def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY
STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
Filed by the
Registrant x
Filed by a Party other than
Registrant o
Check the appropriate box:
o Preliminary
Proxy Statement
o Confidential,
For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
x Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to
§ 240.14a-12
CRANE
CO.
(Name
of Registrant as Specified in Its Charter)
Not
Applicable
(Name
of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
x No
fee required
o Fee
computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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o Fee
paid previously with preliminary materials:
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Check box if any part of the fee is offset as provided by
Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its
filing.
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Amount previously paid:
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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CRANE CO. 100 FIRST
STAMFORD PLACE STAMFORD, CONNECTICUT 06902
March 9,
2011
DEAR CRANE CO. SHAREHOLDER:
Crane Co. cordially invites you to attend the Annual Meeting of
the Shareholders of Crane Co., at 10:00 a.m. Eastern
Daylight Time on Monday, April 18, 2011 in the First Floor
Conference Room at 200 First Stamford Place, Stamford,
Connecticut.
The Notice of Meeting and Proxy Statement on the following pages
describe the matters to be presented at the meeting. Management
will report on current operations, and there will be an
opportunity for discussion of Crane Co. and its activities. Our
2010 Annual Report accompanies this Proxy Statement.
It is important that your shares be represented at the meeting,
regardless of the size of your holdings. If you are unable to
attend in person, we urge you to participate by voting your
shares by proxy. You may do so by filling out and returning the
enclosed proxy card, or by using the internet address or the
toll-free telephone number on the proxy card.
Sincerely,
R.S. EVANS
Chairman of the Board
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE SHAREHOLDER MEETING TO BE HELD ON APRIL 18, 2011.
THIS PROXY STATEMENT AND THE 2010 ANNUAL REPORT TO
SHAREHOLDERS
ARE AVAILABLE AT
WWW.CRANECO.COM/AR
CRANE
CO.
100 FIRST STAMFORD PLACE
STAMFORD, CONNECTICUT 06902
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
APRIL 18, 2011
March 9,
2011
To the Shareholders of Crane Co.:
THE ANNUAL MEETING OF THE SHAREHOLDERS OF CRANE CO. will be held
in the First Floor Conference Room at 200 First Stamford Place,
Stamford, Connecticut on Monday, April 18, 2011 at
10:00 a.m., Eastern Daylight Time, for the following
purposes:
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To elect three directors to serve for three-year terms until the
Annual Meeting of Shareholders in 2014;
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To consider and vote on a proposal to ratify the selection of
Deloitte & Touche LLP as independent auditors for
Crane Co. for 2011;
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To consider and vote on a proposal to approve the Annual
Incentive Plan;
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To approve, by a non-binding advisory vote, the compensation
paid by the Company to certain executive officers;
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To recommend, by a non-binding advisory vote, the frequency with
which the shareholders of the Company will be asked to approve
the compensation paid by the Company to certain executive
officers; and
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To conduct any other business that properly comes before the
meeting, in connection with the foregoing or otherwise.
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The Board of Directors has fixed the close of business on
February 28, 2011 as the record date for the meeting;
shareholders at that date and time are entitled to notice of and
to vote at the meeting or any postponement or adjournment of the
meeting. A complete list of shareholders as of the record date
will be open to the examination of any shareholder during
regular business hours at the offices of Crane Co., 100 First
Stamford Place, Stamford, Connecticut, for ten days before the
meeting, as well as at the meeting.
In order to assure a quorum, it is important that shareholders
who do not expect to attend the meeting in person fill in, sign,
date and return the enclosed proxy in the accompanying envelope,
or use the internet address or the toll-free telephone number on
the enclosed proxy card.
By Order of the Board of Directors,
AUGUSTUS I. DUPONT
Secretary
IF YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE WRITE
FOR YOUR ADMISSION CARD TO THE CORPORATE SECRETARY, CRANE CO.,
100 FIRST STAMFORD PLACE, STAMFORD, CONNECTICUT 06902.
TABLE OF
CONTENTS
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A-1
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CRANE
CO.
100 FIRST STAMFORD PLACE STAMFORD, CONNECTICUT 06902
PROXY
STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 18, 2011
GENERAL
MEETING MATTERS
The Board of Directors of Crane Co. asks you to complete and
return the enclosed proxy for use at the Annual Meeting of
Shareholders to be held in the First Floor Conference Room at
200 First Stamford Place, Stamford, Connecticut, on Monday,
April 18, 2011, at 10:00 a.m., Eastern Daylight Time,
or at any postponement or adjournment of the meeting.
This Proxy Statement and enclosed form of proxy are first being
sent to shareholders on or about March 9, 2011.
Shares represented by the enclosed proxy, if properly executed,
received by the Secretary prior to the meeting, and not revoked,
will be voted in accordance with the directions indicated on the
proxy. If no directions are indicated on a properly executed and
returned proxy, the shares represented by the proxy will be
voted for each nominee named in this Proxy Statement for
election as a director, for the proposal to ratify the
selection of Deloitte & Touche LLP as our independent
auditors for 2011, for the proposal to approve the Annual
Incentive Plan, for the non-binding advisory vote
regarding executive compensation and in favor of annual
votes by shareholders on executive compensation. If any
other matter is presented at the Annual Meeting upon which a
vote may properly be taken, the shares represented by the proxy
will be voted in accordance with the discretion of the person or
persons named in the proxy.
A shareholder may revoke a proxy at any time before the vote is
taken, either by written notice to the Corporate Secretary, by
submitting a new proxy, or by casting a vote in person at the
meeting.
As an alternative to using the written form of proxy,
shareholders of record may vote by using the toll-free number
listed on the enclosed proxy card, proving their identity by
using the Personal Identification Number shown on the card.
Alternatively, shareholders of record may give voting
instructions at the website www.investorvote.com/cr. Both
procedures allow shareholders to appoint a proxy to vote their
shares and to confirm that their instructions have been properly
recorded. The enclosed proxy card includes specific instructions
to be followed by any shareholder of record wishing to vote by
telephone or on the internet.
Outstanding Shares and Required Votes. As of
the close of business on February 28, 2011, the record date
for determining shareholders entitled to vote at the Annual
Meeting, Crane Co. had issued and outstanding
58,513,759 shares of common stock, par value $1.00 per
share. Each share of Crane Co. common stock is entitled to one
vote at the meeting.
Nominees for the Board of Directors will be elected if more
votes are cast in favor of the nominee than are cast against the
nominee by the holders of shares present in person or
represented by proxy and entitled to vote at the meeting. Each
other matter to be voted upon at the meeting requires the
affirmative vote of a majority of the votes cast by the holders
of shares of common stock present in person or represented by
proxy and entitled to vote at the meeting, except for the
advisory vote on the frequency of future advisory votes on
executive compensation. This is a choice among three
alternatives, and the provisions of our by-laws concerning
shareholder approval are not applicable to this matter. The
alternative which receives the largest number of votes, even if
not a majority, will be considered the preference of our
shareholders.
Shareholders may abstain from voting on any or all proposals
expected to be brought before the meeting. Abstentions will have
no effect on the election of directors, as each nominee will be
elected if the number of votes cast in favor of such nominee
exceeds the number of votes cast against such nominee.
Abstentions will also have no effect on the non-binding advisory
vote on the frequency of future advisory votes on executive
compensation, as whichever alternative receives the largest
number of votes (even if not a majority of votes cast) will be
considered the preference of our shareholders. On all other
matters, abstaining from voting will have the same effect as a
negative vote.
Under the rules of the NYSE, brokers holding shares for
customers have authority to vote on certain matters even if they
have not received instructions from the beneficial owners, but
do not have such authority as to certain
1
other matters (broker non-votes). Member firms of
the NYSE may vote without specific instructions from beneficial
owners on the ratification of the selection of auditors, but not
in the election of directors or the other questions to be
considered at the meeting. Broker non-votes do not count as
votes cast for or against a matter or as shares entitled
to vote, and therefore will not affect the outcome of the
voting at the meeting.
ITEM 1:
ELECTION OF DIRECTORS
The Board of Directors currently consists of eleven members
divided into three classes.
E. Thayer Bigelow, Philip R. Lochner, Jr. and Ronald
F. McKenna have been nominated for election by shareholders to
hold office for three-year terms until the Annual Meeting in
2014 and until their successors are elected and qualified.
Charles J. Queenan, Jr., who has been a director of the
Company since 1986, has chosen not to stand for reelection, with
the size of the Board therefore being reduced to ten members
effective at the Annual Meeting.
The Board believes that a companys directors should
possess and demonstrate, individually and as a group, an
effective and diverse combination of skills and experience to
guide the management and direction of the companys
business and affairs. The Board has charged the Nominating and
Governance Committee with the responsibility for evaluating the
mix of skills and experience of the Companys directors and
potential director nominees, as well as leading the evaluation
process for the Board and its committees. In conducting its
annual review of director skills and Board composition, the
Nominating and Governance Committee determined and reported to
the Board its judgment that the Board as a whole demonstrates a
diversity of organizational experience, professional experience,
education and other background, viewpoint, skills, and other
personal qualities and attributes that enable the Board to
perform its duties in a highly effective manner. The Nominating
and Governance Committee also considers the Boards overall
diversity of experience, education, background, skills and
attributes when identifying and evaluating potential director
nominees.
The Nominating and Governance Committee has proposed, and the
Board of Directors recommends, that each of the three nominees
(all of whom are current members of the Board) be elected to the
Board. If, before the meeting, any nominee becomes unavailable
for election as a director, the persons named in the enclosed
form of proxy will vote for whichever nominee, if any, the Board
of Directors recommends to fill the vacancy, or the Board of
Directors may reduce the number of directors to eliminate the
vacancy.
Shown below for each of the nominees for election and for each
of those directors whose terms will continue are the
individuals age, position with Crane Co. if any, period of
service as a Crane Co. director, business experience and
directorships in other public companies during at least the past
five years, and the areas of experience and qualifications that
led the Nominating and Governance Committee and the Board to the
conclusion that the person should serve as a director of Crane
Co. Holdings of Crane Co. stock as of February 28, 2011,
are also shown, determined in accordance with
Rule 13d-3
under the Securities Exchange Act of 1934, which includes shares
subject to stock options exercisable within 60 days. No
director except Mr. E. C. Fast beneficially owns more than
1% of the outstanding shares of Common Stock. For more
information on shareholdings of directors and officers, please
see Beneficial Ownership of Common Stock by Directors and
Management, page 15.
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Common Shares
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Beneficially
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Owned
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Nominees to be Elected for Terms to Expire in 2014
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E. THAYER BIGELOW
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51,041
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Age 69; Director since 1984. Managing Director, Bigelow
Media, New York, NY (advisor to media and entertainment
companies) since September 2000 and Senior Advisor, Time Warner
Inc., New York, NY (media and entertainment) since October 1998.
Other directorships: Huttig Building Products, Inc. since 1999;
Lord Abbett & Co. Mutual Funds since 1994 (lead
independent director of Lord Abbett Family of 42 mutual funds);
Expo TV, Inc. since 2010; Adelphia Communications, Inc.
from 2003 to 2007; R. H. Donnelly, Inc. from April 2009 to
January 2010. Relevant skills and experience: operational and
financial expertise gained by extensive experience as chief
executive and financial officer of and advisor to media and
entertainment companies.
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2
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Common Shares
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Beneficially
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PHILIP R. LOCHNER, JR.
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15,318
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Age 68; Director since December 2006. Director of public
companies. Senior Vice President and Chief Administrative
Officer, Time Warner, Inc., New York, NY (media and
entertainment) from 1991 to 1998. A Commissioner of the
Securities and Exchange Commission from 1990 to 1991. Other
directorships: Adelphia Communications from 2005
(post-Chapter 11 filing) to 2008; Apria Healthcare from
1998 to 2008; Gtech Holdings from 2001 to 2006; Monster
Worldwide from 2006 to 2008; Solutia Inc. from 2002 to 2008;
Clarcor Inc. since 1999; CMS Energy Corporation since 2005;
Gentiva Health Services since 2009. Relevant skills and
experience: legal and administrative expertise gained as senior
executive of public company (including certain responsibility
for internal audit, shareholder relations, legal, public
affairs, compensation and benefits, governance, real estate and
other administrative matters); expertise in securities and
disclosure matters gained as a Commissioner of the Securities
and Exchange Commission; expertise in management and governance
matters gained as a director of public companies.
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RONALD F. MCKENNA
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23,730
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Age 70; Director since January 2006. Retired December 2005
as Chairman, and December 2004 as President and Chief Executive
Officer, of Hamilton Sundstrand Corporation, a subsidiary of
United Technologies Corporation, Hartford, CT (high technology
products and services for building and aerospace industries).
President and Chief Executive Officer of Hamilton Sundstrand
Corporation from 1999 through December 2004. Other
directorships: Advanced Power Technology, Inc. from 2005 to
2006; Environmental Systems Products Holdings, Inc. from 2006 to
2007. Relevant skills and experience: operational, sales and
manufacturing expertise gained as senior executive officer of
high-technology manufacturing enterprise with particular focus
in aerospace industry.
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Directors Whose Terms Expire in 2013
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KAREN E. DYKSTRA
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22,295
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Age 52; Director since 2004. Former Partner, Plainfield
Asset Management LLC, Stamford, CT (a registered investment
advisor) from January 2007 to December 2010; Chief Operating
Officer and Chief Financial Officer of Plainfield Direct LLC,
Stamford, CT (a direct lending and investment business of
Plainfield Asset Management LLC) from 2006 to 2010. Vice
PresidentFinance and Chief Financial Officer of Automatic
Data Processing, Inc. (ADP), Roseland, NJ (provider
of computerized transaction processing, data communications and
information services) from February 2003 to May 2006. Vice
PresidentFinance of ADP from July 2001 to January 2003.
Corporate Controller of ADP from October 1998 to July 2001.
Other directorships: Gartner, Inc. since 2007; Plainfield Direct
LLC from 2007 to 2010; AOL Inc. since 2009. Relevant skills and
experience: financial expertise gained as controller and chief
financial officer of public company and chief operating officer
and chief financial officer of private investment vehicle.
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RICHARD S. FORTÉ
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26,057
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Age 66; Director since 1983. Retired. Chairman, Forté
Cashmere Company, South Natick, MA (importer and manufacturer)
from January 2002 to April 2004. President, Dawson Forté
Cashmere Company (importer) from 1997 to 2001. Other
directorships: Huttig Building Products, Inc. since 1999.
Relevant skills and experience: operational, sales and
manufacturing expertise gained as chairman and chief executive
officer of importing/manufacturing enterprises.
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3
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Common Shares
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Beneficially
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JAMES L. L. TULLIS
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26,787
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Age 63; Director since 1998. Chief Executive Officer,
Tullis-Dickerson & Co., Inc., Greenwich, CT (venture
capital investments in the health care industry) since 1986.
Other directorships: Viacell, Inc. from 2005 to 2007; Lord
Abbett & Co. Mutual Funds (42 funds) since 2006.
Relevant skills and experience: financial and organizational
expertise gained as chief executive officer of venture capital
investment group; expertise in management, strategy and
governance matters gained as director of public and private
companies.
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Directors Whose Terms Expire in 2012
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DONALD G. COOK
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17,372
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Age 64; Director since August 2005. General, United States
Air Force (Retired). Commander, Air Education and Training
Command, Randolph Air Force Base, San Antonio, TX from
December 2001 to August 2005. Vice Commander, Air Combat
Command, Langley Air Force Base, Hampton, VA from June 2000 to
December 2001. Vice Commander, Air Force Space Command, Peterson
Air Force Base, Colorado Springs, CO from July 1999 to June
2000. Other directorships: Burlington Northern Santa Fe
Corporation from 2005 to February 2010; Hawker Beechcraft Inc.
since 2007; USAA Federal Savings Bank since 2007; Precision
Turbine Aviation, LLC from 2005 to 2006. Relevant skills and
experience: experience with organizational and intellectual
capital matters gained throughout an extensive career with the
United States Air Force.
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R. S. EVANS
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513,143
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Age 66; Director since 1979. Chairman of the Board of Crane
Co. since April 2001. Chairman and Chief Executive Officer of
Crane Co. from 1984 to 2001. Other directorships: HBD
Industries, Inc. since 1989; Huttig Building Products, Inc.
since 1972. Relevant skills and experience: unique familiarity
with the operations, history and culture of the Company gained
as its former Chief Executive Officer and as its Chairman of the
Board of Directors.
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ERIC C. FAST
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1,060,948
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Age 61; Director since 1999. President and Chief Executive
Officer of Crane Co. since April 2001. President and Chief
Operating Officer of Crane Co. from September 1999 to April
2001. Other directorships: Automatic Data Processing Inc. since
2007; Convergys Corporation from 2000 to 2007; Regions Financial
Corp. since May 2010. Relevant skills and experience: financial
and transactional experience over a
15-year
career in investment banking; understanding of business
operations, strategy and intellectual capital gained from
management of the Company as President and Chief Executive
Officer.
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DORSEY R. GARDNER
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58,745
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Age 68; Director from 1982 to 1986 and since 1989.
President, Kelso Management Company, Inc., Boston, MA
(investment management) since 1980. Other directorships: Huttig
Building Products, Inc. from 2006 to 2007; Kelso Management
Company, Inc. from 1980 to 2010; Otologics, LLC since 2005; The
Thomas Group, Inc. since 2007. Relevant skills and experience:
financial and industry expertise gained as senior executive of
investment management enterprises.
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4
CORPORATE
GOVERNANCE MATTERS
The Board of Directors has adopted Corporate Governance
Guidelines which reflect the Boards commitment to monitor
the effectiveness of policy-making and decision-making both at
the Board and management level, with a view to enhancing
long-term shareholder value. The Corporate Governance Guidelines
are available on our website at
www.craneco.com/governance.
Board Leadership Structure. Our Corporate
Governance Guidelines do not require the separation of the roles
of Chairman of the Board and Chief Executive Officer, as the
Board believes that effective board leadership structure can be
highly dependent on the experience, skills and personal
interaction between persons in leadership roles. Since 2001,
these leadership roles have been filled separately by our
current non-executive Chairman of the Board and our current
President and Chief Executive Officer. To assist in defining
this leadership structure, the Board adopted a position
description for the role of the non-executive Chairman of the
Board, which has now been incorporated into our Corporate
Governance Guidelines. The principal duties are as follows:
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provide leadership to the Board and ensure that each director is
making an appropriate contribution;
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guide the Boards discharge of its duties including
monitoring risk management and compliance activities, reviewing
corporate strategy and evaluating senior management performance
and succession planning;
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chair meetings of the Board of Directors and the Annual Meeting
of Shareholders;
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organize and approve the agendas for Board meetings based on
input from directors and the Chief Executive Officer; and
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conduct a performance evaluation of the Board.
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The Board believes this leadership structure has afforded the
Company an effective combination of internal and external
experience, continuity and independence that has served the
Board and the Company well.
Board Role in Oversight of Risk. The Board
recognizes its duty to assure itself that the Company has
effective procedures for assessing and managing risks to the
Companys operations, financial position and reputation,
including compliance with applicable laws and regulations. The
Board has charged the Audit Committee with the responsibility
for monitoring the Companys processes and procedures for
risk assessment, risk management and compliance, including
regular reports on any violations of law or Company policies and
consequent corrective action. The Audit Committee receives
presentations regarding these matters from management at each
in-person meeting (at least quarterly). The Companys
Director of Compliance and Ethics, as well as the Vice
President, Internal Audit, has a direct reporting relationship
to the Audit Committee. The Chair of the Audit Committee reports
any significant matters to the Board as part of her reports on
the Committees meetings and activities. In addition, the
Board schedules an annual presentation by management on the
Companys risk management practices. The Board also
receives reports from management at each meeting regarding
operating results, the Companys asbestos liability,
pending and proposed acquisition and divestiture transactions
(each of which must be approved by the Board before completion),
capital expenditures and other matters.
Conflicts of Interest; Transactions with Related
Persons. Crane Co. has established a Conflict of
Interest Policy, CP-103, to which all directors, officers and
salaried employees are subject. Those subject to the policy are
required to disclose to the General Counsel in writing each
outside relationship, activity and interest that creates a
potential conflict of interest, including prior disclosure of
transactions with third parties. The General Counsel will
determine whether the matter does or does not constitute an
impermissible conflict of interest, or may in his discretion
refer the question to the Nominating and Governance Committee,
which will review the facts and make a recommendation to the
Board. All directors, executive officers and other salaried
employees are required to certify in writing each year whether
they are personally in compliance with CP-103 and whether they
have knowledge of any other persons failure to comply. In
addition, each director and executive officer is required to
complete an annual questionnaire which calls for disclosure of
any transactions above a stated amount in which Crane Co. or a
Crane Co. affiliate is or is to be a participant on the one
hand, and in which the director or officer or any member of his
or her family has a direct or indirect material interest on the
other. The Board of Directors is of the opinion that these
procedures in the aggregate are sufficient to allow for the
review, approval or ratification of any Transactions with
Related Persons that would be required to be disclosed
under applicable SEC rules.
5
Attendance. The Board of Directors met ten
times during 2010. Each director attended over 85% of the Board
and Committee meetings held in the period during which he or she
was a director and Committee member. In addition, it is Crane
Co.s policy that each of our directors attend the Annual
Meeting; all directors were in attendance at the 2010 Annual
Meeting with the exception of Mr. Evans, who was prevented
from attending due to the disruption of air traffic to and from
Europe caused by a volcanic eruption in Iceland.
Executive Sessions of Non-Management
Directors. Seven of the meetings of the Board
during 2010 included executive sessions without management
present, presided over by R. S. Evans, Chairman of the Board.
Cranes Corporate Governance Guidelines require our
non-management directors to meet in executive session without
management on a regularly scheduled basis, but not less than two
times a year. The Chairman of the Board presides at executive
sessions, unless he is a member of management, in which case the
presiding person at executive sessions rotates on an annual
basis among the Chairs of the Nominating and Governance
Committee, the Audit Committee and the Management Organization
and Compensation Committee. If the designated person is not
available to chair an executive session, then the non-management
directors select a person to preside.
Share Ownership Guidelines for Directors. The
Board of Directors has adopted share ownership guidelines which
require each director to hold shares of Crane Co. stock having a
fair market value not less than five times the directors
annual retainer. A director must have attained this ownership
level by the fifth anniversary of his or her first election as a
director. As of the Record Date, all directors who had attained
their fifth anniversary of service were in compliance with this
ownership guideline.
Shareholder Communications with Directors. The
Board has established a process to receive communications from
shareholders and other interested parties. Shareholders and
other interested parties may contact any member (or all members)
of the Board, any Board committee or any Chair of any such
committee by mail or electronically. To communicate with the
Board of Directors, any individual director or any group or
committee of directors, correspondence should be addressed to
the Board of Directors or any individual director or group or
committee of directors by either name or title. All such
correspondence should be sent to Crane Co.,
c/o Corporate
Secretary, 100 First Stamford Place, Stamford, CT 06902. To
communicate with any of our directors electronically,
shareholders should use the following
e-mail
address: adupont@craneco.com.
All communications received as set forth in the preceding
paragraph will be opened by the office of the Corporate
Secretary for the sole purpose of determining whether the
contents represent a message to our directors. Any contents will
be forwarded promptly to the addressee unless they are in the
nature of advertising or promotion of a product or service, or
are patently offensive or irrelevant. To the extent that the
communication involves a request for information, such as an
inquiry about Crane Co. or stock-related matters, the Corporate
Secretarys office may handle the inquiry directly. In the
case of communications to the Board or any group or committee of
directors, the Corporate Secretarys office will make
sufficient copies of the contents to send to each director who
is a member of the group or committee to which the envelope or
e-mail is
addressed.
Independent
Status of Directors
Standards for Director Independence. No
director qualifies as independent unless the Board affirmatively
determines that the director has no material relationship with
Crane Co. The Board has adopted the standards set forth below in
order to assist the Nominating and Governance Committee and the
Board itself in making determinations of director independence.
Any of the following relationships would preclude a director
from qualifying as an independent director:
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The director is or was an employee, or the directors
immediate family member is or was an executive officer, of Crane
Co. other than as an interim Chairman or interim CEO, unless at
least three years have passed since the end of such employment
relationship.
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The director is or was within the past three years an executive
officer or an employee, or the directors immediate family
member is or was within the past three years an executive
officer, of an organization (other than a charitable
organization) that in any of the last three completed fiscal
years made payments to, or received payments from, Crane Co. for
property or services, if the amount of such payments exceeded
the greater of $1 million, or 2% of the other
organizations consolidated gross revenues.
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The director has received, or the directors immediate
family member has received, direct compensation from Crane Co.,
if the director is a member of the Audit Committee or the amount
of such direct
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6
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compensation received during any twelve-month period within the
preceding three years has exceeded $120,000 per year, excluding
(i) director and committee fees and pension and other forms
of deferred compensation for prior services (so long as such
compensation is not contingent in any way on continued service);
(ii) compensation received as interim Chairman or CEO; or
(iii) compensation received by an immediate family member
for service as a non-executive employee of Crane Co.
