Hill-Rom Holdings, Inc. (Form: 10-K, Received: 11/16/2011 16:04:26)

Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount and do not bear interest, unless the transaction is an installment sale with payment terms exceeding one year. Reserves for uncollectible accounts represent our best estimate of the amount of probable credit losses and collection risk in our existing accounts receivable. We determine such reserves based on historical write-off experience by industry and reimbursement platform. Receivables are generally reviewed on a pooled basis based on historical collection experience for each reimbursement and receivable type. Receivables for capital sales transactions are also reviewed individually for collectability. Account balances are charged against the allowance when we believe it is probable the receivable will not be recovered. We do not have any off-balance sheet credit exposure related to our customers. If circumstances change, such as higher than expected claims denials, payment defaults, adverse changes in general economic conditions, unfavorable impacts of austerity measures initiated by some governmental authorities, instability or disruption of credit markets, or an unexpected material adverse change in a major customer’s or payor’s ability to meet its obligations, our estimates of the realizability of trade receivables could be reduced by a material amount.

Within rental revenues, the domestic third-party payors’ reimbursement process requires extensive documentation, which has had the effect of slowing both the billing and cash collection cycles relative to the rest of the business, and therefore, increasing total accounts receivable. Because of the extensive documentation required and the requirement to settle a claim with the primary payor prior to billing the secondary and/or patient portion of the claim, the collection period for a claim in a portion of our business may, in some cases, be extended.

We generally hold our trade accounts receivable until they are paid. Certain long-term receivables are occasionally sold to third parties; however, any recognized gain or loss on such sales has historically not been material.

Inventories

Inventories are valued at the lower of cost or market. Inventory costs are determined by the last-in, first-out (“LIFO”) method for approximately 60 and 65 percent of our inventories at September 30, 2011 and 2010. Costs for other inventories have been determined principally by the first-in, first-out (“FIFO”) method. Inventories consist of the following:

	September 30
	2011		2010

Finished products	$	55.6	$	64.2
Work in process		4.2		4.7
Raw materials		35.8		39.6
Total	$	95.6	$	108.5

If the FIFO method of inventory accounting, which approximates current cost, had been used for all inventories, they would have been approximately $2.2 million and $1.2 million higher than reported at September 30, 2011 and 2010.

Property, Plant and Equipment

Property, plant and equipment is recorded at cost and depreciated over the estimated useful life of the assets using principally the straight-line method. Ranges of estimated useful lives are as follows:

	Useful Life
Land improvements	6 - 25 years
Buildings and building equipment	20 - 40 years
Machinery and equipment	3 - 10 years
Equipment leased to others	2 -10 years

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When property, plant and equipment is retired from service or otherwise disposed of, the cost and related amount of depreciation or amortization are eliminated from the asset and accumulated depreciation accounts. The difference, if any, between the net asset value and the proceeds on sale are charged or credited to income. Total depreciation expense for fiscal years 2011, 2010 and 2009 was $74.3 million, $72.8 million and $74.3 million. The major components of property and the related accumulated depreciation were as follows:

	September 30
	2011				2010
			Accumulated				Accumulated
	Cost		Depreciation		Cost		Depreciation

Land and land improvements	$	12.2	$	3.9	$	12.5	$	3.7
Buildings and building equipment		115.3		79.0		112.8		75.7
Machinery and equipment		269.0		205.3		257.1		192.2
Equipment leased to others		423.1		308.6		422.6		289.7
Total	$	819.6	$	596.8	$	805.0	$	561.3

Intangible Assets

Intangible assets are stated at cost and consist predominantly of goodwill, software, patents and trademarks. With the exception of goodwill and certain trademarks, our intangible assets are amortized on a straight-line basis over periods generally ranging from 3 to 20 years.

We assess the carrying value of goodwill and non-amortizable intangibles annually, during the third quarter of each fiscal year, or more often if events or changes in circumstances indicate there may be impairment. Goodwill is allocated among the reporting units based on the relative fair value of those units.

The majority of our goodwill and many of our intangible assets are not deductible for income tax purposes. A summary of intangible assets and the related accumulated amortization and impairment losses was as follows:

	September 30
	2011				2010
			Amortization				Amortization
	Cost		and Impairment		Cost		and Impairment

Goodwill	$	560.0	$	472.8	$	553.9	$	472.8
Software		154.7		106.2		150.5		91.7
Other		134.7		57.1		123.9		46.1
Total	$	849.4	$	636.1	$	828.3	$	610.6

Amortization expense for fiscal years 2011, 2010 and 2009 was $29.6 million, $26.9 million and $25.9 million. Amortization expense for all intangibles is expected to approximate the following for each of the next five fiscal years and thereafter:

	Amount
2012	$	31.7
2013	$	27.5
2014	$	20.0
2015	$	13.7
2016	$	9.5
2017 and beyond	$	4.7

Software consists mainly of capitalized costs associated with internal use software, including applicable costs associated with the implementation/upgrade of our Enterprise Resource Planning system. In addition, software includes capitalized development costs for software products to be sold. The net book value of computer software costs, included within Intangible assets, was $48.5 million and $58.8 million at September 30, 2011 and 2010. Capitalized software costs are amortized on a straight-line basis over periods ranging from three to ten years. Amortization expense approximated $19.1 million, $17.5 million and $16.6 million for fiscal years 2011, 2010 and 2009.

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Guarantees

We routinely grant limited warranties on our products with respect to defects in material and workmanship. The terms of these warranties are generally one year, however, certain components and products have substantially longer warranty periods. We recognize a reserve with respect to these obligations at the time of product sale, with subsequent warranty claims recorded directly against the reserve. The amount of the warranty reserve is determined based on historical trend experience for the covered products. For more significant warranty-related matters which might require a broad-based correction, separate reserves are established when such events are identified and the cost of correction can be reasonably estimated.

A reconciliation of changes in our warranty reserve is as follows:

	2011			2010			2009

Balance at October 1	$	15.8		$	17.1		$	16.9
Provision for warranties during the period		17.0			16.0			16.9
Warranty reserves acquired		-			-			3.6
Warranty claims incurred during the period		(15.0	)		(17.3	)		(20.3	)
Balance at September 30	$	17.8		$	15.8		$	17.1

In the normal course of business we enter into various other guarantees and indemnities in our relationships with suppliers, service providers, customers, business partners and others. Examples of these arrangements would include guarantees of product performance, indemnifications to service providers and indemnifications of our actions to business partners. These guarantees and indemnifications have not historically nor do we expect them to have a material impact our financial condition or results of operations, although indemnifications associated with our actions generally have no dollar limitations.

In conjunction with our acquisition and divestiture activities, we have entered into select guarantees and indemnifications of performance with respect to the fulfillment of our commitments under applicable purchase and sale agreements. The arrangements generally indemnify the buyer or seller for damages associated with breach of contract, inaccuracies in representations and warranties surviving the closing date and satisfaction of liabilities and commitments retained under the applicable contract. With respect to sale transactions, we also routinely enter into non-competition agreements for varying periods of time. Guarantees and indemnifications with respect to acquisition and divestiture activities, if triggered, could have a materially adverse impact on our financial condition and results of operations.

Retirement Plans

We sponsor retirement and postretirement plans covering select employees. Expense recognized in relation to these defined benefit retirement plans and the postretirement health care plan is based upon actuarial valuations and inherent in those valuations are key assumptions including discount rates, and where applicable, expected returns on assets, projected future salary rates and projected health care cost trends. The discount rates used in the valuation of our defined benefit pension and postretirement plans are evaluated annually based on current market conditions. In setting these rates we utilize long-term bond indices and yield curves as a preliminary indication of interest rate movements, and then make adjustments to the respective indices to reflect differences in the terms of the bonds covered under the indices in comparison to the projected outflow of our obligations. Our overall expected long-term rate of return on pension assets is based on historical and expected future returns, which are inflation adjusted and weighted for the expected return for each component of the investment portfolio. Our rate of assumed compensation increase is also based on our specific historical trends of wage adjustments.

We account for our defined benefit pension and other postretirement plans by recognizing the funded status of a benefit plan in the statement of financial position. We also recognize in Accumulated Other Comprehensive Income (Loss) certain gains and losses that arose during the period. See Note 7 for key assumptions and further discussion related to our pension and postretirement plans.

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Environmental Liabilities

Expenditures that relate to an existing condition caused by past operations, and which do not contribute to future revenue generation, are expensed. A reserve is established when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These reserves are determined without consideration of possible loss recoveries from third parties.

Specific costs included in environmental expense and reserves include site assessment, development of a remediation plan, clean-up costs, post-remediation expenditures, monitoring, fines, penalties and legal fees. Reserve amounts represent the expected undiscounted future cash outflows associated with such plans and actions.

Self Insurance

We are generally self-insured up to certain limits for product/general liability, workers’ compensation, auto liability and professional liability insurance programs. These policies have deductibles and self- insured retentions ranging from $150 thousand to $1.5 million per occurrence, depending upon the type of coverage and policy period. We are also generally self-insured up to certain stop-limits for certain employee health benefits, including medical, drug and dental. Our policy is to estimate reserves based upon a number of factors including known claims, estimated incurred but not reported claims and outside actuarial analysis, which are based on historical information along with certain assumptions about future events. Such estimated reserves are classified as Other Current Liabilities and Other Long-Term Liabilities within the Consolidated Balance Sheets.

Revenue Recognition — Sales and Rentals

Net revenues reflect gross revenues less sales discounts and allowances and customer returns for product sales and a provision for uncollectible receivables for rentals. Revenue is evaluated under the following criteria and recognized when each is met:

•

Evidence of an arrangement: An agreement with the customer reflecting the terms and conditions to deliver products or services serves as evidence of an arrangement.

•

Delivery: For products, delivery is considered to occur upon receipt by the customer and the transfer of title and risk of loss. For rental services, delivery is considered to occur when the services are rendered.

•

Fixed or determinable price: The sales price is considered fixed or determinable if it is not subject to refund or adjustment.

•

Collection is deemed probable: At or prior to the time of a transaction, credit reviews of each customer are performed to determine the creditworthiness of the customer. Collection is deemed probable if the customer is expected to be able to pay amounts under the arrangement as those amounts become due. If collection is not probable, revenue is recognized when collection becomes probable, generally upon cash collection.

As a general interpretation of the above guidelines, revenues for health care products in the patient care environment are generally recognized upon delivery of the products to the customer and their assumption of risk of loss and other risks and rewards of ownership. Local business customs and non-standard sales terms can sometimes result in deviations to this normal practice in certain instances; however, in no case is revenue recognized prior to the transfer of risk of loss and rewards of ownership.

For non-invasive therapy products and medical equipment management services, the majority of product offerings are rental products for which revenues are recognized consistent with the rendering of the service and use of products. For The Vest® product, revenue is generally recognized at the time of receipt of authorization for billing from the applicable paying entity as this serves as evidence of the arrangement and sets a fixed or determinable price.

For health care products and services aimed at improving operational efficiency and asset utilization, various revenue recognition techniques are used, depending on the offering. Arrangements to provide services, routinely under separately sold service and maintenance contracts, result in the deferral of revenues until specified services are performed. Service contract revenue is generally recognized ratably over the contract period, if applicable, or as services are rendered. Product-related goods are generally recognized upon delivery to the customer, similar to products in the patient care environment.

Revenues are presented in the Statements of Consolidated Income (Loss) net of certain discounts and sales adjustments. For product sales, we record reserves resulting in a reduction of revenue for contractual discounts, as well as price concessions and product returns. Likewise, rental revenue reserves, reflecting contractual and other routine billing adjustments, are recorded as a reduction of revenues. Reserves for revenue are estimated based upon historical rates for revenue adjustments.

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Taxes Collected from Customers and Remitted to Governmental Units

Taxes assessed by a governmental authority that are directly imposed on a revenue producing transaction between us and our customers, including but not limited to sales taxes, use taxes, and value added taxes, are accounted for on a net (excluded from revenues and costs) basis.

Cost of Revenues

Cost of goods sold for capital sales consists primarily of purchased material costs, fixed manufacturing expense, variable direct labor, overhead costs and costs associated with the distribution and delivery of products to our customers. Rental expenses consist of costs associated directly with rental revenue, including depreciation, maintenance, logistics and service center facility and personnel costs.

Research and Development Costs

Research and development costs are expensed as incurred. Costs were $63.8 million, $58.3 million and $55.7 million for fiscal years 2011, 2010 and 2009.

In addition, certain software development technology costs are capitalized as intangibles and are amortized over a period of three to five years once the software is ready for its intended use. The amount capitalized during fiscal years 2011, 2010 and 2009 was approximately $2.1 million, $4.8 million and $5.8 million.

Advertising Costs

Advertising costs are expensed as incurred. Costs were $4.0 million, $4.3 million and $4.0 million for fiscal years 2011, 2010 and 2009.

Comprehensive Income

We include the net-of-tax effect of unrealized gains or losses on our available-for-sale securities, foreign currency translation adjustments and pension or other defined benefit postretirement plans’ actuarial gains or losses and prior service costs or credits in comprehensive income.

The composition of Accumulated Other Comprehensive Income (Loss) is as follows:

	September 30
	2011			2010			2009

Available-for-sale securities and currency hedges, net of tax of
$0.4, $0.4 and $0.5, respectively	$	(0.9	)	$	(0.7	)	$	(0.9	)
Foreign currency translation adjustment, net of tax of $1.7, $2.2
and $3.5, respectively		(15.7	)		(11.9	)		(12.6	)
Items not yet recognized as a component of net periodic pension
and postretirement healthcare costs, net of tax of $38.2, $29.3
and $29.2, respectively		(62.4	)		(49.2	)		(46.4	)
Total	$	(79.0	)	$	(61.8	)	$	(59.9	)

Foreign Currency Translation

The functional currency of foreign operations is generally the local currency in the country of domicile. Assets and liabilities of foreign operations are primarily translated into U.S. dollars at year-end rates of exchange and the income statements are translated at the average rates of exchange prevailing during the year. Adjustments resulting from translation of the financial statements of foreign operations into U.S. dollars are excluded from the determination of net income, but included as a component of Accumulated Other Comprehensive Income (Loss). Foreign currency gains and losses resulting from foreign currency transactions are included in our results of operations and are not material.

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Stock-Based Compensation

We account for stock-based compensation under fair value provisions. Stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period. In order to determine the fair value of stock options on the date of grant, we utilize a Binomial model. Inherent in this model are assumptions related to a volatility factor, expected life, risk-free interest rate, dividend yield and expected forfeitures. The risk-free interest rate is based on factual data derived from public sources. The volatility factor, expected life, dividend yield and expected forfeiture assumptions require judgment utilizing historical information, peer data and future expectations. Deferred stock (also known as restricted stock units (“RSUs”)) is measured based on the fair market price of our common stock on the date of grant, as reported by the New York Stock Exchange, multiplied by the number of units granted. See Note 8 for further details.

Income Taxes

The Company and our eligible domestic subsidiaries file a consolidated U.S. income tax return. Foreign operations file income tax returns in a number of jurisdictions. Deferred income taxes are computed using an asset and liability approach to reflect the net tax effects of temporary differences between the financial reporting carrying amounts of assets and liabilities and the corresponding income tax amounts. We have a variety of deferred tax assets in numerous tax jurisdictions. These deferred tax assets are subject to periodic assessment as to recoverability and if it is determined that it is more likely than not that the benefits will not be realized, valuation allowances are recognized. In evaluating whether it is more likely than not that we would recover these deferred tax assets, future taxable income, the reversal of existing temporary differences and tax planning strategies are considered.

We account for uncertain income tax positions using a threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The difference between the tax benefit recognized in the financial statements for an uncertain income tax position and the tax benefit claimed in the tax return is referred to as an unrecognized tax benefit. See Note 10 for further details.

Derivative Instruments and Hedging Activity

We use derivative financial instruments to manage the economic impact of fluctuations in currency exchange rates. Derivative financial instruments related to currency exchange rates include forward purchase and sale agreements which generally have terms no greater than 15 months. Additionally, interest rate swaps have sometimes been used to convert a portion of our long-term debt from fixed to variable interest rates.

Derivative financial instruments are recognized on the Consolidated Balance Sheets as either assets or liabilities and are measured at fair value. Changes in the fair value of derivatives are recorded each period in the Statement of Consolidated Income (Loss) or Accumulated Other Comprehensive Income (Loss), depending on whether a derivative is designated and considered effective as part of a hedge transaction, and if it is, the type of hedge transaction. Gains and losses on derivative instruments reported in Accumulated Other Comprehensive Income (Loss) are subsequently included in the Statement of Consolidated Income (Loss) in the periods in which earnings are affected by the hedged item. These activities have not had a material effect on our financial position or results of operations for the periods presented herein.

Recently Issued Accounting Guidance

On October 1, 2010, we adopted the Financial Accounting Standard Board’s (“FASB”) revised authoritative guidance requiring entities to provide more information about sales of securitized financial assets and similar transactions, particularly if the seller retains some risk with respect to the assets. Our adoption of this guidance was prospective and did not have a material impact on our Consolidated Financial Statements.

On October 1, 2010, we adopted the FASB’s revised authoritative guidance to improve financial reporting for companies involved with variable interest entities to provide more relevant and reliable information to users of financial statements. Our adoption of this guidance was prospective and did not have a material impact on our Consolidated Financial Statements.

In May 2011, the FASB issued an amendment to the authoritative guidance on fair value measurements. The amendment requires companies to include expanded disclosures for their recurring Level 3 fair value measurements. In addition, companies must report the level in the fair value hierarchy of assets and liabilities not recorded at fair value but where fair value is disclosed. The amendment will be applied prospectively and will be effective for our quarter ending March 31, 2012, with early adoption prohibited. Our adoption of this amendment is not expected to have a material effect, but may require additional disclosure on our available-for-sale marketable securities, which are classified and disclosed as Level 3 fair value measurements.

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In June 2011, the FASB issued an amendment to the authoritative guidance on comprehensive income. The amendment eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity or include the components in the Notes to the Condensed Consolidated Financial Statements and instead requires the presentation of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The amendment will be effective for our quarter ending December 31, 2012. The adoption of this amendment is not expected to have a material effect on our Consolidated Financial Statements, but will require a change in the presentation of comprehensive income from the notes of our Consolidated Financial Statements, where it is currently disclosed, to the face of our Consolidated Financial Statements.

In September 2011, the FASB issued an amendment to the authoritative guidance on the annual goodwill impairment test. The amendment provides the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step test. If, as a result of the qualitative assessment, it is determined it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. The amendment will be effective beginning October 1, 2012, however early adoption is permitted. We will consider and apply this guidance in connection with future annual goodwill impairment tests. We do not expect this to have a material impact on our Consolidated Financial Statements.

NOTE 2. ACQUISITIONS

Liko Distributor Acquisition

On September 8, 2011, we acquired the distribution companies for our patient mobility products in France and Switzerland (collectively referred to as “Liko Distributors”). The acquisition represents another step in our strategy for international expansion, leveraging and increasing our direct channel presence, especially in key European markets. The purchase price for the Liko Distributors was $22.5 million ($15.5 million net of cash acquired).

The following table summarizes the fair value of the assets acquired and liabilities assumed as of the acquisition date:

	Amount
Goodwill	$	6.1
Customer relationships		7.9
Non-compete agreements		0.6
Net assets acquired		10.6
Deferred tax liabilities		(2.7	)
Total purchase price	$	22.5

Goodwill is not deductible for tax purposes and was allocated entirely to our International segment. The useful lives assigned to intangibles identified as part of the Liko Distributor acquisition are as follows:

	Useful Life
Customer relationships		5
Non-compete agreements		2

If the Liko Distributors had been acquired at the beginning of our 2009 fiscal year, the impact to revenues and net income on an unaudited pro forma basis would not have been significant to our financial results in any of the periods presented.

Encompass Joint Venture

On November 9, 2009, we entered into a joint venture with Encompass Group, LLC (“Encompass Group”), a leader in health care textiles and therapeutic and prevention surfaces, to form Encompass TSS, LLC (“Encompass”). This joint venture included contributed former assets of Encompass Therapeutic Support Systems (“ETSS”), a division of Encompass Group and was 60 percent owned by us and 40 percent owned by Encompass Group. Encompass Group, through its ETSS business unit, traditionally focused on providing surface replacement systems. For our 60 percent ownership interest in the Encompass JV we paid $7.5 million to Encompass Group, contributed cash and entered into license and distribution agreements with Encompass JV.

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The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of formation.

	Amount
Goodwill	$	8.0
Trade Name		1.5
Customer relationships		7.7
Technology		2.4
Net liabilities assumed		(0.7	)
Noncontrolling interest		(7.5	)
Additional paid-in-capital		(3.9	)
Total purchase price	$	7.5

The Encompass JV agreements contained both a put option for Encompass Group and a call option for us, requiring or allowing us to purchase the remaining 40 percent interest based on predetermined earnings multiples. Changes to the value of the put were accreted to noncontrolling interest in our Consolidated Balance Sheet with the offset being recorded as a component of retained earnings.

The goodwill of $8.0 million arising from the Encompass JV consisted largely of the synergies created from combining ETSS’s focus on customer replacement surfaces with our platform brands. The goodwill is deductible for tax purposes and was allocated entirely to our North America Acute Care segment.

The useful lives assigned to intangibles identified as part of the Encompass JV were as follows:

	Useful Life
Trade name		7
Customer relationships		7
Technology		5

On November 30, 2010, we exercised our call option and purchased the remaining 40 percent of Encompass for $10.6 million, plus a variable earn-out with a minimum of $1.2 million and a maximum of $1.6 million per year over five years. We have a total of $5.3 million accrued in other current liabilities and other long-term liabilities on our Consolidated Balance Sheet at September 30, 2011 related to the earn-out.

If Encompass had been wholly-owned at the beginning of our 2009 fiscal year, the impact to revenues and net income on an unaudited pro forma basis would not have been significant to our financial results in any of the periods presented.

Liko Acquisition

On October 1, 2008, we acquired two related companies (the “Liko Acquisition”): Liko Vårdlyft AB (“Liko Sweden”) and Liko North America Corporation (“Liko North America” and, together with Liko Sweden, “Liko”). Liko, headquartered in Lulea, Sweden, is a leading supplier and developer of patient lifts, slings and other patient transfer technology. The acquisition of Liko represents a direct connection to our mission of enhancing outcomes for patients and their caregivers and is in line with our strategy to add complementary technologies that leverage our global business and presence across the continuum of care. The purchase price for Liko was $190.4 million, including direct acquisition costs of $3.6 million and the payment of outstanding Liko debt of $9.8 million ($187.2 million net of cash acquired). The results of Liko are included in the Consolidated Financial Statements since the date of acquisition.

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The following table summarizes the allocation of the purchase price of Liko based on estimated fair values as of the acquisition date:

	Amount
Goodwill	$	139.5
Trade name		15.8
Customer relationships		15.1
Developed technology		7.3
Non-compete agreements		1.7
Net assets acquired		18.9
Deferred tax liabilities		(7.9	)
Total purchase price	$	190.4

The purchase price remains subject to adjustment based on claims related to provisions contained in the purchase agreements, which are currently being contested and expected to go to arbitration. Any such adjustment is expected to be favorable and not material and would be recorded in our Consolidated Statement of Income (Loss) as a reduction of the goodwill impairment charge that we recorded during fiscal 2009. See Note 4 for further details.

Goodwill is not deductible for tax purposes and has been allocated to reporting units included in all three of our reportable segments based on projected cash flows. The useful lives assigned to intangibles identified as part of the acquisition are as follows:

		Useful Life
Trade name		Indefinite
Developed technology		7
Customer relationships		7
Non-compete agreements		5

NOTE 3. SALE OF NON-STRATEGIC ASSETS

In June 2009, we completed the sale of patents and intellectual property related to our Negative Pressure Wound Therapy technology for which there were no capitalized costs reflected on our consolidated balance sheet. In May 2009, we finalized a strategic development agreement with Teletracking Technologies, Inc. (“TeleTracking”) that resulted in the purchase by TeleTracking of certain assets and obligations related to the NaviCare® Patient Flow product line. These combined transactions resulted in a gain of $10.2 million, net of related transaction costs.

