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 (AMENDMENT NO. _____)
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[ ] Soliciting Materials Pursuant to Rule 14a-11(c) or Rule 14a-12
Huttig Building Products, Inc.
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[HUTTIG LOGO]
14500 SOUTH OUTER FORTY ROAD, SUITE 400
CHESTERFIELD, MISSOURI 63017
March 28, 2002
Dear Huttig Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Huttig Building Products, Inc., to be held at 2:00 p.m., Eastern Daylight Time,
on Monday, April 22, 2002 at the Hyatt Regency Greenwich Hotel, Riverside Room,
1800 E. Putnam, Old Greenwich, Connecticut.
The Notice of Meeting and Proxy Statement on the following pages describe
the matters to be presented at the meeting. Management will report on current
operations and there will be an opportunity for discussion of the Company and
its activities. Our 2002 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, by using the toll-free telephone number on
the proxy card or by using the Internet as instructed on the proxy card.
Sincerely,
/s/ Barry J. Kulpa
Barry J. Kulpa
President and Chief Executive Officer
HUTTIG BUILDING PRODUCTS, INC.
14500 SOUTH OUTER FORTY ROAD, SUITE 400
CHESTERFIELD, MISSOURI 63017
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 22, 2002
March 28, 2002
To the Stockholders of Huttig Building Products, Inc.:
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Stockholders of Huttig
Building Products, Inc., will be held at the Hyatt Regency Greenwich Hotel,
Riverside Room, 1800 E. Putnam, Old Greenwich, Connecticut on Monday, April 22,
2002 at 2:00 p.m., Eastern Daylight Time, for the following purposes:
1. To elect three directors to serve for three-year terms until the
Annual Meeting of Stockholders in 2005;
2. To consider and act upon a proposal to approve the Huttig Building
Products, Inc. Amended and Restated 2001 Stock Incentive Plan;
3. To consider and act upon a proposal to approve the selection of
Deloitte & Touche LLP as independent auditors for the Company for
2002; and
4. To transact such other business as may properly come before the
meeting in connection with the foregoing or otherwise.
The Board of Directors has fixed the close of business on February 25,
2002 as the record date for the purpose of determining stockholders entitled to
notice of and to vote at said meeting or any adjournment thereof. A complete
list of such stockholders will be open to the examination of any stockholder
during regular business hours for a period of ten days prior to the meeting at
the offices of Crane Co., 100 First Stamford Place, Stamford, CT 06902.
In order to assure a quorum, it is important that stockholders who do not
expect to attend the meeting in person fill in, sign, date and return the
enclosed proxy in the accompanying envelope, or you may also vote your shares by
using the toll-free telephone number or via the Internet, as more fully
explained on the enclosed proxy card. Any stockholder attending the meeting may
vote in person even if that stockholder has previously returned a proxy.
By Order of the Board of Directors,
/s/ Nick H. Varsam
Nick H. Varsam
Secretary
HUTTIG BUILDING PRODUCTS, INC.
14500 SOUTH OUTER FORTY ROAD, SUITE 400
CHESTERFIELD, MISSOURI 63017
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 22, 2002
The enclosed proxy is solicited by the Board of Directors of Huttig
Building Products, Inc. (the "Company") for use at the Annual Meeting of
Stockholders to be held at the Hyatt Regency Greenwich Hotel, Riverside Room,
1800 E. Putnam, Old Greenwich, Connecticut, on Monday, April 22, 2002, at 2:00
p.m., Eastern Daylight Time, or at any adjournment or postponement thereof. The
enclosed proxy, when properly executed and received by the Secretary prior to
the meeting, and not revoked, will be voted in accordance with the directions
thereon. If no directions are indicated, the proxy will be voted FOR each
nominee for election as a director, FOR the proposal to approve the Huttig
Building Products, Inc. Amended and Restated 2001 Stock Incentive Plan (the
"2001 Stock Incentive Plan") and FOR the proposal to approve the selection of
Deloitte & Touche LLP as independent auditors for the Company for 2002. If any
other matter should be presented at the Annual Meeting upon which a vote may
properly be taken, the shares represented by the proxy will be voted with
respect thereto in accordance with the discretion of the person or persons
holding such proxy. Proxies may be revoked by stockholders at any time prior to
the voting of the proxy by written notice to the Company, by submitting a new
proxy or by voting in person at the meeting.
Stockholders of record may vote their proxy by using the toll-free number
listed on the proxy card or by voting via the Internet as alternatives to using
the written form of proxy. The telephone voting and Internet voting procedures
are designed to authenticate votes cast by use of a Personal Identification
Number. The procedures allow stockholders to appoint a proxy to vote their
shares and to confirm that their instructions have been properly recorded.
Specific instructions to be followed by any stockholder of record interested in
voting by telephone or the Internet are set forth on the enclosed proxy card.
Proxies voted by telephone or the Internet may be revoked as described above.
The first date on which this proxy statement and the enclosed proxy card
are being sent to the Company's stockholders is on or about March 28, 2002.
As of the close of business on February 25, 2002, the record date for
determining stockholders entitled to notice of and to vote at the meeting, the
Company had issued and outstanding 19,679,095 shares of common stock. Each share
of common stock is entitled to one vote on each matter to be voted on at the
meeting. The presence in person or by proxy at the meeting of stockholders
entitled to cast at least a majority of the votes that all holders of shares of
common stock are entitled to cast will constitute a quorum for the transaction
of business at the meeting. Abstentions may be specified as to all proposals to
be brought before the meeting other than the election of directors. Under the
rules of the New York Stock Exchange, Inc., brokers holding shares for customers
have authority to vote on certain matters even if they have not received
instructions from the beneficial owners, but do not have such authority as to
certain other matters (so-called "broker non-votes"). Abstentions and broker
non-votes are counted for purposes of determining whether a quorum is present at
the meeting.
Directors will be elected by a plurality of the votes cast by holders of
shares of common stock present in person or represented by proxy and entitled to
vote at the meeting. Votes may be cast in favor of a director nominee or
withheld, and the three persons receiving the highest number of favorable votes
will be elected as directors of the Company. Non-voted shares and shares whose
votes are withheld will not affect the outcome of the election of directors.
Approval of the Amended and Restated 2001 Stock Incentive Plan and approval of
the selection of auditors require the affirmative vote of a majority of votes
cast by holders of shares of common stock present in person or represented by
proxy and entitled to vote at the meeting. Abstentions and broker non-votes will
not be counted as votes cast for or against such proposals and, accordingly,
will not be taken into consideration in determining whether or not such
proposals have been approved.
If you participate in the Huttig Building Products, Inc. Savings and
Profit Sharing Plan (the "401(k) Plan"), you will receive one proxy with respect
to all shares registered in the same name. If your accounts are not registered
in the same name, you will receive a separate proxy with respect to your
individual plan shares. Shares of common stock held in the 401(k) Plan will be
voted by The Prudential Investment Company of America, as trustee of the 401(k)
Plan. Participants in the 401(k) Plan should indicate their voting instructions
for each action to be taken under proxy. All voting instructions from the 401(k)
Plan participants will be kept confidential.
1
If a participant fails to sign or to return the enclosed proxy/voting
instruction card, the shares allocated to such participant will be voted in
accordance with the pro rata vote of the participants who did provide
instructions.
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of nine members divided
into three classes with three-year terms of office ending in three different
years. At the 2002 Annual Meeting, three directors are to be elected to hold
office until the 2005 Annual Meeting and until their successors are elected and
qualified. The enclosed proxy will be voted for election of the three directors
of the 2005 class named in the following table, unless a stockholder indicates
that a vote should be withheld with respect to one or more of such directors.
The election of these directors has been proposed and recommended by the Board
of Directors. Each of the nominees has consented to being named in this Proxy
Statement and his indicated his willingness to serve if elected. If any nominee
shall, prior to the meeting, become unavailable for election as a director, the
persons named in the accompanying form of proxy will vote for such nominee, if
any, as may be recommended by the Board of Directors.
Under the Company's By-Laws, a stockholder intending to nominate any
person for election as a director of the Company must notify the Secretary of
the Company in writing not less than 60 days nor more than 90 days prior to the
anniversary date of the immediately preceding annual meeting. If an annual
meeting is called for a date that is not within 30 days before or after the
anniversary date of the immediately preceding annual meeting, a stockholder's
notice must be received by the Company not later than the close of business on
the 10th day following the day on which notice of the date of the annual meeting
was mailed or public disclosure of the date of the annual meeting was made,
whichever first occurs. The notice must set forth (a) as to each person
nominated, (i) the name, age, business address and residential address of such
person, (ii) the principal occupation of such person, (iii) the number of shares
of common stock beneficially owned by such person and (iv) any other information
required to be disclosed in solicitations for proxies for elections of directors
under the federal securities laws; and (b) as to the stockholder giving such
notice, (i) the name and record address of such stockholder, (ii) the number of
shares of common stock beneficially owned by such stockholder, (iii) a
description of any arrangement between such stockholder and each of his or her
nominees and any other persons (including their names) pursuant to which the
nominations are made by such stockholder, (iv) a representation that such
stockholder intends to appear in person or by proxy at the annual meeting to
nominate his or her nominees and (v) any other information required to be
disclosed in solicitations for proxies for elections of directors under the
federal securities laws. The notice must be accompanied by the executed consent
of each nominee to serve as a director if so elected.
The age, position with the Company, period of service as a director of the
Company, business experience during the past five years and directorships in
other companies of each of the nominees for election and of each of those
directors whose terms will continue are set forth below:
NOMINEES FOR DIRECTOR TO BE ELECTED FOR TERMS TO EXPIRE IN 2005
ALAN S. J. DURANT
Age 64, Director since February 2000. President and Director, RMC
Industries Corporation, Decatur, Georgia (concrete products, aggregates
and cement producer) since 1993. Other directorships: RMC Group p.l.c.
R. S. EVANS
Age 58, Director since 1972. Chairman of the Company. Chairman and, until
April 2001, Chief Executive Officer of Crane Co. (diversified manufacturer
of engineered industrial products). Other directorships: Crane Co.,
Fansteel, Inc., HBD Industries, Inc.
BARRY J. KULPA
Age 54, Director since October 1997. President and Chief Executive Officer
of the Company since October 1997. Senior Vice President and Chief
Operating Officer of Dal-Tile International (manufacturer and distributor
of ceramic tile), 1994 to 1997.
2
DIRECTORS WHOSE TERMS EXPIRE IN 2004
E. THAYER BIGELOW, JR.
Age 60, Director since October 1999. Managing General Partner, Bigelow
Media, LLC (media and entertainment consultant), since September 2001.
Senior Advisor, Time-Warner Inc. (media and entertainment company), from
October 1998 to August 2001. Chief Executive Officer, Court TV, an
affiliate of Time Warner Entertainment LP (cable television program
services), March 1997 to October 1998. Other directorships: Crane Co.,
Lord Abbett & Co. Mutual Funds.
RICHARD S. FORTE
Age 57, Director since October 1999. President, Dawson Forte Cashmere
Company (importer), since January 1997. Chairman since January 1997 and,
prior thereto, President, Forte Cashmere Company, Inc. (importer and
manufacturer). Other directorships: Crane Co.
PETER L. YOUNG
Age 63, Director since February 2000. Retired. Group Chief Executive, RMC
Group p.l.c., United Kingdom (international building materials company),
January 1996 to June 2000. Other directorships: RMC Pension Trust Limited,
Ready Mixed Concrete Senior Benefits Trust Limited, RMC Money Purchase
Pension Trust Ltd., Readymix, p.l.c., Ireland (building materials
company).
DIRECTORS WHOSE TERMS EXPIRE IN 2003
DORSEY R. GARDNER
Age 59, Director since October 1999. President, Kelso Management Co., Inc.
(investment management company). General Partner, Hollybank Investments,
L.P., Thistle Investments, L.P. and Gottonside Investments, LLC (private
investment funds). Other directorships: Crane Co.
DELBERT H. TANNER
Age 50, Director since January 2001. Chief Operating Officer and Executive
Vice President, since February 2002, and Senior Vice President, from July
1998 to January 2002, RMC Industries Corporation. Chief Executive Officer,
Channel Partners, Inc. (software marketing company), April 1996 to July
1998.
JAMES L. L. TULLIS
Age 54, Director since October 1999. Chairman and Chief Executive Officer,
Tullis-Dickerson & Co., Inc. (venture capital investments in health care
industry), since 1986. Other directorships: Crane Co.
On December 16, 1999, the Company purchased the U.S. building products
business of The Rugby Group Limited, formerly The Rugby Group p.l.c. ("Rugby"),
in exchange for 6,546,424 newly issued shares of common stock constituting 32%
of the Company's outstanding common stock on that date (the "Exchange").
Pursuant to a Registration Rights Agreement entered into by the Company and
Rugby in connection with the Exchange, so long as the common stock owned by
Rugby and received in the Exchange constitutes at least 30%, 20% and 10% of the
outstanding common stock, Rugby is entitled to designate for nomination by the
Board of Directors three, two or one directors, respectively. As part of the
Company's $15 million stock repurchase program, which the Board of Directors
authorized in August 2001, the company purchased 790,484 shares of its common
stock from Rugby for a cash purchase price of $4,735,000, or $5.99 per share,
the closing sales price of the Company's common stock on the New York Stock
Exchange on the date of purchase. The Company agreed that its repurchase of
these shares from Rugby would not affect Rugby's existing right to nominate up
to three members of Huttig's board of directors. See "Certain Relationships and
Related Transactions" on page 15 of this Proxy Statement. Based on information
as of February 25, 2002, Rugby beneficially owned 29.2% of the Company's common
stock. RMC Group, p.l.c., a public limited company organized under the laws of
England and Wales, now owns 100% of the outstanding capital stock of
Rugby. Messrs. Durant, Tanner and Young are Rugby's designees to the Board of
Directors.
