was an Executive Vice President worldwide marketing, salesin charge of Bayer Diagnostics’ Worldwide Marketing, Sal es and service. During his career,Service operations. From 1990 to 1991, Mr. Classon has held management positions with Pharmacia AB, Sweden; Swedish Match Group; and Asbjorn Habberstad AB. Prior to joining Bayer, he was President and Chief Operating officerOfficer of Pharmacia Biosystems AB.A.B. Prior to 1991, Mr. Classon served as President of Pharmacia Development Company Inc. and Pharmacia A.B.’s Hospital Products Division. Mr. Classon currently serves on the Boardsas a director of Directors of Enzon Pharmaceuticals, Inc., a company focused on oncology and antivirus pharmaceuticals, Millipore Corporation, a bioscience company that provides technologies, tools and services for the discovery, development and production of therapeutic drugs and for other purposes, Auxilium Pharmaceuticals, Inc., a specialty pharmaceutical company in the fields of urology and men’s health,Enzon Pharmaceuticals and Eurand N.V., a specialty pharmaceutical company. He also was a director Mr. Classon served on the board of Millipore Corporation until 2010, and PharmaNet Development Group, Inc., until 2009.
Mr. Classon has extensive experience in the health care industry, including positions in management and on the boards of several companies. His service as a senior officer in numerous large corporations brings an international drug development services company, until its acquisition by another company in March 2009.extensive breadth of knowledge and valuable insight to the Board.
James R. Giertzhas served as a director of Hill-Rom since December 2009. He has been Senior Vice President and Chief Financial Officer of H.B. Fuller Company, St. Paul, Minnesota, since March 2008. Formerly,Prior to joining H.B. Fuller, he was theserved as Senior Managing Director, and Chief Financial Officer, of GMAC ResCap from September, 2006Residential Capital, LLC. Prior to April, 2007, Senior Vice President, Commercial and Industrial Products ofthis he served twelve years in executive leadership positions at Donaldson Company, Inc. from 2000 to September, 2006, a publicly-traded worldwide provider of filtration systems and replacement parts, initially as the Senior Vice President and Chief Financial Officer thereof from 1994 to 2000. Prior theretoand then as the executive in charge of the company’s Industrial Products business segment. In addition, Mr. Giertz held various executive positionshas experience with General Motors Corporation.Corporation where he serv ed as assistant treasurer of the company, and also held international treasury positions in Canada and Europe. Mr. Giertz serves on the Board of Directors of Normandale Community College Foundation and Junior Achievement of the Upper Midwest.
Mr. Giertz has extensive experience in finance and operations, and his service as a senior officer in large corporations brings knowledge and valuable insight to the Board. In addition, his international operations experience is a valuable asset to the Board.
Charles E. Goldenhas served as director of Hill-Rom since 2002. He retiredserved as Executive Vice President and Chief Financial Officer for, and as a member of the Board of Directorsdirector of Eli Lilly and Company, Indianapolis, Indiana, a global provideran international developer, manufacturer and seller of pharmaceutical products, and health care information,from 1996 until his retirement in April 2006. He joined Eli Lilly in those capacities in 1996. Prior to joining Eli Lilly, Mr. Golden servedhe had been associated with General Motors Corporation since 1970, where he held a number of positions, including Corporate Vice President, Chairman and Managing Director of the Vauxhall Motors subsidiary and Corporate Treasurer. He is currently on the boards of Eaton Corporation and Unilever NV/PLC. He also serves as a corporate Vice Presidentdirector of General Motors and Chairman of General Motors’ vehicle operations in the United Kingdom from 1993 to 1996. He joined General Motors as part of its treasurer’s office in 1970 and subsequently held positions in domestic and international operations, ultimately becoming Treasurer of GM. He serves on the Boards of Directors of Unilever N.V., Unilever PLC, Eaton Corporation, Clarian Health Partners, Lilly Endowment and CrossroadsClarian Health Partners.
Mr. Golden has a comprehensive knowledge of America) (as past President),both U.S. GAAP and onIFRS, has extensive experience in financial statement preparation, accounting, corporate finance, risk management and investor relations both in the Finance Committee ofU.S. and Europe. His significant financial, management and health care experience brings valuable financial operations rigor and insight to the Indianapolis Museum of Art, and as a Board member and Secretary/Treasurer of the Indiana Stadium and Convention Building Authority.Board.
John J. Greischwas elected as President and Chief Executive Officer of Hill-Rom onin January 8, 2010. Previously, he held various executive positions with Baxter International, Inc., which develops, manufactures and distributes healthcare products, systems and services, since 2002, including President, International Operations, since 2006; Chief Financial Officer from 2004 to 2006; and President, Bioscience Division, from 2003 to 2004. Prior to his time at Baxter, Mr. Greisch was President and Chief Executive Officer of Fleetpride Corporation, a private distribution company serving the transportation industry. Mr. Greisch serves on the Board of Directors of TomoTherapy, Inc. andthe Children’s Memorial Hospital Foundation and on the Board of Trustees of the John G. Shedd Aquarium. Mr. Greisch resigned from the board of TomoTherapy, Inc. in Ja nuary 2010.
As the CEO of Hill-Rom, Mr. Greisch brings substantial health care experience, valuable operational insights and business knowledge to the Board.
W August Hillenbrandhas served as a director of Hill-Rom since 1972 and served as1972. He was Chief Executive Officer of Hill-Rom from 1989 until 2000. Mr. Hillenbrand also served as President of Hill-Rom from 1981 until 1999. Prior to his retirement in December 2000, Hill-Rom had employed Mr. Hillenbrand throughout his business career. Mr. Hillenbrand is the Chief Executive Officer of Hillenbrand Capital Partners, an unaffiliated family investment partnership. He is on the Board of Directors of Hillenbrand, Inc., which Hill-Rom spun-off during 2008.2008, as well as the Ocean Reef Cultural Center, the Ocean Reef Medical Center, and the Ocean Reef Medical Center Foundation. Mr. Hillenbrand retired from the Boards of Directorsboards of DPL Inc. of Dayton, Ohio and Pella Corporation in 2008.
Mr. Hillenbrand’s long history with Hill-Rom and its predecessor entities brings valuable insight and historical context to the Board. In addition, his knowledge of Pella, Iowa during 2008.Hill-Rom’s operations and business arising from his long history of service with the company provides a useful perspective for the Board’s other directors.
Ronald A. Malonehas served as a director of Hill-Rom since July 2007. He has been Executive Chairman of the Board of Directors of Gentiva Health Services, Inc. since January 2009,2011, having served as Executive Chairman from January 2009 to December 2010 and as Chairman and Chief Executive Officer of Gentiva from June 2002 to December 2008. He served as Executive Vice President of Gentiva from March 2000 to June 2002 and as President of Gentiva’s home health services division from January 2001 to June 2002. Prior to joining Gentiva, he served in various positions with Olsten Corporation including Executive Vice President of Olsten Corporation and President, Olsten Staffing Services, United States and Canada, from January 1999 to March 2000. From 1994 to December 1998, he served successivelyCanada. H e is a director of the National Association for Home Care & Hospice and a director and president of the Alliance for Home Health Quality and Innovation.
Mr. Malone has an extensive knowledge of the home health industry and expertise in pending healthcare reform legislation. In addition, his experience as Olsten’s Senior Vice President, Southeast Division; Senior Vice President, Operations; and Executive Vice President, Operations.an officer of other health care companies provides the Board with valuable operational experience.
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Eduardo R. Menascéhas served as a director of Hill-Rom since September 2004. He is the retired President of the Enterprise Solutions Group for Verizon Communications, Inc., New York City, New York. Prior to the merger of Bell Atlantic and GTE Corporation, which created Verizon, Communications, he was the President and Chief Executive Officer of CTI MOVIL S.A. (Argentina), a business unit of GTE Corporation, from 1996 to 2000. Mr. Menascé has2000, and also held senior positions at CANTV in Venezuela, and Wagner Lockheed and Alcatel in Brazil, and from 1981 to 1992 served as Chairman of the Board and Chief Executive Officer of GTE Lighting in France. He earned a Bachelor’s degree in Industrial Engineering from Universidad Pontificia Catolica de Rio de Janeiro and a Master’s degree in Business Administration from Columbia University. Mr. Menascé currently serves on the Boards of Directors of Pitney Bowes Inc., a global provider of integrated mail and document management solutions, John Wiley & Sons, Inc., KeyCorp, and Hillenbrand, Inc.
Mr. Menascé has broad experience as a developer, publisherformer senior executive responsible for a significant international operation of a public company. This operational experience, his experience on other public company boards, and seller of products in print and electronic media for educational, professional, scientific, technical, medical, and consumer markets, KeyCorp, onehis experience as a director of the nation’s leading bank-based financial service companies, and Hillenbrand, Inc.New York chapter of the National Association of Corporate Directors, all provide the Board with valuable insight.
Katherine S. Napierhas served as a director of Hill-Rom since July 2009. SheMs. Napier has beenserved as the Chief Executive Officer of Arbonne International and its parent company, Natural Products Group, LLC since August 2009. From March 2006 to becoming Arbonne’s CEO, Ms. Napier served on various public company and non profit Boardsis also a 23-year veteran of directors, including Alberto Culver Company, Exact Sciences Corporation, Mentor Corporation, Third Wave Technologies, and Catholic Health Care Partners. Formerly, she was the Senior Vice President of Marketing at McDonald’s Corporation from July 2005 to March 2006, prior to which she held various executive level marketing roles at McDonalds since 2002. Ms. Napier also held various senior executive roles at The Procter & Gamble, Companywhere from 1979 to 2002 including her most recent role as Vice President,she rose from assistant brand manager to vice president and general manager of the company’s North American Pharmaceuticals & Corporate Women’s Health & Vitality.pharmaceutical business and corporate women’s health. Ms. Napier nowalso served as senior vice president of marketing at McDonald’s Corporation, where she led the company’s reinvigoration of its business with women and families. Ms. Napier serves on the Boardboards of Directorsdirectors of EXACTthe Catholic Health Care Partners, Exact Sciences Corporation, a molecular diagnostic company, and Xavier University. She also served on the Boardboards of Alberto Culver Company and Mentor Corporation until August 2009.2009, and the board of Third Wave Technologies, Inc. until 2008. In January 2010, Natural Products Group, LLC filed a voluntary petition for reorganization under chapter 11 of the United States bankruptcy code.
Ms. Napier’s extensive executive, managerial and leadership experience, including many years in the health care industry, positions her well to serve as a member of our Board of Directors. Her business acumen and experience on the boards of directors of numerous companies make her a valuable addition.
Joanne C. Smith, M.D.has served as a director of Hill-Rom since December 2003 and as Vice ChairpersonChair of the Board of Directors of Hill-Rom since May 2005. She was elected as President and Chief Executive Officer of the Rehabilitation Institute of Chicago in October 2006. She hadPrior to that, Dr. Smith has been the President of the National Division of the Rehabilitation Institute of Chicago, since November 2005. Prior to that, Dr. Smith had been the Senior Vice President, Corporate Strategy and Business Development for the Rehabilitation Institute of Chicago since April 2002.among other positions. Since 1992 she has been an attending physician at the same institution. From 1997 through April 2002, Dr. Smith was the Senior Vice President and Chief Operating Officer of the Corporate Partnership Division of the Rehabilitation Institute of Chicago and from 1992 to 1997 she held various management positions there. She also serves on the Boards of Directors of AptarGroup, Inc., a leading supplier of personal care, cosmetics, pharmaceutical, food and beverage dispensing systems, and the AON Memorial Education Fund, a fund dedicated to supportingsupport ing the educational needs of the children who suffered the loss of a parent in the World Trade Center attack.
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Dr. Smith’s executive background, her public company director experience, and her knowledge of and background in the healthcare and medical technology industry (which is particularly relevant for Hill-Rom’s business), make her a valuable member of the Board.
Hill-Rom’s Amended Articles of Incorporation currently provide
We believe that the Board of Directors is divided into three classes, with each class elected every three years. On the recommendation of the Nominating/Corporate Governance Committee, the Board has approved,Hill-Rom and recommends to theits shareholders for approval, amendments to the Amended Articles of Incorporation providing for the annual election of the entire Board of Directors commencing in 2013.
If the amendments are approved by the shareholders, beginningbenefit from responsive corporate governance policies and constructive and consistent dialogue. Accordingly, at the 20112010 annual meeting of shareholders, classes of directors whose terms expire atwe submitted to the shareholders, and the shareholders approved, a proposal that Hill-Rom provide its shareholders an annual meeting will be elected for one-year terms. This will result innon-binding advisory vote regarding our executive compensation. Subsequently, the entire Board being elected annually for one-year terms beginning at the 2013 annual meeting of shareholders. If the amendments are approved by shareholders, conforming changes will be made to Hill-Rom’s AmendedDodd-Frank Wall Street Reform and Restated Code of By-Laws.Consumer Protection Act and subsequent SEC rules mandated a non-binding shareholder vote on executive compensation.
Section 7.1 of Hill-Rom’s Amended Articles of Incorporation contains the provisions that will be affected if this proposal is adopted. Appendix A to this proxy statement shows the proposed changes to Section 7.1, with deletions indicated by strike-outs and additions indicated by double underlining.
This proposal isAs a result of ongoing review of corporate governance matters bythese developments, Hill-Rom is presenting to its shareholders the Board. The Board, assisted byopportunity to vote (on a non-binding basis) on the Nominating/Corporate Governance Committee, considered the advantages and disadvantages of maintaining the classified board structure. The Board considered the view of some shareholders who believe that classified boards have the effect of reducing the accountability of directors to shareholders because classified boards limit the ability of shareholders to evaluate and elect all directors on an annual basis. The election of directors is the primary means for shareholders to influence corporate governance policies. The Board also considered benefits of retaining the classified board structure, which has a long history in corporate law. Proponents of a classified structure believe it provides continuity and stability in the management of the business and affairs of a company because a majority of directors always have prior experience as directors of the company. Proponents also assert that classified boards may enhance shareholder value by forcing an entity seeking control of a target company to initiate arms-length discussions with the board of that company, because the entity cannot replace the entire board in a single election. While the Board recognizes those potential benefits, it also notes that even without a classified board, Hill-Rom has other means to compel a takeover bidder to negotiate with the Board, including certain provisions of Indiana law.following resolution:
On the recommendation of the Nominating/Corporate Governance Committee, the Board approved the amendments, and now recommends
“RESOLVED, that the shareholders approve them. Thethe overall compensation policies and procedures employed by Hill-Rom, as described in the Compensation Discussion and Analysis and the tabular disclosure regarding named executive officer compensation (together with the accompanying narrative disclosure) in this proxy statement.”
Because your vote is advisory, it will not be binding on the Board supports this changeof Directors. However, the Compensation and believes that by taking this action, it can provide shareholders further assurance thatManagement Development Committee (the “Compensation Committee”) will take into account the directors are accountable to shareholders while maintaining appropriate defenses to respond to inadequate takeover bids.
The affirmative vote of at least two-thirdsoutcome of the outstanding shares of common stock is required to approve this proposal.vote when considering future executive compensation arrangements.
The Board of Directors recommends that you vote “FOR” the proposal to amend Hill-Rom’s Amended Articlesapproval of Incorporation to provide for the annual election of the entire Board of Directors.
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In connection with the non-binding vote on executive compensation, we are presenting the following proposal, which gives you as a shareholder the opportunity to Eliminate Supermajority Voting Provisions
Hill-Rom’s Amended Articles of Incorporation currently provide that directors caninform Hill-Rom as to how often you wish the Company to include a proposal, similar to Proposal 2, in our proxy statement. While our Board intends to carefully consider the shareholder vote resulting from the proposal, the final vote will not be removed only for causebinding on us and only byis advisory in nature. Accordingly, Hill-Rom is presenting to its shareholders the affirmative vote of the holders of at least two-thirds of the voting power of all of the shares of Hill-Rom entitledopportunity to vote generally in the election of directors, voting together as(on a single class. Additionally, the Amended Articles of Incorporation currently provide that Article 7 of the Amended Articles of Incorporation, which addresses various matters related to the Board of Directors, including number, term of office, vacancies, removal and quorum, may be altered, amended or repealed only by the affirmative vote of the holders of at least two-thirds of the voting power of all of the shares of Hill-Rom entitled to vote generally in the election of directors, voting together as a single class. On the recommendation of the Nominating/Corporate Governance Committee, the Board has approved, and recommends to the shareholders for approval, amendments to the Amended Articles of Incorporation to eliminate these supermajority voting provisions.
If the amendments are approved by the shareholders, directors may be removed for cause with the affirmative vote of a majority of the voting power of all of the shares of Hill-Rom entitled to vote generally in the election of directors, voting together as a single class. Additionally, the provision dealing with the alteration, amendment or repeal of Article 7 would be deleted in its entirety, with the result that such Article may be altered, amended or repealed in the same manner as any other provision of the Amended Articles of Incorporation in accordance with the Indiana Business Corporation Act, which generally would require approval of a majority of the shares entitled to vote, subject to any special voting rights of any class or series of stock. If the amendments are approved by shareholders, conforming changes will be made to Hill-Rom’s Amended and Restated Code of By-Laws.
Sections 7.3 and 7.5 of Hill-Rom’s Amended Articles of Incorporation contain the provisions that will be affected if this proposal is adopted. Appendix B to this proxy statement shows the proposed changes to Sections 7.3 and 7.5, with deletions indicated by strike-outs and additions indicated by double underlining.
This proposal is a result of ongoing review of corporate governance matters by the Board. The Board, assisted by the Nominating/Corporate Governance Committee, considered the advantages and disadvantages of maintaining these supermajority voting provisions. The Board considered the view of some shareholders that the supermajority voting provisions may make it more difficult for one or a few large shareholders to replace important corporate governance rules of the company to further a special interest, or to take control of the company, and help ensure that important corporate governance rules are not changed without the clear consensus of a substantial majority of shareholders that such change is prudent and in the best interests of the company. While the Board recognizes those potential benefits, the Board also recognizes that supermajority voting provisions are disfavored by many shareholders and shareholder groups for the same reasons — that is, that they make it more difficult for shareholders to change important rules relating to the election of directors or other governance matters. In view of the Board’s proposal to be presented at the annual meeting to declassify the Board and provide for the annual election of the entire Board, the Board believes that maintaining the supermajority provisions could provide only marginal benefit, if any. Accordingly,non-binding basis) on the recommendation of the Nominating/Corporate Governance Committee, the Board approved the amendments, and now recommendsfollowing resolution:
“RESOLVED, that the shareholders approve them.
The affirmativewish the Company to include an advisory vote of at least two-thirdson the compensation of the outstanding sharesCompany’s Named Executive Officers pursuant to Section 14A of common stock is required to approve this proposal.the Securities Exchange Act of 1934:
The Board of Directors recommends that you vote FORto hold an advisory vote on executive compensation “EVERY ONE (1) YEAR”. This recommendation is consistent with the proposal to amend Hill-Rom’s Amended Articlesnon-binding advisory shareholder vote taken at the 2010 annual meeting of Incorporation to eliminate the supermajority voting provisions.shareholders.
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As described below under “Executive Compensation—Compensation Discussion and Analysis,”
The Hill-Rom is committedHoldings, Inc. Short-Term Incentive Plan (the “Incentive Plan”) provides for awards to maintaining an executive compensation program that fosters performance and the creationofficers of long-term shareholder value. Our Compensation and Management Development Committee has designed our executive compensation programHill-Rom which are based on principlesthe attainment of specified performance goals or objectives. The purposes of the Incentive Plan are to:
· provide us flexibility to attract, motivate and retain the services of participants who make significant contributions to our success, and to allow participants to share in our success;
· optimize our profitability and growth through incentives which are consistent with our goals and which link the performance objectives that reflect that commitment. We also value the inputof participants to those of our shareholders regarding our compensation philosophy, policies, proceduresshareholders; and decisions,
· provide participants with an incentive for excellence in individual performance.
Officers of Hill-Rom are eligible to participate in the plan. The Compensation Committee is empowered to determine the specific participants in the plan, and our Board of Directors therefore has approveddesignated the submission to our shareholders of a policy that, if approved by shareholders, would give our shareholders an annual non-binding advisory vote on certain aspectsmembers of our executive compensation.
Specifically, if this proposal is approved by shareholders, then commencing withleadership team, including our 2011 annual meeting of shareholders, we will provide shareholders an annual non-binding advisory vote as to (1) our overall executive compensation philosophy, policies and procedures, as described in the Compensation Discussion and Analysis (CD&A) included in our proxy statement and (2) the compensation decisions made by the Compensation and Management Development Committee with regard to Named Executive Officer performance, as described in the CD&A. The vote will be non-binding and will not affect any compensation paid or awarded to our executive officers, including thecontinuing Named Executive Officers, noras participants in this plan for our 2011 fiscal year.
At the annual meeting, you are being asked to approve the Incentive Plan so that awards will it obligate our Board or Compensationbe excluded from “applicable employee remuneration” under Section 162(m) of the Internal Revenue Code as performance-based compensation and, Management Development Committee to make any changes to our executive compensation program.
We recognize that recent legislative and regulatory proposals have proposed mandating a “say on pay” shareholder vote similartherefore, not subject to the one we are proposing. If a similar shareholder vote is required by law or regulation, we will comply with that law or regulation instead oflimitation on deductible compensation under Section 162(m). Should the policy we are asking you to vote on atshareholders not approve the upcoming annual meeting.
This proposalIncentive Plan, no awards will be approved ifmade under the votes cast in favor ofIncentive Plan for the proposal exceed2011 fiscal year. In such case, however, the votes cast opposing the proposal.Compensation Committee will consider other alternatives.
The Board of Directors recommends that you vote “FOR” the policy providingapproval of the Hill-Rom Holdings, Inc. Short-Term Incentive Plan.
Description of the Incentive Plan
Following is a summary of the material features of the Incentive Plan. It is qualified by reference to the full text of the plan, which is attached as Appendix 1 to this proxy statement.
Administration
The Incentive Plan is administered by the Compensation Committee, which has sole responsibility for determining the participants, establishing performance objectives, setting award targets and determining award amounts, as allowed by the Incentive Plan.
Performance Objectives
The Incentive Plan’s performance objectives are determined with reference to “EBITDA”, as such term is specifically defined in the Incentive Plan. The Incentive Plan defines “EBITDA” to mean, for each relevant fiscal year (the “Performance Period”), Hill-Rom’s earnings before interest, taxes, depreciation and amortization as reported in Hill-Rom’s audited consolidated financial statements for the Performance Period, with such adjustments for such Performance Period as the Compensation Committee may provide for prior to the commencement thereof, or at such later time as may be permitted by applicable provisions of the Internal Revenue Code (which adjustments may include effects of charges for restru cturings, discontinued operations, extraordinary items, other unusual or non-recurring items, and the cumulative effect of tax or accounting changes, each as identified in the financial statements, notes to the financial statements or management’s discussion and analysis).
Awards
The maximum amount payable for any fiscal year is:
| · | Chief Executive Officer: 2% of as-adjusted EBITDA for the Performance Period |
| · | Other Officers: 1% of as-adjusted EBITDA for the Performance Period |
When making awards to participants under the plan, the Compensation Committee has the discretion to reduce, but not increase, such awards. The Compensation Committee has determined that it will take into account the metrics used to make awards under our existing Short-Term Incentive Compensation Plan when exercising such discretion, and that target payouts will remain unchanged from fiscal year 2010 for our Named Executive Officers. See “Executive Compensation” for additional details on these metrics.
Amendment or Modification
Our Board may modify, amend, suspend or terminate the Incentive Plan, provided that no amendment that would require the consent of the shareholders of Hill-Rom pursuant to Section 162(m) of the Internal Revenue Code, New York Stock Exchange listing rules or the Securities Exchange Act of 1934, or any other applicable law, rule or regulation, shall be effective without such consent. However, no modification may, without the consent of the participant, reduce the right of a participant to a payment or distribution to which the participant is entitled by reason of an annual non-binding advisory shareholder vote on executive compensation.outstanding award allocation.
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Subject to shareholder ratification, the Audit Committee of our Board of Directors has appointed the firm of PricewaterhouseCoopers LLP (“PwC”), certified public accountants, as the independent registered public accounting firm to make an examination of the consolidated financial statements of Hill-Rom for its fiscal year ending September 30, 2010. PwC served as Hill-Rom’sour independent registered public accounting firm for the fiscal year endedending September 30, 2009. A representative2011. Representatives from PwC will be present at the annual meeting with an opportunity to make a statement, if he or shethey so desires,desire, and will be available to respond to appropriate questions.
The Audit Committee has adopted a policy requiring that all services from the outside independent registered public accounting firm must be pre-approved by the Audit Committee or its delegate (Chairperson) and has adopted guidelines that non-audit related services, including tax consulting, tax compliance and tax preparation fees, should not exceed the total of audit and audit related fees. During fiscal 2009,2010, PwC’s fees for non-audit related services fell within these guidelines.
The following table presents fees for professional services rendered by PwC for the audit of our annual consolidated financial statements for the years ended September 30, 20092010 and 2008,2009, and fees billed for other services rendered by PwC during those periods.
| | | | | | | | | | |
| | | 2009 | | 2008 | | | | | | | |
Audit Fees (1) | | $ | 1,282,000 | | $ | 2,205,985 | | | $ | 1,219,500 | | | $ | 1,282,000 | |
Audit-Related Fees (2) | | 866,000 | | 1,277,450 | | | | 528,288 | | | | 866,000 | |
Tax Fees (3) | | 40,728 | | 25,000 | | | | 48,000 | | | | 40,728 | |
All Other Fees (4) | | 1,500 | | 1,500 | | | | 1,500 | | | | 1,500 | |
| | | | | | | |
Total | | $ | 2,190,228 | | $ | 3,509,935 | | | $ | 1,797,288 | | | $ | 2,190,228 | |
| | | | | | | |
| | |
| (1) | | Audit Fees were billed by PwC for professional services rendered for the integrated audit of our consolidated financial statements and our internal control over financial reporting, along with the review and audit of the application of new accounting pronouncements, SEC releases and accounting for unusual transactions, includingtransactions. Fiscal 2009 also included the audit of our interim goodwill and intangible asset impairment analysis. The fiscal 2008 amount includes billings for services rendered in connection with our adoption of accounting guidance related to uncertain income tax positions and incremental services in connection with the spin-off of our former funeral services business. |
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| (2) | | Audit-Related Fees were billed by PwC for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and that are not disclosed under “Audit Fees” above. These audit-related services in fiscal 2009 included fees related to acquisition accounting, and other transaction related fees. The fiscal 2008 amount included additional audit fees incurred as a result of the spin-off of our former funeral services business. Both years included the statutory audits of European and other foreign entities.entities and other transaction related fees. |
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| (3) | | Tax Fees were billed by PwC for professional services rendered for tax compliance, tax advice and tax planning. |
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| (4) | | All Other Fees were billed by PwC for all other products and services provided to us. These fees were for software and a subscription to PwC’s online accounting research tool. |
The Board of Directors recommends that the shareholdersyou vote “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as Hill-Rom’s independent registered public accounting firm.
