[CRANE LOGO]
CRANE CO. 100 FIRST STAMFORD PLACE, STAMFORD, CONNECTICUT 06902
March 7, 2002
DEAR CRANE 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, April
22, 2002 at The Hyatt Regency Greenwich, Riverside Meeting Room, 1800 East
Putnam Avenue, Old Greenwich, Connecticut.
The Notice of Meeting and Proxy Statement on the following pages describe
the matters to be presented at the meeting. Management will report on current
operations and there will be an opportunity for discussion of the Company and
its activities. Our 2001 Annual Report 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, or by using the Internet address or the
toll-free telephone number on the proxy card.
Sincerely,
/s/ R.S. EVANS
R.S. EVANS
Chairman of the Board
CRANE CO.
100 FIRST STAMFORD PLACE
STAMFORD, CONNECTICUT 06902
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 22, 2002
----------------
March 7, 2002
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 Hyatt Regency Greenwich, Riverside Meeting Room,
1800 East Putnam Avenue, Old Greenwich, Connecticut on Monday, April 22, 2002
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 2005.
2. To consider and act upon a proposal to approve the selection of
Deloitte & Touche LLP as independent auditors for the Company for
2002.
3. To consider and act upon a proposal submitted by certain shareholders
concerning adoption of the MacBride Principles in reference to the
Company's operations in Northern Ireland.
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 1, 2002 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, or use the Internet address or the
toll-free telephone number set forth on the enclosed proxy card.
By Order of the Board of Directors,
AUGUSTUS I. DUPONT
Secretary
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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.
--------------------------------------------------------------------------------
CRANE CO.
100 FIRST STAMFORD PLACE
STAMFORD, CONNECTICUT 06902
----------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 22, 2002
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
Hyatt Regency Greenwich, Riverside Meeting Room, 1800 East Putnam Avenue, Old
Greenwich, Connecticut, on Monday, April 22, 2002, at 10:00 a.m., Eastern
Daylight Time, or at any adjournment thereof. The enclosed proxy, when properly
executed and received by the Secretary prior to the meeting, and not revoked,
will be voted in accordance with the directions thereon. If no directions are
indicated, the proxy will be voted for each nominee named herein for election
as a director, for the proposal to approve the selection of Deloitte & Touche
LLP as independent auditors for the Company for 2002 and against the
shareholder proposal concerning the MacBride Principles. 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.
Shareholders of record may vote their proxy by using the toll-free number
listed on the proxy card as an alternative to using the written form of proxy.
The telephone voting procedure is designed to authenticate votes cast by use of
a Personal Identification Number. Alternatively, shareholders of record may
vote their proxy via the Internet at the website www.eproxyvote.com/cr. Both
procedures allow shareholders to appoint a proxy to vote their shares and to
confirm that their instructions have been properly recorded. The Company has
been advised by counsel that these procedures are consistent with the
requirements of applicable law. Specific instructions to be followed by any
shareholder of record interested in voting by telephone or via the Internet are
set forth on the enclosed proxy card.
The date on which this proxy statement and enclosed form of proxy are
first being sent to the Company's shareholders is on or about March 15, 2002.
OUTSTANDING SHARES AND REQUIRED VOTES. As of the close of business on
March 1, 2002, the record date for determining shareholders entitled to vote at
the Annual Meeting, the Company had issued and outstanding 59,834,392 shares of
Common Stock, par value $1.00 per share ("Common Stock"). Each share of Common
Stock is entitled to one vote at the meeting. Directors will be elected by a
plurality vote of the holders of shares of Common Stock present in person or
represented by proxy and entitled to vote at the meeting. The approval of
auditors and the shareholder proposal concerning the MacBride Principles each
requires the affirmative vote of the holders of a majority of the shares of
Common Stock present in person or represented by proxy and entitled to vote at
the meeting. Abstentions may be specified as to all proposals to be brought
before the meeting other than the election of directors. Under the rules of the
New York Stock Exchange, Inc. (the "NYSE"), brokers holding shares for
customers have authority to vote on certain matters even if they have not
received instructions from the beneficial owners, but do not have such
authority as to certain other matters (so-called "broker non-votes"). The NYSE
has advised the Company that member firms of the NYSE may vote without specific
instructions from beneficial owners as to all matters presented in this Proxy
Statement other than the shareholder proposal concerning the MacBride
Principles. With regard to the election of directors, votes may be cast in
favor or withheld, and the three persons receiving the highest number of
favorable votes will be elected as directors of the Company. As to the approval
of auditors and the shareholder proposal, if a shareholder abstains from voting
certain shares it will have the effect of a negative vote.
1
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of ten members divided into
three classes. At the Annual Meeting three directors are to be elected to hold
office for three year terms until the Annual Meeting in 2005 and until their
successors are elected and qualified. The enclosed proxy will be voted for
election of the three directors of such class named in the following table,
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, as may be recommended by the Board of Directors, or the
Board of Directors may reduce the number of directors to eliminate the vacancy.
Under the Company's By-Laws, shareholders intending to nominate any person
for election as a director of the Company must notify the Secretary of the
Company in writing not more than 120 days nor less than 90 days prior to the
anniversary date of the immediately preceding annual meeting, unless the date
of the current annual meeting is more than 30 days before or after such
anniversary date. The notice must set forth (a) as to each person nominated,
(i) the name, age, business address and residence address of such person, (ii)
the principal occupation of such person, (iii) the number of shares of Common
Stock beneficially owned by such person and (iv) any other information required
to be disclosed in solicitations for proxies for elections of directors under
the federal securities laws; and (b) as to the shareholder giving such notice,
(i) the name and record address of such shareholder and (ii) the number of
shares of Common Stock beneficially owned by such shareholder. The notice must
be accompanied by the executed consent of the nominee to serve as a director if
so elected.
The age, position with the Company, period of service as a director of the
Company, business experience during the past five years, directorships in other
companies and shareholdings in the Company as of March 1, 2002 for each of the
nominees for election and for each of those directors whose term will continue
are set forth below.
COMMON SHARES
BENEFICIALLY
OWNED (1)
--------------
NOMINEES TO BE ELECTED FOR TERMS TO EXPIRE IN 2005
E. THAYER BIGELOW, JR. ....................................................... 45,060
Age 60; Director since 1984. Managing Director, Bigelow Media, New York,
NY (investment in media and entertainment companies) since September
2000). Senior Advisor, Time Warner Inc., New York, NY (a media and
entertainment company) since October 1998. Chief Executive Officer, Court
TV, New York, NY, an affiliate of Time Warner Entertainment LP (cable
television program services) March 1997 to October 1998. President and
Chief Executive Officer, Time Warner Cable Programming Inc., Stamford,
CT, a subsidiary of Time Warner Entertainment LP (cable television
program services), 1991 to 1997. Other directorships: Huttig Building
Products, Inc., Lord Abbett & Co. Mutual Funds.
CHARLES J. QUEENAN, JR. ...................................................... 20,246
Age 71; Director since 1986. Senior Counsel since 1995 and prior thereto,
Partner, Kirkpatrick & Lockhart LLP. Pittsburgh, PA (attorneys at law).
Other directorships: Allegheny Technologies Incorporated, Teledyne
Technologies Incorporated, Water Pik Technologies, Inc.