NOTE 4. IMPAIRMENT OF GOODWILL AND OTHER INTANGIBLES

We test goodwill and other intangible assets for impairment on an annual basis during our third fiscal quarter, or more often if events or circumstances indicate there may be impairment. The assessment during the third quarter of 2011 and 2010 indicated that there was no impairment with respect to goodwill or other recorded intangible assets. During the second quarter of fiscal 2009, as a result of the decline in our market capitalization related to the overall macro-economic climate and its resulting unfavorable impact on hospital capital spending and our operating results, we determined we were required to perform an interim impairment test with respect to goodwill and certain other intangibles outside of our normal third fiscal quarter test period.

Based on the results of goodwill and other intangible asset impairment testing as of March 31, 2009, we recorded an estimated impairment charge of $470 million in the second fiscal quarter of 2009. During the third quarter of 2009, we refined our impairment assessment for the second quarter and recorded an additional charge of $3.8 million. A further adjustment of $1.0 million was required in the fourth quarter as a result of purchase accounting adjustments in connection with the Liko Acquisition. An additional adjustment is possible based on claims related to provisions contained in the purchase agreement associated with the Liko Acquisition, with any such adjustment expected to be favorable and not material.

As discussed in Note 12, we operate in three reportable business segments. Goodwill and other intangible impairment testing are performed at the reporting unit level, which is one level below a reportable business segment. We have determined that we have eight reporting units. Goodwill is assigned to reporting units at the date the goodwill is initially recorded and has been reallocated as necessary based on the restructuring of reporting units over time. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or organically grown, are available to support the value of the goodwill.

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The goodwill impairment test involves a two-step process. The first step, used to identify potential impairment, is a comparison of each reporting unit’s estimated fair value to its carrying value, including goodwill. If the fair value of a reporting unit exceeds its carrying value, applicable goodwill is considered not to be impaired. If the carrying value exceeds fair value, there is an indication of impairment and the second step is performed to measure the amount of the impairment. The second step requires us to calculate an implied fair value of goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination, which is the excess of the fair value of the reporting unit, as determined in the first step, over the aggregate fair values of the individual assets, liabilities and identifiable intangibles as if the reporting unit was being acquired in a business combination. If the goodwill assigned to a reporting unit exceeds the implied fair value of the goodwill, an impairment charge is recorded for the excess.

For our second quarter of 2009 analysis, we estimated the fair value of each reporting unit in step one based on discounted cash flows as well as a market approach that compared each reporting unit’s earnings and revenue multiples to those of comparable public companies. The reporting unit’s discounted cash flows required significant management judgment with respect to forecasted sales, gross margin and selling, general and administrative expenses, capital expenditures and the selection and use of an appropriate discount rate. Utilizing our weighted average cost of capital as the discount rate for the discounted cash flows and median revenue and earnings multiples of comparable public companies under the market approach resulted in an implied fair value substantially in excess of our market capitalization. In order to reconcile the discounted cash flows and market approach fair values to the trading value of the our common stock, we applied higher discount rates than our weighted average cost of capital to the discounted cash flows and utilized earnings and revenue multiples below the median of comparable public companies, reflecting the equity risk premiums expected by a market participant. The reconciled fair values under both the discounted cash flows and market approach were substantially the same and resulted in three of our then reporting units having a carrying value in excess of their fair value.

The second step required us to allocate the fair value of each reporting unit that failed the first step test to the fair value of each reporting unit’s net assets . We calculated the fair values of each reporting unit’s net assets, with assistance from a third party valuation firm in the determination of fair values for significant tangible and intangible assets. All Hill-Rom-specific data and analytics, including estimates and assumptions, used in the valuations prepared by the third party valuation firm were either prepared or validated by us. Management takes full responsibility for this data and the ultimate results of the valuation work including the final fair values assigned to each reporting unit. Due to the fact that we were required to allocate a significant portion of fair value to unrecorded intangible assets such as the Hill-Rom trade name, technology and know-how and customer lists, but were not permitted to record these assets on our balance sheet, the resulting fair value allocated to implied goodwill was significantly lower than recorded goodwill resulting in the impairment charge.

In fiscal 2009, we incurred the impairment charge for goodwill and other intangibles in each of our three reportable segments in the following amounts: North America Acute Care $289.5 million, North America Post-Acute Care $68.6 million and International $114.7 million, which represented a full impairment of goodwill at that time in the affected North America Acute Care and International reporting units.

The following is a summary of the activity in goodwill by segment. During the first quarter of fiscal 2011, we changed our segment reporting to reflect changes in our organizational structure and management’s view of the business. As a part of these changes, we moved our surgical reporting unit from the International and Surgical segment (now referred to as the International segment) to the North America Acute Care segment. The prior year segment information included below has been updated to reflect these changes. See Note 12 for further details.

	North America Acute Care			North America Post-Acute Care			International			Total

Balances at September 30, 2009:
Goodwill	$	317.0		$	114.2		$	114.7		$	545.9
Accumulated impairment losses		(289.5	)		(68.6	)		(114.7	)		(472.8	)
Goodwill, net at September 30, 2009		27.5			45.6			-			73.1

Changes in Goodwill during the period:
Goodwill related to acquisitions		8.0			-			-			8.0

Balances at September 30, 2010:
Goodwill		325.0			114.2			114.7			553.9
Accumulated impairment losses		(289.5	)		(68.6	)		(114.7	)		(472.8	)
Goodwill, net at September 30, 2010		35.5			45.6			-			81.1

Changes in Goodwill during the period:
Goodwill related to acquisitions		-			-			6.1			6.1

Balances at September 30, 2011:
Goodwill		325.0			114.2			120.8			560.0
Accumulated impairment losses		(289.5	)		(68.6	)		(114.7	)		(472.8	)
Goodwill, net at September 30, 2011	$	35.5		$	45.6		$	6.1		$	87.2

NOTE 5. FINANCING AGREEMENTS

Total debt consists of the following:

	Years Ended September 30
	2011		2010
Outstanding finance credit lines	$	7.8	$	8.1
Revolving credit facility		45.0		45.0
Unsecured 8.50% debentures due on December 1, 2011		47.5		48.4
Unsecured 7.00% debentures due on February 15, 2024		19.7		19.7
Unsecured 6.75% debentures due on December 15, 2027		29.8		29.8
Other		1.3		0.6
Total debt		151.1		151.6
Less current portion of debt		100.3		53.1
Total long-term debt	$	50.8	$	98.5

We have trade finance credit lines and uncommitted letter of credit facilities. These lines are associated with the normal course of business and are not currently, nor have they historically, been of material size to the overall business.

In 2004, we issued $250.0 million of 4.5 percent senior notes due in 2009. In conjunction with and in preparation for the spin-off of the funeral services business, we made a cash tender offer to purchase any and all of these notes. As a result of that tender offer, $224.3 million of long-term debt was retired effective March 31, 2008. During our third fiscal quarter of 2009, we repaid the remaining $25.7 million of outstanding senior notes related to the 2004 issuance at the scheduled maturity date.

Unsecured debentures outstanding at September 30, 2011 have fixed rates of interest. We have deferred gains included in the amounts above from the termination of previous interest rate swap agreements, and those deferred gains amounted to $0.9 million at September 30, 2011 and $2.1 million at September 30, 2010. The deferred gains on the termination of the swaps are being amortized and recognized as a reduction of interest expense over the remaining term of the related debt through 2011 and 2024, and as a result, the effective interest rates on that debt have been and will continue to be lower than the stated interest rates on the debt.

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We have a $500.0 million five-year senior revolving credit facility. The term of the five-year facility expires on March 28, 2013 (subject to extension upon satisfaction of certain conditions set forth in the credit facility). Borrowings under the credit facility bear interest at variable rates specified therein, and the availability of borrowings is subject to our ability at the time of borrowing to meet certain specified conditions, including compliance with covenants contained in the credit agreement governing the facility. The credit agreement contains covenants that, among other matters, require us to maintain a ratio of consolidated indebtedness to consolidated EBITDA (each as defined in the credit agreement) of not more than 3.5:1.0 and a ratio of consolidated EBITDA to interest expense of not less than 3.5:1.0. The proceeds of the five-year facility shall be used, as needed: (i) for working capital, capital expenditures, and other lawful corporate purposes; and (ii) to finance acquisitions.

As of September 30, 2011, we had outstanding borrowings of $45.0 million and undrawn letters of credit of $5.8 million under the five-year facility, leaving $449.2 million of borrowing capacity available under the facility. During the first quarter of fiscal 2010, we made a payment of $45.0 million on our credit facility to reduce a portion of the short-term debt originally borrowed in conjunction with the Liko Acquisition.

The fair value of our debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to us for debt of the same remaining maturities. The book values of our short-term debt instruments approximate fair value. The estimated fair values of our long-term debt instruments were $52.6 million and $95.7 million at September 30, 2011 and 2010.

NOTE 6. FAIR VALUE MEASUREMENTS

Fair value measurements are classified and disclosed in one of the following three categories:

Level 1: Financial instruments with unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets and liabilities.

Level 2: Financial instruments with observable inputs other than those included in Level 1 such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Financial instruments with unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Unobservable inputs reflect our own assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). Unobservable inputs shall be developed based on the best information available in the circumstances, which might include our own data.

The following table summarizes our financial assets and liabilities included in our Consolidated Balance Sheets, measured at fair value on a recurring basis:

			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
	Balance at		Identical Assets		Inputs		Inputs
	September 30, 2011		(Level 1)		(Level 2)		(Level 3)

Cash and cash equivalents	$	224.6	$	224.6	$	-	$	-
Available-for-sale marketable securities		11.1		-		-		11.1
Total assets at fair value	$	235.7	$	224.6	$	-	$	11.1

			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
	Balance at		Identical Assets		Inputs		Inputs
	September 30, 2010		(Level 1)		(Level 2)		(Level 3)

Cash and cash equivalents	$	184.5	$	184.5	$	-	$	-
Available-for-sale marketable securities		11.8		-		-		11.8
Other investments		0.3		-		-		0.3
Total assets at fair value	$	196.6	$	184.5	$	-	$	12.1

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The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value.

At September 30, 2011, we had $11.1 million of AAA rated investment securities which consisted primarily of student loan auction rate securities. While we continue to earn interest on the ARS at the contractual rate, these investments are not currently being bought and sold in an active market and therefore do not have readily determinable market values. At September 30, 2011, our investment advisors provided a valuation based on unobservable inputs for the ARS. The investment advisors utilized a discounted cash flow approach (an “income approach”) to arrive at this valuation, which was corroborated by separate and comparable discounted cash flow analysis prepared by us. The assumptions used in preparing the discounted cash flow model include estimates of interest rates, timing and amount of cash flows, credit spread related yield and illiquidity premiums, and expected holding periods of the ARS. These assumptions are volatile and subject to change as the underlying sources of these assumptions and market conditions change. See below for a reconciliation of the beginning to ending balances of these assets and the related change in the fair value of these assets during fiscal 2011.

Currently, we intend, and believe we have the ability to hold these assets until market conditions are more favorable. If current market conditions do not improve or worsen, the result could be further realized or unrealized losses.

The following table presents the activity related to our ARS during the fiscal year.

	Available-For-Sale			AOCL
Balance at October 1, 2010	$	11.8		$	1.1
Change in fair value		(0.2	)		0.2
Sales or redemptions		(0.5	)		-
Balance at September 30, 2011	$	11.1		$	1.3

The components of the change in our unrealized gains were as follows:

	Years Ended September 30
	2011			2010			2009

Unrealized gains (losses) on available-for sale securities:
Unrealized holding gains (losses) arising during period, net-of-tax	$	(0.2	)	$	0.2		$	(3.0	)
Less: Reclassification adjustment for losses (gains) realized in net income, net-of-tax		-			(0.1	)		2.7
Net change in unrealized gains (losses), net-of-tax	$	(0.2	)	$	0.1		$	(0.3	)

For the fiscal years ended September 30, 2011, 2010 and 2009, we recognized income on our investments of $2.0 million, $2.3 million and $2.9 million, which did not include any impairments.

The carrying amounts of current assets and liabilities approximate fair value because of the short maturity of those instruments.

NOTE 7. RETIREMENT AND POSTRETIREMENT BENEFIT PLANS

Our retirement plans consist of defined benefit plans, a postretirement healthcare plan, and defined contribution savings plans. Plans cover certain employees both in and outside of the U.S.

Retirement Plans

We sponsor four defined benefit plans. Those plans include a master defined benefit retirement plan, a nonqualified supplemental executive defined benefit retirement plan, and two defined benefit retirement plans covering employees in Germany and France. During 2010, we merged the defined benefit plan related to our fiscal 2004 acquisition of Mediq, Inc. (Mediq) into the master defined benefit plan. Benefits for such plans are based primarily on years of service and the employee’s level of compensation during specific periods of employment. We contribute funds to trusts as necessary to provide for current service and for any unfunded projected future benefit obligation over a reasonable period of time. All of our plans have a September 30th measurement date.

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As discussed in Note 9, we announced a restructuring plan during our second quarter of fiscal 2009. The restructuring resulted in a curtailment and remeasurement of both the master defined benefit retirement plan and the postretirement health care plan. The impact of the remeasurement in each plan is included within the following tables as curtailment and special termination benefits.

Effect on Operations

The components of net pension expense for our defined benefit retirement plans were as follows:

	Years Ended September 30
	2011			2010			2009

Service cost	$	5.2		$	5.1		$	4.0
Interest cost		13.2			13.2			13.3
Expected return on plan assets		(16.7	)		(13.1	)		(12.9	)
Amortization of unrecognized prior service cost, net		0.6			0.6			0.6
Amortization of net (gain) loss		4.0			2.6			(0.1	)
Net periodic benefit cost		6.3			8.4			4.9
Curtailment and special termination benefits		-			-			2.8
Net pension expense	$	6.3		$	8.4		$	7.7

Obligations and Funded Status

The change in benefit obligations, plan assets and funded status, along with amounts recognized in the Consolidated Balance Sheets for our defined benefit retirement plans were as follows:

	September 30
	2011			2010

Change in benefit obligation:
Benefit obligation at beginning of year	$	266.5		$	246.2
Service cost		5.2			5.1
Interest cost		13.2			13.2
Actuarial loss		19.4			11.0
Benefits paid		(8.2	)		(8.1	)
Exchange rate (gain)		(0.2	)		(0.9	)
Benefit obligation at end of year		295.9			266.5

Change in plan assets:
Fair value of plan assets at beginning of year		215.7			152.8
Actual return on plan assets		8.8			19.7
Employer contributions		1.0			51.3
Benefits paid		(8.2	)		(8.1	)
Fair value of plan assets at end of year		217.3			215.7
Funded status and net amounts recognized	$	(78.6	)	$	(50.8	)

Amounts recorded in the Consolidated Balance Sheets:
Accrued pension benefits, current portion	$	(0.1	)	$	(1.0	)
Accrued pension benefits, long-term		(78.5	)		(49.8	)
Net amount recognized	$	(78.6	)	$	(50.8	)

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In addition to the amounts above, net actuarial losses of $104.2 million and prior service costs of $2.9 million, less an applicable aggregate tax effect of $40.7 million are included as components of Accumulated Other Comprehensive Income (Loss) at September 30, 2011. At September 30, 2010, net actuarial losses of $81.4 million and prior service costs of $3.5 million, less an applicable aggregate tax effect of $31.5 million, were included as components of Accumulated Other Comprehensive Income (Loss).

The estimated net actuarial loss and prior service cost for our defined benefit retirement plans that will be amortized from Accumulated Other Comprehensive Income (Loss) into net periodic benefit cost over the next fiscal year are $6.1 million and $0.6 million.

Accumulated Benefit Obligation

The accumulated benefit obligation for all defined benefit pension plans was $271.6 million and $243.6 million at September 30, 2011 and 2010. Selected information for our plans, including plans with accumulated benefit obligations exceeding plan assets, was as follows:

	September 30
	2011						2010
	PBO		ABO		Plan Assets		PBO		ABO		Plan Assets

Supplemental executive plan	$	4.4	$	3.7	$	-	$	4.2	$	3.2	$	-
Master plan		278.5		255.7		216.9		248.3		227.2		215.3
German plan		10.5		10.5		-		11.5		11.5		-
French plan		2.5		1.7		0.4		2.5		1.7		0.4
	$	295.9	$	271.6	$	217.3	$	266.5	$	243.6	$	215.7

Actuarial Assumptions

The weighted average assumptions used in accounting for our domestic pension plans were as follows:

	2011	2010	2009
Weighted average assumptions to determined benefit
obligations at the measurement date:
Discount rate for obligation	4.6%	5.1%	5.5%
Rate of compensation increase	3.5%	3.5%	4.0%

Weighted average assumptions to determined benefit
cost for the year:
Discount rate for expense	5.1%	5.5%	7.5%
Expected rate of return on plan assets	7.5%	7.5%	7.5%
Rate of compensation increase	3.5%	4.0%	4.0%

The discount rates used in the valuation of our defined benefit pension plans are evaluated annually based on current market conditions. In setting these rates we utilize long-term bond indices and yield curves as a preliminary indication of interest rate movements, and then make adjustments to the respective indices to reflect differences in the terms of the bonds covered under the indices in comparison to the projected outflow of our pension obligations. The overall expected long-term rate of return is based on historical and expected future returns, which are inflation adjusted and weighted for the expected return for each component of the investment portfolio, as well as taking into consideration economic and capital market conditions. The rate of assumed compensation increase is also based on our specific historical trends of past wage adjustments.

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Plan Assets

The weighted average asset allocations of our master defined benefit retirement plan at September 30, 2011 and 2010, by asset category, along with target allocations, are as follows:

	2011	2010	2011	2010
	Target	Target	Actual	Actual
	Allocation	Allocation	Allocation	Allocation

Equity securities	40 - 60%	40 - 60%	47%	50%
Fixed income securities	40 - 60%	40 - 60%	53%	50%
Total			100%	100%

We have a Plan Committee that sets investment guidelines with the assistance of an external consultant. These guidelines are established based on market conditions, risk tolerance, funding requirements and expected benefit payments. The Plan Committee also oversees the investment allocation process, selects the investment managers and monitors asset performance. As pension liabilities are long-term in nature, we employ a long-term total return approach to maximize the long-term rate of return on plan assets for a prudent level of risk. Target allocations are guidelines, not limitations, and plan fiduciaries may occasionally approve allocations above or below a target range or elect to rebalance the portfolio within the targeted range.

The investment portfolio contains a diversified portfolio of primarily equities and fixed income securities. Securities are also diversified in terms of domestic and international securities, short- and long-term securities, growth and value styles, large cap and small cap stocks. The Plan Committee believes with prudent risk tolerance and asset diversification, the account should be able to meet its pension obligations in the future.

Trust assets are invested subject to the following policy restrictions: short-term securities must be rated A2/P2 or higher; all fixed-income securities shall have a credit quality rating “BBB” or higher; investments in equities in any one company may not exceed 10 percent of the equity portfolio. At both September 30, 2011 and 2010 the master trust assets did not include any Hill-Rom common stock. All Hill-Rom common stock previously held in the master defined benefit retirement plan was sold in fiscal 2010.

Fair Value Measurements of Plan Assets

The following table summarizes the valuation of our pension plan assets by pricing categories:

			Quoted Prices in		Significant
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
	Balance at		Assets		Inputs		Inputs
	September 30, 2011		(Level 1)		(Level 2)		(Level 3)
Cash	$	2.3	$	2.3	$	-	$	-
Equities
US companies		70.3		70.3		-		-
International companies		30.7		30.7		-		-
Fixed income securities		113.6		58.4		55.2		-
Other		0.4		0.4		-		-
Total plan assets at fair value	$	217.3	$	162.1	$	55.2	$	-

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			Quoted Prices in		Significant
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
	Balance at		Assets		Inputs		Inputs
	September 30, 2010		(Level 1)		(Level 2)		(Level 3)
Cash	$	3.6	$	3.6	$	-	$	-
Equities
US companies		72.9		72.9		-		-
International companies		33.4		33.4		-		-
Fixed income securities		105.4		53.4		52.0		-
Other		0.4		0.4		-		-
Total plan assets at fair value	$	215.7	$	163.7	$	52.0	$	-

The Level 2 fixed income securities are commingled funds valued using the net asset value (“NAV”) unit price provided by the fund administrator. The NAV is based on the value of the underlying assets owned by the fund, all of which are publicly traded securities. For further descriptions of the asset Levels used in the above chart, refer to Note 6.

Cash Flows

Our U.S. qualified defined benefit plan is funded in excess of 80 percent, and therefore we expect that the plans will not be subject to the “at risk” funding requirements of the Pension Protection Act.

During 2011 and 2010, we contributed cash of $1.0 million and $51.3 million to our defined benefit retirement plans. We do not expect to contribute to our master defined benefit retirement plan in fiscal year 2012, due to the significant contribution made during 2010, however, minimal contributions will be required for our unfunded plans.

Estimated Future Benefit Payments

The benefit payments, which are expected to be funded through plan assets and company contributions and reflect expected future service, are expected to be paid as follows:

	Pension Benefits
2012	$	9.7
2013		10.3
2014		10.9
2015		11.7
2016		12.5
2017-2021		76.9

Defined Contribution Savings Plans

We have defined contribution savings plans that cover substantially all U.S. employees and certain non-U.S. employees. The general purpose of these plans is to provide additional financial security during retirement by providing employees with an incentive to make regular savings. Company contributions to the plans are based on eligibility and employee contributions. Expense under these plans was $13.0 million, $12.6 million and $13.0 million in fiscal years 2011, 2010 and 2009.

Postretirement Health Care Plan

In addition to defined benefit retirement plans, we also offer a domestic postretirement health care plan that provides health care benefits to qualified retirees and their dependents. The plan includes retiree cost sharing provisions and generally extends retiree coverage for medical, prescription and dental benefits beyond the COBRA continuation period to the date of Medicare eligibility. We use a measurement date of September 30 for this plan. The postretirement health care plan was remeasured at March 31, 2009 in connection with the restructuring mentioned previously.

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The postretirement health care plan reflected (benefit) or cost during fiscal 2011, 2010 and 2009 of ($0.1) million, ($0.1) million and $1.0 million. The change in the accumulated postretirement benefit obligation was as follows:

	Years Ended September 30
	2011			2010
Change in benefit obligation:
Benefit obligation at beginning of year	$	9.7		$	9.7
Service cost		0.4			0.4
Interest cost		0.4			0.5
Actuarial (gain) loss		(0.6	)		0.1
Benefits paid		(0.7	)		(1.3	)
Retiree contributions		0.3			0.3
Benefit obligation at end of year	$	9.5		$	9.7

Amounts recorded in the Consolidated Balance Sheets:
Accrued benefits obligation, current portion	$	0.6		$	0.5
Accrued benefits obligation, long-term		8.9			9.2
Net amount recognized	$	9.5		$	9.7

During fiscal 2011 and 2010, we contributed $0.4 million and $1.0 million to the plan.

In addition to the amounts above, net actuarial gains of $1.7 million and prior service credits of $4.8 million, less an applicable aggregate tax effect of $2.5 million are included as components of Accumulated Other Comprehensive Income (Loss) at September 30, 2011. At September 30, 2010, net actuarial gains of $1.2 million and prior service credits of $5.7 million, less an applicable aggregate tax effect of $2.7 million, were included as components of Accumulated Other Comprehensive Income (Loss).

The discount rate used to determine the net periodic benefit cost for the postretirement health care plan during the fiscal year ended September 30, 2011, 2010 and 2009 was 4.4, 5.5 and 7.5 percent. The discount rate used to determine the benefit obligation as of September 30, 2011, 2010 and 2009 was 4.0, 4.4 and 5.5 percent. As of September 30, 2011 the health care-cost trend rates were assumed to decrease as follows:

	2011	2010	2009

Year 1	7.25%	7.75%	8.25%
Year 2	6.75%	7.25%	7.75%
Year 3	6.25%	6.75%	7.25%
Year 4	5.75%	6.25%	6.75%
Year 5	5.25%	5.75%	6.25%
Year 6	5.00%	5.25%	5.75%
Year 7	5.00%	5.00%	5.25%
Year 8 and beyond	5.00%	5.00%	5.00%

A one-percentage-point increase/decrease in the assumed health care cost trend rates as of September 30, 2011 would cause an increase/decrease in service and interest costs of less than $0.1 million, along with an increase/decrease in the benefit obligation of $0.9 million and $0.8 million.

