EXECUTIVE CHANGE-IN-CONTROL AGREEMENTChange of Control Agreement |
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Exhibit 10.2
EXECUTIVE CHANGE-IN-CONTROL AGREEMENT
This
EXECUTIVE CHANGE-IN-CONTROL AGREEMENT (“Agreement”), dated as of
October 26, 2006, by and between The Lamson & Sessions Co., an Ohio
corporation (the “Company”), and Michael J. Merriman, Jr. (the
“Executive”);
WITNESSETH:
WHEREAS,
the Executive is a senior executive of the Company and has made and is expected
to continue to make major contributions to the profitability, growth and
financial strength of the Company;
WHEREAS,
the Company recognizes that, as is the case for most publicly held companies,
the possibility of a Change in Control (as that term is hereafter defined)
exists;
WHEREAS,
the Company desires to assure itself of both present and future continuity of
management in the event of a Change in Control and desires to establish certain
minimum compensation rights of its key senior executive officers, including the
Executive, applicable in the event of a Change in Control;
WHEREAS,
the Company wishes to ensure that its senior executives are not practically
disabled from discharging their duties upon a Change in Control;
WHEREAS,
this Agreement is not intended to alter materially the compensation and
benefits which the Executive could reasonably expect to receive from the
Company absent a Change in Control and, accordingly, although effective and
binding as of the date hereof, this Agreement shall become operative only upon
the occurrence of a Change in Control; and
WHEREAS,
the Executive is willing to render services to the Company on the terms and
subject to the conditions set forth in this Agreement.
NOW,
THEREFORE, the Company and the Executive agree as follows:
1. Operation
of Agreement:
(a) This Agreement shall
be effective and binding immediately upon its execution, but, anything in this
Agreement to the contrary notwithstanding, this Agreement shall not become
operative unless and until there shall have occurred a Change in Control. For
purposes of this Agreement, a “Change in Control” shall have
occurred if at any time during the Term (as that term is hereafter defined) any
of the following events shall occur:
(i)
The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities and Exchange Act of 1934, as
amended (the “Exchange Act”) (a “Person”) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of either: (A) the then-outstanding shares of common
stock of the Company (the “Company Common Stock”) or (B) the
combined voting power of the then-outstanding voting securities of the Company
entitled to vote generally in the election of directors (“Voting
Stock”); provided, however, that for purposes of this
subsection (i), the following acquisitions shall not constitute a Change in
Control: (1) any acquisition directly from the Company, (2) any
acquisition by the Company, (3) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
Subsidiary of the Company, or
(4)any acquisition by any
Person pursuant to a transaction which complies with clauses (A), (B) and
(C) of subsection (iii) of this Section 1(a); or
(ii)
Individuals who, as of the date hereof, constitute the Board of Directors of
the Company, (the “Incumbent Board”) cease for any reason (other
than death or disability) to constitute at least a majority of the Board of
Directors of the Company; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by the Company’s shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board (either
by a specific vote or by approval of the proxy statement of the Company in
which such person is named as a nominee for director, without objection to such
nomination) shall be considered as though such individual were a member of the
Incumbent Board, but excluding for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest (within the meaning of Rule 14a-11 of the Exchange Act)
with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board of Directors of the Company; or
(iii)
Consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a
“Business Combination”), in each case, unless, following such
Business Combination, (A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Company Common
Stock and Voting Stock immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of, respectively, the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election
of directors, as the case may be, of the entity resulting from such Business
Combination (including, without limitation, an entity which as a result of such
transaction owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in substantially
the same proportions relative to each other as their ownership, immediately
prior to such Business Combination, of the Company Common Stock and Voting
Stock of the Company, as the case may be, (B) no Person (excluding any
entity resulting from such Business Combination or any employee benefit plan
(or related trust) sponsored or maintained by the Company or such entity
resulting from such Business Combination) beneficially owns, directly or indirectly,
20% or more of, respectively, the then-outstanding shares of common stock of
the entity resulting from such Business Combination, or the combined voting
power of the then-outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and
(C) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of
the action of the Board of Directors of the Company, providing for such
Business Combination; or
(iv)
Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
(b) Upon
the occurrence of a Change in Control at any time during the Term, this
Agreement shall become immediately operative.
