LENNOX INTERNATIONAL INC. CHANGE IN CONTROL AGREEMENT
Exhibit 10.1
THIS CHANGE IN CONTROL AGREEMENT (this “Agreement”), effective as of December 11, 2008 (the
“Effective Date”) is made by and between Lennox International Inc., a Delaware corporation (the
“Company”), and [Name] (“Executive”).
WHEREAS, the Company considers it essential to the best interests of its stockholders to
xxxxxx the continued employment of key management personnel;
WHEREAS, the Board (as defined in Appendix A hereto) recognizes that, as is the case
with many publicly held corporations, the possibility of a change in control exists and that such
possibility, and the uncertainty and questions which may raise among management, may result in the
departure or distraction of management personnel to the detriment of the Company and its
stockholders;
WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of key members of the Company’s management,
including Executive, to their assigned duties without the distraction of potentially disturbing
circumstances arising from the possibility of a change in control;
WHEREAS, the Company wishes to enter into this Agreement to protect Executive’s reasonable
expectations regarding compensation and duties if a change in control of the Company occurs,
thereby encouraging Executive to remain in the employ of the Company notwithstanding the
possibility of a change in control;
WHEREAS, it is understood that if Executive has an existing employment agreement (the
“Employment Agreement”) with the Company, then this Agreement is intended to provide certain
protections to Executive that are not afforded by the Employment Agreement; provided however, this
Agreement is not intended to provide benefits that are duplicative of Executive’s current benefits;
and
WHEREAS, upon the Effective Date, this Agreement will supersede all previous agreements, if
any, between the Company and Executive that provides benefits to Executive upon a change in control
of the Company;
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained,
the Company and Executive hereby agree as follows:
1. Term of Agreement. The term of this Agreement shall commence on the Effective Date and
shall continue in effect through December 31, 2009; provided, however, that commencing on January
1, 2010 and each January 1 thereafter, this Agreement shall automatically be extended for one
additional year (collectively, the “Term”); and further provided, however, that if a Change in
Control (as defined in Appendix A hereto) shall have occurred during the Term, the Term
shall expire two years following the event which constitutes a Change in Control.
2. Company’s Obligations.
2.1 General Obligations. The Company agrees, under the conditions described herein,
to pay Executive the Severance Payments (as defined in Section 5.1 herein) and the other payments
and benefits described herein. No Severance Payments shall be payable under this Agreement unless
there shall have been a termination of Executive’s employment as described in Section 5.1.
2.2 Equity and Other Performance Based Awards. Notwithstanding anything to the
contrary in this Agreement, upon a Change in Control, each and every stock option, stock
appreciation right, restricted stock award, restricted stock unit award, performance share unit
award and other equity-based award and any other performance award granted to Executive that is
outstanding immediately prior to the Change in Control shall (i) immediately vest and become
exercisable and any restrictions on the sale or transfer of such shares (other than any such
restriction arising by operation of law) with respect to such shares shall terminate, and (ii) be
considered to have vested at the highest possible award level with respect to each such award.
2.3 Notice of Change in Control. The Company shall promptly notify Executive in
writing of the occurrence of a Change in Control.
3. Terms of Employment Post-CIC.
3.1 Employment Period. Upon a Change in Control, the Company hereby agrees to
continue Executive in its employ, and Executive hereby agrees to remain in the employ of the
Company, in accordance with, and subject to, the terms and provisions of this Agreement, for the
period commencing on the date upon which there occurs a Change in Control and ending on the second
anniversary of the Change in Control (the “CIC Employment Period”).
3.2 Position and Duties.
(i) During the CIC Employment Period, (A) Executive’s position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held, exercised and
assigned by or to Executive at any time during the 90-day period immediately preceding the Change
in Control, and (B) Executive’s services shall be performed at the location where Executive was
employed immediately preceding the Change in Control or at another location within 35 miles
thereof.
