Document/Exhibit Description Pages Size
1: 10-K Annual Report 34 188K
3: EX-10.10 Schedule to Form of Indemnification Agreement 1 4K
4: EX-10.13 Schedule to Employment Agreement 1 5K
5: EX-10.18 Schedule to Stock Option Agreement 1 6K
2: EX-10.7 Schedule to the Stock Option Agreement 1 8K
6: EX-13.1 Pages From Def Proxy Statement 13 69K
7: EX-21.1 Subsidiaries of the Company 1 5K
8: EX-23.1 Independent Auditor's Consent 1 6K
Exhibit 13.1
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of nine members divided into
three classes. At the meeting, three directors are to be elected to hold office
for three-year terms until the Annual Meeting in 2004 and until their successors
are elected and qualified. The enclosed proxy will be voted for election of the
three directors of such class named in the following table, unless a shareholder
indicates that a vote should be withheld with respect to one or more of such
directors. The election of these directors has been proposed and recommended by
the Board of Directors. If any nominee shall, prior to the meeting, become
unavailable for election as a director, the persons named in the accompanying
form of proxy will vote for such nominee, if any, as may be recommended by the
Board of Directors.
Under the Company's By-Laws, a shareholder intending to nominate any person
for election as a director of the Company must notify the Secretary of the
Company in writing not less than 60 days nor more than 90 days prior to the
anniversary date of the immediately preceding annual meeting. If an annual
meeting is called for a date that is not within 30 days before or after the
anniversary date of the immediately preceding annual meeting, a shareholder's
notice must be received by the Company not later than the close of business on
the 10th day following the day on which notice of the date of the annual meeting
was mailed or public disclosure of the date of the annual meeting was made,
whichever first occurs. The notice must set forth (a) as to each person
nominated, (i) the name, age, business address and residence address of such
person, (ii) the principal occupation of such person, (iii) the number of shares
of Common Stock beneficially owned by such person and (iv) any other information
required to be disclosed in solicitations for proxies for elections of directors
under the federal securities laws; and (b) as to the shareholder giving such
notice, (i) the name and record address of such shareholder, (ii) the number of
shares of Common Stock beneficially owned by such shareholder, (iii) a
description of any arrangement between such shareholder and each of his or her
nominees and any other persons (including their names) pursuant to which the
nominations are made by such shareholder, (iv) a representation that such
shareholder intends to appear in person or by proxy at the annual meeting to
nominate his or her nominees and (v) any other information required to be
disclosed in solicitations for proxies for elections of directors under the
federal securities laws. The notice must be accompanied by the executed consent
of each nominee to serve as a director if so elected.
The age, position with the Company, period of service as a director of the
Company, business experience during the past five years, directorships in other
companies and shareholdings in the Company as of February 23, 2001 for each of
the nominees for election and for each of those directors whose term will
continue are set forth below:
[Download Table]
SHARES OF
COMMON STOCK
BENEFICIALLY
OWNED (1)
------------
NOMINEES FOR DIRECTOR TO BE ELECTED FOR TERMS TO EXPIRE IN
2004
E. THAYER BIGELOW, JR 5,467
Age 59, Director since October 1999. Senior Advisor,
Time-Warner Inc., New York, NY (media and entertainment
Company) since October 1998. Chief Executive Officer, Court
TV, New York, NY, an affiliate of Time Warner Entertainment
LP (cable television program services) March 1997 to October
1998. President and Chief Executive Officer, Time Warner
Cable Programming Inc., Stamford, CT, a subsidiary of Time
Warner Entertainment LP (cable television program services),
1991 to 1997. Other directorships: Crane Co., Lord Abbett &
Co. Mutual Funds.
RICHARD S. FORTE 3,677
Age 56, Director since October 1999. President, Dawson Forte
Cashmere Company, South Natick, MA (importer) since January
1997. Chairman since January 1997 and, prior thereto,
President, Forte Cashmere Company, Inc. (importer and
manufacturer). Other directorships: Crane Co.
