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] No Fee Required
[ ] 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:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule and
the date of its filing.
(1) Amount Previously Paid: ___________
(2) Form, Schedule or Registration Statement No.: _________
(3) Filing Party: _________
(4) Date Filed: ___________
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March 20, 1997
Dear Shareholder:
On behalf of the Board of Directors and management, I cordially invite
you to attend the Annual Meeting of Shareholders of Lilly Industries, Inc. to be
held on Thursday, April 24, 1997 at 10:00 A.M., local time. The meeting will be
at the Indiana Convention Center & RCA Dome, Rooms 101 and 102, 100 South
Capitol Avenue, Indianapolis, Indiana.
This letter is accompanied by a notice of meeting and proxy statement
which describe the business to be acted upon. In addition to the business items,
there will be a report on the progress of the Company and an opportunity for
questions.
It is important that your shares be represented at the meeting. Whether
or not you plan to attend in person, you are requested to vote, sign, date, and
promptly return the enclosed proxy in the envelope provided.
Sincerely,
/s/ Douglas W. Huemme
Douglas W. Huemme
Chairman, President and
Chief Executive Officer
<PAGE>
LILLY INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 24, 1997
The Annual Meeting of Shareholders of Lilly Industries, Inc., an
Indiana corporation (the "Company"), will be held at the Indiana Convention
Center & RCA Dome, 100 South Capitol Avenue, Indianapolis, Indiana in Rooms 101
and 102 on Thursday, April 24, 1997 at 10:00 A.M., local time, for the following
purposes:
1. To elect ten directors.
2. To approve a proposed amendment of the Company's 1992
Stock Option Plan to increase the shares reserved by
one million.
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 24, 1997 as the record date for determining shareholders entitled to
notice of and to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Kenneth L. Mills, Asst. Secretary
March 20, 1997
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 24, 1997 and at any adjournment thereof. This Proxy Statement and
the enclosed proxy were mailed on or about March 20, 1997.
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 amendment of
the 1992 Stock Option Plan as described in the Proxy Statement. If any other
business comes before the meeting, the shares will be voted in favor of the
action recommended by the Board of Directors 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 NUMBER ONE
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
Norma J. Oman and Robert A. Taylor, are current directors whose present terms of
office will expire upon completion of the election at the meeting. Norma J. Oman
and Robert A. Taylor have been nominated to replace H. J. (Jack) Baker and
Richard A. Steele who are retiring from the Board of Directors effective with
the annual meeting on April 24, 1997. 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
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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.
James M. Cornelius, John D. Peterson, Thomas E. Reilly, Jr. and Van P.
Smith are nominees for election as directors by holders of the Class A Stock;
and William C. Dorris, Paul K. Gaston, Douglas W. Huemme, Harry Morrison, Ph.D.,
Norma J. Oman and Robert A. Taylor are nominees for election as directors by
holders of the Class B Stock.
The name, principal occupation and certain other information concerning
each nominee for election as a director are set forth below.
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Name and Principal Occupation Certain Other Information
- ----------------------------- -----------------------------------
JAMES M. CORNELIUS Mr. Cornelius, 53, has been a
Chairman of the Board of director of the Company since 1996.
Directors, He has been Chairman of the Board
Guidant Corporation of Directors of Guidant Corporation
since 1994. He was Vice President
of Finance and Chief Financial
Officer of Eli Lilly and Company
from prior to 1992 to 1995. He is
also a director of Guidant
Corporation, American United Life
Insurance Company and the National
Bank of Indianapolis.
WILLIAM C. DORRIS Mr. Dorris, 54, has been a director
Vice President, of the Company since 1989. He has
Corporate Development, been Vice President, Corporate
Lilly Industries, Inc. Development of the Company since
1994. He was General Manager of the
Company's High Point Division from
prior to 1992 to 1994, of the
Company's Templeton Division from
prior to 1992 to 1994 and of the
Company's Dallas Division from 1993
to 1994.
PAUL K. GASTON Mr. Gaston, 63, has been a director
Retired Chairman of of the Company since 1996. He has
Guardsman Products, Inc. been a consultant since 1996. He
and Partner of Warner, was Chairman of Guardsman Products,
Norcross and Judd LLP Inc. from 1994 to 1996. He was a
partner of Warner, Norcross and
Judd LLP, attorneys, from prior to
1992 to 1993 and Managing Partner
from prior to 1992 to 1992. He is
also a director of Kysor Industrial
Corporation.
DOUGLAS W. HUEMME Mr. Huemme, 55, has been a director
Chairman, President and of the Company since 1990. Mr.
Chief Executive Officer, Huemme has been Chairman, President
Lilly Industries, Inc. and Chief Executive Officer of the
Company since 1991. He is also a
director of First Indiana
Corporation and The Somerset Group,
Inc.
HARRY MORRISON, Ph.D. Dr. Morrison, 59, has been a
Dean of the School director of the Company since 1995.
of Science, He has been Dean of the School of
Purdue University Science of Purdue University since
1992. He was Head of the Chemistry
Department of Purdue University
from prior to 1992 to 1992 and a
chemical consultant for: Great
Lakes Chemical Corporation (1991 to
1993) and American Cyanamid (1993).