The Board of Directors has an Executive Committee, Audit Committee and an
Organization and Compensation Committee. The Company does not have a standing
nominating committee. The Executive Committee, which meets when a quorum of the
full Board
3
of Directors cannot be readily obtained, did not meet in 2001.
According to its written charter, the primary function of the Audit
Committee is to assist the Board of Directors in fulfilling its oversight
responsibilities as to accounting policies and financial reporting practices of
the Company and its subsidiaries, the sufficiency of auditing relative thereto
and the adequacy and effectiveness of the Company's internal controls. It is the
Board's principal agent in assuring the independence of the Company's
independent auditors, the integrity of management and the adequacy of
disclosures to stockholders. The independent auditors are ultimately accountable
to the Board of Directors and the Audit Committee, and the Audit Committee and
the Board of Directors have the ultimate authority and responsibility to select,
evaluate, and where appropriate, replace the independent auditors or to nominate
the independent auditors to be proposed for stockholder approval. The Audit
Committee also has responsibility for reviewing compliance with the Company's
business ethics and conflict of interest policies. The Audit Committee annually
recommends to the Board of Directors the appointment of a firm of independent
auditors to audit the financial statements of the Company and meets with such
independent auditors, the Company's internal auditor, the Chief Executive
Officer and the principal financial, accounting, planning, and legal personnel
of the Company to review the scope and the results of the annual audit, the
amount of audit fees, the Company's internal accounting controls, the Company's
financial statements that are contained in the Company's Annual Report on Form
10-K and other related matters. The members of the Audit Committee are
"independent" as such term is defined in Sections 303.01(B)(2)(a) and (B)(3) of
the New York Stock Exchange's corporate governance standards.
The duties of the Organization and Compensation Committee include review
and approval of the compensation of officers and other key employees, annual
review of director compensation, administration of the Company's EVA Incentive
Compensation Plan, 1999 Stock Incentive Plan and 2001 Stock Incentive Plan, and
review and approval of significant changes or additions to the compensation
policies and practices of the Company. (See "Report on Executive Compensation by
the Organization and Compensation Committee of the Company" beginning on page
9.)
The memberships of committees during 2001 were as follows: Executive
Committee: R. S. Evans (Chairman), B. J. Kulpa and J. L. L. Tullis; Audit
Committee: D. R. Gardner (Chairman), E. T. Bigelow, Jr., A. S. J. Durant
(appointed in August 2001) and R. S. Forte; Organization and Compensation
Committee: E. T. Bigelow, Jr. (Chairman), A. S. J. Durant (appointed in August
2001), D. R. Gardner and J. L. L. Tullis.
During 2001, the Board of Directors of the Company met six times, the
Audit Committee met five times and the Organization and Compensation Committee
met three times. Each director attended over 75% of the total number of meetings
of the Board of Directors and the committees on which he served that were held
during his period of service, except for Mr. Durant.
COMPENSATION OF DIRECTORS
The standard retainer payable to each non-employee director, other than
Mr. Evans, is $10,000 per year. Mr. Evans receives an annual fee of $100,000 for
his services as Chairman. Pursuant to the Company's 1999 Non-Employee Director
Restricted Stock Plan, non-employee directors, except Mr. Evans and the
designees of Rugby, receive, in lieu of cash, shares of restricted stock with a
market value equal to that portion of the standard retainer which exceeds
$5,000. The shares are issued each year after the Company's annual meeting, are
forfeitable if the director ceases to remain a director until the Company's next
annual meeting, except in the case of death, disability or a change in control,
and may not be sold for a period of five years or such earlier date as the
director leaves the board. Each of Messrs. Bigelow, Forte, Gardner and Tullis
received 2,360 restricted shares of common stock issued under the 1999
Non-Employee Director Restricted Stock Plan in 2001.
Directors also receive $500 for each board meeting attended. Non-employee
members of the Executive Committee receive an annual retainer of $2,000. Members
of other committees receive $500 and chairmen receive $750 for each committee
meeting attended.
Each of Messrs. Durant, Tanner and Young have agreed with Rugby to
transfer to Rugby all compensation payable to them for services as a
non-employee director of the Company.
4
REPORT OF THE AUDIT COMMITTEE
The Audit Committee has reviewed and discussed with management the
financial statements for fiscal year 2001 audited by Deloitte & Touche LLP, the
Company's independent auditors. The Audit Committee has discussed with Deloitte
& Touche LLP various matters related to the financial statements, including
those matters required to be discussed by SAS 61 (Codification of Statements on
Auditing Standards, AU 380.) The Audit Committee has also received the written
disclosures and the letter from Deloitte & Touche LLP required by Independence
Standards Board Standard No. 1 (Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees), and has discussed with Deloitte
& Touche LLP its independence. Based upon such review and discussions, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2001 for filing with the Securities and Exchange
Commission.
This report is not to be deemed "soliciting material" or deemed to be
filed with the Securities and Exchange Commission or subject to Regulation 14A
of the Securities Exchange Act of 1934, except to the extent that the Company
specifically requests that this report be treated as "soliciting material" or
specifically incorporates it by reference into a document filed with the
Securities and Exchange Commission.
Submitted by:
The Audit Committee of the
Board of Directors of Huttig Building Products, Inc.
D. R. Gardner - Chairman
E. T. Bigelow, Jr.
A. S. J. Durant
R. S. Forte
BENEFICIAL OWNERSHIP OF COMMON STOCK
BY DIRECTORS AND MANAGEMENT
The following table sets forth the number of shares of common stock
beneficially owned, directly or indirectly, by the Company's directors and
nominees for director, the executive officers named in the Summary Compensation
Table and all of the Company's directors and executive officers as a group, as
of February 25, 2002.
SHARES OF SHARES
UNRESTRICTED SHARES IN RESTRICTED UNDERLYING TOTAL SHARES
SHARES COMPANY STOCK EXERCISABLE BENEFICIALLY PERCENT OF SHARES
OWNED(1) 401(K)PLAN OWNED(2) OPTIONS(3) OWNED OUTSTANDING
-------- ---------- -------- ---------- ----- -----------
NON-EMPLOYEE DIRECTORS:
R. S. Evans.................. 457,518(4) -- -- 75,000 532,518 2.7%
E. Thayer Bigelow, Jr........ 6,577 -- 1,250 10,000 17,827 *
Richard S. Forte............. 4,787 -- 1,250 10,000 16,037 *
Dorsey R. Gardner............ 2,872 -- 1,250 10,000 14,122 *
James L. L. Tullis........... 1,554 -- 1,250 10,000 12,804 *
Alan S. J. Durant............ -- -- -- -- --(5) --
Delbert H. Tanner............ -- -- -- -- -- --
Peter L. Young............... -- -- -- -- -- --
NAMED EXECUTIVE OFFICERS:
Barry J. Kulpa............... 99,567 3,386 184,466 314,500 601,919 3.0%
Carl A. Liliequist........... 10,094 4,429 9,645 43,950 68,118 *
George M. Dickens, Jr........ 3,443 2,393 3,443 40,200 49,479 *
John M. Mullin............... -- 3,283 -- 14,000 17,283 *
Thomas S. McHugh............. -- 1,376 -- 14,250 15,626 *
Kenneth E. Thompson.......... 2,318 2,530 -- -- 4,848 *
DIRECTORS AND EXECUTIVE
OFFICERS AS A GROUP (15 PERSONS) 588,370 17,644 202,554 541,900 1,350,828 6.7%
----------
* Represents holdings of less than 1%.
(1) Includes previously restricted shares, the restrictions on which have
lapsed.
5
(2) Includes shares issued under the Company's stock plans. These shares are
subject to forfeiture if the director's or employee's service with the
Company is terminated prior to vesting.
(3) Includes shares underlying options granted by the Board of Directors to
certain non-employee directors and shares underlying options granted to
employees under the Company's 1999 Stock Incentive Plan and 2001 Stock
Incentive Plan, which options are exercisable within 60 days of February
25, 2002, in accordance with Rule 13d-3 under the Securities Exchange Act
of 1934.
(4) Does not include 107 shares owned by Mr. Evans' spouse, the beneficial
ownership of which is expressly disclaimed by Mr. Evans.
(5) Excludes 5,755,940 shares of common stock owned by The Rugby Group
Limited, which may be deemed to be beneficially owned by Mr. Durant, who
is a director and executive officer of RMC Industries Corporation and a
director of RMC Group p.l.c., the parent of Rugby. Mr. Durant expressly
disclaims beneficial ownership of the shares of common stock owned by
Rugby.
PRINCIPAL STOCKHOLDERS OF THE COMPANY
The following table sets forth the ownership of common stock by each person
known by the Company to beneficially own more than 5% of the common stock based
on the number of shares of common stock outstanding as of February 25, 2002.
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
---------------- -------------------- ----------------
RMC Group p.l.c. 5,755,940(1) 29.2%
RMC House
Coldharbour Lane
Thorpe, Egham, Surrey
TW20 8TD
United Kingdom
The Baupost Group, L.L.C. 1,800,000(2) 9.1%
10 St. James Avenue
Suite 2000
Boston, MA 02116
The Crane Fund(3) 1,728,537 8.8%
100 First Stamford Place
Stamford, CT 06902
(1) According to a Statement on Schedule 13D/A filed by RMC Group on August
23, 2001, as of that date RMC Group owned 100% of the outstanding shares
of The Rugby Group Limited, which is the direct beneficial owner of these
shares.
(2) According to a Statement on Schedule 13G filed by The Baupost Group,
L.L.C. on February 14, 2002.
(3) The Crane Fund is a charitable trust managed by trustees appointed by the
board of directors of Crane Co. The incumbent trustees are: G. A. Dickoff,
A. I. DuPont, E.M. Kopczick and M. L. Raithel, all of whom are executive
officers of Crane. Pursuant to the trust instrument, the shares held by
the trust shall be voted by the trustees as directed by the board of
directors of Crane, the distribution of the income of the trust for its
charitable purposes is subject to the control of the board of directors of
Crane and the shares may be sold by the trustees only upon the direction
of the board of directors of Crane. Messrs. Evans, Bigelow, Forte, Gardner
and Tullis are directors of Crane. None of the directors or the trustees
has any direct beneficial interest in, and all disclaim beneficial
ownership of, shares held by The Crane Fund.
6
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
Shown below is information concerning the annual and long-term
compensation for services rendered in all capacities to the Company and its
subsidiaries for the years ended December 31, 2001, 2000 and 1999 for Barry J.
Kulpa, the Company's Chief Executive Officer, the other four most highly
compensated individuals who served as executive officers of the Company at
December 31, 2001, and one other individual who was an executive officer of the
Company during 2001 but not at December 31, 2001. The compensation described in
this table was paid by the Company or a former affiliate of the Company.
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------------------- ----------------------------------------
SECURITIES
OTHER RESTRICTED UNDERLYING
NAME AND BONUS ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) ($)(1) COMPENSATION($) AWARD($)(2) SARS(#)(3) PAYOUTS($) COMPENSATION($)(4)
------------------ ---- --------- ------ --------------- ----------- ---------- ---------- ------------------
Barry J. Kulpa 2001 400,000 36,560 -- 131,250 140,000 -- 2,736
President and Chief 2000 350,000 414,164 -- 276,250 326,000 -- 5,250
Executive Officer 1999 263,000 130,000 -- 274,056(5) 32,528 -- 5,905
Kenneth E. Thompson 2001 191,667 60,000(7) -- -- 20,000 -- 3,903
Vice President and 2000 74,500 61,431 -- -- 100,000 -- --
Chief Financial
Officer(6) 1999 -- -- -- -- -- -- --
Carl A. Liliequist 2001 157,500 77,261 -- -- 13,500 -- 255
Regional Vice 2000 147,500 243,556 -- -- 15,000 -- 158
President(8) 1999 147,500 146,343 -- -- -- -- --
George M Dickens, Jr. 2001 194,325 4,277 -- -- 29,400 -- 2,407
Vice President - 2000 182,600 160,563 -- -- 34,000 -- 4,033
Sales & Marketing (9) 1999 182,600 -- -- -- -- -- 252,908(10)
John M. Mullin 2001 144,886 43,056 -- -- 11,000 -- 2,749
Vice President - 2000 115,000 96,783 -- -- 11,500 -- 5,750
Operations 1999 52,361 70,000 -- -- -- -- 941
Thomas S. McHugh 2001 138,208 45,336 -- -- 13,500 -- 255
Treasurer & 2000 84,375 37,000(12) -- -- 15,000 -- 158
Controller(11) 1999 -- -- -- -- -- -- --
----------
(1) Represents amounts earned by the named executive officers under the
Company's EVA Incentive Compensation Plan, except as otherwise noted. See
the section captioned "Short and Medium-Term Executive Compensation" in
the Report on Executive Compensation by the Organization and Compensation
Committee of the Company beginning on page 9. Amounts reported include the
annual cash payout, if any, after allocation of the EVA award earned for
that year and, for executives who elected to receive 50% of their EVA
award in the form of restricted shares, the value of shares awarded for
that year, based on the closing sales price per share of the Company's
common stock on the New York Stock Exchange on the date the shares were
awarded. After giving effect to such cash payouts, the named executive
officers have credited to their cash accounts under the EVA Plan the
following amounts as of December 31, 2001, which are subject to increase
or decrease in future years: Mr. Kulpa, $36,560; Mr. Liliequist, $154,522;
Mr. Dickens, $4,277; and Mr. Mullin $33,463. Mr. Thompson's cash account
balance was forfeited upon his retirement in accordance with the terms of
the plan, and Mr. McHugh did not participate in the plan. The Company is
responsible for the account balances of the foregoing employees and the
other employees participating in this plan.
