In 2003, Mr. Major formed MTSG, which provides consulting, management and governance services and of which he serves as President. In 2003, he stepped down as Chairman and Chief Executive Officer of Novatel Wireless, Inc., a leading provider of wireless Internet solutions, having served since 2000. Prior to joining Novatel, he was Chairman, Chief Executive Officer and President of Wireless Knowledge. Prior to that, he was Executive Vice President of QUALCOMM and President of its Wireless Infrastructure Division. Prior to joining QUALCOMM in 1997, Mr. Major served as Senior Vice President and Chief Technical Officer at Motorola, Inc., a manufacturer of telecommunications equipment, and Senior Vice President and General Manager for Motorola’s Worldwide Systems Group of the Land Mobile Products Sector. Mr. Major currently serves on the Boards of Directors of Littelfuse, Inc., a manufacturer of fuses; Verilink Corporation, a manufacturer of network access devices; and Broadcom Corporation, a semiconductor manufacturing company. | ||
Walden W. O’Dell, 59, has served as Director of the Company since 2003. Mr. O’Dell serves as Chairman of the Board, Chief Executive Officer and immediate past President of Diebold, Incorporated, the leading global provider of integrated financial self-service delivery systems and services. Prior to joining Diebold, Mr. O’Dell held a series of high-level positions with Emerson, including President of Emerson’s Ridge Tool Division while also serving as Group Vice President of the tool group of Emerson. He has also served as President of the Liebert Corporation, a subsidiary of Emerson. Mr. O’Dell serves on the Boards of Directors of the Columbus Association of Performing Arts and the United Way of Greater Stark County, and he is a member of the Board of Trustees of the Ohio Foundation of Independent Colleges. He is also a member of The Ohio State University Advocates, the Board of Trustees and is a lifetime associate alumni of The Ohio State University. |
Janet K. Cooper, 51, has served as a Director of the Company since 1999. In 2002, Ms. Cooper was named Senior Vice President and Treasurer of Qwest Communications International Inc. Previously, she was Chief Financial Officer and Senior Vice President of McDATA Corporation, a global leader in open storage networking solutions. From 2000 to 2001, she served as Senior Vice President, Finance of Qwest. From 1998 to 2000, she served in various senior level finance positions at US West Inc., a regional Bell operating company, including Vice President, Finance and Controller and Vice President and Treasurer. From 1978 to 1998, Cooper served in various capacities with the Quaker Oats Company, including Vice President, Treasurer and Tax from 1997 to 1998 and Vice President, Treasurer from 1992 to 1997. Ms. Cooper serves on the Board of Directors and chairs the Audit Committee of The TORO Company, a manufacturer of equipment for lawn and turf care maintenance. |
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C. L. (Jerry) Henry, 63, was appointed to serve as a Director of the Company in 2000. Mr. Henry was formerly Chairman and CEO of Johns Manville Corporation, a leading manufacturer of insulation and building products. Prior to his position with Johns Manville, he had served as Executive Vice President and Chief Financial Officer for E. I. du Pont de Nemours and Company, a global science and technology company. Mr. Henry serves as a Director for Georgia Gulf Corp., a leading manufacturer and worldwide marketer of several integrated lines of commodity chemicals and polymers. | ||
Robert E. Schjerven,62, was named Chief Executive Officer of the Company in 2001 and has served as a Director since that time. Prior to his election as Chief Executive Officer of the Company, he served as Chief Operating Officer of the Company in 2000 and as President and Chief Operating Officer of Lennox Industries Inc., a subsidiary of the Company, from 1995 to 2000. He joined the Company in 1986 as Vice President of Marketing and Engineering for Heatcraft Inc., a subsidiary of the Company. From 1988 to 1991, he held the position of Vice President and General Manager of Heatcraft. From 1991 to 1995, he served as President and Chief Operating Officer of Armstrong Air Conditioning Inc., also a subsidiary of the Company. Mr. Schjerven spent the first 20 years of his career with The Trane Company, an international manufacturer and marketer of HVAC systems, and McQuay-Perfex Inc. | ||
Terry D. Stinson, 63, has served as a Director of the Company since 1998. Mr. Stinson currently serves as Chief Executive Officer of his own consulting practice engaged in strategic alliances and marketing for the aerospace industry, and as Chief Executive Officer of Xelus, Inc., a collaborative enterprise service management solution company. Until the fall of 2001, Mr. Stinson was Chairman and Chief Executive Officer of Bell Helicopter Textron Inc., the world’s leading manufacturer of vertical lift aircraft and was its President from 1996 to 1998. From 1991 to 1996, Mr. Stinson served as Group Vice President and Segment President of Textron Aerospace Systems and Components for Textron Inc. Prior to that position, he had been the President of Hamilton Standard Division of United Technologies Corporation, a defense supply company, since 1986. Mr. Stinson currently serves on the Board of Directors of Triumph Group, Inc., a global leader in supplying and overhauling aerospace and industrial gas turbine systems and components. |
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Richard L. Thompson,65, has served as a Director of the Company since 1993 and was appointed Vice-Chairman of the Board in 2005. Mr. Thompson was formerly Group President and member of the Executive Office of Caterpillar Inc., a manufacturer of construction and mining equipment, a position he held since 1995. He joined Caterpillar in 1983 as Vice President, Customer Services. In 1989, he was appointed President of Solar Turbines Inc., a wholly-owned subsidiary of Caterpillar and manufacturer of gas turbines. From 1990 to 1995, he held the role of Vice President of Caterpillar, with responsibility for its worldwide engine business. Previously, he had held the positions of Vice President of Marketing and Vice President and General Manager, Components Operations with RTE Corporation, a manufacturer of electrical distribution products. Mr. Thompson serves as a Director for Gardner Denver, Inc., a manufacturer of air compressors, blowers and petroleum pumps and for NiSource Inc., a natural gas and electric utility. In addition, he is a former Director of the National Association of Manufacturers, the nation’s largest industrial trade association; and Proctor Community Hospital in Peoria, Illinois. |
(i) provide for annual management incentive awards, which are payable in cash (previously such incentive awards were made under the Company’s short term incentive plans); |
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(ii) provide that stock options, stock appreciation rights, stock awards and cash awards (collectively “Awards”) may be granted in the form of performance awards, which may or may not qualify as “qualified performance-based compensation” under section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”); | |
(iii) allow nonemployee Directors and independent contractors to receive stock options, stock appreciation rights, stock awards, restricted stock and stock units, cash awards and performance awards under the Plan (currently such Directors may be awarded only stock options); and | |
(iv) allow Awards to participants outside the United States, subject to applicable laws and terms and conditions to be determined by the Compensation Committee. |
General |
Shares Subject to Plan |
Administration and Eligibility |
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Awards |
Stock Options. Stock options are rights to purchase a specified number of shares of common stock at a specified price. An option granted pursuant to the Plan may consist of either an incentive stock option that complies with the requirements of section 422 of the Code, or a non-qualified stock option that does not comply with such requirements. Only employees may receive incentive stock options and such options must have an exercise price per share that is not less than the fair market value of the common stock underlying the option on the date of grant. Non-qualified stock options will have an exercise price per share that is not less than the fair market value of the common stock underlying the option on the date of grant. | |
