UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

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Lennox International Inc.

 

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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2140 Lake Park Blvd.

Richardson, Texas 75080

 

April 16, 2010

 

Dear Stockholders:

 

It is my pleasure to invite you to the 2010 Annual Meeting of Stockholders of Lennox International Inc. The meeting will be held at 1:00 p.m., local time, on Thursday, May 13, 2010, at the University of Texas at Dallas School of Management, southeast corner of Drive A and University Parkway, Richardson, Texas 75083.

 

The accompanying Notice of Annual Meeting of Stockholders and Proxy Statement describe the items of business that will be discussed and voted upon during the meeting. It is important that you vote your shares whether or not you plan to attend the meeting. To be sure your vote is counted, we urge you to carefully review the Proxy Statement and to vote as soon as possible. You have a choice of voting over the Internet, by telephone or by returning the enclosed Proxy Card by mail. You may also vote in person at the meeting. Please refer to the instructions in the enclosed materials. If you attend the meeting and wish to vote in person, the ballot you submit at the meeting will supersede your proxy.

 

According to amended New York Stock Exchange rules, your broker, bank, or other nominee may not vote on your behalf in the election of directors as it has done in the past. As a result, if you hold your shares through a broker, bank, or other nominee, it is even more important that you provide your broker, bank, or other nominee with voting instructions. If you do not vote your shares, your opinion will not be heard.

 

I look forward to seeing you at the Annual Meeting of Stockholders. On behalf of management and our Board of Directors, I want to thank you for your continued support and confidence in 2010.

 

Sincerely,

 

Richard L. Thompson

Chairman of the Board

2140 Lake Park Blvd.

Richardson, Texas 75080

 

April 16, 2010

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

TO BE HELD ON MAY 13, 2010

 

 

To Our Stockholders:

 

Notice is hereby given that the 2010 Annual Meeting of Stockholders of Lennox International Inc. will be held on Thursday, May 13, 2010 at 1:00 p.m., local time, at the University of Texas at Dallas School of Management, southeast corner of Drive A and University Parkway, Richardson, Texas 75083 to:

 

 

A Proxy Statement, Proxy Card, and Annual Report to Stockholders, which includes our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, accompany this Notice.

 

The Board of Directors has determined that our stockholders of record at the close of business on March 19, 2010 are entitled to notice of, and to vote at, the Annual Meeting of Stockholders.

 

By Order of the Board of Directors,

 

John D. Torres

Corporate Secretary

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 13, 2010:

 

This Proxy Statement and the accompanying Annual Report to Stockholders are available at http://www.lennoxinternational.com/financials/financialreportproxy.htm

 

Your Vote Is Important

 

 

 

PROXY STATEMENT

 

TABLE OF CONTENTS

 

 

Meeting Date and Location

 

The 2010 Annual Meeting of Stockholders will be held on Thursday, May 13, 2010 at 1:00 p.m., local time, at the University of Texas at Dallas School of Management, southeast corner of Drive A and University Parkway, Richardson, Texas 75083. We began mailing this Proxy Statement and the accompanying Notice of Annual Meeting of Stockholders, Proxy Card and Annual Report to Stockholders, which includes our Annual Report on Form 10-K, to our stockholders on or about April 16, 2010 for the purpose of soliciting proxies on behalf of our Board of Directors (our “Board”).

 

Matters to be Voted On

 

At the meeting, you will be asked to vote on three proposals:

 

 

Our Board recommends you vote “for” each of our Board nominees, “for” the Lennox International Inc. 2010 Incentive Plan, as amended and restated, and “for” ratification of our independent registered public accounting firm for 2010.

 

Record Versus Beneficial Ownership of Shares

 

If your shares are registered directly in your name with our transfer agent, BNY Mellon Shareowner Services, you are considered, with respect to those shares, the “stockholder of record.” If you are a stockholder of record, we sent our Notice of Annual Meeting of Stockholders, Proxy Statement, Proxy Card and Annual Report to Stockholders directly to you.

 

If your shares are held in a stock brokerage account or by a bank, you are considered the “beneficial owner” of shares held in street name. In that case, our Notice of Annual Meeting of Stockholders, Proxy Statement, Proxy Card, and Annual Report to Stockholders have been forwarded to you by your broker or bank, which is considered, with respect to those shares, the stockholder of record. Your broker or bank will also send you instructions on how to vote. If you have not heard from your broker or bank, please contact them as soon as possible.

 

Record Date and Number of Votes

 

The record date for the 2010 Annual Meeting of Stockholders is March 19, 2010. If you were a stockholder of record at the close of business on March 19, 2010, you may vote. At the close of business on the record date, there were 55,760,368 shares of our common stock outstanding and entitled to vote and approximately 672 stockholders of record. Each stockholder is entitled to one vote per share.

 

Quorum and Vote Required

 

A quorum is required to transact business at the meeting. To achieve a quorum at the meeting, stockholders holding a majority of our outstanding shares entitled to vote must be present either in person or represented by proxy. Shares held by us in treasury will not count towards a quorum. In the event a quorum is not present at the meeting, we expect the meeting will be adjourned or postponed to solicit additional proxies.

To be elected, nominees for director must receive a plurality of the votes cast. This means that the director nominees with the most votes are elected, regardless of whether any nominee received a majority of the votes. Approval of the Lennox International Inc. 2010 Incentive Plan, as amended and restated, ratification of our independent registered public accounting firm and any other matters submitted to you at the meeting will be decided by the affirmative vote of a majority of our common stock represented in person or by proxy at the meeting and entitled to vote.

 

Abstentions and Broker Non-Votes

 

If a broker or bank holds shares in street name and the beneficial owner does not provide the broker or bank with specific voting instructions, the broker or bank generally has discretion to vote on routine matters but does not have discretion to vote on non-routine matters. When a broker or bank does not vote on a proposal because it does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner, the missing votes are referred to as “broker non-votes.”

 

We understand that pursuant to New York Stock Exchange (“NYSE”) rules, Proposals 1 and 2 will be considered non-routine proposals for which your broker or bank may not exercise voting discretion if it does not receive voting instructions from you and Proposal 3 will be considered a routine proposal for which your broker or bank may exercise voting discretion even if it does not receive voting instructions from you. Prior to 2010, the election of directors was considered a routine proposal, but beginning this year, brokers and banks are no longer permitted to vote your shares in the election of directors. Therefore, we urge you to give voting instructions to your broker on all three proposals.

 

Abstentions and broker non-votes, if applicable, will be included in determining whether a quorum is present, but will not be counted as votes “for” or “against” Proposal 1, Proposal 2, or Proposal 3.

 

Voting Procedures

 

To be sure your shares are represented at the 2010 Annual Meeting of Stockholders, please vote as soon as possible by using one of the following methods:

 

 

If you are the beneficial owner of shares held in a stock brokerage account or by a bank, you will not be able to vote by calling the phone number or accessing the Internet address provided above. The availability of telephone and Internet voting for beneficial owners will depend on the voting procedures of your broker or bank. These procedures differ from the procedures provided by Broadridge for stockholders of record. Therefore, you should check the information forwarded to you by your broker or bank to find out which voting options are available to you.

 

If you vote by telephone or Internet and your proxy is not revoked, your shares will be voted in accordance with your voting instructions and you do not need to return your Proxy Card.

 

 

A representative of Broadridge will tabulate the votes and act as inspector of election at the meeting.

 

Changing Your Vote

 

You can change your vote on a proposal at any time before the meeting for any reason by revoking your proxy. Proxies may be revoked by filing a written notice of revocation, bearing a later date than your proxy, with our Corporate Secretary at or before the meeting. Proxies may also be revoked by:

 

 

In each case, the later submitted vote will be recorded and the earlier vote revoked. Any written notice of a revocation of a proxy should be sent to Lennox International Inc., 2140 Lake Park Blvd., Richardson, Texas 75080, Attention: Corporate Secretary. To be effective, the revocation must be received by our Corporate Secretary before the taking of the vote at the Annual Meeting of Stockholders.

 

Other Business; Adjournments

 

We are not aware of any other business to be acted upon at the 2010 Annual Meeting of Stockholders. However, if you have voted by proxy and other matters are properly presented at the Annual Meeting for consideration, the persons named in the accompanying Proxy Card will have discretion to act on those matters according to their best judgment. In the absence of a quorum, stockholders representing a majority of the votes present in person or by proxy at the meeting may adjourn the meeting.

 

Our Bylaws provide that our Board may be composed of no less than three and no more than 15 members. The size of our Board has been fixed by our Board at 11 members, divided into three classes, with each class serving a three-year term.

 

Upon the recommendation of the Board Governance Committee, the Board has nominated five Class III directors for re-election to our Board to hold office for a three-year term expiring at the 2013 Annual Meeting of Stockholders. All Class I and Class II directors will continue in office, in accordance with their previous election, until the expiration of the terms of their classes at the 2011 or 2012 Annual Meeting of Stockholders. The process followed by the Board in nominating directors and the criteria considered for director nominees is described in the “Corporate Governance — Director Nomination Process and Nominee Criteria” section of this Proxy Statement.