NORMA J. OMAN Mrs. Oman, 49, is a new nominee for
President and Chief director of the Company. She has
Executive Officer, been President and Chief Executive
Meridian Mutual Insurance Officer of Meridian Mutual
Company and Meridian Insurance Company and Meridian
Insurance Group, Inc. Insurance Group, Inc. since prior
to 1992. She is also a director of
Meridian Mutual Insurance Company,
Meridian Insurance Group, Inc. and
Bank One, Indianapolis.
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Name and Principal Occupation Certain Other Information
- ----------------------------- -----------------------------------
JOHN D. PETERSON Mr. Peterson, 63, has been a
Chairman, director of the Company since 1964.
City Securities Corporation He has been Chairman of City
Securities Corporation, securities
dealer, since prior to 1992. He is
also a director of Duke Realty
Investments, Inc. and Capital
Industries, Inc.
THOMAS E. REILLY, JR.
Chairman and Chief Mr. Reilly, 57, has been a director
Executive Officer, of the Company since 1981. He has
Reilly Industries, Inc. been Chairman and Chief Executive
Officer of Reilly Industries, Inc.,
diversified chemical manufacturing
firm, since prior to 1992. He is
also a director of First Chicago
NBD Corporation.
VAN P. SMITH Mr. Smith, 68, has been a director
Chairman, of the Company since 1985. He has
Ontario Corporation been Chairman of Ontario
Corporation, Muncie, Indiana, a
manufacturing and service company
providing a variety of products and
services to the semiconductor,
testing laboratory and computer
software industries, since prior to
1992. He is also a director of
CINergy Corporation, PSI Energy,
Inc., Meridian Mutual Insurance
Company and Meridian Insurance
Group, Inc.
ROBERT A. TAYLOR Mr. Taylor, 43, is a new nominee
Executive Vice President for director of the Company. He has
and Chief Operating been Executive Vice President and
Officer, Chief Operating Officer of the
Lilly Industries, Inc. Company since February, 1997. He
was Vice President and General
Manager, Wood Coatings of the
Company from 1994 to 1997. He was
Vice President, Specialty and
Container Coatings of AKZO
Coatings, Inc. from 1992 to 1994.
He was Managing Director, Southeast
Asia of AKZO Coatings, Inc. from
prior to 1992 to 1992.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR ELECTION OF EACH
OF THE NOMINEES FOR DIRECTOR. YOUR VOTE IS IMPORTANT.
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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 Policy and Nominating Committee, an Audit Committee
and a Technology Committee.
The Compensation Committee, which held two meetings during the
Company's fiscal year ended November 30, 1996, 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 Policy and Nominating Committee, which held three meetings during
the Company's fiscal year ended November 30, 1996, determines various policies,
and identifies and presents candidates as potential members of the Company's
Board of Directors. Richard A. Steele (Chairman), John D. Peterson, Thomas E.
Reilly, Jr., and Van P. Smith are the current members of the Policy and
Nominating Committee.
The Audit Committee, which held two meetings during the Company's
fiscal year ended November 30, 1996, is responsible for recommending to the
Board the 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), James M. Cornelius, John D. Peterson, and Thomas
E. Reilly, Jr. are the current members of the Audit Committee.
The Technology Committee, which held two meetings during the Company's
fiscal year ended November 30, 1996, reviews and evaluates existing and
potential technologies of the Company. Harry Morrison, Ph.D. (Chairman), William
C. Dorris, and Thomas E. Reilly, Jr. are the current members of the Technology
Committee.
The Board of Directors held seven meetings during the Company's fiscal
year ended November 30, 1996. 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,
1996 an annual retainer of $10,000 (except for the chairman of the Audit
Committee, Policy and Nominating Committee, Technology Committee, and
Compensation Committee who each received an additional annual retainer of
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$1,000) and $1,000 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 198,442 shares of Class A Stock for issuance
upon exercise of options to be granted under the Directors Plan. As of February
24, 1997 there were options for an aggregate of 53,954 shares of Class A Stock
outstanding.
Options for 16,538 shares, at an exercise price of $5.19 per share,
were granted in 1991. Options for 14,178 shares, at an exercise price of $8.68
per share, were granted in 1992. Options for 14,178 shares, at an exercise price
of $10.83 per share, were granted in 1993. Options for 14,178 shares, at an
exercise price of $17.17 per share, were granted in 1994. Options for 16,541
shares, at an exercise price of $14.06 per share, were granted in 1995. Options
for 16,541 shares, at an exercise price of $14.69 per share, and options for
1,968 shares, at an exercise price of $15.13 per share, were granted in 1996.
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 18,904 shares under the Directors Plan were exercised in
fiscal year 1996 at prices per share ranging from $5.19 to $14.06.
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table lists, as of February 24, 1997 (unless otherwise
noted), the beneficial ownership of shares of Class A Stock and Class B Stock
for each current director, each nominee for director, each executive officer
named in the Summary Compensation Table, all current directors and executive
officers as a group, and each shareholder known by the Company to be the owner
of more than five percent of the outstanding shares of Class A Stock or Class B
Stock. Unless otherwise indicated each shareholder has sole investment and
voting power with respect to the shares indicated.
