EXHIBIT 10.1
HILLENBRAND INDUSTRIES, INC.
SENIOR EXECUTIVE COMPENSATION PROGRAM
ARTICLE I
PURPOSE - The purpose of this Program is to reward the creation of long term
shareholder value by providing incentive compensation, perquisite and other
compensation to a limited number of senior, key executives of Hillenbrand
Industries, Inc., and its subsidiaries, who contribute by their imagination,
resourcefulness, skills and insight to the business objectives of the
Corporation.
ARTICLE II
DEFINITIONS:
1. "Program" means the Senior Executive Compensation Program which consists of
the following components:
- Short-term Incentive Compensation
- Performance Share Compensation
- Perquisite Compensation
- Deferred Compensation
- Supplemental Pension
2. "Corporation" means Hillenbrand Industries, Inc., an Indiana corporation,
and its subsidiaries.
3. "Corporate" means Hillenbrand Industries, Inc., as a corporate holding
company and does not include subsidiaries.
4. "Subsidiary" means an operating company unit of which a majority equity
interest is owned directly or indirectly by the Corporation.
5. "Board of Directors" or "Board" means the Board of Directors of Hillenbrand
Industries, Inc.
6. "Committee" means the Performance Compensation Committee appointed to
administer the Program. "Sub-Committee" means the sub-committee of the
Performance Compensation Committee appointed to establish and administer
the Performance Base and Target (performance goals) for Incentive
Compensation and shareholder value goals (performance goals) for
Performance Share Compensation.
7. "Office of the President" means the Office of the President of Corporate.
8. "Participant" means a key employee selected for participation in the
Program pursuant to Article IV.
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9. "Incentive Compensation" means the short term Incentive Compensation as
provided in Article V.
10. "Performance Share Compensation" means the long term Performance Share
Compensation as provided in Article VI.
11. "Perquisite Compensation" means the Perquisite Compensation as provided in
Article VII.
12. "Deferred Compensation" means the Deferred Compensation arrangement as
provided in Article VIII.
13. "Supplemental Pension" means Supplemental Pension as provided in Article
IX.
14. "Base Salary" means the annual calendar earnings of a Participant including
salary as reported for federal income tax purposes, but excluding all bonus
payments of any kind, commissions, incentive compensation, long term
performance compensation, perquisites and other forms of additional
compensation.
15. "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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ARTICLE III
ADMINISTRATION - Full power and authority to construe, interpret, and administer
the Program, with the exception of establishing and administering performance
goals, is vested in the Committee. The Sub-Committee has full power to
establish, administer and certify performance goals related to Incentive
Compensation and Performance Share Compensation. Their decisions are final,
conclusive and binding upon all parties, including the Corporation, the
shareholders thereof, and the Participants. The Committee and the Sub-Committee
may rely upon recommendations of the Office of the President or the Chief
Executive Officer in approving financial and non-financial goals recommended to
it.
ARTICLE IV
PARTICIPATION - Selection of key employees for participation for each of the
components of compensation contemplated by the Program are set forth in Articles
V, VI, VII, and VIII.
ARTICLE V
INCENTIVE COMPENSATION - The purpose of Incentive Compensation is to provide
financial recognition to Participants, the amount of which is determined by the
attainment of annual financial and/or non-financial goals.
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1. PARTICIPANTS - Participation in Incentive Compensation by members of the
Office of the President and Corporate Vice Presidents shall be determined
by the Committee. Other Participants in Incentive Compensation shall be
determined by the Office of the President pursuant to recommendation from
the Chief Executive Officer of Corporate, or if an employee of a
Subsidiary, by the Chief Executive Officer thereof.
