EXHIBIT 10.1
Dear Peter,
Thank you for your outstanding
service to Hill-Rom Holdings, Inc. (“ Company
”), and for your support of the, Board of Director’s
succession planning process for the Company’s next President
and Chief Executive Officer (“ CEO ”). We
appreciate your desire to collaborate with the Company in your
planning for retirement as an employee of the Company closely after
the date of your sixty fifth birthday in April 2011 and also
appreciate your willingness to assist the Company in an orderly
succession by stepping down as CEO earlier or later than that date,
depending on when your successor is identified. It is anticipated
succession will not occur before the 2010 calendar year. The
purpose of this Letter Agreement (“ Agreement ”)
is to make sure that your talents are available and maximized for
the Company’s and new CEO’s benefit during the
succession process and subsequent transitional period, and ensure
that your willingness and flexibility as to your transition
provides you appropriate compensation and benefits for your
continuing contributions to the success of the Company through your
originally contemplated retirement date.
Accordingly, this Agreement
memorializes the terms of your employment through your retirement
and thereafter a contemplated consulting relationship with the
Company. Your “ CEO Transition Date ” will be
the date a new CEO commences employment with the Company. This
Agreement amends the Employment Agreement between you and the
Company dated March 31, 2008 (“ Employment
Agreement ”), and any capitalized terms used, but not
otherwise defined in this Agreement shall have the meanings
ascribed to those terms in the Employment Agreement.
1. Pre-Succession Period .
(a) During the period commencing
on the date of this Agreement and ending on CEO Transition
Date (“ Pre-Succession Period ”), you will
continue to be fully engaged as the Company’s President and
CEO. The terms of the Employment Agreement in effect immediately
prior to the date of this Agreement will continue in effect, except
as otherwise explicitly set forth in this Agreement. Your salary,
at an annualized rate of $840,000, shall continue to the later of
December 31, 2009 or the last day of the Pre-Succession
Period. During the Pre-Succession Period you will be eligible for a
bonus under the Company’s Short Term Incentive Compensation
(“ STIC ”) Plan for the Company’s fiscal
years 2009 (not pro-rated), and for 2010 and 2011 prorated for the
time you served as CEO, during such periods which will be paid at
the normal time for bonus payments. This bonus will be based on
overall corporate performance and the Company’s Compensation
and Management Development Committee’s (“
Committee ”) discretion as to your personal
performance modifier and will be subject to all of the terms of the
STIC Plan for the Company’s fiscal years 2009, 2010 and 2011,
respectively.
(b) On the CEO Transition Date,
you agree that you will automatically, without further action,
cease serving as a member of the Boards of Directors of the Company
or any of its subsidiaries (“ Boards ”). From
and after the CEO Transition Date you will no longer be eligible to
be elected to any of the Boards after such date, except in any of
the Boards’ sole discretion.
(c) On the CEO Transition Date,
(i) the Change in Control Agreement between you and the
Company dated March 31, 2008 will automatically, without
further action required, terminate, and the Company and you will
have no obligations thereafter under such Change in Control
Agreement. Your treatment in the event of your termination not for
cause by the Company, whether in connection with a change in
control or otherwise, is addressed in Sections 3(d) and (e), 4 and
6 (b) and (c) below.
(d) If the CEO Transition Date
is on or after April 30, 2011, from and after the CEO
Transition Date you will no longer be an employee, officer or
President and CEO of the Company or any of its subsidiaries, you
will no longer be eligible to be elected to such positions, and you
will not be entitled to any Severance Payments under
Paragraph 16 of your Employment Agreement. Subject to the
terms and conditions contained in this Agreement and the Consulting
Agreement attached hereto as Exhibit A (“ Consulting
Agreement ”), you will be entitled to the payments under
Section 5 of this Agreement.
(e) Until the CEO Transition
Date, the Committee will determine, based on the then existing
facts and circumstances whether, and the extent to which, ongoing
stock based awards will be granted to you.
