UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
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Annual Report Pursuant to
Section 13 or 15(d)
of the Securities Exchange Act of 1934 |
| For the fiscal year ended September 30, 2003 | Commission File No. 1-6651 |
HILLENBRAND INDUSTRIES, INC.
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Indiana
(State or other jurisdiction of incorporation or organization) |
35-1160484
(I.R.S. Employer Identification No.) |
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700 State Route 46 East
Batesville, Indiana (Address of principal executive offices) |
47006-8835
(Zip Code) |
Registrant’s telephone number, including area code: (812) 934-7000
| Title of Each Class | Name of Each Exchange on Which Registered | |
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| Common Stock, without par value | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| Yes ü | No |
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
| Yes ü | No |
State the aggregate market value of the common stock held by non-affiliates of the registrant.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
Documents incorporated by reference.
HILLENBRAND INDUSTRIES, INC.
Annual Report on Form 10-K
September 30, 2003
TABLE OF CONTENTS
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PART I | |||||||
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Item 1.
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Business | 3 | ||||||
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Item 2.
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Properties | 12 | ||||||
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Item 3.
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Legal Proceedings | 12 | ||||||
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Item 4.
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Submission of Matters to a Vote of Security Holders | 13 | ||||||
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PART II | |||||||
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Disclosure Regarding Forward Looking Statements | 13 | ||||||
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Item 5.
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Market for Registrant’s Common Equity and Related Stockholder Matters | 14 | ||||||
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Item 6.
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Selected Financial Data | 15 | ||||||
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Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 | ||||||
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Risk Factors | 54 | ||||||
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Item 7A.
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Quantitative and Qualitative Disclosures About Market Risk | 59 | ||||||
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Item 8.
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Financial Statements and Supplementary Data | 60 | ||||||
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Item 9.
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Changes in and Disagreements With Accountants on Accounting and Financial Disclousre | 95 | ||||||
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Item 9A.
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Controls and Procedures | 95 | ||||||
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PART III | |||||||
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Item 10.
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Directors and Executive Officers of the Registrant | 96 | ||||||
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Item 11.
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Executive Compensation | 96 | ||||||
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management And Related Stockholder Matters | 96 | ||||||
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Item 13.
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Certain Relationships and Related Transactions | 96 | ||||||
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Item 14.
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Principal Accountant Fees and Services | 96 | ||||||
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PART IV | |||||||
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Item 15.
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Exhibits, Financial Statement Schedules, and Reports on Form 8-K | 97 | ||||||
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SIGNATURES | 104 | ||||||
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PART I
Item 1. BUSINESS
Hillenbrand Industries, Inc., an Indiana corporation incorporated on August 7,
1969 and headquartered in Batesville, Indiana, is a diversified, public
holding company and the owner of 100% of the capital stock of its three major
operating companies serving the health care and funeral services industries in
the United States and abroad. Hill-Rom is a manufacturer of equipment for the
health care industry and a provider of associated systems for wound, pulmonary
and circulatory care. Batesville Casket and Forethought both serve the
funeral services industry. Batesville Casket is a manufacturer of caskets and
cremation-related products while Forethought is a provider of financial
products and services designed to help people prefund anticipated funeral and
cemetery costs. Unless the context otherwise requires, the terms
“Hillenbrand” and the “Company” refer to Hillenbrand Industries, Inc., and its
consolidated subsidiaries, and the terms “Hill-Rom Company”, “Batesville
Casket Company” and “Forethought Financial Services”, and derivations thereof,
refer to one or more of the subsidiary companies of Hillenbrand that comprise
those businesses.
Health Care
Hill-Rom Company is a recognized leader in the worldwide health care community
providing sales, rentals, service and support for products including hospital
bed systems, non-invasive therapeutic surfaces and devices, stretchers and
transport systems, furniture, communication and locating systems, headwalls and
operating room accessories. Depending upon customer preferences, utilization
levels and financial objectives, many Hill-Rom® products are available to
customers on either a sales or a rental basis.
The Hill-Rom® line of electrically adjustable hospital beds includes
models, which, through siderail and pendant controls, can be raised, lowered
and adjusted to varied orthopedic and therapeutic contours and positions.
Hospital bed models include the TotalCare Sp0
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RT® bed, a pulmonary bed that
delivers rotation, percussion, and vibration; the TotalCare® bed, a bed
designed for the critically acute patient; the Advanta™, AvantGuard™ and
CareAssist™ beds, designed for a variety of med/surg applications; and the
Affinity® III bed, a bed specifically designed for the needs of the maternity
department. Hill-Rom also provides therapy products for acute care, home care
and long term care applications designed to reduce pressure ulcer prevalence
rates and pulmonary complications, to facilitate patient transfer and
positioning, and to prevent deep vein thrombosis (DVT). Hill-Rom also
manufactures a full line of stretchers under the “TranStar®” name.
Other Hill-Rom® products include nurse call systems, fetal monitoring
information systems, siderail communications, surgical table accessories,
wood-finished and metal/plastic bedside cabinets, adjustable-height overbed
tables, mattresses and upholstered wooden chairs. Its architectural products
include customized, prefabricated modules, either wall-mounted or on
freestanding columns, enabling medical gases, communication accessories and
electrical services to be distributed in patient rooms.
The Company continues to expand its line of products and services to
improve the efficiency and effectiveness of the health care environment for
patients and health care providers. In October 2003, Hill-Rom acquired
Advanced Respiratory, Inc., a manufacturer and distributor of non-invasive
airway clearance products and systems known as The Vest™ airway clearance
system for a purchase price of $83 million, subject to certain working capital
adjustments at the date of close not to exceed $12 million, with additional
contingent payments not to exceed $20 million based on Advanced Respiratory
achieving certain net revenue targets. Also in October 2003, the Company
signed an agreement to acquire Mediq, Inc. (Mediq), a provider of medical
equipment outsourcing, asset management and peak-needs rentals to hospitals and
extended care and home medical equipment makers, for a purchase price of
approximately $330 million. Subject to regulatory approvals and other
conditions, the Company expects to close the acquisition of Mediq before the
end of January 2004. The Company also recently sold its piped-medical gas business and signed
an agreement to sell its infant care products business, reflecting the
Company’s continued efforts to streamline and
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rationalize its existing portfolio of assets. These activities are further described in Note 16 to the
Consolidated Financial Statements, which statements are included under Item 8.
Hill-Rom operates hospital bed, therapy bed and patient room manufacturing
and development facilities in the United States and France. Hill-Rom® products
are sold and/or rented directly to acute and long-term health care facilities
throughout the United States, Canada, Australia and Europe by Hill-Rom account
executives. Hill-Rom has contracts with a number of group purchasing
organizations in the United States as well as government purchasers in other
countries. A significant portion of Hill-Rom’s sales are made pursuant to
these contracts. Most Hill-Rom® products are delivered by Hill-Rom owned
trucks. Hill-Rom also sells products through distributorships throughout the
world.
Within the wound care business, CLINITRON® Air Fluidized Therapy is
provided as a therapeutic adjunct in the treatment of advanced pressure sores,
flaps, grafts and burns. The CLINITRON® unit achieves its support
characteristics from the fluid effect created by forcing air up and through
medical-grade ceramic microspheres contained in the unit’s fluidization
chamber.
Hill-Rom’s other wound and pulmonary care technology, low airloss therapy,
consists of a sleep surface with air-filled cushions separated into integrated
zones. Air pressure is automatically adjusted whenever the patient changes
position. Micro air vents on the cushions allow for the controlled release of
air. This technology is applied to either an integrated unit or as an overlay
to an existing bed. Low airloss products include the Flexicair Eclipse®
mattress, a portable, rental mattress replacement for the acute care
environment; the Silkair® mattress, a low airloss overlay product for home
care; and the V-Cue® mattress, a rotational mattress for pulmonary
applications. In addition to the above products, Hill-Rom’s European
operations have also introduced the Duo Deteq® mattress that combines advanced
pressure control technology in two clinically accepted therapies, the
continuous low pressure Primo™ mattress and the Alto® alternating pressure
relief mattress. Hill-Rom introduced its ActiveCare® sequential compression
device for the prevention of deep vein thrombosis in August of 2003.
Clinical support for Hill-Rom’s wound, pulmonary and circulatory care
therapy systems is provided by a sales force composed primarily of nurses and
health care professionals. Technical support is made available by an extensive
network of technicians and service personnel who provide maintenance and
technical assistance from Hill-Rom Service Centers.
Hill-Rom® therapy systems are made available to hospitals, long-term care
facilities and homes on a rental basis through more than 200 Service Centers
located in the United States, Canada and Western Europe. Certain Hill-Rom®
therapy systems are also made available to customers on a sales basis.
Funeral Services
Batesville Casket Company, an Indiana Corporation, was founded in 1884 and
acquired by the Hillenbrand family in 1906. Batesville manufactures and sells
gasketed caskets made of carbon steel, stainless steel, copper and bronze. It
also produces and markets non-gasketed steel and wood caskets. In addition,
Batesville also manufactures and sells cloth-covered caskets, all wood
construction (orthodox) caskets and a line of urns, cremation containers and
other memorialization products used in cremations. Batesville also supplies
selection room display fixturing through its System Solutions group.
Most Batesville-produced metal caskets are gasketed caskets that are
electronically welded to help resist the entrance of outside elements through
the use of rubber gaskets and a locking bar mechanism. Batesville’s premium
steel caskets also employ a magnesium alloy bar to cathodically help protect
the casket from rust and corrosion. The Company believes that this system of
Cathodic Protection is a feature found only on Batesville produced caskets.
Hardwood caskets from Batesville are made from walnut, mahogany, cherry, maple,
pine, oak, pecan and poplar, solids and veneers. In October 2002, Batesville also
introduced its Marquetry™ Collection, manufactured with a revolutionary new
process for veneers that allows for rounded corners and a furniture-grade
finished appearance. Additional lines of veneer caskets in oak and cherry were
introduced in 2003. Also in 2003, Batesville Casket purchased certain
intellectual property related to the former Marsellus Casket Company and
reintroduced
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select lines of these premium caskets to independent funeral
homes. Batesville’s cloth-covered caskets are constructed with a patented
process using cellular fiberboard construction.
The Options by Batesville cremation division offers a complete cremation
marketing system for funeral service professionals. In addition to a broad
line of cremation caskets, cremation containers and urns, the system includes
training, merchandising support and marketing support materials. Cremation
caskets and containers are manufactured primarily of hardwoods and fiberboard.
Options’ wide assortment of memorial urns are made from a variety of materials,
including cast bronze, cast acrylic, wood, sheet bronze, cloisonné and marble.
Batesville offers several other marketing and merchandising programs to
funeral professionals for both casket and cremation products. Batesville®
caskets are marketed by Batesville’s direct sales force to licensed funeral
professionals operating licensed funeral establishments (or, in the absence of
state licensing requirements, to full service funeral establishments offering
both funeral goods and funeral services in conformance with state law)
throughout the United States, the United Kingdom, Australia, Canada, Mexico and
Puerto Rico. A significant portion of Batesville’s sales are made to large
national funeral services providers under contracts Batesville has entered into
with several of these customers. Batesville maintains inventory at
approximately 80 company-operated Customer Service Centers (CSCs) and six Rapid
Deployment Centers (RDCs) in North America. Batesville® caskets are generally
delivered in specially equipped vehicles owned by Batesville.
Batesville mainly manufactures and distributes products in the U.S. It
also has a small manufacturing facility in Mexico and distribution facilities
in Canada, Mexico, the United Kingdom, Puerto Rico and Australia.
Forethought Financial Services operates primarily through its life
insurance subsidiaries, Forethought Life Insurance Company and Arkansas
National Life Insurance Company, its bank, Forethought Federal Savings Bank,
and its marketing company, The Forethought Group, Inc. These companies provide
funeral and cemetery planning products and services to consumers through
funeral and cemetery professionals. Forethought’s core products are an
insurance-funded funeral plan, a trust-funded funeral plan, and a trust-funded
cemetery plan. The insurance-funded funeral plan consists of two discrete
elements: a contract of life insurance between the consumer and a Forethought
life insurance company (the “Policy”) and a guaranteed funeral planning
agreement between the consumer and the funeral establishment (the “FPA”). The
Policy provides whole life coverage and accumulates cash value. The death
benefit of the Policy is designed to grow over time. In the FPA, the consumer
and the funeral establishment agree on the funeral goods and services to be
provided and the current price of the consumer’s funeral. The funeral
establishment then agrees that if the consumer fully funds the Policy, the
establishment will accept the death benefit of the Policy as payment in full
when the consumer dies and the funeral goods and services are provided
(referred to in the industry as “at time of need”). In this way, consumers
using insurance-funded funeral planning are assured that covered goods and
services will be provided at time of need without additional cost. Because the
death benefit of the Policy is designed to grow over time, the funeral
establishment is provided with protection against cost increases.
Forethought Life Insurance Company also issues life insurance coverage
that is not tied to a guaranteed funeral plan. These policies are referred to
in the industry as “final expense” coverage. Final expense coverage allows a
consumer wishing to set aside funds for his or her funeral to gain immediate
insurance protection and to place funds in a tax-advantaged vehicle that is
designed to increase in value over time.
Trust-funded funeral and cemetery planning offers similar protection, but
uses a different contractual framework. In a guaranteed trust-funded plan, the
consumer and the funeral or cemetery establishment enter into a contract in
which the establishment agrees to provide the goods and services at time of
need in exchange for payment by the consumer to the establishment (the “Trust
Contract”). The Trust Contract is similar to the FPA used for insurance-funded
funeral planning in that the consumer and the funeral or cemetery establishment
agree on the goods and services to be provided at time of need. Unlike the FPA
used for insurance-funded funeral planning, the Trust Contract also includes
terms and conditions under which the consumer will pay the funeral or cemetery
establishment, as the case may be, for the planned funeral or cemetery
services. The establishment, in turn, places these funds in trust with
Forethought Federal Savings Bank. These funds are deposited into
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interest-bearing accounts or publicly traded mutual funds in accordance with
applicable state laws. The consumer does not have a direct contractual
relationship with any Forethought entity. At time of need, these funds are
distributed in accordance with the Trust Contract. The Trust Contract provides
that covered goods and services will be provided at time of need without
additional cost to the consumer. Forethought Federal Savings Bank has also
recently begun administering endowment care trust funds as part of its
services.
The Forethought Group, Inc. cooperates with Batesville Casket Company to
offer the Total Casket Protection® program. Under this program, a benefit is
paid to a funeral professional who delivers a Batesville® casket under a
Forethought funded funeral plan at the time the funeral is performed. This
benefit is equal to the difference between the wholesale price of the casket at
the time the funeral is planned and at the time it is provided.
Forethought is licensed and authorized to write life insurance in 49
states, Puerto Rico and the District of Columbia. Forethought distributes its
insurance-funded funeral planning products through funeral establishments. In
some cases, the funeral professional acts as agent for the sale of the Policy.
In other cases, a preneed insurance professional works in conjunction with
funeral professionals to develop and fund the funeral plan. In all cases, a
life insurance agent licensed by the appropriate state authority and appointed
by Forethought solicits the Policy. Forethought trust-funded funeral and
cemetery planning products are distributed by funeral planning professionals in
29 states.
In addition to these core products, Forethought offers marketing and
administrative products and services directly to its funeral and cemetery
customers. These products and services range from sales and training support
and materials to analytical reports to business-to-business back office support
through Forethoughtonline.com.
BUSINESS SEGMENT INFORMATION
Net revenues, segment profitability, identifiable assets and other measures of
segment reporting for each reporting segment are set forth in Note 10 to the
Consolidated Financial Statements, which statements are included under Item 8.
While the Company serves two predominant industries, health care and
funeral services, for segment reporting purposes each of the Company’s three
major operating companies constitute a reporting segment. The Company’s three
reporting segments are Hill-Rom, Batesville Casket and Forethought.
RAW MATERIALS
Principal materials used in Hill-Rom® products include carbon steel, aluminum,
stainless steel, wood, high-pressure laminates, fabrics, plastics,
silicone-coated soda-lime glass beads and other materials, substantially all of
which are available from several sources. Motors and electronic controls for
electrically and hydraulically operated beds and certain other components are
purchased from one or more manufacturers.
Batesville Casket employs carbon and stainless steel, copper and bronze
sheet, wood, fabrics, finishing materials, rubber gaskets, zinc and magnesium
alloy in the manufacture of its caskets.
Prices for raw materials and finished goods used in the Company’s products
may fluctuate based on a number of factors beyond the Company’s control, and
such fluctuations may affect the Company’s profitability. The Company does not
engage in hedging transactions with respect to raw material purchases, but does
enter into fixed price supply contracts at times.
Additionally, although most of the raw materials and finished goods used
by the Company in its products are generally available from several sources,
certain of these raw materials and finished goods currently are available only
from a single source.
Historically, the Company has been able to anticipate and react to
changing raw material and finished good prices and availability through its
purchasing practices and product price adjustments so as to avoid any material
adverse effect on profitability and supply. However, there can be no assurance
that the Company will be able to do so in the future. See also “Risk Factors”
below.
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COMPETITION
Health Care
Hill-Rom is a recognized U.S. industry leader in the sale and rental of
electrically and hydraulically operated hospital beds, patient room equipment,
specialty beds and surfaces and non-invasive therapy devices for wound,
pulmonary and circulatory care, competing with several other manufacturers and
distributors of competing products. With respect to the sale and rental of
electrically and hydraulically operated hospital beds, specialty beds and
surfaces, competitors include Stryker Corporation, Kinetic Concepts, Inc.,
Gaymar Industries, Inc., Sunrise Medical/Joerns Healthcare Inc.,
Getinge/Pegasus Airwave Inc., and Huntleigh Healthcare, Inc. With respect to
other products and services, competitors include Tyco International/The Kendall
Company, Huntleigh Healthcare, Inc., Nemschoff Chairs Inc., Kimball
International, Modular Services Company, Heraeus, Dukane Communication Systems,
Rauland-Borg Corporation, Homewood Health Care and STERIS Corporation. In
Europe, Hill-Rom competes with a large number of international competitors and
regional manufacturers. Hill-Rom believes that it is a leader in the products
and services it provides in Europe. Hill-Rom competes on the basis of product
quality, service to its customers, innovation and price.
Funeral Services
Batesville Casket is a recognized North American industry leader in the sale of
funeral services products. Batesville competes on the basis of product
quality, innovation, personalization, customer service and price, and believes
that there are at least two other companies, Aurora Casket Company and Matthews
International Corporation, that also manufacture and/or sell funeral services
products over a wide geographic area. However, throughout the United States,
there are many enterprises that manufacture, assemble, or distribute funeral
services products for sale within a limited geographic area.
Forethought is a leader in insurance-funded funeral planning products.
Forethought competes in this business primarily on the basis of service to
funeral establishment customers, compensation to the distribution channel, and
price to the consumer. Forethought’s guaranteed insurance-funded funeral
planning products compete with similar products offered by approximately ten
other life insurers. Forethought’s final expense products compete with
products offered by a large number of life insurance companies. Forethought’s
trust-funded funeral and cemetery planning products compete with similar
products offered by banks and trade associations. Forethought competes in this
business primarily on the basis of service to its funeral and cemetery
customers and the return on funds placed in trust by these customers.
RESEARCH
Each of the Company’s operating subsidiaries conducts research efforts to
further develop new products and improve its existing products, as well as to
enhance its manufacturing and production methods and improve service. All
research and development is Company sponsored and expensed as incurred.
Research and development expense incurred for the fiscal year ended September
30, 2003, the ten-month period ended September 30, 2002 and fiscal year 2001,
were as follows:
PATENTS AND TRADEMARKS
The Company owns a number of patents on its products and manufacturing
processes that are of importance to it, but, except for the marks “Hill-Rom,”
“Batesville,” and “Forethought,” does
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not believe any single patent or related group of patents are of material significance
to the business of the Company as a whole.
The Company also owns a number of trademarks and service marks relating to
its products and product services which are of importance to it, but does not
believe any single trademark or service mark is of material significance to the
business of the Company as a whole.
The Company’s ability to compete effectively depends, to an extent, on its
ability to maintain the proprietary nature of its intellectual property.
However, the Company may not be sufficiently protected by its various patents,
trademarks and service marks. Additionally, certain of its existing patents,
trademarks or service marks may be challenged, invalidated, canceled, narrowed
or circumvented. Beyond that, it may not receive the pending or contemplated
patents, trademarks or service marks for which it has applied or filed.
In the past, certain of the Company’s products have been copied and sold
by others. The Company tries to vigorously enforce its intellectual property
rights. However, the Company cannot ensure that the copying and sale of its
products by others would not materially adversely affect the sale of its
products.
EMPLOYEES
As of September 30, 2003, the Company employed approximately 9,900 persons in
its operations, of which approximately 2,800 work under collective bargaining
agreements. The collective bargaining agreements have expiration dates ranging
from January 2004 to November 2005. Although the Company has not experienced
any significant work stoppages in the past 20 years as a result of labor
disagreements, it cannot ensure that such a stoppage will not occur in the
future. A labor disturbance at one of the Company’s principal facilities could
have a material adverse effect on the Company’s operations.
REGULATORY MATTERS
FDA Regulation
Hill-Rom designs, manufactures, installs and distributes medical devices that
are regulated by the Food and Drug Administration (FDA) in the United States
and similar agencies in other countries. The regulations adopted and standards
imposed by these agencies evolve over time and require Hill-Rom to make changes
in its manufacturing processes and quality systems to remain in compliance.
These agencies routinely inspect Hill-Rom’s facilities, as with other medical
device manufacturers. If Hill-Rom fails to comply with applicable regulations
and standards, determined by inspections or otherwise, Hill-Rom may be subject
to compliance measures, including the recall of products and cessation of
manufacture and/or distribution.
As necessary, Hill-Rom engages in voluntary product recalls and other
corrective actions, including voluntarily ceasing shipment of devices.
Hill-Rom has also implemented an extensive
program designed to ensure its quality systems continue to comply with the FDA
Quality System Regulation requirements and the regulatory equivalents under the
Medical Device Directive in the European Union.
Over the past two years most of Hill-Rom’s United States facilities have
been inspected by FDA representatives who, as is customary in the industry,
issued reports of their findings to management for discussion and remediation.
While Hill-Rom believes it has responded fully to the findings and has
implemented corrective actions when necessary, any determination by the FDA or
similar foreign agency that Hill-Rom’s products or quality systems do not
comply with applicable regulations could result in future compliance
activities, including product recalls, injunctions preventing shipment of
products, or other enforcement actions that could have a material adverse
effect on financial condition, results of operations and cash flow of the
Company.
Health Care Regulation
Hill-Rom’s customers include hospitals and other acute and long-term care
facilities that receive reimbursement for certain of the products and services
they provide from various third-party payers including Medicare, Medicaid,
managed care organizations, such as health
8
maintenance organizations and
preferred provider organizations, and traditional indemnity insurers. In the
Company’s home care rental business, the Company is reimbursed directly by such
third party payors. Accordingly, the Company’s customers are significantly
affected by changes in reimbursement practices of such third-party payors.
Historical changes to Medicare payment programs from traditional “cost-plus”
reimbursement to a prospective diagnosis-based payment system resulted in a
significant change in how the Company’s health care customers acquire and
utilize the Company’s products. This has resulted in reduced utilization and
downward pressure on prices. Future legislative or regulatory efforts relating
to health care reimbursement policies or other factors affecting health care
spending may further affect the manner in which the Company’s customers acquire
and use the Company’s products.
The Company is currently assessing the effects on its business of the
Medicare reform legislation passed by Congress in November 2003, known as the
Medicare Prescription Drug, Improvement and Modernization Act of 2003. While
all of the implications of this legislation are not yet clear, the Company’s
initial assessment is that the net effect on the Company may be positive.
Although the legislation may cause increased pressure on prices in some of the
markets served by the Company, the Company should benefit from increased
capital spending by hospitals resulting from favorable hospital reimbursement
provisions in the legislation.
Environmental Protection
The Company is subject to a variety of federal, state, local and foreign
environmental laws and regulations relating to environmental, waste management,
and health and safety concerns, including the handling, storage, discharge and
disposal of hazardous materials used in or derived from its manufacturing
processes. The Company is committed to operating all of its businesses in a
manner that protects the environment. In the past year, the Company has been
issued Notices of Violation alleging violation of certain environmental permit
conditions. The Notices of Violation involved no or only minor fines or
penalties. The Company, however, has successfully implemented measures to
abate such conditions in compliance with the underlying agreements and/or
regulations. In the past, the Company has voluntarily entered into remediation
agreements with various environmental authorities to address onsite and offsite
environmental impacts. The remaining voluntary remediation activities are
nearing completion. The Company has also been notified as a potentially
responsible party in investigations of certain offsite disposal facilities.
Based on the nature and volume of materials involved, the cost of such onsite
and offsite remediation activities to be incurred by the Company in which it is
currently involved is not expected to exceed $1 million. The Company believes
it has provided adequate reserves in its financial statements for all of these
matters, which have been determined without consideration of possible loss
recoveries from third parties. Future events or changes in existing laws and
regulations or their interpretation may require the Company to make additional
expenditures in the future. The cost or need for any such additional
expenditures is not known.
FOREIGN OPERATIONS AND EXPORT SALES
Information about the Company’s foreign operations is set forth in tables
relating to geographic information in Note 10 to the Consolidated Financial
Statements, which statements are included under Item 8.
The Company’s export revenues constituted less than 10% of consolidated
revenues in 2003 and prior years.
The Company’s foreign operations are subject to risks inherent in doing
business in foreign countries. Risks associated with operating internationally
include political, social and economic instability, increased operating costs,
expropriation and complex and changing government regulations, all of which are
beyond the Company’s control. Further, to the extent the Company receives
revenues in currencies other than U.S. dollars, the value of assets and income
could be, and have in the past been, adversely affected by fluctuations in the
value of local currencies.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are elected each year by the Board of
Directors at its first meeting following the Annual Meeting of Shareholders,
and from time to time as necessary, to serve during the ensuing year and until
their respective successors are elected and qualified. There are no family
relationships between any of the executive officers of the Company or between
any of them and any of the members of the Board of Directors. The following is
a list of the executive officers of the Company as of December 1, 2003.
Frederick W. Rockwood, 55, was elected Chief Executive Officer and
President of the Company on December 3, 2000 after being President since
December 6, 1999. He has been employed by the Company since 1977. Previous
positions held within the Company include President and Chief Executive Officer
of Hillenbrand Funeral Services Group, Inc. from 1997 to 1999, President and
Chief Executive Officer of Forethought Financial Services, Inc. from 1985 to
1997, Senior Vice President of Corporate Planning and Director of Corporate
Strategy. He has also been a management consultant with Bain and Company and
Boston Consulting Group. He is also a member of the Board of Directors of the
Advanced Medical Technology Association (AdvaMed).
Kenneth A. Camp, 58, was elected President and Chief Executive Officer of
Batesville Casket Company on May 1, 2001 and was elected as a Vice President of
Hillenbrand Industries on October 8, 2001. He has been employed by the Company
since 1981. Ken previously held the position of Vice President of
Administration of Hillenbrand Industries from 2000 to 2001. Prior to that
position he held various positions at Batesville Casket Company including Vice
President/General Manager of Operations from 1995 to 2000; Vice President,
Sales and Service; Vice President, Marketing; and Vice President, Strategic
Planning.
Stephen R. Lang, 51, was elected President and Chief Executive Officer of
Forethought Financial Services, Inc. on June 29, 2001 and was elected as a Vice
President of Hillenbrand Industries on October 8, 2001. He also serves as
President of Forethought Life Insurance Company and Forethought Federal Savings
Bank, subsidiaries of Forethought Financial Services, Inc. Steve is a 17-year
Forethought veteran, holding various positions including Vice President and
Chief Operating Officer from 1999 to 2001, Vice President and General Manager
from 1995 to 1999, Vice President of Sales, and Vice President of Human
Resources.
R. Ernest Waaser, 47, was elected President and Chief Executive Officer of
Hill-Rom on January 22, 2001 and was elected as a Vice President of Hillenbrand
Industries on October 8,
2001. He was previously Senior Vice President of AGFA Corporation and
President of AGFA’s Medical Imaging Division from 1999 to 2000. Prior to
joining AGFA, Ernest was Executive Vice President and Chief Operating Officer
of Sterling Diagnostic Imaging, Inc. from 1996 to 1999, a supplier of
conventional and digital systems for the capture, communication, display and
storage of medical diagnostic images. He also served as Research and
Development Director, Diagnostic Imaging, for E. I. DuPont De Nemours & Co.,
Inc. and in various other management capacities with DuPont.
Patrick D. de Maynadier, 43, was elected on January 28, 2002 as Vice
President, General Counsel and Secretary. From May 2000 to October 2001
Patrick was Executive Vice President, General Counsel and Corporate Secretary
for CombiMatrix Corporation, a biotechnology company that develops software
addressable biochips for drug researchers. From May 1999 to May 2002, he was
the President and Chief Executive Officer of SDI Investments, LLC, a spin-off
of Sterling Diagnostic Imaging, Inc. He served as Senior Vice President,
General Counsel and Corporate Secretary of Sterling Diagnostic Imaging, Inc.
from June 1996 to May 1999. Prior to that he was Associate General Counsel of
Falcon Seaboard Resources, Inc., a cogeneration and oil and gas company and a
partner in the corporate and securities section of the law firm Bracewell &
Patterson, L.L.P.
10
Kimberly K. Dennis, 36, was elected Vice President, Shared Services on
September 10, 2003. Kim is responsible for directing the corporation’s IT
infrastructure, travel services, administrative services, graphic
communications, aviation operations and customer visitation guest facilities.
Prior to this assignment, she was Vice President, Business Information Systems
for Batesville Casket Company from August 2001 to September 2003 and Director,
Enterprise Systems for Batesville Casket Company from January 2000 to August
2001. Her career with the Company started in 1989 with Batesville Casket
Company where she held positions of increasing responsibility in finance,
planning, operations, logistics, and information technology. She was also the
principal architect of Batesville Casket Company’s regional distribution center
network and was director and project leader of its enterprise resource planning
project.
Catherine Greany, 47, was elected Vice President, Corporate Development on
May 21, 2002. Since 1998, Catherine was Vice President, Mergers and
Acquisitions, for Omnicare, Inc., a Covington, Kentucky-based health care
services provider. Prior to joining Omnicare, Inc., Catherine was Vice
President, Mergers and Acquisitions, for Vitalink Pharmacy Services Inc. She
has also held a variety of corporate development and financial leadership
positions with Linc Anthem Financial Corporation; American Ophthalmic, Inc.;
GranCare Inc.; Donaldson, Lufkin & Jenrette Securities Corporation; and
Atlantic Richfield Company.
Gregory
N. Miller, 40, was elected Vice President - Controller and Chief
Accounting Officer for Hillenbrand Industries on May 16, 2002. He previously
held the position of Vice President-Controller from November 9, 2001 to May 16,
2002. Prior to joining the Company he held a number of positions with Newell
Rubbermaid, Inc., a manufacturer and marketer of name-brand consumer products
and its divisions including Group Vice President and Controller, Photo Fashions
and Juvenile Products Groups, Newell Rubbermaid from 2000 to 2001; Vice
President and Controller, Little Tikes Company, a Newell Rubbermaid division
from 1999 to 2000; Vice President and Controller and various positions of
increasing responsibility in finance, Newell Window Furnishings/Kirsch from
1993 to 1999. Prior to his Newell positions, he held positions with the
accounting firms of Deloitte & Touche LLP and Grant Thornton.
David L. Robertson, 57, has been employed by the Company since March 23,
1998, and was elected Vice President, Administration on May 1, 2001. He
previously served as Vice President, Executive Leadership Development from June
26, 2000 to May 1, 2001, Vice President, Administration from December 6, 1999
to June 26, 2000 and Vice President,
Human Resources from March 23, 1998 to December 6, 1999. Prior to joining the
Company, he was Senior Vice President, Human Resources for Rubbermaid, Inc., a
manufacturer and marketer of name-brand consumer products, in Wooster, Ohio
from 1994 to 1998. From 1982 to 1994 Mr. Robertson served as Vice President,
Human Resources for Hillenbrand Industries, Inc. Mr. Robertson announced his
intent to retire effective February 1, 2004.
Scott K. Sorensen, 42, was elected Vice President and Chief Financial
Officer on March 1, 2001. Prior to joining the Company, he was employed by
Pliant Corporation (formerly Huntsman Packaging), a film and flexible packaging
producer as its Executive Vice President and Chief Financial Officer, Treasurer
since 1998. Prior to joining Pliant Corporation, Scott held various senior
financial leadership positions with Westinghouse Electric Corporation/CBS
including Chief Financial Officer of the Power Generation Division and the
Communication and Systems Divisions from 1996 to 1998. He has also been an
executive with Phelps Dodge Corporation and a management consultant with
McKinsey & Company.
11
AVAILABILITY OF REPORTS AND OTHER INFORMATION
The Company’s website is www.hillenbrand.com. The Company makes available on
this website, free of charge, access to its annual, quarterly and current
reports and other documents filed by it with or furnished by it to the
Securities and Exchange Commission as soon as practicable after such reports or
documents are filed or furnished. The Company also makes available on this
website position specifications for the Chairman, Vice Chairman, members of the
Board of Directors and the Chief Executive Officer, the Company’s Code of
Ethical Business Conduct, the Corporate Governance Standards of the Company’s
Board of Directors and the charters of each of the standing committees of the
Board of Directors. All of these documents are also available to
shareholders in print upon request.
Table of Contents
Table of Contents
Table of Contents
Table of Contents
(In millions)
2003
2002
2001
$
56
$
40
$
40
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Item 2. PROPERTIES
The principal properties of the Company and its subsidiaries’ continuing
operations are listed below, and are owned by the Company or its subsidiaries
subject to no material encumbrances. All facilities are suitable for their
intended purpose, are being efficiently utilized and are believed to provide
adequate capacity to meet demand for the next several years.
Location
Description
Primary Use
Health Care:
Batesville, IN
Cary, NC
Charleston, SC
Manufacturing and development
facilities
Office facilities
Manufacture and development
of therapy units
Administration
Pluvigner, France
Funeral Services:
Batesville, IN
Manufacturing plants
Office facilities
Manufacture of metal caskets
Administration and Insurance
Operations
Manchester, TN
Manufacturing plant
Manufacture of metal caskets
Vicksburg, MS
Kiln drying and lumber
cutting plant
Drying and dimensioning of
lumber
Batesville, MS
Manufacturing plant
Manufacture of hardwood caskets
Nashua, NH
Manufacturing plant
Manufacture of hardwood
caskets
In addition to the foregoing, the Company leases or owns a number of other manufacturing facilities, warehouse distribution centers, service centers and sales offices throughout the United States, Canada, Western Europe, Mexico and the Far East.
Item 3. LEGAL PROCEEDINGS
The Company is subject to various other claims and contingencies arising out of the normal course of business, including those relating to commercial transactions, product liability, employee related matters, antitrust, safety, health, taxes, environmental and other matters. Litigation is subject to many uncertainties and the outcome of individual litigated matters is not predictable with assurance. It is possible that some litigation matters for which reserves have not been established could be decided unfavorably to the Company, and that any such unfavorable decisions could have a material adverse effect on the financial condition, results of operations and cash flows of the Company.
12
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the quarter ended September 30, 2003.
PART II
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
Certain statements in this Annual Report on Form 10-K contain forward-looking statements within the meanings of the Private Securities Litigation Reform Act of 1995 (the “Act”) or adopted rules, regulations and releases by the Securities and Exchange Commission (SEC) regarding the Company’s future plans, objectives, beliefs, expectations, representations and projections. The Company desires to take advantage of the “safe harbor” provisions in the Act for forward-looking statements made from time to time, including, but not limited to, the forward-looking statements relating to the future performance of the Company contained in Management’s Discussion and Analysis (under Items 7 and 7A of Form 10-K), the Notes to Consolidated Financial Statements (under Item 8 of Form 10-K) and other statements made in this Form 10-K and in other filings with the SEC. The Company has tried, whenever possible, to identify these forward-looking statements by using words such as “intend,” “anticipate,” “believe,” “plan,” “encourage,” “expect,” “may,” “goal,” “become,” “pursue,” “estimate,” “strategy,” “will,” “projection,” “forecast,” “continue,” “accelerate,” “promise,” “increase,” or the negative of those terms or other variations of them or by comparable terminology. The absence of such terms, however, does not mean that the statement is not forward-looking.
The Company cautions readers that any such forward-looking statements are based on assumptions that the Company believes are reasonable, but are subject to a wide range of risks, and there is no assurance that actual results may not differ materially from those in any such forward-looking statements. Forward-looking statements are not guarantees of future performance. Information about factors that may affect future results is set forth under the caption “Risk Factors” below.
13
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Hillenbrand Industries’ common stock is traded on the New York Stock Exchange
under the ticker symbol “HB”. The following table reflects the range of high
and low selling prices of the Company’s common stock by quarter for the twelve
months ended September 30, 2003 and 2002.
2003
2002
High
Low
High
Low
$
54.65
$
46.55
$
57.90
$
48.95
$
54.85
$
46.50
$
62.09
$
53.35
$
52.50
$
47.62
$
66.48
$
52.85
$
58.29
$
49.80
$
60.67
$
48.30
Holders
On December 1, 2003, there were approximately 16,900 shareholders of record.
Dividends
The Company has paid cash dividends on its common stock every quarter since its first public offering in 1971, and those dividends have increased each year thereafter. In fiscal 2003, dividends were paid on December 31, 2002 and March 31, June 30 and September 30, 2003 to shareholders of record as of December 17, 2002 and March 3, June 2 and September 16, 2003. Cash dividends of $1.00 ($0.25 per quarter) in fiscal 2003 and $0.69 ($0.23 per quarter) in 2002 were paid on each share of common stock outstanding. As a result of the Company’s change in its fiscal year end to September 30, the Company also paid a special dividend of $0.0767 per share on March 29, 2002 to shareholders of record as of March 1, 2002. This one-time dividend was for the month of March 2002 and represented one-month of the regular quarterly dividend of $0.23 per share paid throughout the remainder of 2002. The Company currently believes that comparable quarterly cash dividends will continue to be paid in the future, as evidenced by the Board of Directors recent approval of a dividend of $0.27 per share for the first quarter of fiscal 2004.
14
Item 6. SELECTED FINANCIAL DATA
The following table presents selected consolidated financial data of
Hillenbrand Industries, Inc., for the fiscal year ended September 30, 2003 and
the ten month period ended September 30, 2002. Fiscal years 1999-2001 are
presented based on the Company’s previous fiscal year end of the Saturday
nearest November 30. Also presented are comparable unaudited data for the
twelve month periods ended September 30, 2001 and 2002.
Fiscal
Twelve Months Ended
Ten Months
Fiscal Year Ended
Year
September 30,
Ended
Ended
September 30,
December 1,
December 2,
November 27,
2003
2002
2001
2002
2001
2000
1999
(Unaudited)
(53 weeks)
(In millions except per share date)
$
2,042
$
2,057
$
2,053
$
1,683
$
2,019
$
2,004
$
1,955
$
182
$
35
$
152
$
(18
)
$
170
$
151
$
123
(44
)
9
1
8
—
3
1
$
138
$
44
$
153
$
(10
)
$
170
$
154
$
124
$
2.94
$
0.56
$
2.42
$
(0.29
)
$
2.71
$
2.40
$
1.86
(0.71
)
0.14
0.02
0.13
—
0.04
0.01
$
2.23
$
0.70
$
2.44
$
(0.16
)
$
2.71
$
2.44
$
1.87
$
2.93
$
0.56
$
2.41
$
(0.29
)
$
2.70
$
2.40
$
1.86
(0.71
)
0.14
0.02
0.13
—
0.04
0.01
$
2.22
$
0.70
$
2.43
$
(0.16
)
$
2.70
$
2.44
$
1.87
$
5,412
$
5,442
$
4,949
$
5,442
$
5,049
$
4,597
$
4,433
$
155
$
322
$
302
$
322
$
305
$
302
$
302
$
1.00
$
0.98
$
0.83
$
0.77
$
0.84
$
0.80
$
0.78
| (a) | The selected financial data presented above includes a number of non-recurring and special charges. Following is a summary of these charges, on a net-of-tax basis. The amounts are summarized based upon the line items within the Statement of Consolidated Income impacted. Further discussion regarding these adjustments can be found in Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
15
Fiscal
Twelve Months Ended
Ten Months
Fiscal Year Ended
Year
September 30,
Ended
Ended
September 30,
December 1,
December 2,
November 27,
2003
2002
2001
2002
2001
2000
1999
(Unaudited)
(53 weeks)
(In millions)
$
32
$
38
$
1
$
18
$
20
$
1
$
(15
)
(2
)
—
—
—
—
—
—
—
158
—
158
—
—
—
6
10
18
3
21
2
24
—
4
—
4
—
—
—
2
—
—
—
—
—
—
11
—
—
—
—
—
—
—
(32
)
—
(6
)
(26
)
—
—
$
49
$
178
$
19
$
177
$
15
$
3
$
9
$
51
$
—
$
—
$
—
$
—
$
—
$
—
—
(6
)
—
(6
)
—
—
—
$
51
$
(6
)
$
—
$
(6
)
$
—
$
—
$
—
16
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the Company’s audited Consolidated Financial Statements and accompanying notes included under Item 8 of this Form 10-K.
OVERVIEW
Hillenbrand Industries is organized into three major operating companies serving the health care and funeral services industries. Hill-Rom is a manufacturer of equipment for the health care industry and a provider of associated services for wound, pulmonary and circulatory care. Batesville Casket and Forethought both serve the funeral services industry. Batesville Casket is a manufacturer of caskets and cremation-related products while Forethought is a provider of funeral planning financial products.
Over the course of the past three years, Hillenbrand Industries has embarked on a new strategy to create value for shareholders, customers, suppliers and employees. At the cornerstone of this strategy is the Company’s commitment to create and accelerate shareholder value and growth by identifying and implementing strategies that will help realize the potential of the existing portfolio of businesses and position the Company for future growth, both organically and through acquisitions. The five key elements of the Company’s strategy and its impact on the business are outlined as follows:
| 1. | Profitable revenue growth: Profitable revenue growth is critical to the Company’s overall commitment to build shareholder value. Actions taken to achieve this objective include higher research and development spending, a more strategic approach to new product development, an increased focus on higher margin products and a more profitable product mix. These efforts have resulted in numerous product line extensions, new product platforms, gross margin improvement and a foundation for future revenue growth. The Company is also committed to growth through health care acquisitions, such as the recently completed acquisition of Advanced Respiratory, Inc. and the pending acquisition of Mediq, Inc. | ||
| 2. | Improved asset management: The Company continually strives to improve the efficiency and return on its assets and capital. Key components of this effort include business process simplification, asset rationalization and achieving an optimal sales structure. Significant progress has been made in all these areas. In business process simplification, the Company is continuing its efforts to move to a common technology platform with its Enterprise Resource Planning implementations at Hill-Rom and Batesville Casket. In the area of asset rationalization, certain poor performing and slower growth product lines and businesses have been exited and certain under-performing assets have been divested. The recent sale of the Company’s piped-medical gas business and the pending sale of its infant care products business are examples of the asset rationalization strategy. These businesses were selected for divestiture as they no longer fit within our strategic portfolio. They were considered to have limited future growth potential, possessed unique sales channels and research and development requirements, had low profit margins and would have required significant investment to achieve their limited growth potential. Proceeds from the disposition of these businesses will be reinvested as part of the Company’s acquisition growth strategy. | ||
| 3. | Lower cost structure: The Company is committed to increasing shareholder value through the reduction of costs and waste in all areas of its business and the streamlining of processes for higher performance. Strategic sourcing and supply arrangements with key suppliers have resulted in significant reductions in raw material costs while maintaining quality. Fixed costs also continue to be reduced as a result of work force and other realignment activities. With respect to non-operating expenses, in the fourth quarter of 2003 the Company completed the repurchase of approximately |
17
| $157 million of its outstanding long-term debt, all of which carried interest rates ranging from 6.75% to 8.5%. The Company incurred a charge of approximately $16 million related to the repurchase of this debt. | |||
| In addition, in the third fiscal quarter of 2003 Hill-Rom established a new business structure to further the execution of its strategy and strengthen its core businesses. The Company recognized a fiscal 2003 third quarter charge of approximately $9 million with respect to this action and upon completion, expects net operating costs to be reduced between $12 and $14 million annually, with significant benefits beginning in the first quarter of calendar 2004. The Company believes that the benefits of the new Hill-Rom organizational structure include increased speed of decision making, enhanced ability to execute business plans, and improved integration of acquisitions. The new structure should also provide the flexibility to structure and manage distinct business models that address the unique characteristics and opportunities of each Hill-Rom division. | |||
| 4. | Strategic portfolio management: The Company continues to manage its portfolio of operating companies under a unified corporate structure rather than as a group of autonomous companies. Under this approach, each operating company plays a specific role in the fulfillment of the Company’s overall strategy. Batesville Casket and Forethought are responsible for providing earnings and cash flow to fund Corporate growth. Hill-Rom’s role is to provide, in addition to cash flow and earnings, profitable growth through new product innovation, expansion into new areas and acquisitions in its respective adjacent health care businesses. | ||
| 5. | Leadership excellence: The Company has continued the aggressive development of talent in the organization through developmental assignments, inter-organizational transfers and special executive development training experiences. The Company has launched a unique performance development facility to enhance executive capabilities. During 2003, the Company completed a comprehensive evaluation of its compensation and benefit programs to assure marketplace competitive programs and practices, as well as proper alignment with the Company’s shareholder value creation objectives. |
The Company’s recent results of operations have been significantly affected by these strategic initiatives and the resulting reductions in cost, improved manufacturing efficiencies, more profitable product mix and enhanced price realization. The charges and expenditures incurred to implement these initiatives partially offset the achieved benefits, but such benefits are expected to continue in future periods. The Company expects further benefits to be achieved as the Company continues to pursue its strategy, with a primary focus on the following elements of the strategy in 2004:
| 1. | Accelerating top line growth through new business development: While organic growth is important, the Company recognizes that it will not be able to consistently meet its long-term strategic objectives without the benefit of acquisitions. The Company will continue to pursue a focused approach to acquisitions, looking for companies with profitability and growth potential in the health care environment. The Company believes that Advanced Respiratory, Inc., which the Company acquired in October 2003, and Mediq, Inc., which the Company has agreed to acquire, meet these criteria. | ||
| 2. | Product quality, innovation and new product development: The Company is becoming increasingly focused on its product quality and new product development initiatives, increasing funding levels and the speed of research and development and manufacturing cycle times. The ultimate goal of these initiatives is to provide meaningful innovative solutions to customers. During 2003, Hill-Rom introduced its TotalCare® Bariatric bed for use with obese patients, its ActiveCare® product for the prevention of deep vein thrombosis and upgrades to its COMLinx™ communications system, among others. Additionally, Batesville Casket introduced new engineered wood |
18
| casket products manufactured under its revolutionary new process for veneers, reintroduced select premium wood caskets under the Marsellus brand name and entered a new product category with the introduction of urn vaults. | |||
| 3. | Streamlining business for higher performance: The Company plans to continue to rationalize and exit poor performing product lines and businesses and divest itself of under-performing assets. In addition, implementation efforts related to the Enterprise Resource Planning systems at Hill-Rom and Batesville Casket will continue, providing a common technology platform aimed at speeding productivity gains and process improvements. | ||
| 4. | Reduce risk in Forethought investment portfolio: At Forethought, efforts will continue to reduce exposure to the volatility of the credit markets by reducing exposure to high-yield bonds, lowering limits for investments in individual securities, investing in commercial mortgages and seeking favorable returns within acceptable risk parameters. |
In addition to the effects of the continued execution of the Company’s overall Corporate strategy, other trends in the Company’s businesses which have impacted and may continue to impact performance are outlined below.
The health care products industry is a diverse and highly competitive industry. Over the long term, patient demand for services is rising as a result of a number of factors, including an aging population, increasing life expectancy, enlightened consumers and technological advances. These long-term trends are reflected in increasing days of inpatient stays at acute care facilities in the United States and Western Europe, creating modest demand for new facilities and pressure for existing facilities to upgrade and increase efficiency, caregiver safety and productivity in order to maintain profitability and meet demand in a period of staffing shortages.
In addition, health care providers are under continued pressure to control costs. As a result, purchasers of health care products and services such as those offered by the Company’s health care businesses continue to demand more cost effective products and services that improve the quality and efficiency of patient care and service. Specifically, state and federal budget deficits are causing increasing pressure to control costs in the Medicare and Medicaid programs, increasing the likelihood of health care reform and changes in reimbursement practices. Additionally, health care providers face cost control pressures due to increasing numbers of uninsured patients and increasing supply costs. Premium increases to health care plans and the rising uninsured population further exacerbate a difficult reimbursement and economic environment for providers. In the aggregate, these cost control pressures can also impact the relative industry-wide demand for sales versus rental options in various product segments, which in turn can affect the sales versus rental mix of many products in the Company’s portfolio.
Further, group purchasing organizations have come under increasing scrutiny regarding contracting practices, which have included various Congressional hearings. While the Company derives significant revenues through group purchasing organizations, it is not possible at this time to determine what impact, if any, future changes in the practices of group purchasing organizations could have on the Company.
The Company is currently assessing the effects on its business of the Medicare reform legislation passed by Congress in November 2003, known as the Medicare Prescription Drug, Improvement and Modernization Act of 2003. While all of the implications of this legislation are not yet clear, the Company’s initial assessment is that the net effect on the Company may be positive. Although the legislation may cause increased pressure on prices in some of the markets served by the Company, the Company should benefit from increased capital spending by hospitals resulting from favorable hospital reimbursement provisions in the legislation.
Management believes that in order for the Company to achieve its goals of faster growth and improved profitability, it will be required to continue to provide innovative, high quality customer solutions on a cost-effective basis. The Company has been subject to increasing competitive pressure in areas in which the Company has not brought sufficient new products and features to market in the past. Hill-Rom’s increased commitment to new product
19
development should generate additional growth opportunities in 2004 and beyond. New products expected to be launched in 2004 include bed systems, architectural and furniture products and clinical therapy solutions.
Fundamentally, Hill-Rom’s strategy is aimed at providing three value propositions that management believes should directly address long-term customer needs: improving the operational efficiency of healthcare facilities; providing improved patient outcomes, thereby reducing length of stay and costs; and, improving caregiver safety and efficiency. Management believes substantial opportunity exists to grow in these areas by leveraging Hill-Rom’s global rental service center network, its clinical sales force and its strong position in capital equipment. The recently completed acquisition of Advanced Respiratory, Inc. and the pending acquisition of Mediq, Inc. aim to take advantage of these opportunities. Because of its heavy concentration in sales of capital equipment, the Company is susceptible to short-term demand fluctuations resulting from economic and regulatory changes. For example, the Company is currently experiencing a slowdown in capital order patterns in Western Europe and declines in its North American backlog as a result of general economic weakness and competitive pressures. The Company intends to accelerate its efforts in non-capital products and services, which it believes will provide a more stable revenue base. Meanwhile, Hill-Rom continues to focus on increasing its cost competitiveness in light of anticipated price pressures and low cost competitors, particularly in low- to mid-range products.
In the funeral services products industry, the North American burial casket industry appears to be gradually but steadily declining as the result of lower age-adjusted mortality rates and a continued increase in the rate of cremations. The popularity of cremations continues to grow at a rate of approximately one percentage point each year, now estimated at approximately one-third of total deaths. Management expects these trends, which have resulted in declines in the volume of casket sales for the Company over the past three years, to continue in the near future. Although the Company offers a line of cremation products, these products result in lower revenue and carry lower margins. Partially offsetting these negative trends is a growing demand for enhanced personalization of funeral products and increased manufacturing and other operational efficiencies. Based on these trends and factors, the Company’s strategy to improve profitability in the funeral services products industry will require the Company to continue to differentiate its products on the basis of quality, innovation, personalization and customer service, while at the same time continuing to control costs through manufacturing efficiencies, strategic sourcing and other cost reduction efforts.
In the funeral services insurance industry, volatility in the credit markets has continued to adversely impact the Forethought investment portfolio resulting in significant net capital losses and impairments. The current low interest rate environment continues to impact the investment yield on the portfolio, a trend which is not likely to improve significantly in the near-term, as a result of continued low interest rates. The underwriting component of the insurance business is also under some pressure as funeral value sales have been adversely impacted by the rationalization of sales and marketing programs and general economic weakness. The competitive marketplace has also made it difficult to fully align the crediting rate applied to the underlying policies sold and overall investment returns. Forethought is actively managing the spread between its investment returns and the rate of earnings on its policies in force, with target spreads being achieved in the fourth quarter of 2003.
20
RESULTS OF OPERATIONS
Effective for fiscal year 2002, the Company changed its fiscal year end to
September 30 from the Saturday nearest November 30 of each year. As a result
of this change, the Statements of Consolidated Income, Statements of
Consolidated Cash Flows and Statements of Consolidated Shareholders’ Equity
presented in this Form 10-K reflect the Fiscal Year Ended September 30, 2003,
the Ten Months Ended September 30, 2002 and the Fiscal Year Ended December 1,
2001.
As a result of the change in fiscal year ends, for purposes of
Management’s Discussion and Analysis of Financial Condition and Results of
Operations, the following periods of operations are presented and discussed:
The discussion of results for the Fiscal Year Ended September 30, 2003 to
the Twelve Months Ended September 30, 2002 and for the Twelve Months Ended
September 30, 2002 to the Twelve Months Ended September 30, 2001 are presented
for comparative purposes only. Management considers these to be more
meaningful presentations than the respective comparisons of the Ten Months
Ended September 30, 2002 to the Fiscal Years Ended September 30, 2003 and
December 1, 2001. As a result, the explanations related to the comparative
results of the Fiscal Year Ended September 30, 2003 to the Ten Months Ended
September 30, 2002 and the Ten Months Ended September 30, 2002 to the Fiscal
Year Ended December 1, 2001 are more abbreviated than for the other comparisons
included herein. Unless otherwise noted, the factors affecting the results for
the Ten Months Ended September 30, 2002 are consistent with those affecting the
unaudited results for the twelve months ending on this same date. The results
for the Twelve Months Ended September 30, 2002 and 2001 are unaudited.
Unless otherwise indicated, references to 2002 or 2001 in the comparative
discussions below correspond to the periods set forth in the heading of each
section. Further, with the announced divestitures of the infant care and
piped-medical gas businesses of Hill-Rom, these operations are presented as
discontinued operations within the Company’s Consolidated Statement of Income.
Under this presentation, the revenues and variable costs associated with the
businesses are removed from the individual line items comprising the
Consolidated Statement of Income and presented in a separate section entitled,
“Discontinued Operations”. In addition, fixed costs related to the businesses
that will be eliminated with the divestitures are also included as a component
of discontinued operations. The results of discontinued operations are not
necessarily indicative of the results of the businesses if they had been
operated on a stand-alone basis. All discussions and presentations of
financial results within Management’s Discussion and Analysis are presented
based on the Company’s results from continuing operations.
Following
receipt by a member of the Board of Directors of an anonymous letter
in late 2003 that alleged potential issues related to the timing of revenue
recognition at Hill-Rom, an
investigation was voluntarily initiated by the Audit Committee of the
Board of Directors. The Audit Committee engaged independent counsel
to investigate the matter with assistance of forensic accountants.
That investigation did not identify any fraud or illegal conduct.
However, in the course of the investigation a limited number of
sales transactions were identified and corresponding adjustments were
reflected in our audited financial results for fiscal 2003. Senior management and the Audit
Committee will continue to assess and enhance, where appropriate, the
Company’s disclosure controls and procedures in order to ensure
their ongoing effectiveness.
21
The following table presents comparative operating results for all periods
discussed within Management’s Discussion and Analysis:
Fiscal Year Ended September 30, 2003 Compared to Twelve Months Ended
September 30, 2002
Summary
Consolidated revenues of
$2,042 million in 2003 decreased $15 million compared
to $2,057 million in 2002. The decline in revenue was due, in part, to the
impact of the Company’s change in fiscal year-end to September 30 from the
Saturday nearest November 30 of each year. This change in year-end had an
adverse impact on the comparison of sales volume to the prior year, as the
Company had record monthly revenues in November 2001. Also contributing to the
revenue decline was the inclusion of an additional month of sales for certain
foreign operations in 2002 as Hill-Rom discontinued consolidating such
operations on a one-month lag in September 2002. This change benefited 2002
revenues by nearly $17 million. Partially offsetting the decline in revenues
was year-over-year favorability in net capital losses and impairments and
investment income at Forethought of $8 million and $15 million, respectively.
Also offsetting the decline in revenues were favorable movements in foreign
currency exchange rates of approximately $24 million.
Operating
profit of $319 million was recognized in 2003 compared to $10
million in the prior year. The significant increase in the current year
operating profit was primarily attributable to a $250 million litigation charge
taken in 2002 related to the December 2002 settlement of the KCI antitrust
litigation further described in Note 15 to the Consolidated Financial
Statements, which statements are included under Item 8. Higher gross profit
margins, which increased approximately 120 basis points during the year, and
lower operating expenses, which decreased by $35 million, also contributed to
the higher operating profit in 2003. The inclusion of an additional month of
activity for certain foreign operations
of Hill-Rom had a minimal impact on 2002 operating income, and therefore, the
comparison to 2003.
22
In addition to the net capital losses and impairments incurred in each
period as discussed above, the financial results presented herein include a
number of other items which impact the comparability between periods. A
summary of these items is as follows:
Special charges were recognized in both the 2003 and 2002 reporting
periods. In the third quarter of 2003, a charge of $9 million was recorded
related to severance and benefit-related costs associated with the new business
structure at Hill-Rom. In the fourth quarter of 2003, a pension curtailment
charge of approximately $3.5 million was recognized related to a previously
announced pension choice program. This was essentially offset by the
resolution of outstanding claims with the Center for Medicare and Medicaid
Services (CMS) related to previously reserved past due receivables in the
amount of approximately $3 million. In 2002, a net special charge of $15
million was recorded related to continued streamlining efforts at all
Hillenbrand companies and the impairment of a technology asset at Forethought.
In addition, a fourth quarter operating expense charge of $5 million was
recognized related to the write-off of a separate technology asset with no
continuing value at Hill-Rom. Also impacting operating results in 2002 was the
$250 million, $158 million net-of-tax, KCI antitrust litigation charge
previously discussed. Overall, the 2003 and 2002 items outlined above,
including net capital losses, negatively impacted operating profit in each year
by approximately $58 million and $327 million, respectively.
Income
from continuing operations increased in 2003 to $182 million, or
$2.93 on a diluted earnings per share basis, compared to $35 million, or $0.56
on a diluted earnings per share basis in 2002. The increase related primarily
to the lower net capital losses and special charges in 2003, and the KCI
litigation charge of $250 million, $158 million net-of-tax, taken in 2002. In
addition, 2003 income was adversely impacted by a charge of $16 million, $11
million net-of-tax, in Other expense associated with the completion of a bond
tender offer in the fourth quarter of 2003. Income in 2002 was favorably
impacted by the release of approximately $32 million of previously provided tax
reserves which were no longer considered necessary based on the resolution of
certain domestic and foreign tax matters.
Considering
the effect of the items outlined in the table above,
income from continuing operations was adversely impacted by $49 million in 2003
and $177 for the twelve months ended September 30, 2002.
23
Net Revenues
Health Care
Health Care sales decreased
$38 million, or 4.8%, in 2003, to $754 million from
$749 million in 2002. As briefly outlined above, the decline in revenues
related primarily to lower volumes of approximately $55 million, due in part to
the Company’s change in year-end to September 30, and the inclusion of a 13th
month of sales in 2002 for certain foreign operations which increased capital
sales an estimated $15 million. During the fourth quarter of 2002 the Company
discontinued consolidating such operations on a one-month lag basis. The lower
volumes included a year-over-year decline in North American sales of
$27
million, primarily associated with long-term care, maternal care and
architectural products, along with general declines in European volume levels
in select markets of $31 million, most notably in France and Germany. Pricing
pressures also negatively impacted revenues by approximately $3 million in
2003. These declines in revenue were partially offset by the favorable impacts
of foreign currency movements of approximately $20 million.
Health Care therapy rental revenue decreased $10 million, or 3.0%, to $318
million in 2003 compared to $328 million in 2002. Negative experience in terms
of realized rate of $13 million, most notably in home care where prior year
revenues were favorably impacted by the collection of certain previously
reserved receivables, was a key driver of the decline. This negative
experience in realized rate was net of the resolution of outstanding claims of
approximately $3 million with CMS related to previously reserved past due
receivables. The other key driver for the decline in revenue was lower volume
of $16 million. The additional month of revenues in 2002 for certain foreign
operations also had a negative impact on the year-over-year rental revenue
comparison of approximately $2 million. Offsetting these decreases was
favorable product mix of $14 million, resulting primarily from the planned
transition from the Efica to the TotalCare rental solution. Foreign currency
movements also favorably impacted revenue by nearly $4 million.
Funeral Services
Funeral Services product sales increased $7 million to $628 million in 2003
from $621 million in 2002. Favorable price realization (that is, net revenues
after discounts) of $24 million and increased revenue from cremation products
and other miscellaneous product accessory revenues of $6 million were partially
offset by a decline in volume of nearly 5% across virtually all product lines
along with a slightly unfavorable product mix. The decline in volume was
attributable to continued lower death rates, an estimated one-point increase in
cremation rates and management’s decision to exit some unprofitable product
lines in Canada.
Insurance revenues, consisting of underwriting and investment revenues,
increased 8.1% to $347 million in 2003 from $321 million in the prior year.
The increase in revenues was due in part to a favorable comparison of net
capital losses and impairments. In 2003, net capital losses and impairments of
$49 million were recognized compared to $57 million in 2002. Included in
these amounts were impairment charges of $91 million and $67 million in 2003
24
and 2002, respectively, partially offset by net realized capital gains of $42
million and $10 million, respectively. Forethought continues to take steps to
mitigate the risk of future impairments by improving the credit quality of its
investments and lowering the limits of investments in individual securities.
Volatility in the credit markets, however, represents a continuing risk to
future results of operations. As of September 30, 2003, the Forethought
investment portfolio reflected a cumulative net unrealized gain of $185
million, which was net of unrealized losses of $10 million.
Revenues generated by underwriting improved as earned revenues increased
$4 million, or 1.9%, to $216 million in 2003 as a result of increasing policies
in force and the improved profitability of products sold. Earned revenue
consists of revenue from the cost of insurance and amortization of front-end
load. Revenue from cost of insurance is assessed based on mortality while
front-end load represents the amortization of previously deferred revenue for
services rendered following the policy sale. Investment income increased
approximately $15 million in 2003 to $180 million, as the impact of the prior
year’s higher partnership losses and the larger investment base in the current
year more than offset the continuing pressures on investment yield. The
funeral value of policies sold (amount of insurance put in place to prefund the
funeral arrangement) declined in 2003 approximately 15.4% from 2002, primarily
the result of weak economic conditions and the impact of the elimination of a
sales and marketing program in the prior year. All indications are that policy
sales have stabilized.
Gross Profit
Health Care
Gross profit from Health Care sales
decreased to $379 million in 2003 from $394
million in the prior year, a decrease of 3.8%. As a percentage of sales, gross
profit was 50.6% in 2003 compared to 50.1% in 2002. The decrease in gross
profit dollars was primarily associated with lower volumes, due in part to the
Company’s change in fiscal year-end as discussed above. Lower volumes
contributed to approximately $25 million of the decline in gross profit. Also
contributing to the decline were continued pricing pressures in low-to
mid-range product offerings. These pricing pressures are expected to continue
in the near term until new product offerings are introduced in the coming
months. Lower costs resulting from
continuing quality initiatives and improved manufacturing efficiencies resulted
in the overall improvement in gross profit as a percentage of sales.
Health Care therapy rental gross profit remained relatively flat in 2003.
As a percentage of sales, gross profit was 49.4% of revenues in 2003 compared
to 47.6% of revenues in the prior year. The improvement in gross profit margin
was attributable to continued improvements in overall field service and selling
costs and the fiscal fourth quarter resolution of outstanding claims of
approximately $3 million with CMS previously discussed, partially offset by the
negative effect of higher specific product warranties in 2003 than in 2002.
Lower realized rate, most notably in home care where the prior year included
collections on receivables previously written off, along with lower volumes
partially offset the gross profit improvement.
25
Funeral Services
Funeral Services gross profit increased 3.9% from $336 million, or 54.1% of
revenue, in 2002 to $349 million, or 55.6% of revenue, in 2003. This increase
was due to improved price realization, continued efficiencies in manufacturing
and production costs, savings on purchased materials related to strategic
sourcing efforts and lower inventory provisions related to excess, obsolete and
discontinued product lines than in the prior year. These benefits were
partially offset by lower volumes across essentially all products lines,
expected inefficiencies due to the introduction of a new product line at one of
the Company’s plants and increased steel prices resulting from the tariffs
imposed by the U.S. government on steel imports in 2002. Gross profit
percentages are exclusive of distribution costs of $85 million, up from $84
million in the prior year period, but approximately 13.5% of revenues in each
year. Such costs are included in Other operating expenses for all periods.
Profit before other operating expenses for Forethought increased to $16
million in 2003 from a loss of $3 million in 2002. The improvement related
primarily to increased investment income of $15 million and the favorable
differential in net capital losses and impairment charges of $8 million. The
favorable impact of the higher revenues in 2003 was partially offset by
increased cost of revenues, primarily associated with a $9 million increase in
credited interest resulting from the increased number of policies in force,
despite current year reductions in the overall crediting rate of the policies.
This increase was only partially offset by favorability associated with death
benefits paid and a Company sponsored sales and marketing program.
Other Operating Expenses
Other operating expenses, including insurance operations, decreased 5.8% to
$573 million in 2003 compared to $608 million in 2002. As a percentage of
revenues, operating expenses decreased to 28.1% in 2003 from 29.6% in 2002,
solely the result of lower operating expenses. Other operating expenses
consist of selling, marketing, distribution and general administrative costs.
The decrease in operating expenses is primarily attributable to lower incentive
compensation, legal and selling-related expenses. The decreased legal expenses
are associated primarily with the KCI antitrust litigation, which was settled
in December 2002. These decreases were partially offset by increased
engineering and product development spending of $10 million in accordance with
the Company’s business plan and strategy.
Operating Profit
Health Care
Health Care operating profit of $195 million in 2003 improved from an operating
loss of $76 million in 2002. The primary driver for the increase in operating
profit was the prior year $250 million KCI antitrust litigation charge
previously mentioned. Also contributing to the increase were lower operating
expenses, which decreased by $46 million, primarily related to decreased
incentive compensation, legal, bad debt and selling-related costs. Partially
offsetting the improvement in operating expenses was the decline in Health Care
sales gross profit, primarily the result of lower volumes and continued pricing
pressures, which more
than offset the impact of other efficiencies and the overall improvement in
gross margin rates as a percentage of sales.
Health Care operating results in 2003 included a special charge of $9
million related to severance and benefit-related costs associated with the new
business structure previously discussed. This charge was partially offset by
the resolution of outstanding claims with CMS of approximately $3 million.
Operating results in 2002 were impacted by the KCI antitrust litigation charge
of $250 million, net special charge activity of essentially zero and a fourth
quarter operating expense charge related to the write-off of a separate
technology asset of approximately $5 million. During 2002, a realignment
action in Germany was essentially offset by the reversal of prior special
charge provisions in excess of actual requirements.
26
Funeral Services
Batesville Casket operating profit of $182 million in 2003 increased 7.8% as a
result of favorable price realization, continued efficiencies in manufacturing
and production costs and savings on purchased materials related to strategic
sourcing efforts. These benefits were partially offset by lower volumes of
nearly 5% across essentially all product lines, expected inefficiencies due to
the introduction of a new product line at one of the Company’s plants and
increased steel prices resulting from the tariffs enacted in the prior year.
Operating expenses increased $4 million from the prior year, resulting from an
increase in uncollectible accounts, higher costs related to investments in new
product development, increased distribution costs related to higher fuel costs
and amortization expense resulting from the acquisition of the Marsellus
intellectual property in 2003. Offsetting the increases in operating expenses
were lower selling costs driven by the lower burial volumes. In 2002,
Batesville Casket incurred special charges of $4 million, related to the
closure of a wood casket manufacturing plant in Canada and an employee
reduction action in the United States.
At Forethought, operating losses improved approximately $24 million, or
64.6%, due primarily to lower net capital losses and impairments and improved
investment income of $8 million and $15 million, respectively. Improvements in
the underwriting business also contributed to the increase in operating profit.
These favorable impacts were partially offset by increased cost of revenues,
as previously discussed, and slightly higher operating expenses. Forethought
incurred $10 million of special charges in 2002 relating to the realignment of
certain operations and the impairment of certain technology assets.
Other Income and Expense
Interest expense increased $1 million to $19 million in 2003 compared to $18
million in 2002. This increase was primarily related to the amortization of
debt issuance costs and other expenses associated with the Company’s revolving
credit facilities and related amendments. The Company continued to realize the
benefits of interest rate swaps that converted $150 million of long-term debt
from fixed to variable interest rates as a result of the favorable
interest rate environment. In late June 2003, one of the interest rate swaps
was terminated, with the remaining two swaps being terminated in July 2003.
Investment income of $9 million declined from $12 million in 2002, as a result
of lower cash and cash equivalents and the lower interest rate environment.
The lower cash and cash equivalents related primarily to the $175 million, $111
million net-of-tax, payment made in January 2003 associated with the KCI
settlement. As previously mentioned, the Company incurred a charge of
approximately $16 million in conjunction with the completion of a bond tender,
which resulted in the retirement of approximately $157 million of the Company’s
long-term debt. This charge was composed primarily of the premium paid to
repurchase the outstanding bonds, partially offset by recognition of a portion
of the gain associated with the termination of the interest rate swaps. Other
expenses increased year over year, primarily resulting from other investment
write-downs.
Income Taxes
Income tax expense of $100 million was recognized in 2003 compared to an income
tax benefit of $41 million in 2002. The effective tax rate for 2003
approximated 35.5%. This rate included
27
the effect of a valuation allowance of
approximately $4 million provided in the fourth quarter. The allowance was
provided in response to concerns regarding the utilization of certain foreign
deferred tax assets resulting from continued deterioration in operating results
and generally weak economic conditions in certain foreign tax jurisdictions.
Excluding the effect of this valuation allowance, the effective income tax rate
for 2003 would have approximated 34%. The tax benefit in 2002 resulted from
the loss recognized in 2002, resulting from the $250 million KCI antitrust
litigation charge, and the release of approximately $32 million of previously
provided tax reserves. These reserves were released as a result of the
resolution of certain domestic and foreign tax matters. Excluding the impact
of the prior year KCI antitrust litigation charge and the release of tax
reserves, the effective tax rate in 2002 would have approximated 34.2%.
Discontinued Operations
In September 2003, the Company entered into a definitive agreement with Beacon
Medical Products, LLC to sell the piped-medical gas business of Hill-Rom for an
estimated $14 million. Also in September 2003, the Company announced that it
had entered into an agreement with Dräger Medical AG & Co.
KGaA for Dräger
Medical to purchase the Air-Shields infant care business of Hill-Rom for an
estimated $31 million. In the disposition of these businesses, the Company
retained the collection rights to outstanding receivables at the date of close
of approximately $13 million. The sale of the piped-medical gas business was
completed in late October 2003. The sale of the infant care business is
expected to close in the first calendar quarter of 2004, subject to required
regulatory approvals. These businesses were selected for divestiture as they
no longer fit within our strategic portfolio. They were considered to have
limited future growth potential, possessed unique sales channels and research
and development requirements, had low profit margins and would have required
significant investment to achieve their limited growth potential. Proceeds
from the disposition of these businesses will be reinvested as part of the
Company’s acquisition growth strategy.
As a result of these divestitures, and in accordance with Statement of
Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment
or Disposal of Long-Lived Assets”, the Company has reported these businesses as
discontinued operations for all years presented. The results from discontinued
operations reflect a net loss of $44 million in 2003 compared to income of $9
million in the prior year. The loss in 2003 included an estimated pre-tax loss
on the disposal of the two businesses of $50 million, along with a $1 million
income tax provision on the disposal resulting from the book and tax basis
differentials associated with the businesses and the inability of the Company
to readily utilize the capital losses expected to be generated as a result of
the divestitures. The loss on disposal associated with the transactions is
related to $72 million of goodwill specifically assigned to the carrying value
of the respective businesses (See Note 3 to Consolidated Financial Statements).
This loss was recorded as a non-cash reduction of goodwill within the
Consolidated Balance Sheet, with the remaining $22 million of goodwill assigned
to the businesses included in Assets of Discontinued Operations. The reported
income for 2002 included a favorable patent litigation settlement that
accounted for approximately two-thirds of the reported income for the year.
Overall operating performance of the discontinued operations improved in 2003,
primarily in response to somewhat higher revenues and lower operating expenses.
28
Fiscal Year Ended September 30, 2003 Compared to Ten Months Ended September 30, 2002
Summary
Consolidated revenues for the fiscal year ended September 30, 2003 totaled
$2,042 million compared to $1,683 million for the ten months ended September
30, 2002. Giving consideration to the different time periods, overall revenues
were somewhat higher in 2003 as a result of stronger Health Care and Funeral
Services sales. Benefiting overall Health Care sales were favorable movements
in foreign currency exchange rates of approximately $24 million. Offsetting
the Health Care sales improvement was nearly $17 million of additional revenue
recorded in 2002 as a result of the inclusion of an additional month of sales
for certain foreign operations as Hill-Rom discontinued consolidating such
operations on a one-month lag basis in September 2002.
An
operating profit of $319 million, or 15.6% of revenues, was recognized
for the 2003 fiscal year, compared to an operating loss of $37 million for the
ten months ended September 30, 2002. The 2002 operating loss was primarily
attributable to the $250 million KCI antitrust litigation charge previously
discussed. The improvement in operating profit as a percentage of revenues
over 2002, in addition to the impact of the KCI litigation charge, related to
both higher gross profit margins, which increased 120 basis points, and lower
operating expenses as a percentage of revenues. The improved gross profit
margins resulted from improved product mix, primarily in Health Care therapy
rentals, price realization in Funeral Services sales and the benefits of cost
reduction and realignment efforts throughout the Company. The unfavorable
impact on gross margins of the higher net capital losses reported at
Forethought of $49 million in fiscal 2003 compared to the $27 million
recognized for the ten months ended September 30, 2002, were more than offset
by the higher reported
Forethought investment income in fiscal 2003. Lower operating expenses as a
percentage of revenues resulted predominantly from lower incentive
compensation, legal and selling-related expenses. The inclusion of an
additional month of activity for certain foreign operations of Hill-Rom had a
minimal impact on 2002 operating income.
Operating results for the fiscal year ended September 30, 2003 included
net capital losses and impairment charges of $49 million compared to $27
million for the ten months ended September 30, 2002. Operating results in 2003
also included a special charge of $9 million related to severance and
benefit-related costs associated with the new business structure at Hill-Rom.
A fourth quarter pension curtailment charge of approximately $3.5 million was
essentially offset by the resolution of approximately $3 million of past due
and fully reserved receivables with CMS, as previously discussed. Operating
results in 2002 included the $250 million KCI antitrust litigation charge and a
net special charge of $4 million. The net special charge was associated
primarily with a realignment action by Hill-Rom in Germany and the closure of a
wood casket manufacturing plant in Canada and other employee reduction actions
in the United States by Batesville Casket. These charges were partially offset
by the reversal of prior special charge provisions in excess of actual
requirements at Hill-Rom. Operating results in 2002 were also negatively
impacted by a $5 million operating expense charge related to the write-off of a
separate technology asset with no continuing value at Hill-Rom.
In addition to the above items impacting operating earnings, the Company
also recognized a $16 million charge in Other expense related to the completion
of a bond tender offer in the fourth quarter of 2003. During 2002, the Company
recognized the release of approximately $6
29
million of previously provided tax
reserves associated with the resolution of certain domestic and foreign tax
matters. Income from continuing operations of $182 million was recognized in
2003 compared to a net loss of $18 million in 2002. The increase in income was
related primarily to the KCI antitrust litigation charge of $250 million, $158
million net-of-tax, along with the 2002 period including only ten months.
Net Revenues
Health Care
Health Care sales for the fiscal year
ended September 30, 2003 were $749
million compared to $615 million for the ten months ended September 30, 2002.
This increase in revenue resulted primarily from the different time periods and
the favorable impacts of foreign currency movements. Negatively impacting the
revenue comparison was the inclusion of an extra month of sales in 2002 for
certain foreign operations, with an estimated impact of $15 million on capital
sales. North American sales volumes in the comparable portion of each
reporting period demonstrated some improvement, but this was generally offset
by declines in European volumes. Downward pricing pressure on low-to mid-range
product offerings also negatively impacted Health Care sales.
Health Care therapy rental revenue was $318 million for fiscal year 2003
compared to $268 million for the ten months ended September 30, 2002. The
additional two months of rental revenue combined with favorable foreign
currency movements and favorable product mix drove the increase. This was
offset by generally lower units in use and lower rate realization for most
product lines, which put added pressure on rental revenues. The extra month of
sales in 2002 for certain foreign operations previously mentioned increased
2002 Health Care therapy rental revenues by approximately $2 million.
Funeral Services
Funeral Services product sales for fiscal year 2003 were $628 million compared
to $510 million for the ten months ended September 30, 2002. Overall,
excluding the impact of different time periods, volume declines across
virtually all product lines were more than offset by improved price realization
and increased revenue from cremation products and other miscellaneous product
accessory revenues over the prior year. The decline in volume was attributable
to lower death rates, an estimated one-percentage point increase in cremation
rates and management’s decision to exit some unprofitable product lines in
Canada.
Insurance revenues, consisting of underwriting and investment revenues,
were $347 million for the fiscal year ended September 30, 2003 compared to $290
million for the ten months ended September 30, 2002. Investment income
improved over the prior year, as the prior year’s higher partnership losses and
the impacts of a larger investment base more than offset continuing pressures
on investment yield. Forethought’s underwriting business continued to perform
well as a result of increasing policies in force and the improved profitability
of products sold. The funeral value of policies sold, however, was down from
2002 levels as a result of the
30
factors cited earlier. Investment performance
was adversely impacted by net capital losses and impairment charges of $49
million and $27 million in 2003 and 2002, respectively, but was partially
offset by the higher investment income discussed above. Included in the net
capital losses and impairment charges were impairment charges of $91 million
and $39 million in 2003 and 2002, respectively, partially offset by net
realized capital gains of $42 million and $12 million, respectively.
Forethought continues to take steps to mitigate the risk of future impairments,
but volatility in the credit markets represents a continuing risk to future
results of operations.
Gross Profit
Health Care
Gross profit for Health Care sales
increased to 50.6% of revenues for fiscal
year 2003 compared to 49.4% of revenues for the ten months ended September 30,
2002. The increase in gross profit percentage was due primarily to lower costs
resulting from continuing quality initiatives and improved manufacturing
efficiencies.
Health Care therapy rental gross profit increased to 49.4% of revenues for
fiscal year 2003 compared to 47.4% of revenues for the ten months ended
September 30, 2002. The improvement in gross profit percentage was
attributable to continued improvements in overall field service and selling
costs and the fiscal fourth quarter resolution of approximately $3 million of
past due and fully reserved receivables with CMS previously discussed,
partially offset by the negative effect of higher product warranties in 2003.
Lower realized rate, most notably in home care, where the prior year included
collections on receivables previously written off, along with lower volumes
partially offset the gross profit improvement.
Funeral Services
Funeral Services gross profit increased to 55.6% of revenues for fiscal year
2003 compared to 53.9% of revenues for the ten months ended September 30, 2002.
This increase is due to favorable price realization, continued efficiencies in
manufacturing and production costs, savings on purchased materials resulting
from strategic sourcing efforts and lower inventory provisions than in the
prior year. These benefits were partially offset by expected inefficiencies
due to the introduction of a new product line at one of the Company’s plants
and increased steel prices resulting from the tariffs enacted in the prior
year. Gross profit percentages are exclusive of distribution costs of 13.5%
and 13.8% of revenues for 2003 and 2002, respectively, which are included in
Other operating expenses.
Profit before other operating expenses in insurance operations as a
percentage of revenues declined to 4.6% for the fiscal year ended September 30,
2003 from 5.5% for the ten months ended September 30, 2002. The performance in
each period was heavily influenced by net capital losses and impairments of $49
million and $27 million, respectively. Improvements in the underwriting
business and increased investment income provided a partial offset, but could
not fully offset the negative effects of the net capital losses and
impairments.
31
Other Operating Expenses
Other operating expenses, including
insurance operations, decreased to 28.1% of
revenues for fiscal year 2003 compared to 30.0% of revenues for the ten months
ended September 30, 2002. Other operating expenses consist of selling,
marketing, distribution and general administrative costs. The decrease in
operating expenses as a percentage of revenues is consistent with the
explanation previously provided in the comparison of twelve month results for
September 30, 2003 and 2002.
Operating Profit (Loss)
Health Care
Health Care operating profit of $195 million in 2003 increased from an
operating loss of $136 million for the ten months ended September 30, 2002
primarily as a result of the $250 million KCI antitrust litigation charge
included in 2002 and the difference in the length of the time periods under
comparison. The improvement in operating profit was also favorably impacted by
the increased gross profit margins for both Health Care sales and Health Care
therapy rentals and the decline in operating expenses as a percentage of
revenues, as previously discussed.
Health Care operating results for fiscal year 2003 included a $9 million
special charge related to severance and benefit-related costs associated with
the new business structure at Hill-Rom. This was partially offset by the
resolution of outstanding claims with CMS of approximately $3 million. For the
ten months ended September 30, 2002, operating results included the $250
million KCI antitrust litigation charge and a net special charge of $1 million
as a small realignment action in Germany was partially offset by the reversal
of prior special charge provisions in excess of actual requirements. Operating
results in 2002 also included an operating expense charge of $5 million related
to the write-off of a technology asset with no continuing value.
Funeral Services
Batesville Casket operating profit as a percentage of revenue improved nearly
175 basis points in 2003 compared to 2002, primarily as a result of the
increased gross profit margins discussed above. Operating expenses as a
percentage of revenue increased slightly, resulting from the same factors cited
in the comparison of twelve month results for September 30, 2003 and 2002. In
2002 Batesville Casket incurred a special charge of $3 million.
At Forethought, 2003 operating losses increased in comparison to the ten
months ended September 30, 2002. Improvements in the underwriting business and
increased investment income were not sufficient to fully offset the negative
effects of the higher net capital losses and impairments and operating
expenses.
Other Income and Expense
Interest expense increased in fiscal year 2003 compared to the ten months ended
September 30, 2002 as a result of the amortization of debt issuance costs and
other expenses associated with the Company’s revolving credit facilities and
related amendments and the additional two
32
months in 2003. Investment income in
2003 was essentially unchanged compared to the ten months ended September 30,
2002, as the additional two months of income were offset by the effects of
lower cash and cash equivalents and the lower interest rate environment. The
loss on repurchase of debt related to the completion of the fourth quarter 2003
bond tender previously discussed. Other expenses increased year over year,
primarily as a result of other investment write-downs in 2003.
Income Taxes
The effective income tax rate on income from continuing operations for fiscal
year 2003 was approximately 35.5% compared to 63.4% for the ten months ended
September 30, 2002. The effective tax rate for 2003 included the effect of a
valuation allowance of approximately $4 million provided in the fourth quarter.
The allowance was provided in response to concerns regarding the utilization
of certain foreign deferred tax assets resulting from continued deterioration
in operating results and generally weak economic conditions in certain foreign
tax jurisdictions. Excluding the effect of this valuation allowance, the
effective tax rate for 2003 would have approximated 34%. Income taxes in 2002
were favorably impacted by the release of previously provided tax reserves
associated with the resolution of certain domestic and foreign tax matters.
The release of these reserves benefited income taxes by $6 million in 2002.
Excluding the impact of the KCI antitrust litigation charge and the release of
these reserves, the effective tax rate in 2002 would have approximated 34%.
Discontinued Operations
The results from discontinued operations reflected a net loss of $44 million in
2003 compared to income of $8 million for the ten months ended September 30,
2002. The loss in 2003 included an estimated pre-tax loss on the disposal of
the infant care and piped-medical gas businesses of $50 million, along with a
$1 million income tax provision on the disposal
resulting from the book and tax basis differentials associated with the
businesses and the inability of the Company to readily utilize the capital
losses expected to be generated as a result of the divestitures. The reported
income for 2002 included a favorable patent litigation settlement that
accounted for approximately three-quarters of the reported income for the year.
Overall operating performance of the discontinued operations improved in 2003,
primarily in response to somewhat higher revenues and lower operating expenses.
Twelve Months Ended September 30, 2002 Compared to Twelve Months Ended September 30, 2001
Summary
Consolidated revenues remained relatively stable at $2,057 million in 2002
compared to $2,053 million in 2001. Strong Health Care sales were partially
offset by the continuing effects of the prior year exit of certain product
lines and the sale of a Health Care subsidiary in the first quarter of 2002.
Further offsetting the strong Health Care sales were revenue adjustments for
net capital loss and impairment charges recognized by Forethought of
approximately $57 million in 2002 compared with $1 million in 2001. Revenues
in 2002 were benefited by nearly $17 million as a result of the inclusion of an
additional month of sales for certain foreign operations as Hill-Rom
discontinued consolidating such operations on a one-month lag basis in
September 2002 due to the resolution of prior process and system constraints.
Operating profit of $10 million was recognized in 2002 compared to $243
million in the prior year. The significant decline in operating profit was
attributable primarily to the $250 million litigation charge taken in relation
to the KCI antitrust litigation previously discussed. The magnitude of this
charge masked higher gross profit margins achieved in 2002, which increased 220
basis points during the year, resulting from improved product mix, price
realization and the benefits of cost reduction and realignment efforts. The
higher margins however, were partially offset by increased operating expenses
associated with business transformation items described below, legal expenses
related primarily to the KCI antitrust
33
litigation and incentive compensation.
The inclusion of an additional month of activity for certain foreign operations
of Hill-Rom had minimal impact on 2002 operating income.
In addition to the effects of the net capital losses and impairment
charges at Forethought and the KCI antitrust litigation charge, operating
results were also negatively impaired by a number of other items in each
period. In 2002, a special charge of $15 million was recorded related to
continued streamlining efforts at all Hillenbrand companies and the impairment
of a technology asset at Forethought. In addition, a fourth quarter operating
expense charge of $5 million was recognized related to the write-off of a
separate technology asset that had no continuing value at Hill-Rom. Comparable
results for 2001 were also negatively impacted by a net special charge of $27
million primarily related to the realignment of Hill-Rom’s home care and
long-term care businesses and the write-down of certain assets in a non-core
product line, along with costs incurred with respect to the retirement of the
Company’s former Chief Executive Officer. The net impact of the above items,
including the effects of the net capital losses and impairment charges at
Forethought and the KCI litigation charge, negatively impacted operating profit
in 2002 and 2001 by $327 million and $28 million, respectively.
Income from continuing operations declined in 2002 to $35 million, or
$0.56 on a diluted earnings per share basis, compared to $152 million, or $2.41
on a diluted earnings per share basis, in 2001. The decline relates primarily
to the effects of the net capital losses and impairment charges at Forethought
and the KCI litigation charge of $250 million, $158 million net-of-tax,
partially offset by the reversal of $32 million of previously provided tax
reserves. The tax reserves were reversed as they were no longer considered
necessary based on the resolution of certain domestic and foreign tax matters.
An additional offset was provided by the higher revenues and margins achieved
in 2002 as previously outlined.
Net Revenues
Health Care
Health Care sales increased $64 million, or 8.9%, in 2002, to $787 million from
$723 million in 2001. Acute care sales continued to be strong, especially with
the TotalCare SpO
2
RT™ and Advanta™ bed systems. Also contributing to the sales
increase was the inclusion of a 13th month of sales in 2002 for certain foreign
operations, with an estimated impact of $15 million on capital sales. During
the fourth quarter of 2002 the Company discontinued consolidating such
operations on a one-month lag basis. The favorable impacts of foreign currency
movements also contributed approximately $6 million to the increase in sales.
This favorability in revenue was partially offset by declines in North American
sales associated with lower volumes in long-term care and ambulatory products,
along with general declines in European volume levels in select markets, most
notably in Germany. Further, the sale of a small Health Care subsidiary in
the first quarter of 2002 and the prior year exit of certain long-term care
product lines also had a negative impact of sales. The net effect of the
subsidiary sale, the exiting of certain product lines and the elimination of
the 13
th
month of sales for certain foreign operations negatively impacted
revenues in 2002 by approximately $10 million.
34
Health Care therapy rental revenue was essentially flat at $328 million in
2002 compared to $327 million in 2001. Improved rate realization was achieved
in 2002, primarily within the home care market where revenues were favorably
impacted by the collection of certain previously reserved receivables. The
additional month of revenues for certain foreign operations also had a
favorable impact on rental revenues of approximately $2 million, while currency
movements favorably impacted revenue by $1 million. These positive impacts
were offset by lower volume, primarily as a result of six fewer days in the
2002 fiscal year as the Company moved from a 4-4-5 calendar to a calendar month
end with its transition to a new fiscal year-end of September 30, along with
the impacts of the sale of a small subsidiary in the first quarter of 2002.
The favorable impacts of the home care realignment efforts outlined above were
essentially offset by the subsidiary sale, resulting in minimal net impact on
Health Care therapy rental revenues.
Funeral Services
Funeral Services product sales declined $3 million to $621 million in 2002 from
$624 million in 2001. Overall, a decline in volume of approximately 5% across
virtually all product lines was essentially offset by favorable product mix and
improved price realization of $40 million year over year. The decline in
volume was attributable to lower death rates and an increase in cremation
rates, along with the impact of an additional week of revenues in the first
quarter of 2001.
Insurance revenues, consisting of underwriting and investment revenues,
declined $58 million, or 15.3%, to $321 million in 2002 from $379 million in
the prior year. The decline is primarily attributable to net capital losses
and impairment charges in 2002 of $57 million,
primarily within the high-yield bond and telecommunication sectors, compared to
net capital losses and impairments of $1 million in the prior year.
Forethought’s underwriting business continued to perform well, with 2002 earned
revenues increasing $14 million, or 7.1%, to $212 million as a result of
increasing policies in force and the improved profitability of products sold.
The funeral value of policies sold in 2002, however, was down approximately 12%
from 2001. This decline was primarily related to the discontinuance of
Canadian operations, a reduction in trust rollovers, the timing of which is
difficult to predict, and Forethought’s strategic decision to de-emphasize the
passive seller market and to focus its energies on the more profitable active
seller market. Investment performance during the year was also significantly
impacted by the $57 million of net capital losses and impairments recognized
during the year, including $23.4 million of impairments related to Enron Corp.,
WorldCom, Inc., Adelphia Communications and Global Crossing Ltd. Investment
income, which was down $12 million to $165 million in 2002, also continued to
be negatively impacted by the effects of the impairments, the shift from
high-yield bonds to lower yielding investment grade bonds, lower overall
interest rates on new investments and lower partnership income, primarily
related to private equity partnerships.
Gross Profit
35
Health Care
Gross profit for Health Care sales increased to $394 million in 2002 from $349
million in the prior year, an increase of 12.9%. As a percentage of sales,
gross profit was 50.1% in 2002 compared to 48.3% in 2001. The increase was due
primarily to an overall improvement in product mix, slightly higher product
volumes, favorable pricing and operational improvements related to various
previously announced cost reduction and realignment efforts. Partially
offsetting these favorable impacts on gross profit were higher warranty costs
of approximately $11 million, along with other costs associated with the
exiting of certain businesses.
Health Care therapy rental gross profit increased 44.4% from $108 million
in 2001 to $156 million in 2002. As a percentage of sales, gross profit was
47.6% of revenues in 2002 compared to 33.0% of revenues in the prior year. The
improvement in gross profit margin was attributable to lower field service and
home office costs resulting from the sales force restructuring actions of the
prior year, along with other cost containment efforts in the Acute Care and
European markets. Also contributing to this increase were favorable
comparisons to the prior year with respect to uncollectible receivables in the
home care market as a result of the exiting of certain home care product lines
in the prior year. Gross profit was favorably impacted in 2002 by the
collection of certain receivables that had been previously reserved as
uncollectible, while 2001 was unfavorably impacted by reserve adjustments for
uncollectible
receivables. These favorable developments were partially offset by lower units
in use compared to 2001.
