EXHIBIT 10.6
TIER 1 — CEO
CHANGE IN CONTROL AGREEMENT
     This Change in Control Agreement (the “Agreement”) is made and entered into
as of _______________ (date) by and between Hill-Rom Holdings, Inc., an Indiana
corporation (the “Company”), and Peter Soderberg (the “Executive”).
     WHEREAS, the Company considers it essential to the best interests of its
shareholders to foster continuous employment by the Company and its subsidiaries
of their key management personnel;
     WHEREAS, the Compensation and Management Development Committee (the
“Committee”) of the Board of Directors (the “Board”) of the Company has
recommended, and the Board has approved, that the Company enter into Change in
Control Agreements with key executives of the Company and its subsidiaries who
are from time to time designated by the management of the Company and approved
by the Committee;
     WHEREAS, the Committee and the Board believe that Executive has made
valuable contributions to the productivity and profitability of the Company and
consider it essential to the best interests of the Company and its shareholders
that Executive be encouraged to remain with the Company; and
     WHEREAS, the Board believes it is in the best interests of the Company and
its shareholders that Executive continue in employment with the Company in the
event of any proposed Change in Control (as defined below) and be in a position
to provide assessment and advice to the Board regarding any proposed Change in
Control without concern that Executive might be unduly distracted by the
personal uncertainties and risks created by any proposed Change in Control:
     NOW, THEREFORE, the Company and Executive agree as follows:
     1. Termination following a Change in Control. After the occurrence of a
Change in Control, the Company will provide or cause to be provided to Executive
the rights and benefits described in Section 2 hereof in the event that
Executive’s employment with the Company and its subsidiaries is terminated:
          (a) by the Company for any reason other than on account of his death,
permanent disability, retirement or for Cause at any time prior to the third
anniversary of a Change in Control;
          (b) by Executive for Good Reason at any time prior to the third
anniversary of a Change in Control; or
          (c) by Executive for any reason at any time prior to the 30th day
following the first anniversary of the Change in Control.

--------------------------------------------------------------------------------

 

  2

     Anything in this Agreement to the contrary notwithstanding, if a Change in
Control occurs and if the Executive’s employment with the Company is terminated
by the Company, without Cause, prior to the date on which the Change in Control
occurs, and if it is reasonably demonstrated by Executive that such termination
of employment (i) was at the request of a third party who has taken steps
reasonably calculated to effect a Change in Control or (ii) otherwise arose in
connection with or anticipation of a Change in Control which subsequently occurs
within 3 months of such termination, then for purposes of this Agreement
(including Section 3 hereof) a Change in Control shall be deemed to have
occurred on the day immediately prior to such termination of employment and all
references in Section 2 to payments within a specified period as allowed by law
following “Termination” shall instead be references to the specified period
following the Change in Control.
     The rights and benefits described in Section 2 and 3 hereof shall be in
lieu of any severance payments otherwise payable to Executive under any
employment agreement or severance plan or program of the Company or any of its
subsidiaries but shall not otherwise affect Executive’s rights to compensation
or benefits under the Company’s compensation and benefit programs except to the
extent expressly provided herein.
     2. Rights and Benefits Upon Termination.
     In the event of the termination of Executive’s employment under any of the
circumstances set forth in Section 1 hereof (“Termination”), the Company shall
provide or cause to be provided to Executive the following rights and benefits
provided that Executive executes and delivers to the Company within 45 days of
the Termination a Release in the form attached hereto as Exhibit A (“Release”):
          (a) a lump sum payment in cash in the amount of three times
Executive’s Annual Base Salary (as defined below), payable (i) on the date which
is six (6) months following Termination, if the Executive is a “specified
employee” as defined in Code Section 409A(a)(2)(B)(i) of the Internal Revenue
Code of 1986, as amended (“Code”) (Section 409A of the Code is hereunder
referred to as “Section 409A”) and the Treasury Regulations promulgated
thereunder, or (ii) on the next regularly scheduled payroll following the
earlier to occur of fifteen (15) days from the Company’s receipt of an executed
Release or the expiration of sixty (60) days after Executive’s Termination, if
Executive is not such a “specified employee” (or such payment is exempt from
Section 409A); provided, however, that if the before-stated sixty (60) day
period ends in a calendar year following the calendar year in which the sixty
(60) day period commenced, then any benefits not subject to clause (i) shall
only begin on the next regularly scheduled payroll following the expiration of
sixty (60) days after the Executive’s Termination.
          (b) for the 36 months following Termination, continued health and
medical insurance coverage for Executive and his dependents substantially
comparable (with regard to both benefits and employee contributions) to the
coverage provided by the Company immediately prior to the Change in Control for
active employees of equivalent rank. From the end of such 36-month period until
Executive attains Social Security Retirement Age, Executive shall have the right
to purchase (at COBRA rates applicable to such coverage) continued coverage for
himself and his dependents under one or more plans maintained by the Company for
its active employees, to the extent Executive would have been eligible to
purchase continued