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<TABLE>
<CAPTION>
Class A Stock Class B Stock
------------------------------------ -------------------------------
Shares Shares
Beneficially Percent Beneficially Percent
Name of Beneficial Owner Owned of Class Owned Of Class
- ------------------------ --------------- -------- ------------ ---------
<S> <C> <C> <C> <C>
H. J. (Jack) Baker 13,468 (1) * 0 *
James M. Cornelius 4,000 * 0 *
William C. Dorris 39,041 (2) * 17,025 4.7%
Paul K. Gaston 10,000 * 0 *
Douglas W. Huemme 216,340 (3) * 36,000 9.9%
Harry Morrison, Ph.D 2,363 (4) * 0 *
Norma J. Oman 0 * 0 *
John D. Peterson 163,271 (5) * 0 *
Thomas E. Reilly, Jr 38,935 (6) * 0 *
Van P. Smith 13,468 (7) * 0 *
Richard A. Steele 27,187 (8) * 0 *
Robert A. Taylor 16,646 (9) * 6,038 1.7%
Larry H. Dalton 22,656 (10) * 27,855 7.7%
A. Barry Melnkovic 420 * 0 *
Kenneth L. Mills 15,967 (11) * 21,376 5.9%
All current directors 583,762 2.6% 108,294 29.8%
and executive officers
as a group (14 persons)
Neuberger & Berman, LLC 1,341,650 (12) 6.0% 0 *
605 Third Avenue
New York, NY 10158
Quest Advisory Corp. 1,324,642 (12) 5.9% 0 *
1414 Avenue of the Americas
New York, NY 10019
Ned L. Fox 25,259 (13) * 27,283 7.5%
Bill D. Hawkins 21,427 (14) * 21,775 6.0%
Gary D. Missildine 24,609 (15) * 21,498 5.9%
</TABLE>
- ---------------------------------
* Represents less than one percent of class of outstanding shares.
(1) Includes 2,363 shares of Class A Stock which Mr. Baker has the right to
acquire pursuant to currently exercisable stock options.
(2) Does not include 834 shares of Class A Stock which Mr. Dorris' wife
holds as custodian for their minor child. Mr. Dorris disclaims
beneficial ownership of those 834 Shares. Includes 30,291 shares of
Class A Stock which Mr. Dorris has the right to acquire pursuant to
currently exercisable stock options.
(3) Includes 203,814 shares of Class A Stock which Mr. Huemme has the right
to acquire pursuant to currently exercisable stock options.
(4) Includes 2,363 shares of Class A Stock which Dr. Morrison has the right
to acquire pursuant to currently exercisable stock options.
(5) Includes 54,018 shares held in an investment account at City Securities
Corporation. Mr. Peterson owns more than 10% of the equity of 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 34,298
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.
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(6) Does not include 5,071 shares of Class A Stock which Mr. Reilly's wife
holds as custodian for one of their children. Mr. Reilly disclaims
beneficial ownership of those 5,071 shares. Includes 7,089 shares of
Class A Stock which Mr. Reilly has the right to acquire pursuant to
currently exercisable stock options.
(7) Includes 4,726 shares of Class A Stock which Mr. Smith has the right to
acquire pursuant to currently exercisable stock options.
(8) Includes 7,089 shares of Class A Stock which Mr. Steele has the right
to acquire pursuant to currently exercisable stock options.
(9) Includes 4,000 shares of Class A Stock which Mr. Taylor has the right
to acquire pursuant to currently exercisable stock options.
(10) Includes 18,125 shares of Class A Stock which Mr. Dalton has the right
to acquire pursuant to currently exercisable stock options.
(11) Includes 15,580 shares of Class A Stock which Mr. Mills has the right
to acquire pursuant to currently exercisable stock options.
(12) Based on SEC Schedule 13G as of December 31, 1996.
(13) Includes 14,375 shares of Class A Stock which Mr. Fox has the right to
acquire pursuant to currently exercisable stock options.
(14) Includes 1,500 shares of Class A Stock which Mr. Hawkins has the right
to acquire pursuant to currently exercisable stock options.
(15) Includes 11,125 shares of Class A Stock which Mr. Missildine has the
right to acquire pursuant to currently exercisable stock options.
PROPOSAL NUMBER TWO
AMENDMENT OF THE 1992 STOCK OPTION PLAN
TO INCREASE SHARES RESERVED
On January 10, 1997, the Board of Directors authorized the amendment of
the Lilly Industries, Inc. 1992 Stock Option Plan (the "Plan"), subject to
approval by the shareholders, to permit the reservation of an additional one
million shares of Class A Common Stock upon the exercise of options to be
granted under the Plan between the date of shareholder approval and January 31,
2002. A total of 1,549,399 option shares have been granted under the Plan as of
February 24, 1997. The maximum number of shares currently reserved for stock
grants under the Plan is 1,771,875. The amendment will increase the number of
shares reserved or available for stock option grants by 1,000,000 shares to a
total of 2,771,875 shares.