(2) Reflects the value of shares of restricted stock granted to Mr. Kulpa
under the Company's 1999 Stock Incentive Plan, based on the closing sales
price per share of the Company's common stock on the New York Stock
Exchange on the date of grant. On January 22, 2001 and January 24, 2000,
Mr. Kulpa was granted 30,000 shares and 65,000 shares, respectively, of
restricted stock. Restrictions on these restricted shares will lapse
one-fifth per year beginning one year from the date of grant. As of
December 31, 2001, Mr. Kulpa held a total of 160,121 restricted shares of
common stock. Based on the closing sales price per share of the Company's
common stock on December 31, 2001 of $6.10, the value of the 160,121
restricted shares on that date was $976,738. No other named executive
officers have received awards of restricted stock other than the portion
of EVA awards elected to be paid in the form of stock under the EVA Plan.
(3) No options to purchase shares of the Company's common stock were
outstanding in 1999. The shares reported in this column for 1999 represent
shares of Crane Co.'s common stock underlying options that were granted by
Crane prior to the distribution by Crane of all of the outstanding shares
of common stock of the Company to Crane's stockholders on December 16,
1999 (the "Distribution"). All options reported in this column for 1999
were forfeited on March 15, 2000. Options reported for 2000 and 2001
reflect grants under the Company's 1999 Stock Incentive Plan.
(4) Amounts include Huttig's matching contribution for eligible employees
under Huttig's 401(k) plan and premiums for life insurance.
(5) Prior to the Distribution, Mr. Kulpa had been granted an aggregate of
15,000 shares of time-based Crane restricted stock. In the Distribution,
Mr. Kulpa received 3,333 shares of restricted common stock of the Company
in respect of his ownership of the 15,000 shares of time-based Crane
restricted stock. Based on the closing price of $3.4375 per share of the
Company's common stock on December 16, 1999, the date of the Distribution,
the value of the 3,333 shares on that date was $11,457. This value is
included in the restricted stock award reported for 1999. In connection
with the Distribution, on December 17, 1999, the 15,000 shares of
time-based Crane restricted stock owned by Mr. Kulpa were converted into
61,788 shares of the Company's time-based restricted stock. Based on the
closing price of $4.25 per share of the Company's common stock on December
17, 1999, the value of the 61,788 shares on that date was $262,599. The
restrictions on 32,561 shares of Mr. Kulpa's restricted common stock
granted in 1999 will lapse in 2003 and restrictions on 32,560 shares
granted in 1999 will lapse in 2004.
7
(6) Effective January 2002, Mr. Thompson retired from the Company.
(7) Represents discretionary bonus paid upon appointment as Chief Financial
Officer of the Company in January 2001.
(8) Effective October 2001, Mr. Liliequist was no longer an executive officer
of the Company.
(9) Prior to December 16, 1999, Mr. Dickens was employed, and his 1999
compensation was paid, by Rugby Building Products, Inc.
(10) Includes amounts paid under change of control provisions when the Company
acquired Rugby on December 16, 1999.
(11) Mr. McHugh became Vice President - Finance and Chief Financial Officer of
the Company in January 2002.
(12) Includes a $10,000 signing bonus.
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is information on grants to the named executive officers of
options to purchase shares of common stock pursuant to the 1999 Stock Incentive
Plan during the year ended December 31, 2001.
Number of % of
Securities Total Options
Underlying Granted to Exercise or Grant Date
Options Employees in Base Price Expiration Present
Name Granted Fiscal Year $/Share Date Value($)(1)
---- ------- ----------- ------- ---- -----------
Barry J. Kulpa........ 140,000 38% $4.34 1/22/11 $262,332
Kenneth E. Thompson 20,000 5% $4.34 1/22/11 $ 37,476
Carl A. Liliequist..... 29,400 8% $4.34 1/22/11 $ 55,090
George M. Dickens, Jr. 29,400 8% $4.34 1/22/11 $ 55,090
John M. Mullin........ 11,500 3% $4.34 1/22/11 $ 21,549
Thomas S. McHugh...... 13,500 4% $4.34 1/22/11 $ 25,296
----------
(1) The amounts shown were calculated using a Black-Scholes option pricing
model and do not reflect the actual value of the option awards at any
time. The estimated values assume a risk-free rate of return of 4.4% based
upon the five-year Treasury Bill rate, a standard deviation of stock
return of 41%, a dividend payout ratio of 0% and an option duration of 5
years. The standard deviation of stock return represents a statistical
measure intended to reflect the anticipated fluctuation of price movements
over the life of the option. The actual value, if any, that an executive
may realize will depend upon the excess of the stock price over the
exercise price on the date the option is exercised, and so the value
realized by an executive may be more or less than the value estimated by
the Black-Scholes model.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The information set forth in the following table relates to options to
purchase common stock that were exercised by the named executive officers in
2001 and the value of unexercised options held as of December 31, 2001.
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money
Options at Options at
Shares Fiscal Year-End(#) Fiscal Year-End($)(1)
Acquired on Value
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
Barry J. Kulpa........ -- -- 163,000 303,000 $295,030 $541,430
Kenneth E. Thompson... -- -- 50,000 70,000 $ 68,500 $103,700
Carl A. Lillequist.... -- -- 19,500 48,900 $ 35,295 $ 87,039
George M. Dickens, Jr. -- -- 17,000 46,400 $ 30,770 $ 82,514
John M. Mullin........ -- -- 5,500 17,000 $ 9,955 $ 30,195
Thomas S. McHugh...... -- -- 7,500 21,000 $ 12,750 $ 36,510
----------
(1) Based on a share price of $6.10, which was the closing sales price per
share of the Company's common stock on the New York Stock Exchange on
December 31, 2001.
8
REPORT ON EXECUTIVE COMPENSATION BY THE ORGANIZATION AND COMPENSATION COMMITTEE
OF THE COMPANY
The Organization and Compensation Committee of the Board of Directors of
the Company believes that the Company's compensation program is designed to
attract and retain talented executives whose interests are aligned with the
Company's stockholders and who are motivated to contribute to the Company's
long-term financial success. The Company provides its executives with
competitive base pay as well as the opportunity to earn significant compensation
if the Company and the individual meet or exceed challenging performance goals.
The Committee periodically reviews independent compensation surveys as
guidelines to determine competitive pay practices. Independent compensation
consultants have also summarized the survey data. The surveys typically compare
the compensation practices of U.S.-based public companies of similar size to the
Company, some of which are also in the Company's industry. These companies
include those in the Company's peer group set forth in the Stock Performance
Graph on page 14 of this Proxy Statement.
The Committee maintains a three-pronged approach to executive officer and
key employee compensation: competitive base salaries; short and medium-term cash
incentive compensation linked to measurable changes in stockholder value; and
long-term incentive compensation utilizing awards of stock options and
restricted stock, the ultimate value of which is linked to increases in
stockholder returns, primarily through increases in the price of the Company's
common stock. Each of these components represents a portion of each executive
officer's total compensation package. The appropriate mix of compensation for
each individual, however, may differ based on the nature and level of the
individual's responsibilities. For example, for individuals who have primarily
sales or operations related responsibilities, incentive, or "at-risk,"
compensation may represent a greater portion of their total compensation.
BASE SALARIES
The Committee generally reviews the base salaries of each executive
officer at the beginning of the year and assesses salary levels based on the
individual's responsibilities and competitive salary data. The Chief Executive
Officer determines salary adjustments for his direct reports and presents them
to the Committee at that time. Certain of the named executive officers have
employment agreements with the Company that establish a minimum base salary.
Based on the Committee's review of executive salaries and the approved increase
in the Chief Executive Officer's salary in January 2001, base salaries in 2001
for the Company's executive officers named in the Summary Compensation Table
increased an average of 13.9% over 2000 (excluding promotional increases). Two
of the named executive officers' salaries were established or adjusted during
2001 to reflect their promotion. All of the base salaries of the Company's named
executive officers are at levels that, in the view of the Committee, are
appropriate for executives of a public corporation of the Company's size and
industry category.
SHORT AND MEDIUM-TERM INCENTIVE COMPENSATION
The Company's short and medium-term incentive compensation program is
based on the principle of economic value added ("EVA") over a three-year rolling
horizon. EVA1 is defined as the difference between the return on total capital
invested in the business and the cost of capital, multiplied by total capital
employed. The Committee believes that, compared to common performance measures
such as return on capital, return on equity, growth in earnings per share and
growth in cash flow, EVA has the highest correlation with the Company's
financial performance and the creation of long-term stockholder value. In
January of each year, the Committee also reassesses both the strengths and
weaknesses of EVA-based compensation as part of its overall consideration of
executive compensation and performance measures for the coming year.
All of the Company's executive officers and certain other key employees
participate in the Company's EVA Incentive Compensation Plan, which the
Committee administers. The EVA plan provides for positive and negative awards
based on the achievement of pre-established goals for each participant and
increases or decreases in EVA during the year, both absolutely and as compared
to the prior year. The key elements of the EVA formula are the Company's cost of
capital, cash tax rate, return on capital, amount of capital employed, net
operating profit after taxes and the prior year's EVA. Thus, the EVA formula
requires the executive to focus on improvement in the Company's balance sheet as
well as its income statement. At the beginning of each year, the Committee
approves a weighted average cost of capital for use in the EVA formula.
The Company's EVA is calculated based on year-end results and, together
with the increase or decrease in EVA compared to the prior year, is used to
determine the total potential award pool available for the named executive
officers, including the Chief Executive Officer, and certain other key
employees. The size of an executive officer's potential EVA award is based on a
percentage of the total pool assigned to each officer, which percentages the
Committee reviews annually based upon recommendations of the
--------
1 EVA is a registered trademark of Stern, Stewart & Co.
9
Chief Executive Officer. An officer's actual EVA award directly relates to the
accomplishment of that individual's goals established at the beginning of each
year. Awards under the EVA plan are generally uncapped to provide maximum
incentive to create value; however, an executive's award in any given year may
be negative when EVA is reduced. There is a $2 million limit on the annual award
of any participant who is subject to Section 162(m) of the Internal Revenue
Code.
At the beginning of each year, participants elect whether to receive their
awards for the upcoming year entirely in cash or 50% in cash and 50% in
restricted stock. After the award has been determined following the end of the
year, the award is credited to the participant's cash and/or stock
"sub-accounts" in accordance with his election, if the award is positive. If the
EVA award is negative, the amount is deducted from the participant's cash
sub-account in proportion to his election. Negative awards do not affect a
participant's stock sub-account. Restricted stock awarded to participants who
elected to receive 50% of their EVA award in stock vests in 50% increments on
the first and second anniversaries of the award.
Following the Committee's determination of EVA awards, participants
receive a cash payment equal to a predetermined percentage, generally 33-1/3%,
of their aggregate account balance, reduced by the value of any shares of
restricted stock previously awarded that first becomes vested and distributable
in the year in which the annual cash payout is determined and made and limited
by the balance remaining in the participant's cash sub-account. With respect to
new participants in the EVA Plan, the Committee has authorized payouts of 70% of
the new participant's account balance in the first year of participation, 50% in
the second year and 33-1/3% thereafter. As a result, participants with a
negative aggregate account balance generally will receive no cash incentive
compensation payments until subsequent EVA awards result in a positive account
balance. Each year, the Company credits or debits interest on each cash
sub-account, as applicable, at an appropriate money market rate.
The Committee believes that the EVA plan provides its executive officers
and key employees with a tangible and significant short and medium-term
performance incentive. The bank account concept, with the deferred payout at
risk, gives the plan a longer term perspective than annual cash bonus programs
and provides participants with ownership incentives as their accounts build or
decline. Although the plan is formula driven, the Committee retains discretion
to review and adjust its impact on individuals for reasonableness and to insure
that participants continue to be properly incentivized.
The Committee determined the 2001 EVA awards for the named executive
officers in January 2002. Negative EVA awards in 2001 to the named executive
officers totaled $107,980.
LONG-TERM INCENTIVE COMPENSATION
The Committee believes that executive officers approach their
responsibilities more like owners of the Company as their holdings of and
potential to own the Company's common stock increase. This philosophy starts
with the Board of Directors, whose non-employee directors, except for the
Chairman and the Rugby Group designees, receive 50% of their annual retainer in
common stock of the Company. All of the Company's executive officers have been
granted and are eligible to receive stock options or restricted stock awards
under the Company's 1999 Stock Incentive Plan and 2001 Stock Incentive Plan. As
of February 25, 2002, directors and executive officers as a group beneficially
owned 6.7% of the Company's common stock. (See "Beneficial Ownership of Common
Stock by Directors and Management" on page 5 of this Proxy Statement).
Generally at the beginning of each year, the Committee determines the
number of stock options and restricted shares to award its executive officers
and certain other key employees based on its objective and subjective assessment
of the Company's and the individual's performance for the prior year,
competitive compensation practices and the number of shares owned by or reserved
for issuance to executive officers and key employees. In 2001, the Committee
recommended to the Board of Directors, and the Board approved, the grant of
stock options for an aggregate of 371,800 shares of common stock to the
executive officers and key employees of the Company pursuant to the 1999 plan,
including grants of stock options for 243,800 shares of common stock to the
named executive officers. The Committee determined the number of options granted
in 2001 as a necessary means of providing executives and key employees with
appropriate incentives for retention and long-term future performance.
Except for EVA awards elected to be paid in the form of restricted stock
and for restricted stock grants to the Chief Executive Officer, the Committee
has not granted any restricted stock awards to any officers or key employees.
COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
The base salary and incentive compensation of the Company's President and
Chief Executive Officer, Barry J. Kulpa, is determined in the same manner as
described above for all executive officers of the Company. In January 2001, the
Committee
10
increased Mr. Kulpa's base salary from $350,000 to $400,000, or 14.3%. In
addition to competitive pay factors, the Committee noted Mr. Kulpa's role in
successfully transitioning and leading the Company following the distribution by
Crane Co. of all of the outstanding shares of common stock of the Company to
Crane's stockholders in December 1999 and his leadership in integrating the
business of Rugby Building Products, Inc. during 2000.
Due to the decrease in the Company's EVA for 2001, Mr. Kulpa received a
negative incentive compensation award of $91,951 under the EVA plan. Because Mr.
Kulpa elected to receive 50% of his 2001 EVA award in restricted stock, $45,976
was deducted from his EVA cash sub-account, resulting in a cash sub-account
balance of $73,121. As a result, Mr. Kulpa received in 2002 a cash payment of
$36,560, after allocation of his negative 2001 award and adjustment for the
value of restricted stock vesting in 2002.
In January 2001, Mr. Kulpa was granted options to purchase 140,000 shares
of common stock of the Company. The amount of this grant was determined on the
same basis as was used to determine the 2001 option grants to the other
executive officers described above. In addition, Mr. Kulpa received a grant of
30,000 shares of restricted stock as an additional performance and retention
incentive. The restrictions on the restricted stock will lapse in equal
installments over a five-year period.
SECTION 162(m) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code limits to $1 million per
employee the deductibility of compensation paid to the executive officers
required to be listed in this Proxy Statement unless the compensation meets
certain specific requirements for exemption from Section 162(m). The primary
exemption under Section 162(m) is for compensation that is "performance-based"
within the meaning of Section 162(m) and the applicable regulations. The
Committee believes that amounts paid in the future under the EVA plan and the
stock options and restricted stock awards granted under its 2001 Stock Incentive
Plan will qualify for exemption as performance-based compensation for purposes
of Section 162(m) provided that the Company's stockholders approve the Proposal
regarding the Amended and Restated 2001 Stock Incentive Plan contained in this
Proxy Statement. The Committee's present intention is to comply with the
requirements of Section 162(m) except to the extent that the Committee
determines that such compliance would not be in the best interests of the
Company and its stockholders.
Submitted by:
The Organization and Compensation Committee
of the Board of Directors of Huttig Building Products, Inc.
E. T. Bigelow, Jr. - Chairman
A. S. J. Durant
D. R. Gardner
J. L. L. Tullis
RETIREMENT BENEFITS
The Company does not sponsor a defined benefit pension plan for salaried
employees. However, Messrs. Kulpa and Liliequist participated in Crane Co.'s
pension plan for non-bargaining employees prior to the Distribution and have a
non-forfeitable right in their benefits under the Crane pension plan that were
accrued as of December 31, 1999. The accrued benefits under the Crane pension
plan as of December 31, 1999 entitle Messrs. Kulpa and Liliequist to monthly
payments beginning at age 65 of $425.85 and $1,096.78, respectively.
11
EMPLOYMENT AND OTHER AGREEMENTS
EMPLOYMENT AND SEVERANCE AGREEMENT WITH EXECUTIVE OFFICERS
The Company has an agreement with Barry J. Kulpa, the Company's President and
Chief Executive Officer, that provides for the continuation of his then current
base salary, incentive compensation and benefits for the three year period
following a change in control of the Company. A "change in control" generally
includes:
(i) the acquisition, other than from the Company, of beneficial ownership of
20% or more of the then outstanding shares of the Company's common stock
of the Company but excluding acquisitions by
(a) the Company or any of its subsidiaries;
(b) The Rugby Group Limited or any of its direct transferees;
(c) any employee benefit plan (or related trust) of the Company or its
subsidiaries; or
(d) any corporation with respect to which, following such acquisition,
more than 50% of the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or
indirectly, by substantially the same individuals and entities who
were the beneficial owners, respectively, of the common stock and
voting securities of the Company immediately prior to such acquisition
in substantially the same proportion as their ownership immediately
prior to such acquisition; or
(ii) individuals who constitute the incumbent board (including those on the
board at the date of the agreement and those whose election or
nomination was approved by at least a majority of the then incumbent
board) cease for any reason to constitute at least a majority of the
board, but excluding from any "incumbent board" any such individual
whose initial assumption of office is in connection with an actual or
threatened election contest; or
(iii) approval by the stockholders of the Company of a reorganization,
merger or consolidation with respect to which substantially the same
persons who were the respective beneficial owners of the common stock
and voting securities of the Company immediately prior to such
reorganization, merger or consolidation do not, following such
reorganization, merger or consolidation, beneficially own, directly or
indirectly, more than 50% of the then outstanding shares of common
stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such transaction,
or a complete liquidation or dissolution of the Company or of the sale
or other disposition of all or substantially all of the assets of the
Company.
Upon termination within three years after a change in control, by the Company
without cause or by him with "Good Reason" (as defined in the agreement), Mr.
Kulpa is immediately entitled to a proportionate amount of the greater of the
last year's bonus or the average bonus paid in the last three years, three times
the sum of his annual salary and the average of the last three years' bonuses,
and all accrued deferred compensation and vacation pay. Employee benefits,
medical coverage and other welfare benefits also continue until the end of the
three year period. "Good Reason" under the agreement includes, among other
things, any action by the Company that results in a diminution of his position,
authority, duties or responsibilities. The agreement also provides that Mr.
Kulpa may terminate his employment for any reason during the 30 day period
immediately following the first year after the change of control, which shall be
deemed "Good Reason" under the agreement. If it is determined that any economic
benefit or payment or distribution by the Company to Mr. Kulpa pursuant to the
agreement or otherwise (including, but not limited to, any economic benefit
received by him by reason of the acceleration of rights under the Company's
incentive plans) ("Payment"), is subject to the excise tax imposed by Section
4999 of the Internal Revenue Code, the agreement provides that the Company shall
make additional cash payments to Mr. Kulpa such that after payment of all taxes
including any excise tax imposed on such payments, he will retain an amount
equal to the excise tax on all the Payments. The agreement is for a three-year
period, but is automatically renewed annually for a three-year period unless the
Company gives notice that the period will not be extended.
George M. Dickens, Jr., the Company's Vice President - Sales and Marketing,
has an employment agreement with the Company that provides for his continued
employment unless and until the agreement is terminated (i) by the Company
giving to Mr. Dickens not less than 12 months' prior written notice, (ii) by Mr.
Dickens giving to the Company not less than one month's prior written notice,
(iii) without notice on Mr. Dickens' 65th birthday, (iv) by the Company or Mr.
Dickens upon one month's prior written notice to the other upon Mr. Dickens'
permanent disability or (v) by the Company without notice if Mr. Dickens (A)
commits fraudulent or dishonest acts, gross negligence, or disloyalty in
connection with his employment, or is convicted of a criminal act involving
dishonesty (whether or not such conviction is related to his employment), (B)
violates the agreement and does not cure the violation within 30 days after the
receipt of written notice by the Company or (C) dies. The Company has the right
to treat a notice of
12
termination given by Mr. Dickens pursuant to clause (ii), above, as effective at
any time after the giving of such notice. The agreement specifies Mr. Dickens'
applicable annual base salary and provides that he is entitled to participate in
the Company's EVA Plan in accordance with the terms of that plan. The agreement
also provides for the use of a Company automobile or the payment of an allowance
intended to reimburse Mr. Dickens for the expenses of his personal automobile.
The agreement provides generally for the reimbursement of expenses and the
participation in the Company's customary benefits plans. If notice of
termination of the agreement is given pursuant to clause (i) or (ii), above, the
Company will continue to pay Mr. Dickens his salary and provide all fringe
benefits from the date such notice is provided up through the effective date of
the termination. However, in the event that the agreement is terminated as
described under clause (i), above, if Mr. Dickens breaches the agreement during
the period when such severance benefits are being paid, the Company will
immediately upon such breach cease to be obligated to provide such severance
benefits. If the Company exercises its right to treat a notice under clause
(ii), above, as immediately effective, Mr. Dickens will be entitled to no
severance payments or benefits. Mr. Dickens is obligated to use his best efforts
during any applicable severance period to find other employment and severance
payments will be offset by any compensation he receives from such other
employment or could have received with reasonable efforts. The agreement (i)
prohibits Mr. Dickens from engaging in other business activities during his
employment without the prior written consent of the Company, (ii) requires him
to maintain in confidence all confidential information concerning the Company
and (iii) contains customary non-solicitation, no-hire and non-compete
provisions that continue for one year after his employment is terminated.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with Mr. Kulpa and
the non-employee directors of the Company. These agreements require the Company
to indemnify the officers or directors to the full extent permitted by law
against any and all expenses (including advances thereof), judgments, fines,
penalties and amounts paid in settlement incurred in connection with any claim
against such person arising out of the fact that he was a director, officer,
employee, trustee, agent or fiduciary of the Company or was serving as such for
another entity at the Company's request, and to maintain directors and officers
liability insurance coverage or to the full extent permitted by law to indemnify
such person for the lack of insurance coverage.
13
STOCK PERFORMANCE GRAPH
The graph below compares cumulative total stockholder returns for the Company
for the preceding fiscal year with the S&P 500 Stock Index and that of a peer
group made up of other building material and industrial products
distributors.(1) The graph assumes the investment of $100 at the commencement of
the measurement period with dividends reinvested. The historical information set
forth below is not necessarily indicative of future stock performance.
[PERFORMANCE GRAPH]
(1) The peer group includes the following companies: EMCO Ltd., Hughes
Supply Inc., Q.E.P. Co., Watsco Inc., Building Materials Holding
Corporation.
COMPARISON OF TWO YEAR CUMULATIVE TOTAL RETURN
AMONG HUTTIG BUILDING PRODUCTS, THE S&P 500 STOCK INDEX
AND THE COMPANY'S PEER GROUP INDEX
HUTTIG BUILDING PRODUCTS S&P 500 PEER GROUP INDEX
------------------------ ------- ----------------
12/99 100.00 100.00 100.00
12/00 97.06 92.91 80.03
12/01 143.53 80.79 133.45
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of the forms furnished to the Company or written
representations of certain persons, and other than as set forth below, each
director, officer and beneficial owner of 10% of the outstanding shares of the
Company timely filed all required reports under Section 16(a) of the Securities
Exchange Act of 1934 for fiscal 2001.
Mr. Kulpa did not file a Form 5 with respect to 1999 to report his ownership
of 222 shares received as a former stockholder of Crane Co. in the distribution
of the Company's common stock in December 1999. Mr. Kulpa did not file a Form 4
with respect to 2000 to report his open market purchases of 10,000, 1,100 and
5,800 shares of common stock of the Company on January 3, 4 and 12, 2000,
respectively, at a price of $4.00, $3.875 and $4.00 per share, respectively. Mr.
Kulpa reported ownership of the 222 shares and the open market purchases on a
Form 5 filed in February 2002.
14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 6, 1999, the Company and Crane Co. entered into a Distribution
Agreement (the "Distribution Agreement") that provided for the actions required
to effect the Distribution and the allocation of assets and liabilities between
the Company and Crane. On December 16, 1999, in connection with the consummation
of the Distribution, the Company and Crane entered into an agreement (the "Tax
Allocation Agreement") relating to the allocation of liabilities and obligations
with respect to taxes and an agreement (the "Employee Matters Agreement")
relating to the allocation of liabilities and obligations with respect to
employee benefit plans and compensation arrangements. Certain of the Company's
directors also serve as directors and an executive officer of Crane.
The Distribution Agreement provides generally that after the Distribution,
all assets and liabilities of the Company and its business will be vested solely
in the Company, and that Crane will have no interest in those assets and will
have no obligations with respect to those liabilities. The Distribution
Agreement requires the Company to indemnify Crane for certain losses suffered by
Crane, including, without limitation, losses that relate to the Company's
business (whether those losses relate to the period prior to or after
Distribution) or arise as the result of the Company's breach of any agreement or
covenant made to Crane in the Distribution Agreement, the Tax Allocation
Agreement or the Employee Matters Agreement. Crane is similarly obligated to
indemnify the Company for certain losses suffered by the Company, including,
without limitation, losses that relate to the businesses of Crane (whether those
losses relate to the period prior to or after the Distribution) or arise as the
result of Crane's breach of any agreement or covenant made to the Company in the
Distribution Agreement, the Tax Allocation Agreement or the Employee Matters
Agreement.
Under the Tax Allocation Agreement, the Company is responsible for any taxes
imposed on Crane that would not have been payable but for the breach by the
Company of any representation, warranty or obligation under the Tax Allocation
Agreement, the tax ruling request or the Distribution Agreement. These
representations, warranties and obligations relate to the Company's continuing
satisfaction of certain statutory and judicial requirements necessary for the
Distribution to be tax-free to the Company, Crane and its stockholders. In
particular, the Company has represented generally that (1) during the two-year
period following the Distribution, the Company will not enter into any
transaction or make any change in its equity structure that may cause the
Distribution to be treated as part of a plan pursuant to which one or more
persons acquire Company stock representing a 50% or greater equity
interest in the Company, (2) it will not repurchase outstanding Company common
stock after the Distribution representing 20% or more of the outstanding
Company common stock, and (3) following the Distribution, it will continue the
active conduct of its businesses. The Company has also agreed with Crane that it
will not take any of the actions described in (1) or (2) above prior to December
16, 2001 without Crane's prior written consent.