(ii) During the CIC Employment Period, and excluding any periods of vacation and sick leave to
which Executive is entitled, Executive agrees to devote reasonable attention and time to the
business and affairs of the Company and, to the extent necessary to discharge the responsibilities
assigned to Executive hereunder, to use Executive’s reasonable best efforts to perform faithfully
and efficiently such responsibilities. It is expressly understood and agreed that to the extent
that any activities (including, but not limited to, service on corporate, civic or charitable
boards or committees) have been conducted by Executive prior to the Change in Control, the
continued conduct of such activities (or the conduct of activities similar in nature and
scope thereto) subsequent to the Change in Control shall not be deemed to interfere with the
performance of Executive’s responsibilities to the Company.
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3.3 Compensation and Benefits.
(i) Annual Base Salary. During the CIC Employment Period, Executive shall receive an
annual base salary not less than the base salary in effect immediately prior to the Change in
Control (“Annual Base Salary”), which shall be paid in accordance with the normal business practice
of the Company. During this period, the Annual Base Salary shall be reviewed at least annually and
shall be increased at any time and from time to time as shall be substantially consistent with
increases in base salary generally awarded in the ordinary course of business to executives of the
Company and its affiliated companies. Any increase in Annual Base Salary shall not serve to limit
or reduce any other obligation to Executive under this Agreement. Annual Base Salary shall not be
reduced after any such increase and the term “Annual Base Salary” as utilized in this Agreement
shall refer to Annual Base Salary as so increased. As used in this Agreement, the term “affiliated
companies” shall include, when used with reference to the Company, any company controlled by,
controlling or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, Executive shall be awarded, for
each fiscal year or portion thereof during the CIC Employment Period, an annual bonus (the “Annual
Bonus”) in cash equal to no less than the Executive’s target short-term incentive bonus percentage
immediately prior to the Change in Control multiplied by the Executive’s Annual Base Salary,
prorated for any period consisting of less than twelve full months. The Annual Bonus awarded for a
particular fiscal year shall be paid no later than the fifteenth day of the third month following
the end of such year.
(iii) Equity and Performance Based Awards. During the CIC Employment Period,
Executive shall be granted on an annual basis a long-term incentive package consisting of stock
options, stock appreciation rights, restricted stock awards, restricted stock unit awards,
performance share unit awards and other equity-based awards and performance awards, as selected by
the Company, with an aggregate value (as determined by an independent consulting firm selected by
Executive and reasonably acceptable to the Company) that shall be not less than the aggregate value
of the most valuable long-term incentive package awarded Executive in any of the three years
immediately preceding the Change in Control.
(iv) Benefits. During the CIC Employment Period, Executive shall be entitled to the
following benefits, in each such case, no less favorable, in the aggregate, than the most favorable
plan, practice, program or policy of the Company and its affiliates applicable to similarly
situated executives immediately in effect prior to the commencement of the Change in Control or in
effect at any time after the Change in Control:
| (a) | profit-sharing, savings and
retirement plans that are tax-qualified under Section 401(a) of
the Code (as defined in Appendix A hereto), and all
plans that are supplemental to any such tax-qualified plans; and |
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| (b) | welfare benefit plans, practices, policies and programs; and |
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| (c) | prompt reimbursement for all
reasonable expenses incurred by Executive; and |
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| (d) | fringe benefits and perquisites; and |
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| (e) | paid vacation. |
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4. Termination of Employment for Disability, Death and Cause.
4.1 Disability. During the CIC Employment Period, during any period that Executive
fails to perform Executive’s duties with the Company as a result of incapacity due to physical or
mental illness, the Company shall pay Executive’s salary to Executive at the rate in effect at the
commencement of any such period, together with all compensation and benefits payable to Executive
under the terms of the Company’s written plans as in effect during such period, until Executive’s
employment is terminated by the Company for Disability (as defined in Appendix A hereto).
4.2 Death. During the CIC Employment Period, in the event of Executive’s death, the
Company shall pay to Executive’s estate, Executive’s salary, together with all compensation and
benefits payable to Executive under the terms of the Company’s written plans as in effect
immediately prior to the date of death, through the date Executive’s employment is terminated by
death.
