<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
THE LAMSON & SESSIONS CO.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
LAMSON & SESSIONS
25701 Science Park Drive
Cleveland, Ohio 44122
(216) 464-3400
March 15, 1996
To Our Shareholders:
On behalf of the Board of Directors and management, I cordially invite you
to attend the 1996 Annual Meeting of Shareholders to be held on Friday, April
26, 1996, at 9:00 a.m., local time, at The Ritz-Carlton, 1515 West Third Street,
Cleveland, Ohio 44113.
The matters expected to be acted upon by shareholders at this meeting will
be the election of three directors for a three year term ending in 1999 and the
approval of an increase in the number of Common Shares covered by the 1988
Incentive Equity Performance Plan. 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.
Sincerely,
/s/ John B. Schulze
JOHN B. SCHULZE
Chairman of the Board
and Chief Executive Officer
<PAGE> 3
LAMSON & SESSIONS
25701 Science Park Drive
Cleveland, Ohio 44122
(216) 464-3400
NOTICE OF 1996 ANNUAL MEETING OF SHAREHOLDERS
APRIL 26, 1996
Notice is hereby given that the Annual Meeting of Shareholders of The
Lamson & Sessions Co. will be held at The Ritz-Carlton, 1515 West Third Street,
Cleveland, Ohio 44113, on April 26, 1996, beginning at 9:00 a.m., local time,
for the purpose of considering and acting upon the following:
(1) The election of three directors in Class III for three year terms
expiring in 1999;
(2) The approval of an increase of 650,000 in the number of Common Shares
covered by The Lamson & Sessions Co. 1988 Incentive Equity Performance
Plan; and
(3) Any other business as may properly come before the Annual Meeting or
any adjournment thereof.
Holders of Common Shares of record at the close of business on March 4,
1996 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 15, 1996
------------------
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE MARK, SIGN, DATE AND
RETURN THE ENCLOSED PROXY PROMPTLY, USING THE RETURN ENVELOPE ENCLOSED IN ORDER
THAT YOUR VOTE MAY BE COUNTED AT THE ANNUAL MEETING.
<PAGE> 4
LAMSON & SESSIONS
25701 Science Park Drive
Cleveland, Ohio 44122
(216) 464-3400
---------------------------------
PROXY STATEMENT
---------------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 26, 1996
DATE OF THE PROXY STATEMENT -- MARCH 15, 1996
GENERAL INFORMATION
GENERAL
This Proxy Statement is furnished to holders of Common Shares, without par
value (the "Common Shares"), of The Lamson & Sessions Co. (the "Company") in
connection with the solicitation of proxies by the Company's Board of Directors
for the Annual Meeting of Shareholders to be held at The Ritz-Carlton, 1515 West
Third Street, Cleveland, Ohio 44113, on April 26, 1996, at 9:00 a.m., local
time, and at any adjournment thereof (the "Meeting"). Only holders of record of
Common Shares at the close of business on March 4, 1996 will be entitled to
notice of, and to vote at the Meeting. To ensure adequate representation at the
Meeting, all shareholders are requested to mark, sign, date and return promptly
the enclosed proxy.
The Common Shares represented by the accompanying proxy will be voted in
accordance with the instructions thereon if the proxy is received by the Company
prior to the Meeting or by the Company's Secretary at the Meeting, provided that
it has been properly executed and has not been previously revoked. If no
instructions are given with respect to a specified matter to be acted upon, the
proxy will be voted in favor of such matter and in accordance with the best
judgment of the persons named as proxies in the proxy with respect to any other
matter which may properly come before the Meeting. Any person giving a proxy
pursuant to this solicitation may revoke such proxy at any time before it is
voted by giving notice to the Company in writing prior to or at the Meeting. The
shares represented by properly executed proxies not revoked will be voted on all
matters acted upon at the Meeting.
1
<PAGE> 5
QUORUM REQUIREMENTS
The Company's Amended Code of Regulations provides that the holders of
Common Shares entitling them to exercise 75% of the voting power of the Company,
present in person or by proxy, shall constitute a sufficient quorum to elect
directors at the meeting. For all other business presently intended to be
conducted at the Meeting, the holders of Common Shares entitling them to
exercise two-thirds of the voting power of the Company, present in person or by
proxy, shall constitute a sufficient quorum. The holders of a majority of the
Common Shares represented at the 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.
VOTE REQUIRED
With respect to the election of directors, the three nominees within Class
III receiving the greatest number of votes at the Meeting will be elected as the
directors in Class III. (See "Election of Directors" following the section
"Ownership of the Company's Common Shares.") Shares represented by proxies which
are marked "abstain" on any proposal will be counted for the purpose of
determining the number of shares represented by proxy at the Meeting but not in
support of the proposal. Such proxies will thus have the same effect as if the
shares represented thereby were voted against those proposals marked "abstain."
Shares not voted on proxies returned by brokers will be treated as not
represented at the Meeting and will have no effect on the election of directors.
CUMULATIVE VOTING
If notice that cumulative voting is desired is given in writing by any
shareholder to the President, a Vice President or the Secretary not less than
forty-eight hours before the time fixed for holding the Meeting, and if an
announcement of the giving of such notice is made upon the convening of the
Meeting by the Chairman or Secretary or by or on behalf of the shareholder
giving such notice, each shareholder shall have the right to cumulate such
voting power as he or she possesses at such election and to give one nominee a
number of votes equal to the number of directors to be elected multiplied by the
number of shares held by such shareholder, or to distribute such votes on the
same basis among two or more nominees, as the shareholder sees fit. 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 of the three nominees for Class III named below as
possible.
SOLICITATION OF PROXIES
All reasonable expenses of soliciting proxies, including the cost of
preparing, assembling and mailing this Proxy Statement and the accompanying
proxy, will be borne by the Company. 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. The Company will pay
the standard charges of brokerage firms and other nominees or fiduciaries for
sending the proxy materials to their principals who are beneficial owners of
Common Shares and entitled to vote at the Meeting. In addition, the Company has
retained Georgeson & Company Inc. to aid in the solicitation of proxies at an
anticipated fee of approximately $6,000, plus reasonable expenses.
2
<PAGE> 6
OWNERSHIP OF THE COMPANY'S COMMON SHARES
The Board of Directors of the Company has fixed the close of business on
Monday, March 4, 1996, as the record date for the determination of shareholders
entitled to notice of and to vote at the Meeting. On the record date the Company
had issued and outstanding 13,291,751 Common Shares, each of which is entitled
to one vote at the Meeting.
