INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the registrant /x/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/x/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CRANE CO.
- - ------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CRANE CO.
- - ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/x/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or Rule
14a-6(i)(2).
/ / $500 per each party per Exchange Act Rule 14a-6(i)(3), or Rule
14a-6(i)(2).
/ / Fee computed on table below per Exchange Act Rule 14a-6(i)(4)
and 0-1.
<PAGE>
[CRANE LOGO]
CRANE CO. 100 FIRST STAMFORD PLACE, STAMFORD, CONNECTICUT 06902
March 14, 1995
DEAR CRANE CO. SHAREHOLDER:
You are cordially invited to attend the Annual Meeting of the
Shareholders of Crane Co., to be held at 10:00 a.m. Eastern Daylight Time on
Monday, May 8, 1995 at the Sheraton Stamford Hotel, Freedom II Meeting Room, One
First Stamford Place, Stamford, Connecticut.
The Notice of Meeting and Proxy Statement on the following pages
describe the matters to be presented to the meeting. Management will report on
current operations and there will be an opportunity for discussion of the
Company and its activities. Our 1994 Annual Report also accompanies this proxy
statement.
It is important that your shares be represented at the meeting regardless
of the size of your holdings. If you are unable to attend in person, we urge you
to participate by voting your shares by proxy. You may do so by filling out and
returning the enclosed proxy card.
Sincerely,
R.S. EVANS
Chairman,
Chief Executive Officer
and President
<PAGE>
CRANE CO.
100 FIRST STAMFORD PLACE
STAMFORD, CONNECTICUT 06902
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 8, 1995
March 14, 1995
To The Shareholders of Crane Co.:
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of the Shareholders of Crane
Co. will be held at the Sheraton Stamford Hotel, Freedom II Meeting Room, One
First Stamford Place, Stamford, Connecticut on Monday, May 8, 1995 at 10:00
a.m., Eastern Daylight Time, for the following purposes:
1. To elect three Directors to serve for three year terms until the
Annual Meeting of Shareholders in 1998.
2. To consider and act upon a proposal to approve the selection of
Deloitte & Touche LLP as independent auditors for the Company for
1995.
3. To consider and act upon a proposal to approve the Company's Stock
Option Plan as amended to make an additional 1,000,000 Shares of
Common Stock available for grant and to comply with Section 162(m) of
the Internal Revenue Code.
4. To transact such other business as may properly come before the
meeting in connection with the foregoing or otherwise.
The Board of Directors has fixed the close of business on March 10, 1995,
as the record date for the purpose of determining shareholders entitled to
notice of and to vote at said meeting or any adjournment thereof. A complete
list of such shareholders will be open to the examination of any shareholder
during regular business hours for a period of ten days prior to the meeting at
the offices of the Company at 100 First Stamford Place, Stamford, Connecticut.
In order to assure a quorum, it is important that shareholders who do not
expect to attend the meeting in person fill in, sign, date and return the
enclosed proxy in the accompanying envelope.
By Order of the Board of Directors,
PAUL R. HUNDT
Secretary
*****************************************************************************
If you expect to attend the meeting in person, we request that you write for
your card of admission to the Secretary, CRANE CO., 100 First Stamford Place,
Stamford, Connecticut 06902. You may use the enclosed envelope.
*****************************************************************************
<PAGE>
CRANE CO.
100 FIRST STAMFORD PLACE
STAMFORD, CONNECTICUT 06902
------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 8, 1995
The enclosed proxy is solicited by the Board of Directors of Crane Co. (the
"Company") for use at the Annual Meeting of Shareholders to be held at the
Sheraton Stamford Hotel, Freedom II Meeting Room, One First Stamford Place,
Stamford, Connecticut, on Monday, May 8, 1995, at 10:00 a.m., Eastern Daylight
Time, or at any adjournment thereof. The enclosed proxy, properly executed and
received by the Secretary prior to the meeting, and not revoked, will be voted
in accordance with the directions thereon or, if no directions are indicated,
the proxy will be voted for each nominee for election as a director; for the
proposal to approve the selection of Deloitte & Touche LLP as independent
auditors for the Company for 1995; and for the proposal to approve the Company's
Stock Option Plan as amended to make an additional 1,000,000 Shares of Common
Stock available for grant and to comply with Section 162(m) of the Internal
Revenue Code. If any other matter should be presented at the Annual Meeting upon
which a vote may properly be taken, the shares represented by the proxy will be
voted with respect thereto in accordance with the discretion of the person or
persons holding such proxy. Proxies may be revoked by shareholders at any time
prior to the voting of the proxy by written notice to the Company, by submitting
a new proxy, or by personal ballot at the meeting. The first date on which this
proxy statement and enclosed form of proxy are being sent to the Company's
shareholders is on or about March 14, 1995.
Outstanding Shares and Required Votes. As of the close of business on March
10, 1995, the record date for determining shareholders entitled to vote at the
meeting, the Company had issued and outstanding 30,153,625 Common Shares, par
value $1.00 per share ("Common Shares" or "Common Stock"). Each Common Share is
entitled to one vote at the meeting. Directors will be elected by a plurality,
and the other proposals will require for approval a majority of the votes of the
common shares present in person or represented by proxy at the meeting.
Abstentions from the election of Directors will be treated as such. Abstentions
from the proposals will, since they will not be recorded in favor of the
proposals, have the effect of negative votes. Broker non-votes will be treated
as shares as to which voting power has been withheld by the beneficial holders
of the shares and, therefore, as shares not entitled to vote on the proposal as
to which there is the broker non-vote.
ELECTION OF DIRECTORS
The Board of Directors of the Company will consist 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 1998 Annual Meeting and until their
successors are elected and qualified. The proxy will be voted for election of
the three Directors named in the following table, whose election 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, in their
discretion as may be recommended by the Board of Directors or the Board of
Directors may reduce the number of Directors to eliminate the vacancy.
<PAGE>
The respective ages, positions with the Company, periods of service as
Directors of the Company, business experience during the past five years,
directorships in other companies, and shareholdings in the Company as of March
10, 1995 of both the nominees for election and those Directors whose terms will
continue are set forth below:
Common Shares
Beneficially
Owned (1)
--------------
Nominees for Director to be Elected for Terms to Expire in 1998
MONE ANATHAN, III ................................................ 1,285
Age 56; Director since 1992. President, Filene's
Basement Corp., Boston, MA (retailer), Other
directorships: Filene's Basement Corp., Medusa
Corporation, Brookstone, Inc., Harvard Community Health
Plan, Advest Advantage Trusts.
RICHARD S. FORTE ................................................. 6,587
Age 50; Director since 1983. President, Forte Cashmere
Company, Inc., South Natick, MA (importer and
manufacturer). Other directorships: Medusa Corporation.
JEAN GAULIN ...................................................... 0
Age 52; Has not previously served as a Director.
Chairman and Chief Executive Officer, Ultramar
Corporation, Greenwich, CT, 1992 to present (petroleum
refining and marketing); Chief Executive Officer of
Ultramar PLC and President, Chief Executive Officer and
Chairman of American Ultramar Limited (refining and
marketing of gas and petroleum products, oil and gas
exploration), 1984 to 1992. Other directorships:
Ultramar Corporation, Quebec Telephone.
Directors Whose Terms Will Expire in 1996
E. THAYER BIGELOW, JR. ........................................... 9,607
Age 53; Director since 1984. President and Chief
Executive Officer, Time Warner Cable Programming Inc.,
Stamford, CT, 1991 to present; President, Home Box
Office, Inc. (cable programming and entertainment), a
subsidiary of Time Warner Inc., 1988 to 1991. Other
directorships: Medusa Corporation, 39 Lord Abbett
Mutual Funds.
CHARLES J. QUEENAN, JR. .......................................... 6,852
Age 64; Director since 1986. Partner, Kirkpatrick &
Lockhart, Pittsburgh, PA (attorneys at law). Other
directorships: Fansteel, Inc., Allegheny Ludlum
Corporation, Medusa Corporation.
BORIS YAVITZ ...................................................... 3,873
Age 71; Director since 1987. Dean Emeritus, Columbia
University Graduate School of Business, New York, NY;
Deputy Chairman and Director, Federal Reserve Bank of
New York, 1976 to 1982; Director, The Institute for the
Future. Other directorships: Medusa Corporation.
Directors Whose Terms Will Expire in 1997
R. S. EVANS ....................................................... 1,260,950
Age 51; Director since 1979. Chairman, Chief Executive
Officer and President of the Company. Chairman and
Chief Executive Officer of Medusa Corporation. Other
directorships: Medusa Corporation, Fansteel, Inc., HBD
Industries, Inc., Mid-Ocean Limited.
2
<PAGE>
Common Shares
Beneficially
Owned (1)
--------------
DORSEY R. GARDNER ................................................. 2,172
Age 52; Director 1982 to 1986 and since 1989.
President, Kelso Management Co., Inc., Boston, MA.
(investment management). Other directorships: Medusa
Corporation.
DWIGHT C. MINTON .................................................. 17,280
Age 60; Director since 1983. Chairman of the Board and
Chief Executive Officer, Church & Dwight Co., Inc., Princeton,
NJ (manufacturer of consumer and specialty products). Other
directorships: Church & Dwight Co., Inc., Medusa Corporation,
Chemical Bank of New Jersey, First Brands Corporation.
- - -----------
(1) As determined in accordance with Rule 13d-3 under the Securities Exchange
Act of 1934. No Director except Mr. R. S. Evans owns more than 1% of the
outstanding common shares of the Company. See Beneficial Ownership of
Company Stock by Directors and Management, page 4.
The Board of Directors met 13 times during 1994. The average attendance of
Directors at those meetings was 92% and all Directors attended 75% or more of
the Board and Committee meetings which they were scheduled to attend.