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The director is a current partner of or employed by, or the
directors immediate family member is a current partner of,
or an employee who participates in audit, assurance or tax
compliance (but not tax planning) at, a firm that is the
internal or external auditor of Crane Co., or the director was,
or the directors immediate family member was, within the
last three years (but is no longer) a partner or employee of
such a firm and personally worked on the Crane Co. audit at that
time.
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The director is or was employed, or the directors
immediate family member is or was employed, as an executive
officer of another organization, and any of Crane Co.s
present executive officers serves or served on that other
organizations compensation committee, unless at least
three years have passed since the end of such service or the
employment relationship.
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The director is a member of a law firm, or a partner or
executive officer of any investment banking firm, that has
provided services to Crane Co., if the director is a member of
the Audit Committee or the fees paid in any of the last three
completed fiscal years or anticipated for the current fiscal
year exceed the greater of $1 million or 2% of such
firms consolidated gross revenues.
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The existence of any relationship of the type referred to above,
but at a level lower than the thresholds referred to, does not,
if entered into in the ordinary course of business, preclude a
director from being independent. The Nominating and Governance
Committee and the Board review all relevant facts and
circumstances before concluding that a relationship is not
material or that a director is independent.
Crane Co.s Standards for Director Independence, along with
its Corporate Governance Guidelines and Code of Ethics, which
applies to Crane Co.s directors and to all officers and
other employees, including our chief executive officer, chief
financial officer and controller, are available on our website
at www.craneco.com/governance. Crane Co. intends to
satisfy any disclosure requirements concerning amendments to, or
waivers from, the Code of Ethics by posting such information at
that website address.
Independence of Directors. The Nominating and
Governance Committee has reviewed whether any of the directors
or nominees for director, other than Mr. Fast and
Mr. Evans, has any relationship that, in the opinion of the
Committee, (i) is material (either directly or as a
partner, shareholder or officer of an organization that has a
relationship with Crane Co.) and, as such, reasonably likely to
interfere with the exercise by such person of independent
judgment in carrying out the responsibilities of a director or
(ii) would otherwise cause such person not to qualify as an
independent director under the rules of the NYSE
and, in the case of members of the Audit Committee, the
additional requirements under Section 10A of the Securities
Exchange Act of 1934 and the associated rules. The Nominating
and Governance Committee determined that all of Crane Co.s
current directors, other than Mr. Fast and Mr. Evans,
are independent in accordance with the foregoing standards, and
the Board of Directors has reviewed and approved the
determinations of the Nominating and Governance Committee.
Mr. Fast is President and Chief Executive Officer of Crane
Co. Mr. Evans serves as non-executive Chairman of the Board
pursuant to an agreement under which he receives cash
compensation of $225,000 per year, maintains an office and
secretarial support at Crane Co.s principal executive
office and is permitted to use the corporate aircraft for
personal travel, for which he reimburses the Company its
incremental operating costs. He was an employee of the Company
until December 31, 2010. See Compensation of
Directors below.
In reaching their determinations regarding the independence of
the other directors, the Committee and the Board applied the
Standards for Director Independence described above, noted among
other things the matters described under the caption Other
Transactions and Relationships on page 41, and
determined that the amount and nature of such transactions were
not likely to affect the independence of those directors
judgment.
Committees
of the Board; Charters
The Board of Directors has established an Audit Committee, a
Nominating and Governance Committee and a Management
Organization and Compensation Committee. Copies of the charters
of all three committees are available on our website at
www.craneco.com/governance. The Board of Directors has
also established an
7
Executive Committee, which meets when a quorum of the full Board
of Directors cannot be readily obtained. The memberships of
these committees during 2010 were as follows:
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Executive Committee:
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Audit Committee:
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E. T. Bigelow
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K. E. Dykstra (Chair)
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R. S. Evans (Chair)
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R. S. Forté
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E. C. Fast
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D. R. Gardner
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C. J. Queenan, Jr.
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P. R. Lochner, Jr.
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Nominating and Governance Committee:
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Management Organization and Compensation Committee:
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E. T. Bigelow
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E. T. Bigelow
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D. R. Gardner (Chair)
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D. G. Cook
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P. R. Lochner, Jr.
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R. F. McKenna (Chair)
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C. J. Queenan, Jr.
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J. L. L. Tullis
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Audit Committee. The Audit Committee is the
Boards principal agent in fulfilling legal and fiduciary
obligations with respect to matters involving Crane Co.s
accounting, auditing, financial reporting, internal control and
legal compliance functions. The Audit Committee has the
authority and responsibility for the appointment, retention,
compensation and oversight of our independent auditors. The
Audit Committee met seven times in 2010, including three
meetings by conference telephone to review quarterly financial
information, with Crane Co.s management, internal auditors
and independent accountants to review matters relating to the
quality of financial reporting and internal accounting controls
and the nature, extent and results of audits. The Audit
Committees report appears on page 13.
Audit CommitteeQualifications. All
members of the Audit Committee meet the independence and
expertise requirements of the New York Stock Exchange, and all
qualify as independent under the provisions of
Securities and Exchange Commission
Rule 10A-3.
In addition, the Board of Directors has determined that
Ms. Dykstra is an audit committee financial
expert as defined in regulations of the Securities and
Exchange Commission.
Nominating and Governance Committee. The
duties of the Nominating and Governance Committee include
developing criteria for selection of and identifying potential
candidates for service as directors, policies regarding tenure
of service and retirement for members of the Board of Directors
and responsibility for and oversight of corporate governance
matters. The Nominating and Governance Committee met three times
in 2010.
Management Organization and Compensation
Committee. The duties of the Management
Organization and Compensation Committee include: coordinating
the annual evaluation of the Chief Executive Officer;
recommending to the Board of Directors all actions regarding
compensation of the Chief Executive Officer; reviewing the
compensation of other officers and business unit presidents;
reviewing director compensation; administering the annual
incentive compensation plans and Stock Incentive Plan; reviewing
and approving any significant changes in or additions to
compensation policies and practices; and reviewing management
development and succession planning policies.
The Management Organization and Compensation Committee met
12 times in 2010. The Management Organization and
Compensation Committees report appears on page 29.
Independence of Committee Members. As noted
above, each of the members of the Audit Committee, the
Nominating and Governance Committee and the Management
Organization and Compensation Committee is independent under
applicable rules of the NYSE and in the case of members of the
Audit Committee, the additional requirements under
Section 10A of the Securities Exchange Act of 1934 and the
associated rules.
Executive Committee. The Board of Directors
has also established an Executive Committee, which meets when a
quorum of the full Board of Directors cannot be readily
obtained. The Executive Committee may exercise any of the powers
of the Board of Directors, except for (i) approving an
amendment of the Certificate of Incorporation or By-Laws,
(ii) adopting an agreement of merger or sale of all or
substantially all of Crane Co.s
8
assets or dissolution of Crane Co., (iii) filling vacancies
on the Board or any committee thereof or (iv) electing or
removing officers. The Executive Committee did not meet during
2010.
Director
Nominating Procedures
Our Corporate Governance Guidelines provide that the Board
should generally have from nine to twelve directors, a
substantial majority of whom must qualify as independent
directors under the listing standards of the NYSE.
Criteria for Board Membership. Criteria for
Board membership take into account skills, expertise, integrity,
diversity and other qualities which are expected to enhance the
Boards ability to manage and direct Crane Co.s
business and affairs. In general, nominees for director should
have an understanding of the workings of large business
organizations such as Crane Co., and senior level executive
experience as well as the ability to make independent,
analytical judgments, the ability to be an effective
communicator and the ability and willingness to devote the time
and effort to be an effective and contributing member of the
Board. A director who serves as our Chief Executive Officer
should not serve on more than two public company boards in
addition to our Board, and other directors should not sit on
more than four public company boards in addition to our Board.
The members of the Audit Committee should not serve on more than
two other audit committees of public companies.
The Nominating and Governance Committee will, from time to time,
seek to identify potential candidates for director to sustain
and enhance the composition of the Board with the appropriate
balance of knowledge, experience, skills, expertise and
diversity. In this process, the Committee will consider
potential candidates proposed by other members of the Board, by
management or by shareholders, and the Committee has the sole
authority to retain a search firm to assist in this process, at
Crane Co.s expense.
Nominations by Shareholders. In considering
candidates submitted by shareholders, the Nominating and
Governance Committee will take into consideration the needs of
the Board and the qualifications of the candidate. To have a
candidate considered by the Committee, a shareholder must submit
the recommendation in writing and must supply the following
information:
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the name and business address of the proposed candidate;
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qualifications to be a director of Crane Co.;
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a description of what would make the proposed candidate a good
addition to the Board;
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a description of any relationships that could affect the
proposed candidates qualifying as an independent director,
including identifying all other public company board and
committee memberships;
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a confirmation of the proposed candidates willingness to
serve as a director if selected by the Nominating and Governance
Committee and nominated by the Board;
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the name of the shareholder submitting the name of the proposed
candidate, together with information as to the number of shares
owned and the length of time of ownership; and
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any information about the proposed candidate that would, under
the SECs proxy rules, be required to be included in our
proxy statement if the person were a nominee, including, without
limitation, the number of shares of Crane Co. stock beneficially
owned by the proposed candidate.
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Any shareholder recommendation for next years Annual
Meeting, together with the information described above, must be
sent to the Corporate Secretary at 100 First Stamford Place,
Stamford, CT 06902 and, in order to allow for timely
consideration, must be received by the Corporate Secretary no
earlier than December 20, 2011, and no later than
January 19, 2012.
Once a person has been identified by the Nominating and
Governance Committee as a potential candidate, the Committee, as
an initial matter, may collect and review publicly available
information regarding the person to assess whether the person
should be considered further. Generally, if the person expresses
a willingness to be considered and to serve on the Board, and
the Committee believes that the person has the potential to be a
good candidate, the Committee would seek to gather information
from or about the candidate, review the persons
accomplishments and qualifications in light of any other
candidates that the Committee might be considering, and, as
appropriate, conduct one or more interviews with the candidate.
In certain instances, Committee members may contact one or more
references provided by the candidate or may contact other
members of the business community
9
or other persons that may have greater first-hand knowledge of
the candidates accomplishments. The Committees
evaluation process does not vary based on whether or not a
candidate is recommended by a shareholder, although, as stated
above, the Board may take into consideration the number of
shares held by the recommending shareholder and the length of
time that such shares have been held.
Majority
Voting for Directors and Resignation Policy
On January 26, 2009, the Board of Directors adopted an
amendment to the By-Laws providing that directors running for
re-election to the Board without opposition must receive a
majority of votes cast. Any director who fails to receive the
required number of votes for re-election is required by Crane
Co. policy to tender his or her written resignation to the
Chairman of the Board for consideration by the Nominating and
Governance Committee. The Committee will consider such tendered
resignation and make a recommendation to the Board concerning
the acceptance or rejection of the resignation. In determining
its recommendation to the Board, the Committee will consider all
factors deemed relevant by the members of the Committee
including, without limitation, the stated reason or reasons why
shareholders voted against such directors re-election, the
qualifications of the director (including, for example, whether
the director serves on the Audit Committee of the Board as an
audit committee financial expert and whether there
are one or more other directors qualified, eligible and
available to serve on the Audit Committee in such capacity), and
whether the directors resignation from the Board would be
in the best interests of the Company and its shareholders.
COMPENSATION
OF DIRECTORS
The standard retainer payable to each non-employee director is
currently $75,000 per year. Pursuant to the 2009 Non-Employee
Director Compensation Plan, non-employee directors receive, in
lieu of cash, Deferred Stock Units (DSUs) (rounded
to the nearest share) with a market value equal to 50% of the
standard annual retainer. The other 50% of the annual retainer
is paid in cash; however, directors may elect to receive the
retainer entirely in DSUs. All directors other than
Mr. Fast, the President and Chief Executive Officer, and
Mr. Evans, the Chairman of the Board, participate in the
plan. Mr. Evans receives a retainer for his service as
non-executive Chairman of the Board that was increased from
$100,000 to $225,000 effective July 26, 2010. The retainer
fee for Mr. Evans is paid pursuant to an agreement under which
the Company also provides him with an office, office assistant
and technical support. The Company also has a time-sharing
agreement with Mr. Evans under which he is permitted
personal use of the corporate aircraft, for which he reimburses
the Company the aggregate incremental cost. See Other
Agreements and Information Use of Company
Aircraft on page 40. The DSUs are issued each year as
of the date of the Annual Meeting, are forfeitable if the
director ceases to remain a director until Crane Co.s next
Annual Meeting, except in the case of death, disability or
change in control, and entitle the director to receive an
equivalent number of shares of Crane Co. stock upon the
directors ceasing to be a member of the Board. In April
2010 each non-employee director received DSUs pursuant to this
plan; three directors who had elected to receive the entire
retainer in DSUs received 2,068 DSUs, and the remaining seven
non-employee directors received 1,034 DSUs. On January 24,
2011, the Board approved an increase in the annual retainer for
non-employee directors to $100,000 effective at the 2011 Annual
Meeting.
In addition, under the 2009 Non-Employee Director Compensation
Plan an option to purchase 2,000 shares of Common Stock is
granted to each non-employee director as of the date of each
Annual Meeting of shareholders. Each such option has an exercise
price equal to the fair market value at the date of grant, has a
term of 10 years and vests 25% after one year, 50% after
two years, 75% after three years and 100% after four years from
the date of grant, or upon the Directors death or
disability or termination of service after a change in control.
On April 19, 2010 each participating director other than
Mr. Queenan received an option to purchase
2,000 shares at an exercise price of $36.26 per share.
Mr. Queenan elected to continue to participate in the Crane
Co. Retirement Plan for Non-Employee Directors (see description
below), and therefore does not receive any stock option grants
under the Non-Employee Director Stock Compensation Plan.
Non-employee directors also receive $2,000 for each Board
meeting attended. Non-employee members of the Executive
Committee receive a supplemental annual retainer of $2,000.
Members of other committees receive $2,000 for each committee
meeting attended, and committee chairs receive a supplemental
annual retainer of $10,000 for the Audit Committee (increased to
$12,500 effective at the Annual Meeting in 2011) and $7,500 for
the Management Organization and Compensation Committee and the
Nominating and Governance Committee.
10
The Crane Co. Retirement Plan for Non-Employee Directors
(terminated as to active directors other than Mr. Queenan
in 2000) provides for a benefit upon retirement at or after
age 65 equal to the participants 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
Crane Co.s general assets, either in the form of a joint
and survivor annuity or, if the director so elects upon reaching
age 55, in the form of a survivor annuity should the
director die while in service. The Retirement Plan for
Non-Employee Directors was terminated as to active directors
when the Non-Employee Director Stock Compensation Plan was
approved by shareholders in April 2000, but Mr. Queenan
elected to continue his participation in the Retirement Plan in
lieu of any option grants under the Stock Compensation Plan,
with a cap on his annual benefit accrual of $35,000. Certain
former Crane Co. directors continue to receive their retirement
benefits under the Retirement Plan.
Director
Compensation in 2010
The following table shows the compensation in 2010 of all
directors except Mr. Fast, the President and Chief
Executive Officer, whose compensation is shown in the Summary
Compensation Table on page 30.
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Fees Earned or
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Stock
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Option
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Paid in Cash
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Awards
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Awards
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Total
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Name
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($) (1)
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($) (2)
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($) (3)
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($)
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E. T. Bigelow
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$
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96,629
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$
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41,730
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$
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29,120
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$
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167,479
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D. G. Cook
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$
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83,500
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$
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41,730
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$
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29,120
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$
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154,350
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K. E. Dykstra
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$
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79,500
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$
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41,730
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$
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29,120
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$
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150,350
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R. S. Evans
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$
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154,452
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$
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154,452
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R. S. Forté
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$
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69,500
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$
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42,553
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$
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29,120
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$
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141,173
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D. R. Gardner
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$
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81,000
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$
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41,730
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$
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29,120
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$
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151,850
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W. E. Lipner(4)
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$
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12,011
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$
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1,190
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$
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13,201
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P. R. Lochner, Jr.
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$
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38,000
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$
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82,592
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$
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29,120
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$
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149,712
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R. F. McKenna
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$
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50,443
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$
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82,592
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$
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29,120
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$
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162,155
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C. J. Queenan, Jr.
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$
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65,504
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$
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41,730
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$
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107,234
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J. L. L. Tullis
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$
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83,500
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$
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41,730
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$
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29,120
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$
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154,350
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(1)
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Directors who are not employees of
Crane Co. receive a standard retainer of $75,000 per year, half
of which is payable in cash and half in DSUs. Beginning in April
2008, directors may elect to receive the full annual retainer in
DSUs. In addition, non-employee directors receive a retainer of
$7,500 per year for service as Chair of a Committee of the Board
($10,000 for service as the Chair of the Audit Committee),
$2,000 per year for service as a member of the Executive
Committee, and $2,000 for each Board and committee meeting
attended. Mr. Evans receives a retainer for his service as
non-executive Chairman of the Board, which was increased
effective July 25, 2010 from $100,000 to $225,000.
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(2)
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Amounts shown in this column
reflect the grant date fair value computed in accordance with
FASB ASC Topic 718, with respect to awards of DSUs made during
the indicated year. Awards of DSUs during 2010, all pursuant to
the 2009 Non-Employee Director Compensation Plan, were as
follows:
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2,068 DSUs on
April 19 in connection with the Annual Meeting, and an aggregate
of 201.47 additional DSUs in connection with the payment of
regular quarterly dividends on Crane Co. stock on March 10,
June 10, September 10 and December 10 to each of
Mr. Lochner and Mr. McKenna;
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1,034 DSUs on
April 19 in connection with the Annual Meeting, and an aggregate
of 134.25 additional DSUs in connection with the payment of
regular quarterly dividends on Crane Co. stock on March 10,
June 10, September 10 and December 10 to
Mr. Forté;
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1,034 DSUs on
April 19 in connection with the Annual Meeting, and an aggregate
of 112.33 additional DSUs in connection with the payment of
regular quarterly dividends on Crane Co. stock on March 10,
June 10, September 10 and December 10 to each of
Ms. Dykstra and Messrs. Bigelow, Cook, Gardner,
Queenan and Tullis; and
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35.3 DSUs on
March 10 in connection with the payment of a regular
quarterly dividend to Mr. Lipner.
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The grant date fair value of each
DSU granted on April 19, 2010 was $36.26. At
December 31, 2010, Messrs. Lochner and McKenna each
held 9,135.24 DSUs, Mr. Forté held 6,000.48 DSUs, and
Ms. Dykstra and Messrs. Bigelow, Cook, Gardner,
Queenan and Tullis each held 5,062.80 DSUs.
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There were no forfeitures of DSUs
by any of the directors during the year. The assumptions on
which this valuation is based are set forth in Note 12 to
the audited financial statements included in Crane Co.s
annual report on
Form 10-K
filed with the Securities and Exchange Commission on
February 28, 2011.
|
|
(3)
|
|
Amounts shown in this column
reflect the grant date fair value computed in accordance with
FASB ASC Topic 718, with respect to awards of options to
purchase shares of Crane Co. stock made during the indicated
year. Awards of stock options during 2010, all pursuant to the
2009 Non-Employee Director Compensation Plan, were as follows:
Ms. Dykstra and Messrs. Bigelow, Cook, Forté,
Gardner, Lochner, McKenna and Tullis, 2,000 options on April 19
in connection with the Annual Meeting. The grant date fair value
of each option was $14.56. Mr. Evans and Mr. Queenan
do not participate in the Non-Employee Director Compensation
Plan. At December 31, 2010, each non-employee director held
options, with various grant dates and strike prices, as follows:
Mr. Bigelow, 20,000; Mr. Cook, 11,500;
Ms. Dykstra, 14,000; Mr. Forté, 10,500;
Mr. Gardner, 20,000; Mr. Lochner, 8,833;
Mr. McKenna, 10,500; and Mr. Tullis, 20,000. There
were no forfeitures of stock options by any of the directors
during the year. The assumptions on which this valuation is
based are set forth in Note 12 to the audited financial
statements included in Crane Co.s annual report on
Form 10-K
filed with the Securities and Exchange Commission on
February 28, 2011.
|
|
(4)
|
|
Mr. Lipner was a member of the
Board of Directors from 1999 to the Annual Meeting in April
2010, and did not stand for reelection at that time.
|
ITEM 2:
RATIFICATION OF THE SELECTION OF AUDITORS
The Board of Directors proposes and recommends that the
shareholders ratify the Audit Committees selection of the
firm of Deloitte & Touche LLP as independent auditors
for Crane Co. for 2011. Deloitte & Touche LLP have
been Crane Co.s independent auditors since 1979. Although
ratification of this selection is not required by law, the Board
of Directors believes that it is desirable as a matter of
corporate governance. If the shareholders do not ratify the
selection of Deloitte & Touche LLP, the Audit
Committee will reconsider the appointment of
Deloitte & Touche LLP as Crane Co.s independent
auditor. We expect that representatives of Deloitte &
Touche LLP will attend the Annual Meeting, where they will have
an opportunity to make a statement if they wish to do so and to
respond to appropriate questions.
Unless otherwise directed by the shareholders, proxies that are
properly executed and returned will be voted for approval
of the ratification of Deloitte & Touche LLP to audit
our consolidated financial statements for 2011.
Principal
Accounting Firm Fees
Set forth below is a summary of the fees paid for the years
ended December 31, 2010 and 2009 to Crane Co.s
principal accounting firm, Deloitte & Touche LLP, the
member firms of Deloitte Touche Tohmatsu, and their respective
affiliates:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
($ in thousands)
|
|
|
Audit fees (a)
|
|
$
|
4,081
|
|
|
$
|
3,663
|
|
Audit-related fees (b)
|
|
|
297
|
|
|
|
231
|
|
Tax fees (c)
|
|
|
563
|
|
|
|
529
|
|
All other fees (d)
|
|
|
22
|
|
|
|
73
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,963
|
|
|
$
|
4,496
|
|
|
|
|
(a)
|
|
Audit services consisted of:
(i) audit of Crane Co.s annual financial statements;
(ii) reviews of Crane Co.s quarterly financial
statements; (iii) Sarbanes-Oxley Act, Section 404
attestation matters; and (iv) statutory and regulatory
audits, comfort letters, consents and other services related to
Securities and Exchange Commission matters.
|
|
(b)
|
|
Audit-related services consisted of
(i) benefit plan audit fees paid by Crane Co.,
(ii) agreed-upon
procedures reports and (iii) financial accounting and
reporting consultations.
|
|
(c)
|
|
Fees for tax compliance services
totaled $406 and $505 in 2010 and 2009, respectively. Tax
compliance services are services rendered based upon facts
already in existence or transactions that have already occurred
to document, compute, and obtain government approval for amounts
to be included in tax filings. Fees for tax planning and advice
services totaled $156 and $24 in 2010 and 2009, respectively.
|
|
(d)
|
|
Fees for all other services billed
consisted of fees for software licenses, and services related to
inventory.
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Ratio of tax planning and advice fees and all other fees to
audit fees, audit-related fees and tax compliance fees
|
|
|
3.7
|
%
|
|
|
2.2
|
%
|
Percentage of non-audit services approved by the Audit Committee
|
|
|
100
|
%
|
|
|
100
|
%
|
12
AUDIT
COMMITTEE REPORT
In accordance with its written charter adopted by the Board of
Directors, the Audit Committee (the Committee)
assists the Board of Directors in fulfilling its responsibility
for oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of Crane Co. All of
the members of the Committee qualify as independent
under the provisions of Section 10A of the Securities
Exchange Act of 1934 and the rules of the Securities and
Exchange Commission thereunder.
The members of the Committee are not professionally engaged in
the practice of auditing or accounting and are not, and do not
represent themselves to be, performing the functions of auditors
or accountants. Members of the Committee rely without
independent verification on the information provided to them and
on the representations made by management and the independent
auditors. Accordingly, the Committees oversight does not
provide an independent basis to determine that management has
maintained appropriate accounting and financial reporting
principles or appropriate internal controls and procedures
designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the
Committees considerations and discussions referred to
below do not assure that the audit of Crane Co.s financial
statements has been carried out in accordance with the standards
of the Public Company Accounting Oversight Board (United
States), that the financial statements are presented in
accordance with generally accepted accounting principles or that
Crane Co.s auditors are in fact independent.
In discharging its oversight responsibility as to the audit
process, the Committee received the written disclosures and the
letter from the independent auditors required by applicable
requirements of the Public Company Accounting Oversight Board
regarding the independent auditors communications with the
Committee concerning independence, and has discussed with the
independent auditors the independent auditors
independence. The Committee discussed with the auditors any
activities that may impact their objectivity and independence,
including fees for non-audit services, and satisfied itself as
to the auditors independence. The Committee received a
report on the quality control procedures of the independent
auditors. The Committee also discussed with management, the
internal auditors and the independent auditors the quality and
adequacy of Crane Co.s internal controls, with particular
focus on compliance with Section 404 of the Sarbanes-Oxley
Act of 2002, as well as the internal audit functions
organization, responsibilities, budget and staffing. The
Committee reviewed with the independent auditors and the
internal auditors their audit plan and audit scope. The
Committee reviewed with management the risk assessment and risk
management procedures of Crane Co., as well as the procedures
and findings of Crane Co.s compliance program, including
quarterly reports to the Department of the Navy under the
Administrative Agreement entered into in July 2007, which was
terminated in accordance with its terms in July 2010.
