EXHIBIT 10.1
HILLENBRAND INDUSTRIES, INC.
SHORT-TERM INCENTIVE COMPENSATION PROGRAM
ARTICLE I
PURPOSE AND DEFINITIONS
1.1 PURPOSE. The purpose of this Program is to provide performance-based
incentive awards, in addition to regular salary, to eligible employees
of Hillenbrand Industries, Inc. and its Subsidiaries. The Program
provides the mechanism to pay amounts above the average total cash
compensation when the Company experiences above average financial
success. The Program is designed to encourage high individual and group
performance and is based on the philosophy that employees should share
in the success of the Company if above average value is created for
Company shareholders.
1.2 DEFINITIONS:
(a) "ACHIEVEMENT PERCENTAGE" means a percentage determined in
writing by the Committee.
(b) "BASE INCENTIVE COMPENSATION" means the amount determined in
accordance with Section 4.3.
(c) "BASE SALARY" means the annual calendar earnings of a
Participant including wages and salary as reported for federal
income tax purposes, but excluding all bonus payments of any
kind, commissions, incentive compensation, equity based
compensation, long term performance compensation, perquisites
and other forms of additional compensation.
(d) "BOARD OF DIRECTORS" or "BOARD" means the Board of Directors
of Hillenbrand Industries, Inc.
(e) "BUSINESS CRITERIA" means one or more of the following
financial indexes of the Company or a Subsidiary for a Plan
Year determined in accordance with the Company's accounting
principles less certain non-reoccurring and/or non-expected
events happening in any Plan Year, as determined by the
Committee: revenue, earnings per share, net income,
shareholder value growth, return on equity, cash flow, and
comparisons against Standard & Poor's indices. The Business
Criteria may include both financial and non-financial measures
and may reflect achievement of tactical and strategic plans of
a Subsidiary.
(f) "BUSINESS CRITERIA ACHIEVEMENT" means the actual final result
of a Business Criteria for a Plan Year.
(g) "CAUSE" means
(i) a Participant's embezzlement or material misappropriation
of funds or property of the Employer, or
(ii) the willful engaging by a Participant in conduct
constituting a felony or gross misconduct, which is
material and demonstrably injurious to the Employer.
(h) "CEO" means the Chief Executive Officer of the Company.
(i) A "CHANGE IN CONTROL" means:
(i) the date that both of the following occur:
(A) any person, corporation, partnership,
syndicate, trust, estate or other group
acting with a view to the acquisition,
holding or disposition of securities of the
Company, becomes, directly or indirectly,
the beneficial owner, as defined in Rule
13d-3 under the Securities Exchange Act of
1934 ("Beneficial Owner"), of securities of
the Company representing 35% or more of the
voting power of all securities of the
Company having the right under ordinary
circumstances to vote at an election of the
Board ("Voting Securities"), other than by
reason of (x) the acquisition of securities
of the Company by the Company or any
Subsidiaries or any employee benefit plan of
the Company or any Subsidiaries, (y) the
acquisition of securities of the Company
directly from the Company, or (z) the
acquisition of securities of the Company by
one or more members of the Hillenbrand
Family (which term shall mean descendants of
John A. Hillenbrand and their spouses,
trusts primarily for their benefit or
entities controlled by them), and
(B) members of the Hillenbrand Family cease to
be, directly or indirectly, the Beneficial
Owners of Voting Securities having a voting
power equal to or greater than that of such
person, corporation, partnership, syndicate,
trust, estate or group;
(ii) the consummation of a merger or consolidation of the
Company with another corporation unless
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(A) the shareholders of the Company, immediately
prior to the merger or consolidation,
beneficially own, immediately after the
merger or consolidation, shares entitling
such shareholders to 50% or more of the
voting power of all securities of the
corporation surviving the merger or
consolidation having the right under
ordinary circumstances to vote at an
election of directors in substantially the
same proportions as their ownership,
immediately prior to such merger or
consolidation, of Voting Securities of the
Company;
(B) no person, corporation, partnership,
syndicate, trust, estate or other group
beneficially owns, directly or indirectly,
35% or more of the voting power of the
outstanding voting securities of the
corporation resulting from such merger or
consolidation except to the extent that such
ownership existed prior to such merger or
consolidation; and
(C) the members of the Board, immediately prior
to the merger or consolidation, constitute,
immediately after the merger or
consolidation, a majority of the board of
directors of the corporation issuing cash or
securities in the merger;
(iii) the date on which a majority of the members of the Board
consist of persons other than Current Directors (which
term shall mean any member of the Board on the date
hereof and any member whose nomination or election has
been approved by a majority of Current Directors then on
the Board);
(iv) the consummation of a sale or other disposition of all or
substantially all of the assets of the Company; or
(v) the date of approval by the shareholders of Corporate of
a plan of complete liquidation of the Company.
(j) "COMMITTEE" means the Compensation and Management Development
Committee of the Board appointed to administer the Program
under Article II. Each Committee member shall be an outside
director for purposes of Section 162(m)(4) of the Internal
Revenue Code of 1986, as amended.