The following table sets forth as of January 15, 1996 (except as otherwise
noted), information with respect to beneficial ownership of the Company's Common
Shares by any shareholder known by the Company to beneficially own 5% or more of
the Company's outstanding Common Shares.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP CLASS
- ----------------------------------- ----------------- ----------
<S> <C> <C>
Gabelli Funds, Inc.,
GAMCO Investors, Inc.
Mario J. Gabelli
655 Third Avenue
New York, New York 10017 1,939,350(1) 14.59%
Pioneering Management Corporation
60 State Street
Boston, MA 02109 1,305,200(2) 9.82%
Merrill Lynch & Co., Inc.
Merrill Lynch Group, Inc.
Princeton Services, Inc.
Fund Asset Management, L.P.
Merrill Lynch Phoenix Fund, Inc.
250 Vesey Street
New York, New York 10281 879,400(3) 6.62%
TCW Group, Inc.
865 So. Figueroa Street
Los Angeles, CA 90017 820,600(4) 6.17%
Dimensional Fund Advisors Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401 698,200(5) 5.25%
</TABLE>
- ---------------
[FN]
(1) Mario J. Gabelli and various entities which he directly or indirectly
controls and for which he acts as chief investment officer reported the
ownership of such shares in a Schedule 13D dated January 26, 1993 which was
filed with the Securities and Exchange Commission (the "SEC").
(2) Pioneering Management Corporation ("Pioneering"), a registered investment
advisor, reported the beneficial ownership of such shares in a Schedule 13G
dated January 26, 1996 which was filed with the SEC. Pioneering disclaims
beneficial ownership of all such shares.
(3) Merrill Lynch & Co., Inc., Merrill Lynch Group, Inc. and Princeton Services,
Inc. (parent holding companies); Fund Asset Management, L.P. (investment
advisor); and Merrill Lynch Phoenix Fund, Inc. (investment company) reported
the beneficial ownership of such shares in a Schedule 13G dated February 6,
1996 which was filed with the SEC. Merrill Lynch Phoenix Fund, Inc., for
which
3
<PAGE> 7
Fund Asset Management, L.P. acts as investment advisor, holds the reported
securities. Each of the reporting persons disclaims beneficial ownership of
all such shares.
(4) The TCW Group, Inc., formerly known as TCW Management Company, the parent
holding company of Trust Company of the West (bank), TCW Asset Management
Company (registered investment advisor), and TCW Funds Management, Inc.
(registered investment advisor), reported the beneficial ownership of such
shares in a Schedule 13G dated February 12, 1996 which was filed with the
SEC. Each of the reporting persons disclaims beneficial ownership of all
such shares.
(5) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, reported the beneficial ownership of such shares in a Schedule 13G
dated February 7, 1996 which was filed with the SEC. All of such shares are
held in portfolios of DFA Investment Dimensions Group Inc., a registered
open-end investment company or in series of the DFA Investment Trust
Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, as to all of which Dimensional serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
The Board of Directors is divided into three classes. Each class currently
consists of three members. One class is elected annually. The terms of the
following Class III directors expire at the Meeting: A. Malachi Mixon, III,
Kevin O'Donnell and John B. Schulze. Mr. O'Donnell has announced that he will
retire from the Board of Directors at the end of the Meeting. The Board of
Directors has maintained the number of directors following the Meeting at nine.
For election as directors at the Meeting, the Compensation and Organization
Committee has recommended, and the Board of Directors has approved, the
renomination of Messrs. Mixon and Schulze and the nomination of John C. Morley
to serve as directors in Class III for the three year term of office which will
expire at the Annual Meeting of Shareholders in 1999. 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.
It is the intention of the persons named in the enclosed form of proxy to
vote such proxy as specified and if no specification is made, to vote such proxy
for the election of Messrs. Mixon, Morley and Schulze as Class III directors.
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 Meeting, 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 three nominees for election to the Board
of Directors in Class III, and those continuing directors in Classes II and I
who have previously been elected to terms which will expire in 1997 and 1998,
respectively, and the director currently serving in Class III who will retire
after the Meeting. Also listed is the year in which each first became a director
of the Company, the individual's principal occupation, information relating to
beneficial ownership of Common Shares of the Company as of January 15, 1996
(except for Mr. Morley whose share ownership is reported as of March 1996), and
certain other information, based in part on data submitted by the directors and
in part on the Company's records. Except for Mr. Schulze, who beneficially owns
3.41% of the Company's Common Shares, no
4
<PAGE> 8
director, nominee or officer beneficially owns as much as one percent of the
Company's Common Shares. All directors and officers as a group beneficially own
7.31% of the Company's Common Shares.
NOMINEES FOR ELECTION AT THE MEETING
<TABLE>
<CAPTION>
YEAR
NAME, AGE FIRST COMMON SHARES
PRINCIPAL OCCUPATION BECAME A BENEFICIALLY
AND BUSINESS(1) OTHER DIRECTORSHIPS DIRECTOR OWNED
- --------------------------------- ------------------------- -------- -------------
<S> <C> <C> <C>
CLASS III: TERM EXPIRES IN 1996
A. Malachi Mixon, III (55) Invacare Corporation 1990 56,200
Chairman of the Board, Cleveland Clinic
President and Chief Executive Foundation
Officer, Invacare Corporation NCS Healthcare, Inc.
(Manufacturer and distributor Primus Venture Partners
of home healthcare products) The Sherwin Williams
Company
John C. Morley (64) Acheson Industries 1996 1,000
Retired President and Chief AMP Incorporated
Executive Officer, Reliance Cleveland-Cliffs, Inc.
Electric Company (Manufacturer Ferro Corporation
of Electrical and KeyCorp
Telecommunications Equipment
and Systems)
John B. Schulze (58) The Huntington National 1984 477,534(2)(3)
Chairman of the Board, Bank
President and Chief Executive
Officer of the Company
</TABLE>
CONTINUING DIRECTORS
<TABLE>
<CAPTION>
YEAR
NAME, AGE FIRST COMMON SHARES
PRINCIPAL OCCUPATION BECAME A BENEFICIALLY
AND BUSINESS(1) OTHER DIRECTORSHIPS DIRECTOR OWNED
- --------------------------------- ------------------------- -------- -------------
<S> <C> <C> <C>
CONTINUING CLASS I: TERM EXPIRES IN 1998
Francis H. Beam, Jr. (60) Advanced Lighting 1990 24,878
President, Pepper Capital Corp. Technologies, Inc.