Funeral Services
Funeral Services gross profit increased 4.3% from $322 million, or 51.6% of
revenue, in 2001 to $336 million, or 54.1% of revenue, in 2002. This increase
was due to favorable price realization, improved product mix, continued
efficiencies in manufacturing and production costs and savings on purchased
materials related to strategic sourcing efforts. These benefits were partially
offset by lower volumes across essentially all product lines, along with
certain inventory provisions related to excess, obsolete and discontinued
products. Gross profit percentages are exclusive of distribution costs of $84
million, or approximately 13.5% of 2002 revenues, essentially flat with 2001.
Such costs are included in Other operating expenses for all periods.
Profit before other operating expenses and special charges in insurance
operations decreased approximately $60 million resulting in a loss of $3
million in 2002 compared to a profit of $57 million in 2001. This decrease was
due primarily to higher net capital losses and impairments and lower investment
income of $56 million and $12 million, respectively. Improvements in the
underwriting business and efforts by Forethought to reduce its fixed cost
structure partially offset these negative developments.
Other Operating Expenses
Other operating expenses, including insurance operations, increased 7.4% to
$608 million in 2002 compared to $566 million in 2001. These expenses
increased as a percentage of sales from 27.6% to 29.6%, as a result of both
higher expenses and the negative effect of the $57 million of net capital
losses and impairments recognized by Forethought during 2002. Other operating
expenses consist of selling, marketing, distribution and general administrative
costs. The increase in operating expenses is primarily attributable to
increased business transformation costs, legal expenses and higher incentive
compensation. Business transformation included information technology
infrastructure costs, as well as costs associated with new product development
and quality initiatives. The increased legal expenses were associated
primarily with the KCI antitrust litigation. Higher incentive compensation
related to improved overall performance related to target performance
established at the beginning of 2002. These increases in operating expenses
were partially offset by decreased goodwill amortization of approximately $7
million resulting from the adoption of SFAS No. 142, “Goodwill and Other
Intangible Assets” on December 2, 2001 and cost savings associated with
previously announced streamlining and realignment efforts.
36
Operating Profit
Health Care
Health Care incurred an operating loss of $76 million in 2002 compared to an
operating profit of $123 million in 2001. The 2002 operating loss was
attributable to the $250 million KCI antitrust litigation charge previously
discussed. This charge offset otherwise strong performance, largely the result
of increased gross profits for both Health Care sales and Health Care therapy
rentals of $45 million and $48 million, respectively. Health Care sales gross
profit increased primarily as a result of improved product mix, accompanied by
slightly higher volumes, better pricing and operational efficiencies related to
previously announced cost reduction and realignment efforts. These
improvements in gross profit were partially offset by increased warranty costs
and other costs associated with the exiting of certain businesses. Health Care
therapy rental gross profit increased primarily as a result of lower field
service and home office costs resulting from prior restructuring actions, along
with favorable comparisons to 2001 with respect to uncollectible receivables in
the home care market as a result of the exiting of certain home care product
lines in 2001. The overall improvements in gross profit were partially offset
by an increase in operating expenses of $60
million, primarily related to increased business transformation costs, legal
expenses, incentive compensation and higher selling costs related to the
increased revenues.
In addition to the $250 million KCI litigation charge, Health Care
operating results in each period were also negatively impacted by other items.
Net special charge activity was essentially zero in 2002 as a realignment
action in Germany was essentially offset by the reversal of prior special
charge provisions in excess of actual requirements. Operating results in 2002
were further impacted by an operating expense charge of approximately $5
million related to the write-off of a technology asset with no continuing
value. In 2001, an $18 million special charge was recognized related primarily
to the streamlining and realignment of Hill-Rom’s home care and long-term care
businesses and the write-down of certain assets in a non-core product line,
partially offset by small gains on the sale of facilities idled under prior
special charges and the reversal of prior special charge provisions in excess
of actual requirements.
Funeral Services
Batesville Casket operating profit of $169 million increased 5.6% as a result
of favorable price realization, improved product mix, continued efficiencies in
manufacturing and production costs and savings on purchased materials related
to strategic sourcing efforts, partially offset by lower unit volumes.
Operating expenses remained essentially flat as increased business
transformation and incentive compensation costs were nearly offset by lower
selling and marketing costs. In 2002 and 2001 Batesville Casket incurred
special charges of $4 million and $1 million, respectively. The 2002 charge
related to the closure of a wood casket manufacturing plant in Canada and an
employee reduction action in the United States. The 2001 action related to the
relocation of a small operation to another company site and an employee
reduction action in the United States.
At Forethought, operating profit decreased approximately $65 million,
nearly 240%, due primarily to higher net capital losses and impairments and
lower investment income of $56 million and $12 million, respectively. In
addition, Forethought incurred $10 million of special charges in 2002 and $1
million in 2001 relating to the realignment of certain operations and the
impairment of certain technology assets. Improvements in the underwriting
business and efforts by Forethought to reduce its fixed cost structure provided
a partial offset to these negative developments.
37
Other Income and Expense
Interest expense declined $7 million to $18 million in 2002 compared to $25
million in 2001. This decrease was primarily related to the impact of interest
rate swaps that converted $150
million of long-term debt from fixed to variable interest rates entered in
August 2001. The average variable interest rate on debt covered by the swaps
at September 30, 2002 was 4.0%. Investment income of $12 million declined from
$18 million in 2001, despite higher average invested amounts, as a result of
the lower interest rate environment. Other expenses increased $8 million,
primarily related to other investment write-downs.
Income Taxes
An income tax benefit of $41 million was recognized in 2002 compared to tax
expense of $82 million in 2001. The tax benefit in 2002 resulted from the loss
recognized in 2002, resulting primarily from the $250 million KCI antitrust
litigation charge, and the release of approximately $32 million of previously
provided tax reserves. These reserves were released as a result of the
resolution of certain domestic and foreign tax matters. Excluding the impact
of the KCI antitrust litigation charge and the release of these reserves, the
effective tax rate in 2002 would have approximated 34% compared to 35% in 2001.
Discontinued Operations
The results from discontinued operations reflected income of $9 million in 2002
compared to $1 million in the prior year. The reported income for 2002
included a favorable patent litigation settlement that accounted for
approximately two-thirds of the reported income for the year. Overall
operating performance of the discontinued operations improved in 2002,
primarily in response to somewhat higher revenues and lower operating expenses.
Ten Months Ended September 30, 2002 Compared to Fiscal Year Ended December 1, 2001
Summary
Consolidated revenues for the ten months ended September 30, 2002 totaled
$1,683 million compared to $2,019 million for the fiscal year ended December 1,
2001. Giving consideration to the different time periods, overall revenues
were relatively flat as strong Health Care sales were essentially offset by the
continuing effects of the prior year exit of certain product lines and the sale
of a Health Care subsidiary in October 2001. Revenues also benefited by nearly
$17 million as a result of the inclusion of an additional month of sales for
certain foreign
38
operations as Hill-Rom discontinued consolidating such
operations on a one-month lag basis in September 2002.
An operating loss of $37 million was recognized for the ten months ended
September 30, 2002, compared to an operating profit of $235 million, or 11.6%
of revenues, in fiscal 2001. The 2002 operating loss was primarily
attributable to the $250 million KCI antitrust litigation charge previously
discussed. The magnitude of this charge masked higher gross profit margins
achieved in 2002, which increased 210 basis points, resulting from improved
product mix, price realization and the benefits of cost reduction and
realignment efforts. This improvement in margins however, was essentially
offset by higher operating expenses associated with business transformation
items, legal expenses and incentive compensation.
The inclusion of an additional month of activity for certain foreign operations
of Hill-Rom had minimal impact on 2002 operating income.
Operating results for the ten months ended September 30, 2002 included net
capital losses and impairment charges of $27 million compared to $30 million in
2001. Operating results in 2002 also included the $250 million KCI antitrust
litigation charge and a net special charge of $4 million. The net special
charge was associated primarily with a realignment action by Hill-Rom in
Germany and the closure of a wood casket manufacturing plant in Canada and
other employee reduction actions in the United States by Batesville Casket.
This charge was partially offset by the reversal of prior special charge
provisions in excess of actual requirements at Hill-Rom. Operating results in
2002 were also negatively impacted by a $5 million operating expense charge
related to the write-off of a separate technology asset with no continuing
value at Hill-Rom. Results for 2001 were negatively impacted by a net special
charge of $32 million, primarily related to the realignment of Hill-Rom’s home
care and long-term care businesses and the impairment of certain
underperforming assets at Hill-Rom and Forethought, along with costs incurred
in connection with the discontinuance of Forethought operations in Canada.
A loss from continuing operations of $18 million was experienced in 2002
compared to income from continuing operations of $170 million in 2001. The
decline relates primarily to the effects of the KCI litigation charge of $250
million, $158 million net-of-tax, along with the 2002 period only including ten
months. In addition, the results from continuing operations reported in each
year were favorably impacted by the release of approximately $6 million and $26
million, respectively, of previously provided tax reserves. The tax reserves
were reversed as they were no longer considered necessary based on the
resolution of certain domestic and foreign tax matters.
Net Revenues
Health Care
Health Care sales for the ten months ended September 30, 2002 were $615 million
compared to $721 million for fiscal 2001. Acute care revenues were strong,
especially with the TotalCare SpO
2
RT™ and Advanta™ bed systems. Also
contributing to the strong sales was the inclusion of an extra month of sales
in 2002 for certain foreign operations, with an estimated impact of $15
39
million on capital sales, and the favorable impacts of foreign currency movements.
This favorability in revenue was partially offset by declines in North American
specialty products and declines in European volume levels in select markets.
The sale of a small Health Care subsidiary and the prior year exit of certain
long-term care product lines also had a negative impact on sales.
Health Care therapy rental revenue was $268 million for the ten months
ended September 30, 2002 compared to $339 million in fiscal 2001. Rental
revenues in 2002 represented a shortfall to 2001 levels, resulting primarily
from the sale of a small subsidiary and the 2001
exit of certain home care product lines. Generally lower units in use,
including the effect of discontinued product lines, and lower rate realization
for most product lines put added pressure on rental revenues. The extra month
of sales for certain foreign operations and favorable currency movements
previously mentioned provided partial offsets to these negative developments.
Funeral Services
Funeral Services product sales for the ten months ended September 30, 2002 were
$510 million compared to $613 million in fiscal 2001. Overall, excluding the
impact of different time periods, volume declines across virtually all product
lines were essentially offset by favorable product mix and improved price
realization over the prior year. The decline in volume was attributable
primarily to lower death rates and an increase in cremation rates.
Insurance revenues, consisting of underwriting and investment revenues,
were $290 million for the ten months ended September 30, 2002 compared to $346
million in fiscal 2001. Revenues in each period were negatively impacted by
net capital losses and impairment charges, $27 million in 2002 and $30 million
in 2001. Forethought’s underwriting business continued to perform well as a
result of increasing policies in force and the improved profitability of
products sold. The funeral value of policies sold, however, was down from 2001
levels as a result of the discontinuance of Canadian operations, a reduction in
trust rollovers and Forethought’s strategic decision to de-emphasize the
passive seller market. Investment performance was adversely impacted by the
net capital losses and impairments recognized in each period. Investment
income was also negatively impacted by the other factors cited earlier.
Gross Profit
Health Care
Gross profit for Health Care sales increased to 49.4% of revenues for the ten
months ended September 30, 2002 compared to 48.1% in fiscal 2001. The increase
in gross profit percentage was due primarily to an overall improvement in
product mix, slightly higher product volumes, favorable pricing and operational
improvements related to cost reduction and realignment efforts. Partially
offsetting these favorable impacts on gross profit were higher warranty costs,
along with other costs associated with the exiting of certain businesses.
40
Health Care therapy rental gross profit increased to 47.4% of revenues for
the ten months ended September 30, 2002 compared to 38.6% in fiscal 2001. The
improvement in gross profit percentage was attributable to lower field service
and home office costs resulting from the sales force restructuring actions in
2001, along with other cost containment efforts in the Acute Care and European
markets. Also contributing to this increase were favorable comparisons to the
prior year with respect to uncollectible receivables in the home care
market as a result of the exiting of certain home care product lines in the
prior year. Gross profit was favorably impacted in 2002 by the collection of
certain receivables that had been previously reserved as uncollectible, while
2001 was unfavorably impacted by reserve adjustments for uncollectible
receivables.
Funeral Services
Funeral Services gross profit increased to 53.9% of revenues for the ten months
ended September 30, 2002 compared to 52.0% in fiscal 2001. This increase was
due to favorable price realization, improved product mix, continued
efficiencies in manufacturing and production costs and savings on purchased
materials resulting from strategic sourcing efforts. These benefits were
partially offset by lower volumes across essentially all product lines, along
with certain inventory provisions. Gross profit percentages are exclusive of
distribution costs of 13.8% and 13.2% of revenues which are included in Other
operating expenses for 2002 and 2001, respectively.
Profit before other operating expenses and special charges in insurance
operations as a percentage of revenues declined to 5.5% for the ten months
ended September 30, 2002 from 7.8% for fiscal 2001. The performance in each
period was heavily influenced by net capital losses and impairments of $27
million and $30 million, respectively. Improvements in the underwriting
business and efforts by Forethought to reduce its fixed cost structure in 2002
provided a partial offset, but could not fully offset the negative effects of
the net capital losses and impairments and overall investment performance.
Other Operating Expenses
Other operating expenses, including insurance operations, increased to 30.0% of
revenues for the ten months ended September 30, 2002 compared to 27.6% in
fiscal 2001. Other operating expenses consist of selling, marketing,
distribution and general administrative costs. The increase in operating
expenses as a percentage of revenues is consistent with the explanation
previously provided in the comparison of twelve month results for September 30,
2002 and 2001.
Operating (Loss) Profit
Health Care
Health Care incurred an operating loss of $136 million in 2002 as a result of
the $250 million KCI antitrust litigation charge previously discussed. In
addition to the litigation charge, Health Care operating results were
negatively impacted as increased gross profit margins for both Health Care
sales and Health Care therapy rentals were more than offset by higher operating
expenses as a percentage of revenues.
Health Care operating results for the ten months ended September 30, 2002
included the $250 million KCI antitrust litigation charge and a net special
charge of $1 million compared to a fiscal 2001 net special charge of $19
million. During 2002 a small realignment action in Germany was partially
offset by the reversal of prior special charge provisions in excess of actual
requirements. In 2001, the $19 million special charge related primarily to the
streamlining and realignment of Hill-Rom’s home care and long-term care
businesses and the write-down of certain assets in a non-core product line,
partially offset by the reversal of prior provisions in excess of actual
requirements. Operating results in 2002 were also negatively impacted by an
operating expense charge of approximately $5 million related to the write-off
of a technology asset with no continuing value.
41
Funeral Services
Batesville Casket operating profit as a percentage of revenue improved 220
basis points in 2002 compared to 2001 as a result of increased gross profit
margins and relatively flat operating expenses. Operating expenses remained
essentially flat as increased business
transformation and incentive compensation costs were nearly offset by lower
sales and marketing costs. In 2002 and 2001 Batesville Casket incurred special
charges of $3 million and $2 million, respectively.
At Forethought, operating profit as a percentage of revenue improved
slightly in 2002, but was still negative. Improvements in the underwriting
business and reduced operating expenses were not sufficient to fully offset the
negative effects of the net capital losses and disappointing investment
performance. In addition, Forethought incurred $10 million of special charges
in fiscal 2001 relating to the realignment of certain operations and the
impairment of certain technology assets.
Other Income and Expense
Interest expense declined in 2002 compared to fiscal 2001 as a result of the
interest rate swaps put in place in August 2001. Investment income also
declined in 2002 compared to 2001, despite higher average invested amounts, as
a result of the lower overall interest rate environment. Other investment
write-downs resulted in higher Other expense in 2002 compared to fiscal 2001.
Income Taxes
The effective income tax rate for the ten months ended September 30, 2002 was
63.4% compared to 23.4% in 2001. Income taxes in both periods were favorably
impacted by the release of previously provided tax reserves associated with the
resolution of certain domestic and foreign tax matters. The release of these
reserves benefited income taxes by $6 million in 2002 and $26 million in 2001.
Excluding the impact of the KCI antitrust litigation charge and the release of
these reserves, the effective tax rate in 2002 would have approximated 34%
compared to 35% in 2001.
Discontinued Operations
The results from discontinued operations reflected income of $8 million for the
ten months ended September 30, 2002 compared with essentially breakeven results
in 2001. The reported income for 2002 included a favorable patent litigation
settlement that accounted for approximately three-quarters of the reported
income for the year. Overall operating performance of the discontinued
operations improved in 2002, primarily in response to somewhat higher revenues
and lower operating expenses.
42
•
Fiscal Year Ended September 30, 2003 compared to Twelve Months
Ended September 30, 2002
•
Fiscal Year Ended September 30, 2003 compared to Ten Months Ended
September 30, 2002
•
Twelve Months Ended September 30, 2002 compared to Twelve Months
Ended September 30, 2001
•
Ten Months Ended September 30, 2002 compared to Fiscal Year Ended
December 1, 2001
Table of Contents
Ten
Fiscal
Twelve Months Ended
Months
Fiscal Year Ended
Year Ended
Ended
($ in Millions except
September 30,
% of
September 30,
% of
September 30,
% of
September 30
% of
December 1,
% of
per share data)
2003
Revenues
2002
Revenues
2001
Revenues
2002
Revenues
2001
Revenues
(Unaudited)
(Unaudited)
$
749
36.7
$
787
38.3
$
723
35.2
$
615
36.6
$
721
35.7
318
15.6
328
15.6
327
15.9
268
15.9
339
16.8
628
30.7
621
30.2
624
30.4
510
30.3
613
30.4
347
17.0
321
15.6
379
18.5
290
17.2
346
17.1
$
2,042
100.0
$
2,057
100.0
$
2,053
100.0
$
1,683
100.0
$
2,019
100.0
$
379
50.6
$
394
50.1
$
349
48.3
$
304
49.4
$
347
48.1
157
49.4
156
47.6
108
33.0
127
47.4
131
38.6
349
55.6
336
54.1
322
51.6
275
53.9
319
52.0
16
4.6
(3
)
(0.9
)
57
15.0
16
5.5
27
7.8
901
44.1
883
42.9
836
40.7
722
42.9
824
40.8
573
28.1
608
29.6
566
27.6
505
30.0
557
27.6
—
—
250
12.1
—
—
250
14.9
—
—
9
0.4
15
0.7
27
1.3
4
0.2
32
1.6
319
15.6
10
0.5
243
11.8
(37
)
(2.2
)
235
11.6
(37
)
(1.8
)
(16
)
(0.8
)
(9
)
(0.4
)
(12
)
(0.7
)
(13
)
(0.6
)
282
13.8
(6
)
(0.3
)
234
11.4
(49
)
(2.9
)
222
11.0
100
4.9
(41
)
(2.0
)
82
4.0
(31
)
(1.8
)
52
2.6
182
8.9
35
1.7
152
7.4
(18
)
(1.1
)
170
8.4
(44
)
(2.1
)
9
0.4
1
0.1
8
0.5
—
—
$
138
6.8
$
44
2.1
$
153
7.5
$
(10
)
(0.6
)
$
170
8.4
$
2.93
N/A
$
0.56
N/A
$
2.41
N/A
$
(0.29
)
N/A
$
2.70
N/A
(0.71
)
N/A
0.14
N/A
0.02
N/A
0.13
N/A
—
N/A
$
2.22
N/A
$
0.70
N/A
$
2.43
N/A
$
(0.16
)
N/A
$
2.70
N/A
Table of Contents
Fiscal Year
Twelve Months
Twelve Months
Ten Months
Fiscal Year
Ended
Ended
Ended
Ended
Ended
September 30,
September 30,
September 30,
September 30,
December 1,
($ in Millions)
2003
2002
2001
2002
2001
$
49
$
57
$
1
$
27
$
30
(3
)
—
—
—
—
—
250
—
250
—
9
15
27
4
32
—
5
—
5
—
3
—
—
—
—
16
—
—
—
—
—
(32
)
—
(6
)
(26
)
51
—
—
—
—
—
(6
)
—
(6
)
—
Table of Contents
Fiscal Year
Twelve Months
Ended
Ended
September 30,
September 30,
%
($ in Millions)
2003
2002
Change
$
749
$
787
(4.8
)
318
328
(3.0
)
628
621
1.1
347
321
8.1
$
2,042
$
2,057
(0.7
)
Table of Contents
Fiscal Year
Twelve Months
Ended
Ended
September 30,
% of
September 30,
% of
($ in Millions)
2003
Revenues
2002
Revenues
$
379
50.6
$
394
50.1
157
49.4
156
47.6
349
55.6
336
54.1
16
4.6
(3
)
(0.9
)
$
901
44.1
$
883
42.9
Table of Contents
Table of Contents
Fiscal Year
Twelve Months
Ended
Ended
September 30,
September 30,
($ in Millions)
2003
2002
% Change
$
(19
)
$
(18
)
(5.6
)
9
12
(25.0
)
(16
)
—
N/A
(11
)
(10
)
(10.0
)
$
(37
)
$
(16
)
(131.3
)
Table of Contents
Table of Contents
Fiscal Year Ended
Ten Months Ended
September 30, 2003
September 30, 2002
($ in Millions)
% of Revenues
% of Revenues
$
2,042
100.0
$
1,683
100.0
901
44.1
722
42.9
573
28.1
505
30.0
319
15.6
(37
)
(2.2
)
Table of Contents
Fiscal Year
Ten Months
Ended
Ended
September 30,
% of
September 30,
% of
($ in Millions)
2003
Revenues
2002
Revenues
$
749
36.7
$
615
36.6
318
15.6
268
15.9
628
30.7
510
30.3
347
17.0
290
17.2
$
2,042
100.0
$
1,683
100.0
Table of Contents
Fiscal Year
Ten Months
Ended
Ended
September 30,
% of
September 30,
% of
($ in Millions)
2003
Revenues
2002
Revenues
$
379
50.6
$
304
49.4
157
49.4
127
47.4
349
55.6
275
53.9
16
4.6
16
5.5
$
901
44.1
$
722
42.9
Table of Contents
Fiscal Year
Ten Months
Ended
Ended
September 30,
% of
September 30,
% of
($ in Millions)
2003
Revenues
2002
Revenues
$
(19
)
(0.9
)
$
(14
)
(0.8
)
9
0.4
9
0.5
(16
)
(0.8
)
—
—
(11
)
(0.5
)
(7
)
(0.4
)
$
(37
)
(1.8
)
$
(12
)
(0.7
)
Table of Contents
Table of Contents
Twelve Months
Twelve Months
Ended
Ended
September 30,
September 30,
($ in Millions)
2002
2001
% Change
$
787
$
723
8.9
328
327
0.3
621
624
(0.5
)
321
379
(15.3
)
$
2,057
$
2,053
0.2
Table of Contents
Twelve Months
Twelve Months
Ended
Ended
September 30,
% of
September 30,
% of
($ in Millions)
2002
Revenues
2001
Revenues
$
394
50.1
$
349
48.3
156
47.6
108
33.0
336
54.1
322
51.6
(3
)
(0.9
)
57
15.0
$
883
42.9
$
836
40.7
Table of Contents
Table of Contents
Table of Contents
Twelve Months
Twelve Months
Ended
Ended
September 30,
September 30,
%
($ in Millions)
2002
2001
Change
$
(18
)
$
(25
)
28.0
12
18
(33.3
)
(10
)
(2
)
(400.0
)
$
(16
)
$
(9
)
(77.8
)
Ten Months Ended
Fiscal Year Ended
September 30, 2002
December 1, 2001
($ in Millions)
% of
Revenues
% of
Revenues
$
1,683
100.0
$
2,019
100.0
722
42.9
824
40.8
505
30.0
557
27.6
(37
)
(2.2
)
235
11.6
Table of Contents
Ten Months
Fiscal Year
Ended
Ended
September 30,
% of
December 1,
% of
($ in Millions)
2002
Revenues
2001
Revenues
$
615
36.6
$
721
35.7
268
15.9
339
16.8
510
30.3
613
30.4
290
17.2
346
17.1
$
1,683
100.0
$
2,019
100.0
Table of Contents
Ten Months
Fiscal Year
Ended
Ended
September 30,
% of
December 1,
% of
($ in Millions)
2002
Revenues
2001
Revenues
$
304
49.4
$
347
48.1
127
47.4
131
38.6
275
53.9
319
52.0
16
5.5
27
7.8
$
722
42.9
$
824
40.8
Table of Contents
Table of Contents
Ten Months
Fiscal Year
Ended
Ended
September 30,
% of
December 1,
% of
($ in Millions)
2002
Revenues
2001
Revenues
$
(14
)
(0.8
)
$
(23
)
(1.1
)
9
0.5
15
0.7
(7
)
(0.4
)
(5
)
(0.2
)
$
(12
)
(0.7
)
$
(13
)
(0.6
)
Table of Contents
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows from operating activities and selected borrowings have
represented the Company’s primary sources of funds for growth of the business,
including capital expenditures and acquisitions. The Company has not used any
off-balance sheet arrangements, other than routine operating leases. Its
financing agreements contain no restrictive provisions or conditions relating
to dividend payments, working capital or additional unsecured indebtedness
(except to the extent that a dividend payment or incurrence of additional
unsecured indebtedness would result in a default under the Company’s financing
agreements), but there are limitations with respect to secured indebtedness.
The Company’s debt agreements also contain no credit rating triggers. Credit
rating changes can, however, impact the cost of borrowings under the Company’s
financing agreements.
Operating Activities
For the fiscal year ended September 30, 2003, net cash provided by operating
activities totaled $376 million compared to $328 million for the ten months
ended September 30, 2002. The increase in operating cash flow was heavily
influenced by the shorter time period in 2002, but also benefited from higher
net income and favorability in cash provided by insurance operations. These
positives were significantly offset by the initial payment to KCI under the
prior year litigation settlement of $175 million, $111 million net-of-tax.
Recognition of the estimated loss on disposal associated with the planned
divestitures of the infant care and piped-medical gas businesses of Hill-Rom in
2003 and the KCI litigation charge in 2002 had no impact on operating cash
flows in each period as the full amount of the charges remained fully accrued
as of each respective period end.
Depreciation, amortization and the write-down of intangibles increased to
$75 million in 2003 from $71 million in 2002. Included in the 2002 amount of
$71 million was a $5 million write-off of a technology asset with no continuing
value at Hill-Rom. The increase in depreciation and amortization in 2003
related primarily to the 2002 period including only ten months.
Changes in working capital decreased cash from operations. The KCI
antitrust litigation payment referred to above was the driver of the decline.
Although accounts receivable remained relatively consistent with the
prior year, overall days revenues outstanding declined nearly 3
days. Further, while inventory levels, including inventories of discontinued
operations, increased slightly, inventory turns showed marginal improvement.
Better management of accounts payable, a shift in income taxes from a
receivable to a payable position and a reduction of deferred taxes, both
influenced by the prior year KCI settlement, and the sale of approximately $30
million of long-term receivables all favorably impacted operating cash flows.
43
Investing Activities
Net cash used in investing activities for the fiscal year ended September 30,
2003 totaled $334 million compared to $302 million for the ten months ended
September 30, 2002.
The increase related primarily to the comparison of a ten-month to a
twelve-month period. Capital expenditures in both periods included
expenditures associated with the Company’s continuing efforts to move to a
single information technology platform. Capital expenditures in 2003 included
the purchase by Batesville Casket of certain intellectual property related to
the former Marsellus Casket Company. Investing activities in 2003 also
included $14 million of minority investments made throughout the Company.
Forethought invests cash proceeds on insurance premiums predominantly in
U.S. Treasuries and agencies and investment grade corporate bonds with fixed
maturities, with lesser investments in commercial mortgage loans, high-yield
corporate bonds and limited partnerships. The Company’s objective is to
purchase securities with maturities that match the expected cash outflows of
insurance policy benefit payments. The investment portfolio is continually
realigned to better meet this objective. Also contributing to the high level
of sales in recent periods has been Forethought’s continuing efforts to
mitigate the risk of future impairments by reducing its exposure to high-yield
bonds and equities and lowering the limits for investments in individual
securities, which have required further portfolio realignment.
Financing Activities
Net cash used in financing activities totaled $160 million for the fiscal ended
September 30, 2003 compared to $15 million for the ten months ended September
30, 2002. The increased use of cash in financing activities in 2003 compared
to 2002 related to the repurchase of more than half of the Company’s
outstanding long-term debt securities. During the fourth quarter of 2003, the
Company completed a tender offer to repurchase its outstanding long-term debt,
resulting in the repurchase of $157 million of the Company’s debentures for
$185 million. Partially offsetting the cash paid for the bond tender was $27
million of proceeds received on the termination of interest rate swap
agreements, which were completed in the second half of 2003. No repurchases of
the Company’s common stock were made in fiscal year 2003 compared to $62
million of repurchases in the ten months ended September 30, 2002.
Cash dividends paid increased to $62 million in 2003, compared to $48
million in the ten month period ended September 30, 2002. Quarterly cash
dividends per share were $0.25 in 2003, $0.23 in 2002 and $0.21 in 2001. With
the Company’s change in fiscal year end to September 30 beginning in 2002, the
Company’s Board of Directors approved a one-month dividend of $0.0767 per share
which was paid in March 2002.
The Company’s long-term debt-to-capital ratio was 11.8% at September 30,
2003 compared to 24.4% at September 30, 2002. This decrease was primarily due
to the reduction in long-term debt resulting from the repurchase of $157
million of the Company’s debt during 2003, as discussed above.
Other Liquidity Matters
As of September 30, 2003, cash and cash equivalents (excluding investments in
insurance operations) had decreased $116 million to $180 million from $296
million at September 30, 2002. As outlined above, the primary reason for the
decrease related to the $175 million payment, $111 million net-of-tax, required
in January 2003 as part of the December 2002 settlement of the antitrust
litigation with KCI, along with the August 2003 repurchase of outstanding debt
securities for a total purchase price of approximately $185 million. The
impact of these payments was significantly offset by net cash flows generated
from operations. Accompanying the lower cash and cash equivalents at September
30, 2003 will be lower investment income in 2004.
On August 2, 2002 the Company entered into two unsecured credit facilities
totaling $500 million (the “Credit Facilities”) to be used to finance
acquisitions and for working capital, capital expenditures and other corporate
purposes. The Credit Facilities, which are with a syndicate of banks led by
Bank of America, N.A. and Citicorp North America, Inc., consist of a
44
$250 million 364-day senior revolving credit (“364-Day”) facility and a $250 million
three-year senior revolving credit (“Three-Year”) facility. Effective July 30,
2003, the Company completed renegotiation of the 364-Day facility under terms
and conditions generally consistent with the expiring facility. The term of
the 364-Day facility expires one-year from the above date while the Three-Year
facility expires in August 2005. Borrowings under the Credit Facilities bear
interest at variable rates, as defined therein. The availability of borrowings
under the Credit Facilities is subject to the Company’s ability at the time of
borrowing to meet certain specified conditions. These conditions include a
maximum debt to capital ratio of 55%, absence of default under the facilities
and continued accuracy of certain representations and warranties contained in
the Credit Facilities.
As of September 30, 2003, the Company: (i) had $13 million of outstanding,
undrawn letters of credit under the Three-Year facility, (ii) was in compliance
with all conditions set forth under the Credit Facilities, as amended, and
(iii) had complete access to the remaining $487 million of borrowing capacity
available under the Credit Facilities.
The Company has additional uncommitted credit lines totaling $15 million
that have no commitment fees, compensating balance requirements or fixed
expiration dates. As of September 30, 2003, the Company had $13 million of
outstanding, undrawn letters of credit under these facilities.
The Company intends to continue to pursue acquisition candidates, but the
timing, size or success of any acquisition effort and the related potential
capital commitments cannot be predicted. The Company expects to fund future
acquisitions primarily with cash on hand and cash flow from operations and
borrowings, including the unborrowed portion of the Credit Facilities or new
debt issuances, but may also issue additional debt and/or equity in connection
with acquisitions.
In this regard, on July 14, 2003, the Company filed a universal shelf
registration statement with the U.S. Securities and Exchange Commission on Form
S-3 for the potential future sale of up to $1 billion in debt and/or equity
securities. The registration statement has been declared effective and should
provide the Company with significant flexibility with respect to its access to
the public markets. There can be no assurance that additional financing under
the universal shelf registration statement or elsewhere will be available at
terms acceptable to the Company.
On October 20, 2003, the Company announced that it had completed its
acquisition of Advanced Respiratory, Inc., a privately held manufacturer and
distributor of non-invasive airway clearance products and systems. The
purchase price of $83 million, subject to certain working capital adjustments
at the date of close not to exceed $12 million, with additional contingent
payments not to exceed $20 million based on Advanced Respiratory achieving
certain net revenue targets, was funded directly out of the Company’s cash on
hand. The additional payments, if any, would be payable no later than the end
of calendar 2005. In addition, on October 30, 2003, the Company announced a
definitive agreement to acquire Mediq, Inc. (Mediq), a privately held
company in the medical equipment outsourcing and asset management business. It
is anticipated that the purchase price of approximately $330 million will be
initially funded from the Company’s Credit Facilities. The form of permanent
financing for the acquisition is still under review, but will likely involve
the issuance of either debt and/or equity securities under the Company’s
universal shelf registration statement. The acquisition of Mediq is subject to
regulatory clearance and is expected to close before the end of January 2004.
The Company’s final payment of $75 million under the KCI antitrust
litigation settlement reached in 2002 is also due no later than January 2004. It is
expected that this payment will be initially funded from the Company’s Credit
Facilities.
In addition to the cash requirements of the above acquisitions and the
final KCI litigation payment, the Company will receive cash proceeds upon the
completion of its divestitures of the infant care and piped-medical gas
businesses of Hill-Rom. The divestiture of the piped-
medical gas business was completed in October 2003 with the Company receiving
gross proceeds of approximately $14 million. The disposition of the infant
care business is expected to close in the first quarter of calendar 2004, with
the Company receiving proceeds of approximately $31 million at the time of
closing. In addition, the Company has retained the collection rights to
outstanding receivables of these businesses at the date of close of
approximately $13 million.
45
The Company believes that cash on hand and generated from operations and
amounts available under its Credit Facilities, as amended, along with amounts
available from the capital markets, will be sufficient to fund operations,
working capital needs, capital expenditure requirements and financing
obligations.
Contractual Obligations and Contingent Liabilities and Commitments
To give a clear picture of matters potentially impacting our liquidity
position, following are tables of contractual obligations and commercial
commitments as of September 30, 2003 (all amounts in millions):
Near the end of the third quarter of fiscal 2003, the Company announced
that it had selected IBM to manage its global information infrastructure
environment. The seven-year agreement had a cumulative estimated cost of $187
million, which will be incurred in nearly equal amounts over the term of the
agreement. The relationship with IBM is intended to be cost-neutral
and should increase flexibility
with respect to systems and technology demands as the Company executes its
growth strategy.
With respect to the Forethought investment commitments, these amounts
represent additional commitments to numerous private equity and real estate
limited partnerships and commercial mortgages. The timing of these commitment
calls has been estimated based on the current status of each partnership and
the expected origination of mortgages. In addition, Forethought has
other funding commitments with certain real estate limited
partnerships, which are dependent upon the operating performance of
the respective partnerships. Although these commitments are not
quantifiable, they are not expected to exceed $20 million over
the next three years. These commitments will be funded
directly from cash reserves maintained within Forethought’s investment
portfolio.
Unless a range of amounts is disclosed in the following table, the amounts
disclosed represent the total expected commitment.
46
In addition to the contractual obligations and commitments disclosed
above, the Company also has a variety of other contractual agreements related
to the procurement of materials and services and other commitments. With
respect to these agreements, the Company is not subject to any contracts which
commit the Company to material non-cancelable commitments. While many of these
contractual agreements are long-term supply agreements, some of which are
exclusive supply or complete requirements-based contracts, the Company is not
committed under these agreements to accept or pay for requirements which are
not needed to meet production needs. The Company has no material minimum
purchase commitments or “take-or pay” type agreements or arrangements.
In conjunction with the Company’s recent acquisition and divestiture
activities, the Company has entered into select guarantees and indemnifications
of performance with respect to the fulfillment of its commitments under the
respective purchase and sale agreements. The arrangements generally indemnify
the buyer or seller for damages associated with breach of contract,
inaccuracies in representations and warranties surviving the closing date and
satisfaction of liabilities and commitments retained under the respective
contract. For those representations and warranties which survive closing, they
generally survive for periods up to five years or the expiration of the
applicable statutes of limitations. Potential losses under the
indemnifications are generally limited to a portion of the original transaction
price, or to other lesser specific dollar amounts for select provisions. With
respect to sale transactions, the Company also routinely enters into
non-competition agreements for varying periods of time. Guarantees and
indemnifications with respect to acquisition and divestiture activities would
not materially impact the Company’s financial condition or results of
operations.
With respect to capital expenditures, the Company expects capital spending
in 2004 to approximate $100 million before consideration of capital expenditure
requirements for new business acquisitions.
Insurance Assets and Liabilities
Insurance assets of $4,124 million grew 6.0% over assets as of September 30,
2002. Cash and invested assets of $3,359 million constitute 81% of the assets.
The investments are concentrated in U.S. Treasuries and agencies, high-grade
corporate and foreign bonds, with lesser investments in commercial mortgage
loans, high-yield corporate bonds and limited partnerships. The invested
assets are more than adequate to fund the insurance reserves and other
liabilities of $2,796 million. Statutory reserves represent 64% of the face
value of insurance in-force. Forethought Life Insurance Company made a
dividend payment to Hillenbrand Industries of $24 million in January 2001. The
statutory capital and surplus as a percentage of statutory liabilities of
Forethought was 12% and 10% at September 30, 2003 and 2002, respectively. The
deferred tax benefit relative to insurance operations results from differences
in recognition of insurance policy revenues and expenses for financial
accounting and tax reporting purposes. Financial accounting rules require
ratable recognition of insurance product revenues over the lives of the
respective policyholder. These revenues are recognized in the year of policy
issue for tax purposes. This results in a deferred tax asset. Insurance policy
acquisition expenses must be capitalized and amortized for both financial
accounting and tax purposes, although under different methods and amounts.
Financial accounting rules require a greater amount to be capitalized and
amortized than for tax reporting. This results in a deferred tax liability,
which partially offsets the deferred tax asset. This deferred tax asset is
further offset by deferred tax liabilities associated with the tax effect of
adjusting the investment portfolio to fair value and the current net unrealized
gain position
of the portfolio. Excluding the tax effect of adjusting the investment
portfolio to fair value, the net deferred tax asset remained essentially
unchanged in 2003 and 2002.
Shareholders’ Equity
Cumulative treasury stock acquired in open market and private transactions
remained unchanged in 2003 at 20,973,867 shares. The Company currently has
Board of Directors’ authorization to repurchase up to a total of 24,289,067
shares, or a remaining authorization for 3,315,200 shares. Repurchased shares
are to be used for general business purposes. From
47
the cumulative shares
acquired, 133,530 shares, net of shares converted to cash to pay withholding
taxes, were reissued during fiscal 2003 under provisions of the Company’s
various stock-based compensation plans.
OTHER ISSUES
Special Charges
2003 Actions
During the third fiscal quarter of 2003, the Company announced a new business
structure at Hill-Rom to accelerate the execution of its strategy and
strengthen its core businesses. As a result of this action, the Company will
eliminate approximately 300 salaried positions globally. Hill-Rom also expects to hire approximately 100 new personnel with the
skills and experience necessary to execute its business strategy. A fiscal
2003 third quarter charge of $9 million was recognized with respect to this
action, essentially all related to severance and benefit-related costs. Upon
completion, this action is expected to reduce net operating costs between $12
and $14 million annually. Significant benefits are not expected to be realized
until the first quarter of calendar 2004. As of September 30, 2003,
approximately 177 personnel had been terminated, resulting in the utilization
of $4 million of the originally recorded accrual. As of this same date,
approximately 57 new personnel had been hired under the new business structure.
This action is expected to be completed no later than June 2004.
2002 Actions
During the fourth quarter of 2002, the Company announced realignment actions at
Batesville Casket and Hill-Rom. The actions at Batesville Casket included the
closure of a wood casket plant in Canada along with other employee reduction
actions in the United States. These combined actions resulted in the reduction
of approximately 100 employees. A charge of $3 million was recorded in
relation to these actions for severance and other facility closing costs. In
addition, during the fourth quarter Hill-Rom announced an action in Germany to
downsize its field service operations and to relocate its sales and other
administrative functions. A charge of $2 million was recorded for severance
and other facility costs associated with this action, which resulted in the
termination of 25 employees. Of the total charge recorded for the above
actions, $4 million was associated with severance and other costs to be settled
in cash while $1 million related to asset impairments. The remaining accrual
for these actions is approximately $1 million, which is expected to be fully
utilized no later than March 2004.
Also in the fourth quarter and offsetting the above charge was the
reversal of approximately $1 million of severance and benefit costs provided
under a 2001 Hill-Rom action, as the actual costs incurred were favorable to
those originally expected.
2001 Actions
In the fourth quarter of 2001, the Company announced realignment and
streamlining efforts throughout the organization. A charge was taken in
relation to these activities, comprised of severance and facility closing costs
of $4 million and $3 million, respectively, in addition to a $7
million impairment of intangible assets. The charge was offset by a $2 million
reversal of a 1999 Hill-Rom provision as actual costs incurred were favorable
to those estimated in the original plan. The total net charge for the quarter,
which was recorded within the Special charges line of the Statement of
Consolidated Income, was $12 million.
Included in these actions were the reduction of 30 employees in the United
States and Canada and the closure of the Canadian office for Forethought, the
reduction of approximately 90 employees in the United States and the relocation
of a small operation to another location for Batesville Casket and a sales
force reduction at Hill-Rom.
The intangible asset charge of $7 million related to the impairment of a
Forethought website that would no longer be used to generate revenue ($6
million) and an impaired investment asset at the corporate level ($1 million).
48
In the first quarter of 2001, Hill-Rom announced realignment and
streamlining efforts, primarily within the home care and long-term care
businesses. The total net charge for this action was $20 million. The charge
was comprised of severance and other benefit costs and an impairment of
underperforming assets in a non-core product line of $12 million and $8
million, respectively. The severance actions impacted 400 employees in the
United States and Europe, all of which have been terminated.
All activities associated with these charges are now complete.
Other
In addition to the reserve balances outlined above, approximately $4 million of
accrued liabilities were outstanding at September 30, 2003 related to
retirement obligations of W August Hillenbrand, a former Chief Executive
Officer of the Company. Mr. Hillenbrand retired in the fourth calendar quarter
of 2000.
CRITICAL ACCOUNTING POLICIES
The accounting policies of the Company, including those described below,
require management to make significant estimates and assumptions using
information available at the time the estimates are made. Such estimates and
assumptions significantly affect various reported amounts of assets,
liabilities, revenues and expenses. If future experience differs materially
from these estimates and assumptions, results of operations and financial
condition could be affected. A more detailed description of our accounting
policies is included in the Notes to our Consolidated Financial Statements
included in this Form 10-K.
Insurance Investments
At September 30, 2003, the fair value of our insurance investment portfolio was
$3,359 million. The accounting risks associated with these assets relate to
the recognition of income, our determination of other-than-temporary
impairments and our estimation of fair values.
The Company defers any fees received or costs incurred when originating
investments. Fees, costs, discounts and premiums are amortized as yield
adjustments over the contractual lives of the investments. Anticipated
prepayments on commercial mortgage loans and mortgage-backed securities are
considered in determining estimated future yields on such securities.
When a security is sold, the Company reports the difference between the
sales proceeds and amortized cost (determined based on specific identification)
as a capital gain or loss.
The Company regularly evaluates all investments for possible impairment
based on current economic conditions, credit loss experience and other
criteria. If there is a decline in a security’s net realizable value that is
other than temporary, the decline is recognized as a realized loss and the cost
basis of the security is reduced to its estimated fair value. Select criteria
utilized in analyzing individual securities for impairment include:
The evaluation of investments for impairment requires significant
judgments to be made including (i) the identification of potentially impaired
securities; (ii) the determination of their estimated fair value; and (iii)
assessment of whether any decline in estimated fair value is other than
temporary. If new information becomes available or the financial condition of
the investee changes, the Company’s judgment may change resulting in the
recognition of an investment
49
loss at that time. At September 30, 2003,
accumulated other comprehensive income included net unrealized gains on
investments of $185 million, which is net of unrealized losses of $10 million.
These unrealized losses are considered to be temporary.
Estimated fair values for investments are determined predominantly based
on market values provided by broker/dealers or other external investment
advisors.
The Company seeks to closely match the estimated duration of invested
assets to the expected duration of liabilities. When the estimated durations
of assets and liabilities are similar, exposure to interest rate risk is
minimized because a change in the value of assets should be largely offset by a
change in the value of liabilities. A mismatch of the durations of invested
assets and liabilities could have a material impact on results of operations
and financial condition.
Insurance Deferred Policy Acquisition Costs
At September 30, 2003, deferred policy acquisition costs were $695 million.
These costs are amortized in relation to in force policies. The recovery of
these costs is dependent on the future profitability of the related business,
including unearned revenue. If the Company determines a portion of the
unamortized deferred policy acquisition costs is not recoverable, it is charged
to amortization expense immediately.
The assumptions used to amortize and evaluate the recoverability of
deferred policy acquisition costs involve significant judgment. A revision to
these assumptions could have a material adverse effect on results of operations
and financial condition.
Insurance Benefit Reserves
At September 30, 2003, the total balance of liabilities for insurance products
was $2,728 million. The Company calculates and maintains reserves for the
estimated future payment of claims to policyholders based on historical
experience and actuarial assumptions. Many factors can affect these reserves
and liabilities, such as economic and social conditions and inflation.
Therefore, the reserves and liabilities established are necessarily based on
extensive estimates, assumptions and historical experience. Establishing
reserves is an uncertain process, and it is possible that actual claims will
exceed reserves and have a material adverse effect on results of operations and
financial condition.
Liabilities for Loss Contingencies Related to Lawsuits
The Company is involved on an ongoing basis in claims and lawsuits relating to
its operations, including environmental, antitrust, patent infringement,
business practices, commercial transactions and other matters. The ultimate
outcome of these lawsuits cannot be predicted with certainty. An estimated
loss from these contingencies is recognized when the Company believes it is
probable that a loss has been incurred and the amount of the loss can be
reasonably estimated. However, it is difficult to measure the actual loss that
might be
incurred related to litigation. The ultimate outcome of these lawsuits could
have a material adverse effect on the financial condition, results of
operations and cash flow of the Company.
The Company is also involved in other possible claims, including product
liability, workers compensation, employment related matters and auto liability.
While insurance is maintained for such exposures, the policies in place are
high-deductible policies under which the Company assumes a layer of coverage
between $150 thousand and $1.5 million varying with policy year and type of
coverage. Accruals for such claims are established based upon advice from
internal and external counsel and historical settlement information for claims,
related fees and for claims incurred but not reported. The Company utilizes
actuarial techniques and routinely consults with external actuaries in
determining its accrual requirements. Historical patterns of claim loss
information are used to arrive at claim factors which are then applied to loss
estimates under the actuarial techniques. The recorded amounts represent
management’s best estimate of the costs it will incur in relation to such
exposures, but it is possible that actual costs could differ from those
estimates.
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Goodwill and Intangible Assets
The Company adopted the provisions of SFAS No. 142, “Goodwill and Other
Intangible Assets”, as of December 2, 2001. Under this Standard, goodwill and
certain other indefinite-lived intangible assets are no longer amortized, but
instead are subject to periodic impairment evaluations. The Company made its
initial transition impairment assessment in 2002 and determined that there was
no impairment with respect to recorded intangible assets. The most recent
update completed during the third quarter of 2003 reconfirmed the lack of any
impairment. With the exception of goodwill, all of the Company’s intangible
assets are subject to amortization. The majority of the Company’s goodwill
resides at Hill-Rom. If the Company had adopted this Standard as of October 1,
2001, the effect on net income would not have been material as outlined at Note
1 to the Consolidated Financial Statements.
In performing periodic impairment tests, the fair value of the reporting
unit is compared to the carrying value, including goodwill and intangible
assets. If the fair value exceeds the carrying value, there is no impairment.
If the carrying value exceeds the fair value, however, an impairment condition
exists. The impairment loss is determined based on the excess of the carrying
value of the goodwill or intangible asset to their respective implied or
assigned fair values. Impairment tests are required to be conducted at least
annually, or when events or conditions occur that might suggest a possible
impairment. These events or conditions include, but are not limited to, a
change in the business environment, legal factors, regulatory changes, loss of
key personnel, sale or disposition of a significant portion of a reporting unit
or a change in reporting structure. The occurrence of one of these events or
conditions could significantly impact an impairment assessment, necessitating
an impairment charge and adversely affecting the Company’s results of
operations.
In conjunction with the planned divestiture of the infant care and
piped-medical gas businesses of Hill-Rom, the Company reduced its overall
reported goodwill balance by approximately $72 million. While not considered
an impairment of goodwill within the reporting unit concept outlined under SFAS
No. 142, in evaluating the divestitures it was determined that the benefits of
the acquired goodwill associated with these businesses had not been realized,
and would not be realized in the future, by the continuing Hill-Rom operations
since these businesses had not been fully integrated into Hill-Rom. As such,
all goodwill related to the previously acquired infant care and piped-medical
gas businesses, other than a portion related to a retained product line, was
specifically assigned to the carrying value of the respective businesses and
fully considered in recognition of the estimated loss to be incurred upon
completion of the divestitures. The loss was recorded as a non-cash reduction
of goodwill within the Consolidated Balance Sheet, with the remaining $22
million of goodwill assigned to the businesses included in Assets of
Discontinued Operations.
Stock-Based Compensation
The Company applies the provisions of APB Opinion No. 25, “Accounting for Stock
Issued to Employees,” in accounting for stock-based compensation. As a result,
no compensation expense is recognized for stock options granted with exercise
prices equivalent to the fair market value of the stock on date of grant. SFAS
No. 123, “Accounting for Stock-Based Compensation” provides an alternative
method of accounting for stock options based on fair value concepts and the use
of an option pricing model. Accounting for stock options in accordance with
SFAS No. 123 would have reduced the Company’s earnings as outlined in Note 1 to
the Consolidated Financial Statements. The Financial Accounting Standards
Board (FASB) currently has a project underway to reconsider the accounting
model for stock-based compensation plans. This project is not expected to be
completed before the third quarter of calendar 2004. The Company will continue
to monitor the progress of this project and make any required changes to its
current accounting for stock-based compensation upon finalization of the FASB
project.
Retirement Plans
The Company sponsors retirement plans covering a majority of employees.
Expense recognized in relation to defined benefit retirement plans is based
upon actuarial valuations and inherent in those valuations are key assumptions
including discount rates, expected returns on assets
51
and projected future
salary rates. The Company is required to consider current market conditions,
including changes in interest rates, in setting these assumptions. Changes in
retirement benefit expense and the recognized obligation may occur in the
future as a result of a number of factors, including changes to these
assumptions. The Company reduced its expected rate of return on plan assets
from 8.0% to 7.75% effective for fiscal year 2003. This increased pension
expense by approximately $0.5 million. A 50 basis point change in the discount
rate would impact pension expense by approximately $1 million. This impact
could be positive or negative depending on the direction of the change in
rates. See Note 2 to the Consolidated Financial Statements, which statements
are included under Item 8, for key assumptions and other information regarding
recent changes to the Company’s retirement plans.
Valuation Allowances Recorded Against Deferred Tax Assets
The Company has a variety of deferred tax assets in numerous tax jurisdictions.
These deferred tax assets are subject to periodic assessment as to
recoverability and if it is determined that it is more likely than not that the
benefits will not be realized, valuation allowances are recognized. The
Company has recorded valuation allowances against certain of its deferred tax
assets, primarily those related to foreign tax attributes in countries with
poor operating results and capital loss carryforwards in the United States
where future capital gains may not be available to realize the benefit. In
evaluating whether it is more likely than not that the Company would recover
these deferred tax assets, future taxable income, the reversal of existing
temporary differences and tax planning strategies are considered. This
includes consideration of existing unrealized investment gains within the
Forethought investment portfolio that would generate capital gains upon sale of
the underlying securities.
The Company believes that its estimates for the valuation allowances
recorded against deferred tax assets are appropriate based on current facts and
circumstances. However, an increase in interest rates could adversely impact
the valuation of the Forethought investment portfolio, requiring an additional
valuation allowance for existing capital loss carryforwards that may no longer
be recoverable. The Company currently has $22 million of deferred tax assets,
on a tax-effected basis, related to capital loss carryforwards for which no
valuation allowance is maintained.
Environmental Matters
The Company is committed to operating all of its businesses in a manner that
protects the environment. In the past year, the Company has been issued
Notices of Violation alleging violation of certain environmental permit
conditions. The Notices of Violation involved no or only minor fines or
penalties. The Company, however, has successfully implemented measures to
abate such conditions in compliance with the underlying agreements and/or
regulations. In the past, the Company has voluntarily entered into remediation
agreements with various environmental authorities to address onsite and offsite
environmental impacts. The remaining voluntary remediation activities are
nearing completion. The Company has also been notified as a potentially
responsible party in investigations of certain offsite disposal facilities.
Based on the nature and volume of materials involved, the cost of such onsite
and offsite remediation activities to be incurred by the Company in which it is
currently involved is not expected to exceed $1 million. The Company believes
it has provided adequate reserves in its financial statements for all of these
matters, which have been determined without consideration of possible loss
recoveries from third parties. Future events or changes in existing laws and
regulations or their interpretation may require the Company to make additional
expenditures in the future. The cost or need for any such additional
expenditures is not known.
Accounting Standards
On October 1, 2002, the Company adopted SFAS No. 144, “Accounting for the
Impairment or Disposal of Long-Lived Assets”. SFAS No. 144 significantly
changes the criteria to be met to classify an asset as held-for-sale and what
qualifies for discontinued operations treatment. The Statement also requires
expected future operating losses from discontinued operations to be
52
recorded in
the period in which the losses are incurred, rather than as of the date
management commits to a formal plan to dispose of a business as previously
required. In addition, more dispositions will qualify for discontinued
operations treatment in the income statement. The Company followed the
provisions of this Statement in accounting for the divestitures of the Hill-Rom
infant care and piped-medical gas businesses as discontinued operations in its
Consolidated Financial Statements.
On October 1, 2002, the Company adopted SFAS No. 145, “Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections”. This Statement rescinds certain prior statements and amends
others to make various technical corrections. Areas addressed under this
Statement include the reporting of debt extinguishments, clarifications
associated with the accounting for leases and various other technical
corrections to a wide variety of existing accounting literature. The Company
followed the provisions of this Statement in accounting for its fourth quarter
loss on the repurchase of debt.
The Company adopted SFAS No. 146, “Accounting for Costs Associated with
Exit or Disposal Activities” for exit or disposal activities that were
initiated after December 31, 2002. This Statement requires these costs to be
recognized pursuant to specific guidance or when the liability is incurred and
not at project initiation. The Company followed the provisions of this
Statement in recognizing its third quarter business realignment charge at
Hill-Rom.
In November 2002, the FASB issued FASB Interpretation (FIN) No. 45,
“Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others”. This Interpretation clarifies
the requirements of SFAS No. 5, “Accounting for Contingencies”, relating to a
guarantor’s accounting for, and disclosure of, the issuance of certain types of
guarantees. FIN No. 45 requires that upon issuance of a guarantee, the
guarantor must recognize a liability for the fair value of the obligation it
assumes under the guarantee, regardless of whether any separately identifiable
consideration is received. FIN No. 45 also requires additional disclosures
with respect to guarantees falling within its scope. The Company adopted the
Interpretation’s recognition and measurement provisions to guarantees issued or
modified after December 31, 2002. The Company adopted the disclosure
requirements of this Interpretation in its Notes to Consolidated Financial
Statement for both interim and annual periods that ended after December 15,
2002. The
adoption did not have a material impact on the Company’s Consolidated Financial
Statements or results of operations.
In November 2002, the Emerging Issues Task Force (EITF) of the FASB
reached a consensus on EITF Issue No. 00-21 (EITF No. 00-21), “Revenue
Arrangements with Multiple Deliverables”. The Issue addresses certain aspects
of the accounting for arrangements under which a vendor will perform multiple
revenue-generating activities. EITF No. 00-21 addresses when a revenue
arrangement with multiple deliverables should be divided into separate units of
accounting and, if separation is appropriate, how the arrangement consideration
should be allocated to the identified accounting units. The adoption of EITF
No. 00-21 effective July 1, 2003 did not have a material impact on the
Company’s Consolidated Financial Statements or results of operations.
In December 2002, the FASB issued SFAS No. 148, “Accounting for
Stock-Based Compensation – Transition and Disclosure – an amendment of SFAS No.
123, Accounting for Stock-Based Compensation”. This Statement provides for (1)
alternative methods of transition for an entity that voluntarily changes to the
fair-value method of accounting for stock-based compensation; (2) requires more
prominent disclosure of the effects of an entity’s accounting policy decisions
with respect to stock-based compensation on reported income; and (3) amends APB
Opinion No. 28, “Interim Financial Reporting”, to require disclosure of those
effects in interim financial information. SFAS No. 148 is effective for fiscal
years ending after December 15, 2002, and for financial reports containing
condensed financial statements for interim periods beginning after December 15,
2002. The Company has adopted the disclosure provisions of this Statement as
outlined in Note 1 to the Consolidated Financial Statements.
In January 2003, the FASB issued FIN No. 46, “Consolidation of Variable
Interest Entities”. FIN 46 addresses the requirements for business enterprises
to consolidate related entities in which they are determined to be the primary
economic beneficiary as a result of their variable economic
interests. In December 2003, the FASB approved a partial deferral of
FIN 46 along with various other amendments which are expected to
be released before the end of calendar 2003. The Company will comply
with the new deferral provisions and amendments to FIN 46, as
applicable, with full compliance no later than the second quarter of
fiscal 2004. The impact of adoption on financial condition and results
of operations is currently under evaluation, with the primary
consideration being the possible consolidation of certain real estate
partnership interests held within the Forethought investment
portfolio. Consolidation of these partnerships would result in the
inclusion of certain real estate assets and additional long-term debt
on the Company’s Consolidated Balance Sheet.
53
In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity”.
This Statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. The Statement requires that an issuer classify a financial instrument
within the Statement’s scope as a liability (or an asset in some circumstances)
because that financial instrument embodies an obligation of the issuer. The
Company has adopted the applicable provisions of this Statement, however
numerous provisions have been delayed and will be adopted in the future. The
adoption did not have a material impact on the Company’s Consolidated Financial
Statements or results of operations.
RISK FACTORS
The Company’s business involves risks. The following information about these
risks should be considered carefully together with the other information
contained herein. The risks described below are not the only risks the Company
faces. Additional risks not currently known to the Company or deemed
immaterial also may result in adverse effects on the Company’s business.
Failure to comply with the Food and Drug Administration (FDA) regulations and
similar foreign regulations applicable to the Company’s medical device products
could expose the Company to enforcement actions or other adverse consequences.
The Company’s health care businesses design, manufacture, install and
distribute medical devices that are regulated by the FDA in the United States
and similar agencies in other countries. Failure to comply with applicable
regulations could result in future product recalls, injunctions preventing
shipment of products or other enforcement actions that could have a material
adverse effect on the revenues and profitability of the Company’s health care
businesses.
Capital equipment sales and Therapy rental revenues may be adversely affected
by Medicare and state government Medicaid funding cuts that could affect
customers in every segment of the Company’s health care business. The Company
could be subject to substantial fines and possible exclusion from participation
in federal healthcare programs if it fails to comply with the laws and
regulations applicable to its business.
Medicare, Medicaid and managed care organizations, such as health maintenance
organizations and preferred provider organizations, traditional indemnity
insurers and third-party administrators are increasing pressure to both control
health care utilization and to limit reimbursement. Historical changes to
Medicare payment programs from traditional “cost-plus” reimbursement to a
prospective payment system resulted in a significant change in how the
Company’s health care customers acquire and utilize the Company’s products.
This has resulted in reduced utilization and downward pressure on prices.
Similarly, future revenues and profitability of the Company will be subject to
the effect of possible changes in the mix of the Company’s patients among
Medicare, Medicaid and third-party payor categories, increases in case
management and review of services or reductions in coverage or reimbursement
rates by such payors. A rising uninsured population further exacerbates a
challenging reimbursement environment for the Company. The Company is subject
to stringent laws and regulations at both the federal and state levels,
requiring compliance with extensive and complex billing, substantiation and
record-keeping requirements. If the Company is deemed to have violated these
laws and regulations, the Company could be subject to substantial fines and
possible exclusion from participation in federal health care programs such as
Medicare and Medicaid.
54
Negative performance of the Company’s insurance investment portfolio could
negatively impact earnings. The investment portfolio, which is primarily bond
based, could be adversely affected by general economic conditions, changes in
interest rates, default on debt instruments and other factors.
Over the last three years, the Company’s insurance investment portfolio
suffered significant losses and impairments. The Company has taken steps to
reduce risk in its insurance investment portfolio, including reducing its
exposure to high-yield bonds, lowering limits for investments in individual
securities and accepting lower returns for higher quality credit ratings.
However, the Company continues to be exposed to default and reinvestment risk.
The Company may experience further securities impairments resulting from
undisclosed financial difficulties of corporate bond issuers and a continued
slow recovery of the economy, which could have an adverse effect on the
Company’s results of operations and financial condition. Further, as the
Company reinvests funds as securities mature, continued low interest rates in
the credit markets may exert downward pressure on investment income. In 2003,
the Company more actively managed the crediting rates on its policies sold to
mitigate this risk, achieving its target spread in the fourth quarter of 2003.
Competitive pressures could limit the Company’s ability to reduce crediting
rates further, if needed.
Continued declines and fluctuations in mortality rates and increased cremations
may adversely affect, as they have in recent years, the volume of the Company’s
sales of burial caskets.
As the population of the United States continues to age, the number of deaths
in the United States is expected to continue to increase each year for at least
the next several decades. The aging of the baby boomer generation will not
significantly impact the number of U.S. deaths for some years, as the oldest of
the boomers is currently 56 years of age. Offsetting the aging of the
population is the long-term trend of a decreasing age-adjusted death rate. The
life
expectancy of U.S. citizens has increased steadily since the 1950s and is
expected to continue to do so for the foreseeable future.
Cremations as a percentage of total U.S. deaths have increased steadily
since the 1960s, and are expected to continue to increase for the foreseeable
future. The number of U.S. cremations is currently growing faster than the
increase in the number of U.S. deaths, resulting in a contraction in the demand
for burial caskets, which contributed to lower burial casket sales volumes for
the Company in each of fiscal year 2001, the ten-month transition period ended
September 30, 2002 and fiscal year 2003. The Company expects these trends to
continue, and the Company’s burial casket volumes will continue to fall unless
the Company is able to offset these effects. Additionally, death rates can
vary over short periods of time and among different geographical areas. Such
variations could cause the Company’s sales of burial caskets to fluctuate from
quarter to quarter.
Future financial performance will depend in part on the successful introduction
of new products into the marketplace on a cost-effective basis. The financial
success of new products could be adversely impacted by competitors’ products,
customer acceptance, difficulties in product development and manufacturing,
certain regulatory approvals and other factors.
Future financial performance will depend in part on the Company’s ability to
influence, anticipate, identify and respond to changing consumer preferences
and needs. The Company cannot assure that its new products will achieve the
same degree of success that has been achieved historically by its products.
The Company may not correctly anticipate or identify trends in consumer
preferences or needs, or it may identify them later than its competitors do.
Any strategies the Company may implement to address these trends may prove
incorrect or ineffective. In addition, difficulties in manufacturing or in
obtaining regulatory approvals may delay or prohibit introduction of new
products into the marketplace. Further, the Company may not be able to develop
and produce new products at a cost that allows the Company to meet its goals
for profitability, particularly since downward pressure on health care product
55
prices is expected to continue. Failure of the Company to introduce new
products on a cost-effective basis could cause the Company to lose market share
and could materially adversely affect the Company’s business, financial
condition, results of operations and cash flow.
The Company’s health care and funeral services businesses are significantly
dependent on several major contracts with large national providers and group
purchasing organizations. The Company’s relationships with these customers and
organizations pose several risks to the Company.
In its health care and funeral services businesses, the Company has several
large contracts with national providers and group purchasing organizations that
have varying degrees of purchasing leverage. A significant portion of the
Company’s sales in its health care and funeral services products businesses are
made under these contracts. If one or more of these national providers or
group purchasing organizations enters into an exclusive arrangement with
another provider or if the Company otherwise loses one or more of these
contracts or customers for other reasons, this loss could have an adverse
effect on the Company’s business, financial condition, results of operations
and cash flow.
The hospital group purchasing organization industry is rapidly changing
and facing significant challenges as individual group purchasing
organizations begin to modify their
membership requirements and contracting practices, including conversion of sole
sourced agreements to agreements with multiple suppliers, in response to recent
Congressional and public criticism.
Recently, there has also been industry concern regarding the overall
financial condition of several of the national funeral service providers, and
one such customer of the Company has recently filed for bankruptcy. Although
the bankruptcy of this customer has not by itself materially adversely affected
the Company, should one or more additional national funeral service providers
that are customers of the Company file for bankruptcy, become insolvent or
otherwise be unable to pay for the Company’s products, the Company’s results of
operations could be adversely affected.
While the Company’s contracts with large health care and funeral services
providers and group purchasing organizations provide important access to
several of the largest purchasers of health care and funeral services products,
they generally obligate the Company to sell its products within certain price
parameters, therefore limiting the Company’s ability, in the short-term, to
raise prices in response to significant increases in raw material prices or
other factors.
Increased prices for or unavailability of raw materials or finished goods used
in the Company’s products could adversely affect the Company’s profitability or
revenues.
The Company’s profitability is affected by the prices of the raw materials and
finished goods used in the manufacture of its products. These prices may
fluctuate based on a number of factors beyond the Company’s control, including
changes in supply and demand, general economic conditions, labor costs,
competition, import duties, tariffs, currency exchange rates and, in some
cases, government regulation. Significant increases in the prices of raw
materials or finished goods that could not be recovered through increases in
the prices of the Company’s products could adversely affect the Company’s
results of operations. For example, as a result of tariffs imposed by the U.S.
government on steel imports in 2002, the Company is currently experiencing
higher prices than it had in prior periods for steel, a principal raw material
used in the Company’s funeral services products business and, to a lesser
degree, its health care products business. Although the Company has
historically been able to offset steel price increases with increases in the
prices of its products, there can be no assurance that the Company’s customers
will be willing to pay the higher prices or that such prices will fully offset
steel price increases in the future. Any further increases in steel prices
resulting from a tightening supply of steel or other factors could adversely
affect the Company’s profitability. The Company does not engage in hedging
transactions with respect to raw material purchases, but does enter into fixed
price supply contracts at times. Failure to engage in hedging transactions may
result in increased price volatility, with resulting adverse effects on
profitability.
56
The Company’s dependency upon regular deliveries of supplies from
particular suppliers means that interruptions or stoppages in such deliveries
could adversely affect the Company until arrangements with alternate suppliers
could be made. Several of the raw materials and finished goods used in the
manufacture of the Company’s products currently are available only from a
single source. If any of these sole source suppliers were unable to deliver
these materials to the Company for an extended period of time, as the result of
financial difficulties, catastrophic events affecting their facilities or other
factors, or if the Company were unable to negotiate acceptable terms for the
supply of materials with these sole source suppliers, the Company’s business
could suffer. The Company may not be able to find acceptable alternatives, and
any such alternatives could result in increased costs for the Company.
Extended unavailability of a necessary raw material or finished good could
cause the Company to cease manufacturing of one or more products for a period
of time.
The Company may not be successful in achieving expected operating efficiencies
and operating cost reductions associated with announced restructuring,
realignment and cost reduction activities.
In recent periods, the Company has announced a number of restructuring,
realignment and cost reduction measures, including the significant
reorganization of the Hill-Rom business structure announced in the third
quarter of fiscal 2003. These activities may not provide the Company with the
full efficiency and cost reduction benefits it expected from these activities.
Further, such benefits may be realized later than expected, and the costs of
implementing these measures may be greater than anticipated. If these measures
are not successful, the Company may undertake additional realignment and cost
reduction efforts, which could result in future charges. Moreover, the ability
of the Company to achieve its other strategic
goals and business plans may be adversely affected if the Company’s
restructuring and realignment efforts prove ineffective.
Implementation of the Company’s Enterprise Resource Planning system could cause
the Company to make unplanned expenditures or could cause disruptions in the
Company’s business.
The Company currently is in the process of implementing a comprehensive
Enterprise Resource Planning (ERP) business system at Hill-Rom and Batesville
Casket. Although this effort, expected to be completed by mid-2005, was on
schedule and on budget as of September 30, 2003, there can be no assurance that
the rollout of the ERP system will be completed on time and without unplanned
expenditures, or that it will not cause significant disruptions of the
Company’s business.
Product liability or other liability claims could expose the Company to adverse
judgments or could affect the sales of the Company’s products.
The Company is involved in the design, manufacture and sale of health care
products, which face an inherent risk of exposure to product liability claims
if the Company’s products are alleged to have caused injury or are found to be
unsuitable for their intended use. Any such claims could negatively impact the
sales of products that are the subject of such claims or other products of the
Company. The Company from time to time, and currently, is a party to claims
and lawsuits alleging that the Company’s products have caused injury or death
or are otherwise unsuitable. It is possible that the Company will receive
adverse judgments in such lawsuits, and any such adverse judgments could be
material.
The Company is involved on an ongoing basis in claims and lawsuits relating to
its operations, including environmental, antitrust, patent infringement,
business practices, commercial transactions, and other matters.
57
The ultimate outcome of these lawsuits cannot be predicted with certainty but
could have a material adverse effect on the financial condition, results of
operations and cash flow of the Company. The Company is also involved in other
possible claims, including product liability, workers compensation,
employment-related matters and auto liability. While insurance is maintained
for such exposures, the policies in place are high-deductible policies
resulting in the Company assuming exposure for a layer of coverage with respect
to such claims.
The Company may not be able to execute its growth strategy if it is unable to
successfully acquire and integrate other companies in the health care industry.
The Company’s announced growth plans include acquiring other companies in the
health care industry. The Company may not be able to identify suitable
acquisition candidates, negotiate acceptable terms for such acquisitions or
receive necessary financing for such acquisitions on acceptable terms.
Moreover, once an acquisition agreement is signed, various events or
circumstances may either prevent the successful consummation of the
contemplated acquisition, or make it unadvisable. In addition, the Company
expects to compete against other companies for acquisitions. If the Company is
able to consummate acquisitions, such acquisitions could be dilutive to
earnings, and the Company could overpay for such acquisitions. Additionally,
the Company may not be successful in its efforts to integrate acquired
companies, including Advanced Respiratory, Inc., acquired in October 2003, and
Mediq, Inc., expected to be acquired by January 2004, into its systems or
maximize their performance. Integration of acquired companies will divert
management and other resources of the Company from other important matters, and
the Company could experience delays or unusual expenses in the integration
process. Further, the Company may become responsible
for liabilities associated with businesses that it acquires to the extent they
are not covered by indemnification from the sellers or by insurance.
The Company’s success depends on its ability to retain its executive officers
and other key personnel.
The Company’s future performance depends in significant part upon the
continued service of its executive officers and other key personnel, many of
whom the Company has hired recently as part of its strategic initiative to
ensure leadership excellence at the Company. The loss of the services of one
or more of the Company’s executive officers or other key employees could have a
material adverse effect on the Company’s business, prospects, financial
condition and results of operations. This effect would be exacerbated if any
officers or other key personnel left the Company as a group. The Company’s
success also depends on its continuing ability to attract and retain highly
qualified personnel. Competition for such personnel is intense, and there can
be no assurance that the Company can retain its key employees or attract,
assimilate and retain other highly qualified personnel in the future.
58
Fiscal Year
Ten Months
Fiscal Year
Ended
Ended
Ended
September 30,
September 30,
December 1,
($ in Millions)
2003
2002
2001
$
376
$
328
$
445
(334
)
(302
)
(337
)
(160
)
(15
)
43
2
1
1
$
(116
)
$
12
$
152
Table of Contents
Table of Contents
Table of Contents
Payments Due by Period
Contractual
Less than
1-3
4 - 5
After 5
Obligations
Total
1 year
years
years
Years
$
155
$
—
$
—
$
—
$
155
$
180
$
27
$
54
$
54
$
45
$
2
$
—
$
1
$
1
$
—
$
61
$
18
$
26
$
17
$
—
$
55
$
40
$
15
$
—
$
—
$
453
$
85
$
96
$
72
$
200
Amount of Commitment Expiration Per Period
Other Commercial
Total
Amounts
Less than
1 - 3
4 - 5
Over 5
Commitments
Committed
1 year
years
years
Years
$
26
$
26
$
—
$
—
$
—
Table of Contents
Table of Contents
Table of Contents
•
The extent and duration to which the market value of a security was below its cost;
•
Downgrades in debt ratings;
•
Significant declines in value, regardless of the length of time the
market value was below cost;
•
The status of principal and interest payments on debt securities;
•
Financial condition and recent events impacting companies
underlying the securities; and
•
General economic and industry conditions.
Table of Contents
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Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
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Table of Contents
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to various market risks, including fluctuations in interest rates, mismatches in funding obligations and receipts and variability in currency exchange rates. The Company has established policies, procedures and internal processes governing its management of market risks and the use of financial instruments to manage its exposure to such risks.
The Company’s insurance operation is subject to fluctuations in interest rates on its investment portfolio and, to a lesser extent, prepayment and equity pricing risks. The investment portfolio is concentrated in high-grade corporate, foreign and U.S. agency and Treasury bonds with predominantly fixed interest rates, with lesser investments in commercial mortgage loans, high-yield corporate bonds and limited partnerships. The portfolio is managed in accordance with the Company’s objective to substantially match investment durations with policy liability durations and within applicable insurance industry regulations. Investments may be liquidated prior to maturity to meet the matching objective, manage fluctuations in interest rates and prepayments and to rebalance the investments to maintain the desired credit quality of the portfolio. Accordingly, the investments are classified as “available for sale” and are not purchased for trading purposes. The Company uses various techniques, including duration analysis, to assess the sensitivity of the investment portfolio to interest rate fluctuations, prepayment activity, equity price changes and other risks. The insurance operation also performs and reports results for asset adequacy analysis as required by the National Association of Insurance Commissioners. Based on the duration of the investment portfolio at September 30, 2003 and 2002, a hypothetical 10% increase in weighted average interest rates could reduce the market value of the investment portfolio approximately $119 million and $115 million, respectively, over a 12-month period. The Company believes its investment policy and the long-term fixed nature of its portfolio of assets reduces the effect of short-term interest rate fluctuations on earnings.
The Company is subject to variability in foreign currency exchange rates primarily in its European operations. Exposure to this variability is periodically managed primarily through the use of natural hedges, whereby funding obligations and assets are both managed in the local currency. The Company, from time to time, enters into currency exchange agreements to manage its exposure arising from fluctuating exchange rates related to specific transactions. The sensitivity of earnings and cash flows to variability in exchange rates is assessed by applying an appropriate range of potential rate fluctuations to the Company’s assets, obligations and projected results of operations denominated in foreign currencies. Based on the Company’s overall currency rate exposure at September 30, 2003, movements in currency rates would not materially affect the financial condition of the Company.
During 2001, the Company entered into interest rate swap agreements to effectively convert $150 million of its fixed interest rate long-term debt to variable rates. The Company terminated its interest rate swap agreements in June and July 2003, realizing cash proceeds and deferred gains of approximately $27 million. Further, in August 2003 the Company completed the repurchase of approximately $157 million of its outstanding debt securities, resulting in a fourth quarter pre-tax loss on the extinguishment of debt of approximately $16 million, including the write-off of approximately $2 million of debt issuance costs associated with the original debt placement. This loss is net of the partial recognition of previously deferred gains on the termination of the interest rate swap agreements of approximately $14 million. The remaining deferred gains on the termination of the swaps will be amortized and recognized as a reduction in interest expense over the term of the remaining outstanding debt. With the termination of the swap agreements, all of the Company’s debt obligations are again subject to fixed interest rates. With the amortization of the deferred gains from the swap agreements, the prospective effective interest rates will be lower than the stated interest rates, but higher than the variable rates the Company had been subject to during the period the swap agreements were in place.
59
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page | |||||
|
Financial Statements:
|
|||||
|
Report of Management
|
61 | ||||
|
Report of Independent Auditors
|
62 | ||||
|
Statements of Consolidated Income (Loss) for the fiscal year
ended September 30, 2003, the ten months ended
September 30, 2002 and the fiscal year ended
December 1, 2001
|
63 | ||||
|
Consolidated Balance Sheets at September 30, 2003 and 2002
|
64 | ||||
|
Statements of Consolidated Cash Flows for the fiscal year
ended September 30, 2003, the ten months ended
September 30, 2002 and the fiscal year ended
December 1, 2001
|
66 | ||||
|
Statements of Consolidated Shareholders’ Equity for the fiscal year
ended September 30, 2003, the ten months ended
September 30, 2002 and the fiscal year ended
December 1, 2001
|
67 | ||||
|
Notes to Consolidated Financial Statements
|
68 | ||||
|
Financial Statement Schedule for the fiscal year ended September 30, 2003,
the ten months ended September 30, 2002 and the fiscal year
ended December 1, 2001:
|
|||||
|
Schedule II - Valuation and Qualifying Accounts
|
102 | ||||
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or the notes thereto.
60
REPORT OF MANAGEMENT
Hillenbrand Industries, Inc. and Subsidiaries
Management of Hillenbrand Industries is responsible for the preparation, fairness and integrity of the Company’s financial statements and other information included in this Form 10-K. The financial statements have been prepared in accordance with generally accepted accounting principles applied on a materially consistent basis. Where necessary, management has made informed judgments and estimates as to the outcome of events and transactions, with due consideration given to materiality.
Management believes that the Company’s policies, procedures and internal control systems provide reasonable assurance that assets are safeguarded and transactions are properly recorded and executed in accordance with its authorization. The Company also maintains a program of internal auditing to examine and evaluate the adequacy and effectiveness of these policies, procedures and internal controls.
The Company engages independent public auditors who are responsible for performing an independent audit of the financial statements. Their report, immediately following, states their opinion on the fairness of the Company’s financial statements.
The Audit Committee of the Board of Directors meets regularly with the independent auditors, the internal auditors and financial management to assure that each is meeting its responsibilities.
/s/ FREDERICK W. ROCKWOOD
Frederick W. Rockwood
President and Chief Executive Officer
/s/ SCOTT K. SORENSEN
Scott K. Sorensen
Vice President and Chief Financial Officer
/s/ GREGORY N. MILLER
Gregory N. Miller
Vice President – Controller and Chief Accounting Officer
61
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Hillenbrand Industries, Inc. and its subsidiaries at September
30, 2003 and 2002, and the results of their operations and their cash flows
for the fiscal year ended September 30, 2003, the ten months ended September
30, 2002 and the fiscal year ended December 1, 2001 in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the
accompanying index presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements. These financial statements and financial statement
schedule are the responsibility of the Company’s management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
As discussed in Note 3 to the Consolidated Financial Statements, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets”, as of October
1, 2002.
PricewaterhouseCoopers LLP
62
Board of Directors of
Hillenbrand Industries, Inc.
Cincinnati, Ohio
December 22, 2003
Table of Contents
Hillenbrand Industries, Inc. and Subsidiaries
STATEMENTS OF CONSOLIDATED INCOME (LOSS)
(Dollars in millions except per share data)
Fiscal Year
Ten Months
Fiscal Year
Ended
Ended
Ended
September 30,
September 30,
December 1,
2003
2002
2001
$
749
$
615
$
721
318
268
339
628
510
613
347
290
346
2,042
1,683
2,019
370
311
374
161
141
208
279
235
294
331
274
319
1,141
961
1,195
901
722
824
573
505
557
—
250
—
9
4
32
319
(37
)
235
(19
)
(14
)
(23
)
9
9
15
(16
)
—
—
(11
)
(7
)
(5
)
282
(49
)
222
100
(31
)
52
182
(18
)
170
(39
)
14
1
5
6
1
(44
)
8
—
$
138
$
(10
)
$
170
$
2.94
$
(0.29
)
$
2.71
(0.71
)
0.13
—
$
2.23
$
(0.16
)
$
2.71
$
2.93
$
(0.29
)
$
2.70
(0.71
)
0.13
—
$
2.22
$
(0.16
)
$
2.70
$
1.00
$
0.77
$
0.84
62,032,768
62,653,922
62,813,971
62,184,537
62,653,922
63,021,059
See Notes to Consolidated Financial Statements.
63
Hillenbrand Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
September 30,
September 30,
2003
2002
$
180
$
296
356
361
92
103
—
28
63
136
17
34
708
958
200
201
143
141
57
60
655
633
448
423
207
210
77
141
106
73
84
111
267
325
49
—
3,359
3,044
695
697
6
41
64
107
4,124
3,889
$
5,412
$
5,442
64
September 30,
September 30,
2003
2002
$
79
$
75
14
—
102
115
75
250
21
23
76
88
367
551
155
322
116
120
6
10
2,728
2,590
806
795
68
55
3,602
3,440
7
—
4,253
4,443
4
4
47
44
1,532
1,456
118
40
(542
)
(545
)
1,159
999
$
5,412
$
5,442
See Notes to Consolidated Financial Statements.
65
Hillenbrand Industries, Inc. and Subsidiaries
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)
Fiscal Year
Ten Months
Fiscal Year
Ended
Ended
Ended
September 30,
September 30,
December 1,
2003
2002
2001
$
138
$
(10
)
$
170
75
71
100
49
27
30
—
158
—
(7
)
3
(7
)
50
—
—
5
4
3
—
—
(1
)
16
—
—
—
34
10
(5
)
—
7
118
(20
)
(13
)
8
13
(4
)
(186
)
(33
)
44
2
(24
)
(38
)
11
2
35
80
70
62
8
9
5
14
24
42
376
328
445
(115
)
(96
)
(101
)
1
2
8
(14
)
—
—
—
—
8
(1,558
)
(1,457
)
(1,478
)
356
380
336
996
869
890
(334
)
(302
)
(337
)
27
—
—
(185
)
—
(2
)
(62
)
(48
)
(53
)
3
11
16
—
(62
)
(17
)
329
314
364
(272
)
(230
)
(265
)
(160
)
(15
)
43
2
1
1
(116
)
12
152
296
284
132
$
180
$
296
$
284
See Notes to Consolidated Financial Statements.
66
Hillenbrand Industries, Inc. and Subsidiaries
STATEMENTS OF CONSOLIDATED SHAREHOLDERS’ EQUITY
(Dollars in millions)
Common Stock
Accumulated
Common Stock
Other
in Treasury
Shares
Additional
Retained
Comprehensive
Outstanding
Amount
Paid-in Capital
Earnings
Income (Loss)
Shares
Amount
Total
62,404,301
$
4
$
24
$
1,397
$
(108
)
17,919,611
$
(486
)
$
831
—
—
—
170
—
—
—
170
—
—
—
—
9
—
—
9
—
—
—
—
65
—
—
65
—
244
—
—
—
(53
)
—
—
—
(53
)
(329,200
)
—
—
—
—
329,200
(17
)
(17
)
391,621
—
10
—
—
(391,621
)
11
21
62,466,722
4
34
1,514
(34
)
17,857,190
(492
)
1,026
—
—
—
(10
)
—
—
—
(10
)
—
—
—
—
9
—
—
9
—
—
—
—
66
—
—
66
—
—
—
—
(1
)
—
—
(1
)
64
—
—
—
(48
)
—
—
—
(48
)
(1,141,900
)
—
—
—
—
1,141,900
(62
)
(62
)
377,588
—
10
—
—
(377,588
)
9
19
61,702,410
4
44
1,456
40
18,621,502
(545
)
999
—
—
—
138
—
—
—
138
—
—
—
—
5
—
—
5
—
—
—
—
73
—
—
73
216
—
—
—
(62
)
—
—
—
(62
)
112,563
—
3
—
—
(112,563
)
3
6
61,814,973
$
4
$
47
$
1,532
$
118
18,508,939
$
(542
)
$
1,159
See Notes to Consolidated Financial Statements.
67
Hillenbrand Industries, Inc. and Subsidiaries
(Dollars in millions except per share data)
1. Summary of Significant Accounting Policies
Principles of Consolidation
The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. Material intercompany accounts and transactions have been eliminated in consolidation.
Change in Fiscal Year
Effective for fiscal year 2002, the Company changed its fiscal year end to
September 30 from the Saturday nearest November 30 of each year. As a result
of this change, the Statements of Consolidated Income (Loss), Statements of
Consolidated Cash Flows and Statements of Consolidated Shareholders’ Equity are
presented for the fiscal year ended September 30, 2003, the ten-month period
ended September 30, 2002 and the fiscal year ended December 1, 2001. For
comparative purposes only, the following table presents the condensed results
of operations for the ten-month periods ended September 30, 2003 and 2002:
(Unaudited)
2003
2002
Condensed Statement of Consolidated Income (Loss)
$
1,713
$
1,683
951
961
762
722
490
509
—
250
272
(37
)
(34
)
(12
)
238
(49
)
85
(31
)
153
(18
)
(45
)
8
$
108
$
(10
)
$
1.74
$
(0.16
)
$
1.73
$
(0.16
)
Nature of Operations
Hillenbrand Industries is organized into three major operating companies serving the health care and funeral services industries. Hill-Rom is a manufacturer of patient care products and a leading provider of specialized rental therapy products designed to assist in managing the complications of patient immobility. Its products and services are marketed to acute and long-term health care facilities and home care patients primarily in North America and Europe. Hill-Rom generated 52% of Hillenbrand’s revenues for the fiscal year ended September 30, 2003. Batesville Casket and Forethought both serve the funeral services industry. Batesville Casket is a producer of metal and hardwood burial caskets, cremation urns and caskets and marketing support services. Its products are marketed to licensed funeral directors operating licensed funeral homes primarily in North America. Batesville Casket generated 31% of Hillenbrand’s revenues for the fiscal year ended September 30, 2003. Forethought provides funeral and cemetery professionals in 49 U.S. states, the District of Columbia, and Puerto Rico with marketing support for Forethought® funeral plans funded by life insurance policies and
68
trust products. Forethought generated 17% of Hillenbrand’s revenues for the fiscal year ended September 30, 2003.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers investments in marketable securities and other highly
liquid instruments with a maturity of three months or less at date of purchase
to be cash equivalents. Investments which have no stated maturity are also
considered cash equivalents. All of the Company’s marketable securities may be
freely traded.
Inventories
Inventories are valued at the lower of cost or market. Inventory costs are
determined by the last-in, first-out (LIFO) method for approximately 54% and
55% of the Company’s inventories at September 30, 2003 and 2002, respectively.
Costs for other inventories have been determined principally by the first-in,
first-out (FIFO) method. Inventories at the end of each period consist of the
following:
2003
2002
$
66
$
71
12
21
14
11
$
92
$
103
If the FIFO method of inventory accounting, which approximates current cost, had been used for all inventories, they would have been approximately $8 million and $7 million higher than reported at September 30, 2003 and 2002, respectively.
Equipment Leased to Others
Equipment leased to others represents primarily therapy rental units, which are recorded at cost and depreciated on a straight-line basis over their estimated economic life, ranging from 2 to 7 years. Total depreciation expense for fiscal year 2003, the ten months ended September 30, 2002 and fiscal year 2001 was $21 million, $22 million and $28 million, respectively. The majority of these units are leased on a day-to-day basis.
Property
Property is recorded at cost and depreciated over the estimated useful life of the assets using principally the straight-line method. Ranges of estimated useful lives are as follows:
| Buildings and building equipment | 20 – 40 years | |
| Machinery and equipment | 3 – 10 years |
Generally, when property is retired from service or otherwise disposed of, the cost and related amount of depreciation or amortization are eliminated from the asset and accumulated depreciation accounts, respectively. The difference, if any, between the net asset value and the proceeds on sale are charged or credited to income. Total depreciation expense for fiscal year 2003, the ten months ended September 30, 2002 and fiscal year 2001 was $39 million, $31
69
million and $36 million, respectively. The major components of property at
September 30, were as follows:
2003
2002
$
15
$
15
160
158
480
460
$
655
$
633
Goodwill and Intangible Assets
Intangible assets, consisting predominantly of patents, trademarks and software, are stated at cost and amortized on a straight-line basis over periods generally ranging from 3 to 20 years. The Company reviews intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable or as required by professional standards. If an intangible asset is considered impaired and the carrying value exceeds its estimated fair value, an impairment loss is recognized in an amount equal to that excess.
As of December 2, 2001, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets.” This Standard addresses financial accounting and reporting for acquired goodwill and other intangible assets upon their acquisition and after they have been initially recognized in the financial statements. Under this Standard existing intangible assets were evaluated for possible impairment at the date of transition, and then periodically thereafter when conditions warrant, but at least annually. In addition, goodwill and certain other indefinite-lived intangible assets are no longer amortized. The Company made its initial transition impairment assessment in 2002 and determined that there was no impairment with respect to recorded intangible assets. The most recent update completed during the third quarter of 2003 reconfirmed the lack of any impairment.
With the exception of goodwill, all of the Company’s intangible assets are
subject to amortization. Essentially all of the Company’s goodwill resides at
Hill-Rom. A summary of intangible assets and the related accumulated
amortization as of September 30 was as follows:
2003
2002
Cost
Amortization
Cost
Amortization
$
96
$
19
$
177
$
36
126
35
91
25
85
70
76
69
$
307
$
124
$
344
$
130
Amortization expense for fiscal year 2003, the ten months ended September 30, 2002 and fiscal year 2001 was $13 million, $11 million and $20 million, respectively. Intangible asset write-offs approximated $5 million and $13 million for the ten months ended September 30, 2002 and fiscal year 2001, respectively. Of the $13 million write-off in fiscal year 2001, $3 million related to the goodwill of an underperforming business. Amortization expense for all intangibles is expected to approximate the following for each of the next five fiscal years and thereafter: $16 million in 2004, $15 million in 2005, $13 million in 2006, $12 million in 2007, $11 million in 2008 and $39 million thereafter.
In conjunction with the planned divestiture of the infant care and piped-medical gas businesses of Hill-Rom, the Company reduced its overall reported goodwill balance by approximately $72 million. While not considered an impairment of goodwill within the reporting unit concept outlined under SFAS No. 142, in evaluating the divestitures it was determined that the benefits of the acquired goodwill associated with these businesses had not been realized, and would not be realized in the future, by the continuing Hill-Rom operations since these businesses had not been fully integrated by Hill-Rom. As such, all goodwill related to the previously acquired infant care and piped-medical gas businesses, other than a portion
70
related to a retained product line, was specifically assigned to the carrying value of the respective businesses and fully considered in recognition of the $50 million estimated loss to be incurred upon completion of the divestitures. Recognition of the estimated loss was recorded as a non-cash reduction of goodwill within the Consolidated Balance Sheet, with the remaining $22 million of goodwill assigned to the businesses included in Assets of Discontinued Operations.
Other than the $72 million reduction in goodwill related to discontinued operations in fiscal year 2003 and the $3 million write-off in fiscal year 2001, there were no changes in the carrying amount of goodwill for the periods presented herein other than that resulting from amortization prior to the adoption of SFAS No. 142 and the effect of exchange rates on foreign denominated goodwill.
If SFAS No. 142 had been adopted for all periods, the impact on reported
results of operations and earnings per share would have been as follows for
fiscal year 2001:
2001
Net
Basic
Diluted
Income
EPS
EPS
$
170
$
2.71
$
2.70
5
0.08
0.08
$
175
$
2.79
$
2.78
Internal Use Software
Costs associated with internal use software are recorded in accordance with American Institute of Certified Public Accountants Statement of Position 98-1, “Accounting for Costs of Computer Software Developed or Obtained for Internal Use.” Certain expenditures relating to the development of software for internal use are capitalized in accordance with this Statement, including applicable costs associated with the Company’s implementation of an Enterprise Resource Planning system. Unamortized computer software costs included within Intangible assets, were $91 million and $66 million at September 30, 2003 and 2002, respectively. Capitalized software costs are amortized on a straight-line basis over periods ranging from five to ten years once the software is ready for its intended use. Amortization expense approximated $11 million for fiscal year 2003, $8 million for the ten months ended September 30, 2002 and $6 million for fiscal year 2001.
