<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)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] 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 LOGO
25701 Science Park Drive
Cleveland, Ohio 44122
(216) 464-3400
March 18, 1999
To Our Shareholders:
On behalf of the Board of Directors and management of Lamson & Sessions, I
cordially invite you to attend the 1999 Annual Meeting of Lamson's shareholders
to be held on Friday, April 23, 1999, at 9:00 a.m., local time, at the
Renaissance Cleveland Hotel, 24 Public Square, Cleveland, Ohio 44113.
At this meeting, shareholders are expected to elect three directors for a
three-year term ending in the year 2002 and to amend Lamson's Nonemployee
Directors Stock Option 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 LOGO
25701 Science Park Drive
Cleveland, Ohio 44122
(216) 464-3400
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
APRIL 23, 1999
Notice is hereby given that the Annual Meeting of Shareholders of The
Lamson & Sessions Co. will be held at the Renaissance Cleveland Hotel, 24 Public
Square, Cleveland, Ohio 44113, on April 23, 1999, 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 the year 2002;
(2) An amendment to Lamson's Nonemployee Directors Stock Option Plan; and
(3) Any other business as may properly come before the Annual Meeting or
any adjournment thereof.
If you were a shareholder of record at the close of business on March 3,
1999, you are entitled to notice of and to vote at the Annual Meeting and any
adjournment thereof.
By order of the Board of Directors.
/s/ John B. Schulze
JOHN B. SCHULZE
Chairman of the Board
and Chief Executive Officer
March 18, 1999
------------------
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE MARK, SIGN, DATE AND
RETURN THE ENCLOSED PROXY PROMPTLY, USING THE RETURN ENVELOPE ENCLOSED SO THAT
YOUR VOTE WILL BE COUNTED AT THE ANNUAL MEETING.
<PAGE> 4
LAMSON & SESSIONS LOGO
25701 Science Park Drive
Cleveland, Ohio 44122
(216) 464-3400
---------------------------------
PROXY STATEMENT
---------------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 23, 1999
DATE OF THE PROXY STATEMENT -- MARCH 18, 1999
GENERAL INFORMATION
INFORMATION ABOUT THE ANNUAL MEETING
Our Annual Meeting will be held on Friday, April 23, 1999, at 9:00 a.m.,
local time, at the Renaissance Cleveland Hotel, 24 Public Square, Cleveland,
Ohio 44113.
INFORMATION ABOUT THIS PROXY STATEMENT
We sent you this Proxy Statement and the enclosed proxy card because
Lamson's Board of Directors is soliciting your proxy to vote your shares at the
Annual Meeting. If you own Lamson common stock in more than one account, such as
individually and also jointly with your spouse, you may receive more than one
set of these proxy materials. To assist us in saving money and to provide you
with better shareholder services, we encourage you to have all your accounts
registered in the same name and address. You may do this by contacting Lamson's
Shareholder Relations Department at (216) 464-3400. This Proxy Statement
summarizes information that we are required to provide to you under the rules
of the Securities and Exchange Commission and which is designed to assist you
in voting your shares. On or about March 18, 1999, we began mailing these proxy
materials to all shareholders of record at the close of business on March 3,
1999.
PROPOSALS YOU MAY VOTE ON
1. The election of three directors in Class III, with terms expiring in
2002; and
2. An amendment to Lamson's Nonemployee Directors Stock Option Plan.
The Board recommends you vote FOR each of the nominees for director and FOR
the amendment to the Nonemployee Directors Stock Option Plan.
1
<PAGE> 5
INFORMATION ABOUT VOTING
Shareholders can vote on matters presented at the Annual Meeting in two
ways:
- By Proxy - You can vote by signing, dating and returning the enclosed
proxy card. If you do this, the individuals named on the card (your
"proxies") will vote your shares in the manner you indicate. You may
specify on your proxy card whether your shares should be voted for all,
some or none of the nominees for director and whether your shares should
be voted for or against the amendment to the Nonemployee Directors Stock
Option Plan to be presented at the meeting. If you do not indicate
instructions on the card, your shares will be voted for the election of
the directors and for the amendment to the Nonemployee Directors Stock
Option Plan.
- In Person - You may come to the Annual Meeting and cast your vote there.
You may revoke your proxy at any time before it is exercised by sending a
written notice of revocation to Lamson's Secretary, James J. Abel, prior to the
Annual Meeting.
Each share of Lamson common stock is entitled to one vote. As of March 15,
1999, there were 13,444,534 shares of common stock outstanding.
CUMULATIVE VOTING
Notice that cumulative voting is desired must be given to the President, a
Vice President or the Secretary of Lamson at least forty-eight hours before the
Annual Meeting. At the start of the Annual Meeting, Lamson's Chairman or
Secretary or the shareholder giving such notice must announce notice was given
that cumulative voting is desired. If the notice is properly given, each
shareholder will have the right to cumulate his or her voting power and cast all
of his or her votes for one or more of the nominees. If voting for the election
of directors is cumulative, the persons named in the enclosed proxy will vote
the shares represented thereby and by other proxies held by them so as to elect
as many as possible of the three nominees for Class III.
INFORMATION REGARDING TABULATION OF THE VOTE
Lamson's policy is that all proxies, ballots and votes tabulated at a
meeting of the shareholders are confidential. Representatives of National City
Bank will tabulate votes and act as Inspectors of Election at the Annual
Meeting.
QUORUM REQUIREMENT
A quorum of shareholders is necessary to hold a valid meeting. Under
Lamson's Amended Code of Regulations, if shareholders holding 75% of the voting
power are present in person or by proxy, a quorum will exist to elect directors
at the meeting. For all other business that may be conducted at the Annual
Meeting, the holders of common stock entitled to exercise two-thirds of the
voting power of the Company, present in person or by proxy, shall constitute a
sufficient quorum. Abstentions are counted as present for establishing a quorum
but broker non-votes are not. A broker non-vote occurs when a broker votes on
some matters on the proxy card but not on others because the broker does not
have the authority to do so.
2
<PAGE> 6
The holders of a majority of the voting power represented at the Annual
Meeting, whether or not a quorum is present, may adjourn the meeting without
notice other than by announcement at the meeting of the date, time and location
at which the meeting will be reconvened.
INFORMATION ABOUT VOTES NECESSARY FOR ACTION TO BE TAKEN
Election of Directors
The three nominees for directors receiving the greatest number of votes
will be elected at the meeting.
Amendment to the Nonemployee Directors Stock Option Plan
Two-thirds of all the votes cast at the meeting will be required for the
approval of the amendment to Lamson's Nonemployee Directors Stock Option Plan.
Abstentions and broker non-votes will have no effect on the result of the
vote on the two items to be presented at the meeting.
OTHER MATTERS
The Board of Directors does not know of any other matter which will be
presented at the Annual Meeting other than the proposals discussed in this Proxy
Statement. Under our Code of Regulations, generally no business besides the two
items discussed in this proxy may be transacted at the meeting. However, if any
other matter properly comes before the Annual Meeting, your proxies will act on
such proposal in their discretion.