In 1994 the Board of Directors had standing Executive, Audit and
Organization and Compensation Committees. The Company does not have a standing
nominating committee. The Executive Committee, which meets when a quorum of the
full board cannot be readily obtained, met twice in 1994. The Audit Committee
met 3 times in 1994 with the Company's management, internal auditors and
independent auditors to review matters relating to the quality of financial
reporting and internal accounting control and the nature, extent and results of
their audits, and otherwise maintained communications between the auditors of
the Company and the Board of Directors. The Organization and Compensation
Committee met 5 times in 1994. (See the Committee's report on page 10.)
The following Directors were members of committees during 1994: Executive
Committee -- R. S. Evans, E. T. Bigelow, Jr., D.C. Minton and B. Yavitz; Audit
Committee -- M. Anathan, III, R. S. Forte, D. R. Gardner, C. J. Queenan, Jr.,
(Chairman); Organization and Compensation Committee -- E. T. Bigelow, Jr., D. R.
Gardner, D. C. Minton and B. Yavitz (Chairman).
Compensation of Directors. The Company's standard retainer payable to each
non-employee director is $25,000 per annum. Pursuant to the Non-Employee
Director Restricted Stock Plan, non-employee directors receive, in lieu of cash,
shares of Common Stock of the Company with a market value equal to that portion
of the standard annual retainer which exceeds $15,000. All directors who are not
full-time employees of the Company, of which there will be eight, participate in
the plan. The shares are issued each year after the Company's annual meeting,
are forfeitable if the director ceases to remain a director until the Company's
next annual meeting, except in the case of death, disability or change in
control, and may not be sold for a period of five years or until a director
leaves the Board. In May 1994 each non-employee director received 380 restricted
shares of Common Stock pursuant to the plan.
Directors also receive $500 for each Board meeting attended. Non-employee
members of the Executive Committee receive an annual retainer of $2,000. Members
of other committees receive $500 and chairmen receive $750 for each committee
meeting attended.
The Crane Co. Retirement Plan for Non-Employee Directors provides for a
benefit at age 65 equal to the participant's annual retainer in effect at the
time the Director's service terminates, payable for a period of time equal to
the number of years the participant has served on the Board and not as an
employee. After two years of service, participants are 50% vested in benefits
payable, and after each full year of service thereafter, participants are vested
in an additional 10%. In the event of a change in control, or death or
disability, participants are automatically 100% vested and in the case of a
change
3
<PAGE>
in control, a minimum of seven years of retirement benefits is payable.
Additionally, a participant leaving the Board after a change in control would be
entitled to receive a cash payment such that the participant will retain, after
all applicable taxes, the present value of all future retirement benefits
payable under the plan. A former Director may receive his benefits prior to age
65 on an actuarially reduced basis and in the form of a joint and survivor
benefit and/or a pre-retirement spouse benefit. The plan is unfunded and
benefits thereunder are payable as an operating expense.
BENEFICIAL OWNERSHIP OF COMPANY STOCK
BY DIRECTORS AND MANAGEMENT
To focus management attention on growth in shareholder value, the Company
believes that officers and key employees should have a significant equity stake
in the Company. It therefore encourages its officers and key employees to
increase their ownership of and to hold Company Common Stock through the Stock
Option, the Restricted Stock Award and Savings and Investment Plans. Directors
also receive 40% of their annual retainer in Restricted Stock issued under the
Non-Employee Director Restricted Stock Plan. The beneficial ownership of Company
Common Stock by the non-employee directors as a group (see pages 2 and 3 for
individual holdings), the executive officers named in the compensation table,
the other executive officers of the Company as a group as of March 10, 1995 and
by key employees as a group as of December 31, 1994 is as follows:
<TABLE>
<CAPTION>
Stock Shares in
Shares Options Company Total % of Shares
Under Exercisable Savings Shares Outstanding
Shares Restricted Within Plan Beneficially as of
Owned Stock Plans 60 Days(1) (401(k)) Owned (2) 3/10/95 (2)
--------- ----------- ------------ -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Non-Employee Directors
and Nominees as a Group
(8 persons) 44,996 2,660 0 0 47,656 0.16%
R.S. Evans 906,452 120,000 230,000 4,498 1,260,950 4.18%
R.J. Muller 104,045 40,500 45,000 5,683 195,228 0.65%
L.H. Clark 0 15,000 24,500 593 40,093 0.13%
D.S. Smith 0 25,000 39,000 596 64,596 0.21%
P.R. Hundt 108,997 29,500 84,840 3,357 226,694 0.75%
Other Executive Officers
(4 persons) 100,839 54,000 183,017 7,773 345,629 1.15%
--------- ------- ------- ------ --------- ----
Sub-Total--Directors and
Executive Officers as a
Group (17 persons) 1,265,329 286,660 606,357 22,500 2,180,846 7.23%
Key Employees (51 persons) 42,425 50,000 363,459 48,108 503,992 1.67%
--------- ------- ------- ------ --------- ----
Total 1,307,754 336,660 969,816 70,608 2,684,838 8.90%
========= ======= ======= ====== ========= ====
<FN>
- - ----------
(1) Subject to forfeiture if established performance conditions are not met.
(2) As determined in accordance with Rule 13d-3 under the Securities Exchange
Act of 1934. Does not include: 3,457,074 shares of Common Stock Owned by
The Crane Fund (See Principal Shareholders of the Company); nor 226,876
shares of Common Stock owned by the Crane Fund for Widows and Children; nor
an aggregate of 303,874 shares of Common Stock held by trusts for the
pension plans of the Company and certain of its subsidiaries which shares
may be voted or disposed of in the discretion of the trustees unless the
sponsor of the particular plan directs otherwise. Messrs. Hundt, Smith and
three other executive officers are Trustees of the Crane Fund for Widows
and Children. None of the directors or trustees has any direct beneficial
interests in, and all disclaim beneficial ownership of the shares held by
the trusts. In addition, as of December 31, 1994, 2,919 employees of the
Company held 805,387 shares of Common Stock in the Company's Savings and
Investment Plan resulting in a total of 3,490,225 shares of Company Common
Stock held by directors, officers, and employees or 11.57% of the
outstanding shares as of March 10, 1995.
</FN>
</TABLE>
4
<PAGE>
PRINCIPAL SHAREHOLDERS OF THE COMPANY
The following table sets forth the ownership by each person who owned of
record or was known by the Company to own beneficially more than 5% of its
Common Shares on March 10, 1995.
<TABLE>
<CAPTION>
Nature of
Name and Address of Beneficial Percent
Amount and Title of Class Beneficial Owner Ownership of Class
------------------------- ------------------------ ---------- --------
<S> <C> <C> <C>
Common ................................. The Crane Fund (1) 3,457,074 11.46%
100 First Stamford Place
Stamford, CT 06902
Common ................................. FMR Corp (2) 3,442,447 11.42%
82 Devonshire Street
Boston, MA 02109
<FN>
- - ------------
(1) The Crane Fund is a charitable trust managed by trustees appointed by the
Board of Directors of the Company. The incumbent trustees are, G.A.
Dickoff, P.R. Hundt, R.B. Phillips, M.L. Raithel, and D.S. Smith, all of
whom are executive officers of the Company. Pursuant to the trust
instrument, the shares held by the trust shall be voted by the trustees as
directed by the Board of Directors, the distribution of the income of the
trust for its charitable purposes is subject to the control of the Board of
Directors, and the shares may be sold by the trustees only upon the
direction of the Board of Directors acting by a two-thirds vote. 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.
(2) As set forth in a Schedule 13G dated February 13, 1995, Fidelity Management
& Research Company ("Fidelity"), 82 Devonshire Street, Boston, MA 02109, a
wholly-owned subsidiary of FMR Corp. and an investment adviser registered
under Section 203 of the Investment Advisers Act of 1940, is the beneficial
owner of 3,191,103 shares as a result of acting as investment adviser to
several investment companies registered under Section 8 of the Investment
Company Act of 1940. Edward C. Johnson 3d, FMR Corp., through its control
of Fidelity, and the Funds each has sole power to dispose of the 3,191,103
shares owned by the Funds. Neither FMR Corp. nor Edward C. Johnson 3d,
Chairman of FMR Corp., has the sole power to vote or direct the voting of
the shares owned directly by the Fidelity Funds, which power resides with
the Funds' Boards of Trustees. Fidelity carries out the voting of the
shares under written guidelines established by the Funds' Boards of
Trustees. Fidelity Management Trust Company, 82 Devonshire Street, Boston,
MA 02109, a wholly-owned subsidiary of FMR Corp. and a bank as defined in
Section 3(a)(6) of the Securities Exchange Act of 1934, is the beneficial
owner of 251,344 shares as a result of its serving as investment manager of
the institutional account(s). Edward C. Johnson 3d and FMR Corp., through
its control of Fidelity Management Trust Company, has sole dispositive
power over 251,344 shares and sole power to vote or to direct the voting of
169,844 shares, and no power to vote or to direct the voting of 81,500
shares owned by the institutional account(s) as reported above. Edward C.
Johnson 3d and Abigail P. Johnson each own 24.9% of the outstanding voting
common stock of FMR Corp. Mr. Johnson 3d is Chairman of FMR Corp. Various
Johnson family members and trusts for the benefit of Johnson family members
own FMR Corp. voting common stock. These Johnson family members, through
their ownership of voting common stock and the execution of a family
shareholders' voting agreement, form a controlling group with respect to
FMR Corp.