The Committee discussed with the independent registered public
accountants the matters required to be discussed by Statement on
Auditing Standards No. 114, The Auditors
Communication with Those Charged with Governance and, both
with and without members of management present, discussed and
reviewed the independent auditors examination of the
financial statements. The Committee also discussed the results
of the internal audit examinations.
The Committee reviewed the audited financial statements of Crane
Co. as of and for the year ended December 31, 2010, with
management and the independent auditors. Management is
responsible for the preparation, presentation and integrity of
Crane Co.s financial statements, Crane Co.s internal
controls and financial reporting process and the procedures
designed to assure compliance with accounting standards and
applicable laws and regulations. Crane Co.s independent
auditors are responsible for performing an independent audit of
Crane Co.s financial statements and expressing an opinion
as to their conformity with generally accepted accounting
principles.
Based on the above-mentioned review and discussions with the
independent auditors, the Committee recommended to the Board of
Directors that Crane Co.s audited financial statements be
included in its Annual Report on
Form 10-K
for the year ended December 31, 2010, for filing with the
Securities and Exchange Commission.
The Committee approved a policy regarding services by Crane
Co.s independent auditors, effective January 1, 2003.
Under this policy, the independent auditors are prohibited from
performing certain services in accordance with Section 202
of the Sarbanes-Oxley Act of 2002. With respect to
non-prohibited services to be provided by the independent
auditors, the policy requires that a budget for such services be
prepared by management and approved
13
by the Committee at the beginning of each fiscal year, and any
expenditure outside of the budget or within the approved budget
but in excess of $100,000 must also be approved by the Committee
in advance. Pursuant to this policy, the Committee reviewed and
approved the budget for the audit and other services to be
provided by Deloitte & Touche LLP in 2011. The
Committee also approved the reappointment of
Deloitte & Touche LLP to serve as independent
auditors; the Board of Directors concurred in such appointment,
and directed that this action be presented to shareholders for
ratification.
Submitted by:
The Audit Committee of the
Board of Directors of Crane Co.
K.E. Dykstra, Chair
R.S. Forté
D.R. Gardner
P.R. Lochner, Jr.
14
BENEFICIAL
OWNERSHIP OF COMMON STOCK
BY DIRECTORS AND MANAGEMENT
Crane Co. believes that officers and other key employees, in
order to focus their attention on growth in shareholder value,
should have a significant equity stake in the Company. We
therefore encourage our officers and key employees to increase
their ownership of and to hold Crane Co. stock through the Stock
Incentive Plan and the Savings and Investment Plan, as discussed
in the Compensation Discussion and Analysis on page 17.
Directors also receive 50% of their annual retainer, and may
elect to receive the entire retainer, in the form of Deferred
Stock Units issued under the 2009 Non-Employee Director
Compensation Plan. Beneficial ownership of stock by the
non-executive directors, the executive officers named in the
Summary Compensation Table (other than Mr. MacCarrick,
whose employment terminated in May 2010), all other executive
officers as a group and all directors and executive officers of
Crane Co. as a group as of February 28, 2011 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Title of
|
|
Name of
|
|
|
|
Percent of
|
Class
|
|
Beneficial Owner
|
|
Amount and Nature of Beneficial Ownership(1)
|
|
Class
|
|
|
|
|
Shares
|
|
Shares/Share Units
|
|
|
|
Shares in
|
|
|
|
|
|
|
|
|
Owned
|
|
Under
|
|
Stock Options
|
|
Company
|
|
Total Shares
|
|
|
|
|
|
|
Directly or
|
|
Restricted
|
|
Exercisable
|
|
Savings Plan
|
|
Beneficially
|
|
|
|
|
|
|
Beneficially
|
|
Stock Plans(2)
|
|
Within 60 Days
|
|
(401(k))
|
|
Owned
|
|
|
|
Common
Stock
|
|
E. T. Bigelow
|
|
|
30,979
|
|
|
|
5,062
|
|
|
|
15,000
|
|
|
|
|
|
|
|
51,041
|
|
|
|
|
*
|
|
|
D. G. Cook
|
|
|
3,810
|
|
|
|
5,062
|
|
|
|
8,500
|
|
|
|
|
|
|
|
17,372
|
|
|
|
|
*
|
|
|
K. E. Dykstra
|
|
|
10,233
|
|
|
|
5,062
|
|
|
|
7,000
|
|
|
|
|
|
|
|
22,295
|
|
|
|
|
*
|
|
|
R. S. Evans
|
|
|
500,721
|
|
|
|
|
|
|
|
|
|
|
|
12,422
|
|
|
|
513,143
|
|
|
|
|
*
|
|
|
E. C. Fast
|
|
|
381,023
|
|
|
|
211,905
|
|
|
|
465,000
|
|
|
|
3,020
|
|
|
|
1,060,948
|
|
|
|
1.8
|
%
|
|
|
R. S. Forté
|
|
|
12,557
|
|
|
|
6,000
|
|
|
|
7,500
|
|
|
|
|
|
|
|
26,057
|
|
|
|
|
*
|
|
|
D. R. Gardner
|
|
|
46,683
|
|
|
|
5,062
|
|
|
|
7,000
|
|
|
|
|
|
|
|
58,745
|
|
|
|
|
*
|
|
|
P. R. Lochner
|
|
|
350
|
|
|
|
9,135
|
|
|
|
5,833
|
|
|
|
|
|
|
|
15,318
|
|
|
|
|
*
|
|
|
R. F. McKenna
|
|
|
7,095
|
|
|
|
9,135
|
|
|
|
7,500
|
|
|
|
|
|
|
|
23,730
|
|
|
|
|
*
|
|
|
C. J. Queenan
|
|
|
31,669
|
|
|
|
5,062
|
|
|
|
|
|
|
|
|
|
|
|
36,731
|
|
|
|
|
*
|
|
|
J. L. L. Tullis
|
|
|
6,725
|
|
|
|
5,062
|
|
|
|
15,000
|
|
|
|
|
|
|
|
26,787
|
|
|
|
|
*
|
|
|
R. A. Maue
|
|
|
2,700
|
|
|
|
7,375
|
|
|
|
26,250
|
|
|
|
860
|
|
|
|
37,185
|
|
|
|
|
*
|
|
|
A. L. Krawitt
|
|
|
8,216
|
|
|
|
6,750
|
|
|
|
11,250
|
|
|
|
4,391
|
|
|
|
30,607
|
|
|
|
|
*
|
|
|
A. I. duPont
|
|
|
70,221
|
|
|
|
24,961
|
|
|
|
135,000
|
|
|
|
3,877
|
|
|
|
234,059
|
|
|
|
|
*
|
|
|
M. H. Mitchell
|
|
|
34,673
|
|
|
|
18,750
|
|
|
|
76,250
|
|
|
|
1,768
|
|
|
|
131,441
|
|
|
|
|
*
|
|
|
B. L. Ellis
|
|
|
85,179
|
|
|
|
17,962
|
|
|
|
181,250
|
|
|
|
5,228
|
|
|
|
289,619
|
|
|
|
|
*
|
|
|
Other Executive Officers (7 persons)
|
|
|
60,718
|
|
|
|
57,829
|
|
|
|
371,250
|
|
|
|
34,368
|
|
|
|
524,165
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Directors and Executive Officers as a Group
(23 persons)
|
|
|
1,293,552
|
|
|
|
400,174
|
|
|
|
1,339,583
|
|
|
|
65,934
|
|
|
|
3,099,243
|
(3)
|
|
|
5.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Less than one percent.
|
|
(1)
|
|
As determined in accordance with
Rule 13d-3
under the Securities and Exchange Act of 1934.
|
|
(2)
|
|
Restricted shares are subject to
forfeiture if established service conditions are not met.
|
|
(3)
|
|
Does not include
7,778,416 shares of Common Stock owned by The Crane Fund
(see Principal Shareholders of Crane Co., page 16); nor
510,471 shares of Common Stock owned by the Crane Fund for
Widows and Children; nor an aggregate of 674,715 shares of
Common Stock held in trusts for the pension plans of Crane Co.
and certain subsidiaries, which shares may be voted and disposed
of in the discretion of the trustees unless the sponsor of a
particular plan directs otherwise. Mr. Krawitt, Mr. duPont
and one other executive officer, Ms. E. M. Kopczick, are
trustees of The Crane Fund and the Crane Fund for Widows and
Children. None of the directors or trustees has any beneficial
interest in, and all disclaim beneficial ownership of, the
shares held by the trusts. In addition, as of February 28,
2011, employees and former employees of Crane Co. held
1,765,409 shares of Common Stock in the Crane Co. Savings
and Investment Plan.
|
15
PRINCIPAL
SHAREHOLDERS OF CRANE CO.
The following table sets forth the ownership by each person who
owned of record or was known by Crane Co. to own beneficially
more than 5% of our common stock on February 28, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and
|
|
|
|
|
|
|
Nature of
|
|
|
|
|
Name and Address
|
|
Beneficial
|
|
Percent
|
Title of Class
|
|
of Beneficial Owner
|
|
Ownership
|
|
of Class
|
|
Common Stock
|
|
The Crane Fund (1)
100 First Stamford Place
Stamford, CT 06902
|
|
|
7,778,416
|
|
|
|
13.3
|
%
|
Common Stock
|
|
GAMCO Investors, Inc.
One Corporate Center
Rye, NY 10580-1435
|
|
|
5,093,900
|
(2)
|
|
|
8.7
|
%
|
|
|
|
(1)
|
|
The Crane Fund, a trust established
for the benefit of former employees, is managed by trustees
appointed by the Board of Directors of Crane Co. The incumbent
trustees are A.I. duPont, E. M. Kopczick and A. L. Krawitt, all
of whom are executive officers of Crane Co. Pursuant to the
trust instrument, the shares held by the trust are voted by the
trustees as directed by the Board of Directors, the distribution
of the income of the trust for its intended purposes is subject
to the control of the Board of Directors and the shares may be
sold by the trustees only upon the direction of the Board of
Directors. None of the directors or the trustees has any direct
beneficial interest in, and all disclaim beneficial ownership
of, shares held by The Crane Fund.
|
|
(2)
|
|
As reported in a Form 13F
filed February 3, 2011 by GAMCO Investors, Inc. et al.,
giving information on shareholdings as of December 31,
2010. The amount shown represents the aggregate of holdings of
Crane Co. stock reported by GAMCO Asset Management, Inc.
(3,744,800 shares) and Gabelli Funds, LLC
(1,349,100 shares). According to documents previously filed
with the Securities and Exchange Commission, each of such
entities is an investment adviser registered under the
Investment Advisers Act of 1940, and a wholly-owned subsidiary
of GAMCO Investors, Inc., which is a New York Stock
Exchange-listed asset management and financial services company.
|
16
COMPENSATION
DISCUSSION AND ANALYSIS
The following discussion and analysis explains Crane Co.s
compensation program as it applies to the executive officers
named in the Summary Compensation Table on page 30. It
should be noted that the compensation information presented in
the Summary Compensation Table for a given year includes
(i) salaries that are set at the beginning of the year
based on available competitive data, (ii) economic value
added (EVA) incentive plan compensation that is formula-driven
based on parameters set at the beginning of the year in relation
to anticipated performance for that year and then determined
when financial results are confirmed after the conclusion of
that year, (iii) stock and option awards that are also
generally granted at the beginning of the year but are based
upon performance assessments and competitive data for the
previous year, and (iv) pension accruals and other
compensation that is paid or accrued during the year in
accordance with ongoing benefit plans and policies. The
discussion that follows therefore describes decisions by the
Management Organization and Compensation Committee that reflect
performance assessments, competitive data and general economic
and other circumstances that are inherently variable,
particularly in periods of volatility such as 2009 and 2010. The
principal focus of the discussion is the executive compensation
decisions taken by the Committee in 2010, including salaries and
stock grants set in January 2010 based on performance
assessments and competitive data for 2009, EVA parameters set in
January and February 2010 in relation to expected performance in
2010 and EVA payouts determined in January 2011 in accordance
with the plan based on actual results for 2010. This discussion
and analysis should be read in conjunction with the Summary
Compensation Table, its accompanying footnotes and the
additional tabular and narrative disclosure that follows the
Summary Compensation Table.
Overview
of 2010
During 2010, the Committee approved certain changes to the
Companys executive compensation program
including a new annual incentive plan and performance-based
restricted share units intended to increase the
linkage between pay and performance as well as more clearly
define the Companys performance goals. These changes are
described in the following pages.
The Companys performance in 2010 outpaced our initial
expectations by a wide margin. Despite relatively flat revenue,
earnings per share of $2.59 considerably exceeded our guidance
of $2.15 - $2.35 early in the year and the $2.28 recorded in
2009. Our strategy during the past two years has been to use our
substantial cash balance and liquidity position to fund key
initiatives to accelerate our growth as market demand returns.
Throughout the downturn since 2008, we have significantly
strengthened the Company and built a strong foundation for
future growth with increased market share in key markets and
significant reduction of our cost base. These efforts were
recognized by the stock market, as the Companys total
shareholder return in 2010 was 38%, compared to 15% for the
S&P 500, 36% for the S&P Midcap 400 Capital Goods
Group median shareholder return and 28% for the Russell 3000
Capital Goods Group median shareholder return. Salary increases
for the Companys executive officers in 2010 reflected the
cost conscious outlook, averaging 2.9% after no increases in
2009, except for one significant market adjustment for Max
Mitchell, Group President of Fluid Handling, and mid-year
increases for Richard Maue, Vice President and Controller, and
Andrew Krawitt, Vice President and Treasurer, when they took on
additional responsibilities with the departure of Timothy
MacCarrick, the Companys former Chief Financial Officer.
In practice, salaries for all management employees in the
corporate office, including Eric Fast, our Chief Executive
Officer, and certain operating units were reduced 1.9% due to a
mandatory one-week unpaid furlough during 2010.
Under the Companys Corporate EVA Incentive Compensation
Plan, annual bonuses are based on the excess of net operating
profit after tax compared to an expected cost of capital return
on invested capital. Given the highly uncertain outlook in early
2010, the Committee set the corporate EVA framework for 2010 at
12% of positive EVA with no increase or decrease for any
change from 2009. As in 2009, the Committee excluded average
cash balances in excess of $25 million from the invested
capital base (a provision incorporated into the Corporate EVA
Incentive Compensation Plan approved by shareholders in 2009),
to promote liquidity and assure a balanced and measured
application of the Companys free cash flow. Based on the
Companys investor guidance in early 2010, this framework
was anticipated to yield a corporate EVA bonus pool of
$2.4 million to $3.8 million. Based on actual results
for 2010, the corporate EVA bonus pool was $5.6 million.
The stock-based compensation awards shown in the Summary
Compensation Table were granted by the Committee in January 2010
based upon competitive data compiled by the Committees
independent compensation
17
consultant, Aon Hewitt, which compared actual stock grants to
the Companys executive officers in 2009 to the
50th and 75th percentile grants reported by peer group
companies and others included in Aon Hewitts survey data.
The Aon Hewitt report showed that the Companys 2009 grants
were generally less than half of the 50th percentile grants
and well below the 75th percentile grants. Taking into
account the Companys strong response to the difficult
economic conditions in 2009 and the shortfall in 2009
stock-based compensation due to constraints resulting from a
previous burn rate commitment, in January 2010 the
Committee approved awards consisting of approximately 10% more
stock options than in prior years and an increase of
approximately 45% in the aggregate number of restricted share
units (RSUs) compared to the previous year, with an
option exercise price (and RSU award value) of $31.94 per share,
which was the closing price of our common stock on the date of
grant. For the named executive officers in the Summary
Compensation Table, these awards were as follows: Mr. Fast,
180,000 options and 80,000 RSUs; Mr. Maue, 15,000 options
and 3,500 RSUs; Mr. Krawitt, 15,000 options and 3,000 RSUs;
Mr. duPont, 30,000 options and 6,000 RSUs; Mr. Mitchell,
40,000 options and 15,000 RSUs; Mr. Ellis, 35,000 options
and 10,000 RSUs; and Mr. MacCarrick, 30,000 options and
3,000 RSUs. In February 2010, after further review and
discussion of the Chief Executive Officers performance in
2009 and aggregate incentive compensation for the years 2008 and
2009, the Committee approved additional grants to Mr. Fast
of 30,000 stock options and 40,000 RSUs, with an option exercise
price and RSU award value of $32.65 per share, which was the
closing price of our common stock on the date of grant.
The extended consideration of equity grants in early 2010 led
the Committee to undertake a thorough review of the
Companys incentive compensation program, including both
the annual cash incentives and the long-term stock-based
incentives, with the goals of increasing the linkage between pay
and performance and establishing more clearly defined terms and
provisions to set performance goals for management. With the
assistance of Aon Hewitt and in coordination with a senior
management team that provided analysis and alternative models
for discussion, the Committee met 10 times from March 2010 to
early January 2011 (four meetings in person and six by
conference call), a process that concluded with (i) the
Committees recommendation to the Board to approve and
submit for approval by shareholders the new Annual Incentive
Plan presented under Item Three on page 42 and
(ii) the Committees decision to change from
time-based restricted share units (TRSUs) to
performance-based restricted share units (PRSUs) for
the Chief Executive Officer and other members of the senior
management team (currently 17 persons), as described below.
At the outset of this process, the leadership of the Committee
changed as Mr. Bigelow stepped down from his role as Chair
of the Committee after 12 years, and Mr. McKenna, a
member of the Committee since he joined the Board in 2006, was
appointed Committee Chair. The Committees deliberations
also led to an important clarification of compensation
philosophy as the Committee moved from an aspirational targeting
of incentive compensation at the 75th percentile of competitive
peer company compensation to a more structured approach,
embedded in both the new Annual Incentive Plan and the PRSUs, in
which base award values for targeted performance are calibrated
to the 50th percentile of competitive peer company compensation
with significant upside potential for performance that exceeds
target and lesser (or zero) payouts if performance is below
target. In so doing, the Committee has increased the linkage
between pay and performance, particularly for the senior
management team, with the annual incentive framework adopted for
2011 (subject to shareholder approval of the new Annual
Incentive Plan) and the stock options and PRSUs granted in
January 2011. It is the Committees current intention to
continue granting TRSUs to key executives other than the Chief
Executive Officer and the senior management team, and in cases
of particular need for retention of senior management personnel.
In addition, the Committee determined it was advisable to grant
modest awards of TRSUs (constituting approximately 10% of the
total stock-based compensation for each executive) to the Chief
Executive Officer and the senior management team for transition
purposes as the PRSUs granted in January 2011 will not be
eligible for vesting until January 2014.
Other actions taken by the Committee in 2010 included adopting a
modified form of
change-in-control
agreement for executive officers going forward. The modified
form of
change-in-control
agreement is substantially similar to the agreements that have
been entered into with the Companys executive officers
since 1987 except that severance benefits under the modified
agreement require a second trigger of adverse
employment action by the acquiring company after the change in
control and do not permit the executive to terminate employment
unilaterally on the first anniversary of the change in control,
and the modified agreement does not provide any
gross-up
for the so-called golden parachute excise tax.
During 2010, agreements in the modified form were entered into
with
18
Mr. Ellis and three other group presidents, while
agreements in the previous form remain in place with
Messrs. Fast, Maue, Krawitt, duPont, Mitchell, and certain
other executive officers.
Objectives
of the Executive Compensation Program
Crane Co.s executive compensation program is designed and
operated with the following objectives:
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To attract and retain highly-qualified executives;
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To provide those executives with incentives to continuously
improve operating results and to increase shareholder value
without encouraging unnecessary and excessive risk-taking by our
executives;
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To provide benefit programs that are competitive with those of
relevant peer companies; and
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To ensure continuity in the event of a
change-in-control
transaction.
|
In pursuit of these objectives, our executive compensation
program includes the following elements, each of which is more
thoroughly described in this Compensation Discussion and
Analysis:
Short-Term: Crane Co. endeavors to pay
its executives annual base salary at competitive levels,
generally targeting the 50th percentile of pay scales for
similar positions at companies within our peer group (see the
discussion below captioned Role of Peer Group
Analysis). Certain perquisites that have been judged to be
reasonable and competitive elements of compensation are provided
to senior executives as well.
Short- to Medium-Term: The principal
means of short- to medium-term compensation has been the
corporate and operating group EVA plans, which are described
below. For senior executives who participate in the corporate or
operating group EVA plans, including all the named executive
officers, this amount is contingent on firm-wide or group
financial performance as well as on individual performance. For
2011 and going forward, if approved by shareholders, the annual
cash incentive program will utilize metrics derived from the
annual operating plan and resulting investor guidance, such as
earnings per share, operating profit and cash flow, as well as
key performance indicators such as inventory turns and on-time
delivery. See Item 3: Approval of Annual Incentive
Plan on page 42.
Long-Term: Long-term compensation,
which consists primarily of grants of stock options and RSUs, is
granted in order to focus the attention and efforts of
executives and other key employees on shareholder return; for
retention purposes, these grants typically vest over a period of
years. Since January 2007, stock options vest 25% per year over
four years. We changed the term of stock options from
10 years to six years in 2004. We also make annual grants
of RSUs which vest 25% per year over four years. As noted above
and described in more detail below, for 2011 and going forward
RSUs for the Chief Executive Officer and other senior management
will be performance-based rather than time-based.
For medium and long-term compensation, the Committee calibrates
award values for targeted performance by reference to the
50th
percentile of competitive peer company compensation (see
Role of Peer Group Analysis below), with allowance
for variability, particularly in the number of stock options
awarded, based on Company and individual performance during the
previous year.
Crane Co. provides a 401(k) plan for substantially all its
U.S. employees, and matches 50% (reduced to 25% in 2009 and
2010) of employee contributions up to six percent subject
to Internal Revenue Code limitations; such matching
contributions are paid in shares of Crane Co. stock and are
fully vested when an employee has five years of service. The
named executive officers other than Messrs. Maue and
Krawitt also participate in a defined benefit pension plan, and
certain executive officers previously received additional grants
of restricted stock, and now participate in the Benefit
Equalization Plan, to restore pension benefits limited by
federal tax regulations, as described below under
Retirement Shares and Benefit Equalization
Plan.
Role of
Peer Group Analysis
In late 2005 and 2006, the Compensation Committee developed a
list of companies to serve as a peer group for compensation
purposes. The Committee developed this peer group in
collaboration with management and with the assistance of its
independent compensation consultant, Hewitt Associates. Although
Crane Co. pays the fees and expenses of Hewitt Associates, the
firm is retained by the Compensation Committee. While Hewitt
Associates does not perform any other services for Crane Co., in
October 2010 Hewitt was acquired by AON Corporation, a worldwide
provider of risk management, insurance and reinsurance brokerage
services, and renamed Aon Hewitt.
19
AON provides certain insurance brokerage services to the Company
and received fees of approximately $250,000 from the Company in
2010.
During 2008, the Committee reviewed and updated the composition
of the peer group first established in late 2005 and early 2006.
This review yielded a list with many of the same companies as
the Companys original peer group, and so the Committee
determined to make a limited, incremental change in the peer
group by deleting four companies whose revenues or market
capitalization were greater or smaller than the general range of
companies in the peer group and adding four companies with
better fit under these metrics. The resulting list of 15 peer
companies is as follows: Ametek, Inc., Carlisle Companies Inc.,
Curtiss-Wright Corp., Dover Corp., Esterline Corp., Flowserve
Corporation, Harsco Corporation, IDEX Corporation, Pall
Corporation, Pentair, Inc., Roper Industries, Inc., SPX
Corporation, Teledyne Technologies, Inc., Teleflex Inc., and
Trinity Industries, Inc. The Committee used the same peer group
for 2010, except that Teleflex, Inc. was eliminated from the
peer group due to a significant change in the nature of its
business.
Aon Hewitt provides the Compensation Committee with comparative
compensation data on the peer companies from publicly available
sources. In addition, Aon Hewitt provides the Committee with
comparative compensation data compiled from a broad group of
industrial companies with revenues ranging from
$1.0 billion to $5.0 billion, using regression
analysis to determine market values for companies of comparable
size to the Company. This data includes base salary, cash bonus
compensation and stock-based incentive compensation for the
named executive officers, as well as the 50th and
75th percentiles for each category. Aon Hewitt also
presents comparable salary, bonus and equity compensation data
for Mr. Fast and the other named executive officers. The
Committee uses this comparative data during its review of
salaries, annual cash incentive compensation and aggregate stock
option and RSU grant values for the named executive officers,
with the view that base salary should generally be at
approximately the 50th percentile of the peer group and
base award values of cash incentive compensation and stock-based
compensation should be calibrated by reference to the 50th
percentile of the peer group for targeted performance, with
significant upside potential for performance that exceeds target
and lesser (or zero) payouts if performance is below target. As
noted above, the Committee uses its judgment and discretion to
vary the award values, particularly the number of stock options,
based on Company and individual performance during the previous
year, historical stock price trends and other factors.