4.3 Cause. During the CIC Employment Period, the Company may terminate Executive’s
employment for Cause (as defined in Appendix A hereto). In such event, the Company shall
pay Executive’s salary, together with all compensation and benefits payable to Executive under the
terms of the Company’s written plans as in effect immediately prior to the date the Executive’s
employment is terminated for Cause.
5. Termination of Employment by Company without Cause or by Executive for Good Reason.
5.1 Payments to Executive. If Executive’s employment is terminated following a Change
in Control and during the CIC Employment Period either (i) by the Company without Cause or (ii) by
Executive with Good Reason (as defined in Appendix A hereto), then the Company shall pay
Executive the amounts, and provide Executive the benefits, set forth in this Section 5.1
(collectively referred to as, “Severance Payments”).
(A) Cash Payment. In lieu of (x) any further salary and bonus payments to
Executive for periods subsequent to the Date of Termination (as defined in Section 7.2
herein), and (y) any severance benefit otherwise payable to Executive under the Employment
Agreement, if any, the Company shall pay to Executive a lump sum severance
payment, in cash, on the date that is six months and two days after Executive’s date of
termination (the “Designated Date”) from the Company equal to:
(i) three (3) times the Executive’s Annual Base Salary, plus
(ii) three (3) times the Executive’s target short-term incentive bonus
percentage immediately prior to the Change in Control or in effect at any time after
the Change in Control, whichever is greater, multiplied by the Executive’s Annual
Base Salary, plus
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(iii) an amount equal to Executive’s target short-term incentive bonus
percentage immediately prior to the Change in Control or in effect at any time after
the Change in Control, whichever is greater, multiplied by the Executive’s Annual
Base Salary, prorated for any period consisting of less than twelve full months,
plus
(iv) any deferred compensation previously awarded to or earned by Executive
(together with any accrued interest or earnings thereon); provided any amounts paid
to Executive will be paid in accordance with the applicable deferred compensation
plan, plus
(v) payment in lieu of any accrued but unused vacation as of Executive’s Date
of Termination, plus
(vi) an amount equal to 15% of Executive’s Annual Base Salary (this amount
being paid in lieu of outplacement services), plus
(vii) an amount equal to 45% of Executive’s Annual Base Salary (this amount
being paid in lieu of the perquisites).
(B) Health and Welfare Benefit Plans. For the 36-month period immediately
following the Date of Termination, the Company shall provide Executive and covered dependents
as of Executive’s Date of Termination, medical and health benefits and group life and
supplemental group life substantially similar to those provided to Executive and such covered
dependents immediately prior to the Date of Termination (such continuation of such benefits
shall be hereinafter referred to as “Welfare Benefit Contribution”). The Company shall timely
pay or provide to Executive and/or Executive’s family any other amounts or benefits required
to be paid or provided or which Executive and/or Executive’s family is eligible to receive
pursuant to this Agreement and under any plan, program, policy or practice or contract or
agreement of the Company and its affiliated companies as in effect and applicable generally to
other executives and their families on the Date of Termination.
(C) Non-Qualified Pension. For purposes of calculating benefits under the
Company’s Supplemental Retirement Plan and Profit Sharing Restoration Plan, the Company shall
add an additional three years of vesting service and credited service to Executive’s years of
vesting and credited service, as well as an incremental three years added to Executive’s age.
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(D) Certain Pre-Change in Control Terminations. Any provision in this Agreement to
the contrary notwithstanding, if a Change in Control occurs and if Executive’s employment with
the Company has been terminated by the Company without Cause or by Executive with Good Reason
in either case within six (6) months prior to the date on which the Change in Control occurs,
then Executive shall be entitled to the severance and other benefits as if Executive’s
termination had been following a Change in Control, payable on the Designated Date. Any
amounts to be paid to Executive shall be reduced by and offset dollar-for-dollar by any
severance benefits payable to Executive under the Employment Agreement or any other separation
agreement in connection with such termination.
