File No.
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON , 1999
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF
THE SECURITIES EXCHANGE ACT OF 1934
HUTTIG BUILDING PRODUCTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 43-0334550
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
LAKEVIEW CENTER, SUITE 400
14500 SOUTH OUTER FORTY ROAD
CHESTERFIELD, MISSOURI 63017
(Address of principal executive offices) (Zip Code)
(314) 216-2600
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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Securities to be registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
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Common Stock, par value $.01 per share New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
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Securities to be registered pursuant to Section 12(g) of the Act:
NONE
(Title of class)
[CRANE LETTERHEAD]
[Date]
Dear Shareholder:
The enclosed Information Statement sets forth information regarding Huttig Building Products, Inc. and the spin-off of Huttig common stock to Crane shareholders on a tax-free basis. Huttig will thereby become a separate public company, listed on the New York Stock Exchange. If you are a holder of Crane common stock on , 1999, the record date for the spin-off, you will receive one share of Huttig common stock for every shares of Crane common stock you own on that date. The spin-off of Huttig common stock will be registered by book-entry accounts established for all Crane shareholders, and so you will not receive a stock certificate but rather an account statement stating the number of shares of Huttig common stock received by you in the spin-off.
Huttig's business is wholesale distribution of doors, windows and other building products, which is substantially different from Crane's manufacturing businesses. We believe that Huttig as a stand-alone company would be a more effective participant in the consolidation currently taking place in the building products distribution industry. The separation of this distribution business from Crane's manufacturing businesses should also produce added value for Crane shareholders because the market will be better able to see the strength of our manufacturing businesses. We also believe that this transaction will provide more value than the alternatives.
The Information Statement contains important information about Huttig's organization, business and strategies, including financial information. We urge you to read it carefully and to keep it for future reference.
You are not required to take any action to participate in the spin-off. We are not soliciting your proxy, because shareholder approval of the spin-off is not required.
Sincerely,
R. S. Evans Chairman and Chief Executive Officer
PRELIMINARY INFORMATION STATEMENT DATED , 1999 -- FOR INFORMATION ONLY
INFORMATION STATEMENT
CRANE CO.'S SPIN-OFF
OF
HUTTIG BUILDING PRODUCTS, INC.
You are being furnished with this Information Statement in connection with the spin-off by Crane Co. of all of the outstanding common stock of Huttig Building Products, Inc. to stockholders of Crane. Huttig comprises the substantial majority of Crane's Wholesale Distribution segment.
Crane will accomplish the spin-off by distributing all issued and outstanding shares of Huttig common stock to holders of record of Crane common stock. Crane will distribute one share of Huttig common stock for every Crane shares held as of the close of business on , 1999. The actual number of Huttig shares to be distributed will depend on the number of Crane shares outstanding on that date.
OWNING SHARES OF HUTTIG COMMON STOCK WILL ENTAIL RISKS. PLEASE READ "RISK
FACTORS" BEGINNING ON PAGE 8.
NO VOTE OF STOCKHOLDERS IS REQUIRED IN CONNECTION WITH THE SPIN-OFF. YOU ARE NOT BEING ASKED FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND HUTTIG OR CRANE A PROXY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS INFORMATION STATEMENT IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
The date of this Information Statement is , 1999.
TABLE OF CONTENTS
PAGE
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SUMMARY .............................................................................. 3
RISK FACTORS ......................................................................... 8
CAUTIONARY STATEMENT ................................................................. 11
BUSINESS ............................................................................. 11
Overview .......................................................................... 11
Industry Trends ................................................................... 12
Strategy .......................................................................... 13
Products .......................................................................... 14
Purchasing ........................................................................ 15
Sales and Marketing ............................................................... 15
Customers ......................................................................... 15
Competition ....................................................................... 16
Facilities ........................................................................ 16
Tradenames ........................................................................ 16
Employees ......................................................................... 16
Seasonality ....................................................................... 17
Backlog ........................................................................... 17
Legal Proceedings ................................................................. 17
Environmental ..................................................................... 17
HUTTIG HISTORICAL SELECTED FINANCIAL DATA ............................................ 18
HUTTIG UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION ........................... 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION ........................................................................... 22
MARKET RISK DISCLOSURE ............................................................... 24
CREDIT FACILITY ...................................................................... 24
THE SPIN-OFF ......................................................................... 25
Reasons for the Spin-Off ........................................................... 25
Manner of Effecting the Spin-Off ................................................... 25
Results of the Spin-Off ............................................................ 26
Certain Federal Income Tax Consequences of the Spin-Off ............................ 26
Listing and Trading of Huttig Common Stock ......................................... 27
ARRANGEMENTS WITH CRANE RELATING TO THE SPIN-OFF ..................................... 28
Distribution Agreement ............................................................. 28
Employee Matters Agreement ......................................................... 29
Tax Allocation Agreement ........................................................... 31
MANAGEMENT ........................................................................... 32
Directors .......................................................................... 32
Committees of the Board of Directors ............................................... 33
Compensation of Directors .......................................................... 33
Executive Officers ................................................................. 34
BENEFICIAL OWNERSHIP OF HUTTIG COMMON STOCK BY DIRECTORS AND MANAGEMENT .............. 35
PRINCIPAL STOCKHOLDERS OF HUTTIG ..................................................... 36
COMPENSATION OF EXECUTIVE OFFICERS ................................................... 36
Summary Compensation Table ......................................................... 36
Option Grants In Last Fiscal Year .................................................. 37
Aggregate Option Exercises In Last Fiscal Year and Fiscal Year-End Option Values ... 38
Retirement Benefits ................................................................ 38
Other Agreements and Information ................................................... 39
DESCRIPTION OF HUTTIG CAPITAL STOCK .................................................. 40
Common Stock ....................................................................... 40
Preferred Stock .................................................................... 40
Rights Plan ........................................................................ 41
Certain Provisions of Huttig's Governing Documents ................................. 43
Anti-takeover Legislation .......................................................... 43
Transfer Agent and Registrar ....................................................... 44
LIABILITY AND INDEMNIFICATION OF HUTTIG OFFICERS AND DIRECTORS ....................... 44
Elimination of Liability ........................................................... 44
Indemnification of Officers and Directors .......................................... 44
AVAILABLE INFORMATION ................................................................ 45
INDEX TO FINANCIAL STATEMENTS ........................................................ F-1
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SUMMARY
This summary highlights selected information from this document, but does not contain all the details concerning the spin-off, including information that may be important to you. To better understand Huttig and the spin-off, you should carefully review this entire document. References to "Huttig" or "the Company" mean Huttig Building Products, Inc. and its subsidiaries and divisions. References to "Crane" mean Crane Co. and its subsidiaries and divisions.
OVERVIEW OF HUTTIG'S BUSINESS AND STRATEGY
Huttig is a distributor of building materials used principally in new residential construction and in home improvement, remodeling and repair work. Its products are distributed through 45 distribution centers serving 41 states principally to building materials dealers (who, in turn, supply the end-user), directly to professional builders and large contractors, and to home centers, national buying groups and industrial and manufactured housing builders. Huttig's American Pine Products manufacturing facility, located in Prineville, Oregon, produces softwood moldings. Approximately 20% of its sales are to Huttig's distribution centers.
Huttig's growth strategy is to provide the residential construction business with differentiated building products and excellent service and to enhance Huttig's profitability through increased efficiencies. Huttig plans to execute this strategy through acquisitions that allow it to expand geographically, consolidate in existing markets or broaden its customer base, and by focusing on customer service, capitalizing on the size of its distribution center network and reducing its transaction costs.
Huttig's products include doors, windows, moldings, specialty building materials such as housewrap, stair parts and engineered wood products, and lumber and other commodity building products. Products carried by a particular distribution center vary by location. Many of Huttig's products, such as pre-hung doors, pre-assembled windows, cut-to-length molding and lumber, are customized to customer specifications, resulting in higher margin, value-added business. In order to improve customer service, Huttig is focused on increasing its product offerings with a greater depth of similar products and a broader range of complementary products, such as wall panels, trusses and engineered floor systems.
To varying degrees in different markets, Huttig offers a number of services to its customers, including assistance with project design and product specifications, installation of products and coordination of job-site delivery with whole house packages staged for delivery as needed by the contractor.
Each distribution center is focused on meeting local market needs and offering competitive prices. Inventory levels, merchandising and pricing are tailored to local markets. Huttig's information system provides each distribution center manager with real-time pricing, inventory availability and margin analysis to facilitate this strategy. Huttig also supports its distribution centers with centralized product management, credit and financial controls, training and marketing programs and human resources expertise.
Huttig seeks to closely align its employee compensation structure with its shareholders' interests. A significant part of the compensation of most of Huttig's employees is based on the performance of individual distribution centers. Huttig's management incentive compensation programs, in which all executive officers and building center managers participate, are based on increasing the after-tax rate of return on the assets employed in its business. In addition, Huttig's stock-based compensation plans ensure that key employees are focused on actions and strategies intended to increase shareholder value.
QUESTIONS AND ANSWERS ABOUT HUTTIG AND THE SPIN-OFF
Why is Huttig being spun off by Crane? o Huttig is being spun off for the following reasons:
o The spin-off should allow Huttig to more
effectively pursue its acquisition strategy by,
among other things, providing it the flexibility
to use its stock as currency to purchase
potential acquisition targets.
o The growth and management strategies of Huttig's
distribution business are not fully aligned with
the other businesses of Crane. Separation of its
business from Crane will allow Huttig to better
position its own strategic objectives in its area
of expertise, which should result in enhanced
growth.
o The spin-off will enable Huttig to have direct
access to capital markets. Depending upon market
conditions, Huttig may raise equity capital to
retire some or all of its outstanding debt.
o The spin-off will allow Huttig to recruit, retain
and motivate key employees by providing them with
stock-based compensation incentives directly tied
to the success of Huttig's business.
What will I receive in the spin-off? o Crane will distribute one share of Huttig common
stock for every shares of Crane common stock owned
as of , 1999. For example, if you own 100 shares of
Crane common stock, you will receive shares of
Huttig common stock. You will continue to own your
Crane common stock.
What do I have to do to participate in o Nothing. No stockholder vote is required for the
the spin-off? spin-off.
How will Crane distribute Huttig o If you own Crane common stock on the record date,
common stock to me? the distribution agent will automatically credit
your shares of Huttig common stock to a book-entry
account established to hold your Huttig common stock
on , 1999 and will mail you a statement of your
Huttig common stock ownership. Following the
spin-off you may retain your shares of Huttig common
stock in your book-entry account, sell them,
transfer them to a brokerage or other account, or
request a physical certificate for whole shares.
o You will not receive new Crane stock certificates.
What is the record date? o The record date is , 1999.
What if I hold my shares of Crane o If you hold your shares of Crane common stock
common stock through my stockbroker, through your stockbroker, bank or other nominee, you
bank or other nominee? are probably not a stockholder of record and your
receipt of Huttig common stock depends on your
arrangements with the nominee that holds your shares
of Crane common stock for you. It is anticipated
that
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stockbrokers and banks generally will credit their
customers' accounts with Huttig common stock on or
about , 1999, but you should check with
your stockbroker, bank or other nominee. Following
the spin-off you may instruct your stockbroker, bank
or other nominee to transfer your shares of Huttig
common stock into your own name to be held in
book-entry form through the direct registration
system operated by the distribution agent.
How will you treat fractional shares? o If you own fewer than shares of Crane common stock,
you will receive cash instead of your fractional
share of Huttig common stock. If you own or more
shares of Crane common stock, your book-entry
account will be credited with all whole and
fractional shares of Huttig common stock you should
receive unless you request physical certificates (in
which case you will receive physical certificates
for all whole shares of Huttig common stock you
should receive and cash instead of any fractional
share interest). Fractional shares to be cashed out
will be aggregated and sold by the distribution
agent, which will distribute to you your portion of
the cash proceeds promptly after the spin-off. No
interest will be paid on any cash distributed in
lieu of fractional shares.
What is Huttig's dividend policy? o It is currently anticipated that no cash dividends
will be paid on Huttig common stock in the
foreseeable future in order to conserve cash for use
in Huttig's business, for possible future
acquisitions and for debt reduction. It is expected
that Huttig will periodically re-evaluate this
dividend policy taking into account its operating
results, capital needs and other factors.
How will Huttig common stock trade? o Huttig has applied to list its common stock on the
New York Stock Exchange under the symbol "HBP" and
expects that regular trading will begin on , 1999.
A temporary form of interim trading called
"when-issued trading" may occur for Huttig common
stock on or before , 1999 and continue through
, 1999. A when-issued listing can be identified
by the "wi" letters next to Huttig common stock on the
New York Stock Exchange Composite Tape. If when-issued
trading develops, you may buy or sell Huttig common
stock in advance of the , 1999 spin-off. When-issued
trading occurs in order to develop an orderly market
and trading price for Huttig common stock after the
spin-off.
o Crane common stock will continue to trade on a
regular basis and may also trade on a when-issued
basis, reflecting an assumed post-spin-off value for
Crane common stock. When-issued trading in Crane
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common stock, if available, could last from on or
before , 1999 through , 1999. If this occurs,
an additional listing for Crane common stock, followed
by the "wi" letters, will appear on the New York
Stock Exchange Composite Tape.
Is the spin-off taxable for United States o No. Crane has requested a tax ruling from the
federal income tax purposes? Internal Revenue Service stating in principle that
the spin-off will be tax-free to Crane and to
Crane's stockholders. See "Risk Factors" and "The
Spin-Off -- Certain Federal Income Tax Consequences
of the Spin-Off."
Will Huttig be related to Crane in any o Crane will not own any Huttig common stock after the
way after the spin-off? spin-off.
o The board of directors of Huttig will consist of
eight directors, seven of whom currently serve as
directors of Crane. Mr. R. S. Evans, Chairman and
Chief Executive Officer of Crane, is the Chairman of
Huttig.
o Crane's largest stockholder, The Crane Fund, will
also be Huttig's largest stockholder holding
approximately 11.00% of Huttig's outstanding common
stock. The current trustees of The Crane Fund are
officers of Crane. See "Principal Stockholders of
the Company."
o Huttig and Crane have entered into the following
agreements:
o A Distribution Agreement, which provides for the
actions required to separate Huttig's businesses
from other businesses of Crane and governs various
relationships and circumstances that may arise
between Huttig and Crane after the spin-off.
o An Employee Matters Agreement, which addresses
issues between Crane and Huttig about employees,
pension and other employee benefit plans and other
compensation arrangements for current and former
employees of Huttig.
o A Tax Allocation Agreement dividing certain U.S.
federal, state, local and non-U.S. tax liabilities
between Crane and Huttig.
o A Transition Services Agreement under which Crane
will provide various transition services to Huttig
for limited periods of time following the spin-off.
Are there any risks entailed in owning o Yes. Stockholders should consider carefully the
Huttig common stock? matters discussed in the section of this Information
Statement called "Risk Factors."
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WHAT HAS ALREADY BEEN DONE IN PREPARATION FOR THE SPIN-OFF
Board Appointments o The Huttig board of directors is expected to consist
initially of the following individuals, all of whom
are currently directors of Crane other than Mr.
Kulpa: Mr. E. Thayer Bigelow, Jr.,Mr. R. S. Evans,
Mr. Richard S. Forte, Mr. Dorsey R. Gardner, Mr.
Barry J. Kulpa, Mr. Dwight C. Minton, Mr. Charles J.
Queenan, Jr. and Mr. James L. L. Tullis.
Senior Management o It is expected that Huttig senior management after
the spin-off will be the same persons who are
currently serving as executive officers of Huttig.
In addition, Mr. R.S. Evans, Chairman and Chief
Executive Officer of Crane, will continue to be the
Chairman of Huttig. "See Management -- Executive
Officers."
New Credit Arrangements o A -year, $[75] million [unsecured revolving credit
facility] has recently been established by Huttig,
the proceeds of which will be used by Huttig prior
to the spin-off to repay certain of Huttig's debt
obligations and other liabilities to Crane and
certain of its affiliates. Crane will cause any
remaining debt obligation of Huttig to Crane or its
affiliates to be canceled or Crane will contribute
cash to Huttig in an amount sufficient to repay
fully any remaining debt to Crane or its affiliates
prior to the spin-off. In the event that Huttig has
any remaining borrowing availability under this
credit facility following repayment of its debt
obligations to Crane or its affiliates, Huttig
expects to use such funds for working capital or
general corporate purposes.
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WHO CAN HELP ANSWER YOUR QUESTIONS
Stockholders of Crane with questions relating to the spin-off should contact:
Beacon Hill Partners, Inc. 90 Broad Street New York, New York 10004 (212) 843-8500
The distribution agent for Huttig common stock in the spin-off and the transfer agent and registrar for Huttig common stock after the spin-off is:
RISK FACTORS
o CYCLICALITY AND SEASONALITY IN THE NEW RESIDENTIAL CONSTRUCTION AND HOME IMPROVEMENT INDUSTRY COULD HAVE A MATERIAL ADVERSE EFFECT ON HUTTIG'S FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Huttig's sales depend heavily on the strength of the national and local new residential construction and home improvement and remodeling markets. The strength of these markets depends on new housing starts and residential renovation projects, which are a function of many factors beyond Huttig's control, including interest rates, employment levels, availability of credit, prices of commodity wood products and consumer confidence.
Future downturns in the markets that Huttig serves could have a material adverse effect on its operating results or financial condition. In addition, because these markets are sensitive to cyclical changes in the economy in general, future downturns in the economy could have a material adverse effect on Huttig's financial condition and results of operations.
Huttig's first quarter and, to a lesser extent, its fourth quarter, are typically adversely affected by winter construction cycles and weather patterns in colder climates as the level of activity in the new construction and home improvement markets decreases. Because much of Huttig's overhead and expense remains relatively fixed throughout the year, its profits also tend to be lower during the first and fourth quarters. The effects of winter weather patterns on Huttig's business are offset somewhat by the increase in residential construction activity during the same period in the deep South, Southwest and Southern California markets in which Huttig participates. It is expected that these seasonal variations will continue in the future.
o COMPETITION IN HUTTIG'S INDUSTRY COULD RESULT IN LOWER SALES AND PRICES, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON ITS FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The building products distribution industry is highly competitive. The principal competitive factors in this industry are:
o availability of materials and supplies;
o service and delivery capabilities;
o ability to assist with problem-solving;
o relationships with customers; and
o breadth of product offerings.
Also, financial stability and geographic coverage are important to manufacturers in choosing distributors for their products.
Huttig's competition varies by product line, customer classification and geographic market. It competes with many local, regional and, in certain markets and product categories, national building products distributors and dealers. Huttig also competes with major product manufacturers with national distribution capability. To a limited extent in certain markets, Huttig competes with the large home center chains for the business of smaller contractors. There can be no assurance that competition from these large home center chains will not, in the future, include competition for the business of larger contractors.
Some of Huttig's competitors have greater financial and other resources. Because they have greater resources, they may be able to withstand sales or price decreases better than Huttig can. There can be no assurance that Huttig will be able to respond effectively to the competitive pressures in its industry.
o HUTTIG'S PLANNED PURSUIT OF ACQUISITIONS INVOLVES RISKS THAT MAY HAVE AN ADVERSE EFFECT ON HUTTIG'S FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
As part of its growth strategy, Huttig plans to pursue acquisitions. If Huttig is not correct when it assesses the value, strengths, weaknesses, liabilities and potential profitability of acquisition candidates or it is not successful in integrating the operations of the acquired businesses, it could have a material adverse effect on Huttig's financial condition and results of operation. Huttig also may not be successful finding desirable acquisition candidates or completing acquisitions with candidates that it identifies. Depending upon the size of a particular transaction or the magnitude of Huttig's acquisition activity in the aggregate, future acquisitions could require additional equity capital, further borrowings and/or the consent of Huttig's lenders. Future acquisitions that Huttig finances through issuing equity
securities could be dilutive to then current stockholders. There can be no assurances that Huttig's lenders will consent to any capital raising or acquisition transactions.
o HAVING NO OPERATING HISTORY AS A STAND-ALONE COMPANY MAKES IT IMPOSSIBLE TO PREDICT HUTTIG'S PROFITABILITY AFTER THE SPIN-OFF.
Huttig has historically relied on Crane for certain financial and administrative services, such as treasury, legal, tax, insurance and employee benefit plan administration. After the spin-off, Crane will only be obligated to provide Huttig with assistance and services set forth in the Transition Services Agreement. See "Arrangements with Crane Relating to the Spin-Off."
Following the spin-off, Huttig will incur the additional costs of performing these functions itself, as well as the additional expenses associated with the management of a public company. While Huttig has been profitable as part of Crane, there can be no assurance that, as a stand-alone company, its future profits will be comparable to historical results before the spin-off. See "Huttig Unaudited Pro Forma Condensed Financial Information."
o IF HUTTIG CANNOT ATTRACT AND RETAIN KEY PERSONNEL IT COULD HAVE A MATERIAL ADVERSE EFFECT ON ITS FUTURE SUCCESS.
Huttig's future success depends to a significant extent upon the continued service of its executive officers and other key management and technical personnel and on its ability to continue to attract, retain and motivate qualified personnel. The loss of the services of one or more of Huttig's key employees or its failure to attract, retain and motivate qualified personnel could have a material adverse effect on its financial condition and results of operations.
o ANY INABILITY TO OBTAIN THE PRODUCTS THAT HUTTIG DISTRIBUTES COULD HAVE A MATERIAL ADVERSE EFFECT ON ITS FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Huttig distributes building products that are manufactured by a number of major suppliers. As is customary in this industry, Huttig does not have long-term contracts with its suppliers. Although Huttig believes that its relationships with its suppliers are strong and that it would have access to similar products from competing suppliers, any disruption in its sources of supply, particularly of the most commonly sold items, could have a material adverse effect on its financial condition and results of operations. Supply shortages may occur as a result of unanticipated demand or production difficulties. When shortages occur, building material suppliers often allocate products among distributors. Future shortages may occur from time to time and may have a short-term material adverse effect on Huttig's financial condition and results of operations.
o HUTTIG'S FINANCIAL PERFORMANCE IS INFLUENCED BY THE FLUCTUATION IN PRICES OF COMMODITY WOOD PRODUCTS THAT HUTTIG BUYS AND THEN RESELLS.
In parts of Huttig's business, such as the softwood molding manufacturing operation and certain of its distribution centers, Huttig is subject to periodic fluctuations in the prices of wood commodities. Huttig's profitability is influenced by these fluctuations due to the change in commodity prices between the time it buys them and the time it resells them. There can be no assurance that an inability to manage these fluctuations would not have a material adverse effect on Huttig's financial condition and results of operations.
o BECAUSE THERE HAS BEEN NO PRIOR MARKET FOR HUTTIG'S COMMON STOCK, IT IS IMPOSSIBLE TO PREDICT THE PRICES AT WHICH HUTTIG COMMON STOCK WILL TRADE IN THE OPEN MARKET.
There has been no prior trading market for Huttig's common stock, and there can be no guarantee as to the prices at which it will trade after completion of the spin-off. Until Huttig common stock is fully distributed and an orderly market develops, the trading prices for it may fluctuate significantly. The prices at which shares of Huttig common stock trade will be determined by the marketplace and may be influenced by many factors, including, among other things, the following factors:
o the depth and liquidity of the market for Huttig common stock;
o investor perceptions of Huttig, its business and the industries in which it operates;
o Huttig's dividend policy;
o Huttig's financial results; and
o general economic and market conditions.
o IF SUBSTANTIAL VOLUMES OF THE HUTTIG COMMON STOCK RECEIVED IN THE SPIN-OFF ARE RE-SOLD SOON AFTER THE SPIN-OFF, IT COULD CAUSE A DECREASE IN THE MARKET PRICE OF HUTTIG COMMON STOCK.
Substantially all of the shares of Huttig common stock distributed in the spin-off will be eligible for immediate resale in the public market. In transactions similar to the spin-off, it is not unusual for a significant redistribution of shares to occur during the first few weeks or even months following completion of the transaction because of the differing objectives and strategies of investors.
It can not be predicted whether substantial amounts of Huttig common stock will be sold in the open market following the spin-off or what effect such sales might have. A large volume of sales in the public market during this period, or the perception that any redistribution has not been completed, could have a material adverse effect on the market price of Huttig common stock.
o FAILURE OF REPRESENTATIONS AND ASSUMPTIONS UNDERLYING THE IRS TAX RULING COULD CAUSE THE SPIN-OFF NOT TO BE TAX-FREE TO CRANE OR TO CRANE'S STOCKHOLDERS AND MAY GIVE RISE TO INDEMNIFICATION OBLIGATIONS ON HUTTIG'S PART.
While a tax ruling relating to the qualification of a spin-off as a tax-free distribution within the meaning of Section 355 of the Internal Revenue Code generally is binding on the IRS, the continuing validity of a tax ruling is subject to certain factual representations and assumptions. Neither Crane nor Huttig is aware of any facts or circumstances that would cause the representations and assumptions contained in the tax ruling request made by Crane to be untrue.
If the spin-off were not to qualify as a tax-free distribution within the meaning of Section 355 of the Code, Crane would recognize taxable gain equal to the excess of the fair market value of the Huttig common stock distributed to Crane's stockholders over Crane's tax basis in the Huttig common stock. In addition, each Crane stockholder who receives the Huttig common stock in the spin-off would generally be treated as receiving a taxable distribution in an amount equal to the fair market value of the Huttig common stock.
If the spin-off qualified under Section 355 of the Code but was disqualified as tax-free to Crane because of certain post-spin-off circumstances, such as an acquisition of Huttig within two years after the spin-off, Crane would recognize taxable gain but the spin-off would generally be tax-free to each Crane stockholder.
The Tax Allocation Agreement provides that Huttig will be responsible for any taxes imposed on Crane that would not have been payable but for the breach by Huttig of any representation, warranty or obligation under the Tax Allocation Agreement, the tax ruling request or the Distribution Agreement. For example, under the Tax Allocation Agreement, unless Huttig receives an opinion of counsel reasonably satisfactory to Crane or a new IRS ruling to the effect that the action will not disqualify the spin-off from tax-free treatment, Huttig may not for two years after the spin-off, among other things, be acquired by a third party or repurchase more than 20% of the outstanding Huttig common stock. If any of the taxes described above were to become payable by Huttig because it breached one of these or its other representations or obligations, that payment would have a material adverse effect on Huttig's financial position, results of operations and cash flow and could exceed its net worth by a substantial amount. See "Arrangements with Crane Relating to the Spin-Off-- Tax Allocation Agreement."
o IF HUTTIG IS NOT SUCCESSFUL IN MANAGING ITS YEAR 2000 TRANSITION IT COULD HAVE A MATERIAL ADVERSE EFFECT ON ITS FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Crane and Huttig are in the process of implementing plans to address issues related to the impact of the Year 2000 on Huttig's business systems, infrastructure and suppliers. The estimated costs associated with these efforts continue to be evaluated based on actual experience.
While Huttig believes, based on available information, that it will be able to manage its total Year 2000 transition without any material adverse effect on its business, financial condition and results of operations, there can be no
assurance that this will be the case. In addition, Huttig may be adversely affected by the failure of suppliers, customers and federal, state, local and foreign governments to address Year 2000 issues affecting their systems.
See "Management's Discussion and Analysis of Results of Operations and Financial Condition -- Year 2000."
o PROVISIONS OF HUTTIG'S GOVERNING DOCUMENTS, APPLICABLE LAW AND THE TAX ALLOCATION AGREEMENT COULD HAVE THE EFFECT OF DELAYING OR PREVENTING A CHANGE IN CONTROL OF HUTTIG, WHICH MAY HAVE AN ADVERSE EFFECT ON THE MARKET PRICE OF HUTTIG'S COMMON STOCK.
Huttig's Restated Certificate of Incorporation, Restated Bylaws and Rights Agreement, and the General Corporation Law of the State of Delaware (the "DGCL") contain provisions that could make the acquisition of control of Huttig in a transaction not approved by Huttig's board of directors more difficult. See "Description of Huttig Capital Stock -- Rights Plan," "-- Certain Provisions of Huttig's Governing Documents," and "-- Anti-takeover Legislation." Certain tax consequences described above may also discourage an acquisition of control of Huttig for some period of time.
CAUTIONARY STATEMENT
You are cautioned that this document contains disclosures that are forward-looking statements. All statements regarding Huttig's expected future financial position, results of operations, cash flows, dividends, financing plans, business strategy, budgets, projected costs or cost savings, capital expenditures, competitive positions, growth opportunities, plans and objectives of management for future operations and markets for stock are forward-looking statements. In addition, forward-looking statements include statements in which words such as "expect," "believe," "anticipate," "intend," "plans," "should," "opportunity" or similar expressions are used. Although it is believed that the expectations reflected in such forward-looking statements are based on reasonable assumptions, no assurance can be given that such expectations will prove to have been correct, and actual results may differ materially from those reflected in the forward-looking statements.
Factors that could cause Huttig's actual results to differ from the expectations reflected in the forward-looking statements in this document include those set forth in "Risk Factors" as well as those risks relating to leverage and debt service requirements (including sensitivity to fluctuations in interest rates) and general business and economic conditions.
Neither Huttig nor Crane has any intention of or obligation to update forward-looking statements, even if new information, future events or other circumstances make them incorrect or misleading.
BUSINESS
OVERVIEW
Huttig is a distributor of building materials used principally in new residential construction and in home improvement, remodeling and repair work. Its products are distributed through 45 distribution centers serving 41 states principally to building materials dealers (who, in turn, supply the end-user), directly to professional builders and large contractors, and to home centers, national buying groups and industrial and manufactured housing builders. Huttig's American Pine Products manufacturing facility, located in Prineville, Oregon, produces softwood moldings. Approximately 20% of its sales are to Huttig's distribution centers.
Huttig's growth strategy is to provide the residential construction business with differentiated building products and excellent service and to enhance its profitability through increased efficiencies. Huttig plans to execute this strategy through acquisitions that allow it to expand geographically, consolidate in existing markets or broaden its customer base, and by focusing on customer service, capitalizing on the size of its distribution center network and reducing its transaction costs.
Huttig's products include doors, windows, moldings, specialty building materials such as housewrap, stair parts and engineered wood products, and lumber and other commodity building products. Products carried by a particular distribution center vary by location. Many of Huttig's products, such as pre-hung doors, pre-assembled windows, cut-to-length molding and lumber are customized to customer specifications, resulting in higher margin
value-added business. In order to improve customer service, Huttig is focused on increasing its product offerings with a greater depth of similar products and a broader range of complementary products such as wall panels, trusses and engineered floor systems.
To varying degrees in different markets, Huttig offers a number of services to its customers, including assistance with project design and product specifications, installation of products and coordination of job-site delivery with whole house packages staged for delivery as needed by the contractor. Huttig sells on open account terms to pre-approved customers at all locations.
Each distribution center is focused on meeting local market needs and offering competitive prices. Inventory levels, merchandising and pricing are tailored to local markets. Huttig's information system provides each distribution center manager with real-time pricing, inventory availability and margin analysis to facilitate this strategy. Huttig also supports its distribution centers with centralized product management, credit and financial controls, training and marketing programs and human resources expertise.
Huttig seeks to closely align its employee compensation structure with its shareholders' interests. A significant part of the compensation of most of Huttig's employees is based on the performance of individual distribution centers. Huttig's management incentive compensation programs, in which all executive officers and building center managers participate, are based on increasing the after-tax rate of return on the assets employed in its business. In addition, Huttig's stock-based compensation plans ensure that key employees are focused on actions and strategies intended to increase shareholder value.
INDUSTRY TRENDS
The building materials distribution industry is characterized by its substantial size, highly fragmented ownership structure and dependence on the cyclical and seasonal home building industry.
New housing starts in the U.S. in 1998 approximated 1.7 million based on data from F.W. Dodge, including 1.3 million single family residences. Approximately 64% of single family new construction in 1998 occurred in markets served by Huttig's distribution centers. According to the U.S. Department of Commerce, total spending on U.S. new residential construction in 1998 was $214.0 billion and aggregate expenditures for residential repair and remodeling were an additional $120.0 billion. Huttig believes that sales of windows, doors and other millwork accounted for approximately $12.0 billion in 1998.
Prior to the 1970's, building materials were sold in both rural and metropolitan markets largely by local dealers, such as lumberyards and hardware stores. These dealers, who generally purchased their products from wholesale distributors, sold building products directly to homeowners, contractors and homebuilders. In the late 1970's and 1980's, the advent of home center chains such as The Home Depot and Lowe's began to alter this distribution channel, particularly in metropolitan markets, as these retailers started to displace some local dealers. These mass merchandisers market a broad range of competitively priced building materials to the homeowner and small home improvement contractor. Also during this period, some building materials manufacturers such as Georgia Pacific and Weyerhauser began selling their products directly to home center chains and to local dealers as well. Accordingly, most wholesale distributors have been diversifying their businesses by seeking to sell directly to large contractors and homebuilders in selected markets and by providing home centers with fill-in and specialty products. Also, as large homebuilding companies seek to streamline the new residential construction process, building materials distributors have increasing opportunities to provide higher margin turnkey products and services.
The increasingly competitive environment faced by dealers also has prompted a trend toward industry consolidation that Huttig believes offers significant opportunities. Many distributors in the building materials industry are small, privately-held companies that generally lack the purchasing power of a larger entity and may also lack the broad lines of products and sophisticated inventory management and control systems typically needed to operate a multi-branch distribution network. These characteristics are also driving
the consolidation trend in favor of companies like Huttig that operate nationally and have significant infrastructure in place.
STRATEGY
Huttig's strategy is to grow its business by providing the residential construction industry with differentiated building products and excellent service, and to enhance its profitability through increased efficiencies. To execute this strategy, Huttig is focusing on four goals:
o Expansion through acquisition;
o Enhancing customer service;
o Leveraging its size; and
o Lowering transaction costs.
Expansion Through Acquisition. Huttig's acquisition strategy is to target leading traditional regional building materials distributors whose acquisition will allow Huttig to:
o enter new geographic markets;
o consolidate its presence in existing markets through
o increasing economies of scale in terms of delivery capabilities and purchasing, or
o broadening its product offerings, including those that will enhance its reputation as a value-added distributor of name-brand products; or
o broaden its customer base, including by increasing direct sales to builders and contractors.
Although Huttig has locations across most of the U.S., it does not have distribution centers in Texas or the Rocky Mountain or Great Lakes regions. Huttig also sees opportunity for greater market penetration in some of the mid-Atlantic states. Value-added service capabilities, such as project design assistance, installation of products and the ability to provide and co-ordinate delivery of building materials for whole house construction, also influence the selection of acquisition targets.
Enhancing Customer Service. Huttig is seeking to increase sales and profitability through enhancing customer service in the following ways:
o Increasing the breadth of its product lines to provide more "one-stop-shop" capabilities.
o Positioning itself to provide efficient outsourcing of value-added services.
o Optimizing ease and responsiveness in the order-taking and delivery process.
Leveraging Its Size. Huttig has established a centralized approach to product management and administrative functions in order to capitalize on the size of its U.S. distribution center network.
o Inventory levels, merchandising and pricing are tailored to local markets, but vendor selection and purchase cost are negotiated nationally from Huttig's headquarters. Huttig seeks to be a major customer of its suppliers, enabling it to obtain beneficial pricing and purchasing terms, ensure timely delivery of products and maintain appropriate inventory availability. Management believes that further opportunities to realize purchasing economies exist and Huttig intends to pursue such opportunities.
o Huttig centralizes many administrative functions such as accounting and finance, information technology, employee benefits, insurance, human resources, legal and national account sales efforts, both to achieve economies of scale and to permit distribution center managers to focus on sales, service and profitability.
o The benefits of centralization are being further leveraged through the consolidation of distribution centers with overlapping service areas. Huttig plans to continue consolidation of locations in tandem with its acquisition strategy.
Lowering Transaction Costs. Huttig is organizing to reduce transaction costs through increased operating efficiencies. Utilization of Six Sigma, a statistical and analytic process improvement technique to reduce inefficiencies, has been employed beneficially in this effort.
o Huttig's centralization of product management and administrative functions, and the consolidation of overlapping locations, are an integral part of its efforts to increase operating efficiencies. Huttig is also working to centralize logistics and transportation functions.
o Another key effort Huttig is undertaking is the standardization of processes and procedures at its distribution centers, which Huttig believes will further enhance the ability of its managers to focus on sales, service and profitability.
o Assisted by recent investment in technology through installation of a wide area network and upgrades to its computer systems, Huttig can provide administrative support to multiple distribution centers from another center or to all centers from headquarters. Huttig's information system provides its distribution center managers with real-time pricing, inventory availability and margin analysis.
PRODUCTS
Each distribution center carries a variety of products that vary by location. Huttig's principal products are doors, windows, moldings, specialty building materials such as housewrap, stair parts and engineered wood products, and lumber and other commodity building products.
The following table sets forth information regarding the percentage of net sales represented by the specified categories of total products sold by Huttig's distribution centers during each of the last two fiscal years. While it is believed that the percentages included in the table generally indicate the mix of Huttig's sales by category of product, the specific percentages are affected year-to-year by changes in the prices of commodity wood products, as well as changes in unit volumes sold.
1998 1997
------ -----
Doors ................. 37% 37%
Specialty Building
Materials .......... 20 21
Windows ............... 19 21
Moldings .............. 12 15
Lumber and Other
Commodity
Products ........... 12 6
|
Huttig's sales of doors were approximately $260.0 million in 1998 and included both interior and exterior doors and pre-hung door units. Huttig sells wood, steel and composite doors from various branded manufacturers such as Therma-Tru (Registered Trademark) , Jeld-Wen (Registered Trademark) , Florida Made, and Premdor, as well as providing value-priced unbranded products. The pre-hanging of a door within its frame is a value-added service that Huttig provides, allowing an installer to quickly place the unit in the house opening. Coupled with pre-hanging, Huttig also assembles many exterior doors with added sidelites and transoms, also value-added services and products. To meet the increasing demand for pre-hung doors, Huttig invested $3.0 million in the past year in state-of-the-art equipment, which allowed it to increase its capacity by approximately 20%.
Sales of specialty building materials were $141.0 million in 1998. Included in this category are products differentiated through branding or value-added characteristics. Branded products include Tyvek (Registered Trademark) housewrap, L. J. Smith Stair Systems and Simpson Strong-Tie (Registered Trademark) connectors. Also included in specialty sales are trusses, wall panels and engineered wood products such as floor systems assembled in Huttig's new facility in Topeka, Kansas serving the eastern Kansas and western Missouri markets.
Window sales amounted to $133.0 million in 1998 and included shipments of wood, vinyl-clad, vinyl and aluminum windows from branded manufacturers such as Andersen (Registered Trademark) , Weather Shield and Marvin, as well as unbranded products. Andersen (Registered Trademark) trademarked products, sold to dealers through 13 of Huttig's distribution centers, accounted for a significant
majority of Huttig's 1998 sales of windows. Huttig is working to expand the depth of its offerings of windows to include a wider range of quality and price as part of the strategy to better serve the customer.
