SCHEDULE 14A
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 Section 240.14a-11(c) or
Section 240.14a-12
LILLY INDUSTRIES, INC.
(Name Of Registrant As Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6-(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) 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 transactions:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed: <PAGE>
LILLY INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 20, 1995
The Annual Meeting of Shareholders of Lilly Industries,
Inc., an Indiana corporation (the "Company"), will be held at the
Indiana Convention Center, 100 South Capitol Avenue,
Indianapolis, Indiana in Rooms 101 and 102 on Thursday, April 20,
1995 at 10:00 A.M., local time, for the following purposes:
1. To elect ten directors.
2. To approve adoption of the Supplemental Employee Stock
Purchase Plan.
3. To transact such other business as may properly come
before the meeting.
The Board of Directors has established the close of business
on February 17, 1995 as the record date for determining
shareholders entitled to notice of and to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Roman J. Klusas
Roman J. Klusas, Secretary
March 16, 1995
YOUR VOTE IS IMPORTANT
Even if you plan to attend the meeting,
we urge you to mark, sign and date the enclosed
proxy and return it promptly in the enclosed envelope.
<PAGE>
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of
Lilly Industries, Inc., an Indiana corporation (the "Company"),
733 South West Street, Indianapolis, Indiana 46225, for use at
the Annual Meeting of Shareholders to be held on April 20, 1995
and at any adjournment thereof. This Proxy Statement and the
enclosed proxy were mailed on or about March 16, 1995.
All shares represented by the enclosed proxy will be voted
at the meeting in accordance with the instructions given by the
shareholder. If no instruction is given, the shares will be
voted for the election of director nominees as listed in this
Proxy Statement and for adoption of the Supplemental Employee
Stock Purchase Plan and, in the absence of any recommendation, in
accordance with the best judgment of the proxy holders. A
shareholder executing and delivering the enclosed proxy may
revoke it, by a written notice delivered to the Secretary of the
Company or in person at the meeting, at any time before it is
exercised.
The Company will bear the cost of soliciting the proxies.
In addition to being solicited by mail, proxies may be solicited
by personal interview, 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 the beneficial
owners.
PROPOSAL I
ELECTION OF DIRECTORS
Ten directors will be elected at the meeting. The holders
of Class A Stock will elect four directors and the holders of
Class B Stock will elect six directors. Each director will serve
until the next annual meeting or until his successor is elected
and qualified. All of the nominees listed below, excluding Harry
Morrison, Ph.D., are directors whose present terms of office will
expire upon completion of the election at the meeting. Mr.
Morrison has been nominated to replace Robert S. Bailey, formerly
Senior Vice President, Marketing of the Company, who has retired.
Unless authorization is withheld, the enclosed proxy will be
voted in favor of electing as directors the nominees listed
below. If any nominee should be unable to serve, the proxy will
be voted for a substitute nominee selected by the Board of
Directors.
Directors will be elected by a plurality of the votes cast
for nominees by the holders of Class A Stock and Class B Stock at
the Annual Meeting of Shareholders at which a quorum is present.
"Plurality" means that the director nominees who receive the
largest number of votes cast are elected as directors up to the
maximum number of directors to be chosen at the meeting.
Abstentions, broker non-votes, and instructions on the
accompanying proxy card to vote against one or more of the
nominees will be considered as not voted.
H. J. (Jack) Baker, Robert H. McKinney, John D. Peterson and
Van P. Smith are nominees for election as directors by holders of
the Class A Stock; and William C. Dorris, Douglas W. Huemme,
Roman J. Klusas, Harry Morrison, Ph.D., Thomas E. Reilly, Jr.,
and Richard A. Steele are nominees for election as directors by
holders of the Class B Stock.
The name, principal occupation, business experience since
1990, tenure, number and percentage of outstanding shares of the
Company and its subsidiaries beneficially owned on February 17,
1995, and age of each nominee for election as a director are set
forth below. Unless otherwise indicated, each nominee has sole
investment and voting power with respect to the shares shown as
beneficially owned by him.
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Outstanding
Served Shares Shares
Name, Principal Continuously Beneficially Beneficially
Occupation and as a Director Owned at Owned
Prior Business Experience Since Title of Class 2/17/95 <1> at 2/17/95 Age
<S> <C> <C> <C> <C> <C>
H. J. (JACK) BAKER 1985 Class A Stock 8,742 <2> * 67
Chairman of BMW Constructors, Inc.
(industrial mechanical contractor)
since prior to 1990; director of
two publicly-held corporations
(other than the Company): First
Indiana Corporation and The
Somerset Group, Inc.
WILLIAM C. DORRIS 1989 Class A Stock 14,942 <3> * 52
Vice President, Corporate Class B Stock 17,025 4.62%
Development and Technology of
the Company since July, 1994;
General Manager of the Company's
High Point Division from prior
to 1990 to 1994, of the Company's
Templeton Division from 1991 to
1994 and of the Company's
Dallas Division from 1993 to 1994.
DOUGLAS W. HUEMME 1990 Class A Stock 72,259 <4> * 53
Chairman, President and Chief Class B Stock 32,900 8.94%
Executive Officer of the Company
since July, 1991; President and
Chief Operating Officer of the
Company since June, 1990; Vice
President and Group Executive of
the Chemical Group of Whittaker
Corporation from prior to 1990
to April, 1990; director of two
publicly-held corporations (other
than the Company): First Indiana
Corporation and The Somerset
Group, Inc.
ROMAN J. KLUSAS 1988 Class A Stock 16,301 <5> * 48
Vice President and Chief Class B Stock 25,500 6.93%
Financial Officer, and
Secretary of the
Company since prior to
1990.
ROBERT H. McKINNEY 1985 Class A Stock 23,425 * 69
Chairman and Chief Executive
Officer, The Somerset Group,
Inc. (or its predecessor)
since prior to 1990;
Chairman and Chief
Executive Officer, First
Indiana Corporation since prior
to 1990; retired partner,
Bose, McKinney & Evans,
attorneys; director of
two publicly-held corporations
(other than the Company): First
Indiana Corporation and The
Somerset Group, Inc.
