exv10w3



 






Exhibit 10.3




1998 INCENTIVE PLAN

of

LENNOX INTERNATIONAL INC.




PERFORMANCE SHARE PROGRAM AWARD AGREEMENT — 200_-200_-200_




     THIS AGREEMENT (“Agreement”) is made as of the                      (the “Award Date”), by and
between Lennox International Inc., a Delaware corporation (the “Company”), and «First» «Last»
(“Participant”).



     The Company has adopted the 1998 Incentive Plan of Lennox International Inc. (the “Plan”), a
copy of which is appended to this Agreement as Exhibit A and by this reference made a part hereof,
for the benefit of eligible employees, directors, consultants and other independent contractors of
the Company and its Subsidiaries. Capitalized terms used and not otherwise defined herein shall
have the meanings ascribed thereto in the Plan.



     Pursuant to the Plan, the Committee, which has generally been assigned responsibility for
administering the Plan, has determined that it is in the interest of the Company and its
stockholders to make the Award provided herein in order to encourage Participant to remain in the
employ of the Company or its Subsidiaries, to increase Participant’s personal interest in the
continued success and progress of the Company and to foster and enhance the long-term profitability
of the Company for the benefit of its shareholders by offering the incentive of long-term rewards
to be realized only upon attainment of established goals.



     The Company and Participant therefore agree as follows:



     1. Grant of Award. Subject to the terms and conditions herein, the Company grants to the
Participant for the Performance Period, subject to earlier termination pursuant to paragraph 6
below, a contingent award of «Shares» shares of Common Stock (the “Contingent Award”). The
Performance Period begins on                     , and ends on                      (“Performance Period”).



     2. Earned Awards. At the end of the Performance Period, the Committee shall determine
Participant’s Earned Award for such period by reference to the following performance matrix:



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Performance Share Program - Performance Standards	 
	Earned Award
Payout
	 	 	50	%	 	 	50	%	 	 	100	%	 	 	200	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	ROIC
	 	 		%	 	 		%	 	 		%	 	 		%
	 
	 	 	 	 	 	 	 	 	 	 	 	 






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     If, at the end of the Performance Period, at least the minimum performance
level has been attained, the Earned Award (as defined in Section 18 below) will be
vested and will be distributed as soon as practicable to Participant. To the extent
that the Earned Award payout level attained is less than 100%, the difference
between 100% and the Earned Award distributed, if any (the “Unearned Award”), shall
be forfeited. Notwithstanding the above, a Contingent Award shall become fully
vested and be distributed to the Participant, irrespective of the limitations set
forth above, upon the occurrence of a Change of Control (as defined in Section 13
below).



     3. Method and Time of Payment. Earned Awards shall be paid as soon as practicable following
the end of the Performance Period. Earned Awards shall be paid in either (i) the form of the
nearest number of whole shares of Common Stock which is equal to or less than the award determined
by the reference to the matrix specified in paragraph 2 above, (ii) cash, or (iii) a combination,
as determined by the Committee. Subject to the withholding referred to in paragraph 4, the Company
shall deliver to Participant certificates issued in Participant’s name for the number of shares to
be issued to Participant. If delivery is by mail, delivery of shares of Common Stock shall be
deemed effected for all purposes when a stock transfer agent of the Company shall have deposited
the certificates in the United States mail, addressed to Participant.



     4. Withholding for Taxes. Participant acknowledges and agrees that the Company may deduct
from the shares of Common Stock otherwise deliverable in connection with an Earned Award, a number
of whole shares of Common Stock (valued at their Fair Market Value on the date of exercise) that is
at least equal to the minimum statutory amount of all Federal, state and local taxes required to be
withheld by the Company in connection with such delivery, as determined by the Company.



     5. Termination of Employment. Unless otherwise determined by the Committee in its sole
discretion, any Contingent Award not yet earned shall terminate at the times specified below:




     (a) If Participant terminates employment with the Company and its Subsidiaries
voluntarily, or if Participant’s employment with the Company and its Subsidiaries is
terminated by the Company or a Subsidiary for any reason, none of the shares subject
to the Award that have not been previously paid pursuant to paragraph 2 shall be
earned and the Award shall be canceled upon such termination of Participant’s
employment.