Summary of the Plan
On January 31, 1992, the Board of Directors of the Company adopted the
Plan to replace the Company's 1982 Stock Option Plan
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which expired for purposes of granting new stock options on December 31, 1991.
The Company reserved up to 1,771,875 shares, adjusted for stock dividends and
stock splits, of Class A Stock for option grants under the Plan. Shareholders
approved adoption of the Plan on April 23, 1992. The Plan is effective until
January 31, 2002 for purposes of granting options. The closing price of a share
of Class A Stock on the New York Stock Exchange on February 24, 1997 was $19.88.
The purpose of the Plan is to provide to officers and other key
employees a favorable opportunity to acquire shares of Class A Stock, and
thereby increase their incentive to work for the success of the Company and
better enable the Company to attract and retain capable executive personnel. The
Plan provides for the grant of both incentive stock options (options that afford
favorable tax treatment to recipients upon compliance with certain restrictions
and that do not normally result in tax deductions to the Company) and options
that do not so qualify (non-qualified stock options).
The Plan is administered, construed and interpreted by a committee
consisting of at least three members of the Board of Directors (the "Stock
Option Committee"). The Stock Option Committee selects the individuals to whom
options will be granted and determines (a) the time of grant, (b) the number of
shares of Class A Stock to be covered by each option, (c) the exercise (or
option) price, (d) the period within which the option may be exercised, (e)
whether the options will carry reload options, (f) the extent to which the
option (or related reload option) is an incentive stock option or non-qualified
stock option, (g) the extent to which stock appreciation rights are awarded with
an option, and (h) any other terms and conditions of the options granted.
Shares issued under the Plan are authorized but unissued shares of the
Company. In the event of corporate changes affecting the Company's outstanding
shares of stock, such as reorganizations, recapitalizations, stock splits, stock
dividends, mergers, consolidations and liquidations, the Stock Option Committee
will make appropriate adjustments in the number and kind of shares reserved
under the Plan and in the exercise price under, and the number and kind of
shares covered by, outstanding options granted under the Plan. Any shares
subject to an option which expires or is terminated before exercise will again
be available for issuance under the Plan.
One or more options may be granted to officers (including officers who
are members of the Board of Directors) and other key employees of the Company
and its subsidiaries who are materially responsible for the management or
operation of the business of the Company. The Stock Option Committee will
determine the exercise price of each option granted under the 1992 Option Plan,
provided that the exercise price of an incentive stock option may not be less
than the fair market value of the Company's Class A Stock on the date on which
the option is granted. Incentive
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stock options granted to any holder of more than 10% of the combined voting
power of all classes of stock of the Company must have an exercise price no less
than 110% of fair market value of the stock at date of grant. No option may have
a term longer than ten years and one day from the date of grant. However, under
the Internal Revenue Code (the "IRC"), incentive stock options may not have
terms in excess of ten years. Incentive stock options granted to any holder of
more than 10% of the combined voting power of all classes of stock of the
Company may not have terms in excess of five years.
The exercise price must be paid at the time of exercise in cash or by
tendering whole shares of Class A Stock owned by the Optionee and cash having a
fair market value equal to the cash exercise price. Under certain circumstances,
the Plan permits optionees to effect a so-called "cashless exercise" by
delivering a notice of exercise to their broker together with irrevocable
instructions to deliver to the Company the total exercise price in cash and, if
desired, the amount of any taxes to be withheld from the optionee's compensation
as a result of any withholding tax obligation of the Company. Options may be
exercisable in full at any time during their term or in installments of at least
100 shares, on a cumulative basis, as the Stock Option Committee may determine.
No option may be exercised during the first six months after its grant date.
If an Optionee ceases to be an employee of the Company, any option
granted to him will generally terminate, except as specifically provided in his
stock option agreement. The Stock Option Committee will determine, and provide
in an optionee's stock option agreement, appropriate exercise periods following
the retirement, death or permanent and total disability of the optionee. Options
may not be transferred except by will or the laws of descent and distribution.
During the lifetime of an optionee, options may be exercised only by him or his
guardian or legal representative.
The aggregate fair market value of stock with respect to which
incentive stock options are exercisable for the first time by an optionee during
any calendar year under the 1992 Option Plan may not exceed $100,000. This
limitation does not apply to non-qualified stock options. To the extent any
incentive stock options becoming exercisable during a calendar year exceed this
limitation, they will be automatically converted to non-qualified stock options.
In the discretion of the Stock Option Committee, any option may be
accompanied by a "Reload Option". If an optionee's option agreement so provides,
a Reload Option will be granted to an optionee who pays for exercise of all or
part of an option with shares of Class A Stock. The Reload Option represents an
additional option to acquire the same number of shares of Class A Stock as used
by the optionee to exercise the original option. The Stock Option Committee will
determine whether the Reload Option is an incentive stock option or a
non-qualified stock
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option. If the original option was non-qualified, the Reload Option must be
also. The exercise price per share of a Reload Option will generally be the fair
market value of a share of Class A Stock as of the date of exercise of the
original option. The Committee may grant more than one Reload Option with
respect to any one option.