(k) "COMPANY" means Hillenbrand Industries, Inc. as a corporate
holding company and does not include Subsidiaries.
(l) "DISABILITY" means a physical or mental disability by reason
of which a Participant is determined by the Office of the
President or its delegate, to be eligible (except for the
waiting period) for permanent disability benefits under Title
II of the Federal Social Security Act.
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(m) "EMPLOYER" means Hillenbrand Industries, Inc., an Indiana
Corporation, and its Subsidiaries.
(n) "EXECUTIVE MANAGEMENT TEAM" means the officers of the
Corporation who report directly to the CEO.
(o) "INCENTIVE COMPENSATION" means the Incentive Compensation as
provided for in Article IV.
(p) "INCENTIVE COMPENSATION OPPORTUNITY" means the percentage of
Base Salary as determined in accordance with Section 4.2.
(q) "PARTICIPANT" means any individual who is a non-bargained for,
full-time or regular part-time employee of the Employer and is
selected for participation in the Program pursuant to Article
III.
(r) "PERCENTAGE OF TARGET ONE ACHIEVEMENT" means a percentage
determined as of the end of each Plan Year as follows:
(Business Criteria Achievement - Performance Base) / (Target
One - Performance Base.)
(s) "PERCENTAGE OF TARGET TWO ACHIEVEMENT" means a percentage
determined as of the end of each Plan Year as follows:
(Business Criteria Achievement - Target One) / (Target Two -
Target One)
(t) "PERFORMANCE BASE" means the base level of achievement of the
Company or a Subsidiary with respect to the Business Criteria,
as determined in accordance with Section 4.1.
(u) "PLAN YEAR" means the fiscal year beginning on October 1st and
ending on September 30th. The first Plan Year shall begin on
October 1, 2003.
(v) "PROGRAM" means the Hillenbrand Industries, Inc. Short-Term
Incentive Compensation Program.
(w) "SUBSIDIARY" means an operating company unit of which a
majority equity interest is owned directly or indirectly by
the Company.
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(x) "TARGET ONE" means a certain level of achievement of the
Company or a Subsidiary with respect to the Business Criteria,
as determined in accordance with Section 4.1.
(y) "TARGET TWO" means a certain level of achievement of the
Company or a Subsidiary with respect to the Business Criteria
which is greater than Target One as determined in accordance
with Section 4.1.
ARTICLE II
ADMINISTRATION
Full power and authority to construe, interpret, and administer the
Program, including power to establish, administer and certify performance goals
related to Incentive Compensation is vested in the Committee. Decisions of the
Committee are final, conclusive and binding upon all parties, including the
Employer, the Company and its shareholders and the Participants. The Committee
may rely upon recommendations of the CEO, the Executive Management Team, or
persons designated by the Committee, in approving financial and non-financial
goals recommended to it.
ARTICLE III
PARTICIPANTS
Participation in this Program by members of the Executive Management
Team or any Company Vice Presidents shall be determined by the Committee. Other
Participants in this Program shall be determined by the CEO or if an eligible
employee is employed by a Subsidiary, then the Chief Executive Officer of such
Subsidiary.
ARTICLE IV
INCENTIVE COMPENSATION
4.1 ESTABLISHMENT OF PERFORMANCE BASE AND TARGET. A Performance Base,
Target One and Target Two for the Company Vice Presidents as a group
shall be recommended by the CEO and approved by the Committee. The
Performance Base, Target One and Target Two of a Participant who is
otherwise employed by the Company shall be established and approved by
the CEO. The Performance Base, Target One and Target Two of a
Participant who is employed by a Subsidiary shall be established and
approved by the CEO and the Chief Executive Officer of each Subsidiary,
respectively. The Performance Base, Target One and Target Two shall be
established annually for the Company and each Subsidiary and will be
communicated to each Participant.
4.2 BASE SALARY AS A PART INCENTIVE COMPENSATION. Incentive Compensation
Opportunity is established in writing annually by the Committee (within
ninety (90) days of the start of each Plan Year) in percentages up to
but not exceeding the following:
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Class of Participant INCENTIVE COMPENSATION OPPORTUNITIES
-------------------- ------------------------------------
Chief Executive Officer of a Subsidiary 75% of Base Salary
Company Chief Financial Officer 75% of Base Salary
Company or Subsidiary Senior Executives 50% of Base Salary
Company or Subsidiary Executives 40% of Base Salary
Other Key Executives 30% of Base Salary
4.3 BASE INCENTIVE COMPENSATION CALCULATION. Attainment of the Performance
Base or below for a Plan Year shall result in Base Incentive
Compensation of 0% of the Incentive Compensation Opportunity as set
forth in Section 4.2 above. If Target Two is met or exceeded for a Plan
Year, Base Incentive Compensation shall be equal to the Achievement
Percentage multiplied by the amount of a Participant's Incentive
Compensation Opportunity as set forth in Section 4.2 above. If Business
Criteria Achievement is between the Performance Base and Target One for
a Plan Year, the Base Incentive Compensation shall be equal to the
Percentage of Target One Achievement multiplied by both (i) the amount
of a Participant's Incentive Compensation Opportunity as set forth in
Section 4.2 above and (ii) a percentage equal to one-half of the
Achievement Percentage. If the Business Criteria Achievement is between
Target One and Target Two for a Plan Year, the Base Incentive
Compensation shall be equal to the amount of a Participant's Incentive
Compensation Opportunities set forth in Section 4.2 above multiplied by
a percentage as determined under the following formula:
[1/2 ACHIEVEMENT PERCENTAGE PLUS (PERCENTAGE OF TARGET TWO ACHIEVEMENT
TIMES 1/2 ACHIEVEMENT PERCENTAGE)]
4.4 INCENTIVE COMPENSATION. After the Business Criteria Achievement and
Base Incentive Compensation has been determined for each Plan Year, the
Committee shall evaluate each Participant on his or her individual
performance goals. The Committee shall determine each Participant's
Incentive Compensation based on individual financial and non-financial
goals for each Participant.
