| · | Performance-Based RSUs. The Committee values performance-based RSUs at the target share level, which is the number of shares that would ultimately be earned by a Named Executive Officer at the end of the performance measurement period if the targeted performance metrics were achieved at the 100 percent level. These performance metrics are established by the Committee and applied within the applicable award formula as described in detail below. Under each applicable award formula, the maximum number of shares that can potentially be earned at the end of the performance measurement period is 175 percent of the targeted number, and the minimum number is zero. The number of shares to be awarded at the target level depends on the measurement formula being used for the performance-based RSUs. We use two formulas: the “shareholder value formula” and the “relative total shareholder return formula”:
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| o | For the performance-based RSUs issued based on the shareholder value formula, the number of shares to be awarded at the target level is determined by dividing the portion of the total LTIC award dollar value attributable to those performance-based RSUs by the market price per share for our stock on the grant date of the award. From a high level, the Committee views these performance-based RSUs as an award for the value actually returned to shareholders over a three-year period versus what the Committee expected to return at the time of grant. |
| o | For the performance-based RSUs issued based on relative total shareholder return (TSR), the number of shares to be awarded at the target level is determined by using a Monte Carlo simulation approach. The simulation incorporates risk-free interest rates, historical stock prices and dividends, as well as volatilities and correlation of returns for the Company and peer group companies. The portion of the total LTIC award dollar value attributable to those performance-based RSUs is then divided by the per share value of performance-based RSUs as determined by the Monte Carlo simulation to determine the number of shares to be awarded. From a high level, the Committee views these performance-based RSUs as an award to incentivize the Company to return more value to shareholders than its peers. |
2018
The allocation of the LTIC Awards. Consistent with our compensation philosophy, the Compensation Committee awardedaward opportunity in fiscal 2020 among stock options, Shareholder Value RSUs and performance-based restricted stock units as equity awards to our Named Executive Officers for fiscal year 2018. These awards consisted of approximately one-third ofRelative TSR RSUs resulted in the targetfollowing targeted award value inlevels:
| | Performance-Based RSUs At Target | Name29 | Stock Option Shares | Shareholder Value | Relative TSR | Joe A. Raver | 180,968 | 37,570 | 37,570 | Kristina A. Cerniglia | 47,755 | 9,914 | 9,914 | Kimberly K. Ryan | 42,728 | 8,870 | 8,870 | Ling An-Heid30 | 36,444 | 7,566 | 7,566 | Christopher H. Trainor | 30,161 | 6,261 | 6,261 |
Stock Options. The stock options and approximately two-thirdsawarded in performance-based RSUs. For fiscal year 2018, these performance-based RSUs were issued based on two different measurement formulas: approximately one-half of these performance-based RSUs (i.e., one-third of the total award) were issued based on our shareholder value formula; and approximately one-half (i.e., one-third of the total award) were issued based on our relative total shareholder return (TSR) formula. Each such formula is described in detail below. Each year the Compensation Committee evaluates the Company’s compensation program, refining it if necessary or appropriate to align with changing compensation trends and market and industry conditions. Specifically, starting in 2016 we awarded performance-based restricted stock units (RSUs) based on only one shareholder value formula, which is tied to the performance of Hillenbrand, Inc. at the consolidated enterprise level. Prior to fiscal year 2016, those executives with direct responsibility to one of the Company’s business units were awarded shareholder value RSUs based on the performance of that business unit rather than Hillenbrand, Inc. consolidated.
In addition, in 2016 we adjusted the mix of our annual LTIC awards to executives, which now consist of approximately one-third of the award value in stock options, one-third in RSUs based on relative total shareholder return (TSR), and one-third in RSUs based on shareholder value.
The performance-based LTIC awards granted to our Named Executive Officers during fiscal year 2018 consisted of stock options and RSUs as follows:18
Name | | Option Shares | | Aggregate Performance-Based RSU Award | | | Target | | Maximum | | | | | | | | Joe A. Raver | | 90,090 | | 38,071 | | 66,624 | Kristina A. Cerniglia | | 22,522 | | 9,517 | | 16,654 | Kimberly K. Ryan | | 19,519 | | 8,248 | | 14,434 | J. Michael Whitted19 | | 127,239 | | – | | – | Christopher H. Trainor | | 18,018 | | 7,613 | | 13,322 |
The stock options2020 become exercisable ratably on the first, second, and third anniversaries of the grant date (1/3 on each grant date anniversary). and are subject to a ten-year term, in both cases consistent with the Company’s historical practice. These were granted as non-qualified stock options upon terms determined by the Compensation Committee.
Shareholder Value RSUs. The performance-based restricted stock units – both those issued pursuant toShareholder Value RSUs are earned based on the actual shareholder value formula and those issued pursuant tocreated during the relative TSR formula – measure performance over three consecutive fiscal years beginning onthree-year period commencing October 1, 2017. Under each formula,2019 (referred to as “Shareholder Value Delivered”) above or below what was expected during that same period (referred to as “Shareholder Value Expected”). For the numberaward granted in fiscal 2020, the amount of units that vests atShareholder Value Expected as of the end of the three-year measurement period is a function$4,657.9 million, reflecting the targeted amount of the level of achievement of the applicable established performance targets during that period. We believe that by linking the pay of our Named Executive Officers to the achievement of targets over three years, our LTIC program shapes investment strategies that improve the Company’sgrowth in value over the long term.three years ending on September 30, 2022, subject to adjustments for acquisitions, integrations, and dispositions, if any, as described below.
1829 The LTIC award value allocated to stock options was converted to a number of shares using the Black-Scholes option pricing model based on the average of high and low stock price on the date of grant. The LTIC award value allocated to the Shareholder Value RSUs shown in the table – both at the target and maximum levels – reflect the aggregateRelative TSR RSUs was converted to a number of performance-based RSUs granted (i.e., those grantedshares at target based on both the relative TSR formulaaverage of high and low stock price on the shareholder value formula). See the pages that follow for a detailed breakdowndate of these aggregate awards into their component parts.grant.
1930 Mr. WhittedIn addition to these amounts, Ms. An-Heid received an initial, non-recurring grant of 127,239 stock options in June 2018 in connection with his hiring as part of his sign-on award. This sign-on award also included an initial, non-recurring grant of 10,781 time-based RSUs in fiscal 2020 as further described under the heading “Time-Based RSU Awards in Fiscal 2020.”
At the end of the three-year measurement period the Shareholder Value RSUs will vest in an amount equal to the product of (i) the target number of shares, times (ii) a multiplier based on the ratio, expressed as a percentage, of Shareholder Value Delivered to Shareholder Value Expected as follows: Shareholder Value Delivered As Percentage Of Shareholder Value Expected | | Multiplier | | | | Less than 70% | | zero (no units earned) | | | | At least 70% but less than 130% | | 0.25 plus an additional 0.025 for each full percentage point achieved above minimum for range | | | | At least 130% | | 1.75 (maximum number of units earned) |
The achievement levels and corresponding multipliers set forth above are expressed in further below.detail in the payout curve set forth below:
The Compensation Committee has determined that dividend equivalent amounts are accrued on Shareholder Value RSUs during the measurement period as dividends are declared on the Company’s common stock. These equivalent amounts are deemed to be reinvested in additional shares of Company common stock and then ultimately paid in the form of additional shares when the underlying award vests, using the same multiplier as the underlying award. Details ofOur formula for calculating the Shareholder Value Performance-Based RSU Awards. For fiscal year 2018, RSUs representing approximately one-third of the total award made to each Named Executive Officer were awarded based on a shareholder value formula (the “Shareholder Value RSUs”), whichcomponents of these awards is a discounted cash flow model that is designed to reflect the true economic return to investors. The key inputs into the model are:
| · | the Company’s net operating profit after tax, which is calculated by taking net income and adding back certain unusual and/or infrequent non-cash items (“NOPAT”), |
the Company’s net operating profit after tax, which is calculated by taking net income and adding back certain unusual and/or infrequent non-cash items (“NOPAT”);
| · | the established “hurdle rate,” which is a reflection of the Company’s weighted average cost of capital and targeted capital structure (the “Hurdle Rate”). |
the established “hurdle rate,” which is a reflection of the Company’s weighted average cost of capital and targeted capital structure (the “Hurdle Rate”).
It is contemplated that the Hurdle Rate will typically equal or exceed the Company’s weighted average cost of capital.
For the Shareholder Value RSUs, the performance award earned by a Named Executive Officer at the end of the three-year measurement period will be based upon the actual shareholder value created during the period (referred to as “Shareholder Value Delivered”) above or below what was expected (referred to as “Shareholder Value Expected”). In general, the Shareholder Value RSUs are designed to pay on the basis of the growth in value to an investor over three years, and the Company must earn a return that meets the applicable Hurdle Rate in order for a Named Executive Officer to earn the targeted award. The return must exceed the Hurdle Rate to exceed the targeted award. ByWe believe that linking the pay of our Named Executive Officers with the growth in the economic value of the Company the Shareholder Value RSU awardin this way aligns the interests of the executive management team with those of the Company’s investors.shareholders.
The table below sets forth the target and maximum amounts of the Shareholder Value RSU awards granted to our Named Executive Officers in fiscal year 2018:
Name | | Shareholder Value RSU Award | | Target | | Maximum | Joe A. Raver | | 21,843 | | 38,225 | Kristina A. Cerniglia | | 5,460 | | 9,555 | Kimberly K. Ryan | | 4,732 | | 8,281 | J. Michael Whitted20 | | – | | – | Christopher H. Trainor | | 4,368 | | 7,644 |
The applicable award calculation formulas and performance objectives for these Shareholder Value RSU awards were as follows:
Award Formula. The number of shares represented by restricted stock units (including dividends accrued thereon) that will vest and be earned is a function of the amount of Shareholder Value Delivered at the end of the measurement period as compared to the Shareholder Value Expected at the end of the measurement period.
20 As mentioned above, Mr. Whitted joined the Company in June 2018. As a result, he did not receive a Shareholder Value RSU Award in fiscal year 2018.
Subject to applicable adjustment in the event of termination of employment prior to September 30, 2020, at the end of the measurement period all restrictions will lapse and the shares will vest in an amount equal to the product of (i) the target number of shares times (ii) a multiplier based on the ratio, expressed as a percentage, of Shareholder Value Delivered to Shareholder Value Expected as follows:
Shareholder Value Delivered
As Percentage Of
Shareholder Value Expected
| | Multiplier | | | | Less than 70% | | zero (no units earned) | | | | At least 70% but less than 130% | | 0.25 plus an additional 0.025 for each full percentage point achieved above minimum for range | | | | At least 130% | | 1.75 (maximum number of units earned) |
The achievement levels and corresponding multipliers set forth above are expressed in further detail in the payout curve set forth below:
Dividend equivalent amounts are accrued on Shareholder Value RSUs during the measurement period as dividends are declared on the Company’s common stock. These equivalent amounts are deemed to be reinvested in additional shares of Company common stock and then ultimately paid in the form of additional shares when the underlying award vests, using the same multiplier as the underlying award.
Calculation of Shareholder Value Expected. The amount of Shareholder Value Expected as of the end of a measurement period is calculated as (i) the Company’s Adjusted NOPAT (defined below) for the prior fiscal year, (ii) divided by the Hurdle Rate, and (iii) multiplied by the cube of (1 + Hurdle Rate): IfFor the awards made in fiscal 2020, if during the Measurement Periodmeasurement period the Company acquires, divests, or integrates a business or operating unit, then the Shareholder Value Expected at the end of the Measurement Periodmeasurement period and the Hurdle Rate shall be adjusted to reflect the expected impact, if any, of such acquisition, divestiture, or integration during the Measurement Period,measurement period, and, for acquisitions and integrations, taking into account the projected NOPAT and cash flows upon which the Board’s approval of such acquisition was based. The actual financial results of the acquired business or operating unit will be reflected accordingly for purposes of calculating the Shareholder Value Delivered at the end of the Measurement Period.measurement period.31
For the award granted in 2018, the amount of Shareholder Value Expected as of the end of the three-year measurement period was $2,622.1 million, reflecting the targeted amount of growth in value over the three years ending on September 30, 2020, subject to adjustments for acquisitions, if any.
Calculation of Shareholder Value Delivered. The amount of Shareholder Value Delivered as of the end of a measurement period is calculated by adding two components: the NOPAT Component and the Cash Flow Component. The NOPAT Component of Shareholder Value Delivered is the Company’s Adjusted NOPAT (as defined below) for the last fiscal year of the measurement period, divided by the Hurdle Rate. 31 For Shareholder Value RSU awards made beginning in fiscal 2021, Shareholder Value Expected and Shareholder Value Delivered will not be adjusted to include any acquired businesses, as part of an effort to simplify the calculations to better align with measures used in the Company’s external reporting.
| · | The NOPAT Component of Shareholder Value Delivered is the Company’s Adjusted NOPAT (as defined below) for the last fiscal year of the measurement period, divided by the Hurdle Rate. |
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The Cash Flow Component of Shareholder Value Delivered is the sum of the following:
| · | The Cash Flow Component of Shareholder Value Delivered is the sum of the following: |
| o | Adjusted Cash Flows (as defined below) for the third fiscal year in the measurement period; |
| o | Adjusted Cash Flows for the second fiscal year in the measurement period, multiplied by (1 + Hurdle Rate); and |
| o | Adjusted Cash Flows for the first fiscal year in the measurement period, multiplied by the square of (1 + Hurdle Rate). |
Definitions. The following definitions of terms used above reflect the meanings for the awards made in fiscal 2020.32
| · | “Adjusted NOPAT” means NOPAT as adjusted (net of tax where applicable) to exclude certain items, including the following: |
“Adjusted NOPAT” means NOPAT as adjusted (net of tax where applicable) to exclude certain items, including the following:
| o | income, losses, or impairments from specific financial instruments transferred to the Company as part of our spin-off in 2008; |
| o | interest income on corporate investments and interest expense on corporate debt; |
| o | all professional fees, due diligence fees, expenses, and integration costs related to a specific acquisition;acquisition or disposition; |
| o | amortization expense of intangible long-lived assets where internally generated costs are not customarily capitalized in the normal course of the business (e.g., customer lists, patents, etc.); |
| o | all adjustments made to net income related to changes in the fair value of contingent earn-out awards; |
| o | extraordinary external, non-recurring, and material legal costs; |
| o | restructuring charges and other items related to a restructuring plan approved by the Company’s CEO; and |
| o | changes in accounting pronouncements in United States GAAP or applicable international standards that cause an inconsistency in computation as originally designed. |
“Adjusted Cash Flows” means net cash provided by operating activities (whether positive or negative) during a fiscal year, less capital expenditures net of proceeds on the disposal of property, all as shown on audited financial statements for that fiscal year, as adjusted (net of tax where applicable) to exclude the effects of certain items, including the following: 32 Beginning with awards made in fiscal 2021, replacement performance measures corresponding to Adjusted NOPAT and Adjusted Cash Flows will be used including as described in footnote 32 above, with the result that related adjustments will be simplified to better align with measures used in the Company’s external reporting.
| · | “Adjusted Cash Flows” means net cash provided by operating activities (whether positive or negative) during a fiscal year, less capital expenditures net of proceeds on the disposal of property, all as shown on audited financial statements for that fiscal year, as adjusted (net of tax where applicable) to exclude the effects of certain items, including the following: |
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| o | cash receipts or disbursements from financial instruments transferred to the Company as part of our spin-off in 2008; |
| o | interest income on corporate investments and interest expense on corporate debt; |
| o | the difference between the cash pension payment for an active defined benefit plan actually made and the pension expense recorded; |
| o | extraordinary external, non-recurring, and material legal disbursements; |
| o | changes in accounting pronouncements in United States GAAP or applicable international standards that cause an inconsistency in computation as originally designed; and |
| o | the cost of consummated acquisitions or dispositions, including the purchase price, all professional fees, due diligence fees, expenses, and integration costs. |
The foregoing adjustments are not intended to be comprehensive, and the Compensation Committee retains discretion to make additional adjustments consistent with the terms of the Stock Plan and awards thereunder.
Details of the Relative Total Shareholder Return (TSR) Performance-Based RSU AwardsTSR RSUs. The Relative TSR RSUs representing approximately one-third of the total award value made to each Named Executive Officer were based on a relative total shareholder return (TSR) formula (the “Relative TSR RSUs”).
The relative TSR formula measures performance using the same three-year measurement period used with respect to our Shareholder Value RSUs. The performance awardgranted in fiscal 2020 are earned by a Named Executive Officer at the end of the three years will be based on the change in the market price of the Company’s common stock during the three-year period commencing October 1, 2019, compared to the change in market price of the stock of the members of the Company’s compensation peer group21Standard & Poor’s 400 Mid Cap Industrials index (referred to herein as the “Peer Group“Index Companies”), during that same period, taking dividends into account as further described below.
The table This is a change from prior year grants, when we used our then-applicable compensation peer group to measure relative TSR. As described below, sets forth the target and maximum amounts of the Relative TSR RSU awardsRSUs that were granted in fiscal 2018 and vested in fiscal 2020 (as well as those granted in fiscal 2019 and vesting in 2021) were measured in comparison to the compensation peer group, rather than the Index Companies. In either case, by linking the pay of our Named Executive Officers in fiscal year 2018:with the relative return earned by our shareholders compared to our peers, the Relative TSR RSUs create an incentive for our executive management team to produce above market returns for our shareholders.
Name | | Relative Total Shareholder Return RSU Award | | Target | | Maximum | | | | | | Joe A. Raver | | 16,228 | | 28,399 | Kristina A. Cerniglia | | 4,057 | | 7,099 | Kimberly K. Ryan | | 3,516 | | 6,153 | J. Michael Whitted22 | | – | | – | Christopher H. Trainor | | 3,245 | | 5,678 |
In general for awards granted before fiscal 2020, the target award is earned if the Company’s relative TSR during the measurement period ranks between the 45th45th and 55th55th percentiles of the compensation peer group, and the award pays out proportionately higher or lower if relative TSR is above or below that range, as illustrated in more detail below. By linking the pay of our Named Executive Officers with the relative return earned by our shareholders compared to our peers, the Relative TSR RSU award creates an incentive for our executive management team to produce above market returns for our shareholders.
The key inputs and award calculation formula for these Relative TSR RSU awards were as follows:
Key Inputs. The key inputs into the award formula, as defined below, are the Beginning Average Price of the stock of the Company and the Peer Group Companies; the Ending Average Price of the stock of the Company and the Peer Group Companies; the Dividend Reinvestment Multiplier applicable to each such company; and the Total Shareholder Return (TSR) of each such company during the measurement period.
| · | The Beginning Average Price of stock with respect to the Company and each of its Peer Group Companies is the average closing price of that company’s stock over the 20 trading days immediately preceding (but not including) the first day of the measurement period, adjusted for dividends by applying that company’s Dividend Reinvestment Multiplier. |
| · | The Ending Average Price of stock with respect to the Company and each of its Peer Group Companies is the average closing price of that company’s stock over the 20 trading days immediately preceding (and including) the last day of the measurement period, adjusted for dividends by applying that company’s Dividend Reinvestment Multiplier. |
21 For more information on our peer group, please refer to the section entitled, “Peer Group Data” under the heading, “Factors Considered in Setting Compensation” above.
22 As mentioned above, Mr. Whitted joined the Company in June 2018. As a result, he did not receive a Relative TSR RSU Award in fiscal year 2018.
| · | The Dividend Reinvestment Multiplier applicable to the Company and each of its Peer Group Companies is a calculation of the value of dividends paid out by that company, assuming reinvestment of those dividends in that company’s stock, calculated by dividing each dividend paid out by that company over the applicable period by its closing share price on the ex-dividend date. |
| · | The Total Shareholder Return (TSR) of the Company and each of its Peer Group Companies during the measurement period is calculated by subtracting one from the quotient of (i) the Ending Average Price for that company, divided by (ii) the Beginning Average Price for that company: |
Award Formula. The number of shares represented by RSUs that will vest and be earned atAt the end of the three-year measurement period is a function ofin fiscal 2020 the relative percentile ranking of theRelative TSR achieved by the Company during the measurement period, as compared to the TSR achieved by the Peer Group Companies during the measurement period. Subject to applicable adjustmentRSUs granted in the event of termination of employment prior to September 30, 2020, at the end of the measurement period all restrictions will lapse and shares will vestfiscal 2018 vested in an amount equal to the product of (i) the target number of shares times (ii) a multiplier based on the ranking, expressed as a percentile, of the Company’s TSR within the Peer Group Companiescompanies in its compensation peer group as follows:
Relative Percentile Rank Of Company TSR | | Multiplier | | | | Equal to or less than 24.99% | | zero (no RSUs earned) | At least 25% up to 29.99% | | 0.40 | At least 30% up to 34.99% | | 0.55 | At least 35% up to 39.99% | | 0.70 | At least 40% up to 44.99% | | 0.85 | At least 45% up to 54.99%33 | | 1.00 | At least 55% up to 59.99% | | 1.15 | At least 60% up to 64.99% | | 1.30 | At least 65% up to 69.99% | | 1.45 | At least 70% up to 74.99% | | 1.60 | At least 75% | | 1.75 |
Whereas dividends accrue during the measurement period with respect to shares underlying the Shareholder Value RSUs as described above, the Compensation Committee has determined that dividends do not accrue during the measurement period with respect to shares underlying Relative TSR RSUs, as the determination of the grant date value of the Relative TSR RSUs assumed no dividends are paid on these shares. Beginning with awards made in fiscal 2020 and vesting in fiscal 2022, the Compensation Committee modified the payout formula described above for Relative TSR RSUs to provide a 25 percent minimum payout at 25 percent achievement, 100 percent payout at 50 percent achievement, and 175 percent payout at 75 percent achievement and above. The formula will use linear interpolation for payouts between these markers, rather than the “banded” approach we have historically used. Thus, in general, the Company’s relative TSR must be achieved at median to receive the target payout going forward. The key inputs and award calculation formula for these Relative TSR RSU awards are the Beginning Average Price and Ending Average Price of the stock of the Company and the Company’s compensation peer group companies or Index Companies, as applicable; the Dividend Reinvestment Multiplier applicable to each such company; and the TSR of each such company during the measurement period. The Beginning Average Price of stock with respect to the Company and each of its compensation peer group companies for the LTIC awards granted in fiscal 2018 and fiscal 2019, is the average closing price of that company’s stock over the 20 trading days immediately preceding (but not including) the first day of the measurement period, adjusted for dividends by applying that company’s Dividend Reinvestment Multiplier. For the LTIC awards granted in fiscal 2020, the comparison is based on the Index Companies, not the compensation peer group companies, and on the closing price of that company’s stock on the trading day immediately preceding the first day of the measurement period, using the same Dividend Reinvestment Multiplier.
33 Actual vesting level for Relative TSR RSUs awarded in fiscal 2018.
The Ending Average Price of stock with respect to the Company and each of its compensation peer group companies for the LTIC awards granted in fiscal 2018 and fiscal 2019, is the average closing price of that company’s stock over the 20 trading days immediately preceding (and including) the last day of the measurement period, adjusted for dividends by applying that company’s Dividend Reinvestment Multiplier. For the LTIC awards granted in fiscal 2020, the comparison is based on the Index Companies, not the compensation peer group companies, and on the closing price of that company’s stock on the last trading day of the measurement period, using the same Dividend Reinvestment Multiplier. The Dividend Reinvestment Multiplier applicable to the Company and each of its compensation peer group companies or the Index Companies, as applicable, is a calculation of the value of dividends paid out by that company, assuming reinvestment of those dividends in that company’s stock, calculated by dividing each dividend paid out by that company over the applicable period by its closing share price on the ex-dividend date. The TSR of the Company and each of its compensation peer group companies or the Index Companies during the measurement period is calculated by subtracting one from the quotient of (i) the Ending Average Price for that company, divided by (ii) the Beginning Average Price for that company: Vesting of Fiscal Year 20162018 LTIC Awards. On September 30, 2018,2020, the three-year measurement period for the Company’s LTIC awards that were granted in fiscal year 20162018 closed. Those awards vested in accordance with our two LTIC award formulas described above. During the three-year measurement period (fiscal years 2016-2018)2018-2020), the Company achieved an actual shareholder value increase equal to 102.7106 percent of the target for that measurement period, resulting in a vested award amount equal to 106.8116 percent of the targeted number of shares (i.e., the number of shares that would be earned upon achievement in full of the target shareholder value increase).
Under the relative TSR formula, at the end of the three-year measurement period, the Company ranked 510 out of the 1618 companies in the Company’s Peer Groupcompensation peer group constituted as of the date of the award (excluding one company that was acquired in the interim)23(as described above, the percentile calculation includes the 15 Peer Group Companies17 peer group companies plus the Company), resulting in a percentile figure of 73.347.0 percent, and, therefore, a multiplier of 1.601.0 times the target award.
Additional details regarding the LTIC awards granted in fiscal year 20162018 are set forth under the heading “Long-Term Incentive Compensation” in the “Compensation Discussion and Analysis” section of our proxy statement for our 20172019 Annual Meeting of shareholders whichthat was filed with the SEC on January 4, 2017.2, 2019. See the “Option Exercises and Stock Vested for Fiscal Year Ended September 30, 2018”2020” table in Part III below for additional detail regarding the vesting of the LTIC awards granted in fiscal 2016.2018.
Non-recurring Time-Based RSU Awards in Fiscal 2020. In fiscal 2020, consistent with its historical use of time-based RSU awards as a retention tool for certain key executives, the Compensation Committee approved the granting of an initial, non-recurring time-based RSU sign-on award to Ling An-Heid, President of the Company’s Mold-Masters business, who joined the Company in connection with the Milacron acquisition. Ms. An-Heid was a key executive at Milacron prior to the acquisition, and the Compensation Committee determined to make this award as part of her retention and with the aim of facilitating a successful integration of Milacron. Consequently, Ms. An-Heid received an award of 31,308 time-based RSUs, vesting 50 percent on each of December 5, 2021, and December 5, 2022. See the “Outstanding Equity Awards at September 30, 2020” table in Part III below for additional detail regarding Ms. An-Heid’s LTIC awards granted in fiscal 2020. Retirement and Savings Plans
Savings Plan. We maintain a tax-qualified defined contribution savings plan (the “Savings Plan”) in which substantially allmost of our U.S.-domiciled employees from Hillenbrand companies prior to the acquisition of Milacron, including all of the Named Executive Officers other than Ms. An-Heid, are eligible to participate. EmployeesThe employees participating in the Savings Plan may contribute a percentage of their compensation thereto on a pre-tax or Roth after-tax basis, to the Savings Plan, subject to applicable limits. TheFor the Savings Plan, the Company matches contributions in an amount equal to 50¢ for every dollar contributed byall eligible employees not accruing legacy pension benefits, which includes all of the employee until the employee contributions reach six percent of his or her compensation.Named Executive Officers other than Ms. An-Heid. Additionally, whether or not employees eligible to contribute to the Savings Plan did so, the Company providesprovided an automatic contribution per pay period to the Savings Plan for all eligible employees in an amount equal to four percent of compensation.Plan. All contributions by employees and the automatic Company contribution are fully vested immediately. Theimmediately, but the Company matching contributions dohave not vesthistorically vested until after three years of credited service;service, at which point further Company matching contributions vest immediately when made. Beginning in 2021, all contributions, including Company matching contributions, will vest immediately when made. Since the acquisition of Milacron through 2020, we also have maintained, among other plans, a registered retirement savings plan (employee contributions) and deferred profit sharing plan (employer contributions) in Canada, and Ms. An-Heid is eligible to participate in these (but did not in fiscal 2020). As with the Savings Plan, the Canadian deferred profit sharing plan provides matching contributions to participating employees.
