SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant: Lilly Industries, Inc.
Filed by a Party other than the Registrant:
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Lilly Industries, Inc.
(Name Of Registrant As Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2)
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6-(i)(3)
[ ] 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: N/A
(2) Aggregate number of securities to which transaction
applies: N/A
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: N/A
(4) Proposed maximum aggregate value of transaction:
N/A
[ ] 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. N/A
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
LILLY INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 21, 1994
The Annual Meeting of Shareholders of Lilly Industries,
Inc., an Indiana corporation (the "Company"), will be held at One
Indiana Square, Ohio and Pennsylvania Streets, Indianapolis,
Indiana in the 5th Floor Auditorium on Thursday, April 21, 1994
at 10:00 A.M., local time, for the following purposes:
1. To elect ten directors.
2. To transact such other business as may properly come
before the meeting.
The Board of Directors has established the close of business
on February 18, 1994 as the record date for determining
shareholders entitled to notice of and to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Roman J. Klusas, Secretary
March 17, 1994
YOUR VOTE IS IMPORTANT
Even if you plan to attend the meeting,
we urge you to mark, sign and date the enclosed
proxy and return it promptly in the enclosed envelope.
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of
Lilly Industries, Inc., an Indiana corporation (the "Company"),
733 South West Street, Indianapolis, Indiana 46225, for use at
the Annual Meeting of Shareholders to be held on April 21, 1994
and at any adjournment thereof. This Proxy Statement and the
enclosed proxy were mailed on or about March 17, 1994.
All shares represented by the enclosed proxy will be voted
at the meeting in accordance with the instructions given by the
shareholder. If no instruction is given, the shares will be
voted in favor of the actions recommended by the Board of
Directors and, in the absence of any recommendation, in accordance
with the best judgment of the proxy holders. A shareholder
executing and delivering the enclosed proxy may revoke it, by a
written notice delivered to the Secretary of the Company or in
person at the meeting, at any time before it is exercised.
The Company will bear the cost of soliciting the proxies.
In addition to being solicited by mail, proxies may be solicited
by personal interview, telephone and telegram by directors,
officers and employees of the Company. The Company expects to
reimburse brokers or other persons for their reasonable out-of-
pocket expenses in forwarding proxy material to the beneficial
owners.
PROPOSAL I
ELECTION OF DIRECTORS
Ten directors will be elected at the meeting. The holders
of Class A Stock will elect four directors and the holders of
Class B Stock will elect six directors. Each director will serve
until the next annual meeting or until his successor is elected
and qualified. All of the nominees listed below are directors
whose present terms of office will expire upon completion of the
election at the meeting. Unless authorization is withheld, the
enclosed proxy will be voted in favor of electing as directors
the nominees listed below. If any nominee should be unable to
serve, the proxy will be voted for a substitute nominee selected
by the Board of Directors.
Directors will be elected by a plurality of the votes cast
for nominees by the holders of Class A Stock and Class B Stock at
the Annual Meeting of Shareholders at which a quorum is present.
"Plurality" means that the director nominees who receive the
largest number of votes cast are elected as directors up to the
maximum number of directors to be chosen at the meeting.
Abstentions, broker non-votes, and instructions on the
accompanying proxy card to vote against one or more of the
nominees will be considered as not voted.
H. J. (Jack) Baker, Robert H. McKinney, John D. Peterson and
Van P. Smith are nominees for election as directors by holders of
the Class A Stock; and Robert S. Bailey, William C. Dorris,
Douglas W. Huemme, Roman J. Klusas, Thomas E. Reilly, Jr., and
Richard A. Steele are nominees for election as directors by
holders of the Class B Stock.
The name, principal occupation, business experience since
1989, tenure, number and percentage of outstanding shares of the
Company and its subsidiaries beneficially owned on February 18,
1994, and age of each nominee for election as a director are set
forth below. Unless otherwise indicated, each nominee has sole
investment and voting power with respect to the shares shown as
beneficially owned by him.
Percentage of
Outstanding
Served Shares Shares
Name, Principal Continuously Beneficially Beneficially
Occupation and as a Director Owned at Owned
Prior Business Experience Since Title of Class 2/18/94 (13) at 2/18/94 Age
ROBERT S. BAILEY 1971 Class A Stock 11,714 (1) * 63
Senior Vice President, Class B Stock 16,974 7.56%
Marketing of the Company
since 1989; Vice President
and General Manager of the
Company's Indianapolis
Division from prior
to 1989 to 1989.
