<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
HILLENBRAND INDUSTRIES
NOTICE OF ANNUAL MEETING
TO BE HELD APRIL 13, 1999
The annual meeting of shareholders of Hillenbrand Industries, Inc.,
an Indiana corporation, 700 State Route 46 East, Batesville, Indiana
47006-8835, will be held at the Sherman House, 35 South Main Street,
Batesville, Indiana 47006-0067, on Tuesday, April 13, 1999, at 10:00 o'clock
a.m., local time (Eastern Standard Time), for the following purposes:
(1) To elect three members to the Board of Directors;
(2) To ratify the appointment of PricewaterhouseCoopers LLP as
independent auditors of Hillenbrand Industries, Inc.; and
(3) To transact such other business as may properly come before
the meeting and any adjournment of the meeting.
The Board of Directors has fixed the close of business on February
12, 1999, as the record date for determining which shareholders are entitled
to notice of and to vote at the meeting.
By Order of the Board of Directors
Mark R. Lindenmeyer
Secretary
March 5, 1999
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
VOTING...................................................................... 1
ELECTION OF DIRECTORS....................................................... 1
ABOUT THE BOARD OF DIRECTORS (INCLUDING DIRECTORS COMPENSATION)............. 6
RATIFICATION OF APPOINTMENT OF AUDITORS..................................... 7
EXECUTIVE COMPENSATION...................................................... 8
COMPENSATION COMMITTEES' REPORT.............................................11
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.................16
COMPANY STOCK PERFORMANCE...................................................16
RETIREMENT PLANS............................................................17
COST OF SOLICITATION........................................................18
SHAREHOLDER PROPOSALS.......................................................18
INCORPORATION BY REFERENCE..................................................18
</TABLE>
<PAGE>
HILLENBRAND INDUSTRIES
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of
Hillenbrand Industries, Inc. (the "Company"), 700 State Route 46 East,
Batesville, Indiana 47006-8835 [telephone (812) 934-7000], for use at the
annual meeting of its shareholders to be held at the Sherman House, 35 South
Main Street, Batesville, Indiana 47006-0067, on April 13, 1999, at 10:00
a.m., local time (Eastern Standard Time), and at any adjournments of the
meeting, and was mailed initially to shareholders on or about March 5, 1999.
All shares represented by these proxies will be voted at this meeting in
accordance with instructions given by shareholders. Where no instructions are
given the shares will be voted (1) in favor of the election of the Board of
Directors' nominees for three directors; (2) in favor of the ratification of
the appointment of PricewaterhouseCoopers LLP as independent auditors of the
Company; and (3) in the discretion of the proxy holder upon such other
business as may properly come before the meeting.
The purpose of the annual meeting is to vote upon the matters set
forth above. The Board of Directors is not aware of any other business which
may come before the meeting. A shareholder executing and delivering the
enclosed proxy may revoke it by giving a later proxy, notifying the Secretary
of the Company in writing, or voting in person at the annual meeting.
VOTING
The close of business on February 12, 1999, has been fixed as the
record date for determining which shareholders are entitled to notice of and
to vote at the annual meeting. On February 12, 1999, there were 66,403,448
shares of the Company's common stock issued and outstanding. Each share of
common stock is entitled to one vote with respect to every matter submitted
to a vote at the meeting. Votes cast by proxy or in person at the annual
meeting will be tabulated by the election inspectors appointed for the
meeting.
VOTES NECESSARY TO ADOPT PROPOSALS. A plurality of the votes cast is
required for the election of directors. Directors are elected by a plurality
of the votes cast by shareholders entitled to vote at a meeting at which a
quorum is present. The affirmative vote of the holders of a majority of the
votes cast is required for the ratification of the appointment of the
auditors.
A majority of the shares issued and outstanding constitutes a
quorum. Under Indiana law, once a share is represented for any purpose at a
meeting it is deemed present for quorum purposes for the remainder of the
meeting. Abstentions, broker non-votes, and instructions on a proxy to
withhold authority to vote for one or more of the director nominees will
result in fewer votes being cast with respect to a particular issue or
nominee.
ELECTION OF DIRECTORS
The Articles of Incorporation and the Code of By-laws of the Company
provide that members of the Board of Directors shall be classified with
respect to the terms which they shall serve by dividing them into three
classes. Each class consists of three or four members. At the upcoming annual
meeting, three members of the Board of Directors in Class III shall be
elected for three year terms expiring at the 2002 annual meeting, or until
their successors are duly elected and qualified. The four directors in Class
I and three directors in Class II were each previously elected to three year
terms expiring at the 2000 and 2001 annual meetings, respectively.
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The enclosed proxy, unless authority is withheld, will be voted in
favor of electing as directors the nominees listed for the terms indicated.
If any one or more of these nominees should be unable to serve, the enclosed
proxy may be voted for a substitute nominee selected by the Board of
Directors or the Board of Directors may amend the Code of By-laws of the
Company to reduce the number of directors.