2. Post-Succession Period .
(a) If the CEO Transition Date
is on or after April 30, 2011, there shall be no
Post-Succession Period as set forth in this Section 2, and
this Section 2 shall terminate and be null and void for all
purposes.
(b) If your CEO Transition Date
is before April 30, 2011, then during the period commencing on
the day immediately following the CEO Transition Date and ending on
April 30, 2011 (“ Post-Succession Period
”), you will no longer be President or CEO of the Company,
and you will no longer be eligible to be elected to such position
beginning on the first day of the Post-Succession Period. However,
during the Post-Succession Period you will continue to be employed
by the Company through April 30, 2011. It is contemplated that
you would continue to advise and help shape the Company’s
business and product innovation initiatives. You will continue to
be subject to the terms of the Employment Agreement as modified by
this Agreement. You will report solely to the Company’s CEO
and will hold the title “Chief Innovation Officer.” All
work and tasks to be started and completed by you in this position
will be authorized by the then existing CEO.
(c) During the Post-Succession
Period and for the services rendered as an employee of the Company
as described in Section 2(b) above, you will receive an
annualized salary of $500,000 payable in regular payroll
installments, which shall be your “Base Salary” as
defined in the Employment Agreement (“ Base Salary" );
provided, that to receive such amount you will be available to
perform services constituting at least 40% of your time, which, for
purposes of this agreement shall be agreed to be at least 1,000
hours per year on a fully annualized basis (or an average of 83.33
hours per month). For the first 250 hours you will receive no
additional compensation and for and any days or hours worked in
excess of 250 hours, you will receive an additional $2,000 per
eight hour day (“ Employment Per Diem Amount ”)
or $250 per hour (“ Employment Hourly Amount ”)
as payment for time spent in your new position described in
Section 2(a) above. With respect to the Employment Per Diem
Amount and Employment Hourly Amount, within ten (10) days
after the end of each calendar month in the Post-Succession Period,
you will provide the General Counsel of the Company a report
reflecting each day (and/or hour) you worked in your new position
during such month, and within fourteen (14) days of the
receipt of such report, the Company will pay you the Employment Per
Diem Amount and Employment Hourly Amount for such month based on
the days and hours worked as reflected in the report.
(d) It is anticipated that you
will incur a “separation from service” (under Treasury
Regulation Section 1.409A-1(h)) on the last day of the
Post-Succession Period. As of the last day of the Post-Succession
Period, you agree that you will automatically, without further
action, cease serving as an employee or officer of the Company or
any of its subsidiaries, and you will not be entitled to any
Severance Payments under Paragraph 16 of your Employment
Agreement. Subject to the terms and conditions contained in this
Agreement and the Consulting Agreement, you will be entitled to the
payments under Section 5.
3. Benefits During the Pre- and Post-Succession
Periods .
(a) During the Pre-Succession
Period and Post-Succession Period (if applicable) you will continue
to receive the benefits described in Section 4(f) and Section
4(h) of the Employment Agreement, except as provided in
(i) and (ii) below, both being effective with your CEO
Transition Date.
(i) With
respect to health, dental and vision coverage, you will be eligible
for coverage under the related Company plans in accordance with
Section 4980B of the Internal Revenue Code of 1986, as amended
(“ COBRA Coverage ”). The Company will fully
subsidize and provide such COBRA Coverage at no cost to you on an
after-tax basis.
(ii) With
respect to disability benefits, upon your becoming disabled, you
will immediately notify the Company of such disability, and
(A) the Company will continue to pay you your Base Salary
during the period that you otherwise would be entitled to benefits
under the Company’s short-term disability plan (if not so
entitled); and (B) upon such disability continuing in duration
to become a long-term disability, you will be a participant under
the Company’s long term disability plan and receive the
long-term disability benefits as are due you under such plan. For
purposes of this Section 3(a)(ii), “disability”
shall have the same meaning as disability set forth in the
disability plans of the Company.