</FN>
</TABLE>
5
<PAGE>
EXECUTIVE COMPENSATION
A: Summary Compensation Table
The following table sets forth the compensation paid to the Company's Chief
Executive Officer and to each of the four most highly paid executive officers
for each of the last three completed fiscal years.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
----------------------------- --------------------------------------------------
Awards Payout
-------------------------- ---------
Other Restricted (2) Securities All(1)
Annual Stock Underlying LTIP (2) Other
Name and Compensation Award(s) Options/ Payouts Compensation
Principal Position Year Salary($) Bonus($) $ $ SARs (#) ($) ($)
- - -------------------- ---- ---------- ------- ------- ------- -------- --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R.S. Evans
Chairman, Chief 1994 610,000 347,457 112,031 0 60,000 0 6,926
Executive Officer & 1993 610,000 308,463 104,063 0 40,000 0 6,452
President 1992 610,000 210,099 266,028(3) 0 40,000 0 6,222
R.J. Muller 1994 240,000 181,662 34,361 0 12,000 0 5,699
Executive Vice 1993 235,000 146,985 33,188 0 12,000 0 5,552
President 1992 235,000 124,617 28,267 0 10,000 0 5,418
L. H. Clark 1994 240,000 121,714 9,375 0 20,000 0 7,523
Executive Vice 1993 173,327 15,124 2,813 0 10,000 0 5,560
President 1992 142,004 50,702 0 0 7,000 0 2,598
D.S. Smith 1994 206,908 109,349 15,939 0 25,000 0 5,000
Vice President-- 1993 131,000 74,283 6,750 0 12,000 0 4,497
Finance & Chief 1992 125,000 44,362 3,376 0 10,000 0 4,364
Financial Officer
P.R. Hundt 1994 200,000 79,010 26,110 0 15,000 0 7,422
Vice President, 1993 194,000 70,224 25,405 0 15,000 0 5,495
General Counsel & 1992 187,000 47,974 23,390 0 15,000 0 5,347
Secretary
<FN>
- - -----------
(1) Amounts in each case include the Company's matching contribution of $4,620
for the purchase of company stock in the Company's Saving & Investment Plan
(401k) and premiums for life insurance.
(2) Certain shares of restricted stock issued under the Company's Restricted
Stock Award Plan are subject to performance based conditions on vesting and
are classified as long term incentive awards reportable upon grant in
Section D. Long Term Incentive Awards In Last Fiscal Year and in the column
LTIP Payouts of this table upon vesting. The shares of restricted stock
under that plan held by each of the persons identified in the table and the
aggregate value thereof at December 31, 1994 were as follows:
Restricted Stock Award
--------------------------------------------------------------
Restricted Aggregate
Stock Held LTIP Restricted Aggregate
# of Shares # of Shares Shares Held Value
----------- ----------- ----------- ----------
R.S. Evans ...... 0 120,000 120,000 $3,225,000
R.J. Muller ..... 0 40,500 40,500 1,088,438
L.H. Clark ...... 0 15,000 15,000 403,125
D.S. Smith ...... 0 25,000 25,000 671,875
P.R. Hundt ...... 0 29,500 29,500 792,813
Dividends paid on all restricted stock are reported in the column Other
Annual Compensation of this table.
(3) $162,434 of $266,028 relates to an adjustment required to a 1989 and 1990
tax gross-up based upon a tax assessment received.
(4) The named executives have credited to their accounts under the Company's
EVA Incentive Compensation Plan for Executive Officers (see Company's
Organization & Compensation Committee Report on page 10) the following
amounts which are subject to increase or decrease in future years: R.S.
Evans $649,914; R.J. Muller $363,324; L.H. Clark $243,428;D.S. Smith
$218,698; P.R. Hundt $158,020. Under the program one third of the account
balance in any year will be payable to the named executive.
</FN>
</TABLE>
6
<PAGE>
B. Option Grants in Last Fiscal Year.
The following table shows all individual grants of stock options to the
named executive officers of the Company during the fiscal year ended December
31, 1994.
<TABLE>
<CAPTION>
Number of % of
Securities Total Options/
Underlying SARs(1)
Options/ Granted to Exercise or
SARs Employees in Base Price Expiration Grant Date
Name Granted (1) Fiscal Year $/(Sh) (2) Date Value (3)
- - ---- ------------- ------------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C>
R.S. Evans ................. 60,000 17.2% $26.81 5/09/2004 $733,500
R.J. Muller ................ 12,000 3.4% 26.81 5/09/2004 146,700
L.H. Clark ................. 20,000 5.7% 26.81 5/09/2004 244,500
D.S. Smith ................. 25,000 7.2% 26.81 5/09/2004 305,625
P.R. Hundt ................. 15,000 4.3% 26.81 5/09/2004 183,375
<FN>
- - -------------
(1) The Company does not grant SARs.
(2) The option price of options granted under the plan were and may not be less
than 100% of the average fair market value of the shares on the date of
grant. Options granted become exercisable 50% one year, 75% two years and
100% three years after grant and expire, unless exercised, ten years after
grant. If employment terminates, the optionee may exercise the option only
to the extent it could have been exercised on the date his employment
terminated and within three months thereof. In the event employment
terminates by reason of retirement, permanent disability or change in
control, options become fully exercisable. The exercise price may be paid
by delivery of shares owned for more than six months and income tax
obligations related to exercise may be satisfied by surrender of shares
received upon exercise, subject to certain conditions.
(3) The amounts shown were calculated using a Black-Scholes option pricing model
which derived a value of $12.225 per share for each option granted on May
9, 1994. The estimated values assume a risk-free rate of return of 7.49%
based upon the 10-year Treasury (adjusted for constant maturities) from the
Federal Reserve Statistical Release H.15 (519), stock price volatility of
.83 as measured by Media General Financial Services, a dividend payout rate
of 0 and an option term of 10 years. The option value was not discounted to
reflect the vesting period of the options or to reflect any exercise or
lapse of the options prior to the end of the ten year option period. The
actual value, if any, that an executive may realize will depend upon the
excess of the stock price over the exercise price on the date the option is
exercised, so that there is no assurance the value realized by an executive
will be at or near the value estimated by the Black-Scholes model.
</FN>
</TABLE>
C. Aggregate Option Exercises in the Last Fiscal Year and Fiscal Year End Option
Values
The following table provides information concerning each option exercised
during the fiscal year ended December 31, 1994 by each of the named executive
officers and the value of unexercised options held by such executive officers on
December 31, 1994.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-money
Options/SARs(1) at Options/SARs(1) at
Shares Fiscal Year End (#) Fiscal Year End ($)(2)
Acquired on Value ------------------------- -------------------------
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- - ---- ------------ ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
R.S. Evans ......... 0 0 180,000/90,000 $666,550/15,150
R.J. Muller ........ 0 0 68,500/20,500 247,938/3,968
L.H. Clark ......... 0 0 10,250/26,750 3,844/3,831
D.S. Smith ......... 0 0 21,000/33,500 9,751/4,813
P.R. Hundt ......... 0 0 69,840/26,250 297,057/5,194
<FN>
- - ------------
(1) The Company does not grant SARs.
(2) Computed based upon the difference between aggregate fair-market value and
aggregate exercise price.
</FN>
</TABLE>
7
<PAGE>
D. Long Term Incentive Awards In Last Fiscal Year
The following table shows long term incentive awards to the named executive
officers during the fiscal year ended December 31, 1994.
<TABLE>
<CAPTION>
Performance Estimated Future Payouts under Non-Stock
Number or Other Price-Based Plans
of Shares Period Until --------------------------------------------------
Units or Other Maturation Threshold Target Maximum
Name Rights (#) or Payout ($ or #) ($ or #) ($ or #)
- - ---- -------------- ------------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
R.S. Evans ..... 40,000 50% 11/09/96; 20,000 shares 20,000 shares 40,000 shares
50% to 100% 5/09/99 11/09/96 5/09/99
R.J. Muller .... 5,000 50% 11/09/96; 2,500 shares 2,500 shares 5,000 shares
50% to 100% 5/09/99 11/09/96 5/09/99
L.H. Clark ..... 10,000 50% 11/09/96; 5,000 shares 5,000 shares 10,000 shares
50% to 100% 5/09/99 11/09/96 5/09/99
D.S. Smith ..... 15,000 50% 11/09/96; 7,500 shares 7,500 shares 15,000 shares
50% to 100% 5/09/99 11/09/96 5/09/99
P.R. Hundt ..... 5,000 50% 11/09/96; 2,500 shares 2,500 shares 5,000 shares
50% to 100% 5/09/99 11/09/96 5/09/99
</TABLE>
All long term incentive awards ("LTIP shares") were made under the
Company's restricted stock award plan. During the restriction period the LTIP
shares are subject to forfeiture and may not be sold, transferred, assigned or
pledged ("the restrictions"). The restrictions on the LTIP shares shall
automatically lapse:
1) On fifty percent (50%) of the LTIP share award on November 9, 1996 if
on that date the total return on the Company's shares (based on stock
price appreciation with dividends reinvested in Company stock) since
May 9, 1994 exceeds 125% of the S&P 500 total return;
2) On fifty percent (50%) of the LTIP share award on May 9, 1999 if on
that date the total return on the Company's shares (based on stock
price appreciation with dividends reinvested in Company stock) since
November 9, 1996 exceeds 125% of the S&P 500 total return;
3) On one hundred percent (100%) of the LTIP share award on May 9, 1999
(if any portion thereof remains unvested by reason of the failure to
satisfy Section 1 and 2 above) if on that date the total return on the
Company's shares (based on stock price appreciation with dividends
reinvested in Company stock) since May 9, 1994 exceeds 125% of the S&P
500 total return;
4) Restrictions lapse on death, permanent disability, normal retirement
age or a change in control;
5) Income and excise tax if any are grossed up upon lapse in
restrictions.
On May 9, 1994 the average price of a Company common share was $26.8125.
However, absent death, disability or a change-in-control, recipients will
realize value (other than dividends) only if the objectives stated above are
achieved. Thus there is no assurance that any of the LTIP shares awarded will
have value to the recipients.
8
<PAGE>
E. Performance Graph
The following performance graph compares the total return to shareholders
of an investment of $100 in each of Crane Co. Common Stock, the S&P 500 Index
and the Dow Jones Industrial-Diversified Index in which the Company is included
as one of 18 companies from December 31, 1989 to December 31, 1994. "Total
Return" means the increase in value of an investment in a security over a given
period assuming reinvestment in that security of all dividends received thereon
during the period.