     (b) If Participant’s employment with the Company and its Subsidiaries is
terminated by reason of Participant’s death or Disability (as defined below) prior
to expiration of the Performance Period, Participant, or in the event of
Participant’s death, Participant’s beneficiary, shall receive a prorata payment of
Participant’s Earned Awards based upon the Company’s attainment of its performance
goals (as determined in the sole discretion of the Committee),



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determined as of the date of death or Disability. Such payment shall be made
as soon as practicable. Any Unearned Award shall be forfeited.




     (c) If Participant’s employment with the Company and its Subsidiaries is
terminated by reason of Participant’s retirement under an employee pension benefit
plan maintained by the Company or a Subsidiary during the Performance Period, then,
for purposes of this Agreement, Participant shall be deemed to have continued in
employment until the end of the Performance Period, and Participant shall receive an
Earned Award, to the extent that such an Earned Award is payable in accordance with
paragraph 2 for the Performance Period. Such Earned Award shall be payable as soon
as practicable after the end of the Performance Period. Any Unearned Award shall be
forfeited.



     “Disability” for purposes of this Agreement, shall mean disability as defined in any written
employment agreement between Participant and the Company or a Subsidiary in effect at the time of
Participant’s termination of employment or, in the absence of any such employment agreement, as
determined by the Committee in good faith and/or pursuant to any long-term disability plan
sponsored by the Company or applicable Subsidiary.



     6. Nontransferability of Award. During Participant’s lifetime, the Award is not transferable
(voluntarily or involuntarily) other than pursuant to a domestic relations order and, except as
otherwise required pursuant to a domestic relations order, is payable only to Participant or
Participant’s court appointed legal representative. Participant may designate a beneficiary or
beneficiaries to whom the benefits of the Award shall pass upon Participant’s death and may change
such designation from time to time by filing a written designation of beneficiary or beneficiaries
with the Committee on the form annexed hereto as Exhibit B or such other form as may be prescribed
by the Committee, provided that no such designation shall be effective unless so filed prior to the
death of Participant. If no such designation is made or if the designated beneficiary does not
survive Participant’s death, the benefits of the Award shall pass by will or the laws of descent
and distribution.



     7. No Stockholder Rights. Participant shall not be deemed for any purpose, including voting
rights and dividends, to be, or to have any of the rights of, a stockholder of the Company with
respect to any shares of Common Stock as to which this Agreement relates until such shares shall
have been issued to Participant by the Company. Furthermore, the existence of this Agreement shall
not affect in any way the right or power of the Company or its stockholders to accomplish any
corporate act, including, without limitation, the acts referred to in Section 15 of the Plan.



     8. Adjustments. As provided in Section 15 of the Plan, certain adjustments may be made to
shares of Common Stock upon the occurrence of events or circumstances described in Section 15 of
the Plan.



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     9. Restrictions Imposed by Law. Without limiting the generality of Section 16 of the Plan,
Participant agrees that the Company will not be obligated to deliver any shares of Common Stock, if
counsel to the Company determines that such delivery would violate any applicable law or any rule
or regulation of any governmental authority or any rule or regulation of, or agreement of the
Company with, any securities exchange or association upon which the Common Stock may be listed or
quoted. The Company shall in no event be obligated to take any affirmative action in order to
cause the delivery of shares of Common Stock to comply with any such law, rule, regulation or
agreement.