 

We provide below biographical information for each nominee for Class III director and for each current director in the classes continuing in office. For each director and director nominee, the information presented includes the positions held, principal occupation and business experience for the past five years or more. The biographical description below for each director and director nominee also includes the specific experience, qualifications, attributes and skills that led to the Board’s conclusion that such person should serve as a director of our company at this time, or that the Board would expect to consider if it were making a conclusion as to whether such person should serve as a director of our company at this time, respectively.

 

If you do not wish your shares to be voted for any particular nominee, you may withhold your vote for that particular nominee. If any nominee for Class III director becomes unavailable, the persons named in the accompanying Proxy Card may vote for any alternate designated by the incumbent Board, upon the recommendation of the Board Governance Committee, or the number of directors constituting the Board may be reduced.

The Board has nominated the following individuals for re-election as Class III directors for a three-year term expiring at the 2013 Annual Meeting of Stockholders:

 

THE BOARD RECOMMENDS A VOTE “FOR”
EACH OF THE ABOVE NOMINEES.

 

The following Class I directors’ terms will continue until the 2011 Annual Meeting of Stockholders:

 

The following Class II directors’ terms will continue until the 2012 Annual Meeting of Stockholders:

 

 

The following family relationships exist among certain members of our Board:

 

 

Our Board, the Compensation and Human Resources Committee (the “Committee”), and company management all believe that the effective use of cash and equity-based incentives has been a key component of our company’s success in the past and is vital to our company’s achievement of strong performance in the future. In 1998, our Board adopted the 1998 Incentive Plan of Lennox International Inc., which has been amended several times since its initial adoption, (as amended, the “1998 Plan”). On April 15, 2005, stockholders of our company approved the amendment and restatement of the 1998 Plan to, among other things, increase the number of shares available for award and to approve the material terms for performance-based awards for purposes of compliance with Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

 

On March 12, 2010, our Board approved an amendment and restatement of the 1998 Plan in the form of the Lennox International Inc. 2010 Incentive Plan (the “Plan”), subject to the approval of our company’s stockholders. The principal features of the 1998 Plan as it exists today and the proposed changes included in the Plan are summarized below. This summary does not include all information about the Plan. A copy of the Plan as proposed is included as Appendix A to this Proxy Statement, and the following description is qualified in its entirety by reference to the text of the Plan.

 

We are not seeking to increase the amount of shares available for issuance or to adjust any of the individual award limits contained in the 1998 Plan. We are asking for your approval of the material terms for performance-based awards for purposes of compliance with Section 162(m) of the Code, as described below. The Board unanimously recommends that stockholders vote for approval of the Lennox International Inc. 2010 Incentive Plan, as amended and restated.

 

Section 162(m)

 

Under Section 162(m) of the Code and applicable regulations, we must seek your approval of our incentive plan at intervals of no more than five years to preserve our company’s ability to receive a federal income tax deduction for certain performance-based awards. Our stockholders must approve the material terms of performance-based compensation plans, including the employees eligible to receive compensation under the plan, a description of the business criteria on which performance goals are based, and the maximum amount of compensation that could be paid to any employee under the plan, to ensure that performance-based compensation over $1 million payable to our CEO and certain other highly compensated executive officers is tax deductible and qualifies under Section 162(m) of the Code. In accordance with these requirements, we are asking our stockholders to approve the Plan in order to extend the Plan’s qualification under Section 162(m) of the Code for incentives established within the next five years.

 

Summary of Changes

 

Plan Limits and Administration

 

The Plan does not include an increase in the total number of shares authorized for issuance or transfer from the amount set forth in the 1998 Plan. The Plan has been updated to reflect the current limits on the number of shares that may be issued after December 31, 2009 and on the number of shares that will be available for full-value restricted stock, restricted stock units, performance shares, performance units, and other share-based awards, as described below in Summary of the Plan.

 

Under a new provision in the Plan, the Committee has the authority to delegate its responsibilities under the Plan, in certain limited circumstances, to either a committee of two or more directors or, with respect to awards to employees who are not directors or executive officers, to our executive officers.

 

Vesting Periods and Other Award Restrictions

 

Under the 1998 Plan, the Committee could extend the exercisability of an award, accelerate the vesting or exercisability of an award, eliminate any award restrictions, make awards to prospective employees in

certain circumstances, waive any restriction or other provision of the 1998 Plan, or otherwise amend or modify an award as long as the action either was not adverse to, or was consented to by, the participant.

 

The Plan gives the Committee more limited authority in the foregoing areas. The Plan does not permit the Committee to make awards to prospective employees. The Plan limits the ability of the Committee to accelerate the vesting or exercisability of an award, eliminate award restrictions, or modify awards except in certain limited circumstances described below in Summary of the Plan. The Plan increases the minimum vesting period of options and stock appreciation rights from six months to one year and requires all awards to employees to have a one year minimum vesting period. Subject to the limitations imposed under Section 162(m) of the Code, the Plan authorizes the Committee to waive the forfeiture period for restricted stock, restricted stock unit, and other share-based awards.

 

Term and Price

 

The Plan includes a new provision that options and stock appreciation rights will expire after ten years, and that incentive stock options to a participant holding more than 10% of our company stock will expire after five years.

 

The Plan includes a new requirement that in the case of an incentive stock option granted to a participant who, at the time of the grant, owns company stock representing more than 10% of the voting power, the option price per share will be no less than 110% of the fair market value of one share on the date of grant.

 

Director Awards

 

The 1998 Plan gave the Committee the authority to make determinations regarding any director awards. The Plan provides that any action or determination by the Committee specifically affecting or relating to an award to a director will require the approval of the Board.

 

The 1998 Plan provided that restricted stock awards to directors must have a minimum vesting period of one year, provided that the Committee could authorize earlier vesting by reason of death, disability, retirement, or change in control. The Plan excludes awards to non-employee directors and consultants from the minimum vesting period requirements applicable to other participants.

 

Other Share-Based Awards

 

The Plan includes a new type of award category, other share-based awards, that was not included in the 1998 Plan.

 

Performance Awards

 

The Plan expands the list of criteria that the Committee may consider in determining the performance criteria that must be achieved for a participant to receive a performance award. The specific criteria the Committee may consider in making performance awards is described below in Summary of the Plan.

 

Dividends and dividend equivalents distributed in connection with a performance award will be subject to restrictions and risk of forfeiture to the same extent as the underlying award of cash, stock, or other property.

 

Change in Control

 

The 1998 Plan provided for accelerated vesting of stock, restricted stock, restricted stock units, and performance awards in the event of a change in control, but did not include a definition for “change in control” or any other provisions regarding the effect of a change in control. The Plan includes a definition for “change in control,” and provisions regarding the effect of a change in control, which are substantially similar to the provisions contained in our form of Change in Control Agreement entered into between our company and certain of our executive officers, and our form of 2009 Long-Term Incentive Award Agreement for U.S. Employees. Such change in control provisions are described below under Summary of the Plan.

Clawback

 

The Plan includes a new provision that permits our company to include in any award agreement provisions for cancellation or forfeiture of an award, and repayment to our company of any gain related to an award, upon terms and conditions as may be determined by the Committee in its sole discretion.

 

Deemed Exercise

 

Under a new provision in the Plan, an award agreement may provide that an option or stock appreciation right with a positive value will be deemed exercised on the last day of the term if the participant has not exercised the award.

 

Section 162(m) Requirements

 

The Plan provides a more comprehensive description of the conditions and limitations applicable to awards intended to comply with Section 162(m) of the Code.

 

Summary of the Plan

 

Objectives

 

The objectives of the Plan are to attract and retain employees, non-employee directors and independent contractors to our company and to reward successful execution of our business strategy and achievement of desired business results. Plan awards provide participants with a proprietary interest in the growth and performance of our company, and help to align the interests of Plan participants with the interests of our stockholders.

 

Shares Subject to Plan

 

Any shares issued under the Plan may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares purchased in the open market. Subject to adjustment in the event of any merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property, other than a regular cash dividend), stock split, reverse stock split, spin-off or similar transaction or other change in corporate structure affecting our company’s shares or their value, a total of 24,254,706 shares of our common stock are authorized for issuance or transfer under the Plan, of which 22,094,706 shares of our common stock are available for awards to employees and consultants and 2,160,000 shares are available for awards to directors. For awards made under the Plan after December 31, 2009, no more than 2,922,553 shares may be issued to employees and consultants, no more than 842,790 shares may be issued to directors, and only 1,859,651 of the total shares authorized for issuance under the Plan will be available for full-value restricted stock awards, restricted stock unit awards, performance shares, performance units and other share-based awards to employees, directors or consultants. Under the Plan, a director may not be granted in any calendar year awards with respect to more than 40,000 shares, except that a non-employee vice chairman of the Board may be granted in any calendar year awards with respect to up to 120,000 shares and a non-employee chairman of the Board may be granted in any calendar year awards with respect to up to 200,000 shares.

 

Subject to adjustment in the instances described above, no participant under the Plan may, in any calendar year:

 

 

In addition, the maximum dollar value that may be granted to any participant in any calendar year with respect to cash-based performance awards that are intended to comply with the performance-based exception

under Section 162(m) of the Code is $5,000,000. If an award is cancelled, the cancelled award will continue to be counted toward the share or dollar value limitations described above.