2. ESTABLISHMENT OF PERFORMANCE BASE AND TARGET - A Performance Base and
Target for members of the Office of the President and Corporate Vice
Presidents as a group shall be recommended by the Chief Executive Officer
of Corporate and approved by the Sub-Committee. The Performance Base and
Target for each Participant who is a Chief Executive Officer of a
Subsidiary shall be approved by the Office of the President. The
Performance Base and Target for other Corporate Participants and other
Subsidiary Participants shall be established and approved by the Office of
the President and the Chief Executive Officer of each Subsidiary,
respectively. The Performance Base and Target shall be established
annually for Corporate and each Subsidiary and will be communicated to each
Participant. The Performance Base and Target for members of the Office of
the President and Corporate Vice Presidents shall be directly related to
the return on shareholder equity of the Corporation or as otherwise
determined by the Sub-Committee. The Performance Base and Target for other
Participants shall include both financial and non-financial measures and
shall reflect accomplishment of tactical and strategic plans of each
Subsidiary.
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3. COMPUTATION OF INCENTIVE COMPENSATION - Incentive Compensation opportunity
is established as follows:
CLASS OF PARTICIPANT INCENTIVE COMPENSATION OPPORTUNITIES
Office of the President 60% of Base Salary
Chief Executive Officer of 50% of Base Salary
Subsidiary
Corporate or Subsidiary 40% of Base Salary
Senior Executive
Other Executive 30% of Base Salary
Attainment of the Performance Base shall result in Incentive Compensation
of a predetermined percentage from 0% to 50% of the above incentive
compensation opportunity. If the Performance Target is met or exceeded,
Incentive Compensation of a predetermined percentage from 150% to 300% of
the above incentive compensation opportunity will be paid. Achievement of
results between Performance Base and Target will generate incentive
compensation calculated according to a predetermined pro-rata method. The
various determinations are recommended by the Office of the President and
approved by the Sub-Committee.
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4. PAYMENT OF INCENTIVE COMPENSATION - At the end of each fiscal year,
Incentive Compensation for each Participant shall be calculated pursuant to
paragraph 3 above. Attainment of financial and non-financial goals for
those Participants shall be considered in calculation of Incentive
Compensation pertaining thereto. In no event shall Incentive Compensation
be more than the value established pursuant to paragraph 3 above.
Incentive Compensation shall be due and payable in cash after forty (40)
days but within seventy-five (75) days after the end of the fiscal year;
except that all or a portion thereof may be deferred pursuant to the
Deferred Compensation arrangement set forth in Article VIII. The Sub-
Committee will certify in writing that performance goals were attained
prior to payout.
5. TERMINATION - Termination of a Participant's employment for reasons other
than death, Disability or normal or early retirement shall terminate any
non-deferred Incentive Compensation. Termination 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 out of the
fiscal year of termination.
ARTICLE VI
PERFORMANCE SHARE COMPENSATION - The purpose of Performance Share Compensation
is to reward Participants for the creation of value for the shareholders of
Corporate over continuing three year periods.
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1. PARTICIPANTS - Members of the Office of the President shall be Participants
in Performance Share Compensation as approved by the Committee. Other
Participants in Performance Share Compensation shall be determined by the
Committee, pursuant to the recommendation of the Chief Executive Officer of
Corporate, or if an employee of a Subsidiary other than the Chief Executive
Officer thereof, by the Chief Executive Officer thereof.
2. DETERMINATION OF TENTATIVE AWARD - On the first day of each fiscal year
tentative Performance Share Compensation (Tentative Award) shall be
determined for each Participant. The Tentative Award shall be the quotient
obtained by dividing (a) the product of the Participant's Base Salary and
the salary factor set forth in the following table by (b) the Average
Annual Share Price.
CLASS OF PARTICIPANT SALARY FACTORY
Office of the President .50
Subsidiary Chief Executive Officer .45
Corporate or Subsidiary .30
Senior Executive
Other Executive .20
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The Average Annual Share Price shall be determined by averaging the closing
price of the common stock of Corporate on the last trading date of each
fiscal quarter of the preceding fiscal year. The Tentative Award thus
determined shall be expressed in terms of a number of shares of common
stock of Corporate rounded to the next highest whole share.
3. PERFORMANCE SHARE PERIOD - A performance share period ("Period") shall
begin on the first day of each fiscal year and shall include the next three
(3) consecutive fiscal years.