Investments
In accordance with the provisions of SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” the Company has classified its investments in debt and equity securities as “available for sale” and reported them at fair value on the balance sheet. Unrealized gains and losses are charged or credited to accumulated other comprehensive income (loss) in shareholders’ equity and deferred taxes are recorded for the income tax effect of such unrealized gains and losses. The fair value of investments is predominantly based on market values provided by brokers/dealers or other external investment advisors.
Investments in private equity and real estate limited partnerships held in the insurance investment portfolio are accounted for using the equity method of accounting, with earnings or losses reported within Insurance revenues in the Consolidated Statement of Income. Other minority investments made outside of the insurance business are accounted for on either a cost or equity basis, dependent upon the Company’s level of influence over the investee.
The Company regularly evaluates all investments for possible impairment based on current economic conditions, credit loss experience and other criteria. If there is a decline in a security’s net realizable value that is other than temporary, the decline is recognized as a realized loss and the cost basis of the security is reduced to its estimated fair value.
71
The evaluation of investments for impairment requires significant judgments to be made including (i) the identification of potentially impaired securities; (ii) the determination of their estimated fair value; and (iii) assessment of whether any decline in estimated fair value is other than temporary.
Guarantees
The Company routinely grants limited warranties on its products with respect to
defects in material and workmanship. The terms of these warranties are
generally one year, however, certain components and products have longer
warranty periods. The Company recognizes a reserve with respect to these
obligations at the time of product sale, with subsequent warranty claims
recorded directly against the reserve. The amount of the warranty reserve is
determined based on historical trend experience for the covered products. For
more significant warranty-related matters which might require a broad-based
correction, separate reserves are established when such events are identified
and the cost of correction can be reasonably estimated. Warranty reserves are
classified as Other current liabilities within the Consolidated Balance Sheet.
A reconciliation of changes in the Company’s warranty reserve for fiscal year
2003 and the ten months ended September 30, 2002 is as follows:
2003
2002
$
23
$
22
23
20
(25
)
(19
)
$
21
$
23
In the normal course of business the Company enters into various other guarantees and indemnities in its relationships with suppliers, service providers, customers, business partners and others. Examples of these arrangements would include guarantees of product performance, indemnifications to service providers and indemnifications of Company actions to business partners. These guarantees and indemnifications would not materially impact the Company’s financial condition or results of operations, although indemnifications associated with the Company’s actions generally have no dollar limitations.
In conjunction with the Company’s recent acquisition and divestiture activities, the Company has entered into select guarantees and indemnifications of performance with respect to the fulfillment of its commitments under the respective purchase and sale agreements. The arrangements generally indemnify the buyer or seller for damages associated with breach of contract, inaccuracies in representations and warranties surviving the closing date and satisfaction of liabilities and commitments retained under the respective contract. For those representations and warranties which survive closing, they generally survive for periods up to five years or the expiration of the applicable statutes of limitations. Potential losses under the indemnifications are generally limited to a portion of the original transaction price, or to other lesser specific dollar amounts for select provisions. With respect to sale transactions, the Company also routinely enters into non-competition agreements for varying periods of time. Guarantees and indemnifications with respect to acquisition and divestiture activities would not materially impact the Company’s financial condition or results of operations.
Environmental Liabilities
Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. A reserve is established when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These reserves are determined without consideration of possible loss recoveries from third parties. More specifically, financial management, in consultation with its
72
environmental engineer, estimates the range of liability based on current interpretation of environmental laws and regulations. For each site in which a Company unit is involved, a determination is made of the specific measures that are believed to be required to remediate the site, the estimated total cost to carry out the remediation plan and the periods in which the Company will make payments toward the remediation plan. The Company does not make an estimate of general or specific inflation for environmental matters since the number of sites is small, the magnitude of costs to execute remediation plans is not significant and the estimated time frames to remediate sites are not believed to be lengthy.
Specific costs included in environmental expense are site assessment, development of a remediation plan, clean-up costs, post-remediation expenditures, monitoring, fines, penalties and legal fees. The reserve represents the expected undiscounted future cash outflows.
Expenditures that relate to current operations are charged to expense.
Revenue Recognition – Sales and Therapy Rentals
Net revenues reflect gross revenues less sales discounts and allowances and customer returns for product sales and a provision for uncollectible receivables for therapy rentals. Revenue recognition for product sales and therapy rentals is evaluated under the following criteria:
Evidence of an arrangement: Revenue is recognized when there is evidence of an agreement with the customer reflecting the terms and conditions to deliver products or services.
Delivery: For products, delivery is considered to occur upon receipt by the customer and the transfer of title and risk of loss. For therapy rental services, delivery is considered to occur when the services are rendered.
Fixed or determinable price: The sales price is considered fixed or determinable if it is not subject to refund or adjustment.
Collection is deemed probable: At or prior to the time of a transaction, credit reviews of each customer are performed to determine the creditworthiness of the customer. Collection is deemed probable if the customer is expected to be able to pay amounts under the arrangement as those amounts become due. If collection is not probable, revenue is recognized when collection becomes probable, generally upon cash collection.
Cost of Revenues
Cost of goods sold for product sales consist primarily of purchased material costs, fixed manufacturing expense, and variable direct labor and overhead costs. Health Care rental expenses are those costs associated directly with rental revenue, including depreciation and service of the Company’s therapy rental units, service center facility and personnel costs, and regional sales expenses.
Research and Development Costs
Research and development costs are expensed as incurred and were $56 million for fiscal year 2003 and $40 million for both the ten months ended September 30, 2002 and fiscal year 2001.
Distribution Costs
Distribution costs consist of shipping and handling costs and are included in Other operating costs in the Statements of Consolidated Income. Distribution costs were $107 million, $90 million and $106 million for fiscal year 2003, the ten months ended September 30, 2002 and fiscal year 2001, respectively.
Advertising Costs
Advertising costs are expensed as incurred and were $6 million, $5 million and $6 million for fiscal year 2003, the ten months ended September 30, 2002 and fiscal year 2001, respectively.
73
Earnings Per Common Share
Basic earnings per share is calculated based upon the weighted-average number of outstanding common shares for the period, plus the effect of deferred vested shares. Diluted earnings per share is calculated consistent with the basic earnings per share calculation including the effect of dilutive unissued common shares related to stock-based employee compensation programs. For all years presented, anti-dilutive stock options were excluded from the calculation of dilutive earnings per share. Excluded shares were 734,432, 407,887 and 718,988 for fiscal year 2003, the ten months ended September 30, 2002 and fiscal year 2001, respectively. Cumulative treasury stock acquired, less cumulative shares reissued, have been excluded in determining the average number of shares outstanding.
Comprehensive Income
SFAS No. 130, “Reporting Comprehensive Income,” requires unrealized gains or losses on the Company’s available-for-sale securities, foreign currency translation adjustments and minimum pension liability adjustments, which prior to adoption were reported separately in shareholders’ equity, to be included in other comprehensive income.
The composition of accumulated other comprehensive income at September 30, 2003 and 2002 is the cumulative adjustment for unrealized gains or losses on available-for-sale securities, mainly relating to the insurance portfolio, of $124 million and $51 million, foreign currency translation adjustments of ($5) million and ($10) million, and a minimum pension liability of ($1) million in each period.
Stock-Based Compensation
The Company applies the provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees”, in accounting for stock-based compensation. As a result, no compensation expense is recognized for stock options granted with exercise prices equivalent to the fair market value of stock on date of grant. Compensation expense is recognized on other forms of stock-based compensation, including stock and performance-based awards and units.
The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition provisions of SFAS
No. 123, “Accounting for Stock-Based Compensation”, to all stock-based employee
compensation for fiscal year 2003, the ten months ended September 30, 2002 and
fiscal year 2001:
2003
2002
2001
$
138
$
(10
)
$
170
1
1
6
(6
)
(4
)
(8
)
$
133
$
(13
)
168
$
2.23
$
(0.16
)
$
2.71
$
2.15
$
(0.21
)
$
2.67
$
2.22
$
(0.16
)
$
2.70
$
2.14
$
(0.21
)
$
2.66
74
Income Taxes
The Company and its eligible domestic subsidiaries file a consolidated U.S. income tax return. Foreign operations file income tax returns in a number of jurisdictions. Deferred income taxes are computed in accordance with SFAS No. 109, “Accounting for Income Taxes” and reflect the net tax effects of temporary differences between the financial reporting carrying amounts of assets and liabilities and the corresponding income tax amounts.
Foreign Currency Translation
The functional currency of foreign operations is generally the local currency in the country of domicile. Assets and liabilities of foreign operations are primarily translated into U.S. dollars at year-end rates of exchange and the income statements are translated at the average rates of exchange prevailing during the year. Adjustments resulting from translation of the financial statements of foreign operations into U.S. dollars are excluded from the determination of net income, but included as a component of other comprehensive income. Foreign currency gains and losses resulting from foreign currency transactions are included in results of operations and are not material.
Insurance Liabilities, Recognition of Insurance Policy Income, and Related Benefits and Expenses
Forethought’s life insurance subsidiaries sell long-duration insurance contracts. Revenue is recognized on amounts charged to the insurance liabilities for current benefits and expenses. Premiums received in excess of the portion required to provide future benefits and current expenses are deferred and also recognized as revenue over the actuarially determined life of the contract. Benefit reserves equal the cash surrender values provided in the contracts. Expenses are recorded for interest credited to the benefit reserve, death benefits in excess of the benefit reserve and amortization of deferred acquisition costs.
Deferred Acquisition Costs
Policy acquisition costs, consisting of commissions, certain policy issue expenses and premium taxes, vary with, and are primarily related to, the production of new business. These deferred acquisition costs are being amortized consistently with unearned revenues. Amortization charged to expense for fiscal year 2003, the ten months ended September 30, 2002 and fiscal year 2001 was $61 million, $44 million and $48 million, respectively.
Reclassification
Certain prior year amounts have been reclassified to conform to the current year’s presentation.
Accounting Standards
On October 1, 2002, the Company adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. SFAS No. 144 significantly changes the criteria to be met to classify an asset as held-for-sale and what qualifies for discontinued operations treatment. The Statement also requires expected future operating losses from discontinued operations to be recorded in the period in which the losses are incurred, rather than as of the date management commits to a formal plan to dispose of a business as previously required. In addition, more dispositions will qualify for discontinued operations treatment in the income statement. The Company followed the provisions of this Statement in accounting for the divestitures of the Hill-Rom infant care and piped-medical gas businesses as discontinued operations in its Consolidated Financial Statements.
On October 1, 2002, the Company adopted SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections”. This Statement rescinds certain prior statements and amends others to make various technical
75
corrections. Areas addressed under this Statement include the reporting of debt extinguishments, clarifications associated with the accounting for leases and various other technical corrections to a wide variety of existing accounting literature. The Company followed the provisions of this Statement in accounting for its fourth quarter loss on the repurchase of debt.
The Company adopted SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” for exit or disposal activities that were initiated after December 31, 2002. This Statement requires these costs to be recognized pursuant to specific guidance or when the liability is incurred and not at project initiation. The Company followed the provisions of this Statement in recognizing its third quarter business realignment charge at Hill-Rom.
In November 2002, the FASB issued FASB Interpretation (FIN) No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”. This Interpretation clarifies the requirements of SFAS No. 5, “Accounting for Contingencies”, relating to a guarantor’s accounting for, and disclosure of, the issuance of certain types of guarantees. FIN No. 45 requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under the guarantee, regardless of whether any separately identifiable consideration is received. FIN No. 45 also requires additional disclosures with respect to guarantees falling within its scope. The Company adopted the Interpretation’s recognition and measurement provisions to guarantees issued or modified after December 31, 2002. The Company adopted the disclosure requirements of this Interpretation in its Notes to Consolidated Financial Statement for both interim and annual periods that ended after December 15, 2002. The adoption did not have a material impact on the Company’s Consolidated Financial Statements or results of operations.
In November 2002, the Emerging Issues Task Force (EITF) of the FASB reached a consensus on EITF Issue No. 00-21 (EITF No. 00-21), “Revenue Arrangements with Multiple Deliverables”. The Issue addresses certain aspects of the accounting for arrangements under which a vendor will perform multiple revenue-generating activities. EITF No. 00-21 addresses when a revenue arrangement with multiple deliverables should be divided into separate units of accounting and, if separation is appropriate, how the arrangement consideration should be allocated to the identified accounting units. The adoption of EITF No. 00-21 effective July 1, 2003 did not have a material impact on the Company’s Consolidated Financial Statements or results of operations.
In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of SFAS No. 123, Accounting for Stock-Based Compensation”. This Statement provides for (1) alternative methods of transition for an entity that voluntarily changes to the fair-value method of accounting for stock-based compensation; (2) requires more prominent disclosure of the effects of an entity’s accounting policy decisions with respect to stock-based compensation on reported income; and (3) amends APB Opinion No. 28, “Interim Financial Reporting”, to require disclosure of those effects in interim financial information. SFAS No. 148 is effective for fiscal years ending after December 15, 2002, and for financial reports containing condensed financial statements for interim periods beginning after December 15, 2002. The Company has adopted the disclosure provisions of this Statement as outlined in Note 1 to the Consolidated Financial Statements.
In January 2003, the FASB issued FIN No. 46, “Consolidation of Variable Interest Entities”. FIN 46 addresses the requirements for business enterprises to consolidate related entities in which they are determined to be the primary economic beneficiary as a result of their variable economic interests. In December 2003, the FASB approved a partial deferral of FIN 46 along with various other amendments which are expected to be released before the end of calendar 2003. The Company will comply with the new deferral provisions and amendments to FIN 46, as applicable, with full compliance no later than the second quarter of fiscal 2004. The impact of adoption on financial condition and results of operations is currently under evaluation, with the primary consideration being the possible consolidation of certain real estate partnership interests held within the Forethought investment portfolio. Consolidation of these partnerships would result in the inclusion of certain real estate assets and additional long-term debt on the Company’s Consolidated Balance Sheet.
In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”. This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. The Statement requires that an issuer classify a financial instrument within the Statement’s scope as a liability (or an asset in some circumstances) because that financial instrument embodies an obligation of the issuer. The Company has adopted the applicable provisions of this Statement, however numerous
76
provisions have been delayed and will be adopted in the future. The adoption did not have a material impact on the Company’s Consolidated Financial Statements or results of operations.
2. Retirement Plans
The Company and its subsidiaries have several defined benefit retirement plans covering the majority of employees, including certain employees in foreign countries. The Company contributes funds to trusts as necessary to provide for current service and for any unfunded projected future benefit obligation over a reasonable period. The benefits for these plans are based primarily on years of service and the employee’s level of compensation during specific periods of employment.
The components of net pension expense for defined benefit retirement plans
in the United States for fiscal year 2003, the ten months ended September 30,
2002 and fiscal year 2001 were as follows:
2003
2002
2001
$
10
$
9
$
10
14
11
13
(14
)
(12
)
(14
)
1
1
(1
)
3
—
—
$
14
$
9
$
8
The change in benefit obligations, plan assets and funded status, along
with amounts recognized in the Consolidated Balance Sheets for the Company’s
domestic defined benefit retirement plans at September 30 were as follows:
September 30,
September 30,
2003
2002
$
205
$
214
10
9
14
11
—
—
11
(25
)
(5
)
—
(5
)
(4
)
230
205
163
164
13
(8
)
9
11
(5
)
(4
)
180
163
(50
)
(42
)
8
1
13
17
$
(29
)
$
(24
)
77
The weighted-average assumptions used in accounting for the Company’s
domestic pension plans were as follows:
2003
2002
2001
6.25
%
6.75
%
7.25
%
6.75
%
7.25
%
7.75
%
7.75
%
8.0
%
8.0
%
4.0
%
4.0
%
5.5
%
For all of the Company’s domestic defined benefit retirement plans, the fair value of plan assets was less than the accumulated benefit obligation as of September 30, 2003 and 2002, resulting in the recognition of minimum pension liabilities of less than $1 million for both periods.
Effective January 1, 2002, the Company amended certain of its domestic pension plans to lower the retirement age and increase early retirement benefits.
During fiscal year 2003, the Company further amended the terms of one of its defined benefit pension plans for most non-bargained employees. Under the amended plan, employees hired after June 30, 2003 are no longer eligible for participation in the defined benefit plan, but will instead participate in a new 401(k) retirement program that will begin January 1, 2004. Current employees and those hired up to July 1, 2003 were given the opportunity to choose to continue participating in the defined benefit pension plan and the existing 401(k) plan or to participate in the new 401(k) retirement program. Elections were completed as of September 30, 2003, and will become effective January 1, 2004.
For those employees that elected to continue participation in the defined benefit pension plan, there will be no changes in benefits and all future service will be recognized as credited service under the plan. For those who elected the new 401(k) retirement program, benefits under the defined benefit pension plan will be frozen and paid out in accordance with the plan provisions with future service considered only under the new 401(k) retirement program. The Company recognized a curtailment loss of approximately $3.5 million during the fourth fiscal quarter of 2003 as a result of this amendment and the related reduction in future service under the defined benefit pension plan. This loss was recognized as a component of Other operating expense in the Statement of Consolidated Income.
In addition to the above plans, the Company has an unfunded liability for a defined benefit pension plan in Germany. The unfunded benefit obligation of this plan, included in Other long-term liabilities, was $11 million and $9 million at September 30, 2003 and 2002, respectively. Pension expense was negligible in all reporting periods.
The Company also sponsors several defined contribution plans covering certain of its employees. Employer contributions are made to these plans based on a percentage of employee compensation. The cost of these defined contribution plans was $10 million for fiscal year 2003, $8 million for the ten months ended September 30, 2002 and $5 million for fiscal year 2001.
3. Discontinued Operations
In September 2003, Hill-Rom entered into definitive agreements to dispose of two non-strategic businesses.
| • | On September 24, 2003, Hill-Rom signed a definitive agreement to sell its piped-medical gas business to Beacon Medical Products, LLC, for an estimated $14 million, subject to adjustment for certain conditions existing at closing. The piped-medical gas business, with operations in Batesville, IN and the United Kingdom, is a leading provider of medical gas delivery and management systems in acute care facilities. Hill-Rom retained collection rights to outstanding receivables of the piped-medical gas business at the date of close of approximately $4 million. | ||
| • | On September 29, 2003, Hill-Rom signed a definitive agreement to sell its Air-Shields infant care business to Dräger Medical AG & Co. KGaA for an estimated $31 million, subject to adjustment for certain conditions existing at closing. Air-Shields, based in Hatboro, PA, is a leading provider of infant care warming therapy, |
78
| incubators and other infant care products. Hill-Rom retained collection rights to outstanding receivables of the infant care business at the date of close of approximately $9 million. |
The divestiture of the piped-medical gas business closed in late October 2003. The sale of the Air-Shields infant care business is expected to close in the first calendar quarter of 2004, subject to required regulatory approvals. Upon the signing of the definitive sale agreements, both the infant care and piped-medical gas businesses have been treated as discontinued operations for all years provided within the Consolidated Statements of Income in accordance with the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. Consistent with this treatment, the operating results for each business have been removed from the individual line items comprising the Consolidated Statements of Income and presented in a separate section of the Statement of Income, for all periods. In fiscal year 2003, the results of discontinued operations also reflect an estimated loss on the disposal of the businesses of $51 million, net-of-tax, consisting of a $50 million pre-tax loss and a $1 million income tax provision. The loss on disposal is related to $72 million of goodwill specifically assigned to the carrying value of the respective businesses. In evaluating the divestitures, it was determined that the benefits of the acquired goodwill associated with these businesses had not been realized, and would not be realized in the future, by the continuing Hill-Rom operations since they were not fully integrated. As such, all goodwill related to the previously acquired infant care and piped-medical gas businesses, other than a portion related to a retained product line that was integrated into Hill-Rom, was assigned to the respective businesses and fully considered in recognition of the estimated loss to be incurred upon completion of the divestitures. This loss was recorded as a non-cash reduction of goodwill within the Consolidated Balance Sheet, with the remaining $22 million of goodwill assigned to the businesses included in Assets of Discontinued Operations. The tax provision recorded on the loss results from the book and tax basis differentials associated with the businesses and the inability of the Company to readily utilize the capital losses expected to be generated as a result of the divestitures.
Operating results for the discontinued operations were as follows for
fiscal year 2003, the ten months ended September 30, 2002 and fiscal year 2001:
2003
2002
2001
$
101
$
74
$
88
$
11
$
14
$
1
(50
)
—
—
5
6
1
$
(44
)
$
8
$
—
Assets and liabilities of the discontinued operations, which are presented
in separate line-items within the Consolidated Balance Sheet for fiscal year
2003, were as follows:
2003
$
21
6
22
49
7
$
42
4. Disposition
On October 25, 2001, Hill-Rom sold Narco Medical Services for approximately $8 million, resulting in an after-tax gain of approximately $1 million. Results for Narco Medical Services were included
79
with Hill-Rom through the date of disposition and did not materially affect the results of Hill-Rom or the Company’s consolidated earnings or cash flows. The gain on the sale of Narco Medical Services is classified within the Other line under Other income (expense), net in the Statement of Consolidated Income.
5. Special Charges
2003 Actions
During the third fiscal quarter of 2003, the Company announced a new business structure at Hill-Rom to accelerate the execution of its strategy and strengthen its core businesses. As a result of this action, the Company will eliminate approximately 300 salaried positions globally. Hill-Rom also expects to hire approximately 100 new personnel with the skills and experience necessary to execute its business strategy. A fiscal 2003 third quarter charge of $9 million was recognized with respect to this action, essentially all related to severance and benefit-related costs. Upon completion, this action is expected to reduce net operating costs between $12 and $14 million annually. Significant benefits are not expected to be realized until the first quarter of calendar 2004. As of September 30, 2003, approximately 177 personnel had been terminated, resulting in the utilization of $4 million of the originally recorded accrual. As of this same date, approximately 57 new personnel had been hired under the new business structure. This action is expected to be completed no later than June 2004.
2002 Actions
During the fourth quarter of 2002, the Company announced realignment actions at Batesville Casket and Hill-Rom. The actions at Batesville Casket included the closure of a wood casket plant in Canada along with other employee reduction actions in the United States. These combined actions resulted in the reduction of approximately 100 employees. A charge of $3 million was recorded in relation to these actions for severance and other facility closing costs. In addition, during the fourth quarter Hill-Rom announced an action in Germany to downsize its field service operations and to relocate its sales and other administrative functions. A charge of $2 million was recorded for severance and other facility costs associated with this action, which resulted in the termination of 25 employees. Of the total charge recorded for the above actions, $4 million was associated with severance and other costs to be settled in cash while $1 million related to asset impairments. The remaining accrual for these actions is approximately $1 million, which is expected to be fully utilized no later than March 2004.
Also in the fourth quarter and offsetting the above charge was the reversal of approximately $1 million of severance and benefit costs provided under a 2001 Hill-Rom action, as the actual costs incurred were favorable to those originally expected.
2001 Actions
In the fourth quarter of 2001, the Company announced realignment and streamlining efforts throughout the organization. A charge was taken in relation to these activities, comprised of severance and facility closing costs of $4 million and $3 million, respectively, in addition to a $7 million impairment of intangible assets. The charge was offset by a $2 million reversal of a 1999 Hill-Rom provision as actual costs incurred were favorable to those estimated in the original plan. The total net charge for the quarter, which was recorded within the Special charges line of the Statement of Consolidated Income, was $12 million.
Included in these actions were the reduction of 30 employees in the United States and Canada and the closure of the Canadian office for Forethought, the reduction of approximately 90 employees in the United States and the relocation of a small operation to another location for Batesville Casket and a sales force reduction at Hill-Rom.
The intangible asset charge of $7 million related to the impairment of a Forethought website that would no longer be used to generate revenue ($6 million) and an impaired investment asset at the corporate level ($1 million).
80
In the first quarter of 2001, Hill-Rom announced realignment and streamlining efforts, primarily within the home care and long-term care businesses. The total net charge for this action was $20 million. The charge was comprised of severance and other benefit costs and an impairment of underperforming assets in a non-core product line of $12 million and $8 million, respectively. The severance actions impacted 400 employees in the United States and Europe, all of which have been terminated.
All activities associated with these charges are now complete.
Other
In addition to the reserve balances outlined above, approximately $4 million of accrued liabilities were outstanding at September 30, 2003 related to retirement obligations of W August Hillenbrand, a former Chief Executive Officer of the Company. Mr. Hillenbrand retired in the fourth calendar quarter of 2000.
6. Financing Agreements
Long-term debt consists of the following:
September 30,
September 30,
2003
2002
$
55
$
114
50
108
50
100
$
155
$
322
Long-term debt has been significantly reduced from the prior year following the completion of an offer by the Company to repurchase its outstanding debt securities. The debt tender offer, which was completed in August 2003, resulted in the repurchase of approximately $157 million in debt securities at face value for a purchase price of approximately $185 million.
There are no scheduled payments on long-term debt as of September 30, 2003 in the next five years.
Beginning in August 2001 and continuing through essentially the third quarter of 2003, $150 million of the Company’s debt securities were subject to interest rate swap agreements. The interest rate swaps covered all or part of the securities maturing on December 1, 2011 and February 15, 2024, effectively converting the securities from fixed to variable interest rates.
Near the end of the third quarter of fiscal year 2003, the Company terminated its outstanding interest rate swap agreements, realizing cash proceeds and deferred gains of approximately $27 million. The deferred gains on the termination of the swaps will be amortized and recognized as a reduction in interest expense over the remaining term of the related debt. With the termination of the swap agreements, all of the Company’s debt obligations are again subject to fixed interest rates. With the gains from the swap agreements, the prospective effective interest rates will be lower than the stated interest rates, but higher than the variable rates the Company had been subject to during the period the swap agreements were in place. For the periods in which the interest rate swap agreements were outstanding, the average variable interest rate on debt covered by the swaps, approximated 3.3%, 4.2% and 5.6%, respectively, for fiscal year 2003, the ten months ended September 30, 2002 and fiscal year 2001.
Upon completion of the debt tender offer previously discussed, approximately $14 million of the deferred gains related to the termination of the interest rate swap agreements were recognized, reducing the loss on repurchase of the debt to approximately $16 million, including the write-off of approximately $2 million of debt issuance costs associated with the original debt placement.
As of September 30, 2003 the Company had two unsecured credit facilities totaling $500 million (the “Credit Facilities”) to be used to finance acquisitions and for working capital, capital
81
expenditure and other corporate purposes. The Credit Facilities, which are with a syndicate of banks, consist of a $250 million 364-day senior revolving credit (“364-Day”) facility and a $250 million three-year senior revolving credit (“Three-Year”) facility. Effective July 30, 2003, the Company completed renegotiation of the 364-Day facility under terms and conditions generally consistent with the expiring facility. The term of the 364-Day facility expires one-year from the above date while the Three-Year facility expires in August 2005. Borrowings under the Credit Facilities bear interest at variable rates, as defined therein. The availability of borrowings under the Credit Facilities is subject to the Company’s ability at the time of borrowing to meet certain specified conditions. These conditions include a maximum debt to capital ratio of 55%, absence of default under the facilities and continued accuracy of certain representations and warranties contained in the Credit Facilities.
As of September 30, 2003, the Company: (i) had $13 million of outstanding, undrawn letters of credit under the Three-Year facility, (ii) was in compliance with all conditions set forth under the Credit Facilities, as amended, and (iii) had complete access to the remaining $487 million of borrowing capacity available under the Credit Facilities.
The Company has additional uncommitted credit lines totaling $15 million that have no commitment fees, compensating balance requirements or fixed expiration dates. As of September 30, 2003, the Company had $13 million of outstanding, undrawn letters of credit under these facilities.
In July 2003, the Company filed a universal shelf registration statement with the U.S. Securities and Exchange Commission on Form S-3 for the potential future sale of up to $1 billion in debt and/or equity securities. The registration statement is now effective.
7. Stock-Based Compensation
Over time, the Company has had various stock-based compensation programs, the key components of which are further described below. The Company’s primary active stock-based compensation program is the Stock Incentive Plan. All stock-based compensation programs are administered by the full Board of Directors or its Compensation and Management Development Committee.
The Stock Incentive Plan, which was approved at the 2002 annual meeting of shareholders, replaced the 1996 Stock Option Plan. Common shares reserved for issuance under the Stock Incentive Plan total 5 million, plus 294,611 shares previously authorized for use under the 1996 Stock Option Plan. The Stock Incentive Plan provides for long-term performance compensation for key employees and members of the Board of Directors. A variety of discretionary awards for employees and non-employee directors are authorized under the plan, including incentive or non-qualified stock options, stock appreciation rights, restricted stock, deferred stock and bonus stock. The vesting of such awards may be conditioned upon either a specified period of time or the attainment of specific performance goals as determined by the administrator of the plan. The option price and term are also subject to determination by the administrator with respect to each grant. Option prices are generally expected to be set at the average fair market price at date of grant and option terms are not expected to exceed ten years.
Under the terms of the plan, each non-employee director was automatically granted an option to purchase 4,000 shares of common stock each year on the first day following the Company’s annual meeting, vesting on the first anniversary of the date of grant and exercisable over a ten year term. Beginning in fiscal 2004, instead of options, each non-employee member of the Board of Directors will be granted restricted stock units (or deferred stock awards), which will vest on the later to occur of the first anniversary of the date of grant or the six-month anniversary of the date that a director ceases to be a member of the Company’s Board of Directors. The annual grant will consist of 1,400 restricted stock units for each non-employee director, with the exception of the Chairman of the Board whose annual grant shall be 3,500 restricted stock units.
As of September 30, 2003, 823,600 option shares have been granted and 73,333 shares have been cancelled under the Stock Incentive Plan. In addition, a total of 79,250 restricted stock units were granted in fiscal 2003 under the Stock Incentive Plan, all of which are contingent upon continued employment and vest over periods ranging from one to three years. The shares had a fair value at the date of grant ranging between $47.49 and $54.04 per share. Dividends, payable in stock, accrue on the grants and are subject to the same specified terms as the original
82
grants. As of September 30, 2003, a total of 79,210 restricted stock units, net of cancellations and dividends earned, remain outstanding. A total of 4,465,134 shares remain available for future grants under all aspects of the Stock Incentive Plan.
The fair value of option grants under the Company’s Stock Incentive Plan
and the predecessor 1996 Stock Option Plan are estimated on the date of grant
using the Black-Scholes option-pricing model. The weighted average fair value
of options granted under each of these plans was $12.74, $17.65, and $13.71 per
share for fiscal year 2003, the ten months ended September 30, 2002 and fiscal
year 2001, respectively. The following assumptions were used in the
determination of fair value in each period:
2003
2002
2001
3.52
%
4.70
%
4.47
%
1.60
%
1.55
%
1.59
%
.2629
.2637
.2589
5.97 years
5.92 years
5.98 years
The following table summarizes transactions under the Company’s current
and predecessor stock option plans for fiscal year 2003, the ten months ended
September 30, 2002 and fiscal year 2001:
2003
2002
2001
Weighted
Weighted
Weighted
Average
Average
Average
Number of
Exercise
Number of
Exercise
Number of
Exercise
Shares
Price
Shares
Price
Shares
Price
2,247,572
$
47.69
2,309,166
$
45.78
1,841,198
$
43.62
590,100
$
47.58
263,500
$
60.09
1,025,000
$
48.06
(62,933
)
$
39.86
(253,019
)
$
43.49
(370,996
)
$
42.46
(86,660
)
$
50.33
(72,075
)
$
46.95
(186,036
)
$
43.60
2,688,079
$
47.77
2,247,572
$
47.69
2,309,166
$
45.78
1,606,408
$
46.53
1,188,640
$
45.27
1,005,520
$
45.82
The following table summarizes information about stock options outstanding
at September 30, 2003:
Options Outstanding
Options Exercisable
Weighted
Average
Weighted
Weighted
Range of
Number
Remaining
Average
Number
Average
Exercise Prices
Outstanding
Contractual Life
Exercise Price
Exercisable
Exercise Price
799,947
6.20
$
39.72
707,810
$
38.99
584,100
8.75
$
47.40
76,000
$
46.83
567,000
8.13
$
49.79
218,883
$
49.71
672,032
5.53
$
54.52
548,715
$
53.32
65,000
7.46
$
62.60
55,000
$
62.70
2,688,079
7.02
$
47.77
1,606,408
$
46.53
Non-family, non-employee members of the Board of Directors were awarded 16,448 phantom shares of common stock in 2001 with a fair value of $57.44 per share under the Hillenbrand Director Phantom Stock Plan. One half of these shares vested on July 10, 2001 and the other half vested on December 31, 2001. As of September 30, 2003 there were 4,283 shares vested and payable under this program.
Members of the Board of Directors may elect to defer fees earned and invest them in common stock of the Company under the Hillenbrand Industries Directors’ Deferred Compensation Plan. A total of 12,081 deferred shares are payable as of September 30, 2003 under this program.
83
The Company has historically had various other stock-based compensation programs, including a long-term performance based plan. Shares granted under these predecessor programs were contingent upon continued employment over specified terms, generally not exceeding three years, and some required the achievement of pre-established and approved financial objectives. As of September 30, 2003, there are 36,226 shares granted under these various programs which have not yet vested and 255,586 shares which are deferred, but fully vested and payable.
8. Shareholders’ Equity
One million shares of preferred stock, without par value, have been authorized and none have been issued.
As of September 30, 2003, the Board of Directors had authorized the repurchase, from time to time, of up to 24,289,067 shares of the Company’s stock. The purchased shares will be used for general corporate purposes. As of September 30, 2003, a total of 20,973,867 shares had been purchased at market trading prices, of which 18,508,939 shares remain in treasury.
9. Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instruments (other than Insurance investments which are described in Note 13) for which it is practicable to estimate that value.
The carrying amounts of current assets and liabilities approximate fair value because of the short maturity of those instruments.
The fair value of the Company’s debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. The carrying value and estimated fair values of the Company’s long-term debt instruments were $155 million and $166 million at September 30, 2003 and $322 million and $327 million at September 30, 2002, respectively.
The Company has limited involvement with derivative financial instruments and does not use them for trading purposes. They are used to manage well-defined interest rate and foreign currency risks. With respect to foreign currency risks, forward contracts are sometimes utilized to hedge exposure to adverse exchange risk related to specific assets and obligations denominated in foreign currencies. As of September 30, 2003 and 2002, the Company had no outstanding forward contracts. During 2001, the Company entered into interest rate swap agreements to effectively convert a portion of its fixed interest rate long-term debt to variable rates. The notional amount of the interest rate swaps was $150 million. As outlined in Note 6, the Company terminated its outstanding interest rate swap agreements near the end of the third quarter of fiscal year 2003.
During the term of the interest rate swap agreements, there was no hedge ineffectiveness as each swap met the short-cut method requirements under SFAS No. 133, “Accounting for Derivatives and Hedging Activities”. As a result, changes in the fair value of the interest rate swap agreements during their term offset changes in the fair value of the underlying debt, with no net gain or loss recognized in earnings. With the termination of the swap agreements and the completion of a debt tender offer in the fourth quarter of fiscal year 2003, the remaining unrecognized deferred gains remain classified as debt and will be amortized and recognized as a reduction of interest expense over the remaining term of the debt securities.
10. Segment Reporting
SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” requires reporting of segment information that is consistent with the way in which management operates and views the Company.
The Company is organized into three major operating companies, each of which represents a reporting segment, serving the health care and funeral services industries. Hill-Rom produces, sells and rents selected mechanically, electrically and hydraulically adjustable hospital beds, hospital procedural stretchers, hospital patient room furniture, architectural systems and
84
wound, pulmonary and circulatory care therapy systems designed to meet the needs of medical-surgical, critical care, long-term care and home care providers. Batesville Casket and Forethought both serve the funeral services industry. Batesville Casket manufactures and sells a variety of metal and hardwood caskets and a line of urns and caskets used in cremation. Batesville’s products are sold to licensed funeral professionals operating licensed funeral homes. Forethought provides funeral and cemetery professionals with marketing support for Forethought® funeral plans funded by life insurance policies and trust products.
Corporate manages areas that affect all segments such as taxes, interest income and expense, debt, legal, treasury, and business development. Nearly all interest expense amounts relate to activities undertaken at Corporate to benefit the Company as a whole.
In analyzing segment performance, the Company’s management reviews income before income taxes and net income, both before the impact of the litigation charge and before special charges.
Based on criteria established in SFAS No. 131, the Company’s reporting segments are Hill-Rom, Batesville Casket and Forethought. Corporate, while not a segment, is presented separately to aid in the reconciliation of segment information to that reported in the Consolidated Financial Statements.
85
Financial information regarding the Company’s reportable segments for
fiscal year 2003, the ten months ended September 30, 2002 and fiscal year 2001
is presented below:
Corporate
Batesville
and Other
Hill-Rom
Casket
Forethought
Expense
Consolidated
$
1,067
$
628
$
347
$
—
$
2,042
$
203
$
185
$
(13
)
$
(84
)
$
291
$
131
$
122
$
(9
)
$
(56
)
$
188
$
(6
)
$
182
$
(44
)
$
138
$
686
$
278
$
4,124
$
324
$
5,412
$
92
$
16
$
3
$
4
$
115
$
49
$
18
$
2
$
6
$
75
$
883
$
510
$
290
$
—
$
1,683
$
116
$
143
$
(5
)
$
(49
)
$
205
$
78
$
94
$
(3
)
$
(26
)
$
143
$
(158
)
$
(3
)
$
(18
)
$
8
$
(10
)
$
686
$
280
$
3,822
$
654
$
5,442
$
72
$
12
$
3
$
9
$
96
$
50
$
15
$
2
$
4
$
71
$
1,060
$
613
$
346
$
—
$
2,019
$
167
$
159
$
1
$
(73
)
$
254
$
109
$
103
$
1
$
(22
)
$
191
$
(21
)
$
170
$
—
$
170
$
697
$
306
$
3,550
$
496
$
5,049
$
64
$
25
$
6
$
6
$
101
$
71
$
17
$
9
$
3
$
100
| (a) | Corporate and Other expense includes a $16 million loss on the repurchase of debt ($11 million after tax). | |
| (b) | Reflects a $6 million (after tax) charge related to a business structure realignment at Hill-Rom. | |
| (c) | Reflects results of Hill-Rom piped-medical gas and infant care businesses classified as discontinued operations. Results in 2003 include an estimated loss on disposal of $51 million. | |
| (d) | Corporate and Other Expense includes the reversal of $6 million and $26 million of previously provided tax reserves for potential disallowances and valuation allowances no longer considered necessary in 2002 and 2001, respectively. | |
| (e) | Reflects antitrust litigation charge of $158 million (after tax) related to Hill-Rom. | |
| (f) | Reflects a $3 million (after tax) charge related to the realignment of certain operations. | |
| (g) | Hill-Rom reflects a $5 million operating expense charge related to the write-off of a technology asset with no continuing value. | |
| (h) | Reflects a $21 million (after tax) charge related to the realignment of certain operations, the write-down of certain underperforming assets, the reversal of certain prior special charge provisions and other items. | |
| (i) | Hill-Rom and Forethought reflect a $7 million and $6 million write-off, respectively, of intangibles related to asset impairments. |
86
Geographic Information
Most of the Company’s operations outside the United States are in Europe and consist of the manufacturing, selling and renting of health care products.
Geographic data for net revenues from continuing operations and long-lived
assets (which consist mainly of property, equipment leased to others and
intangibles) for fiscal year 2003, the ten months ended September 30, 2002 and
fiscal year 2001 were as follows:
2003
2002
2001
$
1,819
$
1,493
$
1,791
223
190
228
$
2,042
$
1,683
$
2,019
$
378
$
428
$
411
69
56
54
$
447
$
484
$
465
| (a) | Net revenues are attributed to geographic areas based on the location of the operation making the sale. | |
| (b) | Includes property, equipment leased to others and intangibles, including goodwill. |
11. Income Taxes
Income taxes are computed in accordance with SFAS No. 109. The significant
components of income (loss) from continuing operations before income taxes and
the consolidated income tax provision from continuing operations for fiscal
year 2003, the ten months ended September 30, 2002 and fiscal year 2001 were as
follows:
2003
2002
2001
$
289
$
(47
)
$
209
(7
)
(2
)
13
$
282
$
(49
)
$
222
$
23
$
44
$
76
5
7
(12
)
1
3
6
29
54
70
63
(76
)
(14
)
7
(7
)
3
1
(2
)
(7
)
71
(85
)
(18
)
$
100
$
(31
)
$
52
87
Differences between income tax expense (benefit) from continuing
operations reported for financial reporting purposes and that computed based
upon the application of the statutory U.S. Federal tax rate to the reported
income (loss) from continuing operations before income taxes for fiscal year
2003, the ten months ended September 30, 2002 and fiscal year 2001 were as
follows:
2003
2002
2001
% of
% of
% of
Pretax
Pretax
Pretax
Amount
Income
Amount
Loss
Amount
Income
$
99
35.0
$
(17
)
35.0
$
78
35.0
7
2.5
—
—
4
1.8
2
0.8
—
—
2
1.0
(10
)
(3.5
)
(4
)
8.1
(8
)
(3.6
)
—
—
(4
)
8.1
(18
)
(8.1
)
4
1.4
(2
)
4.0
(8
)
(3.6
)
(2
)
(0.7
)
(4
)
8.2
2
0.9
$
100
35.5
$
(31
)
63.4
$
52
23.4
| (a) | At statutory rate. | |
| (b) | Net of Federal benefit. | |
| (c) | Federal tax rate differential. |
The tax effects of temporary differences that gave rise to the deferred
tax balance sheet accounts were as follows:
September 30, 2003
September 30, 2002
Non-insurance
Insurance
Non-insurance
Insurance
$
3
$
—
$
7
$
—
4
—
4
—
4
—
5
—
26
—
96
—
21
1
16
10
11
—
12
—
—
1
—
1
2
37
—
24
10
—
—
—
—
282
—
278
16
—
11
—
14
—
11
1
111
321
162
314
29
1
27
—
8
—
8
—
2
65
—
27
—
19
—
20
—
7
—
6
—
218
—
216
—
5
—
4
39
315
35
273
(15
)
—
(1
)
—
$
57
$
6
$
126
$
41
88
During 2002 and 2001, the Company recognized approximately $2 million and $8 million of operating loss carryforwards and other tax attributes in foreign jurisdictions on a tax-effected basis. This recognition was based upon improvements in operating performance in select foreign tax jurisdictions. As of September 30, 2003, the Company had remaining tax attributes of approximately $16 million on a tax-effected basis. The tax attributes are subject to various carryforward periods, ranging from 1 year to an unlimited period.
Realization of deferred tax assets for the remaining foreign tax attributes are dependent upon the generation of sufficient taxable income within the carryforward period in select foreign tax jurisdictions. A valuation allowance of $5 million has been recorded relative to these available tax benefits, as it is more likely than not they will expire without being utilized. The valuation allowance was increased $4 million over the prior year level due to an acceleration of losses in select foreign tax jurisdictions, most notably in France.
As of September 30, 2003, the Company had capital loss carryforwards of $22 million, on a tax-effected basis, available to offset future capital gains. The carryforwards expire at various dates up to five years. No valuation allowance is maintained with respect to these carryforwards. Upon completion of the divestitures of the piped-medical gas and infant care businesses of Hill-Rom (See Note 3 — Discontinued Operations), additional capital losses of an estimated $10 million, on a tax-effected basis, will be generated. As the Company considers it more likely than not that it will be unable to utilize these additional capital losses prior to expiration, a full valuation allowance is maintained with respect to the expected loss on business divestitures.
In evaluating whether it is more likely than not that the Company would recover its deferred tax assets, future taxable income, the reversal of existing temporary differences and tax planning strategies were considered. This included consideration of existing unrealized investment gains within the Forethought investment portfolio that would generate capital gains upon sale of the underlying securities. The Company believes that its estimates for the valuation allowances recorded against deferred tax assets are appropriate based on current facts and circumstances. However, an increase in interest rates could adversely impact the valuation of the Forethought investment portfolio, requiring an additional valuation allowance for existing capital loss carryforwards that may no longer be recoverable.
In conjunction with a routine audit by the Internal Revenue Service (IRS) of the Company’s 1990 to 1998 federal income tax returns, the IRS had disallowed significant portions of the deductions associated with the Company’s corporate-owned life insurance (COLI) program. On December 3, 2002, the Company and the IRS entered into a closing agreement to resolve all issues associated with the COLI program. The settlement was completed in 2003 and had no material effect on the Company’s financial statements.
During 2001, the Company settled an IRS examination of the 1996 to 1998 tax years. The favorable settlement of the IRS examination resulted in the reversal of $18 million of previously provided tax reserves. During 2002, an additional $6 million of tax reserves were released in conjunction with the resolution of certain other domestic and foreign tax matters.
12. Supplementary Information
The following amounts were (charged) or credited to income from continuing
operations for fiscal year 2003, the ten months ended September 30, 2002 and
fiscal year 2001:
2003
2002
2001
$
(18
)
$
(14
)
$
(18
)
$
(56
)
$
(40
)
$
(40
)
$
9
$
9
$
15
(a)
Excludes insurance operations.
89
The table below indicates the minimum annual rental commitments (excluding
renewable periods) aggregating $61 million, for manufacturing facilities,
warehouse distribution centers, service centers and sales offices, under
noncancelable operating leases.
$
18
$
14
$
12
$
9
$
8
$
—
Near the end of the third quarter of fiscal 2003, the Company announced that it had selected IBM to manage its global information infrastructure environment. The seven-year agreement had a cumulative estimated cost of $187 million, which will be incurred in nearly equal amounts over the term of the agreement. Estimated payments under the terms of the agreement are expected to approximate $27 million per year for each of the next five years, with additional payments of $45 million thereafter.
The table below provides supplemental information to the Statements of
Consolidated Cash Flows for fiscal year 2003, the ten months ended September
30, 2002 and fiscal year 2001.
2003
2002
2001
$
7
$
97
$
55
$
19
$
20
$
20
$
3
$
8
$
5
$
—
$
18
$
4
13. Financial Services
Forethought and its subsidiaries serve funeral and cemetery planning professionals with life insurance policies, trust products and marketing support for Forethought ® funeral planning.
Investments are predominantly U.S. Treasuries and agencies, high-grade corporate and foreign bonds, with smaller investments in equities, commercial mortgage loans, high-yield corporate bonds and limited partnerships. Investments are carried on the balance sheet at fair value. The Company’s objective is to purchase investment securities with maturities that match the expected cash outflows of policy benefit payments. The investment portfolio is constantly monitored to ensure assets match the expected payment of the liabilities. Securities are also sold in other circumstances, including concern about the credit quality of the issuer. Cash (unrestricted as to use) is held for future investment.
As of September 30, 2003, Forethought had outstanding investment commitments of approximately $55 million with numerous private equity and real estate limited partnerships and commercial mortgages. The timing of these commitment calls is uncertain, but based on the current status of each partnership and the expected origination of mortgages, it has been estimated that $40 million of the commitments will be called in fiscal 2004 with the additional $15 million in fiscal 2005. In addition, Forethought has other funding commitments with certain real estate limited partnerships, which are dependent upon the operating performance of the respective partnerships. Although these commitments are not quantifiable, they are not expected to exceed $20 million over the next three years. These commitments will be funded directly from cash reserves maintained within Forethought’s investment portfolio.
90
The amortized cost and fair value of investment securities available for
sale at September 30, 2003 were as follows:
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
$
1,444
$
57
$
5
$
1,496
1,434
133
5
1,562
56
—
—
56
240
5
—
245
$
3,174
$
195
$
10
$
3,359
The amortized cost and fair value of investment securities available for
sale at September 30, 2002 were as follows:
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
$
1,398
$
101
$
12
$
1,487
1,312
84
47
1,349
120
—
35
85
136
—
13
123
$
2,966
$
185
$
107
$
3,044
The amortized cost and fair value of investment securities available for
sale at September 30, 2003, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or repay obligations with or without call or prepayment
penalties.
Amortized
Fair
Cost
Value
$
11
$
11
261
280
608
659
764
841
1,234
1,267
56
56
240
245
$
3,174
$
3,359
91
The cost used to compute realized gains and losses is determined by
specific identification. Proceeds and realized gains and losses from the sale
of investment securities available for sale and from write-downs associated
with other than temporary declines in value (impairments) were as follows for
fiscal year 2003, the ten months ended September 30, 2002 and fiscal year 2001:
2003
2002
2001
$
996
$
869
$
890
$
68
$
34
$
34
$
117
$
61
$
64
Summarized financial information of the Company’s insurance operations
included in the Statements of Consolidated Income for fiscal year 2003, the
ten months ended September 30, 2002 and fiscal year 2001 was as follows:
2003
2002
2001
$
180
$
138
$
172
216
179
204
(49
)
(27
)
(30
)
347
290
346
83
71
93
183
148
164
65
55
62
—
—
10
29
21
26
$
(13
)
$
(5
)
$
(9
)
The majority of investment income relates to interest bearing securities of the U.S. government and its agencies and other corporate securities.
Insurance liabilities consisted of the following:
Statutory data at September 30, 2003 and 2002 and December 31, 2001:
Mortality or
Interest
Withdrawal
Morbidity
Rate
Assumptions
Assumptions
Assumptions
2003
2002
Life Insurance
Varies by
Varies by
Contracts
age/plan/duration
age/plan/duration
SP: up to 0.2%
using various
MP: up to 60%;
percentages of the
Varies by age
avg. 5%-10% in
1979-81 US Census
and issue year
duration 1
Mortality Table
3% to 5.5%
$2,683
$2,545
Annuity Contracts
Varies by
Varies by
age/plan/duration
age/plan/duration
SP: up to 0.2%
using various
MP: up to 60%;
percentages of the
Varies by age
avg. 5%-10% in
1979-81 US Census
and issue year
duration 1
Mortality Table
2% to 5%
45
45
Total Benefit
Liabilities
$2,728
$2,590
2003 (unaudited)
2002
2001
$
22
$
(14
)
$
(6
)
$
346
$
263
$
307
Forethought’s life insurance companies are restricted in the amount of dividends that they can distribute to their shareholders without approval of the department of insurance in their respective states of domicile. On January 2, 2001, Forethought Life Insurance Company paid a dividend of $24 million to Hillenbrand Industries, Inc. The amount of
92
dividends that can be paid in fiscal year 2004 without approval, which is based upon statutory financial data as of December 31 of each year, is estimated to approximate $34 million.
The National Association of Insurance Commissioners (NAIC) adopted Codification of Statutory Accounting Principles as the NAIC’s primary guidance on statutory accounting as of January 1, 2001. The State of Indiana adopted the Codification guidance, effective January 1, 2001. The effect of adoption on the Company’s statutory surplus did not have a material effect on surplus.
14. Unaudited Quarterly Financial Information
Fiscal Year
Ended
2003 Quarter Ended (a)
12/31/02
3/31/03
6/30/03
9/30/03
9/30/03
$
449
$
526
$
526
$
541
$
2,042
162
237
245
257
901
7
60
60
55
182
1
2
2
(49
)
(44
)
8
62
62
6
138
0.12
1.01
1.00
0.10
2.23
0.12
1.00
1.00
0.10
2.22
Three Months
One Month
Ended
Ten Months
Ended
Ended
2002 Quarter Ended (a)
12/31/01
3/31/02
6/30/02
9/30/02
9/30/02
$
147
$
512
$
474
$
550
$
1,683
59
231
188
244
722
10
52
32
(112
)
(18
)
(1
)
1
1
7
8
9
53
33
(105
)
(10
)
0.14
0.85
0.52
(1.69
)
(0.16
)
0.14
0.85
0.52
(1.69
)
(0.16
)
| (a) | Quarter results for 2003 and 2002 have been adjusted to reflect the piped-medical gas and infant care businesses of Hill-Rom on a discontinued operations basis. This basis of presentation was initially adopted in the fourth quarter of fiscal 2003. | |
| (b) | Reflects a fourth quarter loss on the repurchase of debt of $11 million (after tax). | |
| (c) | Reflects a fourth quarter estimated loss on the divestiture of the piped-medical gas and infant care businesses of $51 million (after tax). |
15. Commitments and Contingencies
On August 16, 1995, Kinetic Concepts, Inc. (KCI), and one of its affiliates (collectively, the “plaintiffs”), filed suit against Hillenbrand and its Hill-Rom subsidiary in the United States District Court for the Western District of Texas, San Antonio Division (the Court). The plaintiffs alleged violation of various antitrust laws, including illegal bundling of products, predatory pricing, refusal to deal and attempting to monopolize the hospital bed industry. On December 31, 2002, the Company entered into a comprehensive settlement agreement relating to the longstanding antitrust litigation with the plaintiffs. At the request of the parties, on January 2, 2003, the Court dismissed the lawsuit with prejudice. Upon dismissal of the lawsuit, the Company took a litigation charge and established an accrual in the amount of $250 million in the fourth quarter of fiscal 2002. Hillenbrand paid KCI $175 million out of its cash on hand in January 2003. Hillenbrand will pay KCI an additional $75 million no earlier than one year after the initial payment, unless KCI becomes bankrupt or undergoes a change of control. Neither party admitted any liability or fault in connection with the settlement.
In 2000, Hill-Rom, Inc. sued Ohmeda Medical and Datex-Ohmeda, Inc. (collectively, “Ohmeda”) in Federal Court in Indianapolis, Indiana alleging patent infringement. Hill-Rom succeeded in
93
obtaining a preliminary injunction prohibiting Ohmeda from continuing efforts to make, import, sell, or offer for sale its combination incubator and infant warmer, the Giraffe™ Omnibed, pending a jury trial on Hill-Rom’s patent infringement claim. A jury trial on this matter was held in May 2002 with the jury finding on behalf of Hill-Rom. Prior to the holding of a separate trial for determination of damages, the parties reached a settlement. While specific terms of the settlement are confidential, the settlement granted cross-licensing of certain patents and Hill-Rom also received a cash payment for past damages and a royalty on certain future product sales. The settlement amount has been recognized as a component of Discontinued operations within the Statement of Consolidated Income.
Batesville Casket Company and certain funeral homes were subject to a suit filed in the State Superior Court, Lake County, California which alleged violations of portions of the California Business and Professional Code concerning unfair business practices and false advertising related to sales of caskets in California. Batesville Casket and the plaintiff reached a settlement late in fiscal 2001, which was approved by the court late in 2002. The settlement amount, which was recorded in fiscal 2001, was not material to the Company’s financial condition, results of operations, or cash flows.
The Company is committed to operating all of its businesses in a manner that protects the environment. In the past year, the Company has been issued Notices of Violation alleging violation of certain environmental permit conditions. The Notices of Violation involved no or only minor fines or penalties. The Company, however, has successfully implemented measures to abate such conditions in compliance with the underlying agreements and/or regulations. In the past, the Company has voluntarily entered into remediation agreements with various environmental authorities to address onsite and offsite environmental impacts. The remaining voluntary remediation activities are nearing completion. The Company has also been notified as a potentially responsible party in investigations of certain offsite disposal facilities. Based on the nature and volume of materials involved, the cost of such onsite and offsite remediation activities to be incurred by the Company in which it is currently involved is not expected to exceed $1 million. The Company believes it has provided adequate reserves in its financial statements for all of these matters, which have been determined without consideration of possible loss recoveries from third parties. Future events or changes in existing laws and regulations or their interpretation may require the Company to make additional expenditures in the future. The cost or need for any such additional expenditures is not known.
The Company is subject to various other claims and contingencies arising out of the normal course of business, including those relating to commercial transactions, patent infringement, business practices, antitrust, safety, health, taxes, environmental and other matters. Litigation is subject to many uncertainties, and the outcome of individual litigated matters is not predictable with assurance. It is possible that some litigation matters for which reserves have not been established could be decided unfavorably to the Company, and that any such unfavorable decision could have a material adverse effect on the financial condition, results of operations and cash flows of the Company.
The Company is also involved in other possible claims, including product liability, workers compensation, employment related matters and auto liability. While insurance is maintained for such exposures, the policies in place are high-deductible policies under which the Company assumes a layer of coverage between $150 thousand and $1.5 million varying with policy year and type of coverage. Accruals for such claims are established based upon advice from internal and external counsel and historical settlement information for claims, related fees and for claims incurred but not reported. The Company utilizes actuarial techniques and routinely consults with external actuaries in determining its accrual requirements. Historical patterns of claim loss information are used to arrive at claim factors which are then applied to loss estimates under the actuarial techniques. The recorded amounts represent management’s best estimate of the costs it will incur in relation to such exposures, but it is possible that actual costs could differ from those estimates.
94
16. Subsequent Events
On October 20, 2003, Hill-Rom acquired Advanced Respiratory, Inc., a privately held manufacturer and distributor of non-invasive airway clearance products and systems. The acquisition of Advanced Respiratory fits well with Hill-Rom’s existing pulmonary expertise, expands the Company’s home-care product line, offers good growth potential and is aimed at allowing Hill-Rom to leverage its clinical sales force. The purchase price for the acquisition was $83 million, subject to certain working capital adjustments at the date of close not to exceed $12 million, with additional contingent payments not to exceed $20 million. The additional contingent purchase price is dependent upon Advanced Respiratory achieving certain net revenue targets over the next two years. The Company is currently still in the process of performing its allocation of purchase price, but goodwill associated with the transaction is expected to approximate between $50 and $55 million. Any required contingency payments would further increase goodwill at the time the net revenue targets are achieved. For the fiscal year ended June 30, 2003, Advanced Respiratory reported net revenues of approximately $45 million and income before income taxes of nearly $5 million.
In addition, on October 30, 2003, the Company announced a definitive agreement to acquire Mediq, Inc. (Mediq), a privately held company in the medical equipment outsourcing and asset management business. The acquisition of Mediq is subject to regulatory clearance and is expected to close before the end of January 2004. This acquisition will expand Hill-Rom’s product and service offerings, strengthen after-sales service capabilities and allow increased leverage of Hill-Rom’s global service center network. The purchase price for Mediq will approximate $330 million. Over the past twelve months, Mediq had approximately $165 million in revenues and approximately $53 million in EBITDA. The Company expects that upon consummation of the acquisition it could realize approximately $15 million in cost synergies over the course of its integration.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in or disagreements with the independent accountants.
Item 9A. CONTROLS AND PROCEDURES
An evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report was carried out under the supervision and with the participation of the Company’s management, including the President and Chief Executive Officer and the Vice President and Chief Financial Officer (“the Certifying Officers”) pursuant to Rules 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, the Certifying Officers concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report for the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act to be recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. There has been no change in the Company’s internal control over financial reporting during the fiscal quarter ended September 30, 2003 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
95
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to executive officers is included in this report in Item 1 under the caption “Executive Officers of the Registrant.” Information relating to the directors will appear in the section entitled “Election of Directors” in the Company’s Proxy Statement to be filed with the Securities and Exchange Commission relating to the Company’s 2004 Annual Meeting of Shareholders (the “2004 Proxy Statement”), which section is incorporated herein by reference. The required information on compliance with Section 16(a) of the Securities Exchange Act of 1934 is incorporated by reference to the 2004 Proxy Statement, where such information is included under the caption “Section 16(a) Beneficial Ownership Reporting Compliance”. Information regarding the Company’s code of ethical business conduct is incorporated by reference to the 2004 Proxy Statement, where such information is included under the heading “About the Board of Directors”.
Item 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference to the 2004 Proxy Statement, where such information is included under the headings “About the Board of Directors” and “Executive Compensation”.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required by this Item is incorporated herein by reference to the 2004 Proxy Statement, where such information is included under the headings “Election of Directors” and “Equity Compensation Plan Information”.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by reference to the 2004 Proxy Statement, where such information is included under the headings “About the Board of Directors” and “Compensation Committee Interlocks and Insider Participation”.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is incorporated herein by reference to the 2004 Proxy Statement, where such information is included under the heading “Ratification of Appointment of Auditors”.
96
PART IV
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
| (a) | The following documents have been filed as a part of this report or, where noted, incorporated by reference: |
| (1) | Financial Statements | ||
| The financial statements of the Company and its consolidated subsidiaries listed on the Index to Consolidated Financial Statements on page 60. | |||
| (2) | Financial Statement Schedules | ||
| The financial statement schedule filed in response to Item 8 and Item 15(d) of Form 10-K is listed on the Index to Consolidated Financial Statements on page 60. | |||
| (3) | Exhibits | ||
| The following exhibits have been filed as part of this report in response to Item 15(c) of Form 10-K: |
97
10.7
Form of Change in Control Agreement between
Hillenbrand Industries, Inc. and Frederick W. Rockwood
(Incorporated herein by reference to Exhibit 10.7 filed with
Form 10-Q for the quarter ended June 2, 2001)
10.8
Form of Change in Control Agreement between
Hillenbrand Industries, Inc. and certain executive officers
(Incorporated herein by reference to Exhibit 10.8 filed with
Form 10-Q for the quarter ended June 2, 2001)
10.9
Form of Indemnity Agreement between Hillenbrand
Industries, Inc. and certain executive officers
10.10
Hillenbrand Industries, Inc. Board of Directors’
Deferred Compensation Plan (Incorporated herein by reference
to Exhibit 10.10 filed with Form 10-Q for the quarter ended
June 2, 2001)
10.11
Hillenbrand Industries, Inc. Director Phantom
Stock Plan and form of award (Incorporated herein by reference
to Exhibit 10.11 filed with Form 10-Q for the quarter ended
June 2, 2001)
10.12
Hillenbrand Industries, Inc. Stock Incentive
Plan (Incorporated herein by reference to the definitive Proxy
Statement dated March 1, 2002 and filed with the Commission
relative to the Company’s 2002 Annual Meeting of Shareholders)
10.13
First Amendment to Hillenbrand Industries, Inc.
Stock Incentive Plan
10.14
Hillenbrand Industries, Inc. Supplemental
Executive Retirement Plan
10.15
Hillenbrand Industries, Inc. Senior Executive
Deferred Compensation Program
10.16
Form of Stock Award
granted to certain executive officers in lieu of perquisites under
the Stock Incentive Plan
10.17
Executive Employment Agreement between
Hillenbrand Industries, Inc. and Frederick W. Rockwood
dated January 27, 2000, as amended
10.18
Executive Employment Agreement between
Hillenbrand Industries, Inc. and Scott K. Sorensen dated March
1, 2001, as amended
10.19
Executive Employment Agreement between
Hillenbrand Industries, Inc. and Patrick D. de Maynadier dated
January 28, 2002, as amended
10.20
Executive Employment Agreement between
Hillenbrand Industries, Inc. and Kimberly K. Dennis dated
August 1, 2003, as amended
10.21
Executive Employment Agreement between
Batesville Services, Inc. and Kenneth A. Camp dated May 1,
2001, as amended
10.22
Executive Employment Agreement between Hill-Rom,
Inc. and R. Ernest Waaser dated December 19, 2000, as amended
10.23
Executive Employment Agreement between
Forethought Financial Services, Inc. and Stephen R. Lang dated
October 4, 2002
98
Other Exhibits
10.24
364-Day Amended and Restated Credit Agreement
dated July 30, 2003 among Hillenbrand Industries, Inc. and
Bank of America, N.A., as Administrative Agent, and Citicorp
North America, Inc., as Syndication Agent, and other lenders
(Incorporated herein by reference to Exhibit 10.19 filed with
Form 10-Q for the quarter ended June 30, 2003)
10.25
First Amendment to the 364-Day Amended and
Restated Credit Agreement dated as of October 10, 2003 among
Hillenbrand Industries, Inc. and Bank of America, N.A., as
Administrative Agent, and Citicorp North America, Inc., as
Syndication Agent, and other lenders
10.26
Three-Year Credit Agreement dated August 2, 2002
among Hillenbrand Industries, Inc. and Bank of America, N.A.,
as Administrative Agent, and Citicorp North America, Inc., as
Syndication Agent, and other lenders (Incorporated herein by
reference to Exhibit 10.13 filed with Form 10-Q for the
quarter ended June 30, 2002)
10.27
First Amendment to the Three-Year Credit
Agreement dated November 20, 2002 among Hillenbrand
Industries, Inc. and Bank of America, N.A., as Administrative
Agent, and Citicorp North America, Inc., as Syndication Agent,
and other lenders (Incorporated herein by reference to Exhibit
10.16 filed with Form 8-K dated November 21, 2002)
10.28
Second Amendment to the Three-Year Credit
Agreement dated November 27, 2002 among Hillenbrand
Industries, Inc. and Bank of America, N.A., as Administrative
Agent, and Citicorp North America, Inc., as Syndication Agent,
and other lenders (Incorporated herein by reference to Exhibit
10.17 filed with Form 10-K for the transition period ended
September 30, 2002)
10.29
Third Amendment to the Three-Year Credit
Agreement dated July 30, 2003 among Hillenbrand Industries,
Inc. and Bank of America, N.A., as Administrative Agent, and
Citicorp North America, Inc., as Syndication Agent, and other
lenders (Incorporated herein by reference to Exhibit 10.20
filed with Form 10-Q for the quarter ended June 30, 2003)
10.30
Fourth Amendment to the Three-Year Credit
Agreement dated October 10, 2003 among Hillenbrand Industries,
Inc. and Bank of America, N.A., as Administrative Agent, and
Citicorp North America, Inc., as Syndication Agent, and other
lenders
14
Hillenbrand Industries, Inc. Code of Ethical
Business Conduct (Incorporated herein by reference to Exhibit
99.1 filed with Form 8-K dated May 19, 2003)
21
Subsidiaries of the Registrant
23
Consent of Independent Accountants
31.1
Certification of Chief Executive Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Chief Financial Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
99
32.1
Certification of Chief Executive Officer Pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
32.2
Certification of Chief Financial Officer Pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
99.1
Hillenbrand Industries, Inc. Corporate Governance
Standards for Board of Directors
99.2
Charter of Audit Committee of Board of Directors
99.3
Charter of Finance Committee of Board of
Directors (Incorporated herein by reference to Exhibit 99.4 to
Form 8-K dated May 19, 2003)
99.4
Charter of Nominating/Corporate Governance
Committee of Board of Directors
99.5
Charter of Compensation and Management
Development Committee of Board of Directors (Incorporated
herein by reference to Exhibit 99.2 to Form 8-K dated
September 10, 2003)
99.6
Position Specification for Chairman of Board of
Directors (Incorporated herein by reference to Exhibit 99.9 to
the Form 10-K for the Transition Period ended September 30,
2002)
99.7
Position Specification for Vice Chairman of Board
of Directors
99.8
Position Specification for Member of Board of
Directors (Incorporated herein by reference to Exhibit 99.10
to the Form 10-K for the Transition Period ended September 30,
2002)
99.9
Position Specification for President and Chief
Executive Officer (Incorporated herein by reference to Exhibit
99.11 to the Form 10-K for the Transition Period ended
September 30, 2002)
| (b) | Reports on Form 8-K |
| During the quarter ended September 30, 2003, the Company filed five reports on Form 8-K. |
| The Form 8-K dated July 11, 2003 reported under “Item 5. Other Events” that the Company had filed reconciliations of financial measures prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) to the non-GAAP financial measures previously included in the Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) section of the 2002 Form 10-K and the Financial News Releases contained in the Forms 8-K dated January 8, 2003 and February 7, 2003. These reconciliations were filed in order to comply with the requirements of the Securities and Exchange Commission’s Regulation G and Item 10(e) of Regulation S-K, which became effective March 28, 2003. | |
| The Form 8-K dated August 4, 2003 reported under “Item 5. Other Events” the Company’s announcement that it had commenced tender offers to purchase any or all of its outstanding 8 ½% Debentures due 2011, 7% Debentures due 2024 and 6 ¾% Debentures due 2027. |
100
| The Form 8-K dated August 13, 2003 reported under “Item 5. Other Events” the Company’s announcement that the previously announced offers to purchase outstanding securities expired at the scheduled expiration time of 5:00 p.m. EDT, on August 11, 2003. As of the expiration time, approximately $157 million in aggregate face amount of outstanding debt securities had been tendered and accepted for purchase. | |
| The Form 8-K dated September 8, 2003 reported under “Item 5. Other Events” the Company’s announcement that it had signed a definitive agreement to acquire Advanced Respiratory, Inc., a privately held manufacturer and distributor of non-invasive airway clearance products and systems. | |
| The Form 8-K dated September 29, 2003 reported under “Item 5. Other Events” the Company’s announcement that a contract had been signed with Dräger Medical AG & Co. KGaA for Dräger Medical to acquire the Air-Shields infant care business of Hill-Rom Company, Inc., a subsidiary of Hillenbrand Industries. |
| During the quarter ended September 30, 2003, the Company furnished four reports on Form 8-K containing information pursuant to “Item 9. Regulation FD Disclosure”. | |||
| The Form 8-K/A filed July 30, 2003 amended the Form 8-K dated February 6, 2003 filed by Hillenbrand Industries, Inc. on February 7, 2003 (the “Original Form 8-K”). The sole purpose of this amendment was to change the Item of Form 8-K under which information was reported in the Original Form 8-K so that the information was furnished under Item 9 of Form 8-K rather than filed under Item 5 of Form 8-K. This Form 8-K/A furnished under “Item 9. Regulation FD Disclosure” the Company’s announcement of its earnings for the first quarter ended December 31, 2002. | |
| The Form 8-K dated July 30, 2003 furnished under “Item 9. Regulation FD Disclosure” the Company’s announcement of its earnings for the third quarter ended June 30, 2003. | |
| The Form 8-K dated September 10, 2003 furnished under “Item 9. Regulation FD Disclosure” that the Board of Directors of Hillenbrand Industries, Inc. had approved revised Corporate Governance Standards for the Board of Directors, a revised Charter for the Compensation and Management Development Committee of the Board of Directors and an Amended and Restated Code of By-Laws for the Company. | |
| The Form 8-K dated September 22, 2003 furnished under “Item 9. Regulation FD Disclosure” the Company’s announcement of its revised earnings per share guidance for the fourth quarter and full year ended September 30, 2003. |
101
SCHEDULE II
HILLENBRAND INDUSTRIES, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
For The Fiscal Year Ended September 30, 2003, the Ten Months Ended September 30, 2002
and the Fiscal Year Ended December 1, 2001
(Dollars in millions)
ADDITIONS
BALANCE AT
CHARGED TO
CHARGED TO
DEDUCTIONS
BALANCE
BEGINNING
COSTS AND
OTHER
NET OF
AT END
DESCRIPTION
OF PERIOD
EXPENSES
ACCOUNTS
RECOVERIES (b)
OF PERIOD
$
36
$
5
$
5
(a)
$
20
$
26
$
44
$
5
$
3
(a)
$
16
$
36
$
61
$
4
$
13
(a)
$
34
$
44
$
16
$
6
$
—
$
6
$
16
$
12
$
8
$
—
$
4
$
16
$
12
$
6
$
—
$
6
$
12
| (a) | Reduction of gross revenues for uncollectible health care rental reimbursements, cash discounts and other adjustments in determining net revenue. Also includes the effect of acquisition of businesses, if any. | |
| (b) | Generally reflects the write-off of specific receivables against recorded reserves. |
102
ADDITIONS
BALANCE AT
CHARGED TO
CHARGED TO
DEDUCTIONS
BALANCE
BEGINNING
COSTS AND
OTHER
NET OF
AT END
DESCRIPTION
OF PERIOD
EXPENSES
ACCOUNTS
RECOVERIES
OF PERIOD
$
3
$
9
$
—
$
6
$
6
$
1
$
—
$
—
$
1
$
—
$
5
$
—
$
—
$
1
$
4
$
9
$
9
$
—
$
8
$
10
$
5
$
3
$
—
$
5
$
3
$
1
$
1
$
—
$
1
$
1
$
7
$
—
$
—
$
2
$
5
$
13
$
4
$
—
$
8
$
9
$
2
$
16
$
—
$
13
$
5
$
1
$
3
$
—
$
3
$
1
$
4
$
—
$
—
$
4
$
—
$
8
$
—
$
—
$
1
$
7
$
15
$
19
$
—
$
21
$
13
103
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| HILLENBRAND INDUSTRIES, INC. | ||||||
| By: |
/s/ Frederick W. Rockwood
|
|||||
|
Frederick W. Rockwood
President and Chief Executive Officer |
||||||
Dated: December 23, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
|
/s/ Ray J.
Hillenbrand
|
/s/ Peter
H. Soderberg
|
|
| Ray J. Hillenbrand | Peter H. Soderberg | |
| Chairman of the Board | Director | |
|
/s/ Rolf A. Classon
|
/s/ John
C. Hancock
|
|
| Rolf A. Classon | John C. Hancock | |
| Vice-Chairman of the Board | Director | |
|
/s/ Scott K. Sorensen
|
/s/ John
A. Hillenbrand II
|
|
| Scott K. Sorensen | John A. Hillenbrand II | |
| Vice President and | Director | |
| Chief Financial Officer | ||
|
/s/ Gregory N. Miller
|
/s/ W
August Hillenbrand
|
|
| Gregory N. Miller | W August Hillenbrand | |
| Vice President – Controller and | Director | |
| Chief Accounting Officer | ||
|
/s/ Charles E. Golden
|
/s/ Frederick
W. Rockwood
|
|
| Charles E. Golden | Frederick W. Rockwood | |
| Director | Director, President and | |
| Chief Executive Officer |
Dated: December 23, 2003
104
HILLENBRAND INDUSTRIES, INC.
| 3.1 | Restated Certificate of Incorporation of the Registrant (Incorporated herein by reference to Exhibit 3 filed with Form 10-K for the year ended November 28, 1992) | |||||
| 3.2 | Amended and Restated Code of Bylaws of the Registrant | |||||
| 4 | Indenture dated as of December 1, 1991, between Hillenbrand Industries, Inc. and LaSalle Bank National Association (as successor to Harris Trust and Savings Bank) as Trustee (Incorporated herein by reference to Exhibit (4) (a) to Registration Statement on Form S-3, Registration No. 33-44086) | |||||
| 10.1 | Hillenbrand Industries, Inc. Short Term Incentive Compensation Plan | |||||
| 10.2 | Hillenbrand Industries, Inc. 1996 Stock Option Plan (Incorporated herein by reference to Exhibit 10.2 filed with Form 10-Q for the quarter ended February 27, 1999) | |||||
| 10.3 | Form of Stock Award granted to certain executive officers (Incorporated herein by reference to Exhibit 10.4 filed with Form 10-K for the year ended November 27, 1999) | |||||
| 10.4 | Form of Stock Award granted to certain executive officers under the Stock Incentive Plan | |||||
| 10.5 | Agreement between W August Hillenbrand and Hillenbrand Industries, Inc. (Incorporated herein by reference to Exhibit 10.5 filed with Form 10-K for the year ended December 2, 2000) | |||||
| 10.6 | Hillenbrand Industries, Inc. form of Director Indemnity Agreement | |||||
| 10.7 | Form of Change in Control Agreement between Hillenbrand Industries, Inc. and Frederick W. Rockwood (Incorporated herein by reference to Exhibit 10.7 filed with Form 10-Q for the quarter ended June 2, 2001) | |||||
| 10.8 | Form of Change in Control Agreement between Hillenbrand Industries, Inc. and certain executive officers (Incorporated herein by reference to Exhibit 10.8 filed with Form 10-Q for the quarter ended June 2, 2001) | |||||
| 10.9 | Form of Indemnity Agreement between Hillenbrand Industries, Inc. and certain executive officers | |||||
| 10.10 | Hillenbrand Industries, Inc. Board of Directors’ Deferred Compensation Plan (Incorporated herein by reference to Exhibit 10.10 filed with Form 10-Q for the quarter ended June 2, 2001) | |||||
| 10.11 | Hillenbrand Industries, Inc. Director Phantom Stock Plan and form of award (Incorporated herein by reference to Exhibit 10.11 filed with Form 10-Q for the quarter ended June 2, 2001) |
105
10.12
Hillenbrand Industries, Inc. Stock Incentive
Plan (Incorporated herein by reference to the definitive Proxy
Statement dated March 1, 2002 and filed with the Commission
relative to the Company’s 2002 Annual Meeting of Shareholders)
10.13
First Amendment to Hillenbrand Industries, Inc.
Stock Incentive Plan
10.14
Hillenbrand Industries, Inc. Supplemental
Executive Retirement Plan
10.15
Hillenbrand Industries, Inc. Senior Executive
Deferred Compensation Program
10.16
Form of Stock Award
granted to certain executive officers in lieu of perquisites under
the Stock Incentive Plan
10.17
Executive Employment Agreement between
Hillenbrand Industries, Inc. and Frederick W. Rockwood dated
January 27, 2000, as amended
10.18
Executive Employment Agreement between
Hillenbrand Industries, Inc. and Scott K. Sorensen dated March
1, 2001, as amended
10.19
Executive Employment Agreement between
Hillenbrand Industries, Inc. and Patrick D. de Maynadier dated
January 28, 2002, as amended
10.20
Executive Employment Agreement between
Hillenbrand Industries, Inc. and Kimberly K. Dennis dated
August 1, 2003, as amended
10.21
Executive Employment Agreement between
Batesville Services, Inc. and Kenneth A. Camp dated May 1,
2001, as amended
10.22
Executive Employment Agreement between Hill-Rom,
Inc. and R. Ernest Waaser dated December 19, 2000, as amended
10.23
Executive Employment Agreement between
Forethought Financial Services, Inc. and Stephen R. Lang dated
October 4, 2002
10.24
364-Day Amended and Restated Credit Agreement
dated July 30, 2003 among Hillenbrand Industries, Inc. and
Bank of America, N.A., as Administrative Agent, and Citicorp
North America, Inc., as Syndication Agent, and other lenders
(Incorporated herein by reference to Exhibit 10.19 filed with
Form 10-Q for the quarter ended June 30, 2003)
10.25
First Amendment to the 364-Day Amended and
Restated Credit Agreement dated as of October 10, 2003 among
Hillenbrand Industries, Inc. and Bank of America, N.A., as
Administrative Agent, and Citicorp North America, Inc., as
Syndication Agent, and other lenders
10.26
Three-Year Credit Agreement dated August 2, 2002
among Hillenbrand Industries, Inc. and Bank of America, N.A.,
as Administrative Agent, and
Citicorp North America, Inc., as Syndication Agent, and other
lenders (Incorporated herein by reference to Exhibit 10.13
filed with Form 10-Q for the quarter ended June 30, 2002)
106
10.27
First Amendment to the Three-Year Credit
Agreement dated November 20, 2002 among Hillenbrand
Industries, Inc. and Bank of America, N.A., as Administrative
Agent, and Citicorp North America, Inc., as Syndication Agent,
and other lenders (Incorporated herein by reference to Exhibit
10.16 filed with Form 8-K dated November 21, 2002)
10.28
Second Amendment to the Three-Year Credit
Agreement dated November 27, 2002 among Hillenbrand
Industries, Inc. and Bank of America, N.A., as Administrative
Agent, and Citicorp North America, Inc., as Syndication Agent,
and other lenders (Incorporated herein by reference to Exhibit
10.17 filed with Form 10-K for the transition period ended
September 30, 2002)
10.29
Third Amendment to the Three-Year Credit
Agreement dated July 30, 2003 among Hillenbrand Industries,
Inc. and Bank of America, N.A., as Administrative Agent, and
Citicorp North America, Inc., as Syndication Agent, and other
lenders (Incorporated herein by reference to Exhibit 10.20
filed with Form 10-Q for the quarter ended June 30, 2003)
10.30
Fourth Amendment to the Three-Year Credit
Agreement dated October 10, 2003 among Hillenbrand Industries,
Inc. and Bank of America, N.A., as Administrative Agent, and
Citicorp North America, Inc., as Syndication Agent, and other
lenders
14
Hillenbrand Industries, Inc. Code of Ethical
Business Conduct (Incorporated herein by reference to Exhibit
99.1 filed with Form 8-K dated May 19, 2003)
21
Subsidiaries of the Registrant
23
Consent of Independent Accountants
31.1
Certification of Chief Executive Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Chief Financial Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification of Chief Executive Officer Pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
32.2
Certification of Chief Financial Officer Pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
99.1
Hillenbrand Industries, Inc. Corporate Governance
Standards for Board of Directors
99.2
Charter of Audit Committee of Board of Directors
99.3
Charter of Finance Committee of Board of
Directors (Incorporated herein by reference to Exhibit 99.4 to
Form 8-K dated May 19, 2003)
107
99.4
Charter of Nominating/Corporate Governance
Committee of Board of Directors
99.5
Charter of Compensation and Management
Development Committee of Board of Directors (Incorporated
herein by reference to Exhibit 99.2 to Form 8-K dated
September 10, 2003)
99.6
Position Specification for Chairman of Board of
Directors (Incorporated herein by reference to Exhibit 99.9 to
the Form 10-K for the Transition Period ended September 30,
2002)
99.7
Position Specification for Vice Chairman of Board
of Directors
99.8
Position Specification for Member of Board of
Directors (Incorporated herein by reference to Exhibit 99.10
to the Form 10-K for the Transition Period ended September 30,
2002)
99.9
Position Specification for President and Chief
Executive Officer (Incorporated herein by reference to
Exhibit 99.11
to the Form 10-K for the Transition Period ended September 30,
2002)
108
EXHIBIT 3.2
AMENDED AND RESTATED CODE OF BY-LAWS
OF
HILLENBRAND INDUSTRIES, INC.
(as adopted by the Board of Directors on December 4, 2003)
ARTICLE 1.
DEFINITION OF CERTAIN TERMS
SECTION 1.01 CORPORATION. The term "Corporation," as used in this Code of By-laws, shall mean and refer to Hillenbrand Industries, Inc., a corporation duly organized and existing under and pursuant to the provisions of The Indiana Business Corporation Law, as amended.
SECTION 1.02 COMMON STOCK. The term "Common Stock," as used in this Code of By-laws, shall mean and refer to the shares of Common Stock, without par value, which the Corporation is authorized to issue under and pursuant to the provisions of the Articles of Incorporation of the Corporation.
SECTION 1.03 SHAREHOLDERS. The term "Shareholders," as used in this Code of By-laws, shall mean and refer to the persons shown by the records of the Corporation to be the holders of the duly authorized, issued and outstanding shares of Common Stock.
SECTION 1.04 BOARD OF DIRECTORS. The term "Board of Directors," as used in this Code of By-laws, shall mean and refer to the Board of Directors of the Corporation.
SECTION 1.05 OFFICERS. The terms "President," "Vice-President," "Secretary," "Assistant Secretary," "Treasurer" and "Assistant Treasurer," as used in this Code of By-laws, shall mean and refer, respectively, to the individuals holding those offices of the Corporation in their capacities as such.
SECTION 1.06 ACT. The term "Act," as used in this Code of By-laws, shall mean and refer to The Indiana Business Corporation Law, as now in force or hereafter amended.
ARTICLE 2.
SHARES OF THE CORPORATION
SECTION 2.01 FORM OF CERTIFICATES. The shares of the Corporation may be issued in book entry form or evidenced by certificates in such form as is prescribed by law and approved by the Board of Directors.
SECTION 2.02 TRANSFER OF SHARES. Shares of the Corporation may be transferred on the books thereof only by the holder of such shares or by his duly authorized representative, upon the surrender to the Corporation or its transfer agent of the certificate for such share properly endorsed.
SECTION 2.03 LOST, DESTROYED OR STOLEN STOCK CERTIFICATES. No share certificates shall be issued in place of any certificate alleged to have been lost, destroyed or stolen unless the Board of Directors is, or such officer or officers as may be designated by the Board of Directors are, satisfied as to such loss, destruction or theft and unless an indemnity bond acceptable to the Board or such officers has been furnished by the owner of such lost, destroyed or stolen certificate, or his legal representative.
SECTION 2.04 REGULATIONS RELATING TO THE TRANSFER AGENTS AND REGISTRARS OF THE CORPORATION. The provisions governing the appointment of the Transfer Agents, Registrars and Dividend Disbursing Agent of the Corporation, conferring upon them their respective powers, rights, duties and obligations in their capacities as such, allocating and delimiting their power to make original issue and transfer of the shares of Common Stock, specifying to whom the Shareholders shall give notice of changes of their addresses, allocating and imposing the duty of maintaining the original stock ledgers or transfer books, or both, of the Corporation and of disclosing the names of the Shareholders, the number of shares of Common Stock held by each and the address of each Shareholder as it appears upon the records of the Corporation, and dealing with other related matters are contained in the "Regulations Relating to the Transfer Agents and Registrars of Hillenbrand Industries, Inc." duly adopted by the Board of Directors, certified copies of which are on file with, and may be inspected at the office of:
Computershare Investor Services 2 North LaSalle Street Chicago, Illinois 60602
the Registrar and Transfer Agents of the Corporation.
ARTICLE 3.
THE SHAREHOLDERS
SECTION 3.01 ANNUAL MEETING. The Shareholders shall hold their annual meeting during the second quarter of each fiscal year for the purposes of electing individuals to the Board of Directors in accordance with Section 4.03, acting upon such other questions or matters as are proposed to be submitted to a vote at the meeting and acting upon such further questions or matters as may properly come before the meeting. The annual meeting shall be called by the Board of Directors.
SECTION 3.02 SPECIAL MEETING. The Shareholders may hold a special meeting at any time for the purposes of electing individuals to vacant positions upon the Board of Directors, acting upon such other questions or matters as are proposed to be submitted to a vote at the meeting and acting upon such further questions or matters as may properly come before the meeting. A special meeting of the Shareholders may be called by the Board of Directors, by the President or by Shareholders holding not less than one-fourth (1/4) of the duly authorized, issued and outstanding shares of Common Stock (determined as of the date upon which the special meeting is called).
SECTION 3.03 PLACE OF MEETINGS. Meetings of the Shareholders may be held at the Principal Office of the Corporation (as defined in the Act) or any other place, within or without the State of Indiana.
SECTION 3.04 PROCEDURE FOR CALLING MEETINGS. Any meeting of the Shareholders which is called by the Board of Directors shall be deemed duly to have been called upon the adoption of a resolution by the Board of Directors, not less than ten (10) days before the date of the meeting, setting forth the time, date and place of the meeting and containing a concise statement of the questions or matters proposed to be submitted to a vote at the meeting. Any special meeting of the Shareholders which is called by the President shall be deemed duly to have been called upon delivery to the Secretary, not less than ten (10) days before the date of the meeting, of a written instrument, executed by the President, setting forth the time, date and place of the meeting and containing a concise statement of the questions or matters proposed to be submitted to a vote at the meeting. Any special meeting of the Shareholders which is called by the Shareholders shall be deemed duly to have been called upon delivery to the Secretary, not less than fifty (50) days before the date of the meeting, of a written instrument, executed by each of the Shareholders calling the meeting, setting forth the time, date and place of the meeting and containing a concise statement of the questions or matters proposed to be submitted to a vote at the meeting.
SECTION 3.05 RECORD DATE. For the purpose of determining the Shareholders entitled to notice of, or to vote at, any meeting of the Shareholders, for the purpose of determining the Shareholders entitled to receive payment of any dividend or other distribution, or in order to make a determination of the Shareholders for any other corporate purpose, the Board of Directors may fix in advance a date as the record date for that determination of the Shareholders, that date, in any case, to be not more than seventy (70) days and, in case of a meeting of the Shareholders, not less than ten (10) days, before the date upon which the particular action, requiring that determination of the Shareholders, is to be taken. If no record date is fixed for the determination of the Shareholders entitled to notice of, or to vote at, a meeting of the Shareholders, then the date ten (10) days before the date of the meeting shall be the record date for the meeting. If no record date is fixed for the determination of the Shareholders entitled to receive payment of a dividend or other distribution, then the date upon which the resolution of the Board of Directors declaring the dividend or other distribution is adopted shall be the record date for the determination of the Shareholders. When a determination of the Shareholders entitled to notice of, or to vote at, a meeting of the Shareholders has been made, the determination shall apply to any adjournment of the meeting. The Shareholders upon any record date shall be the Shareholders as of the close of business on that record date.
SECTION 3.06 NOTICE OF MEETINGS. Notice of any meeting of the Shareholders shall be deemed duly to have been given if, at least ten (10) days before the date of the meeting, a written notice stating the date, time and place of meeting, and containing a concise statement of the questions or matters proposed to be submitted to a vote at the meeting, is delivered by the Secretary to each Shareholder entitled to notice of, and to vote at, the meeting. The written notice shall be deemed duly to have been delivered by the Secretary to a Shareholder at the date upon which:
(1) it is delivered personally to the Shareholders;
(2) it is deposited in the United States First Class Mail, postage prepaid, addressed to the address of the Shareholder set forth upon the records of the Corporation; or
(3) it is sent by telegraph, facsimile or other form of wire or wireless communication, addressed to the address of the Shareholder set forth upon the records of the Corporation.
Written notice of the meeting shall be deemed duly to have been waived by any Shareholder present, in person or by proxy, at the meeting. Written notice of the meeting may be waived by any Shareholder not present, in person or by proxy, at the meeting, either before or after the meeting, by written instrument, executed by the Shareholder, delivered to the Secretary.
SECTION 3.07 VOTING LISTS. The Secretary shall, not less than five (5) days before the date of each meeting of the Shareholders, prepare, or cause to be prepared, a complete list of the Shareholders entitled to notice of, and to vote at, the meeting. The voting list shall disclose the names and addresses of those Shareholders, arranged in alphabetical order, and the number of duly authorized, issued and outstanding shares of Common Stock held by each of those Shareholders (determined as of the record date for the meeting). The Secretary shall cause the voting list to be produced and kept open at the Principal Office of the Corporation where it shall be subject to inspection by any Shareholder during the five (5) days before the meeting. The Secretary shall also cause the voting list to be produced and kept open at the time and place of the meeting where it shall be subject to inspection by any Shareholder during the course of the meeting.
SECTION 3.08 QUORUM AT MEETINGS. At any meeting of the Shareholders the presence, in person or by proxy, of Shareholders holding a majority of the duly authorized, issued and outstanding shares of Common Stock (determined as of the record date for the meeting) shall constitute a quorum.
SECTION 3.09 VOTING AT MEETINGS. Any action required or permitted to be taken at any meeting of the Shareholders with respect to any question or matter other than the election of directors shall be taken pursuant to a vote of the duly authorized, issued and outstanding shares of Common Stock (determined as of the record date for the meeting) present, in person or by proxy, at a meeting at which a quorum is present, in which the votes cast favoring the action exceed the votes cast opposing the action, unless a greater number of affirmative votes is required by the provisions of the Act, the Articles of Incorporation of the Corporation or other applicable legal or regulatory requirement, in which event the action shall be taken only pursuant to the affirmative vote of the greater number. Directors shall be elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present, unless the Articles of Incorporation of the Corporation provide otherwise.
SECTION 3.10 VOTING BY PROXY. A shareholder may vote at any meeting of the Shareholders, either in person or by proxy. Each proxy shall be in the form of a written instrument executed by the Shareholder or a duly authorized agent of the Shareholder, or may be transmitted by electronic submission as authorized by the Corporation. No proxy shall be voted at any meeting unless and until it has been filed with the Secretary.
SECTION 3.11 NOTICE OF SHAREHOLDER BUSINESS. At any meeting of the shareholders, only such business may be conducted as shall have been properly brought before the meeting, and as shall have been determined to be lawful and appropriate for consideration by Shareholders at the meeting. To be properly brought before a meeting business must be (a) specified in the notice of meeting given in accordance with Section 3.06 of this Article 3, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors or the Chairman of the Board or the Chief Executive Officer, or (c) otherwise properly brought before the meeting by a Shareholder. For business to be properly brought before a meeting by a Shareholder pursuant to clause (c) above, the Shareholder must have given timely notice thereof in writing to the Secretary of the Corporation at the principal place of business of the Corporation. To be timely, a Shareholder's notice must be delivered to or mailed and received by the Secretary not later than 100 days prior to the anniversary of the date of the immediately preceding annual meeting which was specified in the initial formal notice of such meeting (but if the date of the forthcoming annual meeting is more than 30 days after such anniversary date, such written notice will also be timely if received by the Secretary by the later of 100 days prior to the forthcoming meeting date and the close of business 10 days following the date on which the Company first makes public disclosure of the meeting date). A Shareholder's notice to the Secretary shall set forth as to each matter the Shareholder proposes to bring before the meeting (a) a brief description of the business desired to be brought before the meeting, (b) the name and address of the Shareholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the Shareholder, and (d) any interest of the Shareholder in such business. Notwithstanding anything in these By-laws to the contrary, no business shall be conducted at a meeting except in accordance with the procedures set forth in this Section 3.11. The person presiding at the meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the Code of By-laws, or that business was not lawful or appropriate for consideration by Shareholders at the meeting, and if he should so determine, he shall so declare to the meeting and any such business shall not be transacted.