(Venture capital firm); Retired
Vice Chairman and Regional
Managing Partner, Ernst & Young
(International accounting and
management consulting firm)
Martin J. Cleary (60) Guardian Life Insurance 1989 31,000
President and Chief Operating Company of America
Officer, The Richard E. Jacobs
Group (Real estate developer)
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
YEAR
NAME, AGE FIRST COMMON SHARES
PRINCIPAL OCCUPATION BECAME A BENEFICIALLY
AND BUSINESS(1) OTHER DIRECTORSHIPS DIRECTOR OWNED
- --------------------------------- ------------------------- -------- -------------
<S> <C> <C> <C>
D. Van Skilling (62) None 1989 22,988
Executive Vice President and
General Manager, TRW
Information Systems and
Services, TRW Inc.
(Manufacturer of high
technology products for space,
defense, automotive and
information systems markets)
CONTINUING CLASS II: TERM EXPIRES IN 1997
Leigh Carter (70) Centerior Energy 1991 8,000
Retired President and Chief Corporation
Operating Officer, The Adams Express Company
BFGoodrich Co. (Producer of Armada Funds
chemicals, plastics and Petroleum & Resources
aerospace products); Retired Corporation
Chairman, Tremco, Incorporated The Sherwin Williams
(Subsidiary of BFGoodrich and Company
manufacturer of specialty
chemical products)
John C. Dannemiller (57) Bearings, Inc. 1988 23,416
Chairman and Chief Executive Star Bank Cleveland
Officer, Bearings, Inc. Star Bank Holding Co.
(Distributor of bearings, power
transmission components and
related products)
George R. Hill (54) None 1990 22,958
Senior Vice President, The
Lubrizol Corporation (Full
service supplier of performance
chemicals to worldwide
transportation and industrial
markets)
</TABLE>
6
<PAGE> 10
RETIRING DIRECTOR
<TABLE>
<CAPTION>
YEAR
NAME, AGE FIRST COMMON SHARES
PRINCIPAL OCCUPATION BECAME A BENEFICIALLY
AND BUSINESS(1) OTHER DIRECTORSHIPS DIRECTOR OWNED
- --------------------------------- ------------------------- -------- -------------
<S> <C> <C> <C>
RETIRING CLASS III:
Kevin O'Donnell (70) RPM, Inc. 1984 5,000
Managing Director, O'Donnell & The National Machinery
Associates (Management Company
Consulting); Retired Chief
Executive Officer, SIFCO
Industries, Inc. (Manufacturer
and marketer focusing on
metalworking and related
industrial technologies)
All present directors and
executive
officers as a group (14 persons) 1,024,731(2)(3)(4)
</TABLE>
- ---------------
(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
15, 1996 upon the exercise of outstanding options under the Company's stock
option plans: Mr. Schulze -- 322,134 and all directors and executive
officers as a group -- 626,635.
(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, but as to which shares the director may have
disclaimed beneficial ownership. 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 22,900 shares owned by his wife, as to which he has
disclaimed beneficial ownership. No other director or executive officer has
disclaimed beneficial ownership of any shares.
(4) Does not include 1,000 shares owned by Director-Nominee John C. Morley.
STANDING COMMITTEES OF THE BOARD OF DIRECTORS
Each of the Committees described below reports to the Board of Directors at
the next meeting of the Board following a Committee meeting:
THE AUDIT COMMITTEE: Messrs. O'Donnell (Chairman), Carter, Cleary and Hill
currently are the members of the Audit Committee, which held two meetings during
1995. The functions of the Audit Committee include recommending to the Board of
Directors the appointment of the Company's independent auditors, and reviewing
the proposed audit programs (including both independent and internal audits) for
each fiscal year, the results of these audits, and the adequacy of the Company's
system of internal control. The Audit Committee also reviews the Form 10-K
annual report to the SEC. The Audit Committee meets privately with the
independent auditors and with the Company's internal auditors at each of its
meetings.
7
<PAGE> 11
THE COMPENSATION AND ORGANIZATION COMMITTEE: Messrs. Skilling (Chairman),
Beam, Dannemiller and Mixon currently are the members of the Compensation and
Organization Committee, which held three meetings during 1995. The Compensation
and Organization 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 Committee also reviews and recommends
candidates for election to the Board of Directors and appointments to any
Committee of the Board. This 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 the Secretary
of the Company.
The Board of Directors held five meetings in 1995. Messrs. Cleary,
Dannemiller, and Mixon each attended fewer than 75% of the aggregate of the
meetings of the Board and the Committees on which they served.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company are each paid an annual
retainer of $12,500 in respect of service on the Board of Directors and any
Committee of the Board and a separate fee of $1,200 for attendance at a meeting
of the Board or attendance at a Committee meeting. Effective January 1, 1995,
standing Committee Chairmen receive an annual fee of $1,500. A director who is
an employee of the Company does not receive any fees or other remuneration for
his services as a director or a member of any Committee of the Board. The
Company has established a Deferred Compensation Plan for Nonemployee Directors,
under which directors may elect to defer annual retainer and meeting fees.
Pursuant to 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 such deferred compensation invested in
Common Shares of the Company, such director will receive an additional sum, also
invested in Common Shares, equal to 25% of the deferred amount.
Nonemployee directors of the Company are provided with certain retirement
and death benefits under the Company's Outside Directors' Benefit Program (the
"Program"). All nonemployee directors who have completed an aggregate of one
year of continuous service ("Vesting Service") are eligible to participate. The
Program generally provides for normal retirement benefits payable upon
attainment of age seventy and completion of five years of Vesting Service. The
Program also contains provisions for early retirement benefits and vested
deferred retirement benefits, 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 nonemployee director at the time he ceases to be a nonemployee
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, his beneficiary or the Company can elect that
such retirement or death benefits be paid in an actuarially-equivalent, lump sum
payment.
NONEMPLOYEE DIRECTORS STOCK OPTION PLAN. In 1994, the Company's
shareholders approved the Nonemployee Directors Stock Option Plan (the
"Directors Plan"), authorizing the grant of options to nonemployee directors for
the purchase of an aggregate of 60,000 Common Shares. The Directors Plan
provides that each year on the Monday following the Annual Meeting of
Shareholders, commencing in
8
<PAGE> 12
1994, each individual elected, reelected or continuing as a nonemployee director
will automatically receive a nonqualified option to purchase 1,000 Common
Shares. The Board of Directors has reserved 60,000 Common Shares for issuance
under the Directors Plan. The exercise price for such options will be the
average of the high and low prices at which the Common Shares traded on the New
York Stock Exchange ("NYSE") on the date of grant. If on the Monday following
the Annual Meeting of Shareholders, the Common Shares do not trade on the NYSE,
then the date of grant will be the next day on which trades occur. Options
become exercisable one year after the date of grant and expire ten years after
the date of grant.
Upon normal retirement, options granted to a nonemployee director will
continue to become exercisable and must be exercised within 36 months of
retirement. Upon the death of a nonemployee director, his or her legal
representative or heirs will have twelve months within which to exercise those
options which were exercisable at the time of death.
