Definitive Proxy Statement
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
Hill-Rom Holdings, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of its
filing. |
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HILL-ROM HOLDINGS, INC.
NOTICE OF ANNUAL MEETING
To Be Held March 4, 2010
The annual meeting of shareholders of Hill-Rom Holdings, Inc., an Indiana corporation, will be
held at the offices of Hill-Rom Holdings, Inc., 1069 State Route 46 East, Batesville, Indiana
47006, on Thursday, March 4, 2010, at 10:00 a.m., Eastern Standard Time, for the following
purposes:
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To elect five members to the Board of Directors nominated by the Board
of Directors; |
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To consider and vote on a proposal recommended by the Board of
Directors to amend the Amended Articles of Incorporation of Hill-Rom Holdings,
Inc. to provide for the annual election of the entire Board of Directors; |
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To consider and vote on a proposal recommended by the Board of
Directors to amend the Amended Articles of Incorporation of Hill-Rom Holdings,
Inc. to eliminate all supermajority voting provisions; |
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To consider and vote on a proposal recommended by the Board of
Directors to approve a policy providing for an annual non-binding advisory
shareholder vote on executive compensation; and |
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To ratify the appointment of PricewaterhouseCoopers LLP as the
independent registered public accounting firm of Hill-Rom Holdings, Inc. |
The Board of Directors has fixed the close of business on December 28, 2009, as the record
date for determining which shareholders are entitled to notice of and to vote at the meeting.
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By Order of the Board of Directors |
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Patrick D. de Maynadier |
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Secretary |
January 15, 2010
HILL-ROM HOLDINGS, INC.
PROXY STATEMENT
This proxy statement relates to the solicitation by the Board of Directors of Hill-Rom
Holdings, Inc. (Hill-Rom, we, us or our), 1069 State Route 46 East, Batesville, Indiana
47006, telephone (812) 934-7777, of proxies for use at the annual meeting of Hill-Roms
shareholders to be held at Hill-Roms offices (at the address shown above), on Thursday, March 4,
2010, at 10:00 a.m., Eastern Standard Time, and at any adjournments of the meeting. This proxy
statement and the enclosed form of proxy were mailed initially to shareholders on or about January
15, 2010.
Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to Be
Held on March 4, 2010.
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The proxy statement and annual report to shareholders are available at
www.proxyvote.com. |
TABLE OF CONTENTS
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A-1 |
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B-1 |
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-i-
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Shareholders holding shares of Hill-Rom common stock as of the close of business on December
28, 2009, the record date, are entitled to vote at the annual meeting. You have one vote for each
share of common stock held as of the record date, which may be voted on each proposal presented at
the annual meeting.
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What is the record date and what does it mean? |
The record date for the annual meeting is December 28, 2009. The record date was established
by the Board of Directors as required by our Amended and Restated Code of By-Laws and Indiana law.
Owners of record of our common stock at the close of business on the record date are entitled to:
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Receive notice of the annual meeting; |
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Attend the annual meeting in person if they so desire; and |
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Vote their shares of common stock on the proposals presented at the annual meeting. |
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How many shares of Hill-Rom common stock were outstanding on the record date? |
At the close of business on the record date, there were 62,756,886 shares of common stock
outstanding and entitled to vote at the annual meeting. Common stock is the only class of stock
entitled to vote.
4. |
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Why did I receive a notice in the mail regarding the Internet availability of proxy materials
this year instead of a full set of proxy materials? |
This year, pursuant to rules of the U.S. Securities and Exchange Commission (SEC) that allow
companies to furnish their proxy materials over the Internet, we have sent to many of our
shareholders an important Notice Regarding the Availability of Proxy Materials instead of a paper
copy of the proxy materials. Instructions on how to access the proxy materials over the Internet
or to request a paper copy may be found in that Notice. In addition, shareholders may request to
receive proxy materials in printed form by mail or electronically by e-mail on an ongoing basis. A
shareholders election to receive proxy materials by mail or e-mail will remain in effect until the
shareholder terminates the election.
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Why didnt I receive a Notice Regarding the Availability of Proxy Materials in the mail
regarding the Internet availability of proxy materials? |
We are providing shareholders who have previously requested to receive paper copies of the
proxy materials and certain other shareholders with paper copies of the proxy materials instead of
a Notice Regarding the Availability of Proxy Materials. If you would like to reduce the costs
incurred by us in mailing proxy materials, you can consent to receiving all future proxy
statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up
for electronic delivery, follow the instructions provided with your proxy materials and on your
proxy card or voting instruction card to vote using the Internet or go to
www.enroll.icsdelivery.com/hrc. When prompted, indicate that you agree to receive or access
shareholder communications electronically in the future.
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Can I vote my shares by filling out and returning the Notice Regarding the Availability of
Proxy Materials? |
No. The Notice will, however, provide instructions on how to vote by telephone, by Internet,
by requesting and returning a paper proxy card, or by submitting a ballot in person at the annual
meeting.
-1-
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How can I access the proxy materials over the Internet? |
You
can view the proxy materials for the annual meeting on the Internet
at www.proxyvote.com.
Please have your 12 digit control number available. Your 12 digit control number can be found on
your Notice Regarding the Availability of Proxy Materials. If you received a paper copy of your
proxy materials, your 12 digit control number can be found on your proxy card or voting instruction
form.
Our
proxy materials are also available on our website at
www.hill-rom.com.
You are voting on the matters identified in the Notice of Annual Meeting on the front cover of
this proxy statement.
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How does the Board recommend that I vote? |
The Board recommends that you vote FOR each of the nominees for director and FOR each of the
other proposals.
Your vote is very important regardless of the number of shares you hold. The Board strongly
encourages you to exercise your right to vote as a Hill-Rom shareholder.
You may vote by any of the following methods:
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By Telephone or Internet If you have telephone or Internet access, you may submit
your proxy vote by following the instructions provided in the Notice Regarding the
Availability of Proxy Materials, or if you received a printed version of the proxy
materials by mail, by following the instructions provided with your proxy materials and
on your proxy card or voting instruction form. |
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By Mail You may submit your proxy vote by mail by signing a proxy card if your
shares are registered or, for shares held beneficially in street name, by following the
voting instructions included by your broker, trustee or nominee, and mailing it in the
enclosed envelope. If you provide specific voting instructions, your shares will be
voted as you have instructed. In order to vote by mail, you need either download a
copy of the proxy card from the Internet, or request a hard copy of the proxy statement
and proxy card, as described in the Notice Regarding the Availability of Proxy
Materials. |
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In Person at the Annual Meeting |
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Shareholders of record. If your shares are registered directly
in your name with our transfer agent, Computershare Trust Company, N.A., you
are considered, with respect to those shares, the shareholder of record. As the
shareholder of record, you have the right to vote in person at the annual
meeting. |
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Street name shareholders. If your shares are held in a
brokerage account or by another nominee or trustee, you are considered the
beneficial owner of shares held in street name. As the beneficial owner, you
are also invited to attend the annual meeting. Since a beneficial owner is not
the shareholder of record, you may not vote these shares in person at the
meeting unless you obtain a legal proxy from your broker, trustee or nominee
that holds your shares, giving you the right to vote the shares at the meeting.
See question 18, Who can attend the annual meeting? below for additional
information. |
-2-
12. |
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If I vote by telephone or Internet and received a proxy card in the mail, do I need to return
my proxy card? |
No.
13. |
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Can I change my vote? |
If you are a shareholder of record, you may revoke your proxy at any time before the voting
polls are closed at the annual meeting, by the following methods:
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voting at a later time by telephone or Internet; |
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writing our Corporate Secretary, Patrick D. de Maynadier, Hill-Rom Holdings, Inc.,
1069 State Route 46 East, Batesville, Indiana 47006; or |
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giving notice of revocation to the Inspector of Election at the annual meeting. |
If you are a street name shareholder and you vote by proxy, you may later revoke your proxy by
informing the holder of record in accordance with that entitys procedures.
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What happens if I do not specify a choice for a proposal when returning a proxy? |
You should specify your choice for each proposal on your proxy card or voting instruction
form. Shares represented by proxies will be voted in accordance with the instructions given by the
shareholders. If you are a shareholder of record and your proxy card is signed and returned
without voting instructions, it will be voted according to the recommendation of the Board of
Directors.
If you are a beneficial/street name shareholder and fail to provide voting instructions, your
broker, bank or other holder of record is permitted to vote your shares on the proposal to amend
our Amended Articles of Incorporation to provide for the annual election of the entire Board of
Directors, the proposal to provide for an annual non-binding advisory shareholder vote on executive
compensation and the ratification of PricewaterhouseCoopers LLP as our independent registered
public accounting firm. However, the record holder may not vote on the election of directors or
the proposal to amend our Amended Articles of Incorporation to eliminate all supermajority voting
provisions absent instructions from you. Without your voting instructions on these proposals, a
broker non-vote will occur. If you are a beneficial/street name shareholder and your proxy card
is signed and returned without voting instructions, it will be voted according to the
recommendation of the Board.
15. |
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What happens if other matters come up at the annual meeting? |
The matters described in the notice of annual meeting are the only matters we know of that
will be voted on at the annual meeting. If other matters are properly presented at the annual
meeting, the persons named in the enclosed proxy card or voting instruction form will vote your
shares according to their best judgment.
16. |
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Who will count the votes? |
A representative of Broadridge Financial Solutions, Inc., an independent tabulator appointed
by the Board of Directors, will count the votes and act as the Inspector of Election. The
Inspector of Election will have the authority to receive, inspect, electronically tally and
determine the validity of the proxies received.
A quorum is a majority of the outstanding shares of common stock and is required to hold the
annual meeting. A quorum is determined by counting shares of common stock present in person at the
annual meeting or represented by proxy. If you submit a properly executed proxy, you will be
considered part of the quorum even if you abstain from voting. Broker non-votes are treated as
present for the purpose of determining a quorum.
-3-
18. |
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Who can attend the annual meeting? |
Admission to the annual meeting is limited to shareholders of Hill-Rom, persons holding
validly executed proxies from shareholders who held Hill-Rom common stock on December 28, 2009, and
invited guests of Hill-Rom.
If you are a shareholder of Hill-Rom, you must bring certain documents with you in order to be
admitted to the annual meeting. The purpose of this requirement is to help us verify that you are
actually a shareholder of Hill-Rom. Please read the following rules carefully because they specify
the documents that you must bring with you to the annual meeting in order to be admitted. The
items that you must bring with you differ depending upon whether you are a record holder or hold
your stock in street name.
Proof of ownership of Hill-Rom stock must be shown at the door. Failure to provide adequate
proof that you were a shareholder on the record date may prevent you from being admitted to the
annual meeting.
If you were a record holder of Hill-Rom common stock on December 28, 2009, then you must bring
a valid government-issued personal identification (such as a drivers license or passport).
If a broker, bank, trustee or other nominee was the record holder of your shares of Hill-Rom
common stock on December 28, 2009, then you must bring:
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Valid government-issued personal identification (such as a drivers license or
passport), and |
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Proof that you owned shares of Hill-Rom common stock on December 28, 2009. |
Examples of proof of ownership include the following: (1) a letter from your bank or broker
stating that you owned Hill-Rom common stock on December 28, 2009; (2) a brokerage account
statement indicating that you owned Hill-Rom common stock on December 28, 2009; or (3) the voting
instruction form provided by your broker indicating that you owned Hill-Rom common stock on
December 28, 2009.
If you are a proxy holder for a shareholder of Hill-Rom, then you must bring:
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The validly executed proxy naming you as the proxy holder, signed by a shareholder
of Hill-Rom who owned shares of Hill-Rom common stock on December 28, 2009, and |
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Valid government-issued personal identification (such as a drivers license or
passport), and |
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If the shareholder whose proxy you hold was not a record holder of Hill-Rom common
stock on December 28, 2009, proof of the shareholders ownership of shares of Hill-Rom
common stock on December 28, 2009, in the form of a letter or statement from a bank,
broker or other nominee indicating that the shareholder owned Hill-Rom common stock on
December 28, 2009. |
You may not use cameras, recording equipment or other electronic devices during the annual
meeting.
19. |
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How many votes must each proposal receive to be adopted? |
Directors are elected by a plurality of the votes cast by shareholders entitled to vote, which
means that nominees who receive the greatest number of votes will be elected even if less than a
majority of the votes cast. However, our Corporate Governance Standards 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. The Board is 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. Hill-Rom will promptly disclose, in a Form 8-K, the
Boards decision regarding whether to accept the directors resignation offer and, if applicable,
the reason(s) for rejecting the resignation offer.
-4-
Under our Amended Articles of Incorporation, approval of each of the two proposals to amend
our Amended Articles of Incorporation requires the affirmative vote of at least two-thirds of the
outstanding shares of our common stock.
The proposal to provide for an annual non-binding advisory shareholder vote on executive
compensation and ratification of the appointment of the independent registered public accounting
firm will be approved if the votes cast favoring the action exceed the votes cast opposing the
action.
20. |
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How are votes, including broker non-votes and abstentions, counted? |
Votes are counted in accordance with our Amended and Restated Code of By-Laws and Indiana law.