5.2 Gross-Up Payment.
(A) Whether or not Executive becomes entitled to the Severance Payments, if any payments
or benefits received or to be received by Executive whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, or with any Person
whose actions result in a Change in Control or any Person affiliated with the Company or such
Person (such payments or benefits, excluding the Gross-Up Payment (as defined below), being
hereinafter referred to as the “Total Payments”) are subject to the Excise Tax (any excise tax
imposed under Section 4999 of the Code ), the Company shall pay to Executive an additional
amount (the “Gross-Up Payment”) such that the net amount retained by Executive, after
deduction of any Excise Tax on the Total Payments and any federal, state and local income and
employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the Total
Payments.
(B) For purposes of determining whether any of the Total Payments will be subject to the
Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated
as “parachute payments” (within the meaning of Code Section 280G(b)(2)) unless, in the opinion
of the Company, such payments or benefits (in whole or in part) do not constitute parachute
payments, including by reason of Code Section 280G(b)(4)(A), (ii) all “excess parachute
payments” within the meaning of Code Section 280G(b)(1) shall be treated as subject to the
Excise Tax unless, in the opinion of the Company, such excess parachute payments (in whole or
in part) represent reasonable compensation for services actually rendered (within the meaning
of Code Section 280G(b)(4)(B)) in excess of the Base Amount allocable to such reasonable
compensation, or are otherwise not subject to the Excise Tax, and (iii) the value of any
noncash benefits or any deferred payment or benefit shall be determined by the Company in
accordance with the principles of Code Section 280G(d)(3) and (4). The Company and Executive
agree that the determinations described in this Section 4.2(B) shall take the form of a letter
from the Company accompanied by calculations prepared by the Company and certified by a
national accounting firm selected by the Company.
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(C) The Gross-Up Payment (or portion thereof) will be paid to Executive on the day of the
payment of the Total Payments (or portion thereof) that give rise to the Excise Tax; provided,
however, that if the amount of such Gross-Up Payment (or portion thereof) cannot be fully
determined on or before the date on which payment is due,
the Company will pay to Executive by such date an amount estimated in good faith by the
Company to be the minimum amount of such Gross-Up Payment (or portion thereof) and will pay
the remainder of such Gross-Up Payment (or portion thereof) (together with interest at the
rate provided in Code Section 1274(b)(2)(B)) as soon as the amount thereof can be determined,
but in no event later than 45 days after complete payment of the Total Payments. Further, in
the event that on the day of payment of the Total Payments (or portion thereof) (or the 45-day
period following such payments), no Gross-Up Payment (or portion thereof) is determined by the
Company to be due and it is subsequently determined that a Gross-Up Payment (or portion
thereof) is owing to Executive, such Gross-Up Payment (or portion thereof) will be made by the
Company to Executive at the date that such Gross-Up Payment amount (or portion thereof) is
determined by the Company to be payable to Executive.
(D) In the event that the Excise Tax is finally determined to be less than the amount
taken into account hereunder in calculating the Gross-Up Payment, Executive shall repay to the
Company, within five business days following the later of the date that the amount of such
reduction in the Excise Tax is fully determined and the date that such amount is fully
refunded to Executive by the Internal Revenue Service, the portion of the Gross-Up Payment
attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the
Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up
Payment) being repaid by Executive, to the extent that such repayment results in a reduction
in the Excise Tax and a dollar-for-dollar reduction in Executive’s taxable income and wages
for purposes of federal, state and local income and employment taxes. In the event that the
Excise Tax is determined to exceed the amount originally remitted by Executive which was taken
into account hereunder in calculating the Gross-Up Payment and Executive is obliged to remit
additional Excise Taxes, Executive shall provide the Company with written notice advising as
to the amount of additional Excise Taxes which were so remitted and the date on which they
were so remitted. As soon as practicable following receipt of such notice (but not later than
the end of the taxable year following the year in which the additional Excise Taxes were
remitted by Executive), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by Executive with respect to
such excess Excise Taxes). Executive and the Company shall each reasonably cooperate with the
other in connection with any administrative or judicial proceedings concerning the existence
or amount of liability for Excise Tax with respect to the Total Payments.
6. Non-exclusivity of Rights. Except as provided in Section 5 of this Agreement,
nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in
any plan, program, policy or practice provided by the Company or any of its affiliated companies
and for which Executive may qualify, nor shall anything herein limit or otherwise affect such
rights as Executive may have under any contract or agreement with the Company or any of its
affiliated companies. Amounts which are vested benefits or which Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or agreement except
as such plan, policy, practice or program is expressly superseded by this Agreement.
