SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /x/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
HILLENBRAND INDUSTRIES, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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HILLENBRAND INDUSTRIES
NOTICE OF ANNUAL MEETING
TO BE HELD APRIL 9, 19968, 1997
The annual meeting of shareholders of Hillenbrand Industries, Inc., an
Indiana corporation, 700 State Route 46 East, Batesville, Indiana 47006-8835,
will be held at the Sherman House in Batesville, Indiana, on Tuesday, April 9,
1996,8,
1997, at 10:00 o'clock a.m., local time, for the following purposes:
(1) To elect four members to the Board of Directors;
(2) To approve the Hillenbrand Industries, Inc. 1996 Stock Option Plan;
(3) To ratify the appointment of Price Waterhouse LLP as independent
auditors of Hillenbrand Industries, Inc.; and
(3)(4) To transact such other business as may properly come before the
meeting and any adjournment of the meeting.
The Board of Directors has fixed the close of business on February 9, 1996,14,
1997, as the record date for determining which shareholders are entitled to
notice of and to vote at the meeting.
By Order of the Board of Directors
Mark R. Lindenmeyer
Secretary
March 1, 1996February 28, 1997
CONTENTS
PAGE
----
VOTING 1
ELECTION OF DIRECTORS 2
ABOUT THE BOARD OF DIRECTORS (INCLUDING DIRECTOR COMPENSATION) 7
APPROVAL OF THE 1996 STOCK OPTION PLAN 9
RATIFICATION OF APPOINTMENT OF AUDITORS 914
EXECUTIVE COMPENSATION
-SUMMARY COMPENSATION TABLE 1015
-LONG TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR 1116
-COMPENSATION COMMITTEES' REPORT 1217
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION 1723
COMPANY STOCK PERFORMANCE 1824
RETIREMENT PLANS 1925
COST OF SOLICITATION 2026
SHAREHOLDER PROPOSALS 2026
INCORPORATION BY REFERENCE 2127
EXHIBIT A - HILLENBRAND INDUSTRIES, INC. 1996 STOCK OPTION PLAN A-1
HILLENBRAND INDUSTRIES
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Hillenbrand
Industries, Inc. (the "Company"), 700 State Route 46 East, Batesville, Indiana
47006-8835 [telephone (812) 934-7000], for use at the annual meeting of its
shareholders to be held at the Sherman House in Batesville, Indiana, on April 9, 1996,8,
1997, at 10:00 a.m., local time, and at any adjournments of the meeting, and was
mailed initially to shareholders on or about March 1, 1996.February 28, 1997. All shares
represented by these proxies will be voted at this meeting in accordance with
instructions given by shareholders. Where no instructions are given the shares
will be voted (1) in favor of the election of the Board of Directors' nominees
for four directors; (2) in favor of the approval of the Hillenbrand Industries,
Inc. 1996 Stock Option Plan; (3) in favor of the ratification of the appointment
of Price Waterhouse LLP as independent auditors of the Company; and (3)(4) in the
discretion of the proxy holder upon such other business as may properly come
before the meeting.
The purpose of the annual meeting is to vote upon the matters set forth
above. The Board of Directors is not aware of any other business which may come
before the meeting. A shareholder executing and delivering the enclosed proxy
may revoke it by giving a later proxy, notifying the Secretary of the Company in
writing, or voting in person at the annual meeting.
VOTING
The close of business on February 9, 1996,14, 1997, has been fixed as the record
date for determining which shareholders are entitled to notice of and to vote at
the annual meeting. On February 9, 1996,14, 1997, there were 70,066,38068,796,966 shares of the
Company's common stock issued and outstanding. Each share of common stock is
entitled to one vote with respect to every matter submitted to a vote at the
meeting. Votes cast by proxy or in person at the annual meeting will be
tabulated by the election inspectors appointed for the meeting.
VOTES NECESSARY TO ADOPT PROPOSALS. A plurality of the votes cast is
required for the election of Directors.directors. Directors are elected by a plurality of
the votes cast by shareholders entitled to vote at a meeting at which a quorum
is present. The approval of the 1996 Stock Option Plan requires the affirmative
vote of the holders of a majority of the outstanding common shares present in
person or by proxy and entitled to vote. The affirmative vote of the holders of
a majority of the votes cast is required for the ratification of the appointment
of the auditors.
A majority of the shares issued and outstanding constitutes a quorum.
Under Indiana law, once a share is represented for any purpose at a meeting it
is deemed present for quorum purposes for the remainder of the meeting. Abstentions,For
matters other than the approval of the 1996 Stock Option Plan, abstentions,
broker non-votes and instructions on a proxy to withhold authority to vote for
one or more of the director nominees will result in fewer votes being cast with
respect to a particular issue or nominee. With respect to the approval of the
1996 Stock Option Plan, abstentions will have the same effect as a vote against
such issue and broker non-votes will not be treated as shares entitled to vote
and will therefore have no effect.
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ELECTION OF DIRECTORS
The Articles of Incorporation and the Code of By-laws of the Company
provide that members of the Board of Directors shall be classified with respect
to the terms which they shall serve by dividing them into three classes. Each
class consists of three or four members. At the upcoming annual meeting, four
members of the Board of Directors in Class IIII shall be elected for three year
terms expiring at the 19992000 annual meeting, or until their successors are duly
elected and qualified. The fourthree directors in Class -1-
III and three membersdirectors in
Class IIIII were each previously elected to three year terms expiring at the 19971998
and 19981999 annual meetings, respectively.
The enclosed proxy, unless authority is withheld, will be voted in favor of
electing as directors the nominees listed for the terms indicated. If any one
or more of these nominees should be unable to serve, the enclosed proxy may be
voted for a substitute nominee selected by the Board of Directors or the Board
of Directors may amend the Code of By-laws of the Company to reduce the number
of directors.
NOMINEES:
CLASS IIII
To be elected to serve three year terms expiring at the 19992000 annual meeting:
SERVED SHARES(1)
AS SHARES(12) A BENEFICIALLY OWNED PERCENT OF TOTAL
DIRECTOR OWNED AS OF FEBRUARY 9, SHARES
NAME AGE PRINCIPAL OCCUPATION SINCE 1996FEBRUARY 14, 1997 OUTSTANDING
- - ---- --- -------------------- ---------- ------------------------ -----------------
JOHN C. HANCOCK 66 CONSULTANT 1980 13,000(11) (1)
GEORGE M. HILLENBRAND II 56 PERSONAL INVESTMENTS 1986 6,033,673(2)(10) 8.6%
JOHN A. HILLENBRAND II 64 PERSONAL INVESTMENTS 1981(3) 4,071,232(4)(10) 5.8%
LONNIE M. SMITH 51 SENIOR EXECUTIVE VICE 1981 128,173(5) (1)
PRESIDENT OF THE COMPANY
DIRECTORS:
CLASS I
Serving three year terms expiring at the 1997 annual meeting:
SERVED AS SHARES(12)
A BENEFICIALLY OWNED PERCENT OF TOTAL
DIRECTOR AS OF FEBRUARY 9, SHARES
NAME AGE PRINCIPAL OCCUPATION SINCE 1996 OUTSTANDING
- ---- --- -------------------- -------- ------------------ ---------------------------
PETER F. COFFARO 6768 CHAIRMAN OF THE BOARD PABCO 1987 48,936 (1)46,674 (2)
FLUID POWER CO., OHIO VALLEY
FLOORING, AND ANCHOR FLANGE COMPANY
EDWARD S. DAVIS 64 PARTNER;65 PARTNER, HUGHES HUBBARD 1974 4,000(11) (1)4,000(3) (2)
& REED, ATTORNEYS
LEONARD GRANOFF 6970 PRESIDENT OF KOFFLER CORPORATIONGRANOFF ASSOCIATES 1978 25,000 (1)16,208 (2)
W AUGUST HILLENBRAND 5556 PRESIDENT AND CHIEF EXECUTIVE 1972 4,570,171(6) 6.5%4,359,024(3)(4) 6.3%
OFFICER OF THE COMPANY (10)(11)(5)
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DIRECTORS:
CLASS II
Serving three year terms expiring at the 1998 annual meeting:
SERVED SHARES(1)
AS SHARES(12) A BENEFICIALLY OWNED PERCENT OF TOTAL
DIRECTOR OWNED AS OF FEBRUARY 9, SHARES
NAME AGE PRINCIPAL OCCUPATION SINCE 1996FEBRUARY 14, 1997 OUTSTANDING
- - ---- --- --------------------- --------- ------------------- -------------------------------------- ----- ----------------- -----------
LAWRENCE R. BURTSCHY 5960 CHAIRMAN OF L.R. 1970 6,018,072(7)(10) 8.6%5,974,832(5)(6) 8.7%
BURTSCHY & COMPANY
DANIEL A. HILLENBRAND 7273 CHAIRMAN OF THE BOARD 1969 1,993,797(8)(10) 2.8%1,986,922(5)(7) 2.9%
OF THE COMPANY
RAY J. HILLENBRAND 6162 PERSONAL INVESTMENTS 1970 2,515,380(9)(10) 3.6%2,399,380(5)(8) 3.5%
CLASS III
Serving three year terms expiring at the 1999 annual meeting:
SERVED SHARES(1)
AS A BENEFICIALLY PERCENT OF TOTAL
DIRECTOR OWNED AS OF SHARES
NAME AGE PRINCIPAL OCCUPATION SINCE FEBRUARY 14, 1997 OUTSTANDING
- - ---- --- -------------------- ----- ----------------- -----------
JOHN C. HANCOCK 67 CONSULTANT 1980 13,000(3) (2)
GEORGE M. HILLENBRAND II 57 PERSONAL INVESTMENTS 1986 5,993,988(5)(9) 8.7%
JOHN A. HILLENBRAND II 65 PERSONAL INVESTMENTS 1981(10) 3,742,414(5)(11) 5.4%
STOCK OWNERSHIP OF OTHER NAMED EXECUTIVE OFFICERS:
SHARES(12)SHARES(1)
BENEFICIALLY OWNED PERCENT OF TOTAL
OWNED AS OF FEBRUARY 9, SHARES
NAME AGE PRINCIPAL OCCUPATION 1996FEBRUARY 14, 1997 OUTSTANDING
- - ---- --- --------------------- ------------------- -------------------------------------- ----------------- -----------
LONNIE M. SMITH(12) 52 SENIOR EXECUTIVE VICE 126,173(13) (2)
PRESIDENT
TOM E. BREWER 5758 SENIOR VICE PRESIDENT 41,340 (1)
& CHIEF 41,340 (2)
FINANCIAL OFFICER
MARK R. LINDENMEYER 4950 VICE PRESIDENT, GENERAL 2,386 (1)
GENERAL(2)
COUNSEL & SECRETARY
JAMES G. THORNE 5455 VICE PRESIDENT- 1,511 (1)
HUMANPRESIDENT-HUMAN 2,511 (2)
RESOURCES
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ALL DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY 20,605,997(2)(4)(5) 29.4%
AS A GROUP,
INCLUDING THOSE LISTED ABOVE, CONSISTING OF 20 PERSONS. 19,818,613(3)(4)(6)(7)(8)
OF 21 PERSONS. (9)(11)(13) 28.8%
(1) The Company's only class of equity securities outstanding is common stock
without par value. The Company is not aware of any person, other than
members of the Hillenbrand family as indicated herein, beneficially owning
more than five percent (5%) of the Company's common stock.