REVOCATION OF PROXY
If you give a proxy, you may revoke it at any time before it is exercised
by giving notice to Lamson's Secretary in writing prior to the Annual Meeting.
COSTS OF PROXY SOLICITATION
Lamson will pay all the costs of soliciting these proxies. In addition to
solicitation by mail, proxies may be solicited personally, by telegram,
telephone or personal interview by an officer or regular employee of the
Company. Lamson will also ask banks, brokers and other institutions, nominees
and fiduciaries to forward the proxy material to their principals and to obtain
authority to execute proxies, and reimburse them for expenses. In addition,
Lamson has also retained Georgeson & Company, Inc. to aid in the distribution
and solicitation of proxies, and has agreed to pay Georgeson a fee of
approximately $6,500, plus reasonable expenses.
3
<PAGE> 7
INFORMATION ABOUT LAMSON COMMON STOCK OWNERSHIP
The following table sets forth as of December 31, 1998 (except as otherwise
noted), all persons we know to be "beneficial owners" of more than five percent
of Lamson's common stock. This information is based on Schedule 13D and 13G
reports filed with the Securities and Exchange Commission by each of the
individuals or firms listed in the table below. If you wish, you may obtain
these reports from the Securities and Exchange Commission.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS
------------------- ----------------------- ----------
<S> <C> <C>
Gabelli Funds, Inc.,
GAMCO Investors, Inc.
Mario J. Gabelli
655 Third Avenue
New York, New York 10017 1,683,728(2) 12.52%
David L. Babson & Co., Inc.
One Memorial Drive
Cambridge, Massachusetts 02142-1300 1,671,400(3) 12.43%
Farhad Fred Ebrahimi
475 Circle Drive
Denver, Colorado 80206 1,421,400(4) 10.57%
Dimensional Fund Advisors Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401 913,000(5) 6.79%
The TCW Group, Inc.
865 South Figueroa Street
Los Angeles, California 90017 812,800(6) 6.05%
J&W Seligman & Co. Incorporated
100 Park Avenue
New York, New York 10017 779,375(7) 5.79%
The Lamson & Sessions Co. Salaried
Employees' Retirement Plan
25701 Science Park Drive
Cleveland, Ohio 44122 682,756(8) 5.07%
</TABLE>
- - ---------------
(1) "Beneficial Ownership" is a technical term broadly defined by the Securities
and Exchange Commission to mean more than ownership in the usual sense. So,
for example, you "beneficially" own Lamson common stock not only if you hold
it directly, but also if you indirectly (through a relationship, a position
as a director or trustee, or a contract or understanding), have (or share)
the power to vote the stock, or to sell it, or you have the right to acquire
it within 60 days.
(2) Mario J. Gabelli and various entities which he directly or indirectly
controls and for which he acts as chief investment officer reported the
ownership of such shares (as of March 12, 1997) in a Schedule 13D which was
filed with the Securities and Exchange Commission on March 17, 1997.
(3) David L. Babson & Co., Inc. ("DLB"), in its capacity as investment advisor,
may be deemed the beneficial owner of 1,671,400 Common Shares, which are
owned by numerous investment counseling clients and which ownership is
reported in a Schedule 13G which was filed with the Securities and Exchange
Commission on January 21, 1999.
4
<PAGE> 8
(4) Farhad Fred Ebrahimi reported the beneficial ownership (as of June 25, 1998)
of such shares in a Schedule 13D which was filed with the Securities and
Exchange Commission on October 5, 1998. The reporting person claims
beneficial ownership of all such shares. During 1998, Mr. Ebrahimi filed
late Forms 3 and 4 relating to six transactions involving common stock
beneficially owned by him.
(5) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, reported the beneficial ownership of such shares in a Schedule 13G
which was filed with the Securities and Exchange Commission on February 11,
1999. 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.
(6) 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/A which was filed with the Securities and Exchange
Commission on February 12, 1999. Each of the reporting persons disclaims
beneficial ownership of all such shares.
(7) J&W Seligman & Co. Incorporated ("JWS") reported the ownership of such
shares in a Schedule 13G filed with the Securities and Exchange Commission
on February 9, 1999. The Schedule 13G was also filed on behalf of William C.
Morris, who may be deemed to control JWS.
(8) The Lamson & Sessions Co. Salaried Employees' Retirement Plan reported the
ownership of such shares (as of July 8, 1998) in a Schedule 13G filed with
the Securities and Exchange Commission on August 7, 1998.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
Nominees for Directors
The Board of Directors has ten members and is divided into three classes.
Class I currently consists of four members, and Classes II and III currently
consist of three members each. A single class of directors is elected by the
shareholders annually for a three-year term. The terms of the following Class
III directors expire at the Annual Meeting: A. Malachi Mixon, III, John C.
Morley and John B. Schulze. For election as Class III directors at the meeting,
the Compensation and Organization Committee has recommended, and the Board of
Directors has approved, the re-nomination of Messrs. Mixon, Morley and Schulze
to serve as directors for the three-year term of office which will expire at the
Annual Meeting of Shareholders in the year 2002. 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 Annual Meeting, shares of common stock of Lamson
(the "Common Shares") represented by the proxies so appointed
5
<PAGE> 9
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 I and II,
who have previously been elected to terms which will expire in the year 2000 and
in the year 2001, respectively. Also listed is the year in which each individual
first became a director of the Company, the individual's principal occupation,
information relating to the individual's beneficial ownership of Common Shares
of the Company as of March 15, 1999 and certain other information, based in part
on data submitted by the directors. Except for Mr. Schulze, who beneficially
owns 4.63% of the Company's Common Shares, no director or nominee beneficially
owns as much as one percent of the Company's Common Shares. Messrs. Abel and
Allen, executive officers of the Company, beneficially own 1.44% and 1.01%,
respectively, of the Company's Common Shares. All directors and officers as a
group beneficially own 10.32% of the Company's Common Shares.
NOMINEES FOR ELECTION AT THE MEETING
<TABLE>
<CAPTION>
NAME, AGE YEAR FIRST COMMON SHARES
PRINCIPAL OCCUPATION BECAME A BENEFICIALLY
AND BUSINESS(1) OTHER DIRECTORSHIPS DIRECTOR OWNED(2)
-------------------- ------------------- ---------- -------------
<S> <C> <C> <C>
CLASS III: TERM EXPIRES IN 1999
A. Malachi Mixon, III (58) Invacare Corporation 1990 70,575
Chairman of the Board and NCS Healthcare, Inc. The
Chief Executive Officer, Sherwin Williams Company
Invacare Corporation Cleveland Clinic Foundation
(Manufacturer and
distributor of home
healthcare products)
John C. Morley (67) AMP Incorporated 1996 10,713
President, Evergreen Cleveland-Cliffs, Inc.