(c) The
period during which this Agreement shall be in effect (the “Term”)
shall commence as of the date hereof and shall expire as of the later of
(i) the close of business on December 31, 2009 or (ii) the
expiration of the Period of Employment (as that term is hereafter defined); provided,
however, that (A) commencing on January 1, 2007 and each
January 1 thereafter prior to the occurrence of a Change in Control, the term
of this Agreement shall automatically be extended for an additional year
unless, not later than December 30 of the immediately preceding year, the
Company or the Executive shall have given
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notice that it or he, as the case
may be, does not wish to have the Term extended, and (B) subject to
Section 8 hereof, if, prior to a Change in Control, the Executive ceases
for any reason to be an officer of the Company, thereupon the Term shall be
deemed to have expired and this Agreement shall immediately terminate and be of
no further effect.
2. Employment:
Period of Employment:
(a) Subject
to the terms and conditions of this Agreement, upon the occurrence of a Change
in Control, the Company shall continue the Executive in its employ and the
Executive shall remain in the employ of the Company for the period set forth in
Section 2(b) hereof (the “Period of Employment”), in the position
and with substantially the same duties and responsibilities that he had immediately
prior to the Change in Control, or to which the Company and the Executive may
hereafter mutually agree in writing. Throughout the Period of Employment, the
Executive shall devote substantially all of his time during normal business
hours (subject to vacations, sick leave and other absences in accordance with
the policies of the Company as in effect for senior executives immediately
prior to the Change in Control) to the business and affairs of the Company, but
nothing in this Agreement shall preclude the Executive from devoting reasonable
periods of time during normal business hours to (i) serving as a director,
trustee or member of or participant in any organization or business,
(ii) engaging in charitable and community activities, or (iii) managing
his personal investments.
(b) The
Period of Employment shall commence on the date of an occurrence of a Change in
Control and, subject only to the provisions of Section 4 hereof, shall
continue until the earlier of (i) the expiration of the third anniversary of
the occurrence of the Change in Control, (ii) the Executive’s death;
provided, however, that commencing on each anniversary of the
Change of Control, the expiration of the Period of Employment provided for
under clause (i) of this Section 2(b) shall automatically be extended for
an additional year unless, not later than 90 calendar days prior to such
anniversary date, either the Company or the Executive shall have given written
notice to the other that the Period of Employment shall not be so extended.
3. Compensation
During Period of Employment:
(a) Upon
the occurrence of a Change in Control, the Executive shall receive during the
Period of Employment (i) annual base salary at a rate not less than the
Executive’s annual fixed or base compensation (payable monthly or
otherwise as in effect for senior executives of the Company immediately prior
to the occurrence of a Change in Control) or such higher rate as may be
determined from time to time by the Board of Directors of the Company (the “Board”)
or the Compensation Committee thereof (the “Committee”) (which base
salary at such rate is herein referred to as “Base Pay”) and
(ii) an annual amount equal to not less than the average of the aggregate
annual bonus, incentive or other payments of cash compensation in addition to
the amounts referred to in clause (i) above made or to be made in regard
to services rendered in any calendar year during the period of two calendar
years immediately preceding the year in which the Change in Control occurred pursuant
to any bonus, incentive, profit sharing, performance, discretionary pay or
similar policy, plan, program or arrangement of the Company or any successor
thereto providing benefits at least as great as the benefits payable thereunder
prior to a Change in Control (“Incentive Pay”); provided, however,
that with the prior written consent of the Executive, nothing herein shall
preclude a change in the mix between Base Pay and Incentive Pay so long as the
aggregate cash compensation received by the Executive in any one calendar year
is not reduced in connection therewith or as a result thereof; and provided
further, however, that in no event shall any increase in the
Executive’s aggregate cash compensation or any portion thereof in any way
diminish any other obligation of the Company under this Agreement.