In the event that an individual ceases to serve as a nonemployee director
for any reason other than retirement 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" or upon a "potential change in
control" (each as defined in the Directors Plan) of the Company, all stock
options fully vest and become exercisable.
The Directors Plan will terminate, for purposes of granting further
options, on April 22, 2000 unless terminated earlier by the Board of Directors
or extended by the Board with the approval of the shareholders. The Directors
Plan is administered by the Board of Directors.
On May 1, 1995 each nonemployee director was granted a nonqualified option
to purchase 1,000 Common Shares pursuant to the Directors Plan at an exercise
price of $6.625 per share, which are scheduled to become exercisable on May 1,
1996.
9
<PAGE> 13
EXECUTIVE COMPENSATION
The summary compensation table below sets forth all compensation paid,
earned or accrued for services in all capacities to the Company and its
subsidiaries during the fiscal year ended December 30, 1995 to the Chief
Executive Officer and the four most highly compensated executive officers of the
Company whose compensation exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL -------------------------
COMPENSATION SECURITIES PERFORMANCE
-------------------- OTHER ANNUAL UNDERLYING UNIT OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS PAYOUTS (2)(3)
- ------------------------------------- ----- -------- -------- --------------- ---------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
John B. Schulze 1995 $380,000 $359,000 $ -- 80,000 $ 105,000 44,191
Chairman of the Board, 1994 360,000 192,000 -- 60,000 -- 44,212
President and Chief 1993 360,000 54,000 -- 60,000 -- 44,321
Executive Officer
James J. Abel 1995 220,000 170,000 -- 36,000 67,500 10,166
Executive Vice President, 1994 208,000 90,000 -- 30,000 -- 10,190
Secretary, Treasurer 1993 179,581 26,250 37,976 30,000 -- 10,219
and Chief Financial Officer
Charles E. Allen 1995 150,000 90,000 -- 15,000 37,500 14,659
Senior Vice President 1994 150,000 60,000 -- 20,000 -- 14,716
1993 148,834 21,500 -- 20,000 -- 14,771
Mark R. Buck 1995 138,000 47,500 -- 15,000 18,000 7,555
Vice President - 1994 125,000 42,000 -- 12,000 -- 3,487
Carlon Electrical Products (4) 1993 114,000 25,000 -- 8,000 -- 2,747
A. Corydon Meyer 1995 122,000 33,000 -- 15,000 18,000 7,360
Vice President - 1994 110,500 29,000 -- 8,000 -- 2,317
Lamson Home Products (4) 1993 100,500 12,000 -- 7,000 -- 2,169
</TABLE>
- ---------------
[FN]
(1) The amount indicated for Mr. Abel with respect to 1993 represents the
incremental cost to the Company of providing a club initiation fee of
$32,700 and club dues of $1,082 as well as automobile lease payments, life
insurance premiums and fees for personal income tax service. While other
executive officers enjoy similar perquisites, such perquisites did not
exceed 10% of the salary and bonus of any officer (Mr. Abel included) in
1994 or 1995.
(2) Includes split dollar life insurance premium payments paid for Mr. Schulze,
Mr. Abel, Mr. Allen, Mr. Buck, and Mr. Meyer in 1995 of $39,691, $5,666,
$10,159, $3,678 and $2,887, respectively; for Mr. Schulze, Mr. Abel and Mr.
Allen in 1994 of $39,712, $5,690 and $10,216, respectively; and for Mr.
Schulze, Mr. Abel, and Mr. Allen in 1993 of $39,824, $5,722 and $10,274,
respectively.
(3) Includes matching contributions equal to 50% of the first 6% of an
employee's compensation contributed to the Company's 401(k) Deferred Savings
Plan, 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. Allen, Mr. Buck and Mr. Meyer in 1995 totaled $4,500,
$4,500, $4,500,
10
<PAGE> 14
$3,877 and $4,473, respectively; in 1994 totaled $4,500, $4,500, $4,500,
$3,487 and $2,317, respectively; and in 1993 totaled $4,497, $4,497, $4,497,
$2,747 and $2,196, respectively.
(4) Carlon Electrical Products and Lamson Home Products are business units of
the Company.
STOCK OPTIONS
The Company has in effect the 1988 Incentive Equity Performance Plan ("1988
Plan"), pursuant to which grants and awards of various forms of equity ownership
are outstanding or available for future grants to officers and key employees of
the Company. In addition, options remain outstanding under the Company's 1978
Stock Option Plan ("1978 Plan"), which plan expired by its terms in 1988. Under
the 1988 Plan, the Company may grant awards consisting of options to purchase
Common Shares, stock appreciation rights held in tandem with stock options,
restricted stock awards and/or deferred stock awards. All awards under the 1988
Plan are made by the Compensation and Organization Committee.
The following table shows grants of stock options made to the executive
officers named in the Summary Compensation Table during 1995 pursuant to the
1988 Plan and the value of the options at the date of grant thereof.
OPTION GRANTS DURING LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT
DATE
INDIVIDUAL GRANTS VALUE
- ---------------------------------------------------------------------------------------- --------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANT
OPTIONS GRANTED TO EXERCISE DATE
GRANTED EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME (#)(1) FISCAL YEAR ($/SH) DATE VALUE(2)
---------- ------------ -------- ---------- --------
<S> <C> <C> <C> <C> <C>
John B. Schulze.............. 80,000 35.2% $ 5.81 02/23/05 $309,600
James J. Abel................ 36,000 15.9% 5.81 02/23/05 139,320
Charles E. Allen............. 15,000 6.6% 5.81 02/23/05 58,050
Mark R. Buck................. 15,000 6.6% 5.81 02/23/05 58,050
A. Corydon Meyer............. 15,000 6.6% 5.81 02/23/05 58,050
</TABLE>
- ---------------
(1) Options are exercisable after February 22, 1996 and then only as follows:
1/3 when the Company's Common Shares price reaches $7.00; 1/3 when the
Company's Common Shares price reaches $8.125; and 1/3 when the Company's
Common Shares price reaches $9.25. In the event of a "change in control" or
"potential change in control" (each as defined in the 1988 Plan) of the
Company, all stock options and stock appreciation rights fully vest and
become exercisable, all restrictions and deferral limitations are lifted on
restricted and deferred stock, and any 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
11
<PAGE> 15
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 21 quarters of stock
prices; interest rate assumptions based on the Ten-year Treasury Strip
Yield, as reported in The Wall Street Journal; a dividend yield assumption
of zero; and an assumed time of exercise upon the maturity of the option.
