EXHIBIT 10.2
HILLENBRAND INDUSTRIES, INC.
1996 STOCK OPTION PLAN
1. PURPOSE. The purpose of the Hillenbrand Industries, Inc. 1996
Stock Option Plan (the "Plan"), as amended and restated on January 20, 1997
and January 19, 1999, is to provide to officers (including officers who are
members of the Board of Directors), other key employees and non-employee
directors of Hillenbrand Industries, Inc. (the "Corporation") and other key
employees of any of the eighty percent (80%) or greater owned, direct or
indirect, subsidiaries of the Corporation (individually a "Subsidiary" and
collectively the "Subsidiaries") who are materially responsible for the
management or operation of the business of the Corporation or a Subsidiary, a
favorable opportunity to acquire Common Stock, without par value, of the
Corporation ("Common Stock"), thereby providing them with an increased
incentive to work for the success of the Corporation and the Subsidiaries and
to enable the Corporation and the Subsidiaries to attract and retain capable
executive personnel. The two means by which an individual may acquire an
option to purchase Common Stock are: (a) the grant to a key employee of an
option to acquire shares of Common Stock (an "Option") in accordance with
Section 5 hereof, and (b) the grant to a member of the Board of Directors of
the Corporation who is not employed by the Corporation or a Subsidiary (an
"Outside Director") of an option to acquire shares of Common Stock (a
"Director Option") in accordance with Section 7 hereof.
2. ADMINISTRATION OF THE PLAN. Except with respect to grants to an
Outside Director of a Director Option in accordance with Section 7 hereof,
the Plan shall be administered, construed and interpreted by the Subcommittee
of the Performance Compensation Committee of the Corporation's Board of
Directors (the "Committee"). The Committee must be composed of two or more
persons who qualify as "Non-Employee Directors" within the meaning of Rule
16b-3(b)(3) promulgated under the Securities Exchange Act of 1934, as amended
(the "1934 Act") and as "outside directors" as defined in Treasury Reg.
Section 1.162-27(e)(3). The decision of a majority of the members of the
Committee shall constitute the decision of the Committee, and the Committee
may act either at a meeting at which a majority of the members of the
Committee is present or by a written consent signed by all members of the
Committee. The Committee shall have the sole, final and conclusive authority
to determine, consistent with and subject to the provisions of the Plan:
(a) the individuals (the "Optionees") to whom Options are granted
under the Plan;
(b) the time when Options shall be granted hereunder;
(c) the number of shares of Common Stock of the Corporation to be
covered under each Option;
(d) the price to be paid upon the exercise of each Option;
(e) the period within which each Option may be exercised;
(f) the extent to which an Option is an incentive stock option or a
non-qualified stock option;
(g) the extent to which stock appreciation rights shall be awarded in
conjunction with an Option; and
(h) the terms and conditions of the respective agreements by which
Options and stock appreciation rights shall be evidenced.
The Committee shall also have authority to prescribe, amend and rescind rules
and regulations relating to the Plan, and to make all other determinations
necessary or advisable in the administration of the Plan.
Those provisions of the Plan (including, but not limited to, Section 7)
that are applicable to the administration, construction or interpretation of
Director Options (the "Director Option Provisions") shall be administered,
construed and interpreted by those members of the Board of Directors of the
Corporation who are not Outside Directors (the "Inside Directors"). If at
any time there are no Inside Directors, the chief executive officer and the
treasurer of the Corporation shall be deemed to be the Inside Directors for
all purposes of the Plan. The decision of a majority of the Inside Directors
shall constitute the decision of the Inside Directors, and the Inside
Directors may act either at a meeting at which a majority of the Inside
Directors is present or by a written consent signed by all of the Inside
Directors. The Inside Directors shall have the sole, final and conclusive
authority to interpret and construe the Director Option Provisions and to
prescribe, amend and rescind rules and regulations relating to the Director
Option Provisions.
