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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrantx
Filed by a Party other than the Registranto
Check the appropriate box:
o | Preliminary Proxy Statement. | |
o | CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2)). | |
x | Definitive Proxy Statement. | |
o | Definitive Additional Materials. | |
o | Soliciting Material Pursuant to Section 240.14a-12 |
Hillenbrand Industries, Inc.
Payment of Filing Fee (check the appropriate box):
x | No fee required. | |||
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
1) | Title of each class of securities to which transaction applies: | |||
2) | Aggregate number of securities to which transaction applies: | |||
3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |||
4) | Proposed maximum aggregate value of transaction: | |||
5) | Total fee paid: | |||
o | Fee paid previously with preliminary materials. | |||
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
1) | Amount Previously Paid: | |||
2) | Form, Schedule or Registration Statement No.: | |||
3) | Filing Party: | |||
4) | Date Filed: | |||
PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
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(1) | To elect four members to the Board of Directors; | ||
(2) | To ratify the appointment of PricewaterhouseCoopers LLP as independent auditors of Hillenbrand Industries, Inc.; and | ||
(3) | To transact such other business as may properly come before the meeting and any adjournment of the meeting. |
By Order of the Board of Directors | ||||
Patrick D. de Maynadier | ||||
Secretary |
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Shares(1) | ||||||||||
Served As A | Beneficially Owned As Of | Percent of Total | ||||||||
Name | Age | Principal Occupation | Director Since | December 16, 2005 | Shares Outstanding | |||||
Rolf A. Classon | 60 | Interim President and Chief | 2002 | 12,281(2) | (3) | |||||
Executive Officer of the Company | ||||||||||
Charles E. Golden | 59 | Executive Vice President and | 2002 | 12,988(2) | (3) | |||||
Chief Financial Officer of Eli | ||||||||||
Lilly and Company | ||||||||||
W August Hillenbrand | 65 | Retired Chief Executive Officer | 1972 | 3,270,570(2)(4)(5) | 5.3% | |||||
of the Company | ||||||||||
Eduardo R. Menascé | 60 | Retired President, Enterprise | 2004 | 1,830(2) | (3) | |||||
Solutions Group, | ||||||||||
Verizon Communications |
Shares(1) | ||||||||||||||
Served As A | Beneficially Owned As Of | Percent of Total | ||||||||||||
Name | Age | Principal Occupation | Director Since | December 16, 2005 | Shares Outstanding | |||||||||
Ray J. Hillenbrand | 71 | Chairman of the Board of the Company | 1970 | 508,143(2)(4)(6) | (3) | |||||||||
Mark D. Ketchum | 56 | Interim Chief Executive Officer and President of Newell Rubbermaid, Inc. | 2004 | 1,830(2) | (3) | |||||||||
Anne Griswold Peirce | 54 | Associate Dean for Academic Affairs and Associate Professor of Clinical Nursing at Columbia University School of Nursing | 2003 | 3,409(2)(7) | (3) | |||||||||
Peter H. Soderberg | 59 | President and Chief Executive Officer of Welch Allyn, Inc. | 2002 | 11,781(2) | (3) |
Shares (1) | ||||||||||||||||
Served As A | Beneficially Owned As Of | Percent of Total | ||||||||||||||
Name | Age | Principal Occupation | Director Since | December 16, 2005 | Shares Outstanding | |||||||||||
John A. Hillenbrand II | 74 | Personal Investments | 1981 | (8) | 1,015,026(2)(4) (9) | 1.7 | % | |||||||||
Joanne C. Smith | 45 | President of the National Division of the Rehabilitation Institute of Chicago | 2003 | 3,281(2) | (3) |
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Shares(1) | ||||||||||
Beneficially Owned As Of | Percent of Total | |||||||||
Name | Age | Principal Occupation | December 16, 2005 | Shares Outstanding | ||||||
Gregory N. Miller | 42 | Senior Vice President and Chief Financial Officer(10) | 26,066 | (3) | ||||||
Patrick D. de Maynadier | 45 | Vice President, General Counsel and Secretary(11) | 64,011 | (3) | ||||||
Kenneth A. Camp | 60 | Senior Vice President of Hillenbrand Industries, Inc. and | 147,804 | (3) | ||||||
President and Chief Executive Officer, | ||||||||||
Batesville Casket Company, Inc.(12) | ||||||||||
All directors and executive officers of the Company as a group, consisting of 17 persons. | 5,183,465 | (2)(5)(6)(7)(9) | 8.5% |
Shares | Percent of Total | |||||
Name | Address | Beneficially Owned | Shares Outstanding | |||
Franklin Mutual Advisers, LLC | 101 John F. Kennedy Parkway, Short Hills, NJ 07078 | 3,962,200(13) | 6.5% | |||
JPMorgan Chase & Co. | 270 Park Avenue, New York, NY 10017 | 3,597,831(14) | 5.9% |
(1) | The Company’s only class of equity securities outstanding is common stock without par value. These share figures include the following shares that may be purchased pursuant to stock options that are exercisable within 60 days of December 16, 2005: Rolf A. Classon, 8,000 shares; Charles E. Golden, 8,000 shares; W August Hillenbrand, 222,000 shares; Ray J. Hillenbrand, 30,000 shares; Peter H. Soderberg, 8,000 shares; John A. Hillenbrand II, 24,000 shares; Gregory N. Miller 25,000; Patrick D. de Maynadier, 61,000 shares; Kenneth A. Camp, 138,500 shares; and all directors and executive officers as a group, 625,749 shares. Except as otherwise indicated in these footnotes, the persons named have sole voting and investment power with respect to all shares shown as beneficially owned by them. | |
(2) | These share figures include vested deferred fees and/or compensation in the form of deferred restricted stock and restricted stock units (otherwise known as deferred stock awards) held on the books and records of the Company in the following amounts: Rolf A. Classon, 3,281 shares; Charles E. Golden, 4,988 shares; W August Hillenbrand, 4,020 shares; Eduardo R. Menasce, 1,830 shares; Ray J. Hillenbrand, 7,185 shares; Mark D. Ketchum, 1,830 shares; Anne Griswold Peirce, 3,378 shares; Peter H. Soderberg, 3,281 shares; John A. Hillenbrand II, 3,281 shares; Joanne C. Smith, 3,281 shares; and all directors and executive officers as a group, 36,355 shares. | |
(3) | Ownership of less than one percent (1%) of the total shares outstanding. | |
(4) | John A. Hillenbrand II and Ray J. Hillenbrand are brothers, and they are cousins of W August Hillenbrand. | |
(5) | Includes 235,755 shares owned beneficially by W August Hillenbrand’s wife, Nancy K. Hillenbrand; 1,835,817 shares owned of record, or which may be acquired within sixty days, by trusts, of which W August Hillenbrand is trustee or co-trustee; 46,374 shares held of record by a charitable trust, of which Mr. Hillenbrand is a co-trustee; 111,440 shares held by a limited liability company, and 302,575 shares held by a limited partnership, of which Mr. Hillenbrand is a limited partner. Mr. Hillenbrand disclaims beneficial ownership of these shares. Mr. Hillenbrand’s address is the address of the Company’s principal executive offices. | |
(6) | Includes 128,975 shares held of record by a charitable foundation, of which Mr. Ray J. Hillenbrand is a trustee; and 222,854 shares held of record by family partnerships for the benefit of other members of his immediate family. Mr. Hillenbrand disclaims beneficial ownership of these shares. | |
(7) | Includes 31 shares held of record by Anne Griswold Peirce’s spouse. |
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(8) | John A. Hillenbrand II previously served as a director of the Company from 1972 to 1979. | |
(9) | Includes 17,240 shares held of record by John A. Hillenbrand II’s wife, Joan L. Hillenbrand; and an aggregate of 526,250 shares held of record by trusts for the benefit of his children and grandchildren, by a family partnership and by a family corporation. Mr. Hillenbrand disclaims beneficial ownership of these shares. | |
(10) | Mr. Miller was elected Senior Vice President and Chief Financial Officer of the Company effective July 14, 2005. | |
(11) | Mr. de Maynadier was elected Vice President, General Counsel and Secretary of the Company effective January 28, 2002. | |
(12) | Mr. Camp was elected President and Chief Executive Officer of Batesville Casket Company, Inc., a subsidiary of the Company, on May 1, 2001. He was also elected as a Senior Vice President of the Company on August 4, 2005. Prior to his election to these positions, Mr. Camp has held various other positions within Hillenbrand Industries, Inc. and its subsidiary Batesville Casket Company, Inc. | |
(13) | As of December 16, 2005, based on information provided to the Company by Franklin Mutual Advisers, LLC. | |
(14) | This information is based solely on a Schedule 13G filed by JPMorgan Chase & Co. with the Securities and Exchange Commission on February 11, 2005. |
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(INCLUDING DIRECTOR COMPENSATION)
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• | Security holders of the Company and other interested persons may communicate with the Chairman of the Board, the chairs of the Company’s Nominating/Corporate Governance Committee, Audit Committee or Compensation and Management Development Committee or the non-management directors of the Company as a group by sending an email toinvestors@hillenbrand.com. The email should specify which of the foregoing is the intended recipient. | ||
