<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Rule 14a-11(c) or Rule 14a-12
HILLENBRAND INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
[COMPANY NAME]
- --------------------------------------------------------------------------------
(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:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
HILLENBRAND INDUSTRIES
NOTICE OF ANNUAL MEETING
TO BE HELD APRIL 11, 2000
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 11, 2000, at 10:00 o'clock a.m., local time
(Eastern Standard Time), for the following purposes:
(1) To elect four members to the Board of Directors;
(2) To reapprove the Hillenbrand Industries, Inc. Senior Executive
Compensation Program;
(3) To ratify the appointment of PricewaterhouseCoopers LLP as
independent auditors of Hillenbrand Industries, Inc.; and
(4) 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 11,
2000, 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 3, 2000
<PAGE> 3
CONTENTS
PAGE
----
VOTING.................................................................... 1
ELECTION OF DIRECTORS..................................................... 2
ABOUT THE BOARD OF DIRECTORS (INCLUDING DIRECTOR COMPENSATION)............ 8
REAPPROVAL OF THE SENIOR EXECUTIVE COMPENSATION PROGRAM................... 10
RATIFICATION OF APPOINTMENT OF AUDITORS................................... 11
EXECUTIVE COMPENSATION.................................................... 12
COMPENSATION COMMITTEES' REPORT........................................... 17
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION............... 23
COMPANY STOCK PERFORMANCE................................................. 24
RETIREMENT PLANS.......................................................... 25
COST OF SOLICITATION...................................................... 26
SHAREHOLDER PROPOSALS..................................................... 26
INCORPORATION BY REFERENCE................................................ 27
EXHIBIT A - HILLENBRAND INDUSTRIES, INC. SENIOR EXECUTIVE
COMPENSATION PROGRAM...................................................... A-1
<PAGE> 4
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 11, 2000, 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 3, 2000. 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 four directors; (2) in favor of the reapproval of the Senior Executive
Compensation Program; (3) in favor of the ratification of the appointment of
PricewaterhouseCoopers LLP as independent auditors of the Company; and (4) 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 11, 2000, 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 11, 2000, there were 62,751,733 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.
-1-
<PAGE> 5
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 reapproval of the Senior Executive Compensation Program requires
the affirmative vote of the holders of a majority of the outstanding common
shares present in person or by proxy and entitled to vote. 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, four
members of the Board of Directors in Class I shall be elected for three year
terms expiring at the 2003 annual meeting, or until their successors are duly
elected and qualified. The three directors in Class II and four directors in
Class III were each previously elected to three year terms expiring at the 2001
and 2002 annual meetings, respectively.
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.
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<PAGE> 6
NOMINEES:
CLASS I
To be elected to serve three year terms expiring at the 2003 annual meeting:
<TABLE>
<CAPTION>
SERVED AS SHARES(1)
A BENEFICIALLY OWNED PERCENT OF
DIRECTOR AS OF TOTAL SHARES
NAME AGE PRINCIPAL OCCUPATION SINCE FEBRUARY 11, 2000 OUTSTANDING
- ---- --- -------------------- ----- ----------------- -----------
<S> <C> <C> <C> <C> <C>
PETER F. COFFARO 71 CHAIRMAN OF THE BOARD OF PABCO 1987 38,874 (2)
FLUID POWER CO., OHIO VALLEY
FLOORING, AND ANCHOR FLANGE
COMPANY
EDWARD S. DAVIS 68 PARTNER, HUGHES HUBBARD 1974 12,578(3) (2)
& REED LLP, ATTORNEYS
LEONARD GRANOFF 73 PRESIDENT OF GRANOFF ASSOCIATES 1978 20,208 (2)
W AUGUST HILLENBRAND 59 CHIEF EXECUTIVE OFFICER OF THE 1972 3,997,533(3)(4) 6.3%
COMPANY (5)
</TABLE>
DIRECTORS:
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 11, 2000 OUTSTANDING
- ---- --- -------------------- ----- ----------------- -----------
<S> <C> <C> <C> <C> <C>
LAWRENCE R. BURTSCHY 63 CHAIRMAN OF L.R. 1970 4,966,202(4)(6) 7.9%
BURTSCHY & COMPANY
DANIEL A. HILLENBRAND 76 CHAIRMAN OF THE BOARD 1969 1,845,119(4)(7) 2.9%
OF THE COMPANY
RAY J. HILLENBRAND 65 PERSONAL INVESTMENTS 1970 1,970,761(4)(8) 3.1%
</TABLE>
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<PAGE> 7
CLASS III
Serving 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 11, 2000 OUTSTANDING
- ---- --- -------------------- ----- ----------------- -----------
<S> <C> <C> <C> <C> <C>
JOHN C. HANCOCK 70 CONSULTANT 1980 24,093(3) (2)
GEORGE M. HILLENBRAND II 60 PERSONAL INVESTMENTS 1986 4,835,091(4)(9) 7.7%
JOHN A. HILLENBRAND II 68 PERSONAL INVESTMENTS 1981(10) 3,667,124(4)(11) 5.8%
FREDERICK W. ROCKWOOD 52 PRESIDENT OF THE COMPANY 1999 79,004(3) (2)
</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 11, 2000 OUTSTANDING
- ---- --- -------------------- ----------------- -----------
<S> <C> <C> <C> <C>
DONALD G. BARGER, JR. 57 VICE PRESIDENT AND CHIEF (2)
FINANCIAL OFFICER 21,696(3)
DAVID L. ROBERTSON 54 VICE PRESIDENT, (2)
ADMINISTRATION 24,724(3)
MICHAEL L. BUETTNER 42 VICE PRESIDENT, (2)
CORPORATE DEVELOPMENT 20,830(3)
MARK R. LINDENMEYER 53 VICE PRESIDENT, GENERAL (2)
COUNSEL AND SECRETARY 16,580(3)
17,735,034(3)(5)(6) 28.1%
ALL DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY AS A GROUP, (7)(8)(9)(11)
CONSISTING OF 16 PERSONS.