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Both the
Board of Directors and management of Hill-Rom firmly embrace good and accountable corporate governance and believe that an attentive, performingLeadership
The Board is a tangible competitive advantage. Director compensationcurrently led by our non-executive Chair, Mr. Classon, who is an independent director. The Board has always been comprised of cash and stock based compensation. A non-Chief Executive Officer director has helddetermined that the position of Chairmanleadership of the Board since April 1989. In early 2001, efforts to modify the composition of the Board began, withis currently best conducted by an emphasis on independence and the mix of characteristics, experiences and diverse perspectives and skills most appropriate for Hill-Rom. Since May 2002, Hill-Rom has welcomedindependent Chair. The Chair provides overall leadership to the Board eight of Hill-Rom’s current directors, all of whom are proven leaders, seven of whom are independent and seven of whom have significant experience in the health care or related industries. The Board has had a majority of independent directors since December 4, 2003. The Board has established position specifications, including performance criteria, for itself, the Chairman of the Board, the Vice Chairperson of the Board and the Chief Executive Officer.
The Board of Directors, which is elected by the shareholders, is the ultimate decision-making body of Hill-Rom except with respect to those matters reserved to the shareholders. It selects the senior management team, which is charged with the conduct of Hill-Rom’s business. Having selected the senior management team, the Board acts as an advisor and counselor to senior management and oversees and monitors its performance.
Board’s Role in Strategic Planning
The Board of Directors has the legal responsibility for overseeing the affairs of Hill-Rom and, thus, an obligation to be informed about Hill-Rom’s business and strategies. This involvement enables the Board to provide guidance to management in formulating and developing plans and to exercise independent decision-making authority on matters of importance to Hill-Rom. Acting as a full Board and through the Board’s three standing committees, the Board is actively involved in Hill-Rom’s strategic planning process.
Each year, typically in the spring, summer and fall, senior management sets aside specific periods to develop, discuss and refine Hill-Rom’s long-range operating plan and overall corporate strategy. Specific operating priorities are developed to effectuate Hill-Rom’s long-range plan. Some of the priorities are short-term in focus; others are based on longer-term planning horizons. Senior management reviews the insights and conclusions reached at its meetings with the Board over the course of several Board meetings and seeks approval of the overall corporate strategy and long-range operating plan at Board meetings that usually occur in the summer and fall, including a two to three day offsite retreat in July dedicated to strategic planning. These meetings are focused on corporate strategy and involve both management presentations and input from the Board regarding the assumptions, priorities and objectives that will form the basis for management��s strategies and operating plans. To the extent necessary to support strategy, the Board, with assistance from outside advisors, also from time to time evaluates other matters such as Hill-Rom’s corporate and capital structure.
At most Board meetings, the Board substantively reviews Hill-Rom’s progress against its strategic plans and exercises oversight and decision-making authority regarding strategic areas of importance and associated funding authorizations.
In addition, Board meetings held throughout the year target specific strategies and critical areas for extended, focused Board input and discussion.
The Board’s role is inextricably linked to the development and review of Hill-Rom’s strategic plan. Through these processes, the Board, consistent with good corporate governance, supports the long-term success of Hill-Rom by exercising sound and independent business judgment on the strategic issues that are important to Hill-Rom’s business.
Functioning of the Board
The Board and Board committees agenda setting process generally involves all directors. The Chairman of the Board, Chief Executive Officer and Secretary initially develop a proposed agenda for Board meetings with the
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understanding that certain items pertinent to the advisory and monitoring functions of the Board be brought to it periodically byfunction, while the Chief Executive Officer, for review and/or decision. For example,Mr. Greisch, provides leadership with respect to the day-to-day management and operation of our business. We believe the separation of the offices allows Mr. Classon to focus on managing Board reviewsmatters and allows Mr. Greisch to focus on managing our business. In addition, we believe the annual corporate budget. Proposed agenda items that fall withinseparation of the scope of responsibilities of a Board committee are initially developed byoffices enhances the chair of that committee with the Secretary. After initial agendas are developed, the Chairmanobjectivity of the Board Chief Executive Officer and Secretary discuss coordination of the agendas and make further modifications, as appropriate. Board and committee agendas and materials related to agenda items are provided to Board members sufficiently, typically at least one week, in advance of regular meetings to allow the directors to review and provide feedback on the agendas and related materials and to prepare for discussion of the items at the meetings. More recently the Board has added an executive session at the beginning of each of its regular meetings to allow directors, after they have reviewed the materials provided to them in advance of the meeting, to provide additional guidance on the structure and areas of focus and emphasis of each meeting.management oversight role.
At the invitation of the Board and its committees, members of senior management attend Board and committee meetings or portions thereof for the purpose of participating in focused discussions. Generally, discussions of matters to be considered by the Board and its committees are facilitated by the manager responsible for that function or area of Hill-Rom’s operations. In addition, Board members have free access to all other members of management and employees of Hill-Rom and, as necessary and appropriate in their discretion, the Board and its committees may, and do, consult with independent legal, financial and accounting advisors to assist in their duties to Hill-Rom and its shareholders.
The chairs of the committees of the Board each preside over the portion of the Board meetings at which the principal items to be considered are within the scope of the authority of their respective committees. The chair of each committee determines the frequency, length and agenda of meetings of that committee. Sufficient time to consider the agenda items is provided. Materials related to agenda items are provided to the committee members sufficiently, typically at least one week, in advance of regular meetings to allow the members to prepare for discussion of the items at the meeting.
Executive sessions or meetings of outside directors without management present are held regularly at the beginning and end of Board meetings, and, depending on directors’ desire, from time to time during Board and committee meetings. The Chairman of the Board generally presides at executive sessions of non-management directors, except that the chairs of the committees of the Board preside at executive sessions of non-management directors held following meetings of their committees or at which the principal items to be considered are within the scope or authority of their committees.
Board’s Role in Strategic Planning and Oversight of Risk Management
The Board is responsible for directing and overseeing the management of Hill-Rom’s business in the best interests of the shareholders and consistent with good corporate citizenship. The Board sets strategic direction and priorities for the Company, approves the selection of the senior management team and oversees and monitors risks and performance. At Board meetings during the year, members of senior management present their long-range strategic plans to the Board, and at the start of each fiscal year, that Board reviews and approves an operating plan and budget for the next year.
A fundamental part of setting Hill-Rom’s business strategy is the assessment of the risks Hill-Rom faces and how they are managed. The Board and the Audit Committee meet regularly throughout the year with our financial and treasury management teams and with our Vice President, Internal Audit and Chief Legal Officer to assess the financial, legal/compliance and operational/strategic risks throughout our businesses and review our insurance and other risk management programs and policies in order to enable the Board to exercise its ultimate oversight responsibility for Hill-Rom’s risk management processes.
In addition, the Compensation Committee assesses Hill-Rom’s compensation structure on a regular basis to appropriately align risks and incentives for our executive management. See “Compensation Discussion and Analysis” below for additional information.
Communications with Directors; Directors
Shareholders of Hill-Rom and other interested persons may communicate with the Chairman of the Board, the chairs of Hill-Rom’s Nominating/Corporate Governance Committee, Audit Committee or Compensation Committee or the non-management directors of Hill-Rom as a group by sending an email to investors@hill-rom.com. The email should specify which of the foregoing is the intended recipient.
Director Attendance at Annual Meeting
In order to provide Hill-Rom’s security holders and other interested parties with a direct and open line of communication to the Board of Directors, the Board of Directors has adopted and implemented the following procedures for communications to directors.
| • | | Security holders of Hill-Rom and other interested persons may communicate with the Chairman of the Board, the chairs of Hill-Rom’s Nominating/Corporate Governance Committee, Audit Committee or Compensation and Management Development Committee or the non-management directors of Hill-Rom as a group by sending an email to investors@hill-rom.com. The email should specify which of the foregoing is the intended recipient.
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All communications received in accordance with these procedures will be reviewed initially by Hill-Rom’s Investor Relations Department and General Counsel. The Investor Relations Department will relay all such communications to the appropriate director or directors unless the Investor Relations Department and General Counsel determine that the communication:
Hill-Rom currently does not relate to the business or affairs of Hill-Rom or the functioning or constitution of the Board of Directors or any of its committees;
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relates to routine or insignificant matters that do not warrant the attention of the Board of Directors;
is an advertisement or other commercial solicitation or communication;
is frivolous or offensive; or
is otherwise not appropriate for delivery to directors.
The director or directors who receive any such communication will have discretion to determine whether the subject matter of the communication should be brought to the attention of the full Board of Directors or one or more of its committees and whether any response to the person sending the communication is appropriate. Any such response will be made through Hill-Rom’s Investor Relations Department and only in accordance with Hill-Rom’s policies and procedures and applicable law and regulations relating to the disclosure of information.
Hill-Rom’s Investor Relations Department will retain copies of all communications received pursuant to these procedures for a period of at least one year.
The Nominating/Corporate Governance Committee of the Board of Directors will review the effectiveness of these procedures from time to time and, if appropriate, recommend changes.
Hill-Rom has not established a formal policy regarding director attendance at its annual meetings of shareholders, but all of Hill-Rom’s directors generally do attend the annual meetings. The Chairman of the Board presides at the annual meeting of shareholders, and the Board of Directors holds one of its regular meetings in conjunction with the annual meeting of shareholders. Accordingly, unless one or more members of the Board are unable to attend, all members of the Board are present for the annual meeting. All members of the Board at the time of Hill-Rom’s 2009our 2010 annual meeting of shareholders attended that meeting.meeting in person.
Corporate Governance Standards and Code of Ethics
The Board has adopted Corporate Governance Standards for the Board of Directors that provide the framework for the effective functioning of the Board of Directors. Among other matters, these Standards:
confirm thatIn addition, the Board of Directors has established standing committees, each with a charter approved by the Board, to address certain key areas. These committees are the Audit Committee, Compensation and Management Development Committee and Nominating/Corporate Governance Committee;
provide that at least a majority of the directors of Hill-Rom shall be independent;
provide for an annual determination by the Board of Directors regarding the independence of each director;
provide that the Audit Committee, Nominating/Corporate Governance Committee and Compensation and Management Development Committee will consist entirely of independent directors;
provide for an annual assessment by the Nominating/Corporate Governance Committee of the Board’s effectiveness as a whole as well as the effectiveness of the individual directors and the Board’s various committees, including a review of the mix of skills, core competencies and qualifications of members of the Board;
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provide that in an uncontested election, any nominee for director who receives a greater number of votes “withheld” from his or her election than votes “for” such election shall promptly tender his or her resignation, with the Board being required to accept the resignation unless the Board determines, in the exercise of its fiduciary duties, that accepting such resignation would not be in the best interests of Hill-Rom and its shareholders;
provide that the non-management directors shall conduct executive sessions without participation by any employees of Hill-Rom at each regularly scheduled meeting of the Board;
limit the number of public company boards on which a director may sit to four without Board approval;
| • | | provide that no Board member may be nominated or re-nominated to serve on the Board if he/she has reached his/her 72nd birthday prior to the term for which he or she is being considered, with an opportunity for the Board (based on a recommendation of the Nominating/Corporate Governance Committee) to waive the age limit on a case-by-case basis;
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provide that, because it is the desire of the Board to have its composition include a healthy slate of actively employed directors, the Board has an objective that it be composed of a minimum of 50% employed members;
provide that all proposed related party transactions between Hill-Rom or any of its subsidiaries and any director or executive officer of Hill-Rom must be reviewed and approved by the Nominating/Corporate Governance Committee in advance.
Stock Ownership Guidelines for Directors and Executive Officers
Hill-Rom’s Corporate Governance Standards include stock ownership guidelines for Hill-Rom’s directors and executive officers. In general, these standards require non-employee directors to hold deferred stock shares (otherwise known as restricted stock units) granted to them until six months after they cease to be directors and that executive officers of Hill-Rom must achieve and maintain a minimum level of stock ownership as discussed further under “Executive Compensation—Compensation Discussion and Analysis.”
Code of Ethical Business Conduct and Related Matters
The Board of Directors has adopted a Code of Ethical Business Conduct covering, among other matters, conflicts of interest, corporate opportunities, confidentiality, protection and proper use of Hill-Rom’s assets, fair dealing, compliance with laws, including insider trading laws, accuracy and reliability of Hill-Rom’s books and records and reporting of illegal or unethical behavior. This Codethat applies to all directors, officers and other employees of Hill-Rom, including Hill-Rom’s Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer.Officer, which constitutes a “code of ethics” within the meaning of Item 406 of the SEC’s Regulation S-K. The Board reviews, from time to time, and makes changes to the Code based on recommendations made by the Audit Committee of the Board. Hill-Rom’s Code of Ethical Business Conduct constitutes a “code of ethics” withinThey are both available via the meaning of Item 406investor relations section of the SEC’s Regulation S-K.Hill-Rom website at http://ir.hill-rom.com.
All employees, including Hill-Rom’s Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, are required to participate in ethics training and abide by the Code of Ethical Business Conduct to ensure that Hill-Rom’s business is conducted in a consistently legal and ethical manner. All members of the Board of Directors and all officers of Hill-Rom and its subsidiaries are required annually to certify their compliance with the Code and disclose any exceptions to compliance.
Employees are required to report any conduct that they believe in good faith to be an actual or apparent violation of the Code of Ethical Business Conduct. The Sarbanes-Oxley Act of 2002 requires companies to have procedures to receive, retain and treat complaints received regarding accounting, internal accounting controls or auditing matters and to allow for the confidential and anonymous submission by employees of concerns regarding
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questionable accounting or auditing matters. Hill-Rom currently has such procedures in place and has effectively and independently addressed concerns raised by employees and others.
Hill-Rom has adopted a stand alone Code of Conduct that is consistent with the Advanced Medical Technology Association’s (AdvaMed) Code of Ethics on Interactions with Health Care Professionals. AdvaMed is a medical technology association, representing members that produce nearly 90 percent of the health care technology purchased annually in the United States and more than 50 percent purchased annually around the world. The AdvaMed Code is a voluntary code of ethics to facilitate members’ ethical interactions with those individuals or entities that purchase, lease, recommend, use, arrange for the purchase or lease of, or prescribe members’ medical technology products in the United States. Hill-Rom is a member of AdvaMed. The AdvaMed Code can be accessed atwww.advamed.org/MemberPortal/About/code/codeofethics.htm.
Directors may not be given personal loans or extensions of credit by Hill-Rom, and all directors are required to deal at arm’s length with Hill-Rom and its subsidiaries, and to disclose any circumstance that might be perceived as a conflict of interest.
Pursuant to the Foreign Corrupt Practices Act and the Sarbanes-Oxley Act of 2002, Hill-Rom monitors and enforces policies, and implements a system of internal controls, designed to detect and prevent money laundering, corruption and bribery. Supporting processes include ethics training and certification regarding, among other compliance matters, compliance with the Foreign Corrupt Practices Act, documentation, training and testing, new hire criminal background checks and internal audit procedures.
Director Education
Hill-Rom has an orientation and continuing education process for Board members that includes extensive materials, meetings with key management, visits to company facilities and Hill-Rom and industry events. Moreover, as part of directors’ education, which includes, among other things, regular dedicated sessions regarding Hill-Rom’s businesses and operations, Audit Committee sponsored financial literacy and legal and regulatory compliance training, and participation in Hill-Rom and industry trade events, the Board requires each director to attend an outside governance or director related seminar at least once every three years.
Determinations with Respect to Independence of Directors
As noted above, the
The Corporate Governance Standards adopted by the Board of Directors require the Board of Directors to make an annual determination regarding the independence of each of Hill-Rom’s directors anddirectors. The standards provide standards for making these determinations which are consistent withthat if a director is not independent pursuant to the listing standards of the New York Stock Exchange.Exchange, or if the director owns, or is affiliated with the owner of, a controlling amount of voting stock of Hill-Rom, such director shall not be independent. The Board mademakes these determinations for each member of the Board on December 3, 2009, based on an annual evaluation performed by and recommendations made by the Nominating/Corporate Governance Committee, consistent with past practices. When making these determinations, the Board in particular considered the following:
As set forth in Hill-Rom’s Corporate Governance Standards,
Charles E. Golden is a director will be independent only ifmember of the Board of Directors determines, based onof Clarian Health Partners, which purchased approximately $3.2 million, $4.9 million and $2.8 million of products and services from Hill-Rom in the fiscal years 2008, 2009 and 2010, respectively.
Eduardo R. Menascé, is a considerationdirector of all relevant facts and circumstances, that the directora number of entities with which Hill-Rom has no material relationship with Hill-Rom orordinary course relationships. Mr. Menascé is not an executive of any of its subsidiaries (either directly or as a partner, shareholder or officer of an organization that has a relationship with Hill-Rom or any of its subsidiaries). In assessingthese entities, and the materiality of a director’s relationship with Hill-Rom and each director’s independence, the Board must consider the issue of materiality not only from the standpoint of the director but also from that of the persons or organizations with which the director has an affiliation. Material relationships can include, among others, commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships. In assessing a director’s independence, the Board must also consider the director’s ownership, or affiliation with the owner, of less than a controlling amount of voting securities of Hill-Rom. The Board cannot conclude that a director is independent in the following circumstances:
The director is, or has been within the last three years, an employee of Hill-Rom or any of its subsidiaries, or an immediate family member of the director is, or has been within the last three
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| | | years, an executive officer of Hill-Rom (but employment as an interim executive officer will not disqualify a director from being considered independent following that employment). |
The director has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than $120,000 per year in direct compensation from Hill-Rom or its subsidiaries, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service).
(A) The director is a current partner or employee of a firm that is the internal or external auditor of Hill-Rom or any of its subsidiaries; (B) the director has an immediate family member who is a current partner of such a firm; (C) the director has an immediate family member who is a current employee of such a firm and personally works on Hill-Rom’s audit; or (D) the director or an immediate family member was within the last three years a partner or employee of such a firm and personally worked on the audit of Hill-Rom or any of its subsidiaries within that time.
The director or an immediate family member of the director is, or has been within the last three years, employed as an executive officer of another company where any of Hill-Rom’s present executives at the same time serves or served on that company’s compensation committee.
The director is a current employee, or an immediate family member of the director is a current executive officer, of a company that has made payments to or received payments from, Hill-Rom for property or services in an amount which,the largest of these entities, Key Corp., have not exceeded $1,000,000 in any of the last three years.
Joanne C. Smith, M.D. has served as President and Chief Executive Officer of the Rehabilitation Institute of Chicago since October 2006, which has purchased approximately $419,000, $290,000 and $459,000 of products and services from Hill-Rom in fiscal years exceeded the greater of $1 million, or2008, 2009 and 2010, respectively. These amounts are significantly less than 2% of such other company’s consolidatedthe gross revenues.
revenues of the Rehabilitation Institute of Chicago in those years.The director owns, or is affiliated with the owner of, a controlling amount of voting stock of Hill-Rom.
To assist in the Board’s determinations, each director completed materials designed to identify any relationships that could affect the director’s independence,Based on these standards and the General Counselall relevant facts and Secretary of Hill-Rom conducted follow up interviews with certain directors. On the basis of these materials and the standards described above,circumstances, the Board has determined that each of Rolf A. Classon, James R. Giertz, Charles E. Golden, Ronald A. Malone, Eduardo R. Menascé, Katherine S. Napier and Joanne C. Smith, M.D. is independent.
The Board considered that Charles E. Golden is a member of the Board of Directors of Clarian Health Partners, which purchased approximately $3.5 million, $3.2 million and $4.9 million of products and services from Hill-Rom in the fiscal years 2007, 2008 and 2009, respectively. In determining that this relationship was not material, the Board considered that Mr. Golden is not an executive officer of Clarian Health Partnersindependent, and that the amount of products and services purchased from Hill-Rom by Clarian Heath Partners in the last three years has been substantially below 2% of the consolidated gross revenues of Clarian Health Partners in those years.
With respect to Eduardo R. Menascé, the Board considered Hill-Rom’s payment to or receipt from entities of which Mr. Menascé serves as a director of de minimis amounts for goods and services in the ordinary course of business. In addition, the Board considered that Hill-Rom has had ordinary course of business banking and financial services relationships that do no constitute advisory services with Key Corp., for which Mr. Menascé serves as a director. In determining that these relationships were not material, the Board considered that Mr. Menascé was not an executive officer of any of the entities to or from which Hill-Rom made or received payments and that the payments have not exceeded $1,000,000 in any of the last three years.
With respect to Joanne C. Smith, the Board considered the fact that the Rehabilitation Institute of Chicago, of which Dr. Smith has served as President and Chief Executive Officer since October 2006, has purchased approximately $57,000, $419,000 and $290,000 of products and services from Hill-Rom in fiscal years 2007, 2008 and 2009, respectively. In evaluating this relationship, the Board considered that the amount of purchases by the Rehabilitation Institute of Chicago in the last three years constituted significantly less than 2% of the gross revenues
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of the Rehabilitation Institute of Chicago in those years and that Dr. Smith had no direct authority for purchasing decisions. On the basis of these factors, the Board determined that this relationship was not material.
The Board concluded that, based on all of the relevant facts and circumstances, none of these relationships constituted a material relationship with Hill-Rom that represents a potential conflict of interest or otherwise interferes with the exercise by any of these directors of his or her independent judgment from management and Hill-Rom.
Also on the basis of the standards described above and the materials submitted by the directors, the Board determined thatneither W August Hillenbrand does not meet the standards for independence.nor John J. Greisch also does not meet the independence standards because of his current service as President and Chief Executive Officer of Hill-Rom. Accordingly, neither of these non-independent directors serves on the Audit, Compensation and Management Development or Nominating/Corporate Governance Committees of the Board of Directors.are independent.
Transactions with Related Persons
The Corporate Governance Standards for the Board require that all new proposed related party transactions involving executive officers or directors must be reviewed and approved by the Nominating/Corporate Governance Committee in advance.Committee. The Corporate Governance Standards do not specify the standards to be applied by the Nominating/Corporate Governance Committee in reviewing transactions with related persons. However, we expect that in general the Nominating/Corporate Governance Committee will consider all of the relevant facts and circumstances, including, if applicable, but not limited to: the benefits to us; the impact on a director’s independence in the event the related person is a director, an immediately family member of a director or an entity in which a director is a partner,p artner, shareholder or executive officer; the availability of other sources for comparable products or services; the terms of the transaction; and the terms available for similar transactions with unrelated third parties.
During fiscal 2009, there were no
In addition to the above disclosed transactions with related person transactions that are required to be disclosed in this proxy statement.
Boardpersons, William A. Hillenbrand II, the son of Directors Role in Chief Executive Officer (“CEO”) and Executive Succession Planning
Our Board of Directors is accountable for the development, implementation and continual review ofW August Hillenbrand, a succession plan for the CEO and other executive officers. Board members are expected to have a thorough understandingdirector of the characteristics necessary forCompany, was hired as Hill-Rom’s Director of Sales Effectiveness on November 2, 2009, with a CEO to execute on a long-term strategy that optimizes operating performance, profitability$125,000 base annual salary and shareowner value creation. As part of its responsibilities under its Charter, the Compensationparticipation in all other employee incentive and Management Development Committee of the Board oversees the succession planning process for the CEO, each ofbenefit plans commensurate with other employees at his direct reports and each of their direct reports and other key employees. The Compensation and Management Development Committee’s succession management process focuses on the top eighty executives. The process ensures that critical business capabilities are safeguarded, executive development is accelerated, and strategic talent is leveraged to focus on current and new business imperatives. The ongoing succession process is designed to reduce vacancy, readiness and transition risks and develop strong leadership quality and executive bench strength. The succession and development plans for each of the CEO’s direct reports, including internal CEO succession candidates, all of whom with which the Board has ongoing exposure, is reviewed annually with the Boardlevel. William A. Hillenbrand II’s employment was ratified by the CEO and the Senior Vice PresidentNominating/Corporate Governance Committee on May 6, 2010.
In September 2009, the Board announced plans to facilitate the orderly succession and retirement of Peter H. Soderberg, President and CEO. The process culminated with the election of John J. Greisch as President and CEO effective January 8, 2010. Consistent with his wishes conveyed at the time of his arrival in 2006 and endorsed by the Board at that time, Mr. Soderberg will formally retire as an employee of the company at the end of April 2011 (at age 65). The Board formed a search committee to identify a new CEO and retained Spencer Stuart, a leading executive recruiting firm, to advise the Board. The search process, included a review of both internal and external candidates. Mr. Soderberg is now the Chief Innovation Officer reporting to Mr. Greisch. In that role, it is anticipated that Mr. Soderberg will continue to advise and help shape the company’s business and product innovation initiatives on a part-time basis.
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To make sure that Mr. Soderberg’s talents were available and maximized for Hill-Rom’s and the new CEO’s benefit during the succession process and subsequent transitional period, and ensure Mr. Soderberg remained flexible as to his retirement date so as to ensure a suitable successor could be found without undue time pressure on the Board and without penalizing Mr. Soderberg in the event the successor was found prior to Mr. Soderberg’s retirement at age 65, the Compensation and Management Development Committee, after consultation with its outside consultant and the Board, modified Mr. Soderberg’s compensation and benefits. The arrangement provided the flexibility to ensure an orderly and planned transition—regardless of when the new CEO would have been elected. Mr. Soderberg’s revised compensation and benefits arrangements are described below under “Executive Compensation—Compensation Discussion and Analysis—Employment Agreements.” Mr. Greisch’s compensation and benefits arrangements also are described below under “Executive Compensation—Compensation Discussion and Analysis—Retirement, Change in Control and Severance” and “—Employment Agreements.” Mr. Greisch’s arrangements reflect changes from the arrangements with prior CEOs, including a “double trigger” Change in Control Agreement that does not contain excise tax “gross-up” provisions and no allowance for personal use of Hill-Rom aircraft.
Meetings and Committees of the Board of Directors
It is the general policy of Hill-Rom that all significant decisions be considered by the Board as a whole. As a consequence, the committee structure of the Board is limited to those committees considered to be basic to, or required for, the operation of a publicly owned company. Currently these committees are the Audit Committee, Compensation and Management Development Committee and Nominating/Corporate Governance Committee, each of which has a written charter adopted by the Board of Directors. The Nominating/Corporate Governance Committee recommends the members and chairs of these committees to the Board. The Audit Committee, Compensation and Management Development Committee and Nominating/Corporate Governance Committee are made up of only independent directors.
During the fiscal year ended September 30, 2009,2010, the Board of Directors of Hill-Rom held seveneight meetings. During this period, no member of the Board of Directors attended fewer than 75% of the aggregate of the number of meetings of the full Board of Directors and the number of meetings of the committees on which he or she served.