H. J. (JACK) BAKER 1985 Class A Stock 4,252 (2) * 66
Chairman of BMW Constructors, Inc.
(industrial mechanical contractor)
since prior to 1989; director of
two publicly-held corporations
(other than the Company): First
Indiana Corporation and The
Somerset Group, Inc.
WILLIAM C. DORRIS 1989 Class A Stock 2,997 (3) * 51
General Manager of the Company's Class B Stock 12,525 5.58%
High Point Division since prior
to 1989, of the Company's
Templeton Division since
1991 and of the Company's
Dallas Division since 1993.
DOUGLAS W. HUEMME 1990 Class A Stock 4,431 (4) * 52
Chairman, President and Chief Class B Stock 14,700 6.55%
Executive Officer of the Company
since July, 1991; President and
Chief Operating Officer of the
Company since June, 1990; Vice
President and Group Executive of
the Chemical Group of Whittaker
Corporation from prior to 1989
to April, 1990; director of one
publicly-held corporation (other
than the Company): The Somerset
Group, Inc.
ROMAN J. KLUSAS 1988 Class A Stock 5,128 * 47
Vice President and Chief Class B Stock 12,000 5.34%
Financial Officer, and
Secretary of the Company
since prior to 1989.
ROBERT H. McKINNEY 1985 Class A Stock 14,041 (5) * 68
Chairman and Chief Executive
Officer, The Somerset Group,
Inc. (or its predecessor)
since prior to 1989;
Chairman and Chief
Executive Officer, First
Indiana Corporation since prior
to 1989; retired partner,
Bose, McKinney & Evans,
attorneys; director of
two publicly-held corporations
(other than the Company): First
Indiana Corporation and The
Somerset Group, Inc.
JOHN D. PETERSON 1964 Class A Stock 100,856 (6) * 60
Chairman of City Securities
Corporation (7) (securities
dealer) since prior to 1989;
director of two publicly-held
corporations (other than the
Company): Duke Realty
Investments, Inc., and Capital
Industries, Inc.
THOMAS E. REILLY, JR. 1981 Class A Stock 14,417 (8) * 54
Chairman and Chief Executive
Officer of Reilly Industries,
Inc. (diversified chemical
manufacturing firm) since
May, 1990, and President of
Reilly Industries, Inc. from
prior to 1989 through
August, 1990.
VAN P. SMITH 1985 Class A Stock 4,252 (9) * 65
Chairman of Ontario Corporation,
Muncie, Indiana (metallurgically-
related manufacturing and services
firm serving the aircraft and
aerospace industries) since
prior to 1989; director of
four publicly-held corporations
(other than the Company):
PSI Resources, Inc., PSI
Energy, Inc., Meridian Mutual
Insurance Company, and Meridian
Insurance Group, Inc.
RICHARD A. STEELE 1981 Class A Stock 13,398 (10) * 67
Retired President and Chief
Executive Officer of Citizens
Gas and Coke Utility (gas
distribution utility) since
prior to 1989.
All current directors and Class A Stock 178,280 (11) 1.20%
officers as a group, Class B Stock 66,249 (12) 29.50%
consisting of 11 persons
___________________________________
<FN>
* Represents less than one percent of outstanding shares.
(1) Includes 546 shares of Class A Stock beneficially owned by Mr. Bailey and his wife as joint tenants.
Does not include 550 shares of Class A Stock owned of record and beneficially by Mr. Bailey's wife.
Mr. Bailey disclaims beneficial ownership of those 550 shares.
(2) Includes 3,150 shares of Class A Stock which Mr. Baker has the right to acquire pursuant to
currently exercisable stock options.
(3) Does not include 436 shares of Class A Stock which Mr. Dorris' wife holds as custodian for their
minor child. Mr. Dorris disclaims beneficial ownership of those 436 shares.
(4) Includes 2,791 shares of Class A Stock which Mr. Huemme has the right to acquire pursuant to
currently exercisable stock options.
(5) Includes 3,150 shares of Class A Stock which Mr. McKinney has the right to acquire pursuant to
currently exercisable stock options.
(6) Does not include 165 shares of Class A Stock held by City Securities Corporation in the ordinary
course of its business as a dealer in securities and incident to the maintenance by it of a market
of Class A Stock. Mr. Peterson owns more than 10% of the equity of City Securities Corporation.