SECTION 3.12 NOTICE OF SHAREHOLDER NOMINEES. Nominations of persons for election to the Board of Directors of the Corporation may be made at any meeting of Shareholders by or at the direction of the Board of Directors or by any Shareholder of the Corporation entitled to vote for the election of members of the Board of Directors at the meeting. For nominations to be made by a Shareholder, the Shareholder must have given timely notice thereof in writing to the Secretary of the Corporation at the principal place of business of the Corporation and any nominee must satisfy the qualifications established by the Board of Directors of the Corporation from time to time as contained in the proxy statement of the Corporation for the immediately preceding annual meeting or posted on the Website of the Corporation. To be timely, a Shareholder's nomination must be delivered to or mailed and received by the Secretary not later than (i) in the case of the annual meeting, 100 days prior to the anniversary of the date of the immediately preceding annual meeting which was specified in the initial formal notice of such meeting (but if the date of the forthcoming annual meeting is more than 30 days after such anniversary date, such written notice will also be timely if received by the Secretary by the later of 100 days prior to the forthcoming meeting date and the close of business 10 days following the date on which the Company first makes public disclosure of the meeting date) and (ii) in the case of a special meeting, the close of business on the tenth day following the date on which the Corporation first makes public disclosure of the meeting date. Each notice given by such
Shareholder shall set forth: (i) the name and address of the Shareholder who
intends to make the nomination and of the person or persons to be nominated;
(ii) a representation that the Shareholder is a holder of record, setting forth
the shares so held, and intends to appear in person or by proxy as a holder of
record at the meeting to nominate the person or persons specified in the notice;
(iii) a description of all arrangements or understandings between such
Shareholder and each nominee proposed by the Shareholder and any other person or
persons (identifying such person or persons) pursuant to which the nomination or
nominations are to be made by the shareholders; (iv) such other information
regarding each nominee proposed by such Shareholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission; (v) the consent in writing of each nominee
to serve as a director of the Corporation if so elected, and (vi) a description
of the qualifications of such nominee to serve as a director of the Corporation.
If facts show that a nomination was not made in accordance with the foregoing provisions, the Chairman of the meeting shall so determine and declare to the meeting, whereupon the defective nomination shall be disregarded.
ARTICLE 4.
THE BOARD OF DIRECTORS
SECTION 4.01 NUMBER OF MEMBERS. The Board of Directors shall consist of no fewer than nine (9) members and no more than eleven (11) members, as fixed from time to time by resolution of the Board of Directors.
SECTION 4.02 QUALIFICATION OF MEMBERS. Each member of the Board of Directors shall be an adult individual. Members of the Board of Directors need not be Shareholders and need not be residents of the State of Indiana or citizens of the United States of America.
SECTION 4.03 ELECTION OF MEMBERS. The members of the Board of Directors shall be elected by the Shareholders at the annual meeting of the Shareholders, at a special meeting of the Shareholders called for that purpose or by the unanimous written consent of the Shareholders, except that a majority of the duly elected and qualified members of the Board of Directors then occupying office may fill any vacancy in the membership of the Board of Directors caused by the resignation, death, or adjudication or legal incompetency of a member of the Board of Directors, or caused by an increase in the number of the members of the Board of Directors.
The members of the Board of Directors shall be divided into three classes, each having one-third of the total number of members of the Board of Directors or as near to one-third of such number as may be possible, with the difference between the number of Directors in any class and the number of Directors in any other class not exceeding one. If the number of Directors is changed, any increase or decrease shall be apportioned among the classes as determined by the Board of Directors, provided that (i) in no case will a decrease in the number of Directors shorten the term of any incumbent Director and (ii) any such increase or decrease shall be apportioned such that each class has one-third of the total number of members of the Board of Directors or as near to one-third of such number as may be possible, with the difference between the number of Directors in any class and the number of Directors in any other class not exceeding one.
At each annual meeting of Shareholders, the terms of all of the members of one class of Directors shall expire and Directors shall be elected to succeed the members of such class for three-year terms expiring at the third succeeding annual meeting of Shareholders. A Director elected by the Board of Directors to fill any vacancy on the Board of Directors shall be elected for a term expiring at the next succeeding annual meeting of Shareholders, regardless of the class to which such director is elected, and at such next annual meeting of Shareholders, a Director shall be elected to succeed such Director for a term of one, two or three years expiring at the next annual meeting of Shareholders at which full three-year terms of members of such Director's class will expire. Each member of the Board of Directors shall serve as such throughout the term for which he is elected, or until his successor is duly elected and qualified.
SECTION 4.04 REMOVAL OF MEMBERS. Any Director, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least two-thirds (2/3) of the voting power of all of the shares of the Corporation entitled to vote generally in the election of Directors, voting together as a single class.
SECTION 4.05 RESIGNATIONS OF MEMBERS. Any member of the Board of Directors may resign at any time, with or without cause, by delivering written notice of his resignation to the Board of Directors. The resignation shall take effect at the time specified in the written notice or upon receipt by the Board of Directors, as the case may be, and, unless otherwise specified in the written notice, the acceptance of the resignation shall not be necessary to make it effective.
SECTION 4.06 ANNUAL MEETING. The Board of Directors shall hold its annual meeting immediately following the annual meeting of the Shareholders for the purposes of electing individuals to each of the offices of the Corporation and acting upon such other questions or matters as may properly come before the meeting.
SECTION 4.07 SPECIAL MEETINGS. The Board of Directors may hold a special meeting at any time for the purposes of electing individuals to each vacant position on the Board of Directors, electing individuals to each vacant office of the Corporation and acting upon such other questions and matters as may properly come before the meeting. A special meeting of the Board of Directors may be called by any member of the Board of Directors.
SECTION 4.08 PLACE OF MEETINGS. The annual meeting of the Board of Directors shall be held at the same place at which the annual meeting of the Shareholders is held. Special meeting of the Board of Directors may be held at the Principal Office of the Corporation or at any other place, within or without the State of Indiana.
SECTION 4.09 PROCEDURE FOR CALLING MEETINGS. Any special meeting of the Board of Directors shall be deemed duly to have been called by a member of the Board of Directors upon delivery to the Secretary, not less than seven (7) days before the date of such meeting, of a written instrument, executed by the member of the Board of Directors calling the meeting, setting forth the time, date and place of the meeting. The written instrument may also contain, at the option of the member of the Board of Directors calling the meeting, a concise statement of the questions or matters proposed to be submitted to a vote, or otherwise considered, at the meeting. Any special meeting of the Board of Directors with respect to which all members of the
Board of Directors are either present or duly waive written notice, either before or after the meeting, shall also be deemed duly to have been called.
SECTION 4.10 NOTICE OF MEETINGS. No notice of the annual meeting of the Board of Directors shall be required. Notice of any special meeting of the Board of Directors shall be deemed duly to have been given if, at least seven (7) days before the date of the meeting, a written notice stating the date, time and place of the meeting and, to the extent set forth in the written instrument by which the meeting is called, containing a concise statement of the questions or matters proposed to be submitted to a vote, or otherwise considered, at the meeting is delivered by the Secretary to each member of the Board of Directors. The written notice shall be deemed duly to have been delivered by the Secretary to a member of the Board of Directors at the date upon which:
(1) it is delivered personally to the member of the Board of Directors;
(2) it is deposited in the United States First Class Mail, postage prepaid, addressed to the last known address of the member of the Board of Directors; or
(3) it is sent by telegraph, facsimile or other form of wire or wireless communication, addressed to the last known address of the member of the Board of Directors.
Written notice of the meeting shall be deemed duly to have been waived by any member of the Board of Directors present at the meeting. Written notice of the meeting may be waived by any member of the Board of Directors not present at the meeting, either before or after the meeting, by written instrument, executed by the member of the Board of Directors, delivered to the Secretary.
SECTION 4.11 QUORUM AT MEETINGS. At any annual or special meeting of the Board of Directors the presence of two-thirds of the then duly elected and qualified members of the Board of Directors then occupying office shall constitute a quorum.
SECTION 4.12 VOTING AT MEETINGS. Any action required or permitted to be taken at any meeting of the Board of Directors with respect to any question or matter shall be taken pursuant to the affirmative vote of a majority of the then duly elected and qualified members of the Board of Directors present at the meeting, unless a greater number is required by the provisions of the Act, in which event the action shall be taken only pursuant to the affirmative vote of that greater number.
SECTION 4.13 ACTION WITHOUT MEETING. Any action required or permitted to be taken at any meeting of the Board of Directors with respect to any question or matter may be taken without a meeting, if, before that action is taken, a unanimous written consent to that action is executed by all of the then duly elected and qualified members of the Board of Directors and the written consent is filed with the minutes of the preceding of the Board of Directors.
SECTION 4.14 THE CHAIRMAN OF THE BOARD. The Chairman of the Board shall be a member of the Board of Directors. The Chairman of the Board shall provide leadership to the Board of Directors, advice and counsel to the President and other officers of the Corporation, shall preside at all meetings of the Shareholders and the Board of Directors, and shall, in addition, have such further powers and perform such further duties as are specified in the Code of By-laws or as the Board of Directors may, from time to time, assign or delegate to him.
SECTION 4.15 THE CHAIRMAN EMERITUS. The Chairman Emeritus shall be a member of the Board of Directors or a former member of the Board of Directors. The Chairman Emeritus shall provide advice and counsel to the Chairman of the Board and to the President and other officers of the Corporation, and shall, in addition, have such further powers and perform such further duties as are specified in the Code of By-Laws or as the Board of Directors may, from time to time, assign or delegate to him.
SECTION 4.16 THE VICE CHAIRMAN. The Board of Directors may appoint a Vice Chairman of the Board. The Vice Chairman of the Board shall be a member of the Board of Directors. The Vice Chairman of the Board shall preside at all meetings of the Shareholders and the Board of Directors in the absence of the Chairman of the Board, shall otherwise act in place of and carry out the responsibilities of the Chairman of the Board if the Chairman of the Board is absent or unable to act, shall provide advice and counsel to the Chairman of the Board and assist the Chairman of the Board in providing leadership to the Board of Directors and shall have such further powers and perform such further duties as are specified in the Code of By-laws or as the Board of Directors may, from time to time, assign or delegate to him.
If at any time the person serving as Chairman of the Board ceases to be the Chairman of the Board for any reason and prior to that time the Board of Directors has not appointed another member of the Board of Directors to succeed such person as Chairman of the Board, the Vice Chairman, at that time and without further action by the Board of Directors, shall become the Chairman of the Board and shall serve in that capacity until he is replaced as Chairman of the Board by the Board of Directors or ceases to be a member of the Board of Directors.
ARTICLE 5.
COMMITTEES
SECTION 5.01 DESIGNATION; POWERS. The Board of Directors may, by resolution passed by a majority of the whole board, designate one or more committees, with each such committee to consist of one or more of the directors of the Corporation. Any such designated committee shall have and may exercise such of the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation as may be provided in such resolution, except that no such committee shall have the following powers of the Board of Directors:
(1) powers in reference to amending the Articles of Incorporation;
(2) powers in reference to adopting an agreement or plan of merger of consolidation;
(3) powers in reference to proposing a special corporate transaction;
(4) powers in reference to recommending to the Shareholders a voluntary dissolution of the Corporation or revocation of voluntary dissolution proceedings; and
(5) powers in reference to the amendment of this Code of By-laws.
Any such designated committee may authorize the seal of the Corporation to be affixed to all papers which may require it. In addition to the above, such committee or committees shall have such other powers and limitations of authority as may be determined from time to time by the Board of Directors.
SECTION 5.02 PROCEDURE; MEETINGS; QUORUM. Any committee designated pursuant to Section 5.01 shall keep regular minutes of its actions and proceedings in a book provided for that purpose and report the same to the Board of Directors at its meeting next succeeding such action, shall fix its own rules or procedures, and shall meet at such times and at such place or places as may be provided by such rules, or by such committee or the Board of Directors. Should a committee fail to fix its own rules, the provisions of this Code of By-laws, pertaining to the calling of meetings and conduct of business by the Board of Directors, shall apply as nearly as may be possible. At every meeting of any such committee, the presence of a majority of all the members thereof shall constitute a quorum, and the affirmative vote of a majority of the members present shall be necessary for the adoption by it of any resolution.
SECTION 5.03 SUBSTITUTION AND REMOVAL OF MEMBERS; VACANCIES. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. The Board of Directors shall have the power at any time to remove any member(s) of a committee and to appoint other directors in lieu of the person(s) so removed and shall also have the power to fill vacancies in a committee.
ARTICLE 6.
THE OFFICERS
SECTION 6.01 NUMBER OF OFFICERS. The officers of the Corporation shall consist of a President, a Secretary and a Treasurer, and may, in addition, consist of one or more Executive Vice-Presidents, Senior Vice-Presidents, Vice-Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers. Any two or more offices may be held by the same person except that the offices of President and Secretary shall not be held by the same person.
SECTION 6.02 QUALIFICATIONS OF OFFICERS. Each officer of the Corporation shall be an adult individual. The officers of the Corporation need not be Shareholders and need not be residents of the State of Indiana or citizens of the United States of America.
SECTION 6.03 ELECTION OF OFFICERS. The officers of the Corporation shall be elected by the Board of Directors. Each officer shall serve as such until the next ensuing annual meeting of the Board of Directors or until his successor shall have been duly elected and shall have qualified, except as hereinafter provided. Each officer shall be deemed to have qualified as such upon his election.
SECTION 6.04 REMOVAL OF OFFICERS. Any officer of the Corporation may be removed at any time, with or without cause by the Board of Directors.
SECTION 6.05 RESIGNATION OF OFFICERS. Any officer of the Corporation may resign at any time, with or without cause, by delivering written notice of his resignation to the Board of Directors. The resignation shall take effect at the time specified in the written notice, or upon receipt by the Board of Directors, as the case may be, and, unless otherwise specified in the written notice, the acceptance of the resignation shall not be necessary to make it effective.
SECTION 6.06 FILLING OF VACANCIES. Any vacancies in the offices of the Corporation because of death, adjudication of incompetency, resignation, removal or any other cause shall be filled for the unexpired portion of the term of that office by the Board of Directors.
SECTION 6.07 THE PRESIDENT. The President shall be the Chief Executive Officer of the Corporation. He shall be responsible for the active overall direction and administration of the affairs of the Corporation, subject, however, to the control of the Board of Directors. In general, he shall have such powers and perform such duties as are incident to the office of the President and Chief Executive Officer of a business corporation and shall, in addition, have such other and further powers and perform such other further duties as are specified in this Code of By-Laws or as the Board of Directors may, from time to time, assign to or delegate to him.
SECTION 6.08 THE VICE-PRESIDENTS. Each Vice-President (if one or more Vice-Presidents are elected) shall assist the Chairman of the Board and the President in their duties and shall have such other powers and perform such other duties as the Board of Directors, the Chairman of the Board or the President may, from time to time, assign or delegate to him. At the request of the President, any Vice-President may, in the case of absence or inability to act of the President, temporarily act in his place. In the case of the death or inability to act without having designated a Vice-President to act temporarily in his place, the Vice-President so to perform the duties of the President shall be designated by the Board of Directors.
SECTION 6.09 THE SECRETARY. The Secretary shall be the chief custodial officer of the Corporation. He shall keep or cause to be kept, in minute books provided for the purpose, the minutes of the proceedings of the Shareholders and the Board of Directors. He shall see that all notices are duly given in accordance with the provisions of this Code of By-laws and as required by law. He shall be custodian of the minute books, archives, records and the seal of the Corporation and see that the seal is affixed to all documents, the execution of which on behalf of the Corporation under its seal is duly authorized by the Shareholders, the Board of Directors, the Chairman of the Board or the President or as required by law. In general, he shall have such powers and perform such duties as are incident to the office of Secretary of a business corporation and shall, in addition, have such further powers and perform such further duties as are specified in this Code of By-laws or as the Board of Directors, the Chairman of the Board, or the President may, from time to time, assign or delegate to him.
SECTION 6.10 THE ASSISTANT SECRETARIES. Each Assistant Secretary (if one or more Assistant Secretaries are elected) shall assist the Secretary in his duties, and shall have such other powers and perform such other duties as the Board of Directors, the Chairman of the Board, the President or the Secretary may, from time to time, assign or delegate to him. At the request of the
Secretary, any Assistant Secretary may, in the case of the absence or inability to act of the Secretary, temporarily act in his place. In the case of the death or resignation of the Secretary, or in the case of his absence or inability to act without having designated an Assistant Secretary to act temporarily in his place, the Assistant Secretary so to perform the duties of the Secretary shall be designated by the President.
SECTION 6.11 THE TREASURER. The Treasurer shall have such powers and perform such duties as are incident to the office of Treasurer of a business corporation and have such further powers and perform such further duties as the Board of Directors, the Chairman of the Board, the President or the Vice-President -- Finance, may, from time to time, assign or delegate to him. In the absence of the Vice-President -- Finance, the Treasurer shall be the Chief Financial Officer of the Corporation.
SECTION 6.12 THE ASSISTANT TREASURERS. Each Assistant Treasurer (if one or more Assistant Treasurers are elected) shall assist the Treasurer in his duties, and shall have such other powers and perform such other duties as the Board of Directors, the Chairman of the Board, the President or the Treasurer may, from time to time, assign or delegate to him. At the request of the Treasurer, any Assistant Treasurer may, in the case of the absence or inability to act of the Treasurer, temporarily act in his place. In the case of the death or resignation of the Treasurer, or in the case of his inability to act without having designated an Assistant Treasurer to act temporarily in his place, the Assistant Treasurer so to perform the duties of the Treasurer shall be designated by the President.
SECTION 6.13 FUNCTION OF OFFICES. The offices of the Corporation are established in order to facilitate the day to day administration of the affairs of the Corporation in the ordinary course of its business and to provide an organization capable of executing and carrying out the decisions and directions of the Board of Directors. The officers of the Corporation shall have such powers and perform such duties as may be necessary or desirable to conduct and effect all transactions in the ordinary course of the business of the Corporation without further authorization by the Board of Directors and such further powers as are granted by this Code of By-laws or are otherwise granted by the Board of Directors.
ARTICLE 7.
INDEMNIFICATION
SECTION 7.01 DEFINITIONS. As used in this Article 7:
(a) "expenses" includes all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys' fees and related disbursements and other out-of-pocket costs) actually and reasonably incurred by an Eligible Person (as hereinafter defined) in connection with the investigation, defense, settlement or appeal of a proceeding or establishing
or enforcing a right to indemnification or advancement of expenses under this Article; provided, however, that expenses shall not include any judgments, fines, ERISA excise taxes or penalties or amounts paid in settlement of a proceeding.
(b) "proceeding" includes, without limitation, any threatened, pending, or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal, whether by a third party or by or in the right of the Corporation, by reason of the fact that an Eligible Person is or was a director, officer or employee of the Corporation or, while a director, officer or employee of the Corporation, is or was serving at the request of the Corporation as a director, officer, partner, member, manager, trustee, employee, fiduciary or agent of another domestic or foreign corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise, or an affiliate of the Corporation, whether for profit or not.
SECTION 7.02 INDEMNITY. The Corporation shall indemnify any person who is or was a director, officer or employee of the Corporation ("Eligible Person") in accordance with the provisions of this Section 7.02 if the Eligible Person is a party to or threatened to be made a party to any proceeding against all expenses, judgments, fines (including any excise tax or penalty assessed with respect to any employee benefit plan) and amounts paid in settlement actually and reasonably incurred by the Eligible Person in connection with such proceeding, but only (a) if the Eligible Person acted in good faith, and (b) (i) in the case of conduct in the Eligible Person's official capacity with the Corporation, if the Eligible Person acted in a manner which the Eligible Person reasonably believed to be in the best interests of the Corporation, or (ii) in the case of conduct other than in the Eligible Person's official capacity with the Corporation, if the Eligible Person acted in a manner which the Eligible Person reasonably believed was at least not opposed to the best interests of the Corporation, and (c) in the case of a criminal proceeding, the Eligible Person had reasonable cause to believe that the Eligible Person's conduct was lawful or had no reasonable cause to believe that the Eligible Person's conduct was unlawful, and (d) if required by the Act, the Corporation makes a determination that indemnification of the Eligible Person is permissible because the Eligible Person has met the standard of conduct as set forth in the Act.
SECTION 7.03 INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY. Notwithstanding any other provisions of this Article, to the extent that the Eligible Person has been wholly successful, on the merits or otherwise, in the defense of any proceeding or in defense of any claim, issue or matter therein, including the dismissal of an action without prejudice, the Corporation shall indemnify the Eligible Person against all expenses incurred in connection therewith.
SECTION 7.04 ADDITIONAL INDEMNIFICATION. Notwithstanding any limitation in Sections 7.02 or 7.03, the Corporation shall indemnify the Eligible Person to the full extent authorized or permitted by any amendments to or replacements of the Act adopted after the date of adoption of this Article that increase the extent to which a corporation may indemnify its Eligible Persons if the Eligible Person is a party to or threatened to be made a party to any proceeding against all expenses, judgments, fines (including any excise tax or penalty assessed with respect to any employee benefit plan) and amounts paid in settlement actually and reasonably incurred by the Eligible Person in connection with such proceeding.
SECTION 7.05 EXCLUSIONS. Notwithstanding any provision in this Article 7, the Corporation shall not be obligated under this Article to make any indemnity or advance expenses in connection with any claim made against the Eligible Person:
(a) for which payment has actually been made to or on behalf of the Eligible Person under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under such insurance or other indemnity provision;
(b) for any transaction from which the Eligible Person derived an improper personal benefit;
(c) for recovery of profits resulting from the purchase and sale or sale and purchase by the Eligible Person of securities of the Corporation in violation of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state or local statutory law or common law;
(d) if a court having jurisdiction in the matter shall finally determine that such indemnification is not lawful under any applicable statute or public policy (in this respect, if applicable, both the Corporation and the Eligible Person have been advised that the Securities and Exchange Commission takes the position that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication); or
(e) in connection with any proceeding (or part thereof) initiated by the Eligible Person against the Corporation or its directors, officers or employees, unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board of Directors of the Corporation, (iii) such indemnification is provided by the Corporation, in its sole discretion, pursuant to the powers vested in the Corporation under applicable law, or (iv) the proceeding is initiated pursuant to Section 7.08 hereof and the Eligible Person is successful in whole or in part in such proceeding.
SECTION 7.06 ADVANCEMENT OF EXPENSES. The expenses incurred by the Eligible Person in any proceeding shall be paid promptly by the Corporation upon demand and in advance of final disposition of the proceeding at the written request of the Eligible Person, if (a) the Eligible Person furnishes the Corporation with a written affirmation of the Eligible Person's good faith belief that the Eligible Person has met the standard of conduct required by the Act or this Article, (b) the Eligible Person furnishes the Corporation with a written undertaking to repay such advance to the extent that it is ultimately determined that the Eligible Person did not meet the standard of conduct that would entitle the Eligible Person to indemnification, and (c) if required by the Act, the Corporation makes a determination that the facts known to those making the determination would not preclude indemnification under the Act. Such advances shall be made without regard to the Eligible Person's ability to repay such expenses.
SECTION 7.07 NOTIFICATION AND DEFENSE OF CLAIM. To obtain indemnification under this Article, as soon as practicable after receipt by the Eligible Person of notice of the commencement of any proceeding, the Eligible Person shall, if a claim in respect thereof is to be
made against the Corporation under this Article, notify the Corporation of the commencement thereof; provided, however, that the omission so to notify the Corporation will not relieve the Corporation from any liability which it may have to the Eligible Person otherwise than under this Article. With respect to any such proceeding as to which the Eligible Person notifies the Corporation of the commencement thereof:
(a) The Corporation will be entitled to participate therein at its own expense.
(b) Except as otherwise provided below, the Corporation may, at its option and jointly with any other indemnifying party similarly notified and electing to assume such defense, assume the defense thereof, with legal counsel reasonably satisfactory to the Eligible Person. The Eligible Person shall have the right to employ separate counsel in such proceeding, but the Corporation shall not be liable to the Eligible Person under this Article, including Section 7.06 hereof, for the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense, unless (i) the Eligible Person reasonably concludes that there may be a conflict of interest between the Corporation and the Eligible Person in the conduct of the defense of such proceeding or (ii) the Corporation does not employ counsel to assume the defense of such proceeding. The Corporation shall not be entitled to assume the defense of any proceeding brought by the Corporation or as to which the Eligible Person shall have made the conclusion provided for in (i) above.
(c) If two or more persons who may be entitled to indemnification from the Corporation, including the Eligible Person, are parties to any proceeding, the Corporation may require the Eligible Person to engage the same legal counsel as the other parties. The Eligible Person shall have the right to employ separate legal counsel in such proceeding, but the Corporation shall not be liable to the Eligible Person under this Article, including Section 7.06 hereof, for the fees and expenses of such counsel incurred after notice from the Corporation of the requirement to engage the same counsel as other parties, unless the Eligible Person reasonably concludes that there may be a conflict of interest between the Eligible Person and any of the other parties required by the Corporation to be represented by the same legal counsel.
(d) The Corporation shall not be liable to indemnify the Eligible Person under this Article for any amounts paid in settlement of any proceeding effected without its written consent in advance which consent shall not be unreasonably withheld. The Corporation shall be permitted to settle any proceeding the defense of which it assumes, except the Corporation shall not settle any action or claim in any manner which would impose any penalty or limitation on the Eligible Person without the Eligible Person's written consent, which consent shall not be unreasonably withheld.
SECTION 7.08 ENFORCEMENT. Any right to indemnification or advances granted by this Article to the Eligible Person shall be enforceable by or on behalf of the Eligible Person in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in
whole or in part, or (ii) no disposition of such claim is made within 90 days of a written request therefor. The Eligible Person, in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting the claim. Neither the failure of the Corporation (including its Board of Directors or its shareholders) to make a determination prior to the commencement of such enforcement action that indemnification of the Eligible Person is proper in the circumstances, nor an actual determination by the Corporation (including its Board of Directors or its shareholders) that such indemnification is improper, shall be a defense to the action or create a presumption that the Eligible Person is not entitled to indemnification under this Article or otherwise. The termination of any proceeding by judgment, order of court, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that the Eligible Person is not entitled to indemnification under this Article or otherwise.
SECTION 7.09 PARTIAL INDEMNIFICATION. If the Eligible Person is entitled under any provisions of this Article to indemnification by the Corporation for some or a portion of the expenses, judgments, fines (including any excise tax or penalty assessed with respect to any employee benefit plan) and amounts paid in settlement actually and reasonably incurred by the Eligible Person in the investigation, defense, appeal or settlement of any proceeding but not, however, for the total amount thereof, the Corporation shall indemnify the Eligible Person for the portion of such expenses, judgments, fines (including any excise tax or penalty assessed with respect to any employee benefit plan) and amounts paid in settlement to which the Eligible Person is entitled.
SECTION 7.10 NONEXCLUSIVITY; SURVIVAL; SUCCESSORS AND ASSIGNS. The indemnification and advance payment of expenses as provided by this Article shall not be deemed exclusive of any other rights to which the Eligible Person may be entitled under the Corporation's articles of incorporation or any agreement, any vote of shareholders or directors, the Act, or otherwise, both as to action in the Eligible Person's official capacity and as to action in another capacity. The right of the Eligible Person to indemnification under this Article shall vest at the time of occurrence or performance of any event, act or omission or any alleged event, act or omission giving rise to any action, suit or proceeding and, once vested, shall survive any actual or purported amendment, restatement or repeal of this Article by the Corporation or its successors or assigns whether by operation of law or otherwise and shall survive termination of the Eligible Person's services to the Corporation and shall inure to the benefit of the heirs, personal representatives and estate of the Eligible Person.
SECTION 7.11 SEVERABILITY. If this Article or any portion thereof is invalidated on any ground by any court of competent jurisdiction, the Corporation shall indemnify the Eligible Person as to expenses, judgments, fines (including any excise tax or penalty assessed with respect to any employee benefit plan) and amounts paid in settlement with respect to any proceeding to the full extent permitted by any applicable portion of this Article that is not invalidated or by any other applicable law.
SECTION 7.12 SUBROGATION. In the event of payment under this Article, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of the Eligible Person, who shall as a condition of receiving indemnification hereunder execute all documents required and shall do all acts necessary or desirable to secure such rights and to enable the Corporation effectively to bring suit to enforce such rights.
ARTICLE 8.
MISCELLANEOUS MATTERS
SECTION 8.01 FISCAL YEAR. The fiscal year of the Corporation shall end at midnight on September 30 of each calendar year.
SECTION 8.02 NEGOTIABLE INSTRUMENTS. All checks, drafts, bills of exchange and orders for the payment of money may, unless otherwise directed by the Board of Directors, or unless otherwise required by law, be executed in its name by the President, a Vice-President, the Treasurer or an Assistant Treasurer, singly and without necessity of countersignature. The Board of Directors may, however, authorize any other officer or employee of the Corporation to sign checks, drafts and orders for the payment of money, singly and without necessity of countersignature.
SECTION 8.03 NOTES AND OBLIGATIONS. All notes and obligations of the Corporation for the payment of money other than those to which reference is made in Section 8.02 of this Code of By-laws, may, unless otherwise directed by the Board of Directors, or unless otherwise required by law, be executed in its name by the President, a Vice President, or the Treasurer, singly and without necessity of either attestation or affixation of the corporate seal by the Secretary or an Assistant Secretary.
SECTION 8.04 DEEDS AND CONTRACTS. All deeds and mortgages made by the Corporation and all other written contracts and agreements to which the Corporation shall be a party may, unless otherwise directed by the Board of Directors, or unless otherwise required by law, be executed in its name by the President or a Vice-President singly and without necessity of either attestation or affixation of the corporate seal by the Secretary or an Assistant Secretary.
SECTION 8.05 ENDORSEMENT OF STOCK CERTIFICATES. Any certificate for shares of stock issued by any corporation and owned by the Corporation (including Common Stock held by the Corporation as treasury stock) may, unless otherwise required by law, be endorsed for sale or transfer by the President or a Vice-President, and attested by the Secretary or an Assistant Secretary; the Secretary or an Assistant Secretary, when necessary or required, may affix the corporate seal to the certificate.
SECTION 8.06 VOTING OF STOCK. Any shares of stock issued by any other corporation and owned by the Corporation may be voted at any shareholders' meeting of the other corporation by the President, if he is present, or in his absence by a Vice-President. Whenever, in the judgment of the President, it is desirable for the Corporation to execute a proxy or to give a shareholders' consent with respect to any shares of stock issued by any other corporation and owned by the Corporation, the proxy or consent may be executed in the name of the Corporation by the President or a Vice-President singly and without necessity of either attestation or affixation of the corporate seal by the Secretary or an Assistant Secretary. Any person or persons designated in the manner above stated as the proxy or proxies of the Corporation shall have full right, power and authority to vote the share or shares of stock issued by the other corporation and owned by the Corporation the same as the share might be voted by the Corporation.
SECTION 8.07 CORPORATE SEAL. The corporate seal of the Corporation shall be circular in form and mounted on a metal die, suitable for impressing the same on paper. About the upper periphery of the seal shall appear the words "Hillenbrand Industries, Inc.," and about the lower periphery of the seal shall appear the word "Indiana." In the center of the seal shall appear the words "Corporate Seal." No instrument executed by any of the officers of the Corporation shall be invalid or ineffective in any respect by reason of the fact that the corporate seal has not been affixed to it.
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
(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.
(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.
(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:
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
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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.
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.
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.
EXHIBIT 10.4
HILLENBRAND INDUSTRIES, INC.
STOCK AWARD
(EFFECTIVE _______, 200__)
1. Purpose. The purpose of the Hillenbrand Industries, Inc. Stock Award (hereinafter called the "Award") is to promote profitability and growth of Hillenbrand Industries, Inc. (the "Company") by offering an incentive payable in Company common stock to _____________ ("Employee") who contributes to such profitability and growth.
2. Amount of Award. The Company shall cause an account to be established in the name of the Employee ("Deferred Stock Account") which shall be assumed to be invested in _______ (________) shares ("Initial Deferred Stock Award") of common stock, no par value of the Company ("Common Stock"). No actual shares of Common Stock shall be held in the Deferred Stock Account, and the number of shares of Common Stock maintained in the Deferred Stock Account ("Deferred Stock") shall be a book entry which states the number of shares of Common Stock the Employee would have a right to receive in accordance with the terms of this Award. Any cash dividend paid on Common Stock by the Company while the Deferred Stock Account exists will be assumed to be paid on the Deferred Stock in the Deferred Stock Account and shall be assumed to be reinvested in Common Stock on the date of such dividend payment, thereby increasing the number of shares of Deferred Stock maintained in the Deferred Stock Account. Any stock dividends, stock splits and other similar rights inuring to Common Stock shall also be assumed to inure to the Deferred Stock, which may increase or decrease the number of shares of Deferred Stock in the Deferred Stock Account. The Initial Deferred Stock Stock Award plus any increases or less any decreases due to cash dividends, stock dividends, stock splits and any other similar rights inuring to Common Stock as set forth in the two immediately preceding sentences shall herein after be referred to as the "Deferred Stock Award."
If Employee's employment with the Company or any of its Subsidiaries (as defined in the Plan) continues uninterrupted from the effective date of this Award through the day after the second, third, fourth and fifth anniversaries of such effective date, respectively, an amount of Deferred Stock which equals a percentage as set forth below of the Deferred Stock Award, shall be non-forfeitable ("Vested Deferred Stock"), and the Company shall, subject to his election to defer receipt, deliver to him shares of Common Stock equal in number to the number of shares of Deferred Stock which became Vested Deferred Stock on the day after such second, third, fourth and fifth anniversary dates as follows:
The day after the second anniversary date of the 20% of the Deferred Stock Award effective date of this Award The day after the third anniversary date of the 25% of the Deferred Stock Award effective date of this Award The day after the fourth anniversary date of the 25% of the Deferred Stock Award effective date of this Award The day after the fifth anniversary date of 30% of the Deferred Stock the effective date of this Award Award |
Any Deferred Stock maintained in the Deferred Stock Account which is not Vested Deferred Stock shall, upon the Employee's termination of employment shall be forfeited by Employee without the payment of any consideration or further consideration by the Company, and neither Employee nor any successors, heirs, assigns, or legal representatives of Employee shall thereafter have any further rights or interest in such forfeited Deferred Stock. Any fractional shares of Vested Deferred Stock shall be rounded up to the next whole share of Vested Deferred Stock.
Notwithstanding the schedule set forth above, Deferred Stock maintained in the
Deferred Stock Account shall become Vested Deferred Stock upon (A) the
occurrence of any one of the following events after the day after the first
anniversary date of the effective date of this Award: (i) termination of
Employee's employment with the Company, one of its Subsidiaries (as defined in
the Plan) or one of their respective divisions by reason of retirement after
attaining age fifty-five (55) and completion of five (5) years of employment, or
(ii) termination of Employee's employment with the Company, one of its
Subsidiaries or one of their respective divisions by reason of disability, as
determined by the Compensation and Management Development Committee of the
Company's Board of Directors (the "Committee"), or death, or (B) the occurrence
of (i) a Change in Control (as defined in Section 14.2 of the Plan), or (ii) a
sale, transfer or disposition of substantially all of the assets or capital
stock of a Subsidiary (as defined in the Plan) or division of the Company or one
of its Subsidiaries for whom the Employee is employed at the time of such sale.
Temporary absences from employment because of illness, vacation or leave of
absence and transfers among the Company and/or any of its Subsidiaries shall not
be considered terminations of employment. For purposes of this Agreement and the
Plan, the Committee shall have absolute discretion to determine the date and
circumstances of termination of Employee's employment, and its determination
shall be final, conclusive and binding upon Employee.
The shares of Common Stock delivered to the Employee shall be from shares held by the Company as treasury stock or from shares of Common Stock acquired by the Company in the open market. Subject to the Employee's election to defer, all shares of Common Stock to be delivered to the Employee shall be delivered as soon as administratively possible after the day after the corresponding anniversary date or as soon as administratively possible after the Employee's termination of employment or after the occurrence of the events described in clauses (B) (i) and (ii) in the immediate foregoing paragraph of this Section.
3. Administration of the Award. The Committee shall administer the Award. The Committee shall have complete and full discretion in the administration and interpretation of the terms of the Award.
4. Right to Defer Payment of Award.
(a) Election to Defer Award. The Employee may elect
to defer payment of the Award otherwise due on the anniversary date set forth in
Section 2 by completing a written election and delivering such election to the
Company at least sixty (60) days prior to
the applicable anniversary date; provided however, that the completion of such
written election and the delivery of such election may be at an earlier date as
determined by the Committee or required by law to insure the validity of such
deferral. At the end of the deferral period elected by the Employee (or within a
certain period of time after the last day of the deferral period as determined
by the Committee or required by law to insure the validity of the deferral) or,
if earlier, within sixty (60) calendar days of the date on which the Employee's
employment is terminated, the Company, consistent with Section 2 and subject to
Section 6, 7 and 8 shall deliver to the Employee shares of Common Stock equal in
number to the number of Vested Deferred Stock held in the Employee's Deferred
Stock Account.
(b) Financial Hardship. A withdrawal from the Employee's Deferred Stock Account of Vested Deferred Stock shall be permitted prior to the termination of the deferral period in the event that the Employee experience serious financial hardship which is beyond the Employee's control and which would cause the Employee a severe hardship if such withdrawal were not permitted. Serious financial hardship may be incurring a disability or unexpected and unreimbursed major expenses resulting from illness or accident or impending bankruptcy. The Employee must apply to the Committee for a serious financial hardship withdrawal and demonstrate that the circumstances being experienced were not under the Employee'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 the Employee's withdrawal request. If such application for withdrawal is permitted, the amount of such withdrawal shall be limited to an amount of the Employee's Vested Deferred Stock which would have been payable if the Employee's employment with the Company was terminated. If the Employee makes a withdrawal, the amount of the Employee's Deferred Stock Account under this Award shall be proportionately reduced to reflect the withdrawal. Also, the withholding requirements described in Section 7 shall also be effected before the withdrawal.
5. No Rights as Stockholder. Employee shall have no rights as a stockholder with respect to any shares of Common Stock covered by this Award until shares of Common Stock are delivered to the Employee pursuant to the last paragraph in Section 2 and Section 4. Until such time, Employee shall not be entitled to dividends (except where the Employee's Deferred Stock Account is adjusted pursuant to the first paragraph of Section 2) or to vote at meetings of the stockholders of the Company.
6. Compliance With Securities Laws. Prior to the receipt of any certificates for shares of Common Stock pursuant to this Award, Employee (or Employee's beneficiary or legal representative upon Employee's death or disability) shall enter into such additional written representations, warranties and Awards as the Company may reasonably request in order to comply with applicable securities laws or with this Award.
7. Stock Ownership Guidelines. Employee (or Employee's beneficiary or legal representative upon the Employee's death or disability) shall be bound by the "Stock Ownership Guidelines" of the Company as may be in effect from time to time.
8. Withholding. Any payment of Common Stock under this Award shall be subject to applicable federal and state withholding requirements. Hence, unless the Employee delivers a check to the Company equal to the required withholding, the number of shares distributed shall be reduced to meet the Employee's applicable withholding requirements.
9. Designation of Beneficiary. The Employee shall be permitted to provide to the Committee a beneficiary designation for receipt of his or her Award after death. If the Employee fails to designate a beneficiary, or if the designated beneficiary predeceases the Employee, the Award shall be paid to the deceased Employee's spouse, if living, or if such spouse is not living, to the deceased Employee's estate.
10. Adjustments. If there is a change in the outstanding shares of the Common Stock by reason of any stock dividend or split, recapitalization, merger, consolidation, spin-off, reorganization, combination or exchange of shares or other similar corporate change occurring after the effective date of this Award, the Committee shall adjust the number of shares of Common Stock subject to the Award to reflect the change, and such adjustment shall be conclusive and binding upon the Employee and the Company.
11. Non-Transferability.
(a) The Deferred Stock, the Deferred Stock Account and the Vested Deferred Stock may not be sold, assigned, transferred, exchanged, pledged, hypothecated, or otherwise encumbered and no such sale, assignment, transfer, exchange, pledge, hypothecation, or encumbrance, whether made or created by a voluntary act of the Employee or any agent of the Employee or by operation of law, shall be recognized by, or be binding upon, or shall in any manner affect the rights of, the Company, its successors or any agent thereof.
(b) No amounts payable under the Award shall be transferable by the Employee other than by his designation of a beneficiary pursuant to Section 9. The amounts payable under the Award shall be exempt from the claims of creditors of the Employee and from all orders, decrees, levies and executions and any other legal process to the fullest extent that may be permitted by law.
12. Amendments to Award. The Award may only be modified upon the mutual agreement of the Company and the Employee.
13. Source of Benefit Payments. The payment of the Award to the Employee shall be paid solely from the general assets of the Company. Until the actual delivery of the shares of Common Stock, the Employee shall not have any interest in any specific assets of the Company, including shares of Common Stock, under the terms of the Award. The Award shall not be considered to create an escrow account, trust fund or other funding arrangement of any kind, or a fiduciary relationship between the Employee and the Company. Until such time of payment, no shares of the Common Stock shall be set aside by the Company for the Award.
14. Successors and Assigns.
(a) This Award is personal to the Employee and without the prior written consent of the Company shall not be assignable by the Employee except by will or the laws of descent and distribution. This Award shall inure to the benefit of and be enforceable by the Employee's guardian and legal representatives.
(b) This Award shall inure to the benefit of and be binding upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Award in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.
15. Award Subject to Plan. This Award is subject to the terms of the Hillenbrand Industries, Inc. Stock Incentive Plan ("Plan"). The terms and provisions of the Plan (including any subsequent amendments thereto) are hereby incorporated herein by reference. In the event of a conflict between any terms and provisions contained herein and the terms or provisions of the Plan, the applicable terms or provisions of the Plan will govern and prevail.
16. Governing Law. This Award shall be governed by and construed in accordance with the internal laws of the State of Indiana without reference to principles of conflict of laws. The captions of this Award are not part of the provisions hereof and shall have no force or effect. This Award may not be amended or modified except by a written Award executed by the parties hereto or their respective successors and legal representatives.
17. Severability. The invalidity or unenforceability of any provision of this Award shall not affect the validity or enforceability of any other provision of this Award.
18. No Waiver. The failure of the Employee or the Company to insist upon strict compliance with any provision of this Award or the failure to assert any right the Employee or the Company may have under this Award shall not be deemed to be a waiver of such provision or right or any other provision or right of this Award.
19. Entire Award. The Employee and the Company acknowledge that this Award supersedes any prior agreement between the parties with respect to the subject matter of this Award.
20. Counterparts. This Award may be executed in counterparts, which together shall constitute one and the same original.
Effective Date: _________, ______
HILLENBRAND INDUSTRIES, INC.
By: ____________________________________
Frederick W. Rockwood, President and
Chief Employee Officer
EXHIBIT 10.6
DIRECTOR INDEMNITY AGREEMENT
THIS AGREEMENT is made as of ______________ 2003, by and between Hillenbrand Industries, Inc., an Indiana corporation (the "Corporation"), and __________________ (the "Director") residing at _____________________________.
WHEREAS, the Corporation is aware that competent and experienced persons are increasingly reluctant to serve as directors of corporations unless they are protected by director liability insurance and/or indemnification, due to the increasing amount of litigation against directors and the increasing expense of defending such claims, and due to the fact that the exposure frequently bears no reasonable relationship to the compensation of such directors; and
WHEREAS, it is essential to the Corporation to retain and attract as directors the most capable and qualified persons available; and
WHEREAS, it is now and has been the express policy of the Corporation to indemnify its directors so as to provide them with the maximum possible protection permitted by law; and
WHEREAS, the Corporation's articles of incorporation and the Indiana Business Corporation Law, by their nonexclusive nature, permit contracts between the Corporation and its directors with respect to indemnification of directors.
NOW, THEREFORE, the Corporation and the Director agree as follows:
1. DEFINITIONS. As used in this Agreement:
(a) "expenses" includes all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys' fees and related disbursements and other out-of-pocket costs) actually and reasonably incurred by the Director in connection with the investigation, defense, settlement or appeal of a proceeding or establishing or enforcing a right to indemnification or advancement of expenses under this Agreement; provided, however, that expenses shall not include any judgments, fines, ERISA excise taxes or penalties or amounts paid in settlement of a proceeding.
(b) "proceeding" includes, without limitation, any threatened, pending, or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil,
criminal, administrative, or investigative and whether formal or informal, whether by a third party or by or in the right of the Corporation, by reason of the fact that the Director is or was a director of the Corporation or, while a director of the Corporation, is or was serving at the request of the Corporation as a director, officer, partner, member, manager, trustee, employee, fiduciary, or agent of another foreign or domestic corporation, partnership, limited liability company, joint venture, trust, employee benefit plan, or other enterprise, or an affiliate of the Corporation, whether for profit or not.
2. INDEMNITY. The Corporation shall indemnify the Director in
accordance with the provisions of this Section 2 if the Director is a party to
or threatened to be made a party to any proceeding against all expenses,
judgments, fines (including any excise tax or penalty assessed with respect to
any employee benefit plan) and amounts paid in settlement actually and
reasonably incurred by the Director in connection with such proceeding, but only
(a) if the Director acted in good faith, and (b) (i) in the case of conduct in
the Director's official capacity with the Corporation, if the Director acted in
a manner which the Director reasonably believed to be in the best interests of
the Corporation, or (ii) in the case of conduct other than in the Director's
official capacity with the Corporation, if the Director acted in a manner which
the Director reasonably believed was at least not opposed to the best interests
of the Corporation, and (c) in the case of a criminal proceeding, the Director
had reasonable cause to believe that the Director's conduct was lawful or had no
reasonable cause to believe that the Director's conduct was unlawful, and (d) if
required by the Indiana Business Corporation Law, as amended or as may be
amended, revised or superseded (the "Act"), the Corporation makes a
determination that indemnification of the Director is permissible because the
Director has met the standard of conduct as set forth in the Act.
3. INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY. Notwithstanding any other provisions of this Agreement, to the extent that the Director has been wholly successful, on the merits or otherwise, in the defense of any proceeding or in defense of any claim, issue or matter therein, including the dismissal of an action without prejudice, the Corporation shall indemnify the Director against all expenses incurred in connection therewith.
4. ADDITIONAL INDEMNIFICATION. Notwithstanding any limitation in Sections 2 or 3, the Corporation shall indemnify the Director to the full extent authorized or permitted by any amendments to or replacements of the Act adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its directors if the Director is a party to or threatened to be made a party to any proceeding against all expenses, judgments, fines (including any excise tax or penalty assessed with respect to any employee benefit plan) and amounts paid in settlement actually and reasonably incurred by the Director in connection with such proceeding.
5. EXCLUSIONS. Notwithstanding any provision in this Agreement, the Corporation shall not be obligated under this Agreement to make any indemnity or advance expenses in connection with any claim made against the Director:
(a) for which payment has actually been made to or on behalf of the Director under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under such insurance or other indemnity provision;
(b) for any transaction from which the Director derived an improper personal benefit;
(c) for recovery of profits resulting from the purchase and sale or sale and purchase by the Director of securities of the Corporation in violation of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state or local statutory law or common law;
(d) if a court having jurisdiction in the matter shall finally determine that such indemnification is not lawful under any applicable statute or public policy (in this respect, if applicable, both the Corporation and the Director have been advised that the Securities and Exchange Commission takes the position that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication); or
(e) in connection with any proceeding (or part thereof) initiated
by the Director against the Corporation or its directors, officers or employees,
unless (i) such indemnification is expressly required to be made by law, (ii)
the proceeding was authorized by the Board of Directors of the Corporation,
(iii) such indemnification is provided by the Corporation, in its sole
discretion, pursuant to the powers vested in the Corporation under applicable
law, or (iv) the proceeding is initiated pursuant to Section 8 hereof and the
Director is successful in whole or in part in such proceeding.
6. ADVANCEMENT OF EXPENSES. The expenses incurred by the Director in any proceeding shall be paid promptly by the Corporation upon demand and in advance of final disposition of the proceeding at the written request of the Director, if (a) the Director furnishes the Corporation with a written affirmation of the Director's good faith belief that the Director has met the standard of conduct required by the Act or this Agreement, (b) the Director furnishes the Corporation with a written undertaking to repay such advance to the extent that it is ultimately determined that the Director did not meet the standard of conduct that would entitle the Director to indemnification, and (c) if required by the Act, the Corporation makes a determination that the facts known to those making the determination would not preclude indemnification
under the Act. Such advances shall be made without regard to the Director's ability to repay such expenses.
7. NOTIFICATION AND DEFENSE OF CLAIM. As soon as practicable after receipt by the Director of notice of the commencement of any proceeding, the Director will, if a claim in respect thereof is to be made against the Corporation under this Agreement, notify the Corporation of the commencement thereof; provided, however, that the omission so to notify the Corporation will not relieve the Corporation from any liability which it may have to the Director otherwise than under this Agreement. With respect to any such proceeding as to which the Director notifies the Corporation of the commencement thereof:
(a) The Corporation will be entitled to participate therein at its own expense.
(b) Except as otherwise provided below, the Corporation may, at its option and jointly with any other indemnifying party similarly notified and electing to assume such defense, assume the defense thereof, with legal counsel reasonably satisfactory to the Director. The Director shall have the right to employ separate counsel in such proceeding, but the Corporation shall not be liable to the Director under this Agreement, including Section 6 hereof, for the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense, unless (i) the Director reasonably concludes that there may be a conflict of interest between the Corporation and the Director in the conduct of the defense of such proceeding or (ii) the Corporation does not employ counsel to assume the defense of such proceeding. The Corporation shall not be entitled to assume the defense of any proceeding brought by the Corporation or as to which the Director shall have made the conclusion provided for in (i) above.
(c) If two or more persons who may be entitled to indemnification from the Corporation, including the Director, are parties to any proceeding, the Corporation may require the Director to engage the same legal counsel as the other parties. The Director shall have the right to employ separate legal counsel in such proceeding, but the Corporation shall not be liable to the Director under this Agreement, including Section 6 hereof, for the fees and expenses of such counsel incurred after notice from the Corporation of the requirement to engage the same counsel as other parties, unless the Director reasonably concludes that there may be a conflict of interest between the Director and any of the other parties required by the Corporation to be represented by the same legal counsel.
(d) The Corporation shall not be liable to indemnify the Director under this Agreement for any amounts paid in settlement of any proceeding effected without its written consent in advance which consent shall not be unreasonably withheld. The Corporation shall be permitted to settle any
proceeding the defense of which it assumes, except the Corporation shall not settle any action or claim in any manner which would impose any penalty or limitation on the Director without the Director's written consent, which consent shall not be unreasonably withheld.
8. ENFORCEMENT. Any right to indemnification or advances granted by this Agreement to the Director shall be enforceable by or on behalf of the Director in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within 90 days of a written request therefor. The Director, in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting the claim. Neither the failure of the Corporation (including its Board of Directors or its shareholders) to make a determination prior to the commencement of such enforcement action that indemnification of the Director is proper in the circumstances, nor an actual determination by the Corporation (including its Board of Directors or its shareholders) that such indemnification is improper, shall be a defense to the action or create a presumption that the Director is not entitled to indemnification under this Agreement or otherwise. The termination of any proceeding by judgment, order of court, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that the Director is not entitled to indemnification under this Agreement or otherwise.
9. PARTIAL INDEMNIFICATION. If the Director is entitled under any provisions of this Agreement to indemnification by the Corporation for some or a portion of the expenses, judgments, fines (including any excise tax or penalty assessed with respect to any employee benefit plan) and amounts paid in settlement actually and reasonably incurred by the Director in the investigation, defense, appeal or settlement of any proceeding but not, however, for the total amount thereof, the Corporation shall indemnify the Director for the portion of such expenses, judgments, fines (including any excise tax or penalty assessed with respect to any employee benefit plan) and amounts paid in settlement to which the Director is entitled.
10. TERM. The term of this Agreement shall begin on the date first written above and shall terminate at such time as the Director no longer serves as a director of the Corporation, subject to the survival of rights of indemnification set forth in paragraph 11 below.
11. NONEXCLUSIVITY; SURVIVAL; SUCCESSORS AND ASSIGNS. The indemnification and advance payment of expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which the Director may be entitled under the Corporation's articles of incorporation, the by-laws, any other agreement, any vote of shareholders or disinterested directors, the Act, or otherwise, both as to action in the Director's official
capacity and as to action in another capacity while holding such office. The right of the Director to indemnification under this Agreement shall vest at the time of occurrence or performance of any event, act or omission or any alleged event, act or omission giving rise to any action, suit or proceeding and, once vested, shall survive any actual or purported termination of this Agreement by the Corporation or its successors or assigns whether by operation of law or otherwise and shall survive termination of the Director's services to the Corporation and shall inure to the benefit of the heirs, personal representatives and estate of the Director. This Agreement shall be binding, and the Corporation shall take such action to ensure that it is binding, upon all successors and assigns of the Corporation, including any transferee of all or substantially all of its assets and any successor by merger, consolidation, or operation of law.
12. SEVERABILITY. If this Agreement or any portion thereof is invalidated on any ground by any court of competent jurisdiction, the Corporation shall indemnify the Director as to expenses, judgments, fines (including any excise tax or penalty assessed with respect to any employee benefit plan) and amounts paid in settlement with respect to any proceeding to the full extent permitted by any applicable portion of this Agreement that is not invalidated or by any other applicable law.
13. SUBROGATION. In the event of payment under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of the Director, who shall execute all documents required and shall do all acts necessary or desirable to secure such rights and to enable the Corporation effectively to bring suit to enforce such rights.
14. MODIFICATION AND WAIVER. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall constitute a waiver of any other provisions hereof (whether or nor similar) nor shall such waiver constitute a continuing waiver.
15. NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (i) if delivered by hand and receipted for by the party to whom such notice or other communication shall have been directed, at the time of such delivery, or (ii) if mailed by certified or registered mail, return receipt requested, with postage prepaid, three (3) business days after deposit into the United States mail if to an address in the United States, or if delivered by recognized overnight courier three (3) business days after receipt by such courier if to an address outside the United States:
(a) If to the Director, at the address indicated above.
(b) If to the Corporation, to:
Hillenbrand Industries, Inc. 700 State Route 46 East Batesville, Indiana 47006 Attention: General Counsel
or to such other address as may have been furnished to either party by the other party.
16. COUNTERPARTS. This Agreement may be executed in any number of counterparts, which shall together constitute one agreement.
17. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana, without giving effect to conflicts of laws principles requiring application of the substantive laws of another jurisdiction.
18. SCOPE OF AGREEMENT. This Agreement constitutes the entire agreement between the parties hereto for the purposes herein contained, and this Agreement shall supercede any other agreements, understandings, representations, or warranties, oral or written, relating to the subject matter of this Agreement, which shall be deemed to exist or to bind any of the parties hereto or their respective successors or assigns, except as expressly referred to herein.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as of the date first written above.
HILLENBRAND INDUSTRIES, INC. DIRECTOR
By: _________________________ _________________________________
Patrick de Maynadier,
Vice President, General
Counsel and Secretary
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EXHIBIT 10.9
OFFICER INDEMNITY AGREEMENT
THIS AGREEMENT is made as of _______________2003, by and between Hillenbrand Industries, Inc., an Indiana corporation (the "Corporation"), and _________________ (the "Officer") residing at ______________________________.
WHEREAS, the Corporation is aware that competent and experienced persons are increasingly reluctant to serve as officers of corporations unless they are protected by officer liability insurance and/or indemnification, due to the increasing amount of litigation against officers and the increasing expense of defending such claims; and
WHEREAS, it is essential to the Corporation to retain and attract as officers the most capable and qualified persons available; and
WHEREAS, the Corporation's articles of incorporation and the Indiana Business Corporation Law, by their nonexclusive nature, permit contracts between the Corporation and its officers with respect to indemnification of officers.
NOW, THEREFORE, the Corporation and the Officer agree as follows:
1. DEFINITIONS. As used in this Agreement:
(a) "expenses" includes all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys' fees and related disbursements and other out-of-pocket costs) actually and reasonably incurred by the Officer in connection with the investigation, defense, settlement or appeal of a proceeding or establishing or enforcing a right to indemnification or advancement of expenses under this Agreement; provided, however, that expenses shall not include any judgments, fines, ERISA excise taxes or penalties or amounts paid in settlement of a proceeding.
(b) "proceeding" includes, without limitation, any threatened, pending, or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal, whether by a third party or by or in the right of the Corporation, by reason of the fact that the Officer is or was an officer of the Corporation or, while an officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, partner, member, manager, trustee, employee, fiduciary, or agent of another foreign or domestic corporation, partnership, limited liability company, joint venture, trust, employee benefit plan, or other enterprise, or an affiliate of the Corporation, whether for profit or not.
2. INDEMNITY. The Corporation shall indemnify the Officer in accordance with the provisions of this Section 2 if the Officer is a party to or threatened to be made a party to any proceeding against all expenses, judgments, fines (including any excise tax or penalty assessed
with respect to any employee benefit plan) and amounts paid in settlement actually and reasonably incurred by the Officer in connection with such proceeding, but only (a) if the Officer acted in good faith, and (b) (i) in the case of conduct in the Officer's official capacity with the Corporation, if the Officer acted in a manner which the Officer reasonably believed to be in the best interests of the Corporation, or (ii) in the case of conduct other than in the Officer's official capacity with the Corporation, if the Officer acted in a manner which the Officer reasonably believed was at least not opposed to the best interests of the Corporation, and (c) in the case of a criminal proceeding, the Officer had reasonable cause to believe that the Officer's conduct was lawful or had no reasonable cause to believe that the Officer's conduct was unlawful, and (d) if required by the Indiana Business Corporation Law, as amended or as may be amended, revised or superseded (the "Act"), the Corporation makes a determination that indemnification of the Officer is permissible because the Officer has met the standard of conduct as set forth in the Act.
3. INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY. Notwithstanding any other provisions of this Agreement, to the extent that the Officer has been wholly successful, on the merits or otherwise, in the defense of any proceeding or in defense of any claim, issue or matter therein, including the dismissal of an action without prejudice, the Corporation shall indemnify the Officer against all expenses incurred in connection therewith.
4. ADDITIONAL INDEMNIFICATION. Notwithstanding any limitation in Sections 2 or 3, the Corporation shall indemnify the Officer to the full extent authorized or permitted by any amendments to or replacements of the Act adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers if the Officer is a party to or threatened to be made a party to any proceeding against all expenses, judgments, fines (including any excise tax or penalty assessed with respect to any employee benefit plan) and amounts paid in settlement actually and reasonably incurred by the Officer in connection with such proceeding.
5. EXCLUSIONS. Notwithstanding any provision in this Agreement, the Corporation shall not be obligated under this Agreement to make any indemnity or advance expenses in connection with any claim made against the Officer:
(a) for which payment has actually been made to or on behalf of the Officer under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under such insurance or other indemnity provision;
(b) for any transaction from which the Officer derived an improper personal benefit;
(c) for recovery of profits resulting from the purchase and sale or sale and purchase by the Officer of securities of the Corporation in violation of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state or local statutory law or common law;
(d) if a court having jurisdiction in the matter shall finally determine that such indemnification is not lawful under any applicable statute or public policy (in this respect, if applicable, both the Corporation and the Officer have been advised that the Securities and Exchange Commission takes the position that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication); or
(e) in connection with any proceeding (or part thereof) initiated
by the Officer against the Corporation or its directors, officers or employees,
unless (i) such indemnification is expressly required to be made by law, (ii)
the proceeding was authorized by the Board of Directors of the Corporation,
(iii) such indemnification is provided by the Corporation, in its sole
discretion, pursuant to the powers vested in the Corporation under applicable
law, or (iv) the proceeding is initiated pursuant to Section 8 hereof and the
Officer is successful in whole or in part in such proceeding.
6. ADVANCEMENT OF EXPENSES. The expenses incurred by the Officer in any proceeding shall be paid promptly by the Corporation upon demand and in advance of final disposition of the proceeding at the written request of the Officer, if (a) the Officer furnishes the Corporation with a written affirmation of the Officer's good faith belief that the Officer has met the standard of conduct required by the Act or this Agreement, (b) the Officer furnishes the Corporation with a written undertaking to repay such advance to the extent that it is ultimately determined that the Officer did not meet the standard of conduct that would entitle the Officer to indemnification, and (c) if required by the Act, the Corporation makes a determination that the facts known to those making the determination would not preclude indemnification under the Act. Such advances shall be made without regard to the Officer's ability to repay such expenses.
7. NOTIFICATION AND DEFENSE OF CLAIM. As soon as practicable after receipt by the Officer of notice of the commencement of any proceeding, the Officer will, if a claim in respect thereof is to be made against the Corporation under this Agreement, notify the Corporation of the commencement thereof; provided, however, that the omission so to notify the Corporation will not relieve the Corporation from any liability which it may have to the Officer otherwise than under this Agreement. With respect to any such proceeding as to which the Officer notifies the Corporation of the commencement thereof:
(a) The Corporation will be entitled to participate therein at its own expense.
(b) Except as otherwise provided below, the Corporation may, at its option and jointly with any other indemnifying party similarly notified and electing to assume such defense, assume the defense thereof, with legal counsel reasonably satisfactory to the Officer. The Officer shall have the right to employ separate counsel in such proceeding, but the Corporation shall not be liable to the Officer under this Agreement, including Section 6 hereof, for the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense, unless (i) the Officer reasonably concludes that there may be a conflict of interest between the Corporation and the Officer in the conduct of the defense of such proceeding or (ii) the Corporation does not employ counsel to assume the defense of such proceeding. The Corporation shall not be entitled to assume the defense of any proceeding brought by the Corporation or as to which the Officer shall have made the conclusion provided for in (i) above.
(c) If two or more persons who may be entitled to indemnification from the Corporation, including the Officer, are parties to any proceeding, the Corporation may require the Officer to engage the same legal counsel as the other parties. The Officer shall have the right
to employ separate legal counsel in such proceeding, but the Corporation shall not be liable to the Officer under this Agreement, including Section 6 hereof, for the fees and expenses of such counsel incurred after notice from the Corporation of the requirement to engage the same counsel as other parties, unless the Officer reasonably concludes that there may be a conflict of interest between the Officer and any of the other parties required by the Corporation to be represented by the same legal counsel.
(d) The Corporation shall not be liable to indemnify the Officer under this Agreement for any amounts paid in settlement of any proceeding effected without its written consent in advance which consent shall not be unreasonably withheld. The Corporation shall be permitted to settle any proceeding the defense of which it assumes, except the Corporation shall not settle any action or claim in any manner which would impose any penalty or limitation on the Officer without the Officer's written consent, which consent shall not be unreasonably withheld.
8. ENFORCEMENT. Any right to indemnification or advances granted by this Agreement to the Officer shall be enforceable by or on behalf of the Officer in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within 90 days of a written request therefor. The Officer, in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting the claim. Neither the failure of the Corporation (including its Board of Directors or its shareholders) to make a determination prior to the commencement of such enforcement action that indemnification of the Officer is proper in the circumstances, nor an actual determination by the Corporation (including its Board of Directors or its shareholders) that such indemnification is improper, shall be a defense to the action or create a presumption that the Officer is not entitled to indemnification under this Agreement or otherwise. The termination of any proceeding by judgment, order of court, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that the Officer is not entitled to indemnification under this Agreement or otherwise.
9. PARTIAL INDEMNIFICATION. If the Officer is entitled under any provisions of this Agreement to indemnification by the Corporation for some or a portion of the expenses, judgments, fines (including any excise tax or penalty assessed with respect to any employee benefit plan) and amounts paid in settlement actually and reasonably incurred by the Officer in the investigation, defense, appeal or settlement of any proceeding but not, however, for the total amount thereof, the Corporation shall indemnify the Officer for the portion of such expenses, judgments, fines (including any excise tax or penalty assessed with respect to any employee benefit plan) and amounts paid in settlement to which the Officer is entitled.
10. TERM. The term of this Agreement shall begin on the date first written above and shall terminate at such time as the Officer no longer serves as an officer of the Corporation, subject to the survival of rights of indemnification set forth in paragraph 11 below.
11. NONEXCLUSIVITY; SURVIVAL; SUCCESSORS AND ASSIGNS. The indemnification and advance payment of expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which the Officer may be entitled under the Corporation's articles of incorporation, the by-laws, any other agreement, any vote of shareholders or directors, the Act, or otherwise, both as to action in the Officer's official capacity and as to action in another capacity while holding such office. The right of the Officer to indemnification under this
Agreement shall vest at the time of occurrence or performance of any event, act or omission or any alleged event, act or omission giving rise to any action, suit or proceeding and, once vested, shall survive any actual or purported termination of this Agreement by the Corporation or its successors or assigns whether by operation of law or otherwise and shall survive termination of the Officer's services to the Corporation and shall inure to the benefit of the heirs, personal representatives and estate of the Officer. This Agreement shall be binding, and the Corporation shall take such action to ensure that it is binding, upon all successors and assigns of the Corporation, including any transferee of all or substantially all of its assets and any successor by merger, consolidation, or operation of law.
12. SEVERABILITY. If this Agreement or any portion thereof is invalidated on any ground by any court of competent jurisdiction, the Corporation shall indemnify the Officer as to expenses, judgments, fines (including any excise tax or penalty assessed with respect to any employee benefit plan) and amounts paid in settlement with respect to any proceeding to the full extent permitted by any applicable portion of this Agreement that is not invalidated or by any other applicable law.
13. SUBROGATION. In the event of payment under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of the Officer, who shall execute all documents required and shall do all acts necessary or desirable to secure such rights and to enable the Corporation effectively to bring suit to enforce such rights.
14. MODIFICATION AND WAIVER. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall constitute a waiver of any other provisions hereof (whether or nor similar) nor shall such waiver constitute a continuing waiver.
15. NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (i) if delivered by hand and receipted for by the party to whom such notice or other communication shall have been directed, at the time of such delivery, or (ii) if mailed by certified or registered mail, return receipt requested, with postage prepaid, three (3) business days after deposit into the United States mail if to an address in the United States, or if delivered by recognized overnight courier three (3) business days after receipt by such courier if to an address outside the United States:
(a) If to the Officer, at the address indicated above.
(b) If to the Corporation, to:
Hillenbrand Industries, Inc. 700 State Route 46 East Batesville, Indiana 47006 Attention: General Counsel
or to such other address as may have been furnished to either party by the other party.
16. COUNTERPARTS. This Agreement may be executed in any number of counterparts, which shall together constitute one agreement.
17. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana, without giving effect to conflicts of laws principles requiring application of the substantive laws of another jurisdiction.
18. SCOPE OF AGREEMENT. This Agreement constitutes the entire agreement between the parties hereto for the purposes herein contained, and this Agreement shall supercede any other agreements, understandings, representations, or warranties, oral or written, relating to the subject matter of this Agreement, which shall be deemed to exist or to bind any of the parties hereto or their respective successors or assigns, except as expressly referred to herein.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as of the date first written above.
HILLENBRAND INDUSTRIES, INC. OFFICER
By: ___________________________________ _________________________________
Patrick de Maynadier
Vice President, General Counsel
and Secretary
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EXHIBIT 10.13
FIRST AMENDMENT TO THE
HILLENBRAND INDUSTRIES, INC.
STOCK INCENTIVE PLAN
WITNESSETH:
WHEREAS, Hillenbrand Industries, Inc. (the "Company") presently maintains the Hillenbrand Industries, Inc. Stock Incentive Plan (the "Plan") which became effective on January 15, 2002; and
WHEREAS, the Company, pursuant to Section 16.1 of the Plan, has the right to amend the Plan, from time to time, subject to certain limitations.
NOW, THEREFORE, the Plan is hereby amended in the following manner:
1. Effective October 1, 2003, Section 12.1 of the Plan is hereby amended in its entirety to read as follows:
12.1 In addition to any other award which may be granted under the Plan, each Non-Employee Director shall be granted on the first trading day following the close of each annual meeting of the Company's shareholders a Director Option to purchase four thousand (4,000) shares of Common Stock; provided however, that if the Non-Employee Directors are granted some other award under Sections 7, 8, 9, or 10 of the Plan on an annual or some other reoccurring basis which does not take any action by the Committee or Board other than to initially approve such award, then during the period of time such other reoccurring award is effective, no Non-Employee Director shall be granted Director Options as set forth in this Section 12.1.
IN WITNESS WHEREOF, the Company has executed this First Amendment as of ______________, 2003.
HILLENBRAND INDUSTRIES, INC.
EXHIBIT 10.14
HILLENBRAND INDUSTRIES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
.
.
.
TABLE OF CONTENTS
HILLENBRAND INDUSTRIES, INC. SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
PAGE
ARTICLE I. DEFINITIONS............................................................................... 1
ARTICLE II. ADMINISTRATION OF THIS PLAN............................................................... 4
2.1 Committee..................................................................................... 4
2.2 Committee Duties.............................................................................. 4
2.3 Agent......................................................................................... 5
2.4 Binding Effect of Decisions................................................................... 5
ARTICLE III. PARTICIPATION............................................................................. 6
ARTICLE IV. SUPPLEMENTAL RETIREMENT BENEFIT........................................................... 6
4.1 Supplemental Retirement Benefit............................................................... 6
4.2 Subject To Pension Plan....................................................................... 6
4.3 Change in Control............................................................................. 7
4.4 Forfeiture of Supplement Retirement Benefit................................................... 7
4.5 Frozen Supplemental Retirement Benefit........................................................ 7
ARTICLE V. EMPLOYER CONTRIBUTIONS.................................................................... 7
5.1 Defined Contributions......................................................................... 7
5.2 Matching Contributions........................................................................ 8
5.3 Supplemental Contributions.................................................................... 9
5.4 Defined Contribution Accounts, Matching Account and Supplemental Contribution Account......... 9
5.5 Earnings on Accounts.......................................................................... 9
5.6 Vesting....................................................................................... 10
5.7 Distribution of Aggregate Account............................................................. 10
5.8 Forfeiture of Aggregate Account............................................................... 10
ARTICLE VI. OFFSET FOR OBLIGATIONS TO EMPLOYER........................................................ 10
ARTICLE VII. RIGHTS OF A PARTICIPANT................................................................... 10
ARTICLE VIII. AMENDMENT AND TERMINATION................................................................. 11
8.1 Amendment..................................................................................... 11
8.2 Termination................................................................................... 11
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TABLE OF CONTENTS
(continued)
PAGE
ARTICLE IX. DETERMINATION OF BENEFITS................................................................. 11
9.1 Claim......................................................................................... 11
9.2 Claim Decision................................................................................ 11
9.3 Request for Review............................................................................ 12
9.4 Review of Decision............................................................................ 12
ARTICLE X. NOTICES................................................................................... 12
ARTICLE XI. GENERAL PROVISIONS........................................................................ 12
11.1 Controlling Law............................................................................... 12
11.2 Captions...................................................................................... 13
11.3 Facility of Payment........................................................................... 13
11.4 Withholding of Payroll Taxes.................................................................. 13
11.5 Protective Provisions......................................................................... 13
11.6 Terms......................................................................................... 13
11.7 Successor..................................................................................... 13
ARTICLE XII. UNFUNDED STATUS OF PLAN................................................................... 13
ARTICLE XIII. RIGHTS TO BENEFITS........................................................................ 14
ARTICLE XIV. BOARD APPROVAL............................................................................ 14
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HILLENBRAND INDUSTRIES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
W I T N E S S E T H:
WHEREAS, effective January 1, 2004 (the "Effective Date"), Hillenbrand Industries, Inc. (the "Employer") establishes the Hillenbrand Industries, Inc. Supplemental Executive Retirement Plan (the "Plan") to provide selected key executives of the Employer with competitive supplemental retirement benefits and additional retirement income.
ARTICLE I.
DEFINITIONS
1.1 "AGGREGATE ACCOUNT" means the vested (pursuant to Article V) balance credited to a Participant's Defined Contribution Account, Matching Account and/or Supplemental Contribution Account, including contribution credits and deemed income, gains and losses (to the extent realized as determined by the Employer, in its discretion) credited thereto. A Participant's Aggregate Account shall be determined as of the date of reference. A Participant's Aggregate Account shall be utilized solely as a device for measurement and determination of the amount to be paid to the Participant pursuant to this Plan. A Participant's Aggregate Account shall not constitute or be treated as a trust fund of any kind.
1.2 "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.
1.3 "BENEFICIARY" means, with respect to the Supplemental Retirement Benefit (as defined in paragraph 4.1(a)), the person, persons, trust or other entity designated by the Participant to receive any benefits payable under the Pension Plan, and with respect to payments related to the Aggregate Account, the person, persons, trust or other entity designated by the Participant to receive benefits payable under the Deferred Compensation Guidelines.
1.4 "BOARD" means the Board of Directors of Hillenbrand Industries, Inc..
1.5 "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 Committee'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.
1.6 A "CHANGE IN CONTROL" means
(a) the date that both occur
(i) 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 the 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
(ii) 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;
(b) the consummation of a merger or consolidation of the Company with another corporation unless
(i) 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;
(ii) 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
(iii) 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;
(c) 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);
(d) the consummation of a sale or other disposition of all or
substantially all of the assets of the Company; or
(e) the date of approval by the shareholders of the Company of a
plan of complete liquidation of the Company.
1.7 "CODE" means the Internal Revenue Code of 1986, as amended.
1.8 "COMMITTEE" means the Compensation and Management Development Committee
of the Board.
1.9 "COMPANY" means Hillenbrand Industries, Inc., as a corporate holding
company and does not include Subsidiaries.
1.10 "DEFERRED COMPENSATION GUIDELINES" means the Company's "Deferred
Compensation Payment Administrative Guidelines", as amended by the
Committee in its sole discretion, which is attached hereto as Exhibit
"B".
1.11 "DEFINED CONTRIBUTION ACCOUNT" means the account maintained on the
books of account of the Employer for each Participant pursuant to
Section 5.1. Separate Defined Contribution Accounts shall be maintained
for each Participant. The Defined Contribution Account shall be
utilized solely as a device for measurement and determination of the
amount to be paid to the Participant pursuant to this Plan. A
Participant's Defined Contribution Account shall not constitute or be
treated as a trust fund of any kind.
1.12 "EMPLOYER" means Hillenbrand Industries, Inc., an Indiana corporation,
and its Subsidiaries.
1.13 [INTENTIONALLY LEFT BLANK]
1.14 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.15 "MATCHING ACCOUNT" means the account maintained on the books of account
of the Employer for each Participant pursuant to Section 5.2. Separate
Matching Accounts shall be maintained for each Participant. A Matching
Account shall be utilized solely as a device for measurement and
determination of the amount to be paid to the Participant
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pursuant to this Plan. A Matching Account shall not constitute or be
treated as a trust fund of any kind.
1.16 "PARTICIPANT" means any individual who is a non-bargained for,
full-time or regular part-time employee of the Employer who is selected
for participation in this Plan pursuant to Article III.
1.17 "PENSION PLAN" means the Hillenbrand Industries Pension Plan, as
amended.
1.18 "PLAN YEAR" means the twelve (12) month period ending on the December
31 of each year during which this Plan is in effect, provided that the
first Plan Year shall commence on the Effective Date and end on
December 31 of the calendar year in which the Effective Date occurs.
1.19 "SAVINGS PLAN" means the Hillenbrand Industries Savings Plan, as
amended.
1.20 "SUBSIDIARY" means an operating company unit of which a majority equity
interest is owned directly or indirectly by the Company.
1.21 "SUPPLEMENTAL CONTRIBUTION ACCOUNT" means the account maintained on the
books of account of the Employer for each EMT Participant pursuant to
Section 5.3. Separate Supplemental Contribution Accounts shall be
maintained for each EMT Participant. The Supplemental Contribution
Account shall be utilized solely as a device for measurement and
determination of the amount to be paid to the EMT Participant pursuant
to this Plan. An EMT Participant's Supplemental Contribution Account
shall not constitute or be treated as a trust fund of any kind.
1.22 "TARGET BONUS" means the designated percentage of a Participant's Base
Salary utilized in the Company's short term incentive compensation
plan, regardless of what percent of a Participant's Base Salary had
been paid.
ARTICLE II.
ADMINISTRATION OF THIS PLAN
2.1 Committee. This Plan shall be administered by the Committee. A majority
of the Committee shall constitute a quorum and all decisions made by
the Committee pursuant to provisions of this Plan shall be made by a
majority of the Committee members present at any duly held regular or
special meeting at which a quorum is present or by the unanimous
written consent of a majority of the Committee members in lieu of any
such meeting.
2.2 Committee Duties. The Committee shall also have the authority to make,
amend, interpret, and enforce all appropriate rules and regulations for
the administration of this Plan and decide or resolve any and all
questions, including interpretations of this Plan, as may arise in
connection with this Plan. The Committee shall have the sole
discretionary
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|
authority and all powers necessary to accomplish these purposes,
including, but not by way of limitation, the right, power, authority
and duty:
(a) To make rules, regulations and procedures for the
administration of this Plan which are not inconsistent with
the terms and provisions hereof, provided such rules,
regulations and procedures are evidenced in writing and copies
thereof are delivered to the Employer.
(b) To construe and interpret all terms, provisions, conditions
and limitations of this Plan;
(c) To correct any defect, supply any omission, construe any
ambiguous or uncertain provisions, or reconcile any
inconsistency that may appear in this Plan, in such manner and
to such extent as it shall deem expedient to carry this Plan
into effect;
(d) To employ and compensate such accountants, attorneys,
investment advisors and other agents and employees as the
Committee may deem necessary or advisable in the proper and
efficient administration of this Plan;
|
(e) To determine all questions relating to eligibility;
(f) To determine the amount, manner and time of payment of any benefits hereunder and to prescribe procedures to be followed by distributees in obtaining benefits;
(g) To prepare, file and distribute, in such manner as the Committee determines to be appropriate, such information and material as is required by the reporting and disclosure requirements of ERISA; and
(h) To make a determination as to the right of any person to receive a benefit under this Plan.
2.3 Agent. In the administration of this Plan, the Committee may, from time to time, employ an agent and delegate to it such administrative duties as it sees fit and may, from time to time, consult with counsel who may be counsel to the Employer.
2.4 Binding Effect of Decisions. The decision or action of the Committee with respect to any question arising out of or in connection with the administration, interpretation and application of this Plan and the rules and regulations promulgated hereunder shall be final, conclusive and binding upon all persons having any interest in this Plan and shall not be subject to appeal except as provided in Article IX.
ARTICLE III.
PARTICIPATION
Participation in this Plan shall be determined by the Committee or any person designated by it. In no event shall any employee of the Employer become eligible to participate in this Plan if such employee would not be considered a member of a select group of management or highly compensated employees for purposes of ERISA.
ARTICLE IV.
SUPPLEMENTAL RETIREMENT BENEFIT
4.1 Supplemental Retirement Benefit.
(a) For each Participant who participates in the Pension Plan and continues to accrue a benefit thereunder while this Plan is in effect ("Traditional Participant"), such Traditional Participant shall be paid a monthly benefit under this Plan ("Supplemental Retirement Benefit") equal in amount to (1) the monthly benefit payable under the Pension Plan (i) without the limitations on maximum benefits set forth in Section 415 of the Code, and (ii) with the changes to the calculation of "Earnings" (as defined in the Pension Plan) as described in paragraph (b) of this Section 4.1, less (2) the monthly benefit payable under the Pension Plan.
(b) For purposes of calculating the Supplemental Retirement
Benefit under this Section 4.1, "Earnings" as defined in the
Pension Plan shall include the amount of a Traditional
Participant's Target Bonus (whether or not the target is
attained and whether or not the Target Bonus is paid) for a
calendar year, including any Target Bonus for calendar years
prior to the Effective Date for the same years that Earnings
is used to determine the Participant's monthly benefit payable
under the Pension Plan, and such Earnings shall not be limited
by the compensation limits set forth in Code Section
401(a)(17); provided however, that such "Earnings" may be
limited in amount by the Board or Committee, as they determine
in their sole discretion, for any one or more Traditional
Participants.
(c) Exhibit "A" attached hereto provides an example of the calculation of "Average Monthly Earnings" (as defined in the Pension Plan) used in the calculation of a Traditional Participant's Supplemental Retirement Benefit hereunder.
4.2 Subject To Pension Plan. Except as provided in Article 4.1 above, the Supplemental Retirement Benefit to be paid a Traditional Participant shall be subject to all provisions of the Pension Plan, including but not limited to, all monthly benefit calculations, normal and early retirement, deferred vested benefits, disability retirement, vesting, benefit election options, beneficiary designations and joint and survivor benefits.
4.3 Change in Control. Notwithstanding the vesting requirement set forth in the Pension Plan and except as provided in Section 4.4 below, upon the occurrence of a Change in Control a Traditional Participant shall be credited with five (5) years of "Vesting Service" (as defined in the Pension Plan) for purposes of determining whether a Traditional Participant is eligible for a Supplemental Retirement Benefit.
4.4 Forfeiture of Supplement Retirement Benefit. Notwithstanding any other provision of this Article IV, upon the termination of a Traditional Participant's employment by the Company or any of its Subsidiaries for Cause, such Traditional Participant shall forfeit all rights to any Supplemental Retirement Benefit under this Article IV, and the Employer shall have no obligation to make any such payments.
4.5 Frozen Supplemental Retirement Benefit. If the Committee (at its sole discretion) should determine that a Traditional Participant is no longer eligible to earn or accrue a Supplemental Retirement Benefit as provided for under this Article IV, then, on the date of such determination by the Committee, the Traditional Participant's Supplemental Retirement Benefit shall be frozen as of such date and he or she will earn or accrue no Supplemental Retirement Benefit thereafter.
ARTICLE V.
EMPLOYER CONTRIBUTIONS
5.1 Defined Contributions.
(a) Each Plan Year the Employer shall record as a contribution to the Defined Contribution Account of a Traditional Participant an amount equal to (1) the maximum amount of contribution of whatever kind the Employer would have had to make to the Savings Plan for and on behalf of a Traditional Participant for such Plan Year (i) without the annual additions limits set forth in Code Section 415 and (ii) with the changes to the calculation of "Compensation" (as defined in the Savings Plan) as described in paragraph (c) of this Section 5.1, less (2) the amount of contribution of whatever kind that the Employer actually made to the Savings Plan for and on behalf of the Traditional Participant for such Plan Year.
(b) For each Participant who is not a Traditional Participant
("Non-Traditional Participant"), each Plan Year the Employer
shall record as a contribution to the Defined Contribution
Account of a Non-Traditional Participant an amount equal to
(1) the maximum amount of contribution of whatever kind, other
than any Employer Matching Contributions (as defined in the
Savings Plan), the Employer would have had to make to the
Savings Plan for and on behalf of a Non-Traditional
Participant for such Plan Year (i) without the annual
additions limits set forth in Code Section 415 and (ii) with
the changes to the calculation of "Compensation" (as defined
in the Savings Plan) as described in paragraph (c) of this
Section 5.1, less (2) the amount of contribution of whatever
kind, other than any Employer Matching Contributions, that the
Employer actually made to the
Savings Plan for and on behalf of the Non-Traditional Participant for such Plan Year.
(c) For purposes of calculating the Defined Contributions under this Section 5.1, "Compensation" as defined in the Savings Plan shall include the amount of a Participant's Target Bonus (whether or not the target is attained and whether or not the Target Bonus is paid) for a Plan Year, and such "Compensation" shall not be limited by the compensation limits set forth in Code Section 401(a)(17); provided however, that such "Compensation" may be limited in amount by resolution of the Board or Committee, as they determine in their sole discretion, for any one or more Participants.
5.2 Matching Contributions.
(a) For each Non-Traditional Participant who has elected to
contribute the maximum amount as provided under Code Section
402(g)(1) as a "qualified cash or deferred arrangement" (as
defined in Code Section 401(k)(2)) to the Savings Plan, each
Plan Year the Employer shall record as a contribution to the
Matching Account of a Non-Traditional Participant an amount
equal to (1) the maximum amount of Employer Matching
Contributions (as defined in the Savings Plan) the Employer
would have had to make to the Savings Plan for and on behalf
of a Non-Traditional Participant for such Plan Year (i)
without the annual additions limits set forth in Code Section
415, (ii) without any limits on a Non-Traditional
Participant's "qualified cash or deferred arrangement" under
Code Sections 401(k) or 402(g)(1), (iii) without any limits on
a matching contribution as set forth in Code Section 401(m)
and (iv) with the changes to the calculation of "Compensation"
(as defined in the Savings Plan) as described in paragraph (c)
of this Section 5.2, less (2) the amount of Employer Matching
Contributions that the Employer actually made to the Savings
Plan for and on behalf of the Non-Traditional Participant for
such Plan Year.
(b) For each Non-Traditional Participant who has not elected to contribute the maximum amount as provided under Code Section 402(g)(1) as a "qualified cash or deferred arrangement" (as defined in Code Section 401(k)(2)) to the Savings Plan, each Plan Year the Employer shall record as a contribution to the Matching Account of a Non-Traditional Participant an amount equal to (1) the maximum amount of Employer Matching Contributions (as defined in the Savings Plan) the Employer would have had to make to the Savings Plan for and on behalf of a Non-Traditional Participant for such Plan Year (i) without the annual additions limits set forth in Code Section 415, (ii) without any limits on a Non-Traditional Participant's "qualified cash or deferred arrangement" under Code Sections 401(k), (iii) without any limits on a matching contribution as set forth in Code Section 401(m), (iv) with the limits on a Non-Traditional Participant's "qualified cash or deferred arrangement" under Code Section 402(g)(i) and (v) with the changes to the calculation of "Compensation" (as defined in the Savings Plan) as
described in paragraph (c) of this Section 5.2, less (2) the amount of Employer Matching Contributions that the Employer actually made to the Savings Plan for and on behalf of the Non-Traditional Participant for such Plan Year.
(c) For purposes of calculating the Matching Contributions under this Section 5.2, "Compensation" as defined in the Savings Plan shall include the amount of a Participant's Target Bonus (whether or not the target is attained and whether or not the Target Bonus is paid) for a Plan Year and such "Compensation" shall not be limited by the compensation limits set forth in Code Section 401(a)(17); provided however, that such "Compensation" may be limited in amount by the Board or Committee, as they determine in their sole discretion, for any one or more Non-Traditional Participants.
5.3 Supplemental Contributions.
(a) Each Plan Year the Employer shall record as a contribution to the Supplemental Contribution Account of certain Participants selected by the Committee an amount equal to three percent (3%) of such Participants' "Compensation" (as defined in the Savings Plan) with such changes to its calculation as described in paragraph (b) of this Section 5.3.
(b) For purposes of calculating the Supplemental Contributions under this Section 5.3, "Compensation" as defined in the Savings Plan shall include the amount of a selected Participant's Target Bonus (whether or not the target is attained and whether or not the Target Bonus is paid) for a Plan Year and such "Compensation" shall not be limited by the compensation limits set forth in Code Section 401(a)(17); provided however, that such "Compensation" may be limited in amount by the Board or Committee, as they determine in their sole discretion, for any one or more of the selected Participants.
5.4 Defined Contribution Accounts, Matching Account and Supplemental
Contribution Account. All Employer contributions made pursuant to this
Section V shall be credited to a Participant's Defined Contribution
Account, Matching Account and/or, Supplemental Contribution Account
which shall be a bookkeeping account established for each Participant
by the Employer. The time when the Employer contributions are credited
to a Participant's Defined Contribution Account, Matching Account
and/or Supplemental Contribution Account shall be determined by the
Committee, in its sole discretion. The Defined Contribution Accounts,
the Matching Accounts and the Supplemental Contribution Account shall
be unfunded and shall maintain all credits made to such account,
pursuant to this Plan for the benefit of a Participant.
5.5 Earnings on Accounts. The balance of a Participant's Defined Contribution Account, Matching Account and/or Supplemental Contribution Account, shall accrue interest credited monthly to the Participant's Defined Contribution Account balance, Matching Account balance and/or Supplemental Contribution Account balance at the end of the
Company'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 Company's principal bank, or, at the election of the Committee, Participants selected by the Committee may be credited at such other rate or rates as may be determined by the Committee.
5.6 Vesting. Except as provided in Section 5.7 below, a Participant shall be fully (100%) vested in all amounts credited to his or her Defined Contribution Account and Supplemental Contribution Account, and a Participant shall vest in all amounts credited to his or her Matching Account pursuant to the vesting schedule maintained under the Savings Plan for any Employer Matching Contributions made to the Savings Plan by the Employer; provided however, that upon the occurrence of an event which is a Change in Control, each Participant shall be fully 100% vested in such Participant's Matching Account.
5.7 Distribution of Aggregate Account. A Participant's Aggregate Account shall become available for distribution as account balances under the Savings Plan become available for distribution. Once distributable (as contemplated under the Savings Plan), distributions of a Participant's Aggregate Account shall be made in accordance with the Deferred Compensation Guidelines. The balance of a Participant's Aggregate Account shall be treated as "deferred compensation" under the Deferred Compensation.
5.8 Forfeiture of Aggregate Account. Notwithstanding anything in this Article V, upon the termination of a Participant's employment by the Company or any of its Subsidiaries for Cause, such Participant shall forfeit all rights to his or her Aggregate Account under this Article V, and the Employer shall have no obligations with respect to this Article V.
ARTICLE VI.
OFFSET FOR OBLIGATIONS TO EMPLOYER
If, at such time as the Participant becomes entitled to benefit payments hereunder, the Participant has any debt, obligation or other liability representing an amount owing to the Company or any Subsidiary, and if such debt, obligation, or other liability is due and owing at the time benefit payments are payable hereunder, the Employer may offset the amount owed the Company or the Subsidiary against the amount of benefits otherwise distributable hereunder.
ARTICLE VII.
RIGHTS OF A PARTICIPANT
Establishment of this Plan shall not be construed as giving any Participant the right to be retained in the Employer's service or employ or the right to receive any benefits not specifically provided by this Plan.
Payments under this Plan will not be segregated from the general funds of the Employer and no Participant will have any claim on any specific assets of the Employer. To the extent that any Participant acquires a right to receive benefits under this Plan, his or her right will be no greater
than the right of any unsecured general creditor of the Employer and is not assignable or transferable except to his or her Beneficiary or estate.
ARTICLE VIII.
AMENDMENT AND TERMINATION
8.1 Amendment. This Plan may be amended from time to time by resolution of the Board. The amendment of any one or more provisions of this Plan shall not affect the remaining provisions of this Plan. No amendment shall reduce any benefits accrued by any Participant prior to the amendment.
8.2 Termination. The Board has the right to terminate this Plan at any time. Any benefit accrued prior to this Plan's termination will continue to be subject to the provisions of this Plan.
ARTICLE IX.
DETERMINATION OF BENEFITS
9.1 Claim. A person who believes that he is being denied a benefit to which he is entitled under this Plan (hereinafter referred to as a "Claimant") may file a written request for such benefit with the Committee, setting forth his claim. The request must be addressed to the Committee.
9.2 Claim Decision. Upon receipt of a claim, the Committee shall advise the Claimant that a reply will be forthcoming within a reasonable time, but not later than 90 days from its receipt of the claim and shall, in fact, deliver such reply within such period. The Committee may, however, extend the reply period for an additional 90 days if the Committee determines that special circumstances require such an extension. If an extension is required, written notice shall be furnished to the Claimant prior to the termination of the initial 90-day period. The extension notice shall indicate (i) the special circumstances requiring an extension of time; and (ii) the date by which the Committee expects to tender the benefit determination. If the claim is denied in whole or in part, the Committee shall adopt a written opinion, using language calculated to be understood by the Claimant, setting forth:
(a) The specific reason for such denial;
(b) The specific reference to pertinent provisions of this agreement upon which such denial is based;
(c) A description of any additional material or information necessary for the Claimant to perfect his claim and an explanation why such material or such information is necessary.
(d) Appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review, including the Claimant's right to bring a civil action following an adverse benefit determination on review; and
(e) The time limits for requesting a review.
9.3 Request for Review. Within sixty (60) days after the receipt by the
Claimant of the written opinion described above, the Claimant may
request in writing that the Committee review its determination. Such
request must be addressed to the Committee. The Claimant or his duly
authorized representative may, but need not, review the pertinent
documents, records and other information, receive copies of such
information, and submit documents, records, issues and comments in
writing for consideration by the Committee. If the Claimant does not
request a review of the Committee's determination within such sixty
(60) day period, he shall be barred and estopped from challenging the
Participating Employer's determination.