 

Shares of our common stock issued as substitution awards in connection with an acquisition of another entity by us will not reduce the number of shares available for awards under the Plan. In addition, we may use shares under a pre-existing, stockholder-approved plan of a company acquired by or combined with us for awards under the Plan, and those shares will not reduce the total number of shares available for grant under the Plan. However, such shares may only be used for grants of awards made prior to the expiration of the pre-existing plan and to persons who were not employees or directors of ours prior to such acquisition or combination. Under the Plan, if shares subject to an award are forfeited, an award expires or terminates without issuance of shares, or an award is settled in whole or in part for cash, those shares subject to forfeiture, expiration, termination, cash settlement or non-issuance will again be available for award grants.

 

Notwithstanding anything to the contrary contained in the Plan, the following shares will not be added to the shares authorized for grant under the Plan: (i) shares tendered by the participant or withheld by the company in payment of the purchase price of an option, or to satisfy any tax withholding obligation with respect to an option; and (ii) shares reacquired by the company on the open market or otherwise using cash proceeds from the exercise of options or options granted under a prior plan.

 

On March 30, 2010, the last reported sale price of our company’s common stock in NYSE composite transactions was $45.10 per share.

 

Eligibility and Administration

 

Any company employee, non-employee director, or consultant will be eligible to be a participant under the Plan. The Committee has the exclusive authority to administer the Plan and to take all actions that are specifically contemplated by the Plan or are necessary or appropriate in connection with the administration of the Plan, except with respect to matters that are required to be administered by the Board. Any action or determination by the Committee specifically affecting or related to a director award will require the prior approval of the Board. To the extent not inconsistent with applicable law, including Section 162(m) of the Code, or the rules and regulations of the NYSE, the Committee may delegate to (i) a committee of two or more directors of our company any of the authority of the Committee under the Plan, including the right to grant, cancel, or suspend awards and (ii) to one or more executive officers or a committee of executive officers the right to grant awards to employees who are not directors or executive officers of our company and the authority to take action on behalf of the Committee pursuant to the Plan to cancel or suspend awards to employees who are not directors or executive officers of our company.

 

The Committee has full power and authority, subject to the provisions of the Plan and to any resolutions consistent with the Plan as may from time to time be adopted by the Board, to:

 

 

 

No Repricing

 

Neither the Committee nor the Board may, without the approval of our company’s stockholders, reduce the grant price per share of an option or a stock appreciation right after it is granted, cancel an option or stock appreciation right when the grant price per share exceeds the fair market value of one share in exchange for cash or another award (other than in connection with a change in control or a corporate transaction as provided for in the Plan), or take any other action with respect to an option or stock appreciation right that would be treated as a repricing under the NYSE rules and regulations.

 

Awards

 

Awards under the Plan may be granted singly, in combination or in tandem. Awards under the Plan may be evidenced by an award agreement with such terms and conditions as the Committee determines, that are not inconsistent with the terms of the Plan. The types of awards that may be made to participants under the Plan are as follows:

 

Stock Options.  Stock options are rights to purchase a specified number of shares of common stock at a specified price. An option granted pursuant to the Plan may consist of either an incentive stock option that complies with the requirements of Section 422 of the Code, or a non-qualified stock option that does not comply with such requirements. Only company employees may receive incentive stock options. Options granted under the Plan must have an exercise price per share that is not less than the fair market value of the common stock underlying the option on the date of grant, except in the case of a grant of incentive stock options to a participant who, at the time of the grant, owns company stock representing more than 10% of the voting power of all classes of company stock, the option price per share will be no less than 110% of the fair market value of one share on the date of grant. Options granted under the Plan may not include provisions that “reload” the option upon exercise.

 

The exercise price of an option must be paid in full at the time an option is exercised. Payment for an option must be made either in cash or cash equivalents, shares of company common stock or through any other method specified in an award agreement, or, with the consent of the Committee, by other consideration having a fair market value on the exercise date equal to the total purchase price or by withholding shares otherwise issuable in connection with the exercise of the option, or any combination of the foregoing. The Committee has the sole discretion to provide that the shares issued upon an option’s exercise will be in the form of restricted stock. An option granted under the Plan may not be exercised for a fraction of a share.

 

The Committee may grant incentive stock options to any employee, subject to the requirements of Section 422 of the Code. Solely for purposes of determining whether shares are available for the grant of incentive stock options under the Plan, the maximum aggregate number of shares that may be issued pursuant to incentive stock options granted under the Plan will be 2,922,553 shares, subject to adjustment as provided in the Plan.

 

Options granted to company employees will not be exercisable before the expiration of one year from the date the option is granted except in the case of a company acquired by or combined with us, under special

circumstances determined by the Committee, as contemplated in a change in control, or as may be set forth in an award agreement with respect to the participant’s retirement, death, or disability. The restriction on exercisability before the expiration of one year from the date the option is granted will not apply to options granted to non-employee directors or consultants. The Committee will fix the term of each option granted under the Plan, except that no option will be exercisable after the expiration of ten years from the date of grant and, in the case of an incentive stock option granted to a participant, who owns company stock representing more than 10% of the voting power of all classes of company stock at the time of the grant, the option term may not exceed five years from the date of grant. An award agreement may provide that if, on the last day of the option term, the fair market value of one share exceeds the option price per share, the participant has not exercised the option and the option has not expired, the option will be deemed to have been exercised by the participant on the last day of the option term with payment made by withholding shares otherwise issuable in connection with the option exercise.

 

Stock Appreciation Rights.  A stock appreciation right gives the recipient the right to receive a payment in cash or company common stock equal to the excess of the fair market value, or a lesser amount determined by the Committee, of a share of company common stock on the date the right is exercised over the grant price of the stock appreciation right. The Committee will determine in its sole discretion whether payment of a stock appreciation right is made in cash, whole shares or other property, or any combination.

 

A stock appreciation right granted under the Plan will:

 

 

The restriction on exercisability before the expiration of one year from the date of grant will not apply to stock appreciation rights granted to non-employee directors or consultants. An award agreement may provide that if, on the last day of a stock appreciation right term, the fair market value of one share exceeds the grant price per share of the stock appreciation right and the stock appreciation right has not expired, the stock appreciation right will be deemed to have been exercised by the participant on the last day of the term, with payment made by withholding shares otherwise issuable in connection with the exercise.

 

Restricted Stock and Restricted Stock Unit Awards.  Awards of restricted stock and of restricted stock units may be granted under the Plan to participants, and such awards may be made as a form of payment of performance awards and other earned cash-based incentive compensation. The Committee may determine if the participant must provide any consideration (other than services) to our company before the issuance of restricted stock or restricted stock units. Unless the award agreement provides otherwise, participants holding restricted stock awards may vote the shares and receive distributions. A participant receiving a restricted stock unit award will not have voting or dividend rights for the underlying award shares. Unless otherwise provided in an award agreement, if the restrictions have not lapsed for any restricted stock or restricted stock unit award, then any distributions of shares or any other property except cash will have the same restrictions as such award.

 

Except in the case of a company acquired by or combined with us, under special circumstances determined by the Committee, as contemplated in a change in control, or as may be set forth in an award agreement with respect to the participant’s retirement, death or disability, restricted stock awards and restricted stock unit awards subject only to continued employment with our company will have a vesting period of not less than one year from date of grant, subject to accelerated vesting in the Committee’s

discretion if the participant’s service with our company terminates. The Committee may, in its discretion, waive the forfeiture period and any other conditions set forth in an award agreement for restricted stock or restricted stock units. The minimum vesting period requirement of one year will not apply to restricted stock awards or restricted stock unit awards granted to non-employee directors or consultants.

 

Other Share-Based Awards.  Our company may grant participants other share-based awards under the Plan, which include other awards of shares and other awards that are valued by reference to, or are otherwise based on, shares or other property, including deferred stock units. Any dividend distribution other than cash made under an other share-based award that vests based on achievement of performance goals will be subject to the same restrictions and risk of forfeiture as the shares covered by the award. Other share-based awards may be paid in cash, shares, or other property, or any combination. Other share-based awards may be paid in a lump sum or in installments or on a deferred basis subject to the requirements of Section 409A of the Code.

 

Except in the case of a company acquired by or combined with us, under special circumstances determined by the Committee, as contemplated in a change in control, or as may be set forth in an award agreement with respect to the participant’s retirement, death, or disability, other share-based awards subject only to continued service with our company will have a vesting period of not less than one year from date of grant, subject to accelerated vesting in the Committee’s discretion if the participant’s service with our company terminates. The Committee may, in its discretion, waive the forfeiture period and any other conditions set forth in an award agreement for other share-based awards, subject to Section 162(m) of the Code. The minimum vesting period of one year will not apply to other share-based awards granted to non-employee directors or consultants.

