UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

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Hill-Rom Holdings, Inc.

(Name of Registrant as Specified in Its Charter)

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HILL-ROM HOLDINGS, INC.

NOTICE OF ANNUAL MEETING

To Be Held February 13, 2009

     The annual meeting of shareholders of Hill-Rom Holdings, Inc., an Indiana corporation, will be held at the offices of Hill-Rom Holdings, Inc., 1069 State Route 46 East, Batesville, Indiana 47006, on Friday, February 13, 2009, at 10:00 a.m., Eastern Standard Time, for the following purposes:

	(1)		To elect three members to the Board of Directors;
	(2)		To approve the Hill-Rom Holdings, Inc. Employee Stock Purchase Plan;
	(3)		To approve the amendment of the Hill-Rom Holdings, Inc. Stock Incentive Plan to reserve an additional 5,500,000 shares of common stock for issuance thereunder;
	(4)		To ratify the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Hill-Rom Holdings, Inc.; and
	(5)		To transact such other business as may properly come before the meeting and any adjournment of the meeting.

     The Board of Directors has fixed the close of business on December 17, 2008, as the record date for determining which shareholders are entitled to notice of and to vote at the meeting.

By Order of the Board of Directors

Patrick D. de Maynadier
Secretary

January 7, 2009

TABLE OF CONTENTS

		Page
VOTING			1
ELECTION OF DIRECTORS			2
ABOUT THE BOARD OF DIRECTORS (INCLUDING DIRECTOR COMPENSATION)			11
EXECUTIVE COMPENSATION			29
EQUITY COMPENSATION PLAN INFORMATION			71
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION			71
APPROVAL OF HILL-ROM HOLDINGS, INC. EMPLOYEE STOCK PURCHASE PLAN			72
APPROVAL OF AMENDMENT OF HILL-ROM HOLDINGS, INC. STOCK INCENTIVE PLAN TO RESERVE ADDITIONAL SHARES			77
AUDIT COMMITTEE’S REPORT			83
RATIFICATION OF APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			84
COST OF SOLICITATION			85
SHAREHOLDER PROPOSALS			85
INCORPORATION BY REFERENCE			86

HILL-ROM HOLDINGS, INC.

PROXY STATEMENT

          This proxy statement relates to the solicitation by the Board of Directors of Hill-Rom Holdings, Inc. (the “Company”, “Hill-Rom”, “we”, “us” or “our”), 1069 State Route 46 East, Batesville, Indiana 47006, telephone (812) 934-7777, of proxies for use at the annual meeting of the Company’s shareholders to be held at the Company’s offices (at the address shown above), on Friday, February 13, 2009, at 10:00 a.m., Eastern Standard Time, and at any adjournments of the meeting. This proxy statement and the enclosed form of proxy were mailed initially to shareholders on or about January 7, 2009. All shares represented by these proxies will be voted at this meeting in accordance with instructions given by shareholders. Where no instructions are given, the shares will be voted (1) in favor of the election of the Board of Directors’ nominees for three directors; (2) in favor of the approval of the Hill-Rom Holdings, Inc. Employee Stock Purchase Plan; (3) in favor of the amendment of the Hill-Rom Holdings, Inc. Stock Incentive Plan to reserve an additional 5,500,000 shares of common stock for issuance thereunder; (4) in favor of the ratification of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Company; and (5) in the discretion of the proxy holders upon such other business as may properly come before the meeting.

          The purpose of the annual meeting is to vote upon the matters set forth above. The Board of Directors is not aware of any other business that may come before the meeting.

Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to Be Held on February 13, 2009.

•

The proxy statement and annual report to shareholders are available at http://ir.hill-rom.com/annual-proxy.cfm.

VOTING

          The close of business on December 17, 2008, has been fixed as the record date for determining which shareholders are entitled to notice of and to vote at the annual meeting. On December 17, 2008, there were 62,562,678 shares of the Company’s common stock issued and outstanding. Each share of common stock is entitled to one vote with respect to every matter submitted to a vote at the meeting. Votes cast by proxy, whether by proxy card, telephone or the Internet, or in person at the annual meeting, will be tabulated by the election inspectors appointed for the meeting. If you submit your proxy by telephone or via the Internet, you should not return your proxy card. Instructions for submitting proxies by telephone or the Internet are set forth on the enclosed proxy card. If you choose to submit your proxy by mail, please sign, date and return the proxy card in the envelope provided. A proxy may be revoked at any time before it is voted at the meeting by submitting written notice of revocation to the Secretary of the Company or by submitting another timely proxy by telephone, Internet or mail. If you hold shares through a broker or other custodian, please check the voting instructions used by that broker or custodian.

     Votes Necessary to Adopt Proposals. Directors are elected by a plurality of the votes cast by shareholders entitled to vote at a meeting at which a quorum is present, which means that nominees who receive the greatest number of votes will be elected even if less than a majority of the votes cast. Approval of the Employee Stock Purchase Plan, approval of the amendment of the Stock Incentive Plan, ratification of the appointment of the independent registered public accounting firm and any other matter that comes before the meeting will be approved if the votes cast favoring the action exceed the votes cast opposing the action.

     A majority of the shares issued and outstanding constitutes a quorum. Under Indiana law, once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting. Abstentions, broker non-votes and instructions on a proxy to withhold authority to vote for one or more of the director nominees will result in fewer votes being cast with respect to a particular issue or nominee. A broker non-vote occurs when a broker holding shares for a beneficial owner does not vote on a particular matter because the broker does not have discretionary voting power for that matter and has not received instructions from the beneficial owner. In the absence of such instructions, brokers generally have discretionary voting power for the election of directors and the ratification of the appointment of the independent registered public accounting firm but not for the approval of the Employee Stock Purchase Plan and the amendment of the Stock Incentive Plan.

ELECTION OF DIRECTORS

     The Articles of Incorporation and the Code of By-laws of the Company provide that members of the Board of Directors shall be classified with respect to the terms that they shall serve by dividing them into three classes that are as nearly equal in number of members as possible. Generally, directors in each class are elected for a three-year term unless they resign or retire earlier.

     Under the Company’s Code of By-Laws, any director elected by the Board of Directors to fill a vacancy will be elected for a term expiring at the next annual meeting of directors. At the annual meeting, proxies may not be voted for a greater number of persons than the number of nominees named in this proxy statement.

     The Company’s Amended Articles of Incorporation provide that the Board of Directors shall consist of not less than nine members as may be specified in the Company’s Code of By-Laws. The Company’s Code of By-Laws provides that the Board of Directors shall consist of nine to eleven members, as fixed from time to time by the Board of Directors. The Board of Directors currently consists of eight members, with three directors in each of Classes I and III and two directors in Class II. There is currently a vacancy in Class II.

     The terms of the three directors in Class I, Rolf A. Classon, Eduardo R. Menascé and Patrick T. Ryan, expire at the upcoming annual meeting. The Board of Directors is proposing that Eduardo R. Menascé be reelected as a Class II director to fill the vacancy in that Class and to serve a term expiring at the 2010 annual meeting of shareholders, rather than as a Class I director. Mr. Menascé currently serves on the Board of Directors of Hillenbrand, Inc., which the Company spun-off on March 31, 2008. In connection with the spin-off, in order to limit the number of directors serving on the Boards of both the Company and Hillenbrand, Inc., the Board determined that Mr. Menascé should serve on both Boards only for a limited transition period. For this reason, the Board is proposing that Mr. Menascé be elected only for a one-year term

rather than the three-year term for which he would be elected if he were reelected as a Class I director.

     Accordingly, at the upcoming annual meeting, the shareholders will elect two members of the Board of Directors in Class I to serve three-year terms expiring at the 2012 annual meeting of shareholders and one member of the Board of Directors in Class II to serve a one-year term expiring at the 2010 annual meeting of shareholders. The other directors in Class II and Class III were each previously elected to serve terms expiring at the 2010 and 2011 annual meetings, respectively. Following the upcoming annual meeting, there will be a vacancy on the Board in Class I, which the Board intends to fill as soon as practicable.

     Unless authority is withheld, all shares represented by proxies submitted pursuant to this solicitation will be voted in favor of electing as directors the nominees listed below for the terms indicated. If any of these nominees should be unable to serve, shares represented by proxies may be voted for a substitute nominee selected by the Board of Directors, or the position may become vacant.

     The Board of Directors recommends that shareholders vote FOR the election to the Board of Directors of each of the nominees named below.

     NOMINEES:

CLASS I

     Nominees to be elected to serve three-year terms expiring at the 2012 annual meeting:

Shares (1)

Served As A

Beneficially Owned As Of

Percent of Total

Name

Age

Principal Occupation

Director Since

December 17, 2008

Shares Outstanding

Rolf A. Classon

63

Chairman of the Board of the Company

2002

56,853(2)

(3)

Patrick T. Ryan

50

Private Investor

2007

4,227(4)

(3)

CLASS II

     Nominee to be elected to serve a one-year term expiring at the 2010 annual meeting:

Shares (1)

Served As A

Beneficially Owned As Of

Percent of Total

Name

Age

Principal Occupation

Director Since

December 17, 2008

Shares Outstanding

Eduardo R. Menascé

63

Retired President, Enterprise Solutions Group, Verizon Communications

2004

7,524(4)

(3)

     CONTINUING DIRECTORS:

CLASS II

     Serving terms expiring at the 2010 annual meeting:

Shares(1)

Served As A

Beneficially Owned As Of

Percent of Total

Name

Age

Principal Occupation

Director Since

December 17, 2008

Shares Outstanding

Ronald A. Malone

54

Chairman and Chief Executive Officer of Gentiva Health Services, Inc.

2007

4,227(4)

(3)

Peter H. Soderberg

62

President and Chief Executive Officer of the Company

2002

489,707(5)

(3)

CLASS III

     Serving terms expiring at the 2011 annual meeting:

												Shares (1)
								Served As A				Beneficially Owned As Of		Percent of Total
Name		Age				Principal Occupation		Director Since				December 17, 2008		Shares Outstanding
Charles E. Golden			62			Retired Executive Vice President and Chief Financial Officer of Eli Lilly and Company			2002			35,393(6)		(3)
W August Hillenbrand			68			Retired Chief Executive Officer of the Company			1972			1,408,569(7)			2.2	%
Joanne C. Smith			48			President and Chief Executive Officer of the Rehabilitation Institute of Chicago			2003			18,768(8)		(3)

								Shares(1)
								Beneficially Owned As Of		Percent of Total Shares
Name		Age				Principal Occupation		December 17, 2008		Outstanding
Gregory N. Miller			45			Senior Vice President, Chief Financial Officer and Treasurer		156,505(10)		(3)
Patrick D. de Maynadier			48			Senior Vice President, General Counsel and Secretary		211,912(11)		(3)
Kimberly K. Dennis			42			Group Vice President, North America Post-Acute Care		172,579 (12)		(3)
John H. Dickey			54			Senior Vice President, Human Resources		135,233(13)		(3)
All Directors and Executive Officers of the Company as a group, consisting of 18 persons								3,068,594(14)		4.8%

						Shares
						Beneficially Owned As Of				Percent of Total
Name		Address				December 17, 2008				Shares Outstanding
Franklin Mutual Advisers, LLC		101 John F. Kennedy Parkway, Short Hills, NJ 07078					3,237,429	(15)			5.2	%
Franklin Resources, Inc.		One Franklin Parkway, San Mateo, CA 94493					3,586,514	(16)			5.7	%
Bank of America Corporation		100 North Tryon Street, Floor 25, Charlotte, NC 28255					3,658,584	(17)			5.8	%
FMR LLC		82 Devonshire Street, Boston, MA 02109					3,688,174	(18)			5.9	%
HealthCor Management, L.P.		152 West 57th Street, 47th Floor, New York, NY 10019					3,350,000	(19)			5.4	%
Breeden Capital Management, LLC		100 Northfield Street, Greenwich, CT 06830					3,278,409	(20)			5.2	%

     Rolf A. Classon became Chairman of the Board of the Company on March 20, 2006. He served as Interim President and Chief Executive Officer of the Company from May 11, 2005 until March 20, 2006 and as Vice Chairman of the Board from December 4, 2003 until his election as Interim President and Chief Executive Officer. He was Chairman of the Executive Committee of Bayer HealthCare, a sub group of Bayer AG, from October 2002 to July 2004, and was President of Bayer Health Care L.L.C., a subsidiary of Bayer AG, from October 2002 to July 2004. Previously, he had been President of Bayer’s Diagnostic Division and head of Bayer’s Worldwide Business Group – Diagnostics since 1995. Bayer is an international research-based company active in life sciences, polymers and chemicals. A native of Sweden, Mr. Classon joined Bayer’s Miles Diagnostics business in 1991 as Executive Vice President, worldwide marketing, sales and service. During his career, Mr. Classon has held management positions with Pharmacia AB, Sweden; Swedish Match Group; and Asbjorn Habberstad AB. Prior to joining Bayer, he was President and Chief Operating officer of Pharmacia Biosystems AB. Mr. Classon currently serves on the Boards of Directors of Enzon Pharmaceuticals, Inc., a company focused on oncology and antivirus pharmaceuticals, Millipore Corporation, a bioscience company that provides technologies, tools and services for the discovery, development and production of therapeutic drugs and for other purposes, PharmaNet Development Group, Inc., an international drug development services company, Auxilium Pharmaceuticals, Inc., a specialty pharmaceutical company in the fields of urology and men’s health, and Eurand N.V., a specialty pharmaceutical company.

     Peter H. Soderberg was elected as President and Chief Executive Officer of the Company effective March 20, 2006. Mr. Soderberg, a Company board member since 2002, was

most recently President and Chief Executive Officer of Welch Allyn, Inc., Skaneateles Falls, N.Y. He held that position since January, 2000. Mr. Soderberg was previously Group Vice President and Chief Operating Officer of Welch Allyn, Inc. His prior experience includes 23 years at Johnson & Johnson where he served in a variety of operations, marketing and management positions in four of its over-the-counter and professional product companies. Most recently, he was President of Johnson & Johnson Health Management, a Johnson & Johnson portfolio company. His career also includes roles as President and Chief Executive Officer of an industrial technology company and the founder and President of a venture capital business. He is on the Boards of Directors of Greatbatch, Inc. (NYSE:GB), Constellation Brands, Inc. (NYSE:STZ), the Advanced Medical Technology Association (AdvaMed), and, before his recent move to Indiana, was on the boards of the Syracuse Symphony Orchestra (as its Vice Chairman), the Metropolitan Development Authority of Central New York (as its Vice Chairman) and CNYMedtech (as its Chairman).

     Charles E. Golden has served as director of the Company since 2002. He retired as Executive Vice President and Chief Financial Officer for, and as a member of the Board of Directors of, Eli Lilly and Company, Indianapolis, Indiana, a global provider of pharmaceutical products and health care information, in April 2006. He joined Eli Lilly in those capacities in 1996. Prior to joining Eli Lilly, Mr. Golden served as a corporate Vice President of General Motors and Chairman of General Motors’ vehicle operations in the United Kingdom from 1993 to 1996. He joined General Motors as part of its treasurer’s office in 1970 and subsequently held positions in domestic and international operations, ultimately becoming Treasurer of GM. He serves on the Boards of Directors of Unilever N.V., Unilever PLC, Eaton Corporation, Clarian Health Partners, Lilly Endowment and Crossroads of America Council (Boy Scouts of America) (as past President), and on the Finance Committee of the Indianapolis Museum of Art, and as a Board member and Secretary/Treasurer of the Indiana Stadium and Convention Building Authority.

     W August Hillenbrand has served as a director of the Company since 1972 and served as Chief Executive Officer of the Company from 1989 until 2000. Mr. Hillenbrand also served as President of the Company from 1981 until 1999. Prior to his retirement in December 2000, the Company had employed Mr. Hillenbrand throughout his business career. Mr. Hillenbrand is the Chief Executive Officer of Hillenbrand Capital Partners, an unaffiliated family investment partnership. He is on the Board of Directors of Hillenbrand, Inc., which the Company spun-off during 2008. Mr. Hillenbrand retired from the Boards of Directors of DPL Inc. of Dayton, Ohio and Pella Corporation of Pella, Iowa during 2008.