For information regarding compensation paid to our Named Executive Officers under the Savings Plan, see footnote 5 to the “Summary Compensation Table” in Part III below.
Supplemental Retirement Plan. We maintain a Supplemental Retirement Plan administered by Fidelity Management Trust Company (the “SRP”) that provides a defined contribution benefit to plan participants. All of the Named Executive Officers other than Ms. An-Heid, who is not a U.S.-domiciled employee, participate in the SRP. The SRP is designed to supplement the amount of retirement benefits that participants are entitled to receive from our Savings Plan. 23 As of the grant date of the award, the Company’s peer group did not include Actuant Corporation or Barnes Group Inc., but did include CLARCOR Inc.
The Internal Revenue Code establishes certain limits with respect to tax-qualified retirement plans like our Savings Plan, including a limit on the maximum amount of compensation that can be counted as earnings of the participant for purposes of calculating benefits. The application of these tax law limits can reduce the amount that would otherwise be payable to a participant under the terms of a tax-qualified retirement plan. Additionally, our Savings Plan excludes any cash bonus amounts from the definition of compensation for plan purposes, focusing the contribution formula only on base salary. Beginning in 2021, the contribution formula will also take cash bonus amounts into account. In general, the SRP is designed to “make whole” a participant by paying benefits otherwise lost under the Savings Plan due to the application of tax law limits and the exclusion of the annual cash bonus from the plan’s contribution formula. The SRP annually accrues future benefits for the participants equal to the difference between (i) the benefit amount that is actually contributed for a participant under the Savings Plan, and (ii) the amount that would have been contributed if (a) the tax law limits were not applied, and (b) the participant’s targeted annual cash bonus amount were included as compensation (in addition to base salary) in the contribution formula under the plan. Once benefits under the SRP have vested, they are generally payable following retirement or termination of employment. However, if a participant’s employment is terminated for “cause” (as such term is defined in the SRP), contributions under the SRP may be forfeited. Under the SRP, participants are permitted to direct the investment of their accrued accounts (on a hypothetical basis because this is non-cash “shadow” deferred compensation) into various Fidelity mutual funds and/or Company common stock. The Company then actually makes those designated investments for the Company’s own account with funds contributed by the Company under a “Rabbi Trust” arrangement so that the Company can actually fund the earnings or losses experienced by each participant in his or her hypothetical investments when distributions are made. The SRP also permits a participant to elect to defer all or a portion of his or her annual cash bonus for payment at a later time and to invest the deferred amounts in Fidelity mutual funds and/or Company common stock on a hypothetical basis.
For information concerning benefits payable to our Named Executive Officers under the SRP, see the table entitled “Nonqualified Deferred Compensation for Fiscal Year Ended September 30, 2018”2020” in Part III below.
None of our Named Executive Officers participates in or has account balances in any non-qualified defined benefit plan sponsored by us.
Employment Agreements and Termination Benefits
Employment Agreements. We have entered into employment agreements with each of the Named Executive Officers. We believe that it is appropriate for our senior executives to have employment agreements because they provide the Company certain contractual protections that we might not otherwise have, including provisions relating to not competing with us, not soliciting our employees, and maintaining the confidentiality of our proprietary information. The employment agreements we have with our Named Executive Officers contain non-competition and non-solicitation agreements that generally continue in effect for a period of one to two years after the termination of the Named Executive Officer’s employment. Additionally, we believe that employment agreements are a useful tool in the recruiting and retention of senior-level executives. The employment agreements are substantially similar among our Named Executive Officers, other than a few differences in the employment agreement of Ling An-Heid due to Canadian law and market practices that are described in more detail below.
Termination Benefits Under Employment Agreements with Named Executive Officers Based in the United States. The employment agreements with our Named Executive Officers based in the United States provide for employment “at will.” They are terminable by the Named Executive Officer without “cause” or without “good reason” on 60 days’ written notice, by the Company at any time without “cause,” and also by the Company at any time (subject to certain cure rights) for “cause,” as such term is defined in each employment agreement. TheThese Named Executive Officers are also entitled to terminate their employment agreements for “good reason,” as such term is defined in their agreements. If we terminate the employment of a Named Executive Officer without “cause,” or if his or her employment is terminated with “good reason,” then we are obligated to provide severance compensation in connection with such termination. No severance compensation is payable under our employment agreements with the Named Executive Officers if we terminate with “cause,” if the executive terminates without “good reason,” or if the employment relationship is terminated on account of death or disability.
If the employment of a Named Executive Officer based on the United States is terminated by us without cause or is terminated by the executive officer upon the occurrence, without the executive officer’s consent, of a good reason event, we are required under the officer’s employment agreement to provide severance compensation to such Named Executive Officer as follows: continuation of the officer’s base salary for 12 months (24 months for Mr. Raver), subject to required tax withholdings, which payments may need to be delayed for six months under certain provisions of the Internal Revenue Code;
| · | continuation of the officer’s base salary for 12 months (24 months for Mr. Raver), subject to required tax withholdings, which payments may need to be delayed for six months under certain provisions of the Internal Revenue Code; |
continued health coverage and, in some cases, group life insurance, until the continuation of base salary period described above is complete; and limited out-placement counseling. Termination Benefits Under the Employment Agreement with Ling An-Heid (the “An-Heid Agreement”). The An-Heid Agreement provides for specific circumstances under which it may be terminated by either Ms. An-Heid or the Company’s Mold-Masters affiliate that is a party thereto (“Mold-Masters”). The An-Heid Agreement is terminable by Ms. An-Heid for any reason on four weeks’ written notice, by Mold-Masters at any time for “cause,” as such term is defined in the An-Heid Agreement, and also by Mold-Masters at any time without “cause” upon providing Ms. An-Heid with appropriate statutory notice and severance, as well as additional contractual notice. No severance compensation is payable under the An-Heid Agreement if Ms. An-Heid is terminated with “cause.”
If Ms. An-Heid’s employment is terminated by Mold-Masters without cause, the An-Heid Agreement requires notice and severance compensation to Ms. An-Heid as follows:
minimum statutory notice of eight weeks plus four additional weeks of notice per year of service, up to seventy additional weeks, all or a portion of which may be paid in lieu of notice;
| · | continued health coverage and, in some cases, group life insurance, until the continuation of base salary period described above is complete; and |
minimum statutory severance of twenty-six weeks; and
| · | limited out-placement counseling. |
continuation of health insurance benefits throughout the eight-week statutory notice period, including payment of premiums on Ms. An-Heid’s behalf.
In addition, upon termination, Ms. An-Heid is entitled to payment of pro-rated unused vacation pay (or a corresponding deduction for any excess vacation pay) based on ten percent of the gross wages paid to her during the applicable calendar year.
Post-Termination Payments of STIC and LTIC. A Named Executive Officer whose employment terminates may or may not be entitled to the post-termination payment of all or a pro rata portion of the STIC or LTIC award that would have been payable to the Named Executive Officer if his or her employment had continued through the end of the applicable measurement period. The amount payable, if any, depends on the performance of the Company or its applicable business unit throughout the measurement period in question and the circumstances under which employment terminates.
STIC. Post-termination STIC is payable to a Named Executive Officer after the performance period in question has ended and only if it is determined under the applicable performance formula that an amount would have been payable to the former officer had his or her employment continued through the end of the performance period. The amount, if any, that is payable depends upon the circumstances of the termination. If employment terminates due to death, disability, retirement (after age 55 and five years of service), involuntary termination without “cause,” or voluntary termination for “good reason,” then the former officer is entitled to a pro-rata payment of his or her STIC award based on the portion of the fiscal year during which he or she remained employed, subject to a reduction of up to one-third of that amount at the discretion of the Compensation Committee. No pro-rata STIC is payable to officers upon an involuntary termination with cause or a voluntary termination without good reason. LTIC. Following termination, the RSU portion of an LTIC award is payable to a Named Executive Officer only after the measurement period in question has ended and only if it is determined under the applicable performance formula that an amount would have been payable to the former officer had his or her employment continued through the end of the measurement period. Once the amount that would have been paid had employment continued (the “Full Period Award”) is determined, there are three possible outcomesif employment terminates due to determinedeath, disability, or retirement (after age 55 and five years of service), the portionNamed Executive Officer is entitled to a pro-rata amount of the Full Period Award ifbased on the portion of the measurement period during which he or she remained employed, and in any that is payable to the former Named Executive Officer:
69other circumstance, all outstanding RSUs are forfeited upon termination of employment.
| · | if employment terminates due to death, disability, or retirement (after age 55 and five years of service), the Named Executive Officer is entitled to a pro-rata amount of the Full Period Award based on the portion of the measurement period during which he or she remained employed. For grants awarded prior to fiscal year 2017, an additional 52 weeks (up to a maximum of the Full Period Award amount) is added; |
| · | if employment is terminated by the Company without “cause,” or by the executive for “good reason,” the Named Executive Officer is entitled to a pro-rata amount of the Full Period Award based solely on the portion of the measurement period during which he or she remained employed; and |
| · | in any other circumstance, all outstanding RSUs are forfeited upon termination of employment. |
With respect to stock options, all unvested options become fully vested upon a termination of employment due to death, disability, or retirement occurring more than one year after the grant date. Unless otherwise expressly approved by the Compensation Committee, all unvested options are forfeited upon a termination of employment due to any other circumstance. Vested stock options will be treated as follows:
| · | if employment terminated due to death, disability, or retirement (as defined above), or if employment is terminated by the Company without “cause,” or by the executive for “good reason,” the Named Executive Officer will have the lesser of one year (or five years for stock options granted prior to fiscal year 2017) or the original expiration of the stock options to exercise; and |
if employment terminated due to death, disability, or retirement (as defined above), or if employment is terminated by the Company without “cause,” or by the executive for “good reason,” the Named Executive Officer will have the lesser of one year or the original expiration of the stock options to exercise; and
| · | in any other circumstance, the Named Executive Officer will have the lesser of 90 days or the original expiration date of the stock options to exercise. |
in any other circumstance, the Named Executive Officer will have the lesser of 90 days or the original expiration date of the stock options to exercise.
For more information regarding the severance benefits payable to our Named Executive Officers under their employment agreements and our STIC and LTIC compensation programs, see the tables under the heading “Potential Payments Upon Termination” in Part III below.
Change in Control Agreements. We believe it is important that management be in a position to provide an objective assessment and advice to the Company’s Board of Directors regarding any proposed business transaction without being unduly distracted by the uncertainties and risks that a proposed change in control of the Company creates with respect to management. Accordingly, we have entered into change in control agreements with each of our Named Executive Officers and other key executives that provide compensation to the executive if his or her employment is terminated in connection with a change in the control of the Company. Compensation provided under the change in control agreements is paid only upon an executive’s termination of employment and is in lieu of severance compensation provided under that executive’s employment agreement.
These change in control agreements provide for the following:
| · | Payment of benefits only upon a “double-trigger,” requiring not only a change in control but also a qualified termination of employment in order for benefits to be realized. Qualified terminations are any termination in anticipation of or within two years after the occurrence of a change in control, but excluding terminations on account of death, disability, retirement, or for “cause.” These change in control agreements expressly supersede the Company’s Stock Plan, which provides for single-trigger vesting of equity awards. |
Payment of benefits only upon a “double-trigger,” requiring not only a change in control but also a qualified termination of employment in order for benefits to be realized. Qualified terminations are any termination in anticipation of or within two years after the occurrence of a change in control, but excluding terminations on account of death, disability, retirement, or for “cause.” These change in control agreements expressly supersede the Company’s Stock Plan, which provides for single-trigger vesting of equity awards.
| · | Vesting of benefits without any tax gross-up payments relating to the excise tax on excess “parachute payments” imposed by Section 4999 of the Internal Revenue Code. If an executive is entitled to receive payments upon a change in control that may be subject to the excise tax, he or she will either be paid the full amount (and remain personally liable for the excise tax) or be paid a reduced amount that does not give rise to the excise tax, whichever is greater on an after-tax basis. |
Vesting of benefits without any tax gross-up payments relating to the excise tax on excess “parachute payments” imposed by Section 4999 of the Internal Revenue Code. If an executive is entitled to receive payments upon a change in control that may be subject to the excise tax, he or she will either be paid the full amount (and remain personally liable for the excise tax) or be paid a reduced amount that does not give rise to the excise tax, whichever is greater on an after-tax basis.
The benefits to be provided upon a qualified termination include:
| · | a lump sum payment in cash equal to two times the executive’s annual base salary (three times for Mr. Raver); |
a lump sum payment in cash equal to two times the executive’s annual base salary (three times for Mr. Raver);
| · | continued health insurance for the executive and his or her dependents for 24 months (36 months for Mr. Raver) and continued life insurance coverage for 24 months, with the right to purchase continued medical insurance (at COBRA rates) from the end of this period until the executive reaches Social Security retirement age; |
continued health insurance for the executive and his or her dependents for 24 months (36 months for Mr. Raver) and continued life insurance coverage for 24 months, with the right to purchase continued medical insurance (at COBRA rates) from the end of this period until the executive reaches Social Security retirement age;
| · | a lump sum payment equal to two times (three times for Mr. Raver) the amount of the additional amounts, if any, accrued during the last 12 months in the executive’s defined contribution accounts under the Company’s Supplemental Retirement Plan; |
a lump sum payment equal to two times (three times for Mr. Raver) the amount of the additional amounts, if any, accrued during the last 12 months in the executive’s defined contribution accounts under the Company’s Supplemental Retirement Plan;
| · | a lump sum payment equal to his or her respective current year STIC award, assuming 100 percent achievement in that year of the relevant performance targets under the STIC Plan; and |
a lump sum payment equal to his or her respective current year STIC award, assuming 100 percent achievement in that year of the relevant performance targets under the STIC Plan; and
| · | immediate vesting of all outstanding stock options and equity awards, assuming (where applicable) 100 percent achievement of the relevant performance targets. |
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immediate vesting of all outstanding stock options and equity awards, assuming (where applicable) 100 percent achievement of the relevant performance targets.
Under the change in control agreements, a “change in control” is defined generally as: (i) the acquisition of beneficial ownership of 35 percent or more of the voting power of all of the Company’s voting securities by a person or group; (ii) the consummation of certain mergers or consolidations; (iii) a change in the composition of a majority of the members of our Board of Directors; (iv) the consummation of a sale of substantially all of the Company’s assets; or (v) the approval by our shareholders of a plan of complete liquidation of the Company.
The amounts potentially payable to our Named Executive Officers in connection with a change in control are set forth in the tables under the headings “Potential Payments Upon Termination” and “Change in Control Benefits” in Part III below. Pending approval of the Stock Plan proposal by the Company’s shareholders, the Company intends to amend the change in control agreements described above to make corresponding changes and certain other updates to reflect market practice in this area.
Other Personal Benefits
In addition to the compensation components discussed above, we also provide our Named Executive Officers, as well as certain other employees and officers, with other benefits as described below. We generally disfavor providing extensive perquisites but do provide modest benefits intended to enhance the effectiveness of our Named Executive Officers and complement the highly variable, performance-oriented compensation components we utilize. We also provide these benefits in order to remain competitive with the market and believe that these benefits help us to attract and retain qualified executives.
Executive Financial Planning, Estate Planning, and Tax Preparation Service Program. Our Named Executive Officers and certain other officers are eligible for limited reimbursement of (i) financial and estate planning services and (ii) income tax preparation services. Reimbursement is approved for up to $5,000 per calendar year.
Executive Physical. We provide the Named Executive Officers and certain other officers with annual physicals. We cover 100 percent of the cost of this program.program for officers who see the Company’s selected provider, or reimburse an equivalent amount for any officer who selects his or her own provider. This program was developed to promote the physical well-being and health of our senior-level managers. We believe that this program is in the best long-term interests of our shareholders.
Other Benefits. Our Named Executive Officers also participate in other benefit plans that we fully or partially subsidize. Their participation is generally on the same terms as other employees. Some of the more significant of these benefits include medical, dental, life, disability, and vision insurance, as well as relocation reimbursement, tuition reimbursement, and holiday and vacation benefits. Many employees, including all of our Named Executive Officers, participate in our group term life insurance program, which provides death benefit coverage of up to two times base salary or $500,000, whichever is less. In addition, our Named Executive Officers and certain other employees are eligible to participate in our optional supplemental group term life insurance program, in which participants may purchase additional term life insurance at their own expense in amounts up to the lesser of five times base annual salary or $600,000. Furthermore, in certain cases, our Named Executive Officers may receive supplemental long-term disability premiums paid by the Company.Company and other modest personal benefits as set forth in the footnotes to the Summary Compensation Table below.
Compensation-Related Policies
In connection with the Company’s compensation program, we have established certain policies that relate to executive compensation. The most significant of these policies are described below.
Stock Ownership Requirement. All of our Named Executive Officers, as well as certain other officers, are required to own a significant number of shares of Company common stock. Specifically, the officers identified below, from and after the fifth anniversary of the date on which such individual first became such an officer, are required to hold shares of our common stock or equivalents (as further described below) with a minimum aggregate value at the following levels (“Required Ownership Level”):
Position | | Required Ownership Level | | | | Chief Executive Officer of the Company | | 5 x Base Annual Salary | | | | Senior Vice Presidents of the Company | | 2 x Base Annual Salary | | | | Certain senior officers of the Company and its subsidiaries as designated by the Company Chief Executive Officer | | 1 x Base Annual Salary |
Our Named Executive Officers currently hold shares of our common stock or stock equivalents at levels greater than or equal to the Required Ownership Level.24 Shares owned outright and shares represented by RSUs or restricted stock awards, whether vested or unvested, including performance-based shares at the target award level, count as share equivalents toward the Required Ownership Level. Unexercised stock options do not count toward the Required Ownership Level. Failure to achieve or maintain the Required Ownership Level may result in (i) the applicable individual being required to hold all after-tax vested stock award shares and after-tax shares acquired upon exercise of stock options, or (ii) suspension of future equity awards, until the Required Ownership Level is achieved. The Compensation Committee (or its designee) may make exceptions, in its sole discretion, in the event of disability or great financial hardship.
Anti-Hedging Policy. For a discussion of the Company’s anti-hedging policy, see Part VII of this proxy statement.
Clawback. For STIC and LTIC awards, the Company has adopted a “clawback” policy applicable to executive officers. Specifically, if the Company is required, because of fraud or negligence, to restate financial results for any period (the “Restatement Period”) in a manner that would have adversely affected the amount of the payout of any STIC or LTIC awards, the Compensation Committee has the right during the three-year period following the Restatement Period to review the matter and determine what, if any, repayment executives will be required to submit.
Tax Deduction Management. Under Section 162(m) of the Internal Revenue Code, the Company is not able to deduct for federal income tax purposes annual compensation in excess of $1.0 million paid to certain employees – generally its Named Executive Officers (other than the Chief Financial Officer). However, subject to changes in Section 162(m) as further described below, compensation that is “performance-based” is not subject to that deduction limitation. In general, the Compensation Committee has intended to structure and administer executive compensation plans and arrangements, including our STIC and LTIC awards, so that they qualify for the performance-based compensation exception. However, the Compensation Committee may from time to time approve payments that cannot be deducted in order to maintain flexibility in structuring appropriate compensation programs in the interest of shareholders.
The Tax Cuts and Jobs Act, which was enacted on December 22, 2017, includes several significant changes to Section 162(m) of the Internal Revenue Code, such as the repeal of the performance-based compensation exemption and the expansion of the individuals subject to the provision (for example, by including the Chief Financial Officer and certain former Named Executive Officers). Because of these changes, except as otherwise provided in the transition relief provisions of the Tax Cuts and Jobs Act, compensation paid to any of our Named Executive Officers generally will not be deductible in the fiscal year starting October 1, 2018 or later, to the extent that it exceeds $1.0 million. 24 Mr. Whitted was hired in June 2018 and does not currently own shares at the applicable Required Ownership Level, but has until June 2023 to come into compliance.
PART II: COMPENSATIONCOMPENSATION COMMITTEE REPORT
Each member of the Compensation Committee of the Board of Directors of Hillenbrand, Inc. is “independent,” as that term is defined under (i) the New York Stock Exchange listing standards, (ii) the non-employee director standards of Rule 16b-3 of the Securities Exchange Act of 1934, as amended, (iii) the outside director requirements of Section 162(m) of the Internal Revenue Code, and (iv) the Company’s Corporate Governance Standards. The Compensation Committee currently consists of Gary L. Collar, Helen W. Cornell, Mark C. DeLuzio, and F. Joseph Loughrey.Loughrey, Jennifer W. Rumsey, and Stuart A. Taylor, II.
As a committee, one of our obligations is to ensure Hillenbrand’s executive compensation program is performance-based, in order to align management interests with the short-term and long-term interests of shareholders, and is competitive, in order to enable the Company to attract and retain superior executive personnel. We engage an independent executive compensation consulting firm to assist us in our review of the Company’s executive compensation programs to ensure these programs are competitive and consistent with our stated objectives. The executive compensation consultant is retained by and directly accountable to us, and we generally approve all related fees paid to the executive compensation consultant. We have no interlocks or insider participation, and we engage in annual self-evaluations to determine our effectiveness as a committee. We have adopted a Charter, which may be found on Hillenbrand’s web site at www.hillenbrand.com.
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this proxy statement with management and, based upon this review and discussion, recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018.2020.
| Respectfully submitted, | | | | Helen W. Cornell (Chairperson) | | Gary L. Collar | | Mark C. DeLuzioF. Joseph Loughrey | | F. Joseph LoughreyJennifer W. Rumsey | | Stuart A. Taylor, II |
PART III: EXECUTIVE COMPENSATIONCOMPENSATION TABLES
Tabular Compensation Information
In the following pages we present numerous tables that set out various elements of compensation for our Named Executive Officers. No one table alone presents the “total picture”; instead, you should review all the information carefully to understand the amounts and manner in which our Named Executive Officers have been paid. To understand all the numbers in the tables below, you need to carefully read the footnotes, which explain various assumptions and calculations that give rise to the dollar amounts in the tables.
Compensation of Named Executive Officers
Summary Compensation Table
The following table summarizes the total compensation paid to or earned by each of the Named Executive Officers for the fiscal years ended September 30, 2018, 2017,2020, 2019, and 2016,2018, except where otherwise noted. We have entered into employment agreements with each of the Named Executive Officers, which are described in detail in the “Employment Agreements and Termination Benefits” section of Part I above.