 

Performance Awards.  Performance awards are subject to the attainment of one or more performance goals which are described below, and may be paid in cash, shares or other property. The Committee will determine the amount of any performance award, the performance criteria to be achieved and the length of the performance period. Except in the case of a company acquired by or combined with us, under special circumstances determined by the Committee, as contemplated in a change in control, or as may be set forth in an award agreement with respect to the participant’s retirement, death or disability, performance share awards will have a performance period of not less than one year from date of grant. Except in the event of a change in control or as may be provided in an award agreement, performance awards will be distributed only after the end of the performance period. Performance awards may be paid in a lump sum or in installments after the end of the performance period or on a deferred basis subject to the requirements of Section 409A of the Code.

 

The Committee establishes performance goals for participants who have received performance awards, and the performance goals will be based on one or more, or a combination, of the following criteria, or the attainment of specified levels of or growth or improvement in one or more of the following criteria: net sales; revenue; revenue growth or product revenue growth; operating income (before or after taxes); pre- or after-tax income (before or after allocation of corporate overhead and bonus); earnings per share; net income (before or after taxes); return on equity; total stockholder return; return on assets or net assets; appreciation in or maintenance of the price of the shares or any other publicly-traded securities of our company; market share; gross profits; earnings (including earnings before taxes, earnings before interest and taxes or earnings before interest, taxes, depreciation and amortization); economic value-added models or equivalent metrics; comparisons with various stock market indices; reductions in costs; cash flow or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; expense levels; working capital levels, including cash, inventory and accounts receivable; operating margins, gross margins or cash margin; year-end cash; debt reduction; stockholder equity; operating efficiencies; research and development achievements; manufacturing achievements (including obtaining particular yields from manufacturing runs and other measurable objectives related to process development activities); regulatory achievements (including submitting or filing applications or other documents with regulatory authorities or receiving approval of any such applications or other documents and passing pre-approval inspections (whether of the company or our company’s third-party manufacturer) and validation of manufacturing processes (whether the company’s or our company’s third-party manufacturer’s)); strategic partnerships or transactions; establishing relationships with commercial entities with respect to the marketing, distribution and sale of our company’s products (including with group purchasing

organizations, distributors and other vendors); supply chain achievements (including establishing relationships with manufacturers or suppliers of component materials and manufacturers of our company’s products); co-development, co-marketing, profit sharing, joint venture or other similar arrangements); financial ratios measuring liquidity, activity, profitability, working capital or leverage; cost of capital or assets under management; financing and other capital raising transactions (including sales of our company’s equity or debt securities; factoring transactions; sales or licenses of our company’s assets, including its intellectual property, whether in a particular jurisdiction or territory or globally; or through partnering transactions); and implementation, completion or attainment of measurable objectives with respect to research, development, manufacturing, production volume levels, acquisitions and divestitures and recruiting and maintaining personnel.

 

Dividends and dividend equivalents distributed in connection with a performance award will be subject to restrictions and risk of forfeiture to the same extent as the award with respect to which such cash, stock, or other property has been distributed.

 

Effective Date, Amendment and Termination of the Plan

 

The Plan will be effective on the date it is approved by the stockholders of our company. If the Plan is not approved by our company’s stockholders within twelve months after the Board’s adoption of the Plan, the Plan and any awards granted under the Plan will be null and void and the 1998 Plan of our company will remain in full force and effect, except as may be limited under Section 162(m) of the Code, which would likely limit our ability to make future awards of options and time-based other awards. The Board may alter, amend, suspend or terminate the Plan as it deems advisable, subject to any legal requirement for stockholder approval and to compliance with all applicable laws. No amendment or termination of the Plan may impair the rights of a participant in any material respect under any award previously granted without such participant’s consent. The Plan will terminate on the tenth anniversary from the effective date.

 

Change in Control and Effect of a Change in Control

 

A change in control will be deemed to have occurred if the event set forth in any one of the following paragraphs has occurred:

 

(i) Any person (other than an exempt person) becomes the beneficial owner of 35% or more of the shares of outstanding company common stock or 35% or more of the combined voting power of the company’s outstanding voting stock; provided, however, that no change in control will be deemed to occur for purposes of this paragraph if such person becomes a beneficial owner of 35% or more of the shares of common stock or 35% or more of the combined voting power of the company’s voting stock solely as a result of an exempt transaction or an acquisition by a person pursuant to a reorganization, merger or consolidation, if, after such event, the conditions described in clauses (A), (B) and (C) of subsection (iii) of this definition are satisfied;

 

(ii) A majority of the individuals who constitute the Board cease for any reason to be directors; with the exception of any individual becoming a new director whose election, or nomination for election, was approved by a vote of at least a majority of the directors in place prior to the majority of individuals who constitute the Board ceasing for any reason to be directors and any 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;

 

(iii) Approval by company stockholders of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, (A) 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 company common stock immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership immediately prior to such reorganization, merger or consolidation of the outstanding company common stock, (B) 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 company’s outstanding common stock or 35% or more of the combined voting power of the company’s voting stock 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 (C) 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 Board existing 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 company stockholders of a complete liquidation or dissolution of the company, unless it 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, or the sale or disposition of substantially all of the assets of the company 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 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 Board existing 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.

 

Unless otherwise specified or as set forth in a change in control agreement approved by the Committee, in the event of a change in control (as defined above) of the company: (i) those options and stock appreciation rights outstanding as of the date of the change in control will immediately vest and become fully exercisable, (ii) restrictions, limitations and other conditions applicable to restricted stock, restricted stock units, performance shares, and performance units will lapse and the awards will become free of all restrictions, limitations and conditions and become fully vested at target, and (iii) the restrictions, other limitations and other conditions applicable to any other share-based awards or any other awards will lapse, and such other share-based awards or such other awards may become free of all restrictions, limitations and conditions and become fully vested at target and transferable to the full extent of the original grant.

 

The Committee may determine in its discretion that, upon the occurrence of a change in control of the company, each option and stock appreciation right outstanding will terminate within a specified number of days after notice to the participant, or that each participant will receive, with respect to each share subject to such option or stock appreciation right, an amount equal to the excess of the fair market value of such share immediately prior to the occurrence of such change in control over the exercise price per share of such option or stock appreciation right; such amount to be payable in cash, in one or more kinds of stock or property (including the stock or property, if any, payable in the transaction) or in a combination thereof, as the Committee determines in its discretion.

 

Adjustments

 

The Committee will make adjustments or other substitutions to the Plan and to awards it deems equitable or appropriate, taking into consideration the accounting and tax consequences, in the event of any merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property, other than a regular cash dividend), stock split, reverse stock split, spin-off or similar transaction or other change in corporate structure affecting the company’s shares or their value.

Limits on Transferability

 

In general, an award under the Plan will not be assignable or transferable other than by will or the laws of descent and distribution. To the extent permitted under Section 409A of the Code and approved by the Committee, a participant may transfer awards to certain family members or to a trust or other entity meeting certain ownership requirements. In no event may a transfer of an award be made for value.

 

Deferral

 

The Committee is authorized to establish procedures to defer payment of an award.

 

Tax Withholding

 

To the extent our company is required to withhold federal, state, local or foreign taxes in connection with any payment made or benefit realized under the Plan, our company may withhold an amount of shares with a fair market value equal to the statutory minimum amount required to be withheld.

 

Cancellation or Forfeiture

 

An award agreement may provide for the cancellation or forfeiture of an award and repayment to our company of any gain related to an award upon such terms and conditions as may be determined by the Committee in its sole discretion.

 

Foreign Employees and Consultants

 

Awards to participants who are foreign nationals or are providing services outside the U.S. may be made on different terms and conditions than those applicable to awards to employees or consultants providing services in the U.S. as the Committee determines are necessary or desirable in order to recognize differences in local law or tax policy.

 

Plan Benefits

 

Because the Committee has discretion over the granting of awards to employees, non-employee directors, and consultants under the Plan, we cannot determine which persons may be granted awards. Additionally, we are unable to estimate the number of shares of our company’s common stock that may be awarded under the Plan. As of December 31, 2009, the Company had approximately 11,600 employees.

 

U.S. Federal Income Tax Consequences

 

The following is a general discussion of the current U.S. federal income tax consequences of awards under the Plan. These federal tax laws may change and the federal, state, and local tax consequences for any employee will depend upon his or her individual circumstances. This summary does not address all potential tax consequences related to awards, such as estate and gift taxes, foreign taxes, and state and local taxes.

 

Restricted Stock, Restricted Stock Units, Performance Shares and Performance Units

 

A participant generally will not have taxable income upon grant of restricted stock, restricted stock units, performance shares or performance units. Instead, the participant will recognize taxable ordinary income equal to the excess of the fair market value of the vested shares of common stock when distributed over the exercise price (if any) paid for such common stock. For restricted stock only, a participant may elect to be taxed at the time of grant.

 

Nonqualified Stock Options and Stock Appreciation Rights

 

The grant of a non-qualified stock option or stock appreciation right will not result in taxable income to the participant. Upon the exercise of a non-qualified stock option, a participant generally will realize ordinary taxable income equal to the difference between the option price and the fair market value of the common

stock underlying the option on the date of exercise. Upon the exercise of a stock appreciation right, the participant will recognize ordinary income in an amount equal to the difference between the fair market value of the common stock underlying the stock appreciation right on the date of grant and the fair market value of our common stock on the date of exercise.