     Ronald A. Malone has served as a director of the Company since July 2007. He has been Chief Executive Officer and Chairman of the Board of Directors of Gentiva Health Services, Inc. since June 2002. He served as Executive Vice President of Gentiva from March 2000 to June 2002 and as President of Gentiva’s home health services division from January 2001 to June 2002. Prior to joining Gentiva, he served in various positions with Olsten Corporation including Executive Vice President of Olsten Corporation and President, Olsten Staffing Services, United States and Canada, from January 1999 to March 2000. From 1994 to December 1998, he served successively as Olsten’s Senior Vice President, Southeast Division; Senior Vice President, Operations; and Executive Vice President, Operations.

     Eduardo R. Menascé has served as a director of the Company since 2004. He is the retired President of the Enterprise Solutions Group for Verizon Communications, Inc., New York City, New York. Prior to the merger of Bell Atlantic and GTE Corporation, which created

Verizon Communications, he was the President and Chief Executive Officer of CTI MOVIL S.A. (Argentina), a business unit of GTE Corporation, from 1996 to 2000. Mr. Menascé has also held senior positions at CANTV in Venezuela and Wagner Lockheed and Alcatel in Brazil and from 1981 to 1992 served as Chairman of the Board and Chief Executive Officer of GTE Lighting in France. He earned a Bachelor’s degree in Industrial Engineering from Universidad Pontificia Catolica de Rio de Janeiro and a Master’s degree in Business Administration from Columbia University. Mr. Menascé currently serves on the Boards of Directors of Pitney Bowes Inc., a global provider of integrated mail and document management solutions, John Wiley & Sons, Inc., a developer, publisher and seller of products in print and electronic media for educational, professional, scientific, technical, medical, and consumer markets, KeyCorp, one of the nation’s leading bank-based financial service companies, and Hillenbrand, Inc.

     Patrick T. Ryan has been a director of the Company since July 2007. He served as Chief Executive Officer and a director of PolyMedica Corporation from September 2004 until its acquisition by Medco Health Solutions, Inc. in October 2007. He has been in the healthcare field since 1980, with specific experience in operations, strategic development, service, sales and finance. Prior to his service with PolyMedica, Mr. Ryan served as the Chairman and Chief Executive Officer of Physicians Dialysis, Inc. From its inception in 2000, Mr. Ryan led Physicians Dialysis, Inc. through several rounds of financing and created a nationwide network of 24 dialysis clinics. Physicians Dialysis was the nation’s sixth largest dialysis provider when it was acquired in September 2004. Previously, Mr. Ryan served as President and Chief Executive Officer of Principalcare Inc., a company specializing in women’s healthcare. Mr. Ryan also served as President and Chief Executive Officer of ImageAmerica Inc., a publicly-traded company that provided multi-modality medical diagnostic imaging services. Mr. Ryan has served as a director for numerous private companies and three public companies, and is currently serving as a director at Affiliated Managers Group, Inc and Beth Israel Deaconess Medical Center.

     Joanne C. Smith, M.D. has served as a director of the Company since 2003 and as Vice Chairperson of the Board of Directors of the Company since 2005. She was elected as President and Chief Executive Officer of the Rehabilitation Institute of Chicago in October 2006. She had been the President of the National Division of the Rehabilitation Institute of Chicago since November 2005. Prior to that, Dr. Smith had been the Senior Vice President, Corporate Strategy and Business Development for the Rehabilitation Institute of Chicago since April 2002. Since 1992 she has been an attending physician at the same institution. From 1997 through April 2002, Dr. Smith was the Senior Vice President and Chief Operating Officer of the Corporate Partnership Division of the Rehabilitation Institute of Chicago and from 1992 to 1997 she held various management positions there. She also serves on the Boards of Directors of AptarGroup, Inc., a leading supplier of personal care, cosmetics, pharmaceutical, food and beverage dispensing systems, and the AON Memorial Education Fund, a fund dedicated to supporting the educational needs of the children who suffered the loss of a parent in the World Trade Center attack.

     Under Section 16(a) of the Securities Exchange Act of 1934, the Company’s directors, its executive officers and any person holding more than ten percent of the Company’s common stock are required to file with the SEC initial reports of ownership and reports of changes in ownership of common stock of the Company. The Company is required to report in this proxy statement any failure to file or late filing occurring during the fiscal year ended September 30,

2008. Based solely on a review of filings furnished to the Company and other information from reporting persons, the Company believes that all of these filing requirements were satisfied by its directors, executive officers and ten percent beneficial owners, except that Richard G. Keller filed a late report with respect to a stock award and each of Peter H. Soderberg, Gregory N. Miller, Patrick D. de Maynadier, John H. Dickey, Richard G. Keller and Sheri H. Edison filed a late report with respect to a “founders grant” of thirty deferred stock shares (otherwise known as restricted stock units) made to each Company employee at the time of the spin-off of the Company’s funeral services business.

ABOUT THE BOARD OF DIRECTORS
(INCLUDING DIRECTOR COMPENSATION)

     The Board of Directors, which is elected by the shareholders, is the ultimate decision-making body of the Company except with respect to those matters reserved to the shareholders. It selects the senior management team, which is charged with the conduct of the Company’s business. Having selected the senior management team, the Board acts as an advisor and counselor to senior management and oversees and monitors its performance.

Board’s Role in Strategic Planning

     The Board of Directors has the legal responsibility for overseeing the affairs of the Company and, thus, an obligation to keep informed about the Company’s business and strategies. This involvement enables the Board to provide guidance to management in formulating and developing plans and to exercise independent decision-making authority on matters of importance to the Company. Acting as a full Board and through the Board’s three standing committees, the Board is fully involved in the Company’s strategic planning process.

     Each year, typically in the spring, summer and fall, senior management sets aside specific periods to develop, discuss and refine the Company’s long-range operating plan and overall corporate strategy. Specific operating priorities are developed to effectuate the Company’s long-range plan. Some of the priorities are short-term in focus; others are based on longer-term planning horizons. Senior management reviews the insights and conclusions reached at its meetings with the Board over the course of several Board meetings and seeks approval of the overall corporate strategy and long-range operating plan at Board meetings that usually occur in the summer and fall, including a two to three day offsite retreat in July dedicated to strategic planning. These meetings are focused on corporate strategy and involve both management presentations and input from the Board regarding the assumptions, priorities and objectives that will form the basis for management’s strategies and operating plans. To the extent necessary to support strategy, the Board, with assistance from outside advisors, also from time to time evaluates other matters such as the Company’s corporate and capital structure.

     At subsequent Board meetings, the Board continues to substantively review the Company’s progress against its strategic plans and to exercise oversight and decision-making authority regarding strategic areas of importance and associated funding authorizations.

     In addition, Board meetings held throughout the year target specific strategies and critical areas for extended, focused Board input and discussion.

     The role that the Board plays is inextricably linked to the development and review of the Company’s strategic plan. Through these processes, the Board, consistent with good corporate governance, encourages the long-term success of the Company by exercising sound and independent business judgment on the strategic issues that are important to the Company’s business.

Functioning of the Board

     The Board and Board committees agenda setting process generally involves all directors. The Chairman of the Board, Chief Executive Officer and Secretary initially develop a proposed agenda for Board meetings with the understanding that certain items pertinent to the advisory and monitoring functions of the Board be brought to it periodically by the Chief Executive Officer for review and/or decision. For example, the Board reviews the annual corporate budget. Proposed agenda items that fall within the scope of responsibilities of a Board committee are initially developed by the chair of that committee with the Secretary. After initial agendas are developed, the Chairman of the Board, Chief Executive Officer and Secretary discuss coordination of the agendas and make further modifications, as appropriate. Board and committee agendas and materials related to agenda items are provided to Board members sufficiently, typically one to two weeks, in advance of regular meetings to allow the directors to review and provide feedback on the agendas and related materials and to prepare for discussion of the items at the meetings.

     At the invitation of the Board and its committees, members of senior management attend Board and committee meetings or portions thereof for the purpose of participating in discussions. Generally, discussions of matters to be considered by the Board and its committees are facilitated by the manager responsible for that function or area of the Company’s operations. In addition, Board members have free access to all other members of management and employees of the Company and, as necessary and appropriate in their discretion, the Board and its committees may, and do, consult with independent legal, financial and accounting advisors to assist in their duties to the Company and its shareholders.

     The chairs of the committees of the Board each preside over the portion of the Board meetings at which the principal items to be considered are within the scope of the authority of their respective committees. The chair of each committee determines the frequency, length and agenda of meetings of that committee. Sufficient time to consider the agenda items is provided. Materials related to agenda items are provided to the committee members sufficiently, typically one to two weeks, in advance of regular meetings to allow the members to prepare for discussion of the items at the meeting.

     Executive sessions or meetings of outside directors without management present are held regularly after Board and committee meetings. The Chairman of the Board generally presides at executive sessions of non-management directors, except that the chairs of the committees of the Board preside at executive sessions of non-management directors held following meetings of their committees or at which the principal items to be considered are within the scope or authority of their committees.

Communications with Directors

     In order to provide the Company’s security holders and other interested parties with a direct and open line of communication to the Board of Directors, the Board of Directors has adopted and implemented the following procedures for communications to directors.

•

Security holders of the Company and other interested persons may communicate with the Chairman of the Board, the chairs of the Company’s Nominating/Corporate Governance Committee, Audit Committee or

Compensation and Management Development Committee or the non-management directors of the Company as a group by sending an email to investors@hill-rom.com. The email should specify which of the foregoing is the intended recipient.

•

All communications received in accordance with these procedures will be reviewed initially by the Company’s Investor Relations Department and General Counsel. The Investor Relations Department will relay all such communications to the appropriate director or directors unless the Investor Relations Department and General Counsel determine that the communication:

	•		does not relate to the business or affairs of the Company or the functioning or constitution of the Board of Directors or any of its committees;
	•		relates to routine or insignificant matters that do not warrant the attention of the Board of Directors;
	•		is an advertisement or other commercial solicitation or communication;
	•		is frivolous or offensive; or
	•		is otherwise not appropriate for delivery to directors.

	•		The director or directors who receive any such communication will have discretion to determine whether the subject matter of the communication should be brought to the attention of the full Board of Directors or one or more of its committees and whether any response to the person sending the communication is appropriate. Any such response will be made through the Company’s Investor Relations Department and only in accordance with the Company’s policies and procedures and applicable law and regulations relating to the disclosure of information.
	•		The Company’s Investor Relations Department will retain copies of all communications received pursuant to these procedures for a period of at least one year.
	•		The Nominating/Corporate Governance Committee of the Board of Directors will review the effectiveness of these procedures from time to time and, if appropriate, recommend changes.

     The Company has not established a formal policy regarding director attendance at its annual meetings of shareholders, but the Company’s directors generally do attend the annual meetings. The Chairman of the Board presides at the annual meeting of shareholders, and the Board of Directors holds one of its regular meetings in conjunction with the annual meeting of shareholders. Accordingly, unless one or more members of the Board are unable to attend, all members of the Board are present for the annual meeting. All members of the Board at the time of the Company’s 2008 annual meeting of shareholders attended that meeting, except for one member who was unable to attend.

Other Corporate Governance Matters

     Both the Board of Directors and management of the Company firmly embrace good and accountable corporate governance and believe that an attentive, performing Board is a tangible competitive advantage. Director compensation has always been comprised of cash and stock based compensation. A non-Chief Executive Officer director has held the position of Chairman of the Board since April 1989. In early 2001, efforts to modify the composition of the Board began, with an emphasis on independence and the mix of characteristics, experiences and diverse perspectives and skills most appropriate for the Company. The Board has established position specifications, including performance criteria, for itself, the Chairman of the Board, the Vice Chairperson of the Board and the Chief Executive Officer, and, since May 2002, as part of the planned transition of the membership of our Board, the Company has welcomed to the Board seven of the Company’s current directors, all of whom are proven leaders, six of whom are independent and six of whom have significant experience in the health care industry. There have been more non-Hillenbrand family directors than family members on the Board since May 2002, and the Board has had a majority of independent directors since December 4, 2003.

     Since September 2002, the Board of Directors of the Company has taken additional measures to ensure continued high standards for corporate governance. Specifically, the Board has taken the following actions, among others:

•

The Board approved Corporate Governance Standards for the Board of Directors in September 2002 and has revised these Standards on several occasions as warranted by changes in New York Stock Exchange governance standards and other developments. Among other matters, these Standards:

	•		confirm that the Board of Directors has established standing committees, each with a charter approved by the Board, to address certain key areas. These committees are the Audit Committee, Compensation and Management Development Committee and Nominating/Corporate Governance Committee;
	•		provide that at least a majority of the directors of the Company shall be independent;
	•		provide for an annual determination by the Board of Directors regarding the independence of each director;
	•		provide that the Audit Committee, Nominating/Corporate Governance Committee and Compensation and Management Development Committee will consist entirely of independent directors;
	•		provide for an annual assessment by the Nominating/Corporate Governance Committee of the Board’s effectiveness as a whole as well as the effectiveness of the individual directors and the Board’s various committees, including a review of the mix of skills, core competencies and qualifications of members of the Board;
	•		provide that the non-management directors shall conduct executive sessions without participation by any employees of the Company at each regularly scheduled meeting of the Board;

	•		limit the number of public company boards on which a director may sit to four without Board approval;
	•		provide that no more than half of the members of the Board may be over seventy years of age; and
	•		provide that all proposed related party transactions between the Company or any of its subsidiaries and any director or executive officer of the Company must be reviewed and approved by the Nominating/Corporate Governance Committee in advance.

	•		The Board determined the independence of each of the Company’s directors based on the standards set forth in the Corporate Governance Standards described above and elected only independent directors as members of the Audit Committee, Nominating/Corporate Governance Committee and Compensation and Management Development Committee. See “Determinations with Respect to Independence of Directors” below.
	•		On December 2, 2008, the Nominating/Corporate Governance Committee of the Board completed a formal evaluation of the effectiveness of the incumbent directors who are being nominated for election at the Company’s 2009 annual meeting of shareholders, the Board as a whole and the Board’s various committees, in light of Board and Board committee goals established for 2008. The evaluation included a review of the mix of skills, core competencies and qualifications of members of the Board. The Nominating/Corporate Governance Committee also reviewed a summary of its findings with the Board.
	•		In September 2002, the Board overhauled its committee structure and adopted revised charters for each of its committees, which have been further amended as warranted by changes in NYSE listing standards, SEC rules and other developments.
	•		The Board adopted a revised Code of Ethical Business Conduct covering, among other matters, conflicts of interest, corporate opportunities, confidentiality, protection and proper use of the Company’s assets, fair dealing, compliance with laws, including insider trading laws, accuracy and reliability of the Company’s books and records and reporting of illegal or unethical behavior. This Code applies to all directors, officers and other employees of the Company, including the Company’s Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer. The Board periodically reviews and makes changes to the Code based on recommendations made by the Audit Committee of the Board. The Company’s Code of Ethical Business Conduct constitutes a “code of ethics” within the meaning of Item 406 of the SEC’s Regulation S-K.
	•		All employees, including the Company’s Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, are required to participate in ethics training and abide by the Code of Ethical Business Conduct to ensure that the Company’s business is conducted in a consistently legal and ethical manner. All members of the Board of Directors and all officers of the Company and its subsidiaries are required annually to certify their compliance with the Code and disclose any exceptions to compliance.