(a) | | (b) | | (c) | | | (d) | | | (e) | | | (f) | | | (g) | | | (h) | | | (i) | | | (j) | | Name And Principal Position (As Of September 30, 2018) | | Year | | Salary $ (1) | | | Bonus $ | | | Stock Awards $ (2) | | | Option Awards $ (3) | | | Non-Equity Incentive Plan Compensation $ (4) | | | Change In Pension Value And Nonqualified Deferred Compensation Earnings $ | | | All Other Compensation $ (5) | | | Total $ | | Joe A. Raver President and Chief Executive Officer | | 2018 | | $ | 809,685 | | | $ | – | | | $ | 1,999,942 | | | $ | 999,999 | | | $ | 1,420,254 | | | $ | – | | | $ | 100,616 | | | $ | 5,330,496 | | | 2017 | | $ | 745,699 | | | $ | – | | | $ | 1,599,939 | | | $ | 799,995 | | | $ | 1,069,462 | | | $ | – | | | $ | 102,896 | | | $ | 4,317,991 | | | 2016 | | $ | 690,356 | | | $ | – | | | $ | 1,266,623 | | | $ | 633,326 | | | $ | 741,219 | | | $ | – | | | $ | 32,685 | | | $ | 3,364,209 | | Kristina A. Cerniglia | | 2018 | | $ | 521,695 | | | $ | – | | | $ | 499,951 | | | $ | 249,994 | | | $ | 655,000 | | | $ | – | | | $ | 56,742 | | | $ | 1,983,382 | | Senior Vice President and Chief Financial Officer | | 2017 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Kimberly K. Ryan Senior Vice President and President of Coperion | | 2018 | | $ | 485,892 | | | $ | – | | | $ | 433,287 | | | $ | 216,661 | | | $ | 570,600 | | | $ | – | | | $ | 1,731,089 | | | $ | 3,437,529 | | | 2017 | | $ | 471,186 | | | $ | – | | | $ | 411,941 | | | $ | 205,993 | | | $ | 449,097 | | | $ | – | | | $ | 1,073,074 | | | $ | 2,611,291 | | | 2016 | | $ | 459,000 | | | $ | – | | | $ | 411,954 | | | $ | 205,994 | | | $ | 427,400 | | | $ | – | | | $ | 203,553 | | | $ | 1,707,901 | | J. Michael Whitted (6) Senior Vice President, Strategy and Corporate Development | | 2018 | | $ | 121,096 | | | $ | – | | | $ | 499,969 | | | $ | 1,500,021 | | | $ | 146,600 | | | $ | – | | | $ | 7,519 | | | $ | 2,275,205 | | | 2017 | | $ | N/A | | | $ | – | | | $ | N/A | | | $ | N/A | | | $ | N/A | | | $ | – | | | $ | N/A | | | $ | N/A | | | 2016 | | $ | N/A | | | $ | – | | | $ | N/A | | | $ | N/A | | | $ | N/A | | | $ | – | | | $ | N/A | | | $ | N/A | | Christopher H. Trainor Senior Vice President and President of Batesville | | 2018 | | $ | 434,746 | | | $ | – | | | $ | 399,924 | | | $ | 200,000 | | | $ | 264,200 | | | $ | – | | | $ | 44,153 | | | $ | 1,343,023 | | | 2017 | | $ | 421,425 | | | $ | – | | | $ | 349,983 | | | $ | 175,000 | | | $ | 294,908 | | | $ | – | | | $ | 50,878 | | | $ | 1,292,194 | | | 2016 | | $ | 407,589 | | | $ | – | | | $ | 199,955 | | | $ | 99,993 | | | $ | 184,700 | | | $ | – | | | $ | 60,342 | | | $ | 952,579 | |
(a) | | (b) | | | (c) | | | (d) | | | (e) | | | (f) | | | (g) | | | (h) | | | (i) | | | (j) | | Name And Principal Position (As Of September 30, 2020) | | Year | | | Salary
$ (1) | | | Bonus
$ | | | Stock Awards
$ (2) | | | Option Awards
$ (3) | | | Non-Equity Incentive Plan Compensation
$ (4) | | | Change In Pension Value And Nonqualified Deferred Compensation Earnings
$ | | | All Other Compensation
$ (5) | | | Total
$ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Joe A. Raver President and Chief Executive Officer | | | 2020 2019 2018 | | | $ $ $ | 723,197 844,178 809,685 | | | $ $ $ | – – – | | | $ $ $ | 2,417,254 2,233,248 1,999,942 | | | $ $ $ | 1,199,999 1,116,640 999,999 | | | $ $ $ | 663,800 1,250,897 1,420,254 | | | $ $ $ | – – – | | | $ $ $ | 47,779 17,765 100,616 | | | $
$ $ | 5,052,029 5,462,728 5,330,496 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Kristina A. Cerniglia Senior Vice President, Chief Financial Officer, and Integration Leader | | | 2020 2019 2018 | | | $ $ $ | 538,395 535,346 521,695 | | | $ $ $ | – – – | | | $ $ $ | 637,867 549,946 499,951 | | | $ $ $ | 316,663 274,991 249,994 | | | $ $ $ | 370,000 567,904 655,000 | | | $ $ $ | – – – | | | $ $ $ | 64,275 78,065 56,742 | | | $ $ $ | 1,927,200 2,006,252 1,983,382 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Kimberly K. Ryan Senior Vice President and President of Coperion | | | 2020 2019 2018 | | | $ $ $ | 501,496 498,644 485,892 | | | $ $ $ | – – – | | | $ $ $ | 570,696 466,613 433,287 | | | $ $ $ | 283,329 233,327 216,661 | | | $ $ $ | 368,600 550,569 570,600 | | | $ $ $ | – – – | | | $ $ $ | 465,540 2,023,261 1,731,089 | | | $ $ $ | 2,189,661 3,772,414 3,437,529 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ling An-Heid (6) Senior Vice President and President of Mold-Masters |
|
| 2020 2019 2018 | | | | 433,805 N/A N/A | | | $ $ $ | 435,129 N/A N/A | | | $ $
$
| 1,486,774 N/A N/A | | | $ $
$
| 241,660 N/A N/A | | | $ $ $ | 159,700
N/A N/A
| | | $ $ $ | – N/A N/A | | | $ $ $ | 12,202 N/A
N/A | | | $ $ $ | 2,769,270 N/A N/A | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Christopher H. Trainor Senior Vice President and President of Batesville | | | 2020 2019 2018 | | | $ $ $ | 450,895 447,834 434,746 | | | $ $ $ | – – – | | | $ $ $ | 402,833 399,972 399,924 | | | $ $ $ | 199,998 199,991 200,000 | | | $ $ $ | 539,400 252,975 264,200 | | | $ $ $ | – – – | | | $ $ $ | 58,186 58,665 44,153 | | | $ $ $ | 1,651,312 1,359,437 1,343,023 | |
(1) | The amounts indicated represent the dollar value of base salary earned during fiscal years 2018, 2017,2020, 2019, and 2016,2018, as applicable. |
(2) | The amounts indicated represent the grant date fair value related to awards of restricted stock units granted during fiscal years 2018, 2017,2020, 2019, and 2016,2018, computed in accordance with stock-based accounting rules (FASB ASC Topic 718). The determination of this value is based on the methodology set forth in Note 910 to our audited financial statements included in our Annual Report on Form 10-K, which was filed with the SEC on November 13, 2018.12, 2020. Awards that are performance-based are valued for purposes of this table above based on the targeted 100 percent performance achievement level. The maximum award amounts when the grants were made, at the highest possible performance achievement level, were 175 percent of the values shown in the table. |
(3) | The amounts indicated represent the grant date fair value related to stock option awards granted during fiscal years 2018, 2017,2020, 2019, and 2016,2018, computed in accordance with stock-based accounting rules (FASB ASC Topic 718). The determination of this value is based on the methodology set forth in Note 910 to our audited financial statements included in our Annual Report on Form 10-K, which was filed with the SEC on November 13, 2018.12, 2020. |
(4) | The amounts indicated represent cash awards earned for fiscal years 2018, 2017,2020, 2019, and 2016,2018, and paid in the first quarter of fiscal 2019, 2018,2021, 2020, and 2017,2019, respectively, under our STIC Plan. See the “Annual Cash Incentive Awards” section of Part I above. |
(5) | Includes, where applicable for fiscal year 20182020 as set forth in the table below this note, (a) supplemental long-term disability premiums paid by the Company, (b) Company contributions to the Savings Plan and the SRP, (c)(b) tax gross-ups and reimbursements received, and (d)(c) other personal benefits (perquisites) that equal or exceed in the aggregate the sum of $10,000 (which are itemized and further described in the table below this note). |
Other Compensation – Additional Detail (Fiscal Year 2018)2020)
| | Company Contribution | | | Tax Reimbursements And Gross-Ups | | | Life Insurance Premiums | | | Personal Benefits Aggregating td0,000 Or More | | | Company Contribution | | |
| | |
| | Name | | | 401(K | ) | | Supp 401(K) | | | | | | | | | | 401(K) |
| | Supp 401(K) | | | Tax Reimbursements And Gross-Ups | | | Personal Benefits Aggregating td0,000 Or More | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Joe A. Raver | | $ | 20,000 | | | $ | 74,218 | | | $ | 3,352 | * | | $ | 3,046 | | | $ | – | | | $ | 20,150 | | | $ | 69,466 | | | $ | (41,837 | )* | | $ | – | | Kristina A. Cerniglia | | $ | 20,000 | | | $ | 33,443 | | | $ | – | | | $ | 3,299 | | | $ | – | | | $ | 19,676 | | | $ | 34,591 | | | $ | – | | | $ | 10,008 | ** | Kimberly K. Ryan | | $ | 20,219 | | | $ | 30,163 | | | $ | 1,559,470 | * | | $ | 2,959 | | | $ | 118,278 | ** | | $ | 19,085 | | | $ | 31,200 | | | $ | 415,255 | * | | $ | – | | J. Michael Whitted | | $ | 7,519 | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | Ling An-Heid | | | $ | – | | | $ | – | | | $ | – | | | $ | 12,202 | *** | Christopher H. Trainor | | $ | 19,252 | | | $ | 22,064 | | | $ | – | | | $ | 2,837 | | | $ | – | | | $ | 20,211 | | | $ | 25,762 | | | $ | – | | | $ | 12,213 | **** |
| * | Under the Company’s expatriation policies, the Company paid certain of Mr. Raver’s and Ms. Ryan’s foreign taxes. For Mr. Raver, the amount reported in this column reflects paymentsreimbursements made by Mr. Raver to the Company for excesscorrection of a foreign tax paymentsgross-up paid by the Company on Mr. Raver’s behalf during fiscal year 2018. These payments relate2017 and relates to his work conducted on behalf of the Company while residing in Switzerland and correct an overpayment for a partial reimbursement of these amounts by Mr. Raver in 2017.Switzerland. Mr. Raver completed this work and returned to the United States in 2013. For Ms. Ryan, the amount reported in this column reflects foreign tax payments made by the Company for foreign tax payments on Ms. Ryan’s behalf during fiscal year 20182020 and relates to her work conducted on behalf of the Company while residing in Germany. |
| ** | Ms. Ryan and her spouse were relocated from Indiana to Germany in 2015, in connection with Ms. Ryan’s assumption of the role of President of Coperion. All but $5,500 (which consists of financial planning and tax preparation payments, including $500 of related expatriation benefits) of theThe personal benefits amount reported for Ms. RyanCerniglia in the table above is attributed to payments made by the Company in 2018 on behalf of Ms. Ryanfiscal 2020 for calendar year 2020 financial planning and her spouse in connection with the relocation pursuant to the Company’s expatriation policiestax preparation ($2,700), calendar year 2019 financial planning and programs. The expatriation benefits provided to Ms. Ryan and her spouse consisted of housing rental and utilitiestax preparation ($71,400), a cost of living allowance ($30,800)3,000), and other miscellaneous expenseslong-term disability insurance premiums ($10,600)4,308). |
| *** | The personal benefits amount reported for Ms. An-Heid in the table above is attributed to payments made by the Company in fiscal 2020 for a car allowance ($10,988) and long-term disability insurance premiums ($1,214). The Company provided a car allowance for Ms. An-Heid because of the travel required for her position and given that her car is primarily used for business purposes. |
| **** | The personal benefits amount reported for Mr. Trainor in the table above is attributed to payments made by the Company in fiscal 2020 for calendar year 2020 financial planning ($3,925), an executive physical ($2,100), transportation and other costs related to Mr. Trainor’s spouse joining him as host of the annual Batesville sales performance trip ($2,308), and long-term disability insurance premiums ($3,880). |
(6) | Mr. WhittedMs. An-Heid was not a Named Executive Officer in 20162018 and 2019 or 2017.for the first approximately seven weeks of fiscal 2020, becoming one in connection with the acquisition of Milacron. The compensation for Ms. An-Heid set forth in this table includes only compensation paid by the Company (i.e., excluding compensation paid by Milacron in fiscal 2020 prior to its acquisition by the Company). Ms. An-Heid’s base salary earned during fiscal 2020 included $51,651 of pay in lieu of vacation in connection with her joining the Company. Ms. An-Heid’s cash compensation was paid in Canadian dollars (“CAD”). The values throughout this Part III have been converted to U.S. dollars at an average exchange rate for fiscal 2020 of 1.34409 CAD per $1.00 USD based on Bloomberg data. |
Grants of Plan-Based Awards for Fiscal Year Ended September 30, 20182020
The following table summarizes the grants of plan-based awards to each of the Named Executive Officers for the fiscal year ended September 30, 2018.2020. (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | | (i) | | (j) | | (k) | | (l) | | | (b)
| | (c)
| | | (d)
| | | (e)
| | | (f)
| | | (g)
| | | (h)
| | | (i)
| | | (j)
| | | (k)
| | | (l)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | Estimated Future Shares Earned Under Equity Incentive Plan Awards (2) | | All Other Stock Awards: Number Of Shares Or Units # | | All Other Option Awards: Number Of Securities Underlying Options # (3) | | | | | | Grant Date Fair Value Of Stock And Option Awards $ (4) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Exercise Or Base Price Of Option Awards $/Sh | | Grant Date Closing Market Price $/Sh | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | | Estimated Future Shares Earned Under Equity Incentive Plan Awards (2) | | | All Other Stock Awards: | | | All Other Option | | |
|
| | | Grant Date Fair Value Of | | | | | Awards: Number Of | Exercise Or | Grant Date | Name | | Grant Date | | Threshold $ | | Target $ | | Maximum $ | | Threshold # | | Target # | | Maximum # | | | Grant Date | | Threshold $ | | | Target $ | | | Maximum $ |
|
| Threshold # | | | Target # | | | Maximum # | | | Number Of Shares Or Units # | | | Securities Underlying Options # (3) | | | Base Price Of Option Awards $/Sh | Closing Market Price $/Sh | | | Stock And Option | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Joe A. Raver | | | | $ | 111,375 | | $ | 891,000 | | $ | 2,138,400 | | | | | | | | | | | | | | | | | | | | | $ | 99,613 | | | $ | 796,908 | | | $ | 1,912,579 | | | | | | | | | | | | | | | | | | | | | | | | | | 12/7/2017 (5) | | | | | | | | | | | | 5,460 | | | 21,843 | | | 38,225 | | | | | | | | | | $ | 999,973 | | | 2/12/2020 (5) | | | | | | | | | | | 9,392 | | | 37,570 | | | 65,747 | | | | | | | | | | | | | $ | 1,103,431 | | | | 12/7/2017 (6) | | | | | | | | | | | | 4,057 | | | 16,228 | | | 28,399 | | | | | | | | | | $ | 999,969 | | | 12/5/2019 (6) | | | | | | | | | | | 9,392 | | | 37,570 | | | 65,747 | | | | | | | | | | | | | $ | 1,313,823 | | | | 12/7/2017 (7) | | | | | | | | | | | | | | | | | | | | | | | 90,090 | | $ | 45.78 | | | | $ | 999,999 | | | 12/5/2019 (7) | | | | | | | | | | | | | | | | | | | | | | | 180,968 | | | $ | 31.94 | | | | $ | 1,199,999 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Kristina A. Cerniglia | | | | $ | 48,916 | | $ | 391,327 | | $ | 939,185 | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 50,475 | | | $ | 403,797 | | | $ | 969,112 | | | | | | | | | | | | | | | | | | | | | | | | | | 12/7/2017 (5) | | | | | | | | | | | | 1,365 | | | 5,460 | | | 9,555 | | | | | | | | | | | | $ | 249,959 | | | 2/12/2020 (5) | | | | | | | | | | | 2,478 | | | 9,914 | | | 17,349 | | | | | | | | | | | | | $ | 291,174 | | | | 12/7/2017 (6) | | | | | | | | | | | | 1,014 | | | 4,057 | | | 7,099 | | | | | | | | | | | | $ | 249,992 | | | 12/5/2019 (6) | | | | | | | | | | | 2,478 | | | 9,914 | | | 17,349 | | | | | | | | | | | | | $ | 346,693 | | | | 12/7/2017 (7) | | | | | | | | | | | | | | | | | | | | | | | 22,522 | | $ | 45.78 | | | | $ | 249,994 | | | 12/5/2019 (7) | | | | | | | | | | | | | | | | | | | | | | | 47,755 | | | $ | 31.94 | | | | $ | 316,663 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Kimberly K. Ryan | | | | $ | 45,559 | | $ | 364,471 | | $ | 874,730 | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 47,015 | | | $ | 376,122 | | | $ | 902,692 | | | | | | | | | | | | | | | | | | | | | | | | | | 12/7/2017 (5) | | | | | | | | | | | | 1,183 | | | 4,732 | | | 8,281 | | | | | | | | | | | | $ | 216,631 | | | 2/12/2020 (5) | | | | | | | | | | | 2,217 | | | 8,870 | | | 15,522 | | | | | | | | | | | | | $ | 260,512 | | | | 12/7/2017 (6) | | | | | | | | | | | | 879 | | | 3,516 | | | 6,153 | | | | | | | | | | | | $ | 216,656 | | | 12/5/2019 (6) | | | | | | | | | | | 2,217 | | | 8,870 | | | 15,522 | | | | | | | | | | | | | $ | 310,184 | | | | 12/7/2017 (7) | | | | | | | | | | | | | | | | | | | | | | | 19,519 | | $ | 45.78 | | | | $ | 216,661 | | | 12/5/2019 (7) | | | | | | | | | | | | | | | | | | | | | | | 42,728 | | | $ | 31.94 | | | | $ | 283,329 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | J. Michael Whitted | | | | $ | 11,493 | | $ | 91,947 | | $ | 220,673 | | | | | | | | | | | | | | | | | | | | | | | | | Ling An-Heid | | | | | $ | 40,669 | | | $ | 325,354 | | | $ | 780,849 | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2/12/2020 (5) | | | | | | | | | | | 1,891 | | | 7,566 | | | 13,240 | | | | | | | | | | | | | $ | 222,213 | |
| | | 12/5/2019 (6) | | | | | | | | | | | 1,891 | | | 7,566 | | | 13,240 | | | | | | | | | | | | | $ | 264,583 | | | | 6/18/2018 | | | | | | | | | | | | | | | | | | | | | 10,781 | (8) | | | | | | | | | $ | 499,969 | | | 12/5/2019 (7) | | | | | | | | | | | | | | | | | | | | | | | 36,444 | | | $ | 31.94 | | | | $ | 241,660 | | | | 6/18/2018 | | | | | | | | | | | | | | | | | | | | | | | | 127,239 | (8) | $ | 46.375 | | | | $ | 1,500,148 | | | 12/5/2019 (8) | | | | | | | | | | | | | | | | | | | | 31,308 | | | | | | | | | | $ | 999,978 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Christopher H. Trainor | | | $ | 32,611 | | $ | 260,885 | | $ | 547,859 | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 42,271 | | | $ | 338,172 | | | $ | 710,160 | | | | | | | | | | | | | | | | | | | | | | | | | | 12/7/2017 (5) | | | | | | | | | | | | 1,092 | | | 4,368 | | | 7,644 | | | | | | | | | | | | | $ | 199,967 | | | 12/5/2019 (5) | | | | | | | | | | | 1,565 | | | 6,261 | | | 10,956 | | | | | | | | | | | | | $ | 183,886 | | | | 12/7/2017 (6) | | | | | | | | | | | | 811 | | | 3,245 | | | 5,678 | | | | | | | | | | | | | $ | 199,957 | | | 12/5/2019 (6) | | | | | | | | | | | 1,565 | | | 6,261 | | | 10,956 | | | | | | | | | | | | | $ | 218,947 | | | | 12/7/2017 (7) | | | | | | | | | | | | | | | | | | | | | | | | 18,018 | | $ | 45.78 | | | | $ | 200,000 | | | 12/5/2019 (7) | | | | | | | | | | | | | | | | | | | | | | | 30,161 | | | $ | 31.94 | | | | $ | 199,998 |
|
(1) | The amounts indicated represent potential cash awards that could have been paid – at the threshold, target (100 percent), and maximum levels – under the STIC Plan. See the “Annual Cash Incentive Awards” section of Part I above for a discussion of this plan. See the Non-Equity Incentive Plan Compensation column of the “Summary Compensation Table” above in this Part III for the actual amounts earned, which were paid in December 2018.2020. Mr. Raver’s target STIC award is calculated using his base salary paid taking into effect the COVID-19 related voluntary reduction. |
(2) | The number of shares indicated represents a grant of performance-based restricted stock units subject to vesting conditions based on the financial performance of the Company during the three-fiscal-year measurement period 2018-2020.2020-2022. During that period, shares represented by the RSUs that are issued based on the shareholder value formula (see footnote 5 below) accrue dividend equivalent amounts as dividends are declared on the Company’s common stock. These equivalent amounts are deemed to be reinvested in additional shares of Company common stock and then ultimately paid in the form of additional shares on the distribution date of the underlying award, in proportion to the number of shares that vest and are distributed in accordance with the award formula. Dividends do not accrue during the measurement period with respect to shares represented by the RSUs that are issued based on the relative total shareholder returnTSR formula (see footnote 6 below). The amounts in the table represent the number of shares that could be earned under the awards at the threshold, target (100 percent), and maximum achievement of the applicable performance targets. The vesting schedules for stock awards granted during fiscal year 20182020 are disclosed by individual Named Executive Officer in the footnotes to the “Outstanding Equity Awards at September 30, 2018”2020” table below. |
(3) | Options expire ten years from date of grant and will vest in equal increments on the first three anniversaries of the option grant date. Stock awards and options are granted to our Named Executive Officers at the discretion of the Compensation Committee. |
(4) | The valuations of stock options and RSUs are grant date fair values computed in accordance with stock-based accounting rules (FASB ASC Topic 718) and are based on the methodology set forth in Note 910 to our financial statements included in our Annual Report on Form 10-K, which was filed with the SEC on November 13, 2018.12, 2020. The amounts used in column (l) for performance-based equity awards are based on an assumed 100 percent achievement of the applicable performance targets. |
(5) | The number of shares indicated represents a grant of performance-based restricted stock units subject to vesting conditions based on the increase in shareholder value of the Company during the three-fiscal-year measurement period 2018-2020.2020-2022. See the discussion in the “Long-Term Incentive Compensation (LTIC)”Compensation” section of Part I above under the heading “Details“Shareholder Value RSUs.” Ordinarily, these performance-based RSU awards are granted in December of each year; however, in fiscal 2020, the Shareholder Value Performance-Based RSU Awards.”Company required additional time to set the corresponding targets for such awards given that the acquisition of Milacron closed only weeks before the time the awards otherwise would have been approved and granted. As a result, these awards were not granted until the next regularly scheduled Compensation Committee meeting, in February 2020, after the Company had completed its analysis and target-setting process that included adjustments for the Milacron acquisition. |
(6) | The number of shares indicated represents a grant of performance-based restricted stock units subject to vesting conditions based on the percentile ranking of the Company’s total shareholder returnTSR compared to its peersthe Index Companies during the three-fiscal-year measurement period 2018-2020.2020-2022. See the discussion in the “Long-Term Incentive Compensation (LTIC)”Compensation” section of Part I above under the heading “Details of the Relative Total Shareholder Return (TSR) Performance-Based RSU Awards.“Relative TSR RSUs.” |
(7) | The number of shares indicated represents a grant of non-qualified stock options which vest 33‑1/3 percent per year over a three-year period. |
(8) | See footnote 1211 to the table below entitled “Outstanding Equity Awards at September 30, 2018.2020.” |
Outstanding Equity Awards at September 30, 20182020
The following table summarizes the number and terms of awards of stock options and restricted stock units outstanding for each of the Named Executive Officers as of September 30, 2018.2020.