The following table shows the composition of the committees of the Board of Directors.Board:
Director | | | | | | |
| | | | Nominating/ | | Compensation and |
| | | | Corporate | | Management |
| | | | Governance | | Development |
Director | | Audit Committee | Nominating/ Corporate Governance Committee | Compensation Committee | | Committee |
Rolf A. Classon (Board Chairman)Chair) (I) | | | | VC | | ü |
James R. Giertz (I) | | ü | | | | |
| Charles E. Golden (I) | | C | | ü | | |
| John J. Greisch | | | | | | |
| W August Hillenbrand | | | | | | |
| Ronald A. Malone (I) | | | | | | C |
| Eduardo R. Menascé (I) | | VC | | ü | | |
| Katherine S. Napier (I) | | ü | | | | |
Joanne C. Smith, M.D. (Board Vice Chairperson)Chair) (I) | | | | C | | VC |
| | |
I = Independent Director |
|
C = Committee Chair |
|
VC = Committee Vice Chair |
I = Independent Director
C = Committee Chair
VC = Committee Vice Chair
TheAudit Committeehas general oversight responsibilities with respect to Hill-Rom’s financial reporting and financial controls.controls, and legal, regulatory and ethical compliance. It regularly reviews Hill-Rom’s financial reporting process, its system of internal controls
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regarding accounting,control over financial reporting, legal and regulatory compliance and ethics that management or the Board has established and the internal and external audit processes of Hill-Rom. The Audit Committee consists of Charles E. Golden (Chairman), Eduardo R. Menascé (Vice Chairman), James R. Giertzoperates pursuant to a written charter, and Katherine S. Napier. Rolf A. Classon also served on the Audit Committee until the election of Ms. Napier to the Board and the Audit Committee on July 16, 2009. Duringduring the fiscal year ended September 30, 2009, the Audit Committee2010, held ten meetings. Each member of the Audit Committee is independent under Rule 10A-3 of the SEC and NYSE listing standards and meets the financial literacyliter acy guidelines established by the Board in the Audit Committee Charter. The Board interprets “financial literacy” to mean the ability to read and understand audited and unaudited consolidated financial statements (including the related notes) and monthly operating statements of the sort released or prepared by Hill-Rom, as the case may be, in the normal course of its business. The Board of Directors has determined that each of Messrs. Golden, Menascé and Giertz is an “audit committee financial expert” as that term is defined in Item 407(d) of Regulation S-K of the SEC.S-K.
TheCompensation and Management Development Committeeassists the Board in ensuring that the officers and key management of Hill-Rom are effectively compensated in terms of salaries, supplemental compensation and other benefits that are internally equitable and externally competitive. The Compensation Committee is also responsible for reviewing and assessing the talent development and succession management actions concerning the officers and key employees of Hill-Rom. The Compensation and Management Development Committee consists of Ronald A. Malone (Chairman), Joanne C. Smith (Vice Chair)operates pursuant to a written charter, and since July 16, 2009, Rolf A Classon. Patrick T. Ryan also served as a member of the Committee until his resignation on July 16, 2009. During the fiscal year ended September 30, 2009, the Compensation and Management Development Committee held five meetings.Each member of the Compensation and Management Development Committee is independent as defined by the New York Stock Exchange listing standards.
TheNominating/Corporate Governance Committeeconsists of Joanne C. Smith (Chairperson), Rolf A. Classon (Vice Chairman), Charles E. Golden, and Eduardo R. Menascé. The Nominating/Corporate Governance Committee held six meetings during the fiscal year ended September 30, 2009. Each member of the 2010, held ten meetings.
The Nominating/Corporate Governance Committee is independent as defined by assists the New York Stock Exchange listing standards.
The primary function of the Nominating/Corporate Governance Committee is to assist the Board of Directors in ensuring that Hill-Rom is operated in accordance with prudent and practical corporate governance standards, ensuring that the Board achieves its objective of having a majority of its members be independent in accordance with New York Stock ExchangeNYSE listing standards and other regulations and identifying candidates for the Board of Directors. The Nominating/Corporate Governance Committee operates pursuant to a written charter, and during the fiscal year ended September 30, 2010, held four meetings.
The Board of Directors has adopted position specifications applicable to members of the Board of Directors, and nominees for the Board of Directors recommended by the Nominating/Corporate Governance Committee must meet the qualifications set forth in these position specifications.nominees. The specifications provide, in general, that a candidate for director should not ever (i) have been the subjectmust be of sound character, be an SEC enforcement action in which he or she consented to the entry of injunctive relief, a cease and desist order, or a suspension or other limitation on the ability to serve as a corporate officer or supervisor, (ii) had any license suspended or revoked due to misconduct of any type or (iii) violated any fiduciary duty to Hill-Rom or its Code of Ethical Business Conduct, and should exhibit the following characteristics:
Have a reputation for industry, integrity, honesty, candor, fairness and discretion;
Be an acknowledged expert in his or her chosen field, be knowledgeable of endeavor, which area of expertise should have some relevance to Hill-Rom’s businesses or operations;
Be knowledgeable, orbusiness (or be willing and able to become so quickly, in the critical aspects of Hill-Rom’s businessesso) and operations; and
Be experienced and skillful in servinghave experience as a competent overseer of, and trusted advisor to, senior management of a substantial publicly held corporation.
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management. In addition, as specified in the charter for the Nominating/Corporate Governance Committee, nominees for the Boardparticular skills and talents of Directors recommended by the Nominating/Corporate Governance Committeeany director nominee should positively contribute to the mixdiversity of the various skills core competencies and qualificationstalents of the Board through expertise in one or moreas a whole.
Table of the following areas: accounting and finance, product and technology development, healthcare, manufacturing, services businesses, sales and market development, international operations, international governance, mergers and acquisitions related business development, strategic oversight, government relations, investor relations, executive leadership development, public company governance, and executive compensation design and processes.Contents The Nominating/Corporate Governance Committee reviews incumbent directors against the position specifications applicable to members of the Board of Directors and independence standards set forth in the New York Stock Exchange listing standards. Additionally, the Board as a whole, the Board committees and the individual incumbent directors who are being nominated for election at the next annual meeting of shareholders are formally evaluated annually by the Nominating/Corporate Governance Committee, whose findings are reviewed with the Board. The Nominating/Corporate Governance Committee retains a nationally recognized consulting firm to assist it with the evaluation process and retains a nationally recognized executive search firm to assist it with the identification and evaluation of new directors.
The Nominating/Corporate Governance Committee’s policy with respect to the consideration ofconsiders director candidates recommended by shareholders, is that it will consider such candidates. Anyand any such recommendations should be communicated to the ChairmanChair of the Nominating/Corporate Governance Committee in the manner described above in “—Communications with Directors” and should be accompanied by substantially the same types of information as are required under Hill-Rom’s Code of By-laws for shareholder nominees.
Hill-Rom’s Code of By-Laws provides that nominations of persons for election to the Board of Directors of Hill-Rom may be made at any meeting of shareholders by or at the direction of the Board of Directors or by any shareholder entitled to vote for the election of members of the Board of Directors at the meeting. For nominations to be made by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of Hill-Rom and any nominee must satisfy the qualifications established by the Board of Directors of Hill-Rom from time to time as contained in the proxy statement of Hill-Rom for the immediately preceding annual meeting or posted on the Website of Hill-Rom atour website, www.hill-rom.com. To be timely, a shareholder’s nomination must be delivered to or mailed and received by the Secretary not later than (i) in the case of the annual meeting, 100 days prior to the anniversary of the date of the immediately preceding annual meeting which was specified in the initial formal notice of such meeting (but if the date of the forthcoming annual meeting is more than 30 days after such anniversary date, such written notice will also be timely if received by the Secretary by the later of 100 days prior to the forthcoming meeting date and the close of business 10 days following the date on which Hill-Rom first makes public disclosure of the meeting date) and (ii) in the case of a special meeting, the close of business on the tenth day following the date on which Hill-Rom first makes public disclosure of the meeting date. The notice given by a shareholder must set forth: (i) the name and address of the shareholder who intends to make the nomination andan d of the person or persons to be nominated; (ii) a representation that the shareholder is a holder of record, setting forth the shares so held, and intends to appear in person or by proxy as a holder of record at the meeting to nominate the person or persons specified in the notice; (iii) a description of all arrangements or understandings between such shareholder and each nominee proposed by the shareholder and any other person or persons (identifying such person or persons) pursuant to which the nomination or nominations are to be made by the shareholders; (iv) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the SEC; (v) the consent in writing of each nominee to serve as a director of Hill-Rom if so elected, and (vi) a description of the qualifications of such nominee to serve as a director of Hill-Rom.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended September 30, 2009,2010, the following directors served on the Compensation and Management Development Committee: Ronald A. Malone, Joanne C. Smith, M.D. and Rolf A. Classon, Ronald A. Malone and Patrick T. Ryan.Classon. The Compensation and Management Development Committee had no interlocks or insider participation.
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Availability of Governance Documents
Copies of Hill-Rom’s Corporate Governance Standards, Code of Ethical Business Conduct and Board committee charters are available on Hill-Rom’s website atwww.hill-rom.comor in print to any shareholder who requests copies through Hill-Rom’s Investor Relations office. Also available on Hill-Rom’s website are position specifications adopted by the Board for the positions of Chief Executive Officer, Chairman of the Board of Directors,Chair and Vice Chairperson of the Board of Directors, Vice Chairperson of each of the committeesChair of the Board of Directors and other members of the Board of Directors.
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The Audit Committee of the Board of Directors (the “Committee”) is composed solely of directors, who are independent under SEC Rule 10A-3 and the NYSE’s listing standards. The Committee operates under a written charter adopted by the Board of Directors.
Management is responsible for Hill-Rom’s internal controls, financial reporting process and compliance with laws and regulations and ethical business standards. The independent registered public accounting firm is responsible for performing an integrated audit of Hill-Rom’s consolidated financial statements and its internal control over financial reporting in accordance with standards of the Public Company Accounting Oversight Board (“PCAOB”) and the issuance of a report thereon. The Committee’sAudit Committee of the Board of Directors (the “Committee”) has the responsibility is to monitor and oversee these processes.
In this regard, the
The Committee meets separately at most regular committee meetings with management, the Vice President of Internal Audit and Hill-Rom’s outside independent registered public accounting firm. The Committee has the authority to conduct or authorize investigations into any matters within the scope of its responsibilities and the authority to retain such outside counsel, experts, and other advisors as it determines appropriate to assist it in the conduct of any such investigation. In addition, the Committee approves, subject to shareholder ratification, the appointment of Hill-Rom’s outside independent registered public accounting firm, PricewaterhouseCoopers LLP (“PwC”), and pre-approves all audit and non-audit services to be performed by the firm.
In this context, the
The Committee has reviewed and discussed the consolidated financial statements with management and PwC. Management represented to the Committee that Hill-Rom’s consolidated financial statements were prepared in accordance with generally accepted accounting principles. PwC discussed with the Committee matters required to be discussed by Statement on Auditing Standards No. 114 (The Auditor’s Communication With Those Charged With Governance). Management and the independent registered public accounting firm also made presentations to the committee throughout the year on specific topics of interest, including: (i) current developments and best practices for audit committees; (ii) updates on the substantive requirements of the Sarbanes-OxleySarbanes-Ox ley Act of 2002, including management’s responsibility for assessing the effectiveness of internal control over financial reporting; (iii) key elements of anti-fraud programs and controls; (iv) transparency of corporate financial reporting; (v) Hill-Rom’s critical accounting policies; (vi) the applicability of several new and proposed accounting releases; and (vii) numerous SEC accounting developments.
PwC also provided to the Committee the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the audit committee regarding independence. PwC informed the Audit Committee that it was independent with respect to Hill-Rom within the meaning of the securities acts administered by the SEC and the requirements of the PCAOB,PCAOB. The Committee discussed this finding, and PwC discussed with the Committee that firm’s independence with respect to Hill-Rom. In addition, the Committeealso considered whether non-audit consulting services provided by the auditors’ firmPwC could impair the auditors’ independence and concluded that such services have not impaired the auditors’ independence.done so.
Based upon the Committee’s discussions with management and PwC and the Committee’s review of the representations of management and the report of PwC to the Committee,forgoing, the Committee recommended to the Board of Directors that the audited consolidated financial statements be included in Hill-Rom’s Annual Report on Form 10-K for the year ended September 30, 2009.2010.
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In addition, the Committee has discussed with the Chief Executive Officer and the Chief Financial Officer of Hill-Rom the certifications required to be given by such officers in connection with Hill-Rom’s Annual Report on Form 10-K pursuant to the Sarbanes-Oxley Act of 2002 and SEC rules adopted thereunder, including the subject matter of such certifications and the procedures followed by such officers and other management in connection with the giving of such certifications.
Submitted by the Audit Committee*
Committee
Charles E. Golden (Chairman)
(Chair)
Eduardo R. Menascé (Vice Chairman)
Chair)
James R. Giertz
Katherine S. Napier
(Each
| | |
* | | James R. Giertz was elected to the Audit Committee after the approval of the Audit Committee Report, and his name therefore does not appear under the Report. |
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The following table sets forth information with respect to the beneficial ownership of our outstanding common stock as of December 28, 20092010 by:
each of our directors and our Named Executive Officers;
all of our directors and executive officers as a group; and
| · | each of our directors and our Named Executive Officers; |
| · | all of our directors and executive officers as a group; and |
| · | each person or entity who is known by us to be the beneficial owner of more than five percent of our common stock. |
Our common stock is our only class of equity securities outstanding. Except as otherwise noted in the footnotes below, the individual director or executive officer or their family members had sole voting and investment power with respect to such securities. None of the shares beneficially owned by our directors and executive officers are pledged as security. The number of shares beneficially owned includes, as applicable, directly and/or indirectly owned shares of common stock, common stock shares underlying stock options that are currently exercisable or will become exercisable within 60 days from December 28, 2009,2010, and deferred stock share awards (otherwise known as restricted stock units or RSUs) that are vested or will vest within 60 days from December 28, 2009.2010. Except as specified below , the business address of the persons listed is our headquarters, 1069 State Route 46 East, Batesville, Indiana 47006.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Shares | | | Shares | | | | | | | |
| | | | | | | | | | | Underlying | | | Underlying | | | | | | | |
| | | | | | | | | | | Stock | | | RSUs That | | | Total | | | | |
| | | | | | | | | | | Options | | | are Vested | | | Number of | | | | |
| | | Shares | | | Shares | | | Exercisable | | | or Will | | | Shares | | | | |
| | | Owned | | | Owned | | | within | | | Vest within | | | Beneficially | | | Percent of | |
| Name of Beneficial Owner | | Directly | | | Indirectly | | | 60 Days | | | 60 Days | | | Owned | | | Class | |
Directors and Executive Officers: | | | | | | | | | | | | | | | | | | | | | | | | |
| Rolf A. Classon | | | 15,806 | | | | — | | | | 14,800 | | | | 33,598 | | | | 64,204 | | | | * | |
Peter H. Soderberg(1) | | | 63,150 | | | | 25,125 | | | | 392,001 | | | | 6,620 | | | | 486,896 | | | | * | |
| John J. Greisch | | | — | | | | — | | | | — | | | | — | | | | — | | | | 0.0 | % |
| James R. Giertz | | | — | | | | — | | | | — | | | | 833 | | | | 833 | | | | * | |
| Charles E. Golden | | | 3,853 | | | | — | | | | 14,800 | | | | 22,600 | | | | 41,253 | | | | * | |
| W August Hillenbrand | | | 74,277 | | | | 1,078,937 | | | | 72,000 | | | | 12,720 | | | | 1,237,934 | | | | 2.0 | % |
| Ronald A. Malone | | | — | | | | — | | | | — | | | | 7,749 | | | | 7,749 | | | | * | |
| Eduardo R. Menascé | | | — | | | | — | | | | — | | | | 11,138 | | | | 11,138 | | | | * | |
| Katherine S. Napier | | | — | | | | — | | | | — | | | | 836 | | | | 836 | | | | * | |
| Joanne C. Smith | | | 2,000 | | | | — | | | | — | | | | 20,641 | | | | 22,641 | | | | * | |
| Gregory N. Miller | | | 24,622 | | | | — | | | | 129,321 | | | | — | | | | 153,943 | | | | * | |
| Patrick D. de Maynadier | | | 16,362 | | | | — | | | | 184,595 | | | | — | | | | 200,957 | | | | * | |
| C. Jeffrey Kao | | | 7,947 | | | | — | | | | 44,611 | | | | — | | | | 52,558 | | | | * | |
| John H. Dickey | | | 11,364 | | | | — | | | | 113,802 | | | | 1,129 | | | | 126,295 | | | | * | |
| All directors and executive officers as a group (19 individuals) | | | 196,925 | | | | 1,079,379 | | | | 1,008,723 | | | | 111,244 | | | | 2,396,271 | | | | 3.8 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Other 5% Beneficial Owners: | | | | | | | | | | | | | | | | | | | | | | | | |
HealthCor Management, L.P.
152 West 57th Street, 47th Floor
New York, NY 10019 | | | | | | | | | | | | | | | | | | | 4,000,000 | (2) | | | 6.4 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Keeley Asset Management Corp.
401 South LaSalle Street
Chicago, IL 60605 | | | | | | | | | | | | | | | | | | | 3,251,070 | (3) | | | 5.2 | % |
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Name of Beneficial Owner | Shares Owned Directly(2) | Shares Owned Indirectly | Shares Under Options/RSUs Exercisable/ Vesting Within 60 Days | Total Number of Shares Beneficially Owned | Percent of Class | Shares Underlying RSUs/Options Not Yet Beneficially Owned(3) |
Directors and Named Executive Officers: | | | | | | | | | | | | |
Rolf A. Classon | 15,806 | | - | | 55,523 | | 71,329 | | * | | - | |
John J. Greisch | 30,000 | | - | | 51,996 | | 81,996 | | * | | 337,539 | |
James R. Giertz | 2,000 | | - | | 3,377 | | 5,377 | | * | | - | |
Charles E. Golden | 2,713 | | - | | 34,937 | | 37,650 | | * | | - | |
W August Hillenbrand | 92,047 | | 1,035,043 | | 28,624 | | 1,155,714 | | 1.8% | | - | |
Ronald A. Malone | - | | - | | 11,253 | | 11,253 | | * | | - | |
Eduardo R. Menascé | - | | - | | 14,699 | | 14,699 | | * | | - | |
Katherine S. Napier | - | | - | | 4,224 | | 4,224 | | * | | - | |
Joanne C. Smith, M.D. | 2,000 | | - | | 24,362 | | 26,362 | | * | | - | |
Gregory N. Miller (1) | 36,452 | | - | | - | | 36,452 | | * | | - | |
Kimberly K. Dennis | 21,570 | | 442 | | 100,035 | | 122,047 | | * | | 61,281 | |
Susan R. Lichtenstein | 1,000 | | - | | - | | 1,000 | | * | | 57,972 | |
Perry Stuckey III (1) | - | | - | | - | | - | | * | | - | |
Peter H. Soderberg (1) | 63,150 | | 25,125 | | - | | 88,275 | | * | | - | |
Patrick D. de Maynadier (1) | 16,466 | | - | | - | | 16,466 | | * | | - | |
Gregory J. Tucholski (1) | 8,091 | | - | | - | | 8,091 | | * | | - | |
All directors and executive officers as a group (18 individuals) | 184,417 | | 1,040,485 | | 355,250 | | 1,580,152 | | 2.5% | | 732,434 | |
Name of Beneficial Owner | Total Number of Shares Beneficially Owned | Percent of Class |
Other 5% Beneficial Owners: | | |
BlackRock Inc. 40 East 52nd Street New York, NY 10022 | 5,008,978 (4) | 8.0% |
| | | |
*FMR LLC 82 Devonshire Street Boston MA 02109 | 7,093,174 (5) | 11.2% |
| | |
HealthCor Management, L.P. 152 West 57th Street 47th Floor New York, NY 10019 | 4,591,573 (6) | 7.3% |
| | |
Keeley Asset Management Corp. 401 South LaSalle Street Chicago, IL 60605 | 3,546,160 (7) | 5.7% |
| * | Less than 1% of the total shares outstanding. |
| |
| (1) | | Mr.Messrs. Soderberg, resigned as Presidentde Maynadier, Tucholski, Stuckey and Chief Executive OfficerMiller ceased to be executive officers of Hill-Rom effective January 8, 2010. He2010, May 6, 2010, June 1, 2010, November 29, 2010 and December 13, 2010, respectively. Mr. Soderberg continues to serve as a part-time employee of Hill-Rom in the non-executive officer capacity of Chief Innovation Officer. Share ownership for these individuals is based on the most recently available public data, and is not included in the line item “All directors and executive officers as a group”. |
| |
| (2) | Includes shares of common stock purchased under our employee stock purchase plan over the first quarter of fiscal year 2011 and issued December 31, 2010. |
| (3) | Excludes performance based options and stock units previously granted and currently outstanding. |
| (4) | This information is based solely on Schedule 13G filed by BlackRock, Inc. with the SEC on January 29, 2010. |
| (5) | This information is based solely on Schedule 13G filed by FMR LLC with the SEC on July 9, 2010. |
| (6) | This information is based solely on Amendment No. 12 to Schedule 13G filed by HealthCor Management, L.P. with the SEC on February 17, 2009.12, 2010. The Schedule 13G also was filed with respect to all or a portion of such shares by HealthCor Associates, LLC, HealthCor Offshore, Ltd., HealthCor Offshore Master Fund, L.P., HealthCor Offshore GP, LLC, HealthCor Hybrid Offshore, Ltd., HealthCor Hybrid Offshore Master Fund, L.P., HealthCor Hybrid Offshore GP.GP, LLC, HealthCor Group LLC, HealthCor Capital, L.P., HealthCor, L.P. and Joseph Healey, each with the same address as HealthCor Management, L.P., and by Arthur Cohen, 12 South Main Street, #203, Norwalk, CT 06854. |
| |
(3) | (7) | This information is based solely on Amendment No. 1 to Schedule 13G filed by Keeley Asset Management Corp. with the SEC on February 13, 2009.16, 2010. The Schedule 13G also was filed with respect to a portion of such shares by John L. Keeley, Jr., with the same address as Keeley Asset Management Corp. |
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Background
Our “Named Executive Officers” for fiscal year 2009 are Peter H. Soderberg, former President and Chief Executive Officer; Gregory N. Miller, Senior Vice President, Chief Financial Officer and Treasurer; Patrick D. de Maynadier, Senior Vice President, General Counsel and Secretary; C. Jeffrey Kao, President, North America Acute Care; and John H. Dickey, Senior Vice President, Human Resources. Mr. Soderberg resigned as President and Chief Executive Officer effective January 8, 2010 and continues to serve as a part-time employee of Hill-Rom in the capacity of Chief Innovation Officer.Compensation Philosophy
The elements and amounts of the compensation of the Named Executive Officers have been designed and determined by the Compensation and Management Development Committee of our Board of Directors (the “Compensation Committee”) in collaboration with management and approved by Hill-Rom’s Board of Directors.
Objectives and Principles of Hill-Rom’s Executive Compensation Program
The objectives of Hill-Rom’s executive compensation program are to ensure officers and key management personnel are effectively compensated in terms of base salary, variable compensation and other benefits that are internally equitable and externally competitive and advance the long term interests of Hill-Rom’s shareholders. Hill-Rom’s compensation program is designed to reward business performance at enterprise and business unit levels, shareholder value creation and individual performance relative to predefined duties and responsibilities.to:
| | Align management’s interests with those of shareholders; |
| | Motivate and provide incentive for employees to achieve superior results; |
| | Ensure clear accountabilities and provide rewards for producing results; |
| | Ensure competitive compensation in order to attract and retain superior talent; and |
| | Ensure simplicity and transparency in compensation structure. |
Hill-Rom’s compensation program is based on the following guiding principles, which support Hill-Rom’s commitment to maintain a compensation program that fosters performance and the creation of long-term shareholder value:
Aligning management’s interests with those of shareholders;
Motivating and providing incentive for employees to achieve superior results;
Assuring clear accountabilities and providing rewards for producing results;
Ensuring competitive compensation in order to attract and retain superior talent; and
Ensuring simplicity and transparency in compensation structure.
Hill-Rom’s executives’ fixed compensation (which primarily includes base salaries, benefits and limited perquisites), as well as executives’ short-term and long-term performance based compensation at target levels of performance, havehas generally been designed to fall at approximatelytargeted the 50th percentile of compensation paid by companies with which Hill-Rom competes for executive talent. TotalHowever, the Compensation Committee believes that it is critical to retain flexibility in setting compensation is paid above or belowwhen competing for the 50th percentile of the applicable markettop executive talent necessary to grow Hill-Rom’s business and increase stockholder value, and has indicated that it will exceed this target when necessary. In addition, because Hill-Rom utilizes performance-based compensation, in any given year total compensation can vary when pre-established business and/or personal criteria targets are exceeded or are not achieved. Our executives’ short-term and long-term performance based compensation are each expressed as a percentage of their base salaries. Total direct compensation is targeted at the 50th percentile of the applicable market.
Process for Determining Compensation
The Board’s Compensation Committee is charged with ensuring that Hill-Rom’s compensation programs meet the objectives outlined above. In that role, the Compensation Committee makes all executive compensation decisions, administers Hill-Rom’s compensation plans and keeps the Board of Directors informed regarding executive compensation matters. The Compensation Committee, in consultation with Hill-Rom’s compensation consultant and the full Board, determines the compensation of the Chief Executive Officer. The Chief Executive Officer makes
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recommendations to the Compensation Committee regarding the compensation of his direct reports, including Hill-Rom’s other Named Executive Officers. From time to time, Hill-Rom management also provides recommendations to the Compensation CommitteeComm ittee regarding modifications to the elements and structure of Hill-Rom’s compensation program. The process and methodology for determining compensation for the Named Executive Officers is generally consistent for each Named Executive Officer, including the Chief Executive Officer, unless otherwise noted.
The Compensation Committee engages nationally recognized outside compensationconsiders peer group data, survey data and benefits consulting firms (1) to evaluate independently and objectively the effectiveness of and assist with implementation of Hill-Rom’s compensation and benefit programs and (2) to provide the Compensation Committee with additional expertise in the evaluation of Hill-Rom’s compensation practices and of the recommendations developed by management and firms engaged by Hill-Rom. The consultants also provide information and insights relative to current and emerging compensation and benefits practices. From fiscal year 2005 to fiscal year 2008, Ernst & Young served as the Compensation Committee’s compensation consultant. For fiscal year 2009, the Compensation Committee has retained Mercer (US) Inc. (“Mercer”) as its compensation and benefits consulting firm. The Compensation Committee periodically changes its consultant in order to obtain a fresh perspective on executive compensation and benefits. Mercer was selected after interviewing several nationally recognized firms. Criteria for selection included:
Experience within the medical technology sector
Previous experience of Principal Consultant serving as consultant to a committee of the Board of Directors
Key project costs and annual fees
Availability and responsiveness
Mercer provides other consulting services to Hill-Rom, most of which are in the areas of Health & Welfare. The Compensation Committee regularly reviews and approves these services as part of the Committee’s ongoing vigilance as to Mercer’s objectivity.