The following table shows information with respect to the exercise of
options during 1995 and to the unexercised options to purchase the Company's
Common Shares under the 1978 and 1988 Plans held at December 30, 1995, the
Company's fiscal year end, by the executive officers named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY
HELD AT DECEMBER 30, 1995(#) OPTIONS/SARS HELD AT
DECEMBER 30, 1995(1)
SHARES ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- ---------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John B. Schulze..... -- $ -- 228,800 160,000 $ 590,847 $ 258,940
James J. Abel....... -- -- 49,600 76,000 138,992 121,710
Charles E. Allen.... -- -- 69,933 41,667 175,241 63,681
Mark R. Buck........ -- -- 27,333 29,667 67,607 46,933
A. Corydon Meyer.... -- -- 10,967 25,333 28,781 42,202
</TABLE>
- ---------------
(1) Based on the closing price on the NYSE -- Composite Transactions of the
Company's Common Shares on December 29, 1995 (the last trading day in fiscal
year 1995) of $7.75.
LONG-TERM INCENTIVE PLAN AWARDS
In 1995, the Compensation Committee's Long-Term Incentive Plan awards to
officers and key employees were made through the grant of stock options as
described above in the table immediately following the Summary Compensation
Table and in accordance with the Committee's responsibilities as outlined below
under the heading of "Stock Options and Long-Term Incentive Compensation."
PENSION BENEFITS
The following table shows the estimated pension benefits for the executive
officers named in the Summary Compensation Table above in straight life annuity
amounts payable pursuant to The Lamson & Sessions Co. Salaried Employees'
Retirement Plan ("Lamson & Sessions Plan") upon retirement at age
12
<PAGE> 16
sixty-five during the year 1995 based upon the formula described below (prior to
the adjustment for Social Security benefits):
<TABLE>
<CAPTION>
ANNUAL NORMAL RETIREMENT BENEFITS
FOR YEARS OF CREDITED SERVICE INDICATED(1)
AVERAGE ANNUAL -----------------------------------------------
COMPENSATION(2) 15 YEARS 20 YEARS 25 YEARS 30 YEARS
--------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 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
</TABLE>
- ---------------
(1) Certain of the benefits shown in the table may in part be paid as an
operating expense outside the tax-qualified Lamson & Sessions Plan due to
the maximum annual benefit limitation of $120,000 imposed by the Employee
Retirement Income Security Act of 1974, as amended. The payment of such
benefits outside the Lamson & Sessions Plan will not, however, increase the
amount of total benefits currently provided under the Lamson & Sessions
Plan. See "Supplemental Executive Retirement Plans."
(2) Includes salary, overtime and bonuses, but excludes commissions.
The officers of the Company participate in the pension plans of the Company
or a division thereof for which they meet the eligibility requirements. The
pension plans generally provide for normal retirement benefits payable after
attainment of age sixty-five and contain provisions for early retirement
benefits, vested deferred retirement benefits and survivor's benefits upon the
death of a participant.
The Lamson & Sessions Plan covers the salaried employees of the Company.
Normal retirement benefits under the Lamson & Sessions Plan, payable on a life
annuity basis, 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
thirty and the numerator of which is the participant's number of years of
service up to thirty.
Messrs. Schulze, Abel, Allen, Buck and Meyer are participants in the Lamson
& Sessions Plan with 8, 5, 27, 9 and 6 years of credited service, respectively,
thereunder. The Lamson & Sessions Plan provides credit for service with an
acquired company which maintained a pension plan and, accordingly, fourteen of
Mr. Allen's years of credited service are so covered. Any benefits received by
Mr. Allen under such other plan will be offset against any benefits he will
receive under the Lamson & Sessions Plan.
13
<PAGE> 17
SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS
Since 1975, the Company has had various forms of supplemental retirement
benefit agreements with certain officers and executives of the Company who would
not have been able to achieve approximately thirty years of service on their
normal retirement date.
The Company entered into amended and restated supplemental executive
retirement plans in March 1990 with Messrs. Schulze and Allen, and with Mr. Abel
as of January 1, 1991 (the "SERPS"). The SERPS provide that the employee will
receive, upon normal retirement, a supplemental retirement benefit equal to the
difference between (i) the amount which would have been payable to him 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 he had completed thirty years of service with the
Company and (ii) the amount actually payable to him thereunder or under any
other applicable plan for which the employee meets the eligibility requirements.
The SERPS also provide for, among other things, disability benefits and benefits
in the event the employee's employment with the Company is terminated other than
for cause prior to retirement and in the event of the employee's death prior to
retirement under certain circumstances. Under the SERPS, employees will also be
reimbursed for the amount of taxes payable on benefits received under the SERPS
in the event federal tax provisions relating to compensation paid in connection
with a change in control of the Company become applicable. The SERPS provide for
forfeiture of benefits in the event an employee is terminated for cause and in
certain other circumstances.
The Company annually expenses the actuarial present value of the
anticipated costs of all such supplemental retirement benefits. Such costs are
calculated on the basis of the total group of participants, not on an individual
basis, and are prorated for active participants on the basis of the employment
period until retirement, and for retired participants on the basis of a future
lifetime calculation. The periodic expense for 1995 for the participants as a
group (including the five executive officers named in the Summary Compensation
Table) was $480,700. Directors who are not or were not employees of the Company
or a subsidiary thereof are not eligible for such supplemental agreements.
AGREEMENTS WITH CERTAIN OFFICERS
The Company has entered into agreements with Messrs. Schulze, Abel, Allen,
Buck and Meyer (the "Employment Agreements"), which specify certain financial
arrangements that the Company will provide upon the termination of such
individuals' employment with the Company under certain circumstances. The form
of Employment Agreement was approved by the Board of Directors in July 1988. The
agreements are intended to ensure continuity and stability of senior management
of the Company.
Each of the Employment Agreements provides that in the event of certain
defined "changes in control" of the Company, the individual would continue his
employment with the Company in his then current position for a term ranging from
two to three years following such "change in control." Following a "change in
control" each officer who is a party to an Employment Agreement 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
officer's duties or compensation, (ii) a determination by such officer that he
is unable effectively to carry out his duties and responsibilities, (iii)
relocation of the officer's principal work location to a place more than fifty
miles from
14
<PAGE> 18
his principal work location immediately prior to the "change in control," (iv)
the liquidation, merger or sale of the Company (unless the new entity assumes
such agreement) or (v) a material breach of such agreement, such officer would
be entitled to resign and would be entitled to receive a lump sum payment equal
to the present value of his base compensation and incentive compensation (based
on historical experience) which would be payable during the balance of the
remaining period of employment. The officer 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 agreement. The amount of benefits
which an officer may receive pursuant to the Employment Agreements is capped to
avoid any payments constituting an "excess parachute payment" as defined in the
Internal Revenue Code.