We fund the postretirement health care plan as benefits are paid, and current plan benefits are expected to require net company contributions of approximately $0.6 million in fiscal 2012 and less than $1 million per year thereafter.

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NOTE 8. COMMON STOCK

Share Repurchases

We repurchased 3.0 million and 1.0 million shares of our common stock during fiscal years 2011 and 2010 for $110.0 million and $34.5 million in the open market. No shares were repurchased in fiscal 2009. In May 2011, our Board of Directors approved an expansion of our share repurchase authorization by 3.0 million shares. Share repurchases may be made through the open market or private transactions. As of September 30, 2011 a cumulative total of 26.7 million shares had been repurchased by us at market trading prices, leaving 2.0 million shares remaining for purchase under the Board’s authorization. The Board’s approval has no expiration date and currently there are no plans to terminate this program in the future.

Stock-Based Compensation

We have stock-based compensation plans under which employees and non-employee directors may be granted options to purchase shares of Company common stock at the fair market value at the time of grant. In addition to stock options, we grant performance-based stock options, performance share units (“PSUs”) and RSUs to certain management level employees and vested deferred stock to non-employee directors. We also offer eligible employees the opportunity to buy shares of our common stock at a discount via an Employee Stock Purchase Plan (“ESPP”). The ESPP was approved by our shareholders in February 2009 and did not have a significant impact on our financial statements in fiscal years 2011 and 2010.

Our primary stock-based compensation program is the Stock Incentive Plan, which has been approved by our shareholders. In February 2009, our shareholders approved an amendment to the Stock Incentive Plan to reserve an additional 5.5 million shares for issuance, increasing the total number of shares authorized to 15.3 million shares. At September 30, 2011, 6.2 million shares were available for future grants under our stock-based compensation plans. We generally settle our stock-based awards with treasury shares. As of September 30, 2011, we had 18.6 million treasury shares available for use to settle stock-based awards.

The following table sets forth a summary of the annual stock-based compensation cost that was charged against income for all types of awards:

	Years Ended September 30
	2011			2010			2009

Total stock-based compensation cost (pre-tax)	$	12.2		$	12.0		$	12.1
Total income tax benefit		(4.5	)		(4.4	)		(4.5	)
Total stock-based compensation cost, net of tax	$	7.7		$	7.6		$	7.6

Stock Options

Stock options granted by our Compensation Committee under the Stock Incentive Plan are non-qualified stock options. These awards are generally granted with exercise prices equal to the average of the high and low prices of our common stock on the date of grant. They vest in equal annual installments over a three or four year period and the maximum contractual term is ten years. We use a Binomial option-pricing model to estimate the fair value of stock options, and compensation cost is recognized on a straight-line basis over the requisite service period.

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The following table sets forth the weighted average fair value per share of stock options and the related valuation assumptions used in the determination of those fair values, excluding performance-based stock options:

	Years Ended September 30
	2011		2010		2009
Weighted average fair value per share	$	12.31	$	7.86	$	5.63

Valuation assumptions:
Risk-free interest rate	1.2%		2.4%		0.8 - 2.7%
Expected dividend yield	1.1%		1.7%		1.5%
Expected volatility	37.3%		37.2%		30.4%
Weighted average expected life	5.3 years		5.6 years		6.2 years

The risk-free interest rate is based upon observed U.S. Treasury interest rates appropriate for the term of our employee stock options. Expected dividend yield is based on the history and our expectation of dividend payouts. Expected volatility for options was based on the median volatility of our Peer Group. Expected life represents the weighted average period the stock options are expected to remain outstanding and is a derived output of the Binomial model. The expected life of employee stock options is impacted by the above assumptions as well as the post-vesting forfeiture rate and the exercise factor used in the Binomial model. These two variables are based on the history of exercises and forfeitures for previous stock options granted by us and Hillenbrand Industries, Inc., our predecessor.

The following table summarizes transactions under our stock option plans, excluding performance-based stock options, for fiscal year 2011:

	Weighted					Weighted
	Average			Weighted		Average	Aggregate
	Number of			Average		Remaining	Intrinsic
	Shares			Exercise		Contractual	Value (1)
	(in thousands)			Price		Term	(in millions)

Balance Outstanding at October 1, 2010		2,920		$	26.02
Granted		628			39.18
Exercised		(1,586	)		27.16
Cancelled/Forfeited		(258	)		24.67
Balance Outstanding at September 30, 2011		1,704		$	30.05	7.5 years	$	5.8
Exercisable at September 30, 2011		551		$	27.63	5.3 years	$	1.7
Options Expected to Vest		984		$	30.85	8.5 years	$	3.7

(1)

The aggregate intrinsic value represents the total pre-tax intrinsic value, based on our closing stock price of $30.02, as reported by the New York Stock Exchange on September 30, 2011. This amount, which changes continuously based on the fair value of our common stock, would have been received by the option holders had all option holders exercised their options as of the balance sheet date.

The total intrinsic value of options exercised during fiscal years 2011, 2010 and 2009 was $23.3 million, $3.9 million and $15 thousand.

As of September 30, 2011, there was $8.2 million of unrecognized compensation expense related to stock options granted under the Plan. This unrecognized compensation expense does not reflect a reduction for our estimate of potential forfeitures, and is expected to be recognized over a weighted average period of 2.8 years.

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Performance-Based Stock Options

Our Compensation Committee sometimes grants performance-based stock options to a limited number of our executives. These awards are consistent with our compensation program’s guiding principles and are designed to align management’s interests with those of shareholders. Option prices and the term of such awards are similar to our stock options; however, vesting of the performance grants is contingent upon the achievement of performance targets and corresponding service requirements. Performance targets are set at the date of grant with a threshold, target and maximum level. The number of options that ultimately vests increases at each level of performance attained. Expense recognized to date related to performance-based stock options has not been significant.

The fair values of the performance options are estimated on the date of the grant using the Binomial option-pricing model and related valuation assumptions for stock options, as previously discussed. For certain performance awards with a market condition such as total shareholder return, as described below, a Monte-Carlo simulation method is used to determine fair value. The Monte-Carlo simulation is a generally accepted statistical technique used to generate a defined number of stock price paths in order to develop a reasonable estimate of the range of our and the Peer Group’s future expected stock prices and minimizes standard error.

As of September 30, 2011, the total number of performance-based stock options granted and outstanding is approximately 0.5 million shares. There is no unrecognized compensation expense related to performance-based stock options as of September 30, 2011 and the performance period concluded as of September 30, 2011.

There were no performance-based stock options granted during fiscal years 2011 and 2010. The following table sets forth the weighted average fair value per share for performance-based stock options and the related valuation assumptions used in the determination of those fair values for grants made in fiscal year 2009.

		Year Ended September 30, 2009
Weighted average fair value per share		$4.88

Valuation assumptions:
Risk-free interest rate		0.8 - 2.7%
Expected dividend yield		1.5%
Expected volatility		30.4%
Weighted average expected life		6.2 years

The basis for the assumptions listed above is similar to the valuation assumptions used for non-performance-based stock options, as discussed previously.

The following table summarizes our stock option activity related to performance-based stock options for fiscal year 2011. None of the performance-based stock options were exercisable as of September 30, 2011.

	Weighted					Weighted
	Average			Weighted		Average	Aggregate
	Number of			Average		Remaining	Intrinsic
	Shares			Exercise		Contractual	Value (1)
	(in thousands)			Price		Term	(in millions)

Balance Outstanding at October 1, 2010		897		$	19.39
Granted		-			-
Exercised		-			-
Cancelled/Forfeited		(373	)		19.39
Balance Outstanding at September 30, 2011		524		$	19.39	7.20	$	5.6

(1)

The aggregate intrinsic value represents the total pre-tax intrinsic value, based on our closing stock price of $30.02 as reported by the New York Stock Exchange on September 30, 2011. This amount, which changes continuously based on the fair value of our common stock, would have been received by the option holders had the maximum performance targets been achieved and all option holders met the maximum performance targets and exercised their options as of the balance sheet date.

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Restricted Stock Units

RSUs are granted to certain employees with fair values equal to the average of the high and low prices of our common stock on the date of grant, multiplied by the number of units granted. RSU grants are contingent upon continued employment and vest over periods ranging from one to five years. Dividends, payable in common stock equivalents, accrue on the grants and are subject to the same specified terms as the original grants, including the risk of forfeiture.

The following table summarizes transactions for our nonvested RSUs for fiscal year 2011:

				Weighted
	Number of			Average
	Share Units			Grant Date
	(in thousands)			Fair Value

Nonvested RSUs at October 1, 2010		793		$	24.66
Granted		143			39.40
Vested		(378	)		25.05
Forfeited		(152	)		25.86
Nonvested RSUs at September 30, 2011		406		$	29.03

As of September 30, 2011, there was $7.2 million of total unrecognized compensation expense related to nonvested RSUs granted under the Stock Incentive Plan. This unrecognized compensation expense does not reflect a reduction for our estimate of potential forfeitures, and is expected to be recognized over a weighted average period of 2.2 years. The total vest date fair value of shares that vested during fiscal years 2011, 2010 and 2009 was $15.9 million, $7.3 million and $1.9 million.

Performance Share Units

Our Compensation Committee grants PSUs to certain employees and these awards are subject to any stock dividends, stock splits, and other similar rights inuring to common stock, but unlike our RSUs are not entitled to dividend reinvestment. Vesting of the grants is contingent upon achievement of performance targets and corresponding service requirements.

The fair value of the PSUs is equal to the average of the high and low prices of our common stock on the date of grant, multiplied by the number of units granted. For PSUs with a market condition such as total shareholder return, the Monte-Carlo simulation method is used to determine fair value. The following table sets forth the weighted average fair value per share for total shareholder return PSUs and the related valuation assumptions used in the determination of those fair values for fiscal 2011:

		Year Ended September 30, 2011
Weighted average fair value per share		$31.13

Valuation assumptions:
Risk-free interest rate		0.8%
Expected dividend yield		1.1%
Expected volatility		39.8 - 41.7%

The basis for the assumptions listed above is similar to the valuation assumptions used for stock options, as discussed previously.

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The following table summarizes transactions for our nonvested PSUs for fiscal 2011:

				Weighted
	Number of			Average
	Share Units			Grant Date
	(in thousands)			Fair Value

Nonvested PSUs as of October 1, 2010		102		$	20.72
Granted		186			31.41
Vested		(17	)		23.26
Forfeited		(29	)		26.44
Nonvested PSUs at September 30, 2011		242		$	22.52

As of September 30, 2011, there was $4.8 million of unrecognized compensation expense related to PSUs granted under the Stock Incentive plan based on the expected achievement of certain performance targets or market conditions. This unrecognized compensation expense does not reflect a reduction for our estimate of potential forfeitures, and is expected to be recognized by the end of fiscal 2013.

NOTE 9. SPECIAL CHARGES

Over the past several years, we have placed a focus on improving our cost structure and business processes through various means including consolidation of certain manufacturing and select back office operations, customer rationalizations and various other organizational changes. The charges associated with these actions are summarized below.

2011 Actions

During the second quarter of fiscal 2011, we recorded an additional special charge of $2.6 million related to our fiscal 2010 fourth quarter action. The majority of the charge related to additional severance and other benefits provided to affected employees of that action as well as a write-down of assets held for sale. During the third quarter of fiscal 2011, we recorded a benefit of $1.2 million primarily related to the net reversal of severance recorded in relation to our fourth quarter of fiscal 2010 restructuring action, partially offset by an additional write-down of assets held for sale. The table below excludes the impacts of write-downs on assets held for sale.

2010 Actions

During the fourth quarter of fiscal 2010, we announced plans to eliminate approximately 100 positions which resulted in a special charge of $4.3 million primarily related to severance and other benefits provided to affected employees. The majority of the cash expenditures associated with the severance will be completed by the end of our 2011 fiscal year. We also recorded a charge of $3.9 million related to write-downs associated with the planned disposal of two aircraft from our corporate aviation assets, which are jointly owned with Hillenbrand, Inc. The loss was recognized net of management’s estimate of amounts to be recovered. The assets held for sale are recorded in other current assets in the Consolidated Balance Sheet.

During the second quarter of fiscal 2010, we announced organizational changes including the elimination of approximately 160 positions across the Company. The result was a special charge of $5.0 million primarily related to severance and other benefits provided to affected employees. The majority of the cash expenditures associated with the severance was completed by the end of our 2011 fiscal year with the remainder to be paid in fiscal 2012.

2009 Actions

During the second quarter of fiscal 2009, we announced a plan which impacted approximately 450 salaried, hourly and temporary employees. In total, the plan resulted in a charge of $11.9 million related to severance and early retirement packages. Additionally, postretirement health care costs and the waiver of an early retirement pension penalty offered in conjunction with a voluntary early retirement incentive and the associated curtailment charges resulted in additional charges of $4.2 million. Asset impairment, discontinued use of a building under an operating lease and other charges of approximately $4.4 million were also recorded in conjunction with these actions. The charge related to severance and early retirement packages and resulted in cash expenditures that were substantially completed as of September 30, 2010.

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Severance activity related to these actions during fiscal 2011 was as follows:

	Beginning								Ending
	Balance								Balance
	September 30,								September 30,
	2010		Expenses		Cash Payments		Reversals		2011
Fiscal Year 2010
Q2 Action - Restructuring	$	1.5	$	-	$	1.1	$	-	$	0.4
Q4 Action - Restructuring		3.7		3.3		2.9		2.6		1.5
Total Fiscal Year 2010	$	5.2	$	3.3	$	4.0	$	2.6	$	1.9

Fiscal Year 2009
Q2 Action - Restructuring	$	0.4	$	-	$	0.4	$	-	$	-


Total	$	5.6	$	3.3	$	4.4	$	2.6	$	1.9

NOTE 10. INCOME TAXES

The significant components of income before income taxes and the consolidated income tax provision were as follows:

	Years Ended September 30
	2011			2010			2009
Income before income taxes:
Domestic	$	122.5		$	169.4		$	(221.4	)
Foreign		37.2			13.5			(157.4	)
Total	$	159.7		$	182.9		$	(378.8	)

Income tax expense:
Current provision
Federal	$	41.1		$	35.9		$	23.3
State		2.3			(5.3	)		(0.3	)
Foreign		4.3			7.0			1.4
Total current provision		47.7			37.6			24.4
Deferred provision:
Federal		(0.8	)		15.2			(3.2	)
State		(0.2	)		4.4			5.3
Foreign		(20.5	)		(0.3	)		(0.3	)
Total deferred provision		(21.5	)		19.3			1.8
Income tax expense	$	26.2		$	56.9		$	26.2

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Differences between income tax expense reported for financial reporting purposes and that computed based upon the application of the statutory U.S. Federal tax rate to the reported income before income taxes were as follows:

	Years Ended September 30
	2011						2010						2009
				% of						% of						% of
				Pretax						Pretax						Pretax
	Amount			Income			Amount			Income			Amount			Income

Federal income tax (a)	$	55.9			35.0		$	64.0			35.0		$	(132.6	)		35.0
State income tax (b)		2.4			1.5			4.8			2.6			3.6			(0.9	)
Foreign income tax (c)		(8.0	)		(5.0	)		(0.6	)		(0.3	)		(2.1	)		0.5
Impairment of goodwill and other intangibles		-			-			-			-			163.3			(43.1	)
Application of federal tax credits		(4.1	)		(2.5	)		(0.6	)		(0.3	)		(3.6	)		0.9
Adjustment of estimated income tax accruals		2.3			1.4			(9.7	)		(5.4	)		0.2			-
Valuation of tax attributes		(19.5	)		(12.2	)		-			-			(1.9	)		0.5
Other, net		(2.8	)		(1.8	)		(1.0	)		(0.5	)		(0.7	)		0.2
Income tax expense	$	26.2			16.4		$	56.9			31.1		$	26.2			(6.9	)

(a)	At statutory rate.

(b)	Net of Federal benefit.

(c)	Federal tax rate differential.

The tax effect of temporary differences that gave rise to the deferred tax balance sheet accounts were as follows:

	Years Ended September 30
	2011			2010
Deferred tax assets:
Employee benefit accruals	$	57.4		$	45.4
Reserve for bad debts		9.0			10.4
Net operating loss carryforwards - state		2.7			2.1
Tax credit carryforwards		1.9			2.4
Foreign (loss carryforwards and other tax attributes)		18.4			21.7
Other, net		31.8			34.3
		121.2			116.3
Less: Valuation allowance		(8.1	)		(28.5	)
Total deferred tax assets		113.1			87.8

Deferred tax liabilities:
Depreciation		(42.5	)		(41.2	)
Amortization		(25.4	)		(31.1	)
Other, net		(4.7	)		(6.4	)
Total deferred tax liabilities		(72.6	)		(78.7	)
Deferred tax asset - net	$	40.5		$	9.1

At September 30, 2011, we had $18.4 million of deferred tax assets related to operating loss carryforwards and other tax attributes in foreign jurisdictions. These tax attributes are subject to various carryforward periods with the majority eligible to be carried forward for an unlimited period. We also had $2.7 million of deferred tax assets related to state net operating loss carryforwards, which expire between 2012 and 2027 and $1.9 million of deferred tax assets related to state credits, which expire between 2012 and 2026.

The gross deferred tax assets as of September 30, 2011 were reduced by valuation allowances of $8.1 million, relating primarily to foreign operating loss carryforwards and other tax attributes, as it is more likely than not that some portion or all of these tax attributes will not be realized. The valuation allowance was reduced by $20.4 million during fiscal 2011 due to releases of valuation allowances on deferred tax assets realized or expected to be utilized as well as adjustments in value of related deferred tax assets.

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In evaluating whether it is more likely than not that we would recover our deferred tax assets, future taxable income, the reversal of existing temporary differences and tax planning strategies were considered. We believe that our estimates for the valuation allowances recorded against deferred tax assets are appropriate based on current facts and circumstances.

We file a consolidated federal income tax return as well as multiple state, local and foreign jurisdiction tax returns. In the normal course of business, we are subject to examination by the taxing authorities in each of the jurisdictions where we file tax returns. During fiscal 2011, the Internal Revenue Service (“IRS”) concluded its audit for fiscal year ended 2009. Also during fiscal 2011, the IRS initiated and is still conducting its post-filing examination of the fiscal 2010 consolidated federal return. We also continued to participate in the IRS Compliance Assurance Program (“CAP”) for fiscal year 2011 and have submitted the application to remain in the CAP for fiscal 2012 and 2013. The CAP provides the opportunity for the IRS to review certain tax matters prior to us filing our tax return for the year, thereby reducing the time it takes to complete the post-filing examination. We are also subject to state and local or foreign income tax examinations by taxing authorities for years back to fiscal 2003.

We also have on-going audits in various stages of completion in several state and foreign jurisdictions, one or more of which may conclude within the next 12 months. Such settlements could involve some or all of the following: the payment of additional taxes, the adjustment of certain deferred taxes and/or the recognition of unrecognized tax benefits. The resolution of these matters, in combination with the expiration of certain statutes of limitations in various jurisdictions, make it reasonably possible that our unrecognized tax benefits may decrease as a result of either payment or recognition by approximately $12 to $14 million in the next twelve months, excluding interest.

The total amount of gross unrecognized tax benefits as of September 30, 2011, 2010 and 2009 was $17.8 million, $24.0 million and $35.5 million which includes $11.5 million, $8.0 million and $17.3 million, that, if recognized, would impact the effective tax rate in future periods. The remaining amount relates to items which, if recognized, would not impact our effective tax rate.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	Years Ended September 30
	2011			2010			2009
Balance at October 1	$	24.0		$	35.5		$	29.6
Increases in tax position of prior years		0.4			3.9			2.6
Decreases in tax position of prior years		(3.0	)		(6.8	)		(3.1	)
Increases in tax positions related to the current year		5.1			1.4			8.0
Settlements with taxing authorities		(5.2	)		(6.0	)		(1.0	)
Lapse of applicable statute of limitations		(3.5	)		(4.0	)		(1.2	)
Change in positions due to acquisitions or dispositions		-			-			0.7
Foreign currency adjustments		-			-			(0.1	)
Total change		(6.2	)		(11.5	)		5.9
Balance at September 30	$	17.8		$	24.0		$	35.5

We recognize accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. Accrued interest and penalties, which are not presented in the reconciliation table above, were $1.9 million, $2.1 million and $6.8 million at September 30, 2011, 2010 and 2009. During fiscal 2011 and 2009, we recognized $0.1 million and $0.8 million of income tax expense for interest and penalties, while in fiscal 2010 we recognized $3.0 million of income tax benefit for interest and penalties.

The amount of gross unrecognized tax benefits reflected in our financial statements includes amounts related to our former funeral services business for taxing jurisdictions where we filed consolidated tax returns. Pursuant to the Tax Sharing Agreement entered into as part of the spin-off, Hillenbrand, Inc. is responsible for the portion of the unrecognized tax benefits attributable to the funeral services business. As of September 30, 2011, such gross unrecognized tax benefits were $2.6 million, excluding interest.

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NOTE 11. EARNINGS PER COMMON SHARE

Basic earnings per share is calculated based upon the weighted average number of outstanding common shares for the period, plus the effect of deferred vested shares. Diluted earnings per share is calculated consistent with the basic earnings per share calculation plus the effect of dilutive unissued common shares related to stock-based employee compensation programs. For all years presented, anti-dilutive stock options were excluded from the calculation of dilutive earnings per share. Excluded shares were 0.6 million, 3.4 million and 5.8 million for fiscal years 2011, 2010 and 2009. Cumulative treasury stock acquired, less cumulative shares reissued, have been excluded in determining the average number of shares outstanding. For the year ended September 30, 2009, as a result of our net loss and to avoid dilution of the net loss, our basic and diluted earnings per share were identical.

Earnings per share is calculated as follows:

	Years Ended September 30
	2011		2010		2009

Net income (loss) attributable to common shareholders	$	133.3	$	125.3	$	(405.0	)

Average shares outstanding - Basic		63,164		62,934		62,581
Add potential effect of exercise of stock options
and other unvested equity awards		735		805		-
Average shares outstanding - Diluted		63,899		63,739		62,581

Net Income (Loss) Attributable to Common Shareholders
per Common Share - Basic	$	2.11	$	1.99	$	(6.47	)

Net Income (Loss) Attributable to Common Shareholders
per Common Share - Diluted	$	2.09	$	1.97	$	(6.47	)

NOTE 12. SEGMENT REPORTING

We disclose segment information that is consistent with the way in which management operates and views the business. During the first quarter of fiscal 2011, we changed our segment reporting to reflect changes in our organizational structure and management’s view of the business. We moved our surgical reporting unit from the International and Surgical segment (now referred to as the International segment) to the North America Acute Care segment. In addition, manufacturing and research and development costs were fully allocated to our three segments. We have also assigned additional direct functional costs to the segments as well as an allocation of certain corporate functional expenses that can be attributed to the segments. The prior year segment information included in this Note has been updated to reflect these changes. Our new operating structure contains the following reporting segments:

North America Acute Care - sells and rents our hospital patient support and near-patient technologies, as well as our health information technology solutions and surgical accessories, to acute care facilities .

North America Post-Acute Care - sells and rents a variety of products outside of the hospital setting including long-term acute care, extended care and home care and our respiratory care products in all settings .

International - sells and rents similar products as our North America businesses in regions outside of the U.S. and Canada.

Our performance under the new operating structure continues to be measured on a divisional income basis before litigation and special charges. Divisional income generally represents the division’s standard gross profit less its direct operating costs along with an allocation of manufacturing and distribution costs, research and development and corporate functional expenses.

Corporate expenses, while not considered a segment, are presented separately to aid in the reconciliation of segment information to consolidated financial information. These costs include corporate expenses that support the entire organization such as administration, finance, legal and human resources.