 

Incentive Stock Options

 

Upon the grant or exercise of an incentive stock option, a participant will not recognize taxable income. However, the excess of the fair market value of the shares at the time of exercise over the option price will be a preference item that could create an alternative minimum tax liability for the participant. The participant will recognize taxable income in the year in which the shares of common stock underlying the incentive stock option are sold or disposed of.

 

If a participant disposes of the shares acquired on exercise of an incentive stock option after the later of two years from the option grant date and more than one year from the exercise date, the gain recognized by the participant, if any, will be a long-term capital gain at this time. If the participant disposes of the shares within two years of the grant of the incentive stock option or within one year of exercise of the incentive stock option, then a disqualifying disposition will occur and the participant generally will recognize ordinary income in the year of the disposition equal to the lesser of: (i) the excess of the fair market value of such shares on the exercise date over the exercise price paid for the shares, and (ii) the amount realized on the sale or disposition over the exercise price paid for the shares. The balance of the gain or loss, if any, will be long-term or short-term capital gain, depending on how long the shares were held.

 

Cash Awards and Performance Awards Payable in Cash

 

The participant will recognize taxable ordinary income when cash awards or performance awards payable in cash are paid to the participant.

 

Our Company’s Income Tax Deduction

 

Subject to the rules regarding reasonable compensation, and assuming that performance awards paid under the Plan are “qualified performance-based compensation” within the meaning of Section 162(m) of the Code, we will generally be entitled to a corresponding income tax deduction at the time a participant recognizes ordinary income from awards made under the Plan. However, we will not receive any income tax deduction when a participant recognizes capital gain income upon disposition of shares of common stock received pursuant to an incentive stock option or any other form of award.

 

The Board Recommends A Vote “For”

Approval Of The Lennox International Inc. 2010 Incentive Plan, As Amended And Restated.

 

Proxies Solicited By The Board Will Be Voted “For” Approval Of The

Lennox International Inc. 2010 Incentive Plan, As Amended And Restated,

Unless A Stockholder Has Indicated Otherwise In Voting The Proxy.

 

We currently administer two equity compensation plans: the 1998 Plan and the Non-Employee Directors’ Compensation and Deferral Plan. The following table provides information as of December 31, 2009 regarding shares of our common stock that may be issued under these equity compensation plans.

 

 

 

 

 

The following table illustrates the number of shares of our common stock that may be issued pursuant to outstanding performance share units and the number of shares that may be available for future issuance under our equity compensation plans if our performance falls below or exceeds our target performance goals:

 

 

 

The Audit Committee of the Board has selected KPMG LLP to continue as our independent registered public accounting firm for the 2010 fiscal year. We are asking our stockholders to ratify the appointment of KPMG LLP as our independent registered public accounting firm. If our stockholders do not ratify the appointment, the Audit Committee will consider whether it should select a different firm, however, it is not required to do so. Even if the appointment is ratified, the Audit Committee, in its discretion, may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of our company and our stockholders.

 

A representative of KPMG LLP will be present at the 2010 Annual Meeting of Stockholders and will be available to respond to appropriate questions. The representative will also have an opportunity to make a statement at the meeting if he or she desires to do so.

 

THE BOARD RECOMMENDS A VOTE “FOR” THE RATIFICATION OF
KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE
2010 FISCAL YEAR.

 

Independent Registered Public Accountants

 

Audit and Non-Audit Fees

 

The following table sets forth the aggregate fees billed to date for professional services rendered by KPMG LLP for each of the last two fiscal years (in thousands).

 

 

 

 

Audit Committee Approval of Audit and Non-Audit Services

 

The Audit Committee pre-approves all audit services provided by our independent registered public accountants. In addition, all non-audit services provided by KPMG LLP are pre-approved in accordance with our policy entitled “Use of External Audit Firm for Non-Attest Services.” The policy identifies services that are specifically prohibited by Securities and Exchange Commission (“SEC”) rules and states that these services may not be performed by our independent registered public accountants. For permissible non-audit services, the Audit Committee has delegated pre-approval authority to the Audit Committee Chairperson. In

addition, the Audit Committee has approved annual maximum amounts for tax advisory and tax return services. No engagements are commenced until the Audit Committee Chairperson’s approval has been received. All approved services are reported to the full Audit Committee at each quarterly meeting.

 

In accordance with the foregoing, all services provided by KPMG LLP in 2009 were pre-approved by the Audit Committee.

 

The Audit Committee maintains effective working relationships with the Board, management, the company’s internal auditors and the company’s independent registered public accounting firm (“Independent Accountants”). As set forth in the Audit Committee Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that our company’s financial statements and disclosures are complete and accurate and in accordance with generally accepted accounting principles and applicable rules and regulations of the SEC and the NYSE. The Independent Accountants are responsible for auditing the company’s financial statements and expressing an opinion as to their conformity with generally accepted accounting principles.

 

The Audit Committee (1) reviewed and discussed the company’s quarterly and audited financial statements for the year ended December 31, 2009 with the company’s management and with the Independent Accountants; (2) discussed with the Independent Accountants the matters required to be discussed by Statement on Auditing Standards No. 61, as amended, as adopted by the Public Company Accounting Oversight Board in Rule 3200T; and (3) received the written disclosures and the letter from the Independent Accountants required by applicable requirements of the Public Company Accounting Oversight Board regarding the Independent Accountants’ communications with the Audit Committee concerning independence and discussed with Independent Accountants the Independent Accountants’ independence and considered whether the provision of non-audit services by the Independent Accountants to the company is compatible with maintaining the accountants’ independence.

 

Members of the Audit Committee rely, without independent verification, on the information provided to them and on the representations made by management and the Independent Accountants. Accordingly, the Audit Committee’s oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee’s considerations and discussions referred to above do not assure that the audits of the company’s financial statements have been carried out in accordance with generally accepted auditing standards, that the financial statements are presented in accordance with generally accepted accounting principles or that the company’s Independent Accountants are in fact “independent.”

 

Based upon the reviews and discussions described above, and subject to the limitations on the role and responsibilities of the Audit Committee referred to in this report and in the Audit Committee Charter, the Audit Committee recommended to the Board that the audited financial statements be included in the company’s Annual Report on Form 10-K for the year ended December 31, 2009.

 

Submitted by the Audit Committee of the Board:

 

Paul W. Schmidt (Chairperson)		Janet K. Cooper
C. L. (Jerry) Henry		John E. Major

 

Director Independence

 

Our Corporate Governance Guidelines require a majority of our directors to be “independent.” Pursuant to NYSE rules, our Board has adopted a formal definition of “independent” for the purpose of determining whether a particular director or nominee meets the independence standards of our company and the NYSE. In accordance with this definition, a director must be determined to have no material relationship with our company other than as a director and must not receive any material benefit or suffer any material detriment as a member of our Board that is not shared with or suffered by other stockholders of our company so as to possibly influence any decisions of the director. The definition further requires that the director meet the independence tests promulgated by the NYSE. The full text of our definition of an independent director can be found on our website at http://www.lennoxinternational.com by following the links “About Us — Corporate Governance — Definition of Independent Director.”

 

Applying these standards and the independence standards of the NYSE, the Board has determined that a majority of our Board is independent (see table below). We believe we are in compliance with the corporate governance requirements of the NYSE, the SEC and the Sarbanes-Oxley Act of 2002.

 

Board Meetings and Leadership Structure

 

The Board considers and evaluates the effectiveness of our Board leadership structure from time to time as part of its self-evaluation process. Currently, the roles of Chairman of the Board and CEO are held separately by Mr. Thompson and Mr. Bluedorn, respectively. We believe this leadership structure is best for our company and our stockholders at this time. Our Chairman of the Board’s responsibility is to lead the Board, and our CEO’s responsibility is to manage our company. The Board does not have a lead independent director because the Chairman of the Board is an independent director.

 

Our Chairman of the Board provides leadership to the Board, plans and chairs Board meetings, presides over meetings of the independent directors and facilitates the Board’s strategic planning for our company. The Chairman of the Board also serves as an ex officio member of each of the Board committees.

 

Our CEO is responsible for driving the performance of our company in accordance with our overall strategy, building and maintaining a high performance management team, managing company operations and representing our company to customers, employees and other stakeholders. Our CEO has served in his role since April 2007.

 

The Board met seven times in 2009. All directors attended in excess of 75% of the total number of meetings of the Board and committees of the Board on which they served. While the Board does not currently have a policy with regard to attendance of Board members at the annual meeting of stockholders, all of our directors attended our 2009 Annual Meeting of Stockholders.

 

Board Committees

 

The standing committees of the Board are as follows: Audit, Board Governance, Compensation and Human Resources, and Public Policy. The Board has adopted charters for each of these committees which are available on our website at http://www.lennoxinternational.com by following the links “About Us — Corporate Governance — Committee Charters.” Each of these Board committees is led by a different independent director and the members of each Board committee are all independent directors.

The following table provides current membership information for each of the Board committees and indicates which directors our Board has determined are independent.