2
[Download Table]
SHARES OF
COMMON STOCK
BENEFICIALLY
OWNED (1)
------------
PETER L. YOUNG None
Age 62, Director since February 2000. Group Chief Executive,
RMC Group p.l.c., United Kingdom (international building
materials company) from January 1996 to June 2000. Other
Directorships: RMC Pension Trust Limited, Ready Mixed
Concrete Senior Benefits Trust Limited, RMC Money Purchase
Pension Trust Ltd., Harleyford Golf p.l.c., Readymix,
p.l.c., Ireland (a building materials company).
DIRECTORS WHOSE TERMS EXPIRE IN 2003
DORSEY R. GARDNER 1,762
Age 58, Director since October 1999. President, Kelso
Management Company, Inc., Boston, MA (investment
management). General Partner, Hollybank Investments, L.P.,
and Thistle Investments, L.P., Miami, FL (private investment
funds). Other directorships: Crane Co.
DELBERT H. TANNER None
Age 49, Director since January 2001. Senior Vice President,
RMC Industries since 1998. Chief Executive Officer, Channel
Partners, Inc. 1996-1998. Executive Vice President,
Construction Materials -- CalMat Co. 1993-1996.
JAMES L. L. TULLIS 444
Age 53, Director since October 1999. Chairman and Chief
Executive Officer, Tullis-Dickerson & Co., Inc., Greenwich,
CT (venture capital investments in the health care industry)
since 1986. Other directorships: Crane Co., PSS Worldmed,
Inc.
DIRECTORS WHOSE TERMS EXPIRE IN 2002
ALAN S. J. DURANT None
Age 63, Director since February 2000. President and
Director, RMC Industries Corporation, Decatur, Georgia
(building materials company) since 1993. Other
directorships: RMC Group p.l.c
R. S. EVANS 457,518
Age 56, Director since 1972. Chairman of the Company.
Chairman and Chief Executive Officer of Crane Co. Other
directorships: Crane Co., Fansteel, Inc., HBD Industries,
Inc., Hexcel Corporation.
BARRY J. KULPA 203,317
Age 53, Director since October 1997. President and Chief
Executive Officer of the Company since October 1997. Senior
Vice President and Chief Operating Officer of Dal-Tile
International (manufacturer and distributor of ceramic
tile), 1994 to 1997. Vice President and Chief Financial
Officer of David Weekley Homes (regional homebuilder), 1992
To 1994.
---------------
(1) As determined in accordance with Rule 13d-3 under the Securities Exchange
Act of 1934. No director except Mr. R. S. Evans and Mr. Barry J. Kulpa owns
more than 1% of the outstanding shares of Common Stock. Mr. Evans owns 2.2%
of the outstanding shares of Common Stock. For more information on Mr.
Kulpa's beneficial ownership, see Beneficial Ownership of Common Stock by
Directors and Management, page 6.
3
BENEFICIAL OWNERSHIP OF COMMON STOCK
BY DIRECTORS AND MANAGEMENT
The following table sets forth the number of shares of Common Stock
beneficially owned, directly or indirectly, by the non-employee directors as a
group (see pages 2 and 3 for individual holdings), the executive officers named
in the Summary Compensation Table and all of the Company's directors and
executive officers as a group, as of February 23, 2001.
[Enlarge/Download Table]
SHARES
UNDER SHARES IN PERCENT OF SHARES
RESTRICTED COMPANY TOTAL SHARES OUTSTANDING AS OF
SHARES STOCK SAVINGS PLAN BENEFICIALLY FEBRUARY 23,
OWNED PLANS(1) (401(K)) OWNED(2) 2001
------- ---------- ------------ ------------ -----------------
Non-Employee Directors as a
Group (8 persons) (3)....... 468,868 -- -- 468,868 2.3%
Barry J. Kulpa................ 54,222 147,121 2,074 203,417 1.0%
George M. Dickens............. -- -- 1,174 1,174 *
Carl A. Liliequist............ 5,308 -- 6,271 11,579 *
Paul W. Lyle.................. -- -- 1,044 1,044 *
John G. Olson................. 3,291 -- 4,130 7,421 *
Other Executive Officers
(4 persons)................. 1,146 -- 4,193 5,339 *
Total......................... 532,835 147,121 18,886 698,842 3.4%
---------------
* Represents holdings of less than 1%.