(2) Ownership of less than one percent (1%) of the total shares outstanding.
(2) Includes 4,844,920(3) Does not include deferred compensation in the form of deferred shares owned of
record by trusts, of which George M.
Hillenbrand II is co-trustee, forcommon stock held on the benefit of Mr. Hillenbrandbooks and other
members of his immediate family. Mr. Hillenbrand disclaims beneficial
ownership of these shares.
(3) John A. Hillenbrand II previously served as a Directorrecords of the Company from
1972 to 1979.in the following
amounts: Edward S. Davis - 4,358 shares; John C. Hancock - 4,008 shares; W
August Hillenbrand - 144,283 shares; and other executive officers - 12,994
shares.
(4) Includes 2,064 shares held of record by John A. Hillenbrand II as custodian
under the Uniform Gifts to Minors Act; 16,240 shares held of record by his
wife, Joan L. Hillenbrand; 586,096 shares held of record by trusts for the
benefit of his children and grandchildren; and 2,528,392 shares held of
record by a family partnership for the benefit of other members of his
immediate family. Mr. Hillenbrand disclaims beneficial ownership of these
shares.
(5) Includes 7,200 shares held of record by a family partnership. Mr. Smith
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest therein.
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(6) Includes 3,086,5632,471,451 shares owned of record by trusts, of which W August
Hillenbrand is trustee or co-trustee; and 688,716 shares owned of record by
a family partnership for the benefit of members of his family (Mr.family. Mr.
Hillenbrand disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest therein).therein. Also includes 217,174 shares
owned of record and beneficially by his wife, Nancy K. Hillenbrand; 60,37658,418
shares held of record by a charitable trust, of which Mr. Hillenbrand is a
co-trustee; and 251,075251,325 shares held by a limited partnership, of which Mr.
Hillenbrand is a limited partner. Mr. Hillenbrand disclaims beneficial
ownership of these shares.
(7) Includes 4,844,920 shares owned of record by trusts, of which Lawrence R.
Burtschy is co-trustee, for the benefit of certain members of the Daniel
A. Hillenbrand and George C. Hillenbrand families; and 958,407 shares
owned of record and beneficially by his wife, Elisabeth H. Burtschy. Mr.
Burtschy disclaims beneficial ownership of these shares.
(8) Includes 72,400 shares held of record and beneficially owned by Daniel A.
Hillenbrand's wife, Mary H. Hillenbrand. Mr. Hillenbrand disclaims
beneficial ownership of these shares.
(9) Includes 800,000 shares held of record by a trust, of which Ray J.
Hillenbrand is trustee; 15,975 shares held of record by a charitable
foundation, of which Mr. Hillenbrand is a trustee; and 1,530,120 shares
held of record by family partnerships for the benefit of other members
of his immediate family. Mr. Hillenbrand disclaims beneficial ownership
of these shares.
(10)(5) John A. Hillenbrand II and Ray J. Hillenbrand are brothers. John A., Ray
J., W August and George M. Hillenbrand II are nephews of Daniel A.
Hillenbrand. Lawrence R. Burtschy is a son-in-law of George C.
Hillenbrand, deceased, brother of Daniel A. Hillenbrand.
(11) Does not include deferred compensation in(6) Includes 4,804,920 shares owned of record by trusts, of which Lawrence R.
Burtschy is co-trustee, for the formbenefit of deferredcertain members of the Daniel A.
Hillenbrand and George C. Hillenbrand families; and 954,852 shares owned of
common stockrecord and beneficially by his wife, Elisabeth H. Burtschy. Mr. Burtschy
disclaims beneficial ownership of these shares.
(7) Includes 72,400 shares held onof record and beneficially owned by Daniel A.
Hillenbrand's wife, Mary H. Hillenbrand. Mr. Hillenbrand disclaims
beneficial ownership of these shares.
(8) Includes 800,000 shares held of record by a trust, of which Ray J.
Hillenbrand is trustee; 15,975 shares held of record by a charitable
foundation, of which Mr. Hillenbrand is a trustee; and 1,414,120 shares
held of record by family partnerships for the booksbenefit of other members of
his immediate family. Mr. Hillenbrand disclaims beneficial ownership of
these shares.
(9) Includes 4,804,920 shares owned of record by trusts, of which George M.
Hillenbrand II is co-trustee, for the benefit of Mr. Hillenbrand and recordsother
members of his immediate family. Mr. Hillenbrand disclaims beneficial
ownership of these shares.
(10) John A. Hillenbrand II previously served as a Director of the Company infrom
1972 to 1979.
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(11) Includes 16,240 shares held of record by his wife, Joan L. Hillenbrand;
590,096 shares held of record by trusts for the following
amounts: Edward S. Davis - 3,507 shares; John C. Hancock - 3,017 shares;
W Augustbenefit of his children and
grandchildren; and 2,498,392 shares held of record by a family partnership
for the benefit of other members of his immediate family. Mr. Hillenbrand
- 136,157 shares; and other executive officers -
12,765disclaims beneficial ownership of these shares.
(12) The Company's only class of equity securities outstanding is Common Stock
without par value. The Company is not aware of any person, other than
membersMr. Smith resigned as Senior Executive Vice President and as a director of
the HillenbrandCompany effective February 14, 1997.
(13) Includes 7,200 shares held of record by a family as indicated herein, beneficially
owning more than 5 percentpartnership. Mr. Smith
disclaims beneficial ownership of these shares except to the Company's Common Stock.extent of his
pecuniary interest therein.
Daniel A. Hillenbrand has been Chairman of the Board since 1972. Mr.
Hillenbrand served as President of the Company from 1972 through October 20,
1981, and as Chief Executive Officer from 1972 through April 11, 1989. Mr.
Hillenbrand had been employed by the Company throughout his business career
until his retirement on April 30, 1989.
W August Hillenbrand has been President of the Company since October 21,
1981 and was elected Chief Executive Officer of the Company on April 11, 1989.
Mr. Hillenbrand has been employed by the Company throughout his business career.
He is also a director of DPL, Inc. of Dayton, Ohio.
George M. Hillenbrand II has devoted his business career to the management
of personal and family investments.
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John A. Hillenbrand II has managed personal and family investments since
1979. He is also a director of PSI Energy of Plainfield, Indiana, CINergy Corp.
of Cincinnati, Ohio and National City Bank, of Indianapolis, Indiana. Mr.
Hillenbrand was employed by and active in the management of the Company prior to
his resignation as an officer in 1979. He is also chairman, vice chairman, or a
director of several privately owned companies.
Ray J. Hillenbrand has been engaged in the management of personal and
family investments for much of his career. Mr. Hillenbrand was employed by and
active in the management of the Company prior to his resignation as an officer
in 1977.
Mr. Burtschy is Chairman of L.R. Burtschy & Company, an investment
management company, and has been so engaged since 1969. Mr. Burtschy is also a
director of Skyline Chili, Inc. of Cincinnati, Ohio, and a director or partner
of several privately owned companies.
Mr. Coffaro, a mechanical engineer, has devoted his career to the
development of a number of manufacturing and distribution businesses. He is a
director of several privately owned companies located in Cincinnati, Ohio.
Mr. Davis, a partner in Hughes Hubbard & Reed, a New York law firm, has
practiced law during his entire professional career. He is also a director of
Cognitronics Corporation of Danbury, Connecticut.
-5-
Mr. Granoff is President and director of Koffler Corporation,Granoff Associates, a privately
owned investment company in Providence, Rhode Island.
Dr. Hancock, who holds a Ph.D. in Electrical Engineering, is a consultant.
Until 1988, he was Executive Vice President for Corporate Development and
Technology of United Telecommunications, Inc. (Sprint).
Mr. Smith has been Senior Executive Vice President since 1982 and has
been employed by the Company or its subsidiaries in various offices since
1976.SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, the Company's
directors, its executive officers and any person holding more than ten percent
of the Company's common stock are required to file reports of
ownership and any changes in ownership with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of common stock and other equity securities of the New York Stock Exchange.Company. The
Company is required to report in this proxy statement any failure to file or
late filing occurring during 1995.1996. Based solely on reports and other
information from reporting persons, the Company believes that all of these
filing requirements were satisfied by its directors, executive officers and ten
percent beneficial owners, except that two reports concerning two transactions
were filed late regarding the creation of
three trusts, three distributions from trusts, and two transfers into trusts,
each concerning shares indirectly beneficially owned by W August Hillenbrand
and one report was filed late regarding a gift by George M.John A. Hillenbrand II.
ABOUT THE BOARD OF DIRECTORS
(INCLUDING DIRECTOR COMPENSATION)
The Board of Directors has the following standing committees: an Executive
Committee, a Finance Committee, an Audit Committee, a Compensation Committee and
a Performance -5-
Compensation Committee. The Company does not have a nominating
committee. During 1995,1996, the Board of Directors of the Company held four
meetings.
The Executive Committee of the Board of Directors consists of Messrs.
Lawrence R. Burtschy, Daniel A. Hillenbrand (Chairman), George M. Hillenbrand
II, John A. Hillenbrand II, Ray J. Hillenbrand and W August Hillenbrand and
Lonnie M. Smith.Hillenbrand. The
Executive Committee advises the Chief Executive Officer on business decisions of
significant impact and on the business in general. Subject to limitations
provided by law or the Code of By-laws, the Executive Committee exercises the
power and authority of the Board of Directors as may be necessary during the
intervals between meetings of the Board. The Executive Committee met fivethree
times during 1995.1996.
The Finance Committee of the Board of Directors consists of Messrs.
Lawrence R. Burtschy, Daniel A. Hillenbrand (Chairman), George M. Hillenbrand
II, John A. Hillenbrand II, Ray J. Hillenbrand and W August Hillenbrand. The
Finance Committee reviews financial policies and procedures of the Company. It
also makes recommendations to the Board of Directors on dividend policy,
issuance and sale or repurchase of Company securities, and the investment of
Company funds, including pension and thrift plans. The Finance Committee also
advises on proposed acquisitions and divestments. During 1995,1996, the Finance
Committee held fivefour meetings.
The Audit Committee of the Board of Directors consists of Messrs. Peter F.
Coffaro, Edward S. Davis (Chairman) and Daniel A. Hillenbrand. The Audit
Committee annually recommends to the Board of Directors of the Company
independent accountants for appointment by the Board of Directors as auditors of
the books, records and accounts of the Company and its subsidiaries. The
-6-
Audit Committee reviews the services to be performed by the independent
accountants; makes a determination regarding the possible effect of the
performance of such services on the independence of the principal independent
accountants; receives and reviews the reports submitted by the principal
independent accountants of the Company; and takes such action with respect to
such reports as it deems appropriate. In addition, the Audit Committee
determines the duties and responsibilities of the internal auditing staff;
reviews the annual program for the internal audit of the operational procedures
of the Company; receives and reviews reports submitted by the internal auditing
staff; and takes such action as it deems appropriate to assure that the
interests of the Company are adequately protected, including the maintenance of
accounting controls and standards. During 1995,1996, the Audit Committee held four
meetings.