Molding sales, including door jams, door and window frames, and decorative ceiling, chair and floor molding, were $89.0 million in 1998. The vast majority of these sales were made by American Pine Products. Profitability of this highly competitive, commodity-priced product depends upon efficient plant operations, rapid inventory turnover and quick reaction to changing market conditions. Moldings are a necessary complementary product line to doors and windows as part of a house's millwork package.
Sales of lumber and other commodity building products were $85.0 million in 1998. Growth of Huttig's lumber sales has resulted primarily from its acquisition of Mallco Lumber Company in Phoenix in 1997 and Huttig's acquisition of certain assets of and assumption of certain liabilities of Consolidated Lumber Company, Inc. in Kansas City in 1998. These acquisitions reflect Huttig's strategy to provide builders with the capability to purchase a house's framing and millwork package of products from one source and have each component delivered when needed. Other commodity building products include dry wall, metal vents, siding, nails and other miscellaneous hardware.
PURCHASING
Huttig generally negotiates with its major vendors on a company-wide basis to obtain favorable pricing, volume discounts and other beneficial purchase terms. A majority of Huttig's purchases are made from suppliers offering payment, discount and volume purchase programs. Distribution center managers are responsible for inventory selection and ordering on terms negotiated centrally. This approach allows Huttig's distribution centers to remain responsive to local market demand, while still maximizing purchasing leverage through volume orders. Distribution center managers are also responsible for inventory management at their respective locations.
Huttig is a party to distribution agreements with certain vendors, including Andersen (Registered Trademark) , on an exclusive or non-exclusive basis, depending on the product and the territory involved. Huttig's distributorships generally are terminable at any time by either party, in some cases without notice, and otherwise on notice ranging up to 60 days.
SALES AND MARKETING
Each of Huttig's distribution centers tailors its product and service mix to the local market and operates as a separate profit center. Huttig's marketing programs center on fostering strong customer relationships and providing superior service. This strategy is furthered by the high level of technical knowledge and expertise of Huttig's personnel. Huttig focuses its marketing efforts on the residential new housing and remodeling segments, with efforts directed toward the commercial and industrial segments limited to a small portion of its business. Certain of Huttig's suppliers advertise to the trade and directly to the individual consumer through nationwide print and other media.
Huttig's distribution center sales organization consists of outside field sales personnel serving the customer on-site who report directly to their local distribution center manager. They are supported by inside customer service representatives at each branch. This sales force is compensated by commissions determined on the basis of return on sales or total margin on sales.
CUSTOMERS
Huttig distributes products to a large number and variety of building materials dealers, professional builders, large contractors, home centers, national buying groups and others.
Building materials dealers represent Huttig's single largest customer group. Despite the advent of the home center chains and the trends toward consolidation of dealers and increased direct participation in wholesale distribution by some building materials manufacturers, Huttig believes that the wholesale distribution business continues to provide opportunities for increased sales. Huttig is targeting home centers for sales of fill-in and specialty products. In addition, some manufacturers are seeking to outsource the marketing function for their products, a role
that Huttig, as a large, financially stable distributor, is well-positioned to fill. Opportunities also exist for large distributors with the necessary capabilities to perform increasing amounts of services such as pre-hanging doors, thereby enabling Huttig to enhance the value-added component of its business.
The percentage of Huttig's 1998 revenue attributable to various categories of customers are as follows:
Dealers .......................... 62% Home Centers and Buying Groups 15% Builders and Contractors ......... 13% Industrial and Manufactured Housing ....................... 10% |
COMPETITION
Huttig's competition varies by product line, customer classification and geographic market. Huttig competes with many local and regional building product distributors, and, in certain markets and product categories, with national building product distributors and dealers. Huttig also competes with major corporations with national distribution capability, such as Georgia-Pacific, Weyerhaeuser and other product manufacturers that engage in direct sales; however, it also acts as a distributor for certain products of these manufacturers. Huttig sells products to large home center chains such as The Home Depot and Lowe's and, to a limited extent in certain markets, competes with them for business from smaller contractors. Competition from such large home center chains may, in the future, include more competition for the business of larger contractors.
Huttig believes that competition in the wholesale distribution business is largely on the basis of product availability, service and delivery capabilities and breadth of product offerings. Also, financial stability and geographic coverage are important to manufacturers in choosing distributors for their products. In the builder support business, Huttig's target customers generally select building products distributors on the basis of service and delivery, ability to assist with problem-solving, relationships and breadth of product offerings. Huttig's relative size and financial position are advantageous in obtaining and retaining distributorships for important products. Huttig's relative size also permits it to attract experienced sales and service personnel and gives it the resources to provide company-wide sales, product and service training programs. By working closely with its customers and utilizing its information technology, Huttig's branches are able to maintain appropriate inventory levels and are well-positioned to deliver completed orders on time.
Huttig's American Pine Products softwood molding manufacturing business competes on the basis of relative length of lead times to produce and deliver product, service and geographic coverage.
FACILITIES
Huttig's headquarters are in Chesterfield, Missouri, in leased facilities. Its manufacturing facility for softwood moldings is a 280,000-square foot facility owned by Huttig and located in Prineville, Oregon. Approximately 53% of Huttig's 45 distribution centers are leased and the remainder are owned. Warehouse space at Huttig's distribution centers aggregates approximately 2.7 million square feet. The types of facilities at these centers vary by location, from traditional wholesale distribution warehouses that may have particular value-added service capabilities such as pre-hung door operations, to classic lumber yards, and to builder support facilities with broad product offerings and capabilities for a wide range of value-added services. Huttig believes that its locations are well maintained and generally adequate for their purposes.
TRADENAMES
Historically, Huttig has operated under various tradenames in the markets it serves, retaining the name of an acquired business to preserve local identification. To capitalize on its increasing national presence, Huttig has converted most branch operations to the primary tradename "Huttig Building Products." Some local branches continue to use historical tradenames as secondary tradenames to maintain goodwill.
EMPLOYEES
At December 31, 1998, Huttig employed 2,328 persons, of which approximately 300 were
represented by unions. Huttig has not experienced any strikes or other work interruptions in recent years and has maintained generally favorable relations with its employees. The following table shows the approximate breakdown by job function of Huttig's employees:
Officers and corporate administrative ........... 77 Distribution center ......... 1,574 Field sales ................. 234 Manufacturing ............... 443 |
SEASONALITY
Huttig's first quarter and, to a lesser extent, its fourth quarter, are typically adversely affected by winter construction cycles and weather patterns in colder climates as the level of activity in both the new construction and home improvement markets decreases. The effects of winter weather patterns on Huttig's business are offset somewhat by the increase in residential construction activity during the same period in the deep South, Southwest and Southern California markets in which Huttig participates. Huttig also closely monitors operating expenses and inventory levels during seasonally affected periods and, to the extent possible, controls variable operating costs to minimize seasonal effects on profitability.
BACKLOG
Huttig's customers generally order products on an as-needed basis. As a result, virtually all product shipments in a given fiscal quarter result from orders received in that quarter. Consequently, order backlog represents only a very small percentage of the product sales that Huttig anticipates in a given quarter and is not indicative of its actual sales for any future period.
LEGAL PROCEEDINGS
Huttig is involved in various lawsuits, claims and proceedings arising in the ordinary course of its business. While the outcome of any lawsuits, claims or proceedings cannot be predicted, Huttig does not believe that the disposition of any pending matters will have a material adverse effect on its financial condition or liquidity.
ENVIRONMENTAL
Huttig is subject to federal, state and local environmental laws and regulations. Huttig has been identified as a potentially responsible party in connection with the clean up of contamination at two sites. In addition, some of Huttig's distribution centers are located in areas of current or former industrial activity where environmental contamination may have occurred, and for which Huttig, among others, could be held responsible. Huttig does not believe that its contribution to the clean up of the two sites will be material or that there are any material environmental liabilities at any of its distribution center locations. Huttig also believes that it is in compliance with applicable laws and regulations regulating the discharge of hazardous substances into the environment.
HUTTIG HISTORICAL SELECTED FINANCIAL DATA
The following table summarizes certain selected financial data of Huttig. The Statement of Income Data set forth below for each of the three years in the period ended December 31, 1998 and the Balance Sheet Data at December 31, 1998 and 1997 are derived from the audited consolidated financial statements and notes thereto included elsewhere in this Information Statement. The Statement of Income Data set forth below for each of the two years in the period ended December 31, 1995 and the Balance Sheet Data at December 31, 1996, 1995 and 1994 are derived from audited consolidated financial statements of Huttig not included in this Information Statement. The Statement of Income Data set forth below for the six month periods ended June 30, 1999 and 1998 and the Balance Sheet Data at June 30, 1999 and 1998 are derived from the unaudited condensed financial statements included elsewhere in this Information Statement. The historical selected financial data may not necessarily be indicative of Huttig's past or future performance as a separate, stand-alone company. Such historical data should be read in conjunction with "Management's Discussion and Analysis of Results of Operations and Financial Condition" and Huttig's financial statements and notes thereto included elsewhere in this Information statement. Per share data has not been presented because Huttig was not a publicly-held company during the periods presented.
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (IN THOUSANDS)
Statement of Income
Data:
Net sales ................ $380,754 $319,640 $707,450 $625,503 $595,089 $570,856 $598,665
Depreciation and
amortization ........... 3,272 2,226 5,586 4,409 4,929 5,228 5,234
Operating profit ......... 11,797 8,534 26,971 19,842 22,105 18,889 19,500
Interest expense,
net .................... 3,853 2,912 6,870 4,467 200 352 402
Income before
taxes .................. 7,289 5,507 21,851 14,814 20,757 20,094 20,082
Provision for
income taxes ........... 2,769 1,929 8,255 5,759 8,469 8,243 8,225
Net income ............... 4,520 3,578 13,596 9,055 12,288 11,851 11,857
Balance Sheet Data
(at end of period):
Assets ................... 213,217 165,658 218,462 153,950 206,430 191,535 185,527
Long-term debt:
Note Payable--
Parent ................ 92,182 67,100 93,940 67,100 -- -- --
Other long-term
debt .................. 1,253 1,512 1,379 1,715 2,074 2,540 4,911
|
HUTTIG UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
The following Huttig unaudited pro forma statements of income and balance sheet have been derived from the Huttig historical financial statements included elsewhere in this Information Statement. These statements should be read in conjunction with "Management's Discussion and Analysis of Results of Operations and Financial Condition" and the consolidated financial statements and notes thereto included elsewhere in this Information Statement.
The Huttig unaudited pro forma statements of income have been prepared on the basis that the spin-off, including the initial borrowings under the Huttig credit agreement and the application of a portion of the proceeds of said borrowings to repay certain indebtedness to Crane, and the aquisition of certain assets and assumption of certain liabilities of Consolidated Lumber Company, Inc., had occurred at January 1, 1998. The Huttig unaudited pro forma balance sheet has been prepared on the basis that the spin-off and the borrowings had occurred on June 30, 1999. The pro forma adjustments as described in the notes to the pro forma statements of income and balance sheet are based on currently available information and contain adjustments that management believes are reasonable. This pro forma information does not necessarily represent what the financial position or results of operations would have actually been if the transactions had in fact occurred on such date or at the beginning of such period or to be indicative of the financial results or results of operations for any future date or period.
HUTTIG UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
PRO FORMA
HISTORICAL ACQUISITION (A) ADJUSTMENTS PRO FORMA (B)
------------ ----------------- ----------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales ............................. $707,450 $31,253 $ -- $738,703
Cost of sales ......................... 606,993 22,850 -- 629,843
Selling, general and administrative 67,900 6,664 -- 74,564
Depreciation and amortization ......... 5,586 239 867 (c) 6,692
-------- ------- -------- --------
Operating profit ...................... 26,971 1,500 (867) 27,604
Interest expense, net ................. 6,870 -- (797) (d) 6,073
Miscellaneous income, net ............. 1,750 73 -- 1,823
-------- ------- -------- --------
Income before taxes ................... 21,851 1,573 (70) 23,354
Provision for income taxes ............ 8,255 594 (26)(e) 8,823
-------- ------- -------- --------
Net income ............................ $ 13,596 $ 979 $ (44) $ 14,531
======== ======= ======== ========
Net income per share:
Basic ...............................................................................
Diluted .............................................................................
Average diluted shares outstanding ................................................... (f)
|
(a) Reflects January to June results of operations of Consolidated Lumber Company, Inc. not included in 1998 results.
(b) Pro forma amounts do not reflect additional estimated annual expenses of approximately $2,000 for insurance, compensation, professional fees, directors fees and other expenses that Huttig expects to incur as a separate, stand-alone company after the spin-off.
(c) Reflects January to June amortization of the excess of the purchase price over the cost of the net assets acquired of Consolidated Lumber Company, Inc. not included in 1998 results.
(d) Reflects interest expense of $5,906 on the $75,000 assumed borrowings under the credit agreement at an annual interest rate of 73/4% and the amortization of $750 in financing fees over eight years, which is $797 less than interest expense of $6,703 incurred on parent company debt for the period.
(e) Reflects the tax effect of the pro forma adjustments.
(f) Reflects shares issued to effect the spin-off and the dilutive effect of stock options.
HUTTIG UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1999
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA (A)
------------ ----------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales ................................... $380,754 $ -- $380,754
Cost of sales ............................... 330,323 -- 330,323
Selling, general and administrative ......... 35,362 -- 35,362
Depreciation and amortization ............... 3,272 -- 3,272
-------- -------- --------
Operating profit ............................ 11,797 -- 11,797
Interest expense, net ....................... 3,853 (835)(b) 3,018
Miscellaneous expense, net .................. 655 -- 655
-------- -------- --------
Income before taxes ......................... 7,289 835 8,124
Provision for income taxes .................. 2,769 317 (c) 3,086
-------- -------- --------
Net income .................................. $ 4,520 $ 518 $ 5,038
-------- -------- --------
Net income per share:
Basic .......................................................................
Diluted .....................................................................
Average diluted shares outstanding ........................................... (d)
|
(a) Pro forma amounts do not reflect additional estimated six-month expenses of approximately $1,000 for insurance, compensation, professional fees, directors fees and other expenses that Huttig expects to incur as a separate, stand-alone company after the spin-off.
(b) Reflects interest expense of $2,953 on the $75,000 assumed borrowings under the credit agreement at an annual rate of 73/4% and the amortization of $750 in financing fees over eight years, which is $835 less than interest expense of $3,788 incurred on parent company debt for the period.
(c) Reflects the tax effect of the pro forma adjustments.
(d) Reflects shares to effect the spin-off and the dilutive effect of stock options.
HUTTIG UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------ ------------------ ----------
(IN THOUSANDS)
Assets
------
Current Assets:
Cash ............................................... $ 946 $ -- $ 946
Accounts receivable (net) .......................... 80,857 -- 80,857
Inventories ........................................ 49,288 -- 49,288
Other current assets ............................... 623 -- 623
-------- --------
Total current assets ............................. 131,714 -- 131,714
Other assets ........................................ 43,682 -- 43,682
Property, plant and equipment -- net ................ 37,821 -- 37,821
-------- --------
Total assets ..................................... $213,217 $ -- $213,217
======== ========== ========
Liabilities and Equity
----------------------
Current Liabilities:
Loans and current maturities of long-term debt ..... $ 255 $ -- $ 255
Accounts payable ................................... 48,637 -- 48,637
Payable to Parent .................................. 14,494 (14,494)(a) --
Accrued liabilities ................................ 16,569 -- 16,569
-------- ---------- --------
Total current liabilities ........................ 79,955 (14,494) 65,461
Long-term debt ...................................... 1,253 74,250 (b) 75,503
Note payable to Parent .............................. 92,182 (92,182)(c) --
Postretirement benefits ............................. 7,577 -- 7,577
Equity .............................................. 32,250 32,426 (d) 64,676
-------- ----------- --------
Total liabilities and equity ..................... $213,217 $ -- $213,217
======== =========== ========
|
(a) Reflects the payment of $14,494 due to Crane.
(b) Reflects $75,000 borrowings under the credit agreement, net of $750 for financing fees.
(c) Reflects the payment of $92,182 note due to a Crane financing subsidiary.
(d) Reflects a $32,426 capital contribution from Crane.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
GENERAL
The building products industry and Huttig are affected by various factors including general economic conditions, the level of new residential building and home improvement activity, weather conditions, interest rates, employment levels, and the availability of credit. See "Risk Factors."
Huttig has experienced improvement in its results of operations since 1994, with revenue growing from $598.7 million in 1994 to $707.5 million in 1998. This revenue growth has been accomplished largely due to acquisitions completed since 1993. Additionally, Huttig's operating profit has increased from $19.5 million in 1994 to $27.0 million in 1998, a compounded annual growth rate of 8.4%.
These trends are reflected in a 6.2% compounded annual growth rate in gross margin, which resulted primarily from the contribution of acquired businesses and sales of higher margin products at existing branches. Gross profit as a percentage of revenue has grown from 13.2% in 1994 to 14.2% in 1998. Operating profit as a percentage of revenue has increased from 3.3% in 1994 to 3.8% in 1998.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Revenue increased 19.1% from $319.6 million in the first six months of 1998 to $380.8 million in the comparable period of 1999. This increase was due to the 1998 mid-year acquisitions of Consolidated Lumber Company and Number One Supply and same-branch sales growth of 5.6%.
Gross profit grew $8.5 million to $50.4 million in the first six months of 1999 as the result of the acquisitions discussed above as well as from the increase in same-branch sales. Gross profit as a percentage of sales on a same-branch basis increased 0.4% over the 1998 period.
Selling, general and administrative expense increased $4.2 million or 13.5% from the comparable prior period, to $35.4 million, primarily as a result of acquisitions. On a same-branch basis, excluding acquisitions, these expenses increased only 2.1%, and therefore in the first six months of 1999 were 9.4% of sales compared to 9.7% in the same period last year.
As a result of the contribution from the acquisitions and the improved expense control, operating income in the first six months of 1999 was $11.8 million, or $3.3 million higher than the same period last year, and operating profit margin increased to 3.1% from 2.7%.
Interest expense increased $0.9 million as the result of higher borrowings.
Net income increased $0.9 million, or 26.3%, for the first six months of 1999 compared to the same period in 1998, and reflected a small increase as a percentage of sales.
FISCAL 1998 COMPARED TO FISCAL 1997
Revenue increased 13.1% from $625.5 million in 1997 to $707.5 million in 1998. This increase was due primarily to the mid-1997 acquisition of MALLCO Lumber Co. and the mid-1998 acquisitions of Number One Supply and certain assets and assumption of certain liabilities of Consolidated Lumber Company, Inc. Same-branch sales grew $6.5 million or 1.1% in 1998.
Gross profit in 1998 grew $18.1 million, or 21.9%, from the prior year and gross profit margins improved to 14.2% from 13.2%. Total gross profit increased principally as a result of the acquisitions, and margins increased due to an improved product mix including a greater percentage of value-added products, primarily doors.
Selling, general and administrative expenses increased $9.7 million or 16.8%, to $67.9 million in 1998 from $58.2 million in 1997. This was primarily because of the effect of acquisitions, but also due to an increase in compensation expense. This caused these expenses as a percentage of sales to increase from 9.3% in 1997 to 9.6% in 1998.
Because the gross profit margin increase was greater than the related increase in expenses, operating profit margins increased as a percentage of sales to 3.8% in 1998 from 3.2% in 1997. Operating profit totaled $27.0 million in 1998, a 35.9% increase from $19.8 million in 1997.
Interest expense increased $2.4 million in 1998 compared to 1997 as result of higher borrowings to finance a dividend to a subsidiary of Huttig's parent.
Net income increased 50.1% from $9.1 million in 1997 to $13.6 million in 1998 and net income as a percentage of sales increased from 1.4% in 1997 to 1.9% in 1998.
FISCAL 1997 COMPARED TO FISCAL 1996
Revenue increased 5.1% from $595.1 million in 1996 to $625.5 million in 1997. This was due primarily to the benefit of the sales contribution of the MALLCO Lumber acquisition in July 1997.
Gross profit declined $0.8 million or 1.0% in 1997 compared to 1996, because of an increase in raw materials costs for Huttig's molding manufacturing operations and the inability to increase selling prices due to competition from importers.
Selling, general and administrative expense increased $2.0 million or 3.5% from $56.2 million in 1996 to $58.2 million in 1997, primarily due to the acquisition noted above and expenses for repair of several older facilities. As a percentage of sales, these expenses decreased marginally to 9.3% in 1997 from 9.4% in the prior period. Operating income decreased 10.2% from $22.1 million in 1996 to $19.8 million in 1997.
Interest expense increased $4.3 million in 1997 compared to 1996 as result of higher borrowings to finance a dividend to a subsidiary of Huttig's parent.
Net income decreased 26.3% from $12.3 million in 1996 to $9.1 million in 1997 and net income as a percentage of sales decreased from 2.1% in 1996 to 1.4% in 1997.
LIQUIDITY AND CAPITAL RESOURCES
Huttig has depended primarily on the cash generated from its own operations to finance its needs. The combination of income from operations and cash generation from improved working capital management has been used to finance capital expenditures and seasonal working capital needs. Huttig's working capital requirements are generally greatest in the first eight months of the year and Huttig generates cash from working capital reductions in the last four months of the year. A continuing management focus to improve inventory turnover and accounts receivable and accounts payable days outstanding resulted in reduced working capital needs. Inventory turns increased to 10.1 from 8.1 in 1997 and 7.3 in 1996 resulting in a positive effect on cash flow of $12.4 million over the two years. To the extent internal funds generated were insufficient, Huttig borrowed from Crane Co. and to the extent cash generated by Huttig was greater than current requirements, the cash was returned to Crane. In particular, Huttig historically has borrowed from Crane to finance acquisitions, but has typically been able to generate cash sufficient to finance all other needs. In 1998, capital expenditures of $5.8 million and acquisition costs aggregating $44.9 million were financed through $35.9 million in cash generated from operations, with the remainder through borrowings from Crane.
In the future, Huttig will finance seasonal working capital requirements and acquisitions through cash from operations and the [bank facility]. $ of the proceeds from [the bank facility] will be used to repay indebtedness and other liabilities to Crane in connection with the spin-off.
EFFECTS OF INFLATION
In 1997, raw material price increases had a negative impact on Huttig's results of operations as it was unable to pass along these added costs to customers through sales price increases due to increased competition from imports. However, as Huttig continues to grow, its manufacturing operations decrease as a percentage of its overall business and any impact of inflation is lessened. Furthermore, management believes that, to the extent inflation affects its costs in the future and competitive conditions permit, Huttig can offset these increased costs by increasing sales prices.
YEAR 2000
The Year 2000 Issue relates to most computer software programs using two digits, rather than four, to define the applicable year for dates. Any of Huttig's information technology (IT) and non-information technology (non-IT) systems may recognize a date using "00" as the year 1900, rather than the year 2000. This could result in system failures or miscalculations, causing disruptions in operations, including the inability to process transactions and engage in similar normal business activities within Huttig and with third parties.
Huttig has implemented a year 2000 program for its IT and non-IT systems consisting of four phases: 1) awareness, formation, planning and management; 2) inventory, analysis, compliance testing, prioritization and planning; 3) implementation and validation; and 4) Year 2000 compliance. Huttig's senior management receive regular updates on the status of Huttig's Year 2000 program.
In addition, Huttig has contacted significant vendors and customers in order to determine its risks from a third party's failure to remediate its own Year 2000 issues. While information obtained from these contacts will be used to mitigate these risks, there can be no assurance that any third party systems or products will be Year 2000 compliant on a timely basis or that non-compliance by such third parties will not have a material adverse effect on Huttig.
Huttig's Year 2000 program was initiated in 1997. Virtually all mission-critical systems, including IT and non-IT systems, are in the implementation phase or are compliant. Non mission-critical systems are in various phases of completion and an immaterial amount of work on them is expected to continue into the year 2000. It is expected that all mission-critical systems will be implemented, tested and validated by September of 1999.
Year 2000 costs incurred to date are approximately $1.3 million, of which $0.7 million was expensed and $0.6 million was capitalized. Estimated future costs to complete the Year 2000 program are $0.5 million, of which $0.2 million will be expensed as incurred and the remaining $0.3 million will be capitalized. These costs have been, and will continue to be, funded from normal operating cash flows of the business. No other information technology projects have been or are being delayed by this program.
Huttig believes that completed and planned modifications and conversions of its software and hardware systems and its efforts to verify the readiness and compliance of material third parties will allow it to meet its Year 2000 compliance schedule. However, the success of the Year 2000 compliance program is based on the availability of a variety of technical experts, expected successful software modifications being performed by third parties, timely delivery of new software and hardware systems, and other factors. A deficiency with respect to any of these factors could cause a failure in Huttig's Year 2000 program, in whole or in part. The failure to correct a material Year 2000 program could result in an interruption in, or a failure of, certain normal business activities or operations, which could have a material adverse effect on Huttig's results of operations, liquidity or financial condition. Due to the inherent uncertainty in the Year 2000 problem, particularly in regard to third party vendor and customer Year 2000 readiness, Huttig is unable to determine at this time whether the consequences of any Year 2000 disruptions or failures will have a material adverse effect on Huttig's results of operations, liquidity or financial condition. However, based on current information, the most reasonably likely worst case scenario would involve the temporary disruption of Huttig's ability to fulfill customer orders and no material adverse effect on Huttig's financial condition is expected from this specific scenario.
MARKET RISK DISCLOSURE
Huttig currently has no floating rate indebtedness, holds no derivative instruments and does not generate significant income from non-U.S. sources. Accordingly, changes in interest rates and currency exchange rates do not generally have a direct effect on Huttig's financial position. Huttig is subject to periodic fluctuations in the price of wood commodities. Profitability is influenced by these fluctuations as prices change between the time Huttig buys and sells the wood. In addition, to the extent changes in interest rates affect the housing and remodeling market, Huttig would be affected by such changes.
CREDIT FACILITY
Huttig has recently established a $[75] million [unsecured revolving credit facility] with . Borrowings under this credit facility will be used to repay certain of Huttig's debts to Crane and some of its affiliates. If Huttig has any remaining borrowing availability under this credit facility, it is expected that those funds will be used for working capital or general corporate purposes.
THE SPIN-OFF
REASONS FOR THE SPIN-OFF
On , 1999, Crane's board of directors approved the spin-off of Huttig. The Crane board of directors believes that the spin-off is in the best interest of Crane's stockholders.
Huttig is being spun-off for the following reasons:
o The spin-off should allow Huttig to more effectively pursue its acquisition strategy by, among other things, providing it the flexibility to use its stock as currency to purchase potential acquisition targets.
o The growth and management strategies of Huttig's distribution business are not fully aligned with the other businesses of Crane. Separation of Huttig's business from Crane will allow Huttig to better position its own strategic objectives in its area of expertise, which should result in enhanced growth.
o The spin-off will enable Huttig to have direct access to capital markets. Depending upon market conditions, Huttig may raise equity capital to retire some or all of its outstanding debt.
o The spin-off will allow Huttig to recruit, retain and motivate key employees by providing them with stock-based compensation incentives directly tied to the success of Huttig's business.
MANNER OF EFFECTING THE SPIN-OFF
Crane will effect the spin-off by distributing all issued and outstanding shares of Huttig common stock to holders of record of Crane common stock as of the close of business on , 1999. The spin-off will be made on the basis of one share of Huttig common stock for every shares of Crane common stock held as of the close of business on , 1999.
As Huttig will use a direct registration system to implement the spin-off, the distribution agent will credit the shares of Huttig common stock distributed on the date of the spin-off, including fractional interests for those stockholders who receive at least one whole share of Huttig common stock, to book-entry accounts established for all Crane stockholders and will mail an account statement to each stockholder stating the number of shares of Huttig common stock, including such fractional interests, received by such stockholder in the spin-off. Following the spin-off, stockholders may request transfer to a brokerage or other account or physical stock certificates for their shares of Huttig common stock.
If a stockholder owns fewer than shares of Crane common stock and therefore is entitled to receive less than one whole share of Huttig common stock, that stockholder will receive cash instead of a fractional share of Huttig common stock. If a stockholder requests physical certificates for shares of Huttig common stock, that stockholder will receive physical certificates for all whole shares of Huttig common stock and cash instead of any fractional share interest. The distribution agent will, promptly after the date of the spin-off, aggregate all such fractional share interests in Huttig common stock with those of other similarly situated stockholders and sell such fractional share interests in Huttig common stock at then-prevailing prices. The distribution agent will distribute the cash proceeds to stockholders entitled to such proceeds pro rata based upon their fractional interests in Huttig common stock. No interest will be paid on any cash distributed in lieu of fractional shares.
No owner of Crane common stock will be required to pay any cash or other consideration for shares of Huttig common stock received in the spin-off or to surrender or exchange any shares of Crane common stock to receive shares of Huttig common stock. The shares of Huttig common stock distributed in the spin-off will be fully paid and nonassessable. The shares of Huttig common stock will not be entitled to preemptive rights. See "Description of Huttig Capital Stock."
Participants in the Crane Dividend Reinvestment and Stock Purchase Plan will be credited with the number of shares (including fractional shares) of Huttig common stock distributed in the spin-off in respect of the Crane common stock held in their dividend reinvestment accounts. Shares of Huttig
common stock credited as a result of the spin-off to a participant in the Crane Dividend Reinvestment and Stock Purchase Plan in respect of the Crane common stock held in that participant's dividend reinvestment account will be aggregated with shares of Huttig common stock distributed in the spin-off in respect of Crane common stock held by that participant outside such account and will be credited to such stockholder through the book-entry system.
NO CONSIDERATION WILL BE PAID BY STOCKHOLDERS OF CRANE FOR THE SHARES OF HUTTIG COMMON STOCK TO BE RECEIVED BY THEM IN THE SPIN-OFF, NOR WILL THEY BE REQUIRED TO SURRENDER OR EXCHANGE SHARES OF CRANE COMMON STOCK OR TAKE ANY OTHER ACTION IN ORDER TO RECEIVE HUTTIG COMMON STOCK.
RESULTS OF THE SPIN-OFF
After the spin-off, Huttig will be a separate public company. The number and identity of its stockholders immediately after the spin-off will be the same as the number and identity of Crane's stockholders at the close of business on . Immediately after the spin-off, it is expected that Huttig will have approximately holders of record of its common stock and approximately shares of its common stock outstanding, based on the number of record stockholders and issued and outstanding shares of Crane common stock at the close of business on and on the distribution ratio of one share of Huttig common stock for every shares of Crane common stock owned by a Crane stockholder at that time.
The spin-off will not affect the number of outstanding shares of Crane common stock or the rights attendant to those shares.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE SPIN-OFF
The following is a summary of the material U.S. federal income tax consequences of the spin-off. It is not intended to address the tax consequences for every stockholder. In particular, this summary does not cover state, local or non-U.S. income and other tax consequences. Accordingly, stockholders are strongly encouraged to consult their individual tax advisors for information on the tax consequences applicable to their individual situations. In addition, stockholders residing outside of the United States are encouraged to seek tax advice regarding the tax implications of the spin-off.
Crane has requested a tax ruling from the IRS. If granted, the tax ruling will state that, among other things, the spin-off will qualify as a tax-free distribution under Section 355 of the Internal Revenue Code. In accordance with this tax ruling:
o No gain or loss will be recognized by Crane upon the spin-off of Huttig common stock to Crane's stockholders.
o No gain or loss will be recognized by Crane's stockholders as a result of their receipt of Huttig common stock in the spin-off except to the extent that a stockholder receives cash in lieu of any fractional share.
o A Crane stockholder who receives cash as a result of the sale of a fractional share of Huttig common stock by the distribution agent on behalf of such stockholder will be treated as having received the fractional share in the spin-off and then having sold the fractional share. Accordingly, the stockholder will recognize gain or loss equal to the difference between the cash received and the amount of tax basis allocable (as described below) to the fractional share. Such gain or loss will be capital gain or loss if the fractional share would have been held by the stockholder as a capital asset.
o A stockholder's tax basis in Crane common stock will be apportioned between Crane common stock and Huttig common stock received in the spin-off on the basis of the relative fair market values of the shares at the time of the spin-off.
o The holding period of Huttig common stock received in the spin-off will be the same as the holding period of Crane common stock with respect to which Huttig common stock will be distributed, provided that the stockholder holds the Crane common stock as a capital asset on the date of the spin-off.
A tax ruling relating to the qualification of a spin-off as a tax-free distribution within the meaning of Section 355 of the Internal Revenue Code generally is binding on the IRS. However, the continuing validity of a tax ruling is subject to certain factual representations and assumptions. Crane and Huttig are not aware of any facts or circumstances that would cause the representations and assumptions contained in the tax ruling request made by Crane to be untrue.
If the spin-off were not to qualify as a tax-free distribution within the meaning of Section 355 of the Code, Crane would recognize taxable gain equal to the excess of the fair market value of the Huttig common stock distributed to Crane's stockholders over Crane's tax basis in the Huttig common stock. In addition, each Crane stockholder who receives Huttig common stock in the spin-off would generally be treated as receiving a taxable distribution in an amount equal to the fair market value of Huttig common stock. If the spin-off qualified under Section 355 of the Code but was disqualified as tax-free to Crane because of certain post-spin-off circumstances, such as an acquisition of Huttig within two years after the spin-off, Crane would recognize taxable gain but the spin-off would generally be tax-free to each Crane stockholder. See "Risk Factors."
Promptly following the spin-off, Crane will send a letter to the holders of Crane common stock who receive Huttig common stock in the spin-off that will explain the allocation of tax basis between Crane common stock and Huttig common stock.
THE FOREGOING IS ONLY A SUMMARY OF THE MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE SPIN-OFF UNDER CURRENT LAW AND IS INTENDED FOR GENERAL INFORMATION ONLY. EACH CRANE STOCKHOLDER SHOULD CONSULT HIS OR HER TAX ADVISOR AS TO THE PARTICULAR CONSEQUENCES OF THE SPIN-OFF TO SUCH STOCKHOLDER, INCLUDING THE APPLICATION OF STATE, LOCAL AND NON-U.S. TAX LAWS, AND AS TO POSSIBLE CHANGES IN TAX LAW THAT MAY AFFECT THE TAX CONSEQUENCES DESCRIBED ABOVE.
The Tax Allocation Agreement provides that Huttig will be responsible for any taxes imposed on Crane that would not have been payable but for the breach by Huttig of any representation, warranty or obligation under the Tax Allocation Agreement, the tax ruling request or the Distribution Agreement. See "Arrangements with Crane Relating to the Spin-Off -- Tax Allocation Agreement."
LISTING AND TRADING OF HUTTIG COMMON STOCK
Currently, there is no public market for Huttig common stock. Huttig has applied to have its common stock approved for listing on the New York Stock Exchange under the trading symbol "HBP". It is expected that a when-issued trading market for Huttig common stock will develop on or before the close of business on , 1999. The prices at which Huttig common stock may trade on a when-issued basis cannot be predicted. It is expected that the New York Stock Exchange will determine that Crane common stock traded on or after , 1999, the second trading day prior to the record date for the spin-off, may be traded either "ex-distribution -- when issued" or "regular way" (with due bills attached). Crane common stock traded "ex-distribution -- when issued" will entitle the buyer to receive only the underlying shares of Crane common stock. Crane common stock traded "regular way" (with due bills attached) will have due bills attached entitling the buyer to receive and requiring the seller to deliver the shares of Huttig common stock to be issued in the spin-off as well as the underlying shares of Crane common stock.
Beginning on the first New York Stock Exchange trading day after the date of the spin-off, it is expected that trading of Crane common stock "ex-distribution -- when issued" or "regular way" (with due bills attached) will no longer be permitted and Crane common stock will trade "regular way" only, entitling the buyer to receive only Crane common stock.
Until Huttig common stock is fully distributed and an orderly market develops, the prices at which trading in Huttig common stock occurs may fluctuate significantly and may be lower or higher than the price that would be expected for a fully-distributed issue. The prices at which Huttig common stock will trade following the spin-off will be determined by the marketplace and may be influenced by many factors, including:
o the depth and liquidity of the market for Huttig common stock,
o investor perceptions of Huttig, its business and the industries in which it operates,
o Huttig's dividend policy,
o Huttig's financial results, and
o general economic and market conditions.
Substantially all of the shares of Huttig common stock distributed in the spin-off will be eligible for immediate resale in the public market. In transactions similar to the spin-off, it is not unusual for a significant redistribution of shares to occur during the first few weeks or even months following completion of the transaction. We are not able to predict whether substantial amounts of Huttig common stock will be sold in the open market following the spin-off or what effect these sales may have on prices at which Huttig common stock may trade. Sales of substantial amounts of Huttig common stock in the public market during this period, or the perception that any redistribution has not been completed, could materially adversely affect the market price of Huttig common stock.
Generally, Huttig common stock distributed in the spin-off will be freely transferable, except for securities received by persons deemed to be Huttig "affiliates" under the Securities Act of 1933. Persons who may be deemed to be Huttig affiliates after the spin-off generally include individuals or entities that control, are controlled by, or are under common control with Huttig, including Huttig directors and executive officers. Persons who are Huttig affiliates will be permitted to sell their shares of Huttig common stock received in the spin-off only pursuant to an effective registration statement under the Securities Act or an exemption from the registration requirements of the Securities Act, such as in accordance with the requirements of Rule 144 under the Securities Act.
ARRANGEMENTS WITH CRANE
RELATING TO THE SPIN-OFF
For the purpose of governing certain of the relationships between Crane and Huttig relating to the spin-off and to provide for an orderly transition and for other matters, Crane and Huttig have entered into the agreements described below, copies of which have been filed as exhibits to the Registration Statement of which this Information Statement is a part. The following summaries of the material terms of these agreements are qualified by reference to the agreements as so filed.
DISTRIBUTION AGREEMENT
Huttig and Crane will enter into a Distribution Agreement that provides for the actions required to effect the spin-off.
The Distribution Agreement provides that on or prior to the effectiveness of the spin-off, Crane will deliver to the distribution agent a certificate or certificates representing a number of shares of Huttig common stock equal to the number of shares of Crane common stock issued and outstanding as of the record date divided by . Crane will instruct the distribution agent to make book-entry credits on the date of the spin-off or as soon thereafter as practicable for each holder of record of Crane common stock as of the record date for a number of shares of Huttig common stock equal to the quotient obtained by dividing (i) the number of shares of Crane common stock held by that holder of record as of the record date by (ii) .
The Distribution Agreement also provides that, after the spin-off, Crane will continue to have all rights in and to the name "Crane" and all related corporate symbols and logos.
The Distribution Agreement also provides that prior to the spin-off Huttig will borrow sufficient funds to repay indebtness and other outstanding liabilities to Crane in the amount of [ ].