A broker non-vote or abstention will be counted towards a quorum and as represented at the
meeting. A broker non-vote or abstention will not be counted in the election of directors or the
votes on the proposal to provide for an annual non-binding advisory shareholder vote on executive
compensation and ratification of the appointment of the independent registered public accounting
firm. With respect to the two proposals to amend our Amended Articles of Incorporation, broker
non-votes and abstentions will have the same effect as a vote against such proposals. Shares will
not be voted at the annual meeting if a properly executed proxy card covering those shares has not
been returned and the holder does not cast votes in respect of those shares in person at the annual
meeting.
21. |
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How can I view the shareholder list? |
A complete list of the registered shareholders entitled to vote at the annual meeting will be
available to view during the annual meeting. You may access this list at Hill-Roms offices at
1069 State Route 46 East, Batesville, Indiana 47006 during ordinary business hours during the five
business days immediately before the annual meeting.
22. |
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Who pays for the proxy solicitation related to the annual meeting? |
We do. In addition to sending you or making available to you these materials, some of our
directors and officers as well as management and non-management employees may contact you by
telephone, mail, e-mail or in person. You may also be solicited by means of press releases issued
by Hill-Rom, postings on our website, www.hill-rom.com, and advertisements in periodicals. None of
our officers or employees will receive any extra compensation for soliciting you. We have retained
Innisfree M&A Incorporated (Innisfree) to assist us in soliciting your proxy for an estimated fee
of $6,500, plus reasonable out-of-pocket expenses. Innisfree will ask brokers and other
custodians and nominees whether other persons are beneficial owners of Hill-Rom common stock. If
so, we will supply them with the Notice Regarding the Availability of Proxy Materials or proxy
materials for distribution to the beneficial owners. We will also reimburse banks, nominees,
fiduciaries, brokers and other custodians for their costs of sending the Notice Regarding the
Availability of Proxy Materials or proxy materials to the beneficial owners of Hill-Rom common
stock.
23. |
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If I want to submit a shareholder proposal for the 2011 annual meeting, when is it due and
how do I submit it? |
In order for shareholder proposals submitted pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934 to be presented at our 2011 annual meeting of shareholders and included in our
proxy statement and form of proxy relating to that meeting, such proposals must be submitted to the
Secretary of Hill-Rom at our principal offices in Batesville, Indiana not later than September 17,
2010.
In addition, our Amended and Restated Code of By-laws provides that for business to be brought
before a shareholders meeting by a shareholder or for nominations to the Board of Directors to be
made by a shareholder for consideration at a shareholders meeting, notice thereof must be received
by the Secretary of Hill-Rom at our principal offices not later than 100 days prior to the
anniversary of the immediately preceding annual meeting, or not later than November 24, 2010 for
the 2011 annual meeting of shareholders. The notice must also provide certain information set
forth in the Amended and Restated Code of By-laws.
-5-
24. |
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How can I obtain a copy of the Annual Report on Form 10-K? |
You may receive a hardcopy of proxy materials, including the Annual Report on Form 10-K, by
following the directions set forth on the Notice Regarding the Availability of Proxy Materials.
The Annual Report on Form 10-K is also available at on our website at
www.hill-rom.com.
25. |
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Where can I find the voting results of the annual meeting? |
We will announce preliminary voting results at the conclusion of the annual meeting and
publish the final voting results in a Form 8-K to be filed with the SEC within four business days
after the conclusion of the annual meeting.
-6-
PROPOSALS REQUIRING YOUR VOTE
Proposal No. 1 Election of Directors
Hill-Roms Articles of Incorporation and Code of By-laws provide that members of the Board of
Directors shall be classified with respect to the terms that they shall serve by dividing them into
three classes that are as nearly equal in number of members as possible. Generally, directors in
each class are elected for a three-year term unless they resign or retire earlier. These
provisions are proposed to be amended as described below under Proposal No. 2 Amendment of
Articles of Incorporation to Provide for Annual Election of Directors, but the Articles of
Incorporation and Code of By-Laws currently in effect will govern the election of directors at the
upcoming annual meeting regardless of whether Proposal No. 2 is approved by the shareholders at the
annual meeting. If Proposal No. 2 is approved by the shareholders, the amendments to the Articles
of Incorporation contemplated thereby will be effective for the election of directors commencing
with the 2011 annual meeting of shareholders.
Hill-Roms Amended Articles of Incorporation provide that the Board of Directors shall consist
of not less than nine members as may be specified in Hill-Roms Code of By-Laws. Hill-Roms Code
of By-Laws provides that the Board of Directors shall consist of nine to eleven members, as fixed
from time to time by the Board of Directors. The Board of Directors currently consists of nine
members, with three directors in each Class. The terms of the three directors in Class II, Ronald
A Malone, Eduardo R. Menascé and John J. Greisch, expire at the upcoming annual meeting. Mr.
Greisch was elected to replace Peter H. Soderberg as President and Chief Executive Officer of
Hill-Rom effective January 8, 2010 and concurrently was elected to replace Mr. Soderberg as a Class
II director. Additionally, because Hill-Roms Code of By-Laws provides that any director elected
by the Board of Directors to fill a vacancy will be elected for a term expiring at the next annual
meeting of shareholders, the terms of Katherine S. Napier and James R. Giertz, each a Class I
director elected by the Board in July and December 2009, respectively, expire at the upcoming
annual meeting. Accordingly, at the upcoming annual meeting, the shareholders will elect two
members of the Board of Directors in Class I to serve two-year terms expiring at the 2012 annual
meeting of shareholders and three members of the Board of Directors in Class II to serve three-year
terms expiring at the 2013 annual meeting of shareholders. The other directors in Class I and
Class III were each previously elected to serve terms expiring at the 2012 and 2011 annual
meetings, respectively.
At the annual meeting, proxies may not be voted for a greater number of persons than the
number of nominees named in this proxy statement. Unless authority is withheld, all shares
represented by proxies submitted pursuant to this solicitation will be voted in favor of electing
as directors the nominees listed below for the terms indicated. If any of these nominees should be
unable to serve, shares represented by proxies may be voted for a substitute nominee selected by
the Board of Directors, or the position may become vacant.
The Board of Directors recommends that shareholders vote FOR the election to the Board of
Directors of each of the nominees named below.
NOMINEES:
CLASS I
Nominees to be elected to serve two-year terms expiring at the 2012 annual meeting:
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Served As A |
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Principal Occupation |
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Director Since |
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James R. Giertz |
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52 |
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Senior Vice President and Chief Financial Officer of H.B. Fuller Company |
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2009 |
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Katherine S. Napier |
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Chief Executive Officer of Arbonne International, LLC |
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2009 |
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-7-
CLASS II
Nominees to be elected to serve three-year terms expiring at the 2013 annual meeting:
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Served As A |
Name |
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Age |
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Principal Occupation |
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Director Since |
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Ronald A. Malone |
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55 |
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Executive Chairman of
Gentiva Health Services, Inc. |
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2007 |
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Eduardo R. Menascé |
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64 |
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Retired President, Enterprise Solutions Group, Verizon Communications |
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2004 |
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John J. Greisch |
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54 |
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President and Chief Executive Officer of Hill-Rom |
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2010 |
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CONTINUING DIRECTORS:
CLASS I
Serving a term expiring at the 2012 annual meeting:
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Served As A |
Name |
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Age |
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Principal Occupation |
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Director Since |
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Rolf A. Classon |
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64 |
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Chairman of the Board of Hill-Rom |
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2002 |
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CLASS III
Serving terms expiring at the 2011 annual meeting:
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Served As A |
Name |
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Age |
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Principal Occupation |
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Director Since |
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Charles E. Golden |
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63 |
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Retired Executive Vice President and Chief Financial Officer of Eli Lilly and Company |
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2002 |
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W August Hillenbrand |
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69 |
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Retired Chief Executive Officer of Hill-Rom |
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1972 |
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Joanne C. Smith |
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49 |
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President and Chief Executive Officer of the Rehabilitation Institute of Chicago |
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2003 |
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Rolf A. Classon became Chairman of the Board of Hill-Rom on March 20, 2006. He served as
Interim President and Chief Executive Officer of Hill-Rom from May 11, 2005 until March 20, 2006
and as Vice Chairman of the Board from December 4, 2003 until his election as Interim President and
Chief Executive Officer. He was Chairman of the Executive Committee of Bayer HealthCare, a sub
group of Bayer AG, from October 2002 to July 2004, and was President of Bayer Health Care L.L.C., a
subsidiary of Bayer AG, from October 2002 to July 2004. Previously, he had been President of
Bayers Diagnostic Division and head of Bayers Worldwide Business Group Diagnostics since 1995.
Bayer is an international research-based company active in life sciences, polymers and chemicals. A
native of Sweden, Mr. Classon joined Bayers Miles Diagnostics business in 1991 as
-8-
Executive Vice President, worldwide marketing, sales and service. During his career, 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 officer of Pharmacia
Biosystems AB. Mr. Classon currently serves on the Boards 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 mens health, and Eurand N.V., a
specialty pharmaceutical company. He also was a director of PharmaNet Development Group, Inc., an
international drug development services company, until its acquisition by another company in March
2009.
James R. Giertz has 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, he was the Senior Managing Director and Chief Financial Officer of GMAC ResCap
from September, 2006 to April, 2007, Senior Vice President, Commercial and Industrial Products of
Donaldson Company, Inc. from 2000 to September, 2006 and the Senior Vice President and Chief
Financial Officer thereof from 1994 to 2000. Prior thereto Mr. Giertz held various executive
positions with General Motors Corporation. Mr. Giertz serves on the Board of Directors of
Normandale Community College Foundation and Junior Achievement of the Upper Midwest.
Charles E. Golden has served as director of Hill-Rom since 2002. He retired as Executive Vice
President and Chief Financial Officer for, and as a member of the Board of Directors of, Eli Lilly
and Company, Indianapolis, Indiana, a global provider of pharmaceutical products and health care
information, in April 2006. He joined Eli Lilly in those capacities in 1996. Prior to joining Eli
Lilly, Mr. Golden served as a corporate Vice President 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 treasurers 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
Crossroads of America Council (Boy Scouts of America) (as past President), and on the Finance
Committee of the Indianapolis Museum of Art, and as a Board member and Secretary/Treasurer of the
Indiana Stadium and Convention Building Authority.
John J. Greisch was elected as President and Chief Executive Officer of Hill-Rom on 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. and Childrens Memorial Hospital Foundation and on the Board of Trustees of the
John G. Shedd Aquarium.
W August Hillenbrand has served as a director of Hill-Rom since 1972 and served as 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. Mr. Hillenbrand retired from
the Boards of Directors of DPL Inc. of Dayton, Ohio and Pella Corporation of Pella, Iowa during
2008.
Ronald A. Malone has 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, having
served 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
Gentivas 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 successively as Olstens Senior Vice President,
Southeast Division; Senior Vice President, Operations; and Executive Vice President, Operations.
-9-
Eduardo R. Menascé has served as a director of Hill-Rom since 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 has 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 Bachelors
degree in Industrial Engineering from Universidad Pontificia Catolica de Rio de Janeiro and a
Masters 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., a developer, publisher and seller of products in
print and electronic media for educational, professional, scientific, technical, medical, and
consumer markets, KeyCorp, one of the nations leading bank-based financial service companies, and
Hillenbrand, Inc.
Katherine S. Napier has served as a director of Hill-Rom since July 2009. She has been Chief
Executive Officer of Arbonne International, LLC since August 2009. From March 2006 to becoming
Arbonnes CEO, Ms. Napier served on various public company and non profit Boards 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 McDonalds 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 Company from 1979 to 2002, including her most recent role
as Vice President, North American Pharmaceuticals & Corporate Womens Health & Vitality. Ms.
Napier now serves on the Board of Directors of EXACT Sciences Corporation and Xavier University.
She also served on the Board of Alberto Culver Company until August 2009.
Joanne C. Smith, M.D. has served as a director of Hill-Rom since 2003 and as Vice Chairperson
of the Board of Directors of Hill-Rom since 2005. She was elected as President and Chief Executive
Officer of the Rehabilitation Institute of Chicago in October 2006. She had 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. 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 supporting the educational needs of the children who suffered the loss of
a parent in the World Trade Center attack.
-10-
Proposal No. 2 Amendment of Articles of Incorporation to Provide for Annual Election of Directors
Hill-Roms Amended Articles of Incorporation currently provide 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, and recommends to the
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, beginning at the 2011 annual meeting of
shareholders, classes of directors whose terms expire at the annual meeting will be elected for
one-year terms. This will result in 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-Roms Amended and Restated Code of By-Laws.
Section 7.1 of Hill-Roms 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 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 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.
On the recommendation of the Nominating/Corporate Governance Committee, the Board approved the
amendments, and now recommends that the shareholders approve them. The Board supports this change
and believes that by taking this action, it can provide shareholders further assurance that the
directors are accountable to shareholders while maintaining appropriate defenses to respond to
inadequate takeover bids.
The affirmative vote of at least two-thirds of the outstanding shares of common stock is
required to approve this proposal.
The Board of Directors recommends that you vote FOR the proposal to amend Hill-Roms Amended
Articles of Incorporation to provide for the annual election of the entire Board of Directors.
-11-
Proposal No. 3 Amendment of Articles of Incorporation to Eliminate Supermajority Voting
Provisions
Hill-Roms Amended Articles of Incorporation currently provide that directors can be removed
only for cause and 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. 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-Roms Amended and
Restated Code of By-Laws.