(b) For
his service pursuant to Section 2(a) hereof, during the Period of Employment
the Executive shall be a full participant in, and shall be entitled to the
perquisites, benefits and service credit for benefits as provided under, any
and all employee retirement income and welfare benefit and other fringe
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benefit policies, plans,
programs or arrangements in which senior executives of the Company participate,
including without limitation any stock option, stock purchase, stock
appreciation, savings, pension, supplemental executive retirement or/ other
retirement income or welfare benefit (within the meaning of Section 3(1)
of the Employee Retirement Income Act of 1974, as amended), deferred compensation,
incentive compensation, group and/or executive life, health, medical/hospital
or other insurance (whether funded by actual insurance or self-insured by the
Company), disability, salary continuation, expense reimbursement (including
automobile allowances and reimbursement of club dues and financial planning
fees) and other employee benefit policies, plans, programs or arrangements that
may now exist or any equivalent successor policies, plans, programs or
arrangements that may be adopted hereafter by the Company providing
perquisites, benefits and service credit for benefits at least as great as are
payable thereunder prior to a Change in Control (collectively, “Employee
Benefits”); provided, however, that the Executive’s
rights thereunder shall be governed by the terms thereof and shall not be
enlarged hereunder or otherwise affected hereby. Subject to the proviso in the
immediately preceding sentence, if and to the extent that the Company
determines, in the exercise of its reasonable judgment after consultation with
nationally recognized legal counsel, that any perquisite, benefit or service
credit for benefits is not or cannot be paid or provided under any such policy,
plan, program or arrangement as a result of the amendment or termination thereof,
then the Company shall itself pay or provide therefor. Nothing in this
Agreement shall preclude improvement or enhancement of any such Employee
Benefits, provided that no such improvement shall in any way diminish any other
obligation of the Company under this Agreement.
(c) The
Company has determined that the amounts payable pursuant to this Section 3
constitute reasonable compensation for services to be rendered during the
Period of Employment.
4. Termination
Following a Change in Control:
(a) In
the event of the occurrence of a Change in Control, the Executive’s
employment may be terminated by the Company during the Period of Employment and
the Executive shall not be entitled to the benefits provided by Section 5
hereof only upon the occurrence of one or more of the following events:
(i)
The Executive’s death;
(ii)
If the Executive shall become permanently disabled within the meaning of, and
begins actually to receive disability benefits pursuant to, the long-term
disability plan in effect for senior executives of the Company immediately
prior to the Change in Control; or
(iii)
For “Cause”, which for purposes of this Agreement shall mean that,
prior to any termination pursuant to Section 4(b) hereof, the Executive shall
have committed:
(A)
an intentional act of fraud, embezzlement or theft in connection with his
duties or in the course of his employment with the Company;
(B)
intentional wrongful damage to property of the Company; or
(C)
intentional wrongful disclosure of secret processes or confidential information
of the Company;
and any such act shall have
been materially harmful to the Company. For purposes of this Agreement, no act,
or failure to act, on the part of the Executive shall be deemed “intentional”
if it was due primarily to an error in judgment or negligence, but shall be
deemed “intentional” only if done, or omitted to be done, by the
Executive not in good faith and without reasonable belief that his action or
omission was in the best interest of the Company. Notwithstanding the
foregoing, the Executive shall not be deemed to have been terminated for
“Cause” hereunder unless and until there shall have been delivered
to the Executive a copy of a resolution duly
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adopted by the affirmative
vote of not less than three-quarters of the Board then in office at a meeting
of the Board called and held for such purpose (after reasonable notice to the
Executive and an opportunity for the Executive, together with his counsel, to
be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive had committed an act set forth above in this
Section 4(a)(iii) and specifying the particulars thereof in detail.
Nothing herein shall limit the right of the Executive or his beneficiaries to
contest the validity or propriety of any such determination.