	•		Employees are required to report any conduct that they believe in good faith to be an actual or apparent violation of the Code of Ethical Business Conduct. The Sarbanes-Oxley Act of 2002 requires companies to have procedures to receive, retain and treat complaints received regarding accounting, internal accounting controls or auditing matters and to allow for the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters. The Company currently has such procedures in place and has effectively and independently addressed concerns raised by employees and others.
	•		Hill-Rom has adopted a Code of Conduct that is consistent with the Advanced Medical Technology Association’s (AdvaMed) Code of Ethics on Interactions with Health Care Professionals.  AdvaMed is a medical technology association, representing members that produce nearly 90 percent of the health care technology purchased annually in the United States and more than 50 percent purchased annually around the world.  The AdvaMed Code is a voluntary code of ethics to facilitate members’ ethical interactions with those individuals or entities that purchase, lease, recommend, use, arrange for the purchase or lease of, or prescribe members’ medical technology products in the United States.  The Company is a member of AdvaMed. The AdvaMed Code can be accessed at www.advamed.org/MemberPortal/About/code/codeofethics.htm.
	•		Directors may not be given personal loans or extensions of credit by the Company, and all directors are required to deal at arm’s length with the Company and its subsidiaries, and to disclose any circumstance that might be perceived as a conflict of interest.
	•		The Board approved a policy mandating that the Company’s outside independent registered public accounting firm not perform any prohibited non-audit services under the Sarbanes-Oxley Act of 2002 and the related SEC rules. In addition, the Audit Committee approved a policy requiring that all services from the outside independent registered public accounting firm must be pre-approved by the Audit Committee or its delegate (i.e., the Audit Committee Chairman).
	•		The Board adopted stock ownership guidelines for the Company’s directors and executive officers. In general, these standards require non-employee directors to hold deferred stock shares (otherwise known as restricted stock units) granted to them until six months after they cease to be directors and that executive officers of the Company must achieve and maintain a minimum level of stock ownership as discussed further under “Executive Compensation—Compensation Discussion and Analysis.” The stock ownership guidelines are included in the Corporate Governance Standards.
	•		As part of directors’ education, which includes, among other things, regular dedicated sessions regarding the Company’s businesses and operations, Audit Committee sponsored financial literacy and legal and regulatory compliance training, and participation in Company and industry trade events, the Board requires each director to attend an outside governance or director related seminar at least once every three years.

•

Pursuant to the Foreign Corrupt Practices Act and the Sarbanes-Oxley Act of 2002, the Company monitors and enforces policies, and implements a system of internal controls, designed to detect and prevent money laundering, corruption and bribery. Supporting processes include ethics training and certification regarding, among other things, compliance with the Foreign Corrupt Practices Act, documentation, training and testing, new hire criminal background checks and internal audit procedures.

Consistent with the Company’s commitment to corporate governance, the Board and management believe that the foregoing measures, and others that have been taken, place the Company in compliance with listing requirements of the New York Stock Exchange, the Sarbanes-Oxley Act of 2002 and related rules of the SEC. Copies of the Company’s Corporate Governance Standards, Code of Ethical Business Conduct and Board committee charters are available on the Company’s website at www.hill-rom.com or in print to any shareholder who requests copies through the Company’s Investor Relations office. Also available on the Company’s website are position specifications adopted by the Board for the positions of Chief Executive Officer, Chairman of the Board of Directors, Vice Chairperson of the Board of Directors, Vice Chairperson of each of the committees of the Board of Directors and other members of the Board of Directors.

Determinations with Respect to Independence of Directors

     As noted above, the Corporate Governance Standards adopted by the Board of Directors require the Board of Directors to make an annual determination regarding the independence of each of the Company’s directors and provide standards for making these determinations which are consistent with the listing standards of the New York Stock Exchange. The Board made these determinations for each member of the Board on December 3, 2008, based on an annual evaluation performed by and recommendations made by the Nominating/Corporate Governance Committee, consistent with past practices.

     As set forth in the Company’s Corporate Governance Standards, a director will be independent only if the Board of Directors determines, based on a consideration of all relevant facts and circumstances, that the director has no material relationship with the Company or any of its subsidiaries (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company or any of its subsidiaries). In assessing the materiality of a director’s relationship with the Company and each director’s independence, the Board must consider the issue of materiality not only from the standpoint of the director but also from that of the persons or organizations with which the director has an affiliation. Material relationships can include, among others, commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships. In assessing a director’s independence, the Board must also consider the director’s ownership, or affiliation with the owner, of less than a controlling amount of voting securities of the Company. The Board cannot conclude that a director is independent in the following circumstances:

•

The director is, or has been within the last three years, an employee of the Company or any of its subsidiaries, or an immediate family member of the director is, or has been within the last three years, an executive officer of the Company (but employment as an interim executive officer will not disqualify a director from being considered independent following that employment).

	•		The director has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than $120,000 per year in direct compensation from the Company or its subsidiaries, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service).
	•		(A) The director is a current partner or employee of a firm that is the internal or external auditor of the Company or any of its subsidiaries; (B) the director has an immediate family member who is a current partner of such a firm; (C) the director has an immediate family member who is a current employee of such a firm and personally works on the Company’s audit; or (D) the director or an immediate family member was within the last three years a partner or employee of such a firm and personally worked on the audit of the Company or any of its subsidiaries within that time.
	•		The director or an immediate family member of the director is, or has been within the last three years, employed as an executive officer of another company where any of the Company’s present executives at the same time serves or served on that company’s compensation committee.
	•		The director is a current employee, or an immediate family member of the director is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeded the greater of $1 million, or 2% of such other company’s consolidated gross revenues.
	•		The director owns, or is affiliated with the owner of, a controlling amount of voting stock of the Company.

     To assist in the Board’s determinations, each director completed materials designed to identify any relationships that could affect the director’s independence, and the General Counsel and Secretary of the Company conducted follow up interviews with certain directors. On the basis of these materials and the standards described above, the Board determined that each of Rolf A. Classon, Charles E. Golden, Ronald A. Malone, Eduardo R. Menascé, Patrick T. Ryan and Joanne C. Smith is independent.

     With respect to Rolf A. Classon, the Board considered the fact that Mr. Classon served as Interim President and Chief Executive Officer of the Company from May 11, 2005 to March 20, 2006 and received compensation from the Company for serving in that capacity. In determining that this relationship was not material, the Board considered that Mr. Classon served as Interim President and Chief Executive Officer for a period of only approximately ten months and received compensation that the Board believed was reasonable and appropriate for his service in that capacity. Further, the Board noted that the NYSE listing standards and the Company’s Corporate Governance Standards expressly acknowledge that service as an executive officer in an interim capacity, and compensation received for that service, do not disqualify a director from being considered independent.

     The Board considered that Charles E. Golden is a member of the Board of Directors of Clarian Health Partners, which purchased approximately $3.0 million, $3.5 million and $3.2

million of products and services from the Company in the fiscal years 2006, 2007 and 2008, respectively. In determining that this relationship was not material, the Board considered that Mr. Golden is not an executive officer of Clarian Health Partners and that the amount of products and services purchased from the Company by Clarian Heath Partners in the last three years has been substantially below 2% of the consolidated gross revenues of Clarian Health Partners in those years.

     With respect to each of Eduardo R. Menascé and Patrick T. Ryan, the Board considered the Company’s payment to or receipt from entities of which one of these individuals serves as a director of de minimis amounts for goods and services in the ordinary course of business. In addition, the Board considered that the Company has had ordinary course of business banking and financial services relationships with Key Corp., for which Mr. Menascé serves as a director. In determining that these relationships were not material, the Board considered that these directors were not executive officers of any of the entities to or from which the Company made or received payments and that the payments have not exceeded $1,000,000 in any of the last three years.

     With respect to Joanne C. Smith, the Board considered the fact that the Rehabilitation Institute of Chicago, of which Dr. Smith has served as President and Chief Executive Officer since October 2006 and served as Senior Vice President of Strategy and Business Development from April 2002 through November 2005 and as President of its National Division from November 2005 through October 2006, has purchased approximately $50,000, $57,000 and $419,000 of products and services from the Company in fiscal years 2006, 2007 and 2008, respectively. In evaluating this relationship, the Board considered that the amount of purchases by the Rehabilitation Institute of Chicago in the last three years constituted significantly less than 2% of the gross revenues of the Rehabilitation Institute of Chicago in those years and that Dr. Smith had no authority with respect to the purchasing decisions of the Rehabilitation Institute of Chicago prior to November 2005 and no direct authority for purchasing decisions since November 2005. On the basis of these factors, the Board determined that this relationship was not material.

     The Board concluded that, based on all of the relevant facts and circumstances, none of these relationships constituted a material relationship with the Company that represents a potential conflict of interest or otherwise interferes with the exercise by any of these directors of his or her independent judgment from management and the Company.

     Also on the basis of the standards described above and the materials submitted by the directors, the Board determined that W August Hillenbrand does not meet the standards for independence. Peter H. Soderberg also does not meet the independence standards because of his current service as President and Chief Executive Officer of the Company. Accordingly, neither of these non-independent directors serves on the Audit, Compensation and Management Development or Nominating/Corporate Governance Committees of the Board of Directors.

Meetings and Committees of the Board of Directors

     It is the general policy of the Company that all significant decisions be considered by the Board as a whole. As a consequence, the committee structure of the Board is limited to those committees considered to be basic to, or required for, the operation of a publicly owned company. Currently these committees are the Audit Committee, Compensation and Management Development Committee and Nominating/Corporate Governance Committee, each

of which has a written charter adopted by the Board of Directors. The Nominating/Corporate Governance Committee recommends the members and chairs of these committees to the Board. The Audit Committee, Compensation and Management Development Committee and Nominating/Corporate Governance Committee are made up of only independent directors. The current charter for each of the Board’s standing committees is available on the Company’s website at www.hill-rom.com and is available in print to any shareholder who requests it through the Company’s Investor Relations office. Until February 2008, the Board had a Finance Committee that assisted the Board in matters related to the capital structure of the Company and had responsibility for overseeing the investment of the Company’s assets pending utilization in the Company’s operations. The Finance Committee was disbanded in February 2008, and its former responsibilities are now carried out by the full Board of Directors.

     In furtherance of its policy of having significant decisions made by the Board as a whole, the Company has an orientation and continuing education process for Board members that includes extensive materials, meetings with key management, visits to Company facilities and Company and industry events. Moreover, as part of directors’ education, which includes, among other things, regular dedicated sessions regarding the Company’s businesses and operations, Audit Committee sponsored financial literacy and legal and regulatory compliance training, and participation in Company and industry trade events, the Board requires each director to attend an outside governance or director related seminar at least once every three years.

     During the fiscal year ended September 30, 2008, the Board of Directors of the Company held nine meetings. During this period, no incumbent member of the Board of Directors attended fewer than 75% of the aggregate of the number of meetings of the full Board of Directors and the number of meetings of the committees on which he or she served.

     The following table shows the composition of the committees of the Board of Directors.

				Nominating		Compensation
				and		and
				Corporate		Management
		Audit		Governance		Development
Director		Committee		Committee		Committee
Rolf A. Classon (Board Chairman) (I)		ü		VC
Charles E. Golden (I)		C		ü
W August Hillenbrand
Ronald A. Malone (I)						C
Eduardo R. Menascé (I)		VC		ü
Patrick T. Ryan (I)						ü
Joanne C. Smith, M.D. (Board Vice Chairperson) (I)				C		VC
Peter H. Soderberg

     The Audit Committee has general oversight responsibilities with respect to the Company’s financial reporting and financial controls. It annually reviews the Company’s financial reporting process, its system of internal controls regarding accounting, legal and regulatory compliance and ethics that management or the Board has established and the internal and external audit processes of the Company. The Audit Committee consists of Charles E. Golden (Chairman), Eduardo R. Menascé (Vice Chairman) and Rolf A. Classon. Jose A. Mejia and Ray J. Hillenbrand also served on the Audit Committee until their resignations on December 13, 2007 and March 31, 2008, respectively. During the fiscal year ended September 30, 2008, the Audit Committee held fourteen meetings. Each member of the Audit Committee is independent under Rule 10A-3 of the SEC and NYSE listing standards and meets the financial literacy guidelines established by the Board in the Audit Committee Charter. The Board interprets “financial literacy” to mean the ability to read and understand audited and unaudited consolidated financial statements (including the related notes) and monthly operating statements of the sort released or prepared by the Company, as the case may be, in the normal course of its business. The Board of Directors has determined that each member of the audit committee is an “audit committee financial expert” as that term is defined in Item 407(d) of Regulation S-K of the SEC.

     The Compensation and Management Development Committee assists the Board in ensuring that the officers and key management of the Company are effectively compensated in terms of salaries, supplemental compensation and other benefits that are internally equitable and externally competitive. The Committee is also responsible for reviewing and assessing the talent development and succession management actions concerning the officers and key employees of the Company. The Compensation and Management Development Committee consists of Ronald A. Malone (Chairman), Joanne C. Smith (Vice Chair) and Patrick T. Ryan. Rolf A. Classon also served as a member of the Committee and as its Chairman from May 31, 2007 to May 27, 2008. During the fiscal year ended September 30, 2008, the Compensation and Management Development Committee held five meetings. Each member of the Compensation and Management Development Committee is independent as defined by the New York Stock Exchange listing standards.

     The Nominating/Corporate Governance Committee consists of Joanne C. Smith (Chairperson), Rolf A. Classon (Vice Chairman), Charles E. Golden, and Eduardo R. Menascé. Ray J. Hillenbrand also served as a member of the Nominating/Corporate Governance Committee until his resignation on March 31, 2008. The Nominating/Corporate Governance Committee held eight meetings during the fiscal year ended September 30, 2008. Each member of the Nominating/Corporate Governance Committee is independent as defined by the New York Stock Exchange listing standards.

     The charter for the Nominating/Corporate Governance Committee of the Board of Directors provides that the primary function of this Committee is to assist the Board of Directors in ensuring that the Company is operated in accordance with prudent and practical corporate governance standards, ensuring that the Board achieves its objective of having a majority of its members be independent in accordance with New York Stock Exchange and other regulations and identifying candidates for the Board of Directors. The charter provides that this Committee must consist of at least three members of the Board of Directors, all of whom must be independent. The charter provides that, to fulfill its duties and responsibilities, the Committee must:

	•		Review from time to time and, if appropriate, recommend to the Board changes to the corporate governance standards for the Board of Directors of the Company and its committees, including committee charters;
	•		Review from time to time, and, if appropriate, make changes to the statement setting forth the responsibilities of directors and the qualifications for new nominees for election to the Board;
	•		Review from time to time, and, if appropriate, make changes to the statement setting forth the responsibilities of and the qualifications for the Chairman of the Board and the Vice Chairperson of the Board;
	•		Annually assess the Board’s effectiveness as a whole as well as the effectiveness of the individual directors and the Board’s various committees, including a review of the mix of skills, core competencies and qualifications of members of the Board;
	•		Assess, at least annually, the compensation package for the members of the Board of Directors and, if appropriate, recommend changes to the Board of Directors;
	•		Make recommendations with respect to the composition of Board committees;
	•		If deemed necessary, select and retain an executive search firm to identify qualified candidates to serve as members of the Board, considering effectiveness, responsiveness and other relevant factors, and approve the fees and other compensation to be paid to the executive search firm;
	•		Review the performance of the executive search firm and approve any proposed discharge of the executive search firm when circumstances warrant;
	•		Select and recommend to the Board director nominees for election at each annual meeting of shareholders, as well as director nominees to fill vacancies arising between annual meetings of shareholders;
	•		When deemed necessary or appropriate, make recommendations to the Board regarding the appointment or replacement of the Chairman of the Board and the Vice Chairperson of the Board;
	•		Recommend to the Board annually, based on a consideration of all relevant facts and circumstances, whether each director is independent (as that term is defined in the Corporate Governance Standards for the Board of Directors).
	•		Assess the adequacy of and make recommendations to the Board regarding directors’ and officers’ insurance coverage;
	•		Review and make recommendations to the Board regarding any shareholder proposals;
	•		Pre-approve any related party transactions between the Company or any of its subsidiaries and any director or executive officer;
	•		Determine requirements for, and means of, director orientation and training; and
	•		Review the charter for the Committee and assess the performance of the members of the Committee at least annually and recommend updates and changes to the Board as conditions warrant.
	•		With respect to ethical, legal and regulatory compliance:

	•		Review and assess periodically the Company’s Code of Ethical Business Conduct, recommend changes in the Code of Ethical Business Conduct as conditions warrant and confirm that management has established a system to monitor compliance with the Code of Ethical Business Conduct by officers and relevant employees of the Company;
	•		Promote an organizational culture that encourages commitment to compliance with the law and use good faith efforts to assure that corporate

information and reporting systems exist that are adequate to assure that appropriate information as to compliance matters comes to its attention in a timely manner as a matter of ordinary operations; and

•

Together with the Audit Committee assist the Board in its oversight of legal and regulatory compliance, other than matters of financial compliance (accounting, auditing, financial reporting, and investor disclosures), as to which the Audit Committee has sole oversight.