</TABLE>
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<PAGE> 8
(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 11, 2000:
Peter F. Coffaro, 4,000 shares; Edward S. Davis, 4,000 shares; Leonard
Granoff, 4,000 shares; W August Hillenbrand, 90,000 shares; Lawrence R.
Burtschy, 4,000 shares; Daniel A. Hillenbrand, 4,000 shares; Ray J.
Hillenbrand, 4,000 shares; John C. Hancock, 4,000 shares; George M.
Hillenbrand II, 4,000 shares; John A. Hillenbrand II, 4,000 shares;
Frederick W. Rockwood, 38,334 shares; Donald G. Barger, Jr., 10,334
shares; Michael L. Buettner, 12,001 shares; Mark R. Lindenmeyer, 12,001
shares; David L. Robertson, 8,001 shares; and all directors and
executive officers as a group, 212,672 shares.
(2) Ownership of less than one percent (1%) of the total shares
outstanding.
(3) Includes deferred fees and/or compensation in the form of deferred or
restricted shares of common stock held on the books and records of the
Company in the following amounts: Donald G. Barger, Jr., 6,307 shares;
Michael L. Buettner, 5,802 shares; Edward S. Davis, 4,578 shares; John
C. Hancock, 7,093 shares; W August Hillenbrand, 158,544 shares; Mark R.
Lindenmeyer, 1,013 shares; Frederick W. Rockwood, 30,982 shares; David
L. Robertson, 5,029 shares; and other executive officers, 705 shares.
(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 2,163,195 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; 52,460 shares held of record by a charitable trust, of
which Mr. Hillenbrand is a co-trustee; and 277,825 shares held by a
limited partnership, of which Mr. Hillenbrand is a limited partner. Mr.
Hillenbrand disclaims beneficial ownership of these shares.
(6) 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 937,925
shares owned of record and beneficially by his wife, Elisabeth H.
Burtschy. Mr. Burtschy disclaims beneficial ownership of these shares.
-5-
<PAGE> 9
(7) 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.
(8) 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 1,001,501 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.
(9) 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.
(10) John A. Hillenbrand II previously served as a Director of the Company
from 1972 to 1979.
(11) Includes 17,240 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.
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.
W August Hillenbrand has been Chief Executive Officer of the Company
since April 11, 1989. Mr. Hillenbrand also served as President of the Company
from October 21, 1981 until December 6, 1999. 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.
-6-
<PAGE> 10
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. He is also Chairman of Able Body Corporation and Nambe
Mills, Inc., and Vice Chairman of Pri-Pak, Inc. Mr. Hillenbrand was employed by
and active in the management of the Company prior to his resignation as an
officer in 1979.
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).
Mr. Rockwood was elected President of the Company on December 6, 1999.
He has been employed by the Company or its subsidiaries since 1977, including
the positions of President and Chief Executive Officer of Hillenbrand Funeral
Services Group, Inc., President and Chief Executive Officer of Forethought
Financial Services, Inc., Senior Vice President of Corporate Planning and
Director of Corporate Strategy.
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
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<PAGE> 11
statement any failure to file or late filing occurring during 1999. 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 Peter F. Coffaro.
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 1999, the Board of Directors of the Company held
seven 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 1999.
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 1999, 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
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<PAGE> 12
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 1999, 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 1999, the Compensation Committee held two
meetings.
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 Senior Executive
Compensation Program, except for those responsibilities designated to the
Sub-Committee under the plan. 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 1999.
During the Company's fiscal year ended November 27, 1999, each Director
who was not a salaried officer or employee of the Company received an annual fee
of $20,000 and a fee of $3,500 for each Board of Directors meeting attended.