4. DETERMINATION OF PERFORMANCE SHARE COMPENSATION - Shareholder value created
by the Corporation shall be the basis for determining payout of Performance
Share Compensation for Corporate Participants. At the beginning of each
Period the Sub-Committee, based on recommendations from the Office of the
President, shall approve goals, including a base goal, a target goal and a
200% achievement goal for the creation of shareholder value to be achieved
during the Period for the Corporation. Such goals shall be communicated to
the Corporate Participants.
Shareholder value created by each Subsidiary or other goals shall be the
basis for determining Performance Share Compensation for Subsidiary
Participants. At the beginning of each Period the Sub-Committee, based on
recommendations from the Office of the President, shall approve goals,
including a base goal, a target goal and a 200% achievement goal
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for the shareholder value or other goals to be achieved during the Period
for each Subsidiary. Such goals shall be communicated to the Subsidiary
Participants.
5. CALCULATION OF PERFORMANCE SHARE COMPENSATION - At the end of each Period,
Performance Share Compensation shall be calculated for each Participant.
If the shareholder value created equals or is greater than the base goal,
Performance Share Compensation shall be calculated by multiplying the
Tentative Award by a fraction, the numerator of which is the actual
shareholder value created for the Corporation less the base goal and the
denominator of which is the target goal less the base goal. If the actual
shareholder value created is greater than the target goal, but less than
the 200% achievement goal, Performance Share Compensation shall be
calculated by multiplying the Tentative Award by the sum of: (a) one (1),
and (b) the product obtained by multiplying one (1) times a fraction the
numerator of which is the actual shareholder value created less the target
goal and the denominator of which is the 200% achievement goal less the
target goal. If the actual shareholder value equals or exceeds the 200%
achievement goal, the Award shall be calculated by multiplying the
Tentative Award by two (2).
6. PAYMENT OF THE PERFORMANCE SHARE COMPENSATION - Shares of common stock of
Corporate representing Performance Share Compensation shall be delivered to
the Participant within a reasonable time after Performance Share
Compensation is determined but not
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sooner than forty (40) days after the end of the Period and not later than
seventy-five (75) days thereafter; except that all or a portion thereof
may be deferred pursuant to the Deferred Compensation arrangement set
forth in Article VIII. The Sub-Committee will certify in writing that
performance goals were attained prior to payment.
7. TERMINATION - Termination of a Participant's employment for reasons other
than death, Disability or normal or early retirement shall terminate any
non-deferred Performance Share Compensation. Termination of a
Participant's employment by reason of death, Disability or normal or early
retirement shall result in a reduction of Performance Share Compensation by
multiplying Performance Share Compensation by a fraction the numerator of
which is the number of fiscal year full months occurring between the
establishment of a Tentative Award and such termination, and the
denominator of which is 36.
ARTICLE VII
PERQUISITE COMPENSATION - The purpose of Perquisite Compensation is to provide
Participants with certain benefits to aid such Participants in carrying out
their duties, to help provide for their well being, and to create the potential
for added long term financial security.
1. PARTICIPANTS - Office of the President, Chief Executive Officer of
Subsidiaries and Corporate and Subsidiary Senior Executives shall be
eligible for Perquisite Compensation.
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2. PERQUISITE COMPENSATION - Perquisite Compensation shall not exceed ten
percent (10%) of the Base Salary of a Participant subject to such other
limits as may be imposed on Participants who constitute the Office of the
President and Corporate Vice Presidents by the Committee or on other
Participants by the Chief Executive Officer. A variety of perquisite
options shall be determined by the Chief Executive Officer from time to
time and communicated to the Participants, except that any perquisite
option involving the purchase of common stock of Corporate subject to the
approval of the Committee.
3. CARRYOVERS - Perquisite Compensation is available during the fiscal year
during which it is earned. Balances from one fiscal year shall be carried
forward to the succeeding fiscal year only. Amounts carried forward to the
succeeding fiscal year and not spent shall be forfeited.
ARTICLE VIII
DEFERRED COMPENSATION - The purpose of Deferred Compensation is to provide
voluntary and mandatory deferral of portions of compensation paid to a
Participant by the Corporation.