2
COMMON SHARES
BENEFICIALLY
OWNED (1)
--------------
JEAN GAULIN .................................................................. 2,480
Age 59; Director from 1995 to 1999 and since 2001. Retired Chairman,
President and Chief Executive Officer of Ultramar Diamond Shamrock
Corporation, San Antonio, TX (petroleum refining and marketing).
Chairman, President and Chief Executive Officer, Ultramar Diamond
Shamrock Corporation January 2000 to December 2001; Vice Chairman,
President and Chief Executive Officer, Ultramar Diamond Shamrock
Corporation, 1999; Vice Chairman, President and Chief Operating Officer,
Ultramar Diamond Shamrock Corporation, December 1996 to December
1998. Other directorships: Abitibi Consolidated, Inc., National Bank of
Canada.
DIRECTORS WHOSE TERMS WILL EXPIRE IN 2004
RICHARD S. FORTE ............................................................. 34,270
Age 57; Director since 1983. President, Dawson Forte Cashmere Company,
South Natick, MA (importer) since January 1997. Chairman since
January 1997 and, prior thereto, President, Forte Cashmere Company, Inc.
(importer and manufacturer). Other directorships: Huttig Building
Products, Inc.
WILLIAM E. LIPNER ............................................................ 6,045
Age 54; Director since 1999. Chairman and Chief Executive Officer, NFO
WorldGroup, Inc., Greenwich, CT (marketing information/ research services
worldwide). Other directorships: Change Technology Partners, Inc., NFO
WorldGroup, Inc.
JAMES L. L. TULLIS ........................................................... 7,790
Age 54; Director since 1998. Chief Executive Officer, Tullis-Dickerson & Co.,
Inc., Greenwich, CT (venture capital investments in the health care
industry) since 1986. Other directorships: Huttig Building Products, Inc.
DIRECTORS WHOSE TERMS WILL EXPIRE IN 2003
R. S. EVANS .................................................................. 1,888,922
Age 57; Director since 1979. Chairman of the Board of the Company.
Chairman and Chief Executive Officer of the Company from 1984 to 2001.
Other directorships: Fansteel, Inc., HBD Industries, Inc., Huttig Building
Products, Inc.
ERIC C. FAST ................................................................. 672,888
Age 52; Director since September 1999. President and Chief Executive Officer
of the Company since April 2001. President and Chief Operating Officer of
the Company from September 1999 to April 2001. Co-head of Global
Investment Banking of Salomon Smith Barney (investment banking firm)
from 1995 to 1998 and a Managing Director of that firm from 1988 to 1998.
Other directorships: Convergys Corporation, National Integrity Life
Insurance Company.
3
COMMON SHARES
BENEFICIALLY
OWNED (1)
--------------
DORSEY R. GARDNER ........................................................... 27,251
Age 59; Director from 1982 to 1986 and since 1989. President, Kelso
Management Company, Inc., Boston, MA (investment management).
General Partner, Hollybank Investments, L. P., and Thistle Investments, L.
P., Miami, FL (private investment funds). Other directorships: Huttig
Building Products, Inc.
DWIGHT C. MINTON ............................................................ 73,252
Age 67; Director since 1983. Chairman Emeritus of the Board of Church &
Dwight Co., Inc. Princeton, NJ (manufacturer of consumer and specialty
products). Other directorships: Church & Dwight Co., Inc. ................
----------
(1) As determined in accordance with Rule 13d-3 under the Securities Exchange
Act of 1934. No director except Mr. R. S. Evans and Mr. E. C. Fast owns
more than 1% of the outstanding shares of Common Stock. See Beneficial
Ownership of Common Stock by Directors and Management, page 5.
The Board of Directors met nine times during 2001. Each director attended
over 75% of the Board and Committee meetings held in the period during which he
was a director.
The Board of Directors has an Executive Committee, Audit Committee,
Nominating Committee and Organization and Compensation Committee. The Executive
Committee, which meets when a quorum of the full Board of Directors cannot be
readily obtained, did not meet in 2001. The Audit Committee, which consists of
directors who meet the independence and experience requirements of the New York
Stock Exchange, met seven times in 2001 (including three meetings by conference
telephone to review quarterly financial information) with the Company's
management, internal auditors and independent auditors to review matters
relating to the quality of financial reporting and internal accounting controls
and the nature, extent and results of their audits, and otherwise maintained
communications between the auditors of the Company and the Board of Directors.
(See the Committee's report on page 17.) The duties of the Nominating Committee
include developing criteria for selection of and identifying potential
candidates for service as directors of the Company, as well as policies
regarding tenure of service and retirement for members of the Board of
Directors. The Nominating Committee met once in 2001. The duties of the
Organization and Compensation Committee include recommending to the Board of
Directors all actions regarding compensation of the Chief Executive Officer,
review of the compensation of other officers and business unit presidents,
annual review of director compensation, administration of the EVA Incentive
Compensation Plan and Stock Incentive Plan and review and approval of
significant changes or additions to the compensation policies and practices of
the Company. The Organization and Compensation Committee met four times in
2001. (See the Committee's report on page 10.)
The memberships of committees during 2001 were as follows: Executive
Committee: E.T. Bigelow, Jr., R.S. Evans, E. C. Fast and D.C. Minton; Audit
Committee: R.S. Forte, D.R. Gardner and C.J. Queenan, Jr. (Chairman);
Nominating Committee: E. T. Bigelow, Jr., R. S. Evans (Chairman) and C. J.
Queenan, Jr.; Organization and Compensation Committee: E.T. Bigelow, Jr.
(Chairman), D.R. Gardner, D.C. Minton and J.L.L. Tullis.
COMPENSATION OF DIRECTORS. The Company's standard retainer payable to each
non-employee director is $30,000 per annum. Pursuant to the Non-Employee
Director Stock Compensation Plan, non-employee directors receive, in lieu of
cash, shares of Common Stock of the Company (rounded to the nearest ten shares)
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 are 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
4
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 such
earlier date as the director leaves the Board. In April 2001 each non-employee
director other than Mr. Gaulin received 560 restricted shares of Common Stock
pursuant to the plan. Mr. Gaulin, who rejoined the Board of Directors in May
2001, received 480 restricted shares pursuant to the plan.
In addition, under the Non-Employee Director Stock Compensation Plan an
option to purchase 2,000 shares of Common Stock is granted to each non-employee
director immediately following each annual meeting of shareholders. Each such
option has an exercise price equal to the fair market value at the date of
grant, has a term of 10 years and vests 50% after one year, 75% after two years
and 100% after three years from the date of grant. On April 23, 2001 each
non-employee director other than Mr. Gaulin and Mr. Queenan received an option
to purchase 2,000 shares at an exercise price of $26.95 per share. Mr. Gaulin
received on May 21, 2001 an option to purchase 2,000 shares at an exercise
price of $28.79 per share. Mr. Queenan elected to continue to participate in
the Crane Co. Retirement Plan for Non-Employee Directors (see description
below), and therefore does not receive any stock option grants under the
Non-Employee Director Stock Compensation 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 upon retirement at or after age 65 equal to the participant's annual
retainer in effect at the time 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 death, disability or change in
control, participants are automatically 100% vested and, in the case of a
change 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, in lieu of installment payments, a lump sum cash
payment such that the participant will retain, after all applicable taxes, the
actuarial equivalent of the benefits payable under the plan. A former director
may receive his benefits prior to age 65 on an actuarially reduced basis. The
plan is unfunded and benefits thereunder are payable from the Company's general
assets, either in the form of a joint and survivor annuity or, if the director
so elects upon reaching age 55, in the form of a survivor annuity should the
director die while in service. The Retirement Plan for Non-Employee Directors
was terminated as to active directors when the Non-Employee Director Stock
Compensation Plan was approved by shareholders in April 2000, but Mr. Queenan
elected to continue his participation in the Retirement Plan in lieu of any
option grants under the new Stock Compensation Plan. Former Crane Co. directors
will continue to receive their retirement benefits under the Retirement Plan.