| | Option Awards | | Stock Awards (1) | | | Option Awards | | Stock Awards (1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (a) | | (b) | | | (c) | | (d) | | (e) | | (f) | | (g) | | | (h) | | | (i) | | | (j) | | | (b) | | | (c) | | | (d) | | (e) | | (f) | | (g) | | | (h) | | | (i) | | | (j) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Number Of Securities Underlying Unexercised Options # Exercisable | | | Number Of Securities Underlying Unexercised Options # Unexercisable | | Equity Incentive Plan Awards: Number Of Securities Underlying Unexercised Unearned Options # | | Option Exercise Price $ | | Option Expiration Date | | Number Of Shares Or Units Of Stock That Have Not Vested # | | | Market Value Of Shares Or Units Of Stock That Have Not Vested $ (2) | | | Equity Incentive Plan Awards: Number Of Unearned Shares, Units Or Other Rights That Have Not Vested # | | | Equity Incentive Plan Awards: Market Or Payout Value Of Unearned Shares, Units Or Other Rights That Have Not Vested $ (2) | |
| Number Of Securities Underlying Unexercised Options # Exercisable | | | Number Of Securities Underlying Unexercised Options # Unexercisable | | Equity Incentive Plan Awards: Number Of Securities Underlying Unexercised Unearned Options
# |
| Option Exercise Price $ | | Option Expiration Date | | Number Of Shares Or Units Of Stock That Have Not Vested # | | Market Value Of Shares Or Units Of Stock That Have Not Vested $ (2) | | | Equity Incentive Plan Awards: Number Of Unearned Shares, Units Or Other Rights That Have Not Vested # | | Equity Incentive Plan Awards: Market Or Payout Value Of Unearned Shares, Units Or Other Rights That Have Not Vested $ (2) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Joe A. Raver | | | 30,592 | | | | | | | $ | 22.26 | | 12/6/2021 | | | | | | | | | | | | | | 30,592 | | | | | | | | $ | 22.26 | | 12/6/2021 | | | | | | | | | | | | | | | | 34,806 | | | | | | | $ | 20.675 | | 12/4/2022 | | | | | | | | | | | | | | 34,806 | | | | | | | | $ | 20.675 | | 12/4/2022 | | | | | | | | | | | | | | | | 45,267 | | | | | | | $ | 28.155 | | 12/3/2023 | | | | | | | | | | | | | | 45,267 | | | | | | | | $ | 28.155 | | 12/3/2023 | | | | | | | | | | | | | | | | 46,220 | | | | | | | $ | 32.655 | | 12/3/2024 | | | | | | | | | | | | | | 46,220 | | | | | | | | $ | 32.655 | | 12/3/2024 | | | | | | | | | | | | | | | | 54,103 | | | | 27,051 | (3) | | | $ | 31.11 | | 12/2/2025 | | | | | | | | | | | | | | 81,154 | | | | | | | | $ | 31.11 | | 12/2/2025 | | | | | | | | | | | | | | | | 31,853 | | | | 63,703 | (4) | | | $ | 36.08 | | 12/7/2026 | | | | | | | | | | | | | | 95,556 | | | | | | | | $ | 36.08 | | 12/7/2026 | | | | | | | | | | | | | | | | | | | | 90,090 | (5) | | | $ | 45.78 | | 12/7/2027 | | | | | | | | | 45,287 | (7)(9) | | $ | 2,368,510 | | | 60,061 | | | 30,029 | (3) | | | | $ | 45.78 | | 12/7/2027 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 34,829 | (8)(9) | | $ | 1,821,557 | | | 36,647 | | | 73,291 | (4) | | | | $ | 41.32 | | 12/6/2028 | | | | | | | | 67,128 | (6)(8) | | $ | 1,903,750 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 180,968 | (5) | | | | $ | 31.94 | | 12/6/2029 | | | | | | | | 64,064 | (7)(8) | | $ | 1,816,855 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Kristina A. Cerniglia | | | 17,891 | | | | | | | | $ | 32.655 | | 12/3/2024 | | | | | | | | | | | | | | | | 17,891 | | | | | | | | $ | 32.655 | | 12/3/2024 | | | | | | | | | | | | | | | | 25,627 | | | | | | | | $ | 31.11 | | 12/2/2025 | | | | | | | | | | | | | | | | 17,085 | | | | 8,542 | (3) | | | $ | 31.11 | | 12/2/2025 | | | | | | | | | | | | | | | | 27,870 | | | | | | | | $ | 36.08 | | 12/7/2026 | | | | | | | | | | | | | | | | 9,291 | | | | 18,579 | (4) | | | $ | 36.08 | | 12/7/2026 | | | | | | | | | | | | | | | | 15,015 | | | 7,507 | (3) | | | | $ | 45.78 | | 12/7/2027 | | | | | | | | | | | | | | | | | | | | 22,522 | (5) | | | $ | 45.78 | | 12/7/2027 | | | | | | | | | 12,278 | (7)(10) | | $ | 642,139 | | | 9,025 | | | 18,049 | (4) | | | | $ | 41.32 | | 12/6/2028 | | | | | | | | 17,206 | (6)(9) | | $ | 487,962 | | | | | | | | | | | | | | | | | | | | | | | | | 9,482 | (8)(10) | | $ | 495,909 | | | | | | 47,755 | (5) | | | | $ | 31.94 | | 12/6/2029 | | | | | | | | 16,438 | (7)(9) | | $ | 466,182 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Kimberly K. Ryan | | | 31,586 | | | | | | | | $ | 20.675 | | 12/4/2022 | | | | | | | | | | | | | | | | 22,202 | | | | | | | | $ | 28.155 | | 12/3/2023 | | | | | | | | | | | | | | | | 22,202 | | | | | | | | $ | 28.155 | | 12/3/2023 | | | | | | | | | | | | | | | | 18,428 | | | | | | | | $ | 32.655 | | 12/3/2024 | | | | | | | | | | | | | | | | 18,428 | | | | | | | | $ | 32.655 | | 12/3/2024 | | | | | | | | | | | | | | | | 26,396 | | | | | | | | $ | 31.11 | | 12/2/2025 | | | | | | | | | | | | | | | | 17,598 | | | | 8,798 | (3) | | | $ | 31.11 | | 12/2/2025 | | | | | | | | | | | | | | | | 24,605 | | | | | | | | $ | 36.08 | | 12/7/2026 | | | | | | | | | | | | | | | | 8,202 | | | | 16,403 | (4) | | | $ | 36.08 | | 12/7/2026 | | | | | | | | | | | | | | | | 13,013 | | | 6,506 | (3) | | | | $ | 45.78 | | 12/7/2027 | | | | | | | | | | | | | | | | | | | | 19,519 | (5) | | | $ | 45.78 | | 12/7/2027 | | | | | | | | | 10,748 | (7)(11) | | $ | 562,120 | | | 7,658 | | | 15,314 | (4) | | | | $ | 41.32 | | 12/6/2028 | | | | | | | | 15,069 | (6)(10) | | $ | 427,357 | | | | | | | | | | | | | | | | | | | | | | | | | 8,305 | (8)(11) | | $ | 434,352 | | | | | | 42,728 | (5) | | | | $ | 31.94 | | 12/6/2029 | | | | | | | | 14,406 | (7)(10) | | $ | 408,554 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | J. Michael Whitted | | | | | | | 127,239 | (6) | | | $ | 46.375 | | 6/18/2028 | | | 10,823 | (12) | | $ | 566,043 | | | | | | | | | | | Ling An-Heid | | | | | | 36,444 | (5) | | | | $ | 31.94 | | 12/6/2029 | | 32,347 | (11) | | $ | 917,361 | | | 7,767 | (6)(12) | | $ | 220,272 | | | | | | | | | | | | | | | | | | | | | | | 7,566 | (7)(12) | | $ | 214,572 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Christopher H. Trainor | | | 4,993 | | | | | | | | $ | 28.155 | | 12/3/2023 | | | | | | | | | | | | | | | | | | 4,993 | | | | | | | | $ | 28.155 | | 12/3/2023 | | | | | | | | | | | | | | | | 7,454 | | | | | | | | $ | 32.655 | | 12/3/2024 | | | | | | | | | | | | | | | | | | 7,454 | | | | | | | | $ | 32.655 | | 12/3/2024 | | | | | | | | | | | | | | | | 8,543 | | | | 4,270 | (3) | | | $ | 31.11 | | 12/2/2025 | | | | | | | | | | | | | | | | | | 12,813 | | | | | | | | $ | 31.11 | | 12/2/2025 | | | | | | | | | | | | | | | | 6,968 | | | | 13,935 | (4) | | | $ | 36.08 | | 12/7/2026 | | | | | | | | | | | | | | | | | | 20,903 | | | | | | | | $ | 36.08 | | 12/7/2026 | | | | | | | | | | | | | | | | | | | | 18,018 | (5) | | | $ | 45.78 | | 12/7/2027 | | | | | | | | | | | 9,484 | (7)(13) | | $ | 496,013 | | | 12,013 | | | 6,005 | (3) | | | | $ | 45.78 | | 12/7/2027 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 7,314 | (8)(13) | | $ | 382,522 | | | 6,564 | | | 13,126 | (4) | | | | $ | 41.32 | | 12/6/2028 | | | | | | | | 11,537 | (6)(13) | | $ | 327,189 | | | | | | | | 30,161 | (5) | | | | $ | 31.94 | | 12/6/2029 | | | | | | | | 11,006 | (7)(13) | | $ | 312,130 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Figures below include accrued dividends where applicable. |
(2) | Value is based on the closing price of Hillenbrand common stock of $52.30$28.36 on September 28, 2018,30, 2020, as reported on the New York Stock Exchange. |
(3) | The options were granted on December 2, 2015. The options fully vested on December 2, 2018. |
(4) | The options were granted on December 7, 2016.2017. The options fully vested on December 7, 2020. |
(4) | The options were granted on December 6, 2018. One-third of the options vested on each of December 7, 20176, 2019 and December 7, 2018.6, 2020. The remaining one-third will vest on December 7, 2019.6, 2021. |
(5) | The options were granted on December 7, 2017.5, 2019. One-third of the options vested on December 7, 2018.5, 2020. The remaining two-thirds will vest in two equal portions on each of December 7, 20195, 2021 and December 7, 2020.5, 2022. |
(6) | The options were granted on June 18, 2018. One-third of the options will vest on each of June 18, 2019, June 18, 2020, and June 18, 2021. |
(7) | Such performance-based RSU awards are subject to vesting conditions based on the increase in shareholder value of the Company during a three-fiscal-year measurement period. For additional detail regarding these awards, including information regarding how dividends accrue, see the discussion in the “Long-Term Incentive Compensation (LTIC)”Compensation” section of Part I above under the heading “Details of the Shareholder“Shareholder Value Performance-Based RSU Awards.RSUs.” The amounts in the table represent the award amounts at 100 percent achievement of the targeted increase in shareholder value associated with the award.award, plus accrued dividends where applicable. Generally, award vesting is contingent upon continued employment. See the section titled “Employment Agreements and Termination Benefits” in Part I above for additional information regarding vesting. |
(8)(7) | Such performance-based RSU awards are subject to vesting conditions based on the percentile ranking of the Company’s total shareholder return (TSR)TSR compared to its peers (either the Company’s compensation peer group or the Index Companies, as applicable) during a three-fiscal-year measurement period. Whereas dividends accrue during the measurement period with respect to shares underlying RSU awards based on the increase in shareholder value (see footnote 76 above), dividends do not accrue during the measurement period with respect to shares underlying RSU awards based on relative total shareholder return.TSR. For additional detail regarding these awards, see the discussion in the “Long-Term Incentive Compensation (LTIC)”Compensation” section of Part I above under the heading “Details of the Relative Total Shareholder Return (TSR) Performance-Based RSU Awards.“Relative TSR RSUs.” The amounts in the table represent the award amounts at the targeted percentile ranking of the Company’s relative TSR. Generally, award vesting is contingent upon continued employment. See the section titled “Employment Agreements and Termination Benefits” in Part I above for additional information regarding vesting.vesting |
(9)(8) | Mr. Raver was awarded the following performance-based RSUs:RSUs (excluding accrued dividends): |
| Award Date | | Restricted Stock Units Awarded | | Vesting Schedule | | December 7, 20166, 2018 | | 22,17227,024 | | Award will vest on September 30, 2019,2021, assuming 100% achievement of the targeted increase in shareholder value. | | December 7, 20166, 2018 | | 18,60126,494 | | Award will vest on September 30, 2019,2021, assuming 100% achievement of the targeted percentile ranking of the Company’s relative TSR. | | December 7, 20175, 2019 | | 21,84337,570 | | Award will vest on September 30, 2020, assuming 100% achievement of the targeted increase in shareholder value. | | December 7, 2017 | | 16,228 | | Award will vest on September 30, 2020,2022, assuming 100% achievement of the targeted percentile ranking of the Company’s relative TSR. | February 12, 2020 | | 37,570 | | Award will vest on September 30, 2022, assuming 100% achievement of the targeted increase in shareholder value. |
(10)(9) | Ms. Cerniglia was awarded the following performance-based RSUs:RSUs (excluding accrued dividends): |
| Award Date | | Restricted Stock Units Awarded | | Vesting Schedule | | December 7, 20166, 2018 | | 6,4676,655 | | Award will vest on September 30, 2019,2021, assuming 100% achievement of the targeted increase in shareholder value. | | December 7, 20166, 2018 | | 5,4256,524 | | Award will vest on September 30, 2019,2021, assuming 100% achievement of the targeted percentile ranking of the Company’s relative TSR. | | December 7, 20175, 2019 | | 5,4609,914 | | Award will vest on September 30, 2020, assuming 100% achievement of the targeted increase in shareholder value. | | December 7, 2017 | | 4,057 | | Award will vest on September 30, 2020,2022, assuming 100% achievement of the targeted percentile ranking of the Company’s relative TSR. | February 12, 2020 | | 9,914 | | Award will vest on September 20, 2022, assuming 100% achievement of the targeted increase in shareholder value. |
(11) Ms. Ryan was awarded the following performance-based RSUs:(10) | Ms. Ryan was awarded the following performance-based RSUs (excluding accrued dividends): |
| Award Date | | Restricted Stock Units Awarded | | Vesting Schedule | | December 7, 20166, 2018 | | 5,7095,646 | | Award will vest on September 30, 2019,2021, assuming 100% achievement of the targeted increase in shareholder value. | | December 7, 20166, 2018 | | 4,7895,536 | | Award will vest on September 30, 2019,2021, assuming 100% achievement of the targeted percentile ranking of the Company’s relative TSR. | | December 7, 20175, 2019 | | 4,7328,870 | | Award will vest on September 30, 2020, assuming 100% achievement of the targeted increase in shareholder value. | | December 7, 2017 | | 3,516 | | Award will vest on September 30, 2020,2022, assuming 100% achievement of the targeted percentile ranking of the Company’s relative TSR. | February 12, 2020 | | 8,870 | | Award will vest on September 30, 2022, assuming 100% achievement of the targeted increase in shareholder value. |
(12) Mr. Whitted was awarded the following time-based RSUs as part of his non-recurring sign-on award:(11) | Ms. An-Heid was awarded the following time-based RSUs as part of an initial, non-recurring sign-on award in connection with her joining the Company as part of the Milacron acquisition (excluding accrued dividends): |
| Award Date | | Restricted Stock Units Awarded | | Vesting Schedule | | June 18, 2018December 5, 2019 | | 10,78131,308 | | Award will vest 33.5%50% on each of June 18, 2019December 5, 2021 and 2020, and 33% on June 18, 2021.December 5, 2022. |
Ms. An-Heid was a key executive at Milacron prior to the acquisition, and the Compensation Committee determined to make this award as part of her retention and with the aim of facilitating a successful integration of Milacron.
(13) Mr. Trainor was awarded the following performance-based RSUs:(12) | Ms. An-Heid was awarded the following performance-based RSUs (excluding accrued dividends): |
| Award Date | | Restricted Stock Units Awarded | | Vesting Schedule | | December 7, 20165, 2019 | | 4,8507,566 | | Award will vest on September 30, 2019, assuming 100% achievement of the targeted increase in shareholder value. | | December 7, 2016 | | 4,069 | | Award will vest on September 30, 2019,2022, assuming 100% achievement of the targeted percentile ranking of the Company’s relative TSR. | | December 7, 2017February 12, 2020 | | 4,3687,566 | | Award will vest on September 30, 2020,2022, assuming 100% achievement of the targeted increase in shareholder value. |
(13) | December 7, 2017Mr. Trainor was awarded the following performance-based RSUs (excluding accrued dividends): |
Award Date | | 3,245Restricted Stock Units Awarded | | Vesting Schedule | December 6, 2018 | | 4,840 | | Award will vest on September 30, 2020,2021, assuming 100% achievement of the targeted increase in shareholder value. | December 6, 2018 | | 4,745 | | Award will vest on September 30, 2021, assuming 100% achievement of the targeted percentile ranking of the Company’s relative TSR. | December 5, 2019 | | 6,261 | | Award will vest on September 30, 2022, assuming 100% achievement of the targeted percentile ranking of the Company’s relative TSR. | February 12, 2020 | | 6,261 | | Award will vest on September 30, 2022, assuming 100% achievement of the targeted increase in shareholder value. |
Option Exercises and Stock Vested for Fiscal Year Ended September 30, 20182020
The following table summarizes the value realized upon vesting of stock awards (including the dividends accrued thereon) during the fiscal year ended September 30, 2018,2020, for the Named Executive Officers. Mr. Raver was the only Named Executive Officer who exercised options during this fiscal year, as detailed in the table.
| | Option Awards | | | Stock Awards | | | Option Awards | | | Stock Awards | | Name | | Number Of Shares Acquired On Exercise # | | | Value Realized On Exercise $ | | | Number Of Shares Acquired On Vesting # | | | Value Realized On Vesting $ | | | Number Of Shares Acquired On Exercise # | | | Value Realized On Exercise $ | | | Number Of Shares Acquired On Vesting # | | | Value Realized On Vesting $ | | | | | | | | | | | | | | | | | | | | | | | | | | | Joe A. Raver | | | 68,496 | | | $ | 1,789,223 | | | | 23,221 (2 | ) | | $ | 994,323 (1 | ) | | – | | | $ | – | | | 27,247(2 | ) | | $ | 1,037,293(1 | ) | | | | – | | | $ | – | | | | 29,030 (3 | ) | | $ | 1,243,065 (1 | ) | | – | | | $ | – | | | 16,228(3 | ) | | $ | 617,800(1 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Kristina A. Cerniglia | | | – | | | $ | – | | | | 7,325 (2 | ) | | $ | 313,657 (1 | ) | | – | | | $ | – | | | 6,804(2 | ) | | $ | 259,028(1 | ) | | | | – | | | $ | – | | | | 9,166 (3 | ) | | $ | 392,488 (1 | ) | | – | | | $ | – | | | 4,057(3 | ) | | $ | 154,450(1 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Kimberly K. Ryan | | | – | | | $ | – | | | | 7,549(2 | ) | | $ | 323,248 (1 | ) | | 31,586 | | | $ | 387,781 | | | 5,897(2 | ) | | $ | 224,499(1 | ) | | | | – | | | $ | – | | | | 9,441(3 | ) | | $ | 404,264 (1 | ) | | – | | | $ | – | | | 3,516(3 | ) | | $ | 133,854(1 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | J. Michael Whitted | | | – | | | $ | – | | | | – | | | $ | – | | | Ling An-Heid | | | – | | | $ | – | | | – | | | $ | – | | | | | – | | | $ | – | | | – | | | $ | – | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Christopher H. Trainor | | | – | | | $ | – | | | | 3,656 (2 | ) | | $ | 156,550 (1 | ) | | – | | | $ | – | | | 5,440(2 | ) | | $ | 207,101(1 | ) | | | | – | | | $ | – | | | | 4,582 (3 | ) | | $ | 196,201 (1 | ) | | – | | | $ | – | | | 3,245(3 | ) | | $ | 123,537(1 | ) |
(1) | Based upon the mean between the high and low sale prices of Hillenbrand common stock on the New York Stock Exchange on the date the Board of Directors of the Company approved distribution of the underlying awards. |
(2) | These amounts are presented on a pre-tax basis (i.e., not accounting for withholding) and include dividends that were accrued during the measurement period and paid out upon vesting in proportion to the number of shares that vested. These amounts reflect the vesting of shareholder value performance-based RSU awards granted by the Company under its LTIC program in fiscal year 2016,2018, in accordance with the award formula then in effect. Additional details regarding the LTIC awards granted in fiscal year 20162018 are set forth under the heading “Long-Term Incentive Compensation” in the “Compensation Discussion and Analysis” section of our proxy statement for our 20172019 Annual Meeting of shareholders, which was filed with the SEC on January 4, 2017.2, 2019. See the discussion in the “Long-Term Incentive Compensation (LTIC)”Compensation” section of Part I above for additional explanation of the Company’s LTIC program. |
(3) | These amounts are presented on a pre-tax basis (i.e., not accounting for withholding) and do not include dividends. These amounts reflect the vesting of relative TSR performance-based RSU awards granted by the Company under its LTIC program in fiscal year 2018, in accordance with the award formula then in effect. Whereas dividends accrue during the measurement period with respect to shares underlying RSU awards based on the increase in shareholder value, dividends do not accrue during the measurement period with respect to shares underlying RSU awards based on relative total shareholder returnTSR (for additional information, see footnotes 76 and 87 to the table above titled “Outstanding Equity Awards at September 30, 2018”2020”). These amounts reflect the vesting of relative total shareholder return (TSR) performance-based RSU awards granted by the Company under its LTIC program in fiscal year 2016, in accordance with the award formula then in effect. Additional details regarding the LTIC awards granted in fiscal year 20162018 are set forth under the heading “Long-Term Incentive Compensation” in the “Compensation Discussion and Analysis” section of our proxy statement for our 20172019 Annual Meeting of shareholders, which was filed with the SEC on January 4, 2017.2, 2019. See the discussion in the “Long-Term Incentive Compensation (LTIC)”Compensation” section of Part I above for additional explanation of the Company’s LTIC program. |
Nonqualified Deferred Compensation for Fiscal Year Ended September 30, 20182020
The following table quantifies the “defined contribution” benefits expected to be paid from the Supplemental Retirement Plan (SRP)(the “SRP”).
(a) | | (b) | | | (c) | | | (d) | | | (e) | | | (f) | | | (b) | | | (c) | | | (d) | | | (e) | | | (f) | | Name | | Executive Contributions In Last Fiscal Year $ | | | Company Contributions In Last Fiscal Year $ (1) | | | Aggregate Earnings In Last Fiscal Year $ | | | Aggregate Withdrawals/ Distributions $ | | | Aggregate Balance At Last Fiscal Year End $ | | | Executive Contributions In Last Fiscal Year $ | | | Company Contributions In Last Fiscal Year $ (1) | | | Aggregate Earnings In Last Fiscal Year $ | | | Aggregate Withdrawals/ Distributions $ | | | Aggregate Balance At Last Fiscal Year End $ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Joe A. Raver | | $ | 1,069,462 | | | $ | 74,218 | | | $ | 85,750 | | | $ | 1,112,223 | | | $ | 777,065 | | | $ | – | | | $ | 69,466 | | | $ | 69,185 | | | $ | – | | | $ | 1,060,159 | | Kristina A. Cerniglia | | $ | 520,144 | | | $ | 33,443 | | | $ | 40,266 | | | $ | 533,174 | | | $ | 212,049 | | | $ | – | | | $ | 34,591 | | | $ | 45,871 | | | $ | – | | | $ | 363,694 | | Kimberly K. Ryan | | $ | – | | | $ | 30,163 | | | $ | 19,531 | | | $ | – | | | $ | 335,534 | | | $ | – | | | $ | 31,200 | | | $ | 29,623 | | | $ | – | | | $ | 465,078 | | J. Michael Whitted | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | Ling An-Heid | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | Christopher H. Trainor | | $ | – | | | $ | 22,064 | | | $ | 13,027 | | | $ | – | | | $ | 95,830 | | | $ | – | | | $ | 25,762 | | | $ | 25,483 | | | $ | – | | | $ | 193,042 | |
(1) | The Company maintains the SRP to provide additional retirement benefits to certain employees selected by the Compensation Committee whose benefits under the Company’s Savings Plan are reduced, curtailed, or otherwise limited as a result of certain limitations under the Internal Revenue Code and as a result of excluding their annual cash bonuses from the definition of “compensation” under the contribution formula in the Savings Plan. The additional benefits provided by the SRP are designed to reflect the amount by which benefits under the Savings Plan are so reduced, curtailed, or limited by reason of the application of such limitations and exclusion. |
“Compensation” under the SRP means the corresponding definition of compensation under the Savings Plan (which is generally equivalent to base salary) plus the participant’s targeted cash bonus as determined under the Company’s Short-Term Incentive Compensation (STIC) Plan. Amounts reported here are also reported as Supplemental 401(k) in the “Summary Compensation Table” above in the column entitled All Other Compensation and are further detailed in footnote 5 thereto. Generally, a lump sum cash payment is available to the participant within one year of retirement or termination of employment. In the alternative, a participant may defer receipt by electing a stream of equal annual payments for up to 15 years.
See the more detailed description of the SRP under the heading “Retirement and Savings Plans” in Part I above. The Compensation Committee continues to oversee the selection of which executives are permitted to participate in the plan.
The following amounts represent employer contributions and above-market earnings that have been reported as compensation in the “Summary Compensation Table” in fiscal year 20182020 and previous fiscal years:
Name | | 2018 | | | 2017 | | | 2016 | | | 2020 | | | 2019 | | | 2018 | | | | | | | | | | | | | | | | | | | | | Joe A. Raver | | $ | 74,218 | | | $ | 89,478 | | | $ | 78,050 | | | $ | 69,466 | | | $ | 130,025 | | | $ | 74,218 | | Kristina A. Cerniglia | | $ | 33,443 | | | $ | 43,252 | | | $ | 41,913 | | | $ | 34,591 | | | $ | 57,315 | | | $ | 33,443 | | Kimberly K. Ryan | | $ | 30,163 | | | $ | 38,885 | | | $ | 37,678 | | | $ | 31,200 | | | $ | 51,717 | | | $ | 30,163 | | J. Michael Whitted (1) | | $ | – | | | $ | N/A | | | $ | N/A | | | Ling An-Heid (1) | | | $ | – | | | $ | N/A | | | $ | N/A | | Christopher H. Trainor | | $ | 22,064 | | | $ | 27,650 | | | $ | 24,238 | | | $ | 25,762 | | | $ | 39,248 | | | $ | 22,064 | |
(1) | Ms. An-Heid was not a Named Executive Officer for 2018 and 2019, becoming one in connection with the acquisition of Milacron in fiscal 2020. |
(1) Mr. Whitted was not a Named Executive Officer for 2016 or 2017.
Potential Payments Upon Termination
The following tables present the benefits that would be received by each of the Named Executive Officers in the event of a hypothetical termination as of September 30, 2018.2020. For information regarding definitions of termination events included in the employment agreements with the Named Executive Officers, see “Employment Agreements and Termination Benefits” in Part I above.
Joe A. Raver
Event | | Salary And Other Cash Payments (1) | | | Accelerated Vesting Of Stock Awards (2) | | | Continuance Of Health And Welfare Benefits | | | Total | | | Salary And Other Cash Payments (1) | | | Accelerated Vesting Of Stock Awards (2) | | | Continuance Of Health And Welfare Benefits | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | Permanent Disability | | $ | 3,734,948 | | | $ | 7,037,788 | | | $ | 39,596 | | | $ | 10,812,332 | | | $ | 2,837,805 | | | $ | 2,998,981 | | | $ | 47,445 | | | $ | 5,884,231 | | Death | | $ | 1,920,254 | | | $ | 7,037,788 | | | $ | 21,300 | | | $ | 8,979,342 | | | $ | 1,163,824 | | | $ | 2,998,981 | | | $ | 25,298 | | | $ | 4,188,103 | | Termination without Cause | | $ | 3,070,254 | | | $ | 4,843,928 | | | $ | 39,596 | | | $ | 7,953,778 | | | $ | 1,853,824 | | | $ | 2,998,981 | | | $ | 47,445 | | | $ | 4,900,250 | | Resignation with Good Reason | | $ | 3,070,254 | | | $ | 4,843,928 | | | $ | 39,596 | | | $ | 7,953,778 | | | $ | 1,853,824 | | | $ | 2,998,981 | | | $ | 47,445 | | | $ | 4,900,250 | | Termination for Cause | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | Resignation without Good Reason | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | Retirement | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | Change in Control (3) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Kristina A. Cerniglia
Event | | Salary And Other Cash Payments (1) | | | Accelerated Vesting Of Stock Awards (2) | | | Continuance Of Health And Welfare Benefits | | | Total | | | Salary And Other Cash Payments (1) | | | Accelerated Vesting Of Stock Awards (2) | | | Continuance Of Health And Welfare Benefits | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | Permanent Disability | | $ | 2,844,238 | | | $ | 2,079,053 | | | $ | 21,330 | | | $ | 4,944,621 | | | $ | 2,557,855 | | | $ | 755,523 | | | $ | 23,722 | | | $ | 3,337,100 | | Death | | $ | 1,123,775 | | | $ | 2,079,053 | | | $ | 11,282 | | | $ | 3,214,110 | | | $ | 836,363 | | | $ | 755,523 | | | $ | 12,649 | | | $ | 1,604,535 | | Termination without Cause | | $ | 1,149,075 | | | $ | 1,449,853 | | | $ | 21,330 | | | $ | 2,620,258 | | | $ | 874,758 | | | $ | 755,523 | | | $ | 23,722 | | | $ | 1,654,003 | | Resignation with Good Reason | | $ | 1,149,075 | | | $ | 1,449,853 | | | $ | 21,330 | | | $ | 2,620,258 | | | $ | 874,758 | | | $ | 755,523 | | | $ | 23,722 | | | $ | 1,654,003 | | Termination for Cause | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | Resignation without Good Reason | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | Retirement | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | Change in Control (3) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Kimberly K. Ryan
Event | | Salary And Other Cash Payments (1) | | | Accelerated Vesting Of Stock Awards (2) | | | Continuance Of Health And Welfare Benefits | | | Total | | | Salary And Other Cash Payments (1) | | | Accelerated Vesting Of Stock Awards (2) | | | Continuance Of Health And Welfare Benefits | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | Permanent Disability | | $ | 2,770,780 | | | $ | 1,983,597 | | | $ | 23,747 | | | $ | 4,778,124 | | | $ | 2,572,291 | | | $ | 655,454 | | | $ | 20,489 | | | $ | 3,248,234 | | Death | | $ | 1,043,426 | | | $ | 1,983,597 | | | $ | 11,282 | | | $ | 3,038,305 | | | $ | 835,031 | | | $ | 655,454 | | | $ | 11,114 | | | $ | 1,501,599 | | Termination without Cause | | $ | 1,032,676 | | | $ | 1,403,847 | | | $ | 23,747 | | | $ | 2,460,270 | | | $ | 836,527 | | | $ | 655,454 | | | $ | 20,489 | | | $ | 1,512,470 | | Resignation with Good Reason | | $ | 1,032,676 | | | $ | 1,403,847 | | | $ | 23,747 | | | $ | 2,460,270 | | | $ | 836,527 | | | $ | 655,454 | | | $ | 20,489 | | | $ | 1,512,470 | | Termination for Cause | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | Resignation without Good Reason | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | Retirement | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | Change in Control (3) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
J. Michael WhittedLing An-Heid
Event(4) | | Salary And Other Cash Payments (1) | | | Accelerated Vesting Of Stock Awards (2) | | | Continuance Of Health And Welfare Benefits | | | Total | | | Salary And Other Cash Payments (1) | | | Accelerated Vesting Of Stock Awards (2) | | | Continuance Of Health And Welfare Benefits | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | Permanent Disability | | $ | 3,158,591 | | | $ | 1,319,934 | | | $ | 21,322 | | | $ | 4,499,847 | | | $ | 2,038,362 | | | $ | 1,062,309 | | | $ | 15,405 | | | $ | 3,116,076 | | Death | | $ | 1,008,088 | | | $ | 1,319,934 | | | $ | 11,276 | | | $ | 2,339,298 | | | $ | 694,325 | | | $ | 1,062,309 | | | $ | – | | | $ | 1,756,634 | | Termination without Cause | | $ | 933,088 | | | $ | – | | | $ | 21,322 | | | $ | 954,410 | | | $ | 2,038,362 | | | $ | 144,948 | | | $ | 15,405 | | | $ | 2,198,715 | | Resignation with Good Reason | | $ | 933,088 | | | $ | – | | | $ | 21,322 | | | $ | 954,410 | | | Termination for Cause | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | 34,576 | | | $ | – | | | $ | – | | | $ | 34,576 | | Resignation without Good Reason | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | Retirement | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | 194,325 | | | $ | 1,062,309 | | | $ | – | | | $ | 1,256,634 | | Change in Control (3) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Christopher H. Trainor
Event | | Salary And Other Cash Payments (1) | | | Accelerated Vesting Of Stock Awards (2) | | | Continuance Of Health And Welfare Benefits | | | Total | | | Salary And Other Cash Payments (1) | | | Accelerated Vesting Of Stock Awards (2) | | | Continuance Of Health And Welfare Benefits | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | Permanent Disability | | $ | 2,789,918 | | | $ | 1,314,600 | | | $ | 19,798 | | | $ | 4,124,316 | | | $ | 3,142,846 | | | $ | 553,663 | | | $ | 21,954 | | | $ | 3,718,463 | | Death | | $ | 778,103 | | | $ | 1,314,600 | | | $ | 10,650 | | | $ | 2,103,353 | | | $ | 990,434 | | | $ | 553,663 | | | $ | 11,914 | | | $ | 1,556,011 | | Termination without Cause | | $ | 715,853 | | | $ | 880,616 | | | $ | 19,798 | | | $ | 1,616,267 | | | $ | 941,329 | | | $ | 553,663 | | | $ | 21,954 | | | $ | 1,516,946 | | Resignation with Good Reason | | $ | 715,853 | | | $ | 880,616 | | | $ | 19,798 | | | $ | 1,616,267 | | | $ | 941,329 | | | $ | 553,663 | | | $ | 21,954 | | | $ | 1,516,946 | | Termination for Cause | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | Resignation without Good Reason | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | Retirement | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | Change in Control (3) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Includes, as applicable in each scenario, severance compensation, prorated Short-Term Incentive Compensation (STIC),STIC, and insurance proceeds. |
(2) | For those Named Executive Officers who were employed at the relevant time, the accelerated vesting value of performance-based stock awards includes the annual LTIC awards granted in fiscal year 2016,2018, which vested on September 30, 2018,2020, and the annual LTIC awards granted in fiscal years 20172019 and 2018,2020, which have not vested. The accelerated vesting value of the awards granted in fiscal year 20162018 in the table is based on (a) the actual level of achievement of the targeted shareholder value increase as described in footnote 2 to the table above titled “Option Exercises and Stock Vested for Fiscal Year Ended September 30, 2020,” and (b) the actual level of achievement of the targeted relative TSR as described in footnote 3 to the table above titled “Option Exercises and Stock Vested for Fiscal Year Ended September 30, 2018,” and (b) the actual level of achievement of the targeted relative total shareholder return as described in footnote 4 to the table above titled “Option Exercises and Stock Vested for Fiscal Year Ended September 30, 2018.2020.” The accelerated vesting values of the annual LTIC awards granted in fiscal years 20172019 and 20182020 assume 100 percent achievement of the applicable performance targets and the closing stock price on September 30, 2018.2020. However, the actual value that would be realized would be based on the actual achievement of such performance targets at the end of the applicable measurement period and the stock price on September 30, 2019,2022, and September 30, 2020,2021, which areis unknown at this time. |
Our Named Executive Officers do not currently qualifyIn addition, Ms. An-Heid qualifies for special accelerated vesting in the retirement context due to their ages. However,her age at September 30, 2020. None of our other Named Executive Officers currently qualify for the same; however, in the event of a qualifying retirement in the future, these executives would be entitled to accelerated vesting value.