The Stock Option Committee may grant stock appreciation rights
("SAR's") in tandem with the grant of any option under the Plan. An SAR entitles
the holder thereof to receive, upon the surrender of the related option(or
portion thereof), an amount payable in Class A Stock and/or cash, as determined
by the Stock Option Committee, equal to the excess of the fair market value of
the shares of Class A Stock subject to such option (or portion thereof) over the
exercise price of such shares. The Stock Option Committee may limit the payment
upon exercise of an SAR to less than the amount of such excess. If an SAR is
exercised, its related stock option automatically terminates.
The Stock Option Committee may provide that a grantee of a
non-qualified stock option, following exercise thereof, will be paid a portion
of the tax benefit to be realized by the Company attributable to the federal
income tax deduction resulting from such exercise. The Committee may decide to
do this to offset the disadvantages for tax purposes to the grantee of a
non-qualified option relative to an incentive stock option.
The Stock Option Committee may determine, and provide in an optionee's
stock option agreement, that, in the event of a change of control of the
Company, and subject to the provisions of the Plan, outstanding options that are
not otherwise exercisable will become immediately exercisable. The effect of
such change of control provisions which, under certain circumstances, could
accelerate benefits to optionholders may be to increase the cost of a potential
business combination or acquisition of control of the Company. To the extent
that this increased cost is significant, potential acquirors may be deterred
from pursuing a transaction involving the Company, and shareholders may thus be
deprived of an opportunity to sell their shares at a favorable price. In
determining whether to grant options that become exercisable upon a change of
control, the Stock Option Committee will consider (a) whether this deterrent
effect could be significant, and (b) to the extent this provision could operate
to accelerate benefits under stock options awarded in the future, whether the
expected benefits of these provisions in attracting and retaining qualified
management personnel outweigh the possible disadvantages.
The Board of Directors may amend the Plan from time to time, and, with
the consent of the optionee, the terms and provisions of his option; provided,
however, that (a) no amendment may, without the consent of an optionee, make any
changes in any outstanding option that would adversely affect the rights of the
optionee, and (b) without approval of the holders of at least a majority of the
shares of the Company entitled to vote thereon,
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<PAGE>
no amendment may materially (i) increase the benefits accruing to optionees,
(ii) increase the number of securities that are issuable under the Plan, or
(iii) modify requirements as to eligibility for Plan participation. The Board of
Directors of the Company may terminate the Plan at any time. In any event, no
options may be granted under the Stock Option Plan after January 31, 2002.
Under current tax laws, the grant of incentive and non-qualified stock
options will have no federal tax consequences to the Company or the optionee.
Moreover, if an incentive stock option is exercised (a) while the employee is
employed by the Company or its subsidiaries, (b) within three months after the
optionee ceases to be an employee of the Company or its subsidiaries, (c) after
the optionee's death, or (d) within one year after the optionee ceases to be an
employee of the Company or its subsidiaries if the optionee's employment is
terminated because of permanent and total disability, the exercise of the
incentive stock option will ordinarily have no federal income tax consequences
to the Company or the optionee.
The recipient of a non-qualified stock option generally will realize
taxable ordinary income at the time of exercise of the option in an amount equal
to the excess of the fair market value of the shares acquired at the time of
such exercise over the exercise price. A like amount is generally deductible by
the Company for federal income tax proposes as of that date, as long as the
Company withholds federal income tax with respect to that taxable amount.
At the time an SAR is granted, an optionee will recognize no taxable
income and there will be no tax consequences to the Company. The optionee will
recognize taxable income at the time the SAR is exercised in an amount equal to
the amount of cash and the fair market value of the shares of Class A Stock
received upon such exercise. The income recognized on exercise of an SAR will be
taxable at ordinary income tax rates. The Company generally will be entitled to
a deduction with respect to the exercise of an SAR in an amount equal to the
amount of ordinary income recognized by the optionee upon such exercise.
Shares Granted and Reserved
A total of 1,549,399 option shares have been granted under the Plan as
of February 24, 1997. The maximum number of shares currently reserved for stock
grants under the Plan is 1,771,875. With adoption of the proposed amendment, the
maximum number of shares reserved or available for issuance under the Plan will
be increased to 2,771,875.
Required Vote
The proposed amendment of the Company's 1992 Stock Option Plan to
increase the shares reserved by one million requires the affirmative vote of
holders of a majority of the outstanding
12
<PAGE>
shares of Class A Stock and Class B Stock, voting as separate voting groups.
Abstentions from voting and broker non-votes will have the practical effect of
voting against the proposed amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
PROPOSAL TO AMEND THE 1992 STOCK OPTION PLAN. YOUR VOTE IS IMPORTANT.
13
<PAGE>
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 1996.
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 Officers' Compensation
For fiscal 1996 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 business
units which become the basis for determining annual bonuses. If the Company
and/or business units 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 1996 were determined in December, 1996 based
upon fiscal year-end financial results.
14
<PAGE>
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 executives' level of
compensation and past contributions to the Company. On January 12, 1996 and
April 18, 1996 the Stock Option Committee granted the incentive stock options
reflected in the tables that follow.
