UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 2, 2001 COMMISSION FILE NO. 1-6651
HILLENBRAND INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
INDIANA 35-1160484
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 STATE ROUTE 46 EAST
BATESVILLE, INDIANA 47006-8835
(Address of principal executive offices) (Zip Code)
(812) 934-7000
(Registrant's telephone number, including area code)
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NOT APPLICABLE
(Former name, former address and former
fiscal year, if changed since last report)
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.
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
Common Stock, without par value - 62,590,780 as of July 3, 2001.
HILLENBRAND INDUSTRIES, INC.
INDEX TO FORM 10-Q
Page
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Statements of Consolidated Income 3
for the Three Months And Six Months
Ended 6/02/01 and 5/27/00
Condensed Consolidated Balance Sheets at 4
6/02/01 and 12/02/00
Condensed Statements of Consolidated Cash Flows 5
for the Six Months Ended 6/02/01 and 5/27/00
Notes to Condensed Consolidated Financial Statements 6-12
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 13-20
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 20
Item 6 - Exhibits and Reports on Form 8-K 21
SIGNATURES 22
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Hillenbrand Industries, Inc. and Subsidiaries
Statements of Consolidated Income
Three Months Ended Six Months Ended
---------------------- ----------------------
06/02/01 05/27/00 06/02/01 05/27/00
-------- -------- -------- --------
(In Millions Except Per Share Data)
Net revenues:
Health Care sales ...................... $ 193 $ 187 $ 372 $ 360
Health Care rentals .................... 85 77 171 161
Funeral Services sales ................. 153 148 316 316
Insurance revenues ..................... 94 91 191 180
-------- -------- -------- --------
Total revenues ......................... 525 503 1,050 1,017
Cost of revenues:
Health Care cost of goods sold ......... 106 106 207 204
Health Care rental expenses ............ 55 56 111 113
Funeral Services cost of goods sold .... 73 75 153 161
Insurance cost of revenue .............. 77 73 161 151
-------- -------- -------- --------
Total cost of revenues ................. 311 310 632 629
Gross profit ................................ 214 193 418 388
Other operating expenses .................... 147 135 288 273
Unusual charges (expense), net .............. - - (20) 2
-------- -------- -------- --------
Operating profit ............................ 67 58 110 117
Interest expense ............................ (6) (6) (12) (13)
Investment income ........................... 4 5 7 9
Other income (expense), net ................. (1) (1) (2) -
-------- -------- -------- --------
Income before income taxes .................. 64 56 103 113
Income taxes ................................ 23 20 37 41
-------- -------- -------- --------
Net income .................................. $ 41 $ 36 $ 66 $ 72
======== ======== ======== ========
Basic and diluted earnings
per common share (Note 3) ................. $ .65 $ .56 $ 1.05 $ 1.14
======== ======== ======== ========
Dividends per common share .................. $ .21 $ .20 $ .42 $ .40
======== ======== ======== ========
Average shares outstanding (thousands) ...... 62,734 62,885 62,709 63,069
======== ======== ======== ========
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See Notes to Condensed Consolidated Financial Statements
Hillenbrand Industries, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
ASSETS 06/02/01 12/02/00
-------- --------
(In Millions)
Current assets:
Cash, cash equivalents and short-term investments ........ $ 227 $ 132
Trade receivables ........................................ 353 407
Inventories .............................................. 115 112
Other .................................................... 84 73
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Total current assets .................................... 779 724
Equipment leased to others, net ............................ 66 67
Property, net .............................................. 210 205
Other assets:
Intangible assets, net ................................... 174 181
Other .................................................... 98 106
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Total other assets ...................................... 272 287
Insurance assets:
Investments .............................................. 2,595 2,465
Deferred policy acquisition costs ........................ 655 636
Deferred income taxes .................................... 92 100
Other .................................................... 115 113
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Total insurance assets .................................. 3,457 3,314
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Total assets ............................................... $ 4,784 $ 4,597
======= =======
LIABILITIES
Current liabilities:
Trade accounts payable ................................... 64 68
Other .................................................... 226 214
------- -------
Total current liabilities ............................... 290 282
Other liabilities:
Long-term debt ........................................... 302 302
Other long-term liabilities .............................. 102 85
Deferred income taxes .................................... - 3
------- -------
Total other liabilities ................................. 404 390
Insurance liabilities:
Benefit reserves ......................................... 2,350 2,276
Unearned revenue ......................................... 778 758
Other .................................................... 59 60
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Total insurance liabilities ............................. 3,187 3,094
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Total liabilities .......................................... 3,881 3,766
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Commitments and contingencies (Note 5)
SHAREHOLDERS' EQUITY
Common stock ............................................. 4 4
Additional paid-in capital ............................... 25 24
Retained earnings ........................................ 1,436 1,397
Accumulated other comprehensive income (loss) (Note 4) ... (79) (108)
Treasury stock ........................................... (483) (486)
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Total shareholders' equity .............................. 903 831
------- -------
Total liabilities and
shareholders' equity ...................................... $ 4,784 $ 4,597
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See Notes to Condensed Consolidated Financial Statements
Hillenbrand Industries, Inc. and Subsidiaries
Condensed Statements of Consolidated Cash Flows
Six Months Ended
06/02/01 05/27/00
-------- --------
(In Millions)
Net income .......................................... $ 66 $ 72
Adjustments to reconcile net income
to net cash flows from operating activities:
Depreciation, amortization and
write-down of intangibles ....................... 51 46
Change in noncurrent deferred income taxes ........ (6) -
Change in net working capital excluding cash
and current debt ................................ 48 35
Change in insurance items:
Deferred policy acquisition costs ................ (20) (25)
Unearned revenue ................................. 20 19
Other insurance items, net ....................... 27 42
Other, net ........................................ 37 (5)
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Net cash provided by operating activities ............. 223 184
----- -----
Investing activities:
Capital expenditures ................................ (44) (46)
Proceeds on disposal of fixed assets and
equipment leased to others ........................ 4 6
Other investments ................................... - (1)
Insurance investments:
Purchases ......................................... (853) (265)
Proceeds on maturities ............................ 125 99
Proceeds on sales ................................. 624 60
----- -----
Net cash used in investing activities ................. (144) (147)
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Financing activities:
Additions to debt, net .............................. - 12
Payment of cash dividends ........................... (26) (25)
Treasury stock acquisitions ......................... - (36)
Insurance deposits received ......................... 179 183
Insurance benefits paid ............................. (138) (133)
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Net cash provided by financing activities ............. 15 1
----- -----
Effect of exchange rate changes on cash ............... 1 (2)
----- -----
Total cash flows ...................................... 95 36
Cash, cash equivalents and short-term investments:
At beginning of period ............................... 132 170
----- -----
At end of period ..................................... $ 227 $ 206
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See Notes to Condensed Consolidated Financial Statements
Hillenbrand Industries, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Dollars in millions except per share data)
1. Basis of Presentation
The unaudited, condensed consolidated financial statements appearing in this quarterly report on Form 10-Q should be read in conjunction with the financial statements and notes thereto included in the Company's latest annual report. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The statements herein have been prepared in accordance with the Company's understanding of the instructions to Form 10-Q. In the opinion of management, such financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position, results of operations, and cash flows, for the interim periods.
Certain prior year amounts have been reclassified to conform to the current year's presentation.
2. Supplementary Balance Sheet Information
The following information pertains to non-insurance assets and consolidated shareholders' equity:
06/02/01 12/02/00
-------- --------
Allowance for possible losses and
discounts on trade receivables .... $ 55 $ 61
Inventories
Finished Products ................. $ 78 $ 73
Work in Process ................... 25 26
Raw Materials ..................... 12 13
---- ----
Total Inventory ................. $115 $112
==== ====
Accumulated depreciation of equipment
leased to others and property ..... $589 $589
Accumulated amortization of intangible
assets ............................ $118 $108
Capital Stock:
Preferred stock, without par value:
Authorized 1,000,000 shares;
Shares issued .................. None None
Common stock, without par value:
Authorized 199,000,000 shares;
Shares issued .................. 80,323,912 80,323,912
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3. Earnings per Common Share
Basic earnings per common share were computed by dividing net income by the average number of common shares outstanding including the effect of deferred vested shares under the Company's Senior Executive Compensation Program. Diluted earnings per common share were computed consistent with the basic earnings per share calculation including the effect of dilutive potential common shares. Potential common shares arising from shares awarded under the Company's various stock-based compensation plans, including the 1996 Stock Option Plan, did not have a material effect on diluted earnings per common share in any of the periods presented. Cumulative treasury stock acquired, less cumulative shares reissued, have been excluded in determining the average number of shares outstanding.
Earnings per share is calculated as follows (in thousands except per share data):
Three Months Ended Six Months Ended
06/02/01 05/27/00 06/02/01 05/27/00
-------- -------- -------- --------
Net income $40,710 $35,271 $65,945 $71,790
Average shares outstanding 62,734 62,885 62,709 63,069
Basic and diluted earnings per
common share $ .65 $ .56 $ 1.05 $ 1.14
4. Comprehensive Income (Loss)
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Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income", requires unrealized gains or losses on the Company's available-for-sale securities and foreign currency translation adjustments, which prior to adoption were reported separately in shareholders' equity, to be included in accumulated other comprehensive income (loss).
The components of comprehensive income (loss) are as follows (in millions):
Three Months Ended Six Months Ended
06/02/01 05/27/00 06/02/01 05/27/00
-------- -------- -------- --------
Net income $ 41 $ 36 $ 66 $ 72
Net change in unrealized gain
(loss) on available-for-sale
securities (36) (38) 20 (85)
Foreign currency translation
adjustment (1) (4) 9 (6)
---- ---- ---- ----
Comprehensive income (loss) $ 4 $ (6) $ 95 $(19)
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The composition of accumulated other comprehensive income (loss) at June 2, 2001 and December 2, 2000 is the cumulative adjustment for unrealized gains or (losses) on available-for-sale securities of ($60) and ($80) million, respectively, and the foreign currency translation adjustment of ($19) and ($28) million, respectively.
5. Contingencies
On August 16, 1995, Kinetic Concepts, Inc. (KCI), and Medical Retro Design, Inc. (collectively, the "plaintiffs"), filed suit against Hillenbrand Industries, Inc., and its subsidiary Hill-Rom Company, Inc., in the United States District Court for the Western District of Texas, San Antonio Division. The plaintiffs allege violation of various antitrust laws, including illegal bundling of products, predatory pricing, refusal to deal and attempting to monopolize the hospital bed industry. They seek monetary damages totaling in excess of $269 million, trebling of any damages that may be allowed by the court, and injunctions to prevent further alleged unlawful activities. The Company believes that the claims are without merit and is aggressively defending itself against all allegations. Accordingly, it has not recorded any loss provision relative to damages sought by the plaintiffs.
On November 20, 1996, the Company filed a Counterclaim to the above action against KCI in the U.S. District Court in San Antonio, Texas. The Counterclaim alleges, among other things, that KCI has attempted to monopolize the therapeutic bed market, interfere with the Company's and Hill-Rom's business relationships by conducting a campaign of anticompetitive conduct, and abused the legal process for its own advantage.
The original claims by the plaintiffs against Hillenbrand Industries and the counterclaims by the Company against KCI are currently scheduled to go to trial in early to mid 2002.
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, 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 reasonably possible that some litigation matters for which reserves have not been established could be decided unfavorably to the Company. Management believes, however, that the ultimate liability, if any, in excess of amounts already provided or covered by insurance, is not likely to have a material adverse effect on the Company's financial condition, results of operations or cash flows.
The Company's healthcare businesses manufacture medical devices that are regulated by the U.S. Food and Drug Administration ("FDA"). The Company continuously improves its quality systems in response to evolving federal regulations and customer information, and the FDA routinely inspects the Company's manufacturing facilities to ensure compliance with those regulations. The Company has responded to previous inspection findings by further strengthening its quality system and hiring additional qualified staff and will continue to work with the FDA to address any findings where further improvement is required.
The Company has voluntarily entered into remediation agreements with environmental authorities, and has been issued Notices of Violation alleging violations of certain permit conditions. Accordingly, the Company is in the process of implementing plans of abatement in compliance with agreements and regulations. The Company has also been notified as a potentially responsible party in investigations of certain offsite disposal facilities. The cost of all plans of abatement and waste-site cleanups in which the Company is currently involved is not expected to exceed $5 million. The Company has provided adequate reserves in its financial statements for these matters. These reserves have been determined without consideration of possible loss recoveries from third parties. Changes in environmental law might affect the Company's future operations, capital expenditures and earnings. The cost of complying with these provisions, if any, is not known.
6. Unusual Charges
2001 Actions
In the first quarter of 2001, Hill-Rom announced realignment efforts in its home care and long term care businesses along with an organizational streamlining effort to capture efficiencies, enhance productivity and better serve customers. Hill-Rom also wrote-down certain assets associated with an underperforming, non-core Hill-Rom product line. The total estimated cost of these actions was $20 million, which was recorded as an unusual charge in the Statement of Consolidated Income. The cash component of this charge will approximate $12 million.
Included in the realignment and streamlining plan was the reduction of approximately 400 employees in the United States and Europe with an estimated cost of $12 million. The unusual charge also included $8 million related to the write-down of certain assets associated with an underperforming, non-core product line and a small amount of assets related to the realignment plan.
As of June 2, 2001, $5 million of the employee reduction costs have been incurred. The Company expects substantially all employee reduction costs to be incurred by the end of fiscal 2001.
2000 Actions
In October 2000, the Company announced the retirement of W August Hillenbrand, Chief Executive Officer. In relation to Mr. Hillenbrand's retirement, the Company incurred a charge of $8 million related to future payments and other compensation related items under the terms of his retirement agreement.
In November 2000, Forethought announced a realignment of certain operations, incurring an unusual charge of $1 million.
1999 Actions
In November 1999, the Company announced a plan to reduce the operating cost structure at Hill-Rom, to write-down the value of certain impaired assets and to recognize a liability associated with the estimated cost of a field corrective action for a previously acquired product line. The estimated cost of these actions necessitated an unusual charge of $29 million. The cash component of this charge was $19 million.
Included in the cost-cutting actions was the reduction of 350 employees in the United States and Europe and the closure of select manufacturing and other facilities in the United States and Europe. Estimated costs for the work force and facility closure actions were $8 million and $3 million, respectively. The unusual charge also included $10 million relative to asset impairments for a Hill-Rom investment that has since been liquidated and the write-off of other strategic investments which have discontinued operations. The remaining component of the 1999 unusual charge related to an $8 million field corrective action taken relative to a previously acquired product line.
As of June 2, 2001, all work force reduction and facility closure costs and $6 million related to the field corrective action have been incurred. The field corrective action is expected to be completed by the end of the fourth quarter of 2001.
During the fourth quarter of 2000, approximately $2 million of the original provision was reversed to income within the Unusual charges line of the Statement of Consolidated Income as actual costs incurred were favorable to those originally expected.
Other
Dispositions of idled facilities under prior actions were completed in December 1999 and November 2000, resulting in gains of $2 million and $1 million, respectively. These gains were reflected within the Unusual charges line of the Statement of Consolidated Income.
The reserve balances for the above plans included in other current liabilities approximated $11 million and $8 million as of June 2, 2001 and December 2, 2000, respectively. The reserve balance included in other long-term liabilities for certain retirement obligations is approximately $5 million as of June 2, 2001.
7. Segment Reporting
Statement of Financial Accounting Standards (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. In the first quarter of 2001, the Company changed its method of analyzing segment performance. Whereas prior methods of segment evaluation were based upon pretax measures, the Company will now also utilize net income before unusual charges to evaluate segment performance. Prior period information has been restated to conform to the current year's presentation.
Based on criteria established in SFAS No. 131, the Company's reporting segments are Health Care (Hill-Rom), Funeral Services Products (Batesville Casket Company - Batesville) and Funeral Services Insurance (Forethought Financial Services - Forethought). Corporate, while not a segment, is presented separately to aid in the reconciliation of segment information to that reported in the Statements of Consolidated Income.
