Exhibit 10.3

 

HILLENBRAND, INC. STOCK INCENTIVE PLAN
PERFORMANCE BASED UNIT AWARD AGREEMENT

Relative Total Shareholder Return

 

This Performance Based Unit Award Agreement (this “Agreement”) is effective as
of the        day of                   , 20    , between Hillenbrand, Inc. (the
“Company”) and                                    (the “Employee”).  The Award
evidences the grant by the Company of Restricted Stock Units subject to the
attainment of certain performance measures as described herein (hereinafter,
“Performance Based Units” or “Units”), all in accordance with the provisions of
the Hillenbrand, Inc. Stock Incentive Plan, as amended from time-to-time (the
“Plan”).  The number of Units that will ultimately be earned under this
Agreement, as well as the number of shares of Common Stock that will be
distributed in settling those earned Units, which will not be determined until
the end of the Measurement Period, will depend on the Company’s Total
Shareholder Return (as defined below) relative to that of the current members of
the Company’s compensation peer group.

 

The Units are subject to the terms and conditions set forth in the Plan (which
is incorporated herein by reference), any rules and regulations adopted by the
Board of Directors of the Company or the committee of the Board which
administers the Plan (collectively, the “Committee”), and this Agreement.  In
the event of any conflict between the provisions of the Plan and the provisions
of this Agreement, the terms, conditions, and provisions of the Plan shall
control, and this Agreement shall be deemed to be modified accordingly.  This
grant becomes effective only if Employee affirmatively accepts it and evidences
Employee’s understanding of the terms and conditions of the Award, in accordance
with applicable procedures established by the Company.  Any terms used in this
Agreement as capitalized defined terms that are not defined herein shall have
the meanings set forth in the Plan.  For purposes of this Agreement, “Employer”
means the entity (i.e., the Company or the Subsidiary) that employs the
Employee.

 

AWARD INFORMATION

 

Target Performance Based Unit Award

 

         Units

Maximum Performance Based Unit Award

 

         Units

Measurement Period (three fiscal years)

 

October 1, 20     through September 30, 20    

 

AWARD DETERMINATION

 

The number of Units that will be earned at the end of the Measurement Period is
a function of the Company’s Total Shareholder Return, compared and ranked
against the Total Shareholder Return of the current members of the Company’s
compensation peer group.  For purposes of this Agreement, the term “Total
Shareholder Return” (TSR), as applied to the Company or any member of its
compensation peer group, shall mean stock price appreciation from the beginning
to the end of the Measurement Period, plus dividends and distributions made or
declared during the Measurement Period (it shall be assumed that such dividends
or distributions are reinvested in the common stock of the Company or the
applicable member of

 

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the peer group), expressed as a percentage return.  To the extent that the
Employee is a “covered employee” within the meaning of Code Section 162(m), the
Agreement will be administered in accordance with performance-based compensation
exception under Code Section 162(m) to the maximum extent possible.

 

Except as otherwise provided below in the Terms and Conditions, at the end of
the Measurement Period, the Units earned will be the number of whole Units
(rounded down) equal to the product of (a) the number of Units constituting the
Target Performance Based Unit Award set forth above, and (b) a multiplier, as
provided in the table set forth below.  This multiplier is determined following
the Measurement Period, based on the ranking (expressed as a percentage) of the
Company’s TSR during the Measurement Period against the TSR of its peer
companies, as follows:

 

Ranking of Company TSR against peer group
members, expressed as a percentage

 

Multiplier

Equal to or less than 24.99% of peer group

 

zero (no Units earned)

Equal to 25% up to 29.99% of peer group

 

.4

Equal to 30% up to 34.99% of peer group

 

.55

Equal to 35% up to 39.99% of peer group

 

.7

Equal to 40% up to 44.99% of peer group

 

.85

Equal to 45% up to 54.99% of peer group

 

1.0 (target number of Units earned)

Equal to 55% up to 59.99% of peer group

 

1.15

Equal to 60% up to 64.99% of peer group

 

1.3

Equal to 65% up to 69.99% of peer group

 

1.45

Equal to 70% up to 74.99% of peer group

 

1.6

Equal to or greater than 75% of peer group

 

1.75 (maximum Units earned)

 

For purposes hereof, the Company’s peer group consists of the companies
identified below.  In the event any such company is not publicly traded at the
conclusion of the Measurement Period, it will not be included in the TSR ranking
calculated following the Measurement Period; provided, however, that in the
event any such company is not publicly traded by reason of bankruptcy,
liquidation, or similar proceeding, it shall be included in the TSR ranking with
an applicable TSR equal to negative one hundred percent (-100%).