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	Years Ended September 30
	2011			2010			2009
Revenues:
North America Acute Care	$	981.0		$	875.8		$	826.7
North America Post-Acute Care		209.1			205.7			200.8
International		401.6			388.1			359.4
Total revenues	$	1,591.7		$	1,469.6		$	1,386.9

Divisional income:
North America Acute Care	$	227.3		$	177.8		$	118.1
North America Post-Acute Care		43.3			46.0			41.7
International		27.9			29.9			10.3
Corporate expenses		(83.0	)		(70.0	)		(59.5	)
Total divisional income		215.5			183.7			110.6

Impairment of goodwill and other intangibles		-			-			472.8
Litigation charge (credit)		47.3			(21.2	)		-
Special charges		1.4			13.2			20.5
Operating profit (loss)		166.8			191.7			(382.7	)

Gain on sale of non-strategic assets		-			-			10.2
Interest expense		(8.5	)		(8.7	)		(10.4	)
Investment income and other, net		1.4			(0.1	)		4.1
Income before income taxes	$	159.7		$	182.9		$	(378.8	)

Geographic Information

Geographic data for net revenues and long-lived assets (which consist mainly of property and equipment leased to others) were as follows:

	Years Ended September 30
	2011		2010		2009
Net revenues to unaffiliated customers: (a)
United States	$	1,105.0	$	1,027.1	$	985.5
Foreign		486.7		442.5		401.4
Total revenues	$	1,591.7	$	1,469.6	$	1,386.9
Long-lived assets: (b)
United States	$	180.2	$	200.3	$	230.5
Foreign		42.6		43.4		41.9
Total long-lived assets	$	222.8	$	243.7	$	272.4

(a) Net revenues are attributed to geographic areas based on the location of the customer.

(b) Includes property and equipment leased to others.

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NOTE 13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following table presents selected consolidated financial data by quarter for each of the last two fiscal years.

2011 Quarter Ended
	December 31, 2010		March 31, 2011		June 30, 2011		September 30, 2011

Net revenues	$	374.2	$	402.1	$	384.8	$	430.6
Gross profit	$	184.5	$	198.6	$	187.6	$	210.6
Net income attributable to common shareholders	$	35.2	$	33.1	$	1.5	$	63.5
Basic net income attributable to common
shareholders per common share	$	0.56	$	0.53	$	0.02	$	1.01
Diluted net income attributable to common
shareholders per common share	$	0.55	$	0.52	$	0.02	$	1.01


2010 Quarter Ended
	December 31, 2009		March 31, 2010		June 30, 2010		September 30, 2010

Net revenues	$	355.3	$	357.1	$	360.6	$	396.6
Gross profit	$	170.8	$	171.8	$	178.0	$	196.0
Net income attributable to common shareholders	$	19.8	$	24.2	$	30.6	$	50.7
Basic net income attributable to common
shareholders per common share	$	0.32	$	0.38	$	0.48	$	0.80
Diluted net income attributable to common
shareholders per common share	$	0.31	$	0.38	$	0.48	$	0.79

NOTE 14. COMMITMENTS AND CONTINGENCIES

Lease Commitments

Rental expense for fiscal years 2011, 2010 and 2009 was $20.0 million, $19.5 million and $19.4 million. The table below indicates the minimum annual rental commitments (excluding renewable periods) aggregating $59.3 million, for manufacturing facilities, warehouse distribution centers, service centers and sales offices, under non-cancelable operating leases.

	Amount
2012	$	20.9
2013	$	13.7
2014	$	9.0
2015	$	5.4
2016	$	3.9
2017 and beyond	$	6.4

We have a long-term agreement with IBM to manage our global information structure environment that expires in September 2014. The expected aggregate cost from September 30, 2011 through the duration of the contract is $33.0 million.

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Self Insurance

We are involved in possible claims and are generally self-insured up to certain limits for product/general liability, workers’ compensation, auto liability and professional liability insurance programs. These policies have deductibles and self-insured retentions ranging from $150 thousand to $1.5 million per occurrence, depending upon the type of coverage and policy period. We are also generally self-insured up to certain stop-loss limits for certain employee health benefits, including medical, drug and dental. Our policy is to estimate reserves based upon a number of factors including known claims, estimated incurred but not reported claims and outside actuarial analysis, which are based on historical information along with certain assumptions about future events.

Legal Proceedings

Batesville Casket Antitrust Litigation

In 2005 the Funeral Consumers Alliance, Inc. and a number of individual consumer casket purchasers filed a purported class action antitrust lawsuit on behalf of certain consumer purchasers of Batesville® caskets against us and our former Batesville Casket Company, Inc. subsidiary (now wholly-owned by Hillenbrand, Inc.), and three national funeral home businesses.

The district court has dismissed the claims and denied class certification, but in October 2010, the plaintiffs appealed these decisions to the United States Court of Appeals for the Fifth Circuit. If the plaintiffs were to succeed in reversing the district court’s dismissal of the claims, but not the denial of class certification, then the plaintiffs would be able to pursue individual damages claims: the alleged overcharges on the plaintiffs’ individual casket purchases, which would be trebled as a matter of law, plus reasonable attorneys fees and costs.

If the plaintiffs were to (1) succeed in reversing the district court’s dismissal of the claims, (2) succeed in reversing the district court order denying class certification and certify a class, and (3) prevail at trial, then the damages awarded to the plaintiffs, which would be trebled as a matter of law, could have a significant material adverse effect on our results of operations, financial condition and/or liquidity. The plaintiffs filed a report indicating that they are seeking damages ranging from approximately $947.0 million to approximately $1.5 billion before trebling on behalf of the purported class of consumers they seek to represent.

We and Hillenbrand, Inc. have entered into a judgment sharing agreement that apportions the costs and any potential liabilities associated with this litigation between us and Hillenbrand, Inc. We believe that we have committed no wrongdoing as alleged by the plaintiffs and that we have meritorious defenses to class certification and to plaintiffs’ underlying allegations and damage theories.

Office of Inspector General Investigation

In February 2008, we were served with an Administrative Investigative Demand subpoena by the United States Attorney’s Office for the Eastern District of Tennessee pursuant to a Health and Human Services’ Office of Inspector General investigation. In September 2008, we were informed that the investigation was precipitated by the 2005 filing of a qui tam complaint under the False Claims Act in the United States District Court for the Eastern District of Tennessee. In June 2011, we reached agreement with respect to a tentative financial settlement and recognized a charge in the third quarter of $42.3 million. This settlement was finalized and paid in September 2011. Concurrently with this settlement, we entered into a five year Corporate Integrity Agreement, which provides for certain other compliance-related activities during the five year term of the agreement, including specific written standards, monitoring, training, education, independent review, disclosure and reporting requirements. We did not admit any wrongdoing as part of the settlement.

Freedom Medical Antitrust Litigation

On October 19, 2009, Freedom Medical, Inc. filed a complaint against us, another manufacturer and two group purchasing organizations in the United States District Court for the Eastern District of Texas. The plaintiff alleged, among other things, that we and the other defendants conspired to exclude it from the biomedical equipment rental market and to maintain our market share by engaging in a variety of conduct in violation of state and federal antitrust laws. In September 2011, we settled this matter in exchange for a payment of $5.0 million. We did not admit any wrongdoing as part of the settlement.

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Stryker Litigation

On April 4, 2011, we filed two separate actions against Stryker Corporation alleging infringement of certain Hill-Rom patents covering proprietary communications networks, status information systems and powered wheels used in our beds or stretchers. One suit was filed in the Southern District of Indiana and the other was filed in the Western District of Wisconsin. Both suits seek monetary damages and injunctions against Stryker for selling or distributing any beds, stretchers or ancillary products that infringe Hill-Rom’s patents. Stryker responded in the Wisconsin litigation with counterclaims seeking declaratory judgment for noninfringement and invalidity for the patents at issue. In the Indiana litigation, Stryker has counterclaimed for non-infringement and invalidity for several of the patents at issue, and has filed counterclaims alleging infringement of three of their patents. In August 2011 the Wisconsin litigation was transferred to the Southern District of Indiana. No trial dates have been set. Because the litigation is in a preliminary stage, we cannot assess the likelihood of a positive or negative outcome or determine an estimate, or a range of estimates, of potential damages, nor can we give any assurances that this matter will not have a material adverse impact on our financial condition, results of operations or cash flows.

Antitrust Settlement

In fiscal 2005, we entered into a definitive, court approved agreement with Spartanburg Regional Healthcare Systems and its attorneys to settle a purported antitrust class action lawsuit. A number of potential plaintiffs, including the United States government, opted out of the settlement, and we retained a reserve of $21.2 million against these potential claims. However, no individual claims were filed prior to the August 2010 statute of limitations deadline, and we therefore reversed this reserve into income as of September 30, 2010.

General

We are subject to various other claims and contingencies arising out of the normal course of business, including those relating to governmental investigations and proceedings, commercial transactions, product liability, employee related matters, antitrust, safety, health, taxes, environmental and other matters. Litigation is subject to many uncertainties and the outcome of individual litigated matters is not predictable with assurance. It is possible that some litigation matters for which reserves have not been established could be decided unfavorably to us, and that any such unfavorable decisions could have a material adverse effect on our financial condition, results of operations and cash flows.

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Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the supervision and participation of our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer (the “Certifying Officers”), has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2011. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and such information is accumulated and communicated to management, including our Certifying Officers and our Board of Directors, as appropriate to allow timely decisions regarding required disclosure.

Based upon that evaluation, the Certifying Officers concluded that our disclosure controls and procedures were effective as of September 30, 2011.

Management’s Report on Internal Control Over Financial Reporting

The report of management’s assessment of the effectiveness of our internal control over financial reporting as of September 30, 2011 and the related attestation report of our independent registered public accounting firm, are included under Part II, Item 8 of this Form 10-K.

Changes in Internal Control Over Financial Reporting

Except as described in the following paragraph, there were no changes in our internal control over financial reporting during the quarter ended September 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We utilize a company-wide information technology (“IT”) platform. This IT platform is integrated into substantially all of our company-wide operations and materially impacts our manufacturing, sales, accounting and other back-office functionality. In the second quarter of fiscal 2011, we completed the first phase of a multi-year initiative to upgrade this platform, with the second phase of the initiative beginning in the fourth quarter. This upgrade includes changes to the design and operation of controls over financial reporting as well as monitoring controls surrounding the implementation of these changes. We are testing controls for design effectiveness prior to implementation of each phase, and operating effectiveness during and after implementation.

Item 9B. OTHER INFORMATION

None.

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PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item is incorporated herein by reference to our Proxy Statement to be filed with the SEC in January 2012 relating to our 2012 Annual Meeting of Shareholders (the “2012 Proxy Statement”), under the headings “Election of Directors”, “Section 16(a) Beneficial Ownership Reporting Compliance”, and “Corporate Governance.” Information relating to our executive officers is included in this report in Part I, Item 1 under the caption “Executive Officers of the Registrant.”

Item 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference to the 2012 Proxy Statement, under the heading “Executive Compensation.”

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item is incorporated herein by reference to the 2012 Proxy Statement, under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information.”

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated herein by reference to the 2012 Proxy Statement, where such information is included under the heading “Corporate Governance.”

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item is incorporated herein by reference to the 2012 Proxy Statement, where such information is included under the heading “Proposals Requiring Your Vote - Ratification of Appointment of Independent Registered Public Accounting Firm.”

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PART IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)	The following documents have been filed as a part of this Form 10-K or, where noted, incorporated by reference:

(1)

Financial Statements

The financial statements of the Company and its consolidated subsidiaries are listed under Part II, Item 8 on the Index to Consolidated Financial Statements on page 36.

(2)

Financial Statement Schedules

The financial statement schedule filed in response to Part II, Item 8 and Part IV, Item 15(c) of Form 10-K is listed under Part II, Item 8 on the Index to Consolidated Financial Statements on page 36.

(3)

Exhibits (See changes to Exhibit Index below):

“The Exhibit Index, which follows the signature page to this Form 10-K and is hereby incorporated herein by reference, sets forth a list of those exhibits filed herewith, and includes and identifies management contracts or compensatory plans or arrangements required to be filed as exhibits to this Form 10-K by Item 601 (b)(10)(iii) of Regulation S-K.”

The agreements included as exhibits to this Form 10-K are intended to provide information regarding their terms and not to provide any other factual or disclosure information about us or the other parties to the agreements. The agreements may contain representations and warranties by the parties to the agreements, including us, solely for the benefit of the other parties to the applicable agreement. Such representation and warranties:

should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

may have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

may apply standards of materiality in a way that is different from what may be viewed as material to certain investors; and

were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time.

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SCHEDULE II

HILL-ROM HOLDINGS, INC. AND SUBSIDIARIES

Valuation and Qualifying Accounts

For The Fiscal Years Ended September 30, 2011, 2010 and 2009

(Dollars in millions)

			ADDITIONS
	BALANCE AT		CHARGED TO			CHARGED TO			DEDUCTIONS				BALANCE
	BEGINNING		COSTS AND			OTHER			NET OF				AT END
DESCRIPTION	OF PERIOD		EXPENSES			ACCOUNTS			RECOVERIES				OF PERIOD

Reserves deducted from assets to which they apply:
Allowance for possible losses and sales returns -
accounts receivable:

Period Ended:
September 30, 2011	$	29.0	$	1.5		$	3.1	(a)	$	(6.9	)	(b)		26.7
September 30, 2010	$	27.5	$	0.8		$	7.2	(a)	$	(6.5	)	(b)	$	29.0
September 30, 2009	$	25.9	$	4.1		$	8.0	(a)	$	(10.5	)	(b)	$	27.5

Allowance for inventory valuation:

Period Ended:
September 30, 2011	$	24.7	$	3.7		$	-		$	(5.5	)	(c)		22.9
September 30, 2010	$	28.3	$	0.2		$	-		$	(3.8	)	(c)		24.7
September 30, 2009	$	21.2	$	10.5		$	-		$	(3.4	)	(c)		28.3

Valuation allowance against deferred tax assets:

Period Ended:
September 30, 2011	$	28.5	$	(19.5	)	$	-		$	(0.9	)	(d)		8.1
September 30, 2010	$	37.5	$	(0.8	)	$	-		$	(8.2	)	(d)		28.5
September 30, 2009	$	85.7	$	2.4		$	-		$	(50.6	)	(d)		37.5

(a)	Reduction of gross revenues for uncollectible health care rental reimbursements, cash discounts and other adjustments in determining
	net revenue. Also includes the effect of acquired businesses, if any.

(b)	Generally reflects the write-off of specific receivables against recorded reserves.

(c)	Generally reflects the write-off of specific inventory against recorded reserves.

(d)	Primarily reflects write-offs of deferred tax assets against the valuation allowance and other movement of the valuation allowance
	offset by an opposing change in deferred tax assets.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	HILL-ROM HOLDINGS, INC.


	By:	/s/ John J. Greisch
		John J. Greisch
		President and Chief Executive Officer

Date: November 16, 2011

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

/s/ Rolf A. Classon		/s/ James R. Giertz
Rolf A. Classon Chairman of the Board		James R. Giertz Director

/s/ John J. Greisch		/s/ Charles E. Golden
John J. Greisch President and Chief Executive Officer and Director (Principal Executive Officer)		Charles E. Golden Director

/s/ Joanne C. Smith, M.D.		/s/ W August Hillenbrand
Joanne C. Smith, M.D. Director Vice Chairperson of the Board		W August Hillenbrand Director

/s/ Mark J. Guinan		/s/ Ronald A. Malone
Mark J. Guinan Senior Vice President and Chief Financial Officer (Principal Financial Officer)		Ronald A. Malone Director

/s/ Richard G. Keller		/s/ Eduardo R. Menascé
Richard G. Keller Vice President — Controller and Chief Accounting Officer (Principal Accounting Officer)		Eduardo R. Menascé Director
		/s/ Katherine S. Napier
		Katherine S. Napier Director

Date: November 16, 2011

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HILL-ROM HOLDINGS, INC.

INDEX TO EXHIBITS

Management contracts and compensatory plans or arrangements are designated with “*”.

2.1	Distribution Agreement dated as of March 14, 2008 by and between Hill-Rom Holdings, Inc. (formerly Hillenbrand Industries, Inc.) and Hillenbrand, Inc. (formerly Batesville Holdings, Inc.) (Incorporated herein by reference to Exhibit 2.1 filed with Form 8-K dated April 1, 2008)

2.2	Letter Agreement dated as of March 31, 2008 between Hill-Rom Holdings, Inc. and Hillenbrand, Inc. regarding interpretation of Distribution Agreement (Incorporated herein by reference to Exhibit 2.2 filed with Form 10-Q for the quarter ended March 31, 2008.)

2.3	Share Sale and Purchase Agreement dated as of September 30, 2008 between Family Holding I Alvik AB and Hill-Rom AB regarding the sale of Liko Vårdlyft AB (Incorporated herein by reference to Exhibit 2.1 filed with Form 8-K dated September 30, 2008)

2.4	Share Sale and Purchase Agreement dated as of September 30, 2008 between AM Holding AB and Hill-Rom Company, Inc. regarding the sale of Liko North America Corporation (Incorporated herein by reference to Exhibit 2.2 filed with Form 8-K dated September 30, 2008)

3.1	Restated and Amended Articles of Incorporation of Hill-Rom Holdings, Inc., as currently in effect (Incorporated herein by reference to Exhibit 3.1 filed with Form 8-K dated March 10, 2010)

3.2	Amended and Restated Code of By-Laws of Hill-Rom Holdings, Inc., as currently in effect (Incorporated herein by reference to Exhibit 3.2 filed with Form 8-K dated March 10, 2010)

4.1	Indenture dated as of December 1, 1991, between Hill-Rom Holdings, Inc. and Union Bank, N.A. (as successor to LaSalle Bank National Association and Harris Trust and Savings Bank) as Trustee (Incorporated herein by reference to Exhibit (4) (a) to Registration Statement on Form S-3, Registration No. 33-44086)

*10.1	Hill-Rom Holdings, Inc. Amended and Restated Short Term Incentive Compensation Program (Incorporated herein by reference to Exhibit 10.1 filed with Form 10-K for the year ended September 30, 2009)

*10.2	Hill-Rom Holdings, Inc. 1996 Stock Option Plan (Incorporated herein by reference to Exhibit 10.2 filed with Form 10-Q for the quarter ended February 27, 1999)

*10.3	Form of Stock Award granted to certain executive officers (Incorporated herein by reference to Exhibit 10.4 filed with Form 10-K for the year ended November 27, 1999)

*10.4	Form of Stock Award granted to certain executive officers under the Stock Incentive Plan. (Incorporated herein by reference to Exhibit 10.4 filed with Form 10-K for the year ended September 30, 2003)

*10.5	Form of Director Indemnity Agreement (Incorporated herein by reference to Exhibit 10.6 filed with Form 10-K for the year ended September 30, 2003)

*10.6	Form of Indemnity Agreement between Hill-Rom Holdings, Inc. and certain executive officers

*10.7	Hill-Rom Holdings, Inc. Board of Directors’ Deferred Compensation Plan (Incorporated herein by reference to Exhibit 10.10 filed with Form 10-Q for the quarter ended June 2, 2001)

*10.8	Hill-Rom Holdings, Inc. Director Phantom Stock Plan and form of award (Incorporated herein by reference to Exhibit 10.11 filed with Form 10-Q for the quarter ended June 2, 2001)

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*10.9	Hill-Rom Holdings, Inc. Supplemental Executive Retirement Plan (Incorporated herein by reference to Exhibit 10.14 filed with Form 10-K for the year ended September 30, 2003)

*10.10	Hill-Rom Holdings, Inc. Senior Executive Deferred Compensation Program (Incorporated herein by reference to Exhibit 10.15 filed with Form 10-K for the year ended September 30, 2003)

*10.11	Form of Non-Qualified Stock Option Agreement under Amended and Restated Hill-Rom Holdings, Inc. Stock Incentive Plan

*10.12	Form of Non-Qualified Stock Option Agreement (CEO version) under Amended and Restated Hill-Rom Holdings, Inc. Stock Incentive Plan

*10.13	Form of Director Stock Award (Incorporated herein by reference to Exhibit 10.1 filed with Form 10-Q for the quarter ended December 31, 2004)

*10.14	Form of Performance Based Stock Award granted December 3, 2009 to certain executive officers, including the named executive officers, under the Stock Incentive Plan (Incorporated herein by reference to Exhibit 10.18 filed with Form 10-K for the year ended September 30, 2010)

10.15	Credit Agreement dated as of March 28, 2008 among Hill-Rom Holdings, Inc., the lenders named therein, and Citibank, N.A. as agent for the lenders (Incorporated herein by reference to Exhibit 10.1 to the Form 8-K dated April 1, 2008)

*10.16	Employment Agreement dated as of March 31, 2008 between Hill-Rom Holdings, Inc. and Peter H. Soderberg (Incorporated herein by reference to Exhibit 10.2 filed with Form 8-K dated April 1, 2008)

*10.17	Employment Agreement dated as of March 31, 2008 between Hill-Rom Holdings, Inc. and Gregory N. Miller (Incorporated herein by reference to Exhibit 10.3 filed with Form 8-K dated April 1, 2008)

*10.18	Employment Agreement dated as of March 31, 2008 between Hill-Rom Holdings, Inc. and Patrick D. de Maynadier (Incorporated herein by reference to Exhibit 10.4 filed with Form 8-K dated April 1, 2008)

*10.19	Employment Agreement dated as of March 31, 2008 between Hill-Rom Holdings, Inc. and John H. Dickey (Incorporated herein by reference to Exhibit 10.5 filed with Form 8-K dated April 1, 2008)

*10.20	Form of Change in Control Agreement between Hill-Rom Holdings, Inc. and Peter H. Soderberg (Incorporated herein by reference to Exhibit 10.6 filed with Form 8-K dated April 1, 2008)

10.21	Judgment Sharing Agreement dated as of March 14, 2008 among Hill-Rom Holdings, Inc., Hillenbrand, Inc. and Batesville Casket Company, Inc. (Incorporated herein by reference to Exhibit 10.8 filed with Form 8-K dated April 1, 2008)

10.22	Employee Matters Agreement dated as of March 14, 2008 between Hill-Rom Holdings, Inc. and Hillenbrand, Inc. (Incorporated herein by reference to Exhibit 10.9 filed with Form 8-K dated April 1, 2008)

10.23	Tax Sharing Agreement dated as of March 31, 2008 between Hill-Rom Holdings, Inc. and Hillenbrand, Inc. (Incorporated herein by reference to Exhibit 10.10 filed with Form 8-K dated April 1, 2008)

*10.24	Amended and Restated Hill-Rom Holdings, Inc. Stock Incentive Plan, as currently in effect (Incorporated herein by reference to Exhibit 10.30 filed with Form 10-K for the year ended September 30, 2009)

*10.25	Employment Agreement dated as of March 31, 2008 between Hill-Rom Company, Inc. and Richard G. Keller (Incorporated herein by reference to Exhibit 10.12 filed with Form 10-Q for the quarter ended March 31, 2008)

*10.26	Employment Agreement dated as of March 31, 2008 between Hill-Rom Holdings, Inc. and C. Jeffery Kao (Incorporated herein by reference to Exhibit 10.14 filed with Form 10-Q for the quarter ended March 31, 2008)

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*10.27	Employment Agreement dated as of March 31, 2008 between Hill-Rom Holdings, Inc. and Mark D. Baron (Incorporated herein by reference to Exhibit 10.15 filed with Form 10-Q for the quarter ended March 31, 2008)

*10.28	Employment Agreement dated as of March 31, 2008 between Hill-Rom Holdings, Inc. and Kimberly K. Dennis (Incorporated herein by reference to Exhibit 10.16 filed with Form 10-Q for the quarter ended March 31, 2008)

*10.29	Employment Agreement dated as of July 31, 2008 between Hill-Rom Holdings, Inc. and Earl V. DeCarli (Incorporated herein by reference to Exhibit 10.18 filed with Form 10-Q for the quarter ended June 30, 2008)

*10.30	Letter Agreement dated September 27, 2009 between Hill-Rom Holdings, Inc. and Peter H. Soderberg (Incorporated herein by reference to Exhibit 10.1 filed with Form 8-K dated September 27, 2009)

*10.31	Hill-Rom Holdings, Inc. Employee Stock Purchase Plan (Incorporated by reference to Appendix I to the Company’s definitive Proxy Statement on Schedule 14A dated January 7, 2009)