HARRY MORRISON, Ph.D. Nominee Class A Stock 0 * 57
Dean of School of Science,
Purdue University since 1992;
Head of Chemistry Department,
Purdue University from prior
to 1990 to 1992; chemical
consultant for: Great Lakes
Chemical Corporation (1991 to
1993), American Cyanamid (1993),
Bristol Myer Squibb (1991) and
Ciba-Geigy (1991).
JOHN D. PETERSON 1964 Class A Stock 143,145 <6> * 61
Chairman of City Securities
Corporation <7> (securities
dealer) since prior to 1990;
director of two publicly-held
corporations (other than the
Company): Duke Realty
Investments, Inc., and Capital
Industries, Inc.
THOMAS E. REILLY, JR. 1981 Class A Stock 33,323 <8> * 55
Chairman and Chief Executive
Officer of Reilly Industries,
Inc. (diversified chemical
manufacturing firm) since
May, 1990, and President of
Reilly Industries, Inc. from
prior to 1990 through August,
1990; director of one publicly
held corporation (other than
the Company): NBD Bancorp, Inc.
VAN P. SMITH 1985 Class A Stock 8,742 * 66
Chairman of Ontario Corporation,
Muncie, Indiana (metallurgically-
related manufacturing and services
firm serving the aircraft and
aerospace industries) since
prior to 1990; director of
four publicly-held corporations
(other than the Company):
CINergy Corporation, PSI
Energy, Inc., Meridian Mutual
Insurance Company, and Meridian
Insurance Group, Inc.
RICHARD A. STEELE 1981 Class A Stock 22,461 <9> * 68
Retired President and Chief
Executive Officer of Citizens
Gas and Coke Utility (gas
distribution utility) since
prior to 1990.
All current directors and Class A Stock 347,510 <10> 1.55%
executive officers as a group, Class B Stock 95,000 <11> 25.81%
consisting of 10 persons
___________________________________
<FN>
* Represents less than one percent of outstanding shares.
<1> Adjusted for all stock splits and stock dividends through February, 1995.
<2> Includes 7,089 shares of Class A Stock which Mr. Baker has the right to acquire pursuant to currently
exercisable stock options.
<3> Does not include 666 shares of Class A Stock which Mr. Dorris' wife holds as custodian for their
minor child. Mr. Dorris disclaims beneficial ownership of those 666 shares. Includes 7,875 shares
of Class A Stock which Mr. Dorris has the right to acquire pursuant to currently exercisable stock
options.
<4> Does not include 3,496 shares of Class A Stock held by Mr. Huemme's adult children. Mr. Huemme
disclaims beneficial ownership of these 3,496 shares. Includes 71,562 shares of Class A Stock which
Mr. Huemme has the right to acquire pursuant to currently exercisable stock options.
<5> Includes 7,400 shares of Class A Stock which Mr. Klusas has the right to acquire pursuant to
currently exercisable stock options.
<6> Does not include 5,066 shares of Class A Stock held by City Securities Corporation in the ordinary
course of its business as a dealer in securities and incident to the maintenance by it of a market of
Class A Stock. Mr. Peterson owns more than 10% of the equity of City Securities Corporation.
Includes 44,018 shares held in an investment account at City Securities Corporation. Does not
include 34,548 shares of Class A Stock owned of record and beneficially by Mr. Peterson's wife. Mr.
Peterson disclaims beneficial ownership of those 34,548 shares. Includes 14,449 shares of Class A
Stock owned beneficially by Mr. Peterson as trustee of a GST Investment Share Trust for benefit of
Mr. Peterson and 28,898 shares of Class A Stock owned beneficially by Mr. Peterson as trustee of two
GST Investment Share Trusts for benefit of Mr. Peterson's two sisters. Includes 7,089 shares of
Class A Stock which Mr. Peterson has the right to acquire pursuant to currently exercisable stock
options.
<7> John D. Peterson is the Chairman and a shareholder of City Securities Corporation, a securities
dealer located in Indianapolis, Indiana. City Securities Corporation is a market maker for the
Company's Class A Stock. Since December 1, 1993, the Company's Employees Stock Purchase Plan has
purchased 18,072 shares of Class A Stock from City Securities Corporation for an average purchase
price of $14.76 per share. These amounts have been adjusted to reflect the 3-for-2 stock split in
June, 1994. The shares were purchased periodically from City Securities Corporation for a price per
share equal to the last quoted asked price for the shares in the over-the-counter market.
<8> Does not include 4,554 shares of Class A Stock which Mr. Reilly's wife holds as custodian for their
child. Mr. Reilly disclaims beneficial ownership of those 4,554 shares. Includes 7,089 shares of
Class A Stock which Mr. Reilly has the right to acquire pursuant to currently exercisable stock
options.
<9> Includes 7,089 shares of Class A Stock which Mr. Steele has the right to acquire pursuant to
currently exercisable stock options.
<10> Includes 4,170 shares of Class A Stock beneficially owned by Kenneth L. Mills, Director of Corporate
Accounting and Assistant Secretary of the Company, 3,938 shares of which Mr. Mills has the right to
acquire pursuant to currently exercisable stock options. Excludes 96,377 shares of Class A Stock
beneficially owned by Robert S. Bailey, formerly Senior Vice President, Marketing of the Company, who
has retired, 50,353 shares of which Mr. Bailey has the right to acquire pursuant to currently
exercisable stock options. Includes 119,131 shares of Class A Stock which all directors and officers
of the Company have the right to acquire pursuant to currently exercisable stock options.
<11> Includes 19,575 shares of Class B Stock (5.32% of total Class B Stock outstanding) beneficially owned
by Kenneth L. Mills, Director of Corporate Accounting and Assistant Secretary of the Company.
</TABLE>
Committees of the Board of Directors and Compensation of
Directors
Among other committees, the Board of Directors of the
Company has a Compensation Committee, a Nominating Committee, and
an Audit Committee.
The Compensation Committee, which held three meetings during
the Company's fiscal year ended November 30, 1994, formulates and
presents to the Board of Directors for its consideration
recommendations as to the Chairman's compensation, determines the
aggregate amount to be paid as employee bonuses by the Company
and its subsidiaries, and determines the aggregate and individual
base salaries and bonuses to be paid to officers of the Company.