Self-Assessment
Process
Each year, the Chief Executive Officer proposes a set of goals
and objectives for himself, which are reviewed and approved by
the Board as part of an annual self-assessment and review
process managed by the Committee. The goals and objectives
include quantitative goals based on the annual operating plan
and related metrics, as well as certain qualitative objectives
relating to business strategy, organization and intellectual
capital development. At the end of each year, Mr. Fast
prepares and delivers to the Committee a self-assessment of his
performance during that year, with reference to the goals and
objectives established at the beginning of the year as well as
challenges and opportunities that arose during the year. This
self-assessment is shared with the other members of the Board of
Directors, and their responses and other observations are
compiled by the Chair of the Committee and discussed with
Mr. Fast, who then responds to the full Board.
The principal conclusion of this assessment process for 2009
(shaping the Committees decisions particularly as to
stock-based compensation in January and February 2010) were
(1) strong leadership during very difficult economic
conditions, including disciplined focus on cost reduction,
preservation of liquidity and investment in customer-facing
activities, (2) continued development of the Companys
intellectual capital and (3) successful execution on the
Companys core business strategies. The Committee took
these conclusions and findings into account, along with other
data and information referred to above, in determining
Mr. Fasts compensation for 2009 and going into 2010.
The principal conclusions of this assessment process for 2010
(shaping the Committees compensation decisions in January
2011) were (1) excellent results with respect to earnings
and stock price performance, particularly given the modest
revenue growth, (2) high marks for executive leadership
regarding development and execution of the strategic plan and
cost reductions to drive margin improvements, (3) continued
strengthening of management teams in operating businesses and
(4) incremental strengthening of the Companys
businesses with the acquisition of Merrimac Industries and Money
Controls. The Committee took these conclusions and findings into
account, along with other data and information referred to
above, in determining Mr. Fasts cash and stock-based
20
incentive compensation for 2010. A similar process is followed
for each of the Companys other named executive officers
except that it is the Chief Executive Officer who reviews the
self-assessment by such executive officer and provides the
conclusions and findings that help guide the compensation
decisions affecting such officer.
Use of
Tally Sheets
The Committee reviews tally sheets for each named executive
officer for several purposes. The Committee has found that the
tally sheets present a comprehensive and detailed data set for
compensation paid and accrued for each executive officer. This
data serves as a useful reference point for the competitive
market data presented by Aon Hewitt, promoting continuity and a
sound footing for compensation decisions. In addition, the
Committee uses the tally sheet to track contractual commitments
under
change-in-control
agreements as the elements of compensation and relevant amounts
change from year to year. In making annual compensation
decisions, the Committee refers to the tally sheets for the
purpose of gauging whether the annual stock grants are
appropriate in light of previous wealth accumulation. However,
as only one of several information sources used by the Committee
(other data points include competitive market data provided by
Aon Hewitt, the size of cash awards under the annual bonus plan,
historical grant practices by the Company, and analysis of the
shares available under the Stock Incentive Plan), the tally
sheets are not determinative with respect to any particular
element of compensation, the amount awarded or the manner in
which the Companys compensation program is implemented.
Design
and Operation of Executive Compensation Program
Base
Salary
Base salaries for executive officers are established at the date
of hire based on competitive market data (see the discussion of
Role of Peer Group Analysis above), current salary
levels within Crane Co. and the bargaining process needed to
attract the particular executive. Mr. Fast has an
employment agreement, executed in January 2001 in connection
with his promotion to Chief Executive Officer, which provides
for an annual salary of not less than $650,000. His salary was
reviewed by the Compensation Committee in January 2010 by
reference to peer group data and other relevant competitive
market data compiled for the Committee by Aon Hewitt. On the
recommendation of the Compensation Committee, the Board of
Directors determined to increase Mr. Fasts annual
salary from $950,000 to $980,000, an increase of 3.2% and the
first increase since 2007. Salaries for other named executive
officers are reviewed in a similar manner but are determined by
the Chief Executive Officer and then reviewed with the
Compensation Committee. Increases in base salary for the named
executive officers other than Mr. Fast averaged 2.9% in
2010, excluding the significant market adjustment for
Mr. Mitchell and the mid-year promotional increases for
Messrs. Maue and Krawitt.
According to the competitive data provided by Aon Hewitt in
January 2010, the annual salary for each named executive officer
in relation to the median 50th percentile of peer group and
survey data, before giving effect to the salary increases noted
above, was as follows: Mr. Fast, 2.6% above; Mr. Maue,
5.4% above; Mr. Krawitt, 3.0% below; Mr. duPont 8.3% below;
Mr. Mitchell, 24.4% below; Mr. Ellis, 16.2% below; and
Mr. MacCarrick, 13.2% below. The Committee approved the
Chief Executive Officers approach of generally modest
increases in annual salary to reduce these gaps while remaining
focused on controlling costs in an uncertain business
environment.
EVA
Executive officers and other senior corporate executives, as
well as members of senior management of individual business
units, participate in non-equity incentive compensation plans
based on EVA, which is generally defined as the amount by which
net operating profit after tax exceeds cost of capital. These
plans are designed to reward executives for sustained,
continuous improvement in operating profit in relation to the
invested capital employed in the business.
Cash payments to eligible participants are based on either or
both of the aggregate EVA for the relevant unit and the growth
of EVA over the prior year, as determined by the Compensation
Committee, as well as a participation percentage for each
individual. The participation percentage of the Chief Executive
Officer is set by the Compensation Committee, while the
percentages of the other participants are recommended by the
Chief Executive Officer and approved by the Committee, subject
to maximum participation percentages set by the Committee.
Messrs. Fast, Maue, Krawitt and duPont participate in the
Crane Co. Corporate EVA Incentive Compensation Plan (the
Corporate EVA Plan), which is based on the results
of the Company as a whole, while Mr. Mitchell participates
in the EVA Plan for the Fluid Handling Group and Mr. Ellis
participates in the EVA Plan for the
21
Merchandising Systems Group. Mr. Ellis also participates in
the Corporate EVA Plan by reason of his responsibilities
overseeing the deployment of the Crane Business System across
the Company.
EVACorporate
EVA Plan.
Calculation of EVA; Establishment of EVA Bonus
Pool. The cost of capital used in the Corporate
EVA Plan is comprised of two components, a cost of equity fixed
in advance by the Compensation Committee and a cost of debt
which is Crane Co.s actual after-tax interest cost. At the
beginning of each year the Compensation Committee determines the
cost of equity component of the cost of capital; in 2010, after
reviewing the cost of equity used for the Corporate EVA Plan
over the past 10 years and a calculation of the cost of
equity based upon several alternative methodologies, the
Committee fixed the cost of equity for the Corporate EVA Plan at
11.10% (the same rate used since 2006). This cost of equity was
then blended on a monthly weighted average basis with the actual
cost of debt to determine the overall cost of capital for the
Corporate EVA Plan, which was 9.1% for 2010.
The bonus pool, which may be positive or negative, is then
determined using a methodology set forth in the plan; generally,
if the prior years EVA was positive, 6% of current year
positive EVA plus 10% of the change from the prior years
EVA; if the prior years EVA was negative, 15% of the
change from the prior years EVA; provided that the
Compensation Committee may determine, in its discretion, to fix
different percentages and combinations of current EVA and change
from the prior year in order to target a corporate EVA bonus
pool appropriate to planned performance. In February 2010, given
the continuing uncertain outlook, the Committee fixed the
Corporate EVA framework at 12% of positive EVA with no increase
or decrease for the change from the prior year. The Committee
also excluded average cash balances in excess of
$25 million from the invested capital base to promote
liquidity and assure a balanced and measured application of the
Companys free cash flow. Under the terms of the Corporate
EVA Plan, provisions relating to Crane Co.s asbestos and
Superfund environmental liabilities, which are regarded as being
legacy liabilities for which current management should not be
held accountable, are excluded from the calculation of EVA. To
the extent permitted by the requirements of Section 162(m)
of the Internal Revenue Code, the Compensation Committee may
also exclude other significant non-budgeted or non-controllable
gains or losses in order to properly measure executive
performance. In February 2010, the Committee reviewed and
approved the cost of equity component of the cost of capital
calculation for 2010, and in January 2011, the Committee
reviewed and approved the final determination of the aggregate
Corporate EVA bonus pool for 2010, which was $5.6 million.
The Corporate EVA bonus pool for 2010 was calculated
substantially as follows (dollars in millions):
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A. Net Operating Profit After Tax
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$
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176.5
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B. Average Capital Employed
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$
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1,429.5
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x Cost of Capital
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x 9.1
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%
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C. Expected Return on Capital
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$
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129.6
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D. Economic Value Added (A-C)
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$
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47.0
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E. Current Year EVA x 12%
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$
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5.6
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F. Corporate Bonus Pool
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$
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5.6
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G. CEO Participation (30%)
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$
|
1.68
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|
All participants in the Corporate EVA Plan (there were 11
participants in 2010) share in this award in accordance
with their respective participation percentages, as described
below.
Participation Percentages; Target Bonuses;
Payouts. At the beginning of each year, the
Compensation Committee establishes a maximum participation
percentage for executive officers; for 2010, the participation
percentages were fixed at 30% for Mr. Fast and a maximum of
15% for any other executive officer named in the Summary
Compensation Table, subject to determination of the final
participation percentage after the end of the year. The
participation percentage for each participant generally falls
within a range established at the beginning of the year, with
the final percentage fixed by the Committee after review of the
EVA bonus pool calculation for the year, the relative
performance assessments for all participants in the particular
bonus pool and the recommendation of the Chief Executive
Officer. The total of the participation percentages of all
participants equals 100 percent. In January 2011, the
Compensation Committee approved the participation percentages of
the participants in the Corporate EVA Plan, including
Messrs. Fast (30%), Maue (9%), Krawitt (9%), duPont (10%),
and Ellis (5%) based on competitive market analysis, prior
participation percentages and the number of and relative
performance of all participants in the Corporate EVA Plan and,
in the case of Mr. Ellis, his participation in the
Merchandising Systems EVA Plan. (Mr. MacCarrick,
22
whose employment ended in May 2010, did not receive an EVA award
or payout in 2011.) This amount appears in the Summary
Compensation Table in the column headed Non-Equity
Incentive Plan Compensation, and in the Grants of
Plan-Based Awards Table in the column headed Estimated
Future Payouts under Non-Equity Incentive Plan
AwardsTarget. An amount equal to 6% interest on the
portion of EVA awards earned but not paid out in previous years
appears in the Summary Compensation Table in the column headed
Change in Pension Value and Nonqualified Deferred
Compensation Earnings. (For years in which the EVA award
is negative, as it was for participants in the Corporate EVA
Plan for 2008, the Summary Compensation Table indicates zero
compensation in this category.)
If the EVA award in a particular year is negative, an executive
may still receive a cash payment from his or her bank account up
to the target bonus, before the negative EVA award is applied to
the bank account, a bookkeeping account established for each
participant in the Plan. If the bank account balance is
negative, the executive receives no incentive compensation
payment the following year unless the EVA award is positive.
Each year, Crane Co. adds interest to a positive balance at six
percent. The EVA bank account is subject to forfeiture in the
event an executive leaves Crane Co. by reason of termination or
resignation, but is paid in full if the executive dies, becomes
disabled or retires at age 65 (or earlier at the discretion
of the Committee) or upon a change in control of Crane Co.
Under the terms of the Corporate EVA Plan, Messrs. Fast,
Maue, Krawitt and duPont each received a cash payout in February
2011 equal to the sum of (i) the executives target
bonus as a percentage of base salary (90% for Mr. Fast and
70% for Messrs. Maue, Krawitt and duPont) and
(ii) one-third of the executives bank account, which
is comprised of the unpaid portion of previous awards plus six
percent annual interest, plus any remaining amount from the
award for 2010 after deducting the target bonus.
If the new Annual Incentive Plan is approved by shareholders,
the earned but unpaid amounts under the EVA plans will be paid
in two annual installments, with interest at the rate of 2% per
year.
EVAOperating
Groups
Senior business unit management, including Mr. Mitchell and
Mr. Ellis, participate in EVA Plans based upon the
performance of their own business units, which are similar in
general structure to the Corporate EVA Plan but have certain
significant differences. It should be noted that because of
these differences, the sum of the EVA bonus pools for all of our
operating units does not equal the Corporate EVA bonus pool.
Calculation of EVA; Establishment of EVA Bonus
Pool. Because the capital structure of our
business units is subject to many factors outside the control of
management of the particular unit, the operating group EVA Plans
use a fixed cost of capital of 9.5%. Aggregate EVA is calculated
for each unit in the same manner as for the Corporate EVA Plan,
but in certain cases the percentage of aggregate EVA
and/or the
percentage of the improvement from prior year are adjusted by
the Chief Executive Officer and reviewed by the Committee to
reflect the particular circumstances, goals and objectives of
the units. In 2010 the aggregate EVA award pool for the Fluid
Handling Group was $2.43 million, and the aggregate EVA
award pool for the Merchandising Systems Group was
$1.13 million.
Participation Percentages and
Payouts. Participation percentages for the
business unit EVA pools are established by the Chief Executive
Officer, subject, in the case of executive officers, to the
approval of the Committee. For 2010, Mr. Mitchells
participation percentage was 13% of Fluid Handling Group EVA,
and Mr. Ellis participation percentage was 20% of
Merchandising Systems Group EVA. The awards for 2010 to
Messrs. Mitchell and Ellis are shown in the Summary
Compensation Table in the column headed Non-Equity
Incentive Plan Compensation, and in the Grants of
Plan-Based Awards Table in the column headed Estimated
Future Payouts under Non-Equity Incentive Plan
AwardsTarget. An amount equal to 6% interest on the
portion of EVA awards earned but not paid out in previous years
is included in the summary Compensation Table in the column
headed Change in Pension Value and Nonqualified Deferred
Compensation Earnings.
Under the terms of the operating group EVA Plans, participating
executives generally receive a cash payment equal to 50% of the
sum of (i) the award for the current year and (ii) the
unpaid bank balance from the prior year plus interest at six
percent, except that in the case of new participants the payment
is 70% of such sum in the first year. The operating group EVA
Plans do not use target bonuses.
23
Activity for each of the named executive officers in the EVA
Plans for 2010 (other than Mr. MacCarrick) was as follows:
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Payout of
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Target Bonus
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|
|
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|
|
|
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Bank-
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Interest
|
|
|
|
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|
(participants in
|
|
|
Additional
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|
|
|
|
|
Bank-
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|
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|
Beginning
|
|
|
at 6% on
|
|
|
2010 EVA
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|
Crane Co. EVA
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|
|
Payout
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|
|
Total
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Ending
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Name
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|
Balance
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|
|
Balance
|
|
|
Award
|
|
|
Plan only)
|
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from EVA Bank (1)
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|
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Payout
|
|
|
Balance
|
|
|
E.C. Fast
|
|
$
|
54,548
|
|
|
$
|
3,273
|
|
|
$
|
1,690,424
|
|
|
$
|
882,000
|
|
|
$
|
288,719
|
|
|
$
|
1,170,719
|
|
|
$
|
577,526
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|
R. A. Maue
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|
$
|
59,536
|
|
|
$
|
3,572
|
|
|
$
|
507,127
|
|
|
$
|
207,917
|
|
|
$
|
120,761
|
|
|
$
|
328,678
|
|
|
$
|
241,557
|
|
A. L. Krawitt
|
|
$
|
99,897
|
|
|
$
|
5,994
|
|
|
$
|
507,127
|
|
|
$
|
178,923
|
|
|
$
|
144,684
|
|
|
$
|
323,607
|
|
|
$
|
289,411
|
|
A. I. duPont
|
|
$
|
130,036
|
|
|
$
|
7,802
|
|
|
$
|
563,475
|
|
|
$
|
232,675
|
|
|
$
|
156,197
|
|
|
$
|
388,872
|
|
|
$
|
312,441
|
|
M. H. Mitchell
|
|
$
|
411,951
|
|
|
$
|
24,717
|
|
|
$
|
315,454
|
|
|
$
|
|
|
|
$
|
376,061
|
|
|
$
|
376,061
|
|
|
$
|
376,061
|
|
B. L. Ellis
|
|
$
|
20,231
|
|
|
$
|
1,214
|
|
|
$
|
507,975
|
|
|
$
|
127,879
|
|
|
$
|
175,123
|
|
|
$
|
303,002
|
|
|
$
|
226,418
|
|
|
|
|
(1)
|
|
For Messrs. Fast, Maue,
Krawitt and duPont, the amount shown is equal to one-third of
the remaining bank balance after payment of the target bonus and
application of the balance of the 2010 award. For
Mr. Mitchell and Mr. Ellis, who do not have a target
bonus under, respectively, the Fluid Handling Group EVA Plan and
the Merchandising Systems Group EVA Plan, the amount shown is
50% and 66%, respectively, of the sum of the 2010 award plus the
beginning bank balance, if any, and 6% interest on the unpaid
bank balance from the previous year.
|
By reference to the competitive data provided by Aon Hewitt in
January 2011 (using available proxy statement data for peer
companies and other survey data, which generally presented bonus
payments paid in 2010 for performance in 2009), the EVA bonus
payouts for each of the named executive officers in relation to
the previously targeted 75th percentile was as follows:
Mr. Fast, 5.4% above; Mr. Maue, 16.2% above;
Mr. Krawitt, 16.3% above; Mr. duPont, 35.9% above;
Mr. Mitchell, 13.1% below; and Mr. Ellis, 21.3% above.
No comparative data was provided for Mr. MacCarrick as he
had left the Company in May 2010. The Committee took note that
given the improving economic environment through 2010, annual
bonuses for 2010 performance at other industrial companies were
likely to be higher than the bonus data for 2009 provided by Aon
Hewitt.
Stock-Based
Compensation
The Stock Incentive Plan is used to provide long-term incentive
compensation through stock options and performance-based
restricted share units, as well as retention of highly regarded
executives through time-based restricted share units. We believe
that executive officers approach their responsibilities more
like owners as their holdings of and potential to own stock
increase. Under the Stock Incentive Plan, stock options must be
granted at no less than fair market value on the date of grant
and vest and become exercisable 25% per year over four years.
Accordingly, executives can realize a gain only if the share
price increases from the date of grant, directly linking this
incentive compensation to increases in shareholder value.
Although broad market dynamics can strongly influence our share
price, the Board of Directors believes that with stock options
executives are motivated to take actions that improve the share
price, such as profitable sales growth through internal growth
as well as acquisitions, improvement in operating margins to
generate increased operating profit and drive higher multiple
valuations and prudent use of free cash flow through capital
expenditures, dividends, acquisitions and stock repurchases.
The Stock Incentive Plan also authorizes the Board of Directors,
acting through the Compensation Committee, to grant restricted
stock (now restricted share units, or RSUs) subject to such
terms and conditions as the Committee may deem appropriate. In
2010, as in previous years, the Committee granted RSUs having
time-based vesting conditions, for purposes of retaining highly
regarded executives. The vesting conditions for the RSUs granted
to the named executive officers in 2010 were 25% per year over
four years.
In determining the size of the stock option and restricted share
unit grants in January 2010, the Compensation Committee
considered the peer group data compiled by Aon Hewitt, as well
as our historical grant practices including the number of
shares, as well as fair market value of the stock and, for stock
options, Black-Scholes values on the dates of grant.
Grants in 2010. In January 2010 (and
including the additional grants made to Mr. Fast in
February 2010), the Committee granted an aggregate of 1,030,000
stock options, of which 210,000 or 20.4% were granted to
Mr. Fast and an aggregate of 165,000 or 16% were granted to
Messrs. Maue, Krawitt, duPont, Mitchell, Ellis and
MacCarrick. In January 2010 (and including the additional grants
made to Mr. Fast in February 2010), the
24
Committee also granted an aggregate of 315,500 restricted share
units, of which 120,000 or 38% were granted to Mr. Fast and
40,500 or 12.8% were granted to Messrs. Maue, Krawitt,
duPont, Mitchell, Ellis and MacCarrick. The grant date fair
value of each such grant of options and RSUs is presented in the
Grants of Plan-Based Awards Table under the caption Grant
Date Fair Value of Stock and Option Awards. For more
information regarding the number of unexercised stock options
and unvested restricted stock and restricted share units held by
each of our named executive officers as of December 31,
2010, please see the 2010 Outstanding Equity Awards at Fiscal
Year-End table on page 34.
The Committee approved higher grant values of stock options and
RSUs in 2010 in order to recognize managements strong
response to the difficult economic conditions in 2009, the
superior share price return of the Companys common stock
in 2009 and the shortfall in 2009 stock-based compensation due
to constraints resulting from the burn rate
commitment for the period
2007-2009.
By reference to the competitive data provided by Aon Hewitt in
January 2010 (using available proxy statement data for peer
companies and Form 4 transaction reports for their
executives as available, which generally presented stock grants
made in 2009), the aggregate grant value of stock options and
restricted stock units for each of the named executive officers
in relation to the previously targeted 75th percentile was as
follows: Mr. Fast, 61% above, including the additional
grants in February 2010; Mr. Maue, 23% above;
Mr. Krawitt, 51% above; Mr. duPont, 18% below;
Mr. Mitchell, 17% above; Mr. Ellis, 32% above; and
Mr. MacCarrick, 61% below. The variability of the
comparative percentages from executive to executive is
principally due to differences in the competitive compensation
data available, and the difficulty in matching the named
executive officers to comparable positions in other companies
with different organizational structures. The Committee uses
such data for reference purposes but it is not determinative
with respect to any particular compensation award by the
Committee.
During the balance of 2010, the Committee granted an additional
30,000 stock options and 16,000 restricted share units
under the Stock Incentive Plan, none of which were granted to
any named executive officer other than 2,000 RSUs granted to
each of Mr. Maue and Mr. Krawitt in May when they took
on additional responsibilities upon the departure of
Mr. MacCarrick.
Grants in 2011. The PRSUs awarded to
members of the senior management team in January 2011 are based
on a relative measurement of total shareholder return (share
price appreciation plus reinvested dividends), or TSR, for Crane
Co. over the three-year period January 1, 2011 through
December 31, 2013 (with the share price on each date being
defined as the average of the closing prices on each of the
preceding twenty trading days) compared to the median TSR for
the S&P Midcap 400 Capital Goods Group (approximately
40 companies, including seven of the companies in our peer
group for compensation purposes). The Committee selected the
larger comparator group for relative TSR purposes based on the
advice of Aon Hewitt that a larger group is appropriate for
continuity in measuring relative TSR over a three-year period.
The PRSUs will vest as shares of Crane Co. common stock in
accordance with the following formula:
|
|
|
|
|
Crane Co. TSR Relative to
|
|
|
|
S&P Midcap 400 Capital
|
|
PRSU
|
|
Goods Group
|
|
Vesting
|
|
|
Less than
35th
percentile
|
|
|
0
|
%
|
35th
percentile
|
|
|
50
|
%
|
50th
percentile
|
|
|
100
|
%
|
70th
percentile or greater
|
|
|
175
|
%
|
For TSR between the
35th and
50th
percentiles and between the
50th and
70th
percentiles, the vesting would be interpolated on a straight
line basis. If Crane Co.s TSR for the three-year period is
negative, the maximum vesting is 100%. In addition, the maximum
value that can be earned under the PRSUs (total shares earned
multiplied by the final share price) cannot exceed 3.5 times the
base award value.
The PRSUs granted in January 2011 to the named executive
officers in the Summary Compensation Table on page 30 are
as follows: Mr. Fast 30,900; Mr. Maue 3,300;
Mr. Krawitt 3,300; Mr. duPont 4,400; Mr. Mitchell
6,500; and Mr. Ellis 4,400. Such grants constitute
approximately 30 percent of the stock-based incentive
compensation awarded to each executive officer. Approximately
60 percent of the stock-based incentive compensation to
such executive officers was granted in the form of stock options
with the customary vesting of 25 percent per year over four
years and a six year term. In addition, the Committee determined
that it was appropriate to grant a limited
25
number of TRSUs for transition purposes as the PRSUs do not
vest, if at all, for three years; such grants constitute
approximately 10 percent of the stock-based incentive
compensation to such executive officers. Grants of TRSUs in
January 2011 to the named executive officers are as follows:
Mr. Fast 9,600; Mr. Maue 1,000; Mr. Krawitt
1,000; Mr. duPont 1,350; Mr. Mitchell 2,000; and
Mr. Ellis 1,350. Going forward, the Committee expects that
stock-based compensation for the senior management group will be
60% (by value) in options and 40% in PRSUs.
Policies with Respect to Timing of Stock-Based Awards and
Exercise Price of Stock Options. Annual
grants of stock options and restricted stock (now RSUs) to
executive officers have been made at the Compensation
Committees January meeting, when all annual executive
compensation decisions are made. The February 2010 grants to
Mr. Fast discussed on page 18 under the caption
Overview of 2010 should be viewed as part of this
annual grant process. The Committee also grants stock options
and RSUs at other dates to newly hired or promoted executives.
The exercise price of stock options under the 2009 Stock
Incentive Plan is equal to the fair market value at the date of
grant, determined on the basis of the closing price on the date
of grant.
