Exhibit 10.1

 

February 23, 2011

 

Mr. F. Michael Ball
215 Larkspur Avenue
Corona del Mar, CA 92625

 

Dear Mike:

 

We are pleased to confirm our offer of employment to you as follows:

 

POSITION

 

Chief Executive Officer. In addition, you will be elected to serve on the Board
of Directors effective as of your start date.

 

REPORTING TO

 

Board of Directors.

 

ONE-TIME SPECIAL HIRING INCENTIVE

 

Contingent upon your starting work at Hospira on or before March 28, 2011, you
will receive a one-time special hiring incentive consisting of a grant value of
$500,000 in Hospira stock options to be effective on the last trading day of the
quarter that includes your start date. This grant shall vest ratably over three
years, subject to immediate vesting upon your involuntary termination by Hospira
without “cause” or your resignation with “good reason” as those terms are
defined below. The grant will be governed by the terms of the Hospira 2004
Long-Term Incentive Plan, as amended, and the individual award agreement. The
form of award agreement for the grant of the stock options is enclosed for your
review. The grant values expressed above will be rounded up or down to the
nearest whole share of Hospira stock. To determine the number of option shares,
the grant value will be divided by the Black-Scholes value determined as of the
last trading day of the calendar quarter (March 31, 2011).

 

BASE SALARY

 

Your initial base salary will be at the annual rate of $975,000. Salaries will
generally be reviewed each calendar year and may be increased, but not
decreased, by the Board of Directors based on performance, market conditions or
other business factors consistent with Hospira’s Compensation Administration
Program.

 

SHORT-TERM INCENTIVE COMPENSATION

 

In this position, you will be eligible to receive annual incentive awards under
Hospira’s performance incentive plan. For fiscal year 2011, your participation
target will be 120% of your full year base salary, regardless of the actual
salary paid to you during 2011. The amount of incentive compensation you
actually earn is determined by the Board of Directors and is dependent on
Hospira’s success in achieving defined goals. Your participation in Hospira’s
performance incentive plan will be governed by the terms of the plan.

 

LONG-TERM INCENTIVE COMPENSATION — INITIAL AND ANNUAL GRANTS

 

Contingent upon your starting work at Hospira on or before March 28, 2011, you
will receive:

 

(a)          A grant value of $1,950,000 in Hospira stock options to be
effective on the last trading day of the quarter that includes your start date.

 

 

FMB

 

IWB

 

F. Michael Ball

 

Hospira, Inc.

 

 

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(b)         A grant value of $2,925,000 in Hospira performance share units to be
effective on the last trading day of the quarter that includes your start date.

 

You will be eligible to participate in future grants under the LTIP, subject to
compensation committee approval. All grants will be governed by the terms of the
LTIP and individual award agreements. The award agreements for your initial and
subsequent grants will provide for immediate vesting upon your involuntary
termination by Hospira without “cause” or your resignation with “good reason”.
Forms of award agreements for grants of stock options and performance share
units are enclosed for your review.

 

For purposes of this Employment Offer and the individual award agreements, the
definitions of “cause” and “good reason” will have the following meaning:

 

The term ‘Cause’ shall mean the willful engaging by the Participant in illegal
conduct or gross misconduct which is demonstrably and materially injurious to
the Company. For purposes of this Agreement, no act, or failure to act, on the
Participant’s part shall be deemed ‘willful’ unless done, or omitted to be done,
by the Participant not in good faith and without reasonable belief that the
Participant’s action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Participant shall not be deemed to have been
terminated for Cause unless and until the Company delivers to the Participant a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice to the Participant and
an opportunity for the Participant, together with counsel, to be heard before
the Board) finding that, in the good faith opinion of the Board, the Participant
was guilty of conduct set forth above and specifying the particulars thereof in
detail.”