None of these agreements creates employment obligations for the Company
unless a "change in control" has occurred, prior to which time the Company and
the officer 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 officers for "cause."
The Company has established trust agreements pursuant to which amounts
payable under the SERPS, the Employment Agreements and certain expenses incurred
by the officers who are parties thereto in enforcing their rights thereunder,
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, they will become irrevocable. Such
trusts are nominally funded, but the Company is obligated to fund them fully
upon the occurrence of the "change in control" events.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with each current
member of the Board of Directors as well as all of the Company's executive
officers. Such agreements essentially provide that to the extent permitted by
Ohio law, the Company will indemnify the indemnitee against all expenses, costs,
liabilities and losses (including attorneys' fees, judgments, fines or
settlements) incurred or suffered by the indemnitee in connection with any suit
in which the indemnitee is a party or otherwise involved as a result of his
service as a member of the Board of Directors or as an officer if the
indemnitee's conduct which gave rise to such liability meets certain prescribed
standards.
COMPENSATION COMMITTEE REPORT
OVERVIEW AND PHILOSOPHY
The Compensation and Organization Committee of the Board of Directors (the
"Committee") is composed entirely of nonemployee 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 which enhance shareholder value, to provide a
balance between annual and long-term forms of compensation and, above all, to
ensure that
15
<PAGE> 19
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 Internal
Revenue Code, which disallows a deduction to publicly held companies for
compensation paid to any executive officer whose compensation exceeds $1 million
and has concluded that this Section will not affect compensation paid to any
executive officer in 1996.
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
which 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. In determining the Chairman's
compensation, the Committee considered the Company's performance and recognized
(i) the overall improvement, on an operating basis, of the Company's financial
position during the past year, (ii) the further progress made in improving the
Company's capital structure, and (iii) the continuing improvement in the
strategic positioning of the Company.
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.
The Chairman's award is based solely on the financial performance of the Company
expressed in terms of earnings per share. Executive officers receive awards
based 80% on the financial performance of the Company and individual business
units and 20% on the achievement of specific personal goals and objectives.
STOCK OPTIONS AND LONG-TERM INCENTIVE COMPENSATION
The Committee also is charged with the responsibility of administering the
Company's 1988 Incentive Equity Performance 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.
The Committee fixes the terms 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. To tie
stock options more directly to performance of the Company's stock, the Committee
in 1993 changed the vesting schedule for stock options from 50% vesting one year
after the date of grant and 100% vesting after two years to a vesting schedule
under which, one year after the date of grant, three minimum stock price
appreciation levels must be reached as a condition to full exercise of the
option.
16
<PAGE> 20
Since stock options under the 1988 Incentive Equity Performance Plan and
grants under the Long-Term 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 Plan are made in the form of performance units
payable upon the achievement of three year corporate goals, currently expressed
in terms of earnings per share. 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 1995.
COMPENSATION AND ORGANIZATION COMMITTEE
D. Van Skilling, Chairman John C. Dannemiller
Francis H. Beam, Jr. A. Malachi Mixon, III
17
<PAGE> 21
COMPANY STOCK PERFORMANCE
The following performance graph compares the five year cumulative return
from investing $100 on December 31, 1990 in each of the Company's Common Shares,
the Standard & Poor's Electrical Equipment Index and the Standard & Poor's 500
Index, with dividends assumed to be reinvested when received.
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
<TABLE>
<CAPTION>
STANDARD &
POOR'S ELEC- STANDARD & PO
MEASUREMENT PERIOD LAMSON & TRICAL EQUIP- OR'S 500
(FISCAL YEAR COVERED) SESSIONS MENT INDEX INDEX
<S> <C> <C> <C>
12/90 100 100 100
12/91 106 133 130
12/92 145 145 140
12/93 123 175 155
12/94 155 177 157
12/95 200 249 215
[FIGURE1]
</TABLE>
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
<PAGE> 22
SECURITY OWNERSHIP OF MANAGEMENT
Each of the named executive officers beneficially owned the number of
Common Shares indicated opposite his name as of January 15, 1996. Except for Mr.
Schulze who beneficially owns 3.41% of the Company's Common Shares, none of the
named executive officers beneficially owns as much as one percent of the
Company's Common Shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME OWNERSHIP(1)(2)
---------------------------------------------------------------
<S> <C>
John B. Schulze............................... 477,534
James J. Abel................................. 96,600
Charles E. Allen.............................. 120,834
Mark R. Buck.................................. 46,850
A. Corydon Meyer.............................. 27,074
</TABLE>
- ---------------
(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
15, 1996 upon the exercise of outstanding options under the Company's stock
option plans: Mr. Schulze -- 322,134; Mr. Abel -- 93,600; Mr. Allen --
93,267; Mr. Buck -- 44,000; and Mr. Meyer -- 25,967.
(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, but as to which shares the officer may have
disclaimed beneficial ownership. 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 22,900 shares owned by his wife, as to which he has
disclaimed beneficial ownership. No other executive officer has disclaimed
beneficial ownership of any shares.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company'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 and the New York and Pacific
Stock Exchanges and to provide the Company 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 December 30, 1995, all Section 16(a)
filing requirements applicable to its executive officers, directors and greater
than ten percent beneficial owners were complied with, except as follows: on
September 21, 1995, Mr. Beam filed a late Form 4 indicating a purchase of Common
Shares.
PROPOSED AMENDMENT TO 1988 INCENTIVE EQUITY PERFORMANCE PLAN
(PROPOSAL NO. 2)
BACKGROUND
The Lamson & Sessions Co. 1988 Incentive Equity Performance Plan ("1988
Plan") was approved by the shareholders on May 5, 1988. On February 29, 1996,
the Board of Directors approved an amendment to the 1988 Plan, subject to
shareholder approval at the Annual Meeting. The proposed
19
<PAGE> 23
amendment would increase the number of shares to be issued under the 1988 Plan
from 1,150,000 to 1,800,000, thereby making 650,000 additional shares available
for grant under the Plan. The additional shares represent less than 5% of the
issued and outstanding stock of the Company. To date, options to acquire
approximately 983,000 Common Shares have been granted under the 1988 Plan.
Accordingly, the Board of Directors believes an increase in the maximum number
of shares for which awards under the 1988 Plan may be granted is necessary in
light of the Company's present intention to continue granting awards in order to
assist the Company in developing and maintaining strong management. The
following summary of the 1988 Plan as amended is qualified by reference to the
full text of the 1988 Plan.