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Among Crane Co., S&P 500 and Dow Jones Industrial-Diversified Index(1)
Fiscal Year Ending December 31,
....Graphical Representation of Data Table Below.....
<S> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994
- - ---------------------------------------------------------------------------------------------------------------
Crane Co. ($) 100 89 108 112 120 134
- - ---------------------------------------------------------------------------------------------------------------
S&P 500 ($) 100 97 126 136 150 152
- - ---------------------------------------------------------------------------------------------------------------
DJ Industrial--Diversified ($) 100 93 115 134 164 150
- - ---------------------------------------------------------------------------------------------------------------
<FN>
(1) Peer companies in the Dow Jones Industrial-Diversified Index are:
Allied-Signal, CBI Industries, Cooper Industries, Dexter Corp., Dover
Corp., FMC Corp., Harsco Corp., Illinois Tool Works, Ingersoll-Rand Co.,
National Service Industries, Parker Hannifin Corp., PPG Industries, Raychem
Corp., Stanley Works, Tenneco Inc., Trinova Corp. and Tyco International.
In prior years, the S&P Manufacturing (Diversified Industrial) Index, which
includes 12 companies, was used for comparison. In management's opinion,
the eighteen companies that comprise the Dow Jones Industrial-Diversified
Index more closely parallel the products made and markets served by Crane
Co. and thus represent a better benchmark for comparison. The five year
cumulative total return of the S&P Manufacturing (Diversified Industrial)
Index would have shown an ending investment value of $166 compared to the
$150 investment value shown by the Dow Jones Industrial-Diversified Index.
</FN>
</TABLE>
9
<PAGE>
Report on Executive Compensation
by the Organization and Compensation
Committee of the Company
In 1994 the Organization and Compensation Committee (the "Committee"),
which consists of four independent directors, continued its three-pronged
approach to executive officer and key employee compensation: first, it paid
competitive base salaries; second, it linked both short-term and long-term
incentive compensation directly or indirectly to increases in shareholder value;
and third, it established significant rewards for improved shareholder returns
with Common Stock of the Company, and strongly encouraged executive officers and
key employees to hold a significant portion of their net worth in Company stock.
A. Base Salaries. The Company attempts to pay competitive base salaries to
attract and retain the highly qualified executive officers needed to manage the
Company and its business units. From time to time, the Committee will retain
independent compensation consultants or review widely published general surveys
of compensation practices of a broad range of industrial companies to determine
whether salary levels remain generally competitive for equivalent positions.
For 1994, the Company limited increases for executive officers to 4% overall.
B. Performance Focused Medium Term Incentive Compensation. The Company's
annual incentive compensation program utilizes the principles of Economic Value
Added ("EVA") with a three year rolling horizon. EVA is defined as the
difference between the return on total capital invested in the business and the
cost of capital, multiplied by total capital employed ("EVA Calculation").
Compared to such common performance measures as return on capital, return on
equity, growth in earnings per share and growth in cash flow, EVA has the
highest statistical correlation with the creation of value for shareholders. The
program does not involve the establishment or meeting of any goals. Rather, the
increase or decrease in EVA for a business unit during the year, both absolutely
and compared to the prior year, is the sole basis for any incentive compensation
award, thereby motivating managers to focus on continuous value improvement.
Awards are uncapped to provide maximum incentive to create value. While
particular EVA formulas are tailored to the size and unique characteristics of
the business unit or units for which a specific executive is responsible, the
key elements of the EVA formula applicable to any individual are the Cost of
Capital (generally the cost of capital to the Company), the Return on Capital,
the Amount of Capital employed in the business unit, the Net Operating Profits
of the unit after tax, and the prior year's EVA. Awards are calculated on the
basis of year-end results, and award formulas utilize both a percentage of the
change in EVA of a business unit from the prior year, whether positive or
negative, and a percentage of the positive EVA, if any, in the current year. The
EVA award is usually calculated for an entire business unit and the executive
receives a percentage of the unit's award. For executive officers responsible
for more than one business unit, the formula is based on a percentage of the
aggregate EVA, positive or negative, of the units reporting to the executive.
After the EVA award, whether positive or negative, for a particular year
has been determined, it is credited to the executive's "bank account". If the
executive's account is a positive number, 33 1/3% of the account balance is paid
to the executive in cash annually. The remainder of the account balance
represents that individual's "equity" in the account for future years. If EVA
awards are negative, an account balance can be negative. In such case, the
officer will receive no incentive compensation payments until the aggregate of
subsequent EVA awards results in a positive account balance. Each year, the
Company adds interest to a positive balance or charges interest on a negative
balance at an appropriate money market rate. The account is subject to
forfeiture in the event an executive officer leaves the Company by reason of
termination or resignation. The bank account concept with the vulnerable
three-year payout gives the annual incentive compensation program a longer-term
perspective and provides participants with ownership incentives as the account
balances build or decline. Although the program is formula driven, the Committee
retains discretion to review and adjust its impact on business units and
individuals for reasonableness and to preserve its incentivizing objectives.
10
<PAGE>
C. Shareholder Return Focused Long-term Incentive Compensation. The Company
has used its existing Stock Option Plan and Restricted Stock Award Plan as the
foundation for a long-term stock-based incentive compensation program focused on
shareholder return. The Committee believes that, as their holdings of and
potential to own Company stock increase, executive officers in particular will
approach their responsibilities more and more like owners of the Company. This
philosophy starts with the Board of Directors, the non-employee members of which
now receive 40% of their annual retainer in Company Stock. To date, 11.57% of
the Company's Common Stock is beneficially owned by the directors, management
and the employees, with the CEO owning 4.18% and the four other Named Executive
Officers owning 1.74%. (See Beneficial Ownership of Company Stock by Directors
and Management, page 4.)
(i) The Stock Option Plan. The Stock Option Plan is administered by the
Committee, which is authorized to grant options to key employees of the Company
or any majority-owned subsidiary of the Company. Options granted become
exercisable 50% one year, 75% two years and 100% three years after grant and the
option price must not be less than 100% of the average fair market value on the
date of grant. Options expire, unless exercised, ten years after grant. Because
the Company's Stock Option Plan requires that options be granted at no less than
fair market value, a gain can only result if the Company's share price increases
from the date of grant. This ties this incentive program directly into increases
in shareholder value. In 1994, the Committee granted 349,500 stock options to
the officers and key employees of the Company. In order to continue the option
program, the Company is proposing at the 1995 Annual Meeting that an additional
1,000,000 shares be made available for grant. (See Proposal to Approve Stock
Option Plan as Amended, page 14.)
(ii) The Company's Restricted Stock Award Plan. Under the Restricted Stock
Award Plan, restricted shares of the Company's Common Stock may be awarded to
selected key officers and employees. The Committee administers the plan and has
the authority to select participants to determine the amount and timing of
awards, restriction periods, market value thresholds and any terms and
conditions applicable to grants. Since 1990 the Committee has established
various performance goals for the lapse of restrictions on stock awarded under
the Plan involving the achievement over 2 1/2 and 5 year intervals of returns
for the Company's shareholders equal to or better than either 150% or 125% of
the shareholder return of the S&P 500 or 17 1/2% compounded annually. Since none
of the conditions have been met, no restricted stock awarded since 1990 has
vested to date and, if the conditions are not met, the restricted stock awards
will be forfeited after five (5) years. In 1994, the Committee awarded 110,500
shares of restricted stock to officers and employees of the Company. (See
Long Term Incentive Awards in Last Fiscal Year on p. 8 for a description of the
1994 performance goals.)
D. Compensation for the Chief Executive Officer. The Committee is of the
view that the CEO's compensation package should emphasize incentives closely
linked to shareholder return through significant grants of stock options and
performance based restricted stock. Thus, the 1994 base salary of the Chief
Executive Officer who also serves as President and Chief Operating Officer
remained at $610,000, a level established in 1990, which in the judgment of the
Committee is appropriate for an individual having such broad responsibilities.
His 1995 base salary will also remain at that level. As a result, increases in
CEO compensation can only result from improvements in corporate performance and
shareholder returns. The CEO's 1994 incentive compensation award of $715,401
under the EVA Incentive Compensation Plan for Executive Officers was calculated
on the basis of the increase in the Company's EVA in 1994 plus a percentage of
that EVA and credited to his "account" as provided for in the plan. The actual
amount paid to the CEO in 1994 from his account was $347,457. The balance in the
account is subject to increase or decrease depending upon EVA in subsequent
years. In view of the additional responsibilities resulting from the recent
acquisition of five companies which increased the size of the Company by
approximately one-third, the CEO was awarded 40,000 shares of performance based
restricted stock under the Restricted Stock Award Plan and 60,000 options under
the Stock Option Plan which in the Committee's judgment will provide the
appropriate incentive. If the established performance goals are not met, (See
Long Term Incentive Awards in Past Fiscal Year p. 8 above), the restricted stock
will be forfeited at the end of five years.
11
<PAGE>
E. Omnibus Budget Revenue Reconciliation Act of 1993. In 1993, Congress
adopted the Omnibus Budget Revenue Reconciliation Act of 1993, certain
provisions of which (Section 162(m) of the Internal Revenue Code) for tax years
beginning after December 31, 1993 limit 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. The Company believes that all long-term incentive awards
to date under the Stock Option and Restricted Stock Award Plans will meet the
requirements of Section 162(m) for deductibility. The EVA Incentive Compensation
Program for Executive Officers which was approved by the shareholders at the
1994 Annual Meeting, is intended to constitute a performance based plan meeting
the criteria for continued deductibility set out in the proposed regulations.
As a matter of policy, the Committee intends to develop and administer
compensation programs which will maintain deductibility under Section 162(m) for
all executive compensation, except in the limited circumstance when the
materiality of the deduction is in the judgment of the Committee significantly
outweighed by the incentive value of the compensation. To that end, the Company
is proposing this year that the shareholders approve the Stock Option Plan as
amended to authorize an additional 1,000,000 shares for which options may be
granted under the Plan and to comply with Section 162(m).