At the closing of the Company's purchase of the U.S. residential building
products business of The Rugby Group Limited in December 1999, the Company
entered into a Registration Rights Agreement with Rugby. Pursuant to this
agreement, the Company granted Rugby rights to cause the Company to register for
sale the shares of common stock issued to Rugby in exchange for the stock of
Rugby USA, Inc., the parent of Rugby Building Products, Inc. Pursuant to the
Registration Rights Agreement, so long as the shares of common stock owned by
Rugby and received in the December 1999 transaction constitute at least 30%,
20%, or 10%, respectively, of the Company's outstanding common stock, Rugby has
the right to designate for nomination by the Board of Directors of the Company
three, two and one director(s), respectively. So long as the Huttig common stock
owned by Rugby and received in the Exchange constitutes 10% or more of the
Company's outstanding common stock, Rugby is required to be present at all
meetings of the Company's stockholders and to vote its shares of common stock in
favor of the Board's nominees for election to the Board of Directors. On the
date of the Exchange Agreement between the Company and Rugby, the Crane Fund,
one of the Company's principal stockholders, agreed with Rugby that, so long as
the common stock owned by Rugby and received in the Exchange constitutes 10% or
more of the Company's outstanding common stock, the Crane Fund would be present
at all meetings of the Company's stockholders and vote its shares of common
stock for the nominees designated by Rugby as provided in the Registration
Rights Agreement.
As part of the Company's $15 million stock repurchase program, on August 20,
2001, the Company purchased 790,484 shares of its common stock from Rugby for a
cash purchase price of $4,735,000, or a per share price of $5.99, the closing
sales price of the Company's common stock on the New York Stock Exchange on the
date of purchase. Pursuant to their repurchase agreement, Rugby and the Company
agreed that, if solely as a result of Rugby's sale of these shares to the
Company shares of common stock beneficially owned by Rugby and its affiliates in
the aggregate at any time would constitute less than 30% of the Company's
outstanding stock, the Registration Rights Agreement would be deemed to be
amended so that Rugby would maintain its right to designate for nomination three
directors to be elected to the Board. As a result, Rugby will continue to have
the right to nominate three directors so long as the common stock received in
the exchange transaction and held by Rugby and its affiliates in the aggregate
constitutes at least Rugby's new ownership percentage after giving effect to the
Company's repurchase of these shares, as this percentage may increase from time
15
to time as a result of the Company's repurchase of common stock pursuant to its
stock repurchase program. Since the program was authorized, the Company has
repurchased 1,142,447 shares of common stock. Based on information as of
February 25, 2002, Rugby beneficially owns 29.2% of the Company's outstanding
common stock.
Messrs. Durant, Tanner and Young are directors of the Company designated by
Rugby. Mr. Durant is a director of RMC Group p.l.c., the parent of The Rugby
Group Limited, the Company's largest stockholder, and is Rugby's designated
nominee for election as a director for a term expiring in 2005. See "Election of
Directors." The Registration Rights Agreement and the letter agreement providing
for the Company's repurchase of shares of common stock from Rugby and the
amendment of the Registration Rights Agreement were the result of arms' length
negotiations with Rugby.
On August 3, 2001, the Company loaned George M. Dickens, Jr., Vice President
- Sales & Marketing of the Company, the sum of $125,000 as part of his
relocation from Georgia and purchase of a home in Missouri. The loan bears
interest at annual rate of 8% and is repayable in full upon the sale of Mr.
Dickens' former residence in Georgia.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Organization and Compensation Committee is or has ever been
an officer or employee of the Company and no executive officer of the Company
has served as a director or member of a compensation committee of another
company of which any member of the Board of Directors is an executive officer.
PROPOSAL TO APPROVE THE
AMENDED AND RESTATED 2001 STOCK INCENTIVE PLAN
INTRODUCTION
In keeping with its belief that the Company's stock incentive program is a
vital part of its long-term compensation focused on stockholder return, the
Board of Directors adopted the Huttig Building Products, Inc. 2001 Stock
Incentive Plan (the "2001 Plan") in December 2001 as a successor to the
Company's 1999 Stock Incentive Plan (the "1999 Plan"), which provides for the
grant of restricted shares of common stock and stock options to officers and
other key employees of the Company and its subsidiaries. The Company's
stockholders approved the 1999 Plan in 2001. In 2001, upon the recommendation of
the Organization and Compensation Committee of the Board of Directors of the
Company (the "Compensation Committee") the Board of Directors approved the grant
of stock options for an aggregate of 371,800 shares of common stock to the
executive officers and key employees of the Company and the award of 140,000
shares of restricted stock to the Company's Chief Executive Officer pursuant to
the 1999 Plan. After giving effect to those grants, the 1999 Plan had a balance
of 58,869 shares remaining available for issuance under the plan. In the view of
the Compensation Committee and the Board, the remaining shares were not
sufficient to make the full number of stock option and restricted stock grants
to key employees required to maintain a competitive, incentivizing, annual grant
cycle for key employees. Accordingly, on December 3, 2001, upon the
recommendation of the Compensation Committee, the Board approved the 2001 Plan.
Like the 1999 Plan, the 2001 Plan provides for the grant of restricted shares
of common stock and stock options to key employees of the Company and its
subsidiaries. Among the key differences from the 1999 Plan, the 2001 Plan, as
originally adopted, provides for the grant of up to 500,000 shares, is limited
to the use of treasury shares and does not allow for the grant of incentive
stock options. In adopting the 2001 Plan, the Board of Directors considered
existing and proposed rules of the New York Stock Exchange governing stockholder
approval of the issuance of Company equity securities, including stock options,
and stock option or purchase plans. The Board adopted the 2001 Plan to
accommodate the grant of options and restricted stock expected to be recommended
by the Compensation Committee and submitted to the Board at its January 2002
meeting and limited the plan to the use of treasury shares in light of
applicable NYSE rules. On January 29, 2002, the Board granted options to
purchase 322,000 shares to the Company's executive officers and certain other
key employees, and a restricted stock award of 30,000 shares to the Company's
Chief Executive Officer. As a result, 148,000 shares remain available for grant
under the 2001 Plan. Notwithstanding the limitation of the 2001 Plan to the use
of treasury shares, the Board, believing that stockholder approval of the
potential dilutive effect of future stock option and restricted stock grants is
an important consideration, amended the 2001 Plan to provide for the grant of up
to 1,000,000 shares but conditioned the amendment on the approval of the 2001
Plan, as so amended (the "Amended 2001 Plan"), by the Company's stockholders at
the 2002 Annual Meeting of Stockholders. The Amended 2001 Plan continues to
limit grants of options and restricted stock to the use of treasury shares only.
16
The purpose of the Amended 2001 Plan is to
- attract and retain key employees of the Company and its subsidiaries who
are and will be contributing to the success of the business,
- motivate and reward key employees who have made significant contributions
to the success of the Company and encourage them to continue to give their
best efforts to its future success,
- provide competitive incentive compensation opportunities, and
- provide further opportunities for stock ownership by key employees in
order to increase their proprietary interest in the Company and their
personal interest in its continued success.
On February 25, 2002, the closing price for a share of common stock on the New
York Stock Exchange was $5.80.
PRINCIPAL PROVISIONS OF THE AMENDED 2001 PLAN
Set forth below is a summary of the principal provisions of the Amended 2001
Plan, which summary is qualified in its entirety by reference to the complete
text of the Plan set forth at Appendix A to this Proxy Statement.
GENERAL
The Amended 2001 Plan will remain in effect until terminated by action of
the Board. Those key employees of the Company and its subsidiaries that are
designated by the Compensation Committee are eligible to participate in the
Amended 2001 Plan. "Key employees" means officers as well as other employees
designated by the Compensation Committee in its discretion, upon the
recommendation of management, but not any employee who, assuming the full
exercise of such options granted, would own more than ten percent (10%) of the
combined voting power of all classes of stock of the Company or any subsidiary.
At February 25, 2002, 12 key employees were eligible to participate in the
Amended 2001 Plan.
OPTIONS
Under the Amended 2001 Plan, the Compensation Committee may grant to a
participant non-qualified options to purchase common stock of the Company. The
Compensation Committee has the discretion to determine the terms and conditions
of stock option grants made pursuant to the Plan; provided, however, that the
exercise price of any options granted under the Plan must be at least equal to
100% of the fair market value of one share of Company common stock on the date
when the option is granted. Unlike the 1999 Plan, the Amended 2001 Plan defines
"fair market value" as the average of the high and low sales prices of the
Company's common stock on the New York Stock Exchange composite tape on the
applicable date (e.g., date of grant). The 1999 Plan defines fair market value
as the average of such high and low prices on the ten consecutive trading days
ending on the applicable date. The number of shares subject to purchase and the
price per share under each outstanding option will be adjusted to reflect any
stock dividend, stock split, recapitalization or similar event.
Options granted under the Amended 2001 Plan are exercisable in whole or in
part (in lots of ten shares or any multiple thereof) from time to time beginning
from the date the option is granted, subject to the provision that an option may
not be exercised (except in connection with certain events of termination, as
discussed below) (i) more than 90 days after the participant's termination or
more than ten years from the date of grant, whichever period is shorter, or (ii)
prior to the expiration of one year from the date of grant of the option. Unless
the Compensation Committee determines otherwise with respect to a particular
option grant, no option may be exercised with respect to more than 50% of the
underlying shares of common stock during the second year after the grant date,
75% during the third year, and 100% thereafter.
The exercise price for options may be paid in cash, in shares of common
stock, or a combination of the foregoing. The Compensation Committee also has
the discretion to approve the exercise of options on a cashless basis.
Furthermore, the Compensation Committee may authorize on behalf of the Company
the acceptance of the surrender of the right to exercise an option or a portion
thereof and the payment by the Company therefor of an amount equal to the excess
of the fair market value on the date of surrender of the shares of common stock
covered by such option or portion thereof over the aggregate option price of
such shares. Payment of the exercise price may be made in cash, in shares of
common stock, or a combination of the foregoing as determined by the
Compensation Committee. Shares of common stock underlying surrendered options
are not available for future grants under the Amended 2001 Plan.
17
Options granted under the Amended 2001 Plan are not transferable by the
participant otherwise than by will or the laws of descent and distribution, and
are exercisable, during the participant's lifetime, only by the participant.
Notwithstanding the foregoing, non-qualified stock options may be transferable
without payment of consideration to immediate family members of the participant
or to trusts or partnerships for the benefit of such family members.
The Compensation Committee may grant "reload options" under certain
circumstances after the exercise of all or a portion of an option granted
pursuant to the Amended 2001 Plan. A reload option entitles the participant to
purchase a number of shares of Company common stock equal to the number of
shares delivered in payment of all or part of the exercise price of the original
option plus the shares delivered or withheld to satisfy tax liabilities
associated with the exercise of the original option. The exercise price of a
reload option will be the fair market value of the common stock at the date the
reload option is granted. A reload option will not be exercisable earlier than
six months after its date of grant, and the expiration date of a reload option
will not be later than the expiration date of the original option.
If a participant retires or ceases to be employed by the Company or by a
subsidiary by reason of permanent disability or after a change in control, all
options granted to that participant may be exercised in whole or in part within
90 days after such event (or such longer period as the Compensation Committee
may permit), but not after the expiration of the term of the option. If a
participant dies while employed by the Company or by a subsidiary or within 90
days after retiring or ceasing to be employed by the Company by reason of
permanent disability or after a change in control (as defined in the Amended
2001 Plan), all options granted to that participant may be exercised in whole or
in part by the estate of such participant at any time within one year after the
participant's death, but not after the expiration of the term of the option. In
either situation, the Compensation Committee may authorize the acceptance of the
surrender of the right to exercise such options or any portion thereof in return
for a payment equal to the excess of the fair market value on the date of
surrender over the aggregate option price of such shares. If a participant's
employment is terminated for any other reason and the option is exercisable in
whole or in part at the date of termination, the participant may exercise the
option to the extent it was exercisable as of the date of termination at any
time typically within 90 days after such termination of employment, but in no
event after the expiration of the term of the option.
RESTRICTED SHARES
The Compensation Committee may grant to any participant an award of such
number of shares of common stock on such terms, conditions and restrictions as
the Compensation Committee will establish in its sole discretion ("Restricted
Shares"). The terms of any award of Restricted Shares will be set forth in an
Award Agreement which will contain provisions determined by the Compensation
Committee and not inconsistent with the Amended 2001 Plan. Upon the lapse or
release of all restrictions, one or more share certificates registered in the
name of the participant for an appropriate number of shares will be delivered to
the participant free of any restrictions. Unless otherwise provided by the
Compensation Committee in the applicable Award Agreement, all restrictions on
Restricted Shares will lapse in the event of a change in control (as defined in
the Amended 2001 Plan). With respect to performance-based awards of Restricted
Shares that are intended to qualify for deductibility under the
"performance-based" compensation exception contained in Section 162(m) of the
Internal Revenue Code, performance targets may be specified by the Compensation
Committee and typically will include specified levels of one or more of the
following (in absolute terms or relative to one or more other companies or
indices): revenues, free cash flow, return on assets, operating income, return
on investment, economic value added, return on stockholders' equity, stock price
appreciation, total share return, earnings before interest, taxes, depreciation
and amortization, earnings per share and/or growth in earnings per share.
The Compensation Committee has the discretion, as to any award of
Restricted Shares, to award a separate cash amount, payable to the participant
at the time when the forfeiture restrictions on the Restricted Shares lapse or
at such earlier time as the participant may elect to be taxed with respect to
such Restricted Shares equal to (i) the federal income tax and the golden
parachute excise tax payable under Section 4999 of the Internal Revenue Code, if
any, with respect to the lapse of such restrictions or with respect to such
election, divided by (ii) one minus the total effective federal income and
excise tax rate applicable as a result of the lapse of such restrictions or a
result of such election.