1. PARTICIPANTS - Participants deferring compensation shall execute a Deferred
Compensation Agreement (the "Agreement") with Corporate outlining their
various rights, duties and obligations thereunder.
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2. ELECTION TO DEFER COMPENSATION - DEFERRAL PERIOD - A Participant may elect
to defer all or any portion of Base Salary, Incentive Compensation,
Performance Share Compensation and Perquisite Compensation. A
Participant's written election to defer any compensation must be made
before the beginning of the period of service, ordinarily a fiscal year,
during which such compensation would otherwise be paid. The election must
state the duration of the deferral period, and shall be irrevocable.
3. DEFERRALS OF BASE SALARY, INCENTIVE COMPENSATION AND PERQUISITE
COMPENSATION - (a) When earned, amounts deferred from a Participant's Base
Salary, Incentive Compensation and Perquisite Compensation shall be
credited, but not paid, to an account in the name of the Participant and
shall accrue interest credited monthly at the end of each of the
Corporation's fiscal months at a rate which is equal to the monthly prime
interest rate (determined as of the first day of each month) charged by the
Corporation's principal bank, or, at the election of the Committee,
Participant's selected by the Committee may be credited at such other rate
or rates as may be determined by the Committee. At the end of the deferral
period payment shall be made in cash. (b) In the alternative, a
Participant may elect that Incentive Compensation amounts deferred, when
earned shall be credited, but not paid, to an account in the name of the
Participant which shall be assumed to be invested in the common stock of
Corporate, at the then current market price. Dividends, stock dividends,
stock splits and other rights inuring to the common stock of Corporate
which would be normally payable thereon shall be assumed to be reinvested
in the common stock of Corporate at the market value on
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the date of assumed payment. Such election shall be made prior to the
period during which the amount is earned and, once made, shall be
irrevocable. At the end of the deferral period payment shall be made in
shares of common stock of Corporate.
4. DEFERRALS OF PERFORMANCE SHARE COMPENSATION - (a) When due and payable,
amounts deferred from Performance Share Compensation will be credited, but
not paid, to an account in the name of the Participant which shall be
assumed to be invested in the common stock of Corporate. Dividends, stock
dividends, stock splits and other rights inuring to the common stock of
Corporate, which would be normally payable thereon shall be assumed to be
reinvested in the common stock of Corporate at the market value on the date
of the assumed payment. At the end of the deferral period payment shall be
made in shares of common stock of Corporate. (b) Beginning with the
1995/1997 Period, all Performance Share Compensation earned above the 100%
target goal will be deferred without election by the Participant until the
Participant's death or the latter of (i) reaching age 62 or (ii)
termination of employment. Mandatory deferred shares will be subject to
forfeiture in the event the Participant voluntarily terminates his
employment (except by reason of retirement after reaching age 62) during
the three years following the end of a Period according to the following
schedule: (i) termination during the first year following the end of a
Period will result in forfeiture of all of the mandatory deferred shares
relating to that Period; (ii) termination during the second year following
the end of a Period will result in forfeiture of two-thirds of the
mandatory deferred
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shares relating to that Period; and (iii) termination during the third
year following the end of a Period will result in forfeiture of one-
third of the mandatory deferred shares relating to that Period.
5. FINANCIAL HARDSHIP - A withdrawal of Deferred Compensation credited to a
Participant's account prior to the termination of the deferral period shall
be permitted in the event the Participant experiences serious financial
hardship which is beyond the Participant's control and which would cause
the Participant severe hardship if such withdrawal were not permitted.
Serious financial hardship may include a disability or unexpected and
unreimbursed major expenses resulting from illness or accident or impending
bankruptcy. Any Participant desiring such withdrawal by reason of serious
financial hardship must apply to the Committee and demonstrate that the
circumstances being experienced were not under the Participant's control
and constitute a real emergency which is likely to cause great financial
hardship. The Committee shall have the authority to require such medical
or other evidence as it may need to determine the necessity for
Participant's withdrawal request.