     10. Notice. Unless the Company notifies Participant in writing of a different procedure, any
notice or other communication to the Company with respect to this Agreement shall be in writing and
shall be (a) delivered personally to the following address:


Lennox International Inc.

c/o Corporate Secretary

2140 Lake Park Boulevard

Richardson, Texas 75080



     or (b) sent by first class mail, postage prepaid and addressed as follows:


Lennox International Inc.

c/o Corporate Secretary

2140 Lake Park Boulevard

Richardson, Texas 75080



     Any notice or other communication to Participant with respect to this Agreement shall be in writing
and shall be delivered personally, or shall be sent by first class mail, postage prepaid, to
Participant’s address as listed in the records of the Company on the Award Date, unless the Company
has received written notification from Participant of a change of address.



     11. Amendment. Notwithstanding any other provisions hereof, this Agreement may be
supplemented or amended from time to time as approved by the Committee as contemplated by Section 6
of the Plan. Without limiting the generality of the foregoing, without the consent of Participant:




     (a) this Agreement may be amended or supplemented (i) to cure any ambiguity or
to correct or supplement any provision herein which may be defective or inconsistent
with any other provision herein, or (ii) to add to the covenants and agreements of
the Company for the benefit of Participant or surrender any right or power reserved
to or conferred upon the Company in this Agreement; subject, however, to any
required approval of the Company’s stockholders and, provided, in each case, that
such changes or corrections shall not adversely affect the rights of Participant
with respect to the Award evidenced hereby without the Participant’s consent, (iii)
to make changes to the number of shares of Common Stock subject to Participant’s
Award or to change the



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performance standards of paragraph 2, as equitably determined by the Committee
to reflect adjustment required by the effect of a major corporate event such as the
acquisition or disposition of a Subsidiary or major business activity or substantial
operating assets, or a “going public” event; or (iv) to make such other changes as
the Company, upon advice of counsel, determines are necessary or advisable because
of the adoption or promulgation of, or change in or to the interpretation of, any
law or governmental rule or regulation, including any applicable Federal or state
securities laws; and




     (b) subject to Section 6 of the Plan and any required approval of the Company’s
stockholders, the Award evidenced by this Agreement may be canceled by the Committee
and a new Award made in substitution therefore, provided that the Award so
substituted shall satisfy all requirements of the Plan as of the date such new Award
is made and no such action shall adversely affect an Award without Participant’s
consent.



     12. Participant Employment. Nothing contained in this Agreement, and no action of the Company
or the Committee with respect hereto, shall confer or be construed to confer on Participant any
right to continue in the employ of the Company or any of its Subsidiaries or interfere in any way
with the right of the Company or any employing Subsidiary to terminate Participant’s employment at
any time, with or without cause; subject, however, to the provisions of any employment agreement
between Participant and the Company or any Subsidiary.



     13. Change of Control. As used in this Agreement, the terms set forth below shall have the
following respective meanings:



     “Beneficial Owner” shall mean, with reference to any securities, any Person if:




     (i) such Person is the “beneficial owner” of (as determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Exchange Act, as in effect on
the date of this Agreement) such securities; provided, however, that a Person shall
not be deemed the “Beneficial Owner” of, or to “beneficially own,” any security
under this subsection (i) as a result of an agreement, arrangement or understanding
to vote such security if such agreement, arrangement or understanding: (x) arises
solely from a revocable proxy or consent given in response to a public (i.e., not
including a solicitation exempted by Rule 14a-2(b)(2) of the General Rules and
Regulations under the Exchange Act) proxy or consent solicitation made pursuant to,
and in accordance with, the applicable provisions of the General Rules and
Regulations under the Exchange Act and (y) is not then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor report); or




     (ii) such Person is a member of a group (as that term is used in Rule 13d-5(b)
of the General Rules and Regulations under the Exchange Act) that includes any other
Person (other than Exempt Persons) that beneficially owns such securities;



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provided, however, that a Person shall not be deemed the “Beneficial Owner” of, or to “beneficially
own” any security held by a Norris Family Trust with respect to which such Person acts in the
capacity of trustee, personal representative, custodian, administrator, executor, officer, partner,
member, or other fiduciary; provided, further, that nothing in this definition shall cause a
Person engaged in business as an underwriter of securities to be the Beneficial Owner of, or to
“beneficially own,” any securities acquired through such Person’s participation in good faith in a
firm commitment underwriting until the expiration of forty days after the date of such acquisition.
For purposes hereof, “voting” a security shall include voting, granting a proxy, consenting or
making a request or demand relating to corporate action (including, without limitation, a demand
for a stockholder list, to call a stockholder meeting or to inspect corporate books and records) or
otherwise giving an authorization (within the meaning of Section 14(a) of the Exchange Act) in
respect of such security.