(1) Subject to forfeiture if established service conditions are not met.
(2) As determined in accordance with Rule 13d-3 under the Securities Exchange
Act of 1934.
(3) Excludes 6,546,424 shares of Common Stock owned by Rugby, which may be
deemed to be beneficially owned by Mr. Durant, who is a director of RMC. Mr.
Durant is also an executive officer of RMC. Mr. Durant expressly disclaims
beneficial ownership of the shares of Common Stock owned by Rugby. Does not
include 107 shares owned by Mr. Evans' spouse the beneficial ownership of
which is expressly disclaimed by Mr. Evans.
6
PRINCIPAL STOCKHOLDERS OF THE COMPANY
The following table sets forth the ownership of Common Stock by each person
known by the Company to beneficially own more than 5% of the Common Stock on
February 23, 2001.
[Download Table]
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
------------------- -------------------- ----------------
RMC Group p.l.c.(1)......................... 6,546,424 32.0%
RMC House
Coldharbour Lane
Thorpe, Egham
Surrey TW20 8TD
England
The Baupost Group, L.L.C. .................. 2,285,320(2) 11.0%
44 Brattle Street, 5th Floor
Cambridge, MA 02138
The Crane Fund(3)........................... 1,728,537 8.3%
100 First Stamford Place
Stamford, CT 06902
---------------
(1) According to a Statement on Schedule 13D/A filed by RMC on April 26, 2000,
as of that date it owned 100% of the outstanding shares of Rugby, which is
the direct beneficial owner of the 6,546,424 shares of Company Common Stock.
(2) According to a Schedule 13G filed by The Baupost Group, L.L.C. on April 10,
2000.
(3) The Crane Fund is a charitable trust managed by trustees appointed by the
board of directors of Crane Co. The incumbent trustees are: G. A. Dickoff,
A. I. DuPont, E. M. Kopczick and M. L. Raithel, all of whom are executive
officers of Crane. Pursuant to the trust instrument, the shares held by the
trust shall be voted by the trustees as directed by the board of directors
of Crane, the distribution of the income of the trust for its charitable
purposes is subject to the control of the board of directors of Crane and
the shares may be sold by the trustees only upon the direction of the board
of directors of Crane. None of the directors or the trustees has any direct
beneficial interest in, and all disclaim beneficial ownership of, shares
held by The Crane Fund.
7
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
Shown below is information concerning the annual and long-term compensation
for services rendered in all capacities to the Company and its subsidiaries for
the years ended December 31, 2000, 1999 and 1998 for Barry J. Kulpa, the
Company's Chief Executive Officer, and the other four most highly compensated
individuals who serve as executive officers of the Company and one other
individual who was an executive officer of the Company during 2000 but was no
longer so at December 31, 2000. The compensation described in this table was
paid by the Company or a prior affiliate of the Company.
[Enlarge/Download Table]
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------------------- ----------------------------------------------------------
COMPANY SECURITIES
OTHER RESTRICTED UNDERLYING
NAME AND BONUS ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) ($)(1) COMPENSATION($) AWARD($) SARS(#) (4) PAYOUTS($) COMPENSATION($)(5)
------------------ ---- --------- ------- --------------- ---------- ----------- ---------- ------------------
Barry J. Kulpa........ 2000 350,000 130,000 -- 276,250(2) 326,000 -- 5,250
President and
Chief............. 1999 263,000 130,000 -- 274,056(3) 32,528 -- 5,905
Executive Officer... 1998 250,000 130,671 -- -- 36,000 -- 6,152
George M Dickens...... 2000 182,600 -- 34,000 4,033
Regional Vice....... 1999 182,600 63,000 -- -- -- -- 252,908(10)
President(6)........ 1998 182,600 62,800 -- -- -- -- 3,185
Carl A. Liliequist.... 2000 147,500 148,465 39,000 5,250
Regional Vice....... 1999 147,500 146,343 -- -- 2,711 -- 5,257
President........... 1998 147,188 166,031 -- -- 2,250 -- 5,339
Paul W. Lyle.......... 2000 160,000 -- 34,000 3,637
Regional Vice....... 1999 160,000 108,000 -- -- -- -- 152,619(10)
President(6),(7).... 1998 160,000 90,000 -- -- -- -- 2,077
John G. Olson......... 2000 128,333 53,040 20,000 2,100
Regional Vice....... 1999 93,333 42,705 -- -- -- -- 2,338
President(8)........ 1998 30,833 -- -- -- -- -- --
Gregory D. Lambert.... 2000 107,708 50,000 65,000(9) 1,850
Vice President -...... 1999 185,000 50,000 -- -- 8,132 -- 1,975
Administration
and............... 1998 -- -- -- -- -- -- --
Chief Financial
Officer(9)
---------------
(1) Represents the amounts paid to the named executives under the EVA Plan.