The Distribution Agreement provides generally that all of Huttig's assets and liabilities will be vested solely in Huttig after the spin-off. Crane will have no interest in Huttig's assets and will have no obligation with respect to Huttig's liabilities after the spin-off. Specifically, the Distribution Agreement provides that Huttig will:
o secure the release of and substitution for Crane and its affiliates from all liabilities in respect of credit facilities, guaranties, letters of credit and other similar financial instruments related to
Huttig's business, other than those relating to both Huttig's business and other businesses of Crane; and
o use its reasonable best efforts to secure the release of and substitution for Crane and its affiliates from all liabilities in respect of bonds, indemnities, assurances and other contracts related to Huttig's business and any financial instruments or other contractual obligations related to both Huttig's business and other businesses of Crane.
The Distribution Agreement also provides that at the time of the spin-off:
o intercompany receivables, payables and other balances between Huttig and Crane and/or an affiliate of Crane will be settled and eliminated, with limited exceptions related to the spin-off, and
o agreements, arrangements, commitments or understandings between Huttig and Crane and/or an affiliate of Crane will be terminated except spin-off related arrangements and agreements with third parties.
The Distribution Agreement provides generally that all costs and expenses incurred through the time of the spin-off in connection with the spin-off, the preparation, execution and delivery of the agreements described in this section and the consummation of the contemplated transactions will be charged to and paid by Crane, other than (i) costs and expenses of Huttig's credit facilities and other financings and (ii) costs and expenses to the extent attributable to Huttig's business subsequent to the spin-off, which will be paid by Huttig. Except as otherwise expressly provided in any agreement, all costs and expenses incurred subsequent to and in connection with the spin-off will be paid by the party for whose benefit the expenses are incurred. Any expenses that cannot be allocated on that basis will be split equally between Huttig and Crane.
The Distribution Agreement provides that the spin-off will not occur until all of the following conditions are satisfied or waived by the Crane board of directors:
o receipt of the tax ruling from the IRS;
o repayment by Huttig of indebtedness and other liabilities to Crane in the amount of ;
o all material consents that are required to effect the spin-off having been obtained;
o the Form 10 having become effective under the Exchange Act;
o Huttig's Restated Certificate, the Restated Bylaws and the Rights Plan having been adopted and in full force and effect;
o Huttig common stock having been approved for listing on the NYSE;
o Huttig and Crane having entered into the arrangements necessary to effect the transactions contemplated by the Distribution Agreement, including any conveyance documents, the Employee Matters Agreement, the Tax Allocation Agreement, and the Transition Services Agreement;
o no order, injunction or decree having been issued and in effect by any court of competent jurisdiction or other legal restraint or prohibition preventing consummation of the spin-off; and
o no suit, action or proceeding by or before any court of competent jurisdiction or other governmental entity having been commenced and pending to restrain or challenge the spin-off, and no inquiry having been received that in the reasonable judgment of the Crane board may lead to such a suit, action or proceeding.
Satisfaction of each of the foregoing conditions will not create any obligation on the part of Crane to effect or seek to effect the spin-off or in any way limit Crane's right to terminate the Distribution Agreement.
EMPLOYEE MATTERS AGREEMENT
Huttig and Crane will enter into an Employee Matters Agreement that will govern Huttig's employee benefits obligations, including both compensation and benefits, with respect to its employees. Under the Employee Matters Agreement, we assume certain liabilities for pension, welfare and other employee benefits
with respect to our employees and certain former employees who remain covered under one or more of our benefit plans and arrangements and agree to establish certain benefit plans for such individuals. The Employee Matters Agreement does not alter or affect any employee benefit plan currently sponsored or maintained by us exclusively for the benefit of our employees.
The Employee Matters Agreement does not preclude us from discontinuing or changing such plans, or establishing any new plans, at any time after the spin-off. In addition, the Employee Matters Agreement represents an agreement between Crane and Huttig and does not create or establish any contract with, or other right or interest in, any employee of Crane or Huttig or any other party with respect to employee benefits.
Retirement Plans. Effective prior to or immediately after the spin-off, we will establish our own qualified and non-qualified employee benefit plans, which generally will be the same as Crane's plans as in effect at that time, except that we will not establish or maintain a qualified defined benefit pension plan for our salaried employees. Benefits accrued by our salaried and hourly employees under the applicable Crane pension plans will be frozen, and we will have no liability, and Crane will have no obligation to transfer assets, with respect to such benefits. Crane will retain responsibility for funding and paying when due retirement benefits accrued by Huttig employees under a Crane pension plan prior to the spin-off.
Our salaried employees who have accrued benefits under a Crane pension plan will be fully vested in those benefits. To the extent that they are not already 100% vested in their pension benefit, our hourly employees who have accrued benefits under a Crane pension plan will continue to receive service credit for vesting purposes under the Crane pension plan for service with Huttig after the spin-off. In addition, both our salaried and hourly employees who have accrued benefits under a Crane pension plan will continue to receive service credit for retirement benefit eligibility purposes under the Crane pension plan for service with Huttig after the spin-off. However, our employees will accrue no further benefits under the Crane pension plan after the spin-off. [Discuss Huttig replacement for defined benefit plan for salaried employees].
We will establish a new defined benefit pension plan for hourly
employees that will initially provide for accrual of benefits by our hourly
employees from the date of the spin-off on the same basis as is currently
provided under the corresponding Crane pension plan for hourly employees. We
will also set up a 401(k)/profit sharing plan for our employees who
participated in the Crane 401(k) plan. All of the account balances of our
employees under the Crane 401(k) plan will be fully vested and a corresponding
amount of assets will be transferred from the Crane 401(k) plan to our
401(k)/profit sharing plan. We also intend to continue our 401(k) Target Plan
for former bargaining employees of Palmer G. Lewis Company and our American
Pine Products 401(k) Profit Sharing Plan.
Stock and Incentive Compensation Plans. In addition to the tax-qualified retirement plans discussed above, we will establish certain nonqualified stock and incentive compensation plans and arrangements similar to those currently offered by Crane. These plans and arrangements include the EVA Incentive Compensation Plan for Executive Officers, an omnibus stock incentive plan providing for stock options and awards of restricted stock and a restricted stock award plan for non-employee directors of Huttig. We will assume liability for the account balances of our employees under Crane's EVA Incentive Compensation Plan for Executive Officers. As described below, we will also assume responsibility for stock options and restricted stock held by our employees under Crane's stock-based plans. We further intend to establish an employee stock purchase plan for our employees that will allow them to invest in Huttig's future growth by purchasing Huttig stock at market prices.
Crane Stock Plans. Pursuant to the Employee Matters Agreement, each outstanding stock option for Crane Common Stock granted under the Crane Stock Option Plan held by any Huttig employee as of the close of business on the date of the spin-off will be replaced, effective as soon as practicable after the date of the spin-off, with a stock option for Huttig common stock, with an appropriate adjustment
to reflect the spin-off as described below. The Huttig option will provide for the purchase of a number of shares of Huttig common stock equal to the number of shares of Crane common stock subject to the applicable Crane option as of the date of the spin-off, multiplied by the Ratio (as defined below) and then rounded to the nearest whole share. The per-share exercise price of such Huttig option will equal the per-share exercise price of the applicable Crane option as of the spin-off divided by the Ratio.
For purposes of the replacement awards described above, the "Ratio" means the amount obtained by dividing (a) the average of the daily high and low per-share prices of the Crane common stock as listed on the NYSE during each of the ten consecutive trading days ending on the date of the spin-off by (b) the average of the daily high and low per-share prices of the Huttig common stock during each of the ten consecutive trading days immediately after the date of the spin-off.
Crane and Huttig have agreed with Mr. Kulpa that he will receive an equivalent replacement award of Huttig restricted stock in exchange for his performance-based and time-based Crane restricted stock. See the Summary Compensation Table under "Compensation of Executive Officers."
Shares Subject to Replacement Awards. It is not possible to specify how many shares of Huttig common stock will be subject to replacement awards. It is expected that some Crane stock awards consisting of stock options held by Huttig employees will be exercised, other Crane stock awards will vest and other Crane stock awards could be granted, prior to the date of the spin-off. In addition, the remaining balance of unexercised Crane stock awards will be converted into replacement awards by reference to the Ratio, which will not be known until after the spin-off is completed. Stockholders of Huttig are, however, likely to experience some dilutive impact from the above-described adjustments.
Health and Welfare Plans. As of the spin-off, we generally will assume all liabilities and responsibilities for providing health and welfare benefits to our employees and retirees. However, during a transitional period, Crane and the Company may jointly participate in certain contracts, policies and other administrative or indemnity arrangements with third parties to provide health and welfare benefits applicable to their respective employees and retirees.
With respect to postretirement medical and life insurance benefits to be offered by us, we presently intend to continue to pay 50% of any premium or cost of such coverage for our current retirees. For our active employees who began working with us prior to 1992, we intend to continue to offer postretirement medical and life insurance benefits as are currently offered, but we will not pay any of the premium or cost of such coverage. For our active employees who began working with us in 1992 or later, we do not intend to offer group postretirement medical and life insurance benefits.
TAX ALLOCATION AGREEMENT
Through the date of the spin-off, Huttig's results of operations have been and will be included in Crane's consolidated U.S. federal income tax returns. As part of the spin-off, Huttig and Crane will enter into a Tax Allocation Agreement which provides, among other things, for the allocation between Crane and Huttig of federal, state, local and non-U.S. tax liabilities relating to Huttig's business.
The terms of the Tax Allocation Agreement provide that Huttig will pay its allocable share of any taxes due with respect to consolidated tax returns that Huttig files with Crane for all periods that commence prior to the spin-off. Each of Huttig and Crane will be separately responsible for the filing of tax returns and payment of all taxes for periods beginning after the date of the spin-off. Under the Tax Allocation Agreement, Huttig is responsible for any taxes imposed on Crane that would not have been payable but for the breach by Huttig of any representation, warranty or obligation under the Tax Allocation Agreement, the tax ruling request or the Distribution Agreement.
Although the Tax Allocation Agreement is binding between Crane and Huttig, it is not binding on the Internal Revenue Service and does not affect the liability of Huttig or its subsidiaries, or the liability of Crane and its subsidiaries, to the IRS for all federal taxes of the consolidated group relating to periods through the date of the spin-off.
MANAGEMENT
DIRECTORS
The Restated Certificate of Incorporation of Huttig provides for three classes of directors whose initial terms of office will expire at the annual meeting of stockholders to be held in 2000, 2001 and 2002, respectively. Huttig expects to hold its first annual meeting of stockholders in April, 2000. Successors to any directors whose terms have expired are elected to three-year terms and hold office until their successors are elected and qualified.
The Huttig board of directors is expected initially to consist of the individuals named below. The age, business experience during the past five years, directorships in other companies and expected ownership of Huttig common stock (based on holdings of Crane common stock as of , 1999 and the terms of the spin-off) for each of the directors are also set forth below.
HUTTIG COMMON STOCK
EXPECTED TO BE
BENEFICIALLY OWNED (1)
-----------------------
DIRECTORS WHOSE TERMS WILL EXPIRE IN 2000
E. Thayer Bigelow, Jr. ................................................................ [ ]
Age 57; 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: Crane Co., Lord Abbett & Co. Mutual Funds
Charles J. Queenan, Jr. ............................................................... [ ]
Age 69; Senior Counsel since 1995 and, prior thereto, Partner, Kirkpatrick &
Lockhart LLP, Pittsburgh, PA (attorneys at law). Other directorships: Allegheny
Teledyne Incorporated, Crane Co.
DIRECTORS WHOSE TERMS WILL EXPIRE IN 2001
Richard S. Forte ...................................................................... [ ]
Age 55; President, Dawson Forte Cashmere Company, South Natick, MA (importer)
since January 1997. Chairman since January 1997 and, prior thereto, President,
Forte Cashmere Company, Inc. (importer and manufacturer). Other directorships:
Crane Co.
Barry J. Kulpa ........................................................................ [ ]
Age 51; President, Huttig Sash & Door Company since October 1997. Senior Vice
President and Chief Operating Officer of Dal Tile International (manufacturer and
distributor of ceramic tile), 1994 to 1997. Vice President and Chief Financial Officer
of David Weekley Homes (regional homebuilder), 1992 to 1994.
James L. L. Tullis .................................................................... [ ]
Age 52; Chairman and Chief Executive Officer, Tullis-Dickerson & Co., Inc.,
Greenwich, CT (venture capital investments in the health care industry) since 1986.
Other directorships: Acme United Corporation, Crane Co., PSS Worldmed, Inc.
DIRECTORS WHOSE TERMS WILL EXPIRE IN 2002
R. S. Evans ........................................................................... [ ]
Age 55; Chairman and Chief Executive Officer of Crane. Other directorships: Crane
Co., Fansteel, Inc., HBD Industries, Inc., Southdown Corporation.
Dorsey R. Gardner ..................................................................... [ ]
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HUTTIG COMMON STOCK
EXPECTED TO BE
BENEFICIALLY OWNED (1)
-----------------------
Age 51; President, Kelso Management Company, Inc., Boston, MA (investment
management). Other directorships: Crane Co., Filene's Basement Corp., Security
First Technologies, Inc.
Dwight C. Minton ................................................................ [ ]
Age 64; Chairman of the Board, Church & Dwight Co., Inc., Princeton, NJ
(manufacturer of consumer and specialty products). Other directorships: Church &
Dwight Co., Inc., Crane Co.
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(1) As determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934. No director except Mr. R. S. Evans is expected to own more than 1% of the outstanding shares of Huttig common stock. See "Beneficial Ownership of Huttig Common Stock by Directors and Management."
COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors has established an Audit Committee, an Organization and Compensation Committee and an Executive Committee.
Executive Committee. The Executive Committee is empowered to act in lieu of the full board of directors at any meeting at which it is not feasible for a quorum of the full board of directors to meet. The Executive Committee can take any action that could be taken by the board of directors except, among other things, electing or removing officers of Huttig, amending the Restated Certificate of Incorporation or Bylaws or approving a merger, consolidation or sale of substantially all of Huttig's assets.
Audit Committee. The principal functions of the Audit Committee include:
o Reviewing with the board of directors and the independent accountants matters relating to the quality of financial reporting and internal accounting controls.
o Maintaining communication between the internal and external auditors and the board of directors.
o Reviewing and communicating to the board of directors the nature, extent and results of the internal and external audit functions.
Organization and Compensation Committee. The Organization and Compensation Committee will:
o Make recommendations to the board of directors concerning approval of the compensation of officers and other key employees.
o Make recommendations to the board of directors concerning director compensation.
o Administer Huttig's incentive compensation plans, including the EVA Incentive Compensation Plan and Stock Incentive Plan and approval of significant changes or additions to Huttig's compensation policies and practices.
The memberships of committees are as follows: [Executive Committee: R. S. Evans, B. J. Kulpa and D. C. Minton; Audit Committee: R. S. Forte, D. R. Gardner and C. J. Queenan, Jr. (Chairman); Organization and Compensation Committee: E.T. Bigelow, Jr. (Chairman), D. R. Gardner, D. C. Minton and J. L. L. Tullis (Chairman).]
COMPENSATION OF DIRECTORS
The standard retainer payable to each non-employee director is $10,000 per year. Mr. R. S. Evans will receive an annual fee of $100,000 for his services as Chairman of the Board of Huttig. Pursuant to the Non-Employee Director Restricted Stock Plan, non-employee directors receive, in lieu of cash, shares of Huttig common stock with a market value equal to that portion of the standard annual retainer which exceeds $5,000. All directors who are not full-time employees of Huttig, of which there
are seven, participate in the plan. The shares will be issued each year after Huttig's annual meeting, will be forfeitable if the director ceases to remain a director until Huttig'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.
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.
Huttig's 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 Huttig'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.
EXECUTIVE OFFICERS
Set forth below are the name, age, position and office to be held with Huttig, and principal occupations and employment during the past five years of those individuals who are expected to serve as Huttig's executive officers immediately following the spin-off. Huttig's executive officers will be elected to serve until they resign or are removed, or are otherwise disqualified to serve, or until their successors are elected and qualified.
BARRY J. KULPA, age 51, has served as Huttig's President and Chief Executive Officer since October of 1997. Prior to joining Huttig, Mr. Kulpa served as Senior Vice President and Chief Operating Officer of Dal-Tile International (manufacturer and distributor of ceramic tile) from 1994 to 1997. From 1992 to 1994, he was Vice President and Chief Financial Officer of David Weekley Homes (regional homebuilder).
GREGORY D. LAMBERT, age 48, has served as Chief Financial Officer and Vice President, Administration since January of 1999. Prior to joining Huttig, Mr. Lambert served as Senior Vice President and Treasurer of Ames Department Store (discount retailer) from 1996 to 1998. From 1994 to 1996, he was Vice President of Strategic Planning for Homart Development, a shopping center developer. From 1980 to 1994, Mr. Lambert was the Director of Strategic Planning for May Department Stores (retailer).
DAVID DEAN, age 56, has served as Controller of Huttig since August of 1992.
DAVID A. GIFFIN, age 50, has served as Regional Vice President since September of 1998. Prior to that, Mr. Giffin was Vice President of Human Resources for Huttig from 1991 to 1998.
HOWARD L. HATFIELD, age 55, became a Regional Vice President upon Huttig's acquisition of Consolidated Lumber Company in July of 1998. Prior to joining Huttig, he was President, Chief Executive Officer and owner of Consolidated Lumber Company, Inc. from 1980 to 1998.
CARL A. LILIEQUIST, age 45, became a Regional Vice President upon Huttig's acquisition of PGL Building Products in July of 1988.
STOKES R. RITCHIE, age 48, has been a Regional Vice President since August of 1998. Prior to joining Huttig, Mr. Ritchie was Vice President of Sales and Marketing of the Westex Division of LYDALL, Inc. (OEM automotive products manufacturer) from 1996 to 1998. From 1994 to 1996, Mr. Ritchie was Vice President, Sales and Marketing for American Woodmark Corporation.
BENEFICIAL OWNERSHIP OF HUTTIG COMMON STOCK BY DIRECTORS AND MANAGEMENT
To focus management attention on growth in shareholder value, Huttig believes that officers and key employees should have a significant equity stake in the Company. Huttig therefore plans to encourage its officers and key employees to increase their ownership of and to hold common stock through the Stock Incentive, Employee Stock Purchase and Savings and Investment Plans. Directors will also receive 50% of their annual retainer in restricted stock issued under the Non-Employee Director Restricted Stock Plan. The following table sets forth the number of shares of Huttig common stock expected to be beneficially owned following the spin-off, directly or indirectly, by the non-employee directors as a group, the executive officers named in the Summary Compensation Table, all of Huttig's directors and executive officers as a group and Huttig's other key employees as a group as of , 1999.
SHARES
UNDER SHARES IN
RESTRICTED STOCK OPTIONS COMPANY TOTAL SHARES % OF SHARES
SHARES STOCK EXERCISABLE SAVINGS PLAN BENEFICIALLY OUTSTANDING AS OF
OWNED PLANS(1) WITHIN 60 DAYS (401(K)) OWNED(2) (2)
-------- ------------ ---------------- -------------- -------------- ------------------
Non-Employee Directors
as a Group (7 persons) ...... [ ] [ ] [ ] [ ] [ ] *
Barry J. Kulpa ............... -- [ ] [ ] [ ] [ ] *
Carl A. Liliequist ........... -- -- [ ] [ ] [ ] *
David A. Giffin .............. [ ] -- [ ] [ ] [ ] *
David Dean ................... -- -- -- [ ] [ ] *
Other Executive Officers
(3 persons) ................. -- -- -- -- -- *
Sub-total -- Directors and
Executive Officers as a
Group (14 persons) .......... [ ] [ ] [ ] [ ] [ ] %
Key Employees
( persons) ................. [ ] [ ] [ ] [ ] [ ] *
------ ------ ------ ------ ------
Total ........................ [ ] [ ] [ ] [ ] [ ] %
====== ====== ====== ====== ======
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(1) Subject to forfeiture if established performance and/or service conditions are not met.
(2) As determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934.
PRINCIPAL STOCKHOLDERS OF HUTTIG
The following table sets forth the ownership of Huttig common stock by each person expected to own beneficially more than 5% of Huttig common stock immediately following the spin-off.
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
---------------- -------------------------- ------------------ ---------
Common Stock The Crane Fund (1) [ ](1) [ ]
100 First Stamford Place
Stamford, CT 06902
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COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
Shown below is information concerning the annual and long-term compensation for services rendered in all capacities to Huttig and its subsidiaries for the year ended December 31, 1998 for Barry J. Kulpa, Huttig's Chief Executive Officer, and the other three most highly compensated individuals who serve as executive officers of Huttig and received at least $100,000 in cash compensation for services to Huttig for the year 1998. The compensation described in this table was paid by Huttig or an affiliate of Huttig.
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------------------------- -------------------------------------------------
OTHER RESTRICTED SECURITIES ALL (3)
ANNUAL STOCK UNDERLYING LTIP(2) OTHER
NAME AND BONUS (1) COMPENSATION AWARD (2) OPTIONS/ PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) ($) ($) ($) SARS (#) ($) ($)
---------------------------- ------ ------------ ----------- -------------- ------------ ------------ --------- -------------
Barry J. Kulpa ............. 1998 250,000 130,671 7,625 272,813 36,000 -- 2,498
President and
Chief Executive
Officer
Carl A. Liliequist ......... 1998 147,188 166,031 -- -- 2,250 -- 5,339
Regional Vice
President
David A. Giffin ............ 1998 115,753 37,608 -- -- 750 -- 5,184
Regional Vice
President
David Dean ................. 1998 98,600 23,259 -- -- -- -- 3,912
Controller
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(2) Shares of restricted stock issued under Crane's Restricted Stock Award Plan 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 Award Plan held by each of the named executive officers and the aggregate value thereof at December 31, 1998 were as follows:
RESTRICTED STOCK AWARD PLAN
-----------------------------
RESTRICTED AGGREGATE
STOCK HELD LTIP RESTRICTED AGGREGATE
# OF SHARES # OF SHARES SHARES HELD VALUE
------------- ------------- ------------- ----------
Barry J. Kulpa ............. 7,500 15,000 22,500 $679,219
Carl A. Liliequist ......... -- -- -- --
David A. Giffin ............ -- -- -- --
David Dean ................. -- -- -- --
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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. Under the Employee Matters Agreement, Huttig has agreed to grant Mr. Kulpa awards of restricted shares of Huttig common stock having a value equivalent to the awards of Crane restricted stock shown in the table above, which will be cancelled on the date of the spin-off. See "Arrangements with Crane Relating to the Spin-Off -- Employee Matters Agreement."
(3) Amounts include Crane's matching contribution for eligible employees for the purchase of common stock in Crane's Saving & Investment Plan (401(k)) and premiums for life insurance.
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is information on grants to the named executive officers of options to purchase shares of Crane common stock pursuant to the Crane Stock Option Plan during the year ended December 31, 1998, which are reflected in the Summary Compensation Table above. Huttig will replace each Crane option held by Huttig employees with an economically equivalent Huttig option. See "Arrangements with Crane Relating to the Spin-Off -- Employee Matters Agreement."
NUMBER OF % OF
SECURITIES TOTAL/OPTIONS/
UNDERLYING SARS
OPTIONS/ GRANTED TO EXERCISE OR GRANT DATE
SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED (1) FISCAL YEAR (1) $/SHARE (2) DATE VALUE ($)(3)
---------------------------- ------------- ----------------- ------------- ------------ --------------
Barry J. Kulpa ............. 36,000 75% $ 36.37 04/20/2008 $396,360
Carl A. Liliequist ......... 2,250 5 36.37 04/20/2008 24,773
David A. Giffin ............ 750 2 36.37 04/20/2008 8,258
David Dean ................. -- -- -- -- --
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(2) The exercise price of options granted under Crane's Stock Option Plan were not 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 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. Under the Employee Matters Agreement, Huttig's stock options issued in exchange for Crane stock options will have the same terms as the Crane stock options they replace except that the exercise price and the number of shares will be adjusted based on the relative market values of Crane common stock and Huttig common stock as of the date of the spin-off.
(3) The amounts shown were calculated using a Black-Scholes option pricing model which derives a value of $11.01 per share for each option granted. The estimated values assume a risk-free rate of return of 5.60% based upon the 100-year Treasury (adjusted for constant maturities) from the Federal Reserve Statistical Release H.15(519), stock price volatility of 24.22%, a dividend payout ratio of .92% and an option duration of 5.29 years. The actual value, if any, that an executive may realize will depend upon the excess of the stock price over the exercise price on the date the option is exercised, and so the value realized by an executive may be more or less than the value estimated by the Black-Scholes model.
AGGREGATE OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS(1) AT OPTIONS/SARS (1) AT
SHARES FISCAL YEAR-END (#) FISCAL YEAR-END ($)(2)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------------------------- -------------- -------------- ------------- --------------- ------------- --------------
Barry J. Kulpa ............. -- -- 11,250 47,250 24,159 24,159
Carl A. Liliequist ......... -- -- 18,000 4,500 268,099 21,403
David A. Giffin ............ -- -- 15,749 1,876 252,339 10,711
David Dean ................. -- -- 750 750 -- --
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(2) Computed based upon the difference between aggregate fair market value at December 31, 1998 and aggregate exercise price.
RETIREMENT BENEFITS
All of Huttig's officers, including the individuals identified in the Summary Compensation Table, are participants in Crane's pension plan for non-bargaining employees. Directors who are not employees do not participate in the plan. Following the spin-off, Huttig's executives will participate in retirement plans maintained by Huttig. See "Arrangements with Crane Relating to the Spin-Off -- Employee Matters Agreement." Under the Crane pension 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 1 2/3% per year of service of the participant's average annual compensation during the five highest consecutive compensation years of the 10 years of service immediately preceding retirement less 1 2/3% per years of service of the participant's 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 Crane's Restricted Stock Award Plan and (iii) on or after January 1, 1993, income derived from Crane's Stock Option Plan and a former Crane's 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 Crane's pension plan based on benefit accruals through December 31, 1998 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. Our employees will not accrue any additional pension benefits under the Crane pension plan after the spin-off. See "Arrangements with Crane Relating to the Spin-Off -- Employee Matters Agreement."
YEARS OF SERVICE
AVERAGE 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 97,936 117,524 136,111*
$250,000** ......... 41,675 83,350 104,188 125,025 145,863*
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** 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"). 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 Crane's pension plan for the foregoing individuals for the years 1994 through 1996 was limited to $150,000, and was increased to $160,000 for 1997, 1998 and 1999. In no event will the OBRA '93 Limitation reduce any participant's accrued benefit as of December 31, 1993.
OTHER AGREEMENTS AND INFORMATION
Huttig has entered into indemnification agreements with Barry J. Kulpa, Gregory D. Lambert and each non-employee director of Huttig. The Indemnification Agreements require Huttig 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 Huttig or was serving as such for another entity at Huttig's request, and to maintain directors and officers liability insurance coverage or to the full extent permitted by law to indemnify such person for the lack of insurance coverage.
Barry J. Kulpa has an agreement which, in the event of a change in control of Huttig, provides for the continuation of his then current base salary, incentive compensation and benefits for the three year period following the change in control. Upon termination within three years after a change in control, by Huttig without cause or by him with "Good Reason" (as defined in the agreement), Mr Kulpa is immediately entitled to a proportionate amount of the greater of the last year's bonus or the average bonus paid in the last three years, three times the sum of his annual salary and the greater of the last year's bonus or the average of the last three years' bonuses, and all accrued deferred compensation and vacation pay. Employee benefits, medical coverage and other welfare benefits also continue for three years after termination. "Good Reason" under the agreement includes, among other things, any action by Huttig which results in a diminution of his position, authority, duties or responsibilities. The agreement also provides that Mr. Kulpa may terminate his employment for any reason during the 30 day period immediately following the first year after the change of control, which shall be deemed "Good Reason" under the agreement. If it is determined that any economic benefit or payment or distribution by Huttig to Mr. Kulpa pursuant to the agreement or otherwise (including, but not limited to, any economic benefit received by him by reason of the acceleration of rights under Huttig's incentive plan) ("Payment"), is subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, the agreement provides that Huttig shall make additional cash payments to Mr. Kulpa such that after payment of all taxes including any excise tax imposed on such payments, he will retain an amount equal to the excise tax on all the Payments. The agreement is for a three-year period, but is automatically renewed annually for a three-year period unless Huttig gives notice that the period will not be extended.
DESCRIPTION OF HUTTIG CAPITAL STOCK
Huttig's Restated Certificate of Incorporation provides that its authorized capital stock consists of (i) 50,000,000 shares of common stock, $.01 par value, of which (based on the number of shares of Crane common stock outstanding as of , 1999) approximately shares will be issued to stockholders of Crane in the spin-off, and (ii) 5,000,000 shares of preferred stock, par value $.01 per share, of which shares have been designated as Series A Junior Participating Preferred Stock for issuance in connection with the exercise of rights. See "-- Rights Plan."
COMMON STOCK
Each share of Huttig common stock will entitle its holder of record to one vote in the election of directors and on all other matters to be voted on by the stockholders. Holders of Huttig common stock will not have cumulative voting rights. As a result, the holders of a majority of the shares of Huttig common stock voting for the election of directors may elect all nominees standing for election as directors.
Subject to the rights of holders of preferred stock, holders of Huttig common stock will be entitled to receive such dividends, if any, as may be declared from time to time by the board of directors in its discretion from funds legally available for that use. It is currently anticipated that no cash dividends will be paid on its common stock in the foreseeable future in order to conserve cash for use in its business, possible future acquisitions and debt reduction. Huttig's board of directors expects to periodically re-evaluate this dividend policy taking into account Huttig's operating results, capital needs and other factors.
Subject to the rights of holders of preferred stock, holders of Huttig common stock will be entitled to share on a pro rata basis in any distribution to stockholders upon the liquidation, dissolution or winding up of Huttig. No holder of Huttig common stock will have any preemptive right to subscribe for any Huttig common stock or other security.
PREFERRED STOCK
Huttig's board of directors, without further action by the stockholders, may from time to time authorize the issuance of shares of preferred stock in one or more series and, within certain limitations, fix the powers, preferences and rights and the qualifications, limitations or restrictions thereof and the number of shares constituting any series or designations of such series. Satisfaction of any dividend preferences of outstanding preferred
stock would reduce the amount of funds available for the payment of dividends on Huttig common stock. Holders of preferred stock would normally be entitled to receive a preference payment in the event of the liquidation, dissolution or winding up of Huttig before any payment is made to the holders of Huttig common stock.
Under certain circumstances, the issuance of preferred stock may render more difficult or tend to discourage a change in control of Huttig. Although Huttig currently has no plans to issue shares of preferred stock, the board of directors, without stockholder approval, may issue preferred stock that could adversely affect the rights of holders of shares of Huttig common stock. For a description of the terms of the Series A Junior Participating Preferred Stock, see "-- Rights Plan."
RIGHTS PLAN
On , 1999, Huttig's board of directors determined to issue one preferred share purchase right with each share of Huttig common stock distributed in the spin-off. Each right entitles the registered holder to purchase from Huttig one one-hundredth of a share of Series A Junior Participating Preferred Stock at a price of $ per one one-hundredth of a Preferred Share, subject to adjustment. The description and terms of the rights are set forth in a Rights Agreement dated as of , 1999 between Huttig and , as Rights Agent.
Until the earlier to occur of:
o 10 days following a public announcement that a person or group of affiliated or associated persons have acquired beneficial ownership of 15% or more of Huttig's outstanding common stock (an "Acquiring Person"); or
o 10 business days (or such later date as may be determined by Huttig's board of directors) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 15% or more of the outstanding Huttig common stock (the earlier of such dates being the "Distribution Date"),
the rights will be evidenced, with respect to any of the common stock certificates outstanding as of the record date, by such common stock certificate with a copy of the summary of rights attached to it.
The Rights Agreement provides that, until the Distribution Date (or earlier redemption or expiration of the rights), the rights will be transferred only with Huttig common stock. Until the Distribution Date (or earlier redemption or expiration of the rights), new certificates for Huttig common stock issued upon transfer or new issuance will contain a notation incorporating the Rights Agreement by reference.
Until the Distribution Date (or earlier redemption or expiration of the rights), the surrender for transfer of any certificates for Huttig common stock, even without such notation or a copy of the summary of rights being attached, will also constitute the transfer of the rights associated with Huttig common stock represented by that certificate. As soon as practicable following the Distribution Date, separate certificates evidencing the rights will be mailed to holders of record of Huttig common stock as of the close of business on the Distribution Date and those separate certificates alone will evidence the rights.
The rights are not exercisable until the Distribution Date. The rights will expire at the close of business on , 2009, unless this date is extended or unless Huttig earlier redeems or exchanges the rights, in each case, as described below.
The purchase price payable, and the number of series A preferred shares or other securities or property issuable, upon exercise of the rights are subject to adjustment from time to time to prevent dilution:
o in the event of a stock dividend on, or a subdivision, combination or reclassification of, the series A preferred shares;
o upon the grant to holders of the series A preferred shares of certain rights or warrants to subscribe for or purchase series A preferred shares at a price, or securities convertible into series A preferred shares with a conversion price, less than the then-current market price of the series A preferred shares; or
o upon the distribution to holders of the series A preferred shares of evidence of indebtedness or assets (excluding regular periodic cash dividends paid out of earnings or retained earnings or dividends payable in series A preferred shares) or of subscription rights or warrants (other than those referred to above).
The number of outstanding rights and the number of one one-hundredths of a series A preferred share issuable upon exercise of each right are also subject to adjustment in the event of a split of Huttig common stock or a dividend on Huttig common stock payable in shares of Huttig common stock or subdivisions, consolidations or combinations of Huttig common stock occurring, in any such case, prior to the Distribution Date.
Series A preferred shares purchasable upon exercise of the rights will not be redeemable. Each series A preferred share will be entitled to a minimum preferential quarterly dividend payment of $1.00 per share but will be entitled to an aggregate dividend of 100 times the dividend declared per share of Huttig common stock. If Huttig is liquidated, the holders of the series A preferred shares will be entitled to a minimum preferential liquidation payment of $100.00 per share but will be entitled to an aggregate payment of 100 times the payment made per share of Huttig common stock. Each series A preferred share will have 100 votes, voting together with Huttig common stock. Finally, if Huttig engages in a merger, consolidation, or any other transaction in which shares of Huttig common stock are exchanged, each series A preferred share will be entitled to receive 100 times the amount received per share of Huttig common stock. These rights are protected by customary antidilution provisions.
Because of the nature of the series A preferred shares' dividend, liquidation and voting rights, the value of the one one-hundredth interest in a series A preferred share purchasable upon exercise of each right should approximate the value of one share of Huttig common stock.
If any person or group of affiliated or associated persons becomes an Acquiring Person, proper provision shall be made so that each holder of a right, other than rights beneficially owned by the Acquiring Person (which will thereafter be void), will thereafter have the right to receive upon exercise that number of shares of Huttig common stock having a market value of two times the exercise price of the right.
At any time after any person or group becomes an Acquiring Person and prior to the acquisition by that person or group of 50% or more of the outstanding shares of Huttig common stock, the board of directors may exchange the rights (other than rights owned by such person or group which will have become void), in whole or in part, at an exchange ratio of one share of Huttig common stock, or one one-hundredth of a series A preferred share, per right.
If Huttig is acquired in a merger or other business combination transaction or 50% or more of Huttig's consolidated assets or earning power are sold after a person or group has become an Acquiring Person, proper provision will be made so that each holder of a right will thereafter have the right to receive, upon the exercise of a right at the then current exercise price of the right, that number of shares of common stock of the acquiring company which at the time of that transaction will have a market value of two times the exercise price of the right.
With certain exceptions, no adjustment in the purchase price will be required until cumulative adjustments require an adjustment of at least 1% in the purchase price. No fractional series A preferred shares will be issued (other than fractions which are integral multiples of one one-hundredth of a series A preferred share, which may, at Huttig's election, be evidenced by depository receipts) and, in lieu thereof, an adjustment in cash will be made based on the market price of the series A preferred shares on the last trading day prior to the date of exercise.
At any time prior to the acquisition by a person or group of affiliated or associated persons of beneficial ownership of 15% or more of the outstanding shares of Huttig common stock, the board of directors may redeem the rights in whole, but not in part, at a price of $.01 per right. The redemption of the rights may be made effective at such time, on such basis and with such conditions as the board of
directors in its sole discretion may establish. Immediately upon any redemption of the rights, the right to exercise the rights will terminate and the only rights of the holders of the rights will be to receive the redemption price.
The terms of the rights may be amended by the board of directors without the consent of the holders of the rights, except that from and after the time that any person or group of affiliated or associated persons becomes an Acquiring Person, no amendment may adversely affect the interests of the holders of the rights.
Until a right is exercised, the holder of the right will have no rights as a stockholder, including, without limitation, the right to vote or to receive dividends.
CERTAIN PROVISIONS OF HUTTIG'S GOVERNING DOCUMENTS
The following is a description of certain provisions of Huttig's Restated Certificate of Incorporation and Bylaws. The description is qualified in its entirety by reference to the full texts of those documents. Certain provisions of Huttig's Certificate and Bylaws could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of Huttig, without the approval of Huttig's board of directors.
Classification of Directors. The Certificate and Bylaws provide that the board of directors will consist of three classes of directors. The initial members of the board of directors will be divided into three classes to serve as follows: one class will initially hold office for a term to expire at the first annual meeting of stockholders after their initial election; another class will initially hold office for a term to expire at the second annual meeting of stockholders after their initial election; and the third class will initially hold office for a term to expire at the third annual meeting of stockholders after their initial election. At each annual meeting of Huttig's stockholders, only the election of directors of the class whose term is expiring will be voted upon, and upon election each director will serve a three-year term. See "Management -- Directors."
Right to Call a Special Meeting. The Certificate provides that special meetings of the stockholders may only be called by the Chairman or by the board pursuant to a resolution approved by a majority of the entire board. Accordingly, stockholders will not have the right to call a special meeting of the stockholders.
No Action by Consent. The Certificate provides that any action required to be taken by stockholders must be effected at a duly called annual or special meeting of stockholders and may not be effected by the written consent of stockholders.
Fiduciary Duties of Directors. As permitted by the DGCL, Huttig's Certificate includes a provision eliminating the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director except for liability:
o for any breach of the director's duty of loyalty to the corporation or its stockholders;
o for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
o for unlawful payment of a dividend or an unlawful stock purchase or redemption; or
o for any transaction from which the director derives an improper personal benefit.
The Certificate further provides that, if the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of directors shall be eliminated or limited to the fullest extent so permitted. The Certificate also specifies that no amendment to or repeal of the provisions shall apply to or have any effect on the liability or alleged liability of any of Huttig's directors for or with respect to any acts or omissions of such director occurring prior to the amendment or repeal.