• | All communications received in accordance with these procedures will be reviewed initially by the Company’s Investor Relations Department and General Counsel. The Investor Relations Department will relay all such communications to the appropriate director or directors unless the Investor Relations Department and General Counsel determine that the communication: |
• | does not relate to the business or affairs of the Company or the functioning or constitution of the Board of Directors or any of its committees; | ||
• | relates to routine or insignificant matters that do not warrant the attention of the Board of Directors; | ||
• | is an advertisement or other commercial solicitation or communication; |
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• | is frivolous or offensive; or | ||
• | is otherwise not appropriate for delivery to directors. |
• | The director or directors who receive any such communication will have discretion to determine whether the subject matter of the communication should be brought to the attention of the full Board of Directors or one or more of its committees and whether any response to the person sending the communication is appropriate. Any such response will be made through the Company’s Investor Relations Department and only in accordance with the Company’s policies and procedures and applicable law and regulations relating to the disclosure of information. | ||
• | The Company’s Investor Relations Department will retain copies of all communications received pursuant to these procedures for a period of at least one year. | ||
• | The Nominating/Corporate Governance Committee of the Board of Directors will review the effectiveness of these procedures from time to time and, if appropriate, recommend changes. |
• | The Board approved Corporate Governance Standards for the Board of Directors in September 2002 and has revised these Standards on several occasions as warranted by changes in New York Stock Exchange governance standards and other developments. Among other matters, these Standards: |
• | confirm that the Board of Directors has established standing committees, each with a charter approved by the Board, to address certain key areas. These committees are |
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the Audit Committee, Finance Committee, Compensation and Management Development Committee and Nominating/Corporate Governance Committee; | |||
• | provide that at least a majority of the directors of the Company shall be independent; | ||
• | provide for an annual determination by the Board of Directors regarding the independence of each director; | ||
• | provide that the Audit Committee, Nominating/Corporate Governance Committee and Compensation and Management Development Committee will consist entirely of independent directors; | ||
• | provide for an annual assessment by the Nominating/Corporate Governance Committee of the Board’s effectiveness as a whole as well as the effectiveness of the individual directors and the Board’s various committees, including a review of the mix of skills, core competencies and qualifications of members of the Board; | ||
• | provide that the non-management directors shall conduct executive sessions without participation by any employees of the Company at each regularly scheduled meeting of the Board; | ||
• | limit the number of public company boards on which a director may sit to four without Board approval; | ||
• | provide that no more than half of the members of the Board may be over seventy years of age; and | ||
• | provide all proposed related party transactions between the Company or any of its subsidiaries and any director or executive officer of the Company must be reviewed and approved by the Nominating/Corporate Governance Committee in advance. |
The full text of the Corporate Governance Standards as approved and revised by the Board of Directors is attached to this proxy statement as Appendix A. | |||
• | The Board determined the independence of each of the Company’s directors based on the standards set forth in the Corporate Governance Standards described above and elected only independent directors as members of the Audit Committee, Nominating/Corporate Governance Committee and Compensation and Management Development Committee. See “Determinations with Respect to Independence of Directors” below. | ||
• | On November 29, 2005, the Nominating/Corporate Governance Committee of the Board completed a formal evaluation of the effectiveness of the incumbent directors who are being nominated for election at the Company’s 2006 annual meeting of shareholders. That Committee substantially completed a formal evaluation of the effectiveness of the Board as a whole as well as the effectiveness of the individual directors and the Board’s various committees, including a review of the mix of skills, core competencies and qualifications of members of the Board. On that date, the Nominating/Corporate Governance Committee also reviewed a summary of its findings with the Board, in light of Board and Board committee goals established for 2006. The Nominating/Corporate Governance Committee plans to complete its formal evaluation of all individual directors, the Board and its committees over the course of several meetings. | ||
• | In September 2002, the Board overhauled its committee structure and adopted revised charters for each of its committees as warranted by changes in NYSE listing standards, SEC rules and other developments. |
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• | The Board adopted a revised Code of Ethical Business Conduct covering, among other matters, conflicts of interest, corporate opportunities, confidentiality, protection and proper use of the Company’s assets, fair dealing, compliance with laws, including insider trading laws, accuracy and reliability of the Company’s books and records and reporting of illegal or unethical behavior. This Code applies to all directors, officers and other employees of the Company, including the Company’s Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer. The Board periodically reviews and makes changes to the Code based on recommendations made by the Audit Committee of the Board. The Company’s Code of Ethical Business Conduct constitutes a “code of ethics” within the meaning of Item 406 of the Securities and Exchange Commission’s Regulation S-K. | ||
• | All employees, including the Company’s Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, are required to participate in ethics training and abide by the Code of Ethical Business Conduct to ensure that the Company’s business is conducted in a consistently legal and ethical manner. All members of the Board of Directors and all officers of the Company and its subsidiaries have read and certified their compliance with the Code without exception. | ||
• | Employees are required to report any conduct that they believe in good faith to be an actual or apparent violation of the Code of Ethical Business Conduct. The Sarbanes-Oxley Act of 2002 requires companies to have procedures to receive, retain and treat complaints received regarding accounting, internal accounting controls or auditing matters and to allow for the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters. The Company currently has such procedures in place and has effectively and independently addressed concerns raised by employees and others. | ||
• | Hill-Rom refers to Advanced Medical Technology Association’s (AdvaMed) Code of Ethics for Interactions with Health Care Professionals on a regular basis to seek guidance on policies and ethical issues. AdvaMed is the largest medical technology association in the world, representing more than 1,200 innovators and manufacturers of medical devices, diagnostic products and medical information systems. The Code is a voluntary code of ethics to facilitate members’ ethical interactions with those individuals or entities that purchase, lease, recommend, use, arrange for the purchase or lease of, or prescribe members’ medical technology products in the United States. The Company and Hill-Rom are members. The Code can be accessed atwww.advamed.org/publicdocs/coe.html. | ||
• | Directors may not be given personal loans or extensions of credit by the Company, and all directors are required to deal at arm’s length with the Company and its subsidiaries, and to disclose any circumstance that might be perceived as a conflict of interest. | ||
• | The Board approved a policy mandating that the Company’s outside independent auditors not perform any prohibited non-audit services under the Sarbanes-Oxley Act of 2002 and the related SEC rules. In addition, the Audit Committee approved a policy requiring that all services from the outside independent auditors must be pre-approved by the Audit Committee or its delegate (i.e., the Audit Committee Chairman). | ||