     The Board of Directors has adopted position specifications applicable to members of the Board of Directors, and nominees for the Board of Directors recommended by the Nominating/Corporate Governance Committee must meet the qualifications set forth in these position specifications. The specifications provide that a candidate for director should not ever (i) have been the subject of an SEC enforcement action in which he or she consented to the entry of injunctive relief, a cease and desist order, or a suspension or other limitation on the ability to serve as a corporate officer or supervisor, (ii) had any license suspended or revoked due to misconduct of any type or (iii) violated any fiduciary duty to the Company or its Code of Ethical Business Conduct, and should exhibit the following characteristics:

	•		Have a reputation for industry, integrity, honesty, candor, fairness and discretion;
	•		Be an acknowledged expert in his or her chosen field of endeavor, which area of expertise should have some relevance to the Company’s businesses or operations;
	•		Be knowledgeable, or willing and able to become so quickly, in the critical aspects of the Company’s businesses and operations; and
	•		Be experienced and skillful in serving as a competent overseer of, and trusted advisor to, senior management of a substantial publicly held corporation.

In addition, as specified in the charter for the Nominating/Corporate Governance Committee, nominees for the Board of Directors recommended by the Nominating/Corporate Governance Committee should contribute to the mix of skills, core competencies and qualifications of the Board through expertise in one or more of the following areas: accounting and finance, product and technology development, healthcare, manufacturing, services businesses, sales and market development, international operations, international governance, mergers and acquisitions related business development, strategic oversight, government relations, investor relations, executive leadership development, public company governance, and executive compensation design and processes.

     The Nominating/Corporate Governance Committee reviews incumbent directors against the position specifications applicable to members of the Board of Directors and independence standards set forth in the New York Stock Exchange listing standards. Additionally, since 2003, the Board as a whole, the Board committees and the individual incumbent directors who are being nominated for election at the next annual meeting of shareholders are formally evaluated annually by the Nominating/Corporate Governance Committee, whose findings are reviewed with the Board. The Nominating/Corporate Governance Committee retains a nationally recognized consulting firm to assist it with the evaluation process and retains a nationally recognized executive search firm to assist it with the identification and evaluation of new directors.

     The Nominating/Corporate Governance Committee’s policy with respect to the consideration of director candidates recommended by shareholders is that it will consider such

candidates. Any such recommendations should be communicated to the Chairman of the Nominating/Corporate Governance Committee in the manner described above in “Communications with Directors” and should be accompanied by substantially the same types of information as are required under the Company’s Code of By-laws for shareholder nominees.

     The Company’s Code of By-Laws provides that nominations of persons for election to the Board of Directors of the Company may be made at any meeting of shareholders by or at the direction of the Board of Directors or by any shareholder entitled to vote for the election of members of the Board of Directors at the meeting. For nominations to be made by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the Company and any nominee must satisfy the qualifications established by the Board of Directors of the Company from time to time as contained in the proxy statement of the Company for the immediately preceding annual meeting or posted on the Website of the Company at www.hill-rom.com. To be timely, a shareholder’s nomination must be delivered to or mailed and received by the Secretary not later than (i) in the case of the annual meeting, 100 days prior to the anniversary of the date of the immediately preceding annual meeting which was specified in the initial formal notice of such meeting (but if the date of the forthcoming annual meeting is more than 30 days after such anniversary date, such written notice will also be timely if received by the Secretary by the later of 100 days prior to the forthcoming meeting date and the close of business 10 days following the date on which the Company first makes public disclosure of the meeting date) and (ii) in the case of a special meeting, the close of business on the tenth day following the date on which the Company first makes public disclosure of the meeting date. The notice given by a shareholder must set forth: (i) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (ii) a representation that the shareholder is a holder of record, setting forth the shares so held, and intends to appear in person or by proxy as a holder of record at the meeting to nominate the person or persons specified in the notice; (iii) a description of all arrangements or understandings between such shareholder and each nominee proposed by the shareholder and any other person or persons (identifying such person or persons) pursuant to which the nomination or nominations are to be made by the shareholders; (iv) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the SEC; (v) the consent in writing of each nominee to serve as a director of the Company if so elected, and (vi) a description of the qualifications of such nominee to serve as a director of the Company.

Compensation of Non-Employee Directors

     In setting non-employee director compensation, the Board of Directors, based on recommendations from the Nominating/Corporate Governance Committee, considers the significant amount of time that directors expend in fulfilling their duties to Hill-Rom as well as the skill-level required for members of the Board. Directors who are also employees of Hill-Rom receive no additional remuneration for services as a director. Of our current Board members, only Mr. Soderberg is a salaried employee of the Company. All other directors receive separate compensation for Board service.

     Our compensation package for non-employee members of our Board is comprised of cash (annual retainers and committee meeting fees) and deferred stock shares (otherwise known as restricted stock unit) awards. Directors are also entitled to reimbursement of expenses incurred in connection with attendance at board and/or committee meetings. Our director pay package is designed to attract and retain highly-qualified, independent professionals to monitor the

effectiveness of policy and decision-making both at the Board and management level, with a view to enhancing shareholder value over the long term. Our Nominating/Corporate Governance Committee generally reviews our non-employee director compensation program, or elements thereof, on an annual basis, with the assistance of the compensation consulting firm used by the Compensation and Management Development Committee. Actual annual pay varies among directors based on committee memberships, committee chair responsibilities and meeting attendance.

     Directors receive an annual retainer of $25,000 for their service as directors, together with a $3,500 fee for each Board meeting attended. The Chairman of the Board of Directors’ annual retainer is $150,000. For any Board meeting lasting longer than one day, each director who attends receives $1,000 for each additional day. Directors who attend a Board meeting or standing committee meeting by telephone receive fifty percent (50%) of the usual meeting fee. Each director who is a member of the Nominating/Corporate Governance, Audit or Compensation and Management Development Committee receives a fee of $1,500 for each committee meeting attended. Prior to the elimination of the Finance Committee effective March 31, 2008, each member of that committee also received a fee of $1,500 for each meeting attended.

     The Chairs of the Audit, Compensation and Management Development and Nominating/Corporate Governance Committees receive an additional $10,000, $8,000, and $7,000 annual retainer, respectively. Prior to the elimination of the Finance Committee, the Chair of that committee received an additional $5,000 annual retainer. Directors who attend meetings of committees of which they are not members receive no fees for their attendance.

     In addition to earning cash retainers, each non-employee director is also awarded on the first trading day following the close of each of our annual meeting of shareholders, deferred stock shares (otherwise known as restricted stock units) under our Stock Incentive Plan. A new director receives a pro-rata portion of the annual award representing the time served during the fiscal year of joining the Board of Directors. Delivery of shares underlying such deferred stock shares occurs on the later of one year and one day from the date of the grant or the six month anniversary of the date that the applicable director ceases to be a member of the Board of Directors.

     In 2008, the annual grant consisted of 1,800 deferred stock shares for each non-employee director and 3,500 deferred stock shares for the Chairman of the Board. In connection with the spin-off of our funeral services business, the deferred stock shares granted in 2008 to directors who serve only on the Board of Hill-Rom following the spin-off were adjusted to 3,331 Hill-Rom deferred stock shares for each non-employee director and 6,476 Hill-Rom deferred stock shares for the Chairman of the Board utilizing a conversion factor designed to provide the director equivalent value both before and after the spin-off. The deferred stock shares granted in 2008 to W August Hillenbrand and Eduardo R. Menascé, who serve on the Boards of both Hill-Rom and Hillenbrand, Inc. following the spin-off, were adjusted to constitute 1,800 deferred stock shares in each company. Dividends paid on our common stock are deemed to have been paid with regard to the deferred stock shares awarded and deemed to be reinvested in our common stock at the market value on the date of such dividend, and will be paid in additional shares on the distribution date of the underlying award.

     The following table sets forth the compensation paid to our non-employee directors during the fiscal year ended September 30, 2008.

Director Compensation Table For Fiscal Year Ending September 30, 2008

(a)		(b)				(c)				(d)				(e)				(f)				(g)				(h)
																		Change in Pension
																		Value and Nonqualified
														Non-Equity				Deferred
		Fees Earned or												Incentive Plan				Compensation				All Other
		Paid in Cash				Stock Awards				Option Awards				Compensation				Earnings				Compensation				Total
Name		$ (1)				$ (2)				$ (3)				$				$ (4)				$ (5)				$
Rolf A. Classon – Chairman		$	205,750			$	185,605			$	51,426											$	232			$	443,013
Charles E. Golden		$	88,750			$	95,454			$	51,426											$	35			$	235,665
John A. Hillenbrand II (6)		$	21,000							$	53,315											$	46			$	74,361
Ray J. Hillenbrand (7)		$	33,500			$	95,454															$	74			$	129,028
W August Hillenbrand (8)		$	59,250			$	95,454			$	223,688							$	3,655			$	603,443			$	985,490
Ronald A. Malone		$	62,500			$	95,454															$	223			$	158,177
Jose A. Mejia (9)		$	4,000																			$	7			$	4,007
Eduardo R. Menascé		$	71,000			$	95,454															$	232			$	166,686
Patrick T. Ryan		$	56,250			$	95,454															$	223			$	151,927
Joanne C. Smith		$	66,500			$	95,454															$	232			$	162,186

		Deferred
		Cash				Vested Deferred Stock
		$				#				$
W August Hillenbrand(a)		$	34,647
Charles E. Golden							3,825			$	115,936
Ronald A. Malone		$	54,794

(a)

In connection with the spin-off of our funeral services business, Mr. Hillenbrand’s deferred cash compensation balance at March 31, 2008, which was $487,169 including interest, was transferred to Hillenbrand, Inc. The amount indicated in the table above represents the ending balance of Mr. Hillenbrand’s Hill-Rom board of director fees earned and deferred during the period April 1, 2008 through September 30, 2008.

(5)

Consists of pension benefits, incremental cost of aircraft usage, security expenses, Company paid life insurance and other personal benefits provided by the Company. All Other Compensation earned or allocated during the fiscal year ended September 30, 2008 is as follows:

Aircraft

Company Paid

Gross-up/Tax

Supp DB

Name

Usage (a)

Security

Health Care

Life Insurance

Reimbursement

Pension

Rolf A. Classon

Charles E. Golden

John A. Hillenbrand II

Ray J. Hillenbrand

W August Hillenbrand

$

30,182

$

17,374

$

6,298

$

178,242

$

115,887

$

205,586

Ronald A. Malone

Jose A. Mejia

Eduardo R. Menascé

Patrick T. Ryan

Joanne C. Smith

						Co. Provided				Pers. Asst.								Misc.
Name						Term Life Ins.(b)				Sal & Benefits				Communications				Benefits				Total
Rolf A. Classon						$	232															$	232
Charles E. Golden						$	35															$	35
John A. Hillenbrand II						$	46															$	46
Ray J. Hillenbrand						$	74															$	74
W August Hillenbrand						$	232			$	32,870			$	10,015			$	6,757			$	603,443
Ronald A. Malone						$	223															$	223
Jose A. Mejia						$	7															$	7
Eduardo R. Menascé						$	232															$	232
Patrick T. Ryan						$	223															$	223
Joanne C. Smith						$	232															$	232

(a)

The Company does not charge for the personal use of its aircraft, but it does report amounts related to such use as taxable income to the IRS. The value of the use of Company aircraft disclosed in the Director Compensation Table is based upon the variable cost of operating the aircraft ($2,671 per flight hour for fiscal year 2008), which includes trip-related expenses such as fuel, aircraft maintenance, crew travel expenses, on-board catering, landing and parking fees, and also takes into account flights without passengers. We do not include fixed costs that do not change based on personal usage such as pilot salaries and depreciation expense. W August Hillenbrand used approximately eight occupied flight hours during

fiscal 2008. Accordingly, included in the table above is $30,182, representing the aggregate incremental cost to the Company for Mr. Hillenbrand’s personal use of the Company’s aircraft for fiscal 2008 and is not the value reported to the IRS.

(b) Amounts represent the dollar value of insurance premiums paid by the Company during fiscal 2008. Participation in the life insurance program is voluntary and may be declined. The value of the insurance premiums paid disclosed in the Director Compensation Table is not the value reported to the IRS.

(6)		John A. Hillenbrand II retired from the Board effective February 8, 2008.
(7)		Ray J. Hillenbrand resigned from the Board effective March 31, 2008.
(8)		W August Hillenbrand and the Company entered into an agreement relating to Mr. Hillenbrand’s retirement as Chief Executive Officer of the Company on December 2, 2000. That agreement entitled Mr. Hillenbrand to receive a package of benefits from the Company, including payment of life and health insurance premiums which are grossed up for tax purposes, reimbursement of medical expenses not covered by insurance, an office, a secretary, reimbursement of miscellaneous expenses, supplemental pension fund benefit payments and limited use of the Company’s corporate aircraft for personal purposes on the same basis as the Company’s Chief Executive Officer. In connection with the spin-off of the Company’s funeral services business, the Company’s obligations under this agreement were assumed by Hillenbrand, Inc. effective March 31, 2008. During the period from October 1, 2007 to March 31, 2008, these benefits aggregated approximately $585,837. Additionally, during fiscal year 2008 the Company paid $17,374 for legal and security measures to address certain security threats to Mr. Hillenbrand and the Company as well as $232 for Company provided term life insurance.
(9)		Jose A. Mejia resigned from the Board effective December 13, 2007.

Transactions with Related Persons

     The Corporate Governance Standards for the Board require that all new proposed related party transactions involving executive officers or directors must be reviewed and approved by the Nominating/Corporate Governance Committee in advance. The Corporate Governance Standards do not specify the standards to be applied by the Nominating/Corporate Governance Committee in reviewing transactions with related persons. However, we expect that in general the Nominating/Corporate Governance Committee will consider all of the relevant facts and circumstances, including, if applicable, but not limited to: the benefits to us; the impact on a director’s independence in the event the related person is a director, an immediately family member of a director or an entity in which a director is a partner, shareholder or executive officer; the availability of other sources for comparable products or services; the terms of the transaction; and the terms available for similar transactions with unrelated third parties.

     During fiscal 2008, there were no related person transactions that are required to be disclosed in this proxy statement.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

     Background

     Our current executive officers who qualify as “named executive officers” for compensation disclosure purposes are Peter H. Soderberg, President and Chief Executive Officer; Gregory N. Miller, Senior Vice President, Chief Financial Officer and Treasurer; Patrick D. de Maynadier, Senior Vice President, General Counsel and Secretary; Kimberly K. Dennis, Group Vice President, North America Post-Acute Care; and John H. Dickey, Senior Vice President, Human Resources. In addition, Kenneth A. Camp, former Senior Vice President of the Company and President of our former Batesville Casket Company subsidiary, qualifies as a “named executive officer”. These individuals are referred to as the “Named Executive Officers.”

     On March 31, 2008, we completed the spin-off to our shareholders of our Batesville Casket funeral services business. Effective upon completion of the spin-off, Mr. Camp ceased to be an executive officer of the Company, and his employment agreement and other agreements with the Company were terminated.

     In connection with the spin-off, equitable adjustments were made to all outstanding stock option and deferred stock share (otherwise known as restricted stock unit) awards related to our common stock to the extent necessary to maintain the equivalent value of such awards upon completion of the spin-off. Pursuant to these adjustments, stock options and deferred stock shares held by funeral services business employees, including Mr. Camp, were converted to stock based awards of Hillenbrand, Inc., the new holding company for the spun-off business. Additionally, the vesting of certain outstanding deferred stock shares held by employees of the funeral services business, including Mr. Camp, was accelerated pursuant to provisions triggered by the spin-off. Stock options and deferred stock shares held by employees who continued with Hill-Rom remained as stock options and deferred stock shares of Hill-Rom and were adjusted. The outstanding stock options and deferred stock shares were converted and/or adjusted using an adjustment ratio based on the closing market price of the Company’s shares and Hillenbrand, Inc. “when issued” shares on March 31, 2008, thus maintaining the same intrinsic value for the awards that existed immediately before the spin-off. Information in this proxy statement regarding equity compensation awards gives effect to the adjustments made in connection with the spin-off, except where noted in the case of Mr. Camp.