--------------------------------------------------------------------------------

 

3

coverage under the plan in effect immediately prior to the Change in Control had
his employment terminated 36 months following Termination. The payment of any
health or medical claims for the health and medical coverage provided in this
subparagraph (b) shall be made to the Executive as soon as administratively
practicable after the Executive has provided the appropriate claim
documentation, but in no event shall the payment for any such health or medical
claim be paid later than the last day of the calendar year following the
calendar year in which the expense was incurred. Notwithstanding anything herein
to the contrary, to the extent required by Section 409A: (1) the amount of
medical claims eligible for reimbursement or to be provided as an in-kind
benefit under this Agreement during a calendar year may not affect the medical
claims eligible for reimbursement or to be provided as an in-kind benefit in any
other calendar year, and (2) the right to reimbursement or in-kind benefits
under this Agreement shall not be subject to liquidation or exchange for another
benefit;
          (c) continuation for Executive, for a period of three years following
Termination, of the Executive Life Insurance Bonus Plan (if any) provided for
Executive by the Company immediately prior to the Change in Control and the
group term life insurance program provided for executive immediately prior to
the Change in Control. The payment of any claim for death benefits provided
under this subparagraph (c) shall be paid in accordance with the appropriate
program, provided, however that if the death benefit is subject to Section 409A,
then the death benefit shall be paid, as determined by the Company in its
complete and absolute discretion, no later than the later to occur of (i) the
last day of calendar year in which the death of the Executive occurs or (ii) the
90th day following the Executive’s death;
          (d) a lump sum payment in cash, payable within 30 days after
Termination, equal to all accrued and unpaid vacation, reimbursable business
expenses, and similar miscellaneous benefits as of the Termination, provided,
however, that to the extent that any such miscellaneous benefits are subject to
Section 409A, such benefits shall be paid in one lump sum (i) on the date which
is six months following Termination, if the Executive is a “specified employee”
as defined in Code Section 409A(a)(2)(B)(i) or (ii) on the next regularly
scheduled payroll following the earlier to occur of fifteen (15) days from the
Company’s receipt of an executed Release or the expiration of sixty (60) days
after Executive’s Termination, if Executive is not such a “specified employee;”
provided, however, that if the before-stated sixty (60) day period ends in a
calendar year following the calendar year in which the sixty (60) day period
commenced, then any benefits not subject to clause (i) shall only begin on the
next regularly scheduled payroll following the expiration of sixty (60) days
after the Executive’s Termination. ; and
          (e) a monthly pension annuity benefit commencing as of the first day
of the calendar month following the later to occur of (i) the Executive
attaining age 62 or (ii) the six month anniversary date of the Executive’s
Termination (the “Pension Benefit Starting Date”) and paid on the first day of
each succeeding month (if unmarried, in the form of a life annuity with
guaranteed payments for 24 months, or if married in the form of a joint and 50%
survivor annuity) equal to the actuarially equivalent difference between (i) the
monthly Pension Plan annuity benefit, the monthly Supplemental Pension Plan
annuity benefit if Executive is a participant in the Supplemental Pension Plan,
and any additional pension benefit provided in an offer letter (or other written
document signed by an authorized officer of the Company other than