Sections 7.3 and 7.5 of Hill-Roms 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 Boards 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, on the recommendation of the Nominating/Corporate Governance Committee, the
Board approved the amendments, and now recommends that the shareholders approve them.
The affirmative vote of at least two-thirds of the outstanding shares of common stock is
required to approve this proposal.
The Board of Directors recommends that you vote FOR the proposal to amend Hill-Roms Amended
Articles of Incorporation to eliminate the supermajority voting provisions.
-12-
Proposal No. 4 Annual Non-Binding Vote on Executive Compensation
As described below under Executive CompensationCompensation Discussion and Analysis,
Hill-Rom is committed to maintaining an executive compensation program that fosters performance and
the creation of long-term shareholder value. Our Compensation and Management Development Committee
has designed our executive compensation program based on principles and objectives that reflect
that commitment. We also value the input of our shareholders regarding our compensation
philosophy, policies, procedures and decisions, and our Board of Directors therefore has approved
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 aspects of our executive compensation.
Specifically, if this proposal is approved by shareholders, then commencing with 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 the Named
Executive Officers, nor will it obligate our Board or 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 similar 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 of the policy we
are asking you to vote on at the upcoming annual meeting.
This proposal will be approved if the votes cast in favor of the proposal exceed the votes
cast opposing the proposal.
The Board of Directors recommends that you vote FOR the policy providing for an annual
non-binding advisory shareholder vote on executive compensation.
-13-
Proposal No. 5 Ratification of the Appointment of the Independent Registered Public Accounting
Firm
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-Roms
independent registered public accounting firm for the year ended September 30, 2009. A
representative from PwC will be present at the annual meeting with an opportunity to make a
statement, if he or she so desires, 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, PwCs 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, 2009 and 2008, and
fees billed for other services rendered by PwC during those periods.
|
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2009 |
|
|
2008 |
|
Audit Fees (1) |
|
$ |
1,282,000 |
|
|
$ |
2,205,985 |
|
Audit-Related Fees (2) |
|
|
866,000 |
|
|
|
1,277,450 |
|
Tax Fees (3) |
|
|
40,728 |
|
|
|
25,000 |
|
All Other Fees (4) |
|
|
1,500 |
|
|
|
1,500 |
|
|
|
|
|
|
|
|
Total |
|
$ |
2,190,228 |
|
|
$ |
3,509,935 |
|
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(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, including the audit of our interim 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. |
|
(3) |
|
Tax Fees were billed by PwC for professional services rendered for tax compliance, tax advice
and tax planning. |
|
(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 PwCs online accounting research tool. |
The Board of Directors recommends that the shareholders vote FOR the ratification of the
appointment of PricewaterhouseCoopers LLP as Hill-Roms independent registered public accounting
firm.
-14-
CORPORATE GOVERNANCE
Both the Board of Directors and management of Hill-Rom firmly embrace good and accountable
corporate governance and believe that an attentive, performing Board is a tangible competitive
advantage. Director compensation has always been comprised of cash and stock based compensation.
A non-Chief Executive Officer director has held the position of Chairman of the Board since April
1989. In early 2001, efforts to modify the composition of the Board began, with 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 welcomed to the Board eight of Hill-Roms
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-Roms business. Having selected
the senior management team, the Board acts as an advisor and counselor to senior management and
oversees and monitors its performance.
Boards 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-Roms 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 Boards three standing committees, the Board is actively involved in
Hill-Roms strategic planning process.
Each year, typically in the spring, summer and fall, senior management sets aside specific
periods to develop, discuss and refine Hill-Roms long-range operating plan and overall corporate
strategy. Specific operating priorities are developed to effectuate Hill-Roms 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 managements
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-Roms
corporate and capital structure.
At most Board meetings, the Board substantively reviews Hill-Roms 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 Boards role is inextricably linked to the development and review of Hill-Roms 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-Roms 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
-15-
understanding that certain items pertinent to the advisory and monitoring functions of the Board be
brought to it periodically by the Chief Executive Officer for review and/or decision. For example,
the Board reviews the annual corporate budget. Proposed agenda items that fall within the scope of
responsibilities of a Board committee are initially developed by the chair of that committee with
the Secretary. After initial agendas are developed, the Chairman 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.
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-Roms 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.
Communications with Directors; Director Attendance at Annual Meeting
In order to provide Hill-Roms 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.
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Security holders of Hill-Rom and other interested persons may communicate with the
Chairman of the Board, the chairs of Hill-Roms 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-Roms 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: |
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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; |
-16-
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relates to routine or insignificant matters that do not warrant the
attention of the Board of Directors; |
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is an advertisement or other commercial solicitation or communication; |
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is frivolous or offensive; or |
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is otherwise not appropriate for delivery to directors. |
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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-Roms Investor Relations Department and only in
accordance with Hill-Roms policies and procedures and applicable law and regulations
relating to the disclosure of information. |
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Hill-Roms Investor Relations Department will retain copies of all communications
received pursuant to these procedures for a period of at least one year. |
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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-Roms 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-Roms 2009
annual meeting of shareholders attended that meeting.
Corporate Governance Standards
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:
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confirm that 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; |
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provide that at least a majority of the directors of Hill-Rom shall be independent; |
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provide for an annual determination by the Board of Directors regarding the
independence of each director; |
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provide that the Audit Committee, Nominating/Corporate Governance Committee and
Compensation and Management Development Committee will consist entirely of independent
directors; |
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provide for an annual assessment by the Nominating/Corporate Governance Committee of
the Boards effectiveness as a whole as well as the effectiveness of the individual
directors and the Boards 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; |
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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; |
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limit the number of public company boards on which a director may sit to four
without Board approval; |
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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; |
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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-Roms Corporate Governance Standards include stock ownership guidelines for Hill-Roms
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
CompensationCompensation 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-Roms assets, fair dealing, compliance with laws, including insider trading laws, accuracy
and reliability of Hill-Roms books and records and reporting of illegal or unethical behavior.
This Code applies to all directors, officers and other employees of Hill-Rom, including Hill-Roms
Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer. 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-Roms Code of Ethical Business Conduct constitutes a code of ethics
within the meaning of Item 406 of the SECs Regulation S-K.
All employees, including Hill-Roms 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-Roms 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 Associations (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 at www.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 arms 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-Roms 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 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-Roms directors and provide standards for making these determinations which are consistent
with the listing standards of the New York Stock Exchange. The Board made 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.
As set forth in Hill-Roms Corporate Governance Standards, a director will be independent only
if the Board of Directors determines, based on a consideration of all relevant facts and
circumstances, that the director has no material relationship with Hill-Rom or 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 assessing the materiality of a
directors relationship with Hill-Rom and each directors 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 directors independence, the Board must also consider the
directors 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:
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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). |
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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). |
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(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-Roms 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. |
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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-Roms present executives at the same time serves or served on that companys
compensation committee. |
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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, in any of the
last three fiscal years, exceeded the greater of $1 million, or 2% of such other
companys consolidated gross revenues. |
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The director owns, or is affiliated with the owner of, a controlling amount of
voting stock of Hill-Rom. |
To assist in the Boards determinations, each director completed materials designed to
identify any relationships that could affect the directors independence, and the General Counsel
and Secretary of Hill-Rom conducted follow up interviews with certain directors. On the basis of
these materials and the standards described above, the Board 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 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 Partners 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-Roms 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
-20-
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 that W August Hillenbrand does not meet the standards for
independence. 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.
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. 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 directors 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, 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 related person transactions that are required to be
disclosed in this proxy statement.
Board 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
of a succession plan for the CEO and other executive officers. Board members are expected to have a
thorough understanding of the characteristics necessary for a CEO to execute on a long-term
strategy that optimizes operating performance, profitability and shareowner value creation. As part
of its responsibilities under its Charter, the Compensation and Management Development Committee of
the Board oversees the succession planning process for the CEO, each of his direct reports and each
of their direct reports and other key employees. The Compensation and Management Development
Committees 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 CEOs direct reports, including internal CEO succession candidates, all of whom with which the
Board has ongoing exposure, is reviewed annually with the Board by the CEO and the Senior Vice
President of Human Resources. The Board also reviews the foregoing in executive session.
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
companys business and product innovation initiatives on a part-time basis.
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To make sure that Mr. Soderbergs talents were available and maximized for Hill-Roms and the
new CEOs 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. Soderbergs retirement at age 65, the Compensation and
Management Development Committee, after consultation with its outside consultant and the Board,
modified Mr. Soderbergs compensation and benefits. The arrangement provided the flexibility to
ensure an orderly and planned transitionregardless of when the new CEO would have been elected.
Mr. Soderbergs revised compensation and benefits arrangements are described below under Executive
CompensationCompensation Discussion and AnalysisEmployment Agreements. Mr. Greischs
compensation and benefits arrangements also are described below under Executive
CompensationCompensation Discussion and AnalysisRetirement, Change in Control and Severance and
Employment Agreements. Mr. Greischs 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, the Board of Directors of Hill-Rom held seven
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.
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Nominating/ |
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Compensation and |
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Corporate |
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Management |
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Governance |
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Development |
Director |
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Audit Committee |
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Committee |
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Committee |
Rolf A. Classon (Board Chairman) (I) |
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VC |
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James R. Giertz (I) |
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Charles E. Golden (I) |
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John J. Greisch |
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W August Hillenbrand |
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Ronald A. Malone (I) |
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C |
Eduardo R. Menascé (I) |
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VC |
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Katherine S. Napier (I) |
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Joanne C. Smith, M.D. (Board Vice Chairperson) (I) |
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VC |
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I = Independent Director |
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C = Committee Chair |
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VC = Committee Vice Chair |
The Audit Committee has general oversight responsibilities with respect to Hill-Roms
financial reporting and financial controls. It regularly reviews Hill-Roms financial reporting
process, its system of internal controls
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regarding accounting, 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. Giertz 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. During the fiscal year ended
September 30, 2009, the Audit Committee 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 literacy
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.
The Compensation and Management Development Committee assists 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 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) 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.
The Nominating/Corporate Governance Committee consists 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 Nominating/Corporate Governance Committee is independent as defined by 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 Exchange and other regulations and
identifying candidates for the Board of Directors.
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. The
specifications provide that a candidate for director should not ever (i) have been the subject of
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:
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Have a reputation for industry, integrity, honesty, candor, fairness and discretion; |
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Be an acknowledged expert in his or her chosen field of endeavor, which area of
expertise should have some relevance to Hill-Roms businesses or operations; |
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Be knowledgeable, or willing and able to become so quickly, in the critical aspects
of Hill-Roms businesses and operations; and |
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Be experienced and skillful in serving as a competent overseer of, and trusted
advisor to, senior management of a substantial publicly held corporation. |
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In addition, as specified in the charter for the Nominating/Corporate Governance Committee,
nominees for the Board of Directors recommended by the Nominating/Corporate Governance Committee
should contribute to the mix of skills, core competencies and qualifications of the Board through
expertise in one or more 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.
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 Committees policy with respect to the consideration of
director candidates recommended by shareholders is that it will consider such candidates. Any such
recommendations should be communicated to the Chairman 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-Roms Code of
By-laws for shareholder nominees.
Hill-Roms 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 at www.hill-rom.com. To be timely, a shareholders 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 and 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, the following directors served on the
Compensation and Management Development Committee: Joanne C. Smith, Rolf A. Classon, Ronald A.
Malone and Patrick T. Ryan. The Compensation and Management Development Committee had no
interlocks or insider participation.
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Availability of Governance Documents
Copies of Hill-Roms Corporate Governance Standards, Code of Ethical Business Conduct and
Board committee charters are available on Hill-Roms website at www.hill-rom.com or in print to any
shareholder who requests copies through Hill-Roms Investor Relations office. Also available on
Hill-Roms website are position specifications adopted by the Board for the positions of Chief
Executive Officer, Chairman of the Board of Directors, Vice Chairperson of the Board of Directors,
Vice Chairperson of each of the committees of the Board of Directors and other members of the Board
of Directors.
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AUDIT COMMITTEE REPORT
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 NYSEs listing standards. The
Committee operates under a written charter adopted by the Board of Directors.
Management is responsible for Hill-Roms 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-Roms 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 Committees responsibility is to monitor and oversee these processes.
In this regard, the Committee meets separately at most regular committee meetings with
management, the Vice President of Internal Audit and Hill-Roms 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-Roms 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 Committee has reviewed and discussed the consolidated financial
statements with management and PwC. Management represented to the Committee that Hill-Roms
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 Auditors 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-Oxley Act of 2002, including managements 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-Roms 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 accountants 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, and PwC discussed with the Committee that firms independence with
respect to Hill-Rom. In addition, the Committee considered whether non-audit consulting services
provided by the auditors firm could impair the auditors independence and concluded that such
services have not impaired the auditors independence.
Based upon the Committees discussions with management and PwC and the Committees review of
the representations of management and the report of PwC to the Committee, the Committee recommended
to the Board of Directors that the audited consolidated financial statements be included in
Hill-Roms Annual Report on Form 10-K for the year ended September 30, 2009.
-26-
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-Roms 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*
Charles E. Golden (Chairman)
Eduardo R. Menascé (Vice Chairman)
Katherine S. Napier
(Each of whom the Board of Directors has determined is an independent director under
applicable standards)
|
|
|
* |
|
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. |
-27-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial ownership of our
outstanding common stock as of December 28, 2009 by:
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each of our directors and our Named Executive Officers; |
|
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|
all of our directors and executive officers as a group; and |
|
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|
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, 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. Except as specified below, the business address of the persons listed is
our headquarters, 1069 State Route 46 East, Batesville, Indiana 47006.