Includes 34,346 shares held in an investment account at City Securities Corporation. Does not
include 23,032 shares of Class A Stock owned of record and beneficially by Mr. Peterson's wife. Mr.
Peterson disclaims beneficial ownership of those 23,032 shares. Includes 9,633 shares of Class A
Stock owned beneficially by Mr. Peterson as trustee of a GST Investment Share Trust for benefit of
Mr. Peterson and 19,266 shares of Class A Stock owned beneficially by Mr. Peterson as trustee of two
GST Investment Share Trusts for benefit of Mr. Peterson's two sisters. Includes 3,150 shares of
Class A Stock which Mr. Peterson has the right to acquire pursuant to currently exercisable stock
options.
(7) John D. Peterson is the Chairman and a shareholder of City Securities Corporation, a securities
dealer located in Indianapolis, Indiana. City Securities Corporation is a market maker for the
Company's Class A Stock. Since December 1, 1992, the Company's Employees Stock Purchase Plan has
purchased 9,759 shares of Class A Stock from City Securities Corporation for an average purchase
price of $17.05 per share. These amounts have been adjusted to reflect the 3-for-2 stock split in
March, 1993. The shares were purchased periodically from City Securities Corporation for a price
per share equal to the last quoted asked price for the shares in the over-the-counter market.
(8) Does not include 3,174 shares of Class A Stock which Mr. Reilly's wife holds as custodian for their
minor child. Mr. Reilly disclaims beneficial ownership of those 3,174 shares. Includes 3,150
shares of Class A Stock which Mr. Reilly has the right to acquire pursuant to currently exercisable
stock options.
(9) Includes 3,150 shares of Class A Stock which Mr. Smith has the right to acquire pursuant to
currently exercisable stock options.
(10) Includes 3,150 shares of Class A Stock which Mr. Steele has the right to acquire pursuant to
currently exercisable stock options.
(11) Includes 2,794 shares of Class A Stock beneficially owned by Kenneth L. Mills, Director of Corporate
Accounting and Assistant Secretary of the Company. Includes 21,691 shares of Class A Stock which
all directors and officers of the Company have the right to acquire pursuant to currently
exercisable stock options.
(12) Includes 10,050 shares of Class B Stock (4.48% of total Class B Stock outstanding) beneficially
owned by Kenneth L. Mills, Director of Corporate Accounting and Assistant Secretary of the Company.
(13) Adjusted for all stock splits and stock dividends through February, 1994.
Committees of the Board of Directors and Compensation of
Directors
Among other committees, the Board of Directors of the
Company has a Compensation Committee, a Nominating Committee, and
an Audit Committee.
The Compensation Committee, which held two meetings during
the Company's fiscal year ended November 30, 1993, formulates and
presents to the Board of Directors for its consideration
recommendations as to the Chairman's compensation, determines the
aggregate amount to be paid as employee bonuses by the Company
and its subsidiaries, and determines the aggregate and individual
base salaries and bonuses to be paid to officers of the Company.
Van P. Smith (Chairman), H. J. Baker, and Thomas E. Reilly, Jr.
are the current members of the Compensation Committee.
The Nominating Committee, which held one meeting during the
Company's fiscal year ended November 30, 1993, identifies and
presents candidates as potential members of the Company's Board
of Directors. Robert H. McKinney (Chairman), Van P. Smith, and
Richard A. Steele are the current members of the Nominating
Committee.
The Audit Committee, which held two meetings during the
Company's fiscal year ended November 30, 1993, is responsible for
recommending to the Board the firm to select as independent
auditors, for reviewing the scope and the results of the audits
made by the independent auditors, for overseeing the adequacy of
internal controls, and for reviewing and approving fees paid to
the independent auditors. Richard A. Steele (Chairman), John D.
Peterson, and Thomas E. Reilly, Jr. are the current members of
the Audit Committee.
The Board of Directors held five meetings during the
Company's fiscal year ended November 30, 1993. No incumbent
director attended fewer than 75% of the aggregate of such
meetings of the Board and meetings of committees of which he was
a member at the time of the meeting.
Directors who are also employees of the Company receive no
director fees. Non-employee directors received for the fiscal
year ended November 30, 1993 an annual retainer of $7,500 (except
for the chairman of the Audit Committee, Policy Committee,
Nominating Committee, and Compensation Committee who each
received an additional annual retainer of $500) and $600 for each
meeting of the Board or Board committee attended.