Ventures Ltd. (Private Ferro Corporation
investment company)
John B. Schulze (61) None 1984 676,200(3)
Chairman of the Board,
President and Chief
Executive Officer of the
Company
</TABLE>
6
<PAGE> 10
CONTINUING DIRECTORS
<TABLE>
<CAPTION>
NAME, AGE YEAR FIRST COMMON SHARES
PRINCIPAL OCCUPATION BECAME A BENEFICIALLY
AND BUSINESS(1) OTHER DIRECTORSHIPS DIRECTOR OWNED(2)
-------------------- ------------------- ---------- -------------
<S> <C> <C> <C>
CONTINUING CLASS II: TERM EXPIRES IN 2000
John C. Dannemiller (60) Applied Industrial 1988 37,405
Chairman of the Board and Chief Technologies
Executive Officer, Applied First Star Bank Corporation
Industrial Technologies
(Formerly Bearings, Inc.,
Distributor of bearings, power
transmission components and related
products)
George R. Hill (57) None 1990 37,350
Senior Vice President, The Lubrizol
Corporation (Full service supplier
of performance chemicals to
worldwide transportation and
industrial markets)
D. Van Skilling (65) First American Financial 1989 38,683
Chairman of the Board and Chief Corporation
Executive Officer, Experian U.S. Business Bank
Information Solutions, Inc.
(Supplier of credit, marketing and
real estate information and
decision support systems)
</TABLE>
7
<PAGE> 11
<TABLE>
<CAPTION>
NAME, AGE YEAR FIRST COMMON SHARES
PRINCIPAL OCCUPATION BECAME A BENEFICIALLY
AND BUSINESS(1) OTHER DIRECTORSHIPS DIRECTOR OWNED(2)
-------------------- ------------------- ---------- -------------
<S> <C> <C> <C>
CONTINUING CLASS I: TERM EXPIRES IN
2001
James T. Bartlett (61) Keithley Instruments, Inc. 1997 9,937
Managing Director, Primus Venture Oglebay Norton Company
Partners (Private investments firm)
Francis H. Beam, Jr. (63) Advanced Lighting 1990 20,798
President, Pepper Capital Corp. Technologies, Inc.
(Venture capital firm)
Martin J. Cleary (63) Guardian Life Insurance Company 1989 34,000
President and Chief Operating of America
Officer, The Richard E. Jacobs Cleveland Indians Baseball Co.,
Group (Real estate developer) Inc.
William H. Coquillette (49) None 1997 6,525
Partner, Jones, Day, Reavis & Pogue
(Law firm)
All present directors and executive 1,505,824
officers as a group (18 persons)
</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 other than (a) Mr. Skilling who was the Executive Vice
President of TRW Information Systems and Services, TRW Inc., until September
1996 (Manufacturer of high technology products for space, defense,
automotive and information systems markets), and (b) Mr. Morley who was the
President and Chief Executive Officer of Reliance Electric Company until
June 1995 (Manufacturer of electrical and telecommunications equipment and
systems).
(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
15,1999 upon the exercise of outstanding options under the Company's stock
option plans: Mr. Schulze -- 496,300 and all directors and executive
officers as a group -- 477,664.
(3) Includes shares held jointly or in the name of the director's spouse, minor
children, or relatives sharing his home, reporting of which is required by
applicable rules of the SEC. Unless otherwise indicated, or in the case of
joint ownership, the listed individuals possess sole voting power and sole
investment power with respect to such shares. The figure for Mr. Schulze
includes 25,900 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.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors oversees the business and affairs of Lamson and
monitors the performance of management. The Board met seven times during 1998.
8
<PAGE> 12
The Board has two committees: the Audit Committee and the Compensation and
Organization Committee. Each committee reports to the Board at the next meeting
of the Board following a committee meeting. The Audit Committee and the
Compensation and Organization Committee each held two meetings in 1998.
STANDING COMMITTEES OF THE BOARD OF DIRECTORS
THE AUDIT COMMITTEE: Messrs. Beam (Chairman), Cleary, Morley and Dr. Hill
currently are the members of the Audit Committee. 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 Annual Report on Form 10-K to the
Securities and Exchange Commission (the "SEC"). The Audit Committee meets
privately with the independent auditors and with the Company's internal auditors
at each of its meetings.
THE COMPENSATION AND ORGANIZATION COMMITTEE: Messrs. Skilling (Chairman),
Bartlett, Beam, Dannemiller and Mixon currently are the members of the
Compensation and Organization Committee. 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 Compensation and Organization Committee also reviews and recommends
candidates for election to the Board of Directors and appointments to any
committee of the Board. The Compensation and Organization Committee will
consider any nominee recommended by a shareholder of the Company. A resume of
the candidate's business experience and background should be directed in writing
to the attention of Lamson's Secretary.
COMPENSATION OF LAMSON'S DIRECTORS
Directors who are employees of Lamson do not receive any separate fees or
other remuneration for serving as a director or a member of any Committee of the
Board. Nonemployee directors are each paid an annual retainer of $12,500 for
their service on the Board of Directors, and receive an additional fee of $1,200
for each Board or Board Committee meeting attended. Each of the Chairmen of the
Audit Committee and the Compensation and Organization Committee receives an
additional annual fee of $1,500. Lamson has established a Deferred Compensation
Plan for nonemployee directors, under which directors may elect to defer their
annual retainers and meeting fees. Under this Plan, deferred fees may be
invested by the trustee, at a director's option, in either a money market fund
or Common Shares of the Company. If a director elects to have this deferred
compensation invested in Common Shares of the Company, the director will receive
an additional sum, also invested in Common Shares, equal to 25% of the deferred
amount.
Lamson's nonemployee directors' retirement benefits 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 are eligible to participate. The
Program generally provides for normal retirement benefits payable upon
attainment of age seventy and completion of five years of continuous service.
The Program also contains provisions for early retirement benefits, 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
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<PAGE> 13
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, the participant's 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: Lamson's Nonemployee Directors
Stock Option Plan (the "Directors Plan"), approved by the Company's shareholders
in 1994, authorizes the grant of options to nonemployee directors for the
purchase of Common Shares. The Directors Plan provides that each year on the
Monday following the Annual Meeting of Shareholders, each individual elected,
re-elected or continuing as a nonemployee director automatically receives a
nonqualified option to purchase 1,000 Common Shares. The exercise price for such
options is the average of the high and low prices at which the Common Shares
traded on the New York Stock Exchange, Inc. ("NYSE") on the date of grant.
Options become exercisable one year after the date of grant and expire ten years
after the date of the grant. The Board of Directors has reserved 60,000 Common
Shares for issuance under the Directors Plan.
Options granted to a nonemployee director must be exercised within 36
months of retirement as a director. Upon the death of a nonemployee director,
the director's legal representative or heirs will have twelve months within
which to exercise those options which were exercisable at the time of death.
If a director resigns, or 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.
Pursuant to the Directors Plan, on April 27, 1998 each nonemployee director
was granted a nonqualified stock option to purchase 1,000 Common Shares at an
exercise price of $7.469 per share. These stock options are scheduled to become
exercisable on April 27, 1999.