Van P. Smith (Chairman), H. J. Baker, and Thomas E. Reilly, Jr.
are the current members of the Compensation Committee.
The Nominating Committee, which held no meetings during the
Company's fiscal year ended November 30, 1994, identifies and
presents candidates as potential members of the Company's Board
of Directors. Robert H. McKinney (Chairman), Van P. Smith, and
Richard A. Steele are the current members of the Nominating
Committee.
The Audit Committee, which held two meetings during the
Company's fiscal year ended November 30, 1994, is responsible for
recommending to the Board the firm to select as independent
auditors, for reviewing the scope and the results of the audits
made by the independent auditors, for overseeing the adequacy of
internal controls, and for reviewing and approving fees paid to
the independent auditors. Richard A. Steele (Chairman), John D.
Peterson, and Thomas E. Reilly, Jr. are the current members of
the Audit Committee.
The Board of Directors held four meetings during the
Company's fiscal year ended November 30, 1994. No incumbent
director attended fewer than 75% of the aggregate of such
meetings of the Board and meetings of committees of which he was
a member at the time of the meeting.
Directors who are also employees of the Company receive no
director fees. Non-employee directors received for the fiscal
year ended November 30, 1994 an annual retainer of $10,000
(except for the chairman of the Audit Committee, Policy
Committee, Nominating Committee, and Compensation Committee who
each received an additional annual retainer of $750) and $750 for
each meeting of the Board or Board committee attended.
The Lilly Industries, Inc. 1991 Director Stock Option Plan
(the "Directors Plan") provides for the granting of non-qualified
options for up to a maximum of 23,625 shares of Class A Stock per
calendar year and provides automatically for the grant of options
for 2,363 shares of Class A Stock to each non-employee director
on the date of each annual meeting of the shareholders, beginning
with the 1992 Annual Meeting. The Directors Plan is intended to
be substantially self-administering.
The Company has reserved 236,250 shares of Class A Stock for
issuance upon exercise of options to be granted under the
Directors Plan. As of February 17, 1995 there were options for
an aggregate of 42,534 shares of Class A Stock outstanding.
Options for 16,538 shares, at an exercise price of $5.19 per
share, were automatically granted on October 18, 1991 (date of
Board adoption). Options for 14,178 shares, at an exercise price
of $8.68 per share, were automatically granted on April 23, 1992
(date of 1992 Annual Meeting). Options for 14,178 shares, at an
exercise price of $10.83 per share, were automatically granted on
April 22, 1993 (date of 1993 Annual Meeting). Options for 14,178
shares, at an exercise price of $17.17 per share, were
automatically granted on April 21, 1994 (date of 1994 Annual
Meeting). Options granted under the Directors Plan will
generally become exercisable on the first anniversary of the date
upon which they were granted. Each option terminates five years
after its grant date.
Options for 7,089 shares under the Directors Plan were
exercised in fiscal year 1994 at prices per share ranging from
$5.19 to $10.83. All amounts granted and exercise prices listed
above have been adjusted to reflect all stock splits and stock
dividends through February, 1995.
PROPOSAL II
APPROVAL OF SUPPLEMENTAL EMPLOYEE STOCK PURCHASE PLAN
The Company's Board of Directors has determined that the
interests of the Company will be served by making additional
matching contributions available to certain eligible employees of
the Company and its subsidiaries who participate in the Company's
Employee Stock Purchase Plan ("ESPP"). To provide for these
additional matching contributions, the Company's Board of
Directors has adopted the Supplemental Employee Stock Purchase
Plan (the "Supplemental Plan") effective December 1, 1994,
subject to the approval of the Supplemental Plan by the separate
affirmative votes, by class, of the holders of a majority of the
Company's Class A Common Stock and the Company's Class B Common
Stock present, or represented, and entitled to vote at the Annual
Meeting of the Company's shareholders to be held on April 20,
1995. The Supplemental Plan is summarized below. All statements
made in this summary are qualified by reference to the full text
of the Supplemental Plan, a copy of which will be sent free to
any shareholder upon request. Write to Mr. Roman J. Klusas,
Secretary, Lilly Industries, Inc., 733 S. West Street,
Indianapolis, Indiana 46225 or call (317) 687-6700.
The employees eligible to participate in the Supplemental
Plan are those full-time employees of the Company and its
subsidiaries who have been continuously employed by the Company
or any of its subsidiaries for a period of at least ninety (90)
days, excluding, however, those employees who are otherwise
eligible but who are members of a collective bargaining unit
represented by a labor organization duly recognized by the
Company or one of its subsidiaries unless there is in effect
between the Company or one of its subsidiaries and that labor
organization a collective bargaining agreement providing for the
participation of such members in the Supplemental Plan. The
approximate number of employees eligible to participate in the
Supplemental Plan at the present time is 900.
An account will be set up for each participating employee
and each account will be credited with an amount equal to 25% of
each participating employee's voluntary monthly payroll deduction
under the ESPP. This amount will be paid by the employer by
which the participating employee is employed.
The Company will use the cash balance of a participating
employee's account to purchase shares of the Company's Class A
Common Stock. Shares of the Company's Class A Common Stock will
be purchased for participating employees' accounts in the over-
the-counter market at available prices, or from the Company
directly at a price per share equal to the last quoted asked
price in the over-the-counter market.
Shares of the Company's Class A Common Stock purchased by
the Company pursuant to the Supplemental Plan will be allocated
among all participating employees' accounts in proportion to the
cash balances of the participating employees' accounts on the
date of purchase. All shares so purchased will be registered in
the name of the Supplemental Plan or the Supplemental Plan's
nominee. No shares so purchased will be voted on any matter
submitted to a vote of the Company's shareholders so long as they
are registered in the name of the Supplemental Plan or the
Supplemental Plan's nominee.
A participating employee's account will be credited with all
dividends paid with respect to shares allocated to his account on
the payment date of such dividends, and with all stock dividends,
stock splits, and other securities and rights to subscribe paid
or distributed with respect to shares allocated to his account on
the payment date of such stock dividends, stock splits, or other
distributions.