NOMINEES:
CLASS III
To be elected to serve three year terms expiring at the 2002 annual meeting:
<TABLE>
<CAPTION>
SERVED AS SHARES(1)
A BENEFICIALLY OWNED PERCENT OF
DIRECTOR AS OF TOTAL SHARES
NAME AGE PRINCIPAL OCCUPATION SINCE FEBRUARY 12, 1999 OUTSTANDING
- ---- --- -------------------- ----- ----------------- -----------
<S> <C> <C> <C> <C> <C>
JOHN C. HANCOCK 69 CONSULTANT 1980 22,792(2) (3)
GEORGE M. HILLENBRAND II 59 PERSONAL INVESTMENTS 1986 4,847,785(4)(5) 7.3%
JOHN A. HILLENBRAND II 67 PERSONAL INVESTMENTS 1981(6) 3,695,624(4)(7) 5.6%
</TABLE>
DIRECTORS:
CLASS I
Serving three year terms expiring at the 2000 annual meeting:
<TABLE>
<CAPTION>
SERVED AS SHARES(1)
A BENEFICIALLY OWNED PERCENT OF
DIRECTOR AS OF TOTAL SHARES
NAME AGE PRINCIPAL OCCUPATION SINCE FEBRUARY 12, 1999 OUTSTANDING
- ---- --- -------------------- ----- ----------------- -----------
<S> <C> <C> <C> <C> <C>
PETER F. COFFARO 70 CHAIRMAN OF THE BOARD OF PABCO 1987 43,874 (3)
FLUID POWER CO., OHIO VALLEY
FLOORING, AND ANCHOR FLANGE
COMPANY
EDWARD S. DAVIS 67 PARTNER, HUGHES HUBBARD 1974 12,480(2) (3)
& REED LLP, ATTORNEYS
LEONARD GRANOFF 72 PRESIDENT OF GRANOFF ASSOCIATES 1978 20,208 (3)
W AUGUST HILLENBRAND 58 PRESIDENT AND CHIEF EXECUTIVE 1972 3,997,048(2)(4) 6.0%
OFFICER OF THE COMPANY (8)
</TABLE>
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CLASS II
Serving three year terms expiring at the 2001 annual meeting:
<TABLE>
<CAPTION>
SERVED AS SHARES(1)
A BENEFICIALLY OWNED PERCENT OF
DIRECTOR AS OF TOTAL SHARES
NAME AGE PRINCIPAL OCCUPATION SINCE FEBRUARY 12, 1999 OUTSTANDING
- ---- --- -------------------- ----- ----------------- -----------
<S> <C> <C> <C> <C> <C>
LAWRENCE R. BURTSCHY 62 CHAIRMAN OF L.R. 1970 4,982,982(4)(9) 7.5%
BURTSCHY & COMPANY
DANIEL A. HILLENBRAND 75 CHAIRMAN OF THE BOARD 1969 1,853,869(4)(10) 2.8%
OF THE COMPANY
RAY J. HILLENBRAND 64 PERSONAL INVESTMENTS 1970 1,960,761(4)(11) 3.0%
</TABLE>
STOCK OWNERSHIP OF OTHER NAMED EXECUTIVE OFFICERS:
<TABLE>
<CAPTION>
SHARES(1)
BENEFICIALLY OWNED PERCENT OF
AS OF TOTAL SHARES
NAME AGE PRINCIPAL OCCUPATION FEBRUARY 12, 1999 OUTSTANDING
- ---- --- -------------------- ----------------- -----------
<S> <C> <C> <C> <C>
TOM E. BREWER 60 SENIOR VICE PRESIDENT, FINANCE 59,028(2) (3)
ROBERT J. TENNISON 52 VICE PRESIDENT, 6,759(2) (3)
CONTINUOUS IMPROVEMENT
MARK R. LINDENMEYER 52 VICE PRESIDENT, GENERAL 10,453(2) (3)
COUNSEL & SECRETARY
DONALD G. BARGER, JR. 56 VICE PRESIDENT AND CHIEF 4,920(2) (3)
FINANCIAL OFFICER
ALL DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY AS A GROUP, 17,797,930(2)(5)(7) 26.8%
CONSISTING OF 20 PERSONS. (8)(9)(10)(11)
</TABLE>
(1) The Company's only class of equity securities outstanding is common
stock without par value. The Company is not aware of any person, other
than members of the Hillenbrand family as indicated herein,
beneficially owning more than five percent (5%) of the Company's common
stock. Includes the following shares that may be purchased pursuant to
stock options that are exercisable within 60 days of February 12, 1999:
John C. Hancock, 4,000 shares; George M. Hillenbrand II, 4,000 shares;
John A. Hillenbrand II, 4,000 shares; Peter F. Coffaro, 4,000 shares;
Edward S. Davis, 4,000 shares; Leonard Granoff, 4,000 shares; W August
Hillenbrand, 40,000 shares; Lawrence R. Burtschy, 4,000 shares; Daniel
A. Hillenbrand, 4,000 shares; Ray J. Hillenbrand, 4,000 shares; Tom E.
Brewer, 13,668 shares; Robert J. Tennison, 4,001 shares; Mark R.
Lindenmeyer, 5,334 shares; Donald G. Barger, Jr., 2,667 shares; and all
directors and executive officers as a group, 122,175 shares.
(2) Includes deferred fees and/or compensation in the form of deferred
shares of common stock held on the books and records of the Company in
the following amounts: Donald G. Barger, Jr., 1,250 shares; Tom
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<PAGE>
E. Brewer, 2,312 shares; Edward S. Davis, 4,480 shares; John C.
Hancock, 5,792 shares; W August Hillenbrand, 155,814 shares; Mark R.
Lindenmeyer, 1,479 shares; Robert J. Tennison, 1,808 shares; and other
executive officers, 18,791 shares.
(3) Ownership of less than one percent (1%) of the total shares
outstanding.
(4) John A. Hillenbrand II and Ray J. Hillenbrand are brothers. John A.,
Ray J., W August and George M. Hillenbrand II are nephews of Daniel A.
Hillenbrand. Lawrence R. Burtschy is a son-in-law of George C.
Hillenbrand, deceased, brother of Daniel A. Hillenbrand.
(5) Includes 3,814,920 shares owned of record by trusts, of which George M.
Hillenbrand II is co-trustee, for the benefit of Mr. Hillenbrand and
other members of his immediate family. Mr. Hillenbrand disclaims
beneficial ownership of these shares.
(6) John A. Hillenbrand II previously served as a Director of the Company
from 1972 to 1979.
(7) Includes 16,240 shares held of record by his wife, Joan L. Hillenbrand;
596,951 shares held of record by trusts for the benefit of his children
and grandchildren; and 2,473,392 shares held of record by a family
partnership for the benefit of other members of his immediate family.
Mr. Hillenbrand disclaims beneficial ownership of these shares.
(8) Includes 2,286,842 shares owned of record by trusts, of which W August
Hillenbrand is trustee or co-trustee; and 688,716 shares owned of
record by a family partnership for the benefit of members of his
family. Mr. Hillenbrand disclaims beneficial ownership of these shares
except to the extent of his pecuniary interest therein. Also includes
217,174 shares owned of record and beneficially by his wife, Nancy K.
Hillenbrand; 54,996 shares held of record by a charitable trust, of
which Mr. Hillenbrand is a co-trustee; and 251,325 shares held by a
limited partnership, of which Mr. Hillenbrand is a limited partner. Mr.
Hillenbrand disclaims beneficial ownership of these shares.
(9) Includes 3,814,920 shares owned of record by trusts, of which Lawrence
R. Burtschy is co-trustee, for the benefit of certain members of the
Daniel A. Hillenbrand and George C. Hillenbrand families; and 948,705
shares owned of record and beneficially by his wife, Elisabeth H.
Burtschy. Mr. Burtschy disclaims beneficial ownership of these shares.
(10) Includes 10,400 shares held of record and beneficially owned by Daniel
A. Hillenbrand's wife, Mary H. Hillenbrand. Mr. Hillenbrand disclaims
beneficial ownership of these shares.
(11) Includes 800,000 shares held of record by a trust, of which Ray J.
Hillenbrand is trustee; 15,975 shares held of record by a charitable
foundation, of which Mr. Hillenbrand is a trustee; and 991,501 shares
held of record by family partnerships for the benefit of other members
of his immediate family. Mr. Hillenbrand disclaims beneficial ownership
of these shares.