9.4 Review of Decision. Within a reasonable time not later than sixty (60) days after the Committee's receipt of a request for review, the Committee will review its determinations. After considering all materials presented by the Claimant, the Committee will render a written opinion, written in a manner calculated to be understood by the Claimant, setting forth (a) the specific reasons for the decision; (b) and containing specific references to the pertinent provisions of this Plan on which the decision is based; (c) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant's claim for benefits; and (d) a statement of the Claimant's right to bring an action under Section 502(a) of ERISA. If special circumstances require that the sixty (60) day time period be extended, the Committee will so notify the Claimant prior to the termination of the initial 60-day period and will render the decision as soon as possible, but no later than one hundred twenty (120) days after the filing of the request for review. The extension notice will set forth: (a) the special circumstances; and (b) the date as of which the benefit determination will be made.
ARTICLE X.
NOTICES
Notices and elections under this Plan must be in writing. A notice or election is deemed delivered if it is delivered personally or mailed by registered or certified mail to the person at his or her last known business address.
ARTICLE XI.
GENERAL PROVISIONS
11.1 Controlling Law. The provisions of this Plan shall be subject to
regulation under ERISA. To the extent not preempted by federal law,
this Plan shall be construed and interpreted according to the laws of
the State of Indiana.
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11.2 Captions. The captions of Articles and Sections of this Plan are for
the convenience of reference only and shall not control or affect the
meaning or construction of any of its provisions.
11.3 Facility of Payment. Any amounts payable hereunder to any Participant
who is under legal disability or who, in the judgment of the Committee,
is unable to properly manage his or her financial affairs may be paid
to the legal representative of such Participant or may be applied for
the benefit of such Participant in any manner which the Committee may
select, and any such payment shall be deemed to be payment for such
Participant's account and shall be a complete discharge of all
liability of the Employer with respect to the amount so paid.
11.4 Withholding of Payroll Taxes. To the extent required by the laws in
effect at the time compensation or deferred compensation payments are
made, the Employer shall withhold from such compensation, or from
deferred compensation payments made hereunder, any taxes required to be
withheld for federal, state or local government purposes.
11.5 Protective Provisions. A Participant will cooperate with the Employer
by furnishing any and all information requested by the Employer in
order to facilitate the payment of benefits hereunder.
11.6 Terms. Whenever any words are used herein in the masculine, they shall
be construed as though they were used in the feminine in all cases
where they would so apply; and wherever any words are used herein in
the singular or in the plural, they shall be construed as though they
were used in the plural or the singular, as the case may be, in all
cases where they would so apply.
11.7 Successor. The provisions of this Plan shall bind and inure to the
benefit of Hillenbrand Industries, Inc. and its successors and assigns.
The terms successors and assigns as used herein shall include any
corporate or other business entity which shall, whether by merger,
consolidation, purchase or otherwise, acquire all or substantially all
of the business and assets of Hillenbrand Industries, Inc. and
successors of any such company or other business entity.
ARTICLE XII.
UNFUNDED STATUS OF PLAN
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It is the intention of the parties that the arrangements herein described be unfunded for tax purposes and for purposes of Title I or ERISA. Plan participants have the status of general unsecured creditors of the Employer. This Plan constitutes a mere promise by the Employer to make payments in the future.
ARTICLE XIII.
RIGHTS TO BENEFITS
Subject to Article VI, a Participant's rights to benefit payments under this Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the participant or the participant's beneficiaries.
ARTICLE XIV.
BOARD APPROVAL
This Plan was approved by the Board on _____________________.
IN WITNESS WHEREOF, the Employer has caused this Plan to be executed this ________ day of ______________, 2003.
HILLENBRAND INDUSTRIES, INC.
By: __________________________
Name: __________________________
Title: __________________________
EXHIBIT "A"
EXAMPLE OF
AVERAGE MONTHLY EARNINGS FOR
SUPPLEMENTAL RETIREMENT BENEFIT
Calculation of Target Bonus
Target Target
Base Salary Bonus % Bonus
----------- ------- -------
Year 5 $210,000 40% $84,000
Year 4 201,500 30% 60,450
Year 3 194,000 30% 58,200
Year 2 185,500 24% 44,520
Year 1 180,000 24% 43,200
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Supplemental
Earnings (Pension Plan) Retirement
w/o Section 401(a)17 limits Target Bonus Earnings
--------------------------- ------------ ------------
Year 5 $210,000 $84,000 $ 294,000
Year 4 201,500 60,450 261,950
Year 3 194,000 58,200 252,200
Year 2 185,500 44,520 230,020
Year 1 180,000 43,200 223,200
----------
$1,261,370
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Average Monthly Earnings for Supplemental Retirement Benefit:
$ 1,261,370 / 5 / 12 = $21,023
EXHIBIT "B"
DEFERRED COMPENSATION PAYMENT ADMINISTRATIVE GUIDELINES
1. A Participant's Aggregate Account under the Company's Supplement Executive Retirement Plan shall become available for distribution as account balances under the Company's Savings Plan become available for distribution.
2. In the circumstance where an Employee is under the age of 55 or has less than 5 years service and one of the following events occur:
a. The Employee's employment with the Company is terminated
b. The Employee dies
c. The Employee becomes totally and permanently disabled
then the Company in its sole discretion, and with the Employee's prior deferral payment election not withstanding, may elect to pay to the Employee or designated beneficiary, deferred cash and stock compensation in either of the following:
a. In a lump sum on the termination date or earliest practical date thereafter
b. In a lump sum on the first workday in the next calendar year following termination.
3. In the circumstance where an Employee terminates for any reason and is age 55 or over and has 5 years of service or more, then the Employee may, within 30 days of termination, make a final irrevocable payment election to receive deferred cash and stock compensation in either of the following:
a. In a lump sum payment on the first workday in the next calendar year following termination, or any subsequent date within the fifteen year period following termination, but in no case earlier than the deferred payment date designated in the most recent signed and dated deferral election on file with the Company
b. In a stream of equal annual payments for a period of up to 15 years with the balance, if any, to be paid in year 15, beginning with a date within 12 months of termination, selected by the Employee, but in no case earlier than the deferred payment date designated in the most recent signed and dated deferral election on file with the Company
c. For deferred cash compensation only, in a stream of equal monthly (or equivalent bi-weekly) payments for a period of up to 180 months with the balance, if any, to be paid in month 180, beginning with a date within 12 months of termination, selected by the Employee, but in no case earlier than the deferred payment date designated in the most recent signed and dated deferral election on file with the Company.
4. In the circumstance where an Employee terminates for any reason and is age 55 or over and has 5 years of service or more and does not make any deferral payment election within 30 days of termination then the Company in its sole discretion, may elect to pay deferred cash and stock compensation in either of the following:
a. In compliance with the Employee's most recent signed and dated deferral election on file with the Company
b. In a lump sum on the termination date or earliest practical date thereafter
c. In a lump sum on the first workday in the next calendar year following termination.
EXHIBIT 10.15
HILLENBRAND INDUSTRIES, INC.
EXECUTIVE DEFERRED COMPENSATION PROGRAM
ARTICLE I
PURPOSE AND DEFINITIONS
1.1 PURPOSE. The purpose of this Program is to provide voluntary deferrals of portions of an employee's compensation to be paid by Hillenbrand Industries, Inc. and its Subsidiaries. Since the Company has divided up the "components" of the Hillenbrand Industries, Inc. Senior Executive Compensation Program into separate programs, this Program is a continuation of the deferred compensation component of such Senior Executive Compensation Program.
1.2 DEFINITIONS:
(a) "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.
(b) "BENEFICIARY" means, with respect to payments related to Deferred Compensation, the person, persons, trust or other entity designated by the Participant to receive any benefits payable under the Deferred Compensation Guidelines.
(c) "BOARD OF DIRECTORS" or "BOARD" means the Board of Directors of Hillenbrand Industries, Inc.
(d) "COMMITTEE" means the Compensation and Management Development Committee of the Board appointed to administer the Program under Article II.
(e) "COMPANY" means Hillenbrand Industries, Inc. as a corporate holding company and does not include Subsidiaries.
(f) "DEFERRED COMPENSATION" means the cumulative amount credited to an account maintained for a Participant pursuant to Section 4.2.
(g) "DEFERRED COMPENSATION GUIDELINES" means the Company's "Deferred Compensation Payment Administrative Guidelines," as amended by the Committee in its sole discretion, which is attached hereto as Exhibit "A".
(h) "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.
(i) "EMPLOYER" means Hillenbrand Industries, Inc., an Indiana Corporation, and its Subsidiaries.
(j) "INCENTIVE COMPENSATION" means the Incentive Compensation as provided for in the Hillenbrand Industries, Inc. Short-Term Incentive Compensation Program.
(k) "PARTICIPANT" means any individual who is a non-bargained for, key employee of the Employer and is selected for participation in the Program pursuant to Article III.
(l) "PERQUISITE COMPENSATION" means a variety of benefits offered to a Participant to aid him or her in carrying out his or her duties, to provide for the Participant's well being, and to create the potential for added long-term financial security.
(m) "PLAN YEAR" means a calendar year. The first Plan Year shall begin on January 1, 2004.
(n) "PROGRAM" means the Hillenbrand Industries, Inc. Executive Deferred Compensation Program.
(o) "SUBSIDIARY" means an operating company unit of which a majority equity interest is owned directly or indirectly by the Company.
ARTICLE II
ADMINISTRATION
Full power and authority to construe, interpret, and administer the Program 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.
ARTICLE III
PARTICIPANTS
Participation in this Program by executive employees of the Employer shall be determined by the Committee.
ARTICLE IV
DEFERRAL OF COMPENSATION
4.1 ELECTION TO DEFER COMPENSATION/DEFERRAL PERIOD. A Participant may elect to defer all or any portion of his or her Base Salary, Incentive Compensation and/or 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 or Plan Year (depending on the type of compensation), during which such compensation would otherwise be paid. The election must state the duration of the deferral period, and shall be irrevocable. Participants deferring compensation shall execute a Deferred Compensation Agreement (the "Agreement") with the Company (an example of which is attached hereto as Exhibit "B"), outlining their various rights, duties and obligations thereunder. All deferrals of compensation under this Program are subject to the Deferred Compensation Guidelines.
4.2 DEFERRED COMPENSATION - 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 Company'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 Company's principal bank, or, at the election of the Committee, Participants 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, with Committee approval, 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 the Company, at the then current market price. Dividends, stock dividends, stock splits and other rights inuring to the common stock of the Company which would be normally payable thereon shall be assumed to be reinvested in the common stock of the Company at the market value on 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 the Company.
ARTICLE V
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 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 VI
FINALITY OF DETERMINATION
Each determination made by the Committee 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 VII
OFFSET FOR OBLIGATIONS TO EMPLOYER
If, at such time as the Participant becomes entitled to benefit payments hereunder, the Participant has any debt, obligation or other liability representing an amount owing to the Company or any Subsidiary, and if such debt, obligation, or other liability is due and owing at the time benefit payments are payable hereunder, the Employer may offset the amount owed the Company or the Subsidiary against the amount of benefits otherwise distributable hereunder.
ARTICLE VIII
RIGHTS OF A PARTICIPANT
Payments under this Program will not be segregated from the general funds of the Employer and no Participant will have any claim on any specific assets of the Employer. To the extent that any Participant acquires a right to receive benefits under this Program, his or her right will be no greater than the right of any unsecured general creditor of the Employer and is not assignable or transferable except to his or her Beneficiary or estate.
ARTICLE IX
DETERMINATION OF BENEFITS
9.1 CLAIM. A person who believes that he is being denied a benefit to which he is entitled under the Program (hereinafter referred to as a "Claimant") may file a written request for such benefit with the Committee, setting forth his claim. The request must be addressed to the Committee.
9.2 CLAIM DECISION. Upon receipt of a claim, the Committee shall advise the Claimant that a reply will be forthcoming within a reasonable time, but not later than 90 days from its receipt of the claim and shall, in fact, deliver such reply within such period. The Committee may, however, extend the reply period for an additional 90 days if the Committee determines that special circumstances require such an extension. If an extension is required, written notice shall be furnished to the Claimant prior to the termination of the initial 90-day period. The extension notice shall indicate (i) the special circumstances requiring an extension of time; and (ii) the date by which the Committee expects to tender the benefit determination. If the claim is denied in whole or in part, the Committee shall adopt a written opinion, using language calculated to be understood by the Claimant, setting forth:
(a) The specific reason for such denial;
(b) The specific reference to pertinent provisions of this agreement upon which such denial is based;
(c) A description of any additional material or information necessary for the Claimant to perfect his claim and an explanation why such material or such information is necessary.
(d) Appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review, including the Claimant's right to bring a civil action following an adverse benefit determination on review; and
(e) The time limits for requesting a review.
9.3 REQUEST FOR REVIEW. Within sixty (60) days after the receipt by the
Claimant of the written opinion described above, the Claimant may
request in writing that the Committee review its determination. Such
request must be addressed to the Committee. The Claimant or his duly
authorized representative may, but need not, review the pertinent
documents, records and other information, receive copies of such
information, and submit documents, records, issues and comments in
writing for consideration by the Committee. If the Claimant does not
request a review of the Committee's determination within such sixty
(60) day period, he shall be barred and estopped from challenging the
participating Employer's determination.
9.4 REVIEW OF DECISION. Within a reasonable time not later than sixty (60)
days after the Board of Directors' receipt of a request for review, the
Committee will review its determinations. After considering all
materials presented by the Claimant, the Committee will render a
written opinion, written in a manner calculated to be understood by the
Claimant, setting forth (a) the specific reasons for the decision; (b)
and containing specific references to the pertinent provisions of this
Program on which the decision is based; (c) a statement that the
Claimant is entitled to receive, upon request and free of charge,
reasonable access to, and copies of, all documents, records, and other
information relevant to the Claimant's claim for benefits; and (d) a
statement of the Claimant's right to bring an action under Section
502(a) of ERISA. If special circumstances require that the sixty (60)
day time period be extended, the Committee will so notify the Claimant
prior to the termination of the initial 60-day period and will render
the decision as soon as possible, but no later than one hundred twenty
(120) days after the filing of the request for review. The extension
notice will set forth: (a) the special circumstances; and (b) the date
as of which the benefit determination will be made.
ARTICLE X
LIMITATIONS
Neither the action of the Company in establishing the Program, nor any action taken by the Company, the Committee, 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 any employee of the Employer the right to be retained in the employ of the Employer.
ARTICLE XI
UNFUNDED STATUS OF PROGRAM
It is the intention of the parties that the arrangements herein described be unfunded for tax purposes and for purposes of Title I or ERISA. Program Participants have the status of general unsecured creditors of the Employer. The Program constitutes a mere promise by the Employer to make payments in the future.
ARTICLE XII
RIGHTS TO BENEFITS
Subject to Article VII, a Participant's rights to benefit payments under the Program are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or the Participant's Beneficiaries.
ARTICLE XIII
AMENDMENTS, SUSPENSION OR TERMINATION
The Committee 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 affect adversely any right or
obligation with respect to any Deferred Compensation and that no amendment shall reduce any benefits accrued by any Participant prior to the amendment. No amendment shall require shareholder approval unless such approval is otherwise required by law.
ARTICLE XIV
MISCELLANEOUS
14.1 GOVERNING LAW. This Program shall be governed by and construed in
accordance with the laws of the State of Indiana.
14.2 CAPTIONS. The captions of Articles and Sections of this Program are for
the convenience of reference only and shall not control or affect the
meaning or construction of any of its provisions.
14.3 FACILITY OF PAYMENT. Any amounts payable hereunder to any Participant
who is under legal disability or who, in the judgment of the Committee,
is unable to properly manage his or her financial affairs may be paid
to the legal representative of such Participant or may be applied for
the benefit of such Participant in any manner which the Committee may
select, and any such payment shall be deemed to be payment for such
Participant's account and shall be a complete discharge of all
liability of the Employer with respect to the amount so paid.
14.4 WITHHOLDING OF PAYROLL TAXES. To the extent required by the laws in
effect at the time compensation or Deferred Compensation payments are
made, the Employer shall withhold from such compensation, or from
Deferred Compensation payments made hereunder, any taxes required to be
withheld for federal, state or local government purposes.
14.5 PROTECTIVE PROVISIONS. A Participant will cooperate with the Employer
by furnishing any and all information requested by the Employer in
order to facilitate the payment of benefits hereunder.
14.6 TERMS. Whenever any words are used herein in the masculine, they shall
be construed as though they were used in the feminine in all cases
where they would so apply; and wherever any words are used herein in
the singular or in the plural, they shall be construed as though they
were used in the plural or the singular, as the case may be, in all
cases where they would so apply.
14.7 SUCCESSOR. The provisions of this Program shall bind and inure to the
benefit of the Company and its successors and assigns. The terms
successors and assigns as used herein shall include any corporate or
other business entity which shall, whether by merger, consolidation,
purchase or otherwise, acquire all or substantially all of the business
and assets of the Company and successors of any such company or other
business entity.
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EXHIBIT A
DEFERRED COMPENSATION PAYMENT ADMINISTRATIVE GUIDELINES
1. For a current Employee, the Company will pay deferred compensation in compliance with the most recent signed and dated deferral election on file with the Company. In no circumstance, (except for hardship as determined by the Compensation and Management Development Committee of the Board of Directors) for a current active full or part time Employee, will payment be made before the payment date irrevocably elected by the Employee.
2. In the circumstance where an Employee is under the age of 55 or has less than 5 years service and one of the following events occur:
a. The Employee's employment with the Company is terminated
b. The Employee dies
c. The Employee becomes totally and permanently disabled
then the Company in its sole discretion, and with the Employee's prior deferral payment election not withstanding, may elect to pay to the Employee or designated beneficiary, deferred cash and stock compensation in either of the following:
a. In a lump sum on the termination date or earliest practical date thereafter
b. In a lump sum on the first workday in the next calendar year following termination.
3. In the circumstance where an Employee terminates for any reason and is age 55 or over and has 5 years of service or more, then the Employee may, within 30 days of termination, make a final irrevocable payment election to receive deferred cash and stock compensation in either of the following:
a. In a lump sum payment on the first workday in the next calendar year following termination, or any subsequent date within the fifteen year period following termination, but in no case earlier than the deferred payment date designated in the most recent signed and dated deferral election on file with the Company
b. In a stream of equal annual payments for a period of up to 15 years with the balance, if any, to be paid in year 15, beginning with a date within 12 months of termination, selected by the Employee, but in no case earlier than the deferred payment date designated in the most recent signed and dated deferral election on file with the Company
c. For deferred cash compensation only, in a stream of equal monthly (or equivalent bi-weekly) payments for a period of up to 180 months with the balance, if any, to be paid in month 180, beginning with a date within 12 months of termination, selected by the Employee, but in no case earlier than the deferred payment date designated in the most recent signed and dated deferral election on file with the Company.
4. In the circumstance where an Employee terminates for any reason and is age 55 or over and has 5 years of service or more and does not make any deferral payment election within 30 days of termination then the Company in its sole discretion, may elect to pay deferred cash and stock compensation in either of the following:
a. In compliance with the Employee's most recent signed and dated deferral election on file with the Company
b. In a lump sum on the termination date or earliest practical date thereafter
c. In a lump sum on the first workday in the next calendar year following termination.
EXHIBIT B
HILLENBRAND INDUSTRIES, INC.
SENIOR AND REGULAR EXECUTIVE
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT made this _____ day of _______________, 200__ by and between Hillenbrand Industries, Inc., an Indiana corporation (the "Corporation"), and _____________________ residing in the City of _______________ and the State of _________ (the "Employee").
WHEREAS, The Corporation, or one of its subsidiaries, has employed the Employee and the Employee has served the Corporation in such capacity as the Corporation has designated from time to time; and
WHEREAS, During the term of the Employee's employment, the Employee has devoted and shall continue to devote all of the Employee's time, attention, skill and efforts to the performance of the Employee's duties for the Corporation; and
WHEREAS, The Employee may receive base salary, perquisite and other compensation and from time to time incentive compensation.
NOW, THEREFORE, In consideration of the premises and the covenants herein set forth, IT IS AGREED:
1. Deferral of Compensation and Elections - The Corporation shall pay the Employee such base salary, perquisite, incentive and other compensation, except that:
(a) To the extent that the Employee elects to defer all or a portion of the Employee's base salary, perquisite, incentive or other compensation payable to the Employee, unless the investment of such deferral is covered by some other plan, the Corporation shall credit (but not pay) such amounts to an account (the "Account") in the name of the Employee and shall accrue interest credited monthly at the end of each calendar month of the Corporation at a rate equal to the monthly prime interest rate (determined as of the first day of each month) charged by the Corporation's principal bank.
An election to defer must be made prior to the beginning of 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 cash.
(b) The Employee may also elect in the alternative that all or a portion of the Employee's incentive compensation amounts deferred, when earned shall be credited, but not paid, to the Account in the name of the Employee which shall be assumed to be invested in the common stock of the Corporation, at the then current market price. Dividends, stock dividends, stock splits and other rights
inuring to the common stock of the Corporation which would be normally payable thereon shall be assumed to be reinvested in the common stock of the Corporation at the market value on 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 the Corporation.
(c) The Employee and the Employee's designated beneficiary agree to assume all risk in connection with any decrease in value of the funds which are credited in accordance with the provisions of this Agreement.
(d) Title to and beneficial ownership of any assets which the Corporation may earmark to pay the deferred compensation hereunder shall at all times remain in the Corporation, and the Employee and the Employee's designated beneficiary shall not own any specific assets of the Corporation.
2. Payment of Deferred Compensation and Elections - The Employee may elect to receive deferred compensation in a lump sum of the cash or stock of the Corporation accrued in the Employee's Account at the end of the deferral period elected in writing by the Employee pursuant to the terms of the program or in such installments as the Employee may designate. Such election notwithstanding, the Company in its sole discretion may elect to pay deferred compensation in lump sum to the Employee, or in the case of an Employee's death to the Employee's designated beneficiary, if:
(a) The Employee's employment with the Corporation is terminated.
(b) The Employee retires.
(c) The Employee dies.
(d) The Employee becomes totally and permanently disabled.
The designated beneficiary referred to herein may be designated or changed by the Employee (without the consent of any prior beneficiary) on a form provided by the Corporation and delivered to the Corporation before the Employee's death. If no such beneficiary shall have been designated, or if no designated beneficiary shall survive the Employee, the payment or payment shall be paid to the Employee's estate.
3. Nothing contained in this Agreement and no action taken pursuant to the provisions of this Agreement shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Corporation and the Employee, the Employee's designated beneficiary or any other person. Likewise, nothing herein and no action taken shall create a partnership or joint venture between the Corporation and the Employee, the Employee's designated beneficiary or any other person. Any funds which may be invested under the provisions of this Agreement shall continue for all purposes to be a part of the general funds of the Corporation and no person other than the Corporation
shall by virtue of the provisions of this Agreement have any interest in such funds. To the extent that any person acquires a right to receive payments from the Corporation under this Agreement, such right shall be no greater than the right of any unsecured general creditor of the Corporation.
4. Notwithstanding anything herein contained to the contrary, no payment of any then unpaid installments shall be made and all rights under the Agreement of the Employee, the Employee's designated beneficiary, executors or administrators, or any other person, to receive payments thereof shall be forfeited, if the Employee shall engage in any activity or conduct which in the opinion of the Corporation is detrimental to the best interests of the Corporation.
5. The right of the Employee or any other person to any payment under this Agreement shall not be assigned, transferred, pledged or encumbered except by will or by the laws of descent and distribution.
6. If the Corporation shall have conclusive evidence that any person to whom any payment is payable under this Agreement is unable to care for his or her affairs because of illness or accident, or is a minor, any payment due (unless a prior claim therefore shall have been made by a duly appointed guardian, committee or other legal representative) may be paid to the spouse, a child, a parent, a brother, a sister, or to any person who in the sole discretion of the Corporation shall otherwise be entitled to payment, in such manner and proportions as the Corporation may determine. Any such payment shall be a complete discharge of the liabilities of the Corporation under this Agreement.
7. Nothing contained herein shall be construed as conferring upon the Employee the right to continue in the employ of the Corporation or in any capacity.
8. In the event of a finding of constructive receipt by the Internal Revenue Service of any deferred amount pursuant hereto or to any other plan, the Employee may, upon the Employee's written election, immediately receive in full such deferred amount held by the Corporation.
9. All elections, notices or writings necessary to give effect to any provision hereof shall be presented in writing duly executed by the Employee or a person on the Employee's behalf to the Vice President, Administration of the Corporation and by the Vice President, Administration of the Corporation to the Employee at the Employee's last known address.
10. The Corporation shall have full power and authority to interpret, construe and administer this Agreement, and its interpretations and construction thereof and actions thereunder, including any valuation of the Account, or the amount or recipient of the payment to be made therefrom, shall be binding and conclusive on all persons for all purposes. The Corporation shall not be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Agreement unless attributable to its own willful misconduct or lack of good faith.
11. This Agreement shall be binding upon and inure to the benefit of the Corporation, its successors and assigns and the Employee and the Employee's designated beneficiaries, heirs, executors, administrators and legal representatives.
12. If any provision of this Agreement is held invalid, such invalidity shall not affect the other provisions of this Agreement which shall be given effect independently of the invalid provisions; and, in such circumstances, the invalid provision is severable.
13. This Agreement shall be construed in accordance with and governed by the law of the State of Indiana.
NOTE: PARTICIPATION IN THE DEFERRED COMPENSATION AGREEMENT MAY HAVE A SIGNIFICANT EFFECT ON AMOUNTS CALCULATED FOR THE CORPORATION'S PENSION PLANS, OTHER PERSONAL RETIREMENT PLANS, AND F.I.C.A. ESTIMATES. CONSULTATION WITH YOUR PERSONAL TAX ADVISER IS STRONGLY ENCOURAGED PRIOR TO EXECUTING THIS AGREEMENT.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed by its duly authorized officer, and the Employee has hereunto set the Employee's hand as of the date first above written.
Dated: ________________ HILLENBRAND INDUSTRIES, INC.
BY: ____________________________
David L. Robertson
Vice President, Administration
EMPLOYEE
__________________________________
Employee
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EXHIBIT 10.16
HILLENBRAND INDUSTRIES, INC.
STOCK AWARD IN LIEU OF PERQUISITES
(EFFECTIVE _______, 200__)
1. Purpose. The purpose of the Hillenbrand Industries, Inc. Stock Award (hereinafter called the "Award") is to promote profitability and growth of Hillenbrand Industries, Inc. (the "Company") by offering an incentive payable in Company common stock to _____________ ("Employee") who contributes to such profitability and growth.
2. Amount of Award. The Company shall cause an account to be established in the name of the Employee ("Deferred Stock Account") which shall be assumed to be invested in _______ (________) shares of common stock, no par value of the Company ("Common Stock"). No actual shares of Common Stock shall be held in the Deferred Stock Account, and the number of shares of Common Stock maintained in the Deferred Stock Account ("Deferred Stock") shall be a book entry which states the number of shares of Common Stock the Employee would have a right to receive in accordance with the terms of this Award. Any cash dividend paid on Common Stock by the Company while the Deferred Stock Account exists will be assumed to be paid on the Deferred Stock in the Deferred Stock Account and shall be assumed to be reinvested in Common Stock on the date of such dividend payment, thereby increasing the number of shares of Deferred Stock maintained in the Deferred Stock Account. Any stock dividends, stock splits and other similar rights inuring to Common Stock shall also be assumed to inure to the Deferred Stock, which may increase or decrease the number of shares of Deferred Stock in the Deferred Stock Account.
If Employee's employment with the Company or any of its Subsidiaries (as defined in the Plan) continues uninterrupted from the effective date of this Award through the day after the first anniversary of such effective date, the percentage as set forth below of the Deferred Stock maintained in the Deferred Stock Account, shall be non-forfeitable ("Vested Deferred Stock"), and the Company shall, subject to his election to defer receipt, deliver to him shares of Common Stock equal in number to the number of shares of Deferred Stock which became Vested Deferred Stock on the day after such first anniversary date as follows:
The day after the first anniversary date of the 100% of the nonvested Deferred Stock in effective date of this Award the Deferred Stock Account |
Any Deferred Stock maintained in the Deferred Stock Account which is not Vested Deferred Stock shall, upon the Employee's termination of employment shall be forfeited by Employee without the payment of any consideration or further consideration by the Company, and neither Employee nor any successors, heirs, assigns, or legal representatives of Employee shall thereafter have any further rights or interest in such forfeited Deferred Stock. Any fractional shares of Vested Deferred Stock shall be rounded up to the next whole share of Vested Deferred Stock.
Notwithstanding the schedule set forth above, Deferred Stock maintained in the
Deferred Stock Account shall become Vested Deferred Stock upon (A) the
occurrence of any one of the following events after the day after the first
anniversary date of the effective date of this Award: (i) termination of
Employee's employment with the Company, one of its Subsidiaries (as defined in
the Plan) or one of their respective divisions by reason of retirement after
attaining age fifty-five (55) and completion of five (5) years of employment, or
(ii) termination of Employee's employment with the Company, one of its
Subsidiaries or one of their respective divisions by reason of disability, as
determined by the Compensation and Management Development Committee of the
Company's Board of Directors (the "Committee"), or death, or (B) the occurrence
of (i) a Change in Control (as defined in Section 14.2 of the Plan),or (ii) a
sale, transfer or disposition of substantially all of the assets or capital
stock of a Subsidiary (as defined in the Plan) or division of the Company or one
of its Subsidiaries for whom the Employee is employed at the time of such sale.
Temporary absences from employment because of illness, vacation or leave of
absence and transfers among the Company and/or any of its Subsidiaries shall not
be considered terminations of employment. For purposes of this Agreement and the
Plan, the Committee shall have absolute discretion to determine the date and
circumstances of termination of Employee's employment, and its determination
shall be final, conclusive and binding upon Employee.
The shares of Common Stock delivered to the Employee shall be from shares held by the Company as treasury stock or from shares of Common Stock acquired by the Company in the open market. Subject to the Employee's election to defer, all shares of Common Stock to be delivered to the Employee shall be delivered as soon as administratively possible after the day after the corresponding anniversary date or as soon as administratively possible after the Employee's termination of employment or after the occurrence of the events described in clauses (B) (i) and (ii) in the immediate foregoing paragraph of this Section.
3. Administration of the Award. The Committee shall administer the Award. The Committee shall have complete and full discretion in the administration and interpretation of the terms of the Award.
4. Right to Defer Payment of Award.
(a) Election to Defer Award. The Employee may elect to defer payment of the Award otherwise due on the first anniversary date set forth in Section 2 by completing a written election and delivering such election to the Company at least sixty (60) days prior to such first anniversary date; provided however, that the completion of such written election and the delivery of such election may be at an earlier date as determined by the Committee or required by law to insure the validity of such deferral. At the end of the deferral period elected by the Employee (or within a certain period of time after the last day of the deferral period as determined by the Committee or required by law to insure the validity of the deferral) or, if earlier, within sixty (60) calendar days of the date on which the Employee's employment is terminated, the Company, consistent with Section 2 and subject to Section 6, 7 and 8 shall deliver to the Employee shares of Common Stock equal in number to the number of Vested Deferred Stock held in the Employee's Deferred Stock Account.
(b) Financial Hardship. A withdrawal from the Employee's Deferred Stock Account of Vested Deferred Stock shall be permitted prior to the termination of the deferral period in the event that the Employee experience serious financial hardship which is beyond the Employee's control and which would cause the Employee a severe hardship if such withdrawal were not permitted. Serious financial hardship may be incurring a disability or unexpected and unreimbursed major expenses resulting from illness or accident or impending bankruptcy. The Employee must apply to the Committee for a serious financial hardship withdrawal and demonstrate that the circumstances being experienced were not under the Employee'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 the Employee's withdrawal request. If such application for withdrawal is permitted, the amount of such withdrawal shall be limited to an amount of the Employee's Vested Deferred Stock which would have been payable if the Employee's employment with the Company was terminated. If the Employee makes a withdrawal, the amount of the Employee's Deferred Stock Account under this Award shall be proportionately reduced to reflect the withdrawal. Also, the withholding requirements described in Section 7 shall also be effected before the withdrawal.
5. No Rights as Stockholder. Employee shall have no rights as a stockholder with respect to any shares of Common Stock covered by this Award until shares of Common Stock are delivered to the Employee pursuant to the last paragraph in Section 2 and Section 4. Until such time, Employee shall not be entitled to dividends (except where the Employee's Deferred Stock Account is adjusted pursuant to the first paragraph of Section 2) or to vote at meetings of the stockholders of the Company.
6. Compliance With Securities Laws. Prior to the receipt of any certificates for shares of Common Stock pursuant to this Award, Employee (or Employee's beneficiary or legal representative upon Employee's death or disability) shall enter into such additional written representations, warranties and Awards as the Company may reasonably request in order to comply with applicable securities laws or with this Award.
7. Stock Ownership Guidelines. Employee (or Employee's beneficiary or legal representative upon the Employee's death or disability) shall be bound by the "Stock Ownership Guidelines" of the Company as may be in effect from time to time.
8. Withholding. Any payment of Common Stock under this Award shall be subject to applicable federal and state withholding requirements. Hence, unless the Employee delivers a check to the Company equal to the required withholding, the number of shares distributed shall be reduced to meet the Employee's applicable withholding requirements.
9. Designation of Beneficiary. The Employee shall be permitted to provide to the Committee a beneficiary designation for receipt of his or her Award after death. If the Employee fails to designate a beneficiary, or if the designated beneficiary predeceases the Employee, the Award shall be paid to the deceased Employee's spouse, if living, or if such spouse is not living, to the deceased Employee's estate.
10. Adjustments. If there is a change in the outstanding shares of the Common Stock by reason of any stock dividend or split, recapitalization, merger, consolidation, spin-off, reorganization, combination or exchange of shares or other similar corporate change occurring after the effective date of this Award, the Committee shall adjust the number of shares of Common Stock subject to the Award to reflect the change, and such adjustment shall be conclusive and binding upon the Employee and the Company.
11. Non-Transferability.
(a) The Deferred Stock, the Deferred Stock Account and the Vested Deferred Stock may not be sold, assigned, transferred, exchanged, pledged, hypothecated, or otherwise encumbered and no such sale, assignment, transfer, exchange, pledge, hypothecation, or encumbrance, whether made or created by a voluntary act of the Employee or any agent of the Employee or by operation of law, shall be recognized by, or be binding upon, or shall in any manner affect the rights of, the Company, its successors or any agent thereof.
(b) No amounts payable under the Award shall be transferable by the Employee other than by his designation of a beneficiary pursuant to Section 9. The amounts payable under the Award shall be exempt from the claims of creditors of the Employee and from all orders, decrees, levies and executions and any other legal process to the fullest extent that may be permitted by law.
12. Amendments to Award. The Award may only be modified upon the mutual agreement of the Company and the Employee.
13. Source of Benefit Payments. The payment of the Award to the Employee shall be paid solely from the general assets of the Company. Until the actual delivery of the shares of Common Stock, the Employee shall not have any interest in any specific assets of the Company, including shares of Common Stock, under the terms of the Award. The Award shall not be considered to create an escrow account, trust fund or other funding arrangement of any kind, or a fiduciary relationship between the Employee and the Company. Until such time of payment, no shares of the Common Stock shall be set aside by the Company for the Award.
14. Successors and Assigns.
(a) This Award is personal to the Employee and without the prior written consent of the Company shall not be assignable by the Employee except by will or the laws of descent and distribution. This Award shall inure to the benefit of and be enforceable by the Employee's guardian and legal representatives.
(b) This Award shall inure to the benefit of and be binding upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform this Award in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.
15. Award Subject to Plan. This Award is subject to the terms of the Hillenbrand Industries, Inc. Stock Incentive Plan ("Plan"). The terms and provisions of the Plan (including any subsequent amendments thereto) are hereby incorporated herein by reference. In the event of a conflict between any terms and provisions contained herein and the terms or provisions of the Plan, the applicable terms or provisions of the Plan will govern and prevail.
16. Governing Law. This Award shall be governed by and construed in accordance with the internal laws of the State of Indiana without reference to principles of conflict of laws. The captions of this Award are not part of the provisions hereof and shall have no force or effect. This Award may not be amended or modified except by a written Award executed by the parties hereto or their respective successors and legal representatives.
17. Severability. The invalidity or unenforceability of any provision of this Award shall not affect the validity or enforceability of any other provision of this Award.
18. No Waiver. The failure of the Employee or the Company to insist upon strict compliance with any provision of this Award or the failure to assert any right the Employee or the Company may have under this Award shall not be deemed to be a waiver of such provision or right or any other provision or right of this Award.
19. Entire Award. The Employee and the Company acknowledge that this Award supersedes any prior agreement between the parties with respect to the subject matter of this Award.
20. Counterparts. This Award may be executed in counterparts, which together shall constitute one and the same original.
Effective Date: _________, ______
HILLENBRAND INDUSTRIES, INC.
By: ____________________________________
Frederick W. Rockwood, President and
Chief Employee Officer
EXHIBIT 10.17
EXECUTIVE
EMPLOYMENT AGREEMENT
PREAMBLE
This Executive Employment Agreement defines the essential terms and conditions of our employment relationship with you. The subjects covered in this Agreement are vitally important to you and to the Company. Thus, you should read the document carefully and ask any questions before signing the Agreement. Given the importance of these matters to you and the Company, all executives shall sign the Agreement as a condition of employment.
This Agreement, dated and effective this 27th day of January, 2000, between Hillenbrand Industries, Inc., an Indiana corporation (the "Company"), and Frederick W. Rockwood, ("Executive").
WITNESSETH:
The Company desires to employ Executive as well as to safeguard the Company against disclosure or use of trade secrets or confidential data and to obtain a non-compete agreement; and
In the course of Executive's employment, it will be necessary for Executive to acquire knowledge of trade secrets and confidential data of the Company; and
Executive desires from the Company agreement on certain conditions regarding his employment and the termination of the employment relationship if the parties part ways;
NOW, THEREFORE, in consideration of Executive's employment by the Company and the other benefits provided Executive under this Agreement and the mutual covenants herein contained, the parties agree as follows:
1. Employment. The Company agrees to employ Executive and Executive agrees to serve as President of Hillenbrand Industries, Inc. Executive's employment with the Company is at-will which means he may terminate his employment at any time, for any reason, with or without notice. Likewise, the Company has the right to terminate Executive's employment at any time for any reason not prohibited by law upon the terms and conditions set out in the Agreement. Nothing in this Agreement is intended to create and should not be interpreted to create an employment contract for any specified length of time between Executive and the Company.
2. Compensation. The Company shall pay Executive for his services, compensation as follows:
(a) A base salary at the rate of Twenty Thousand One Hundred Ninety-two Dollars and Thirty-one Cents ($20,192.31) bi-weekly, less usual and ordinary deductions, annualized at Five Hundred Twenty-five Thousand Dollars ($525,000).
(b) Incentive compensation, payable solely at the discretion of the Company, pursuant to the Company's Exempt Employee Executive Compensation Program.
(c) Such additional compensation, benefits and perquisites as the Company, in its discretion, may deem appropriate.
3. Duties. Executive shall at all times faithfully and diligently perform his obligations under this Agreement and act in the best interest of the Company and its affiliated companies including any parent or subsidiaries (hereinafter jointly referred to as the "Companies"). Executive's duties shall be to act in such office or capacity as the Company may request from time to time and Executive agrees to perform all duties necessary or advisable in order to carry out such functions in an efficient manner. Executive's duties and responsibilities at all times shall be subject to the authority of the Board of Directors of the Company and such officers and agents thereof to whom authority may be delegated thereby, and/or curtailed at any time. Executive shall at all times devote his full time, best efforts and ability, skill, and attention exclusively to the furtherance of the business objectives and interests of the Company, all to the exclusion of other employers or interests or their products and services. Executive shall not engage in any gainful employment other than under this Agreement without the prior written consent of the Company. In addition, Executive shall at all times act in accordance with the Hillenbrand Industries, Inc. Handbook of Ethical Business Conduct and Corporate Compliance Handbook.
4. Termination of Employment. Because Executive is an at-will employee, his employment may be terminated at any time, without cause, by Executive or the Company upon sixty (60) days written notice or pay in lieu of notice. Executive's employment may be terminated at any time, without notice, for cause. For purposes of this Agreement, cause shall be defined to include but shall not be limited to things such as dishonesty, nonperformance of duties, violation of Company policy or procedures, conviction of a felony, violation of the Hillenbrand Industries, Inc. Handbook of Ethical Business Conduct, or disloyalty or a failure to act or not act in accordance with the direction of the Company.
If, because of disability, Executive becomes unable to perform the essential functions of his position, with or without reasonable accommodation, Executive's employment shall be terminated. However, Executive may be entitled to benefits under the Company's regular fringe benefit programs if he meets the eligibility criteria of such programs.
If Executive's employment terminates for whatever reason, prior to the end of the fiscal year, Executive shall not be entitled to any of the compensation, benefits and perquisites identified in Paragraphs 2(b) and (c) above for any portion of such fiscal year which have not already been paid to Executive as of the date of his separation.
5. Severance Payments. Subject to the terms and conditions set out below, if Executive's employment with the Company is terminated without cause, the Company shall pay Executive severance pay based upon his base salary at the time of termination for a period figured in accordance with any guidelines established by the Company or six (6) months, whichever is longer, but in no event shall severance payments exceed twelve (12) months.
No severance pay shall be paid if Executive voluntarily leaves the Company's employ or is terminated for cause.
Moreover, any severance pay payable hereunder shall be offset against any amount of notice pay paid pursuant to Paragraph 4 and is contingent upon Executive complying with the covenants and agreements of Paragraphs 6 through 9 and executing a Settlement and Release Agreement in a form not substantially different from that attached to the Agreement as Exhibit A.
6. Protection of the Company's Business. Executive acknowledges that in the course of his employment he will acquire knowledge of trade secrets and confidential data of the Company. Such trade secrets and confidential data may include but are not limited to confidential product information, customer lists, technical information, methods by which the Company proposes to compete with its business competitors, secret strategic plans, confidential reports prepared by business consultants which may reveal strengths and weaknesses of the Company and its competition, and similar information relating to the Company's products, customers, strategies, and operations, which trade secrets and confidential data pertain to its operations throughout the United States and the world but maintain their situs in Indiana. In order to perform his obligations under this Agreement, Executive must necessarily learn such trade secrets and confidential data, all of which are extremely important to the Company, are not known outside the business of the Company, are known only to a limited group of its top executives and directors, are protected by strict measures to preserve secrecy, are of great value to the Company, are the result of the expenditure of money, time and effort thereby, are difficult for an outsider to duplicate, and disclosure of which would be extremely detrimental to the Company. Executive agrees to keep all such trade secrets or confidential data secret and not to release such information to persons not authorized by the Company to receive such secrets and data, both during his employment with the Company and at all times thereafter. Executive acknowledges that trade secrets and confidential data need not be expressly marked as such by the Company.
7. Documents, Inventions, Etc. All records, files, drawings, documents, equipment, and the like relating to the Company shall be and remain the sole property of the Company. If Executive's employment with the Company ends for any reason, Executive shall immediately return to the Company all such items without keeping any copies. Executive shall fully and promptly disclose to the Company all ideas, conceptions, inventions, discoveries, and designs conceived or contemplated by him which relate directly, indirectly or in any way to any of the products and/or services provided or contemplated by the Companies or any extensions thereof (whether alone or with others and whether patentable or unpatentable hereinafter called "Inventions") and shall assign to the Company his entire right, title and interest in and to the Inventions. Executive shall take all reasonable action requested by the Company to protect, obtain title to and/or patent in any country in the name of the Company or its nominee, any of such Inventions, including execution and delivery of all applications, assignments and other papers deemed necessary by the Company, provided he is reimbursed reasonable expenses incurred by him in so doing.
8. Limited Non-Competition. During Executive's employment and thereafter if said employment should end for whatever reason, it is very important to the Company to protect its legitimate business interests by restricting Executive's ability to compete with the Company in a limited manner. Therefore, this provision is drafted narrowly so as to be able to safeguard the Company's legitimate business interests while not unreasonably interfering with Executive's ability to obtain alternate employment. Executive acknowledges that this limited non-competition provision is not an attempt to prevent him from obtaining other employment.
(a) During At-Will Employment By Company. During Executive's employment by the Company, Executive shall not, directly or indirectly, have any ownership
interest in, work for, advise, manage, or act as an agent or consultant for, or have any business connection or business or employment relationship with any person or entity that competes with the Company or that contemplates competing with the Company without the prior written approval of an executive officer of the Company.
(b) During Two Year Post-Employment Period. For a period of two
(2) years after Executive's separation from the Company
(regardless of the reason for the separation), he shall not:
(i) directly or indirectly have any ownership interest in any entity or person engaged in research, development, production, sale or distribution of a product or service which competes with or is substantially similar to any product or service in research, development or design, or manufactured, produced, sold or distributed by the Company, within the geographical area in which Executive has been performing services on behalf of the Company or for which he has been assigned responsibility at anytime within the twenty-four (24) months preceding his separation.
(ii) within the geographical area in which Executive has been performing services on behalf of the Company or for which he has been assigned responsibility at anytime within the twenty-four (24) months preceding his separation, directly or indirectly in any competitive capacity, work for, advise, manage, or act as an agent or consultant for or have any business connection or business or employment relationship with any entity or person engaged in research, development, production, sale or distribution of a product or service which competes with or is substantially similar to any product or service in research, development or design, or manufactured, produced, sold or distributed by the Company.
(iii) directly or indirectly market, sell or otherwise
provide any products or services which are
competitive with or substantially similar to any
product or service in research, development or
design, or manufactured, produced, sold or
distributed by the Company, to any customer of the
Company with whom Executive has had contact (either
directly or indirectly) or over which he has had
responsibility at any time during the twenty-four
(24) months preceding his separation.
(c) In the event that Executive worked for the Company less than a total of twenty-four (24) months prior to separation, the limited non-competition of sections 8(b)(i) - (iii) above shall remain in effect the longer of --
(i) six (6) months, or
(ii) the term of Executive's employment with the Company
(e.g., if Executive worked for the Company for ten
(10) months, the limited non-competition provisions
apply for ten (10) months post separation).
(d) Executive acknowledges that after termination of this Agreement, he will inevitably possess trade secrets and confidential data of the Company which he would inevitably use if he were to engage in conduct prohibited as set forth above and such use would be unfair to and extremely detrimental to the Company and in view of the benefits provided him in this Agreement, such conduct on his part would be inequitable. Accordingly, Executive separately and
severally covenants for the benefit of the Company to keep each of the covenants described in the foregoing provisions of Paragraph 8 above throughout the two year period specified above.
(e) Publicly Traded Stock. Nothing in the foregoing provisions of Paragraph 8 prohibits Executive from purchasing for investment purposes only, any stock or corporate security traded or quoted on a national securities exchange or national market system, so long as such ownership does not violate the Hillenbrand Industries, Inc. Handbook of Ethical Business Conduct.
(f) Maximum Application. The parties expressly agree that the terms of this limited non-competition provision under Paragraph 8 are reasonable and necessary to protect the Company's interests, and are valid and enforceable. In the unlikely event, however, that a court of competent jurisdiction were to determine that any portion of this limited non-competition provision is unenforceable, then the parties agree that the remainder of the limited non-competition provision shall remain valid and enforceable to the maximum extent possible.
9. Other Limited Prohibitions. During Executive's employment by the Company and for two (2) years post-separation (for whatever reason) or the length of Executive's tenure whichever is less (but in no event less than six (6) months), Executive shall not:
(a) Request or advise any customer of the Company, or any person or entity having business dealings with the Company, to withdraw, curtail or cease such business with the Company;
(b) Disclose to any person or entity the identities of any customers of the Company, or the identity of any persons or entities having business dealings with the Company; or
(c) Directly or indirectly influence or attempt to influence any other employee of the Company to separate from the Company.
10. Specific Enforcement/Injunctive Relief. Executive agrees that it would be difficult to measure damages to the Company from any breach of the covenants contained in Paragraphs 6 through 9, but that such damages from any breach would be great, incalculable and irremedial, and that damages would be an inadequate remedy. Accordingly, Executive agrees that the Company may have specific performance of the terms of this Agreement in any court having jurisdiction. In addition, if Executive violates the provisions of Paragraphs 8 or 9, Executive agrees that any period of such violation shall be added to the term of the restriction. For example, if Executive violates the non-competition provision for three months, the Company shall be entitled to enforce the non-competition provision for two years and three months post-separation. In determining the period of any violation, the parties stipulate that in any calendar month in which Executive engages in any activity violative of the provisions of Paragraphs 8 or 9, Executive is deemed to have violated such provision for the entire month, and that month shall be added to the duration of the non-competition provision as set out above. The parties agree however, that specific performance and the "add back" remedies described above shall not be the exclusive remedies, and the Company may enforce any other remedy or remedies available to it either in law or in equity including but not limited to temporary, preliminary, and/or permanent injunctive relief.
11. Severability. If any provision of this Agreement is held invalid, such invalidity shall not affect the other provisions of this Agreement which shall be given effect independently of the invalid provisions; and, in such circumstances, the invalid provision is severable.
12. Titles. Titles are used for the purpose of convenience in this Agreement and shall be ignored in any construction of it.
13. Governing Law. This Agreement shall be construed in accordance with the laws of the State of Indiana. The parties expressly agree that it is appropriate for Indiana law to apply: (1) to the interpretation of this Agreement; (2) to any disputes arising out of this Agreement; and (3) to any disputes arising out of the employment relationship of the parties.
14. Choice of Forum. The Company is based in Indiana, and Executive understands and acknowledges the Company's desire and need to defend any litigation against it in Indiana. Accordingly, the parties agree that any claim of any type brought by Executive against the Company or any of its employees or agents must be maintained only in a court sitting in Marion County, Indiana, or Ripley County, Indiana, or, if a federal court, the Southern District of Indiana, Indianapolis Division.
Executive further understands and acknowledges that in the event the Company initiates litigation against him, the Company may need to prosecute such litigation in his forum state, in the State of Indiana, or in such other state where Executive is subject to personal jurisdiction. Accordingly, the parties agree that the Company can pursue any claim against Executive in any forum in which Executive is subject to personal jurisdiction. Executive specifically consents to personal jurisdiction in the State of Indiana, as well as any state in which resides a customer assigned to him.
15. Successors and Assigns. The rights and obligations of the Company under this Agreement shall inure to its benefit, its successors and affiliated companies and shall be binding upon the successors and assigns of the Company. This Agreement, being personal to Executive, cannot be assigned by Executive, but his personal representative shall be bound by all its terms and conditions.
16. Waiver and Amendments, Etc. Failure of the Company to insist upon strict compliance with any terms or provisions of this Agreement shall not be deemed a waiver of any terms, provisions or rights of the Company. Moreover, no modifications, amendments, extensions or waivers of this Agreement or any provisions hereof shall be binding upon the Company or Executive unless in writing and signed by Executive and the Company.
17. Complete Agreement. This Agreement constitutes the entire employment agreement of the parties and supersedes all prior employment agreements addressing the terms, conditions, and issues contained herein. Nothing in this Agreement, however, affects any separate written agreements addressing other terms and conditions and issues (by way of example only, the Inventions, Improvements, Copyrights and Trade Secrets Agreement).
IN WITNESS WHEREOF, the parties have signed this Agreement effective as of the day and year first above written.
EXECUTIVE HILLENBRAND INDUSTRIES, INC.
By:
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Exhibit A
SETTLEMENT AND RELEASE AGREEMENT
THIS SETTLEMENT and RELEASE AGREEMENT (the "Agreement") is entered into by and between ___________ ("(1)") and (2) ("Company"). The parties agree to the following:
1. (1)'s active employment by the Company shall terminate effective (3). All Company benefits shall terminate on that date except as otherwise specifically stated below. (1) and the Company desire to compromise and settle any and all claims which (1) may have against the Company. The Company specifically denies and this Agreement shall not in any way be construed as an admission of, any liability to or any wrongful conduct against (1) or any other person.
2. In exchange for and in consideration of the promises contained in this
Agreement and contingent upon (1)'s compliance with such promises,
including but not limited to the promises contained in Paragraphs ___
through ___ below, the Company agrees to pay (1) (i) a severance pay
benefit, inclusive of any notice pay obligations ("Severance Pay"),
equal to the bi-weekly rate of ____________, less usual and ordinary
deductions, beginning on the effective date of this Agreement and
continuing for a period of ___ weeks or until (1) is re-employed,
whichever first occurs; (ii) for ___ of earned but unused vacation as
of (3); and (iii) life insurance coverage until Severance Pay
terminates. As of (3), (1) is ineligible to participate in the
Company's health insurance program and continuation of coverage
requirements under COBRA will be triggered at that time. However, as
additional consideration for the promises and obligations contained
herein, the Company further agrees to pay the cost of continued
coverage under the Company's health care program until Severance Pay
terminates. Thereafter, if applicable, coverage will be made available
to (1) at his sole expense for the remaining months of the extended
coverage period pursuant to applicable law under COBRA. The medical
insurance provided herein does not include any disability coverage. The
benefits described in this Paragraph reflect consideration provided to
(1) in addition to anything of value to which (1) already is entitled.
3. It is understood by the parties that unless it is specifically stated otherwise, nothing in this Agreement shall affect any rights (1) may have under any Profit Sharing and Savings Plan (401(k)) and/or Pension Plan provided by the Company as of the date of his termination.
4. In return for the promises contained in Paragraph 2, (1) shall and does hereby RELEASE, INDEMNIFY, HOLD HARMLESS, and FOREVER DISCHARGE THE COMPANY, its parent, subsidiaries or affiliates, and all of the Company's present or former employees, officers, servants, agents, stockholders and directors from any and all claims, demands, actions or causes of action on account of, arising out of or in any way connected with (a) (1)'s employment with the Company, (b) (1)'s leaving of that employment, (c) all matters alleged or which could have been alleged in a charge or complaint against the Company, (d) any and all injuries, loss or damages to (1), including any claims for attorney's fees, (e) any and all claims relating to the conduct of any employee, officer, director, or agent of the Company, and (f) any and all matters, transactions or things occurring prior to the date of signing the Agreement, including any and all possible claims, known or unknown, which could have been asserted against the Company or the Company's employees, agents, officers, stockholders or directors. This release shall not apply to claims that may arise after (1) signs this Agreement.
5. The release contained in Paragraph 4 includes, but is not limited to, any claims arising under federal, state or local laws relating to employment discrimination or harassment,
including any claims of discrimination based on age, disability,
handicap, national origin, race, religion or sex, any claims growing
out of any legal restrictions on an employer's right to separate its
employees and any claims for personal injury, compensatory or punitive
damages. This release includes, but is not limited to, any claims (1)
may have under the Civil Rights Acts of 1866 and 1964, as amended, 42
U.S.C. Sections 1981 and 2000(e) et seq.; the Civil Rights Act of 1991;
the Age Discrimination in Employment Act, as amended, 29 U.S.C.
Sections 621 et seq.; the Americans with Disabilities Act of 1990, as
amended, 42 U.S.C. Sections 12,101 et seq.; the Fair Labor Standards
Act 29 U.S.C. Sections 201 et seq.; and any other discrimination,
harassment or employment related law, rule or regulation or any federal
or state statute or common law doctrine regarding (i) the existence or
breach of oral or written contracts of employment, (ii) negligent or
intentional misrepresentations, (iii) wrongful discharge, (iv) just
cause dismissal, (v) defamation, (vi) interference with contract or
(vii) negligent or intentional infliction of emotional distress.
6. (1) hereby affirms and acknowledges the post-termination covenants contained in his Employment Agreement with the Company, including but not limited to, the non-compete, trade secret and confidentiality provisions. A copy of the Employment Agreement is attached to this Agreement as Exhibit A and incorporated herein.
7. On or before (3), (1) shall return to the Company any and all things in his possession or control relating to Company business, including but not limited to all Company credit cards, office equipment, personal computer, fax machine, pager, phone, correspondence, reports, vendor or supplier contracts, ledger sheets or other financial information, drawings, plans (including, but not limited to business and marketing plans), personnel or labor relations files, office keys, manuals, sample contracts and any other documents or things pertaining to the Company, including but not limited to any copies of the foregoing documents that are or may have been in (1)'s possession or control.
Furthermore, (1) shall not give, sell, make available or otherwise share any documents described above to or with any third party without the express written consent of the Company.
Finally, (1) expressly acknowledges that this Paragraph 7 is intended to cover all documents and other things that (1) created, controlled or came into contact with during his employment with the Company and that are directly or indirectly related to the Company, including but not limited to all documents and other things that (1) may have previously given, loaned or otherwise made available for other individuals or entities.
8. (1) shall not discuss with any individual proprietary or confidential information regarding the Company. Further, (1) shall not make any written or oral statement that may defame, disparage or cast in a negative light so as to do harm to the personal or professional reputation of (a) the Company, (b) the employees, officers, directors or trustees of the Company or (c) the services and/or products provided by the Company and its subsidiaries.
9. If any portion of this Agreement should be, for any reason, not enforceable, the parties agree that the remaining portion or portions should continue to be enforceable. Moreover, if (1) pursues any claims of any type against Company, (1) agrees to immediately return all consideration provided by Company as part of this Agreement.
10. (1) agrees and understands that this Agreement is confidential. He shall not communicate, display or otherwise reveal any of the contents of this Agreement except by written consent of the Company. (1) acknowledges that confidentiality is a
substantial inducement for Company to enter into this Agreement, and that there is consideration for this confidentiality provision in terms of the consideration set forth in Paragraph 2. For violations of this confidentiality provision, (1) acknowledges that injunctive relief and damages can be awarded to Company.
11. Each of the promises and obligations shall be binding upon and shall inure to the benefit of the heirs, executors, administrators, assigns and successors in interest of each of the parties.
12. This Agreement shall be governed by and interpreted in accordance with the laws of the State of
13. (1) also acknowledges that he has been advised of his right to discuss all aspects of this Agreement with his private attorney prior to signing this Agreement and further that he has carefully read and fully understands all of the provisions of this Agreement, and that he is knowingly and voluntarily entering into this Agreement.
14. (1) represents and agrees that he has been given a period of at least
____________ (___) calendar days, prior to signing this Agreement, to
consider this Agreement. (1) and Company further agree that (1) may
accept the terms of this Agreement prior to the expiration of the ___
calendar days. Additionally, (1) understands that he has a period of
seven (7) calendar days after signing this Agreement to revoke it. If
(1) does not advise the Company (by a writing received by Company
within such seven (7) day period) of his intent to revoke the
Agreement, the Agreement will become effective and enforceable upon the
expiration of the seven (7) days. THIS AGREEMENT SHALL NOT BECOME
EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS ENDED.
15. This Agreement represents the entire agreement between the parties; there are no other written or oral agreements between the parties. (1) represents and acknowledges that in signing this Agreement he does not rely, and has not relied, upon any representation or statement made by the Company or by any of the Company's employees, officers, agents, stockholders, directors or attorneys with regard to the subject matter, basis or effect of this Agreement or otherwise.
PLEASE READ CAREFULLY. THIS SETTLEMENT AND RELEASE
AGREEMENT INCLUDES A COMPLETE RELEASE OF ALL
KNOWN AND UNKNOWN CLAIMS.
The parties have each executed this Agreement on the dates indicated opposite their names.
Dated: By:
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Title:
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December 22, 2003
Frederick W. Rockwood
Hillenbrand Industries, Inc.
700 State Route 46 East
Batesville, Indiana 47006
Dear Fred:
Re: Amendment to Employment Agreement
This is to confirm that, notwithstanding anything in Paragraphs 4 and 5 of the Employment Agreement dated January 27, 2000, between you and Hill-Rom, Inc, Inc. ("Company") (hereinafter "Employment Agreement"), in the event your employment is involuntarily terminated by the Company without cause, you shall, subject to the terms and conditions set out below, be entitled to receive the greater of:
(i) (a) Fifty-two (52) weeks of your base salary at the time of termination paid as a lump sum, without set off for any other income over and above such severance or any Accrued Obligations and (b) any Accrued Obligations; or
(ii) (a) Severance pay determined in accordance with any guidelines established by the Company, without set off for any other income over and above such severance or any Accrued Obligations and (b) any Accrued Obligations;
"Accrued Obligations" collectively refers to accrued wages, deferred compensation, or other compensation, benefits, or perquisites which have been fully paid or fully accrued as of the effective date of your separation, in accordance with the Company's past practice and applicable law.
This severance pay will be in lieu of, and not in addition to, any amount of severance pay previously described in Paragraph 5 of your Employment Agreement as payable to you in the event your employment with the Company is involuntarily terminated without cause.
No severance pay shall be paid if you voluntarily leave the Company's employ or are terminated for cause. Any severance pay made payable hereunder shall be paid in lieu of, and not in addition to, any notice pay.
Additionally, such severance pay is contingent upon you (1) fully complying with any restrictive covenants contained in your Employment Agreement and (2) executing a Settlement and Release Agreement in a form not substantially different from that attached to your Employment Agreement as Exhibit A ("Separation Agreement") and including the terms contained in this Amendment.
Except to the extent explicitly amended herein, all terms and conditions contained in your Employment Agreement, in any document specifically incorporated therein by reference, and in any other agreement between you and the Company, shall remain in full force and effect.
Sincerely,
Patrick D. de Maynadier
Vice President
Hillenbrand Industries, Inc.
THIS AMENDMENT IS MADE PART OF AND SHOULD BE KEPT WITH YOUR EMPLOYMENT AGREEMENT
EXHIBIT 10.18
EXECUTIVE
EMPLOYMENT AGREEMENT
P R E A M B L E
This Executive Employment Agreement defines the essential terms and conditions of our employment relationship with you. The subjects covered in this Agreement are vitally important to you and to the Company. Thus, you should read the document carefully and ask any questions before signing the Agreement. Given the importance of these matters to you and the Company, all executives shall sign the Agreement as a condition of employment.
This EMPLOYMENT AGREEMENT, dated and effective this 1st day of March, 2001, is entered into by and between Hillenbrand Industries, Inc., an Indiana corporation (the "Company"), and Scott K. Sorensen, ("Executive").
W I T N E S S E T H:
WHEREAS, the Company is an Indiana corporation engaged through its various subsidiaries in the healthcare and death care industries throughout the United States and abroad;
WHEREAS, the Company is willing to employ Executive in an executive capacity and Executive desires to be employed by the Company in such capacity based upon the terms and conditions set forth in this Agreement;
WHEREAS, in the course of the employment contemplated under this Agreement, it will be necessary for Executive to acquire knowledge of certain trade secrets and other confidential and proprietary information regarding the Company and its subsidiaries (hereinafter jointly referred to as the "Companies"); and
WHEREAS, the Company and Executive (collectively referred to herein as the "Parties") acknowledge and agree that the execution of this Agreement is necessary to memorialize the terms and conditions of their employment relationship as well as safeguard against the unauthorized disclosure or use of the Company's confidential information and to otherwise preserve the goodwill and ongoing business value of the Company;
NOW THEREFORE, in consideration of Executive's employment, the Company's willingness to disclose confidential and proprietary information to Executive and the mutual covenants contained herein as well as other good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows:
1. Employment. The Company agrees to employ Executive and Executive agrees to serve as Vice President and Chief Financial Officer.
2. Duties. Executive agrees to perform all duties and responsibilities traditionally assigned to, or falling within the normal responsibilities of, an individual employed in the above-referenced
position, specifically including his agreement to provide the necessary oversight concerning all financial and SEC matters relating to the Company. Executive also agrees to perform any and all additional duties or responsibilities as may be assigned by the Company in its sole discretion.
3. Best Efforts and Duty of Loyalty. During the term of employment with the Company, Executive covenants and agrees to perform all assigned duties in a diligent and professional manner and in the best interest of the Company. Executive agrees to devote his full working time, attention, talents, skills and best efforts to further the Company's business and agrees not to take any action, or make any omission, that deprives the Company of any business opportunities or otherwise act in a manner that conflicts with the best interest of the Company or is otherwise detrimental to its business. Executive agrees not to engage in any outside business activity, whether or not pursued for gain, profit or other pecuniary advantage, without the express written consent of the Company. Executive shall act at all times in accordance with the Hillenbrand Industries, Inc. Handbook of Ethical Business Conduct, the Corporate Compliance Handbook and all other applicable policies which may exist or be adopted by the Company from time to time. The Parties agree that nothing contained herein shall be construed to prohibit Executive from serving on other corporate boards provided, however, such activities are disclosed in advance to the Company and have the approval of the Company's CEO, do not interfere with Executive's ability to perform all duties and responsibilities contemplated hereunder and do not otherwise violate the terms and conditions of this Agreement.
4. At-Will Employment. Subject to the terms and conditions set forth below in Paragraph No. 8, Executive specifically acknowledges and accepts such employment on an "at-will" basis and agrees that, notwithstanding anything contained herein to the contrary, both Executive and the Company retain the right to terminate this relationship at any time, with or without cause, for any reason not prohibited by applicable law. Executive acknowledges that nothing in this Agreement is intended to create, nor should be interpreted to create, an employment contract for any specified length of time between the Company and Executive.
5. Compensation. For all services rendered under this Agreement or on behalf of the Company, Executive shall be paid as follows:
(a) A base salary at the bi-weekly rate of Thirteen Thousand, Four Hundred, Sixty-one Dollars and Fifty-four Cents ($14,423.08), less usual and ordinary deductions;
(b) Incentive compensation, payable solely at the discretion of the Company, pursuant to the Company's Exempt Employee Executive Compensation Program; and
(c) Such additional compensation, benefits and perquisites as the Company, in its sole discretion, may deem appropriate.
Notwithstanding anything contained herein to the contrary, Executive acknowledges that the Company specifically reserves the right to make changes to Executive's compensation in its sole discretion, including but not limited to, modifying or eliminating a compensation component. The Parties anticipate that Executive's compensation structure will be reviewed on an annual basis but acknowledge that the Company shall have no obligation to do so.
6. Warranties and Indemnification. Executive warrants that he is not a party to any contract, restrictive covenant, or other agreement purporting to limit or otherwise adversely affecting his ability to provide the services contemplated under this Agreement. Alternatively, should any such agreement exist, Executive warrants that the contemplated services to be performed hereunder will not violate the terms and conditions of any such agreement. In either event,
Executive agrees to fully indemnify and hold the Company harmless from any and all claims arising from, or involving the enforcement of, any such restrictive covenants or other agreements.
7. Restricted Duties. Executive agrees not to disclose, or use for the benefit of the Company, any confidential or proprietary information belonging to any predecessor employer which otherwise has not been made public and further acknowledges that the Company has specifically instructed him not to disclose or use such confidential or proprietary information. Based on his understanding of the anticipated duties and responsibilities hereunder, Executive acknowledges that such duties and responsibilities will not compel the disclosure or use of any such confidential and proprietary information.
8. Termination of Employment. Executive's employment may be terminated at any time, without cause, by either party upon sixty (60) days' written notice or pay in lieu of notice. Executive's employment may be terminated at any time, without notice, for cause. For purposes of this Agreement, cause shall be defined to include but shall not be limited to dishonesty, nonperformance of duties, violation of Company policy or procedures, conviction of a felony, violation of the Hillenbrand Industries, Inc. Handbook of Ethical Business Conduct, unfaithfulness or a failure to act or not act in accordance with the direction of the Company or in a manner contrary to the best interests of the Company. In addition, Executive's employment shall immediately terminate upon his death. In the event Executive is unable to perform services hereunder because of disability, he shall not be entitled to any compensation except such as is ordinarily paid to disabled executive employees under the regular fringe benefit programs of the Company. In the event Executive voluntarily leaves the Company's employ or is terminated with or without cause prior to the end of the fiscal year, Executive shall not be entitled to any of the compensation, benefits and perquisites identified in Paragraphs 5(b) and 5(c) above for any portion of such fiscal year which have not already been paid to Executive as of the date of his separation.
9. Severance Payments. Subject to the terms and conditions set out below, if Executive's employment is terminated by the Company without cause, the Company shall pay Executive severance pay based upon his base salary at the time of termination for a period figured in accordance with any guidelines established by the Company or twelve (12) months, whichever is longer. No severance pay shall be paid if Executive voluntarily leaves the Company's employ or is terminated for cause. Moreover, any severance pay made payable hereunder shall be offset against any amount of notice pay paid pursuant to Paragraph 5 and is contingent upon Executive complying with the covenants and agreements of Paragraphs 12 through 15 and executing a Separation and Release Agreement in a form not substantially different from that attached to the Agreement as Exhibit A.
10. Documents, Inventions, Etc. All records, files, drawings, documents, equipment, and the like relating to the Company shall be and remain the sole property of the Company. Executive, on the termination of his employment hereunder, shall immediately return to the Company all such items without retention of any copies. De minimis items such as pay stubs, 401(k) plan summaries, employee bulletins, and the like are excluded from this requirement. Executive shall fully and promptly disclose to the Company all ideas, conceptions, inventions, discoveries, and designs that are conceived or contemplated by him within the scope of his employment and pertaining to the business of the Company (whether alone or with others and whether patentable or unpatentable hereinafter called "Inventions") and shall assign to the Company his entire right, title and interest in and to the Inventions. Executive shall take all reasonable action requested by the Company to protect, obtain title to and/or patent in any country in the name of the Company or its nominee, any of such Inventions, including execution and delivery of all applications, assignments and
other papers deemed necessary by the Company, provided he is reimbursed reasonable expenses incurred by him in so doing.
11. Confidential Information. Executive acknowledges that the Company possesses certain trade secrets as well as other confidential and proprietary information which the Company has acquired or will acquire at great effort and expense. Such information may include, without limitation, confidential information regarding the Companies' products and services, marketing strategies, business plans, operations, costs, current or prospective customer information (including customer contacts, requirements, creditworthiness and like matters), product concepts, designs, prototypes or specifications, research and development efforts, technical data and know-how, sales information, including pricing and other terms and conditions of sale, financial information, internal procedures, techniques, forecasts, methods, trade information, trade secrets, software programs, project requirements, inventions, trademarks, trade names, and similar information regarding the Companies' business (collectively referred to herein as "Confidential Information"). Executive further acknowledges that, as a result of his employment with the Company, Executive will have access to, will become acquainted with, and/or may help develop, such Confidential Information.
12. Restricted Use of Confidential Information. Executive agrees that all Confidential Information is and shall remain the sole and exclusive property of the Company. Except as may be expressly authorized by the Company in writing, Executive agrees not to disclose, or cause any other person or entity to disclose, any Confidential Information to any third party while employed by the Company and for as long thereafter as such information remains confidential (or as limited by applicable law). Further, Executive agrees to use such Confidential Information only in the course of Executive 's duties in furtherance of the Company's business and agrees not to make use of any such Confidential Information for Executive's own purposes or for the benefit of any other entity or person.
13. Non-Solicitation. During Executive's employment and for a period of twelve (12) months thereafter, Executive agrees not to engage in the following prohibited conduct:
(a) Solicit, offer products or services to, accept orders from, or otherwise transact commercial business with, any customer or entity with whom Executive had contacted or transacted any business during the twelve (12) month period preceding Executive's date of separation or about whom Executive possessed, or had access to, confidential and proprietary information;
(b) Attempt to entice or otherwise cause any third party to withdraw, curtail or cease doing business with the Company, specifically including customers, venders, independent contractors and other third party entities;
(c) Disclose to any person or entity the identities, contacts or preferences of any customers of the Company, or the identity of any other persons or entities having business dealings with the Company;
(d) Directly or indirectly induce any individual who has been employed by or had provided services to the Company within the six (6) month period immediately preceding the effective date of Executive's separation to terminate such relationship with the Company;
(e) Offer employment to, accepted employment inquiries from, or employ any individual who had been employed by the Company at any time within the six (6) month period immediately preceding the effective date of Executive's separation of employment; or
(f) Otherwise attempt to directly or indirectly interfere with the Company's business or its relationship with its employees, consultants, independent contractors or customers.
14. Acknowledged Need for Limited Non-Compete. Executive acknowledges that the Company has spent and will continue to expend substantial amounts of time, money and effort to develop its business strategies, Confidential Information, customer relationships, goodwill and employee relationships, and that Executive will benefit from these efforts. Further, Executive acknowledges the inevitable use of, or near-certain influence by his knowledge of, the Confidential Information disclosed to Executive during the course of employment if allowed to compete against the Company in an unrestricted manner and that such use would be unfair and extremely detrimental to the Company. Accordingly, based on these legitimate business reasons, Executive acknowledges the Company's need to protect its legitimate business interests by reasonably restricting Executive's ability to compete with the Company on a limited basis.
15. Limited Non-Compete. For the above reasons, and as a condition of employment, Executive agrees during the Relevant Non-Compete Period not to directly or indirectly engage in the following competitive activities:
(a) Executive shall not have any ownership interest in, work for, advise, consult, or have any business connection or business or employment relationship with any Competitor unless Executive provides written notice to the Company of such employment prior to accepting such employment and, further, provides sufficient written assurances to the Company's satisfaction that such employment will not jeopardize the Company's legitimate interests or otherwise violate the terms of this Agreement;
(b) Executive shall not engage in any research, development,
production, sale or distribution of any Competitive Products,
specifically including any products or services relating to
those for which Executive had responsibility for the twelve
(12) month period preceding Executive's date of separation;
(c) Executive shall not market, sell, or otherwise offer or provide any Competitive Products within the applicable Geographic Territory, specifically including any products or services relating to those for which Executive had responsibility for the twelve (12) month period preceding Executive's date of separation; and
(d) Executive shall not distribute, market, sell or otherwise offer or provide any Competitive Products to any customer of the Company with whom Executive had contact (either directly or indirectly) or for which Executive had responsibility at any time during the twelve (12) month period preceding Executive's date of separation.
Executive agrees that the foregoing restrictions apply equally to Executive whether performed individually, directly or indirectly, or as a partner, shareholder, officer, director, manager, employee, salesman, independent contractor, broker, agent, or consultant for any other individual, partnership, firm, corporation, company, or other entity engaged in such conduct.
16. Non-Compete Definitions. For purposes of this Agreement, the Parties agree that the following terms shall apply:
(a) "Competitive Products" shall include any product or service which directly or indirectly competes with, is substantially similar to, or serves as a reasonable substitute for, any
product or service in research, development or design, or manufactured, produced, sold or distributed by the Companies;
(b) "Competitor" shall include any person or entity that offers or plans to offer any Competitive Products;
(c) "Geographic Territory" shall include any territory formally
assigned to Executive as well as all territories in which
Executive has provided any services, sold any products or
otherwise had responsibility at any time during the twelve
(12) month period preceding Executive's date of separation;
(d) "Relevant Non-Compete Term" shall include the period of
Executive's employment with the Company as well as a period of
twelve (12) months after such employment is terminated,
regardless of the reason for such termination provided,
however, that this period shall be reduced to the greater of
(i) six (6) months or (ii) the length of Executive's
employment with the Company, if such employment is less than
twelve (12) months.
17. Consent to Reasonableness. In light of the above-referenced concerns, including Executive's knowledge of and access to the Company's Confidential Information, Executive acknowledges that the terms of the foregoing restrictive covenants are reasonable and necessary to protect the Company's legitimate business interests and will not unreasonably interfere with Executive's ability to obtain alternate employment. As such, Executive hereby agrees that such restrictions are valid and enforceable, and affirmatively waives any argument or defense to the contrary.
18. Survival of Restrictive Covenants. Executive acknowledges that the above restrictive covenants shall survive the termination of this Agreement and the termination of Executive's employment for any reason. Executive further acknowledges that any alleged breach by the Company of any contractual, statutory or other obligation shall not excuse or terminate the obligations hereunder or otherwise preclude the Company from seeking injunctive or other relief. Rather, Executive acknowledges that such obligations are independent and separate covenants undertaken by Executive for the benefit of the Company.
19. Scope of Restrictions. If the scope of any restriction contained in any preceding paragraphs of this Agreement is deemed too broad to permit enforcement of such restriction to its fullest extent, then such restriction shall be enforced to the maximum extent permitted by law, and Executive hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction.
20. Specific Enforcement/Injunctive Relief. Executive agrees that it would be difficult to measure any damages to the Company from a breach of the above-referenced restrictive covenants, but that such damages would be great, incalculable and irremedial, and that monetary damages alone would be an inadequate remedy. Accordingly, Executive agrees that the Company shall be entitled to injunctive relief against such breach, or threatened breach, in any court having jurisdiction. In addition, if Executive violates any such restrictive covenant, Executive agrees that the period of such violation shall be added to the term of the restriction. In determining the period of any violation, the Parties stipulate that in any calendar month in which Executive engages in any activity violative of such provisions, Executive shall be deemed to have violated such provision for the entire month, and that month shall be added to the duration of the non-competition provision. Executive acknowledges that the remedies described above shall not be the exclusive remedies, and the Company may seek any other remedy available to it either in law or in equity, including the recovery of compensatory or punitive damages. Executive further
agrees that the Company shall be entitled to an award of all costs and attorneys' fees incurred by it in any attempt to enforce the terms of this Agreement, if the Company prevails.
21. Publicly Traded Stock. The Parties agree that nothing contained in this Agreement shall be construed to prohibit Executive from investing his personal assets in any stock or corporate security traded or quoted on a national securities exchange or national market system provided, however, such investments do not require any services on the part of Executive in the operation or the affairs of the business or otherwise violate the Hillenbrand Industries, Inc. Handbook of Ethical Business Conduct.
22. Titles. Titles are used for the purpose of convenience in this Agreement and shall be ignored in any construction of it.
23. Severability. The Parties agree that each and every paragraph, sentence, clause, term and provision of this Agreement is severable and that, in the event any portion of this Agreement is adjudged to be invalid or unenforceable, the remaining portions thereof shall remain in effect and be enforced to the fullest extent permitted by law. Further, should any particular covenant, provision or clause of this Agreement be held unreasonable or contrary to public policy for any reason, the Parties acknowledge and agree that such covenant, provision or clause shall automatically be deemed modified such that the contested covenant, provision or clause will have the closest effect permitted by applicable law to the original form and shall be given effect and enforced as so modified to whatever extent would be reasonable and enforceable under applicable law.
24. Choice of Forum. The Company is based in Indiana, and Executive understands and acknowledges the Company's desire and need to defend any litigation against it in Indiana. Accordingly, the Parties agree that any claim of any type brought by Executive against the Company or any of its employees or agents must be maintained only in a court sitting in Marion County, Indiana, or Ripley County, Indiana, or, if a federal court, the Southern District of Indiana, Indianapolis Division. Executive further understands and acknowledges that in the event the Company initiates litigation against Executive, the Company may need to prosecute such litigation in Executive's forum state, in the state of Indiana, or in such other state where the Executive is subject to personal jurisdiction. Accordingly, the Parties agree that the Company can pursue any claim against Executive in any forum in which Executive is subject to personal jurisdiction. Executive specifically consents to personal jurisdiction in the State of Indiana, as well as any state in which resides a customer assigned to the Executive.
25. Choice of Law. This Agreement shall be deemed to have been made within the County of Ripley, State of Indiana and shall be interpreted and construed in accordance with the laws of the State of Indiana. Any and all matters of dispute of any nature whatsoever arising out of, or in any way connected with the interpretation of this Agreement, any disputes arising out of the Agreement or the employment relationship between the Parties hereto, shall be governed by, construed by and enforced in accordance with the laws of the State of Indiana without regard to any applicable state's choice of law provisions.
26. Successors and Assigns. The rights and obligations of the Company under this Agreement shall inure to its benefit, its successors and affiliated companies and shall be binding upon the successors and assigns of the Company. This Agreement, being personal to Executive, cannot be assigned by Executive, but his personal representative shall be bound by all its terms and conditions.
27. Assignment-Waiver-Notices. The rights and obligations of the Company under this Agreement shall inure to the benefit of its successors and affiliated companies and shall be binding upon the successors and assignees of the Company. This Agreement, being personal to the Executive, cannot be assigned by Executive, but his personal representative shall be bound by all its terms and conditions. The waiver by the Company of breach of any provision of this Agreement by Executive shall not be construed as a waiver of any subsequent breach by Executive. Any notice hereunder shall be sufficient if in writing and mailed to the last known residence of Executive or to the Company at its principal office with a copy mailed to the Office of General Counsel.
28. Amendments and Modifications. Except as specifically provided herein, no modification, amendment, extension or waiver of this Agreement or any provision hereof shall be binding upon the Company or Executive unless in writing and signed by both parties. Nothing in this Agreement shall be construed as a limitation upon the Company's right to modify or amend any of its manuals at its sole discretion and any such modification or amendment which pertains to matters addressed herein shall be deemed to be incorporated in and made a part of this Agreement.
29. Outside Representations. Employee represents and acknowledges that in signing this Agreement he does not rely, and has not relied, upon any representation or statement made by the Company or by any of the Company's employees, officers, agents, stockholders, directors or attorneys with regard to the subject matter, basis or effect of this Agreement other than those specifically contained herein.
30. Entire Agreement. This Agreement constitutes the entire employment agreement between the Parties hereto concerning the subject matter hereof and shall supersede all prior and contemporaneous agreements between the Parties in connection with the subject matter of this Agreement. Nothing in this Agreement, however, shall affect any separately-executed written agreement addressing any other issues (e.g., the Inventions, Improvements, Copyrights and Trade Secrets Agreement). Finally, the Parties further agree that no verbal or other statements, discussions, or impressions, other than those provisions contained in this Agreement, have been relied upon by either party in executing this Agreement.
IN WITNESS WHEREOF, the parties have signed this Agreement effective as of the day and year first above written.
EXECUTIVE HILLENBRAND INDUSTRIES, INC. Signed: ____________________________ By: ______________________________ Printed: ___________________________ Title: ___________________________ Dated: _____________________________ Dated: ___________________________ |
CAUTION: READ BEFORE SIGNING
Exhibit A
SEPARATION AND RELEASE AGREEMENT
THIS SEPARATION and RELEASE AGREEMENT ("Agreement") is entered into by and between [EMPLOYEE'S FULL NAME] ("Employee") and Hillenbrand Industries, Inc. ("Company"). To wit, the Parties agree as follows:
1. Employee's active employment by the Company shall terminate effective
[DATE OF TERMINATION] (Employee's "Effective Termination Date"). As of
that date, all Company benefits and obligations shall terminate except
as specifically provided by this Agreement. Employee agrees that the
Company shall have no other obligations or liabilities to him and that
his receipt of the severance benefits provided herein shall constitute
a complete settlement and satisfaction of any and all claims he may
have against the Company.
2. In consideration of the promises contained in this Agreement and contingent upon Employee's compliance with such promises, the Company agrees to provide Employee the following:
(i) Severance pay, inclusive of any notice pay obligations, to be paid at the bi-weekly rate of $_______, less applicable deductions, for a period of [WEEKS OF SEPARATION] (___) weeks following the date of termination or until Employee becomes employed again, whichever first occurs;
(ii) Payment for any earned but unused vacation as of [DATE OF TERMINATION]; and
(iii) Life insurance coverage until the above-referenced Severance Pay terminates.
The above Severance Benefits shall be paid in accordance with the Company's standard payroll practices and shall begin on the first normally scheduled payroll following Employee's Effective Termination Date or the effective date of this Agreement, whichever occurs last.
3. As of the Effective Termination Date, Employee will become ineligible to participate in the Company's health insurance program and continuation of coverage requirements under COBRA will be triggered at that time. However, as additional consideration for the promises and obligations contained herein, and provided Employee completes the applicable election of coverage forms, the Company further agrees to pay the cost of such continued coverage under the Company's health care program until the above-referenced Severance Pay terminates. Thereafter, if applicable, coverage will be made available to Employee at his sole expense for the remaining months of the COBRA coverage period made available pursuant to applicable law. The medical insurance provided herein does not include any disability coverage.
4. Should Employee become employed before the above-referenced Severance Benefits are exhausted or terminated, Employee agrees to so notify the Company in writing within three (3) business days of Employee's acceptance of such employment, providing the name of such employer as well as the anticipated start date.
5. It is understood by the Parties that, unless it is specifically stated otherwise, nothing in this Agreement shall affect any rights Employee may have under any Profit Sharing and Savings Plan (401(k)) and/or Pension Plan provided by the Company as of the date of his termination, such items to be governed by the terms of the applicable plan documents.
6. In exchange for the foregoing Severance Benefits, [EMPLOYEE'S FULL NAME] on behalf of himself, his heirs, representatives, agents and assigns hereby COVENANTS NOT TO SUE, RELEASES, INDEMNIFIES, HOLDS HARMLESS, and FOREVER DISCHARGES (i) Hillenbrand Industries, Inc., (ii) its parent, subsidiary or affiliated entities, (iii) all of their present or former directors, officers, employees, shareholders, and agents as well as (iv) all predecessors, successors and assigns thereof from any and all actions, charges, claims, demands, damages or liabilities of any kind or character whatsoever, known or unknown, which Employee now has or may have had through the effective date of this Agreement.
7. Without limiting the generality of the foregoing release, it shall
include: (i) all claims or potential claims arising under any federal,
state or local laws relating to the Parties' employment relationship,
including any claims Employee may have under the Civil Rights Acts of
1866 and 1964, as amended, 42 U.S.C. Sections 1981 and 2000(e) et seq.;
the Civil Rights Act of 1991; the Age Discrimination in Employment Act,
as amended, 29 U.S.C. Sections 621 et seq.; the Americans with
Disabilities Act of 1990, as amended, 42 U.S.C. Sections 12,101 et
seq.; the Fair Labor Standards Act 29 U.S.C. Sections 201 et seq.; and
any other federal, state or local law governing the Parties' employment
relationship; (ii) any claims on account of, arising out of or in any
way connected with Employee's employment with the Company or leaving of
that employment; (iii) any claims alleged or which could have been
alleged in any charge or complaint against the Company; (iv) any claims
relating to the conduct of any employee, officer, director, agent or
other representative of the Company; (v) any claims of discrimination
or harassment on any basis; (vi) any claims arising from any legal
restrictions on an employer's right to separate its employees; (vii)
any claims for personal injury, compensatory or punitive damages or
other forms of relief; and (viii) all other causes of action sounding
in contract, tort or other common law basis, including (a) the breach
of any alleged oral or written contract, (b) negligent or intentional
misrepresentations, (c) wrongful discharge, (d) just cause dismissal,
(e) defamation, (f) interference with contract or business relationship
or (g) negligent or intentional infliction of emotional distress.
8. The Parties acknowledge that it is their mutual and specific intent that the above waiver fully comply with the requirements of the Older Workers Benefit Protection Act (29 U.S.C. Section 626). Accordingly, Employee hereby acknowledges that:
(a) He has carefully read and fully understands all of the provisions of this Agreement and that he has entered into this Agreement knowingly and voluntarily;
(b) The Severance Benefits offered in exchange for Employee's release of claims exceed in kind and scope that to which he would have otherwise been legally entitled;
(c) Prior to signing this Agreement, Employee had been advised in writing and given an opportunity to consult with an attorney of his choice concerning its terms and conditions; and
(d) He has been offered at least twenty-one (21) days within which to review and consider this Agreement.
9. The Parties agree that nothing contained herein shall purport to waive or otherwise affect any of Employee's rights or claims which may arise after this Agreement is signed by him.
10. The Parties agree that this Agreement shall not become effective and enforceable until seven (7) calendar days after its execution by Employee or Employee's last day of active employment, whichever occurs last. Employee may revoke this Agreement for any reason by providing written notice of such intent to the Company within seven (7) days after he has signed this Agreement, thereby forfeiting Employee's right to receive any Severance Benefits provided hereunder and rendering this Agreement null and void in its entirety.
11. Employee acknowledges that his termination and the severance benefits offered hereunder were based on an individual determination and were not offered in conjunction with any group termination or group severance program.
12. Employee hereby affirms and acknowledges his continued obligations to comply with the post-termination covenants contained in his Employment Agreement, including but not limited to, the non-compete, trade secret and confidentiality provisions. Employee acknowledges that a copy of the Employment Agreement has been attached to this Agreement as Exhibit ___ or has otherwise been provided to him and, to the extent not inconsistent with the terms of this Agreement, the terms thereof shall be incorporated herein by reference. Employee acknowledges that the restrictions contained therein are valid and reasonable in every respect and are necessary to protect the Company's legitimate business interests. Employee hereby affirmatively waives any claim or defense to the contrary.
13. On or before [DATE OF TERMINATION], Employee agrees to return to the Company the original and all copies of all things in his possession or control relating to the Company or its business, including but not limited to any and all contracts, reports, memoranda, correspondence, manuals, forms, records, designs, budgets, contact information or lists (including customer, vendor or supplier lists), ledger sheets or other financial information, drawings, plans (including, but not limited to, business, marketing and strategic plans), personnel or other business files, computer hardware, software, or access codes, door and file keys, identification, credit cards, pager, phone, and any and all other physical, intellectual, or personal property of any nature that he received, prepared, helped prepare, or directed preparation of in connection with his employment with the Company. Nothing contained herein shall be construed to require the return of any non-confidential and de minimis items regarding Employee's pay, benefits or other rights of employment such as pay stubs, W-2 forms, 401(k) plan summaries, benefit statements, etc.
14. Employee agrees not to discuss or disclose, directly or indirectly, any proprietary or confidential information regarding the Company without its express written consent. Employee further agrees not to make any written or oral statement that may defame, disparage or cast in a negative light so as to do harm to the personal or professional reputation of (a) the Company, (b) its employees, officers, directors or trustees or (c) the services and/or products provided by the Company and its subsidiaries or affiliate entities.
15. The Parties agree that each and every paragraph, sentence, clause, term and provision of this Agreement is severable and that, if any portion of this Agreement should be deemed not enforceable for any reason, such portion shall be stricken and the remaining portion or portions thereof should continue to be enforced to the fullest extent permitted by applicable law.
16. Employee specifically agrees and understands that the existence and terms of this Agreement are strictly CONFIDENTIAL and that such confidentiality is a material term of this Agreement. Accordingly, except as required by law or unless authorized to do so by the Company in writing, Employee agrees that he shall not communicate, display or otherwise reveal any of the contents of this Agreement to anyone other than his spouse, legal counsel or financial advisor provided,
however, that they are first advised of the confidential nature of this Agreement and Employee obtains their agreement to be bound by the same. The Company agrees that Employee may respond to legitimate inquiries regarding the termination of his employment by stating that the Parties have terminated their relationship on an amicable basis and that the Parties have entered into a Confidential Separation and Release Agreement which prohibits him from further discussing the specifics of his separation. Nothing contained herein shall be construed to prevent Employee from discussing or otherwise advising subsequent employers of the existence of any obligations as set forth in his Employment Agreement. Further, nothing contained herein shall be construed to limit or otherwise restrict the Company's ability to disclose the terms and conditions of this Agreement as it sees fit in its sole discretion.
17. In the event that Employee breaches or threatens to breach any provision of this Agreement, he agrees that the Company shall be entitled to seek any and all equitable and legal relief provided by law, specifically including immediate and permanent injunctive relief. Employee hereby waives any claim that the Company has an adequate remedy at law. In addition, and to the extent not prohibited by law, Employee agrees that the Company shall be entitled to discontinue providing any additional Severance Benefits as well as an award of all costs and attorneys' fees incurred by the Company in any effort to enforce the terms of this Agreement if the Company prevails. Employee agrees that the foregoing relief shall not be construed to limit or otherwise restrict the Company's ability to pursue any other remedy provided by law, including the recovery of any actual, compensatory or punitive damages. Moreover, if Employee pursues any claims against the Company subject to the foregoing General Release, or breaches the above Confidential provision, Employee agrees to immediately reimburse the Company for the value of all benefits received under this Agreement to the fullest extent permitted by law.
18. Employee acknowledges that this Agreement is entered into solely for the purpose of terminating his employment relationship with the Company on an amicable basis and shall not be construed as an admission of liability or wrongdoing by the Company and further acknowledges that the Company has expressly denied any such liability or wrongdoing.
19. Each of the promises and obligations shall be binding upon and shall inure to the benefit of the heirs, executors, administrators, assigns and successors in interest of each of the Parties.
20. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Indiana.
21. Employee represents and acknowledges that in signing this Agreement he does not rely, and has not relied, upon any representation or statement made by the Company or by any of the Company's employees, officers, agents, stockholders, directors or attorneys with regard to the subject matter, basis or effect of this Agreement other than those specifically contained herein.
22. This Agreement represents the entire agreement between the Parties concerning the subject matter hereof, shall supercede any and all prior agreements which may otherwise exist between them concerning the subject matter hereof (specifically excluding, however, the post-termination obligations contained in any existing Employment Agreement or other legally-binding document), and shall not be altered, amended, modified or otherwise changed except by a writing executed by both Parties.
PLEASE READ CAREFULLY. THIS SEPARATION AND RELEASE
AGREEMENT INCLUDES A COMPLETE RELEASE OF ALL
KNOWN AND UNKNOWN CLAIMS.
IN WITNESS WHEREOF, the Parties have themselves signed, or caused a duly authorized agent thereof to sign, this Agreement on their behalf and thereby acknowledge their intent to be bound by its terms and conditions.