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7. Termination Procedures.
7.1 Notice of Termination. Any termination by the Company for Cause, or by Executive
for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in
accordance with Section 11 of this Agreement. The failure by Executive or the Company to set forth
in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason
or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or
the Company from asserting such fact or circumstance in enforcing Executive’s or the Company’s
rights hereunder. For purposes of this Agreement, a “Notice of Termination” shall mean a notice
which shall indicate the specific termination provision in this Agreement relied upon and shall set
forth the Date of Termination.
7.2 Date of Termination. For purposes of this Agreement, the term “Date of
Termination” means (i) if Executive’s employment is terminated by the Company for Cause, or by
Executive for Good Reason, the date of receipt of the Notice of Termination or any later date
specified therein, as the case may be, (ii) if Executive’s employment is terminated by the Company
other than for Cause, the Date of Termination shall be the date specified by the Company when it
notifies Executive of such termination and (iii) if Executive’s employment is terminated by reason
of death or Disability, the Date of Termination shall be the date of death of Executive or the date
of Disability, as the case may be.
8. Full Settlement. Subject to the offset provided for in Section 5.1, the Company’s
obligation to make payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, mitigation or
other claim, right or action which the Company may have against Executive or others. The Company
agrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and
expenses which Executive may reasonably incur as a result of any contest (unless Executive’s claim
is found by a court of competent jurisdiction to have been frivolous) by the Company, Executive or
others of the validity or enforceability of, or liability under, any provision of this Agreement
(other than Section 10 hereof) or any guarantee of performance thereof (including as a result of
any contest by Executive about the amount of any such payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the “applicable federal rate” provided for in Section
7872(f)(2)(A) of the Code; provided that any such reimbursement payment by the Company pursuant to
this sentence shall be made on or before the last day of the calendar year immediately following
the calendar year in which any such fee or expense was incurred.
9. Successors; Binding Agreement.
9.1 This Agreement is personal to Executive and without the prior written consent of the
Company shall not be assignable by Executive otherwise than by will or the laws of
descent and distribution. This Agreement shall inure to the benefit of and be enforceable by
Executive’s heirs, executors and other legal representatives.
9.2 This Agreement shall inure to the benefit of and be binding upon the Company and may only
be assigned to a successor described in Section 9.3.
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9.3 The Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession had taken place. As
used in this Agreement, “Company” shall mean the Company as earlier defined and any successor to
its business and/or assets which assumes and agrees to perform this Agreement by operation of law,
or otherwise.
10. Confidential Information; Certain Prohibited Activities.
10.1 Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by Executive during
Executive’s employment by the Company or any of its affiliated companies and which shall not be or
become public knowledge (other than by acts by Executive or representatives of Executive in
violation of this Agreement). After Executive’s Date of Termination, Executive shall not, without
the prior written consent of the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other than the Company and
those designated by it. Except as provided in Subsection 10.3 below, in no event shall an asserted
violation of the provisions of this Section 10 constitute a basis for deferring or withholding any
amounts otherwise payable to Executive under this Agreement. Also, within 14 days of the
termination of Executive’s employment for any reason, Executive shall return to the Company all
documents and other tangible items of or containing Company information which are in Executive’s
possession, custody or control.
10.2 Executive agrees that for a period of 24 complete calendar months following Executive’s
Date of Termination, Executive will not, either directly or indirectly, call on, solicit, induce or
attempt to induce any of the employees or officers of the Company whom Executive had knowledge of
or association with during Executive’s employment with the Company to terminate their association
with the Company either personally or through the efforts of his or her subordinates.
10.3 In the event of a breach by Executive of any provision of this Section 10, the Company
shall be entitled to (i) cease any Welfare Benefit Contribution entitlement provided pursuant to
Section 5.1(B) hereof, (ii) relief by temporary restraining order, temporary injunction and/or
permanent injunction, (iii) recovery of all attorneys’ fees and costs incurred in obtaining such
relief and (iv) any other legal and equitable relief to which it may be entitled, including
monetary damages.