(b) During the Pre-Succession
Period and so long as you remain an employee of the Company during
such period, you will continue to receive the “Aircraft
Use” benefit described in Section 4(g) of the Employment
Agreement, but during the Post-Succession Period (if applicable),
the Aircraft Use benefit shall be revised to be that your Aircraft
Use can only be for Company business (including business travel to
Batesville, Indiana) and only upon receipt of the approval of the
then existing CEO (or in accordance with parameters and procedures
previously-agreed with the CEO). During the Post-Succession Period
(if applicable) there shall be no Aircraft Use for personal
travel.
(c) During the Pre-Succession
Period and so long as you remain an employee of the Company during
such period, the office and clerical support provided to you prior
to the date of this Agreement will continue to be provided to you.
During the Post-Succession Period (if applicable) and so long as
you remain an employee of the Company during such period, an office
will be provided to you at the Company’s home office (or
other premises as may be mutually agreed) as well as the reasonable
use of an assistant for any work on any Company business. You also
will be furnished such other offices and related facilities and
support personnel as are commensurate with your new role and
responsibilities, to be determined by the CEO. During the
Post-Succession Period (if applicable), unless requested by the
Company CEO for business purposes, it is not expected that you will
need to travel to Batesville, Indiana to perform your employment
services but may do so if, in your discretion, it facilitates your
duties and responsibilities.
(d) Except as provided in
Section 3(f) below, all equity-based compensation which has
not vested prior to the date of the Agreement shall continue to
vest in accordance with the related grant or award agreement so
long as you continue to be an employee of the Company during the
Pre-Succession Period and Post-Succession Period. Notwithstanding
the foregoing, all then-unvested performance-based restricted stock
units (“ RSU ”) will become fully vested on
April 30, 2011, but only if you are an employee of the Company
on such date or if the Company terminates your employment prior to
April 30, 2011 for reasons other than for Cause (as defined in
Section 10 of the Employment Agreement) or you terminate due
to Good Reason (during the Pre-Succession Period as defined under
Paragraph 11 of the Employment Agreement, and during the
Post-Succession Period as defined under Section 6(b) below), and
shares of Company common stock underlying the RSUs will be
distributed to you only to the extent the performance goals are
achieved at the end of the applicable performance periods, with
those RSUs whose performance goals are not achieved being
forfeited.
(e) Except as otherwise provided
in this Section 3(e), with respect to any Company stock
options granted to you prior to this Agreement (“ Stock
Options ”), if your employment with the Company
terminates prior to April 30, 2011, such Stock Options shall
be exercised in accordance with terms of the applicable stock
option agreements. If your employment is terminated by the Company
prior to April 30, 2011 other than for Cause or by you for
Good Reason, you will be fully vested in all Stock Options, except
performance-based Stock Options, and shall have until May 1,
2014 to exercise those vested Stock Options. With respect to
performance-based Stock Options, if your employment is terminated
by the Company prior to April 30, 2011 other than for Cause or
by you for Good Reason, you will be treated as if you had retired
on April 30, 2011. From and after April 30 2011 or your CEO
Transition Date, if later, all vested options may be exercised
prior to the earlier to occur of (i) the last day of the
“Term” of such option as set forth in the related
option agreement or (ii) the latter of May 1, 2014 or the
third anniversary of your CEO Transition Date.
(f) On
December 3, 2009 you will be granted RSUs having a face value
of $200,000. The number of RSUs granted will be equal to $200,000
divided by the average of the high and low Hill-Rom Holding’s
Inc. stock price on that date. The RSUs will vest on
December 3, 2010 so long as you are employed on such date, or
upon the event of your death, termination due to your Disability
(as defined under Section 12 of the Employment Agreement),
termination by the Company without Cause or by you for Good Reason
before that date, and will be distributed within fifteen
(15) days thereafter. Other than the grant of the RSUs set
forth in the preceding sentence, no equity-based compensation will
be granted to you after the date of this Agreement, except in the
discretion of the Board or a Committee thereof.
(g) Upon
receipt of an invoice therefore, the Company will promptly pay your
actual and reasonable out of pocket legal costs of negotiating and
entering into this Agreement, but not more than $25,000 in the
aggregate.