Effective December 31 of each calendar year, the Company
will distribute to each participating employee the number of
whole shares of the Company's Class A Common Stock then credited
to his account. If the participating employee's employment by
the Company or one of its subsidiaries has been terminated during
the course of that calendar year, then, effective December 31 of
that calendar year, the Company will purchase any fractional
shares then credited to his account at the last quoted asked
price per share on December 31 of that calendar year crediting
that purchase price to his account, and will then distribute to
the employee the cash balance of his account.
If the Supplemental Plan had been in effect during the
fiscal year ending November 30, 1994, and all eligible employees
had participated in the Supplemental Plan, the maximum
contributions by the Company and its subsidiaries which would
have been credited to the accounts of the Chief Executive Officer
of the Company, the four highest paid executive officers who were
serving as executive officers at the end of the fiscal year
ending November 30, 1994, all executive officers as a group, and
all employees of the Company and its subsidiaries are the
following:
<TABLE>
<CAPTION>
New Plan Benefits
Supplemental Employee Stock Purchase Plan
Name and Position Dollar Value No. of Shares<1>
<S> <C> <C>
Douglas W. Huemme $1,000 69
Chairman, President and CEO
Roman J. Klusas $1,000 69
Vice President and CFO
Robert S. Bailey $1,000 69
Vice President, Marketing
William C. Dorris $1,000 69
Vice President, Corporate
Development and Technology
Kenneth L. Mills $1,000 69
Director of Corporate
Accounting
All executive officers as $5,000 345
a group
All employees $175,000 12,000
<FN>
<1> No. of shares computed based upon an average price per share of $14.58.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
APPROVAL OF THE SUPPLEMENTAL EMPLOYEE STOCK PURCHASE PLAN.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overview and Philosophy
The Compensation Committee of the Board of Directors of the
Company is composed entirely of non-employee directors. The
Committee formulates and presents to the Board of Directors
recommendations as to the Chairman's compensation and base
salaries for all officers of the Company, the aggregate amount to
be paid as employee bonuses by the Company and the aggregate and
individual bonuses to be paid to officers of the Company. The
Compensation Committee also serves as the Stock Option Committee
for the Company's 1992 Stock Option Plan. The following report
of the Compensation Committee discusses the application of the
Compensation Committee's policies to the annual and long-term
compensation of the Company's executive officers for fiscal 1994.
The objective of the Company's executive compensation
program is to enhance the Company's long-term profitability by
providing compensation that will attract and retain superior
talent, reward performance and align the interests of the
executive officers with the long-term interests of the
shareholders of the Company.
Executive Officer Compensation
For fiscal 1994 compensation for the Company's executive
officers consisted of base salary, annual cash bonuses, stock
options, supplemental executive retirement plans, and various
broad based employee benefits, including pension plans and
contributions under employee stock purchase and 401(k) plans.
Base salary levels for the Company's executive officers are
competitively set relative to companies in peer businesses. In
determining salaries, the Committee also takes into account
individual experience and performance.
The Company's annual bonus plan is intended to provide a
direct cash incentive to executive officers and other key
employees to maximize the Company's profitability. At the
beginning of each fiscal year, financial performance objectives
are targeted for the Company and individual locations which
become the basis for determining annual bonuses. If the Company
and/or locations achieve their target performance, then
participants receive an established target bonus. The amount of
bonus will increase or decrease by specified percentage within an
established range based upon actual performance compared to
target performance. In the case of the Chief Executive Officer
the performance factor most heavily weighted in determining the
bonus is earnings per share. The bonuses for 1994 were
determined in December, 1994 based upon fiscal year-end financial
results.
Stock Options
Through its stock option program, the Company seeks to
enable its executive officers and other key employees to develop
and maintain a long-term ownership position in the Company's
common stock, thereby creating a direct and strong link between
executive pay and shareholder return. The Committee considers
stock options to be an important portion of compensation tied to
performance and a strong incentive for increasing shareholder
value over the long term. In granting stock options, the Stock
Option Committee took into account the number of options granted
in prior years, the practices of other peer companies, reviewed
surveys, and considered the executive's level of compensation and
past contributions to the Company. On January 28, 1994 the Stock
Option Committee granted the incentive stock options reflected in
the tables that follow. Additionally, on September 30, 1994, the
Stock Option Committee granted non-qualified stock options for
150,000 shares to Douglas W. Huemme, the Company's Chairman,
President and Chief Executive Officer. These options are also
reflected in the tables that follow. These options granted to
Mr. Huemme become exercisable in 20% increments annually
commencing with the date of grant. The exercise of these options
is contingent upon Mr. Huemme's continued employment in the
capacity of Chief Executive Officer. The size and duration of
the options granted to Mr. Huemme were determined subjectively
and reflect the significant influence his position has upon long-
term growth and shareholder return.
Compensation Committee and
Stock Option Committee
Van P. Smith, Chairman
H. J. Baker
Thomas E. Reilly, Jr.
COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
Douglas W. Huemme, the Company's Chairman, President and
Chief Executive Officer serves as a director of The Somerset
Group, Inc. Mr. Robert H. McKinney, a current director and
director nominee of the Company, is the Chairman and Chief
Executive Officer of The Somerset Group, Inc. In 1994, Mr.
Huemme became a member of the Compensation Committee of The
Somerset Group, Inc.