10
<PAGE> 14
EXECUTIVE COMPENSATION
The following table summarizes the compensation earned by the Company's
five most highly compensated executive officers (the "Named Executive Officers")
with respect to the fiscal year shown for services rendered to the Company and
its subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------------------
ANNUAL AWARDS PAYOUTS
COMPENSATION ---------- -----------
---------------------------------- SECURITIES PERFORMANCE ALL OTHER
NAME AND OTHER ANNUAL UNDERLYING UNIT COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(#) PAYOUTS (1)(2)
------------------ ---- ------ ----- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
John B. Schulze........... 1998 $395,000 $380,000 $ -- 70,000 $ -- $ 28,049
Chairman of the Board,.. 1997 395,000 -- -- 70,000 -- 28,118
President and Chief..... 1996 395,000 163,000 -- 65,000 105,000 27,924
Executive Officer
James J. Abel............. 1998 $260,000 101,400 -- 35,000 -- 111,750(3)
Executive Vice
President,............ 1997 250,000 -- -- 31,000 -- 10,344
Secretary, Treasurer.... 1996 235,000 79,500 -- 27,000 67,500 10,130
and Chief Financial
Officer
Charles E. Allen.......... 1998 $156,000 93,500 -- -- -- 14,720
Senior Vice President... 1997 156,000 -- -- 10,000 -- 14,801
1996 150,000 38,600 -- 10,000 37,500 14,608
Donald A. Gutierrez....... 1998 $155,000 58,500 -- 20,000 -- 35,325(3)
Vice President.......... 1997 145,000 -- -- 3,500 -- 2,957
Carlon (4).............. 1996 110,000 10,000 -- 3,500 -- --
Albert J. Catani, II...... 1998 $147,000 43,500 -- 15,000 -- 47,799(3)
Vice President.......... 1997 143,000 -- -- 10,000 -- 4,074
Manufacturing........... 1996 135,000 34,800 -- 6,000 -- 3,038
</TABLE>
- - ---------------
(1) Includes split dollar life insurance premium payments paid for Mr. Schulze,
Mr. Abel, Mr. Allen, Mr. Gutierrez and Mr. Catani in 1998 of $23,249,
$5,550, $10,040, $-0- and $-0-, respectively; in 1997 of $23,368, $5,594,
$10,051, $-0- and $-0-, respectively; and, in 1996 of $23,424, $5,530,
$10,108, $-0- and $-0-, respectively.
(2) 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. Gutierrez and Mr. Catani in 1998 totaled
$4,800, $4,800, $4,680, $3,825 and $4,299, respectively; in 1997 totaled
$4,750, $4,750, $4,750, $2,957 and $4,074, respectively; and in 1996 totaled
$4,500, $4,500, $4,500, $-0- and $3,038, respectively.
(3) Pursuant to the implementation of stock ownership guidelines for the
Company's executive officers by the Compensation and Organization Committee
of the Company's Board of Directors, Messrs. Abel, Gutierrez and Catani each
elected to defer a portion of their 1998 annual bonuses and invest these
amounts in Common Shares of the Company. Accordingly, income amounts
deferred by Messrs. Abel, Gutierrez and Catani are $101,400, $31,500 and
$43,500, respectively.
(4) Carlon is a business unit of the Company.
11
<PAGE> 15
STOCK OPTIONS
The following table sets forth information concerning stock option grants
made to the Named Executive Officers during fiscal year 1998 pursuant to the
Company's 1988 Incentive Equity Performance Plan (the "1988 Plan").
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
- - ------------------------------------------------------------------------------------- ----------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANT
OPTIONS GRANTED TO EXERCISE DATE
GRANTED EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME (#)(1) FISCAL YEAR ($/SH) DATE VALUE(2)
---- ---------- ------------ -------- ---------- --------
<S> <C> <C> <C> <C> <C>
John B. Schulze................... 70,000 15.49% $6.938 2/26/08 $179,200
James J. Abel..................... 35,000 7.75% $6.938 2/26/08 89,600
Charles E. Allen.................. -- -- -- -- --
Donald A. Gutierrez............... 20,000 4.43% $6.938 2/26/08 51,200
Albert J. Catani, II.............. 15,000 3.32% $6.938 2/26/08 38,400
</TABLE>
- - ---------------
(1) Options are exercisable after February 26, 1999 and then only as follows:
one-third on each anniversary of the grant date over three years, with the
number of shares vested in each year rounded to the nearest whole share. 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 fully vest and
become exercisable and all awards of stock may be cashed out on the basis of
the highest price paid or offered for Common Shares during the preceding
60-day period.
(2) The present value determinations in this column were made pursuant to rules
promulgated by the SEC using a Black-Scholes option pricing model and,
therefore, are not intended to forecast possible future appreciation, if
any, of the Company's Common Shares. The actual value, if any, an executive
officer may realize will depend on the excess of the stock price over the
exercise price on the date the option is exercised, so that there is no
assurance that the value realized by an executive officer will be at or near
the value estimated by the Black-Scholes model. The estimated values under
that model are based on arbitrary assumptions as to variables such as
interest rates, stock price volatility, time of exercise and dividend yield.
The Company determined the estimated values using volatility assumptions
based on 48 months of stock prices; interest rate assumptions based on the
five-year Treasury Strip Yield, as reported in The Wall Street Journal; a
dividend yield assumption of zero; and an assumed time of exercise of the
option of five years.
12
<PAGE> 16
STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information about stock options exercised
during fiscal year 1998 by the Named Executive Officers and the fiscal year-end
values of unexercised options held by the Named Executive Officers. All of such
options were granted under the 1988 Plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS HELD AT OPTIONS HELD AT
SHARES JANUARY 2, 1999(#) JANUARY 2, 1999(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John B. Schulze......... -- -- 427,966 138,334 $ 65,000 $ --0--
James J. Abel........... -- -- 153,933 64,667 21,075 --0--
Charles E. Allen........ -- -- 105,599 10,001 15,405 --0--
Donald A. Gutierrez..... -- -- 5,250 21,750 --0-- --0--
Albert J. Catani, II.... -- -- 14,833 23,667 --0-- --0--
</TABLE>
- - ---------------
(1) Based on the closing price on the New York Stock Exchange--Composite
Transactions of the Company's Common Shares on December 31, 1998 (the last
trading day in fiscal year 1998) of $5.125.
13
<PAGE> 17
PENSION BENEFITS
The following table shows the estimated annual pension benefits under The
Lamson & Sessions Co. Salaried Employees' Retirement Plan ("Lamson & Sessions
Plan"), that would be payable to employees in various compensation
classifications upon retirement at age sixty-five during the year 1998.
<TABLE>
<CAPTION>
ANNUAL NORMAL RETIREMENT BENEFITS
FOR YEARS OF CREDITED SERVICE INDICATED
AVERAGE ANNUAL -----------------------------------------
COMPENSATION 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>
The amounts listed in the table are computed on a straight-life annuity
basis and are subject to an offset for Social Security benefits. These amounts
have been determined without regard to the maximum benefit limitations for
defined benefit plans and the limitations on compensation imposed by the
Internal Revenue Code of 1986, as amended (the "Code"). The Code places
limitations on the amount of compensation that may be taken into account in
calculating pension benefits and on the amount of pensions that may be paid
under federal income tax qualified plans such as the Lamson & Sessions Plan. For
benefits accruing in plan years beginning after 1998, no more than $160,000
(indexed for inflation) in annual compensation may be taken into account.