The Compensation Committee of the Board of Directors consists of Messrs.
Peter F. Coffaro, Edward S. Davis (Chairman), John C. Hancock, Daniel A.
Hillenbrand and W August Hillenbrand. The Compensation Committee annually
reviews the performance contributions of the officers of the Company and makes
recommendations to the Board of Directors for adjustments to the base salaries
of those officers. The Compensation Committee also has general oversight
responsibility for other compensation programs of the Company and reviews the
structure, cost effectiveness, and competitive position of the Company's
compensation programs. During 1995,1996, the Compensation Committee held twothree
meetings.
The Performance Compensation Committee of the Board of Directors consists
of Messrs. Peter F. Coffaro, Edward S. Davis, John C. Hancock and Daniel A.
Hillenbrand (Chairman) and its Sub-Committee consists of Messrs. Peter F.
Coffaro and John C. Hancock. The Performance Compensation Committee is
responsible for the administration of the Company's Performance Compensation
Plan, Restricted Stock Plan, and Senior Executive Compensation Program, except
for those responsibilities designated to the Sub-Committee under those plans.
The Performance Compensation Committee and/or -6-
its Sub-Committee selects
participants, makes awards, establishes specific performance objectives, and
assesses individual and subsidiary performance achievements against those
previously established performance objectives. The Sub-Committee will be
responsible for administering the 1996 Stock Option Plan. The Performance
Compensation Committee held twothree meetings in 1995.1996.
During the Company's fiscal year ended December 2, 1995,November 30, 1996, each Director who
was not a salaried officer or employee of the Company received an annual fee of
$20,000 and a fee of $2,500 for each Board of Directors meeting attended through
July, 1996. Beginning with the October 1996 Board of Directors meeting, this
amount was increased to $3,000 for each board meeting attended. Directors who
are members of the Audit, Finance, and Compensation Committees received $1,000
for each committee meeting attended. Directors were reimbursed for expenses
incurred as a result of attendance at Board or committee meetings. Directors of
the Company may defer receipt of directors' fees otherwise payable to them by
the Company. Subject to shareholder approval of the Company's 1996 Stock Option
Plan, non-employee Directors will receive non-qualified stock options to
purchase 2,000 shares of common stock each year. Non-employee Directors are
also eligible to participate in the Company's group term life insurance program
in which premiums are paid by the Company. Death benefits, which are age
related, range from $60,000 to $150,000.
Daniel A. Hillenbrand has entered into a Consulting Agreement with the
Company under which he is to provide consulting and advisory services to the
Company, including advice on
-7-
acquisitions and capital expenditures, until May 31, 1999, for which he receives
an annual consulting fee of $505,289, as well as certain pension, health care,
insurance and other benefits which totaled $105,360$111,793 during 1995.1996. Mr.
Hillenbrand has unique knowledge and extensive experience in the industries
served by the Company, in part because of his long-term relationship with the
Company, and in addition he is well-recognized as an innovator and leader in
these industries. Therefore, consulting services from other sources would not
be comparable to the services provided by Mr. Hillenbrand. Mr. Hillenbrand
retired from the Company on April 30, 1989, but continues to serve as Chairman
of the Board.
In connectionAPPROVAL OF THE 1996 STOCK OPTION PLAN
The Company seeks shareholder approval of the Company's 1996 Stock Option
Plan (the "Plan"). Subject to shareholder approval, the Board of Directors
adopted the Plan on July 9, 1996 and adopted an amended and restated Plan on
January 20, 1997. The purpose of the Plan is to provide to officers, other key
employees and non-employee directors of the Corporation and other key employees
of 80% or greater owned, direct or indirect, subsidiaries of the Company (the
"Subsidiaries") who are materially responsible for the management or operation
of the business of the Company or a Subsidiary, a favorable opportunity to
acquire common stock, thereby providing them with an increased incentive to work
for the long-term success of the Company and the Subsidiaries and better
enabling the Company and the Subsidiaries to attract and retain capable
directors and executive personnel. The Board therefore recommends approval of
the Plan.
The description of the Plan contained in this proxy statement is qualified
in its entirety by reference to the full text of the Plan, which is attached to
this proxy statement as Exhibit A.
GENERAL INFORMATION
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS. Except with respect to
options to be granted to non-employee directors, the Plan will be administered
by the Sub-Committee of the Performance Compensation Committee of the Board of
Directors (the "Committee"), which will be authorized to grant (i) incentive
stock options under the Internal Revenue Code of 1986, (ii) non-qualified stock
options, and (iii) stock appreciation rights to employees of the Company and
the Subsidiaries who are designated by the Committee. Consistent with the Company'sterms
of the Plan, the Committee will select the individuals to whom options will be
granted, determine the time of grant for options, determine the number of shares
subject to an option, establish the exercise price, determine the period during
which an option may be exercised, specify the extent to which an option is an
incentive stock repurchase program, duringoption or non-qualified stock option, specify the pastextent to
which stock appreciation rights will be awarded in conjunction with an option,
and specify any other terms or conditions applicable to options. The exercise
price of the options may not be less than the fair market value of the common
stock on the date of grant. Incentive stock options granted to any holder of
more than 10% of the combined voting power of all classes of stock must have an
exercise price no less than 110% of the fair market value of the stock on the
date of grant. No option may have a term longer than ten years and one day from
the date of grant, except that incentive stock options may not have a term in
excess of ten years. Incentive stock options granted to any holder of more than
10% of the combined voting power of all classes of stock may not have a term in
excess of five years. Under a stock appreciation right, the optionee may
surrender all or a part of an option and receive in exchange payment of no more
than 100% of the excess of the fair market value of the common stock subject to
the option on the date
-8-
of exercise over the exercise price of the option. Currently, approximately 125
employees will receive grants of stock options. The number of employees
receiving grants can be expected to vary from year to year. The maximum number
of shares for which options may be granted in any calendar year to any
individual shall not exceed 200,000.
NON-EMPLOYEE DIRECTORS STOCK OPTIONS. Participation in this feature of the
Plan would be limited to members of the Board of Directors who are not employees
of the Company purchased 15,000or any of its Subsidiaries ("Non-Employee Directors"). The Plan
provides that each year, on the first day following the Company's Annual Meeting
of Shareholders, each individual elected, reelected or continuing as a
Non-Employee Director will automatically receive, in consideration for service
as a director, non-qualified stock options to purchase 2,000 shares of common
stock ("Director Options"). Under the Plan's formula, the exercise price for
Director Options will be the average of the high and low prices on the date of
the grant of the Company's common stock as traded on the New York Stock
Exchange. Director Options become exercisable on the first anniversary of the
date of grant and expire ten years from date of grant. After the Annual Meeting
to be held on April 8, 1997, there will be nine Non-Employee Directors.
OTHER INFORMATION
A total of 3,000,000 shares of the Company's common stock have been
reserved for issuance under the Plan. In the event of changes affecting the
Company's common stock such as mergers, reorganizations, consolidations,
recapitalizations, liquidations, stock dividends, stock splits, share
combinations, exchange of shares or other changes in the nature of the shares of
common stock, the Committee (or in the case of Director Options, the members of
the Board of Directors who are not Non-Employee Directors) may make appropriate
adjustments in the number and class of shares reserved under the Plan, and in
the number, class and/or price of shares subject to outstanding options, to
prevent dilution or enlargement of rights. If options under the Plan terminate,
expire or lapse for any reason, any common stock subject to such options shall
again be available for the grant of options under the Plan. Payment to the
option exercise price may be (1) in cash, (2) if the optionee may do so in
conformity with the Securities Exchange Act of 1934 and if permitted by the
applicable stock option agreement, by delivering a promissory note together with
irrevocable instructions to a broker to deliver the option price in cash to the
Company, (3) subject to the approval of the Committee in the case of employee
stock options, by tendering shares of common stock owned by him or her for at
least six (6) months having a fair market value equal to the exercise price, or
(4) any combination of such shares and cash.
The grant of a non-qualified option under the Plan will generally have no
immediate tax consequence to the Company or the optionee. However, the
recipient of a non-qualified option generally will realize taxable ordinary
income at the time of exercise of an option in an amount equal to the excess of
the fair market value of the shares acquired at the time of such exercise over
the exercise price. A like amount is generally deductible by the Company for
federal income tax purposes as of that date.
The grant of an incentive option under the Plan will have no immediate
federal tax consequences to the Company or the optionee. Moreover, if the
incentive option is exercised while the optionee is employed by the Company or a
Subsidiary, is exercised within three months after the optionee ceases to be an
employee of the Corporation or any of the Subsidiaries, is exercised after the
-9-
optionee's death, or is exercised within one year after the optionee ceases to
be an employee of the Company or any of the Subsidiaries if his or her
employment was terminated because of permanent and total disability, the
exercise of the incentive option will generally have no federal income tax
consequences to the Company or the optionee.
At the time a stock appreciation right is granted, an optionee will
recognize no taxable income and there will be no tax consequences to the
Company. The optionee will recognize taxable income at the time the stock
appreciation right is exercised in an amount equal to the amount of cash and the
fair market value of the shares of common stock received upon such exercise.
The income recognized on the exercise of a stock appreciation right will be
taxable at ordinary income tax rates. The Company generally will be entitled to
a deduction with respect to the exercise of a stock appreciation right in an
amount equal to the amount of ordinary income recognized by the optionee upon
such exercise.
The Company has the power and right to withhold, or require an optionee to
remit to the Company, an amount sufficient to satisfy federal, state and local
taxes required by law to be withheld with respect to any grant, exercise or
payment made under or as a result of the Plan.
Upon approval of the Company's shareholders, the Plan will be effective on
July 9, 1996 and will terminate on July 9, 2006, unless terminated earlier by
the Board of Directors or extended by the Board with the approval of the
shareholders. The Board may amend the Plan as it deems advisable except that,
without shareholder approval, the number of shares of common stock reserved for
issuance under the Plan may not be increased, the period during which an option
may be exercised may not be extended beyond ten years and one day from the day
on which the option may be granted, the class of employees to whom the options
may be granted may not be materially modified and no amendment may be made to
the Plan which requires shareholder approval under applicable law or the rules
of the New York Stock Exchange.
Subject to shareholder approval of the Plan, 2,000 options will be granted
to each Non-Employee Director on April 9, 1997. Also subject to shareholder
approval of the Plan, the Committee intends to grant the following non-qualified
options in April 1997.
Name and Position Number of Options
----------------- -----------------
W August Hillenbrand, President 30,000
and Chief Executive Officer
Tom E. Brewer, Senior Vice President 8,000
and Chief Financial Officer
Mark R. Lindenmeyer, Vice President, 4,000
General Counsel and Secretary
James G. Thorne, Vice President - Human Resources 4,000
Executive Officers as a Group (11 persons) 63,000
Non-Executive Officer Employees as a Group 211,000
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Because the value of options granted under the Plan will depend on the
Company's future share price, the value of such options is not determinable. No
options were granted under the Plan with respect to periods ending November 30,
1996.