An award is forfeitable if the participant does not continue in the
service of the Company or one of its subsidiaries until the expiration of the
forfeiture period for such Restricted Shares and does not satisfy any and all
other conditions set forth in the appropriate Award Agreement. Until such time
as the risk of forfeiture lapses or the shares awarded are forfeited,
participants who have been awarded restricted shares will have all rights of a
holder of outstanding Company common stock with respect to the shares subject to
the Award Agreement, including but not limited to the right to vote such shares
and the right to receive dividends. No Restricted Shares may be assigned or
transferred (other than by will or the laws of descent and distribution or to an
inter vivos trust with respect to which the participant is treated as the owner
under Sections 671 through 677 of the Internal Revenue Code), pledged or
18
sold prior to the lapse of the applicable restrictions. Any shares of Company
common stock or other securities distributed as a dividend with respect to
Restricted Shares as to which the restrictions have not yet lapsed will be
subject to the same restrictions as the Restricted Shares.
TERM; AMENDMENT
The Amended 2001 Plan will remain in effect until terminated by action of
the Board. The Board may at any time amend or terminate the Amended 2001 Plan,
as it will deem advisable; provided, however, that no change may be made in
awards previously granted under the Amended 2001 Plan which would materially
impair participants' rights without their consent. The Amended 2001 Plan does
not require the Board to obtain stockholder approval of any amendment, although
NYSE and/or SEC rules may require such approval under certain circumstances. In
any event, the Board may amend or revise the Amended 2001 Plan to comply with
applicable laws or governmental regulations.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion briefly summarizes the federal income tax
consequences of the issuance and exercise of non-qualified stock options under
the Amended 2001 Plan to the participants and the Company. State and local tax
consequences may differ.
NON-QUALIFIED OPTIONS. A participant generally is not required to
recognize income on the grant of a non-qualified stock option. Instead, ordinary
income generally is required to be recognized on the date the participant
exercises the non-qualified stock option. In general, the amount of ordinary
income required to be recognized is an amount equal to the amount by which the
aggregate fair market value of the shares on the date of exercise exceeds the
aggregate exercise price per share paid for such shares.
RESTRICTED SHARES. Restricted Shares will be subject to a substantial risk
of forfeiture for the period of time specified in the award. Unless a grantee of
Restricted Shares makes an election under Section 83(b) of the Internal Revenue
Code as described below, the grantee generally is not required to recognize
ordinary income on the award of Restricted Shares. Instead, on the date the
substantial risk of forfeiture lapses, the grantee will be required to recognize
ordinary income in an amount equal to the fair market value of the shares on
such date. If a grantee makes a Section 83(b) election to recognize ordinary
income on the date the Restricted Shares are granted, the amount of ordinary
income required to be recognized is an amount equal to the fair market value of
the shares on the date of grant. In such case, the grantee will not be required
to recognize additional ordinary income when the substantial risk of forfeiture
lapses.
GAIN OR LOSS ON SALE OR EXCHANGE OF SHARES. In general, gain or loss from
the sale or exchange of Restricted Shares or shares acquired upon the exercise
of incentive and non-qualified stock options will be treated as capital gain or
loss, provided that the shares are held as capital assets at the time of the
sale or exchange. However, if certain holding period requirements are not
satisfied at the time of the sale or exchange of shares acquired upon the
exercise of an incentive stock option (a "disqualifying disposition"), a
participant may be required to recognize ordinary income upon such disposition.
DEDUCTIBILITY BY THE COMPANY. The Company generally is not allowed a
deduction in connection with the grant or exercise of an incentive stock option.
However, if a participant is required to recognize income as a result of a
disqualifying disposition, the Company will be entitled to a deduction equal to
the amount of ordinary income so recognized. In the case of a non-qualified
stock option (including an incentive stock option that is treated as a
non-qualified stock option as described above) or an award of Restricted Shares,
at the same time the participant is required to recognize ordinary income, the
Company will generally be allowed a deduction in an amount equal to the amount
of ordinary income so recognized.
PERFORMANCE BASED COMPENSATION. Subject to certain exceptions, Section
162(m) of the Internal Revenue Code disallows federal income tax deductions for
compensation paid by a publicly-held corporation to certain executives to the
extent the compensation exceeds $1 million for the taxable year. The Amended
2001 Plan is intended to allow the grant of awards that qualify under an
exception to the deduction limit for "performance-based compensation."
PARACHUTE PAYMENTS. Where payments to certain employees that are
contingent on a change of control exceed limits specified in the Internal
Revenue Code, the employee generally is liable for a 20 percent excise tax on,
and the corporation or other entity making the payment generally is not entitled
to any deduction for, a specified portion of such payments. If grants of stock
options are made the vesting of which is accelerated by a change in control of
the Company, such accelerated vesting would be
19
relevant in determining whether the excise tax and any deduction disallowance
rules would be triggered with respect to certain of the Company's employees.
PLAN BENEFITS
The amounts of any awards to be made under the Amended and Restated 2001
Stock Incentive Plan are not determinable at this time. However, the following
table sets forth, with respect to each person and group of persons identified
therein, the number of options and restricted shares granted under the 2001
Stock Incentive Plan since the adoption of the plan. For information regarding
awards made during 2001 under the 1999 Stock Incentive Plan to the Company's
Chief Executive Officer and the other named executive officers, please see
"Executive Compensation" beginning on page 7 of this Proxy Statement.
Number of
Number of Options(1) Restricted Shares
-------------------- -----------------
All current executive
officers as a group (5 260,000 30,000
persons)
All current directors who are
not executive officers, as
a group -- --
(8 persons)
Nominees for election as a
director:
Alan S. J. Durant -- --
R. S. Evans -- --
Barry J. Kulpa 110,000 30,000
All employees, including all
current officers who are
not executive officers, as 62,000 --
a group
Each associate of any director, -- --
executive officer or nominee
Each other person who received
five percent of such options:
George M. Dickens, Jr. 42,000 --
Thomas S. McHugh 40,000 --
John M. Mullin 34,000 --
William Bronson(2) 36,000 --
Nick H. Varsam(3) 34,000 --
James Watt(4) 26,000 --
---------------
(1) Option granted at per share exercise price of $5.875, which was the closing
sale price of the common stock as reported on the New York Stock Exchange on
the date of grant.
(2) Mr. Bronson is Vice President - Information Technology of the Company.
(3) Mr. Varsam is Vice President - General Counsel and Secretary of the Company.
(4) Mr. Watt is Vice President - Product Management of the Company.
20
EQUITY COMPENSATION PLAN INFORMATION
The following table presents information, as of December 31, 2001, for equity
compensation plans under which equity securities of the Company are authorized
for issuance, in accordance with recently adopted SEC disclosure rules, with
which the Company has chosen to comply voluntarily in this year's Proxy
Statement.
NUMBER OF SECURITIES
REMAINING AVAILABLE
NUMBER OF SECURITIES FOR FUTURE ISSUANCE FOR FUTURE ISSUANCE
TO BE ISSUED UPON WEIGHTED-AVERAGE UNDER EQUITY
EXERCISE OF EXERCISE PRICE OF COMPENSATION PLANS
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (A))
PLAN CATEGORY (A) (B) (C)
------------------------------------------------------------------------------------------------------
Equity compensation 1,121,300 $4.36 58,869(1)
plans approved by
security holders
Equity compensation 80,000(3) $4.34 500,000(4)
plans not approved by
security holders(2)
-----------------------------------------------------------------------------------------------------
Total 1,201,300 $4.36 558,869
=====================================================================================================
(1)To the extent such shares are not issued pursuant to future option grants,
all of such shares are available for issuance in the form of awards of
restricted stock under the Company's 1999 Stock Incentive Plan.
(2)As of December 31, 2001, includes the Company's 2001 Stock Incentive Plan
and written option agreements providing for option grants to certain of the
Company's non-employee directors (see footnote (3) below). For a description
of the material features of the 2001 Stock Incentive Plan, see "Proposal to
Approve the Amended and Restated 2001 Stock Incentive Plan" beginning on page
16 of this Proxy Statement. At December 31, 2001, no options or restricted
stock were outstanding under the 2001 Stock Incentive Plan.
(3)Includes options to purchase 20,000 shares at a per share exercise price of
$4.34 granted on January 22, 2001 to each of Messrs. Bigelow, Forte, Gardner
and Tullis, directors of the Company. Each of these options vests 50% on the
first anniversary on the date of grant, an additional 25% on the second
anniversary and the remaining 25% on the third anniversary.
(4)To the extent such shares are not issued pursuant to future option grants,
all of such shares are available for issuance in the form of awards of
restricted stock under the Company's 2001 Stock Incentive Plan, which
includes shares of restricted stock that may be awarded under the Company's
EVA Incentive Compensation Plan. The EVA plan provides that all restricted
shares issued as awards under that plan are issued under and generally
subject to the provisions of (i) the Company's 1999 Stock Incentive Plan,
with respect to EVA awards granted prior to January 1, 2002, and (ii) the
Company's 2001 Stock Incentive Plan, with respect to EVA awards granted on or
after January 1, 2002.
RECOMMENDATION
The Board of Directors recommends a vote FOR approval of the Huttig Building
Products, Inc. Amended and Restated 2001 Stock Incentive Plan. Approval of the
Amended and Restated 2001 Stock Incentive Plan requires the affirmative vote of
a majority of the votes cast by holders of shares of common stock present in
person or represented by proxy and entitled to vote on this proposal at the
meeting.
21
APPROVAL OF THE SELECTION OF AUDITORS
The Board of Directors proposes and recommends that the stockholders approve
the selection of the firm of Deloitte & Touche LLP as independent auditors for
the Company for fiscal 2002. Deloitte & Touche LLP have been the independent
auditors for the Company since 1979. Unless otherwise directed by the
stockholders, proxies will be voted for approval of the selection of Deloitte &
Touche LLP to audit the books and accounts of the Company for the fiscal year
ending December 31, 2002. In accordance with the Company's practice, a member of
the firm will attend the Annual Meeting, have an opportunity to make a statement
if he or she desires to do so and to respond to appropriate questions that may
be asked by stockholders.
AUDIT FEES
The aggregate fees of Deloitte & Touche LLP for professional services
rendered for the audit of the Company's annual consolidated financial statements
for fiscal 2001 and the reviews of the consolidated financial statements
included in the Company's Forms 10-Q for 2001 were approximately $227,500, which
includes out-of-pocket expenses of approximately $10,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
Deloitte & Touche LLP did not perform any professional services with respect
to financial information systems design and implementation for fiscal 2001.
ALL OTHER FEES
The aggregate fees of Deloitte & Touche LLP for all other professional
services rendered for fiscal 2001 were approximately $792,000 and can be
sub-categorized as follows:
Attestation Fees. The aggregate fees for attestation services rendered by
Deloitte & Touche LLP for consents to the SEC for registration statements
during 2001 were approximately $8,000.
Other Fees. The aggregate fees for all other professional services, such as
general tax compliance and project-specific tax services, rendered by
Deloitte & Touche LLP during 2001 were approximately $784,000, which includes
out-of-pocket expenses of approximately $10,000.
The Audit Committee of the Board of Directors did consider whether the
provision of the tax services described above is compatible with maintaining the
independence of Deloitte & Touche LLP.
RECOMMENDATION
The Board of Directors recommends a vote FOR approval of the selection of
Deloitte & Touche LLP as independent auditors for the Company for 2002. Approval
of the selection of auditors requires the affirmative vote of a majority of the
votes cast by holders of shares of common stock present in person or represented
by proxy and entitled to vote on this proposal at the meeting.
MISCELLANEOUS
SOLICITATION OF PROXIES
The Company will bear all of the costs of the solicitation of proxies for use
at the Annual Meeting. In addition to the use of the mails, proxies may be
solicited by personal interview, telephone and fax by directors, officers and
employees of the Company, who will undertake such activities without additional
compensation. To aid in the solicitation of proxies, the Company has retained
Mellon Investor Services LLC, which will receive a fee for its services of
$7,000 plus expenses. Banks, brokerage houses and other institutions, nominees
and fiduciaries will be requested to forward the proxy materials to the
beneficial owners of the common stock held of record by such persons and
entities and will be reimbursed for their reasonable expenses in forwarding such
material.
INCORPORATION BY REFERENCE
The Report on Executive Compensation of the Organization and Compensation
Committee of the Company, appearing on pages 9 through 11 of this Proxy
Statement, will not be deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent that the Company specifically incorporates the report by reference, and
the report will not otherwise be deemed filed under such Acts.
22
NEXT ANNUAL MEETING; STOCKHOLDER PROPOSALS
The Company's By-Laws provide that the annual meeting of stockholders of the
Company will be held on the fourth Monday in April in each year unless otherwise
determined by the Board of Directors. Appropriate proposals of stockholders
intended to be presented at the 2003 Annual Meeting must be received by the
Company for inclusion in the Company's proxy statement and form of proxy
relating to that meeting on or before November 28, 2002. In addition, the
Company's By-Laws provide that if stockholders intend to nominate directors or
present proposals at the 2003 Annual Meeting other than through inclusion of
such proposals in the Company's proxy materials for that meeting, then the
Company must receive notice of such nominations or proposals no earlier than
January 22, 2003 and no later than February 21, 2003. If the Company does not
receive notice by that date, then such proposals may not be presented at the
2003 Annual Meeting.
23
APPENDIX A
HUTTIG BUILDING PRODUCTS, INC.
AMENDED AND RESTATED 2001 STOCK INCENTIVE PLAN
1. PURPOSE AND ADOPTION OF THE PLAN
The purpose of the Huttig Buildings Products, Inc. 2001 Stock Incentive
Plan (as the same may be amended from time to time, the "Plan") is (i) to
attract and retain key employees of Huttig Building Products, Inc., a Delaware
corporation (the "Company"), and its Subsidiaries (as defined below) who are and
will be contributing to the success of the business; (ii) to motivate and reward
key employees who have made significant contributions to the success of the
Company and encourage them to continue to give their best efforts to its future
success; (iii) to provide competitive incentive compensation opportunities; and
(iv) to further opportunities for stock ownership by such key employees in order
to increase their proprietary interest in the Company and their personal
interest in its continued success.