     The elements and amounts of the compensation of the Named Executive Officers have been determined by the Compensation and Management Development Committee of our Board of Directors (the “Compensation Committee”). Hill-Rom’s compensation programs have been designed by the Compensation Committee in collaboration with management and approved by Hill-Rom’s Board of Directors.

     Objectives and Principles of Hill-Rom’s Executive Compensation Program

     The objectives of Hill-Rom’s executive compensation program are to ensure officers and key management personnel are effectively compensated in terms of base salary, supplemental compensation and other benefits that are internally equitable and externally competitive and advance the long term interests of Hill-Rom’s shareholders. Hill-Rom’s compensation program is designed to reward individual performance relative to predefined duties and responsibilities

(which may appropriately change as circumstances change). The compensation program also considers business performance at enterprise and business unit levels and long-term shareholder value creation.

     Hill-Rom’s compensation program is based on the following guiding principles, which support Hill-Rom’s commitment to maintain a compensation program that fosters performance and the creation of long-term shareholder value:

	•		Aligning management’s interests with those of shareholders;
	•		Motivating and providing incentive for employees to achieve superior results;
	•		Assuring clear accountabilities and providing rewards for producing results;
	•		Ensuring competitive compensation in order to attract and retain superior talent; and
	•		Ensuring simplicity and transparency in compensation structure.

     To attract and retain high-caliber executive officers, Hill-Rom’s total compensation packages for the Named Executive Officers are intended to be “in line” with what is offered by companies with which it competes for executive talent. Hill-Rom also analyzes overall compensation carefully to ensure it recognizes other factors such as length of service, the level of experience and responsibility, complexity of position, internal pay equity within Hill-Rom and the degree of replacement difficulty. Hill-Rom also analyzes individual performance, including such qualities as leadership, strategic vision and execution of corporate initiatives. In addition to compensation being competitive and aligned with individual performance, significant portions of executive compensation should be tied to both the achievement of Hill-Rom’s key operational and financial performance goals and the value of Hill-Rom stock, thereby aligning executive compensation with both the success of Hill-Rom’s business strategy and objectives as well as the returns realized by its shareholders. To that end, Hill-Rom management has been granted opportunities for both short-term and long-term incentives that are tied to the achievement of key operational and financial metrics that drive Hill-Rom’s business strategy. Furthermore, Hill-Rom grants time-based stock options and deferred stock shares (also referred to as restricted stock units) and performance based deferred stock shares and non-qualified stock options to ensure alignment with the interests of Hill-Rom’s shareholders.

     Hill-Rom’s executives’ fixed compensation (which primarily includes base salaries, benefits and limited perquisites), as well as executives’ short-term and long-term performance based compensation at target levels of performance, have generally been designed to fall at approximately the 50th percentile of compensation paid by companies with which Hill-Rom competes for executive talent. Total compensation is paid above or below the 50th percentile of the applicable market when pre-established business and/or personal criteria targets are exceeded or are not achieved. Our executives’ short-term and long-term performance based compensation are each expressed as a percentage of their base salaries. Total direct compensation is targeted at the 50th percentile of the applicable market.

     To create an ongoing personal financial stake in Hill-Rom’s success for each officer, further align the interests of the officers and Hill-Rom’s shareholders and motivate officers to

maximize shareholder value, Hill-Rom’s Board of Directors has adopted guidelines that require its executive officers to maintain specified stock ownership percentages.

     Process for Determining Compensation

     The Compensation Committee is charged with ensuring that Hill-Rom’s compensation programs meet the objectives outlined above. In that role, the Compensation Committee makes all executive compensation decisions, administers Hill-Rom’s compensation plans and keeps the Board of Directors informed regarding executive compensation matters. The Compensation Committee, in consultation with Hill-Rom’s compensation consultant, determines the compensation of the Chief Executive Officer. The Chief Executive Officer makes recommendations to the Compensation Committee regarding the compensation of his direct reports, including Hill-Rom’s other Named Executive Officers. From time to time, Hill-Rom management also provides recommendations to the Compensation Committee regarding modifications to the elements and structure of Hill-Rom’s compensation program. The process and methodology for determining compensation for the Named Executive Officers is generally consistent for each Named Executive Officer, including the Chief Executive Officer, unless otherwise noted.

     The Compensation Committee has normally engaged nationally recognized independent compensation and benefits consulting firms (1) to evaluate independently and objectively the effectiveness of and assist with implementation of Hill-Rom’s compensation and benefit programs and (2) to provide the Compensation Committee with additional expertise in the evaluation of Hill-Rom’s compensation practices and of the recommendations developed by management and firms engaged by Hill-Rom. The consultants also provide information and insights relative to current and emerging compensation and benefits practices. Since April 2005, the Compensation Committee has retained Ernst & Young as its compensation and benefits consulting firm. For executive officers of Hill-Rom, Ernst & Young has provided peer group proxy and survey data regarding the amount, form and mix of compensation at the twenty-fifth percentile, median and seventy fifth percentile, which have been used by the Compensation Committee as one reference point in its decision making around compensation packages.

     Among the factors considered by the Compensation Committee in determining the elements and amounts of total compensation are peer group data, survey data, internal pay equity, external market conditions, individual factors, and aggregate compensation.

     Peer Group and Survey Data. As one of several factors in considering approval of elements of Hill-Rom’s compensation programs, the Compensation Committee has compared Hill-Rom’s compensation programs and performance against an approved peer group of companies. The compensation peer group, which is periodically reviewed and updated by the Compensation Committee, currently consists of twelve companies that are similar in size and in similar industries as Hill-Rom and with whom Hill-Rom may compete for executive talent. For the 2008 fiscal year, the companies comprising Hill-Rom’s compensation peer group, which was revised in December 2007 for the 2008 fiscal year, were:

	Apria Healthcare Group, Inc.		Bard (C.R.), Inc.
	Beckman Coulter, Inc.		Becton Dickinson & Co.
	Conmed Corporation		DENTSPLY International, Inc.
	Getinge AB		Hospira, Inc.
	Invacare Corporation		Kinetic Concepts, Inc.
	Mettler-Toledo International, Inc.		Respironics, Inc. (1)
	Steris Corporation

     In addition to peer group data, the Compensation Committee considers survey data that include a broad sample of Fortune 1000 companies, focusing on data regarding companies with revenues within a reasonable range of Hill-Rom or its business units, companies in the manufacturing industry and companies with a comparable number of full time equivalent employees. The Compensation Committee uses data compiled from various compensation surveys (i.e., consolidated data averaged from at least three surveys) from human resource benefit firms such as Watson & Wyatt, Mercer and others as appropriate. The purpose of the survey data is to provide an additional source of market data to validate the findings under the proxy analysis. In particular, the survey data provide additional data based on the specific job responsibilities of the Named Executive Officers compared to the appropriate market.

     Internal Pay Equity. From time to time, the Compensation Committee has examined the relationship between the compensation paid to executives within each pay grade and within Hill-Rom as a whole to avoid any unjustified differences in compensation. In December 2007, the Compensation Committee compared the pay of the Company’s Chief Executive Officer to the next highest executive and to the average of its four other Named Executive Officers as part of its analysis and approval of the compensation program for fiscal year 2008. In light of this information (coupled with other information reviewed as described in more detail below), the Compensation Committee did not identify issues within this analysis that would warrant any changes in compensation strategy. The Compensation Committee intends to review internal pay equity again in the Fall of 2009 as part of a total compensation review for the Company’s Named Executive Officers.

     External Market Conditions and Individual Factors. The Compensation Committee is aware that it cannot establish total executive compensation levels solely on the basis of the median range of competitive benchmark survey data without additional analysis. Accordingly, the Compensation Committee also takes into account external market conditions and individual factors when establishing the total compensation of each executive. Some of these factors include the executive’s length of service, the level of experience and responsibility, complexity of position, individual performance, internal pay equity within Hill-Rom and the degree of replacement difficulty.

     Aggregate Compensation. For Named Executive Officers of Hill-Rom, the Compensation Committee has considered the aggregate value of base salary, short-term incentive compensation at target level and the estimated value of long-term incentive compensation. The Compensation Committee has compared the aggregate amount of these elements of compensation for the Named Executive Officers to the aggregate amount of the same elements of named executive officer compensation at other companies using peer group and survey data and targeted aggregate compensation of Hill-Rom’s Named Executive Officers at median levels.

     In addition, in December 2007, the Compensation Committee reviewed the total compensation of the Company’s Named Executive Officers in comparison to the total compensation of its peer group companies, in each case as reported under the SEC’s new disclosure rules for executive compensation. The purpose of this high level review was to look at all elements of compensation that are not typically captured within a total direct compensation analysis covering base salary, annual incentive, and long term incentive compensation and, if there were significant differences, to understand what elements of compensation gave rise to the differences. Based on its total compensation review, the Compensation Committee did not identify any issues that warranted a change to the existing strategy. The Compensation Committee has scheduled an updated total compensation review for the Company’s Named Executive Officers for the Fall of 2009.

     As a supplemental analytical tool for the review of the total compensation of the Named Executive Officers, the Compensation Committee also reviewed tally sheets for the Named Executive Officers in December 2007 and 2008. The tally sheets provided information not only relative to the total compensation of the Named Executive Officers, but also provided information on how changing one element of pay could impact other elements. The Compensation Committee did not identify any issues that would warrant a change in the current compensation strategy for any of the Named Executive Officers.

     Elements of Executive Compensation

     The three major components of Hill-Rom ‘s executive officer compensation are: (1) base salary, (2) variable cash incentive awards and (3) long-term, equity-based incentive awards. Each component of the program was developed in a “building block” approach, with the objective of developing a compensation package based on each element being competitive, based on peer group proxy statement and survey data, while also being competitive as a whole.

     Base Salary. Hill-Rom provides senior management with a fixed level of cash compensation in the form of base salary that is competitive and consistent with their skill level, experience, knowledge, length of service with Hill-Rom and the level of responsibility and complexity of their position. Base salary is intended to aid in the attraction and retention of talent in a competitive market. The target salary for Hill-Rom’s senior management has been based in part on the competitive market median of Hill-Rom’s peer group, supplemented by published survey data (the “competitive market”). Actual base salaries may differ from the competitive market median target as a result of various factors, including length of service, the level of experience and responsibility, complexity of their position, individual performance, internal pay equity within Hill-Rom and the degree of difficulty in replacing the individual. The base salaries of senior management are reviewed by the Compensation Committee on an annual basis, generally during the first quarter of the fiscal year, as well as at the time of promotion or significant changes in responsibility. Executives are eligible for merit based increases based on prior year performance. Individual performance is determined by use of a broad based internal performance management system, which differentiates individual achievement. Performance is ranked on a scale that ranges from “unacceptable” to “outstanding,” with a corresponding range of possible merit based increases in base salary. For 2008, the Named Executive Officers, other than Mr. Camp who received a 3.0% merit increase based on his performance, did not receive a merit increase in order to partially fund a “founders grant” of 30 deferred stock shares (otherwise known as restricted stock units) to each of approximately 6,000 Hill-Rom associates in connection with the spin-off of the funeral services business. For 2009, the recommended range of merit based increases was 0% to 6%, with a target increase of 3%. Our Named Executive

Officers received merit based increases for 2009 ranging from 0% to 5.8%. Base salaries also may increase based on changes in the competitive market. As a result of market review of Mr. Dickey’s base compensation, he was awarded, in addition to his merit increase, a market adjustment of $12,148 resulting in a final fiscal 2009 base salary of $268,000.

     When adjusting base salaries, the Compensation Committee also considers the effects of the adjustment on other elements of compensation that may be tied to or related to base salary, including annual cash incentive awards, pension and retirement plan benefits and severance and change in control benefits.

     The base salary paid to each of our Named Executive Officers during the year ended September 30, 2008 is set forth in the Summary Compensation Table under “—Compensation of Named Executive Officers” below. The Compensation Committee has approved the following base salaries for 2009: Mr. Soderberg — $840,000; Mr. Miller — $400,000; Mr. de Maynadier $363,000; Ms. Dennis — $297,000; and Mr. Dickey — $268,000. Variances from the target increase were based on individual performance.

     Annual Cash Incentives

     Overview. The payment of annual cash incentives is formula-based, with adjustments for achievement of individual performance goals, and is governed by Hill-Rom’s Short-Term Incentive Compensation Plan (“STIC Plan”). The objective of the STIC Plan is to provide a total level of cash compensation that is heavily weighted on the achievement of internal performance objectives, which takes into consideration the competitive market median total cash compensation.

     The STIC Plan is designed to motivate executives to perform and meet company and individual objectives, with significant compensation at risk. The program provides a mechanism to pay amounts above the market median (50^th percentile) total cash compensation when Hill-Rom experiences above average financial success, is designed to encourage high individual and group performance and is based on the philosophy that employees should share in the success of Hill-Rom if above average value is created for Hill-Rom shareholders. The potential to be paid significant awards plays an important role in the attraction and retention of executives.

     Pool Funding Percentage. Under the terms of the STIC Plan, the Compensation Committee establishes specific financial objectives for the Company and its business units, and may also establish non-financial objectives. A STIC Plan pool is established for each of the Company and its business units and is funded based upon the achievement by the Company or the applicable business unit of the established performance objectives. Each STIC Plan pool is funded between 0% and 150% of the product of the target incentive compensation opportunity (expressed as a percentage of their base salary) for each STIC Plan participant times their base salary (“Pool Funding”). STIC Plan pools are funded at 100% when performance is at target levels and are funded up to 150% when performance exceeds target levels. In general, STIC Plan pools are not funded, and no short-term incentive compensation is payable, when minimum financial performance objectives are not met. However, in the event that minimum financial performance objectives are not met, the Hill-Rom pool is funded at a minimum funding level of 30% in order to provide the CEO a pool of dollars with which to award high performing associates or business units in his discretion.

     Short-term financial performance objectives are established annually at levels that typically reflect strong financial performance under then existing conditions. Fiscal year 2008 financial performance objectives were measured in terms of revenues and operating income for Hill-Rom and its business units, with each STIC Plan pool being funded 75% by operating income and 25% by revenues generated within the Company or the applicable business unit. Despite the performance objectives, however, the Compensation Committee has the discretion to exclude from the calculation of applicable revenue and operating income targets for purposes of funding STIC Plan pools, nonrecurring special charges and amounts. A list of categories of adjustments which may be considered was pre-approved by the Compensation Committee in 2005 and generally includes items such as significant litigation and settlement costs; restructuring charges; changes in accounting policies; acquisition and divestiture impacts; and major unbudgeted material expenses incurred by or at the direction of the Board. The target objectives are intended to represent stretch goals based on the business plan of Hill-Rom or the applicable business unit. The objectives are set with the intention that the relative level of difficulty in achieving the targets is consistent from year to year. In fiscal year 2006, the Company’s consolidated performance achievement was slightly below target. In fiscal year 2007, achievement by the Company was above the minimum financial performance objectives but below target. For fiscal 2008, Hill-Rom had the following revenue and operating income targets:

		Revenues				Operating Income
Hill-Rom		$1,455.1 million				$135.0 million

     The Company believes that it would be competitively harmful to disclose the business unit financial performance objectives as that would enable competitors to identify what the financial targets and business strategies are for certain specific operating businesses.

     At its December 2, 2008 meeting, the Compensation Committee reviewed the adjusted financial performance of the Company against the predetermined financial targets and determined that for fiscal 2008, achievement for funding of the Hill-Rom pool was 104% of target.

     Individual STIC Percentage. Each participant is entitled to participate in the STIC Plan pools determined by the Compensation Committee. In fiscal 2008, Mr. Soderberg, Mr. Miller, Mr. de Maynadier and Mr. Dickey participated in only the Hill-Rom pool and were eligible for payouts based 100% on the funding of that pool. The Hill-Rom pool funding was calculated based 50% on total Hill-Rom performance and 50% based on the weighted average performance of Hill-Rom’s three principal business units: North America Acute Care, North America Post-Acute Care, and International and Surgical. Ms. Dennis participated in both the Hill-Rom pool and the North America Post-Acute Care pool and was eligible for payouts based 50% on the funding of the Hill-Rom pool and 50% on the funding of the North America Post-Acute Care pool.