Among the factors considered by the Compensation Committee inwhen determining the elements and amounts of total compensation are peer group data, survey data, internal pay equity, external market conditions, individual factors, and aggregate compensation.
Peer Group and Survey Data. As one of several factors in considering approval of elements of Hill-Rom’s compensation programs, the Compensation Committee has compared compares Hill-Rom’s compensation programs and performance against an approved peer group of companies. The compensation peer group, which is periodically reviewed and updated by the Compensation Committee, consists of companies that are similar in size and in similar industries as Hill-Rom and with whom Hill-Rom may compete for executive talent.
In May 2009, the Compensation Committee’s compensation consultant, Mercer (US) Inc. (“Mercer”), conducted a review of Hill-Rom’s peer group. After evaluating many potential peer companies against various criteria, including, among others, participation in similar market segments, revenue size, number of employees, total equity value, and comparable published operating and financial metrics, the Board of Directors of the company elected to add additional peer companies for purposes of evaluating the Company’s performance. A key objective in selecting peers was to align Hill-Rom’s planned fiscal year 2009 revenue with the median revenue of its peer companies. Hill-Rom focused on companies whose revenue’s were one-half to two times Hill-Rom’s planned revenue. The 2009Compensation Committee determined to keep the same peer group median revenuefor 2010 as was $1.8 billion and Hill-Rom’s planned revenue was $1.6 billion. Seven additional companies were added (as shown below). Hill- Rom’s 2008 fiscal year Peer Group and 2009 Peer Group are providedselected in the table below:2009.
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| | |
2008 Fiscal Year | | 2009 Fiscal Year |
Apria HealthcarePeer Group Inc. | | Removed From Peer Group1Companies |
| C. R. Bard, Inc. | | C. R. Bard, IncSteris Corporation |
| Beckman Coulter, Inc. | | Beckman Coulter, Inc. |
Becton Dickinson & Co. | | Removed From Peer Group2 |
Conmed Corporation | | Conmed Corporation |
Dentsply International, Inc. | | Dentsply International, Inc |
Hospira, Inc., | | Hospira, Inc., |
Invacare Corporation | | Invacare Corporation |
Kinetic Concepts, Inc. | | Kinetic Concepts, Inc. |
Mettler-Toldeo International, Inc. | | Mettler-Toldeo International, Inc |
Steris Corporation | | Steris Corporation |
Additional Peers ¾¾¾¾¾¾¾¾¾¾®
| | Varian Medical Systems, Inc. |
| Conmed Corporation | PerkinElmer, Inc. |
| Dentsply International Inc. | Inverness Medical Innovations,Alere Inc. |
| Hospira, Inc. | The Cooper Companies, Inc. |
| Invacare Corporation | ResMed Inc. |
| Kinetic Concepts, Inc. | Integra Lifesciences Holdings Corporation |
| Mettler-Toledo International Inc. | Edwards Lifesciences Corporation |
| | |
1 | | Apria Healthcare Group, Inc. was acquired by another company during 2008 and therefore has been removed from the peer group. |
|
2 | | Becton Dickinson & Co. was removed from the peer group this year as its revenues were no longer comparable. |
In addition to peer group data, the Compensation Committee considers survey data that include a broad sample of Fortune 1000 companies, focusing on data regarding companies with revenues within a range of one-half to two times Hill-Rom’s revenue or its business units, companies in the manufacturing industry and companies with a comparable number of full time equivalent employees. The Compensation Committee uses data compiled from various compensation surveys (i.e., consolidated data averaged from at least three surveys) from human resource benefit firms such as Watson & Wyatt, Mercer and others as appropriate. The purpose of the survey data is to provide an additional source of market data to validate the findings under the proxy analysis. In particular, the survey data provide additional data based on the specific job responsibilities of the Named Executive Officers compared to the appropriate market.
Internal Pay Equity
Other Factors. From time to time, the Compensation Committee has examined the relationship between the compensation paid to executives within each pay grade and within Hill-Rom as a whole to avoid any unjustified differences in compensation. In May 2009, the Compensation Committee compared the pay of Hill-Rom’s Chief Executive Officer to the next highest executive and to the average of its four other Named Executive Officers as part of its analysis and approval of the compensation program for fiscal year 2009. In light of this information (coupled with other information reviewed as described in more detail below), the Compensation Committee did not identify issues within this analysis that would warrant any changes in compensation strategy. The Compensation Committee intends to review internal pay equity again in the fall of 2010 as part of a total compensation review for Hill-Rom’s Named Executive Officers.
External Market Conditions and Individual Factors. The Compensation Committee is aware that it cannot establish total executive compensation levels solely on the basis of the median range of competitive benchmark
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survey data without additional analysis. Accordingly, the Compensation Committee also takes into account external market conditions and individualinternal factors when establishing the total compensation of each executive. Some of these factors include the executive’s length of service, the level of experience and responsibility, external market conditions, complexity of position, individual performance, internal pay equity within Hill-Rom and the degree of replacement difficulty.
Aggregate Compensation. For Named Executive Officers of Hill-Rom, the Compensation Committee has considered the aggregate value of base salary, short-term incentive compensation at target level and the estimated value of long-term incentive compensation. The Compensation Committee has compared the aggregate amount of these elements of compensation for the Named Executive Officers to the aggregate amount of the same elements of named executive officer compensation at other companies using peer group and survey data and targeted aggregate compensation of Hill-Rom’s Named Executive Officers at median levels.
In addition, the Compensation Committee periodically reviews the total compensation of Hill-Rom’s Named Executive Officers in comparison to the total compensation of its peer group companies, in each case as reported under the SEC’s disclosure rules for executive compensation.companies. The purpose of this high level review wasis to look at all elements of compensation that are not typically captured within a total direct compensation analysis covering base salary, annual incentive, and long term incentive compensation and, if there were significant differences, to understand what elements of compensation gave rise to the differences. Based on its total compensation review, the
Compensation Committee found that in aggregate, Hill-Rom’s Named Executive Officers target total direct compensation opportunity levels for fiscal year 2009 were between median and 75th percentile levels due to the previous use of stock options that contained performance-based vesting criteria, which resulted in larger equity grants. As discussed below, the 2010 long-term incentive program has been redesigned to provide total compensation packages that are, in aggregate, generally in line with market median levels.Consultant
The Compensation Committee has scheduled an updated totalengages nationally recognized outside compensation review forand benefits consulting firms to evaluate independently and objectively the effectiveness of and assist with implementation of Hill-Rom’s Named Executive Officers for the fall of 2010.
As a supplemental analytical tool for the review of the total compensation of the Named Executive Officers,and benefit programs and to provide the Compensation Committee with additional expertise in the evaluation of Hill-Rom’s compensation practices. During the fiscal year ended September 30, 2010, the Compensation Committee retained Mercer as its compensation and benefits consulting firm.
Mercer also provides other consulting services to Hill-Rom, most of which are in the areas of Health & Welfare. The decision to retain Mercer for these other services was made at the recommendation of Hill-Rom’s management, however the Compensation Committee regularly reviews and approves these services as part of its ongoing vigilance as to Mercer’s objectivity. In fiscal year 2010, we paid Mercer approximately $163,000 for work related to executive compensation, $15,000 for other consulting services, and $796,000 for administrative services related to our health and welfare benefits.
Risk Assessment of Compensation Policies and Practices
With Mercer’s assistance, the Compensation Committee reviewed tally sheets forour material compensation policies and practices applicable to our employees, including our executive officers, and concluded that these policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Named Executive Officers in December 2008 and 2009.Company. The tally sheets provided information not only relative to the total compensationkey features of the Named Executive Officers, but also provided information on how changing one elementexecutive compensation program that support this conclusion include:
| | appropriate pay philosophy, peer group and market positioning; |
| | effective balance in cash and equity mix, short and long term focus, corporate, business unit and individual performance focus and financial and non-financial performance measurement and discretion; |
| | compensation programs designed to avoid excessive risk-taking; and |
| | meaningful risk mitigants, such as the stock ownership guidelines and executive compensation recoupment policies. |
Elements of Executive Compensation
The three major components of Hill-Rom’sHill-Rom’s executive officer compensation are: (1) base salary, (2) variable cash incentive awards and (3) long-term, equity-based incentive awards. Each component of the program, was developed in a “building block” approach, withas well as the objective of developing a compensation package based on each element being competitive, based on peer group proxy statement and survey data, while also being competitiveprogram as a whole.whole, is designed to be competitive with our peers.
Base Salary. Hill-Rom provides senior management with a fixed level of cash compensation in the form of base salary that is competitive and consistent with their skill level, experience, knowledge, length of service with Hill-Rom, and the level of responsibility and complexity of their position. Base salary is intended to aid in the attraction and retention of talent in a competitive market. Base salary is generally targeted at the market median although actual salaries may be higher or lower as a result of various factors, including length of service, the level of experience and responsibility, complexity of their position, individual performance, internal pay equity within Hill-Rom and the degree of difficulty in replacing the individual. individua l.
The base salaries of senior management are reviewed by the Compensation Committee on an annual basis, generally during the first quarter of the fiscal year, as well as at the time of promotion or significant changes in responsibility. Executives are typically eligible for merit basedbase salary increases based on prior year performance.individual performance, as well as market benchmarking that helps the Compensation Committee assess the Company’s competitiveness for talent. Individual performance is determined by use of a broad basedan internal performance management system, which differentiates individual achievement. PerformanceMarket benchmarking is ranked on a scale that ranges from “unacceptable”done via the Compensation Committee’s independent consultant, as well as with reference to “outstanding,” with a corresponding range of possible merit based increases in base salary. When adjusting base salaries,publicly reported compensation data. For fiscal year 2011, the Compensation Committee also considersgranted merit increase s in the effectsamounts of $100,000, $8,300, and $11,880, for each of Mr. Greisch, Ms. Lichtenstein and Ms. Dennis, respectively. The increases reflect the Committee’s assessment of the adjustment
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on other elements of compensation that may be tied to or related to base salary, including annual cash incentive awards, pension and retirement plan benefits and severance and change in control benefits.
The Named Executive Officers 2009 target merit increase was 3.0%, effective January 1, 2009. Beginning on this date, the base salaries paid to each of our Named Executive Officers was: Mr. Soderberg $840,000, Mr. Miller $400,000, Mr. de Maynadier $363,000, Mr. Dickey $268,000, and Mr. Kao $340,000.
The base salary paid to each of our Named Executive Officersexecutives’ performance during the fiscalpreceding year, ended September 30, 2009 is set forth inas well as the Summary Compensation Table under “—CompensationCommittee’s consideration of Named Executive Officers” below. In recognition of the challenges in the global economy and its impact on our business, Management recommended and the Compensation Committee decided that the Named Executive Officers will not receive merit increases normally scheduledmarket benchmarking for January, 2010. With the exception of Mr. Kao, no changes were made to the base salaries of any of our Named Executive Officers for fiscal year 2010. Mr. Kao was awarded a market adjustment of $40,000 effective October 1, 2009.similarly placed executives.
Annual Cash Incentives
Overview. The payment of annual cash incentives is formula-based, with adjustments for achievement of individual performance goals, and is governed by Hill-Rom’s Short-Term Incentive Compensation Plan (“STIC Plan”). The objective of the STIC Plan is to provide a total level of cash compensation that is heavily weighted on the achievement of internal performance objectives, which takes into consideration the competitive market median of total cash compensation.
The STIC Plan provides for individual short-term incentive compensation payouts ranging up to a maximum of two times the executive’s short-term incentive compensation target opportunity (set forth below) depending upon achievement of (1) Company-wide goals and (2) on individual goals specific to the officer’s area of responsibility, such as sales, operating income, cash flow, and demonstrated management and leadership, as appropriate. The individual goals are both qualitative and quantitative in nature and, therefore, the evaluation of performance against those objectives by the Compensation Committee is, designed to motivate executives to perform and meet company and individual objectives, with significant compensation at risk. The program provides a mechanism to pay amounts above the market median of (50th percentile) total cash compensation when Hill-Rom experiences above average financial success, is designed to encourage high individual and group performance and is based on the philosophy that employees should share in the success of Hill-Rom if above average value is created for Hill-Rom shareholders. The potential to be paid significant awards plays an important role in the attraction and retention of executives.part, subjective.
Pool
STIC Funding Percentage. Under the terms of the STIC Plan, the Compensation Committee establishes a STIC Plan pool each year that will be funded based upon the achievement of pre-established performance objectives. The STIC Plan pool is funded at 100%between 30% and 150% of aggregate target opportunities when performance is at target levels and is funded at 150% for maximum performance. In the event that minimum financial performance objectives are not met, the pool is funded at 30% in order to provide the CEO a poolopportunities.
The 20092010 STIC Plan pool was funded by operating income and by revenues generated within Hill-Rom. For fiscal year 2009,2010, the targets were:
| | | | | | | | |
| | Target | | | Weight | |
Revenue | | $ | 1,558 million | | | | 25 | % |
| Operating Income | | $ | 138133.0 million | | 75% |
| Revenue | $1,472.5 million | | 75 | %25% |
The objectives are set with the intention that the relative level of difficulty in achieving the targets is consistent from year to year. In fiscal year 2006, Hill-Rom’s consolidated performance achievement was slightly below target. In fiscal year 2007, achievement by Hill-Rom was above the minimum financial performance objectives but below target. In fiscal year 2008, achievement by Hill-Rom was slightly above target.
The Compensation Committee has the discretion to exclude from the calculation of applicable revenue and operating income targets for purposes of funding STIC Plan pools, nonrecurring special charges and amounts. A list
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of categories of adjustments which may be considered was initially reviewed and approved by the Compensation Committeeaddition, in 2005 and generally includes items such as significant litigation and settlement costs; restructuring charges; changes in accounting policies; acquisition and divestiture impacts; and major unbudgeted material expenses incurred by or at the direction of the Board. The list is reviewed annually and in December 2009 the Compensation Committee clarified, consistent with past practices, that acquisition and divestiture impacts include incremental or foregone revenues and operating income from acquisitions or divestitures, respectively,order to encourage management to take actions in the best interests of Hill-Rom, the Company.
Compensation Committee has the discretion to exclude nonrecurring special charges and amounts from the calculation of these targets. At its December 3, 2009November 15, 2010 meeting, the Compensation Committee reviewed the adjusted financial performance of Hill-Rom against the predetermined financial targets and determined that Hill-Rom failed to achieve its revenue target but exceeded thresholdbased on our performance for operating income. The resulting achievement for funding ofin fiscal year 2010, the Hill-Rom pool for fiscal 2009,STIC Funding Percentage was 48.2% of target.137.2%.
Individual STIC Performance. The Compensation Committee had theuses its discretion to exercise negative discretion and reduce the financial performanceassess achievement but chose not to do so.
of individual goals. Such assessment yields an Individual STIC PercentagePerformance percentage, which may be above or below 100%.
STIC Target Opportunity. For fiscal 2009, minimum,2010, the CEO target and maximum opportunities for the Named Executive Officers as a percentage of fiscal year 2009 wages were as follows:
| | | | | | | | | | | | | |
| | | Minimum | | | Target | | | Maximum | |
| Mr. Soderberg | | | 0 | % | | | 100 | % | | | 200 | % |
| Mr. Miller | | | 0 | % | | | 50 | % | | | 100 | % |
| Mr. de Maynadier | | | 0 | % | | | 50 | % | | | 100 | % |
| Mr. Dickey | | | 0 | % | | | 50 | % | | | 100 | % |
| Mr. Kao | | | 0 | % | | | 50 | % | | | 100 | % |
The STIC Plan provides for individual short term incentive compensation payouts ranging up to a maximum of two times the executive’s short term incentive compensation target opportunity set forth above depending upon achievement of applicable Pool Funding and personal performance objectives (measured by a personal performance multiplier from 0% to 150%) determined, in the case of the President and Chief Executive Officer of Hill-Rom by the Compensation Committee, and, in the case of other Named Executive Officers and other employees, by the President and Chief Executive Officer of Hill-Rom and approved by the Compensation Committee. Individual performance is measured using the same performance factors used for determining merit based increases in base salary. Those personal performance factors are based on achievement of personal performance goals established for each individual, including each of the Named Executive Officers, at the beginning of each fiscal year. Those goals are both qualitative and quantitative in nature and, therefore, the evaluation of performance against those objectives by the Compensation Committee is, in part, subjective. Additionally, the Compensation Committee evaluates individual performance against objectives that arise during the course of the applicable fiscal year that were not considered when individual goals were determined at the beginning of the year.
For 2009, the individual performance objectives established at the beginning of the year for our Named Executive Officers included the following:
| • | | Peter H. Soderberg: Deliver financial results at or above expectations; improve product and service development execution; oversee Liko integration and realization of promised value; review and fix or dispose of portfolio assets that are dilutive to our financial performance and/or strategic directions; advance Hill-Rom’s compliance culture; develop the shareholder base by continuing to provide clear and credible messages and transparent communications; continue to develop the top two management layers of the organization to assure we have a high performing team, strong teamwork, and demonstrated depth.
|
| • | | Gregory N. Miller: execute on fiscal year 2009 business plan and deliver “on-flight path” 2010 budget; progress development of continuous improvement and individual development initiatives; achieve operational excellence objectives; provide financial leadership for business development and M&A activities; and institutionalize strategic enterprise risk management processes.
|
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| • | | Patrick D. de Maynadier: enable achievement of fiscal year 2009 operating income plan and adherence to the flight path for the fiscal year 2010 forecast; provide value added support for business development and related alliance and acquisition and divestiture activities; lead execution of compliance infrastructure improvements, tighten processes with respect to risk identification, aggressively and cost effectively manage litigation/claims management; continue to support the Board of Directors in its evaluation of and modifications to key governance practices; and develop a comprehensive and differentiated corporate social responsibility program.
|
| • | | C. Jeffrey Kao: deliver on fiscal year 2009 business plan objectives and deliver an “on-flight path” 2010 plan; create innovative business processes and ideas in uncertain economic times; enhance North America Acute Care teamwork; and stabilize market share.
|
John H. Dickey: align the human resources function with our fiscal year 2009 strategic plans and budget; align the human resources team to support strategic focus on people, processes and culture; achieve successful execution of operating expense reductions, assist with the integration of the Liko acquisition; enhance the management and leadership talent within the organization; create and sustain an ownership culture within the organization; and assist the Board of Directors and the Compensation Committee in carrying out their duties through providing human resources expertise.
After considering personal performance against the goals described above and other objectives that arose during the course of the year, and Company and business unit financial performance, the Compensation Committee awarded short-term incentive compensation to our Named Executive Officers for fiscal 2009 as set forth in the Summary Compensation Table under “—Compensation of Named Executive Officers” below.
The following table provides information for the calculation of annual cash incentives. As described above, Mr. Soderberg’s target short term incentive compensation opportunity for fiscal 2009 was 100% of fiscal year 2009 wagesbase salary and 50% or $840,000. Based on the performance levels described above60% of base salary for Hill-Rom, the Hill-Rom pool was funded at 48.2% of target opportunity. Thus, the financial performance modifier for Mr. Soderberg and all Hill-Rom employees, including the other Named Executive Officers, based on these funding levels was 48.2%. Based on his individual performance, Mr. Soderberg received an individual performance modifier of 115%Officers.
STIC Payment Calculation. The Compensation Committee determined that despite a challenging year in which providers of capital equipmentfinal STIC Plan payment to U.S. hospitals, like Hill-Rom, were disproportionately impactedany individual is calculated by multiplying the credit crisis and recessionary economic environment,(a) the STIC Funding Percentage by (b) the Individual STIC Performance by (c) the STIC Target Opportunity by (d) base salary.
Changes for FY 2011. Assuming approval by our shareholders at the 2011 annual meeting, all Named Executive Officers’ individual performance modifiers were above average. In fiscal year 2009, Hill-Rom achieved substantial increasesOfficers will participate in year over year gross margins and cash flow from operations as well as year over year reductions in operating expense. In addition, the Named Executive Officers’ achieved above average performance on their individual objectives as outlined above. The final short-term incentive compensation payout, as outlined in the table below, is reflective of each Named Executive Officer’s individual performance and Hill-Rom’s financial performance and pool funding level of 48.2%.
| | | | | | | | | | | | | | | | | | | | | |
| | | Fiscal | | | | | | | | | | | | | |
| | | Year 2009 | | | Target | | | Individual | | | Financial | | | STIC | |
| | | Wages | | | Percentage | | | Performance | | | Performance | | | Payout | |
| Mr. Soderberg | | $ | 840,000 | | | | 100 | % | | | 115 | % | | | 48.20 | % | | $ | 465,612 | |
| Mr. Miller | | $ | 395,178 | | | | 50 | % | | | 115 | % | | | 48.20 | % | | $ | 109,524 | |
| Mr. de Maynadier | | $ | 360,649 | | | | 50 | % | | | 110 | % | | | 48.20 | % | | $ | 95,608 | |
| Mr. Dickey | | $ | 263,704 | | | | 50 | % | | | 110 | % | | | 48.20 | % | | $ | 69,908 | |
| Mr. Kao | | $ | 340,000 | | | | 50 | % | | | 110 | % | | | 48.20 | % | | $ | 90,134 | |
Changes for fiscal year 2010. For fiscal year 2010, Mr. Miller, Mr. Kao, and Mr. de Maynadier’s short term incentive compensation target opportunity will increase to 60% of base salary. This increaseour Incentive Plan (as described previously under Proposal No. 4), which is designed to target market median short term incentive opportunity as determined bycomply with the analysis completed by Mercerrequirements of our peer group’s target short term incentive opportunities.
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In addition, Mr. Kao and other senior North America Acute Care executives will participate in a one-time fiscal year 2010 cash incentive program designed to incentivize market share gain against key competitors. For Mr. Kao, this cash incentive program has an award range with two thirds of any earned award being paid in December of 2010 and the remaining one third being paid in December of 2011 if market share gains are maintained. We are not disclosing the identity of the competitors or the metrics used to measure market share gain because of the competitive harm that could result from such disclosure.
Section 162(m). Section 162(m) of the Internal Revenue Code (the “Code”) limits tax deductibility of certain1986 for performance-based compensation. The Incentive Plan provides for a maximum award equal to 2.0% of our EBITDA (as adjusted) for our CEO and 1.0% for each other named executive compensationofficer. However, in excess of $1 million per year unless certain requirementsdetermining actual awards made under the plan, the Compensation Committee has the discretion to, and has indicated its expectation that it will, pay actual awards which are met. Section 162(m) was considered in developinglower than the maximum awards.
We anticipate that the Compensation Committee will use this “negative discretion” to reduce these maximum awards by such amounts as are necessary to provide final award payments to plan participants that are consistent with award payments that would otherwise be made under Hill-Rom’s STIC Plan, but Hill-Rom preferred to retainPlan.
To accomplish this, the flexibility of upward discretion. As a result,Compensation Committee will utilize target awards under the STIC Plan do not satisfy the performance based exception under Section 162(m) and therefore are subject to Section 162(m) and included in the $1 million dollar compensation cap in the year the awards are included in taxable incomefor each of the recipient.plan participants that are generally unchanged from fiscal year 2010, 100% of base salary for the CEO and 50% to 75% of base salary for all other participants. These target awards will then be adjusted upwards or downwards based on Company and individual goals and measures. For fiscal year 2011, the Company determined goals and measures will be based on revenue, adjusted earnings per share, and cash flow return on invested capital. The individual goals and measures will be goals specific to the officer’s area of responsibility, such as sales, operating income, cash flow, and demonstrated management and leadership, as appropr iate.
Long-Term Equity Awards
Overview:Hill-Rom’s Stock Incentive Plan which was approved by Hill-Rom’s shareholders in 2002 and was amended in 2009, provides for the opportunity to grant stock options and other equity-based incentive awards to officers, other key employees and non-employee directors to help align those individuals’ interests with those of shareholders, to help motivate executives to make strategic long-term decisions, and to better enable Hill-Rom to attract and retain capable directors and executive personnel.
The fiscal year 2008 and fiscal year 2009 long-term incentive grants for the Named Executive Officers consisted
Equity Awards Granted in Fiscal 2009 for Fiscal 2008 Performance
Service Based Equity Awards.These equity based awards were granted to executive officers in December 2008 based on a multiple of the executive officer’s annual base salary. The awards could range from 0% to 200% of base salary, with a target of 100% of base salary, for Named Executive Officers other than the CEO. The awards for the CEO could range from 0% to 480% of base salary, with a target of 240% of base salary. Hill-Rom elected to use a process based on multiples of base salary for determining equity awards in order to more accurately target market median compensation levels and to have a clear and simple means of comparing equity awards to other elements of compensation. The target award amount was determined by the Compensation Committee to be competitive market median. These service-based awards consisted of a blend of stock options and deferred stock shares that all vest ratably over a four-year period.
Performance Based Equity Awards. During the first quarter of fiscal 2009, Hill-Rom granted performance based stock options to key employees, including each of our Named Executive Officers. Each award was divided evenly into two separate grants. The first grant, representing 50% of the total award, vests based on three-year performance targets related to cumulative revenue and cumulative earnings per share. The second grant, representing the other 50% of the total award, vests based on three-year performance targets related to relative total shareholder return. All other terms of the two grants are the same. If the performance goals are met at the maximum level, these performance based stock option awards will fully vest at the end of fiscal 2011.
Mr. Soderberg’s performance based stock option awards are a combination of stock options, up to the annual individual stock option limit under our Stock Incentive Plan, and performance based deferred stock shares, representing the excess dollar amount of options over that limit. However, under each award, all performance based stock options must vest prior to the vesting of the performance based deferred stock shares.
Other Equity Based Compensation. In addition to the equity awards described above, senior management may from time to time receive additional equity based compensation at the date of hire, upon promotion, for special recognition, upon a significant change in responsibility, or to incentivize specific non-financial objectives. These
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awards are often used as a recruiting and retention tool. These grants are typically in the form of stock options or deferred stock shares and are typically granted as a percentage of the respective employee’s base salary. Mr. Kao received a grant of 7,114 performance based deferred stock shares on December 2, 2008 in lieu of any award under the STIC Plan for fiscal 2008. Vesting of the award on December 3, 2009 was based on Mr. Kao’s continued employment and achievement of certain one-year non-financial performance criteria. The award vested in full on December 3, 2009. There were no other such awards made to the Named Executive Officers during fiscal year 2009.