3. ELIGIBILITY FOR OPTIONS. The Committee may, consistent with the
purposes of the Plan, grant Options (and/or related stock appreciation
rights) to officers and other key employees of the Corporation or of a
Subsidiary who in the opinion of the Committee are from time to time
materially responsible for the management or operation of the business of the
Corporation or of a Subsidiary; provided, however, that in no event may any
employee who owns (after application of the ownership rules in Section
424(d) of the Internal Revenue Code of 1986, as amended (the "Code")) shares
of Common Stock possessing more than 10% of the total combined voting power
of all classes of Common Stock of the Corporation be granted an incentive
stock option hereunder unless at the time such option is granted the option
price is at least 110% of the fair market value of the Common Stock subject
to the Option and such incentive stock option by its terms is not exercisable
after the expiration of five (5)
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years from the date such Option is granted. Subject to the provisions of
Section 4 hereof, an individual who has been granted an Option under the
Plan, if he is otherwise eligible, may be granted an additional Option or
Options if the Committee shall so determine. The maximum number of shares of
Common Stock with respect to which Options or stock appreciation rights may
be granted in any calendar year to any individual shall not exceed two
hundred thousand (200,000).
4. STOCK SUBJECT TO THE PLAN. There shall be reserved for issuance
upon the exercise of Options (or stock appreciation rights awarded in
conjunction with Options) and Director Options granted under the Plan three
million (3,000,000) shares of Common Stock which may be authorized but
unissued shares of the Corporation. Subject to Section 8 hereof, the shares
for which Options and/or Director Options may be granted under the Plan shall
not exceed that number. If any Option (including any stock appreciation
right awarded in conjunction with the Option) or any Director Option shall
expire or terminate for any reason without having been exercised in full, the
unpurchased shares subject thereto shall (unless the Plan shall have
terminated) become available for other Options or Director Options under the
Plan. The number of shares of Common Stock available for Options or Director
Options under the Plan shall not be increased by the fact that Options are
exercised by the tendering of additional shares of Common Stock or by the
fact that an Optionee elects to have shares of Common Stock withheld in
accordance with Section 9 hereof.
5. TERMS OF OPTION. Each Option granted under the Plan shall be
subject to the following terms and conditions and to such other terms and
conditions not inconsistent therewith as the Committee may deem appropriate:
(a) OPTION PRICE. The price to be paid for shares of Common Stock
upon the exercise of an Option shall be the average between the high and
the low of the Common Stock on the date of grant (or, if the date of grant
is not a trading date, then on the last previous trading day), but such
price in the case of an incentive stock option in no event shall be less
than the fair market value, as determined by the Committee consistent with
the requirements of Section 422 of the Code, of Common Stock on the date
on which the Option is granted.
(b) PERIOD FOR EXERCISE OF OPTION. An Option shall not be
exercisable after the expiration of such period as shall be fixed by the
Committee at the time such Option is granted, but such period in no event
shall exceed ten (10) years and one (1) day from the date on which such
Option is granted; provided, however, that incentive stock options shall
have terms not in excess of ten (10) years; provided, further, that no
Option shall be exercisable prior to the date on which the Plan is approved
by the shareholders of the Corporation as required by Section 422 of the
Code.
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(c) EXERCISE OF OPTIONS. The option price of each share of Common
Stock purchased upon exercise of an Option shall be paid in full (1) in
cash at the time of such exercise, or (2) if the Optionee may do so in
conformity with Regulation T (12 C.F.R. Section 220.3(e)(4)) and without
violating Section 16(b) or (c) of the 1934 Act (to the extent applicable)
and if permitted under the agreement entered into by the Corporation and
the Optionee relating to the Option, by delivering a properly executed
exercise note together with irrevocable instructions to a broker to deliver
promptly to the Corporation the total option price in cash and, if desired,
the amount of any taxes to be withheld from the Optionee's compensation as
a result of any withholding tax obligation of the Corporation or any of its
Subsidiaries, as specified in such notice, or (3) subject to the approval
of the Committee, by tendering to the Corporation whole shares of Common
Stock owned by him for at least six (6) months having a fair market value
equal to the cash exercise price of the shares with respect to which the
Option is being exercised, or (4) subject to the approval of the Committee,
any combination of such shares and cash. For this purpose, the fair market
value of the shares tendered by the Optionee shall be computed as of the
exercise date in such manner as determined by the Committee, consistent
with the requirements of Section 422 of the Code. The Committee shall
have the authority to grant Options exercisable in full at any time during
their term, or exercisable in such installments, equal or non-equal, as the
Committee shall determine. An Option may be exercised at any time or from
time to time during the term of the Option as to any or all whole shares
which have become subject to purchase pursuant to the terms of the Option
(including, without limitation, any quotas with respect to option exercise)
or the Plan.