Daniel A. Hillenbrand has been Chairman of the Board since 1972. Mr.
Hillenbrand served as President of the Company from 1972 through October 20,
1981, and as Chief Executive Officer from 1972 through April 11, 1989. Mr.
Hillenbrand had been employed by the Company throughout his business career
until his retirement on April 30, 1989.
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<PAGE>
W August Hillenbrand has been President of the Company since October
21, 1981 and was elected Chief Executive Officer of the Company on April 11,
1989. Mr. Hillenbrand has been employed by the Company throughout his
business career. He is also a director of DPL Inc. of Dayton, Ohio and HON
INDUSTRIES Inc. of Muscatine, Iowa.
George M. Hillenbrand II has devoted his business career to the
management of personal and family investments.
John A. Hillenbrand II has managed personal and family investments
since 1979. He is also a director of PSI Energy, Inc. of Plainfield, Indiana,
Cinergy Corp. of Cincinnati, Ohio and National City Bank, Indiana of
Indianapolis, Indiana. Mr. Hillenbrand was employed by and active in the
management of the Company prior to his resignation as an officer in 1979. He
is also chairman, vice chairman, or a director of several privately owned
companies.
Ray J. Hillenbrand has been engaged in the management of personal
and family investments for much of his career. Mr. Hillenbrand was employed
by and active in the management of the Company prior to his resignation as an
officer in 1977.
Mr. Burtschy is Chairman of L.R. Burtschy & Company, an investment
management company, and has been so engaged since 1969. Mr. Burtschy is a
director or partner of several privately owned companies and partnerships.
Mr. Coffaro, a mechanical engineer, has devoted his career to the
development of a number of manufacturing and distribution businesses. He is a
director of several privately owned companies located in Cincinnati, Ohio.
Mr. Davis, a partner in Hughes Hubbard & Reed LLP, a New York law
firm, has practiced law during his entire professional career. He is also a
director of Cognitronics Corporation of Danbury, Connecticut.
Mr. Granoff is President and director of Granoff Associates, a
privately owned investment company in Providence, Rhode Island.
Dr. Hancock, who holds a Ph.D. in Electrical Engineering, is a
consultant. Until 1988, he was Executive Vice President for Corporate
Development and Technology of United Telecommunications, Inc. (Sprint).
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, the
Company's directors, its executive officers and any person holding more than
ten percent of the Company's common stock are required to file with the
Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of common stock and other equity securities of the
Company. The Company is required to report in this proxy statement any
failure to file or late filing occurring during 1998. Based solely on reports
and other information from reporting persons, the Company believes that all
of these filing requirements were satisfied by its directors, executive
officers and ten percent beneficial owners, except that one report involving
one transaction was filed late by Robert J. Tennison, Vice President,
Continuous Improvement.
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<PAGE>
ABOUT THE BOARD OF DIRECTORS
(INCLUDING DIRECTOR COMPENSATION)
The Board of Directors has the following standing committees: an
Executive Committee, a Finance Committee, an Audit Committee, a Compensation
Committee and a Performance Compensation Committee. The Company does not have
a nominating committee. During 1998, the Board of Directors of the Company
held five meetings.
The Executive Committee of the Board of Directors consists of
Messrs. Lawrence R. Burtschy, Daniel A. Hillenbrand (Chairman), George M.
Hillenbrand II, John A. Hillenbrand II, Ray J. Hillenbrand and W August
Hillenbrand. The Executive Committee advises the Chief Executive Officer on
business decisions of significant impact and on the business in general.
Subject to limitations provided by law or the Code of By-laws, the Executive
Committee exercises the power and authority of the Board of Directors as may
be necessary during the intervals between meetings of the Board. The
Executive Committee met four times during 1998.
The Finance Committee of the Board of Directors consists of Messrs.
Lawrence R. Burtschy, Daniel A. Hillenbrand (Chairman), George M. Hillenbrand
II, John A. Hillenbrand II, Ray J. Hillenbrand and W August Hillenbrand. The
Finance Committee reviews financial policies and procedures of the Company.
It also makes recommendations to the Board of Directors on dividend policy,
issuance and sale or repurchase of Company securities, and the investment of
Company funds, including pension and thrift plans. The Finance Committee also
advises on proposed acquisitions and divestments. During 1998, the Finance
Committee held four meetings.
The Audit Committee of the Board of Directors consists of Messrs.
Peter F. Coffaro, Edward S. Davis (Chairman) and Daniel A. Hillenbrand. The
Audit Committee annually recommends to the Board of Directors of the Company
independent accountants for appointment by the Board of Directors as auditors
of the books, records and accounts of the Company and its subsidiaries. The
Audit Committee reviews the services to be performed by the independent
accountants; makes a determination regarding the possible effect of the
performance of such services on the independence of the principal independent
accountants; receives and reviews the reports submitted by the principal
independent accountants of the Company; and takes such action with respect to
such reports as it deems appropriate. In addition, the Audit Committee
determines the duties and responsibilities of the internal auditing staff;
reviews the annual program for the internal audit of the operational
procedures of the Company; receives and reviews reports submitted by the
internal auditing staff; and takes such action as it deems appropriate to
assure that the interests of the Company are adequately protected, including
the maintenance of accounting controls and standards. During 1998, the Audit
Committee held four meetings.
The Compensation Committee of the Board of Directors consists of
Messrs. Peter F. Coffaro, Edward S. Davis (Chairman), John C. Hancock, Daniel
A. Hillenbrand and W August Hillenbrand. The Compensation Committee annually
reviews the performance contributions of the officers of the Company and
makes recommendations to the Board of Directors for adjustments to the base
salaries of those officers. The Compensation Committee also has general
oversight responsibility for other compensation programs of the Company and
reviews the structure, cost effectiveness, and competitive position of the
Company's compensation programs. During 1998, the Compensation Committee held
two meetings.
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<PAGE>
The Performance Compensation Committee of the Board of Directors
consists of Messrs. Peter F. Coffaro, Edward S. Davis, John C. Hancock and
Daniel A. Hillenbrand (Chairman) and its Sub-Committee consists of Messrs.
Peter F. Coffaro and John C. Hancock. The Performance Compensation Committee
is responsible for the administration of the Company's Performance
Compensation Plan and Senior Executive Compensation Program, except for those
responsibilities designated to the Sub-Committee under those plans. The
Performance Compensation Committee and/or its Sub-Committee selects
participants, makes awards, establishes specific performance objectives, and
assesses individual and subsidiary performance achievements against those
previously established performance objectives. The Sub-Committee is
responsible for administering the 1996 Stock Option Plan. The Performance
Compensation Committee held two meetings in 1998.