(3) | See table below titled “Change in Control Benefits.” |
(4) | Under Canadian law, Ms. An-Heid is entitled to payment for her accrued and unused vacation under each of the termination scenarios presented. |
Change in Control Benefits
The change in control agreements we have with Named Executive Officers may provide the estimated benefits set forth in the following table, calculated assuming a hypothetical termination as of September 30, 2018.2020. For more detail regarding the change in control agreements generally, see the discussion under “Employment Agreements and Termination Benefits” in Part I above. Benefits under our change in control agreements are payable only upon a “double-trigger.” Therefore, the amounts shown in the table below assume not only a change in control but also the requisite qualified termination of employment.
Name | | Salary-Based Compensation | | | Incentive Compensation | | | Continuance Of Health And Welfare Benefits | | | Pension Benefits | | | Retirement Savings Plan Benefit | | | Accelerated Vesting Of Stock-Based Awards | | | Tax Gross-Up / Cutback (1) | | | Total | | | Salary-Based Compensation | | | Incentive Compensation | | | Continuance Of Health And Welfare Benefits | | | Pension Benefits | | | Retirement Savings Plan Benefit | | | Accelerated Vesting Of Stock-Based Awards | | | Tax Gross-Up / Cutback (1) | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Joe A. Raver | | $ | 2,475,000 | | | $ | 891,000 | | | $ | 56,740 | | | $ | – | | | $ | 222,653 | | | $ | 8,470,017 | | | $ | – | | | $ | 12,115,410 | | | $ | 1,785,000 | | | $ | 796,908 | | | $ | 82,531 | | | $ | – | | | $ | 208,398 | | | $ | 4,846,979 | | | $ | – | | | $ | 7,719,816 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Kristina A. Cerniglia | | $ | 1,050,600 | | | $ | 391,327 | | | $ | 41,360 | | | $ | – | | | $ | 66,886 | | | $ | 2,425,600 | | | $ | – | | | $ | 3,975,773 | | | $ | 1,076,791 | | | $ | 403,797 | | | $ | 52,240 | | | $ | – | | | $ | 69,182 | | | $ | 1,235,560 | | | $ | – | | | $ | 2,837,570 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Kimberly K. Ryan | | $ | 978,500 | | | $ | 364,471 | | | $ | 46,047 | | | $ | – | | | $ | 60,326 | | | $ | 2,254,553 | | | $ | – | | | $ | 3,703,897 | | | $ | 1,002,991 | | | $ | 376,122 | | | $ | 45,120 | | | $ | – | | | $ | 62,400 | | | $ | 1,079,807 | | | $ | – | | | $ | 2,566,440 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | J. Michael Whitted | | $ | 850,000 | | | $ | 318,750 | | | $ | 41,344 | | | $ | – | | | $ | – | | | $ | 1,319,934 | | | $ | – | | | $ | 2,530,028 | | | Ling An-Heid | | | $ | 922,019 | | | $ | 325,354 | | | $ | 8,481 | | | $ | – | | | $ | – | | | $ | 1,352,205 | | | $ | – | | | $ | 2,608,059 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Christopher H. Trainor | | $ | 875,500 | | | $ | 260,885 | | | $ | 38,389 | | | $ | – | | | $ | 44,128 | | | $ | 1,641,382 | | | $ | (128,478 | ) | | $ | 2,731,806 | | | $ | 901,791 | | | $ | 338,172 | | | $ | 48,345 | | | $ | – | | | $ | 51,524 | | | $ | 864,356 | | | $ | – | | | $ | 2,204,188 | |
(1) | As discussed in Part I above under the heading “Employment Agreements and Termination Benefits,” our change in control agreements do not provide for any tax gross-up payments relating to the excise tax on excess “parachute payments” imposed by Section 4999 of the Internal Revenue Code. If an executive is entitled to receive payments upon a change in control that may be subject to the excise tax, he or she will either be paid the full amount (and remain personally liable for the excise tax) or be paid a reduced amount (cutback) that does not give rise to the excise tax, whichever is greater on an after-tax basis. |
These calculations do not consider the value of non-compete provisions that executives must adhere to in order to receive certain payments upon a change in control. These provisions are valuable to the Company and are expected to be enforced in the event of an actual transaction.
Pending approval of the Stock Plan proposal by the Company’s shareholders, the Company intends to amend these change in control agreements to make corresponding changes and certain other updates to reflect market practice in this area.
PARTPART IV: COMPENSATION CONSULTANT MATTERS
The Compensation Committee’s independent compensation consultants wereconsultant was regularly invited to attend Committee meetings during fiscal year 2018.2020.
EY
EYDeloitte Consulting was engaged as the independent compensation consultant by the Compensation Committee to assist the Committee in determining the form and amount of compensation paid to our Named Executive Officers for fiscal year 2018, through and including the May 2018 Committee meeting. Among other things, during fiscal year 2018 until its engagement ended, EY2020. Deloitte Consulting provided advice and recommendations regarding the Company’s executive compensation levels and practices, including reviewpractices; the Company’s compensation philosophy and recommendations on CEO and other executive officer compensation;strategies; advice on the Company’s peer group; evaluation of performance metrics and peer performance; analysis and recommendations regarding share availability under our STIC and LTIC plan;programs, including changes in connection with the acquisition of Milacron; advice on the Company’s anticipated CEO pay ratio disclosure; review and recommendations on CEO and other executive officer compensation for fiscal year 2021; and periodic reports to the Compensation Committee on market and industry compensation trends and regulatory developments. Fees for those services, which were approved by the Compensation Committee, totaled $185,051$494,240 during fiscal year 2018.2020. The Compensation Committee has reviewed the independence of EYDeloitte Consulting in light of applicable SEC rules and NYSE listing standards regarding compensation consultant independence and has affirmatively concluded that EYDeloitte Consulting is independent from the Company and has no conflict of interest relating to its engagement by the Compensation Committee.
Other Engagements: EY
The Company also engaged EY during fiscal year 2018 to provide services unrelated to executive compensation. These engagements primarily consisted of tax advice and advice on director compensation. Fees paid to EY for these engagements totaled $112,442 during fiscal year 2018. Management initiated these engagements – the Board was not asked to approve them. However, the Chairperson of the Compensation Committee was consulted prior to each material engagement of EY for non-executive compensation related services. Given the nature and scope of these services, the Compensation Committee believes that these services did not raise a conflict of interest and did not impair EY’s ability to provide independent advice to the Committee concerning executive compensation matters.
Deloitte
Following a request for proposal process in 2018, Deloitte has been engaged as the independent compensation consultant by the Compensation Committee to assist the Committee in determining the form and amount of compensation paid to our Named Executive Officers for fiscal year 2018, following the Committee’s May 2018 meeting. Among other things, since the Committee’s May 2018 meeting, Deloitte provided advice and recommendations regarding the Company’s compensation philosophy and strategies; advice on the Company’s peer group; evaluation of performance metrics and peer performance; analysis and recommendations regarding our STIC and LTIC programs; advice on the Company’s anticipated CEO pay ratio disclosure; advice and recommendations relating to the tax treatment of incentive compensation awards; review and recommendations on CEO and other executive officer compensation for fiscal year 2019; and periodic reports to the Compensation Committee on market and industry compensation trends and regulatory developments. Fees for those services, which were approved by the Compensation Committee, totaled $113,829 during fiscal year 2018. The Compensation Committee has reviewed the independence of Deloitte in light of applicable SEC rules and NYSE listing standards regarding compensation consultant independence and has affirmatively concluded that Deloitte is independent from the Company and has no conflict of interest relating to its engagement by the Compensation Committee.
Other Engagements: DeloitteEngagements
The Company also engaged Deloitte Consulting or its affiliates during fiscal year 20182020 to provide services unrelated to executive compensation. These engagements primarily consisted of (a) advicesignificant support for integration planning and counselreadiness activities in connection with respect to the Company’s ethicsMilacron acquisition and compliance program, which was completed before Deloitte was retained as our independent compensation consultant;first combined quarterly reporting; (b) purchase price accounting and related valuation services in connection with the Milacron acquisition; (c) tax and other mobility advice on expatriate assignments; (c)(d) international business tax and legal consulting for the Company and certain of its subsidiaries; and (e) support related to the adoption of Accounting Standards Update 2014-09,on Internal Revenue from Contracts with Customers; and (d) other discrete projects, such as a review of director compensation limits.Code section 280G matters. Fees paid to Deloitte Consulting and its affiliates for these engagements totaled $879,063$5,793,852 during fiscal year 2018. A majority of these fees were incurred prior to Deloitte’s engagement as our independent compensation consultant.2020. Management initiated these engagements – the Board was not asked to approve them. However, the Chairperson of the Compensation Committee was consulted prior to each material engagement of Deloitte Consulting or any of its affiliates for non-executive compensation related services, effective after Deloitte’s assumption of the role.compensation-related services. Given the nature and scope of these services, the Compensation Committee believes that these services did not raise a conflict of interest and did not impair Deloitte’sDeloitte Consulting’s ability to provide independent advice to the Committee concerning executive compensation matters. In making this determination, the Compensation Committee considered, among other things, the following factors: The types of non-compensation services provided by Deloitte Consulting; The amounts of fees for such non-compensation services, noting in particular that such fees are negligible when considered in the context of Deloitte Consulting’s and its affiliates’ total revenues for the period; Deloitte Consulting’s policies and procedures concerning conflicts of interest; Deloitte Consulting representatives who advise the Compensation Committee do not provide any non-compensation-related services to the Company; There are no other business or personal relationships between management of the Company or members of the Compensation Committee and the Deloitte Consulting representatives who provide compensation services to the Company; and Neither Deloitte Consulting nor any of the Deloitte Consulting representatives who provide compensation services to the Company own any common stock or other securities of the Company.
PART V: COMPENSATION-RELATEDCOMPENSATION-RELATED RISK ASSESSMENT
The Compensation Committee analyzes on an annual basis the actual or anticipated effect (including, as appropriate, a deterrent effect) that our compensation policies and practices have had or may have on our employees with respect to creating any excessive and undesirable risk-taking in the performance of their duties for the Company. The Compensation Committee then makes a determination, on an annual basis, as to whether any of our compensation policies and practices creates risks that are reasonably likely to have a material adverse effect on the Company. At its regularly scheduled meeting held on December 5, 2018,2, 2020, the Compensation Committee determined that the Company’s current compensation policies and practices do not create any such risks.
The Compensation Committee’s determination was based on an assessment of the Company’s variable compensation risk that was led by the Company’s internal audit personnel and supported by its Director of Compensation. The Compensation Committee, with its independent compensation consultant, evaluated the results of this assessment and solicited feedback from a number of other sources, including Company management and internal legal, finance, and human resources personnel. The Company’s executive management team discussed its review and analysis of the results of the assessment with the Company’s Audit Committee and the Compensation Committee before the Compensation Committee made its annual determination regarding compensation-related risk.
The Compensation Committee seeks to discourage and deter inappropriate risk-taking through the compensation programs it adopts and implements for our Named Executive Officers and our employees generally. We believe that the compensation-related programs employed by the Company are consistent with those objectives and align our employees’ incentives for risk-taking with the best long-term interests of our shareholders. These programs provide a holistic approach to compensation that provides a mix of fixed and variable compensation, with the variable component impacting both short-term cash compensation and long-term equity compensation. Program features, such as stock ownership guidelines, limits on the payout of variable compensation, and clawback policies, provide additional balance between risk and reward.
PART VI: CEO PAY RATIORATIO
As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act and Regulation S-K under the Exchange Act, we are providing information regarding the relationship of annual total compensation of our CEO and our median employee (the CEO pay ratio). Our CEO pay ratio is a reasonable good faith estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. The ratio set forth below may not be comparable to the ratio for other companies due to differences in operations, industry, locations, employee populations, and compensation practices. Additionally, companies may utilize different methodologies, exclusions, estimates, and assumptions in calculating their CEO pay ratio.
For purposes of the CEO pay ratio, we are required to identify a median employee, without regard to location, compensation arrangements, or employment status. The median employee was identified from our global employee population as of September 30, 2018,2019, using gross fiscal wages of all global employees. Gross fiscal wages includes base salary plus overtime, short-term incentive compensation, long-term incentive compensation distributions, and other income. We did not perform any full-time equivalency adjustments for part-time or temporary employees, annualize for employees hired throughout the year, or exclude any non-US employees. Amounts in foreign currency were converted from local currency to U.S. dollars. Additionally, we did not make any cost-of-living adjustments.
The rules adopted by the SEC require a registrant to identify its median employee only once every three years, and our median employee was originally identified in 2019. In fiscal 2020, there was no change in the Company’s employee population or employee compensation arrangements that the Company believes would significantly impact the Company’s pay ratio disclosure, excluding for this purpose the employees who joined the Company as a result of the Milacron acquisition that closed on November 21, 2019 (approximately 4,000 employees as of September 30, 2020), as permitted by the instructions to Item 402(u) of Regulation S-K. Once the median employee was identified, the employee’s annual total compensation was calculated in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K.
The annual total compensation for fiscal year 20182020 for our CEO was $5,330,496$5,052,029 and the median employee (excluding the CEO) was $51,606.$53,446. The resulting CEO pay ratio for the fiscal year is estimated to be 10395 to 1. Due to the variability of the CEO’s performance-based compensation, the CEO pay ratio can differ significantly from year to year.
PART VII: ANTI-HEDGING AND ANTI-PLEDGING
Directors, officers, and all other employees of the Company, or any of their designees, are prohibited from purchasing financial instruments or otherwise engaging in transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of the Company’s securities either (i) granted to the employee or director by the Company as part of the compensation of the employee or director, or (ii) held (directly or indirectly) by the employee or director.
Our policy also prohibits purchasing financial instruments or engaging in any transactions that suggest speculation in or hedging against the Company’s securities; engaging in “short sales”; and holding Company securities in a margin account or otherwise pledging Company securities as collateral for a loan.
PROPOSAL NO. 2 – ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS
The core of Hillenbrand’s executive compensation policies and practices continues to be to pay for performance. Our executive officers are compensated in a manner consistent with our strategy, competitive practice, sound corporate governance principles, and shareholder interests and concerns. We believe our compensation program is strongly aligned with the long-term interests of our shareholders. We urge you to read the “Compensation Discussion and Analysis” section of this proxy statement for additional details on our executive compensation, including our compensation philosophy and objectives and the 20182020 compensation of our Named Executive Officers.
The U.S. Congress has enacted requirements commonly referred to as the “Say on Pay” rules. Our shareholders have elected, pursuant to an advisory vote at the Annual Meeting of shareholders in 2017, to hold a Say on Pay Vote each year. Accordingly, we are asking you to vote in favor of the adoption of the following resolution:
BE IT RESOLVED by the shareholders of Hillenbrand, Inc., that the shareholders approve the compensation of Hillenbrand’s Named Executive Officers as disclosed in the proxy statement pursuant to the SEC’s compensation disclosure rules.
As an advisory vote, this Proposal is non-binding. Although the vote is non-binding, the Board of Directors and the Compensation Committee value the opinions of our shareholders and will consider the outcome of the vote when making future compensation decisions for our Named Executive Officers.
The Board of Directors recommends that the shareholders vote FOR Proposal No. 2 to approve the adoption of the above resolution.
The affirmative vote of a majority of the votes cast on this Proposal No. 2 is required for approval of this non-binding Proposal. If you own shares through a bank, broker, or other holder of record, you must instruct your bank, broker, or other holder of record how to vote your shares in order for your vote to be counted on this Proposal. Abstentions and broker non-votes are not counted as votes cast and, therefore, do not affect the outcome of this Proposal.
COMPENSATION OFOF DIRECTORS
The Nominating/Corporate GovernanceNCG Committee of the Company’s Board of Directors (the “NCG Committee”) determines the compensation of its non-employee directors. The Company’s director compensation program uses a combination of cash and stock-based compensation to attract and retain highly qualified individuals to serve on the Board. In setting director compensation, the NCG Committee considers the significant amount of time that directors expend in fulfilling their duties to the Company, as well as the skill level required for members of the Board. The NCG Committee assesses the Company’s director compensation package periodically, but no less frequently than once every three years, to ensure that it reflects competitive market conditions and sound corporate governance practices. Any changes in director compensation must be approved by the Board. The NCG Committee engaged a compensation consultant to conduct a director compensation study in 2019, and the results of this study were considered by the Board and initially adopted to be effective during 2020. As part of the Company’s response to the COVID-19 pandemic, the Board voluntarily waived its scheduled cash compensation increase for 2020, which increase has been implemented for 2021.
In fiscal year 2018, the NCG Committee maintained the director compensation approach that was effective in fiscal year 2017, which is discussed in greater detail in the footnotes to the director compensation table below. In addition, in December 2018, the NCG Committee recommended, and the full Board approved, a revision to ourOur Corporate Governance Standards limitingset forth stock ownership guidelines for our non-employee directors and limit total annual base compensation for non-employee directors. An increased limit on total annual base compensation for non-employee directors is proposed to $400,000.be included in the amendment and restatement of the Company’s Stock Incentive Plan as further discussed under “Proposal No. 3 – Approval of the Amendment and Restatement of the Hillenbrand, Inc. Stock Incentive Plan” below. If Proposal No. 3 is approved, the compensation limit as set forth in the Amended and Restated Stock Incentive Plan will be increased, to $600,000, and will replace the limit in the Corporate Governance Standards. This limit, including as proposed, is inclusive of the value of both the annual cash retainer and the grant date fair value of the annual RSU award but excludes amounts payable for service as a Board or Committee Chairperson. The stock ownership guidelines require our non-employee directors to own an amount of our stock (including, for this purpose, RSUs) equal to five times the director’s annual cash compensation. Our new directors have five years to come into compliance with this requirement, and all of our current non-employee directors (other than Ms. Rumsey, who was elected to the Board in August 2020) are currently in compliance. Ms. Rumsey is under the five-year compliance deadline.
The following table sets forth the compensation paid to our non-employee directors in fiscal year 2018.2020. Directors who are also employees of the Company receive no additional remuneration for services as a director. Of the Company’s current Board members,directors, only Mr. Raver is a salaried employee of the Company.