COMPENSATION OF EXECUTIVE OFFICERS
Shown below is information concerning the annual and long-
term compensation for services to the Company performed during
the fiscal years indicated of those persons who were at November
30, 1994 the chief executive officer and the other four most
highly compensated executive officers.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation:
Shares
Underlying All Other
Fiscal Annual Compensation Stock Options Compensa-
Name and Principal Position Year Salary Bonus Granted <1> tion <2>
<S> <C> <C> <C> <C> <C>
Douglas W. Huemme 1994 $335,385 $310,000 161,250 $ 7,290
Chairman, President and 1993 293,077 280,000 0 5,983
Chief Executive Officer 1992 235,077 200,000 70,876 6,228
Roman J. Klusas 1994 147,115 155,000 7,501 5,737
Vice President and Chief 1993 123,846 140,000 5,000 3,738
Financial Officer, Secretary 1992 110,558 100,000 31,501 4,087
Robert S. Bailey 1994 137,923 100,000 0 6,776
Senior Vice President, 1993 131,577 85,000 4,000 6,811
Marketing 1992 122,395 100,000 31,501 5,227
William C. Dorris 1994<4> 122,769 75,000 4,500 4,095<3>
Vice President, Corporate
Development and Technology
Kenneth L. Mills 1994 98,385 40,000 3,000 3,441
Director of Corporate 1993 92,331 37,000 2,000 3,290
Accounting, Assistant 1992 83,064 32,000 7,875 2,706
Secretary
<FN>
<1> Adjusted for all stock splits and stock dividends through February, 1995.
<2> All Other Compensation is comprised of matching Company contributions on behalf of the employees to
the Employees Stock Purchase Plan and the 401(k) Plan and a portion of Company payments for group
term life insurance premiums. These three types of All Other Compensation for fiscal year 1994 are
respectively detailed by employee as follows: Douglas W. Huemme--$1,000, $4,620 and $1,670; Roman J.
Klusas--$1,000, $4,389 and $348; Robert S. Bailey--$1,000, $4,512 and $1,264; William C. Dorris--
$293, $3,284 and $518; and Kenneth L. Mills--$704, $2,563 and $174.
<3> In connection with Mr. Dorris' relocation during 1994 the Company provided him with an interest-free
loan to be used for the purchase of a new residence. The loan was made in June, 1994 and fully
repaid in November, 1994. The largest amount outstanding on the loan during this period was $254,000
and if the loan carried a market interest rate, he would have paid $5,900 in interest during 1994.
<4> Mr. Dorris was appointed Vice President, Corporate Development and Technology in 1994.
</TABLE>
<PAGE>
STOCK OPTION GRANTS
The following table provides details regarding stock options
granted to the named executive officers in fiscal 1994. In
addition there are shown the hypothetical gains or "option
spreads" that would exist for the respective options. These
gains are based on assumed rates of annual compound stock price
appreciation of 5% and 10% from the date the options were granted
over the full option term. These amounts represent certain
assumed rates of appreciation only. Actual gains, if any, on
stock option exercises and common stock holdings are dependent on
the future performance of the Company's common stock and the
overall stock market conditions. There can be no assurance that
the amounts reflected on this table will be achieved.
<TABLE>
<CAPTION>
FISCAL 1994 STOCK OPTION GRANTS
Potential
Percent of Realizable Value
Number Total Options Assuming Annual
of Shares Granted to Rates of Stock
Underlying Employees Exercise Price Appreciation
Options in Fiscal Price Per Expiration for Option Term
Name
Granted <1> 1994 Share Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Douglas W. Huemme 11,250<1> 3.87% $14.33 01/28/99 $ 44,553 $ 98,443
30,000<2> 10.31% 12.25 09/30/99 101,540 224,359
30,000<2> 10.31% 12.25 09/30/00 124,992 283,545
30,000<2> 10.31% 12.25 09/30/01 149,617 348,649
30,000<2> 10.31% 12.25 09/30/02 175,473 420,264
30,000<2> 10.31% 12.25 09/30/03 202,621 499,040
Roman J. Klusas 7,501<1> 2.58% 14.33 01/28/99 29,702 65,629
William C. Dorris 4,500<1> 1.55% 14.33 01/28/99 17,821 39,377
Kenneth L. Mills 3,000<1> 1.03% 14.33 01/28/99 11,881 26,252
<FN>
<1> Stock options granted to the named executive officers during fiscal 1994 which expire January 28,
1999 consisted of both qualified and non-qualified options. One-third of these options become
exercisable on each of January 28, 1996, 1997 and 1998. The purchase price of shares subject to
these options may be paid in cash or by exchanging shares at fair market value. For non-qualified
stock options granted, the grantee will be reimbursed for federal income taxes resulting from
exercise in an amount equal to the Company's tax benefit.
<2> Stock options granted on September 30, 1994 to Mr. Huemme were non-qualified options. The first 20
percent (30,000 shares) of the total number of shares covered by the option became exercisable
September 30, 1994, and the option shall become exercisable with respect to the second, third, fourth
and fifth 20 percent of such shares on the first, second, third and fourth anniversaries (September
30, 1995, September 30, 1996, September 30, 1997 and September 30, 1998), respectively, of the date
of grant. When the option becomes exercisable with respect to any shares, those shares may be
purchased at any time, or from time to time, in whole or in part, during a period of five years from
the date the specific option becomes exercisable. This option will terminate if Mr. Huemme ceases to
be the Chief Executive Officer of the Company for any reason other than retirement, permanent and
total disability, or death. The purchase price of shares subject to these options may be paid in
cash or by exchanging shares at fair market value. The grantee will be reimbursed for federal income
taxes resulting from exercise in an amount equal to the Company's tax benefit.
</TABLE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table shows stock option exercises by named
executive officers during fiscal 1994, including the aggregate
value realized by such officers on the date of exercise. In
addition, this table includes the number of shares covered by
both exercisable and non-exercisable stock options as of November
30, 1994. Also reported are the values for "in-the-money"
options (options whose exercise price is lower than the market
value of the shares at fiscal year end) which represent the
spread between the exercise price of any such existing stock
options and the fiscal year-end market price of the stock.
<TABLE>
<CAPTION>
1994 STOCK OPTION EXERCISES,
OUTSTANDING GRANTS AND VALUE AS OF NOVEMBER 30, 1994
Number of
Shares Underlying Value of
Unexercised Unexercised
Value Options at In-the-Money
Realized 11/30/94 Options at
Shares at Exer- Unexer- 11/30/94 <4>
Acquired on Exercise cisable cisable Exer- Unexer-
Name Exercise <1> Date <2> <1> <1>,<3> cisable cisable <3>
<S> <C> <C> <C> <C> <C> <C>
Douglas W. Huemme 10,628 $114,273 82,338 208,328 $360,046 $577,932
Roman J. Klusas 8,949 90,743 15,751 46,502 90,411 200,766
Robert S. Bailey 1,896 19,541 53,253 0 287,189 0
William C. Dorris 6,174 62,604 7,875 23,250 45,203 98,385
Kenneth L. Mills 414 5,070 3,938 14,288 22,604 56,586
<FN>
<1> Adjusted for all stock splits and stock dividends through February, 1995.