*10.32	Letter Agreement effective October 1, 2009 between Hill-Rom Holdings, Inc. and Earl V. DeCarli (Incorporated herein by reference to Exhibit 10.40 filed with Form 10-K for the year ended September 30, 2009)

*10.33	Employment Agreement dated January 6, 2010 between Hill-Rom Holdings, Inc. and John J. Greisch (Incorporated herein by reference to Exhibit 10.1 filed with Form 8-K dated January 7, 2010)

*10.34	Change in Control Agreement between Hill-Rom Holdings, Inc. and John J. Greisch dated January 6, 2010 (Incorporated herein by reference to Exhibit 10.2 filed with Form 8-K dated January 7, 2010)

*10.35	Limited Recapture Agreement between Hill-Rom Holdings, Inc. and John J. Greisch dated January 6, 2010 (Incorporated herein by reference to Exhibit 10.4 filed with Form 8-K dated January 7, 2010)

*10.36	Separation and Release Agreement between Hill-Rom Holdings, Inc. and C. Jeffrey Kao dated March 1, 2010 (Incorporated herein by reference to Exhibit 10.1 filed with Form 8-K dated March 3, 2010)

*10.37	Separation and Release Agreement between Hill-Rom Holdings, Inc. and Gregory J. Tucholski dated April 23, 2010 (Incorporated herein by reference to Exhibit 10.1 filed with Form 10-Q for the quarter ended June 30, 2010)

*10.38	Employment Agreement between Hill-Rom Holdings, Inc. and Alejandro Infante-Saracho dated May 6, 2010 (Incorporated herein by reference to Exhibit 10.5 filed with Form 10-Q for the quarter ended March 31, 2010)

*10.39	Limited Recapture Agreement between Hill-Rom Holdings, Inc. and Alejandro Infante-Saracho dated May 6, 2010 (Incorporated herein by reference to Exhibit 10.6 filed with Form 10-Q for the quarter ended March 31, 2010)

*10.40	Employment Agreement between Hill-Rom Holdings, Inc. and Susan R. Lichtenstein dated May 10, 2010 (Incorporated herein by reference to Exhibit 10.7 filed with Form 10-Q for the quarter ended March 31, 2010)

*10.41	Limited Recapture Agreement between Hill-Rom Holdings, Inc. and Susan R. Lichtenstein dated May 10, 2010 (Incorporated herein by reference to Exhibit 10.8 filed with Form 10-Q for the quarter ended March 31, 2010)

*10.42	Employment Agreement between Hill-Rom Holdings, Inc. and Philip D. Settimi dated May 6, 2010 (Incorporated herein by reference to Exhibit 10.9 filed with Form 10-Q for the quarter ended March 31, 2010)

*10.43	Limited Recapture Agreement between Hill-Rom Holdings, Inc. and Philip D. Settimi dated May 6, 2010 (Incorporated herein by reference to Exhibit 10.10 filed with Form 10-Q for the quarter ended March 31, 2010)

*10.44	Employment Agreement between Hill-Rom Holdings, Inc. and Martha G. Aronson dated August 1, 2010 (Incorporated by reference to Exhibit 10.50 filed with the Company’s Form 10-K on November 17, 2010)

*10.45	Limited Recapture Agreement between Hill-Rom Holdings, Inc. and Martha G. Aronson dated August 1, 2010 (Incorporated by reference to Exhibit 10.51 filed with the Company’s Form 10-K on November 17, 2010)

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*10.46	Employment Agreement between Hill-Rom Holdings, Inc. and Perry Stuckey III dated August 1, 2010 (Incorporated by reference to Exhibit 10.52 filed with the Company’s Form 10-K on November 17, 2010)

*10.47	Limited Recapture Agreement between Hill-Rom Holdings, Inc. and Perry Stuckey III dated August 1, 2010 (Incorporated by reference to Exhibit 10.53 filed with the Company’s Form 10-K on November 17, 2010)

*10.48	Employment Agreement between Hill-Rom Holdings, Inc. and Scott R. Jeffers dated September 13, 2010 (Incorporated by reference to Exhibit 10.54 filed with the Company’s Form 10-K on November 17, 2010)

*10.49	Limited Recapture Agreement between Hill-Rom Holdings, Inc. and Scott R. Jeffers dated September 13, 2010 (Incorporated by reference to Exhibit 10.55 filed with the Company’s Form 10-K on November 17, 2010)

*10.50	Amended Employment Agreement dated as of July 28, 2010 between Hill-Rom Holdings, Inc. and Patrick D. de Maynadier (Incorporated by reference to Exhibit 10.56 filed with the Company’s Form 10-K on November 17, 2010)

*10.51	Amended Employment Agreement dated as of August 26, 2010 between Hill-Rom Holdings, Inc. and Mark D. Baron (Incorporated by reference to Exhibit 10.57 filed with the Company’s Form 10-K on November 17, 2010)

*10.52	Form of Change in Control Agreement between Hill-Rom Holdings, Inc. and certain of its officers, including Named Executive Officers (other than the CEO) (Incorporated by reference to Exhibit 10.58 filed with the Company’s Form 10-K on November 17, 2010)

*10.53	Amended Change in Control Agreement between Hill-Rom Holdings, Inc. and John J. Greisch dated September 30, 2010 (Incorporated by reference to Exhibit 10.59 filed with the Company’s Form 10-K on November 17, 2010)

*10.54	Change in Control Agreement between Hill-Rom Holdings, Inc. and Kimberly K. Dennis dated September 30, 2010 (Incorporated by reference to Exhibit 10.60 filed with the Company’s Form 10-K on November 17, 2010)

*10.55	2011 Non-Employee Director Compensation Policy (Incorporated by reference to Exhibit 10.61 filed with the Company’s Form 10-K on November 17, 2010)

*10.56	Form of Restricted Stock Unit Agreement under Amended and Restated Hill-Rom Holdings, Inc. Stock Incentive Plan (Incorporated by reference to Exhibit 10.63 filed with the Company’s Form 10-K on November 17, 2010)

*10.57	Form of Restricted Stock Unit Agreement (CEO version) under Amended and Restated Hill-Rom Holdings, Inc. Stock Incentive Plan (Incorporated by reference to Exhibit 10.65 filed with the Company’s Form 10-K on November 17, 2010)

*10.58	Employment Agreement between Hill-Rom Holdings, Inc. and Mark Guinan, dated November 1, 2010 (Incorporated by reference to Exhibit 10.1 filed with the Company’s Form 8-K on November 1, 2010)

*10.59	Limited Recapture Agreement between Hill-Rom Holdings, Inc. and Mark Guinan, dated November 1, 2010 (Incorporated by reference to Exhibit 10.4 filed with the Company’s Form 8-K on November 1, 2010)

*10.60	Letter Agreement between Hill-Rom Holdings, Inc. and Greg Miller, dated November 1, 2010 (Incorporated by reference to Exhibit 10.4 filed with the Company’s Form 8-K on November 1, 2010)

*10.61	FY 2011 Form of Performance Based Stock Award under the Stock Incentive Plan

*10.62	FY 2011 Form of Performance Based Stock Award under the Stock Incentive Plan (CEO version)

*10.63	Separation and Release Agreement between Hill-Rom Holdings, Inc. and Perry Stuckey effective December 31, 2010 (Incorporated by reference to Exhibit 10.11 filed with the Company’s Form 10-Q on January 27, 2011)

*10.64	Employment Agreement between Hill-Rom Holdings, Inc. and Brian Lawrence, dated December 6, 2010 (Incorporated by reference to Exhibit 10.12 filed with the Company’s Form 10-Q on January 27, 2011)

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*10.65	Limited Recapture Agreement between Hill-Rom Holdings, Inc. and Brian Lawrence, dated December 6, 2010 (Incorporated by reference to Exhibit 10.13 filed with the Company’s Form 10-Q on January 27, 2011)

*10.66	Employment Agreement between Hill-Rom Holdings, Inc. and Michael O. Oliver, dated March 14, 2011 (Incorporated by reference to Exhibit 10.1 filed with the Company’s Form 10-Q on April 28, 2011)

*10.67	Limited Recapture Agreement between Hill-Rom Holdings, Inc. and Michael O. Oliver, dated March 14, 2011 (Incorporated by reference to Exhibit 10.2 filed with the Company’s Form 10-Q on April 28, 2011)

*10.68	Hill-Rom Holdings, Inc. Short-Term Incentive Plan (Incorporated by reference to Appendix 1 to the Hill-Rom Holdings, Inc. Definitive Proxy Statement on Schedule 14A dated January 18, 2011)

*10.69	Hill-Rom Holdings, Inc. Amended and Restated Supplemental Executive Retirement Plan

*10.70	Employment Agreement between Hill-Rom Holdings, Inc. and Alton Shader, dated July 11, 2011 (Incorporated by reference to Exhibit 10.2 filed with the Company’s Form 10-Q on July 28, 2011)

*10.71	Limited Recapture Agreement between Hill-Rom Holdings, Inc. and Alton Shader, dated July 11, 2011 (Incorporated by reference to Exhibit 10.3 filed with the Company’s Form 10-Q on July 28, 2011)

*10.72	Employment Agreement between Hill-Rom Holdings, Inc. and Andreas Frank, dated October 3, 2011

*10.73	Limited Recapture Agreement between Hill-Rom Holdings, Inc. and Andreas Frank, dated October 3, 2011

99.1	Schedules showing the effect of changes in reportable segments for quarterly periods in fiscal year 2009 and 2010 (Incorporated by reference to Exhibit 99.1 filed with the Company’s Form 10-Q on April 28, 2011)

21	Subsidiaries of the Registrant

23	Consent of Independent Registered Public Accounting Firm

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema Document

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	XBRL Extension Labels Linkbase Document

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

EMPLOYMENT AGREEMENT

P R E A M B L E

This Employment Agreement defines the essential terms and conditions of our employment relationship with you. The subjects covered in this Agreement are vitally important to you and to the Company. Thus, you should read the document carefully and ask any questions before signing the Agreement. Given the importance of these matters to you and the Company, you are required to sign the Agreement as a condition of employment.

This EMPLOYMENT AGREEMENT, dated and effective this 1st day of October 2011 is entered into by and between Hill-Rom Holdings, Inc. ("Company") and Andreas G. Frank ("Employee").

W I T N E S S E T H:

WHEREAS, the Company and its affiliated entities 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), air clearing devices, biomedical and asset management services, as well as other medical-related accessories, devices, products and services;

WHEREAS, the Company is willing to employ Employee in an executive or managerial position and Employee desires to be employed by the Company in such capacity based upon the terms and conditions set forth in this Agreement;

WHEREAS, in the course of the employment contemplated under this Agreement and as a continuation of Employee's past employment with the Company , if applicable, it will be necessary for Employee to acquire and maintain knowledge of certain trade secrets and other confidential and proprietary information regarding the Company as well as any of its parent, subsidiary and/or affiliated entities (hereinafter jointly referred to as the "Companies"); and

WHEREAS, the Company and Employee (collectively referred to as the "Parties") acknowledge and agree that the execution of this Agreement is necessary to memorialize the terms and conditions of their employment relationship as well as safeguard against the unauthorized disclosure or use of the Company's confidential information and to otherwise preserve the goodwill and ongoing business value of the Company;

NOW THEREFORE, in consideration of Employee's employment, the Company's willingness to disclose certain confidential and proprietary information to Employee and the mutual covenants contained herein as well as other good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows:

Employment . As of the effective date of this Agreement, the Company agrees to employ Employee and Employee agrees to serve as Senior Vice President, Corporate Development and Strategy. Employee agrees to perform all duties and responsibilities traditionally assigned to, or falling within the normal responsibilities of, an individual employed in the above-referenced position. Employee also agrees to perform any and all additional duties or responsibilities as may be assigned by the Company in its sole discretion. The Parties acknowledge that both this title and the underlying duties may change.

Best Efforts and Duty of Loyalty . During the term of employment with the Company, Employee covenants and agrees to exercise reasonable efforts to perform all assigned duties in a diligent and professional manner and in the best interest of the Company. Employee agrees to devote Employee's full working time, attention, talents, skills and best efforts to further the Company's business and agrees not to take any action, or make any omission, that deprives the Company of any business opportunities or otherwise act in a manner that conflicts with the best interest of the Company or is otherwise detrimental to its business. Employee agrees not to engage in any outside business activity, whether or not pursued for gain, profit or other pecuniary advantage, without the express written consent of the Company. Employee shall act at all times in accordance with the Company's Code of Ethical Business Conducts, and all other applicable policies which may exist or be adopted by the Company from time to time.

At-Will Employment . Subject to the terms and conditions set forth below, Employee specifically acknowledges and accepts such employment on an "at-will" basis and agrees that both Employee and the Company retain the right to terminate this relationship at any time, with or without cause, for any reason not prohibited by applicable law upon notice as required by this Agreement. Employee acknowledges that nothing in this Agreement is intended to create, nor should be interpreted to create, an employment contract for any specified length of time between the Company and Employee.

4.	Compensation . For all services rendered by Employee on behalf of, or at the request of, the Company, Employee shall be paid as follows:

(a)

A base salary at the bi-weekly rate of ten thousand five hundred seventy six dollars and ninety two cents ($10,576.92), less usual and ordinary deductions;

(b)

A cash award of Sixty Thousand Five Hundred Dollars and Zero Cents ($60,500.00) payable on the earlier of (i) December 9, 2011 or (ii) in the event Employee is involuntarily terminated without cause prior to December 9, 2011, the next regularly scheduled payroll date following the effective date of Employee’s termination.

(c)

Incentive compensation, payable solely at the discretion of the Company, pursuant to the Company's existing Incentive Compensation Program or any other program as the Company may establish in its sole discretion; and

(d)

Such additional compensation, benefits and perquisites as the Company may deem appropriate

Changes to Compensation . Notwithstanding anything contained herein to the contrary, Employee acknowledges that the Company specifically reserves the right to make changes to Employee's compensation in its sole discretion including, but not limited to, modifying or eliminating a compensation component. The Parties agree that such changes shall be deemed effective immediately and a modification of this Agreement unless, within seven (7) days after receiving notice of such change, Employee exercises Employee's right to terminate this Agreement without cause or for "Good Reason" as provided below in Paragraph No. 11. The Parties anticipate that Employee's compensation structure will be reviewed on an annual basis but acknowledge that the Company shall have no obligation to do so.

6.	Direct Deposit . As a condition of employment, and within thirty (30) days of the effective date of this Agreement, Employee agrees to make all necessary arrangements to have all sums paid pursuant to this Agreement direct deposited into one or more bank accounts as designated by Employee.

Warranties and Indemnification . Employee warrants that Employee is not a party to any contract, restrictive covenant, or other agreement purporting to limit or otherwise adversely affecting Employee's ability to secure employment with any third party. Alternatively, should any such agreement exist, Employee warrants that the contemplated services to be performed hereunder will not violate the terms and conditions of any such agreement. In either event, Employee agrees to fully indemnify and hold the Company harmless from any and all claims arising from, or involving the enforcement of, any such restrictive covenants or other agreements.

Restricted Duties . Employee agrees not to disclose, or use for the benefit of the Company, any confidential or proprietary information belonging to any predecessor employer(s) that otherwise has not been made public and further acknowledges that the Company has specifically instructed Employee not to disclose or use such confidential or proprietary information. Based on Employee's understanding of the anticipated duties and responsibilities hereunder, Employee acknowledges that such duties and responsibilities will not compel the disclosure or use of any such confidential and proprietary information.

Termination Without Cause . The Parties agree that either party may terminate this employment relationship at any time, without cause, upon sixty (60) days' advance written notice or, if terminated by the Company, pay in lieu of notice (hereinafter referred to as "notice pay"). In such event, Employee shall only be entitled to such compensation, benefits and perquisites that have been paid or fully accrued as of the effective date of Employee's separation and as otherwise explicitly set forth in this Agreement. However, in no event shall Employee be entitled to notice pay if Employee is eligible for and accepts severance payments pursuant to the provisions of Paragraphs 16 and 17, below.

10.	Termination With Cause . Employee's employment may be terminated by the Company at any time "for cause" without notice or prior warning. For purposes of this Agreement, "cause" shall mean the Company's good faith determination that Employee has:

(a)

Acted with gross neglect or willful misconduct in the discharge of his/her duties and responsibilities or refused to follow or comply with the lawful direction of the Board of Directors of the Company or the terms and conditions of this Agreement providing such refusal is not based primarily on Employee's good faith compliance with applicable legal or ethical standards;

(b)

Acquiesced or participated in any conduct that is dishonest, fraudulent, illegal (at the felony level), unethical, involves moral turpitude or is otherwise illegal and involves conduct that has the potential, in the Company's reasonable opinion, to cause the Company, its officers or its directors embarrassment or ridicule;

(c)

Violated a material requirement of any Company policy or procedure, specifically including a violation of the Company's Code of Ethics or Associate Policy Manual;

(d)

Disclosed without proper authorization any trade secrets or other Confidential Information (as defined herein);

(e)

Engaged in any act that, in the reasonable opinion of the Company, is contrary to its best interests or would hold the Company, its officers or directors up to probable civil or criminal liability, provided that, if Executive acts in good faith in compliance with applicable legal or ethical standards, such actions shall not be grounds for termination for cause; or

(f)

Engaged in such other conduct recognized at law as constituting cause.

Upon the occurrence or discovery of any event specified above, the Company shall have the right to terminate Employee's employment, effective immediately, by providing notice thereof to Employee without further obligation to Employee, other than accrued wages or other accrued wages, deferred compensation or other accrued benefits of employment (collectively referred to herein as "Accrued Obligations"), which shall be paid in accordance with the Company's past practice and applicable law. To the extent any violation of this Paragraph is capable of being promptly cured by Employee (or cured within a reasonable period to the Company's satisfaction), the Company agrees to provide Employee with a reasonable opportunity to so cure such defect. Absent written mutual agreement otherwise, the Parties agree in advance that it is not possible for Employee to cure any violations of sub-paragraph (b) or (d) and, therefore, no opportunity for cure need be provided in those circumstances.

11.

Termination by Employee for Good Reason . Employee may terminate this Agreement and declare this Agreement to have been terminated "without cause" by the Company (and, therefore, for "Good Reason") upon the occurrence, without Employee's consent, of any of the following acts by the Company, or failures by the Company to act (each a “Good Reason Condition”), provided (i) the Employee provides written notice to the Company of the occurrence of the Good Reason Condition within ten (10) business days after the Employee has knowledge of the Good Reason Condition; (ii) the Company fails to notify the Employee of the Company’s intended method of correction within thirty (30) business days after the Company receives Employee’s notice, or the Company fails to correct the Good Reason Condition within thirty (30) business days after such Employee notice; and (iii) the Employee resigns within ten (10) business days after the end of the 30-business-day period specified in (ii):

(a)

A material diminution in Employee’s duties;

(b)

The failure to elect or reelect Employee as Vice President or other officer of the Company (unless such failure is related in any way to the Company's decision to terminate Employee for cause);

(c)

The failure of the Company to continue to provide Employee with office space, related facilities and support personnel (including, but not limited to, administrative and secretarial assistance) within the Company's principal executive offices commensurate with his responsibilities to, and position within, the Company;

(d)

A material reduction by the Company in the amount of Employee's base salary or the discontinuation or material reduction by the Company of Employee's participation at the same level of eligibility as compared to other peer employees in any incentive compensation, additional compensation, benefits, policies or perquisites subject to Employee understanding that such reduction(s) shall be permissible if the change applies in a similar way to other peer level employees;

(e)

The relocation of the Company's principal executive offices or Employee's place of work to a location requiring a change of more than fifty (50) miles in Employee's daily commute; or

(f)

Any other action or inaction by the Company that constitutes a material breach of this Employment Agreement.

12.

Termination Due to Death or Disability . In the event Employee dies or suffers a disability (as defined herein) during the term of employment, this Agreement shall automatically be terminated on the date of such death or disability without further obligation on the part of the Company other than the payment of Accrued Obligations. For purposes of this Agreement, Employee shall be considered to have suffered a "disability" upon a determination that Employee cannot perform the essential functions of Employee's position as a result of a such a disability and the occurrence of one or more of the following events:

(a)

Employee becomes eligible for or receives any benefits pursuant to any disability insurance policy as a result of a determination under such policy that Employee is permanently disabled;

(b)

Employee becomes eligible for or receives any disability benefits under the Social Security Act; or

(c)

A good faith determination by the Company that Employee is and will likely remain unable to perform the essential functions of Employee's duties or responsibilities hereunder on a full-time basis, with or without reasonable accommodation, as a result of any mental or physical impairment.

Notwithstanding anything expressed or implied above to the contrary, the Company agrees to fully comply with its obligations under the Family and Medical Leave Act of 1993 and the Americans with Disabilities Act as well as any other applicable federal, state, or local law, regulation, or ordinance governing the provision of leave to individuals with serious health conditions or the protection of individuals with disabilities, as well as the Company's obligation to provide reasonable accommodation thereunder.

13.	Exit Interview . Upon termination of Employee's employment for any reason, Employee agrees, if requested, to participate in an exit interview with the Company and reaffirm in writing Employee's post-employment obligations as set forth in this Agreement.

14.

Section 409A Notification . Employee acknowledges that Employee has been advised of the American Jobs Creation Act of 2004, which added Section 409A to the Internal Revenue Code ("Section 409A"), and significantly changed the taxation of nonqualified deferred compensation plans and arrangements. Under proposed and final regulations as of the date of this Agreement, Employee has been advised that Employee's severance pay and other termination benefits may be treated by the Internal Revenue Service as providing "nonqualified deferred compensation," and therefore subject to Section 409A. In that event, several provisions in Section 409A may affect Employee's receipt of severance compensation, including the timing thereof. These include, but are not limited to, a provision which requires that distributions to "specified employees" of public companies on account of separation from service may not be made earlier than six (6) months after the effective date of such separation. If applicable, failure to comply with Section 409A can lead to immediate taxation of such deferrals, with interest calculated at a penalty rate and a 20% penalty. As a result of the requirements imposed by the American Jobs Creation Act of 2004, Employee agrees if Employee is a "specified employee" at the time of Employee's termination of employment and if payments in connection with such termination of employment are subject to Section 409A and not otherwise exempt, such payments (and other benefits to the extent applicable) due Employee at the time of termination of employment shall not be paid until a date at least six (6) months after the effective date of Employee's termination of employment ("Employee's Effective Termination Date"). Notwithstanding any provision of this Agreement to the contrary, to the extent that any payment under the terms of this Agreement would constitute an impermissible acceleration of payments under Section 409A or any regulations or Treasury guidance promulgated thereunder, such payments shall be made no earlier than at such times allowed under Section 409A. If any provision of this Agreement (or of any award of compensation) would cause Employee to incur any additional tax or interest under Section 409A or any regulations or Treasury guidance promulgated thereunder, the Company or its successor may reform such provision; provided that it will (i) maintain, to the maximum extent practicable, the original intent of the applicable provision without violating the provisions of Section 409A and (ii) notify and consult with Employee regarding such amendments or modifications prior to the effective date of any such change. Each amount to be paid or benefit to be provided to Employee pursuant to this Agreement, which constitutes deferred compensation subject to Section 409A, shall be construed as a separate identified payment for purposes of Section 409A. To the extent required to avoid an accelerated or additional tax under Section 409A, amounts reimbursed to Employee under this Agreement shall be paid to Employee on or before the last day of the year following the year in which the expense was incurred, the amount of expenses eligible for reimbursement (and in-kind benefits provided to Employee) during any one year may not affect amounts reimbursed or provided in any subsequent tax year, and the right to reimbursement (and in-kind benefits provided to Employee) under this Agreement shall not be subject to liquidation or exchange for another benefit.

15.