The Lilly Industries, Inc. 1991 Director Stock Option Plan
(the "Directors Plan") provides for the granting of non-qualified
options for up to a maximum of 15,750 shares of Class A Stock per
calendar year and provides automatically for the grant of options
for 1,575 shares of Class A Stock to each non-employee director
on the date of each annual meeting of the shareholders, beginning
with the 1992 Annual Meeting. The Directors Plan is intended to
be substantially self-administering.
The Company has reserved 157,500 shares of Class A Stock for
issuance upon exercise of options to be granted under the
Directors Plan. As of February 18, 1994 there were options for
an aggregate of 28,350 shares of Class A Stock outstanding.
Options for 11,025 shares, at an exercise price of $7.78 per
share, were automatically granted on October 18, 1991 (date of
Board adoption). Options for 9,450 shares, at an exercise price
of $13.01 per share, were automatically granted on April 23, 1992
(date of 1992 Annual Meeting). Options for 9,450 shares, at an
exercise price of $16.25 per share, were automatically granted on
April 22, 1993 (date of 1993 Annual Meeting). Options granted
under the Directors Plan will generally become exercisable on the
first anniversary of the date upon which they were granted. Each
option terminates five years after its grant date.
No options under the Directors Plan were exercised in fiscal
year 1993. All amounts granted and exercise prices listed above
have been adjusted to reflect all stock splits and stock
dividends through February, 1994.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overview and Philosophy
The Compensation Committee of the Board of Directors of the
Company is composed entirely of non-employee directors. The
Committee formulates and presents to the Board of Directors
recommendations as to the Chairman's compensation and base
salaries for all officers of the Company, the aggregate amount to
be paid as employee bonuses by the Company and the aggregate and
individual bonuses to be paid to officers of the Company. The
Compensation Committee also serves as the Stock Option Committee
for the Company's 1992 Stock Option Plan. The following report
of the Compensation Committee discusses the application of the
Compensation Committee's policies to the annual and long-term
compensation of the Company's executive officers for fiscal 1993.
The objective of the Company's executive compensation
program is to enhance the Company's long-term profitability by
providing compensation that will attract and retain superior
talent, reward performance and align the interests of the
executive officers with the long-term interests of the
shareholders of the Company.
Executive Officer Compensation
For fiscal 1993 compensation for the Company's executive
officers consisted of base salary, annual cash bonuses, stock
options, supplemental executive retirement plans, and various
broad based employee benefits, including pension plans and
contributions under employee stock purchase and 401(k) plans.
Base salary levels for the Company's executive officers are
competitively set relative to companies in peer businesses. In
determining salaries, the Committee also takes into account
individual experience and performance.
The Company's annual bonus plan is intended to provide a
direct cash incentive to executive officers and other key
employees to maximize the Company's profitability. At the
beginning of each fiscal year, financial performance objectives
are targeted for the Company and individual divisions which
become the basis for determining annual bonuses. If the Company
and/or divisions achieve their target performance, then
participants receive an established target bonus. The amount of
bonus will increase or decrease by specified percentage within an
established range based upon actual performance compared to
target performance. The bonuses for 1993 were determined in
December, 1993 based upon fiscal year-end financial results.
Stock Options
Through its stock option program, the Company seeks to
enable its executive officers and other key employees to develop
and maintain a long-term ownership position in the Company's
common stock, thereby creating a direct and strong link between
executive pay and shareholder return. On June 25, 1993 the Stock
Option Committee granted the incentive stock options reflected in
the tables that follow. In granting stock options, the Stock
Option Committee took into account the practices of other peer
companies, reviewed surveys, and considered the executive's level
of compensation and past contributions to the Company.
Compensation Committee and
Stock Option Committee
Van P. Smith, Chairman
H. J. Baker
Thomas E. Reilly, Jr.