4. Retirement .
Upon cessation of your employment
with the Company, except as provided below if the Company
terminates your employment other than for Cause, or you terminate
for Good Reason before April 30, 2011, all benefits described
in Sections 3(a), 3(b) and 3(c) of this Agreement shall
terminate except those benefits which specifically continue after
termination of employment. Notwithstanding the foregoing, if your
employment is terminated by the Company other than for Cause or you
terminate for Good Reason before April 30, 2011, all benefits
described in Section 4(f) of the Employment Agreement, other
than 401(k) Savings Plan and Supplemental Executive Retirement Plan
participation, and in Section 3(a) of this Agreement will continue
until April 30, 2011 (provided, COBRA Coverage will expire at
such time thereafter as is provided in accordance with the terms of
applicable plan under which it is provided).
5. Consulting Period .
(a) If the CEO Transition Date
is on or after April 30, 2012, there shall be no Consulting
Period as set forth in this Section 5 and this Section 5
shall terminate and be null and void for all purposes.
(b) Starting on the latter to
occur of your CEO Transition Date or May 1, 2011 and ending
April 30, 2012 (“ Consulting Period ”), you
agree to be a consultant to the Company pursuant to a consulting
agreement substantially identical to the Consulting Agreement.
6. Miscellaneous .
(a) Except as provided in
Section 6(b) below, while you are employed during the
Pre-Succession Period and Post-Succession Period, all obligations
of the Company and all of your obligations under the Employment
Agreement which are not specifically revised by this Agreement
shall continue to be obligations of both Parties.
(b) You hereby agree that from
and after the date on which a new CEO commences employment with the
Company no provision under Section 2 of this Agreement or the
satisfaction of any obligation hereunder, including but not limited
to your ceasing to serve as President and CEO and a member of any
of the Boards, shall provide you the right to terminate your
employment for “Good Reason” as set forth under
Section 11 of the Employment Agreement. Notwithstanding the
foregoing, during the Post-Succession Period, your right to
terminate your employment with the Company for “Good
Reason” shall continue provided that for purposes of
Section 11 of the Employment Agreement, all references to your
position, duties, responsibilities, Base Salary, compensation,
office space, related facilities, support personnel and other
similar terms shall be the position, duties, responsibility, Base
Salary, compensation, office space, related facilities, support
personnel and other similar terms set forth in Section 2
and/or Section 3.
(c) If during the Pre-Succession
Period or Post-Succession Period, your employment is terminated by
the Company without Cause or you terminate your employment with the
Company for Good Reason (as provided above), in lieu of the
severance payments set forth in Sections 16 and 17 of the
Employment Agreement (subject to satisfying all other conditions
under that Agreement, e.g., execution of a Separation and Release
Agreement), you shall be entitled to receive any remaining balances
under your Base Salary and Consulting Fee (as provided under
Exhibit A), and benefits due you, otherwise payable or to
be provided above under this Agreement. This Section 6(c) does
not entitle you to any payments of the Employment Per Diem Amount,
Employment Hourly Amount, Consulting Per Diem Amount or Consulting
Hourly Amount for hours/days not worked.
(d) You represent and
acknowledge that in signing this Agreement you do not rely, and
have not relied, upon any representation or statement made by the
Company or by any of the Company’s employees, officers,
agents, stockholders, directors or attorneys with regard to the
subject matter, basis or effect of this Agreement other than those
specifically contained herein.
(e) You acknowledge that you
have been offered a reasonable amount of time within which to
consider and review this Agreement; that you have carefully read
and fully understand all of the provisions of this Agreement; and
that you have entered into this Agreement knowingly and
voluntarily.
(f) All payments to be made
under this Agreement and the Employment Agreement are subject to
applicable federal, state and any other tax withholding
requirements.
Very truly yours,
Hill-Rom Holding, Inc.
By:
Accepted and Agreed to this
day of , 2009.