     Under the terms of the Plan for fiscal 2008, short term incentive compensation target opportunity, based on Hill-Rom or business unit performance, was equal to 90% of base salary in the case of Mr. Soderberg and 50% of base salary in the case of the other Named Executive Officers. The STIC Plan provides for individual short term incentive compensation payouts ranging up to a maximum of two times the executive’s short term incentive compensation target opportunity set forth above depending upon achievement of applicable Pool Funding and personal performance objectives (measured by a personal performance multiplier from 0% to

150%) determined, in the case of the President and Chief Executive Officer of Hill-Rom by the Compensation Committee, and, in the case of other Named Executive Officers and other employees, by the President and Chief Executive Officer of the Company and approved by the Compensation Committee. Individual performance is measured using the same performance factors used for determining merit based increases in base salary. Those personal performance factors are based on achievement of personal performance goals established for each individual, including each of the Named Executive Officers, at the beginning of each fiscal year. Those goals are both qualitative and quantitative in nature and, therefore, the evaluation of performance against those objectives by the Compensation Committee is, in part, subjective. Additionally, the Compensation Committee evaluates individual performance against objectives that arise during the course of the applicable fiscal year that were not considered when individual goals were determined at the beginning of the year.

     For 2008, the individual performance objectives established at the beginning of the year for our Named Executive Officers included the following:

	•		Peter H. Soderberg: successful completion of the spin-off of the funeral services business; overseeing improvements in new product development and innovation; continuing to develop the Hill-Rom brand; executing on our plans to grow through acquisitions and business alliances; and enhancing our risk management processes.
	•		Gregory N. Miller: successful completion of the spin-off of the funeral services business; continuing to improve and develop various aspects of the functions overseen by our Chief Financial Officer; and enhancing our risk management processes.
	•		Patrick D. de Maynadier: successful completion of the spin-off of the funeral services business; supporting our business development projects, including acquisitions and alliances; managing significant litigation; improving our records management and document retention processes; and enhancing our risk management and compliance related processes.
	•		Kimberly K. Dennis: achievement of the 2008 plan for the North America Post-Acute Care business segment; various objectives related to the execution of our strategy for North America Acute Care business segment, as described in our annual and quarterly reports filed with the SEC, including objectives related to new product introductions, alliances and acquisitions and development of the direct-to-consumer business; and development of a plan to mitigate risk in our third party payer business.
	•		John H. Dickey: aligning the human resources function with our 2008 plan and 2009 budget; aligning the human resources team to support our strategic focus on people, processes and culture; successful completion of the spin-off of the funeral services business; enhancing the management and leadership talent within our organization; creating and sustaining an ownership culture within our organization; and assisting the Board of Directors and the Compensation and Management Development Committee in carrying out their duties through providing human resources expertise.

     After considering personal performance against the goals described above and other objectives that arose during the course of the year, and Company and business unit financial performance, the Compensation Committee awarded short-term incentive compensation to our Named Executive Officers for fiscal 2008 as set forth in the Summary Compensation Table under “—Compensation of Named Executive Officers” below.

     The following provides an example of the calculation of annual cash incentives, using Mr. Soderberg. As described above, Mr. Soderberg’s target short term incentive compensation opportunity for fiscal 2008 was 90% of base salary, or approximately $756,000. He was eligible for payouts based 100% on the funding of the Hill-Rom pool. Based on the performance levels described above for Hill-Rom and its three principal business units, the Hill-Rom pool was funded at 104% of target opportunity. Thus, the financial performance modifier for Mr. Soderberg based on these funding levels was approximately 104%. Based on his individual performance, Mr. Soderberg received an individual performance modifier of 110%. Accordingly, Mr. Soderberg’s annual cash incentive payment was equal to approximately 114% of his $756,000 target opportunity, or approximately $862,000.

     Short-term incentive compensation is calculated for each executive participant at the end of each fiscal year and is payable in cash. Payment of earned 2008 short-term incentive compensation was made during the first quarter of fiscal 2009. All or a portion of short term incentive compensation may be deferred by the executive and invested either in cash or common stock to be paid at the end of the deferral period.

     Section 162(m). Section 162(m) of the Internal Revenue Code (the “Code”) limits tax deductibility of certain executive compensation in excess of $1 million per year unless certain requirements are met. Section 162(m) was considered in developing the company’s STIC Plan, but the Company preferred to retain the flexibility of upward discretion. As a result, awards under the STIC Plan do not satisfy the performance based exception under Section 162(m) and therefore are subject to Section 162(m) and included in the $1 million dollar compensation cap in the year the awards are included in taxable income of the recipient.

     Long-Term Equity Awards

     Overview. Hill-Rom’s Stock Incentive Plan, which was approved by Hill-Rom’s shareholders in 2002 and is proposed to be amended as described elsewhere in this proxy statement, provides for the opportunity to grant stock options and other equity-based incentive awards to officers, other key employees and non-employee directors to help align those individuals’ interests with those of shareholders, to motivate executives to make strategic long-term decisions, and to better enable Hill-Rom to attract and retain capable directors and executive personnel.

     Time Based Equity Awards Overview. To better align the interests of executive officers with those of Hill-Rom’s shareholders, the Compensation Committee began in 2004 to substitute deferred stock shares (otherwise known as restricted stock units) under the Stock Incentive Plan for a portion of the stock option grants that would have previously been granted to executives. In September of 2005, after considering the Stock Incentive Plan burn rate, number of participants and potential aggregate target awards for participants, the Compensation Committee decided that the total value of time based equity grants should be divided equally between stock options and deferred stock shares because the Compensation Committee wanted to provide equity based incentives balanced between higher risk and opportunity stock options, which are potentially

more dilutive to Hill-Rom’s Stock Incentive Plan, and outstanding equity with less risky and potentially less dilutive deferred stock shares, which are effective executive retention vehicles.

     An option’s value to an executive upon exercise of the option and sale of the underlying shares is tied to corporate performance because higher corporate performance leads to higher share price and options have no value if equity value does not increase over the grant date stock price. Deferred stock shares provide for long-term incentive opportunities that differ from stock options. Deferred stock shares can have value to the executive even if the issuer’s share price declines prior to vesting, increasing their value as a retention device. Although deferred stock shares offer less exposure to downside equity performance, there is also less opportunity related to upside equity performance with deferred stock shares when compared to stock options because a lower number of deferred stock shares are awarded to provide comparable grant date fair value to stock options. If an executive does not perform and is terminated before full vesting, he or she loses the value of unvested awards’ full potential award value, subject to certain early vesting events, such as a change in control, death, disability or retirement as described in more detail under "—Retirement, Change in Control Agreements and Severance” below.

     Consistent with Hill-Rom’s long term practices, time based equity awards are granted only by the Compensation Committee and are typically granted annually in November or December, following certification of Hill-Rom’s financial results from the immediately preceding fiscal year, regardless of the current trading price of Hill-Rom’s equity. Stock option exercise prices are the average of high and low equity price on the date of grant, which is the date the award is approved by the Compensation Committee. Stock options are typically granted for terms of ten years. Historically, stock options typically have vested one-third on each of the first three anniversaries of the date of grant, and deferred stock shares typically have vested in twenty percent, twenty-five percent, twenty-five percent and thirty percent increments on the day after the dates of each of the second, third, fourth and fifth anniversaries of grant. Beginning with the awards granted in December 2008, the Compensation Committee has changed the standard vesting terms of stock option and deferred stock share awards so that stock options vest twenty-five percent on each of the first four anniversaries of the date of grant, and deferred stock shares vest in fifty percent, twenty-five percent and twenty-five percent increments on the second, third and fourth anniversaries of the date of the grant, respectively. This change was made to bring Hill-Rom’s practices more in line with those of its peers and to simplify communication and accounting with respect to these awards.

     Time Based Equity Awards Granted in Fiscal 2008 for Fiscal 2007 Performance. These equity based awards were granted to executive officers in December of 2007 based on a grant range of between 0% and 200% of a standard grant amount. The standard grant amount is determined by the Compensation Committee as competitive market median awards for each executive grade level. The actual grant of awards, with potential grants up to 200% of standard grant, is made by considering the individual’s performance through the Hill-Rom performance management system, using the same performance factors as those used for merit based salary increases and short-term incentive compensation awards. While time based equity awards are focused primarily on motivating future performance, to the extent that the executive officers’ personal performance objectives for the most recently completed fiscal year have not been achieved, those individuals’ equity based grants may be made at levels that are lower on the standard range of grants available. Awards made in fiscal 2008 (December 2007) based on fiscal 2007 performance for our Named Executive Officers other than Mr. Soderberg were based on

the following ranges of potential stock option and restricted stock unit awards (as adjusted for the spin-off of the funeral services business):

						Deferred Stock Share
						(otherwise known as
						Restricted Stock
		Stock Option Range				Unit) Range
Gregory N. Miller			0 to 42,180				0 to 11,100
Kenneth A. Camp			0 to 51,800				0 to 13,690
Patrick D. de Maynadier			0 to 42,180				0 to 11,100
Kimberly K. Dennis			0 to 42,180				0 to 11,100
John H. Dickey			0 to 42,180				0 to 11,100

     Awards made to Mr. Soderberg in fiscal 2008 (December 2007) based on fiscal 2007 performance were determined by the Compensation Committee based on an assessment of Mr. Soderberg’s individual performance. Actual awards granted to the Named Executive Officers during the fiscal year ended September 30, 2008 are set forth in the Grants of Plan-Based Awards Table under “—Compensation of Named Executive Officers” below.

     As part of its analysis and approval of the fiscal 2008 long-term incentive awards, the Compensation Committee reviewed information relative to equity wealth accumulation based on previous grants. The purpose of this analysis was to determine whether prior and proposed grants are likely to be effective for retention and performance incentive to the Named Executive Officers, as well as to determine whether the accumulation of equity warranted continued participation in severance and change in control programs of the Company. Based on its analysis, the Compensation Committee did not identify any issues that would warrant a change in the existing long-term incentive strategy.

     Time Based Equity Awards Granted in Fiscal 2009 for Fiscal 2008 Performance. These equity based awards were granted to executive officers in December 2008 based on a multiple of the executive officer’s annual base salary. The awards could range from 0% to 200% of base salary, with a target of 100% of base salary, for Named Executive Officers other than the CEO. The awards for the CEO could range from 0% to 480% of base salary, with a target of 240% of base salary. The Company elected to use a process based on multiples of base salary for determining equity awards in order to more accurately target market median compensation levels and to have a clear and simple means of comparing equity awards to other elements of compensation. The target award amount is determined by the Compensation Committee as competitive market median. After considering the individual performance for the Named Executive Officers, the Compensation Committee granted the following equity awards in December 2008:

						Deferred Stock Shares
						(otherwise known as
		Stock Options				Restricted Stock Units)
Peter H. Soderberg			179,041				51,999
Gregory N. Miller			33,571				9,750
Patrick D. de Maynadier			31,286				9,087
Kimberly K. Dennis			25,578				7,429
John H. Dickey			22,061				6,408

     In addition to reviewing the equity accumulation information as part of the approval of fiscal 2008 awards for fiscal 2007 performance, the Compensation Committee also reviewed the overall share usage under its current stock incentive program prior to approving the fiscal 2009 awards for fiscal 2008 performance. The Compensation Committee determined that the Company’s overall dilution trends and its annual dilution rate, when compared to peer group and market data, were reasonable, and no changes were warranted.

     Performance Based Equity Awards. Beginning in the third quarter of fiscal 2007, Hill-Rom began granting performance based equity awards to its executive officers. These awards are consistent with our compensation program’s guiding principles and were designed to (1) align the executive officers’ interests with those of shareholders, (2) motivate and provide incentive to achieve superior results, (3) assure clear accountabilities and provide rewards for producing results, and (4) ensure competitive compensation. The award level of the performance based awards granted for fiscal year 2007 to fiscal year 2009 performance was calculated to place the Named Executive Officers total direct compensation at market median while subsequent performance based awards allow for above median compensation for above median performance.

     Vesting of the performance based equity awards is contingent upon achievement of three-year or one-year, two-year and three-year performance targets and corresponding service requirements. These performance measures reflect Hill-Rom’s confidential strategic plan and Hill-Rom does not disclose the amount publicly for competitive reasons. These measures were chosen based upon the importance of these objectives in the achievement of Hill-Rom’s strategic plan, providing quality earnings and creating value for Hill-Rom’s stockholders. In setting these performance targets, Hill-Rom also considered the performance of its peer group, market indices and customer base with the intent that these goals be set to represent stretch goals relative to Hill-Rom’s customers and peers. Achievement of these targets is believed to be a “challenging” goal. However, the first performance based awards were made in April of 2007, and, therefore, there is no historical precedent on which to assess the likelihood of achievement. These performance measures are subject to adjustment by the Compensation Committee based upon unusual or extraordinary items that were not contemplated when the performance measures were set and may be out of the control of management. These items are the same as those that are excluded in the calculation of performance measures for purposes of short-term incentive compensation.

     Performance Based Equity Awards Granted for Fiscal 2007 to Fiscal 2009 Performance. In April 2007, Hill-Rom granted performance based deferred stock shares (otherwise known as restricted stock units) to its executive officers including the Named Executive Officers. These performance based deferred stock shares are subject to any stock dividends, stock splits, and other similar rights inuring to common stock but, unlike the time based deferred stock shares

described above, are not entitled to cash dividend reinvestment. The deferred stock shares vest based on the achievement of one-year, two-year, and three-year performance targets related to cumulative revenue, cumulative operating income and return on assets employed and corresponding service requirements. While there can be 100% vesting if the three year targets are met, when the annual targets are met 20% may vest in year one, 20% may vest in year two, and 60% may vest in year three. For the one-year performance targets related to fiscal 2007 performance, the objectives were not achieved and no interim vesting occurred. For the two-year performance targets related to fiscal 2008 performance, the cumulative revenue target was achieved and, under the plan rules, 20% of the grant related solely to that performance measure vested at the end of fiscal 2008. The other performance measures under this grant (return on assets employed and operating income) failed to meet the performance target and no vesting under these measures occurred.

     The second quarter 2007 performance based awards granted to the Named Executive Officers are set forth in the Outstanding Equity Awards Table under “—Compensation of Named Executive Officers” below.

     Performance Based Equity Awards Granted for Fiscal 2008 to Fiscal 2010 Performance. In the second quarter of 2008, Hill-Rom granted performance based stock option awards to its executive officers including the Named Executive Officers. The performance based stock option awards vest based on three-year performance targets related to cumulative revenue, cumulative earnings per share and free cash flow. If the performance goals are met at the maximum level, these performance based stock option awards will fully vest at the end of fiscal 2010.

     In the case of Mr. Soderberg’s performance based stock option award, due to reaching the annual stock option award limit as stated in our Stock Incentive Plan, his award is a combination of stock options (up to the annual stock option limit) and performance based deferred stock shares representing the excess dollar amount of options over the annual stock option limit. However, all performance based stock options must vest prior to the vesting of the performance based deferred stock shares.

     The performance based awards granted to the Named Executive Officers during the fiscal year ended September 30, 2008 are set forth in the Grants of Plan Based Awards and Outstanding Equity Awards Tables under “—Compensation of Named Executive Officers” below.

     Performance Based Equity Awards Granted for Fiscal 2009 to Fiscal 2011 Performance. During the first quarter of fiscal 2009, Hill-Rom granted performance based stock options to key employees, including each of our Named Executive Officers. The total award was divided evenly into two separate grants for accounting purposes. The first grant, representing 50% of the total award, vests based on three-year performance targets related to cumulative revenue and cumulative earnings per share. The second grant, representing the other 50% of the total award, vests based on three-year performance targets related to relative total shareholder return. All other terms of the two grants are the same. If the performance goals are met at the maximum level, these performance based stock option awards will fully vest at the end of fiscal 2011.

     The awards were in the following amounts for the Named Executive Officers:

						Performance Based
		Performance Based				Deferred
		Stock Options				Stock Shares
Peter H. Soderberg			191,055				48,510
Gregory N. Miller			140,143			NA
Patrick D. de Maynadier			103,375			NA
Kimberly K. Dennis			79,929			NA
John H. Dickey			66,182			NA

     Mr. Soderberg’s performance based stock option awards are a combination of stock options, up to the annual individual stock option limit under our Stock Incentive Plan, and performance based deferred stock shares (otherwise known as restricted stock units), representing the excess dollar amount of options over that limit. However, under each award, all performance based stock options must vest prior to the vesting of the performance based deferred stock shares.