ANTI-TAKEOVER LEGISLATION
Because neither the Certificate nor the Bylaws contain a provision expressly electing not to be covered by Section 203 of the DGCL, Huttig is subject to this statutory anti-takeover provision. Section 203 provides that any person
who acquires 15% or more of a corporation's voting stock (thereby becoming an "interested stockholder") may not engage in a "business combination" with the corporation for a period of three years following the time the person became an interested stockholder, unless:
o the board of directors of the corporation approved, prior to such time, either the business combination or the transaction that resulted in the person becoming an interested stockholder;
o upon consummation of the transaction that resulted in that person becoming an interested stockholder, that person owns at least 85% of the corporation's voting stock outstanding at the time the transaction commenced (excluding shares owned by persons who are directors and officers of that corporation and shares owned by employee stock plans in which participants do not have the right to determine confidentially whether shares will be tendered in a tender or exchange offer); or
o the business combination is approved by the board of directors and authorized by the affirmative vote (at an annual or special meeting and not by written consent) of at least 662/3% of the outstanding shares of voting stock not owned by the interested stockholder.
In determining whether a stockholder is the "owner" of 15% or more of a corporation's voting stock for purposes of Section 203, ownership is defined to include the right, directly or indirectly, to acquire stock or to control the voting or disposition of stock. A "business combination" is defined to include:
o mergers or consolidations of a corporation with an interested stockholder;
o sales or other dispositions of ten percent or more of the assets of a corporation with or to an interested stockholder;
o certain transactions resulting in the issuance or transfer to an interested stockholder of any stock of a corporation or its subsidiaries;
o certain transactions which would result in increasing the proportionate share of the stock of a corporation or its subsidiaries owned by an interested stockholder, and
o receipt by an interested stockholder of the benefit (except proportionately as a stockholder) of any loans, advances, guarantees, pledges or other financial benefits from, by or to a corporation or any of its majority-owned subsidiaries.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for Huttig common stock will be .
LIABILITY AND INDEMNIFICATION OF HUTTIG OFFICERS AND DIRECTORS
ELIMINATION OF LIABILITY
As described above under "Certain Provisions of Huttig's Governing
Documents--
Fiduciary Duties of Directors," Huttig's Restated Certificate of Incorporation
eliminates, subject to certain statutory limitations, the liability of its
directors to the corporation or its stockholders for monetary damages for
breaches of fiduciary duty.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under Section 145 of the DGCL, a corporation has the power to indemnify directors and officers under certain prescribed circumstances and subject to certain limitations against certain costs and expenses, including attorney's fees actually and reasonably incurred in connection with any action, suit or proceeding, whether civil, criminal, administrative or investigative, to which any of them is a party by reason of his or her being a director or officer of the corporation, if it is determined that he or she acted in accordance with the applicable standard of conduct set forth in such statutory provision.
The Huttig bylaws provide for mandatory indemnification to its directors and officers and to persons serving at the Company's request in a similar capacity with another corporation or other enterprise generally as provided in the DGCL.
Huttig's bylaws also require the Company to indemnify or advance expenses within 60 days of receipt of the written request for such
indemnification or advance from the director or officer. The costs and expenses associated with the successful establishment in a court proceeding of the director's or officer's right to indemnification or advancement of expenses is also required to be indemnified by Huttig under its bylaws. The bylaws further require Huttig to purchase and maintain directors' and officers' liability insurance, provided that such insurance is available under terms which are deemed acceptable by a majority vote of Huttig's board of directors.
Huttig also has entered into indemnification agreements with its directors and certain executive officers. See "Management -- Other Agreements and Information."
Huttig also maintains insurance on behalf of any person who is or was a Huttig director or officer, or is or was serving at Huttig's request as a director, officer, employee or agent of another entity against any liability asserted against such person and incurred by such person in any such capacity or arising out of his or her status as such, whether or not Huttig would have the power to indemnify such person against such liability under the DGCL.
AVAILABLE INFORMATION
Huttig has filed a Registration Statement on Form 10 with the SEC with respect to Huttig common stock. The Registration Statement and the exhibits to it contain some information not appearing in this Information Statement. This Information Statement provides a summary of some of the agreements and contracts appearing as exhibits to the Registration Statement. You are encouraged to review the exhibits to the Registration Statement for a more complete description of the contracts and agreements summarized in this Information Statement.
You may access and read the Registration Statement and all of the exhibits to it through the SEC's Internet site at www.sec.gov. This site contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. You may also read and copy any document Huttig files at the SEC's public reference room located at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Huttig's SEC filings will also be available after the spin-off at the offices of the New York Stock Exchange.
After the spin-off, Huttig will be required to file annual, quarterly and special reports and other information with the SEC. Huttig will also be subject to proxy solicitation requirements. Once filed, you can access this information from the SEC in the manner set forth in the preceding paragraph.
INDEX TO FINANCIAL STATEMENTS
PAGE
-----
Huttig Financial Statements
Independent Auditors' Report .................................................. F-2
Consolidated Balance Sheets at December 31, 1998 and 1997 and unaudited
Consolidated Balance Sheets at June 30, 1999 and 1998 ....................... F-3
Consolidated Statements of Income and Retained Earnings for the Years Ended
December 31, 1998, 1997 and 1996 and unaudited Consolidated Statements
of Income and Retained Earnings for the Six Months Ended June 30, 1999
and 1998 .................................................................... F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 1998,
1997 and 1996 and unaudited Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1999 and 1998 ......................................... F-5
Notes to Consolidated Financial Statements .................................... F-6
Consolidated Lumber Company, Inc. Financial Statements
Report of Independent Auditors ................................................ F-13
Statement of Assets Acquired and Liabilities Assumed at December 31, 1997 ..... F-14
Statement of Revenues and Expenses Associated with Operations Acquired for the
Year Ended December 31, 1997 ................................................ F-15
Notes to Financial Statements ................................................. F-16
|
INDEPENDENT AUDITORS' REPORT
To the Shareholder of
Huttig Building Products, Inc.:
We have audited the accompanying consolidated balance sheets of Huttig Building Products, Inc. (formerly Huttig Sash & Door Company) (an indirect wholly owned subsidiary of Crane Co. through Crane International Holdings, a direct subsidiary of Crane Co.) and its subsidiaries (the "Company") as of December 31, 1998 and 1997, and the related consolidated statements of income and retained earnings and cash flows for each of the three years in the period ended December 31, 1998. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 1998 and 1997, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1998 in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP St. Louis, Missouri January 20, 1999 (June 21, 1999 as to Note 9) |
HUTTIG BUILDING PRODUCTS, INC.
(FORMERLY HUTTIG SASH & DOOR COMPANY)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
DECEMBER 31, JUNE 30,
--------------------------- ------------
1998 1997 1999
------------ ------------ ------------
ASSETS
CURRENT ASSETS:
Cash ........................................................ $ 9,423 $ 2,210 $ 946
Accounts receivable, net .................................... 67,028 54,404 80,857
Receivable -- Parent ........................................ 17,098 5,624 --
Inventories ................................................. 43,130 36,406 49,288
Prepaid expenses ............................................ 585 575 623
--------- --------- --------
Total current assets ...................................... 137,264 99,219 131,714
--------- --------- --------
PROPERTY, PLANT AND EQUIPMENT -- At cost:
Land ........................................................ 7,335 7,678 7,324
Buildings and improvements .................................. 39,081 42,708 36,446
Machinery and equipment ..................................... 24,638 20,501 25,900
--------- --------- --------
Gross property, plant and equipment ....................... 71,054 70,887 69,670
Less accumulated depreciation ............................... 33,746 35,492 31,849
--------- --------- --------
Property, plant and equipment, net ........................ 37,308 35,395 37,821
--------- --------- --------
OTHER ASSETS:
Cost in excess of assets acquired, net ...................... 42,109 16,840 43,031
Other ....................................................... 1,677 1,609 430
Deferred income taxes ....................................... 104 887 221
--------- --------- --------
Total other assets ........................................ 43,890 19,336 43,682
--------- --------- --------
TOTAL ....................................................... $ 218,462 $ 153,950 $213,217
========= ========= ========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ........................ $ 319 $ 359 $ 255
Accounts payable -- trade and collections as agents ......... 54,424 33,815 48,637
Accrued payrolls ............................................ 11,109 9,900 8,974
Accrued liabilities ......................................... 8,533 6,452 7,595
Payable -- Parent ........................................... -- -- 14,494
--------- --------- --------
Total current liabilities ................................. 74,385 50,526 79,955
--------- --------- --------
LONG-TERM DEBT:
Notes payable -- Parent ..................................... 93,940 67,100 92,182
Other long-term debt ........................................ 1,379 1,715 1,253
--------- --------- --------
Total long-term debt ...................................... 95,319 68,815 93,435
--------- --------- --------
ACCRUED POSTRETIREMENT BENEFITS .............................. 7,303 6,750 7,577
--------- --------- --------
COMMITMENTS AND CONTINGENCIES (Note 6) .......................
SHAREHOLDER'S EQUITY:
Common stock -- No par value -- authorized, 3,000
shares; issued and outstanding, 1,000 shares .............. 10 10 10
Retained earnings ........................................... 41,445 27,849 32,240
--------- --------- --------
Total shareholder's equity ................................ 41,455 27,859 32,250
--------- --------- --------
TOTAL ........................................................ $ 218,462 $ 153,950 $213,217
========= ========= ========
|
See notes to consolidated financial statements.
HUTTIG BUILDING PRODUCTS, INC.
(FORMERLY HUTTIG SASH & DOOR COMPANY)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------------ -------------------------
1998 1997 1996 1999 1998
------------ ------------ ------------ ----------- -----------
NET SALES .............................. $ 707,450 $ 625,503 $ 595,089 $380,754 $319,640
--------- --------- --------- -------- --------
OPERATING COSTS AND
EXPENSES:
Cost of sales ......................... 606,993 543,097 511,892 330,323 277,723
Selling, general and administrative 67,900 58,155 56,163 35,362 31,157
Depreciation and amortization ......... 5,586 4,409 4,929 3,272 2,226
--------- --------- --------- -------- --------
Total operating costs and
expenses ........................... 680,479 605,661 572,984 368,957 311,106
--------- --------- --------- -------- --------
OPERATING PROFIT ....................... 26,971 19,842 22,105 11,797 8,534
--------- --------- --------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense -- Parent ............ (6,703) (4,285) -- (3,788) (2,820)
Interest expense -- net of interest
income of $3 and $18 in 1997
and 1996, respectively .............. (167) (182) (200) (65) (92)
Other miscellaneous, net .............. 1,750 (561) (1,148) (655) (115)
--------- --------- --------- -------- --------
Total other expense, net ............ (5,120) (5,028) (1,348) (4,508) (3,027)
--------- --------- --------- -------- --------
INCOME BEFORE TAXES .................... 21,851 14,814 20,757 7,289 5,507
PROVISION FOR INCOME
TAXES ................................. 8,255 5,759 8,469 2,769 1,929
--------- --------- --------- -------- --------
NET INCOME ............................. 13,596 9,055 12,288 4,520 3,578
RETAINED EARNINGS,
BEGINNING OF YEAR ..................... 27,849 148,734 136,446 41,445 27,849
DIVIDENDS PAID TO PARENT ............... -- 129,940 -- 13,725 --
--------- --------- --------- -------- --------
RETAINED EARNINGS, END OF
YEAR .................................. $ 41,445 $ 27,849 $ 148,734 $ 32,240 $ 31,427
========= ========= ========= ======== ========
NET INCOME PER SHARE ................... $ 13,596 $ 9,055 $ 12,288 $ 4,520 $ 3,578
========= ========= ========= ======== ========
DIVIDENDS PER SHARE .................... $ -- $ 129,940 $ -- $ 13,725 $ --
========= ========= ========= ======== ========
|
See notes to consolidated financial statements.
HUTTIG BUILDING PRODUCTS, INC.
(FORMERLY HUTTIG SASH & DOOR COMPANY)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------------- --------------------------
1998 1997 1996 1999 1998
----------- --------------- ----------- ------------ -----------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income ................................. $ 13,596 $ 9,055 $ 12,288 $ 4,520 $ 3,578
Depreciation ............................... 3,540 3,372 3,642 1,764 1,673
Amortization ............................... 2,046 1,037 1,287 1,508 553
Deferred taxes ............................. (102) (202) (282) (117) 153
Accrued postretirement benefits ............ 553 500 436 274 261
Changes in operating assets and
liabilities (exclusive of acquisitions):
Accounts receivable ...................... (1,864) (1,742) (1,731) (13,106) (7,748)
Inventories .............................. 2,081 10,297 (973) (5,502) 3,944
Other current assets ..................... 324 265 (149) (38) (78)
Accounts payable ......................... 16,629 494 191 (5,787) 7,855
Accrued liabilities ...................... 2,812 (165) 2,494 (3,579) (262)
Other .................................... (3,720) 175 189 (125) 132
--------- ----------- --------- --------- --------
Total cash from operating activities ..... 35,895 23,086 17,392 (20,188) 10,061
--------- ----------- --------- --------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures ....................... (5,765) (3,338) (2,515) (4,791) (1,512)
Cash used for acquisitions ................. (44,861) (12,050) (2,000) (5,631)
Proceeds from disposition of capital
assets ................................... 6,069 388 201 2,585 (11)
--------- ----------- --------- --------- --------
Total cash from investing activities ..... (44,557) (15,000) (2,314) (4,206) (7,154)
--------- ----------- --------- --------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Cash dividend paid to Parent ............... -- (62,840) -- (13,725) --
Repayment of long-term debt ................ (376) (386) (514) (1,950) (187)
Proceeds from (payments to) Parent ......... 16,251 55,672 (15,670) 31,592 (3,927)
--------- ----------- --------- --------- --------
Total cash from financing activities ..... 15,875 (7,554) (16,184) 15,917 (4,114)
--------- ----------- --------- --------- --------
INCREASE (DECREASE) IN CASH ................. 7,213 532 (1,106) (8,477) (1,207)
CASH, BEGINNING OF YEAR ..................... 2,210 1,678 2,784 9,423 2,210
--------- ----------- --------- --------- --------
CASH, END OF YEAR ........................... $ 9,423 $ 2,210 $ 1,678 $ 946 $ 1,003
========= =========== ========= ========= ========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Interest paid .............................. $ 6,860 $ 4,471 $ 220 $ 3,852 $ 2,854
========= =========== ========= ========= ========
Income taxes paid .......................... $ 4,466 $ 6,099 $ 10,009 $ 1,377 $ 601
========= =========== ========= ========= ========
NON-CASH FINANCING ACTIVITY:
Dividends paid to Parent ................... -- $ (129,940) -- (13,725) --
Issuance of note payable to Parent ......... -- 67,100 -- -- --
----------- ---------
Cash dividends paid to Parent ............ $ -- $ (62,840) $ -- (13,725) $ --
========= =========== ========= ========= ========
Liabilities assumed in connection with
asset acquisitions ....................... $ 4,224 $ 864 $ -- -- 463
========= =========== ========= ========
|
See notes to consolidated financial statements.
HUTTIG BUILDING PRODUCTS, INC.
(FORMERLY HUTTIG SASH & DOOR COMPANY)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
1. ACCOUNTING POLICIES AND PROCEDURES
ORGANIZATION -- Huttig Building Products, Inc. (formerly Huttig Sash & Door Company), an indirect wholly owned subsidiary of Crane Co. through Crane International Holdings, a direct subsidiary of Crane Co. (the "Parent" or "Crane"), and its subsidiaries (the "Company") is one of the largest nationwide distributors of doors, windows, molding, trim and related building products in the United States, and operates one finished lumber production plant. The Company primarily sells its products for new residential construction and renovation.
PRINCIPLES OF CONSOLIDATION -- The financial statements include the accounts of Huttig Building Products, Inc. and its wholly owned subsidiaries, CIPCO, Inc., which was formed January 2, 1997 and Rondel's, Inc., which was acquired on March 31, 1993. All intercompany accounts and transactions have been eliminated.
REVENUE RECOGNITION -- Revenues are recorded when products are delivered and title passes to the customer or when services are rendered.
USE OF ESTIMATES -- The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates.
INVENTORIES -- Inventories are stated at the lower of cost or market. Approximately 68% and 83% of inventories were determined by using the LIFO (last in, first out) method of inventory valuation as of December 31, 1998 and 1997, respectively; the remainder was determined by the FIFO (first in, first out) method. Had the Company used the FIFO method of inventory valuation for all inventories, net income would have been decreased by $2,632, $1,956 and $735 in 1998, 1997 and 1996, respectively. During 1998, 1997, and 1996 LIFO inventory quantities were reduced, resulting in a partial liquidation of the LIFO bases, the effect of which increased net earnings by $1,922, $2,377, and $1,605, respectively. The replacement cost would be higher than the LIFO valuation by $15,368 in 1998 and $19,599 in 1997.
PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment are stated at cost. Depreciation was computed primarily by the straight-line method over the estimated useful lives of the respective assets which range from three to twenty-five years. Amortization expense on property under capital leases is included in depreciation expense.
OTHER ASSETS -- Cost in excess of net assets acquired is being amortized on a straight-line basis over fifteen to forty years. Other intangible assets are being amortized on a straight-line basis over their estimated useful lives which range from two to five years.
LONG-LIVED ASSETS -- The Company periodically evaluates the recoverability of its long-lived assets by assessing whether the carrying value of the assets can be recovered over the remaining life through undiscounted cash flows. Long-lived assets are carried at lower-of-cost or market. Based on these evaluations, management does not believe that any impairment has occurred.
INCOME TAXES -- The Company is included in the federal income tax return of its Parent. The Company is charged its proportionate share of federal income taxes determined as if it filed a separate federal income tax return. Income tax payments represent payments of intercompany balances. Income tax expense is based on reported earnings before income taxes. Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes using currently enacted tax rates.
HUTTIG BUILDING PRODUCTS, INC.
(FORMERLY HUTTIG SASH & DOOR COMPANY)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS -- During 1998, the Company adopted Statement of Financial Accounting Standards No. 130 ("SFAS 130"), Reporting Comprehensive Income, and Statement of Financial Accounting Standards No. 131 ("SFAS 131"), Disclosures about Segments of an Enterprise and Related Information.
SFAS 130 established standards for reporting and display of comprehensive income in a full set of financial statements. In addition to displaying an amount for net income (loss), the Company is now required to display other comprehensive income (loss), which includes other changes in equity (deficit). SFAS 130 had no effect on the Company's financial statements for the years ended December 31, 1996, 1997 and 1998.
SFAS 131 established standards for the way that public business enterprises report information about operating segments in annual financial statements and also established standards for related disclosures about products and services, geographic areas, and major customers. Management has considered the requirements of SFAS 131 and, as discussed in Note 8, believes the Company operates in one business segment.
In June 1998, Statement of Financial Accounting Standards No. 133 ("SFAS 133"), Accounting for Derivative Instruments and Hedging Activities, was released. SFAS 133, as amended by SFAS 137, is effective for all fiscal years beginning after June 15, 2000. The Company has historically made no use of derivative instruments and financial hedges and believes there will be no impact of the new accounting pronouncement on the financial statements.
RECLASSIFICATIONS -- Certain prior year amounts have been reclassified to conform to the current year presentation.
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- The unaudited interim consolidated financial statements as of June 30, 1999 and for the six-month periods then ended were prepared in condensed format, in accordance with the SEC rules and regulations for interim financial statements. In the opinion of management, the interim financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation. The accounting principles applied in preparation of the interim financial statements are consistent with those applied in the annual financial statements. Results of operations for the six-month period ended June 30, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999.
2. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
The Company has defined benefit pension plans covering substantially all salaried and hourly employees not covered by collective bargaining agreements. The plans generally provide benefit payments using a formula based on length of service and final average compensation, except for some hourly employees for whom the benefits are a fixed amount per year of service. The Company's policy is to fund at least the minimum amount required by the applicable regulations.
The Company's defined benefit plans for hourly and salaried employees are part of the Parent's defined benefit plans. The liabilities of the Company for such plans are recorded through the receivable-Parent balance. As a result, the Company is charged its proportionate share of the total expense for the plans. Pension expense related to the Company's defined benefit pension plans was $1,224, $1,013 and $970 in 1998, 1997 and 1996, respectively. The Company also participates in several multi-employer pension plans which provide benefits to certain employees under collective bargaining agreements. Total contributions to these plans were $468 in 1998, $454 in 1997 and $480 in 1996.
In addition to providing pension benefits, certain health care and life insurance benefits are provided for a majority of employees. Employees hired before January 1, 1992 become eligible for these benefits if they meet minimum age and service requirements. The Company does not prefund those benefits and has the right to modify or terminate benefits.
HUTTIG BUILDING PRODUCTS, INC.
(FORMERLY HUTTIG SASH & DOOR COMPANY)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table sets forth the amounts recognized in the Company's balance sheet at December 31, for company sponsored post-retirement benefits:
1998 1997 1996
------------ ------------ ----------
Change in benefit obligation:
Benefit obligation at beginning of year ......... $ 6,750 $ 6,250
Service cost .................................... 248 236
Interest cost ................................... 500 447
Actuarial gain .................................. (12) (52)
Benefits paid ................................... (183) (131)
-------- --------
Benefit obligation at end of year ............. $ 7,303 $ 6,750
======== ========
Funded status .................................... $ (7,303) $ (6,750)
Unrecognized actuarial loss ...................... 242 667
-------- --------
Accrued benefit cost .......................... $ (7,061) $ (6,083)
======== ========
Discount rate .................................... 6.75% 7.25% 7.50%
Components of net periodic benefit cost:
Service cost .................................... $ 248 $ 236 $ 214
Interest cost ................................. 500 447 497
Recognized actuarial gain ....................... (12) (52) (124)
-------- -------- -------
Net periodic benefit cost ..................... $ 736 $ 631 $ 587
======== ======== =======
|
The cost of covered healthcare benefits was assumed to increase 8.5% for 1998, and then to decrease gradually to 4.75% by 2005 and remain at that level thereafter. In 1997, the cost of covered healthcare benefits was assumed to increase 9.4%, and then to decrease gradually to 5% by 2007 and remain at that level thereafter.
1 PERCENTAGE 1 PERCENTAGE
POINT INCREASE POINT DECREASE
---------------- ---------------
Effect on total of service and interest cost components ......... $120 $104
Effect on postretirement benefit obligation ..................... 375 329
|
3. ACCOUNTS RECEIVABLE
Receivables are carried at net realizable value.
A summary of the allowance for doubtful accounts, cash discounts, returns and allowances activity at December 31 follows:
1998 1997 1996
--------- --------- ---------
Balance at beginning of year $ 1,459 $ 1,912 $ 1,946
Provisions 16,632 15,641 14,358
Deductions 16,559 16,094 14,392
------- ------- -------
Balance at end of year $ 1,532 $ 1,459 $ 1,912
======= ======= =======
|
HUTTIG BUILDING PRODUCTS, INC.
(FORMERLY HUTTIG SASH & DOOR COMPANY)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT
1998 1997
---------- ----------
Notes payable -- Parent ........................... $93,940 $67,100
Industrial revenue bond ........................... 429 588
Capital lease obligations (see Note 6) ............ 1,269 1,486
------- -------
Total long-term debt ........................... 95,638 69,174
Less current portion .............................. 319 359
------- -------
Long-term debt -- net of current portion .......... $95,319 $68,815
======= =======
|
The notes payable -- Parent bears interest at a weighted average rate of 8.09%. Interest payments are due quarterly through June 30, 2003. Accrued intercompany interest of $1,941 and $1,434 at December 31, 1998 and 1997, respectively, is included in receivable-Parent.
The industrial revenue bond bears interest at a rate of 6.46%, based on 63% of the Bank's preferred lending rate which was 10.25% at December 31, 1997 and principal payments of $39 are made quarterly until 2001. The bond is collateralized by property with a net book value of $1,908 and $1,988 at December 31, 1998 and 1997, respectively.
At December 31, 1998, the principal amounts of long-term debt repayments required for future years were $319 in 1999, $263 in 2000, $228 in 2001, $67,221 in 2002, and $26,962 in 2003.
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of investments and short-term debt approximates the fair value. Long-term debt rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value for debt issues that are not quoted on an exchange. The estimated fair value of long-term debt at December 31, 1998 approximates the carrying value of $95,638.
6. COMMITMENTS AND CONTINGENCIES
The Company leases certain of its vehicles, equipment and warehouse and manufacturing facilities under capital and operating leases with various terms. Certain leases contain renewal or purchase options. Future minimum payments, by year, and in the aggregate, under these leases with initial or remaining terms of one year or more consisted of the following at December 31, 1998:
MINIMUM
CAPITAL OPERATING SUBLEASE
LEASES LEASES INCOME NET
--------- ----------- --------- ----------
1999 .................................... $ 216 $ 5,373 $ 1,360 $ 4,229
2000 .................................... 204 4,595 966 3,833
2001 .................................... 204 3,961 652 3,513
2002 .................................... 204 2,907 599 2,512
2003 .................................... 161 1,546 457 1,250
Thereafter .............................. 554 844 17 1,381
------- -------- ------- --------
Total minimum lease payments ......... $ 1,543 $ 19,226 $ 4,051 $ 16,718
======== ======= ========
Interest ................................ 274
-------
Present value ........................... $ 1,269
=======
|
The present value of the $1,269 above includes $161 due within one year.
HUTTIG BUILDING PRODUCTS, INC.
(FORMERLY HUTTIG SASH & DOOR COMPANY)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The weighted average interest rate for capital leases is 9.2%. These obligations mature in varying amounts through 2007. Rental expense for all operating leases was $6,672, $5,778, and $5,572 for 1998, 1997 and 1996, respectively.
The cost of assets capitalized under leases is as follows at December 31:
1998 1997
---------- ----------
Land, buildings and improvements .......... $ 3,966 $ 3,966
Machinery and equipment ................... -- 126
------- -------
Cost of leased assets .................. 3,966 4,092
Less accumulated depreciation ............. 2,696 2,582
------- -------
Cost of leased assets -- net ........... $ 1,270 $ 1,510
======= =======
|
LITIGATION -- As of December 31, 1998, the Company is involved in various
claims and legal actions arising in the ordinary course of business. In the
opinion of management, the ultimate disposition of these matters will not have
a material effect on the Company's financial condition and results of
operations.
The Company is involved in two remediation actions to clean up hazardous wastes
as required by federal and state laws. Estimated future environmental
remediation costs of $500 at December 31, 1998 and $143 at December 31, 1997
were fully accrued.
The Company, through its Parent, has established insurance programs to cover product and general liability losses. These programs have deductible amounts before coverage begins. The Company does not deem its deductible exposure to be material.
7. INCOME TAXES
A reconciliation between income taxes based on the application of the statutory federal income tax rate to income taxes as set forth in the consolidated statements of income and retained earnings follows:
1998 1997 1996
------------- ------------- -------------
Income before taxes ................................. $ 21,851 $ 14,814 $ 20,757
========= ========= =========
Statutory federal tax at 35% ........................ $ 7,648 $ 5,185 $ 7,265
Increase resulting from:
State and local income taxes ....................... 411 280 943
Nondeductible goodwill and other expenses .......... 196 294 261
--------- --------- ---------
Provision for income taxes .......................... $ 8,255 $ 5,759 $ 8,469
========= ========= =========
Percentage of income before taxes ................... 37.8% 38.9% 40.8%
========= ========= =========
|
Deferred income taxes at December 31 are comprised of the following:
1998 1997
-------------------------- -------------------------
ASSETS LIABILITIES ASSETS LIABILITIES
---------- ------------- ---------- ------------
Depreciation .................................. $ -- $ 698 $ -- $ 646
Difference between book and tax basis ......... -- 838 -- 865
Inventory related ............................. -- 273 -- 372
Insurance related ............................. 1,301 -- 1,203 --
Employee benefits related ..................... 3,113 -- 4,039 --
Other ......................................... 1,552 -- 696 --
------- ------- ------- -------
Total ...................................... $ 5,966 $ 1,809 $ 5,938 $ 1,883
======= ======= ======= =======
|
HUTTIG BUILDING PRODUCTS, INC.
(FORMERLY HUTTIG SASH & DOOR COMPANY)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At December 31, 1998 and 1997, net current deferred tax assets of $4,053 and $3,168, respectively, were included in receivable-Parent. Net non-current deferred tax assets of $104 and $887 at December 31, 1998 and 1997, respectively, were included in deferred income taxes. The provision for income taxes is composed of the following:
1998 1997 1996
--------- --------- ---------
Current:
U.S. Federal tax ............ $7,708 $5,499 $7,256
State and local tax ......... 649 464 1,495
------ ------ ------
Total current ............. 8,357 5,961 8,751
------ ------ ------
Deferred:
U.S. Federal tax ............ (86) (170) (238)
State and local tax ......... (16) (32) (44)
------ ------ ------
Total deferred ............ (102) (202) (282)
------ ------ ------
Total income tax ............ $8,255 $5,759 $8,469
====== ====== ======
|
8. SALES BY PRODUCT
The Company operates in one business segment, the distribution of building materials used principally in new residential construction and in home improvement, remodeling and repair work. The Company derives substantially all of its revenues from domestic customers. The following table presents, for the periods indicated, the Company's sales by product.
1998 1997 1996
----------- ----------- -----------
Doors ...................................... $259,943 $232,502 $214,957
Specialty Building Materials ............... 140,871 133,746 128,169
Windows .................................... 132,991 128,195 128,126
Moldings ................................... 88,641 93,907 102,159
Lumber & Other Commodity Products .......... 85,004 37,152 21,678
-------- -------- --------
Total sales ............................... $707,450 $625,503 $595,089
======== ======== ========
|
9. ACQUISITIONS
Costs in excess of net assets acquired at December 31, 1998 and 1997 consists of the following:
1998 1997
Costs in excess of net assets acquired $48,412 $21,629
Accumulated amortization 6,303 4,789
------- -------
Total - net $42,109 $16,840
======= =======
|
During 1998, the Company completed two acquisitions. In June, the Company acquired Number One Supply, a building products distribution business based in Baltimore, Maryland and Raleigh, North Carolina, for a total cost of $4,900. In July, the Company acquired certain net assets of Consolidated Lumber Company, Inc., a wholesale distributor of lumber and millwork products in the greater Kansas City, Missouri area for a total cost of approximately $40,000. In connection with the acquisition of Consolidated Lumber Company, Inc., the Company recorded $26,200 of goodwill which will be amortized using the straight-line basis over 15 years.
HUTTIG BUILDING PRODUCTS, INC.
(FORMERLY HUTTIG SASH & DOOR COMPANY)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
During July 1997, the Company completed one acquisition at a total cost of $12,100. The Company acquired MALLCO Lumber & Building Materials Inc., a leading wholesale distributor of lumber, doors and engineered wood products serving Arizona and the surrounding region.
All acquisitions were accounted for by the purchase method. The results of operations for all acquisitions have been included in the financial statements from their respective dates of purchase. The following unaudited pro forma financial information presents the combined results of operations of the Company and Number One Supply and Consolidated Lumber, Inc. as if the acquisitions had taken place at the beginning of 1998. The pro forma amounts give effect to certain adjustments including the amortization of goodwill and intangibles, decreased interest expense and income tax effects. This pro forma information does not necessarily reflect the results of operations as it would have been if the businesses had been managed by the Company during these periods and is not indicative of results that may be obtained in the future. Pro forma 1998 results are as follows: net sales of $738,703 and net income of $14,531.
10. SUBSEQUENT EVENTS
On April 15, 1999, the Company issued dividends of $13,725, which resulted in a corresponding decrease in the receivable from parent account. On June 21, 1999, Crane's Board of Directors authorized management to develop a plan for the possible spin-off of the Company to Crane shareholders on a tax-free basis.
11. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table sets forth selected consolidated financial information of Huttig on a quarterly basis for the first two quarters of 1999 and each quarter of 1998 and 1997. Huttig's business is seasonal and particularly sensitive to weather conditions. Interim amounts are therefore subject to significant fluctuations.
NET COST OF DEPRECIATION AND OPERATING NET
QUARTER SALES SALES AMORTIZATION PROFIT INCOME
(IN THOUSANDS)
1999
First $174,775 $153,887 $1,623 $ 3,987 $ 1,232
Second 205,979 176,436 1,649 7,810 3,288
-------- -------- ------ ------- -------
$380,754 $330,323 $3,272 $11,797 $ 4,520
======== ======== ====== ======= =======
1998
First $146,858 $127,575 $1,129 $ 2,953 $ 966
Second 172,782 150,148 1,097 5,581 2,612
Third 202,209 171,484 1,699 10,638 5,312
Fourth 185,601 157,786 1,661 7,799 4,706
-------- -------- ------ ------- -------
$707,450 $606,993 $5,586 $26,971 $13,596
======== ======== ====== ======= =======
1997
First $133,657 $116,999 $1,073 $ 1,944 $ 1,000
Second 153,140 133,093 1,053 4,760 1,838
Third 176,045 152,419 1,140 7,213 3,487
Fourth 162,661 140,586 1,143 5,925 2,730
-------- -------- ------ ------- -------
$625,503 $543,097 $4,409 $19,842 $ 9,055
======== ======== ====== ======= =======
|
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Consolidated Lumber Company, Inc.
We have audited the accompanying statement of assets acquired and liabilities assumed of Consolidated Lumber Company, Inc. (the Company) as of December 31, 1997, and the related statement of revenues and expenses associated with operations acquired (as described in Note 1) for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
As described in Note 1, the financial statements referred to above have been prepared in consideration of the terms of the Asset Purchase Agreement between Consolidated Lumber Company, Inc. and Huttig Sash & Door Company (Huttig) for the sale of certain assets, liabilities and business operations to Huttig and is not intended to be a complete presentation of the Company's assets, liabilities and results of operations.
In our opinion, the financial statements referred to above present fairly, in all material respects, the assets acquired and liabilities assumed of Consolidated Lumber Company, Inc. at December 31, 1997, and the revenues and expenses associated with the operations acquired for the year then ended, pursuant to the terms of the Asset Purchase Agreement described in Note 1, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
March 2, 1998, except Notes 1
and 2, as to which the date is
August 20, 1999
|
CONSOLIDATED LUMBER COMPANY, INC.
STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
DECEMBER 31, 1997
ASSETS ACQUIRED (NOTE 2)
Current assets:
Accounts receivable ...................... $ 7,051,563
Inventories .............................. 7,809,052
Prepaid expenses ......................... 106,658
-----------
Total current assets ...................... 14,967,273
Property, plant and equipment, at cost:
Leasehold improvements ................... 334,387
Vehicles ................................. 1,717,382
Office and computer equipment ............ 487,021
Machinery and equipment .................. 465,473
-----------
3,004,263
Accumulated depreciation ................. 1,692,865
-----------
Net property, plant and equipment ......... 1,311,398
-----------
Total assets acquired ..................... 16,278,671
LIABILITIES ASSUMED (NOTE 2)
Current liabilities:
Accounts payable ......................... 2,661,224
Accrued expenses ......................... 1,098,679
-----------
Total current liabilities assumed ......... 3,759,903
-----------
Net assets acquired ....................... $12,518,768
===========
|
See accompanying notes.
CONSOLIDATED LUMBER COMPANY, INC.
STATEMENT OF REVENUES AND EXPENSES
ASSOCIATED WITH OPERATIONS ACQUIRED
YEAR ENDED DECEMBER 31, 1997
Net sales ....................................................... $69,243,169
Cost of sales ................................................... 51,737,222
-----------
Gross profit .................................................... 17,505,947
Selling, general and administrative expenses .................... 11,671,107
-----------
Operating income ................................................ 5,834,840
Other income .................................................... 153,667
-----------
Excess of revenues over expenses of operations acquired ......... $ 5,988,507
===========
|
See accompanying notes.
CONSOLIDATED LUMBER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Effective July 1, 1998, Huttig Sash & Door Company (a subsidiary of Crane Co.) acquired certain assets and assumed certain liabilities of Consolidated Lumber Company, Inc. (the Company), a Kansas corporation. In the planned spin off of Huttig Sash & Door Company (Huttig) from Crane Co., the financial statements of the Company as of and for the year ended December 31, 1997, as described below, are required for Huttig's filing of a registration statement on Form 10 with the Securities and Exchange Commission.
The accompanying financial statements have been prepared from the books and records of the Company and present the assets acquired and liabilities assumed in the acquisition and the related revenues and expenses associated with the operations acquired.
NATURE OF BUSINESS
The operations of the Company, acquired by Huttig, primarily consist of the wholesale distribution of building materials to professional contractors building in the single-family home market. The Company also sells value-added items including prehung doors, fabricated roof trusses and preassembled windows. The corporate office is in Merriam, Kansas with four lumber yards and a millwork center located in Kansas and Missouri.
ACCOUNTS RECEIVABLE
The Company grants credit to certain customers who meet the Company's preestablished credit requirements. Generally, the Company does not require security when trade credit is granted to customers. Credit losses have consistently been within management's expectations.
INVENTORIES
Inventories are carried at the lower of cost, determined using the average cost method which approximates the first-in, first-out method, or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost. When retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and the resulting gains or losses are taken into income. Additions, improvements, renewals and expenditures which materially increase the life of the property are capitalized. Maintenance and repairs are charged to expense as incurred.
Depreciation is computed using the straight-line method over the estimated useful lives of the assets which range from five to 39 years.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
2. SALE TRANSACTION
On July 1, 1998, certain assets, liabilities and operations of the Company, specifically excluding the lumber and millwork business operations and related assets and liabilities located in Tucson, Arizona,
CONSOLIDATED LUMBER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SALE TRANSACTION (CONTINUED)
were sold to Huttig for approximately $40 million. In connection with the sale, all assets used in the Company's business of manufacturing and selling lumber and millwork products at its four facilities located in Kansas and Missouri, unless otherwise excluded, and the current liabilities related thereto, excluding any line of credit debt, notes payable or other long-term debt, were transferred to Huttig.
3. COMMITMENTS
The Company leases certain vehicles, office space and plant facilities under long-term, noncancelable operating leases which expire on varying dates through 2002, certain facilities of which are leased from stockholders. Certain vehicle lease agreements provide the Company with the option to purchase the related vehicle upon expiration of the lease. Future minimum lease rentals under these noncancelable operating leases are as follows:
YEAR ENDED DECEMBER 31 AMOUNT
---------------------- -----------
1998 $ 614,597
1999 539,940
2000 467,212
2001 193,935
2002 13,445
----------
Total minimum lease payments $1,829,129
==========
|
Rental expense for all operating leases was $668,456 for the year ended December 31, 1997. In most cases, management expects that in the normal course of business existing leases will be renewed or replaced by other leases.
Three of the operating leases, with aggregate annual rentals for the year ended December 31, 1997 of approximately $390,000, are with companies controlled by stockholders of the Company.
4. INCOME TAXES
The Company has elected to be treated as an S corporation for tax purposes. Consequently, any income from the acquired business operations is included in the income tax returns of the Company's stockholders, and no income taxes have been provided herein.
5. CASH FLOWS
Cash flows provided by operating activities of the acquired operations for the year ended December 31, 1997 were generated primarily by earnings. Cash flows used in investing activities related primarily to capital expenditures for the year.
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.
HUTTIG BUILDING PRODUCTS, INC.