After giving effect to such payments, the named executives have credited to
their accounts under the Company's EVA Plan the following amounts as of
December 31, 2000, which are subject to increase or decrease in future
years: Barry J. Kulpa, $77,483; Carl A. Liliequist, $302,686; George M.
Dickens, $0; Paul W. Lyle, $0; John G. Olson; $53,044. Under the program,
one-third of the account balance in any year will be payable to the named
executive. The Company is responsible for the account balances of the
foregoing employees and the other Company employees participating in this
plan.
(2) On January 24, 2000, Mr. Kulpa was granted 65,000 restricted shares of
Common Stock under the Company's Stock Incentive Plan. Based on the closing
price of a share of Common Stock on January 24, 2000 of $4.25, the value of
the 65,000 restricted shares on that date was $276,250. Restrictions on the
65,000 shares granted in 2000 will lapse one-fifth per year beginning one
year from the date of grant. Dividends will be paid on all restricted
shares of Common Stock at the same rate as on other shares of Common Stock.
As of December 31, 2000, Mr. Kulpa held a total of 130,121 restricted
shares of Common Stock. Based on the closing price of a share of Common
Stock on December 29, 2000 (the last New York Stock Exchange trading day of
2000) of $4.125, the value of the 130,121 restricted shares on that date
was $536,749.
(3) Prior to the distribution by Crane Co. of all of the outstanding shares of
Common Stock to Crane Co.'s shareholders on December 16, 1999 (the
"Distribution"), Mr. Kulpa had been granted an aggregate of 15,000 shares
of time-based Crane restricted stock. In the Distribution, Mr. Kulpa
received 3,333 shares of restricted Company Common Stock in respect of his
ownership of the 15,000 shares of time-based Crane restricted stock. Based
on the closing price of $3.4375 per share of the Company's Common Stock on
December 16, 1999, the date of the Distribution, the value of the 3,333
shares on that date was $11,457.
8
This value is included in the $274,056 reported in the Summary Compensation
Table for 1999. In connection with the Distribution, on December 17, 1999
the 15,000 shares of time-based Crane restricted stock owned by Mr. Kulpa
were converted into 61,788 shares of the Company's time-based restricted
stock. Based on the closing price of $4.25 per share of the Company's
Common Stock on December 17, 1999, the value of the 61,788 shares on that
date was $262,599. The restrictions on 32,561 shares of Mr. Kulpa's
restricted Common Stock granted in 1999 will lapse in 2003 and restrictions
on 32,560 shares granted in 1999 will lapse in 2004.
(4) No options to purchase shares of Common Stock were outstanding in 1998 or
1999. The shares reported in this column for 1998 and 1999 represent shares
of Crane's common stock underlying options that were granted by Crane prior
to the Distribution. All options reported in this column for 1998 and 1999
were forfeited on March 15, 2000.
(5) Amounts include Huttig's matching contribution for eligible employees for
the purchase of common stock in Huttig's Saving & Investment Plan (401(k))
and premiums for life insurance.
(6) Prior to December 16, 1999, Mssrs. Dickens and Lyle were employed by Rugby.
Compensation reported for 1998 and 1999 was paid by Rugby.
(7) Mr. Lyle resigned from the Company in January 2001.
(8) Mr. Olson became an executive officer of the Company on March 15, 2000.