BENEFICIAL OWNERSHIP OF COMMON 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 Common Stock through the Stock
Incentive Plan and the Savings and Investment Plan. Directors also receive 50%
of their annual retainer in restricted stock issued under the Non-Employee
Director Stock Compensation Plan. The beneficial ownership of Common Stock by
the non-employee directors as a group (see pages 2-4 for individual holdings),
the executive officers named in the Summary Compensation Table and all
directors and executive officers of the Company as a group as of March 1, 2002
is as follows:
5
SHARES IN
SHARES UNDER STOCK OPTIONS COMPANY TOTAL SHARES % OF SHARES
SHARES RESTRICTED EXERCISABLE SAVINGS PLAN BENEFICIALLY OUTSTANDING AS
OWNED STOCK PLANS (1) WITHIN 60 DAYS (401(K)) OWNED OF 03/01/02 (2)
---------- --------------- -------------- ------------ ------------ ---------------
Non-Employee Directors
and Nominees as a
Group (8 persons) .......... 120,269 4,400 91,725 -- 216,394 0.35%
R. S. Evans (3) ............. 678,839 179,277 1,021,039 9,767 1,888,922 3.03%
E. C. Fast .................. 101,140 102,316 468,960 472 672,888 1.08%
M. L. Raithel (4) ........... 201,699 57,480 218,377 4,982 482,538 0.77%
A. I. duPont ................ 225 60,151 249,234 1,136 310,746 0.50%
T. M. Noonan ................ 18 25,139 106,801 1,811 133,769 0.21%
B. L. Ellis ................. 2,095 40,368 74,334 1,281 118,078 0.19%
Other Executive Officers
(4 persons) ................ 68,596 25,436 219,206 22,932 336,170 0.54%
------- ------- --------- ------ ---------
Total -- Directors and
Executive Officers as a
Group (18 persons) ......... 1,172,881 494,567 2,449,676 42,381 4,159,505 6.68%
========= ======= ========= ====== =========
----------
(1) Subject to forfeiture if established performance and/or service
conditions are not met.
(2) As determined in accordance with Rule 13d-3 under Securities Exchange Act
of 1934. Does not include 7,778,416 shares of Common Stock owned by The
Crane Fund (see Principal Shareholders of the Company, below); nor
510,471 shares of Common Stock owned by the Crane Fund for Widows and
Children; nor an aggregate of 683,715 shares of Common Stock held in
trusts for the pension plans of the Company and certain subsidiaries
which shares may be voted and disposed of in the discretion of the
trustees unless the sponsor of a particular plan directs otherwise. Mr.
duPont, Mr. Raithel and two other executive officers are trustees for The
Crane Fund and the Crane Fund for Widows and Children. None of the
directors or trustees has any beneficial interest in, and all disclaim
beneficial ownership of, the shares held by the trusts. In addition, as
of March 1, 2002, 4,197 other employees of the Company held 1,710,095
shares of Common Stock in the Crane Co. Savings and Investment Plan, 711
shares of Common Stock in the Crane Co. Union Employees Savings and
Investment Plan, and 271,840 shares of Common Stock in the ELDEC
Corporation and Interpoint Corporation Deferred Income Plan, resulting in
a total of 6,142,151 shares of Common Stock beneficially owned by
directors, officers and employees, or 9.86% of the outstanding shares as
of March 1, 2002.
(3) Includes 720 shares owned by Mr. Evans' spouse.
(4) Includes 20,785 shares owned by Mr. Raithel's spouse and 1,425 shares
owned by his daughter.
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 Stock on March 1, 2002.
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
-------------- ------------------- --------- --------
Common Stock ......... The Crane Fund (1) 7,778,416(1) 12.99%
100 First Stamford Place
Stamford, CT 06902
----------
(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, A.I. duPont, E. M. Kopczick and M.L. Raithel, 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. 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.
6
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation for each of the last three
completed fiscal years paid to Mr. R. S. Evans, who served as the Company's
Chief Executive Officer until April 23, 2001, Mr. E. C. Fast, who was elected
Chief Executive Officer of the Company on April 23, 2001, and each of the four
most highly paid executive officers other than the Chief Executive Officer who
were serving as executive officers at December 31, 2001.
ANNUAL COMPENSATION LONG TERM COMPENSATION
----------------------------------------------- -------------------------------------------------
OTHER RESTRICTED SECURITIES ALL(4)
ANNUAL STOCK UNDERLYING LTIP(3) OTHER
NAME AND COMPENSATION AWARD(2) OPTIONS/ PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS(1)($) ($) ($) SARS(#) ($) ($)
------------------------ ------ ----------- ------------- -------------- ------------ ------------ --------- -------------
R.S. Evans 2001 517,188 2,001,328 120,947 2,695,400 250,000 -- 8,346
Chairman of 2000 775,000 791,406 256,149 3,980,400 175,000 -- 8,862
the Board 1999 725,000 548,675 213,743 -- 216,854 -- 9,956
E.C. Fast 2001 587,500 387,078 35,355 1,752,010 300,000 -- 7,185
President and Chief 2000 450,000 261,856 19,026 -- 100,000 -- 6,975
Executive Officer 1999 141,634 100,000 5,000 1,068,500 325,280 --
M.L. Raithel 2001 290,000 282,424 29,974 105,250 40,000 -- 2,668
Vice President, 2000 228,662 235,552 18,309 266,400 35,000 -- 815
Finance and Chief 1999 180,000 142,916 18,449 109,526 37,949 -- 986
Financial Officer
A.I. duPont 2001 255,000 202,885 23,914 105,250 40,000 -- 6,200
Vice President, 2000 240,000 172,229 29,319 179,093 40,000 -- 5,820
General Counsel and 1999 208,000 110,432 23,715 194,052 65,056 -- 5,794
Secretary
T.M. Noonan 2001 185,000 201,361 8,603 131,563 15,000 -- 5,677
Vice President, 2000 179,007 170,072 7,176 132,200 20,000 -- 5,655
Taxes 1999 156,000 97,858 4,200 71,411 21,685 -- 5,508
B.L. Ellis 2001 195,000 169,918 14,756 263,125 20,000 -- 5,489
Vice President, Chief 2000 178,500 125,578 10,539 197,190 20,000 -- 5,457
Information Officer 1999 154,050 44,415 5,250 178,575 21,685 -- 5,179
----------
(1) Represents the amounts paid to the named executives under the Company's EVA
Incentive Compensation Plan for Executive Officers (see Part B of the
Report on Executive Compensation by the Organization & Compensation
Committee on page 10). After giving effect to such payments, the named
executives have credited to their accounts under such plan the following
amounts, which are subject to increase or decrease in future years: E.C.
Fast $774,156; M.L. Raithel $564,848; A.I. duPont $405,770; T.M. Noonan
$492,722; and B. L. Ellis $339,836. Under the program one-third of the
account balance in any year will be payable to the named executive. Mr.