<2> Aggregate market value of shares acquired less the aggregate price paid by executive.
<3> The shares represented could not be acquired by the respective executive as of November 30, 1994.
<4> Amount reflecting gains on outstanding options are based on the November 30, 1994 closing NASDAQ
stock price which was $13.25 per share.
</TABLE
<PAGE>
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The line graph below compares annual changes in cumulative
total return to shareholders on the Company's Common Stock
against the cumulative total return as measured by the Standard &
Poor's 500 Composite Index and the Standard & Poor's Chemical
Composite Index. The comparisons are for a period of five fiscal
years ended November 30, 1994.
</TABLE>
<TABLE>
<CAPTION>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
<S> <C> <C> <C> <C> <C> <C>
Dollar Value at November 30 1989 1990 1991 1992 1993 1994
Lilly Common $100 $ 72 $ 86 $158 $247 $225
S&P 500 $100 $ 93 $108 $125 $133 $131
S&P Chemical $100 $ 84 $ 98 $111 $119 $132
<FN>
* Assumes $100 was invested on November 30, 1989 in Lilly Industries, Inc. Common Stock
and each index. Also assumes reinvestment of all dividends.
</TABLE> <PAGE>
PENSION PLANS
Retirement benefits are provided by the Company and its
subsidiaries under non-contributory pension plans, each of which
is qualified under Section 401 of the Internal Revenue Code.
Effective December 1, 1994, the pension plan in which officers of
the Company participate was amended to freeze years of service at
November 30, 1994. Monthly pension benefits under this plan are
based on length of service at November 30, 1994 and average
monthly earnings for the 60 consecutive months producing the
highest average during employment. The earnings covered by the
Company's pension plans include cash salary, wages and bonuses
actually paid, plus Company contributions made on behalf of the
participants pursuant to the Employees Stock Purchase Plan of the
Company and any amounts deferred or redirected by participants
under any cash or deferred arrangement and salary reduction plans
maintained by the Company under Section 401(k) and Section 125 of
the Internal Revenue Code. Such compensation does not vary
substantially from the cash compensation reported in the
executive officers summary compensation table.
The estimated annual retirement benefits presented on a
straight-life annuity basis payable at the normal retirement age
of 65 under those plans to persons in specified remuneration and
years-of-service classifications are as follows (benefits listed
in the table are not subject to any further offset):
<TABLE>
<CAPTION>
Assumed Average
Earnings During Five Years of Service at November 30, 1994
Consecutive Years
Producing Highest Average 10 20 30 40 50
<S> <C> <C> <C> <C> <C>
$100,000 $12,500 $25,000 $37,500 $50,000 $62,500
125,000 15,625 31,250 46,875 62,500 78,125
150,000 18,750 37,500 56,250 75,000 93,750
</TABLE>
The years of service credited to the following officers of the
Company on November 30, 1994 under the pension plan in which they
participate are as follows: Douglas W. Huemme--4.5; Roman J. Klusas--
7.8; Robert S. Bailey--41.2; William C. Dorris--23.8; and Kenneth L.
Mills--17.0.
Effective for the plan years beginning December 1, 1994
compensation used in calculating benefits is limited to $150,000. In
addition the Employee Retirement Income Security Act of 1974 ("ERISA")
limits the annual benefits that may be paid from the Company's tax
qualified plans (the "Section 415 limit"). The Section 415 limit for
1994 is $118,800 for any one employee.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Company maintains a Supplemental Executive Retirement Plan
(the "SERP") providing supplemental benefits in the event of disability,
retirement, or death for individuals or other key executives in senior
management positions (including the individuals listed in the summary
compensation table).
The SERP has been designed so that, if the assumptions made as to
mortality experience, policy dividends and other factors are realized,
the Company will recover all its payments under the SERP, plus a factor
for the use of the Company's money, through insurance policies.
Moreover, the Board of Directors has retained the right to terminate,
modify or reduce any benefits payable under the SERP at any time under
any circumstances.
Under the SERP, it is anticipated that a participant will receive
annual retirement benefits up to $15,000, $20,000, $25,000 or $50,000
(depending upon the responsibilities and duties of the position held by
the participant) for a period of 15 years after retirement (the
"retirement benefit"). Unless a participant becomes disabled, the
participant must remain continuously employed by the Company in their
current position or in a more senior management position until
retirement. Benefits are payable monthly.
If a participant becomes disabled prior to retiring from the
Company, it is anticipated that the participant will receive monthly
disability payments equal to the monthly retirement benefits the
participant would have received under the retirement provisions of the
SERP for 15 years after the participant is determined to be disabled.
If a participant dies prior to retiring from the Company, the
participant's estate or designated beneficiary receives death benefit
payments for 15 years. If a participant who is receiving disability or
retirement benefits under the SERP dies, the participant's estate or
designated beneficiaries are entitled under the current SERP to receive
the balance of the participant's benefits monthly.
Estimated annual benefits payable upon normal retirement for each
of the most highly compensated executive officers of the Company are as
follows: Douglas W. Huemme--$50,000; Roman J. Klusas--$25,000; Robert
S. Bailey--$25,000; William C. Dorris--$25,000; and Kenneth L. Mills--
$15,000. Estimated annual benefits payable upon normal retirement for
all current employee participants (excluding executive officers) as a
group are $115,000.
EMPLOYMENT TERMINATION AGREEMENTS
Four executive officers, Roman J. Klusas, Robert S. Bailey,
William C. Dorris, and Kenneth L. Mills, have Termination Benefits
Agreements providing for payment of severance benefits equal to one
year's salary and benefits if the Company undergoes a change in control
within the ten-year term of the Agreement (commencing December 1, 1990)
and if, within three years after such change in control, any such
executive is terminated without "cause" or resigns for "good reason", as
those terms are defined in the Agreement.