(9) Mr. Lambert resigned on June 30, 2000. All options granted to Mr. Lambert
were forfeited at the time of his resignation.
(10) Includes amounts paid under change of control provisions when Rugby was
acquired by Huttig on December 16, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is information on grants to the executive officers named in the
Summary Compensation Table of options to purchase shares of Common Stock
pursuant to the Stock Incentive Plan during the year ended December 31, 2000.
[Enlarge/Download Table]
NUMBER
OF % OF
SECURITIES TOTAL OPTIONS GRANT
UNDERLYING GRANTED TO EXERCISE OR DATE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED FISCAL YEAR $/SHARE DATE VALUE($)(1)
---- ---------- ------------- ----------- ---------- -----------
Barry J. Kulpa..................... 326,000 36% $4.29 1/24/10 $635,341
George M. Dickens.................. 34,000 4% $4.29 1/24/10 $ 66,263
Carl A. Liliequist................. 39,000 4% $4.29 1/24/10 $ 76,000
Paul W. Lyle....................... 34,000 4% $4.29 1/24/10 $ 66,263
John G. Olson...................... 20,000 2% $4.40 5/22/10 $ 40,600
Gregory D. Lambert................. 65,000 7% $4.29 1/24/10 $126,679
---------------
(1) The amounts shown were calculated using a Black-Scholes option pricing and
do not reflect the actual value of the option awards at any time. The
estimated values assume a risk-free rate of return of 4.9% based upon the
10-year Treasury Bill rate, a standard deviation of stock return of 45%, a
dividend payout ratio of 0% and an option duration of 5 years. The standard
deviation of stock return represents a statistical measure intended to
reflect the anticipated fluctuation of price movements over the life of the
option. The actual value, if any, that an executive may realize will depend
upon the excess of the stock price over the exercise price on the date the
option is exercised, and so the value realized by an executive may be more
or less than the value estimated by the Black-Scholes model.
9
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The information set forth in the following table relates to options to
purchase Huttig common stock that were exercised by the executive officers named
in the Summary Compensation Table in 2000.
[Enlarge/Download Table]
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Barry J. Kulpa....... -- -- -- 326,000 -- --
Carl A. Liliequist... -- -- -- 39,000 -- --
George M. Dickens.... -- -- -- 34,000 -- --
Paul W. Lyle......... -- -- -- 34,000 -- --
John G. Olson........ -- -- -- 20,000 -- --
Gregory D. Lambert... -- -- -- -- -- --
---------------
(1) Based on a share price of $4.13, which was the closing price for a share of
the Company's stock on December 29, 2000, no options reported in this table
were in-the-money as of December 31, 2000.
10
The Company's EVA program involves the meeting of pre-established goals.
The increase or decrease in EVA during the year is used to determine the total
potential award and the amount of actual award is increased or decreased based
on accomplishment of the pre-established goals. Awards are generally uncapped to
provide maximum incentive to create value and, because awards may be positive or
negative, executives can incur penalties when value is reduced. There is,
however, a $2 million limit on the annual award of any participant who is
subject to Section 162(m) of the Internal Revenue Code.
Reference is made to the Proposal to Approve the EVA Incentive Compensation
Plan beginning on page 20 of this Proxy Statement for a detailed description of
the EVA Plan.
LONG-TERM INCENTIVE COMPENSATION
The Compensation Committee believes that executive officers approach their
responsibilities more like owners of the Company as their holdings of and
potential to own Common Stock increase. This philosophy starts with the Board of
Directors, whose non-employee members receive 50% of their annual retainer in
Company Common Stock. As of February 23, 2001, 3.4% of the Company's Common
Stock was beneficially owned by directors, management and key employees. (See
Beneficial Ownership of Common Stock by Directors and Management, pages 2, 3 and
6). In 2000, the Company granted stock options for an aggregate of 895,500
shares of Common Stock to the officers and key employees of the Company pursuant
to the Stock Incentive Plan. Based on financial analysis and a review of
competitive compensation practices, these option grants were sized to (1)
replace Crane stock options forfeited by the recipients in connection with the
Distribution and (2) provide the recipients with appropriate incentives for
retention and future performance. For a description of the Stock Incentive Plan,
reference is made to the Proposal to Approve the Stock Incentive Plan beginning
on page 16 of this Proxy Statement.
COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
The base salary and incentive compensation of the Company's President and
Chief Executive Officer, Barry J. Kulpa, was determined in the same manner as
described above for all executive officers of the Company. Mr. Kulpa's base
salary of $350,000 was set in the beginning of 2000 by the Compensation
Committee. Mr. Kulpa's 2000 incentive compensation award of $427,737 under the
EVA Plan was credited to his "account" as provided for in the EVA Plan, and in
2000, one-third of Mr. Kulpa's EVA account balance as of December 31, 1999 was
paid to him. In 2000, Mr. Kulpa was granted stock options in respect of 326,000
shares of Common Stock. The amount of this grant was determined on the same
basis as was used to determine the 2000 option awards of other executive
officers, as described above under "Long-Term Incentive Compensation." In
addition, Mr. Kulpa received a grant of 65,000 shares of restricted Common Stock
as a performance and retention incentive. The restrictions on the restricted
stock will lapse in equal installments over a five-year period.
SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code limits to $1 million per
employee the deductibility of compensation paid to the executive officers
required to be listed in the Company's Proxy Statement unless the compensation
meets certain specific requirements for exemption from Section 162(m). The
primary exemption under Section 162(m) is for compensation that is
"performance-based" within the meaning of Section 162(m) and the applicable
regulations. The Compensation Committee believes that amounts paid in the future
under its EVA Plan and the stock options and restricted share awards granted
under its Stock Incentive Plan will qualify for exemption as performance-based
compensation for purposes of Section 162(m) provided that the shareholders
approve the Proposals regarding the EVA Plan and the Stock Incentive Plan
contained in this Proxy Statement. The Committee's present intention is to
comply with the requirements of Section 162(m) except to the extent that
11
RETIREMENT BENEFITS
The Company does not sponsor a defined benefit pension plan for salaried
employees. However, Messrs. Kulpa and Liliequist participated in Crane's pension
plan for non-bargaining employees prior to the Distribution. These officers have
a non-forfeitable right in their benefits under the Crane pension plan that was
accrued as of December 30, 2000. The accrued benefits under the Crane pension
plan as of December 31, 2000 entitle Messrs. Kulpa and Liliequist to monthly
payments beginning at age 65 of $425.85 and $1,096.78, respectively.
OTHER AGREEMENTS
The Company has entered into indemnification agreements with Barry J. Kulpa
and the non-employee directors of the Company. The Indemnification Agreements
require the Company to indemnify the officers or directors to the fullest extent
permitted by law against any and all expenses (including advances thereof),
judgments, fines, penalties and amounts paid in settlement incurred in
connection with any claim against such person arising out of the fact that he
was a director, officer, employee, trustee, agent or fiduciary of the Company or
was serving as such for another entity at the Company's request, and to maintain
directors and officers liability insurance coverage or to the full extent
permitted by law to indemnify such person for the lack of insurance coverage.
Barry J. Kulpa has an agreement that, in the event of a change in control
of the Company, provides for the continuation of his then current base salary,
incentive compensation and benefits for the three-year period following the
change in control. Upon termination within three years after a change in
control, by the Company without cause or by him with "Good Reason" (as defined
in the agreement), Mr. Kulpa is immediately entitled to a proportionate amount
of the greater of the last year's bonus or the average bonus paid in the last
three years, three times the sum of his annual salary and the average of the
last three years' bonuses, and all accrued deferred compensation and vacation
pay. Employee benefits, medical coverage and other welfare benefits also
continue until the end of the three-year period. "Good Reason" under the
agreement includes, among other things, any action by the Company that results
in a diminution of his position, authority, duties or responsibilities. The
agreement also provides that Mr. Kulpa may terminate his employment for any
reason during the 30-day period immediately following the first year after the
change of control, which shall be deemed "Good Reason" under the agreement. If
it is determined that any economic benefit or payment or distribution by the
Company to Mr. Kulpa pursuant to the agreement or otherwise (including, but not
limited to, any economic benefit received by him by reason of the acceleration
of rights under the Company's Stock Incentive Plan) ("Payment"), is subject to
the excise tax imposed by Section 4999 of the Internal Revenue Code, the
agreement provides that the Company shall make additional cash payments to Mr.