• | The Board adopted stock ownership guidelines for the Company’s directors and executive officers. In general, these standards require non-employee directors to hold restricted stock units (otherwise known as deferred stock awards) granted to them until six months after they cease to be directors and that executive officers of the Company must achieve and maintain a |
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minimum level of stock ownership. The stock ownership guidelines are included in the Corporate Governance Standards attached as Appendix A. | |||
• | As part of directors’ education, which includes, among other things, regular dedicated sessions regarding the Company’s businesses and operations, Audit Committee sponsored financial literacy and legal and regulatory compliance training, and participation in Company and industry trade events, the Board requires each director to attend an outside governance or director related seminar at least once every three years. | ||
• | Pursuant to the Foreign Corrupt Practices Act and the Sarbanes-Oxley Act of 2002, the Company monitors and enforces policies, and implements a system of internal controls, designed to detect and prevent money laundering, corruption and bribery. Supporting processes include ethics training and certification regarding, among other things, compliance with the Foreign Corrupt Practices Act, documentation, training and testing, new hire criminal background checks and internal audit procedures. |
• | The director is, or has been within the last three years, an employee of the Company or any of its subsidiaries, or an immediate family member of the director is, or has been within the last |
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three years, an executive officer of the Company (but employment as an interim executive officer will not disqualify a director from being considered independent following that employment). | |||
• | The director has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than $100,000 per year in direct compensation from the Company or its subsidiaries, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service). | ||
• | (A) The director or an immediate family member of the director is a current partner of a firm that is the internal or external auditor of the Company or any of its subsidiaries; (B) the director is a current employee of such a firm; (C) the director has an immediate family member who is a current employee of such a firm and who participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice; or (D) the director or an immediate family member was within the last three years (but is no longer) a partner or employee of such a firm and personally worked on the audit of the Company or any of its subsidiaries within that time. | ||
• | The director or an immediate family member of the director is, or has been within the last three years, employed as an executive officer of another company where any of the Company’s present executives at the same time serves or served on that company’s compensation committee. | ||
• | The director is a current employee, or an immediate family member of the director is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeded the greater of $1 million, or 2% of such other company’s consolidated gross revenues. | ||
• | The director owns, or is affiliated with the owner of, a controlling amount of voting stock of the Company. |
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• | Review from time to time and, if appropriate, recommend to the Board changes to the corporate governance standards for the Board of Directors of the Company and its committees, including committee charters; | ||
• | Review from time to time, and, if appropriate, make changes to the statement setting forth the responsibilities of directors and the qualifications for new nominees for election to the Board; | ||
• | Review from time to time, and, if appropriate, make changes to the statement setting forth the responsibilities of and the qualifications for the Chairman of the Board and the Vice Chairperson of the Board; | ||
• | Annually assess the Board’s effectiveness as a whole as well as the effectiveness of the individual directors and the Board’s various committees, including a review of the mix of skills, core competencies and qualifications of members of the Board; | ||
• | Assess, at least annually, the compensation package for the members of the Board of Directors and, if appropriate, recommend changes to the Board of Directors; | ||
• | Make recommendations with respect to the composition of Board committees; | ||
• | If deemed necessary, select and retain an executive search firm to identify qualified candidates to serve as members of the Board, considering effectiveness, responsiveness and other relevant factors, and approve the fees and other compensation to be paid to the executive search firm; | ||
• | Review the performance of the executive search firm and approve any proposed discharge of the executive search firm when circumstances warrant; | ||
• | Select and recommend to the Board director nominees for election at each annual meeting of shareholders, as well as director nominees to fill vacancies arising between annual meetings of shareholders; | ||
• | When deemed necessary or appropriate, make recommendations to the Board regarding the appointment or replacement of the Chairman of the Board and the Vice Chairperson of the Board; | ||
• | Recommend to the Board annually, based on a consideration of all relevant facts and circumstances, whether each director is independent (as that term is defined in the Corporate Governance Standards for the Board of Directors). | ||
• | Assess the adequacy of and make recommendations to the Board regarding directors’ and officers’ insurance coverage; | ||
• | Review and make recommendations to the Board regarding any shareholder proposals; | ||
• | Pre-approve any related party transactions between the Company or any of its subsidiaries and any director or executive officer; | ||
• | Determine requirements for, and means of, director orientation and training; and | ||
• | Review the charter for the Committee and assess the performance of the members of the Committee at least annually and recommend updates and changes to the Board as conditions warrant. |
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• | Have a reputation for industry, integrity, honesty, candor, fairness and discretion; | ||
• | Be an acknowledged expert in his or her chosen field of endeavor, which area of expertise should have some relevance to the Company’s businesses or operations; | ||
• | Be knowledgeable, or willing and able to become so quickly, in the critical aspects of the Company’s businesses and operations; and | ||
• | Be experienced and skillful in serving as a competent overseer of, and trusted advisor to, senior management of a substantial publicly held corporation. |
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• | Directors receive an annual retainer of $25,000 for their service as directors, together with a $3,500 fee for each Board meeting attended. The Chairman of the Board of Director’s annual retainer is $150,000. | ||
• | For any Board meeting lasting longer than one day, each director who attends receives $1,000 for each additional day. | ||
• | Directors who attend a Board meeting or standing committee meeting by telephone receive fifty percent (50%) of the usual meeting fee. | ||
• | Each director who is a member of the Nominating/Corporate Governance, Finance, Audit or Compensation and Management Development Committee receives a fee of $1,500 for each committee meeting attended. | ||
• | The Chairs of the Audit, Compensation and Management Development, Nominating/Corporate Governance and Finance Committees receive an additional $10,000, $8,000, $7,000 and $5,000 annual retainer, respectively. | ||
• | Directors who attend meetings of committees of which they are not members receive no fees for their attendance. | ||
• | Notwithstanding the foregoing, for any meeting of an ad hoc committee or team of the Board that requires attendance in person or by telephone, the directors who attend each receive a meeting fee of $1,500, except when such meetings occur before, during or after a meeting of the Board or a standing committee of the Board that also is attended by such directors. | ||
• | Board and committee retainers are paid in quarterly installments and the meeting fees are paid following the meeting. | ||
• | Each director is reimbursed for expenses incurred as a result of attendance at Board or committee meetings. The Company also makes its aircraft available to directors for attendance at Board meetings. | ||
• | Each director is awarded on the first trading day following the close of each annual meeting of the Company’s shareholders 1,800 restricted stock units (otherwise known as deferred stock awards) under |