All equity awards granted to the Named Executive Officers during fiscal 2009 are reflected in the Grants of Plan Based Awards for Fiscal Year Ended September 30, 2009 table under “—Compensation of Named Executive Officers” below
Performance Based Equity Awards Granted for Fiscal 2007 to Fiscal 2009 Performance
In April 2007, Hill-Rom granted performance based deferred stock shares to its executive officers including the Named Executive Officers. The deferred stock shares vest based on the achievement of one-year, two-year, and three-year performance targets related to cumulative revenue, cumulative operating income and return on assets employed and corresponding service requirements. Full vesting occurs if all of the three year targets are met. When all annual targets are met, 20% vest in year one, 20% vest in year two, and 60% vest in year three. The year one performance targets related to fiscal 2007 performance were not achieved and no interim vesting occurred. The year two cumulative revenue target related to fiscal 2008 performance was achieved and a portion of the grant related solely to revenue attainment vested at the end of fiscal 2008. The other performance targets (i.e., return on assets employed and operating income) were not met and no vesting for those measures occurred. The following performance targets related to fiscal year 2009 performance were not achieved and no vesting occurred:
| | | | |
• Cumulative Revenue (2007 – 2009)
| | $4,391 million |
| | | | |
• Cumulative Operating Income (2007 – 2009)
| | $444.3 million |
| | | | |
• Return on Assets Employed (2009)
| | 21.0% |
At the end of fiscal 2009, management determined that the targets of this performance based equity award were not achieved and upon approval of the Compensation Committee at its December 3, 2009 meeting, all unvested restricted stock units related to this performance grant were forfeited.
Fiscal Year 2010 Long-Term Incentive Awards for Fiscal Year 2009 Performance
In September 2009, the Compensation Committee with support from its compensation consultant, Mercer, modified Hill-Rom’s long-term incentive compensation program to provide a portfolio approach to long-term incentives. The objectives of the redesign were to:
Provide awards, at target, that are aligned with competitive market levels;
Provide payouts that correlate with high performance resulting in increased payouts and low performance resulting in reduced payouts;
| · | Provide awards, at target, that are aligned with competitive market levels; |
Provide a mix of awards representative of typical market practice; and
| · | Provide payouts that correlate with high performance resulting in increased payouts and low performance resulting in reduced payouts; |
Provide awards that support internal equity among Hill-Rom’s executives.
| · | Provide a mix of awards representative of typical market practice; and |
| · | Provide awards that support internal equity among Hill-Rom’s executives. |
In addition the Compensation Committee considered the Stock Incentive Plan burnshare usage rate, number of plan participants and potential aggregate target awards for participants in the process of determining target awardsaward levels and the mix of long-term incentive awards.
Fiscal
Awards made in fiscal year 2010 target award levels aswere a percentagecombination of base salarystock options, restricted stock units (“RSUs”) and award typesperformance stock units (“PSUs”). Awards made in fiscal year 2011 were a combination of stock options and PSUs for Mr. Miller, Mr. Kao, Mr. de Maynadier,the Named Executive Officers, and Mr. Dickey are as follows:
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| | | | | | | | | | | | | | | | | |
| | | Target LTI | | | Distribution of Award | |
| | | Award As | | | | | | | Deferred Stock | | | Performance | |
| | | % of Base | | | Stock Options | | | Shares | | | Share Units | |
| Mr. Miller | | | 175 | % | | | 30 | % | | | 40 | % | | | 30 | % |
| Mr. Kao | | | 175 | % | | | 30 | % | | | 40 | % | | | 30 | % |
| Mr. de Maynadier | | | 120 | % | | | 30 | % | | | 40 | % | | | 30 | % |
| Mr. Dickey | | | 120 | % | | | 30 | % | | | 40 | % | | | 30 | % |
a combination of stock options, RSUs and PSUs for others. The long-term incentive award program provides for awards ranging up to a maximum of two times the executives target long-term incentive award as a percentage of base salary as set forth above depending on achievement of personal performance objectives and overall business performance.
See “—Employment Agreements” below for a discussion of awards made to Mr. Soderberg
Stock Options and related matters pursuant to the letter agreement entered into with Mr. Soderberg to address CEO succession.
Stock Options:These awards represent an opportunity to purchase a specific number of shares of Hill-Rom stock at a specific price (“exercise price”) during a 10 year period of time. Stock option exercise prices are the average of the high and low prices of Hill-Rom common stock on the date of grant, which is the date the award is approved by the Compensation Committee. Prior to December 2008, stock options typically have vested in three equal annual installments on each of the first three anniversaries of the date of grant. Beginning with the awards granted in December 2008, the Compensation Committee changed the standard vesting terms of stock option so that stock options vest in four equal annual installments on each of the first four anniversaries of the date of grant.
Deferred Stock Shares:These awards, otherwise known as restricted stock units, represent a commitment to deliver shares of Hill-Rom stock upon the completion of a time-based vesting period. Effective in December 2008, the Compensation Committee set the vesting terms of deferred stock shares to vest fifty percent on the day after the second anniversary of the grant and twenty-five percent each on the day after the third and forth anniversaries of the grant.RSUs. In December 2009, the Compensation Committee modifiedrevised the standard vesting terms of deferredour stock sharesoption and RSU award agreements going forward to mirrorprovide for vesting in four equal annual installments beginning on the vestingfirst anniversary of the date of grant for stock options (four equal annual installmentsand beginning on the day after the first anniversary of the date of grant). This change was madegrant for RSUs. Prior to bring Hill-Rom’s practices more in line with thosethis time, the Compensation Committee used a variety of its peers and to simplify communication and accounting with respect to these awards. These awards are entitled to quarterly dividend reinvestment and are subject to any stock dividends, stock splits, and other similar rights inuring to common stock but they do not confer voting rights.vesting schedules, depending on the award.
If an executive does not perform satisfactorily and is terminated before fully vesting in a stock option or deferred stock share award, he or she forfeits any unvested portions of the respective award unless certain early vesting conditions are met as a result of a change in control, death, disability or retirement as described in more detail under “—Retirement, Change in Control Agreements and Severance” below.
Performance Based Share Units.Units or PSUs.These awards provide the opportunity to earn shares of Hill-Rom stock based on achievement of performance objectives and completion of a time based vesting period. For the performance based share unitPSU awards granted in fiscal year 20102011 for the three year performance period of fiscal year 20102011 to fiscal year 2012,2013, vesting is based on the achievement of three independent one-yearrelative total shareholder return (“TSR”), a stock performance targets and a time based vesting period that corresponds with the three-year performance period (i.e., date of grant to end of the fiscal year 2012). One-third of the awards is linked to performance in each of the three years in the performance period; accordingly, if the performance targets are achieved in any one year, the portion of the award linked to that year’s performance will vest regardless of performance in any other year, provided that the participant continues to be employed by the company at the end of the three-year period.
Performance measures and targets are established annually for a one year period by the Compensation Committee in the first quarter of the fiscal year. For fiscal year 2010 the Compensation Committee determined that free cash flow (50%) and earnings per share (50%) were the most appropriate performance targets. The performance measures were chosenmetric based upon the importance of these objectives in the achievement of Hill-Rom’s strategic plan, providing quality earningsshare price appreciation and creatingdividends paid to our shareholders. The ultimate PSU value for Hill-Rom’s stockholders.
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In setting performance targets, Hill-Rom considered the performance of its peer group, market indices and customer base. The fiscal year 2010 performance goals were set at levels consistent with published guidance.
These performance measures are subject to adjustment by the Compensation Committee based upon unusual or extraordinary items that were not contemplated when the performance measures were set and are out of the control of management. These items are generally the same as those that are excluded in the calculation of performance measures for purposes of short-term incentive compensation.
Final performance share unit awards will vary based on achievement of performance targets and can range from 0% to 200% of target award level. Upon certificationthe targeted amount, depending on H ill-Rom’s TSR during the performance period as compared to a peer group of performance achievementother companies. This peer group is comprised of mid-cap medical technology companies and completionincludes, but is not limited to, the companies used to evaluate our overall compensation levels.
Share Ownership Guidelines. In order to drive the long-term performance of the service requirements, the awards will be vested.
Performance based share units are subject to any stock dividends, stock splits, and other similar rights inuring to common stock but, unlike the time based deferred stock shares described above, are not entitled to quarterly dividend reinvestment.
The portfolio equity awards granted in fiscal year 2010 to the Named Executive Officers for fiscal year ending September 30, 2009 performance are set forth in the following table.
| | | | | | | | | | | | | |
| | | Stock | | | Deferred Stock | | | Performance | |
| | | Options | | | Shares | | | Share Units | |
| Mr. de Maynadier | | | 18,541 | | | | 8,241 | | | | 6,181 | |
| Mr. Dickey | | | 12,444 | | | | 5,531 | | | | 4,148 | |
| Mr. Kao | | | 25,731 | | | | 11,436 | | | | 8,577 | |
| Mr. Miller | | | 27,086 | | | | 12,038 | | | | 9,029 | |
Other Equity Based Compensation. In addition to the equity awards described above, Mr. Miller received a one time grant of 8,599 deferred stock shares on December 3, 2009 to bring Mr. Miller’s total direct compensation closer to market total direct compensation for his position and level of responsibility. The award will vest in four equal annual installments on the day after the first, second, third, and fourth anniversaries, respectively, of the date of grant.
The Compensation Committee granted all annual long-term incentive awards, as referenced above, at its December 3, 2009 meeting following the certification of Hill-Rom’s financial results from the immediately preceding fiscal year, regardless of the current trading price of Hill-Rom’s equity.
Share Ownership Guidelines. To create an ongoing personal financial stake in Hill-Rom’s success for each officer, further align the interests of the officers and Hill-Rom’s shareholders and motivate officers to maximize shareholder value, Hill-Rom’s Board of Directors has adopted guidelines that require itsCompany, executive officers are required to maintain specified stock ownership percentages.
All executive officers and designated members of managementown a certain amount of Hill-Rom are expected to own shares of Hill-Rom common stock. Specifically, ourThe Chief Executive Officer his executive officer direct reports, including the Named Executive Officers, from and after the later to occur of (1) February 13, 2006 or (2) the date on which any such individual first became an officer of Hill-Rom or any of its subsidiaries (“Start Date”) areis required to hold sharesachieve ownership of Hill-Rom common stock or equivalents described belowvalued at four times annual base salary. Each of the following levels (“Required Ownership Level”):
| | |
| | Required Ownership Level |
Position | | (Expressed as Base Annual Salary Multiple) |
Chief Executive Officer | | 4 x Base Annual Salary |
Other Named Executive Officers | | 2 x Base Annual Salary |
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other executive officers is required to achieve ownership of Hill-Rom common stock valued at two times annual base salary, in each case within five years of becoming an executive officer. Shares owned outright (including vested deferred shares) and deferred stock shares, whether vested or unvested, count as share equivalents towardstoward the Required Ownership Level. The Required Ownership Level must be achieved within five years fromrequired ownership level. This requirement, like the Start Date. Failure to achieve or maintain the Required Ownership Level may result in (1) the applicable individual being required to hold all after tax vested deferred stock sharesExecutive Compensation Recoupment Policy discussed below, helps ensure long-term focus and after-tax shares acquired upon exerciseappropriate levels of stock options or (2) suspension of future restricted stock or deferred stock share grants until the Required Ownership Level is achieved. The Compensation Committee (or its designee) may make exceptions, in its (his or her) sole discretion, in the event of disability or great financial hardship.risk-taking by executive officers.
Hill-Rom has implemented separate stock ownership guidelines for its non-employee directors, which are described above under “Corporate Governance—Stock Ownership Guidelines for Directors and Executive Officers.”
Section 162(m). The Stock Incentive Plan is designed to provide for the grant of awards that meet the requirements of Section 162(m) of the Code and also enables the Compensation Committee to grant awards that do not satisfy the performance based pay exemption under the Section 162(m) requirements. For example, time-based vested deferred stock share awards do not satisfy the performance based exception under Section 162(m) and therefore are subject to Section 162(m) and included in the $1 million dollar compensation cap in the year the awards are included in taxable income of the recipient. However, performance based equity awards and stock options do qualify for exemption under Section 162(m).
Hill-Rom’s Compensation Recoupment Policy.Effective inIn December 2009, our Board of Directors adopted an Executive Compensation Recoupment Policy. Under the Policy,policy, the Compensation Committee can recoup from an executive officer all performance-based compensation and any trading profits on any Company security trades for executive officers (i.e., officers subject to Section 16 ofin Hill-Rom securities received during the Securities Exchange Act of 1934) would be subject to recoupment by Hill-Romprior 24 months in the event there is a material restatement of financial results due to misconduct of the individual executive officer(s)officer from whom recoupment is sought. The Policy which applies prospectively from its effective date, gives the Compensation Committee discretion to determine whether and to what extent to seek recoupment under the Policy based on specific facts and circumstances.
All performance-based compensation,i.e., cash awards under STIC Plan
Retirement and performance-based (but not time based) stock options and deferred stock shares awarded under Stock Incentive Plan (and similar awards under future plans) and trading profits received during the 24-months prior to the disclosure of the restatement are covered under this policy.
Retirement, Change in Control Agreements and Severance
Overview. Hill-Rom believes that it is in the best interests of it and its shareholders to have the unbiased dedication of its executives, without the distraction of personal uncertainties such as retirement or a change in control. Hill-Rom has designed its senior management retirement and other post-employment benefit programs to reduce such distraction. Hill-Rom believes that its programs allow for a “smooth” transition in the event of retirement or a change in control without providing “windfall” benefits to management. ItWe also believesbelieve that these benefits are at market levels and competitive with those of other comparable companies. In addition to our Company-wide retirement programs (including our 401(k) and pension plan, which has stopped taking new entrants), we have several other programs in place.
The components of Hill-Rom’s retirement benefits program are as follows:
Normal Retirement Guidelines
Deferred Compensation Program
Supplemental Executive Retirement Plan
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Change in Control Agreements
Normal Retirement Guidelines. Executives currently employed, including the Named Executive Officers who are at least 55 years of age and with 5 years length of service are eligible to receive certain benefits under Hill-Rom’s Stock Incentive Plan. These guidelines are incorporated into each individual equity award agreement and have been approved by the Compensation Committee. The following is allowed:
accelerated vesting of outstanding time-based deferred stock awards and stock options, which have been held for at least one year;
partial vesting of outstanding performance based deferred stock awards, which have been held for at least one year and for which performance objectives have been achieved; and
| · | accelerated vesting of outstanding time-based RSUs and stock options, which have been held for at least one year; |
an extension of up to three years of the time to exercise eligible outstanding stock options.
Executive Deferred Compensation Program. Under the Hill-Rom Holdings, Inc. Executive Deferred Compensation Program (the “Deferred Compensation Program”) certain executives, including the Named Executive Officers, who are chosen by the Compensation Committee may elect to defer all or a portion of their base compensation, payments under the STIC Plan and certain other benefits to be paid in years later than when such amounts are due. As of September 30, 2009, none of the Named Executive Officers participate or have balances in the Deferred Compensation Program. | · | partial vesting of outstanding PSUs and/or performance-based stock options, which have been held for at least one year and for which performance objectives have been achieved; and |
Pension Plan. The Hill-Rom Holdings, Inc. Pension Plan (the “Pension Plan”) covers officers and other employees of Hill-Rom and its subsidiaries. It is a tax qualified plan. Effective June 30, 2003, the Pension Plan was closed to new participants. Existing participants, effective January 1, 2004 were given the choice to remain in the Pension Plan and to continue earning credited service or to freeze their accumulated benefit as of January 1, 2004 and to participate in an enhanced defined contribution savings plan, as described below. The Code limits the amount of benefits that may be paid under the Pension Plan. A supplemental pension benefit that makes up for the Code limitations is provided under the SERP described below. Benefits under the Pension Plan are not subject to deductions for Social Security or other offset amounts.
Employees who retire under the Pension Plan receive fixed benefits calculated by means of a formula that takes into account the highest average annual calendar year eligible compensation earned over five consecutive years and the employee’s years of service. | · | an extension of up to three years of the time to exercise eligible outstanding stock options. |
For information regarding the pension benefits payable to our Named Executive Officers, see the Pension Benefits at September 30, 2009 table under “—Compensation of Named Executive Officers” below.
Savings Plan. Hill-Rom maintains the Hill-Rom, Inc. Savings Plan (the “Savings Plan”), which covers substantially all employees, including senior management. Under the Savings Plan, which is a tax-qualified retirement savings plan, participating employees may contribute up to 40 percent of compensation on a before-tax basis. Hill-Rom provides a matching contribution to the Savings Plan, for those employees who are not active participants in the Pension Plan and for those employees hired on or after July 1, 2003, in an amount equal to fifty cents for each dollar contributed by participating employees on the first six percent of their compensation. Additionally, Hill-Rom annually contributes to the Savings Plan, (1) for employees who are active participants in the Pension Plan and employees who are paid commissions, an amount equal to three percent of such employees’ compensation, and (2) for employees who are not active participants in the Pension Plan and for those employees hired on or after July 1, 2003, an amount equal to four percent of such employees’ compensation.
During 2009, the Savings Plan limited the “additions” that can be made to a participating employee’s account to $46,000 per year. “Additions” include all Hill-Rom contributions and the before-tax contributions made by Hill-Rom at the request of the participating employee under Section 401(k) of the Code. Of those additions, the current maximum before-tax contribution made by a participating employee is $16,500 per year (or $22,000 per year for certain participants age 50 and over). In addition, no more than $245,000 of annual compensation may be taken
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into account in computing benefits under the Savings Plan. A supplemental savings plan benefit that makes up for these limitations is provided under the SERP as described below.
Participants immediately vest in their own contributions and earnings. Matching contributions made by Hill-Rom cliff vest after three years of continuous employment and all subsequent matching contributions immediately vest thereafter.
For information regarding compensation paid to our Named Executive Officers under the Savings Plan, see the Summary Compensation Table and footnote 6 thereto under “—Compensation of Named Executive Officers” below.
Supplemental Executive Retirement Plan. The Hill-Rom Holdings, Inc. Supplemental Executive Retirement Plan (the “SERP”) provides additional retirement benefits to certain employees selected by the Compensation Committee whose retirement benefits under the Pension Plan and/our Company-wide pension plan or Savings Plan401(k) plan are reduced, curtailed or otherwise limited as a result of certain limitations under the Code. Participants in the defined benefit SERP include Messrs. de Maynadier and Dickey, and participants in the defined contribution SERP include Messrs. Soderberg, Miller, de Maynadier and Dickey.
Additionally, certain defined contribution SERP participants may annually receive an additional benefit of a certain percentage of such participants’ Compensation (as defined below). “Compensation” is defined under the Pension Plan and the Savings Plan and includes a percentage of a participant’s eligible compensation as determined under the STIC. Long-term incentive compensation is not included in the calculation of the SERP benefits. Mr. Soderberg’s contribution to his non-qualified deferred compensation plan is referenced in his employment agreement, see “—Employment Agreements” below.
The retirement benefits to be paid under the SERP are paid from the general assets of Hill-Rom, and are subject to Section 409A of the Code. The defined contribution SERP benefits are paid in a lump sum no sooner than six months after the date of termination. A participant may elect to defer receipt of his or her defined benefit SERP to age 65.
For information regarding the pension benefits payable to our Named Executive Officers under the SERP, see the Pension Benefits at September 30, 2009 table under “—Compensation of Named Executive Officers” below. For information regarding nonqualified deferred compensation payable to our Named Executive Officers see the Nonqualified Deferred Compensation for Fiscal Year Ending September 30, 2009 table under “—Compensation of Named Executive Officers” below.
Change in Control Agreements. Hill-Rom has a Change in Control Agreement (the “Change in Control Agreements”)agreement in place with each Named Executive Officer other than Mr. Soderberg. The Changewho currently is an executive of Hill-Rom. These change in Control Agreement previouslycontrol agreements are of the form commonly referred to as “double-trigger” agreements, in placethat they are triggered only in the event that an executive is terminated in connection with Mr. Soderberg terminated upon his resignation as President and Chief Executive Officer effective January 8, 2010, at which time Hill-Rom entered into a Changechange in Control Agreement with its new President and Chief Executive Officer, Mr. Greisch. The Changecontrol, not merely if a change in Control Agreementscontrol occurs. They are intended to encourage continued employment by Hill-Rom of its key management personnel and to allow such personnel to be in a position to provide assessment and advice to the Board of Directors regarding any proposed Changechange in Controlcontrol without concern that such personnel might be unduly distracted by the uncertaintiesuncertai nties and risks created by athe proposed Change in Control.
The Change in Control Agreements provide for payment of specified benefits upon Hill-Rom’s termination of the executive’s employment without “cause” or for “good reason” in anticipation of or within two years (three years in the case of Mr. Greisch’s agreement and Mr. Soderberg’s former agreement) after a Change in Control. Mr. Soderberg’s Change in Control Agreement also provided for the payment of the specified benefits in the event Mr. Soderberg terminated employment for any reason during the 30-day period following the first anniversary of the Change in Control. Mr. Greisch’s agreement contains no such “single trigger” provision. The benefits to be provided by Hill-Rom upon a Change in Control under any of the above circumstances are:
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a lump sum payment in cash equal to two times (three times in the case of Mr. Greisch’s agreement and Mr. Soderberg’s former agreement) the executive’s annual base salary;
continued health and medical insurance for the executive and the executive’s dependents and continued life insurance coverage for the executive for 24 months (36 months in the case of Mr. Greisch’s agreement and Mr. Soderberg’s former agreement), with the right to purchase continued medical insurance (at COBRA rates) from the end of this period until the executive reaches retirement age;
a cash payment in lieu of certain perquisites, such as accrued and unpaid vacation; and
an increase to the defined benefit and defined contribution pension benefit otherwise payable to the executive calculated by giving him equivalent credit for two additional years of age and service (or, in the case of Mr. Soderberg’s former agreement, three additional years of age and service credit).
Instead of the increase to the defined benefit and defined contribution pension benefit described in the last bullet above, Mr. Greisch’s agreement provides that he is entitled to a lump sum cash payment equal to three times the amounts accrued over the preceding twelve months in Mr. Greisch’s aggregate accounts under the SERP.
In addition, upon a Change in Control, whether or not the executive’s employment is terminated, all outstanding stock options, restricted stock and deferred stock shares will become fully vested and the executive will be deemed to have earned all outstanding short-term incentive compensation and performance share compensation awards to the extent such awards would have been earned if all performance targets for the relevant period were achieved. Mr. Soderberg’s former Change in Control Agreement provided that if Mr. Soderberg received payments that would be subject to the excise tax on excess parachute payments imposed by Section 4999 of the Code, he would have been entitled to receive an additional “gross-up” payment in an amount necessary to put him in the same after-tax position as if such excise tax had not been imposed. The Change in Control Agreements for the other Named Executive Officers provide for a similar “gross-up” payment, except that if the value of all “parachute payments” to an executive does not exceed 120% of the maximum threshold that could be paid to the Named Executive Officer without giving rise to the excise tax, the payments otherwise called for by the Change in Control Agreement will be reduced to the maximum amount which would not give rise to the excise tax. Mr. Greisch’s Change in Control Agreement does not provide for any excise tax “gross-up” payment.
Under the Change in Control Agreements, a “Change in Control” is defined generally as (1) the acquisition of beneficial ownership of 35% or more of the voting power of all Hill-Rom voting securities by a person or group other than members of the Hillenbrand Family; (2) the consummation of certain mergers or consolidations; (3) the failure of a majority of the members of the Hill-Rom Board of Directors to consist of Current Directors (defined as any directortransaction. For information on the datepotential payments to executives on a change of the Change in Control Agreements and any director whose election was approved by a majority of the then-Current Directors); (4) the consummation of a sale of substantially all of the assets of Hill-Rom; or (5) the date of approval by the shareholders of Hill-Rom of a plan of complete liquidation of Hill-Rom.
For information regarding the benefits that would have been payable to the Named Executive Officers as of September 30, 2009 under the Change in Control Agreements,control, see the Potential“-Potential Payments Upon Termination or Change in Control tables under “—Compensation of Named Executive Officers”Control” below.
Other Personal Benefits
In addition to the elements of compensation discussed above, we also provide senior level management with various other benefits as follows:
Executive Financial Planning, Estate Planning and Tax Preparation Service
Limited CEO personal use of corporate aircraft. See “Employment Agreements.”
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Hill-Rom provides these benefits in order to remain competitive with the market, in attracting and believes that these benefits help it to attract and retainretaining qualified executives. These benefits also reduce the amount of time and attention that senior management must spend on personal matters and allows them to dedicate more time to Hill-Rom. Hill-Rom believes that these benefits are in-line with the market, are reasonable in nature, are not excessive and are in the best interest of Hill-Rom and its shareholders.
Tuition Reimbursement Program. All employees are eligible to participate in Hill-Rom’s Tuition Reimbursement Program. This program is provided to support Hill-Rom’s innovation and commitment to improving its abilities. Hill-Rom believes that education will support the development of its employees for new positions and enhance their contributions to the achievement of its strategic goals. Under Hill-Rom’s Tuition Reimbursement Program, Hill-Rom reimburses tuition, registration fees and laboratory fees for all of its employees. All fulltime employees are eligible for 100% reimbursement on a course-by-course basis within a job related degree program; there is no maximum limit to reimbursement. Minimum academic achievement is required in order to receive reimbursement. This program is not currently being used by any of our Named Executive Officers.
Executive Financial and/or Estate Planning and Tax Preparation Service Program. Senior level managers are eligible for reimbursement of financial and/or estate planning services and for income tax preparation services. Reimbursement is approved for dollar amounts of up to 50% of an executive’s out of pocket costs up to $2,000 per year. Qualified expenses include income tax preparation, estate planning and investment planning, among others.
Executive Physical. Hill-Rom provides senior level managers with annual physicals. Hill-Rom covers 100% of the cost of this program. This program was developed to promote the physical well being and health of Hill-Rom’s senior level managers. Hill-Rom believes this program is in the best long-term interests of its shareholders.
Other Benefits. Senior management also participates in other benefit plans that Hill-Rom fully or partially subsidizes. Their participation is on the same terms as other employees of Hill-Rom. Some of the more significant of these benefits include medical, dental, life and vision insurance, as well as relocation reimbursement; holiday and vacation benefits. All Named Executive Officers participate in Hill-Rom’s group term life insurance program which provides death benefit coverage of up to two times base salary or $500,000, whichever is lesser, and provides accidental death and dismemberment coverage of up to $200,000. In addition, beginning January 1, 2007 the Named Executive Officers were eligible to participate in the optional supplemental group term life insurance program in which participants may purchase up to the lesser of five times their base annual salary or $600,000 of additional term life insurance at their own expense.
Employment Agreements
We have entered into employment agreements with each of the Named Executive Officers of Hill-Rom. These agreements are summarized below.