The exercise price of an option must be paid in full at the time an option is exercised. The exercise price must be paid either in cash, shares of LII common stock, by the surrender of another Award or a combination thereof. Options issued under the Plan may not be repriced, replaced or regranted through cancellation or by decreasing the exercise price of a previously granted option without the prior approval of the Stockholders. Additionally, options may not include provisions that “reload” the option upon exercise. | |
Stock Appreciation Rights. Stock appreciation rights are rights to receive a payment in cash or LII common stock, equal to the excess of the fair market value or other specified valuation of a specified number of shares of LII common stock on the date the rights are exercised over a specified strike price. The terms, conditions and limitations applicable to any stock appreciation right will be determined by the Compensation Committee. | |
Stock Awards. Stock awards consist of either restricted common stock, non-restricted common stock or units denominated in shares of common stock (which may or may not be subject to restriction). The Compensation Committee will determine the terms, conditions and limitations applicable to any stock awards; provided, however, that restricted stock awards will have a vesting period of at least one year. Rights to dividends or dividend equivalents may be extended to and made part of any stock award at the discretion of the Compensation Committee. | |
Cash Awards. Cash awards consist of grants denominated in cash. The Compensation Committee will determine the terms, conditions and limitations applicable to any cash awards. |
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Performance Awards. Performance awards are subject to the attainment of one or more performance goals (which are described below). Some performance awards are intended to qualify as “qualified performance-based compensation” under section 162(m) of the Code. Section 162(m) of the Code limits the Company’s ability to take an income tax deduction for compensation in excess of $1 million that is paid during any fiscal year to an individual who is either the Company’s Chief Executive Officer or one of the four other highest-paid executive officers at the end of such fiscal year. However, the deduction limit of section 162(m) of the Code does not apply to “qualified performance-based compensation.” | |
To qualify as “qualified performance-based compensation” under section 162(m) of the Code, a performance award will be paid or vest solely upon the attainment of one or more pre-established, objective performance goals established by the Compensation Committee prior to the earlier of: (a) 90 days after the commencement of the period of service to which the performance goals relate or (b) the lapse of 25% of the period of service, and in any event while the outcome is substantially uncertain. A performance goal may be based upon one or more business criteria that apply to the participant, one or more business units, divisions or segments of the Company, applicable sectors, or the Company as a whole and, at the discretion of the Compensation Committee, by comparison with a peer group of companies. The business criteria that may be applied include one or more of the following: cash flow; ratio of debt to debt plus equity; earnings before taxes; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings per share; operating earnings; economic value added; ratio of operating earnings to capital spending; free cash flow; net profit; net sales; sales growth; working capital ratio; stock price; return on net assets, equity or Stockholders’ equity; or total return to Stockholders. The Compensation Committee will determine the terms, conditions and limitations applicable to any performance awards; provided, however, that a stock award granted to an employee as a performance award will generally have a vesting period of at least one year. | |
Annual Management Incentive Awards. The Compensation Committee may designate participants who are eligible to receive annual management incentive awards each year based upon performance goals established by the Compensation Committee for the Company. Within the first 90 days of each fiscal year, the Compensation Committee shall establish: (i) performance goals for the Company for such fiscal year and (ii) target awards that correspond to the performance goals. The Compensation Committee shall determine after the end of each fiscal year whether the performance goals for such fiscal year have been achieved and, if so, the Award payable to each eligible participant. Such Awards will be payable in cash as promptly as practicable thereafter. | |
Director Awards. In its sole and absolute discretion, the Compensation Committee may grant non-qualified stock options, stock appreciation rights, stock awards, restricted stock and stock units, cash awards and performance awards to nonemployee Directors. The terms of an option or stock appreciation right granted to a nonemployee Director shall be determined by the Compensation Committee, subject to the following restrictions: the exercise price of an option and the strike price of a stock appreciation right shall not be less than the fair market value of the common stock subject to the option or stock appreciation right on the grant date, (ii) the term of the option or stock appreciation right shall not exceed 10 years measured from the date of grant, and (iii) options and stock appreciation rights may not be “reloaded” upon exercise. |
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Other Provisions |
Restricted Stock |
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Restricted Stock Units |
Non-Restricted Stock |
Stock Options |
Stock Appreciation Rights |
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Cash Awards and Performance Awards Payable in Cash |
Number of Securities | Weighted-average | Number of Securities | |||||||||||
Plan Category | to be Issued(a) | Exercise Price(b) | Remaining(c) | ||||||||||
Equity compensation plans approved by security holders | 11,622,614 | (1) | $ | 14.07 | (2) | 2,702,937 | (3) | ||||||
Equity compensation plans not approved by security holders | — | — | — | ||||||||||
Total | 11,622,614 | $ | 14.07 | 2,702,937 | |||||||||
(a) | Number of securities to be issued upon exercise of outstanding options, warrants and rights. |
(b) | Weighted-average exercise price of outstanding options, warrants and rights. |
(c) | Number of securities remaining available for future issuance under equity compensation plans, excluding securities reflected in column (a). |
(1) | Includes the following: |
• | 8,257,642 shares of common stock to be issued upon exercise of outstanding stock options granted under the 1998 Plan and the Non-employee Directors’ Compensation and Deferral Plan; | |
• | Stock appreciation rights based on 1,087,108 shares of common stock granted under the 1998 Plan. Upon exercise, the stock appreciation rights will be settled in cash; and | |
• | 2,280,864 shares of common stock to be issued upon the vesting of restricted stock units outstanding under the 1998 Plan. |
Excludes 247,224 shares of common stock to be issued upon exercise of outstanding options originally granted under the five equity compensation plans adopted by SEI. The options have a |
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weighted average exercise price of $29.14. The options were assumed by the Company in connection with the acquisition of SEI in 2000. No additional options will be granted under such plans. |
(2) | Upon vesting, restricted stock units are settled for shares of common stock on a one-for-one basis. Accordingly, the restricted stock units have been excluded for purposes of computing the weighted-average exercise price. |
(3) | Includes 2,560,770 shares of common stock available for issuance under the 1998 Plan, 367,531 shares of common stock reserved for issuance under the Non-employee Directors’ Compensation and Deferral Plan and 59,502 shares of common stock reserved for issuance under the Employee Stock Purchase Plan. |
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• | Email to directors@lennoxintl.com | |
• | Mail to |
• | Refer substantiated allegations of improper accounting, internal controls or auditing matters affecting the Company to the Audit Committee Chairperson; | |