 

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Acuity Brands, Inc. (AYI)

 

John Bean Technologies Corporation (JBT)

Bruker Corporation (BRKR)

 

Matthews International Corporation (MATW)

Clarcor, Inc. (CLC)

 

Middleby Corp. (MIDD)

EnPro Industries, Inc. (NPO)

 

Herman Miller Inc. (MLHR)

Graco, Inc. (GGG)

 

Rexnord Corporation (RXN)

HNI Corp. (HNI)

 

Steelcase Inc. (SCS)

Idex Corporation (IEX)

 

Tempur Sealy International Inc. (TPX)

Itron, Inc. (ITRI)

 

Waters Corporation (WAT)

 

TERMS AND CONDITIONS

 

Note:  If this Award is granted to an Employee who is employed by a Subsidiary
in Canada, Mexico, or a country in Europe or Asia, or is a resident of such a
country, the terms and conditions of the Appendix A (and the applicable addenda
attached to Appendix A) are hereby incorporated into and shall become part of
the Terms and Conditions of this Agreement.

 

1.             Grant of Performance Based Units.  Pursuant to and subject to the
terms and conditions of the Plan, the Company hereby awards to the Employee, who
is an employee of the Company or one of its Subsidiaries, the opportunity to
earn the number of Units that will be determined at the end of the Measurement
Period under the Award Determination section above, up to but not exceeding the
number of Units specified above as the Maximum Performance Based Unit Award. 
Each Unit represents the conditional right to receive one share of the Company’s
common stock, without par value (“Common Stock”).  Upon settlement at the end of
the Measurement Period, the earned Units will be settled by the distribution to
the Employee of one share of Common Stock for each Unit being settled, as
provided in Paragraph 7 and subject to withholding as provided in Paragraph 11.

 

2.             Acceptance; Transfer Restrictions.  The Employee hereby accepts
the award of Units described in this Agreement and agrees that the Units will be
held by the Employee and the Employee’s successors subject to (and will not be
disposed of except in accordance with) all of the restrictions, terms, and
conditions contained in this Agreement and the Plan.  Except as otherwise
provided in this Agreement or the Plan, the Employee may not sell, assign,
transfer, pledge, or otherwise dispose of or encumber any of the Units, any
shares of Common Stock underlying the Units, or any interest in the Units or
underlying shares of Common Stock, until the Measurement Period expires, at
which time the Employee’s rights in the Units will be earned and settled to the
extent provided in this Agreement.  Any purported sale, assignment, transfer,
pledge, or other disposition or encumbrance in violation of this Agreement or
the Plan will be void and of no effect.

 

3.             Earning/Measurement Period.  If the Employee remains employed by
the Company or a Subsidiary through the end of the Measurement Period, then at
the end of the Measurement Period the Units will become fully earned, to the
extent determined under the Award Determination section above.  If the Employee
does not remain employed through the end of the Measurement Period, the
provisions of Paragraph 8 below will apply in determining the number of Units,
if any, which will become earned at the end of the Measurement Period.

 

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All Units not earned at the end of the Measurement Period will be forfeited, and
the Employee will have no rights or interest in or to those forfeited Units.

 

4.             Unfunded Obligations.  The Company will reflect the Employee’s
interests in the Units and the underlying shares of Common Stock by means of
bookkeeping entries on the financial records of the Company, and this Agreement
will not create in the Employee or any successors any right to, or claim against
any, specific assets of the Company or result in the creation of any trust or
escrow account for the Employee or any successors.  With respect to their
interests under this Agreement, the Employee and any successors will be general
creditors of the Company.

 

5.             Voting Rights.  The Employee will not have any rights of a
shareholder to vote the shares of Common Stock underlying the Units until the
Units are earned and settled after the end of the Measurement Period.  Once the
Units are settled by distribution of shares of Common Stock, the Employee will
have all shareholder voting rights with respect to those shares of Common Stock.