COMPENSATION OF EXECUTIVE OFFICERS
Shown below is information concerning the annual and long-
term compensation for services to the Company performed during
the fiscal years indicated of those persons who were at November
30, 1993 the chief executive officer and the other three most
highly compensated executive officers.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation:
Shares Underlying All Other
Fiscal Annual Compensation Stock Options Compensa-
Name and Principal Position Year Salary Bonus Granted (1) tion (2)
Douglas W. Huemme 1993 $293,077 $280,000 0 $5,983
Chairman, President and 1992 235,077 200,000 70,876 6,228
Chief Executive Officer 1991(3) 213,750 120,000 12,404 1,576
Roman J. Klusas 1993 123,846 140,000 5,000 3,738
Vice President and Chief 1992 110,558 100,000 31,501 4,087
Financial Officer, Secretary 1991 90,000 40,000 0 1,139
Robert S. Bailey 1993 131,577 85,000 4,000 6,811
Senior Vice President, 1992 122,395 100,000 31,501 5,227
Marketing 1991 121,000 45,000 0 1,997
Kenneth L. Mills 1993 92,331 37,000 2,000 3,290
Director of Corporate 1992 83,064 32,000 7,875 2,706
Accounting, Assistant 1991 72,723 20,000 827 1,004
Secretary
<FN>
(1) Adjusted for all stock splits and stock dividends through February, 1994.
(2) All Other Compensation is comprised of matching Company contributions on behalf of the employees to
the Employees Stock Purchase Plan and the 401(k) Plan, and a portion of Company payments for group
term life insurance premiums. These three types of All Other Compensation for fiscal year 1993 are
respectively detailed by employee as follows: Douglas W. Huemme--$1,000, $4,119 and $864; Roman J.
Klusas--$1,000, $2,477 and $261; Robert S. Bailey--$1,000, $4,632 and $1,179; and Kenneth L. Mills--
$650, $2,487 and $153.
(3) Mr. Huemme was appointed Chairman, President and Chief Executive Officer of the Company in July,
1991.
STOCK OPTION GRANTS
The following table provides details regarding stock options
granted to the named executive officers in fiscal 1993. In
addition there are shown the hypothetical gains or "option
spreads" that would exist for the respective options. These
gains are based on assumed rates of annual compound stock price
appreciation of 5% and 10% from the date the options were granted
over the full option term. These amounts represent certain
assumed rates of appreciation only. Actual gains, if any, on
stock option exercises and common stock holdings are dependent on
the future performance of the Company's common stock and the
overall stock market conditions. There can be no assurance that
the amounts reflected on this table will be achieved.
FISCAL 1993 STOCK OPTION GRANTS
Potential
Percent of Realizable Value
Number Total Options Assuming Annual
of Shares Granted to Rates of Stock
Underlying Employees Exercise Price Appreciation
Options in Fiscal Price Per Expiration for Option Term
Name Granted (1) 1993 Share Date 5% 10%
Roman J. Klusas 5,000 5.80% $15.88 06/25/98 $21,938 $48,474
Robert S. Bailey 4,000 4.64% 15.88 06/25/98 17,551 38,779
Kenneth L. Mills 2,000 2.32% 15.88 06/25/98 8,775 19,389
<FN>
(1) Stock options granted to the named executive officers during fiscal 1993 consisted of both qualified
and non-qualified options. One-third of these options become exercisable on each of June 25, 1995,
1996 and 1997. The purchase price of shares subject to these options may be paid in cash or by
exchanging shares at fair market value. For non-qualified stock options granted, the grantee will
be reimbursed for federal income taxes resulting from exercise in an amount equal to the Company's
tax benefit.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table shows stock option exercises by named
executive officers during fiscal 1993, including the aggregate
value realized by such officers on the date of exercise. In
addition, this table includes the number of shares covered by
both exercisable and non-exercisable stock options as of November
30, 1993. Also reported are the values for "in-the-money"
options (options whose exercise price is lower than the market
value of the shares at fiscal year end) which represent the
spread between the exercise price of any such existing stock
options and the fiscal year-end market price of the stock.
1993 STOCK OPTION EXERCISES,
OUTSTANDING GRANTS AND VALUE AS OF NOVEMBER 30, 1993
Number of
Shares Underlying Value of
Unexercised Unexercised
Value Options at In-the-Money
Realized 11/30/93 Options at
Shares at Exer- Unexer- 11/30/93 (4)
Acquired on Exercise cisable cisable Exer- Unexer-
Name Exercise (1) Date (2) (1) (1),(3) cisable cisable (3)
Douglas W. Huemme 2,942 $17,786 9,876 83,486 $135,353 $956,362
Roman J. Klusas 3,150 33,186 5,966 36,501 83,285 377,731
Robert S. Bailey 1,775 25,010 3,039 35,501 42,424 371,361
Kenneth L. Mills 3,434 33,822 0 10,426 0 107,330
<FN>
(1) Adjusted for all stock splits and stock dividends through February, 1994.