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11. Notices. For the purpose of this Agreement, notices and all other communications provided for in the
Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed
by United States registered mail, return receipt requested, postage prepaid, addressed, if to
Executive, to the address inserted below Executive’s signature on the final page hereof and, if to
the Company, to the address set forth below, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of change of address
shall be effective only upon actual receipt:
To the Company:
Lennox International Inc.
0000 Xxxx Xxxx Xxxx.
Xxxxxxxxxx, XX 00000
Attention: Chief Human Resources Officer
0000 Xxxx Xxxx Xxxx.
Xxxxxxxxxx, XX 00000
Attention: Chief Human Resources Officer
12. Miscellaneous. This Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors and heirs, executors and
other legal representatives. Executive’s or the Company’s failure to insist upon strict compliance
with any provision hereof or any other provision of this Agreement or the failure to assert any
right Executive or the Company may have hereunder, including, without limitation, the right of
Executive to terminate employment for Good Reason pursuant to Section 5.1 of this Agreement, shall
not be deemed to be a waiver of such provision or right or any other provision or right of this
Agreement. This Agreement shall be governed by and construed in accordance with the laws of the
State of Texas, without reference to principles of conflict of laws that would require the
application of the laws of any other state or jurisdiction. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor provisions to such
sections. The Company may withhold from any amounts payable under this Agreement such federal,
state or local taxes as shall be required to be withheld pursuant to any applicable law or
regulation.
13. Validity. The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement, which shall remain
in full force and effect.
14. Section 409A. This Agreement is intended to comply with Section 409A of the
Internal Revenue Code of 1986, as amended, and shall be construed in a manner to give effect to
such intention. The parties shall, if necessary, amend the terms of this Agreement to the limited
extent necessary and possible in order to comply with the requirements of Section 409A. Each
payment due hereunder will be considered to be separate payments due to Executive and not one of a
series of payments for purposes of Section 409A.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date above
first written.
| LENNOX INTERNATIONAL INC. |
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| By: | ||||
| Date: | ||||
| EXECUTIVE: [NAME] |
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| By: | ||||
| Date: | ||||
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Appendix A
(A) “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under Section
12 of the Exchange Act.
(B) “Base Amount” shall have the meaning set forth in Section 280G(b)(3) of the Code.
(C) “Beneficial Owner” shall mean, with reference to any securities, any Person if:
(i) such Person is the “beneficial owner” (as determined pursuant to Rule 13d-3 of
the General Rules and Regulations under the Exchange Act, as in effect on the date of
this Agreement) of such securities; provided, however, that a Person shall not be deemed
the “Beneficial Owner” of, or to “beneficially own,” any security under this subsection
(i) as a result of an agreement, arrangement or understanding to vote such security if
such agreement, arrangement or understanding: (x) arises solely from a revocable proxy
or consent given in response to a public (i.e., not including a solicitation exempted by
Rule 14a-2(b)(2) of the General Rules and Regulations under the Exchange Act) proxy or
consent solicitation made pursuant to, and in accordance with, the applicable provisions
of the General Rules and Regulations under the Exchange Act and (y) is not then
reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(ii) such Person is a member of a group (as that term is used in Rule 13d-5(b) of
the General Rules and Regulations under the Exchange Act) that includes any other Person
(other than an Exempt Person) that beneficially owns such securities;
provided, however, that nothing in this definition shall cause a Person engaged in business as an
underwriter of securities to be the Beneficial Owner of, or to “beneficially own,” any securities
acquired through such Person’s participation in good faith in a firm commitment underwriting until
the expiration of forty (40) days after the date of such acquisition. For purposes hereof,
“voting” a security shall include voting, granting a proxy, consenting or making a request or
demand relating to corporate action (including, without limitation, a demand for a stockholder
list, to call a stockholder meeting or to inspect corporate books and records) or otherwise giving
an authorization (within the meaning of Section 14(a) of the Exchange Act) in respect of such
security.
(D) “Board” shall mean the Board of Directors of the Company.