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, who retired as a director of the Company in April, 1996, is the
Chairman of The Somerset Group, Inc. Mr. Huemme became a member of the
Compensation Committee of The Somerset Group, Inc. in 1994.
15
<PAGE>
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, 1996 the chief executive
officer and the other four most highly compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation:
Shares Underlying
Fiscal Annual Compensation Stock Options All Other
Name and Principal Position Year Salary Bonus Granted Compensation (1)
- ------------------------ ----- -------------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
Douglas W. Huemme 1996 $375,000 $400,000 15,000 $115,322
Chairman, President and 1995 372,083 280,000 0 90,549
Chief Executive Officer 1994 335,385 310,000 161,250 7,290
William C. Dorris 1996 156,923 200,000 15,000 17,115
Vice President, Corporate 1995 144,167 85,000 5,000 10,185
Development 1994 122,769 75,000 4,500 4,095
Larry H. Dalton 1996 142,788 170,000 15,000 15,967
Vice President, Operations 1995(2) 120,000 85,000 4,500 11,146
and Manufacturing
Kenneth L. Mills 1996 111,346 125,000 10,000 10,800
Corporate Accounting 1995 104,875 32,00 3,500 10,521
Director and Assistant Secretary 1994 98,385 40,000 3,000 3,441
A. Barry Melnkovic 1996(3) 71,539 75,000 2,000 1,900
Vice President, Human
Resources
- -------------------------
</TABLE>
1 All Other Compensation is comprised of matching Company contributions
on behalf of the employees to the Employees Stock Purchase Plan, the
401(k) Plan, the 401(k) Replacement Plan, and a portion of Company
payments for group term life insurance premiums. These four types of
All Other Compensation for fiscal year 1996 are respectively detailed
by employee as follows: Douglas W. Huemme--$2,000, $9,000, $37,500 and
$1,900; William C. Dorris--$2,000, $9,000, $5,515 and $600; Larry H.
Dalton--$2,000,$9,000, $4,667 and $300; Kenneth L. Mills--$2,000,
$8,600, $0 and $200; and A. Barry Melnkovic--$692,$1,108, $0 and $100.
Additionally, for Mr. Huemme only, All Other Compensation also includes
$64,922 as reimbursement of split-dollar life insurance premiums.
2 Mr. Dalton was appointed as an executive officer in 1995.
3 Mr. Melnkovic was appointed as an executive officer in April, 1996.
16
<PAGE>
STOCK OPTION GRANTS
The following table provides details regarding stock options granted to
the named executive officers in fiscal 1996. 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.
FISCAL 1996 STOCK OPTION GRANTS
<TABLE>
<CAPTION>
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) 1996 Share Date 5% 10%
- ---------------- ----------- --------- --------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Douglas W. Huemme 15,000 5.2% $12.56 01/12/01 $52,055 $115,018
William C. Dorris 15,000 5.2% 12.56 01/12/01 52,055 115,018
Larry H. Dalton 15,000 5.2% 12.56 01/12/01 52,055 115,018
Kenneth L. Mills 10,000 3.5% 12.56 01/12/01 34,703 76,679
A. Barry Melnkovic 2,000 .7% 14.69 04/18/01 8,118 17,936
</TABLE>
(1) Stock options granted to the named executive officers during fiscal
1996 consisted of both qualified and non-qualified options. For options
granted to D. W. Huemme, W. C. Dorris, L. H. Dalton and K. L. Mills
one-third of these options become exercisable on each of January 12,
1998, 1999 and 2000. For options granted to A. B. Melnkovic one-third
of these options become exercisable on each of April 18, 1998, 1999 and
2000. 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 federal tax benefit.
17
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table shows stock option exercises by named executive
officers during fiscal 1996, 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, 1996. 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.
1996 STOCK OPTION EXERCISES,
OUTSTANDING GRANTS AND VALUE AS OF NOVEMBER 30, 1996
<TABLE>
<CAPTION>
Number of
shares Underlying Value of
Unexercised Unexercised
Value Options at In-the-Money
Realized 11/30/96 Options at
Shares at Unexer- 11/30/96 (3)
Acquired on Exercise Exer- cisable Exer- Unexer-
Name Exercise Date (1) cisable (2) cisable cisable (2)
- ---------------- ---------- -------- -------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Douglas W. Huemme 12,326 $106,723 203,814 78,750 $1,762,166 $479,738
William C. Dorris 0 0 30,291 20,834 297,232 121,802
Larry H. Dalton 12,000 61,440 18,125 20,500 164,429 119,945
Kenneth L. Mills 412 3,988 15,580 14,333 145,087 84,451
A. Barry Melnkovic 0 0 0 2,000 0 7,620
</TABLE>
(1) Aggregate market value of shares acquired less the aggregate price paid
by executive.
(2) The shares represented could not be acquired by the respective
executive as of November 30, 1996.
(3) Amount reflecting gains on outstanding options are based on the
November 30, 1996 closing NYSE stock price which was $18.50 per share.
18
<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, 1996.