(2) Aggregate market value of shares exercised less the aggregate price paid by executive.
(3) The shares represented could not be acquired by the respective executive as of November 30, 1993.
(4) Amount reflecting gains on outstanding options are based on the November 30, 1993 closing NASDAQ
stock price which was $22.25 per share.
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The line graph below compares annual changes in cumulative
total return to shareholders on the Company's Common Stock
against the cumulative total return as measured by the Standard &
Poor's 500 Composite Index and the Standard & Poor's Chemical
Composite Index. The comparisons are for a period of five fiscal
years ended November 30, 1993.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
(Filed in paper under cover of Form SE)
Dollar Value November 30
1988 1989 1990 1991 1992 1993
_________________________________________________
Lilly Common 100.00 116.22 83.62 99.48 183.52 287.40
S&P 500 100.00 126.41 117.73 137.09 157.60 168.72
S&P Chemical 100.00 124.90 104.94 122.58 138.81 148.58
<FN>
* Assumes $100 was invested on November 30, 1988 in Lilly
Industries, Inc. Common Stock and each index.
Also, assumes reinvestment of all dividends.
PENSION PLANS
Retirement benefits are provided by the Company and its
subsidiaries under non-contributory pension plans, each of which
is qualified under Section 401 of the Internal Revenue Code.
Under the pension plan in which officers of the Company may
participate, each full-time salaried employee is entitled, upon
retirement, to receive a monthly pension based on his length of
service and his average monthly earnings during 60 consecutive
months producing the highest average. The earnings covered by
the Company's pension plans include cash salary, wages and
bonuses actually paid, plus Company contributions made on behalf
of the participants pursuant to the Employees Stock Purchase Plan
of the Company and any amounts deferred or redirected by
participants under any cash or deferred arrangement and salary
reduction plans maintained by the Company under Section 401(k)
and Section 125 of the Internal Revenue Code. Such compensation
does not vary substantially from the cash compensation reported
in the executive officer's summary compensation table on page 7.
The estimated annual retirement benefits presented on a
straight-life annuity basis payable at the normal retirement age
of 65 under those plans to persons in specified remuneration and
years-of-service classifications are as follows (benefits listed
in the table are not subject to any further offset):
Assumed Average
Earnings During Five Years of Service at Age 65
Consecutive Years
Producing Highest Average 10 20 30 40 50
$100,000 $12,500 $25,000 $37,500 $ 50,000 $ 62,500
125,000 15,625 31,250 46,875 62,500 78,125
150,000 18,750 37,500 56,250 75,000 93,750
175,000 21,875 43,750 65,625 87,500 109,375
200,000 25,000 50,000 75,000 100,000 115,641
235,840 29,480 58,960 88,440 115,641 115,641
The years of service credited to the following officers of
the Company on December 1, 1993 under the pension plan in which
they participate are as follows: Douglas W. Huemme--3.5; Roman
J. Klusas--6.8; Robert S. Bailey--40.2; and Kenneth L. Mills--
16.0.
Effective for the plan years beginning December 1, 1993
compensation used in calculating benefits is limited to $235,840.
In addition the Employee Retirement Income Security Act of 1974
("ERISA") limits the annual benefits that may be paid from the
Company's tax qualified plans (the "Section 415 limit"). The
Section 415 limit for 1993 is $115,641 for any one employee.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Company maintains a Supplemental Executive Retirement
Plan (the "SERP") providing supplemental benefits in the event of
disability, retirement, or death for individuals or other key
executives in senior management positions (including the
individuals listed in the summary compensation table).
The SERP has been designed so that, if the assumptions made
as to mortality experience, policy dividends and other factors
are realized, the Company will recover all its payments under the
SERP, plus a factor for the use of the Company's money, through
insurance policies. Moreover, the Board of Directors has
retained the right to terminate, modify or reduce any benefits
payable under the SERP at any time under any circumstances.
Under the SERP, it is anticipated that a participant will
receive annual retirement benefits up to $15,000, $20,000,
$25,000 or $50,000 (depending upon the responsibilities and
duties of the position held by the participant) for a period of
15 years after retirement (the "retirement benefit"). Unless a
participant becomes disabled, the participant must remain
continuously employed by the Company in their current position or
in a more senior management position until retirement. Benefits
are payable monthly.