 

 

 

 

Audit Committee

 

The Audit Committee acts pursuant to its written charter adopted by our Board. The Audit Committee assists the Board in fulfilling its oversight responsibilities relating to the integrity of our financial statements and related systems of internal controls, our compliance with legal and regulatory requirements, the independent registered public accounting firm’s qualifications, independence and performance and the performance of our internal audit function. The Audit Committee also has the direct responsibility for the appointment, compensation, retention and oversight of our Independent Accountants.

 

Each Audit Committee member is independent as independence for audit committee members is defined by the SEC and the NYSE and satisfies the NYSE’s financial literacy requirements. The Board has determined that Mr. Schmidt, Chairperson of the Audit Committee, is an audit committee financial expert as defined by the SEC. The Audit Committee met 13 times in 2009.

 

Board Governance Committee

 

The Board Governance Committee assists the Board by identifying individuals qualified to become Board members, developing qualification criteria for Board membership, making recommendations to the Board regarding the appropriate size of the Board and appointment of members to the Board’s committees, developing and recommending to the Board the Corporate Governance Guidelines and codes of conduct applicable to our company, developing our company’s director education programs, and overseeing the evaluation of our Board. Each member of the Board Governance Committee is independent as independence for nominating committee members is defined by the NYSE. The Board Governance Committee met three times in 2009.

 

Compensation and Human Resources Committee

 

The Compensation and Human Resources Committee determines our compensation philosophy and oversees our compensation programs for our executive officers and the non-employee members of our Board. The Committee’s responsibilities also include oversight of our short- and long-term incentive plans and our executive succession plans. The Committee also reviews the funding requirements and investment policies of our defined benefit and defined contribution retirement plans, and the performance of investment funds, investment advisors, and investment managers under those plans.

 

The Committee reports to the full Board on a regular basis and seeks Board approval for actions relating to Board compensation. The Committee forms and delegates authority to subcommittees when appropriate.

Our CEO makes recommendations to the Committee with respect to various elements of executive compensation. See “Executive Compensation — Compensation Discussion and Analysis” for information concerning the Committee’s philosophy and objectives in overseeing executive compensation. The Board has determined that each member of the Committee is independent as independence for compensation committee members is defined by the NYSE. The Committee met six times in 2009.

 

The Committee’s charter authorizes the Committee to obtain advice and assistance from internal or external legal, accounting or other advisors and to retain third-party compensation consultants. The Committee retains Frederic W. Cook & Co., Inc. as its executive compensation consultant to provide objective analysis, advice and recommendations regarding the compensation of our executives and non-employee directors. See “Executive Compensation — Compensation Discussion and Analysis” for further information regarding our executive compensation programs and the scope of services provided by Frederic W. Cook & Co., Inc.

 

Public Policy Committee

 

The Public Policy Committee is responsible for overseeing our company’s environmental, health and safety issues, and our position on corporate social responsibilities and public issues of significance that affect our stakeholders. The Public Policy Committee met once in 2009.

 

Director Nomination Process and Nominee Criteria

 

The Board is responsible for approving candidates for Board membership. The Board has delegated the director screening and recruitment process to the Board Governance Committee. In this capacity, the Board Governance Committee develops and periodically reviews the qualification criteria for Board membership, identifies new director candidates, and makes recommendations to the Board regarding the appropriate size of the Board and appointment of members to the Board’s committees. The Board Governance Committee typically retains a third-party search firm to assist in identifying and evaluating potential new director candidates. Qualifications required of individuals for consideration for Board membership will vary according to the particular areas of expertise, experience and skills being sought as a complement to the existing Board composition at the time of any vacancy.

 

Neither our Board nor our Board Governance Committee has a formal diversity policy. However, our Corporate Governance Guidelines provide that, when nominating new members to the Board, the Board will seek the best qualified candidates, while taking diversity into consideration. This consideration may include diversity of experience, functional expertise, and industry knowledge. Our Board of Director Qualification Guidelines further provide that the Board Governance Committee considers a candidate’s diversity of viewpoints in determining the particular qualifications desired for any new Board member.

 

According to our Board of Director Qualification Guidelines, the Board Governance Committee considers the following factors, in addition to such other factors that the Board Governance Committee deems relevant:

 

 

 

The full text of our qualification guidelines can be found on our website at http://www.lennoxinternational.com by following the links “About Us — Corporate Governance — Board of Directors — Board of Director Qualification Guidelines.”

 

When a vacancy occurs on the Board, the Board Governance Committee may recommend to the Board a nominee to fill the vacancy, or alternatively, may recommend that the vacancy remain. The Board Governance Committee also evaluates and recommends to the Board nominees for election to our Board at our Annual Meeting of Stockholders.

 

Stockholder Nominations for Director

 

The Board Governance Committee considers nominees for election to the Board recommended by stockholders. A stockholder wishing to nominate a candidate for election to the Board at a meeting of the stockholders is required to give written notice to our Corporate Secretary of his or her intention to make a nomination. We must receive the notice of nomination at least 60 days but no more than 90 days prior to the Annual Meeting of Stockholders, or if we give less than 70 days’ notice of the Annual Meeting of Stockholders date, the notice of nomination must be received within 10 days following the date on which notice of the date of the Annual Meeting of Stockholders was mailed or such public disclosure was made to our stockholders. In the case of a special meeting of stockholders for the election of directors, we must receive the notice of nomination within 10 days following the date on which notice of such meeting is first given to stockholders. Pursuant to our Bylaws, the notice of nomination is required to contain certain information about both the nominee and the stockholder making the nomination, including information sufficient to allow the Board Governance Committee to determine if the candidate meets our qualification criteria for Board membership. The Board Governance Committee may require that the proposed nominee furnish additional information in order to determine that person’s eligibility to serve as a director. A nomination that does not comply with the above procedure will be disregarded. Stockholder nominees whose nominations comply with the foregoing procedure and who meet the criteria described above under the heading “Director Nomination Process and Nominee Criteria” and in our Corporate Governance Guidelines will be evaluated by the Board Governance Committee in the same manner as the Board Governance Committee’s nominees.

 

Stockholder Communications with Directors

 

Stockholders may send written communications to the Board by:

 

 

Communications addressed to the Board will be reviewed by our Corporate Secretary. The Corporate Secretary will:

 

 

 

Interested parties may communicate with non-management directors of the Board by sending written communications to the addresses listed above to the attention of the Chairman of the Board.

 

Other Corporate Governance Policies and Practices

 

New Stock Ownership Guidelines

 

We adopted stock ownership guidelines as a new requirement because we believe stock ownership by executives helps align the interests of the executives with the interests of our stockholders and motivates the executives to build long-term stockholder value. The following stock ownership requirements are effective January 1, 2010:

 

 

Each person will have five years from the later of January 1, 2010, or the date of hire or appointment to a covered position, to meet the applicable guidelines.

 

New Clawback Policy

 

We adopted a formal incentive compensation clawback policy for our CEO, Executive Vice Presidents and other Section 16 officers effective January 1, 2010. Under this policy, in the event of any fraud or misconduct that results in a restatement of our company’s financial results within three years of the filing of the original financial results, the Compensation and Human Resources Committee has the right to recoup and/or cancel incentive compensation of each person involved in such fraud or misconduct.

 

Code of Conduct and Code of Ethical Conduct

 

We have adopted a Code of Conduct that applies to all our directors and employees, including our senior financial and principal executive officers. Amendments to and waivers, if any, from our Code of Conduct as it pertains to our executive officers, will be disclosed on our website. Our Code of Conduct is available on our website at http://www.lennoxinternational.com by following the links “About Us — Corporate Governance — Code of Conduct.”

 

Corporate Governance Guidelines

 

We have adopted Corporate Governance Guidelines that are available on our website at http://www.lennoxinternational.com by following the links “About Us — Corporate Governance — Corporate Governance Guidelines.”

 

Executive Session Meetings

 

In accordance with our Corporate Governance Guidelines, the independent members of our Board, all of whom are non-management directors, meet regularly in executive session without the presence of management. The Chairman of the Board chairs the executive session meetings of our independent directors.

 

Authority to Retain Independent Advisors

 

Our Board and each of the Audit, Compensation and Human Resources, Board Governance and Public Policy Committees has the authority to retain independent advisors and consultants, with all fees and expenses paid by our company.

Whistleblower Procedures

 

The Audit Committee has established procedures for the handling of complaints regarding accounting, internal accounting controls, or auditing matters, including procedures for confidential and anonymous submission by our employees of concerns regarding such matters.

 

Disclosure Committee

 

We have established a Disclosure Committee composed of members of management to assist us in fulfilling our obligations to maintain disclosure controls and procedures and to coordinate and oversee the process of preparing the reports we file or submit to the SEC under the Securities Exchange Act of 1934.

 

Risk Oversight and Analysis

 

The Board oversees our company’s processes to manage risk at the Board and senior management levels. The Audit Committee oversees the guidelines and policies that govern our company’s processes to assess and manage significant enterprise risk exposure. While the Board and Audit Committee oversee our company’s risk management, our management is responsible for the development, implementation, and maintenance of our risk management processes. Management provides periodic reports to the Board and Board committees, as appropriate, on its assessment of strategic, operational, legal and compliance, and financial reporting risks to our company. The Board, and Board committees, as appropriate, review and consider the management reports provided on our company’s enterprise risk and risk management strategy.