(d) TERMINATION OF OPTION. If an Optionee ceases to be an employee
of the Corporation or one of the Subsidiaries or if there is a disposition
of the Subsidiary for which the Optionee performed the majority of his
services, any Option granted to him shall forthwith terminate unless the
Option provides otherwise or the Committee otherwise agrees. Leave of
absence approved by the Committee shall not constitute cessation of
employment. Notwithstanding the foregoing provisions of this subsection
(d), no Option shall be exercisable after the expiration of the period
fixed by the Committee in accordance with subsection (b) above. All
Options shall terminate if the Plan is not approved by the shareholders of
the Corporation within the time period set forth in Section 15.
(e) TRANSFERABILITY OF OPTION. An incentive stock option may not be
transferred by the Optionee otherwise than by will or the laws of descent
and distribution, and during the lifetime of the Optionee shall be
exercisable only by the Optionee. The Committee shall have the discretion
to determine the extent to which non-qualified stock options may be
transferred by Optionees.
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(f) INVESTMENT REPRESENTATIONS. Unless the transfer of shares of
Common Stock subject to an Option are registered under applicable federal
and state securities laws, each Optionee by accepting an Option shall be
deemed to agree for himself and his legal representatives that any Option
granted to him and any and all shares of Common Stock purchased upon the
exercise of the Option shall be acquired for investment and not with a view
to, or for the sale in connection with, any distribution thereof, and each
notice of the exercise of any portion of an Option shall be accompanied by
a representation in writing, signed by the Optionee or his legal
representatives, as the case may be, that the shares of Common Stock are
being acquired in good faith for investment and not with a view to, or for
sale in connection with, any distribution thereof (except in case of the
Optionee's legal representatives for distribution, but not for sale, to his
legal heirs, legatees and other testamentary beneficiaries). Any shares
issued pursuant to an exercise of an option may, but need not, bear a
legend evidencing such representations and restrictions.
(g) MAXIMUM INCENTIVE STOCK OPTIONS. The aggregate fair market value
(determined as of the time the Option is granted) of Common Stock subject
to incentive stock options that are exercisable for the first time by an
employee during any calendar year under the Plan or any other plan of the
Corporation or any Subsidiary shall not exceed $100,000. For this purpose,
the fair market value of such shares shall be determined as of the date the
Option is granted and shall be computed in such manner as shall be
determined by the Committee, consistent with the requirements of Section
422 of the Code. If the immediate exercisability of incentive stock
options arising from the retirement, death or permanent and total
disability of an Optionee consistent with the terms of the applicable
option agreement or arising from any change of control of the Corporation
in accordance with the applicable option agreement would cause this
$100,000 limitation to be exceeded for an Optionee, such incentive stock
options shall automatically be converted into non-qualified stock options
as of the date on which such incentive stock options become exercisable but
only to the extent necessary to comply with the $100,000 limitation.
(h) AGREEMENT. Each Option shall be evidenced by an agreement
between the Optionee and the Corporation which shall provide, among other
things, that, with respect to incentive stock options, the Optionee shall
advise the Corporation immediately upon any sale or transfer of the shares
of Common Stock received upon exercise of the Option to the extent such
sale or transfer takes place prior to the later of (a) two (2) years from
the date of grant or (b) one (1) year from the date of exercise. The
agreement shall include the Option term and exercise conditions.