Directors who are members of the Executive, Finance, Audit and Compensation
Committees received $1,500 for each committee meeting attended. 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 had a Consulting Agreement with the Company under
which he provided consulting and advisory services to the Company, including
advice on
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<PAGE> 13
acquisitions and capital expenditures, through May 31, 1999, for which he
received a consulting fee of $264,305 during 1999, as well as certain insurance,
pension, health care and other benefits which totaled $227,529. 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 10,000 shares of common
stock of the Company from one of Ray J. Hillenbrand's sons.
REAPPROVAL OF THE SENIOR EXECUTIVE COMPENSATION PROGRAM
The Company seeks shareholder approval of the Company's Senior
Executive Compensation Program, as amended and restated (the "Program"). The
Program provides for varying forms of incentive and deferred compensation to
approximately 60 key executives of the Company and its subsidiaries, who
contribute by their imagination, resourcefulness, skills, and insight to the
business objectives of the Company. A limited version of the Program was first
implemented in fiscal year 1978 and the Program was amended and restated in 1991
and 1995, at which time it was approved by the shareholders. Certain provisions
of the Program have also been amended subsequently. The Board of Directors has
increased the number of shares of stock of the Company available for issuance
under the Program, from 1,023,648 to 2,500,000 shares, to provide for sufficient
shares in order to allow the Program to continue uninterrupted during the next
several years, and it has amended Article V.3. of the Program to provide for
greater flexibility in setting award opportunities upon achievement of various
performance results, including an increase in the limits of the short term
incentive compensation opportunity, and it has approved some additional
administrative changes.
In order to meet the requirements under Section 162(m) of the Internal
Revenue Code so that the tax deductibility of compensation under the Program
will continue to be available, shareholder approval must be obtained every five
years.
See "Compensation Committees' Report - Incentive Compensation" for a
description of the Program and for information on awards and performance in
prior periods. The full text of the Program is attached to this Proxy Statement
as Exhibit A. The description of the Program contained in the Proxy Statement is
qualified in its entirety by reference to Exhibit A.
The Board of Directors believes that the Program has been and will
continue to be an important incentive for key executives and that continuation
of the Program is in the best interests of the shareholders of the Company.
Because the awards under the Program are subject to the Company's future
performance and/or share price, the value of future awards is not determinable.
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<PAGE> 14
The affirmative vote of the holders of a majority of the outstanding
shares of the common stock of the Company present in person or by proxy and
entitled to vote is required to reapprove the Program.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE REAPPROVAL OF THE
SENIOR EXECUTIVE COMPENSATION PROGRAM.
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 December 2, 2000. 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 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.
-11-
<PAGE> 15
EXECUTIVE COMPENSATION
The following tabulation and notes set forth the compensation paid or
accrued by the Company during the three fiscal years ended November 27, 1999,
November 28, 1998 and November 29, 1997 to the Chief Executive Officer and each
of the other four most highly compensated executive officers, as well as two
additional individuals who were executive officers of the Company during a
portion of 1999.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------
AWARDS PAYOUTS
--------------------------------------------------------------------------------------------
NAME OTHER RESTRICTED SECURITIES
AND ANNUAL STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUTS COMPENSATION
POSITION YEAR $ $ $(1) $(2) #(3) $(4) $(5)
-------- ---- ------ ----- ------------ --------- --------- ------- ------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
W AUGUST HILLENBRAND (7) 1999 $855,192 $ 0 $662,429 $ 0 60,000 $ 0 $422,203
CHIEF EXECUTIVE OFFICER 1998 $790,288 $717,750 $214,542 $ 0 60,000 $1,062,631 $373,960
1997 $732,032 $661,433 $142,270 $ 0 30,000 $ 0 $195,393
- ------------------------------------------------------------------------------------------------------------------------------------
DONALD G. 1999 $306,058 $ 0 $ 31,828 $139,063 20,000 $ 0 $ 14,085
BARGER, JR. (8) 1998 $211,813 $127,088 (6) $ 0 8,000 $ 65,195 $ 15,466
VICE PRESIDENT AND CHIEF 1997 N/A N/A N/A N/A N/A N/A N/A
FINANCIAL OFFICER
- ------------------------------------------------------------------------------------------------------------------------------------
DAVID L. ROBERTSON (9) 1999 $238,077 $ 0 $ 27,509 $139,063 18,000 $ 0 $ 16,027
VICE PRESIDENT, 1998 $157,967 $ 94,780 $ 44,662 $ 0 8,000 $ 135,606 $ 20,251
ADMINISTRATION 1997 N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAEL L. BUETTNER 1999 $226,750 $ 0 $ 38,486 $139,063 18,000 $ 0 $ 9,531
VICE PRESIDENT, 1998 $202,654 $122,400 (6) $ 0 8,000 $ 91,743 $ 10,030
CORPORATE DEVELOPMENT 1997 $184,048 $123,681 (6) $ 0 4,000 $ 0 $ 3,200
- ------------------------------------------------------------------------------------------------------------------------------------
MARK R. LINDENMEYER 1999 $223,933 $ 0 $ 29,704 $ 0 10,000 $ 0 $ 21,898
VICE PRESIDENT, GENERAL 1998 $214,240 $129,150 $ 20,849 $ 0 8,000 $ 179,522 $ 20,275
COUNSEL AND SECRETARY 1997 $204,423 $123,000 $ 22,519 $ 0 4,000 $ 0 $ 8,486
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT J. TENNISON (10) 1999 $287,980 $ 0 (6) $278,125 23,000 $ 0 $ 12,166
PRESIDENT AND CHIEF 1998 $228,327 $138,900 (6) $ 0 8,000 $ 94,299 $ 13,289
EXECUTIVE OFFICER OF 1997 $209,423 $ 94,500 (6) $ 0 2,000 N/A $ 3,200
HILL-ROM COMPANY, INC.