 

The term “Good Reason” shall mean any of the following events, absent the
Participant’s consent: a reduction of the Participant’s base salary; a material
diminution in the Participant’s authorities, duties, or responsibilities; or a
material breach by the Company of any agreement between the Company and the
Participant. For each event described above, the Participant must furnish notice
to the Board within thirty (30) days of the occurrence of the event, the Company
shall have thirty (30) days after receiving such notice in which to cure, and if
the failure is not cured by the end of the cure period the Participant must
terminate employment within fifteen (15) days after the expiration of the cure
period.

 

The grant values expressed above will be rounded up or down to the nearest whole
share of Hospira stock or performance share unit. To determine the number of
option shares, the grant value will be divided by the Black-Scholes value
determined as of the last trading day of the calendar quarter (March 31st in the
case of the initial grants above). The strike price for the options is the
average of the high and low on the same final trading day. To determine the
number of performance units, the grant value will be divided by the Monte-Carlo
value determined as of the last trading day of the calendar quarter.

 

LONG TERM INCENTIVE COMPENSATION — “MAKE-WHOLE” GRANTS

 

Contingent upon your starting work at Hospira on or before March 28, 2011, you
will receive:

 

(a)          A grant value of $3,394,208 in shares of Hospira restricted stock
to compensate you for the loss of unvested options from your prior employer.

(b)         A grant value of $710,000 in shares of Hospira restricted stock to
compensate you for the loss of unvested restricted stock from your prior
employer.

(c)          A grant value of $1,929,621 in shares of Hospira restricted stock
to compensate you for the loss of retirement benefits with your prior employer.

 

 

FMB

 

IWB

 

F. Michael Ball

 

Hospira, Inc.

 

 

2

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The foregoing grants of restricted stock shall be effective on the last trading
day of the quarter that includes your start date. These restricted stock grants
shall vest ratably over three years. By way of illustration, if you remain
employed on March 31, 2012, you will become one-third vested in the restricted
stock granted under clauses (a), (b) and (c). However, these restricted stock
grants shall immediately vest upon your involuntary termination by Hospira
without “cause” or your resignation with “good reason” as those terms are
defined above. All grants are governed by the terms of the Hospira 2004
Long-Term Stock Incentive Plan, as amended (“LTIP”) and individual award
agreements, except that the clawback provisions contained in the standard form
of award agreement shall not apply. The form of award agreements for grants of
restricted stock is enclosed for your review. The grant values expressed above
will be rounded up or down to the nearest whole share of Hospira stock. To
determine the number of restricted stock units, the grant values are divided by
the closing price of Hospira stock on the last trading day of the calendar
quarter (March 31, 2011).

 

RELOCATION

 

Acceptance of our offer requires that you relocate to the metro-Chicagoland
area. We will provide assistance to you through the Hospira Relocation Program
plan. Information regarding this program will be provided to you by Ken Meyers,
Senior Vice President, Organizational Transformation and People Development. In
the event you voluntarily or involuntarily (for cause) terminate your employment
within 12 months after the date of hire, by your signature below, you
acknowledge and agree to immediately pay back to Hospira all relocation benefits
expended on your behalf.

 

VACATION

 

You are entitled to four weeks of paid vacation each calendar year under
Hospira’s Vacation policy.

 

BENEFITS

 

You will be eligible to participate in Hospira’s benefit programs according to
the rules governing each. Hospira’s benefit programs are outlined in the
attached booklet.

 

RETIREMENT

 

You will be eligible to participate in Hospira’s 401(k) Retirement Savings Plan
and the Hospira Non-Qualified Savings & Investment Plan. The plans provide a
company matching contribution of 7% of your salary when you elect to make
contributions of 5% or more. Information outlining the details of the plans is
attached.

 

REIMBURSEMENT OF ATTORNEYS’ FEES

 

We will reimburse you up to $15,000 for attorneys’ fees incurred by you in
connection with the review of this Employment Offer and related documents upon
presentation of invoices and evidence of payment in accordance with Hospira’s
expense reimbursement policy.

 

SEVERANCE

 

You will be eligible for severance benefits available to corporate officers as
described in the Hospira Corporate Officer Severance Plan. Hospira will amend
the severance plan to permit your participation in the plan. Moreover, for
purposes of your participation in the severance plan, Section 4(b) will be
amended with respect to you to read as follows: ‘The Participant’s employment is
terminated for other than ‘Cause,” defined as the willful engaging by the
Participant in illegal conduct or gross misconduct which is demonstrably and
materially injurious to the Company. For purposes of this Agreement, no act, or
failure to act, on the Participant’s part shall be deemed ‘willful’ unless

 

 

FMB

 

IWB

 

F. Michael Ball

 

Hospira, Inc.

 

 

3

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done, or omitted to be done, by the Participant not in good faith and without
reasonable belief that the Participant’s action or omission was in the best
interest of the Company.’ Your severance benefits will be determined in
accordance with the severance plan, and this paragraph, even if not so amended
at the time of your termination.

 

CHANGE IN CONTROL

 

You will be eligible for benefits following a change in control in accordance
with the terms of the attached form of Agreement Regarding Change in Control,
which will expire by its terms as of December 31, 2012 unless a change in
control occurs before such date. All similar agreements with corporate officers
are set to expire on December 31, 2012 to permit the Compensation Committee to
review the current change in control program at Hospira and to consider adoption
of a replacement program during 2011.

 

INDEMNIFICATION

 

As CEO, you will be indemnified to the fullest extent permitted under Delaware
law in accordance with Hospira’s by-laws.

 

ACKNOWLEDGEMENTS

 

In addition, by your signature below, you acknowledge and agree that you are
free of any contractual obligations, including any non-compete agreements, from
your current or former employers that will impede your contributions to Hospira.

 

This Employment Offer amends the terms of the Employee Agreement signed
concurrently herewith. To the extent that this Employment Offer and the Employee
Agreement are in direct conflict, this Employment Offer is controlling. Nothing
in this Employment Offer or the Employee Agreement is intended to create an
employment contract for any specific duration. You employment is at-will, which
means that both you and Hospira have the right to terminate the employment
relationship at any time with or without notice, in accordance with the terms of
this Employment Offer. The terms of this Employment Offer, including but not
limited to position, base salary, other compensation and benefits, can only be
modified by an express, written agreement signed by you and Hospira’s Chairman
of the Board.

 

This offer will remain in effect for four business days from the date of this
Employment Offer, unless extended by Hospira. By signing this letter in the
space below, you acknowledge that you have received and read this letter and all
the enclosures hereto, and you further acknowledge your acceptance of the terms
set forth herein and in the enclosures. Enclosed are two copies of this
Employment Offer. If acceptable to you, please sign one copy and return it to
Roger Hale in the enclosed pre-paid Federal Express envelope.

 

MISCELLANEOUS

 

We have already received acceptable references and we have completed a
background investigation. Our offer of employment is contingent upon our receipt
of:

 

·                  Acceptable drug screen results

·                  Receipt of a signed Hospira Employee Agreement (sample
enclosed for your review only).

 

 

FMB

 

IWB

 

F. Michael Ball

 

Hospira, Inc.

 

 

4

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Under the Immigration Reform and Control Act of 1986, as amended by the
Immigration Act of 1990, our company is required to verify the identity and
employment eligibility of all new hires. In order to comply with this legal
obligation, you must successfully complete an Employment Eligibility form (I-9)
within three days of hire. We have enclosed a Form I-9 for your review. Please
note that you will need to provide either (i) one document from “List A” or
(ii) one document from “List B” and one document from “List C” of the form. Only
original documents can be accepted.

 

After acceptance of this Employment Offer, you will be contacted by Ken Meyers
regarding our benefit programs and other employment-related matters.

 

EARLY TERMINATION

 

If you accept this Employment Offer and if Hospira rescinds it before your start
date other than by reason of “cause” (as defined above), then Hospira agrees to
make a one-time cash payment to you within 30 days of such rescission in an
amount equal to $6,033,829. You and Hospira agree that such payment is made in
lieu of any other payment or benefit that is or becomes due under this
Employment Offer and related documents.

 

START DATE

 

As agreed, your start date will be Monday, March 28, 2011.

 

Mike, we believe we can provide you with a challenging employment opportunity
and that you, in turn, will make significant contributions to the success of
Hospira. If you have any questions, please feel free to call Roger Hale at
502-551-3061 or me at 502-759-2741.

 

Sincerely,

 

 

/s/ Irving W. Bailey II

 

Irving W. Bailey II

Lead Director

Hospira, Inc.

 

 

Accepted:

/s/ F. Michael Ball

 

March 2, 2011

 

Signature

 

March 2, 2011

 

 

Enclosures:

(1)                                  Hospira Employee Agreement

(2)                                  Form I-9 and Lists of Acceptable Documents
(provided under separate cover)

(3)                                  Forms of Award Agreements

a.                                       Non-Qualified Stock Option Terms

b.                                      Restricted Stock Agreement

c.                                       Performance Share Unit Agreement

d.                                      Performance Share Unit Program
Description

(4)                                  Change in Control Agreement

(5)                                  Hospira Officer Severance Pay Plan

(6)                                  Hospira Your Benefits 2011 (provided under
separate cover)

(7)                                  Hospira Non-Qualified Savings & Investment
Plan Summary (provided under separate cover)

 

5

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Enclosure (1)

 

EMPLOYEE AGREEMENT

 

Agreement made between HOSPIRA, INC., a Delaware corporation, on behalf of
itself and its Subsidiaries (as defined below) (collectively, “HOSPIRA”), and
the undersigned employee (“EMPLOYEE”), WITNESS the following:

 

EMPLOYEE acknowledges that HOSPIRA has the right to protect its good will and
interest in Confidential Information (as defined below) and obtain the benefit
of certain discoveries, inventions, improvements, and innovations developed by
its employees.

 

In consideration of the execution of this Agreement, the mutual agreements
contained in this Agreement and the employment of EMPLOYEE by HOSPIRA, the
parties agree as follows:

 

1.             EMPLOYEE is engaged by HOSPIRA in a position of trust and
confidence in which EMPLOYEE will use, observe, obtain or have access to
Confidential Information (as defined below).

 

2.             As used in this Agreement, the following terms have the meanings
specified:

 

(a)            “HOSPIRA Customer” means any person, corporation or any other
commercial organization or entity that EMPLOYEE called upon or dealt with for
purposes of selling, promoting or marketing a service or product on behalf of
HOSPIRA during the last two years of EMPLOYEE’s employment with HOSPIRA.

 

(b)           “Competing Products” means any product, process or service that
has the same or similar purpose or use as a product, process or service
researched, discovered, developed, manufactured, imported, marketed, sold,
offered for sale or used by HOSPIRA, which is related in any way to EMPLOYEE’s
employment with HOSPIRA.

 

(c)            “Confidential Information” means all discoveries, inventions,
improvements and innovations, whether or not patentable or copyrightable,
methods, processes, techniques, shop practices, formulae, compounds,
compositions, organisms, computer software, equipment, research data, clinical
and pharmacological data, marketing, pricing and sales information, personnel
data, customer lists, financial data, plans and all other know-how, trade
secrets and proprietary information which are in the possession of HOSPIRA and
which have not been published or disclosed to the general public.  Confidential
Information also includes information received by HOSPIRA under an obligation of
confidentiality to any third party.

 

(d)           “Subsidiary” means a corporation or any other commercial
organization or entity, and any branch or office of any of the foregoing, thirty
percent (30%) or more of the assets or voting securities of which is owned or
controlled, directly or indirectly, by HOSPIRA.