The affirmative vote of the holders of a majority of the outstanding shares
of the common stock of the Company present in person or by proxy and entitled to
vote is required to approve the Plan. Shares voted for the proposal and shares
represented by returned proxies that do not contain instructions to vote against
the proposal or to abstain from John A. Hillenbrand II at $28.75voting will be counted as shares cast for the
proposal. Shares will be counted as cast against the proposal if the shares are
voted either against the proposal or to abstain from voting. Broker non-votes
will not change the number of votes cast for or against the proposal and will
not be treated as shares entitled to vote.
On February 14, 1997, the closing price of the Company's common stock on
the New York Stock Exchange was $37 5/8 per share.
The Board of Directors believes that the Plan will be important for
attracting key employees and outside directors and that implementation of the
Plan is in the best interests of the shareholders and the Company. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1996 STOCK OPTION PLAN.
RATIFICATION OF APPOINTMENT OF AUDITORS
Subject to shareholder ratification, the Board of Directors of the Company
has appointed the firm of Price Waterhouse LLP, certified public accountants, as
independent auditors to make an examination of the financial statements of the
Company for its fiscal year ending November 30, 1996.29, 1997. The appointment was made
upon the recommendation of the Audit Committee, which is composed of members of
the Board of Directors who are not officers or otherwise employees of the
Company. A representative of Price Waterhouse LLP will be present at the annual
meeting with an opportunity to make a statement, if he so desires, and will
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF PRICE WATERHOUSE LLP AS INDEPENDENT AUDITORS
OF THE COMPANY.
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EXECUTIVE COMPENSATION
The following tabulation and notes set forth the compensation paid or
accrued by the Company during the three fiscal years ended November 30, 1996,
December 2, 1995 and December 3, 1994 and November 27, 1993 to the Chief Executive Officer and each of
the other four most highly compensated executive officers.
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SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
PAYOUTS
------------------- ------------
OTHER ALL
ANNUAL- - ---------------------------------------------------------------------------------------------------------
Annual Compensation Long Term
Compensation
Payouts
------------------------------------------------------------------
Other All Other
Annual LTIP OTHER
NAME AND COMPENSATION PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARYCompen-
Name and Compensation Payouts sation
Principal Position Year Salary $ BONUSBonus $ $(1) $(2) $(3)
- -------------------------------------- ---- -------- -------- ------------ ------------ ------------------- ---- ---- ----
- - ---------------------------------------------------------------------------------------------------------
W AUGUST HILLENBRAND 1996 $690,972 $623,633 $ 105,023 $0 $186,032
President & Chief Executive 1995 $657,987 $0 $ 78,853 $0 $146,177
PRESIDENT & CHIEFOfficer 1994 $638,367 $0 $ 77,340 $0 $128,727
EXECUTIVE OFFICER 1993 $586,461 $531,000 $ 77,965 $1,414,168 $146,195- - ---------------------------------------------------------------------------------------------------------
LONNIE M. SMITHSMITH(4) 1996 $539,677 $487,080 $ 80,927 $0 $ 53,180
Senior Executive 1995 $514,057 $0 $ 65,450 $0 $ 43,827
SENIOR EXECUTIVEVice President 1994 $498,827 $0 (4)(5) $0 $ 39,841
VICE PRESIDENT 1993 $458,231 $414,900 (4) $1,103,645 $ 37,810- - ---------------------------------------------------------------------------------------------------------
TOM E. BREWER 1996 $304,308 $183,000 (5) $0 $ 55,819
Senior Vice President & 1995 $293,423 $0 (4)(5) $0 $ 46,557
SENIOR VICEChief Financial Officer 1994 $286,827 $0 (4)(5) $0 $ 36,846
PRESIDENT & 1993 $266,600 $160,680 (4) $ 403,263 $ 23,234
CHIEF FINANCIAL
OFFICER- - ---------------------------------------------------------------------------------------------------------
MARK R. LINDENMEYER 1996 $194,423 $117,000 (5) $0 $ 25,667
Vice President, General 1995 $182,192 $0 (4)(5) $0 $ 5,440
VICE PRESIDENT,Counsel & Secretary 1994 $173,615 $0 (4)(5) $0 $ 4,975
GENERAL COUNSEL & 1993 $161,385 $ 97,200 (4) $ 180,320 $ 3,001
SECRETARY- - ---------------------------------------------------------------------------------------------------------
JAMES G. THORNE (6) 1996 $179,865 $108,300 (5) $0 $ 3,000
Vice President 1995 $166,635 $0 (4)(5) N/A $ 3,000
VICE PRESIDENTHuman Resources 1994 $148,173 $0 (4)(5) N/A $ 1,848
HUMAN RESOURCES 1993 $ 57,192 $ 18,940 (4) N/A $ 1,250- - ---------------------------------------------------------------------------------------------------------
FOOTNOTES TO SUMMARY COMPENSATION TABLE
(1) Consists of the cost of perquisites and other personal benefits provided by
the Company. Included in the 19951996 amounts shown for W August Hillenbrand
are $71,320$79,253 for financial planning services reimbursed. Included in the
19951996 amounts shown for Lonnie M. Smith are $23,729$24,214 and $20,819$21,006 for
financial planning services and life insurance reimbursed respectively.
(2) The amounts appearing in this column are the values as of November 30,
1996, December 2, 1995 and December 3, 1994 and November 27, 1993 of the shares earned under the
Senior Executive Compensation Program for 1994-1996, 1993-1995 1992-1994 and
1991-19931992-1994 performance cycles respectively. Also included are values as
of November 27, 1993 of the shares earned under the Performance
Compensation Plan for the 1992-1993 cycle.
(3) All other compensation earned or allocated in 19951996 is as follows:
PENSION CONTRIBUTIONS ABOVE MARKET
SUPPLEMENTAL 401(K) INTEREST EARNED TOTAL
--------------------- ------ --------------- --------
W AUGUST HILLENBRAND $131,094 $3,000 $12,083 $146,177
LONNIE M. SMITH $ 40,827 $3,000 $ 0 $ 43,827
TOM E. BREWER $ 39,540 $3,000 $ 4,017 $ 46,557
MARK R. LINDENMEYER $ 2,373 $3,000 $ 67 $ 5,440
JAMES G. THORNE $ 0 $3,000 $ 0-12-
PENSION CONTRIBUTIONS ABOVE MARKET
SUPPLEMENTAL 401(k) INTEREST EARNED TOTAL
------------ ------ --------------- -----
W AUGUST HILLENBRAND $157,155 $3,000 $25,877 $186,032
LONNIE M. SMITH $ 50,180 $3,000 NONE $ 53,180
TOM E. BREWER $ 45,305 $3,000 $ 7,514 $ 55,819
MARK R. LINDENMEYER $ 22,475 $3,000 $ 192 $ 25,667
JAMES G. THORNE NONE $3,000 NONE $ 3,000
(4) Lonnie M. Smith resigned as Senior Executive Vice President and as a
director of the Company effective February 14, 1997.
(5) Amounts do not exceed disclosure thresholds established under SEC rules.
-8-
(5)(6) James G. Thorne has served as an executive officer of the Company since
April 11, 1994. Prior to that time, Mr. Thorne served as an officer of a
subsidiary of the Company beginning on June 14, 1993.
LONG TERM INCENTIVE PLANS - AWARDS
IN LAST FISCAL YEAR
The following table gives information regarding long term incentive plan
awards made during fiscal year 19951996 to each of the named executive officers.
ESTIMATED FUTURE
NUMBER OF PERFORMACEPERFORMANCE OR OTHER PAYOUTS UNDER NON-STOCK PRICE-BASED PLANS
SHARES, UNITS OR PERIOD UNTIL -----------------------------------------
NAME OTHER RIGHTS (1)RIGHTS(1) MATURATION OR PAYOUT THRESHOLD # TARGET # MAXIMUM #
----- --------------- -------------------- ---------------- -------------------- ------------------------ -------- ---------
W AUGUST HILLENBRAND 9,461 1995/199711,622 1996/1998 1 9,461 18,92211,622 23,244
LONNIE M.SMITH 7,391 1995/1997M. SMITH (2) 9,077 1996/1998 1 7,391 14,7829,077 18,154
TOM E. BREWER 2,530 1995/19973,070 1996/1998 1 2,530 5,0603,070 6,140
MARK R.LINDENMEYER 1,575 1995/1997R. LINDENMEYER 1,963 1996/1998 1 1,575 3,1501,963 3,926
JAMES G. THORNE 1,441 1995/19971,817 1996/1998 1 1,441 2,8821,817 3,634
FOOTNOTES TO LONG TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
(1) Performance share award based on participation in the Senior Executive
Compensation Program. Payout of award is dependent on specified levels of
shareholder value created during a three year period. The target amount
will be earned if 100% of targeted shareholder value created is achieved.
Incremental amounts above the threshold will be earned at the achievement
of 21% of the targeted shareholder value created and the maximum award is
based on achievement of 150% of the targeted shareholder value created.
(2) Mr. Smith resigned as Senior Executive Vice President and as a director of
the Company effective February 14, 1997. Under the terms of the Senior
Executive Compensation Program, the long term incentive plan awards made to
Mr. Smith in 1996 have terminated.
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COMPENSATION COMMITTEES' REPORT
The Compensation Committee and the Performance Compensation Committee of
the Board of Directors, under the direction of the Board of Directors, have
prepared the following report for inclusion in this proxy statement. This
report sets forth the compensation policies applicable to the Company's
executive officers and the relationship of corporate performance to executive
compensation. The functions of each Committee and of a sub-committee of one of
them are divided in order to meet applicable legal requirements, but those
committees are collectively referred to in this report as the Committee.
COMPENSATION PHILOSOPHY
The Company's compensation programs reflect a long-standing and strongly
held belief in the principle of performance oriented compensation. The values
that are integral to the design and operation of the Company's compensation
administration and plan designs include:
- creating long term shareholder value as the cornerstone of the
Company's compensation philosophy
- linking compensation programs to the achievement of business
strategies in each subsidiary
-9-
- having financial objectives at the subsidiary level that reflect the
performance expectations of the Company for that entity
- emphasizing variable pay rather than fixed compensation
Performance expectations reflect the Company's commitment to continuous
improvement. When expectations are met or exceeded, variable compensation should
be paid; whento the extent expectations are not met, no variable incentive compensation
should not be paid.
The compensation package for the senior executives of the Company is
comprised of base salary, an annual cash incentive, a three-year performance
opportunity, and benefits which are generally available in companies of similar
size. The Board of Directors is recommending shareholder approval of a stock
option plan.
COMPENSATION ELEMENTS
1. BASE SALARY
At the senior executive level, base salaries are conservative when
compared with companies of similar size and financial performance. Emphasis
in the Company's compensation programs is placed on variable or "at risk"
compensation rather than on base salary. The Compensation Committee reviews
the base salaries of the executive officers on an annual basis. Adjustments
to base salaries result from an assessment of the performance contributions
of each executive in relationship to that executive's scope of
responsibility. The Compensation Committee also examines the overall
competitive position of the base salaries of its executive officers in
-14-
relation to companies of similar size and financial performance. The
Committee maintains an appropriate position for other compensation
elements, i.e. short term incentive compensation, perquisite compensation,
long term incentive compensation, and certainother benefit programs including life
insurance and pension benefits. The Company rewards the creation of
sustainable long term shareholder value and as a result places greater
emphasis on variable compensation than on base salary.