Retirement Shares. From 1995 to 2008,
the Committee administered a program using grants of restricted
stock to make up the shortfall in executive officer and key
employee pension benefits imposed by certain federal tax
policies which limit the amount of compensation that can be
considered in determining benefits under tax-qualified pension
plans. Under this program, the Committee granted from time to
time, to certain executive officers, including certain of the
named executive officers, and to certain other key employees who
were impacted by such tax limitations, amounts of restricted
stock calculated by our actuaries to make up that portion of the
retirement benefit at normal retirement (age 65) lost
by reason of the tax limitations. This plan was discontinued in
2008.
Benefit
Equalization Plan
In January 2008, at the recommendation of the Committee, the
Board of Directors adopted the Benefit Equalization Plan in lieu
of the Retirement Shares plan discussed in the preceding
paragraph, under which participating executives will receive a
retirement benefit intended to restore the portion of the
retirement benefit under the Companys pension plan that is
not payable due to certain federal tax policies that limit the
amount of compensation that can be considered in determining
benefits under tax-qualified pension plans. The Benefit
Equalization Plan is designed only to restore retirement
benefits under the Companys regular pension plan that are
limited by the tax code; there is no supplemental benefit based
on deemed service or enhanced compensation formulas. As
discussed above, these shortfall amounts were previously
addressed by periodic, discretionary awards of restricted stock
calculated by the Companys actuaries to make up that
portion of the retirement benefit at normal retirement
(age 65) lost by reason of the tax limitations. The
original grant value of all prior grants of so-called
Retirement Shares is deducted in determining the
benefit payable under the Benefit Equalization Plan. Benefits
accrued under this plan are not funded or set aside in any
manner. In the event of retirement at age 62 with
10 years of service, a participating executive would be
eligible to receive benefits under that plan without the
reduction factor set forth in the Companys tax-qualified
pension plan of three percent per year prior to age 65. The
executives currently participating in this plan are
Messrs. Fast, duPont and Ellis and one other executive
officer.
Stock
Ownership Guidelines
Crane Co. has established stock ownership guidelines for
executive officers and business unit presidents. The ownership
guidelines for executive officers are expressed as a multiple of
base salary:
|
|
|
|
|
Salary Range
|
|
Minimum Ownership Level
|
|
|
$125,001$175,000
|
|
|
2 x Base Salary
|
|
$175,001$300,000
|
|
|
3 x Base Salary
|
|
$300,001$500,000
|
|
|
4 x Base Salary
|
|
Above $500,000
|
|
|
5 x Base Salary
|
|
The policy permits executives to sell up to 50% of the net
shares realized upon an option exercise or vesting of restricted
stock (i.e., the total shares covered by the option exercised or
the restricted share grant vesting less the number of shares
surrendered to satisfy tax withholding obligations), while
retaining at least 50% of such net shares in order to meet the
stock ownership guidelines. Shares which count toward the
satisfaction of the guidelines are (i) shares owned by the
executive, (ii) shares held in the executives 401(k)
account and (iii) restricted stock and RSUs held by the
executive. Once such guidelines are met, the policy permits
executives to sell any shares held
26
above the required ownership guidelines. Executives are expected
to reach the applicable minimum ownership level by the fifth
anniversary of their date of hire or first date in the relevant
executive position.
Clawback
Policy
Under the Companys clawback policy, the
Company may recoup from the Chief Executive Officer, the Chief
Financial Officer, the General Counsel, and other executive
officers (including all the named executive officers) the annual
incentive bonuses and amounts realized from stock option
exercises and vesting of restricted stock and restricted share
units based upon financial statements that are subsequently
restated, as a result of fraud or similar misconduct by such
executives. The Compensation Committee administers this policy
and has the discretion to determine when it is to be applied, to
whom and to which compensation.
Impact of
Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code limits to
$1 million per employee the deductibility of compensation
paid to the named executive officers unless the compensation
meets certain specific requirements. The Corporate and operating
group EVA incentive compensation plans are intended to
constitute performance-based plans meeting the criteria for
continued deductibility set out in the applicable regulations.
In addition, we believe that all stock options granted to date
under our stock incentive plans meet the requirements of
Section 162(m) for deductibility. Time-based RSUs such as
those granted in 2010 do not satisfy the performance-based
criteria of Section 162(m), and accordingly compensation
expense in respect of income recognized by the executive officer
upon lapse of the restrictions is not deductible to the extent
that such income, together with all other compensation in such
year that did not satisfy the criteria of Section 162(m),
exceeded $1 million. In 2010, approximately
$1.7 million of compensation received by Mr. Fast,
principally due to the vesting of restricted stock granted in
previous years, was not deductible under Section 162(m). As
a matter of policy, the Committee intends to develop and
administer compensation programs which will maintain
deductibility under Section 162(m) for all executive
compensation, except in the limited circumstance when the
materiality of the deduction is in the judgment of the Committee
significantly outweighed by the incentive or retention value of
the compensation. The PRSUs to be granted to the Chief Executive
Officer and senior management beginning in 2011 are expected to
be deductible and thus are expected to further this policy goal.
Other
Compensation
The All Other Compensation and Change in
Pension Value and Nonqualified Deferred Compensation
Earnings columns of the Summary Compensation Table and the
accompanying footnote set forth the details of other
compensation received by the named executive officers. In
certain cases, such as the Crane Co. contributions to defined
contribution plans and the increase in actuarial value of the
defined benefit pension, such compensation is determined on the
same basis as that used for all other employees. In other cases,
such as automobile allowances, executive health exams and other
personal benefits, the compensation is provided to certain key
employees but not to all employees and we have determined it to
be reasonable and competitive compensation for the named
executive officers in relation to general industry practices.
In the case of personal use of the corporate aircraft, this
benefit is restricted to the Chief Executive Officer and the
Chairman of the Board (our former chief executive officer). The
Chief Executive Officer, Mr. Fast, has an agreement with
Crane Co. as described under the caption Other Agreements
and Information on page 40 pursuant to which he
reimburses the Company for a portion of the costs of such
personal use based upon U.S. Treasury regulations
establishing the fair market value of such personal use for tax
purposes, and the net incremental cost to Crane Co. above the
reimbursed amount is included in the All Other
Compensation column of the Summary Compensation Table. The
Chairman of the Board, Mr. Evans, has an agreement
providing that he pay the aggregate incremental cost of aircraft
operation. Under applicable Treasury regulations, Crane also
loses a portion of the federal income tax deduction for the
costs of operating or leasing employer-provided aircraft to the
extent the costs attributable for personal use (as determined
pursuant to such regulations) exceed the amount reimbursed. For
2010, the disallowed deduction was approximately
$1.7 million. The Board of Directors has approved this
personal use of the aircraft for Mr. Fast because the Board
believes that such personal use of the aircraft permits the most
efficient use of time by Mr. Fast and thereby benefits
Crane Co.; for Mr. Evans, our former chief executive
officer, the Board of Directors has approved this use in
connection with his continued service as non-executive Chairman
of the Board and in recognition
27
of his long service and substantial contributions to Crane Co.
For more information regarding the use of the Company aircraft,
see the section captioned Use of Company Aircraft on
page 40.
Change in
Control Provisions
Certain executive officers have an agreement which, in the event
of a change in control of Crane Co., provides for continued
employment for a period of three years following the change in
control. Upon termination within such employment period after a
change in control, either by the employer without cause or by
the executive with Good Reason (as defined in the
agreement to include the executives right to terminate
such employment without specifying any reason within the
30-day
period commencing on the first anniversary of the change in
control), the executive is entitled to receive a multiple of
base salary and average annual bonus payments based on the
number of years in the employment period, and certain other
benefits. The EVA plans, stock options and restricted stock and
RSUs contain similar features which accelerate vesting in the
event of a change in control. The change in control agreements
obligate Crane Co. to make additional payments to the employee
such that after payment of all taxes including any excise tax
under section 4999 of the Internal Revenue Code resulting
from such payments and the accelerated vesting of EVA bank
balances, stock options, restricted stock and RSUs, the employee
will retain an amount sufficient to pay the excise tax on all
such payments. As stated above under Overview of
2010, the Committee approved a modified form of agreement
for executive officers going forward which does not include the
discretionary right to terminate or provide for any payments in
respect of excise taxes, and agreements in this modified form
were entered into during 2010 with Mr. Ellis and three
other operating group presidents.
As set forth below under Potential Payments upon
Termination or Change in Control, the aggregate payments
to the named executive officers under the change in control
agreements would range from $2,336,398 for Mr. Ellis to
$8,269,681 for Mr. Fast. The corresponding additional
payments in respect of excise taxes would range from nil for
Messrs. Fast and Ellis to $1,430,385 for Mr. Mitchell.
The Board of Directors has approved these agreements and other
provisions to assure the continuity of management in the event
of a change in control and considers these agreements and
provisions to be competitive with terms offered by other
companies with which we compete for executive talent,
particularly with the adoption in 2010 of the modified form of
agreement for executive officers in 2010 and going forward.
28
MANAGEMENT
ORGANIZATION AND COMPENSATION COMMITTEE REPORT
The Management Organization and Compensation Committee of the
Board of Directors has submitted the following report for
inclusion in this Proxy Statement:
The Committee has reviewed and discussed with management the
foregoing Compensation Discussion and Analysis. Based on our
review and discussions with management, the Committee
recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this Proxy Statement, and
incorporated by reference in Crane Co.s Annual Report on
Form 10-K
for the year ended December 31, 2010.
Submitted by:
The Management Organization and Compensation Committee of the
Board of Directors of Crane Co.
Ronald F. McKenna, Chair
E. Thayer Bigelow
Donald G. Cook
James L. L. Tullis
29
2010
SUMMARY COMPENSATION TABLE
The table below summarizes the compensation for 2008, 2009 and
2010 earned by Crane Co.s Chief Executive Officer; its
Vice PresidentController and its Vice
PresidentTreasurer, who have shared the responsibilities
of the Chief Financial Officer position since May 24, 2010;
each of the three other most highly paid executive officers who
were serving as executive officers at December 31, 2010;
and its former Chief Financial Officer, whose employment began
as of July 28, 2008 and terminated as of May 21, 2010.
These individuals are sometimes referred to in this Proxy
Statement as the named executive officers. Amounts
shown in the columns headed Stock Awards and
Option Awards relate to grants made in January of
the indicated year except that in the case of
Mr. MacCarrick, the 2008 grants were made in July 2008, and
in the cases of Mr. Krawitt and Mr. Maue, additional
grants were made in May 2010 when they were promoted to take on
additional duties. Amounts shown in the column headed
Non-Equity Incentive Plan Compensation relate to EVA
awards made, on the basis of performance during the indicated
year, in January of the year following.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
Compensation
|
|
All Other
|
|
|
Name and
|
|
|
|
Salary
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Total
|
Principal Position
|
|
Year
|
|
($)
|
|
($) (1)
|
|
($) (2)
|
|
($) (3)
|
|
($) (4)
|
|
($) (5)
|
|
($)
|
|
Eric C. Fast
|
|
|
2010
|
|
|
$
|
957,692
|
|
|
$
|
3,861,200
|
|
|
$
|
1,961,700
|
|
|
$
|
1,690,424
|
|
|
$
|
617,106
|
|
|
$
|
351,141
|
|
|
$
|
9,439,263
|
|
President and Chief
|
|
|
2009
|
|
|
$
|
931,731
|
|
|
$
|
985,800
|
|
|
$
|
439,400
|
|
|
$
|
813,000
|
|
|
$
|
682,131
|
|
|
$
|
267,341
|
|
|
$
|
4,119,403
|
|
Executive Officer (6)
|
|
|
2008
|
|
|
$
|
950,000
|
|
|
$
|
3,955,910
|
(7)
|
|
$
|
867,100
|
|
|
$
|
0
|
|
|
$
|
774,316
|
|
|
$
|
375,893
|
|
|
$
|
6,923,219
|
|
Richard A. Maue
|
|
|
2010
|
|
|
$
|
277,283
|
|
|
$
|
173,110
|
|
|
$
|
139,800
|
|
|
$
|
507,127
|
|
|
$
|
3,572
|
|
|
$
|
33,210
|
|
|
$
|
1,134,102
|
|
Vice President, Controller
|
|
|
2009
|
|
|
$
|
250,096
|
|
|
$
|
32,860
|
|
|
$
|
50,700
|
|
|
$
|
216,800
|
|
|
$
|
0
|
|
|
$
|
42,789
|
|
|
$
|
593,245
|
|
and Principal Accounting
|
|
|
2008
|
|
|
$
|
255,000
|
|
|
$
|
36,460
|
|
|
$
|
66,700
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
33,039
|
|
|
$
|
391,199
|
|
Officer (8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew L. Krawitt
|
|
|
2010
|
|
|
$
|
238,089
|
|
|
$
|
157,140
|
|
|
$
|
139,800
|
|
|
$
|
507,127
|
|
|
$
|
5,994
|
|
|
$
|
26,067
|
|
|
$
|
1,074,217
|
|
Vice President, Treasurer
|
|
|
2009
|
|
|
$
|
215,220
|
|
|
$
|
32,860
|
|
|
$
|
50,700
|
|
|
$
|
176,150
|
|
|
$
|
4,100
|
|
|
$
|
41,390
|
|
|
$
|
520,420
|
|
and Principal Financial
|
|
|
2008
|
|
|
$
|
219,440
|
|
|
$
|
72,920
|
|
|
$
|
66,700
|
|
|
$
|
0
|
|
|
$
|
14,200
|
|
|
$
|
36,901
|
|
|
$
|
410,161
|
|
Officer (9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Augustus I. duPont
|
|
|
2010
|
|
|
$
|
324,885
|
|
|
$
|
191,640
|
|
|
$
|
279,600
|
|
|
$
|
563,475
|
|
|
$
|
221,588
|
|
|
$
|
43,623
|
|
|
$
|
1,624,811
|
|
Vice President, General
|
|
|
2009
|
|
|
$
|
316,506
|
|
|
$
|
49,290
|
|
|
$
|
101,400
|
|
|
$
|
243,900
|
|
|
$
|
286,952
|
|
|
$
|
59,266
|
|
|
$
|
1,057,314
|
|
Counsel and Secretary
|
|
|
2008
|
|
|
$
|
322,712
|
|
|
$
|
397,414
|
(7)
|
|
$
|
200,100
|
|
|
$
|
0
|
|
|
$
|
246,470
|
|
|
$
|
57,477
|
|
|
$
|
1,224,173
|
|
Max H. Mitchell
|
|
|
2010
|
|
|
$
|
357,889
|
|
|
$
|
479,100
|
|
|
$
|
372,800
|
|
|
$
|
315,454
|
|
|
$
|
50,641
|
|
|
$
|
34,986
|
|
|
$
|
1,610,870
|
|
President, Fluid
|
|
|
2009
|
|
|
$
|
307,002
|
|
|
$
|
131,440
|
|
|
$
|
101,400
|
|
|
$
|
150,645
|
|
|
$
|
69,545
|
|
|
$
|
46,857
|
|
|
$
|
806,889
|
|
Handling Group
|
|
|
2008
|
|
|
$
|
313,022
|
|
|
$
|
218,760
|
|
|
$
|
200,100
|
|
|
$
|
650,940
|
|
|
$
|
41,111
|
|
|
$
|
45,800
|
|
|
$
|
1,469,733
|
|
Bradley L. Ellis
|
|
|
2010
|
|
|
$
|
282,615
|
|
|
$
|
319,400
|
|
|
$
|
326,200
|
|
|
$
|
507,975
|
|
|
$
|
61,915
|
|
|
$
|
37,551
|
|
|
$
|
1,535,656
|
|
President, Merchandising
|
|
|
2009
|
|
|
$
|
270,644
|
|
|
$
|
131,440
|
|
|
$
|
101,400
|
|
|
$
|
0
|
|
|
$
|
107,995
|
|
|
$
|
49,987
|
|
|
$
|
661,466
|
|
Systems Group
|
|
|
2008
|
|
|
$
|
270,644
|
|
|
$
|
247,928
|
(7)
|
|
$
|
200,100
|
|
|
$
|
249,961
|
|
|
$
|
58,370
|
|
|
$
|
44,812
|
|
|
$
|
1,071,815
|
|
Timothy J. MacCarrick
|
|
|
2010
|
|
|
$
|
166,535
|
|
|
$
|
95,820
|
|
|
$
|
279,600
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
14,907
|
|
|
$
|
556,862
|
|
Vice President,
|
|
|
2009
|
|
|
$
|
372,692
|
|
|
$
|
49,290
|
|
|
$
|
101,400
|
|
|
$
|
230,350
|
|
|
$
|
0
|
|
|
$
|
41,934
|
|
|
$
|
795,666
|
|
Chief Financial Officer (10)
|
|
|
2008
|
|
|
$
|
156,093
|
|
|
$
|
220,920
|
|
|
$
|
180,000
|
|
|
$
|
0
|
(11)
|
|
$
|
0
|
|
|
$
|
344,851
|
|
|
$
|
901,864
|
|
|
|
|
(1)
|
|
Amounts shown in this column
reflect the grant date fair value computed in accordance with
FASB ASC Topic 718, with respect to awards of time-based and
retirement-based restricted shares of Crane Co. stock or RSUs
made during the indicated year. For details of individual grants
of RSUs during 2010 please see the Grants of Plan-Based Awards
table below. Mr. MacCarrick forfeited the unvested portion
of his previous grants of restricted stock and RSUs, including
the entire grant received in 2010, when his employment
terminated on May 21, 2010; there were no other forfeitures
of restricted shares or RSUs by any of the named executive
officers during the fiscal year. The assumptions on which these
valuations are based are set forth in Note 12 to the
audited financial statements included in Crane Co.s annual
report on
Form 10-K
filed with the Securities and Exchange Commission on
February 28, 2011.
|
|
(2)
|
|
Amounts shown in this column
reflect the grant date fair value computed in accordance with
FASB ASC Topic 718, with respect to awards of options to
purchase Crane Co. stock made during the indicated year. For
details of individual grants of stock options during 2010 please
see the Grants of Plan-Based Awards table below.
Mr. MacCarrick forfeited the unvested portion of his
previous grants of stock options, including the entire grant
received in 2010, when his employment terminated on May 21,
2010; there were no other forfeitures of Crane Co. stock options
by any of the named executive officers during the fiscal year.
The assumptions on which these valuations are based are set
forth in Note 12 to the audited financial statements
included in Crane Co.s annual report on
Form 10-K
filed with the Securities and Exchange Commission on
February 28, 2011.
|
30
|
|
|
(3)
|
|
Amounts shown in this column for
all named executive officers in 2009 and 2010, and for
Messrs. Mitchell and Ellis in 2008, are additions to the
EVA account in which the named executive officer participates.
For 2008, Messrs. Fast ($248,100), Maue ($12,405), Krawitt
($49,620), duPont ($78,565) and MacCarrick ($82,700), who
participated in the Corporate EVA Incentive Compensation Plan,
received negative awards, resulting in deductions from their EVA
plan balances for 2008. Mr. Ellis, who participates in the
Merchandising Systems EVA Incentive Compensation Plan, received
a negative award resulting in a deduction of ($148,268) from his
EVA plan balance for 2009. In accordance with Securities and
Exchange Commission rules, these deductions are shown as zeroes
in the Summary Compensation Table. For a full explanation of the
operation of the EVA plans please refer to the narrative
disclosure below under Annual Compensation of the Named
Executive Officers and to the Compensation Discussion and
Analysis at page 21.
|
|
(4)
|
|
The amount shown in this column for
Messrs. Fast, duPont, Mitchell and Ellis includes the
increase in the actuarial present value of the accumulated
benefit under all defined benefit plans (which include the Crane
Co. Pension Plan for Eligible Employees and, in the case of
Messrs. Fast, duPont and Ellis, the Crane Co. Benefit
Equalization Plan) from December 31, 2009 (the pension plan
measurement date used for financial statement reporting purposes
with respect to Cranes audited financial statements for
2009) to December 31, 2010 (the pension plan
measurement date with respect to Cranes audited financial
statements for 2010). For additional information regarding
defined benefit plans, please see the Pension Benefits table
below. Also included is interest earned at a rate of 6% on the
unpaid EVA bank balance from the prior year, as follows:
Mr. Fast, $3,273; Mr. Maue, $3,572; Mr. Krawitt,
$5,994; Mr. duPont, $7,802; Mr. Mitchell, $24,717; and
Mr. Ellis, $1,214. Please see the Compensation Discussion
and Analysis under the caption Design and Operation of
Executive Compensation ProgramEVACorporate EVA
PlanParticipation Percentages; Target Bonuses;
Payouts on page 22.
|
|
(5)
|
|
Amounts in this column for 2010
include the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal Use
|
|
|
|
Company Match
|
|
|
|
|
Dividends Paid
|
|
Personal Use
|
|
of Company-
|
|
Contribution
|
|
of Employee
|
|
|
|
|
on Restricted
|
|
of Company
|
|
Provided
|
|
to Retirement
|
|
401(k)
|
|
Insurance
|
|
|
Stock/RSUs*
|
|
Aircraft**
|
|
Car
|
|
Account
|
|
Contributions
|
|
Premiums
|
|
E. C. Fast
|
|
$
|
240,632
|
|
|
$
|
83,492
|
|
|
$
|
20,418
|
|
|
|
|
|
|
$
|
4,125
|
|
|
$
|
2,474
|
|
R. A. Maue
|
|
$
|
6,795
|
|
|
|
|
|
|
$
|
16,903
|
|
|
$
|
4,900
|
|
|
$
|
3,948
|
|
|
$
|
664
|
|
A. L. Krawitt
|
|
$
|
6,050
|
|
|
|
|
|
|
$
|
10,869
|
|
|
$
|
4,900
|
|
|
$
|
3,675
|
|
|
$
|
573
|
|
A. I. duPont
|
|
$
|
24,220
|
|
|
|
|
|
|
$
|
14,437
|
|
|
|
|
|
|
$
|
4,125
|
|
|
$
|
841
|
|
M. H. Mitchell
|
|
$
|
21,930
|
|
|
|
|
|
|
$
|
8,113
|
|
|
|
|
|
|
$
|
4,125
|
|
|
$
|
818
|
|
B. L. Ellis
|
|
$
|
20,796
|
|
|
|
|
|
|
$
|
13,323
|
|
|
|
|
|
|
$
|
2,726
|
|
|
$
|
706
|
|
T. J. MacCarrick
|
|
$
|
1,950
|
|
|
|
|
|
|
$
|
7,645
|
|
|
$
|
4,900
|
|
|
|
|
|
|
$
|
412
|
|
|
|
|
*
|
|
Dividends are paid on shares of
restricted stock and RSUs at the same rate as on all other
shares of Common Stock.
|
|
**
|
|
The method of computing the cost of
personal use of the Crane Co. aircraft is described under the
caption Use of Company Aircraft on page 40.
|
|
(6)
|
|
Mr. Fast also served as acting
Chief Financial Officer from November 14, 2007 to
July 27, 2008.
|
|
(7)
|
|
Includes retirement shares granted
in January 2008, to participating executives in respect of
retirement benefits accrued for service during 2006 and 2007. No
shares were granted under this program in 2007, and the program
was discontinued in 2008. The amounts attributable to retirement
shares are as follows: Mr. Fast, $708,107; Mr. duPont,
$58,625; and Mr. Ellis, $29,168. In each case, based upon
calculations by Buck Consultants, the Companys pension
actuary, slightly more than one-half of such shares were
attributable to retirement benefits accrued for service during
2007; for Mr. Fast, 15,105 shares were attributable to
2007 service and 13,395 shares were attributable to 2006
service.
|
|
(8)
|
|
Mr. Maue, who has been Vice
President, Controller of the Company since August 2007, assumed
additional responsibilities, including joint responsibility with
Mr. Krawitt for financial matters, as of May 24, 2010.
|
|
(9)
|
|
Mr. Krawitt, who has been Vice
President, Treasurer of the Company since September 2006,
assumed additional responsibilities, including joint
responsibility with Mr. Maue for financial matters, as of
May 24, 2010.
|
|
(10)
|
|
Mr. MacCarrick joined Crane
Co. as Vice President and Chief Financial Officer on
July 28, 2008 and resigned effective May 21, 2010.
|
|
(11)
|
|
Mr. MacCarrick received in
February 2009 a guaranteed EVA payout of $200,000 pursuant to
terms of employment negotiated in connection with his hiring on
July 28, 2008. This amount is included under All
Other Compensation for 2008. See the Compensation
Discussion and Analysis under the caption Design and
Operation of Executive Compensation
ProgramEVACorporate EVA PlanParticipation
Percentages; Target Bonuses; Payouts on page 22.
|
31
2010
Grants of Plan-Based Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future
|
|
|
|
All Other
|
|
|
|
Grant Date
|
|
|
|
|
Payouts Under
|
|
All Other
|
|
Option Awards:
|
|
Exercise or
|
|
Fair Value
|
|
|
|
|
Non-Equity
|
|
Stock Awards:
|
|
Number of
|
|
Base Price
|
|
of Stock
|
|
|
|
|
Incentive Plan
|
|
Number of
|
|
Securities
|
|
of Option
|
|
and Option
|
|
|
|
|
Awards-Target
|
|
Shares of Stock
|
|
Underlying
|
|
Awards
|
|
Awards
|
Name
|
|
Grant Date (1)
|
|
($) (2)
|
|
or Units (#)
|
|
Options (#)
|
|
($/Sh) (3)
|
|
($) (4)
|
|
E. C. Fast
|
|
N/A
|
|
$
|
1,690,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 25, 2010
|
|
|
|
|
|
|
80,000
|
|
|
|
|
|
|
|
|
|
|
$
|
2,555,200
|
|
|
|
January 25, 2010
|
|
|
|
|
|
|
|
|
|
|
180,000
|
|
|
$
|
31.94
|
|
|
$
|
1,677,600
|
|
|
|
February 22, 2010
|
|
|
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
$
|
1,306,000
|
|
|
|
February 22, 2010
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
$
|
32.65
|
|
|
$
|
284,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. A. Maue
|
|
N/A
|
|
$
|
507,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 25, 2010
|
|
|
|
|
|
|
3,500
|
|
|
|
|
|
|
|
|
|
|
$
|
111,790
|
|
|
|
January 25, 2010
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
$
|
31.94
|
|
|
$
|
139,800
|
|
|
|
May 24, 2010
|
|
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
$
|
61,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A. L. Krawitt
|
|
N/A
|
|
$
|
507,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 25, 2010
|
|
|
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
$
|
95,820
|
|
|
|
January 25, 2010
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
$
|
31.94
|
|
|
$
|
139,800
|
|
|
|
May 24, 2010
|
|
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
$
|
61,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A. I. duPont
|
|
N/A
|
|
$
|
563,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 25, 2010
|
|
|
|
|
|
|
6,000
|
|
|
|
|
|
|
|
|
|
|
$
|
191,640
|
|
|
|
January 25, 2010
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
$
|
31.94
|
|
|
$
|
279,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M. H. Mitchell
|
|
N/A
|
|
$
|
315,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 25, 2010
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
$
|
479,100
|
|
|
|
January 25, 2010
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
$
|
31.94
|
|
|
$
|
372,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B. L. Ellis
|
|
N/A
|
|
$
|
281,737
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
$
|
226,238
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 25, 2010
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
$
|
319,400
|
|
|
|
January 25, 2010
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
$
|
31.94
|
|
|
$
|
326,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T. J. MacCarrick
|
|
January 25, 2010
|
|
|
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
$
|
95,820
|
|
|
|
January 25, 2010
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
$
|
31.94
|
|
|
$
|
279,600
|
|
|
|
|
(1)
|
|
All grants were effective as of the
date on which the Compensation Committee voted to approve them.