     The terms “beneficially own” and “beneficially owning” shall have meanings that are
correlative to this definition of the term “Beneficial Owner.”




     “Change of Control” shall mean any of the following occurring on or after the date of this
Agreement:




     (i) Any Person (other than an Exempt Person) shall become the Beneficial Owner
of 35% or more of the shares of Common Stock then outstanding or 35% or more of the
combined voting power of the Voting Stock of the Company then outstanding; provided,
however, that no Change of Control shall be deemed to occur for purposes of this
subsection (i) if such Person shall become a Beneficial Owner of 35% or more of the
shares of Common Stock or 35% or more of the combined voting power of the Voting
Stock of the Company solely as a result of (x) an Exempt Transaction or (y) an
acquisition by a Person pursuant to a reorganization, merger or consolidation, if,
following such reorganization, merger or consolidation, the conditions described in
clauses (x), (y) and (z) of subsection (iii) of this definition are satisfied;




     (ii) Individuals who, as of the date of this Agreement, constitute the Board
(the “Incumbent Board”) cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director subsequent to
the date of this Agreement whose election, or nomination for election by the
Company’s shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board; provided, further, that there shall
be excluded, for this purpose, any such individual whose initial assumption of
office occurs as a result of any actual or threatened election contest that is
subject to the provisions of Rule 14a-11 under the Exchange Act;




     (iii) Approval by the shareholders of the Company of a reorganization, merger
or consolidation, in each case, unless, following such reorganization,



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merger or consolidation, (x) more than 65% of the then outstanding shares of
common stock of the corporation resulting from such reorganization, merger or
consolidation and the combined voting power of the then outstanding Voting Stock of
such corporation is beneficially owned, directly or indirectly, by all or
substantially all of the Persons who were the Beneficial Owners of the outstanding
Common Stock immediately prior to such reorganization, merger or consolidation
(ignoring, for purposes of this clause (x), the first proviso in the definition of
“Beneficial Owner” set forth above) in substantially the same proportions as their
ownership immediately prior to such reorganization, merger or consolidation of the
outstanding Common Stock, (y) no Person (excluding any Exempt Person or any Person
beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 35% or more of the Common Stock then
outstanding or 35% or more of the combined voting power of the Voting Stock of the
Company then outstanding) beneficially owns, directly or indirectly, 35% or more of
the then outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation or the combined voting power of the then
outstanding Voting Stock of such corporation and (z) at least a majority of the
members of the board of directors of the corporation resulting from such
reorganization, merger or consolidation were members of the Incumbent Board at the
time of the execution of the initial agreement or initial action by the Board
providing for such reorganization, merger or consolidation; or




     (iv) Approval by the shareholders of the Company of (x) a complete liquidation
or dissolution of the Company, unless such liquidation or dissolution is approved as
part of a plan of liquidation and dissolution involving a sale or disposition of all
or substantially all of the assets of the Company to a corporation with respect to
which, following such sale or other disposition, all of the requirements of clauses
(y)(A), (B) and (C) of this subsection (iv) are satisfied, or (y) the sale or other
disposition of all or substantially all of the assets of the Company, other than to
a corporation, with respect to which, following such sale or other disposition, (A)
more than 65% of the then outstanding shares of common stock of such corporation and
the combined voting power of the Voting Stock of such corporation is then
beneficially owned, directly or indirectly, by all or substantially all of the
Persons who were the Beneficial Owners of the outstanding Common Stock immediately
prior to such sale or other disposition (ignoring, for purposes of this clause
(y)(A), the first proviso in the definition of “Beneficial Owner” set forth above)
in substantially the same proportions as their ownership, immediately prior to such
sale or other disposition, of the outstanding Common Stock, (B) no Person (excluding
any Exempt Person and any Person beneficially owning, immediately prior to such sale
or other disposition, directly or indirectly, 35% or more of the Common Stock then
outstanding or 35% or more of the combined voting power of the Voting Stock of the
Company then outstanding) beneficially owns, directly or indirectly, 35% or more of
the then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding Voting Stock of such corporation and (C) at
least a