However, under the Supplemental Executive Retirement Plan agreements, ("SERPS")
described below, participating executives will receive the amounts to which they
otherwise would have been entitled under the Lamson & Sessions Plan provided
they meet the terms of the applicable SERP.
The amounts shown in the column under the heading "Average Annual
Compensation" are based on the highest five consecutive years of compensation
during the last ten years prior to retirement and include salary, overtime and
bonuses, but exclude commissions and stock option awards. Normal retirement
benefits under the Lamson & Sessions Plan are equal to the greater of (a) 50% of
a participant's average annual compensation based on the highest five
consecutive years during the last ten years prior to retirement less 50% of the
participant's primary Social Security benefit or (b) $3,600 times a fraction,
the denominator of which is 30 and the numerator of which is the participant's
number of years of service up to 30.
Messrs. Schulze, Abel, Allen, Gutierrez and Catani are participants in the
Lamson & Sessions Plan with 11, 8, 30, 2 and 3 years of credited service,
respectively, under the Lamson & Sessions Plan. The
14
<PAGE> 18
Company has entered into amended and restated SERPS with Messrs. Schulze, Abel
and Allen. Messrs. Schulze and Abel will not be able to achieve thirty years of
service on their normal retirement dates.
The SERPS provide that the executive will receive, upon normal retirement,
a supplemental retirement benefit equal to the difference between (i) the amount
that would have been payable to the executive under the Lamson & Sessions Plan,
without regard to any federal statutory limitation on the annual amount of
benefits payable under the Lamson & Sessions Plan and the amount of compensation
taken into account in calculating benefits under the Lamson & Sessions Plan, as
if the executive had completed thirty years of service with the Company, and
(ii) the amount actually payable to the executive under the Lamson & Sessions
Plan or under any other applicable plan for which the executive meets the
eligibility requirements. The SERPS also provide for, among other things,
disability benefits and benefits in the event the executive's employment with
the Company is terminated under certain circumstances prior to retirement and in
the event of the executive's death prior to retirement under certain
circumstances. Under the SERPS, executives 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" (as defined in the SERPS) of the Company, become applicable.
AGREEMENTS WITH CERTAIN OFFICERS
Lamson has entered into agreements with Messrs. Schulze, Abel, Allen,
Gutierrez and Catani (the "Employment Agreements"), which specify certain
financial arrangements that the Company will provide upon the termination of
such individuals' employment with the Company under circumstances involving a
"change in control" (as defined in the Employment Agreements) of the Company.
The Employment 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 a "change
in control" of the Company, the individual would continue employment with the
Company in the individual's then current position for a term ranging from two to
three years following the "change in control." Following a "change in control"
the individual would be entitled during the ensuing period of employment to
receive base compensation and to continue to participate in incentive and
employee benefit plans consistent with past practices. Upon the occurrence of a
"change in control" followed by (i) a significant adverse change in the nature
or scope of the individual's duties or compensation, (ii) the individual's
determination of being unable effectively to carry out the current duties and
responsibilities, (iii) relocation of the individual's principal work location
to a place more than fifty miles from the principal work location immediately
prior to the "change in control," (iv) the liquidation, merger or sale of the
Company (unless the new entity assumes the Employment Agreement) or (v) a
material breach of the Employment Agreement, the individual would be entitled to
resign and would be entitled to receive a lump sum payment equal to the present
value of the then current base compensation and incentive compensation (based on
historical experience) that would be payable during the balance of the remaining
period of employment. The individual would also be entitled to continue to
participate in employee benefit plans consistent with past practices for the
remaining period of employment provided in his Employment Agreement. The amount
of benefits that an individual may receive pursuant to his Employment Agreement
is capped to avoid any payments constituting an "excess parachute payment" as
defined in the Code.
The Employment Agreements do not create employment obligations for the
Company unless a "change in control" has occurred, prior to which time the
Company and the individual each reserves the
15
<PAGE> 19
right to terminate the employment relationship. Both before and after the
occurrence of a "change in control" the Company may terminate the employment of
any of such individuals for "cause."
The Company has established trust agreements pursuant to which amounts
payable under the SERPS, the Employment Agreements and certain expenses incurred
by the officers in enforcing their rights under these arrangements, must be
deposited by the Company in trust and expended by the trustee for such purposes.
Such trusts are revocable, but upon the occurrence of certain "change in
control" events affecting the Company, will become irrevocable. The trusts are
currently nominally funded, but the Company is obligated to fund them fully upon
the occurrence of the "change in control" events.
The Company has also entered into Indemnification Agreements with each
current member of the Board of Directors as well as each of the Company's
executive officers. These agreements provide that, to the extent permitted by
Ohio law, the Company will indemnify the director or officer against all
expenses, costs, liabilities and losses (including attorneys' fees, judgments,
fines or settlements) incurred or suffered by the director or officer in
connection with any suit in which the director or officer is a party or
otherwise involved as a result of the individual's service as a member of the
Board of Directors or as an officer if the individual's conduct that gave rise
to such liability meets certain prescribed standards.
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 that enhance shareholder value, to provide a
balance between annual and long-term forms of compensation and, above all, to
ensure that total compensation is performance-oriented and related to Company
goals and objectives, using measurable criteria to the extent possible.
The Committee has considered the impact of Section 162(m) of the Code,
which disallows a deduction to publicly-held companies for compensation paid to
any executive officer whose compensation exceeds $1 million and has concluded
that this Section will not affect compensation paid to any executive officer in
1998.
EXECUTIVE OFFICER BASE COMPENSATION
Each executive officer's base salary is reviewed by the Committee at the
time of the officer's annual performance review. The base salary is recommended
to the Committee by the Chairman of the Board and Chief Executive Officer (the
"Chairman") and falls within a salary range for each officer's job function that
has been established by an independent executive compensation consultant, based,
in
16
<PAGE> 20
part, on information collected by the consultant concerning compensation for
executives with similar responsibilities at companies with comparable size and
geographic location. Typically, salaries fall throughout the range and are not
based on an arbitrary percentage of the highest salary within the range. In each
case, the Committee reviews the recommendation of the Chairman and approves the
salary only after making an independent assessment of the individual executive's
performance.
Mr. Schulze's compensation is based upon the same factors considered with
regard to executive officer compensation generally. The components making up his
1998 compensation included base salary and stock options. Fifty-five percent of
Mr. Schulze's base salary represented his target award under the Short-Term
Incentive Plan, the achievement of which was contingent upon the attainment of
specific earnings-per-share goals. The Committee's award of stock options to Mr.
Schulze under the 1988 Plan was based on the same methodology used to calculate
the awards of options to other executive officers under the 1988 Plan and
designed to further align Mr. Schulze's interests with those of other
shareholders of the Company.
In determining Mr. Schulze's compensation, the Committee considered the
Company's performance. The Committee discusses and approves priorities
recommended by Mr. Schulze at the beginning of the year and discusses his
performance with respect to these priorities periodically during the year and at
the end of the year.
Mr. Schulze is not present when the Committee reviews his performance and
determines his compensation.