Awards under the corporate and business unit EVA plans relating
to the 2010 performance of the business and of the individual
were finalized and approved at the January 24, 2011 meeting
of the Compensation Committee.
|
|
(2)
|
|
The amounts shown are additions to
the EVA account in which the named executive officer
participates, as described in Note 3 to the Summary
Compensation Table and in the Compensation Discussion and
Analysis which begins on page 17. Both the amount of the
EVA pool and the participants percentage of the pool are
approved by the Compensation Committee, based on the performance
of both the business and the individual, in January of the year
following the year to which the award relates. Because there are
no maximum or threshold amounts under
the EVA Plans, the corresponding columns are omitted from the
table.
|
|
(3)
|
|
The exercise price of options
awarded under the plan in effect at the time of the 2010 annual
grants, the 2009 Stock Incentive Plan, is the fair market value
of Crane Co. stock on the date of grant, determined in
accordance with the terms of that Plan by taking the closing
market price on the date of grant.
|
|
(4)
|
|
The grant date fair value of each
RSU, calculated in accordance with FASB ASC Topic 718 by taking
the closing trading price on the date of grant, is $31.94 for
the January 25, 2010 grants, $32.65 for the
February 22, 2010 grants and $30.66 for the May 24,
2010 grants. The grant date fair value of each stock option,
calculated in accordance with FASB ASC Topic 718 using the
Black-Scholes option pricing model, is $9.32 for the
January 25, 2010 grants and $9.47 for the February 22,
2010 grants.
|
|
(5)
|
|
This amount was added to
Mr. Elliss Corporate EVA account.
|
|
(6)
|
|
This amount was added to
Mr. Elliss Merchandising Systems EVA account.
|
32
Annual
Compensation of the Named Executive Officers
Base SalaryThe base annual salary of the Chief
Executive Officer is determined by the terms of his employment
agreement, subject to annual increases as recommended by the
Management Organization and Compensation Committee and approved
by the Board of Directors. The base annual salary of each of the
named executive officers other than the Chief Executive Officer
is determined by the Chief Executive Officer and reviewed by the
Committee. Based on the base salaries of the named executive
officers, as well as the fair value of equity awards and
non-equity incentive plan awards granted to them in 2010, base
salary accounted for approximately 17% of the total compensation
of the named executive officers.
EVAMessrs. Fast, Maue, Krawitt, duPont, Ellis
and MacCarrick each received awards under the Crane Co.
Corporate EVA Incentive Compensation Plan, calculated with
reference to Crane Co.s financial results for 2010.
Mr. Mitchell received an award under the Fluid Handling
Group EVA Plan, and Mr. Ellis received an award under the
Merchandising Systems Group EVA Plan, in each case including
both cash compensation and grants of potential future benefits.
Grants relating to 2010 performance were not fixed until the
first meeting of the Compensation Committee and the Board of
Directors in 2011. The operation of the EVA plans is described
in detail beginning on page 21 in the Compensation
Discussion and Analysis.
Stock Options and RSUsIn 2010, consistent with
previous practice, Crane Co. made annual grants of stock options
and RSUs to executives and other key employees, including
Messrs. Fast, Maue, Krawitt, Mitchell, duPont, Ellis and
MacCarrick, at the January 25 meeting of the Compensation
Committee. Additional grants of RSUs were made to Mr. Maue
and Mr. Krawitt on May 24 in connection with
promotions.
Options expire, unless exercised, six years after grant. Options
become exercisable 25% per year over four years. The exercise
price of the options granted on January 25, 2010 was
$31.94, and the exercise price of the options granted on
February 22, 2010 was $32.65, which was in each case the
fair market value of Crane Co. stock on the date of grant,
calculated in accordance with the terms of the 2009 Stock
Incentive Plan by taking the closing price on the grant date.
The exercise price may be paid by delivery of shares already
owned, and income tax obligations related to the exercise may be
satisfied by surrender of shares received upon exercise, subject
to certain conditions.
The RSUs vest as to one-fourth of the award on the first,
second, third and fourth anniversaries of the date of grant, or
upon the participants earlier death, permanent disability,
normal retirement at age 65, or early retirement at
age 62 or older with at least ten years of service, or upon
a change in control of Crane Co.
Retirement SharesCertain provisions of the Internal
Revenue Code limit the amount of compensation that can be
considered in determining benefits under a tax-qualified defined
benefit plan. From 1995 to 2008, the Committee administered a
retirement plan for selected executive officers and other key
employees using grants of restricted stock to make up the
shortfall in pension benefits imposed by this tax limitation.
Such grants vest on the earlier of the executives normal
retirement date at age 65 or the tenth anniversary of the
date of grant, except in the case of Mr. Fast, whose shares
would also vest in the event of his early retirement on or after
the tenth anniversary of his date of hire, i.e.
September 27, 2009. Grants were made under this program in
2008 to Messrs. Fast, duPont and Ellis.
Other CompensationThe amounts appearing in the
Summary Compensation Table under the caption All Other
Compensation are disaggregated in footnote 5 to the table.
33
2010
Outstanding Equity Awards at Fiscal Year-End
The following table shows for each named executive officer the
number of unexercised options and the number of shares of
restricted stock or RSUs that had not vested as of
December 31, 2010. No such awards have been transferred by
any of the named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Value of
|
|
|
Number of
|
|
Number of
|
|
Option
|
|
|
|
Number of Shares or
|
|
Shares or Units of
|
|
|
Securities Underlying
|
|
Securities Underlying
|
|
Exercise
|
|
Option
|
|
Units of Stock That
|
|
Stock That
|
|
|
Unexercised Options
|
|
Unexercised Options
|
|
Price
|
|
Expiration
|
|
Have Not Vested
|
|
Have Not Vested
|
Name
|
|
(#) Exercisable
|
|
(#) Unexercisable (1)
|
|
($)
|
|
Date
|
|
(#) (2)
|
|
($) (3)
|
|
E. C. Fast
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
279,805
|
|
|
$
|
11,491,591
|
|
|
|
|
250,000
|
|
|
|
0
|
|
|
$
|
23.23
|
|
|
|
1/28/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
0
|
|
|
$
|
36.58
|
|
|
|
1/23/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
|
25,000
|
(4)
|
|
$
|
36.64
|
|
|
|
1/29/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
65,000
|
|
|
|
65,000
|
(5)
|
|
$
|
36.46
|
|
|
|
1/28/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
32,500
|
|
|
|
97,500
|
(6)
|
|
$
|
16.43
|
|
|
|
1/26/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
180,000
|
(7)
|
|
$
|
31.94
|
|
|
|
1/25/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
30,000
|
(8)
|
|
$
|
32.65
|
|
|
|
2/22/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. A. Maue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
$
|
328,560
|
|
|
|
|
7,500
|
|
|
|
2,500
|
|
|
$
|
46.48
|
|
|
|
9/24/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
5,000
|
(5)
|
|
$
|
36.46
|
|
|
|
1/28/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
|
|
|
11,250
|
(6)
|
|
$
|
16.43
|
|
|
|
1/26/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
15,000
|
(7)
|
|
$
|
31.94
|
|
|
|
1/25/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A. L. Krawitt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
$
|
308,025
|
|
|
|
|
10,000
|
|
|
|
0
|
|
|
$
|
40.75
|
|
|
|
9/25/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
|
|
|
1,250
|
(4)
|
|
$
|
36.64
|
|
|
|
1/29/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
5,000
|
(5)
|
|
$
|
36.46
|
|
|
|
1/28/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
|
|
|
11,250
|
(6)
|
|
$
|
16.43
|
|
|
|
1/26/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
15,000
|
(7)
|
|
$
|
31.94
|
|
|
|
1/25/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A. I. duPont
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,861
|
|
|
$
|
1,144,251
|
|
|
|
|
40,000
|
|
|
|
0
|
|
|
$
|
23.23
|
|
|
|
1/28/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
0
|
|
|
$
|
19.11
|
|
|
|
1/27/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
0
|
|
|
$
|
36.58
|
|
|
|
1/23/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
18,750
|
|
|
|
6,250
|
(4)
|
|
$
|
36.64
|
|
|
|
1/29/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
15,000
|
(5)
|
|
$
|
36.46
|
|
|
|
1/28/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
22,500
|
(6)
|
|
$
|
16.43
|
|
|
|
1/26/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
30,000
|
(7)
|
|
$
|
31.94
|
|
|
|
1/25/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M. H. Mitchell
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,500
|
|
|
$
|
1,047,285
|
|
|
|
|
6,250
|
|
|
|
0
|
|
|
$
|
36.58
|
|
|
|
1/23/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
7,500
|
(4)
|
|
$
|
36.64
|
|
|
|
1/29/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
15,000
|
(5)
|
|
$
|
36.46
|
|
|
|
1/28/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
22,500
|
(6)
|
|
$
|
16.43
|
|
|
|
1/26/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
40,000
|
(7)
|
|
$
|
31.94
|
|
|
|
1/25/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Value of
|
|
|
Number of
|
|
Number of
|
|
Option
|
|
|
|
Number of Shares or
|
|
Shares or Units of
|
|
|
Securities Underlying
|
|
Securities Underlying
|
|
Exercise
|
|
Option
|
|
Units of Stock That
|
|
Stock That
|
|
|
Unexercised Options
|
|
Unexercised Options
|
|
Price
|
|
Expiration
|
|
Have Not Vested
|
|
Have Not Vested
|
Name
|
|
(#) Exercisable
|
|
(#) Unexercisable (1)
|
|
($)
|
|
Date
|
|
(#) (2)
|
|
($) (3)
|
|
B. L. Ellis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,112
|
|
|
$
|
990,280
|
|
|
|
|
40,000
|
|
|
|
0
|
|
|
$
|
23.23
|
|
|
|
1/28/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
0
|
|
|
$
|
19.11
|
|
|
|
1/27/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
0
|
|
|
$
|
36.58
|
|
|
|
1/23/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
22,500
|
|
|
|
7,500
|
(4)
|
|
$
|
36.64
|
|
|
|
1/29/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
15,000
|
(5)
|
|
$
|
36.46
|
|
|
|
1/28/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
22,500
|
(6)
|
|
$
|
16.43
|
|
|
|
1/26/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
35,000
|
(7)
|
|
$
|
31.94
|
|
|
|
1/25/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T. J. MacCarrick
|
|
|
none
|
|
|
|
none
|
|
|
|
|
|
|
|
|
|
|
|
none
|
|
|
|
|
|
|
|
|
(1)
|
|
Options will vest on the dates
indicated in the corresponding footnote; options also vest upon
normal retirement at or after age 65, or upon termination
after a change in control.
|
|
(2)
|
|
Shares of restricted stock and RSUs
shown in this column include both time-based and
retirement-based restricted shares. Time-based restricted shares
and RSUs will vest according to the following schedule:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting Date
|
|
Fast
|
|
Maue
|
|
Krawitt
|
|
duPont
|
|
Mitchell
|
|
Ellis
|
|
January 25, 2011
|
|
|
20,000
|
|
|
|
875
|
|
|
|
750
|
|
|
|
1,500
|
|
|
|
3,750
|
|
|
|
2,500
|
|
January 26, 2011
|
|
|
15,000
|
|
|
|
500
|
|
|
|
500
|
|
|
|
750
|
|
|
|
2,000
|
|
|
|
2,000
|
|
January 28, 2011*
|
|
|
20,000
|
|
|
|
250
|
|
|
|
500
|
|
|
|
1,000
|
|
|
|
1,500
|
|
|
|
1,500
|
|
January 29, 2011*
|
|
|
12,500
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
1,500
|
|
|
|
1,500
|
|
February 22, 2011
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 24, 2011
|
|
|
|
|
|
|
500
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 24, 2011*
|
|
|
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 25, 2012
|
|
|
20,000
|
|
|
|
875
|
|
|
|
750
|
|
|
|
1,500
|
|
|
|
3,750
|
|
|
|
2,500
|
|
January 26, 2012
|
|
|
15,000
|
|
|
|
500
|
|
|
|
500
|
|
|
|
750
|
|
|
|
2,000
|
|
|
|
2,000
|
|
January 28, 2012*
|
|
|
20,000
|
|
|
|
250
|
|
|
|
500
|
|
|
|
1,000
|
|
|
|
1,500
|
|
|
|
1,500
|
|
February 22, 2012
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 24, 2012
|
|
|
|
|
|
|
500
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 25, 2013
|
|
|
20,000
|
|
|
|
875
|
|
|
|
750
|
|
|
|
1,500
|
|
|
|
3,750
|
|
|
|
2,500
|
|
January 26, 2013
|
|
|
15,000
|
|
|
|
500
|
|
|
|
500
|
|
|
|
750
|
|
|
|
2,000
|
|
|
|
2,000
|
|
February 22, 2013
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 24, 2013
|
|
|
|
|
|
|
500
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 25, 2014
|
|
|
20,000
|
|
|
|
875
|
|
|
|
750
|
|
|
|
1,500
|
|
|
|
3,750
|
|
|
|
2,500
|
|
February 22, 2014
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 24, 2014
|
|
|
|
|
|
|
500
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Grants made in 2007 and 2008. For all other grants, vesting also
occurs upon normal retirement at age 65, or early
retirement at age 62 or older with at least ten years of
service or upon a change in control. |
Retirement-based restricted shares will vest according to the
following schedule:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting Date
|
|
Fast
|
|
|
|
|
|
|
|
|
duPont
|
|
|
|
|
|
Ellis
|
|
|
January 28, 2012
|
|
|
5,605
|
|
|
|
|
|
|
|
|
|
|
|
2,311
|
|
|
|
|
|
|
|
212
|
|
January 24, 2015
|
|
|
22,600
|
|
|
|
|
|
|
|
|
|
|
|
6,600
|
|
|
|
|
|
|
|
2,200
|
|
January 23, 2016
|
|
|
5,600
|
|
|
|
|
|
|
|
|
|
|
|
800
|
|
|
|
|
|
|
|
400
|
|
January 28, 2018
|
|
|
28,500
|
|
|
|
|
|
|
|
|
|
|
|
6,900
|
|
|
|
|
|
|
|
800
|
|
Retirement-based restricted shares will also vest fully, in the
case of Mr. duPont and Mr. Ellis, upon normal retirement at
age 65. For Mr. Fast, retirement-based shares vest
fully upon early retirement if after the tenth anniversary of
his date of hire (September 27, 2009).
35
|
|
|
(3)
|
|
Computed using a price of $41.07
per share, which was the closing market price of Crane Co. stock
on the last trading day of 2010.
|
|
(4)
|
|
The unvested portion of this option
grant will vest on January 29, 2011.
|
|
(5)
|
|
The unvested portion of this option
grant will vest 50% on January 28, 2011 and 100% on
January 28, 2012.
|
|
(6)
|
|
The unvested portion of this option
grant will vest 33% on January 26, 2011, 67% on
January 26, 2012, and 100% on January 26, 2013.
|
|
(7)
|
|
The unvested portion of this option
grant will vest 25% on January 25, 2011, 50% on
January 25, 2012, 75% on January 25, 2013, and 100% on
January 25, 2014.
|
|
(8)
|
|
The unvested portion of this option
grant will vest 25% on February 22, 2011, 50% on
February 22, 2012, 75% on February 22, 2013, and 100%
on February 22, 2014.
|
2010
Option Exercises and Stock Vested
The following table provides information on each exercise of
stock options, and each vesting of restricted stock and RSUs,
for each of the named executive officers during 2010. The value
realized on exercise of options is computed by multiplying the
number of shares acquired upon exercise by the difference
between the market price of the shares on the applicable
exercise date (calculated as the closing price on that date),
and the exercise price of the options. The value realized on
vesting of restricted stock and RSUs is computed by multiplying
the number of shares by the market price on the applicable
vesting date (calculated as the closing price on that date).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
Value Realized
|
|
|
Number of Shares/Units
|
|
|
Value Realized
|
|
|
|
Acquired on Exercise
|
|
|
on Exercise
|
|
|
Acquired on Vesting
|
|
|
on Vesting
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
E. C. Fast
|
|
|
640,000
|
|
|
$
|
5,477,496
|
|
|
|
47,500
|
|
|
$
|
1,434,650
|
|
R. A. Maue
|
|
|
|
|
|
|
|
|
|
|
1,250
|
|
|
$
|
41,615
|
|
A. L. Krawitt
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
$
|
30,135
|
|
A. I. duPont
|
|
|
100,000
|
|
|
$
|
669,365
|
|
|
|
4,050
|
|
|
$
|
131,434
|
|
M. H. Mitchell
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
$
|
151,410
|
|
B. L. Ellis
|
|
|
100,000
|
|
|
$
|
1,031,600
|
|
|
|
9,800
|
|
|
$
|
162,546
|
|
T. J. MacCarrick
|
|
|
7,500
|
|
|
$
|
144,448
|
|
|
|
750
|
|
|
$
|
22,838
|
|
Retirement
Benefits
All officers of Crane Co. hired before January 1, 2006,
including Messrs. Fast, duPont, Mitchell and Ellis, are
participants in Crane Co.s Pension Plan for All Eligible
Employees. Directors who are not employees do not participate in
the plan. Eligibility for retirement benefits is subject to
certain vesting requirements, which include completion of five
years of service where employment is terminated prior to normal
or other retirement or death, as determined by applicable law
and the plan. Benefit accruals continue for years of service
after age 65.
The annual pension benefits payable under the pension plan are
equal to
12/3%
per year of service of the participants average annual
compensation during the five highest compensated consecutive
years of the 10 years of service immediately preceding
retirement less
12/3%
per year of service of the participants Social Security
benefit, up to a maximum deduction of 50% of the Social Security
benefit. Compensation for purposes of the pension plan is
defined as total
W-2
compensation plus employee contributions made under salary
reduction plans less (i) reimbursements or other expense
allowances; (ii) cash and noncash fringe benefits
(including automobile allowances); (iii) moving expenses
(including home allowances); (iv) deferred
compensation; (v) welfare benefits; (vi) severance
pay; (vii) amounts realized from the exercise of a
non-qualified stock option or the sale, exchange or other
disposition of stock acquired under a qualified stock option;
and (viii) amounts realized when restricted stock (or
property) held by the employee is recognized in the
employees taxable income under Section 83 of the
Internal Revenue Code. 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 any payout
under the non-equity incentive plan compensation for the
immediately preceding year. However, the tax code limits the
total compensation taken into account for any participant under
the pension plan. That limit was $245,000 for 2010 and is
subject to adjustment in future years.
In January 2008, at the recommendation of the Compensation
Committee, the Board of Directors adopted a Benefit Equalization
Plan under which participating executives will receive a
retirement benefit intended to restore the
36
portion of the retirement benefit under the Companys
pension plan that is not payable due to the tax code limit on
the amount of compensation that can be considered in determining
benefits under tax-qualified pension plans. The Benefit
Equalization Plan is designed only to restore retirement
benefits under the Companys regular pension plan that are
limited by the tax code; there is no supplemental benefit based
on deemed service or enhanced compensation formulas. As
discussed above, these shortfall amounts were previously
addressed by periodic, discretionary awards of restricted stock
calculated by the Companys actuaries to make up that
portion of the retirement benefit at normal retirement
(age 65) lost by reason of the tax limitations. The
original grant value of all prior grants of so-called
Retirement Shares is deducted in determining the
benefit payable under the Benefit Equalization Plan. Benefits
accrued under this plan are not funded or set aside in any
manner. The Benefit Equalization Plan was amended and restated
effective December 8, 2008 to provide that, in the event of
retirement at age 62 or older with ten years of service, a
participating executive would be eligible to receive benefits
under the Plan without the reduction factor set forth in the
Companys tax-qualified pension plan of 3% per year prior
to age 65. The executives currently participating in this
plan are Messrs. Fast, duPont and Ellis and one other
executive officer.
For employees hired on or after January 1, 2006, Crane Co.
provides a retirement benefit equal to two percent of covered
compensation as described above, which amount is invested in the
Crane Co. Savings and Investment Plan (401(k) plan) at the
direction of the employee. Mr. Maue and Mr. Krawitt
and three other executive officers are covered by this
retirement benefit, as was Mr. MacCarrick.
The table below sets forth the number of years of credited
service and the present value at December 31, 2010 of the
accumulated benefit under the Pension Plan and the Benefit
Equalization Plan for each of the named executive officers
covered by those plans.
Pension
Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
Payments
|
|
|
|
|
Years Credited
|
|
Present Value
|
|
During Last
|
|
|
|
|
Service
|
|
of Accumulated Benefit
|
|
Fiscal Year
|
Name
|
|
Plan Name
|
|
(#)
|
|
($) (1)
|
|
($)
|
|
E. C. Fast
|
|
Crane Co. Pension Plan for
|
|
|
11
|
|
|
$
|
339,541
|
|
|
|
|
|
|
|
Eligible Employees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crane Co. Benefit Equalization Plan
|
|
|
11
|
|
|
$
|
1,810,679
|
|
|
|
|
|
A. I. duPont
|
|
Crane Co. Pension Plan for
|
|
|
15
|
|
|
$
|
394,000
|
|
|
|
|
|
|
|
Eligible Employees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crane Co. Benefit Equalization Plan
|
|
|
15
|
|
|
$
|
538,159
|
|
|
|
|
|
M. H. Mitchell
|
|
Crane Co. Pension Plan for
|
|
|
7
|
|
|
$
|
94,438
|
|
|
|
|
|
|
|
Eligible Employees
|
|
|
|
|
|
|
|
|
|
|
|
|
B. L. Ellis
|
|
Crane Co. Pension Plan for
|
|
|
14
|
|
|
$
|
143,122
|
|
|
|
|
|
|
|
Eligible Employees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crane Co. Benefit Equalization Plan
|
|
|
14
|
|
|
$
|
111,871
|
|
|
|
|
|
|
|
|
(1)
|
|
The actuarial present value of each
participants accumulated pension benefit is determined
using the same assumptions and pension plan measurement date
used for financial statement reporting purposes. The actual
retirement benefit at normal retirement date payable under the
Pension Plan for Eligible Employees is subject to an additional
limit under the tax code which, for 2010, does not permit annual
retirement benefit payments to exceed the lesser of $195,000 or
the participants average compensation for the
participants three consecutive calendar years of highest
compensation, subject to adjustment for future years. The dollar
limit is subject to further reduction to the extent that a
participant has fewer than 10 years of service with Crane
Co. or 10 years of participation in the defined benefit
plan.
|
37
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The following discussion describes and quantifies the payments
that would be made to each of the named executive officers
(except Mr. MacCarrick, whose employment ended May 21,
2010) under a variety of circumstances, assuming that each
had taken place on December 31, 2010: (1) the
executive resigns voluntarily; (2) the executive is
involuntarily terminated, either directly or constructively;
(3) the executive retires; (4) the executive dies or
becomes permanently disabled while employed; (5) a change
in control of Crane Co. takes place; and (6) the executive
is terminated following a change in control of Crane Co.