Director Compensation for the Fiscal Year Ended September 30, 20182020 (a) | | (b) | | | (c) | | | (d) | | | (e) | | | (f) | | | (g) | | | (h) | | | (b) | | | (c) | | | (d) | | | (e) | | | (f) | | | (g) | | | (h) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Fees Earned Or Paid In Cash $ (1) | | | Stock Awards $ (2) | | | Option Awards $ | | | Non-Equity Incentive Plan Compensation $ | | | Change In Pension Value And Nonqualified Deferred Compensation Earnings $ | | | All Other Compensation $ (3) | | | Total | | | Fees Earned Or Paid In Cash $ (1) | | | Stock Awards $ (2) | | | Option Awards $ | | | Non-Equity Incentive Plan Compensation $ | | | Change In Pension Value And Nonqualified Deferred Compensation Earnings $ | | | All Other Compensation $ (3) | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | F. Joseph Loughrey – Chairperson | | $ | 112,500 | | | $ | 164,967 | (4) | | $ | – | | | $ | – | | | $ | – | | | $ | 333 | | | $ | 277,800 | | | $ | 112,500 | | | $ | 164,995 | | | $ | – | | | $ | – | | | $ | – | | | $ | 304 | | | $ | 277,799 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Edward B. Cloues, II | | $ | 70,000 | | | $ | 109,993 | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | 179,993 | | | $ | 70,000 | | | $ | 109,997 | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | 179,997 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gary L. Collar | | $ | 70,000 | | | $ | 109,993 | | | $ | – | | | $ | – | | | $ | – | | | $ | 333 | | | $ | 180,326 | | | $ | 70,000 | | | $ | 109,997 | | | $ | – | | | $ | – | | | $ | – | | | $ | 304 | | | $ | 180,301 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Helen W. Cornell | | $ | 71,164 | | | $ | 109,993 | | | $ | – | | | $ | – | | | $ | – | | | $ | 333 | | | $ | 181,490 | | | $ | 82,500 | | | $ | 109,997 | | | $ | – | | | $ | – | | | $ | – | | | $ | 304 | | | $ | 192,801 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Mark C. DeLuzio | | $ | 70,000 | | | $ | 109,993 | | | $ | – | | | $ | – | | | $ | – | | | $ | 333 | | | $ | 180,326 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Joy M. Greenway | | $ | 70,000 | | | $ | 109,993 | | | $ | – | | | $ | – | | | $ | – | | | $ | 333 | | | $ | 180,326 | | | $ | 70,000 | | | $ | 109,997 | | | $ | – | | | $ | – | | | $ | – | | | $ | 304 | | | $ | 180,301 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Daniel C. Hillenbrand | | $ | 27,808 | (5) | | $ | 43,687 | (5) | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | 71,495 | (5) | | $ | 70,000 | | | $ | 109,997 | | | $ | – | | | $ | – | | | $ | – | | | $ | 221 | | | $ | 180,218 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Thomas H. Johnson | | $ | 70,000 | | | $ | 109,993 | | | $ | – | | | $ | – | | | $ | – | | | $ | 333 | | | $ | 180,326 | | | $ | 70,000 | | | $ | 109,997 | | | $ | – | | | $ | – | | | $ | – | | | $ | 304 | | | $ | 180,301 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Eduardo R. Menascé | | $ | 82,500 | | | $ | 109,993 | | | $ | – | | | $ | – | | | $ | – | | | $ | 216 | | | $ | 192,709 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Neil S. Novich | | $ | 81,396 | | | $ | 109,993 | | | $ | – | | | $ | – | | | $ | – | | | $ | 333 | | | $ | 191,722 | | | $ | 82,500 | | | $ | 109,997 | | | $ | – | | | $ | – | | | $ | – | | | $ | 304 | | | $ | 192,801 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Jennifer W. Rumsey | | | $ | 10,931 | | | $ | 17,159 | | | $ | – | | | $ | – | | | $ | – | | | $ | 37 | | | $ | 28,127 | | | | | | | | | | | | | | | | | | | | | | | | | Stuart A. Taylor, II | | $ | 82,500 | | | $ | 109,993 | | | $ | – | | | $ | – | | | $ | – | | | $ | 333 | | | $ | 192,826 | | | $ | 82,500 | | | $ | 109,997 | | | $ | – | | | $ | – | | | $ | – | | | $ | 304 | | | $ | 192,801 | |
(1) | DirectorsFrom January 1, 2017 through the end of 2020, directors received an annual cash retainer of $70,000. TheEffective January 1, 2021, this annual cash retainer is planned to increase to $80,000, in order to align more closely with the market median, as recommended by the latest Board compensation study. In the past, the Chairperson of the Board received an additional annual cash retainer of $30,000. Effective January 1, 2021, this additional annual cash retainer is planned to increase to $35,000, as recommended by the compensation study, in order to align more closely with the market. In fiscal 2020, Chairpersons of the Audit, Nominating/Corporate Governance, Compensation, and M&A Committees received an additional annual cash retainer of $12,500, which for Mr. Novich and Ms. Cornell was prorated for the periods each served as Compensation Committee Chairperson during 2018 ($11,396 and $1,164 respectively).$12,500. Members of certain non-permanent committees may receive additional retainers as determined by the Board. Directors receive no additional per-meeting fee for Board or committee meeting attendance. Non-employee directors may participate in the Board deferred compensation plan, in which members of the Boarddirectors may elect to defer receipt of fees earned. Under the Company’s Supplemental Retirement Plan, deferred amounts may be invested in a variety of Fidelity mutual funds and/or Company common stock. See the “Retirement and Savings Plans” section of Part I of “Executive Compensation” above for more detail regarding the Supplemental Retirement Plan. |
(2) | On the first trading day followingFollowing the close of the 20182020 Annual Meeting of the Company’s shareholders and on the date thereof, each director was awarded restricted stock units (RSUs) based on a value on that date of $110,000.$110,000, and the Chairperson was awarded additional RSUs based on a value on that date of $55,000, in each case with respect to fiscal 2020. Effective October 1, 2020, this annual award of RSUs was increased to $125,000, and the Chairperson’s additional annual award of RSUs was increased to $85,000, each as recommended by the compensation study and in order to align more closely with the market. The annual award of RSUs to non-employee directors (including the Chairperson) is issued pursuant to the Company’s Stock Incentive Plan (the “Stock Plan”) and is valued using the average of the high and low sale prices of the Company’s common stock on the date of grant. Historically, RSUs awarded to non-employee directors vestvested immediately upon grant;grant, including those granted in fiscal 2020; however, beginning with awards made in fiscal 2021, subject to shareholder approval of the amendment and restatement of the Stock Plan, the Company expects to make RSU awards to non-employee directors subject to vesting upon the earlier to occur of (1) the first anniversary of the grant date or (2) the time immediately prior to the commencement of the first annual meeting of the Company’s shareholders that occurs after (not including) the grant date. In all cases, the directors are required to hold the shares underlying these grants – and the shares are not delivered – until after the occurrence of one of the following: a change in control of the Company, the director’s death or permanent and total disability, or the date the director ceases to be a director of the Company (forCompany. (For more information on the grants, please refer to the discussion found under the section, “Security Ownership of Directors and Management” above).above.) These RSUs carry no voting rights until such time as the underlying shares are delivered. Dividends paid on the Company common stock are accrued with regard to the RSUs awarded, deemed to be reinvested in Company common stock at the market value on the date of such dividend, and paid in additional shares on the distribution date of the underlying award in proportion to the number of shares that vest. |
On February 15, 2018, 2,44713, 2020, 3,818 RSUs with a fair value of $109,993$109,997 were granted to each person who was a non-employee director as of that date. See footnote 4 below for detail regarding the additional RSU grant made todate, and the Board Chairperson.Chairperson received an additional 1,909 RSUs with a fair value of $54,998 for his service in such capacity. As of September 30, 2018,2020, the aggregate numbers of shares represented by vested restricted stock unit awards for our directors were as follows:
Name | | Vested RSU Awards # | | | | F. Joseph Loughrey – Chairperson | | 54,37367,214 | Edward B. Cloues, II | | 33,32941,715 | Gary L. Collar | | 10,76917,911 | Helen W. Cornell | | 26,30534,306 | Mark C. DeLuzio | | 67,202 | Joy M. Greenway | | 18,53726,101 | Daniel C. Hillenbrand | | 9467,539 | Thomas H. Johnson | | 44,14053,122 | Eduardo R. Menascé | | 53,137 | Neil S. Novich | | 37,28345,855 | Jennifer W. Rumsey | 563 | Stuart A. Taylor, II | | 54,07063,512 |
(3) | Consists of Company-provided term life insurance, the value of which is net of premiums paid. Participation in the life insurance program is voluntary and may be declined. |
(4) | The Board of Directors has approved certain increased stock-based compensation to be paid to the Chairperson of the Board as a means to compensate him for his commitment, acting purely in his role as Chairperson, to provide advice and counsel to Mr. Raver in connection with Mr. Raver’s transition to Company President and CEO. Such increased compensation is approved on an interim basis only and is re-evaluated each year. In 2016, the Board approved a reduction in the additional annual equity award granted to the Chairperson from $75,000 to $55,000, effective for fiscal year 2017 and thereafter. Consequently, the Chairperson received, in addition to the standard grant of 2,447 RSUs made to each non-employee director, an additional 1,223 RSUs, making his aggregate stock-based compensation for the year valued at 3,670 RSUs. |
(5) | Mr. Hillenbrand joined the Board in May 2018, and this amount reflects proration of the full year award. |
EQUITY COMPENSATIONCOMPENSATION PLAN INFORMATION
The following table sets forth information concerning the Company’s equity compensation plans as of September 30, 2018:2020:
| | (a) | | (b) | | (c) | | (a) | | | (b) | | | (c) | | Plan Category | | Number Of Securities To Be Issued Upon Exercise Of Outstanding Options, Warrants, And Rights # (1) | | Weighted-Average Exercise Price Of Outstanding Options, Warrants, And Rights $ | | Number Of Securities Remaining Available For Issuance Under Equity Compensation Plans (Excluding Securities Reflected In Column (a)) # | | Number Of Securities To Be Issued Upon Exercise Of Outstanding Options, Warrants, And Rights # (1) | | | Weighted-Average Exercise Price Of Outstanding Options, Warrants, And Rights $ | | | Number Of Securities Remaining Available For Issuance Under Equity Compensation Plans (Excluding Securities Reflected In Column (a)) # | | | | | | | | | | | | | | | | | | Equity compensation plans approved by security holders | | 2,844,887 | | $ 34.80 | | 3,506,120 | | 3,835,201 | | | $ | 35.06 | | | 1,911,305 | |
(1) | Shares underlying awards of performance-based restricted stock units are reflected in this column as follows: (i) with respect to awards that vested on September 30, 2018,2020, this column reflects the actual vesting of awards and, therefore, the number of shares actually issued with respect to such awards; and (ii) with respect to awards that are scheduled to vest on September 30, 20192021 and September 30, 2020,2022, this column reflects a number of shares that would be issued if the maximum 175 percent potential payout were earned. The discussion above in the “Compensation Discussion and Analysis” section under the heading “Long-Term Incentive Compensation (LTIC)”Compensation” explains how we reserve within our Stock Plan a number of shares sufficient to cover the maximum 175 percent potential payout of our then-outstanding performance-based equity awards. |
PROPOSAL NO. 3 – APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE HILLENBRAND, INC. STOCK INCENTIVE PLAN
The Board of Directors is asking our shareholders to approve an amendment and restatement of the Stock Plan. The Stock Plan was adopted on December 19, 2008. The Stock Plan has since been amended and restated and was most recently approved by our shareholders on February 26, 2014. On December 3, 2020, the Board of Directors, upon the recommendation of the Compensation Committee, approved another amendment and restatement of the Stock Plan, subject to shareholder approval, in order to: Increase the number of shares of our Common Stock (the “Shares”) reserved for issuance under the Stock Plan by 2,700,000 Shares; Extend the expiration date of the Stock Plan from December 3, 2023 to December 1, 2030; Impose a cap in the Stock Plan on the annual compensation paid to our non-employee directors; and Reflect market practices. The complete text of the Stock Plan is attached as Appendix A to this proxy statement. The following summary of the Stock Plan does not purport to be complete and is qualified in its entirety by reference to Appendix A. How We Calculated the Proposed Increase in Share Authorization The Board of Directors believes that the future success of the Company depends, in large part, on our ability to attract, motivate and retain high-caliber employees and directors. Equity compensation is a key component of our compensation program, because it helps us attract, motivate and retain talented employees and directors and align their interests with those of our shareholders. As of December 14, 2020, and excluding the proposed Share increase, 1,284,907 Shares remained available for issuance or delivery under the Stock Plan. Based on our historical grant practices, as summarized below, and our projected recruiting and retention needs, we anticipate that the Company will deplete the remaining Share reserve by the end of calendar year 2021 without sufficient Shares to make projected annual grants in December 2021 unless we reserve more Shares for issuance under the Stock Plan. In order to maintain the flexibility to keep pace with our competitors and effectively attract, motivate and retain the high-caliber employees and directors, we are asking our shareholders to authorize an additional 2,700,000 Shares for issuance as awards under the Stock Plan, which would increase the aggregate number of Shares reserved for issuance under the Stock Plan from 12,535,436 to 15,235,436 Shares. We intend to grant future equity awards under the Stock Plan in amounts that are reasonable and consistent with market data prepared by the Compensation Committee’s independent consultant. Based on our projected recruiting and retention needs, we believe that the proposed Share increase would allow us to continue granting equity awards under the Stock Plan to employees and directors for approximately three more years. Without shareholder approval of the additional Shares under the Stock Plan, we may be required to increase the cash components of our compensation program, which would significantly inhibit our ability to attract, motivate and retain high-caliber employees and directors in a competitive marketplace and align their interests with those of our shareholders. In determining the size of this Share request, the Compensation Committee considered, among other things, our outstanding equity awards, our burn rate, our stock price and volatility, our projected recruiting and retention needs, the potential dilution of our equity compensation program, the voting guidelines of certain institutional investors and proxy advisory firms, and competitive market practices. The results of this comprehensive analysis were presented to the Compensation Committee and the Board of Directors for its consideration. Certain of these factors are outlined below: Outstanding Awards.As of December 14, 2020, there were 1,575,134 Shares subject to outstanding time- and performance-based RSU awards (calculated at maximum), and 2,302,023 Shares subject to outstanding stock options under the Stock Plan.34 The Company’s practice with respect to performance-based RSU awards is, during the measurement period, to reserve within the Stock Plan a number of shares equal to the maximum potential payout to ensure sufficient availability of shares and for administrative purposes. As of that date, the weighted average exercise price of the outstanding stock options was $35.60, the weighted average remaining contractual term for the stock options was 6.22 years, and the closing market price of a Share as reported on the NYSE was $37.98 per Share. Burn Rate. We use our burn rate to measure the potential life expectancy of the Stock Plan and shareholder dilution. Our burn rate is summarized in the table below, which provides data on our Share usage (including awards to employees and non-employee directors) for the last three completed fiscal years. Fiscal Year | Stock Options Granted | Time-Based RSUs Granted | Performance- Based RSUs Earned | Total Shares (1) | Burn Rate | 2018 | 479,991 | 34,166 | 243,310 | 1,034,943 | 1.64% | 2019 | 431,726 | 29,651 | 134,140 | 759,308 | 1.21% | 2020 | 454,929 | 338,105 | 114,043 | 1,359,225 | 1.85% | 3-year Average Burn Rate (2018-2020) | 1.57% |
(1) | The total number of Shares is calculated by multiplying (i) the sum of Time-Based RSUs Granted and Performance-Based RSUs Earned, by (ii) a factor of 2, which is intended to reflect our stock price volatility, and then adding that amount to the Stock Options Granted. |
Dilution and Overhang. We measure the dilutive impact of our equity program (the so-called “overhang”) by dividing (i) the number of Shares subject to outstanding awards (with performance-based RSUs calculated at maximum) plus the number of Shares available to be granted under the Stock Plan (the “numerator”), by (ii) our total Shares outstanding plus the Shares included in the numerator. As of December 14, 2020, our fully diluted overhang was approximately 6.23 percent. The 2,700,000 additional Shares being requested under the Stock Plan would bring our fully diluted overhang to approximately 9.49 percent, which we believe to be within industry norms.
34 These amounts include the grant in December 2020 of 257,806 time-based RSUs and 359,931 performance-based RSUs (calculated at maximum). Summary of Other Material Changes to the Stock Plan In addition to the proposed increase in the Share reserve, as described above, the Board of Directors approved the following additional changes to the Stock Plan: Extended Term. The term of the Stock Plan is extended from December 3, 2023 to December 1, 2030. Cap on Director Compensation. The Stock Plan imposes a cap on equity awards granted to non-employee directors, so that the accounting value of those equity awards, when added to any cash retainers for service as a director, cannot exceed $600,000 per year. Cap on Awards to Employees. The Stock Plan increases the cap on equity awards granted to employees, so that no employee may be granted stock options and/or stock appreciation rights under the Stock Plan for more than 750,000 Shares in any fiscal year (up from 500,000 Shares prior to the amendment), and no employee may be granted restricted stock, restricted stock units, and/or bonus stock awards for more than 500,000 Shares in any fiscal year (up from 300,000 Shares prior to the amendment). Minimum Vesting Provisions. The amendment provides that all awards granted under the Stock Plan are subject to a minimum vesting requirement of at least one year, with an exception for awards covering up to five percent of the Shares available for issuance as of the Annual Meeting and for director awards that vest on the earlier of the first anniversary of the grant date or the next Annual Meeting of shareholders. Prior to the amendment, the Stock Plan imposed a minimum vesting requirement only on stock options and appreciation rights (which could vest at a rate no faster than 1/3 per year). Limit on Dividend Equivalents. Dividends or dividend equivalents payable with respect to any awards granted under the Stock Plan will be accumulated or reinvested until such award is earned, and the dividends or dividend equivalents shall not be paid if the underlying award does not become vested. Additionally, no dividend equivalents will be granted with respect to Shares underlying a stock option or appreciation right. Clawback Policy. Awards granted under the Stock Plan are subject to recoupment under our clawback policy, as described under the heading “Compensation Discussion and Analysis – Compensation-Related Policies” above. Other Changes. The Stock Plan includes additional changes to eliminate references to a prior spin-off transaction and to reflect the repeal of the performance-based compensation exception to Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Summary of the Other Material Provisions of the Stock Plan The following is a summary of the other material provisions of the Stock Plan, as amended and proposed for approval by the shareholders. Share Reserve. As noted above, the maximum number of Shares that may be issued or transferred with respect to awards under the Stock Plan is 15,235,436, subject to adjustment as provided below (which includes the original 4,635,436 Shares reserved under the Stock Plan as of December 19, 2008, the addition of 4,000,000 Shares to the Stock Plan as approved by shareholders on February 24, 2010, the addition of 3,900,000 Shares to the Stock Plan as approved by shareholders on February 26, 2014, and the proposed addition of 2,700,000 Shares to the Stock Plan as set forth above). Shares issued under the Stock Plan may include authorized but unissued Shares, treasury Shares, Shares purchased in the open market, or a combination of the foregoing. Shares underlying awards that are settled in cash or that terminate or are forfeited, cancelled or surrendered without the issuance of Shares will again be available for issuance under the Stock Plan. Shares delivered under awards that are granted in assumption of, or in substitution or exchange for, outstanding awards previously granted by an entity acquired directly or indirectly by the Company or with which the Company directly or indirectly combines (“Substitute Awards”), shall not count against the Stock Plan’s share limit, except as may be required by the rules and regulations of any stock exchange or trading market. No Share Recycling. Shares surrendered to pay the exercise price of stock options, repurchased by us with option proceeds, or withheld for taxes upon exercise or vesting of an award, will not again be available for issuance under the Stock Plan. When a stock appreciation right is exercised and settled in Shares, all of the Shares underlying the stock appreciation right will be counted against the Share limit of the Stock Plan regardless of the number of Shares used to settle the stock appreciation right. Adjustments. In the event of any equity restructuring, such as a stock dividend, stock split, spin off, rights offering or recapitalization through a large, nonrecurring cash dividend, the Compensation Committee will adjust the number and kind of Shares that may be delivered under the Stock Plan, the individual award limits, and, with respect to outstanding awards, the number and kind of Shares subject to outstanding awards and the exercise price or other price of Shares subject to outstanding awards, to prevent dilution or enlargement of rights. In the event of any other change in corporate capitalization, such as a merger, consolidation or liquidation, the Compensation Committee may, in its discretion, make such equitable adjustment as described in the foregoing sentence, to prevent dilution or enlargement of rights. Moreover, in the event of any such transaction or event, the Compensation Committee, in its discretion, may provide in substitution for any or all outstanding awards such alternative consideration (including cash) as it, in good faith, may determine to be equitable in the circumstances and may require in connection therewith the surrender of all awards so replaced. Eligibility. All employees, officers, and non-employee directors of the Company and its subsidiaries are eligible to receive equity awards under the Stock Plan, except that Incentive Stock Options may not be granted to non-employee directors. Currently, there are approximately 10,700 worldwide employees (including our executive officers) and 10 non-employee directors eligible to participate in the Stock Plan. The Compensation Committee is authorized to select the employees who will receive awards under the Stock Plan from time-to-time. Under our current director compensation program, each of the non-employee directors receives a grant of equity awards at the conclusion of each Annual Meeting of shareholders. Administration. The Compensation Committee has the authority and responsibility to administer the Stock Plan. The Compensation Committee consists solely of members intended to be “non-employee directors” within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as amended, and “independent directors” under the NYSE rules. The Compensation Committee may exercise broad discretionary authority in the administration of the Stock Plan, including the authority to determine the treatment of awards upon an employee’s retirement, disability, death, termination for cause or other termination of employment, or during a leave of absence. In addition, the Compensation Committee is authorized to delegate some or all of its administrative duties to one or more of its members or to one or more employees or agents of the Company. The Board of Directors retains authority to administer and issue awards under the Stock Plan and specifically reserves the exclusive authority to approve and administer all awards granted to non-employee directors and to approve the compensation of our President and CEO. Amendments and Termination. The Board of Directors may amend or discontinue the Stock Plan at any time, with shareholder approval to the extent required by applicable laws. No such amendment or termination, however, may adversely affect any holder of outstanding awards without his or her consent. No Repricing. The Stock Plan does not permit the “repricing” of stock options and stock appreciation rights without shareholder approval. This includes a prohibition on reducing the exercise price of stock options or appreciation rights, cancellation of stock options or appreciation rights in exchange for an award having a lower exercise price, for another award, or for cash, and “reloads” in connection with the exercise of stock options or appreciation rights. Types of Awards. The Stock Plan permits the Board of Directors or Compensation Committee to grant the following types of awards:
| o | Stock Options. Stock options entitle the holder to elect to purchase up to a specified number of Shares at a specified price (the exercise price). The exercise price (other than Substitute Awards) cannot be less than the fair market value of the Shares when the options are granted. Under the Stock Plan, stock options may be Incentive Stock Options or “Non-Qualified Options” under the Code. Stock options may not be exercised more than ten years from the date of grant, unless the Compensation Committee determines otherwise on an individual basis. |
The applicable option exercise price is payable at the time of exercise in any of the following methods, to the extent permitted by the Compensation Committee: (i) cash, (ii) delivery of unrestricted Shares owned by the optionee having a value at the time of exercise equal to the exercise price, (iii) a cashless exercise (including withholding of Shares otherwise deliverable on exercise or a broker-assisted arrangement as permitted by applicable laws), (iv) any other manner permitted by law, or (v) any combination of the foregoing.
| o | Stock Appreciation Rights. A stock appreciation right entitles the holder to receive, for each Share as to which the award is granted, payment of an amount, in cash, in Shares, or in a combination, as determined by the Compensation Committee, equal in value to the excess of the fair market value of a Share on the date of exercise over the fair market value of a Share on the day the stock appreciation right was granted. |
| o | Restricted Stock. Restricted stock means Shares that are actually issued to the recipient of the award, but the recipient has no right to sell them, pledge them, or otherwise transfer any interest in them until it is determined in the future how many Shares the recipient is entitled to retain (free of such restrictions) and how many Shares must be forfeited back to the Company. Such determination will be based on the conditions the Compensation Committee attaches to the award, which may include performance-based conditions (as described below). |
| o | Restricted Stock Unit (“RSU”). An RSU award is a promise by the Company to issue up to a fixed number of Shares to the award recipient at some point in the future, with the number of Shares that are actually issued and the number of Shares that are forfeited being determined by the conditions attached to the award by the Compensation Committee (which may include performance-based conditions, as described below). Except as provided by the Compensation Committee, RSU awards that are unvested at the time the holder’s employment or other relationship with the Company is terminated will be forfeited. |
| o | Bonus Stock. Bonus stock means unrestricted Shares that are issued to an award recipient at no cost to the recipient or at a discount from its fair market value. |
Vesting and Forfeiture of Awards. Subject to the minimum vesting requirements described above, the exercisability of stock options, and the vesting or forfeiture of all other equity awards under the Stock Plan may be conditioned in any manner that the Compensation Committee chooses. The Stock Plan grants broad discretion to the Compensation Committee to determine the terms and conditions applicable to awards. For example, time-based equity awards may be granted with the condition that they will become earned (vested) ratably over a period of years as long as the recipient remains employed. Performance-based equity awards may be granted with the condition that they will become earned (vested) or be forfeited in accordance with the attainment of specified financial or other performance objectives. Performance-Based Awards. The Compensation Committee has the right under the Stock Plan to grant awards that will become earned (vested) or be forfeited based on the level of achievement of objective and pre-established performance objectives. These objectives are established by the Compensation Committee based on one or more of the following criteria, in each case applied to the Company on a consolidated basis and/or to a business unit, and which the Compensation Committee may use as an absolute measure, as a measure of improvement relative to prior performance, or as a measure of comparable performance relative to a peer group of companies: sales, operating profits, operating profits before taxes, operating profits before interest expense and taxes, net earnings, earnings per share, return on equity, return on assets, return on invested capital, total shareholder return, cash flow, debt to equity ratio, market share, stock price, and shareholder, economic or market value added. In establishing and measuring performance targets for a year, the Compensation Committee may provide for appropriate objectively determinable adjustments to any performance measure for extraordinary and/or non-recurring items. Transferability of Certain Awards. Unless otherwise provided by the Compensation Committee, stock options and stock appreciation rights granted under the Stock Plan will not be transferable by a participant other than by will or the laws of descent and distribution, and restricted stock and RSU awards may not be sold, assigned, transferred, pledged, or otherwise encumbered during the vesting period. In no event may the Compensation Committee permit a stock option to be transferred for consideration. Change in Control. Unless an award is granted with contrary provisions or the participant has a change in control agreement with the Company with contrary provisions, a “change in control” of the Company will result in the immediate full vesting of all Shares under outstanding awards under the Stock Plan; provided that, any awards with respect to which the number of Shares earned depends upon performance shall vest based on the greater of: (i) an assumed achievement of all relevant performance goals at their “target” level, or (ii) the actual level of achievement of all relevant performance goals against target as of the date immediately prior to the change in control (or as close to such date as administratively practicable). In addition, the Compensation Committee has the right to cancel any outstanding awards in connection with a change in control, in exchange for a payment in cash or other property (including shares of the resulting entity) in an amount equal to the excess of the fair market value of the Shares subject to the award over any exercise price related to the award, including the right to cancel any “underwater” stock options and stock appreciation rights without payment therefor. Notwithstanding the default provisions of the Stock Plan, certain Company executives, including the Named Executive Officers, have superseding agreements with the Company that provide for vesting of outstanding equity awards only if there has been both a change in control transaction and a qualifying termination of employment – referred to as “double-trigger” vesting. Pending approval of the amendments to the Stock Plan by the Company’s shareholders, the Company intends to amend these agreements to make corresponding changes and certain other updates to reflect market practices. The Stock Plan includes a provision that could result in a reduction of the amount paid to a participant in the event any payment or benefit resulting from an award, including accelerated vesting of any equity compensation, would constitute a “parachute payment” within the meaning of Section 280G of the Code and could be subject to the excise tax imposed by Section 4999 of the Code. In that event, the payment would be either provided to the recipient in full or provided to the recipient to such lesser extent which would result in no portion of such payment being subject to the excise tax, whichever of the foregoing amounts results in the receipt by the recipient, on an after-tax basis, of the greatest amount of the payment. A change in control generally means (i) the acquisition of securities representing 35 percent or more of the voting power of our outstanding securities; (ii) our incumbent directors ceasing to constitute at least a majority of the members of our Board; (iii) a reorganization, merger or consolidation, unless (a) substantially all of the beneficial owners of our outstanding stock prior to the transaction continue to own (in the same proportions) shares entitling them to 50 percent or more of the voting power of the outstanding securities of the combined or resulting entity, (b) no person owns 35 percent or more of the voting power of the outstanding securities of the combined or resulting entity, and (c) at least a majority of the members of the board of the resulting corporation are individuals who were our incumbent directors prior to the transaction; (iv) a sale or other disposition of all or substantially all (i.e., 50 percent or more) of the assets of the Company in one transaction or a series of transactions within any period of 12 consecutive months; or (v) shareholder approval of our complete liquidation or dissolution. Waiver of Conditions. The authority of the Compensation Committee under the Stock Plan includes the right to waive the satisfaction of any or all conditions in an award as to the vesting of the Shares awarded. Federal Income Tax Consequences to Participants Overview. The following discussion is limited to a summary of the U.S. federal income tax consequences of the grant, exercise, and vesting of awards under the Stock Plan. The tax consequences of awards may vary according to country of participation. Also, the tax consequences of the grant, exercise, or vesting of awards may vary depending upon the particular circumstances, and it should be noted that income tax laws, regulations, and interpretations change frequently. Participants should rely upon their own tax advisors for advice concerning the specific tax consequences applicable to them, including the applicability and effect of state, local, and foreign tax laws.
| • | Non-Qualified Stock Options. In general, (i) a participant will not recognize income at the time a Non-Qualified Option is granted; (ii) a participant will recognize ordinary income at the time of exercise in an amount equal to the excess of the fair market value of the Shares on the date of exercise over the option exercise price paid for the Shares; and (iii) at the time of sale of Shares acquired pursuant to the exercise of the non-qualified option, appreciation (or depreciation) in value of the Shares after the date of exercise will be treated as either short-term or long-term capital gain (or loss) depending on how long the Shares have been held. |
| • | Incentive Stock Options. A participant will not recognize income at the time an Incentive Stock Option is granted or exercised. However, the excess of the fair market value of the Shares on the date of exercise over the option exercise price paid may constitute a preference item for the alternative minimum tax. If Shares are issued to the optionee pursuant to the exercise of an Incentive Stock Option, and if no disqualifying disposition of such Shares is made by such optionee within two years after the date of the grant or within one year after the issuance of such Shares to the optionee, then upon sale of such Shares, any amount realized in excess of the option price will be taxed to the optionee as a long-term capital gain and any loss sustained will be a long-term capital loss. If Shares acquired upon the exercise of an Incentive Stock Option are disposed of prior to the expiration of either holding period described above, the optionee generally will recognize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of such Shares as of the time of exercise (or, if less, the amount realized on the disposition of such Shares if a sale or exchange) over the option price paid for such Shares. Any further gain (or loss) realized by the participant generally will be taxed as short-term or long-term capital gain (or loss) depending on the holding period. |
| • | Stock Appreciation Rights. A participant will not recognize income upon the grant of stock appreciation rights. The participant generally will recognize ordinary income when the stock appreciation rights are exercised in an amount equal to the cash and the fair market value of any unrestricted Shares received on the exercise. |
| • | Restricted Stock. A participant will not be subject to tax until the Shares of restricted stock are no longer subject to forfeiture or restrictions on transfer for purposes of Section 83 of the Code. At that time, the participant will be subject to tax at ordinary income rates on the fair market value of the restricted Shares (reduced by any amount paid by the participant for such restricted Shares). However, a participant who so elects under Section 83(b) of the Code within 30 days of the date of transfer of the Shares will have taxable ordinary income on the date of transfer of the Shares equal to the excess of the fair market value of such Shares (determined without regard to the restrictions) over the purchase price, if any, of such restricted Shares. Any appreciation (or depreciation) realized upon a later disposition of such Shares will be treated as long-term or short-term capital gain depending upon how long the Shares have been held. If a Section 83(b) election has not been made, any dividends received with respect to restricted Shares that are subject to forfeiture and transfer restrictions generally will be treated as compensation that is taxable as ordinary income to the participant. |
| • | RSUs. A participant will not recognize income upon the grant of an RSU award. Upon payment of the awards, the participant generally will recognize ordinary income in an amount equal to the cash and the fair market value of any unrestricted Shares received. |
| • | Bonus Stock. A participant will recognize ordinary income upon the grant of a bonus stock award equal to the fair market value of the unrestricted Shares received by the participant. |
| • | Dividends or Dividend Equivalents. Any dividend or dividend equivalents awarded with respect to awards granted under the Stock Plan and paid in cash or unrestricted Shares will be taxed to the participant at ordinary income rates when such cash or unrestricted Shares are received by the participant. |
| • | Section 409A. The Stock Plan permits the grant of various types of awards that may or may not be exempt from Section 409A of the Code. If an award is subject to Section 409A, and if the requirements of Section 409A are not met, the award could be subject to tax at an earlier time than described above and could be subject to additional taxes and penalties. Awards granted under the Stock Plan generally will be designed either to be exempt from, or to comply with the requirements of, Section 409A. |
Federal Income Tax Consequences to the Company. To the extent that a participant recognizes ordinary income in the circumstances described above, the Company will be entitled to a corresponding federal income tax deduction provided that, among other things, the income (i) meets the test of reasonableness, is an ordinary and necessary business expense, and is not an “excess parachute payment” within the meaning of Section 280G of the Code; and (ii) is not disallowed by the $1 million limitation on executive compensation under Section 162(m) of the Code. Registration with the SEC. The Company intends to file a Registration Statement on Form S-8 relating to the issuance of additional Shares under the Stock Plan with the SEC pursuant to the Securities Act of 1933, as amended, after approval of the Stock Plan, as amended and restated, by the Company’s shareholders. Plan Benefits Under the Stock Plan. Because it is within the discretion of the Compensation Committee to determine which directors, officers, employees and consultants will receive awards and the amount and type of awards received, it is not presently possible to determine the number of individuals to whom awards will be made in the future under the Stock Plan or the amount of the awards. The Board of Directors has approved the Amended and Restated Hillenbrand, Inc. Stock Incentive Plan and recommends that the shareholders vote FOR Proposal No. 3 to approve and adopt such plan. The affirmative vote of a majority of the votes cast on this Proposal No. 3 is required for approval of this Proposal. If you own Shares through a bank, broker, or other holder of record, you must instruct your bank, broker, or other holder of record how to vote your Shares in order for your vote to be counted on this Proposal. Abstentions will have the same effect as votes against the Proposal and broker non-votes are not counted as votes cast and, therefore, do not affect the outcome of the Proposal. AUDIT COMMITTEECOMMITTEE REPORT
The Audit Committee of the Board of Directors (the “Committee”) is composed of sevenfive directors, each of whom is independent under SEC Rule 10A-3 and the New York Stock Exchange listing standards. The Committee operates under a written Charter adopted by the Board of Directors, a copy of which can be accessed at http://ir.hillenbrand.com/investor-relations/corporate-governance/governance-documents. The Committee has the authority to conduct or authorize investigations into any matters within the scope of its responsibilities and the authority to retain such outside counsel, experts, and other advisors as it determines appropriate to assist it in the conduct of any such investigation.