During the Company's fiscal year ended November 28, 1998, each
Director who was not a salaried officer or employee of the Company received
an annual fee of $20,000 and a fee of $3,000 for the January 19, 1998 and
April 7, 1998 Board of Directors meetings attended and $3,500 for the July 7,
1998, August 17, 1998 and October 6, 1998 Board of Directors meetings
attended. Directors who are members of the Executive, Finance, Audit and
Compensation Committees received $1,000 for each committee meeting attended
during January and April of 1998 and $1,500 for each committee meeting
attended during July and October of 1998. Directors were reimbursed for
expenses incurred as a result of attendance at Board or committee meetings.
Directors of the Company may defer receipt of directors' fees otherwise
payable to them by the Company. On January 19, 1999, the Board of Directors
amended the Company's 1996 Stock Option Plan to increase the number of
non-qualified stock options granted to non-employee Directors each year from
2,000 to 4,000. Non-employee Directors are also eligible to participate in
the Company's group term life insurance program in which premiums are paid by
the Company. Death benefits, which are age related, range from $45,000 to
$150,000.
Daniel A. Hillenbrand has entered into a Consulting Agreement with
the Company under which he is to provide consulting and advisory services to
the Company, including advice on acquisitions and capital expenditures, until
May 31, 1999, for which he receives an annual consulting fee of $505,289, as
well as certain insurance, pension, health care and other benefits which
totaled $337,462 during 1998. Mr. Hillenbrand has unique knowledge and
extensive experience in the industries served by the Company, in part because
of his long-term relationship with the Company, and in addition he is
well-recognized as an innovator and leader in these industries. Therefore,
consulting services from other sources would not be comparable to the
services provided by Mr. Hillenbrand. Mr. Hillenbrand retired from the
Company on April 30, 1989, but continues to serve as Chairman of the Board.
During the past year the Company purchased 20,000 shares of common
stock from Ray Hillenbrand, 123,500 shares of stock from W August
Hillenbrand, 9,100 shares of stock from a trust established by George C.
Hillenbrand to facilitate the payment of the trust's federal and state taxes
upon the death of Mr. Hillenbrand's widow, Margaret M. Hillenbrand, and
15,000 shares of stock from John A. Hillenbrand II.
RATIFICATION OF APPOINTMENT OF AUDITORS
Subject to shareholder ratification, the Board of Directors of the
Company has appointed the firm of PricewaterhouseCoopers LLP, certified
public accountants, as independent auditors to make an examination of the
financial statements of the Company for its fiscal year ending November 27,
1999. The appointment was made upon the recommendation of the Audit
Committee, which is composed of members of the Board of Directors who are not
officers or otherwise employees of the Company. A representative of
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PricewaterhouseCoopers LLP will be present at the annual meeting with an
opportunity to make a statement, if he so desires, and will respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT AUDITORS OF THE COMPANY.
EXECUTIVE COMPENSATION
The following tabulation and notes set forth the compensation paid
or accrued by the Company during the three fiscal years ended November 28,
1998, November 29, 1997 and November 30, 1996 to the Chief Executive Officer
and each of the other four most highly compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ------------------------------------- ---------------------------------------------- ------------------------------- -------------
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------
AWARDS PAYOUTS
--------------- -------------- --------------- -------------------------------
NAME OTHER SECURITIES
AND ANNUAL UNDERLYING LTIP ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION OPTIONS PAYOUTS COMPENSATION
POSITION YEAR $ $ $(1) #(2) $(3) $(4)
-------- ---- --------- -------- -------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------- --------------- -------------- --------------- --------------- --------------- --------------
W AUGUST HILLENBRAND 1998 $790,288 $717,750 $214,542 60,000 $1,062,631 $373,960
PRESIDENT AND CHIEF 1997 $732,032 $661,433 $142,270 30,000 $ 0 $195,393
EXECUTIVE OFFICER 1996 $690,972 $623,633 $130,900 N/A $ 0 $160,155
- ------------------------------------- --------------- -------------- --------------- --------------- --------------- --------------
TOM E. BREWER 1998 $341,865 $206,100 (5) 25,000 $ 280,705 $ 82,216
SENIOR VICE PRESIDENT, 1997 $321,615 $193,800 (5) 8,000 $ 0 $ 56,599
FINANCE 1996 $304,308 $183,000 (5) N/A $ 0 $ 48,305
- ------------------------------------- --------------- -------------- --------------- --------------- --------------- --------------
ROBERT J. TENNISON 1998 $228,327 $138,900 (5) 8,000 $ 94,299 $ 13,289
VICE PRESIDENT, 1997 $209,423 $ 94,500 (5) 2,000 N/A $ 3,200
CONTINUOUS IMPROVEMENT 1996 $157,981 $ 69,111 (5) N/A N/A $ 3,000
- ------------------------------------- --------------- -------------- --------------- --------------- --------------- --------------
MARK R. LINDENMEYER 1998 $214,240 $129,150 (5) 8,000 $ 179,522 $ 29,304
VICE PRESIDENT, GENERAL 1997 $204,423 $123,000 (5) 4,000 $ 0 $ 16,746
COUNSEL & SECRETARY 1996 $194,423 $117,000 (5) N/A $ 0 $ 25,475
- ------------------------------------- --------------- -------------- --------------- --------------- --------------- --------------
DONALD G. 1998 $211,813 $127,088 (5) 8,000 $ 65,195 $ 15,466
BARGER, JR. (6) 1997 N/A N/A N/A N/A N/A N/A
VICE PRESIDENT AND CHIEF 1996 N/A N/A N/A N/A N/A N/A
FINANCIAL OFFICER
- ------------------------------------- --------------- -------------- --------------- --------------- --------------- --------------
</TABLE>
(1) Consists of the cost of perquisites, above market interest earned and
other personal benefits provided by the Company. Included in the 1998
amounts shown for W August Hillenbrand are $117,369 for above market
interest earned and $66,834 for financial planning services reimbursed.
(2) All options were granted pursuant to the Company's 1996 Stock Option
Plan. The Company has not awarded stock appreciation rights.
(3) The amounts appearing in this column are the values as of November 28,
1998, November 29, 1997 and November 30, 1996 of the shares earned
under the Senior Executive Compensation Program for 1996-1998,
1995-1997 and 1994-1996 performance cycles, respectively.