• | Refer substantiated allegations of other improper conduct affecting the Company to the Chairman of the Board; | |
• | Advise the Board at its regularly scheduled meetings of significant Stockholder communications; and | |
• | Refer questions concerning the Company’s products, services and human resources issues to the appropriate department in the Company for a response. |
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Lennox International Inc. | |
Attention: Investor Relations | |
2140 Lake Park Blvd. | |
Richardson, Texas 75080 | |
(972) 497-5000 |
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C. L. (Jerry) Henry (chair) Paul W. Schmidt | Janet K. Cooper Terry D. Stinson | John E. Major |
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Executive Officers |
Chief Executive Officer |
• | In mid-2003, Mr. Schjerven executed a strategic restructuring of the businesses into three core segments: Worldwide Heating and Cooling, Worldwide Refrigeration, and Service Experts, and significantly improved the leadership structure of the businesses by repositioning three key, skilled and experienced executives to lead the segments. | |
• | Mr. Schjerven continued to successfully focus his executive team on improving the organization’s financial structure, balance sheet and cash flow. | |
• | Mr. Schjerven led his team to generate free cash flow of $115 million and reduced debt over the past three years by $328 million. |
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• | Under Mr. Schjerven’s leadership in 2003, operating income grew 44% to $156 million; income, before the cumulative effect of an accounting change, increased 97% to $84 million, a record for LII; and diluted earnings per share, before the cumulative effect of an accounting change, rose from $0.73 to $1.40. | |
• | Mr. Schjerven’s focus on innovation resulted in approximately one-third of 2003’s revenue in the manufacturing businesses being generated from products launched in the past three years—several with important industry leadership claims. | |
• | A negative development was the discovery of deficiencies in internal controls within Service Experts’ Canadian operations, which resulted in downward adjustments of $7 million to previously reported cumulative earnings for the years 1999-2003. |
Executive Officers |
• | maintain competitive total executive compensation opportunity; | |
• | align all executive reward programs with the success of the Company; | |
• | attract top executive talent to support organizational growth and expansion; | |
• | ensure equity among internal position values; and | |
• | implement “best practices” in the area of executive compensation. |
• | The major business segments within LII each had a broad based variable pay program in which the respective President managing the business segment participated. Each business segment President, in conjunction with the Chief Executive Officer, determined the financial measurements and standards for that business unit’s program. Based on the performance of the business segment, the programs generated cash payouts for the named executive officers ranging from 1.0% to 5.0% of annual base earnings. Each broad based program was aligned with the performance metrics in the management short-term incentive program detailed below. | |
• | Each year, the Chief Executive Officer recommends and the Compensation Committee evaluates and approves the design, performance measurements and targets for the management short-term incentive programs. The performance metrics for the 2004 management short-term incentive program were net income, earnings before interest and taxes, sales growth, cash flow and working capital ratio. Threshold, minimum, target and maximum performance levels were defined, and target bonus award levels were established for each executive officer. Target incentive award opportunity for the named executive officers ranged from 70% to 100% of their base salary. Executive officers who are also Presidents of a business unit had 70% of the target based on their business unit results and 30% based on aggregate LII results. 50% of the target payment could be achieved with the threshold performance and up to 150% of the target payment could be achieved with the maximum performance. Additionally, for performance above the maximum level, each business unit selected one of the above named performance metrics to function as a multiplier of 1.0 to 1.5 of the incentive payment as determined by the other metrics, resulting in a potential payment of up to 225% of the target payment. Final 2004 incentive payouts in this |
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program for the named executive officers ranged between 100.0% and 132.21% of target payments, based on performance and as determined by the Compensation Committee. |
Chief Executive Officer |
• | Under Mr. Schjerven’s leadership in 2004, LII achieved record income of $91 million, before goodwill impairment, from continuing operations, a 5% increase over the prior year. | |
• | Mr. Schjerven led his team to work effectively through several major business challenges: an investigation into deficiencies in internal controls in Service Experts’ Canadian operations; the implementation of Sarbanes-Oxley Section 404 financial controls documentation requirements; managing industry-wide sharp rises in commodity prices; and the impacts of an abnormally cool summer in an industry that is reliant on seasonal weather norms. | |
• | During an otherwise challenging year, Mr. Schjerven effectively functioned as both CEO and CFO while a search was underway for the top financial position. | |
• | Cash flow performance in 2004 was disappointing, although debt was reduced by $52 million. The Compensation Committee, however, noted that over the past 4 years LII has reduced debt by $380 million. Mr. Schjerven has restructured and is implementing process changes to better manage cash flow ongoing. |
Executive Officers |
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Chief Executive Officer |
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Richard L. Thompson (chair) | Linda G. Alvarado | |||
James J. Byrne | John E. Major |
Long-Term Compensation | |||||||||||||||||||||||||||||
Awards | Payouts | ||||||||||||||||||||||||||||
Securities | |||||||||||||||||||||||||||||
Annual Compensation | Restricted | Underlying | |||||||||||||||||||||||||||
Stock | Options/SARs | LTIP | All Other | ||||||||||||||||||||||||||
Named Executive Officer | Year | Salary | Bonus(1) | Awards(2) | Granted | Payouts(3) | Compensation(4) | ||||||||||||||||||||||
Robert E. Schjerven | 2004 | $ | 850,000 | $ | 998,750 | $ | 1,168,252 | 0 | $ | 0 | $ | 221,745 | |||||||||||||||||
Chief Executive Officer | 2003 | 802,500 | 1,156,043 | 873,280 | 123,902 | 205,265 | 232,703 | ||||||||||||||||||||||
2002 | 750,000 | 1,725,000 | 2,094,618 | 440,950 | 104,569 | 148,784 | |||||||||||||||||||||||
Harry J. Ashenhurst, Ph.D. | 2004 | 421,287 | 352,827 | 317,993 | 0 | 0 | 96,316 | ||||||||||||||||||||||
Executive Vice President | 2003 | 399,324 | 470,007 | 240,137 | 34,070 | 108,358 | 85,581 | ||||||||||||||||||||||
and Chief Administrative | 2002 | 368,376 | 557,169 | 1,079,635 | 88,410 | 64,350 | 56,881 | ||||||||||||||||||||||
Officer | |||||||||||||||||||||||||||||
Scott J. Boxer | 2004 | 406,953 | 288,945 | 317,993 | 0 | 0 | 110,815 | ||||||||||||||||||||||
President/COO | 2003 | 381,688 | 567,928 | 634,937 | 34,070 | 88,199 | 126,887 | ||||||||||||||||||||||
Service Experts Inc. | 2002 | 320,256 | 457,934 | 1,079,635 | 88,410 | 48,263 | 54,578 | ||||||||||||||||||||||
Robert J. McDonough | 2004 | 404,258 | 389,041 | 317,993 | 0 | 0 | 766,787 | ||||||||||||||||||||||
President/COO | 2003 | 367,866 | 339,952 | 634,937 | 34,070 | 75,599 | 78,574 | ||||||||||||||||||||||
World Wide | 2002 | 320,004 | 484,470 | 1,079,635 | 88,410 | 36,192 | 46,071 | ||||||||||||||||||||||
Heating & Cooling | |||||||||||||||||||||||||||||
Michael G. Schwartz | 2004 | 364,042 | 331,921 | 317,993 | 0 | 0 | 80,375 | ||||||||||||||||||||||
President/COO | 2003 | 340,062 | 321,421 | 634,937 | 34,070 | 88,199 | 89,821 | ||||||||||||||||||||||
World Wide | 2002 | 304,500 | 437,780 | 1,079,635 | 88,410 | 48,263 | 51,688 | ||||||||||||||||||||||
Refrigeration |