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Shares |
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Shares |
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|
|
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Underlying |
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Underlying |
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Stock |
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RSUs That |
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Total |
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Options |
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are Vested |
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Number of |
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Shares |
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|
Shares |
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Exercisable |
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or Will |
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Shares |
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Owned |
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Owned |
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within |
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Vest within |
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Beneficially |
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Percent of |
|
Name of Beneficial Owner |
|
Directly |
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|
Indirectly |
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60 Days |
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|
60 Days |
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Owned |
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|
Class |
|
Directors and Executive Officers: |
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Rolf A. Classon |
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15,806 |
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14,800 |
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33,598 |
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64,204 |
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* |
|
Peter H. Soderberg (1) |
|
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63,150 |
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|
25,125 |
|
|
|
392,001 |
|
|
|
6,620 |
|
|
|
486,896 |
|
|
|
* |
|
John J. Greisch |
|
|
|
|
|
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|
|
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|
0.0 |
% |
James R. Giertz |
|
|
|
|
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|
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|
833 |
|
|
|
833 |
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|
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* |
|
Charles E. Golden |
|
|
3,853 |
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|
|
|
|
|
|
14,800 |
|
|
|
22,600 |
|
|
|
41,253 |
|
|
|
* |
|
W August Hillenbrand |
|
|
74,277 |
|
|
|
1,078,937 |
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|
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72,000 |
|
|
|
12,720 |
|
|
|
1,237,934 |
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2.0 |
% |
Ronald A. Malone |
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|
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7,749 |
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|
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7,749 |
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|
|
* |
|
Eduardo R. Menascé |
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|
|
|
|
|
|
|
|
|
|
|
|
|
11,138 |
|
|
|
11,138 |
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|
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* |
|
Katherine S. Napier |
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836 |
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|
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836 |
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|
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* |
|
Joanne C. Smith |
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2,000 |
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|
|
|
|
20,641 |
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|
|
22,641 |
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|
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* |
|
Gregory N. Miller |
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24,622 |
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|
|
|
|
129,321 |
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|
|
|
|
|
|
153,943 |
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|
|
* |
|
Patrick D. de Maynadier |
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16,362 |
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|
|
|
|
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184,595 |
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|
|
|
|
|
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200,957 |
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* |
|
C. Jeffrey Kao |
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7,947 |
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|
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44,611 |
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|
|
|
|
|
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52,558 |
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|
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* |
|
John H. Dickey |
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11,364 |
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|
|
|
|
|
|
113,802 |
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|
|
1,129 |
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|
|
126,295 |
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|
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* |
|
All directors and executive
officers as a group (19
individuals) |
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196,925 |
|
|
|
1,079,379 |
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|
|
1,008,723 |
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|
|
111,244 |
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|
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2,396,271 |
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3.8 |
% |
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Other 5% Beneficial Owners: |
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HealthCor Management, L.P.
152 West 57th Street, 47th Floor
New York, NY 10019 |
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4,000,000 |
(2) |
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6.4 |
% |
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Keeley Asset Management Corp.
401 South LaSalle Street
Chicago, IL 60605 |
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3,251,070 |
(3) |
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5.2 |
% |
-28-
|
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* |
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Less than 1% of the total shares outstanding. |
|
(1) |
|
Mr. Soderberg resigned as President and Chief Executive Officer of Hill-Rom effective
January 8, 2010. He continues to serve as a part-time employee of Hill-Rom in the non-executive
officer capacity of Chief Innovation Officer. |
|
(2) |
|
This information is based solely on Amendment No. 1 to Schedule 13G filed by HealthCor
Management, L.P. with the SEC on February 17, 2009. 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. 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) |
|
This information is based solely on Schedule 13G filed by Keeley Asset Management Corp.
with the SEC on February 13, 2009. |
-29-
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
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.
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-Roms Board of Directors.
Objectives and Principles of Hill-Roms Executive Compensation Program
The objectives of Hill-Roms 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-Roms shareholders. Hill-Roms 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.
Hill-Roms compensation program is based on the following guiding principles, which support
Hill-Roms commitment to maintain a compensation program that fosters performance and the creation
of long-term shareholder value:
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Aligning managements interests with those of shareholders; |
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Motivating and providing incentive for employees to achieve superior results; |
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Assuring clear accountabilities and providing rewards for producing results; |
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Ensuring competitive compensation in order to attract and retain superior
talent; and |
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Ensuring simplicity and transparency in compensation structure. |
Hill-Roms 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, have generally been designed to fall at approximately
the 50th percentile of compensation paid by companies with which Hill-Rom competes for executive
talent. Total compensation is paid above or below the 50th percentile of the applicable market
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 Compensation Committee is charged with ensuring that Hill-Roms compensation programs meet
the objectives outlined above. In that role, the Compensation Committee makes all executive
compensation decisions, administers Hill-Roms compensation plans and keeps the Board of Directors
informed regarding executive compensation matters. The Compensation Committee, in consultation
with Hill-Roms compensation consultant and the full Board, determines the compensation of the
Chief Executive Officer. The Chief Executive Officer makes
-30-
recommendations to the Compensation Committee regarding the compensation of his direct
reports, including Hill-Roms other Named Executive Officers. From time to time, Hill-Rom
management also provides recommendations to the Compensation Committee regarding modifications to
the elements and structure of Hill-Roms 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 compensation and benefits
consulting firms (1) to evaluate independently and objectively the effectiveness of and assist with
implementation of Hill-Roms compensation and benefit programs and (2) to provide the Compensation
Committee with additional expertise in the evaluation of Hill-Roms 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
Committees 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:
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Experience within the medical technology sector |
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Previous experience of Principal Consultant serving as consultant to a committee
of the Board of Directors |
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Key project costs and annual fees |
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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 Committees ongoing vigilance as to Mercers objectivity.
Among the factors considered by the Compensation Committee in 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-Roms compensation programs, the Compensation Committee has compared Hill-Roms
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, Mercer conducted a review of Hill-Roms
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 Companys
performance. A key objective in selecting peers was to align Hill-Roms planned fiscal year 2009
revenue with the median revenue of its peer companies. Hill-Rom focused on companies whose
revenues were one-half to two times Hill-Roms planned revenue. The 2009 peer group median
revenue was $1.8 billion and Hill-Roms planned revenue was $1.6 billion. Seven additional
companies were added (as shown below). Hill- Roms 2008 fiscal year Peer Group and 2009 Peer Group
are provided in the table below:
-31-
|
|
|
2008 Fiscal Year |
|
2009 Fiscal Year |
Apria Healthcare Group, Inc.
|
|
Removed From Peer Group1 |
C. R. Bard, Inc.
|
|
C. R. Bard, Inc |
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. |
|
PerkinElmer, Inc. |
|
Inverness Medical Innovations, Inc. |
|
The Cooper Companies, Inc. |
|
ResMed Inc. |
|
Integra Lifesciences Holdings Corporation |
|
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-Roms 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. 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-Roms 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-Roms 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
-32-
survey data without additional analysis. Accordingly, the Compensation Committee also takes
into account external market conditions and individual factors when establishing the total
compensation of each executive. Some of these factors include the executives length of service,
the level of experience and responsibility, 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-Roms Named Executive Officers at median levels.
In addition, the Compensation Committee periodically reviews the total compensation of
Hill-Roms Named Executive Officers in comparison to the total compensation of its peer group
companies, in each case as reported under the SECs disclosure rules for executive compensation.
The purpose of this high level review was 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-Roms 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.
The Compensation Committee has scheduled an updated total compensation review for Hill-Roms
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, the Compensation Committee also reviewed tally sheets for the Named Executive
Officers in December 2008 and 2009. The tally sheets provided information not only relative to the
total compensation of the Named Executive Officers, but also provided information on how changing
one element of pay could impact other elements. The Compensation Committee did not identify any
issues that would warrant a change in the current compensation strategy for any of the Named
Executive Officers.
Elements of Executive Compensation
The three major components of Hill-Roms 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, with 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 competitive as a whole.
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. 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 based increases
based on prior year performance. Individual performance is determined by use of a broad based
internal performance management system, which differentiates individual achievement. Performance
is ranked on a scale that ranges from unacceptable to outstanding, with a corresponding range
of possible merit based increases in base salary. When adjusting base salaries, the Compensation
Committee also considers the effects of the adjustment
-33-
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 Officers during the fiscal year ended
September 30, 2009 is set forth in the Summary Compensation Table under Compensation 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 scheduled 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.
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-Roms 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 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.
Pool 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% 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 pool of dollars with which to award high performing associates or
business units in his discretion. In fiscal year 2009, unlike in past years, no separate pools
were established for any of Hill-Roms business units. In this uncertain economy management and the
Compensation Committee believed it was important for all of our business unit leaders to focus on
Hill-Rom as a whole.
The 2009 STIC Plan pool was funded by operating income and by revenues generated within
Hill-Rom. For fiscal year 2009, the targets were:
|
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|
Target |
|
|
Weight |
|
Revenue |
|
$ |
1,558 million |
|
|
|
25 |
% |
Operating Income |
|
$ |
138 million |
|
|
|
75 |
% |
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-Roms 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
-34-
of categories of adjustments which may be considered was initially reviewed and approved by
the Compensation Committee 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, to
encourage management to take actions in the best interests of the Company.
At its December 3, 2009 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 threshold performance for operating income. The
resulting achievement for funding of the Hill-Rom pool for fiscal 2009, was 48.2% of target. The
Compensation Committee had the discretion to exercise negative discretion and reduce the financial
performance achievement but chose not to do so.
Individual STIC Percentage. For fiscal 2009, minimum, 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 executives 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-Roms
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. |
-35-
|
|
|
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. Soderbergs target short term incentive compensation opportunity for fiscal
2009 was 100% of fiscal year 2009 wages or $840,000. Based on the performance levels described
above 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%. The Compensation
Committee determined that despite a challenging year in which providers of capital equipment to
U.S. hospitals, like Hill-Rom, were disproportionately impacted by the credit crisis and
recessionary economic environment, the Named Executive Officers individual performance modifiers
were above average. In fiscal year 2009, Hill-Rom achieved substantial increases 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 Officers individual performance
and Hill-Roms 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
Maynadiers short term incentive compensation target opportunity will increase to 60% of base
salary. This increase is designed to target market median short term incentive opportunity as
determined by the analysis completed by Mercer of our peer groups target short term incentive
opportunities.
-36-
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 certain executive compensation in excess of $1 million per year unless certain
requirements are met. Section 162(m) was considered in developing Hill-Roms STIC Plan, but
Hill-Rom preferred to retain the flexibility of upward discretion. As a result, 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 income of the recipient.
Long-Term Equity Awards
Overview: Hill-Roms Stock Incentive Plan, which was approved by Hill-Roms 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 of combination of restricted stock units, stock options, and performance-based
options. As shown in our Grants of Plan Based Awards Table, the 2009 equity grants were targeted to
have blend approximating 50% service-based and 50% performance based equity.
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 officers 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. Soderbergs 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
-37-
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 employees 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. Kaos 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-Roms 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 a mix of awards representative of typical market practice; and |
|
|
|
Provide awards that support internal equity among Hill-Roms executives. |
In addition the Committee considered the Stock Incentive Plan burn rate, number of plan
participants and potential aggregate target awards for participants in the process of determining
target awards levels and the mix of long-term incentive awards.
Fiscal year 2010 target award levels as a percentage of base salary and award types for Mr.
Miller, Mr. Kao, Mr. de Maynadier, and Mr. Dickey are as follows:
-38-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
% |
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 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. In December 2009,
the Compensation Committee modified the standard vesting terms of deferred stock shares to mirror
the vesting of stock options (four equal annual installments beginning on the day after the first
anniversary of the date of grant). This change was made to bring Hill-Roms practices more in line
with those 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.
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. 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 unit awards granted in fiscal year 2010 for the
three year performance period of fiscal year 2010 to fiscal year 2012, vesting is based on the
achievement of three independent one-year 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 years 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 chosen based upon the
importance of these objectives in the achievement of Hill-Roms strategic plan, providing quality
earnings and creating value for Hill-Roms stockholders.
-39-
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 certification of performance achievement and
completion 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. Millers
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-Roms financial results from
the immediately preceding fiscal year, regardless of the current trading price of Hill-Roms
equity.
Share Ownership Guidelines. To create an ongoing personal financial stake in Hill-Roms
success for each officer, further align the interests of the officers and Hill-Roms shareholders
and motivate officers to maximize shareholder value, Hill-Roms Board of Directors has adopted
guidelines that require its executive officers to maintain specified stock ownership percentages.
All executive officers and designated members of management of Hill-Rom are expected to own
shares of Hill-Rom common stock. Specifically, our 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) are required to hold shares of Hill-Rom common stock or
equivalents described below at 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 |
-40-
Shares owned outright (including vested deferred shares) and deferred stock shares, whether
vested or unvested, count as share equivalents towards the Required Ownership Level. The Required
Ownership Level must be achieved within five years from 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 shares and after-tax shares acquired upon exercise 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.