Effective June 25, 199522, 1996 the Board of Directors acted on the
recommendation of the Compensation Committee to increase the compensation of
W August Hillenbrand by 5%. Prior to making the adjustment the Compensation
Committee reviewed the year to date performance of each of the
subsidiaries, the financial performance of the Company, and the performance
contributions of Mr. Hillenbrand in relationship to performance objectives,
such as management of cash flow and return on equity, and made an assessment
of the degree to which he was contributing to the creation of long term
shareholder value. The Compensation Committee also reviewed competitive
compensation information provided by an independent consulting firm prior
to recommending to the Board of Directors the adjustment to Mr.
Hillenbrand's base salary. The Compensation Committee utilized the services
of an independent compensation consulting firm to provide marketplace
competitive information regarding base salaries of executive officers. The
Company compared its officers' base salaries with those of other diversified
manufacturing firms. The Company also examined the base salaries of its
executive officers with the base salary practices of companies who have
generated similar total shareholder returns. Other executive officers were
granted adjustments to their base salaries at the same time based both upon
their performance contributions, such as management of cash flow, during
the preceding twelve months and -10-
marketplace comparisons. Adjustments to the
base salaries of the other executive officers were recommended by the
Compensation Committee and approved by the Board of Directors.
2. PERQUISITES
The senior executive officers are eligible for perquisite compensation
under the Company's Senior Executive Compensation Program (the "Program").
The annual amount of a perquisite account is limited to 10% of each
participant's base salary or such other limits as may be imposed on
participants by the Performance
Compensation Committee (in the case of participants who are members
of the Office of the President and certain other senior executives) and by
the Chief Executive Officer of the Company (in the case of other
participants). Perquisite compensation may be used to pay for supplemental
health care, insurance benefits, financial planning assistance, club
membership fees or Company common stock. All or a portion of perquisite
compensation may be deferred to be paid in cash at the end of the deferral
period.
3. INCENTIVE COMPENSATION
a. SHORT TERM INCENTIVE COMPENSATION
Under the terms of the Program, the Performance
Compensation Committee or its Sub-Committee establishes specific
financial and non-financial objectives for each subsidiary and for the
Company overall. Each subsidiary is measured and rewarded based upon its
performance contributions and the performance of its strategic business
units. Short term financial performance
-15-
objectives are established annually at levels which generally represent
continuous improvement over prior years' results. Non-financial performance
objectives are established to assure proper attention by each subsidiary to
those non-financial factors which are necessary for long term shareholder
value creation. Achievement of financial objectives determines how much
short term incentive compensation is potentially available for distribution
in each subsidiary; achievement of both the financial and non-financial
objectives determines how much incentive compensation will actually be
paid. The CommitteesCommittee established financial and non-financial objectives to
maintain the appropriate balance between the short and long term
performance expectations of shareholders.
The amount of short term incentive compensation is determined by first
establishing a performance base ("Performance Base") and a target
("Target") for each subsidiary. The Performance Base and Target for
members of the Office of the President and the Company's Vice Presidents
are recommended by the Chief Executive Officer of the Company and approved
by the Sub-Committee and
ratified by the Performance Compensation Committee. The Performance Base and Target for each participant in
the Program who is a chief executive officer of a subsidiary are approved
by the Office of the President. The Performance Base and Target for other
participants who are employees of the Company are established and approved
by the Office of the President and the Performance Base and Target for
participants who are employees of subsidiaries of the Company are
established by the chief executive officer of such subsidiary. The
Performance Base and Target for members of the Office of the President are
directly related to the return on shareholder equity of the Company or as
otherwise determined by the Sub-Committee and ratified by the
Performance Compensation Committee. Goals for
-11-
other participants
include both financial and non-financial measures and may reflect the
accomplishment of tactical and strategic plans of each subsidiary.
Short term incentive compensation opportunity is equal to 60% of base
salary for members of the Office of the President; 50% of base salary in
the case of a chief executive officer of a subsidiary; 40% of base salary
for corporate or subsidiary senior executives; and 30% for all other
executive participants. Attainment of the Performance Base results in
short term incentive compensation equal to 50% of the above scale. Short
term incentive compensation of up to 150% of the amount of the above scale
may be paid. Achievement above Performance Base is paid according to a
formula recommended by the Office of the President and approved by the
Performance
Compensation Committee.
Short term incentive compensation is calculated for each senior
executive participant at the end of each fiscal year. Short term incentive
compensation is payable in cash after forty days, but within seventy-five
days, after the end of the fiscal year. All or a portion of short term
incentive compensation may be deferred by the employee and invested either
in cash or common stock to be paid at the end of the deferral period.
No short term incentive compensation was earned by or
paid to the executiveExecutive officers of the Company forwere awarded cash bonuses in January
1997 based upon the 1995 fiscal year because theachievement of return on shareholder equity objectives
established by the Committee at the beginning of the 19951996 fiscal year were not achieved.year.
-16-
b. LONG TERM INCENTIVE COMPENSATION
Under the terms of the Program, the Performance
Compensation Committee and its Sub-Committee reviewreviews the business
plans of each of the subsidiaries and the performance expectations of the
Company overall at the commencement of each fiscal year. The performance
history and expected performance contributions of each subsidiary provide
the appropriate foundation for the Sub-CommitteeCommittee to establish performance
objectives for long term compensation programs.
The Performance Compensation Committee recommends to the Board of Directors the establishment
and administration of the Company's long term incentive compensation. The
Performance Compensation Committee and its Sub-Committee
designatedesignates participants in the long term component of the Program
and establishestablishes the shareholder value creation objectives for each
subsidiary and for the Company for each three-year cycle of the Program.
The Committees
reviewCommittee reviews a mathematically calculated analysis of a
shareholder's risk-adjusted expectation for return on his or her investment
in the Company's common stock. The Sub-CommitteeCommittee establishes specific
performance objectives for each subsidiary and for the Company based upon
the shareholder value calculation. These objectives are
ratified byFor the Performance Compensation Committee. Theexecutive officers of the
Company, the base for the three-year cycle is established by taking the
prior year's net income and dividing it by the weighted average cost of
capital for the Company. During the three-year cycle, the positive and
negative cash flows are measured and adjusted to account for their time
value to the Company. At the end of the three-year period, the Company's
net income is again capitalized by dividing it by the Company's weighted
average cost of capital. The result of these calculations is compared with
the present value of the base year's capitalized net income to determine if
shareholder value exceeded calculated shareholder expectations. The sum of
the performance objectives so established for the various subsidiaries is
higher than -12-
calculated shareholder expectation for the Company as a whole,
as calculated under this model. The level of performance so determined
represents the minimum level of performance which must be achieved for
payment of long term incentive compensation. The Sub-CommitteeCommittee further
establishes a maximum level of shareholder value creation for which
incentive compensation will be paid, and the
maximum level is ratified by the Performance Compensation
Committee.paid. Performance above that target level
creates additional value for shareholders but does not result in additional
payments to executive officers.
The long term component of the Program affords executives the
opportunity to become significant shareholders in the Company, thereby
aligning the interests of shareholders and executives. At the commencement
of each three-year cycle a performance opportunity for each participant is
established. That opportunity is equal to 50% of base salary for members
of the Office of the President; 45% of base salary in the case of a chief
executive officer of a subsidiary; 30% of base salary for corporate or
subsidiary senior executives; and 20% of base salary for all other
executive participants. That opportunity is divided by the preceding
year's average share price of the Company's common stock to determine the
tentative award in shares of common stock. At the conclusion of the
performance cycle the extent to which the financial performance of the
Company exceeded the calculated expectations of shareholders is determined.
To the extent that calculated shareholder expectations were exceeded,
payouts are made under the Program, some of which may be required to be
deferred.
-17-
The range of award can be from 0 to 200% of the opportunity established for
each executive at the outset of the cycle.
Long term performance share compensation is payable at the end of the
three-year cycle (but not sooner than forty days after the end of the
cycle) in the form of shares of common stock. Payment of long term
performance compensation is contingent upon a participant's continued
employment throughout the three-year period to which the compensation
relates. All or a portion of long term performance compensation earned may
be deferred by the employee. All earned compensation above the 100% target
achievement at the end of each cycle must be deferred until the later of
age 62 or retirement and is subject to forfeiture in the event the employee
voluntarily terminates employment within three years of the end of the
cycle.
During the 1993/19951994/1996 cycle the financial performance of the Company
was below the performance targets for the Program's minimum payout;
therefore no amounts were earned or paid to the executive officers of the
Company for the 1993/19951994/1996 cycle.
-13-
c. STOCK OPTION PLAN
During the past year, the Committee has reviewed and recommended for
approval the 1996 Stock Option Plan. Providing for the opportunity to
grant stock options to officers, other key employees and non-employee
directors will help align those individuals interests with those of
shareholders, will motivate executives to make strategic long-term
decisions, and will better enable the Company to attract and retain capable
directors and executive personnel. No awards under the 1996 Stock Option
Plan were granted during the fiscal year ended November 30, 1996. Subject
to shareholder approval, the Committee intends to grant non-qualified
options to officers and other key employees in 1997.
* * *
Section 162(m) of the Internal Revenue Code limits tax deductibility of
certain executive compensation in excess of $1 million per year unless certain
requirements are met. The Program is designed to meet these requirements. The
policy of the Performance Compensation Committee related to these requirements
is to maintain a compensation program which maximizes the creation of long term
shareholder value. The Committee's present intention is to comply with the
requirements of Section 162(m) except in those limited cases where the Committee
believes shareholder interests are best served by another approach.
Respectfully submitted to the Company's shareholders by the Compensation
Committee and the Performance Compensation Committee of the Board of Directors.
BY: COMPENSATION COMMITTEE BY: PERFORMANCE COMPENSATION COMMITTEE
Peter F. Coffaro Peter F. Coffaro
Edward S. Davis (Chairman) Edward S. Davis
John C. Hancock John C. Hancock
-18-
Daniel A. Hillenbrand Daniel A. Hillenbrand (Chairman)
W August Hillenbrand
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Peter F. Coffaro, Edward S. Davis, John C. Hancock, Daniel A. Hillenbrand
and W August Hillenbrand served on the Compensation Committee during 1995,1996, and
Peter F. Coffaro, Edward S. Davis, John C. Hancock and Daniel A. Hillenbrand
served on the Performance Compensation Committee during 1995.1996.
Daniel A. Hillenbrand, Chief Executive Officer of the Company until April
11, 1989, and currently Chairman of the Board of the Company, serves on both the
Compensation Committee and the Performance Compensation Committee of the
Company. W August Hillenbrand, President and Chief Executive Officer of the
Company, serves on the Compensation Committee.
Edward S. Davis, who is Chairman of the Compensation Committee and a member
of the Performance Compensation Committee, is a partner in the law firm of
Hughes Hubbard & Reed. The Company retains Hughes Hubbard & Reed as legal
counsel.