A-1
(E) “Cause” shall have the same meaning as set forth in the Employment Agreement, or, if
no employment agreement exists, shall mean (a) any violation by Executive of the Company’s
written policies as they may exist or be created or modified and made available to Executive
from time to time in the future, including, as examples and not as a limitation of the
policies to which Executive may be subject, those policies prohibiting discrimination in the
workplace, including the prohibition of
harassment, on the ground of race, sex, religion, age or any other prohibited basis; (b)
any state or federal criminal conviction, including, but not limited to, entry of a plea of
nolo contendere or deferred adjudication upon a felony or misdemeanor charge; (c) the
commission by Executive of any material act of misconduct or dishonesty related to Executive’s
employment; (d) any intentional or grossly negligent action or omission to act which breaches
any covenant, agreement, condition or obligation contained in this Agreement; or (e) acts that
in any way have a direct, substantial and adverse effect on the Company’s reputation.
(F) “Change in Control” shall be deemed to have occurred if the event set forth in any
one of the following paragraphs shall have occurred:
(i) Any Person (other than an Exempt Person) shall become the Beneficial Owner of
35% or more of the shares of Common Stock then outstanding or 35% or more of the
combined voting power of the Voting Stock of the Company then outstanding; provided,
however, that no Change in Control shall be deemed to occur for purposes of this
subsection (i) if such Person shall become a Beneficial Owner of 35% or more of the
shares of Common Stock or 35% or more of the combined voting power of the Voting Stock
of the Company solely as a result of (x) an Exempt Transaction or (y) an acquisition by
a Person pursuant to a reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions described in clauses (x), (y)
and (z) of subsection (iii) of this definition are satisfied;
(ii) Individuals who, as of the Effective Date, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director subsequent to the Effective
Date whose election, or nomination for election by the Company’s shareholders, was
approved by a vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the Incumbent
Board; provided, further, that there shall be excluded, for this purpose, any such
individual whose initial assumption of office occurs as a result of any election contest
with respect to the election or removal of directors or other solicitation of proxies or
consents by or on behalf of a person other than the Board;
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(iii) Approval by the shareholders of the Company of a reorganization, merger or
consolidation, in each case, unless, following such reorganization, merger or
consolidation, (x) more than 65% of the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation and the combined
voting power of the then outstanding Voting Stock of such corporation is beneficially
owned, directly or indirectly, by all or substantially all of the Persons who were the
Beneficial Owners of the outstanding Common Stock immediately prior to such
reorganization, merger or consolidation (ignoring, for purposes of this clause (x), the
first proviso in subsection (i) of the definition of “Beneficial Owner” set forth above)
in substantially the same proportions as their ownership immediately prior to such
reorganization, merger or consolidation of the outstanding Common Stock, (y) no Person
(excluding any Exempt Person or any
Person beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 35% or more of the Common Stock then outstanding
or 35% or more of the combined voting power of the Voting Stock of the Company then
outstanding) beneficially owns, directly or indirectly, 35% or more of the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation or the combined voting power of the then
outstanding Voting Stock of such corporation and (z) at least a majority of the members
of the board of directors of the corporation resulting from such reorganization, merger
or consolidation were members of the Incumbent Board at the time of the execution of the
initial agreement or initial action by the Board providing for such reorganization,
merger or consolidation; or
(iv) Approval by the shareholders of the Company of (x) a complete liquidation or
dissolution of the Company, unless such liquidation or dissolution is approved as part
of a plan of liquidation and dissolution involving a sale or disposition of all or
substantially all of the assets of the Company to a corporation with respect to which,
following such sale or other disposition, all of the requirements of clauses (y)(A), (B)
and (C) of this subsection (iv) are satisfied, or (y) the sale or other disposition of
all or substantially all of the assets of the Company, other than to a corporation, with
respect to which, following such sale or other disposition, (A) more than 65% of the
then outstanding shares of common stock of such corporation and the combined voting
power of the Voting Stock of such corporation is then beneficially owned, directly or
indirectly, by all or substantially all of the Persons who were the Beneficial Owners of
the outstanding Common Stock immediately prior to such sale or other disposition
(ignoring, for purposes of this clause (y)(A), the first proviso in subsection (i) of
the definition of “Beneficial Owner” set forth above) in substantially the same
proportions as their ownership, immediately prior to such sale or other disposition, of
the outstanding Common Stock, (B) no Person (excluding any Exempt Person and any Person
beneficially owning, immediately prior to such sale or other disposition, directly or
indirectly, 35% or more of the Common Stock then outstanding or 35% or more of the
combined voting power of the Voting Stock of the Company then outstanding) beneficially
owns, directly or indirectly, 35% or more of the then outstanding shares of common stock
of such corporation and the combined voting power of the then outstanding Voting Stock
of such corporation and (C) at least a majority of the members of the board of directors
of such corporation were members of the Incumbent Board at the time of the execution of
the initial agreement or initial action of the Board providing for such sale or other
disposition of assets of the Company.