Section 409A Acknowledgement . Employee acknowledges that, notwithstanding anything contained herein to the contrary, both Parties shall be independently responsible for accessing their own risks and liabilities under Section 409A that may be associated with any payment made under the terms of this Agreement or any other arrangement which may be deemed to trigger Section 409A. Further, the Parties agree that each shall independently bear responsibility for any and all taxes, penalties or other tax obligations as may be imposed upon them in their individual capacity as a matter of law. To the extent applicable, Employee understands and agrees that Employee shall have the responsibility for, and Employee agrees to pay, any and all appropriate income tax or other tax obligations for which Employee is individually responsible and/or related to receipt of any benefits provided in this Agreement. Employee agrees to fully indemnify and hold the Company harmless for any taxes, penalties, interest, cost or attorneys' fee assessed against or incurred by the Company on account of such benefits having been provided to Employee or based on any alleged failure to withhold taxes or satisfy any claimed obligation. Employee understands and acknowledges that neither the Company, nor any of its employees, attorneys, or other representatives has provided or will provide Employee with any legal or financial advice concerning taxes or any other matter, and that Employee has not relied on any such advice in deciding whether to enter into this Agreement.

16.

Severance Payments . In the event Employee's employment is terminated by the Company without cause (including by Employee for Good Reason), and subject to the normal terms and conditions imposed by the Company as set forth herein and in the attached Separation and Release Agreement, Employee shall be eligible to receive severance pay based upon Employee's base salary at the time of termination for a period determined in accordance with any guidelines as may be established by the Company or for a period up to twelve (12) months (whichever is longer).

17.

Severance Payment Terms and Conditions . No severance pay shall be paid if Employee voluntarily leaves the Company's employ without Good Reason, as defined above, or is terminated for cause. Any severance pay made payable under this Agreement shall be paid in lieu of, and not in addition to, any other contractual, notice or statutory pay or other accrued compensation obligation (excluding accrued wages and deferred compensation). Additionally, such severance pay is contingent upon Employee fully complying with the restrictive covenants contained herein and executing a Separation and Release Agreement in a form not substantially different from that attached as Exhibit A. Further, the Company's obligation to provide severance hereunder shall be deemed null and void should Employee fail or refuse to execute and deliver to the Company the Company's then-standard Separation and Release Agreement (without modification) within any time period as may be prescribed by law or, in absence thereof, twenty-one (21) days after the Employee's Effective Termination Date. Conditioned upon the execution and delivery of the Separation and Release Agreement as set forth in the prior sentence, Severance pay benefits shall be paid as follows: (i) in one lump sum equivalent to six (6) months' salary on the day following the date which is six (6) months following Employee's Effective Termination Date with any remainder to be paid in bi-weekly installments equivalent to the Employee's salary commencing upon the next regularly scheduled payroll date, if both the severance pay benefit is subject to Section 409A and if Employee is a "specified employee" under Section 409A or (ii) for any severance pay benefits not subject to clause (i), begin upon the next regularly scheduled payroll following the earlier to occur of fifteen (15) days from the Company's receipt of an executed Separation and Release Agreement or the expiration of sixty (60) days after Employee's Effective Termination Date and shall be paid on the Company's regularly scheduled pay dates; provided, however, that if the before-stated sixty (60) day period ends in a calendar year following the calendar year in which the sixty (60) day period commenced, then any benefits not subject to clause (i) shall only begin on the next regularly scheduled payroll following the expiration of sixty (60) days after the Employee's Effective Termination Date. Excluding any lump sum payment due as a result of the application of Section 409A (which shall be paid regardless of reemployment), all other severance payments provided hereunder shall terminate upon reemployment.

18.	Assignment of Rights .

(a)

Copyrights . Employee agrees that all works of authorship fixed in any tangible medium of expression by Employee during the term of this Agreement relating to the Company's business ("Works"), either solely or jointly with others, shall be and remain exclusively the property of the Company. Each such Work created by Employee is a "work made for hire" under the copyright law and the Company may file applications to register copyright in such Works as author and copyright owner thereof. If, for any reason, a Work created by Employee is excluded from the definition of a "work made for hire" under the copyright law, then Employee does hereby assign, sell, and convey to the Company the entire rights, title, and interests in and to such Work, including the copyright therein, to the Company. Employee will execute any documents that the Company deems necessary in connection with the assignment of such Work and copyright therein. Employee will take whatever steps and do whatever acts the Company requests, including, but not limited to, placement of the Company's proper copyright notice on Works created by Employee to secure or aid in securing copyright protection in such Works and will assist the Company or its nominees in filing applications to register claims of copyright in such Works. The Company shall have free and unlimited access at all times to all Works and all copies thereof and shall have the right to claim and take possession on demand of such Works and copies.

(b)

Inventions . Employee agrees that all discoveries, concepts, and ideas, whether patentable or not, including, but not limited to, apparatus, processes, methods, compositions of matter, techniques, and formulae, as well as improvements thereof or know-how related thereto, relating to any present or prospective product, process, or service of the Company ("Inventions") that Employee conceives or makes during the term of this Agreement relating to the Company's business, shall become and remain the exclusive property of the Company, whether patentable or not, and Employee will, without royalty or any other consideration:

(i)

Inform the Company promptly and fully of such Inventions by written reports, setting forth in detail the procedures employed and the results achieved;

(ii)

Assign to the Company all of Employee's rights, title, and interests in and to such Inventions, any applications for United States and foreign Letters Patent, any United States and foreign Letters Patent, and any renewals thereof granted upon such Inventions;

(iii)

Assist the Company or its nominees, at the expense of the Company, to obtain such United States and foreign Letters Patent for such Inventions as the Company may elect; and

(iv)

Execute, acknowledge, and deliver to the Company at the Company's expense such written documents and instruments, and do such other acts, such as giving testimony in support of Employee's inventorship, as may be necessary in the opinion of the Company, to obtain and maintain United States and foreign Letters Patent upon such Inventions and to vest the entire rights and title thereto in the Company and to confirm the complete ownership by the Company of such Inventions, patent applications, and patents.

19.

Company Property . All records, files, drawings, documents, data in whatever form, business equipment (including computers, PDAs, cell phones, etc.), and the like relating to, or provided by, the Company shall be and remain the sole property of the Company. Upon termination of employment, Employee shall immediately return to the Company all such items without retention of any copies and without additional request by the Company. De minimis items such as pay stubs, 401(k) plan summaries, employee bulletins, and the like are excluded from this requirement.

20.

Confidential Information . Employee acknowledges that the Company and its affiliated entities (herein collectively referred to as "Companies") possess certain trade secrets as well as other confidential and proprietary information which they have acquired or will acquire at great effort and expense. Such information may include, without limitation, confidential information, whether in tangible or intangible form, regarding the Companies' products and services, marketing strategies, business plans, operations, costs, current or prospective customer information (including customer identities, contacts, requirements, creditworthiness, preferences, and like matters), product concepts, designs, prototypes or specifications, research and development efforts, technical data and know-how, sales information, including pricing and other terms and conditions of sale, financial information, internal procedures, techniques, forecasts, methods, trade information, trade secrets, software programs, project requirements, inventions, trademarks, trade names, and similar information regarding the Companies' business(es) (collectively referred to herein as "Confidential Information"). Employee further acknowledges that, as a result of Employee's employment with the Company, Employee will have access to, will become acquainted with, and/or may help develop, such Confidential Information. Confidential Information shall not include information readily available in the public so long as such information was not made available through fault of Employee or wrong doing by any other individual.

21.

Restricted Use of Confidential Information . Employee agrees that all Confidential Information is and shall remain the sole and exclusive property of the Company and/or its affiliated entities. Except as may be expressly authorized by the Company in writing, Employee agrees not to disclose, or cause any other person or entity to disclose, any Confidential Information to any third party while employed by the Company and for as long thereafter as such information remains confidential (or as limited by applicable law). Further, Employee agrees to use such Confidential Information only in the course of Employee's duties in furtherance of the Company's business and agrees not to make use of any such Confidential Information for Employee's own purposes or for the benefit of any other entity or person.

22.

Acknowledged Need for Limited Restrictive Covenants . Employee acknowledges that the Companies have spent and will continue to expend substantial amounts of time, money and effort to develop their business strategies, Confidential Information, customer identities and relationships, goodwill and employee relationships, and that Employee will benefit from these efforts. Further, Employee acknowledges the inevitable use of, or near-certain influence by Employee's knowledge of, the Confidential Information disclosed to Employee during the course of employment if allowed to compete against the Company in an unrestricted manner and that such use would be unfair and extremely detrimental to the Company. Accordingly, based on these legitimate business reasons, Employee acknowledges each of the Companies' need to protect their legitimate business interests by reasonably restricting Employee's ability to compete with the Company on a limited basis.

23.	Non-Solicitation . During Employee's employment and for a period of eighteen (18) months thereafter, Employee agrees not to directly or indirectly engage in the following prohibited conduct:

(a)

Solicit, offer products or services to, or accept orders for, any Competitive Products or otherwise transact any competitive business with, any customer or entity with whom Employee had contact or transacted any business on behalf of the Company (or any Affiliate thereof) during the eighteen (18) month period preceding Employee's date of separation or about whom Employee possessed, or had access to, confidential and proprietary information;

(b)

Attempt to entice or otherwise cause any third party to withdraw, curtail or cease doing business with the Company (or any Affiliate thereof), specifically including customers, vendors, independent contractors and other third party entities;

(c)

Disclose to any person or entity the identities, contacts or preferences of any customers of the Company (or any Affiliate thereof), or the identity of any other persons or entities having business dealings with the Company (or any Affiliate thereof);

(d)

Induce any individual who has been employed by or had provided services to the Company (or any Affiliate thereof) within the six (6) month period immediately preceding the effective date of Employee's separation to terminate such relationship with the Company (or any Affiliate thereof);

(e)

Assist, coordinate or otherwise offer employment to, accept employment inquiries from, or employ any individual who is or had been employed by the Company (or any Affiliate thereof) at any time within the six (6) month period immediately preceding such offer, or inquiry;

(f)

Communicate or indicate in any way to any customer of the Company (or any Affiliate thereof), prior to formal separation from the Company, any interest, desire, plan, or decision to separate from the Company; or

(g)

Otherwise attempt to directly or indirectly interfere with the Company's business, the business of any of the Companies or their relationship with their employees, consultants, independent contractors or customers.

24.	Limited Non-Compete . For the above-stated reasons, and as a condition of employment to the fullest extent permitted by law, Employee agrees during the Relevant Non-Compete Period not to directly or indirectly engage in the following competitive activities:

(a)

Employee shall not have any ownership interest in, work for, advise, consult, or have any business connection or business or employment relationship in any competitive capacity with any Competitor unless Employee provides written notice to the Company of such relationship prior to entering into such relationship and, further, provides sufficient written assurances to the Company's satisfaction that such relationship will not, jeopardize the Company's legitimate interests or otherwise violate the terms of this Agreement;

(b)

Employee shall not engage in any research, development, production, sale or distribution of any Competitive Products, specifically including any products or services relating to those for which Employee had responsibility for the eighteen (18) month period preceding Employee's date of separation;

(c)

Employee shall not market, sell, or otherwise offer or provide any Competitive Products within Employee's Geographic Territory (if applicable) or Assigned Customer Base, specifically including any products or services relating to those for which Employee had responsibility for the eighteen (18) month period preceding Employee's date of separation; and

(d)

Employee shall not distribute, market, sell or otherwise offer or provide any Competitive Products to any customer of the Company with whom Employee had contact or for which Employee had responsibility at any time during the eighteen (18) month period preceding Employee's date of separation.

25.	Non-Compete Definitions . For purposes of this Agreement, the Parties agree that the following terms shall apply:

(a)

"Affiliate" includes any parent, subsidiary, joint venture, or other entity controlled, owned, managed or otherwise associated with the Company;

(b)

"Assigned Customer Base" shall include all accounts or customers formally assigned to Employee within a given territory or geographical area or contacted by Employee at any time during the eighteen (18) month period preceding Employee's date of separation;

(c)

"Competitive Products" shall include any product or service that directly or indirectly competes with, is substantially similar to, or serves as a reasonable substitute for, any product or service in research, development or design, or manufactured, produced, sold or distributed by the Company;

(d)

"Competitor" shall include any person or entity that offers or is actively planning to offer any Competitive Products and may include (but not be limited to) any entity identified on the Company's Illustrative Competitor List, attached hereto as Exhibit B, which shall be amended from time to time to reflect changes in the Company's business and competitive environment (updated competitor lists will be provided to Employee upon reasonable request);

(e)

"Geographic Territory" shall include any territory formally assigned to Employee as well as all territories in which Employee has provided any services, sold any products or otherwise had responsibility at any time during the eighteen (18) month period preceding Employee's date of separation;

(f)

"Relevant Non-Compete Period" shall include the period of Employee's employment with the Company as well as a period of eighteen (18) months after such employment is terminated, regardless of the reason for such termination provided, however, that this period shall be reduced to the greater of (i) nine (9) months or (ii) the total length of Employee's employment with the Company, including employment with any parent, subsidiary or affiliated entity, if such employment is less than eighteen (18) months;

(g)

"Directly or indirectly" shall be construed such that the foregoing restrictions shall apply equally to Employee whether performed individually or as a partner, shareholder, officer, director, manager, employee, salesman, independent contractor, broker, agent, or consultant for any other individual, partnership, firm, corporation, company, or other entity engaged in such conduct.

26.

Consent to Reasonableness . In light of the above-referenced concerns, including Employee's knowledge of and access to the Companies' Confidential Information, Employee acknowledges that the terms of the foregoing restrictive covenants are reasonable and necessary to protect the Company's legitimate business interests and will not unreasonably interfere with Employee's ability to obtain alternate employment. As such, Employee hereby agrees that such restrictions are valid and enforceable, and affirmatively waives any argument or defense to the contrary. Employee acknowledges that this limited non-competition provision is not an attempt to prevent Employee from obtaining other employment in violation of IC §22-5-3-1 or any other similar statute. Employee further acknowledges that the Company may need to take action, including litigation, to enforce this limited non-competition provision, which efforts the Parties stipulate shall not be deemed an attempt to prevent Employee from obtaining other employment.

27.

Survival of Restrictive Covenants . Employee acknowledges that the above restrictive covenants shall survive the termination of this Agreement and the termination of Employee's employment for any reason. Employee further acknowledges that any alleged breach by the Company of any contractual, statutory or other obligation shall not excuse or terminate the obligations hereunder or otherwise preclude the Company from seeking injunctive or other relief. Rather, Employee acknowledges that such obligations are independent and separate covenants undertaken by Employee for the benefit of the Company.

28.

Effect of Transfer . Subject to the provisions of Paragraph 11 above, Employee agrees that this Agreement shall continue in full force and effect notwithstanding any change in job duties, job titles or reporting responsibilities. Employee further acknowledges that the above restrictive covenants shall survive, and be extended to cover, the transfer of Employee from the Company to its parent, subsidiary, or any other affiliated entity (hereinafter collectively referred to as an "Affiliate") or any subsequent transfer(s) among them. Specifically, in the event of Employee's temporary or permanent transfer to an Affiliate, Employee agrees that the foregoing restrictive covenants shall remain in force so as to continue to protect such company for the duration of the non-compete period, measured from Employee's effective date of transfer to an Affiliate. Additionally, Employee acknowledges that this Agreement shall be deemed to have been automatically assigned to the Affiliate as of Employee's effective date of transfer such that the above-referenced restrictive covenants (as well as all other terms and conditions contained herein) shall be construed thereafter to protect the legitimate business interests and goodwill of the Affiliate as if Employee and the Affiliate had independently entered into this Agreement. Employee's acceptance of Employee's transfer to, and subsequent employment by, the Affiliate shall serve as consideration for (as well as be deemed as evidence of Employee's consent to) the assignment of this Agreement to the Affiliate as well as the extension of such restrictive covenants to the Affiliate. Employee agrees that this provision shall apply with equal force to any subsequent transfers of Employee from one Affiliate to another Affiliate.

29.

Post-Termination Notification . For the duration of Employee's Relevant Non-compete Period or other restrictive covenant period, which ever is longer, Employee agrees to promptly notify the Company no later than five (5) business days of Employee's acceptance of any employment or consulting engagement. Such notice shall include sufficient information to ensure Employee compliance with Employee's non-compete obligations and must include at a minimum the following information: (i) the name of the employer or entity for which Employee is providing any consulting services; (ii) a description of Employee's intended duties as well as (iii) the anticipated start date. Such information is required to ensure Employee's compliance with Employee's non-compete obligations as well as all other applicable restrictive covenants. Such notice shall be provided in writing to the Office of Vice President and General Counsel of the Company at 1069 State Road 46 E, Batesville, Indiana 47006. Failure to timely provide such notice shall be deemed a material breach of this Agreement and entitle the Company to return of any severance paid to Employee plus attorneys' fees. Employee further consents to the Company's notification to any new employer of Employee's rights and obligations under this Agreement.

30.

Scope of Restrictions . If the scope of any restriction contained in any preceding paragraphs of this Agreement is deemed too broad to permit enforcement of such restriction to its fullest extent, then such restriction shall be enforced to the maximum extent permitted by law, and Employee hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction.

31.

Specific Enforcement/Injunctive Relief . Employee agrees that it would be difficult to measure any damages to the Company from a breach of the above-referenced restrictive covenants, but acknowledges that the potential for such damages would be great, incalculable and irremediable, and that monetary damages alone would be an inadequate remedy. Accordingly, Employee agrees that the Company shall be entitled to immediate injunctive relief against such breach, or threatened breach, in any court having jurisdiction. In addition, if Employee violates any such restrictive covenant, Employee agrees that the period of such violation shall be added to the term of the restriction. In determining the period of any violation, the Parties stipulate that in any calendar month in which Employee engages in any activity in violation of such provisions, Employee shall be deemed to have violated such provision for the entire month, and that month shall be added to the duration of the non-competition provision. Employee acknowledges that the remedies described above shall not be the exclusive remedies, and the Company may seek any other remedy available to it either in law or in equity, including, by way of example only, statutory remedies for misappropriation of trade secrets, and including the recovery of compensatory or punitive damages. Employee further agrees that the Company shall be entitled to an award of all costs and attorneys' fees incurred by it in any attempt to enforce the terms of this Agreement.

32.

Publicly Traded Stock . The Parties agree that nothing contained in this Agreement shall be construed to prohibit Employee from investing Employee's personal assets in any stock or corporate security traded or quoted on a national securities exchange or national market system provided, however, such investments do not require any services on the part of Employee in the operation or the affairs of the business or otherwise violate the Company's Code of Ethics.

33.

Notice of Claim and Contractual Limitations Period . Employee acknowledges the Company's need for prompt notice, investigation, and resolution of any claims that may be filed against it due to the number of relationships it has with employees and others (and due to the turnover among such individuals with knowledge relevant to any underlying claim). Accordingly, Employee agrees prior to initiating any litigation of any type (including, but not limited to, employment discrimination litigation, wage litigation, defamation, or any other claim) to notify the Company, within One Hundred and Eighty (180) days after the claim accrued, by sending a certified letter addressed to the Company's General Counsel setting forth: (i) claimant's name, address, and phone; (ii) the name of any attorney (if any) representing Employee; (iii) the nature of the claim; (iv) the date the claim arose; and (v) the relief requested. This provision is in addition to any other notice and exhaustion requirements that might apply. For any dispute or claim of any type against the Company (including but not limited to employment discrimination litigation, wage litigation, defamation, or any other claim), Employee must commence legal action within the shorter of one (1) year of accrual of the cause of action or such shorter period that may be specified by law.

34.

Non-Jury Trials . Notwithstanding any right to a jury trial for any claims, Employee waives any such right to a jury trial, and agrees that any claim of any type (including but not limited to employment discrimination litigation, wage litigation, defamation, or any other claim) lodged in any court will be tried, if at all, without a jury.

35.

Choice of Forum . Employee acknowledges that the Company is primarily based in Indiana, and Employee understands and acknowledges the Company's desire and need to defend any litigation against it in Indiana. Accordingly, the Parties agree that any claim of any type brought by Employee against the Company or any of its employees or agents must be maintained only in a court sitting in Marion County, Indiana, or Ripley County, Indiana, or, if a federal court, the Southern District of Indiana, Indianapolis Division. Employee further understands and acknowledges that in the event the Company initiates litigation against Employee, the Company may need to prosecute such litigation in such state where the Employee is subject to personal jurisdiction. Accordingly, for purposes of enforcement of this Agreement, Employee specifically consents to personal jurisdiction in the State of Indiana as well as any state in which resides a customer assigned to the Employee. Furthermore, Employee consents to appear, upon Company's request and at Employee's own cost, for deposition, hearing, trial, or other court proceeding in Indiana or in any state in which resides a customer assigned to the Employee.

36.

Choice of Law . This Agreement shall be deemed to have been made within the County of Ripley, State of Indiana and shall be interpreted and construed in accordance with the laws of the State of Indiana. Any and all matters of dispute of any nature whatsoever arising out of, or in any way connected with the interpretation of this Agreement, any disputes arising out of the Agreement or the employment relationship between the Parties hereto, shall be governed by, construed by and enforced in accordance with the laws of the State of Indiana without regard to any applicable state's choice of law provisions.

37.	Titles . Titles are used for the purpose of convenience in this Agreement and shall be ignored in any construction of it.

38.

Severability . The Parties agree that each and every paragraph, sentence, clause, term and provision of this Agreement is severable and that, in the event any portion of this Agreement is adjudged to be invalid or unenforceable, the remaining portions thereof shall remain in effect and be enforced to the fullest extent permitted by law. Further, should any particular clause, covenant, or provision of this Agreement be held unreasonable or contrary to public policy for any reason, the Parties acknowledge and agree that such covenant, provision or clause shall automatically be deemed modified such that the contested covenant, provision or clause will have the closest effect permitted by applicable law to the original form and shall be given effect and enforced as so modified to whatever extent would be reasonable and enforceable under applicable law.

39.

Assignment-Notices . The rights and obligations of the Company under this Agreement shall inure to its benefit, as well as the benefit of its parent, subsidiary, successor and affiliated entities, and shall be binding upon the successors and assigns of the Company. This Agreement, being personal to Employee, cannot be assigned by Employee, but Employee's personal representative shall be bound by all its terms and conditions. Any notice required hereunder shall be sufficient if in writing and mailed to the last known residence of Employee or to the Company at its principal office with a copy mailed to the Office of the General Counsel.

40.

Amendments and Modifications . Except as specifically provided herein, no modification, amendment, extension or waiver of this Agreement or any provision hereof shall be binding upon the Company or Employee unless in writing and signed by both Parties. The waiver by the Company or Employee of a breach of any provision of this Agreement shall not be construed as a waiver of any subsequent breach. Nothing in this Agreement shall be construed as a limitation upon the Company's right to modify or amend any of its manuals or policies in its sole discretion and any such modification or amendment which pertains to matters addressed herein shall be deemed to be incorporated herein and made a part of this Agreement.

41.

Outside Representations . Employee represents and acknowledges that in signing this Agreement Employee does not rely, and has 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.

42.

Voluntary and Knowing Execution . Employee acknowledges that Employee has been offered a reasonable amount of time within which to consider and review this Agreement; that Employee has carefully read and fully understands all of the provisions of this Agreement; and that Employee has entered into this Agreement knowingly and voluntarily.

43.

Entire Agreement . This Agreement constitutes the entire employment agreement between the Parties hereto concerning the subject matter hereof and shall supersede all prior and contemporaneous agreements between the Parties in connection with the subject matter of this Agreement. Any pre-existing Employment Agreements shall be deemed null and void. Nothing in this Agreement, however, shall affect any separately-executed written agreement addressing any other issues (e. g., the Inventions, Improvements, Copyrights and Trade Secrets Agreement, etc.).

IN WITNESS WHEREOF, the Parties have signed this Agreement effective as of the day and year first above written.

"EMPLOYEE"		Hill-Rom Holdings, Inc.
Signed:	/s/ Andreas Frank	By:	/s/ Michael Oliver

Printed :	Andreas Frank	Title:	SVP, Chief Human Resource Officer

Dated:		Dated:

CAUTION: READ BEFORE SIGNING

Exhibit A

SAMPLE SEPARATION AND RELEASE AGREEMENT

THIS SEPARATION and RELEASE AGREEMENT ("Agreement") is entered into by and between [Employee's Full Name] ("Employee") and [Insert Company Name] (together with its subsidiaries and affiliates, the "Company"). To wit, the Parties agree as follows:

Employee's active employment by the Company shall terminate effective [date of termination] (Employee's "Effective Termination Date"). Except as specifically provided by this Agreement, Employee's Employment Agreement, any Change in Control Agreement and any Indemnity Agreement that may exist between the Company and Employee, Employee agrees that the Company shall have no other obligations or liabilities to [him/her] following [his/her] Effective Termination Date and that [his/her] receipt of the Severance Benefits provided herein shall constitute a complete settlement, satisfaction and waiver of any and all claims [he/she] may have against the Company.