Evans' account balance was paid to him in full in connection with his
retirement as Chief Executive Officer, and he no longer participates in the
EVA Plan.
(2) Amounts shown are the fair market value at date of grant of shares of
restricted stock awarded to the named executive officers with vesting
conditions other than Company performance. These include shares of
restricted stock to provide retirement benefits that would have been earned
by them under the Company's qualified pension plan but for the application
of certain limits imposed by the Internal Revenue Code (see Part C of the
Report on Executive Compensation by the Organization and Compensation
Committee on page 11). Such shares will vest after 10 years of service or
upon age 65, or earlier retirement under the terms of the pension plan. In
addition, the amounts shown include the fair value of shares of time-based
restricted stock at date of grant. Such shares will vest in accordance with
various schedules over a period of five years from the date of grant if the
executive continues in the employ of the Company or upon his earlier death
or permanent disability or upon a change-in-control of the Company.
7
(3) Shares of restricted stock issued under the Company's restricted stock
plans that are subject to performance-based conditions on vesting are
classified as long-term incentive awards reportable in the column "LTIP
Payouts" of the Summary Compensation Table upon vesting. The shares of
Common Stock under the restricted stock plan held by each of the named
executive officers and the aggregate value thereof at December 31, 2001
were as follows:
RESTRICTED STOCK AWARD PLAN
-------------------------------------------------------------
RESTRICTED AGGREGATE
STOCK HELD LTIP RESTRICTED AGGREGATE
NAME # OF SHARES # OF SHARES SHARES HELD VALUE
-------------------------- ------------- ------------- ------------- -------------
R. S. Evans .............. 100,000 79,277 179,277 $4,596,662
E. C. Fast ............... 96,711 -- 96,711 2,479,670
M. L. Raithel ............ 26,938 12,684 39,622 1,015,908
A. I. duPont ............. 30,057 23,783 53,840 1,380,458
T. M. Noonan ............. 14,571 6,342 20,913 536,209
B. L. Ellis .............. 36,156 -- 36,156 927,040
The shares listed in the first column under the heading "Restricted Stock
Held" are subject only to time-based vesting criteria as described under
note (2) above. The shares of restricted stock which are performance-based,
listed under the heading "LTIP," may lapse upon failure to achieve the
performance criteria and so the value presented above for such shares
remains at-risk to the executive. Dividends are paid on all restricted
stock at the same rate as other shares of Common Stock and are reported in
the column "Other Annual Compensation" of the Summary Compensation Table.
(4) Amounts included in the Company's matching contribution for eligible
employees for the purchase of Common Stock in the Company's Saving &
Investment Plan (401k) and premiums for life insurance.
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, 2001.
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE GRANT DATE
NAME GRANTED (1) FISCAL YEAR $/SHARE (2) EXPIRATION DATE PRESENT VALUE ($)(3)
----------------------- -------------- -------------- ------------- ----------------- ---------------------
R. S. Evans ........... 250,000 18.70% 26.95 4/23/11 1,909,250
E. C. Fast ............ 100,000 7.48% 26.95 1/22/11 763,700
E. C. Fast ............ 200,000 14.96% 26.95 4/23/11 1,527,400
M. L. Raithel ......... 40,000 2.99% 26.95 1/22/11 305,480
A. I. duPont .......... 40,000 2.99% 26.95 1/22/11 305,480
T. M. Noonan .......... 15,000 1.12% 26.95 1/22/11 114,555
B. L. Ellis ........... 20,000 1.50% 26.95 1/22/11 152,740
----------
(1) No SARs were granted.
(2) The exercise price of options granted under the Company's stock option
plans were and may not be less than 100% of the 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, 10 years after grant. If employment terminates, the optionee
generally may exercise the option only to the extent it could have been
exercised on the date his employment terminated and must be exercised
within three months thereof. In the event employment terminates by reason
of retirement, permanent disability, death 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 derives a value of $7.64 per share for each option granted. The
estimated values assume a risk-free rate of return of 4.89% based upon the
10-year Treasury (adjusted for constant maturities) from the Federal
Reserve Statistical Release H.15(519), stock price volatility of 27.02%, a
dividend payout ratio of 1.475% and an option duration of 5.10 years. The
actual value, if any, that an executive may realize will depend upon the
excess of the stock price over the exercise price on the date the option is
exercised, and so the value realized by an executive may be more or less
than the value estimated by the Black-Scholes model.
8
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
SHARES AT FISCAL YEAR-END (#) (1) AT FISCAL YEAR-END ($) (2)
ACQUIRED ON VALUE ------------------------------- ------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------------------- -------------- ------------- ------------- --------------- ------------- --------------
R. S. Evans ........... 0 0 896,039 250,000 3,947,037 --
E. C. Fast ............ 0 0 293,960 431,320 1,627,703 744,568
M. L. Raithel ......... 65,869 1,085,411 180,139 66,988 1,013,204 143,622
A. I. duPont .......... 0 0 202,970 76,264 811,769 185,605
T.M. Noonan ........... 0 0 88,879 30,422 309,456 72,496
B.L. Ellis ............ 0 0 53,912 35,422 125,001 82,071
----------
(1) No SARs were held at December 31, 2001.
(2) Computed based upon the difference between aggregate fair market value at
December 31, 2001, the last trading day for the year, and aggregate
exercise price.
PERFORMANCE GRAPH
The following performance graph compares the total return to shareholders
of an investment of $100 in each of Crane Co. Common Stock, the S&P 500 Index
and the S&P Manufacturing (Diversified) Index, in which the Company is included
as one of 13 companies, from December 31, 1996 to December 31, 2001. "Total
Return" means the increase in value of an investment in a security over a given
period assuming reinvestment in that security of all dividends received thereon
during the period.
[LINE CHART]
--------------------------------------------------------------------------------
Crane Co. ($) 100 151 160 112 163 149
--------------------------------------------------------------------------------
S&P 500 ($) 100 133 171 208 189 166
--------------------------------------------------------------------------------
S&P Mfg Diversified ($) 100 119 138 170 202 199
--------------------------------------------------------------------------------
9
Peer companies in the S&P Industrial Manufacturing-Diversified Index are:
Danaher Corp., Eaton Corp., Honeywell International, Illinois Tool Works, ITT
Industries, Johnson Controls, Minnesota Mining & Manufacturing, Parker Hannifin
Corp., Textron Inc., Thermo Electron Corporation, Tyco International and United
Technologies Corporation.
REPORT ON EXECUTIVE COMPENSATION
BY THE ORGANIZATION AND COMPENSATION
COMMITTEE OF THE COMPANY
In 2001 the Organization and Compensation Committee of the Board of
Directors of the Company (the "Committee") maintained its previously
established three-pronged approach to executive officer and key employee
compensation: competitive base salaries; short and medium-term cash incentive
compensation linked to measurable increases in shareholder value; and long-term
incentive compensation utilizing stock options the value of which is keyed to
increases in shareholder returns (through increases in the price of the
Company's Common Stock) and awards of restricted Common Stock for retention
purposes. The Committee has established targets for ownership of Company Common
Stock to encourage executive officers and key employees to hold a significant
portion of their net worth in the Company's Common Stock so that the future
price of the Company's Common Stock will constitute a key element in their
financial planning and ultimately in their net worth. In addition, the
Committee continued a program using shares of restricted stock to offset
significant limitations in pension benefits imposed upon certain executive
officers and key employees by federal tax policies while concurrently
preserving the incentive linkage between improved share performance and the
recipient's ultimate return.