(Registrant)
Date: September 21, 1999 By: /s/ Barry J. Kulpa
------------ -----------------------------
Name: Barry J. Kulpa
Title: President and Chief
Executive Officer
|
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
2.1 Form of Distribution Agreement between Crane Co. and Huttig Building Products, Inc.*
3.1 Restated Certificate of Incorporation of Huttig Sash & Door Company (filed herewith).
3.2 By-laws of Huttig Building Products, Inc. (filed herewith).
4.1 Specimen certificate for Common Stock of Huttig Building Products, Inc.*
4.2 Form of Rights Agreement between Huttig Building Products, Inc. and the rights agent named
therein*
10.1 Form of Tax Allocation Agreement between Crane Co. and Huttig Building Products, Inc. (filed
herewith).
10.2 Form of Employee Matters Agreement between Crane Co. and Huttig Building Products, Inc.
(filed herewith).
10.3 Form of Transition Services Agreement between Crane Co. and Huttig Building Products, Inc.*
10.4 Form of the Economic Value Added Incentive Compensation Plan for Executive Officers of Huttig
Building Products, Inc.*
10.5 Form of Non-Employee Director Restricted Stock Plan (filed herewith).
10.6 Form of Stock Incentive Plan*
10.7 Form of Employee Stock Purchase Plan*
10.8 Form of Indemnification Agreement for Executive Officers and Directors (filed herewith).
10.9 Amended Employment/Severance Agreement between Huttig Building Products, Inc. and Barry J.
Kulpa dated *.
10.10 Form of Retirement Plan for Non-Employee Directors*
21.1 Subsidiaries of Huttig Building Products, Inc.*
27.1 Financial Data Schedule (filed herewith).
|
RESTATED CERTIFICATE OF INCORPORATION
OF
HUTTIG SASH & DOOR COMPANY
The name of the Corporation is HUTTIG SASH & DOOR COMPANY. The Corporation's original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on January 2, 1913.
This Restated Certificate of Incorporation restates and integrates and also further amends the Certificate of Incorporation of the Corporation, as heretofore amended and supplemented, and was duly adopted in accordance with the provisions of Section 242 and 245 of the General Corporation Law of the State of Delaware.
ARTICLE I
The name of the corporation (hereinafter called the "Corporation") is Huttig Building Products, Inc.
ARTICLE II
The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The name of the Corporation's registered agent at such address is The Corporation Trust Company.
ARTICLE III
The purpose or purposes for which the Corporation is organized are to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware.
ARTICLE IV
The total number of shares of all classes of stock which the Corporation shall have authority to issue is Fifty Million (50,000,000) shares of common stock, par value $.01 per share ("Common Stock"), and Five Million (5,000,000) shares of preferred stock, par value $.01 per share ("Preferred Stock").
The following is a description of each of the classes of stock of the Corporation and a statement of the powers, preferences, and rights of such stock, and the qualifications and restrictions thereof.
(a) At all meetings of the shareholders of the Corporation the holders of the Common Stock shall be entitled to one vote for each share of Common Stock held by them respectively.
(b) Shares of the Preferred Stock may be issued from time to time in one or more series as may from time to time be determined by the Board of Directors of the Corporation. Each series shall be distinctly designated. Except as otherwise provided in the resolution setting forth the designations and rights of the series of Preferred Stock, all shares of any one series of Preferred Stock shall be alike in every particular, except that there may be different dates from which dividends (if any) thereon shall be cumulative, if made cumulative. The relative preferences, participating, optional and other special rights of each such series, and limitations thereof, if any, may differ from those of any and all other series at any time outstanding. The Board of Directors of the Corporation is hereby expressly granted authority to fix by resolution or resolutions adopted prior to the issuance of any shares of each particular series of the Preferred Stock, the designation, preference, and relative, participating, optional or other rights, if any, or the qualifications, limitations or restrictions thereof, if any, of such series, including, but without limiting the generality of the foregoing, the following:
(1) the distinctive designation of, and the number of shares of the Preferred Stock which shall constitute the series, which number may be increased (except as otherwise fixed by the Board of Directors) or decreased (but not below the number of shares thereof then outstanding) from time to time by action of the Board of Directors;
(2) the rate and times at which, and the terms and conditions upon which, dividends, if any, on shares of the series may be paid, the extent of preferences or relation, if any, of such dividends to the dividends payable on any other class or classes of stock of the Corporation, or on any series of the Preferred Stock or of any other class or classes of stock of the Corporation, and whether such dividends shall be cumulative, partially cumulative or non-cumulative;
(3) the right, if any, of the holders of shares of the series to convert the same into shares of any other class or classes of stock of the Corporation or any of its subsidiaries, and the terms and conditions of such conversion;
(4) the right, if any, of the holders of shares of the series to exchange the same for any other class or classes of stock of the Corporation or any of its subsidiaries or for any other property that the Board of Directors may determine, and the terms and conditions of such exchange;
(5) whether shares of the series shall be subject to redemption and the redemption price or prices and the time or times at which, and the terms and conditions upon which, shares of the series may be redeemed;
(6) the rights, if any, of the holders of shares of the series upon voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding-up of the Corporation;
(7) the terms of the sinking fund or redemption or purchase account, if any, to be provided for shares of the series; and
(8) the voting powers, if any, of the holders of shares of the series which may, without limiting the generality of the foregoing, include the right, voting as a series by itself or together with other series of the Preferred Stock or all series of the Preferred Stock as a class, (1) to cast more or less than one vote per share on any or all matters voted upon by the shareholders, (2) to elect one or more directors of the Corporation in the event there shall have been a default in the payment of dividends on any one or more series of the Preferred Stock or under such other circumstances and upon such conditions as the Board of Directors may fix.
(c) The relative preferences, rights and limitations of each series of Preferred Stock in relation to the preferences, rights and limitations of each other series of Preferred Stock shall, in each case, be as fixed from time to time by the Board of Directors in the resolution or resolutions adopted pursuant to authority granted in this Article IV, and the consent by class or series vote or otherwise, of the holders of the Preferred Stock of such of the series of the Preferred Stock as are from time to time outstanding shall not be required for the issuance by the Board of Directors of any other series of Preferred Stock whether the preferences and rights of such other series shall be fixed by the Board of Directors as senior to, or on a parity with, the preferences and rights of such outstanding series, or any of them; provided, however, that the Board of Directors may provide in such resolution or resolutions adopted with respect to any series of Preferred Stock that the consent of the holders of a majority (or such greater proportion as shall be therein fixed) of the outstanding shares of such series voting thereon shall be required for the issuance of any or all other series of Preferred Stock.
(d) Subject to the provisions of the preceding paragraph (c), shares of any series of Preferred Stock may be issued from time to time as the Board of Directors shall determine and on such terms and for such consideration, not less than the par value thereof, as shall be fixed by the Board of Directors.
ARTICLE V
BOARD OF DIRECTORS
Section 1. Number. The business and affairs of the Corporation shall be managed under the direction of the Board of Directors which shall consist of not less than three nor more than fifteen persons. The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors.
Section 2. Election and Terms. The directors shall be divided into three classes, as nearly equal in number as reasonably possible, with the term of office of the first class to expire at the 2000 Annual Meeting of Stockholders, the term of office of the second class to expire at the 2001 Annual Meeting of Stockholders and the term of office of the third class to expire at the 2002 Annual Meeting of Stockholders. At each Annual Meeting of Stockholders, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding Annual Meeting of Stockholders after their election.
Section 3. Newly Created Directorships and Vacancies. Newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled only by a majority vote of the directors then in office, and directors so chosen shall hold office for a term expiring at the Annual Meeting of Stockholders at which the term of the class to which they have been elected expires. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.
Section 4. Removal. Any director, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least two-thirds of the voting power of the shares then entitled to vote at an election of directors, voting together as a single class.
Section 5. Amendment, Repeal, etc. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least two-thirds of the voting power of the then outstanding shares entitled to vote thereon pursuant to Article IV, voting together as a single class, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article V.
ARTICLE VI
STOCKHOLDER ACTION
Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders. Special meetings of stockholders of the Corporation may be called only by the Chairman of the Board of Directors or by the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors. At a special meeting of the stockholders, only such business shall be conducted as shall be specified in the notice of meeting (or any supplement thereto). Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least two-thirds of the voting power of the then outstanding shares entitled to vote thereon pursuant to Article IV, voting together as a single class, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article VI.
ARTICLE VII
BY-LAW AMENDMENTS
The Board of Directors shall have the power to make, alter, amend or repeal the By-laws of the Corporation by such vote as may be specified therein. The affirmative vote of the holders of two-thirds or more of the voting power of the then outstanding shares entitled to vote thereon pursuant to Article IV, voting together as a single class, shall be required for the stockholders to make, alter, amend or repeal the By-laws. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least two-thirds of the voting power of the then outstanding shares entitled to vote thereon pursuant to Article IV, voting together as a single class, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article VII.
ARTICLE VIII
No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. If the General Corporation Law of the State of Delaware is hereafter amended to authorize corporate action further limiting or eliminating the personal liability of directors, then the liability of a director to the Corporation shall be limited or eliminated to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended from time to time. No repeal or modification of this Article VIII, directly or by adoption of an inconsistent provision of this Certificate of Incorporation, by the stockholders of the Corporation shall be effective with respect to any cause of action, suit, claim or other matter, that, but for this Article VIII, would accrue or arise prior to such repeal or modification.
IN WITNESS WHEREOF, the Corporation has caused this Restated Certificate of Incorporation to be executed by the undersigned duly authorized officer on September 21, 1999.
HUTTIG SASH & DOOR COMPANY
By: /s/ David S. Smith ---------------------------------- David S. Smith Vice President - Finance |
HUTTIG BUILDING PRODUCTS, INC.
BY-LAWS
HUTTIG BUILDING PRODUCTS, INC.
BY-LAWS
ARTICLE I
DEFINITIONS; OFFICES
Section 1. Definitions. When used herein, "Board" shall mean the Board of Directors of the Corporation, "Chairman" shall mean the Chairman of the Board and "Corporation" shall mean this Corporation.
Section 2. Principal Office. The principal office of the Corporation shall be located in the City of Chesterfield, State of Missouri.
Section 3. Other Offices. The Corporation may have and maintain such other business office or offices, either within or without the State of Missouri, as the Board of Directors may from time to time determine.
Section 4. Registered Office. The registered office of the corporation shall be at such address as from time to time the Board of Directors may determine.
ARTICLE II
STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the stockholders of the Corporation shall be held at the hour of ten o'clock a.m. on the fourth Monday of April in each year beginning in 2000, unless the Board shall fix a different date and time, for the election of Directors and for the transaction of such other business as may properly come before the meeting. If the day fixed for the annual meeting shall be a legal holiday, such meeting shall be held on the next succeeding business day. If the election of Directors shall not be held on the day designated herein for the annual meeting, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of the stockholders as soon thereafter as such meeting can conveniently be convened and held.
No business may be transacted at an annual meeting of stockholders, other than business that is either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the annual meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (c) otherwise properly brought before the annual meeting by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section and on the record date for the determination of stockholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section.
In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than sixty (60) days nor more than ninety (90) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that (i) if the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date or (ii) with respect to the annual meeting of stockholders of the Corporation to be held in the year 2000, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary
must set forth as to each matter such stockholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and record address of such stockholder, (iii) the
class or series and number of shares of capital stock of the Corporation that
are owned by such stockholder, (iv) a description of all arrangements or
understandings between such stockholder and any other person or persons
(including their names) in connection with the proposal of such business by such
stockholder and any material interest of such stockholder in such business and
(v) a representation that such stockholder intends to appear in person or by
proxy at the annual meeting to bring such business before the meeting.
No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section; provided, however, that once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section shall be deemed to preclude discussion by any stockholder of any such business. If the chairman of the annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted.
Section 2. Special Meetings. Special meetings of stockholders of the Corporation may be called only by the Chairman of the Board of Directors or by the Board of Directors pursuant to a resolution approved by a majority of the Board of Directors. A call for a special meeting of stockholders shall be in writing, filed with the Secretary, and shall specify the time and place of holding such meeting and the purpose or purposes for which it is called. At a special meeting of the stockholders, only such business shall be conducted as shall be specified in the notice of meeting (or any supplement thereto).
Section 3. Nomination of Directors. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the
Corporation, except as may be otherwise provided in the Certificate of
Incorporation of the Corporation with respect to the right of holders of
preferred stock of the Corporation to nominate and elect a specified number of
directors in certain circumstances. Nominations of persons for election to the
Board of Directors may be made at any annual meeting of stockholders, or at any
special meeting of stockholders called for the purpose of electing directors,
(a) by or at the direction of the Board of Directors (or any duly authorized
committee thereof) or (b) by any stockholder of the Corporation (i) who is a
stockholder of record on the date of the giving of the notice provided for in
this Section and on the record date for the determination of stockholders
entitled to vote at such meeting and (ii) who complies with the notice
procedures set forth in this Section.
In addition to any other applicable requirements, for a nomination to
be made by a stockholder, such stockholder must have given timely notice thereof
in proper written form to the Secretary of the Corporation. To be timely, a
stockholder's notice to the Secretary must be delivered to or mailed and
received at the principal executive offices of the Corporation (a) in the case
of an annual meeting, not less than sixty (60) days nor more than ninety (90)
days prior to the anniversary date of the immediately preceding annual meeting
of stockholders; provided, however, that (i) if the annual meeting is called for
a date that is not within thirty (30) days before or after such anniversary date
or (ii) with respect to the annual meeting of stockholders of the Corporation to
be held in the year 2000, notice by the stockholder in order to be timely must
be so received not later than the close of business on the tenth (10th) day
following the day on which notice of the date of the annual meeting was mailed
or public disclosure of the date of the annual meeting was made, whichever first
occurs; and (b) in the case of a special meeting of stockholders called for the
purpose of electing directors, not later than the close of business on the tenth
(10th) day following the day on which notice of the date of the special meeting
was mailed or public disclosure of the date of the special meeting was made,
whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary
must set forth (a) as to each person whom the stockholder proposes to nominate
for election as a director (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of such
person, (iii) the class or series and number of shares of capital stock of the
Corporation that are owned beneficially or of record by such person and (iv) any
other information relating to such person that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder; and (b) as to the stockholder giving the
notice (i) the name and record address of such stockholder, (ii) the class or
series and number of shares of capital stock of the Corporation that are owned
beneficially or of record by such stockholder, (iii) a description of all
arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or by proxy at
the meeting to nominate the person named in its notice and (v) any other
information relating to such stockholder that would be required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.
No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section. If the chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded.
Section 4. Stockholder Action. Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders.
Section 5. Place of Meetings. The annual meeting of stockholders and all special meetings of stockholders for the election of directors shall be held either at the principal office of the Corporation or at such other place suitable for the holding of a stockholders' meeting as shall be designated in the notice thereof. Special meetings of stockholders for a purpose or purposes other than the election of directors may be held at such place, either within or without the State of Missouri, as shall be specified or fixed in the call for such meeting and the notice thereof as the place for the holding of a special meeting for any purpose or purposes.
Section 6. Notice of Meetings. Except as otherwise provided by statute, written or printed notice stating the place, day and hour of the meeting and, in case of a special meeting, stating the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 60 days before the date of the meeting, either personally or by mail, by or at the direction of the Secretary, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail in a sealed envelope addressed to the stockholder at his last known post office address as it appears on the stock record books of the Corporation, with postage thereon prepaid.
Attendance of a person at a meeting of stockholders, in person or by proxy, constitutes a waiver of notice of the meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
Section 7. Record Dates. The Board may fix in advance a date, not more than 60 nor fewer than 10 days prior to the date of any meeting of stockholders, nor more than 60 days prior to the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change conversion or exchange of capital stock shall go into effect, as a record for the determination of the stockholders entitled to notice of, and to vote at, any such meeting and any adjournment thereof, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise rights in respect of any such change, conversion or exchange of capital stock, and in such case such stockholders and only such stockholders as shall be entitled to such notice of, and to vote at, such meeting and any adjournment thereof, or to receive
payment of such dividend, or to receive such allotment of rights, or to exercise rights, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid.
Section 8. Voting Lists. The officer or agent having charge of the transfer book for shares of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder present. The original share or stock ledger or transfer book or a duplicate thereof, shall be the only evidence as to who are the stockholders entitled to examine such list or share ledger or transfer book or to vote at any meeting of stockholders.
Section 9. Quorum. At any meeting of stockholders the holders of a majority of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum of the stockholders for all purposes unless a greater or lesser quorum shall be provided by law or by the Certificate of Incorporation and in such case the representation of the number so required shall constitute a quorum. The stockholders present in person or by proxy at a meeting at which a quorum is present may continue to do business until adjournment, notwithstanding withdrawal of enough stockholders to leave less than a quorum.
Whether or not a quorum is present the meeting may be adjourned from time to time by a vote of the holders of a majority of the shares present. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting if held at the time specified in the notice thereof.
Section 10. Voting and Proxies. Each holder of Common Stock shall be entitled to one vote per share held of record upon each matter on which stockholders generally are entitled to vote.
At all meetings of stockholders, a stockholder entitled to vote may vote in person or by a proxy executed in writing by the stockholder or by his duly authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. Unless otherwise provided by law, all questions touching the validity or sufficiency of the proxies shall be decided by the Secretary. Without limiting the manner in which a stockholder may authorize another person or persons to act for him or her as proxy, either of the following shall constitute a valid means by which a stockholder may grant such authority:
(a) A stockholder may execute a writing authorizing another person or persons to act for him or her as proxy. Execution may be accomplished by the stockholder or his
or her authorized officer, director, employee or agent signing such writing or causing his or her signature to be affixed to such writing by any reasonable means, including, but not limited to, by facsimile signature.
(b) A stockholder may authorize another person or persons to act for him or her as proxy by transmitting or authorizing the transmission of a telegram or other means of electronic transmission to the person who will be the holder of the proxy to receive such transmission, provided that any such telegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram or other electronic transmission was authorized by the stockholder.
Directors shall be elected by a plurality of the votes cast at an election.
All other action (unless a greater plurality is required by law or by the Certificate of Incorporation or by these By-laws) shall be authorized by a majority of the votes cast by the holders of shares entitled to vote thereon, present in person or represented by proxy, and where a separate vote by class is required, by a majority of the votes cast by stockholders of such class, present in person or represented by proxy.
Section 11. Voting of Shares by Certain Holders.
(a) Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the By-laws of such corporation may prescribe, or, in the absence of such provision, as the Board of Directors of such corporation may determine.
(b) Shares standing in the name of a deceased person may be voted by his administrator or his executor either in person or by proxy.
(c) Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name, if authority so to do be contained in an appropriate order of the court by which such receiver was appointed, and a certified copy of such order is filed with the Secretary of the Corporation before or at the time of the meeting.
(d) A stockholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.
(e) Shares of the Corporation belonging to it shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any given time, but shares of the Corporation held by it in a fiduciary capacity may be voted and shall be counted in determining the number of outstanding shares at any given time.
Section 12. Inspectors. At each meeting of stockholders, the chairman of the meeting may appoint one or more inspectors of voting whose duty it shall be to receive and count the ballots and make a written report showing the results of the balloting.
ARTICLE III
DIRECTORS
Section 1. Number. The business and affairs of the Corporation shall be managed under the direction of the Board which shall consist of not less than three nor more than fifteen persons. The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the Board pursuant to a resolution adopted by a majority of the entire Board.
Section 2. Election and Terms. The directors shall be divided into three classes, as nearly equal in number as reasonably possible, with the term of office of the first class to expire at the 2000 annual meeting of stockholders, the term of office of the second class to expire at the 2001 annual meeting of stockholders and the term of office of the third class to expire at the 2002 annual meeting of stockholders. At each annual meeting of stockholders, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election.
Section 3. Newly Created Directorships and Vacancies. Newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled only by a majority vote of the directors then in office, and directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of the class to which they have been elected expires. No decrease in the number of directors constituting the Board shall shorten the term of any incumbent director.
Section 4. Removal. Any director, or the entire Board, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least two-thirds of the voting power of the shares of the Corporation then entitled to vote at an election of directors, voting together as a single class.
Section 5. Regular Meetings. The regular annual meeting of the Board shall be held at such time and place as the Board may by resolution determine from time to time without other notice than as set forth in such resolution.
The regular monthly meetings of the Board shall be held at such time and place as the Board may by resolution determine from time to time.
The Board may by resolution change the times and places, either within or without the State of Missouri, for the holding of such regular monthly meetings, and such times and places for the holding of other regular meetings without notice other than such resolution.
Section 6. Special Meetings. Special meetings of the Board may be held at any time on the call of the Chairman or at the request in writing of a majority of the directors. Special meetings of the Board may be held at such place, either within or without the State of Missouri, as shall be specified or fixed in the call for such meeting or notice thereof.
Section 7. Notice of Special Meetings. Notice of each special meeting shall be deposited in the United States mail by or at the direction of the Secretary to each director addressed to him at his residence or usual place of business at least seventy-two (72) hours before the day on which the meeting is to be held, or shall be sent to him by telegram, be delivered personally, or be given orally at least twenty-four (24) hours before the day on which the meeting is to be held. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail in a sealed envelope so addressed, with postage thereon prepaid. If notice be given by telegraph, such notice shall be deemed to be delivered when the same is delivered to the telegraph company. If the Secretary shall fail or refuse to give any such notice, then notice may be given by the officer or any one of the directors making the call.
Notice may be waived in writing by any director, either before or after the meeting. Any meeting of the Board of Directors shall be a legal meeting without any notice thereof having been given if all directors shall be present thereat, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting, and any and all business may be transacted thereat.
Section 8. Quorum. A majority of the members of the Board then in office, or of a committee thereof, shall constitute a quorum for the transaction of business, except that the presence of the Chairman of the Board shall be necessary to constitute a quorum of the Executive Committee of the Board, and the vote of a majority of the members present at a meeting at which a quorum is present shall be the act of the Board or of the Committee thereof, except for the amendment of the By-laws which shall require the vote of not less than a majority of the members of the Board then in office.
Section 9. Action Without a Meeting. Action required or permitted to be taken pursuant to authorization voted at a meeting of the Board, or a committee thereof, may be taken without a meeting if, before or after the action, all members of the Board or of the Committee consent thereto in writing. The written consents shall be filed with the minutes of the proceedings of the Board or Committee. The consent shall have the same effect as a vote of the Board or Committee thereof for all purposes.
Section 10. Organization. At all meetings of the Board, the Chairman, the Vice Chairman of the Board, if any, or in their absence a member of the Board to be selected by the members present, shall preside as Chairman of the meeting. The Secretary or an Assistant Secretary of the Corporation shall act as Secretary of all meetings of the Board, except that in their absence the Chairman of the meeting may designate any other person to act as secretary.
At meetings of the Board business shall be transacted in such order as from time to time the Board may determine.
Section 11. Compensation. In the discretion of the Board, the directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary, or such other compensation as the Board of directors shall from time to time determine. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
Section 12. Presence at Meeting. A member of the Board or of a Committee designated by the Board may participate in a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in this manner constitutes presence in person at the meeting.
Section 13. Executive Committee. The Board, by resolution adopted by a majority of the entire board, may designate two or more directors to constitute an Executive Committee, which committee, to the extent provided in such resolution or in these By-laws, shall have and exercise all of the authority of the Board in the management of the Corporation provided such Committee shall not have the authority of the Board in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation involving the corporation, recommending to the stockholders the sale, lease, or exchange of all or substantially all of the property and assets of the Corporation, recommending to the stockholders a dissolution of the Corporation or a revocation thereof, filling vacancies on the Board or on any committee of the Board (including the Executive Committee), amending, altering or repealing any By-laws of the Corporation, electing or removing officers of the Corporation, fixing the compensation of any member of the Executive Committee or amending, altering or repealing any resolution of the Board which by its terms provides that it shall not be amended, altered or repealed by the Executive Committee.
Section 14. Committees of the Board. The Board may designate one or more other committees, each consisting of one or more directors of the Corporation as members and one or more directors as alternate members, with such power and authority as prescribed by the By-laws or as provided in a resolution adopted by a majority of the Board. Each Committee, and each member thereof, shall serve at the pleasure of the Board.
ARTICLE IV
OFFICERS
Section 1. Officers' Number. The officers of the Corporation shall be a Chairman of the Board, a President, one or more Vice Presidents, a Treasurer, a Controller, and such other officers as the Board may determine from time to time, including such other subordinate corporate or divisional officers as may be elected or appointed in accordance with the provisions of Section 3 of this Article IV. The Board may designate a variation in the title of any officer. Any two or more offices may be held by the same person except the offices of President and Secretary.
Section 2. Election, Term of Office, and Qualifications. The officers of the Corporation shall be elected annually by the Board at the first meeting of the Board held after the annual meeting of stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as the same can conveniently be held. Each officer, except such officers as may be elected or appointed in accordance with the provisions of Section 3 of this Article IV, shall hold his office until his successor shall have been duly elected and shall have qualified or until his death, resignation or removal.
Section 3. Subordinate Officers.
(a) Subordinate Corporate Officers. The Board may annually appoint one or more Assistant Controllers, Assistant Vice Presidents, one or more Assistant Secretaries, Assistant Treasurers, Auditors or Assistant Auditors, and such other subordinate corporate officers and agents as the Board may determine, to hold office as subordinate corporate officers for such period and with such authority and to perform such duties as may be prescribed by these By-laws or as the Board may from time to time determine. The Board may, by resolution, empower the Chairman of the Board to appoint any such subordinate corporate officers or agents to hold office for such period and to perform such duties as may be prescribed in said resolution. In its discretion the Board may leave unfilled, for any such period as it may fix by resolution, any corporate office, except those of President, Secretary and Treasurer.
(b) Divisional Officers. The Board, the Chairman of the Board or the President may from time to time appoint employees of the Company divisional officers who shall have such operating and divisional responsibilities as may be designated by the President. Such divisional officers shall not be corporate officers and shall serve at the discretion of, under the direction of, and subject to removal by, the President.
Section 4. Resignations. Any officer may resign at any time by giving written notice to the Board or to the Chairman of the Board or Secretary of the Corporation. Any such resignation shall take effect at the time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
Section 5. Removal. Any of the officers designated in Section 1 of this Article IV may be removed by the Board, whenever in its judgment the best interests of the Corporation will be served thereby, by the vote of a majority of the total number of directors then in office. Any subordinate corporate officer appointed in accordance with Section 3 of this Article IV may be removed by the Board for like reason by a majority vote of the directors present at any meeting, a quorum being present, or by any superior officer upon whom such power of removal has been conferred by resolution of the Board. Any divisional officer appointed in accordance with Section 3 of this Article IV may be removed by the Chairman of the Board at any time and at his sole discretion or by any superior officer upon whom the power of removal has been conferred by the Chairman of the Board. The removal of any officer, subordinate officer or agent shall be without prejudice to the contract rights, if any, of the person so removed.
Section 6. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or otherwise may be filled for the unexpired portion of the term in the same manner in which an officer to fill said office may be chosen pursuant to Section 2 or 3 of this Article IV, as the case may be.
Section 7. The Chairman of the Board. The Board shall elect a Chairman who shall be chosen from among the directors. The Chairman shall preside at all meetings of the stockholders and the Board at which he is present. The Chairman shall consult with and render advice to the President of the Corporation as may be appropriate in the Chairman's discretion from time to time, and shall perform all other duties as are properly required of him by the Board of Directors from time to time.
Section 8. The President. The Board shall elect a President who shall be the Chief Executive Officer of the Corporation. The President shall have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board are carried into effect, subject, however, to the right of the Board to delegate any specific powers, except such as may be by law exclusively conferred upon the President, to any officer or officers of the Corporation. All papers, documents, deeds, and other instruments required to be executed by the Corporation shall be signed and executed for the Corporation by the President when directed by, and in the manner prescribed by, the Board. The President shall have the general powers and duties of supervision and management which are usually vested in the Chief Executive Officer of a Corporation.
Section 9. Vice Presidents. Vice Presidents shall have supervision over all such matters, other officers of the Company and other employees as may be designated or assigned to them by the President or Chairman of the Board, and shall perform such duties as the
Board of Directors may designate or as may be assigned to them by the President or by the Chairman of the Board in the event of absence or disability of the President.
Section 10. Treasurer. The Treasurer shall:
(a) Subject to the supervision and direction of the Vice President - Finance, have the custody of all moneys, notes, bonds, securities and other evidences of indebtedness belonging to the Corporation, and shall keep full and accurate accounts of all moneys and securities received and of all moneys paid by him on account of the Corporation. He shall daily deposit all moneys, checks and drafts received to the credit and in the name of the Corporation, in such banks or other depositories as shall from time to time be authorized, approved or directed by the President, the Vice President - Finance, or the Board, and shall, on behalf of the Corporation, endorse for deposit or collection, checks, notes, drafts and other obligations, provided, however, that checks of the United States Government or of any state or municipal government, which may be received by any branch house of the Corporation, may be endorsed for deposit by the local manager of the house receiving the check, and provided further, however, that checks, warrants, drafts, notes and other negotiable instruments, which may be received by any branch house of the Corporation, may be endorsed by the local manager in the name of the Corporation for collection or deposit by or in the local bank authorized to carry the local accounts.
(b) Furnish to the Board, to the President and to such other officers as the Board may designate, at such times as may be required, an account of all his transactions as Treasurer.
(c) Perform such other duties pertaining to the business of the Corporation as shall be directed or required by the President, the Vice President - Finance, or the Board and, subject to the control of the Vice President - Finance, the Board and these By-laws, perform all acts incident to the office of the Treasurer.
(d) Give such bond of the faithful discharge of his duties as the Board may require.
The books and papers of the Treasurer shall at all times be open to the inspection of the President and each member of the Board.
Section 11. Secretary. The Secretary shall:
(a) Attend all meetings of the stockholders and keep the minutes of such meetings in one or more books provided for that purpose.
(b) See that all notices are duly given in accordance with the provisions of these By-laws, or as required by law.
(c) Be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation or a facsimile thereof is affixed to or
impressed on all certificates for shares prior to the issue thereof, and all documents, the execution of which on behalf of the Corporation under its seal, is duly authorized.
(d) Sign with the President or a Vice President certificates for shares of the Corporation, the issue of which shall have been authorized by resolution of the Board.
(e) See that the reports, statements, certificates and all other documents and records required by law are properly made, kept and filed.
(f) In general, perform all other duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the President or the Board.
Section 12. Controller. The Controller shall:
(a) Maintain adequate records of all assets, liabilities, and transactions of this Corporation; see that adequate audits thereof are currently and regularly made; and in conjunction with other officers and department heads initiate and enforce measures and procedures whereby the business of the Corporation shall be conducted with the maximum safety, efficiency, and economy. His duties and powers shall extend to all subsidiary corporations and to all affiliated corporations.
(b) Prepare and furnish such reports and financial statements covering results of operations of the Corporation as shall be required of him by the President or the Board. Prepare and furnish such reports and statements showing the financial condition of the Corporation as shall be required of him by the President or the Board, and have the primary responsibility for the preparation of financial reports to the stockholders.
(c) Perform such other duties pertaining to the business of the Corporation as shall be directed or required by the President or the Board and, subject to the control of the President, the Board and these By-laws, perform all acts incident to the office of the Controller.
The books, records and papers of the Controller shall at all times be open to the inspection of the President and each member of the Board.
Section 13. Assistant Treasurers. If one or more Assistant Treasurers shall be elected or appointed pursuant to the provisions of Section 3 of this Article IV, then in the absence or disability of the Treasurer, the Assistant Treasurers shall perform all the duties of the Treasurer, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the Treasurer, except that they shall have no power to sign in the name of the Corporation contracts as described in Article VII, unless specifically authorized by the Board. Any such Assistant Treasurer shall perform such other duties as from time to time may be assigned to him by the Board or any superior officer.
Section 14. Assistant Secretaries. If one or more Assistant Secretaries shall be elected or appointed pursuant to the provisions of Section 3 of this Article IV, then in the absence or disability of the Secretary, the Assistant Secretaries shall perform the duties of the Secretary, and when so acting shall have all the powers of, and be subject to all the restrictions imposed upon, the Secretary. Any such Assistant Secretary shall perform such other duties as from time to time may be assigned to him by the Board or any superior officer.
Section 15. Compensation. The compensation of the officers shall be fixed from time to time by the Board; provided that the Board may authorize any officer or Committee to fix the compensation of officers and employees. No officer shall be prevented from receiving such compensation by reason of the fact that he is also a director of the Corporation.
ARTICLE V
CAPITAL STOCK
Section 1. Certificates of Stock. The certificates for shares of the capital stock of the Corporation shall be in such form as shall be approved by the Board. The certificates shall be signed by the Chairman of the Board, the President, a Vice President and also by the Treasurer or the Secretary, and may be sealed with the seal of the Corporation, or a facsimile thereof.
The signatures of the aforesaid officers may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation or its employee. The validity of any stock certificate of the Corporation signed and executed by or in the name of duly qualified officers of the Corporation shall not be affected by the subsequent death, resignation, or the ceasing for any other reason of any such officer to hold such office, whether before or after the date borne by or the actual delivery of such certificate.
The name of the person owning the shares represented thereby, with the number of such shares and the date of issue, shall be entered on the Corporation's capital stock records.
All certificates surrendered to the Corporation shall be canceled, and no new certificates shall be issued until the former certificate for the same number of shares shall have been surrendered and canceled except in case of a lost or destroyed certificate.
The Corporation may treat the holder of record of any share or shares of stock as the holder in fact thereof, and shall not be bound to recognize any equitable or other claim to interest in any such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by law.
Section 2. Lost, Stolen or Destroyed Certificates. The Corporation may issue a new certificate for shares in place of a certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Board may require the owner of the lost or destroyed certificate, or his legal representative, to give the Corporation a bond in form satisfactory to the Corporation sufficient to indemnify the Corporation, its transfer agents and registrars against any claim that
may be made against them on account of the alleged lost or destroyed certificate or the issuance of such a new certificate.
Section 3. Transfer of Shares. Shares of the capital stock of the Corporation shall be transferable by the owner thereof in person or by duly authorized attorney, upon surrender of the certificates therefor properly endorsed. The Board, at its option, may appoint a transfer agent and registrar, or one or more transfer agents and one or more registrars, or either, for the stock of the Corporation.
Section 4. Regulations. The Board shall have power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration of certificates for shares of the capital stock of the Corporation.
ARTICLE VI
EXECUTION OF INSTRUMENTS ON BEHALF OF THE CORPORATION
The President or any Vice President, and any other officer or officers, agent or agents of the Corporation that the Board may from time to time designate, may enter into any contract or execute any instrument in the name of and on behalf of the Corporation; with respect to the President and any Vice President, such authority shall be general and with respect to any other officer or agent, such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
ARTICLE VII
CORPORATE SEAL
The corporate seal of the Corporation shall have inscribed thereon the name of the Corporation and the words "Corporate Seal-____-Delaware." Said seal may be used by causing it or a facsimile or equivalent thereof to be impressed or affixed or reproduced, and shall be in the custody of the Secretary. If and when so directed by the Board, a duplicate of the seal may be kept and used by the Treasurer, or by any Assistant Treasurer or Assistant Secretary.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 1. Dividends. Dividends upon the outstanding shares of the Corporation may be paid from any source permitted by law. Dividends may be declared at any regular or special meeting of the Board and may be paid in cash or other property or in the form of a stock dividend.
Section 2. Fiscal Year. The fiscal year of the Corporation shall end on the 31st day of December each year, unless otherwise provided by resolution of the Board.
Section 3. Stock in other Corporations. Any shares of stock in any other corporation which may from time to time be held by the Corporation may be represented and voted at any meeting of stockholders of such corporation by the Chairman or the President of the Corporation or by any other person or persons thereunto authorized by the Board, or by any proxy designated by written instrument of appointment executed in the name of the Corporation either by the Chairman, the President, or a Vice President, and attested by the Secretary or an Assistant Secretary.
ARTICLE IX
INDEMNIFICATION
Section 1. Actions, Suits or Proceedings other than by or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was or has agreed to become a director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director or officer or trustee of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity against costs, charges, expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding or any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. Actions or Suits by or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was or has agreed to become a director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director or officer or trustee of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges and expenses (including attorneys' fees) actually and reasonably incurred by him or on his behalf in connection with the defense or settlement of such action or suit and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation except that no
indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such costs, charges and expenses which the Court of Chancery or such other court shall deem proper.
Section 3. Indemnification for Costs, Charges and Expenses of Successful Party. Notwithstanding the other provisions of this Article, to the extent that a director or officer of the Corporation has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article, or in defense of any claim, issue or matter therein, he shall be indemnified against all costs, charges and expenses (including attorneys' fees) actually and reasonably incurred by him or on his behalf in connection therewith.
Section 4. Determination of Right to Indemnification. Any indemnification under Sections 1 and 2 of this Article (unless ordered by a court) shall be paid by the corporation unless a determination is made (1) by the Board of Directors by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (3) by the stockholders, that indemnification of the director or officer is not proper in the circumstances because he has not met the applicable standard of conduct set forth in Sections 1 and 2 of this Article.
Section 5. Advance of Costs, Charges and Expenses. Costs, charges and expenses (including attorneys' fees) incurred by a person referred to in Sections 1 and 2 of this Article in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding; provided, however, that the payment of such costs, charges and expenses incurred by a director or officer in his capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer) in advance of the final disposition of such action, suit or proceeding shall be made only upon receipt of an undertaking by or on behalf of the director or officer to repay all amounts so advanced in the event that it shall ultimately be determined that such director or officer is not entitled to be indemnified by the corporation as authorized in this Article. The Board of Directors may, in the manner set forth above, and upon approval of such director or officer of the Corporation, authorize the Corporation's counsel to represent such person, in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding.
Section 6. Procedure for Indemnification. Any indemnification under Sections 1, 2 and 3, or advance of costs, charges and expenses under Section 5 of this Article, shall be made promptly, and in any event within 60 days, upon the written request of the director or officer. The right to indemnification or advances as granted by this Article shall be enforceable by the director or officer in any court of competent jurisdiction, if the Corporation
denies such request, in whole or in part, or if no disposition thereof is made within 60 days. Such persons' costs and expenses incurred in connection with successfully establishing right to indemnification, in whole or in part, in any such action shall also be indemnified by the Corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of costs, charges and expenses under Section 5 of this Article where the required undertaking, if any, has been received by the Corporation) that the claimant has not met the standard of conduct set forth in Sections 1 or 2 of this Article, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, its independent legal counsel, and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 1 or 2 of this Article, nor the fact that there has been an actual determination by the Corporation (including its Board of Directors, its independent legal counsel, and its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.
Section 7. Other Rights; Continuation of Right to Indemnification. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under any law (common or statutory), agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office or while employed by or acting as agent for the Corporation, and shall continue as to a person who has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of such person. All rights to indemnification under this Article shall be deemed to be a contract between the Corporation and each director or officer of the Corporation who serves or served in such capacity at any time while this Article is in effect. Any repeal or modification of this Article or any repeal or modification of relevant provisions of the Delaware General Corporation Law or any other applicable laws shall not in any way diminish any rights to indemnification of such director or officer or the obligations of the Corporation arising hereunder.