"EMPLOYEE" HILLENBRAND INDUSTRIES, INC. Signed: ______________________________ By: ______________________________ Printed: _____________________________ Title: ___________________________ Dated: _______________________________ Dated: ___________________________ |
December 22, 2003
Scott K. Sorensen
Hillenbrand Industries, Inc.
700 State Route 46 East
Batesville, Indiana 47006
Dear Scott:
Re: Amendment to Employment Agreement
This is to confirm that, notwithstanding anything in Paragraphs 8 and 9 of the Employment Agreement dated March 1, 2001, between you and Hillenbrand Industries, Inc, Inc. ("Company") (hereinafter "Employment Agreement"), in the event your employment is involuntarily terminated by the Company without cause, you shall, subject to the terms and conditions set out below, be entitled to receive the greater of:
(i) (a) Fifty-two (52) weeks of your base salary at the time of termination paid as a lump sum, without set off for any other income over and above such severance or any Accrued Obligations and (b) any Accrued Obligations; or
(ii) (a) Severance pay determined in accordance with any guidelines established by the Company, without set off for any other income over and above such severance or any Accrued Obligations and (b) any Accrued Obligations;
"Accrued Obligations" collectively refers to accrued wages, deferred compensation, or other compensation, benefits, or perquisites which have been fully paid or fully accrued as of the effective date of your separation, in accordance with the Company's past practice and applicable law.
This severance pay will be in lieu of, and not in addition to, any amount of severance pay previously described in Paragraph 9 of your Employment Agreement as payable to you in the event your employment with the Company is involuntarily terminated without cause.
No severance pay shall be paid if you voluntarily leave the Company's employ or are terminated for cause. Any severance pay made payable hereunder shall be paid in lieu of, and not in addition to, any notice pay.
Additionally, such severance pay is contingent upon you (1) fully complying with any restrictive covenants contained in your Employment Agreement and (2) executing a Separation and Release Agreement in a form not substantially different from that attached to your Employment Agreement as Exhibit A ("Separation Agreement") and including the terms contained in this Amendment.
Except to the extent explicitly amended herein, all terms and conditions contained in your Employment Agreement, in any document specifically incorporated therein by reference, and in any other agreement between you and the Company, shall remain in full force and effect.
Sincerely,
Frederick W. Rockwood
President and CEO
Hillenbrand Industries, Inc.
THIS AMENDMENT IS MADE PART OF AND SHOULD BE KEPT WITH YOUR EMPLOYMENT AGREEMENT
EXHIBIT 10.19
EXECUTIVE
EMPLOYMENT AGREEMENT
P R E A M B L E
This Executive Employment Agreement defines the essential terms and conditions of our employment relationship with you. The subjects covered in this Agreement are vitally important to you and to the Company. Thus, you should read the document carefully and ask any questions before signing the Agreement. Given the importance of these matters to you and the Company, all executives shall sign the Agreement as a condition of employment.
This EMPLOYMENT AGREEMENT, dated and effective this 28th day of January, 2002, ("Agreement") is entered into by and between Hillenbrand Industries, Inc. ("Company"), and Patrick D. de Maynadier ("Executive").
W I T N E S S E T H:
WHEREAS, the Company is an Indiana corporation engaged through its various subsidiary entities in the death care, healthcare and funeral services industries throughout the United States and abroad;
WHEREAS, the Company is willing to employ Executive in an executive capacity and Executive desires to be employed by the Company in such capacity based upon the terms and conditions set forth in this Agreement;
WHEREAS, in the course of the employment contemplated under this Agreement, it will be necessary for Executive to acquire knowledge of certain trade secrets and other confidential and proprietary information regarding the Company as well as its subsidiary and/or affiliated entities (hereinafter jointly referred to as the "Companies"); and
WHEREAS, the Company and Executive (collectively referred to herein as the "Parties") acknowledge and agree that the execution of this Agreement is necessary to memorialize the terms and conditions of their employment relationship as well as safeguard against the unauthorized disclosure or use of the Company's confidential information and to otherwise preserve the goodwill and ongoing business value of the Company;
NOW THEREFORE, in consideration of Executive's employment, the Company's willingness to disclose certain confidential and proprietary information to Executive and the mutual covenants contained herein as well as other good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows:
1. Employment. The Company agrees to employ Executive, and Executive agrees to serve as, Vice President, General Counsel & Secretary.
2. Duties. Executive agrees to perform all duties and responsibilities traditionally assigned to, or falling within the normal responsibilities of, an individual employed in the above-referenced position. Executive also agrees to perform any and all additional duties or responsibilities as may be reasonably assigned by the Company in its sole discretion consistent with the Executive's position as Vice President, General Counsel and Secretary .
3. Best Efforts and Duty of Loyalty. During the term of employment with the Company, Executive covenants and agrees to perform all assigned duties in a diligent and professional manner and in the best interest of the Company. Executive agrees to devote his full working time, attention, talents, skills and best efforts to further the Company's business and agrees to use his good faith efforts not to take any action, or make any omission, that deprives the Company of any business opportunities or otherwise act in a manner that conflicts with the best interest of the Company or is otherwise detrimental to its business. Executive agrees not to engage in any outside business activity, whether or not pursued for gain, profit or other pecuniary advantage, without the express written consent of the Company. Executive shall act at all times in accordance with the Hillenbrand Industries, Inc. Handbook of Ethical Business Conduct, the Corporate Compliance Handbook and all other applicable policies which may exist or be adopted by the Company from time to time. Notwithstanding anything to the contrary contained in this Agreement, the Company acknowledges and consents to Executive's limited obligations and responsibilities as an officer and agent of SDI Investments Liquidating Trust and its Subsidiaries and as an employee of and special advisor to CombiMatrix Corporation (which position shall terminate no later than September 1, 2002).
4. At-Will Employment. Subject to the terms and conditions set forth below, Executive specifically acknowledges and accepts such employment on an "at-will" basis and agrees that, subject to the terms and conditions set forth in this Agreement, both Executive and the Company retain the right to terminate this relationship at any time, with or without cause, for any reason not prohibited by applicable law upon proper notice. Executive acknowledges that nothing in this Agreement is intended to create, nor should be interpreted to create, an employment contract for any specified length of time between the Company and Executive.
5. Compensation. For all services rendered by Executive on behalf of, or at the request of, the Company, Executive shall be paid as follows:
(a) A base salary at the bi-weekly rate of Ten Thousand, Seven Hundred Sixty-Nine Dollars and Twenty-three Cents ($10,769.23), less usual and ordinary deductions;
(b) Incentive compensation, payable solely at the discretion of the Company, pursuant to the Company's Exempt Employee Executive Compensation Program or any other program as the Company may establish in its sole discretion; and
(c) Such additional compensation, benefits and perquisites as the Company may deem appropriate, including, without limitation, those set forth in the letter from Fred Rockwood to Executive dated January 11, 2002 (the terms of which shall be incorporated herein by reference). Moreover, Executive shall be eligible to receive incentive compensation and additional compensation, benefits and perquisites at levels substantially comparable to other peer level executives. Employee shall be entitled to at least four weeks per year paid vacation. During 2002, he may take five additional business days at a mutually convenient time to move his belongings from Seattle, Washington to the Batesville, Indiana area.
Notwithstanding anything contained herein to the contrary, Executive acknowledges that the Company specifically reserves the right to make changes to Executive's compensation in its sole discretion including, but not limited to, modifying or eliminating a compensation component. The Parties agree that such changes shall be deemed effective immediately and a modification of this Agreement unless, within fourteen (14) days after receiving notice of such change, Executive exercises his right to terminate this Agreement without cause. The Parties anticipate that Executive's compensation structure will be reviewed on an annual basis but acknowledge that the Company shall have no obligation to do so.
6. Direct Deposit. As a condition of employment, and within thirty (30) days of the effective date of this Agreement, Executive agrees to make all necessary arrangements to have all sums paid pursuant to this Agreement direct deposited into one or more bank accounts as designated by Executive.
7. Warranties and Indemnification. Executive warrants that he is not a party to any contract, restrictive covenant, or other agreement purporting to limit or otherwise adversely affecting his ability to secure employment with any third party except for employment agreements with previous employers, which Executive warrants will not be violated by his employment by or performance of services for the Company as contemplated hereby. Executive agrees to fully indemnify and hold the Company harmless from any and all claims arising from, or involving the enforcement of, any such restrictive covenants or other agreements.
8. Restricted Duties. Executive agrees not to disclose, or use for the benefit of the Company, any confidential or proprietary information belonging to any predecessor employer which otherwise has not been made public and further acknowledges that the Company has specifically instructed him not to disclose or use such confidential or proprietary information. Based on his understanding of the anticipated duties and responsibilities hereunder, Executive acknowledges that such duties and responsibilities will not compel the disclosure or use of any such confidential and proprietary information.
9. Termination Without Cause. Executive's employment may be terminated at any time, without cause, by either party upon sixty (60) days' advance written notice or pay in lieu of notice. In such event, Executive shall only be entitled to such compensation, benefits and perquisites which have been paid or fully accrued as of the effective date of his separation and as otherwise set forth in this Agreement. For purposes of this Agreement, Executive's employment will be deemed to have been terminated "without cause" upon the occurrence, without Executive's consent, of any of the following circumstances:
(i) The assignment to Executive of duties that are materially inconsistent with the position initially held by the Executive or a change in his reporting relationship to the CEO;
(ii) The failure to elect or reelect Executive to the office of Vice President, General Counsel and Secretary (unless such failure is related in any way to the Company's decision to terminate Executive for cause);
(iii) The failure of the Company to continue to provide Executive with office space, related facilities and support personnel (including, but not limited to, administrative and secretarial assistance) within the Company's principal executive offices commensurate with his responsibilities to, and position within, the Company;
(iv) A reduction by the Company in the amount of Executive's base salary or the discontinuation or reduction by the Company of Executive's participation at the same
level of eligibility as other peer executives in any incentive compensation, additional compensation, benefits, policies or perquisites;
(v) The relocation of the Company's principal executive offices or Executive's place of work to a location of more than 100 miles outside of Batesville, Indiana; or
(vi) The failure by the Company to timely reimburse Executive for any valid documented business expenses.
10. Termination With Cause. Executive's employment may be terminated at any time "for cause" without notice or prior warning. For purposes of this Agreement, "cause" shall mean the Company's good faith determination that Executive has:
(i) Failed, refused or otherwise been deemed unable to fully and timely comply with the terms and conditions of this Agreement, specifically including any reasonable instructions or orders issued by the Company, provided such noncompliance is not based primarily on Employee's good faith 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 Company's reasonable opinion, to cause the Company, it officers or its directors embarrassment or ridicule;
(iii) Violated any Company policy or procedures, specifically including a violation of Hillenbrand Industries, Inc.'s Handbook of Ethical Business Conduct;
(iv) Disclosed without proper authorization any trade secrets or other Confidential Information (as defined herein); or
(v) Engaged in any act which, in the reasonable opinion of the Company, is contrary to its best interests or would hold the Company, its officers or directors up to probable civil or criminal liability, provided that, if Executive acts in good faith in compliance with applicable legal or ethical standards, such actions shall not be grounds for termination for cause.
Upon the occurrence or discovery of any event specified above, the Company shall have the right to terminate Executive's employment, effective immediately, by providing notice thereof to Executive without further obligation to him, other than accrued wages, deferred compensation or other accrued benefits of employment (collectively referred to herein as "Accrued Obligations") which shall be paid in accordance with the Company's past practice and applicable law. To the extent any violation of this Paragraph is capable of being cured by Executive in a reasonable amount time, the Company agrees to provide Executive with a reasonable opportunity to so cure such defect. Absent mutual agreement, the Parties agree that it is not possible for Executive to cure any violations of Paragraph Nos. 10(ii) or (iv) and, therefore, no opportunity for cure need be provided in those circumstances.
11. Termination Due to Death or Disability. In the event Executive dies or suffers a disability (as defined herein) during the term of employment, this Agreement shall automatically be terminated on the date of such death or disability without further obligation on the part of the Company", other than for (a) payment of the sum of Accrued Obligations, which shall be paid to Executive or his estate or beneficiary, as applicable, in a lump sum in cash upon termination; and (b) payment
to Employee or his estate or beneficiary, as applicable, any amounts due pursuant to the terms of any applicable benefit plans. For purposes of this Agreement, Executive shall be considered to have suffered a "disability" upon the occurrence of one or more of the following events:
(i) Executive becomes eligible for or receives any benefits pursuant to any disability insurance policy as a result of a determination under such policy that Executive is permanently disabled;
(ii) Executive becomes eligible for or receives any disability benefits under the Social Security Act; or
(iii) A good faith determination by the Company that Executive is and will likely remain unable to perform the essential functions of his duties or responsibilities hereunder on a full-time basis, subject to reasonable accommodation, as a result of any mental or physical impairment.
Notwithstanding anything expressed or implied above to the contrary, the Company agrees to fully comply with its obligations under the Americans with Disabilities Act as well as any other applicable federal, state, or local law, regulation, or ordinance governing the protection of individual with such disabilities as well as the Company's obligation to provide reasonable accommodation thereunder.
12. Severance Payments. In the event Executive's employment is terminated
by the Company without cause, and subject to the terms and conditions
set out below, Executive shall be eligible for severance pay based upon
his base salary at the time of termination for a period determined in
accordance with any guidelines established by the Company or a period
of up to twelve (12) months, whichever is longer. Executive shall be
entitled to the "full" severance, i.e., fifty-two (52) weeks of
severance without set off for other income over and above such
severance and the Accrued Obligations, in the event Employee is
terminated without cause during the first three (3) years of employment
(measured from his original date of hire). Thereafter, Employee shall
be entitled to severance for the full severance period or until he
obtains other employment, which occurs first. In the event Employee
accepts employment at a lower rate of pay before he exhausts the
above-referenced severance benefits, the Company agrees to continue to
pay Employee the difference between such severance pay benefits and
Employee's base salary to be paid by a subsequent employer. All other
severance benefits however, shall terminate upon reemployment. No
severance pay shall be paid if Executive voluntarily leaves the
Company's employ or is terminated for cause. Any severance pay made
payable hereunder shall be paid in lieu of, and not in addition to, any
notice pay. However, such severance shall be in addition to other
accrued compensation. Additionally, such severance pay is contingent
upon Executive fully complying with the restrictive covenants contained
herein and executing a Separation and Release Agreement in a form not
substantially different from that attached to this Agreement as Exhibit
A. If Executive executes a Separation and Release Agreement in such
form, the Company shall provide Executive with the severance pay and
benefits contemplated in this Agreement and the form of Separation and
Release Agreement attached as Exhibit A.
13. Assignment of Rights.
(a) Copyrights. Executive agrees that all works of authorship fixed in any tangible medium of expression by him during the term of this Agreement relating to the Companies' business ("Works"), either solely or jointly with others, shall be and remain exclusively the property of the Companies. Each such Work created by Executive is a "work made
for hire" under the copyright law and the Company may file applications to register copyright in such Works as author and copyright owner thereof. If, for any reason, a Work created by Executive is excluded from the definition of a "work made for hire" under the copyright law, then Executive does hereby assign, sell, and convey to the Company or its designee the entire rights, title, and interests in and to such Work, including the copyright therein, to the Company or its designee. Executive will execute any documents which the Company deems necessary in connection with the assignment of such Work and copyright therein. Executive will take whatever reasonable steps and do whatever acts the Company reasonably requests, including, but not limited to, placement of the Company's proper copyright notice on Works created by Executive to secure or aid in securing copyright protection in such Works and will assist the Company or its nominees in filing applications to register claims of copyright in such Works. The Company shall have free and unlimited access at all times to all Works and all copies thereof and shall have the right to claim and take possession on demand of such Works and copies.
(b) Inventions. Executive agrees that all discoveries, concepts, and ideas, whether patentable or not, including, but not limited to, apparatus, processes, methods, compositions of matter, techniques, and formulae, as well as improvements thereof or know-how related thereto, relating to any present or prospective product, process, or service of any of the Companies ("Inventions") that Executive conceives or makes during the term of this Agreement relating to any of the Companies' business, shall become and remain the exclusive property of the Companies, whether patentable or not, and Executive will, without royalty or any other consideration:
(i) inform the Company promptly and fully of such Inventions by written reports, setting forth in detail the procedures employed and the results achieved;
(ii) assign to the Company or its designee all of his rights, title, and interests in and to such Inventions, any applications for United States and foreign Letters Patent, any United States and foreign Letters Patent, and any renewals thereof granted upon such Inventions;
(iii) assist the Company or its nominees, at the expense of the Company, to obtain such United States and foreign Letters Patent for such Inventions as the Company may elect; and
(iv) execute, acknowledge, and deliver to the Company at the Company's expense such written documents and instruments, and do such other acts, such as giving testimony in support of his inventorship, as may be necessary in the opinion of the Company, to obtain and maintain United States and foreign Letters Patent upon such Inventions and to vest the entire rights and title thereto in the Company or its designee and to confirm the complete ownership by the Company or its designee of such Inventions, patent applications, and patents.
14. Company Property. All records, files, drawings, documents, equipment, and the like relating to, or provided by, the Companies shall be and remain the sole property of the applicable Companies. Upon termination of employment, Executive shall immediately return to the Companies all such items without retention of any copies. De minimis items such as pay stubs, 401(k) plan summaries, employee bulletins, and the like are excluded from this requirement. Any
legal forms developed by Executive during the term of his employment may be used by him thereafter provided they are not used to compete against the Company
15. Confidential Information. Executive acknowledges that the Companies possess certain trade secrets as well as other confidential and proprietary information which they have acquired or will acquire at great effort and expense. Such information may include, without limitation, confidential information regarding the Companies' products and services, marketing strategies, business plans, operations, costs, current or prospective customer information (including customer contacts, requirements, creditworthiness and like matters), product concepts, designs, prototypes or specifications, research and development efforts, technical data and know-how, sales information, including pricing and other terms and conditions of sale, financial information, internal procedures, techniques, forecasts, methods, trade information, trade secrets, software programs, project requirements, inventions, trademarks, trade names, and similar information regarding the Companies' business (collectively referred to herein as "Confidential Information"). Executive further acknowledges that, as a result of his employment with the Company, Executive will have access to, will become acquainted with, and/or may help develop, such Confidential Information.
16. Restricted Use of Confidential Information. Executive agrees that all Confidential Information is and shall remain the sole and exclusive property of the applicable Companies. Except as may be expressly authorized by the Company in writing, Executive agrees not to disclose, or cause any other person or entity to disclose, any Confidential Information to any third party while employed by the Company and for as long thereafter as such information remains confidential (or as limited by applicable law). Further, Executive agrees to use such Confidential Information only in the course of Executive's duties in furtherance of the Company's business and agrees not to make use of any such Confidential Information for Executive's own purposes or for the benefit of any other entity or person.
17. Acknowledged Need for Limited Restrictive Covenants. Executive acknowledges that the Companies have spent and will continue to expend substantial amounts of time, money and effort to develop their respective business strategies, Confidential Information, customer relationships, goodwill and employee relationships, and that Executive will benefit from these efforts. Further, Executive acknowledges the inevitable use of, or near-certain influence by his knowledge of, the Confidential Information disclosed to Executive during the course of employment if allowed to compete against the Company or any of the other Companies in an unrestricted manner and that such use would be unfair and extremely detrimental to the Company and/or or any of the other Companies. Accordingly, based on these legitimate business reasons, Executive acknowledges the Company's need to protect its legitimate business interests by reasonably restricting Executive's ability to compete with the Company or any of the other Companies on a limited basis.
18. Non-Solicitation. During Executive's employment and for a period of eighteen (18) months thereafter, Executive agrees not to directly or indirectly engage in the following prohibited conduct:
(a) Solicit, offer Competitive Products or services to, accept orders from, or otherwise transact business with, any customer or entity with whom Executive had contact or transacted any business during the eighteen (18) month period preceding Executive's date of separation or about whom Executive possessed, or had access to, confidential and proprietary information;
(b) Attempt to entice or otherwise cause any third party to withdraw, curtail or cease doing business with the Company or any of its affiliated or subsidiary companies, specifically including customers, venders, independent contractors and other third party entities;
(c) Disclose to any person or entity the identities, contacts or preferences of any customers of the Company, or the identity of any other persons or entities having business dealings with the Company or any of the other Companies if such information is at that time confidential or a trade secret.;
(d) Induce any individual who has been employed by or had provided services to the Company within the six (6) month period immediately preceding the effective date of Executive's separation to terminate such relationship with the Company;
(e) Offer employment to, accept employment inquiries from, or employ any individual who is or had been employed by the Company or any of the other Companies at any time within the six (6) month period immediately preceding such offer or inquiry provided Executive somehow assists in the restricted activity; or
(f) Otherwise attempt to directly or indirectly interfere with any of the Companies' business or its relationship with their respective employees, consultants, independent contractors or customers.
19. Limited Non-Compete. For the above reasons, and as a condition of employment to the fullest extent permitted by law, Executive agrees during the Relevant Non-Compete Period not to directly or indirectly engage in the following competitive activities:
(a) Executive shall not have any ownership interest in, work for, advise, consult, or have any business connection or business or employment relationship with any Competitor unless Executive provides written notice to the Company of such relationship prior to entering into such relationship and, further, provides sufficient written assurances to the Company's satisfaction that such relationship will not jeopardize the Company's legitimate interests or otherwise violate the terms of this Agreement;
(b) Executive shall not engage in any research, development,
production, sale or distribution of any Competitive Products,
specifically including any products or services relating to
those for which Executive had responsibility for the eighteen
(18) month period preceding Executive's date of separation;
(c) Executive shall not market, sell, or otherwise offer or provide any Competitive Products within the applicable Geographic Territory, specifically including any products or services relating to those for which Executive had responsibility for the eighteen (18) month period preceding Executive's date of separation; and
(d) Executive shall not distribute, market, sell or otherwise offer or provide any Competitive Products to any customer of the Company with whom Executive had contact (either directly or indirectly) or for which Executive had responsibility at any time during the eighteen (18) month period preceding Executive's date of separation.
20. Non-Compete Definitions. For purposes of this Agreement, the Parties agree that the following terms shall apply:
(a) "Competitive Products" shall include any product or service which directly or indirectly competes with, is substantially similar to, or serves as a reasonable substitute for, any product or service in research, development or design, or manufactured, produced, sold or distributed by the Company or any of the other Companies;
(b) "Competitor" shall include any person or entity that offers or plans to offer any Competitive Products;
(c) "Geographic Territory" shall include any territory formally
assigned to Executive as well as all territories in which
Executive has provided any services, sold any products or
otherwise had responsibility at any time during the eighteen
(18) month period preceding Executive's date of separation;
(d) "Relevant Non-Compete Term" shall include the period of
Executive's employment with the Company as well as a period of
eighteen (18) months after such employment is terminated,
regardless of the reason for such termination provided,
however, that this period shall be reduced to the greater of
(i) six (6) months or (ii) the total length of Executive's
employment with the Company, including employment with a
parent, subsidiary or affiliated entity, if such employment is
less than eighteen (18) months;
(e) "Directly or indirectly" shall be construed such that the foregoing restrictions shall apply equally to Executive whether performed individually or as a partner, shareholder, officer, director, manager, employee, salesman, independent contractor, broker, agent, or consultant for any other individual, partnership, firm, corporation, company, or other entity engaged in such conduct.
21. Consent to Reasonableness. In light of the above-referenced concerns, including Executive's knowledge of and access to the Companies' Confidential Information, Executive acknowledges that the terms of the foregoing restrictive covenants are reasonable and necessary to protect the Company's legitimate business interests and will not unreasonably interfere with Executive's ability to obtain alternate employment. As such, Executive hereby agrees that such restrictions are valid and enforceable, and affirmatively waives any argument or defense to the contrary.
22. Survival of Restrictive Covenants. Executive acknowledges that the above restrictive covenants shall survive the termination of this Agreement and the termination of Executive's employment for any reason. Executive further acknowledges that any alleged breach by the Company of any contractual, statutory or other obligation shall not excuse or terminate the obligations hereunder or otherwise preclude the Company from seeking injunctive or other relief. Rather, Executive acknowledges that such obligations are independent and separate covenants undertaken by Executive for the benefit of the Company.
23. Scope of Restrictions. If the scope of any restriction contained in any preceding paragraphs of this Agreement is deemed too broad to permit enforcement of such restriction to its fullest extent, then such restriction shall be enforced to the maximum extent permitted by law, and Executive hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction.
24. Specific Enforcement/Injunctive Relief. Executive agrees that it would be difficult to measure any damages to the Company from a breach of the above-referenced restrictive covenants, but that such damages would be great, incalculable and irremedial, and that monetary damages alone would be an inadequate remedy. Accordingly, Executive agrees that the Company shall be
entitled to immediate injunctive relief against such breach, or threatened breach, in any court having jurisdiction. In addition, if Executive violates any such restrictive covenant, Executive agrees that the period of such violation shall be added to the term of the restriction. In determining the period of any violation, the Parties stipulate that in any calendar month in which Executive engages in any activity violative of such provisions, Executive shall be deemed to have violated such provision for the entire month, and that month shall be added to the duration of the non-competition provision. Executive acknowledges that the remedies described above shall not be the exclusive remedies, and the Company may seek any other remedy available to it either in law or in equity, including the recovery of compensatory or punitive damages. Executive further agrees that the Company shall be entitled to an award of all costs and attorneys' fees incurred by it in any attempt to enforce the terms of this Agreement.
25. Publicly Traded Stock. The Parties agree that nothing contained in this Agreement shall be construed to prohibit Executive from investing his personal assets in any stock or corporate security traded or quoted on a national securities exchange or national market system provided, however, such investments do not require any services on the part of Executive in the operation or the affairs of the business or otherwise violate the Hillenbrand Industries, Inc. Handbook of Ethical Business Conduct. Notwithstanding anything to the contrary contained herein or elsewhere in this Agreement, the Company acknowledges and consents to Executive's limited investments in, as well as his obligations and responsibilities as an officer and agent of, SDI Investments Liquidating Trust and its Subsidiaries and as an employee of and special advisor to CombiMatrix Corporation (which position shall terminate no later than September 1, 2002).
26. Titles. Titles are used for the purpose of convenience in this Agreement and shall be ignored in any construction of it.
27. Severability. The Parties agree that each and every paragraph, sentence, clause, term and provision of this Agreement is severable and that, in the event any portion of this Agreement is adjudged to be invalid or unenforceable, the remaining portions thereof shall remain in effect and be enforced to the fullest extent permitted by law. Further, should any particular clause, covenant, or provision of this Agreement be held unreasonable or contrary to public policy for any reason, the Parties acknowledge and agree that such covenant, provision or clause shall automatically be deemed modified such that the contested covenant, provision or clause will have the closest effect permitted by applicable law to the original form and shall be given effect and enforced as so modified to whatever extent would be reasonable and enforceable under applicable law.
28. Choice of Forum. Executive acknowledges that the Companies are primarily based in Indiana, and Executive understands and acknowledges the Company's desire and need to defend any litigation against it in Indiana. Accordingly, the Parties agree that any claim of any type brought by Executive against the Company or any of its employees or agents not subject to mandatory arbitration must be maintained only in a court sitting in Marion County, Indiana, or Ripley County, Indiana, or, if a federal court, the Southern District of Indiana, Indianapolis Division. Executive further understands and acknowledges that in the event the Company initiates litigation against Executive, the Company may need to prosecute such litigation in such state where the Executive is subject to personal jurisdiction. Accordingly, for purposes of enforcement of this Agreement, Executive specifically consents to personal jurisdiction in the State of Indiana as well as any state in which resides a customer assigned to the Executive.
29. Choice of Law. This Agreement shall be deemed to have been made within the County of Ripley, State of Indiana and shall be interpreted and construed in accordance with the laws of the
State of Indiana. Any and all matters of dispute of any nature whatsoever arising out of, or in any way connected with the interpretation of this Agreement, any disputes arising out of the Agreement or the employment relationship between the Parties hereto, shall be governed by, construed by and enforced in accordance with the laws of the State of Indiana without regard to any applicable state's choice of law provisions.
30. Assignment-Notices. The rights and obligations of the Company under this Agreement shall inure to its benefit, as well as the benefit of its parent, subsidiary, successor and affiliated entities, and shall be binding upon the successors and assigns of the Company. This Agreement, being personal to Executive, cannot be assigned by Executive, but his personal representative shall be bound by all its terms and conditions. Any notice required hereunder shall be sufficient if in writing and mailed to the last known residence of Executive or to the Company at its principal office with a copy mailed to the Office of General Counsel.
31. Amendments and Modifications. Except as specifically provided herein, no modification, amendment, extension or waiver of this Agreement or any provision hereof shall be binding upon the Company or Executive unless in writing and signed by both Parties. The waiver by the Company of a breach of any provision of this Agreement by Executive shall not be construed as a waiver of any subsequent breach. Nothing in this Agreement shall be construed as a limitation upon the Company's right to modify or amend any of its manuals or policies in its sole discretion and any such modification or amendment which pertains to matters addressed herein shall be deemed to be incorporated herein and made a part of this Agreement.
32. Outside Representations. Executive represents and acknowledges that in signing this Agreement he does not rely, and has not relied, upon any representation or statement made by the Company or by any of the Company's employees, officers, agents, stockholders, directors or attorneys with regard to the subject matter, basis or effect of this Agreement other than those specifically contained herein.
33. Voluntary and Knowing Execution. Executive acknowledges that he has been offered a reasonable amount of time within which to consider and review this Agreement; that he has carefully read and fully understands all of the provisions of this Agreement; and that he has entered into this Agreement knowingly and voluntarily.
34. Entire Agreement. This Agreement constitutes the entire employment agreement between the Parties hereto concerning the subject matter hereof and shall supersede any and all prior and contemporaneous agreements between the Parties in connection with the subject matter of this Agreement. Nothing in this Agreement, however, shall affect any separately-executed written agreement addressing any other issues (e.g., the Inventions, Improvements, Copyrights and Trade Secrets Agreement, the Change in Control Agreement between the Company and Executive of even date herewith as well as the Indemnity Agreement independently executed by the Company and Executive of even date herewith).
(Document continued on next page)
IN WITNESS WHEREOF, the Parties have signed this Agreement effective as of the day and year first above written.
EXECUTIVE HILLENBRAND INDUSTRIES, INC. Signed: ______________________________ By: ______________________________ Printed: _____________________________ Title: ___________________________ Dated: _______________________________ Dated: ___________________________ |
CAUTION: READ BEFORE SIGNING
Exhibit A
SEPARATION AND RELEASE AGREEMENT
THIS SEPARATION and RELEASE AGREEMENT ("Agreement") is entered into by and between Patrick D. de Maynadier ("Employee") and Hillenbrand Industries, Inc. ("Company"). To wit, the Parties agree as follows:
1. Employee's active employment by the Company shall terminate effective
[DATE OF TERMINATION] (Employee's "Effective Termination Date"). As of
that date, all Company benefits and obligations shall terminate, except
as and to the extent set forth herein and in Executive's Employment
Agreement, the Change in Control Agreement between the Company and
Executive, and the Indemnity Agreement negotiated and entered into
between the Company and Executive (collectively, the "Other
Agreements").
2. Except as specifically provided by this Agreement or those Other Agreements, Employee agrees that the Company shall have no other obligations or liabilities to him following his Effective Termination Date and that his receipt of the Severance Benefits provided herein shall constitute a complete settlement, satisfaction and waiver of any and all claims he may have against the Company.
3. In consideration of the promises contained in this Agreement and contingent upon Employee's compliance with such promises, the Company agrees to provide Employee the following:
(i) Severance pay, inclusive of any notice pay obligations, to be
paid at the bi-weekly rate of $_______, less applicable
deductions or other set-offs, for a period of up to Fifty-two
(52) weeks following the Employee's Effective Termination Date
in accordance with the terms and conditions set forth below in
Paragraph No. 5;
(ii) Payment for any earned but unused vacation as of Employee's Effective Termination Date; and
(iii) Life insurance coverage until the above-referenced Severance Pay terminates.
4. The above Severance Pay Benefits shall be paid in accordance with the Company's standard payroll practices (e.g. biweekly) and shall begin on the first normally scheduled payroll following Employee's Effective Termination Date or the effective date of this Agreement, whichever occurs last. The Parties agree that the initial four (4) weeks of the foregoing severance shall be allocated as additional consideration provided to Employee in exchange for his execution of a release in compliance with the Older Workers Benefit Protection Act. The balance of the severance benefits shall be allocated as consideration for all other promises and obligations undertaken by Employee, including execution of a general release of claims.
5. The Parties agree that Employee shall be entitled to the "full" severance, i.e., fifty-two (52) weeks of severance without set off for other income over and above such severance and the Accrued Obligations (as defined in Executive's Employment Agreement), in the event Employee is terminated without cause during the first three (3) years of employment (measured from his original date of hire). Thereafter, Employee shall be entitled to severance for the full severance period or until he obtains other employment, which occurs first. In the event Employee accepts employment at a lower rate of pay before he exhausts the above-referenced severance benefits, the Company agrees to continue to pay Employee the difference between such severance pay
benefits and Employee's base salary to be paid by a subsequent employer. All other severance benefits however, shall terminate upon reemployment.
6. In addition, the Company agrees to provide Employee with limited out-placement counseling consistent with Employee's position and tenure with a entity of the Company choosing provided Employee begins to participate in such counseling immediately following termination of employment.
7. As of the Effective Termination Date, Employee will become ineligible to participate in the Company's health insurance program and continuation of coverage requirements under COBRA (if any) will be triggered at that time. However, as additional consideration for the promises and obligations contained herein, and provided Employee timely completes the applicable election of coverage forms, the Company further agrees to pay the cost of such continued coverage under the Company's health care program until the above-referenced Severance Pay terminates. Thereafter, if applicable, coverage will be made available to Employee at his sole expense for the remaining months of the COBRA coverage period made available pursuant to applicable law. The medical insurance provided herein does not include any disability coverage.
8. Employee agrees to notify the Company in writing within three (3) business days of Employee's acceptance of any subsequent employment by providing the name of such employer, his intended duties as well as the anticipated start date. Such information is required to ensure Employee's compliance with his non-compete obligations as well as all other applicable restrictive covenants. This notice will also serve to trigger the Company's right to terminate the above-referenced severance benefits and Company-paid COBRA benefits consistent with the above paragraphs. Failure to timely provide such notice shall be deemed a material breach of this Agreement entitling the Company to recover as damages the value of all benefits provided to Employee hereunder.
9. It is understood by the Parties that, unless it is specifically stated otherwise, nothing in this Agreement shall affect any rights Employee may have under any Pension Plan and/or Savings Plan (i.e., 401(k) plan) provided by the Company as of the date of his termination, such items to be governed exclusively by the terms of the applicable plan documents.
10. In exchange for the foregoing Severance Benefits, PATRICK de MAYNADIER
on behalf of himself, his heirs, representatives, agents and assigns
hereby COVENANTS NOT TO SUE, RELEASES, INDEMNIFIES, HOLDS HARMLESS, and
FOREVER DISCHARGES (i) Hillenbrand Industries, Inc., (ii) its parent,
subsidiary or affiliated entities, (iii) all of their present or former
directors, officers, employees, shareholders, and agents as well as
(iv) all predecessors, successors and assigns thereof from any and all
actions, charges, claims, demands, damages or liabilities of any kind
or character whatsoever, known or unknown, which Employee now has or
may have had through the effective date of this Agreement.
11. Without limiting the generality of the foregoing release, it shall include: (i) all claims or potential claims arising under any federal, state or local laws relating to the Parties' employment relationship, including any claims Employee may have under the Civil Rights Acts of 1866 and 1964, as amended, 42 U.S.C. Sections 1981 and 2000(e) et seq.; the Civil Rights Act of 1991; the Age Discrimination in Employment Act, as amended, 29 U.S.C. Sections 621 et seq.; the Americans with Disabilities Act of 1990, as amended, 42 U.S.C. Sections 12,101 et seq.; the Fair Labor Standards Act 29 U.S.C. Sections 201 et seq.; the Worker Adjustment and Retraining Notification Act, 29 U.S.C. Sections 2101, et seq.; and any other federal, state or local law governing the Parties' employment relationship; (ii) any claims on account of, arising out of or in any way connected with Employee's employment with the Company or leaving of that employment; (iii) any claims alleged or which could have been alleged in any charge or complaint against the Company; (iv)
any claims relating to the conduct of any employee, officer, director,
agent or other representative of the Company; (v) any claims of
discrimination, harassment or retaliation on any basis; (vi) any claims
arising from any legal restrictions on an employer's right to separate
its employees; (vii) any claims for personal injury, compensatory or
punitive damages or other forms of relief; and (viii) all other causes
of action sounding in contract, tort or other common law basis,
including (a) the breach of any alleged oral or written contract, (b)
negligent or intentional misrepresentations, (c) wrongful discharge,
(d) just cause dismissal, (e) defamation, (f) interference with
contract or business relationship or (g) negligent or intentional
infliction of emotional distress.
12. The Parties acknowledge that it is their mutual and specific intent that the above waiver fully comply with the requirements of the Older Workers Benefit Protection Act (29 U.S.C. Section 626) and any similar law governing release of claims. Accordingly, Employee hereby acknowledges that:
(a) He has carefully read and fully understands all of the provisions of this Agreement and that he has entered into this Agreement knowingly and voluntarily;
(b) The Severance Benefits offered in exchange for Employee's release of claims exceed in kind and scope that to which he would have otherwise been legally entitled;
(c) Prior to signing this Agreement, Employee had been advised, and is being advised by this Agreement, to consult with an attorney of his choice concerning its terms and conditions; and
(d) He has been offered at least twenty-one (21) days within which to review and consider this Agreement.
13. The Parties agree that nothing contained herein shall purport to waive or otherwise affect any of Employee's rights or claims that may arise after he signs this Agreement.
14. The Parties agree that this Agreement shall not become effective and enforceable until the date this Agreement is signed by both Parties or seven (7) calendar days after its execution by Employee, whichever is later. Employee may revoke this Agreement for any reason by providing written notice of such intent to the Company within seven (7) days after he has signed this Agreement, thereby forfeiting Employee's right to receive any Severance Benefits provided hereunder and rendering this Agreement null and void in its entirety.
15. Although the Company is unwilling to release any claims it may have against Employee, the Company affirmatively represents and warrants on behalf of itself, and on behalf of (i) its subsidiary and affiliated entities, (ii) all of their present or former directors, officers, employees, shareholders and agents, as well as (iii) all predecessors, successors and assigns thereof, that it is unaware of any facts, circumstances, occurrences, claims, damages or liabilities which could serve as a basis for filing any action, charge, claim, or lawsuit against Employee as of the effective date of this Agreement.
16. Employee acknowledges that his termination and the Severance Benefits offered hereunder were based on an individual determination and were not offered in conjunction with any group termination or group severance program and waives any claim to the contrary.
17. Employee hereby affirms and acknowledges his continued obligations to comply with the post-termination covenants contained in his Employment Agreements, including but not limited to, the non-compete, trade secret and confidentiality provisions. Employee acknowledges that a copy of
the Employment Agreement has been attached to this Agreement as Exhibit A or has otherwise been provided to him and, to the extent not inconsistent with the terms of this Agreement or applicable law, the terms thereof shall be incorporated herein by reference. Employee acknowledges that the terms, conditions and restrictions contained therein are valid and reasonable in every respect and are necessary to protect the Company's legitimate business interests. Employee hereby affirmatively waives any claim or defense to the contrary.
18. The Company hereby affirms and acknowledges its continued obligations to comply with the post-termination covenants contained in the Other Agreements. To the extent not inconsistent with the terms of this Agreement or applicable law, the terms thereof shall be incorporated herein by reference. The Parties acknowledge that the terms, conditions and restrictions contained in the Other Agreements are valid and reasonable in every respect and are necessary to protect the Company's and Employee's legitimate business interests. The Parties each hereby affirmatively waive any claim or defense to the contrary.
19. Employee acknowledges that the Company possesses, and he has been granted access to, certain trade secrets as well as other confidential and proprietary information which the Company has acquired at great effort and expense. Such information includes, without limitation, confidential information regarding products and services, marketing strategies, business plans, operations, costs, current or prospective customer information (including customer contacts, requirements, creditworthiness and like matters), product concepts, designs, prototypes or specifications, regulatory compliance issues, research and development efforts, technical data and know-how, sales information, including pricing and other terms and conditions of sale, financial information, internal procedures, techniques, forecasts, methods, trade information, trade secrets, software programs, project requirements, inventions, trademarks, trade names, and similar information regarding the Companies' business (collectively referred to herein as "Confidential Information").
20. Employee agrees that all such Confidential Information is and shall remain the sole and exclusive property of the Company. Except as may be expressly authorized by the Company in writing, or as may be required by law after providing due notice thereof to the Company, Employee agrees not to disclose, or cause any other person or entity to disclose, any Confidential Information to any third party for as long thereafter as such information remains confidential (or as limited by applicable law) and agrees not to make use of any such Confidential Information for Employee's own purposes or for the benefit of any other entity or person.
21. On or before Employee's Effective Termination Date or per the Company's request, Employee agrees to return the original and all copies of all things in his possession or control relating to the Company or its business, including but not limited to any and all contracts, reports, memoranda, correspondence, manuals, forms, records, designs, budgets, contact information or lists (including customer, vendor or supplier lists), ledger sheets or other financial information, drawings, plans (including, but not limited to, business, marketing and strategic plans), personnel or other business files, computer hardware, software, or access codes, door and file keys, identification, credit cards, pager, phone, and any and all other physical, intellectual, or personal property of any nature that he received, prepared, helped prepare, or directed preparation of in connection with his employment with the Company. Nothing contained herein shall be construed to require the return of any non-confidential and de minimis items regarding Employee's pay, benefits or other rights of employment such as pay stubs, W-2 forms, 401(k) plan summaries, benefit statements, etc.
22. Employee hereby consents and authorizes the Company to deduct as an offset from the above-referenced severance payments the value of any Company property not returned or returned in a
damaged condition as well as any monies paid by the Company on Employee's behalf (e.g., payment of any outstanding American Express bill).
23. Employee agrees not to make any written or oral statement that may defame, disparage or cast in a negative light so as to do harm to the personal or professional reputation of (a) the Company, (b) its employees, officers, directors or trustees, or (c) the services and/or products provided by the Company and its subsidiaries or affiliate, provided, however, that nothing contained herein shall be construed to limit or otherwise restrict the Employee from providing truthful information in response to a court order, subpoena or other lawful request. Similarly, the Company agrees not to make any written or oral statement that may defame, disparage or cast in a negative light so as to do harm to the personal or professional reputation of Employee, provided, however, that nothing contained herein shall be construed to limit or otherwise restrict the Company from providing truthful information in response to a court order, subpoena or other lawful request.
24. Employee specifically agrees and understands that the existence and terms of this Agreement are strictly CONFIDENTIAL and that such confidentiality is a material term of this Agreement. Accordingly, except as required by law or unless authorized to do so by the Company in writing, Employee agrees that he shall not communicate, display or otherwise reveal any of the contents of this Agreement to anyone other than his spouse, legal counsel or financial advisor provided, however, that they are first advised of the confidential nature of this Agreement and Employee obtains their agreement to be bound by the same. The Company agrees that Employee may respond to legitimate inquiries regarding the termination of his employment by stating that the Parties have terminated their relationship on an amicable basis and that the Parties have entered into a Confidential Separation and Release Agreement which prohibits him from further discussing the specifics of his separation. Nothing contained herein shall be construed to prevent Employee from discussing or otherwise advising subsequent employers of the existence of any obligations as set forth in his Employment Agreement. Further, nothing contained herein shall be construed to limit or otherwise restrict the Company's ability to disclose the terms and conditions of this Agreement as may be required by business necessity.
25. In the event that Employee breaches or threatens to breach any provision of this Agreement, he agrees that the Company shall be entitled to seek any and all equitable and legal relief provided by law, specifically including immediate and permanent injunctive relief. Employee hereby waives any claim that the Company has an adequate remedy at law. In addition, and to the extent not prohibited by law, Employee agrees that the Company shall be entitled to discontinue providing any additional Severance Benefits upon such breach or threatened breach as well as an award of all costs and attorneys' fees incurred by the Company in any successful effort to enforce the terms of this Agreement. Employee agrees that the foregoing relief shall not be construed to limit or otherwise restrict the Company's ability to pursue any other remedy provided by law, including the recovery of any actual, compensatory or punitive damages. Moreover, if Employee pursues any claims against the Company subject to the foregoing General Release, or breaches the above Confidential provision, Employee agrees to immediately reimburse the Company for the value of all benefits received under this Agreement to the fullest extent permitted by law.
26. Similarly, in the event that the Company breaches or threatens to breach any provision of this Agreement, Employee shall be entitled to seek any and all equitable and legal relief provided by law, specifically including immediate and permanent injunctive relief. In the event Employee is required to file suit to enforce the terms of this Agreement, the Company agrees that Employee shall be entitled to recover an award of all costs and attorneys' fees incurred by him in any successful effort to enforce the terms of this Agreement. In the event Employee is unsuccessful, he agrees that the Company shall be entitled to an award of its costs and attorneys' fees.
27. Employee and the Company hereby acknowledge that this Agreement is entered into solely for the purpose of terminating their employment relationship on an amicable basis and shall not be construed as an admission of liability or wrongdoing by either Employee or the Company, both parties having each expressly denied any such liability or wrongdoing.
28. Each of the promises and obligations shall be binding upon and shall inure to the benefit of the heirs, executors, administrators, assigns and successors in interest of each of the Parties.
29. The Parties agree that each and every paragraph, sentence, clause, term and provision of this Agreement is severable and that, if any portion of this Agreement should be deemed not enforceable for any reason, such portion shall be stricken and the remaining portion or portions thereof should continue to be enforced to the fullest extent permitted by applicable law.
30. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Indiana without regard to any applicable state's choice of law provisions.
31. Employee represents and acknowledges that in signing this Agreement he does not rely, and has not relied, upon any representation or statement made by the Company or by any of the Company's employees, officers, agents, stockholders, directors or attorneys with regard to the subject matter, basis or effect of this Agreement other than those specifically contained herein.
32. This Agreement represents the entire agreement between the Parties concerning the subject matter hereof, shall supercede any and all prior agreements which may otherwise exist between them concerning the subject matter hereof (specifically excluding, however, the post-termination obligations contained in any existing Employment Agreement or other legally-binding document), and shall not be altered, amended, modified or otherwise changed except by a writing executed by both Parties.
PLEASE READ CAREFULLY. THIS SEPARATION AND RELEASE
AGREEMENT INCLUDES A COMPLETE RELEASE OF ALL
KNOWN AND UNKNOWN CLAIMS.
IN WITNESS WHEREOF, the Parties have themselves signed, or caused a duly authorized agent thereof to sign, this Agreement on their behalf and thereby acknowledge their intent to be bound by its terms and conditions.
"EMPLOYEE" HILLENBRAND INDUSTRIES, INC. Signed: ______________________________ By: ______________________________ Printed: _____________________________ Title: ___________________________ Dated: _______________________________ Dated: ___________________________ |
December 22, 2003
Patrick D. de Maynadier
Hillenbrand Industries, Inc.
700 State Route 46 East
Batesville, Indiana 47006
Dear Patrick:
Re: Amendment to Employment Agreement
This is to confirm that, notwithstanding anything in Paragraphs 9 and 12 of the Employment Agreement dated January 28, 2002, between you and Hillenbrand Industries, Inc. ("Company") (hereinafter "Employment Agreement"), in the event your employment is involuntarily terminated by the Company without cause, you shall, subject to the terms and conditions set out below, be entitled to receive the greater of:
(i) (a) Fifty-two (52) weeks of your base salary at the time of termination paid as a lump sum, without set off for any other income over and above such severance or any Accrued Obligations and (b) any Accrued Obligations; or
(ii) (a) Severance pay determined in accordance with any guidelines established by the Company, without set off for any other income over and above such severance or any Accrued Obligations and (b) any Accrued Obligations;
"Accrued Obligations" collectively refers to accrued wages, deferred compensation, or other compensation, benefits, or perquisites which have been fully paid or fully accrued as of the effective date of your separation, in accordance with the Company's past practice and applicable law.
This severance pay will be in lieu of, and not in addition to, any amount of severance pay previously described in Paragraph 12 of your Employment Agreement as payable to you in the event your employment with the Company is involuntarily terminated without cause.
No severance pay shall be paid if you voluntarily leave the Company's employ or are terminated for cause. Any severance pay made payable hereunder shall be paid in lieu of, and not in addition to, any notice pay.
Additionally, such severance pay is contingent upon you (1) fully complying with any restrictive covenants contained in your Employment Agreement and (2) executing a Separation and Release Agreement in a form not substantially different from that attached to your Employment Agreement as Exhibit A ("Separation Agreement") and including the terms contained in this Amendment.
Except to the extent explicitly amended herein, all terms and conditions contained in your Employment Agreement, in any document specifically incorporated therein by reference, and in any other agreement between you and the Company, shall remain in full force and effect.
Sincerely,
Frederick W. Rockwood
President and CEO
Hillenbrand Industries, Inc.
THIS AMENDMENT IS MADE PART OF AND SHOULD BE KEPT WITH YOUR EMPLOYMENT AGREEMENT
EXHIBIT 10.20
EXECUTIVE
EMPLOYMENT AGREEMENT
P R E A M B L E
This Executive Employment Agreement defines the essential terms and conditions of our employment relationship with you. The subjects covered in this Agreement are vitally important to you and to the Company. Thus, you should read the document carefully and ask any questions before signing the Agreement. Given the importance of these matters to you and the Company, all executives shall sign the Agreement as a condition of employment.
This EMPLOYMENT AGREEMENT, dated and effective this 1st day of August 2003 is entered into by and between Kimberly K. Dennis ("Executive"), and Hillenbrand Industries ("Company").
W I T N E S S E T H:
WHEREAS, the Company is an Indiana corporation engaged through its various subsidiary entities in the death care, healthcare and funeral services industries throughout the United States and abroad;
WHEREAS, the Company is willing to employ Executive in an executive capacity and Executive desires to be employed by the Company in such capacity based upon the terms and conditions set forth in this Agreement;
WHEREAS, in the course of the employment contemplated under this Agreement, it will be necessary for Executive to acquire knowledge of certain trade secrets and other confidential and proprietary information regarding the Company as well as its various subsidiary and/or affiliated entities (hereinafter jointly referred to as the "Companies"); and
WHEREAS, the Company and Executive (collectively referred to herein as the "Parties") acknowledge and agree that the execution of this Agreement is necessary to memorialize the terms and conditions of their employment relationship as well as safeguard against the unauthorized disclosure or use of the Company's confidential information and to otherwise preserve the goodwill and ongoing business value of the Company;
NOW THEREFORE, in consideration of Executive's employment, the Company's willingness to disclose certain confidential and proprietary information to Executive and the mutual covenants contained herein as well as other good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows:
1. Employment. The Company agrees to employ Executive and Executive agrees to serve as Vice President, Shared Services.
2. Duties. Executive agrees to perform all duties and responsibilities traditionally assigned to, or falling within the normal responsibilities of, an individual employed in the above-referenced position. Executive also agrees to perform any and all additional duties or responsibilities as may be assigned by the Company in its sole discretion.
3. Best Efforts and Duty of Loyalty. During the term of employment with the Company, Executive covenants and agrees to perform all assigned duties in a diligent and professional manner and in the best interest of the Company. Executive agrees to devote her full working time, attention, talents, skills and best efforts to further the Company's business and agrees not to take any action, or make any omission, that deprives the Company of any business opportunities or otherwise act in a manner that conflicts with the best interest of the Company or is otherwise detrimental to its business. Executive agrees not to engage in any outside business activity, whether or not pursued for gain, profit or other pecuniary advantage, without the express written consent of the Company. Executive shall act at all times in accordance with the Hillenbrand Industries, Inc. Code of Ethics, the Hillenbrand Industries Associate Policy Manual, and all other applicable policies which may exist or be adopted by the Company from time to time.
4. At-Will Employment. Subject to the terms and conditions set forth below, Executive specifically acknowledges and accepts such employment on an "at-will" basis and agrees that both Executive and the Company retain the right to terminate this relationship at any time, with or without cause, for any reason not prohibited by applicable law upon proper notice. Executive acknowledges that nothing in this Agreement is intended to create, nor should be interpreted to create, an employment contract for any specified length of time between the Company and Executive.
5. Compensation. For all services rendered by Executive on behalf of, or at the request of, the Company, Executive shall be paid as follows:
(a) A base salary at the bi-weekly rate of Six Thousand Seven Hundred Thirty Dollars and Seventy-Seven Cents ($6,730.77), less usual and ordinary deductions;
(b) Incentive compensation, payable solely at the discretion of the Company, pursuant to the Company's Exempt Employee Executive Compensation Program or any other program as the Company may establish in its sole discretion; and
(c) Such additional compensation, benefits and perquisites as the Company may deem appropriate.
For purposes of the FY2003 Incentive Compensation, the Parties agree Executive's payment shall be based on either Hillenbrand's achievement of its financial objectives or Batesville Casket Company's achievement of its financial objectives, whichever calculation is greater. The Company further agrees that Executive will be eligible for a prorata share of the amount of incentive compensation for FY2004 in the event her employment is terminated prior to October, 2004 based upon her performance through the effective date of her termination and the Company's financial performance through the end of the fiscal year. Such prorata share will be otherwise determined and paid in accordance with the Company's standard practices. Notwithstanding anything contained herein to the contrary, and with the exception of Executive's Incentive Compensation
eligibility for FY2003 and FY2004, Executive acknowledges that the Company specifically reserves the right to make changes to Executive's compensation in its sole discretion including, but not limited to, modifying or eliminating a compensation component. The Parties agree that such changes shall be deemed effective immediately and a modification of this Agreement unless, within fourteen (14) days after receiving notice of such change, Executive exercises her right to terminate this Agreement without cause. The Parties anticipate that Executive's compensation structure will be reviewed on an annual basis but acknowledge that the Company shall have no obligation to do so.
6. Direct Deposit. As a condition of employment, and within thirty (30) days of the effective date of this Agreement, Executive agrees to make all necessary arrangements to have all sums paid pursuant to this Agreement direct deposited into one or more bank accounts as designated by Executive.
7. Warranties and Indemnification. Executive warrants that she is not a party to any contract, restrictive covenant, or other agreement purporting to limit or otherwise adversely affecting her ability to secure employment with any third party. Alternatively, should any such agreement exist, Executive warrants that the contemplated services to be performed hereunder will not violate the terms and conditions of any such agreement. In either event, Executive agrees to fully indemnify and hold the Company harmless from any and all claims arising from, or involving the enforcement of, any such restrictive covenants or other agreements.
8. Restricted Duties. Executive agrees not to disclose, or use for the benefit of the Company, any confidential or proprietary information belonging to any predecessor employer which otherwise has not been made public and further acknowledges that the Company has specifically instructed her not to disclose or use such confidential or proprietary information. Based on her understanding of the anticipated duties and responsibilities hereunder, Executive acknowledges that such duties and responsibilities will not compel the disclosure or use of any such confidential and proprietary information.
9. Termination Without Cause. Executive's employment may be terminated at any time, without cause, by either party upon sixty (60) days' advance written notice or pay in lieu of notice. In such event, Executive shall only be entitled to such compensation, benefits and perquisites which have been paid or fully accrued as of the effective date of her separation.
10. Termination With Cause. Executive's employment may be terminated at any time "for cause" without notice or prior warning. For purposes of this Agreement, "cause" shall mean the Company's good faith determination that Executive has:
(i) Failed, refused or otherwise been deemed unable to fully and timely comply with the terms and conditions of this Agreement, specifically including any reasonable instructions or orders issued by the Company;
(ii) Acquiesced or participated in any conduct which 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 Company's reasonable opinion, to cause the Company, it officers or its directors embarrassment or ridicule;
(iii) Violated any Company policy or procedures, specifically including a violation of Hillenbrand Industries, Inc.'s Code of Ethics;
(iv) Disclosed without proper authorization any trade secrets or other Confidential Information (as defined herein);
(v) Engaged in any act which, in the reasonable opinion of the Company, is contrary to its best interests or might subject the Company, its officers or directors to potential or probable civil or criminal liability; or
(vi) Engaged in such other conduct recognized at law as constituting cause.
Upon the occurrence or discovery of any event specified above, the Company shall have the right to terminate Executive's employment, effective immediately, by providing notice thereof to Executive without further obligation to him/her, other than accrued wages or other accrued benefits of employment (collectively referred to herein as "Accrued Obligations"), which shall be paid in accordance with the Company's past practice and applicable law.
11. Termination Due to Death or Disability. In the event Executive dies or suffers a disability (as defined herein) during the term of employment, this Agreement shall automatically be terminated on the date of such death or disability without further obligation on the part of the Company other than the payment of Accrued Obligations. For purposes of this Agreement, Executive shall be considered to have suffered a "disability" upon the occurrence of one or more of the following events:
(i) Executive becomes eligible for or receives any benefits pursuant to any disability insurance policy as a result of a determination under such policy that Executive is permanently disabled;
(ii) Executive becomes eligible for or receives any disability benefits under the Social Security Act; or
(iii) A good faith determination by the Company that Executive is and will likely remain unable to perform the essential functions of her duties or responsibilities hereunder on a full-time basis, with or without reasonable accommodation, as a result of any mental or physical impairment.
Notwithstanding anything expressed or implied above to the contrary, the Company agrees to fully comply with its obligations under the Americans with Disabilities Act as well as any other applicable federal, state, or local law, regulation, or ordinance governing the protection of individual with such disabilities as well as the Company's obligation to provide reasonable accommodation thereunder.
12. Severance Payments. In the event Executive's employment is terminated by the Company without cause, and subject to the normal terms and conditions imposed by the
Company (including those set forth herein and in the attached
Separation and Release Agreement), Executive shall be eligible to
receive severance pay based upon her base salary at the time of
termination for a period determined in accordance with any guidelines
as may be established by the Company or for a period up to twelve (12)
months (whichever is longer). No severance pay shall be paid if
Executive voluntarily leaves the Company's employ or is terminated for
cause. Any severance pay made payable hereunder shall be paid in lieu
of, and not in addition to, any notice pay or other accrued
compensation. Additionally, such severance pay is contingent upon
Executive fully complying with the restrictive covenants contained
herein and executing a Separation and Release Agreement in a form not
substantially different from that attached to this Agreement as Exhibit
A. Further, the Company's obligation to provide severance shall be
deemed null and void should Executive fail or refuse to execute the
Agreement in such form within any time period as may be proscribed by
law or, in absence thereof, twenty-one (21) days.
13. Assignment of Rights.
(a) Copyrights. Executive agrees that all works of authorship fixed in any tangible medium of expression by her during the term of this Agreement relating to the Company's business ("Works"), either solely or jointly with others, shall be and remain exclusively the property of the Company. Each such Work created by Executive is a "work made for hire" under the copyright law and the Company may file applications to register copyright in such Works as author and copyright owner thereof. If, for any reason, a Work created by Executive is excluded from the definition of a "work made for hire" under the copyright law, then Executive does hereby assign, sell, and convey to the Company the entire rights, title, and interests in and to such Work, including the copyright therein, to the Company. Executive will execute any documents which the Company deems necessary in connection with the assignment of such Work and copyright therein. Executive will take whatever steps and do whatever acts the Company requests, including, but not limited to, placement of the Company's proper copyright notice on Works created by Executive to secure or aid in securing copyright protection in such Works and will assist the Company or its nominees in filing applications to register claims of copyright in such Works. The Company shall have free and unlimited access at all times to all Works and all copies thereof and shall have the right to claim and take possession on demand of such Works and copies.
(b) Inventions. Executive agrees that all discoveries, concepts, and ideas, whether patentable or not, including, but not limited to, apparatus, processes, methods, compositions of matter, techniques, and formulae, as well as improvements thereof or know-how related thereto, relating to any present or prospective product, process, or service of the Company ("Inventions") that Executive conceives or makes during the term of this Agreement relating to the Company's business, shall become and remain the exclusive property of the Company, whether patentable or not, and Executive will, without royalty or any other consideration:
(i) inform the Company promptly and fully of such Inventions by written reports, setting forth in detail the procedures employed and the results achieved;
(ii) assign to the Company all of her rights, title, and interests in and to such Inventions, any applications for United States and foreign Letters Patent, any United States and foreign Letters Patent, and any renewals thereof granted upon such Inventions;
(iii) assist the Company or its nominees, at the expense of the Company, to obtain such United States and foreign Letters Patent for such Inventions as the Company may elect; and
(iv) execute, acknowledge, and deliver to the Company at the Company's expense such written documents and instruments, and do such other acts, such as giving testimony in support of her inventorship, as may be necessary in the opinion of the Company, to obtain and maintain United States and foreign Letters Patent upon such Inventions and to vest the entire rights and title thereto in the Company and to confirm the complete ownership by the Company of such Inventions, patent applications, and patents.
14. Company Property. All records, files, drawings, documents, equipment, and the like relating to, or provided by, the Company shall be and remain the sole property of the Company. Upon termination of employment, Executive shall immediately return to the Company all such items without retention of any copies. De minimis items such as pay stubs, 401(k) plan summaries, employee bulletins, and the like are excluded from this requirement.
15. Confidential Information. Executive acknowledges that the Company and its affiliated entities (herein collectively referred to as "Companies") possess certain trade secrets as well as other confidential and proprietary information which they have acquired or will acquire at great effort and expense. Such information may include, without limitation, confidential information regarding the Companies' products and services, marketing strategies, business plans, operations, costs, current or prospective customer information (including customer contacts, requirements, creditworthiness and like matters), product concepts, designs, prototypes or specifications, research and development efforts, technical data and know-how, sales information, including pricing and other terms and conditions of sale, financial information, internal procedures, techniques, forecasts, methods, trade information, trade secrets, software programs, project requirements, inventions, trademarks, trade names, and similar information regarding the Companies' business (collectively referred to herein as "Confidential Information"). Executive further acknowledges that, as a result of her employment with the Company, Executive will have access to, will become acquainted with, and/or may help develop, such Confidential Information.
16. Restricted Use of Confidential Information. Executive agrees that all Confidential Information is and shall remain the sole and exclusive property of the Company. Except as may be expressly authorized by the Company in writing, Executive agrees not to
disclose, or cause any other person or entity to disclose, any Confidential Information to any third party while employed by the Company and for as long thereafter as such information remains confidential (or as limited by applicable law). Further, Executive agrees to use such Confidential Information only in the course of Executive's duties in furtherance of the Company's business and agrees not to make use of any such Confidential Information for Executive's own purposes or for the benefit of any other entity or person.
17. Acknowledged Need for Limited Restrictive Covenants. Executive acknowledges that the Company has spent and will continue to expend substantial amounts of time, money and effort to develop its business strategies, Confidential Information, customer relationships, goodwill and employee relationships, and that Executive will benefit from these efforts. Further, Executive acknowledges the inevitable use of, or near-certain influence by her knowledge of, the Confidential Information disclosed to Executive during the course of employment if allowed to compete against the Company in an unrestricted manner and that such use would be unfair and extremely detrimental to the Company. Accordingly, based on these legitimate business reasons, Executive acknowledges the Company's need to protect its legitimate business interests by reasonably restricting Executive's ability to compete with the Company on a limited basis.
18. Non-Solicitation. During Executive's employment and for a period of eighteen (18) months thereafter, Executive agrees not to directly or indirectly engage in the following prohibited conduct:
(a) Solicit, offer products or services to, accept orders from, or otherwise transact business with, any customer or entity with whom Executive had contact or transacted any business during the eighteen (18) month period preceding Executive's date of separation or about whom Executive possessed, or had access to, confidential and proprietary information;
(b) Attempt to entice or otherwise cause any third party to withdraw, curtail or cease doing business with the Company, specifically including customers, venders, independent contractors and other third party entities;
(c) Disclose to any person or entity the identities, contacts or preferences of any customers of the Company, or the identity of any other persons or entities having business dealings with the Company;
(d) Induce any individual who has been employed by or had provided services to the Company within the six (6) month period immediately preceding the effective date of Executive's separation to terminate such relationship with the Company;
(e) Offer employment to, accept employment inquiries from, or employ any individual who is or had been employed by the Company at any time within the six (6) month period immediately preceding such offer or inquiry; or
(f) Otherwise attempt to directly or indirectly interfere with the Company's business or its relationship with its employees, consultants, independent contractors or customers.
19. Limited Non-Compete. For the above reasons, and as a condition of employment to the fullest extent permitted by law, Executive agrees during the Relevant Non-Compete Period not to directly or indirectly engage in the following competitive activities:
(a) Executive shall not have any ownership interest in, work for, advise, consult, or have any business connection or business or employment relationship with any Competitor unless Executive provides written notice to the Company of such relationship prior to entering into such relationship and, further, provides sufficient written assurances to the Company's satisfaction that such relationship will not jeopardize the Company's legitimate interests or otherwise violate the terms of this Agreement;
(b) Executive shall not engage in any research, development,
production, sale or distribution of any Competitive Products,
specifically including any products or services relating to
those for which Executive had responsibility for the eighteen
(18) month period preceding Executive's date of separation;
(c) Executive shall not market, sell, or otherwise offer or provide any Competitive Products within her Geographic Territory (if applicable), specifically including any products or services relating to those for which Executive had responsibility for the eighteen (18) month period preceding Executive's date of separation; and
(d) Executive shall not distribute, market, sell or otherwise offer or provide any Competitive Products to any customer of the Company with whom Executive had contact (either directly or indirectly) or for which Executive had responsibility at any time during the eighteen (18) month period preceding Executive's date of separation.
20. Non-Compete Definitions. For purposes of this Agreement, the Parties agree that the following terms shall apply:
(a) "Competitive Products" shall include any product or service which directly or indirectly competes with, is substantially similar to, or serves as a reasonable substitute for, any product or service in research, development or design, or manufactured, produced, sold or distributed by the Company;
(b) "Competitor" shall include any person or entity that offers or plans to offer any Competitive Products;
(c) "Geographic Territory" shall include any territory formally
assigned to Executive as well as all territories in which
Executive has provided any services, sold any products or
otherwise had responsibility at any time during the eighteen
(18) month period preceding Executive's date of separation;
(d) "Relevant Non-Compete Period" shall include the period of
Executive's employment with the Company as well as a period of
eighteen (18) months after such employment is terminated,
regardless of the reason for such termination provided,
however, that this period shall be reduced to the greater of
(i) six (6) months or (ii) the total length of Executive's
employment with the Company, including employment with a
parent, subsidiary or affiliated entity, if such employment is
less than eighteen (18) months;
(e) "Directly or indirectly" shall be construed such that the foregoing restrictions shall apply equally to Executive whether performed individually or as a partner, shareholder, officer, director, manager, employee, salesman, independent contractor, broker, agent, or consultant for any other individual, partnership, firm, corporation, company, or other entity engaged in such conduct.
21. Consent to Reasonableness. In light of the above-referenced concerns, including Executive's knowledge of and access to the Companies' Confidential Information, Executive acknowledges that the terms of the foregoing restrictive covenants are reasonable and necessary to protect the Company's legitimate business interests and will not unreasonably interfere with Executive's ability to obtain alternate employment. As such, Executive hereby agrees that such restrictions are valid and enforceable, and affirmatively waives any argument or defense to the contrary.
22. Survival of Restrictive Covenants. Executive acknowledges that the above restrictive covenants shall survive the termination of this Agreement and the termination of Executive's employment for any reason. Executive further acknowledges that any alleged breach by the Company of any contractual, statutory or other obligation shall not excuse or terminate the obligations hereunder or otherwise preclude the Company from seeking injunctive or other relief. Rather, Executive acknowledges that such obligations are independent and separate covenants undertaken by Executive for the benefit of the Company.
23. Effect of Transfer to Affiliate. Executive acknowledges that the above restrictive covenants shall survive, and be extended to cover, the transfer of Executive from the Company to its parent, subsidiary, sister corporation or any other affiliated entity (hereinafter collectively referred to as an "Affiliate"). Specifically, in the event of Executive's temporary or permanent transfer to an Affiliate, she agrees that the foregoing restrictive covenants shall remain in force so as to continue to protect the Company for the duration of the non-compete period, measured from her effective date of transfer to an Affiliate. Additionally, Executive acknowledges that this Agreement shall be deemed to have been automatically assigned to the Affiliate as of her effective date of transfer such that the above-referenced restrictive covenants (as well as all other terms and conditions contained herein) shall be construed thereafter to protect the legitimate business interests and goodwill of the Affiliate as if Executive and the Affiliate had independently entered into this Agreement. Executive's acceptance of her transfer to, and subsequent employment by, the Affiliate shall serve as consideration for (as well as be deemed as evidence of her consent to) the assignment of this Agreement to the Affiliate as well as the extension of such restrictive covenants to the Affiliate. Executive agrees that this provision shall apply with equal force to any subsequent transfers of Executive from one Affiliate to another Affiliate.
24. Scope of Restrictions. If the scope of any restriction contained in any preceding paragraphs of this Agreement is deemed too broad to permit enforcement of such restriction to its fullest extent, then such restriction shall be enforced to the maximum extent permitted by law, and Executive hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction.
25. Specific Enforcement/Injunctive Relief. Executive agrees that it would be difficult to measure any damages to the Company from a breach of the above-referenced restrictive covenants, but that such damages would be great, incalculable and irremedial, and that monetary damages alone would be an inadequate remedy. Accordingly, Executive agrees that the Company shall be entitled to immediate injunctive relief against such breach, or threatened breach, in any court having jurisdiction. In addition, if Executive violates any such restrictive covenant, Executive agrees that the period of such violation shall be added to the term of the restriction. In determining the period of any violation, the Parties stipulate that in any calendar month in which Executive engages in any activity violative of such provisions, Executive shall be deemed to have violated such provision for the entire month, and that month shall be added to the duration of the non-competition provision. Executive acknowledges that the remedies described above shall not be the exclusive remedies, and the Company may seek any other remedy available to it either in law or in equity, including the recovery of compensatory or punitive damages. Executive further agrees that the Company shall be entitled to an award of all costs and attorneys' fees incurred by it in any attempt to enforce the terms of this Agreement.
26. Publicly Traded Stock. The Parties agree that nothing contained in this Agreement shall be construed to prohibit Executive from investing her personal assets in any stock or corporate security traded or quoted on a national securities exchange or national market system provided, however, such investments do not require any services on the part of Executive in the operation or the affairs of the business or otherwise violate the Hillenbrand Industries, Inc. Code of Ethics.
27. Titles. Titles are used for the purpose of convenience in this Agreement and shall be ignored in any construction of it.
28. Severability. The Parties agree that each and every paragraph, sentence, clause, term and provision of this Agreement is severable and that, in the event any portion of this Agreement is adjudged to be invalid or unenforceable, the remaining portions thereof shall remain in effect and be enforced to the fullest extent permitted by law. Further, should any particular clause, covenant, or provision of this Agreement be held unreasonable or contrary to public policy for any reason, the Parties acknowledge and agree that such covenant, provision or clause shall automatically be deemed modified such that the contested covenant, provision or clause will have the closest effect permitted by applicable law to the original form and shall be given effect and enforced as so modified to whatever extent would be reasonable and enforceable under applicable law.
29. Choice of Forum. Executive acknowledges that the Companies are primarily based in Indiana, and Executive understands and acknowledges the Company's desire and need to defend any litigation against it in Indiana. Accordingly, the Parties agree that any claim
of any type brought by Executive against the Company or any of its employees or agents must be maintained only in a court sitting in Marion County, Indiana, or Ripley County, Indiana, or, if a federal court, the Southern District of Indiana, Indianapolis Division. Executive further understands and acknowledges that in the event the Company initiates litigation against Executive, the Company may need to prosecute such litigation in such state where the Executive is subject to personal jurisdiction. Accordingly, for purposes of enforcement of this Agreement, Executive specifically consents to personal jurisdiction in the State of Indiana as well as any state in which resides a customer assigned to the Executive.
30. Choice of Law. This Agreement shall be deemed to have been made within the County of Ripley, State of Indiana and shall be interpreted and construed in accordance with the laws of the State of Indiana. Any and all matters of dispute of any nature whatsoever arising out of, or in any way connected with the interpretation of this Agreement, any disputes arising out of the Agreement or the employment relationship between the Parties hereto, shall be governed by, construed by and enforced in accordance with the laws of the State of Indiana without regard to any applicable state's choice of law provisions.
31. Assignment-Notices. The rights and obligations of the Company under this Agreement shall inure to its benefit, as well as the benefit of its parent, subsidiary, successor and affiliated entities, and shall be binding upon the successors and assigns of the Company. This Agreement, being personal to Executive, cannot be assigned by Executive, but her personal representative shall be bound by all its terms and conditions. Any notice required hereunder shall be sufficient if in writing and mailed to the last known residence of Executive or to the Company at its principal office with a copy mailed to the Office of General Counsel.
32. Amendments and Modifications. Except as specifically provided herein, no modification, amendment, extension or waiver of this Agreement or any provision hereof shall be binding upon the Company or Executive unless in writing and signed by both Parties. The waiver by the Company of a breach of any provision of this Agreement by Executive shall not be construed as a waiver of any subsequent breach. Nothing in this Agreement shall be construed as a limitation upon the Company's right to modify or amend any of its manuals or policies in its sole discretion and any such modification or amendment which pertains to matters addressed herein shall be deemed to be incorporated herein and made a part of this Agreement.
33. Outside Representations. Executive represents and acknowledges that in signing this Agreement she does not rely, and has not relied, upon any representation or statement made by the Company or by any of the Company's employees, officers, agents, stockholders, directors or attorneys with regard to the subject matter, basis or effect of this Agreement other than those specifically contained herein.
34. Voluntary and Knowing Execution. Executive acknowledges that she has been offered a reasonable amount of time within which to consider and review this Agreement; that she has carefully read and fully understands all of the provisions of this Agreement; and that she has entered into this Agreement knowingly and voluntarily.
35. Entire Agreement. This Agreement constitutes the entire employment agreement between the Parties hereto concerning the subject matter hereof and shall supersede all prior and contemporaneous agreements between the Parties in connection with the subject matter of this Agreement. Nothing in this Agreement, however, shall affect any separately-executed written agreement addressing any other issues (e.g., the Inventions, Improvements, Copyrights, and Trade Secrets Agreement, etc.).
IN WITNESS WHEREOF, the Parties have signed this Agreement effective as of the day and year first above written.
EXECUTIVE HILLENBRAND INDUSTRIES Signed: ______________________________ By: ______________________________ Printed: _____________________________ Title: ___________________________ Dated: _______________________________ Dated: ___________________________ |
CAUTION: READ BEFORE SIGNING
Exhibit A
SEPARATION AND RELEASE AGREEMENT
THIS SEPARATION and RELEASE AGREEMENT ("Agreement") is entered into by and between Kimberly K. Dennis ("Employee") and Hillenbrand Industries ("Company"). To wit, the Parties agree as follows:
1. Employee's active employment by the Company shall terminate effective
[DATE OF TERMINATION] (Employee's "Effective Termination Date"). Except
as specifically provided by this Agreement, Employee agrees that the
Company shall have no other obligations or liabilities to her following
her Effective Termination Date and that her receipt of the Severance
Benefits provided herein shall constitute a complete settlement,
satisfaction and waiver of any and all claims she may have against the
Company.
2. In consideration of the promises contained in this Agreement and contingent upon Employee's compliance with such promises, the Company agrees to provide Employee the following:
(i) Severance , inclusive of any notice pay obligations, to be
paid at the bi-weekly rate of $_______, less applicable
deductions or other set-offs, for a period up to fifty-two
(52) weeks following the Employee's Effective Termination Date
or until Employee becomes employed again, whichever first
occurs;
(ii) Payment for any earned but unused vacation as of Employee's Effective Termination Date; and
(iii) Life insurance coverage until the above-referenced Severance Pay terminates.
3. The above Severance Benefits shall be paid in accordance with the Company's standard payroll practices (e.g. biweekly) and shall begin on the first normally scheduled payroll following Employee's Effective Termination Date or the effective date of this Agreement, whichever occurs last. The Parties agree that the initial four (4) weeks of the foregoing severance shall be allocated as additional consideration provided to Employee in exchange for her execution of a release in compliance with the Older Workers Benefit Protection Act. The balance of the severance benefits shall be allocated as consideration for all other promises and obligations undertaken by Employee, including execution of a general release of claims.
4. As of her Effective Termination Date, Employee will become ineligible to participate in the Company's health insurance program and continuation of coverage requirements under COBRA (if any) will be triggered at that time. However, as additional consideration for the promises and obligations contained herein, the Company agrees to continue to pay the employer's share of such coverage as provided under the health care
program selected by Employee as of her Effective Termination Date, subject to any approved changes in coverage based on a qualified election, until the above-referenced Severance Pay terminates provided Employee (i) timely completes the applicable election of coverage forms and (ii) continues to pay the employee portion of the applicable premium(s). Thereafter, if applicable, coverage will be made available to Employee at her sole expense (i.e., Employee will be responsible for the full COBRA premium) for the remaining months of the COBRA coverage period made available pursuant to applicable law. The medical insurance provided herein does not include any disability coverage.
5. Employee agrees to notify the Company in writing within three (3) business days of Employee's acceptance of any subsequent employment by providing the name of such employer, her intended duties as well as the anticipated start date. Such information is required to ensure Employee's compliance with her non-compete obligations as well as all other applicable restrictive covenants. This notice will also serve to trigger the Company's right to terminate the above-referenced severance benefits and Company-paid COBRA benefits consistent with the above paragraphs. Failure to timely provide such notice shall be deemed a material breach of this Agreement entitling the Company to recover as damages the value of all benefits provided to Employee hereunder.
6. In exchange for the foregoing Severance Benefits, KIMBERLY K. DENNIS on behalf of himself/herself, her heirs, representatives, agents and assigns hereby COVENANTS NOT TO SUE, RELEASES, INDEMNIFIES, HOLDS HARMLESS, and FOREVER DISCHARGES (i) HILLENBRAND INDUSTRIES, (ii) its parent, subsidiary or affiliated entities, (iii) all of their present or former directors, officers, employees, shareholders, and agents as well as (iv) all predecessors, successors and assigns thereof from any and all actions, charges, claims, demands, damages or liabilities of any kind or character whatsoever, known or unknown, which Employee now has or may have had through the effective date of this Agreement.
7. Without limiting the generality of the foregoing release, it shall
include: (i) all claims or potential claims arising under any federal,
state or local laws relating to the Parties' employment relationship,
including any claims Employee may have under the Civil Rights Acts of
1866 and 1964, as amended, 42 U.S.C. Sections 1981 and 2000(e) et seq.;
the Civil Rights Act of 1991; the Age Discrimination in Employment Act,
as amended, 29 U.S.C. Sections 621 et seq.; the Americans with
Disabilities Act of 1990, as amended, 42 U.S.C. Sections 12,101 et
seq.; the Fair Labor Standards Act 29 U.S.C. Sections 201 et seq.; the
Worker Adjustment and Retraining Notification Act, 29 U.S.C. Sections
2101, et seq.; and any other federal, state or local law governing the
Parties' employment relationship; (ii) any claims on account of,
arising out of or in any way connected with Employee's employment with
the Company or leaving of that employment; (iii) any claims alleged or
which could have been alleged in any charge or complaint against the
Company; (iv) any claims relating to the conduct of any employee,
officer, director, agent or other representative of the Company; (v)
any claims of discrimination, harassment or retaliation on any basis;
(vi) any claims arising from any legal restrictions on an employer's
right to separate its employees; (vii) any claims for personal injury,
compensatory or punitive damages or other forms of relief; and (viii) all other causes of action sounding in contract, tort or other common law basis, including (a) the breach of any alleged oral or written contract, (b) negligent or intentional misrepresentations, (c) wrongful discharge, (d) just cause dismissal, (e) defamation, (f) interference with contract or business relationship or (g) negligent or intentional infliction of emotional distress.
8. The Parties acknowledge that it is their mutual and specific intent that the above waiver fully comply with the requirements of the Older Workers Benefit Protection Act (29 U.S.C. Section 626) and any similar law governing release of claims. Accordingly, Employee hereby acknowledges that:
(a) She has carefully read and fully understands all of the provisions of this Agreement and that she has entered into this Agreement knowingly and voluntarily;
(b) The Severance Benefits offered in exchange for Employee's release of claims exceed in kind and scope that to which she would have otherwise been legally entitled;
(c) Prior to signing this Agreement, Employee had been advised, and is being advised by this Agreement, to consult with an attorney of her choice concerning its terms and conditions; and
(d) She has been offered at least twenty-one (21) days within which to review and consider this Agreement.
9. The Parties agree that nothing contained herein shall purport to waive or otherwise affect any of Employee's rights or claims that may arise after she signs this Agreement.
10. The Parties agree that this Agreement shall not become effective and enforceable until the date this Agreement is signed by both Parties or seven (7) calendar days after its execution by Employee, whichever is later. Employee may revoke this Agreement for any reason by providing written notice of such intent to the Company within seven (7) days after she has signed this Agreement, thereby forfeiting Employee's right to receive any Severance Benefits provided hereunder and rendering this Agreement null and void in its entirety.
11. The Parties agree that nothing contained herein shall purport to waive or otherwise affect any of Employee's rights or claims that may arise after she signs this Agreement. It is further understood by the Parties that nothing in this Agreement shall affect any rights Employee may have under any Pension Plan and/or Savings Plan (i.e., 401(k) plan) provided by the Company as of the date of her termination, such items to be governed exclusively by the terms of the applicable plan documents.
12. Employee acknowledges that her termination and the Severance Benefits offered hereunder were based on an individual determination and were not offered in conjunction
with any group termination or group severance program and waives any claim to the contrary.
13. Employee hereby affirms and acknowledges her continued obligations to comply with the post-termination covenants contained in her Employment Agreement, including but not limited to, the non-compete, trade secret and confidentiality provisions. Employee acknowledges that a copy of the Employment Agreement has been attached to this Agreement as Exhibit A or has otherwise been provided to her and, to the extent not inconsistent with the terms of this Agreement or applicable law, the terms thereof shall be incorporated herein by reference. Employee acknowledges that the restrictions contained therein are valid and reasonable in every respect and are necessary to protect the Company's legitimate business interests. Employee hereby affirmatively waives any claim or defense to the contrary.
14. Employee acknowledges that the Company possesses, and she has been granted access to, certain trade secrets as well as other confidential and proprietary information which the Company has acquired at great effort and expense. Such information includes, without limitation, confidential information regarding products and services, marketing strategies, business plans, operations, costs, current or prospective customer information (including customer contacts, requirements, creditworthiness and like matters), product concepts, designs, prototypes or specifications, regulatory compliance issues, research and development efforts, technical data and know-how, sales information, including pricing and other terms and conditions of sale, financial information, internal procedures, techniques, forecasts, methods, trade information, trade secrets, software programs, project requirements, inventions, trademarks, trade names, and similar information regarding the Companies' business (collectively referred to herein as "Confidential Information").
15. Employee agrees that all such Confidential Information is and shall remain the sole and exclusive property of the Company. Except as may be expressly authorized by the Company in writing, or as may be required by law after providing due notice thereof to the Company, Employee agrees not to disclose, or cause any other person or entity to disclose, any Confidential Information to any third party for as long thereafter as such information remains confidential (or as limited by applicable law) and agrees not to make use of any such Confidential Information for Employee's own purposes or for the benefit of any other entity or person.
16. On or before Employee's Effective Termination Date or per the Company's request, Employee agrees to return the original and all copies of all things in her possession or control relating to the Company or its business, including but not limited to any and all contracts, reports, memoranda, correspondence, manuals, forms, records, designs, budgets, contact information or lists (including customer, vendor or supplier lists), ledger sheets or other financial information, drawings, plans (including, but not limited to, business, marketing and strategic plans), personnel or other business files, computer hardware, software, or access codes, door and file keys, identification, credit cards, pager, phone, and any and all other physical, intellectual, or personal property of any nature that
she received, prepared, helped prepare, or directed preparation of in connection with her employment with the Company. Nothing contained herein shall be construed to require the return of any non-confidential and de minimis items regarding Employee's pay, benefits or other rights of employment such as pay stubs, W-2 forms, 401(k) plan summaries, benefit statements, etc.
17. Employee hereby consents and authorizes the Company to deduct as an offset from the above-referenced severance payments the value of any Company property not returned or returned in a damaged condition as well as any monies paid by the Company on Employee's behalf (e.g., payment of any outstanding American Express bill).
18. Employee agrees not to make any written or oral statement that may defame, disparage or cast in a negative light so as to do harm to the personal or professional reputation of (a) the Company, (b) its employees, officers, directors or trustees or (c) the services and/or products provided by the Company and its subsidiaries or affiliate entities.
19. Employee specifically agrees and understands that the existence and terms of this Agreement are strictly CONFIDENTIAL and that such confidentiality is a material term of this Agreement. Accordingly, except as required by law or unless authorized to do so by the Company in writing, Employee agrees that she shall not communicate, display or otherwise reveal any of the contents of this Agreement to anyone other than her spouse, legal counsel or financial advisor provided, however, that they are first advised of the confidential nature of this Agreement and Employee obtains their agreement to be bound by the same. The Company agrees that Employee may respond to legitimate inquiries regarding the termination of her employment by stating that the Parties have terminated their relationship on an amicable basis and that the Parties have entered into a Confidential Separation and Release Agreement which prohibits her from further discussing the specifics of her separation. Nothing contained herein shall be construed to prevent Employee from discussing or otherwise advising subsequent employers of the existence of any obligations as set forth in her Employment Agreement. Further, nothing contained herein shall be construed to limit or otherwise restrict the Company's ability to disclose the terms and conditions of this Agreement as may be required by business necessity.
20. In the event that Employee breaches or threatens to breach any provision of this Agreement, she agrees that the Company shall be entitled to seek any and all equitable and legal relief provided by law, specifically including immediate and permanent injunctive relief. Employee hereby waives any claim that the Company has an adequate remedy at law. In addition, and to the extent not prohibited by law, Employee agrees that the Company shall be entitled to discontinue providing any additional Severance Benefits upon such breach or threatened breach as well as an award of all costs and attorneys' fees incurred by the Company in any successful effort to enforce the terms of this Agreement. Employee agrees that the foregoing relief shall not be construed to limit or otherwise restrict the Company's ability to pursue any other remedy provided by law, including the recovery of any actual, compensatory or punitive damages. Moreover, if Employee pursues any claims against the Company subject to the foregoing General Release, or
breaches the above Confidential provision, Employee agrees to immediately reimburse the Company for the value of all benefits received under this Agreement to the fullest extent permitted by law.
21. Employee acknowledges that this Agreement is entered into solely for the purpose of terminating her employment relationship with the Company on an amicable basis and shall not be construed as an admission of liability or wrongdoing by the Company and further acknowledges that the Company has expressly denied any such liability or wrongdoing.
22. Each of the promises and obligations shall be binding upon and shall inure to the benefit of the heirs, executors, administrators, assigns and successors in interest of each of the Parties.
23. The Parties agree that each and every paragraph, sentence, clause, term and provision of this Agreement is severable and that, if any portion of this Agreement should be deemed not enforceable for any reason, such portion shall be stricken and the remaining portion or portions thereof should continue to be enforced to the fullest extent permitted by applicable law.
24. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Indiana without regard to any applicable state's choice of law provisions.
25. Employee represents and acknowledges that in signing this Agreement she does not rely, and has not relied, upon any representation or statement made by the Company or by any of the Company's employees, officers, agents, stockholders, directors or attorneys with regard to the subject matter, basis or effect of this Agreement other than those specifically contained herein.
26. This Agreement represents the entire agreement between the Parties concerning the subject matter hereof, shall supercede any and all prior agreements which may otherwise exist between them concerning the subject matter hereof (specifically excluding, however, the post-termination obligations contained in any existing Employment Agreement or other legally-binding document), and shall not be altered, amended, modified or otherwise changed except by a writing executed by both Parties.
PLEASE READ CAREFULLY. THIS SEPARATION AND RELEASE
AGREEMENT INCLUDES A COMPLETE RELEASE OF ALL
KNOWN AND UNKNOWN CLAIMS.
IN WITNESS WHEREOF, the Parties have themselves signed, or caused a duly authorized agent thereof to sign, this Agreement on their behalf and thereby acknowledge their intent to be bound by its terms and conditions.
"EMPLOYEE" HILLENBRAND INDUSTRIES Signed: ______________________________ By: ______________________________ Printed: _____________________________ Title: ___________________________ Dated: _______________________________ Dated: ___________________________ |
December 22, 2003
Kimberly K. Dennis
Hillenbrand Industries, Inc.
700 State Route 46 East
Batesville, Indiana 47006
Dear Kim:
Re: Amendment to Employment Agreement
This is to confirm that, notwithstanding anything in Paragraphs 9 and 12 of the Employment Agreement dated August 1, 2003, between you and Hillenbrand Industries, Inc. ("Company") (hereinafter "Employment Agreement"), in the event your employment is involuntarily terminated by the Company without cause, you shall, subject to the terms and conditions set out below, be entitled to receive the greater of:
(i) (a) Fifty-two (52) weeks of your base salary at the time of termination paid as a lump sum, without set off for any other income over and above such severance or any Accrued Obligations and (b) any Accrued Obligations; or
(ii) (a) Severance pay determined in accordance with any guidelines established by the Company, without set off for any other income over and above such severance or any Accrued Obligations and (b) any Accrued Obligations;
"Accrued Obligations" collectively refers to accrued wages, deferred compensation, or other compensation, benefits, or perquisites which have been fully paid or fully accrued as of the effective date of your separation, in accordance with the Company's past practice and applicable law.
This severance pay will be in lieu of, and not in addition to, any amount of severance pay previously described in Paragraph 12 of your Employment Agreement as payable to you in the event your employment with the Company is involuntarily terminated without cause.
No severance pay shall be paid if you voluntarily leave the Company's employ or are terminated for cause. Any severance pay made payable hereunder shall be paid in lieu of, and not in addition to, any notice pay.
Additionally, such severance pay is contingent upon you (1) fully complying with any restrictive covenants contained in your Employment Agreement and (2) executing a Separation and Release Agreement in a form not substantially different from that attached to your Employment Agreement as Exhibit A ("Separation Agreement") and including the terms contained in this Amendment.
Except to the extent explicitly amended herein, all terms and conditions contained in your Employment Agreement, in any document specifically incorporated therein by reference, and in any other agreement between you and the Company, shall remain in full force and effect.
Sincerely,
Frederick W. Rockwood
President and CEO
Hillenbrand Industries, Inc.
THIS AMENDMENT IS MADE PART OF AND SHOULD BE KEPT WITH YOUR EMPLOYMENT AGREEMENT
EXHIBIT 10.21
EXECUTIVE
EMPLOYMENT AGREEMENT
P R E A M B L E
This Executive Employment Agreement defines the essential terms and conditions of our employment relationship with you. The subjects covered in this Agreement are vitally important to you and to the Company. Thus, you should read the document carefully and ask any questions before signing the Agreement. Given the importance of these matters to you and the Company, all executives shall sign the Agreement as a condition of employment.
This EMPLOYMENT AGREEMENT, dated and effective this 1st day of May, 2001 is entered into by and between Batesville Services, Inc. ("Company"), and Kenneth A. Camp ("Executive").
W I T N E S S E T H:
WHEREAS, the Company and its affiliated entities are engaged in the design, manufacture, promotion and sale of funeral and burial-related products and services throughout the United States and North America including, but not limited to, burial caskets, cremation products, funeral home displays and fixturing as well as other memorial products and services;
WHEREAS, the Company is willing to employ Executive in an executive capacity and Executive desires to be employed by the Company in such capacity based upon the terms and conditions set forth in this Agreement;
WHEREAS, in the course of the employment contemplated under this Agreement, it will be necessary for Executive to acquire knowledge of certain trade secrets and other confidential and proprietary information regarding the Company as well as its affiliated and/or subsidiary entities (hereinafter jointly referred to as the "Companies"); and
WHEREAS, the Company and Executive (collectively referred to herein as the "Parties") acknowledge and agree that the execution of this Agreement is necessary to memorialize the terms and conditions of their employment relationship as well as safeguard against the unauthorized disclosure or use of the Company's confidential information and to otherwise preserve the goodwill and ongoing business value of the Company;
NOW THEREFORE, in consideration of Executive's employment, the Company's willingness to disclose certain confidential and proprietary information to Executive and the mutual covenants contained herein as well as other good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows:
1. Employment. The Company agrees to employ Executive and Executive agrees to serve as President and CEO.
2. Duties. Executive agrees to perform all duties and responsibilities traditionally assigned to, or falling within the normal responsibilities of, an individual employed in the above-referenced position, specifically including his agreement to assume overall responsibility for: (i) the direction, growth and profitability of the Company and its various subsidiaries; (ii) providing leadership and vision to the Company and its management team; (iii) the development and implementation of the Company's strategic and other business plans; and (iv) the development, promotion and protection of the Company's business interests, including customer relations, product development and trade secrets. Executive also agrees to perform any and all additional duties or responsibilities as may be assigned by the Company in its sole discretion.