PLAN SUMMARY
The purpose of the 1988 Plan is to encourage key executive and managerial
employees of the Company and its subsidiaries and affiliates to become owners of
the Company's Common Shares in order to increase their interest in the Company's
long-term success.
The 1988 Plan is administered by the Compensation and Organization
Committee. The Committee is authorized from time to time, upon recommendation of
the Chief Executive Officer, to select key employees and officers who will
participate in the 1988 Plan and to determine the size of the awards and grants,
and the conditions and terms applicable to them.
In general, the Company may grant Awards consisting of stock options to
purchase Common Shares, SARs held in tandem with stock options, restricted stock
awards ("Restricted Stock") and/or deferred stock awards ("Deferred Stock").
Stock options are granted for fixed terms and at a fixed price per share
which will not be less than the fair market value of the Common Shares on the
date the option is granted. The market value of the securities underlying
options previously granted was $8.125 at January 15, 1996. Options may be
granted that qualify as ISOs or that do not so qualify ("Non-Qualified Stock
Options"). The term for ISOs may not exceed ten years and, for Non-Qualified
Stock Options, may not exceed ten years and a day. A participant may not usually
exercise a stock option until one year after its grant. Awards of stock options
may be subject to conditions including the attainment of performance goals.
SARs may be granted in tandem with a stock option. SARs entitle the holder
to receive cash and/or Common Shares equal to the excess of the fair market
value of the Common Shares covered by the SAR over the option price of those
Common Shares. Generally, SARs may not be exercised during the first six months
of their term. When exercising the SAR the holder must surrender the underlying
stock option.
Awards of Restricted Stock are subject to conditions which may include the
attainment of performance goals and the payment of a purchase price which will
be set by the Compensation and Organization Committee.
Awards of Deferred Stock entitle the participant to a non-transferable
right to receive Common Shares after a specified deferral period. The
participant receives the Deferred Stock without payment; however, conditions may
be imposed upon the right to receive the Common Shares, including, without
limitation, the attainment of specified performance goals.
In the event of a "change in control" or upon a "potential change in
control" (each as defined in the 1988 Plan) of the Company, all stock options
and SARs fully vest and become exercisable, all restrictions and deferral
limitations are lifted on Restricted and Deferred Stock, and any or all awards
of stock may be cashed out on the basis of the highest price paid or offered for
Common Shares during the preceding sixty day period.
20
<PAGE> 24
PLAN BENEFITS
Set forth in the table below are the number of Non-Qualified Stock Options
that were granted under the Plan during the Company's last completed fiscal
year, to each of (i) the chief executive officer and the four most highly
compensated executive officers of the Company, (ii) all present executive
officers as a group and (iii) all employees, including all present officers who
are not executive officers, as a group. To date, no incentive stock options have
been granted under the Plan. The number of stock options that will be granted to
the aforementioned individuals and groups in the future is not determinable at
this time.
<TABLE>
<CAPTION>
NUMBER OF NONQUALIFIED
STOCK OPTIONS GRANTED
NAME AND POSITION DURING 1995
----------------------------------------------------------------------------------------
<S> <C>
John B. Schulze
Chairman of the Board,
President and Chief
Executive Officer............................................... 80,000
James J. Abel
Executive Vice President,
Secretary, Treasurer
and Chief Financial Officer..................................... 36,000
Charles E. Allen
Senior Vice President........................................... 15,000
Mark R. Buck
Vice President -
Carlon Electrical Products...................................... 15,000
A. Corydon Meyer
Vice President -
Lamson Home Products............................................ 15,000
All present nonemployee directors as a group...................... 0
All present executive officers as a group......................... 166,000
All employees, including all present officers who are not
executive officers, as a group.................................. 227,000
</TABLE>
FEDERAL INCOME TAX ASPECTS OF 1988 INCENTIVE EQUITY PERFORMANCE PLAN
The following is a brief summary of the Federal income tax consequences of
the transactions under the Plan based on Federal income tax laws in effect on
December 31, 1995. This summary is not intended to be exhaustive and does not
describe state or local tax consequences.
INCENTIVE STOCK OPTIONS. Generally, no taxable income is recognized by the
optionee upon the grant or exercise of an ISO. If Common Shares are issued to an
optionee pursuant to the exercise of an ISO, 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 such optionee, then (1)
upon sale of such shares, any amount recognized in excess of the option price
will be taxed to such optionee as long-term capital gain and any loss sustained
will be a long-term capital loss, and (2) no deduction will be allowed to the
Company for Federal income tax purposes. The exercise of an ISO will give rise
to an item of tax preference that may result in alternative minimum tax
liability for the optionee, unless the optionee engages, within the same year of
exercise, in a disqualifying disposition of the shares received upon exercise.
21
<PAGE> 25
If Common Shares acquired upon the exercise of an ISO are disposed of prior
to the expiration of either holding period described above, generally (1) the
optionee 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 exercise
(or, if less, the amount recognized on the disposition of such shares if a sale
or exchange) over the option price paid for such shares, and (2) the Company
will be entitled to deduct such amount for Federal income tax purposes if it
complies with withholding requirements ("withholding requirements"). Any further
gain (or loss) recognized by the participant will be taxed as short-term or
long-term capital gain (or loss), as the case may be, and will not result in any
deduction by the Company.
Subject to certain exceptions for disability or death, if an ISO is
exercised more than three months following the termination of employment, the
exercise of the option will generally be taxed as a Non-Qualified Stock Option.
NON-QUALIFIED STOCK OPTIONS. Except as noted below, with respect to
Non-Qualified Stock Options, (1) no income is recognized by the optionee at the
time the option is granted; (2) generally, at exercise, ordinary income is
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 exercise, and the Company is entitled to a tax
deduction in the same amount subject to the withholding requirements and the
ordinary and necessary test; and (3) at the time of sale of shares acquired
pursuant to the exercise of a Non-Qualified Stock Option, appreciation (or
depreciation) after the date of exercise is treated as either short-term or
long-term capital gain (or loss) depending on how long the shares have been
held. See discussions below regarding restricted stock and deferred stock awards
for tax rules applicable where the spread value of an option is settled in
restricted stock or deferred stock.
STOCK APPRECIATION RIGHTS. No income will be recognized by an optionee in
connection with the grant of an SAR. When the SAR is exercised, the optionee
will generally 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. The Company
will be entitled to a deduction for Federal income tax purposes at the same time
equal to the amount included in such optionee's income by reason of the exercise
subject to the withholding requirements and the ordinary and necessary test. If
the optionee receives Common Shares upon the exercise of an SAR, the
post-exercise appreciation (or depreciation) will be treated in the same manner
as discussed above under "Non-Qualified Stock Options."