The Plan has been approved by the Board of Directors of the Company (the
"Board") to be effective as of December 3, 2001 (the "Effective Date"). The Plan
shall remain in effect until terminated by action of the Board.
2. DEFINITIONS
For the purposes of this Plan, capitalized terms shall have the following
meanings:
(a) "Award" means any grant to a Participant of one or a combination of
Non-Qualified Stock Options described in Section 6 and Restricted Shares
described in Section 8.
(b) "Award Agreement" means a written agreement between the Company and a
Participant or a written notice or certificate from the Company to a Participant
specifically setting forth the terms and conditions of an Award granted under
the Plan.
(c) "Beneficiary" means an individual, trust or estate who or which, by a
written designation of the Participant filed with the Company or by operation of
law, succeeds to the rights and obligations of the Participant under the Plan
and an Award Agreement upon the Participant's death.
(d) "Board" shall have the meaning given to such term in Section 1(b).
(e) "Change in Control" means the first to occur of the following events
after the Effective Date: (i) the first purchase of shares pursuant to a tender
offer or exchange offer (other than a tender offer or exchange offer by the
Company) for all or part of the Company's Common Stock or any securities
convertible into such Common Stock, (ii) the receipt by the Company of a
Schedule 13D or other advice indicating that a person is the "beneficial owner"
(as that term is defined in Rule 13d-3 under the Exchange Act) of 20% or more of
the Company's Common Stock calculated as provided in paragraph (d) of said Rule
13d-3, (iii) the date of consummation of any Merger of the Company in which the
Company will not be the continuing or surviving corporation or pursuant to which
shares of Common Stock of the Company would be converted into cash, securities
or other property, other than a Merger of the Company in which the holders of
Common Stock of the Company immediately prior to the Merger would own more than
50% of the common stock of the surviving corporation immediately after the
Merger, (iv) the date of consummation of any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or
substantially all the assets of the Company, (v) the adoption of any plan or
proposal for the liquidation (but not a partial liquidation) or dissolution of
the Company, or (vi) the date upon which the individuals who constitute the
Board as of the Effective Date (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person becoming a
director subsequent to such date whose election, or nomination for election by
the Company's stockholders, was approved by a vote of at least three-quarters of
the directors comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
Directors of the Company) shall, for purposes of this Plan, be considered as
though such person were a member of the Incumbent Board.
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(f) "Code" means the Internal Revenue Code of 1986, as amended. References
to a section of the Code include that section and any comparable section or
sections of any future legislation that amends, supplements or supersedes said
section.
(g) "Committee" means the Organization and Compensation Committee of the
Board or such other committee composed of at least three members of the Board as
may be designated by the Board from time to time or, if there shall be no such
Committee, the Board.
(h) "Company" shall have the meaning given to such term in Section 1.
(i) "Common Stock" means Common Stock, par value $.01 per share, of the
Company.
(j) "Date of Grant" means the date as of which the Committee grants an
Award. If the Committee contemplates an immediate grant to a Participant, the
Date of Grant shall be the date of the Committee's action. If the Committee
contemplates a date on which the grant is to be made other than the date of the
Committee's action, the Date of Grant shall be the date so contemplated and set
forth in or determinable from the records of action of the Committee; provided,
however, that the Date of Grant shall not precede the date of the Committee's
action.
(k) "Effective Date" shall have the meaning given to such term in Section
1.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(m) "Fair Market Value" means, as of any applicable date, for all purposes
in this Plan, the average of the high and low sales prices of the Common Stock
on the New York Stock Exchange-Composite Transactions Tape on such date, or if
no sale of stock has been recorded on such date, then on the next preceding date
on which a sale was so made. In the event the Common Stock is not admitted to
trade on a securities exchange, the Fair Market Value as of any given date shall
be as determined in good faith by the Committee.
(n) "Incentive Stock Option" means a stock option within the meaning of
Section 422 of the Code.
(o) "Merger" means any merger, reorganization, consolidation, share
exchange, transfer of assets or other transaction having similar effect
involving the Company.
(p) "Non-Qualified Stock Option" means a stock option which is not an
Incentive Stock Option.
(q) "Options" means all Non-Qualified Stock Options granted at any time
under the Plan.
(r) "Participant" means a person designated to receive an Award under the
Plan in accordance with Section 5.
(s) "Permanent Disability" means a physical or mental disability or
infirmity that prevents the performance of a Participant's 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 Committee's reasoned and good faith judgment 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.
(t) "Plan" shall have the meaning given to such term in Section 1(a).
(u) "Purchase Price," with respect to Options, shall have the meaning set
forth in Section 6(b).
(v) "Restricted Shares" means Common Stock subject to restrictions imposed
in connection with Awards granted under Section 8.
(w) "Retirement" means a Participant's retirement at or after age 65.
(x) "Subsidiary" means a subsidiary of the Company within the meaning of
Section 424(f) of the Code.
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3. ADMINISTRATION
(a) This Plan shall be administered by the Committee; provided, however,
if any member of the Committee does not meet the qualifications for a
"non-employee director" established from time to time by rules or regulations of
the Securities and Exchange Commission under Section 16 of the Exchange Act, the
remaining members of the Committee (but not less than two) shall administer the
Plan. The Committee shall have the sole discretionary authority to interpret the
Plan, to establish and modify administrative rules for the Plan, to impose such
conditions and restrictions on Awards as it determines appropriate, and to take
such steps in connection with the Plan and Awards granted hereunder as it may
deem necessary or advisable. No member of the Committee shall be eligible to
participate in, and no person shall become a member of the Committee if within
one year prior thereto he or she shall have been eligible to participate in this
Plan or any other plan of the Company or its Subsidiaries (other than the Huttig
Building Products, Inc. 1999 Non-Employee Director Restricted Stock Plan)
entitling the participants therein to acquire stock, stock options, stock
appreciation rights or restricted stock of the Company or its Subsidiaries.
Decisions of the Committee in connection with the administration of the Plan
shall be final, conclusive and binding upon all parties, including the Company,
its stockholders and the Participants.
(b) 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 interpretations taken or
made in good faith with respect to this Plan or Awards made hereunder, and all
members of the Committee shall be fully indemnified and protected by the Company
in respect of any such action, determination or interpretation.
4. SHARES
(a) The total number of shares of Common Stock authorized to be issued
under the Plan shall not exceed in the aggregate 1,000,000 shares. The number of
shares available for issuance under the Plan shall be subject to adjustment in
accordance with Section 9. The shares to be offered under the Plan shall be
limited solely to issued shares of Common Stock which will have been reacquired
by the Company, including shares purchased in the open market.
(b) Subject to the provisions of Section 6(d), any shares subject to an
Option granted under this Plan that expires or is terminated for any reason
without having been exercised in full, shares of Common Stock forfeited as
provided in Section 8(h) and shares of Common Stock subject to any Award that
are otherwise surrendered by a Participant or terminated shall continue to be
available for future grants under this Plan. If any shares of Common Stock are
withheld from those otherwise issuable or are tendered to the Company, by
attestation or otherwise, in connection with the exercise of an Option, only the
net number of shares of Common Stock issued as a result of such exercise shall
be deemed delivered for purposes of determining the maximum number of shares
available for delivery under the Plan.
5. PARTICIPATION
Participants in the Plan shall be such key employees of the Company and
its Subsidiaries as the Committee, in its sole discretion, may designate from
time to time. For purposes of the Plan, "key employees" shall mean officers as
well as other employees (including officers and other employees who are also
directors of the Company or any Subsidiary) designated by the Committee in its
discretion upon the recommendation of management, but shall not include any
employee who, assuming the full exercise of such Option, would own more than 10%
of the combined voting power of all classes of stock of the Company or any
Subsidiary. Options under the Plan shall only be Non-Qualified Stock Options and
not Incentive Stock Options. Awards granted hereunder shall be evidenced by
Award Agreements in such form as the Committee shall approve, which Agreements
shall comply with and be subject to the terms and conditions of this Plan.
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6. GRANT AND EXERCISE OF STOCK OPTIONS
(a) The purchase price of each share of Common Stock upon exercise of any
Options granted under the Plan shall not be less than 100% of the Fair Market
Value of the stock on the date the Options are granted (the "Purchase Price").
(b) Except as otherwise permitted by the Committee or otherwise provided
in an Award Agreement, each Option granted under this Plan shall be exercisable
in whole or in part (in lots of ten shares or any multiple thereof) from time to
time beginning from the date the Option is granted, subject to the provision
that an Option may not be exercised by the Participant, except as provided in
Section 6(g) or Section 7, (i) more than 90 days after the termination of the
Participant's employment by the Company or a Subsidiary or more than 10 years
from the Date of Grant, whichever period is shorter, or (ii) prior to the
expiration of one year from the Date of Grant; provided further, that, unless
otherwise determined by the Committee, the Option may not be exercised in excess
of 50% of the total shares subject to such Option during the second year after
the Date of Grant, 75% during the third year, and 100% thereafter.
(c) The Purchase Price of the shares purchased upon the exercise of an
Option shall be paid in full at the time of exercise in cash or, in whole or in
part, by tendering (either actually or by attestation) shares of Common Stock.
The value of each share of Common Stock delivered in payment of all or part of
the Purchase Price upon the exercise of an Option shall be the Fair Market Value
of the Common Stock on the date the Option is exercised. Exercise of Options
shall also be permitted, if approved by the Committee, in accordance with a
cashless exercise program under which, if so instructed by a Participant, shares
of Common Stock may be issued directly to the Participant's broker or dealer
upon receipt of an irrevocable written notice of exercise from the Participant.
(d) The Committee, upon such terms and conditions as it shall deem
appropriate, may (but shall not be obligated to) authorize on behalf of the
Company the acceptance of the surrender of the right to exercise an Option or a
portion thereof (but only to the extent and in the amounts that such Option
shall then be exercisable) and the payment by the Company therefor of an amount
equal to the excess of the Fair Market Value on the date of surrender of the
shares of Common Stock covered by such Option or portion thereof over the
aggregate option price of such shares. Such payment shall be made in shares of
Common Stock (valued at such Fair Market Value) or in cash, or partly in cash
and partly in shares of Common Stock, as the Committee shall determine. The
shares of Common Stock covered by any Option or portion thereof, as to which the
right to exercise shall have been so surrendered, shall not again be available
for the purposes of this Plan.
(e) Each Option granted under this Plan shall not be transferable by the
Participant otherwise than by will or the laws of descent and distribution, and
shall be exercisable, during the Participant's lifetime, only by the
Participant. Notwithstanding the foregoing, Non-Qualified Stock Options may be
transferable, without payment of consideration, to immediate family members of
the Participant or to trusts or partnerships for the benefit of such family
members.
(f) The Company, in its sole discretion, shall have the right (but shall
not in any case be obligated) to withhold shares issuable upon the exercise of
an Option granted hereunder sufficient to pay, or to require a Participant to
pay to the Company, the cash amount of any taxes which the Company is required
to withhold upon the exercise of an Option granted hereunder, provided that
anything contained herein to the contrary notwithstanding, the Committee may, in
accordance with such rules as it may adopt, accept shares of Common Stock
received in connection with the exercise of the Option being taxed or otherwise
previously acquired in satisfaction of any withholding requirements or up to the
entire tax liability arising from the exercise of such Option.
(g) The Committee, in its sole discretion, shall have the right (but shall
not in any case be obligated), exercisable at any time after the Date of Grant,
to permit the exercise of any Option prior to the time such Option would
otherwise become exercisable under the terms of the Award Agreement.
(h) The Committee shall have the authority to specify, either at the time
of grant of an Option or at a later date, that upon exercise of all or a portion
of that Option (the "Original Option") a reload stock option ("Reload Option")
shall be granted under specified conditions. A Reload Option shall entitle the
Participant to purchase a number of shares equal to the shares delivered in
payment of all or part of the exercise price of the Original Option pursuant to
Section 6(c) plus the shares delivered or withheld to satisfy the tax liability
associated with such exercise pursuant to Section 6(g). The specific terms and
conditions applicable for Reload Options shall be determined by the Committee
and shall be set forth in rules adopted by the Committee or in agreements or
other documentation evidencing such Reload Options; provided, however, that (i)
the exercise price of the Reload Option shall be the Fair Market Value of the
Common Stock at the Date of Grant, (ii) the Reload Option shall not be
exercisable, except as provided in Section 6(g) or Section 7, earlier than six
months after its Date of Grant, and (iii) the expiration date of the Reload
Option shall not be later than the expiration date of the Original Option.
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7. EXERCISE OF OPTIONS UPON TERMINATION OF EMPLOYMENT
(a) If a Participant shall retire or shall cease to be employed by the
Company or by a Subsidiary by reason of Permanent Disability or after a Change
in Control, all Options theretofore granted to such Participant, whether or not
previously exercisable, may be exercised in whole or in part, and/or the
Committee may authorize the acceptance of the surrender of the right to exercise
such Options or any portion thereof as provided in Section 6(d), at any time
within 90 days after such Retirement, termination by reason of Permanent
Disability, or termination after a Change in Control (or such longer period as
may be permitted by the Committee), but not after the expiration of the term of
the Option.
(b) If a Participant shall die while employed by the Company or by a
Subsidiary or within 90 days of the cessation or termination of such employment
under circumstances described in Section 7(a) (or such longer period as may be
permitted by the Committee), all Options theretofore granted to such
Participant, whether or not previously exercisable, may be exercised in whole or
in part, and/or the Committee may authorize the acceptance of the surrender of
the right to exercise such Options or any portion thereof as provided in Section
6(d), by the estate of such Participant (or by a person who shall have acquired
the right to exercise such Option by bequest or inheritance), at any time within
one year after the death of such Participant but not after the expiration of the
term of the Option.