If such application for withdrawal is permitted, the amount of such
withdrawal shall be limited to an amount of the Participant's account
which would have been payable if the Participant's employment with the
Corporation was terminated. The allowed amount of withdrawal shall be
payable in lump sum or common stock certificate promptly after notice to
the Participant of approval by the Committee. If a Participant makes a
withdrawal, the amount of the Participant's account under the Program
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shall be proportionately reduced to reflect such withdrawal. The balance
of the Participant's account, if any, shall be payable according to
otherwise applicable provisions of the Program.
ARTICLE IX
SUPPLEMENTAL PENSION - The purpose of Supplemental Pension is to provide and
supplement the normal retirement benefit which may be reduced or limited due to
the deferral of compensation or statutory limitation.
1. PARTICIPANTS - Office of the President, Chief Executive Officer of
Subsidiary, and Corporate or Subsidiary Senior Executive shall be eligible
for supplemental pension benefits.
2. SUPPLEMENTAL PENSION BENEFITS - In the event a Participant's pension
benefit under any qualified pension plan of the Corporation in effect at
the time of the Participant's retirement (or other event requiring the
payment of a benefit thereunder) shall be less than said benefit would have
been as a result of the deferral of any compensation, then the Corporation
will pay the difference to the Participant at such time as the amount would
have been paid under the qualified pension plan. As and for an additional
supplemental pension benefit, the Corporation shall pay to the Participant
any difference between the Participant's pension benefits actually payable
under the pension plan and the amount that would have been payable but for
any statutory limitation incorporated into the pension plan language as a
requirement of law. Such
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supplemental pension benefit will be paid by the Corporation at such time
as the amount would have been paid under the qualified pension plan but for
the limitation.
ARTICLE X
FINALITY OF DETERMINATION - Each determination made by the Committee and the
Office of the President shall be final, binding and conclusive for all purposes
and upon all persons and the Committee may rely conclusively on the
determinations made by the Corporation's independent public accountants or by
the Corporation's employees with respect to action of the Committee.
ARTICLE XI
LIMITATIONS - No employee of the Corporation or any other persons shall have any
claim or right (legal, equitable or other) to be granted any award hereunder,
and no director, officer or employee of the Corporation, or any other person,
shall have the authority to enter into any agreement with any person for the
making or payment of any award or to make any representation or warranty with
respect thereto.
1. No Participant for whose benefit compensation has been deferred shall have
any right in compensation other than to receive compensation at the time
and in the form elected by the Participant subject to the fulfillment of
the conditions described herein, which right may not be
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assigned or transferred except by will or the laws of the descent and
distribution.
2. Neither the action of the Corporation in establishing this Program nor any
action taken by the Corporation, the Committee, the Board of Directors, or
the Office of the President, nor any provision of this Program, shall be
construed as giving to any Participant or employee of the Corporation the
right to be retained in the employ of the Corporation.
ARTICLE XII
AMENDMENTS, SUSPENSION OR TERMINATION - The Committee may discontinue this
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 affect adversely any right or
obligation with respect to any award theretofor made and provided further that
any amendment increasing the number of shares of common stock of Corporate
available to the Program shall be subject to the approval of the Board of
Directors. No amendment shall require shareholder approval unless such approval
is otherwise required by law.
ARTICLE XIII
RESERVATION OF SHARES - As of December 4, 1994, an aggregate of 1,160,825 shares
of common stock of Corporate are authorized and remain reserved for issuance
under this Program.
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The number of shares of common stock of Corporate authorized for issuance under
this Program shall be subject to adjustment by the Committee, in its sole
discretion, to reflect any stock split, stock dividend, recapitalization,
merger, consolidation, reorganization, combination or exchange of shares or
other similar event.
ARTICLE XIV
EFFECTIVE DATE - This Program was approved by the Board of Directors on October
4, 1977, became effective December 1, 1977 for the fiscal year beginning on the
date and, as amended and restated, was approved by the Board of Directors on
January 22, 1991, effective April 1, 1991, and approved April 5, 1994, effective
December 4, 1994 respectively, and amended by the Committee on January 18, 1999.
ARTICLE XV
GOVERNING LAW - This Program shall be governed and construed in accordance with
the laws of the State of Indiana.
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