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majority of the members of the board of directors of such corporation were
members of the Incumbent Board at the time of the execution of the initial agreement
or initial action of the Board providing for such sale or other disposition of
assets of the Company; or 




     (v) If the Participant is an employee of a Subsidiary of the Company, a Change
of Control is deemed to have occurred at such time as any of the following occur
while such Participant is an employee of such Subsidiary: (A) such Subsidiary shall
no longer be deemed to be a Subsidiary of the Company or (B) the sale or transfer of
all or substantially all of the assets of such Subsidiary to any Person other than
the Company or a Subsidiary of the Company.




     “Common Stock” shall mean the common stock, par value $.01 per share, of the Company.




     “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.




     “Exempt Person” shall mean (i) the Company, any subsidiary of the Company, any employee
benefit plan of the Company or any subsidiary of the Company, and any Person organized, appointed
or established by the Company for or pursuant to the terms of any such plan, (ii) any Person who is
shown under the caption “Principal and Selling Stockholders” in the Company’s final prospectus
dated July 28, 1999 relating to its initial public offering of the Common Stock as beneficially
owning (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the
Exchange Act, as in effect on the date of this Agreement) one percent or more of the Common Stock
and (iii) any lineal descendant and any spouse of any such lineal descendant of D.W. Norris, but
only if such lineal descendant and any spouse of any such lineal descendant shall not at any time
hold shares of Common Stock or Voting Stock of the Company with the primary purpose of effecting
with respect to the Company (A) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, (B) a sale or transfer of a material amount of assets, (C) any
material change in the capitalization, (D) any other material change in the business or corporate
structure or operations, (E) changes in the corporate charter or bylaws or (F) a change in the
composition of the Board or of the members of senior management.




     “Exempt Transaction” shall mean an increase in the percentage of the outstanding shares of
Common Stock or the percentage of the combined voting power of the outstanding Voting Stock of the
Company beneficially owned by any Person solely as a result of a reduction in the number of shares
of Common Stock then outstanding due to the repurchase of Common Stock by the Company, unless and
until such time as such Person shall purchase or otherwise become the Beneficial Owner of
additional shares of Common Stock constituting 3% or more of the then outstanding shares of Common
Stock or additional Voting Stock representing 3% or more of the combined voting power of the then
outstanding Voting Stock.




     “Norris Family Trust” shall mean any trust, estate, custodianship, other fiduciary
arrangement, corporation, limited partnership, limited liability company or other business entity
(collectively, a “Family Entity”) formed, owned, held, or existing primarily for the benefit of the



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lineal descendants of D.W. Norris and any spouses of such lineal descendants, but only if such
Family Entity shall not at any time hold Common Stock or Voting Stock of the Company with the
primary purpose of effecting with respect to the Company (i) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation (ii) a sale or transfer of a material
amount of assets, (iii) any material change in capitalization, (iv) any other material change in
business or corporate structure or operations, (v) changes in corporate charter or bylaws, or (vi)
a change in the composition of the Board or of the members of senior management.




     “Person” shall mean any individual, firm, corporation, partnership, association, trust,
unincorporated organization or other entity.




     “Subsidiary” mean, with respect to any Person, (i) a corporation a majority of whose Voting
Stock is at the time, directly or indirectly, owned by such Person, by one or more Subsidiaries of
such Person or by such Person and one or more Subsidiaries thereof or (ii) any other Person (other
than a corporation), including, without limitation, a joint venture, in which such Person, one or
more Subsidiaries thereof or such Person and one or more Subsidiaries thereof, directly or
indirectly, at the date of determination thereof, have at least majority ownership interest
entitled to vote in the election of directors, managers or trustees thereof (or other Persons
performing similar functions).