(1) | Includes annual incentive payments for the respective year from annual variable pay plans and other bonuses and an additional bonus for Mr. Boxer in the amount of $118,940, which was earned as LII stock, in conjunction with a special 2004 SEI incentive program as a provision of his 2003 appointment to the role of President/COO SEI. |
(2) | Represents PSP awards and/or restricted stock awards of the following number of shares of LII common stock granted pursuant to the 1998 Plan multiplied by the average of the high and low price of LII common stock on the New York Stock Exchange (the “Fair Market Value”) on the |
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grant date(s). Restricted stock awards in December 2004 at a Fair Market value of $19.365 per share are as follows: Mr. Schjerven 60,328 shares; Dr. Ashenhurst 16,421 shares; Mr. Boxer 16,421 shares; Mr. McDonough 16,421 shares and Mr. Schwartz 16,421 shares. For the December 2004 restricted stock grant, all shares granted will vest and be distributed in December 2007, providing continued employment with LII. Restricted stock awards in December 2003 at a Fair Market Value of $16.76 per share are as follows: Mr. Schjerven 52,105 shares; Dr. Ashenhurst 14,328 shares; Mr. Boxer 14,328 shares; Mr. McDonough 14,328 shares; and Mr. Schwartz 14,328 shares. For the December 2003 restricted stock grant, all shares granted will vest and be distributed in December 2006, providing continued employment with LII. Mr. Boxer, Mr. McDonough and Mr. Schwartz received 30,000 restricted stock awards in July 2003 upon a major management reorganization. PSP awards in December 2002 at a Fair Market Value of $13.375 per share are as follows: Mr. Schjerven 70,800 shares; Dr. Ashenhurst 28,000 shares; Mr. Boxer 28,000 shares; Mr. McDonough 28,000 shares; and Mr. Schwartz 28,000 shares. All December 2002 PSP shares will vest in December 2005 providing performance targets are met. There were no stock awards in 2001 due to an insufficient number of shares remaining in the 1998 Plan; therefore, upon Stockholder approval of additional shares at the 2002 Annual Meeting of Stockholders, the delayed 2001 award was made in May 2002, with the normal grant schedule resuming in December 2002. PSP awards in May 2002 at a Fair Market Value of $16.21 per share are as follows: Mr. Schjerven 70,800 shares; Dr. Ashenhurst 28,000 shares; Mr. Boxer 28,000 shares; Mr. McDonough 28,000 shares; and Mr. Schwartz 28,000 shares. Earned May 2002 PSP shares vested in December 2004 based on performance targets met. For the 2002 and 2001 PSP grants, shares that did not vest in any performance period due to failure to achieve performance targets will vest 10 years from the grant date. A special restricted stock award in July 2002 at a Fair Market Value of $16.21 per share are as follows: Dr. Ashenhurst 15,500 shares; Mr. Boxer 15,500 shares; Mr. McDonough 15,500 shares; and Mr. Schwartz 15,500 shares. For the July 2002 restricted stock grant, all shares granted will vest and be distributed in July 2005, providing continued employment with LII. | |
(3) | There was no PSP payout in 2004 for the 2001-2003 performance period. 2003 amounts represent the value of earned awards in the form of LII common stock for the PSP for the 2000-2002 performance period, paid in April 2003. 2002 amounts represent the value of earned awards in the form of LII common stock for the PSP for the 1999-2001 performance period, paid in 2002. |
(4) | Composed of contributions by LII to its profit sharing retirement plan and profit sharing restoration plan and the dollar value of term life insurance premiums paid by LII. Contributions to the plans were as follows: In 2004: Mr. Schjerven— $204,023; Dr. Ashenhurst— $88,053; Mr. Boxer— $96,749; Mr. McDonough— $76,289; in addition to $676,473 as payment for relocation costs, which include approximately $400,000 for anticipated losses on sale of primary residence, approximately $200,000 to offset anticipated tax effects on sale of primary residence and approximately $75,000 in other miscellaneous relocation expenses; and Mr. Schwartz— $66,640. In 2003: Mr. Schjerven— $217,387; Dr. Ashenhurst— $79,630; Mr. Boxer— $69,382, in addition to $46,552 as payment for installation of LII equipment under the executive equipment program; Mr. McDonough— $67,866; Mr. Schwartz— $63,964. In 2002: Mr. Schjerven— $133,494; Dr. Ashenhurst— $50,953; Mr. Boxer— $43,642; Mr. McDonough— $38,001; Mr. Schwartz— $41,314. |
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Individual Grants | ||||||||||||||||||||||||
Percent of | ||||||||||||||||||||||||
Number of | Total | |||||||||||||||||||||||
Securities | Options/SARs | |||||||||||||||||||||||
Underlying | Granted to | Grant Date | ||||||||||||||||||||||
Grant | Options/SARs | Employees in | Exercise or | Expiration | Present | |||||||||||||||||||
Name | Date | Granted | Fiscal Year | Base Price | Date | Value | ||||||||||||||||||
Robert E. Schjerven | N/A | 0 | N/A | N/A | N/A | N/A | ||||||||||||||||||
Harry J. Ashenhurst, Ph.D. | N/A | 0 | N/A | N/A | N/A | N/A | ||||||||||||||||||
Scott J. Boxer | N/A | 0 | N/A | N/A | N/A | N/A | ||||||||||||||||||
Robert J. McDonough | N/A | 0 | N/A | N/A | N/A | N/A | ||||||||||||||||||
Michael G. Schwartz | N/A | 0 | N/A | N/A | N/A | N/A |
Number of Securities | Value of Unexercised | |||||||||||||||||||||||
Underlying Unexercised | In-the-Money | |||||||||||||||||||||||
Options/SARs at | Options/SARs at | |||||||||||||||||||||||
Shares | December 31, 2004 | December 31, 2004(1) | ||||||||||||||||||||||
Acquired | Value | |||||||||||||||||||||||
Name | on Exercise | Realized | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
Robert E. Schjerven | 0 | $ | 0 | 854,828 | 159,593 | $ | 6,668,157 | $ | 823,978 | |||||||||||||||
Harry J. Ashenhurst, Ph.D. | 20,000 | 196,750 | 273,649 | 38,150 | 1,842,804 | 186,920 | ||||||||||||||||||
Scott J. Boxer | 0 | 0 | 247,517 | 38,150 | 1,739,403 | 186,920 | ||||||||||||||||||
Robert J. McDonough | 14,294 | 143,899 | 236,422 | 38,150 | 1,742,850 | 186,920 | ||||||||||||||||||
Michael G. Schwartz | 0 | 0 | 224,714 | 38,150 | 1,649,491 | 186,920 |
(1) | Calculated on the basis of the Fair Market Value of the underlying securities as of December 31, 2004, $20.29 per share, minus the exercise price for “in-the-money” options. |
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Estimated Future Payouts Under | ||||||||||||||||||||
Number of | Performance or | Non-Stock Price-Based Plans | ||||||||||||||||||
Shares, Units or | Other Period Until | |||||||||||||||||||
Other Rights | Maturation or | Threshold | Target | Maximum | ||||||||||||||||
Name | (#) | Payout | (#) | (#) | (#) | |||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | |||||||||||||||
Robert E. Schjerven | 93,672 | 3 years | 46,836.0 | 93,672.0 | 187,344.0 | |||||||||||||||
Harry J. Ashenhurst. Ph.D. | 25,497 | 3 years | 12,748.5 | 25,497.0 | 50,994.0 | |||||||||||||||
Scott J. Boxer | 25,497 | 3 years | 12,748.5 | 25,497.0 | 50,994.0 | |||||||||||||||
Robert J. McDonough | 25,497 | 3 years | 12,748.5 | 25,497.0 | 50,994.0 | |||||||||||||||
Michael G. Schwartz | 25,497 | 3 years | 12,748.5 | 25,497.0 | 50,994.0 |
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Years of Service | ||||||||||||||||||||||||
2004 Final Average Earnings(1) | 5 | 10 | 15 | 20 | 25 | 30 | ||||||||||||||||||
$ 250,000 | $ | 34,726 | $ | 69,452 | $ | 104,178 | $ | 104,178 | $ | 104,178 | $ | 104,178 | ||||||||||||
425,000 | 62,726 | 125,452 | 188,178 | 188,178 | 188,178 | 188,178 | ||||||||||||||||||
600,000 | 90,726 | 181,452 | 272,178 | 272,178 | 272,178 | 272,178 | ||||||||||||||||||
775,000 | 118,726 | 237,452 | 356,178 | 356,178 | 356,178 | 356,178 | ||||||||||||||||||
950,000 | 146,726 | 293,452 | 440,178 | 440,178 | 440,178 | 440,178 | ||||||||||||||||||
1,125,000 | 174,726 | 349,452 | 524,178 | 524,178 | 524,178 | 524,178 | ||||||||||||||||||
1,300,000 | 202,726 | 405,452 | 608,178 | 608,178 | 608,178 | 608,178 | ||||||||||||||||||
1,475,000 | 230,726 | 461,452 | 692,178 | 692,178 | 692,178 | 692,178 | ||||||||||||||||||
1,650,000 | 258,726 | 517,452 | 776,178 | 776,178 | 776,178 | 776,178 |
(1) | Final Average Earnings are the average of the highest five consecutive years of includible earnings. Compensation for these purposes includes salary and bonuses, and excludes extraordinary compensation such as benefits from the 1998 Plan or its predecessor plans. Bonus numbers used in these calculations, as per the 1998 Plan requirements, are the bonuses actually paid in those years. In the “Summary Compensation Table,” the 2004 bonus reported is the bonus earned in 2004, but not actually paid until 2005. |