 

3.             All identification badges, access cards or keys, automobiles,
computers or other equipment, memoranda, notes, records, reports, photographs,
drawings, plans, papers, computer software, compounds and other documents,
products and materials made or compiled by or made available to EMPLOYEE during
the course of employment with HOSPIRA, and any copies, summaries or abstracts
thereof, whether in electronic, paper or other form and whether or not they
contain Confidential Information, are and shall be the property of HOSPIRA and
shall be delivered to HOSPIRA by EMPLOYEE prior to termination of employment
with HOSPIRA.

 

4.             All discoveries, inventions, improvements, software, innovations,
trademarks, trade dress, or Internet domain names, whether or not patentable,
copyrightable, or registerable  (including all data and records pertaining
thereto) which EMPLOYEE may invent, discover, originate, or conceive during the
term of employment with HOSPIRA or which may arise out of or result from
Confidential Information obtained, provided or otherwise acquired, either
directly or indirectly, by EMPLOYEE in connection with EMPLOYEE’s employment
with HOSPIRA, shall be the sole and exclusive property of HOSPIRA.  EMPLOYEE
shall promptly and fully disclose each and all such discoveries, inventions,
improvements, software or innovations to HOSPIRA.

 

5.             EMPLOYEE shall, and does hereby, assign to HOSPIRA, EMPLOYEE’s
entire right, title, and interest to any of the discoveries, inventions,
improvements, software, innovations, trademarks, trade dress, and Internet
domain names described in Paragraph 4 of this Agreement and any related U.S. or
foreign counterparts, including patents, patent applications, copyrights and
registrations; shall execute any instruments considered

 

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necessary by HOSPIRA to convey or perfect HOSPIRA’s ownership thereof; and shall
assist HOSPIRA in obtaining, defending and enforcing its rights therein. 
HOSPIRA shall bear all expenses it authorizes be incurred in connection with
such activity and shall pay to EMPLOYEE reasonable compensation for any time
spent by EMPLOYEE performing such duties at the request of HOSPIRA after
termination of employment.  In addition, EMPLOYEE shall maintain in confidence
any information, including without limitation documents and communications,
disclosed to EMPLOYEE after EMPLOYEE’s term of employment with HOSPIRA in
connection with EMPLOYEE’s obligations hereunder.

 

6.             Paragraphs 4 and 5 of this Agreement shall not apply to an
invention for which no equipment, supplies, facility or trade secret information
of HOSPIRA was used and which was developed entirely on EMPLOYEE’s own time,
unless (a) at the time of completion of reduction to practice the invention
relates (1) to the business of HOSPIRA or (2) to HOSPIRA’s actual or
demonstrably anticipated research or development, or (b) the invention results
from any work performed by the EMPLOYEE for HOSPIRA.

 

7.             EMPLOYEE understands that HOSPIRA has hired EMPLOYEE because of
EMPLOYEE’s general skills and abilities and not because of EMPLOYEE’s
possession, if any, of any former employer’s, customer’s, or other third party’s
confidential or proprietary information.  EMPLOYEE hereby certifies that
EMPLOYEE has returned all property, data, and documents, whether in electronic,
paper, or other form, of any former employer, customer, or other third party. 
EMPLOYEE agrees (a) not to disclose or use, directly or indirectly, in
furtherance of EMPLOYEE’s employment with HOSPIRA, any confidential or
proprietary information, whether in electronic, paper, or other form, that
EMPLOYEE obtained through EMPLOYEE’s employment with any previous
employer(s) and (b) to comply with and abide by any confidentiality obligations
that EMPLOYEE has at the time hired by HOSPIRA.

 

8.             EMPLOYEE shall use all best efforts to protect the secrecy and
confidentiality of Confidential Information.  Employee shall not, during the
term of employment with HOSPIRA or thereafter, use or disclose, or assist in the
disclosure to others, directly or indirectly, any Confidential Information,
except as required and authorized in the scope of EMPLOYEE’s job
responsibilities and in the furtherance of HOSPIRA’s business.  EMPLOYEE
acknowledges that the relationship of EMPLOYEE to HOSPIRA with respect to
Confidential Information shall be fiduciary in nature.

 

9.             EMPLOYEE shall not, during the term of employment with HOSPIRA or
for a period of one year after the termination of employment with HOSPIRA, in
each country in which HOSPIRA conducts business, engage, directly or indirectly,
in any activity or employment, for the benefit of Employee or others, in a
manner that contributes to any research, discovery, development, manufacture,
importation, marketing, promotion, sale or use of one or more Competing
Products.  This paragraph shall only apply to the extent permitted by the laws
of the state in which EMPLOYEE works or worked on behalf of HOSPIRA immediately
prior to the termination of employment.

 

10.           EMPLOYEE shall not, during the term of employment with HOSPIRA or
for a period of one year after the termination of employment with HOSPIRA, in
each country in which HOSPIRA conducts business, engage, directly or indirectly,
for the benefit of EMPLOYEE or others, in any activity or employment in the
performance of which any Confidential Information obtained, provided or
otherwise acquired, directly or indirectly, during the term of employment with
HOSPIRA is likely to be used or disclosed, notwithstanding EMPLOYEE’s
undertaking to the contrary.  This paragraph shall apply only to the extent
permitted by the laws of the state in which EMPLOYEE works on behalf of HOSPIRA
or worked immediately prior to the termination of employment with HOSPIRA, and
shall not be construed to limit in any way EMPLOYEE’s obligation not to use or
disclose Confidential Information as set forth in Paragraph 8 above.

 

11.           EMPLOYEE shall not, directly or indirectly,  during the term of
employment with HOSPIRA or for a period of one year after termination of
employment with HOSPIRA, promote or market any Competing Products to any HOSPIRA
Customer, or solicit any HOSPIRA Customers for purposes of selling  any
Competing Products.

 

12.           EMPLOYEE shall not, during the term of employment with HOSPIRA or
for a period of two years after termination of employment with HOSPIRA, directly
or indirectly, for the benefit of EMPLOYEE or others, solicit or assist in
soliciting to work as an employee, independent contractor, partner, or
otherwise, any employee of HOSPIRA about whom EMPLOYEE acquired knowledge
through EMPLOYEE’s employment with HOSPIRA.

 

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13.           This Agreement shall not be construed to limit in any way any
“shop right,” “fiduciary duty” or other common law or statutory or contractual
rights of HOSPIRA, in or to any Intellectual Property or Confidential
Information, including without limitation any trade secrets, which HOSPIRA has
or may have by virtue of EMPLOYEE’s employment.

 

14.           EMPLOYEE is employed at will, meaning either HOSPIRA or EMPLOYEE
may terminate the employment relationship at any time, with or without notice,
and for any reason or no reason at all.

 

15.           For a period of two years after termination of employment with
HOSPIRA, EMPLOYEE shall communicate EMPLOYEE’s obligations under this Agreement
to each subsequent employer(s), including providing to each subsequent
employer(s) a copy of this Agreement, and shall advise HOSPIRA of the name and
address of EMPLOYEE’s intended future employer. HOSPIRA shall have the right to
advise any subsequent employer of EMPLOYEE’s obligations hereunder.

 

16.           If any provision or provisions (or portions thereof) of this
Agreement are held to be unenforceable by any court, such provision or
provisions (or portions thereof) will be limited or eliminated to the minimum
extent necessary so that this Agreement shall otherwise remain in full force and
effect and be enforceable.  This Agreement shall inure to the benefit of, be
binding upon and be enforceable by HOSPIRA, and its successors and assigns and
EMPLOYEE and EMPLOYEE’s heirs, executors, and administrators.

 

17.           This Agreement shall be construed, and its enforceability and the
relationship of the parties shall be determined, in all respects under the laws
of Illinois, without giving effect to conflict of laws.