- ------------------------------------------------------------------------------------------------------------------------------------
TOM E. BREWER (11) 1999 $134,418 $138,071 $ 31,723 $ 0 25,000 $ 2,029 $ 13,219
FORMER SENIOR 1998 $341,865 $206,100 $ 46,524 $ 0 25,000 $ 280,705 $ 82,216
VICE PRESIDENT, FINANCE 1997 $321,615 $193,800 $ 19,473 $ 0 8,000 $ 0 $ 56,599
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-12-
<PAGE> 16
(1) Consists of above market interest earned, the cost of perquisites and
other personal benefits provided by the Company. Included in the 1999
amounts shown for W August Hillenbrand are $530,039 for above market
interest earned, most of which reflects the change in a financial index
in which the Company has made an offsetting like investment, and
$100,067 for reimbursed financial planning services. Included in the
1999 amounts for Donald G. Barger, Jr. are $13,053 and $9,600 for
reimbursed financial planning services and automobile allowance,
respectively. Included in the 1999 amounts for David L. Robertson are
$865, $14,066 and $9,600 for above market interest earned, reimbursed
insurance and automobile allowance, respectively. Included in the 1998
amounts for David L. Robertson are $26,704 for reimbursed relocation
expenses. Included in the 1999 amounts for Michael L. Buettner are
$135, $28,000 and $9,600 for above market interest earned,
reimbursement of purchase of Company stock and automobile allowance,
respectively. Included in the 1999 amounts for Mark R. Lindenmeyer are
$10,105 and $9,600 for reimbursed insurance and automobile allowance,
respectively. Included in the 1999, 1998 and 1997 amounts for Mark R.
Lindenmeyer are $1,456, $1,338 and $321 for above market interest
earned, respectively. Included in the 1999, 1998 and 1997 amounts for
Tom E. Brewer are $28,461, $36,924 and $9,873 for above market interest
earned, respectively.
(2) As of November 27, 1999 the number of shares and value of restricted
stock held are as follows:
RESTRICTED STOCK
-------------------------
NAME # $
---- ------ --------
DONALD G. BARGER, JR. 5,029 $175,038
DAVID L. ROBERTSON 5,029 $175,038
MICHAEL L. BUETTNER 5,029 $175,038
ROBERT J. TENNISON 10,057 $350,075
Restricted stock shares were awarded 5,000 shares each to Donald G.
Barger, Jr., David L. Robertson and Michael L. Buettner and 10,000
shares to Robert J. Tennison on October 5, 1999 and will vest on October
5, 2002. Dividends paid on the Company common stock will be deemed to
have been paid with regard to the shares awarded under this stock grant
and deemed to be reinvested in Company common stock at the market value
on the date of such dividend, and will be paid in additional shares on
October 5, 2002.
(3) All options were granted pursuant to the Company's 1996 Stock Option
Plan.
-13-
<PAGE> 17
(4) The amounts appearing in this column are the values as of November 27,
1999, November 28, 1998 and November 29, 1997 of the shares earned
under the Senior Executive Compensation Program for 1997-1999,
1996-1998 and 1995-1997 performance cycles, respectively.
(5) All Other Compensation earned or allocated in 1999 is as follows:
<TABLE>
<CAPTION>
PENSION CONTRIBUTIONS
----------------------- SPLIT-DOLLAR LIFE
NAME SUPPLEMENTAL 401(K) INSURANCE BENEFITS TOTAL
- ---- ------------- ------ ------------------ -----
<S> <C> <C> <C> <C>
W AUGUST HILLENBRAND $287,750 $3,200 $131,253 $422,203
DONALD G. BARGER, JR. N/A $3,200 $ 10,885 $ 14,085
DAVID L. ROBERTSON $ 3,400 $3,200 $ 9,426 $ 16,027
MICHAEL L. BUETTNER N/A $3,200 $ 6,331 $ 9,531
MARK R. LINDENMEYER $ 9,731 $3,200 $ 8,966 $ 21,898
ROBERT J. TENNISON N/A $3,200 $ 8,966 $ 12,166
TOM E. BREWER $ 0 $1,050 $ 12,169 $ 13,219
</TABLE>
(6) Amounts do not exceed disclosure thresholds established under SEC rules.