Hill-Rom has implemented separate stock ownership guidelines for its non-employee directors,
which are described above under Corporate GovernanceStock 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-Roms Compensation Recoupment Policy. Effective in December 2009, our Board of Directors
adopted an Executive Compensation Recoupment Policy. Under the Policy, all performance-based
compensation and trading profits on any Company security trades for executive officers (i.e.,
officers subject to Section 16 of the Securities Exchange Act of 1934) would be subject to
recoupment by Hill-Rom in the event there is a material restatement of financial results due to
misconduct of the individual executive officer(s) 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 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. It also believes that these benefits are at market
levels and competitive with those of other comparable companies.
The components of Hill-Roms retirement benefits program are as follows:
|
|
|
Normal Retirement Guidelines |
|
|
|
Deferred Compensation Program |
|
|
|
Supplemental Executive Retirement Plan |
-41-
|
|
|
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-Roms 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 |
|
|
|
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.
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 employees years of service.
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
employees 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/or Savings 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 participants eligible compensation as determined under the STIC. Long-term incentive
compensation is not included in the calculation of the SERP benefits. Mr. Soderbergs 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) in place with each Named Executive Officer other than Mr. Soderberg. The
Change in Control Agreement previously in place 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 Change in Control Agreement with its new President and Chief Executive Officer, Mr. Greisch.
The Change in Control Agreements 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 Change in Control without concern that such
personnel might be unduly distracted by the uncertainties and risks created by a proposed Change in
Control.
The Change in Control Agreements provide for payment of specified benefits upon Hill-Roms
termination of the executives employment without cause or for good reason in anticipation of
or within two years (three years in the case of Mr. Greischs agreement and Mr. Soderbergs former
agreement) after a Change in Control. Mr. Soderbergs 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.
Greischs 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.
Greischs agreement and Mr. Soderbergs former agreement) the executives annual
base salary; |
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continued health and medical insurance for the executive and the executives
dependents and continued life insurance coverage for the executive for 24 months
(36 months in the case of Mr. Greischs agreement and Mr. Soderbergs 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; |
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a cash payment in lieu of certain perquisites, such as accrued and unpaid
vacation; and |
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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. Soderbergs 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. Greischs 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. Greischs
aggregate accounts under the SERP.
In addition, upon a Change in Control, whether or not the executives 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. Soderbergs 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. Greischs 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 director on the date 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, see the Potential
Payments Upon Termination or Change in Control tables under Compensation of Named Executive
Officers 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:
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Executive Financial Planning, Estate Planning and Tax Preparation Service |
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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 and believes
that these benefits help it to attract and retain 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-Roms Tuition
Reimbursement Program. This program is provided to support Hill-Roms 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-Roms 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
executives 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-Roms 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-Roms 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. Soderbergs employment. Amounts credited to Mr. Soderbergs 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. Soderbergs employment with Hill-Rom. Through January 8, 2010, when Mr.
Soderberg resigned as President and Chief Executive Officer, he was permitted to use Hill-Roms
aircraft for personal travel to and from Mr. Soderbergs 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-Roms aircraft for personal travel.
-45-
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. Soderbergs
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. Soderbergs
employment. The employment agreement also required Hill-Rom to pay Mr. Soderbergs costs of
entering into the employment agreement, including the reasonable fees and expenses of his legal
counsel.
In connection with Hill-Roms recent CEO succession process described above under Corporate
GovernanceBoards 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.
Soderbergs 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-Roms 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. Soderbergs
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. Soderbergs 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. Soderbergs work being authorized by the new
President and CEO. It is contemplated that he will continue to advise and help shape Hill-Roms
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-Roms 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. Soderbergs 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. Soderbergs employment is terminated before April
30, 2011 by Hill-Rom other than for cause (as defined in Mr. Soderbergs 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.
-46-
Soderberg only to the extent the performance goals are achieved by Hill-Rom at the end of the
applicable performance periods.
If Mr. Soderbergs 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. Soderbergs 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. Soderbergs 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. Soderbergs 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. Soderbergs breach of the
consulting agreement or Mr. Soderberg terminates the consulting agreement because of Hill-Roms
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 other 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 and 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 instructions or orders issued by us, (2) illegal conduct, (3) violation of
significant company policy, (4) improper disclosure of our confidential 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 us upon
the occurrence without the executive officers 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
officers then current position or a material change in the executive officers 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 officers base salary or the
discontinuation or reduction by us of the executive officers 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 officers 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 officers 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 officers 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
officers 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. Greischs basic duties and provides for the
following items of compensation for Mr. Greish:
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a base salary of $800,000 per year; |
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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; |
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a signing award of deferred stock shares (otherwise known as restricted stock units)
with a grant date value of $800,000, which will vest over four years after the
commencement of Mr. Greischs employment, with 20%, 30% and 50% vesting at the second,
third and fourth anniversary, respectively, of the date of grant; |
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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; |
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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; |
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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;
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such additional compensation, benefits and perquisites, including participation in
Hill-Roms 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. Greischs 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. Greischs 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-Roms obligation to pay Mr. Greischs
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. Greischs 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. Greischs 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, 2009, 2008 and 2007 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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Change in |
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Pension |
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Value and |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
(1) |
|
The amounts indicated represent the dollar value of base salary earned during fiscal years
2009, 2008 and 2007. |
|
(2) |
|
The amounts indicated represent the aggregate dollar amount of compensation expense
recognized in our Consolidated Financial Statements during the applicable year, excluding the
reduction for risk of forfeiture, related to deferred stock share and performance share unit
awards held by our Named Executive Officers The determination of this expense is based on the
methodology set forth in Notes 1 and 14 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. 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). |
-50-
|
|
|
(3) |
|
The amounts indicated represent the aggregate dollar amount of compensation expense
recognized in our Consolidated Financial Statements during the applicable 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 is based on
the methodology set forth in Notes 1 and 14 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. The amounts for fiscal 2009 and 2008 also include the increase
in fair value of each Named Executive Officers stock options due to 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). |
|
(4) |
|
The amounts indicated represent cash awards earned for fiscal years 2009, 2008 and 2007 and
paid in fiscal years 2010, 2009 and 2008, respectively, under our STIC Plan. See the Annual
Cash Incentives section of the Compensation Discussion and Analysis. |
|
(5) |
|
Unlike fiscal years 2008 and 2007, 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. Therefore, the 2009 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 below for additional information. |
|
(6) |
|
All Other Compensation consists of the incremental cost of aircraft usage, Company
contributions made to the 401(k) Savings Plan, the savings plan portion 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 allocated during the 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. Soderbergs tenure as President and Chief Executive Officer,
Hill-Rom agreed to permit Mr. Soderberg to use Hill-Roms aircraft for travel to and
from Mr. Soderbergs 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. The value of the use of Hill-Rom aircraft
disclosed in the Summary Compensation Table is based upon the variable costs of
operating the aircraft ($1,666 per flight hour for fiscal 2009), 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 fixed costs that 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. Soderbergs personal use of Hill-Roms 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. |
-51-
|
|
|
(7) |
|
Prior to fiscal 2009, Mr. Kao was not a Named Executive Officer. Accordingly, compensation
information is presented for Mr. Kao for 2009 only. |
Grants of Plan-Based Awards for Fiscal Year Ended September 30, 2009
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. All stock-based awards in fiscal year 2009
were granted under our Stock Incentive Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 |
|
|
|
|
(1) |
|
Amounts represent potential cash awards that could be paid under our STIC Program. Awards can
range from 0% to 200% of the target amount. See Annual Cash Incentives 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. |
-52-
|
|
|
(2) |
|
Performance-based stock option awards were 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. Soderbergs 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 Plan during the
fiscal year ended September 30, 2009 related to fiscal 2008 performance. 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, and will be paid in additional shares on the vesting date of the
underlying award. The vesting schedules for all deferred stock share awards granted during
the 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, are
disclosed in the footnotes to the Outstanding Equity Awards at September 30, 2009 table. |
|
(5) |
|
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) |
|
The valuation of stock options, deferred stock shares and performance share units is based on
the methodology set forth in Notes 1 and 14 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. In the case of the performance-based equity awards, the grant
date fair value indicated above is based on the maximum amount that was granted to each Named
Executive Officer. |
Outstanding Equity Awards at September 30, 2009
The following table summarizes the number and terms of stock option, deferred stock share and
performance share units outstanding for each of the Named Executive Officers as of September 30,
2009.
(table on following page)
-53-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 |
|
-54-
|
|
|
(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) |
|
Unvested stock options based solely on continued employment will become exercisable in
accordance with the following vesting schedule: |
|
|
|
Grant Date |
|
Remaining Vesting Schedules (as of 9/30/2009) |
12/2/2008
|
|
Four equal annual installments on 12/2/2009, 12/2/2010, 12/2/2011 and 12/2/2012. |
5/27/2008
|
|
Two equal annual installments on 5/27/2010 and 5/27/2011. |
12/6/2007
|
|
Two equal annual installments 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. |
|
|
|
(3) |
|
Unvested deferred stock shares based solely on continued employment will vest in accordance
with the following vesting schedule: |
|
|
|
Grant Date |
|
Remaining Vesting Schedules (as of 9/30/2009) |
12/2/2008
|
|
50%, 25% and 25% 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. |
12/5/2007
|
|
20%, 25%, 25% 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% 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. |
11/30/2005
|
|
25% and 30% on 12/1/2009 and 12/1/2010, respectively. |
12/15/2004
|
|
Fully vest on 12/16/2009. |
|
|
|
(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 |
|
-55-
|
|
|
(5) |
|
Mr. Miller 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 |
|
|
9,750 |
|
|
|
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 |
|
-56-
|
|
|
(8) |
|
Mr. Kao 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 |
|
|
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 |
|
|
|
|
(9) |
|
Performance-based stock options (and in the case of Mr. Soderberg performance-based options
and performance share units in excess of the annual stock option limit) were granted on April
1, 2008. Vesting of the grants is contingent upon 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. |
|
(10) |
|
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) were granted on December
2, 2008. The total award was divided evenly into two separate grants. 50% 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% 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 were 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. Kaos 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,
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. |
-57-
Option Exercises and Stock Vested For Fiscal Year Ended September 30, 2009
The following table summarizes the number of stock option awards exercised and the value
realized upon exercise during the fiscal year ended September 30, 2009 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 |
|
|
|
|
(1) |
|
There were no stock option exercises by our Named Executive Officers during fiscal year 2009. |
|
(2) |
|
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 disclosed in the footnotes to the
Outstanding Equity Awards at September 30, 2009 table. |
|
(3) |
|
The value realized on vesting was based on 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. |
-58-
Pension Benefits at September 30, 2009
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, 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 |
|
|
|
|
(1) |
|
The Pension Plan covers officers, including our Named Executive Officers and other employees.
Employer contributions to the Pension Plan are made on an actuarial basis, and no specific
contributions are determined or set aside for any individual. Effective June 30, 2003, the
Pension Plan was closed to new participants. Existing participants, effective January 1,
2004, were given the choice of remaining 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 (401(k) Savings Plan). Benefits under the Pension
Plan are not subject to deductions for Social Security or other offset amounts. Officers and
other 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 employees years of service. |
|
|
|
The Pension Plan permits participants with 5 or more years of credited service to retire as
early as age 55 but with a reduction in the amount of their monthly benefit. The reduction
is 0.25% for each month the actual retirement date precedes the participants normal
retirement date at age 65 up to a maximum of 30%. Although Mr. Dickey became retirement
eligible during fiscal year 2009, the present value of accumulated benefit under the Pension
Plan and SERP in the above table has not been reduced for the early retirement provisions. |
|
(2) |
|
Hill-Rom maintains the Pension Plan portion of the SERP to provide additional retirement
benefits to certain employees selected by the Compensation Committee or our Chief Executive
Officer whose retirement benefits under the Pension Plan are reduced, curtailed or otherwise
limited as a result of certain limitations under the Code. Compensation under the SERP
means the corresponding definition of compensation under the Pension Plan plus a percentage of
a participants eligible compensation as determined under our STIC Program. The retirement
benefit to be paid under the SERP is from the general assets of Hill-Rom, and such benefits
are generally payable at the time and in the manner benefits are payable under the Pension
Plan but no earlier than six months after the date of termination |
|
(3) |
|
This column represents the years of service as of September 30, 2009. |
-59-
|
|
|
(4) |
|
This column represents the total discounted value of the monthly single life annuity benefit
earned as of September 30, 2009 assuming the executive leaves Hill-Rom at this date and
retires at age 65. The present value is not the monthly or annual lifetime benefit that would
be paid to the executive. The present values are based on a 5.50% discount rate at September
30, 2009, assume no pre-retirement mortality and utilize the IRS 430 Static Annuitant
Mortality Table. |
|
(5) |
|
Mr. Soderberg does not participate in the Pension Plan or the Pension Plan portion of the
SERP, since the pension plans were closed to new participants effective June 30, 2003. Mr.