3. Best Efforts and Duty of Loyalty. During the term of employment with the Company, Executive covenants and agrees to perform all assigned duties in a diligent and professional manner and in the best interest of the Company. Executive agrees to devote his full working time, attention, talents, skills and best efforts to further the Company's business and agrees not to take any action, or make any omission, that deprives the Company of any business opportunities or otherwise act in a manner that conflicts with the best interest of the Company or is otherwise detrimental to its business. Executive agrees not to engage in any outside business activity, whether or not pursued for gain, profit or other pecuniary advantage, without the express written consent of the Company. Executive shall act at all times in accordance with the Hillenbrand Industries, Inc. Handbook of Ethical Business Conduct, the Corporate Compliance Handbook and all other applicable policies which may exist or be adopted by the Company from time to time.
4. At-Will Employment. Subject to the terms and conditions set forth below, Executive specifically acknowledges and accepts such employment on an "at-will" basis and agrees that both Executive and the Company retain the right to terminate this relationship at any time, with or without cause, for any reason not prohibited by applicable law upon proper notice. Executive acknowledges that nothing in this Agreement is intended to create, nor should be interpreted to create, an employment contract for any specified length of time between the Company and Executive.
5. Compensation. For all services rendered by Executive on behalf of, or at the request of, the Company, Executive shall be paid as follows:
(a) A base salary at the bi-weekly rate of Twelve Thousand, Five Hundred Dollars and No Cents ($12,500.00), less usual and ordinary deductions;
(b) Incentive compensation, payable solely at the discretion of the Company, pursuant to the Company's Exempt Employee Executive Compensation Program or any other program as the Company may establish in its sole discretion; and
(c) Such additional compensation, benefits and perquisites as the Company may deem appropriate.
Notwithstanding anything contained herein to the contrary, Executive acknowledges that the Company specifically reserves the right to make changes to Executive's compensation in its sole discretion including, but not limited to, modifying or eliminating a compensation component. The Parties agree that such changes shall be deemed effective immediately and a modification of this Agreement unless, within fourteen (14) days after receiving notice of such change, Executive exercises his right to terminate this Agreement without cause. The Parties anticipate that Executive's compensation structure will be reviewed on an annual basis but acknowledge that the Company shall have no obligation to do so.
6. Direct Deposit. As a condition of employment, and within thirty (30) days of the effective date of this Agreement, Executive agrees to make all necessary arrangements to have all sums paid pursuant to this Agreement direct deposited into one or more bank accounts as designated by Executive.
7. Warranties and Indemnification. Executive warrants that he is not a party to any contract, restrictive covenant, or other agreement purporting to limit or otherwise adversely affecting his ability to secure employment with any third party. Alternatively, should any such agreement exist, Executive warrants that the contemplated services to be performed hereunder will not violate the terms and conditions of any such agreement. In either event, Executive agrees to fully indemnify and hold the Company harmless from any and all claims arising from, or involving the enforcement of, any such restrictive covenants or other agreements.
8. Restricted Duties. Executive agrees not to disclose, or use for the benefit of the Company, any confidential or proprietary information belonging to any predecessor employer which otherwise has not been made public and further acknowledges that the Company has specifically instructed him not to disclose or use such confidential or proprietary information. Based on his understanding of the anticipated duties and responsibilities hereunder, Executive acknowledges that such duties and responsibilities will not compel the disclosure or use of any such confidential and proprietary information.
9. Termination Without Cause. Executive's employment may be terminated at any time, without cause, by either party upon sixty (60) days' advance written notice or pay in lieu of notice. In such event, Executive shall only be entitled to such compensation, benefits and perquisites which have been paid or fully accrued as of the effective date of his separation.
10. Termination With Cause. Executive's employment may be terminated at any time "for cause" without notice or prior warning. For purposes of this Agreement, "cause" shall mean the Company's good faith determination that Executive has:
(i) Failed, refused or otherwise been deemed unable to fully and timely comply with the terms and conditions of this Agreement, specifically including any reasonable instructions or orders issued by the Company;
(ii) Acquiesced or participated in any conduct which is dishonest, fraudulent, illegal, unethical or otherwise involves moral turpitude;
(iii) Violated any Company policy or procedures, specifically including a violation of Hillenbrand Industries, Inc.'s Handbook of Ethical Business Conduct;
(iv) Disclosed without proper authorization any trade secrets or other Confidential Information (as defined herein); or
(v) Engaged in any act which, in the opinion of the Company, is contrary to its best interests or might hold the Company, its officers or directors up to embarrassment, ridicule or possible civil or criminal liability.
Upon the occurrence or discovery of any event specified above, the Company shall have the right to terminate Executive's employment, effective immediately, by providing notice thereof to Executive without further obligation to him.
11. Termination Due to Death or Disability. In the event Executive dies or suffers a disability (as defined herein) during the term of employment, this Agreement shall automatically be terminated on the date of such death or disability without further obligation on the part of the Company. For purposes of this Agreement, Executive shall be considered to have suffered a "disability" upon the occurrence of one or more of the following events:
(i) Executive becomes eligible for or receives any benefits pursuant to any disability insurance policy as a result of a determination under such policy that Executive is permanently disabled;
(ii) Executive becomes eligible for or receives any disability benefits under the Social Security Act; or
(iii) A good faith determination by the Company that Executive is and will likely remain unable to perform the essential functions of his duties or responsibilities hereunder on a full-time basis, with or without reasonable accommodation, as a result of any mental or physical impairment.
Notwithstanding anything expressed or implied above to the contrary, the Company agrees to fully comply with its obligations under the Americans with Disabilities Act as well as any other applicable federal, state, or local law, regulation, or ordinance governing the protection of individual with such disabilities as well as the Company's obligation to provide reasonable accommodation thereunder.
12. Severance Payments. In the event Executive's employment is terminated
by the Company without cause, and subject to the terms and conditions
set out below, Executive shall be eligible for severance pay based upon
his base salary at the time of termination for a period determined in
accordance with any guidelines established by the Company or six (6)
months, whichever is longer. No severance pay shall be paid if
Executive voluntarily leaves the Company's employ or is terminated for
cause. Any severance pay made payable hereunder shall be paid in lieu
of, and not in addition to, any notice pay or other accrued
compensation. Additionally, such severance pay is contingent upon
Executive fully complying with the restrictive covenants contained
herein and executing a Separation and Release Agreement in a form not
substantially different from that attached to this Agreement as Exhibit
A.
13. Assignment of Rights.
(a) Copyrights. Executive agrees that all works of authorship fixed in any tangible medium of expression by him during the term of this Agreement relating to the Company's business ("Works"), either solely or jointly with others, shall be and remain exclusively the property of the Company. Each such Work created by Executive is a "work made for hire" under the copyright law and the Company may file applications to register copyright in such Works as author and copyright owner thereof. If, for any reason, a Work created by Executive is excluded from the definition of a "work made for hire" under the copyright law, then Executive does hereby assign, sell, and convey to the Company the entire rights, title, and interests in and to such Work, including the copyright therein, to the Company. Executive will execute any documents which the Company deems necessary in connection with the assignment of such Work and copyright therein. Executive will take whatever steps and do whatever acts the Company requests, including, but not limited to, placement of the Company's proper copyright notice on Works created by Executive to secure or aid in securing copyright protection in
such Works and will assist the Company or its nominees in filing applications to register claims of copyright in such Works. The Company shall have free and unlimited access at all times to all Works and all copies thereof and shall have the right to claim and take possession on demand of such Works and copies.
(b) Inventions. Executive agrees that all discoveries, concepts, and ideas, whether patentable or not, including, but not limited to, apparatus, processes, methods, compositions of matter, techniques, and formulae, as well as improvements thereof or know-how related thereto, relating to any present or prospective product, process, or service of the Company ("Inventions") that Executive conceives or makes during the term of this Agreement relating to the Company's business, shall become and remain the exclusive property of the Company, whether patentable or not, and Executive will, without royalty or any other consideration:
(i) inform the Company promptly and fully of such Inventions by written reports, setting forth in detail the procedures employed and the results achieved;
(ii) assign to the Company all of his rights, title, and interests in and to such Inventions, any applications for United States and foreign Letters Patent, any United States and foreign Letters Patent, and any renewals thereof granted upon such Inventions;
(iii) assist the Company or its nominees, at the expense of the Company, to obtain such United States and foreign Letters Patent for such Inventions as the Company may elect; and
(iv) execute, acknowledge, and deliver to the Company at the Company's expense such written documents and instruments, and do such other acts, such as giving testimony in support of his inventorship, as may be necessary in the opinion of the Company, to obtain and maintain United States and foreign Letters Patent upon such Inventions and to vest the entire rights and title thereto in the Company and to confirm the complete ownership by the Company of such Inventions, patent applications, and patents.
14. Company Property. All records, files, drawings, documents, equipment, and the like relating to, or provided by, the Company shall be and remain the sole property of the Company. Upon termination of employment, Executive shall immediately return to the Company all such items without retention of any copies. De minimis items such as pay stubs, 401(k) plan summaries, employee bulletins, and the like are excluded from this requirement.
15. Confidential Information. Executive acknowledges that the Companies possess certain trade secrets as well as other confidential and proprietary information which they have acquired or will acquire at great effort and expense. Such information may include, without limitation, confidential information regarding the Companies' products and services, marketing strategies, business plans, operations, costs, current or prospective customer information (including customer contacts, requirements, creditworthiness and like matters), product concepts, designs, prototypes or specifications, research and development efforts, technical data and know-how, sales information, including pricing and other terms and conditions of sale, financial information, internal procedures, techniques, forecasts, methods, trade information, trade secrets, software programs, project requirements, inventions, trademarks, trade names, and similar information regarding the Companies' business (collectively referred to herein as "Confidential
Information"). Executive further acknowledges that, as a result of his employment with the Company, Executive will have access to, will become acquainted with, and/or may help develop, such Confidential Information.
16. Restricted Use of Confidential Information. Executive agrees that all Confidential Information is and shall remain the sole and exclusive property of the Company. Except as may be expressly authorized by the Company in writing, Executive agrees not to disclose, or cause any other person or entity to disclose, any Confidential Information to any third party while employed by the Company and for as long thereafter as such information remains confidential (or as limited by applicable law). Further, Executive agrees to use such Confidential Information only in the course of Executive's duties in furtherance of the Company's business and agrees not to make use of any such Confidential Information for Executive's own purposes or for the benefit of any other entity or person.
17. Acknowledged Need for Limited Restrictive Covenants. Executive acknowledges that the Company has spent and will continue to expend substantial amounts of time, money and effort to develop its business strategies, Confidential Information, customer relationships, goodwill and employee relationships, and that Executive will benefit from these efforts. Further, Executive acknowledges the inevitable use of, or near-certain influence by his knowledge of, the Confidential Information disclosed to Executive during the course of employment if allowed to compete against the Company in an unrestricted manner and that such use would be unfair and extremely detrimental to the Company. Accordingly, based on these legitimate business reasons, Executive acknowledges the Company's need to protect its legitimate business interests by reasonably restricting Executive's ability to compete with the Company on a limited basis.
18. Non-Solicitation. During Executive's employment and for a period of eighteen (18) months thereafter, Executive agrees not to directly or indirectly engage in the following prohibited conduct:
(a) Solicit, offer products or services to, accept orders from, or otherwise transact business with, any customer or entity with whom Executive had contact or transacted any business during the eighteen (18) month period preceding Executive's date of separation or about whom Executive possessed, or had access to, confidential and proprietary information;
(b) Attempt to entice or otherwise cause any third party to withdraw, curtail or cease doing business with the Company, specifically including customers, venders, independent contractors and other third party entities;
(c) Disclose to any person or entity the identities, contacts or preferences of any customers of the Company, or the identity of any other persons or entities having business dealings with the Company;
(d) Induce any individual who has been employed by or had provided services to the Company within the six (6) month period immediately preceding the effective date of Executive's separation to terminate such relationship with the Company;
(e) Offer employment to, accept employment inquiries from, or employ any individual who is or had been employed by the Company at any time within the six (6) month period immediately preceding such offer or inquiry; or
(f) Otherwise attempt to directly or indirectly interfere with the Company's business or its relationship with its employees, consultants, independent contractors or customers.
19. Limited Non-Compete. For the above reasons, and as a condition of employment to the fullest extent permitted by law, Executive agrees during the Relevant Non-Compete Period not to directly or indirectly engage in the following competitive activities:
(a) Executive shall not have any ownership interest in, work for, advise, consult, or have any business connection or business or employment relationship with any Competitor unless Executive provides written notice to the Company of such relationship prior to entering into such relationship and, further, provides sufficient written assurances to the Company's satisfaction that such relationship will not jeopardize the Company's legitimate interests or otherwise violate the terms of this Agreement;
(b) Executive shall not engage in any research, development,
production, sale or distribution of any Competitive Products,
specifically including any products or services relating to
those for which Executive had responsibility for the eighteen
(18) month period preceding Executive's date of separation;
(c) Executive shall not market, sell, or otherwise offer or provide any Competitive Products within the applicable Geographic Territory, specifically including any products or services relating to those for which Executive had responsibility for the eighteen (18) month period preceding Executive's date of separation; and
(d) Executive shall not distribute, market, sell or otherwise offer or provide any Competitive Products to any customer of the Company with whom Executive had contact (either directly or indirectly) or for which Executive had responsibility at any time during the eighteen (18) month period preceding Executive's date of separation.
20. Non-Compete Definitions. For purposes of this Agreement, the Parties agree that the following terms shall apply:
(a) "Competitive Products" shall include any product or service which directly or indirectly competes with, is substantially similar to, or serves as a reasonable substitute for, any product or service in research, development or design, or manufactured, produced, sold or distributed by the Company;
(b) "Competitor" shall include any person or entity that offers or plans to offer any Competitive Products;
(c) "Geographic Territory" shall include any territory formally
assigned to Executive as well as all territories in which
Executive has provided any services, sold any products or
otherwise had responsibility at any time during the eighteen
(18) month period preceding Executive's date of separation;
(d) "Relevant Non-Compete Term" shall include the period of
Executive's employment with the Company as well as a period of
eighteen (18) months after such employment is terminated,
regardless of the reason for such termination provided,
however, that this period shall be reduced to the greater of
(i) six (6) months or (ii) the total length of
Executive's employment with the Company, including employment with a parent, subsidiary or affiliated entity, if such employment is less than eighteen (18) months;
(e) "Directly or indirectly" shall be construed such that the foregoing restrictions shall apply equally to Executive whether performed individually or as a partner, shareholder, officer, director, manager, employee, salesman, independent contractor, broker, agent, or consultant for any other individual, partnership, firm, corporation, company, or other entity engaged in such conduct.
21. Consent to Reasonableness. In light of the above-referenced concerns, including Executive's knowledge of and access to the Company's Confidential Information, Executive acknowledges that the terms of the foregoing restrictive covenants are reasonable and necessary to protect the Company's legitimate business interests and will not unreasonably interfere with Executive's ability to obtain alternate employment. As such, Executive hereby agrees that such restrictions are valid and enforceable, and affirmatively waives any argument or defense to the contrary.
22. Survival of Restrictive Covenants. Executive acknowledges that the above restrictive covenants shall survive the termination of this Agreement and the termination of Executive's employment for any reason. Executive further acknowledges that any alleged breach by the Company of any contractual, statutory or other obligation shall not excuse or terminate the obligations hereunder or otherwise preclude the Company from seeking injunctive or other relief. Rather, Executive acknowledges that such obligations are independent and separate covenants undertaken by Executive for the benefit of the Company.
23. Scope of Restrictions. If the scope of any restriction contained in any preceding paragraphs of this Agreement is deemed too broad to permit enforcement of such restriction to its fullest extent, then such restriction shall be enforced to the maximum extent permitted by law, and Executive hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction.
24. Specific Enforcement/Injunctive Relief. Executive agrees that it would be difficult to measure any damages to the Company from a breach of the above-referenced restrictive covenants, but that such damages would be great, incalculable and irremedial, and that monetary damages alone would be an inadequate remedy. Accordingly, Executive agrees that the Company shall be entitled to immediate injunctive relief against such breach, or threatened breach, in any court having jurisdiction. In addition, if Executive violates any such restrictive covenant, Executive agrees that the period of such violation shall be added to the term of the restriction. In determining the period of any violation, the Parties stipulate that in any calendar month in which Executive engages in any activity violative of such provisions, Executive shall be deemed to have violated such provision for the entire month, and that month shall be added to the duration of the non-competition provision. Executive acknowledges that the remedies described above shall not be the exclusive remedies, and the Company may seek any other remedy available to it either in law or in equity, including the recovery of compensatory or punitive damages. Executive further agrees that the Company shall be entitled to an award of all costs and attorneys' fees incurred by it in any attempt to enforce the terms of this Agreement.
25. Publicly Traded Stock. The Parties agree that nothing contained in this Agreement shall be construed to prohibit Executive from investing his personal assets in any stock or corporate security traded or quoted on a national securities exchange or national market system provided, however, such investments do not require any services on the part of Executive in the operation
or the affairs of the business or otherwise violate the Hillenbrand Industries, Inc. Handbook of Ethical Business Conduct.
26. Titles. Titles are used for the purpose of convenience in this Agreement and shall be ignored in any construction of it.
27. Severability. The Parties agree that each and every paragraph, sentence, clause, term and provision of this Agreement is severable and that, in the event any portion of this Agreement is adjudged to be invalid or unenforceable, the remaining portions thereof shall remain in effect and be enforced to the fullest extent permitted by law. Further, should any particular clause, covenant, or provision of this Agreement be held unreasonable or contrary to public policy for any reason, the Parties acknowledge and agree that such covenant, provision or clause shall automatically be deemed modified such that the contested covenant, provision or clause will have the closest effect permitted by applicable law to the original form and shall be given effect and enforced as so modified to whatever extent would be reasonable and enforceable under applicable law.
28. Arbitration. As a condition of employment, Executive agrees to execute a separate Arbitration Agreement, the terms and conditions of which shall be incorporated herein by reference.
29. Choice of Forum. Executive acknowledges that the Companies are primarily based in Indiana, and Executive understands and acknowledges the Company's desire and need to defend any litigation against it in Indiana. Accordingly, the Parties agree that any claim of any type brought by Executive against the Company or any of its employees or agents not subject to mandatory arbitration must be maintained only in a court sitting in Marion County, Indiana, or Ripley County, Indiana, or, if a federal court, the Southern District of Indiana, Indianapolis Division. Executive further understands and acknowledges that in the event the Company initiates litigation against Executive, the Company may need to prosecute such litigation in such state where the Executive is subject to personal jurisdiction. Accordingly, for purposes of enforcement of this Agreement, Executive specifically consents to personal jurisdiction in the State of Indiana as well as any state in which resides a customer assigned to the Executive.
30. Choice of Law. This Agreement shall be deemed to have been made within the County of Ripley, State of Indiana and shall be interpreted and construed in accordance with the laws of the State of Indiana. Any and all matters of dispute of any nature whatsoever arising out of, or in any way connected with the interpretation of this Agreement, any disputes arising out of the Agreement or the employment relationship between the Parties hereto, shall be governed by, construed by and enforced in accordance with the laws of the State of Indiana without regard to any applicable state's choice of law provisions.
31. Assignment-Notices. The rights and obligations of the Company under this Agreement shall inure to its benefit, as well as the benefit of its parent, subsidiary, successor and affiliated entities, and shall be binding upon the successors and assigns of the Company. This Agreement, being personal to Executive, cannot be assigned by Executive, but his personal representative shall be bound by all its terms and conditions. Any notice required hereunder shall be sufficient if in writing and mailed to the last known residence of Executive or to the Company at its principal office with a copy mailed to the Office of General Counsel.
32. Amendments and Modifications. Except as specifically provided herein, no modification, amendment, extension or waiver of this Agreement or any provision hereof shall be binding upon the Company or Executive unless in writing and signed by both Parties. The waiver by the
Company of a breach of any provision of this Agreement by Executive shall not be construed as a waiver of any subsequent breach. Nothing in this Agreement shall be construed as a limitation upon the Company's right to modify or amend any of its manuals or policies in its sole discretion and any such modification or amendment which pertains to matters addressed herein shall be deemed to be incorporated herein and made a part of this Agreement.
33. Outside Representations. Executive represents and acknowledges that in signing this Agreement he does not rely, and has not relied, upon any representation or statement made by the Company or by any of the Company's employees, officers, agents, stockholders, directors or attorneys with regard to the subject matter, basis or effect of this Agreement other than those specifically contained herein.
34. Voluntary and Knowing Execution. Executive acknowledges that he has been offered a reasonable amount of time within which to consider and review this Agreement; that he has carefully read and fully understands all of the provisions of this Agreement; and that he has entered into this Agreement knowingly and voluntarily.
35. Entire Agreement. This Agreement constitutes the entire employment agreement between the Parties hereto concerning the subject matter hereof and shall supersede all prior and contemporaneous agreements between the Parties in connection with the subject matter of this Agreement. Nothing in this Agreement, however, shall affect any separately-executed written agreement addressing any other issues (e.g., the Inventions, Improvements, Copyrights and Trade Secrets Agreement, the independent Arbitration Agreement, etc.).
IN WITNESS WHEREOF, the Parties have signed this Agreement effective as of the day and year first above written.
EXECUTIVE BATESVILLE SERVICES, INC. Signed: ______________________________ By: ______________________________ Printed: _____________________________ Title: ___________________________ Dated: _______________________________ Dated: ___________________________ |
CAUTION: READ BEFORE SIGNING
Exhibit A
SEPARATION AND RELEASE AGREEMENT
THIS SEPARATION and RELEASE AGREEMENT ("Agreement") is entered into by and between [EMPLOYEE'S FULL Name] ("Employee") and Batesville Services, Inc. ("Company"). To wit, the Parties agree as follows:
1. Employee's active employment by the Company shall terminate effective
[DATE OF TERMINATION] (Employee's "Effective Termination Date"). As of
that date, all Company benefits and obligations shall terminate except
as specifically provided by this Agreement. Employee agrees that the
Company shall have no other obligations or liabilities to him and that
his receipt of the severance benefits provided herein shall constitute
a complete settlement, satisfaction and waiver of any and all claims he
may have against the Company.
2. In consideration of the promises contained in this Agreement and contingent upon Employee's compliance with such promises, the Company agrees to provide Employee the following:
(i) Severance pay, inclusive of any notice pay obligations, to be paid bi-weekly at the bi-weekly rate of $_______, less applicable deduction or other set-offs, for a period of [WEEKS OF SEPARATION] (___) weeks following the Employee's Effective Termination Date or until Employee becomes employed again, whichever first occurs;
(ii) Payment for any earned but unused vacation as of Employee's Effective Termination Date; and
(iii) Life insurance coverage until the above-referenced Severance Pay terminates.
The above Severance Benefits shall be paid in accordance with the Company's standard payroll practices and shall begin on the first normally scheduled payroll following Employee's Effective Termination Date or the effective date of this Agreement, whichever occurs last.
3. As of the Effective Termination Date, Employee will become ineligible to participate in the Company's health insurance program and continuation of coverage requirements under COBRA will be triggered at that time. However, as additional consideration for the promises and obligations contained herein, and provided Employee timely completes the applicable election of coverage forms, the Company further agrees to pay the cost of such continued coverage under the Company's health care program until the above-referenced Severance Pay terminates. Thereafter, if applicable, coverage will be made available to Employee at his sole expense for the remaining months of the COBRA coverage period made available pursuant to applicable law. The medical insurance provided herein does not include any disability coverage.
4. Should Employee become employed before the above-referenced Severance Benefits are exhausted or terminated, Employee agrees to so notify the Company in writing within three (3) business days of Employee's acceptance of such employment, providing the name of such employer as well as the anticipated start date.
5. It is understood by the Parties that, unless it is specifically stated otherwise, nothing in this Agreement shall affect any rights Employee may have under any Profit Sharing and Savings Plan (401(k)) and/or Pension Plan provided by the Company as of the date of his termination, such items to be governed by the terms of the applicable plan documents.
6. In exchange for the foregoing Severance Benefits, [EMPLOYEE'S FULL NAME] on behalf of himself, his heirs, representatives, agents and assigns hereby COVENANTS NOT TO SUE, RELEASES, INDEMNIFIES, HOLDS HARMLESS, and FOREVER DISCHARGES (i) Batesville Services, Inc., (ii) its parent, subsidiary or affiliated entities, (iii) all of their present or former directors, officers, employees, shareholders, and agents as well as (iv) all predecessors, successors and assigns thereof from any and all actions, charges, claims, demands, damages or liabilities of any kind or character whatsoever, known or unknown, which Employee now has or may have had through the effective date of this Agreement.
7. Without limiting the generality of the foregoing release, it shall include: (i) all claims or potential claims arising under any federal, state or local laws relating to the Parties' employment relationship, including any claims Employee may have under the Civil Rights Acts of 1866 and 1964, as amended, 42 U.S.C. Sections 1981 and 2000(e) et seq.; the Civil Rights Act of 1991; the Age Discrimination in Employment Act, as amended, 29 U.S.C. Sections 621 et seq.; the Americans with Disabilities Act of 1990, as amended, 42 U.S.C. Sections 12,101 et seq.; the Fair Labor Standards Act 29 U.S.C. Sections 201 et seq.; the Worker Adjustment and Retraining Notification Act, 29 U.S.C. Sections 2101, et seq.; and any other federal, state or local law governing the Parties' employment relationship; (ii) any claims on account of, arising out of or in any way connected with Employee's employment with the Company or leaving of that employment; (iii) any claims alleged or which could have been alleged in any charge or complaint against the Company; (iv) any claims relating to the conduct of any employee, officer, director, agent or other representative of the Company; (v) any claims of discrimination or harassment on any basis; (vi) any claims arising from any legal restrictions on an employer's right to separate its employees; (vii) any claims for personal injury, compensatory or punitive damages or other forms of relief; and (viii) all other causes of action sounding in contract, tort or other common law basis, including (a) the breach of any alleged oral or written contract, (b) negligent or intentional misrepresentations, (c) wrongful discharge, (d) just cause dismissal, (e) defamation, (f) interference with contract or business relationship or (g) negligent or intentional infliction of emotional distress.
8. The Parties acknowledge that it is their mutual and specific intent that the above waiver fully comply with the requirements of the Older Workers Benefit Protection Act (29 U.S.C. Section 626) and any similar law governing release of claims. Accordingly, Employee hereby acknowledges that:
(a) He has carefully read and fully understands all of the provisions of this Agreement and that he has entered into this Agreement knowingly and voluntarily;
(b) The Severance Benefits offered in exchange for Employee's release of claims exceed in kind and scope that to which he would have otherwise been legally entitled;
(c) Prior to signing this Agreement, Employee had been advised in writing and given an opportunity to consult with an attorney of his choice concerning its terms and conditions; and
(d) He has been offered at least twenty-one (21) days within which to review and consider this Agreement.
9. The Parties agree that nothing contained herein shall purport to waive or otherwise affect any of Employee's rights or claims which may arise after this Agreement is signed by him.
10. The Parties agree that this Agreement shall not become effective and enforceable until seven (7) calendar days after its execution by Employee. Employee may revoke this Agreement for any reason by providing written notice of such intent to the Company within seven (7) days after he has signed this Agreement, thereby forfeiting Employee's right to receive any Severance Benefits provided hereunder and rendering this Agreement null and void in its entirety.
11. Employee acknowledges that his termination and the severance benefits offered hereunder were based on an individual determination and were not offered in conjunction with any group termination or group severance program and waives any claim to the contrary.
12. Employee hereby affirms and acknowledges his continued obligations to comply with the post-termination covenants contained in his Employment Agreement, including but not limited to, the non-compete, trade secret and confidentiality provisions. Employee acknowledges that a copy of the Employment Agreement has been attached to this Agreement as Exhibit ___ or has otherwise been provided to him and, to the extent not inconsistent with the terms of this Agreement, the terms thereof shall be incorporated herein by reference. Employee acknowledges that the restrictions contained therein are valid and reasonable in every respect and are necessary to protect the Company's legitimate business interests. Employee hereby affirmatively waives any claim or defense to the contrary.
13. Employee acknowledges that the Company possesses, and he has been granted access to, certain trade secrets as well as other confidential and proprietary information which the Company has acquired at great effort and expense. Such information includes, without limitation, confidential information regarding products and services, marketing strategies, business plans, operations, costs, current or prospective customer information (including customer contacts, requirements, creditworthiness and like matters), product concepts, designs, prototypes or specifications, regulatory compliance issues, research and development efforts, technical data and know-how, sales information, including pricing and other terms and conditions of sale, financial information, internal procedures, techniques, forecasts, methods, trade information, trade secrets, software programs, project requirements, inventions, trademarks, trade names, and similar information regarding the Companies' business (collectively referred to herein as "Confidential Information"). Employee agrees that all such Confidential Information is and shall remain the sole and exclusive property of the Company. Except as may be expressly authorized by the Company in writing, or as may be required by law after providing due notice thereof to the Company, Employee agrees not to disclose, or cause any other person or entity to disclose, any Confidential Information to any third party for as long thereafter as such information remains confidential (or as limited by applicable law) and agrees not to make use of any such Confidential Information for Employee's own purposes or for the benefit of any other entity or person.
14. On or before Employee's Effective Termination Date, Employee agrees to return to the Company the original and all copies of all things in his possession or control relating to the Company or its business, including but not limited to any and all contracts, reports, memoranda, correspondence, manuals, forms, records, designs, budgets, contact information or lists (including customer, vendor or supplier lists), ledger sheets or other financial information, drawings, plans (including, but not limited to, business, marketing and strategic plans), personnel or other business files, computer hardware, software, or access codes, door and file keys, identification, credit cards, pager, phone, and any and all other physical, intellectual, or personal property of any nature that he received, prepared, helped prepare, or directed preparation of in connection with his employment with the Company. Nothing contained herein shall be construed to require the return
of any non-confidential and de minimis items regarding Employee's pay, benefits or other rights of employment such as pay stubs, W-2 forms, 401(k) plan summaries, benefit statements, etc.
15. Employee hereby consents and authorizes the Company to deduct as an offset from the above-referenced severance payments the value of any Company property not returned or returned in a damaged condition as well as any monies paid by the Company on Employee's behalf (e.g., payment of any outstanding American Express bill).
16. Employee agrees not to make any written or oral statement that may defame, disparage or cast in a negative light so as to do harm to the personal or professional reputation of (a) the Company, (b) its employees, officers, directors or trustees or (c) the services and/or products provided by the Company and its subsidiaries or affiliate entities.
17. Employee specifically agrees and understands that the existence and terms of this Agreement are strictly CONFIDENTIAL and that such confidentiality is a material term of this Agreement. Accordingly, except as required by law or unless authorized to do so by the Company in writing, Employee agrees that he shall not communicate, display or otherwise reveal any of the contents of this Agreement to anyone other than his spouse, legal counsel or financial advisor provided, however, that they are first advised of the confidential nature of this Agreement and Employee obtains their agreement to be bound by the same. The Company agrees that Employee may respond to legitimate inquiries regarding the termination of his employment by stating that the Parties have terminated their relationship on an amicable basis and that the Parties have entered into a Confidential Separation and Release Agreement which prohibits him from further discussing the specifics of his separation. Nothing contained herein shall be construed to prevent Employee from discussing or otherwise advising subsequent employers of the existence of any obligations as set forth in his Employment Agreement. Further, nothing contained herein shall be construed to limit or otherwise restrict the Company's ability to disclose the terms and conditions of this Agreement as may be required by business necessity.
18. In the event that Employee breaches or threatens to breach any provision of this Agreement, he agrees that the Company shall be entitled to seek any and all equitable and legal relief provided by law, specifically including immediate and permanent injunctive relief. Employee hereby waives any claim that the Company has an adequate remedy at law. In addition, and to the extent not prohibited by law, Employee agrees that the Company shall be entitled to discontinue providing any additional Severance Benefits upon such breach or threat of breach as well as an award of all costs and attorneys' fees incurred by the Company in any successful effort to enforce the terms of this Agreement. Employee agrees that the foregoing relief shall not be construed to limit or otherwise restrict the Company's ability to pursue any other remedy provided by law, including the recovery of any actual, compensatory or punitive damages. Moreover, if Employee pursues any claims against the Company subject to the foregoing General Release, or breaches the above Confidential provision, Employee agrees to immediately reimburse the Company for the value of all benefits received under this Agreement to the fullest extent permitted by law.
19. Employee acknowledges that this Agreement is entered into solely for the purpose of terminating his employment relationship with the Company on an amicable basis and shall not be construed as an admission of liability or wrongdoing by the Company and further acknowledges that the Company has expressly denied any such liability or wrongdoing.
20. Each of the promises and obligations shall be binding upon and shall inure to the benefit of the heirs, executors, administrators, assigns and successors in interest of each of the Parties.
21. The Parties agree that each and every paragraph, sentence, clause, term and provision of this Agreement is severable and that, if any portion of this Agreement should be deemed not enforceable for any reason, such portion shall be stricken and the remaining portion or portions thereof should continue to be enforced to the fullest extent permitted by applicable law.
22. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Indiana without regard to any applicable state's choice of law provisions.
23. Employee represents and acknowledges that in signing this Agreement he does not rely, and has not relied, upon any representation or statement made by the Company or by any of the Company's employees, officers, agents, stockholders, directors or attorneys with regard to the subject matter, basis or effect of this Agreement other than those specifically contained herein.
24. This Agreement represents the entire agreement between the Parties concerning the subject matter hereof, shall supercede any and all prior agreements which may otherwise exist between them concerning the subject matter hereof (specifically excluding, however, the post-termination obligations contained in any existing Employment Agreement or other legally-binding document), and shall not be altered, amended, modified or otherwise changed except by a writing executed by both Parties.
PLEASE READ CAREFULLY. THIS SEPARATION AND RELEASE
AGREEMENT INCLUDES A COMPLETE RELEASE OF ALL
KNOWN AND UNKNOWN CLAIMS.
IN WITNESS WHEREOF, the Parties have themselves signed, or caused a duly authorized agent thereof to sign, this Agreement on their behalf and thereby acknowledge their intent to be bound by its terms and conditions.
"EMPLOYEE" "COMPANY" Signed: ______________________________ By: ______________________________ Printed: _____________________________ Title: ___________________________ Dated: _______________________________ Dated: ___________________________ |
December 22, 2003
Kenneth A. Camp
Batesville Casket Company
One Batesville Boulevard
Batesville, Indiana 47006
Dear Ken:
Re: Amendment to Employment Agreement
This is to confirm that, notwithstanding anything in Paragraphs 9 and 12 of the Employment Agreement dated May 1, 2001, between you and Batesville Services, Inc. ("Company") (hereinafter "Employment Agreement"), in the event your employment is involuntarily terminated by the Company without cause, you shall, subject to the terms and conditions set out below, be entitled to receive the greater of:
(i) (a) Fifty-two (52) weeks of your base salary at the time of termination paid as a lump sum, without set off for any other income over and above such severance or any Accrued Obligations and (b) any Accrued Obligations; or
(ii) (a) Severance pay determined in accordance with any guidelines established by the Company, without set off for any other income over and above such severance or any Accrued Obligations and (b) any Accrued Obligations;
"Accrued Obligations" collectively refers to accrued wages, deferred compensation, or other compensation, benefits, or perquisites which have been fully paid or fully accrued as of the effective date of your separation, in accordance with the Company's past practice and applicable law.
This severance pay will be in lieu of, and not in addition to, any amount of severance pay previously described in Paragraph 12 of your Employment Agreement as payable to you in the event your employment with the Company is involuntarily terminated without cause.
No severance pay shall be paid if you voluntarily leave the Company's employ or are terminated for cause. Any severance pay made payable hereunder shall be paid in lieu of, and not in addition to, any notice pay.
Additionally, such severance pay is contingent upon you (1) fully complying with any restrictive covenants contained in your Employment Agreement and (2) executing a Separation and Release Agreement in a form not substantially different from that attached to your Employment Agreement as Exhibit A ("Separation Agreement") and including the terms contained in this Amendment.
Except to the extent explicitly amended herein, all terms and conditions contained in your Employment Agreement, in any document specifically incorporated therein by reference, and in any other agreement between you and the Company, shall remain in full force and effect.
Sincerely,
Frederick W. Rockwood
President and CEO
Hillenbrand Industries, Inc.
THIS AMENDMENT IS MADE PART OF AND SHOULD BE KEPT WITH YOUR EMPLOYMENT AGREEMENT
EXHIBIT 10.22
EXECUTIVE
EMPLOYMENT AGREEMENT
P R E A M B L E
This Executive Employment Agreement defines the essential terms and conditions of our employment relationship with you. The subjects covered in this Agreement are vitally important to you and to the Company. Thus, you should read the document carefully and ask any questions before signing the Agreement. Given the importance of these matters to you and the Company, all executives shall sign the Agreement as a condition of employment.
This Agreement, dated and effective this 19th day of December, 2000, between Hill-Rom, Inc., an Indiana corporation (the "Company"), and R. Ernest Waaser, ("Executive").
W I T N E S S E T H:
The Company desires to employ Executive as well as to safeguard the Company against disclosure or use of trade secrets or confidential data and to obtain a non-compete agreement; and
In the course of Executive's employment, it will be necessary for Executive to acquire knowledge of trade secrets and confidential data of the Company; and
Executive desires from the Company agreement on certain conditions regarding his employment and the termination of the employment relationship if the parties part ways;
NOW, THEREFORE, in consideration of Executive's employment by the Company and the other benefits provided Executive under this Agreement and the mutual covenants herein contained, the parties agree as follows:
1. Employment. The Company agrees to employ Executive and Executive agrees to serve as President and CEO. Executive's employment with the Company is at-will which means he may terminate his employment at any time, for any reason, with or without notice. Likewise, the Company has the right to terminate Executive's employment at any time for any reason not prohibited by law upon the terms and conditions set out in the Agreement. Nothing in this Agreement is intended to create and should not be interpreted to create an employment contract for any specified length of time between Executive and the Company.
2. Compensation. The Company shall pay Executive for his services, compensation as follows:
(a) A base salary at the rate of $12,500 bi-weekly, less usual and ordinary deductions, annualized at $325,000.
(b) Incentive compensation, payable solely at the discretion of the Company, pursuant to the Company's Exempt Employee Executive Compensation Program.
(c) Such additional compensation, benefits and perquisites as the Company, in its discretion, may deem appropriate. (The initial package of additional benefits and perquisites is outlined in the attached offer letter and incorporated herein by reference. However, the Parties agree that nothing contained herein shall be construed to prohibit or otherwise restrict the Company from exercising its sole discretion to eliminate or modify any such benefits at any time as it sees fit.)
Notwithstanding anything contained herein to the contrary, the Company maintains the right to change Executive's compensation structure, including but not limited to, eliminating a compensation component, and any other changes the Company deems appropriate in its sole discretion.
3. Duties. Executive shall at all times faithfully and diligently perform his obligations under this Agreement and act in the best interest of the Company and its affiliated companies including any parent or subsidiaries (hereinafter jointly referred to as the "Companies"). Executive's duties shall be to act in such office or capacity as the Company may request from time to time and Executive agrees to perform all duties necessary or advisable in order to carry out such functions in an efficient manner. Executive's duties and responsibilities at all times shall be subject to the authority of the Board of Directors of the Company and such officers and agents thereof to whom authority may be delegated thereby, and/or curtailed at any time. Executive shall at all times devote his full time, best efforts and ability, skill, and attention exclusively to the furtherance of the business objectives and interests of the Company, all to the exclusion of other employers or interests or their products and services. Executive shall not engage in any gainful employment other than under this Agreement without the prior written consent of the Company. In addition, Executive shall at all times act in accordance with the Hillenbrand Industries, Inc. Handbook of Ethical Business Conduct and Corporate Compliance Handbook.
4. Warranties and Indemnification. Executive warrants that he is not a party to any restrictive covenant, contract or other agreement limiting or otherwise adversely affecting his employment with the Company. Executive further agrees to indemnify and hold the Company harmless from any and all claims arising from, or involving the enforcement of, any such restrictive covenants or other agreements.
5. Termination of Employment. Because Executive is an at-will employee, his employment may be terminated at any time, without cause, by Executive or the Company upon sixty (60) days written notice or pay in lieu of notice. Executive's employment may be terminated at any time, without notice, for cause. For purposes of this Agreement, cause shall be defined to include but shall not be limited to things such as dishonesty, nonperformance of duties, violation of Company policy or procedures, conviction of a felony, violation of the Hillenbrand Industries, Inc. Handbook of Ethical Business Conduct, or disloyalty or a failure to act or not act in accordance with the direction of the Company.
If, because of disability, Executive becomes unable to perform the essential functions of his position, with or without reasonable accommodation, Executive's employment shall be terminated. However, Executive may be entitled to benefits under the Company's regular fringe benefit programs if he meets the eligibility criteria of such programs.
If Executive's employment terminates for whatever reason, prior to the end of the fiscal year, Executive shall not be entitled to any of the compensation, benefits and perquisites
identified in Paragraphs 2(b) and (c) above for any portion of such fiscal year which have not already been paid to Executive as of the date of his separation.
6. Severance Payments. Subject to the terms and conditions set out below, if Executive's employment with the Company is terminated without cause, the Company shall pay Executive severance pay based upon his base salary at the time of termination for a period of twelve (12) months.
No severance pay shall be paid if Executive voluntarily leaves the Company's employ or is terminated for cause.
Moreover, any severance pay payable hereunder shall be offset against any amount of notice pay paid pursuant to Paragraph 5 and is contingent upon Executive complying with the covenants and agreements of Paragraphs 7 through 10 and executing a Termination and Release Agreement in a form not substantially different from that attached to the Agreement as Exhibit A.
7. Protection of the Company's Business. Executive acknowledges that in the course of his employment he will acquire knowledge of trade secrets and confidential data of the Company. Such trade secrets and confidential data may include but are not limited to confidential product information, customer lists, technical information, methods by which the Company proposes to compete with its business competitors, secret strategic plans, confidential reports prepared by business consultants which may reveal strengths and weaknesses of the Company and its competition, and similar information relating to the Company's products, customers, strategies, and operations, which trade secrets and confidential data pertain to its operations throughout the United States and the world but maintain their situs in Indiana. In order to perform his obligations under this Agreement, Executive must necessarily learn such trade secrets and confidential data, all of which are extremely important to the Company, are not known outside the business of the Company, are known only to a limited group of its top executives and directors, are protected by strict measures to preserve secrecy, are of great value to the Company, are the result of the expenditure of money, time and effort thereby, are difficult for an outsider to duplicate, and disclosure of which would be extremely detrimental to the Company. Executive agrees to keep all such trade secrets or confidential data secret and not to release such information to persons not authorized by the Company to receive such secrets and data, both during his employment with the Company and at all times thereafter. Executive acknowledges that trade secrets and confidential data need not be expressly marked as such by the Company.
8. Documents, Inventions, Etc. All records, files, drawings, documents, equipment, and the like relating to the Company shall be and remain the sole property of the Company. Executive, on the termination of his employment hereunder, shall immediately return to the Company all such items without retention of any copies. De minimis items such as pay stubs, 401(k) plan summaries, employee bulletins, and the like are excluded from this requirement. Executive shall fully and promptly disclose to the Company all ideas, conceptions, inventions, discoveries, and designs that are conceived or contemplated by him within the scope of his employment and pertaining to the business of the Company (whether alone or with others and whether patentable or unpatentable hereinafter called "Inventions") and shall assign to the Company his entire right, title and interest in and to the Inventions. Executive shall take all reasonable action requested by the Company to protect, obtain title to and/or patent in any country in the name of the Company or its nominee, any of such Inventions, including execution and delivery of all applications, assignments and other papers deemed necessary by the Company, provided he is reimbursed reasonable expenses incurred by him in so doing.
9. Limited Non-Competition. During Executive's employment and thereafter if said employment should end for whatever reason, it is very important to the Company to protect its legitimate business interests by restricting Executive's ability to compete with the Company in a limited manner. Therefore, this provision is drafted narrowly so as to be able to safeguard the Company's legitimate business interests while not unreasonably interfering with Executive's ability to obtain alternate employment. Executive acknowledges that this limited non-competition provision is not an attempt to prevent him from obtaining other employment.
(a) During At-Will Employment By Company. During Executive's employment by the Company, Executive shall not, directly or indirectly, have any ownership interest in, work for, advise, manage, or act as an agent or consultant for, or have any business connection or business or employment relationship with any person or entity that competes with the Company or that contemplates competing with the Company without the prior written approval of an executive officer of the Company.
(b) During Two Year Post-Employment Period. For a period of two
(2) years after Executive's separation from the Company
(regardless of the reason for the separation), he shall not:
(i) directly or indirectly have any ownership interest in any entity or person engaged in research, development, production, sale or distribution of a product or service which competes with or is substantially similar to any product or service in research, development or design, or manufactured, produced, sold or distributed by the Company, within the geographical area in which Executive has been performing services on behalf of the Company or for which he has been assigned responsibility at anytime within the twenty-four (24) months preceding his separation.
(ii) within the geographical area in which Executive has been performing services on behalf of the Company or for which he has been assigned responsibility at anytime within the twenty-four (24) months preceding his separation, directly or indirectly in any competitive capacity, work for, advise, manage, or act as an agent or consultant for or have any business connection or business or employment relationship with any entity or person engaged in research, development, production, sale or distribution of a product or service which competes with or is substantially similar to any product or service in research, development or design, or manufactured, produced, sold or distributed by the Company.
(iii) directly or indirectly market, sell or otherwise
provide any products or services which are
competitive with or substantially similar to any
product or service in research, development or
design, or manufactured, produced, sold or
distributed by the Company, to any customer of the
Company with whom Executive has had contact (either
directly or indirectly) or over which he has had
responsibility at any time during the twenty-four
(24) months preceding his separation.
(c) In the event that Executive worked for the Company less than a total of twenty-four (24) months prior to separation, the limited non-competition of sections 9(b)(i) - (iii) above shall remain in effect the longer of --
(i) six (6) months, or
(ii) the term of Executive's employment with the Company
(e.g., if Executive worked for the Company for ten
(10) months, the limited non-competition provisions
apply for ten (10) months post separation).
(d) Executive acknowledges that after termination of this Agreement, he will inevitably possess trade secrets and confidential data of the Company which he would inevitably use if he were to engage in conduct prohibited as set forth above and such use would be unfair to and extremely detrimental to the Company and in view of the benefits provided him in this Agreement, such conduct on his part would be inequitable. Accordingly, Executive separately and severally covenants for the benefit of the Company to keep each of the covenants described in the foregoing provisions of Paragraph 9 above throughout the two year period specified above.
(e) Publicly Traded Stock. Nothing in the foregoing provisions of Paragraph 9 prohibits Executive from purchasing for investment purposes only, any stock or corporate security traded or quoted on a national securities exchange or national market system, so long as such ownership does not violate the Hillenbrand Industries, Inc. Handbook of Ethical Business Conduct.
(f) Maximum Application. In the unlikely event that a court of competent jurisdiction were to determine that any portion of this limited non-competition provision is unenforceable, then the parties agree that the remainder of the limited non-competition provision shall remain valid and enforceable to the maximum extent possible.
10. Other Limited Prohibitions. During Executive's employment by the Company and for two (2) years post-separation (for whatever reason) or the length of Executive's tenure whichever is less (but in no event less than six (6) months), Executive shall not:
(a) Request or advise any customer of the Company, or any person or entity having business dealings with the Company, to withdraw, curtail or cease such business with the Company;
(b) Disclose to any person or entity the identities of any customers of the Company, or the identity of any persons or entities having business dealings with the Company; or
(c) Directly or indirectly influence or attempt to influence any other employee of the Company to separate from the Company.
11. Consent to Reasonableness. In light of Executive's knowledge of an access to the Company's Confidential Information, the Executive and the Company expressly agree that the terms of the foregoing limited non-competition and non-solicitation provisions are reasonable and necessary to protect the Company's legitimate business interests and do not unreasonably interfere with Executive's ability to obtain alternate employment. As such Executive hereby agrees that such restrictions are valid and enforceable and affirmatively waives any argument or defense to the contrary. Further, Executive acknowledges that any alleged breach by the Company of any contractual, statutory or other obligation shall not excuse or terminate his obligations hereunder or otherwise preclude the Company from seeking injunctive or other relief.
12. Scope of Restrictions. If the scope of any restriction contained in any preceding paragraphs of this Agreement is too broad to permit enforcement of such restriction to its fullest extent then
such restriction shall be enforced to the maximum extent permitted by law, and Executive hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction.
13. Specific Enforcement/Injunctive Relief. Executive agrees that it would be difficult to measure damages to the Company from any breach of the covenants contained in Paragraphs 7 through 10, but that such damages from any breach would be great, incalculable and irremedial, and that damages would be an inadequate remedy. Accordingly, Executive agrees that the Company may have specific performance of the terms of this Agreement in any court having jurisdiction. In addition, if Executive violates the provisions of Paragraphs 9 or 10, Executive agrees that any period of such violation shall be added to the term of the restriction. For example, if Executive violates the non-competition provision for three months, the Company shall be entitled to enforce the non-competition provision for two years and three months post-separation. In determining the period of any violation, the parties stipulate that in any calendar month in which Executive engages in any activity violative of the provisions of Paragraphs 9 or 10, Executive is deemed to have violated such provision for the entire month, and that month shall be added to the duration of the non-competition provision as set out above. The parties agree however, that specific performance and the "add back" remedies described above shall not be the exclusive remedies, and the Company may enforce any other remedy or remedies available to it either in law or in equity including but not limited to temporary, preliminary, and/or permanent injunctive relief. Executive further agrees that the Company shall be entitled to an award of all costs and attorneys' fees incurred by it to enforce the terms of this Agreement.
14. Severability. If any provision of this Agreement is held invalid, such invalidity shall not affect the other provisions of this Agreement which shall be given effect independently of the invalid provisions; and, in such circumstances, the invalid provision is severable.
15. Titles. Titles are used for the purpose of convenience in this Agreement and shall be ignored in any construction of it.
16. Governing Law. This Agreement shall be construed in accordance with the laws of the State of Indiana. The parties expressly agree that it is appropriate for Indiana law to apply: (1) to the interpretation of this Agreement; (2) to any disputes arising out of this Agreement; and (3) to any disputes arising out of the employment relationship of the parties.
17. Choice of Forum. The Company is based in Indiana, and Executive understands and acknowledges the Company's desire and need to defend any litigation against it in Indiana. Accordingly, the parties agree that any claim of any type brought by Executive against the Company or any of its employees or agents must be maintained only in a court sitting in Marion County, Indiana, or Ripley County, Indiana, or, if a federal court, the Southern District of Indiana, Indianapolis Division.
Executive further understands and acknowledges that in the event the Company initiates litigation against him, the Company may need to prosecute such litigation in his forum state, in the State of Indiana, or in such other state where Executive is subject to personal jurisdiction. Accordingly, the parties agree that the Company can pursue any claim against Executive in any forum in which Executive is subject to personal jurisdiction. Executive specifically consents to personal jurisdiction in the State of Indiana, as well as any state in which resides a customer assigned to him.
18. Successors and Assigns. The rights and obligations of the Company under this Agreement shall inure to its benefit, its successors and affiliated companies and shall be binding upon the successors and assigns of the Company. This Agreement, being personal to Executive, cannot be assigned by Executive, but his personal representative shall be bound by all its terms and conditions.
19. Assignment-Waiver-Notices. The rights and obligations of the Company under this Agreement shall inure to the benefit of its successors and affiliated companies and shall be binding upon the successors and assignees of the Company. This Agreement, being personal to the Executive, cannot be assigned by Executive, but his personal representative shall be bound by all its terms and conditions. The waiver by the Company of breach of any provision of this Agreement by Executive shall not be construed as a waiver of any subsequent breach by Executive. Any notice hereunder shall be sufficient if in writing and mailed to the last known residence of Executive or to the Company at its principal office.
20. Amendments and Modifications. Except as specifically provided herein, no modification, amendment, extension or waiver of this Agreement or any provision hereof shall be binding upon the Company or Executive unless in writing and signed by both parties. Nothing in this Agreement shall be construed as a limitation upon the Company's right to modify or amend any of its manuals at its sole discretion and any such modification or amendment which pertains to matters addressed herein shall be deemed to be incorporated in and made a part of this Agreement.
21. Complete Agreement. This Agreement constitutes the entire employment agreement of the parties and supersedes all prior employment agreements addressing the terms, conditions, and issues contained herein. Nothing in this Agreement, however, affects any separate written agreements addressing other terms and conditions and issues (by way of example only, the Inventions, Improvements, Copyrights and Trade Secrets Agreement).
IN WITNESS WHEREOF, the parties have signed this Agreement effective as of the day and year first above written.
EXECUTIVE HILL-ROM, INC.
_______________________________ By: ______________________________
- 7 -
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Exhibit A
|
SEPARATION AND RELEASE AGREEMENT
THIS SEPARATION and RELEASE AGREEMENT ("Agreement") is entered into by and between [Employee's Full Name] ("Employee") and [Name of Operating Company] ("Company"). To wit, the Parties agree as follows:
1. Employee's active employment by the Company shall terminate effective
[date of termination] (Employee's "Effective Termination Date"). As of
that date, all Company benefits and obligations shall terminate except
as specifically provided by this Agreement. Employee agrees that the
Company shall have no other obligations or liabilities to him and that
his receipt of the severance benefits provided herein shall constitute
a complete settlement and satisfaction of any and all claims he may
have against the Company.
2. In consideration of the promises contained in this Agreement and contingent upon Employee's compliance with such promises, the Company agrees to provide Employee the following:
(i) Severance pay, inclusive of any notice pay obligations, to be paid at the bi-weekly rate of $_______, less applicable deductions, for a period of [weeks of separation] (___) weeks following the date of termination or until Employee becomes employed again, whichever first occurs;
(ii) Payment for any earned but unused vacation as of [date of termination]; and
(iii) Life insurance coverage until the above-referenced Severance Pay terminates.
The above Severance Benefits shall be paid in accordance with the Company's standard payroll practices and shall begin on the first normally scheduled payroll following Employee's Effective Termination Date or the effective date of this Agreement, whichever occurs last.
3. As of the Effective Termination Date, Employee will become ineligible to participate in the Company's health insurance program and continuation of coverage requirements under COBRA will be triggered at that time. However, as additional consideration for the promises and obligations contained herein, and provided Employee completes the applicable election of coverage forms, the Company further agrees to pay the cost of such continued coverage under the Company's health care program until the above-referenced Severance Pay terminates. Thereafter, if applicable, coverage will be made available to Employee at his sole expense for the remaining months of the COBRA coverage period made available pursuant to applicable law. The medical insurance provided herein does not include any disability coverage.
4. Should Employee become employed before the above-referenced Severance Benefits are exhausted or terminated, Employee agrees to so notify the Company in writing within three (3) business days of Employee's acceptance of such employment, providing the name of such employer as well as the anticipated start date.
5. It is understood by the Parties that, unless it is specifically stated otherwise, nothing in this Agreement shall affect any rights Employee may have under any Profit Sharing and Savings Plan (401(k)) and/or Pension Plan provided by the Company as of the date of his termination, such items to be governed by the terms of the applicable plan documents.
6. In exchange for the foregoing Severance Benefits, [EMPLOYEE'S FULL NAME] on behalf of himself, his heirs, representatives, agents and assigns hereby COVENANTS NOT TO SUE, RELEASES, INDEMNIFIES, HOLDS HARMLESS, and FOREVER DISCHARGES (i) [Name of Operating Company], (ii) its parent, subsidiary or affiliated entities, (iii) all of their present or former directors, officers, employees, shareholders, and agents as well as (iv) all predecessors, successors and assigns thereof from any and all actions, charges, claims, demands, damages or liabilities of any kind or character whatsoever, known or unknown, which Employee now has or may have had through the effective date of this Agreement.
7. Without limiting the generality of the foregoing release, it shall
include: (i) all claims or potential claims arising under any federal,
state or local laws relating to the Parties' employment relationship,
including any claims Employee may have under the Civil Rights Acts of
1866 and 1964, as amended, 42 U.S.C. Sections 1981 and 2000(e) et seq.;
the Civil Rights Act of 1991; the Age Discrimination in Employment Act,
as amended, 29 U.S.C. Sections 621 et seq.; the Americans with
Disabilities Act of 1990, as amended, 42 U.S.C. Sections 12,101 et
seq.; the Fair Labor Standards Act 29 U.S.C. Sections 201 et seq.; and
any other federal, state or local law governing the Parties' employment
relationship; (ii) any claims on account of, arising out of or in any
way connected with Employee's employment with the Company or leaving of
that employment; (iii) any claims alleged or which could have been
alleged in any charge or complaint against the Company; (iv) any claims
relating to the conduct of any employee, officer, director, agent or
other representative of the Company; (v) any claims of discrimination
or harassment on any basis; (vi) any claims arising from any legal
restrictions on an employer's right to separate its employees; (vii)
any claims for personal injury, compensatory or punitive damages or
other forms of relief; and (viii) all other causes of action sounding
in contract, tort or other common law basis, including (a) the breach
of any alleged oral or written contract, (b) negligent or intentional
misrepresentations, (c) wrongful discharge, (d) just cause dismissal,
(e) defamation, (f) interference with contract or business relationship
or (g) negligent or intentional infliction of emotional distress.
8. The Parties acknowledge that it is their mutual and specific intent that the above waiver fully comply with the requirements of the Older Workers Benefit Protection Act (29 U.S.C. Section 626). Accordingly, Employee hereby acknowledges that:
(a) He has carefully read and fully understands all of the provisions of this Agreement and that he has entered into this Agreement knowingly and voluntarily;
(b) The Severance Benefits offered in exchange for Employee's release of claims exceed in kind and scope that to which he would have otherwise been legally entitled;
(c) Prior to signing this Agreement, Employee had been advised in writing and given an opportunity to consult with an attorney of his choice concerning its terms and conditions; and
(d) He has been offered at least twenty-one (21) days within which to review and consider this Agreement.
9. The Parties agree that nothing contained herein shall purport to waive or otherwise affect any of Employee's rights or claims which may arise after this Agreement is signed by him.
10. The Parties agree that this Agreement shall not become effective and enforceable until seven (7) calendar days after its execution by Employee or Employee's last day of active employment, whichever occurs last. Employee may revoke this Agreement for any reason by providing written notice of such intent to the Company within seven (7) days after he has signed this Agreement, thereby forfeiting Employee's right to receive any Severance Benefits provided hereunder and rendering this Agreement null and void in its entirety.
11. Employee hereby affirms and acknowledges his continued obligations to comply with the post-termination covenants contained in his Employment Agreement, including but not limited to, the non-compete, trade secret and confidentiality provisions. Employee acknowledges that a copy of the Employment Agreement has been attached to this Agreement as Exhibit ___ or has otherwise been provided to him and, to the extent not inconsistent with the terms of this Agreement, the terms thereof shall be incorporated herein by reference. Employee acknowledges that the restrictions contained therein are valid and reasonable in every respect and are necessary to protect the Company's legitimate business interests. Employee hereby affirmatively waives any claim or defense to the contrary.
12. On or before [date of termination], Employee agrees to return to the Company the original and all copies of all things in his possession or control relating to the Company or its business, including but not limited to any and all contracts, reports, memoranda, correspondence, manuals, forms, records, designs, budgets, contact information or lists (including customer, vendor or supplier lists), ledger sheets or other financial information, drawings, plans (including, but not limited to, business, marketing and strategic plans), personnel or other business files, computer hardware, software, or access codes, door and file keys, identification, credit cards, pager, phone, and any and all other physical, intellectual, or personal property of any nature that he received, prepared, helped prepare, or directed preparation of in connection with his employment with the Company. Nothing contained herein shall be construed to require the return of any non-confidential and de minimis items regarding Employee's pay, benefits or other rights of employment such as pay stubs, W-2 forms, 401(k) plan summaries, benefit statements, etc.
13. Employee agrees not to discuss or disclose, directly or indirectly, any proprietary or confidential information regarding the Company without its express written consent. Employee further agrees not to make any written or oral statement that may defame, disparage or cast in a negative light so as to do harm to the personal or professional reputation of (a) the Company, (b) its employees, officers, directors or trustees or (c) the services and/or products provided by the Company and its subsidiaries or affiliate entities.
14. The Parties agree that each and every paragraph, sentence, clause, term and provision of this Agreement is severable and that, if any portion of this Agreement should be deemed not enforceable for any reason, such portion shall be stricken and the remaining portion or portions thereof should continue to be enforced to the fullest extent permitted by applicable law.
15. Employee specifically agrees and understands that the existence and terms of this Agreement are strictly CONFIDENTIAL and that such confidentiality is a material term of this Agreement. Accordingly, except as required by law or unless authorized to do so by the Company in writing, Employee agrees that he shall not communicate, display or otherwise reveal any of the contents of this Agreement to anyone other than his spouse, legal counsel or financial advisor provided, however, that they are first advised of the confidential nature of this Agreement and Employee obtains their agreement to be bound by the same. The Company agrees that Employee may respond to legitimate inquiries regarding the termination of his employment by stating that the Parties have terminated their relationship on an amicable basis and that the Parties have entered
into a Confidential Separation and Release Agreement which prohibits him from further discussing the specifics of his separation. [Nothing contained herein shall be construed to prevent Employee from discussing or otherwise advising subsequent employers of the existence of any obligations as set forth in his Employment Agreement. Further,] nothing contained herein shall be construed to limit or otherwise restrict the Company's ability to disclose the terms and conditions of this Agreement as it sees fit in its sole discretion.
16. In the event that Employee breaches or threatens to breach any provision of this Agreement, he agrees that the Company shall be entitled to discontinue providing any additional Severance Benefits and to seek any and all equitable and legal relief provided by law, specifically including immediate and permanent injunctive relief. Employee hereby waives any claim that the Company has an adequate remedy at law. In addition, Employee agrees that the Company shall be entitled to an award of all costs and attorneys' fees incurred by the Company in any effort to enforce the terms of this Agreement. Employee agrees that the foregoing relief shall not be construed to limit or otherwise restrict the Company's ability to pursue any other remedy provided by law, including the recovery of any actual, compensatory or punitive damages. Moreover, if Employee pursues any claims against the Company which is subject to the foregoing General Release, or breaches the above Confidential provision, Employee agrees to immediately reimburse the Company for the value of all benefits received under this Agreement.
17. Employee acknowledges that this Agreement is entered into solely for the purpose of terminating his employment relationship with the Company on an amicable basis and shall not be construed as an admission of liability or wrongdoing by the Company and further acknowledges that the Company has expressly denied any such liability or wrongdoing.
18. Each of the promises and obligations shall be binding upon and shall inure to the benefit of the heirs, executors, administrators, assigns and successors in interest of each of the Parties.
19. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Indiana.
20. Employee represents and acknowledges that in signing this Agreement he does not rely, and has not relied, upon any representation or statement made by the Company or by any of the Company's employees, officers, agents, stockholders, directors or attorneys with regard to the subject matter, basis or effect of this Agreement other than those specifically contained herein.
21. This Agreement represents the entire agreement between the Parties concerning the subject matter hereof, shall supercede any and all prior agreements which may otherwise exist between them concerning the subject matter hereof (specifically excluding, however, the post-termination obligations contained in any existing Employment Agreement or other legally-binding document), and shall not be altered, amended, modified or otherwise changed except by a writing executed by both Parties.
PLEASE READ CAREFULLY. THIS SEPARATION AND RELEASE
AGREEMENT INCLUDES A COMPLETE RELEASE OF ALL
KNOWN AND UNKNOWN CLAIMS.
IN WITNESS WHEREOF, the Parties have themselves signed, or caused a duly authorized agent thereof to sign, this Agreement on their behalf and thereby acknowledge their intent to be bound by its terms and conditions.
"EMPLOYEE" [NAME OF OPERATING COMPANY] Signed: ______________________________ By: ______________________________ Printed: _____________________________ Title: ___________________________ Dated: _______________________________ Dated: ___________________________ |
December 22, 2003
R. Ernest Waaser
Hill-Rom, Inc.
1069 State Route 46 East
Batesville, Indiana 47006
Dear Ernest:
Re: Amendment to Employment Agreement
This is to confirm that, notwithstanding anything in Paragraphs 5 and 16 of the Employment Agreement dated December 19, 2000, between you and Hill-Rom, Inc, Inc. ("Company") (hereinafter "Employment Agreement"), in the event your employment is involuntarily terminated by the Company without cause, you shall, subject to the terms and conditions set out below, be entitled to receive the greater of:
(i) (a) Fifty-two (52) weeks of your base salary at the time of termination paid as a lump sum, without set off for any other income over and above such severance or any Accrued Obligations and (b) any Accrued Obligations; or
(ii) (a) Severance pay determined in accordance with any guidelines established by the Company, without set off for any other income over and above such severance or any Accrued Obligations and (b) any Accrued Obligations;
"Accrued Obligations" collectively refers to accrued wages, deferred compensation, or other compensation, benefits, or perquisites which have been fully paid or fully accrued as of the effective date of your separation, in accordance with the Company's past practice and applicable law.
This severance pay will be in lieu of, and not in addition to, any amount of severance pay previously described in Paragraph 16 of your Employment Agreement as payable to you in the event your employment with the Company is involuntarily terminated without cause.
No severance pay shall be paid if you voluntarily leave the Company's employ or are terminated for cause. Any severance pay made payable hereunder shall be paid in lieu of, and not in addition to, any notice pay.
Additionally, such severance pay is contingent upon you (1) fully complying with any restrictive covenants contained in your Employment Agreement and (2) executing a Termination and Release Agreement in a form not substantially different from that attached to your Employment Agreement as Exhibit A ("Separation Agreement") and including the terms contained in this Amendment.
Except to the extent explicitly amended herein, all terms and conditions contained in your Employment Agreement, in any document specifically incorporated therein by reference, and in any other agreement between you and the Company, shall remain in full force and effect.
Sincerely,
Frederick W. Rockwood
President and CEO
Hillenbrand Industries, Inc.
THIS AMENDMENT IS MADE PART OF AND SHOULD BE KEPT WITH YOUR EMPLOYMENT AGREEMENT
EXHIBIT 10.23
EXECUTIVE
EMPLOYMENT AGREEMENT
P R E A M B L E
This Executive Employment Agreement defines the essential terms and conditions of our employment relationship with you. The subjects covered in this Agreement are vitally important to you and to the Company. Thus, you should read the document carefully and ask any questions before signing the Agreement. Given the importance of these matters to you and the Company, all executives shall sign the Agreement as a condition of employment.
This EMPLOYMENT AGREEMENT, dated and effective this 4th day of October, 2002 is entered into by and between Forethought Financial Services, Inc. ("Company"), and Stephen R. Lang ("Executive").
W I T N E S S E T H:
WHEREAS, the Company and its affiliated entities are engaged in the death care, healthcare, funeral services industries and the business of providing various financial services to and through the funeral industry throughout the United States and North America, including various insurance and trust products through which customers can fund their funeral on a pre-need basis;
WHEREAS, the Company is willing to continue the employment of the Executive in an executive capacity and Executive desires to continue to be employed by the Company in such capacity based upon the terms and conditions set forth in this Agreement;
WHEREAS, the Executive previously entered into an employment agreement with Company dated January 19, 2000 (the "Prior Agreement"), and the parties hereto want to terminate the Prior Agreement and enter into this Agreement.
WHEREAS, in the course of the employment contemplated under this Agreement, it will be necessary for Executive to acquire knowledge of certain trade secrets and other confidential and proprietary information regarding the Company as well as its parent, subsidiary and/or affiliated entities (hereinafter jointly referred to as the "Companies") and prior to the execution of this Agreement Executive has acquired knowledge of certain trade secrets and other confidential and proprietary information regarding the Companies; and
WHEREAS, the Company and Executive (collectively referred to herein as the "Parties") acknowledge and agree that the execution of this Agreement is necessary to memorialize the terms and conditions of their employment relationship as well as safeguard against the unauthorized disclosure or use of the Company's confidential information and to otherwise preserve the goodwill and ongoing business value of the Company;
NOW THEREFORE, in consideration of Executive's employment, the Company's willingness to disclose certain confidential and proprietary information to Executive and the mutual covenants contained herein as well as other good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows:
1. Employment. The Company agrees to employ Executive and Executive agrees to serve as President and CEO.
2. Duties. Executive agrees to perform all duties and responsibilities traditionally assigned to, or falling within the normal responsibilities of, an individual employed in the above-referenced position. Executive also agrees to perform any and all additional duties or responsibilities as may be assigned by the Company or the CEO of Hillenbrand Industries, Inc. ("Hillenbrand") in their sole discretion.
3. Best Efforts and Duty of Loyalty. During the term of employment with the Company, Executive covenants and agrees to perform all assigned duties in a diligent and professional manner and in the best interest of the Company. Executive agrees to devote his full working time, attention, talents, skills and best efforts to further the Company's business and agrees not to take any action, or make any omission, that deprives the Company of any business opportunities or otherwise act in a manner that conflicts with the best interest of the Company or is otherwise detrimental to its business. Executive agrees not to engage in any outside business activity, whether or not pursued for gain, profit or other pecuniary advantage, without the express written consent of the Company. Executive shall act at all times in accordance with the Hillenbrand Handbook of Ethical Business Conduct, the Corporate Compliance Handbook and all other applicable policies which may exist or be adopted by the Company from time to time.
4. At-Will Employment. Subject to the terms and conditions set forth below, Executive specifically acknowledges and accepts such employment on an "at-will" basis and agrees that both Executive and the Company retain the right to terminate this relationship at any time, with or without cause, for any reason not prohibited by applicable law upon proper notice. Executive acknowledges that nothing in this Agreement is intended to create, nor should be interpreted to create, an employment contract for any specified length of time between the Company and Executive.
5. Compensation. For all services rendered by Executive on behalf of, or at the request of, the Company, Executive shall be paid as follows:
(a) A base salary at the bi-weekly rate of Eight Thousand, Seven Hundred Sixty-nine Dollars and Twenty-three Cents ($8,769.23), less usual and ordinary deductions;
(b) Incentive compensation, payable solely at the discretion of the Company, pursuant to the Company's Exempt Employee Executive Compensation Program or any other program as the Company may establish in its sole discretion including the arrangement summarized in Exhibit B attached hereto; and
(c) Such additional compensation, benefits and perquisites as the Company may deem appropriate.
Notwithstanding anything contained herein to the contrary, Executive acknowledges that the Company specifically reserves the right to make changes to Executive's compensation in its sole discretion including, but not limited to, modifying or eliminating a compensation component, provided that if any such changes result in a reduction of compensation or benefits. Such
reduction shall be consistent with reductions generally imposed on other executive officers of the Company. The Parties agree that such changes shall be deemed effective immediately and a modification of this Agreement unless, within fourteen (14) days after receiving notice of such change, Executive exercises his right to terminate this Agreement without cause. The Parties anticipate that Executive's compensation structure will be reviewed on an annual basis but acknowledge that the Company shall have no obligation to do so.
6. Direct Deposit. As a condition of employment, and within thirty (30) days of the effective date of this Agreement, Executive agrees to make all necessary arrangements to have all sums paid pursuant to this Agreement direct deposited into one or more bank accounts as designated by Executive.
7. Warranties and Indemnification. Executive warrants that he is not a party to any contract, restrictive covenant, or other agreement purporting to limit or otherwise adversely affecting his ability to secure employment with any third party. Alternatively, should any such agreement exist, Executive warrants that the contemplated services to be performed hereunder will not violate the terms and conditions of any such agreement. In either event, Executive agrees to fully indemnify and hold the Company harmless from any and all claims arising from, or involving the enforcement of, any such restrictive covenants or other agreements.
8. Restricted Duties. Executive agrees not to disclose, or use for the benefit of the Company, any confidential or proprietary information belonging to any predecessor employer that otherwise has not been made public and further acknowledges that the Company has specifically instructed him not to disclose or use such confidential or proprietary information. Based on his understanding of the anticipated duties and responsibilities hereunder, Executive acknowledges that such duties and responsibilities will not compel the disclosure or use of any such confidential and proprietary information.
9. Termination Without Cause. Executive's employment may be terminated at any time, without cause, by either party upon sixty (60) days' advance written notice or pay in lieu of notice. In such event, Executive shall only be entitled to such compensation, benefits and perquisites which have been paid or fully accrued as of the effective date of his separation.
10. Termination With Cause. Executive's employment may be terminated at any time "for cause" without notice or prior warning. For purposes of this Agreement, "cause" shall be defined as set forth in that certain Retention Agreement between the Company and Executive dated as of October 8, 2001.
Upon the occurrence or discovery of any event covered by the definition of "cause" above, the Company shall have the right to terminate Executive's employment, effective immediately, by providing notice thereof to Executive without further obligation to him, other than accrued wages or other accrued benefits of employment (collectively referred to herein as "Accrued Obligations"), which shall be paid in accordance with the Company's past practice and applicable law.
11. Termination Due to Death or Disability. In the event Executive dies or suffers a disability (as defined herein) during the term of employment, this Agreement shall automatically be terminated on the date of such death or disability without further obligation on the part of the Company other than the payment of Accrued Obligations. For purposes of this Agreement, Executive shall be considered to have suffered a "disability" upon the occurrence of one or more of the following events:
(i) Executive becomes eligible for or receives any benefits pursuant to any disability insurance policy as a result of a determination under such policy that Executive is permanently disabled;
(ii) Executive becomes eligible for or receives any disability benefits under the Social Security Act; or
(iii) A good faith determination by the Company that Executive is and will likely remain unable to perform the essential functions of his duties or responsibilities hereunder on a full-time basis, with or without reasonable accommodation, as a result of any mental or physical impairment.
Notwithstanding anything expressed or implied above to the contrary, the Company agrees to fully comply with its obligations under the Americans with Disabilities Act as well as any other applicable federal, state, or local law, regulation, or ordinance governing the protection of individual with such disabilities as well as the Company's obligation to provide reasonable accommodation thereunder.
12. Severance Payments. In the event Executive's employment is terminated
by the Company without cause, and subject to the normal terms and
conditions imposed by the Company (including those set forth herein and
in the attached Separation and Release Agreement), Executive shall be
eligible to receive severance pay based upon his base salary at the
time of termination for a period determined in accordance with any
guidelines as may be established by the Company or for a period up to
six (6) months (whichever is longer). No severance pay shall be paid if
Executive voluntarily leaves the Company's employ or is terminated for
cause. Any severance pay made payable hereunder shall be paid in lieu
of, and not in addition to, any notice pay or other accrued
compensation. Additionally, such severance pay is contingent upon
Executive fully complying with the restrictive covenants contained
herein and executing a Separation and Release Agreement in a form not
substantially different from that attached to this Agreement as Exhibit
A. Further, the Company's obligation to provide severance shall be
deemed null and void should Executive fail or refuse to execute the
Separation and Release Agreement in such form within any time period as
may be proscribed by law or, in absence thereof, fourteen (14) days.
13. Additional Payment.
(a) Notwithstanding anything in this Agreement to the contrary, in the event that any payment, award, benefit or distribution (or any acceleration of any payment, award, benefit or distribution) by the Company or any affiliate which effectuates a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, in either case, within the meaning of Section 280G(b)(2)(A)(i) of the Code and the regulations promulgated thereunder (a "Change in Ownership"), to or for the benefit of Executive (the "Payments") would be subject to the excise tax imposed by Section 4999 of the Code, or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then, the Company shall pay to Executive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any Excise Tax) imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. For purposes of
determining the amount of the Gross-Up Payment, Executive shall be deemed to (A) pay federal income taxes at the highest marginal rates of federal income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be made and, (B) pay applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. Notwithstanding the foregoing provisions of this Section 13(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that the Payments would not be subject to the Excise Tax if the Payments were reduced by an amount that is less than $20,000 (U.S.), then the amounts payable to Executive under this Agreement shall be reduced (but not below zero) to the maximum amount that could be paid to Executive without giving rise to the Excise Tax (the "Safe Harbor Cap"), and no Gross-Up Payment shall be made to Executive. The reduction of the amounts payable hereunder, if applicable, shall be made by reducing first the payments as elected by Executive. For purposes of reducing the Payments to the Safe Harbor Cap, only amounts payable under this Agreement (and no other Payments) shall be reduced. If the reduction of the amounts payable hereunder would not result in a reduction of the Payments to the Safe Harbor Cap, no amounts payable under this Agreement shall be reduced pursuant to this provision.
(b) Subject to the provisions of Section 13(a), all determinations required to be made under this Section 13, including whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determinations, shall be made by the public accounting firm that is retained by the Company as of the date immediately prior to the Change in Ownership (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) business days of the receipt of notice from the Company or Executive that there has been a Payment, or such earlier time as is requested by the Company (collectively, the "Determination"). In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Ownership, Executive may appoint another U.S. nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company and the Company shall enter into any agreement requested by the Accounting Firm in connection with the performance of the services hereunder. The Gross-Up Payment under this Section 13(a) with respect to any Payments made to Executive shall be made no later than thirty (30) days following such Payment. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall furnish Executive with a written opinion to such effect, and to the effect that failure to report the Excise Tax, if any, on Executive's applicable federal income tax return should not result in the imposition of a negligence or similar penalty. In the event the Accounting Firm determines that the Payments shall be reduced to the Safe Harbor Cap, it shall furnish Executive with a written opinion to such effect. The Determination by the Accounting Firm shall be binding upon the Company and Executive.
(c) As a result of the uncertainty in the application of Section 4999 of the Code at the time of the Determination, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment") or Gross-Up Payments are made by the Company which should not have been made ("Overpayment"), consistent with the calculations required to be made hereunder. In the event that Executive thereafter is required to make payment of any Excise Tax or additional Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment (together with
interest at the rate provided in Section 1274(b)(2)(B) of the
Code) shall be promptly paid by the Company to or for the
benefit of Executive. In the event the amount of the Gross-Up
Payment exceeds the amount necessary to reimburse Executive
for his Excise Tax, the Accounting Firm shall determine the
amount of the Overpayment that has been made and any such
Overpayment (together with interest at the rate provided in
Section 1274(b)(2) of the Code) shall be promptly paid by
Executive (to the extent he has received a refund if the
applicable Excise Tax has been paid to the Internal Revenue
Service) to or for the benefit of the Company. Executive shall
cooperate, to the extent his expenses are reimbursed by the
Company, with any reasonable requests by the Company in
connection with any contest or disputes with the Internal
Revenue Service in connection with the Excise Tax.
(d) The parties hereto agree that this Section 13 supercedes paragraphs 4 of the Retention Agreement by and between the Company and the Executive dated October 8, 2001 (the "Retention Agreement") and of the Change in Control Agreement by and between Hillenbrand and the Executive (the "CIC Agreement") and such paragraphs 4 shall no longer be in effect upon the sale of the stock of the Company by Hillenbrand.
(e) The parties hereto agree that if amounts are payable under the Retention Agreement with respect to a transaction or series of transactions no payments or benefits shall be payable under the CIC Agreement with respect to the same transaction or series of transactions.
14. Assignment of Rights.
(a) Copyrights. Executive agrees that all works of authorship fixed in any tangible medium of expression by him during the term of this Agreement and the Prior Agreement relating to the Company's, Hillenbrand Industries Inc.'s or any of either company's affiliates' ("Affiliate" and collectively with the Company and Hillenbrand the "Group") business ("Works"), either solely or jointly with others, shall be and remain exclusively the property of the Company or, if applicable other member of the Group. Each such Work created by Executive is a "work made for hire" under the copyright law and the Company or, if applicable, other members of the Group may file applications to register copyright in such Works as author and copyright owner thereof. If, for any reason, a Work created by Executive is excluded from the definition of a "work made for hire" under the copyright law, then Executive does hereby assign, sell, and convey to the Company or, if applicable, other members of the Group, the entire rights, title, and interests in and to such Work, including the copyright therein, to the Company or, if applicable, other members of the Group. Executive will execute any documents which the Company or, if applicable, other members of the Group, deems necessary in connection with the assignment of such Work and copyright therein. Executive will take whatever steps and do whatever acts the Company or, if applicable, other members of the Group, requests, including, but not limited to, placement of the Company's proper copyright notice on Works created by Executive to secure or aid in securing copyright protection in such Works and will assist the Company or, if applicable, other members of the Group, or their nominees in filing applications to register claims of copyright in such Works. The Company or, if applicable, other members of the Group, shall have free and unlimited access at all times to all Works and all copies thereof and shall have the right to claim and take possession on demand of such Works and copies.
(b) Inventions. Executive agrees that all discoveries, concepts, and ideas, whether patentable or not, including, but not limited to, apparatus, processes, methods, compositions of matter, techniques, and formulae, as well as improvements thereof or know-how related thereto, relating to any present or prospective product, process, or service of any member of the Group ("Inventions") that Executive conceives or makes during the term of this Agreement and the Prior Agreement relating to the business of any member of the Group, shall become and remain the exclusive property of the Company or other member of the Group, if applicable, whether patentable or not, and Executive will, without royalty or any other consideration:
(i) inform the Company or other members of the Group, if applicable, promptly and fully of such Inventions by written reports, setting forth in detail the procedures employed and the results achieved;
(ii) assign to the Company or other members of the Group, if applicable, all of his rights, title, and interests in and to such Inventions, any applications for United States and foreign Letters Patent, any United States and foreign Letters Patent, and any renewals thereof granted upon such Inventions;
(iii) assist the Company or other members of the Group, if applicable, or their nominees, at the expense of the Company, to obtain such United States and foreign Letters Patent for such Inventions as the Company or other members of the Group, if applicable, may elect; and
(iv) execute, acknowledge, and deliver to the Company, or other members of the Group, at the expense of the appropriate member of the Group such written documents and instruments, and do such other acts, such as giving testimony in support of his inventorship, as may be necessary in the opinion of the Company, or other member of the Group, to obtain and maintain United States and foreign Letters Patent upon such Inventions and to vest the entire rights and title thereto in the Company, or other member of the Group, and to confirm the complete ownership by the Company, or other member of the Group, of such Inventions, patent applications, and patents.
15. Company Property. All records, files, drawings, documents, equipment, and the like relating to, or provided by, any member of the Group, shall be and remain the sole property of the appropriate member of the Group. Upon termination of employment, Executive shall immediately return to the appropriate member of the Group, all such items without retention of any copies. De minimis items such as pay stubs, 401(k) plan summaries, employee bulletins, and the like are excluded from this requirement.
16. Confidential Information. Executive acknowledges that the Group possesses certain trade secrets as well as other confidential and proprietary information that they have acquired or will acquire at great effort and expense. Such information may include, without limitation, confidential information regarding the Group's products and services, marketing strategies, business plans, operations, costs, current or prospective customer information (including customer contacts, requirements, creditworthiness and like matters), product concepts, designs, prototypes or specifications, research and development efforts, technical data and know-how, sales information, including pricing and other terms and conditions of sale, financial information, internal procedures, techniques, forecasts, methods, trade information, trade secrets, software programs, project requirements, inventions, trademarks, trade names, and similar information regarding the
Group's business (collectively referred to herein as "Confidential Information"). Executive further acknowledges that, as a result of his employment with the Company, Executive will have access to, will become acquainted with, and/or may help develop, such Confidential Information.
17. Restricted Use of Confidential Information. Executive agrees that all Confidential Information is and shall remain the sole and exclusive property of the Group. Except as may be expressly authorized by the appropriate member of the Group in writing, Executive agrees not to disclose, or cause any other person or entity to disclose, any Confidential Information to any third party while employed by the Company and for as long thereafter as such information remains confidential (or as limited by applicable law). Further, Executive agrees to use such Confidential Information only in the course of Executive's duties in furtherance of the Company's business and agrees not to make use of any such Confidential Information for Executive's own purposes or for the benefit of any other entity or person.
18. Acknowledged Need for Limited Restrictive Covenants. Executive acknowledges that the Group has spent and will continue to expend substantial amounts of time, money and effort to develop its business strategies, Confidential Information, customer relationships, goodwill and employee relationships, and that Executive will benefit from these efforts. Further, Executive acknowledges the inevitable use of, or near-certain influence by his knowledge of, the Confidential Information disclosed to Executive during the course of employment if allowed to compete against any member of the Group in an unrestricted manner and that such use would be unfair and extremely detrimental to each member of the Group. Accordingly, based on these legitimate business reasons, Executive acknowledges and agrees that each member of the Group other than the Company is a third party beneficiary of this Agreement and acknowledges and agrees that each member of the Group may enforce its rights under this Agreement and acknowledges each member of the Group's need to protect its legitimate business interests by reasonably restricting Executive's ability to compete with the Group on a limited basis.
19. Non-Solicitation. During Executive's employment and for a period of two years thereafter, Executive agrees not to directly or indirectly engage in the following prohibited conduct:
(a) Solicit, offer products or services to, accept orders from, or otherwise transact business with, any customer or entity with whom Executive had contact or transacted any business during the eighteen (18) month period preceding Executive's date of separation or about whom Executive possessed, or had access to, confidential and proprietary information;
(b) Attempt to entice or otherwise cause any third party to withdraw, curtail or cease doing business with the Group, specifically including customers, venders, independent contractors and other third party entities;
(c) Disclose to any person or entity the identities, contacts or preferences of any customers of the Group, or the identity of any other persons or entities having business dealings with the Group;
(d) Induce any individual who has been employed by or had provided services to the Group within the six (6) month period immediately preceding the effective date of Executive's separation to terminate such relationship with the Group;
(e) Offer employment to, accept employment inquiries from, or employ any individual who is or had been employed by the Group at any time within the six (6) month period immediately preceding such offer or inquiry; or
(f) Otherwise attempt to directly or indirectly interfere with the Group's business or its relationship with its employees, consultants, independent contractors or customers.
20. Limited Non-Compete. For the above reasons, and as a condition of employment to the fullest extent permitted by law, Executive agrees during the Relevant Non-Compete Period not to directly or indirectly engage in the following competitive activities:
(a) Executive shall not have any ownership interest in, work for, advise, consult, or have any business connection or business or employment relationship with any Competitor unless Executive provides written notice to the affected member of the Group of such relationship prior to entering into such relationship and, further, provides sufficient written assurances to the affected member of the Group's satisfaction that such relationship will not jeopardize that Group member's legitimate interests or otherwise violate the terms of this Agreement;
(b) Executive shall not engage in any research, development,
production, sale or distribution of any Competitive Products,
specifically including any products or services relating to
those for which Executive had responsibility for the eighteen
(18) month period preceding Executive's date of separation;
(c) Executive shall not market, sell, or otherwise offer or provide any Competitive Products within the applicable Geographic Territory, specifically including any products or services relating to those for which Executive had responsibility for the eighteen (18) month period preceding Executive's date of separation; and
(d) Executive shall not distribute, market, sell or otherwise offer or provide any Competitive Products to any customer of the Group with whom Executive had contact (either directly or indirectly) or for which Executive had responsibility at any time during the eighteen (18) month period preceding Executive's date of separation.
21. Non-Compete Definitions. For purposes of this Agreement, the Parties agree that the following terms shall apply:
(a) "Competitive Products" shall include any product or service that directly or indirectly competes with, is substantially similar to, or serves as a reasonable substitute for, any product or service in research, development or design, or manufactured, produced, sold or distributed by any member of the Group;
(b) "Competitor" shall include any person or entity that offers or plans to offer any Competitive Products;
(c) "Geographic Territory" shall include any territory formally
assigned to Executive as well as all territories in which
Executive has provided any services, sold any products or
otherwise had responsibility at any time during the eighteen
(18) month period preceding Executive's date of separation;
(d) "Relevant Non-Compete Period" shall include the period of Executive's employment with the Company as well as a period of two (2) years after such employment is terminated, regardless of the reason for such termination provided, however, that this period shall be reduced to the greater of (i) six (6) months or (ii) the total length of
Executive's employment with the Company, including employment with a parent, subsidiary or affiliated entity, if such employment is less than eighteen (18) months;
(e) "Directly or indirectly" shall be construed such that the foregoing restrictions shall apply equally to Executive whether performed individually or as a partner, shareholder, officer, director, manager, employee, salesman, independent contractor, broker, agent, or consultant for any other individual, partnership, firm, corporation, company, or other entity engaged in such conduct.
22. Consent to Reasonableness. In light of the above-referenced concerns, including Executive's knowledge of and access to the Group's Confidential Information, Executive acknowledges that the terms of the foregoing restrictive covenants are reasonable and necessary to protect the Group's legitimate business interests and will not unreasonably interfere with Executive's ability to obtain alternate employment. As such, Executive hereby agrees that such restrictions are valid and enforceable, and affirmatively waives any argument or defense to the contrary. The Executive agrees that he has the affirmative duty to notify future employers of the provisions of Sections 15 through 26 hereof.
23. Survival of Restrictive Covenants. Executive acknowledges that the above restrictive covenants shall survive the termination of this Agreement and the termination of Executive's employment for any reason. Executive further acknowledges that any alleged breach by any member of the Group of any contractual, statutory or other obligation shall not excuse or terminate the obligations hereunder or otherwise preclude any member of the Group from seeking injunctive or other relief. Rather, Executive acknowledges that such obligations are independent and separate covenants undertaken by Executive for the benefit of the Company and the other members of the Group.
24. Effect of Transfer to Affiliate. Executive acknowledges that the above restrictive covenants shall survive, and be extended to cover, the transfer of Executive from the Company to its parent, subsidiary, sister corporation or any other Affiliate. Specifically, in the event of Executive's temporary or permanent transfer to an Affiliate, he agrees that the foregoing restrictive covenants shall remain in force so as to continue to protect the Group for the duration of the non-compete period, measured from his effective date of transfer to an Affiliate. Additionally, Executive acknowledges that this Agreement shall be deemed to have been automatically assigned to the Affiliate as of his effective date of transfer such that the above-referenced restrictive covenants (as well as all other terms and conditions contained herein) shall be construed thereafter to protect the legitimate business interests and goodwill of the Affiliate as if Executive and the Affiliate had independently entered into this Agreement. Executive's acceptance of his transfer to, and subsequent employment by, the Affiliate shall serve as consideration for (as well as be deemed as evidence of his consent to) the assignment of this Agreement to the Affiliate as well as the extension of such restrictive covenants to the Affiliate. Executive agrees that this provision shall apply with equal force to any subsequent transfers of Executive from one Affiliate to another Affiliate.
25. Scope of Restrictions. If the scope of any restriction contained in any preceding paragraphs of this Agreement is deemed too broad to permit enforcement of such restriction to its fullest extent, then such restriction shall be enforced to the maximum extent permitted by law, and Executive hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction.
26. Specific Enforcement/Injunctive Relief. Executive agrees that it would be difficult to measure any damages to the Group from a breach of the above-referenced restrictive covenants, but that such damages would be great, incalculable and irremedial, and that monetary damages alone would be an inadequate remedy. Accordingly, Executive agrees that any member of the Group shall be entitled to immediate injunctive relief against such breach, or threatened breach, in any court having jurisdiction. In addition, if Executive violates any such restrictive covenant, Executive agrees that the period of such violation shall be added to the term of the restriction. In determining the period of any violation, the Parties stipulate that in any calendar month in which Executive engages in any activity violative of such provisions, Executive shall be deemed to have violated such provision for the entire month, and that month shall be added to the duration of the non-competition provision. Executive acknowledges the consideration received from the members of the Group in exchange for these restrictive covenants and further acknowledges that the remedies described above shall not be the exclusive remedies, and any member of the Group may seek any other remedy available to it either in law or in equity, including the recovery of compensatory or punitive damages. Executive further agrees that the member of the Group shall be entitled to an award of all costs and attorneys' fees incurred by it in any attempt to enforce the terms of this Agreement.
27. Publicly Traded Stock. The Parties agree that nothing contained in this Agreement shall be construed to prohibit Executive from investing his personal assets in any stock or corporate security traded or quoted on a national securities exchange or national market system provided, however, such investments do not require any services on the part of Executive in the operation or the affairs of the business or otherwise violate the Hillenbrand Handbook of Ethical Business Conduct or successive handbook thereto.
28. Titles. Titles are used for the purpose of convenience in this Agreement and shall be ignored in any construction of it.