Kulpa such that after payment of all taxes including any excise tax imposed on
such payments, he will retain an amount equal to the excise tax on all the
Payments. The agreement is for a three-year period, but is automatically renewed
annually for a three-year period unless the Company gives notice that the period
will not be extended.
Each of the Regional Vice Presidents named in the Summary Compensation
Table have an Employment Agreement with the Company that provides for the
continued employment of the executive unless and until the Employment Agreement
is terminated (i) by the Company giving to the executive not less than 12
months' prior written notice, (ii) by the executive giving to the Company not
less than 1 month's prior written notice, (iii) without notice on the
executive's 65th birthday, (iv) by the Company or the executive upon 1 month's
prior
12
written notice to the other upon the executive's permanent disability or (v) by
the Company without notice if the executive (A) commits fraudulent or dishonest
acts, gross negligence, or disloyalty in connection with his employment, or is
convicted of a criminal act involving dishonesty (whether or not such conviction
is related to his employment), (B) violates the Employment Agreement and does
not cure the violation within 30 days after the receipt of written notice by the
Company or (C) dies. The Company has the right to treat a notice of termination
given by the executive pursuant to clause (ii), above, as effective at any time
after the giving of such notice. Each Employment Agreement specifies the
executive's applicable annual base salary and provides that the executive is
entitled to participate in the Company's EVA Plan in accordance with the terms
of that plan. Each Employment Agreement also provides for the use of a Company
automobile or the payment of an allowance intended to reimburse the executive
for the expenses of his personal automobile. Each Employment Agreement provides
generally for the reimbursement of expenses and the participation in the
Company's customary benefits plans. If notice of termination of an Employment
Agreement is given pursuant to clause (i) or (ii) of the preceding paragraph,
the Company will continue to pay the executive his salary and provide all fringe
benefits from the date such notice is provided up through the effective date of
the termination; provided, however, that in the case of a termination under
clause (i), above, if the executive breaches the Employment Agreement during the
period when such severance benefits are being paid, the Company will immediately
upon such breach cease to be obligated to provide such severance benefits. If
the Company exercises its right to treat a notice under clause (ii), above, as
immediately effective, the executive shall be entitled to no severance payments
or benefits. The executive is obligated to use his best efforts during any
applicable severance period to find other employment and severance payments will
be offset by any compensation the executive receives from such other employment
or could have received with reasonable efforts. Each Employment Agreement (i)
prohibits the executive from engaging in other business activities during his
employment without the prior written consent of the Company, (ii) requires the
executive to maintain in confidence all confidential information concerning the
Company and (iii) contains customary non-solicitation, no-hire and non-compete
provisions.
13
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
For the fiscal year ended December 31, 2000, other than as set forth below,
each director and officer of the Company timely filed all required reports under
Section 16(a) of the Securities Exchange Act of 1934.
Mr. Kulpa did not file a Form 5 with respect to 1999 to report his
ownership of 3,333 shares of Common Stock received by him in the Distribution.
Ownership of these shares was reported by Mr. Kulpa on a Form 4 filed in 2000.
Mr. Olson filed a late Form 3. Mr. Olson also did not file a Form 4 to
report the purchase of 3,000 shares of Common Stock on September 25, 2000 at a
price of $4.50 per share. Ownership of these shares was reported by Mr. Olson on
a timely filed Form 5.
Mr. Thompson, the Company's Vice President, Administration and Chief
Financial Officer, filed a late Form 3. Mr. Thompson also did not file a Form 4
to report the purchase of 1,000 shares of Common Stock on
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July 28, 2000 at a price of $4.63 per share. Ownership of these shares was
reported by Mr. Thompson on a timely filed Form 5.
Mr. Lambert, the Company's former Vice President - Administration and Chief
Financial Officer, filed a late Form 4 with respect to the purchase by him of
10,000 shares of Common Stock on January 25, 2000 at a price of $4.25 per share.