[Graph omitted]
Comparison of Five-year Cumulative Total Return*
<TABLE>
<CAPTION>
Dollar Value November 30 1991 1992 1993 1994 1995 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Lilly Common $100 $184 $289 $263 $264 $384
S&P 500 $100 $115 $123 $121 $161 $202
S&P Chemical $100 $113 $121 $134 $171 $232
</TABLE>
* Assumes $100 was invested on November 30, 1991 in Lilly Industries,
Inc. Common Stock and each index. Also, assumes reinvestment of all
dividends.
19
<PAGE>
PENSION PLANS
Retirement benefits are provided by the Company and its subsidiaries
under non-contributory defined benefit pension plans, all of which are qualified
under Section 401 of the Internal Revenue Code ("Code"). Effective December 1,
1994, the defined benefit pension plan in which executive officers (including D.
W. Huemme, W. C. Dorris, L. H. Dalton and K. L. Mills) 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 Code. Such
compensation for executive officers does not vary substantially from the cash
compensation reported in the summary compensation table.
The Code limits compensation amounts used to calculate retirement
benefits to $160,000 and also limits the annual benefits that may be paid from
the Company's tax qualified plans (Section 415 limit) to $125,000. The Code also
places a $9,500 limit on annual contributions by an employee to the Company's
401(k) plans, and in addition imposes a combined limitation when an employee is
covered by both types of plans. However, effective January 1, 1996 the Company
adopted a supplemental replacement plan that will make payments to certain
executive officers (including D. W. Huemme, W. C. Dorris, L. H. Dalton and K. L.
Mills) in an amount equal to the difference, if any, between the benefits that
would have been payable under the defined benefit pension plan and 401(k) plans
without regard to the limitations imposed by the Code and the actual benefits
payable under such plans as so limited.
The estimated annual retirement benefits presented on a straight-life
annuity basis payable at the normal retirement age of 65 under the defined
benefit pension plan 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):
20
<PAGE>
<TABLE>
<CAPTION>
Assumed Average
Earnings During Five Years of Service at November 30, 1994
Consecutive Years
Producing Highest Average 5 10 15 20 25
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$100,000 $ 6,250 $12,500 $18,750 $25,000 $31,250
200,000 12,500 25,000 37,500 50,000 62,500
300,000 18,750 37,500 56,250 75,000 93,750
400,000 25,000 50,000 75,000 100,000 125,000
500,000 31,250 62,500 93,750 125,000 156,250
600,000 37,500 75,000 112,500 150,000 187,500
700,000 43,750 87,500 131,250 175,000 218,750
800,000 50,000 100,000 150,000 200,000 250,000
</TABLE>
The years of service credited to the following executive officers of
the Company on November 30, 1994 under the pension plan in which they
participate are as follows: Douglas W. Huemme--4.5; William C. Dorris--23.8;
Larry H. Dalton--11.5; and Kenneth L. Mills--17.0.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS
The Company maintains two executive retirement plans providing
supplemental benefits in the event of disability, retirement, or death. The
Board of Directors has retained the right to terminate, modify or reduce any
benefits payable under the plans with the exception that it may not amend or
terminate the plans to affect vested benefits.
Executive Retirement Plan Adopted 1989: Under the executive retirement
plan adopted in 1989, supplemental retirement benefits are provided for key
employees in senior management positions (including D. W. Huemme, W. C. Dorris,
L. H. Dalton, and K. L. Mills). Annual retirement benefits are $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
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 plan 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 dies, the participant's estate or designated beneficiaries
are entitled to receive the balance of the participant's benefits monthly.
21
<PAGE>
Estimated annual benefits payable upon normal retirement for the
following executive officers of the Company are: D. W. Huemme--$50,000; W. C.
Dorris--$25,000; L. H. Dalton--$20,000; and K. L. Mills--$15,000. Estimated
annual benefits payable upon normal retirement for all current employee
participants (excluding executive officers) as a group are $65,000.
Executive Retirement Plan Adopted January 1, 1996: An executive
retirement plan adopted on January 1, 1996 provides for annual retirement
benefits for certain officers (including D. W. Huemme, W. C. Dorris, L. H.
Dalton and K. L. Mills) of the Company payable at age 65 over the remaining life
of the participant. Retirement benefits are based on years of service and pay
which is defined as average annual base salary and incentive bonus for the three
consecutive years producing the highest average. A participant reaching age 62
with 22 years of service is fully vested and will receive an annual retirement
benefit equal to 55% of his pay reduced by other retirement benefits provided by
the Company (i.e., benefits from the defined benefit pension plan, the executive
retirement plan adopted in 1989, the supplemental replacement plan and certain
Company contributions to 401(k) plans). Mr. Huemme's retirement benefits under
the plan are also reduced by any benefits received from his former employer,
Whittaker Corporation.
The vesting schedule for the plan is as follows:
Years of Vesting
Age Service Percentage
--- -------- ----------
53 13 10%
54 14 20%
55 15 30%
56 16 40%
57 17 50%
58 18 60%
59 19 70%
60 20 80%
61 21 90%
62 22 100%
Years of service as of November 30, 1996 for executive officers
participating in this plan are: D. W. Huemme--20; W. C. Dorris--25; L. H.