(b) In
the event of the occurrence of a Change in Control, during the Period of
Employment, the Executive shall be entitled to the benefits as provided in
Section 5 hereof upon the occurrence of one or more of the following
events:
(i)
Any termination by the Company of the employment of the Executive which
termination shall be for any reason other than for Cause or as a result of the
death of the Executive or by reason of the Executive’s disability and the
actual receipt of disability benefits in accordance with Section 4(a)(ii)
hereof; or
(ii)
Termination by the Executive of his employment with the Company upon the
occurrence of any of the following events:
(A)
Failure to elect, re-elect or otherwise maintain the Executive in the office or
position in the Company which the Executive held immediately prior to a Change
in Control, or the removal of the Executive as a Director of the Company (or
any successor thereto) if the Executive shall have been a Director of the
Company immediately prior to the Change in Control;
(B)
A significant adverse change in the nature or scope of the authorities, powers,
functions, responsibilities or duties attached to the position with the Company
which the Executive held immediately prior to the Change in Control, any
reduction in the aggregate of the Executive’s Base Pay and Incentive Pay
received from the Company, or the termination of the Executive’s rights to
any Employee Benefits to which he was entitled immediately prior to the Change
in Control or a reduction in scope or value thereof without the prior written
consent of the Executive, any of which is not remedied within ten
(10) calendar days after receipt by the Company of written notice from the
Executive of such change, reduction or termination, as the case may be;
(C)
A determination by the Executive made in good faith that as a result of a
Change in Control and a change in circumstances thereafter significantly
affecting his position, including without limitation a change in the scope of
the business or other activities for which he was responsible immediately prior
to the Change in Control, he has been rendered substantially unable to carry
out, has been substantially hindered in the performance of, or has suffered a
substantial reduction in, any of the authorities, powers, functions,
responsibilities or duties attached to the position held by the Executive
immediately prior to the Change in Control, which situation is not remedied
within ten (10) calendar days after written notice to the Company from the
Executive of such determination;
(D)
The liquidation, dissolution, merger, consolidation or reorganization of the
Company or transfer of all or a significant portion of its business and/or
assets, unless the successor or successors (by liquidation, merger,
consolidation, reorganization or otherwise) to which all or a significant
portion of its business and/or assets have been transferred (directly or by operation
of law) shall have assumed all duties and obligations of the Company under this
Agreement pursuant to Section 11 hereof;
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(E)
The Company shall relocate its principal executive offices, or require the
Executive to have his principal location of work changed, to any location which
is in excess of fifty (50) miles from the location thereof immediately
prior to the Change of Control or the Company shall require the Executive to
travel away from his office in the course of discharging his responsibilities
or duties hereunder significantly more (in terms of either consecutive days or
aggregate days in any calendar year) than was required of him prior to the
Change of Control without, in either case, his prior written consent; or
(F)
Without limiting the generality or effect of the foregoing, any material breach
of this Agreement by the Company or any successor thereto.
(c) A
termination by the Company pursuant to Section 4(a) hereof or by the Executive
pursuant to Section 4(b) hereof shall not affect any rights which the Executive
may have pursuant to any agreement, policy, plan, program or arrangement of the
Company providing Employee Benefits, which rights shall be governed by the
terms thereof. If this Agreement or the employment of the Executive is
terminated under circumstances in which the Executive is not entitled to any
payments under Sections 3 or 5 hereof, the Executive shall have no further
obligation or liability to the Company hereunder with respect to his prior or
any future employment by the Company.
5. Severance
Compensation:
(a) If, following the occurrence of a Change in Control, the Company shall terminate the Executive’s employment during the Period of Employment other than pursuant to Section 4(a) hereof, or if the Executive shall terminate his employment pursuant to Section 4(b) hereof, the Company shall pay to the Executive the amounts specified in this Section 5(a) and, if required to be paid in a lump sum, the Company shall pay such amounts within five (5)