Employee further submits, and the Company hereby accepts, his resignation as an employee, officer and director, as of his Effective Termination Date for any position he may hold. The Parties agree that this resignation shall apply to all such positions Employee may hold with the Company or any parent, subsidiary or affiliated entity thereof. Employee agrees to execute any documents needed to effectuate such resignation. Employee further agrees to take whatever steps are necessary to facilitate and ensure the smooth transition of his duties and responsibilities to others.

Employee acknowledges that he/she has been advised of the American Jobs Creation Act of 2004, which added Section 409A ("Section 409A") to the Internal Revenue Code, and significantly changed the taxation of nonqualified deferred compensation plans and arrangements. Under proposed and final regulations as of the date of this Agreement, Employee has been advised that his/her severance pay may be treated by the Internal Revenue Service as providing "nonqualified deferred compensation," and therefore subject to Section 409A. In that event, several provisions in Section 409A may affect Employee's receipt of severance compensation. These include, but are not limited to, a provision which requires that distributions to "specified employees" of public companies on account of separation from service may not be made earlier than six (6) months after the effective date of such separation. If applicable, failure to comply with Section 409A can lead to immediate taxation of deferrals, with interest calculated at a penalty rate and a 20% penalty. As a result of the requirements imposed by the American Jobs Creation Act of 2004, Employee agrees if he/she is a "specified employee" at the time of his/her termination of employment and if severance payments are covered as "non-qualified deferred compensation" or otherwise not exempt, the severance pay benefits shall not be paid until a date at least six (6) months after Employee's Effective Termination Date from Company, as more fully explained by Paragraph 4, below. Each amount to be paid or benefit to be provided to Employee pursuant to this Agreement, which constitutes deferred compensation subject to Section 409A, shall be construed as a separate identified payment for purposes of Section 409A. To the extent required to avoid an accelerated or additional tax under Section 409A, amounts reimbursed to Employee under this Agreement shall be paid to Employee on or before the last day of the year following the year in which the expense was incurred, the amount of expenses eligible for reimbursement (and in-kind benefits provided to Employee) during any one year may not affect amounts reimbursed or provided in any subsequent tax year, and the right to reimbursement (and in-kind benefits provided to Employee) under this Agreement shall not be subject to liquidation or exchange for another benefit.

4.	In consideration of the promises contained in this Agreement and contingent upon Employee's compliance with such promises, the Company agrees to provide Employee the following:

(a)

Severance pay, in lieu of, and not in addition to any other contractual, notice or statutory pay obligations (other than accrued wages and deferred compensation) in the maximum total amount of [Insert Amount] Dollars and [ ] Cents ($ __________ ), less applicable deductions or other set offs, payable as follows:

[For 409A Severance Pay for Specified Employees Only]

(i)

A lump payment in the gross amount of [insert amount equal to 6 months' pay] Dollars and ___ Cents ($ _______ ) payable the day following the sixth (6 tth ) month anniversary of Employee's Effective Termination Date, with any remaining amount to be paid in bi-weekly installments equivalent to Employee's base salary (i.e. ____________ Dollars and ____________ Cents ($_________), less applicable deductions or other setoffs, commencing upon the next regularly scheduled payroll date after the payment of the lump sum for a period of up to _______ weeks or until the Employee becomes reemployed, whichever comes first.

[For Non-409A Severance Pay or 409A Severance Pay for Non-Specified Employees Only]

(i)

Commencing on the next regularly scheduled payroll immediately following the earlier to occur of fifteen (15) days from the Company's receipt of an executed Separation and Release Agreement or the expiration of sixty (60) days after Employee's Effective Termination Date, Employee shall be paid severance equivalent to [his/her] bi-weekly base salary (i.e. ___________ Dollars and __________ Cents ($ __________ ), less applicable deductions or other set-offs), for a period up to [insert weeks] ( __ ) weeks following Employee's Effective Termination Date or until Employee becomes reemployed, whichever occurs first; provided, however, that if the before-stated sixty (60) day period ends in a calendar year following the calendar year in which the sixty (60) day period commenced, then this severance pay shall only begin on the next regularly scheduled payroll following the expiration of sixty (60) days after the Employee's Effective Termination Date.

(b)

Group Life Insurance coverage until the above-referenced Severance Pay terminates.

Except as may be required by Section 409A, the above Severance Pay shall be paid in accordance with the Company's standard payroll practices (e.g. bi-weekly). The Parties agree that the initial two (2) weeks of the foregoing Severance Pay shall be allocated as consideration provided to Employee in exchange for his/her execution of a release in compliance with the Older Workers Benefit Protection Act. The balance of the severance benefits and other obligations undertaken by the Company pursuant to this Agreement shall be allocated as consideration for all other promises and obligations undertaken by Employee, including execution of a general release of claims.

The Company further agrees to provide Employee with limited out-placement counseling with a company of its choice provided that Employee participates in such counseling immediately following termination of employment. Notwithstanding anything in this Section 6 to the contrary, the out-placement counseling shall not be provided after the last day of the second calendar year following the calendar year in which termination of employment occurs.

As of [his/her] Effective Termination Date, Employee will become ineligible to participate in the Company's health insurance program and continuation of coverage requirements under COBRA (if any) will be triggered at that time. However, as additional consideration for the promises and obligations contained herein (and except as may be prohibited by law), the Company agrees to continue to pay the employer's share of such coverage as provided under the health care program selected by Employee as of [his/her] Effective Termination Date, subject to any approved changes in coverage based on a qualified election, until the above-referenced Severance Pay terminates, Employee accepts other employment or Employee becomes eligible for alternative healthcare coverage, which ever comes first, provided Employee (i) timely completes the applicable election of coverage forms and (ii) continues to pay the employee portion of the applicable premium(s). Thereafter, if applicable, coverage will be made available to Employee at [his/her] sole expense ( i.e. , Employee will be responsible for the full COBRA premium) for the remaining months of the COBRA coverage period made available pursuant to applicable law. In the event Employee is deemed to be a highly compensated employee under applicable law, Employee acknowledges that the value of the benefits provided hereunder may be subject to taxation. The medical insurance provided herein does not include any disability coverage.

Should Employee become employed before the above-referenced Severance Benefits are exhausted or terminated, Employee agrees to so notify the Company in writing within five (5) business days of Employee's acceptance of such employment, providing the name of such employer (or entity to whom Employee may be providing consulting services), [his/her] intended duties as well as the anticipated start date. Such information is required to ensure Employee's compliance with [his/her] non-compete obligations as well as all other applicable restrictive covenants. This notice will also serve to trigger the Company's right to terminate the above-referenced severance pay benefits (specifically excluding any lump sum payment due as a result of the application of Section 409A) as well as all Company-paid or Company–provided benefits consistent with the above paragraphs. Failure to timely provide such notice shall be deemed a material breach of this Agreement entitling the Company to recover as damages the value of all benefits provided to Employee hereunder plus attorneys fees.

Employee agrees to fully indemnify and hold the Company harmless for any taxes, penalties, interest, cost or attorneys' fee assessed against or incurred by the Company on account of such benefits having been provided to [him/her] or based on any alleged failure to withhold taxes or satisfy any claimed obligation. Employee understands and acknowledges that neither the Company, nor any of its employees, attorneys, or other representatives has provided [him/her] with any legal or financial advice concerning taxes or any other matter, and that [he/she] has not relied on any such advice in deciding whether to enter into this Agreement. To the extent applicable, Employee understands and agrees that [he/she] shall have the responsibility for, and [he/she] agrees to pay, any and all appropriate income tax or other tax obligations for which [he/she] is individually responsible and/or related to receipt of any benefits provided in this Agreement not subject to federal withholding obligations

10.

In exchange for the foregoing Severance Benefits, [EMPLOYEE'S FULL NAME] on behalf of [himself/herself], [his/her] heirs, representatives, agents and assigns hereby RELEASES, INDEMNIFIES, HOLDS HARMLESS, and FOREVER DISCHARGES (i) [Company Legal Name], employees, shareholders, and agents, as well as, (iv) all predecessors, successors and assigns thereof from any and all actions, charges, claims, demands, damages or liabilities of any kind or character whatsoever, known or unknown, which Employee now has or may have had through the effective date of this Agreement.

11.

Without limiting the generality of the foregoing release, it shall include: (i) all claims or potential claims arising under any federal, state or local laws relating to the Parties' employment relationship, including any claims Employee may have under the Civil Rights Acts of 1866, 1964 and 1991, as amended, 42 U.S.C. §§ 1981 and 2000(e) et seq .; the Age Discrimination in Employment Act, as amended, 29 U.S.C. §§ 621 et seq .; the Americans with Disabilities Act of 1990, as amended, 42 U.S.C §§ 12,101 et seq .; the Fair Labor Standards Act 29 U.S.C. §§ 201 et seq .; the Worker Adjustment and Retraining Notification Act, 29 U.S.C. §§ 2101, et seq .; the Sarbanes-Oxley Act of 2002, specifically including the Corporate and Criminal Fraud Accountability Act, 18 USC §1514A et seq .; the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1101 et seq .; the Family and Medical Leave Act of 1993, as amended, 29 U.S.C. §§ 2601 et seq .; and any other federal, state or local law governing the Parties' employment relationship; (ii) any claims on account of, arising out of or in any way connected with Employee's employment with the Company or leaving of that employment; (iii) any claims alleged or which could have been alleged in any charge or complaint against the Company; (iv) any claims relating to the conduct of any employee, officer, director, agent or other representative of the Company; (v) any claims of discrimination, harassment or retaliation on any basis; (vi) any claims arising from any legal restrictions on an employer's right to separate its employees; (vii) any claims for personal injury, compensatory or punitive damages or other forms of relief; and (viii) all other causes of action sounding in contract, tort or other common law basis, including (a) the breach of any alleged oral or written contract, (b) negligent or intentional misrepresentations, (c) wrongful discharge, (d) just cause dismissal, (e) defamation, (f) interference with contract or business relationship or (g) negligent or intentional infliction of emotional distress.

12.	Employee further agrees and covenants not to sue the Company or any entity or individual subject to the foregoing General Release with respect to any claims, demands, liabilities or obligations release by this Agreement provided, however, that nothing contained in this Agreement shall:

(a)

prevent Employee from filing an administrative charge with the Equal Employment Opportunity Commission or any other federal, state or local agency; or

(b)

prevent employee from challenging, under the Older Worker's Benefit Protection Act (29 U.S.C. § 626), the knowing and voluntary nature of his/her release of any age claims in this Agreement in court or before the Equal Employment Opportunity Commission. [INCLUDE THIS SUBPARAGRAPH (b) IF EMPLOYEE IS AGE 40 OR OLDER]

13.

Notwithstanding his right to file an administrative charge with the EEOC or any other federal, state, or local agency, Employee agrees that with his release of claims in this Agreement, he has waived any right he may have to recover monetary or other personal relief in any proceeding based in whole or in part on claims released by him in this Agreement. For example, Employee waives any right to monetary damages or reinstatement if an administrative charge is brought against the Company whether by Employee, the EEOC, or any other person or entity, including but not limited to any federal, state, or local agency. Further, with his release of claims in this Agreement, Employee specifically assigns to the Company his right to any recovery arising from any such proceeding.

14.

[INCLUDE THIS LANGUAGE IF THE EMPLOYEE IS AGE 40 OR OLDER] The Parties acknowledge that it is their mutual and specific intent that the above waiver fully complies with the requirements of the Older Workers Benefit Protection Act (29 U.S.C. § 626) and any similar law governing release of claims. Accordingly, Employee hereby acknowledges that:

(a)

[He/She] has carefully read and fully understands all of the provisions of this Agreement and that [he/she] has entered into this Agreement knowingly and voluntarily;

(b)

The Severance Benefits offered in exchange for Employee's release of claims exceed in kind and scope that to which [he/she] would have otherwise been legally entitled absent the execution of this Agreement;

(c)

Prior to signing this Agreement, Employee had been advised, and is being advised by this Agreement, to consult with an attorney of [his/her] choice concerning its terms and conditions; and

(d)

[He/She] has been offered at least [twenty-one (21)/forty-five (45)] days within which to review and consider this Agreement.

15.

[ADD THIS LANGUAGE IF THE EMPLOYEE IS AGE 40 OR OLDER] The Parties agree that this Agreement shall not become effective and enforceable until the date this Agreement is signed by both Parties or seven (7) calendar days after its execution by Employee, whichever is later. Employee may revoke this Agreement for any reason by providing written notice of such intent to the Company within seven (7) days after [he/she] has signed this Agreement, thereby forfeiting Employee's right to receive any Severance Benefits provided hereunder and rendering this Agreement null and void in its entirety. This revocation must be sent to the Employee's HR representative with a copy sent to the Company Office of General Counsel and must be received by the end of the seventh day after the Employee signs this Agreement to be effective.

16.

[ADD THIS LANGUAGE IF THE EMPLOYEE IS IN MINNESOTA – DO NOT USE THE PRECEDING PARAGRAPH IF THIS PARAGRAPH IS USED] The Parties agree that this Agreement shall not become effective and enforceable until the date this Agreement is signed by both parties or fifteen (15) calendar days after its execution by Employee, whichever is later. Employee may revoke this Agreement for any reason by providing written notice of such intent to the Company within fifteen (15) days after Employee has signed this Agreement, thereby forfeiting Employee’s right to receive any Severance Benefits provided hereunder not otherwise required by law and rendering this Agreement null and void in its entirety. If the notice of revocation is mailed it must be postmarked within the fifteen (15) day period and sent certified mail, return receipt requested. This revocation must be sent to the Employee’s HR Representative and to the Company Office of General Counsel.

17.

[ADD THIS LANGUAGE IF THE EMPLOYEE IS IN CALIFORNIA] Employee specifically acknowledges that, as a condition of this Agreement, he/she expressly releases all rights and claims that he/she knows about as well as those he/she may not know about. Employee expressly waives all rights under Section 1542 of the Civil Code of the State of California, which reads as follows:

"A general release does not extend to claims which the creditor does not know or suspect to exist in his/her favor at the time of executing the release which if known, must have materially affected his/her settlement with the debtor."

Notwithstanding the provision by Section 1542, and for the purpose of implementing a full and complete release and discharge of the Company as set forth above, Employee expressly acknowledges that this Agreement is intended to include and does in its effect, without limitation, include all claims which Employee does not know or suspect to exist in his/her favor at the time of signing this Agreement and that this Agreement expressly contemplates the extinguishment of all such claims.

18.

The Parties agree that nothing contained herein shall purport to waive or otherwise affect any of Employee's rights or claims that may arise after [he/she] signs this Agreement. It is further understood by the Parties that nothing in this Agreement shall affect any rights Employee may have under any Company sponsored Deferred Compensation Program, Executive Life Insurance Bonus Plan, Stock Grant Award, Stock Option Grant, Restricted Stock Unit Award, Pension Plan and/or Savings Plan ( i.e ., 401(k) plan) provided by the Company as of the date of [his/her] termination, such items to be governed exclusively by the terms of the applicable agreements or plan documents.

19.

Similarly, notwithstanding any provision contained herein to the contrary, this Agreement shall not constitute a waiver or release or otherwise affect Employee's rights with respect to any vested benefits, any rights [he/she] has to benefits which can not be waived by law, any coverage provided under any Directors and Officers ("D&O") policy, any rights Employee may have under any indemnification agreement [he/she] has with the Company prior to the date hereof, any rights he/she has as a shareholder, or any claim for breach of this Agreement, including, but not limited to the benefits promised by the terms of this Agreement.

20.

[ Optional Provision for Equity Eligible Employees: Except as provided herein, Employee acknowledges that [he/she] will not be eligible to receive or vest in any additional stock options, stock awards or restricted stock units ("RSUs") as of [his/her] Effective Termination Date. Failure to exercise any vested options within the applicable period as set for in the plan and/or grant will result in their forfeiture. Employee acknowledges that any stock options, stock awards or RSUs held for less than the required period shall be deemed forfeited as of the effective date of this Agreement. All terms and conditions of such stock options, stock awards or RSUs shall not be affected by this Agreement, shall remain in full force and effect, and shall govern the Parties' rights with respect to such equity based awards.]

21.	[Option A] Employee acknowledges that [his/her] termination and the Severance Benefits offered hereunder were based on an individual determination and were not offered in conjunction with any group termination or group severance program and waives any claim to the contrary.

[Option B] Employee represents and agrees that [he/she] has been provided relevant cohort information based on the information available to the Company as of the date this Agreement was tendered to Employee. This information is attached hereto as Exhibit A. The Parties acknowledge that simply providing such information does not mean and should not be interpreted to mean that the Company was obligated to comply with 29 C.F.R. § 1625.22(f).

22.

Employee hereby affirms and acknowledges [his/her] continued obligations to comply with the post-termination covenants contained in [his/her] Employment Agreement, including but not limited to, the non-compete, trade secret and confidentiality provisions. Employee acknowledges that a copy of the Employment Agreement has been attached to this Agreement as Exhibit [A/B] or has otherwise been provided to [him/her] and, to the extent not inconsistent with the terms of this Agreement or applicable law, the terms thereof shall be incorporated herein by reference. Employee acknowledges that the restrictions contained therein are valid and reasonable in every respect and are necessary to protect the Company's legitimate business interests. Employee hereby affirmatively waives any claim or defense to the contrary. Employee hereby acknowledges that the definition of Competitor, as provided in [his/her] Employment Agreement shall include but not be limited to those entities specifically identified in the updated Competitor List, attached hereto as Exhibit [B/C] .

23.

Employee acknowledges that the Company as well as its parent, subsidiary and affiliated companies ("Companies" herein) possess, and [he/she] has been granted access to, certain trade secrets as well as other confidential and proprietary information that they have acquired at great effort and expense. Such information includes, without limitation, confidential information regarding products and services, marketing strategies, business plans, operations, costs, current or, prospective customer information (including customer contacts, requirements, creditworthiness and like matters), product concepts, designs, prototypes or specifications, regulatory compliance issues, research and development efforts, technical data and know-how, sales information, including pricing and other terms and conditions of sale, financial information, internal procedures, techniques, forecasts, methods, trade information, trade secrets, software programs, project requirements, inventions, trademarks, trade names, and similar information regarding the Companies' business (collectively referred to herein as "Confidential Information").

24.

Employee agrees that all such Confidential Information is and shall remain the sole and exclusive property of the Company. Except as may be expressly authorized by the Company in writing, or as may be required by law after providing due notice thereof to the Company, Employee agrees not to disclose, or cause any other person or entity to disclose, any Confidential Information to any third party for as long thereafter as such information remains confidential (or as limited by applicable law) and agrees not to make use of any such Confidential Information for Employee's own purposes or for the benefit of any other entity or person. The Parties acknowledge that Confidential Information shall not include any information that is otherwise made public through no fault of Employee or other wrong doing.

25.

On or before Employee's Effective Termination Date or per the Company's request, Employee agrees to return the original and all copies of all things in [his/her] possession or control relating to the Company or its business, including but not limited to any and all contracts, reports, memoranda, correspondence, manuals, forms, records, designs, budgets, contact information or lists (including customer, vendor or supplier lists), ledger sheets or other financial information, drawings, plans (including, but not limited to, business, marketing and strategic plans), personnel or other business files, computer hardware, software, or access codes, door and file keys, identification, credit cards, pager, phone, and any and all other physical, intellectual, or personal property of any nature that [he/she] received, prepared, helped prepare, or directed preparation of in connection with [his/her] employment with the Company. Nothing contained herein shall be construed to require the return of any non-confidential and de minimis items regarding Employee's pay, benefits or other rights of employment such as pay stubs, W-2 forms, 401(k) plan summaries, benefit statements, etc.

26.

Employee hereby consents and authorizes the Company to deduct as an offset from the above-referenced severance payments the value of any Company property not returned or returned in a damaged condition as well as any monies paid by the Company on Employee's behalf (e.g., payment of any outstanding American Express bill).

27.

Employee agrees to cooperate with the Company in connection with any pending or future litigation, proceeding or other matter which has been or may be brought against or by the Company before any agency, court, or other tribunal and concerning or relating in any way to any matter falling within Employee's knowledge or former area of responsibility. Employee agrees to immediately notify the Company, through the Office of the General Counsel, in the event [he/she] is contacted by any outside attorney (including paralegals or other affiliated parties) unless (i) the Company is represented by the attorney, (ii) Employee is represented by the attorney for the purpose of protecting [his/her] personal interests or (iii) the Company has been advised of and has approved such contact. Employee agrees to provide reasonable assistance and completely truthful testimony in such matters including, without limitation, facilitating and assisting in the preparation of any underlying defense, responding to discovery requests, preparing for and attending deposition(s) as well as appearing in court to provide truthful testimony. The Company agrees to reimburse Employee for all reasonable out of pocket expenses incurred at the request of the Company associated with such assistance and testimony.

28.

Employee agrees not to make any written or oral statement that may defame, disparage or cast in a negative light so as to do harm to the personal or professional reputation of (a) the Company, (b) its employees, officers, directors or trustees or (c) the services and/or products provided by the Company and its subsidiaries or affiliate entities. The Parties acknowledge that nothing contained herein shall be construed to prevent or prohibit the Company or the Employee from providing truthful information in response to any court order, discovery request, subpoena or other lawful request.

29.

EMPLOYEE SPECIFICALLY AGREES AND UNDERSTANDS THAT THE EXISTENCE AND TERMS OF THIS AGREEMENT ARE STRICTLY CONFIDENTIAL AND THAT SUCH CONFIDENTIALITY IS A MATERIAL TERM OF THIS AGREEMENT. Accordingly, except as required by law or unless authorized to do so by the Company in writing, Employee agrees that [he/she] shall not communicate, display or otherwise reveal any of the contents of this Agreement to anyone other than [his/her] spouse, legal counsel or financial advisor provided, however, that they are first advised of the confidential nature of this Agreement and Employee obtains their agreement to be bound by the same. The Company agrees that Employee may respond to legitimate inquiries regarding the termination of [his/her] employment by stating that the Parties have terminated their relationship on an amicable basis and that the Parties have entered into a Confidential Separation and Release Agreement that prohibits [him/her] from further discussing the specifics of [his/her] separation. Nothing contained herein shall be construed to prevent Employee from discussing or otherwise advising subsequent employers of the existence of any obligations as set forth in [his/her] Employment Agreement. Further, nothing contained herein shall be construed to limit or otherwise restrict the Company's ability to disclose the terms and conditions of this Agreement as may be required by business necessity.

30.

In the event that Employee breaches or threatens to breach any provision of this Agreement, [he/she] agrees that the Company shall be entitled to seek any and all equitable and legal relief provided by law, specifically including immediate and permanent injunctive relief. Employee hereby waives any claim that the Company has an adequate remedy at law. In addition, and to the extent not prohibited by law, Employee agrees that the Company shall be entitled to discontinue providing any additional Severance Benefits upon such breach or threatened breach as well as an award of all costs and attorneys' fees incurred by the Company in any successful effort to enforce the terms of this Agreement. Employee agrees that the foregoing relief shall not be construed to limit or otherwise restrict the Company's ability to pursue any other remedy provided by law, including the recovery of any actual, compensatory or punitive damages. Moreover, if Employee pursues any claims against the Company subject to the foregoing General Release, or breaches the above confidentiality provision, Employee agrees to immediately reimburse the Company for the value of all benefits received under this Agreement to the fullest extent permitted by law.

31.

Similarly, in the event that the Company breaches or threatens to breach any provision of this Agreement, Employee shall be entitled to seek any and all equitable or other available relief provided by law, specifically including immediate and permanent injunctive relief. In the event Employee is required to file suit to enforce the terms of this Agreement, the Company agrees that Employee shall be entitled to an award of all costs and attorneys' fees incurred by [him/her] in any wholly successful effort (i.e. entry of a judgment in [his/her] favor) to enforce the terms of this Agreement. In the event Employee is wholly unsuccessful, the Company shall be entitled to an award of its costs and attorneys' fees.