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• | the Company’s Stock Incentive Plan. Delivery of shares underlying such restricted stock units occurs on the later to occur of one year and one day from the date of the grant or the six month anniversary of the date that the applicable director ceases to be a member of the Board of Directors of the Company. In the case of the Chairman of the Board of Directors, his or her annual grant of restricted stock units is 3,500. | ||
• | Non-employee directors are also eligible to participate in the Company’s group term life insurance program in which the Company pays premiums. Death benefits, which are age related, range from $97,500 to $150,000. |
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Long Term Compensation | ||||||||||||||||||||||||||||
Annual Compensation | Awards | |||||||||||||||||||||||||||
Restricted | Securities | |||||||||||||||||||||||||||
Other Annual | Stock | Underlying | All Other | |||||||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($) | Compensation ($)(1) | Awards ($)(2) | Options (#)(3) | Compensation ($)(4) | |||||||||||||||||||||
Rolf A. Classon(6) | 2005 | $ | 330,685 | $ | 0 | $ | 123,603 | $ | 1,103,221 | 0 | $ | 306,627 | ||||||||||||||||
Interim President and Chief | 2004 | N/A | N/A | N/A | $ | 95,095 | 0 | $ | 76,516 | |||||||||||||||||||
Executive Officer | 2003 | N/A | N/A | N/A | $ | 0 | 4,000 | $ | 72,008 | |||||||||||||||||||
Frederick W. Rockwood(7) | 2005 | $ | 642,689 | $ | 0 | (5) | $ | 827,753 | 90,000 | $ | 173,002 | |||||||||||||||||
Former President and | 2004 | $ | 1,039,767 | $ | 0 | $ | 142,048 | $ | 919,144 | 100,000 | $ | 494,809 | ||||||||||||||||
Chief Executive Officer | 2003 | $ | 996,354 | $ | 1,882,188 | $ | 170,603 | $ | 540,350 | 100,000 | $ | 11,650 | ||||||||||||||||
Gregory N. Miller(8) | 2005 | $ | 258,586 | $ | 0 | (5) | $ | 83,370 | 8,000 | $ | 28,939 | |||||||||||||||||
Senior Vice President and | 2004 | $ | 241,696 | $ | 21,688 | (5) | $ | 58,240 | 5,000 | $ | 19,631 | |||||||||||||||||
Chief Financial Officer | 2003 | $ | 226,072 | $ | 216,913 | (5) | $ | 81,053 | 5,500 | $ | 6,000 | |||||||||||||||||
Scott K. Sorensen(9) | 2005 | $ | 388,475 | $ | 0 | (5) | $ | 197,865 | 18,000 | $ | 56,221 | |||||||||||||||||
Former Vice President and | 2004 | $ | 457,591 | $ | 0 | (5) | $ | 282,056 | 24,000 | $ | 50,029 | |||||||||||||||||
Chief Financial Officer | 2003 | $ | 427,882 | $ | 769,811 | (5) | $ | 270,175 | 25,000 | $ | 6,660 | |||||||||||||||||
Patrick D. de Maynadier | 2005 | $ | 318,300 | $ | 0 | (5) | $ | 181,747 | 18,000 | $ | 38,803 | |||||||||||||||||
Vice President, General | 2004 | $ | 312,325 | $ | 0 | (5) | $ | 218,866 | 18,000 | $ | 31,788 | |||||||||||||||||
Counsel and Secretary | 2003 | $ | 290,510 | $ | 348,280 | (5) | $ | 108,070 | 15,000 | $ | 6,508 | |||||||||||||||||
Kenneth A. Camp Senior Vice President of the | 2005 | $ | 391,914 | $ | 0 | (5) | $ | 220,097 | 24,000 | $ | 97,575 | |||||||||||||||||
Company and President | 2004 | $ | 384,375 | $ | 0 | (5) | $ | 252,936 | 20,000 | $ | 86,681 | |||||||||||||||||
and Chief Executive Officer, Batesville Casket Company, Inc. | 2003 | $ | 359,448 | $ | 474,280 | (5) | $ | 270,175 | 20,000 | $ | 6,906 | |||||||||||||||||
R. Ernest Waaser(10) Former President and Chief | 2005 | $ | 346,174 | $ | 0 | (5) | $ | 197,865 | 24,000 | $ | 56,003 | |||||||||||||||||
Executive Officer, Hill-Rom | 2004 | $ | 407,398 | $ | 0 | (5) | $ | 282,056 | 24,000 | $ | 50,575 | |||||||||||||||||
Company, Inc. | 2003 | $ | 379,355 | $ | 522,067 | $ | 55,604 | $ | 270,175 | 25,000 | $ | 6,975 | ||||||||||||||||
Bruce J. Bonnevier(11) | 2005 | $ | 250,000 | $ | 0 | (5) | $ | 170,631 | 16,000 | $ | 48,019 | |||||||||||||||||
Former Vice President, Human | 2004 | $ | 97,678 | $ | 0 | (5) | $ | 110,770 | 15,000 | $ | 38,979 | |||||||||||||||||
Resources | 2003 | N/A | N/A | N/A | N/A | N/A | N/A |
(1) | Consists of the cost of aircraft usage, cash perquisites, home security expenses, automobile allowances, reimbursement for relocation expenses and professional services for tax preparation and financial planning services, and other personal benefits provided by the Company. Included in 2005 for Rolf A. Classon is $123,603 for Mr. Classon’s use of the Company’s jet aircraft. The Company’s arrangements with Mr. Classon relating to his service as Interim President and Chief Executive Officer permit use of the Company’s aircraft by Mr. Classon and, on limited occasions approved in advance by the Chairman of the Board, his family for travel between the Company’s Batesville, Indiana headquarters and their permanent residence and by Mr. Classon for travel relating |
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to Mr. Classon’s business activities not related to the Company, such as travel to meetings of other boards of directors on which Mr. Classon serves. The Company will make gross-up payments to Mr. Classon for any income taxes payable by him as a result of the use of the Company’s aircraft for these purposes. The Company also has adopted a policy permitting the Chief Executive Officer, but not other executive officers, to use the Company’s aircraft for personal purposes up to fifty hours per year. While the Company does not charge for the personal use of its aircraft, and for purposes of its policy on use of Company aircraft does not regard these as personal uses of Company aircraft by Mr. Classon, it does report amounts related to such use as taxable income to the Internal Revenue Service. The value of the use of Company aircraft disclosed in the Summary Compensation Table is based upon the incremental cost of $1,424 per flight hour to the Company and not the values reported to the IRS. | ||
(2) | These amounts represent awards of shares of deferred stock and restricted stock units (otherwise known as deferred stock awards), pursuant to which an equal number of shares of common stock of the Company will be issued upon satisfaction of certain vesting conditions and deferral elections. As of September 30, 2005 the number of shares and value of deferred stock and shares underlying restricted stock units held are as follows: |
Restricted Stock Units and | ||||||||
Deferred Stock | ||||||||
Name | Shares (#) | Value ($) | ||||||
Rolf A. Classon | 23,399 | $ | 1,100,923 | |||||
Frederick W. Rockwood | 19,442 | $ | 914,746 | |||||
Gregory N. Miller | 2,573 | $ | 121,060 | |||||
Scott K. Sorensen | 2,613 | $ | 122,942 | |||||
Patrick D. de Maynadier | 6,983 | $ | 328,550 | |||||
Kenneth A. Camp | 8,208 | $ | 386,186 | |||||
R. Ernest Waaser | 5,602 | $ | 263,574 | |||||
Bruce J. Bonnevier | 5,200 | $ | 244,660 |
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(3) | Options were granted pursuant to the Company’s Stock Incentive Plan for the fiscal years ended September 30, 2005, 2004 and 2003, respectively. | |
(4) | All Other Compensation earned or allocated in the fiscal year ended September 30, 2005 is as follows: |
Supplemental | Board of | |||||||||||||||||||||||
401(k) | 401(k) | Signing | Executive Life | Directors | ||||||||||||||||||||
Name | Contributions | Contributions | Bonus | Insurance | Fees | Total | ||||||||||||||||||
Rolf A. Classon | $ | 4,085 | $ | 0 | $ | 250,000 | $ | 792 | $ | 51,750 | $ | 306,627 | ||||||||||||
Frederick W. Rockwood | $ | 6,300 | $ | 11,675 | $ | 155,027 | $ | 173,002 | ||||||||||||||||
Gregory N. Miller | $ | 17,162 | $ | 11,777 | $ | 28,939 | ||||||||||||||||||
Scott K. Sorensen | $ | 6,300 | $ | 38,667 | $ | 11,254 | $ | 56,221 | ||||||||||||||||
Patrick D. de Maynadier | $ | 6,300 | $ | 24,004 | $ | 8,499 | $ | 38,803 | ||||||||||||||||
Kenneth A. Camp | $ | 6,300 | $ | 37,409 | $ | 53,866 | $ | 97,575 | ||||||||||||||||
R. Ernest Waaser | $ | 6,300 | $ | 33,841 | $ | 15,862 | $ | 56,003 | ||||||||||||||||
Bruce J. Bonnevier | $ | 17,741 | $ | 24,080 | $ | 6,198 | $ | 48,019 |
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(5) | Amounts do not exceed disclosure thresholds established under SEC rules. | |
(6) | Mr. Classon became Interim President and Chief Executive Officer of the Company on May 11, 2005. Prior to that time, he was a director of the Company but was not an employee of the Company. | |
(7) | Mr. Rockwood retired from the Company on May 11, 2005. | |
(8) | Mr. Miller was elected Senior Vice President and Chief Financial Officer of the Company effective July 14, 2005. Prior to that time, he was Vice President, Controller and Chief Accounting Officer of the Company. | |
(9) | Mr. Sorensen resigned from the Company effective July 14, 2005. In 2004, Mr. Sorensen was appointed to the Board of Directors and the Audit Committee of GMP Companies, Inc., a privately held company in which the Company had previously made a minority equity investment. Mr. Sorensen received from GMP the compensation paid to all of GMP’s non-management directors, including fees for attendance at board and committee meetings and stock option grants. He resigned from GMP’s Board in 2005. | |
(10) | Mr. Waaser resigned from the Company effective July 14, 2005. | |
(11) | Mr. Bonnevier was elected Vice President, Human Resources effective May 12, 2004. Prior to that date, he was not employed by the Company. Mr. Bonnevier resigned from the Company effective December 31, 2005. |