A. BASE SALARIES. In 2001 the base salaries of the Company's executive
officers and other key managers were reviewed and adjusted where appropriate to
reflect promotions and other changes in duties as well as competitive market
conditions. The Committee believes the Company's base salaries are sufficiently
competitive to attract and retain qualified executive officers and key
managers. Increases in base salaries of executive officers other than the Chief
Executive Officer averaged 14.2% during 2001, ranging from 2.7% to 41.7%.
B. SHORT AND MEDIUM-TERM INCENTIVE COMPENSATION--FOCUSED ON ECONOMIC VALUE
ADDED. 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.
The Committee believes that, 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 correlation with the creation of value for
shareholders over the long term.
The program does not involve the meeting of pre-established goals, as
such. Rather, the EVA for a business unit during the year, in aggregate as well
as the increase or decrease 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 generally uncapped to provide maximum
incentive to create value and, because awards may be positive or negative,
executives can incur penalties when value is reduced.
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 profit of the unit after tax and the prior year's EVA. Thus, the EVA
formula requires the executive to focus on improvement in the unit's balance
sheet as well as the income statement. 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
--------------
* EVA is a registered trademark of Stern, Stewart & Co.
10
percentage of the positive EVA, if any, in the current year. EVA awards are
calculated for the Company as a whole for the corporate executives or where
appropriate for the business unit for which the executive is responsible. A
percentage of the measured entity's award is allocated to each participating
executive. For executives 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, one-third of the account balance is
paid to the executive in cash annually, and the remainder of the account
balance represents that individual's "equity" in the account for future years;
provided that for newly hired executives, 70% of the account balance is paid in
year one, 50% in year two and one-third in year three and thereafter. If an EVA
award is negative, the amount will be deducted from the balance in the account.
If the account balance is negative, the executive 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 at an appropriate money market rate. The account is subject to
forfeiture in the event an executive leaves the Company by reason of
termination or resignation, but is paid in full if the executive dies, becomes
disabled or retires at age 65 (or earlier at the discretion of the Committee)
or upon a sale of the executive's business unit or a change-in-control of the
Company. The bank account concept with the three year payout at risk gives the
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, provided that
the EVA award percentages of the individuals named in the Summary Compensation
Table are capped by the Committee at the beginning of the year.
C. LONG-TERM INCENTIVE COMPENSATION--FOCUSED ON SHAREHOLDER RETURN. The
Company has used its stock option plan and restricted stock plan (now combined
in the 2001 Stock Incentive Plan) as the foundation for a long-term stock-based
incentive compensation program focused on shareholder return. The Committee
believes that executive officers approach their responsibilities more and more
like owners of the Company as their holdings of and potential to own Company
Common Stock increase. This philosophy starts with the Board of Directors,
whose non-employee members receive 50% of their annual retainer in Company
Common Stock. To date, 9.86% of the Company's Common Stock is beneficially
owned by directors, management and key employees, with the Chairman of the
Board owning 3.03% and the other executive officers owning 3.65%. (See
Beneficial Ownership of Common Stock by Directors and Management, page 6.) The
Committee has established targets for ownership of Company Common Stock by
executive officers and key employees (expressed as a multiple of their base
salary, ranging from a multiple of one for salaries up to $125,000 to a
multiple of five for salaries above $500,000). The Committee also continues to
discourage sales of stock acquired by such individuals through the vesting of
restricted stock grants and option exercises.
(i) Stock Options. The Stock Incentive 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 after the grant date, 75% two years after the grant
date and 100% three years after the grant date 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, 10 years after grant. Because the Company's Stock
Incentive 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 incentive program is, therefore, directly tied to increases
in shareholder value. In 2001, the Committee granted 1,095,000 stock options to
the officers and key employees of the Company.
11
(ii) Restricted Stock. Under the Stock Incentive Plan, the Committee may
also award restricted shares of the Company's Common Stock to selected officers
and key employees. The Committee has the authority to select participants and
to determine the amount and timing of awards, restriction periods, market value
thresholds and any terms and conditions applicable to grants. From 1990 to
1997, the Committee generally established performance goals for the lapse of
restrictions on stock awarded involving the achievement over 21/2 and 5 year
intervals of returns for the Company's shareholders (Common Stock price
appreciation plus dividends) equal to or better than certain performance
benchmarks, e.g. 125% of the shareholder return of the S&P 500, 150% of such
return or 17.5% compounded annually. Each such award has also required that the
price of the Company's Common Stock must be higher than the price on the date
of grant, or the restrictions will not lapse. If the conditions are not met,
such restricted stock awards are forfeited after five years, subject to the
discretion of the Committee to adjust the terms of such awards. Beginning in
1998, the Committee determined to reduce the aggregate number of shares of
restricted stock to be awarded and to award such restricted stock with
time-vesting criteria only to selected employees for long-term retention
purposes. A total of 279,500 shares of restricted stock were awarded to
officers and other key employees of the Company on this basis in 2001, which
generally vest as to 25 percent of the award on the second, third, fourth and
fifth anniversaries of the date of grant, or upon the participant's earlier
death, permanent disability, normal retirement at age 65 or upon a
change-in-control of the Company.
Since 1995, the Committee has administered a program using grants of
restricted stock to make up the shortfall in executive officer and key employee
pension benefits imposed by certain federal tax policies which limit the amount
of compensation that can be considered for determining benefits under
tax-qualified plans. Under this program, the Committee will grant to certain
executive officers and key employees who have been impacted by such tax
limitations amounts of restricted stock to make up that portion of the
Company's retirement benefit at normal retirement (age 65), lost by reason of
the tax limitations. The Committee is of the view that the grants provide the
potential to offset the tax limitations on the executive's future pension
benefits, but require the recipient to look to future increases in shareholder
value through stock appreciation if that objective is to be actually achieved.
No awards were made under this program in 2001.
D. COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER. In 2001, E. C. Fast
succeeded R. S. Evans as Chief Executive Officer when Mr. Evans retired after
17 years as Chief Executive Officer of the Company. In connection with this
transition, the Committee approved agreements with both Mr. Evans and Mr. Fast,
the principal terms of which are set forth below under the caption "Other
Agreements and Information." The employment agreement with Mr. Fast is in
keeping with the Committee's view that Chief Executive Officer compensation
should include a competitive base salary while emphasizing incentives closely
linked to shareholder return, such as the Company's EVA Plan and significant
grants of stock options, with a substantial award of time-based restricted
stock for retention purposes. Mr. Fast's 2001 incentive compensation award of
$883,666 under the EVA Incentive Compensation Plan was calculated on the basis
of a pre-established percentage of the aggregate EVA for the Company, after
adjustments approved by the Committee to mitigate certain anomalies from the
disposition of several businesses by the Company, and that award was credited
to Mr. Fast's "account" as provided for in the EVA Plan. The actual amount paid
to Mr. Fast for 2001 from his account was $387,078.