Financial information regarding the Company's reportable segments is presented below:
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Funeral Services Corporate
Health ---------------- and Other
Care Products Insurance Expense Consolidated
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THREE MONTHS ENDED
JUNE 2, 2001
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Net revenues $ 278 $ 153 $ 94 $ - $ 525
Income before income taxes $ 32 $ 41 $ 9 $ (18) $ 64
Net income $ 20 $ 26 $ 6 $ (11) $ 41
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THREE MONTHS ENDED
MAY 27, 2000
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Net revenues $ 264 $ 148 $ 91 $ - $ 503
Income before income taxes $ 21 $ 34 $ 11 $ (10) $ 56
Net income $ 14 $ 22 $ 7 $ (7) $ 36
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Funeral Services Corporate
Health ---------------- and Other
Care Products Insurance Expense Consolidated
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SIX MONTHS ENDED
JUNE 2, 2001
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Net revenues $ 543 $ 316 $ 191 $ - $ 1,050
Income before income taxes
and unusual items $ 59 $ 84 $ 14 $ (34) $ 123
Net income before unusual items $ 38 $ 54 $ 9 $ (22) $ 79
Unusual items (after taxes) (a) $ (13)
-----------
Net income $ 66
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SIX MONTHS ENDED
MAY 27, 2000
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Net revenues $ 521 $ 316 $ 180 $ - $ 1,017
Income before income taxes
and unusual items $ 43 $ 76 $ 12 $ (20) $ 111
Net income before unusual items $ 27 $ 49 $ 8 $ (13) $ 71
Unusual items (after taxes) (b) $ 1
-----------
Net income $ 72
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(a) Reflects a $13 million (after tax) charge for business realignment and
work force reduction activities and certain asset impairments.
(b) Reflects a gain on the sale of an idled facility, which was closed as
part of a prior unusual charge.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Hillenbrand Industries is organized into two business groups. The Health Care Group, which is considered one reporting segment, consists of Hill-Rom. The Funeral Services Group consists of two reporting segments, Funeral Services Products (Batesville Casket Company - Batesville) and Funeral Services Insurance (Forethought Financial Services - Forethought).
SECOND QUARTER 2001 COMPARED WITH SECOND QUARTER 2000
Consolidated revenues of $525 million increased 4.4%, or $22 million, compared to the second quarter of 2000. Operating profit increased 15.5%, or $9 million, to $67 million. Net income of $41 million increased 13.9%, or $5 million, and earnings per share increased 16.1% to $.65 compared to $.56 in 2000.
Health Care sales in the second quarter were $193 million compared to $187 million last year, a 3.2% increase, despite a $2.8 million negative currency impact. Excluding this negative currency impact, sales would have increased 4.7%. Growth in health care sales is primarily due to increased shipments to domestic acute care customers and European shipments partially offset by decreased shipments in the long-term care and U.S. export markets. Health Care rental revenues increased 10.4%, or $8 million, to $85 million due to increased units in use by acute care customers and improvements in home care, partially offset by lower revenue in Europe, decreased units in use by our long-term care customers and unfavorable mix in the acute care and home care markets. Overall, acute care rental revenues increased approximately 12.8%. Funeral Services sales increased $5 million, or 3.4%, to $153 million compared to the second quarter of 2000 due to increased rates, volume and improved mix. Insurance revenues of $94 million increased 3.3%, or $3 million, compared to last year. Earned premiums rose due to increased policies in-force year over year and capital gains, net of $13 million of recorded impairment charges in the Company's high yield bond portfolio, increased slightly. Investment income was relatively flat with the prior year due primarily to weakness in the Company's high yield bond portfolio.
Gross profit on Health Care sales of $87 million increased 7.4% compared to the second quarter of 2000 and as a percentage of sales increased to 45.1% compared to 43.3% last year. This increase was due to increased volume and favorable factory performance. Gross profit on rental revenues grew 42.9%, or $9 million, to $30 million. As a percentage of sales, gross profit improved to 35.3% compared to 27.3% in the second quarter of 2000. This increase is due to an overall better-realized rate and increased volume. Funeral Services gross profit rose 9.6% to $80 million and as a percentage of sales was 300 basis points above last year at 52.3%. Increased volume combined with continued operating efficiencies resulted in this increase.
Funeral Services insurance operating profit decreased $1 million to $9 million compared to the second quarter of 2000 primarily due to flat investment income due to some weakness and impairments in the high yield bond portfolio combined with the increased cost of insurance due to an increase in policies.
Other operating expenses (including insurance operations) increased 8.9%, or $12 million, to $147 million and also increased as a percentage of revenues to 28.0% compared to 26.8% in the second quarter of 2000. The increase was attributable to additional investments in business development and process transformation activities and increased incentive compensation, partially offset by reduced costs resulting from current and prior year realignment and streamlining activities at Hill-Rom.
Interest expense was flat with last year. Investment income decreased $1 million due to lower rates and the partial sale of an investment in 2000.
The effective income tax rate was 36.0% in the second quarter of 2001 compared to 36.4% in 2000. The decrease in the tax rate was primarily due to tax initiatives undertaken by the Company and the continuing profitability in Europe.
SIX MONTHS 2001 COMPARED TO SIX MONTHS 2000
Except as noted below, the factors affecting the second quarter comparisons also affected the year-to-date comparison.
Consolidated revenues of $1,050 million increased 3.2%, or $33 million, compared to $1,017 in 2000. Operating profit decreased $7 million, or 6.0%, to $110 million and net income decreased 8.3%, or $6 million, to $66 million. Earnings per share of $1.05 decreased 7.9% compared to $1.14 through the first six months of 2000.
Results for the first six months of 2001 include a $20 million charge related to the realignment of home care and long-term care businesses and an organizational streamlining effort at Hill-Rom. 2000 results include a $2 million gain on the sale of an idled facility which was closed as part of a prior unusual charge. The 2001 charge and 2000 gain are included in the Unusual charges line of the Statement of Consolidated Income. Excluding the unusual items mentioned above, 2001 operating profit increased 13.0%, net income increased approximately 11.3% and earnings per share increased 13.5% from 2000 levels.
Health Care sales grew 3.3%, or $12 million, to $372 million despite a $6.9 million negative currency impact. Excluding this negative currency impact, health care sales would have increased 5.3%. The increase of $12 million is primarily due to increased shipments in the U.S. acute care, long-term care and export markets and in Europe. Health Care rental revenues increased $10 million, or 6.2%, to $171 million compared to last year mainly due to increased units in use and improved rates in the acute care and home care markets combined with improved mix in long-term care. These increases were partially offset by lower rental revenue in Europe, an unfavorable mix in acute care and home care and decreased units in use by long-term care customers. Overall, acute care rental revenues were up 10.8%. Funeral Services sales were flat with last year as decreased volume was offset by increased prices. Funeral Services insurance revenues increased $11 million, or 6.1%, to $191 million. Earned premiums and investment income both increased as a result of higher policies in-force and the increased size of the investment portfolio. Capital gains, net of impairment losses of $20 million in the Company's high yield bond portfolio, increased nearly $3 million over last year.
Consolidated gross profit of $418 million increased 7.7%, or $30 million. Gross profit from Health Care sales was $165 million, a 5.8% increase, despite only a 3.3% increase in sales. As a percentage of sales gross profit improved 100 basis points to 44.4%. Health Care rental gross profit grew 25% to $60 million and was 35.1% of revenues compared to 29.8% in 2000. 2000 gross profit was negatively impacted by low Medicare reimbursement experience in the home care market. Gross profit on Funeral Services sales was $163 million, an increase of 5.2% on flat sales. As a percentage of sales, Funeral Services gross profit increased to 51.6% compared to 49.1% in 2000.
Insurance operating profit of $14 million was $2 million above the 2000 level of $12 million due to decreased operating expenses and increased net capital gains.
Other operating expenses increased 5.5%, or $15 million, to $288 million and also increased as a percentage of sales to 27.4% compared to 26.8% in the first six months of 2000.
Investment income decreased $2 million due to decreased interest rates and the partial sale of an investment in 2000.
The effective income tax rate was 36.0% in 2001 compared to 36.4% in 2000.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows from operating activities and selected borrowings represent the Company's primary sources of funds for growth of the business, including capital expenditures and acquisitions. Cash, cash equivalents and short-term investments (excluding investments of insurance operations) at June 2, 2001 increased $95 million to $227 million compared to December 2, 2000.
Net cash generated from operating activities increased $39 million to $223 million compared to $184 million generated in the first six months of 2000. Operating cash flows were positively impacted by strong collections of receivables, increased other current liabilities, and favorable changes in other assets and other long-term liabilities. Partially offsetting these favorable items were increases in inventory, other current assets and a decrease in accounts payable.
Net cash used in investing activities decreased $3 million to $144 million primarily as a result of decreased capital expenditures and proceeds on disposal of fixed assets and equipment leased to others.
Net cash provided by financing activities increased $14 million to $15 million primarily due to treasury stock acquisitions in the prior year partially offset by the negative net effect of insurance deposits received and benefits paid at Forethought along with debt borrowings in 2000 that did not recur in 2001.
UNUSUAL CHARGES
2001 Actions
In the first quarter of 2001, Hill-Rom announced realignment efforts in its home care and long term care businesses along with an organizational streamlining effort to capture efficiencies, enhance productivity and better serve customers. Hill-Rom also wrote-down certain assets associated with an underperforming, non-core Hill-Rom product line. The total estimated cost of these actions was $20 million, which was recorded as an unusual charge in the Statement of Consolidated Income. The cash component of this charge will approximate $12 million.
Included in the realignment and streamlining plan was the reduction of approximately 400 employees in the United States and Europe with an estimated cost of $12 million. The unusual charge also included $8 million related to the write-down of certain assets associated with an underperforming, non-core product line and a small amount of assets related to the realignment plan.
As of June 2, 2001, $5 million of the employee reduction costs have been incurred. The Company expects substantially all employee reduction costs to be incurred by the end of fiscal 2001.
2000 Actions
In October 2000, the Company announced the retirement of W August Hillenbrand, Chief Executive Officer. In relation to Mr. Hillenbrand's retirement, the Company incurred a charge of $8 million related to future payments and other compensation related items under the terms of his retirement agreement.
In November 2000, Forethought announced a realignment of certain operations, incurring an unusual charge of $1 million.
1999 Actions
In November 1999, the Company announced a plan to reduce the operating cost structure at Hill-Rom, to write-down the value of certain impaired assets and to recognize a liability associated with the estimated cost of a field corrective action for a previously acquired product line. The estimated cost of these actions necessitated an unusual charge of $29 million. The cash component of this charge was $19 million.
Included in the cost-cutting actions was the reduction of 350 employees in the United States and Europe and the closure of select manufacturing and other facilities in the United States and Europe. Estimated costs for the work force and facility closure actions were $8 million and $3 million, respectively. The unusual charge also included $10 million relative to asset impairments for a Hill-Rom investment that has since been liquidated and the write-off of other strategic investments which have discontinued operations. The remaining component of the 1999 unusual charge related to an $8 million field corrective action taken relative to a previously acquired product line.
As of June 2, 2001, all work force reduction and facility closure costs and $6 million related to the field corrective action have been incurred. The field corrective action is expected to be completed by the end of the fourth quarter of 2001.
During the fourth quarter of 2000, approximately $2 million of the original provision was reversed to income within the Unusual charges line of the Statement of Consolidated Income as actual costs incurred were favorable to those originally expected.
Other
Dispositions of idled facilities under prior actions were completed in December 1999 and November 2000, resulting in gains of $2 million and $1 million, respectively. These gains were reflected within the Unusual charges line of the Statement of Consolidated Income.
The reserve balances for the above plans included in other current liabilities approximated $11 million and $8 million as of June 2, 2001 and December 2, 2000, respectively. The reserve balance included in other long-term liabilities for certain retirement obligations is approximately $5 million as of June 2, 2001.
EURO CONVERSION
On January 1, 1999, certain members of the European Union established fixed conversion rates between their existing currencies and the European Union's common currency, known as the Euro. It is planned that by July 1, 2002 the participating countries will withdraw all currencies and use the Euro exclusively.
The Company has committed resources to conduct assessments and to take corrective actions to ensure it is prepared for the introduction of the Euro. The Company is actively addressing the many areas involved with the introduction of the Euro, including information management, finance and legal. This review includes the conversion of information technology, business and financial systems, and the effect on the Company's financial instruments, as well as the impact on the pricing and distribution of Company products by January 1, 2002.
The Company believes the effect of introduction of the Euro, as well as any related cost of conversion, will not have a material impact on the results of operations, financial condition and cash flows.
ACCOUNTING STANDARDS
As of December 3, 2000, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." The adoption of this Standard did not materially affect the Company's financial position or results of operations. SFAS No. 133, as amended, establishes accounting and reporting standards for derivative instruments and hedging activities and requires that all derivatives be recognized on the balance sheet at fair value. Changes in fair values of derivatives will be accounted for based upon their intended use and designation.
As of December 3, 2000, the Company adopted Staff Accounting Bulletin No. 101 (SAB No. 101), "Revenue Recognition in Financial Statements", issued by the Securities and Exchange Commission. Adoption of this Staff Accounting Bulletin did not materially affect the Company's financial position or results of operations.
FACTORS THAT MAY AFFECT FUTURE RESULTS
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995 (the "Act") or by the Securities and Exchange
Commission (SEC) in its rules, regulations and releases, readers of this
document are advised that the document contains both statements of historical
facts and forward-looking statements. Forward-looking statements are subject to
certain risks and uncertainties, which could cause actual results to differ
materially from those indicated by the forward-looking statements.
Forward-looking statements can be identified by the fact that they do not relate
strictly to historical or current facts. The Company has tried, wherever
possible, to identify these forward-looking statements by using words such as
"believes," "continue," "expects," or other words of similar meaning.
Forward-looking statements give the Company's expectations or predictions of future conditions, events or results. They are not guarantees of future performance. By their nature, forward-looking statements are subject to risks and uncertainties. There are a number of factors -many of which are beyond the Company's control- that could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. Forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.
Some of these factors are described below. There are other factors besides those described or incorporated in this report and in other documents filed with the SEC that could cause actual conditions, events or results to differ from those in the forward-looking statements.
- The Company's business and earnings are sensitive to general business and economic conditions of its customers, including funeral homes, hospitals, long-term care facilities and others, in the United States and abroad. A downturn in health care capital spending or the market for pre-need insurance products could adversely affect the demand for these products and the Company's financial operations.
- Our death care business is susceptible to changes in death rates mainly in the United States. Death rates are difficult to predict with great certainty for any financial period.
- Future financial performance will depend on the successful introduction of new products into the marketplace. The financial success of new products could be impacted by competitor's products, customer acceptance, difficulties in manufacturing, certain regulatory approvals and other factors.
- Many of Hill-Rom's acute care, long-term care and home care customers are impacted by changes in Medicare reimbursement trends. Cuts in Medicare funding mandated by the Balanced Budget Act of 1997 (BBA) have had, and could continue to have, an adverse effect on the Company's healthcare sales derived from the acute-care market. Legislative changes phased in beginning July 1, 1998 have had, and may continue to have, a dampening effect on the Company's rental revenue derived from Medicare patients in the long-term care market. The Company is also experiencing, and may continue to experience, pressure on reimbursement rates related to its home care rental business.
- The Company has undertaken several realignment and cost reduction activities in the past three years to become more efficient, enhance productivity and better serve customers. While management believes these activities will be successful and will increase shareholder value, there is always the possibility that these initiatives could take longer than expected and cost reductions not materialize as anticipated.
- Legal factors including unanticipated litigation of product liability or other liability claims; antitrust litigation; environmental matters; and patent disputes that could preclude introduction of products into the market place or negatively affect the profitability of products.
- Changes in tax laws, including laws related to the remittance of foreign earnings or investments in foreign countries with favorable tax rates and settlements of federal, state and foreign tax audits.