     Other Equity Based Compensation. In addition to the equity awards described above, senior management may from time to time receive additional equity based compensation at the date of hire, upon promotion, for special recognition or upon a significant change in responsibility. These awards are used as a recruiting and retention tool. These grants are typically in the form of stock options or deferred stock shares (otherwise known as restricted stock units) and are typically granted as a percentage of the respective employee’s base salary. There were no Other Equity Based Compensation awards made to the Named Executive Officers during fiscal year 2008.

     Share Ownership Guidelines. All executive officers and designated members of management of Hill-Rom are expected to own shares of Hill-Rom common stock. Specifically, our Chief Executive Officer, his executive officer direct reports, including the Named Executive Officers, from and after the later to occur of (1) February 13, 2006 or (2) the date on which any such individual first became an officer of Hill-Rom or any of its subsidiaries (“Start Date”) are required to hold shares of Hill-Rom common stock or equivalents described below at the following levels (“Required Ownership Level”):

		Required Ownership Level
Position		(Expressed as Base Annual Salary Multiple)
Chief Executive Officer		4 x Base Annual Salary
Other Named Executive Officers		2 x Base Annual Salary

     Shares owned outright (including vested deferred shares) and deferred stock shares (otherwise known as restricted stock units), whether vested or unvested, count as share equivalents towards the Required Ownership Level. The Required Ownership Level must be achieved within five years from the Start Date. Failure to achieve or maintain the Required Ownership Level may result in (1) the applicable individual being required to hold all after tax vested deferred stock shares and after-tax shares acquired upon exercise of stock options or (2) suspension of future restricted stock or deferred stock share grants until the Required Ownership Level is achieved. The Compensation Committee (or its designee) may make exceptions, in its (his or her) sole discretion, in the event of disability or great financial hardship.

     Section 162(m). The Stock Incentive Plan is designed to provide for the grant of awards that meet the requirements of Section 162(m) of the Code and also enables the Compensation Committee to grant awards that do not satisfy the performance based pay exemption under the Section 162(m) requirements. For example, time-based vested deferred stock share (otherwise known as a restricted stock unit) awards do not satisfy the performance based exception under Section 162(m) and therefore are subject to Section 162(m) and included in the $1 million dollar compensation cap in the year the awards are included in taxable income of the recipient.

     Retirement, Change in Control Agreements and Severance

     Overview. Hill-Rom believes that it is in the best interests of it and its shareholders to have the unbiased dedication of its executives, without the distraction of personal uncertainties such as retirement or a change in control. Hill-Rom has designed its senior management retirement and other post-employment benefit programs to reduce such distraction. Hill-Rom believes that its programs allow for a “smooth” transition in the event of retirement or a change in control without providing “windfall” benefits to management. It also believes that these benefits are at market levels and competitive with those of other comparable companies.

     The components of Hill-Rom’s retirement benefits program are as follows:

	•		Normal Retirement Guidelines
	•		Deferred Compensation Program
	•		Pension Plan
	•		Savings Plan
	•		Supplemental Executive Retirement Plan
	•		Change in Control Agreements
	•		Severance Pay Plan

     Normal Retirement Guidelines. Executives currently employed, including the Named Executive Officers who are at least 55 years of age and with 5 years length of service, are eligible to receive certain benefits under Hill-Rom’s Stock Incentive Plan. These guidelines are incorporated into each individual equity award agreement and have been approved by the Compensation Committee. The following is allowed:

	•		accelerated vesting of outstanding time-based deferred stock awards and stock options, which have been held for at least one year;
	•		partial vesting of outstanding performance based deferred stock awards, which have been held for at least one year; and
	•		an extension of up to three years of the time to exercise eligible outstanding stock options.

     Executive Deferred Compensation Program. Under the Hill-Rom Holdings, Inc. Executive Deferred Compensation Program (the “Deferred Compensation Program”) certain executives, including the Named Executive Officers, who are chosen by the Compensation Committee may elect to defer all or a portion of their base compensation, payments under the STIC Plan and certain other benefits to be paid in years later than when such amounts are due. As of September 30, 2008, none of the Named Executive Officers participate or have balances in the Deferred Compensation Program.

     Pension Plan. The Hill-Rom Holdings, Inc. Pension Plan (the “Pension Plan”) covers officers and other employees of Hill-Rom and its subsidiaries. Directors of the Company who are not employees of the Company or one of its subsidiaries are not eligible to participate in the Pension Plan. The principal terms of the Hill-Rom Pension Plan are described below.

     Contributions to the Pension Plan by Hill-Rom are made on an actuarial basis, and no specific contributions are determined or set aside for any individual. Effective June 30, 2003, the Pension Plan was closed to new participants. Existing participants, effective January 1, 2004 were given the choice to remain in the Pension Plan and to continue earning credited service or to freeze their accumulated benefit as of January 1, 2004 and to participate in an enhanced defined contribution savings plan, as described below.

     The Code limits the amount of benefits that may be paid under the Pension Plan. A supplemental pension benefit that makes up for the Code limitations is provided under the SERP described below. Benefits under the Pension Plan are not subject to deductions for Social Security or other offset amounts.

     Employees who retire under the Pension Plan receive fixed benefits calculated by means of a formula that takes into account the highest average annual calendar year eligible compensation earned over five consecutive years and the employee’s years of service.

     For information regarding the pension benefits payable to our Named Executive Officers, see the Pension Benefits at September 30, 2008 table under “—Compensation of Named Executive Officers” below.

     Savings Plan. Hill-Rom maintains the Hill-Rom Holdings, Inc. Savings Plan (the “Savings Plan”), which covers substantially all employees, including senior management. Under the Savings Plan, which is a tax-qualified retirement savings plan, participating employees may contribute up to 40 percent of compensation on a before-tax basis. Hill-Rom contributes a matching contribution to the Savings Plan, for those employees who are not active participants in the Pension Plan and for those employees hired on or after July 1, 2003, in an amount equal to fifty cents for each dollar contributed by participating employees on the first six percent of their compensation. Additionally, Hill-Rom annually contributes to the Savings Plan, (1) for employees who are active participants in the Pension Plan and employees who are paid commissions, an amount equal to three percent of such employees’ compensation, and (2) for employees who are not active participants in the Pension Plan and for those employees hired on or after July 1, 2003, an amount equal to four percent of such employees’ compensation.

     During 2008, the Savings Plan limited the “additions” that can be made to a participating employee’s account to $46,000 per year. “Additions” include all Hill-Rom contributions and the before-tax contributions made by Hill-Rom at the request of the participating employee under Section 401(k) of the Code. Of those additions, the current maximum before-tax contribution

made by a participating employee is $15,500 per year (or $20,500 per year for certain participants age 50 and over). In addition, no more than $230,000 of annual compensation may be taken into account in computing benefits under the Savings Plan. A supplemental savings plan benefit that makes up for these limitations is provided under the SERP as described below.

     Participants immediately vest in their own contributions and earnings. Matching contributions made by Hill-Rom cliff vest after three years of continuous employment and all subsequent matching contributions immediately vest thereafter.

     Each year Hill-Rom performs standard year-end coverage, nondiscrimination and compliance testing on the Savings Plan to ensure compliance with applicable Internal Revenue Service rules and regulations. In the event the plan does not meet the nondiscrimination requirements, a prorated portion of the contributions made by “Highly Compensated” employees will be returned to the respective employee in order to ensure compliance.

     For information regarding compensation paid to our Named Executive Officers under the Savings Plan, see the Summary Compensation Table and footnote 6 thereto under “—Compensation of Named Executive Officers” below.

     Supplemental Executive Retirement Plan. The Hill-Rom Holdings, Inc. Supplemental Executive Retirement Plan (the “SERP”) provides additional retirement benefits to certain employees selected by the Compensation Committee and the Chief Executive Officer of Hill-Rom whose retirement benefits under the Pension Plan and/or Savings Plan are reduced, curtailed or otherwise limited as a result of certain limitations under the Code. The employees that have been selected to participate in this plan include all the Named Executive Officers and other senior executive officers of the Company and its subsidiaries.

     The additional retirement benefits provided by the SERP are (1) for certain Pension Plan participants chosen by the Compensation Committee, in an amount equal to the benefits under the Pension Plan which are so reduced, curtailed or limited by reason of the application of such limitation and/or (2) for certain Savings Plan participants chosen by the Compensation Committee, in an amount equal to the benefits under the Savings Plan which are so reduced, curtailed or limited by reason of the application of such limitation. Effective June 30, 2003, the Pension Plan and the Pension Plan portion of the SERP were closed to new participants. Additionally, certain participants in the SERP who are selected by the Compensation Committee may annually receive an additional benefit of a certain percentage of such participants’ Compensation (as defined below) for such year (the current percentage is three or four percent), and the amount of the retirement benefit shall equal the sum of such annual additional benefit plus additional earnings factor. “Compensation” under the SERP means the corresponding definition of compensation under the Pension Plan and the Savings Plan plus a percentage of a participant’s eligible compensation as determined under Hill-Rom’s Short-Term Incentive Compensation Program. Long-term incentive compensation is not included in the calculation of the SERP benefits.

     The retirement benefit to be paid under the SERP is from the general assets of Hill-Rom, and such benefits, except as otherwise required by Section 409A of the Code, are generally payable at the time and in the manner benefits are payable under the Pension Plan. Under the Savings Plan, a lump sum cash payment is available to the participant within one year of retirement or termination of employment. In the alternative a participant may defer receipt by electing a stream of equal annual payments for up to 15 years.

     For information regarding the pension benefits payable to our Named Executive Officers under the SERP, see the Pension Benefits at September 30, 2008 table under “—Compensation of Named Executive Officers” below.

     Change in Control Agreements. The Company has entered into a Change in Control Agreement (the “Change in Control Agreements”) with each Named Executive Officer. The Change in Control Agreements are intended to encourage continued employment by the Company of its key management personnel and to allow such personnel to be in a position to provide assessment and advice to the Board of Directors regarding any proposed Change in Control without concern that such personnel might be unduly distracted by the uncertainties and risks created by a proposed Change in Control.

     The Change in Control Agreements provide for payment of specified benefits upon the Company’s termination of the executive’s employment (other than on account of death, disability, retirement or “cause”) in anticipation of or within two years (three years in the case of the Chief Executive Officer) after a Change in Control, or upon the executive’s termination of employment for “good reason” within two years (three years in the case of the Chief Executive Officer) after a Change in Control. The Chief Executive Officer’s Change in Control Agreement also provides for the payment of the specified benefits in the event the Chief Executive Officer terminates employment for any reason during the 30-day period following the first anniversary of the Change in Control. The benefits to be provided by the Company upon a Change in Control under any of the above circumstances are:

	•		a lump sum payment in cash equal to two times (three times in the case of the Chief Executive Officer) the executive’s annual base salary;
	•		continued health and medical insurance for the executive and the executive’s dependents and continued life insurance coverage for the executive for 24 months (36 months in the case of the Chief Executive Officer), with the right to purchase continued medical insurance (at COBRA rates) from the end of this period until the executive reaches retirement age;
	•		a cash payment in lieu of certain perquisites, such as accrued and unpaid vacation; and
	•		an increase to the defined benefit and defined contribution pension benefit otherwise payable to the executive calculated by giving him equivalent credit for two additional years of age and service (or, in the case of the Chief Executive Officer, three additional years of age and service credit).

     In addition, upon a Change in Control, whether or not the executive’s employment is terminated, all outstanding stock options, restricted stock and deferred stock shares (otherwise known as restricted stock units) will become fully vested and the executive will be deemed to have earned all outstanding short-term incentive compensation and performance share compensation awards to the extent such awards would have been earned if all performance targets for the relevant period were achieved. The Chief Executive Officer’s Change in Control Agreement provides that if the Chief Executive Officer receives payments that would be subject to the excise tax on excess parachute payments imposed by Section 4999 of the Code, the Chief Executive Officer will be entitled to receive an additional “gross-up” payment in an amount necessary to put the Chief Executive Officer in the same after-tax position as if such excise tax

had not been imposed. The Change in Control Agreements for the other above named executive officers provide for a similar “gross-up” payment, except that if the value of all “parachute payments” to an executive does not exceed 120% of the maximum “parachute payment” that could be paid to the Named Executive Officer without giving rise to the excise tax, the payments otherwise called for by the Change in Control Agreement will be reduced to the maximum amount which would not give rise to the excise tax.

     Under the Change in Control Agreements, a “Change in Control” is defined generally as (1) the acquisition of beneficial ownership of 35% or more of the voting power of all Hill-Rom voting securities by a person or group other than members of the Hillenbrand Family; (2) the consummation of certain mergers or consolidations; (3) the failure of a majority of the members of the Hill-Rom Board of Directors to consist of Current Directors (defined as any director on the date of the Change in Control Agreements and any director whose election was approved by a majority of the then-Current Directors); (4) the consummation of a sale of substantially all of the assets of Hill-Rom; or (5) the date of approval by the shareholders of Hill-Rom of a plan of complete liquidation of Hill-Rom.

     For information regarding the benefits that would have been payable to the Named Executive Officers as of September 30, 2008 under the Change in Control Agreements, see the Potential Payments Upon Termination or Change in Control tables under “—Compensation of Named Executive Officers” below.

     Severance Pay Plan. Under the Hill-Rom Holdings, Inc. Severance Pay Plan for Salaried Employees (the “Severance Plan”) post-employment severance benefits are provided to our employees who are terminated in connection with a reduction-in-force or corporate reorganization. Generally these benefit amounts are based upon length of service and position level with Hill-Rom. Generally, under the Severance Plan an eligible participant will receive one week’s pay for each year of service up to a maximum of twenty-six week’s pay. An additional two week’s pay will be made if the participant is age forty or older. Additional benefits may be provided by Hill-Rom if the participant is terminated as part of an Employer-designated reduction in force, determined in the sole discretion of Hill-Rom. In any case the total benefit payable under the Severance Plan will not exceed the amount of a participant’s annual compensation during the year immediately preceding the participant’s termination of employment.

     Generally, the employment agreements that we have entered into with the Named Executive Officers provide severance benefits that are greater than those provided under the Severance Plan. For information regarding the severance benefits payable to our Named Executive Officers under their employment agreements, see the Potential Payments Upon Termination or Change in Control tables under “—Compensation of Named Executive Officers” below.

     Other Personal Benefits

     In addition to the elements of compensation discussed above, we also provide senior level management with various other benefits as follows:

	•		Tuition Reimbursement
	•		Executive Financial Planning, Estate Planning and Tax Preparation Service
	•		Executive Physical

•

Other Benefits

     Hill-Rom provides these benefits in order to remain competitive with the market and believes that these benefits help it to attract and retain qualified executives. These benefits also reduce the amount of time and attention that senior management must spend on personal matters and allows them to dedicate more time to the Company. Hill-Rom believes that these benefits are in-line with the market, are reasonable in nature, are not excessive and are in the best interest of Hill-Rom and its shareholders.

     Tuition Reimbursement Program. All employees are eligible to participate in Hill-Rom’s Tuition Reimbursement Program. This program is provided to support Hill-Rom’s innovation and commitment to improving its abilities. The Company believes that education will support the development of its employees for new positions and enhance their contributions to the achievement of its strategic goals. Under Hill-Rom’s Tuition Reimbursement Program, Hill-Rom reimburses tuition, registration fees and laboratory fees for all of its employees. All fulltime employees are eligible for 100% reimbursement on a course-by-course basis within a job related degree program; there is no maximum limit to reimbursement. Minimum academic achievement is required in order to receive reimbursement. This program is not currently being used by any of our Named Executive Officers.

     Executive Financial and/or Estate Planning and Tax Preparation Service Program. Senior level managers are eligible for reimbursement of financial and/or estate planning services and for income tax preparation services. Reimbursement is approved for dollar amounts of up to 50% of an executive’s out of pocket costs up to $2,000 per year. Qualified expenses include income tax preparation, estate planning and investment planning, among others.