--------------------------------------------------------------------------------

 

4

Executive) if Executive is subject to any such letter or document, which
Executive will receive starting at the Pension Benefit Starting Date (if
unmarried, in the form of a life annuity with guaranteed payments for 24 months,
or if married in the form of a joint and 50% survivor annuity), and (ii) the
monthly pension annuity benefit he would have received starting at the Pension
Benefit Starting Date under such plan(s) and/or offer letter, as in effect on or
after the date hereof (if unmarried, in the form of a life annuity with
guaranteed payments for 24 months, or if married in the form of a joint and 50%
survivor annuity), calculated as if Executive had earned three additional years
of service and pay at his Annual Base Salary (and for purposes of calculating
Average Monthly Earnings as defined in the Pension Plan, Executive Annual Base
Salary shall be annualized for any portion of the imputed service period which
is less than a full calendar year and such portion of the year shall be eligible
to be counted). Unless the Executive (who also must be a participant in the
Supplemental Pension Plan) elects a form of annuity set forth on Annex A
attached to the Supplemental Pension Plan prior to his or her Pension Benefit
Starting Date, Executive, if unmarried, shall receive a life annuity with
guaranteed payment for 24 months, or, if married, a 50% joint and survivor
annuity. The benefit provided for in this paragraph shall be funded in a rabbi
trust prior to the Change in Control. For purposes of this subparagraph (e), the
benefit under clause (ii) will be calculated as though the Pension Plan and any
applicable Supplemental Pension Plan as in effect on or after date hereof,
remained the same.(f) a lump sum payment in cash for amounts accrued as of the
Termination and an additional amount equal to the amounts accrued for the last
12 months times three (3) immediately prior to the Termination Date in any of
the Defined Contribution, Matching Account and/or Supplemental Contribution
Account, payable (i) on the date which is six (6) months following Termination,
if the Executive is a “specified employee” as defined in Code
Section 409A(a)(2)(B)(i) or (ii) on the next regularly scheduled payroll
following the earlier to occur of fifteen (15) days from the Company’s receipt
of an executed Release or the expiration of sixty (60) days after Executive’s
Termination, if Executive is not such a “specified employee” (or such payment is
exempt from Section 409A); provided, however, that if the before-stated sixty
(60) day period ends in a calendar year following the calendar year in which the
sixty (60) day period commenced, then any benefits not subject to clause
(i) shall only begin on the next regularly scheduled payroll following the
expiration of sixty (60) days after the Executive’s Termination..
     3. Additional Benefits Upon A Change in Control.
     Upon the occurrence of a Change in Control, so long as Executive is an
employee of the Company at that time, the Company will provide or cause to be
provided to Executive the following rights and benefits whether or not
Executive’s employment with the Company or its subsidiaries is later terminated:
          (a) a lump sum payment in cash equal to the amount of Short-Term
Incentive Compensation which would be payable to Executive if the company
performance targets (at 100%) with respect to such incentive compensation in
effect for the entire year in which the Change in Control occurred had been
achieved, payable within 30 days of the Change in Control;

--------------------------------------------------------------------------------

 

5

          (b) the number of shares of common stock of the Company that would be
payable to Executive under the Company’s Stock Incentive Plan provided, however,
that if the Change in Control involves a merger, acquisition or other corporate
restructuring where the Company is not the surviving entity (or survives as a
wholly-owned subsidiary of another entity), then, in lieu of such shares of
common stock of the Company, Executive shall be entitled to receive the
consideration he would have received in such transaction in exchange for such
shares of common stock; and provided, further, that the Company shall in any
case have the right to substitute cash for such shares of common stock of the
Company or merger consideration in an amount equal to the fair market value of
such shares or merger consideration as determined by the Company including:

  (i)   immediate vesting of all Bonus Stock Awards (as defined in the Company’s
Stock Incentive Plan) held by Executive;     (ii)   immediate vesting of all
outstanding Stock Options held by Executive under the Company’s Stock Incentive
Plan;     (iii)   immediate vesting of all awards of Restricted Stock held by
Executive under any Stock Award Agreements (as defined in the Company’s Stock
Incentive Plan) with Executive and Hill-Rom Holdings, Inc.;     (iv)   immediate
vesting of all awards of Deferred Stock (as defined in the Company’s Stock
Incentive Plan) (also known as Restricted Stock Units) held by Executive under
the Company’s Stock Incentive Plan; and     (v)   the exercise of any Stock
Appreciation Right (as defined in the Company’s Stock Incentive Plan) within
60 days of a Change in Control as provided by section 7.2 of the Stock Incentive
Plan.

          Any distribution to be made under this Section 3 shall be made no
later than the 15th day of the third month following the Company’s first taxable
year in which the Change in Control occurs.
     4. Gross-Up on Excess Parachute Payment.
          (a) If any benefit or payment by the Company or its subsidiaries to
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, including any acceleration of vesting
or payment) (a “Payment”) is determined to be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, being herein collectively referred to as the
“Excise Tax”), then Executive shall be entitled to receive an additional payment
(the “Gross-Up Payment”) in an amount such that the net amount of such
additional payment retained by Executive, after payment of all federal, state
and local income and employment taxes (including, without limitation, any
federal, state, and local income and employment taxes and Excise Tax imposed on
the Gross-Up

--------------------------------------------------------------------------------

 

6

Payment), shall be equal to the Excise Tax imposed on the Payment. The payment
of any Gross-Up Payment shall be made prior to the date the Executive is to
remit the Excise Tax as provided under the Code.
          (b) Subject to the provisions of Section 4(c) hereto, all
determinations required to be made under this Section 4, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by an independent accounting firm of nationally recognized standing selected by
the Company and which is not serving as accountant or auditor for the Company or
the individual, entity or group effecting the Change in Control (the “Accounting
Firm”), which shall provide detailed supporting calculations both to the Company
and Executive within 30 business days of the receipt of the notice from
Executive that there hasbeen a Payment or such earlier time as is requested by
the Company. All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any determination by the Accounting Firm shall be binding upon
the Company and Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments will not have
been made by the Company which should have been made (“Underpayment”),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 4(c) hereof and
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and the amount of the Underpayment shall be promptly paid by the Company to or
for the benefit of Executive.
          (c) Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of a Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after Executive is informed in
writing of such claim and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. Executive shall not
pay such claim prior to the expiration of the 30-day period following the date
on which it gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due). If the
Company notifies Executive in writing prior to the expiration of such period
that it desires to contest such claim, Executive shall:
          (i) give the Company any information reasonably requested by the
Company relating to such claim;
          (ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company;
          (iii) cooperate with the Company in good faith in order effectively to
contest such claim; and
          (iv) permit the Company to participate in any proceedings relating to
such claim; provided, however, that the Company shall bear and pay directly all
costs and

--------------------------------------------------------------------------------

 

7

expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or federal, state and local income and
employment tax (including interest and penalties with respect thereto) imposed
as a result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 4(c), the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct Executive to pay the tax claimed and sue
for a refund or to contest the claim in any permissible manner, and Executive
agrees to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if the Company
directs Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to Executive, on an after-tax basis, and
shall hold Executive harmless from any Excise Tax or federal, state or local
income or employment tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the statute
of limitations relating to payment of taxes for the taxable year of Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. The Company’s control of the contest, however,
shall be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder, and Executive shall be entitled to settle or contest, as the
case may by, any other issue raised by the Internal Revenue Service or any other
taxing authority.
          (d) If, after the receipt by Executive of an amount advanced by the
Company pursuant to Section 4(c), Executive becomes entitled to receive any
refund with respect to such claim, Executive shall (subject to the Company’s
complying with the requirements of Section 4(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 4(c), a determination is made that
Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after such determination,
then such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
          (e) In the event that the Excise Tax is subsequently determined to be
less than initially determined by the Accounting Firm, Executive shall repay to
the Company at the time that the amount of such reduction in Excise Tax is
determined (but, if previously paid to the taxing authorities, not prior to the
time the amount of such reduction is refunded to Executive or otherwise realized
as a benefit by Executive) the portion of the Gross-Up Payment that would not
have been paid if the Excise Tax as subsequently determined had been applied in
initially calculating the Gross-Up Payment, with the amount of such repayment
determined by the Accounting Firm.