Payments or other benefits would be due to the named executive
officers, under the described circumstance, under the following
plans and agreements:
Change in Control Agreements. Each of the
named executive officers except Mr. MacCarrick has an
agreement which, in the event of a change in control of Crane
Co., provides for the continuation of the employees then
current base salary, bonus plan and benefits for the three-year
period following the change in control. The agreements are for a
three-year period, but are automatically extended annually by an
additional year unless Crane Co. gives notice that the period
shall not be extended.
Upon termination within three years after a change in control,
by Crane Co. without Cause or by the employee with
Good Reason (as defined in the agreement), the
employee is immediately entitled to a proportionate amount of
the greater of the last years bonus or the average bonus
paid in the three prior years; plus three times the sum of his
or her annual salary and the greater of the last years
bonus or the average of the previous three years bonuses;
all accrued deferred compensation and vacation pay, employee
benefits, medical coverage and other benefits also continue for
three years after termination. If a change in control had taken
place on December 31, 2010, and employment had terminated
immediately thereafter, each of the named executive officers
having change in control agreements would have become entitled
to payments under this provision in the following amounts
(exclusive of the value of the EVA bank discussed under the
caption EVA Plans below): Mr. Fast, $7,622,876;
Mr. Maue, $2,205,784; Mr. Krawitt, $2,061,240;
Mr. duPont, $2,552,667; Mr. Mitchell, $3,290,668; and
Mr. Ellis, $2,064,536. The Companys best estimate of
the value of the continuation for three years of each
executives medical coverage and other benefits is as
follows: Mr. Fast, $69,278; Mr. Maue, $47,638;
Mr. Krawitt, $50,956; Mr. duPont, $61,286;
Mr. Mitchell, $48,173; and Mr. Ellis, $45,443.
Cause under the change in control agreements
generally includes, among other things, personal dishonesty or
certain breaches of fiduciary duty; repeated, willful and
deliberate failure to perform the executives specified
duties; the commission of a criminal act related to the
performance of duties; distributing proprietary confidential
information about the Company; habitual intoxication by alcohol
or other drugs during work hours; or conviction of a felony.
Good Reason under the change in control agreements
includes, among other things, any action by Crane Co. which
results in a diminution in the position, authority, duties or
responsibilities of the employee. As described in the
Compensation Discussion and Analysis at page 18, in 2010
the Company adopted a new form of change in control agreement.
Agreements entered into prior to this change provide that
termination of employment by the employee for any reason during
the 30-day
period immediately following the first year after a change in
control shall be deemed a termination for Good
Reason. Agreements in the revised form do not include this
provision.
Under the agreements entered into in the earlier form, if it is
determined that any economic benefit or payment or distribution
by Crane Co. to the individual, pursuant to the agreement or
otherwise (including, but not limited to, any economic benefit
received by the employee by reason of the acceleration of rights
under the stock option and restricted stock plans of Crane Co.)
(Payment), is subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code, the change in
control agreements provide that Crane Co. shall make additional
cash payments to the employee such that after payment of all
taxes including any excise tax imposed on such additional
payments, the employee will retain an amount sufficient to pay
the excise tax on all the Payments. If a change in control had
taken place on December 31, 2010, and employment had
terminated immediately thereafter, the named executive officers
would have become entitled to the following payments under this
provision: Mr. Maue, $1,124,392; Mr. Krawitt,
$1,096,732; and Mr. Mitchell, $1,430,385.
EVA Plans. Under the terms of the Crane Co.
EVA Plan and the operating group EVA plans, the EVA bank account
is forfeited if a participant resigns voluntarily or is
terminated, but is paid in full in the event of retirement at
age 65 (or earlier at the discretion of the Compensation
Committee), death or disability, or upon a change in control.
The
38
EVA bank accounts of the named executive officers at
December 31, 2010, taking into account the grants of awards
based on 2010 results and the related payouts, which took place
in the first quarter of 2011, stood as follows: Mr. Fast,
$577,526; Mr. Maue, $241,557; Mr. Krawitt, $289,411;
Mr. duPont, $312,441; Mr. Mitchell, $376,061; and
Mr. Ellis, $226,418.
Benefit Equalization Plan. Mr. Fast, Mr.
duPont and Mr. Ellis participate in the Benefit
Equalization Plan described in the Compensation Discussion and
Analysis at page 26 and under the caption Retirement
Benefits on page 36. Assuming their separation from
service as of December 31, 2010, they would have become
entitled to benefits valued as follows: Mr. Fast,
$1,810,679; Mr. duPont, $538,159; and Mr. Ellis, $111,871.
In the event of a participants death, one-half of the
benefit would be payable to the participants beneficiary.
Restricted Stock and RSUs. Under the terms of
the Stock Incentive Plan, any unvested shares of restricted
stock and RSUs are forfeited in the event of resignation or
termination, but vest immediately upon a change in control. The
Compensation Committee may, in its sole discretion, waive the
forfeiture period and allow shares of restricted stock and RSUs
to vest in the event of retirement, death or disability, and the
table on the following page assumes that they would do so. If
the then unvested restricted stock and RSUs owned by each of the
named executive officers had become vested as of
December 31, 2010, and assuming the value of Crane Co.
stock to be $41.07 per share, the closing price on the last
trading day of 2010, the aggregate value to each of the named
executive officers would have been as follows: Mr. Fast,
$11,491,591; Mr. Maue, $328,560; Mr. Krawitt,
$308,025; Mr. duPont, $1,144,251; Mr. Mitchell,
$1,047,285; and Mr. Ellis, $990,280. See 2010
Outstanding Equity Awards at Fiscal Year-End on
page 34.
Stock Options. Under the terms of the existing
stock option grants under the Stock Incentive Plans, any options
previously granted but not exercisable at the time of
termination are cancelled in the event of voluntary or
involuntary termination of employment, but unvested options
become exercisable in the event of retirement, death or
permanent disability, or termination following a change in
control. If the then unvested stock options of each of the named
executive officers had become exercisable as of
December 31, 2010, and assuming the value of Crane Co.
stock to be $41.07 per share, the closing price on the last
trading day of 2010, the aggregate value to each of the named
executive officers of exercising the options on that date would
have been as follows: Mr. Fast, $4,708,800; Mr. Maue,
$437,200; Mr. Krawitt, $442,738; Mr. duPont, $925,138;
Mr. Mitchell, $1,021,975; and Mr. Ellis, $976,325.
Employment AgreementMr. Fast. On
January 22, 2001, Crane Co. entered into an employment
agreement with Mr. Fast pursuant to which Mr. Fast
agreed to serve as President and Chief Executive Officer of
Crane Co. commencing on the date of the 2001 Annual Meeting,
April 23, 2001. The employment agreement is renewable each
year for one additional year unless either party gives written
notice to the other, and provides for the following
compensation: (i) an annual salary of no less than
$650,000; (ii) participation in the EVA Incentive
Compensation Plan; (iii) the grant of certain stock options
in 2001 and 2002; and (iv) the grant of certain shares of
restricted stock in 2001. The employment agreement also contains
certain covenants of Mr. Fast concerning confidentiality,
non-competition and non-solicitation of employees after
termination of employment.
If Crane Co. terminates Mr. Fasts employment other
than for Cause, Mr. Fast would be entitled to receive a
lump sum cash payment equal to two times his annual base salary
plus the higher of his current EVA bank account or two times his
highest EVA bonus payment in the preceding five years. If Crane
had terminated Mr. Fasts employment as of
December 31, 2010, such cash payment would have been
$4,875,768. In addition, all of Mr. Fasts stock
options would become fully vested and exercisable and all of his
restricted stock would become fully vested, yielding the values
set forth in the preceding paragraphs captioned Restricted
Stock and Stock Options.
Severance Pay. Crane Co.s stated
severance policy is to pay salaried employees one week per year
of service upon termination for the convenience of Crane Co.;
however, Crane Co.s prevailing practice on severance in
the case of executive officers is to pay the executive an amount
equal to one years base salary, either in a lump sum or by
continuation of biweekly payroll distributions, at the election
of the executive, with medical, dental and other welfare
benefits and pension benefits continuing during such period. In
the case of Mr. Fast, this severance policy would be
superseded by the terms of his employment agreement, discussed
in the preceding paragraph. Under this practice, if each of the
other named executive officers had been terminated as of
December 31, 2010, the severance to which they would have
been entitled would have been as follows: Mr. Maue,
$312,903; Mr. Krawitt, $272,589; Mr. duPont, $352,822;
Mr. Mitchell, $387,882; and Mr. Ellis, $299,324.
39
The table below reflects the estimated aggregate compensation
that each of the named executive officers would receive in the
event of such executives voluntary resignation,
involuntary termination, normal retirement, death or disability,
change in control and termination following a change of control.
The amounts shown assume that such termination was effective as
of December 31, 2010, and include amounts earned through
that date. They are therefore not equivalent to the amount that
would be paid out to the executive upon termination at another
time.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
Voluntary
|
|
Involuntary
|
|
|
|
Death or
|
|
Change in
|
|
Control and
|
Name
|
|
Resignation(1)
|
|
Termination
|
|
Retirement
|
|
Disability
|
|
Control
|
|
Termination
|
|
E. C. Fast
|
|
$
|
1,810,679
|
|
|
$
|
22,886,838
|
|
|
$
|
18,588,596
|
|
|
$
|
17,683,257
|
|
|
$
|
12,069,117
|
|
|
$
|
26,280,751
|
|
R. A. Maue
|
|
|
|
|
|
$
|
312,903
|
|
|
$
|
1,007,317
|
|
|
$
|
1,007,317
|
|
|
$
|
570,117
|
|
|
$
|
4,385,131
|
|
A. L. Krawitt
|
|
|
|
|
|
$
|
272,589
|
|
|
$
|
1,040,170
|
|
|
$
|
1,040,170
|
|
|
$
|
597,436
|
|
|
$
|
4,249,102
|
|
A. I. duPont
|
|
$
|
538,159
|
|
|
$
|
890,981
|
|
|
$
|
2,919,989
|
|
|
$
|
2,650,910
|
|
|
$
|
1,456,692
|
|
|
$
|
5,533,943
|
|
M. H. Mitchell
|
|
|
|
|
|
$
|
387,882
|
|
|
$
|
2,445,321
|
|
|
$
|
2,445,321
|
|
|
$
|
1,423,346
|
|
|
$
|
7,214,547
|
|
B. L. Ellis
|
|
$
|
111,871
|
|
|
$
|
411,195
|
|
|
$
|
2,304,894
|
|
|
$
|
2,248,958
|
|
|
$
|
1,216,698
|
|
|
$
|
4,414,873
|
|
|
|
|
(1) |
|
Amounts in this column represent the present value of benefits
that would be payable over a period of years under the Benefit
Equalization Plan. See Pension Benefits on
page 37. |
OTHER
AGREEMENTS AND INFORMATION
Indemnification Agreements. Crane Co. has
entered into indemnification agreements with Mr. Fast, each
other director, Messrs. Maue, Krawitt, duPont, Mitchell and
Ellis, and the seven other executive officers of Crane Co., the
form of which was approved by the shareholders at the 1987
Annual Meeting. The indemnification agreements require Crane Co.
to indemnify the officers or directors to the full extent
permitted by law against any and all expenses (including
advances of expenses), judgments, fines, penalties and amounts
paid in settlement incurred in connection with any claim against
the indemnified person arising out of services as a director,
officer, employee, trustee, agent or fiduciary of Crane Co. or
for another entity at the request of Crane Co., and either to
maintain directors and officers liability insurance coverage or
to the full extent permitted by law to indemnify such person for
the lack of such insurance.
Use of Company Aircraft. Crane Co. has entered
into time share agreements with Mr. Evans and Mr. Fast
regarding personal use of the corporate aircraft, including
aircraft leased by Crane Co. from a third party operator. Under
these agreements, which became effective on January 1, 2004
and were renewed on January 30, 2007, Crane Co. agrees to
lease the aircraft to the executive pursuant to federal aviation
regulations and to provide a qualified flight crew, and the
executive agrees to pay Crane Co. for each flight an amount
equal to the lesser of (i) the amount calculated for
personal use of aircraft under Department of Treasury
regulations or (ii) the sum of specified expenses actually
incurred for such flight. Effective January 1, 2009, the
agreement with Mr. Evans was amended to provide that he pay
the aggregate incremental cost of aircraft operation. During
2010, the aggregate incremental cost to Crane Co. for personal
use of the aircraft by Messrs. Evans and Fast, less amounts
paid by them under the time share agreements, was $0 and
$83,492, respectively. Such incremental costs include fuel,
landing fees, parking fees, temporary hangar charges, flight
crew meals and lodging, and, for chartered aircraft, the entire
charter fee.
40
OTHER
TRANSACTIONS AND RELATIONSHIPS
Mr. Queenan. The law firm of K&L
Gates LLP furnished legal services to Crane Co. in 2010,
predominantly for asbestos-related matters, for which Crane Co.
paid approximately $31.6 million. Mr. Queenan retired
in 1995 as a partner of a predecessor law firm; he remains
senior counsel to the firm, but no longer has any interest in
its profits.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Management Organization and Compensation
Committee is or has ever been an officer or employee of Crane
Co., and no executive officer of Crane Co. has served as a
director or member of the compensation committee of another
company of which any member of the Management Organization and
Compensation Committee is an executive officer.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
For the year ended December 31, 2010, based solely upon our
review of the reports filed by our directors and executive
officers under Section 16(a) and representations provided
to us by our directors and executive officers, we believe that
each director and executive officer filed all required reports
under Section 16(a) of the Securities Exchange Act of 1934
on time.
41
ITEM 3:
APPROVAL OF ANNUAL INCENTIVE PLAN
In 2010, the Management Organization and Compensation Committee
of the Board of Directors (the Committee) and its
outside compensation consultant, Aon Hewitt, reviewed the
Companys performance incentive compensation programs and
practices. As a result of this review, the Committee determined
to adopt a new annual incentive plan that permits the use of a
range of different performance metrics. These performance
metrics may be used individually or in combination with one
another to provide appropriate incentives to eligible officers
and key employees. This approach will provide the Committee with
greater flexibility in designing annual incentive awards
tailored to the specific business needs and strategic plans of
the Company over time. In addition, by using performance metrics
linked to the Companys annual operating plan, greater
transparency may be achieved between operating results and
performance rewards, thereby enhancing the incentive effects of
the annual cash bonus plan.
On the recommendation of the Committee, the Board of Directors
has approved the Companys Annual Incentive Plan (the
Incentive Plan). The Incentive Plan will be
effective as of January 1, 2011, subject to shareholder
approval. We are asking our shareholders to approve the
Incentive Plan, including the material performance terms of the
Incentive Plan, as a matter of good corporate governance and to
preserve our ability to take a federal tax deduction under
Section 162(m) of the Internal Revenue Code of 1986, as
amended (Section 162(m)), for certain
performance-based compensation awards. Section 162(m)
limits the deductibility for federal income tax purposes of
certain compensation paid to any covered employee in
excess of $1 million in any year. The term covered
employee includes our chief executive officer and the
three other most highly compensated executive officers who are
required to be disclosed in our proxy statement as a named
executive officer. Certain compensation, including
compensation paid based on the achievement of pre-established
performance goals, is excluded from this deduction limit if the
material terms under which the compensation is to be paid,
including the performance goals to be used, are approved by
shareholders.
Accordingly, this proposal requests approval of the Incentive
Plan by our shareholders. Set forth below is a summary of the
principal provisions of the Incentive Plan. This summary is
qualified in its entirety by reference to the complete text of
the Incentive Plan set forth in Appendix A to this Proxy
Statement. If this proposal is not adopted, we will continue to
be able to grant performance-based awards, but certain awards to
executive officers may no longer be fully tax deductible by the
Company.
Eligibility
and Limitation on Awards
The Incentive Plan generally is administered and interpreted by
the Committee. The participants in the Incentive Plan are the
officers and key employees of the Company and its subsidiaries
who are designated as participants by our Chief Executive
Officer. However, the Committee determines eligibility for any
executive officer of the Company, including any covered
employee as defined under Section 162(m). If the
Incentive Plan is approved, it is expected that all twelve
current executive officers and 141 other key employees
would be eligible to participate in the Incentive Plan in 2011.
Any participant who is a covered employee may not,
in any calendar year, receive an award exceeding $3,500,000. The
Committee retains discretion to reduce (including a reduction to
zero) any award otherwise payable under the Incentive Plan, even
if the applicable level of performance has been met.
Performance
Measures
For each calendar year, the Committee will establish one or more
performance objectives in writing within ninety (90) days
after the beginning of the calendar year or other performance
period that will apply to each award. The performance objectives
selected will be expressed as a specified target amount, target
amount of growth, target rate of growth, or similar numerical
goal, with respect to one or more of the following business
criteria (the Performance Measures):
|
|
|
|
|
net sales; sales of a particular product or line of products;
|
|
|
|
gross profit; ratio of gross profit to sales;
|
|
|
|
operating profit; ratio of operating profit to sales (in each
case either before or after taxes and before or after allocation
of corporate overhead and bonuses);
|
42
|
|
|
|
|
net income; earnings per share;
|
|
|
|
adjusted earnings (including earnings before taxes, earnings
before interest and taxes, or earnings before interest, taxes,
depreciation and amortization);
|
|
|
|
cash flow from operations; free cash flow;
|
|
|
|
return on equity, assets, net assets, total capital, or total
invested capital; economic value added models or equivalent
metrics;
|
|
|
|
share price; total shareholder return (in each case either
absolutely or as compared with a peer group or stock market
index);
|
|
|
|
financial statement items such as cash, total debt,
shareholders equity, working capital, material costs and
engineering, selling and administrative expenses (in each case
either absolutely or in proportion to another financial
statement item such as assets or sales); or
|
|
|
|
implementation, completion or attainment of measurable
objectives with respect to specific operational goals and
targets, such as: (i) environmental, health
and/or
safety goals (including lost workday rates); (ii) customer
satisfaction; (iii) inventory turns; (iv) lead time;
(v) on-time delivery; (vi) purchase price index;
(vii) days sales outstanding; (viii) quality;
(ix) research and development; (x) specific
products/projects (including new product introductions); and
(xi) recruitment or retention of personnel.
|
Performance Measures may, in the discretion of the Committee, be
established on a Company-wide basis or (except for criteria
relating to share price or per-share financial measures) with
respect to one or more business units, divisions, subsidiaries
or business segments, as applicable. In addition, Performance
Measures may be absolute or relative (to the performance of one
or more comparable companies or indices) and may differ for
awards granted to any one participant or to different
participants. For participants who are not covered
employees under Section 162(m), the Committee may
establish performance goals or criteria other than the
Performance Measures, including without limitation subjective
criteria, and the Committee may apply discretion to either
increase or decrease award amounts.
The Committee has the authority to make equitable adjustments in
the criteria for certain special items, such as in connection
with: (i) asset write-downs or impairment charges;
(ii) litigation or claim costs, judgments or settlements,
including asbestos claims and defense costs;
(iii) environmental costs; (iv) the effect of changes
in tax laws, accounting principles or other laws or provisions
affecting reported results; (v) restatements occurring as a
result of errors that arise from events other than fraud or
other misconduct; (vi) provisions for reorganization and
restructuring programs; (vii) nonrecurring items as
described in managements discussion and analysis of
financial condition and results of operations appearing in the
Companys annual report to shareholders for the applicable
year; (viii) acquisitions or divestitures; and
(ix) foreign exchange gains and losses. Any such
adjustments will be made consistent with the principles of
Section 162(m) with respect to covered
employees.
Adjustments
for Job Changes
If a participant is promoted, demoted or transferred to a
different business unit or function during a performance period,
the Committee may (i) adjust, change or eliminate the
performance goals or the applicable performance period as it
deems appropriate to make such goals and period comparable to
the initial goals and period, or (ii) make a cash payment
to the participant in an amount determined by the Committee.
However, no such adjustments will be applied to awards to
covered employees as defined in Section 162(m),
except to the extent the Committee exercises negative
discretion, as permitted under Section 162(m).
Effect of
Termination of Employment or Change in Control During
Performance Period
In the event of a participants death, Permanent
Disability (as defined in the Incentive Plan) or
Retirement (as defined in the Incentive Plan) during
a performance period, the participant will be entitled to a pro
rated payment of his or her award based on actual performance
determined after the close of the performance period. If a
participant terminates employment with the Company or any
subsidiary during the performance period for any other reason,
his or her award will be forfeited.
In the event of a Change in Control (as defined in
the Incentive Plan) of the Company during a performance period,
a pro rated interim payment will be made following the Change in
Control in an amount equal to the greater
43
of the participants target award and the
participants Incentive Plan award paid for the most
recently completed performance period. The participant will
continue to be eligible for his or her Incentive Plan award for
the performance period in which the Change in Control occurs,
subject to the terms and conditions of such award, and the
amount of the interim payment will be offset against any such
award that may become payable following the performance period.
Amendment
and Termination
The Board of Directors may modify, suspend or terminate the
Incentive Plan at any time in its discretion, subject to
approval of the Companys shareholders if necessary to
satisfy the requirements of Section 162(m).
Periodic
Re-Approval by Shareholders
As the Committee has authority to vary the specific Performance
Measures used for each performance period, the Plan must be
approved by shareholders at least every five years in order for
payments to continue to qualify as fully deductible
performance-based compensation under Section 162(m).
New Plan
Benefits
As benefits under the Incentive Plan are based on financial and
other performance in the future, the amount of benefits payable
to specific participants is not determinable at this date. On
January 24, 2011, subject to shareholder approval of the
Incentive Plan, the Committee set target awards and
corresponding performance targets for the Companys named
executive officers, all Company executive officers as a group
and all other non-executive employees for the 2011 calendar year
as set forth in the table below (non-employee directors are not
included in the table as they are not eligible to participate in
the Plan):
|
|
|
|
|
|
|
Annual
|
|
|
Incentive Plan
|
|
|
Target Dollar
|
Name and Position
|
|
Value ($)
|
|
E. C. Fast, President and CEO
|
|
$
|
1,100,000
|
|
R. A. Maue, Vice President, Controller and Principal Accounting
Officer
|
|
$
|
293,333
|
|
A. L. Krawitt, Vice President, Treasurer and Principal Financial
Officer
|
|
$
|
293,333
|
|
A. I. duPont, Vice President, General Counsel and Secretary
|
|
$
|
293,333
|
|
M. H. Mitchell, President, Fluid Handling Group
|
|
$
|
306,000
|
|
B. L. Ellis, President, Merchandising Systems Group
|
|
$
|
278,224
|
|
Executive Officer Group (13 persons)
|
|
$
|
4,047,042
|
|
Non-Executive Officer Employee Group (141 persons)
|
|
$
|
10,012,185
|
|
Performance metrics for 2011 consist of targeted earnings per
share (75% of the award) and free cash flow (25% of the award)
for the Chief Executive Officer and other corporate executives,
and operating profit (70% of the award), cash flow from
operations (15% of the award) and specified key performance
indicators (15% of the award) for group presidents and other
executives of the Companys business units. In addition to
the targeted performance goals, the Committee set minimum
threshold and maximum cap values for each performance metric, so
that final payments may range from $0 to 200% of the target
award amounts.
Vote
Required
Approval of the Incentive Plan requires the affirmative vote of
a majority of the votes cast on this proposal at the Annual
Meeting of Shareholders. See Outstanding Shares and Required
Votes, page 1.
The Board of Directors recommends that you vote FOR approval
of the Annual Incentive Plan.
44
ITEM 4:
ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE
OFFICERS
In accordance with the Wall Street Reform and Consumer
Protection Act (the Dodd-Frank Act) and the related
rules adopted by the Securities and Exchange Commission, we are
asking shareholders to express their opinion of the compensation
of the Named Executive Officers in 2010, as described elsewhere
in this Proxy Statement.
The Compensation Discussion and Analysis beginning on
page 17 above describes the four objectives of Crane
Co.s executive compensation program:
(1) to attract and retain highly-qualified executives;
(2) to provide those executives with incentives to
continuously improve operating results and to increase
shareholder value without encouraging unnecessary and excessive
risk-taking by our executives;
(3) to provide benefit programs that are competitive with
those of relevant peer companies; and
(4) to ensure continuity in the event of a
change-in-control
transaction.
The Compensation Discussion and Analysis explains in detail the
elements of the Companys executive compensation program
and the steps taken by the Company to ensure that the program,
as put into practice in 2010, was aligned with these four
objectives. Balancing medium-term and long-term compensation
elements, the program directly links incentive compensation for
executives with increases in shareholder value, principally by
means of annual cash bonuses based on economic value added,
stock options and RSUs. The Company believes that this system,
as put into practice under the supervision of the Management
Organization and Compensation Committee, has been instrumental
in enabling the Company to achieve superior financial
performance and investor returns in a period of great volatility
and uncertainty.