Submitted by:
The Organization and Compensation
Committee of the Board of Directors of Crane Co.
B. Yavitz, Chairman
E. T. Bigelow, Jr.
D. R. Gardner
D. C. Minton
Retirement Benefits
All officers of the Company, including the individuals identified in the
Compensation Table, are participants in the Company's pension plan for
non-bargaining employees. Non-Employee Directors do not participate in the Plan.
Certain amounts realized from participation in the stock option plans of the
Company and in a former Stock Appreciation Rights Plan, which are included for
pension purposes in the Compensation Table, are included in the computation of
compensation prior to January 1, 1993, but are excluded from such computation
thereafter.
Eligibility for retirement benefits is subject to certain vesting
requirements which, effective January 1, 1989, include completion of five years
of service where employment is terminated prior to normal or other retirement or
death as determined by applicable law and the Plan. Benefit accruals continue
for years of service after age 65.
The annual pension benefits payable under the pension plan are equal to
1 2/3% per year of service of the participant's average annual compensation
during the five highest compensated consecutive years of the ten years of
service immediately preceding retirement less 1 2/3% per year of service of the
participant's Social Security benefit, up to a maximum deduction of 50% of the
Social Security benefit.
The table below sets forth the estimated annual benefit payable on
retirement at normal retirement age (age 65) under the Company's plan based on
benefit accruals through December 31, 1994 for specified salary and years of
service classifications, and assumes benefits to be paid in the form of a single
life annuity. The amounts have not been reduced by the Social Security offset
referred to above.
12
<PAGE>
<TABLE>
<CAPTION>
PENSION PLAN TABLE
Average Years of Service
Annual ------------------------------------------------------------
Compensation 10 20 25 30 35
------------ ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$150,000 ......................... $25,005 $50,010 $ 62,513 $ 75,015 $ 87,518
$175,000 ......................... 29,173 58,345 72,931 87,518 102,104
$200,000 ......................... 33,340 66,680 83,350 100,020 116,690
$225,000 ......................... 37,508 75,015 93,769 112,523 131,276*
$235,000 ......................... 39,175 78,349 97,936 117,524 136,111*
$250,000** ....................... 41,675 83,350 104,188 125,025* 145,863*
<FN>
- - --------------------
* Effective January 1, 1995, the actual retirement benefit at normal
retirement date payable pursuant to Section 235(a) of the Tax Equity and
Fiscal Responsibility Act of 1982 (and subsequent to 1986 at the age at
which unreduced Social Security benefits may commence pursuant to the Tax
Reform Act of 1986) may not exceed the lesser of $120,000 or 100% of the
officer's average compensation during his highest three consecutive
calendar years of earnings (the "Tax Act Limitation"). The Tax Act
Limitation will be adjusted annually for changes in the cost of living. The
dollar limit is subject to further reduction to the extent that a
participant has fewer than ten years of service with the Company or ten
years of participation in the defined benefit plan.
** Between January 1, 1989 and December 31, 1993, for the purpose of
determining benefit accruals and benefit limitations under the pension plan
for all plan years beginning in 1989, a participant's compensation is
deemed to be limited to $200,000 indexed for inflation ($235,840 for 1993)
("Limitation"). As a result of the Limitation, the covered compensation
under the Company's pension plan for each of Messrs. Evans, Clark, Muller,
Smith and Hundt (who have 21, 4, 10, 3 and 26 years of service credit,
respectively) was limited to $235,840 in 1993. However, in no event will
the Limitation reduce any participant's accrued benefit below his accrued
benefit as of December 31, 1988. Commencing January 1, 1994, the
compensation limit was further reduced to $150,000 indexed for inflation in
future years ("OBRA '93 Limitation"). As a result of the OBRA '93
Limitation, the covered compensation under the Company's pension plan for
the foregoing individuals is limited to $150,000, but in no event will the
OBRA '93 Limitation reduce any participant's accrued benefit as of December
31, 1993.
</FN>
</TABLE>
Other Agreements and Information
The Company has entered into indemnification agreements with R.S. Evans,
each other Director of the Company, and P.R. Hundt, the form of which was
approved by the shareholders of the Company at the 1987 Annual Meeting. The
Indemnification Agreements require the Company to indemnify the officers or
directors to the full 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
request of the Company, to maintain directors and officers liability insurance
coverage or to the full extent permitted by law to indemnify such person for the
lack thereof.
Each of the individuals named in the Compensation Table (and certain other
executive officers) has an agreement which, in the event of a change in control
of the Company, provides for the continuation of the employee's then current
base salary, bonus plan, 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 the employee with "Good Reason" (as
defined in the agreement), the employee is immediately entitled to a
proportionate amount of the last year's bonus, three times (Evans, Smith, and
Hundt) or two times (Clark and Muller) his annual salary and either the last
year's bonus or the average of the last three years' bonuses if higher, and all
accrued deferred compensation and vacation pay. Employee benefits also continue
for three years after termination. "Good Reason" under the agreements includes,
among other things, any action by the Company which
13
<PAGE>
results in a diminution in the position, authority, duties or responsibilities
of the employee. The agreements of Messrs. Evans, Smith and Hundt and certain
other executive officers not named in the Compensation Table also provide that
the employee may terminate 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 the individual, pursuant to the
agreement or otherwise, (including, but not limited to, any economic benefit
received by the employee by reason of the acceleration of rights under the
various options and restricted stock plans of the Company) ("Payment") is
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
(the "Code"), the agreements provide that the Company shall make additional cash
payments to the employee such that after payment of all taxes including any
excise tax imposed on such payments, the employee will retain an amount equal to
the excise tax on all the Payments. The agreements are for a three year period,
but are automatically renewed annually for a three year period unless the
Company gives notice that the period shall not be extended.
OTHER TRANSACTIONS AND RELATIONSHIPS
Transactions
During 1994, the Company purchased approximately $270,760 worth of products
from Peerless-Winsmith, Inc. ("Peerless"), a wholly-owned subsidiary of HBD
Industries, Inc. ("HBD"). Mr. T.M. Evans, the father of Mr. R.S. Evans, is the
controlling shareholder and a director of both companies. Mr. R.S. Evans is a
shareholder and director of HBD. The law firm of Kirkpatrick & Lockhart, of
which Mr. Queenan is a partner, furnished legal services to the Company in 1994.
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 this Committee is an executive officer.
APPROVAL OF THE SELECTION OF AUDITORS
The Board of Directors proposes and recommends that the shareholders
approve the selection of the firm of Deloitte & Touche LLP as independent
auditors for the Company for 1995. Deloitte & Touche LLP have been the
independent auditors for the Company since 1979. Unless otherwise directed by
the shareholders, proxies will be voted for approval of the selection of
Deloitte & Touche LLP to audit the books and accounts of the Company for the
current year. In accordance with the Company's practice, a member of the firm
will attend the Annual Meeting, have an opportunity to make a statement if he
desires to do so and to respond to appropriate questions which may be asked by
shareholders.
PROPOSAL TO APPROVE
STOCK OPTION PLAN AS AMENDED
The Board of Directors believes that the Company's stock option program is
an integral part of the Company's approach to long term shareholder return
focused incentive compensation, and its continuing efforts to align shareholder
and management interests. Since only 147,447 shares remain available for grant
under the Plan, it is most desirable, that the shareholders approve the Stock
Option Plan ("Plan") as amended to make an additional 1,000,000 shares of Common
Stock, par value $1, of the Company available for grant. It is also appropriate
at this time to amend the Plan in certain technical respects to meet the
requirements of Section 162(m) of the Internal Revenue Code and any proposed or
future regulations thereunder ("Section 162(m)") in order to preserve for the
Company in the future the deductibility of all compensation which executive
officers of the Company may be deemed to receive upon the exercise of options
under the Plan. The Section 162(m) amendments provide (1) that if any member of
the Organization and Compensation Committee does not meet the qualifica-
14
<PAGE>
tions for an "outsider director" established from time to time under Section
162(m), the remaining members of the Committee (but not less than two) shall
administer the Plan, and (2) that the maximum number of options which may be
awarded under the Plan to any single individual during a single year may not
exceed 200,000.
When the Plan was first approved by the shareholders in 1984, 500,000
Shares of Common Stock were authorized for options to key employees of the
Company or its majority owned subsidiaries. In 1987 and 1991 additional grants
of 750,000 and 1,000,000 shares, respectively, of Common Stock were authorized.
These amounts were adjusted as applicable for a 2% share distribution in 1985,
50% stock distributions in 1986 and 1989, and a three for two stock split in
1987. The Plan, originally scheduled to expire in 1994, has been extended to
1999.
The market value of the Company's Common Stock on March 10, 1995 was $30.25
per share.