(for fiscal year ended September 30, 2005)
Individual Grants | ||||||||||||||||||||
Number of Securities | Percent of Total Options | |||||||||||||||||||
Underlying Options | Granted to | Exercise or | Grant Date Present | |||||||||||||||||
Name | Granted (#)(1) | Employees in Fiscal Year | Base Price ($/Share) | Expiration Date | Value ($)(2) | |||||||||||||||
Rolf A. Classon | None | |||||||||||||||||||
Frederick W. Rockwood | 90,000 | 15.89% | $ | 55.58 | 12/15/14 | $ | 1,187,019 | |||||||||||||
Gregory N. Miller | 8,000 | 1.41% | $ | 55.58 | 12/15/14 | $ | 105,513 | |||||||||||||
Scott K. Sorensen | 18,000 | 3.18% | $ | 55.58 | 12/15/14 | $ | 237,404 | |||||||||||||
Patrick D. de Maynadier | 18,000 | 3.18% | $ | 55.58 | 12/15/14 | $ | 237,404 | |||||||||||||
Kenneth A. Camp | 24,000 | 4.24% | $ | 55.58 | 12/15/14 | $ | 316,538 | |||||||||||||
R. Ernest Waaser | 24,000 | 4.24% | $ | 55.58 | 12/15/14 | $ | 316,538 | |||||||||||||
Bruce J. Bonnevier | 16,000 | 2.83% | $ | 55.58 | 12/15/14 | $ | 211,026 |
(1) | All options were granted pursuant to the Company’s Stock Incentive Plan. The options were granted at an exercise price equal to the fair market value of the Company’s common stock on the date of grant. The options were granted for terms of ten years, and vest one-third on each of the first three anniversaries of the date of grant. On September 7, 2005 the Board of Directors accelerated and immediately vested the above options held by employees on September 7, 2005, subject to certain exercise and hold restrictions, during the period between September 7, 2005 and the original vesting dates. | |
(2) | The weighted average fair value of options granted during the fiscal year ended September 30, 2005 was $13.19 under the Binomial model using the following assumptions: (i) risk-free interest rates of 2.64-4.09 percent; (ii) expected dividend yields of 1.70-2.08 percent; (iii) expected volatility factors of 0.2023-0.2592; and (iv) expected |
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term of 6.8 years. The actual value realized by an officer from exercise of the options will depend on the market value of the Company’s common stock on the dates the options are exercised. |
and Fiscal Year-End Option Values
(for fiscal year ended September 30, 2005)
Number of Securities Underlying | Value of Unexercised In-the- | |||||||||||||||||||||||
Unexercised Options at | Money Options at | |||||||||||||||||||||||
Shares Acquired | Fiscal Year-End | Fiscal Year-End | ||||||||||||||||||||||
Name | On Exercise | Value Realized | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
Rolf A. Classon | 0 | $ | 0 | 8,000 | 0 | $ | 0 | $ | 0 | |||||||||||||||
Frederick W. Rockwood | 7,500 | $ | 187,216 | 395,834 | 0 | $ | 579,984 | $ | 0 | |||||||||||||||
Gregory N. Miller | 0 | $ | 0 | 23,167 | 1,833 | $ | 0 | $ | 0 | |||||||||||||||
Scott K. Sorensen | 91,667 | $ | 188,611 | 0 | 0 | $ | 0 | $ | 0 | |||||||||||||||
Patrick D. de Maynadier | 10,000 | $ | 95,100 | 56,000 | 5,000 | $ | 0 | $ | 0 | |||||||||||||||
Kenneth A. Camp | 7,500 | $ | 175,141 | 131,834 | 6,666 | $ | 172,616 | $ | 0 | |||||||||||||||
R. Ernest Waaser | 31,667 | $ | 50,736 | 0 | 0 | $ | 0 | $ | 0 | |||||||||||||||
Bruce J. Bonnevier | 0 | $ | 0 | 31,000 | 0 | $ | 0 | $ | 0 |
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• | If the agreement is terminated due to death or disability, Mr. Classon or his estate will be entitled to receive his base salary accrued through the date of his termination and a pro rata portion of his guaranteed bonus for his service period, and a pro rata portion of the restricted stock units previously issued shall immediately vest. | ||
• | If the agreement is terminated with or without cause (as defined) by the Company or voluntarily on the part of Mr. Classon, the Company shall only be obligated to pay Mr. Classon his base salary accrued but unpaid as of the date of termination. | ||
• | Mr. Classon will be precluded from competing against Hillenbrand while employed by Hillenbrand and for a period of eighteen months (subject to reduction in certain circumstances) after his employment is terminated, regardless of the reason for such termination. |
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• | Mr. Rockwood received severance pay paid in a lump sum payment in the gross amount of $1,051,935, consistent with the terms of the previously existing Executive Employment Agreement. | ||
• | The Company paid $2,000 of professional fees incurred in the review and negotiation of the Separation and Release Agreement. | ||
• | Mr. Rockwood was provided with payment of earned but unused vacation as of May 11, 2005. | ||
• | Mr. Rockwood is entitled to receive life insurance coverage for a period of twelve months beginning May 11, 2005. | ||
• | Mr. Rockwood is eligible for extended healthcare coverage under the current terms of the Hillenbrand Industries Healthcare Plan until the age of 65. The agreement provides that the Company will pay for full cost of such extended healthcare coverage until Mr. Rockwood reaches 65 years of age. | ||
• | In accordance with the terms of the Company’s Stock Incentive Plan, all stock options, stock awards and restricted stock units issued to Mr. Rockwood more than one year prior to May 11, 2005 were deemed fully vested, and Mr. Rockwood will have three years from May 11, 2005 to exercise any such stock options. All stock options, stock awards and restricted stock units issued within a year prior to May 11, 2005 were forfeited. | ||
• | Mr. Rockwood and the Company agreed to reduce the term of the non-compete period provided for in the previously existing Executive Employment Agreement between Mr. Rockwood and Hillenbrand from two years to one year. |
• | Mr. Waaser will receive severance pay paid in a lump sum payment in the gross amount of $415,636.52, consistent with the terms of the previously existing Executive Employment Agreement. | ||
• | Mr. Waaser was provided with payment of earned but unused vacation as of July 31, 2005. |
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• | Mr. Waaser is entitled to receive life insurance coverage for a period of twelve months beginning July 31, 2005. | ||
• | Mr. Waaser is eligible for extended healthcare coverage under the current terms of the Hillenbrand Industries Healthcare Plan for twelve months after July 31, 2005 or until he becomes eligible for coverage through a subsequent employer. The agreement provides that Hill-Rom will pay for the employer’s share of such extended healthcare coverage. |
• | Mr. Sorensen will receive severance pay in a lump sum payment in the gross amount of $466,424.92, consistent with the terms of the previously existing Executive Employment Agreement. | ||
• | Mr. Sorensen was provided with payment of earned but unused vacation as of July 31, 2005. | ||
• | Mr. Sorensen is entitled to receive life insurance coverage for a period of twelve months beginning July 31, 2005. | ||
• | Mr. Sorensen is eligible for extended healthcare coverage under the current terms of the Hillenbrand Industries Healthcare Plan until for twelve months after July 31, 2005. The agreement provides that the Company will pay for the employer’s share of such extended healthcare coverage. |
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Highest Average Eligible | ||||||||||||||||||||||||||||||||||||
Compensation for any | ||||||||||||||||||||||||||||||||||||
Period of | 5 Years | 10 Years | 15 Years | 20 Years | 25 Years | 30 Years | 35 Years | 40 Years | ||||||||||||||||||||||||||||
5 Consecutive Years | of Service | of Service | of Service | of Service | of Service | of Service | of Service | of Service | ||||||||||||||||||||||||||||
$ | 100,000 | $ | 5,000 | $ | 11,000 | $ | 16,000 | $ | 21,000 | $ | 27,000 | $ | 32,000 | $ | 37,000 | $ | 43,000 | |||||||||||||||||||
$ | 200,000 | $ | 13,000 | $ | 27,000 | $ | 40,000 | $ | 53,000 | $ | 67,000 | $ | 80,000 | $ | 93,000 | $ | 107,000 | |||||||||||||||||||
$ | 300,000 | $ | 21,000 | $ | 43,000 | $ | 64,000 | $ | 85,000 | $ | 107,000 | $ | 128,000 | $ | 149,000 | $ | 171,000 | |||||||||||||||||||
$ | 400,000 | $ | 29,000 | $ | 59,000 | $ | 88,000 | $ | 117,000 | $ | 147,000 | $ | 176,000 | $ | 205,000 | $ | 235,000 | |||||||||||||||||||
$ | 500,000 | $ | 37,000 | $ | 75,000 | $ | 112,000 | $ | 149,000 | $ | 187,000 | $ | 224,000 | $ | 261,000 | $ | 299,000 | |||||||||||||||||||
$ | 600,000 | $ | 45,000 | $ | 91,000 | $ | 136,000 | $ | 181,000 | $ | 227,000 | $ | 272,000 | $ | 317,000 | $ | 363,000 | |||||||||||||||||||
$ | 700,000 | $ | 53,000 | $ | 107,000 | $ | 160,000 | $ | 213,000 | $ | 267,000 | $ | 320,000 | $ | 373,000 | $ | 427,000 | |||||||||||||||||||
$ | 800,000 | $ | 61,000 | $ | 123,000 | $ | 184,000 | $ | 245,000 | $ | 307,000 | $ | 368,000 | $ | 429,000 | $ | 491,000 | |||||||||||||||||||
$ | 900,000 | $ | 69,000 | $ | 139,000 | $ | 208,000 | $ | 277,000 | $ | 347,000 | $ | 416,000 | $ | 485,000 | $ | 555,000 | |||||||||||||||||||
$ | 1,000,000 | $ | 77,000 | $ | 155,000 | $ | 232,000 | $ | 309,000 | $ | 387,000 | $ | 464,000 | $ | 541,000 | $ | 619,000 | |||||||||||||||||||