The Board strongly endorses the Companys actions in this
regard, and recommends that shareholders vote for the
following resolution:
RESOLVED, that the compensation of the Named Executive Officers
as disclosed in the Proxy Statement is approved.
Vote
Required
Approval of the above resolution requires the affirmative vote
of a majority of the votes cast on this question at the Annual
Meeting of the Shareholders. See Outstanding Shares and Required
Votes, page 1. In accordance with the Dodd-Frank Act and
the related SEC rules, the resolution is non-binding and
advisory; however, the Board will give due consideration to the
opinion of the Companys shareholders expressed pursuant to
this vote.
ITEM 5:
ADVISORY VOTE ON FREQUENCY OF FUTURE ADVISORY VOTES
ON COMPENSATION OF NAMED EXECUTIVE OFFICERS
The Company will include in its proxy materials for subsequent
Annual Meetings a non-binding resolution similar to Item 4
above.
In accordance with the Dodd-Frank Act and the related SEC rules,
the Board is asking shareholders to express their opinion as to
how frequently the advisory vote on compensation should be
solicited: every year, every second year, or every third year.
The Board believes that an annual advisory vote on executive
compensation, providing the Board with timely information on
shareholders views of Crane Co.s compensation
practices each year, is the best approach for the Company.
Accordingly, the Board recommends that shareholders vote in
favor of holding the advisory vote on compensation
annually.
Vote
Required
The alternative which receives the largest number of votes, even
if not a majority, will be considered the preference of the
Companys shareholders. See Outstanding Shares and Required
Votes, page 1. In accordance with the Dodd-Frank Act and
the related SEC rules, the resolution is non-binding and
advisory; however, the Board will give due consideration to the
opinion of the Companys shareholders expressed pursuant to
this vote.
45
MISCELLANEOUS
Solicitation of Proxies. Crane Co. will bear
all of the costs of the solicitation of proxies for use at the
Annual Meeting. In addition to the use of the mails, proxies may
be solicited by personal interview, telephone,
e-mail and
fax by directors, officers and employees of Crane Co., who will
undertake such activities without additional compensation. To
aid in the solicitation of proxies, Crane Co. has retained The
Proxy Advisory Group, LLC, which will receive a fee for its
services of $11,000 plus disbursements. Banks, brokerage houses
and other institutions, nominees and fiduciaries will be
requested to forward the proxy materials to the beneficial
owners of the common stock held of record by such persons and
entities and will be reimbursed for their reasonable expenses in
forwarding such material.
Incorporation by Reference. The Audit
Committee Report on page 13 of this Proxy Statement shall
not be deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing
under the Securities Act of 1933 or the Securities Exchange Act
of 1934, and shall not be deemed filed under those Acts, except
to the extent that Crane Co. specifically incorporates any such
matter in a filed document by reference.
Next Annual Meeting; Shareholder
Proposals. The By-Laws provide that the Annual
Meeting of Shareholders will be held on the fourth Monday in
April in each year unless otherwise determined by the Board of
Directors. Appropriate proposals of security holders intended to
be presented at the 2012 Annual Meeting must be received for
inclusion in the proxy statement and form of proxy relating to
that meeting on or before November 10, 2011. In addition,
under the By-Laws, if security holders intend to nominate
directors or present proposals at the 2012 Annual Meeting other
than through inclusion of such proposals in the proxy materials
for that meeting, then Crane Co. must receive notice of such
nominations or proposals no earlier than December 20, 2011
and no later than January 19, 2012. If we do not receive
notice by that date, then such proposals may not be presented at
the 2012 Annual Meeting.
We urge shareholders who do not expect to attend in person to
sign, date and return the enclosed proxy in the envelope
provided, or to use the internet address or the toll-free
telephone number on the enclosed proxy card. In order to avoid
unnecessary expense, we ask your cooperation in voting your
proxy promptly, no matter how large or how small your holdings
may be.
By Order of the Board of Directors,
AUGUSTUS I. DUPONT
Secretary
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APPENDIX A
CRANE CO.
ANNUAL INCENTIVE PLAN
The purpose of the Crane Co. Annual Incentive Plan (the
Plan) is to enhance the ability of Crane Co. (the
Company) and its subsidiaries to motivate, attract
and retain the services of individuals upon whose judgment,
interest and special effort the successful conduct of the
Companys business is largely dependent. The Plan furthers
these goals by providing eligible employees of the Company and
its subsidiaries an opportunity to participate in the
Companys success by earning cash incentive compensation
based on the achievement by the Company of certain
pre-established goals and the employees contributions
towards meeting the goals.
For purposes of this Plan, the following capitalized terms shall
have the respective meanings set forth below:
(a) Award means an annual incentive
award granted under the terms of this Plan.
(b) Board means the Board of Directors
of the Company.
(c) Cause means, with respect to a
Participant, any of the following as determined by the Company:
(i) personal dishonesty or breach of fiduciary duty by the
Participant involving personal profit at the expense of the
Company; (ii) repeated violations by the Participant of the
Participants obligations under any written employment or
other agreement with the Company which are demonstrably willful
and deliberate on the Participants part and which are not
remedied in a reasonable period of time after receipt of written
notice from the Company; (iii) the Participants
commission of a criminal act related to the performance of the
Participants duties, or the Participants furnishing
of proprietary confidential information about the Company to a
competitor, or potential competitor, or third party whose
interests are adverse to those of the Company; (iv) the
Participants habitual intoxication by alcohol or drugs
during work hours; or (v) the Participants conviction
of a felony.
(d) Change in Control means the
occurrence of one of the following: (i) a
person (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended
(the Exchange Act)) becoming the beneficial
owner (as that term is defined in
Rule 13d-3
under the Exchange Act) of more than 50% of the outstanding
shares of the common stock of the Company calculated as provided
in paragraph (d) of said
Rule 13d-3,
other than a transaction that is not a Change in Control under
clause (ii) of this definition; (ii) the consummation
of a reorganization, merger, statutory share exchange,
consolidation or similar transaction of the Company with any
other corporation, other than a reorganization, merger,
statutory share exchange, consolidation or similar transaction
which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or being converted into voting
securities of the surviving entity) at least fifty percent (50%)
of the total voting power represented by the voting securities
of the Company or such surviving entity outstanding immediately
after such transaction; (iii) the consummation of any sale,
exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all the assets of
the Company; or (iv) a majority of the members of the Board
being replaced during any twelve (12) month period
commencing on the effective date of this Plan, by directors
whose appointment or election is not endorsed by a majority of
the members of the Board prior to the date of the appointment.
(e) Code means the Internal Revenue Code
of 1986, as amended from time to time, and the rulings and
regulations issued thereunder.
(f) Company shall have the meaning given
to such term in Section 1.
(g) Committee means the Management
Organization and Compensation Committee of the Board.
(h) Covered Employee means a Participant
who is a covered employee within the meaning of
Section 162(m)(3) of the Code.
(i) Participant means an individual
designated in accordance with Section 4 as eligible to
participate in the Plan.
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(j) Permanent Disability means a
physical or mental disability or infirmity that prevents the
performance of the Participants services for the Company
and its subsidiaries lasting (or likely to last, based on
competent medical evidence presented to the Committee) for a
period of six months or longer. The Committees
determination of Permanent Disability shall be final and shall
be based on such competent medical evidence as shall be
presented to it by such Participant or by any physician or group
of physicians or other competent medical expert employed by the
Participant or the Company to advise the Committee.
(k) Retirement means the
Participants termination of employment for any reason
other than death, Permanent Disability or Cause upon or after
the earlier of the date that the Participant attains
(i) age 65 or (ii) age 62 and would be
credited with at least 10 Years of Service (as
defined in Crane Co.s Pension Plan for All Eligible
Employees or the equivalent service term in any successor to the
Pension Plan, and regardless of whether the Participant is a
participant in such Pension Plan).
(a) Committee Duties and Authority. The
Plan will be administered by the Committee. The Committees
decisions in the administration of the Plan shall be final and
binding on all parties. The Committee shall have the sole
discretionary authority to interpret the Plan, to establish and
modify administrative rules for the Plan, to designate the
employees eligible to participate in the Plan, to establish and
adjust any Awards, to impose such conditions and restrictions on
Awards under the Plan as it determines appropriate, and to take
such steps in connection with the Plan and Awards made under the
Plan as it may deem necessary or advisable. Notwithstanding the
foregoing, the Committee may, in its discretion, delegate any or
all of its powers and duties hereunder to the Companys
Chief Executive Officer, provided that, with respect to the
participation hereunder by any Covered Employee, all such powers
and duties shall remain with the Committee to the extent
necessary to ensure, to the extent practicable, that amounts
payable under this Plan qualify as performance-based
compensation under Section 162(m)(4)(C) of the Code.
(b) Other Administrative Matters. The
Committee may employ attorneys, consultants, accountants or
other persons and the Committee and 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 Committee member shall receive compensation with
respect to his or her services for the Committee except as may
be authorized by the Board. All actions taken and all
interpretations and determinations made by the Committee in good
faith shall be final and binding upon all employees who have
received Awards, the Company and all other interested persons.
No member of the Committee shall be personally liable for any
action, determination or interpretation 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.
The persons who shall participate in this Plan shall be such
officers and other key employees of the Company and its
subsidiaries as may be designated as Participants by the
Companys Chief Executive Officer; provided that
participation in the Plan shall be determined by the Committee
for any executive officer of the Company.
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5.
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PERFORMANCE-BASED
AWARDS
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(a) Award Terms and Limits. The Committee
is authorized to grant Awards to Participants on such terms and
conditions as may be selected by the Committee consistent with
the terms of this Plan, provided that (i) no Award with
respect to any Covered Employee may exceed $3,500,000 for any
particular calendar year and (ii) the Committee in its sole
and exclusive discretion may reduce (including a reduction to
zero) any Award.
(b) General Provisions Regarding Performance
Goals. The performance goals for Awards shall
consist of one or more business criteria and a targeted level or
levels of performance with respect to each of such criteria, as
specified by the Committee consistent with this Section 5.
Performance goals shall be objective and shall otherwise meet
the requirements of Section 162(m) of the Code, including
the requirement that the level or levels of performance targeted
by the Committee result in the achievement of performance goals
being substantially uncertain. The Committee may
determine that such Awards shall be earned upon achievement of
any one performance goal or that two or more of the performance
goals must be achieved as a condition to the Award
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becoming earned, and such determinations by the Committee may
include degrees to which the Award becomes earned based on
degrees of achievement of the applicable performance goals.
Performance goals may, in the discretion of the Committee, be
established on a Company-wide basis, or with respect to one or
more business units, divisions, subsidiaries or business
segments, as applicable. Performance goals may be absolute or
relative (to the performance of one or more comparable companies
or indices). Performance goals may differ for Awards granted to
any one Participant or to different Participants.
Notwithstanding any provision herein to the contrary, for
Participants who are not Covered Employees with respect to a
given year: (i) the Committee may establish criteria other
than those listed in Section 5(c), including without
limitation subjective criteria, and (ii) the Committee may
apply discretion to either increase or decrease Award amounts.
(c) Authorized Performance
Goals. Performance goals for Awards established
by the Committee shall be expressed as a specified target
amount, target amount of growth, target rate of growth, or
similar numerical goal, with respect to one or more of the
following business criteria, by the Company on a consolidated
basis,
and/or
(except for criteria relating to share price or per-share
financial measures) by one or more specified business units,
divisions, subsidiaries or business segments of the Company:
(i) net sales; sales of a particular product or line of
products;
(ii) gross profit; ratio of gross profit to sales;
(iii) operating profit; ratio of operating profit to sales
(in each case before or after taxes and before or after
allocation of corporate overhead and bonuses);
(iv) net income; earnings per share;
(v) adjusted earnings (including earnings before taxes,
earnings before interest and taxes, or earnings before interest,
taxes, depreciation and amortization);
(vi) cash flow from operations; free cash flow;
(vii) return on equity, assets, net assets, total capital,
or total invested capital; economic value added models or
equivalent metrics;
(viii) share price; total shareholder return (in each case
either absolutely or as compared with a peer group or stock
market index);
(ix) financial statement items such as cash, total debt,
shareholders equity, working capital, material costs and
engineering, selling and administrative expenses(in each case
either absolutely or in proportion to another financial
statement item such as assets or sales); or
(x) implementation, completion or attainment of measurable
objectives with respect to specific operational goals and
targets, such as: (A) environmental, health
and/or
safety goals (including lost workday rates); (B) customer
satisfaction; (C) inventory turns; (D) lead time;
(E) on-time delivery; (F) purchase price index;
(G) days sales outstanding; (H) quality;
(I) research and development, (J) specific
products/projects (including new product introductions); and
(K) recruitment or retention of personnel
(d) Timing. Performance goals shall be
established not later than 90 days after the beginning of
any performance period applicable to such Awards, or at such
other date as may be required or permitted for
performance-based compensation under
Section 162(m) of the Code. No Awards will be made to
Covered Employees until the Committee has approved that the
performance goals have been met.
(e) Adjustments for Special Items. The
Committee may determine prospectively, at the time that goals
under this Section 5 are established, whether or not to
adjust any such goals during or after the fiscal year or other
performance period to take into consideration
and/or
mitigate the impact of any gains or losses, reserves or other
charges to earnings, accounting changes, acquisitions,
dispositions
and/or
divestitures (special items), or if such special
items were not foreseen or were not quantifiable at the time
such goals were established, upon the occurrence of such special
items, including any of the following that occur during a fiscal
year or other performance period: (i) asset write-downs or
impairment charges; (ii) litigation or claim costs,
judgments or settlements, including asbestos claims and defense
costs; (iii) Superfund environmental costs; (iv) the
effect of changes in tax laws, accounting principles or other
laws or provisions affecting reported results;
(v) restatements occurring as a result of errors that arise
from events other than fraud or other misconduct; (vi)
provisions for reorganization and restructuring programs;
(vii) nonrecurring items as described in managements
discussion and analysis of financial
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condition and results of operations appearing in the
Companys annual report to shareholders for the applicable
year; (viii) acquisitions or divestitures; and
(ix) foreign exchange gains and losses.
(f) Adjustments for Job Changes. If a
Participant is promoted, demoted or transferred to a different
business unit or function during a performance period, the
Committee may determine that the performance goals or
performance period are no longer appropriate and may
(i) adjust, change or eliminate the performance goals or
the applicable performance period as it deems appropriate to
make such goals and period comparable to the initial goals and
period, or (ii) make a cash payment to the Participant in
an amount determined by the Committee; provided that no such
adjustment shall be applied to Awards to Covered Employees,
except to the extent the Committee exercises such negative
discretion as is permitted under Section 162(m) of the Code.
(g) Intent to Comply with
Section 162(m). It is the intent of the
Company that Awards under this Plan granted to persons who are
designated by the Committee as likely to be Covered Employees
shall, if so designated by the Committee, constitute
qualified performance-based compensation within the
meaning of Section 162(m) of the Code. Accordingly, the
terms of this Plan, including the definitions of Covered
Employee and other terms used herein, shall be interpreted in a
manner consistent with Section 162(m) of the Code. The
foregoing notwithstanding, because the Committee cannot
determine with certainty whether a given Participant will be a
Covered Employee with respect to a fiscal year that has not yet
been completed, the term Covered Employee as used herein shall
mean only a person designated by the Committee, at the time of
grant of an Award, as likely to be a Covered Employee with
respect to that fiscal year. If any provision of the Plan or any
agreement relating to such Award does not comply or is
inconsistent with the requirements of Section 162(m) of the
Code, such provision shall be construed or deemed amended to the
extent necessary to conform to such requirements.
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6.
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IMPACT
OF TERMINATION OF EMPLOYMENT OR CHANGE IN CONTROL
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(a) Impact of Termination of
Employment. In the event a Participant
voluntarily terminates employment (other than Retirement) or is
terminated involuntarily during a fiscal year or other
applicable performance period, any outstanding Award for the
Participant will be forfeited. In the event of death, Permanent
Disability or Retirement during a fiscal year or other
applicable performance period, the Award will be paid on a pro
rated basis to the Participant based on the actual performance
determined after the end of such period. In the event of any
termination of employment after the end of a fiscal year or
other applicable performance period (including death, Permanent
Disability, Retirement, voluntary termination or involuntary
termination for any reason other than Cause), any Award for such
period will be determined based on actual performance and paid
at the same time as Awards are paid to all other Participants.
(b) Impact of Change in Control. In the
event of a Change in Control, the Company shall pay to each
Participant for the fiscal year or other performance period then
in effect an interim lump-sum cash payment (the CIC
Payment) within 30 days following the occurrence of
the Change in Control. The amount of the CIC Payment shall equal
the greater of (A) the Participants target Award for
such period or (B) the amount of the actual Award paid to
the Participant for the most recently completed fiscal year or
other performance period, such amount multiplied by a fraction
in which (x) the numerator is the number of months,
including fractional months, that have elapsed during the
applicable fiscal year or other performance period through the
occurrence of the Change in Control and (y) the denominator
is the total number of months in the applicable fiscal year or
other performance period. The CIC Payment shall not reduce the
obligation of the Company to make a final payment under the
terms of the Plan, but any CIC Payment made shall be offset
against any later payment required under the terms of the Plan
for the fiscal year or other performance period in which the
Change in Control occurs. Notwithstanding the foregoing, unless
otherwise required by law, in no event shall a Participant be
required to refund to the Company, or have offset against any
other payment due the Participant from or on behalf of the
Company, all or any portion of the CIC Payment.
(a) Effective Date. The Plan shall be
effective as of January 1, 2011, subject to approval by the
shareholders of the Company at the 2011 annual
shareholders meeting. Any Award made under the Plan prior
to the 2011 annual shareholders meeting shall be subject
to shareholder approval of the Plan at the 2011 annual
shareholders meeting to the extent necessary to qualify as
qualified performance-based compensation within the
meaning of Section 162(m) of the Code. If for any reason
the shareholders of the Company do not approve the Plan at the
A-4
2011 annual shareholders meeting, the Plan shall
immediately terminate and no Awards shall be made under the
Plan. Subject to its approval by the shareholders, the Plan
shall remain effective until the first annual meeting of
shareholders held in 2016, subject to any further shareholder
approvals (or re-approvals) mandated for qualified
performance-based compensation under Section 162(m)
of the Code, and subject to the right of the Board to terminate
the Plan, on a prospective basis only, at any time.
(b) Plan Amendment and Termination. The
Board may modify, suspend or terminate the Plan at any time;
provided, however, that any such amendment is subject to
approval by the shareholders of the Corporation to the extent
necessary to satisfy the requirements of Section 162(m) of
the Code.
(c) Effect of Award on Other Employee
Benefits. By acceptance of participation in this
Plan, each Participant agrees that his or her Award is special
additional compensation and that it will not affect any employee
benefit, e.g., life insurance, etc., in which the recipient
participates, except that payments made under this Plan shall be
included in the employees compensation for purposes of the
Companys qualified and nonqualified retirement plans to
the extent provided in such plans.
(d) No Right to Continued Employment or Additional
Awards. The receipt of an Award shall not give
the Participant any right to continued employment, and the right
and power to dismiss any Participant from his or her employment
is specifically reserved to the Company. In addition, the
receipt of an Award with respect to any fiscal year or other
performance period shall not entitle the Participant to an Award
with respect to any subsequent fiscal year or other performance
period.
(e) Withholding Taxes. The Company shall
have the right to deduct from all payments under this Plan any
Federal, state or local taxes required by law to be withheld
with respect to such payments.
(f) Governing Law. This Plan shall be
construed in accordance with and governed by the laws of the
State of Delaware, other than the conflict of law provisions
thereof.
(g) Recovery of Compensation in Certain
Circumstances. Notwithstanding any other
provision of this Plan, if the Committee determines that the
Company is required to restate its financial statements due to
material noncompliance with any financial reporting requirement
under the law, whether such noncompliance is the result of
misconduct or other circumstances, a Participant shall be
required to reimburse the Company for any amounts earned or
payable with respect to any Award to the extent required by and
otherwise in accordance with applicable law and any Company
policies.
A-5
IMPORTANT ANNUAL MEETING INFORMATION Electronic Voting Instructions You can vote by Internet
or telephone! Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may
choose one of the two voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE
LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by
7:00 a.m., Central Time on April 18, 2011. Vote by Internet Log on to the Internet and go to
www.investorvote.com/cr Follow the steps outlined on the secured website. Vote by telephone
Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada any time on a touch
tone telephone. There is NO CHARGE to you for the call. Follow the instructions provided by the
recorded message. Using a black ink pen, mark your votes with an X as shown in this example. Please
do not write outside the designated areas. Annual Meeting Proxy Card _IF YOU HAVE NOT VOTED VIA THE
INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE
ENCLOSED ENVELOPE. Proposals The Board of Directors recommends a vote FOR all the nominees
listed, FOR Proposals 2, 3 and 4, and FOR ANNUAL frequency of say-on-pay voting by shareholders. 01
- E. Thayer Bigelow (term expiring 2014) 02 Philip R. Lochner, Jr. (term expiring 2014) 03 -
Ronald F. McKenna (term expiring 2014) 1. Election of Directors: For Against Abstain 2.
Ratification of selection of Deloitte & Touche LLP as independent auditors for the Company for
2011. For Against Abstain 3. Approval of Annual Incentive Plan. For Against Abstain For Against
Abstain For Against Abstain C Authorized Signatures This section must be completed for your vote
to be counted. Date and Sign Below Please sign exactly as name(s) appears hereon. Joint owners
should each sign. When signing as attorney, executor, administrator, corporate officer, trustee,
guardian, or custodian, please give full title. Date (mm/dd/yyyy) Please print date below.
Signature 1 Please keep signature within the box. Signature 2 Please keep signature within
the box. B Non-Voting Items Change of Address Please print new address below. 1 Yr 2 Yrs 3 Yrs
Abstain 5. Say When on Pay An advisory vote on approval of the frequency of shareholder votes on
executive compensation. For Against Abstain 4. Say on Pay An advisory vote on approval of
executive compensation. |
INVESTOR INFORMATION Visit our web site at www.craneco.com where you will find detailed information
about the Company, its component businesses and its stock performance. All of this information,
including annual reports, SEC filings, earnings, news and dividend releases, can be bookmarked,
printed or downloaded from this site. You may automatically receive e-mail notification of Crane
Co. news, SEC filings, and daily closing stock price by clicking Investors and then Email
Signup at www.craneco.com. Once your name has been added to our distribution list, the Company
will automatically e-mail you news and information as it is released. You may also listen to all
earnings releases, dividend releases, corporate news and other important announcements 24 hours a
day, seven days a week, on demand by dialing our Crane Co. Shareholder Direct Information Line
toll-free at 1-888-CRANE-CR (1-888-272-6327). ELECTRONIC DELIVERY OF PROXY MATERIALS Shareholders
can elect to receive Proxy Materials (proxy statement, annual report and proxy card) over the
Internet instead of receiving paper copies in the mail. If you are a registered shareholder and
wish to consent to electronic delivery of Proxy Materials, you may register your authorization at
www.computershare.com/investor. You can locate your account number on your stock certificate,
dividend check or plan statement. Annual Meeting of Shareholders April 18, 2011 This Proxy is
Solicited on Behalf of the Board of Directors. The undersigned does hereby appoint and constitute
R. S. Evans, E.C. Fast and A.I duPont and each of them, true and lawful agents and proxies of the
undersigned, with full power of substitution, and hereby authorizes each of them to vote, as
directed on the reverse side of this card, or, if not so directed, in accordance with the Board of
Directors recommendations, all shares of Crane Co. held of record by the undersigned at the close
of business on February 28, 2011 at the Annual Meeting of Shareholders of Crane Co. to be held in
the First Floor Conference Room, 200 First Stamford Place, Stamford, Connecticut on Monday, April
18, 2011 at 10:00 a.m., Eastern Daylight Time, or at any adjournment thereof, with all the powers
the undersigned would possess if then and there personally present, and to vote, in their
discretion, upon such other matters as may come before said meeting. This proxy covers all shares
for which the undersigned has the right to give voting instructions to Vanguard Fiduciary Trust
Company, Trustee of the Crane Co. Savings and Investment Plan. This proxy, when properly executed,
will be voted as indicated on the reverse side. If voting instructions are not received by the
proxy tabulator by April 11, 2011 it will be treated as directing the Plans Trustee to vote shares
held in the Plan in the same proportion as the shares for which the Trustee has received timely
instructions from others who do vote. You are encouraged to specify your choices by marking the
appropriate boxes (SEE REVERSE SIDE), but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors recommendations. The Proxies cannot vote your shares unless
you sign and return this card or use the toll-free telephone number or Internet web site on the
reverse side. This proxy when properly executed will be voted in the manner directed herein. If no
direction is made, this proxy will be voted FOR election of all nominees, FOR Proposals 2, 3 and 4,
and FOR ANNUAL frequency of say-on-pay voting by shareholders. Proxy Crane Co. _IF YOU HAVE NOT
VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM
PORTION IN THE ENCLOSED ENVELOPE._ |