Peter H. Soderberg
EXHIBIT A
CONSULTING AGREEMENT
THIS AGREEMENT is made as of [
Effective Date to be filled in here] (“ Effective
Date ”) by and between Hill-Rom Holdings, Inc. (“
Company ”) and Peter Soderberg in his individual
capacity (“ Consultant ”).
WITNESSETH
WHEREAS, the Company and its
affiliates are engaged in the healthcare industry throughout the
United States and abroad including, but not limited to, the design,
manufacture, sale, service and rental of hospital beds and
stretchers, hospital furniture, medical-related architectural
products, specialty sleep surfaces (including therapeutic
surfaces), movable medical equipment as well as other
medical-related accessories, devices and products;
WHEREAS, Consultant retired from the
Company on [retirement date to be filled in here] , at which
time the parties contemplated that Consultant would make himself
available from time to time following his retirement to perform
certain consulting services until April 30, 2012; and
WHEREAS, the Company and Consultant
(collectively referred to herein as the “ Parties
” or individually as a “ Party ”)
acknowledge and agree that the execution of this Agreement is
necessary to memorialize the terms and conditions of their
engagement as well as to protect the Company’s confidential
information, goodwill and other legitimate business concerns.
NOW THEREFORE, in consideration of
the promises and mutual covenants contained herein, and in further
consideration of each act done pursuant to this Agreement by either
of the Parties hereto, the Parties agree as follows:
1. Independent
Contractor . Effective the Effective Date, the Company hereby
engages Consultant, and Consultant accepts such engagement, as an
independent contractor to provide the consulting services described
herein based upon the terms and conditions set forth in this
Agreement. It is mutually understood and agreed that Consultant
shall not be considered an employee, agent or partner of the
Company and neither Party shall have any authority to bind the
other in any respect. Consultant shall not engage in any conduct or
communication which would create any appearance that he was able to
bind the Company in any regard.
2. Duties of
Consultant . Upon request of the Company and on a mutually
agreeable basis, Consultant agrees to [Description of work to be
filled in here at time of execution by the Parties] , and such
other services as may be mutually agreed from time to time by the
Consultant and the Company’s Chief Executive Officer.
Consultant shall report to the Company’s Chief Executive
Officer. Except as specifically otherwise provided in this
Agreement, Consultant shall not be prohibited from providing
consulting or other services (other than in full-time employment)
to any third party.
3. Performance
of Duties . Consultant agrees to perform such Consulting
Services in an ethical and professional manner. Consultant agrees
to comply with and be bound by all laws, rules and regulations that
are applicable to the performance of said services, including all
requirements regarding Equal Employment Opportunity, the provisions
of Executive Orders 11246 and 13201 (as may be applicable) as well
as all related rules and regulations. Consultant shall comply with
the policies of the Company to the extent applicable to its
independent service-providers, including, without limitation,
applicable policies regarding the confidentiality, privacy and
ownership of Company information. At no time during the term of
this Agreement will Consultant provide any consulting services or
similar services to any individual or entity which competes with
the Company or any Affiliate (defined below).
4.
Consultant’s Agents and Employees . This is a personal
service agreement. Consultant shall not use agents, employees or
subcontractors to perform the services under this Agreement or
otherwise delegate to any person or entity such services, without
the written consent of the Company. Consultant shall be liable
hereunder for the acts and/or omissions of any agent or employee of
Consultant and shall cause all such individuals involved in
providing services to the Company hereunder to execute all
documents and to do all things necessary to hold in strictest
confidence all trade secrets and Confidential Information,
consistent with and disclosed pursuant to the terms of this
Agreement and to otherwise fully comply with the terms and
conditions of this Agreement. Additionally, Consultant acknowledges
that he is solely responsible for compliance with all applicable
laws governing his relationship with his agents, employees and
subcontractors, specifically including federal, state and local law
concerning wages, hours, terms and conditions of employment,
unemployment compensation, workers compensation, social security
and other payroll withholdings and employment taxes.
5. Conflict of
Interest . Consultant represents and warrants that he is
unaware of any agreement which would in any way prohibit or
interfere with the performance