Peter H. Soderberg— Hill-Rom and Peter H. Soderberg entered into an amended Employment Agreement effective March 31, 2008. The agreement provides that Mr. Soderberg was entitled to receive a base salary of $840,000 per year and had the opportunity to earn an incentive compensation bonus and participate in plans, programs and policies available to other executive officers of Hill-Rom. It also provides for his participation in a nonqualified deferred compensation plan established for his benefit, pursuant to which Mr. Soderberg was credited with $75,000 within 30 days after March 20, 2006 and will be credited with $75,000 on each anniversary thereafter during Mr. Soderberg’s employment. Amounts credited to Mr. Soderberg’s account under this plan bear interest at a prime rate in effect from time to time or at other rates determined by the Compensation Committee. Mr. Soderberg will be fully vested in all amounts credited to his account under this plan and will be entitled to receive the balance of the account in a lump sum cash payment on or as soon as possible after the date that is six months after the date of the termination of Mr. Soderberg’s employment with Hill-Rom. Through January 8, 2010, when Mr. Soderberg resigned as President and Chief Executive Officer, he was permitted to use Hill-Rom’s aircraft for personal travel to and from Mr. Soderberg’s primary and secondary residences up to a maximum of 100 occupied hours of flight time per calendar year. Mr. Greisch will not have access to Hill-Rom’s aircraft for personal travel.
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If Mr. Soderberg was terminated by Hill-Rom other than for “cause”, including a termination by Mr. Soderberg for “good reason” (each defined generally in the same manner as in the employment agreements of the other Named Executive Officers as described below), Hill-Rom would have been required to pay severance to Mr. Soderberg in an amount equal to twelve months of Mr. Soderberg’s base salary, with payments commencing six months after the time of termination. The employment agreement also contains a limited non-competition and non-solicitation agreement of Mr. Soderberg, which continues generally for a period of two years after the termination of Mr. Soderberg’s employment. The employment agreement also required Hill-Rom to pay Mr. Soderberg’s costs of entering into the employment agreement, including the reasonable fees and expenses of his legal counsel.
In connection with Hill-Rom’s recent CEO succession process described above under “Corporate Governance—Board’s Role in CEO Succession Planning,” Hill-Rom and Mr. Soderberg entered into a letter agreement dated September 17, 2009. The letter agreement amends certain aspects of Mr. Soderberg’s employment agreement described above.
Pursuant to the letter agreement, Mr. Soderberg stepped down as President and Chief Executive Officer effective January 8, 2010 and will retire from employment with Hill-Rom on April 30, 2011. The letter agreement sets forth the compensation and benefits Mr. Soderberg is to receive until his retirement from Hill-Rom and establishes a consulting relationship with Mr. Soderberg through April 30, 2012, all as described below.
Pursuant to the letter agreement, Mr. Soderberg continued to receive his annualized salary of $840,000 through January 8, 2010 (the “CEO Transition Date”), was eligible for and was paid a bonus under Hill-Rom’s STIC Plan for the fiscal year 2009 and, in December 2009, was granted deferred stock shares valued at $200,000 at the grant date (8,599 deferred stock shares). These deferred stock shares will vest on the day after the first anniversary of the grant date, so long as Mr. Soderberg is then employed by Hill-Rom, or upon the earlier termination of Mr. Soderberg’s employment due to death or disability, by Hill-Rom other than for cause or by Mr. Soderberg for good reason. The letter agreement does not provide for any other stock-based awards for Mr. Soderberg after the date of the letter agreement but provides that, until the CEO Transition Date, the Compensation Committee could determine whether, and to what extent, ongoing stock-based awards would be granted to Mr. Soderberg. No such award was made prior to the CEO Transition Date.
On the CEO Transition Date, the Change in Control Agreement between Hill-Rom and Mr. Soderberg terminated, and Mr. Soderberg’s termination benefits thereafter are governed by the letter agreement. Also on the CEO Transition Date, Mr. Soderberg ceased serving as a member of the Board of Directors of Hill-Rom and its subsidiaries.
Mr. Soderberg will continue to be employed by Hill-Rom in a part-time capacity with the title of Chief Innovation Officer during the period commencing on the day immediately following the CEO Transition Date and ending on April 30, 2011 (the “Post-Succession Period”). He will report directly to the new President and CEO with all Mr. Soderberg’s work being authorized by the new President and CEO. It is contemplated that he will continue to advise and help shape Hill-Rom’s business and product innovation initiatives. For his services during the Post-Succession Period, Mr. Soderberg will receive an annualized salary of $500,000, provided that he is available to provide services of at least 1,000 hours on an annualized basis. He will also receive an additional $2,000 per diem rate for eight hour days worked over the first 250 hours.
The letter agreement provides that certain miscellaneous benefits provided to Mr. Soderberg under the Employment Agreement will continue during the Post-Succession Period, except that during the Post-Succession Period Mr. Soderberg may use Hill-Rom’s aircraft only for Hill-Rom business and not for personal travel.
Except as described below, all equity-based compensation which had not vested prior to the date of the letter agreement will continue to vest in accordance with the related grant or award so long as Mr. Soderberg continues to be an employee of Hill-Rom. Mr. Soderberg’s performance-based restricted stock units will become fully vested on April 30, 2011 if Mr. Soderberg continues to be an employee of Hill-Rom on that date or if Mr. Soderberg’s employment is terminated before April 30, 2011 by Hill-Rom other than for cause (as defined in Mr. Soderberg’s employment agreement) or by Mr. Soderberg for good reason (as defined in the letter agreement). Shares of Hill-Rom common stock underlying the performance-based restricted stock units will be distributed to Mr.
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Soderberg only to the extent the performance goals are achieved by Hill-Rom at the end of the applicable performance periods.
If Mr. Soderberg’s employment is terminated prior to April 30, 2011 by Hill-Rom other than for cause or by Mr. Soderberg for good reason, Mr. Soderberg will be fully vested in all stock options, except performance-based stock options, and he will have until May 1, 2014 to exercise those vested stock options. With respect to performance-based stock options, if Mr. Soderberg’s employment is terminated prior to April 30, 2011 by Hill-Rom other than for cause or by Mr. Soderberg for good reason, Mr. Soderberg will be treated as if he had retired on April 30, 2011,i.e., he will remain eligible for his performance-based stock options to vest based on performance criteria being met. From and after April 30, 2011, all of Mr. Soderberg’s vested options may be exercised prior to the earlier of (i) the last day of the term of such option as set forth in the related option agreement or (ii) May 1, 2014.
If Mr. Soderberg’s employment is terminated by Hill-Rom without cause, in lieu of the severance payments provided under the employment agreement, Mr. Soderberg will be entitled to receive any remaining base salary and consulting fee otherwise payable under the letter agreement.
The letter agreement provides that beginning on May 1, 2011 and ending on April 30, 2012, Mr. Soderberg will act as a consultant to Hill-Rom pursuant to a consulting agreement to be entered into between Hill-Rom and Mr. Soderberg. During the term of the consulting agreement, Mr. Soderberg will be paid an annualized consulting fee of $500,000 plus an additional payment based on days or hours worked as a consultant.
If the consulting agreement is terminated by Hill-Rom without Mr. Soderberg’s breach of the consulting agreement or Mr. Soderberg terminates the consulting agreement because of Hill-Rom’s breach of the consulting agreement, Mr. Soderberg shall be entitled to receive any remaining balance under the consulting fee otherwise payable.
Hill-Rom reimbursed Mr. Soderberg for $25,000 of out of pocket legal costs associated with entering into the letter agreement.
Other Named Executive Officers— Hill-Rom or its subsidiaries have entered into an employment agreement with each of the otherour Named Executive Officers. We believe that it is appropriate for our senior executives to have employment agreements because they provide certain contractual protections to us that we might not otherwise have, including provisions relating to non-competition with us, non-solicitation of our employees and confidentiality of our proprietary information. Additionally, we believe that employment agreements are a useful tool in recruiting and retention of senior level employees. The current employment agreements set forth the basic duties of the executive officers and provide that each executive officer is entitled to receive, in addition to base salary, incentive compensation payable in our discretion and such additional compensation, benefits andan d perquisites as we may deem appropriate. The employment agreements are terminable by either us or the executive officer “without cause” on sixty (60) days’ written notice, or if terminated by us, pay in lieu of notice, and are terminable at any time by us for cause, as defined in each employment agreement. Generally “cause” is defined as (1) failure by the executive officer to comply with the terms of the employment agreement, specifically not complying with any reasonable instructionsSee “-Potential Payments Upon Termination or orders issued by us, (2) illegal conduct, (3) violation of significant company policy, (4) improper disclosure of our confidentialChange in Control” below for further information or (5) engaging in conduct that is contrary to our best interests. The executive officer may terminate his employment agreement and declare the agreement to have terminated “without cause” by usregarding payments due upon the occurrence without the executive officer’s consent of a “good reason” event. Generally, a “good reason” event is defined as any of the following (1) an assignment to the executive officer of duties lasting more than sixty days that are materially inconsistent with the executive officer’s then current position or a material change in the executive officer’s reporting relationship to the CEO or his/her successor; (2) the failure to elect or reelect the executive officer as Vice President or other officer of us (unless such failure is related in any way to our decision to terminate the executive officer for cause); (3) our failure to provide the executive officer with office space and support personnel commensurate with level of responsibilities and/or position; (4) a reduction by us in the amount of the executive officer’s base salary or the discontinuation or reduction by us of the executive officer’s participation in the same level of eligibility as compared to other peer employees in any incentive compensation, additional compensation, benefits, policies or perquisites; (5) the relocation of our principal executive offices or the executive officer’s place of work requiring a commuting change of more than fifty (50) miles; or (6) our failure to perform our obligations under the employment agreement. If an executive officer is terminated by us
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without cause or terminated by the executive officer upon the occurrence, without the executive officer’s consent, of a good reason event, we are required to pay severance to the executive in an amount equal to twelve months of the executive officer’s base salary, with payments commencing six months after the time of termination. The employment agreements also contain limited non-competition and non-solicitation agreements of the executive officers, which continue generally for a period of eighteen to twenty-four months after the termination of the executive officer’s employment.
For information regarding the benefits payable to our Named Executive Officers under their employment agreements, see the Potential Payments Upon Termination or Change in Control tables under “—Compensation of Named Executive Officers” below.
John J. Greisch— In connection with the election of Mr. Greisch as President and Chief Executive Officer, Hill-Rom and Mr. Greish entered into an employment agreement dated January 8, 2010. The employment agreement sets forth Mr. Greisch’s basic duties and provides for the following items of compensation for Mr. Greish:
a base salary of $800,000 per year;cash incentive compensation opportunity under the STIC Plan, with a target payment of 100% of base salary earned during the applicable fiscal year; for fiscal 2010, Hill-Rom has guaranteed to Mr. Greisch an STIC Plan payment of a minimum of 60% of base salary earned during fiscal 2010, subject to his continued employment through the end of the fiscal year;-25-
an additional stock option with a grant date value of $2,000,000 vesting 25% at each anniversary of the date of grant over four years;
starting for fiscal year 2011, participation in equity-based awards under the Hill-Rom long-term incentive plan in place at that time as authorized by the Compensation Committee of the Board of Directors;
participation in Hill-Rom retirement plans, including the 401(k) Savings Plan and the defined contribution portion of the SERP, consistent with the terms of and interpretations under such plans, as available to other executive officers of Hill-Rom; and
such additional compensation, benefits and perquisites, including participation in Hill-Rom’s health and welfare plans, as are available to other executive officers of Hill-Rom and as the Board of Directors may deem appropriate.
If Mr. Greisch is terminated by Hill-Rom other than for “cause”, including a termination by Mr. Greisch for “good reason” (each as defined in the employment agreement), Hill-Rom will be required to pay severance to Mr. Greisch in an amount equal to two times Mr. Greisch’s annual base salary, with payments commencing six months after the time of termination. The signing award restricted stock units, to the extent not previously vested, will be deemed to have been 50% vested if termination occurs after the second anniversary of the commencement of Mr. Greisch’s employment and 75% vested if termination occurs after the third anniversary. Health and similar welfare benefits will continue for twelve months or until Mr. Greisch is eligible to be covered by comparable benefits of a subsequent employer, whichever is earlier, and Mr. Griesch will be immediately vested in the SERP.
In the case of death or disability, Hill-Rom would not be required to make any additional payments other than all vested benefits to which Mr. Greisch or his surviving spouse or his beneficiary is entitled in accordance with any applicable plans, except that Mr. Greisch would be immediately vested in the SERP. Any outstanding time-
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vested restricted shares and options would immediately vest in full, and Mr. Greisch or his surviving spouse or his beneficiary would have three years to exercise vested stock options.
If Mr. Greisch retires, Hill-Rom will be required to pay him retirement benefits and all other applicable benefits pursuant to terms of such plans. Hill-Rom’s obligation to pay Mr. Greisch’s base salary, annual bonus, and long-term incentives shall cease except to the extent incentives are vested and in accordance with such plans. Any outstanding time-vested restricted shares fully vest (restrictions lapse) if he retires after having reached age 55 and completed five years employment, so long at the grant was made more than one year prior.
The employment agreement also contains a limited non-competition and non-solicitation agreement of Mr. Greisch, which continues generally for a period of two years after the termination of Mr. Greisch’s employment. The employment agreement also requires Hill-Rom to pay Mr. Greisch $200,000 to cover relocation costs after Mr. Greisch purchases a residence within 75 miles of Batesville, Indiana. Up to $50,000 of that amount, however, may be used during the first six months after the commencement of Mr. Greisch’s employment for temporary housing. The employment agreement also requires Hill-Rom to reimburse him for the reasonable fees and expenses of his legal counsel in connection with the review of the agreement up to $15,000.
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Compensation of Named Executive Officers
The following tables and notes set forth compensation information for the fiscal years ended September 30, 2010, 2009 2008 and 20072008 for our Named Executive Officers. All references in the following tables to stock awards and stock options awarded prior to the March 31, 2008 spin-off of our former funeral services business give effect to the adjustments made in connection with the spin-off.
In connection with the spin-off, we entered into new employment agreements with each of the Named Executive Officers — see the “Employment Agreements” section of the Compensation Discussion and Analysis for further discussion. The Named Executive Officers were not entitled to receive payments that would be characterized as “Bonus” payments for the fiscal years ended September 30, 2009, 2008 and 2007.
Total cash compensation, which includes salary and non-equity incentive plan compensation, is based on individual performance as well as the overall performance of Hill-Rom as described in the “Base Salary” and “Annual Cash Incentives” sections of the Compensation Discussion and Analysis. Generally, the emphasis that is placed on stock-based compensation increases as the level of responsibility of the individual employee increases.
Summary Compensation Table
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| (a) | | (b) | | | (c) | | | (d) | | | (e) | | | (f) | | | (g) | | | (h) | | | (i) | | | (j) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Change in | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Pension | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Value and | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Nonqualified | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Non-Equity | | | Deferred | | | | | | | |
| | | | | | | | | | | | | | | Stock | | | Option | | | Incentive Plan | | | Compensation | | | All Other | | | | |
| Name and Principal | | | | | | Salary | | | Bonus | | | Awards | | | Awards | | | Compensation | | | Earnings | | | Compensation | | | Total | |
| Position | | Year | | | $ (1) | | | $ | | | $ (2) | | | $ (3) | | | $ (4) | | | $ (5) | | | $ (6) | | | $ | |
PETER H. SODERBERG | | | 2009 | | | $ | 840,000 | | | None | | $ | 1,077,316 | | | $ | 1,319,506 | | | $ | 465,612 | | | $ | 0 | | | $ | 427,996 | | | $ | 4,130,430 | |
| Former President and | | | 2008 | | | $ | 840,000 | | | None | | $ | 851,169 | | | $ | 1,713,045 | | | $ | 862,369 | | | $ | 2,635 | | | $ | 522,031 | | | $ | 4,791,249 | |
| Chief Executive Officer | | | 2007 | | | $ | 830,575 | | | None | | $ | 1,445,305 | | | $ | 531,680 | | | $ | 711,245 | | | $ | 6,004 | | | $ | 517,394 | | | $ | 4,042,203 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
GREGORY N. MILLER | | �� | 2009 | | | $ | 395,178 | | | None | | $ | 143,680 | | | $ | 197,550 | | | $ | 109,524 | | | $ | 9,763 | | | $ | 41,431 | | | $ | 897,126 | |
| Senior Vice President, | | | 2008 | | | $ | 378,000 | | | None | | $ | 261,238 | | | $ | 663,729 | | | $ | 235,217 | | | $ | 486 | | | $ | 39,539 | | | $ | 1,578,209 | |
| Chief Financial Officer and Treasurer | | | 2007 | | | $ | 371,403 | | | None | | $ | 300,702 | | | $ | 125,508 | | | $ | 174,828 | | | $ | 1,267 | | | $ | 38,893 | | | $ | 1,012,601 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
JOHN H. DICKEY | | | 2009 | | | $ | 263,704 | | | None | | $ | 317,827 | | | $ | 233,253 | | | $ | 69,908 | | | $ | 341,323 | | | $ | 12,204 | | | $ | 1,238,219 | |
| Senior Vice President, | | | 2008 | | | $ | 248,400 | | | None | | $ | 324,083 | | | $ | 577,694 | | | $ | 154,571 | | | $ | 10,130 | | | $ | 11,532 | | | $ | 1,326,410 | |
| Human Resources | | | 2007 | | | $ | 246,421 | | | None | | $ | 275,991 | | | $ | 108,310 | | | $ | 125,011 | | | $ | 63,867 | | | $ | 10,820 | | | $ | 830,420 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
C. JEFFREY KAO(7) | | | 2009 | | | $ | 340,000 | | | None | | $ | 186,722 | | | $ | 226,569 | | | $ | 90,134 | | | $ | 0 | | | $ | 19,000 | | | $ | 862,425 | |
President,
North America Acute Care | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
PATRICK D. DE MAYNADIER | | | 2009 | | | $ | 360,649 | | | None | | $ | 140,874 | | | $ | 172,650 | | | $ | 95,608 | | | $ | 137,561 | | | $ | 32,791 | | | $ | 940,133 | |
| Senior Vice President, General | | | 2008 | | | $ | 352,273 | | | None | | $ | 263,748 | | | $ | 795,994 | | | $ | 210,075 | | | $ | 688 | | | $ | 31,742 | | | $ | 1,654,520 | |
| Counsel and Secretary | | | 2007 | | | $ | 347,268 | | | None | | $ | 301,091 | | | $ | 104,468 | | | $ | 163,447 | | | $ | 23,316 | | | $ | 31,720 | | | $ | 971,310 | |
| | | | | | | | Change in Pension Value | | |
| | | | | | | Non-Equity | and Nonqualified | | |
| | | | | Stock | Option | Incentive Plan | Deferred Compensation | All Other | |
| Name and Principal Position | Year | Salary | Bonus (1) | Awards (2) | Awards (3) | Compensation (4) | Earnings (5) | Compensation (6) | Total |
| | | | | | | | | | |
| | | | | | | | | | |
| JOHN J. GREISCH (7) | 2010 | $583,014 | None | $800,004 | $1,609,819 | $879,692 | - | $134,995 | $4,007,524 |
| President and Chief Executive Officer, | | | | | | | | | |
| Member of the Board of Directors | | | | | | | | | |
| | | | | | | | | | |
| GREGORY N. MILLER (8) | 2010 | $400,000 | None | $550,030 | $203,958 | $345,668 | $3,827 | $45,447 | $1,548,930 |
| Former Senior Vice President and Chief | 2009 | $395,178 | None | $189,053 | $643,302 | $109,524 | $9,763 | $41,431 | $1,388,251 |
| Financial Officer and Treasurer | 2008 | $378,000 | None | $243,986 | $695,205 | $235,217 | $486 | $39,539 | $1,592,433 |
| | | | | | | | | | |
| KIMBERLY K. DENNIS | 2010 | $297,000 | None | $412,755 | $114,230 | $193,513 | $132,519 | $13,411 | $1,163,428 |
| Senior Vice President, | 2009 | $295,027 | None | $144,048 | $403,104 | $78,212 | $206,410 | $14,285 | $1,141,086 |
| North America Post-Acute Care | 2008 | $288,000 | None | $162,911 | $430,266 | $153,982 | $108 | $13,343 | $1,048,610 |
| | | | | | | | | | |
| PERRY STUCKEY III (9) | 2010 | $56,822 | $200,000 | $340,023 | $133,080 | $38,971 | - | $1,569 | $770,465 |
| Former Senior Vice President and | | | | | | | | | |
| Chief Human Resources Officer | | | | | | | | | |
| | | | | | | | | | |
| SUSAN R. LICHTENSTEIN (10) | 2010 | $163,726 | None | $250,002 | $201,156 | $134,750 | - | $6,225 | $755,859 |
| Senior Vice President, Corporate Affairs, | | | | | | | | | |
| Chief Legal Officer and Secretary | | | | | | | | | |
| | | | | | | | | | |
| PETER H. SODERBERG (11) | 2010 | $592,219 | None | $200,013 | - | $312,522 | - | $228,431 | $1,333,185 |
| Former President and | 2009 | $840,000 | None | $1,210,880 | $1,961,365 | $465,612 | - | $427,996 | $4,905,853 |
| Chief Executive Officer | 2008 | $840,000 | None | $1,086,170 | $2,240,798 | $862,369 | $2,635 | $522,031 | $5,554,003 |
| | | | | | | | | | |
| PATRICK D. DE MAYNADIER (12) | 2010 | $363,000 | None | $549,225 | $139,614 | $298,756 | $95,524 | $67,616 | $1,513,735 |
| Former Senior Vice President, | 2009 | $360,649 | None | $176,197 | $511,247 | $95,608 | $137,561 | $32,791 | $1,314,053 |
| General Counsel and Secretary | 2008 | $352,273 | None | $189,936 | $575,267 | $210,075 | $688 | $31,742 | $1,359,981 |
| | | | | | | | | | |
| GREGORY J. TUCHOLSKI (13) | 2010 | $213,041 | None | $336,037 | $195,795 | - | - | $451,357 | $1,196,230 |
| Former President, International | | | | | | | | | |
| and Surgical | | | | | | | | | |
| | 1) | Mr. Stuckey received a one-time sign-on cash award upon commencement of his employment to compensate him for the bonus opportunity foregone at his previous employer upon joining Hill-Rom. |
(1) | | 2) | The 2010 amounts indicatedin this column represent the dollargrant date fair value of base salary earned during fiscal years 2009, 2008 and 2007. |
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(2) | | The amounts indicated represent the aggregate dollar amount of compensation expense recognized in our Consolidated Financial Statementstime-based RSUs granted during the applicable fiscal year, excluding thea reduction for risk of forfeiture, relatedforfeiture. Also included is the grant date fair value of PSUs granted during fiscal 2010 to deferred stock share andcertain officers based upon the target achievement of the performance share unit awards held by our Named Executive Officers The determinationconditions as of this expense isthe grant date as more fully described in the footnotes to the Grants of Plan-Based Awards Table. These grant date fair values were based on the methodology set forth in Notes 1 and 1413 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended September 30, 2010. The 2009 which was filed withand 2008 award values for Messrs. Miller, Soderberg, de Maynadier and Ms. Dennis have been recalculated from the amounts disclosed in our previous Proxy Statements to reflect the new SEC on November 24, 2009. Mr. Dickey is retirement eligible (retirement defined as age 55 with 5 years of service) and therefore, expense associated with his stock awards is being accelerated over a shorter period (i.e., the first anniversary of the grant).