(7) On December 6, 1999, Mr. Hillenbrand withdrew as President of the
Company in order for Frederick W. Rockwood to assume that position.
(8) Mr. Barger was elected Vice President and Chief Financial Officer
effective March 16, 1998.
(9) Mr. Robertson was elected Vice President, Human Resources effective
March 23, 1998 and was elected Vice President, Administration effective
December 6, 1999.
(10) On May 26, 1999, Mr. Tennison became President and Chief Executive
Officer of the Company's Hill-Rom subsidiary. Prior to that, Mr.
Tennison was Vice President, Continuous Improvement of the Company.
(11) On April 16, 1999, Mr. Brewer retired and is no longer an executive
officer of the Company.
-14-
<PAGE> 18
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 27, 1999.
<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 8.09% $52.1563 1/18/09 $ 872,472
DONALD G. BARGER, JR. 15,000 2.02% $52.1563 1/18/09 $ 218,118
5,000 0.67% $29.9688 8/23/09 $ 41,777
DAVID L. ROBERTSON 8,000 1.08% $52.1563 1/18/09 $ 116,330
10,000 1.35% $29.9688 8/23/09 $ 83,553
MICHAEL L. BUETTNER 8,000 1.08% $52.1563 1/18/09 $ 116,330
10,000 1.35% $29.9688 8/23/09 $ 83,553
MARK R. LINDENMEYER 8,000 1.08% $52.1563 1/18/09 $ 116,330
2,000 0.27% $29.9688 8/23/09 $ 16,711
ROBERT J. TENNISON 8,000 1.08% $52.1563 1/18/09 $ 116,330
15,000 2.02% $29.9688 8/23/09 $ 125,330
TOM E. BREWER 25,000 3.37% $52.1563 1/18/09 $ 363,530
</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 1999.
(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 5.23%, stock price volatility of .2319 and annual
dividend yield of 1.68%. 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.
-15-
<PAGE> 19
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 1999 by the named executive officers and
unexercised options held by such officers as of November 27, 1999:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
W AUGUST HILLENBRAND 0 $0 40,000 110,000 $ 0 $ 0
DONALD G. BARGER, JR. 0 $0 2,667 25,333 $ 0 $24,219
DAVID L. ROBERTSON 0 $0 2,667 23,333 $ 0 $48,438
MICHAEL L. BUETTNER 0 $0 5,334 24,666 $ 0 $48,438
MARK R. LINDENMEYER 0 $0 5,334 16,666 $ 0 $ 9,688
ROBERT J. TENNISON 0 $0 4,001 28,999 $ 0 $72,656
TOM E. BREWER 0 $0 33,000 0 $ 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 1999 to each of the named executive officers.
<TABLE>
<CAPTION>
ESTIMATED FUTURE
NUMBER OF SHARES, PERFORMANCE 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 7,450 1999/2001 1 7,450 14,900
DONALD G. BARGER, JR. 1,599 1999/2001 1 1,599 3,198
DAVID L. ROBERTSON 1,264 1999/2001 1 1,264 2,528
MICHAEL L. BUETTNER 1,215 1999/2001 1 1,215 2,430
MARK R. LINDENMEYER 1,169 1999/2001 1 1,169 2,338
ROBERT J. TENNISON 2,049 1999/2001 1 2,049 4,098
TOM E. BREWER (2) 699 1999/2001 1 97 194
</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.
-16-
<PAGE> 20
(2) Estimated future payouts prorated based on April 16, 1999 retirement.
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 or termination the Company's cash
value share, up to 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.
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
-17-
<PAGE> 21
- - 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 sustainable long term
shareholder value and as a result places greater emphasis on variable
compensation than on base salary.
Effective July 5, 1999 the Board of Directors acted on the
recommendation of the Committee to increase the compensation of W August
Hillenbrand by 5.99%. 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
-18-
<PAGE> 22
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. The Committee has 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 or equity index.
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 objectives, and may establish 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. Achievement of financial objectives determines how much short
term incentive compensation is potentially available for distribution in each
subsidiary and determines how much incentive compensation will actually be paid.
The Committee established these objectives to maintain the appropriate balance
between the short and long term performance expectations of shareholders.
-19-
<PAGE> 23
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, President 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 established and 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.
Short term incentive compensation opportunity is equal to 60% of base
salary for the Office of the President of the Company (which is comprised of the
Chief Executive Officer and President of the Company); 50% of base salary in the
case of a chief executive officer of a subsidiary; 40% of base salary for other
corporate or subsidiary senior executives; and 30% for all other executive
participants. For executive officers of the Company during the 1999 fiscal year,
the plan provided for short term incentive compensation equal to 50% of the
above scale upon attainment of the Performance Base, and upon achievement at a
certain level above the Performance Base, 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.
During fiscal year 1999, short term performance objectives were below
expectations; therefore, no cash bonuses were awarded in January 2000 to
executive officers of the Company.