The agreement with Mr. Evans reflected the Committee's decision to secure
the continued service of Mr. Evans as non-executive Chairman of the Board and
to recognize his long service and outstanding performance as Chief Executive
Officer of the Company with a substantial award of stock options that would
also provide incentives for Mr. Evans, in his role as Chairman of the Board, to
continue focusing on ways to improve shareholder value for the Company. The
payment of Mr. Evans' EVA bank account and the vesting of outstanding stock
options and retirement-based restricted stock were pursuant to the terms of the
relevant plans. On April 23, 2001 the Committee granted Mr. Evans 100,000
shares of restricted stock vesting 50% on April 23, 2003 and 50% on April 23,
2004.
12
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 EVA Incentive Compensation Plan 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 applicable regulations. In addition, the
Company believes that all stock options and performance-based restricted stock
granted to date under the Company's stock incentive plans will meet the
requirements of Section 162(m) for deductibility. The shares of time-based
restricted stock granted to offset the impact of the tax limitations on pension
benefits, as well as the other time-based restricted stock awarded in 2001 as
described in paragraph C above, would not satisfy the performance-based
criteria of Section 162(m), and accordingly compensation expense in respect of
income recognized by the executive officer upon lapse of the restrictions would
not be deductible to the extent that such income, together with all other
compensation in such year that did not satisfy the criteria of Section 162(m),
exceeded $1 million. 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.
Submitted by:
The Organization and Compensation
Committee of the Board of Directors of
Crane Co.
E.T. Bigelow, Jr.
D.R. Gardner
D.C. Minton
J.L.L. Tullis
13
RETIREMENT BENEFITS
All officers of the Company, including the individuals identified in the
Summary Compensation Table, are participants in the Company's pension plan for
non-bargaining employees. Directors who are not employees do not participate in
the plan. Eligibility for retirement benefits is subject to certain vesting
requirements, which 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
12/3% per year of service of the participant's average annual compensation
during the five highest compensated consecutive years of the 10 years of
service immediately preceding retirement less 12/3% per year of service of the
participant's Social Security benefit, up to a maximum deduction of 50% of the
Social Security benefit. Compensation for purposes of the pension plan is
defined as total W-2 compensation less (i) the imputed income value of group
life insurance and auto allowance, (ii) income derived from participation in
the Company's restricted stock plans and (iii) on or after January 1, 1993,
income derived from the Company's stock option plans and a former stock
appreciation rights plan. In general, such covered compensation for any year
would be equivalent to the sum of the salary set forth in the Summary
Compensation Table for such years plus the bonus shown in the Table for the
immediately preceding year.
The table below sets forth the estimated annual benefit payable on
retirement at normal retirement age (age 65) under the Company's pension plan.
Benefits are based on accruals through December 31, 2001 for specified salary
and years of service classifications, and assume 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.
PENSION PLAN TABLE
AVERAGE YEARS OF SERVICE
ANNUAL -------------------------------------------------------------------
COMPENSATION* 10 20 25 30 35
----------------- ---------- ---------- ---------- ---------- ---------------
$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 97,936 117,524 137,111
$250,000......... 41,675 83,350 104,188 125,025 145,863**
--------------
* 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 (who retired in
2001) and Raithel (who have 28 and 31 years of service credit,
respectively) was limited to $235,840 in 1993. Messrs. duPont and Noonan
were not employed by the Company in 1993; they joined the Company in 1996
and each now has six years of service credit under the Company's pension
plan. Mr. Ellis joined the Company in 1997 and has four years of service
credit under the company's pension plan. Mr. Fast joined the Company in
1999 and has two years of service credit under the Company's pension plan.
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 for the years 1994 through 1996
was limited to $150,000, was increased to $160,000 for 1997, 1998 and 1999,
and was increased to $170,000 for 2000 and 2001 and $200,000 for 2002. In
no event will the OBRA '93 Limitation reduce any participant's accrued
benefit as of December 31, 1993.
14
** Effective January 1, 1996, 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 may be adjusted annually for changes in the cost of living. The
1999 limit was $130,000, increased to $135,000 for 2000, $140,000 for 2001
and $160,000 for 2002. The dollar limit is subject to further reduction to
the extent that a participant has fewer than 10 years of service with the
Company or 10 years of participation in the defined benefit plan.
OTHER AGREEMENTS AND INFORMATION
The Company has entered into indemnification agreements with R. S. Evans,
E. C. Fast, each other director of the Company, Messrs. duPont, Ellis, Noonan
and Raithel and the four other executive officers of the Company, 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, and 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 Summary 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 greater of the last year's bonus or
the average bonus paid in the three prior years, three times the sum of his or
her annual salary and the greater of the last year's bonus or the average of
the last three years' bonuses, and all accrued deferred compensation and
vacation pay, and employee benefits, medical coverage and other benefits also
continue for three years after termination. "Good Reason" under the agreements
includes, among other things, any action by the Company which results in a
diminution in the position, authority, duties or responsibilities of the
employee. The agreements also provide that the employee may terminate his or
her employment for any reason during the 30 day period immediately following
the first year after the change of control, which shall be deemed "Good Reason"
under the agreement. If it is determined that any economic benefit or payment
or distribution by the Company to 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 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.
On January 22, 2001 the Company entered into an Employment Agreement with
Mr. Fast pursuant to which Mr. Fast agreed to serve as President and Chief
Executive Officer of the Company commencing upon the retirement of Mr. Evans as
Chief Executive Officer of the Company on the date of the 2001 Annual Meeting,
April 23, 2001. The Employment Agreement is for a term of two years, renewable
each year for one additional year unless either party gives written notice to
the other, and provides for the following compensation: (i) an annual salary of
no less than $650,000; (ii) participation in the EVA Incentive Compensation
Plan; (iii) the grant on the date of the Crane Co.
15
Board meeting in April 2001 of non-qualified stock options to purchase 200,000
shares of Common Stock, and the grant on the date of the Crane Co. Board
meeting in January 2002 of non-qualified stock options to purchase 300,000
shares of Common Stock, in each case with an exercise price equal to the fair
market value of a share of Common Stock on the date of grant, with a term of 10
years and vesting 50% after one year, 75% after two years and 100% after three
years from the date of grant; and (iv) the grant on the date of the Crane Co.
Board Meeting in April 2001 of 65,000 restricted shares of Common Stock vesting
25% on each of the second, third, fourth and fifth anniversaries of the date of
grant. The Employment Agreement also contains certain covenants of Mr. Fast
concerning confidentiality, non-competition and non-solicitation of employees
after termination of employment. If the Company terminates Mr. Fast's
employment other than for cause, Mr. Fast would be entitled to receive a lump
sum cash payment equal to two times his annual base salary plus the higher of
his current EVA bank account or two times his highest EVA bonus payment in the
preceding five years, all stock options would become fully vested and
exercisable and all restricted stock would become fully vested and
nonforfeitable.
Also on January 22, 2001 the Board of Directors approved certain
arrangements for the benefit of Mr. Evans upon his resignation as Chief
Executive Officer of the Company. Under these arrangements, which became
effective on the date of the 2001 Annual Meeting, Mr. Evans continues to serve
as non-executive Chairman of the Board and devotes approximately 50 days per
year to the business of the Company, and he receives the following
compensation: (i) an annual salary of no less than $400,000; (ii) payment of
his current EVA bank account balance (distributed in January 2002), with the
right to participate in the EVA Incentive Compensation Plan for the period from
January 1, 2001 until the date of his retirement; (iii) full vesting of all
outstanding stock options held by Mr. Evans; (iv) all retirement-based
restricted stock would become fully vested and nonforfeitable; and (v) the
grant of non-qualified stock options to purchase 250,000 shares of Common Stock
at an exercise price equal to the fair market value of a share of Common Stock
on the date of grant with a term of 10 years and vesting 50% after one year 75%
after two years and 100% after three years from the date of grant. In addition,
the Company provides Mr. Evans with an office and an office assistant at the
Company's business headquarters, technical support for an office outside of the
Company's headquarters and the use of the Company's airplane for business and
personal use subject to the approval of the Company's Chief Executive Officer.