Principal Features of the Stock Option Plan, as Proposed to be Amended
a. Administration
The Plan will continue to be administered by the Organization and
Compensation Committee of the Board of Directors (the "Committee"). All members
of which shall be independent directors, provided however, if any member of the
Committee does not meet the qualifications for an "outside director" established
from time to time by Section 162(m), the remaining members of the Committee (but
not less than two) shall administer the Plan.
b. Amount of Stock
The Plan will provide for an additional 1,000,000 shares of common stock of
the Company either out of the authorized and unissued shares, or out of treasury
shares, subject to adjustment as set forth below. The maximum number of shares
for which options may be granted under the Plan to any single individual in any
year shall not exceed 200,000 shares. Options under the Plan may in the
discretion of the Committee be designated as Incentive Stock Options ("ISOs") or
non-qualified options. ISOs are governed by Section 422 of the Internal Revenue
Code. ISOs awarded prior to January 1, 1987 could not be exercised while there
was outstanding any other prior granted ISO. ISOs issued after December 31, 1986
may be exercised in any order and whether or not a prior option is then
outstanding. However, the aggregate fair market value of shares of common stock
at the date of grant with respect to which ISOs are exercisable for the first
time during any calendar year may not exceed $100,000. To permit continued
compliance with the rules of the Internal Revenue Code without the delay or
expense incidental to a meeting of shareholders, the Plan permits the Committee
to amend all ISOs to comply with, or to the extent permitted by, changes or
amendments to Section 422 of the Internal Revenue Code or the rules or
regulations thereunder.
c. Eligibility and Participation
Only key employees of the Company and any majority-owned subsidiary are
eligible to participate, including officers or employees who may also be
directors of the Company or of any of its subsidiaries, but not including any
employee who owns more than 10% of the stock of the Company or any such
subsidiary. No member of the Committee or other non-employee Director will be
eligible to receive stock options under the Plan. The Committee, in its
discretion upon the recommendation of management, determines those employees
who, as key employees, will be granted options and the amounts thereof. In 1994,
the Committee granted options to the five executive officers named in the
Compensation Table, to the other executive officers and to other officers and
key employees of the Company as follows:
15
<PAGE>
<TABLE>
<CAPTION>
Stock Option Plan
Number of Securities Grant Date
Name Underlying Options Value $ (1)
---- -------------------- -------------
<S> <C> <C>
R. S. Evans ......................................... 60,000 $ 733,500
R. J. Muller ........................................ 12,000 146,700
L. H. Clark ......................................... 20,000 244,500
D. S. Smith ......................................... 25,000 305,625
P. R. Hundt ......................................... 15,000 183,375
Other Executive Officers (4 Persons) ................ 40,000 489,000
------- ----------
Sub Total--Executive Officers as a Group
(9 Persons) ........................................ 172,000 2,102,700
Other Officers and Key Employees
(46 Persons) ....................................... 177,500 2,169,938
------- ----------
Total ............................................. 349,500 $4,272,638
======= ==========
<FN>
- - ----------------
(1) The amounts shown were calculated using a Black-Scholes option pricing
model which derived a value of $12.225 per share for each option granted on
May 9, 1994. The estimated values assume a risk-free rate of return of
7.49% based upon the 10-year Treasury (adjusted for constant maturities)
from the Federal Reserve Statistical Release H.15 (519), stock price
volatility of .83 as measured by Media General Financial Services, a
dividend payout rate of 0 and an option term of ten years. The option value
was not discounted to reflect the vesting period of the options or to
reflect any exercise or lapse of the options prior to the end of the ten
year option period. 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, so that there is no assurance the value
realized by an executive will be at or near the value estimated by the
Black-Scholes model.
</FN>
</TABLE>
d. Purchase Price
Options will be granted at a price not less than 100% of the average fair
market value of the shares on the date of grant. Shares available for option or
subject to options granted and the option price thereof will be increased or
decreased proportionately for any stock split, stock dividend or other similar
share adjustment. The Committee may also make appropriate, discretionary
adjustments or conversions for any future mergers, exchanges of securities,
reorganizations or liquidations in whole or in part. The purchase price shall be
paid in full upon the exercise of an option either in cash or in whole or in
part with common shares previously owned by an optionee and valued on the basis
of fair market value on the date the option is exercised. (The Committee
requires that shares surrendered to exercise an option have been held for at
least six months thereby effectively prohibiting the practice of "pyramiding"
whereby an option holder could start with a relatively small number of shares
and by a series of successive and substantially simultaneous exercises and
surrenders exercise all of his then exercisable stock options with no additional
cash and no more investment than the few original shares). The Committee may
also (although it shall not be obligated to do so), authorize the acceptance of
an optionee's surrender of his right to exercise an option, or portion thereof,
and the payment to the optionee of the difference between the fair market value
of the shares underlying the option or portion thereof and the option price
thereof, in cash, or partly in cash and partly in shares.
e. Conditions on Exercise of Option
Each option may be exercised in whole or in part (in lots of ten shares or
a multiple thereof) commencing one year from the date of grant and ending ten
years from such date, but no more than three months after termination of
employment, or one year from date of death, and the option may be exercised,
respectively, by the employee or his heirs only to the extent that the employee
was entitled to do so on the date of termination of employment or death. No
option shall be transferable except by will or by the laws of descent or
distribution. Beginning one year from the date of grant, an option may be
exercised by an employee at a cumulative rate not in excess of 50% of the total
shares available during the second year, 75% during the third year and 100%
thereafter.
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If an optionee retires or ceases to be employed by reason of permanent
disability or after a change-in-control, the optionee may exercise an
outstanding option in whole or in part, and/or the Committee may authorize the
acceptance of the surrender of the right to exercise such option or any portion
thereof, at any time within three months thereafter but not after the expiration
of the term of the option. The term "change-in-control" means (i) the first
purchase of shares pursuant to a tender offer or exchange (other than a tender
offer or exchange by the Company) for all or part of the Company's Common Stock
or any securities convertible into such Common Stock, (ii) the receipt by the
Company of a Schedule 13D or other advice indicating that a person is the
"beneficial owner" (as that term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of 20% or more of the Company's Common Stock calculated as
provided in paragraph (d) of said Rule 13d-3, (iii) the date of approval by
shareholders of the Company of an agreement providing for any consolidation or
merger of the Company in which the Company will not be the continuing or
surviving corporation or pursuant to which shares of Common Stock of the Company
would be converted into cash, securities or other property, other than a merger
of the Company in which the holders of Common Stock of the Company immediately
prior to the merger would have the same proportion of ownership of common stock
of the surviving corporation immediately after the merger, (iv) the date of the
approval by shareholders of the Company of any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or
substantially all the assets of the Company or (v) the adoption of any plan or
proposal for the liquidation (but not a partial liquidation) or dissolution of
the Company.
f. Amendment or Termination
The Plan may be terminated or amended by the Board of Directors at any time
except as to outstanding options. The Directors may also amend the Plan in their
discretion to comply with applicable laws or governmental regulations but no
such change may be made which would either increase the number of shares under
the Plan or change the minimum purchase price.
g. Expiration Date
No options under the Plan may be granted after May 1, 1999.
h. Miscellaneous
Neither the adoption of the amendments to the Plan by the Board of
Directors nor the submission of the Plan as amended to the shareholders of the
Company for approval shall be construed as creating any limitations on the power
of the Board to adopt such other incentive arrangements as it may deem
desirable, and such arrangements may be either applicable generally or only in
specific cases. If the Plan as amended is not approved by the shareholders, no
further grants under the Plan will be made after the shares presently authorized
for grant have been exhausted.
i. Tax Aspects
Under present Federal income tax laws and regulations, the receipt of an
option granted under the Plan, whether non-qualified or an ISO, will not be
subject to any tax and the Company will not be entitled to a deduction. Upon
exercise of a non-qualified stock option, an optionee, other than an optionee
who is an officer of the Company, will recognize ordinary income in an amount
equal to the amount by which the fair market value of each share on the date of
exercise exceeds the option price. The amount so recognized as income will be
deductible by the Company, subject to the rules for reasonableness of
compensation and, in connection with the Executive Officers of the Company named
in the Company's Proxy Statement from time to time, the compliance of this Plan
with Section 162(m). If an officer cannot dispose of the shares on the exercise
date without the possibility of liability under Section 16(b) of the Securities
Exchange Act of 1934, (in all likelihood because of an open market purchase in
the prior six months) the officer will not recognize income until either the
first date within six months after the date of exercise on which the shares so
purchased may be disposed of without the possibility of such liability (which
under certain circumstances may be the exercise date) or the exercise date if
the officer elects to recognize income on that date by making the appropriate
election with the Internal Revenue Service within 30 days after exercise (in
either case, the "Section 16(b) Tax
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<PAGE>
Date"). On the Section 16(b) Tax Date, an officer will recognize income in the
amount by which the fair market value of the shares on such date exceeds the
option price, and the company will receive a deduction. Upon any subsequent sale
of shares by an optionee, other than an officer, the optionee's basis in the
shares purchased for determining gain or loss will be their fair market value on
the date of exercise, if such shares were acquired for cash. In the case of an
officer, the basis in shares acquired for cash upon the exercise of a
non-qualified stock option will be their fair market value on the Section 16(b)
Tax Date.
If the exercise of the non-qualified stock option is made by delivery of
shares of Common Stock in payment of the option price, the shares delivered are
deemed to be exchanged in a tax-free transaction for the equivalent number of
new shares of Common Stock. Such equivalent number of new shares has the same
basis and holding period as the shares exchanged. The number of shares received
in excess of the number of shares delivered is included in the optionee's income
at the fair market value thereof at the time of exercise (or, in the case of an
officer at the Section 16(b) Tax Date). If the shares are capital assets in the
hands of an optionee, any gain or loss recognized upon the sale or other
disposition of these shares will be capital gain or loss, either long-term or
short-term depending upon the holding period of the shares (which begins on the
date the optionee recognizes income with respect to such shares, except for the
shares deemed to be received in a tax-free transaction as described above).
Upon the exercise of an ISO, an optionee will not recognize taxable income,
and the Company will not be entitled to a deduction. The excess of the fair
market value of each share over the option price at the date of exercise (or in
the case of officers at the Section 16(b) Tax Date) is an item of adjustment for
alternative minimum tax. The alternative minimum tax paid with respect to the
exercise of an ISO in one year will be a credit against regular tax in
subsequent years. In the year the optionee sells stock acquired under an ISO,
the optionee's basis in the stock for determining gain or loss for alternative
minimum tax purposes is increased by the amount treated as an item of adjustment
in year the option was exercised. If the holding period requirements for Section
422(a) are met by the optionee (i.e., no disposition of the shares is made by
the optionee within two years of the grant of the option and within one year
after the transfer of the shares to the optionee), then any gain or loss
recognized by the optionee upon disposition of the shares will be treated as
long-term capital gain or loss (assuming the shares are capital assets in the
hands of the optionee).