 

We have reviewed our company’s compensation policies and practices to determine if risks arising from those policies and practices are reasonably likely to have a material adverse effect on our company. Based on such review, we have not identified any risks arising from our compensation policies and practices that are reasonably likely to have a material adverse effect on our company. For our executive compensation programs, we incorporate balanced short-term and long-term incentive programs for cash and equity awards that are designed to reward successful execution of our business strategy and achievement of desired business results. Additionally, we have established stock ownership requirements and clawback provisions to align the interests of our Section 16 officers with the interests of our stockholders. For company employees who are not executives, we use a variety of incentive compensation programs to incentivize our employees to attain individual goals and support the financial performance of our company. All of our incentive compensation plans are reviewed and approved at least annually by senior management.

 

Overview

 

This Compensation Discussion and Analysis (“CD&A”) describes the philosophy and objectives of the compensation programs for our named executive officers (“NEOs”). The Compensation and Human Resources Committee of the Board (the “Committee”) establishes and administers our executive compensation programs, practices and policies. The Committee receives input from management and its executive compensation consultant, and considers competitive practices, our business objectives, stockholder interests, regulatory requirements and other relevant factors, to develop our executive compensation programs. The Committee reviews, modifies and approves, as appropriate, our executive compensation programs in an effort to provide market-competitive, equitable and consistent administration of compensation for our executive officers.

 

Named Executive Officers

 

The following persons are NEOs of our company for 2009:

 

 

Executive Compensation Philosophy and Key Objectives

 

We maintain a pay-for-performance compensation philosophy designed to reward successful execution of our business strategy and achievement of desired business results, with a focus on creating alignment with the interests of our stockholders. When our financial results exceed expected performance, we increase our monetary rewards to our executive officers. When our financial results fall below expected performance, we decrease our monetary awards to our executive officers.

 

The strategic objectives of our executive compensation programs are to:

 

 

The following table lists each element of executive compensation and how the Committee believes it correlates to our compensation philosophy and key objectives.

 

 

Competitive Compensation

 

Market Analysis

 

To maintain a market competitive program, the Committee uses benchmarking data when establishing executive compensation. Benchmarking against a representative peer group assists us in assessing the competitiveness of our executive compensation programs.

 

Our company’s compensation peer group, as approved by the Committee, includes the following 15 companies (the “Compensation Peer Group”):

 

 

The Committee selected the members of our Compensation Peer Group using the following criteria:

 

 

In 2009, the Committee analyzed the membership of the Compensation Peer Group based on the criteria described above, and adjusted the peer group by adding Flowserve Corporation and by removing ITT Corporation.

 

In addition to comparing our executive officer compensation to the compensation provided by our Compensation Peer Group, we also reference published compensation data from compensation databases and other studies of compensation trends and practices (with all such data and practices, including our Compensation Peer Group, collectively referred to as the “Market”).

 

Pay Positioning and Compensation Mix

 

For 2009, the Committee targeted base salary for our NEOs at the 50th percentile of the Market. The Committee set short-term incentive opportunities and long-term incentive planning values between the 50^th — 65^th percentiles of the Market and included stretch performance goals, allowing us to maintain a strong pay-for-performance link while attracting and retaining leadership talent.

The Committee granted a majority of total compensation to our NEOs in the form of non-cash long-term incentive awards. The graphs below illustrate the 2009 target compensation mix for the CEO and the average target compensation mix for the other NEOs (excluding Ms. Carter and Mr. Rumbough).

 

 

We apply similar methodologies in setting compensation and determining the compensation mix for our CEO as we apply for our other NEOs, but our CEO’s target compensation mix has a greater percentage of “at-risk” performance-based compensation than the target compensation mix of the other NEOs. The Committee established a different compensation mix for our CEO due to his greater influence on company performance.

 

Process for Determining Named Executive Officer Compensation

 

Executive Officers

 

The Committee obtains input from management when making executive compensation decisions. The Chairman of the Board, CEO, CFO, Chief Human Resources Officer and Chief Legal Officer attend Committee meetings at the invitation of the Committee and provide input as requested. Customarily, the CEO makes recommendations to the Committee with respect to various elements of compensation for the NEOs, but he is not involved in the deliberations or determinations regarding his own compensation. The Committee then determines and approves the compensation to be provided to the NEOs.

 

Role of the Executive Compensation Consultant

 

In 2009, the Committee engaged Frederic W. Cook & Co., Inc. (“Frederic W. Cook”) to provide analysis, advice and recommendations on executive compensation to the Committee. Frederic W. Cook does not provide any other services for our company. At the Committee’s request, Frederic W. Cook performed the following services for the Committee in 2009:

 

 

The Committee analyzed and considered the information provided by management and Frederic W. Cook to determine the appropriate program design and the level and mix of each compensation element for the NEOs.

 

Components and Analysis of 2009 Executive Compensation

 

Base Salary

 

The Committee considered salary data for the Market, our annual merit budget, achievement of performance objectives, internal equity and recommendations provided by the CEO for his direct reports

when determining each NEO’s base salary. The following table provides detail regarding 2008 and 2009 base salaries for each NEO.

 

		2008				Increase%		2009
		Annualized				Effective		Annualized
NEO		Base Salary				January 1, 2009		Base Salary
Mr. Bluedorn		$	828,000			0.0%		$	828,000
Mr. Hau			N/A			N/A			425,000
Mr. Boxer			502,217			0.0			502,217
Mr. Young			390,509			0.0			390,509
Mr. Torres			370,000			0.0			370,000
Mr. Rumbough			222,794			0.0			222,794

 

As discussed earlier, in setting NEO base salaries, the Committee used the 50th percentile of the Market as a guideline. During 2009, we did not increase salaries for salaried employees, including the NEOs, due to difficult economic conditions across our business. The 2009 base salary for each NEO, included in the Summary Compensation Table, is within a reasonable range of our guideline.

 

Short-Term Incentive Program

 

Our short-term incentive program is a cash-based program for our executive officers that is designed to reward the successful performance of our company, our business units and each individual. We provide cash-based rewards to those individuals who most directly influence our performance results when they achieve established performance goals. Each year, the CEO proposes to the Committee for review and approval the financial metrics and performance goals that must be achieved for any payouts to be made under our short-term incentive program. The 2009 short-term incentive program funded based on performance against the financial goals shown below. The final 2009 short-term incentive awards were based 85% on financial performance and 15% on each NEO’s individual performance.

 

Financial Performance.  The following table summarizes the financial performance goals and payout opportunities under our 2009 short-term incentive program, along with the actual company and business unit performance for each metric.

 

2009 Short-Term Incentive Program Summary — Financial Performance
($ in millions)

 

 

 

 

Individual Performance.  The Committee incorporates an individual performance factor to supplement financial performance in order to further drive our company’s performance culture. The individual performance factor comprises 15% (at target) of an individual’s short-term incentive payout to reward individual personal achievements. The individual performance factor is measured against specific goals established for each NEO as part of the performance review process.

 

Targets and Payouts.  Under the short-term incentive program, target payout opportunities are determined as a percentage of base salary. The target payout opportunities are based on publicly available Market data for similar executive officer positions using the 50th — 65th percentiles as a guideline. Each NEO’s target percentage fits within this guideline, except the CEO’s target for 2009 was below the 50th percentile of the Market. The Committee increased the CEO’s 2009 short-term incentive target payout opportunity to 110% from 100% in 2008 in an effort to move closer to the 50th percentile.

 

Based on analysis of the Market data and internal equity considerations, the Committee set the following short-term incentive targets for 2009. Based on actual financial and individual performance, the Committee approved the corresponding 2009 payouts for each NEO.

 

2009 Short-Term Incentive Targets and Payouts

 

 

 

 

The Committee may, in its discretion, modify the short-term incentive program to account for unusual events or revised business objectives that occur during the performance period. The Committee did not make any such modifications in 2009.

 

We include the short-term incentive payments made to the NEOs for 2009, which were approved by the Committee and paid on March 15, 2010, in the Summary Compensation Table under “Non-Equity Incentive Plan Compensation.”

Long-Term Incentive Program

 

We have a long-term incentive program designed to incent those employees who have principal responsibility for our long-term profitability. We believe participation in our long-term incentive program helps align the interests of our NEOs with the interests of our stockholders.

 

We use a mix of performance share units (“PSUs”), restricted stock units (“RSUs”) and stock appreciation rights (“SARs”) in our long-term incentive program. PSUs and SARs reward performance, as measured by achievement of specified financial objectives for PSUs and stock price growth for SARs. RSUs help us to retain key members of management. The Committee allocated the mix of elements in our long-term incentive program in a manner designed to drive company performance and help us to retain key talent.

 

For 2009, the long-term incentive allocations for our NEOs were as follows:

 

 

The Committee determines the grant date for all long-term incentive awards. The Committee generally grants awards on an annual basis at its regularly scheduled December meeting, although awards may be granted in special circumstances or upon hire for certain executives. The Committee does not coordinate the grant date for any award with the release of material non-public information. The Committee sets the exercise price of our SARs at 100% of fair market value, which is defined as the average of the high and low NYSE trading prices of our common stock on the date of grant.