SHORT-TERM INCENTIVE COMPENSATION
Under the Company's Short-Term Incentive Plan, target award levels are
established annually by the Committee for each executive officer of the Company.
Mr. Schulze's award is based solely on the financial performance of the Company
expressed in terms of earnings per share. Other executive officers' achievement
of target awards is based 80 percent on the financial performance of the Company
and individual business units and 20 percent on the achievement of specific
personal goals and objectives. In 1998, the Company's Short-Term Incentive Plan
provided target award opportunities for executive officers that ranged from 25
to 55 percent of base salary, although amounts could vary above and below that
range depending upon Company and business unit performance and individual
accomplishment.
STOCK OPTIONS AND LONG-TERM INCENTIVE COMPENSATION
The Committee also is charged with the responsibility of administering the
1988 Plan, under which stock options are granted to executive officers and other
employees of the Company. The Committee believes that stock options align the
interests of the executive officers with those of the shareholders, providing a
way in which the executive officers can build a meaningful stake in the Company.
Accordingly, the Committee has approved the implementation of stock ownership
guidelines for the executive officers that are to be achieved over a fixed
period of time. The guidelines are based on each executive officer's respective
salary compensation level and they will be reviewed by the Committee at
appropriate intervals.
The Committee fixes the terms, vesting requirements and the size of the
grants of stock options awarded to the executive officers without regard to the
amount of options or the expiration dates of options already held by executive
officers. The size of each grant is based on the duties, responsibilities,
performance and experience of the executive officer and his anticipated
contribution to the Company.
17
<PAGE> 21
Options granted to executive officers vest one-third on each anniversary over
three years, with the number of shares vested in each year rounded to the
nearest whole share.
Because stock options under the 1988 Plan and grants under the Company's
Long-Term Incentive Plan are both forms of long-term executive compensation,
grants under both plans are generally considered at the same time. Awards under
the Long-Term Incentive Plan are made in the form of performance units payable
upon the achievement of three-year corporate goals, currently expressed in terms
of 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 1998.
COMPENSATION AND ORGANIZATION COMMITTEE
D. Van Skilling, Chairman John C. Dannemiller
James T. Bartlett A. Malachi Mixon, III
Francis H. Beam, Jr.
18
<PAGE> 22
COMPANY STOCK PERFORMANCE
The following performance graph compares the five year cumulative return
from investing $100 on December 31, 1993 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
[GRAPH]
<TABLE>
<CAPTION>
LAMSON & SESSIONS S&P 500 S&P ELECTRICAL
----------------- ------- --------------
<S> <C> <C> <C>
12/93 100.00 100.00 100.00
12/94 126.00 101.00 101.00
12/95 163.00 139.00 142.00
12/96 153.00 171.00 192.00
12/97 122.00 229.00 271.00
12/98 108.00 294.00 363.00
</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.
19
<PAGE> 23
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, 1999. Except for Mr.
Schulze who beneficially owns 4.63% and Messrs. Abel and Allen who beneficially
own 1.44% and 1.01%, respectively, of the Company's Common Shares, none of the
other Named Executive Officers beneficially owns as much as one percent of the
Company's Common Shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME OWNERSHIP(1)(2)
---- -----------------
<S> <C>
John B. Schulze................................. 676,200
James J. Abel................................... 210,552
Charles E. Allen................................ 147,833
Donald A. Gutierrez............................. 16,775
Albert J. Catani, II............................ 27,667
</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, 1999 upon the exercise of outstanding options under the Company's stock
option plans: Mr. Schulze--496,300; Mr. Abel--184,933; Mr. Allen--112,266;
Mr. Gutierrez--13,666 and Mr. Catani--25,167.
(2) Includes shares held jointly or in the name of the officer's spouse, minor
children, or relatives sharing his home, reporting of which is required by
applicable rules of the SEC. Unless otherwise indicated, or in the case of
joint ownership, the listed individuals possess sole voting power and sole
investment power with respect to such shares. The figure for Mr. Schulze
includes 25,900 shares owned by his wife, as to which he has disclaimed
beneficial ownership. No other Named Executive Officer has disclaimed
beneficial ownership of any shares.
CERTAIN BUSINESS RELATIONSHIPS
During the past fiscal year, the Company, in the normal course of business,
utilized the services of the law firm of Jones, Day, Reavis & Pogue in which Mr.
Coquillette is a partner. The Company plans to continue using the services of
the firm in 1999.
AMENDMENT TO THE
NONEMPLOYEE DIRECTORS STOCK OPTION PLAN
(PROPOSAL NO. 2)
GENERAL
The Nonemployee Directors Stock Option Plan (the "Plan") was originally
adopted at the 1994 Annual Meeting of Shareholders to benefit the Company and
its shareholders by allowing directors who are not current employees of the
Company ("Nonemployee Directors") to increase their financial stake in the
Company through ownership of the Company's common stock (the "Common Stock").
After consultation with the Company's compensation consultants and in order to
continue this purpose, the
20
<PAGE> 24
Board of Directors voted to amend the Plan on February 25, 1999, subject to
approval by the Company's shareholders at the Annual Meeting.
The Amendment increases the number of Common Shares underlying the options
automatically granted each year from 1,000 to 2,000. The Plan originally
authorized the issuance of 60,000 shares of Common Stock of which, only 17,000
remain available for future grants. The Amendment increases the shares of Common
Stock available for issuance by 100,000 shares. The Amendment also extends the
date, after which no option may be granted under the Plan, from April 22, 2000
to April 22, 2004.
There are currently nine Nonemployee Directors of the Company. On December
31, 1998, the closing price of the Common Stock on the New York Stock Exchange
("NYSE") was $5.125 per share.
A summary description of the Amended Plan is set forth below. The full text
of the Amended Plan is annexed to this Proxy Statement as Exhibit A, and the
following summary is qualified in its entirety by reference to Appendix A.
SUMMARY OF AMENDED PLAN
Subject to recapitalization adjustment as provided in the Amended Plan,
160,000 shares of Common Stock (60,000 of which were originally approved at the
1994 Annual Meeting of Shareholders and 100,000 of which are being added by the
Amendment) are reserved for issuance under the Amended Plan. The Amended Plan
provides that each year on the Monday following the Annual Meeting of
Shareholders, each individual elected, re-elected or continuing as a Nonemployee
Director will automatically receive a nonqualified option to purchase 2,000
shares of Common Stock. The exercise price for such options will be the average
of the high and low prices at which the Common Stock traded on the NYSE on the
date of grant. If on the Monday following the Annual Meeting of Shareholders,
the Common Stock does not trade on the NYSE, then the date of grant will be the
next day trades occur. Options become exercisable one year after the date of
grant and expire ten years after the date of grant. Options may be exercised
only upon payment to the Company of the aggregate exercise price of the shares.
Such payment must be made in cash or in shares of Common Stock owned by the
Nonemployee Director for six months.
Upon normal retirement as of the Annual Meeting of Shareholders after a
director's 70th birthday, options granted to a Nonemployee Director will
continue to become exercisable as if the Nonemployee Director had not retired.