If a participant becomes disabled prior to retiring from the
Company, it is anticipated that the participant will receive
monthly disability payments equal to the monthly retirement
benefits the participant would have received under the retirement
provisions of the SERP for 15 years after the participant is
determined to be disabled. If a participant dies prior to
retiring from the Company, the participant's estate or designated
beneficiary receives death benefit payments for 15 years. If a
participant who is receiving disability or retirement benefits
under the SERP dies, the participant's estate or designated
beneficiaries are entitled under the current SERP to receive the
balance of the participant's benefits monthly.
Estimated annual benefits payable upon normal retirement for
each of the most highly compensated executive officers of the
Company are as follows: Douglas W. Huemme--$50,000; Roman J.
Klusas--$25,000; Robert S. Bailey--$25,000; and Kenneth L. Mills-
- -$15,000. Estimated annual benefits payable upon normal
retirement for all current employee participants (excluding
executive officers) as a group are $140,000.
EMPLOYMENT TERMINATION AGREEMENTS
Three executive officers, Roman J. Klusas, Robert S. Bailey,
and Kenneth L. Mills, have Termination Benefits Agreements
providing for payment of severance benefits equal to one year's
salary and benefits if the Company undergoes a change in control
within the ten-year term of the Agreement (commencing December 1,
1990) and if, within three years after such change in control,
any such executive is terminated without "cause" or resigns for
"good reason", as those terms are defined in the Agreement.
OUTSTANDING SHARES AND VOTING RIGHTS
Shareholders of record on February 18, 1994 are entitled to
notice of, and to vote at, the Annual Meeting of Shareholders,
and at any adjournment thereof. On that date 14,883,440 shares
of the Company's Class A Stock and 224,577 shares of the
Company's Class B Stock were outstanding, each share (except the
3,492 shares of Class A Stock held by the Employees Stock
Purchase Plan) being entitled to one vote with respect to every
matter submitted to a vote of the shares of that class.
Seven persons are known by management to own beneficially
more than 5% of the outstanding shares of the Company's Class A
Stock or Class B Stock. The names and addresses of these persons
and the number and percentage of shares if more than 5% of the
outstanding shares of Class A Stock or Class B Stock owned
beneficially by them as of February 18, 1994 (except for the
shares owned by College Retirement Equities Fund which are as of
February 8, 1994) are included in the following table. Unless
otherwise indicated each shareholder has sole investment and
voting power with respect to the shares indicated.
Amount and
Nature of
Name and Address of Beneficial Percent
Beneficial Owner Title of Class Ownership(1) of Class
Robert S. Bailey Class B Stock 16,974 7.56%
733 South West Street
Indianapolis, IN 46225
William C. Dorris Class B Stock 12,525 5.58%
1717 English Road
High Point, NC 27262
Ned L. Fox Class B Stock 13,189 5.87%
733 South West Street
Indianapolis, IN 46225
Bill D. Hawkins Class B Stock 11,850 5.28%
2305 Industrial Road
Dothan, Al 36303
Douglas W. Huemme Class B Stock 14,700 6.55%
733 South West Street
Indianapolis, IN 46225
Roman J. Klusas Class B Stock 12,000 5.34%
733 South West Street
Indianapolis, IN 46225
College Retirement Class A Stock 863,785 5.80%
Equities Fund
730 Third Avenue
New York, NY 10017
________________________
<FN>
(1) Adjusted for all stock splits and stock dividends through
February, 1994.
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Company has selected the firm of Ernst & Young,
certified public accountants, as independent auditors to make an
examination of the accounts of the Company for its fiscal year
ending November 30, 1994. Ernst & Young has served in that
capacity since 1956. Representatives of Ernst & Young will be
present at the Annual Meeting with the opportunity to make a
statement, if they desire to do so, and will respond to
appropriate questions.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the
annual meeting to be held in April, 1995 must be received by the
Company at its principal executive offices for inclusion in the
proxy statement and form of proxy relating to that meeting no
later than November 17, 1994.
ANNUAL REPORT
The Annual Report for the Company's fiscal year ended
November 30, 1993 is being mailed with this Proxy Statement to
all shareholders. The Annual Report is not a part of the proxy
soliciting material. Insofar as any of the information in this
Proxy Statement has been furnished by persons other than the
Company, the Company relies upon information furnished by others
for the accuracy and completeness thereof.