- Compliance with the regulations and certification requirements of domestic and foreign authorities may delay or prevent new product introductions or affect the production and marketing of existing products.
- Unexpected negative performance of the insurance investment portfolio could negatively impact the earnings of the Company. The investment portfolio could be affected by general economic conditions, changes in interest rates, default on debt instruments and other factors.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
The Company held its Annual Meeting of shareholders on April 10, 2001. Matters voted upon by proxy were: The election of three directors nominated for three year terms expiring in 2004 and the ratification of the Board of Director's appointment of PricewaterhouseCoopers LLP as independent accountants of the Company.
Voted
For Withheld
----- --------
Election of directors in Class II
for terms expiring in 2004:
Lawrence R. Burtschy 51,611,724 2,486,220
Daniel A. Hillenbrand 51,361,774 2,736,169
Ray J. Hillenbrand 51,846,288 2,251,655
|
Messrs. Peter F. Coffaro, Edward S. Davis, Leonard Granoff and W August Hillenbrand will continue to serve as Class I directors and Messrs. John C. Hancock, George M. Hillenbrand II, John A. Hillenbrand II and Frederick W. Rockwood will continue to serve as Class III directors.
Voted Voted
For Against Abstained
----- ------- ---------
Proposal to ratify
PricewaterhouseCoopers LLP
as the Company's
independent accountants 53,686,822 371,658 39,466
|
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
Exhibit 3.2 Form of Amended Bylaws of the Registrant
Exhibit 10.1 Hillenbrand Industries, Inc. Senior
Executive Compensation Program as
amended
Exhibit 10.7 Form of Change in Control Agreement
between Hillenbrand Industries, Inc. and
Frederick W. Rockwood
Exhibit 10.8 Form of Change in Control Agreement
between Hillenbrand Industries, Inc. and
certain executive officers
Exhibit 10.9 Form of Indemnity Agreement between
Hillenbrand Industries, Inc. and certain
executive officers
Exhibit 10.10 Hillenbrand Industries, Inc. Board of
Directors' Deferred Compensation Plan
Exhibit 10.11 Hillenbrand Industries, Inc. Director
Phantom Stock Plan and form of award
B. Reports on Form 8-K
|
There were no reports filed on Form 8-K during the second quarter ended June 2, 2001.
SIGNATURES
Pursuant to the requirements 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.
DATE: July 3, 2001 BY: /s/ Scott K. Sorensen
-------------------------
Scott K. Sorensen
Vice President and
Chief Financial Officer
DATE: July 3, 2001 BY: /s/ James D. Van De Velde
-------------------------
James D. Van De Velde
Vice President and Controller
|
HILLENBRAND INDUSTRIES, INC.
INDEX TO EXHIBITS
3.2 Form of Amended Bylaws of the Registrant
10.1 Hillenbrand Industries, Inc. Senior
Executive Compensation Program as
amended
10.7 Form of Change in Control Agreement
between Hillenbrand Industries, Inc. and
Frederick W. Rockwood
10.8 Form of Change in Control Agreement
between Hillenbrand Industries, Inc. and
certain executive officers
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
10.11 Hillenbrand Industries, Inc. Director
Phantom Stock Plan and form of award
|
EXHIBIT 3.2
CODE OF BY-LAWS
OF
HILLENBRAND INDUSTRIES, INC.
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 General Corporation Act, 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 Amended 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. Executive Committee. The term "Executive Committee," as used in this Code of By-laws, shall mean and refer to the Executive Committee of the Corporation.
Section 1.06. 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 1.07. Act. The term "Act," as used in this Code of By-laws, shall mean and refer to The Indiana General Corporation Act, as now in force or hereafter amended.
ARTICLE 2
Shares of The Corporation
Section 2.01. Form of Certificates. The share of the Corporation shall be represented by certificates which shall be 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:
Harris Trust and Savings Bank 111 West Monroe Street Chicago, Illinois 60690
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 month of April of each year for the purposes of electing individuals to each position 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. 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 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 deposited with a telegraph company, transmission charges prepaid, 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 shall be taken pursuant to the affirmative vote of a majority of the duly authorized, issued and outstanding shares of Common Stock (determined as of the record date for the meeting) present at the meeting, in person or by proxy, 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 the greater number.
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. 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 desire 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. 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; and (v) the consent in writing of each nominee to serve as a director of the Corporation if so elected.
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 eleven (11) members.
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 to 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 classified with respect to the terms with respect to which they shall severally serve as such by dividing them into three classes, each such class constituted as follows:
Class One - Four Members Class Two - Three Members Class Three - Four Members |
At the annual meeting of the Shareholders to be held in 1979, the members of the Board of Directors in Class One shall be elected for a three year term expiring at the close of the Annual Meeting of the Shareholders to be held in 1982. The members of the Board of Directors in Class Two shall continue to serve a two year term expiring at the close of the annual meeting of the Shareholders to be held in 1980. The members of the Board of Directors in Class Three shall continue to serve a three year term expiring at the close of the annual meeting of the Shareholders held in 1981. At the annual meetings of the Shareholders held after 1978, the successors of the class of members of the Board of Directors whose terms shall expire at the conclusion of that annual meeting shall be elected to serve as such for a term of three years, so that the terms of members of the Board of Directors of no more than one class shall expire at the conclusion of any annual meeting. 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 member of the Board of Directors may be removed at any time, with or without cause, by the Shareholders at a special meeting called for that purpose.
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 position upon the Executive Committee, 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 position on the Executive Committee, 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 deposited with a telegraph company, transmission charges prepaid, 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.
ARTICLE 5
The Executive Committee
Section 5.01. Establishment of Executive Committee. During the intervals between the meetings of the Board of Directors, the Executive Committee shall have and may exercise all powers of the Board of Directors except for the following powers:
(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.
Section 5.02. Number of Members. The Executive Committee shall consist of seven (7) members.
Section 5.03. Qualifications of Members. Each member of the Executive Committee shall be a duly elected and qualified member of the Board of Directors.
Section 5.04. Election of Members. The members of the Executive Committee shall be elected by the Board of Directors. Each member of the Executive Committee shall serve as such for a term coextensive with his term as a member of the Board of Directors, except as hereinafter provided. Each member of the Executive Committee shall be deemed to have qualified as such upon his election.
Section 5.05. Removal of Members. Any members of the Executive Committee may be removed at any time, with or without cause, by the Board of Directors.
Section 5.06. Resignations of Members. Any member of the Executive Committee 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, 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 5.07. Filling of Vacancies. Any vacancies in the membership of the Executive Committee because of death, adjudication of incompetency, resignation or removal of a member of the Executive Committee, or caused by an increase in the number of members of the Executive Committee, shall be filled for the unexpired portion of the term of such position by the Board of Directors.
Section 5.08. Meetings. The Executive Committee may hold meetings at any time for the purpose of acting upon such questions and matters as may properly come before such meeting. A meeting of the Executive Committee may be called by any member of the Executive Committee.
Section 5.09. Place of Meetings. Meetings of the Executive Committee may be held at the Principal Office of the Corporation or at any other place, within or without the State of Indiana.
Section 5.10. Procedure for Calling Meetings. Any meeting of the Executive Committee shall be deemed duly to have been called by a member of the Executive Committee upon delivery to the Secretary, not less than three (3) days before the date of the meeting, of a written instrument, executed by the member of the Executive Committee calling the meeting, setting forth the time, date and place of such meeting. The written instrument may also contain, at the option of the member of the Executive Committee calling the meeting, a concise statement of the questions or matters proposed to be submitted to vote, or discussed, at the meeting. Any meeting of the Executive Committee with respect to which all members of the Executive Committee are either present or duly waive written notice, either before or after the meeting, shall also be deemed duly to have been called.
Section 5.11. Notice of Meetings. Notice of any meeting of the Executive Committee shall be deemed duly to have been given if, at least three (3) 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 at the meeting is delivered by the Secretary to each of the members of the Executive Committee. The written notice shall be deemed duly to have been delivered by the Secretary to a member of the Executive Committee at the date upon which:
(1) it is delivered personally to the member of the Executive Committee;
(2) it is deposited in the United States First Class Mail, postage prepaid, addressed to the last known address of the member of the Executive Committee; or
(3) it is deposited with a telegraph company, transmission charges prepaid, addressed to the last known address of the member of the Executive Committee.
Written notice of the meeting shall be deemed duly to have been waived by any member of the Executive Committee present at the meeting. Written notice of the meeting may be waived by any member of the Executive Committee not present at the meeting, either before or after the meeting, by written instrument, executed by the member of the Executive Committee, delivered to the Secretary.
Section 5.12. Quorum at Meetings. At any meeting of the Executive Committee the presence of a majority of the then duly elected and qualified members of the Executive Committee shall constitute a quorum.
Section 5.13. Voting at Meetings. Any action required or permitted to be taken at any meeting of the Executive Committee with respect to any question or matter shall be taken pursuant to a vote of a majority of the then duly elected and qualified members of the Executive Committee 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 vote of that greater number.
Section 5.14. Action Without Meeting. Any action required or permitted to be taken at any meeting of the Executive Committee 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 duly elected and qualified members of the Executive Committee then occupying office and the written consent is filed with the minutes of the proceedings of the Executive 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, the Board of Directors and the Executive Committee. 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 Executive Committee, 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 Executive Committee, 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 Executive Committee, 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 Executive Committee, 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 Executive Committee, 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 and the Executive Committee. 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 or the Executive Committee and such further powers as are granted by this Code of By-laws or are otherwise granted by the Board of Directors or the Executive Committee.
ARTICLE 7
Miscellaneous Matters
Section 7.01. Fiscal Year. The fiscal year of the Corporation shall end at midnight on the Saturday closest to November 30th of each calendar year, and the succeeding fiscal year shall begin on the Sunday immediately following.
Section 7.02. 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 the Executive Committee, 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 of the Executive Committee 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 7.03. 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 7.02 of this Code of By-laws, may, unless otherwise directed by the Board of Directors of the Executive Committee, 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 7.04. 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 the Executive Committee, 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 7.05. 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 7.06. 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 7.07. 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.
SENIOR EXECUTIVE COMPENSATION PROGRAM
ARTICLE I
PURPOSE - The purpose of this Program is to reward the creation of long term shareholder value by providing incentive compensation, perquisite and other compensation to a limited number of senior, key executives of Hillenbrand Industries, Inc., and its subsidiaries, who contribute by their imagination, resourcefulness, skills and insight to the business objectives of the Corporation.
ARTICLE II
DEFINITIONS:
1. "Program" means the Senior Executive Compensation Program which consists of
the following components:
- Short-term Incentive Compensation
- Performance Share Compensation
- Perquisite Compensation
- Deferred Compensation
- Supplemental Pension
- Restricted Stock
2. "Corporation" means Hillenbrand Industries, Inc., an Indiana corporation, and its subsidiaries.
3. "Corporate" means Hillenbrand Industries, Inc., as a corporate holding company and does not include subsidiaries.
4. "Subsidiary" means an operating company unit of which a majority equity interest is owned directly or indirectly by the Corporation.
5. "Board of Directors" or "Board" means the Board of Directors of Hillenbrand Industries, Inc.
6. "Committee" means the Performance Compensation Committee appointed to administer the Program. "Sub-Committee" means the sub-committee of the Performance Compensation Committee appointed to establish and administer the Performance Base and Target (performance goals) for Incentive Compensation and shareholder value goals (performance goals) for Performance Share Compensation.
7. "Office of the President" means the Office of the President of Corporate.
8. "Participant" means an employee selected for participation in the Program pursuant to Article IV.
9. "Incentive Compensation" means the short term Incentive Compensation as provided in Article V.
10. "Performance Share Compensation" means the long term Performance Share Compensation as provided in Article VI.
11. "Perquisite Compensation" means the Perquisite Compensation as provided in Article VII.
12. "Deferred Compensation" means the Deferred Compensation arrangement as provided in Article VIII.
13. "Supplemental Pension" means Supplemental Pension as provided in Article IX.
14. "Base Salary" means the annual calendar earnings of a Participant including salary as reported for federal income tax purposes, but excluding all bonus payments of any kind, commissions, incentive compensation, long term performance compensation, perquisites and other forms of additional compensation.
15. "Disability" means a physical or mental disability by reason of which a Participant is determined by the Office of the President or its delegate, to be eligible (except for the waiting period) for permanent disability benefits under Title II of the Federal Social Security Act.
16. "Restricted Stock" means the Restricted Stock arrangement as provided in Article X.
17. A "Change in Control" shall be deemed to occur on:
(i) the date that both
(A) any person, corporation, partnership, syndicate, trust, estate or other group acting with a view to the acquisition, holding or disposition of securities of Corporate, 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 Corporate representing 35% or more of the voting power of all Corporate securities 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 Corporate securities by Corporate or any of its subsidiaries or any employee benefit plan of Corporate or any of its subsidiaries, (y) the acquisition of Corporate securities directly from Corporate, or (z) the acquisition of Corporate securities 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 Corporate with another corporation unless
(A) the shareholders of Corporate, 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 Corporate;
(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 Corporate's 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 Corporate; or
(v) the date of approval by the shareholders of Corporate of a plan of complete liquidation of Corporate.
Notwithstanding the foregoing, any transaction referred to in this Paragraph 17 that occurs after May 8, 2002 shall not be deemed a "Change in Control."
18. "Cause" shall mean
(i) embezzlement or material misappropriation of funds or property of the Company, or
(ii) the willful engaging by Participant in conduct constituting a felony or gross misconduct which is materially and demonstrably injurious to the Corporation.
For purposes of this provision, no act, on the part of Participant, shall be considered "willful" unless it is done, or omitted to be done, by Participant in bad faith or without reasonable belief that Participant's action or omission was in the best interests of the Corporation.
ARTICLE III
ADMINISTRATION - Full power and authority to construe, interpret, and administer the Program, with the exception of establishing and administering performance goals, is vested in the Committee. The Sub-Committee has full power to establish, administer and certify performance goals related to Incentive Compensation and Performance Share Compensation. Their decisions are final, conclusive and binding upon all parties, including the Corporation, the shareholders thereof, and the Participants. The Committee and the Sub-Committee may rely upon recommendations of the Office of the President or the Chief Executive Officer in approving financial and non-financial goals recommended to it.
ARTICLE IV
PARTICIPATION - Selection of employees for participation for each of the components of compensation contemplated by the Program are set forth in Articles V, VI, VII, VIII, IX and X.
ARTICLE V
INCENTIVE COMPENSATION - The purpose of Incentive Compensation is to provide financial recognition to Participants, the amount of which is determined by the attainment of annual financial and/or non-financial goals.
1. PARTICIPANTS - Participation in Incentive Compensation by members of the Office of the President and Corporate Vice Presidents shall be determined by the Committee. Other Participants in Incentive Compensation shall be determined by the Office of the President, or the Committee, pursuant to recommendation from the Chief Executive Officer of Corporate, or if an employee of a Subsidiary, by the Chief Executive Officer thereof.
2. ESTABLISHMENT OF PERFORMANCE BASE AND TARGET - A Performance Base and Target for members of the Office of the President and Corporate Vice Presidents as a group shall be recommended by the Chief Executive Officer of Corporate and approved by the Sub-Committee. The Performance Base and Target for each Participant who is a Chief Executive Officer of a Subsidiary shall be approved by the Office of the President. The Performance Base and Target for other Corporate Participants and other Subsidiary Participants shall be established and approved by the Office of the President and the Chief Executive Officer of each Subsidiary, respectively. The Performance Base and Target shall be established annually for Corporate and each Subsidiary and will be communicated to each Participant. The Performance Base and Target for members of the Office of the President and Corporate Vice Presidents shall be directly related to the net income of the Corporation or as otherwise determined by the Sub-Committee. The Performance Base and Target for other Participants may include both financial and non-financial measures and may reflect accomplishment of tactical and strategic plans of each Subsidiary.
3. COMPUTATION OF INCENTIVE COMPENSATION - Incentive Compensation opportunity is established as follows:
CLASS OF PARTICIPANT INCENTIVE COMPENSATION OPPORTUNITIES Office of the President 60% of Base Salary Chief Executive Officer of Subsidiary 50% of Base Salary Corporate Chief Financial Officer 50% of Base Salary Corporate or Subsidiary Senior 40% of Base Salary Executive Other Executive 30% of Base Salary |
Attainment of the Performance Base shall result in Incentive Compensation of a predetermined percentage from 0% to 50% of the above incentive compensation opportunity. If the Performance Target is met or exceeded, Incentive Compensation of a predetermined percentage from 150% to 300% of the above incentive compensation opportunity will be paid. Achievement of results between Performance Base and Target will generate incentive compensation calculated according to a predetermined pro-rata method. The various determinations are recommended by the Office of the President and approved by the Sub-Committee.
4. PAYMENT OF INCENTIVE COMPENSATION - At the end of each fiscal year, Incentive Compensation for each Participant shall be calculated pursuant to paragraph 3 above. Attainment of financial and non-financial goals for those Participants shall be considered in calculation of Incentive Compensation pertaining thereto. In no event shall Incentive Compensation be more than the value established pursuant to paragraph 3 above. Incentive Compensation shall be due and payable in cash after forty (40) days but within seventy-five (75) days after the end of the fiscal year; except that all or a portion thereof may be deferred pursuant to the Deferred Compensation arrangement set forth in Article VIII. The Sub-Committee will certify in writing that performance goals were attained prior to payout.
5. TERMINATION - Subject to paragraph 6, termination of a Participant's employment prior to the end of the fiscal year for reasons other than death, Disability or normal or early retirement shall terminate any non-deferred Incentive Compensation. Termination because of death, Disability or normal or early retirement shall result in a pro-ration of Incentive Compensation based on the number of months employed out of the fiscal year of termination.
6. CHANGE IN CONTROL - Upon a Change in Control, a Participant's unpaid Incentive Compensation for the fiscal year ending prior to the change in Control shall in all events be paid in accordance with paragraphs 3 and 4. In addition, a Participant's Incentive Compensation for the fiscal year during which the Change in Control occurred shall in no event be less than the amount calculated pursuant to paragraph 3 above as if the company performance targets (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 fiscal 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 paragraph 4 above, provided, however, and notwithstanding paragraph 5 above, that in the case of a Participant whose employment is terminated prior to payout (for any reason other than on account of termination by the Company for Cause) the Incentive Compensation shall be paid out within 30 days of such termination. In the event of termination for Cause, the Incentive Compensation shall be forfeited.
ARTICLE VI
PERFORMANCE SHARE COMPENSATION - The purpose of Performance Share Compensation is to reward Participants for the creation of value for the shareholders of Corporate over continuing three year periods.
1. PARTICIPANTS - Members of the Office of the President shall be Participants in Performance Share Compensation as approved by the Committee. Other Participants in Performance Share Compensation shall be determined by the Committee, pursuant to the recommendation of the Chief Executive Officer of Corporate, or if an employee of a Subsidiary other than the Chief Executive Officer thereof, by the Chief Executive Officer thereof.
2. DETERMINATION OF TENTATIVE AWARD - On the first day of each fiscal year tentative Performance Share Compensation (Tentative Award) shall be determined for each Participant. The Tentative Award shall be the quotient obtained by dividing (a) the product of the Participant's Base Salary and the salary factor set forth in the following table by (b) the Average Annual Share Price.
CLASS OF PARTICIPANT SALARY FACTOR Office of the President .50 Subsidiary Chief Executive Officer .45 Corporate or Subsidiary .30 Senior Executive Other Executive .20 |
The Average Annual Share Price shall be determined by averaging the closing price of the common stock of Corporate on the last trading date of each fiscal quarter of the preceding fiscal year. The Tentative Award thus determined shall be expressed in terms of a number of shares of common stock of Corporate rounded to the next highest whole share.
3. PERFORMANCE SHARE PERIOD - A performance share period ("Period") shall
begin on the first day of each fiscal year and shall include the next three
(3) consecutive fiscal years.
4. DETERMINATION OF PERFORMANCE SHARE COMPENSATION - Shareholder value created by the Corporation shall be the basis for determining payout of Performance Share Compensation for Corporate Participants. At the beginning of each Period the Sub-Committee, based on recommendations from the Office of the President, shall approve goals, including a base goal, a target goal and a 200% achievement goal for the creation of shareholder value to be achieved during the Period for the Corporation. Such goals shall be communicated to the Corporate Participants.
Shareholder value created by each Subsidiary or other goals shall be the basis for determining Performance Share Compensation for Subsidiary Participants. At the beginning of each Period the Sub-Committee, based on recommendations from the Office of the President, shall approve goals, including a base goal, a target goal and a 200% achievement goal for the shareholder value or other goals to be achieved during the Period for such Subsidiary. Such goals shall be communicated to the Subsidiary Participants.
5. CALCULATION OF PERFORMANCE SHARE COMPENSATION - At the end of each Period, Performance Share Compensation shall be calculated for each Participant. If the shareholder value created equals or is greater than the base goal, Performance Share Compensation shall be calculated by multiplying the Tentative Award by a fraction, the numerator of which is the actual shareholder value created for the Corporation less the base goal and the denominator of which is the target goal less the base goal. If the actual shareholder value created is greater than the target goal, but less than the 200% achievement goal, Performance Share Compensation shall be calculated by multiplying the Tentative Award by the sum of: (a) one (1), and (b) the product obtained by multiplying one (1) times a fraction the numerator of which is the actual shareholder value created less the target goal and the denominator of which is the 200% achievement goal less the target goal. If the actual shareholder value equals or exceeds the 200% achievement goal, the Award shall be calculated by multiplying the Tentative Award by two (2).
6. PAYMENT OF THE PERFORMANCE SHARE COMPENSATION - Shares of common stock of Corporate representing Performance Share Compensation shall be delivered to the Participant within a reasonable time after Performance Share Compensation is determined but not sooner than forty (40) days after the end of the Period and not later than seventy-five (75) days thereafter; except that all or a portion thereof may be deferred pursuant to the Deferred Compensation arrangement set forth in Article VIII. The Sub-Committee will certify in writing that performance goals were attained prior to payment.
7. TERMINATION - Subject to paragraph 8, termination of a Participant's employment for reasons other than death, Disability or normal or early retirement shall terminate any non-deferred Performance Share Compensation. Termination of a Participant's employment by reason of death, Disability or normal or early retirement shall result in a reduction of Performance Share Compensation by multiplying Performance Share Compensation by a fraction the numerator of which is the number of fiscal year full months occurring between the establishment of a Tentative Award and such termination, and the denominator of which is 36.
8. CHANGE IN CONTROL - Upon a Change in Control, a Participant's unpaid Performance Share Compensation for all performance share periods ending prior to the Change in Control shall in all events be paid in accordance with paragraphs 5 and 6. In addition, a Participant's Performance Share Compensation for all performance share periods in progress at the date of such Change in Control shall in no event be less than the amount calculated pursuant to paragraph 5 as if the target goal for each such performance share period was achieved 100% and then pro-rated utilizing a fraction, the numerator of which is the number of months from the establishment of the Tentative Award up to and including the month during which the Change in Control occurred, and the denominator of which is 36. Following a Change in Control, such award shall be paid in shares of common stock of Corporate in accordance with paragraph 6 above, provided, however, that if the Change in Control involves a merger, acquisition or other corporate restructuring where Corporate is not the surviving entity (or survives as a wholly-owned subsidiary of another entity), then, in lieu of such shares of common stock of Corporate, Participant shall be entitled to receive the consideration he would have received in such transaction in exchange for such shares of common stock; and provided, further, that Corporate shall in any case have the right to substitute cash for such shares of common stock of Corporate or merger consideration in an amount equal to the fair market value of such shares or merger consideration as determined by Corporate. Following a Change in Control the Performance Share Compensation under the Program shall be paid at the time specified in paragraph 6 above, provided, however, and notwithstanding paragraph 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 by the Company for Cause) the Performance Compensation shall be paid out within 30 days of such termination. In the event of termination for Cause, the Performance Compensation shall be forfeited.
ARTICLE VII
PERQUISITE COMPENSATION - The purpose of Perquisite Compensation is to provide Participants with certain benefits to aid such Participants in carrying out their duties, to help provide for their well being, and to create the potential for added long term financial security.
1. PARTICIPANTS - Office of the President, Chief Executive Officer of Subsidiaries and Corporate and Subsidiary Senior Executive shall be eligible for Perquisite Compensation.
2. PERQUISITE COMPENSATION - Perquisite Compensation shall not exceed ten percent (10%) of the Base Salary of a Participant subject to such other limits as may be imposed on Participants who constitute the Office of the President and Corporate Vice Presidents by the Committee or on other Participants by the Chief Executive Officer. A variety of perquisite options shall be determined by the Chief Executive Officer from time to time and communicated to the Participants, except that any perquisite option involving the purchase of common stock of Corporate is subject to the approval of the Committee.
3. CARRYOVERS - Perquisite Compensation is available during the fiscal year during which it is earned. Balances from one fiscal year shall be carried forward to the succeeding fiscal year only. Amounts carried forward to the succeeding fiscal year and not spent shall be forfeited.
ARTICLE VIII
DEFERRED COMPENSATION - The purpose of Deferred Compensation is to provide voluntary and mandatory deferral of portions of compensation paid to a Participant by the Corporation.
1. PARTICIPANTS - Participants in this Deferred Compensation program shall be determined by the Committee, pursuant to the recommendation of the Chief Executive Officer of Corporate, or if an employee of a Subsidiary other than the Chief Executive Officer thereof, by the Chief Executive Officer thereof. Participants deferring compensation shall execute a Deferred Compensation Agreement (the "Agreement") with Corporate outlining their various rights, duties and obligations thereunder.
2. ELECTION TO DEFER COMPENSATION - DEFERRAL PERIOD - A Participant may elect to defer all or any portion of Base Salary, Incentive Compensation, Performance Share Compensation and Perquisite Compensation. A Participant's written election to defer any compensation must be made before the beginning of the period of service, ordinarily a fiscal year, during which such compensation would otherwise be paid. The election must state the duration of the deferral period, and shall be irrevocable.
3. DEFERRALS OF BASE SALARY, INCENTIVE COMPENSATION AND PERQUISITE COMPENSATION - (a) When earned, amounts deferred from a Participant's Base Salary, Incentive Compensation and Perquisite Compensation shall be credited, but not paid, to an account in the name of the Participant and shall accrue interest credited monthly at the end of each of the Corporation's fiscal months at a rate which is equal to the monthly prime interest rate (determined as of the first day of each month) charged by the Corporation's principal bank, or, at the election of the Committee, Participant's selected by the Committee may be credited at such other rate or rates as may be determined by the Committee. At the end of the deferral period payment shall be made in cash. (b) In the alternative, a Participant may elect that Incentive Compensation amounts deferred, when earned shall be credited, but not paid, to an account in the name of the Participant which shall be assumed to be invested in the common stock of Corporate, at the then current market price. Dividends, stock dividends, stock splits and other rights inuring to the common stock of Corporate which would be normally payable thereon shall be assumed to be reinvested in the common stock of Corporate at the market value on the date of assumed payment. Such election shall be made prior to the period during which the amount is earned and, once made, shall be irrevocable. At the end of the deferral period payment shall be made in shares of common stock of Corporate.
4. DEFERRALS OF PERFORMANCE SHARE COMPENSATION - (a) When due and payable,
amounts deferred from Performance Share Compensation will be credited, but
not paid, to an account in the name of the Participant which shall be
assumed to be invested in the common stock of Corporate. Dividends, stock
dividends, stock splits and other rights inuring to the common stock of
Corporate, which would be normally payable thereon shall be assumed to be
reinvested in the common stock of Corporate at the market value on the date
of the assumed payment. At the end of the deferral period payment shall be
made in shares of common stock of Corporate. (b) All Performance Share
Compensation earned above the 100% target goal will be deferred without
election by the Participant until the Participant's death or the earlier of
(i) reaching age 62 or (ii) termination of employment. Mandatory deferred
shares will be subject to forfeiture in the event the Participant
voluntarily terminates his employment (except by reason of retirement after
reaching age 62) during the three years following the end of a Period
according to the following schedule: (i) termination during the first year
following the end of a Period will result in forfeiture of all of the
mandatory deferred shares relating to that Period; (ii) termination during
the second year following the end of a Period will result in forfeiture of
two-thirds of the mandatory deferred shares relating to that Period; and
(iii) termination during the third year following the end of a Period will
result in forfeiture of one-third of the mandatory deferred shares relating
to that Period. Notwithstanding the foregoing, upon a Change in Control,
mandatory deferred shares shall immediately vest and no longer be subject
to forfeiture.
5. FINANCIAL HARDSHIP - A withdrawal of Deferred Compensation credited to a Participant's account prior to the termination of the deferral period shall be permitted in the event the Participant experiences serious financial hardship which is beyond the Participant's control and which would cause the Participant severe hardship if such withdrawal were not permitted. Serious financial hardship may include a disability or unexpected and unreimbursed major expenses resulting from illness or accident or impending bankruptcy. Any Participant desiring such withdrawal by reason of serious financial hardship must apply to the Committee and demonstrate that the circumstances being experienced were not under the Participant's control and constitute a real emergency which is likely to cause great financial hardship. The Committee shall have the authority to require such medical or other evidence as it may need to determine the necessity for Participant's withdrawal request.
If such application for withdrawal is permitted, the amount of such withdrawal shall be limited to an amount of the Participant's account which would have been payable if the Participant's employment with the Corporation was terminated. The allowed amount of withdrawal shall be payable in lump sum or common stock certificate promptly after notice to the Participant of approval by the Committee. If a Participant makes a withdrawal, the amount of the Participant's account under the Program 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.
6. RABBI TRUST - Prior to the occurrence of a Change in Control, the Corporation shall establish a rabbi trust and shall fully fund in such rabbi trust all obligations of the Corporation under this Article VIII accrued through the date of the Change in Control.
ARTICLE IX
SUPPLEMENTAL PENSION - The purpose of Supplemental Pension is to provide and supplement the normal retirement benefit which may be reduced or limited due to the deferral of compensation or statutory limitation.
1. PARTICIPANTS - Office of the President, Chief Executive Officer of Subsidiary, and Corporate or Subsidiary Senior Executive shall be eligible for supplemental pension benefits, and the Committee shall determine whether such officers will be Participants in this Supplemental Pension program. Other Participants in this Supplemental Pension program shall be determined by the Committee, pursuant to the recommendation of the Chief Executive Officer of Corporate.
2. SUPPLEMENTAL PENSION BENEFITS - In the event a Participant's pension benefit under any qualified pension plan of the Corporation in effect at the time of the Participant's retirement (or other event requiring the payment of a benefit thereunder) shall be less than said benefit would have been as a result of the deferral of any compensation, then the Corporation will pay the difference to the Participant at such time as the amount would have been paid under the qualified pension plan. As and for an additional supplemental pension benefit, the Corporation shall pay to the Participant any difference between the Participant's pension benefits actually payable under the pension plan and the amount that would have been payable but for any statutory limitation incorporated into the pension plan language as a requirement of law. Such supplemental pension benefit will be paid by the Corporation at such time as the amount would have been paid under the qualified pension plan but for the limitation.
3. RABBI TRUST - Prior to the occurrence of a Change in Control, the Corporation shall establish a rabbi trust and shall fully fund (as determined by the Corporation's actuary) in such rabbi trust all obligations of the Corporation under this Article IX accrued through the date of the Change in Control.
ARTICLE X
RESTRICTED STOCK - The purpose of Restricted Stock is to promote the profitability and growth of the Corporation by offering an incentive payable in shares of common stock of Corporate to Participants who contribute to such profitability and growth. The Committee has heretofore awarded Restricted Stock pursuant to Stock Award Agreements dated October 5, 1999, January 17, 2001, April 10, 2001, and May 8, 2001 ("the Outstanding Restricted Stock Awards"). The provisions of paragraph 5 below shall also be applicable to the Outstanding Restricted Stock Awards.
1. PARTICIPANTS - Participation in Restricted Stock shall be determined by the Committee, pursuant to the recommendation of the Chief Executive Officer of Corporate, or if an employee of a Subsidiary other than the Chief Executive Officer thereof, by the Chief Executive Officer thereof.
2. AMOUNT OF AWARD - A Restricted Stock award shall entitle the Participant to receive a number of shares of common stock of Corporate as determined by the Committee subject to completion of a period of service and satisfaction of such other terms and conditions as may be specified by the Committee, all as set forth in a Restricted Stock award agreement entered into by Corporate with the Participant.
3. RIGHT TO DEFER PAYMENT OF AWARD - The Committee may permit a Participant to defer payment of a Restricted Stock award on such terms and conditions as the Committee may specify in the Restricted Stock award agreement.
4. SOURCE OF BENEFIT PAYMENTS - Payment of Restricted Stock shall be made solely from the general assets of Corporate. Until the actual delivery of the shares of Corporate common stock, the Participant shall not have any interest in any specific assets of the Corporation, including shares of Corporate common stock, under the terms of the award.
5. CHANGE IN CONTROL - Upon a Change in Control, (i) each Restricted Stock
award shall immediately vest and no longer be subject to forfeiture, and
(ii) each such award shall be paid in shares of Corporate common stock
within 30 days following the Change in Control; provided, however, that if
the Change in Control involves a merger, acquisition or other corporate
restructuring where Corporate is not the surviving entity (or survives as a
wholly-owned subsidiary of another entity), then, in lieu of such shares of
Corporate common stock, each Participant shall be entitled to receive the
consideration he would have received in such transaction in exchange for
such shares of Corporate common stock; and provided, further, that the
Committee shall in any case have the right to substitute cash for such
shares of Corporate common stock or merger consideration in an amount equal
to the fair market value of such shares or merger consideration as
determined by the Committee.
ARTICLE XI
FINALITY OF DETERMINATION - Each determination made by the Committee and the Office of the President shall be final, binding and conclusive for all purposes and upon all persons and the Committee may rely conclusively on the determinations made by the Corporation's independent public accountants or by the Corporation's employees with respect to action of the Committee.
ARTICLE XII
LIMITATIONS - No employee of the Corporation or any other persons shall have any claim or right (legal, equitable or other) to be granted any award hereunder, and no director, officer or employee of the Corporation, or any other person, shall have the authority to enter into any agreement with any person for the making or payment of any award or to make any representation or warranty with respect thereto.
1. No Participant for whose benefit compensation has been deferred shall have any right in compensation other than to receive compensation at the time and in the form elected by the Participant subject to the fulfillment of the conditions described herein, which right may not be assigned or transferred except by will or the laws of the descent and distribution.
2. Neither the action of the Corporation in establishing this Program nor any action taken by the Corporation, the Committee, the Board of Directors, or the Office of the President, nor any provision of this Program, shall be construed as giving to any Participant or employee of the Corporation the right to be retained in the employ of the Corporation.
ARTICLE XIII
AMENDMENTS, SUSPENSION OR TERMINATION - The Committee may discontinue this Program in whole or in part at any time and may from time to time amend or revise the terms as permitted by applicable statute; provided, however, that no such discontinuance, amendment, or revision shall affect adversely any right or obligation with respect to any award theretofor made and provided further that any amendment increasing the number of shares of common stock of Corporate available to the Program shall be subject to the approval of the Board of Directors. No amendment shall require shareholder approval unless such approval is otherwise required by law.
ARTICLE XIV
PARACHUTE PAYMENT LIMITATION - Notwithstanding anything in this Program to the contrary (unless the Participant is a party to a Change in Control agreement with Corporate which provides otherwise), in the event it shall be determined that any payment or distribution by the Corporation to or for the benefit of the Participant (whether paid or payable or distributed or distributable under the Program or otherwise, including any acceleration of vesting or payment) would subject the Participant to excise tax liability under Section 4999 of the Internal Revenue Code, then the aggregate present value of the amounts payable to or for the benefit of the Participant under the Program shall be reduced to an amount expressed in present value which maximizes the aggregate present value of benefits under the Program without causing any payment under the Program to subject the Participant to excise tax liability under Section 4999.
ARTICLE XV
RESERVATION OF SHARES - As of January 18, 2000, an aggregate of 2,500,000 shares of common stock of Corporate are authorized and remain reserved for issuance under this Program. The number of shares of common stock of Corporate authorized for issuance under this Program shall be subject to adjustment by the Committee, in its sole discretion, to reflect any stock split, stock dividend, recapitalization, merger, consolidation, reorganization, combination or exchange of shares or other similar event.
ARTICLE XVI
EFFECTIVE DATE - This Program was approved by the Board of Directors on October 4, 1977, became effective December 1, 1977 for the fiscal year beginning on the date and, as amended and restated, was approved by the Board of Directors on January 22, 1991, effective April 1, 1991, and approved April 5, 1994, effective December 4, 1994 respectively, and amended by the Committee on January 18, 1999, and by the Board of Directors on January 18, 2000, and by the Board of Directors on May 8, 2001.
ARTICLE XVII
GOVERNING LAW - This Program shall be governed and construed in accordance with the laws of the State of Indiana.
EXHIBIT 10.7
CHANGE IN CONTROL AGREEMENT
This Change in Control Agreement (the "Agreement") is made and entered into as of April 10, 2001, by and between Hillenbrand Industries, Inc., an Indiana corporation (the "Company"), and __________________ (the "Executive").
WHEREAS, the Company considers it essential to the best interests of its shareholders to foster continuous employment by the Company and its subsidiaries of their key management personnel;
WHEREAS, the Compensation Committee (the "Committee") of the Board of Directors (the "Board") of the Company has recommended, and the Board has approved, that the Company enter into Change in Control Agreements with key executives of the Company and its subsidiaries who are from time to time designated by the Management of the Company and approved by the Committee;
WHEREAS, the Committee and the Board believe that Executive has made valuable contributions to the productivity and profitability of the Company and consider it essential to the best interests of the Company and its shareholders that Executive be encouraged to remain with the Company; and
WHEREAS, the Board believes it is in the best interests of the Company and its shareholders that Executive continue in employment with the Company in the event of any proposed Change in Control (as defined below) and be in a position to provide assessment and advice to the Board regarding any proposed Change in Control without concern that Executive might be unduly distracted by the personal uncertainties and risks created by any proposed Change in Control:
NOW, THEREFORE, the Company and Executive agree as follows:
1. TERMINATION FOLLOWING A CHANGE IN CONTROL. The Company will provide or cause to be provided to Executive the rights and benefits described in Section 2 hereof in the event that Executive's employment with the Company and its subsidiaries is terminated:
(a) by the Company for any reason other than on account of his death, permanent disability, retirement or for Cause at any time prior to the third anniversary of a Change in Control;
(b) by Executive for Good Reason at any time prior to the third anniversary of a Change in Control; or
(c) by Executive for any reason during the 30-day period immediately following the first anniversary of the Change in Control.
Anything in this Agreement to the contrary notwithstanding, if a Change in Control occurs and if the Executive's employment with the Company is terminated by the Company, without Cause, prior to the date on which the Change in Control occurs, and if it is reasonably demonstrated by Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control or (ii) otherwise arose in connection with or anticipation of a Change in Control which subsequently occurs within 3 months of such termination, then for purposes of this Agreement (including Section 3 hereof) a Change in Control shall be deemed to have occurred on the day immediately prior to such termination of employment and all references in Section 2 to payments within a specified period following "Termination" shall instead be references to the specified period following the Change in Control.
The rights and benefits described in Section 2 and 3 hereof shall be in lieu of any severance payments otherwise payable to Executive under any employment agreement or severance plan or program of the Company or any of its subsidiaries but shall not otherwise affect Executive's rights to compensation or benefits under the Company's compensation and benefit programs except to the extent expressly provided herein.
2. RIGHTS AND BENEFITS UPON TERMINATION.
In the event of the termination of Executive's employment under any of the circumstances set forth in Section 1 hereof ("Termination"), the Company shall provide or cause to be provided to Executive the following rights and benefits provided that Executive executes and delivers to the Company within 30 days of the Termination a Release in the form attached hereto as Exhibit A:
(a) a lump sum payment in cash in the amount of three times Executive's Annual Base Salary (as defined below), payable within 30 days of Termination;
(b) for the 36 months following Termination, continued health and medical insurance coverage for Executive and his dependents substantially comparable (with regard to both benefits and employee contributions) to the coverage provided by the Company immediately prior to the Change in Control for active employees of equivalent rank. From the end of such 36-month period until Executive attains Social Security Retirement Age, Executive shall have the right to purchase (at COBRA rates applicable to such coverage) continued coverage for himself and his dependents under one or more plans maintained by the Company for its active employees, to the extent Executive would have been eligible to purchase continued coverage under the plan in effect immediately prior to the Change in Control had his employment terminated 36 months following Termination;
(c) a lump sum payment in cash, payable within 30 days of Termination, equal to the unpaid portion of the Perquisite Compensation to which Executive is entitled for the year of Termination plus the amount of Perquisite Compensation to which Executive would be entitled for one additional year based on his Annual Base Salary;
(d) a lump sum payment in cash, payable within 30 days of Termination, equal to the unpaid portion of the car allowance to which Executive is entitled for the year of Termination plus the amount of car allowance for one additional year;
(e) except as provided otherwise in this paragraph, continuation for
Executive, for a period of three years following Termination, of the Split
Dollar Life Insurance Program (if any) provided for Executive by the Company
immediately prior to the Change in Control and the group term life insurance
program provided for executive immediately prior to the Change in Control. The
Company shall be under no obligation to provide insurance benefits with
reference to a Split Dollar Life Insurance Program that has terminated between
the date of the Change in Control and Executive's Termination under
[sub-sections (a), (b), or (c) of Section 4.1] of such program's agreement
between the policy owner and the Company. The company shall be under no
obligation to provide insurance benefits with reference to a Split Dollar Life
Insurance Program that has terminated between the date of the Change in Control
and Executive's Termination by notice from the policy owner under [subsection
(d) of Section 4.1] of such agreement. If Executive is a participant in a Split
Dollar Life Insurance Program, the Company may nevertheless elect to exercise
its right to terminate the Split Dollar Life Insurance Program under Section
[4.1(d)] of the program agreement between the policy owner and the Company. If
the Company elects to exercise such right, the Company shall provide insurance
coverage with a face amount comparable to the then current face amount (net of
the Company's interest) in the split-dollar policy, at no greater cost to the
policy owner and the Executive, until the completion of the three-year period
following Termination. Nothing in the paragraph shall prevent Company and the
policy owner from agreeing to provide such comparable coverage through a
modification of their agreement under the Split Dollar Life Insurance Program;
(f) a lump sum payment in cash, payable within 30 days of Termination, equal to all accrued and unpaid vacation, reimbursable business expenses, and similar miscellaneous benefits as of the Termination; and
(g) a monthly pension annuity benefit starting at age 62 or the current age, if later (in the form of a joint and 50% survivor annuity) equal to the difference between (i) the monthly Pension Plan annuity benefit, the monthly Supplemental Pension Plan annuity benefit if Executive is a participant in the Supplemental Pension Plan, and any additional pension benefit provided in an offer letter if Executive is subject to such an offer letter, which Executive will receive starting at age 62 or the current age, if later (in the form of a joint and 50% survivor annuity), and (ii) the monthly pension annuity benefit he would have received starting at age 62 or the current age, if later under such plan(s) and/or offer letter, as in effect on April 10, 2001, (in the form of a joint and 50% survivor annuity) calculated as if Executive had earned two additional years of service and pay at his Annual Base Salary or continued in service with pay at his Annual Base Salary through December 31, 2004, whichever is greater. The monthly pension annuity benefit described in the prior sentence shall be paid at the same time(s) and in the same form as Executive's benefit under the Pension Plan (with the same actuarial adjustments as used in calculating benefits under the Pension Plan). The benefit provided for in this paragraph shall be funded in a rabbi trust prior to the Change in Control. For purposes of this subparagraph (g),
the benefit under clause (ii) will be calculated as though the Pension Plan and Supplemental Plan as in effect on April 10, 2001 remained the same.
3. ADDITIONAL BENEFITS UPON A CHANGE IN CONTROL.
Upon the occurrence of a Change in Control, so long as Executive is an employee of the Company at that time, the Company will provide or cause to be provided to Executive the following rights and benefits whether or not Executive's employment with the Company or its subsidiaries is terminated:
(a) a lump sum payment in cash equal to the amount of Short-Term Incentive Compensation which would be payable to Executive if the company performance targets (at 100%) with respect to such incentive compensation in effect for the entire year in which the Change in Control occurred had been achieved, payable within 30 days of the Change in Control;
(b) the number of shares of common stock of the Company that would be payable to Executive as Performance Share Compensation under all performance share periods in progress at the date of the Change in Control as if the target goal for each such performance share period was achieved 100%, without proration for uncompleted performance share periods, provided, however, that if the Change in Control involves a merger, acquisition or other corporate restructuring where the Company is not the surviving entity (or survives as a wholly-owned subsidiary of another entity), then, in lieu of such shares of common stock of the Company, Executive shall be entitled to receive the consideration he would have received in such transaction in exchange for such shares of common stock; and provided, further, that the Company shall in any case have the right to substitute cash for such shares of common stock of the Company or merger consideration in an amount equal to the fair market value of such shares or merger consideration as determined by the Company
(c) immediate vesting of all mandatory deferred shares attributable to Performance Share Compensation,
(d) immediate vesting of all outstanding options held by Executive under the Hillenbrand Industries, Inc. 1996 Stock Options Plan; and
(e) immediate vesting of all awards of Restricted Stock held by Executive under the Stock Award Agreements with Executive and Hillenbrand Industries, Inc.
4. GROSS-UP ON EXCESS PARACHUTE PAYMENT.
(a) If any benefit or payment by the Company or its subsidiaries to Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, including any acceleration of vesting or payment) (a "Payment") is determined to 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, being herein collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive an additional payment (the "Gross-Up Payment") in an amount such
that the net amount of such additional payment retained by Executive, after payment of all federal, state and local income and employment taxes (including, without limitation, any federal, state, and local income and employment taxes and Excise Tax imposed on the Gross-Up Payment), shall be equal to the Excise Tax imposed on the Payment.
(b) Subject to the provisions of Section 4(c) hereto, all determinations required to be made under this Section 4, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by an independent accounting firm of nationally recognized standing selected by the Company and which is not serving as accountant or auditor for the Company or the individual, entity or group effecting the Change in Control (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Company and Executive within 15 business days of the receipt of the notice from Executive that there has been a Payment or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment shall be paid by the Company to Executive within ten business days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments will not have been made by the Company which should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 4(c) hereof and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and the amount of the Underpayment shall be promptly paid by the Company to or for the benefit of Executive.
(c) Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall:
(i) give the Company any information reasonably requested by the Company relating to such claim;
(ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively to contest such claim; and
(iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or federal, state and local income and employment tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 4(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or to contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an after-tax basis, and shall hold Executive harmless from any Excise Tax or federal, state or local income or employment tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. The Company's control of the contest, however, shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder, and Executive shall be entitled to settle or contest, as the case may by, any other issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 4(c), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Company's complying with the requirements of Section 4(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 4(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
(e) In the event that the Excise Tax is subsequently determined to be less than initially determined by the Accounting Firm, Executive shall repay to the Company at the time that the amount of such reduction in Excise Tax is determined (but, if previously paid to the
taxing authorities, not prior to the time the amount of such reduction is refunded to Executive or otherwise realized as a benefit by Executive) the portion of the Gross-Up Payment that would not have been paid if the Excise Tax as subsequently determined had been applied in initially calculating the Gross-Up Payment, with the amount of such repayment determined by the Accounting Firm.
5. CONFIDENTIALITY; NON-COMPETITION.
(a) Executive shall not at any time without the prior approval of the Company disclose to any person, firm, corporation or other entity any trade secret, confidential customer information, or other proprietary information not known within the industry or by the public generally regarding the business then being conducted by the Company, including, without limitation, financial information, marketing and sales information and business and strategic plans.
(b) Executive shall not at any time during the term of this Agreement and within three years following the termination of his employment with the Company, (i) solicit any persons who are employed by the Company to terminate their employment with the Company, and (ii) directly or indirectly (either individually or as an agent, employee, director, officer, stockholder, partner or individual proprietor, consultant or as an investor who has made advances of loan capital or contributions to equity capital), engage in any activity which he knows (or reasonably should have known) to be competitive with the business of the Company as then being carried on. Nothing in this Agreement, however, shall prevent Executive from owning, as an investment, up to two percent (2%) of the outstanding equity capital of any competitor of the Company, shares of which are regularly traded on a national securities exchange or in over-the-counter markets. The restrictions set forth in this Section 5 shall not apply in the event of a termination of Executive's employment pursuant to Section 1.
6. DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings:
(a) "Annual Base Salary" means the annualized amount of Executive's rate of base salary in effect immediately before the Change in Control or immediately before the date of Termination, whichever is greater.
(b) "Cause" means
(i) embezzlement or material misappropriation of funds or property of the Company,
(ii) the continued failure of Executive to perform substantially the Executive's current duties (as of the date hereof) with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Company which specifically identifies the manner in which the Company believes that Executive has not substantially performed the Executive's duties; or
(iii) the willful engaging by Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act, on the part of Executive, shall be considered "willful" unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive's action or omission was in the best interests of the Company.
(c) A "Change in Control" shall be deemed to occur on:
(i) the date that both
(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 Company securities 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 Company securities by the Company or any of its subsidiaries or any employee benefit plan of the Company or any of its subsidiaries, (y) the acquisition of Company securities directly from the Company, or (z) the acquisition of Company securities 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 Company's 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 the Company of a plan of complete liquidation of the Company.
(d) "Good Reason" means any of the following events occurring without the Executive's consent:
(i) the assignment to Executive of duties substantially inconsistent with his current position, duties, responsibilities or status with the Company (as of the date hereof) or a substantial reduction of the Executive's duties or responsibilities, which persists for at least 30 days following written notice thereof by Executive; provided that it is specifically understood that within six months of a Change in Control the Company shall have the flexibility to appoint the Executive to a reporting relationship different from that which existed prior to the Change in Control, to make an immaterial change in Executive's duties, or to change the Executive's title provided that Executive shall not have a stature less than that of ______________________________. It is understood that equivalent positions may have different titles;
(ii) a failure by the Company to continue to provide to Executive compensation and benefits (including bonus opportunities) which in the aggregate are at least as great as the compensation and benefits provided prior to the Change in Control;
(iii) the Company's requiring Executive to be based at any office or location more than 100 miles from the location at which he performs his service for the Company, except for travel reasonably required in the performance of Executive's responsibilities, or
(iv) any failure by the Company to perform its obligations under
Section 9 (b) hereof.
(e) "Normal Retirement Benefit" shall have the meaning set forth in the Pension Plan.
(f) "Pension Plan" means the Hillenbrand Industries Pension Plan of January 1, 1994 as amended from time to time.
(g) "Performance Share Compensation" means the Performance Share Compensation payable under Article VI of the Senior Executive Program, or any successor long-term incentive plan or program.
(h) "Perquisite Compensation" means the Perquisite Compensation set forth in Article VII of the Senior Executive Program, or any successor plan or program.
(i) "Senior Executive Program" means the Hillenbrand Industries Inc. Senior Executive Compensation Program, as it may be amended from time to time.
(j) "Short-Term Incentive Compensation" means the Incentive Compensation payable under Article V of the Senior Executive Program, or any successor or other short-term incentive plan or program.
(k) "Early Retirement Benefits" early retirement benefits shall have the meaning set forth in the pension plan which defines the age at which full, unreduced benefits are available without any early retirement reduction being applied
(l) (l) "Split Dollar Life Insurance Program" shall mean a program
under which the Company assists the owner of an insurance policy
- on the life of Executive - in the payment of premiums for the
policy, as evidenced by a split dollar life insurance agreement
between the owner and the Company.
(m) "Supplemental Pension Plan" means the Supplemental Pension Plan provided under Article IX of the Senior Executive Program, or any successor long-term supplemental pension plan or program or any other commitment made by the company to provide retirement benefits in addition to those provided by the pension plan trust.
7. NOTICE.
(a) Any discharge or termination of Executive's employment pursuant to
Section 1 shall be communicated in a written notice to the other party hereto
setting forth the effective date of such discharge or termination (which date
shall not be more than 30 days after the date such notice is delivered) and, in
the case of a discharge for Cause or a termination for Good Reason the basis for
such discharge or termination.
(b) For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to 700 Highway 46 East, Batesville, Indiana 47006 provided that all notices to the Company shall be directed to the attention of the Board with a copy to Vice
President and General Counsel, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
8. NO DUTY TO MITIGATE. Executive is not required to seek other employment or otherwise mitigate the amount of any payments to be made by the Company pursuant to this Agreement.
9. ASSIGNMENT.
(a) This Agreement is personal to Executive and shall not be assignable by Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors. The Company shall require any successor to all or substantially all of the business and/or assets of the Company, whether direct or indirect, by purchase, merger, consolidation, acquisition of stock, or otherwise, to expressly assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform it if no such succession had taken place.
10. ARBITRATION. Any dispute or controversy arising under, related to or in connection with this Agreement shall be settled exclusively by arbitration before a single arbitrator in Cincinnati, Ohio, in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitrator's award shall be final and binding on all parties to this Agreement. Judgment may be entered on an arbitrator's award in any court having competent jurisdiction.
11. INTEGRATION. This Agreement supersedes and replaces any prior oral or written agreements or understandings in respect of the matters addressed hereby.
12. AMENDMENT. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.
13. SEVERABILITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
14. WITHHOLDING. The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
15. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the law of the State of Indiana without reference to principles of conflict of laws.
16. ATTORNEY'S FEES. If any legal proceeding (whether in arbitration, at trial or on appeal) is brought under or in connection with this Agreement, each party shall pay its own expenses, including attorneys' fees.
17. TERM OF AGREEMENT. The term of this Agreement shall be one (1) year commencing on the date hereof; provided however, that this Agreement shall be automatically renewed for successive one-year terms commencing on each anniversary of the date of this Agreement unless the Company shall have given notice of non-renewal to Executive at least 30 days prior to the scheduled termination date; and further provided that notwithstanding the foregoing, this Agreement shall not terminate (i) within three years after a Change in Control or (ii) during any period of time when a transaction which would result in a Change in Control is pending or under consideration by the Board. The termination of this Agreement shall not adversely affect any rights to which Executive has become entitled prior to such termination. In addition, Section 5(a) shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the day and year first above set forth.
HILLENBRAND INDUSTRIES, INC.
EXHIBIT 10.8
CHANGE IN CONTROL AGREEMENT
This Change in Control Agreement (the "Agreement") is made and entered into as of April 10, 2001, by and between Hillenbrand Industries, Inc., an Indiana corporation (the "Company"), and _______________ (the "Executive").
WHEREAS, the Company considers it essential to the best interests of its shareholders to foster continuous employment by the Company and its subsidiaries of their key management personnel;
WHEREAS, the Compensation Committee (the "Committee") of the Board of Directors (the "Board") of the Company has recommended, and the Board has approved, that the Company enter into Change in Control Agreements with key executives of the Company and its subsidiaries who are from time to time designated by the Management of the Company and approved by the Committee;
WHEREAS, the Committee and the Board believe that Executive has made valuable contributions to the productivity and profitability of the Company and consider it essential to the best interests of the Company and its shareholders that Executive be encouraged to remain with the Company; and
WHEREAS, the Board believes it is in the best interests of the Company and its shareholders that Executive continue in employment with the Company in the event of any proposed Change in Control (as defined below) and be in a position to provide assessment and advice to the Board regarding any proposed Change in Control without concern that Executive might be unduly distracted by the personal uncertainties and risks created by any proposed Change in Control:
NOW, THEREFORE, the Company and Executive agree as follows:
1. TERMINATION FOLLOWING A CHANGE IN CONTROL. The Company will provide
or cause to be provided to Executive the rights and benefits described in
Section 2 hereof in the event that Executive's employment with the Company and
its subsidiaries is terminated:
(a) by the Company for any reason other than on account of his death, permanent disability, retirement or for Cause at any time prior to the second anniversary of a Change in Control; or
(b) by Executive for Good Reason at any time prior to the second anniversary of a Change in Control.
Anything in this Agreement to the contrary notwithstanding, if a Change in Control occurs and if the Executive's employment with the Company is terminated by the Company, without Cause, prior to the date on which the Change in Control occurs, and if it is reasonably
demonstrated by Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control or (ii) otherwise arose in connection with or anticipation of a Change in Control which subsequently occurs within 3 months of such termination, then for purposes of this Agreement (including Section 3 hereof) a Change in Control shall be deemed to have occurred on the day immediately prior to such termination of employment and all references in Section 2 to payments within a specified period following "Termination" shall instead be references to the specified period following the Change in Control.
The rights and benefits described in Section 2 and 3 hereof shall be in lieu of any severance payments otherwise payable to Executive under any employment agreement or severance plan or program of the Company or any of its subsidiaries but shall not otherwise affect Executive's rights to compensation or benefits under the Company's compensation and benefit programs except to the extent expressly provided herein.
2. RIGHTS AND BENEFITS UPON TERMINATION.
In the event of the termination of Executive's employment under any of the circumstances set forth in Section 1 hereof ("Termination"), the Company shall provide or cause to be provided to Executive the following rights and benefits provided that Executive executes and delivers to the Company within 30 days of the Termination a Release in the form attached hereto as Exhibit A:
(a) a lump sum payment in cash in the amount of two times Executive's Annual Base Salary (as defined below), payable within 30 days of Termination;
(b) for the 24 months following Termination, continued health and medical insurance coverage for Executive and his dependents substantially comparable (with regard to both benefits and any employee contributions) to the coverage provided by the Company immediately prior to the Change in Control for active employees of equivalent rank. From the end of such 24-month period until Executive attains Social Security Retirement Age, Executive shall have the right to purchase (at COBRA rates applicable to such coverage) continued coverage for himself and his dependents under one or more plans maintained by the Company for its active employees, to the extent Executive would have been eligible to purchase continued coverage under the plan in effect immediately prior to the Change in Control had his employment terminated 24 months following Termination;
(c) a lump sum payment in cash, payable within 30 days of Termination, equal to the unpaid portion of the Perquisite Compensation to which Executive is entitled for the year of Termination plus the amount of Perquisite Compensation to which Executive would be entitled for one additional year based on his Annual Base Salary;
(d) a lump sum payment in cash, payable within 30 days of Termination, equal to the unpaid portion of the car allowance to which Executive is entitled for the year of Termination plus the amount of car allowance for one additional year;
(e) except as provided otherwise in this paragraph,
continuation for Executive, for a period of two years following Termination, of
the Split Dollar Life Insurance Program (if any) provided for Executive by the
Company immediately prior to the Change in Control and the group term life
insurance program provided for executive immediately prior to the Change in
Control. The Company shall be under no obligation to provide insurance benefits
with reference to a Split Dollar Life Insurance Program that has terminated
between the date of the Change in Control and Executive's Termination under
[sub-sections (a), (b), or (c) of Section 4.1] of such program's agreement
between the policy owner and the Company. The company shall be under no
obligation to provide insurance benefits with reference to a Split Dollar Life
Insurance Program that has terminated between the date of the Change in Control
and Executive's Termination by notice from the policy owner under [subsection
(d) of Section 4.1] of such agreement. If Executive is a participant in a Split
Dollar Life Insurance Program, the Company may nevertheless elect to exercise
its right to terminate the Split Dollar Life Insurance Program under Section
[4.1(d)] of the program agreement between the policy owner and the Company. If
the Company elects to exercise such right, the Company shall provide insurance
coverage with a face amount comparable to the then current face amount (net of
the Company's interest) in the split-dollar policy, at no greater cost to the
policy owner and the Executive, until the completion of the two-year period
following Termination. Nothing in the paragraph shall prevent Company and the
policy owner from agreeing to provide such comparable coverage through a
modification of their agreement under the Split Dollar Life Insurance Program;
(f) a lump sum payment in cash, payable within 30 days of Termination, equal to all accrued and unpaid vacation, reimbursable business expenses, and similar miscellaneous benefits as of the Termination; and
(g) a monthly pension annuity benefit starting at age 62 or the current age, if later (in the form of a joint and 50% survivor annuity) equal to the difference between (i) the monthly Pension Plan annuity benefit, the monthly Supplemental Pension Plan annuity benefit if Executive is a participant in the Supplemental Pension Plan, and any additional pension benefit provided in an offer letter (or other written letter) if Executive is subject to such an offer letter (or other written letter), which Executive will receive starting at age 62 or the current age, if later (in the form of a joint and 50% survivor annuity), and (ii) the monthly pension annuity benefit he would have received starting at age 62 or the current age, if later under such plan(s) and/or offer letter, as in effect on April 10, 2001, (in the form of a joint and 50% survivor annuity) calculated as if Executive had earned two additional years of service and pay at his Annual Base Salary (and for purposes of calculating Average Monthly Earnings as defined in the Pension Plan, Executive Annual Base Salary shall be annualized for any portion of the imputed service period which is less than a full calendar year and such portion of the year shall be eligible to be counted). The monthly pension annuity benefit described in the prior sentence shall be paid at the same time(s) and in the same form as Executive's benefit under the Pension Plan (with the same actuarial adjustments as used in calculating benefits under the Pension Plan). The benefit provided for in this paragraph shall be funded in a rabbi trust prior to the Change in Control. For purposes of this subparagraph (g), the benefit under clause (ii) will be calculated as though the Pension Plan and Supplemental Plan as in effect on May 10, 2001 remained the same.
3. ADDITIONAL BENEFITS UPON A CHANGE IN CONTROL.
Upon the occurrence of a Change in Control, so long as Executive is an employee of the Company at that time, the Company will provide or cause to be provided to Executive the following rights and benefits whether or not Executive's employment with the Company or its subsidiaries is terminated:
(a) a lump sum payment in cash equal to the amount of Short-Term Incentive Compensation which would be payable to Executive if the company performance targets (at 100%) with respect to such incentive compensation in effect for the entire year in which the Change in Control occurred had been achieved, payable within 30 days of the Change in Control;
(b) the number of shares of common stock of the Company that would be payable to Executive as Performance Share Compensation under all performance share periods in progress at the date of the Change in Control as if the target goal for each such performance share period was achieved 100%, without proration for uncompleted performance share periods, provided, however, that if the Change in Control involves a merger, acquisition or other corporate restructuring where the Company is not the surviving entity (or survives as a wholly-owned subsidiary of another entity), then, in lieu of such shares of common stock of the Company, Executive shall be entitled to receive the consideration he would have received in such transaction in exchange for such shares of common stock; and provided, further, that the Company shall in any case have the right to substitute cash for such shares of common stock of the Company or merger consideration in an amount equal to the fair market value of such shares or merger consideration as determined by the Company;
(c) immediate vesting of all mandatory deferred shares attributable to Performance Share Compensation,
(d) immediate vesting of all outstanding options held by Executive under the Hillenbrand Industries, Inc. 1996 Stock Options Plan; and
(e) immediate vesting of all awards of Restricted Stock held by Executive under the Stock Award Agreements with Executive and Hillenbrand Industries, Inc.
4. GROSS-UP ON EXCESS PARACHUTE PAYMENT.
(a) If any benefit or payment by the Company or its subsidiaries to Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, including any acceleration of vesting or payment) (a "Payment") is determined to 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, being herein collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive an additional payment (the "Gross-Up Payment") in an amount such that the net amount of such additional payment retained by Executive, after payment of all federal, state and local income and employment taxes (including, without limitation, any federal,
state, and local income and employment taxes and Excise Tax imposed on the Gross-Up Payment), shall be equal to the Excise Tax imposed on the Payment. Notwithstanding the foregoing provisions of this Section 4(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that the net present value of the Payments (calculated at the discount rate in effect under Code Section 280G) do not exceed 120% of the "Reduced Amount," then no Gross-Up Payment shall be made to the Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount. For purposes of this Section, the term "Reduced Amount" shall mean the greatest amount that could be paid to the Executive such that the receipt of Payments would not give rise to any Excise Tax.
(b) Subject to the provisions of Section 4(c) hereto, all determinations required to be made under this Section 4, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by an independent accounting firm of nationally recognized standing selected by the Company and which is not serving as accountant or auditor for the Company or the individual, entity or group effecting the Change in Control (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Company and Executive within 15 business days of the receipt of the notice from Executive that there has been a Payment or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment shall be paid by the Company to Executive within ten business days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments will not have been made by the Company which should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 4(c) hereof and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and the amount of the Underpayment shall be promptly paid by the Company to or for the benefit of Executive.
(c) Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall:
(i) give the Company any information reasonably requested by the Company relating to such claim;
(ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively to contest such claim; and
(iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or federal, state and local income and employment tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 4(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or to contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an after-tax basis, and shall hold Executive harmless from any Excise Tax or federal, state or local income or employment tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. The Company's control of the contest, however, shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder, and Executive shall be entitled to settle or contest, as the case may by, any other issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 4(c), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Company's complying with the requirements of Section 4(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 4(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required
to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
(e) In the event that the Excise Tax is subsequently determined to be less than initially determined by the Accounting Firm, Executive shall repay to the Company at the time that the amount of such reduction in Excise Tax is determined (but, if previously paid to the taxing authorities, not prior to the time the amount of such reduction is refunded to Executive or otherwise realized as a benefit by Executive) the portion of the Gross-Up Payment that would not have been paid if the Excise Tax as subsequently determined had been applied in initially calculating the Gross-Up Payment, with the amount of such repayment determined by the Accounting Firm.
5. CONFIDENTIALITY; NON-COMPETITION.
(a) Executive shall not at any time without the prior approval of the Company disclose to any person, firm, corporation or other entity any trade secret, confidential customer information, or other proprietary information not known within the industry or by the public generally regarding the business then being conducted by the Company, including, without limitation, financial information, marketing and sales information and business and strategic plans.
(b) Executive shall not at any time during the term of this
Agreement and within three years following the termination of his employment
with the Company, (i) solicit any persons who are employed by the Company to
terminate their employment with the Company, and (ii) directly or indirectly
(either individually or as an agent, employee, director, officer, stockholder,
partner or individual proprietor, consultant or as an investor who has made
advances of loan capital or contributions to equity capital), engage in any
activity which he knows (or reasonably should have known) to be competitive with
the business of the Company as then being carried on. Nothing in this Agreement,
however, shall prevent Executive from owning, as an investment, up to two
percent (2%) of the outstanding equity capital of any competitor of the Company,
shares of which are regularly traded on a national securities exchange or in
over-the-counter markets. The restrictions set forth in this Section 5 shall not
apply in the event of a termination of Executive's employment pursuant to
Section 1.
6. DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings:
(a) "Annual Base Salary" means the annualized amount of Executive's rate of base salary in effect immediately before the Change in Control or immediately before the date of Termination, whichever is greater.
(b) "Cause" means
(i) embezzlement or material misappropriation of funds or property of the Company,
(ii) the continued failure of Executive to perform substantially the Executive's duties (as of the date hereof) with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Company which specifically identifies the manner in which the Company believes that Executive has not substantially performed the Executive's duties; or
(iii) the willful engaging by Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act, on the part of Executive, shall be considered "willful" unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive's action or omission was in the best interests of the Company.
(c) A "Change in Control" shall be deemed to occur on:
(i) the date that both
(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 Company securities 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 Company securities by the Company or any of its subsidiaries or any employee benefit plan of the Company or any of its subsidiaries, (y) the acquisition of Company securities directly from the Company, or (z) the acquisition of Company securities 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 Company's 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 the Company of a plan of complete liquidation of the Company.
(d) "Good Reason" means any of the following events occurring without the Executive's consent:
(i) the assignment to Executive of duties substantially inconsistent with his position, duties, responsibilities or status with the Company (as of the date hereof) or a substantial reduction of the Executive's duties or responsibilities, which persists for at least 30 days following written notice thereof by Executive; provided that it is specifically understood that within six months of a Change in Control the Company shall have the flexibility to appoint the Executive to a reporting relationship different from that which existed prior to the Change in Control, to make an immaterial change in Executive's duties, or to change the Executive's title provided that Executive shall not have a stature less than that of _____________________________. It is understood that equivalent positions may have different titles;
(ii) a failure by the Company to continue to provide to Executive compensation and benefits (including bonus opportunities) which in the aggregate are at least as great as the compensation and benefits provided prior to the Change in Control;
(iii) the Company's requiring Executive to be based at any office or location more than 100 miles from the location at which he performs his service for the Company, except for travel reasonably required in the performance of Executive's responsibilities, or
(iv) any failure by the Company to perform its obligations under Section 9 (b) hereof.
(e) "Pension Plan" means the Hillenbrand Industries Pension Plan of January 1, 1994 as amended from time to time.
(f) "Performance Share Compensation" means the Performance Share Compensation payable under Article VI of the Senior Executive Program, or any successor long-term incentive plan or program.
(g) "Perquisite Compensation" means the Perquisite Compensation set forth in Article VII of the Senior Executive Program, or any successor plan or program.
(h) "Senior Executive Program" means the Hillenbrand Industries Inc. Senior Executive Compensation Program, as it may be amended from time to time.
(i) "Short-Term Incentive Compensation" means the Incentive Compensation payable under Article V of the Senior Executive Program, or any successor short-term incentive plan or program.
(j) "Split Dollar Life Insurance Program" shall mean a program under which the Company assists the owner of an insurance policy - on the life of Executive - in the payment of premiums for the policy, as evidenced by a split dollar life insurance agreement between the owner and the Company.
(k) "Supplemental Pension Plan" means the Supplemental Pension Plan provided under Article IX of the Senior Executive Program, or any successor long-term supplemental pension plan or program.
7. NOTICE.
(a) Any discharge or termination of Executive's employment pursuant to Section 1 shall be communicated in a written notice to the other party hereto setting forth the effective date of such discharge or termination (which date shall not be more than 30 days after the date such notice is delivered) and, in the case of a discharge for Cause or a termination for Good Reason the basis for such discharge or termination.
(b) For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to 700 Highway 46 East, Batesville, Indiana 47006 provided that all notices to the Company shall be directed to the attention of the Board with a copy to the Vice President and General Counsel, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
8. NO DUTY TO MITIGATE. Executive is not required to seek other employment or otherwise mitigate the amount of any payments to be made by the Company pursuant to this Agreement.
9. ASSIGNMENT.
(a) This Agreement is personal to Executive and shall not be assignable by Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors. The Company shall require any successor to all or substantially all of the business and/or assets of the Company, whether direct or indirect, by purchase, merger, consolidation, acquisition of stock, or otherwise, to expressly assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform it if no such succession had taken place.
10. ARBITRATION. Any dispute or controversy arising under, related to or in connection with this Agreement shall be settled exclusively by arbitration before a single arbitrator in Indianapolis, Indiana, in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitrator's award shall be final and binding on all parties to this Agreement. Judgment may be entered on an arbitrator's award in any court having competent jurisdiction.
11. INTEGRATION. This Agreement supersedes and replaces any prior oral or written agreements or understandings in respect of the matters addressed hereby.
12. AMENDMENT. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.
13. SEVERABILITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
14. WITHHOLDING. The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
15. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the law of the State of Indiana without reference to principles of conflict of laws.
16. ATTORNEY'S FEES. If any legal proceeding (whether in arbitration, at trial or on appeal) is brought under or in connection with this Agreement, each party shall pay its own expenses, including attorneys' fees.
17. TERM OF AGREEMENT. The term of this Agreement shall be one (1) year commencing on the date hereof; provided however, that this Agreement shall be automatically renewed for successive one-year terms commencing on each anniversary of the date of this Agreement unless the Company shall have given notice of non-renewal to Executive at least 30 days prior to the scheduled termination date; and further provided that notwithstanding the foregoing, this Agreement shall not terminate (i) within three years after a Change in Control or (ii) during any period of time when a transaction which would result in a Change in Control is pending or under consideration by the Board. The termination of this Agreement shall not adversely affect any rights to which Executive has become entitled prior to such termination. In addition, Section 5(a) shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the day and year first above set forth.
HILLENBRAND INDUSTRIES, INC.
Title President and Chief Executive
Officer
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Executive
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EXHIBIT 10.9
INDEMNITY AGREEMENT
THIS AGREEMENT is made as of ____________________, 2001 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, 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 be for an initial term ending on December 31, 2002. This initial term shall automatically renew at expiration for successive renewal terms of twelve (12) months, unless and until the Corporation or the Officer gives notice of termination to the other party at least sixty (60) days prior to the end of the initial term or any renewal term.
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:
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Printed Name: Printed Name:
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Title:
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EXHIBIT 10.10
HILLENBRAND INDUSTRIES, INC.
BOARD OF DIRECTORS'
DEFERRED COMPENSATION PLAN
Effective April 10, 2001
HILLENBRAND INDUSTRIES, INC.
BOARD OF DIRECTORS'
DEFERRED COMPENSATION PLAN
(EFFECTIVE APRIL 10, 2001)
PREAMBLE
The Hillenbrand Board of Directors' Deferred Compensation Plan (the "Plan") is an unfunded deferred compensation plan for directors of Hillenbrand Industries, Inc. ("Hillenbrand" or the "Company"). This Plan has been approved by the Board of Directors of Hillenbrand on this 10th day of April, 2001.
ARTICLE I
DEFINITIONS
Section 1.01. Administrator. The term "Administrator" means Hillenbrand.
Section 1.02. Beneficiary. The term "Beneficiary" means, for a Participant, the individual or individuals designated by that Participant in the last Beneficiary Designation Form executed by that Participant to receive benefits in the event of that Participant's death. If no such beneficiary shall have been designated, or if no designated beneficiary shall survive the Participant, the beneficiary shall be the Participant's estate.
Section 1.03. Board. The term "Board" means the Board of Directors of Hillenbrand Industries, Inc.
Section 1.04. Cash Participation Account. The term "Cash Participation Account" means the bookkeeping account maintained by the Administrator for each Participant reflecting amounts deferred under this Plan and the Prior Deferrals and accruing interest monthly at the Interest Rate.
Section 1.05. Compensation. The term "Compensation" means for each Participant in any Plan Year the total amount of remuneration (including retainers and meeting fees) for director services and consulting fees and continuing director fees for former Directors as paid to that Participant by the Company in that Plan Year.
Section 1.06. Director. The term "Director" means each non-employee member of the Board of Directors of the Company.
Section 1.07. Effective Date. The term "Effective Date" means April 10, 2001.
Section 1.08. Forms. The term "Forms" means the forms used by the Company for Plan operation and shall include the following:
(a) Enrollment Form. The term "Enrollment Form" shall be the form on which a Director designates the amount of Compensation to be deferred under the Plan and the Participation Account(s) to which such amounts shall be credited.
(b) Distribution Election Form. The term "Distribution Election Form" means the form on which a Director designates when his Participation Account shall be distributed.
(c) Beneficiary Designation Form. The term "Beneficiary Designation Form" means the form on which a Director designates his Beneficiary.
Section 1.09. Hillenbrand. The term "Hillenbrand" or the "Company" means Hillenbrand Industries, Inc. and any successor thereof.
Section 1.10. Hillenbrand Common Stock. The term "Hillenbrand Common Stock" means the common stock, without par value, of Hillenbrand.
Section 1.11. Interest Rate. The term "Interest Rate" means the rate of return credited monthly at the end of each of Hillenbrand's fiscal months to amounts held in the Participant's Cash Participation Account. The Interest Rate shall be equal to the prime rate charged by Bank One, Indianapolis (or such other bank which is Hillenbrand's principal bank) as determined as of the last day of the prior fiscal month; provided, however, that Hillenbrand reserves the right to change the method of determining the Interest Rate on a prospective basis.
Section 1.12. Participant. The term "Participant" means any individual who fulfills the eligibility requirements contained in Article II of this Plan and elects to defer Compensation under the Plan, and any individual whose Prior Deferrals are credited to a Participation Account.
Section 1.13. Participation Account. The term "Participation Account" means the Cash Participation Account and/or the Phantom Stock Participation Account, as applicable. The Participation Accounts are bookkeeping accounts and are not required to be funded in any manner.
Section 1.14. Phantom Shares. The term "Phantom Shares" means phantom shares of Hillenbrand Common Stock (each representing one share).
Section 1.15. Phantom Stock Participation Account. The term "Phantom Stock Participation Account" means the bookkeeping account maintained by the Administrator for each Participant reflecting amounts deferred under this Plan and the Prior Deferrals and credited as Phantom Shares (including adjustments as provided in Article III).
Section 1.16. Plan. The term "Plan" means the plan embodied by this instrument as now in effect or hereafter amended.
Section 1.17. Plan Year. The term "Plan Year" means the calendar year.
Section 1.18. Prior Deferrals. The term "Prior Deferrals" means amounts of Compensation deferred by Directors under Board practices in effect prior to the Effective Date (including earnings credited on such amounts through the Effective Date) and not distributed prior to the Effective Date.
ARTICLE II
PARTICIPATION IN THE PLAN
Section 2.01. Eligibility. As of the Effective Date, all Directors shall be eligible to become Participants in this Plan, and former Directors shall be eligible to participate to the extent they are entitled to consulting fees or continuing director fees.
Section 2.02. Deferral Amounts.
(a) Amount of Deferral. The amount of Compensation to be deferred in a Plan Year shall be designated by each Participant in the Enrollment Form executed by that Participant for that Plan Year prior to the beginning of that Plan Year and within the time period established by the Administrator.
(b) Special Rules for New Directors. For the Plan Year during which a person first becomes eligible to become a Participant, the Participant shall be provided by the Administrator the opportunity to make a special election for such Plan Year with respect to the Compensation paid in such Plan Year after the date on which he becomes eligible to participate.
(c) Timing of Deferral. The following rules govern the timing of the deferral of Compensation under this Plan:
(i) Compensation deferred by Participants shall be effected pro-rata from each payment of Compensation during the Plan Year.
(ii) The amount of Compensation which a Participant has elected to defer in his Cash Participation Account shall be credited to such Account on the day the deferred Compensation would have been paid but for the deferral. The amount of Compensation which a Participant has elected to defer in his Phantom Stock Participation Account shall be credited to such Account in the form of a number of Phantom Shares equal to the number of shares of Hillenbrand Common Stock which could have been purchased with the deferred Compensation at the average of the high and low price at which Hillenbrand Common Stock traded on the fifth trading day following the day the deferred Compensation would have been paid but for the deferral.
ARTICLE III
PARTICIPATION ACCOUNTS
Section 3.01. Designation of Account. A Participant shall designate in his Enrollment Form the Participation Account to which the amount of any Compensation deferred hereunder shall be credited. A Participant may designate that such amounts be credited to the Participant's Cash Participation Account or his Phantom Stock Participation Account, or he may designate that a portion of such amounts be credited to each.
Section 3.02. Cash Participation Account. Amounts credited to a Participant's Cash Participation Account shall accrue interest credited monthly at the end of each of Hillenbrand's fiscal months at the Interest Rate. Upon distribution as provided in Article IV, the Company shall pay the Participant in cash the value of his Cash Participation Account.
Section 3.03. Phantom Stock Participation Account. Amounts deferred in a Participant's Phantom Stock Participation Account shall be credited in the form of a number of Phantom Shares determined pursuant to Section 2.02(c). Any cash dividends or other distributions normally payable on Hillenbrand Common Stock prior to pay-out of the Participation Account shall be assumed to be distributed on Phantom Shares and reinvested in Phantom Shares at the closing price of Hillenbrand Common Stock on the applicable distribution date; provided, however, that in the case of an extraordinary dividend or other distribution, the Board in its discretion may determine to treat such distribution as a separate phantom investment to be credited to the Participation Accounts in cash or in kind with earnings thereon to be credited at such rate or rates as determined by the Board at the time of such distribution. In the event of any stock split, stock dividend, merger, consolidation, reorganization, recapitalization or other change in capital structure affecting Hillenbrand Common Stock, the Phantom Shares then credited to a Participant's Phantom Stock Participation Account shall be adjusted in the same manner as the Hillenbrand Common Stock. If the adjustment results in the Phantom Stock Participation Account being converted to cash, the Account shall thereafter be credited with interest at the Interest Rate. Upon distribution as provided in Article IV, the Company shall distribute to the Participant one share of Hillenbrand Common Stock for each Phantom Share then credited to his Phantom Stock Participation Account.
Section 3.04. Merger. In the event of a merger, acquisition or other corporate restructuring in which Hillenbrand is not the surviving entity (or survives as a wholly-owned subsidiary of another entity), each Participant shall have a one-time opportunity to elect to convert his Phantom Stock Participation Account to a Cash Participation Account.
ARTICLE IV
DISTRIBUTIONS FROM PLAN
Section 4.01. Manner of Payout of a Participant's Participation Account. The date on which a Participant's Participation Account attributable to deferrals in a Plan Year is to be distributed to that Participant under the provisions of this Plan shall be designated by that Participant in the Distribution Election Form executed by that Participant with respect to that Plan Year. Amounts credited to a Participant's Cash Participation Account shall be distributed in cash on the date designated by the Participant. Phantom Shares credited to a Participant's Phantom Stock Participation Account shall be distributed in shares of Hillenbrand Common Stock on the date designated by the Participant. Such election notwithstanding, the Company, in its sole discretion, may elect to pay deferred compensation in a single payment to the Participant, or in the case of a Participant's death, to the Participant's Beneficiary, if the Participant ceases to serve on the Board, dies, or becomes totally and permanently disabled.
Section 4.02. Special Distribution Rules. Notwithstanding anything contained in this Plan to the contrary, the following special rules shall govern distributions made under this Plan:
(i) A Participant shall be permitted to change the date on which his Participation Account shall be distributed by completing a new Distribution Election Form which is delivered to the Administrator, on such advance time period as may be determined from time to time by the Administrator before the earlier of the date on which the Participant ceases to be a Director or the date on which distribution of the Participant's Participation Account would have been made but for the change in election; provided, however, that any completed Distribution Election Form which was not received prior to the period described above shall be null and void.
(ii) If a Participant fails to complete a Distribution Election Form, amounts credited to his Participation Account shall automatically be distributed in cash and/or in shares of Hillenbrand Common Stock, as applicable, in the Plan Year immediately following the date on which the Participant ceases to be a Director.
Section 4.03. Withholding Tax Requirements. Each Participant shall, no later than the date as of which the value of an amount payable under the Plan first becomes includible in such person's gross income for applicable tax purposes, pay to the Company, or make arrangements satisfactory to the Administrator regarding payment of, any federal, state, local, or other taxes of any kind required by law to be withheld with respect to the award. The obligations of the Company under the Plan shall be conditional on such payment or arrangements, and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant.
Section 4.04. Securities Law Requirements. Each distribution under the Plan shall be subject to the requirement that, if at any time the Administrator shall determine that (i) the listing, registration or qualification of the Hillenbrand Common Stock to be distributed upon any securities exchange or market or under any state or federal law, or (ii) the consent or approval of any government regulatory body with respect to such distribution or (iii) an agreement by the Participant with respect to the disposition of Hillenbrand Common Stock distributed under the Plan is necessary or desirable in order to satisfy any legal requirements, such distribution shall not be made, in whole or in part, unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Administrator. The Company shall have no obligation to effect any registration or qualification of the Hillenbrand Common Stock under federal or state laws or to compensate a Participant for any loss resulting from the application of this Section.
Section 4.05. Death Benefits. In the event of a Participant's death, the benefit payable to the Participant under the Plan shall be paid to his Beneficiary.
ARTICLE V
ADMINISTRATION
Section 5.01. Delegation of Responsibility. Hillenbrand may delegate duties involved in the administration of this Plan to such person or persons whose services are deemed by it to be necessary or convenient.
Section 5.02. Payment of Benefits. The amounts allocated to a Participant's Participation Account and payable as benefits under this Plan shall be paid solely from the general assets of the Company. No Participant shall have any interest in any specific assets of the Company under the terms of this Plan. This Plan shall not be considered to create an escrow account, trust fund or other funding arrangement of any kind or a fiduciary relationship between any Participant and the Company. The Company's obligations under this Plan are purely contractual and shall not be funded or secured in any way.
ARTICLE VI
AMENDMENT OR TERMINATION OF PLAN
Section 6.01. Termination. The Board of Directors of Hillenbrand may at any time terminate this Plan. As of the date on which this Plan is terminated, no additional amounts shall be deferred from any Participant's Compensation. The Company shall pay to each such Participant the balance contained in his Participation Account at such time and in the manner designated by that Participant in the forms executed by that Participant; provided, however, that Hillenbrand, in its sole and complete discretion, may pay out to the Participants their Participation Accounts in a single payment of cash (with respect to the Cash Participation Account) and Hillenbrand Common Stock (with respect to the Phantom Stock Participation Account) as soon as practicable after the Plan termination.
Section 6.02. Amendment. Hillenbrand may amend the provisions of this Plan at any time; provided, however, that no amendment shall adversely affect the rights of Participants or their Beneficiaries with respect to (1) the balances contained in their Cash Participation Accounts immediately prior to the amendment, including the Interest Rate to be credited on such amounts, and (2) the Phantom Shares credited to their Phantom Stock Participation Accounts immediately prior to the amendment.
ARTICLE VII
MISCELLANEOUS
Section 7.01. Successors. This Plan shall be binding upon the successors of the Company.
Section 7.02. Choice of Law. This Plan shall be construed and interpreted pursuant to, and in accordance with, the laws of the State of Indiana, without regard to conflicts of law provisions.
Section 7.03. No Service Contract. This Plan shall not be construed as affecting in any manner the rights or obligations of the Company or of any Participant to continue or to terminate director status at any time.
Section 7.04. Non-Alienation. No Participant or his Beneficiary shall have any right to anticipate, pledge, alienate or assign any of his rights under this Plan, and any effort to do so shall be null and void. The benefits payable under this Plan shall be exempt from the claims of creditors or other claimants and from all orders, decrees, levies and executions and any other legal process to the fullest extent that may be permitted by law.
Section 7.05. Reservation of Shares. The Company shall reserve from time to time a sufficient number of shares of Hillenbrand Common Stock to satisfy its obligations under the Plan. Such shares shall be treasury shares.
EXHIBIT 10.11
HILLENBRAND INDUSTRIES, INC.
DIRECTOR PHANTOM STOCK PLAN
The Hillenbrand Industries, Inc. Director Phantom Stock Plan (the "Plan") is an unfunded deferred compensation plan for certain directors of Hillenbrand Industries, Inc. ("Hillenbrand" or the "Company"). This Plan has been approved by the Board of Directors of Hillenbrand on this 10th day of July, 2001.
ARTICLE I
DEFINITIONS
Section 1.01. Administrator. The term "Administrator" means Hillenbrand.
Section 1.02 Beneficiary. The term "Beneficiary" means, for a Participant, the individual or individuals designated by that Participant in the last Beneficiary Designation Form executed by that Participant to receive benefits in the event of that Participant's death. If no such beneficiary shall have been designated, or if no designated beneficiary shall survive the Participant, the beneficiary shall be the Participant's estate.
Section 1.03 Beneficiary Designation Form. The term "Beneficiary Designation Form" means the form on which a Participant designates his Beneficiary.
Section 1.04 Board. The term "Board" means the Board of Directors of Hillenbrand Industries, Inc.
Section 1.05 Director. The term "Director" means each non-employee member of the Board of Directors of the Company.
Section 1.06 Effective Date. The term "Effective Date" means July 10, 2001.
Section 1.07 Hillenbrand. The term "Hillenbrand" or the "Company" means Hillenbrand Industries, Inc. and any successor thereof.
Section 1.08 Hillenbrand Common Stock. The term "Hillenbrand Common Stock" means the common stock, without par value, of Hillenbrand.
Section 1.09 Participant. The term "Participant" means any individual who fulfills the eligibility requirements contained in Article II of this Plan and has been designated by the Board as a recipient of an award under the Plan.
Section 1.10 Participation Account. The term "Participation Account" means the bookkeeping account maintained by the Administrator for each Participant reflecting amounts awarded under this Plan (as adjusted from time to time in the manner provided in Article III).
Section 1.11 Phantom Shares. The term "Phantom Shares" means phantom shares of Hillenbrand Common Stock (each representing one share).
Section 1.12 Plan. The term "Plan" means the plan embodied by this instrument as now in effect of hereafter amended.
Section 1.13 Plan Year. The term "Plan Year" means the calendar year.
ARTICLE II
PARTICIPATION IN THE PLAN
Section 2.01. Eligibility. Any Director shall be eligible to receive an award of Phantom Shares under the Plan.
Section 2.02 Awards. Subject to the provisions of the Plan, the Board shall determine in its discretion the Directors to whom awards shall be made and the terms and conditions of each such award including, without limitation, the number of Phantom Shares to be awarded and the vesting schedule, if any, applicable to such award. The number of Phantom Shares awarded under the Plan shall be credited to a Participant's Participation Account.
Section 2.03 Timing of Payout of a Participant's Participation Account.
Phantom Shares credited to a Participant's Participation Account shall, to the
extent vested, be distributed in shares of Hillenbrand Common Stock in a single
payment as soon as practical following the earliest to occur of: (i) the
Participant's death; (ii) the Participant's total and permanent disability; or
(iii) the Participant's ceasing to serve as a member of the Board. Any
non-vested Phantom Shares credited to the Participant's Participation Account as
of such date shall be forfeited on such date.
Section 2.04 Withholding Tax Requirements. Each Participant shall, no later than the date as of which the value of an award first becomes includible in such person's gross income for applicable tax purposes, pay to the Company, or make arrangements satisfactory to the Administrator regarding payment of, any federal, state, local, or other taxes of any kind required by law to be withheld with respect to the award. The obligations of the Company under the Plan shall be conditional on such payment or arrangements, and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant.
Section 2.05 Securities Law Requirements. Each award under the Plan shall be subject to the requirement that, if at any time the Administrator shall determine that (i) the listing, registration or qualification of the award or the Hillenbrand Common Stock subject or related thereto upon any securities exchange or market or under any state or federal law, or (ii) the consent or approval of any government regulatory body or (iii) an agreement by the Participant with respect to the disposition of an award or Hillenbrand Common Stock subject or related thereto is necessary or desirable in order to satisfy any legal requirements, such award shall not be granted or paid, in whole or in part, unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Administrator. The Company shall have no obligation to effect any registration or qualification of the awards or Hillenbrand Common Stock under federal or state laws or to compensate a Participant for any loss caused by suspension or loss of the right to, or payment of, an award pursuant to the Plan.
ARTICLE III
PARTICIPATION ACCOUNTS
Phantom Shares awarded hereunder to a Participant shall be credited to his Participation Account. Any cash dividends or other distributions normally payable on Hillenbrand Common Stock prior to pay-out of the Participation Account shall be assumed to be distributed on Phantom Shares and reinvested in Phantom Shares at the closing price of Hillenbrand Common Stock on the applicable distribution date, and shall vest on the same date or dates as the underlying Phantom Shares; provided, however, that in the case of an extraordinary dividend or other distribution, the Board in its discretion may determine to treat such distribution as a separate phantom investment to be credited to the Participation Accounts in cash or in kind with earnings thereon to be credited at such rate or rates as determined by the Board at the time of such distribution. In the event of any stock split, stock dividend, merger, consolidation, reorganization, recapitalization or other change in capital structure affecting Hillenbrand Common Stock, the Phantom Shares then credited to a Participant's Participation Account shall be adjusted in the same manner as the Hillenbrand Common Stock. At the time specified in Section 2.03, the Company shall distribute to the Participant one share of Hillenbrand Common Stock for each Phantom Share then credited to his Participation Account to the extent then vested.
ARTICLE IV
DEATH BENEFITS
In the event of a Participant's death, the benefit payable to the Participant under the Plan, to the extent vested, shall be paid to his Beneficiary.
ARTICLE V
ADMINISTRATION
Section 5.01 Delegation of Responsibility. Hillenbrand may delegate duties involved in the administration of this Plan to such person or persons whose services are deemed by it to be necessary or convenient.
Section 5.02 Payment of Benefits. Benefits under the Plan shall be paid solely from the general assets of the Company, except to the extent payable upon the delivery of a certificate representing shares of Hillenbrand Common Stock. No Participant shall have any interest in any specific assets of the Company under the terms of this Plan. This Plan shall not be considered to create an escrow account, trust fund or other funding arrangement of any kind or a fiduciary relationship between any Participant and the Company. The Company's obligations under this Plan are purely contractual and shall not be funded or secured in any way.
ARTICLE VI
AMENDMENT OR TERMINATION OF PLAN
Section 6.01. Termination. The Board of Directors of Hillenbrand may at any time terminate this Plan. As of the date on which this Plan is terminated, no additional awards shall be made under the Plan. The Company shall pay to each Participant a number of shares of Hillenbrand Common Stock equal to the number of Phantom Shares then credited to his Participation Account (whether or not then vested) in a single payment as soon as practicable after the Plan termination.
Section 6.02. Amendment. Hillenbrand may amend the provisions of this Plan at any time, provided, however, that no amendment shall adversely affect the rights of Participants or their Beneficiaries with respect to the Phantom Shares credited to their Participation Accounts immediately prior to the amendment.
ARTICLE VII
MISCELLANEOUS
Section 7.01. Successors. This Plan shall be binding upon the successors of the Company.
Section 7.02 Choice of Law. This Plan shall be construed and interpreted pursuant to, and in accordance with, the laws of the State of Indiana without regard to conflicts of law provisions.
Section 7.03 No Service Contract. This Plan shall not be construed as affecting in any manner the rights or obligations of the Company or of any Participant to continue or to terminate director status at any time.
Section 7.04 Non-Alienation. No Participant or his Beneficiary shall have any right to anticipate, pledge, alienate or assign any of his rights under this Plan, and any effort to do so shall be null and void. The benefits payable under this Plan shall be exempt from the claims of creditors or other claimants and from all orders, decrees, levies and executions and any other legal process to the fullest extent that may be permitted by law.
Section 7.05 Reservation of Shares. The Company shall reserve from time to time a sufficient number of shares of Hillenbrand Common Stock to satisfy its obligations under the Plan. Such shares shall be treasury shares.
[Form of grant]
[Award Recipient]*
Dear [Recipient]:
1. Award. The Board of Directors of Hillenbrand Industries, Inc. (the "Company") has granted you an award of 4,112 Phantom Shares pursuant to the Hillenbrand Industries, Inc. Director Phantom Stock Plan (the "Plan"). Defined terms utilized herein and not otherwise defined shall have the meanings set forth in the Plan.
2. Vesting of Phantom Shares. One-half of the Phantom Shares are fully vested. The other half will vest on December 31, 2001 provided that you continue to serve as a member of the Board of Directors of the Company on that date.
3. Rules Governing Award. Your award shall be subject to all of the terms and conditions set forth in the Plan, a copy of which is enclosed.
Hillenbrand Industries, Inc.
By: ________________________
* Grant awarded on July 10, 2001 to Peter F. Coffaro, Edward S. Davis, Leonard Granoff and John C. Hancock.