OUTSTANDING SHARES AND VOTING RIGHTS
Shareholders of record on February 17, 1995 are entitled to
notice of, and to vote at, the Annual Meeting of Shareholders, and at
any adjournment thereof. On that date 22,383,362 shares of the
Company's Class A Stock and 368,137 shares of the Company's Class B
Stock were outstanding, each share (except the 7,165 shares of Class A
Stock held by the Employees Stock Purchase Plan) being entitled to one
vote with respect to every matter submitted to a vote of the shares of
that class.
Five persons are known by management to own beneficially more
than 5% of the outstanding shares of the Company's Class A Stock or
Class B Stock. The names and addresses of these persons and the number
and percentage of shares if more than 5% of the outstanding shares of
Class A Stock or Class B Stock owned beneficially by them as of February
17, 1995 are included in the following table. Unless otherwise
indicated each shareholder has sole investment and voting power with
respect to the shares indicated.
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address of Beneficial Percent
Beneficial Owner Title of Class Ownership<1> of Class
<S> <C> <C> <C>
Ned L. Fox Class B Stock 27,177 7.38%
733 South West Street
Indianapolis, IN 46225
Bill D. Hawkins Class B Stock 20,775 5.64%
2305 Industrial Road
Dothan, AL 36303
Douglas W. Huemme Class B Stock 32,900 8.94%
733 South West Street
Indianapolis, IN 46225
Roman J. Klusas Class B Stock 25,500 6.93%
733 South West Street
Indianapolis, IN 46225
Kenneth L. Mills Class B Stock 19,575 5.32%
733 South West Street
Indianapolis, IN 46225
________________________
<FN>
<1> Adjusted for all stock splits and stock dividends through February,
1995.
</TABLE>
<PAGE>
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Company has selected the firm of Ernst & Young, certified
public accountants, as independent auditors to make an examination of
the accounts of the Company for its fiscal year ending November 30,
1995. Ernst & Young LLP has served in that capacity since 1956.
Representatives of Ernst & Young LLP will be present at the Annual
Meeting with the opportunity to make a statement, if they desire to do
so, and will respond to appropriate questions.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the Annual
Meeting to be held in April, 1996 must be received by the Company at its
principal executive offices for inclusion in the proxy statement and
form of proxy relating to that meeting no later than November 17, 1995.
ANNUAL REPORT
The Annual Report for the Company's fiscal year ended November 30,
1994 is being mailed with this Proxy Statement to all shareholders. The
Annual Report is not a part of the proxy soliciting material. Insofar
as any of the information in this Proxy Statement has been furnished by
persons other than the Company, the Company relies upon information
furnished by others for the accuracy and completeness thereof.
<PAGE>
SUPPLEMENTAL EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors of Lilly Industries, Inc. (the "Company")
has determined that the interests of the Company will be served by
making additional matching contributions available to certain eligible
employees of the Company and its subsidiaries who participate in the
Lilly Employee Stock Purchase Plan (the "ESPP"). To provide for these
additional matching contributions, the Company's Board of Directors
adopts this plan, to be known as the Lilly Supplemental Employee Stock
Purchase Plan (the "Supplemental Plan") effective December 1, 1994,
subject to the approval of this plan by the separate affirmative votes,
by class, of the holders of a majority of the Company's Class A Common
Stock and the Company's Class B Common Stock present, or represented,
and entitled to vote at the Annual Meeting of the Company's shareholders
to be held on April 20, 1995:
1. The employees eligible to participate in this plan are those full-
time employees of the Company and its subsidiaries who have been
continuously employed by the Company or any of its subsidiaries for
a period of at least ninety (90) days, excluding, however, those
employees who are otherwise eligible but who are members of a
collective bargaining unit represented by a labor organization duly
recognized by the Company or one of its subsidiaries unless there
is in effect between the Company or one of its subsidiaries and
that labor organization a collective bargaining agreement providing
for the participation of such members in this plan. An eligible
employee will automatically participate in this plan by electing to
participate in the ESPP.
2. There is no maximum or minimum number of shares which may be
purchased by or issued to each eligible employee; provided,
however, a maximum of 3,800,535 shares of the Company's Class A
Common Stock may be offered pursuant to this plan and the ESPP.
3. A separate account will be established for each participating
employee.
4. A participating employee's account will be credited with an amount
equal to twenty-five percent (25%) of each payroll deduction to the
ESPP on the day the employee receives the paycheck from which the
deduction is made. This amount will be paid to the employee's
account by the employer by which the participating employee is
employed.
5. The Company will use the cash balance of a participating employee's
account to purchase shares of the Company's Class A Common Stock.
Shares of the Company's Class A Common Stock will be purchased in
the over-the-counter market at available prices, or from the
Company directly at a price per share equal to the last quoted
asked price in the over-the-counter market. The Company has no
obligation to invest the cash balance of a participating employee's
account in anything except shares of the Company's Class A Common
Stock and has no obligation to invest that cash balance in those
shares more frequently than quarterly during the calendar year.
<PAGE>
6. Shares of the Company's Class A Common Stock purchased by the
Company pursuant to this plan will be allocated among all
participating employees' accounts in proportion to the cash
balances of the participating employees' accounts on the date of
purchase. Allocations to participating employees' accounts shall
be made in full shares and in fractional shares. All shares so
purchased shall be registered in the name of the plan or the plan's
nominee. No shares so purchased shall be voted on any matter
submitted to a vote of the Company's shareholders so long as they
are registered in the name of the plan or the plan's nominee.
7. A participating employee's account will be credited with all
dividends paid with respect to shares allocated to his account on
the payment date of such dividends.
8. A participating employee's account will be credited with stock
dividends, stock splits, and other securities and rights to
subscribe paid or distributed with respect to shares allocated on
his account on the payment date of such stock dividends, stock
splits, or other distributions.
9. The Company will pay any commissions or other expenses incurred in
connection with purchasing shares for participating employees'
accounts.