 

6.             Dividends and Other Distributions.  During the Measurement
Period, the Employee will not have any rights of a shareholder to receive
dividends or other distributions with respect to the shares of Common Stock
underlying the Units (i.e., the Units will not accrue dividends).  Once the
Units are settled by distribution of shares of Common Stock, the Employee will
have all shareholder rights to dividends and other distributions with respect to
those shares of Common Stock.

 

7.             Actions after Earning is Determined.  As soon after the end of
the Measurement Period as is practicable, and in any event on or before the end
of the calendar year during which the Measurement Period ends, the Company will
settle the earned Units by distributing to the Employee one share of Common
Stock for each Unit earned under this Agreement.  To distribute those shares of
Common Stock, the Company will, in its discretion, either deliver to the
Employee stock certificates representing, or shall instruct the Company’s
transfer agent to recognize in book entry form that the Employee is the
registered holder of, the number of shares of Common Stock attributable to the
earned Units as of the end of the Measurement Period, free from any restrictions
or other terms and conditions of this Agreement.  At that same time, the Company
shall take such actions as it shall deem appropriate to cancel the forfeited
Units and to cause them to no longer be recognized as outstanding awards under
the Plan.  The Employee (or his or her successors) shall execute and deliver
such instruments and take such other actions as the Company shall reasonably
request with respect to the actions to be taken pursuant to this Paragraph.

 

8.             Termination of Employment.  If the Employee’s employment with the
Company and/or a Subsidiary terminates during the Measurement Period (a transfer
of employment among the Company and its Subsidiaries will not be treated as a
termination of employment), then all or some portion of the Units that would
otherwise have become earned Units (based on the actual performance for the
Measurement Period) had the Employee remained employed throughout the entire
Measurement Period, if any (the “Full Period Units”), will be earned or be
forfeited as follows:

 

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(a)           if the Employee’s employment terminates due to death, Disability
or Retirement, then at the end of the Measurement Period the number of Units
that then become earned Units will be equal to the product (rounded down to the
nearest whole Unit) of (i) the number of Full Period Units, and (ii) a fraction,
the numerator of which is the sum (to a maximum of 156) of 52 plus the number of
full weeks in the Measurement Period during which the Employee was employed by
the Company or a Subsidiary, and the denominator of which is 156;

 

(b)           if the Employee’s employment terminates due to involuntary
termination without Cause, then at the end of the Measurement Period the number
of Units that then become earned Units will be equal to the product (rounded
down to the nearest whole Unit) of (i) the number of Full Period Units, and
(ii) a fraction, the numerator of which is the number of full weeks in the
Measurement Period during which the Employee was employed by the Company or a
Subsidiary, and the denominator of which is 156;

 

(c)           if the Employee, at termination of employment, is a party to a
written employment agreement with the Company or a Subsidiary that provides for
the voluntary termination of employment by the Employee for Good Reason, and if
the Employee terminates employment voluntarily for Good Reason, then at the end
of the Measurement Period the number of Units that then become earned Units will
be the same portion of the Full Period Units as if the Employee’s employment had
been involuntarily terminated without Cause, as determined under subparagraph
(b) of this Paragraph; and

 

(d)           upon termination of the Employee’s employment for any reason other
than those described in subparagraphs (a), (b), or (c) of this Paragraph, all of
the Units will be forfeited immediately upon the termination of the Employee’s
employment.

 

9.             Change in Control.  Except as otherwise required under the terms
and conditions of any applicable change in control agreement between the
Employee and the Company or a Subsidiary, upon the occurrence of a Change in
Control during the Measurement Period, the number of Units that then become
earned Units will be equal to the product (rounded down to the nearest whole
Unit) of (i) the number of Units equal to the Target Performance Based Unit
Award, and (ii) a fraction, the numerator of which is the number of full weeks
in the Measurement Period prior to the Change in Control, and the denominator of
which is 156, and all other shares will be forfeited.