     “Voting Stock” shall mean, with respect to a corporation, all securities of such corporation
of any class or series that are entitled to vote generally in the election of directors of such
corporation (excluding any class or series that would be entitled so to vote by reason of the
occurrence of any contingency, so long as such contingency has not occurred).




     14. Governing Law. This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of Delaware.




     15. Construction. References in this Agreement to “this Agreement” and the words “herein,”
“hereof,” “hereunder” and similar terms include all Exhibits and Schedules appended hereto,
including the Plan. This Agreement is entered into, and the Award evidenced hereby is granted,
pursuant to the Plan and shall be governed by and construed in accordance with the Plan and the
administrative interpretations adopted by the Committee thereunder. All decisions of the Committee
upon questions regarding the Plan or this Agreement shall be conclusive. Unless otherwise
expressly stated herein, in the event of any inconsistency between the terms of the Plan and this
Agreement, the terms of the Plan shall control. The headings of the paragraphs of this Agreement
have been included for convenience of reference only, are not to be considered a part hereof and
shall in no way modify or restrict any of the terms or provisions hereof.




     16. Duplicate Originals. The Company and Participant may sign any number of copies of this
Agreement. Each signed copy shall be an original, but all of them together represent the same
agreement.




     17. Rules by Committee. The rights of Participant and obligations of the Company hereunder
shall be subject to such reasonable rules and regulations as the Committee may adopt from time to
time hereafter.



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     18. Definitions. As used herein:




     (a) “Fair Market Value” means the fair market value of a share of Common Stock
as most recently fixed and determined (prior to the date of the event giving rise to
the use and application of such term) as follows: (i) if shares of Common Stock are
listed on a national securities exchange, the mean between the highest and lowest
sales price per share of Common Stock on the consolidated transaction reporting
system for the principal national securities exchange on which shares of Common
Stock are listed on that date, or, if there shall have been no such sale so reported
on that date, on the last preceding date on which such a sale was so reported, (ii)
if shares of Common Stock are not so listed but are quoted on the Nasdaq National
Market, the mean between the highest and lowest sales price per share of Common
Stock reported by the Nasdaq National Market on that date, on the last preceding
date on which such a sale was so reported, (iii) if the Common Stock is not so
listed or quoted, the mean between the closing bid and asked price on that date, or,
if there are no quotations available for such date, on the last preceding date on
which such quotations shall be available, as reported by the Nasdaq Stock market,
or, if not reported by the Nasdaq Stock Market, by the National Quotation Bureau
Incorporated.




     (b) “Earned Award” means the number of whole shares earned at the end of the
Performance Period by applying the Corporation’s attained level of performance to
the Contingent Award.




     19. Entire Agreement. Subject to the provisions of any applicable written employment
agreement between Participant and the Company or any Subsidiary, Participant and the Company hereby
declare and represent that no promise or agreement not herein expressed has been made and that this
Agreement contains the entire agreement between the parties hereto with respect to the Award and
replaces and makes null and void any prior agreements, oral or written, between Participant and the
Company regarding the Award.



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     20. Participant Acceptance. Participant shall signify acceptance of the terms and conditions
of this Agreement by signing in the space provided at the end hereof and returning a signed copy to
the Company.



	 	 	 	 	 
	 	 	 
	 	Signed:  	 	 
	 	 	«First» «Last» 	 
	 	 	 	 
	 
	 	 	 
	 	Date:  	 	 
	 	 	 	 
	 	 	 	 
	 
	 	LENNOX INTERNATIONAL INC.

 	 
	 	By:  	 	 
	 	 	Name:  	William F. Stoll, Jr. 	 
	 	 	Title:  	Executive Vice President, Chief Legal Officer,
and Secretary 	 
	 




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