-14-
COMPANY STOCK PERFORMANCE
The following graph compares the cumulative total return for Hillenbrand
common shares of the Company with the S & P 500 Index and S & P Manufacturing
(Diversified Industrial) Index:
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG HILLENBRAND INDUSTRIES, S&P 500 AND
S&P MANUFACTURING (DIVERSIFIED INDUSTRIAL)INDUSTRIALS)
BASE = NOVEMBER 19901991
Date Hillenbrand S&P 500 S&P Mfg
19901991 $100 $100 $100
1991 $164 $120 $119
1992 $141 $118 $117
1993 $143 $130 $141
1994 $104 $132 $144
1995 $116 $181 $211
1996 $133 $231 $143 $139
1993 $234 $157 $167
1994 $171 $159 $171
1995 $191 $217 $250$297
Assumes $100 invested in November 1990.1991. Total return assumes that all
dividends are reinvested when received.
-15--19-
RETIREMENT PLANS
SAVINGS PLAN
Under the Hillenbrand Industries, Inc., Savings Plan (the "Savings Plan"),
officers of the Company and other employees may contribute through payroll
deduction up to 15 percent of their base salary on a pre-tax basis, subject to
certain maximum amounts established by the Internal Revenue Service, pursuant to
Section 401(k) of the Internal Revenue Code, into a choice of investment
vehicles. The Company makes matching contributions of 40 percent of the first
five percent of pre-tax contributions (prior to January 1, 1992, the Company
contributed 25 percent of the first four percent of pre-tax contributions),
subject to certain maximum amounts established by the Internal Revenue Service,
and such amounts become fully vested after five years of service with the
Company and its subsidiaries.
PENSION PLAN
The Hillenbrand Industries, Inc. Pension Plan (the "Pension Plan") covers
officers of the Company and other employees. Directors of the Company who are
not employees of the Company or one of its subsidiaries are not eligible to
participate in the Pension Plan. Contributions to the Pension Plan by the
Company are made on an actuarial basis, and no specific contributions are
determined or set aside for any individual.
Employees, including officers of the Company, who retire under the Pension
Plan receive fixed benefits calculated by means of a formula that takes into
account the highest average annual base salary earned over five consecutive
years and the employees' years of service. The following table shows
approximate representative pension benefits based on a single life annuity
calculation for the compensation and years of service indicated:
APPROXIMATE ANNUAL PENSION UPON RETIREMENT AT AGE 65
HIGHEST AVERAGE BASE
SALARY FOR ANY PERIOD OF 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
OF
5 CONSECUTIVE YEARS OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE
- ----------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 100,000 6,000 12,0007,000 13,000 19,000 25,000 31,000 37,000 44,000 50,000
$ 200,000 14,000 28,00015,000 29,000 43,000 57,000 71,000 85,000 100,000 114,000
$ 300,000 22,000 44,00023,000 45,000 67,000 89,000 111,000 133,000 156,000 178,000
$ 400,000 30,000 60,00031,000 61,000 91,000 121,000 151,000 181,000 212,000 242,000
$ 500,000 38,000 76,00039,000 77,000 115,000 153,000 191,000 229,000 268,000 306,000
$ 600,000 46,000 92,00047,000 93,000 139,000 185,000 231,000 277,000 324,000 370,000
$ 700,000 54,000 108,00055,000 109,000 163,000 217,000 271,000 325,000 380,000 434,000
$ 800,000 62,000 124,00063,000 125,000 187,000 249,000 311,000 373,000 436,000 498,000
$ 900,000 70,000 140,00071,000 141,000 211,000 281,000 351,000 421,000 492,000 562,000
$ 1,000,000 78,000 156,000$1,000,000 79,000 157,000 235,000 313,000 391,000 469,000 548,000 626,000
The credited years of service under the Pension Plan and the 19951996 calendar
year base salaries for the officers named in the table are as follows: W August
Hillenbrand - 3536 years, $659,850;$692,925; Lonnie M. Smith - 1920 years, $515,500;$541,200; Tom E.
Brewer - 1314 years, $294,000;$305,000; Mark R. Lindenmeyer - 910 years, $183,000;$195,000; and James
G. Thorne - 23 years, $167,500.
-16-$180,500.
-20-
The Internal Revenue Code limits the amount of benefits which may be paid
under a qualified pension plan, such as the Company's Pension Plan. In order to
be able to pay the full benefits which are earned as described in the paragraph
and table above, the Company has established a non-qualified, unfunded pension
plan for senior executives to pay the amounts which could not otherwise be paid
because of the limitations established by the Internal Revenue Code. The
Pension Plan is not subject to deductions for Social Security or other offset
amounts.
COST OF SOLICITATION
The entire cost of solicitation of proxies by the Board of Directors will
be borne by the Company. In addition to the use of the mails, proxies may be
solicited by personal interview, facsimile, telephone and telegram by directors,
officers and employees of the Company. The Company expects to reimburse brokers
or other persons for their reasonable out-of-pocket expenses in forwarding proxy
material to beneficial owners.
SHAREHOLDER PROPOSALS
Any proposal by a shareholder which is to be presented at the annual
meeting to be held in 19971998 must be received at the Company's principal executive
offices in Batesville, Indiana, not later than December 30, 1996,29, 1997, in order to be
included in the proxy statement and form of proxy relating to that meeting.
Pursuant to the Code of By-laws of the Company, any proposal by a
shareholder may not be presented at the annual meeting to be held in 19971998 unless
it is delivered to or mailed and received by the Secretary at the Company's
principal offices in Batesville, Indiana, not later than 100 days prior to the
anniversary of the April 9, 19968, 1997 annual meeting. If the date of the annual
meeting to be held in 19971998 is more than 30 days after such anniversary date,
such notice will also be timely if received by the Secretary by the later of 100
days prior to the forthcoming 19971998 annual meeting date and the close of business
10 days following the date on which the Company first makes public disclosure of
the 19971998 annual meeting date.
INCORPORATION BY REFERENCE
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that incorporates this Proxy Statementproxy
statement by reference, the Compensation Committees' Report and the line graph
Comparison of Five Year Cumulative Total Return shall not be incorporated by
reference into any such filings.
Mark R. Lindenmeyer
Secretary
MarchFebruary 28, 1997
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EXHIBIT A
HILLENBRAND INDUSTRIES, INC.
1996 STOCK OPTION PLAN
1. PURPOSE. The purpose of the Hillenbrand Industries, Inc. 1996 Stock
Option Plan (the "Plan"), as amended and restated on January 20, 1997, is to
provide to officers (including officers who are members of the Board of
Directors), other key employees and non-employee directors of Hillenbrand
Industries, Inc. (the "Corporation") and other key employees of any of the
eighty percent (80%) or greater owned, direct or indirect, subsidiaries of the
Corporation (individually a "Subsidiary" and collectively the "Subsidiaries")
who are materially responsible for the management or operation of the business
of the Corporation or a Subsidiary, a favorable opportunity to acquire Common
Stock, without par value, of the Corporation ("Common Stock"), thereby providing
them with an increased incentive to work for the success of the Corporation and
the Subsidiaries and to enable the Corporation and the Subsidiaries to attract
and retain capable executive personnel. The two means by which an individual
may acquire an option to purchase Common Stock are: (a) the grant to a key
employee of an option to acquire shares of Common Stock (an "Option") in
accordance with Section 5 hereof, and (b) the grant to a member of the Board of
Directors of the Corporation who is not employed by the Corporation or a
Subsidiary (an "Outside Director") of an option to acquire shares of Common
Stock (a "Director Option") in accordance with Section 7 hereof.
2. ADMINISTRATION OF THE PLAN. Except with respect to grants to an
Outside Director of a Director Option in accordance with Section 7 hereof, the
Plan shall be administered, construed and interpreted by the Subcommittee of the
Performance Compensation Committee of the Corporation's Board of Directors (the
"Committee"). The Committee must be composed of two or more persons who qualify
as "Non-Employee Directors" within the meaning of Rule 16b-3(b)(3) promulgated
under the Securities Exchange Act of 1934, as amended (the "1934 Act") and as
"outside directors" as defined in Treasury Reg. Section 1.162-27(e)(3). The
decision of a majority of the members of the Committee shall constitute the
decision of the Committee, and the Committee may act either at a meeting at
which a majority of the members of the Committee is present or by a written
consent signed by all members of the Committee. The Committee shall have the
sole, final and conclusive authority to determine, consistent with and subject
to the provisions of the Plan:
(a) the individuals (the "Optionees") to whom Options are granted
under the Plan;
(b) the time when Options shall be granted hereunder;
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(c) the number of shares of Common Stock of the Corporation to be
covered under each Option;
(d) the price to be paid upon the exercise of each Option;
(e) the period within which each Option may be exercised;
(f) the extent to which an Option is an incentive stock option or a
non-qualified stock option;
(g) the extent to which stock appreciation rights shall be awarded in
conjunction with an Option; and
(h) the terms and conditions of the respective agreements by which
Options and stock appreciation rights shall be evidenced.
The Committee shall also have authority to prescribe, amend and rescind rules
and regulations relating to the Plan, and to make all other determinations
necessary or advisable in the administration of the Plan.
Those provisions of the Plan (including, but not limited to, Section 7)
that are applicable to the administration, construction or interpretation of
Director Options (the "Director Option Provisions") shall be administered,
construed and interpreted by those members of the Board of Directors of the
Corporation who are not Outside Directors (the "Inside Directors"). If at any
time there are no Inside Directors, the chief executive officer and the
treasurer of the Corporation shall be deemed to be the Inside Directors for all
purposes of the Plan. The decision of a majority of the Inside Directors shall
constitute the decision of the Inside Directors, and the Inside Directors may
act either at a meeting at which a majority of the Inside Directors is present
or by a written consent signed by all of the Inside Directors. The Inside
Directors shall have the sole, final and conclusive authority to interpret and
construe the Director Option Provisions and to prescribe, amend and rescind
rules and regulations relating to the Director Option Provisions.
3. ELIGIBILITY FOR OPTIONS. The Committee may, consistent with the
purposes of the Plan, grant Options (and/or related stock appreciation rights)
to officers and other key employees of the Corporation or of a Subsidiary who in
the opinion of the Committee are from time to time materially responsible for
the management or operation of the business of the Corporation or of a
Subsidiary; provided, however, that in no event may any employee who owns (after
application of the ownership rules in Section 424(d) of the Internal Revenue
Code of 1986, as amended (the "Code")) shares of Common Stock possessing more
than 10% of the total combined voting power of all classes of Common Stock of
the Corporation be granted an incentive stock option hereunder unless at the
time such option is granted the option price is at least 110% of the fair market
value of the Common Stock subject to the
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Option and such incentive stock option by its terms is not exercisable after the
expiration of five (5) years from the date such Option is granted. Subject to
the provisions of Section 4 hereof, an individual who has been granted an Option
under the Plan, if he is otherwise eligible, may be granted an additional Option
or Options if the Committee shall so determine. The maximum number of shares of
Common Stock with respect to which Options or stock appreciation rights may be
granted in any calendar year to any individual shall not exceed two hundred
thousand (200,000).