29. Severability. The Parties agree that each and every paragraph, sentence, clause, term and provision of this Agreement is severable and that, in the event any portion of this Agreement is adjudged to be invalid or unenforceable, the remaining portions thereof shall remain in effect and be enforced to the fullest extent permitted by law. Further, should any particular clause, covenant, or provision of this Agreement be held unreasonable or contrary to public policy for any reason, the Parties acknowledge and agree that such covenant, provision or clause shall automatically be deemed modified such that the contested covenant, provision or clause will have the closest effect permitted by applicable law to the original form and shall be given effect and enforced as so modified to whatever extent would be reasonable and enforceable under applicable law.
30. Choice of Forum. Executive acknowledges that the Company is primarily based in Indiana, and Executive understands and acknowledges the Company's desire and need to defend any litigation against it in Indiana. Accordingly, the Parties agree that any claim of any type brought by Executive against the Company, any other member of the Group, or any of their employees or agents must be maintained only in a court sitting in Marion County, Indiana, or Ripley County, Indiana, or, if a federal court, the Southern District of Indiana, Indianapolis Division. Executive further understands and acknowledges that in the event any member of the Group initiates litigation against Executive, such member may need to prosecute such litigation in such state where the Executive is subject to personal jurisdiction. Accordingly, for purposes of enforcement of this Agreement, Executive specifically consents to personal jurisdiction in the State of Indiana as well as any state in which resides a customer assigned to the Executive.
31. Choice of Law. This Agreement shall be deemed to have been made within the County of Ripley, State of Indiana and shall be interpreted and construed in accordance with the laws of the State of Indiana. Any and all matters of dispute of any nature whatsoever arising out of, or in any way connected with the interpretation of this Agreement, any disputes arising out of the Agreement or the employment relationship between the Parties hereto, shall be governed by, construed by and enforced in accordance with the laws of the State of Indiana without regard to any applicable state's choice of law provisions.
32. Assignment-Notices. The rights and obligations of the Company under this Agreement shall inure to its benefit, as well as the benefit of its parent, subsidiary, successor and affiliated entities, and shall be binding upon the successors and assigns of the Company. This Agreement, being personal to Executive, cannot be assigned by Executive, but his personal representative shall be bound by all its terms and conditions. Any notice required hereunder shall be sufficient if in writing and mailed to the last known residence of Executive or to the Company at its principal office with a copy mailed to the Office of General Counsel.
33. Amendments and Modifications. Except as specifically provided herein, no modification, amendment, extension or waiver of this Agreement or any provision hereof shall be binding upon the Company or Executive unless in writing and signed by both Parties. The waiver by the Company of a breach of any provision of this Agreement by Executive shall not be construed as a waiver of any subsequent breach. Nothing in this Agreement shall be construed as a limitation upon the Company's right to modify or amend any of its manuals or policies in its sole discretion and any such modification or amendment which pertains to matters addressed herein shall be deemed to be incorporated herein and made a part of this Agreement.
34. Outside Representations. Executive represents and acknowledges that in signing this Agreement he does not rely, and has not relied, upon any representation or statement made by the Company, any affiliates or by any of the Company's or any affiliates' employees, officers, agents, stockholders, directors or attorneys with regard to the subject matter, basis or effect of this Agreement other than those specifically contained herein.
35. Voluntary and Knowing Execution. Executive acknowledges that he has been offered a reasonable amount of time within which to consider and review this Agreement; that he has carefully read and fully understands all of the provisions of this Agreement; and that he has entered into this Agreement knowingly and voluntarily.
36. Entire Agreement. This Agreement constitutes the entire employment agreement between the Parties hereto concerning the subject matter hereof and shall supersede and terminate the Prior Agreement and all other prior and contemporaneous agreements between the Parties in connection with the subject matter of this Agreement. Nothing in this Agreement, however, shall affect any separately-executed written agreement addressing any other issues (e.g., the Inventions, Improvements, Copyrights and Trade Secrets Agreement, etc.) or the Retention Agreement by and between the Executive and the Company or the Change in Control Agreement by and between the Executive and Hillenbrand.
IN WITNESS WHEREOF, the Parties have signed this Agreement effective as of the day and year first above written.
EXECUTIVE FORETHOUGHT FINANCIAL SERVICES, INC. Signed: ______________________________ By: ________________________________ Printed: _____________________________ Title: _____________________________ Dated: _______________________________ Dated: _____________________________ |
CAUTION: READ BEFORE SIGNING
With respect to Section 13(d) and (e) of this Agreement only.
HILLENBRAND INDUSTRIES, INC.
By: __________________________________
Title: _______________________________
Dated: _______________________________
EXHIBIT A
SEPARATION AND RELEASE AGREEMENT
THIS SEPARATION and RELEASE AGREEMENT ("Agreement") is entered into by and between Stephen R. Lang ("Employee") and Forethought Financial Services, Inc. ("Company"). To wit, the Parties agree as follows:
1. Employee's active employment by the Company shall terminate effective
[DATE OF TERMINATION] (Employee's "Effective Termination Date"). As of
that date, all Company benefits and obligations shall terminate. Except
as specifically provided by this Agreement, Employee agrees that the
Company shall have no other obligations or liabilities to him following
his Effective Termination Date and that his receipt of the Severance
Benefits provided herein shall constitute a complete settlement,
satisfaction and waiver of any and all claims he may have against the
Company.
2. In consideration of the promises contained in this Agreement and contingent upon Employee's compliance with such promises, the Company agrees to provide Employee the following:
(i) Severance pay, inclusive of any notice pay obligations, to be paid at the bi-weekly rate of $_______, less applicable deductions or other set-offs, for a period up to [WEEKS OF SEPARATION] (___) weeks following the Employee's Effective Termination Date or until Employee becomes employed again, whichever first occurs;
(ii) Payment for any earned but unused vacation as of Employee's Effective Termination Date; and
(iii) Life insurance coverage until the above-referenced Severance Pay terminates.
3. The above Severance Pay Benefits shall be paid in accordance with the Company's standard payroll practices (e.g. biweekly) and shall begin on the first normally scheduled payroll following Employee's Effective Termination Date or the effective date of this Agreement, whichever occurs last. The Parties agree that the initial four (4) weeks of the foregoing severance shall be allocated as additional consideration provided to Employee in exchange for his execution of a release in compliance with the Older Workers Benefit Protection Act. The balance of the severance benefits shall be allocated as consideration for all other promises and obligations undertaken by Employee, including execution of a general release of claims.
4. As of the Effective Termination Date, Employee will become ineligible to participate in the Company's health insurance program and continuation of coverage requirements under COBRA (if any) will be triggered at that time. However, as additional consideration for the promises and obligations contained herein, and provided Employee timely completes the applicable election of coverage forms, the Company further agrees to pay the cost of such continued coverage under the Company's health care program until the above-referenced Severance Pay terminates. Thereafter, if applicable, coverage will be made available to Employee at his sole expense for the remaining months of the COBRA coverage period made available pursuant to applicable law. The medical insurance provided herein does not include any disability coverage.
5. Employee agrees to notify the Company in writing within three (3) business days of Employee's acceptance of any subsequent employment by providing the name of such employer, his intended duties as well as the anticipated start date. Such information is required to ensure Employee's compliance with his non-compete obligations as well as all other applicable restrictive covenants.
This notice will also serve to trigger the Company's right to terminate the above-referenced severance benefits and Company-paid COBRA benefits consistent with the above paragraphs. Failure to timely provide such notice shall be deemed a material breach of this Agreement entitling the Company to recover as damages the value of all benefits provided to Employee hereunder.
6. In exchange for the foregoing Severance Benefits, Stephen R. Lang on behalf of himself, his heirs, representatives, agents and assigns hereby COVENANTS NOT TO SUE, RELEASES, INDEMNIFIES, HOLDS HARMLESS, and FOREVER DISCHARGES (i) Forethought Financial Services, Inc., (ii) its parent, subsidiary or affiliated entities, (iii) all of their present or former directors, officers, employees, shareholders, and agents as well as (iv) all predecessors, successors and assigns thereof from any and all actions, charges, claims, demands, damages or liabilities of any kind or character whatsoever, known or unknown, which Employee now has or may have had through the effective date of this Agreement.
7. Without limiting the generality of the foregoing release, it shall
include: (i) all claims or potential claims arising under any federal,
state or local laws relating to the Parties' employment relationship,
including any claims Employee may have under the Civil Rights Acts of
1866 and 1964, as amended, 42 U.S.C. Sections 1981 and 2000(e) et seq.;
the Civil Rights Act of 1991; the Age Discrimination in Employment Act,
as amended, 29 U.S.C. Sections 621 et seq.; the Americans with
Disabilities Act of 1990, as amended, 42 U.S.C. Sections 12,101 et
seq.; the Fair Labor Standards Act 29 U.S.C. Sections 201 et seq.; the
Worker Adjustment and Retraining Notification Act, 29 U.S.C. Sections
2101, et seq.; and any other federal, state or local law governing the
Parties' employment relationship; (ii) any claims on account of,
arising out of or in any way connected with Employee's employment with
the Company or leaving of that employment; (iii) any claims alleged or
which could have been alleged in any charge or complaint against the
Company; (iv) any claims relating to the conduct of any employee,
officer, director, agent or other representative of the Company; (v)
any claims of discrimination, harassment or retaliation on any basis;
(vi) any claims arising from any legal restrictions on an employer's
right to separate its employees; (vii) any claims for personal injury,
compensatory or punitive damages or other forms of relief; and (viii)
all other causes of action sounding in contract, tort or other common
law basis, including (a) the breach of any alleged oral or written
contract, (b) negligent or intentional misrepresentations, (c) wrongful
discharge, (d) just cause dismissal, (e) defamation, (f) interference
with contract or business relationship or (g) negligent or intentional
infliction of emotional distress.
8. The Parties acknowledge that it is their mutual and specific intent that the above waiver fully comply with the requirements of the Older Workers Benefit Protection Act (29 U.S.C. Section 626) and any similar law governing release of claims. Accordingly, Employee hereby acknowledges that:
(a) He has carefully read and fully understands all of the provisions of this Agreement and that he has entered into this Agreement knowingly and voluntarily;
(b) The Severance Benefits offered in exchange for Employee's release of claims exceed in kind and scope that to which he would have otherwise been legally entitled;
(c) Prior to signing this Agreement, Employee had been advised, and is being advised by this Agreement, to consult with an attorney of his choice concerning its terms and conditions; and
(d) He has been offered at least twenty-one (21) days within which to review and consider this Agreement.
9. The Parties agree that nothing contained herein shall purport to waive or otherwise affect any of Employee's rights or claims that may arise after he signs this Agreement.
10. The Parties agree that this Agreement shall not become effective and enforceable until the date this Agreement is signed by both Parties or seven (7) calendar days after its execution by Employee, whichever is later. Employee may revoke this Agreement for any reason by providing written notice of such intent to the Company within seven (7) days after he has signed this Agreement, thereby forfeiting Employee's right to receive any Severance Benefits provided hereunder and rendering this Agreement null and void in its entirety.
11. The Parties agree that nothing contained herein shall purport to waive or otherwise affect any of Employee's rights or claims that may arise after he signs this Agreement. It is further understood by the Parties that nothing in this Agreement shall affect any rights Employee may have under any Pension Plan and/or Savings Plan (i.e., 401(k) plan) provided by the Company as of the date of his termination, such items to be governed exclusively by the terms of the applicable plan documents.
12. Employee acknowledges that his termination and the Severance Benefits offered hereunder were based on an individual determination and were not offered in conjunction with any group termination or group severance program and waives any claim to the contrary.
13. Employee hereby affirms and acknowledges his continued obligations to comply with the post-termination covenants contained in his Employment Agreement, including but not limited to, the non-compete, trade secret and confidentiality provisions. Employee acknowledges that a copy of the Employment Agreement has been attached to this Agreement as Exhibit A or has otherwise been provided to him and, to the extent not inconsistent with the terms of this Agreement or applicable law, the terms thereof shall be incorporated herein by reference. Employee acknowledges that the restrictions contained therein are valid and reasonable in every respect and are necessary to protect the Company's legitimate business interests. Employee hereby affirmatively waives any claim or defense to the contrary.
14. Employee acknowledges that the Company possesses, and he has been granted access to, certain trade secrets as well as other confidential and proprietary information which the Company has acquired at great effort and expense. Such information includes, without limitation, confidential information regarding products and services, marketing strategies, business plans, operations, costs, current or prospective customer information (including customer contacts, requirements, creditworthiness and like matters), product concepts, designs, prototypes or specifications, regulatory compliance issues, research and development efforts, technical data and know-how, sales information, including pricing and other terms and conditions of sale, financial information, internal procedures, techniques, forecasts, methods, trade information, trade secrets, software programs, project requirements, inventions, trademarks, trade names, and similar information regarding the Companies' business (collectively referred to herein as "Confidential Information").
15. Employee agrees that all such Confidential Information is and shall remain the sole and exclusive property of the Company. Except as may be expressly authorized by the Company in writing, or as may be required by law after providing due notice thereof to the Company, Employee agrees not to disclose, or cause any other person or entity to disclose, any Confidential Information to any third party for as long thereafter as such information remains confidential (or as limited by applicable law) and agrees not to make use of any such Confidential Information for Employee's own purposes or for the benefit of any other entity or person.
16. On or before Employee's Effective Termination Date or per the Company's request, Employee agrees to return the original and all copies of all things in his possession or control relating to the Company or its business, including but not limited to any and all contracts, reports, memoranda, correspondence, manuals, forms, records, designs, budgets, contact information or lists (including customer, vendor or supplier lists), ledger sheets or other financial information, drawings, plans (including, but not limited to, business, marketing and strategic plans), personnel or other business files, computer hardware, software, or access codes, door and file keys, identification, credit cards, pager, phone, and any and all other physical, intellectual, or personal property of any nature that he received, prepared, helped prepare, or directed preparation of in connection with his employment with the Company. Nothing contained herein shall be construed to require the return of any non-confidential and de minimis items regarding Employee's pay, benefits or other rights of employment such as pay stubs, W-2 forms, 401(k) plan summaries, benefit statements, etc.
17. Employee hereby consents and authorizes the Company to deduct as an offset from the above-referenced severance payments the value of any Company property not returned or returned in a damaged condition as well as any monies paid by the Company on Employee's behalf (e.g., payment of any outstanding American Express bill).
18. Employee agrees not to make any written or oral statement that may defame, disparage or cast in a negative light so as to do harm to the personal or professional reputation of (a) the Company, (b) its employees, officers, directors or trustees or (c) the services and/or products provided by the Company and its subsidiaries or affiliate entities.
19. Employee specifically agrees and understands that the existence and terms of this Agreement are strictly CONFIDENTIAL and that such confidentiality is a material term of this Agreement. Accordingly, except as required by law or unless authorized to do so by the Company in writing, Employee agrees that he shall not communicate, display or otherwise reveal any of the contents of this Agreement to anyone other than his spouse, legal counsel or financial advisor provided, however, that they are first advised of the confidential nature of this Agreement and Employee obtains their agreement to be bound by the same. The Company agrees that Employee may respond to legitimate inquiries regarding the termination of his employment by stating that the Parties have terminated their relationship on an amicable basis and that the Parties have entered into a Confidential Separation and Release Agreement which prohibits him from further discussing the specifics of his separation. Nothing contained herein shall be construed to prevent Employee from discussing or otherwise advising subsequent employers of the existence of any obligations as set forth in his Employment Agreement. Further, nothing contained herein shall be construed to limit or otherwise restrict the Company's ability to disclose the terms and conditions of this Agreement as may be required by business necessity.
20. In the event that Employee breaches or threatens to breach any provision of this Agreement, he agrees that the Company shall be entitled to seek any and all equitable and legal relief provided by law, specifically including immediate and permanent injunctive relief. Employee hereby waives any claim that the Company has an adequate remedy at law. In addition, and to the extent not prohibited by law, Employee agrees that the Company shall be entitled to discontinue providing any additional Severance Benefits upon such breach or threatened breach as well as an award of all costs and attorneys' fees incurred by the Company in any successful effort to enforce the terms of this Agreement. Employee agrees that the foregoing relief shall not be construed to limit or otherwise restrict the Company's ability to pursue any other remedy provided by law, including the recovery of any actual, compensatory or punitive damages. Moreover, if Employee pursues any claims against the Company subject to the foregoing General Release, or breaches the above Confidential provision, Employee agrees to immediately reimburse the Company for the value of all benefits received under this Agreement to the fullest extent permitted by law.
21. Employee acknowledges that this Agreement is entered into solely for the purpose of terminating his employment relationship with the Company on an amicable basis and shall not be construed as an admission of liability or wrongdoing by the Company and further acknowledges that the Company has expressly denied any such liability or wrongdoing.
22. Each of the promises and obligations shall be binding upon and shall inure to the benefit of the heirs, executors, administrators, assigns and successors in interest of each of the Parties.
23. The Parties agree that each and every paragraph, sentence, clause, term and provision of this Agreement is severable and that, if any portion of this Agreement should be deemed not enforceable for any reason, such portion shall be stricken and the remaining portion or portions thereof should continue to be enforced to the fullest extent permitted by applicable law.
24. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Indiana without regard to any applicable state's choice of law provisions.
25. Employee represents and acknowledges that in signing this Agreement he does not rely, and has not relied, upon any representation or statement made by the Company or by any of the Company's employees, officers, agents, stockholders, directors or attorneys with regard to the subject matter, basis or effect of this Agreement other than those specifically contained herein.
26. This Agreement represents the entire agreement between the Parties concerning the subject matter hereof, shall supercede any and all prior agreements which may otherwise exist between them concerning the subject matter hereof (specifically excluding, however, the post-termination obligations contained in any existing Employment Agreement or other legally-binding document), and shall not be altered, amended, modified or otherwise changed except by a writing executed by both Parties.
PLEASE READ CAREFULLY. THIS SEPARATION AND RELEASE
AGREEMENT INCLUDES A COMPLETE RELEASE OF ALL
KNOWN AND UNKNOWN CLAIMS.
IN WITNESS WHEREOF, the Parties have themselves signed, or caused a duly authorized agent thereof to sign, this Agreement on their behalf and thereby acknowledge their intent to be bound by its terms and conditions.
"EMPLOYEE" FORETHOUGHT FINANCIAL SERVICES, INC. Signed: ______________________________ By: ________________________________ Printed: _____________________________ Title: _____________________________ Dated: _______________________________ Dated: _____________________________ |
EXHIBIT 10.25
FIRST AMENDMENT
TO
364-DAY AMENDED AND RESTATED CREDIT AGREEMENT
FIRST AMENDMENT to the 364-Day Amended and Restated Credit Agreement dated as of October 10, 2003 (this "First Amendment") among HILLENBRAND INDUSTRIES, INC. (the "Borrower"), each lender to the 364-Day Amended and Restated Credit Agreement (as defined below) (the "Lenders"), and BANK OF AMERICA, N.A., as Administrative Agent (in such capacity, the "Administrative Agent") and Alternative Rate Lender, CITICORP NORTH AMERICA, INC., as Syndication Agent, and BANK ONE, NA, LASALLE BANK NATIONAL ASSOCIATION and UBS AG, STAMFORD BRANCH, as Documentation Agents.
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lenders, the Administrative Agent, Citicorp North America, Inc., as Syndication Agent, and Bank One, NA, LaSalle Bank National Association and UBS AG, Stamford Branch, as Documentation Agents, entered into that certain 364-Day Amended and Restated Credit Agreement dated as of July 30, 2003 (the "364-Day Amended and Restated Credit Agreement" and as amended by this First Amendment and as hereinafter amended, modified, supplemented, extended or restated from time to time, the "Amended Credit Agreement"). Capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Amended Credit Agreement.
(2) The Borrower has requested the Lenders, among other things, amend covenants and other provisions in the 364-Day Amended and Restated Credit Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:
SECTION 1.01. Amendments to Article VII.
(a) Section 7.01(j) is hereby amended by changing the reference therein from "Section 7.03(g)" to "Section 7.03(i)".
(b) Section 7.03 is hereby amended by: (i) changing the existing
Section 7.03(g) to be Section 7.03(i) and replacing in such section the phrase
"under subsection (a) through (f)" with "under subsection (a) through (h)", (ii)
deleting the word "and" at the end of Section 7.03(f) and (iii) adding new
Sections 7.03(g) and (h) as follows:
"(g) Indebtedness of a Substantially-Owned Subsidiary of the Borrower to the Borrower or any of its Substantially-Owned Subsidiaries or Indebtedness of the Borrower to any Substantially-Owned Subsidiary of the Borrower if such Indebtedness is evidenced by notes contributed to Sycamore Insurance Company Ltd. or its Subsidiaries or if such Indebtedness otherwise secures liabilities to third parties; provided that (i) immediately before and after giving effect thereto, no Default exists or would result therefrom, (ii) each item of such Indebtedness shall be unsecured and, (A) in the case of Indebtedness owed by the Borrower, shall be subordinated in right of payment to all of the Obligations under this Agreement and the other Loan Documents on the terms set forth in Exhibit G
and (B) in the case of Indebtedness owed by any Substantially-Owned Subsidiary of the Borrower, shall not be paid unless all accrued and owed Obligations under this Agreement and the other Loan Documents are paid in full; (iii) the aggregate amount of all such Indebtedness shall not exceed $2 billion; and (iv) such Indebtedness shall only be permitted to the extent that it will be eliminated for purposes of the consolidated financial statements of the Borrower in accordance with GAAP;
(h) Indebtedness of a Substantially-Owned Subsidiary of
the Borrower to the Borrower or any of its Substantially-Owned
Subsidiaries or Indebtedness of the Borrower to any Substantially-Owned
Subsidiary of the Borrower in connection with loans or advances, other
than intercompany Indebtedness of the type contemplated in Section
7.03(g); provided that (i) immediately before and after giving effect
thereto, no Default exists or would result therefrom, (ii) each item of
intercompany debt shall be unsecured and, (A) in the case of
Indebtedness owed by the Borrower, shall be subordinated in right of
payment to all of the Obligations under this Agreement and the other
Loan Documents on the terms set forth in Exhibit G, and (B) in the case
of Indebtedness owed by any Substantially-Owned Subsidiary of the
Borrower, shall not be paid unless all accrued and owed Obligations
under this Agreement and the other Loan Documents are paid in full; and
(iii) such Indebtedness shall only be permitted to the extent that it
will be eliminated for purposes of the consolidated financial
statements of the Borrower in accordance with GAAP; and"
SECTION 1.02. Other Amendments to Credit Agreement.
(a) Exhibit G hereto is hereby added as Exhibit G to the Amended Credit Agreement.
(b) A new definition is hereby added to Section 1.01, in appropriate alphabetical order, as follows:
"Substantially-Owned Subsidiary" means any Person at least 90% of the capital stock or other equity interests of which are directly or indirectly owned by the Borrower.
(c) Section 7.08 is amended by adding the following immediately before the period at the end thereof:
"; provided that this Section 7.08 shall not prohibit any transaction permitted by Section 7.03(g) or 7.03(h)"
SECTION 1.03. Representations and Warranties. The Borrower hereby represents and warrants to the Administrative Agent and the Lenders, as follows:
(a) After giving effect to this First Amendment, the representations and warranties set forth in Article V of the Amended Credit Agreement, and in each other Loan Document, are true and correct in all material respects on and as of the date hereof and on and as of the First Amendment Effective Date (as defined below) with the same effect as if made on and as of the date hereof, except (i) to the extent such representations and warranties expressly relate solely to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date and (ii) the representations and
warranties contained in subsections (a) and (b) of Section 5.05 of the Amended Credit Agreement shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b), respectively, of Section 6.01 of the Amended Credit Agreement.
(b) After giving effect to this First Amendment, no Default or Event of Default has occurred and is continuing under the Amended Credit Agreement.
(c) The execution, delivery and performance by the Borrower of this First Amendment have been duly authorized by the Borrower.
(d) This First Amendment constitutes the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms.
(e) The execution, delivery and performance by the Borrower of this First Amendment do not (i) contravene the terms of any such Person's Organization Documents; (ii) conflict with or result in any breach or contravention of, or the creation of any Lien under, (A) any Contractual Obligation to which the Borrower is a party, except to the extent that such breach, contravention or creation of any such Lien could not reasonably be expected to have a Material Adverse Effect or (B) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which the Borrower or its property is subject; or (iii) violate any material Law.
(f) There are no actions, suits, proceedings, claims or disputes, pending, or, to the knowledge of the Borrower after due and diligent investigation threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority by or against the Borrower or any of its Subsidiaries or against any of their properties or revenues that (i) purport to affect or pertain to this Amended Credit Agreement or any other Loan Document, or any of the transactions contemplated hereby or (ii) either individually or in aggregate, could reasonably be expected to have a Material Adverse Effect.
SECTION 1.04. Effectiveness. This First Amendment shall become effective only upon satisfaction of the following conditions precedent (the first date upon which each such condition has been satisfied being herein called the "First Amendment Effective Date"):
(a) The Administrative Agent shall have received duly executed counterparts of this First Amendment which, when taken together, bear the authorized signatures of the Borrower, the Administrative Agent and the Required Lenders.
(b) The Borrower shall have paid all expenses referred to in Section 1.06 of this First Amendment.
SECTION 1.05. APPLICABLE LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT ALL PARTIES HERETO SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
SECTION 1.06. Expenses. The Borrower shall pay all reasonable costs and expenses incurred by the Administrative Agent in connection with the preparation, negotiation, execution, delivery and enforcement of this First Amendment, including all reasonable Attorney Costs. The agreement set forth in this Section 1.06 shall survive the termination of this First Amendment and the Amended Credit Agreement.
SECTION 1.07. Counterparts. This First Amendment may be executed in any number of counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one agreement. Delivery of an executed counterpart of the signature page of this First Amendment by facsimile transmission shall be effective as delivery of a manually executed counterpart thereof.
SECTION 1.08. Amended Credit Agreement. Except as expressly modified or consented to herein, the Amended Credit Agreement shall continue in full force and effect in accordance with the provisions thereof. This First Amendment is a Loan Document executed under the Amended Credit Agreement and shall be construed in accordance with the Amended Credit Agreement. The parties hereto waive any Default or Event of Default existing on the date hereof that resulted from any matter permitted by the Amended Credit Agreement, but not permitted by the 364-Day Amended and Restated Credit Agreement prior to this First Amendment.
[Signature Pages to Follow]
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed as of the date first above written.
HILLENBRAND INDUSTRIES, INC.
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
BANK OF AMERICA, N.A., as
Administrative Agent
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
CITICORP NORTH AMERICA, INC., as
Syndication Agent
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
BANK ONE, NA,
as Documentation Agent
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
LASALLE BANK NATIONAL ASSOCIATION, as
Documentation Agent
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
UBS AG, STAMFORD BRANCH,
as Documentation Agent
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
BANK OF AMERICA, N.A., as a Lender and
Alternative Rate Lender
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
BANK ONE, NA, as a Lender
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
BNP PARIBAS, as a Lender
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
CITICORP NORTH AMERICA, INC., as a Lender
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
FIFTH THIRD BANK, as a Lender
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
KEYBANK NATIONAL ASSOCIATION, as a Lender
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
LASALLE BANK NATIONAL ASSOCIATION, as a
Lender
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
NATIONAL CITY BANK OF INDIANA, as a Lender
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
THE NORTHERN TRUST COMPANY, as a Lender
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
PNC BANK, NATIONAL ASSOCIATION, as a
Lender
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
SUNTRUST BANK, as a Lender
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
UBS AG, STAMFORD BRANCH, as a Lender
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
EXHIBIT G
SUBORDINATION TERMS
[LEGEND]
The indebtedness evidenced by this instrument is subordinated to the prior payment in full of certain Senior Indebtedness pursuant to, and to the extent provided herein. Any holder of this instrument shall be deemed to be bound by, and subject to, the terms of the subordination contained herein.
The payment of all obligations and amounts owing under this [describe promissory note or other instrument creating intercompany debt] (the "Subordinated Debt") to [describe payee] ("Subordinated Lender") shall be subordinated to all indebtedness under (1) the Three-Year Credit Agreement dated as of August 2, 2002 among Hillenbrand Industries, Inc. (the "Borrower"), the lenders party thereto, Bank of America, N.A., as Administrative Agent for such lenders, Citicorp North America, Inc. (successor by assignment from Citicorp USA, Inc.), as syndication agent for such lenders, and Bank One, NA, LaSalle Bank National Association and UBS AG, Stamford Branch, as documentation agents for such lenders, and (2) the 364-Day Amended and Restated Credit Agreement dated as of July 30, 2003 among the Borrower, the lenders party thereto, Bank of America, N.A., as Administrative Agent for such lenders, Citicorp North America, Inc., as syndication agent for such lenders, and Bank One, NA, LaSalle Bank National Association and UBS AG, Stamford Branch, as documentation agents for such lenders, as each such agreement may be amended, renewed, extended, increased, substituted, refinanced, restructured, replaced, supplemented or otherwise modified from time to time, whether for principal or interest (including, without limitation, interest provided for therein, accruing after the filing of a petition initiating any proceeding under any Federal or state law, whether or not such interest accrues after the filing of such petition for purposes of the Bankruptcy Code of the United States or is an allowed claim in such proceeding (the "Senior Indebtedness"), as follows:
(a) Upon any payment or distribution of all or any of the assets or securities of the Borrower of any kind or character, whether in cash, properties or securities, upon any dissolution, winding up, liquidation, reorganization, arrangement, protection, relief or composition of the Borrower or its debts, whether voluntary or involuntary, total or partial, or in bankruptcy, insolvency, receivership, arrangement, relief or other proceedings, or upon an assignment for the benefit of creditors or any marshaling of the assets and liabilities of the Borrower (any such events or proceedings being an "Insolvency Event"), the holders of the Senior Indebtedness shall be entitled to receive payment in full of all Senior Indebtedness before the Subordinated Lender shall receive any payment on account of principal or interest due under the Subordinated Debt and any payment or distribution of assets or securities of the Borrower of any kind or character, whether in cash, property or securities to which the Subordinated Lender would be entitled shall be made by the Borrower or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution directly to the Administrative Agent on behalf of the holders of the Senior Indebtedness for application (in the case of cash) to or as collateral (in the case of non-cash property or securities) for the payment in full of all Senior Indebtedness after giving effect to any concurrent payment or distribution to the
Administrative Agent on behalf of the holders of the Senior Indebtedness on the Senior Indebtedness.
(b) No attempt to exercise any right of set-off or counterclaim by the Subordinated Lender in respect of the Subordinated Debt and no direct or indirect payment, credit or distribution by or on behalf of the Borrower in respect of the Subordinated Debt or upon acceleration, demand, foreclosure, collection, set-off, counterclaim or otherwise, shall be made, and no consideration in respect of the Subordinated Debt shall be given or permitted if at the time of such payment, credit or distribution there exists an event of default under the Senior Indebtedness or the Subordinated Debt.
(c) If, notwithstanding the foregoing prohibited payments, credits or distributions or the giving or receipt of consideration, the Subordinated Lender shall receive any payment, credit or distribution in respect of the Subordinated Debt contrary to such provisions, then in such event such payment, credit, distribution or consideration shall be received and held in trust for the Administrative Agent on behalf of the holders of the Senior Indebtedness and shall be paid over or delivered to the Administrative Agent on behalf of the holders of the Senior Indebtedness for application to or as collateral for the payment in full of the Senior Indebtedness after giving effect to any concurrent payment or distribution to the Administrative Agent on behalf of the Senior Indebtedness in respect of the Senior Indebtedness. No amount paid by the Borrower to the holders of the Subordinated Debt and paid over by the holder of the Subordinated Debt to the Administrative Agent on behalf of the holders of the Senior Indebtedness shall, as between the Borrower and the holders of the Subordinated Debt, be deemed to be a payment by the Borrower to or on account of such Subordinated Debt.
(d) No present or future holder of Senior Indebtedness shall be prejudiced in his or its right to enforce subordination of the Subordinated Lender by any act or failure to act on the part of the Borrower whether or not such act or failure shall give rise to any right of rescission or other claim or cause of action on the part of the Subordinated Lender. Nothing contained in this Subordinated Debt is intended to or shall impair as between the Borrower and the Subordinated Lender, the obligations of the Borrower to the holders of the Subordinated Debt to pay the Subordinated Debt as and when it shall become due and payable in accordance with its terms, nor is intended to affect the relative rights of the holder of the Subordinated Debt and the creditors of the Borrower (other than the holders of the Senior Indebtedness).
(e) If the Subordinated Lender does not file a proper claim or proof of debt in the form required in connection with any dissolution, winding up, liquidation, or reorganization of the Borrower in any bankruptcy, insolvency, or receivership proceedings prior to thirty (30) calendar days before the expiration of the time to file such claim or proofs, or shall otherwise fail to act with reasonable diligence to realize upon, enforce, perfect or pursue its claims in any such proceeding, then the Administrative Agent on behalf of the holders of the Senior Indebtedness shall have the right to file and prove all claims therefor and to take all such other action in the name of Subordinated Lender or otherwise, as the Administrative Agent on behalf of the holders of the Senior Indebtedness may determine to be necessary or appropriate for the enforcement, perfection, pursuit of, or realization upon such claim in order to further its rights hereunder. Upon any such failure by the Subordinated Lender, the Administrative Agent on behalf of the holders of the Senior Indebtedness, and any officer or employee designated by the
Administrative Agent for such purpose, is hereby constituted and appointed attorney-in-fact for the Subordinated Lender with full power (which power, being coupled with an interest, shall be irrevocable so long as the Senior Indebtedness is in effect) to file any claim, proof of debt or proof of claim in any such proceeding, to take such action as may be necessary or desirable to perfect or realize on such claim and to endorse the Subordinated Lender's name upon any instruments given as a payment on or distribution in connection with the Subordinated Debt.
(f) In addition to any other remedies available to the Administrative Agent on behalf of the holders of the Senior Indebtedness, the Administrative Agent on behalf of the holders of the Senior Indebtedness is hereby authorized to demand specific performance of the provisions of this Subordinated Debt relating to subordination at any time when the Subordinated Lender shall have failed to comply with any of the provisions relating to subordination. The Subordinated Lender hereby irrevocably waives any defense based on the adequacy of a remedy at law that might be asserted as a bar to such remedy of specific performance. The Subordinated Lender hereby acknowledges that the provisions relating to subordination are intended to be enforceable at all times, whether before or after the commencement of an Insolvency Event.
(g) The Subordinated Lender or any holder of this Subordinated Debt may not transfer, sell or assign its interest in the Subordinated Debt except for transfers or assignments to Hillenbrand Industries Inc. or any of its Subsidiaries, without the consent of the holders of Senior Indebtedness.
(h) The Subordinated Debt does not, and shall not, have the benefit of any guarantees or security interests.
(i) The holders of Senior Indebtedness are entitled to the benefits of, and are third party beneficiaries of, the subordination provisions contained herein. The Subordinated Debt may not be amended, modified or renewed without the express written consent of the holders of Senior Indebtedness.
EXHIBIT 10.30
FOURTH AMENDMENT
TO
THREE-YEAR CREDIT AGREEMENT
FOURTH AMENDMENT to the Three-Year Credit Agreement dated as of October
10, 2003 (this "Fourth Amendment") among HILLENBRAND INDUSTRIES, INC. (the
"Borrower"), each lender to the Three-Year Credit Agreement (as defined below)
(the "Lenders"), and BANK OF AMERICA, N.A., as Administrative Agent (in such
capacity, the "Administrative Agent"), Swingline Lender and Alternative Rate
Lender BANK OF AMERICA, N.A., BANK ONE, NA and LASALLE BANK NATIONAL
ASSOCIATION, as L/C Issuers, CITICORP NORTH AMERICA, INC. (successor by
assignment from CITICORP USA, INC.), as Syndication Agent, and BANK ONE, NA,
LASALLE BANK NATIONAL ASSOCIATION and UBS AG, STAMFORD BRANCH, as Documentation
Agents.
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lenders, the Administrative Agent, Citicorp North America, Inc. (successor by assignment from Citicorp USA, Inc.), as Syndication Agent, and Bank One, NA, LaSalle Bank National Association and UBS AG, Stamford Branch, as Documentation Agents, entered into that certain Three-Year Credit Agreement dated as of August 2, 2002 (as amended by the First Amendment dated as of November 20, 2002, the Second Amendment dated as of November 27, 2002, and the Third Amendment dated as of July 30, 2003, the "Three-Year Credit Agreement" and as amended by this Fourth Amendment and as hereinafter amended, modified, supplemented, extended or restated from time to time, the "Amended Credit Agreement"). Capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Amended Credit Agreement.
(2) The Borrower has requested the Lenders, among other things, amend certain covenants and other provisions in the Three-Year Credit Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:
SECTION 1.01. Amendments to Article VII.
(a) Section 7.01(j) is hereby amended by changing the reference therein from "Section 7.03(g)" to "Section 7.03(i)".
(b) Section 7.03 is hereby amended by: (i) changing the existing
Section 7.03(g) to be Section 7.03(i) and replacing in such section the phrase
"under subsection (a) through (f)" with "under subsection (a) through (h)", (ii)
deleting the word "and" at the end of Section 7.03(f) and (iii) adding new
Sections 7.03(g) and (h) as follows:
"(g) Indebtedness of a Substantially-Owned Subsidiary of the Borrower to the Borrower or any of its Substantially-Owned Subsidiaries or Indebtedness of the Borrower to any Substantially-Owned Subsidiary of the Borrower if such Indebtedness is evidenced by notes contributed to Sycamore Insurance Company Ltd. or its Subsidiaries or if such Indebtedness otherwise secures liabilities to third parties; provided that (i) immediately
before and after giving effect thereto, no Default exists or would result therefrom, (ii) each item of such Indebtedness shall be unsecured and, (A) in the case of Indebtedness owed by the Borrower, shall be subordinated in right of payment to all of the Obligations under this Agreement and the other Loan Documents on the terms set forth in Exhibit H and (B) in the case of Indebtedness owed by any Substantially-Owned Subsidiary of the Borrower, shall not be paid unless all accrued and owed Obligations under this Agreement and the other Loan Documents are paid in full; (iii) the aggregate amount of all such Indebtedness shall not exceed $2 billion; and (iv) such Indebtedness shall only be permitted to the extent that it will be eliminated for purposes of the consolidated financial statements of the Borrower in accordance with GAAP;
(h) Indebtedness of a Substantially-Owned Subsidiary of
the Borrower to the Borrower or any of its Substantially-Owned
Subsidiaries or Indebtedness of the Borrower to any Substantially-Owned
Subsidiary of the Borrower in connection with loans or advances, other
than intercompany Indebtedness of the type contemplated in Section
7.03(g); provided that (i) immediately before and after giving effect
thereto, no Default exists or would result therefrom, (ii) each item of
intercompany debt shall be unsecured and, (A) in the case of
Indebtedness owed by the Borrower, shall be subordinated in right of
payment to all of the Obligations under this Agreement and the other
Loan Documents on the terms set forth in Exhibit H, and (B) in the case
of Indebtedness owed by any Substantially-Owned Subsidiary of the
Borrower, shall not be paid unless all accrued and owed Obligations
under this Agreement and the other Loan Documents are paid in full; and
(iii) such Indebtedness shall only be permitted to the extent that it
will be eliminated for purposes of the consolidated financial
statements of the Borrower in accordance with GAAP; and"
SECTION 1.02. Other Amendments to Credit Agreement.
(a) Exhibit H hereto is hereby added as Exhibit H to the Amended Credit Agreement.
(b) A new definition is hereby added to Section 1.01, in appropriate alphabetical order, as follows:
"Substantially-Owned Subsidiary" means any Person at least 90% of the capital stock or other equity interests of which are directly or indirectly owned by the Borrower.
(c) Section 7.08 is amended by adding the following immediately before the period at the end thereof:
"; provided that this Section 7.08 shall not prohibit any transaction permitted by Section 7.03(g) or 7.03(h)"
(d) For the purposes of the Amended Credit Agreement, all references to "Citicorp USA, Inc." or "Citicorp USA" shall be replaced with the following:
"Citicorp North America, Inc. (successor by assignment from Citicorp USA, Inc.)"
SECTION 1.03. Representations and Warranties. The Borrower hereby represents and warrants to the Administrative Agent and the Lenders, as follows:
(a) After giving effect to this Fourth Amendment, the representations and warranties set forth in Article V of the Amended Credit Agreement, and in each other Loan Document, are true and correct in all material respects on and as of the date hereof and on and as of the Fourth Amendment Effective Date (as defined below) with the same effect as if made on and as of the date hereof, except (i) to the extent such representations and warranties expressly relate solely to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date and (ii) the representations and warranties contained in subsections (a) and (b) of Section 5.05 of the Amended Credit Agreement shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b), respectively, of Section 6.01 of the Amended Credit Agreement.
(b) After giving effect to this Fourth Amendment, no Default or Event of Default has occurred or is continuing under the Amended Credit Agreement.
(c) The execution, delivery and performance by the Borrower of this Fourth Amendment have been duly authorized by the Borrower.
(d) This Fourth Amendment constitutes the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms.
(e) The execution, delivery and performance by the Borrower of this Fourth Amendment do not (i) contravene the terms of any such Person's Organization Documents; (ii) conflict with or result in any breach or contravention of, or the creation of any Lien under, (A) any Contractual Obligation to which the Borrower is a party, except to the extent that such breach, contravention or creation of any such Lien could not reasonably be expected to have a Material Adverse Effect or (B) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which the Borrower or its property is subject; or (iii) violate any material Law.
(f) There are no actions, suits, proceedings, claims or disputes, pending, or, to the knowledge of the Borrower after due and diligent investigation threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority by or against the Borrower or any of its Subsidiaries or against any of their properties or revenues that (i) purport to affect or pertain to this Amended Credit Agreement or any other Loan Document, or any of the transactions contemplated hereby or (ii) either individually or in aggregate, could reasonably be expected to have a Material Adverse Effect.
SECTION 1.04. Effectiveness. This Fourth Amendment shall become effective only upon satisfaction of the following conditions precedent (the first date upon which each such condition has been satisfied being herein called the "Fourth Amendment Effective Date"):
(a) The Administrative Agent shall have received duly executed counterparts of this Fourth Amendment which, when taken together, bear the authorized signatures of the Borrower, the Administrative Agent and the Required Lenders.
(b) The Borrower shall have paid all expenses referred to in Section 1.06 of this Fourth Amendment.
SECTION 1.05. APPLICABLE LAW. THIS FOURTH AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT ALL PARTIES HERETO SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
SECTION 1.06. Expenses. The Borrower shall pay all reasonable costs and expenses incurred by the Administrative Agent in connection with the preparation, negotiation, execution, delivery and enforcement of this Fourth Amendment, including all reasonable Attorney Costs. The agreement set forth in this Section 1.06 shall survive the termination of this Fourth Amendment and the Amended Credit Agreement.
SECTION 1.07. Counterparts. This Fourth Amendment may be executed in any number of counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one agreement. Delivery of an executed counterpart of the signature page of this Fourth Amendment by facsimile transmission shall be effective as delivery of a manually executed counterpart thereof.
SECTION 1.08. Amended Credit Agreement. Except as expressly modified or consented to herein, the Amended Credit Agreement shall continue in full force and effect in accordance with the provisions thereof. This Fourth Amendment is a Loan Document executed under the Amended Credit Agreement and shall be construed in accordance with the Amended Credit Agreement. The parties hereto waive any Default or Event of Default existing on the date hereof that resulted from any matter permitted by the Amended Credit Agreement, but not permitted by the Three-Year Credit Agreement prior to this Fourth Amendment.
[Signature Pages to Follow]
IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to be duly executed as of the date first above written.
HILLENBRAND INDUSTRIES, INC.
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
BANK OF AMERICA, N.A., as Administrative
Agent
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
CITICORP NORTH AMERICA, INC., as
Syndication Agent
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
BANK ONE, NA, as Documentation Agent
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
LASALLE BANK NATIONAL ASSOCIATION,
as Documentation Agent
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
UBS AG, STAMFORD BRANCH, as Documentation Agent
By: ______________________________________ Name: ____________________________________ Title: ___________________________________
By: ______________________________________ Name: ____________________________________ Title: ___________________________________
BANK OF AMERICA, N.A., as a Lender, Swingline Lender, Alternative Rate Lender, and a L/C Issuer
By: ______________________________________ Name: ____________________________________ Title: ___________________________________
BANK ONE, NA, as a Lender and a L/C Issuer
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
BNP PARIBAS, as a Lender
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
CITICORP NORTH AMERICA, INC., as a Lender
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
FIFTH THIRD BANK as a Lender
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
KEYBANK NATIONAL ASSOCIATION, as a Lender
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
LASALLE BANK NATIONAL ASSOCIATION, as a
Lender and a L/C Issuer
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
NATIONAL CITY BANK OF INDIANA, as a Lender
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
THE NORTHERN TRUST COMPANY, as a Lender
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
PNC BANK, NATIONAL ASSOCIATION, as a
Lender
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
SUNTRUST BANK, as a Lender
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
UBS AG, STAMFORD BRANCH, as a Lender
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
EXHIBIT H
SUBORDINATION TERMS
[LEGEND]
The indebtedness evidenced by this instrument is subordinated to the prior payment in full of certain Senior Indebtedness pursuant to, and to the extent provided herein. Any holder of this instrument shall be deemed to be bound by, and subject to, the terms of the subordination contained herein.
The payment of all obligations and amounts owing under this [describe promissory note or other instrument creating intercompany debt] (the "Subordinated Debt") to [describe payee] ("Subordinated Lender") shall be subordinated to all indebtedness under (1) the Three-Year Credit Agreement dated as of August 2, 2002 among Hillenbrand Industries, Inc. (the "Borrower"), the lenders party thereto, Bank of America, N.A., as Administrative Agent for such lenders, Citicorp North America, Inc. (successor by assignment from Citicorp USA, Inc.), as syndication agent for such lenders, and Bank One, NA, LaSalle Bank National Association and UBS AG, Stamford Branch, as documentation agents for such lenders, and (2) the 364-Day Amended and Restated Credit Agreement dated as of July 30, 2003 among the Borrower, the lenders party thereto, Bank of America, N.A., as Administrative Agent for such lenders, Citicorp North America, Inc., as syndication agent for such lenders, and Bank One, NA, LaSalle Bank National Association and UBS AG, Stamford Branch, as documentation agents for such lenders, as each such agreement may be amended, renewed, extended, increased, substituted, refinanced, restructured, replaced, supplemented or otherwise modified from time to time, whether for principal or interest (including, without limitation, interest provided for therein, accruing after the filing of a petition initiating any proceeding under any Federal or state law, whether or not such interest accrues after the filing of such petition for purposes of the Bankruptcy Code of the United States or is an allowed claim in such proceeding (the "Senior Indebtedness"), as follows:
(a) Upon any payment or distribution of all or any of the assets or securities of the Borrower of any kind or character, whether in cash, properties or securities, upon any dissolution, winding up, liquidation, reorganization, arrangement, protection, relief or composition of the Borrower or its debts, whether voluntary or involuntary, total or partial, or in bankruptcy, insolvency, receivership, arrangement, relief or other proceedings, or upon an assignment for the benefit of creditors or any marshaling of the assets and liabilities of the Borrower (any such events or proceedings being an "Insolvency Event"), the holders of the Senior Indebtedness shall be entitled to receive payment in full of all Senior Indebtedness before the Subordinated Lender shall receive any payment on account of principal or interest due under the Subordinated Debt and any payment or distribution of assets or securities of the Borrower of any kind or character, whether in cash, property or securities to which the Subordinated Lender would be entitled shall be made by the Borrower or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution directly to the Administrative Agent on behalf of the holders of the Senior Indebtedness for application (in the case of cash) to or as collateral (in the case of non-cash property or securities) for the payment in full of all Senior Indebtedness after giving effect to any concurrent payment or distribution to the
Administrative Agent on behalf of the holders of the Senior Indebtedness on the Senior Indebtedness.
(b) No attempt to exercise any right of set-off or counterclaim by the Subordinated Lender in respect of the Subordinated Debt and no direct or indirect payment, credit or distribution by or on behalf of the Borrower in respect of the Subordinated Debt or upon acceleration, demand, foreclosure, collection, set-off, counterclaim or otherwise, shall be made, and no consideration in respect of the Subordinated Debt shall be given or permitted if at the time of such payment, credit or distribution there exists an event of default under the Senior Indebtedness or the Subordinated Debt.
(c) If, notwithstanding the foregoing prohibited payments, credits or distributions or the giving or receipt of consideration, the Subordinated Lender shall receive any payment, credit or distribution in respect of the Subordinated Debt contrary to such provisions, then in such event such payment, credit, distribution or consideration shall be received and held in trust for the Administrative Agent on behalf of the holders of the Senior Indebtedness and shall be paid over or delivered to the Administrative Agent on behalf of the holders of the Senior Indebtedness for application to or as collateral for the payment in full of the Senior Indebtedness after giving effect to any concurrent payment or distribution to the Administrative Agent on behalf of the Senior Indebtedness in respect of the Senior Indebtedness. No amount paid by the Borrower to the holders of the Subordinated Debt and paid over by the holder of the Subordinated Debt to the Administrative Agent on behalf of the holders of the Senior Indebtedness shall, as between the Borrower and the holders of the Subordinated Debt, be deemed to be a payment by the Borrower to or on account of such Subordinated Debt.
(d) No present or future holder of Senior Indebtedness shall be prejudiced in his or its right to enforce subordination of the Subordinated Lender by any act or failure to act on the part of the Borrower whether or not such act or failure shall give rise to any right of rescission or other claim or cause of action on the part of the Subordinated Lender. Nothing contained in this Subordinated Debt is intended to or shall impair as between the Borrower and the Subordinated Lender, the obligations of the Borrower to the holders of the Subordinated Debt to pay the Subordinated Debt as and when it shall become due and payable in accordance with its terms, nor is intended to affect the relative rights of the holder of the Subordinated Debt and the creditors of the Borrower (other than the holders of the Senior Indebtedness).
(e) If the Subordinated Lender does not file a proper claim or proof of debt in the form required in connection with any dissolution, winding up, liquidation, or reorganization of the Borrower in any bankruptcy, insolvency, or receivership proceedings prior to thirty (30) calendar days before the expiration of the time to file such claim or proofs, or shall otherwise fail to act with reasonable diligence to realize upon, enforce, perfect or pursue its claims in any such proceeding, then the Administrative Agent on behalf of the holders of the Senior Indebtedness shall have the right to file and prove all claims therefor and to take all such other action in the name of Subordinated Lender or otherwise, as the Administrative Agent on behalf of the holders of the Senior Indebtedness may determine to be necessary or appropriate for the enforcement, perfection, pursuit of, or realization upon such claim in order to further its rights hereunder. Upon any such failure by the Subordinated Lender, the Administrative Agent on behalf of the holders of the Senior Indebtedness, and any officer or employee designated by the
Administrative Agent for such purpose, is hereby constituted and appointed attorney-in-fact for the Subordinated Lender with full power (which power, being coupled with an interest, shall be irrevocable so long as the Senior Indebtedness is in effect) to file any claim, proof of debt or proof of claim in any such proceeding, to take such action as may be necessary or desirable to perfect or realize on such claim and to endorse the Subordinated Lender's name upon any instruments given as a payment on or distribution in connection with the Subordinated Debt.
(f) In addition to any other remedies available to the Administrative Agent on behalf of the holders of the Senior Indebtedness, the Administrative Agent on behalf of the holders of the Senior Indebtedness is hereby authorized to demand specific performance of the provisions of this Subordinated Debt relating to subordination at any time when the Subordinated Lender shall have failed to comply with any of the provisions relating to subordination. The Subordinated Lender hereby irrevocably waives any defense based on the adequacy of a remedy at law that might be asserted as a bar to such remedy of specific performance. The Subordinated Lender hereby acknowledges that the provisions relating to subordination are intended to be enforceable at all times, whether before or after the commencement of an Insolvency Event.
(g) The Subordinated Lender or any holder of this Subordinated Debt may not transfer, sell or assign its interest in the Subordinated Debt except for transfers or assignments to Hillenbrand Industries Inc. or any of its Subsidiaries, without the consent of the holders of Senior Indebtedness.
(h) The Subordinated Debt does not, and shall not, have the benefit of any guarantees or security interests.
(i) The holders of Senior Indebtedness are entitled to the benefits of, and are third party beneficiaries of, the subordination provisions contained herein. The Subordinated Debt may not be amended, modified or renewed without the express written consent of the holders of Senior Indebtedness.
EXHIBIT 21
HILLENBRAND INDUSTRIES, INC.
SUBSIDIARIES OF THE REGISTRANT
All subsidiaries of the Company are wholly-owned Indiana corporations, unless otherwise noted.
Hillenbrand Funeral Services Group, Inc.
Hill-Rom, Inc.
Forethought Financial Services, Inc.
Hillenbrand Investment Advisory Corporation, a Delaware corporation
Hillenbrand Properties, Inc.
Sherman House Corporation
Travel Services, Inc.
Memory Showcase, Inc.
Sleep Options, Inc.
The Acorn Development Group, Inc.
Sycamore Insurance Company Limited, a Bermuda corporation
Larkspur Holdings, Inc.
Subsidiaries of Hillenbrand Funeral Services Group, Inc.
Batesville Services, Inc.
Hillenbrand Funeral Services, International, Inc.
Subsidiaries of Batesville Services, Inc.
Batesville Casket Company, Inc.
Batesville International Corporation
Batesville Logistics, Inc.
Batesville Manufacturing, Inc.
Batesville Casket de Mexico, S.A. de C.V., a Mexican corporation
Subsidiary of Batesville Casket de Mexico, S.A. de C.V.
Industrias Arga, S.A. de C.V., a Mexican corporation
Subsidiaries of Hill-Rom, Inc.
Hill-Rom Company, Inc.
MEDAES Holdings, Inc., a Georgia corporation
The OR Group, Inc.
Subsidiaries of Hill-Rom Company, Inc. PaTMark Company, Inc., a Delaware corporation Hill-Rom International, Inc.
Subsidiary of PaTMark Company, Inc. Hill-Rom Manufacturing, Inc., a Delaware corporation
Subsidiaries of Hill-Rom International Inc. Hill-Rom Australia Pty, Ltd, an Australian corporation Hill-Rom Asia Limited, a Hong-Kong corporation
Subsidiaries of Hill-Rom Manufacturing Inc. Hill-Rom Services, Inc., a Delaware corporation Fisher Berkeley Corporation, a California corporation
Subsidiary of Hill-Rom Services, Inc. Hill-Rom SARL, a French corporation
Subsidiary of MEDAES Holdings, Inc. Hill-Rom MEDAES, Inc., a Georgia corporation
Subsidiary of The OR Group, Inc. AMATECH Corporation
Jointly owned subsidiary of Hill-Rom Services, Inc. and MEDAES
Holdings, Inc.
Hill-Rom International B.V., a Netherlands corporation
Subsidiaries of Hill-Rom International B.V.
Hill-Rom B.V., a Netherlands corporation
Hill-Rom Ltd., a United Kingdom corporation
Hillrom S.A., a Switzerland corporation
HR Netherlands B.V., a Netherlands corporation
HR Investments B.V., a Netherlands corporation
Hill-Rom Austria GmbH, an Austrian corporation
Subsidiaries of Hill-Rom, Ltd. (UK) Hill-Rom (UK), Ltd., a United Kingdom corporation Batesville Casket UK, Ltd., a United Kingdom corporation MEDAES Ltd., a United Kingdom corporation
Jointly owned subsidiary of Hill-Rom International B.V. and Hill-Rom
Services, Inc.
Hill-Rom GmbH, a German corporation
Subsidiaries of Hill-Rom SARL
Hill-Rom Industries SA, a French corporation
Hill-Rom, S.p.A, an Italian corporation
Hill-Rom SAS, a French corporation
SCI Le Couviour Immoblier, a French corporation
Hill-Rom Iberia S.L., a Spanish corporation
Hill-Rom Medibed AB, a Swedish corporation
Subsidiaries of Forethought Financial Services, Inc.
Forethought Life Insurance Company
The Forethought Group, Inc.
Forethought Florida, Inc.
ForeLife Agency, Inc.
Forethought Federal Savings Bank, federally chartered
Forethought Investment Management, Inc.
Foresight Association, Inc.
Subsidiaries of Forethought Life Insurance Company Forethought Properties, Inc. Arkansas National Life Insurance Company, an Arkansas company Forethought Life Assurance Company Forethought Life Insurance Company of New York, a New York corporation
Jointly owned subsidiary of Batesville International Corporation, Hill-Rom, Inc., Hill-Rom Manufacturing, Inc. and Hill-Rom Company, Inc. Hillenbrand Industries Canada, Ltd., an Ontario (Canada) corporation
Jointly owned subsidiary of Hillenbrand Industries, Inc., Hill-Rom
Company, Inc., Batesville Services, Inc. and Hill-Rom Manufacturing,
Inc.
Hillenbrand Industries FSC (Barbados), Inc., a Barbados corporation
Subsidiaries of Hillenbrand Properties, Inc. Cutler Property, Inc.
Jointly owned subsidiary of Sycamore Insurance Company Limited
and Larkspur Holdings, Inc.
Larkspur Ridge, LLC
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-107016) and Forms S-8 (Nos. 33-38465, 333-49669, 333-88354 and 333-88328) of Hillenbrand Industries, Inc. of our report (which includes an explanatory paragraph relating to the adoption of Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", as of October 1, 2002) dated December 22, 2003 relating to the financial statements and financial statement schedule, which appears in this Form 10-K.
/S/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Cincinnati, Ohio December 23, 2003 |
EXHIBIT 31.1
CERTIFICATIONS
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Frederick W. Rockwood, certify that:
1. I have reviewed this annual report on Form 10-K of Hillenbrand Industries, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
DATE: DECEMBER 23, 2003 /S/ Frederick W. Rockwood Frederick W. Rockwood President and Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATIONS
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Scott K. Sorensen, certify that:
1. I have reviewed this annual report on Form 10-K of Hillenbrand Industries, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
DATE: DECEMBER 23, 2003 /S/ Scott K. Sorensen Scott K. Sorensen Vice President and Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS
ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Hillenbrand Industries, Inc. (the "Company") on Form 10-K for the period ending September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Frederick W. Rockwood, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/S/ Frederick W. Rockwood ------------------------- Frederick W. Rockwood President and Chief Executive Officer December 23, 2003 |
A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN PROVIDED TO HILLENBRAND INDUSTRIES, INC. AND WILL BE RETAINED BY HILLENBRAND INDUSTRIES, INC. AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST.
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Hillenbrand Industries, Inc. (the "Company") on Form 10-K for the period ending September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Scott K. Sorensen, Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/S/ Scott K. Sorensen --------------------- Scott K. Sorensen Vice President and Chief Financial Officer December 23, 2003 |
A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN PROVIDED TO HILLENBRAND INDUSTRIES, INC. AND WILL BE RETAINED BY HILLENBRAND INDUSTRIES, INC. AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST.
EXHIBIT 99.1
HILLENBRAND INDUSTRIES, INC.
(THE "COMPANY")
CORPORATE GOVERNANCE STANDARDS
FOR
BOARD OF DIRECTORS
(As approved by Board of Directors on December 4, 2003)
The following corporate governance standards established by the Board of Directors provide a structure within which directors and management can effectively pursue the Company's objectives for the benefit of its shareholders and other constituencies. The Company's business is managed under the direction of the Board, but the conduct of the Company's business has been delegated by the Board to the Company's senior management team.
1. The Board will consider all major decisions of the Company. However, the Board has established the following standing Committees so that certain important areas can be addressed in more depth than may be possible in a full Board meeting: Audit Committee, Nominating/Corporate Governance Committee, Compensation and Management Development Committee and Finance Committee. Each standing Committee has a specific charter that has been approved by the Board.
2. By the Company's 2004 Annual Meeting of Shareholders, and at all times thereafter, at least a majority of the directors of the Company shall be independent, as determined pursuant to numbered paragraph 3 below.
3. The Board, after receiving a recommendation from the Nominating/Corporate Governance Committee, must determine annually, based on a consideration of all relevant facts and circumstances, whether each director is independent. A director does not qualify as independent unless the Board has affirmatively determined that the director has no material relationship with the Company(1), (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). In assessing the materiality of a director's relationship with the Company and each director's independence, the Board shall consider the issue of materiality not only from the standpoint of the director but also from that of the persons or organizations with which the director has an affiliation and shall consider whether the relationship represents a potential conflict of interest or otherwise interferes with the director's exercise of his or her independent judgment from management and the Company. Material relationships can include, among others, commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships. In assessing a director's independence,
the Board shall also consider the director's ownership, or affiliation with the owner, of less than a controlling amount of voting securities of the Company. The basis for the Board's determination that a relationship is not material shall be disclosed in the Company's annual proxy statement.
Further, the Board cannot conclude that a director is independent as follows:
- A director who is or was an employee, or whose immediate family member(2) is or was an executive officer, of the Company may not be considered independent until three years after the end of such employment relationship. Employment as an interim Chairman or CEO shall not disqualify a director from being considered independent following that employment.
- A director who receives or received, or whose immediate family member receives or received, more than $100,000 per year in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), may not be considered independent until three years after he or she ceased to receive more than $100,000 per year in such compensation. Compensation received by a director for former service as an interim Chairman or CEO need not be considered in determining independence under this test.
- A director who is or was affiliated with or employed by, or whose immediate family member is or was affiliated with or employed in a professional capacity by, a present or former internal or external auditor of the Company may not be considered independent until three years after the end of the affiliation or the employment or auditing relationship.
- A director who is or was employed, or whose immediate family member is or was employed, as an executive officer of another company where any of the Company's present executives serves or served on that company's compensation committee may not be considered independent until three years after the end of such service or the employment relationship.
- A director who is an executive officer or an employee, or whose immediate family member is an executive officer, of a company that makes or made payments to, or receives or received payments from, the Company for property or services in an amount which, in any single fiscal year, exceeds or exceeded the greater of $1 million, or 2% of such other company's consolidated gross revenues, may not be considered independent until three years after falling below such
threshold. The look-back provision for this test applies solely to the financial relationship between the Company and the director or immediate family member's current employer; the Board need not consider former employment of the director or immediate family member. Charitable organizations shall not be considered "companies" for purposes of this provision, but the Company shall disclose in its annual proxy statement any charitable contributions made by the Company to any charitable organization in which a director serves as an executive officer if, within the preceding three years, contributions in any single fiscal year exceeded the greater of $1 million, or 2% of such charitable organization's consolidated gross revenues. In addition, the Board must consider the materiality of any such charitable relationship in making its determination of independence.
- A director who owns, or is affiliated with the owner, of a controlling amount of voting stock of the Company may not be considered independent.
The disqualification of one director from being independent pursuant to these provisions shall not automatically disqualify any other director on the Board who is an immediate family member of such disqualified director but the disqualification of an immediate family member shall be one of the facts and circumstances considered by the Board in assessing such other director's independence.
Moreover, the Board discourages the following types of transactions with or on behalf of non-officer directors:
- the making of substantial charitable contributions to any organization in which a director is affiliated;
- the entering into of consulting contracts with (or providing other indirect forms of compensation to) directors; or
- the entering into of other compensatory arrangements with directors that may raise questions about their independence.
4. The Audit Committee, the Nominating/Corporate Governance Committee and the Compensation and Management Development Committee of the Board will consist entirely of independent directors.
5. Each member of the Board will act in accordance with the criteria for selection and discharge the responsibilities set forth in the Position Specifications(3) for a director of the Company.
6. In addition to evaluations to be performed by the Compensation and Management Development Committee, the Board will evaluate the performance of the Company's Chief Executive Officer and certain other senior management positions at least annually in meetings of independent directors that are not attended by the Chief Executive Officer. As a general rule, the Chief Executive Officer should not also hold the position of Chairman of the Board. However, if, with the Board's approval, the Chief Executive Officer also holds the position of Chairman of the Board, the Board will elect a non-executive Vice Chairman (or a non-executive director who is the Lead Director). The Vice Chairman or Lead Director will preside at meetings to evaluate the performance of the Chief Executive Officer.
7. Every year the Board will engage management in a discussion of the Company's strategic direction and, based on that discussion, set the Company's strategic direction and review and approve a three-year strategic framework and a one-year business plan.
8. On an ongoing basis during each year, the Board will monitor the Company's performance against its annual business plan and against the performance of its peers. In this connection, the Board will assess the impact of emerging political, regulatory and economic trends and developments on the Company. The Board will hold periodic meetings devoted primarily to the review of the Company's strategic plan and business plan and its performance against them.
9. The Nominating/Corporate Governance Committee will annually assess the Board's effectiveness as a whole as well as the effectiveness of the individual directors and the Board's various Committees, including a review of the mix of skills, core competencies and qualifications (including independence under applicable standards) of members of the Board and its various committees, which should reflect expertise in one or more of the following areas: accounting and finance, healthcare, international business, mergers and acquisitions, leadership, business and management, strategic planning, government relations, investor relations, executive leadership development, and executive compensation. In order to make these assessments, the Nominating/Corporate Governance Committee shall solicit annually the opinions of each director regarding the foregoing matters. The Nominating/Corporate Governance Committee shall present its findings and recommendations to the Board of Directors for appropriate corrective action by the Board. Ineffective directors shall be replaced as promptly as practicable and inefficient Committees of the Board shall be restructured or eliminated promptly.
10. Directors are expected to own shares of common stock of the Company. The Board of Directors may from time to time adopt, revise or terminate director stock ownership guidelines. Specifically, any non employee director who from and after October 1, 2003 is awarded restricted shares of the Company's common stock or restricted stock units (otherwise known as deferred stock awards) with respect to shares of the Company's common stock shall be required to hold any vested shares of the Company's common stock under such awards until at least the six month anniversary from the date such director ceases to be a director of the Company.
Directors are encouraged to limit the number of directorships that they hold in public companies so that they can devote sufficient time to the discharge of their responsibilities to each public company for which they serve as a director, including the Company. The Nominating/Corporate
Governance Committee shall make recommendations to the Board regarding the membership of the several Board committees and the chairs of such committees. The members of the several Board committees shall be elected by the Board, after consideration of the recommendation of the Nominating/Corporate Governance Committee, at the annual meeting of the Board to serve until the next annual meeting of the Board or until their successors shall be duly elected and qualified. Unless the Chair of any Committee is elected by the Board, after consideration of the recommendation of the Nominating/Corporate Governance Committee, the members of the Committee may designate a Chair by majority vote of the Committee membership. The several Committee Chairs will periodically report the Committee's findings and conclusions to the Board. Upon termination of or significant change in a member of the Board's principal employment, he or she shall notify the Chairman of the Board and tender his or her resignation from the Board, which may be rejected by the Board if the change in status is satisfactory and the Board believes that the director will continue to be a valuable contributor to the Board.
11. Succession planning and management development will be reviewed annually by the Chief Executive Officer with the Board.
12. All executive officers are expected to own shares of the Company's common stock, in addition to options to purchase common stock. Specifically, all executives who are awarded restricted shares of the Company's common stock or restricted stock units (otherwise known as deferred stock awards under the Company's Stock Incentive Plan) with respect to shares of the Company's common stock from and after December 2003 shall be required to hold shares of the Company's common stock or equivalents described below at a level equal to at least 400% of their initial annual restricted stock or restricted stock unit grant ("Required Ownership Level"). Until, but not after, the Required Ownership Level is achieved, if annual grants subsequent to the first annual grant are less than the initial annual grant, then the Required Ownership Level will be adjusted downward based on the annual average grant amount. Shares owned outright, restricted stock units (whether vested or unvested) and restricted shares (whether vested or unvested) will count as share equivalents towards the Required Ownership Level. The Required Ownership Level must be achieved within five years from the date of the first annual restricted stock grant. Failure to maintain the Required Ownership Level will result in suspension of future restricted stock or restricted stock unit grants until the Required Ownership Level is achieved.
13. Incentive compensation plans will link executive compensation directly and objectively to measured financial and non-financial goals set in advance by the Compensation and Management Development Committee.
14. Shareholders of the Company will be given an opportunity to vote on the adoption and amendment of all equity-compensation plans. Brokers may not vote a customer's shares on any equity compensation plan unless the broker has received that customer's instructions to do so.
15. Subject to limited exceptions permitted by law, the Company will not directly or indirectly grant loans to executive officers or directors of the Company that are not available to outsiders.
16. Stock options will not be repriced, that is, the exercise price for options will not be lowered even if the current fair market value of the underlying shares is below their exercise price.
17. Analyses and empirical data that are important to the directors' understanding of the business to be conducted at a meeting of the Board or any Committee will be distributed, to the extent practicable, in writing to all members in advance of the meeting. Management will make every reasonable effort to assure that this material is both concise and in sufficient detail to provide a reasonable basis upon which directors may make an informed business decision. In many cases, significant items requiring Board or Committee approval may be reviewed in one or more meetings, with the intervening time being used for clarification and discussion of relevant issues. Outside directors shall be encouraged to provide input into the development of Board and Committee meeting agenda.
18. Directors shall have complete access to the Company's management. It is assumed that directors will exercise reasonable judgment to assure that contact of this sort is not distracting to the business operations of the Company and that any such contact, if in writing, will be copied to the Chief Executive Officer and the Chairman of the Board. Furthermore, the Board encourages the Chief Executive Officer to bring managers into Board meetings from time to time who: (a) can provide additional insight into the items being discussed because of personal involvement in these areas, and/or (b) represent potential members of future senior management that the Chief Executive Officer believes should be given exposure to the Board.
19. The Nominating/Corporate Governance Committee shall assess, at least annually, the adequacy and suitability of the compensation package for members of the Company's Board of Directors in relation to competitive market and sound corporate governance practices. The Chief Executive Officer or other members of the senior management team or other persons appointed by the Nominating/Corporate Governance Committee shall report to the Nominating/Corporate Governance Committee once a year regarding the adequacy and suitability of the Company's Board compensation package in relation to other comparable U.S. companies. Changes in Board compensation, if any, should be suggested by the Nominating/Corporate Governance Committee and approved only after a full discussion among the members of the Board.
20. While the Board, with the recommendation of the Nominating/Corporate Governance Committee, will review from time to time the compensatory arrangements with the Company's non-officer, non-employee directors, the Board believes that the form and amount of the Company's current compensatory arrangements with its non-officer, non-employee directors summarized below are both customary and appropriate:
- Directors shall receive an annual retainer of $25,000 for their service as directors, together with a $3,500 fee for each Board meeting attended. The Chairman of the Board of Director's annual retainer shall, however, be $150,000.
- For any Board meeting lasting longer than one day, each Director who attends will receive $1,000 for each additional day.
- Directors who attend a Board meeting or standing committee meeting by telephone will receive fifty percent (50%) of the usual meeting fee.
- Each Director who is a member of the Nominating/Corporate Governance, Finance, Audit or Compensation and Management Development Committee receives a fee of $1,500 for each committee meeting attended.
- The Chairmen of the Audit, Compensation and Management Development, Nominating/Corporate Governance and Finance Committees shall receive an additional $10,000, $8,000, $7,000 and $5,000 annual retainer, respectively.
- Directors who attend meetings of committees of which they are not members shall receive no fees for their attendance.
- For any meeting of an ad hoc committee or team of the Board that requires actual attendance, the Directors who attend shall each receive a meeting fee of $1,500, except when such meetings occur before, during or after a meeting of the Board or a standing committee of the Board that also is attended by such Directors.
- Board and committee retainers shall be paid in quarterly installments and the meeting fees shall be paid following the meeting.
- Each Director shall be reimbursed for expenses incurred as a result of attendance at Board or committee meetings.
- Each Director shall be awarded on the first trading day following the close of each annual meeting of the Company's shareholders 1,400 restricted stock units (otherwise known as deferred stock awards) under the Corporation's Stock Incentive Plan in lieu of the stock option grant contemplated by Section 12 of the Corporation's Stock Incentive Plan. Vesting for such restricted stock units will occur on the later to occur of one year and one day from the date of the grant or the six month anniversary of the date that a the applicable Director ceases to be a member of the Board of Directors of the Corporation. In the case of the Chairman of the Board of Directors, his or her annual grant of restricted stock units shall be 3,500.
21. The Board is responsible for the enactment and approval of changes in the Company's Code of Business Conduct and Ethics ("Policy Statement"). The Board's Audit Committee has responsibility for the oversight of the implementation and administration of the Policy Statement, the review and assessment at least annually of the effectiveness of the Policy Statement and the recommendation to the Board of suggested changes in the Policy Statement.
22. The Board will consider from time to time its optimum size and will increase or decrease from time to time, as appropriate, the number of its members.
23. The Board is committed to the continuing orientation and training of new and incumbent directors at the Board and Committee levels.
24. The non-management directors regularly shall conduct executive sessions without participation by any employees of the Company and shall designate and publicly disclose the name of a director who will preside at regularly scheduled meetings of the non-management directors.
25. While the information needed for the Board's decision making generally will be found within the Company, from time to time the Board may seek legal or other expert advise from sources independent of management. Generally such advice will be sought with the knowledge and concurrence of the Chief Executive Officer. Accordingly, the Board shall have the sole authority to engage, compensate, oversee and terminate external independent consultants, counsel and other advisors as it determines necessary to carry out its responsibilities. The Company shall provide appropriate funding (as determined by each committee) for payment of compensation to advisors engaged by the Board.
26. Likewise, each committee of the Board shall have the sole authority to engage, compensate, oversee and terminate external independent consultants, counsel and other advisors as it determines necessary to carry out its duties, including the resolution of any disagreements between management and the auditor regarding financial reporting. The Company shall provide appropriate funding (as determined by each committee) for payment of compensation to advisors engaged by the committees.
27. These Corporate Governance Standards have been developed and approved by the Board. The Board will review at least annually the practices incorporated into these Corporate Governance Standards by comparing them to the standards identified by leading governance authorities and the evolving needs of the Company and determine whether these Corporate Governance Standards should be updated. These Corporate Governance Standards shall be published in the Company's Proxy Statement or Annual Report to shareholders.
EXHIBIT 99.2
HILLENBRAND INDUSTRIES, INC. (THE "COMPANY")
AUDIT COMMITTEE CHARTER
(As approved by Board of Directors on May 15, 2003)
MISSION STATEMENT
The Audit Committee ("Committee") shall assist the Board of Directors of the Company ("Board") in fulfilling its oversight responsibilities regarding financial reports and financial controls of the Company. In discharging that role, the Committee shall review the Company's financial reporting process, its system of internal controls regarding accounting, legal and regulatory compliance and ethics that management or the Board, as the case may be, have established and the internal and external audit processes of the Company. The Committee will endeavor to maintain effective working relationships with the Board, management, and the internal and external auditors. Each Committee member will maintain an understanding of the requirements of membership which are necessary to meet and fulfill Committee responsibilities.
ORGANIZATION
The Board shall arrange that:
1. The Committee shall be comprised of at least three members of the Board, each of whom must meet the independence criteria set forth in the Company's Corporate Governance Standards for the Board of Directors at all times during his or her tenure on the Committee. No member of the Committee may, other than in his or her capacity as a member of the Committee, the Board or any other committee of the Board,
(a) accept, directly or indirectly(1), any consulting, advisory or other compensatory fee from the Company or any of its subsidiaries, provided that, unless the rules of the New York Stock Exchange provide otherwise, compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the Company (provided that such compensation is not contingent in any way on continued service); or
(1) Payments by the Company of the following sort will be deemed to constitute indirect acceptance of compensatory payments and accordingly will render a member of the Board ineligible for service on the Committee: (a) payments to an entity in which the member is a partner, member, officer such as a managing director occupying a comparable position or executive officer, or occupies a similar position (except limited partners, non-managing members and those occupying similar positions who, in each case, have no active role in providing services to the Company) and which provides accounting, consulting, legal, investment banking or financial advisory services to the Company or any of its subsidiaries; and (b) payments to the member's spouse, minor child or stepchild or adult child or stepchild sharing the member's home.
(b) be an affiliated person(2) of the Company or any of its subsidiaries.
2. All members of the Committee should possess, at a minimum, basic financial literacy, as such qualification is interpreted by the Board, or acquire such literacy within a reasonable period of time from joining the Committee. At the present time, the Board interprets "financial literacy" to mean the ability to read and understand audited and unaudited consolidated financial statements (including the related notes) and monthly operating statements of the sort released or prepared by the Company, as the case may be, in the normal course of its business. The Chair of the Committee shall be available, capable, qualified and competent in dealing with financial and related issues.
3. At least one member of the Committee shall be an "audit committee financial expert" who shall have all of the following attributes:
o an understanding of generally accepted accounting principles and financial statements;
o the ability to assess the general application of generally accepted accounting principles in connection with the accounting for estimates, accruals and reserves;
o experience in preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Company's financial statements, or experience in actively supervising one or more persons engaged in such activities;
o an understanding of internal controls and procedures for financial reporting; and
o an understanding of the audit committee function.
An audit committee financial expert may have acquired these attributes through:
(2) An "affiliated person" or "affiliate" of a specified person, means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the specified person. The term "control" (including the terms "controlling", "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise. A person who is not an executive officer of the specified person and is not the beneficial owner, directly or indirectly, of more than 10% of any class of voting equity securities of a specified person will be deemed not to be in control of the specified person, and an executive officer, general partner or managing member of an affiliate, or a director who is also is an employee of an affiliate, shall be deemed also to be an affiliate.
A Committee member who sits on the board of directors of both the Company and an affiliate of the Company is exempt from the "affiliated person" requirement if the Committee member, except for being a director on each such board of directors, otherwise meets the independence requirements described in clauses (a) and (b) for both the Company and the affiliate, including the receipt of only ordinary-course compensation for serving as a member of the board of directors, audit committee or any other board committee of the Company or the affiliate.
o education and experience as a principal financial officer, principal accounting officer, controller, public accountant or auditor or experience in one or more positions that involve the performance of similar functions;
o experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor or person performing similar functions;
o experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing or evaluation of financial statements; or
o other relevant experience.
4. No director shall be appointed to the Committee who is currently serving on the audit committees of two or more other public companies unless the Board determines that such simultaneous service would not impair the ability of such member to serve on the Committee and such determination is disclosed in the Company's annual proxy statement.
5. The members of the Committee shall be designated by the Board at the annual meeting of the Board to serve until the next annual meeting of the Board or until their successors shall be duly elected and qualified. Unless a Chair is designated by the Board, the members of the Committee may designate a Chairman by majority vote of the Committee membership.
6. Committee meetings shall be held not less than quarterly, usually in conjunction with the Company's regular quarterly Board meetings. The Committee may choose to meet more frequently, if needed.
ROLES AND RESPONSIBILITIES
The following functions shall be the common recurring activities of the Committee in carrying out its oversight function. These functions are set forth as a guide with the understanding that the Committee may diverge from this guide as appropriate under any particular set of circumstances.
FINANCIAL REPORTING
The Committee shall:
1. Review with management and the external auditors any financial statement issues and the results of the audit.
2. Review management's disposition of proposed significant audit adjustments as identified by the external auditors.
3. Inquire into the fairness of the statements and disclosures by requesting explanations from management and from the internal and external auditors on whether:
o Generally accepted accounting principles have been consistently applied.
o There are any significant or unusual events or transactions.
o The Company's financial and operating controls are functioning effectively.
o The Company's financial statements contain adequate and appropriate disclosures.
4. Review with the external auditors their views as to the quality of the Company's accounting principles and financial reporting practices.
5. Review and discuss with management and the external auditors the Company's annual audited financial statements and recommend to the Board the inclusion of the Company's audited financial statements in its Annual Report on Form 10-K.
6. Prior to the Company's filing of each Annual Report on Form 10-K and Quarterly Report on Form 10-Q, review and discuss with management and the external auditors the content of such filing, including the disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and review any exceptions to the certifications required of the Chief Executive Officer and Chief Financial Officer in connection with such filings. The Committee shall also discuss with the external auditors the matters required to be brought to the Committee's attention by Statement on Auditing Standards No. 61, as well as other matters that should be communicated to the Committee by the external auditors.
7. Discuss with management, prior to their dissemination, earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies, provided that, if it is not otherwise practicable for the entire Committee to review revisions to earnings guidance, such review may be performed by the Chairman of the Committee.
INTERNAL CONTROL
The Committee shall:
1. Review with management, as well as internal and external auditors, the Company's business risk management process, including the adequacy of the Company's overall control environment and controls in selected areas representing significant financial and business risk.
2. Require that the internal and external auditors and management keep the Committee informed about any significant fraud, illegal acts, or deficiencies in internal control, and similar significant matters.
3. Create an opportunity that significant findings and recommendations made by the internal and external auditors can be received and discussed on a timely basis.
4. Gain an understanding of whether internal control recommendations made by internal and external auditors have been implemented by management.
5. Inquire as to the extent to which internal and external auditors review computer systems and applications and the security of such systems and applications.
INTERNAL AUDIT
1. The Committee shall review as often as it deems necessary but at least annually:
o The annual audit plan, activities and organizational structure of the internal audit function.
o The qualifications of the internal audit function and, when necessary, participate in the appointment, replacement, reassignment, or dismissal of the Director of Internal Audit.
o The effectiveness of the internal audit function.
2. The Committee shall also review periodically as it deems appropriate the reports prepared by the internal audit staff and management's responses to such reports.
EXTERNAL AUDIT
1. The Committee shall review:
o The external auditors' proposed audit scope and approach.
o The performance of the external auditors.
2. The Committee shall have the direct responsibility for and the sole authority to engage, compensate, oversee, retain and terminate the Company's external auditors (subject, where applicable, to shareholder ratification), including the resolution of any disagreements between management and the Company's external auditors regarding financial reporting. The Company shall provide appropriate funding (as determined by the Committee) for payment of compensation to the Company's external auditors.
3. The Committee must approve in advance any non-audit services performed by the Company's external auditors, including tax services. Notwithstanding the foregoing, the Company's external auditors may not provide the following services to the Company: bookkeeping or other services related to the accounting records or financial statements of the Company; financial information systems design and implementation; appraisal or valuation services, fairness opinions or contribution-in kind reports; actuarial services; internal audit outsourcing services; management functions or human resources; broker or dealer, or investment adviser or investment banking services; legal services and expert services unrelated to the audit; and any other service that the applicable federal oversight regulatory authority determines, by regulation, is impermissible. Any non-audit service approved by the Committee and performed by the Company's external auditors must be
disclosed to investors in the Company's reports on Form 10-K and/or proxy statements for its annual meetings of shareholders.
4. The lead (or coordinating) audit partner and the audit review partner associated with the Company's external auditors must be changed at least every five years.
5. The Committee cannot engage external auditors to perform audit services for the Company if the Company's Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer or any person in an equivalent position was employed by such external auditors within one year preceding the initiation of the audit.
6. The Committee may not engage external auditors to perform audit services for the Company if the external auditors are otherwise not independent with respect to the Company in accordance with Rule 2-01 of Securities and Exchange Commission Regulation S-X (or any successor rule), any independence standards adopted by the Public Company Accounting Oversight Board and any other applicable standards.
7. The Committee shall, at least annually, use its best efforts to obtain and review a report from the external auditors addressing: (a) the auditors internal quality-control procedures; (b) any material issues raised by the most recent internal quality-control review, or peer review, of the external auditors; (c) any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the external auditors and any steps taken to deal with such issues; and (d) the independence of the external auditors, including a discussion of any relationships or services that may impact their objectivity and independence.
OTHER RESPONSIBILITIES
The Committee shall:
1. Meet at least quarterly, with the external auditors, Director of Internal Audit, and management in separate executive sessions to discuss any matters that the Committee or these groups believe should be discussed privately.
2. Update the Board about Committee activities and make appropriate recommendations, as often as the Board deems appropriate.
3. Annually review and assess the continuing adequacy of this Charter and the performance of this Committee and its members and, if appropriate, recommend changes for the approval of the Board.
4. Prepare a report to shareholders to be included in the Company's proxy statements as required by the Securities and Exchange Commission.
5. Perform any other activities consistent with this Charter, the Company's Code of By-laws and governing law, as the Committee or the Board deems necessary, appropriate or desirable.
6. As appropriate, obtain advice and assistance from outside legal, accounting or other advisors without the necessity for prior authorization by the Board.
7. Establish policies for the hiring by the Company of present or former employees of the Company's external auditors.
ETHICAL, LEGAL AND REGULATORY COMPLIANCE
The Committee shall:
1. Review and assess at least annually the Company's Code of Business Conduct and Ethics (the "Policy Statement"), recommend changes in the Policy Statement as conditions warrant and confirm that management has established a system to monitor compliance with the Policy Statement by officers and relevant employees of the Company.
2. Review management's monitoring of the Company's compliance with the Policy Statement, and confirm that management has a review system in place to maximize the likelihood that the Company's financial statements, reports and other financial information disseminated to governmental organizations and the public satisfy applicable legal requirements.
3. Review, with the Company's counsel, legal and regulatory compliance matters including corporate securities trading policies.
4. Review, with the Company's counsel, any legal or regulatory matter that could have a significant impact on the Company's financial statements.
5. The Committee shall establish procedures for (a) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and (b) the confidential, anonymous submission by employees of the Company regarding questionable accounting or auditing matters.
OPERATIONS
The Committee shall conduct its operations in accordance with the procedures set forth in Article 4 of the Company's Code of By-Laws applicable to the operations of the Board, except to the extent that such procedures are modified on superseded by the terms of this Charter. The Committee shall have the authority to adopt such additional procedures for the conduct of its business as are not inconsistent with those referred to in the preceding sentence. Except as otherwise expressly provided herein, the Committee shall have no authority to delegate its responsibilities to any subcommittee.
GENERAL LIMITATIONS
The Committee's responsibility is oversight, and it and the Board recognize that the Company's management is responsible for preparing the Company's financial statements. Additionally, the Committee recognizes that financial management, the internal audit staff, and the external auditors, have more knowledge and more detailed information about the Company than do the
members of the Committee. Consequently, in carrying out its oversight responsibilities the Committee is not providing any expert or special assurance as to the Company's financial statements or any professional certification of the financial statements prepared by management or the audit work performed by the internal or external auditors.
The Board recognizes that the members of the Committee will discharge the
foregoing oversight responsibilities by evaluating (a) reports given to them,
(b) presentations made to the them and (c) other significant financial reporting
decisions which are reported to them by management, internal auditors and
external auditors. Within the bounds of sound business judgment and assessment,
and to the extent permitted by the Indiana Business Corporation Law, each member
of the Committee shall be entitled to rely on the integrity of the individuals
and organizations from whom they receive such information. In discharging his or
her duties as a member of the Committee, each member is entitled to rely on
information, opinions, reports or statements, including financial statements and
other financial data, that is prepared and presented by either (i) one or more
officers or employees of the Company who the member reasonably believes to be
reliable and competent in the matters presented or (ii) legal counsel, external
independent auditors or other persons as to the matters the member reasonably
believes are within the person's professional or expert competence. The
Committee may also retain independent counsel, accountants or others, as it
deems appropriate. Furthermore, in fulfilling their responsibilities hereunder,
it is recognized that members of the Committee are not full-time employees of
the Company and are not, and do not hold themselves out to be, accountants or
auditors by profession or experts in the fields of accounting or auditing.
EXHIBIT 99.4
HILLENBRAND INDUSTRIES, INC.
NOMINATING/CORPORATE GOVERNANCE
COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
(As approved by Board of Directors on December 4, 2003)
I. PURPOSE
The primary function of the Nominating/Corporate Governance Committee (the "Committee") is to assist the Board of Directors of Hillenbrand Industries, Inc. (the "Company") in: (a) fulfilling its responsibility for assuring that the Company is operated in accordance with prudent and practical corporate governance standards, (b) achieving its objective that a majority of its members be independent, qualified persons at the earliest practicable time and from time to time in conformity with the requirements of the New York Stock Exchange and applicable regulations and (c) identifying qualified individuals to serve on the Board of Directors of the Company.
II. COMPOSITION
The Committee shall be comprised of at least three members of the Board, each of whom must meet the independence criteria set forth in the Company's Corporate Governance Standards for the Board of Directors at all times during his or her tenure on the Committee. The members of the Committee shall be elected by the Board at the annual meeting of the Board to serve until the next annual meeting of the Board or until their successors shall be duly elected and qualified. Unless a Chair is elected by the Board, the members of the Committee may designate a Chair by majority vote of the Committee membership. The Chair will periodically report the Committee's findings and conclusions to the Board.
III. MEETINGS
The Committee shall meet at least two times annually, or more frequently as circumstances dictate. The Committee will be assisted by the Company's Vice President, Administration with respect to its nominating function and by the Vice President, General Counsel with respect to governance matters. The Company's Secretary will serve as executive secretary of the Committee.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties, the Committee shall:
1. Review from time to time and, if appropriate, recommend changes to the Board to the corporate governance standards for Board of Directors of the Company and its committees, including committee charters.
2. Review from time to time, and, if appropriate, make changes to, the statement setting forth the responsibilities of directors and the qualifications for new nominees for election to the Board.
3. Review from time to time, and, if appropriate, make changes to, the statements setting forth the responsibilities of and the qualifications for the Chairman of the Board and the Vice Chairman of the Board.
4. Annually assess the Board's effectiveness as a whole as well as the effectiveness of the individual directors and the Board's various committees, including a review of the mix of skills, core competencies and qualifications of members of the Board, which should reflect expertise in one or more of the following areas: accounting and finance, healthcare, international business, mergers and acquisitions, leadership, business and management, strategic planning, government relations, investor relations, executive leadership development, and executive compensation. In order to make these assessments, the Committee shall solicit annually the opinions of each director regarding the foregoing matters. Ineffective directors shall be replaced as promptly as practicable and inefficient committees of the Board shall be restructured or eliminated promptly.
5. If deemed necessary, select and retain an executive search firm to identify qualified candidates to serve as members of the Board, considering effectiveness, responsiveness and other relevant factors, and approve the fees and other compensation to be paid to the executive search firm.
6. Review the performance of the executive search firm and approve any proposed discharge of the executive search firm when circumstances warrant.
7. Select and recommend to the Board, director nominees for election at each annual meeting of shareholders, as well as director nominees to fill vacancies arising between annual meetings of shareholders.
8. When deemed necessary or appropriate, make recommendations to the Board regarding the appointment or replacement of the Chairman of the Board and the Vice Chairman of the Board.
9. Perform such additional functions and have such additional powers as may from time to time be expressly delegated to the Committee by the Board.
10. The Committee shall conduct its operations in accordance with the procedures set forth in Article 4 of the Company's Code of By-Laws applicable to the operations of the Board, except to the extent that such procedures are modified on superseded by the terms of this Charter. The Committee shall have the authority to adopt such additional procedures for the conduct of its business as are not inconsistent with those referred to in
the preceding sentence. The Committee shall have no authority to delegate its responsibilities to any subcommittee.
11. The Committee shall determine requirements for, and means of, director orientation and training.
12. Review this Charter and assess the performance of the members of Committee at least annually and recommend updates and changes to the Board as conditions warrant.
EXHIBIT 99.7
POSITION SPECIFICATION FOR VICE CHAIRMAN
OF BOARD OF DIRECTORS OF
HILLENBRAND INDUSTRIES, INC.
APPROVED AT DECEMBER 2003 BOARD MEETING
POSITION OVERVIEW: The Vice Chairman of the Board acts in place of
the Chairman of the Board if the Chairman of the
Board is absent or unable to act, assists the
Chairman of the Board in providing leadership and
direction to the Board of Directors and will
succeed to the position of Chairman of the Board
if the Chairman of the Board ceases to be the
Chairman of the Board and the Board of Directors
has not appointed another member of the Board of
Directors to be Chairman of the Board.
CRITERIA FOR SELECTION: In addition to the selection criteria applicable
to all directors, the Vice Chairman of the Board
should satisfy the criteria for selection
applicable to the Chairman of the Board as set
forth in the Position Specification for Chairman
of Board of Directors of Hillenbrand Industries,
Inc. in effect from time to time, including being
an independent director under the standards of the
New York Stock Exchange.
RESPONSIBILITIES: Responsibilities of the Vice Chairman of the Board
include the following, in addition to those
applicable to all other directors of the
corporation:
1. Presiding at all meetings of the corporation's
shareholders and Board of Directors in the
absence of the Chairman of the Board;
2. Performing all other responsibilities of the
Chairman of the Board if the Chairman of the
Board is absent or unable to act; and
3. At the request of the Chairman of the Board,
providing advice and counsel to or otherwise
assisting the Chairman of the Board in the
conduct of the responsibilities of the
Chairman of the Board.
PERFORMANCE METRICS: Performance meets expectations when the Vice
Chairman of the Board discharges the foregoing
responsibilities with dedication, candor,
fairness, integrity, honesty and discretion.
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