Dalton--13; K. L. Mills--19. Mr. Huemme's years of service include his
employment tenure with Whittaker Corporation.
If a participant becomes disabled prior to retiring from the Company,
that participant will receive benefits based on pay at the date of disability
and years of service had the participant's employment continued to age 65. If a
participant
22
<PAGE>
dies before retiring from the Company, but after age 55, a benefit is payable to
the participant's spouse equal to 50% of normal retirement benefits based on pay
at date of death and years of service assuming employment continued to age 65,
or date of death if later.
If a participant competes with the Company, violates any trade
secrets or breaches any confidence of the Company, either before or after
termination or after retirement, the participant will forfeit all rights to any
benefits under this plan.
23
<PAGE>
EMPLOYMENT TERMINATION AGREEMENTS
Two executive officers, 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 24, 1997 are entitled to notice
of, and to vote at, the Annual Meeting of Shareholders, and at any adjournment
thereof. On that date 22,436,059 shares of the Company's Class A Stock and
363,527 shares of the Company's Class B Stock were outstanding, each share
(except the 16,589 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.
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Company has selected the firm of Ernst & Young LLP, certified
public accountants, as independent auditors to make an examination of the
accounts of the Company for its fiscal year ending November 30, 1997. 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, 1998 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 18, 1997.
ANNUAL REPORT
The Annual Report for the Company's fiscal year ended November 30,
1996 was separately mailed to shareholders on February 26, 1997. 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.
24
<PAGE>
P
R
O
X
Y
LILLY INDUSTRIES, INC. CLASS A STOCK
Proxy Solicited on Behalf of the Board of Directors for Annual
Meeting April 24, 1997
The undersigned appoints Thomas E. Reilly, Jr. and Van P. Smith, 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 & RCA Dome, 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:
1. Election of Directors:
James M. Cornelius, John D. Peterson, Thomas E. Reilly, Jr.,
Van P. Smith.
2. Proposal to amend the 1992 Stock Option Plan as provided in the Proxy
Statement.
3. In their discretion upon such other business as may come before the
meeting.
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but if you do not specify a choice the shares will be voted for
all proposals. The Proxies cannot vote your shares unless you sign and return
this Card.
SEE REVERSE
SIDE
DETACH CARD
25
<PAGE>
[X] Please mark your SHARES IN YOUR NAME REINVESTMENT SHARES
votes as in this
example.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of 2. Amend 1992 Stock
Directors Option Plan
(see reverse) (see reverse)
For, except vote withheld from the following nominee(s):
- -------------------------------------------
SIGNATURE(S) __________________________________________ DATE ___________
SIGNATURE(S) __________________________________________ DATE ___________
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
26
<PAGE>
P
R
O
X
Y
LILLY INDUSTRIES, INC. CLASS B STOCK
Proxy Solicited on Behalf of the Board of Directors for Annual
Meeting April 24, 1997
The undersigned appoints Douglas W. Huemme and William C. Dorris, 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 & RCA Dome, 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:
1. Election of Directors:
William C. Dorris, Paul K. Gaston, Douglas W. Huemme,
Harry Morrison, Ph.D., Norma J. Oman, Robert A. Taylor.
2. Proposal to amend the 1992 Stock Option Plan as provided in the Proxy
Statement.
3. In their discretion upon such other business as may come before the
meeting.
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but if you do not specify a choice the shares will be voted for
all proposals. The Proxies cannot vote your shares unless you sign and return
this Card.
SEE REVERSE
SIDE
DETACH CARD
27
<PAGE>
[X] Please mark your SHARES IN YOUR NAME REINVESTMENT SHARES
votes as in this
example.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of 2. Amend 1992 Stock
Directors Option Plan
(see reverse) (see reverse)
For, except vote withheld from the following nominee(s):
- -------------------------------------------
SIGNATURE(S) __________________________________________ DATE ___________
SIGNATURE(S) __________________________________________ DATE ___________
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
28
-25-
<PAGE>
APPENDIX
First Amendment to
Lilly Industries, Inc.
1992 STOCK OPTION PLAN
1. Paragraph 4 of the Lilly Industries, Inc. ("Lilly") 1992 Stock
Option Plan (the "Stock Option Plan") is amended and restated in its entirety to
read as follows:
4. Stock Subject to the Plan. There shall be reserved for
issuance upon the exercise of options granted under the Plan two
million seven hundred seventy one thousand eight hundred seventy five
(2,771,875) shares of Class A Stock, without par value, of the
Corporation, which may be authorized but unissued shares of the
Corporation. Subject to Section 7 hereof, the shares for which options
may be granted under the Plan shall not exceed that number. If any
option shall expire or terminate for any reason without having
exercised in full, the unpurchased shares subject thereto shall (unless
the Plan shall have terminated) become available for other options
under the Plan.
2. This First Amendment to the Stock Option Plan shall become effective
when it shall have been approved by the requisite vote of the holders of the
Class A Stock and Class B Stock as set forth in the Proxy Statement of Lilly for
its annual meeting of shareholders to be held on April 24, 1997.
3. All other terms and provisions of the Plan shall remain in full
force and effect.