Management has the primary responsibility for the Company’s financial statements, for maintaining effective internal control over financial reporting, and for assessing the effectiveness of internal control over financial reporting. The independent registered public accounting firm of PricewaterhouseCoopersErnst & Young LLP (“PwC”EY”) was responsible in fiscal year 20182020 for performing an integrated audit of the Company’s consolidated financial statements and its internal control over financial reporting in accordance with standards of the Public Company Accounting Oversight Board (PCAOB) and the issuance of a report thereon. The Audit Committee’s responsibility is to monitor and oversee these processes. In addition, the Committee approves, subject to shareholder ratification, the appointment of the Company’s independent registered public accounting firm and pre-approves all audit and non-audit services to be performed by the firm. The Audit Committee through its Chairperson is also directly involved in the selection of PwC’s new engagement partner, which occurs every five years pursuant to PwC’s policy to rotate its key audit personnel. The most recent engagement partner rotation occurred in 2016.
Furthermore, Hillenbrand’s Audit Committee believes that the continued retention of PwC to serve as Hillenbrand’s independent registered public accounting firm is in the best interests of Hillenbrand and its shareholders. In making such determination, the Audit Committee considers, among other things, an evaluation of PwC’s performance as well as the impact of changing auditors. PwC has been retained as Hillenbrand’s independent registered public accounting firm continuously since 2007.
The Committee has reviewed and discussed the audited consolidated financial statements for the fiscal year ended September 30, 2018,2020, with management and representatives of PwC.EY. Management represented to the Committee that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles. Representatives of PwCEY discussed with the Committee matters required to be discussed by Auditing Standard No. 1301, ‘Communications with Audit Committees,’ as adopted by PCAOB.
PwCEY also provided to the Committee the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee regarding independence, and the Audit Committee discussed with PwCEY its independence. In addition, the Committee considered whether non-audit consulting services provided by PwCEY impaired its independence and concluded that such services did not impair its independence.
Based upon these procedures and discussions, the Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2018,2020, for filing with the Securities and Exchange Commission.
| Submitted by the Audit Committee, | | | | Eduardo R. MenascéNeil S. Novich (Chairperson)25
| | Edward B. Cloues, II | | Joy M. Greenway | | Daniel C. Hillenbrand | | Thomas H. Johnson | | Neil S. Novich | | Stuart A. Taylor, II |
25 Mr. Menascé served as Chairperson of the Audit Committee at the time this Audit Committee Report was delivered. Effective January 1, 2019, Mr. Novich became Chairperson of the Audit Committee.
PROPOSAL NO. 34 – RATIFICATION OF APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Subject to shareholder ratification, the Audit Committee of the Board of Directors of the Company has appointed the firm of PricewaterhouseCoopers LLP (“PwC”),EY, certified public accountants, as the independent registered public accounting firm to make an examination of the consolidated financial statements of the Company for its fiscal year ending September 30, 2019. PwC2021. EY served as the independent registered public accounting firm of the Company for the fiscal year ended September 30, 2018. A2020, replacing PricewaterhouseCoopers LLP, which had served more than 10 years. As we intend to hold our Annual Meeting in person, we expect that a representative of PwCEY will be presentavailable at the Annual Meeting with an opportunity to make a statement if he or she desires to do so and will also be available to respond to appropriate questions. If we determine that alternative arrangements are needed for the Annual Meeting, we will endeavor to have a representative of EY similarly available.
The Board of Directors, at the request of the Audit Committee, recommends that the shareholders vote FOR Proposal No. 34 to ratify the appointment of PwCEY as the Company’s independent registered public accounting firm for fiscal year 2019.2021.
The affirmative vote of a majority in voting power of the votes cast on this Proposal No. 34 is required for approval of this Proposal. Abstentions and broker non-votes are not counted as votes cast and, therefore, do not affect the outcome of the Proposal.
If the appointment is not ratified by a majority of the votes cast, the adverse vote will be considered as an indication to the Audit Committee that it should consider selecting another independent registered public accounting firm for the following fiscal year.
Principal Accountant Fees and Services
The Audit Committee has adopted a policy requiring that all services to be performed by the independent registered public accounting firm be pre-approved by the Audit Committee or its delegate (Chairperson) and has adopted guidelines that fees for non-audit related services, including tax consulting, tax compliance, and tax preparation fees, should not exceed the total of audit and audit-related fees. During each of the fiscal yearsyear ended September 30, 2017, and 2018, PwC’s2020, EY’s fees, all of which were approved by the Audit Committee, fell within these guidelines.
| | 2018 | | | 2017 | | | | | | | | | Audit Fees (1) | | $ | 2,473,700 | | | $ | 2,446,700 | | Audit-Related Fees (2) | | $ | 720,000 | | | $ | 100,000 | | Tax Fees (3) | | $ | 376,000 | | | $ | 501,100 | | All Other Fees (4) | | $ | 4,600 | | | $ | 3,700 | | Total | | $ | 3,574,300 | | | $ | 3,051,500 | |
The table below sets forth the aggregate amount of fees billed for professional services rendered by EY to the Company and its subsidiaries for this period. Since EY was appointed in fiscal 2020, there were no fees billed for professional services rendered by EY during the fiscal year ended September 30, 2019.
| | 2020 | | | | | | Audit Fees (1) | | $ | 3,663,000 | | Audit-Related Fees (2) | | $ | 78,000 | | Tax Fees (3) | | $ | 345,000 | | All Other Fees (4) | | $ | 3,000 | | Total | | $ | 4,089,000 | |
(1) | Audit Fees services include: (i) the audit by EY of the financial statements included in our annual reports on Form 10-K; (ii) reviews by EY of the interim financial statements included in our quarterly reports on Form 10-Q; and (iii) statutory audits by EY of certain subsidiaries; and (iv)subsidiaries. |
(2) | Audit-Related Fees services include out of pocket expenses.expenses for EY. |
(2) | Audit-Related Fees services include: (i) consultations on the application of accounting standards; (ii) out of pocket expenses; and (iii) other advisory fees and due diligence costs associated with investigating potential strategic opportunities. |
(3) | Tax Fees services include general tax consulting services.services from EY. |
(4) | All Other Fees services include: (i) special accounting projects; and (ii)include a subscription to PwC’s accountingEY Atlas, a cloud-based platform and research tool. |
The Board of Directors does not know of any matters that will be brought before the 20192021 Annual Meeting other than those listed in the notice of meeting. If any other matters are properly introduced at the meeting for consideration, the individuals named on the proxy card will have authority to vote on such matters in their discretion.
January 2, 2019December 29, 2020
Appendix A The proposed amendment and restatement of the Hillenbrand, Inc. Stock Incentive Plan that the shareholders are being asked to approve is set forth below. AMENDED AND RESTATED HILLENBRAND, INC. STOCK INCENTIVE PLAN (Amended and Restated as of December 3, 2020) RECITALS WHEREAS, the Board of Directors of Hillenbrand, Inc. (hereinafter referred to as “Hillenbrand” or the “Company”) adopted with shareholder approval the Hillenbrand, Inc. Stock Incentive Plan (the “Plan”) as of December 19, 2008, which was amended and restated, with shareholder approval, as of February 24, 2010 and December 4, 2013; WHEREAS, the Board of Directors of the Company has determined that it is in the best interest of the Company and its shareholders to increase the total number of shares of Common Stock that can potentially be issued under the Plan and to make certain other amendments to reflect market practices and the elimination of the performance-based compensation exception to Section 162(m) of the Internal Revenue Code; and WHEREAS, the Board of Directors of the Company has, subject to shareholder approval, re-adopted the Plan in the form that follows to amend, restate, supersede and replace the form thereof previously adopted (when approved by the shareholders of the Company). SECTION 1. | Purpose and Types of Awards |
1.1 The purposes of the Plan are to enable the Company to attract, retain and reward its employees, officers and directors, and strengthen the mutuality of interests between such persons and the Company’s shareholders by offering such persons an equity interest in the Company and thereby enabling them to participate in the long-term success and growth of the Company. 1.2 Awards under the Plan may be in the form of (i) Stock Options; (ii) Stock Appreciation Rights; (iii) Restricted Stock; (iv) Restricted Stock Units; (v) Bonus Stock and/or (vi) Substitute Awards. Each Award shall be subject to the minimum vesting provisions set forth in Section 15.8 of the Plan. 2.1 When capitalized in this Plan, the following terms shall have the meanings specified below (or as elsewhere defined), unless the context otherwise requires: “Award” means an award of Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Bonus Stock or Substitute Awards granted pursuant to the terms and conditions of the Plan. “Board” shall mean the Board of Directors of the Company.
“Bonus Stock” shall mean an Award described in Section 10 of the Plan. “Change in Control” shall have the meaning set forth in Section 14.2. “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time. “Committee” shall mean the Compensation and Management Development Committee of the Board or such other committee of independent directors (within the meaning of the applicable exchange listing standards) of the Board designated by the Board to administer the Plan, or if no committee is designated, and in any case with respect to Awards to non-employee directors, the entire Board. “Common Stock” shall mean the common stock of the Company, without par value. “Company” shall mean Hillenbrand, Inc. and its successors. “Employee” shall mean an employee of the Company or of any Subsidiary of the Company. “Fair Market Value” of the Common Stock on any date shall mean the value determined in good faith by the Committee, by formula or other method consistent with the determination of fair market value under Code Section 409A and its interpretive regulations; provided, however, that unless the Committee determines to use a different measure, the fair market value of the Common Stock shall be the average of the high and the low sales prices of the Common Stock (on such exchange or market as is determined by the Board to be the primary market for the Common Stock) on the date in question (or if shares of Common Stock were not traded on such date, then on the next preceding trading day on which a sale of Common Stock occurred). “Full Value Award” shall mean any Award other than a Stock Option or Stock Appreciation Right. “Incentive Option” shall mean a Stock Option granted under the Plan that both is designated as an Incentive Option and qualifies as an incentive stock option within the meaning of Section 422 of the Code. “Non-Employee Director” shall mean a director of the Company who is not employed by the Company or any of its Subsidiaries. “Non-Qualified Option” shall mean a Stock Option granted under the Plan that either is designated as a Non-Qualified Option or does not qualify as an incentive stock option within the meaning of Section 422 of the Code. “Optionee” shall mean any person who has been granted a Stock Option under the Plan or who is otherwise entitled to exercise a Stock Option. “Option Period” shall mean, with respect to any portion of a Stock Option, the period after such portion has become exercisable and before it has expired or terminated. “Plan” shall have the meaning set forth in the recitals.
“Relationship” shall mean the status of employee, officer or director of the Company or any Subsidiary of the Company. “Restricted Stock” shall mean an Award described in Section 8 of the Plan. “Restricted Stock Units” or “RSUs” shall mean an Award described in Section 9 of the Plan. “Shareholder Approval Date” shall mean the date of shareholder approval of the Plan as amended and restated as set forth herein. “Stock Appreciation Right” shall mean an Award described in Section 7 of the Plan. “Stock Option” shall mean an Incentive Option or a Non-Qualified Option and, unless the context requires otherwise, shall include Director Options. “Subsidiary” shall mean any corporation, partnership, joint venture or other entity in which the Company owns, directly or indirectly, more than 50% of the ownership interests; provided, however, that for purposes of granting Incentive Options, the term “Subsidiary” shall mean any company (other than the Company) that is a “subsidiary corporation” within the meaning of Section 424 of the Code. “Substitute Award” means an Award that is granted in assumption of, or in substitution or exchange for, an outstanding award previously granted by an entity acquired directly or indirectly by the Company or with which the Company directly or indirectly combines. 2.2 The following rules shall govern in interpreting the Plan: (a) The Plan and all Awards are intended to be exempt from, or to comply with, the provisions of Section 409A of the Code, and the Plan and all Awards shall be administered to effect compliance with such intent. (b) Any reference herein to a provision of law, regulation or rule shall be deemed to include a reference to the successor of such law, regulation or rule. (c) To the extent consistent with the context, any masculine term shall include the feminine, and vice versa, and the singular shall include the plural, and vice versa. (d) If any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity of that provision shall not affect the remaining parts of the Plan, and the Plan shall be interpreted and enforced as if the illegal or invalid provision had never been included herein. 3.1 The Plan shall be administered by the Committee. Notwithstanding anything to the contrary contained herein, only the Board shall have authority to grant Awards to Non-Employee Directors and to amend and interpret such Awards.
3.2 The Committee shall have the authority and discretion with respect to Awards to take the following actions, if consistent with Section 15.7 of the Plan and subject to the conditions of Section 3.2A of the Plan: to grant and amend (provided, however, that no amendment shall impair the rights of the Award holder without his or her written consent) Awards to eligible persons under the Plan; to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall deem advisable; to interpret the terms and provisions of the Plan and any Award; and to make all factual and other determinations necessary or advisable for the administration of the Plan. In particular, and without limiting its authority and powers, the Committee shall have the authority and discretion: (a) to select the persons to whom Awards will be granted from among those eligible; (b) to determine the number of shares of Common Stock to be covered by each Award, subject to the limitations contained herein; (c) subject to Section 15.8 of the Plan, to determine the terms and conditions of any Award, including, but not limited to, any vesting or other restrictions based on such continued employment, performance objectives and such other factors as the Committee may establish, and to determine whether the terms and conditions of the Award have been satisfied; (d) to determine the treatment of Awards upon an Employee’s retirement, disability, death, termination for cause or other termination of employment, or during a leave of absence or upon a Non-Employee Director’s termination of Relationship as allowed by law; (e) to determine, in establishing the terms of the Award agreement, that the Award holder has no rights with respect to any dividends declared with respect to any shares covered by an Award or that amounts equal to the amount of any dividends declared with respect to the number of shares covered by an Award; (f) to amend the terms of any Award, prospectively or retroactively, provided, however, that no amendment shall impair the rights of the Award holder without his or her written consent; (g) to determine the Fair Market Value of the Common Stock on a given date; (h) to adopt one or more sub-plans or appendices to Award agreements containing such provisions as may be necessary or desirable to enable Awards to comply with the laws of other jurisdictions and/or qualify for preferred tax treatment under such laws; and (i) to delegate such administrative duties as it may deem advisable to one or more of its members or to one or more Employees or agents.
3.2A Except for adjustments made pursuant to Sections 4.4 or 14.1 of the Plan, the Board or the Committee will not, without the further approval of the shareholders of the Company, authorize the amendment of any outstanding Stock Option or Stock Appreciation Right to reduce the exercise price. No Stock Option or Stock Appreciation Right will be cancelled and replaced with an Award having a lower exercise price, or for another Award, or for cash without further approval of the stockholders of the Company, except as provided in Sections 4.4 or 14.1. Furthermore, no Stock Option or Stock Appreciation Right will provide for the payment, at the time of exercise, of a cash bonus or grant or sale of another Award without further approval of the stockholders of the Company. This Section 3.2A is intended to prohibit the repricing of “underwater” Stock Options or Stock Appreciation Rights without shareholder approval and will not be construed to prohibit the adjustments provided for in Sections 4.4 or 14.1 of the Plan. 3.3 The Committee shall have the right to designate Awards as “performance Awards.” The grant or vesting of a performance Award shall be subject to the achievement of performance objectives established by the Committee based on such criteria as determined by the Committee, which may include (without limitation) one or more of the following criteria: sales, operating profits, operating profits before taxes, operating profits before interest expense and taxes, net earnings, earnings per share, return on equity, return on assets, return on invested capital, total shareholder return, cash flow, debt to equity ratio, market share, stock price, and shareholder, economic or market value added. As determined by the Committee, any performance objectives may be applied to the Company on a consolidated basis and/or to a business unit and may be used as an absolute measure, as a measure of improvement relative to prior performance, or as a measure of comparable performance relative to a peer group of companies. In establishing and measuring performance objectives for a performance period, the Committee may provide for appropriate adjustments to any performance measure for extraordinary and/or non-recurring items. The Committee may establish minimum, target and maximum performance targets, with the Award amount based on the level of the performance target(s) achieved. 3.4 All determinations and interpretations made by the Committee pursuant to the provisions of the Plan shall be final and binding on all persons, including the Company and Award holders. Determinations by the Committee under the Plan relating to the form, amount and terms and conditions of Awards need not be uniform and may be made selectively among persons who receive or are eligible to receive Awards, whether or not such persons are similarly situated. 3.5 No member of the Board or the Committee, nor any officer or Employee of the Company or its Subsidiaries acting on behalf of the Board or the Committee, shall be personally liable for any action, determination or interpretation taken or made with respect to the Plan or any Award hereunder. The Company shall indemnify all members of the Board and the Committee and all such officers and Employees acting on their behalf, to the extent permitted by law, from and against any and all liabilities, costs and expenses incurred by such persons as a result of any act, or omission to act, in connection with the performance of such persons’ duties, responsibilities and obligations under the Plan. SECTION 4. | Stock Subject to Plan |
4.1 Subject to adjustment as provided in Section 4.4, the total number of shares of Common Stock which may be issued under the Plan shall be 15,235,436 (all of which may be granted as Incentive Stock Options), which includes the original 4,635,436 shares reserved under the Plan as of December 19, 2008, the addition of 4,000,000 shares to the Plan as approved by shareholders on February 24, 2010, the addition of 3,900,000 shares to the Plan as approved by shareholders on February 26, 2014, and the addition of 2,700,000 shares to the Plan as of December 3, 2020, subject to approval of the shareholders. Such shares may consist of authorized but unissued shares or shares that have been issued and reacquired by the Company.
4.2 For the purposes hereof, the following shares of Common Stock covered by previously-granted Awards shall be deemed not to have been issued under the Plan and will remain available for Awards: (a) shares of Common Stock covered by an Award that expires or is forfeited, canceled, surrendered, or otherwise terminated without the issuance of such shares; (b) shares of Common Stock covered by an Award that is settled only in cash; and (c) Substitute Awards (except as may be required by reason of the rules and regulations of any stock exchange or other trading market on which the Shares are listed). The following shares of Common Stock may not again be made available for issuance as Awards: (i) shares of Common Stock tendered in payment of the exercise price of a Stock Option; (ii) shares of Common Stock withheld by the Company or any Subsidiary to satisfy a tax withholding obligation with respect to an Award; and (iii) shares of Common Stock that are repurchased by the Company with Stock Option proceeds. Without limiting the foregoing, with respect to any Stock Appreciation Right that is settled in shares of Common Stock, the full number of shares subject to the Award shall count against the number of shares available for Awards under the Plan regardless of the number of shares used to settle the Stock Appreciation Right upon exercise. 4.3 No Employee shall be granted Stock Options and/or Stock Appreciation Rights with respect to more than 750,000 shares of Common Stock in any fiscal year, and no Employee shall be granted Restricted Stock, Restricted Stock Units and/or Bonus Stock with respect to more than 500,000 shares of Common Stock in any fiscal year, subject to adjustment as provided in Section 4.4. 4.4 In the event of any recapitalization, stock dividend, extraordinary cash dividend, stock split, spin-off, split-up, split-off, distribution of assets or other change in corporate structure affecting the Common Stock such that an adjustment is determined by the Board in its discretion to be appropriate in order to prevent dilution or enlargement of benefits under the Plan, then the Committee shall, in such a manner as it may in its discretion deem equitable, cause there to be an equitable adjustment in the number and kind of shares of Common Stock specified in Section 4.1 of the Plan and, with respect to outstanding Awards, in the number and kind of shares of Common Stock subject to outstanding Awards and the exercise price or other price of shares subject to outstanding Awards, in each case to prevent dilution or enlargement of the rights of participants. In the event of any merger, consolidation, liquidation, or similar transaction, the Committee may, in its sole discretion, cause there to be an equitable adjustment as described in the foregoing sentence, to prevent dilution or enlargement of rights and may provide in substitution for any or all outstanding Awards such alternative consideration (including cash or other property) as it, in good faith, may determine to be equitable in the circumstances, and may require in connection therewith the surrender of all Awards so replaced. Notwithstanding the foregoing, the Committee shall not make any adjustment pursuant to this Section 4.4 that would cause an Award that is otherwise exempt from Section 409A of the Code to become subject to Section 409A or to cause an Award that is subject to Section 409A of the Code to fail to satisfy the requirements of Section 409A. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on all persons. 4.5 No fractional shares shall be issued or delivered under the Plan. The Committee shall determine whether the value of fractional shares shall be paid in cash or other property, or whether such fractional shares and any rights thereto shall be cancelled without payment.
5.1 The persons who are eligible for Awards under Sections 6, 7, 8, 9, and 10 of the Plan are Employees, officers and directors of the Company or of any Subsidiary of the Company. In addition, Awards under such Sections may be granted to prospective Employees, officers or directors, but such Awards shall not become effective until the recipient’s commencement of employment or service with the Company or a Subsidiary. Incentive Options may be granted only to Employees and prospective Employees, but such Awards shall not become effective until the recipient’s commencement of employment or service with the Company or a Subsidiary. Award recipients under the Plan shall be selected from time to time by the Committee, in its sole discretion, from among those eligible. 5.2 Non-Employee Directors shall be granted Awards under Section 12 in addition to any Awards which may be granted to them under other Sections of the Plan.
6.1 The Stock Options granted to eligible persons under the Plan may be of two types: (a) Incentive Options, and (b) Non-Qualified Options. To the extent that any Stock Option granted to an Employee does not qualify as an Incentive Option, it shall constitute a Non-Qualified Option. All Stock Options granted to persons who are not Employees shall be Non-Qualified Options. 6.2 Subject to the following provisions, Stock Options granted under Section 6 of the Plan shall be in such form and shall have such terms and conditions as the Committee may determine. (a)Option Price. The option price per share of Common Stock purchasable under a Stock Option (other than a Substitute Award) shall be determined by the Committee and may not be less than the Fair Market Value of the Common Stock on the date of grant of the Stock Option (or, with respect to Awards to prospective Employees, on the first date of employment). (b)Option Term. Unless otherwise provided by the Committee in the applicable Award agreement, the term of each Stock Option shall be fixed by the Committee and shall not exceed ten years. (c)Exercisability. Stock Options shall be exercisable and shall vest at such time or times and subject to such terms and conditions as shall be determined by the Committee, subject to the minimum vesting provisions of Section 15.8 of the Plan. (d)Method of Exercise. Stock Options may be exercised in whole or in part at any time during the Option Period by giving the Company notice of exercise in the form approved by the Committee (which may be written or electronic) specifying the number of whole shares to be purchased, accompanied by payment of the aggregate option price for such shares. Payment of the option price shall be made in such manner as the Committee may provide in the Award agreement, which may include (i) cash (including cash equivalents), (ii) delivery of shares of Common Stock already owned by the Optionee, (iii) by a cashless exercise (including by withholding shares deliverable upon exercise or through a broker-assisted arrangement to the extent permitted by applicable laws), (iv) any other manner permitted by law, or (v) any combination of the foregoing.
(e)No Shareholder Rights. An Optionee shall have no rights to dividends or other rights of a shareholder with respect to shares subject to a Stock Option until the Optionee has duly exercised the Stock Option and a certificate for such shares has been duly issued (or the Optionee has otherwise been duly recorded as the owner of the shares on the books of the Company). Moreover, no dividend equivalents may be granted under the Plan with respect to the shares of Common Stock underlying any Stock Option. (f)Termination of Employment or Relationship. Following the termination of an Optionee’s employment or other Relationship with the Company or its Subsidiaries, the Stock Option shall be exercisable to the extent determined by the Committee. The Committee may provide different post-termination exercise provisions which may vary based on the nature of and reason for the termination. The Committee shall have absolute discretion to determine the date and circumstances of any termination of employment or other Relationship. (g)Non-transferability. Unless otherwise provided by the Committee in the applicable Award agreement, (i) Stock Options shall not be transferable by the Optionee other than by will or the laws of descent and distribution, and (ii) during the Optionee’s lifetime, all Stock Options shall be exercisable only by such Optionee. The Committee, in its sole discretion, may permit Stock Options to be transferred to such other transferees and on such terms and conditions as may be determined by the Committee; provided, however, that in no event shall the Committee permit a Stock Option to be transferred for consideration. 6.3 Notwithstanding the provisions of Section 6.2, Incentive Options shall be subject to the following additional restrictions: (a)Option Term. No Incentive Option shall be exercisable more than ten years after the date such Incentive Option is granted. (b)Additional Limitations for 10% Shareholders. No Incentive Option granted to an Employee who owns more than 10% of the total combined voting power of all classes of stock of the Company or any of its parent or subsidiary corporations, as defined in Section 424 of the Code, shall (i) have an option price which is less than 110% of the Fair Market Value of the Common Stock on the date of grant of the Incentive Option, or (ii) be exercisable more than five years after the date such Incentive Option is granted. (c)Exercisability. The aggregate Fair Market Value (determined as of the time the Incentive Option is granted) of the shares with respect to which Incentive Options (granted under the Plan and any other plans of the Company, its parent corporation or subsidiary corporations, as defined in Section 424 of the Code) are exercisable for the first time by an Optionee in any calendar year shall not exceed $100,000. Any Stock Options in excess of such $100,000 limitation shall be treated as Non-Qualified Options.