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.
-20-
<PAGE> 24
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 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, also referred to as Performance
Share Compensation, 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 and President 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
-21-
<PAGE> 25
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 earlier of age
62 or termination of employment and is subject to forfeiture in the event the
employee voluntarily terminates employment within three years after the end of
the cycle.
During the 1997/1999 cycle the financial performance of the Company was
below the performance targets for the Program's minimum payout; therefore no
amounts were earned or paid to the executive officers of the Company for the
1997/1999 cycle.
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.
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 1999 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.
d. STOCK AWARD
The Committee recommended, and on October 5, 1999 the Board of Directors
approved, stock grants of 5,000 shares each to Donald Barger, David Robertson
and Michael Buettner and a total of 30,000 shares to executives of the operating
companies. The awards are conditioned on the continued employment of the
executives for three years from the date of grant. Dividends paid on the
Company's common stock will be deemed to have been paid with regard to the
shares awarded under this stock grant and deemed to be reinvested in Company
common stock at the market value on the date of such dividend, and will be paid
in additional shares at the end of the three year period.
* * *
-22-
<PAGE> 26
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. The stock awards made on October
5, 1999 do not meet the eligibility requirements under Section 162(m).
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
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 1999, and
Peter F. Coffaro, Edward S. Davis, John C. Hancock and Daniel A. Hillenbrand
served on the Performance Compensation Committee during 1999.
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, 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.
-23-
<PAGE> 27
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:
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG HILLENBRAND INDUSTRIES, S&P 500 AND
S&P MANUFACTURING (DIVERSIFIED INDUSTRIALS)
BASE = NOVEMBER 1994
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Date Hillenbrand S&P 500 S&P Mfg
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
1994 $100 $100 $100
- ------------------------------------------------------------------------------------------------------------------------------------
1995 112 137 147
- ------------------------------------------------------------------------------------------------------------------------------------
1996 128 138 150
- ------------------------------------------------------------------------------------------------------------------------------------
1997 157 225 243
- ------------------------------------------------------------------------------------------------------------------------------------
1998 203 278 274
- ------------------------------------------------------------------------------------------------------------------------------------
1999 125 337 328
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Assumes $100 invested in November 1994. Total return assumes that all
dividends are reinvested when received.
-24-
<PAGE> 28
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:
APPROXIMATE ANNUAL PENSION UPON RETIREMENT AT AGE 65
<TABLE>
<CAPTION>
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 $ 23,000 $ 29,000 $ 35,000 $ 41,000 $ 47,000
$ 200,000 $ 14,000 $ 28,000 $ 42,000 $ 55,000 $ 69,000 $ 83,000 $ 97,000 $111,000
$ 300,000 $ 22,000 $ 44,000 $ 66,000 $ 87,000 $109,000 $131,000 $153,000 $175,000
$ 400,000 $ 30,000 $ 60,000 $ 90,000 $119,000 $149,000 $179,000 $209,000 $239,000
$ 500,000 $ 38,000 $ 76,000 $114,000 $151,000 $189,000 $227,000 $265,000 $303,000
$ 600,000 $ 46,000 $ 92,000 $138,000 $183,000 $229,000 $275,000 $321,000 $367,000
$ 700,000 $ 54,000 $108,000 $162,000 $215,000 $269,000 $323,000 $377,000 $431,000
$ 800,000 $ 62,000 $124,000 $186,000 $247,000 $309,000 $371,000 $433,000 $495,000
$ 900,000 $ 70,000 $140,000 $210,000 $279,000 $349,000 $419,000 $489,000 $559,000
$1,000,000 $ 78,000 $156,000 $234,000 $311,000 $389,000 $467,000 $545,000 $623,000
</TABLE>
-25-
<PAGE> 29
The credited years of service under the Pension Plan and the 1999 calendar
year base salaries for the officers named in the table are as follows: W August
Hillenbrand - 39 years, $860,000; Donald G. Barger, Jr. - 2 years, $307,500;
Michael L. Buettner, 5 years, $233,962; Mark R. Lindenmeyer - 13 years,
$224,750; David L. Robertson - 16 years, $239,615; and Robert J. Tennison - 4
years, $295,385.
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 2001 must be received at the Company's principal executive
offices in Batesville, Indiana, not later than January 1, 2001, 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 2001 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 11, 2000 annual meeting. If the date of the annual
meeting to be held in 2001 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 2001 annual meeting date and the close of business
10 days following the date on which the Company first makes public disclosure of
the 2001 annual meeting date.
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<PAGE> 30
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 3, 2000
-27-
<PAGE> 31
EXHIBIT A
---------
HILLENBRAND INDUSTRIES, INC.
SENIOR EXECUTIVE COMPENSATION PROGRAM
ARTICLE I
PURPOSE - The purpose of this Program is to reward the creation of long term
shareholder value by providing incentive compensation, perquisite and other
compensation to a limited number of senior, key executives of Hillenbrand
Industries, Inc., and its subsidiaries, who contribute by their imagination,
resourcefulness, skills and insight to the business objectives of the
Corporation.