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(i) CERTIFICATES. The certificate or certificates for the shares of
Common Stock issuable upon an exercise of an Option shall be issued as
promptly as practicable after such exercise. An Optionee shall not have
any rights of a shareholder in respect to the shares of Common Stock
subject to an Option until the date of issuance of a stock certificate to
him for such shares. In no case may a fraction of a share be purchased or
issued under the Plan, but if, upon the exercise of an Option, a fractional
share would otherwise be issuable, the Corporation shall pay cash in lieu
thereof.
(j) NO RIGHT TO CONTINUED SERVICE. Nothing in the Plan or in any
agreement entered into pursuant hereto shall confer on any person any right
to continue in the employ of the Corporation or the Subsidiaries or affect
any rights of the Corporation, a Subsidiary, or the shareholders of the
Corporation may have to terminate his service at any time.
(k) INCENTIVE STOCK OPTIONS AND NON-QUALIFIED STOCK OPTIONS.
Options granted under the Plan may be incentive stock options under Section
422 of the Code or non-qualified stock options. All Options granted
hereunder shall be clearly identified as either incentive stock options or
non-qualified stock options. In no event shall the exercise of an
incentive stock option affect the right to exercise any non-qualified stock
option, nor shall the exercise of any non-qualified stock option affect the
right to exercise any incentive stock option. Nothing in the Plan shall be
construed to prohibit the grant of incentive stock options and
non-qualified stock options to the same person; provided, however, that
incentive stock options and non-qualified stock options shall not be
granted in a manner whereby the exercise of one non-qualified stock option
or incentive stock option affects the exercisability of the other. No
incentive stock option may be granted after the conclusion of a ten (10)
year period commencing on the date the Plan is adopted.
6. STOCK APPRECIATION RIGHTS. The Committee may award a stock
appreciation right in conjunction with either an incentive stock option or a
non-qualified stock option. Under a stock appreciation right, the Optionee may
surrender all or a part of an Option and receive in exchange payment of no more
than 100% of the excess of the fair market value of the Common Stock subject to
the Option on the date of exercise over the exercise price of the Option. The
award of a stock appreciation right shall be evidenced by an agreement between
the Corporation and the Optionee, the provisions of which shall be determined by
the Committee in accordance with the provisions of the Plan.
A stock appreciation right may be exercisable at any date with respect to
no more than the number of shares of Common Stock for which the related Option
is exercisable. A stock appreciation right may be exercisable only when the per
share
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fair market value (as determined in accordance with Section 5(a) hereof) of
the Common Stock subject to the Option exceeds the per share exercise price
of the Option. Each stock appreciation right shall terminate no later than
the termination date of the related Option, and is transferable only with and
to the extent that the related Option is transferable.
The Committee may limit the payment on exercise of a stock appreciation
right to less than 100% of the increase in value, as aforesaid, or it may set
a maximum dollar amount of payment not to exceed 100% of the increase in
value. Payment may be made in cash, in shares of Common Stock, or in a
combination of cash and shares of Common Stock. Notwithstanding any other
provision in the Plan to the contrary, the Committee shall have the sole
discretion either to (a) determine the form in which payment for the stock
appreciation right will be made (i.e., cash, shares of Common Stock or a
combination thereof), or (b) to consent to or disapprove the election of the
Optionee to receive cash in full or partial settlement of the stock
appreciation right. Such consent or disapproval must be given within seven
(7) calendar days after the date on which the Optionee initially elects the
form of payment. Upon exercise of a stock appreciation right respecting a
given number of shares subject to the Option, the right to exercise the
related Option respecting such shares shall automatically terminate.
7. DIRECTOR OPTIONS. Director Options shall be granted as of the
first day following each annual meeting of the Corporation's shareholders (a
"Grant Date"). As of each Grant Date, each Outside Director serving as a
director of the Corporation on that Grant Date shall automatically be granted
a Director Option to purchase four thousand (4,000) shares of Common Stock,
provided, however, that if on a Grant Date the number of remaining shares
available for Director Option grants is not large enough to grant each
Outside Director with a Director Option of four thousand (4,000) shares, the
number of shares covered by the final Director Option for each Outside
Director shall be reduced proportionately to the nearest whole share so that
the number of shares granted under the Plan does not exceed the number of
shares reserved under Section 4 hereof. Each Director Option granted under
the Plan shall be a non-qualified stock option and shall be evidenced by a
Director Stock Option Agreement between the Corporation and the Outside
Director. The Director Stock Option Agreement shall specify the number of
shares of Common Stock subject to the Director Option and shall also be
subject to the following terms and conditions:
(a) DIRECTOR OPTION PRICE. The price to be paid for shares of Common
Stock upon the exercise of each Director Option shall be the average of the
high and low prices of the Common Stock as traded on the New York Stock
Exchange on the Grant Date; provided, however, that if the Grant Date falls
on a day when shares of Common Stock are not traded, the option price of
the Director Option
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shall be determined as of the first day following the Grant Date on which
such shares are traded on the New York Stock Exchange.