OTHER TRANSACTIONS AND RELATIONSHIPS
On December 6, 1999, the Company and Crane entered into a Distribution
Agreement (the "Distribution Agreement") that provided for the actions required
to effect the Distribution and the allocation of assets and liabilities between
the Company and Crane. On December 16, 1999, in connection with the consummation
of the Distribution, the Company and Crane entered into an agreement (the "Tax
Allocation Agreement") relating to the allocation of liabilities and obligations
with respect to taxes and an agreement (the "Employee Matters Agreement")
relating to the allocation of liabilities and obligations with respect to
employee benefit plans and compensation arrangements. Certain of the Company's
directors also serve as directors and an executive officer of Crane.
The Distribution Agreement provides generally that after the Distribution,
all assets and liabilities of the Company and its business will be vested solely
in the Company, and that Crane will have no interest in those assets and will
have no obligations with respect to those liabilities. The Distribution
Agreement requires the Company to indemnify Crane for certain losses suffered by
Crane, including, without limitation, losses that relate to the Company's
business (whether those losses relate to the period prior to or after
Distribution) or arise as the result of the Company's breach of any agreement or
covenant made to Crane in the Distribution Agreement, the Tax Allocation
Agreement or the Employee Matters Agreement. Crane is similarly obligated to
indemnify the Company for certain losses suffered by the Company, including,
without limitation, losses that relate to the businesses of Crane (whether those
losses relate to the period prior to or after the Distribution) or arise as the
result of Crane's breach of any agreement or covenant made to the Company in the
Distribution Agreement, the Tax Allocation Agreement or the Employee Matters
Agreement.
Under the Tax Allocation Agreement, the Company is responsible for any
taxes imposed on Crane that would not have been payable but for the breach by
the Company of any representation, warranty or obligation under the Tax
Allocation Agreement, the tax ruling request or the Distribution Agreement.
These representations, warranties and obligations relate to the Company's
continuing satisfaction of certain statutory and judicial requirements necessary
for the Distribution to be tax-free to the Company, Crane and its shareholders.
In particular, the Company has represented generally that (1) during the
two-year period following the Distribution, the Company will not enter into any
transaction or make any change in its equity structure that may cause the
Distribution to be treated as part of a plan pursuant to which one or more
persons acquire Company stock representing a 50-percent or greater equity
interest in the Company, (2) it will not repurchase outstanding Company Common
Stock after the Distribution representing 20 percent or more of the outstanding
Company Common Stock, and (3) following the Distribution, it will continue the
active conduct of its businesses. The Company has also agreed with Crane that it
will not take any of the actions described in (1) or (2) above prior to December
16, 2001 without Crane's prior written consent.
At the Closing of the Exchange, the Company entered into a Registration
Rights Agreement with Rugby pursuant to which the Company granted Rugby certain
rights to cause the Company to register for sale the shares of Common Stock
received by it in the Exchange. Pursuant to the Registration Rights Agreement,
so long as the shares of Common Stock owned by Rugby and received in the
Exchange constitute at least 30%, 20%, or 10%, respectively, of the outstanding
Common Stock, Rugby has the right to designate for nomination by the Board of
Directors of the Company three, two and one director(s), respectively.
Also at the Closing of the Exchange, the Company entered into a Transition
Services Agreement with Rugby pursuant to which the Company agreed to provide,
for a period of six months from the date of the Exchange, certain administrative
services to the industrial businesses of Rugby USA. The industrial businesses of
Rugby USA were transferred to an affiliate of Rugby USA immediately prior to the
consummation of the Exchange and, accordingly, were not purchased by the
Company.
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One of the Company's directors is also a director and executive officer of
RMC, Rugby's parent corporation. The Registration Rights Agreement and the
Transition Services Agreement were the result of arms' length negotiations with
Rugby.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Organization and Compensation Committee is or has ever
been an employee of the Company, and no executive officer of the Company has
served as a director or member of a compensation committee of another company of
which any member of the Organization and Compensation Committee is an executive
officer.
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Dates Referenced Herein and Documents Incorporated by Reference
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