Such options must be exercised within 36 months of retirement (but not after the
expiration of the option period). Upon the death of a Nonemployee Director, his
or her legal representative or heirs will have 12 months (but not after the
expiration of the option period) 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 90 days after termination (but not after
the expiration of the option period). In the event of a "change in control" (as
defined in the Plan) of the Company, all stock options fully vest and become
exercisable.
No option is transferable other than by will or by laws of descent and
distribution. During the optionee's lifetime, an option may only be exercised by
the optionee or his or her guardian or legal representative.
The Plan is administered by the Board of Directors. The Plan may be amended
or terminated by the Board of Directors. No amendment may revoke or alter
outstanding options in any manner unfavorable to
21
<PAGE> 25
optionees. The Board of Directors may not amend the Plan without shareholder
approval when such approval is required by any applicable law or regulation. No
option may be granted under the Amended Plan after April 22, 2004, but options
granted prior to that date will continue to be exercisable pursuant to their
terms.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain of the federal income tax
consequences of certain transactions under the Amended Plan based on federal
income tax laws in effect on January 1, 1999. This summary is not intended to be
exhaustive and does not describe state or local tax consequences.
TAX CONSEQUENCES TO ELIGIBLE DIRECTORS
The options granted under the Amended Plan will be non-qualified stock
options. In general, (i) no income will be recognized by a Nonemployee Director
at the time an option is granted; (ii) at the time an option is exercised,
ordinary income will be recognized by the Nonemployee Director 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
(iii) at sale, appreciation (or depreciation) after the date of exercise will be
treated as a capital gain.
TAX CONSEQUENCES TO THE COMPANY
To the extent that a Nonemployee Director recognizes ordinary income in the
circumstances described above, the Company will be entitled to a corresponding
deduction provided that, among other things, the income meets the test of
reasonableness, is an ordinary and necessary business expense and is not an
"excess parachute payment" within the meaning of Section 280G of the Code.
NEW PLAN BENEFITS
The following table shows information regarding benefits which will be
received by Nonemployee Directors during 1999.
22
<PAGE> 26
NEW PLAN BENEFITS
NONEMPLOYEE DIRECTORS STOCK OPTION PLAN, AS AMENDED
<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF UNITS (1)
----------------- -------------------
<S> <C>
John B. Schulze............................ 0
Chairman of the Board, President and
Chief Executive Officer
James J. Abel.............................. 0
Executive Vice President, Secretary,
Treasurer and Chief Financial Officer
Charles E. Allen........................... 0
Senior Vice President
Donald A. Gutierrez........................ 0
Vice President-Carlon
Albert J. Catani, II....................... 0
Vice President-Manufacturing
Executive Officer Group.................... 0
Non-Executive Director Group............... 18,000
Non-Executive Officer Employee Group....... 0
</TABLE>
- - ---------------
(1) Number of Common Shares underlying stock options
VOTE REQUIRED FOR APPROVAL OF
THE NONEMPLOYEE DIRECTORS STOCK OPTION PLAN
The approval of the Nonemployee Directors Stock Option Plan requires the
affirmative vote of the holders of two-thirds of the Common Shares issued and
outstanding and entitled to vote at the meeting, whether present in person or by
proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THIS PROPOSAL.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORT COMPLIANCE
Section 16(a) of the Exchange Act requires Lamson's executive officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission, the New York Stock
Exchange and the Pacific Stock Exchange, and to provide Lamson with copies of
such reports.
Based solely on review of the copies of such reports furnished to the
Company, or written representation that no forms were required to be filed, the
Company believes that during the year ended January 2, 1999, all Section 16(a)
filing requirements applicable to its executive officers, directors and greater
than ten percent beneficial owners were complied with, except for Mr. Ebrahimi,
a greater than 10% beneficial owner, who filed late Forms 3 and 4 relating to
six transactions involving Common Shares.
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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 1998, Ernst
& Young was reappointed by the Board of Directors of the Company, on the
recommendation of the Audit Committee, as the Company's independent auditors for
the fiscal year ended January 2, 1999. 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 2000, must be received by the Company's
Secretary at its principal office in Cleveland, Ohio, not later than November
18, 1999 for inclusion in the Company's Proxy Statement and Form of Proxy
relating to the Annual Meeting of Shareholders in the year 2000. 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 Securities and Exchange Commission.
OTHER MATTERS
The Board of Directors of the Company is not aware of any matter to come
before the Annual Meeting other than as herein presented. However, if any other
matter is properly brought before the Annual Meeting, the persons appointed as
proxies in the accompanying proxy will have discretion to vote or act hereon
according to their best judgment.
The Company's 1998 Annual Report, including financial statements, has been
mailed contemporaneously with this Proxy Statement.
By Order of the Board of Directors. /s/ James J. Abel
JAMES J. ABEL
Executive Vice President, Secretary,
Treasurer and Chief Financial
Officer
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APPENDIX A
THE LAMSON & SESSIONS CO.
NONEMPLOYEE DIRECTORS STOCK OPTION PLAN
(AS AMENDED AND RESTATED AS OF APRIL 23, 1999)
The Nonemployee Directors Stock Option Plan ("Plan") is established to
attract, retain and compensate for service highly-qualified individuals who are
not current employees of The Lamson & Sessions Co. ("Company") as members of the
Board of Directors and to enable them to increase their ownership in the
Company's Common Stock. The Plan will be beneficial to the Company and its
stockholders since it will allow these directors to have a greater personal
financial stake in the Company through the ownership of Company stock, in
addition to underscoring their common interest with shareholders in increasing
the long-term value of the Company stock.
1. ELIGIBILITY
All members of the Company's Board of Directors who are not current
employees of the Company ("Nonemployee Directors") are eligible to participate
in this Plan.
2. OPTIONS
Only a nonqualified stock option ("NQSO") may be granted under this Plan.
3. SHARES AVAILABLE
(a) Number of Shares Available: There are hereby reserved for issuance
under this Plan 160,000 (60,000 of which were originally approved in 1994
and 100,000 of which are being added by amendment) shares of Common Stock,
without par value, which may be authorized but unissued shares or treasury
shares.
(b) Recapitalization Adjustments: In the event of a reorganization,
recapitalization, stock split, stock dividend, combination of shares,
merger, consolidation, rights offering, or any other change in corporate
structure affecting the Common Stock, a substitution or adjustment shall be
made in the aggregate number of shares reserved for issuance under this
Plan, in the number and option price of shares subject to outstanding
NQSO's under this Plan and in the number of shares to be covered by options
awarded under Section 4 hereof as may be determined to be appropriate by
the Board of Directors, provided that the number of shares subject to any
award shall always be a whole number.
4. ANNUAL GRANT OF NONQUALIFIED STOCK OPTIONS
Each year on the Monday following the Company's Annual Meeting of
Shareholders, each individual elected, re-elected or continuing as a Nonemployee
Director shall automatically receive a NQSO covering 2,000 shares of Common
Stock. If Common Stock is not traded on the New York Stock Exchange ("NYSE") on
any date a grant would otherwise be awarded, then the grant shall be made the
next day thereafter on which Common Stock is so traded.