If the shares acquired on exercise of an ISO are disposed of prior to the
expiration of either of the required holding periods, the optionee will
recognize ordinary income in the disposition year. The amount of ordinary income
will be the lesser of (a) the excess of the fair market value of the shares on
the date of exercise of the option over the option price, or (b) the amount
realized on the disposition of the shares over the amount paid for such shares,
so long as the disposition is by sale or exchange with respect to which a loss,
if sustained, would be recognized. (For an officer the fair market value
referred to in clause (a) will be determined on the Section 16(b) Tax Date.) The
Company will receive a deduction at the time of the disqualifying disposition in
an amount equal to the ordinary income recognized by the optionee, subject to
general rules pertaining to the reasonableness of compensation. In addition,
long-term or short-term capital gain may be recognized by the optionee in an
amount equal to the excess of the amount realized on the disqualifying
disposition over the sum of the option price and the ordinary income recognized
by the optionee.
If the exercise of an ISO is made by delivery of shares of Common Stock in
payment of the option price, and such delivered shares were not acquired upon
the exercise of an ISO or if so acquired are delivered after expiration of the
holding period requirements, the shares delivered are deemed to be exchanged in
a tax-free transaction for the equivalent number of new shares of Common Stock.
Such equivalent number of new shares has the same basis and holding period as
the shares exchanged. The number of shares received in excess of the number of
shares delivered has a zero basis. If shares so acquired are sold more than two
years after the ISO was granted and more than one year after the transfer of the
shares to the optionee, the gain or loss arising from the sale based upon the
amount realized upon such sale will constitute long-term capital gain or loss
(assuming the shares are capital assets in the hands of the optionee). Proposed
Treasury regulations provide that, if an ISO is exercised with previously
acquired shares, and any of the shares received on exercise are disposed of
before the holding period requirements are satisfied, such disposition shall be
deemed to be a disposition of the
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<PAGE>
shares with the lowest basis acquired upon exercise of the ISO. The exercise of
an ISO by delivery of shares acquired upon the exercise of an ISO prior to the
expiration of the holding period requirements will be deemed to be a taxable
exchange and a disqualifying disposition of the ISO stock so delivered; but the
shares so purchased should still be entitled to ISO treatment as described above
if the applicable holding period requirements are met.
If an option is exercised by the estate of an optionee, the above-described
holding period requirements do not apply, and when the estate disposes of the
stock acquired by exercise of the option, it will not recognize any ordinary
income. The estate, however, may recognize long-term or short-term capital gain
and any long-term capital gain may be subject to the alternative minimum tax.
The Company will receive no deduction.
The foregoing is not to be considered as tax advice to any person who may
be an optionee, and any such persons are advised to consult their own tax
counsel.
The Company has the right to require an optionee to pay applicable
withholding taxes at the time of, and the Committee can accept Common Shares
received or previously acquired to satisfy the withholding requirements up to
the optionee's entire tax liability arising from, the exercise.
Recommendation
The Board of Directors, believing that the Company and its shareholders
will benefit from the continuation of the Plan as amended, hereby recommends
that shareholders vote FOR approval of the Stock Option Plan as amended.
The affirmative vote of a majority of the shares present and voting at the
meeting will be required for approval of the Stock Option Plan as amended.
MISCELLANEOUS
Solicitation of Proxies. The Company will bear all of the costs of the
solicitation of proxies for use at the Annual Meeting. In addition to the use of
the mails, proxies may be solicited by personal interview, telephone and
telegram by directors, officers and employees of the Company, who will undertake
such activities without additional compensation. To aid in the solicitation of
proxies, the Company has retained Beacon Hill Partners, Inc. which will receive
a fee for its services of $5,500 plus up to $1,500 in expenses. Banks, brokerage
houses and other institutions, nominees or fiduciaries will be requested to
forward the proxy materials to the beneficial owners of the Company's Common
Stock held of record by such persons and entities and will be reimbursed for
their reasonable expenses in forwarding such material.
Incorporation by Reference. The Report on Executive Compensation on pages
10 to 12 and Section E. Performance Graph on page 9 of this Proxy Statement
shall not be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934 except to the
extent that the Company specifically incorporates said report or said graph by
reference and neither the report nor the graph shall otherwise be deemed filed
under such Acts.
Next Annual Meeting. The Bylaws presently provide that the Annual Meeting
of the Shareholders of the Company will be held on the second Monday in May in
each year unless otherwise determined by the Board of Directors. Appropriate
proposals of security holders intended to be presented at the 1996 Annual
Meeting must be received by the Company for inclusion in the Company's proxy
statement and form of proxy relating to that meeting on or before November 16,
1995.
Shareholders who do not expect to attend in person are urged to sign, date
and return the enclosed proxy in the envelope provided. In order to avoid
unnecessary expense, we ask your cooperation in mailing in your proxy promptly,
no matter how large or how small your holdings may be.
By Order of the Board of Directors,
PAUL R. HUNDT
Secretary
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<PAGE>
APPENDIX
(Pursuant to Rule 304 of Regulation S-T)
1. Page 9 contains a description in tabular form of a graph entitled
"Performance Graph" which represents the comparison of the cumulative total
stockholder return on the Company's Common Stock against the cumulative total
return of the Standard and Poor's 500 Stock Index and the DJ Industrial
Diversified Index for the period of five years commencing December 31, 1989 and
ending December 31, 1994, which graph is contained in the paper format of this
Proxy Statement being sent to Stockholders.
<PAGE>
CRANE CO.
Annual Meeting of Shareholders May 8, 1995
This Proxy is Solicited on Behalf of the Board of Directors
P The undersigned does hereby appoint and constitute E. T. Bigelow, Jr.,
R R. S. Evans and D. C. Minton, and each of them, his true and lawful agents
O and proxies with power of substitution, and hereby authorizes each of them
X to vote, as directed on the reverse side of this card, or, if not so
Y directed, in accordance with the Board of Directors' recommendations, all
shares of Crane Co. held of record by the undersigned at the close of
business on March 10, 1995 at the Annual Meeting of Shareholders of Crane
Co. to be held in the Freedom II Meeting Room at the Sheraton Stamford
Hotel, One First Stamford Place, Stamford, Connecticut on Monday, May 8,
1995 at 10:00 a.m., Eastern Daylight Time, or at any adjournment thereof
with all the powers the undersigned would possess if then and there
personally present, and to vote, in their discretion, upon such matters as
may come before said meeting.
Election of Directors, Nominees:
Mone Anathan III, Richard S. Forte, Jean Gaulin
You are encouraged to specify your choices by marking the appropriate boxes
(SEE REVERSE SIDE), but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. The Proxies cannot
vote your shares unless you sign and return this card.
-----------
SEE REVERSE
SIDE
-----------
Please mark your 0309
X votes as in this
example.
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR election of
directors and FOR proposals 2 and 3.
- - -------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR all nominees
and FOR proposals 2 and 3.
- - -------------------------------------------------------------------------------
1. Election of Directors (See Reverse)
FOR [ ] WITHHELD [ ]
2. Approval of Independent Auditors
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Approval of Stock Option Plan as Amended
FOR [ ] AGAINST [ ] ABSTAIN [ ]
For, except vote withheld from the following nominee(s):
- - --------------------------------------------------------
- - -------------------------------------------------------------------------------
The signer hereby revokes all proxies heretofore given
by the signer to vote at said meeting or any
adjournments thereof.
Please sign exactly as name appears hereon. Joint
owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please
give full title as such.
-----------------------------------------------------
-----------------------------------------------------
SIGNATURE(S) DATE
THE CRANE CO. STOCK OPTION PLAN
(as of 2/27/95)
1. Full power and authority to construe, interpret and administer this Plan
shall be vested in the Organization and Compensation Committee of the Board of
Directors of Crane Co. ("Committee"), which shall consist of not less than three
non-employee Directors appointed by the Board of Directors; provided, however,
if any member of the Committee does not meet, the qualifications established
from time to time by Section 162(m) of the Internal Revenue Code and any
proposed or future regulations thereunder ("Section 162(m)"), the remaining
members of the Committee (but not less than two) shall administer the Plan. No
member of the Committee shall be eligible to receive stock options. Decisions of
the Committee shall be final, conclusive and binding upon all parties including
the Company, the shareholders and the employees.
2. The stock which may be issued and sold under this Plan will be common
shares of Crane Co., a Delaware corporation (herein called the "Company"), of a
total number not exceeding 500,000 shares (hereinafter the "stock," "Common
Shares," "Common Stock" or "shares") together with an additional 750,000 Common
Shares of the Company authorized by the 1987 Amendment to this Plan, together
with an additional 1,000,000 common shares authorized by the 1991 Amendment to
this Plan, together with an additional 1,000,000 common shares authorized by the
1995 amendments to this Plan which may be either authorized and unissued shares
or issued shares reacquired by the Company. The Committee may in its discretion,
from time to time, grant options to purchase stock to persons who are key
employees of the Company or any subsidiary in which the Company owns directly or
indirectly a majority of the voting stock. The term "key employees" shall mean
officers as well as other employees (including officers and other employees who
are also directors of the Company or of any subsidiary) determined to be such by
the Committee in its discretion upon the recommendation of management, but shall
not include any employee who, after the grant of such option, owns more than 10%
of the combined voting power of all classes of stock of the Company or any
subsidiary. The maximum number of shares for which options may be granted under
the Plan to any single individual in any year shall not exceed 200,000 shares.
Options under the Plan may be incentive stock options ("Incentive Stock
Options") within the meaning of Section 422 of the Internal Revenue Code of 1986
as the same may be amended from time to time (the "Code"), or non-qualified
stock options. Except as provided in paragraph 5, any shares subjected to an
option under the Plan which, for any reason, expire or are terminated without
having been exercised, shall continue to be available for future options under
the Plan. Options granted hereunder shall be evidenced by agreements in such
form as the
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<PAGE>
Committee shall approve, which agreements shall comply with and be subject to
the terms and conditions of this Plan.