RESTRICTED STOCK. A recipient of restricted stock generally will be
subject to tax at ordinary income rates on the fair market value of the
restricted stock at such time the stock is no longer subject to forfeiture or
restrictions on transfer for purposes of Section 83 of the Internal Revenue Code
of 1986 ("restrictions"). However, a recipient who so elects under Section 83(b)
of the Internal Revenue 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 of restricted stock
(determined without regard to the restrictions) over the purchase price, if any,
of such restricted stock. If the shares subject to such election are forfeited,
the recipient will only be entitled to a deduction, refund or loss for tax
purposes equal to the purchase price, if any, of the forfeited shares
(regardless of whether he made a Section 83(b) election). With respect to the
sale of the shares after the forfeiture period has expired, the holding period
to determine whether the recipient has long-term or short-term capital gain or
loss generally begins when the restrictions expire and the tax basis for such
shares will generally be based on the fair market value of such shares on such
date. However, if the recipient timely elects to be taxed as of the date of
transfer of the shares, the holding period commences on such date and the tax
basis will be equal to the fair market value of the shares on such date
(determined without regard to the
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<PAGE> 26
restrictions). The Company generally will be entitled to a deduction equal to
the amount that is taxable as ordinary income to the recipient subject to the
withholding requirements and the ordinary and necessary test.
DEFERRED STOCK. The recipient of a deferred stock award will generally be
subject to tax at ordinary income rates on the fair market value of the deferred
unrestricted stock on the date that such stock is transferred to the participant
under the award, and the capital gains/loss holding period for such stock will
also commence on such date. The Company generally will be entitled to a
deduction equal to the amount that is taxable as ordinary income to the
recipient subject to the withholding requirements and the ordinary and necessary
test.
CAPITAL GAINS. Under current law, capital gains are subject to the same
tax rates that apply to ordinary income, except that capital gains are subject
to a maximum tax rate of 28%. Capital losses, however, will not be treated like
ordinary losses, since capital losses must be offset against any capital gains,
with only the lesser of the excess of such capital losses over such capital
gains or $3,000 ($1,500 in the case of a married individual filing a separate
return) being deductible in the same manner as ordinary losses. Although
legislation to reduce the tax rate on certain capital gains has been introduced
in Congress and is pending, no legislation changing the capital gains tax rate
has yet been enacted. It is uncertain whether any such legislation will be
enacted or, if enacted, whether such legislation will apply to any pre-existing
or future awards under the Plan.
DIVIDENDS AND DIVIDEND EQUIVALENTS. Dividends paid on restricted stock
transferred to a participant will generally be treated as compensation that is
taxable as ordinary income to the participant and is deductible by the Company
subject to the withholding requirements and the ordinary and necessary test,
unless the participant makes a timely Section 83(b) election, in which case the
dividends are treated as dividends that are taxable as ordinary income to the
participant but are not deductible by the Company. If dividend equivalents are
credited with respect to deferred stock awards, such equivalents will be taxed
at ordinary income rates when paid to the participant and will generally be
deductible by the Company at that time subject to the withholding requirements
and the ordinary and necessary test.
PAYMENTS IN RESPECT OF A CHANGE IN CONTROL. The Plan authorizes the
acceleration of payment of awards and related Common Shares in the event of a
Change in Control or Potential Change in Control as defined in the Plan. Such
acceleration of payment may cause part or all of the consideration involved to
be treated as a "parachute payment" under the Internal Revenue Code, which may
subject the recipient thereof to a 20% excise tax and which may not be
deductible by the participant's employer.
REQUIRED VOTE
The proposed amendment to the Lamson & Sessions 1988 Incentive Equity
Performance Plan requires the affirmative vote of the holders of a majority of
the outstanding common shares issued and outstanding and entitled to vote at the
meeting whether present in person or by proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL
INDEPENDENT AUDITORS
For many years the firm of Ernst & Young LLP ("Ernst & Young"), Cleveland,
Ohio, has served as independent auditors to the Company. In February 1995, Ernst
& Young was reappointed by the Board of Directors of the Company, on the
recommendation of the Audit Committee, as the Company's
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<PAGE> 27
independent auditors for the fiscal year ended December 30, 1995.
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.
SHAREHOLDER PROPOSALS
Any shareholder proposal intended to be presented at the Annual Meeting of
Shareholders to be held in April 1997, must be received by the Company's
Secretary at its principal office in Cleveland, Ohio, not later than November
15, 1996 for inclusion in the Company's Proxy Statement and form of proxy
relating to the 1997 Annual Meeting of Shareholders. 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.
OTHER MATTERS
The Board of Directors of the Company is not aware of any matter to come
before the Meeting other than as herein presented. However, if any other matter
is properly brought before the Meeting the persons appointed as proxies in the
accompanying proxy will have discretion to vote or act thereon according to
their best judgment.
The Company's 1995 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
Secretary
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<PAGE> 28
LAMSON & SESSIONS THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS.
25701 Science Park Drive The undersigned hereby appoints J. J.
P Cleveland, Ohio 44122 Abel, C. E. Allen and W. H.
Breitenbach, and each of them, as
------------------------ proxies, each with the power to appoint
R his substitute, and hereby authorizes
them to represent and to vote, as
designated below, all the Common Shares
O of The Lamson & Sessions Co. held of
record by the undersigned on March 4,
1996 at the Annual Meeting of
X Shareholders to be held on April 26,
1996 or any adjournment thereof.
Y 1. ELECTION OF CLASS III DIRECTORS:
TO VOTE FOR ALL NOMINEES LISTED BELOW* / / TO WITHHOLD AUTHORITY / /
for all nominees listed below
A. Malachi Mixon, III, John C. Morley, John B. Schulze
*To withhold authority to vote for any individual nominee listed above,
write that nominee's name on the space provided below.
-----------------------------------------------------------------------------
2. Approval of an increase of 650,000 in the number of Common Shares covered
by The Lamson & Sessions Co. 1988 Incentive Equity Performance Plan.
FOR / / AGAINST / / ABSTAIN / /
3. In their discretion, the persons named as proxies above are authorized to
vote upon any other matter as may properly come before the annual meeting
or any adjournment thereof.
(Continued and to be signed on the other side)
PROXY NO. (proxy -- continued from other side) NO. OF SHARES
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 AND FOR APPROVAL OF THE AMENDMENT TO THE LAMSON & SESSIONS
CO. 1988 INCENTIVE EQUITY PERFORMANCE PLAN.
Please sign exactly as name appears below. When shares are held by
------------------------------------------
joint tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title or capacity. 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.
DATED , 1996
----------------
--------------------------------
Signature
--------------------------------
Second signature if held jointly
PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE
