Exhibit 10.2

 

HOSPIRA 2004 LONG-TERM STOCK INCENTIVE PLAN
(As Amended Effective as of January 1, 2009)

 

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HOSPIRA 2004 LONG-TERM STOCK INCENTIVE PLAN
(As Amended Effective as of January 1, 2009)

 

SECTION 1

 

GENERAL

 

1.1          Purpose, Effective Date and Term.  The purpose of this Hospira 2004
Long-Term Stock Incentive Plan (the “Plan”) is to promote the longer-term
financial success of Hospira, Inc. (the “Company”) and its subsidiaries by
providing a means to attract, retain and reward individuals who can and do
contribute to such success and to further identify their interests with those of
the Company’s shareholders. The “Effective Date” of the Plan is the date on
which the shares of the Company are distributed to the shareholders of Abbott
Laboratories pursuant to the Separation and Distribution Agreement entered into
between the Company and Abbott Laboratories (the “Distribution”).  The Plan
shall be unlimited in duration and, in the event of Plan termination, shall
remain in effect as long as any awards under it are outstanding; provided,
however, that no awards may be granted under the Plan after the ten-year
anniversary of the most recent approval of the Plan by the Company’s
shareholders: May 14, 2019 (“New Effective Date”).  The Plan was administered
and operated in accordance with its provisions in effect prior to such New
Effective Date.  Any existing awards shall be administered in accordance with
their terms as of the New Effective Date.

 

1.2          Administration.  The authority to control and manage the operation
of the Plan shall be vested in a committee of the Board (the “Committee”) in
accordance with Section 6.1.

 

1.3          Participation.  Each recipient of an Abbott Conversion Award as
described in Section 4 and each other employee or director of the Company or any
subsidiary of the Company who is granted an award in accordance with the terms
of the Plan shall be a “Participant” in the Plan.  Awards under the Plan shall
be limited to employees and directors of the Company; provided, however, that an
award (other than an award of an ISO) may be granted to an individual prior to
the date on which he first performs services as an employee or director
(including individuals who it is anticipated will transfer from Abbott to the
Company within 24 months following the Distribution) provided that such award
does not become vested prior to the date such individual commences such
services.

 

1.4          Definitions.  Capitalized terms in the Plan shall be defined as set
forth in the Plan (including the definition provisions of Section 9).

 

SECTION 2

 

AWARDS

 

2.1          General.  Any award under the Plan may be granted singularly, in
combination with another award (or awards), or in tandem whereby the exercise or
vesting of one award held by a Participant cancels another award held by the
Participant.  Each award under the Plan shall be subject to the terms and
conditions of the Plan and such additional terms, conditions, limitations and
restrictions as the Committee shall provide with respect to such award.  Subject

 

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to Section 2.3, an award may be granted as an alternative to or replacement of
an existing award under the Plan or any other plan of the Company or any
subsidiary or as the form of payment for grants or rights earned or due under
any other compensation plan or arrangement of the Company or its subsidiaries,
including without limitation the Hospira Non-Employee Directors’ Fee Plan and
the plan of any entity acquired by the Company or any subsidiary.  The types of
awards that may be granted under the Plan include:

 

(a)      Stock Options.  A stock option represents the right to purchase shares
of Stock at an Exercise Price established by the Committee.  Any option may be
either an incentive stock option (an “ISO”) that is intended to satisfy the
requirements applicable to an “incentive stock option” described in section
422(b) of the Code or a non-qualified option that is not intended to be an ISO,
provided, that no ISOs may be granted after May 14, 2019, which is the ten-year
anniversary of the earlier of the date of adoption or shareholder approval of
the Plan, as amended.  Unless otherwise specifically provided by its terms, any
option granted under the Plan shall be a non-qualified option.

 

(b)      Stock Appreciation Rights.  A stock appreciation right (a “SAR”) is a
right to receive, in cash or Stock, an amount equal to or based upon the excess
of: (a) the Fair Market Value of a share of Stock at the time of exercise, over
(b) an Exercise Price established by the Committee pursuant to Section 2.2.

 

(c)      Stock Awards.  A stock award is a grant of shares of Stock or a right
to receive shares of Stock (or their cash equivalent or a combination of both)
in the future.  Such awards may include, but shall not be limited to, bonus
shares, stock units, performance shares, performance units, restricted stock or
restricted stock units.

 

(d)      Cash Incentive Awards.  A cash incentive award is the grant of a right
to receive a payment of cash, determined on an individual basis or as an
allocation of an incentive pool (or Stock having a value equivalent to the cash
otherwise payable) that is contingent on the achievement of performance
objectives.

 

2.2          Exercise of Options and SARs.  An option or SAR shall be
exercisable in accordance with such terms and conditions and during such periods
as may be established by the Committee.  In no event, however, shall an option
or SAR expire later than ten years after the date of its grant. The ‘Exercise
Price’ of each option and SAR shall not be less than 100% of the Fair Market
Value of a share of Stock. The payment of the Exercise Price of an option shall
be by cash or, subject to limitations imposed by applicable law, by such other
means as the Committee may from time to time permit, including, without
limitation, (i) by tendering, either actually or by attestation, shares of Stock
acceptable to the Committee, and valued at Fair Market Value as of the day of
exercise, (ii) by irrevocably authorizing a third party, acceptable to the
Committee, to sell shares of Stock (or a sufficient portion of the shares)
acquired upon exercise of the option and to remit to the Company a sufficient
portion of the sale proceeds to pay the entire Exercise Price and any tax
withholding resulting from such exercise or (iii) by any combination thereof.

 

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2.3          No Repricing.  Except for adjustments pursuant to Section 3.4
(relating to the adjustment of shares), the Exercise Price for any outstanding
option may not be decreased after the date of grant nor may an outstanding
option granted under the Plan be surrendered to the Company as consideration for
the grant of a replacement option with a lower exercise price without obtaining
the consent of shareholders of the Company.

 

2.4          Performance-Based Compensation. Any award under the Plan which is
intended to be “performance-based compensation” within the meaning of section
162(m) of the Code shall be conditioned on the achievement of one or more
objective performance measures, to the extent required by Code section 162(m) as
may be determined by the Committee.

 

(a)      Performance Measures.  Such performance measures may be based on any
one or more of the following: earnings (e.g., earnings before interest and
taxes; earnings before interest, taxes, depreciation and amortization; or
earnings per share); financial return ratios (e.g., return on investment; return
on invested capital; return on equity; or return on assets); increase in
revenue, operating or net cash flows; cash flow return on investment; total
shareholder return; market share; net operating income, operating income or net
income; debt load reduction; expense management; economic value added; stock
price; and strategic business objectives, consisting of one or more objectives
based on meeting specific cost targets, business expansion goals and goals
relating to acquisitions or divestitures.  Performance measures may be based on
the performance of the Company as a whole or of any one or more business units
of the Company and may be measured relative to a peer group or an index.

 

(b)      Partial and Over Achievement.  The terms of any such award may provide
that partial achievement or achievement in excess of the performance measures
may result in a payment or vesting based upon the degree of achievement.

 

(c)      Extraordinary Items.  In establishing any performance measures, the
Committee may provide for the exclusion of the effects of the following items,
to the extent identified in the audited financial statements of the Company,
including footnotes, or in the Management Discussion and Analysis section of the
Company’s annual report: (i) extraordinary, unusual, and/or nonrecurring items
of gain or loss; (ii) gains or losses on the disposition of a business;
(iii) changes in tax or accounting principles, regulations or laws; or
(iv) mergers or acquisitions.  To the extent not specifically excluded, such
effects shall be included in any applicable performance measure.

 

2.5          Dividends and Dividend Equivalents.  Except as provided in the next
sentence, any award under the Plan, including without limitation any option or
SAR, may provide the Participant with the right to receive dividend payments or
dividend equivalent payments with respect to Stock subject to the award, which
payments shall be made currently or credited to an account for the Participant,
and may be settled in cash or Stock. Notwithstanding the foregoing or any
provision contained in the Plan, no award shall provide the Participant with the
right to receive dividend payments or dividend equivalent payments with respect
to Stock subject to an option, SAR or unvested performance-based compensation.

 

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2.6          Deferral of Payment.  To the extent permitted by the Committee or
the terms of any award under the Plan, a Participant may defer receipt of the
cash or Stock otherwise payable under the award and be credited with interest or
dividend equivalents with respect thereto; provided, however, that any award
otherwise payable in stock shall continue to be payable only in stock. Any
deferral election must be made prior to the calendar year for which the
particular award will be made, or within 30 days after the individual first
becomes a Participant in the Plan in which case the election will apply only to
the benefits related to services performed after the election. Such election
shall also specify the timing and form of payment of any award, which election
may be changed by a subsequent election, provided the subsequent election is
made at least 12 months before the date of the first scheduled payment, if any,
with respect to the award; the subsequent election is not effective for at least
12 months after the date it is made; and the first payment under the subsequent
election must be delayed for at least five years from the date the first payment
would have been paid if the subsequent election had not been made (other than an
election relating to payment on account of death or disability). 
Notwithstanding the foregoing, (i) a Participant may not defer the receipt of
cash or Stock upon the exercise of a stock option or SAR, and (ii) with respect
to any awards or benefits under the Plan that constitute deferred compensation
under Code Section 409A, no payments with respect to such awards or benefits
shall be made to a Participant who is a key employee (as determined by the
Company pursuant to Code Section 416(i)) until on or after the first day of the
seventh calendar month following the Participant’s separation from service, at
which time all payments delayed during the preceding six-month period shall be
paid to the Participant in a lump sum within 30 days.

 

2.7          Non-U.S. Awards.  The Committee may grant awards, in its sole
discretion, to employees and directors of the Company and its subsidiaries who
are residing in jurisdictions outside of the United States.  For purposes of the
foregoing, the Committee may, in its sole discretion, vary the terms of the Plan
in order to conform any awards to the legal and tax requirements of each
non-U.S. jurisdiction where such individual resides.  The Committee may, in its
sole discretion, establish one or more sub-plans of the Plan and/or may
establish administrative rules and procedures to facilitate the operation of the
Plan in such non-U.S. jurisdictions.  For purposes of clarity, any terms
contained herein which are subject to variation in a non-U.S. jurisdiction and
any administrative rules and procedures established for a non-U.S. jurisdiction
shall be reflected in a written addendum to the Plan.  To the extent permitted
under applicable law, the Committee may delegate its authority and
responsibilities under this Section 2.7 of the Plan to one or more officers of
the Company.

 

SECTION 3

 

SHARES SUBJECT TO PLAN

 

3.1          Available Shares.  The shares of Stock with respect to which awards
may be made under the Plan shall be shares currently authorized but unissued or
currently held or, to the extent permitted by applicable law, subsequently
acquired by the Company as treasury shares, including shares purchased in the
open market or in private transactions.

 

3.2          Share Limitations.  Subject to the following provisions of this
subsection 3.2, the maximum number of shares of Stock that may be delivered to
Participants and their beneficiaries under the Plan shall be equal to Thirteen
Million (13,000,000) shares of Stock plus the amount of

 

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shares of Stock available for issuance under the Plan immediately prior to
May 14, 2009 for a total of Forty Four Million (44,000,000) shares of Stock (all
of which may be granted as ISOs).

 

(a)           Reuse of Shares.  To the extent any shares of Stock covered by an
award are not purchased or are forfeited, or if an award otherwise terminates
without delivery of shares, such shares shall not be deemed to have been
delivered for purposes of determining the maximum number of shares of Stock
available for delivery under the Plan.  Shares of Stock that are delivered to
the Company, or withheld from an award, for payment of the exercise price of an
option or SAR, or for payment of tax withholding, and shares of Stock reserved
for issuance upon grants of SARs (to the extent the number or reserved shares
exceeds the number of shares actually issued upon exercise of the SARs) shall
not again be available for grant.  The limitations of this paragraph
3.2(a) shall not apply to a performance-based award payable solely in cash, in
which the amount of the award is not determined directly or indirectly by
reference to the value of shares of Stock.

 

(b)           Accounting for Awards: Fungible Shares.  For purposes of this
Section 3, an award other than a Full Value Award shall reduce the aggregate
number of shares of Stock available for grants under the Plan by the total
number of shares of Stock covered by the award.  A Full Value Award shall reduce
the aggregate number of shares of Stock available for grants under the Plan by
the number of shares of Stock covered by the Full Value Award multiplied by
1.94.  If any Full value Award is forfeited or terminates without delivery of
the shares of Stock, so that the shares covered by the Full Value Award are
again available for grants pursuant to paragraph 3.2(a), the number of shares of
Stock that again becomes eligible for grants shall also be multiplied by 1.94.

 

3.3          Limitations on Grants to Individuals.

 

(a)      Options and SARs.  The maximum number of shares of Stock that may be
subject to options or SARs granted to any Participant during any calendar year
(excluding any awards intended to constitute Conversion Awards) shall be One
Million (1,000,000).

 

(b)           Stock Awards.  The maximum number of shares of Stock that may be
subject to stock awards described under paragraph 2.1(c) which are granted to
any Participant during any calendar year and are intended to be
“performance-based compensation” (as that term is used for purposes of Code
section 162(m)), shall be Five Hundred Thousand (500,000).

 

(c)           Cash Incentive Awards.  The maximum dollar amount that may be
payable to a Participant pursuant to cash incentive awards described under
paragraph 2.1(d) which are granted to any Participant during any calendar year
and are intended to be “performance-based compensation” (as that term is used
for purposes of Code section 162(m)), shall be Five Million Dollars ($5
million).

 

(d)           Director Fees. Other than with respect to initial grants to new
Directors or one-time grants due to extraordinary circumstances, the maximum
number of shares that

 

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may be covered by awards granted to any one individual non-employee Director
pursuant to Section 2.1(a) and 2.1(b) (relating to options and SARs) shall be
One Hundred Thousand (100,000) shares during any calendar year under the terms
of the Hospira Non-Employee Director’s Fee Plan and the maximum number of shares
that may be covered by awards granted to any one individual non-employee
Director pursuant to Section 2.1(c) (relating to Other Stock awards) shall be
Fifty Thousand (50,000) shares during any calendar year under the terms of the
Hospira Non-Employee Director’s Fee Plan.  The foregoing limitations shall not
apply to cash-based director fees that the non-employee Director elects to
receive in the form of Stock or Stock Units.

 

(e)           Dividend, Dividend Equivalents and Earnings.  For purposes of
determining whether an award is intended to be qualified as a performance-based
compensation, pursuant to the foregoing limitations of this Section 3.3, (i) the
right to receive dividends and dividend equivalents with respect to any award
which is not yet vested shall be treated as a separate award, and (ii) if the
delivery of any shares or cash under an award is deferred, any earnings,
including dividends and dividend equivalents, shall be disregarded.

 

3.4          Corporate Transactions.  Subject to paragraphs (a) and (b) below,
in the event of a corporate transaction involving the Company (including,
without limitation, any stock dividend, stock split, extraordinary cash
dividend, recapitalization, reorganization, merger, consolidation, split-up,
spin-off, combination or exchange of shares), the Committee shall adjust awards
to preserve the benefits or potential benefits of the awards and the Plan.  The
action required by the Committee may include: (i) adjustment of the number and
kind of shares which may be delivered under the Plan; (ii) adjustment of the
number and kind of shares subject to outstanding awards; (iii) adjustment of the
Exercise Price of outstanding options and SARs; and (iv) any other adjustments
that the Committee determines to be equitable (which may include, without
limitation, (I) replacement of awards with other awards which the Committee
determines have comparable value and which are based on stock of a company
resulting from the transaction, and (II) cancellation of the award in return for
cash payment of the current value of the award, determined as though the award
was fully vested at the time of payment, provided that in the case of an option
or SAR, the amount of such payment may be the excess of the value of the Stock
subject to the option or SAR at the time of the transaction over the Exercise
Price).

 

(a)      Notwithstanding any other provision of this Plan, including the terms
of any award granted hereunder, if the outstanding common shares of the Company
shall be combined, or be changed into, or exchanged for, another kind of stock
of the Company, into securities of another corporation, or into property
(including cash) whether through recapitalization, reorganization, sale, merger,
consolidation, spin-off, business combination or a similar transaction (a
“Transaction”), the Company shall cause its successor or acquiror (or ultimate
parent of any successor or acquiror), as applicable, to assume each stock option
and SAR outstanding immediately prior to the Transaction (or to cause new
options or rights to be substituted therefor).  Pursuant to such assumed or
substituted option or rights, holders of such option or right shall thereafter
be entitled to receive, upon due exercise of any portion of the option or right,
(a) in the event of a Transaction in which the outstanding common shares of the

 

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Company are combined, or changed into, or exchanged for, solely another kind of
stock of the Company or securities of another corporation (disregarding, for
this purpose, cash paid in lieu of fractional shares), the securities which that
person would have been entitled to receive for common shares acquired through
exercise of the same portion of such option or right immediately prior to the
effective date of such Transaction, and (b) in the event of a Transaction in
which the outstanding common shares of the Company are changed into, or
exchanged for, property (including cash) other than solely stock of the Company
or securities of another corporation (disregarding, for this purpose, cash paid
in lieu of fractional shares), securities the fair market value of which
immediately following the effective date of such Transaction (as determined by
the Committee) equals the fair market value (as determined by the Committee) of
the property which that person would have been entitled to receive for common
shares acquired through exercise of the same portion of such option or right
immediately prior to the effective date of such Transaction.  In each case such
assumed or substituted option or right shall continue to be subject to the same
terms and conditions (including, without limitation, with respect to any right
to receive “replacement options” upon option exercise) to which it was subject
immediately prior to the Transaction. Notwithstanding the foregoing, with
respect to the substitution of a new option or SAR pursuant to a Transaction for
an outstanding option or SAR or the assumption of an outstanding option or SAR
pursuant to a Transaction, the ratio of the exercise price to the fair market
value of the shares subject to the option or SAR immediately after the
substitution or assumption must not be greater than the ratio of the Exercise
Price to the Fair Market Value of the shares subject to the option or SAR
determined as of the last trading day immediately before the substitution or
assumption.

 

(b)      Notwithstanding the immediately preceding paragraph, upon a Transaction
in which the outstanding common shares of the Company are changed into, or
exchanged for, property (including cash) other than solely stock of the Company
or securities of another corporation (disregarding, for this purpose, cash paid
in lieu of fractional shares) and which constitutes a Change in Control, each
holder of an option or SAR may elect to receive, immediately following such
Transaction in exchange for cancellation of any stock option or SAR held by such
person immediately prior to the Transaction, a cash payment, with respect to
each common share subject to such option or right, equal to the difference
between the value of consideration (as determined by the Committee) received by
the shareholders for a common share of the Company in the Transaction, less any
applicable purchase price.

 

3.5          Delivery of Shares.  Delivery of shares of Stock or other amounts
under the Plan shall be subject to the following:

 

(a)           Compliance with Applicable Laws.  Notwithstanding any other
provision of the Plan, the Company shall have no obligation to deliver any
shares of Stock or make any other distribution of benefits under the Plan unless
such delivery or distribution complies with all applicable laws (including,
without limitation, the requirements of the Securities Act of 1933), and the
applicable requirements of any securities exchange or similar entity.

 

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(b)                                 Certificates.  To the extent that the Plan
provides for the issuance of shares of Stock, the issuance may be effected on a
non-certificated basis, to the extent not prohibited by applicable law or the
applicable rules of any stock exchange.

 

SECTION 4

 

ABBOTT CONVERSION AWARDS

 

4.1                                 General.  Certain employees transferred to
the employ of the Company and its subsidiaries have received awards under the
Plan (“Conversion Awards”) as of the Effective Date as replacement awards for
awards granted under the Abbott Laboratories 1996 Incentive Stock Program and
the Abbott Laboratories 1991 Incentive Stock Program (the “Abbott Plans”) and
cancelled in connection with the Distribution.   The number of such Conversion
Awards has been determined by applying a conversion ratio established by the
committee administering the Abbott Plans in accordance with the terms of such
plans on a basis intended to be consistent with Section 424 of the Code and
applicable accounting principles.

 

4.2                                 Share Limitations.  Conversion Awards shall
be taken into account in applying the share limitations set forth in
Section 3.2, but shall be excluded in calculating the individual limitations
under Section 3.3(a).

 

4.3                                 Replacement Options.  If an option granted
under the Plan constitutes a Conversion Award with respect to an option under
the Abbott Plans that provided for the grant of replacement stock options if all
or a portion of the exercise price or taxes incurred in connection with the
exercise of the option are paid with the delivery (or in the case of payment of
taxes, the withholding of shares) of other shares of Abbott Laboratories, then
the Conversion Award shall provide for a replacement stock option (a
“Replacement Option”).  Each Replacement Option shall cover the number of shares
of Stock surrendered (by actual delivery or by attestation) to satisfy the
Exercise Price, plus the number of shares surrendered (by actual delivery or
attestation) or withheld to satisfy the Participant’s tax liability, shall have
an Exercise Price equal to 100% of the Fair Market Value of Stock, shall be
first exercisable six months from the date of grant of the Replacement Option
and shall have the expiration date of the original option.  Except as provided
in the foregoing provisions of this Section 4.3, no replacement stock options
shall be granted under the Plan.

 

SECTION 5

 

CHANGE IN CONTROL

 

5.1                                 Subject to the provisions of Section 3.4
(relating to the adjustment of shares), and except as otherwise provided in the
Plan or the terms of any award:

 

(a)                                  If a Participant who is an employee or
Director of the Company or a subsidiary at the time of a Change in Control then
holds one or more outstanding options or SARs, all such options and SARs then
held by the Participant shall become fully exercisable on and after the date of
the Change in Control (subject to the expiration provisions otherwise applicable
to the option or SAR), and any Stock purchased by the

 

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Participant under such option or acquired under such SAR following such Change
in Control shall be fully vested upon exercise.

 

(b)                                 If a Participant who is an employee or
Director of the Company or a subsidiary at the time of a Change in Control then
holds one or more stock awards described in paragraph 2.1(c) or cash incentive
awards described in paragraph 2.1(d), such awards shall be fully earned and
vested (and all performance measures deemed to be achieved at the target level
of performance).

 

5.2                                 Change in Control.  For purposes of this
Plan, a “Change in Control” shall be deemed to have occurred on the earliest of
a Change in Ownership, a Change in Effective Control, or a Change in Ownership
of Assets, each as defined below.

 

(a)                                          Change in Ownership

 

(i)                                             In general. Except as provided
in paragraph (b)(ii) of this Section, a Change in Ownership of the Company
occurs on the date that any one person, or more than one person acting as a
group (as defined in paragraph (a)(ii) of this Section), acquires ownership of
the Company’s stock that, together with stock held by such person or group,
constitutes more than 50% of the total fair market value or total voting power
of the Company’s stock. However, if any one person, or more than one person
acting as a group, is considered to own more than 50% of the total fair market
value or total voting power of the Company’s stock, the acquisition of
additional stock by the same person or persons is not considered to cause a
Change in Ownership of the Company (or to cause a Change in Effective Control of
the Company (within the meaning of paragraph (b) of this Section)). An increase
in the percentage of stock owned by any one person, or persons acting as a
group, as a result of a transaction in which the Company acquires its stock in
exchange for property will be treated as an acquisition of stock for purposes of
this Section. This paragraph (a)(i) applies only when there is a transfer of the
Company’s stock (or issuance of stock of the Company) and stock in the Company
remains outstanding after the transaction.

 

(ii)                                          Persons acting as a group. For
purposes of paragraph (a)(i) above, persons will not be considered to be acting
as a group solely because they purchase or own stock of the Company at the same
time. However, persons will be considered to be acting as a group if they are
owners of a corporation that enters into a merger, consolidation, purchase or
acquisition of stock, or similar business transaction with the Company. If a
person, including an entity, owns stock in both corporations that enter into a
merger, consolidation, purchase or acquisition of stock, or similar transaction,
such shareholder is considered to be acting as a group with other shareholders
only with respect to the ownership in that corporation before the transaction
giving rise to the change and not with respect to the ownership interest in the
other corporation.

 

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(b)                                         Change in Effective Control

 

(i)                                     In general. Notwithstanding that the
Company has not undergone a Change in Ownership under paragraph (a) of this
Section, a Change in Effective Control of the Company occurs only on either of
the following dates:

 

(1) The date any one person, or more than one person acting as a group (as
determined under paragraph (a)(ii) of this Section), acquires (or has acquired
during the 12-month period ending on the date of the most recent acquisition by
such person or persons) ownership of stock of the Company possessing 30% or more
of the total voting power of the stock of the Company.

 

(2) The date a majority of members of the Board is replaced during any 12-month
period by Directors whose appointment or election is not endorsed by a majority
of the members of the Board before the date of the appointment or election.

 

(ii) Acquisition of additional control. If any one person, or more than one
person acting as a group, is considered to effectively control the Company
(within the meaning of this paragraph (b)), the acquisition of additional
control of the Company by the same person or persons is not considered to cause
a Change in Effective Control of the Company (or to cause a Change in Ownership
of the Company within the meaning of paragraph (a) of this Section).

 

(c)                                  Change in Ownership of Assets

 

(i)                                     In general. A Change in Ownership of
Assets occurs on the date that any one person, or more than one person acting as
a group (as determined in paragraph (a)(ii) of this Section), acquires (or has
acquired during the 12-month period ending on the date of the most recent
acquisition by such person or persons) assets from the Company that have a total
gross fair market value equal to or more than 40% of the total gross fair market
value of all of the Company’s assets immediately before such acquisition or
acquisitions. For this purpose, gross fair market value means the value of the
assets of the Company, or the value of the assets being disposed of, determined
without regard to any liabilities associated with such assets.

 

(ii)                                  Transfers to a related person—There is no
Change in Control event under this paragraph (c) when there is a transfer to an
entity that is controlled by the shareholders of the transferring corporation
immediately after the transfer, as provided in this paragraph (c)(ii). A
transfer of assets by the Company is not treated as a Change in Ownership of
Assets if the assets are transferred to—

 

(1) A shareholder of the Company (immediately before the asset transfer) in
exchange for or with respect to its stock;

 

(2) An entity, 50% or more of the total value or voting power of which is owned,
directly or indirectly, by the Company;

 

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(3) A person, or more than one person acting as a group, that owns, directly or
indirectly, 50% or more of the total value or voting power of all the
outstanding stock of the Company; or

 

(4) An entity, at least 50% of the total value or voting power of which is
owned, directly or indirectly, by a person described in paragraph
(c)(ii)(3) above.

 

For purposes of this paragraph (c)(ii) and except as otherwise provided above, a
person’s status is determined immediately after the transfer of the assets.

 

(iii)                               Persons acting as a group. Persons will not
be considered to be acting as a group solely because they purchase assets of the
Company at the same time. However, persons will be considered to be acting as a
group if they are owners of a corporation that enters into a merger,
consolidation, purchase or acquisition of assets, or similar business
transaction with the Company. If a person, including an entity shareholder, owns
stock in both corporations that enter into a merger, consolidation, purchase or
acquisition of assets, or similar transaction, such shareholder is considered to
be acting as a group with other shareholders in a corporation only to the extent
of the ownership in that corporation before the transaction giving rise to the
change and not with respect to the ownership interest in the other corporation.

 

5.3                                 Amendment of Section 5.  The provisions of
this Section 5 may not be amended or deleted, nor superseded by any other
provision of this Plan during the pendency of a Potential Change in Control.  A
“Potential Change in Control” shall exist during any period in which the
circumstances described in paragraphs (a), (b), (c) or (d), below, exist
(provided, however, that a Potential Change in Control shall cease to exist not
later than the occurrence of a Change in Control):

 

(a)                                  The Company enters into an agreement, the
consummation of which would result in the occurrence of a Change in Control,
provided that a Potential Change in Control described in this Section 5.3 shall
cease to exist upon the expiration or other termination of all such agreements.

 

(b)                                 Any Person (without regard to the exclusions
set forth in subsections (i) through (iv) of such definition) publicly announces
an intention to take or to consider taking actions the consummation of which
would constitute a Change in Control; provided that a Potential Change in
Control described in this paragraph (b) shall cease to exist upon the withdrawal
of such intention, or upon a determination by the Board that there is no
reasonable chance that such actions would be consummated.

 

(c)                                  Any Person becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing 10% or more of
either the then outstanding shares of common stock of the Company or the
combined voting power of the Company’s then outstanding securities (not
including in the securities beneficially owned by such Person any securities
acquired directly from the Company or its Affiliates).

 

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(d)                                 The Board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change in Control exists;
provided that a Potential Change in Control described in this paragraph
(d) shall cease to exist upon a determination by the Board that the reasons that
gave rise to the resolution providing for the existence of a Potential Change in
Control have expired or no longer exist.

 

SECTION 6

 

COMMITTEE

 

6.1                                 Administration.  The authority to control
and manage the operation and administration of the Plan shall be vested in a
committee (the “Committee”) in accordance with this Section 6.  The Committee
shall be selected by the Board.  Subject to applicable stock exchange rules, if
the Committee does not exist, or for any other reason determined by the Board,
the Board may take any action under the Plan that would otherwise be the
responsibility of the Committee.  Notwithstanding the foregoing, with respect to
any action, determination, interpretation or modification with respect to a
specific award granted to a non-employee Director, other than ministerial
actions, the Committee shall be comprised of the Board.

 

6.2                                 Powers of Committee.  The Committee’s
administration of the Plan shall be subject to the following:

 

(a)                                  Subject to the provisions of the Plan, the
Committee will have the authority and discretion to select from among the
Company’s employees and directors those persons who shall receive awards, to
determine the time or times of receipt, to determine the types of awards and the
number of shares covered by the awards, to establish the terms, conditions,
performance criteria, restrictions, and other provisions of such awards, and
(subject to the restrictions imposed by Section 7) to cancel or suspend awards.

 

(b)                                 To the extent that the Committee determines
that the restrictions imposed by the Plan preclude the achievement of the
material purposes of the awards in jurisdictions outside the United States, the
Committee will have the authority and discretion to modify those restrictions as
the Committee determines to be necessary or appropriate to conform to applicable
requirements or practices of jurisdictions outside of the United States.

 

(c)                                  The Committee will have the authority and
discretion to interpret the Plan, to establish, amend, and rescind any rules and
regulations relating to the Plan, and to make all other determinations that may
be necessary or advisable for the administration of the Plan.

 

(d)                                 Any interpretation of the Plan by the
Committee and any decision made by it under the Plan is final and binding on all
persons.

 

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(e)                                  In controlling and managing the operation
and administration of the Plan, the Committee shall take action in a manner that
conforms to the articles and bylaws of the Company, and applicable state
corporate law.

 

6.3                                 Delegation by Committee.  Except to the
extent prohibited by applicable law, the applicable rules of a stock exchange or
this Plan, or as necessary to comply with the exemptive provisions of Rule 16b-3
under the Exchange Act, the Committee may allocate all or any portion of its
responsibilities and powers to any one or more of its members and may delegate
all or any part of its responsibilities and powers to any person or persons
selected by it, including without limitation, (a) delegating to a committee of
one or more members of the Board who are not “independent directors” within the
meaning of Section 162(m) of the Code, the authority to grant awards under the
Plan to eligible persons who are either (i) not then “covered employees,” within
the meaning of Section 162(m) of the Code and are not expected to be “covered
employees” at the time of recognition of income resulting from such award or
(ii) not persons with respect to whom the Company wishes to comply with
Section 162(m) of the Code and/or (b) delegating to a committee of one or more
members of the Board who are not “non-employee directors,” within the meaning of
Rule 16b-3, the authority to grant awards under the Plan to eligible persons who
are not then subject to Section 16 of the Exchange Act.  Any such allocation or
delegation may be revoked by the Committee at any time.  To the extent permitted
by applicable law and resolution of the Board, the Committee may delegate all or
any part of its responsibilities to any officer of the Company.

 

6.4                                 Information to be Furnished to Committee. 
As may be permitted by applicable law, the Company and its subsidiaries shall
furnish the Committee with such data and information as it determines may be
required for it to discharge its duties.  The records of the Company and its
subsidiaries as to an employee’s or Participant’s employment, termination of
employment, leave of absence, reemployment and compensation shall be conclusive
on all persons unless determined to be incorrect.  Subject to applicable law,
Participants and other persons entitled to benefits under the Plan must furnish
the Committee such evidence, data or information as the Committee considers
desirable to carry out the terms of the Plan.

 

SECTION 7

 

AMENDMENT AND TERMINATION

 

7.1                                 Subject to the limitations of Section 5.3,
the Board may, at any time, amend or terminate the Plan, and may amend any award
agreement, provided that no amendment or termination may, in the absence of
written consent to the change by the affected Participant (or, if the
Participant is not then living, the affected beneficiary), adversely affect the
rights of any Participant or beneficiary under any award granted under the Plan
prior to the date such amendment is adopted by the Board; and further provided,
that adjustments pursuant to Section 3.4 (and not in violation of paragraphs
(a) and (b) thereof) shall not be subject to the foregoing limitations of this
Section 7; and further provided that no amendment may (i) remove the provisions
of subsection 2.3 (relating to option repricing), (ii) materially increase the
benefits accruing to Participants under the Plan, (iii) materially increase the
aggregate number of securities which may be issued under the Plan, or
(iv) materially modify the requirements for

 

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participation in the Plan, unless the amendment is approved by the Company’s
stockholders. The Committee shall have the authority to make “minor amendments”
to the Plan or an award agreement.  For purposes of the foregoing, a “minor
amendment” is any amendment which is solely designed to achieve compliance with
applicable legislation or regulation or which will not materially increase the
cost of the Plan to the Company.  Determination of whether an amendment is a
minor amendment shall be made by the Committee after obtaining such advice from
such legal or tax counsel or other consultants as the Committee may deem
appropriate.  With respect to any deferrals under Section 2.6, in the event of a
termination of the Plan, the Company shall distribute all deferred amounts to
the participants provided (i) the Company terminates all non-qualified deferred
compensation arrangements of the same type at the same time that the Plan is
terminated; (ii) except for payments that would be payable if no termination had
occurred, the Company makes no payments of the deferred amounts to Participants
for 12 months but makes all payments within 24 months; and (iii) the Company
adopts no new non-qualified deferred compensation arrangement of the same type
for three years.  Notwithstanding the foregoing or any provision to the
contrary, the Plan shall not be terminated at any time when the Company is
experiencing a downturn in its financial health.

 

SECTION 8

 

GENERAL TERMS

 

8.1                                 No Implied Rights.

 

(a)                                  No Rights to Specific Assets.  Neither a
Participant nor any other person shall, by reason of participation in the Plan,
acquire any right in or title to any assets, funds or property of the Company or
any subsidiary whatsoever, including, without limitation, any specific funds,
assets, or other property which the Company or any subsidiary, in its sole
discretion, may set aside in anticipation of a liability under the Plan.  A
Participant shall have only a contractual right to the Stock or amounts, if any,
payable under the Plan, unsecured by any assets of the Company or any
subsidiary, and nothing contained in the Plan shall constitute a guarantee that
the assets of the Company or any subsidiary shall be sufficient to pay any
benefits to any person.

 

(b)                                 No Contractual Right to Employment or Future
Awards.  The Plan does not constitute a contract of employment, and selection as
a Participant will not give any participating employee the right to be retained
in the employ of the Company or any subsidiary, nor any right or claim to any
benefit under the Plan, unless such right or claim has specifically accrued
under the terms of the Plan.  Except as otherwise provided in the Plan, no award
under the Plan shall confer upon the holder thereof any rights as a shareholder
of the Company prior to the date on which the individual fulfills all conditions
for receipt of such rights.

 

8.2                                 Transferability.  The Committee may provide
at the time it makes an award under the Plan or at any time thereafter that such
award may be transferable by the Participant, subject to such limitations as the
Committee may impose; provided that awards under the Plan are not

 

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transferable for value except as designated by the Participant by will or by the
laws of descent and distribution.

 

8.3                                 Form and Time of Elections.  Unless
otherwise specified herein, each election required or permitted to be made by
any Participant or other person entitled to benefits under the Plan, and any
permitted modification, or revocation thereof, shall be filed with the Company
at such times, in such form, and subject to such restrictions and limitations,
not inconsistent with the terms of the Plan, as the Committee shall require.

 

8.4                                 Evidence.  Evidence required of anyone under
the Plan may be by certificate, affidavit, document or other information which
the person acting on it considers pertinent and reliable, and signed, made or
presented by the proper party or parties.

 

8.5                                 Tax Withholding.  All distributions under
the Plan are subject to withholding of all applicable taxes, and the Committee
may condition the delivery of any shares or other benefits under the Plan on
satisfaction of the applicable withholding obligations.  Except as otherwise
provided by the Committee, such withholding obligations may be satisfied
(i) through cash payment by the Participant; (ii) through the surrender of
shares of Stock which the Participant already owns; or (iii) through the
surrender of shares of Stock to which the Participant is otherwise entitled
under the Plan; provided, however, that except as otherwise specifically
provided by the Committee, such shares under clause (iii) may not be used to
satisfy more than the Company’s minimum statutory withholding obligation.

 

8.6                                 Action by Company or Subsidiary.  Any action
required or permitted to be taken by the Company or any subsidiary shall be by
resolution of its board of directors, or by action of one or more members of the
board (including a committee of the board) who are duly authorized to act for
the board, or (except to the extent prohibited by applicable law or applicable
rules of any stock exchange) by a duly authorized officer of such company.

 

8.7                                 Successors.  All obligations of the Company
under this Plan shall be binding upon and inure to the benefit of any successor
to the Company, whether the existence of such successor is the result of a
direct or indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business, stock, and/or assets of the Company.

 

8.8                                 Gender and Number.  Where the context
admits, words in any gender shall include any other gender, words in the
singular shall include the plural and the plural shall include the singular.

 

SECTION 9

 

DEFINED TERMS

 

In addition to the other definitions contained herein, the following definitions
shall apply:

 

(a)                                  Affiliates.  The term “Affiliates” has the
meaning ascribed to it in paragraph 5.2(f).

 

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(b)                                 Beneficial Owner.  The term “Beneficial
Owner” has the meaning ascribed to it in paragraph 5.2(f).

 

(c)                                  Board.  The term “Board” means the Board of
Directors of the Company.

 

(d)                                 Change in Control.  The term “Change in
Control” has the meaning ascribed to it in Section 5.2.

 

(e)                                  Code.  The term “Code” means the Internal
Revenue Code of 1986, as amended.  A reference to any provision of the Code
shall include reference to any successor provision of the Code.

 

(f)                                    Committee.  The term “Committee” means
the Committee acting under Section 6.

 

(g)                                 Company.  The term “Company” means
Hospira, Inc. and its successors and assigns.

 

(h)                                 Conversion Award.  The term “Conversion
Award” means an award described in Section 4.1.

 

(i)                                     Director.  The term “Director” means a
member of the Board.

 

(j)                                     Distribution.  The term “Distribution”
means the distribution of Company shares to shareholders of Abbott Laboratories
pursuant to the Separation and Distribution Agreement.

 

(k)                                  Exchange Act.  The term “Exchange Act” has
the meaning ascribed to it by paragraph 5.2(f).

 

(l)                                     Exercise Price.  The term “Exercise
Price” means the price established with respect to an option or SAR pursuant to
Section 2.2.

 

(m)                               Fair Market Value.  The “Fair Market Value” of
the Stock means the average of the highest and lowest sales prices for the Stock
as reported by the New York Stock Exchange Composite Reporting System.  For
purposes of Sections 2.2 and 4.3, the “Fair Market Value” of the Stock means the
average of the highest and lowest sales prices for the Stock as reported by the
New York Stock Exchange Composite Reporting System on the date of the grant. 
Notwithstanding the foregoing, where applicable foreign law requires that Fair
Market Value be based upon a specific price averaging method and period, such
averaging method and period may be substituted for the foregoing definition of
Fair Market Value provided the averaging period does not exceed 30 days.

 

(n)                                 Full Value Award.  The term “Full Value
Award” means a grant of performance shares, performance units, restricted stock
or restricted stock units, and any award (or portion thereof) that provides for
a Participant to receive shares of

 

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Stock, or the value thereof, without payment of an amount at least equal to the
Fair Market Value at the time of grant (or in the case of an SAR, an Exercise
Price).

 

(o)                                 ISO.  The term “ISO” has the meaning
ascribed to it in paragraph 2.1(a).

 

(p)                                 Participant.  The term “Participant” means
any individual who has received an award under the Plan.

 

(q)                                 Person.  The term “Person” has the meaning
ascribed to it by paragraph 5.2(f).

 

(r)                                    Potential Change in Control.  The term
“Potential Change in Control” has the meaning ascribed to it in Section 5.3.

 

(s)                                  SAR.  The term “SAR” has the meaning
ascribed to it in paragraph 2.1(b).

 

(t)                                    Separation and Distribution Agreement. 
The term “Separation and Distribution Agreement” means the agreement entered
into between the Company and Abbott Laboratories pursuant to which Abbott
Laboratories accomplished the spin-off of the Hospira Business (as defined
therein).

 

(u)                                 Stock.  The term “Stock” means common stock
of the Company.

 

(v)                                 Transaction.  The term “Transaction” has the
meaning ascribed to it in paragraph 3.4(a).

 

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