 

18.           EMPLOYEE agrees to abide by the HOSPIRA Code of Business Conduct.

 

19.           The failure or refusal by HOSPIRA either to insist upon the strict
performance of any provision of this Agreement or to exercise any right in any
one or more instances or circumstances shall not be construed as a waiver or
relinquishment of such provision or right, nor shall such failure or refusal be
deemed a custom or practice contrary to such provision or right of this
Agreement.

 

20.           This Agreement is the sole, entire, and complete agreement of the
parties relating to the subject matter hereof, replaces and supersedes all prior
versions and representations, and shall apply, notwithstanding that such
employment may include significant changes in responsibilities, location, and
other terms and conditions, including nature or scope of Confidential
Information to which EMPLOYEE has access.  The  obligations under this Agreement
shall survive termination of employment.

 

21.           No statements, promises, or representations have been made by any
party to the other, or relied upon, other than as expressly provided in this
Agreement with respect to the subject matter of the Agreement.  This Agreement
(and any provision thereof) may not be modified, changed, clarified or
interpreted by the parties, except in a writing specifying the modification,
change, clarification or interpretation, and signed by an HOSPIRA Corporate
Officer and EMPLOYEE.

 

 

 

 

Witness

 

EMPLOYEE Signature

 

 

 

 

 

 

HOSPIRA, INC.

 

EMPLOYEE Printed Name

 

 

 

 

 

 

By

 

 

Address

 

 

 

Dated                                      20      

 

 

 

 

EMPLOYEE Social Security Number

 

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Enclosure (3)a

 

HOSPIRA 2004 LONG-TERM STOCK INCENTIVE PLAN

 

NQSO TERMS

 

The Participant specified below has been granted this Option by Hospira, Inc.
(the “Company”) under the terms of the Hospira 2004 Long-Term Stock Incentive
Plan (the “Plan”).  The Option shall be subject to the following terms and
conditions (the “Option Terms”):

 

1.             Terms of Award.  The following words and phrases relating to the
grant of the Option shall have the following meanings:

 

(a)           The “Participant” is                                   .

 

(b)           The “Grant Date” is                                         .

 

(c)           The number of “Covered Shares” shall be                  shares of
Stock.

 

(d)           The “Exercise Price” is $                         per share.

 

Except where the context clearly implies to the contrary, any capitalized term
in this award shall have the meaning ascribed to that term under the Plan.

 

2.             Non-Qualified Stock Option.  The Option is not intended to
constitute an “incentive stock option” as that term is used in Code section 422.

 

3.             Date of Exercise.  Subject to the limitations of the Option
Terms, on the first anniversary of the Grant Date one-third of the Covered
Shares subject to these Options (rounded up) may be purchased; on the second
anniversary of the Grant Date two-thirds of the Covered Shares subject to these
Options (rounded up) may be purchased; on the third anniversary of the Grant
Date these Options may be exercised in full, provided the Expiration Date has
not occurred prior to such vesting dates.

 

(a)           Notwithstanding the foregoing provisions of this paragraph 3, the
Option shall become fully exercisable upon a Change in Control that occurs on or
before the Date of Termination or in the event of your involuntary termination
by the Company without Cause or your resignation with Good Reason.

 

(b)           The Option may be exercised (prior to or following the Date of
Termination) only as to that portion of the Covered Shares which may be
purchased in accordance with this Section 3, as of the date of exercise.

 

(c)           The Covered Shares shall continue to become exercisable pursuant
to this Section 3 until the Expiration Date (as defined in Section 4).

 

(d)           Notwithstanding the foregoing provisions of this Section 3, in the
event of termination of employment for reasons other than death, Disability or
Retirement, the

 

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Option may only be exercised on or after the Date of Termination only as to that
portion of the Covered Shares for which it was exercisable immediately prior to
the Date of Termination, or became exercisable on the Date of Termination.