Section 8. Insurance. The Corporation shall purchase and maintain insurance on behalf of any person who is or was or has agreed to become a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him or on his behalf in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article, provided that such insurance is available on acceptable terms, which determination shall be made by a vote of a majority of the entire Board of Directors.
Section 9. Savings Clause. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, any portion of this Article so invalidated shall be severable and such invalidity shall not by itself render any other portion of this Article invalid, and the Corporation shall nevertheless indemnify each director or officer of the Corporation as to costs, charges and expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the full extent permitted by any applicable portion of this Article that shall not have been invalidated and to the full extent permitted by applicable law.
ARTICLE X
AMENDMENTS
Except as otherwise required by law or the Certificate of Incorporation, these By-laws may be amended or repealed, and new By-laws may be adopted, either by the affirmative vote of two-thirds of the shares of stock outstanding and entitled to vote thereon, voting together as a single class, or by the affirmative vote of a majority of the Board then in office.
TABLE OF CONTENTS
PAGE
ARTICLE I..................................................................1
Section 1. Definitions.................................................1
Section 2. Principal Office............................................1
Section 3. Other Offices...............................................1
Section 4. Registered Office...........................................1
ARTICLE II.................................................................1
Section 1. Annual Meeting..............................................1
Section 2. Special Meetings............................................2
Section 3. Nomination of Directors.....................................3
Section 4. Stockholder Action..........................................4
Section 5. Place of Meetings...........................................4
Section 6. Notice of Meetings..........................................4
Section 7. Record Dates................................................4
Section 8. Voting Lists................................................5
Section 9. Quorum......................................................5
Section 10. Voting and Proxies.........................................5
Section 11. Voting of Shares by Certain Holders........................6
Section 12. Inspectors.................................................7
ARTICLE III................................................................7
Section 1. Number......................................................7
Section 2. Election and Terms..........................................7
Section 3. Newly Created Directorships and Vacancies...................7
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Section 4. Removal.....................................................7
Section 5. Regular Meetings............................................8
Section 6. Special Meetings............................................8
Section 7. Notice of Special Meetings..................................8
Section 8. Quorum......................................................8
Section 9. Action without a Meeting....................................9
Section 10. Organization...............................................9
Section 11. Compensation...............................................9
Section 12. Presence at Meeting........................................9
Section 13. Executive Committee........................................9
Section 14. Committees of the Board...................................10
ARTICLE IV................................................................10
Section 1. Officers' Number...........................................10
Section 2. Election, Term of Office, and Qualifications...............10
Section 3. Subordinate Officers.......................................10
Section 4. Resignations...............................................11
Section 5. Removal....................................................11
Section 6. Vacancies..................................................11
Section 7. The Chairman of the Board..................................11
Section 8. The President..............................................11
Section 9. Vice Presidents............................................12
Section 10. Treasurer................................................12
Section 11. Secretary.................................................13
Section 12. Controller................................................13
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Section 13. Assistant Treasurers......................................14
Section 14. Assistant Secretaries.....................................14
Section 15. Compensation..............................................14
ARTICLE V.................................................................14
Section 1. Certificates of Stock......................................14
Section 2. Lost, Stolen or Destroyed Certificates.....................15
Section 3. Transfer of Shares.........................................15
Section 4. Regulations................................................15
ARTICLE VI................................................................15
ARTICLE VII...............................................................15
ARTICLE VIII..............................................................16
Section 1. Dividends..................................................16
Section 2. Fiscal Year................................................16
Section 3. Stock in other Corporations................................16
ARTICLE IX................................................................16
Section 1. Actions, Suits or Proceedings other than by or
in the Right of the Corporation.......................................16
Section 2. Actions or Suits by or in the Right of the
Corporation...........................................................17
Section 3. Indemnification for Costs, Charges and Expenses of
Successful Party......................................................17
Section 4. Determination of Right to Indemnification..................17
Section 5. Advance of Costs, Charges and Expenses.....................17
Section 6. Procedure for Indemnification..............................18
Section 7. Other Rights; Continuation of Right to Indemnification.....18
Section 8. Insurance..................................................19
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Section 9. Savings Clause.............................................19
ARTICLE X.................................................................19
TAX ALLOCATION AGREEMENT
THIS TAX ALLOCATION AGREEMENT (this "Agreement"), dated as of ____, 1999 by and between Crane Co., a Delaware corporation ("Crane"), and Huttig Building Products, Inc., a Delaware corporation and a wholly owned, indirect subsidiary of Crane ("Huttig").
WHEREAS, Crane, Huttig and Crane International Holdings, Inc. ("Crane International"), a Delaware corporation and a wholly owned subsidiary of Crane and direct owner of all of the outstanding stock of Huttig have entered into a Distribution Agreement dated as of ____, 1999 (the "Distribution Agreement"), providing for the Distribution (as defined in the Distribution Agreement) of all of the outstanding stock of Huttig to Crane's shareholders;
WHEREAS, the Board of Directors of Crane and Crane International have approved the Distribution Agreement;
WHEREAS, the execution and delivery of this Agreement by the parties hereto is a condition to the obligations of the parties to the Distribution Agreement to consummate the Distribution; and
WHEREAS, Crane on behalf of itself and the Crane Group (as defined herein) and Huttig, on behalf of itself and the Huttig Group (as defined herein), wish to provide for the allocation between the Crane Group and the Huttig Group of all responsibilities, liabilities and benefits relating to or affecting Taxes (as defined herein) paid or payable by either of them for all taxable periods, whether beginning before, on or after the Distribution Date (as defined herein) and to provide for certain other matters.
NOW, THEREFORE, in consideration of the premises and of the respective covenants and agreements set forth herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. DEFINITIONS. Capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings assigned to such terms in the Distribution Agreement, as the case may be. As used in this Agreement, the following terms shall have the following respective meanings:
"Actually Realized" or "Actually Realizes" means, for purposes of determining the timing of any Taxes (or related Tax cost or benefit) relating to any Payment, transaction, occurrence or event (including the receipt of any Tax Refund), the time at which the amount of Taxes payable by such person is increased above or reduced below, as the case may be, the
amount of Taxes that such person would be required to pay but for such payment, transaction, occurrence or event.
"Affiliate" means with respect to each of the parties hereto, (i) a corporation, partnership, limited liability company, trust, joint venture or other business entity in which 50% or more of the outstanding equity or voting power is owned (directly or indirectly) by such party, and (ii) a partnership in which a general partner interest is owned by such party. For purposes of this Agreement, in no event shall Crane or Huttig be treated as an Affiliate of the other.
"Affiliated Group" means the affiliated group of corporations within the meaning of Section 1504 of the Code of which Crane is the common parent.
"Code" means the Internal Revenue Code of 1986, as amended, and shall include corresponding provisions of any subsequently enacted Federal Tax laws.
"The Crane Group" means, solely for purposes of this Agreement, Crane and its Affiliates, other than Huttig and its Affiliates (determined after giving effect to the Distribution).
"Crane Tax Difference" has the meaning set forth in Section 4.1(b).
"Crane Tax Item" means a Tax Item that is attributable to the Crane Group and is not a Huttig Tax Item.
"Consolidated Federal Tax Returns" are the Federal Tax Returns for the Affiliated Group filed on a consolidated basis pursuant to Section 1501 of the Code for any Pre-Distribution Taxable Period.
"Consolidated State Tax Returns" are the state Tax Returns for the Affiliated Group filed on a consolidated, unitary or combined basis pursuant to the laws of any state Taxing Authority for any Pre-Distribution Taxable Period.
"Distribution" means the distributions of Huttig Common Stock to Crane and to the holders of Crane Common Stock pursuant to the Distribution Agreement.
"Distribution Agreement" mean the Distribution Agreement dated as of _______, 1999 among Crane, Huttig and Crane International Holdings, Inc.
"Distribution Date" means the date on which the Distribution occurs or is deemed to occur for Federal Income Tax purposes and shall be deemed effective as of the close of business on such date.
"Group" means either the Crane Group or the Huttig Group, as the context provides.
"Huttig Group" means Huttig and its Affiliates, determined immediately after the Distribution, specifically, Rondel's Inc. and CIPCO Inc.
"Huttig Tax Item" means a Tax Item solely attributable to the Huttig Group.
"Income Tax Benefit" means for any taxable period the excess of (i) the Income Tax liability of the taxpayer for the taxable period calculated as if the Timing Difference or Reverse Timing Difference, as the case may be, had not occurred but with all other facts unchanged, over (ii) the Income Tax liability of the taxpayer for the taxable period, calculated taking into account the Timing Difference or Reverse Timing Difference, as the case may be (treating an Income Tax Refund as a negative Income Tax liability for purposes of such calculation).
"Income Tax Detriment" means for any taxable period the excess of (i) the Income tax liability of the taxpayer for the taxable period, calculated taking into account the Timing Difference or Reverse Timing Difference, as the case may be, over (ii) the Income Tax liability of the taxpayer for the taxable period, calculated as if the Timing Difference or Reverse Timing Difference, as the case may be, had not occurred but with all other facts unchanged (treating an Income Tax Refund as a negative Income Tax liability for purposes of such calculation).
"Income Taxes" means any Tax based upon, measured by, or calculated with respect to (i) net income or profits (including, but not limited to, any capital gains, alternative minimum Tax and any Tax on items of Tax preference, but not including sales, use, real property gains, real or personal property, gross or net receipts, transfer or similar Taxes) or (ii) multiple bases (including, but not limited to, corporate franchise, doing business or occupation Taxes) if one or more of the bases upon which such Tax may be based, measured by, or calculated with respect to, is described in clause (i) above.
"Indemnitee" has the meaning set forth in Section 6.2.
"Indemnitor" has the meaning set forth in Section 6.2.
"Indemnity Issue" has the meaning set forth in Section 6.2.
"IRS" means the Internal Revenue Service.
"Loss Group" has the meaning set forth in Section 4.1(a)(ii).
"Opinion of Counsel" means an opinion of independent tax counsel of recognized national standing and experienced in the issues to be addressed and otherwise reasonably acceptable to Crane, which sets forth an Unqualified Tax Opinion in form and substance satisfactory to Crane. In no event shall Crane be required to conclude that an opinion is satisfactory if there is any risk, however remote, that the transaction which is the subject of the opinion will cause the Distribution to be taxable to any extent under the Code in a manner inconsistent with the rulings requested in the Ruling Request.
"Post-Distribution Taxable Period" means a taxable period beginning after the Distribution Date.
"Post-Tax Indemnification Period" means any Post-Distribution Taxable Period and that portion of any Straddle Period that begins on the day after the Distribution Date.
"Pre-Distribution Taxable Period" means a taxable period ending on or before the Distribution Date.
"Restricted Period" means the two year period beginning on the Distribution Date.
"Reverse Timing Difference" means an increase in income, gain or recapture, or a decrease in deduction, loss or credit, as calculated for Income Tax purposes, of the taxpayer for any Tax Indemnification Period coupled with an increase in deduction, loss or credit, or a decrease in income, gain or recapture, of the taxpayer for any Post-Tax Indemnification Period.
"Ruling Request" means the request for rulings (including all appendices, exhibits and supplements) under Section 355 of the Code, dated July 2, 1999 and filed with the IRS National Office on behalf of Crane, in respect of the Distribution.
"Straddle Period" means a taxable period that begins before and includes but does not end on the Distribution Date.
"Tax" or "Taxes" means all forms of taxation, whenever created or imposed, and whether imposed by a local, municipal, governmental, state, foreign, federal or other body, and without limiting the generality of the foregoing, shall include income, sales, use, ad valorem, gross receipts, license, value added, franchise, transfer, recording, withholding, payroll, wage withholding, employment, excise, occupation, unemployment insurance, social security, business license, business organization, stamp, environmental, premium and property taxes, together with any related interest (including the actual interest that would have accrued if there were no netting of Taxes), penalties and additions to any such tax, or additional amounts imposed by any Taxing Authority (domestic or foreign) upon the Crane Group or the Huttig Group.
"Tax Audit Proceeding" means any audit or other examination, judicial or administrative proceeding relating to liability for, or refunds or adjustments with respect to, Taxes.
"Tax Binder" means the annual information package prepared by Huttig for use by Crane in preparing state and federal tax returns.
"Tax Contest" has the meaning set forth in Section 6.2.
"Tax Deficiency" means a net increase in Taxes payable as a result of a Tax Audit Proceeding or an amendment of a Tax Return or an event having a similar effect.
"Tax Indemnification Period" means any Pre-Distribution Taxable Period and that portion of any Straddle Period that ends on and includes the Distribution Date.
"Tax Item" means any item of income, gain, loss, deduction, credit, provisions for reserves, recapture of credits or any other item which is taken into account in determining taxable income or is otherwise taken into account in determining Taxes paid or payable, including an adjustment under Section 481 of the Code resulting from a change in accounting method, and amounts of property, payroll, sales or other items that are relevant to the apportionment, allocation and determination of Taxes for purposes of determining Tax liabilities other than Federal Income Tax liability.
"Tax Records" has the meaning set forth in Section 7.2
"Tax Refund" means a refund of Taxes (including a reduction in Taxes as a result of the utilization of any credit or any offset against Taxes or Tax Items) reduced (but not below zero) by any net increase in Taxes Actually Realized by the recipient (or its Affiliate) thereof as a result of the receipt thereof.
"Tax Return" means any return, filing, questionnaire, information return or other document required to be filed, including requests for extensions of time, filings made with respect to estimated tax payments, claims for refund and amended returns that may be filed, for any period with any Taxing Authority (whether domestic or foreign) in connection with any Tax or Taxes (whether or not a payment is required to be made with respect to such filing).
"Taxing Authority" means any governmental or quasi-governmental body exercising any Taxing authority or Tax regulatory authority.
"Timing Difference" means an increase in income, gain or recapture, or a decrease in deduction, loss or credit, as calculated for Income Tax purposes, of the taxpayer for any Post-Tax Indemnification Period coupled with an increase in deduction, loss or credit, or a decrease in income, gain or recapture, of the taxpayer for any Tax Indemnification Period.
"Unqualified Tax Opinion" means an unqualified "will" opinion of tax counsel to the effect that a transaction does not disqualify the Distribution from qualifying for tax-deferred treatment for the shareholders of Crane and any member of the Crane Group under Code (section) 355 and any other applicable sections of the Code, assuming that the Distribution would have qualified for tax-deferred treatment if such transaction did not occur. An Unqualified Tax Opinion may rely upon, and assume the accuracy of, any representations contained in the Ruling Request, and any representations contained in an officer's certificate delivered by an officer of Crane or Huttig to such counsel.
ARTICLE II
PREPARATION AND FILING OF TAX RETURNS
Section 2.1. PREPARATION OF TAX RETURNS.
(a) Consistent with Agreements. Each of the parties to this
Agreement agrees to, and to cause each of its relevant Affiliates to, report the
Distribution as a series of transactions that satisfy the requirements of Code
Section 355.
(b) Consistent with Past Practice. Except for any accounting method changes pursuant to applications that are approved by the IRS, all Tax Returns described in Section 2.2 filed after the date of this Agreement, in the absence of a controlling change in law or circumstance, shall be prepared on a basis consistent with the elections, accounting methods, conventions and principles of taxation used for the most recent taxable periods for which Tax Returns involving similar Tax Items have been filed. Subject to the provisions of this Agreement, all decisions relating to the preparation of Tax Returns shall be made in the sole discretion of the party responsible under this Agreement for such preparation.
(c) Huttig Obligations. Huttig agrees to cooperate in good faith with Crane to determine the appropriate amount of Tax Items, if any, attributable to the Crane Group to be reflected on any Tax Returns for Straddle Periods to be prepared by Crane in accordance with Section 2.2(c). With respect to such Tax Returns, Huttig (i) will deliver to Crane no later than 60 days after the Closing Date a Tax Binder for itself and each Affiliate for such taxable years and (ii) will consult with Crane with respect to the application of the Tax Items to be shown on the Tax Returns. Huttig will inform and consult with Crane regarding any Tax Audit Proceedings or any other adjustments which would materially affect any of the Tax Items shown on the Tax Returns. Huttig shall provide Crane with comments and/or objections to such Tax Returns at least 21 days prior to the due date for filing such Tax Returns (giving effect to applicable extensions).
(d) Crane Obligations. Crane agrees to cooperate in good faith with Huttig to determine the appropriate amount of Tax Items attributable to the Huttig Group to be reflected on any Tax Returns for Pre-Distribution Taxable Periods and Straddle Periods to be prepared and filed by Crane in accordance with Section 2.2(a), (b) and (c). Crane further agrees to (i) provide Huttig with a copy of each such Tax Return at least 10 days prior to the due date for filing of any such Tax Returns (giving effect to applicable extensions) for such taxable years and (ii) consult with Huttig with respect to the Tax Items to be shown on such Tax Returns. The computations made with respect to the Tax Returns shall be made, when applicable, on a basis consistent with the principles of Treasury Regulation (sections) 1.1502-76(b)(2). Crane will inform and consult with Huttig regarding any Tax Audit Proceedings or any other adjustments that would materially offset any of the Tax Items shown on the Tax Returns. Crane will provide Huttig with copies of all Tax Returns prepared and filed by Crane in accordance with Sections 2.2(a), (b) and (c) promptly after filing.
Section 2.2. FILING OF TAX RETURNS.
(a) Consolidated Federal Tax Returns and Consolidated State Tax Returns. The Consolidated Federal Tax Returns and the Consolidated State Tax Returns required to be filed after the date hereof shall be prepared or caused to be prepared and filed by Crane.
(b) Pre-Distribution Taxable Period Tax Returns. All Tax Returns other than those described in Section 2.2(a) that are required to be filed for any Pre-Distribution Taxable Period shall be prepared and timely filed or caused to be prepared and timely filed by Crane.
(c) Huttig Straddle Period Tax Returns. All Tax Returns other than those described in Section 2.2(a) which are required to be filed by any member of the Huttig Group for any Straddle Period shall be prepared and timely filed or caused to be prepared and timely filed by Huttig.
(d) Crane Straddle Period Tax Returns. All Tax Returns other than those described in Section 2.2(a) which are required to be filed by any member of the Crane Group for any Straddle Period shall be prepared and timely filed or caused to be prepared and timely filed by Crane.
(e) Post-Distribution Taxable Period Tax Returns. The filing of all Tax Returns for all Post-Distribution Taxable Periods shall be the responsibility of the Huttig Group if such Tax Returns relate to a member or members of the Huttig Group or their respective assets or businesses, and shall be the responsibility of the Crane Group if such Tax Returns relate to a member or members of the Crane Group or their respective assets or businesses.
Section 2.3. DESIGNATION. Huttig hereby irrevocably designates, and agrees to cause each of its Affiliates to so designate, Crane as its agent to take any and all actions necessary or incidental to the preparation and filing of the Tax Returns described in Section 2.2(a), (b) and (d). Crane hereby irrevocably designates, and agrees to cause each of its Affiliates to so designate, Huttig as its agent to take any and all actions necessary or incidental to the preparation and filing of the Tax Returns described in Section 2.2(c).
ARTICLE III
PAYMENT OF TAXES
Section 3.1. PAYMENT OF TAX LIABILITIES.
(a) Consolidated and Pre-Distribution Tax Liabilities.
(i) Huttig Liability. Except as otherwise provided in this Agreement, Huttig or a member of the Huttig Group shall pay or cause to be paid, directly to, or at the direction of, Crane (such direction may specify payment by direct wire transfer), at least two days prior to the date payment (including any estimated payment) thereof is due, all Taxes due with
respect to the Tax Returns described in Section 2.2(a) and (b) that are attributable to any member or members of the Huttig Group, the respective assets or businesses of any member or members of the Huttig Group and any Huttig Tax Item.
(ii) Crane Liability. Except as otherwise provided in this
Agreement, Crane or a member of the Crane Group shall pay or cause to be paid,
on a timely basis, all Taxes due with respect to the Tax Returns described in
Section 2.2(a) and (b) that are attributable to any member or members of the
Crane Group, the respective assets or businesses of any member or members of the
Crane Group and any Crane Tax Item.
(b) Separate Straddle Period Tax Liabilities.
(i) Huttig Liability. Except as otherwise provided in this
Agreement, Huttig or a member of the Huttig Group shall pay or cause to be paid,
on a timely basis, all Taxes due with respect to the Tax Returns described in
Section 2.2(c); provided, however, that Crane shall pay directly to, or at the
direction of, Huttig (such direction may specify payment by direct wire
transfer), at least two days prior to the date payment (including estimated
payment) thereof is due, that portion of those Taxes due that are attributable
to any member or members of the Crane Group, the respective assets or businesses
of any member or members of the Crane Group or any Crane Tax Item.
(ii) Crane Liability. Except as otherwise provided in this
Agreement, Crane or a member of the Crane Group shall pay or cause to be paid,
on a timely basis, all Taxes due with respect to the Tax Returns described in
Section 2.2(d); provided, however, that Huttig shall pay directly to, or at the
direction of, Crane (such direction may specify payment by direct wire
transfer), at least two days prior to the date payment (including estimated
payment) thereof is due, that portion of those Taxes due that are attributable
to any member or members of the Huttig Group, the respective assets or
businesses of any member or members of the Huttig Group or any Huttig Tax Item.
(c) Post-Distribution Taxable Period Tax Liabilities. Except as otherwise provided in this Agreement, all Taxes for all Post-Distribution Taxable Periods shall be paid or caused to be paid by the party responsible under this Agreement for filing the Tax Return pursuant to which such Taxes are due or, if no such Tax Returns are due, by the party liable, without regard to this Agreement, for such Taxes.
Section 3.2. TAX REFUNDS AND CARRYBACKS.
(a) Retention and Payment of Tax Refunds. Except as otherwise provided in this Agreement, Huttig shall be entitled to retain, and to receive within 10 days after Actually Realized by the Crane Group, the portion of all Tax Refunds of Taxes for which the Huttig Group is liable pursuant to Section 3.1 or Section 6.1(a), and Crane shall be entitled to retain, and to receive within 10 days after Actually Realized by the Huttig Group, the portion of all Tax Refunds of Taxes for which the Crane Group is liable pursuant to Section 3.1 or Section 6.1(b). Notwithstanding the foregoing, (i) all Tax Refunds resulting from the carryback of any Crane
Tax Item arising in a Post-Tax Indemnification Period to a Tax Indemnification Period shall be for the account and benefit of the Crane Group and, if and to the extent Actually Realized by Huttig, Huttig shall pay over to Crane any such Tax Refund within 10 days after it is Actually Realized by Huttig or any member of the Huttig Group, (ii) all Tax Refunds resulting from the carryback of any Huttig Tax Item arising in a Post-Tax Indemnification Period to a Tax Indemnification Period shall be for the account of Huttig and, if and to the extent Actually Realized by Crane, Crane shall pay over to Huttig any such Tax Refund within 10 days after it is Actually Realized by Crane or any member of the Crane Group, (iii) all Tax Refunds resulting from the utilization of any Tax Items (such as the utilization of a minimum or foreign tax credit or Section 481(a) adjustments which reduce current year Taxes) attributable to the Huttig Group or the respective assets or businesses of any member or members of the Huttig Group arising in a Tax Indemnification Period shall be for the account of Huttig and, if and to the extent Actually Realized by Crane, Crane shall pay over to Huttig any such Tax Refund within 10 days after it is Actually Realized by Crane or any member of the Crane Group, and (iv) all Tax Refunds resulting from the utilization of any Tax Items (such as the utilization of a minimum or foreign tax credit or Section 481(a) adjustments which reduce current year Taxes) attributable to the Crane Group or the respective assets or businesses of any member or members of Crane Group arising in a Tax Indemnification Period shall be for the account of Crane and, if and to the extent Actually Realized by Huttig, Huttig shall pay over to Crane any such Tax Refund within 10 days after it is Actually Realized by Huttig or any member of the Huttig Group. In computing the amount of any Tax Refunds described in (i), (ii), (iii) or (iv) above, the party paying over such Tax Refunds shall be deemed to recognize all other items of income, gain, loss, deduction or credit for that taxable period together with the utilization of any Tax Item causing a Tax Refund described in this Section 3.2(b). Huttig and Crane and their respective Affiliates will use commercially reasonable efforts to claim and utilize the Tax Items referred to in (i), (ii), (iii) or (iv) in a manner which is designed to maximize (on a present value basis) the Tax Refunds described therein.
(b) Refund Claims. Huttig shall be permitted to file at Huttig's
sole expense, and Crane shall reasonably cooperate with Huttig in connection
with, any claims for Tax Refunds to which Huttig is entitled pursuant to this
Section 3.2 or any other provision of this Agreement. Huttig shall reimburse
Crane for any reasonable out-of-pocket costs and expenses incurred by any member
of the Crane Group in connection with such cooperation. Crane shall be permitted
to file at Crane's sole expense, and Huttig shall reasonably cooperate with
Crane in connection with, any claims for Tax Refund to which Crane is entitled
pursuant to this Section 3.2 or any other provision of this Agreement. Crane
shall reimburse Huttig for any reasonable out-of-pocket costs and expenses
incurred by any member of the Huttig Group in connection with such cooperation.
Any claim for a Tax Refund under this Section 3.2 to which Huttig is entitled
and which relates to a Tax Return for which Crane is required to file under
Section 2.2 shall be subject to the Crane Group's consent (such consent not to
be unreasonably withheld). A copy of a claim for any Tax Refund to which either
party is entitled to file under this Section 3.2 shall be provided to the other
party no later than 30 days prior to the filing of such Tax Refund claim. In the
event that Huttig and Crane are each entitled to file a Tax Refund claim
pursuant to this Section 3.2 for the same period, such Tax Refunds of Crane and
Huttig shall be allocated in a
manner corresponding to the allocation and calculation of Taxes for such periods under Article IV.
ARTICLE IV
ALLOCATION AND CALCULATION OF TAXES
Section 4.1. ALLOCATIONS.
(a) (i) In the case of any Consolidated Federal Tax Return described in Section 2.2(a), the Crane Group and the Huttig Group will each be allocated the portion of such Taxes due with respect to such Tax Returns attributable to each Group, the respective assets or businesses of any member or members of each Group and any Tax Item of each Group. This allocation shall be made in accordance with the principles set forth in Treasury Regulation Section 1.1552-1(a)(2) on the basis of the percentage of the total Tax liability for each Group, if computed on a separate consolidated federal income tax return of each Group, would bear to the aggregate amount of such Tax liability of the Crane Group and the Huttig Group so computed.
(ii) The principles of Treasury Regulation Section
1.1502-33(d)(3) also shall apply to the allocation set forth in Section
4.1(a)(i). If the amount of the Affiliated Group's consolidated federal income
tax liability is less than the sum of the aggregate separate return tax
liabilities of the Huttig Group and the Crane Group (as computed pursuant to
Section 4.1(a)(i) above) due to losses or tax credits of one Group (including
losses or tax credits carried over from prior years), the decrease in tax
liability resulting therefrom shall be allocated 100 percent to that Group. A
Group thus may have a "negative" income tax liability as a result of such an
allocation (a "Loss Group"). If a Loss Group exists, the other Group shall pay
to the Loss Group an amount equal to such "negative" income tax liability. In
other words, if Tax attributes (e.g., losses or tax credits) of one Group are
utilized by the other Group to reduce taxable income or Tax, as the case may be,
the Group utilizing such Tax attributes shall pay to the other Group, with
respect to losses, an amount equal to such reduction in taxable income resulting
from the utilization of such losses multiplied by the top marginal federal
corporate income Tax rate actually used by the Group utilizing the losses in
calculating its deemed Tax liability (prior to the application of Tax credits
against such liability) under this Section 4.1(a) for the taxable period during
which such losses are utilized and, with respect to Tax credits, an amount equal
to the actual amount by which the deemed Tax liability calculated pursuant to
this Section 4.1(a) is reduced by such Tax credits for the taxable period during
which such Tax credits are utilized. Any such payments shall be consistent with
the procedures and timing set forth in Section 3.1(b) hereof.
(b) In the case of any Tax Return described in Section 2.2(b) to be prepared by Crane or any Consolidated State Tax Returns described in Section 2.2(a) or any Tax returns described in Section 2.2(c), the Huttig Group will be allocated all of the Taxes due with respect to each such Tax Return; provided, however, if a Crane Tax Item is included in any such Tax Return, the Taxes that would be due with respect to such Tax Return, calculated as if the Crane Tax Item had not been included but with all other Tax Items unchanged, shall be subtracted from the Taxes due with respect to such Tax Return taking into account the Crane Tax Items (the
"Crane Tax Difference"). If the Crane Tax Difference is a positive amount, the Crane Group shall be allocated an amount of Taxes due on such Tax Return equal to the Crane Tax Difference. If the Crane Tax Difference is a negative amount, the Huttig Group shall pay to the Crane Group an amount equal to the Crane Tax Difference consistent with the procedures and timing set forth in Section 3.1(b) hereof.
(c) In the case of any Tax Return described in Section 2.2(d), the principles set out in Section 4.1(b) hereof shall govern.
(d) In the case of any Tax Return described in Section 2.2(e) to be filed by Huttig, the Huttig Group will be allocated all the Taxes due with respect to each such Tax Return.
(e) In the case of any Tax Return described in Section 2.2(e) to be filed by Crane, the Crane Group will be allocated all the Taxes due with respect to each such Tax Return.
(f) The allocations under this Section 4.1 shall be determined in a manner consistent with the principles set forth in Section 4.3.
Section 4.2. CALCULATIONS AND DETERMINATIONS. All calculations and
determinations required to be made pursuant to this Agreement (including the
calculation in Section 4.1) shall be made in good faith by the party making such
calculations or determinations. Except for any accounting method changes
pursuant to applications for accounting method changes filed prior to the date
hereof and any accounting method elections and changes that may be effective as
of the day after the Distribution Date, all calculations and determinations
required to be made pursuant to this Agreement (including the calculation in
Section 4.1), shall be made, in the absence of a controlling change in law or
circumstance, on a basis consistent with the elections, accounting methods,
conventions and principles of taxation used for the most recent taxable periods
for which Tax Returns involving similar Tax Items have been filed.
Section 4.3. PRINCIPLES OF DETERMINATION. In implementing this Agreement, except as otherwise specifically provided, the parties shall make any adjustments that are necessary to ensure that, with respect to Taxes for Straddle Periods or Pre-Distribution Taxable Periods, payments and reimbursements between the parties reflect the principles that (i) Huttig is to bear responsibility only for that portion of Taxes for Straddle Periods and Pre-Distribution Taxable Periods that are attributable to the Huttig Group, the respective assets or businesses of any member or members of the Huttig Group and any Huttig Tax Item, (ii) Crane is to bear responsibility for all other Taxes for Straddle Periods and Pre-Distribution Taxable Periods, (iii) Crane is responsible for all Taxes for Post-Distribution Taxable Periods (calculated by treating the day after the Distribution Date as the first day of any Post-Distribution Taxable Period) reflected on the Tax Returns, the responsibility for the filing thereof is imposed on Crane pursuant to this Agreement, (iv) Huttig is responsible for all Taxes for Post-Distribution Taxable Periods (calculated by treating the day after the Distribution Date as the first day of any Post-Distribution Taxable Period) reflected on the Tax Returns, the responsibility for the filing thereof is imposed on Huttig pursuant to this Agreement, (v) Crane will be entitled to any Tax Refunds
relating to Tax Items attributable to the Crane Group, the respective assets or businesses of any member or members of the Crane Group or any Crane Tax Item arising in a Tax Indemnification Period and (vi) Huttig will be entitled to any Tax Refunds relating to Tax Items attributable to the Huttig Group or the respective assets or businesses of any member or members of the Huttig Group or any Huttig Tax Item arising in a Tax Indemnification Period.
ARTICLE V
REPRESENTATIONS AND COVENANTS
Section 5.1. REPRESENTATIONS.
(a) Crane Representations.
(i) Crane has reviewed the materials submitted to the IRS in connection with the Ruling Request and, to the best of Crane's knowledge, these materials, including, without limitation, any statements and representations concerning Crane, its business operations, capital structure and/or organization, are complete and accurate in all material respects. All representations made by Crane in the Ruling Request were accurate as of the date of the Ruling Request and will be accurate as of the effective date of this Agreement. With respect to any representation or statement made by or on behalf of Crane or the Crane Group in connection with the Ruling Request and to the extent such representation or statement relates to future actions or events under their control, neither Crane nor any member of the Crane Group will take any action that would have caused such representation or statement to be untrue if Crane or any member of the Crane Group had planned or intended to take such action at the time such representation or statement was made by or on behalf of Crane.
(ii) Crane hereby represents and warrants to Huttig that Crane
has no plan or intention to undertake any of the transactions set forth in
Section 5.2(a) nor does Crane or any member of the Crane Group have any
intention to cease to engage in the active conduct of its current trades or
businesses (within the meaning of Section 355(b)(2) of the Code) during the
Restricted Period.
(b) Huttig Representations.
(i) Huttig has reviewed the materials submitted to the IRS in connection with the Ruling Request and, to the best of Huttig's knowledge, these materials, including, without limitation, any statements and representations concerning Huttig, its business operations, capital structure and/or organization, are complete and accurate in all material respects. All representations made by or on behalf of Huttig or the Huttig Group in connection with the Ruling Request were accurate as of the date of the Ruling Request and will be accurate as of the effective date of this Agreement. With respect to any representation or statement made by or on behalf of Huttig or the Huttig Group in connection with the Ruling Request and to the extent such representation or statement relates to future actions or events under their control, neither Huttig nor any member of the Huttig Group will take any action that would have caused such representation or statement to be untrue if Huttig or any member of the Huttig Group had
planned or intended to take such action at the time such representation or statement was made by or on behalf of Huttig.
(ii) Huttig hereby represents and warrants to Crane that Huttig
has no plan or intention to undertake any of the transactions set forth in
Section 5.2(b) nor does Huttig or any member of the Huttig Group have any
intention to cease to engage in the active conduct of its current trade or
business (within the meaning of Section 355(b)(2) of the Code) during the
Restricted Period.
Section 5.2. COVENANTS.
(a) Crane Covenants. Crane hereby agrees that:
(i) Crane shall, and shall cause each member of the Crane Group to, comply in all material respects with each such representation and statement concerning Crane and the Crane Group made in the materials submitted to the IRS in the Ruling Request.
(ii) Crane will, during the Restricted Period, continue the active conduct of the historic businesses conducted by Crane throughout the five-year period prior to the Distribution.
(iii) Crane will not, nor will it permit any member of the Crane Group to, take any action inconsistent with the information and representations furnished to the IRS or any other Taxing Authority in connection with the Ruling Request (or any comparable pronouncement by a Taxing Authority under applicable law) with respect to the Distribution, regardless of whether such information and representations are included in the ruling or pronouncement issued by the IRS or other Taxing Authority.
(b) Huttig Covenants. Huttig hereby agrees that:
(i) Huttig shall, and shall cause each member of the Huttig Group to, comply in all material respects with each such representation and statement concerning Huttig and the Huttig Group made in the materials submitted to the IRS in the Ruling Request.
(ii) During the Restricted Period, neither Huttig, nor any member of the Huttig Group conducting an active trade or business relied upon in connection with the Distribution, will liquidate, merge or consolidate with any other person without the prior written consent of Crane; provided that the foregoing shall not be deemed to prohibit Huttig and the members of the Huttig Group from entering into or acquiring other businesses or operations (subject to the limitations of this Section 5.2(b)), from disposing of or shutting down segments of such businesses or undertaking restructurings or reorganizations within the Huttig Group so long as Huttig and the members of the Huttig Group continue to engage in such businesses and continue to so maintain a substantial portion of their assets and business operations as they existed prior to the Distribution.
(iii) Huttig will, during the Restricted Period, continue the active conduct of the historic business conducted by Huttig throughout the five-year period prior to the Distribution.
(iv) Huttig will not, nor will it permit any member of the Huttig Group to, take any action inconsistent with the information and representations furnished to the IRS or any other Taxing Authority in connection with the Ruling Request (or any comparable pronouncement by a Taxing Authority under applicable law) with respect to the Distribution, regardless of whether such information and representations are included in the ruling or pronouncement issued by the IRS or other Taxing Authority.
(v) Huttig will not repurchase stock of Huttig in a manner contrary to the requirements of section 4.05(1)(b) of Revenue Procedure 96-30 or in a manner contrary to the representations made in connection with the Ruling Request.
(vi) Except as provided in Section 6.2(c), during the applicable period provided in Section 355(e)(2)(B) of the Code with respect to the Distribution, Huttig will not enter into any transaction or make any change in its equity structure (including stock issuances, pursuant to the exercise of options or otherwise, option grants, the adoption of, or authorization of shares under, a stock option plan, capital contributions, or acquisitions, but not including the Distribution) which may cause the Distribution to be treated as part of a plan pursuant to which one or more persons acquire directly or indirectly Huttig stock representing a "50-percent or greater interest" in Huttig within the meaning of Section 355(e)(4)(A) of the Code.
(vii) Huttig shall provide to Crane, on the first business day of
every month during the Restricted Period, a certificate describing any
transaction or change in equity structure described in this Section 5.2.(b) and
any option grants which occurred during the preceding month. Huttig agrees that
Crane is to have no liability for any tax resulting from any action referred to
in this Section 5.2.(b) and agrees to indemnify and hold harmless the Crane
Group against any such tax. Huttig shall also bear all costs incurred in
connection with obtaining any opinion of counsel or in connection with Crane's
determination of whether or not to grant any written consent required under this
Section 5.2.(b).
(c) Permitted Transactions. Following the Distribution Date, Huttig and its Affiliates may take any action or engage in conduct otherwise prohibited by Section 5.2 so long as prior to such action or conduct, as the case may be, Huttig receives either a ruling from the IRS or an Opinion of Counsel in form and substance reasonably satisfactory to Crane and upon which Crane can rely to the effect that the proposed action or conduct, as the case may be, will not cause the Distribution to fail to qualify for the tax treatment requested in the Ruling Request.
ARTICLE VI
TAX INDEMNIFICATION; TAX CONTESTS
Section 6.1. INDEMNIFICATION.
(a) Huttig Indemnification. Except as otherwise provided in Section
6.1(b), Huttig and the Huttig Group shall be liable for and shall indemnify,
defend and hold harmless the members of the Crane Group from and against (A) all
Taxes of or attributable to the Huttig Group, the respective assets or
businesses of any member or members of the Huttig Group and any Huttig Tax Item
for any Pre-Distribution Taxable Period, Straddle Period or Post-Distribution
Taxable Period, (B) all liability (as a result of Treasury Regulation Section
1.1502-6(a) or a comparable state, local or foreign law) for Income Taxes of any
person (other than a member of the Crane Group or the Huttig Group) which is or
has ever been affiliated with any member of the Huttig Group or with which any
member of the Huttig Group joins or has ever joined (or is or has ever been
required to join) in filing any consolidated, combined or unitary Tax Return for
any Pre-Distribution Taxable Period or Straddle Period; provided, however, if
any member of the Crane Group also is or ever has been affiliated with or files
or has ever filed (or is or has ever joined in the filing of) any such
consolidated, combined or unitary Tax Return for the same Pre-Distribution
Period or Straddle Period with any such person, then the amount of the liability
under this provision shall be allocated between such member or members of the
Crane Group and the Huttig Group in accordance with the principles described in
Section 4.1(a), (C) all Taxes (including but not limited to Taxes assessed by
reason of the Distribution failing to qualify for tax-deferred treatment under
Code (sections) 355) for any taxable period (whether beginning before, on or
after the Distribution Date) that would not have been payable but for the breach
by any member of the Huttig Group of any representation, warranty or obligation
made by Huttig under this Agreement, the Distribution Agreement or the Ruling
Request and (D) all liability for any reasonable legal, accounting, appraisal,
consulting or similar fees and expenses relating to the foregoing.