(b) PERIOD FOR EXERCISE OF DIRECTOR OPTION. A Director Option shall
be exercisable any time during the period that begins twelve (12) months
after the Grant Date on which such Director Option is granted and that ends
on the ten (10) year anniversary of that Grant Date.
(c) EXERCISE OF DIRECTOR OPTIONS. The option price of each share of
Common Stock purchased upon exercise of a Director Option shall be paid in
full (1) in cash at the time of such exercise, or (2) if the Outside
Director may do so in conformity with Regulation T (12 C.F.R. Section
220.3(e)(4)) and without violating Section 16(b) or (c) of the 1934 Act (to
the extent applicable) and if permitted under the agreement entered into by
the Corporation and the Outside Director relating to the Director Option,
by delivering a properly executed exercise note together with irrevocable
instructions to a broker to deliver promptly to the Corporation the total
option price in cash, or (3) by tendering to the Corporation whole shares
of Common Stock owned by him for at least six (6) months having a fair
market value equal to the cash exercise price of the shares with respect to
which the Director Option is being exercised, or (4) any combination of
such shares of Common Stock and cash. For this purpose, the fair market
value of the shares tendered by the Outside Director shall be the average
of the high and low prices of the Common Stock as traded on the New York
Stock Exchange on the exercise date (or, if the Common Stock is not traded
on that date, the first preceding date on which the Common Stock was traded
on the New York Stock Exchange). A Director Option may be exercised at any
time or from time to time during the term of the Director Option as to any
or all whole shares which have become subject to purchase pursuant to the
terms of the Director Option and the Plan.
(d) TERMINATION OF DIRECTOR OPTION. If an Outside Director ceases to
be a director of the Corporation for any reason other than death, any
Director Option granted to that Outside Director may be exercised in whole
or in part at any time within the three (3) year period immediately
following the date on which his or her status as a director terminated.
Leave of absence approved by the Inside Directors shall not constitute
termination of status as a director. In the event of the death of an
Outside Director while serving as a director of the Corporation, any
Director Option granted to that Outside Director may be exercised in whole
or in part by the executor or administrator of the Outside Director's
estate or by the person or persons entitled to the Director Option by will
or by applicable laws of descent and distribution within one (1) year after
the date of the Outside Director's death, whether or not the Director
Option was otherwise exercisable at such date of death. Notwithstanding
the foregoing
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provisions of this subsection (d), no option shall be exercisable after the
expiration of the period set forth in Section 7(b) above.
(e) TRANSFERABILITY OF DIRECTOR OPTION. A Director Option may not be
transferred by the Outside Director otherwise than by will or the laws of
descent and distribution or as otherwise permitted by the applicable option
agreement; provided, however, that a Director Option may be transferred by
an Outside Director to a revocable trust, or any other trust qualifying as
a "grantor trust" under Section 671-677 of the Internal Revenue Code of
1986, as amended, to be held during the lifetime of an Outside Director for
his or her benefit and an Outside Director may transfer a Director Option
to members of his or her immediate family, i.e., children, grandchildren
and spouse, or to one or more trusts for the benefit of such family members
or to partnerships in which such family members are the only partners or to
such other persons or entities as may be determined by the Inside
Directors.