rules. |
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| | 3) | |
(3) | | The 2010 amounts indicatedin this column represent the aggregate dollar amountgrant date fair value of compensation expense recognized intime-based stock options granted to our Consolidated Financial StatementsNamed Executive Officers during the applicable fiscal year, excluding the reduction for risk of forfeiture, related to stock option and performance based stock option awards held by our Named Executive Officers. The determination of this expense isforfeiture. These grant date fair values were based on the methodology set forth in Notes 1 and 1413 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended September 30, 2009, which was filed with the SEC on November 24, 2009.2010. The amounts for fiscal 2009 and 2008 also includeoption award values for Messrs. Miller, Soderberg, de Maynadier and Ms. Dennis have been recalculated from the increaseamounts disclosed in fair value of each Named Executive Officer’s stock options dueour previous Proxy Statements to reflect the modification of such awards in conjunction with the spin-off our former funeral services business. Mr. Dickey is retirement eligible and therefore, expense associated with his stock options is being accelerated over a shorter period (i.e., the first anniversary of the grant). new SEC rules. |
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(4) | 4) | The amounts indicatedin this column represent cash awards earned for the applicable fiscal years 2009, 2008 and 2007year and paid in the subsequent fiscal years 2010, 2009 and 2008, respectively,year, under our STIC Plan. See the “Annual Cash Incentives” section of the Compensation Discussion and Analysis. |
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(5)5) | | UnlikeDuring fiscal years 2008 and 2007,year 2010, we did not pay above-market interest on nonqualified deferred compensation, during fiscal year 2009, as our monthly deferred compensation interest rate did not exceed 120% of the applicable federal long-term month rate as published by the IRS in its revenue rulings.IRS. Therefore, the 20092010 amounts in this column reflect changes in the actuarial present value of pension benefits from September 30, 2008. The main factor contributing to the increase in the 2009 amounts is the use of a lower discount rate from 7.50% in 2008 to 5.50% in 2009. For Messrs. Dickey and de Maynadier, who have more years of credited service under our Pension Plan, the resulting dollar change is more significant than for Mr. Miller. See the Pension Benefits Table and Nonqualified Deferred Compensation Table below for additional information. |
| | 6) | Please refer to the “All Other Compensation” table below for further information: |
| | | All Other Compensation for Fiscal Year 2010 |
| | | Personal | Company Contributions | | | | | | |
| | Name | Aircraft Usage (a) | 401(k) (b) | Supp 401(k) (b) | Supp Retirement (b) | Legal Fee Reimbursement (c) | Unused Vacation Cash-out | Relocation Assistance (d) | Severance Benefits (e) | Other Benefits (f) | Total All Other Compensation |
| | Mr. Greisch | | $16,412 | $103,583 | - | $15,000 | - | - | - | - | $134,995 |
| | Mr. Miller | | $17,150 | $27,652 | - | - | - | - | - | $645 | $45,447 |
| | Ms. Dennis | | $7,007 | $6,016 | - | - | - | - | - | $388 | $13,411 |
| | Mr. Stuckey | | $1,569 | - | - | - | - | - | - | - | $1,569 |
| | Ms. Lichtenstein | | $6,225 | - | - | - | - | - | - | - | $6,225 |
| | Mr. Soderberg | $36,452 | $17,150 | $63,013 | $75,000 | $25,000 | - | - | - | $11,816 | $228,431 |
| | Mr. de Maynadier | | $7,350 | $27,500 | - | - | $27,923 | - | - | $4,843 | $67,616 |
| | Mr. Tucholski | | $10,942 | - | - | - | $23,385 | $180,097 | $230,794 | $6,139 | $451,357 |
(6) | | All Other Compensation consists ofa) | Amount represents the incremental cost to us of aircraft usage, Company contributions made to the 401(k) Savings Plan, the savings plan portionMr. Soderberg’s personal use of the SERP and supplemental retirement benefits. Also included is the incremental cost of professional services for tax preparation and financial planning services, and other personal benefits provided by Hill-Rom. All Other Compensation earned or allocatedour corporate aircraft during the first quarter of fiscal year ended September 30, 2009 was as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Personal | | | | | | | | | | | | | | | Financial | | | | | | | | |
| | | Aircaft | | | Company Contributions | | | Planning and | | | Home | | | | |
| Name | | Usage(a) | | | 401(K) | | | Supp 401(k) | | | Supp Retirement | | | Tax Preparation | | | Security | | | Total | |
| Peter H. Soderberg | | $ | 191,923 | | | $ | 17,150 | | | $ | 143,713 | | | $ | 75,000 | | | | | | | $ | 210 | | | $ | 427,996 | |
| Gregory N. Miller | | | | | | $ | 16,896 | | | $ | 24,535 | | | | | | | | | | | | | | | $ | 41,431 | |
| John H. Dickey | | | | | | $ | 7,352 | | | $ | 4,602 | | | | | | | $ | 250 | | | | | | | $ | 12,204 | |
| C. Jeffrey Kao | | | | | | $ | 17,150 | | | $ | | | | | | | | $ | 1,150 | | | | | | | $ | 19,000 | |
| Patrick D. de Maynadier | | | | | | $ | 7,350 | | | $ | 25,191 | | | | | | | $ | 250 | | | | | | | $ | 32,791 | |
| | |
(a) | | During Mr. Soderberg’s tenure as President and Chief Executive Officer, Hill-Rom agreed to permit Mr. Soderberg to use Hill-Rom’s aircraft for travel to and from Mr. Soderberg’s primary and secondary residences up to a maximum of 100 occupied hours of flight time per calendar year. Mr. Soderberg used approximately 67 occupied flight hours during calendar year 2009.2010. The value of the use of Hill-Rom aircraft disclosed in the Summary Compensation Table is based upon the variable costs of operating the corporate aircraft ($1,6661,841 per flight hour for fiscal 2009)2010), which includes trip-related expenses such as fuel, aircraft maintenance, crew travel expenses, on-board catering, landing and parking fees, and also takes into account flights without passengers. We do not include fixedFixed costs thatare excluded as they do not change based on personal usage such as pilot salaries and depreciation expense. Accordingly, included in the table above is $191,923, representing the aggregate incremental cost to Hill-Rom for Mr. Soderberg’s personal use of Hill-Rom’s aircraft for fiscal 2009. Mr. Soderberg used approximately 67 occupied flight hours during fiscal year 2009. While Hill-Rom does not charge for the personal use of its aircraft, it does report amounts related to such use as taxable income to the IRS. Mr. Greisch is not entitled to use Hill-Rom aircraft for personal purposes. |
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While we do not charge for the personal use of our corporate aircraft, we do report amounts related to such use as taxable income to the IRS. None of our other Named Executive Officers are permitted to use the corporate aircraft for personal use.
| | b) | Amounts represent Company matching contributions to the Named Executive Officer’s accounts in the applicable plans: 401(k) Savings Plan, 401(k) Savings Plan portion of the SERP and the supplemental retirement account. |
(7) | | c) | Amounts represent reimbursement of out-of-pocket legal fees incurred with respect to Mr. Greisch’s employment agreement effective January 8, 2010 and Mr. Soderberg’s letter agreement effective September 17, 2009. |
| d) | Amount represents relocation assistance, including gross-up for taxes, provided to Mr. Tucholski associated with his temporary assignment in Lulea, Sweden. |
| e) | Amount consists of severance payments from June 1, 2010 to September 30, 2010 and a one-time special bonus in lieu of Mr. Tucholski’s 2010 STIC payment. |
| f) | Other benefits include Company-provided financial and estate planning, tax preparation, imputed income on continuing health and welfare coverage, executive physicals and expenses paid on behalf of the executives’ spouses who accompanied such executives on business travel. |
| 7) | Effective January 8, 2010, Mr. Greisch was elected as our President and Chief Executive Officer and a member of the Board. |
| 8) | Effective December 13, 2010, Mark J. Guinan was elected as our Senior Vice President and Chief Financial Officer and Treasurer. In connection with Mr. Guinan’s appointment, Mr. Miller stepped down from his positions as Senior Vice President and Chief Financial Officer and Treasurer. Mr. Miller’s employment with us terminated on December 31, 2010. |
| 9) | Effective August 2, 2010, Mr. Stuckey was elected as our Senior Vice President and Chief Human Resources Officer. Mr. Stuckey stepped down from this position effective November 29, 2010 for personal reasons. |
| 10) | Effective May 6, 2010, Ms. Lichtenstein was elected as our Senior Vice President, Corporate Affairs, Chief Legal Officer and Secretary. |
| 11) | Effective January 7, 2010 and in connection with Mr. Greisch’s appointment, Mr. Soderberg stepped down from his positions as President and Chief Executive Officer and member of the Board, which he held since March 2006. His employment with us will be terminated upon his retirement on April 30, 2011. |
| 12) | Mr. de Maynadier’s employment with us terminated on December 31, 2010. He was Senior Vice President General Counsel and Secretary of the Company from October 1, 2007 through July 2010. Prior to fiscal 2009, that he served as Vice President, General Counsel and Secretary. |
| 13) | Mr. KaoTucholski was not a Named Executive Officer. Accordingly, compensation information is presented for Mr. Kao for 2009 only.Officer prior to 2010, and his employment with us terminated on June 1, 2010. He was the President of the Company’s International and Surgical division from January 2008 through June 2010, and held a variety of marketing and sales positions with Hill-Rom prior to that. |
Grants of Plan-Based Awards for Fiscal Year Ended September 30, 20092010
The following table summarizes the grants of plan-based awards to each of the Named Executive Officers for the fiscal year ended September 30, 2009.2010. All stock-based awards in fiscal year 20092010 were granted under our Stock Incentive Plan.
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| (a) | | (b) | | | (c) | | | (d) | | | (e) | | | (f) | | | (g) | | | (h) | | | (i) | | | (j) | | | (k) | | | (l) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | All Other | | | All Other | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Stock | | | Option | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Awards: | | | Awards: | | | | | | Grant Date | |
| | | | | | | Estimated Future Payouts Under | | | | | | | | | | | | Number | | | Number of | | | Exercise or | | | Fair Value | |
| | | | | | | Non-Equity Incentive | | | Estimated Future Payouts Under | | | of Shares of | | | Securities | | | Base Price of | | | of Stock | |
| | | | | | Plan Awards (1) | | | Equity Incentive Plan Awards (2) | | | Stock or | | | Underlying | | | Option | | | and Option | |
| | | Grant | | | Threshold | | | Target | | | Maximum | | | Threshold | | | Target | | | Maximum | | | Units (3) | | | Options (4) | | | Awards (5) | | | Awards (6) | |
| Name | | Date | | | $ | | | $ | | | $ | | | # | | | # | | | # | | | # | | | # | | | $/sh | | | $ | |
| Peter H. Soderberg | | | | | | $ | 0 | | | $ | 840,000 | | | $ | 1,680,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 12/2/2008 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 179,041 | | | $ | 19.39 | | | $ | 1,008,001 | |
| | | | 12/2/2008 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 51,999 | | | | | | | | | | | $ | 1,008,261 | |
| | | | 12/2/2008 | | | | | | | | | | | | | | | | 0 | | | | 95,527 | | | | 95,527 | | | | | | | | | | | $ | 19.39 | | | $ | 537,817 | |
| | | | 12/2/2008 | | | | | | | | | | | | | | | | | | | | 95,528 | | | | 95,528 | | | | | | | | | | | $ | 19.39 | | | $ | 415,547 | |
| | | | 12/2/2008 | | | | | | | | | | | | | | | | | | | | 6,939 | | | | 24,255 | | | | | | | | | | | | | | | $ | 470,304 | |
| | | | 12/2/2008 | | | | | | | | | | | | | | | | | | | | 6,939 | | | | 24,255 | | | | | | | | | | | | | | | $ | 237,942 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gregory N. Miller | | | | | | $ | 0 | | | $ | 197,462 | | | $ | 394,923 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 12/2/2008 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 33,571 | | | $ | 19.39 | | | $ | 189,005 | |
| | | | 12/2/2008 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 9,750 | | | | | | | | | | | $ | 189,053 | |
| | | | 12/2/2008 | | | | | | | | | | | | | | | | 0 | | | | 46,738 | | | | 70,071 | | | | | | | | | | | $ | 19.39 | | | $ | 394,500 | |
| | | | 12/2/2008 | | | | | | | | | | | | | | | | | | | | 46,739 | | | | 70,072 | | | | | | | | | | | $ | 19.39 | | | $ | 286,594 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| John H. Dickey | | | | | | $ | 0 | | | $ | 131,739 | | | $ | 263,477 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 12/2/2008 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 22,061 | | | $ | 19.39 | | | $ | 124,203 | |
| | | | 12/2/2008 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 6,408 | | | | | | | | | | | $ | 124,251 | |
| | | | 12/2/2008 | | | | | | | | | | | | | | | | | | | | 22,072 | | | | 33,091 | | | | | | | | | | | $ | 19.39 | | | $ | 186,302 | |
| | | | 12/2/2008 | | | | | | | | | | | | | | | | 0 | | | | 22,072 | | | | 33,091 | | | | | | | | | | | $ | 19.39 | | | $ | 135,342 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| C. Jeffrey Kao | | | | | | $ | 0 | | | $ | 170,000 | | | $ | 340,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 12/2/2008 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 34,538 | | | $ | 19.39 | | | $ | 194,449 | |
| | | | 12/2/2008 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 10,031 | | | | | | | | | | | $ | 194,501 | |
| | | | 12/2/2008 | | | | | | | | | | | | | | | | | | | | 30,211 | | | | 45,293 | | | | | | | | | | | $ | 19.39 | | | $ | 255,000 | |
| | | | 12/2/2008 | | | | | | | | | | | | | | | | 0 | | | | 30,212 | | | | 45,294 | | | | | | | | | | | $ | 19.39 | | | $ | 185,252 | |
| | | | 12/2/2008 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 7,114 | | | | | | | | | | | $ | 137,940 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Patrick D. | | | | | | $ | 0 | | | $ | 180,262 | | | $ | 360,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| de Maynadier | | | 12/2/2008 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 31,286 | | | $ | 19.39 | | | $ | 176,140 | |
| | | | 12/2/2008 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 9,087 | | | | | | | | | | | $ | 176,197 | |
| | | | 12/2/2008 | | | | | | | | | | | | | | | | 0 | | | | 34,476 | | | | 51,687 | | | | | | | | | | | $ | 19.39 | | | $ | 290,998 | |
| | | | 12/2/2008 | | | | | | | | | | | | | | | | | | | | 34,476 | | | | 51,688 | | | | | | | | | | | $ | 19.39 | | | $ | 211,404 | |
| | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | All Other Stock Awards: Number of | All Other Option Awards: Number of | Exercise or Base Price of | Grant Date Fair Value of | |
| Name | Grant Date | Min | Target | Max | Min | Target | Max | Shares of Stock or Units (3) | Securities Underlying Options (3) | Option Awards (4) | Stock and Option Awards (5) | |
| | | | | | | | | | | | | |
| John J. Greisch | | $349,808 | $600,000 | $1,200,000 | | | | | | | | |
| | 1/8/2010 | | | | | | | | 207,987 (6) | $23.92 | $1,609,819 | (7) |
| | 1/8/2010 | | | | | | | 33,445 (6) | | | $800,004 | |
| | | | | | | | | | | | | |
| Gregory N. Miller | | $0 | $240,000 | $480,000 | | | | | | | | |
| | 12/3/2009 | | | | | | | | 27,086 (11) | $23.26 | $203,958 | |
| | 12/3/2009 | | | | | | | 12,038 (11) | | | $280,004 | |
| | 12/3/2009 | | | | | | | 8,599 (8, 11) | | | $200,013 | |
| | 12/3/2009 | | | | - | 9,029 (11) | 18,058 (11) | | | | $70,013 | (2) |
| | | | | | | | | | | | | |
| Kimberly K. Dennis | | $0 | $148,500 | $297,000 | | | | | | | | |
| | 12/3/2009 | | | | | | | | 15,170 | $23.26 | $114,230 | |
| | 12/3/2009 | | | | | | | 6,742 | | | $156,819 | |
| | 12/3/2009 | | | | - | 5,057 | 10,114 | | | | $39,216 | (2) |
| | 4/20/2010 | | | | | | | 7,000 (9) | | | $216,720 | |
| | | | | | | | | | | | | |
| Perry Stuckey III | | $0 | $28,333 | $56,667 | | | | | | | | |
| | 8/2/2010 | | | | | | | | 12,000 (6) | $34.28 | $133,080 | (2) |
| | 8/2/2010 | | | | | | | 9,919 (6) | | | $340,023 | |
| | | | | | | | | | | | | |
| Susan R. Lichtenstein | | $0 | $103,750 | $207,500 | | | | | | | | |
| | 5/6/2010 | | | | | | | | 19,625 (6) | $31.69 | $201,156 | |
| | 5/6/2010 | | | | | | | 7,889 (6) | | | $250,002 | |
| | | | | | | | | | | | | |
| Peter H. Soderberg | | $0 | $210,000 | $420,000 | | | | | | | | |
| | 12/3/2009 | | | | | | | 8,599 (10) | | | $200,013 | |
| | | | | | | | | | | | | |
| Patrick D. de Maynadier | | $0 | $217,800 | $435,600 | | | | | | | | |
| | 12/3/2009 | | | | | | | | 18,541 (11) | $23.26 | $139,614 | |
| | 12/3/2009 | | | | | | | 8,241 (11) | | | $191,686 | |
| | 12/3/2009 | | | | - | 6,181 (11) | 12,362 (11) | | | | $47,939 | (2) |
| | 4/20/2010 | | | | | | | 10,000 (9, 11) | | | $309,600 | |
| | | | | | | | | | | | | |
| Gregory J. Tucholski (12) | | $0 | $0 | $0 | | | | | | | | |
| | 12/3/2009 | | | | | | | | 26,002 | $23.26 | $195,795 | |
| | 12/3/2009 | | | | | | | 11,557 | | | $268,816 | |
| | 12/3/2009 | | | | - | 8,668 | 17,336 | | | | $67,221 | (2) |
| | | |
(1) | 1) | Amounts represent potential cash awards that could be paid under our STIC Program. Awards can range from 0%Plan. In the case of Mr. Greisch, the amount under the “Min” column was his guaranteed minimum STIC payment for fiscal year 2010 in accordance with his Employment Agreement effective January 8, 2010. |
| 2) | The amounts under in the “Target” column reflect the number of PSUs granted to 200%the Named Executive Officer on December 3, 2009. They represent the amount of shares the Named Executive Officer will receive if the target performance goals are met during each performance period of the three-year program. The grant date fair value for this award is based on achieving the target amount. See “Annual Cash Incentives”performance goals during the first year of the program (approximately one-third of the PSUs listed under the “Target” column), as the performance goals for the first year were known on the grant date. Refer to the “Long-Term Equity Awards” section of the Compensation Discussion and Analysis for discussion of this program. Also the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table above for the actual amounts earned, which were paid in December 2009.further details. |
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The grant date fair values based on the PSUs listed under the “Max” column are as follows: Mr. Miller: $420,029; Ms. Dennis: $235,252; Mr. de Maynadier: $287,540; and Mr. Tucholski: $403,235.
| | 3) | |
(2) | | Performance-basedAmounts under these columns represent stock option awards wereoptions and RSUs granted pursuant to our Stock Incentive Plan for the fiscal year ended September 30, 2009. These awards were granted at maximum levels of which the vesting schedules, upon satisfying performance criteria, are disclosed by Named Executive Officer in the footnotes to the Outstanding Equity Awards at September 30, 2009 table. In the case of Mr. Soderberg’s performance based stock option award, due to potentially reaching the annual stock option award limit as permitted by our Stock Incentive Plan, his award is a combination of stock options (up to the annual stock option limit) and performance share units representing the excess dollar amount of options over the annual stock option limit. However, all performance based stock options must vest prior to the vesting of the performance share units. |
|
(3) | | Deferred stock share awards were granted pursuant to our Stock Incentive PlanOfficers during the fiscal year ended September 30, 2009 related to fiscal 2008 performance. Dividends paid on Hill-Rom2010 as more fully described in the following footnotes. For stock options, the exercise price is the fair market value of our common stock will be deemed to have been paid with regard toon the deferred stock shares awarded and deemedgrant date, as described in Footnote 4 below. For RSUs, the value to be reinvested in Hill-Romrealized by the Named Executive Officer is based on the fair market value of our common stock at the market value on the date of such dividend, and will be paid in additional shares on the vesting date of the underlying award.dates. The vesting schedules for all deferred stock sharethese awards, and other unvested awards granted during theto our Named Executive Officers prior to fiscal year 2009 are disclosed by individual in the footnotes to the Outstanding Equity Awards at September 30, 2009 table. |
|
(4) | | Stock options were granted pursuant to our Stock Incentive Plan during the fiscal year ended September 30, 2009 related to fiscal 2008. The maximum contractual life of the options is ten years from the grant date and the awards will vest and become exercisable in four equal annual installments beginning on the first anniversary from the grant date. The vesting schedules for all unvested stock option awards, including awards granted during fiscal year 2009,2010, are disclosed in the footnotes to the Outstanding Equity Awards at September 30, 20092010 table. |
| |
(5) | 4) | The Compensation Committee sets the exercise prices of all stock options at the fair market value on the grant date. Our Stock Incentive Plan defines “fair market value” as the average of the high and low selling prices of our common stock on the New York Stock Exchange on the grant date or if the grant date is a non-trading day, then the next trading day thereafter. Due to the terms of our Stock Incentive Plan, it is possible that the exercise price could be less than the closing price of our common stock on the date of grant. For fiscal 2009, no instances of this nature occurred. |
| |
(6) | 5) | The valuationgrant date fair values of stock options, deferred stock sharesRSUs and performance share units isPSUs granted to our Named Executive Officers are based on the methodology set forth in Notes 1 and 1413 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended September 30, 2009, which was filed2010. |
| 6) | Amounts represent one-time executive sign-on stock options and RSUs that Messrs. Greisch and Stuckey and Ms. Lichtenstein each received in connection with their employment with us during fiscal year 2010. |
| 7) | According to Mr. Greisch’s Employment Agreement effective January 8, 2010, he received a grant of stock options with a grant date value of $2,000,000 using the Black-Scholes valuation method. However, according to existing SEC rules for this column, the grant date value for Mr. Greisch’s stock options is required to be computed in accordance with the SECexisting accounting guidance on November 24, 2009. stock-based compensation, which in our case is the Binomial valuation method. For further details, refer to the methodology set forth in Notes 1 and 13 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended September 30, 2010. |
| 8) | Amount represents a one-time grant of 8,599 RSUs to bring Mr. Miller’s total direct compensation closer to market total direct compensation for his position and level of responsibility. |
| 9) | In the case of Mr. de Maynadier and Ms. Dennis, amounts represent one-time executive retention RSU grants to ensure a smooth transition of the performance-basednew executive leadership team put into place by Mr. Greisch. Mr. de Maynadier’s executive retention RSU grant will not vest and will be forfeited due to his separation from Hill-Rom on December 31, 2010. |
| 10) | In the case of Mr. Soderberg, pursuant to the letter agreement dated September 17, 2009, he received a one-time grant of 8,599 RSUs. |
| 11) | In connection with their separations of employment from us on December 31, 2010, a portion of the unvested stock options, RSUs and PSUs outstanding as of September 30, 2010, for Messrs. Miller and de Maynadier will not vest and will be forfeited. |
| 12) | As a result of Mr. Tucholski’s resignation, effective June 1, 2010, he was not eligible to participate in our fiscal year 2010 STIC Program. However, in recognition of his contributions and years of service, we provided to Mr. Tucholski a one-time bonus in lieu of the 2010 STIC payment as part of his severance benefits, which is included in the “All Other Compensation” column of the Summary Compensation Table for the year ended September 30, 2010. In addition, all of the equity awards the grant date fair value indicated above is based on the maximum amount that was granted to each Named Executive Officer.Mr. Tucholski during fiscal year 2010 were forfeited on June 1, 2010. |
Outstanding Equity Awards at September 30, 20092010
The following table summarizes the number and terms of stock option, deferred stock share and performance share unitsPSUs outstanding for each of the Named Executive Officers as of September 30, 2009.2010.