Soderberg does participate in the Savings Plan and the savings plan portion of the SERP and
has accumulated four years of vested service in those plans. |
|
(6) |
|
Mr. Miller has two years of credited service in the Pension Plan, in which his accumulated
benefit was frozen as of January 1, 2004. Mr. Miller participates in the Savings Plan and the
savings plan portion of the SERP and has accumulated eight years of vested service in those
plans. |
|
(7) |
|
Mr. Kao does not participate in the Pension Plan or the Pension Plan portion of the SERP,
since the pension plans were closed to new participants effective June 30, 2003. Mr. Kao does
participate in the Savings Plan and has accumulated two years of vested service in that plan. |
Nonqualified Deferred Compensation for Fiscal Year Ending September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
|
|
|
|
(b) |
|
|
(c) |
|
|
(d) |
|
|
(e) |
|
|
(f) |
|
|
|
|
|
|
|
Executive |
|
|
Registrant |
|
|
Aggregate |
|
|
|
|
|
Aggregate |
|
|
|
|
|
|
|
Contributions in |
|
|
Contributions in |
|
|
Earnings in |
|
|
Aggregate |
|
|
Balance at |
|
|
|
|
|
|
|
Last Fiscal |
|
|
Last Fiscal |
|
|
Last Fiscal |
|
|
Withdrawals/ |
|
|
Last Fiscal |
|
|
|
|
|
|
|
Year |
|
|
Year |
|
|
Year |
|
|
Distributions |
|
|
Year End |
|
Name |
|
Plan |
|
|
$ (1) |
|
|
$ (2) |
|
|
$ (3) |
|
|
$ |
|
|
$ (4) |
|
Peter H. Soderberg |
|
SERP |
(5) |
|
|
N/A |
|
|
$ |
142,712 |
|
|
$ |
17,012 |
|
|
None |
|
|
$ |
550,096 |
|
|
|
Supp. Ret. Acct. |
(6) |
|
|
N/A |
|
|
$ |
75,000 |
|
|
$ |
10,276 |
|
|
None |
|
|
$ |
335,762 |
|
|
|
Vested Deferred Stock |
(7) |
|
None |
|
|
None |
|
|
$ |
0 |
|
|
None |
|
|
$ |
144,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory N. Miller |
|
SERP |
(5) |
|
|
N/A |
|
|
$ |
24,535 |
|
|
$ |
4,113 |
|
|
None |
|
|
$ |
127,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John H. Dickey |
|
SERP |
(5) |
|
|
N/A |
|
|
$ |
4,602 |
|
|
$ |
733 |
|
|
None |
|
|
$ |
22,911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick D. de Maynadier |
|
SERP |
(5) |
|
|
N/A |
|
|
$ |
25,191 |
|
|
$ |
5,334 |
|
|
None |
|
|
$ |
161,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C. Jeffrey Kao (8) |
|
|
|
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
(1) |
|
Under the Executive Deferred Compensation Program certain of our senior executives who are
chosen by the Compensation Committee may elect to defer all or a portion of their base salary
compensation, payments under our STIC Program and certain other benefits to be paid in years
later than when such amounts are due. All or a portion of short term incentive compensation
may be deferred by the executive and invested either in cash, which will bear interest at a
prime rate in effect from time to time or at other rates determined by the Compensation
Committee, or common stock to be paid at the end of the deferral period. As of September 30,
2009 none of the Named Executive Officers are participants or have balances in the Executive
Deferred Compensation Program. |
|
(2) |
|
The amounts indicated are reported as compensation to the Named Executive Officer in the
Summary Compensation Table under the column entitled All Other Compensation and further
disclosed in Footnote 6 thereto. |
-60-
|
|
|
(3) |
|
Amounts represent interest on the deferred compensation balances. No above-market interest
or preferential earnings was paid during fiscal 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. Therefore, no above-market interest or preferential
earnings are reported as compensation to the Named Executive Officers in the Summary
Compensation Table. |
|
(4) |
|
Of the amounts shown in this column related to the SERP and, in the case of Mr. Soderberg,
the Supplemental Retirement Account, the following amounts representing company contributions
and above-market interest were previously reported in the Summary Compensation Table in prior
proxy statements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Amount |
|
|
|
|
|
|
|
Reported in the Summary |
|
|
|
|
|
|
|
Compensation Table of |
|
|
|
Plan |
|
|
Prior Proxy Statements |
|
Peter H. Soderberg |
|
SERP |
(5) |
|
$ |
362,808 |
|
|
|
Supp. Ret. Acct. |
(6) |
|
$ |
228,932 |
|
|
|
|
|
|
|
|
|
|
Gregory N. Miller |
|
SERP |
(5) |
|
$ |
81,372 |
|
|
|
|
|
|
|
|
|
|
Patrick D. de Maynadier |
|
SERP |
(5) |
|
$ |
116,096 |
|
|
|
|
|
|
|
|
|
|
John H. Dickey |
|
SERP |
(5) |
|
$ |
8,993 |
|
|
|
|
(5) |
|
Hill-Rom maintains a Savings Plan portion of the SERP to provide additional retirement
benefits to certain employees whose retirement benefits under the Savings Plan are reduced,
curtailed or otherwise limited as a result of certain limitations under the Code. The
additional retirement benefits provided by the SERP are for certain Savings Plan participants
chosen by the Compensation Committee. Additionally, certain participants in the SERP who are
selected by the Compensation Committee may annually receive an additional benefit of a certain
percentage of such participants Compensation (as defined below) for such year (the current
percentage is three or four percent), and the amount of the retirement benefit shall equal the
sum of such annual additional benefit plus additional earnings based on the monthly prime rate
in effect from time to time or at other rates determined by the Compensation Committee. |
|
|
|
Compensation under the SERP means the corresponding definition of compensation under the
Savings Plan plus a percentage of a participants eligible compensation as determined under
our STIC Program. Employer contribution amounts reported here are also reported as
compensation to the Named Executive Officer under Supplemental 401(k) and Supplemental
Retirement contributions in the Summary Compensation Table under the column entitled All
Other Compensation and further disclosed in Footnote 6 thereto. A lump sum cash payment is
available to the participant within one year of retirement or termination of employment. In
the alternative a participant may defer receipt by electing a stream of equal annual
payments for up to 15 years. |
|
(6) |
|
Mr. Soderberg participates in a nonqualified deferred compensation plan established for the
benefit of Mr. Soderberg, 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. Soderbergs employment. Amounts credited to Mr. Soderbergs 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. Soderbergs employment with Hill-Rom. |
-61-
|
|
|
(7) |
|
Vested deferred stock shares were awarded to Mr. Soderberg in fiscal years 2004 and 2005, at
which time he served as an outside member of our Board of Directors. Dividends paid on
Hill-Rom common stock will be deemed to have been paid with regard to the vested deferred
stock shares awarded and deemed to be reinvested in Hill-Rom common stock at the market value
on the date of such dividend, and will be paid in additional shares on the delivery date of
the underlying award. |
|
|
|
The aggregate number of vested deferred stock shares that Mr. Soderberg held as of September
30, 2009 was 6,620 deferred stock shares. Delivery of these shares will occur on the six
month anniversary of the date Mr. Soderberg ceased to be a member of our Board of Directors.
The value indicated is determined by multiplying the number of Mr. Soderbergs vested
deferred stock shares by $21.78, the closing price of Hill-Rom common stock on September 30,
2009 as reported on the New York Stock Exchange. |
|
(8) |
|
Mr. Kao does not participate in any nonqualified deferred compensation plan. |
Potential Payments Upon Termination or Change in Control
The following tables present the estimated benefits that would have been received, as of
September 30, 2009, by each of the Named Executive Officers (1) under the executives Employment
Agreements in the event of a hypothetical termination and (2) under the executives Change in
Control Agreements in the event of a hypothetical Change in Control, with or without termination.
For information regarding the Employment Agreements, see Compensation Discussion and
AnalysisEmployment Agreements above. For information regarding the Change in Control Agreements,
see Compensation Discussion and AnalysisRetirement, Change in Control Agreements and
SeveranceChange in Control Agreements above. Because the payments to be made to a Named
Executive Officer depend on several factors, the actual amounts to be paid upon a Named Executive
Officers termination of employment can only be determined at the time of the executives
separation from Hill-Rom.
Benefits Payable Upon Termination Under Employment Agreements
Peter H. Soderberg
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuance |
|
|
|
|
|
|
|
|
|
|
Accelerated |
|
|
Accelerated |
|
|
Of Health & |
|
|
|
|
|
|
Salary & Other |
|
|
Vesting of |
|
|
Vesting of |
|
|
Welfare |
|
|
|
|
Event |
|
Cash Payments |
|
|
Stock Options (2) |
|
|
Stock Awards (3) |
|
|
Benefits (4) |
|
|
Total |
|
Permanent Disability (1) |
|
$ |
1,097,289 |
|
|
$ |
427,908 |
|
|
$ |
3,017,967 |
|
|
$ |
10,412 |
|
|
$ |
4,553,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death |
|
$ |
532,308 |
|
|
$ |
427,908 |
|
|
$ |
3,017,967 |
|
|
$ |
3,210 |
|
|
$ |
3,981,393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination without Cause |
|
$ |
872,308 |
|
|
|
|
|
|
|
|
|
|
$ |
10,412 |
|
|
$ |
882,720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation with Good
Reason |
|
$ |
872,308 |
|
|
|
|
|
|
|
|
|
|
$ |
10,412 |
|
|
$ |
882,720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination for Cause |
|
$ |
32,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
32,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation without Good
Reason |
|
$ |
32,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
32,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement |
|
$ |
32,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
32,308 |
|
-62-
Gregory N. Miller
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuance |
|
|
|
|
|
|
|
|
|
|
Accelerated |
|
|
Accelerated |
|
|
Of Health & |
|
|
|
|
|
|
Salary & Other |
|
|
Vesting of |
|
|
Vesting of |
|
|
Welfare |
|
|
|
|
Event |
|
Cash Payments |
|
|
Stock Options (2) |
|
|
Stock Awards (3) |
|
|
Benefits (4) |
|
|
Total |
|
Permanent Disability (1) |
|
$ |
2,396,831 |
|
|
$ |
80,235 |
|
|
$ |
700,096 |
|
|
$ |
12,805 |
|
|
$ |
3,189,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death |
|
$ |
523,077 |
|
|
$ |
80,235 |
|
|
$ |
700,096 |
|
|
$ |
6,682 |
|
|
$ |
1,310,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination without Cause |
|
$ |
423,077 |
|
|
|
|
|
|
|
|
|
|
$ |
12,805 |
|
|
$ |
435,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation with Good
Reason |
|
$ |
423,077 |
|
|
|
|
|
|
|
|
|
|
$ |
12,805 |
|
|
$ |
435,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination for Cause |
|
$ |
23,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
23,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation without Good
Reason |
|
$ |
23,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
23,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement |
|
$ |
23,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
23,077 |
|
Patrick D. de Maynadier
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuance |
|
|
|
|
|
|
|
|
|
|
Accelerated |
|
|
Accelerated |
|
|
Of Health & |
|
|
|
|
|
|
Salary & Other |
|
|
Vesting of |
|
|
Vesting of |
|
|
Welfare |
|
|
|
|
Event |
|
Cash Payments |
|
|
Stock Options (2) |
|
|
Stock Awards (3) |
|
|
Benefits (4) |
|
|
Total |
|
Permanent Disability (1) |
|
$ |
2,196,758 |
|
|
$ |
74,774 |
|
|
$ |
606,943 |
|
|
$ |
8,716 |
|
|
$ |
2,887,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death |
|
$ |
520,942 |
|
|
$ |
74,774 |
|
|
$ |
606,943 |
|
|
$ |
4,012 |
|
|
$ |
1,206,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination without Cause |
|
$ |
383,942 |
|
|
|
|
|
|
|
|
|
|
$ |
8,716 |
|
|
$ |
392,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation with Good
Reason |
|
$ |
383,942 |
|
|
|
|
|
|
|
|
|
|
$ |
8,716 |
|
|
$ |
392,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination for Cause |
|
$ |
20,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
20,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation without Good
Reason |
|
$ |
20,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
20,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement |
|
$ |
20,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
20,942 |
|
-63-
C. Jeffrey Kao
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuance |
|
|
|
|
|
|
|
|
|
|
Accelerated |
|
|
Accelerated |
|
|
Of Health & |
|
|
|
|
|
|
Salary & Other |
|
|
Vesting of |
|
|
Vesting of |
|
|
Welfare |
|
|
|
|
Event |
|
Cash Payments |
|
|
Stock Options (2) |
|
|
Stock Awards (3) |
|
|
Benefits (4) |
|
|
Total |
|
Permanent Disability (1) |
|
$ |
2,579,024 |
|
|
$ |
82,546 |
|
|
$ |
454,026 |
|
|
$ |
12,505 |
|
|
$ |
3,128,101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death |
|
$ |
519,615 |
|
|
$ |
82,546 |
|
|
$ |
454,026 |
|
|
$ |
6,682 |
|
|
$ |
1,062,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination without Cause |
|
$ |
359,615 |
|
|
|
|
|
|
|
|
|
|
$ |
12,505 |
|
|
$ |
372,120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation with Good
Reason |
|
$ |
359,615 |
|
|
|
|
|
|
|
|
|
|
$ |
12,505 |
|
|
$ |
372,120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination for Cause |
|
$ |
19,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
19,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation without Good
Reason |
|
$ |
19,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
19,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement |
|
$ |
19,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
19,615 |
|
John H. Dickey
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuance |
|
|
|
|
|
|
|
|
|
|
Accelerated |
|
|
Accelerated |
|
|
Of Health & |
|
|
|
|
|
|
Salary & Other |
|
|
Vesting of |
|
|
Vesting of |
|
|
Welfare |
|
|
|
|
Event |
|
Cash Payments |
|
|
Stock Options (2) |
|
|
Stock Awards (3) |
|
|
Benefits (4) |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent Disability (1) |
|
$ |
1,430,291 |
|
|
$ |
52,726 |
|
|
$ |
537,944 |
|
|
$ |
10,396 |
|
|
$ |
2,031,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death |
|
$ |
525,769 |
|
|
$ |
52,726 |
|
|
$ |
537,944 |
|
|
$ |
4,012 |
|
|
$ |
1,120,451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination without Cause |
|
$ |
293,769 |
|
|
|
|
|
|
|
|
|
|
$ |
10,396 |
|
|
$ |
304,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation with Good
Reason |
|
$ |
293,769 |
|
|
|
|
|
|
|
|
|
|
$ |
10,396 |
|
|
$ |
304,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination for Cause |
|
$ |
25,769 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
25,769 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation without Good
Reason |
|
$ |
25,769 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
25,769 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement |
|
$ |
25,769 |
|
|
$ |
0 |
|
|
$ |
394,479 |
|
|
|
|
|
|
$ |
420,248 |
|
|
|
|
(1) |
|
Benefits provided under our disability plans are based on various circumstances
including the Named Executive Officer meeting certain eligibility requirements. Our
disability plans are fully insured; therefore, claim payments are reviewed and processed by
our third party insurance carrier. The following assumptions were used to determine the
salary and other cash payment amount for permanent disability. |
Permanent disability assumptions:
|
|
|
|
Normal retirement age is based on the Social Security Normal Retirement Age Table; |
|
|
|
|
Short-term disability benefits are based on salary continuation for 26 weeks (using
the Named Executive Officers annual salary rate as of September 30, 2009); |
-64-
|
|
|
Long-term disability benefits are based on the lesser of 60% of the Named Executive
Officers monthly earnings or $15,000 per month. We assume these benefits begin the day
after the short-term disability benefit period has been completed and extends through
the maximum benefit period aligned with the Named Executive Officers age as of
September 30, 2009; and |
|
|
|
|
The present values of the cash payments are based on a 5.50% discount rate as of
September 30, 2009. |
|
|
|
(2) |
|
The amounts indicated represent the intrinsic value of all unvested non-qualified stock
options, held for at least one year from the grant date, that would have become immediately
vested and exercisable upon permanent disability or death (and in the case of Mr. Dickey,
upon retirement, since he is retirement eligible). Performance-based options were not
included as the performance criteria were not met. For purposes of these disclosures, we
assumed that the unvested stock options were cashed out based on the closing price per
share of Hill-Roms common stock on the New York Stock Exchange on September 30, 2009.