March 17, 1994
PROXY CARD
Class A Stock
Lilly Industries, Inc.
PROXY
For Annual Meeting of Shareholders
To Be Held April 21, 1994
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints THOMAS E. REILLY, JR. and JOHN D.
PETERSON, or either of them, with full power of substitution, as
proxies to vote all shares of Class A Stock held by the
undersigned at the Annual Meeting of Shareholders of Lilly
Industries, Inc. to be held at One Indiana Square, Indianapolis,
Indiana, in the 5th Floor Auditorium, at 10:00 a.m., local time,
and at any adjournment of the meeting, on the following matters:
I. Election of Directors.
____ FOR all four nominees listed below
(except as marked to the contrary below)
____ AGAINST all nominees
H. J. (Jack) Baker, Robert H. McKinney, John D. Peterson,
Van P. Smith
(INSTRUCTION: To vote against any individual nominee, write that
nominee's name on the line provided below.)
_______________________________________________________
II. In their discretion upon such other business as may come
before the meeting.
This proxy may be revoked at any time before it is exercised.
(Continued and to be signed on the other side.)
(Reverse Side of Proxy Card)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THE
SHARES WILL BE VOTED FOR ALL PROPOSALS. IF ANY DIRECTOR NOMINEE
SHOULD BE UNABLE TO SERVE, THE SHARES WILL BE VOTED FOR A
SUBSTITUTE NOMINEE SELECTED BY THE BOARD OF DIRECTORS. IF ANY
OTHER BUSINESS COMES BEFORE THE MEETING, THE SHARES REPRESENTED
BY THIS PROXY WILL BE VOTED IN FAVOR OF THE ACTION RECOMMENDED BY
THE BOARD OF DIRECTORS AND, IN THE ABSENCE OF A RECOMMENDATION,
IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PROXY HOLDERS.
Please sign exactly and as fully as shown on this proxy card.
Dated: _______________________, 1994
________________________________________
Signature
________________________________________
Signature if held jointly
IMPORTANT: This proxy is solicited on behalf of the Board of
Directors. Please sign, date and return this proxy promptly in
the enclosed envelope.
PROXY CARD
Class B Stock
Lilly Industries, Inc.
PROXY
For Annual Meeting of Shareholders
To Be Held April 21, 1994
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints DOUGLAS W. HUEMME and ROMAN J. KLUSAS,
or either of them, with full power of substitution, as proxies to
vote all shares of Class B Stock held by the undersigned at the
Annual Meeting of Shareholders of Lilly Industries, Inc. to be
held at One Indiana Square, Indianapolis, Indiana, in the 5th
Floor Auditorium, at 10:00 a.m., local time, and at any
adjournment of the meeting, on the following matters:
I. Election of Directors.
____ FOR all six nominees listed below
(except as marked to the contrary below)
____ AGAINST all nominees
Robert S. Bailey, William C. Dorris, Douglas W. Huemme,
Roman J. Klusas, Thomas E. Reilly, Jr., Richard A. Steele
(INSTRUCTION: To vote against any individual nominee, write that
nominee's name on the line provided below.)
_________________________________________________________
II. In their discretion upon such other business as may come
before the meeting.
This proxy may be revoked at any time before it is exercised.
(Continued and to be signed on the other side.)
(Reverse Side of Proxy Card)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THE
SHARES WILL BE VOTED FOR ALL PROPOSALS. IF ANY DIRECTOR NOMINEE
SHOULD BE UNABLE TO SERVE, THE SHARES WILL BE VOTED FOR A
SUBSTITUTE NOMINEE SELECTED BY THE BOARD OF DIRECTORS. IF ANY
OTHER BUSINESS COMES BEFORE THE MEETING, THE SHARES REPRESENTED
BY THIS PROXY WILL BE VOTED IN FAVOR OF THE ACTION RECOMMENDED BY
THE BOARD OF DIRECTORS AND, IN THE ABSENCE OF A RECOMMENDATION,
IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PROXY HOLDERS.
Please sign exactly and as fully as shown on this proxy card.
Dated: ___________________, 1994
___________________________________
Signature
___________________________________
Signature if held jointly
IMPORTANT: This proxy is solicited on behalf of the Board of
Directors. Please sign, date and return this proxy promptly in
the enclosed envelope.