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(a) any person, other than specified exempt persons which includes LII and its subsidiaries and employee benefit plans, becoming a beneficial owner of 35% or more of the shares of LII voting securities; | |
(b) a change in the identity of a majority of the Board of Directors, unless approved by a majority of the incumbent members of the Board of Directors; | |
(c) approval by the Stockholders of a reorganization, merger or consolidation in which: |
(1) existing Stockholders would own 65% or less of the voting securities of the surviving entity; | |
(2) any person, other than specified exempt persons, would own 35% or more of the voting securities of the surviving entity; | |
(3) less than a majority of the board of the surviving entity would consist of the then incumbent members of the Board of Directors; or |
(d) approval by the Stockholders of a liquidation or dissolution of LII, unless such liquidation or dissolution involves a sale to a company of which following such transaction: |
(1) more than 65% of the voting securities of such company would be owned by existing Stockholders; | |
(2) no person, other than specified exempt persons, would own 35% or more of the voting securities of such company; and |
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(3) at least a majority of the board of directors of such company would consist of the then incumbent members of the Board of Directors. |
(a) commencement of a tender or exchange offer for voting stock that, if consummated, would result in a change of control; | |
(b) LII entering into an agreement which, if consummated, would constitute a change of control; | |
(c) commencement of a contested election contest subject to proxy rules; or | |
(d) occurrence of any other event that the Board of Directors determines could result in a change of control. |
• | his or her then unpaid current salary and a pro rata portion of the highest bonus earned during the preceding three years, as well as previously deferred compensation and accrued vacation time; | |
• | a lump-sum cash payment equal to the sum of three times the officer’s annual base salary and three times the highest annual bonus paid or awarded to the officer during the preceding three fiscal years; | |
• | a lump-sum cash payment equal to the sum of three times the officer’s annual base salary and three times the highest annual bonus paid or awarded during the preceding three fiscal years, to reflect the equity component of the officer’s compensation; | |
• | a lump-sum cash payment equal to the sum of 15% of the officer’s annual base salary, in lieu of outplacement services, and three times 15% of the annual base salary that would have been paid or awarded to the officer during the fiscal year that includes the date of termination, for the perquisites component of the officer’s compensation; | |
• | for purposes of LII’s supplemental retirement plan and LII’s profit sharing restoration plan, three additional years added to each of the service and age criteria; and | |
• | continued coverage under LII’s employee welfare benefits plans for up to four and one-half years after termination. |
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• | if such person is, by reason of his or her status as a Director, nominee for Director, officer, agent or fiduciary of LII or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise with which such person was serving at LII’s request, any such status being referred to as a “Corporate Status,” made or threatened to be made a party to any threatened, pending or completed action, suit, arbitration, alternative dispute resolution mechanism, investigation or other proceeding, other than a proceeding by or in the right of LII; | |
• | if such person is, by reason of his or her Corporate Status, made or threatened to be made a party to any proceeding brought by or in the right of LII to procure a judgment in its favor, except that no indemnification shall be made in respect of any claim, issue or matter in such proceeding as to which such indemnitee shall have been adjudged to be liable to LII if applicable law prohibits such indemnification, unless and only to the extent that a court shall otherwise determine; | |
• | against expenses actually and reasonably incurred by such person or on his or her behalf in connection with any proceeding to which such indemnitee was or is a party by reason of his or her Corporate Status and in which such indemnitee is successful, on the merits or otherwise; | |
• | against expenses actually and reasonably incurred by such person or on his or her behalf in connection with a proceeding to the extent that such indemnitee is, by reason of his or her Corporate Status, a witness or otherwise participates in any proceeding at a time when such person is not a party in the proceeding; and | |
• | against expenses actually and reasonably incurred by such person in certain judicial adjudications of or awards in arbitration to enforce his or her rights under the indemnification agreements. |
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• | each person known by LII to own more than 5% of the outstanding shares of LII common stock; | |
• | each of LII’s Directors; | |
• | each named executive officer of LII; and | |
• | all executive officers and Directors of LII as a group. |
Shares Beneficially Owned | ||||||||
Beneficial Owner | Number | Percentage | ||||||
John W. Norris, Jr.(1)(2) | 4,738,378 | 7.67 | ||||||
Robert E. Schjerven(2) | 1,654,410 | 2.67 | ||||||
Linda G. Alvarado(2)(3) | 121,496 | * | ||||||
Harry J. Ashenhurst, Ph.D.(2) | 564,062 | * | ||||||
Steven R. Booth(2)(4) | 2,886,837 | 4.73 | ||||||
Thomas W. Booth(2)(5) | 2,955,201 | 4.84 | ||||||
Scott J. Boxer(2) | 547,368 | * | ||||||
David V. Brown(2) | 1,742,402 | 2.85 | ||||||
James J. Byrne(2) | 149,692 | * | ||||||
Janet K. Cooper(2) | 67,589 | * | ||||||
C. L. (Jerry) Henry(2) | 50,382 | * | ||||||
John E. Major(2) | 140,757 | * | ||||||
Robert J. McDonough(2) | 459,908 | * | ||||||
John W. Norris III(2)(6) | 3,013,884 | 4.94 | ||||||
Walden W. O’Dell(2) | 5,086 | * | ||||||
Paul W. Schmidt | 2,000 | * | ||||||
Michael G. Schwartz(2) | 492,437 | * | ||||||
Terry D. Stinson(2) | 71,892 | * | ||||||
Richard L. Thompson(2) | 170,528 | * | ||||||
All executive officers and Directors as a group (23 persons)(2) | 15,541,467 | 24.08 | ||||||
David H. Anderson(2)(7) | 3,261,146 | 5.34 | ||||||
Barclays Global Investors NA/CA/(8) | 4,561,124 | 7.47 |
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* | Less than 1% |
(1) | Includes: (a) 321,750 shares held by the Robert W. Norris Trust A, 321,750 shares held by the John W. Norris, Jr. Trust A, and 663,135 shares held by the Megan E. Norris Trust A, each of which Mr. Norris is a co-trustee; and (b) 2,674,422 shares held by the Norris Family Limited Partnership, of which Mr. Norris is General Partner. |
(2) | Includes the following shares subject to options: Mr. Norris, Jr.— 757,321; Mr. Schjerven— 854,828; Ms. Alvarado— 111,826; Dr. Ashenhurst— 273,649; Mr. S. Booth— 23,808; Mr. T. Booth— 45,141; Mr. Boxer— 247,517; Mr. Brown— 111,826; Mr. Byrne— 79,865; Ms. Cooper— 52,096; Mr. Henry— 38,939; Mr. Major— 111,826; Mr. McDonough— 236,422; Mr. Norris III— 23,808; Mr. O’Dell— 4,138; Mr. Schwartz— 224,714; Mr. Stinson— 52,096; Mr. Thompson— 94,996; all executive officers and Directors as a group— 3,503,224; and Mr. Anderson— 119,264. |
(3) | Includes 8,174 shares held by Cimarron Holdings, LLC. |
(4) | Includes (a) 1,986,906 shares held by trusts for the benefit of Mr. Richard W. Booth, 642,741 shares held by the Steven R. Booth Trust, and 134,052 shares held by The Booth Family Charitable Lead Annuity Trust, each of which Mr. S. Booth is a co-trustee, and (b) 83,446 shares held by Mr. S. Booth’s children. |
(5) | Includes: (a) 1,986,906 shares held by trusts for the benefit of Mr. Richard W. Booth, 40,062 shares held by the Thomas W. Booth Trust, and 134,052 shares held by The Booth Family Charitable Lead Annuity Trust, each of which Mr. T. Booth is a co-trustee, and (b) 76,051 shares held by Mr. T. Booth’s children. |
(6) | Includes (a) 4,987 shares held by the W.H. Norris Trust, 4,987 shares held by the B.W. Norris Trust, and 4,063 shares held by the L.C. Norris Trust, each of which Mr. Norris is a trustee; (b) 2,674,422 shares held by the Norris Family Limited Partnership, of which Mr. Norris is a 1% beneficiary; and (c) 31,768 shares held by Mr. Norris’ minor children. |