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5. OPTION PRICE
The price of the NQSO shall be the mean between the highest and lowest
selling price, regular way of the Common Stock on the NYSE on the date of the
grant.
6. OPTION PERIOD
A NQSO granted under this Plan shall become exercisable one year after date
of grant and shall expire ten years after date of grant ("Option Period").
7. PAYMENT
A NQSO may be exercised only upon payment to the Company in full of the
NQSO price of the shares. Such payment shall be paid in cash or in Common Stock
already owned by the Nonemployee Director for more than six months, or in a
combination of cash and such Common Stock. The sum of the cash and the fair
market value of such Common Stock on the date of exercise shall be equal to the
aggregate purchase price of the shares to be delivered.
8. TERMINATION OF SERVICE
Upon termination of service as a Nonemployee Director (for reasons other
than retirement, as herein-after defined, or death), only those NQSOs
immediately exercisable at the date of termination of service shall be
exercisable by the optionee. Such NQSOs must be exercised within 90 days of
termination of service (but in no event after the expiration of the Option
Period) or they shall be forfeited.
9. RETIREMENT
Upon retirement as a Nonemployee Director, all NQSOs shall continue to
become exercisable as if such director had not retired. Such NQSOs must be
exercised within 36 months of retirement (but in no event after the expiration
of the Option Period) or they shall be forfeited. Mandatory retirement for
directors occurs on the date of the Annual Meeting of Shareholders following a
director's 70th birthday.
10. DEATH
Upon the death of a Nonemployee Director, only those NQSOs which were
exercisable on the date of death shall be exercisable by his or her legal
representatives or heirs. Such NQSOs must be exercised within 12 months from
date of death (but in no event after the expiration of the Option Period) or
they shall be forfeited.
11. CHANGE IN CONTROL PROVISIONS
(a) Impact of Event. In the event of a "Change in Control" as defined
in Section 11(b) any or all NQSOs awarded under this Plan not previously
exercisable and vested shall become fully exercisable and vested.
(b) Definition of "Change in Control." For purposes of Section 11(a),
a "Change in Control" means the happening of any of the following:
(i) The Company is merged or consolidated or reorganized into or
with another corporation or other legal person, and as a result of such
merger, consolidation or reorganization less than a
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majority of the combined voting power of the then-outstanding securities
of such corporation or person immediately after such transaction are
held in the aggregate by the holders of Voting Stock (as that term is
hereafter defined) of the Company immediately prior to such transaction;
(ii) The Company sells or otherwise transfers all or substantially
all of its assets to any other corporation or other legal person, and
less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person immediately
after such sale or transfer is held in the aggregate by the holders of
Voting Stock (hereinafter defined) of the Company immediately prior to
such sale or transfer;
(iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report), each as promulgated pursuant to
the Securities Exchange Act of 1934, as amended ("Exchange Act"),
disclosing that any person (as the term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is defined under Rule
13d-3 or any successor rule or regulation promulgated under the Exchange
Act) of securities representing 15% or more of the combined voting power
of the then-outstanding securities entitled to vote generally in the
election of directors of the Company ("Voting Stock");
(iv) The Company files any report, proxy statement or other
document with the Securities and Exchange Commission pursuant to the
Exchange Act or any rules or regulations presently in effect or
hereafter promulgated under such Act disclosing that a Change in Control
of the Company has or may have occurred or will or may occur in the
future pursuant to any then-existing contract or transaction; or
(v) If during any period of two consecutive years, individuals who
at the beginning of any such period constitute the Board of Directors
cease for any reason to constitute at least a majority thereof, unless
the election, or the nomination for election by the Company's
shareholders, of each member of the Board of Directors first elected
during such period was approved by a vote of at least two-thirds of the
Board of Directors then still in office who were members of the Board of
Directors at the beginning of any such period.
Notwithstanding the foregoing provisions of Section 11(b)(iii) or 11(b)(iv)
thereof, a Change in Control shall not be deemed to have occurred for purposes
of Section 11(a) solely because (i) the Company, (ii) an entity in which the
Company directly or indirectly beneficially owns 80% or more of the voting
securities, or (iii) any Company-sponsored employee stock ownership plan or any
other employee benefit plan of the Company, either files or becomes obligated to
file a report or a proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or
report or item therein) under the Exchange Act, disclosing beneficial ownership
by it of shares of Voting Stock, whether in excess of 15% or otherwise, or
because the Company reports that a Change in Control of the Company has or may
have occurred or will or may occur in the future by reason of such beneficial
ownership.
12. ADMINISTRATION AND AMENDMENT OF THE PLAN
This Plan shall be administered by the Board of Directors of the Company.
This Plan may be terminated or amended by the Board of Directors as they deem
advisable. No amendment may revoke or alter in a manner unfavorable to the
optionees any NQSOs then outstanding, nor may the Board amend this Plan without
shareholder approval where the absence of such approval would cause the Plan to
fail to
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comply with Rule 16b-3 under the Exchange Act, or any other requirement of
applicable law or regulation. A NQSO may not be granted under this Plan after
April 22, 2004, but NQSOs granted prior to that date shall continue to become
exercisable and may be exercised according to their terms.
13. NON-TRANSFERABILITY
No NQSO granted under this Plan is transferable other than by will or the
laws of descent and distribution. During the optionee's lifetime, an NQSO may
only be exercised by the optionee or the optionee's guardian or legal
representative.
14. COMPLIANCE WITH SEC REGULATIONS
It is the Company's intent that the Plan comply in all respects with Rule
16b-3 of the Exchange Act as in effect after May 1, 1991 and any regulations
promulgated thereunder. All grants and exercises of NQSOs under this Plan shall
be executed in accordance with the requirements of Section 16 of the Exchange
Act, as amended, and any regulations promulgated thereunder.
15. MISCELLANEOUS
Except as provided in this Plan, no Nonemployee Director shall have any
claim or right to be granted an NQSO under this Plan. Neither the Plan nor any
action thereunder shall be construed as giving any director any right to be
retained in the service of the Company.
16. EFFECTIVE DATE
This Plan became effective on April 22, 1994 and shall become effective, as
amended, on April 23, 1999, or such later date as shareholder approval is
obtained.
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THIS PROXY IS SOLICITED ON BEHALF
P LAMSON & SESSIONS OF THE BOARD OF DIRECTORS.
25701 Science Park Drive
R Cleveland, Ohio 44122 The undersigned hereby appoints J. J.
Abel, C. E. Allen and L.L. Spencer, and
O ------------------------------- each of them, as proxies, each with the
power to appoint a substitute, and
X hereby authorizes them to represent and
to vote, as designated below, all the
Y Common Shares of The Lamson & Sessions
Co. held of record by the undersigned
on March 3, 1999 at the Annual Meeting
of Shareholders to be held on April 23,
1999 or any adjournment thereof.
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.
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2. A proposal to approve an amendment to Lamson's Nonemployee
Directors Stock Option 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.
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 _______________, 1999
-------------------------------
Signature
-------------------------------
Second Signature if held
jointly
PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE