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<PAGE>
(4) All other compensation earned or allocated in 1998 is as follows:
<TABLE>
<CAPTION>
PENSION CONTRIBUTIONS
-------------------------------- SPLIT DOLLAR LIFE
SUPPLEMENTAL 401(k) INSURANCE BENEFITS TOTAL
------------- ------ ------------------ -----
<S> <C> <C> <C> <C>
W AUGUST HILLENBRAND $223,322 $3,200 $147,438 $ 373,960
TOM E. BREWER $ 65,307 $3,200 $ 13,709 $ 82,216
ROBERT J. TENNISON NONE $3,200 $ 10,089 $ 13,289
MARK R. LINDENMEYER $ 16,015 $3,200 $ 10,089 $ 29,304
DONALD G. BARGER, JR. NONE $3,200 $ 12,266 $ 15,466
</TABLE>
(5) Amounts do not exceed disclosure thresholds established under SEC
rules.
(6) Donald G. Barger, Jr. has been employed and served as an executive
officer of the Company since March 16, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning stock
option grants to the named executive officers during the fiscal year ended
November 28, 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS GRANTED EMPLOYEES IN PRICE GRANT DATE
NAME #(1) FISCAL YEAR ($/SHARE) EXPIRATION DATE PRESENT VALUE (2)
- ---- --------------- ----------- --------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
W AUGUST HILLENBRAND 60,000 12.47% $52.1563 1/18/08 $839,754
TOM E. BREWER 25,000 5.20% $52.1563 1/18/08 $349,898
ROBERT J. TENNISON 8,000 1.66% $52.1563 1/18/08 $111,967
MARK R. LINDENMEYER 8,000 1.66% $52.1563 1/18/08 $111,967
DONALD G. BARGER, JR. 8,000 1.66% $59.2188 3/16/08 $127,128
</TABLE>
(1) All options were granted pursuant to the Company's 1996 Stock Option
Plan. The options were granted at an exercise price equal to the fair
market value of the Company's Common Stock on the date of grant. The
options were granted for terms of ten years, and vest one-third on each
of the first three anniversaries of the date of grant. In the event of
a change of control of the Company, the unvested portions of the
options will be subject to limited accelerated vesting. No stock
appreciation rights were granted to executive officers in fiscal 1998.
(2) Option values were calculated on the basis of the Black-Scholes option
pricing model. Options were assumed to be exercised 6.00 years after
the date of grant. Other assumptions used for the valuations are a
risk-free interest rate of 5.63%, stock price volatility of .1926 and
annual dividend yield of 1.49%. The actual value of the options will
depend on the market value of the Company's common stock on the dates
the options are exercised.
-9-
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information concerning option
exercises during fiscal year 1998 by the named executive officers and
unexercised options held by such officers as of November 28, 1998:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END
ACQUIRED VALUE ------------------------------- -----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
W AUGUST HILLENBRAND 0 $0 10,000 80,000 $136,250 $619,375
TOM E. BREWER 0 $0 2,667 30,333 $ 36,338 $217,193
ROBERT J. TENNISON 0 $0 667 9,333 $ 9,088 $ 64,412
MARK R. LINDENMEYER 0 $0 1,334 10,666 $ 18,176 $ 82,574
DONALD G. BARGER, JR. 0 $0 0 8,000 $ 0 $ 0
</TABLE>
LONG TERM INCENTIVE PLANS - AWARDS
IN LAST FISCAL YEAR
The following table gives information regarding long term incentive
plan awards made during fiscal year 1998 to each of the named executive
officers.
<TABLE>
<CAPTION>
ESTIMATED FUTURE
NUMBER OF SHARES/ PEFORMANCE OR OTHER PAYOUTS UNDER NON-STOCK PRICE-BASED PLANS
UNITS OR PERIOD UNTIL ----------------------------------------------
NAME OTHER RIGHTS (1) MATURATION OR PAYOUT THRESHOLD # TARGET # MAXIMUM #
---- ---------------- -------------------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
W AUGUST HILLENBRAND 9,260 1998/2000 1 9,260 18,520
TOM E. BREWER 2,394 1998/2000 1 2,394 4,788
ROBERT J. TENNISON 1,613 1998/2000 1 1,613 3,226
MARK R. LINDENMEYER 1,500 1998/2000 1 1,500 3,000
DONALD G. BARGER, JR. 1,887 1998/2000 1 1,887 3,774
</TABLE>
(1) Performance share award based on participation in the Senior Executive
Compensation Program. Payout of award is dependent on specified levels
of shareholder value created during a three year period. The target
amount will be earned if 100% of targeted shareholder value created is
achieved. Incremental amounts above the threshold will be earned as
incremental shareholder value is created and the maximum award is based
on achievement of 200% of the targeted shareholder value created.
SPLIT DOLLAR LIFE INSURANCE PLAN
In fiscal 1998, the Company instituted the Hillenbrand Industries
Split Dollar Life Insurance Plan which covers key employees of the Company
and provides split-dollar pre- and post-retirement coverage. Under this plan
pre-retirement employee death benefits range from $600,000 to $5,000,000. At
retirement the coverage is scheduled to be reduced by 50%. Each covered
employee owns an individual policy and the premium is a shared responsibility
between the employee and the Company. The Company pays the majority of the
premiums subject to a collateral assignment agreement with the employee owner
of the policy. The policy matures at age 65 or after the employee has been in
the plan for 15 years, whichever is later. At policy maturity the Company's
cash value share, which equals its cumulative premium payments on the policy,
is transferred from the policy back to the Company. The remaining cash value
is controlled by the employee owner of the policy.
-10-
<PAGE>
COMPENSATION COMMITTEES' REPORT
The Compensation Committee and the Performance Compensation
Committee of the Board of Directors, under the direction of the Board of
Directors, have prepared the following report for inclusion in this proxy
statement. This report sets forth the compensation policies applicable to the
Company's executive officers and the relationship of corporate performance to
executive compensation. The functions of each Committee and of a
sub-committee of one of them are divided in order to meet applicable legal
requirements, but those committees are collectively referred to in this
report as the Committee.
COMPENSATION PHILOSOPHY
The Company's compensation programs reflect a long-standing and
strongly held belief in the principle of performance oriented compensation.
The values that are integral to the design and operation of the Company's
compensation administration and plan designs include:
- - creating long term shareholder value as the cornerstone of the
Company's compensation philosophy
- - linking compensation programs to the achievement of business strategies
in each subsidiary
- - having financial objectives at the subsidiary level that reflect the
performance expectations of the Company for that entity
- - emphasizing variable pay rather than fixed compensation
Performance expectations reflect the Company's commitment to
continuous improvement. When expectations are met or exceeded, variable
compensation should be paid; to the extent expectations are not met, variable
incentive compensation should not be paid.
The compensation package for the senior executives of the Company is
comprised of base salary, an annual cash incentive, a three-year performance
opportunity, stock options, and benefits which are generally available in
companies of similar size.
COMPENSATION ELEMENTS
1. BASE SALARY
At the senior executive level, base salaries are conservative when
compared with companies of similar size and financial performance. Emphasis
in the Company's compensation programs is placed on variable or "at risk"
compensation rather than on base salary. The Committee reviews the base
salaries of the executive officers on an annual basis. Adjustments to base
salaries result from an assessment of the performance contributions of each
executive in relationship to that executive's scope of responsibility. The
Committee also examines the overall competitive position of the base salaries
of its executive officers in relation to companies of similar size and
financial performance. The Committee maintains an appropriate position for
other compensation elements, i.e. short term incentive compensation,
perquisite compensation, long term incentive compensation, and other benefit
programs including life insurance and pension benefits. The Company rewards
the creation of
-11-
<PAGE>
sustainable long term shareholder value and as a result places greater
emphasis on variable compensation than on base salary.
Effective July 6, 1998 the Board of Directors acted on the
recommendation of the Committee to increase the compensation of W August
Hillenbrand by 9.87%. Prior to making the adjustment the Committee reviewed
the year to date performance of each of the subsidiaries, the financial
performance of the Company, and the performance contributions of Mr.
Hillenbrand in relationship to performance objectives, such as management of
cash flow and return on equity, and made an assessment of the degree to which
he was contributing to the creation of long term shareholder value. The
Committee also reviewed competitive compensation information provided by an
independent consulting firm prior to recommending to the Board of Directors
the adjustment to Mr. Hillenbrand's base salary. The Committee also utilized
the services of an independent compensation consulting firm to provide
marketplace competitive information regarding base salaries of executive
officers. The base salaries of executive officers of the Company were
compared with those of other diversified manufacturing firms, and with base
salary practices of companies who have generated total shareholder returns
similar to those of the Company. Other executive officers were granted
adjustments to their base salaries at the same time based both upon their
performance contributions, such as attainment of continuous improvement in
their areas of responsibility and management of cash flow, during the
preceding twelve months and marketplace comparisons. Adjustments to the base
salaries of the other executive officers were recommended by the Committee
and approved by the Board of Directors. Eligible executive officers may elect
to defer all or a portion of their base salary to be paid at the end of the
deferral period in cash with interest accrued at the prime rate. During the
past year, the Committee approved an alternate return calculation for the
Chief Executive Officer of the Company where he may elect for amounts
deferred from base salary, perquisite compensation and incentive compensation
to track the performance of a phantom investment in an equity mutual fund.
2. PERQUISITES
The senior executive officers are eligible for perquisite
compensation under the Company's Senior Executive Compensation Program (the
"Program"). The annual amount of a perquisite account is limited to 10% of
each participant's base salary or such other limits as may be imposed on
participants by the Committee (in the case of the Chief Executive Officer of
the Company and certain other senior executives who are participants) and by
the Chief Executive Officer of the Company (in the case of other
participants). Perquisite compensation may be used to pay for supplemental
health care, insurance benefits, financial planning assistance, club
membership fees or Company common stock. All or a portion of perquisite
compensation may be deferred to be paid in cash at the end of the deferral
period.
3. INCENTIVE COMPENSATION
a. SHORT TERM INCENTIVE COMPENSATION
Under the terms of the Program, the Committee establishes specific
financial and non-financial objectives for each subsidiary and for the
Company overall. Each subsidiary is measured and rewarded based upon its
performance contributions and the performance of its strategic business
units. Short term financial performance objectives are established annually
at levels which generally represent continuous improvement over prior years'
results. Non-financial performance objectives are established to assure
proper attention by each subsidiary to those non-financial factors which are
necessary for long term shareholder value creation. Achievement of financial
objectives determines how much short term incentive compensation is
potentially available for distribution in each subsidiary; achievement of
both the financial and non-financial objectives
-12-
<PAGE>
determines how much incentive compensation will actually be paid. The
Committee established financial and non-financial objectives to maintain the
appropriate balance between the short and long term performance expectations
of shareholders.
The amount of short term incentive compensation is determined by
first establishing a performance base ("Performance Base") and a target
("Target") for each subsidiary. The Performance Base and Target for the
Company's Chief Executive Officer and Vice Presidents are recommended by the
Chief Executive Officer of the Company and approved by the Committee. The
Performance Base and Target for each participant in the Program who is a
chief executive officer of a subsidiary are approved by the Chief Executive
Officer of the Company. The Performance Base and Target for other
participants who are employees of the Company are established and approved by
the Chief Executive Officer of the Company and the Performance Base and
Target for participants who are employees of subsidiaries of the Company are
established by the chief executive officer of such subsidiary. The
Performance Base and Target for the Chief Executive Officer of the Company
are directly related to the return on shareholder equity of the Company or as
otherwise determined by the Committee. Goals for other participants include
both financial and non-financial measures and may reflect the accomplishment
of tactical and strategic plans of each subsidiary.
Short term incentive compensation opportunity is equal to 60% of
base salary for the Chief Executive Officer of the Company; 50% of base
salary in the case of a chief executive officer of a subsidiary; 40% of base
salary for corporate or subsidiary senior executives; and 30% for all other
executive participants. For the 1998 fiscal year, the plan provided for short
term incentive compensation equal to 50% of the above scale upon attainment
of the Performance Base, and achievement above Performance Base was paid up
to 150% of the above scale according to a formula recommended by the Chief
Executive Officer of the Company and approved by the Committee.
Short term incentive compensation is calculated for each senior
executive participant at the end of each fiscal year. Short term incentive
compensation is payable in cash after forty days, but within seventy-five
days, after the end of the fiscal year. All or a portion of short term
incentive compensation may be deferred by the employee and invested either in
cash or common stock to be paid at the end of the deferral period.
Executive officers of the Company were awarded cash bonuses in
January 1999 based upon the achievement of return on shareholder equity
objectives established by the Committee at the beginning of the 1998 fiscal
year.
b. LONG TERM INCENTIVE COMPENSATION
Under the terms of the Program, the Committee reviews the business
plans of each of the subsidiaries and the performance expectations of the
Company overall at the commencement of each fiscal year. The performance
history and expected performance contributions of each subsidiary provide the
foundation for the Committee to establish performance objectives for long
term compensation programs.
The Committee annually recommends to the Board of Directors the
establishment and administration of the Company's long term incentive
compensation. The Committee designates participants in the long term
component of the Program and establishes the shareholder value creation
objectives for each subsidiary and for the Company for the three-year cycle
of the Program. The Committee reviews a mathematically calculated analysis of
a shareholder's risk-adjusted expectation for return on an investment in the
Company's common stock. The Committee establishes specific performance
objectives for each subsidiary and for the Company
-13-
<PAGE>
based upon the shareholder value calculation. For the executive officers of
the Company, the base for the three-year cycle is established by taking the
prior year's net income and dividing it by the weighted average cost of
capital for the Company. During the three-year cycle, the positive and
negative cash flows are measured and adjusted to account for their time value
to the Company. At the end of the three-year period, the Company's net income
is again capitalized by dividing it by the Company's weighted average cost of
capital. The result of these calculations is compared with the present value
of the base year's capitalized net income to determine if shareholder value
exceeded calculated shareholder expectations. The level of performance so
determined represents the minimum level of performance which must be achieved
for payment of long term incentive compensation. The Committee further
establishes a maximum level of shareholder value creation for which incentive
compensation will be paid. Performance above that level creates additional
value for shareholders but does not result in additional payments to
executive officers.
The long term component of the Program affords executives the
opportunity to become significant shareholders in the Company, thereby
aligning the interests of shareholders and executives. At the commencement of
each three-year cycle a performance opportunity for each participant is
established. That opportunity is equal to 50% of base salary for the Chief
Executive Officer of the Company; 45% of base salary in the case of a chief
executive officer of a subsidiary; 30% of base salary for corporate or
subsidiary senior executives; and 20% of base salary for all other executive
participants. That opportunity is divided by the preceding year's average
share price of the Company's common stock to determine the tentative award in
shares of common stock. At the conclusion of the performance cycle the extent
to which the financial performance of the Company exceeded the calculated
expectations of shareholders is determined. To the extent that calculated
shareholder expectations were exceeded, payouts are made under the Program,
some of which may be required to be deferred. The range of award can be from
0 to 200% of the opportunity established for each executive at the outset of
the cycle.
Long term performance share compensation is payable at the end of
the three-year cycle (but not sooner than forty days after the end of the
cycle) in the form of shares of common stock. Payment of long term
performance compensation is contingent upon a participant's continued
employment throughout the three-year period to which the compensation
relates. All or a portion of long term performance compensation earned may be
deferred by the employee. All earned compensation above the 100% target
achievement at the end of each cycle must be deferred until the later of age
62 or retirement and is subject to forfeiture in the event the employee
voluntarily terminates employment within three years after the end of the
cycle.
During the 1996/1998 cycle the financial performance of the Company
was above the performance targets for the Program's minimum payout; therefore
executive officers of the Company were awarded shares of common stock in
January 1999.
c. STOCK OPTION PLAN
The 1996 Stock Option Plan provides for the opportunity to grant
stock options to officers, other key employees and non-employee directors to
help align those individuals' interests with those of shareholders, to
motivate executives to make strategic long-term decisions, and to better
enable the Company to attract and retain capable directors and executive
personnel.
The Committee utilized the services of an independent consulting
compensation firm to provide marketplace competitive information as well as
the practices of companies who have generated similar total shareholder
returns.
-14-
<PAGE>
Stock option grants for non-employee directors of 4,000 shares are
provided by the Plan and are to be granted as of the first day following each
annual meeting of the Company's shareholders. The director options vest one
year after the grant date. Officers and other key employees were granted
stock options during the 1998 fiscal year. These options vest over a three
year period. Officers and some key employees have been given shareholding
guidelines to encourage them to become significant shareholders of the
Company.
* * *
Section 162(m) of the Internal Revenue Code limits tax deductibility
of certain executive compensation in excess of $1 million per year unless
certain requirements are met. The Program is designed to meet these
requirements. The policy of the Committee related to these requirements is to
maintain a compensation program which maximizes the creation of long term
shareholder value. The Committee's intention is to comply with the
requirements of Section 162(m) except in those limited cases where the
Committee believes shareholder interests are best served by another approach.
Respectfully submitted to the Company's shareholders by the
Compensation Committee and the Performance Compensation Committee of the
Board of Directors.
BY: COMPENSATION COMMITTEE BY: PERFORMANCE COMPENSATION
COMMITTEE
Peter F. Coffaro Peter F. Coffaro
Edward S. Davis (Chairman) Edward S. Davis
John C. Hancock John C. Hancock
Daniel A. Hillenbrand Daniel A. Hillenbrand (Chairman)
W August Hillenbrand
-15-
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Peter F. Coffaro, Edward S. Davis, John C. Hancock, Daniel A.
Hillenbrand and W August Hillenbrand served on the Compensation Committee
during 1998, and Peter F. Coffaro, Edward S. Davis, John C. Hancock and
Daniel A. Hillenbrand served on the Performance Compensation Committee during
1998.
Daniel A. Hillenbrand, Chief Executive Officer of the Company until
April 11, 1989, and currently Chairman of the Board of the Company, serves on
both the Compensation Committee and the Performance Compensation Committee of
the Company. W August Hillenbrand, President and Chief Executive Officer of
the Company, serves on the Compensation Committee.
Edward S. Davis, who is Chairman of the Compensation Committee and a
member of the Performance Compensation Committee, is a partner in the law
firm of Hughes Hubbard & Reed LLP. The Company retains Hughes Hubbard & Reed
LLP as legal counsel.
COMPANY STOCK PERFORMANCE
The following graph compares the cumulative total return for common
stock of the Company with the S & P 500 Index and S & P Manufacturing
(Diversified Industrial) Index:
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG HILLENBRAND INDUSTRIES, S&P 500 AND
S&P MANUFACTURING (DIVERSIFIED INDUSTRIALS)
BASE=NOVEMBER 1993
Date Hillenbrand S&P 500 S&P Mfg
<S> <C> <C> <C>
1993 $100 $100 $100
1994 $73 $101 $102
1995 $82 $138 $150
1996 $94 $177 $211
1997 $115 $227 $248
1998 $148 $281 $280
</TABLE>
Assumes $100 invested in November 1993. Total return assumes that all
dividends are reinvested when received.
-16-
<PAGE>
RETIREMENT PLANS
SAVINGS PLAN
Under the Hillenbrand Industries, Inc., Savings Plan (the "Savings
Plan"), officers of the Company and other employees may contribute through
payroll deduction up to 15 percent of their base salary on a pre-tax basis,
subject to certain maximum amounts established by the Internal Revenue
Service, pursuant to Section 401(k) of the Internal Revenue Code, into a
choice of investment vehicles. The Company makes matching contributions of 40
percent of the first five percent of pre-tax contributions (prior to January
1, 1992, the Company contributed 25 percent of the first four percent of
pre-tax contributions), subject to certain maximum amounts established by the
Internal Revenue Service, and such amounts become fully vested after five
years of service with the Company and its subsidiaries.
PENSION PLAN
The Hillenbrand Industries, Inc. Pension Plan (the "Pension Plan")
covers officers of the Company and other employees. Directors of the Company
who are not employees of the Company or one of its subsidiaries are not
eligible to participate in the Pension Plan. Contributions to the Pension
Plan by the Company are made on an actuarial basis, and no specific
contributions are determined or set aside for any individual.
Employees, including officers of the Company, who retire under the
Pension Plan receive fixed benefits calculated by means of a formula that
takes into account the highest average annual base salary earned over five
consecutive years and the employees' years of service. The following table
shows approximate representative pension benefits based on a single life
annuity calculation for the compensation and years of service indicated:
<TABLE>
<CAPTION>
APPROXIMATE ANNUAL PENSION UPON RETIREMENT AT AGE 65
HIGHEST AVERAGE BASE
SALARY FOR ANY PERIOD OF 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
5 CONSECUTIVE YEARS OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE
------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 6,000 $ 12,000 $ 18,000 $ 24,000 $ 30,000 $ 36,000 $ 42,000 $ 48,000
$ 200,000 $ 14,000 $ 28,000 $ 42,000 $ 56,000 $ 70,000 $ 84,000 $ 98,000 $112,000
$ 300,000 $ 22,000 $ 44,000 $ 66,000 $ 88,000 $110,000 $132,000 $154,000 $176,000
$ 400,000 $ 30,000 $ 60,000 $ 90,000 $120,000 $150,000 $180,000 $210,000 $240,000
$ 500,000 $ 38,000 $ 76,000 $114,000 $152,000 $190,000 $228,000 $266,000 $304,000
$ 600,000 $ 46,000 $ 92,000 $138,000 $184,000 $230,000 $276,000 $322,000 $368,000
$ 700,000 $ 54,000 $108,000 $162,000 $216,000 $270,000 $324,000 $378,000 $432,000
$ 800,000 $ 62,000 $124,000 $186,000 $248,000 $310,000 $372,000 $434,000 $496,000
$ 900,000 $ 70,000 $140,000 $210,000 $280,000 $350,000 $420,000 $490,000 $560,000
$1,000,000 $ 78,000 $156,000 $234,000 $312,000 $390,000 $468,000 $546,000 $624,000
</TABLE>
The credited years of service under the Pension Plan and the 1998
calendar year base salaries for the officers named in the table are as
follows: W August Hillenbrand - 38 years, $826,731; Tom E. Brewer - 16 years,
$356,384; Robert J. Tennison - 3 years, $239,769; Mark R. Lindenmeyer - 12
years, $223,327; and Donald G. Barger, Jr. - 1 year, $242,308.
-17-
<PAGE>
The Internal Revenue Code limits the amount of benefits which may be
paid under a qualified pension plan, such as the Company's Pension Plan. In
order to be able to pay the full benefits which are earned as described in
the paragraph and table above, the Company has established a non-qualified,
unfunded pension plan for senior executives to pay the amounts which could
not otherwise be paid because of the limitations established by the Internal
Revenue Code. The Pension Plan is not subject to deductions for Social
Security or other offset amounts.
COST OF SOLICITATION
The entire cost of solicitation of proxies by the Board of Directors
will be borne by the Company. In addition to the use of the mails, proxies
may be solicited by personal interview, facsimile, telephone and telegram by
directors, officers and employees of the Company. The Company expects to
reimburse brokers or other persons for their reasonable out-of-pocket
expenses in forwarding proxy material to beneficial owners.
SHAREHOLDER PROPOSALS
Any proposal by a shareholder which is to be presented at the annual
meeting to be held in 2000 must be received at the Company's principal
executive offices in Batesville, Indiana, not later than January 4, 2000, in
order to be included in the proxy statement and form of proxy relating to
that meeting.
Pursuant to the Code of By-laws of the Company, any proposal by a
shareholder may not be presented at the annual meeting to be held in 2000
unless it is delivered to or mailed and received by the Secretary at the
Company's principal offices in Batesville, Indiana, not later than 100 days
prior to the anniversary of the April 13, 1999 annual meeting. If the date of
the annual meeting to be held in 2000 is more than 30 days after such
anniversary date, such notice will also be timely if received by the
Secretary by the later of 100 days prior to the forthcoming 2000 annual
meeting date and the close of business 10 days following the date on which
the Company first makes public disclosure of the 2000 annual meeting date.
INCORPORATION BY REFERENCE
Notwithstanding anything to the contrary set forth in any of the
Company's previous or future filings under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, that
incorporates this proxy statement by reference, the Compensation Committees'
Report and the line graph Comparison of Five Year Cumulative Total Return
shall not be incorporated by reference into any such filings.
Mark R. Lindenmeyer
Secretary
March 5, 1999
-18-
<PAGE>
HILLENBRAND INDUSTRIES, INC.
Proxy for Annual Meeting Of Shareholders To Be Held April 13, 1999
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Daniel A. Hillenbrand and W August Hillenbrand, or
either of them, with full power of substitution, as proxies to vote all the
shares of the undersigned at the Annual Meeting of Shareholders of
Hillenbrand Industries, Inc. (the "Company") to be held at the Sherman House,
35 South Main Street, Batesville, Indiana 47006-0067, on April 13, 1999 at
10:00 a.m., local time (Eastern Standard Time), and at any adjournments of
the meeting, on the following matters:
(1) Election of director nominees John C. Hancock, George M.
Hillenbrand II and John A. Hillenbrand II to serve three year
terms as directors.
/ / FOR ALL NOMINEES / / WITHHOLD AUTHORITY
(except as marked to the contrary below)
(INSTRUCTION: To withhold authority for any individual
nominee, write that nominee's name on the line provided
below.)
-----------------------------------
(2) Ratification of the appointment of PricewaterhouseCoopers LLP
as independent auditors.
/ / FOR / / AGAINST / / ABSTAIN
(3) In their discretion upon such other business as may properly
come before the meeting or any adjournment thereof.
THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED.
(continued and to be signed on reverse side)
----------------------------------------------------------
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THE SHARES WILL BE VOTED
FOR ITEMS 1 AND 2. IF ANY DIRECTOR NOMINEE SHOULD BE UNABLE TO SERVE, THE
SHARES WILL BE VOTED FOR A SUBSTITUTE NOMINEE SELECTED BY THE BOARD OF
DIRECTORS. IF ANY OTHER BUSINESS COMES BEFORE THE MEETING, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE PROXY
HOLDERS.
-----------------------------
Signature
-----------------------------
Signature if held jointly
Please sign name and title exactly as shown
on label on this proxy card.
Dated:____________________, 1999
IMPORTANT: THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE,
PARTNER, OFFICER OR GUARDIAN, PLEASE GIVE YOUR FULL TITLE. IF SHARES ARE HELD
JOINTLY, ALL HOLDERS MUST SIGN THE PROXY. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