(7) | Mr. Anderson’s address is: P.O. Box 21757, Santa Barbara, CA 93121. |
(8) | Includes: (a) 3,073,403 shares held by Barclays Global Investors, NA, 45 Fremont St., San Francisco, CA 94105; (b) 1,363,521 shares held by Barclays Global Fund Advisors, 45 Fremont St., San Francisco, CA 94105; and (c) 124,200 shares held by Palomino Limited, Walker House Mary Street P.O. Box 908 GT, George Town, Grand Cayman (Cayman Islands). |
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Lennox International Inc. | |
2140 Lake Park Blvd. | |
Richardson, TX 75080 | |
Facsimile: (972) 497-6660 | |
Attention: William F. Stoll, Jr. |
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By Order of the Board of Directors | |
William F. Stoll, Jr. | |
Corporate Secretary |
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“Amendment Effective Date” has the meaning set forth in paragraph 20 hereof. | |
“Annual Management Incentive Awards” has the meaning set forth in paragraph 7(a)(v)(C) hereof. | |
“Authorized Officer” means the Chairman of the Board or the Chief Executive Officer of the Company (or any other senior officer of the Company to whom either of them shall delegate the authority to execute any Award Agreement). | |
“Award” means an Employee Award, a Director Award or an Independent Contractor Award. | |
“Award Agreement” means any Employee Award Agreement, Director Award Agreement or Independent Contractor Award Agreement. | |
“Board” means the Board of Directors of the Company. | |
“Cash Award” means an award denominated in cash. | |
“Code” means the Internal Revenue Code of 1986, as amended from time to time. | |
“Committee” means the Compensation Committee of the Board or such other committee of the Board as is designated by the Board to administer the Plan. | |
“Common Stock” means the Common Stock, par value $.01 per share, of the Company. | |
“Company” means Lennox International Inc., a Delaware corporation. | |
“Director” means an individual serving as a member of the Board. |
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(i) Stock Option. An Employee Award may be in the form of an Option. An Option awarded pursuant to this Plan may consist of an Incentive Option or a Nonqualified Option. The Grant Price of an Incentive Option shall be not less than the Fair Market Value of the Common Stock subject to such Incentive Option on the date of grant. The Grant Price of a Nonqualified Option shall be not less than the Fair Market Value of the Common Stock subject to such Nonqualified Stock Option on the date of grant. Options may not include provisions that “reload” the Option upon exercise. Subject to the foregoing provisions, the terms, conditions and limitations applicable to any Options awarded pursuant to this Plan, including the term of any Options and the date or dates upon which they become exercisable, shall be determined by the Committee. | |
(ii) Stock Appreciation Right. An Employee Award may be in the form of a SAR. The terms, conditions and limitations applicable to any SAR awarded pursuant to this Plan, including the term of any SAR and the date or dates upon which they become exercisable, shall be determined by the Committee. | |
(iii) Stock Award, Restricted Stock and Stock Units. An Employee Award may be in the form of a Stock Award, Restricted Stock or Stock Units. The terms, conditions and limitations applicable to any such Awards granted pursuant to this Plan shall be determined by the Committee; provided that any Restricted Stock Award shall have a minimum Restriction Period of one year from the date of grant, provided that the Committee may provide for earlier vesting by reason of death, disability, retirement or change in control. | |
(iv) Cash Award. An Employee Award may be in the form of a Cash Award. The terms, conditions and limitations applicable to any Cash Awards granted pursuant to this Plan shall be determined by the Committee. |
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(v) Performance Award. Without limiting the type or number of Awards that may be made under the other provisions of this Plan, an Employee Award may be in the form of a Performance Award. The terms, conditions and limitations applicable to any Performance Award granted to Participants pursuant to this Plan shall be determined by the Committee, subject to the limitations set forth below. Any Stock Award granted as an Employee Award which is a Performance Award shall have a minimum Restriction Period of one year from the date of grant, provided that the Committee may provide for earlier vesting upon a termination of employment by reason of death, disability, retirement or change in control. The Committee shall set Performance Goals in its discretion which, depending on the extent to which they are met, will determine the value and/or amount of Performance Awards that will be paid out to the Participant and/or the portion of an Award that may be exercised. |
(A) Nonqualified Performance Awards. Performance Awards granted to Employees that are not intended to qualify as qualified performance-based compensation under Section 162(m) of the Code, or that are Options or SARs, shall be based on achievement of such goals and be subject to such terms, conditions and restrictions as the Committee or its delegate shall determine. | |
(B) Qualified Performance Awards. A Qualified Performance Award shall be paid, vested or otherwise deliverable solely on account of the attainment of one or more pre-established, objective Performance Goals established by the Committee prior to the earlier to occur of (x) 90 days after the commencement of the period of service to which the Performance Goal relates and (y) the lapse of 25% of the period of service (as scheduled in good faith at the time the goal is established), and in any event while the outcome is substantially uncertain. A Performance Goal is objective if a third party having knowledge of the relevant facts could determine whether the goal is met. Such a Performance Goal may be based on one or more business criteria that apply to the individual, one or more business units, divisions, segments or sectors of the Company, or the Company as a whole, and if so desired by the Committee, by comparison with a peer group of companies. Unless otherwise stated, such a Performance Goal need not be based upon an increase or positive result under a particular business criterion and could include, for example, maintaining the status quo or limiting economic losses (measured, in each case, by reference to specific business criteria). In interpreting Plan provisions applicable to Qualified Performance Awards, it is the intent of the Plan to conform with the standards of Section 162(m) of the Code and Treasury Regulation § 1.162-27(e)(2)(i), as to grants to those Participants whose compensation is, or likely to be, subject to Section 162(m) of the Code, and the Committee in establishing such goals and interpreting the Plan shall be guided by such provisions. Prior to the payment of any compensation based on the achievement of Performance Goals, the Committee must certify in writing that applicable Performance Goals and any of the material terms thereof were, in fact, satisfied. Subject to the foregoing provisions, the terms, conditions and limitations applicable to any Qualified Performance Awards made pursuant to this Plan shall be determined by the Committee. | |
(C) Annual Management Incentive Awards. As one form of Qualified Performance Award, the Committee may designate Participants who are eligible to receive a monetary payment in any calendar year based upon Performance Goals for the Company (“Annual Management Incentive Awards”). Within the first 90 Days of each fiscal year of the Company, the Committee shall establish (i) Performance Goals for the Company for such fiscal year (the “Performance Period”) and (ii) target awards (“Target Awards”) that correspond to the Performance Goals. The Committee shall, promptly after the date on which the necessary financial or other information for a particular Performance Period becomes available, certify in writing whether any Performance Goal has been achieved and, if so, the highest Performance Target that has been achieved, all in a manner required by Section 162(m) of the Code. If any Performance Target has been achieved, the Award, |