The foregoing arrangements are set forth in an agreement with a term of three
years, renewable each year for an additional year, and if the Company
terminated Mr. Evan's employment other than for cause, or if Mr. Evans
terminated his employment for Good Reason (as defined in the Agreement) or for
any reason after a change-in-control, Mr. Evans would be entitled to receive a
lump sum cash payment equal to the full amount of his base salary through the
end of the term of the agreement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
For the fiscal year ended December 31, 2001 each director and executive
officer of the Company timely filed all required reports under Section 16(a) of
the Securities Exchange Act of 1934.
OTHER TRANSACTIONS AND RELATIONSHIPS
The law firm of Kirkpatrick & Lockhart LLP, of which Mr. Queenan is senior
counsel, furnished legal services to the Company in 2001.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Organization and Compensation Committee is or has ever
been an employee of the Company and no executive officer of the Company has
served as a director or member of a compensation committee of another company
of which any member of the Committee is an executive officer.
16
PRINCIPAL ACCOUNTING FIRM FEES
Set forth below is a summary of the fees paid for the year ended December
31, 2001 to the Company's principal accounting firm, Deloitte & Touche LLP, the
member firms of Deloitte Touche Tohmatsu, and their respective affiliates:
Audit fees .............................................. $ 1,178,000(1)
Fees relating to financial information systems design and
implementation ......................................... $ 0
All other fees .......................................... $ 2,204,290(2)
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(1) Includes statutory audit fees related to the Company's wholly owned foreign
subsidiaries.
(2) Includes fees for audit related services (consisting principally of audits
of employee benefit plans, due diligence assistance pertaining to
acquisitions and consultation on accounting standards) of $224,000, tax
consulting and other tax related services of $1,965,601 and other non-audit
services of $14,689.
AUDIT COMMITTEE REPORT
In accordance with its written charter adopted by the Board of Directors,
the Audit Committee (the "Committee") assists the Board of Directors in
fulfilling its responsibility for oversight of the quality and integrity of the
accounting, auditing and financial reporting practices of the Company.
In discharging its oversight responsibility as to the audit process, the
Committee obtained from the independent auditors a formal written statement
describing all relationships between the auditors and the Company that might
bear on the auditors' independence consistent with Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees." The Committee
discussed with the auditors any relationships that may impact their objectivity
and independence, including fees for non-audit services, and satisfied itself
as to the auditors' independence. The Committee also discussed with management,
the internal auditors and the independent auditors the quality and adequacy of
the Company's internal controls and the internal audit function's organization,
responsibilities, budget and staffing. The Committee reviewed with the
independent auditors and the internal auditors their audit plan and audit
scope.
The Committee discussed with the independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, with and without management present,
discussed and reviewed the independent auditors' examination of the financial
statements. The Committee also discussed the results of the internal audit
examinations.
The Committee reviewed the audited financial statements of the Company as
of and for the year ended December 31, 2001, with management and the
independent auditors. Management has the responsibility for the preparation of
the Company's financial statements and the independent auditors have the
responsibility for the examination of those statements.
Based on the above-mentioned review and discussions with the independent
auditors, the Committee recommended to the Board of Directors that the
Company's audited financial statements be included in its Annual Report on Form
10-K for the year ended December 31, 2001, for filing with the Securities and
Exchange Commission. The Committee also recommended the reappointment, subject
to shareholder approval, of the independent auditors and the Board of Directors
concurred in such recommendation.
Submitted by:
The Audit Committee of the
Board of Directors of Crane Co.
R.S. Forte
D.R. Gardner
C.J. Queenan, Jr.
17
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 2002. 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 Deloitte &
Touche LLP will attend the Annual Meeting and will 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.
SHAREHOLDER PROPOSAL REGARDING IMPLEMENTATION OF THE
MACBRIDE PRINCIPLES
The following proposal was submitted to the Company by New York City
Comptroller Alan G. Hevesi on behalf of the New York City Employees' Retirement
System and the New York City Teachers' Retirement System, which held 64,625 and
93,409 shares of the Company's common stock as of October 25, 2001,
respectively, and by New York State Comptroller H. Carl McCall on behalf of the
New York State Common Retirement Fund, which held 144,071 shares of the
Company's common stock as of October 31, 2001. Mr. Hevesi's address is 1 Centre
Street, New York, New York 10007-2341, and Mr. McCall's address is A.E. Smith
State Office Building, Albany, New York 12236.
"WHEREAS, Crane Company operates a wholly-owned subsidiary in Northern
Ireland,
WHEREAS, the securing of a lasting peace in Northern Ireland encourages us
to promote means for establishing justice and equality;
WHEREAS, employment discrimination in Northern Ireland has been cited by
the International Commission of Jurists as one of the major causes of sectarian
strife in that country:
WHEREAS, Dr. Sean MacBride, founder of Amnesty International and Nobel
Peace Laureate, has proposed several equal opportunity employment principles to
serve as guidelines for corporations in Northern Ireland. These include:
1. Increasing the representation of individuals from under-represented
religious groups in the workforce, including managerial, supervisory,
administrative, clerical and technical jobs.
2. Adequate security for the protection of minority employees both at the
workplace and while traveling to and from work.
3. The banning of provocative religious or political emblems from the
workplace.
4. All job openings should be publicly advertised and special recruitment
efforts should be made to attract applicants from under-represented
religious groups.
5. Layoff, recall, and termination procedures should not, in practice,
favor particular religious groupings.
6. The abolition of job reservations, apprenticeship restrictions, and
differential employment criteria, which discriminate on the basis of
religion or ethnic origin.
7. The development of training programs that will prepare substantial
numbers of current minority employees for skilled jobs, including the
expansion of existing programs and the creation of new programs to
train, upgrade, and improve the skills of minority employees.
8. The establishment of procedures to assess, identify and actively
recruit minority employees with potential for further advancement.
9. The appointment of a senior management staff member to oversee the
company's affirmative action efforts and the setting up of timetables
to carry out affirmative action principles.
18
RESOLVED, Shareholders request the Board of Directors to:
1. Make all possible lawful efforts to implement and/or increase activity
on each of the nine MacBride Principles."
SUPPORTING STATEMENT OF NEW YORK CITY COMPTROLLER
We believe that our company benefits by hiring from the widest available
talent pool. An employee's ability to do the job should be the primary
consideration in hiring and promotion decisions.
Implementation of the MacBride Principles by Crane Company will
demonstrate its concern for human rights and equality of opportunity in its
international operations.
Please vote your proxy FOR these concerns.
OPPOSITION STATEMENT OF THE BOARD OF DIRECTORS OF THE COMPANY
The Board of Directors believes that the Company benefits by hiring from
the widest available talent pool and that an employee's ability to do the job
should be the primary consideration in hiring and promotion decisions, which is
why the Company has a long standing policy of providing equal opportunity
employment without regard to race, color, religion, sex, national origin,
citizenship status, age, disability or marital status. The Company has one
subsidiary located in Northern Ireland, Crane Stockham Valve Limited ("CSVL"),
and CSVL is subject to the same policy.
CSVL is subject to the Northern Ireland Fair Employment Act 1989, as
amended and updated by the Fair Employment and Treatment (Northern Ireland)
Order 1998 (the "Fair Employment Act"), and the Code of Practice for the
Promotion of Equality of Opportunity promulgated under the Fair Employment Act.
The Fair Employment Act makes religious discrimination and preferential
treatment in employment illegal, and requires CSVL to monitor its work force,
submit annual returns and regularly review its employment procedures. The Fair
Employment Act allows the Equality Commission for Northern Ireland (formerly
the Fair Employment Commission) to oversee such regular reviews and provides
for the imposition of penalties against employers who are found to have
discriminated on the grounds of religious or political beliefs.
As an employer with more than 10 employees in Northern Ireland, CSVL is
registered under the Fair Employment Act, and thus works with the Equality
Commission to further ensure that its employment procedures are not
discriminatory. In addition, CSVL entered into a voluntary agreement with the
Commission in October 1996 pursuant to which CSVL undertook a program of
affirmative action regarding communication of equal opportunity policies and
procedures, continuing to provide a working environment without intimidation or
harassment, annual auditing of its employment practices and procedures and
outreach measures to encourage applications from the Roman Catholic community.
In effect, the Company's policies and applicable laws endorse the same
belief in equality of opportunity that is embodied in the MacBride Principles.
However, the Board of Directors does not believe that it is advisable for the
Company to endorse or subscribe to the MacBride Principles as set forth in the
proposed resolution. By adopting the MacBride Principles, CSVL would become
unnecessarily accountable to two sets of similar but not identical fair
employment guidelines, which would unnecessarily burden CSVL and its management
in the conduct of CSVL's business. In addition, the Board of Directors is
concerned that implementation of a duplicate set of principles could lead to
confusion, conflicts and, potentially, unfairness in the workplace. For the
foregoing reasons, the Board of Directors believes that adoption of the
MacBride Principles is not in the best interests of the Company or its
shareholders.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends a vote AGAINST approval of
the Shareholder Proposal Regarding Implementation of the MacBride Principles.
19
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 fax
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 Georgeson Shareholder which will receive a
fee for its services of $5,500 plus up to $1,800 in expenses. Banks, brokerage
houses and other institutions, nominees and fiduciaries will be requested to
forward the proxy materials to the beneficial owners of the 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
10-13, the Audit Committee Report on page 17 and the 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 either of said
reports or said graph by reference and neither of the reports nor the graph
shall otherwise be deemed filed under such Acts.
Next Annual Meeting; Shareholder Proposals. The By-Laws provide that the
Annual Meeting of 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 2003
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 7, 2002. In addition, the Company's By-Laws provide that if security
holders intend to nominate directors or present proposals at the 2003 Annual
Meeting other than through inclusion of such proposals in the Company's proxy
materials for that meeting, then the Company must receive notice of such
nominations or proposals no earlier than December 24, 2002 and no later than
January 23, 2003. If the Company does not receive notice by that date, then
such proposals may not be presented at the 2003 Annual Meeting.
Shareholders who do not expect to attend in person are urged to sign, date
and return the enclosed proxy in the envelope provided, or to use the Internet
address or the toll-free telephone number on the enclosed proxy card. In order
to avoid unnecessary expense, we ask your cooperation in voting your proxy
promptly, no matter how large or how small your holdings may be.
By Order of the Board of Directors,
AUGUSTUS I. DUPONT
Secretary
March 7, 2002
20
PROXY
CRANE CO.
Annual Meeting of Shareholders April 22, 2002
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned does hereby appoint and constitute R.S. Evans, E.C. Fast and
A.I. duPont and each of them, true and lawful agents and proxies of the
undersigned, with power of substitution, and hereby authorizes each of them to
vote, as directed on the reverse side of this card, or, if not so 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 1, 2002 at
the Annual Meeting of Shareholders of Crane Co. to be held in the Riverside
Meeting Room of the Hyatt Regency Hotel, 1800 East Putnam Avenue, Old Greenwich,
Connecticut on Monday, April 22, 2002 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
other matters as may come before said meeting.
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 or use the toll-free telephone
number or Internet web site on the reverse side.
SEE REVERSE SIDE
_ FOLD AND DETACH HERE _
CRANE(r)
INVESTOR INFORMATION
Visit our web site at www.craneco.com where you will find detailed information
about the company, its component businesses and its stock performance. All of
this information, including annual reports, SEC filings, earnings, news and
dividend releases, can be bookmarked, printed or downloaded from this site.
You may automatically receive Crane Co. news by e-mail by clicking "Email Alert
Signup" at www.craneco.com. Once your name has been added to our distribution
list, the company will automatically e-mail you news on Crane Co.
You may also listen to all earnings releases, dividend releases, corporate news
and other important announcements 24 hours a day, seven days a week, on demand
by dialing our Crane Co. Shareholder Direct Information Line toll-free at
1-888-CRANE-CR (1-888-272-6327).
ELECTRONIC DELIVERY OF ANNUAL REPORT AND PROXY MATERIALS
Most shareholders can elect to view future proxy statements and annual reports
over the Internet instead of receiving paper copies in the mail. If you are a
registered shareholder and wish to consent to electronic delivery of future
annual reports and proxy statements, you may register your authorization at
www.econsent.com/cr. You will be required to provide your social security
number, e-mail address and the account number located above your name on this
proxy card.
0309
[X] Please mark your
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, FOR
proposal 2 and AGAINST proposal 3.
The Board of Directors recommends a vote FOR all nominees, FOR proposal 2 and
AGAINST proposal 3.
[ ] FOR [ ] WITHHELD
1. Election of Directors.
Nominees: 01. E. T. Bigelow, Jr.
02. J. Gaulin
03. C. J. Queenan, Jr.
For, except vote withheld from the following nominee(s):
______________________________________________
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Approval of Deloitte & Touche LLP as independent auditors for the Company
for 2002.
3. Shareholder proposal regarding MacBride Principles.
The signer hereby revokes all proxies heretofore given by the signer to vote at
said meeting or any adjournments thereof.
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SIGNATURE (S) DATE
NOTE: 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.
_ FOLD AND DETACH HERE _
CRANE(r)
VOTE BY TELEPHONE OR INTERNET
Crane Co. encourages you to take advantage of two cost-effective and convenient
ways to vote your shares. You may vote your proxy 24 hours a day, 7 days a week,
using either a touch-tone telephone or electronically through the Internet.
Please have your proxy card and social security number available. Your telephone
or Internet vote authorizes the proxies named on the above proxy card to vote
your shares in the same manner as if you marked, signed, and returned your proxy
card.
BY PHONE: On a touch-tone telephone dial 1-877-PRX-VOTE (1-877-779-8683)
from the U.S. or Canada. You will be asked to enter the PIN
number printed on this card just below the perforation.
BY INTERNET: Log on to the Internet and go to the web site
www.eproxyvote.com/cr. Click the "PROCEED" icon and you will be
asked to enter the PIN number printed on this card.
BY MAIL: Mark, sign and date your proxy card and return it in the
postage-paid envelope. If you are voting by telephone or via the
Internet, there is no need for you to mail back your proxy card.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.