4.5 PAYMENT OF INCENTIVE COMPENSATION. Incentive Compensation shall be due
and payable in cash after forty (40) days but not later than
seventy-five (75) days after the end of the Plan Year.
4.6 ELECTION TO DEFER COMPENSATION - DEFERRAL PERIOD. A Participant may
elect to defer all or any portion of his or her Incentive Compensation.
A Participant's written election to defer any compensation must be made
in the year before the beginning of the period of service, ordinarily a
Plan Year, during which such compensation would otherwise be paid.
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4.7 TERMINATION OF EMPLOYMENT. Subject to Section 4.8 below and the last
sentence of this section, termination of Participant's employment prior
to the last day of the Plan Year for any reasons other than death,
Disability or normal or early retirement (as determined under the
Company's Pension Plan or Savings Plan) shall terminate a Participant's
right to any non-deferred Incentive Compensation. Termination of
employment because of death, Disability or normal or early retirement
shall result in a pro-ration of Incentive Compensation based on the
number of months employed during the Plan Year of a Participant's
termination of employment. Upon a termination of employment for Cause
at any time, a Participant shall forfeit any and all payments due under
this Program.
4.8 CHANGE IN CONTROL. Upon a Change in Control, a Participant's unpaid
Incentive Compensation for a Plan Year ending prior to the Change in
Control shall in all events be paid in accordance with Section 4.5. In
addition, a Participant's Incentive Compensation for the Plan Year
during which the Change in Control occurred shall in no event be less
than the amount calculated pursuant to Sections 4.2, 4.3 and 4.4 above
as if the Target (at 100%) had been achieved. For purposes of such
calculation, Base Salary shall mean such Participant's annualized Base
Salary for the calendar year in which the Change in Control occurred
times a fraction, the numerator of which is the number of months from
the start of the Plan Year up to and including the month during which
the Change in Control occurred and the denominator of which is 12.
Following a Change in Control, the Incentive Compensation under the
Program shall be paid out at the time specified in Section 4.5 above,
provided, however, and notwithstanding Section 4.7 above, that in the
case of a Participant whose employment is terminated prior to payout
(for any reason other than on account of termination of employment by
the Company for Cause) the Incentive Compensation shall be paid out
within 30 days of such termination of employment. In the event of
termination for Cause, the Incentive Compensation shall be forfeited.
ARTICLE V
FINALITY OF DETERMINATION
Each determination made by the Committee and the CEO shall be final,
binding and conclusive for all purposes and upon all persons. The Committee may
rely conclusively on the determinations made by and information received from
the Company's independent public accountants or the Employer employees with
respect to action of the Committee.
ARTICLE VI
LIMITATIONS
No employee of the Employer or any other persons shall have any claim
or right (legal, equitable or other) to be granted any award under the Program,
and no director, officer or employee of the Employer, or any other person, shall
have the authority to enter into any agreement with any person for the making or
payment of any award under the Program or to make any representation or warranty
with respect thereto.
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Neither the action of the Company in establishing the Program nor any
action taken by the Company, the Committee, the Board of Directors, CEO,
Executive Management Team, or any persons designated by them to administer the
Program, nor any provision of the Program, shall be construed as giving to any
Participant or employee of the Employer the right to be retained in the employ
of the Employer.
ARTICLE VII
AMENDMENTS, SUSPENSION OR TERMINATION
The Board may discontinue the Program in whole or in part at any time
and may from time to time amend or revise the terms as permitted by applicable
statute; provided, however, that no such discontinuance, amendment, or revision
shall effect adversely any right or obligation with respect to any award
theretofore made. No amendment shall require shareholder approval unless such
approval is otherwise required by law.
ARTICLE VIII
MISCELLANEOUS
8.1 EFFECTIVE DATE. This Program was approved by the Board of Directors on
August 18, 2003, and became effective October 1, 2003, subject to the
approval of the Program by the stockholders of the Company.
8.2 GOVERNING LAW. This Program shall be governed by and construed in
accordance with the laws of the State of Indiana.
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