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determined for each Participant with reference to the Target Award that corresponds to the highest Performance Target achieved for such Performance Period shall have been earned, except that the Committee may, in its sole discretion, reduce the amount of any Award to reflect the Committee’s assessment of the Participant’s individual performance, to reflect the failure of the Participant to remain in the continuous employ of the Company or its Subsidiaries, or for any other reason. Such Awards shall become payable in cash as promptly as practicable thereafter. |
(i) Stock Option. A Director Award may be in the form of a Nonqualified Stock Option. The Grant Price of the Option shall be not less than the Fair Market Value of the Common Stock subject to such Option on the date of grant. Options may not include provisions that “reload” the option upon exercise. Subject to the foregoing provisions, the terms, conditions and limitations applicable to any Options awarded to Nonemployee Directors pursuant to this Plan, including the Grant Price, the term of the Options, the number of shares subject to the Option and the date or dates upon which they become exercisable, shall be determined by the Committee. | |
(ii) Stock Appreciation Right. A Director Award may be in the form of a SAR. The terms, conditions and limitations applicable to any SAR awarded to Nonemployee Directors pursuant to this Plan, including the term of any SAR and the date or dates upon which they become exercisable, shall be determined by the Committee. | |
(iii) Stock Award, Restricted Stock and Stock Units. A Director Award may be in the form of a Stock Award, Restricted Stock or Stock Units. The terms, conditions and limitations applicable to any such Director Award granted to Nonemployee Directors pursuant to this Plan shall be determined by the Committee; provided that any Restricted Stock Award shall have a minimum Restriction Period of one year from the date of grant, provided that the Committee may provide for earlier vesting by reason of death, Disability, retirement or change in control. | |
(iv) Cash Award. A Director Award may be in the form of a Cash Award. The terms, conditions and limitations applicable to any Cash Awards granted pursuant to this Plan shall be determined by the Committee. | |
(v) Performance Award. Without limiting the type or number of Director Awards that may be made under the other provisions of this Plan, a Director Award may be in the form of a Performance Award. The terms, conditions and limitations applicable to any Performance Award granted to Nonemployee Directors pursuant to this Plan shall be determined by the Committee, subject to the limitations set forth below. Any Stock Award granted as a Director Award which is a Performance Award shall have a minimum Restriction Period of one year from the date of grant, provided that the Committee may provide for earlier vesting by reason of death, Disability, retirement or change in control. The Committee shall set Performance Goals in its discretion |
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which, depending on the extent to which they are met, will determine the value and/or amount of Performance Awards that will be paid out to the Nonemployee Director and/or the portion of an Award that may be exercised. |
(A) Nonqualified Performance Awards. Performance Awards granted to Nonemployee Directors that are not intended to qualify as qualified performance-based compensation under Section 162(m) of the Code, or that are Options or SARs, shall be based on achievement of such goals and be subject to such terms, conditions and restrictions as the Committee or its delegate shall determine. |
(vi) Notwithstanding anything to the contrary contained in this Plan, no Nonemployee Director may be granted, during any calendar year, Director Awards consisting of more than 40,000 shares of Common Stock; provided, however, that a non-employee Vice Chairman of the Board may be granted Director Awards that are up to three times that amount; provided, further, that a non-employee Chairman of the Board may be granted during any calendar year Director Awards that are up to five times that amount. |
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• | Assist the Board of Directors in satisfying its responsibilities to the shareholders with respect to matters relating to the Company’s accounting, financial reporting, audit, legal compliance and internal control practices. | |
• | Report Committee actions to the Board of Directors with such recommendations as the Committee may deem appropriate. | |
• | Attendance by nonmembers at the meetings of the Committee shall be at the sole discretion of the Committee and the Committee may invite at any time such directors, officers, employees of |
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the Company or other parties as it determines to be beneficial to the discharge of its functions and responsibilities. | ||
• | Meet at least annually with the senior internal auditing executive, management and the independent accountants in separate executive sessions to discuss any matters that the Committee or they believe should be discussed privately with the Audit Committee. | |
• | Perform the functions assigned to the Committee by the Company’s charter or bylaws, or the Board of Directors. | |
• | Review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board of Directors for approval. | |
• | Review at least annually the Audit Committee’s own performance. |
• | Review with the Company’s independent accountant, the Company’s internal control procedures, financial and accounting personnel and the adequacy and effectiveness of the accounting and financial controls of the Company, and elicit any recommendations for the improvement of such internal control procedures or particular areas where new or more detailed controls or procedures are desirable or necessary. |
• | Review with management and the independent accountants any significant accounting and reporting issues made in connection with the preparation of the Company’s financial statements, including any significant changes in the Company’s selection or application of accounting principles, any major issues as to the adequacy of the Company’s internal controls and any special steps adopted in light of material control deficiencies. | |
• | Inquire of management, the independent accountants and the senior internal auditing executive about the Company’s significant risks and exposures, and the steps management has taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies. | |
• | Review and discuss with management and the independent accountant the Company’s annual audited financial statements, including disclosures made in management’s discussion and analysis, related footnotes and the independent accountant’s report, and resolve any questions with management, and if required, the independent accountants. | |
• | Review annual and/or quarterly filings with the SEC and other published documents containing the Company’s financial statements, and determine whether the information contained in these documents is consistent with that known to the committee members. | |
• | Ensure review of the Company’s interim financial information, including disclosures made in management’s discussion and analysis, by the Company’s independent accountants in accordance with applicable generally accepted auditing standards prior to the inclusion of such information in the Company’s Form 10-Q. | |
• | Discuss with the independent accountant the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit, including any difficulties encountered in the course of the audit work, any restrictions on the scope of activities or access to requested information, and any significant disagreement with management. | |
• | Discuss with management the Company’s earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies. |
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• | Discuss with management and the independent accountant the effect of regulatory and accounting initiatives as well as off-balance sheet structures on the Company’s financial statements. | |
• | Review disclosures made to the Audit Committee by the Company’s CEO and CFO during their certification process for the Form 10-K and Form 10-Q about any significant deficiencies in the design or operation of internal controls or material weaknesses therein, and any fraud involving management or other employees who have a significant role in the Company’s internal controls. |