 

10.          Potential Repayment Obligation.  This Paragraph 10 is applicable
only if the Employee holds the office of Vice President, or a higher office,
with the Company or one of its significant Subsidiaries as of the effective date
of this Agreement.  Notwithstanding any other provision of this Agreement to the
contrary, any Units granted or shares of Common Stock issued in connection with
this Agreement, and/or any amount received with respect to any sale of any such
shares, shall be subject to potential cancellation, recoupment, rescission,
payback, or other action in accordance with the terms of the Company’s clawback
policy, as it may be amended from time to time (the “Policy”).  The Employee
agrees and consents to the Company’s application, implementation, and
enforcement of (a) the Policy or any similar policy established by the Company
or its Subsidiaries that may apply to the Employee, and (b) any provision of
applicable law relating to cancellation, rescission, payback, or recoupment of
compensation, and

 

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expressly agrees that the Company may take such actions as are necessary to
effectuate the Policy, any similar policy (as applicable to the Employee) or
applicable law without further consent or action being required by the
Employee.  To the extent that the terms of this Agreement and the Policy or any
similar policy conflict, the terms of such policy shall prevail.

 

11.          Withholding.  At the time of the settlement of Units by
distribution of any shares of Common Stock pursuant to Paragraph 7 of this
Agreement, the Company has the right and power to deduct or withhold, or require
the Employee to remit to the Company, an amount sufficient to satisfy all
applicable tax withholding requirements with respect to such distributed
shares.  The Company may permit or require the Employee to satisfy all or part
of the tax withholding obligations in connection with this Agreement by
(a) having the Company withhold otherwise distributable shares, or
(b) delivering to the Company shares of Company Common Stock already owned for a
period of at least six months (or such longer or shorter period as may be
required to avoid a charge to earnings for financial accounting purposes), in
each case having a value equal to the amount to be withheld, which shall not
exceed the amount determined by the applicable minimum statutory tax withholding
rate (or such other rate as will not result in a negative accounting impact). 
For these purposes, the value of the shares of Common Stock to be withheld or
delivered will be equal to the Fair Market Value as of the date that the taxes
are required to be withheld.

 

12.          Deferral of Distribution; Code Section 409A Compliance.  To the
extent that the Employee is a U.S. tax resident, the Employee may make a
one-time, irrevocable election to defer distribution of shares of Common Stock
issued in settlement of earned Units by completing and submitting a written
election to the Company on such forms and following such procedures as are
required by the Company for effecting such elections.  To be effective, the
election must be delivered to the Company by the date that is six months before
the last day of the Measurement Period and must specify an event or date for
distribution of shares of Common Stock from among the following: (a) separation
of service, (b) Disability, (c) death, (d) a fixed date, or (e) a Change in
Control.  The Employee’s right to defer, as well as all other provisions of this
Agreement, shall be interpreted and applied in a manner consistent with the
applicable standards for nonqualified deferred compensation plans established by
Code Section 409A and its interpretive regulations and other regulatory
guidance.  To the extent that any terms of this Agreement would subject the
Employee to gross income inclusion, interest, or additional tax pursuant to Code
Section 409A, those terms are to that extent superseded by, and shall be
adjusted to the minimum extent necessary to satisfy, the applicable Code
Section 409A standards.

 

13.          Notices.  All notices and other communications required or
permitted under this Agreement shall be written and delivered personally or sent
by registered or certified first-class mail, postage prepaid and return receipt
required, addressed as follows: if to the Company, to the Company’s executive
offices in Batesville, Indiana, and if to the Employee or his or her successor,
to the address last furnished by the Employee to the Company.  The Company may,
however, authorize notice by any other means it deems desirable or efficient at
a given time, such as notice by facsimile or electronic mail.

 

14.          No Employment Rights.  Neither the Plan nor this Agreement confers
upon the Employee any right to continue in the employ of the Employer or limits
in any way the right of

 

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the Employer to terminate the Employee’s employment at any time.  The Employee
shall have no rights as a shareholder of the Company with respect to any shares
of Common Stock issuable upon the earning of the Units until the date of
issuance of such shares of Common Stock in settlement of the award.

 

15.          Plan Controlling.  The terms and conditions set forth in this
Agreement are subject in all respects to the terms and conditions of the Plan,
which are controlling.  All determinations and interpretations of the Company or
the Committee are binding and conclusive upon the Employee and his or her legal
representatives.  The Employee agrees to be bound by the terms and provisions of
the Plan.