ARTICLE II
DEFINITIONS:
1. "Program" means the Senior Executive Compensation Program which consists
of the following components:
- Short-term Incentive Compensation
- Performance Share Compensation
- Perquisite Compensation
- Deferred Compensation
- Supplemental Pension
2. "Corporation" means Hillenbrand Industries, Inc., an Indiana corporation,
and its subsidiaries.
3. "Corporate" means Hillenbrand Industries, Inc., as a corporate holding
company and does not include subsidiaries.
4. "Subsidiary" means an operating company unit of which a majority equity
interest is owned directly or indirectly by the Corporation.
A-1
<PAGE> 32
5. "Board of Directors" or "Board" means the Board of Directors of
Hillenbrand Industries, Inc.
6. "Committee" means the Performance Compensation Committee appointed to
administer the Program. "Sub-Committee" means the sub-committee of the
Performance Compensation Committee appointed to establish and administer
the Performance Base and Target (performance goals) for Incentive
Compensation and shareholder value goals (performance goals) for
Performance Share Compensation.
7. "Office of the President" means the Office of the President of Corporate.
8. "Participant" means a key employee selected for participation in the
Program pursuant to Article IV.
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.
A-2
<PAGE> 33
ARTICLE III
ADMINISTRATION - Full power and authority to construe, interpret, and administer
the Program, with the exception of establishing and administering performance
goals, is vested in the Committee. The Sub-Committee has full power to
establish, administer and certify performance goals related to Incentive
Compensation and Performance Share Compensation. Their decisions are final,
conclusive and binding upon all parties, including the Corporation, the
shareholders thereof, and the Participants. The Committee and the Sub-Committee
may rely upon recommendations of the Office of the President or the Chief
Executive Officer in approving financial and non-financial goals recommended to
it.
ARTICLE IV
PARTICIPATION - Selection of key employees for participation for each of the
components of compensation contemplated by the Program are set forth in Articles
V, VI, VII, and VIII.
ARTICLE V
INCENTIVE COMPENSATION - The purpose of Incentive Compensation is to provide
financial recognition to Participants, the amount of which is determined by the
attainment of annual financial and/or non-financial goals.
1. PARTICIPANTS - Participation in Incentive Compensation by members of the
Office of the President and Corporate Vice Presidents shall be determined
by the Committee. Other Participants in Incentive Compensation shall be
determined by the Office of the President pursuant to recommendation from
the Chief Executive Officer of Corporate, or if an employee of a
Subsidiary, by the Chief Executive Officer thereof.
2. ESTABLISHMENT OF PERFORMANCE BASE AND TARGET - A Performance Base and
Target for members of the Office of the President and Corporate Vice
Presidents as a group shall be recommended by the Chief Executive Officer
of Corporate and approved by the Sub-Committee. The Performance Base and
Target for each Participant who is a Chief Executive Officer of a
Subsidiary shall be approved by the Office of the President. The
Performance Base and Target for other Corporate Participants and other
Subsidiary Participants shall be established and approved by the Office of
the President and the Chief Executive Officer of each Subsidiary,
respectively. The Performance Base and Target shall be established
annually for Corporate and each Subsidiary and will be communicated to
each Participant. The Performance Base and Target for members of the
Office of the President and Corporate Vice Presidents shall be directly
related to the net income of the
A-3
<PAGE> 34
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 50% of Base Salary
Subsidiary
Corporate or Subsidiary 40% of Base Salary
Senior Executive
Other Executive 30% of Base Salary
Attainment of the Performance Base shall result in Incentive Compensation
of a predetermined percentage from 0% to 50% of the above incentive
compensation opportunity. If the Performance Target is met or exceeded,
Incentive Compensation of a predetermined percentage from 150% to 300% of
the above incentive compensation opportunity will be paid. Achievement of
results between Performance Base and Target will generate incentive
compensation calculated according to a predetermined pro-rata method. The
various determinations are recommended by the Office of the President and
approved by the Sub-Committee.
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.
A-4
<PAGE> 35
5. TERMINATION - Termination of a Participant's employment for reasons other
than death, Disability or normal or early retirement shall terminate any
non-deferred Incentive Compensation. Termination because of death,
Disability or normal or early retirement shall result in a pro-ration of
Incentive Compensation based on the number of months employed out of the
fiscal year of termination.
ARTICLE VI
PERFORMANCE SHARE COMPENSATION - The purpose of Performance Share Compensation
is to reward Participants for the creation of value for the shareholders of
Corporate over continuing three year periods.
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.
A-5
<PAGE> 36
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 each
Subsidiary. Such goals shall be communicated to the Subsidiary
Participants.
5. CALCULATION OF PERFORMANCE SHARE COMPENSATION - At the end of each Period,
Performance Share Compensation shall be calculated for each Participant.