$ | 1,100,000 | $ | 85,000 | $ | 171,000 | $ | 256,000 | $ | 341,000 | $ | 427,000 | $ | 512,000 | $ | 597,000 | $ | 683,000 | |||||||||||||||||||
$ | 1,200,000 | $ | 93,000 | $ | 187,000 | $ | 280,254 | $ | 373,000 | $ | 467,000 | $ | 560,000 | $ | 653,000 | $ | 747,000 |
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Number of securities remaining | ||||||||||||
Number of securities to be | available for issuance under | |||||||||||
issued upon exercise of | Weighted-average exercise price | equity compensation plans | ||||||||||
outstanding options, | of outstanding options, warrants | (excluding securities reflected in | ||||||||||
warrants and rights | and rights ($) | column (a)) | ||||||||||
Plan Category | (a) | (b) | (c) | |||||||||
Equity compensation plans approved by security holders | 2,543,057 | $ | 45.457 | 3,617,281 | ||||||||
Equity compensation plans not approved by security holders(1)(2) | 18,054 | $ | 0.00 | 0 | ||||||||
Total | 2,561,111 | $ | 45.136 | 3,617,281 |
(1) | Under the Hillenbrand Industries Stock Award Program, which has not been approved by security holders, shares of common stock have been granted to certain key employees. All shares granted under this program are contingent upon continued employment over specified terms. During 1999, 45,000 shares were granted under this program, 20,000 of which were canceled for lack of continued employment. During 2001, an additional 56,500 shares were granted under this program, 10,500 of which have been canceled. Dividends, payable in stock accrue on the grants and are subject to the same specified terms as the original grants. Shares granted in 1999 had a fair value of $27.81 per share and those in 2001 had a range of fair values from $49.76 to $50.85. Of these grants, 5,000 shares became vested on January 1, 2002; 25,000 shares vested on October 5, 2002; 1,500 shares vested on December 6, 2002; 6,500 shares vested on January 1, 2003 and 33,000 shares vested on January 17, 2004. Accrued dividends related to the grants also vested accordingly. A total of 16,251 deferred shares were vested as of September 30, 2005 under this program and will be issuable at a future date. | |
(2) | Members of the Board of Directors may elect to defer fees earned and invest them in common stock of the Company under the Hillenbrand Industries Directors’ Deferred Compensation Plan, which has not been approved by security holders. A total of 1,803 deferred shares were vested as of September 30, 2005 under this program and will be issuable at a future date. |
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DEVELOPMENT COMMITTEE’S REPORT
• | Aligning management’s interests with those of shareholders | ||
• | Aligning and motivating employees to achieve superior results | ||
• | Assuring clear accountabilities and providing rewards for producing results | ||
• | Ensuring competitive compensation in order to attract and retain superior talent | ||
• | Simplicity and transparency in compensation structure |
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Peter H. Soderberg (Vice Chairman)
Anne Griswold Peirce
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Eduardo R. Menascé (Vice Chairman)
Joanne C. Smith
(Each of whom the Board of Directors has determined is an independent director under applicable standards)
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Secretary
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1 | For purposes of this numbered paragraph 3, all references to the Company include the Company’s subsidiaries. |
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• | The director is, or has been within the last three years, an employee of the Company, or an immediate family member2 of the director is, or has been within the last three years, an executive officer of the Company. Employment as an interim Chairman or CEO or other executive officer shall not disqualify a director from being considered independent following that employment. | ||
• | The director has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than $100,000 per year in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service). Compensation received by a director for former service as an interim Chairman or CEO or other executive officer need not be considered in determining independence under this test. Compensation received by an immediate family member for service as an employee of the Company (other than an executive officer) need not be considered in determining independence under this test. | ||
• | The director or an immediate family member of the director is a current partner of a firm that is the Company’s internal or external auditor; (B) the director is a current employee of such a firm; (C) the director has an immediate family member who is a current employee of such a firm and who participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice; or (D) the director or an immediate family member was within the last three years (but is no longer) a partner or employee of such a firm and personally worked on the Company’s audit within that time. | ||
• | The director or an immediate family member of the director is, or has been within the last three years, employed as an executive officer of another company where |
2 | As used in these Corporate Governance Standards, “immediate family member” includes a person’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) who shares such person’s home. When applying the three-year lookback provisions described in this numbered paragraph 3, the Board need not consider individuals who are no longer immediate family members of the director as a result of legal separation or divorce, or those who have died or become incapacitated. |
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any of the Company’s present executives at the same time serves or served on that company’s compensation committee. | |||
• | The director is a current employee, or an immediate family member of the director is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues. The look-back provision for this test applies solely to the financial relationship between the Company and the director or immediate family member’s current employer; the Board need not consider former employment of the director or immediate family member. Contributions to tax exempt organizations shall not be considered “payments” for purposes of this provision, but the Company shall disclose in its annual proxy statement any such contributions made by the Company to any tax exempt organization in which any independent director serves as an executive officer if, within the preceding three years, contributions in any single fiscal year exceeded the greater of $1 million, or 2% of such tax exempt organization’s consolidated gross revenues. In addition, the Board must consider the materiality of any such relationship in making its determination of independence. | ||
• | A director who owns, or is affiliated with the owner, of a controlling amount of voting stock of the Company may not be considered independent. |
• | the making of substantial charitable contributions to any organization in which a director is affiliated; | ||
• | the entering into of consulting contracts with (or providing other indirect forms of compensation to) directors; or | ||
• | the entering into of other compensatory arrangements with directors that may raise questions about their independence. |
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3 | See Position Specification for Member of Board of Directors of Hillenbrand Industries, Inc. |
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• | Directors shall receive an annual retainer of $25,000 for their service as directors, together with a $3,500 fee for each Board meeting attended. The Chairman of the Board of Director’s annual retainer shall, however, be $150,000. | ||
• | For any Board meeting lasting longer than one day, each Director who attends will receive $1,000 for each additional day. | ||
• | Directors who attend a Board meeting or standing committee meeting by telephone will receive fifty percent (50%) of the usual meeting fee. | ||
• | Each Director who is a member of the Nominating/Corporate Governance, Finance, Audit or Compensation and Management Development Committee receives a fee of $1,500 for each committee meeting attended. | ||
• | The Chairmen of the Audit, Compensation and Management Development, Nominating/Corporate Governance and Finance Committees shall receive an additional $10,000, $8,000, $7,000 and $5,000 annual retainer, respectively. | ||
• | Directors who attend meetings of committees of which they are not members shall receive no fees for their attendance. | ||
• | Notwithstanding the foregoing, for any meeting of an ad hoc committee or team of the Board that requires attendance in person or by telephone, the Directors who attend shall each receive a meeting fee of $1,500, except when such meetings occur before, during or after a meeting of the Board or a standing committee of the Board that also is attended by such Directors. | ||