Refer to the Outstanding Equity Awards at September 30, 2009 table for further details on
unvested stock options. |
|
(3) |
|
The amounts indicated represent the market value of all unvested deferred stock shares,
held for at least one year from the grant date, that would have vested immediately and been
distributed upon permanent disability or death (and in the case of Mr. Dickey, upon
retirement, since he is retirement eligible). The amounts were based on the number of
unvested deferred stock shares multiplied by the closing price per share of Hill-Roms
common stock on the New York Stock Exchange on September 30, 2009. Refer to the Outstanding
Equity Awards at September 30, 2009 table for further details on unvested deferred stock
shares. |
|
(4) |
|
Amounts represent the dollar value of estimated vacation benefits and incremental costs
to Hill-Rom by providing continuing health and life insurance coverage based on the Named
Executive Officers selected coverage immediately before the hypothetical termination. |
Benefits Payable Under Change in Control Agreements
Based upon a hypothetical Change in Control date of September 30, 2009, the Change in Control
benefits with and without a termination of employment would be as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Based Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuance |
|
|
Vacation |
|
|
|
|
|
|
Retirement |
|
|
|
|
|
|
|
|
|
|
Perform- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of Heath & |
|
|
And |
|
|
|
|
|
|
Savings |
|
|
|
|
|
|
Restricted |
|
|
ance |
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
Welfare |
|
|
Insurance |
|
|
Pension |
|
|
Plan |
|
|
Stock |
|
|
Stock |
|
|
Based |
|
|
Tax |
|
|
|
|
Name |
|
Salary |
|
|
Comp.(1) |
|
|
Benefits |
|
|
Benefits |
|
|
Benefits(2) |
|
|
Benefit |
|
|
Options(3) |
|
|
Units(4) |
|
|
Awards(4) |
|
|
Gross-Up(5) |
|
|
Total(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter H. Soderberg
With termination |
|
$ |
2,520,000 |
|
|
$ |
840,000 |
|
|
$ |
19,356 |
|
|
$ |
44,188 |
|
|
|
N/A |
|
|
$ |
653,136 |
|
|
$ |
884,529 |
|
|
$ |
3,017,967 |
|
|
$ |
1,281,775 |
|
|
None |
|
$ |
9,260,951 |
|
Without termination |
|
$ |
0 |
|
|
$ |
840,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
884,529 |
|
|
$ |
3,017,967 |
|
|
$ |
1,281,775 |
|
|
None |
|
$ |
6,024,271 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory N. Miller
With termination |
|
$ |
800,000 |
|
|
$ |
200,000 |
|
|
$ |
23,810 |
|
|
$ |
24,877 |
|
|
|
N/A |
|
|
$ |
49,070 |
|
|
$ |
415,176 |
|
|
$ |
700,096 |
|
|
$ |
0 |
|
|
None |
|
$ |
2,213,029 |
|
Without termination |
|
$ |
0 |
|
|
$ |
200,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
415,176 |
|
|
$ |
700,096 |
|
|
$ |
0 |
|
|
None |
|
$ |
1,315,272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick D.
de Maynadier
With termination |
|
$ |
726,000 |
|
|
$ |
181,500 |
|
|
$ |
15,632 |
|
|
$ |
22,742 |
|
|
$ |
113,633 |
|
|
$ |
50,382 |
|
|
$ |
321,840 |
|
|
$ |
606,943 |
|
|
$ |
0 |
|
|
None |
|
$ |
2,038,672 |
|
Without termination |
|
$ |
0 |
|
|
$ |
181,500 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
321,840 |
|
|
$ |
606,943 |
|
|
$ |
0 |
|
|
None |
|
$ |
1,110,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C. Jeffrey Kao
With termination |
|
$ |
680,000 |
|
|
$ |
170,000 |
|
|
$ |
23,810 |
|
|
$ |
20,815 |
|
|
|
N/A |
|
|
|
N/A |
|
|
$ |
299,049 |
|
|
$ |
454,026 |
|
|
$ |
154,943 |
|
|
None |
|
$ |
1,802,643 |
|
Without termination |
|
$ |
0 |
|
|
$ |
170,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
299,049 |
|
|
$ |
454,026 |
|
|
$ |
154,943 |
|
|
None |
|
$ |
1,078,018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John H. Dickey
With termination |
|
$ |
536,000 |
|
|
$ |
134,000 |
|
|
$ |
15,632 |
|
|
$ |
30,929 |
|
|
$ |
322,677 |
|
|
$ |
9,204 |
|
|
$ |
210,901 |
|
|
$ |
537,944 |
|
|
$ |
0 |
|
|
None |
|
$ |
1,797,287 |
|
Without termination |
|
$ |
0 |
|
|
$ |
134,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
210,901 |
|
|
$ |
537,944 |
|
|
$ |
0 |
|
|
None |
|
$ |
882,845 |
|
-65-
|
|
|
(1) |
|
We assumed the Incentive Compensation paid out at 100% performance at target. We have
assumed such payment is fully contingent on the Change in Control and thus fully included in
the Change in Control calculations. However, it is possible that all or a portion of the
Incentive Compensation would have been earned as of the date of the Change in Control. |
|
|
|
(2) |
|
The pension benefit for a termination upon a Change in Control is the excess of the monthly
pension amount the executive would have received starting at age 62 calculated as if the
executive had earned two additional years of service and pay at the executives Annual Base
Salary over the monthly Pension Plan annuity benefit and the monthly SERP annuity benefit. |
|
(3) |
|
The amounts indicated represent the intrinsic value of all unvested non-qualified stock
options and performance-based stock options that would have become immediately vested and
exercisable upon termination upon a Change in Control, with or without termination. For
purposes of these disclosures, we assumed that the unvested stock options were cashed out
based on the closing price per share of Hill-Roms common stock on the New York Stock Exchange
on September 30, 2009. Whether the options would be cashed out or converted into stock of a
buyer in an actual transaction would depend on the structure of the deal. However, if the
options were converted into stock by the buyer, the excise tax, and thus the gross-up payments
required under the agreements could be higher. Refer to the Outstanding Equity Awards at
September 30, 2009 table for further details on unvested stock options. |
|
(4) |
|
The amounts indicated represent the value of all unvested deferred stock shares and
performance based deferred stock shares that would have vested immediately and been
distributed upon a Change in Control, with or without termination, based on the closing price
per share of Hill-Roms common stock on the New York Stock Exchange on September 30, 2009.
Refer to the Outstanding Equity Awards at September 30, 2009 table for further details on
unvested deferred stock shares. |
|
(5) |
|
No tax gross-up payment was necessary as of September 30, 2009 as benefits in each
executives case did not exceed 120% of the base threshold amount to give rise to the excise
tax. For Messrs. Miller, Dickey and Kao, while each executives hypothetical Change in
Control benefits (without termination) did exceed the base threshold amount but slightly less
than 120%, each executives respective benefits indicated above would have been reduced as
required by the Change in Control agreement to the maximum amount which would not give rise to
the excise tax. This reduction is not reflected in the above table, but if it was, the amount
by which Messrs. Miller, Dickey and Kaos Change in Control benefits would be reduced would be
approximately $64,000, $193,000 and $216,000, respectively. |
|
(6) |
|
The Change in Control Agreements for the Named Executive Officers are subject to non-compete
provisions and other restrictive covenants for three years following termination of
employment. These restrictive covenants are valuable to Hill-Rom, and are in part
consideration for the benefits payable under the Agreements. However, for purposes of this
hypothetical Change in Control, no value or payments under the agreements have been assigned
to the restrictive covenants, which would have the effect of reducing the excise tax and thus
gross-up payments under the agreements. |
-66-
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT
The Compensation and Management Development Committee of the Board of Directors of Hill-Rom
Holdings, Inc. has reviewed and discussed the Compensation Discussion and Analysis contained in
this proxy statement with management and, based upon this review and discussion, recommended to the
Board of Directors that the Compensation Discussion and Analysis be included in this proxy
statement.
Submitted by the Compensation and Management Development Committee
Ronald A. Malone (Chairman)
Joanne C. Smith, M.D. (Vice Chairperson)
Rolf A. Classon
-67-
DIRECTOR COMPENSATION
In setting non-employee director compensation, the Board of Directors, based on
recommendations from the Nominating/Corporate Governance Committee, considers the significant
amount of time that directors expend in fulfilling their duties to Hill-Rom as well as the
skill-level required for members of the Board. Directors who are also employees of Hill-Rom receive
no additional remuneration for services as a director. Mr. Greisch is, and Mr. Soderberg was, a
salaried employee of Hill-Rom. All other directors receive separate compensation for Board service.
Our compensation package for non-employee members of our Board is comprised of cash (annual
retainers and committee meeting fees) and deferred stock share awards. Directors are also entitled
to reimbursement of expenses incurred in connection with attendance at board and/or committee
meetings. Our director pay package is designed to attract and retain highly-qualified, independent
professionals to monitor the effectiveness of policy and decision-making both at the Board and
management level, with a view to enhancing shareholder value over the long term. Our
Nominating/Corporate Governance Committee generally reviews our non-employee director compensation
program, or elements thereof, on an annual basis, with the assistance of the compensation
consulting firm used by the Compensation and Management Development Committee (Compensation
Committee). Actual annual pay varies among directors based on committee memberships, committee
chair responsibilities and meeting attendance.
Directors receive an annual retainer of $25,000 for their service as directors, together with
a $3,500 fee for each Board meeting attended. The Chairman of the Board of Directors annual
retainer is $150,000. For any Board meeting lasting longer than one day, each director who attends
receives $1,000 for each additional day. Directors who attend a Board meeting or standing
committee meeting by telephone receive fifty percent (50%) of the usual meeting fee. Each director
who is a member of the Nominating/Corporate Governance, Audit or Compensation and Management
Development Committee receives a fee of $1,500 for each committee meeting attended.
The Chairs of the Audit, Compensation and Management Development and Nominating/Corporate
Governance Committees receive an additional $10,000, $8,000, and $7,000 annual retainer,
respectively. Directors who attend meetings of committees of which they are not members receive no
fees for their attendance.
In addition to earning cash retainers, each non-employee director is also awarded on the first
trading day following the close of each of our annual meeting of shareholders, deferred stock
shares under our Stock Incentive Plan. A new director receives a pro-rata portion of the annual
award representing the time served during the fiscal year of joining the Board of Directors.
Delivery of shares underlying such deferred stock shares occurs on the later of one year and one
day from the date of the grant or the six month anniversary of the date that the applicable
director ceases to be a member of the Board of Directors. In 2009 the annual grant consisted of
6,476 Hill-Rom deferred stock shares for the Chairman of the Board and 3,331 Hill-Rom deferred
stock shares for each non-employee director, except Ms. Napier, who joined the Board in July 2009
and received a pro-rata award of 832 deferred stock shares.