4. STOCK SUBJECT TO THE PLAN. There shall be reserved for issuance upon
the exercise of Options (or stock appreciation rights awarded in conjunction
with Options) and Director Options granted under the Plan three million
(3,000,000) shares of Common Stock which may be authorized but unissued shares
of the Corporation. Subject to Section 8 hereof, the shares for which Options
and/or Director Options may be granted under the Plan shall not exceed that
number. If any Option (including any stock appreciation right awarded in
conjunction with the Option) or any Director Option shall expire or terminate
for any reason without having been exercised in full, the unpurchased shares
subject thereto shall (unless the Plan shall have terminated) become available
for other Options or Director Options under the Plan. The number of shares of
Common Stock available for Options or Director Options under the Plan shall not
be increased by the fact that Options are exercised by the tendering of
additional shares of Common Stock or by the fact that an Optionee elects to have
shares of Common Stock withheld in accordance with Section 9 hereof.
5. TERMS OF OPTION. Each Option granted under the Plan shall be subject
to the following terms and conditions and to such other terms and conditions not
inconsistent therewith as the Committee may deem appropriate:
(a) OPTION PRICE. The price to be paid for shares of Common Stock
upon the exercise of an Option shall be the average between the high and
the low of the Common Stock on the date of grant (or, if the date of grant
is not a trading date, then on the last previous trading day), but such
price in the case of an incentive stock option in no event shall be less
than the fair market value, as determined by the Committee consistent with
the requirements of Section 422 of the Code, of Common Stock on the date
on which the Option is granted.
(b) PERIOD FOR EXERCISE OF OPTION. An Option shall not be
exercisable after the expiration of such period as shall be fixed by the
Committee at the time such Option is granted, but such period in no event
shall exceed ten (10) years and one (1) day from the date on which such
Option is granted; provided, however, that incentive stock options shall
have terms not in excess of ten (10) years; provided, further, that no
Option shall be exercisable prior to the date on which the Plan is approved
by the shareholders of the Corporation as required by Section 422 of the
Code.
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(c) EXERCISE OF OPTIONS. The option price of each share of Common
Stock purchased upon exercise of an Option shall be paid in full (1) in
cash at the time of such exercise, or (2) if the Optionee may do so in
conformity with Regulation T (12 C.F.R. Section 220.3(e)(4)) and without
violating Section 16(b) or (c) of the 1934 Act (to the extent applicable)
and if permitted under the agreement entered into by the Corporation and
the Optionee relating to the Option, by delivering a properly executed
exercise note together with irrevocable instructions to a broker to deliver
promptly to the Corporation the total option price in cash and, if desired,
the amount of any taxes to be withheld from the Optionee's compensation as
a result of any withholding tax obligation of the Corporation or any of its
Subsidiaries, as specified in such notice, or (3) subject to the approval
of the Committee, by tendering to the Corporation whole shares of Common
Stock owned by him for at least six (6) months having a fair market value
equal to the cash exercise price of the shares with respect to which the
Option is being exercised, or (4) subject to the approval of the Committee,
any combination of such shares and cash. For this purpose, the fair market
value of the shares tendered by the Optionee shall be computed as of the
exercise date in such manner as determined by the Committee, consistent
with the requirements of Section 422 of the Code. The Committee shall
have the authority to grant Options exercisable in full at any time during
their term, or exercisable in such installments, equal or non-equal, as the
Committee shall determine. An Option may be exercised at any time or from
time to time during the term of the Option as to any or all whole shares
which have become subject to purchase pursuant to the terms of the Option
(including, without limitation, any quotas with respect to option exercise)
or the Plan.
(d) TERMINATION OF OPTION. If an Optionee ceases to be an employee
of the Corporation or one of the Subsidiaries or if there is a disposition
of the Subsidiary for which the Optionee performed the majority of his
services, any Option granted to him shall forthwith terminate unless the
Option provides otherwise or the Committee otherwise agrees. Leave of
absence approved by the Committee shall not constitute cessation of
employment. Notwithstanding the foregoing provisions of this subsection
(d), no Option shall be exercisable after the expiration of the period
fixed by the Committee in accordance with subsection (b) above. All
Options shall terminate if the Plan is not approved by the shareholders of
the Corporation within the time period set forth in Section 15.
(e) TRANSFERABILITY OF OPTION. An incentive stock option may not be
transferred by the Optionee otherwise than by will or the laws of descent
and distribution, and during the lifetime of the Optionee shall be
exercisable only by the Optionee. The Committee shall have the discretion
to determine the extent to which non-qualified stock options may be
transferred by Optionees.
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(f) INVESTMENT REPRESENTATIONS. Unless the transfer of shares of
Common Stock subject to an Option are registered under applicable federal
and state securities laws, each Optionee by accepting an Option shall be
deemed to agree for himself and his legal representatives that any Option
granted to him and any and all shares of Common Stock purchased upon the
exercise of the Option shall be acquired for investment and not with a view
to, or for the sale in connection with, any distribution thereof, and each
notice of the exercise of any portion of an Option shall be accompanied by
a representation in writing, signed by the Optionee or his legal
representatives, as the case may be, that the shares of Common Stock are
being acquired in good faith for investment and not with a view to, or for
sale in connection with, any distribution thereof (except in case of the
Optionee's legal representatives for distribution, but not for sale, to his
legal heirs, legatees and other testamentary beneficiaries). Any shares
issued pursuant to an exercise of an option may, but need not, bear a
legend evidencing such representations and restrictions.
(g) MAXIMUM INCENTIVE STOCK OPTIONS. The aggregate fair market value
(determined as of the time the Option is granted) of Common Stock subject
to incentive stock options that are exercisable for the first time by an
employee during any calendar year under the Plan or any other plan of the
Corporation or any Subsidiary shall not exceed $100,000. For this purpose,
the fair market value of such shares shall be determined as of the date the
Option is granted and shall be computed in such manner as shall be
determined by the Committee, consistent with the requirements of Section
422 of the Code. If the immediate exercisability of incentive stock
options arising from the retirement, death or permanent and total
disability of an Optionee consistent with the terms of the applicable
option agreement or arising from any change of control of the Corporation
in accordance with the applicable option agreement would cause this
$100,000 limitation to be exceeded for an Optionee, such incentive stock
options shall automatically be converted into non-qualified stock options
as of the date on which such incentive stock options become exercisable but
only to the extent necessary to comply with the $100,000 limitation.
(h) AGREEMENT. Each Option shall be evidenced by an agreement
between the Optionee and the Corporation which shall provide, among other
things, that, with respect to incentive stock options, the Optionee shall
advise the Corporation immediately upon any sale or transfer of the shares
of Common Stock received upon exercise of the Option to the extent such
sale or transfer takes place prior to the later of (a) two (2) years from
the date of grant or (b) one (1) year from the date of exercise. The
agreement shall include the Option term and exercise conditions.
(i) CERTIFICATES. The certificate or certificates for the shares of
Common Stock issuable upon an exercise of an Option shall be issued as
promptly as
A - 5
practicable after such exercise. An Optionee shall not have any rights of
a shareholder in respect to the shares of Common Stock subject to an Option
until the date of issuance of a stock certificate to him for such shares.
In no case may a fraction of a share be purchased or issued under the Plan,
but if, upon the exercise of an Option, a fractional share would otherwise
be issuable, the Corporation shall pay cash in lieu thereof.
(j) NO RIGHT TO CONTINUED SERVICE. Nothing in the Plan or in any
agreement entered into pursuant hereto shall confer on any person any right
to continue in the employ of the Corporation or the Subsidiaries or affect
any rights of the Corporation, a Subsidiary, or the shareholders of the
Corporation may have to terminate his service at any time.
(k) INCENTIVE STOCK OPTIONS AND NON-QUALIFIED STOCK OPTIONS.
Options granted under the Plan may be incentive stock options under
Section 422 of the Code or non-qualified stock options. All Options
granted hereunder shall be clearly identified as either incentive stock
options or non-qualified stock options. In no event shall the exercise of
an incentive stock option affect the right to exercise any non-qualified
stock option, nor shall the exercise of any non-qualified stock option
affect the right to exercise any incentive stock option. Nothing in the
Plan shall be construed to prohibit the grant of incentive stock options
and non-qualified stock options to the same person; provided, however, that
incentive stock options and non-qualified stock options shall not be
granted in a manner whereby the exercise of one non-qualified stock option
or incentive stock option affects the exercisability of the other. No
incentive stock option may be granted after the conclusion of a ten (10)
year period commencing on the date the Plan is adopted.
6. STOCK APPRECIATION RIGHTS. The Committee may award a stock
appreciation right in conjunction with either an incentive stock option or a
non-qualified stock option. Under a stock appreciation right, the Optionee may
surrender all or a part of an Option and receive in exchange payment of no more
than 100% of the excess of the fair market value of the Common Stock subject to
the Option on the date of exercise over the exercise price of the Option. The
award of a stock appreciation right shall be evidenced by an agreement between
the Corporation and the Optionee, the provisions of which shall be determined by
the Committee in accordance with the provisions of the Plan.
A stock appreciation right may be exercisable at any date with respect to
no more than the number of shares of Common Stock for which the related Option
is exercisable. A stock appreciation right may be exercisable only when the per
share fair market value (as determined in accordance with Section 5(a) hereof)
of the Common Stock subject to the Option exceeds the per share exercise price
of the Option. Each stock appreciation right shall terminate no later than the
termination date of the related Option, and is transferable only with and to the
extent that the related Option is transferable.
A - 6
The Committee may limit the payment on exercise of a stock appreciation
right to less than 100% of the increase in value, as aforesaid, or it may set a
maximum dollar amount of payment not to exceed 100% of the increase in value.
Payment may be made in cash, in shares of Common Stock, or in a combination of
cash and shares of Common Stock. Notwithstanding any other provision in the
Plan to the contrary, the Committee shall have the sole discretion either to (a)
determine the form in which payment for the stock appreciation right will be
made (i.e., cash, shares of Common Stock or a combination thereof), or (b) to
consent to or disapprove the election of the Optionee to receive cash in full or
partial settlement of the stock appreciation right. Such consent or disapproval
must be given within seven (7) calendar days after the date on which the
Optionee initially elects the form of payment. Upon exercise of a stock
appreciation right respecting a given number of shares subject to the Option,
the right to exercise the related Option respecting such shares shall
automatically terminate.
7. DIRECTOR OPTIONS. Director Options shall be granted as of the first
day following each annual meeting of the Corporation's shareholders (a "Grant
Date"). As of each Grant Date, each Outside Director serving as a director of
the Corporation on that Grant Date shall automatically be granted a Director
Option to purchase two thousand (2,000) shares of Common Stock, provided,
however, that if on a Grant Date the number of remaining shares available for
Director Option grants is not large enough to grant each Outside Director with a
Director Option of two thousand (2,000) shares, the number of shares covered by
the final Director Option for each Outside Director shall be reduced
proportionately to the nearest whole share so that the number of shares granted
under the Plan does not exceed the number of shares reserved under Section 4
hereof. Each Director Option granted under the Plan shall be a non-qualified
stock option and shall be evidenced by a Director Stock Option Agreement between
the Corporation and the Outside Director. The Director Stock Option Agreement
shall specify the number of shares of Common Stock subject to the Director
Option and shall also be subject to the following terms and conditions:
(a) DIRECTOR OPTION PRICE. The price to be paid for shares of Common
Stock upon the exercise of each Director Option shall be the average of the
high and low prices of the Common Stock as traded on the New York Stock
Exchange on the Grant Date; provided, however, that if the Grant Date falls
on a day when shares of Common Stock are not traded, the option price of
the Director Option shall be determined as of the first day following the
Grant Date on which such shares are traded on the New York Stock Exchange.