• | Board and committee retainers shall be paid in quarterly installments and the meeting fees shall be paid following the meeting. | ||
• | Each Director shall be reimbursed for expenses incurred as a result of attendance at Board or committee meetings. | ||
• | Each Director shall be awarded on the first trading day following the close of each annual meeting of the Company’s shareholders 1,800 restricted stock units (otherwise known as deferred stock awards) under the Corporation’s Stock Incentive Plan in lieu of the stock option grant contemplated by Section 12 of the Corporation’s Stock Incentive Plan. Vesting for such restricted stock units will occur on the later to occur of one year and one day from the date of the grant or the six month anniversary of the date that a the applicable Director ceases to be a member of the Board of Directors of the Corporation. |
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1. | The Committee shall be comprised of at least three members of the Board, each of whom must meet the independence criteria set forth in the Company’s Corporate Governance Standards for the Board of Directors and as required by the New York Stock Exchange, the Securities Exchange Act of 1934 and the rules and regulations of the Securities Exchange Commission at all times during his or her tenure on the Committee. No member of the Committee may, other than in his or her capacity as a member of the Committee, the Board or any other committee of the Board, |
4 | Payments by the Company of the following sort will be deemed to constitute indirect acceptance of compensatory payments and accordingly will render a member of the Board ineligible for service on the Committee: (a) payments to an entity in which the member is a partner, member, officer such as a managing director occupying a comparable position or executive officer, or occupies a similar position (except limited partners, non-managing members and those occupying similar positions who, in each case, have no active role in providing services to the Company) and which provides accounting, consulting, legal, investment banking or financial advisory services to the Company or any of its subsidiaries; and (b) payments to the member’s spouse, minor child or stepchild or adult child or stepchild sharing the member’s home. |
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2. | All members of the Committee should possess, at a minimum, basic financial literacy, as such qualification is interpreted by the Board, or acquire such literacy within a reasonable period of time from joining the Committee. At the present time, the Board interprets “financial literacy” to mean the ability to read and understand audited and unaudited consolidated financial statements (including the related notes) and monthly operating statements of the sort released or prepared by the Company, as the case may be, in the normal course of its business. The Chair of the Committee shall be available, capable, qualified and competent in dealing with financial and related issues. |
• | an understanding of generally accepted accounting principles and financial statements; | ||
• | the ability to assess the general application of generally accepted accounting principles in connection with the accounting for estimates, accruals and reserves; | ||
• | experience in preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Company’s financial statements, or experience in actively supervising one or more persons engaged in such activities; | ||
• | an understanding of internal controls and procedures for financial reporting; and | ||
• | an understanding of the audit committee function. |
5 | An “affiliated person” or “affiliate” of a specified person, means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the specified person. The term “control” (including the terms “controlling”, “controlled by” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise. A person who is not an executive officer of the specified person and is not the beneficial owner, directly or indirectly, of more than 10% of any class of voting equity securities of a specified person will be deemed not to be in control of the specified person, and an executive officer, general partner or managing member of an affiliate, or a director who is also is an employee of an affiliate, shall be deemed also to be an affiliate. |
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• | education and experience as a principal financial officer, principal accounting officer, controller, public accountant or auditor or experience in one or more positions that involve the performance of similar functions; | ||
• | experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor or person performing similar functions; | ||
• | experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing or evaluation of financial statements; or | ||
• | other relevant experience. |
1. | Review with management and the external auditors any financial statement issues and the results of the audit including (a) the initial selection of or changes in significant accounting |
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policies used in developing the financial statements, the reasons for and impact of any changes in policy and reasons alternative treatments were not adopted and (b) any off-balance sheet transactions, special purpose entities, transactions with affiliated companies and related parties and the effect of regulatory and accounting initiatives. | ||
2. | Review management’s disposition of proposed significant audit adjustments as identified by the external auditors. | |
3. | Inquire into the fairness of the statements and disclosures by requesting explanations from management and from the internal and external auditors on whether: |
• | Generally accepted accounting principles have been consistently applied. | ||
• | There are any significant or unusual events or transactions. | ||
• | The Company’s financial and operating controls are functioning effectively. | ||
• | The Company’s financial statements contain adequate and appropriate disclosures. |
4. | Review with the external auditors their views as to the quality of the Company’s accounting principles and financial reporting practices. | |
5. | Meet to review and discuss with management and the external auditors the Company’s annual audited financial statements and quarterly financial statements and recommend to the Board the inclusion of the Company’s audited financial statements in its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. | |
6. | Prior to the Company’s filing of each Annual Report on Form 10-K and Quarterly Report on Form 10-Q, meet to review and discuss with management and the external auditors the content of such filing, including the disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and review any exceptions to the certifications required of the Chief Executive Officer and Chief Financial Officer in connection with such filings. The Committee shall also discuss with the external auditors the matters required to be brought to the Committee’s attention by Statement on Auditing Standards No. 61, as well as other matters that should be communicated to the Committee by the external auditors. The Committee shall receive annually the Independence Standards Board Standard No. 1 letter disclosing all relationships between the external auditor and the Company, discuss it with the external auditor, assess impacts on the auditor’s independence, and make recommendations needed to the Board for actions to ensure the auditor’s independence. | |
7. | Discuss with management, prior to their dissemination, earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies, provided that, if it is not otherwise practicable for the entire Committee to review revisions to earnings guidance, such review may be performed by the Chairman of the Committee. |
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1. | Review with management, as well as internal and external auditors, the Company’s business risk management process, including the adequacy of the Company’s overall control environment and controls in selected areas representing significant financial and business risk. | |
2. | Require that the internal and external auditors and management keep the Committee informed about any significant fraud, illegal acts, or deficiencies in internal control, and similar significant matters. | |
3. | Create an opportunity that significant findings and recommendations made by the internal and external auditors can be received and discussed on a timely basis. | |
4. | Review and discuss with management, as well as the internal and external auditors, management’s report on internal control over financial reporting and the report of the external auditors on management’s assessment of internal control over financial reporting prior to the filing of the Company’s Annual Report on Form 10-K. Gain an understanding of whether internal control recommendations made by internal and external auditors have been implemented by management. | |