10. Effective December 31 of each calendar year, the Company will
distribute to each participating employee the number of whole
shares of the Company's Class A Common Stock then credited to his
account. If the participating employee's employment by the Company
or one of its subsidiaries has been terminated during the course of
that calendar year, then, effective December 31 of that calendar
year, the Company will purchase any fractional shares then credited
to his account at the last quoted asked price-per-share on December
31 of that calendar year crediting that purchase price to his
account, and will then distribute to the employee the cash balance
of his account.
11. The rights granted under this plan to an eligible employee are not
transferable by him other than by will or the laws of descent and
distribution and are exercisable during his lifetime only by him or
by his guardian or his legal representative.
12. The Board of Directors of the Company may amend this plan from time
to time, except that without the approval by the separate
affirmative votes, by class, of the holders of at least a majority
of the Company's Class A Common Stock and the Company's Class B
Common Stock present, or represented, and entitled to vote, at a
meeting of such holders,
(a) the benefits accruing to participants under this plan may not
be increased materially within the meaning of Rule 16b-
3(b)(2)(ii)(A) promulgated under the Securities Exchange Act
of 1934;
(b) the number of securities which may be issued under this plan
may not be increased materially within the meaning of Rule
16b-3(b)(2)(ii)(B) promulgated under the Securities Exchange
Act of 1934; and
(c) the requirements as to eligibility for participation in this
plan may not be modified materially within the meaning of Rule
16b-3(b)(2)(ii)(C) promulgated under the Securities Exchange
Act of 1934.
13. The provisions of this plan regarding the formula pursuant to which
the grant or award is made shall not be amended more than once
every six (6) months, other than to comport with changes in the
Internal Revenue Code, the Employee Retirement Income Security Act,
or the rules thereunder.
14. The terms "subsidiary" and "subsidiaries" used herein mean a
company or companies, respectively, of which 80% or more of the
total voting power of the stock of each such company and 80% or
more of the total value of the stock of each such company are owned
by the Company.
15. This plan is not subject to any provisions of the Employee
Retirement Income Security Act of 1974, as amended, and is not
subject to the qualification requirements of Section 401(a) of the
Internal Revenue Code of 1986, as amended.
16. Employees participating in this plan who are affiliates of the
Company (as defined in Rule 405 under the Securities Act of 1933 to
include persons who directly or indirectly, through one or more
intermediaries, control, are controlled by, or are under common
control with, the Company) are subject to the same resale
restrictions as they apply to shares acquired under the ESPP.
<PAGE>
Class A Stock
Lilly Industries, Inc.
PROXY
For Annual Meeting of Shareholders
To Be Held April 20, 1995
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints ROBERT H. MCKINNEY and JOHN D. PETERSON, or
either of them, with full power of substitution, as proxies to vote all
shares of Class A Stock held by the undersigned at the Annual Meeting of
Shareholders of Lilly Industries, Inc. to be held at the Indiana
Convention Center, 100 South Capitol Avenue, Indianapolis, Indiana in
Rooms 101 and 102, at 10:00 a.m., local time, and at any adjournment of
the meeting, on the following matters:
I. Election of Directors
____ FOR all four nominees listed below
(except as marked to the contrary below)
____ AGAINST all nominees
H. J. (Jack) Baker, Robert H. McKinney, John D. Peterson,
Van P. Smith
(INSTRUCTION: To vote against any individual nominee, write that
nominee's name on the line provided below.)
_______________________________________________________
II. Proposal to approve adoption of the Supplemental Employee Stock
Purchase Plan
______ FOR ______ AGAINST ______ ABSTAIN
III. In their discretion upon such other business as may come before the
meeting.
This proxy may be revoked at any time before it is exercised.
(Continued and to be signed on the other side.)
<PAGE>
(Reverse Side of Proxy Card)
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 ALL PROPOSALS. 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 FAVOR OF THE ACTION
RECOMMENDED BY THE BOARD OF DIRECTORS AND, IN THE ABSENCE OF A
RECOMMENDATION, IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PROXY
HOLDERS.
Please sign exactly and as fully as shown on this proxy card.
Dated: _______________________, 1995
________________________________________
Signature
________________________________________
Signature if held jointly
IMPORTANT: This proxy is solicited on behalf of the Board of Directors.
Please sign, date and return this proxy promptly in the enclosed
envelope.
<PAGE>
Class B Stock
Lilly Industries, Inc.
PROXY
For Annual Meeting of Shareholders
To Be Held April 20, 1995
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints DOUGLAS W. HUEMME and ROMAN J. KLUSAS, or
either of them, with full power of substitution, as proxies to vote all
shares of Class B Stock held by the undersigned at the Annual Meeting of
Shareholders of Lilly Industries, Inc. to be held at the Indiana
Convention Center, 100 South Capitol Avenue, Indianapolis, Indiana in
Rooms 101 and 102, at 10:00 a.m., local time, and at any adjournment of
the meeting, on the following matters:
I. Election of Directors
____ FOR all six nominees listed below
(except as marked to the contrary below)
____ AGAINST all nominees
William C. Dorris, Douglas W. Huemme, Roman J. Klusas, Harry
Morrison, Ph.D., Thomas E. Reilly, Jr., Richard A. Steele
(INSTRUCTION: To vote against any individual nominee, write that
nominee's name on the line provided below.)
_________________________________________________________
II. Proposal to approve adoption of the Supplemental Employee Stock
Purchase Plan
______ FOR ______ AGAINST ______ ABSTAIN
III. In their discretion upon such other business as may come before the
meeting.
This proxy may be revoked at any time before it is exercised.
(Continued and to be signed on the other side.)
<PAGE>
(Reverse Side of Proxy Card)
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 ALL PROPOSALS. 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 FAVOR OF THE ACTION
RECOMMENDED BY THE BOARD OF DIRECTORS AND, IN THE ABSENCE OF A
RECOMMENDATION, IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PROXY
HOLDERS.
Please sign exactly and as fully as shown on this proxy card.
Dated: ___________________, 1995
___________________________________
Signature
IMPORTANT: This proxy is solicited on behalf of the Board of Directors.
Please sign, date and return this proxy promptly in the enclosed
envelope.