3. The price per share of options granted hereunder shall in no instance be
less than 100% of the fair market value of the stock on the date options are
granted. Fair market value as of any day shall, for all purposes in this Plan,
be determined by the average of the high and low prices of the stock on the New
York Stock Exchange-Consolidated Trading on that day, or if no sale of stock has
been recorded on such day, then on the next preceding day on which a sale was so
made ("Fair Market Value"). In the event that there is an increase in the number
of issued common shares of the Company by reason of stock dividends or stock
split-ups, the total number of shares which may be optioned and the number of
shares remaining subject to purchase under each outstanding option shall be
increased and the price per share in such outstanding options shall be
decreased, in proportion to such increase in issued shares. Conversely, in case
the issued common shares of the Company shall be combined into a smaller number
of shares, the total number of shares which may be optioned and the number of
shares remaining subject to purchase under each outstanding option shall be
decreased and the price per share in such outstanding options shall be
increased, in proportion to such decrease in issued shares. In the event of any
merger, consolidation, reorganization or liquidation in part or in whole, the
Committee may make such adjustment in the shares which may be optioned and the
shares previously optioned and the price thereof as the Committee in its
reasonable discretion, deems appropriate. In the event of an exchange of shares,
or other securities of the Company convertible into common shares, for the stock
or securities of another corporation, the Committee may, in the exercise of its
discretion, equitably substitute such new stock or securities for a portion or
all of the option shares.
4. Each option granted under this Plan shall be exercisable in whole or in
part (in lots of ten shares or any multiple thereof) from time to time beginning
from the date the option is granted, subject to the provision that an option may
not be exercised by the optionee, except as provided in paragraphs 7 and 9
hereof, (a) more than three months after the termination of his employment by
the Company or a subsidiary, or (b) more than ten years from the date the option
is granted, whichever period is shorter, or (c) prior to the expiration of one
year from the date the option is granted, and provided further that options may
not be exercised in excess of 50% of the total shares optioned to him during the
second year after the date of grant, 75% during the third year, and 100%
thereafter. The purchase price of the shares purchased upon the exercise of an
Option shall be paid in full at the time of exercise in cash or in whole or in
part with Common Shares.
2
<PAGE>
The value of each share delivered in payment of all or part of the purchase
price upon the exercise of an Option shall be the Fair Market Value of a Common
Share on the date the Option is exercised.
5. The Committee, upon such terms and conditions as it shall deem
appropriate, may (but shall not be obligated to) authorize on behalf of the
Company the acceptance of the surrender of the right to exercise an Option or a
portion thereof (but only to the extent and in the amounts that such Option
shall then be exercisable) and the payment by the Company therefor of an amount
equal to the excess of the Fair Market Value on the date of surrender of the
Shares covered by such Option or portion thereof over the option price of such
Shares. Such payment shall be made in Common Shares (valued at such Fair Market
Value), or in cash, or partly in cash and partly in Common Shares, as the
Committee shall determine. The Common Shares covered by any Option or portion
thereof, as to which the right to exercise shall have been so surrendered, shall
not again be available for the purposes of the Plan.
6. Each option granted under the plan to an employee shall not be
transferable by him otherwise than by will or the laws of descent and
distribution, and shall be exercisable, during his lifetime, only by him.
7. If an optionee shall retire or if he shall cease to be employed by the
Company or by a subsidiary by reason of permanent disability or after a change
in control as defined in paragraph 8 hereof, such optionee may exercise such
Option in whole or in part, and/or the Committee may authorize the acceptance of
the surrender of the right to exercise such Option or any portion thereof as
provided in paragraph 5 hereof, at any time within three months after such
retirement, termination by reason of permanent disability, or termination after
a change in control, but not after the expiration of the term of the Option.
8. For purposes of this Plan, the term "change in control" shall mean (i)
the first purchase of shares pursuant to a tender offer or exchange (other than
a tender offer or exchange by the Company) for all or part of the Company's
Common Stock or any securities convertible into such Common Stock, (ii) the
receipt by the Company of a Schedule 13D or other advice indicating that a
person is the "beneficial owner" (as that term is defined in Rule 13d-3 under
the Securities Exchange Act of 1934) of 20% or more of the Company's Common
Stock calculated as provided in paragraph (d) of said Rule 13d-3, (iii) the
date of approval by stockholders of the Company of an agreement providing for
any consolidation or merger of the Company in which the Company will not be the
continuing or surviving corporation or pursuant to which shares of Common
3
<PAGE>
Stock of the Company would be converted into cash, securities or other property,
other than a merger of the Company in which the holders of Common Stock of the
Company immediately prior to the merger would have the same proportion of
ownership of common stock of the surviving corporation immediately after the
merger, (iv) the date of the approval by stockholders of the Company of any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all the assets of the Company or
(v) the adoption of any plan or proposal for the liquidation (but not a partial
liquidation) or dissolution of the Company.
9. If an optionee shall die while employed by the Company or by a
subsidiary or within three months of the cessation or termination of such
employment, all options theretofore granted to him may be exercised in whole or
in part, and/or the Committee may authorize the acceptance of the surrender of
the right to exercise such option or any portion thereof as provided in
Paragraph 5 hereof, by the estate of such optionee (or by a person who shall
have acquired the right to exercise such option by bequest or inheritance), at
any time within one year after the death of such optionee but only to the extent
the optionee was entitled to exercise the option on the date of his death, and
not after the expiration of the term of the option.
10. Neither the adoption of the Plan by the Board nor the submission of the
Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, and such arrangements may be either
applicable generally or only in specific cases.
11. Incentive Stock Options shall be subject to the following provisions:
(i) With respect to each Incentive Stock Option granted prior to
February 1, 1987, to the extent required by Section 422 of the Code and the
rules and regulations of the Internal Revenue Service (a) each such option
(x) shall not be exercisable or surrenderable by the employee to whom it
was granted while there is outstanding any other Incentive Stock Option
(including any option or portion thereof that the Committee elects to treat
as an Incentive Stock Option) that was previously granted to such employee
by the Company or a subsidiary (determined at the time of granting of such
option) or a predecessor of any of such corporations and (y) shall be
surrenderable only when the Fair Market Value of the Common Stock which may
be purchased upon exercise of
4
<PAGE>
the Incentive Stock Option exceeds the option price (an Incentive Stock
Option shall be treated as outstanding for the purpose of clause (x) above
until it is exercised or surrendered in full or has expired by reason of
lapse of time); (b) The aggregate Fair Market Value (determined as of the
time each Incentive Stock Option is granted) of the Common Stock for which
any employee may be granted Incentive Stock Options in any calendar year
(under all plans of the Company and its subsidiaries which provide for the
granting of Incentive Stock Options) shall not exceed $100,000 plus any
unused limit carryover to such year, determined in accordance with Section
422 of the Code.
(ii) Incentive stock options granted after the effective date of the
1987 amendment to the 1984 plan ("1987 Incentive Options") may be granted
without limitation as to amount or market value provided however that the
aggregate Fair Market Value of shares of Common Stock with respect to which
options are exercisable for the first time during any calendar year as
determined as of the date of grant may not exceed $100,000. Any material
variations or ambiguities between this Plan and said Code and the rules and
regulations shall be resolved in favor of the latter.
(iii) If Section 422 of the Code is amended or the rules and
regulations thereunder are changed, the Committee may, subject to the
provisions of Paragraph 13, revise the terms of the Incentive Stock Options
previously granted or thereafter granted to comply with or to the extent
permitted by such amendments or changes. Provided, however, it is intended
that this Plan fulfills and shall fulfill at all times, the requirements of
Section 422A of the Internal Revenue Code of 1986, or subsequent amendments
thereto and the rules and regulations promulgated thereunder, as the same
relate to Incentive Stock Options.
12. The obligation of the Company to sell and deliver shares under the
options shall be subject to, as deemed necessary or appropriate by counsel for
the Company, (i) all applicable laws, rules and regulations and such approvals
by any governmental agencies as may be required, including, without limitation,
the effectiveness of a registration statement under the Securities Act of 1933,
and (ii) the condition that such shares shall have been duly listed on such
stock exchanges as the Company's Common Shares are then listed.
5
<PAGE>
13. The Plan may be abandoned or terminated at any time by the Board of
Directors except with respect to any options then outstanding under the Plan,
and any option granted under this Plan may be terminated at any time by the
optionee. The Board of Directors may make such changes in and additions to the
Plan as it may deem proper and in the best interest of the Company, provided,
however, that no such action shall impair any option theretofore granted under
the Plan, and provided further that (1) the total number of shares for which
options may be granted under this Plan shall not be increased, and (2) the
minimum purchase price shall not be changed. Notwithstanding the foregoing, the
Board of Directors may amend or revise this Plan to comply with applicable laws
or governmental regulations. In no event shall any option be granted under the
Plan after May 1, 1999.
14. Anything in this Plan to the contrary notwithstanding, it is expressly
agreed and understood that if any one or more provisions of the Plan shall be
illegal or invalid such illegality or invalidity shall not invalidate the Plan
or any other provisions thereof, but the Plan shall be effective in all respects
as though the illegal or invalid provisions had not been included.
15. This Plan, as amended by the 1995 amendment thereto, shall be subject
to ratification and approval by the Company's shareholders, not later than at
the next annual meeting of shareholders, by the affirmative vote of the holders
of a majority of the Company's stock outstanding and entitled to vote.
16. The Company shall have the right to require an Optionee to pay to the
Company the cash amount of any taxes which the Company is required to withhold
upon the exercise of an option granted hereunder, provided that anything
contained herein to the contrary notwithstanding, the Committee may, in
accordance with such rules as it may adopt, accept Common Stock received in
connection with the exercise of the option being taxed or otherwise previously
acquired in satisfaction of any withholding requirements or up to the entire tax
liability arising from the exercise of such option.
6