(f) CERTIFICATES. The certificate or certificates representing the
shares of Common Stock issuable upon an exercise of a Director Option shall
be issued as promptly as practicable after such exercise. An Outside
Director shall not have any rights of a shareholder in respect to the
shares of Common Stock subject to a Director Option until the date of
issuance of a stock certificate representing such shares. In no case may a
fraction of a share be purchased or issued under the Plan, but if, upon the
exercise of a Director Option, a fractional share would otherwise be
issuable, then the Corporation shall pay cash in lieu thereof.
(g) NO RIGHT TO CONTINUED SERVICE. Nothing in this Plan or in any
agreement entered into pursuant hereto shall confer on any person any right
to continue as a director of the Corporation or affect any rights the
Corporation or the shareholders of the Corporation may have to terminate
that person's status as a director at any time.
8. ADJUSTMENT OF SHARES. In the event of any change after the effective
date of the Plan in the outstanding shares of Common Stock of the Corporation by
reason of any reorganization, recapitalization, stock split, stock dividend,
combination of shares, exchange of shares, merger or consolidation, liquidation,
or any other change after the effective date of the Plan in the nature of the
shares of Common Stock of the Corporation, the Committee (or, in the case of
shares to be reserved for issuance pursuant to Director Options, the Inside
Directors) shall determine what changes, if any, are appropriate in the number
and kind of shares of Common Stock reserved under the Plan, in the number of
shares which may be issued to any individual in any calendar year and in the
option price under and the number and kind of shares of Common Stock covered by
outstanding Options or Director Options granted under the
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Plan. Any determination of the Committee or the Inside Directors hereunder
shall be conclusive.
9. TAX WITHHOLDING. Whenever the Corporation proposes or is required to
issue or transfer shares of Common Stock under the Plan, the Corporation shall
have the right to require the Optionee or his legal representative to remit to
the Corporation an amount sufficient to satisfy any federal, state and/or local
tax withholding requirements prior to the delivery of any certificate or
certificates for such shares, and whenever under the Plan payments are to be
made in cash, such payments shall be net of an amount sufficient to satisfy any
federal, state and/or local tax withholding requirements; provided, however,
that notwithstanding the above and to the extent permitted by the Committee, an
Optionee may make a written election to have shares having an aggregate fair
market value sufficient to satisfy the applicable withholding taxes withheld
from the shares otherwise to be received upon the exercise of the Option.
10. AMENDMENT. The Board of Directors of the Corporation may amend the
Plan from time to time, except that without the approval of the Corporation's
shareholders:
(a) the number of shares of Common Stock which may be reserved for
issuance under the Plan may not be increased except as provided in Section
8 hereof;
(b) the period during which an Option or Director Option may be
exercised may not be extended beyond ten (10) years and one (1) day from
the date on which such Option or Director Option was granted;
(c) the class of employees to whom Options may be granted under the
Plan may not be modified materially; and
(d) no other amendment to the Plan may be made which requires the
approval of the Corporation's shareholders under applicable law or under
the rules and regulations of the New York Stock Exchange.
No amendment of the Plan may, without the consent of the Optionee or
Outside Director, make any changes in any outstanding Option or Director Option
theretofore granted under the Plan which would adversely affect the rights of
such Optionee or Outside Director.
11. TERMINATION. The Board of Directors of the Corporation may terminate
the Plan at any time and no Option or Director Option shall be granted
thereafter.
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Such termination, however, shall not affect the validity of any Option or
Director Option theretofore granted under the Plan.
12. SUCCESSORS. The Plan shall be binding upon the successors and assigns
of the Corporation.
13. GOVERNING LAW. The terms of Options and Director Options granted
hereunder and the rights and obligations hereunder of the Corporation, the
Optionees and Outside Directors and their successors in interest shall, except
to the extent governed by federal law, be governed by Indiana law without regard
to conflict of law rules.
14. GOVERNMENT AND OTHER REGULATIONS. The obligations of the Corporation
to issue or transfer and deliver shares of Common Stock under Options or
Director Options granted under the Plan shall be subject to compliance with all
applicable laws, governmental rules and regulations, and administrative action.
15. EFFECTIVE DATE. The Plan became effective on July 9, 1996 and was
amended and restated on January 20, 1997 and January 19, 1999.
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