--------------------------------------------------------------------------------

 

8

     5. Confidentiality; Non-Competition.
          (a) Executive shall not at any time without the prior approval of the
Company disclose to any person, firm, corporation or other entity any trade
secret, confidential customer information, or other proprietary information not
known within the industry or by the public generally regarding the business then
being conducted by the Company, including, without limitation, financial
information, marketing and sales information and business and strategic plans.
          (b) Executive shall not at any time during the term of this Agreement
and within three years following the termination of his employment with the
Company, (i) solicit any persons who are employed by the Company to terminate
their employment with the Company, and (ii) directly or indirectly (either
individually or as an agent, employee, director, officer, stockholder, partner
or individual proprietor, consultant or as an investor who has made advances of
loan capital or contributions to equity capital), engage in any activity which
he knows (or reasonably should have known) to be competitive with the business
of the Company as then being carried on. Nothing in this Agreement, however,
shall prevent Executive from owning, as an investment, up to two percent (2%) of
the outstanding equity capital of any competitor of the Company, shares of which
are regularly traded on a national securities exchange or in over-the-counter
markets. The restrictions set forth in this Section 5 shall not apply in the
event of a termination of Executive’s employment pursuant to Section 1.
     6. Section 409A Acknowledgement.
          Executive acknowledges that he has been advised of Section 409A, which
has significantly changed the taxation of nonqualified deferred compensation
plans and arrangements. Under proposed and final regulations as of the date of
this Agreement, Executive has been advised that Executive’s severance pay and
other Termination benefits may be treated by the Internal Revenue Service as
“nonqualified deferred compensation,” subject to Section 409A. In that event,
several provisions in Section 409A may affect Executive’s receipt of severance
compensation, including the timing thereof. These include, but are not limited
to, a provision which requires that distributions to “specified employees” (as
defined in Section 409A) on account of separation from service may not be made
earlier than six (6) months after the effective date of separation. If
applicable, failure to comply with Section 409A can lead to immediate taxation
of such deferrals, with interest calculated at a penalty rate and a 20% excise
tax. As a result of the requirements imposed by the American Jobs Creation Act
of 2004, Executive agrees that if Executive is a “specified employee” at the
time of Executive’s termination and if severance payments are covered as
“nonqualified deferred compensation” or otherwise not exempt, such severance pay
(and other benefits to the extent applicable) due Executive at time of
termination shall not be paid until a date at least six (6) months after
Executive’s effective termination date. Executive acknowledges that,
notwithstanding anything contained herein to the contrary, both Executive and
the Company shall each be independently responsible for accessing their own
risks and liabilities under Section 409A that may be associated with any payment
made under the

--------------------------------------------------------------------------------

 