If the shareholder value created equals or is greater than the base goal,
Performance Share Compensation shall be calculated by multiplying the
Tentative Award by a fraction, the numerator of which is the actual
shareholder value created for the Corporation less the base goal and the
denominator of which is the target goal less the base goal. If the actual
shareholder value created is greater than the target goal, but less than
the 200% achievement goal, Performance Share Compensation shall be
calculated by multiplying the Tentative Award by the sum of: (a) one (1),
and (b) the product obtained by multiplying one (1) times a fraction the
numerator of which is the actual shareholder value created less the target
goal and the denominator of which is the 200% achievement goal less the
target goal. If the actual shareholder value equals or exceeds the 200%
achievement goal, the Award shall be calculated by multiplying the
Tentative Award by two (2).
6. PAYMENT OF THE PERFORMANCE SHARE COMPENSATION - Shares of common stock of
Corporate representing Performance Share Compensation shall be delivered
to the Participant within a reasonable time after Performance Share
Compensation is determined but not 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.
A-6
<PAGE> 37
7. TERMINATION - Termination of a Participant's employment for reasons other
than death, Disability or normal or early retirement shall terminate any
non-deferred Performance Share Compensation. Termination of a
Participant's employment by reason of death, Disability or normal or early
retirement shall result in a reduction of Performance Share Compensation
by multiplying Performance Share Compensation by a fraction the numerator
of which is the number of fiscal year full months occurring between the
establishment of a Tentative Award and such termination, and the
denominator of which is 36.
ARTICLE VII
PERQUISITE COMPENSATION - The purpose of Perquisite Compensation is to provide
Participants with certain benefits to aid such Participants in carrying out
their duties, to help provide for their well being, and to create the potential
for added long term financial security.
1. PARTICIPANTS - Office of the President, Chief Executive Officer of
Subsidiaries and Corporate and Subsidiary Senior Executives shall be
eligible for Perquisite Compensation.
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.
A-7
<PAGE> 38
1. PARTICIPANTS - 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) Beginning with
the 1995/1997 Period, all Performance Share Compensation earned above the
100% target goal will be deferred without election by the Participant
until the Participant's death or the earlier of (i) reaching age 62 or
(ii) termination of
A-8
<PAGE> 39
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.
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.
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.
A-9
<PAGE> 40
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.
ARTICLE X
FINALITY OF DETERMINATION - Each determination made by the Committee and the
Office of the President shall be final, binding and conclusive for all purposes
and upon all persons and the Committee may rely conclusively on the
determinations made by the Corporation's independent public accountants or by
the Corporation's employees with respect to action of the Committee.
ARTICLE XI
LIMITATIONS - No employee of the Corporation or any other persons shall have any
claim or right (legal, equitable or other) to be granted any award hereunder,
and no director, officer or employee of the Corporation, or any other person,
shall have the authority to enter into any agreement with any person for the
making or payment of any award or to make any representation or warranty with
respect thereto.
1. No Participant for whose benefit compensation has been deferred shall have
any right in compensation other than to receive compensation at the time
and in the form elected by the Participant subject to the fulfillment of
the conditions described herein, which right may not be 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.
A-10
<PAGE> 41
ARTICLE XII
AMENDMENTS, SUSPENSION OR TERMINATION - The Committee may discontinue this
Program in whole or in part at any time and may from time to time amend or
revise the terms as permitted by applicable statute; provided, however, that no
such discontinuance, amendment, or revision shall affect adversely any right or
obligation with respect to any award theretofor made and provided further that
any amendment increasing the number of shares of common stock of Corporate
available to the Program shall be subject to the approval of the Board of
Directors. No amendment shall require shareholder approval unless such approval
is otherwise required by law.
ARTICLE XIII
RESERVATION OF SHARES - As of 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 XIV
EFFECTIVE DATE - This Program was approved by the Board of Directors on October
4, 1977, became effective December 1, 1977 for the fiscal year beginning on the
date and, as amended and restated, was approved by the Board of Directors on
January 22, 1991, effective April 1, 1991, and approved April 5, 1994, effective
December 4, 1994 respectively, and amended by the Committee on January 18, 1999,
and by the Board of Directors on January 18, 2000.
ARTICLE XV
GOVERNING LAW - This Program shall be governed and construed in accordance with
the laws of the State of Indiana.
A-11
<PAGE> 42
HILLENBRAND INDUSTRIES, INC.
Proxy for Annual Meeting Of Shareholders To Be Held April 11, 2000
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 11, 2000 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 Peter F. Coffaro, Edward S. Davis,
Leonard Granoff and W August Hillenbrand 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) Reapproval of the Hillenbrand Industries, Inc. Senior Executive
Compensation Program.
FOR AGAINST ABSTAIN
(3) Ratification of the appointment of PricewaterhouseCoopers LLP as
independent auditors.
FOR AGAINST ABSTAIN
(4) 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, 2 AND 3. 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:__________________, 2000
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.