 

16.          Discretionary Nature of Grant; No Vested Rights.  The Employee
acknowledges and agrees that the Plan is discretionary in nature and may be
amended, cancelled, or terminated by the Company, in its sole discretion, at any
time.  The grant of the Units under the Plan is a one-time benefit and does not
create any contractual or other right to receive a grant of Units or benefits in
lieu of Units in the future.  Future grants, if any, will be at the sole
discretion of the Company, including, but not limited to, the form and timing of
any grant, the number of shares of Common Stock subject to the grant, and the
vesting provisions.  Any amendment, modification, or termination of the Plan
shall not constitute a change or impairment of the terms and conditions of the
Employee’s employment with the Employer.

 

17.          Electronic Delivery.  The Company may, in its sole discretion,
decide to deliver any documents related to the Units or other awards granted to
the Employee under the Plan by electronic means.  The Employee hereby consents
to receive such documents by electronic delivery and agrees to participate in
the Plan through an on-line or electronic system established and maintained by
the Company or a third party designated by the Company.

 

18.          Additional Requirements.  The Company reserves the right to impose
other requirements on the Units, any shares of Common Stock acquired pursuant to
the Units, and the Employee’s participation in the Plan, to the extent the
Company determines, in its sole discretion, that such other requirements are
necessary or advisable in order to comply with local law or to facilitate the
administration of the Plan.  Such requirements may include (but are not limited
to) requiring the Employee to sign any agreements or undertakings that may be
necessary to accomplish the foregoing.

 

19.          Defined Terms.  For purposes of this Agreement, the following terms
have the meanings provided in this Paragraph.  The terms included in the Award
Information section of this Agreement have the values specified in that section.

 

(a)           “Cause” means:

 

(i)            if the Employee is a party to a written employment agreement with
the Company or a Subsidiary that defines “cause” or a comparable term, the
definition in that employment agreement, and

 

(ii)           if not, the Company’s good faith determination that the Employee
has:

 

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(1)           failed or refused to comply fully and timely with any reasonable
instruction or order of the Company or applicable Subsidiary, provided that such
noncompliance is not based primarily on the Employee’s compliance with
applicable legal or ethical standards;

 

(2)           acquiesced or participated in any conduct that is dishonest,
fraudulent, illegal (at the felony level), unethical, involves moral turpitude,
or is otherwise illegal and involves conduct that has the potential to cause the
Company or a Subsidiary or any of their respective officers or directors
embarrassment or ridicule;

 

(3)           violated any applicable Company or Subsidiary policy or procedure,
including the Company’s Code of Ethical Business Conduct; or

 

(4)           engaged in any act that is contrary to the best interests of or
would expose the Company, a Subsidiary, their related businesses, or any of
their respective officers or directors to probable civil or criminal liability,
excluding the Employee’s actions in accordance with applicable legal or ethical
standards.

 

(b)           “Disability” means:

 

(i)            if the Employee, at termination of employment, is a party to a
written employment agreement with the Company or a Subsidiary that defines
“disability” or a comparable term, the definition in such employment agreement,
and

 

(ii)           if not, the Company’s good faith determination that the Employee
is eligible (except for the waiting period) for permanent disability benefits
under Title II of the Federal Social Security Act or, as it relates to Employees
residing outside the United States, applicable local law.

 

(c)           “Good Reason” means, if the Employee, at termination of
employment, is a party to a written employment agreement with the Company or a
Subsidiary, the definition given to that term or a comparable term in that
agreement, if any.

 

(d)           “Retirement” means termination of employment after having:

 

(i)            completed at least five years of service in the aggregate with
the Company, Hill-Rom Holdings, Inc. (formerly known as Hillenbrand
Industries, Inc.), or any Subsidiaries of either of them, and

 

(ii)           reached age fifty-five (55).

 

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IN WITNESS WHEREOF the Company and the Employee have executed this Agreement as
of the date first above written.

 

 

 

 

 

[EMPLOYEE SIGNATURE]

 

 

 

Print Name:

 

 

 

 

 

 

HILLENBRAND, INC.

 

 

 

 

 

By:

 

 

 

 

 

Print Name:

 

 

 

 

 

Title:

 

 

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