5. | Inquire as to the extent to which internal and external auditors review computer systems and applications and the security of such systems and applications. |
1. | The Committee shall review as often as it deems necessary but at least annually: |
• | The annual audit plan, activities and organizational structure of the internal audit function. | ||
• | The qualifications of the internal audit function and, when necessary, participate in the appointment, replacement, reassignment, or dismissal of the Director of Internal Audit. | ||
• | The effectiveness of the internal audit function. |
2. | The Committee shall also review periodically as it deems appropriate the reports prepared by the internal audit staff and management’s responses to such reports. |
1. | The Committee shall review: |
• | The external auditors’ proposed audit scope and approach. | ||
• | The performance of the external auditors. |
2. | The Committee shall have the direct responsibility for and the sole authority to engage, compensate, oversee, retain and terminate (subject, where applicable, to shareholder ratification) any accounting firm engaged (including the resolution of any disagreements between |
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management and the Company’s external auditors regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company and such firm shall report directly to the Committee. The Company shall provide appropriate funding (as determined by the Committee) for payment of compensation to the Company’s external auditors. The Committee shall have ultimate authority to approve all audit engagement fees and terms. | ||
3. | The Committee must approve in advance all auditing services, internal control-related services and permitted non-audit services performed by the Company’s external auditors, including tax services, subject to the de minimus exception for non-audit services described in Section 10A(i)1(B) of the Securities Exchange Act of 1934. The Committee may delegate to its Chairman the authority to pre-approve such non-audit services between regularly scheduled meetings provided that such approvals are reported to the Committee at the next committee meeting. Notwithstanding the foregoing, the Company’s external auditors may not provide the following services to the Company: bookkeeping or other services related to the accounting records or financial statements of the Company; financial information systems design and implementation; appraisal or valuation services, fairness opinions or contribution-in kind reports; actuarial services; internal audit outsourcing services; management functions or human resources; broker or dealer, or investment adviser or investment banking services; legal services and expert services unrelated to the audit; and any other service that the applicable federal oversight regulatory authority determines, by regulation, is impermissible. Non-audit services approved by the Committee and performed by the Company’s external auditors must be disclosed to investors in the Company’s reports on Form 10-K and/or proxy statements for its annual meetings of shareholders. | |
4. | The lead (or coordinating) audit partner and the concurring or reviewing partner associated with the Company’s external auditors must be changed at least every five years. | |
5. | The Committee cannot engage external auditors to perform audit services for the Company if the Company’s Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer or any person in an equivalent position was employed by such external auditors within one year preceding the initiation of the audit. | |
6. | The Committee may not engage external auditors to perform audit services for the Company if the external auditors are otherwise not independent with respect to the Company in accordance with Rule 2-01 of Securities and Exchange Commission Regulation S-X (or any successor rule), any independence standards adopted by the Public Company Accounting Oversight Board and any other applicable standards. |
7. | The Committee shall, at least annually, use its best efforts to obtain and review a report from the external auditors addressing: (a) the auditors internal quality-control procedures; (b) any material issues raised by the most recent internal quality-control review, peer review or Public Company Accounting Oversight Board review of the external auditors or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the external auditors and any steps taken to deal with any such issues; and (c) the independence of the external auditors, including a discussion of any relationships or services that may impact their objectivity and independence. |
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8. | The Committee shall obtain from the external auditors in connection with any audit a timely report relating to the Company’s annual audited financial statements describing all critical accounting policies and practices to be used; all alternative treatments within generally accepted accounting principles for policies and practices related to material items that have been discussed with management, including ramifications of the use of such alternative disclosures and treatments and the treatment preferred by the external auditors; and any material written communications between the external auditors and management, such as any management letter or schedule of unadjusted differences. |
1. | Meet at least quarterly, with the external auditors, Director of Internal Audit, and management in separate executive sessions to discuss any matters that the Committee or these groups believe should be discussed privately. | |
2. | Update the Board about Committee activities and make appropriate recommendations, as often as the Board deems appropriate. | |
3. | Annually review and assess the continuing adequacy of this Charter and the performance of this Committee and its members and, if appropriate, recommend changes for the approval of the Board. | |
4. | Prepare a report to shareholders to be included in the Company’s proxy statements as required by the Securities and Exchange Commission. | |
5. | Perform any other activities consistent with this Charter, the Company’s Code of By-laws and governing law, as the Committee or the Board deems necessary, appropriate or desirable. | |
6. | As appropriate, obtain advice and assistance from outside legal, accounting or other advisors without the necessity for prior authorization by the Board. | |
7. | Establish policies for the hiring by the Company of present or former employees of the Company’s external auditors. |
1. | Review and assess at least annually the Company’s Code of Ethical Business Conduct (the “Policy Statement”), recommend to the Board of Directors changes in the Policy Statement as conditions warrant and confirm that management has established a system to monitor compliance with the Policy Statement by officers and relevant employees of the Company. | |
2. | Review management’s monitoring of the Company’s compliance with the Policy Statement, and confirm that management has a review system in place to maximize the likelihood that the |
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Company’s financial statements, reports and other financial information disseminated to governmental organizations and the public satisfy applicable legal requirements. | ||
3. | Review, with the Company’s counsel, legal and regulatory compliance matters including corporate securities trading policies. | |
4. | Review, with the Company’s counsel, any legal or regulatory matter that could have a significant impact on the Company’s financial statements. | |
5. | The Committee shall establish procedures for (a) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and (b) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters. | |
6. | The Committee shall promote an organizational culture that encourages commitment to compliance with the law and use good faith efforts to assure that corporate information and reporting systems exists that are adequate to assure that appropriate information as to compliance matters comes to its attention in a timely manner as a matter of ordinary operations. |
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Proxy for Annual Meeting Of Shareholders To Be Held February 10, 2006
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
(1) | Election of director nominees Rolf A. Classon, Charles E. Golden, W August Hillenbrand, and Eduardo R. Menascé to serve three-year terms as directors. |
FOR ALL NOMINEES | WITHHOLD AUTHORITY | |
(except as marked to the contrary below) |
(INSTRUCTION:To withhold authority to vote for any individual nominee, write that nominee’s name on the line provided below.) |
(2) | Ratification of the appointment of PricewaterhouseCoopers LLP as independent auditors. |
FOR | AGAINST | ABSTAIN |
(3) | In their discretion upon such other business as may properly come before the meeting or any adjournment thereof. |
Please sign name and title exactly | ||
as shown on label on this proxy card. | ||
Dated: , 2006 |