(c) If a Participant's employment is terminated for any reason other than
death, disability or retirement or after a Change in Control, such Participant
may exercise any Option in whole or in part, at any time within 90 days after
such termination of employment, but only to the extent such Option is
exercisable at the date of termination in accordance with Section 6(b). In no
event may any Option be exercised after the expiration of the term of the
Option.
8. GRANT OF RESTRICTED SHARES
(a) The Committee may grant to any Participant an Award of such number of
shares of Common Stock on such terms, conditions and restrictions, whether based
on performance standards, periods of service, retention by the Participant of
ownership of specified shares of Common Stock or other criteria, as the
Committee shall establish. The terms of any Restricted Share Award granted under
this Plan shall be set forth in an Award Agreement which shall contain
provisions determined by the Committee and not inconsistent with this Plan and
may include awards granted under the Huttig Building Products, Inc. EVA
Incentive Compensation Plan, in accordance with Section 7(b) thereunder.
(b) As soon as practicable after the Date of Grant of a Restricted Share
Award by the Committee, the Company shall cause to be transferred on the books
of the Company or its agent, shares of Common Stock, registered on behalf of the
Participant, evidencing the Restricted Shares covered by the Award, subject to
forfeiture to the Company as of the Date of Grant if an Award Agreement with
respect to the Restricted Shares covered by the Award is not duly executed by
the Participant and timely returned to the Company. All shares of Common Stock
covered by Awards under this Section 8 shall be subject to the restrictions,
terms and conditions contained in the Plan and the applicable Award Agreements
entered into by the appropriate Participants. Until the lapse or release of all
restrictions applicable to an Award of Restricted Shares the share certificates
representing such Restricted Shares may be held in custody by the Company, its
designee, or, if the certificates bear a restrictive legend, by the Participant.
Upon the lapse or release of all restrictions with respect to an Award as
described in Section 8(e), one or more share certificates, registered in the
name of the Participant, for an appropriate number of shares as provided in
Section 8(e), free of any restrictions set forth in the Plan and the related
Award Agreement shall be delivered to the Participant.
(c) Beginning on the Date of Grant of a Restricted Share Award and subject
to execution of the related Award Agreement as provided in Section 8(b), and
except as otherwise provided in such Award Agreement, the Participant shall
become a stockholder of the Company with respect to all shares subject to the
Award Agreement and shall have all of the rights of a stockholder, including,
but not limited to, the right to vote such shares and the right to receive
dividends; provided, however, that any shares of Common Stock or other
securities distributed as a dividend or otherwise with respect to any Restricted
Shares as to which the restrictions have not yet lapsed, shall be subject to the
same restrictions as such Restricted Shares and held or restricted as provided
in Section 8(b).
(d) None of the Restricted Shares may be assigned or transferred (other
than by will or the laws of descent and distribution or to an inter vivos trust
with respect to which the Participant is treated as the owner under Sections 671
through 677 of the Code), pledged or sold prior to the lapse of the restrictions
applicable thereto.
A-5
(e) Upon expiration or earlier termination of the forfeiture period
without a forfeiture and the satisfaction of or release from any other
conditions prescribed by the Committee, or at such earlier time as provided
under the provisions of Section 8(i), the restrictions applicable to the
Restricted Shares shall lapse. As promptly as administratively feasible
thereafter, subject to the requirements of Section 8(k), the Company shall
deliver to the Participant or, in case of the Participant's death, to the
Participant's Beneficiary, one or more share certificates for the appropriate
number of shares of Common Stock, free of all such restrictions, except for any
restrictions that may be imposed by law.
(f) A Participant's Restricted Share Award shall not be contingent on any
payment by or consideration from the Participant other than the rendering of
services.
(g) The Committee will have the discretion, as to any Restricted Share
Award, to award a separate cash amount, payable to the Participant at the time
when the forfeiture restrictions on the Restricted Shares lapse or at such
earlier time as the Participant may elect to be taxed with respect to such
Restricted Shares equal to (i) the federal income tax and the Section 4999
golden parachute excise tax, if any, payable with respect to the lapse of such
restrictions or with respect to such election, divided by (ii) one (1) minus the
total effective federal income and excise tax rate applicable as a result of the
lapse of such restrictions or a result of such election.
(h) Subject to Sections 8(i) and 8(j), Restricted Shares shall be
forfeited and returned to the Company and all rights of the Participant with
respect to such Restricted Shares shall terminate unless the Participant
continues in the service of the Company or a Subsidiary until the expiration of
the forfeiture period for such Restricted Shares and satisfies any and all other
conditions set forth in the Award Agreement. The Committee shall determine the
forfeiture period (which may, but need not, lapse in installments) and any other
terms and conditions applicable with respect to any Restricted Share Award.
(i) Notwithstanding anything contained in this Section 8 to the contrary,
the Committee may, in its sole discretion, waive the forfeiture period and any
other conditions set forth in any Award Agreement under appropriate
circumstances (including the death, disability or Retirement of the Participant
or a material change in circumstances arising after the date of an Award) and
subject to such terms and conditions (including forfeiture of a proportionate
number of the Restricted Shares) as the Committee shall deem appropriate.
(j) Unless otherwise provided by the Committee in the applicable Award
Agreement, in the event of a Change in Control, all restrictions applicable to
the Restricted Share Award shall terminate fully and the Participant shall
immediately have the right to the delivery of share certificates for such shares
in accordance with Section 8(e).
(k) The Company shall have the right (but shall not in any case be
obligated), in its sole discretion, to withhold shares required to be delivered
upon expiration of restrictions sufficient to pay, or to require a Participant
to pay to the Company, the cash amount of any taxes which the Company is
required to withhold with respect to any amount payable and/or shares issuable
under such Participant's Award. The Company may defer payment of cash or
issuance of shares upon exercise or vesting of an Award unless indemnified to
its satisfaction against any liability for any such tax. The amount of such
withholding or tax payment shall be determined by the Committee and shall be
payable by the Participant at such time as the Committee determines.
9. ADJUSTMENTS TO REFLECT CAPITAL CHANGES
In the event that there is an increase in the number of issued shares of
the Common Stock by reason of any stock dividend, stock split, recapitalization
or other similar event, the total number of shares available for Awards under
the Plan and the number of shares remaining subject to purchase under each
outstanding Option shall be increased and the price per share of such
outstanding Options shall be decreased, in proportion to such increase in issued
shares. Conversely, in case the issued shares of Common Stock shall be combined
into a smaller number of shares, the total number of shares available for Awards
under the Plan and the number of shares remaining subject to purchase under each
outstanding Option shall be decreased and the price per share of such
outstanding Options shall be increased, in proportion to such decrease in issued
shares. In the event of any Merger, the Committee may make such adjustment in
the shares available for Awards under the Plan and the shares subject to
outstanding Awards and the price thereof, if applicable, as the Committee, in
its sole discretion, deems appropriate. In the event of an exchange of Common
Stock, or other securities of the Company convertible into Common Stock, for the
stock or securities of another corporation, the Committee may, in its sole
discretion, equitably substitute such new stock or securities for a portion or
all of the shares of Common Stock subject to outstanding Awards.
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10. AMENDMENT AND TERMINATION
This Plan may be amended or terminated at any time by the Board except
with respect to any Awards then outstanding, and any Award granted under this
Plan may be terminated at any time with the consent of the Participant. The
Board may make such changes in and additions to this Plan as it may deem proper
and in the best interest of the Company; provided, however, that no such action
shall, without the consent of the Participant, materially impair any Award
theretofore granted under this Plan.
11. GENERAL PROVISIONS
(a) Each Option granted under this Plan shall be evidenced by a written
Award Agreement containing such terms and conditions as the Committee may
require, and no person shall have any rights under any Award granted under this
Plan unless and until such agreement has been executed and delivered by the
Company and, if required by the Committee, by the Participant.
(b) In the event of any conflict between the terms of this Plan and any
provision of any Option agreement, the terms of this Plan shall be controlling.
(c) No Participant or other person shall have any claim of right to be
granted an Award under the Plan. Neither the Plan nor any action taken hereunder
shall be construed as giving any Participant any right to be retained in the
employ of the Company or any of its Subsidiaries. Unless otherwise agreed by
contract, the Company reserves the right to terminate its employment
relationship with any person at any time and for any reason.
(d) Income realized as a result of a grant or an exercise of any Award
under this Plan shall not be included in the Participant's earnings for the
purpose of any benefit plan in which the Participant may be enrolled or for
which the Participant may become eligible unless otherwise specifically provided
for in such plan.
(e) The obligation of the Company to sell and deliver shares of Common
Stock with respect to any Award granted hereunder shall be subject to, as deemed
necessary or appropriate by counsel for the Company, (i) all applicable laws,
rules and regulations and such approvals by any governmental agencies as may be
required, including, without limitation, the effectiveness of a registration
statement under the Securities Act of 1933, and (ii) the condition that such
shares shall have been duly listed on such stock exchanges as the Common Stock
is then listed.
(f) Anything in this Plan to the contrary notwithstanding, it is expressly
agreed and understood that if any one or more provisions of this Plan shall be
illegal or invalid such illegality or invalidity shall not invalidate this Plan
or any other provisions thereof, but this Plan shall be effective in all
respects as though the illegal or invalid provisions had not been included.
(g) All determinations made and actions taken pursuant to the Plan shall
be governed by the laws of the State of Delaware, other than the conflict of
laws provisions thereof, and construed in accordance therewith.
(h) This Plan shall be unfunded and the Company shall not be required to
segregate any assets that may at any time be represented by Awards under this
Plan. Neither the Company, any of its Subsidiaries, the Committee, nor the Board
shall be deemed to be a trustee of any amounts to be paid under this Plan nor
shall anything contained in this Plan or any action taken pursuant to its
provisions create or be construed to create a fiduciary relationship between the
Company and/or its Subsidiaries, and a Participant. To the extent any person
acquires a right to receive an Award under this Plan, such right shall be no
greater than the right of an unsecured general creditor of the Company.
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PROXY
HUTTIG BUILDING PRODUCTS, INC.
ANNUAL MEETING OF STOCKHOLDERS APRIL 22, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned does hereby appoint and constitute Barry J. Kulpa, Thomas S.
McHugh and Nick H. Varsam, and each of them, true and lawful agents and proxies
of the undersigned, with power of substitution, and hereby authorizes each of
them to vote, as directed on the reverse side of this card, or, if not so
directed, in accordance with the Board of Directors' recommendation, all shares
of Huttig Building Products, Inc. held of record by the undersigned at the close
of business on February 25, 2002 at the Annual Meeting of Stockholders of Huttig
Building Products, Inc. to be held in the Riverside Room at the Hyatt Regency
Greenwich Hotel, 1800 E. Putnam, Old Greenwich, Connecticut, on Monday, April
22, 2002 at 2:00 p.m., Eastern Daylight Time, or at any adjournment thereof with
all the powers the undersigned would possess if then and there personally
present, and to vote, in their discretion, upon such other matters as may come
before said meeting.
You are encouraged to specify your choices by marking the appropriate boxes (SEE
REVERSE SIDE), but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations. The proxies cannot vote your
shares unless you sign and return this card or use the toll-free telephone
number on the reverse side.
SEE REVERSE SIDE
o FOLD AND DETACH HERE o
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PLEASE MARK [X]
ALL NOMINEES AND FOR PROPOSALS 2 AND 3. YOUR VOTES AS
INDICATED IN
THIS EXAMPLE
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ELECTION OF DIRECTORS AND
FOR PROPOSALS 2 AND 3.
1. ELECTION OF DIRECTORS NOMINEES:
01 ALAN S.J. DURANT
FOR ALL NOMINEES LISTED WITHHOLD AUTHORITY 02 R.S. EVANS
TO THE RIGHT (EXCEPT AS TO VOTE FOR ALL NOMINEES 03 BARRY J. KULPA
MARKED TO THE CONTRARY) LISTED TO THE RIGHT
[ ] [ ]
FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEE(S):
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2. APPROVAL OF THE HUTTIG BUILDING 3. APPROVAL OF DELOITTE & TOUCHE LLP
PRODUCTS, INC. AMENDED AND AS INDEPENDENT AUDITORS FOR THE
RESTATED 2001 STOCK INCENTIVE PLAN. COMPANY FOR 2002.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ] [ ]
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THE SIGNER HEREBY REVOKES ALL PROXIES HERETOFORE GIVEN BY THE SIGNER TO VOTE AT
SAID MEETING OR ANY ADJOURNMENTS THEREOF.
SIGNATURE SIGNATURE DATE , 2002
------------------- ---------------- -----------------
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN.
WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE
GIVE FULL TITLE AS SUCH.
o FOLD AND DETACH HERE o
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 4PM EASTERN TIME
THE BUSINESS DAY PRIOR TO ANNUAL MEETING DAY.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED
PROXIES TO VOTE YOUR SHARES IN THE SAME MANNER AS IF YOU
MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
------------------------------------------ ---------------------------------------- --------------------------------
INTERNET TELEPHONE MAIL
HTTP://WWW.EPROXY.COM/HBP 1-800-435-6710
Use the Internet to vote your proxy. Use any touch-tone telephone to vote Mark, sign and date
Have your proxy card in hand when you your proxy. Have your proxy card in your proxy card
access the web site. You will be OR hand when you call. You will be OR and
prompted to enter your control number, prompted to enter your control number, return it in the
located in the box below, to create and located in the box below, and then enclosed postage-paid
submit an electronic ballot. follow the directions given. envelope.
------------------------------------------ ---------------------------------------- --------------------------------
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.