     Executive Physical. Hill-Rom provides senior level managers with annual physicals. Hill-Rom covers 100% of the cost of this program. This program was developed to promote the physical well being and health of Hill-Rom’s senior level managers. Hill-Rom believes this program is in the best long-term interests of its shareholders.

     Other Benefits. Senior management also participates in other benefit plans that Hill-Rom fully or partially subsidizes. Their participation is on the same terms as other employees of Hill-Rom. Some of the more significant of these benefits include medical, dental, life and vision insurance, as well as relocation reimbursement; holiday and vacation benefits. All Named Executive Officers participate in Hill-Rom’s group term life insurance program which provides death benefit coverage of up to two times base salary or $500,000, whichever is lesser, and provides accidental death and dismemberment coverage of up to $200,000. In addition, beginning January 1, 2007 the Named Executive Officers were eligible to participate in the optional supplemental group term life insurance program in which participants may purchase up to the lesser of five times their base annual salary or $600,000 of additional term life insurance at their own expense.

     Employment Agreements

     We have entered into employment agreements with each of the Named Executive Officers of the Company. These agreements are summarized below.

     Peter H. Soderberg — The Company and Peter H. Soderberg entered into an amended Employment Agreement effective March 31, 2008 relating to Mr. Soderberg’s employment as

President and Chief Executive Officer of the Company. The agreement provides that the term of Mr. Soderberg’s employment began effective March 20, 2006. The agreement provides that Mr. Soderberg is entitled to receive a base salary of $840,000 per year and has the opportunity to earn an incentive compensation bonus. The agreement provides that Mr. Soderberg is eligible to participate in Hill-Rom’s 401(k) Savings Plan and Supplemental Executive Retirement Plan consistent with plans, programs and policies available to other executive officers of the Company. He will also participate in a nonqualified deferred compensation plan established for the benefit of Mr. Soderberg, pursuant to which Mr. Soderberg was credited with $75,000 within 30 days after March 20, 2006 and will be credited with $75,000 on each anniversary thereafter during Mr. Soderberg’s employment. Amounts credited to Mr. Soderberg’s account under this plan bear interest at a prime rate in effect from time to time or at other rates determined by the Compensation Committee. Mr. Soderberg will be fully vested in all amounts credited to his account under this plan and will be entitled to receive the balance of the account in a lump sum cash payment on or as soon as possible after the date that is six months after the date of the termination of Mr. Soderberg’s employment with Hill-Rom. Mr. Soderberg may also use the Company’s aircraft for personal travel to and from Mr. Soderberg’s primary and secondary residences up to a maximum of 100 occupied hours of flight time per calendar year. Mr. Soderberg will also be provided such additional compensation, benefits and perquisites, including participation in the Company’s health and welfare plans, as are available to other executive officers of the Company and as the Board of Directors may deem appropriate.

     The employment agreement is terminable by either the Company or Mr. Soderberg on sixty days’ notice, or pay in lieu of notice if terminated by the Company, and is terminable at any time by the Company for “cause” (defined in the same manner as in the employment agreements of the other Named Executive Officers as described below). If Mr. Soderberg is terminated by the Company other than for cause, including a termination by Mr. Soderberg for “good reason” (defined generally in the same manner as in the employment agreements of the other Named Executive Officers as described below), the Company is required to pay severance to Mr. Soderberg in an amount equal to twelve months of Mr. Soderberg’s base salary, with payments commencing six months after the time of termination. The employment agreement also contains a limited non-competition and non-solicitation agreement of Mr. Soderberg, which continues generally for a period of two years after the termination of Mr. Soderberg’s employment. The employment agreement also required the Company to pay Mr. Soderberg’s costs of entering into the employment agreement, including the reasonable fees and expenses of his legal counsel.

     Other Named Executive Officers — The Company or its subsidiaries have entered into an employment agreement with each of the other Named Executive Officers. We believe that it is appropriate for our senior executives to have employment agreements because they provide certain contractual protections to us that we might not otherwise have, including provisions relating to non-competition with us, non-solicitation of our employees and confidentiality of our proprietary information. Additionally, we believe that employment agreements are a useful tool in recruiting and retention of senior level employees. The current employment agreements set forth the basic duties of the executive officers and provide that each executive officer is entitled to receive, in addition to base salary, incentive compensation payable in our discretion and such additional compensation, benefits and perquisites as we may deem appropriate. The employment agreements are terminable by either us or the executive officer “without cause” on sixty (60) days’ written notice, or if terminated by us, pay in lieu of notice, and are terminable at any time by us for cause, as defined in each employment agreement. Generally “cause” is defined as (1) failure by the executive officer to comply with the terms of the employment agreement,

specifically not complying with any reasonable instructions or orders issued by us, (2) illegal conduct, (3) violation of significant company policy, (4) improper disclosure of our confidential information, or (5) engaging in conduct that is contrary to our best interests. The executive officer may terminate his employment agreement and declare the agreement to have terminated “without cause” by us upon the occurrence without the executive officer’s consent of a “good reason” event. Generally, a “good reason” event is defined as any of the following (1) an assignment to the executive officer of duties lasting more than sixty days that are materially inconsistent with the executive officer’s then current position or a material change in the executive officer’s reporting relationship to the CEO or his/her successor; (2) the failure to elect or reelect the executive officer as Vice President or other officer of us (unless such failure is related in any way to our decision to terminate the executive officer for cause); (3) our failure to provide the executive officer with office space and support personnel commensurate with level of responsibilities and/or position; (4) a reduction by us in the amount of the executive officer’s base salary or the discontinuation or reduction by us of the executive officer’s participation in the same level of eligibility as compared to other peer employees in any incentive compensation, additional compensation, benefits, policies or perquisites; (5) the relocation of our principal executive offices or the executive officer’s place of work requiring a commuting change of more than fifty (50) miles; or (6) our failure to perform our obligations under the employment agreement. If an executive officer is terminated by us without cause or terminated by the executive officer upon the occurrence, without the executive officer’s consent, of a good reason event, we are required to pay severance to the executive in an amount equal to twelve months of the executive officer’s base salary, with payments commencing six months after the time of termination. The employment agreements also contain limited non-competition and non-solicitation agreements of the executive officers, which continue generally for a period of eighteen to twenty-four months after the termination of the executive officer’s employment.

     For information regarding the benefits payable to our Named Executive Officers under their employment agreements, see the Potential Payments Upon Termination or Change in Control tables under “—Compensation of Named Executive Officers” below.

     The Compensation and Management Development Committee of the Board of Directors of Hill-Rom Holdings, Inc. has reviewed and discussed the Compensation Discussion and Analysis contained in this proxy statement with management and, based upon this review and discussion, recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

     Submitted by the Compensation and Management Development Committee

Ronald A. Malone (Chairman)
Joanne C. Smith, M.D. (Vice Chairperson)
Patrick T. Ryan

Compensation of Named Executive Officers

     The following tables and notes set forth compensation information for the fiscal years ended September 30, 2008 and 2007 for our Named Executive Officers. All of the information in the following tables reflects compensation earned by the individuals for services with Hill-Rom and its subsidiaries. All references in the following tables to stock and stock options relate to awards of stock and stock options granted by Hill-Rom and give effect to the adjustments made in connection with the spin-off of the funeral services business.

     In connection with the spin-off, we entered into new employment agreements with each of the Named Executive Officers (other than Mr. Camp) – see the “Employment Agreements” section of the Compensation Discussion and Analysis for further discussion. The Named Executive Officers were not entitled to receive payments that would be characterized as “Bonus” payments for the fiscal years ended September 30, 2008 and 2007.

     Total cash compensation, which includes salary and non-equity incentive plan compensation, is based on individual performance as well as the overall performance of Hill-Rom as described in the “Base Salary” and “Annual Cash Incentives” sections of the Compensation Discussion and Analysis. Generally, the emphasis that is placed on stock-based compensation increases as the level of responsibility of the individual employee increases.

Summary Compensation Table

(a)		(b)				(c)				(d)				(e)				(f)				(g)				(h)				(i)				(j)
																										Change in
																										Pension
																										Value and
																										Nonqualified
																						Non-Equity				Deferred
														Stock				Option				Incentive Plan				Compensation				All Other
Name and Principal						Salary				Bonus				Awards				Awards				Compensation				Earnings				Compensation				Total
Position		Year				$ (1)				$				$ (2)				$ (3)				$ (4)				$ (5)				$ (6)				$
PETER H. SODERBERG			2008			$	840,000			None				$	851,169			$	1,713,045			$	862,369			$	2,635			$	522,031			$	4,791,249
President and Chief Executive Officer, Member Board of Directors			2007			$	830,575			None				$	1,445,305			$	531,680			$	711,245			$	6,004			$	517,394			$	4,042,203
GREGORY N. MILLER			2008			$	378,000			None				$	261,238			$	663,729			$	235,217			$	486			$	39,539			$	1,578,209
Senior Vice President, Chief Financial Officer and Treasurer			2007			$	371,403			None				$	300,702			$	125,508			$	174,828			$	1,267			$	38,893			$	1,012,601
KENNETH A. CAMP (7)			2008			$	218,183			None				$	873,415			$	362,276				N/A			$	32,776			$	24,634			$	1,511,284
Former Senior Vice President of the Company and President and Chief Executive Officer, Batesville Casket Company, Inc.			2007			$	424,102			None				$	745,077			$	279,017			$	202,881			$	338,345			$	42,210			$	2,031,632
PATRICK D. DE MAYNADIER			2008			$	352,273			None				$	263,748			$	795,994			$	210,075			$	688			$	31,742			$	1,654,520
Senior Vice President, General Counsel and Secretary			2007			$	347,268			None				$	301,091			$	104,468			$	163,447			$	23,316			$	31,720			$	971,310
KIMBERLY K. DENNIS (8)			2008			$	288,000			None				$	210,749			$	672,876			$	153,982			$	108			$	13,343			$	1,339,058
Group Vice President, North America Post-Acute Care
JOHN H. DICKEY			2008			$	248,400			None				$	324,083			$	577,694			$	154,571			$	10,130			$	11,532			$	1,326,410
Senior Vice President, Human Resources			2007			$	246,421			None				$	275,991			$	108,310			$	125,011			$	63,867			$	10,820			$	830,420

		Change in Actuarial Present Value of				Above Market Nonqualified
		Accumulated Pension Benefit (a)				Deferred Compensation Earnings				Total
Peter H. Soderberg			N/A			$	2,635			$	2,635
Gregory N. Miller						$	486			$	486
Kenneth A. Camp (b)		$	31,510			$	1,266			$	32,776
Patrick D. de Maynadier						$	688			$	688
Kimberly K. Dennis						$	108			$	108
John H. Dickey		$	10,044			$	86			$	10,130

	(a)		See the Pension Benefits table below for additional information, including present value assumptions used in this calculation.
	(b)		The change in actuarial present value of accumulated pension benefit amount for Mr. Camp is calculated as of March 31, 2008.

(6)

Consists of the incremental cost of aircraft usage, Company provided contributions for the savings plan, the savings plan portion of the SERP and supplemental retirement benefits. Also includes the incremental cost of professional services for tax preparation and financial planning services, and other personal benefits provided by the Company. All Other Compensation earned or allocated during the fiscal year ended September 30, 2008 is as follows:

		Aircaft				Company Contribution								Supp				Financial Planning
Name		Usage(a)				401(K)				Supp 401(k)				Retirement				and Tax Preparation				Home Security				Total
Peter H. Soderberg		$	287,133			$	16,100			$	143,588			$	75,000							$	210			$	522,031
Gregory N. Miller						$	15,860			$	23,679															$	39,539
Kenneth A. Camp						$	3,581			$	19,523							$	1,530							$	24,634
Patrick D. de Maynadier						$	6,900			$	24,842															$	31,742
Kimberly K. Dennis						$	7,082			$	6,098							$	163							$	13,343
John H. Dickey						$	7,037			$	4,317							$	178							$	11,532

(a)

The Company has agreed to permit the Chief Executive Officer to use the Company’s aircraft for travel to and from Mr. Soderberg’s primary and secondary residences up to a maximum of 100 occupied hours of flight time per calendar year. Mr. Soderberg used approximately 58 occupied flight hours during calendar year 2008. The value of the use of Company aircraft disclosed in the Summary Compensation Table is based upon the variable cost of operating the aircraft ($2,671 per flight hour for fiscal 2008), which includes trip-related expenses such as fuel, aircraft maintenance, crew travel expenses, on-board catering, landing and parking fees, and also takes into account flights without passengers. We do not include fixed costs that do not change based on personal usage such as pilot salaries and depreciation expense. Accordingly, included in the table above is $287,133, representing the aggregate incremental cost to the Company for Mr. Soderberg’s personal use of the Company’s aircraft for fiscal 2008. Mr. Soderberg used approximately 62 occupied flight hours during fiscal year 2008. While the Company does not charge for the personal use of its aircraft, it does report amounts related to such use as taxable income to the IRS.

(7)		Mr. Camp resigned as an officer of the Company effective March 31, 2008 in connection with the spin-off of the funeral services business.
(8)		Prior to April 1, 2008, Ms. Dennis was an employee of the Company but not an executive officer. Accordingly, compensation information is presented for Ms. Dennis for 2008 only.

Grants of Plan-Based Awards for Fiscal Year Ended September 30, 2008

     The following table summarizes the grants of plan-based awards to each of the Named Executive Officers for the fiscal year ended September 30, 2008. All stock-based awards in fiscal year 2008 were granted under our Stock Incentive Plan.

(a)		(b)				(c)				(d)				(e)				(f)				(g)				(h)				(i)				(j)				(k)								(l)
																														All Other				All Other								Closing
																														Stock				Option								Market
																														Awards:				Awards:								Price of				Grant Date
						Estimated Future Payouts Under																								Number				Number of				Exercise or				Underlying				Fair Value
						Non-Equity Incentive												Estimated Future Payouts Under												of Shares of				Securities				Base Price of				Securities				of Stock
						Plan Awards (1)												Equity Incentive Plan Awards (2)												Stock or				Underlying				Option				on Date				and Option
		Grant				Threshold				Target				Maximum				Threshold				Target				Maximum				Units				Options				Awards				of Grant				Awards
Name		Date				$				$				$				#				#				#				# (3)				# (4)				$/sh (5)				$/sh (5)				$ (6)
Peter H. Soderberg						$	0			$	756,000			$	1,512,000
			12/6/2007																																149,204			$	29.33			$	29.46			$	1,005,796
			12/6/2007																												37,010															$	1,085,409
			4/1/2008																0				171,528				220,853											$	25.37			$	26.51			$	1,590,142
			4/1/2008																								10,341																			$	262,351
			4/1/2008																												30	(7)														$	761
Gregory N. Miller						$	0			$	189,000			$	378,000
			12/5/2007																																24,605			$	29.22			$	29.31			$	165,206
			12/5/2007																												8,326															$	243,225
			4/1/2008																0				73,611				110,417											$	25.37			$	26.51			$	795,000
			4/1/2008																												30	(7)														$	761
Kenneth A. Camp (8)						$	0			$	163,637			$	327,274
			12/5/2007																																37,000			$	29.22			$	29.31			$	248,431
			12/5/2007																												7,400															$	216,200
Patrick D. de Maynadier						$	0			$	176,136			$	352,272
			12/5/2007																																23,125			$	29.22			$	29.31			$	155,269
			12/5/2007																												6,476															$	189,175
			4/1/2008																0				58,333				87,500											$	25.37			$	26.51			$	630,000
			4/1/2008																												30	(7)														$	761
Kimberly K. Dennis						$	0			$	144,000			$	288,000
			12/5/2007																																23,125			$	29.22			$	29.31			$	155,269
			12/5/2007																												5,551															$	162,150
			4/1/2008																0				38,194				57,292											$	25.37			$	26.51			$	412,502
			4/1/2008																												30	(7)														$	761
John H. Dickey						$	0			$	124,200			$	248,400
			12/5/2007																																23,125			$	29.22			$	29.31			$	155,269
			12/5/2007																												6,476															$	189,175
			4/1/2008																0				38,194				57,292											$	25.37			$	26.51			$	412,502
			4/1/2008																												30	(7)														$	761