(d)Notice of Disqualifying Disposition. An Optionee’s right to exercise an Incentive Option shall be subject to the Optionee’s agreement to notify the Company of any “disqualifying disposition” (for purposes of Section 422 of the Code) of the shares acquired upon such exercise. (e)Non-transferability. Incentive Options shall not be transferable by the Optionee, other than by will or by the laws of descent and distribution. During the Optionee’s lifetime, all Incentive Options shall be exercisable only by such Optionee. (f)Last Grant Date. No Incentive Option shall be granted more than ten years after the earlier of the date of adoption or re-adoption of the Plan, as applicable, by the Board or approval of the Plan by the Company’s shareholders. The Committee may, with the consent of the Optionee, amend an Incentive Option in a manner that would cause loss of Incentive Option status, provided the Stock Option as so amended satisfies the requirements of Section 6.2. SECTION 7. | Stock Appreciation Rights |
7.1 A Stock Appreciation Right shall entitle the holder thereof to receive, for each share as to which the Award is granted, payment of an amount, in cash, shares of Common Stock, or a combination thereof, as determined by the Committee, equal in value to the excess of the Fair Market Value of a share of Common Stock on the date of exercise over the Fair Market Value of a share of Common Stock on the day such Stock Appreciation Right was granted. Any such Award shall be in such form and shall have such terms and conditions as the Committee may determine, subject to the minimum vesting provisions of Section 15.8 of the Plan. Unless otherwise provided by the Committee in the applicable Award agreement, the term of each Stock Appreciation Right shall not exceed ten years. The grant shall specify the number of shares of Common Stock as to which the Stock Appreciation Right is granted. No dividend equivalents may be granted under the Plan with respect to the shares of Common Stock underlying any Stock Appreciation Right. SECTION 8. | Restricted Stock |
Subject to the following provisions, all grants of Restricted Stock shall be in such form and shall have such terms and conditions as the Committee may determine: (a) The Restricted Stock agreement shall specify the number of shares of Restricted Stock to be granted, the price, if any, to be paid by the recipient of the Restricted Stock and the date or dates on which, or the conditions upon the satisfaction of which, the Restricted Stock will vest. The grant and/or the vesting of Restricted Stock may be conditioned upon the completion of a specified period of service with the Company and/or its Subsidiaries, upon the attainment of specified performance objectives, or upon such other criteria as the Committee may determine, in each case subject to the minimum vesting provisions of Section 15.8 of the Plan. (b) Stock certificates or book entry shares representing the Restricted Stock granted under the Plan shall be registered in the Award holder’s name, but the Committee may direct that any such certificates, if applicable, be held by the Company on behalf of the Award holder. Except as may be permitted by the Committee, no share of Restricted Stock may be sold, transferred, assigned, pledged or otherwise encumbered by the Award holder until such share has vested in accordance with the terms of the Restricted Stock agreement. At the time Restricted Stock vests, such vested shares shall be delivered (via stock certificate or book entry) to the Award holder (or his or her designated beneficiary in the event of death), free of such restriction.
(c) The Committee may provide that the Award holder shall have the right to vote and/or receive dividends on Restricted Stock; provided, however, that any dividends with respect to unvested Restricted Stock shall be accumulated or deemed reinvested in additional Restricted Stock (as determined by the Committee in its sole discretion and set forth in the applicable Award agreement), subject to the same terms and conditions as the original Award until such Award is earned and vested. (d) Except as may be provided by the Committee, in the event of an Award holder’s termination of employment or other Relationship before all of his or her Restricted Stock has vested, or in the event any conditions to the vesting of Restricted Stock have not been satisfied prior to any deadline for the satisfaction of such conditions set forth in the Award agreement, the shares of Restricted Stock which have not vested shall be forfeited, and the Committee may provide that (i) any purchase price paid by the Award holder shall be returned to the Award holder, or (ii) a cash payment equal to the Restricted Stock’s Fair Market Value on the date of forfeiture, if lower, shall be paid to the Award holder. SECTION 9.
| Restricted Stock Units (RSUs) |
Subject to the following provisions, all grants of Restricted Stock Units shall be in such form and shall have such terms and conditions as the Committee may determine: (a) The Restricted Stock Unit agreement shall specify the number of shares of Common Stock to be paid and the duration of the period (the “Vesting Period”) during which, and the conditions under which, receipt of the underlying Common Stock will be deferred. The Committee may condition the grant or vesting of RSUs, or receipt of Common Stock or cash at the end of the Vesting Period, upon the completion of a specified period of service with the Company and/or its Subsidiaries, upon the attainment of specified performance objectives, or upon such other criteria as the Committee may determine, in each case subject to the minimum vesting provisions of Section 15.8 of the Plan. (b) Except as may be provided by the Committee, RSUs may not be sold, assigned, transferred, pledged or otherwise encumbered during the Vesting Period. (c) At the expiration of the Vesting Period, as soon as administratively practical and in no event later than two and one-half months following the end of the Vesting Period, the Award holder (or his or her designated beneficiary, if applicable) shall receive (i) certificates for the appropriate number of shares of Common Stock designated by the RSU agreement, (ii) cash equal to the Fair Market Value of such Common Stock, or (iii) a combination of shares and cash, as the Committee may determine. (d) Except as may be provided by the Committee, in the event of an Award holder’s termination of employment or other Relationship before the RSU has vested, such Award shall be forfeited.
(e) RSUs may provide the Award holder with dividend equivalents, payable on a contingent basis and either in cash or in additional shares of Common Stock, as determined by the Committee in its sole discretion and set forth in the related Award agreement; provided, however, that any dividend equivalents with respect to unvested RSUs shall be accumulated or deemed reinvested, subject to the same terms and conditions as the original RSUs until such Award is earned and vested. The Committee may grant Bonus Stock to any eligible Award recipient subject to such terms and conditions as the Committee shall determine. The grant of Bonus Stock may, but need not, be conditioned upon the attainment of specified performance objectives or upon such other criteria as the Committee may determine, subject to the minimum vesting provisions of Section 15.8 of the Plan. Unless otherwise specified by the Committee, no money shall be paid by the recipient for the Bonus Stock. Alternatively, the Committee may, after considering any accounting impact to the Company, offer eligible Employees the opportunity to purchase Bonus Stock at a discount from its Fair Market Value. The Bonus Stock may be satisfied by the delivery of the designated number of shares of Common Stock which are not subject to restriction. Bonus Stock may provide the Award holder with dividend equivalents, payable on a contingent basis and either in cash or in additional shares of Common Stock, as determined by the Committee in its sole discretion and set forth in the related Award agreement; provided, however, that any dividend equivalents with respect to unvested Bonus Stock shall be accumulated or deemed reinvested, subject to the same terms and conditions as the original Bonus Stock terms, until such Award is earned and vested. SECTION 11.
| Election to Defer |
To the extent permitted by Section 409A of the Code, the Committee may permit an Award recipient to elect to defer payment of an Award other than a Stock Option for a specified period or until a specified event, upon such terms as are determined by the Committee. An Award holder may elect to defer the distribution date of the payout of Restricted Stock Units or Bonus Stock, provided that such election is made and delivered to the Company in compliance with Section 409A of the Code, when applicable. SECTION 12.
| Non-Employee Director Awards |
The Board shall have the discretion to determine the number and types of Awards to be granted to Non-Employee Directors and the terms of such Awards, including but not limited to the exercisability and the effect of a director’s termination of service, in each case subject to the minimum vesting provisions of Section 15.8 of the Plan. Notwithstanding any other provision of the Plan to the contrary, the aggregate grant date fair value (determined as of the applicable date(s) of grant in accordance with applicable financial accounting rules) of all Awards granted to any Non-Employee Director during any single calendar year for services as a director, taken together with any cash fees payable to such person during such calendar year (excluding any amounts payable for service as a Board or committee chairperson), shall not exceed $600,000.
SECTION 13.
| Tax Withholding |
13.1 Each Award holder shall, no later than the date as of which an amount with respect to an Award first becomes includible in such person’s gross income for applicable tax purposes, pay to the Company, or make arrangements satisfactory to the Committee regarding payment of, any federal, state, local or other taxes of any kind required by law to be withheld with respect to the Award. The obligations of the Company under the Plan shall be conditional on such payment or arrangements. The Company (and, where applicable, its Subsidiaries) shall, to the extent permitted by law, have the right to deduct any applicable tax withholdings from any such taxes from any payment of any kind otherwise due to the Award holder. 13.2 To the extent permitted by the Committee, and subject to such terms and conditions as the Committee may provide, an Employee may elect to have any applicable tax withholdings with respect to any Awards hereunder, satisfied by (a) having the Company withhold shares of Common Stock otherwise deliverable to such person with respect to the Award; (b) delivering to the Company shares of unrestricted Common Stock already owned by the Employee; (c) broker-assisted “cashless exercise;” (d) any other manner permitted by law; or (e) any combination of the foregoing. Alternatively, the Committee may require that a portion of the shares of Common Stock otherwise deliverable be applied to satisfy the withholding tax obligations with respect to the Award. In no event will the value of the shares of Common Stock to be withheld or tendered pursuant to this Section 13 to satisfy applicable withholding taxes exceed the amount of taxes required to be withheld based on the maximum statutory tax rates in the applicable taxing jurisdictions. SECTION 14.
| Change in Control |
14.1In the event of a Change in Control, unless otherwise provided under the terms of any applicable change in control agreement between the Company and an Award holder, and notwithstanding anything in Section 15.8 of the Plan to the contrary: (a) subject to Section 14.1(c) below, all outstanding Stock Options and all outstanding Stock Appreciation Rights awarded under the Plan shall become fully exercisable and vested; (b) subject to Section 14.1(c) below, the restrictions and vesting conditions applicable to any outstanding Restricted Stock, Restricted Stock Unit and Bonus Stock awards under the Plan shall lapse and such shares and awards shall be deemed fully vested; (c)any Awards with respect to which the number of shares of Common Stock earned depends upon performance shall vest based on the greater of: (i) an assumed achievement of all relevant performance goals at their “target” level, or (ii) the actual level of achievement of all relevant performance goals against target measured through the date immediately prior to the Change in Control (or as close to such date as administratively practicable); (d) the Committee may, in its sole discretion, accelerate the payment date of all Restricted Stock Unit awards to the extent permitted under Section 409A of the Code;
(e) the Committee may, in its sole discretion and without the consent of Award holders, provide that any outstanding and vested Award (or a portion thereof), including those that vest by reason of this Section 14.1, shall, upon the occurrence of such Change in Control, be cancelled in exchange for a payment in cash or other property (including shares of the resulting entity in connection with a Change in Control) in an amount equal to the excess, if any, of the Fair Market Value of the shares subject to the Award, over any exercise price related to the Award, which amount may be zero if the Fair Market Value of a share does not exceed the exercise price per share of the applicable Awards.
14.2A “Change in Control” shall be deemed to occur on: (a) the date that any person, corporation, partnership, syndicate, trust, estate or other group acting with a view to the acquisition, holding or disposition of securities of the Company, becomes, directly or indirectly, the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of securities of the Company representing 35% or more of the voting power of all securities of the Company having the right under ordinary circumstances to vote at an election of the Board (“Voting Securities”), other than by reason of (i) the acquisition of securities of the Company by the Company or any of its Subsidiaries or any employee benefit plan of the Company or any of its Subsidiaries, or (ii) the acquisition of securities of the Company directly from the Company; (b) the consummation of a merger or consolidation of the Company with another corporation unless; (i) the shareholders of the Company, immediately prior to the merger or consolidation, beneficially own, immediately after the merger or consolidation, shares entitling such shareholders to 50% or more of the voting power of all securities of the corporation surviving the merger or consolidation having the right under ordinary circumstances to vote at an election of directors in substantially the same proportions as their ownership, immediately prior to such merger or consolidation, of Voting Securities of the Company; (ii) no person, corporation, partnership, syndicate, trust, estate or other group beneficially owns, directly or indirectly, 35% or more of the voting power of the outstanding voting securities of the corporation resulting from such merger or consolidation except to the extent that such ownership existed prior to such merger or consolidation; and (iii) the members of the Company’s Board, immediately prior to the merger or consolidation, constitute, immediately after the merger or consolidation, a majority of the board of directors of the corporation issuing cash or securities in the merger; (c) the date on which individuals who at the beginning of the 24-month period ending on such date constituted the entire Board (“Current Directors”) shall cease for any reason to constitute a majority of the Board, unless the nomination or election of each new director was approved by a majority vote of the Current Directors; (d)the consummation of a sale or other disposition of all or substantially all (i.e., 50% or more) of the assets of the Company in one transaction or a series of transactions within any period of 12 consecutive months; or
(e) the date of approval by the shareholders of the Company of a plan of complete liquidation of the Company. Notwithstanding any other provision of this Section to the contrary, to the extent an Award is subject to Section 409A of the Code, then to the extent required to comply with Section 409A of the Code, an occurrence shall not constitute a Change in Control if it does not constitute a change in the ownership or effective control, or in the ownership of a substantial portion of the assets of, the Company or another allowable acceleration event under Section 409A of the Code and its interpretive regulations. 14.3 This Section 14 shall apply only to Awards granted on and after the Shareholder Approval Date. All Awards granted prior to the Shareholder Approval Date shall be subject to the applicable change in control provisions of the Plan as in effect before the Shareholder Approval Date. SECTION 15.
| General Provisions |
15.1 Each Award shall be subject to the requirement that, if at any time the Committee shall determine that (a) the listing, registration or qualification of the Common Stock subject or related thereto upon any securities exchange or market or under any state or federal law, or (b) the consent or approval of any government regulatory body, or (c) an agreement by the recipient of an Award with respect to the disposition of Common Stock, is necessary or desirable in order to satisfy any legal requirements, or (d) the issuance, sale or delivery of any shares of Common Stock is or may in the circumstances be unlawful under the laws or regulations of any applicable jurisdiction, the right to exercise such Stock Option shall be suspended, such Award shall not be granted and such shares will not be issued, sold or delivered, in whole or in part, unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Committee, and the Committee determines that the issuance, sale or delivery of the shares is lawful. The application of this Section shall not extend the term of any Stock Option or other Award. The Company shall have no obligation to effect any registration or qualification of the Common Stock under federal or state laws or to compensate the Award holder for any loss caused by the implementation of this Section 15.1. 15.2 Any Award shall be subject to forfeiture or repayment pursuant to the terms of any applicable compensation recovery policy maintained by the Company from time to time, including any such policy that may be maintained to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act or any rules or regulations issued by the SEC or applicable securities exchange. In addition, the Committee may provide, at the time of grant or by amendment with the Award holder’s consent, that an Award and/or Common Stock acquired under the Plan shall be forfeited, including after exercise or vesting, if within a specified period of time the Award holder engages in any of the following disqualifying conduct: (a) the Award holder’s performance of service for a competitor of the Company and/or its Subsidiaries, including service as an employee, director or consultant, or the establishing by the Award holder of a business which competes with the Company and/or its Subsidiaries; (b) the Award holder’s solicitation of employees or customers of the Company and/or its Subsidiaries; (c) the Award holder’s improper use or disclosure of confidential information of the Company and/or its Subsidiaries; or (d) material misconduct by the Award holder in the performance of such Award holder’s duties for the Company and/or its Subsidiaries, as determined by the Committee.
15.3 Nothing set forth in this Plan shall prevent the Board or Committee from adopting other or additional compensation arrangements. 15.4 Nothing in the Plan nor in any Award hereunder shall confer upon any Award holder any right to continuation of his or her employment by or other Relationship with the Company or its Subsidiaries or interfere in any way with the rights of any such company to terminate such employment or other Relationship. 15.5 Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or Subsidiary and an Award recipient, and no Award recipient will, by participation in the Plan, acquire any right in any specific Company property, including any property the Company may set aside in connection with the Plan. To the extent that any Award recipient acquires a right to receive payments from the Company or any Subsidiary pursuant to an Award, such right shall not be greater than the right of an unsecured general creditor of the Company or its Subsidiaries. 15.6 Except to the extent preempted by United States federal law or as otherwise expressly provided herein, the Plan and all Awards shall be interpreted in accordance with and governed by the internal laws of the State of Indiana without giving effect to any choice or conflict of law provisions, principles or rules. 15.7 The Plan and all Awards shall be interpreted and applied in a manner consistent with the applicable standards for nonqualified deferred compensation plans established by Code Section 409A and its interpretive regulations and other regulatory guidance. To the extent that any terms of the Plan or an Award would subject an Employee to gross income inclusion, interest or additional tax pursuant to Code Section 409A, those terms are to that extent superseded by, and shall be adjusted to the minimum extent necessary to satisfy or to be exempt from, the Code Section 409A standards. If as of the date Employee’s employment terminates, an Employee is a “key employee,” within the meaning of Code Section 416(i), without regard to paragraph 416(i)(5), and if the Company has stock that is publicly traded on an established securities market or otherwise, any payment of deferred compensation, within the meaning of Code Section 409A, otherwise payable because of employment termination will be suspended until, and will be paid to the Employee on, the first day of the seventh month following the month in which the Employee’s last day of employment occurs. 15.8 Notwithstanding any other provision of the Plan to the contrary, all Awards granted on and after the Shareholder Approval Date shall vest or become exercisable no earlier than the first anniversary of the date of grant of the Award (excluding, for this purpose, any (a) Substitute Awards, and (b) Awards to Non-Employee Directors that vest on the earlier of the one year anniversary of the date of grant or the next annual meeting of shareholders (provided that such vesting period may not be less than 50 weeks after grant)); provided, however, that the Committee may grant Awards without regard to the foregoing minimum vesting requirement with respect to a maximum of five percent (5%) of the shares of Common Stock remaining available for issuance under the Plan under Section 4.1 as of the Shareholder Approval Date (subject to adjustment thereafter under Section 4.4); and, provided further that the foregoing restriction does not apply to the Committee’s discretion to provide for accelerated exercisability or vesting of any Award as provided in Section 3.2(d) of the Plan, by the terms of the Award agreement or otherwise.
15.9 Adjustments. (a) Except as otherwise provided in any award agreement or in any applicable change in control agreement between the Company and an Award recipient, if any payment or benefit resulting from an Award under the Plan or otherwise, including accelerated vesting of any equity compensation (all such payments and/or benefits hereinafter, “Payment”), would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be either (x) provided to the recipient in full, or (y) provided to the recipient to such lesser extent which would result in no portion of such Payment being subject to the excise tax, further reduced by $5,000 (including such further reduction, the “Cutback Amount”), whichever of the foregoing amounts, when taking into account applicable federal, state, local and foreign income and employment taxes, such excise tax and other applicable taxes, (all computed at the highest applicable marginal rates), results in the receipt by the recipient, on an after-tax basis, of the greatest amount of the Payment, notwithstanding that all or a portion of such Payment may be subject to the excise tax. If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment equals the Cutback Amount, reduction shall occur in the following order: (A) cash payments of accelerated Awards under the Plan shall be reduced first and in reverse chronological order such that the cash payment owed on the latest date following the occurrence of the event triggering such excise tax will be the first cash payment to be reduced; (B) accelerated vesting of performance-based equity Awards shall be cancelled or reduced next and in the reverse order of the date of grant for such Awards (i.e., the vesting of the most recently granted Awards will be reduced first), with Full Value Awards reduced before any performance-based stock option or stock appreciation rights are reduced; and (C) accelerated vesting of time-based equity Awards shall be cancelled or reduced last and in the reverse order of the date of grant for such Awards (i.e., the vesting of the most recently granted Awards will be reduced first), with Full Value Awards reduced before any time-based stock option or stock appreciation rights are reduced. (b) The Company shall appoint a nationally recognized accounting firm to make the determinations required hereunder and perform the foregoing calculations. The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder. The accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Company and the Award recipient within fifteen (15) calendar days after the date on which right to a Payment is triggered (if requested at that time by the Company or recipient). Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon the Company and the recipient.
SECTION 16.
| Amendments and Termination |
16.1 The Plan shall terminate at the close of business on December 1, 2030. The Board may discontinue the Plan at any time prior to the date referenced in the prior sentence and may amend it from time to time. No amendment or discontinuation of the Plan shall adversely affect any Award previously granted without the Award holder’s written consent. Amendments may be made without shareholder approval except as required to satisfy applicable laws or regulations or the requirements of any stock exchange or market on which the Common Stock is listed or traded.
16.2 The Committee may amend the terms of any Award prospectively or retroactively; provided, however, that no amendment shall impair the rights of the Award holder without his or her written consent. SECTION 17.
| Effective Date of Plan |
17.1 This revised version of the Plan was approved and adopted by the Board on December 3, 2020, and is to be effective as of such date, and is to amend, restate, supersede, and replace prior versions of the Plan adopted by the Board, contingent upon the approval thereof by the shareholders of the Company within 12 months following the adoption by the Board.
* * * * * *
| | HILLENBRAND, INC. ONE BATESVILLE BOULEVARD
BLVD BATESVILLE, IN 47006 | VOTE BY INTERNET - www.proxyvote.com | Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. ET on 02/13/2019.10/2021. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. | | ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS | If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. | | VOTE BY PHONE - 1-800-690-6903 | Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. ET on 02/13/2019.10/2021. Have your proxy card in hand when you call and then follow the instructions. | | VOTE BY MAIL | Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
| | | TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | | |
| KEEP THIS PORTION FOR YOUR RECORDS | | THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
| | | | For
All | Withhold
All | | | | | | | | | | | |
| For All | Withhold All | For All Except | | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | | | | | | | | The Board of Directors recommends you vote FOR the following: | | | | | | | | | | | | | | | ☐ | ☐ | ☐ | | | | | | | | 1.
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| | | | | | | | | | | | | | | | | | | | | | | | | | | 1. | Election of Directors - Election of these Directors is for three-year terms expiring in 2024. | | | | | | | | | | | | | | | | | | | | | | | | | | | | Nominees | Nominees | | | | | | | | | | | | | |
| | | | | | | | | | | | | | 01 Gary L. Collar* 02 Joy M. Greenway* 03 F. Joseph Loughrey* 04 Daniel C. Hillenbrand** | 01) | Helen W. Cornell 02) Jennifer W. Rumsey 03) Stuart A. Taylor, II | | | | | | | | | | | | | | | | | | | The Board of Directors recommends you vote FOR Proposalsproposals 2, 3 and 3.4: | | For | Against | AbstainFor | Against | Abstain | | | | | | | | | | | | | | | | 2.
| 2. | To approve, by a non-binding advisory vote, the compensation paid by the Company to its Named Executive Officers. | | | ☐ | ☐ | ☐ | | | | | | | | | | | | | | | | 3.
| 3. | To approve the amendment and restatement of the Company's Stock Incentive Plan. | | ☐ | ☐ | ☐ | | | | | | | | | | | | | 4. | To ratify the appointment of PricewaterhouseCoopersErnst & Young LLP as the Company’sCompany's independent registered public accounting firm for fiscal year 2019.2021. | | | ☐ | ☐ | ☐ | | | | | | | | | | | | | | | | | NOTE: Such other business as may properly come before the meeting or any adjournment thereof. | | | | | | | *Election of these Directors is for three-year terms expiring in 2022.
**Election of this Director is for a one-year term expiring in 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Yes | No | | | | | | | | | | | | | | | | | | | | | | | | Please indicate if you plan to attend this meeting
| | ☐ | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX] | Date | | | | | Signature (Joint Owners) | Date | | | | | | | | | | | | | | | | | | | | |
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HILLENBRANDHILLENBRAND, INC., INC.
| 20192021 ANNUAL MEETING OF SHAREHOLDERS ADMISSION TICKET
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You are cordially invited to attend the Annual Meeting of Shareholders on Thursday, February 14, 2019. The Meeting will be held at the Company’s headquarters at One Batesville Boulevard, Batesville, Indiana 47006, at 10:00 a.m. Eastern Standard Time.
| | (Please detach this ticket from your proxy card and bring it with you as identification. Directions to the meeting site are included on this ticket for your convenience. The use of an Admission Ticket is for our mutual convenience, however, your right to attend without an Admission Ticket, upon proper identification, is not affected.)
| | Shareholders are cordially invited to attend the Annual Meeting of shareholders on Thursday, February 11, 2021. The Meeting will be held at the Company's headquarters at One Batesville Boulevard, Batesville, Indiana 47006, at 10:00 a.m., Eastern Standard Time. (Please detach this ticket from your proxy card and bring it as identification. Directions to the meeting site are included on this ticket for convenience. The use of an Admission Ticket is for mutual convenience; however, the right to attend without an Admission Ticket, upon proper identification, is not affected.) Nicholas R. Farrell | Secretary
| | (FOR THE PERSONAL USE OF THE NAMED SHAREHOLDER(S) ON THE BACK – NOT TRANSFERABLE.)
| | Directions to Hillenbrand, Inc.
| | Hillenbrand, Inc. is located between Cincinnati, Ohio and Indianapolis, Indiana. Shareholders traveling from the Cincinnati area should take I-74 West toward Indianapolis to Exit 149 (Batesville), and turn left off the exit ramp. Go straight through the first stop light to the next light and turn left at the intersection of State Road 229 and Highway 46.
| | Shareholders traveling from the Indianapolis area should take I-74 East toward Cincinnati to Exit 149 (Batesville), and turn right off the exit ramp. Go to the first stop light and turn left at the intersection of State Road 229 and Highway 46.
| | To reach Hillenbrand, Inc.’s headquarters, travel on Highway 46, go through three stop lights and turn left onto One Batesville Boulevard. Hillenbrand, Inc. is the second office building on One Batesville Boulevard.
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Secretary(FOR THE PERSONAL USE OF THE NAMED SHAREHOLDER(S) ON THE BACK – NOT TRANSFERABLE) Directions to Hillenbrand, Inc. Hillenbrand, Inc. is located between Cincinnati, Ohio and Indianapolis, Indiana. Shareholders traveling from the Cincinnati area should take 1-74 West toward Indianapolis to Exit 149 (Batesville) and turn left off the exit ramp. Go straight through the first stop light to the next light and turn left at the intersection of State Road 229 and Highway 46. Shareholders traveling from the Indianapolis area should take 1-74 East toward Cincinnati to Exit 149 (Batesville) and turn right off the exit ramp. Go to the first stop light and turn left at the intersection of State Road 229 and Highway 46. To reach Hillenbrand, Inc.'s headquarters, travel on Highway 46 through three stop lights and turn left onto Batesville Boulevard. Hillenbrand, Inc. is the second office building on Batesville Boulevard. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice &and Proxy Statement and Annual Report are available at www.proxyvote.com.
| | | | | | | | | This Proxy and Voting Instruction is solicited on behalf of the Board of Directors for the Annual Meeting of
Shareholders on February 14, 201911, 2021
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| | | | | | | The undersigned appoints F. Joseph Loughrey and Joe A. Raver, or either of them, with full power of substitution, as proxies to vote all the shares of the undersigned of Hillenbrand, Inc. (the “Company”"Company") at the Annual Meeting of Shareholders to be held at the Company’sCompany's headquarters, One Batesville Boulevard, Batesville, Indiana 47006-7798, on February 14, 2019,11, 2021, at 10:00 a.m., local time (Eastern Standard Time), and any adjournments of the meeting, on the matters listed on the reverse. | | | | | | SIGNED PROXIES RETURNED WITHOUT SPECIFIC VOTING DIRECTIONS WILL BE VOTED: (1) in favor of the election of the Board of Directors’Directors' nominees for fourthree directors; (2) for approval ofTo approve, by a non-binding advisory vote, the compensation paid by the Company to its Named Executive Officers; (3) in favorTo approve the amendment and restatement of the ratification ofCompany’s Stock Incentive Plan; (4) To ratify the appointment of PricewaterhouseCoopersErnst & Young LLP as the Company’s independent registered public accounting firm of the Company for fiscal year 2019;2021; and (4)(5) in the discretion of the proxy holders upon such other business as may properly come before the Annual Meeting. | | | | | | This proxy may be revoked at any time before it is exercised. | | | | | |
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| | | | Continued and to be signed on reverse side | | | | | | | |
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0000477745_2 R1.0.1.18
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