 

The target planning values under our long-term incentive program are based on publicly available Market data for similar executive officer positions using the 50th - 65th percentiles as a guideline. In December 2009, the Committee agreed to keep the target planning value flat, as it fell between the 50th — 65th percentiles of the Market. When determining the actual award sizes and planning values for each NEO, the Committee considered the NEO’s individual performance and potential, the NEO’s impact on the financial performance of our company, internal equity, and the number of shares available for grant under the 1998 Plan.

 

Once the Committee determined the long-term incentive planning value for each NEO, we provided 50% of the value in PSUs, 30% in RSUs and 20% in SARs. The specific number of PSUs and RSUs granted was determined by dividing the corresponding planning value by the fair market value of our common stock on the NYSE five trading days prior to the date of grant (without reduction for dividends or for vesting restrictions). The specific number of SARs granted was determined by dividing the corresponding planning value by the Black-Scholes value of our common stock five trading days prior to the date of grant (without reduction for vesting restrictions). Although we determine the number of awards five trading days prior to the date of grant for administrative reasons, the grant date fair value and the SAR exercise price are determined on the actual date of grant.

The following table summarizes the planning values and number of awards granted for each NEO:

 

 

 

 

The Committee provided these award levels in 2009 in order to maintain a market-competitive long-term incentive program, recognize NEO performance in the face of challenging and uncertain markets, and support our critical retention goals.

 

PSUs.  To maintain our strong focus on company performance, we granted 50% of the planning value for the December 2009 long-term incentive award in the form of PSUs. PSUs generally vest at the end of a three-year performance period. If the threshold performance level has been achieved at the end of the performance period, the PSUs, to the extent earned, are distributed in the form of company common stock. Dividends are not earned or paid on PSU awards during the three-year performance period. The Committee determines the measurement criteria annually, in consultation with the CEO, and in consideration of the financial metrics selected for the short-term incentive program as well as other metrics that enhance stockholder value. The Committee certifies the financial performance levels following the end of the performance period and then our company distributes any earned shares.

 

The following table summarizes the key attributes of the PSUs granted in December 2006, which vested on December 31, 2009, and sets out financial performance goals and payout opportunities versus actual performance.

 

December 2006 PSU Grant
(for the January 1, 2007 — December 31, 2009 Performance Period)

 

 

 

 

In 2009, all eligible NEOs earned a payout of 127.68% of PSUs granted in December 2006 by exceeding the target level of ROIC performance over the three-year period beginning January 1, 2007 and ending December 31, 2009. The value of such payout is included in the Fiscal 2009 Option Exercises and Stock Vested Table in the “Stock Awards — Value Realized on Vesting” column.

 

Beginning in December 2007, the Committee used two financial metrics to determine the vesting of PSUs — ROIC and company core net income growth. The Committee established the ROIC performance

goals based on its assessment of desired return relative to the cost of capital as well as historical and projected ROIC outcomes. Similarly, the Committee set our company core net income growth performance goals based on historical results and projected outcomes of that measure as well as expected market conditions.

 

The following table summarizes the key attributes of the PSUs granted in December 2009.

 

December 2009 PSU Grant
(for the January 1, 2010 — December 31, 2012 Performance Period)

 

 

The PSUs granted to our NEOs in 2009 are included in the Fiscal 2009 Grants of Plan-Based Awards Table in the “Estimated Future Payouts Under Equity Incentive Plan Awards” column.

 

RSUs.  To support our critical retention efforts designed to achieve continuity of management, the Committee granted the NEOs 30% of the planning value for the December 2009 long-term incentive award in the form of RSUs. RSUs generally vest and are distributed in shares of our common stock three years following the date of grant if the recipient remains an employee of our company and all other conditions of the award are met. Dividends are not earned or paid on RSUs during the three-year vesting period. The number of shares underlying RSUs granted to our NEOs in 2009 is included in the Fiscal 2009 Grants of Plan-Based Awards Table in the “All Other Stock Awards: Number of Shares of Stock or Units” column.

 

SARs.  To incentivize NEOs to grow our business and deliver increased returns to our stockholders, the Committee granted the NEOs 20% of the planning value for the December 2009 award in the form of SARs. SARs generally vest in one-third increments on each anniversary of the date of grant. Upon the exercise of vested SARs, the increase, if any, between the fair market value of our common stock on the date of grant and the fair market value on the date the SAR is exercised is paid in company common stock. SARs granted in 2009 expire seven years from the date of grant. The number of SARs granted to our NEOs in 2009 is included in the Fiscal 2009 Grants of Plan-Based Awards Table in the “All Other Option Awards: Number of Securities Underlying Options” column.

 

Perquisites

 

We believe providing reasonable perquisites to our NEOs is a market-competitive practice to attract and retain top executive talent. However, rather than offering individual perquisites to our NEOs, we provide a monthly lump-sum cash stipend to allow each NEO more flexibility and choice. In addition, we offer the installation of company products and equipment at the NEO’s home to promote our brand to both business and personal guests.

 

Benefit Programs

 

To attract and retain top executive talent and as a market-competitive practice, we provide certain benefit programs to our NEOs that are in addition to those provided to our general employee population. The

following table summarizes the additional benefit programs in place during 2009 and the purpose of each program.

 

Additional Benefit Programs Offered to NEOs in 2009

 

 

Employment Agreements and Change in Control Agreements

 

We have employment agreements and Change in Control (“CIC”) agreements with each NEO that have been reviewed and approved by the Committee. We believe employment agreements are necessary to attract and retain top executive talent and for financial and business planning purposes. We believe CIC agreements are necessary to (1) retain key executives during periods of uncertainty; (2) enable executives to evaluate, negotiate and execute a CIC transaction more objectively; (3) encourage executives to remain focused on running the business rather than seeking other employment in the event of a possible CIC; and (4) preserve stockholder value by providing continuity of management during a transition period.

 

Since we pay compensation under our CIC agreements only if defined triggering events occur, we evaluate compensation to be provided under these agreements in isolation from the rest of the executive’s compensation package.

 

Our employment agreements and CIC agreements, and the potential costs associated with each, are discussed in detail under “Potential Payments Upon Termination or Change in Control.”

 

Stock Ownership Guidelines

 

We have adopted stock ownership guidelines because we believe stock ownership by executives helps align the interests of the executives with the interests of our stockholders and motivates the executives to build long-term stockholder value. We adopted the following stock ownership requirements effective January 1, 2010:

 

 

Each person will have five years from the later of January 1, 2010, or the date of hire or appointment to a covered position, to meet the applicable guidelines.

 

Clawback Policy

 

Effective January 1, 2010, our company adopted a formal incentive compensation clawback policy for the CEO, EVPs and Section 16 Officers. Under this policy, in the event of any fraud or misconduct that results in a restatement of our company’s financial results within three years of the filing of the original financial results, the Committee has the right to recoup and/or cancel incentive compensation of each person involved in such fraud or misconduct.

Tax and Accounting Implications

 

Section 162(m) Compliance

 

The Committee carefully considers the income tax consequences to our company when analyzing our executive compensation programs. Section 162(m) of the Code limits a company’s ability to deduct compensation paid in excess of $1 million to certain NEOs, unless the compensation meets certain stockholder-approved performance requirements. The Committee has designed several elements of our executive compensation programs to qualify for the “performance-based” exemption. For example, our short-term incentive program, PSUs and SARs are performance-based and therefore exempt from the limitations imposed by Section 162(m) of the Code. If granting awards or providing other executive compensation elements is consistent with Market data, our compensation philosophy or our strategic business goals, the Committee may provide executive compensation that is not fully deductible. Our awards of RSUs meet our objective of key talent retention, but do not meet the performance-based exemption.

 

Nonqualified Deferred Compensation

 

In addition to the non-qualified Supplemental Retirement Plan discussed previously, our company also maintains a frozen non-qualified Profit Sharing Restoration Plan. Both of these deferred compensation plans are administered to comply with Section 409A of the Code.

 

Accounting for Stock-Based Awards

 

When developing each element of NEO compensation, the Committee considered the accounting consequences (in accordance with the requirements of Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation (“FASB ASC Topic 718”)) of the program design and award levels. The Committee reviewed accounting cost models and structured our executive compensation programs in a manner that considered the cost and benefits of the various program elements.

 

Compensation and Human Resources Committee Report

 

The Committee has reviewed and discussed the foregoing CD&A with management, and recommends to the Board that the CD&A be included in this Proxy Statement.

 

Submitted by the Compensation and Human Resources Committee of the Board:

 

Summary Compensation Table

 

The following table provides information regarding total compensation earned by our NEOs, which include our CEO, our current CFO, and our three other most highly compensated executive officers. We also include two individuals who served as our principal financial officer during a portion of 2009, Susan K. Carter, our former EVP and CFO, and Roy A. Rumbough, our Interim CFO and Vice President, Controller and Chief Accounting Officer.

 

 

 

 

 

 

The values attributable to each item listed above are calculated as follows:

 

 

 

Fiscal 2009 Grants of Plan-Based Awards

 

The following table provides information regarding short-term incentive awards and long-term incentive awards (PSUs, RSUs and SARs) granted under the 1998 Plan to our NEOs in 2009.