The following table sets forth the compensation paid to our non-employee directors during the
fiscal year ended September 30, 2009.
-68-
Director Compensation Table For Fiscal Year Ending September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
(b) |
|
|
(c) |
|
|
(d) |
|
|
(e) |
|
|
(f) |
|
|
(g) |
|
|
(h) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Pension |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and Nonqualified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
|
Deferred |
|
|
|
|
|
|
|
|
|
Fees Earned or |
|
|
|
|
|
|
|
|
|
|
Incentive Plan |
|
|
Compensation |
|
|
All Other |
|
|
|
|
|
|
Paid in Cash |
|
|
Stock Awards |
|
|
Option Awards |
|
|
Compensation |
|
|
Earnings |
|
|
Compensation |
|
|
Total |
|
Name |
|
$ (1) |
|
|
$ (2) |
|
|
$ (3) |
|
|
$ |
|
|
$ (4) |
|
|
$ (5) |
|
|
$ |
|
Rolf A. Classon Chairman |
|
$ |
199,750 |
|
|
$ |
76,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
221 |
|
|
$ |
276,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles E. Golden |
|
$ |
76,500 |
|
|
$ |
39,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
221 |
|
|
$ |
115,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W August Hillenbrand |
|
$ |
57,500 |
|
|
$ |
39,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
221 |
|
|
$ |
96,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald A. Malone |
|
$ |
70,750 |
|
|
$ |
39,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
221 |
|
|
$ |
110,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eduardo R. Menascé |
|
$ |
57,250 |
|
|
$ |
39,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
221 |
|
|
$ |
96,644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Katherine S. Napier (6) |
|
$ |
22,750 |
|
|
$ |
13,345 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
15 |
|
|
$ |
36,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick T. Ryan (7) |
|
$ |
32,500 |
|
|
$ |
39,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
185 |
|
|
$ |
71,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joanne C. Smith Vice
Chairperson |
|
$ |
70,750 |
|
|
$ |
39,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
221 |
|
|
$ |
110,144 |
|
|
|
|
(1) |
|
The amounts in this column include the annual retainer and the amounts earned by each
non-employee director for attending Board and/or committee meetings in person and/or by
teleconference that were not held in conjunction with a meeting of our full Board. For the
Chairman of each of our Audit Committee, Compensation Committee and Nominating/Corporate
Governance Committee, the additional annual retainer is also included. |
|
(2) |
|
The amounts indicated represent the aggregate grant date fair value, which was also the
dollar amount of compensation expense recognized in our consolidated financial statements
during the year ended September 30, 2009, excluding the reduction for risk of forfeiture of
deferred stock share awards granted to our non-employee directors during the fiscal year. The
determination of this expense is based on the methodology set forth in Notes 1 and 14 of the
Notes to Consolidated Financial Statements 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. |
|
|
|
The aggregate number of vested deferred stock shares held by each of our current
non-employee directors at September 30, 2009, including dividend reinvestment, is listed
below. Delivery of shares underlying such deferred stock shares occurs on the later of one
year and one day from the grant date or the six month anniversary of the date that the
applicable director ceases to be a member of the Board of Directors. |
|
|
|
|
|
|
|
Shares Underlying |
|
|
|
Vested Deferred Stock |
|
|
|
(with Dividend |
|
Name |
|
Reinvestment) |
|
Rolf A. Classon |
|
|
33,598 |
|
Charles E. Golden |
|
|
20,641 |
|
W August Hillenbrand |
|
|
12,720 |
|
Ronald A. Malone |
|
|
7,749 |
|
Eduardo R. Menascé |
|
|
11,138 |
|
Katherine S. Napier |
|
|
836 |
|
Joanne C. Smith, M.D. |
|
|
20,641 |
|
-69-
|
|
|
(3) |
|
There was no stock-based compensation expense related to non-employee director option awards
recorded in the consolidated financial statements in our Annual Report on Form 10-K for the
year ended September 30, 2009, as no such awards were granted. Certain of our non-employee
directors had the following shares of our common stock underlying stock options outstanding as
of September 30, 2009: |
|
|
|
|
|
|
|
Shares Underlying |
|
Name |
|
Stock Options |
|
Rolf A. Classon |
|
|
14,800 |
|
Charles E. Golden |
|
|
14,800 |
|
W August Hillenbrand |
|
|
72,000 |
|
|
|
|
(4) |
|
Members of the Board of Directors, who are not employees, may participate in our Board of
Directors Deferred Compensation Plan in which members may elect to defer receipt of fees
earned. Upon election, the participant may invest fees earned in either a cash investment
which bears interest at a prime rate in effect from time to time or at other rates determined
by us, or common stock to be paid at the end of the deferral period. During fiscal 2009, we
did not pay above-market interest on nonqualified deferred compensation 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. As of September 30, 2009 the
following directors are participants and have balances in the Board of Directors Deferred
Compensation Program: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred |
|
|
|
|
|
|
Cash |
|
|
Vested Deferred Stock |
|
|
|
$ |
|
|
# |
|
|
$ |
|
W August Hillenbrand |
|
$ |
57,500 |
|
|
|
|
|
|
|
|
|
Charles E. Golden |
|
|
|
|
|
|
1,959 |
|
|
$ |
42,667 |
|
Ronald A. Malone |
|
$ |
70,750 |
|
|
|
|
|
|
|
|
|
|
|
|
(5) |
|
Amounts in this column represent the dollar value of insurance premiums paid by Hill-Rom
during fiscal 2009. Participation in the life insurance program is voluntary and may be
declined. The value of the insurance premiums paid as disclosed in the Director Compensation
Table is not the value reported to the IRS. |
|
(6) |
|
Katherine S. Napier joined the Board effective July 17, 2009. |
|
(7) |
|
Patrick T. Ryan resigned from the Board effective July 16, 2009. |
-70-
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information concerning Hill-Roms equity compensation plans as
of September 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of securities |
|
|
|
|
|
|
|
|
|
|
|
remaining available for |
|
|
|
Number of securities to |
|
|
Weighted-average exercise |
|
|
issuance under equity |
|
|
|
be issued upon exercise |
|
|
price of outstanding |
|
|
compensation plans |
|
|
|
of outstanding options, |
|
|
options, warrants and |
|
|
(excluding securities |
|
|
|
warrants and rights |
|
|
rights ($) |
|
|
reflected in column (a)) |
|
Plan Category |
|
(a) |
|
|
(b) |
|
|
(c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation
plans approved by
security holders |
|
|
6,730,511 |
|
|
$ |
20.94 |
|
|
|
6,741,787 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation
plans not approved by
security
holders(2)(3) |
|
|
9,221 |
|
|
$ |
0.00 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
6,739,732 |
|
|
$ |
20.94 |
|
|
|
6,741,787 |
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amount consists of 5,820,299 shares available for issuance under our Stock Incentive Plan and
921,488 shares available for purchase under our Employee Stock Purchase Plan. |
|
(2) |
|
Under the Hill-Rom Holdings Stock Award Program, which has not been approved by security
holders, shares of common stock have been granted to certain key employees. All shares
granted under this program are contingent upon continued employment over specified terms.
Dividends, payable in stock accrue on the grants and are subject to the same specified terms
as the original grants. A total of 7,262 deferred shares were vested as of September 30, 2009
under this program and will be issuable at a future date. |
|
(3) |
|
Members of the Board of Directors may elect to defer fees earned and invest them in Hill-Rom
common stock under the Hill-Rom Holdings Directors Deferred Compensation Plan, which has not
been approved by security holders. A total of 1,959 deferred shares were vested as of
September 30, 2009 under this program and will be issuable at a future date. |
-71-
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, our directors, our executive
officers and any person holding more than ten percent of our common stock are required to file with
the SEC initial reports of ownership and reports of changes in ownership of our common stock. We
are required to report in this proxy statement any failure to file or late filing occurring during
the fiscal year ended September 30, 2009. Based solely on a review of filings furnished to us and
other information from reporting persons, we believe that all of these filing requirements were
satisfied by our directors, executive officers and ten percent beneficial owners.
-72-
APPENDIX A
PROPOSED AMENDMENTS TO SECTION 7.1 OF
AMENDED ARTICLES OF INCORPORATION
Section 7.1. Number. The number of Directors of the Corporation shall not be less
than nine (9), as may be specified in the Code of By-Laws of the Corporation or by amendment to the
Code of By-Laws of the Corporation adopted by a majority vote of the Directors then in office.
Until the 2011 annual
meeting of Shareholders, The the Directors elected by the
Shareholders shall be divided into three (3) classes, each having one-third, or as near to
one-third as may be, the total number of Directors, with the term of the office of one class
expiring at each annual meeting of Shareholders the first class to expire at the 1988 annual
meeting of Shareholders, the term of the office of the second class to expire at the 1989 annual
meeting of Shareholders and the term of office of the third class to expire at the 1990 annual
meeting of Shareholders.
Commencing with the
2011 annual meeting of Shareholders, At at
each annual meeting of Shareholders, Directors elected by the Shareholders to succeed those
Directors whose terms expire shall be elected for a
one-year term of office to expire at
the third next succeeding annual meeting of Shareholders after their election. Each
Director shall hold office until his successor is elected and qualified.
A-1
APPENDIX B
PROPOSED AMENDMENTS TO SECTIONS 7.3 AND 7.5 OF
AMENDED ARTICLES OF INCORPORATION
Section 7.3. Removal. Any Director, or the entire Board of Directors, may be removed
from office at any time, but only for cause and only by the affirmative vote of the holders of at
least two-thirds (2/3) a majority of the voting power of all of the shares of the
Corporation entitled to vote generally in the election of Directors, voting together as a single
class.
Section 7.5. Amendment. Repeal. Notwithstanding anything contained in these
Articles of Incorporation to the contrary, the affirmative vote of the holders of at least
two-thirds (2/3) of the voting power of all of the shares of the corporation entitled to vote
generally in the election of Directors, voting together as a single class, shall be required to
alter, amend or repeal this Article 7.
B-1
HILL-ROM HOLDINGS, INC.
1069 STATE ROUTE 46 EAST
BATESVILLE, IN 47006
VOTE BY INTERNET www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of
information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting
date. Have your proxy card in hand when you access the web site and follow the
instructions to obtain your records and to create an electronic voting instruction form.
Electronic Delivery of Future PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials,
you can consent to receiving all future proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up for electronic delivery, please
follow the instructions above to vote using the Internet and, when prompted, indicate that
you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card
in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have
provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY
11717.
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TO VOTE, MARK BLOCKS BELOW
IN BLUE OR BLACK INK AS FOLLOWS:
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KEEP THIS PORTION FOR YOUR RECORDS |
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | |
DETACH AND RETURN THIS PORTION ONLY |
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For All
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Withhold All
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For All Except
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To withhold authority to vote for any individual nominee(s),
mark For All Except and write the number(s) of the nominee(s)
on the line below. |
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The Board of Directors recommends that you vote FOR the following: |
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1. Election of Directors
Nominees
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01 James R. Giertz
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02 Katherine S. Napier
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03 Ronald A. Malone
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04 Eduardo R. Menascé
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05 John J. Greisch |
The Board of Directors recommends you vote FOR the following proposal(s): |
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For
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Against
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Abstain
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Proposal to amend the Amended Articles of
Incorporation of Hill-Rom Holdings, Inc. to
provide for the annual
election of the entire Board of Directors.
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Proposal to amend the Amended Articles of
Incorporation of Hill-Rom
Holdings, Inc. to eliminate all
supermajority voting provisions.
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Proposal to approve a policy providing for an annual
non-binding advisory shareholder vote
on executive compensation.
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5
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Ratification of the appointment of PricewaterhouseCoopers
LLP as the independent registered public accounting firm of
Hill-Rom Holdings, Inc.
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NOTE: In their discretion, upon such other matters
that may properly come before the meeting or
any adjournment or adjournments thereof. |
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Please sign exactly as your name(s) appear(s) hereon. When
signing as attorney, executor, administrator, or other
fiduciary, please give full title as such. Joint owners should
each sign personally. All holders must sign. If a corporation
or partnership, please sign in full corporate or partnership
name, by authorized officer.
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Signature [PLEASE SIGN WITHIN
BOX] |
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Signature (Joint Owners) |
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual
Report, Notice & Proxy Statement is/are available at www.proxyvote.com.
HILL-ROM HOLDINGS, INC.
Annual Meeting of Shareholders
March 4, 2010 10:00 AM
This proxy is solicited by the Board of Directors
The shareholder(s) hereby appoint(s) Rolf A. Classon and Joanne C. Smith, or either
of them, as proxies, each with the power to appoint his or her substitute, and hereby
authorizes them to represent and to vote, as designated on the reverse side of this
ballot, all of the shares of Common stock of HILL-ROM HOLDINGS, INC. that the
shareholder(s) is/are entitled to vote at the Annual Meeting of shareholder(s) to be
held at 10:00 AM, EST on March 4, 2010, at the offices of Hill-Rom Holdings, Inc.
1069 State Route 46 East Batesville, IN 47006, and any adjournment or postponement
thereof.
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED BY THE SHAREHOLDER(S). IF
NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES
LISTED ON HTE REVERSE SIDE FOR THE BOARD OF DIRECTORS AND FOR EACH PROPOSAL.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
REPLY ENVELOPE.
Continued and to be signed on reverse side