(b) Crane Indemnification. Except as otherwise provided in Section
6.1(a), Crane and the Crane Group shall be liable for and shall indemnify,
defend and hold harmless the Huttig Group from and against (A) all Taxes
attributable to the Crane Group, the respective assets or businesses of any
member or members of the Crane Group and any Crane Tax Item for any
Pre-Distribution Taxable Period, Straddle Period or Post-Distribution Taxable
Period, (B) all liability (as a result of Treasury Regulation Section
1.1502-6(a) or a comparable state, local or foreign law) for Income Taxes of any
person (other than a member of the Crane Group or the Huttig Group) which is or
has ever been affiliated with any member of the Crane Group or with which any
member of the Crane Group joins or has ever joined (or is or has ever been
required to join) in filing any consolidated, combined or unitary Tax Return for
any Pre-Distribution Taxable Period or Straddle Period; provided, however, if
any member of the Huttig Group also is or ever has been affiliated with or files
or has ever filed (or is or has ever joined in the filing of) any such
consolidated, combined or unitary Tax Return for the same Pre-Distribution
Period or Straddle Period with any such person, then the amount of the liability
under this provision shall be allocated between such member or members of the
Crane Group and the Huttig Group in accordance with the principles described in
Section 4.1(a), (C) all Taxes for any taxable period (whether beginning before,
on or after the Distribution Date) that would not have been payable but for the
breach by any member of the Crane Group of any representation, warranty or
obligation made by Crane under this Agreement, the Distribution Agreement or the
Ruling Request and (D) all liability for any reasonable legal, accounting,
appraisal, consulting or similar fees and expenses relating to the foregoing.
(c) Payments. Subject to Section 6.5(b), any indemnity payment required to be made pursuant to this Section 6.1 shall be paid within 30 days after the indemnified party makes written demand upon the indemnifying party, but in no case earlier than five business days prior to the date on which the relevant Taxes are required to be paid (or would be required to be paid if no such Taxes are due) to the relevant Taxing Authority.
Section 6.2. NOTICE OF INDEMNITY. Whenever any member of the Crane Group or the Huttig Group, as the case may be, (hereinafter an "Indemnitee") receives written notice from any Tax Authority or otherwise of any pending or threatened Tax examination, audit or other administrative or judicial proceeding (hereinafter a "Tax Contest") which could reasonably be expected to result in a determination that would increase the liability for any Tax of such member or any other member of its Group for any Tax Indemnification Period or for any Post-Tax Indemnification Period or require a payment hereunder to the other party (hereinafter an "Indemnity Issue"), the Indemnitee shall notify the other Group (hereinafter the "Indemnitor") of such Indemnity Issue within 30 days of receipt of such notice. The failure of any Indemnitee to give (or any delay in giving) such notice shall not relieve any Indemnitor of its obligations under this Agreement except to the extent that such failure to give (or such delay in giving) such notice shall have adversely affected the Indemnitor's ability to defend against, settle, or satisfy any action, suit or proceeding against Indemnitor, or any damage, loss, claim, or demand for which Indemnitee is entitled to indemnification from Indemnitor under this Agreement.
Section 6.3. TAX CONTESTS. To the extent that a Tax Contest relates to any Taxes for which a member of the Huttig Group is directly liable or has indemnification obligations hereunder, Huttig shall at its own expense control the defense and settlement of that portion of such Tax Contest. To the extent that a Tax Contest relates to any Taxes for which a member of the Crane Group is directly liable hereunder, Crane shall at its own expense control the defense and settlement of that portion of such Tax Contest. Provided, however, that the party in control of the Tax Contest shall in no event take any position in any such proceeding that would subject the party not in control of the defense to any civil fraud or any civil or criminal penalty, and provided, further, that the party in control of the Tax Contest shall not consent, without the prior written consent of the party not in control of the defense, which prior written consent shall not be unreasonably withheld, to any change in the treatment of any Tax Item that in any material respect adversely affects the Tax liability of the party not in control of the defense for a period for which that party is directly or indirectly liable under this Agreement.
Section 6.4. TIMING ADJUSTMENTS.
(a) Timing Differences. If a Tax Audit Proceeding or an amendment of a Tax Return results in a Timing Difference, and such Timing Difference results in a decrease in an indemnity obligation Crane or Huttig has, or otherwise would have had, under Section 6.1 and/or an increase in the amount of a Tax Refund to which Crane or Huttig is entitled under Section 3.2, then in each Post-Tax Indemnification Period in which the Crane Group or the Huttig Group Actually Realizes an Income Tax Detriment, either Crane or Huttig, as the case may be, shall pay to the other an amount equal to such Income Tax Detriment; provided, however, that the
aggregate payments required to be made under this Section 6.4(a) with respect to any Timing Difference shall not exceed the aggregate amount of the Income Tax Benefits realized by the Group from which such payment is made for all taxable periods and the Group receiving such payment for all Tax Indemnification Periods as a result of such Timing Difference. All such payments shall be made within 10 days after the relevant Income Tax Detriment has been Actually Realized and the Group Actually Realizing such Income Tax Detriment notifies the other Group, as the case may be.
(b) Reverse Timing Differences. If a Tax Audit Proceeding or an
amendment of a Tax Return results in a Reverse Timing Difference, and such
Reverse Timing Difference results in an increase in an indemnity obligation of
Crane or Huttig under Section 6.1 and/or a decrease in the amount of a Tax
Refund to which Crane or Huttig is or would otherwise be entitled to under
Section 3.2, then in each Post-Tax Indemnification Period in which the Crane
Group or the Huttig Group Actually Realizes an Income Tax Benefit, Crane or
Huttig, as the case may be, shall pay to the other an amount equal to such
Income Tax Benefit; provided, however, that the aggregate payments required to
be made under this Section 6.4(b) with respect to any Reverse Timing Difference
shall not exceed the aggregate amount of the Income Tax Detriments realized by
the Group from which such payment is made for all taxable periods and the Group
receiving such payment for all Tax Indemnification Periods as a result of such
Reverse Timing Difference. All such payments shall be made within ten days after
the relevant Income Tax Benefit has been Actually Realized.
Section 6.5. PAYMENTS NET OF TAXES.
(a) Gross Up and Characterization. The amount of any payment under this Agreement shall be (i) increased to take account of any net Tax cost incurred by the recipient thereof as a result of the receipt or accrual of payments hereunder (grossed-up for such increase) and (ii) reduced to take account of any net Tax benefit realized by the recipient arising from the incurrence or payment of any such payment, other than any such net Tax benefit that the recipient is specifically entitled to retain pursuant to this Agreement. In computing the amount of any such Tax cost or Tax benefit, the recipient shall be deemed to recognize all other items of income, gain, loss, deduction or credit before recognizing any item arising from the receipt or accrual of any payment hereunder. Except as provided in Section 6.5(b), or unless the parties otherwise agree to an alternative method for determining the present value of any such anticipated Tax benefit or Tax cost, any payment hereunder shall initially be made without regard to this Section and shall be increased or reduced to reflect any such net Tax cost (including gross-up) or net Tax benefit only after the recipient has Actually Realized such cost or benefit. It is the intention of the parties that payments made pursuant to this Agreement are to be treated as relating back to the Contribution and Distribution as an adjustment to the assets and liabilities contributed thereunder, and the parties shall not take any position inconsistent with such intention before any Taxing Authority, except to the extent that a final determination (as defined in Section 1313 of the Code) with respect to the recipient party causes any such payment not to be so treated.
(b) Time for Payment. Notwithstanding any other provision of this Agreement, to simplify the administration of this Agreement, the payment of any amount less
than [$150,000] required to be made pursuant to this Agreement by one party hereto to another party hereto need not be made to such other party prior to 30 days following the close of the calendar quarter during which such payment obligation arose.
(c) Right to Offset. Any party making a payment under this Agreement shall have the right to reduce any such payment by any amounts owed to it by the other party to this Agreement.
ARTICLE VII
COOPERATION AND EXCHANGE OF INFORMATION
Section 7.1. COOPERATION AND EXCHANGE OF INFORMATION. Each party hereto, on behalf of itself and its Affiliates, agrees to provide the other parties hereto with such cooperation and information as such other parties shall reasonably request, and as promptly as practicable, in connection with the preparation or filing of any Tax Return or claim for or allocation of a Tax Refund not inconsistent with this Agreement or in conducting any Tax Audit Proceedings or other proceeding in respect to Taxes or to carry out the provisions of this Agreement. To the extent necessary to carry out the purposes of this Agreement and subject to the other provisions of this Agreement, such cooperation and information shall include without limitation the non-exclusive designation of an officer of Crane as an officer of Huttig solely for the purpose of pursuing refund claims, dealing with Taxing Authorities and defending Tax Audit Proceedings, in each case if such actions relate to Tax matters pertaining to or arising in the Tax Indemnification Period, as well as promptly forwarding copies of appropriate notices and forms or other communications received from or sent to any Taxing Authority and providing copies of all relevant Tax Returns for the Tax Indemnification Period, together with accompanying schedules and related workpapers, documents relating to rulings or other determinations by Taxing Authorities, and records concerning the ownership and Tax basis of property, which either party may possess and which relate to the Tax Items on the Tax Returns. Subject to the rights of the Huttig Group under the other provisions of this Agreement, such officer shall have the authority to execute powers of attorney (including Form 2848) on behalf of each member of the Huttig Group with respect to Tax Returns and Taxes for the Tax Indemnification Period. Each party to this Agreement shall make, or shall cause its Affiliates to make, their employees and facilities available on a mutually convenient basis to provide an explanation of any documents or information provided hereunder.
Section 7.2. RECORD RETENTION. Crane and Huttig agree to (i) retain all Tax Returns, related schedules and workpapers, and all material records and other documents as required under Section 6001 of the Code and the regulations promulgated thereunder relating thereto ("Tax Records") existing on the Distribution Date or created through the Distribution Date, for 10 years from the Distribution Date and (ii) allow the other parties to this Agreement and their representatives (and representatives of any of its Affiliates), at times and dates reasonably acceptable to the retaining party, to inspect, review and make copies of such records, and have access to such employees, as Crane and Huttig may reasonably deem necessary or appropriate from time to time, such activities to be conducted during normal business hours and without
disruption to the respective business of either party. At the end of the 10-year period described in clause (i) Crane or Huttig, as the case may be, shall transfer such records (or cause such records to be transferred) to the other party (at such other party's sole expense), unless such other party notifies Crane or Huttig, as the case may be, within 90 days prior to the expiration of the 10-year period, that such other party does not desire to receive such Tax Records, in which case Crane or Huttig, as the case may be, may destroy or otherwise dispose of such undesired documents.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. ENTIRE AGREEMENT. This Tax Allocation Agreement constitutes the entire agreement, and supersedes all other prior agreements, understandings, representations and warranties, both written and oral, among the parties, with respect to the subject matter hereof and thereof.
Section 8.2. MODIFICATION OR AMENDMENT. The parties hereto may modify or amend this Agreement only by written agreement executed and delivered by duly authorized officers of the respective parties. Anything in this Agreement or the Merger Agreement to the contrary notwithstanding, in the event and to the extent that there shall be a conflict between the provisions of this Agreement and the Merger Agreement, the provisions of this Agreement shall control.
Section 8.3. RESOLUTION OF DISPUTES. Any disputes between the parties with respect to this Agreement that cannot be resolved by good faith effort by the parties shall be submitted to the office of Deloitte & Touche LLP ("Deloitte"), which shall render its opinion as to such matters. Deloitte's determination shall be final and binding on all parties and Deloitte's fees and expenses shall be shared by each of Huttig and Crane in accordance with the final allocation of the Tax liability in dispute.
Section 8.4. NOTICES. Any notice, request, instruction or other communication to be given hereunder by any party to any other party shall be in writing and shall be deemed to have been duly given (i) on the date of delivery if delivered personally, or by telecopy or telefacsimile, upon confirmation of receipt, (ii) on the first business day following the date of dispatch if delivered by Federal Express or other nationally reputable next-day courier service, or (iii) on the third business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:
(a) If to Huttig:
Gregory D. Lambert
Huttig Sash and Door, Inc.
Lakeview Center, Suite 400
145 South Outer Forty Road Chesterfield, Missouri 63006-1041
(b) if to Crane:
David S. Smith
Crane Co.
100 First Stamford Place
Stamford, Connecticut 06902
Section 8.5. NO THIRD PARTY BENEFICIARIES. Except as otherwise expressly provided herein, nothing contained in this Agreement is intended to confer upon any person or entity other than the parties hereto and their respective successors and permitted assigns, any benefit, right or remedies under or by reason of this Agreement.
Section 8.6. ASSIGNMENT. No party to this Agreement shall convey, assign or otherwise transfer any of its rights or obligations under this Agreement without the express written consent of the other parties hereto in their sole and absolute discretion. Any such conveyance, assignment or transfer without the express written consent of the other parties shall be void ab initio. No assignment of this Agreement shall relieve the assigning party of its obligations hereunder.
Section 8.7. TERM. This Agreement shall commence on the date of execution indicated below and shall continue in effect until otherwise agreed to in writing by Huttig and Crane, or their successors.
Section 8.8. CAPTIONS. The Article, Section and paragraph captions herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof.
Section 8.9. SEVERABILITY. If any provision of this Agreement or the application thereof to any person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to persons or circumstances other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon any such determination, the parties shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties.
Section 8.10. SPECIFIC PERFORMANCE. In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the party or parties who are or are to be thereby aggrieved shall have the right of specific performance and injunctive relief giving effect to its or their rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The
parties agree that the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived.
Section 8.11. COUNTERPARTS. For the convenience of the parties, this Agreement may be executed in any number of separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement.
Section 8.12. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware applicable to contracts made and to be performed entirely within such State, without regard to the conflicts of law principles of such State.
Section 8.13. AGENT. Any consent rights of members of the Huttig Group under this Agreement shall be exercised by Huttig on behalf of the Huttig Group, and any notices given by the Crane Group to Huttig shall be deemed to be given to each member of the Huttig Group. Any consent rights of the Crane Group under this Agreement shall be exercised by Crane on behalf of the Crane Group on behalf of the Crane Group, and any notices given by Huttig to Crane shall be deemed to be given to each member of the Crane Group.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties hereto on the date first hereinabove written.
CRANE CO.
HUTTIG BUILDING PRODUCTS, INC.
EMPLOYEE MATTERS AGREEMENT
BETWEEN
CRANE CO.
AND
HUTTIG BUILDING PRODUCTS, INC.
DATED AS OF _______________, 1999
TABLE OF CONTENTS
ARTICLE I DEFINITIONS.........................................................1
1.1 Adverse Change.......................................................1
1.2 Affected Pension Plan Participants...................................1
1.3 Agreement............................................................1
1.4 ASO Contract.........................................................2
1.5 Award................................................................2
1.6 Benefit Liabilities..................................................2
1.7 Close of the Distribution Date.......................................2
1.8 COBRA................................................................2
1.9 Code.................................................................2
1.10 Crane Entity.........................................................2
1.11 Crane Hourly Pension Plan............................................2
1.12 Crane Restricted Stock Plan..........................................3
1.13 Crane Salaried Pension Plan..........................................3
1.14 Crane Savings Plan...................................................3
1.15 Crane Stock Option Plan..............................................3
1.16 Crane Stock Value....................................................3
1.17 Distribution Agreement...............................................3
1.18 ERISA................................................................3
1.19 EVA Plan.............................................................3
1.20 Group Insurance Policies.............................................3
1.21 Group Life Program...................................................3
1.22 Health and Welfare Plans.............................................4
1.23 Huttig Employee Stock Purchase Plan..................................4
1.24 Huttig Entity........................................................4
1.25 Huttig Individual....................................................4
1.26 Huttig Hourly Pension Plan...........................................4
1.27 Huttig Savings & Profit Sharing Plan.................................4
1.28 Huttig Stock Incentive Plan..........................................4
1.29 Huttig Stock Value...................................................4
1.30 Immediately After the Distribution Date..............................5
1.31 IRS 5
1.32 Option...............................................................5
1.33 Plan.................................................................5
1.34 Ratio................................................................5
ARTICLE II GENERAL PRINCIPLES................................................5
2.1 Assumption of Liabilities............................................5
2.2 Establishment of Huttig Plans and Related Trusts.....................6
2.3 Terms of Participation by Huttig Individuals in Huttig Plans.........6
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ARTICLE III DEFINED BENEFIT PLANS............................................6
3.1 Establishment of Huttig Hourly Pension Plan and Trust................6
3.2 Freezing of Pension Plan Benefits....................................7
3.3 Vesting and Crediting Service Under Crane's Pension Plans............7
ARTICLE IV DEFINED CONTRIBUTION PLANS.........................................7
4.1 Savings and Profit Sharing Plan......................................7
4.2 Other Defined Contribution Plans.....................................8
ARTICLE V HEALTH AND WELFARE PLANS...........................................9
5.1 General Provisions...................................................9
5.2 Vendor Contracts.....................................................9
5.3 Procedures for Amendments to Plans, Plan Designs,
Administrative Practices, and Vendor Contracts..................11
5.4 COBRA...............................................................12
5.5 Post-Distribution-Transitional Arrangements.........................12
ARTICLE VI STOCK AND INCENTIVE COMPENSATION BENEFITS AND EXECUTIVE
BENEFITS......................................................................13
6.1 Crane Stock-Based Plans.............................................13
6.2 Crane EVA Plan......................................................13
6.3 Employee Stock Purchase Plan........................................14
ARTICLE VII GENERAL AND ADMINISTRATIVE......................................14
7.1 Non-Termination of Employment, No Third-Party Beneficiaries.........14
7.2 Beneficiary Designations............................................14
7.3 Collective Bargaining...............................................14
7.4 Consent of Third Parties............................................14
7.5 Sharing of Participant Information..................................15
ARTICLE VIII MISCELLANEOUS..................................................15
8.1 Effect if Distribution Does Not Occur...............................15
8.2 Relationship of Parties.............................................15
8.3 Affiliates..........................................................15
8.4 Governing Law.......................................................16
8.5 Entire Agreement, Construction......................................16
8.6 Expenses............................................................16
8.7 Notices.............................................................16
8.8 Consent to Jurisdiction.............................................17
8.9 Amendments..........................................................17
8.10 Assignment..........................................................17
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8.11 Captions............................................................18 8.12 Severability........................................................18 8.13 Parties in Interest.................................................18 8.14 Schedules...........................................................18 8.15 Waivers; Remedies...................................................18 8.16 Further Assurances..................................................19 8.17 Counterparts........................................................19 |
EMPLOYEE MATTERS AGREEMENT
_________________, 1999
The parties to this Employee Matters Agreement, dated as of the date written above, are Crane Co., a Delaware corporation ("Crane"), and Huttig Building Products, Inc., a Delaware corporation and, as of the date hereof, an indirect wholly-owned subsidiary of Crane ("Huttig"). Capitalized terms used herein and not otherwise defined shall have the respective meanings assigned to them in Article I hereof or as assigned to them in the Distribution Agreement (as defined below).
WHEREAS, the Board of Directors of Crane has determined that it is in the best interests of Crane and its stockholders to separate Crane and its subsidiary, Huttig, such that Huttig will be an independent business entity;
WHEREAS, in furtherance of the foregoing, Crane and Huttig have entered into a Distribution Agreement, dated as of the date hereof (the "Distribution Agreement"), and certain other agreements that will govern certain matters relating to the Distribution and the relationship of Crane and Huttig, and their respective Subsidiaries following the Distribution; and
WHEREAS, pursuant to the Distribution Agreement, Crane and Huttig have agreed to enter into this agreement allocating between them the assets, liabilities and responsibilities with respect to certain employee compensation and benefit plans and programs.
NOW, THEREFORE, the parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement the following terms shall have the following meanings:
1.1 Adverse Change is defined in Section 5.3(a).
1.2 Affected Pension Plan Participants is defined in Section 3.1.
1.3 Agreement means this Employee Matters Agreement, including all the Schedules hereto.
1.4 ASO Contract is defined in Section 5.2(a)(i).
1.5 Award means an award under the Crane Stock Option Plan, the Crane Restricted Stock Plan, the EVA Plan or the Huttig Stock Incentive Plan. When immediately preceded by "Crane," the term Award means an award under the applicable Plan described in this Section 1.5 as established or maintained by Crane. When immediately preceded by "Huttig," the term Award means an award under the applicable Plan established or maintained by Huttig.
1.6 Benefit Liabilities means any Liabilities (as defined in the Distribution Agreement) relating to any contributions, compensation or other benefits accrued or payable under any profit sharing, pension, savings, deferred compensation, fringe benefit, insurance, medical, medical reimbursement, life, disability, accident, post-retirement health or welfare benefit, stock option, stock purchase, sick pay, vacation, employment, severance, termination or other compensation or benefit plan, agreement, contract, policy, trust fund or arrangement.
1.7 Close of the Distribution Date means 11:59:59 P.M., Eastern Standard Time or Eastern Daylight Time (whichever shall then be in effect), on the Distribution Date.
1.8 COBRA means the continuation coverage requirements for "group health plans" under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and as codified in Code Section 4980B and ERISA Sections 601 through 608.
1.9 Code means the Internal Revenue Code of 1986, as amended, or any successor federal income tax law. Reference to a specific Code provision also includes any proposed, temporary, or final regulation in force under that provision.
1.10 Crane Entity means any entity that is, at the relevant time, an Affiliate of Crane, except that, for periods beginning Immediately After the Distribution Date, the term "Crane Entity" shall not include Huttig or a Huttig Entity.
1.11 Crane Hourly Pension Plan means the Crane Co. Master Pension Plan for Hourly and Certain Non-Bargaining Employees (Plan C), effective December 31, 1987, as amended further effective January 1, 1994.
1.12 Crane Restricted Stock Plan means the Crane Co. Restricted Stock Award Plan.
1.13 Crane Salaried Pension Plan means the Crane Co. Pension Plan for Non-Bargaining Employees, effective December 31, 1987, as amended further effective January 1, 1994.
1.14 Crane Savings Plan means the Crane Co. Savings and Investment Plan, effective January 1, 1989, as amended further effective June 1, 1997.
1.15 Crane Stock Option Plan means the Crane Co. Stock Option Plan.
1.16 Crane Stock Value means the average of the daily high and low per-share prices of the Crane Common Stock as reported on the New York Stock Exchange - Composite Transactions Tape during each of the ten (10) consecutive trading days ending on the Distribution Date.
1.17 Distribution Agreement is defined in the third paragraph of the preamble of this Agreement.
1.18 ERISA means the Employee Retirement Income Security Act of 1974, as amended. Reference to a specific provision of ERISA also includes any proposed, temporary, or final regulation in force under that provision.
1.19 EVA Plan, when immediately preceded by "Crane," means the Crane Co. Economic Value Added Incentive Compensation Plan for Executive Officers. When immediately preceded by "Huttig," EVA Plan means the Economic Value Added Incentive Compensation Plan to be established by Huttig pursuant to Section 2.2.
1.20 Group Insurance Policies is defined in Section 5.2(b)(i).
1.21 Group Life Program, when immediately preceded by "Crane," means the Crane Co. group life programs, policies and arrangements. When immediately preceded by "Huttig," Group Life Program means the life insurance programs, policies and arrangements to be established by Huttig pursuant to Section 2.2 that correspond to the respective Crane Group Life Programs.
1.22 Health and Welfare Plans, when immediately preceded by "Crane," means the health and welfare plans listed on Schedule 1.22 established and maintained by Crane for the benefit of employees and retirees of Crane and certain Crane Entities, and such other welfare plans or programs as may apply to such employees and retirees as of the Distribution Date. When immediately preceded by "Huttig," Health and Welfare Plans means the health and welfare plans to be established by Huttig pursuant to Section 2.2 that correspond to the respective Crane Health and Welfare Plans.
1.23 Huttig Employee Stock Purchase Plan means the employee stock purchase plan to be established by Huttig pursuant to Section 2.2.
1.24 Huttig Entity means any Person that is, at the relevant time, a Subsidiary of Huttig or is otherwise controlled, directly or indirectly, by Huttig.
1.25 Huttig Individual means any individual (i) who, Immediately After the Distribution Date, is either actively employed by or on leave of absence from Huttig or a Huttig Entity, or (ii) whose last employment within the Pre-Distribution Group (as defined in the Distribution Agreement) was with Huttig or a Huttig Entity.
1.26 Huttig Hourly Pension Plan means the defined benefit pension plan established by Huttig pursuant to Section 2.2 and Article III.
1.27 Huttig Savings & Profit Sharing Plan means the defined contribution plan established by Huttig pursuant to Section 2.2 and Article IV.
1.28 Huttig Stock Incentive Plan means the plan or program established by Huttig pursuant to Section 2.2 consisting of a stock option plan that corresponds to the Crane Stock Option Plan and a restricted stock award plan that corresponds to the Crane Restricted Stock Plan.
1.29 Huttig Stock Value means the average of the daily high and low per-share prices of the Huttig Common Stock during each of the ten (10) consecutive trading days beginning Immediately After the Distribution Date.
1.30 Immediately After the Distribution Date means 12:00 A.M., Eastern Standard Time or Eastern Daylight Time (whichever shall then be in effect), on the day after the Distribution Date.
1.31 IRS means the Internal Revenue Service.
1.32 Option, when immediately preceded by "Crane," means an option to purchase Crane Common Stock pursuant to the Crane Stock Option Plan. When immediately preceded by "Huttig," Option means an option to purchase Huttig Common Stock pursuant to the Huttig Stock Incentive Plan.
1.33 Plan, when immediately preceded by "Crane" or "Huttig," means any plan, policy, program, payroll practice, on-going arrangement, contract, trust, insurance policy or other agreement or funding vehicle providing benefits to employees or former employees of Crane or a Crane Entity, or Huttig or a Huttig Entity, as applicable.
1.34 Ratio means the amount obtained by dividing the Crane Stock Value by the Huttig Stock Value.
ARTICLE II
GENERAL PRINCIPLES
2.1 Assumption of Liabilities. Except as otherwise expressly provided in Article III, Huttig hereby assumes and agrees to pay, perform, fulfill and discharge, in accordance with their respective terms, all of the following (regardless of when or where such Benefit Liabilities arose or arise or were or are incurred): (i) all Benefit Liabilities to or relating to Huttig Individuals, and their respective dependents and beneficiaries, in each case relating to, arising out of or resulting from employment by Crane, a Crane Entity, Huttig or a Huttig Entity before the Distribution Date (including Benefit Liabilities under Crane Plans and Huttig Plans); (ii) all other Benefit Liabilities to or relating to Huttig Individuals, and their respective dependents and beneficiaries, to the extent relating to, arising out of or resulting from future, present or former employment with Huttig or a Huttig Entity (including Benefit Liabilities under Crane Plans and Huttig Plans); (iii) all Benefit Liabilities relating to, arising out of or resulting from any other actual or alleged employment relationship with Huttig or a Huttig Entity; (iv) all Benefit Liabilities relating to, arising out of or resulting from the imposition of withdrawal liability under Subtitle E of Title IV
of ERISA as a result of a complete or partial withdrawal of any Crane Entity from a "multiemployer plan" within the meaning of ERISA Section 4021 which occurs solely as a result of the Distribution; and (v) all other Benefit Liabilities relating to, arising out of or resulting from obligations, liabilities and responsibilities expressly assumed or retained by Huttig, a Huttig Entity, or a Huttig Plan pursuant to this Agreement.
2.2 Establishment of Huttig Plans and Related Trusts. Effective prior to or Immediately After the Distribution Date, Huttig shall adopt, or cause to be adopted, the Huttig Hourly Pension Plan and its related trust, the Huttig Savings and Profit Sharing Plan and its related trust, the Huttig Employee Stock Purchase Plan, the Huttig Stock Incentive Plan, the Huttig EVA Plan and the Huttig Health and Welfare Plans for the benefit of the Huttig Individuals and other current and future employees of Huttig and the Huttig Entities. Subject to the provisions of Section 4.1 regarding the Huttig Savings and Profit Sharing Plan, Section 6.2 regarding the Huttig EVA Plan, Section 6.3 regarding the Huttig Employee Stock Purchase Plan and Section 5.1(b) regarding the Huttig Health and Welfare Plans, the foregoing Huttig Plans as in effect Immediately After the Distribution Date shall be substantially identical in all material respects to the corresponding Crane Plans as in effect as of the Distribution Date.
2.3 Terms of Participation by Huttig Individuals in Huttig Plans. The Huttig Plans shall be, with respect to Huttig Individuals, in all respects the successors in interest to, and shall not provide benefits that duplicate benefits provided by, the corresponding Crane Plans. Crane and Huttig shall agree on methods and procedures, including amending the respective Plan documents and/or requesting approvals or consents of Huttig Individuals where the parties deem appropriate, to prevent Huttig Individuals from receiving duplicative benefits from the Crane Plans and the Huttig Plans. With respect to Huttig Individuals, each Huttig Plan shall provide that all service, all compensation and all other benefit-affecting determinations that, as of the Close of the Distribution Date, were recognized under the corresponding Crane Plan shall, as of Immediately After the Distribution Date, receive full recognition, credit, and validity and be taken into account under such Huttig Plan to the same extent as if such items occurred under such Huttig Plan, except to the extent that duplication of benefits would result.
ARTICLE III
DEFINED BENEFIT PLANS
3.1 Establishment of Huttig Hourly Pension Plan and Trust. The Huttig
Hourly Pension Plan, established by Huttig pursuant to Section 2.2, (i) shall be
a qualified defined benefit pension plan within the meaning of Code Section
401(a), (ii) shall contain provisions, terms and conditions substantially
similar to the provisions, terms and conditions of the Crane Hourly Pension
Plan, and (iii) shall provide coverage from and after the Distribution Date with
respect to Huttig Individuals who, as of the Distribution Date, were
participants under the Crane Hourly Pension Plan. The trust related to the
Huttig Hourly Pension Plan, established by Huttig pursuant to Section 2.2, shall
be exempt from taxation under Code Section 501(a).
3.2 Freezing of Pension Plan Benefits. Effective Immediately After the Distribution Date, the accrued benefits with respect to Huttig Individuals who, as of the Distribution Date, were participants under the Crane Salaried Pension Plan or the Crane Hourly Pension Plan (collectively, the "Affected Pension Plan Participants") shall be frozen and the Affected Pension Plan Participants shall not accrue any additional benefits from and after the Distribution Date under the Crane Salaried Pension Plan or the Crane Hourly Pension Plan, as the case may be. The assets and Benefit Liabilities with respect to the Affected Pension Plan Participants, determined as of the Distribution Date, shall be retained by the applicable Crane Plan and its related trust and paid therefrom when due under the terms of the applicable Crane Plan.
3.3 Vesting and Crediting Service Under Crane's Pension Plans.
(a) Vesting and Service Credit of Crane Salaried Pension Plan Benefits. Effective Immediately After the Distribution Date, notwithstanding anything contained in the Crane Salaried Pension Plan to the contrary, the Affected Pension Plan Participants who, as of the Distribution Date, were participants in the Crane Salaried Pension Plan shall be fully vested in their respective accrued benefits under the Crane Salaried Pension Plan. Affected Pension Plan Participants who, as of the Distribution Date, were participants in the Crane Salaried Pension Plan shall continue to receive service credit for retirement benefit eligibility purposes under the Crane Plan for service with Huttig after the Distribution Date.
(b) Crediting Service Under the Crane Hously Pension Plan. Affected Pension Plan Participants who, as of the Distribution Date, were participants in the Crane Hourly Pension Plan shall continue to receive service credit for vesting and retirement benefit eligibility purposes under the Crane Plan for service with Huttig after the Distribution Date.
ARTICLE IV
DEFINED CONTRIBUTION PLANS
4.1 Savings and Profit Sharing Plan.
(a) Establishment of Savings and Profit Sharing Plan and Trust. The
Huttig Savings and Profit Sharing Plan, established by Huttig pursuant to
Section 2.2, (i) shall be a qualified defined contribution plan within the
meaning of Code Section 401(a), (ii) except as provided under Section 4.1(c),
shall contain provisions, terms and conditions substantially similar to the
provisions, terms and conditions of the Crane Savings Plan, and (iii) shall
provide coverage from and after the Distribution Date with respect to Huttig
Individuals. The trust related to the Huttig Savings and Profit Sharing Plan,
established by Huttig pursuant to Section 2.2, shall be exempt from taxation
under Code Section 501(a).
(b) Assumption of Liabilities and Transfer of Assets.
(i) Effective Immediately After the Distribution Date: (A) the Huttig Savings and Profit Sharing Plan shall assume and be solely responsible for all Benefit Liabilities to or
relating to Huttig Individuals under the Crane Savings Plan, and (B) Crane shall cause an amount equal to the aggregate account balances of the Huttig Individuals participating under the Crane Savings Plan, whether such amounts are vested or unvested under the terms of the Crane Savings Plan, which are held by the related trust as of the Close of the Distribution Date to be transferred to the Huttig Savings and Profit Sharing Plan, and its related trust, and Huttig shall cause such transferred accounts to be accepted by such plan and trust. In Crane's sole and absolute discretion, the amount so transferred may be in cash or in kind or a combination thereof; provided, however, that the following shall be transferred in kind: (A) shares of Crane Common Stock and shares of Huttig Common Stock allocated to participants' accounts as a result of the Distribution; and (B) all promissory notes reflecting participant loans to Huttig Individuals under the Teledyne 401(k) Plan outstanding as of the Distribution Date.
(ii) If any benefit with respect to a Huttig Individual under the Crane Savings Plan is subject to a qualified domestic relations order at the time of transfer, all documentation concerning such qualified domestic relations order shall be assigned to the Huttig Savings and Profit Sharing Plan.
(c) Retirement Benefit Feature of Savings and Profit Sharing Plan. The Huttig Savings and Profit Sharing Plan shall contain provisions regarding special employer contributions that, in the sole discretion of Huttig, are appropriate retirement benefit provisions with respect to Huttig Individuals.
(d) Vesting. Effective Immediately After the Distribution Date, participants in the Huttig Savings and Profit Sharing Plan shall be fully vested in any amounts transferred with respect to such participants from the Crane Savings Plan and its related trust under Section 4.1(b).
4.2 Other Defined Contribution Plans. Effective Immediately After the Distribution Date, Huttig shall retain sole responsibility for sponsorship and administration of the Huttig Sash & Door Company Compensation and Investment Plan (formerly known as the Palmer G. Lewis 401(k) Plan) (the "Lewis 401(k) Plan") and the Huttig Sash & Door Company Tax-Sheltered Investment Plan (formerly known as the American Pine Products 401(k) Profit Sharing Plan) (the "Prineville 401(k) Plan"), including all Benefit Liabilities arising under those plans prior to or after the Distribution Date, and Crane shall have no responsibility or liability with respect to the Lewis 401(k) Plan or the Prineville 401(k) Plan.
ARTICLE V
HEALTH AND WELFARE PLANS
5.1 General Provisions.
(a) Assumption of Health and Welfare Plan Liabilities. Immediately After the Distribution Date, all Benefit Liabilities to or relating to Huttig Individuals under the Crane
Health and Welfare Plans shall cease to be Benefit Liabilities of the Crane Health and Welfare Plans and shall be assumed by the corresponding Huttig Health and Welfare Plans.
(b) Postretirement Medical and Life Insurance Benefits.
(i) Effective Immediately After the Distribution Date, Huttig may, but shall not be required to, alter or amend the postretirement medical and life insurance benefits offered, or the manner in which such benefits are offered, to Huttig Individuals as follows (subject to all terms and conditions of the applicable Huttig Plan): (A) Huttig shall continue to contribute 50% of the applicable premium or cost of coverage for postretirement medical benefits for Huttig Individuals who are currently retired and participating in such coverage as of the Distribution Date; (B) Huttig shall make no contribution regarding the premium or other cost of coverage for postretirement life insurance benefits for Huttig Individuals who are currently retired and participating in such coverage as of the Distribution Date; (C) Huttig shall make no contribution regarding the premium or other cost of coverage for postretirement medical or life insurance benefits for Huttig Individuals who are active employees of Huttig or a Huttig Entity Immediately After the Distribution Date and who commenced employment with Huttig or a Huttig Entity prior to 1992; and (C) Huttig shall not offer postretirement medical or life insurance benefits to Huttig Individuals who are active employees of Huttig or a Huttig Entity Immediately After the Distribution Date and who commenced employment with Huttig or a Huttig Entity after 1991.
(ii) Crane agrees and acknowledges that any alteration or amendment by Huttig of the postretirement medical and life insurance benefits offered under one or more of the Huttig Health and Welfare Plans as described in Section 5.1(b)(i) shall not be considered or otherwise deemed to be an Adverse Change as defined under Section 5.3(a). Notwithstanding the foregoing, Huttig acknowledges that any decision or action with respect to postretirement medical or life insurance benefits offered under any Huttig Plan after the Distribution Date shall be in the sole discretion of Huttig and Huttig shall be solely responsible for such decision or action. Furthermore, Huttig acknowledges that Crane shall in no way be considered or deemed to have consented to, agreed to or otherwise to have been involved in, such decision or action of Huttig.
5.2 Vendor Contracts.
(a) Third-Party ASO Contracts.
(i) Crane shall use its reasonable efforts to amend each administrative services only contract with a third-party administrator that relates to any of the Crane Health and Welfare Plans (an "ASO Contract") in existence as of the date of this Agreement to permit Huttig to participate in the terms and conditions of such ASO Contract from Immediately After the Distribution Date until the expiration of the financial fee guarantees in effect under such ASO Contract as of the Close of the Distribution Date. Crane shall use its reasonable efforts to cause all ASO Contracts into which Crane enters after the date of this Agreement but before the Close of the Distribution Date to allow Huttig to participate in the terms and conditions thereof effective Immediately After the Distribution Date on the same basis as Crane.