(table on following page)
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| | Option Awards | Stock Awards |
| | Number of
Securities
Underlying
Unexercised
Options | Number of
Securities
Underlying
Unexercised
Options (1) | Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned Options | | Option
Exercise Price | | Number of
Shares or
Units of
Stock That
Have Not
Vested (2) | Market
Value of
Shares or
Units of
Stock That
Have Not
Vested (3) | Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested | Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested (3) |
| | |
| | |
| | | Option
Expiration
Date |
| Name | Option
Grant
Date (1) |
| | Exercisable | Unexercisable | | | | | | | |
| | | | | | | | | | | |
| John J. Greisch | | 207,987 | | 1/8/2010 | $23.92 | 1/8/2020 | 33,781 | $ 1,212,400 | - | |
| | | | | | | | | | | |
| Gregory N. Miller | 7,400 | | | | $27.09 | 11/9/2011 | | | | |
| | 4,625 | | | | $33.24 | 4/9/2012 | | | | |
| | 7,400 | | | | $25.67 | 12/4/2012 | | | | |
| | 2,775 | | | | $26.22 | 2/13/2013 | | | | |
| | 9,250 | | | | $31.48 | 12/3/2013 | | | | |
| | 14,800 | | | | $30.04 | 12/15/2014 | | | | |
| | 33,670 | | | | $26.46 | 11/30/2015 | | | | |
| | 24,605 | | | | $31.30 | 11/30/2016 | | | | |
| | 16,404 | 8,201 | | 12/5/2007 | $29.22 | 12/5/2017 | | | | |
| | | | 110,417 (6) | 4/1/2008 | $25.37 | 4/1/2018 | | | | |
| | 8,392 | 25,179 | | 12/2/2008 | $19.39 | 12/2/2018 | | | | |
| | | | 70,071 (5) | 12/2/2008 | $19.39 | 12/2/2018 | | | | |
| | | | 70,072 (5) | 12/2/2008 | $19.39 | 12/2/2018 | | | | |
| | | 27,086 | | 12/3/2009 | $23.26 | 12/3/2019 | 46,085 | $1,653,991 | 9,029 (7) | $324,051 |
| | | | | | | | | | | |
| Kimberly K. Dennis | 3,700 | | | | $33.24 | 4/9/2012 | | | | |
| | 27,750 | | | | $31.48 | 12/3/2013 | | | | |
| | 29,600 | | | | $30.04 | 12/15/2014 | | | | |
| | 21,090 | | | | $31.30 | 11/30/2016 | | | | |
| | | 7,708 | | 12/5/2007 | $29.22 | 12/5/2017 | | | | |
| | | | 57,292 (6) | 4/1/2008 | $25.37 | 4/1/2018 | | | | |
| | | 19,184 | | 12/2/2008 | $19.39 | 12/2/2018 | | | | |
| | | | 39,964 (5) | 12/2/2008 | $19.39 | 12/2/2018 | | | | |
| | | | 39,965 (5) | 12/2/2008 | $19.39 | 12/2/2018 | | | | |
| | | 15,170 | | 12/3/2009 | $23.26 | 12/3/2019 | 32,045 | $1,150,095 | 5,057 (7) | $181,496 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | | (b) | | | (c) | | | (d) | | | (e) | | | (f) | | | (g) | | | (h) | | | (i) | | | (j) | |
| | | | | | | Option Awards | | | | | | | | | | | Stock Awards | | | | |
| | | | | | | | | | | Equity | | | | | | | | | | | | | | | | | | | Equity | | | Equity Incentive | |
| | | | | | | | | | | Incentive | | | | | | | | | | | | | | | | | | | Incentive Plan | | | Plan Awards: | |
| | | | | | | | | | Plan Awards: | | | | | | | | | | | | | | | | | | | Awards: | | | Market or | |
| | | Number of | | | Number of | | | Number of | | | | | | | | | | | | | | | | | | Number of | | | Payout Value of | |
| | | Securities | | | Securities | | | Securities | | | | | | | | | | | Number of | | | Market Value | | | Unearned | | | Unearned | |
| | | Underlying | | | Underlying | | | Underlying | | | | | | | | | | | Shares or Units | | | of Shares or | | | Shares, Units or | | | Shares, Units or | |
| | | Unexercised | | | Unexercised | | | Unexercised | | | Option | | | | | | of Stock That | | | Units of Stock | | | Other Rights | | | Other Rights | |
| | | Options | | | Options | | | Unearned | | | Exercise | | | Option | | | Have Not | | | That Have Not | | | That Have Not | | | That Have Not | |
| | | # | | | # | | | Options | | | Price | | | Expiration | | | Vested (13) | | | Vested (1) | | | Vested | | | Vested (1) | |
| Name | | Exercisable | | | Unexercisable | | | # | | | $ | | | Date | | | # | | | $ | | | # | | | $ | |
| Peter H. Soderberg | | | 7,400 | | | | | | | | | | | $ | 33.28 | | | | 5/17/2012 | | | | | | | | | | | | | | | | | |
| | | | 7,400 | | | | | | | | | | | $ | 26.22 | | | | 2/13/2013 | | | | | | | | | | | | | | | | | |
| | | | 108,808 | | | | | | | | | | | $ | 29.60 | | | | 3/20/2016 | | | | | | | | | | | | | | | | | |
| | | | 82,776 | | | | 41,387 | (2) | | | | | | $ | 32.51 | | | | 12/14/2016 | | | | | | | | | | | | | | | | | |
| | | | 49,735 | | | | 99,469 | (2) | | | | | | $ | 29.33 | | | | 12/6/2017 | | | | | | | | | | | | | | | | | |
| | | | | | | | 179,041 | (2) | | | | | | $ | 19.39 | | | | 12/2/2018 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 220,853 | (9) | | $ | 25.37 | | | | 4/1/2018 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 95,527 | (10) | | $ | 19.39 | | | | 12/2/2018 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 95,528 | (10) | | $ | 19.39 | | | | 12/2/2018 | | | | 138,566 | (3)(4) | | $ | 3,017,967 | | | | 58,851 | (10)(11) | | $ | 1,281,775 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gregory N. Miller | | | 7,400 | | | | | | | | | | | $ | 27.09 | | | | 11/9/2011 | | | | | | | | | | | | | | | | | |
| | | | 4,625 | | | | | | | | | | | $ | 33.24 | | | | 4/9/2012 | | | | | | | | | | | | | | | | | |
| | | | 7,400 | | | | | | | | | | | $ | 25.67 | | | | 12/4/2012 | | | | | | | | | | | | | | | | | |
| | | | 2,775 | | | | | | | | | | | $ | 26.22 | | | | 2/13/2013 | | | | | | | | | | | | | | | | | |
| | | | 9,250 | | | | | | | | | | | $ | 31.48 | | | | 12/3/2013 | | | | | | | | | | | | | | | | | |
| | | | 14,800 | | | | | | | | | | | $ | 30.04 | | | | 12/15/2014 | | | | | | | | | | | | | | | | | |
| | | | 33,670 | | | | | | | | | | | $ | 26.46 | | | | 11/30/2015 | | | | | | | | | | | | | | | | | |
| | | | 16,404 | | | | 8,201 | (2) | | | | | | $ | 31.30 | | | | 11/30/2016 | | | | | | | | | | | | | | | | | |
| | | | 8,202 | | | | 16,403 | (2) | | | | | | $ | 29.22 | | | | 12/5/2017 | | | | | | | | | | | | | | | | | |
| | | | | | | | 33,571 | (2) | | | | | | $ | 19.39 | | | | 12/2/2018 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 110,417 | (9) | | $ | 25.37 | | | | 4/1/2018 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 70,071 | (10) | | $ | 19.39 | | | | 12/2/2018 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 70,072 | (10) | | $ | 19.39 | | | | 12/2/20018 | | | | 32,144 | (3)(5) | | $ | 700,096 | | | | — | (11) | | $ | 0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Patrick de Maynadier | | | 27,750 | | | | | | | | | | | $ | 30.85 | | | | 2/1/2012 | | | | | | | | | | | | | | | | | |
| | | | 9,250 | | | | | | | | | | | $ | 33.24 | | | | 4/9/2012 | | | | | | | | | | | | | | | | | |
| | | | 9,250 | | | | | | | | | | | $ | 25.67 | | | | 12/4/2012 | | | | | | | | | | | | | | | | | |
| | | | 33,300 | | | | | | | | | | | $ | 31.48 | | | | 12/3/2013 | | | | | | | | | | | | | | | | | |
| | | | 33,300 | | | | | | | | | | | $ | 30.04 | | | | 12/15/2014 | | | | | | | | | | | | | | | | | |
| | | | 27,417 | | | | | | | | | | | $ | 26.46 | | | | 11/30/2015 | | | | | | | | | | | | | | | | | |
| | | | 14,060 | | | | 7,030 | (2) | | | | | | $ | 31.30 | | | | 11/30/2016 | | | | | | | | | | | | | | | | | |
| | | | 7,709 | | | | 15,416 | (2) | | | | | | $ | 29.22 | | | | 12/5/2017 | | | | | | | | | | | | | | | | | |
| | | | | | | | 31,286 | (2) | | | | | | $ | 19.39 | | | | 12/2/2018 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 87,500 | (9) | | $ | 25.37 | | | | 4/1/2018 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 51,687 | (10) | | $ | 19.39 | | | | 12/2/2018 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 51,688 | (10) | | $ | 19.39 | | | | 12/2/2018 | | | | 27,867 | (3)(7) | | $ | 606,943 | | | | — | (11) | | $ | 0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| C. Jeffrey Kao | | | 11,717 | | | | 5,858 | (2) | | | | | | $ | 35.77 | | | | 5/24/2017 | | | | | | | | | | | | | | | | | |
| | | | 7,030 | | | | 14,060 | (2) | | | | | | $ | 29.22 | | | | 12/5/2017 | | | | | | | | | | | | | | | | | |
| | | | 10,200 | | | | 19,800 | (2) | | | | | | $ | 31.35 | | | | 5/27/2018 | | | | | | | | | | | | | | | | | |
| | | | | | | | 34,538 | (2) | | | | | | $ | 19.39 | | | | 12/2/2018 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 81,250 | (9) | | $ | 25.37 | | | | 4/1/2018 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 45,293 | (10) | | $ | 19.39 | | | | 12/2/2018 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 45,294 | (10) | | $ | 19.39 | | | | 12/2/2018 | | | | 20,846 | (3)(8) | | $ | 454,026 | | | | 7,114 | (11)(12) | | $ | 154,943 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| John H. Dickey | | | 3,700 | | | | | | | | | | | $ | 24.51 | | | | 1/15/2011 | | | | | | | | | | | | | | | | | |
| | | | 7,400 | | | | | | | | | | | $ | 27.09 | | | | 11/9/2011 | | | | | | | | | | | | | | | | | |
| | | | 3,700 | | | | | | | | | | | $ | 33.24 | | | | 4/9/2012 | | | | | | | | | | | | | | | | | |
| | | | 7,400 | | | | | | | | | | | $ | 25.67 | | | | 12/4/2012 | | | | | | | | | | | | | | | | | |
| | | | 9,250 | | | | | | | | | | | $ | 31.48 | | | | 12/3/2013 | | | | | | | | | | | | | | | | | |
| | | | 12,950 | | | | | | | | | | | $ | 30.04 | | | | 12/15/2014 | | | | | | | | | | | | | | | | | |
| | | | 16,280 | | | | | | | | | | | $ | 26.47 | | | | 1/31/2016 | | | | | | | | | | | | | | | | | |
| | | | 11,100 | | | | | | | | | | | $ | 26.46 | | | | 11/30/2015 | | | | | | | | | | | | | | | | | |
| | | | 14,060 | | | | 7,030 | (2) | | | | | | $ | 31.30 | | | | 11/30/2016 | | | | | | | | | | | | | | | | | |
| | | | 7,709 | | | | 15,416 | (2) | | | | | | $ | 29.22 | | | | 12/5/2017 | | | | | | | | | | | | | | | | | |
| | | | | | | | 22,061 | (2) | | | | | | $ | 19.39 | | | | 12/2/2018 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 57,292 | (9) | | $ | 25.37 | | | | 4/1/2018 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 33,091 | (10) | | $ | 19.39 | | | | 12/2/2018 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 33,091 | (10) | | $ | 19.39 | | | | 12/2/2018 | | | | 24,699 | (3)(6) | | $ | 537,944 | | | | — | (11) | | $ | 0 | |
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| Perry Stuckey III | | 12,000 | | 8/2/2010 | $34.28 | 8/2/2020 | 9,948 | $357,034 | | |
| | | | | | | | | | | |
| Susan R. Lichtenstein | | 19,625 | | 5/6/2010 | $31.69 | 5/6/2020 | 7,939 | $284,931 | | |
| | | | | | | | | | | |
| Peter H. Soderberg | 7,400 | | | | $33.28 | 5/17/2012 | | | | |
| | 7,400 | | | | $26.22 | 2/13/2013 | | | | |
| | 108,808 | | | | $29.60 | 3/20/2016 | | | | |
| | 124,163 | | | | $32.51 | 12/14/2016 | | | | |
| | 99,470 | 49,734 | | 12/6/2007 | $29.33 | 12/6/2017 | | | | |
| | | | 220,853 (6) | 4/1/2008 | $25.37 | 4/1/2018 | | | 10,341 (6) | $371,138 |
| | 44,760 | 134,281 | | 12/2/2008 | $19.39 | 12/2/2018 | | | | |
| | | | 95,527 (5) | 12/2/2008 | $19.39 | 12/2/2018 | | | | |
| | | | 95,528 (5) | 12/2/2008 | $19.39 | 12/2/2018 | 123,970 | $4,449,283 | 48,510 (5) | $1,741,024 |
| | | | | | | | | | | |
| Patrick D. de Maynadier | | 7,708 | | 12/5/2007 | $29.22 | 12/5/2017 | | | | |
| | | | 87,500 (6) | 4/1/2008 | $25.37 | 4/1/2018 | | | | |
| | | 23,465 | | 12/2/2008 | $19.39 | 12/2/2018 | | | | |
| | | | 51,687 (5) | 12/2/2008 | $19.39 | 12/2/2018 | | | | |
| | | | 51,688 (5) | 12/2/2008 | $19.39 | 12/2/2018 | | | | |
| | | 18,541 | | 12/3/2009 | $23.26 | 12/3/2019 | 39,651 | $1,423,074 | 6,181 (7) | $221,836 |
| | | | | | | | | | | |
Gregory J. Tucholski (4) | | | | | | | | | | |
| | | | | | | | | | | |
| | | |
(1) | | Market Value is determined by multiplying the number of unvested deferred stock shares and/or performance share units by $21.78, the closing price per share of Hill-Rom common stock on September 30, 2009, as reported on the New York Stock Exchange. |
| | |
(2) | 1) | Unvested stock options based solely on continued employment will become exercisable in accordance with the following vesting schedule:schedules, except for Messrs. Miller, Stuckey, Soderberg and de Maynadier. In connection with their separations of employment from us, a portion of the unvested stock options outstanding as of September 30, 2010, for Messrs. Miller and de Maynadier will not vest and will be forfeited. Mr. Soderberg’s outstanding stock options are expected to fully vest on or before April 30, 2011, his retirement date. No options vested for Mr. Stuckey prior to his separation date. |
| | |
Grant Date | | Remaining Vesting SchedulesSchedule (as of 9/30/2009)2010) |
12/8/2/20082010 | | Four equal annual installments beginning on 12/8/2/2009, 12/2/2010, 12/2/2011 and 12/2/2012.2011. |
5/27/6/2010 | | Four equal annual installments beginning on 5/6/2011. |
| 1/8/2010 | | Four equal annual installments beginning on 1/8/2011. |
| 12/3/2009 | | Four equal annual installments beginning on 12/3/2010. |
| 12/2/2008 | | TwoThree equal annual installments beginning on 5/27/2010 and 5/27/2011.12/2/2010. |
| 12/6/2007 | | Two equal annual installmentsFully vest on 12/6/2009 and 12/6/2010. |
| 12/5/2007 | | Two equal annual installments on 12/5/2009 and 12/5/2010. |
5/24/2007 | | Fully vest on 5/24/2010. |
12/14/2006 | | Fully vest on 12/14/2009. |
11/30/2006 | | Fully vest on 11/30/2009.5/2010. |
| | | |
(3) | 2) | Unvested deferred stock sharesRSUs based solely on continued employment will vest in accordance with the following vesting schedule:schedules, except for Messrs. Miller, Soderberg and de Maynadier. In connection with their separations from Hill-Rom, a portion of the unvested RSUs outstanding as of September 30, 2010, for Messrs. Miller and de Maynadier will not vest and will be forfeited. Mr. Soderberg’s outstanding RSUs are expected to fully vest on or before April 30, 2011, his retirement date. The amounts include reinvested dividends. |
| | |
Grant Date | | Remaining Vesting Schedules (as of 9/30/2009)2010) |
| 8/2/2010 | | Fully vest on 8/3/2013. |
| 5/6/2010 | | Fully vest on 5/7/2013. |
| 4/20/2010 | | Fully vest on 4/21/2013. |
| 1/8/2010 | | 20% on 1/9/2012, 30% on 1/9/2013 and 50% on 1/9/2014. |
| 12/3/2009 | | Except for Mr. Soderberg’s one-time grant, which will vest 100% on 12/4/2010, the other Named Executive Officers’ grants will vest 25% each on 12/4/2010, 12/4/2011, 12/4/2012 and 12/4/2013. |
| 12/2/2008 | | 50%, 25% on 12/3/2010 and 25% each on 12/3/2010; 12/3/2011 and 12/3/2012, respectively. |
4/1/2008 | | Fully vest on 4/2/2010. |
12/6/2007 | | 20%, 25%, 25% and 30% on 12/7/2009, 12/7/2010, 12/7/2011, and 12/7/2012, respectively.2012. |
| 12/5/2007 | | 20%, 25%, 25% each on 12/6/2010 and 12/6/2011 and 30% on 12/6/2009, 12/6/2010, 12/6/2011, and 12/6/2012. |
5/24/2007 | | 25%, 25% and 30% on 5/25/2010, 5/25/2011, and 5/25/2012, respectively. |
12/14/2006 | | 25%, 25% and 30% on 12/15/2009, 12/15/2010, 12/15/2011, respectively. |
| 11/30/2006 | | 25%, 25% on 12/1/2010 and 30% on 12/1/2009, 12/1/2010, 12/1/2011, respectively. |
3/20/2006 | | 25% and 30% on 3/21/2010 and 3/21/2011, respectively. |
1/31/2006 | | 25% and 30% on 2/1/2010 and 2/1/2011, respectively.2011. |
| 11/30/2005 | | 25% and 30% on 12/1/2009 and 12/1/2010, respectively. |
12/15/2004 | | Fully vest on 12/16/2009.1/2010. |
| | |
(4) | | Mr. Soderberg has been awarded the following deferred stock awards: |
| | | | | | | | | |
| | | | | | | Deferred | |
| | | | | | | Stock Shares | |
| | | | | | | Not Vested as | |
| | | Deferred | | | of September | |
| | | Stock | | | 30, 2009 (with | |
| | | Shares | | | Dividend | |
| Award Date | | Awarded | | | Reinvestment) | |
| December 2, 2008 | | | 51,999 | | | | 53,450 | |
| April 1, 2008 | | | 30 | | | | 30 | |
| December 6, 2007 | | | 37,010 | | | | 38,742 | |
| December 14, 2006 | | | 30,767 | | | | 26,268 | |
| March 20, 2006 | | | 33,791 | | | | 20,076 | |
| | | | | | | | |
| | | | | | | | 138,566 | |
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| | 3) | |
(5) | | Mr. Miller has been awardedMarket Value is determined by multiplying the following deferrednumber of unvested RSUs and/or PSUs by $35.89, the closing price per share of our common stock awards:on September 30, 2010 |
| | | | | | | | | |
| | | | | | | Deferred | |
| | | | | | | Stock Shares | |
| | | | | | | Not Vested as | |
| | | Deferred | | | of September | |
| | | Stock | | | 30, 2009 (with | |
| | | Shares | | | Dividend | |
| Award Date | | Awarded | | | Reinvestment) | |
| December 2, 2008 | | | 9,750 | | | | 10,022 | |
| April 1, 2008 | | | 30 | | | | 30 | |
| December 5, 2007 | | | 8,326 | | | | 8,717 | |
| November 30, 2006 | | | 8,326 | | | | 7,110 | |
| November 30, 2005 | | | 8,900 | | | | 5,337 | |
| December 15, 2004 | | | 2,775 | | | | 928 | |
| | | | | | | | |
| | | | | | | | 32,144 | |
| | |
(6) | | Mr. Dickey has been awarded the following deferred stock awards: |
| | | | | | | | | |
| | | | | | | Deferred | |
| | | | | | | Stock Shares | |
| | | | | | | Not Vested as | |
| | | Deferred | | | of September | |
| | | Stock | | | 30, 2009 (with | |
| | | Shares | | | Dividend | |
| Award Date | | Awarded | | | Reinvestment) | |
| December 2, 2008 | | | 6,408 | | | | 6,587 | |
| April 1, 2008 | | | 30 | | | | 30 | |
| December 5, 2007 | | | 6,476 | | | | 6,780 | |
| November 30, 2006 | | | 5,551 | | | | 4,740 | |
| January 31, 2006 | | | 4,163 | | | | 2,483 | |
| November 30, 2005 | | | 3,701 | | | | 2,220 | |
| December 15, 2004 | | | 3,701 | | | | 1,240 | |
| December 15, 2004 | | | 1,850 | | | | 619 | |
| | | | | | | | |
| | | | | | | | 24,699 | |
| | |
(7) | | Mr. de Maynadier has been awarded the following deferred stock awards: |
| | | | | | | | | |
| | | | | | | Deferred | |
| | | | | | | Stock Shares | |
| | | | | | | Not Vested as | |
| | | Deferred | | | of September | |
| | | Stock | | | 30, 2009 (with | |
| | | Shares | | | Dividend | |
| Award Date | | Awarded | | | Reinvestment) | |
| December 2, 2008 | | | 9,087 | | | | 9,341 | |
| April 1, 2008 | | | 30 | | | | 30 | |
| December 5, 2007 | | | 6,476 | | | | 6,780 | |
| November 30, 2006 | | | 6,476 | | | | 5,530 | |
| November 30, 2005 | | | 7,216 | | | | 4,328 | |
| December 15, 2004 | | | 5,551 | | | | 1,858 | |
| | | | | | | | |
| | | | | | | | 27,867 | |
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| | 4) | |
(8) | | As a result of Mr. Kao has been awarded the following deferred stock awards:Tucholski’s resignation, effective June 1, 2010, no equity awards were outstanding as of September 30, 2010. |
| | | | | | | | | |
| | | | | | | Deferred | |
| | | | | | | Stock Shares | |
| | | | | | | Not Vested as | |
| | | Deferred | | | of September | |
| | | Stock | | | 30, 2009 (with | |
| | | Shares | | | Dividend | |
| Award Date | | Awarded | | | Reinvestment) | |
| December 2, 2008 | | | 10,031 | | | | 10,311 | |
| April 1, 2008 | | | 30 | | | | 30 | |
| December 5, 2007 | | | 5,551 | | | | 5,811 | |
| May 24, 2007 | | | 5,551 | | | | 4,694 | |
| | | | | | | | |
| | | | | | | | 20,846 | |
| | 5) | Represents performance-based options (and in the case of Mr. Soderberg performance-based options and PSUs in excess of the annual stock option limit) granted on December 2, 2008. In connection with their separations from Hill-Rom on December 31, 2010, a portion of the unvested performance-based stock options outstanding as of September 30, 2010, for Messrs. Miller and de Maynadier will not vest and will be forfeited. Mr. Soderberg’s outstanding performance-based stock options are expected to vest on or before April 30, 2011, his retirement date, assuming the performance goals have been achieved. |
(9) | | Performance-based6) | Represents performance-based stock options (and in the case of Mr. Soderberg, performance-based options and performance share unitsPSUs in excess of the annual stock option limit) were granted on April 1, 2008. Vesting ofAs the grants is contingent uponperformance goals were not achieved during the achievement of cumulative three-year performance targets and corresponding service requirements. Performance targets operate independently and each is set at a threshold, target and maximum level, with the number of options ultimately vesting increasing at each level of performance attained. Threshold is the minimum level of performance required for partial vesting of the option. In the case of Mr. Soderberg, all performance based stock options must vest prior to the vesting of performance share units.period ended September 30, 2010, these awards will not vest. |
| |
(10)7) | | The performance-based options (and in the case of Mr. Soderberg performance-based options and performance share units in excess of the annual stock option limit) wereRepresents PSUs granted on December 2, 2008. The total award was divided evenly into two separate grants. 50%3, 2009. As mentioned previously, in connection with their separations of employment from us on December 31, 2010, a portion of the total award is based on Hill-Rom achieving three-year performance targets related to cumulative revenue and cumulative earnings per share. The remaining 50%unvested PSUs outstanding as of the total award is based on Hill-Rom achieving three-year performance targets related to relative total shareholder return. All other terms of the two grants are the same. If the performance goals are met at the maximum level, these performance-based stock option awards will fully vest at the end of fiscal 2011. In the case of Mr. Soderberg, all performance-based stock options must vest prior to the vesting of performance share units. |
|
(11) | | Excluded from this table are unvested performance share units that were granted on April 5, 2007 (and in the case of Mr. Kao, his performance share unit award was granted on May 24, 2007). Vesting of these grants is based on continued employment and achievement of certain one, two, and three-year performance targets through September 30, 2009. The performance targets were2010, for Messrs. Miller and de Maynadier will not achieved and the remaining awards were forfeited. |
|
(12) | | In the case of Mr. Kao, these shares represent performance share units granted on December 2, 2008. Subsequent to September 30, 2009, this award vested 100% on December 3, 2009 based on Mr. Kao’s continued employment and achievement of certain one-year non-financial performance criteria. |
|
(13) | | Amounts in this column include dividend equivalents. Dividends paid on Hill-Rom common stock will be deemed to have been paid with regard to the deferred stock shares awarded and deemed to be reinvested in Hill-Rom common stock at the market value on the date of such dividend,vest and will be paid in additional shares on the vesting date of the underlying award. Generally, vesting is contingent upon continued employment. In the case of retirement, death or disability, vesting may be accelerated for options and deferred stock awards held over one year from issue date of award.forfeited. |
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Option Exercises and Stock Vested For Fiscal Year Ended September 30, 20092010
The following table summarizes the number of stock option awards exercised and the value realized upon exercise during the fiscal year ended September 30, 20092010 for the Named Executive Officers, as well as the number of stock awards vested and the value realized upon vesting.
| | | | | | | | | | | | | | | | | |
| (a) | | (b) | | | (c) | | | (d) | | | (e) | |
| | | Option Awards | | | Stock Awards | |
| | | Number of | | | | | | | Number of | | | | |
| | | Shares | | | | | | | Shares | | | | |
| | | Acquired on | | | Value Realized | | | Acquired on | | | Value Realized | |
| | | Exercise | | | on Exercise | | | Vesting | | | on Vesting | |
| Name | | # | | | $ (1) | | | # (2) | | | $ (3) | |
| | | | | | | | | | | | | | | | | |
| Peter H. Soderberg | | | N/A | | | | N/A | | | | 16,568 | | | $ | 239,543 | |
| | | | | | | | | | | | | | | | | |
| Gregory N. Miller | | | N/A | | | | N/A | | | | 6,401 | | | $ | 124,647 | |
| | | | | | | | | | | | | | | | | |
| Patrick D. de Maynadier | | | N/A | | | | N/A | | | | 7,712 | | | $ | 149,349 | |
| | | | | | | | | | | | | | | | | |
| C. Jeffrey Kao | | | N/A | | | | N/A | | | | 1,734 | | | $ | 29,736 | |
| | | | | | | | | | | | | | | | | |
| John H. Dickey | | | N/A | | | | N/A | | | | 6,537 | | | $ | 119,863 | |
| | Option Awards | Stock Awards |
| Name | Number of Shares Acquired on Exercise | Value Realized on Exercise | Number of Shares Acquired on Vesting (1) | Value Realized on Vesting |
| | | | | |
| John J. Greisch | - | - | - | - |
| | | | | |
| Gregory N. Miller | - | - | 7,353 | $168,503 |
| | | | | |
| Kimberly K. Dennis | 69,269 | $595,943 | 6,385 | $146,380 |
| | | | | |
| Perry Stuckey III | - | - | - | - |
| | | | | |
| Susan R. Lichtenstein | - | - | - | - |
| | | | | |
| Peter H. Soderberg (2) | - | - | 31,752 | $822,893 |
| | | | | |
| Patrick D. de Maynadier | 184,595 | $497,841 | 6,947 | $159,320 |
| | | | | |
| Gregory J. Tucholski | 47,518 | $167,811 | 4,320 | $99,443 |
| | | |
(1) | | There were no stock option exercises by our Named Executive Officers during fiscal year 2009. |
|
(2) | 1) | The pre-tax amounts indicated include a portion of dividends accrued and paid on the date the stock awards vested or if the vesting date was a non-trading day, then the next trading day thereafter. The vesting schedules for all stock awards are disclosedvested. |
| 2) | Also included in the footnotesamount of shares acquired by Mr. Soderberg are 6,695 vested deferred stock shares, including dividend equivalents, which were originally granted to him in fiscal years 2004 and 2005 when he served as an outside member of our Board. These vested deferred stock shares were distributed during fiscal year 2010 on the Outstanding Equity Awards at September 30, 2009 table. |
|
(3) | | Thesix-month anniversary following the date that Mr. Soderberg ceased being a member of our Board and the value realized on vesting was based onof $203,796 is included in the pre-tax number of stock awards converted into Hill-Rom common stock multiplied by the average of the high and low selling prices of Hill-Rom common stock as reported on the New York Stock Exchange, on the respective date the stock awards vested or if the vesting date was a non-trading day, then the next trading day thereafter.table above. |
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Pension Benefits at September 30, 20092010
The following table quantifies the pension benefits expected to be paid from the Hill-Rom, Holdings, Inc. Pension Plan (the “Pension Plan”) and the Hill-Rom Holdings, Inc. Supplemental Executive Retirement Plan (the “SERP”). The terms of each are described below.
| | | | | | | | | | | | | | | | | |
| (a) | | (b) | | | (c) | | | (d) | | | (e) | |
| | | | | | | Number of | | | Present Value | | | Payments | |
| | | | | | | Years Credited | | | of Accumulated | | | During Last | |
| | | Plan Name | | | Service | | | Benefit | | | Fiscal Year | |
| Name | | (1) (2) | | | # (3) | | | $ (4) | | | $ | |
| | | | | | | | | | | | | | | | | |
| Peter H. Soderberg (5) | | | N/A | | | | N/A | | | | N/A | | | | N/A | |
| | | | | | | | | | | | | | | | | |
| Gregory N. Miller (6) | | Pension Plan | | | | 2 | | | $ | 22,383 | | | $ | 0 | |
| | | | | | | | | | | | | | | | | |
| Patrick D. de Maynadier | | Pension Plan | | | | 7 | | | $ | 106,269 | | | $ | 0 | |
| | | SERP | | | | 7 | | | $ | 168,607 | | | $ | 0 | |
| | | | | | | | | | | | | | | | | |
| John H. Dickey | | Pension Plan | | | | 28 | | | $ | 553,882 | | | $ | 0 | |
| | | SERP | | | | 28 | | | $ | 263,915 | | | $ | 0 | |
| | | | | | | | | | | | | | | | | |
| C. Jeffrey Kao (7) | | | N/A | | | | N/A | | | | N/A | | | $ | 0 | |
| Name | Plan Name (1) (2) | Number of Years Credited Service | Present Value of Accumulated Benefit (3) | Payments During Last Fiscal Year |
| | | | | |
| John J. Greisch (4) | - | - | - | - |
| | | | | |
| Gregory N. Miller (5) | Pension Plan | 2 | $26,210 | - |
| | | | | |
| Kimberly K. Dennis | Pension Plan | 21 | $278,294 | - |
| | SERP | 21 | $225,288 | - |
| | | | | |
| Perry Stuckey III (4) | - | - | - | - |
| | | | | |
| Susan R. Lichtenstein (4) | - | - | - | - |
| | | | | |
| Peter H. Soderberg (4) | - | - | - | - |
| | | | | |
| Patrick D. de Maynadier | Pension Plan | 8 | $145,394 | - |
| | SERP | 8 | $225,006 | - |
| | | | | |
| Gregory J. Tucholski (4) | - | - | - | - |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