(b) PERIOD FOR EXERCISE OF DIRECTOR OPTION. A Director Option shall
be exercisable any time during the period that begins twelve (12) months
after the Grant Date on which such Director Option is granted and that ends
on the ten (10) year anniversary of that Grant Date.
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(c) EXERCISE OF DIRECTOR OPTIONS. The option price of each share of
Common Stock purchased upon exercise of a Director Option shall be paid in
full (1) in cash at the time of such exercise, or (2) if the Outside
Director may do so in conformity with Regulation T (12 C.F.R. Section
220.3(e)(4)) and without violating Section 16(b) or (c) of the 1934 Act (to
the extent applicable) and if permitted under the agreement entered into by
the Corporation and the Outside Director relating to the Director Option,
by delivering a properly executed exercise note together with irrevocable
instructions to a broker to deliver promptly to the Corporation the total
option price in cash, or (3) by tendering to the Corporation whole shares
of Common Stock owned by him for at least six (6) months having a fair
market value equal to the cash exercise price of the shares with respect to
which the Director Option is being exercised, or (4) any combination of
such shares of Common Stock and cash. For this purpose, the fair market
value of the shares tendered by the Outside Director shall be the average
of the high and low prices of the Common Stock as traded on the New York
Stock Exchange on the exercise date (or, if the Common Stock is not traded
on that date, the first preceding date on which the Common Stock was traded
on the New York Stock Exchange). A Director Option may be exercised at any
time or from time to time during the term of the Director Option as to any
or all whole shares which have become subject to purchase pursuant to the
terms of the Director Option and the Plan.
(d) TERMINATION OF DIRECTOR OPTION. If an Outside Director ceases to
be a director of the Corporation for any reason other than death, any
Director Option granted to that Outside Director may be exercised in whole
or in part at any time within the three (3) year period immediately
following the date on which his or her status as a director terminated.
Leave of absence approved by the Inside Directors shall not constitute
termination of status as a director. In the event of the death of an
Outside Director while serving as a director of the Corporation, any
Director Option granted to that Outside Director may be exercised in whole
or in part by the executor or administrator of the Outside Director's
estate or by the person or persons entitled to the Director Option by will
or by applicable laws of descent and distribution within one (1) year after
the date of the Outside Director's death, whether or not the Director
Option was otherwise exercisable at such date of death. Notwithstanding
the foregoing provisions of this subsection (d), no option shall be
exercisable after the expiration of the period set forth in Section 7(b)
above.
(e) TRANSFERABILITY OF DIRECTOR OPTION. A Director Option may not be
transferred by the Outside Director otherwise than by will or the laws of
descent and distribution or as otherwise permitted by the applicable option
agreement; provided, however, that a Director Option may be transferred by
an Outside Director to a revocable trust, or any other trust qualifying as
a "grantor trust" under Section 671-677 of the Internal Revenue Code of
1986, as amended, to be held during
A - 8
the lifetime of an Outside Director for his or her benefit and an Outside
Director may transfer a Director Option to members of his or her immediate
family, i.e., children, grandchildren and spouse, or to one or more trusts
for the benefit of such family members or to partnerships in which such
family members are the only partners or to such other persons or entities
as may be determined by the Inside Directors.
(f) CERTIFICATES. The certificate or certificates representing the
shares of Common Stock issuable upon an exercise of a Director Option shall
be issued as promptly as practicable after such exercise. An Outside
Director shall not have any rights of a shareholder in respect to the
shares of Common Stock subject to a Director Option until the date of
issuance of a stock certificate representing such shares. In no case may a
fraction of a share be purchased or issued under the Plan, but if, upon the
exercise of a Director Option, a fractional share would otherwise be
issuable, then the Corporation shall pay cash in lieu thereof.
(g) NO RIGHT TO CONTINUED SERVICE. Nothing in this Plan or in any
agreement entered into pursuant hereto shall confer on any person any right
to continue as a director of the Corporation or affect any rights the
Corporation or the shareholders of the Corporation may have to terminate
that person's status as a director at any time.
8. ADJUSTMENT OF SHARES. In the event of any change after the effective
date of the Plan in the outstanding shares of Common Stock of the Corporation by
reason of any reorganization, recapitalization, stock split, stock dividend,
combination of shares, exchange of shares, merger or consolidation, liquidation,
or any other change after the effective date of the Plan in the nature of the
shares of Common Stock of the Corporation, the Committee (or, in the case of
shares to be reserved for issuance pursuant to Director Options, the Inside
Directors) shall determine what changes, if any, are appropriate in the number
and kind of shares of Common Stock reserved under the Plan, in the number of
shares which may be issued to any individual in any calendar year and in the
option price under and the number and kind of shares of Common Stock covered by
outstanding Options or Director Options granted under the Plan. Any
determination of the Committee or the Inside Directors hereunder shall be
conclusive.
9. TAX WITHHOLDING. Whenever the Corporation proposes or is required to
issue or transfer shares of Common Stock under the Plan, the Corporation shall
have the right to require the Optionee or his legal representative to remit to
the Corporation an amount sufficient to satisfy any federal, state and/or local
tax withholding requirements prior to the delivery of any certificate or
certificates for such shares, and whenever under the Plan payments are to be
made in cash, such payments shall be net of an amount sufficient to satisfy any
federal, state and/or local tax withholding requirements; provided, however,
that notwithstanding the above and to the extent permitted by the Committee, an
Optionee
A - 9
may make a written election to have shares having an aggregate fair market value
sufficient to satisfy the applicable withholding taxes withheld from the shares
otherwise to be received upon the exercise of the Option.
10. AMENDMENT. The Board of Directors of the Corporation may amend the
Plan from time to time, except that without the approval of the Corporation's
shareholders:
(a) the number of shares of Common Stock which may be reserved for
issuance under the Plan may not be increased except as provided in Section
8 hereof;
(b) the period during which an Option or Director Option may be
exercised may not be extended beyond ten (10) years and one (1) day from
the date on which such Option or Director Option was granted;
(c) the class of employees to whom Options may be granted under the
Plan may not be modified materially; and
(d) no other amendment to the Plan may be made which requires the
approval of the Corporation's shareholders under applicable law or under
the rules and regulations of the New York Stock Exchange.
No amendment of the Plan may, without the consent of the Optionee or
Outside Director, make any changes in any outstanding Option or Director Option
theretofore granted under the Plan which would adversely affect the rights of
such Optionee or Outside Director.
11. TERMINATION. The Board of Directors of the Corporation may terminate
the Plan at any time and no Option or Director Option shall be granted
thereafter. Such termination, however, shall not affect the validity of any
Option or Director Option theretofore granted under the Plan.
12. SUCCESSORS. The Plan shall be binding upon the successors and assigns
of the Corporation.
13. GOVERNING LAW. The terms of Options and Director Options granted
hereunder and the rights and obligations hereunder of the Corporation, the
Optionees and Outside Directors and their successors in interest shall, except
to the extent governed by federal law, be governed by Indiana law without regard
to conflict of law rules.
14. GOVERNMENT AND OTHER REGULATIONS. The obligations of the Corporation
to issue or transfer and deliver shares of Common Stock under Options or
Director Options granted under the Plan shall be subject to compliance with all
applicable laws, governmental rules and regulations, and administrative action.
A - 10
15. EFFECTIVE DATE. The Plan became effective on July 9, 1996 -17-and was
amended and restated on January 20, 1997; provided, however, that the validity
of Options and Director Options under the Plan is conditional upon the approval
of the Plan by the Corporation's shareholders on or before July 9, 1997 and the
Options and Director Options granted pursuant to the Plan may not be exercised
until the Board of Directors of the Corporation has been advised by counsel that
such approval has been obtained and all other applicable legal requirements have
been met; provided, further, that if shareholder approval does not occur on or
before July 9, 1997, the Plan, all outstanding Options and any related stock
appreciation rights and Director Options shall be deemed terminated.
A - 11
HILLENBRAND INDUSTRIES, INC.
Proxy for Annual Meeting Of Shareholders To Be Held April 9, 19968, 1997
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Daniel A. Hillenbrand and W August Hillenbrand, or
either of them, with full power of substitution, as proxies to vote all the
shares of the undersigned at the Annual Meeting of Shareholders of Hillenbrand
Industries, Inc. (the "Company") to be held at the Sherman House in Batesville,
Indiana 47006, on April 9, 19968, 1997 at 10:00 a.m., local time, and at any
adjournments of the meeting, on the following matters:
(1) Election of director nominees John C. Hancock, George M.Peter F. Coffaro, Edward S. Davis,
Leonard Granoff and W August Hillenbrand II, John A. Hillenbrand II and Lonnie M. Smith to serve three year terms as
directors.
/ / FOR ALL NOMINEES / / WITHHOLD AUTHORITY
(except as marked to the contrary below)
(INSTRUCTION: To withhold authority for any individual nominee, write
that nominee's name on the line provided below.)
___________________________________-----------------------------------
(2) Approval of the Hillenbrand Industries, Inc. 1996 Stock Option Plan,
as amended and restated.
/ / FOR / / AGAINST / / ABSTAIN
(3) Ratification of the appointment of Price Waterhouse LLP as independent
auditors.
/ / FOR / / AGAINST / / ABSTAIN
(3)(4) In their discretion upon such other business as may properly come
before the meeting or any adjournment thereof.
THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED.
(continued and to be signed on reverse side)
__________________________________________________________----------------------------------------------------------
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THE SHARES WILL BE VOTED FOR
ITEMS 1, 2 AND 2.3. IF ANY DIRECTOR NOMINEE SHOULD BE UNABLE TO SERVE, THE SHARES
WILL BE VOTED FOR A SUBSTITUTE NOMINEE SELECTED BY THE BOARD OF DIRECTORS. IF
ANY OTHER BUSINESS COMES BEFORE THE MEETING, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED IN THE DISCRETION OF THE PROXY HOLDERS.
_____________________________-----------------------------
Signature
_____________________________-----------------------------
Signature if held jointly
Please sign name and title exactly
as shown on label on this proxy card.
Dated:____________________, 1996 , 1997
--------------------
IMPORTANT: THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE,
PARTNER, OFFICER OR GUARDIAN, PLEASE GIVE YOUR FULL TITLE. IF SHARES ARE
HELD JOINTLY, ALL HOLDERS MUST SIGN THE PROXY. NO POSTAGE IS REQUIRED IF
MAILED IN THE UNITED STATES.This proxy is solicited on behalf of the Board of Directors. Please
mark, sign, date and return this proxy promptly in the enclosed envelope. When
signing as attorney, executor, administrator, trustee, partner, officer or
guardian, please give your full title. If shares are held jointly, all holders
must sign the proxy. No postage is required if mailed in the United States.