9

terms of this Agreement which may be deemed to trigger Section 409A. To the
extent applicable, Executive understands and agrees that Executive shall have
the responsibility for, and Executive agrees to pay, any and all appropriate
income tax or other tax obligations for which Executive is individually
responsible and/or related to receipt of any benefits provided in this
Agreement. Executive agrees to fully indemnify and hold the Company harmless for
any taxes, penalties, interest, cost or attorneys’ fee assessed against or
incurred by the Company on account of such benefits having been provided to
Executive or based on any alleged failure to withhold taxes or satisfy any
claimed obligation. Executive understands and acknowledges that neither the
Company, nor any of its employees, attorneys, or other representatives has
provided or will provide Executive with any legal or financial advice concerning
taxes or any other matter, and that Executive has not relied on any such advice
in deciding whether to enter into this Agreement. Notwithstanding any provision
of this Agreement to the contrary, to the extent that any payment under the
terms of this Agreement would constitute an impermissible acceleration of
payments under Section 409A or any regulations or Treasury guidance promulgated
thereunder, such payments shall be made no earlier than at such times allowed
under Section 409A. If any provision of this Agreement (or of any award of
compensation) would cause Executive to incur any additional tax or interest
under Section 409A or any regulations or Treasury guidance promulgated
thereunder, the Company or its successor may reform such provision; provided
that it will (i) maintain, to the maximum extent practicable, the original
intent of the applicable provision without violating the provisions of
Section 409A and (ii) notify and consult with Executive regarding such
amendments or modifications prior to the effective date of any such change.
     7. Definitions. As used in this Agreement, the following terms shall have
the following meanings:

  (a)   “Annual Base Salary” means the annualized amount of Executive’s rate of
base salary in effect immediately before the Change in Control or immediately
before the date of Termination, whichever is greater.     (b)   “Cause” shall
have the same meaning set forth in any current employment agreement that the
Executive has with the Company or any of its subsidiaries.     (c)   A “Change
in Control” shall be deemed to occur on:

  (i)   the date that any person, corporation, partnership, syndicate, trust,
estate or other group acting with a view to the acquisition, holding or
disposition of securities of the Company, becomes, directly or indirectly, the
beneficial owner, as defined in Rule 13d-3 under the Securities Exchange Act of
1934 (“Beneficial Owner”), of securities of the Company representing 35% or more
of the voting power of all securities of the Company having the right under
ordinary circumstances to vote at an election of the Board (“Voting

--------------------------------------------------------------------------------

 

10

      Securities”), other than by reason of (x) the acquisition of securities of
the Company by the Company or any of its Subsidiaries or any employee benefit
plan of the Company or any of its Subsidiaries, (y) the acquisition of
securities of the Company directly from the Company, or (z) the acquisition of
Company securities by one or more members of the Hillenbrand Family (which term
shall mean descendants of John A. Hillenbrand and their spouses, trusts
primarily for their benefit or entities controlled by them);

  (ii)   the consummation of a merger or consolidation of the Company with
another corporation unless         (A) the shareholders of the Company,
immediately prior to the merger or consolidation, beneficially own, immediately
after the merger or consolidation, shares entitling such shareholders to 50% or
more of the voting power of all securities of the corporation surviving the
merger or consolidation having the right under ordinary circumstances to vote at
an election of directors in substantially the same proportions as their
ownership, immediately prior to such merger or consolidation, of Voting
Securities of the Company;         (B) no person, corporation, partnership,
syndicate, trust, estate or other group beneficially owns, directly or
indirectly, 35% or more of the voting power of the outstanding voting securities
of the corporation resulting from such merger or consolidation except to the
extent that such ownership existed prior to such merger or consolidation; and  
      (C) the members of the Company’s Board, immediately prior to the merger or
consolidation, constitute, immediately after the merger or consolidation, a
majority of the board of directors of the corporation issuing cash or securities
in the merger;     (iii)   the date on which a majority of the members of the
Board consist of persons other than Current Directors (which term shall mean any
member of the Board on the date hereof and any member whose nomination or
election has been approved by a majority of Current Directors then on the
Board);     (iv)   the consummation of a sale or other disposition of all or
substantially all of the assets of the Company; or     (v)   the date of
approval by the shareholders of the Company of a plan of complete liquidation of
the Company.

