Recent Proxies Highlight COVID-Related Incentive Actions for September FYE Companies

Reduced bonus to 0% despite financial performance tracking at 21% of target.

Adjusted awards to 75% of payout for most NEOs from the 18% of payout that would have resulted under the bonus funding formula. The company performed multiple sensitivity tests before making its decision.

Awarded a 15% supplemental cash compensation award. NEOs received 10% of target under the original plan, so with the supplemental award NEOs received 25% of their incentive opportunities.

Increased emphasis on individual performance to 50% individual / 50% financial. Financial performance was well below target and funded at 0%. Provided detailed chart on individual performance and achievements in corporate initiatives scorecard and funded individual performance at 160% of target.

Included all participants (including all NEOs) in the corporate pool and did not include any participants in the individual business unit pools. Focusing all participants on the corporate pool enabled HillRom to coalesce around one set of company goals.

Considered an average of the pre-COVID results for the first six months of FY20 and the results of a balanced scorecard for the final six months of FY20, resulting in a payment of 84% of target.

Financial performance metrics for FY21 will be evaluated based on two six-month periods, with criteria established at the beginning of each period. Bonuses for operational and strategic objectives will be determined based on full-year performance.

Measured FY20 in two halves with a qualifier in the second half in which Non-Performing Assets (NPA)/Capital must meet a minimum of 40% for any incentive to be earned in that half of the year. The minimum threshold was not met, resulting in no payment for the second half of the year.

Adjusted NEO individual performance goals for fiscal year 2020 in April 2020. Corporate performance goals were not modified.

Threshold performance level of achievement for a financial metric was lowered to increase the possibility of a minimum reward.

Excluded the impact of COVID-19 from the determination of whether the shared individual objectives were achieved.

For FY20, modified the EBITDA incentive metric to exclude $2.6M related to the adjusted payouts for COVID-19 for certain employees, resulting in 133.8% achievement instead of 0%.

Given the challenges of implementing effective incentives during the pandemic, bonus participants will have the opportunity to earn RSUs equal to 25% of the value of their annual target bonus opportunity based on achievement of an approved sales target.

For FY21, changed metrics to 70% earnings per share (EPS) growth and 30% revenue growth – both based on three one-year growth targets. Prior measure was cumulative EPS over three years.

For FY21, changed metrics to 50% stock price growth and 50% return on invested capital (ROIC) from 50% EPS and 50% ROIC. The use of stock price is temporary in consideration of the pandemic.

For FY21, increased weighting of RSU awards to NEOs. CEO awards will have a higher proportion of PSUs vs. RSUs than that of other NEOs. In prior years, the allocation was 50% to PSUs and 50% to RSUs.

For FY18 awards, reviewed progress against performance goals considering performance through the pre-COVID period (the first 30 of 36-month performance period) as well as the performance in the last 6 months that was impacted by COVID. Projected performance pre-COVID would have resulted in a Performance Share payout at 101.7%, while Company performance for the full period would have resulted in no payout. Final payout was 101.7%.

Modified goals for the FY20 performance period. Performance metrics and attainment for 2021 and 2022 will be determined at the beginning of each fiscal year. At the end of the three-year period, each year’s attainment will be averaged to determine the payout for the cycle.

For the FY19 award (based on EBITDA margin and EPS), lowered the threshold and certain other payout targets. Did not adjust the targets for these performance metrics for payments at or above 100% of target.

For the FY21 tranche of the FY19 PSUs, lowered threshold and target Adjusted Free Cash Flow goals and lowered threshold achievement to 25% (from 50%). For the FY21 and FY22 tranches of the FY20 PSUs, adjusted downward the threshold and target Annual Run Rate metrics for FY21 and FY22.

Excluded costs associated with COVID-19 from the EPS calculation for outstanding performance equity (including FY18 grants). Adjusted EPS was $8.86, resulting in vesting at 108% of target. Had the Committee not exercised discretion, vesting would have occurred at 90% of target.