(ii) Crane shall have the right to determine, and shall promptly notify Huttig of, the manner in which Huttig's participation in the terms and conditions of ASO Contracts as set forth above shall be effectuated. The permissible ways in which Huttig's participation may be effectuated include automatically making Huttig a party to the ASO Contracts or obligating the third party to enter into a separate ASO Contract with Huttig providing for the same terms and conditions as are contained in the ASO Contracts to which Crane is a party. Such terms and conditions shall include the financial and termination provisions, performance standards, methodology, auditing policies, quality measures, reporting requirements and target claims. Huttig hereby authorizes Crane to act on its behalf to extend to Huttig the terms and conditions of the ASO Contracts. Huttig shall fully cooperate with Crane in such efforts, and Huttig shall not perform any act, including discussing any alternative arrangements with any third party, that would prejudice Crane's efforts.
(b) Group Insurance Policies.
(i) This Section 5.2(b) applies to group insurance policies not subject to allocation or transfer pursuant to the foregoing provisions of this Article V ("Group Insurance Policies"). (ii)..Crane shall use its reasonable efforts to amend each Group Insurance Policy in existence as of the date of this Agreement for the provision or administration of benefits under the Crane Health and Welfare Plans to permit Huttig to participate in the terms and conditions of such policy from Immediately After the Distribution Date until the expiration of the financial fee and rate guarantees in effect under such Group Insurance Policy as of the Close of the Distribution Date. Crane shall use its reasonable efforts to cause all Group Insurance Policies into which Crane enters or which Crane renews after the date of this Agreement but before the Close of the Distribution Date to allow Huttig to participate in the terms and conditions thereof effective Immediately After the Distribution Date on the same basis as Crane.
(iii) Huttig's participation in the terms and conditions of each such Group Insurance Policy shall be effectuated by obligating the insurance company that issued such insurance policy to Crane to issue one or more separate policies to Huttig. Such terms and conditions shall include the financial and termination provisions, performance standards and target claims. Huttig hereby unconditionally and irrevocably authorizes Crane to act on its behalf to extend to Huttig the terms and conditions of such Group Insurance Policies. Huttig shall fully cooperate with Crane in such efforts, and Huttig shall not perform any act, including discussing any alternative arrangements with third parties, that would prejudice Crane's efforts.
(c) Effect of Change in Rates. Crane and Huttig shall use their reasonable efforts to cause each of the insurance companies, point-of-service vendors and third-party administrators providing services and benefits under the Crane Health and Welfare Plans and the Huttig Health and Welfare Plans to maintain the premium and/or administrative rates based on the aggregate number of participants in both the Crane Health and Welfare Plans and the Huttig Health and Welfare Plans through the expiration of the financial fee or rate guarantees in effect as of the Close of the Distribution Date under the respective ASO Contracts and Group Insurance Policies.
To the extent they are not successful in such efforts, Crane and Huttig shall each bear the revised premium or administrative rates attributable to the individuals covered by their respective Health and Welfare Plans.
5.3 Procedures for Amendments to Plans, Plan Designs, Administrative Practices, and Vendor Contracts.
(a) Changes in Vendor Contracts, Group Insurance Policies, Plan Design,
and Administration Practices and Procedures. From Immediately After the
Distribution Date through the expiration of the respective financial fee or rate
guarantees in effect as of the Close of the Distribution Date under the
applicable ASO Contract or Group Insurance Policy, any party must comply with
Section 5.3(b) if that party seeks to materially amend, modify, alter or take
other action which would have a material effect on, any of the following items
that, in the reasonable opinion of the other party, shall have a material
adverse impact on one or more of the other party's Health and Welfare Plans
(each such modification, an "Adverse Change"): (i) the termination date,
administration, or operation of (A) an ASO contract between Crane or Huttig and
a third-party administrator, or (B) a Group Insurance Policy issued to Crane or
Huttig, in each case, the material terms and conditions of which contracts and
policies are extended to Huttig or to which Huttig becomes a party pursuant to
Section 5.2; (ii) the design of either a Crane Health and Welfare Plan or a
Huttig Health and Welfare Plan; or (iii) the financing, operation,
administration or delivery of benefits under either a Crane Health and Welfare
Plan or a Huttig Health and Welfare Plan.
(b) Procedure for Implementing Changes. Unless the other party consents in writing, neither Crane nor Huttig shall make any Adverse Change unless the party intending to make the Adverse Change has: (i) given the other party written notice of the intention to make the Adverse Change, accompanied by a written description of the Adverse Change, at least 30 days in advance of the proposed effective date of the Adverse Change; (ii) agreed to bear all of the costs of implementing the Adverse Change which are incurred by all third-party administrators, insurance companies and other vendors and passed through to one or both of the parties; and (iii) certified to the other party, and provided to the other party the written concurrence of each third-party administrator, insurance company or other vendor associated with or performing services in connection with the Health and Welfare Plan affected by the Adverse Change, that (after taking into account the effect of clause (ii)) the proposed Adverse Change will have no material adverse impact (financial, administrative or otherwise) on the corresponding Health and Welfare Plan sponsored by the other party.
5.4 COBRA. Effective Immediately After the Distribution Date, Huttig shall solely be responsible for administering compliance with the health care continuation coverage requirements of COBRA with respect to Huttig Individuals under the Huttig Health and Welfare Plans.
5.5 Post-Distribution-Transitional Arrangements.
(a) Continuance of Elections, Co-Payments and Maximum Benefits.
(i) Huttig shall cause the Huttig Health and Welfare Plans to recognize and maintain all coverage and contribution elections made by Huttig Individuals under the Crane Health and Welfare Plans and apply such elections under the Huttig Health and Welfare Plans for the remainder of the period or periods for which such elections are by their terms applicable. The transfer or other movement of employment from Crane to Huttig at any time before the Close of the Distribution Date shall neither constitute nor be treated as a "status change" under the Crane Health and Welfare Plans or the Huttig Health and Welfare Plans.
(ii) Huttig shall cause the Huttig Health and Welfare Plans to recognize and give credit for (A) all amounts applied to deductibles, out-of-pocket maximums, and other applicable benefit coverage limits with respect to which such expenses have been incurred by Huttig Individuals under the Crane Health and Welfare Plans for the remainder of the year in which the Distribution occurs, and (B) all benefits paid to Huttig Individuals under the Crane Health and Welfare Plans for purposes of determining when such persons have reached their lifetime maximum benefits under the Huttig Health and Welfare Plans.
(iii) Huttig shall use reasonable efforts to (A) provide coverage to Huttig Individuals under the Huttig Group Life Program without the need to undergo a physical examination or otherwise provide evidence of insurability, and (B) recognize and maintain all irrevocable assignments and accelerated benefit option elections made by Huttig Individuals under the Crane Group Life Program.
(b) Health and Welfare Plans Subrogation Recovery. After the Close of the Distribution Date, Crane shall pay to Huttig any amounts Crane recovers from time to time through subrogation or otherwise for claims incurred by or reimbursed to any Huttig Individual. If Huttig recovers any amounts through subrogation or otherwise for claims incurred by or reimbursed to employees and former employees of Crane or a Crane Entity and their respective beneficiaries and dependents (other than Huttig Individuals), Huttig shall pay such amounts to Crane.
ARTICLE VI
STOCK AND INCENTIVE COMPENSATION BENEFITS
AND EXECUTIVE BENEFITS
6.1 Crane Stock-Based Plans.
(a) Stock Options. Huttig shall cause each Crane Option that is outstanding as of the Close of the Distribution Date and is held by a Huttig Individual to be converted, effective as soon as practicable after the Distribution Date, to a Huttig Option (a "Converted Option"). Such Converted Option shall provide for the option to purchase a number of shares of Huttig Common
Stock equal to the number of shares of Crane Common Stock subject to such Crane Option as of the Close of the Distribution Date, multiplied by the Ratio, and then rounded to the nearest whole share. The per-share exercise price of such Converted Option shall equal the per-share exercise price of such Crane Option as of the Close of the Distribution Date divided by the Ratio. Each such Converted Option shall otherwise have the same terms and conditions as were applicable to the corresponding Crane Option as of the Close of the Distribution Date, except that references to Crane and its affiliates shall be amended to refer to Huttig and its affiliates.
(b) Restricted Stock. Effective as soon as administratively practicable after the Distribution Date, Huttig shall cause the Restricted Stock Award held by Mr. Barry Kulpa under the Crane Restricted Stock Plan as of the Distribution Date, to the extent that vesting of shares granted under that Award is not dependent upon any performance or market value criteria (i.e. time-based restrictions), to be converted to a Restricted Stock Award under the Huttig Stock Incentive Plan by multiplying the number of shares of Crane Restricted Stock by the Ratio, and then rounding the product to the nearest whole share. Such Huttig Restricted Stock Award shall have the same terms and conditions as were applicable to the corresponding Crane Restricted Stock Award. Crane shall use reasonable efforts to cancel any certificate in Mr. Kulpa's name with respect to restricted shares of Crane Common Stock. To the extent that Mr. Kulpa's Restricted Stock Award is not subject to conversion under the prior provisions of this Section 6.1(b) (i.e. performance-based restrictions), the parties shall use their reasonable efforts to cause that Restricted Stock Award held by Mr. Barry Kulpa under the Crane Restricted Stock Plan to be replaced, effective on or within a reasonable time after the Distribution Date, with an Award consisting of restricted shares of Huttig Common Stock under the Huttig Stock Incentive Plan and subject to such terms and conditions as the parties and Mr. Kulpa may agree.
6.2 Crane EVA Plan. Effective Immediately After the Distribution Date, Huttig shall assume all Benefit Liabilities to or relating to Huttig Individuals under the Crane EVA Plan. The Huttig EVA Plan shall reflect appropriate adjustments, as determined by Huttig in its sole discretion, of the cost of capital and other factors that shall be applicable to the benefits under the Huttig EVA Plan after the Distribution Date.
6.3 Employee Stock Purchase Plan. The Huttig Employee Stock Purchase Plan, established pursuant to Section 2.2, shall provide employees of Huttig or a Huttig Entity after the Distribution Date with an opportunity to purchase Huttig Common Stock at current market prices.
ARTICLE VII
GENERAL AND ADMINISTRATIVE
7.1 Non-Termination of Employment, No Third-Party Beneficiaries. No provision of this Agreement or the Distribution Agreement shall be construed to create any right, or accelerate entitlement, to any compensation or benefit whatsoever on the part of any Huttig Individual or other future, present or former employee of Crane, a Crane Entity, Huttig, or a Huttig Entity under any Crane Plan or Huttig Plan or otherwise. Without limiting the generality of the
foregoing: (i) the Distribution shall not cause any employee to be deemed to have incurred a termination of employment which entitles such individual to the commencement of benefits under any of the Crane Plans, any of the Huttig Plans, or any individual agreements; and (ii) except as expressly provided in this Agreement, nothing in this Agreement shall preclude Huttig, at any time after the Close of the Distribution Date, from amending, merging, modifying, terminating, eliminating, reducing, or otherwise altering in any respect any Huttig Plan, any benefit under any Plan or any trust, insurance policy or funding vehicle related to any Huttig Plan.
7.2 Beneficiary Designations. All beneficiary designations made by Huttig Individuals for Crane Plans shall be transferred to and be in full force and effect under the corresponding Huttig Plans until such beneficiary designations are replaced or revoked by the Huttig Individual who made the beneficiary designation.
7.3 Collective Bargaining. To the extent any provision of this Agreement is contrary to the provisions of any collective bargaining agreement to which Crane or any Affiliate of Crane is a party, the terms of such collective bargaining agreement shall prevail. Should any provisions of this Agreement be deemed to relate to a topic determined by an appropriate authority to be a mandatory subject of collective bargaining, Crane or Huttig may be obligated to bargain with the union representing affected employees concerning those subjects.
7.4 Consent of Third Parties. If any provision of this Agreement is dependent on the consent of any third party (such as a vendor or a union) and such consent is withheld, Crane and Huttig shall use their reasonable efforts to implement the applicable provisions of this Agreement to the full extent practicable. If any provision of this Agreement cannot be implemented due to the failure of such third party to consent, Crane and Huttig shall negotiate in good faith to implement the provision in a mutually satisfactory manner. The phrase "reasonable efforts" as used herein shall not be construed to require the incurrence of any non-routine or unreasonable expense or liability or the waiver of any right.
7.5 Sharing of Participant Information. Crane and Huttig shall share, Crane shall cause each applicable Crane Entity to share, and Huttig shall cause each applicable Huttig Entity to share, with each other and their respective agents and vendors (without obtaining releases) all participant information necessary for the efficient and accurate administration of each of the Crane Plans and the Huttig Plans. Crane and Huttig and their respective authorized agents shall, subject to applicable laws on confidentiality, be given reasonable and timely access to, and may make copies of, all information relating to the subjects of this Agreement in the custody of the other party, to the extent necessary for such administration. Until [December 31, 2000], all participant information shall be provided in a manner and medium that is compatible with the data processing systems of Crane as in effect on the Close of the Distribution Date, unless otherwise agreed to by Crane and Huttig.
ARTICLE VIII
MISCELLANEOUS
8.1 Effect if Distribution Does Not Occur. If the Distribution does not occur, then all actions and events that are, under this Agreement, to be taken or occur effective as of the Close of the Distribution Date, Immediately After the Distribution Date, or otherwise in connection with the Distribution, shall not be taken or occur except to the extent specifically agreed by Huttig and Crane.
8.2 Relationship of Parties. Nothing in this Agreement shall be deemed or construed by the parties or any third party as creating the relationship of principal and agent, partnership or joint venture between the parties, it being understood and agreed that no provision contained herein, and no act of the parties, shall be deemed to create any relationship between the parties other than the relationship set forth herein.
8.3 Affiliates. Each of Crane and Huttig shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement to be performed by a Crane Entity or a Huttig Entity, respectively.
8.4 Governing Law. To the extent not preempted by applicable federal law, this Agreement shall be governed by, construed and interpreted in accordance with the laws of the State of Delaware, irrespective of the choice of laws principles of the state of Delaware, as to all matters, including matters of validity, construction, effect, performance and remedies.
8.5 Entire Agreement, Construction. This Agreement and the Ancillary Agreements, including, without limitation, any annexes, schedules and exhibits hereto or thereto, and other agreements and documents referred to herein and therein, will together constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and will supersede all prior negotiations, agreements and understandings of the parties of any nature, whether oral or written, with respect to such subject matter. In the event and to the extent that there is a conflict between the provisions of this Agreement and the provisions of the Distribution Agreement, the Transition Services Agreement or the Tax Allocation Agreement, the provisions of this Agreement shall control.
8.6 Expenses. Except as expressly set forth in this Agreement, all costs and expenses incurred through the Close of the Distribution Date with respect to any employee matters described herein shall be charged to and paid by Crane. Except as otherwise set forth in this Agreement, all costs and expenses incurred following the Distribution Date with respect to any employee matters described herein shall be charged to and paid by the party for whose benefit the expenses are incurred, with any expenses that cannot be allocated on such basis to be split equally between the parties.
8.7 Notices. All notices, requests, claims, demands and other communications required or permitted to be given hereunder will be in writing and will be delivered by hand or telecopied or sent, postage prepaid, by registered, certified or express mail or reputable overnight
courier service and will be deemed given when so delivered by hand or telecopied, or three business days after being so mailed (one business day in the case of express mail or overnight courier service). All such notices, requests, claims, demands and other communications will be addressed as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:
(a) If to Crane:
Crane Co.
100 First Stamford Place
Stamford, CT 06902
Attention: Augustus I. duPont Telecopy: (203) 363-7350
with a copy to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222-2312 Attention: Janice C. Hartman Telecopy: (412) 355-6501 |
(b) If to Huttig:
Huttig Building Products, Inc.
14500 South Outer Forty Road
Suite 400
Chesterfield, MO 63017
Attention:
Telecopy: (314) 216-2601
8.8 Consent to Jurisdiction. Each of Crane and Huttig irrevocably submits to the exclusive jurisdiction of (i) the Court of Chancery in and for the State of Delaware and the Superior Court in and for the State of Delaware and (ii) the United States District Court for the District of Delaware, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated thereby (and agrees not to commence any action, suit or proceeding relating thereto except in such courts). Each of Crane and Huttig further agrees that service of any process, summons, notice or document hand delivered or sent by U.S. registered mail to such party's respective address set forth in Section 8.6 will be effective service of process for any action, suit or proceeding in Delaware with respect to any matters to which it has submitted to jurisdiction as set forth in the immediately preceding sentence. Each of Crane and Huttig irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement in (i) the Court of Chancery in and for the State of Delaware and the Superior Court in and for the State of Delaware or (ii) the United States District Court for the District of Delaware, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.
8.9 Amendments. This Agreement cannot be amended, modified or supplemented except by a written agreement executed by Crane and Huttig.
8.10 Assignment. Neither party to this Agreement will convey, assign or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of the other party in its sole and absolute discretion, except that other than as expressly provided herein any party may (without obtaining any consent) assign any of its rights hereunder to a successor to all or any part of its business. Any such conveyance, assignment or transfer requiring the prior written consent of another party which is made without such consent will be void ab initio. No assignment of this Agreement will relieve the assigning party of its obligations hereunder.
8.11 Captions. The article, section and paragraph captions herein and the table of contents hereto are for convenience of reference only, do not constitute part of this Agreement and will not be deemed to limit or otherwise affect any of the provisions hereof. Unless otherwise specified, all references herein to numbered articles or sections are to articles and sections of this Agreement and all references herein to annexes or schedules are to annexes and schedules to this Agreement.
8.12 Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and will in no way be affected, impaired or invalidated thereby. If the economic or legal substance of the matters contemplated hereby is affected in any manner adverse to any party as a result thereof, the parties will negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties.
8.13 Parties in Interest. This Agreement is binding upon and is for the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement is not made for the benefit of any Person not a party hereto, and no Person other than the parties hereto or their respective successors and permitted assigns will acquire or have any benefit, right, remedy or claim under or by reason of this Agreement.
8.14 Schedules. All annexes and schedules attached hereto are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Capitalized terms used in the schedules hereto but not otherwise defined therein will have the respective meanings assigned to such terms in this Agreement.
8.15 Waivers; Remedies. No failure or delay on the part of either Crane or Huttig in exercising any right, power or privilege hereunder will operate as a waiver thereof, nor will any waiver on the part of either Crane or Huttig of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder, nor will any single or partial exercise
of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies which the parties may otherwise have at law or in equity.
8.16 Further Assurances. As and when requested by either party hereto, the other party shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such actions as the requesting party may reasonably request with respect to the matters described herein.
8.17 Counterparts. This Agreement may be executed in separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement.
IN WITNESS WHEREOF, the parties have caused this Employee Matters Agreement to be duly executed as of the day and year first above written.
CRANE CO.
HUTTIG BUILDING PRODUCTS, INC.
HUTTIG BUILDING PRODUCTS, INC.
1999 NON-EMPLOYEE DIRECTOR
RESTRICTED STOCK PLAN
1. Purpose.
The purposes of the Huttig Building Products, Inc. 1999 Non-Employee Director Restricted Stock Plan (the "Plan") are to attract and retain well-qualified persons for service as directors of Huttig Building Products, Inc. (the "Company"), to provide directors through the payment of a portion of directors fees in shares of the Company's Common Stock, par value $.01 per share ("Common Stock"), with the opportunity to increase their proprietary interest in the Company and thereby to increase their personal interest in the Company's continued success.
2. Administration.
Responsibility and authority to administer and interpret the provisions of this Plan shall be conferred upon a committee of at least three persons (all of whom shall be persons not eligible to participate in this Plan) having full authority to act (the "Committee"). The members of the Committee shall be the President and Chief Executive Officer, the Vice President-Finance of the Company, and at least one additional disinterested person to be elected by the Chairman. The Committee shall record its proceedings under this Plan. The Committee may employ attorneys, consultants, accountants or other persons, and the Committee, the Company and its officers and directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All usual and reasonable expenses of the Committee shall be paid by the Company. No member shall receive compensation with respect to his services for the Committee except as may be authorized by the Board of Directors. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon all directors who have received awards, the Company and other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretations taken or made in good faith with respect to this Plan or awards made hereunder, and all members of the Committee shall be fully indemnified and protected by the Company in respect of any such action, determination or interpretation.
3. Eligibility.
All directors of the Company who are not full-time employees of the Company shall be participants in this Plan.
4. Awards.
Each non-employee director shall be paid an annual director's fee, in an amount fixed from time to time by the Board of Directors, which is not dependent upon attendance at meetings (the "Base Fee"). The Base Fee shall be payable in stock and cash as provided hereunder. The stock
portion of the Base Fee shall be determined pursuant to this Section 4. At the Company's Annual Meeting each calendar year, each eligible non-employee director shall be awarded the number of full shares of Common Stock of the Company (rounded to the nearest ten shares) determined by dividing (i) the dollar amount equal to the excess of (a) the Base Fee then in effect over (b) $5,000 by (ii) the average of the high and low prices of a share of Common Stock on the New York Stock Exchange-Composite Transactions Tape on the 10 consecutive trading days ending on the day preceding the award date, or, if no sale of Common Stock has been recorded on such date, then on the next preceding date on which a sale was so made (the "Fair Market Value"). Each such award shall be evidenced by a written agreement, executed by the non-employee director and the Company, containing such restrictions, terms and conditions as the Committee may require. A non-employee director who becomes a member of the Board of Directors after the Annual Meeting in any year shall be awarded a prorated number of full shares of Common Stock based on the number of full months of service for that year. The price of Common Stock to be used in determining the number of shares of Common Stock to which such non-employee director shall be entitled for such year shall be the Fair Market Value of a share of Common Stock, on the day next preceding the date of the non-employee director's election to the Board of Directors.
5. Vesting.
(a) An award of common Stock is forfeitable if the non-employee director ceases to remain a member of the Board of Directors until the Annual Meeting of the year following the year of the award, except in the case of death or disability (as determined by the Committee), which disability renders the director unable to continue to serve the Company or upon a change of control of the Company as set forth in Paragraph 5(b) hereof. In the event of death or disability, an allocated portion of the award for the year of death or disability, based on the number of full months of service, shall become non-forfeitable and distributable as of the date of such death or disability. Shares which are forfeited may be regranted.
(b) Notwithstanding anything else herein, all restrictions on any Common Stock that may have been awarded to a non-employee director hereunder shall lapse in the event of a "change in control." 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 offer (other than a tender offer or exchange offer by the Company) for all or part of the outstanding shares 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, as amended (the "Exchange Act"), of 20% or more of the outstanding shares 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 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, (v) the adoption of any plan or proposal for the
liquidation (but not a partial liquidation) or dissolution of the Company or
(vi) the date upon which individuals who constitute the Board of Directors of
the Company (the "Board") as of _______________, 1999 (the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board, provided
that any person becoming a non-employee director subsequent to such date whose
election, or nomination for election by the Company's stockholders, was approved
by a vote of at least three-quarters of the directors comprising the Incumbent
Board (other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of directors of the Company, as such terms are
used in Rule 14a-11 or Regulation 14A promulgated under the Exchange Act) shall
be, for purposes of this Plan, considered as though such person were a member of
the Incumbent Board.
6. Terms and Conditions.
(a) The difference between the Base Fee and the portion of such Base Fee awarded under this Plan in Common Stock (valued at Fair Market Value) shall be paid to non-employee directors in cash installments on a monthly basis.
(b) Until such time as the risk of forfeiture lapses or the shares awarded are forfeited, a non-employee director has the right to vote and to receive dividends on and other distributions with respect to the shares awarded.
(c) At such time as the risk of forfeiture lapses, a non-employee director's Common Stock awarded under this Plan will have all the rights of any other Common Stock. No payment will be required from the non-employee director upon the issuance or delivery of any restricted stock, except that any amount necessary to satisfy applicable federal, state or local tax requirements shall be withheld or paid promptly upon notification of the amount due and prior to or concurrently with the issuance or delivery of a certificate representing such stock, provided that anything contained herein to the contrary notwithstanding, the Committee may accept stock received in connection with the award being taxed or otherwise previously acquired in satisfaction of withholding requirements.
(d) No shares may be sold or transferred (including, without limitation,
transfer by gift or donation) prior to the fifth anniversary of the date of the
award or the departure or resignation of the non-employee director from the
Board, whichever is earlier; except with regard to shares which vest as a result
of death or disability or upon a change of control of the Company (as defined in
Section 5(b) hereof), at which time all restrictions on transfer shall lapse.
(e) Up to __________ shares of Common Stock may be issued pursuant to this Plan. Shares of Common Stock issued pursuant to this Plan may be drawn from authorized but unissued shares or from treasury, as determined by the Board of Directors.
(f) Certificates for shares issued under this Plan shall be registered in the name of the non-employee director, and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such award substantially in the following form:
The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Huttig Building Products, Inc. 1999 Non-Employee Director Restricted Stock Plan. A copy of such Plan is on file in the offices of Huttig Building Products, Inc.,__________________________.
(g) Prior to termination of the restrictions on sale and transfer provided herein, the certificates for the shares awarded pursuant to this Plan will be held by the Company's Treasurer in custody for the non-employee director.
(h) The Committee shall appropriately adjust the number of shares for which awards may be granted pursuant to this Plan in the event of any stock dividend, stock split, recapitalization or other similar event.
7. Amendment or Discontinuance.
The Board of Directors of the Company may at any time amend, rescind or terminate this Plan, as it shall deem advisable; provided, however, that (i) no change may be made in awards theretofore granted under this Plan which would impair participants' rights without their consent, and (ii) no amendment to this Plan shall be made without approval of the Company's stockholders if the effect of such amendment would be to (a) increase the number of shares reserved for issuance hereunder; (b) materially increase the benefits accruing to participants under this Plan; (c) materially change the requirements for eligibility under Section 3 hereof; or (d) materially modify the method for determining the number of shares awarded under Section 4 hereof; except that any such increase or modification that results from adjustment authorized by Section 6(h) hereof shall not require such approval.
8. Effective Date and Term of Plan.
This Plan shall be submitted to the stockholders of the Company on or before ___________, 1999 and, if approved by the stockholders, shall become effective ___________, 1999. No shares shall be awarded under this Plan after the tenth anniversary of the effective date.
9. Governing Law.
This Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of Delaware, other than the conflict of law provisions thereof.
INDEMNIFICATION AGREEMENT
AGREEMENT, effective as of ___________, between Crane Co., a Delaware corporation (the "Company"), and (NAME) ("Indemnitee").
WHEREAS, both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors and officers of public companies at a time when it has become increasingly difficult to obtain adequate insurance coverage at reasonable costs;
WHEREAS, in recognition of Indemnitee's need for substantial protection against personal liability in order to enhance Indemnitee's continued service to the Company in an effective manner, the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to the full extent (whether partial or complete) permitted by law and as set forth in this Agreement, and, to the extent insurance is maintained, for the continued coverage of Indemnitee under the Company's directors' and officers' liability insurance policies, regardless of any future change in the Certificate of Incorporation, Bylaws, composition of the Board of Directors, or structure of the Company;
NOW, THEREFORE, in consideration of the premises and of Indemnitee's service to the Company, directly or indirectly, and intending to be legally bound hereby, the parties hereto agree as follows:
1. In the event Indemnitee was, is, or becomes a party to or a witness or other participant in, or is threatened to be made a party to or a witness or other participant in, any threatened, pending or completed action, suit or proceeding, or any inquiry or investigation, whether conducted by the Company or any other party, that Indemnitee in good faith believes might lead to any such action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise ("Claim") by reason of (or arising in part out of) the fact that Indemnitee is or was a director, officer, employee, agent or fiduciary of the Company, or is or was serving at the request of the Company as a director, officer, employee, trustee, agent or fiduciary of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, or by reason of anything done or not done by Indemnitee in any such capacity (an "Indemnifiable Event"), the Company shall indemnify Indemnitee to the full extent permitted by law (the determination of which shall be made by the Reviewing Party referred to below) as soon as practicable but in any event no later than thirty days after written demand is presented to the Company, against any and all expenses (including attorneys' fees and all other costs, expenses and obligations paid or incurred in connection with investigating, preparing for and defending or participating in the defense of (including on appeal) any Claim relating to any Indemnifiable Event) (collectively "Expenses"), judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such judgments, fines, penalties or amounts paid in settlement) of such Claim and, if so requested by Indemnitee, the Company shall advance (within two business days of such request) any and all such Expenses to Indemnitee; provided, however, that (i) the foregoing obligation of the Company shall not apply to a Claim that was commenced by the Indemnitee
without the prior approval of the Board of Directors of the Company unless the
Claim was commenced after a Change in Control (as defined in Section 5 herein);
(ii) the foregoing obligation of the Company shall be subject to the condition
that an appropriate person or body (the "Reviewing Party") shall not have
determined (in a written opinion in any case in which the special, independent
counsel referred to in Section 4 hereof is involved) that Indemnitee would not
be permitted to be indemnified for such Expenses under applicable law; and (iii)
if, when and to the extent that the Reviewing Party determines that Indemnitee
would not be permitted to be indemnified for such Expenses under applicable law,
the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees
to reimburse the Company) for all such amounts theretofore paid (unless
Indemnitee has commenced legal proceedings in a court of competent jurisdiction
to secure a determination that Indemnitee should be indemnified under applicable
law, in which event Indemnitee shall not be required to so reimburse the Company
until a final judicial determination requiring such reimbursement is made with
respect thereto as to which all rights of appeal therefrom have been exhausted
or lapsed) and the Company shall not be obligated to indemnify or advance any
additional amounts to Indemnitee under this Agreement (unless there has been a
determination by a court of competent jurisdiction that the Indemnitee would be
permitted to be so indemnified or entitled to such expense advances under
applicable law).
2. If there has not been a Change in Control of the Company (as hereinafter defined), the Reviewing Party shall be (1) a quorum of the Board of Directors consisting of directors who are not parties to the action, suit or proceeding acting by majority vote, or (2) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, independent legal counsel by the use of a written opinion or (3) the stockholders. If there has been a Change in Control of the Company, the Reviewing Party shall be the special, independent counsel referred to in Section 4 hereof.
3. If Indemnitee has not been indemnified by the expiration of the foregoing thirty-day period or received expense advances or if the Reviewing Party determines that Indemnitee would not be permitted to be indemnified or be entitled to receive expense advances within two days of the request therefor in whole or in part under the applicable law, Indemnitee shall have the right to commence litigation seeking from the court a finding that Indemnitee is entitled to indemnification and expense advances or enforcement of Indemnitee's entitlement to indemnification and expense advances or challenging any determination by the Reviewing Party or any aspect thereof that Indemnitee is not entitled to be indemnified or receive expense advances and the burden of proving that indemnification or advancement of expenses is not appropriate shall be on the Company; any determination by the Reviewing Party in favor of Indemnitee shall be conclusive and binding on the Company, unless facts supplied by Indemnitee which form the basis for the determination are subsequently determined to have been materially incorrect at the time supplied. Indemnitee agrees to bring any such litigation in any court in the states of New York or Delaware having subject matter jurisdiction thereof and in which venue is proper, and the Company hereby consents to service of process and to appear in any such proceeding.
4. The Company agrees that if there is a Change in Control of the Company (as hereinafter defined), then with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnity payments and expense advances under this Agreement or any other agreement or Bylaws now or hereafter in effect relating to Claims for Indemnifiable Events, the Company shall seek legal advice only from special, independent counsel selected by Indemnitee who a majority of the disinterested Directors approves (which approval shall not be unreasonably withheld), and who has not otherwise performed services for the Company or Indemnitee. Such counsel, among other things, shall determine whether and to what extent Indemnitee is permitted to be indemnified or is entitled to expense advances under applicable law and shall render its written opinion to the Company and Indemnitee to such effect. The Company agrees to pay the reasonable fees of the special, independent counsel referred to above and to fully indemnify such counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto except for willful misconduct or gross negligence.
5. For purposes of this Agreement, (a) "Change in Control of the Company" shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d)(3) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, is or becomes the beneficial owner (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 80% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or if the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets.
6. To the extent Indemnitee is successful in such proceeding, the Company shall indemnify Indemnitee against any and all expenses (including attorneys' fees) which are incurred by the Indemnitee in connection with any claim asserted or action brought by Indemnitee for (i) indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement or Company Bylaws now or hereafter in effect relating to Claims for Indemnifiable Events and/or (ii) recovery under any directors' and officers' liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined
to be entitled to such indemnification, advance payment of Expenses or insurance recovery, as the case may be.
7. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, judgments, fines, penalties and amounts paid in settlement of any Claim but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in the defense of any Claim relating in whole or in part to any Indemnifiable Event or in defense of any issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection therewith.
8. For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that Indemnitee is not entitled to indemnification or expense advance or that indemnification or expense advance is not permitted by applicable law.
9. The Company represents that it presently has in force and effect Directors' and Officers' Liability Insurance on behalf of Indemnitee against certain customary liabilities which may be asserted against or incurred by Indemnitee. The Company hereby agrees that, so long as Indemnitee shall continue to serve in a capacity referred to in Section 1 hereof, and thereafter so long as Indemnitee shall be subject to any possible claim or threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that Indemnitee served in any capacity referred to in Section 1 hereof, the Company shall purchase and maintain in effect for the benefit of Indemnitee such insurance providing, in all respects, coverage at least comparable to that presently provided; provided, however, if, in the business judgment of the then Board, either (a) the premium cost for such insurance is substantially disproportionate to the amount of coverage, or (b) the coverage provided by such insurance is so limited by exclusions that there is insufficient benefit from such insurance, then and in that event the Company shall not be required to maintain such insurance but shall and hereby agrees to the full extent permitted by law to hold harmless and indemnify Indemnitee to the fullest extent of the coverage which would otherwise have been provided for the benefit of Indemnitee.
10. (a) In the event of any changes after the date of this Agreement in any applicable law, statute, or rule which expands the right of the Company to indemnify a person serving in a capacity referred to in Section 1 hereof, such change shall be within the purview of Indemnitee's rights, and the Company's obligations, under this Agreement. In the event of any changes in any applicable law, statute, or rule which narrow the right of the Company to indemnify a person serving in a capacity referred to in Section 1 hereof, such changes, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties' rights and obligations hereunder.
(b) The indemnification provided by this Agreement shall not be deemed exclusive of any rights to which Indemnitee may be entitled under the Company's Certificate of Incorporation, its Bylaws, any agreement, any vote of stockholders or disinterested directors, laws and regulations in effect now or in the future, or otherwise, both as to action in Indemnitee's official capacity and as to action in another capacity while holding such office.
11. If the indemnification provided in Section 1 is unavailable and may not be paid to Indemnitee because such indemnification is not permitted by law, then in respect of any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall contribute to the full extent permitted by law, to the amount of expenses, judgments, fines (including excise taxes and penalties) and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in such proportion as is appropriate to reflect (i) the relative benefits received by the Company on the one hand and Indemnitee on the other hand from the transaction from which such action, suit or proceeding arose, and (ii) the relative fault of the Company on the one hand and of Indemnitee on the other in connection with the events which resulted in such expenses, judgments, fines or settlement amounts, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of Indemnitee on the other shall be determined by reference to, among other things, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent the circumstances resulting in such expenses, judgments, fines or settlement amounts. The Company agrees that it would not be just and equitable if contribution pursuant to this paragraph were determined by pro rata allocation or any other method of allocation which does not take account of the foregoing equitable considerations.
12. All obligations of the Company contained herein shall continue during the period Indemnitee serves in a capacity referred to in Section 1 hereof of the Company and shall continue thereafter so long as Indemnitee shall be subject to any possible Claim relating to an Indemnifiable Event.
13. (a) Promptly after receipt by Indemnitee of notice of the commencement of any Claim relating to an Indemnifiable Event or proceeding in which Indemnitee is made or is threatened to be made a party or a witness, Indemnitee shall notify the Company of the commencement of such Claim; but the omission so to notify the Company shall not relieve the Company from any obligation it may have to indemnify or advance expenses to Indemnitee otherwise than under this Agreement.
(b) Indemnitee shall not settle any claim or action in any manner which would impose on the Company any penalty, constraint, or obligation to hold harmless or indemnify Indemnitee pursuant to this Agreement without the Company's prior written consent, which consent shall not be reasonably withheld.
14. If any Claim relating to an Indemnifiable Event, commenced against Indemnitee is also commenced against the Company, the Company shall be entitled to participate therein at its own expense, and, except as otherwise provided hereinbelow, to the extent that it may wish, the Company shall be entitled to assume the defense thereof. After notice from the Company to Indemnitee of its election to assume the defense of any Claim, the Company shall not be obligated to Indemnitee under this Agreement for any legal or other expenses subsequently incurred by Indemnitee in connection with the defense thereof other than reasonable costs of investigation, travel and lodging expenses arising out of Indemnitee's participation in such Claim. Indemnitee shall have the right to employ Indemnitee's own counsel in such Claim, but the fees and expenses of such counsel incurred after notice from the Company to Indemnitee of its assumption of the defense thereof shall be at the expense of Indemnitee unless (i) otherwise authorized by the Company, (ii) Indemnitee shall have reasonably concluded, and so notified the Company, that there may be a conflict of interest between the Company and Indemnitee in the conduct of the defense of such Claim, or (iii) the Company shall not in fact have employed counsel to assume the defense of such Claim, in which cases the fees and expenses of Indemnitee's counsel shall be at the expense of the Company. The Company shall not be entitled to assume the defense of any claim brought by or on behalf of the Company or its stockholders or as to which Indemnitee shall have made the conclusion set forth in (ii) of this Section 14.
15. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
16. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.
17. The Company shall not be liable under this Agreement to make any payment in connection with any claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, Bylaw or otherwise) of the amounts otherwise indemnifiable hereunder.
18. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, executors, and personal and legal representatives. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as an officer or director of the Company or of any other enterprise at the Company's request.
19. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the full extent permitted by law.
20. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such state, but excluding any conflicts-of-law rule or principle which might refer such governance, construction or enforcement to the laws of another state or country.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written.
CRANE CO.
By:________________________________
R. S. Evans
Title: Chairman and Chief Executive Officer
INDEMNITEE
| ARTICLE 5 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER 31, 1998 CONSOLIDATED BALANCE SHEET, CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1998 AND NOTES TO THE FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 12 MOS |
| FISCAL YEAR END | DEC 31 1998 |
| PERIOD END | DEC 31 1998 |
| CASH | 9,423 |
| SECURITIES | 0 |
| RECEIVABLES | 68,560 |
| ALLOWANCES | 1,532 |
| INVENTORY | 43,130 |
| CURRENT ASSETS | 137,264 |
| PP&E | 71,054 |
| DEPRECIATION | 33,746 |
| TOTAL ASSETS | 218,462 |
| CURRENT LIABILITIES | 74,385 |
| BONDS | 95,319 |
| COMMON | 10 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| OTHER SE | 41,445 |
| TOTAL LIABILITY AND EQUITY | 218,462 |
| SALES | 707,450 |
| TOTAL REVENUES | 707,450 |
| CGS | 606,993 |
| TOTAL COSTS | 680,479 |
| OTHER EXPENSES | (1,750) |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 6,870 |
| INCOME PRETAX | 21,851 |
| INCOME TAX | 8,255 |
| INCOME CONTINUING | 13,596 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 13,596 |
| EPS BASIC | 0 |
| EPS DILUTED | 0 |