(G) “Code” shall mean the Internal Revenue Code of 1986, as amended.
(H) “Committee” shall mean the Compensation and Human Resources Committee of the Board.
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(I) “Common Stock” shall mean the common stock, par value $.01 per share, of the Company,
and shall include stock of any successor, within the meaning of Section 9.1.
(J) “Company” shall mean Lennox International Inc. and, except in determining under
Section (G) hereof whether or not any Change in Control of the Company has occurred, shall
include any successor to its business and/or assets which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
(K) “Disability” shall mean permanently disabled (completely unable to perform
Executive’s duties as defined in the benefit plans of the Company).
(L) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time
to time.
(M) “Exempt Person” shall mean the Company, any subsidiary of the Company, any employee
benefit plan of the Company or any subsidiary of the Company, and any Person organized,
appointed or established by the Company for or pursuant to the terms of any such plan.
(N) “Exempt Transaction” shall mean an increase in the percentage of the outstanding
shares of Common Stock or the percentage of the combined voting power of the outstanding
Voting Stock of the Company beneficially owned by any Person solely as a result of a reduction
in the number of shares of Common Stock then outstanding due to the repurchase of Common Stock
by the Company, unless and until such time as such Person shall purchase or otherwise become
the Beneficial Owner of additional shares of Common Stock constituting 3% or more of the then
outstanding shares of Common Stock or additional Voting Stock representing 3% or more of the
combined voting power of the then outstanding Voting Stock.
(O) “Good Reason” shall mean:
(i) any change in Executive’s position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities, excluding for this
purpose any de minimus changes and excluding an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by Executive, or any other assignment to Executive of
any duties inconsistent in any respect with such position, authority, duties or
responsibilities, other than de minimus inconsistencies or other than, in each case, any
such change in duties or such assignment that would clearly constitute a promotion or
other improvement in Executive’s position;
(ii) any failure by the Company to comply with any of the provisions of this
Agreement, other than an isolated, insubstantial and inadvertent failure not occurring
in bad faith and which is remedied by the Company promptly after receipt of notice
thereof given by Executive;
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(iii) the Company’s requiring Executive to be based at any office or location other
than at the location where Executive was employed immediately preceding the Change in
Control or at another location within 35 miles thereof;
(iv) any failure by the Company to comply with and satisfy the requirements of
Section 9.3 of this Agreement, provided that (x) the successor described in Section 9.3
has received, at least ten days prior to the Date of Termination, written notice from
the Company or Executive of the requirements of such provision and (y) such failure to
be in compliance and satisfy the requirements of Section 9.3 shall continue as of the
Date of Termination;
(v) in the event that Executive is serving as a member of the Board immediately
prior to the Change in Control, any failure to reelect Executive as a member of the
Board, unless such reelection would be prohibited by the Company’s By-laws as in effect
immediately prior to the Change in Control.
(P) “Person” shall mean any individual, firm, corporation, partnership, association,
trust, unincorporated organization or other entity.
(Q) “Voting Stock” shall mean, with respect to a corporation, all securities of such
corporation of any class or series that are entitled to vote generally in the election of
directors of such corporation (excluding any class or series that would be entitled so to vote
by reason of the occurrence of any contingency, so long as such contingency has not occurred).
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