EXHIBIT 10.1
HILLENBRAND INDUSTRIES, INC.
AMENDED AND RESTATED SHORT-TERM INCENTIVE COMPENSATION PROGRAM
(AS PROPOSED TO BE REVISED IN SEPTEMBER 2004)
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,
comparisons against Standard & Poor's indices and/or other indices
or comparator groups, as approved by the Committee. 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" shall mean the Committee's good faith determination that a
Participant has:
(i) Failed or refused to fully and timely comply with any
reasonable instructions or orders issued by the Employer,
provided such noncompliance is not based primarily on the
Participant's compliance with applicable legal or ethical
standards;
(ii) Acquiesced or participated in any conduct that is dishonest,
fraudulent, illegal (at the felony level), unethical, involves
moral turpitude or is otherwise illegal and involves conduct
that has the potential, in the Employer's reasonable opinion,
to cause the Employer, its related companies or any of their
respective officers or its directors embarrassment or
ridicule;
(iii) Violated any Employer policy or procedure, specifically
including a violation of Hillenbrand Industries, Inc.'s Code
of Ethical Business Conduct; or
(iv) Engaged in any act, which is contrary to its best interests or
would hold the Employer, its related businesses or any of
their respective officers or directors up to probable civil or
criminal liability, excluding the Participant's actions in
compliance with applicable legal or ethical standards.
(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
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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
(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);
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(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.
(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 POOL" means the aggregate amount of Base
Incentive Compensation for all Participants for any Plan Year.
(q) "INCENTIVE COMPENSATION OPPORTUNITY" means the percentage of Base
Salary as determined in accordance with Section 4.2.
(r) "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.
(s) "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.)
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(t) "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)
(u) "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.
(v) "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.
(w) "PROGRAM" means the Hillenbrand Industries, Inc. Short-Term
Incentive Compensation Program.
(x) "SUBSIDIARY" means an operating company unit of which a majority
equity interest is owned directly or indirectly by the Company.
(y) "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.
(z) "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 corporate officer elected to such position by the Board
shall be determined by the
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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:
CLASS OF PARTICIPANT INCENTIVE COMPENSATION OPPORTUNITIES
-------------------- ------------------------------------
Chief Executive Officer of the Company 90% of Base Salary
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
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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. The aggregate amount of Incentive Compensation
that can be paid to all Participants for any Plan Year shall not exceed
the Incentive Compensation Pool for such Plan Year. The Committee may
create or authorize, with the assistance of the CEO, sub-pools for
Participants based on which Subsidiary they are employed by or any other
criteria the Committee deems appropriate, provided that the aggregate
amount of all sub-pools cannot exceed the Incentive Compensation Pool for
any Plan Year. The aggregate amount of Incentive Compensation that can be
paid to all Participants in a sub-pool or combination of sub pools is the
aggregate amount of Base Incentive Compensation allocated by the Committee
to such sub-pool or combination of sub-pools.
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.
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
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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.
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,
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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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