• | Review with the Company’s counsel any contingent liabilities and/or legal matters that could have a significant impact on the Company’s financial statements or the Company’s compliance policies. | |
• | Review the Company’s process for determining risks and exposures from asserted and unasserted litigation and claims. | |
• | Review the Company’s program for monitoring compliance with policies and review any recurring events of non-compliance of a material nature. | |
• | Discuss with management and the independent accountant any correspondence with regulators or governmental agencies and any published reports, which raise material issues regarding the Company’s financial statements or accounting policies. | |
• | Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential anonymous submission by employees of concerns regarding questionable accounting or auditing matters. | |
• | Obtain from the independent accountant assurance that Section 10A(b) of the Exchange Act has not been implicated. |
• | Review the appointment and replacement of the senior internal auditing executive. | |
• | Evaluate and approve the process for establishing the annual internal audit plan and review such plan to determine that the plan is sufficiently linked to the Company’s overall business objectives and associated risks. | |
• | Review with the senior internal auditing executive and management the following: |
1. | The Internal Audit Department Charter. | |
2. | The Department structure, budget, staffing level and qualifications. | |
3. | A summary of activities and significant findings during the year. | |
4. | Any changes required in the scope of the audit plan. |
• | Review the overall effectiveness of the internal audit function and review a summary of the significant reports to management prepared by the internal auditing department and management’s responses. |
• | Ensure that the independent accountants are ultimately accountable to the Audit Committee and that the Audit Committee has the sole authority to appoint or replace the independent accountants (subject, if applicable, to shareholder ratification), approve the compensation of |
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the independent accountants for performing the annual audit, and pre-approve all non-audit engagements with the independent accountants, and direct the dismissal of the independent accountants when circumstances warrant action. | ||
• | Review the scope and approach of the annual audit with the independent accountants, including their process for identifying and responding to key audit and internal control risks. | |
• | Review and evaluate the lead partner of the independent accountants’ team. | |
• | Obtain and review a report from the independent accountants at least annually regarding (a) the independent accountants’ internal quality-control procedures, (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, (c) any steps taken to deal with any such issues, and (d) (to assess the accountants independence) all relationships between the independent accountants and the Company. Evaluate the qualifications, performance and independence of the independent accountants, including considering whether the accountants’ quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the accountants’ independence, and taking into account the opinions of management and internal auditors. The Audit Committee shall present its conclusions with respect to the independent accountants to the Board. | |
• | Ensure the rotation as required by law of the lead (or coordinating) audit partner having primary responsibility for the audit, as well as the audit partner responsible for reviewing the audit. | |
• | Recommend to the Board policies for the Company’s hiring of employees or former employees of the independent accountants who participated in any capacity in the audit of the Company. | |
• | Discuss with the national office of the independent accountants issues on which they were consulted by the Company’s audit team and matters of audit quality and consistency. |
• | Affirm annually, in writing, to the New York Stock Exchange that the Audit Committee has: |
1. | Met and will continue to meet, the membership requirements. | |
2. | Adopted a written charter. | |
3. | Annually reviewed and reassessed the adequacy of the charter. |
• | Disclose in the Company’s proxy statement that: |
1. | All Audit Committee members are independent. | |
2. | The Audit Committee is governed by a written charter, and include a copy of the charter at least once every three years. |
• | Include in the Company’s proxy statement a report from the Audit Committee that states that it has: |
1. | Reviewed and discussed the Company’s audited financial statements with management and the independent accountant. | |
2. | Discussed the quarterly financial statements, including the quality of accounting principles, with the independent accountants. | |
3. | Received the required written independence disclosures from the independent accountants. |
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4. | Recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K. |
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THIS PROXY WILL BE VOTED AS DIRECTED BELOW, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” ALL NOMINEES LISTED IN PROPOSAL 1 AND “FOR” PROPOSAL 2. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSALS 1 AND 2.
Please Mark Here for Address Change or Comments SEE REVERSE SIDE | o |
1. | Election of the following nominees as directors for a term expiring in 2008. | |
01 Thomas W. Booth, 02 James J. Byrne, 03 John W. Norris III, | ||
04 John W. Norris, Jr., 05 Paul W. Schmidt. | ||
INSTRUCTIONS: To withhold authority to vote for any individual nominee mark the “Exceptions” box and write that nominee’s name in the space provided below. | ||
EXCEPTIONS |
FOR | WITHHOLD AUTHORITY | |||
all nominees | to vote for all | |||
listed | nominees listed | EXCEPTIONS | ||
o | o | o |
FOR | AGAINST | ABSTAIN | ||||||
2. | Proposal to approve the LII Amended and Restated 1998 Incentive Plan and to increase the maximum number of shares of common stock available for allocation under such plan. | o | o | o | ||||
3. | At the discretion of such Proxies on any other matter that may properly come before the meeting or any adjournment thereof. |
I (WE) PLAN TO ATTEND THE ANNUAL MEETING OF STOCKHOLDERS ON APRIL 15, 2005. | o |
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Dated: | , 2005 | |||||
Signature | ||||||
Signature | ||||||
Please sign exactly as your name appears hereon. Executors, administrators, guardians, and others signing in a fiduciary capacity should indicate such capacity when signing. If shares are held jointly, each holder should sign. If a corporation, please sign in full corporate name by duly authorized officer. If a partnership, please sign in partnership name by authorized person. |
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on the Internet at www.lennoxinternational.com
<http://www.lennoxinternational.com>
and select SEC Filings from the Financials menu.
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LENNOX INTERNATIONAL INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 15, 2005
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The signatory of this Proxy, by execution on the reverse side of this Proxy, hereby appoints and constitutes John W. Norris, Jr. and William F. Stoll, Jr., and each of them, with full power of substitution, with the powers the signatory of this Proxy would possess if personally present, to vote all shares of Lennox Common Stock entitled to be voted by the signatory at the Annual Meeting of Stockholders to be held at 9:00 a.m., local time, on April 15, 2005, or at any reconvened meeting after any adjournment or postponement thereof, on the matters forth on the reverse side in accordance with any directions given by the signatory and, in their discretion, on all other matters that may properly come before the Annual Meeting or any reconvened meeting after any adjournment or postponement thereof.
IMPORTANT – PLEASE SIGN AND DATE ON THE REVERSE SIDE AND RETURN PROMPTLY.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED ON THE REVERSE SIDE. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED “FOR” ALL NOMINEES LISTED IN PROPOSAL 1 AND “FOR” PROPOSAL 2.
Address Change/Comments (Mark the corresponding box on the reverse side) |
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