--------------------------------------------------------------------------------

 

11

  (d)   “Good Reason” shall have the same meaning set forth in any current
employment agreement that the Executive has with the Company or any of its
subsidiaries     (e)   “Normal Retirement Benefit” shall have the meaning set
forth in the Pension Plan.     (f)   “Pension Plan” means the Hill-Rom, Inc.
Pension Plan as amended from time to time.     (g)   “Section 409A” means
Section 409A of the Internal Revenue Code.     (h)   “Short-Term Incentive
Compensation” means the Incentive Compensation payable under the Short-Term
Incentive Compensation Program, or any successor or other short-term incentive
plan or program.     (i)   “Early Retirement Benefits” early retirement benefits
shall have the meaning set forth in the pension plan which defines the age at
which full, unreduced benefits are available without any early retirement
reduction being applied     (j)   “Executive Life Insurance Bonus Program” shall
mean a program under which the Company pays the annual premium for a whole life
insurance policy on the life of Executive.     (k)   “Supplemental Pension Plan”
means the SERP or any successor long-term supplemental pension plan or program
or any other commitment made by the company to provide retirement benefits in
addition to those provided by the pension plan trust.     (l)   “Defined
Contribution Accounts”, “Matching Accounts”, and “Supplemental Contribution
Accounts” shall have the meanings set forth in the Company’s Supplemental
Executive Retirement Program (“SERP”).

     8. Notice.
          (a) Any discharge or termination of Executive’s employment pursuant to
Section 1 shall be communicated in a written notice to the other party hereto
setting forth the effective date of such discharge or termination (which date
shall not be more than 30 days after the date such notice is delivered) and, in
the case of a discharge for Cause or a termination for Good Reason the basis for
such discharge or termination.
          (b) For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to 1069 Highway 46 East, Batesville, Indiana 47006 provided that all

--------------------------------------------------------------------------------

 

12

notices to the Company shall be directed to the attention of the Board with a
copy to Vice President and General Counsel, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.
     9. No Duty to Mitigate. Executive is not required to seek other employment
or otherwise mitigate the amount of any payments to be made by the Company
pursuant to this Agreement.
     10. Assignment.
          (a) This Agreement is personal to Executive and shall not be
assignable by Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
Executive’s legal representatives.
          (b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors. The Company shall require any successor to all
or substantially all of the business and/or assets of the Company, whether
direct or indirect, by purchase, merger, consolidation, acquisition of stock, or
otherwise, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent as the Company would be required to perform it if
no such succession had taken place.
     11. Arbitration. Any dispute or controversy arising under, related to or in
connection with this Agreement shall be settled exclusively by arbitration
before a single arbitrator in Cincinnati, Ohio, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. The
arbitrator’s award shall be final and binding on all parties to this Agreement.
Judgment may be entered on an arbitrator’s award in any court having competent
jurisdiction.
     12. Integration. This Agreement supersedes and replaces any prior oral or
written agreements or understandings in respect of the matters addressed hereby.
     13. Amendment. This Agreement may not be amended or modified otherwise than
by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
     14. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
     15. Withholding. The Company may withhold from any amounts payable under
this Agreement such federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
     16. Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of Indiana without reference to principles
of conflict of laws.

--------------------------------------------------------------------------------

 

13

     17. Attorney’s Fees. If any legal proceeding (whether in arbitration, at
trial or on appeal) is brought under or in connection with this Agreement, each
party shall pay its own expenses, including attorneys’ fees.
     18. Term of Agreement. The term of this Agreement shall be one (1) year
commencing on the date hereof; provided however, that this Agreement shall be
automatically renewed for successive one-year terms commencing on each
anniversary of the date of this Agreement unless the Company shall have given
notice of non-renewal to Executive at least 30 days prior to the scheduled
termination date; and further provided that notwithstanding the foregoing, this
Agreement shall not terminate (i) within three years after a Change in Control
or (ii) during any period of time when a transaction which would result in a
Change in Control is pending or under consideration by the Board. The
termination of this Agreement shall not adversely affect any rights to which
Executive has become entitled prior to such termination. In addition, Section
5(a) shall survive the termination of this Agreement.
     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the day and year first above set forth.

            HILL-ROM HOLDINGS, INC.
      By           Title Chairman of the Board of Directors           
Executive