32.

Both Parties acknowledge that this Agreement is entered into solely for the purpose of terminating Employee's employment relationship with the Company on an amicable basis and shall not be construed as an admission of liability or wrongdoing by the Company or Employee, both Parties having expressly denied any such liability or wrongdoing.

33.	Each of the promises and obligations shall be binding upon and shall inure to the benefit of the heirs, executors, administrators, assigns and successors in interest of each of the Parties.

34.

The Parties agree that each and every paragraph, sentence, clause, term and provision of this Agreement is severable and that, if any portion of this Agreement should be deemed not enforceable for any reason, such portion shall be stricken and the remaining portion or portions thereof should continue to be enforced to the fullest extent permitted by applicable law.

35.	This Agreement shall be governed by and interpreted in accordance with the laws of the State of Indiana without regard to any applicable state's choice of law provisions.

36.

[USE THIS LANGUAGE IF OWBPA LANGUAGE (FOR EMPLOYEES AGE 40 OR OVER) IS NOT INCLUDED) Employee acknowledges that he/she has been offered a period of twenty-one (21) days within which to consider and review this Agreement; that he/she has carefully read and fully understands all of the provisions of this Agreement; and that he/she has entered into this Agreement knowingly and voluntarily.

37.

Employee represents and acknowledges that in signing this Agreement [he/she] does not rely, and has 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.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

38.

This Agreement represents the entire agreement between the Parties concerning the subject matter hereof, shall supersede any and all prior agreements which may otherwise exist between them concerning the subject matter hereof (specifically excluding, however, the post-termination obligations contained in an Employee's Employment Agreement, or any obligation contained in any other legally-binding document), and shall not be altered, amended, modified or otherwise changed except by a writing executed by both Parties.

PLEASE READ CAREFULLY. THIS SEPARATION AND RELEASE

AGREEMENT INCLUDES A COMPLETE RELEASE OF ALL

KNOWN AND UNKNOWN CLAIMS.

IN WITNESS WHEREOF, the Parties have themselves signed, or caused a duly authorized agent thereof to sign, this Agreement on their behalf and thereby acknowledge their intent to be bound by its terms and conditions.

EMPLOYEE		[Company Legal Name]
	FOR ILLUSTRATION ONLY
Signed:	DO NOT SIGN	By:

Printed:		Title:

Dated:		Dated:

Exhibit B

ILLUSTRATIVE COMPETITOR LIST

The following is an illustrative, non-exhaustive list of Competitors with whom Employee may not, during Employee's relevant non-compete period, directly or indirectly engage in any of the competitive activities proscribed by the terms of Employee's Employment Agreement.

· Amico Corporation

· APEX Medical Corp.

· Aramark Corporation

· Barton Medical Corporation

· CareMed Supply, Inc.

· Corona Medical SAS

· Dukane Communication Systems, a division of Edwards Systems Technology, Inc.

· Fitzsimmons Home Medical Equipment, Inc.

· Gaymar Holding Company, LLC (Gaymar Industries, Inc.)

· Handicare AS (Romedic, Inc.)

· Human Care HC AB

· Intego Systems, Inc. (formerly known as Wescom Products, Inc.)

· Joerns Healthcare, Inc.

· Kinetic Concepts, Inc. (KCI)

· Linet (Linet France, Linet Far East)

· Medical Specialties Distributors, LLC

· Merivaara Corporation

· Modular Service Company

· Nemschoff Chairs, Inc.

· Paramount Bed Company, Ltd.

· Anodyne Medical Device, Inc.

· Apria Healthcare Inc.

· Ascom (Ascom US, Inc.)

· B.G. Industries, Inc.

· Comfortex, Inc.

· Custom Medical Solutions

· Encompass Group, LLC

· Freedom Medical, Inc.

· GF Health Products, Inc. (Graham Field)

· Getinge Group (Arjo; Getinge; Maquet; Pegasus; Huntleigh Technology Plc (Huntleigh Healthcare, LLC))

· Horcher GmbH

· Industrie Guido Malvestio S.P.A.

· Invacare Corporation

· Joh. Stiegelmeyer & Co., GmbH (Stiegelmeyer)

· Linak Group

· MedaSTAT, LLC

· Medline Industries, Inc.

· MIZUOSI

· Molift

· Nurture by Steelcase, Inc.

· Pardo

· Pegasus Airwave, Inc.

· Prism Medical Ltd (Waverly Glen)

· Rauland-Borg Corporation

· Sentech Medical Systems, Inc.

· SIZEwise Rentals, LLC

· Statcom (Jackson Healthcare Solutions)

· Sunrise Medical (Ted Hoyer and Company)

· Tempur-Pedic Medical, Inc.

· V. Guldmann A/S

· West-Com Nurse Call Systems, Inc.

· Premise Corporation

· Radianse, Inc.

· Recovercare, LLC (Stenbar, T.H.E. Medical)

· SimplexGrinnell, LP

· Span America Medical Systems, Inc.

· Stryker Corporation

· Tele-Tracking Technologies, Inc.

· Universal Hospital Services, Inc.

· Voelker AG

While the above list is intended to identify the Company's primary competitors, it should not be construed as all encompassing so as to exclude other potential competitors falling within the Non-Compete definitions of "Competitor." The Company reserves the right to amend this list at any time in its sole discretion to identify other or additional Competitors based on changes in the products and services offered, changes in its business or industry as well as changes in the duties and responsibilities of the individual employee. An updated list will be provided to Employee upon reasonable request. Employees are encouraged to consult with the Company prior to accepting any position with any potential competitor.

(Revised list April 2010)

Indiana	35-1160484
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1069 State Route 46 East Batesville, Indiana	47006-8835
(Address of principal executive offices)	(Zip Code)

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, without par value	New York Stock Exchange

Product Categories		Competitors
Patient Support Systems		Stryker Corporation ArjoHuntleigh (Division of Getinge AB) Linet Invacare Joerns Healthcare

Non-Invasive Therapeutic Products		Kinetic Concepts, Inc. SIZEWise Rentals, LLC RecoverCare, LLC ArjoHuntleigh (Division of Getinge AB)

Medical Equipment Management and Contract Services		Universal Hospital Services, Inc. Freedom Medical, Inc.

Patient Environment and Mobility Solutions		ArjoHuntleigh (Division of Getinge AB) Guldmann Waverly Glen Modular Services Herman Miller Healthcare

Health Information Technology Solutions		Rauland-Borg Corporation GE Medical (owns Dukane) West-Com Nurse Call Systems, Inc.

Surgical Products		MizuhoOSI Tenet Medical (part of Smith & Nephew) Schuerch Medical Action Medical

Location	Description	Primary Use

Acton, MA	Light manufacturing and development facilities Office facilities	Manufacture and development of health care equipment Administration

Batesville, IN	Manufacturing, development and distribution facilities Office facilities	Manufacture and development of health care equipment Administration

Cary, NC	Development facilities Office facilities	Development of health care equipment Administration

Charleston, SC	Development and distribution facilities Office facilities	Development and distribution of medical devices Administration

Chicago, IL	Office facilities	Administration

St. Paul, MN	Office facilities	Administration

Pluvigner, France	Manufacturing, development and distribution facilities Office facilities	Manufacture and development of health care equipment Administration

Montpellier, France	Manufacturing and development facilities	Manufacture and development of medical devices

Sydney, Australia	Manufacturing and development facilities Office facilities	Manufacture and development of health care equipment Administration

Monterrey, Mexico	Manufacturing facilities	Manufacture of health care equipment

Lulea, Sweden	Manufacturing, development and distribution facilities Office facilities	Manufacture and development of safe mobility and handling solutions Administration

Singapore	Manufacturing and development facilities Office facilities	Manufacture and development of health care equipment Administration

	Years Ended September 30
	2011						2010
Quarter Ended:	High		Low		Cash Dividends Declared		High		Low		Cash Dividends Declared
December 31	$	43.80	$	35.49	$	0.1025	$	24.18	$	19.59	$	0.1025
March 31	$	44.00	$	34.89	$	0.1025	$	27.67	$	23.37	$	0.1025
June 30	$	47.19	$	37.92	$	0.1125	$	32.76	$	27.43	$	0.1025
September 30	$	48.80	$	26.90	$	0.1125	$	35.89	$	28.65	$	0.1025

	£ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ____ to ____

		Page
PART I
	Disclosure Regarding Forward Looking Statements
Item 1.	Business	3
Item 1A.	Risk Factors	8
Item 1B.	Unresolved Staff Comments	12
Item 2.	Properties	13
Item 3.	Legal Proceedings	13
Item 4.	Reserved	13
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	14
Item 6.	Selected Financial Data	16
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 8.	Financial Statements and Supplementary Data	36
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	75
Item 9A.	Controls and Procedures	75
Item 9B.	Other Information	75
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	76
Item 11.	Executive Compensation	76
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	76
Item 13.	Certain Relationships and Related Transactions and Director Independence	76
Item 14.	Principal Accounting Fees and Services	76
PART IV
Item 15.	Exhibits and Financial Statement Schedules	77
	SIGNATURES	79

							Maximum
					Total Number		Number of
					of Shares		Shares That
	Total				Purchased as		May Yet Be
	Number		Average		Part of Publicly		Purchased
	of Shares		Price Paid		Announced Plans or		Under the Plans
Period	Purchased (1)		per Share		Programs (2)		or Programs (2)

July 1, 2011 - July 31, 2011		-	$	-		-		3,480,000
August 1, 2011 - August 31, 2011		1,500,000		30.21		1,500,000		1,980,000
September 1, 2011 - September 30, 2011		-		-		-		-
Total		1,500,000	$	30.21		1,500,000		1,980,000

	2006		2007		2008		2009		2010		2011
HRC (HB through March 31, 2008)	$	100	$	98	$	103	$	76	$	127	$	107
S & P 500		100		114		87		79		85		85
Peer Group		100		120		113		106		132		128

	April 1, 2008		September 30, 2008		March 31, 2009		September 30, 2009		March 31, 2010		September 30, 2010		March 31, 2011		September 30, 2011
HRC	$	100	$	115	$	38	$	85	$	107	$	142	$	145	$	120
S & P 500		100		85		58		77		85		83		95		83
Peer Group		100		97		69		91		112		114		129		110

	Years Ended September 30
				% of Related						% of Related						% of Related
	2011			Revenues			2010			Revenues			2009			Revenues
Net Revenues
Capital sales	$	1,119.0			70.3	%	$	996.6			67.8	%	$	921.5			66.4	%
Rental revenues		472.7			29.7	%		473.0			32.2	%		465.4			33.6	%
Total Revenues		1,591.7			100.0	%		1,469.6			100.0	%		1,386.9			100.0	%
Gross Profit
Capital sales		512.2			45.8	%		448.0			45.0	%		365.8			39.7	%
Rental revenues		269.1			56.9	%		268.6			56.8	%		262.1			56.3	%
Total Gross Profit		781.3			49.1	%		716.6			48.8	%		627.9			45.3	%
Research and development expenses		63.8			4.0	%		58.3			4.0	%		55.7			4.0	%
Selling and administrative expenses		502.0			31.5	%		474.6			32.3	%		461.6			33.3	%
Litigation charge (credit)		47.3			3.0	%		(21.2	)		-1.4	%		-			-
Impairment of goodwill and other intangibles		-			-			-			-			472.8			34.1	%
Special charges		1.4			0.1	%		13.2			0.9	%		20.5			1.5	%
Operating Profit (Loss)		166.8			10.5	%		191.7			13.0	%		(382.7	)		-27.6	%
Other income (expense), net		(7.1	)		-0.4	%		(8.8	)		-0.6	%		3.9			0.3	%
Income (Loss) Before Income Taxes		159.7			10.0	%		182.9			12.4	%		(378.8	)		-27.3	%
Income tax expense		26.2			1.6	%		56.9			3.9	%		26.2			1.9	%
Net Income (Loss)		133.5			8.4	%		126.0			8.6	%		(405.0	)		-29.2	%
Less: Net income attributable to noncontrolling interest		0.2			-			0.7			-			-			-
Net Income (Loss) Attributable to Common Shareholders	$	133.3			8.4	%	$	125.3			8.5	%	$	(405.0	)		-29.2	%

Net Income (Loss) Attributable to Common Shareholders
per Common Share - Diluted	$	2.09					$	1.97					$	(6.47	)


Note: Certain percentage amounts may not add due to rounding.

	Years Ended September 30				Percentage Change
								Constant
(Dollars in millions)	2011		2010		As Reported			Currency
Revenues:
Capital sales	$	1,119.0	$	996.6		12.3			10.8
Rental revenues		472.7		473.0		(0.1	)		(0.6	)
Total Revenues	$	1,591.7	$	1,469.6		8.3			7.2

	Years Ended September 30
							Percentage
(Dollars in millions)	2011			2010			Change
Gross Profit
Capital sales	$	512.2		$	448.0			14.3
Percent of Related Revenues		45.8	%		45.0	%

Rental revenues	$	269.1		$	268.6			0.2
Percent of Related Revenues		56.9	%		56.8	%

Total Gross Profit	$	781.3		$	716.6			9.0
Percent of Related Revenues		49.1	%		48.8	%

	Payments Due by Period
			Less Than			1 - 3		4 - 5	After 5
(Dollars in millions)	Total		1 Year		Years		Years		Years
Contractual Obligations
Long-term debt obligations	$	98.3	$	47.5	$	0.3	$	-	$	50.5
Interest payments relating to long-term debt (1)		52.9		5.3		6.7		6.7		34.2
Information technology infrastructure (2)		33.0		11.0		22.0		-		-
Operating lease obligations		59.3		20.9		22.7		9.3		6.4
Pension and postretirement
health care benefit funding (3)		16.4		1.5		2.9		3.3		8.7
Purchase obligations (4)		29.6		17.7		11.8		0.1		-
Other long-term liabilities (5)		31.5		-		16.6		13.0		1.9
Total contractual cash obligations	$	321.0	$	103.9	$	83.0	$	32.4	$	101.7

	Page
Financial Statements:
Management’s Report on Internal Control Over Financial Reporting	37
Report of Independent Registered Public Accounting Firm	38
Statements of Consolidated Income (Loss) for the fiscal years ended September 30, 2011, 2010 and 2009	39
Consolidated Balance Sheets at September 30, 2011 and 2010	40
Statements of Consolidated Cash Flows for the fiscal years ended September 30, 2011, 2010 and 2009	41
Statements of Consolidated Shareholders’ Equity and Comprehensive Income (Loss) for the fiscal years ended September 30, 2011, 2010 and 2009	42
Notes to Consolidated Financial Statements	43

Financial Statement Schedule for the fiscal years ended September 30, 2011, 2010 and 2009:
Schedule II — Valuation and Qualifying Accounts	78

All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or the notes thereto.

												Accumulated
	Common Stock											Other			Common Stock
	Shares					Additional			Retained			Comprehensive			in Treasury
	Outstanding			Amount		Paid-in-Capital			Earnings			Income (Loss)			Shares			Amount			Total


Balance at September 30, 2008		62,508,934		$	4.4	$	111.2		$	1,536.1		$	(4.2	)		17,814,978		$	(564.9	)	$	1,082.6

Comprehensive Income (Loss):
Net income (loss)		-			-		-			(405.0	)		-			-			-			(405.0	)
Foreign currency translation adjustment, net of tax
of $0.9 million		-			-		-			-			(15.0	)		-			-			(15.0	)
Net change in unrealized gain on available-for-sale
securities, net of tax of $0.1 million		-			-		-			-			(0.3	)		-			-			(0.3	)
Items not yet recognized as a component of net periodic
pension costs, net of tax of $25.0 million		-			-		-			-			(40.4	)		-			-			(40.4	)
Total comprehensive income (loss)		-			-		-			-			-			-			-			(460.7	)
Dividends		-			-		0.3			(25.9	)		-			-			-			(25.6	)
Treasury shares acquired		(32,481	)		-		-			-			-			32,481			(0.6	)		(0.6	)
Stock awards and option exercises		191,109			-		7.5			-			-			(191,109	)		6.1			13.6
Balance at September 30, 2009		62,667,562			4.4		119.0			1,105.2			(59.9	)		17,656,350			(559.4	)		609.3

Comprehensive Income:
Net income		-			-		-			126.0			-			-			-			126.0
Foreign currency translation adjustment, net of tax
of $1.3 million		-			-		-			-			0.7			-			-			0.7
Net change in unrealized gain on available-for-sale
securities, net of tax of $0.1 million		-			-		-			-			0.2			-			-			0.2
Items not yet recognized as a component of net periodic
pension costs, net of tax of $0.1 million		-			-		-			-			(2.8	)		-			-			(2.8	)
Total comprehensive income		-			-		-			-			-			-			-			124.1
Dividends		-			-		0.3			(26.1	)		-			-			-			(25.8	)
Treasury shares acquired		(1,092,469	)		-		-			-			-			1,092,469			(36.9	)		(36.9	)
Stock awards and option exercises		1,211,790			-		(2.4	)		-			-			(1,211,790	)		38.3			35.9
Impact of Joint Venture		-			-		2.4			(1.5	)		-			-			-			0.9
Balance at September 30, 2010		62,786,883			4.4		119.3			1,203.6			(61.8	)		17,537,029			(558.0	)		707.5

Comprehensive Income:
Net income		-			-		-			133.5			-			-			-			133.5
Foreign currency translation adjustment, net of tax
of $0.5 million		-			-		-			-			(3.8	)		-			-			(3.8	)
Net change in unrealized gain on available-for-sale
securities, net of tax of $0.0 million		-			-		-			-			(0.2	)		-			-			(0.2	)
Items not yet recognized as a component of net periodic
pension costs, net of tax of $8.9 million		-			-		-			-			(13.2	)		-			-			(13.2	)
Total comprehensive income		-			-		-			-			-			-			-			116.3
Dividends		-			-		0.1			(27.1	)		-			-			-			(27.0	)
Treasury shares acquired		(3,145,899	)		-		-			-			-			3,145,899			(115.3	)		(115.3	)
Stock awards and option exercises		2,045,388			-		(0.4	)		-			-			(2,045,388	)		65.7			65.3
Impact of Joint Venture		-			-		(4.9	)		(0.2	)		-			-			-			(5.1	)
Balance at September 30, 2011		61,686,372		$	4.4	$	114.1		$	1,309.8		$	(79.0	)		18,637,540		$	(607.6	)	$	741.7

	Hill-Rom Holdings, Inc.
	1069 State Route 46 East
	Batesville, Indiana 47006
	Attention: General Counsel

HILL-ROM HOLDINGS, INC.		OFFICER




By:
	Susan R. Lichtenstein
	Senior Vice President, Corporate Affairs,
	Chief Legal Officer and Secretary

Name of Grantee: <NAME>	No. of Shares: <UNITS>

Date of Grant: <GRANT DATE>	Price per Share: <GRANT PRICE>

	BY:	/s/ John Dickey


		John Dickey, Senior Vice President





ACCEPTED:

Company’s Relative TSR Percentile Ranking	Percentage of Deferred Stock Becoming Vested Deferred Stock	Performance Level


Less than 25 th percentile	0%

25 th percentile	25%	Threshold

60 th percentile	100%	Target

	Percentage of September 30, 2013
	Deferred Stock Account Balance
Company’s Relative TSR	That May Be Granted
Percentile Ranking	As Additional Deferred Stock

60 th percentile	0%

65 th percentile	33%

70 th percentile	67%

75 th percentile or above	100%

	HILL-ROM HOLDINGS, INC.


	By:	/s/ John Dickey


	John Dickey
	Senior Vice President


Accepted:
	<Name>

Affymetrix, Inc.	Thoratec Corp.
Alere, Inc.	United Therapeutics Corp.
Bard (C.R.)	Universal Health Services, Inc.
Beckman Coulter, Inc.	Valeant Pharmaceuticals International
Bio-Rad Laboratories, Inc.	Varian, Inc.
Cerner Corporation	VCA Antech, Inc.
Charles River Laboratories International	Vertex Pharmaceuticals, Inc.
Community Health Systems, Inc.	WellCare Health Plans, Inc.
Conmed
Cooper Industries
Covance, Inc.
Dentsply
Edwards Lifesciences Corp.
Endo Pharmaceuticals Holdings, Inc.
Gen-Probe, Inc.
Health Management Associates, Inc.
Health Net, Inc.
Henry Schein, Inc.
Hologic, Inc.
Hospira
IDEXX Laboratories, Inc.
Immucor, Inc.
Integra Lifesciences
Invacare
Kindred Healthcare, Inc.
Kinetic Concepts, Inc.
LifePoint Hospitals, Inc.
Lincare Holdings, Inc.
Masimo Corp.
Medicis Pharmaceutical Corp.
Mettler-Toledo International, Inc.
Omnicare, Inc.
OSI Pharmaceuticals, Inc.
Owens & Minor, Inc.
Perkinelmer
Perrigo Co.
Pharmaceutical Product Development, Inc.
Psychiatric Solutions, Inc.
ResMed, Inc.
STERIS Corp.
Techne Corp.
Teleflex, Inc.

ARTICLE I.	DEFINITIONS	1

ARTICLE II.	ADMINISTRATION OF THIS PLAN	4

2.1	Committee	4

2.2	Committee Duties	4

2.3	Agent	5

2.4	Binding Effect of Decisions	5

ARTICLE III.	PARTICIPATION	5

ARTICLE IV.	SUPPLEMENTAL RETIREMENT BENEFIT	5

4.1	Supplemental Retirement Benefit	5

4.2	Subject To Pension Plan	6

4.3	Payment of Supplemental Retirement Benefits	6

4.4	Change in Control	7

4.5	Forfeiture of Supplement Retirement Benefit	7

4.6	Frozen Supplemental Retirement Benefit	7

ARTICLE V.	EMPLOYER CONTRIBUTIONS	8

5.1	Defined Contributions	8

5.2	Matching Contributions	8

5.3	Supplemental Contributions	9

5.4	Defined Contribution Accounts, Matching Account and Supplemental Contribution Account	10

5.5	Earnings on Accounts	10

5.6	Vesting	10

5.7	Distribution of Aggregate Account	11

5.8	Forfeiture of Aggregate Account	11

ARTICLE VI.	OFFSET FOR OBLIGATIONS TO EMPLOYER	11

ARTICLE VII.	RIGHTS OF A PARTICIPANT	11

ARTICLE VIII.	AMENDMENT AND TERMINATION	11

8.1	Amendment	11

8.2	Termination	11

ARTICLE IX.	DETERMINATION OF BENEFITS	12

9.1	Claim	12

9.2	Claim Decision	12

9.3	Request for Review	12

9.4	Review of Decision	12

ARTICLE X.	NOTICES	13

ARTICLE XI.	GENERAL PROVISIONS	13

11.1	Controlling Law	13

11.2	Captions	13

11.3	Facility of Payment	13

11.4	Withholding of Payroll Taxes	13

11.5	Protective Provisions	13

11.6	Terms	13

11.7	Successor	14

ARTICLE XII.	UNFUNDED STATUS OF PLAN	14

ARTICLE XIII.	RIGHTS TO BENEFITS	14

ARTICLE XIV.	CODE SECTION 409A COMPLIANCE	14

ARTICLE XV.	BOARD APPROVAL	14

			Target		Target
	Base Salary		Bonus %		Bonus

Year 5	$	210,000		40%	$	84,000
Year 4		201,500		30%		60,450
Year 3		194,000		30%		58,200
Year 2		185,500		24%		44,520
Year 1		180,000		24%		43,200

					Supplemental
	Earnings (Pension Plan)				Retirement
	w/o § 401(a)17 limits		Target Bonus		Earnings

Year 5	$	210,000	$	84,000	$	294,000
Year 4		201,500		60,450		261,950
Year 3		194,000		58,200		252,200
Year 2		185,500		44,520		230,020
Year 1		180,000		43,200		223,200
					$	1,261,370

HILL-ROM HOLDINGS, INC.		EXECUTIVE



By:	/s/ Michael Oliver	By:	/s/ Andreas Frank

Name:	Michael Oliver	Name:	Andreas Frank
Title:	Sr. VP, Chief Human Resources Officer