 

4.             Expiration.  The Option shall not be exercisable after the
Company’s close of business on the last business day that occurs prior to the
Expiration Date.  The “Expiration Date” shall be the earliest to occur of:

 

(a)           the seven-year anniversary of the Grant Date;

 

(b)           if the termination of employment occurs for reasons other than
death, Disability, Retirement, involuntary termination without Cause or your
resignation with Good Reason, the three-month anniversary of the Date of
Termination (as defined in Section 10); provided, however, that if the
Participant dies during such three month period following the Date of
Termination, then the three-month anniversary of the date of death;

 

(c)           the date on which the Participant engages in conduct which
constitutes Cause;

 

(d)           the date on which the Participant, at any time prior to the
one-year anniversary of the Date of Termination, engages, directly or
indirectly, for the benefit of the Participant or others, in any activity,
employment or business which, in the sole opinion and discretion of the
Committee, is competitive with the Company or any of its Subsidiaries;

 

(e)           as provided under Restricted Activity in Section 5; or

 

(f)            as provided under Other Right to Correct Payments in Section 6.

 

5.             Restricted Activity.

 

(a)           The Participant shall not, while employed by the Company and for a
period of one year following the termination of employment for any reason:

 

(i)            without the prior written consent of the Committee, directly or
indirectly engage or assist any person engaging in any Competitive Business (as
defined in Section 10), individually, or as an officer, director, employee,
agent, consultant, owner, partner, lender, manager, member, principal, or in any
other capacity, or render any services to any entity that is engaged in any
Competitive Business; provided, however, that the Participant’s ownership of 1%
of any class of equity security of any entity engaged in any Competitive
Business shall not be deemed a breach of this Section 5(a) provided such
securities are listed on a national securities exchange or quotation system or
have been registered under Section 12(g) of the Securities Exchange Act of 1934,
as amended; or

 

(ii)           directly or indirectly divert, take away, solicit, or assist
others in soliciting any current or prospective customer, supplier, independent
contractor or

 

2

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service provider of the Company or any affiliate or otherwise interfere with the
relationship between the Company or any affiliate and any current or prospective
customer, service provider, supplier, independent contractor or stockholder.

 

(b)           The Participant shall not, while employed by the Company and for a
period of two years following the termination of employment for any reason:
directly or indirectly induce any person to leave employment with the Company,
or solicit for employment other than on behalf of the Company, offer employment
to, or employ, any person who was an employee of the Company, in each case
within six months of such inducement, solicitation, or offer.

 

(c)           If the Participant engages in any activity described in
Section 5(a) or Section 5(b) above without the written consent of the Committee,
the Company, as determined by the Committee in its sole discretion, may
(i) cancel and terminate all of the Participant’s unexercised, unexpired or
unpaid Options (whether vested or unvested) under the Plan, and (ii) rescind any
exercise, payment or delivery under any Option occurring within 12 months prior
to, or at any time following, the date of the Participant’s termination of
employment for any reason.  Upon any such rescission, the Participant shall
immediately (A) pay to the Company the amount of any gain realized or payment
received, and (B) forfeit to the Company any Shares received as a result of the
rescinded exercise, payment or delivery under any Options, in such manner and on
such terms and conditions as the Committee shall require, and the Company shall
be entitled, as permitted by applicable law, to deduct from any amounts the
Company owes the Participant from time to time the amount of any such gain
realized or payment received.  “Gain realized” shall be the excess of the Fair
Market Value of the Shares on the date of exercise over the Exercise Price,
multiplied by the number of Shares purchased.

 

6.             Other Right to Correct Payments.  Subject to the Company’s
Executive Compensation Recovery Policy, and notwithstanding anything in the
Option Terms to the contrary, if the Committee determines, in its sole
discretion, that the number of Covered Shares determined to be delivered under
the Option Terms or the value of such Options was based on the Company’s
published financial statements that have been restated then, at the Committee’s
direction, the Company may, but in no case later than 60 months of such
restatement:

 

(a)           cancel all unexercised, unexpired or unpaid Options (whether
vested or unvested) under the Plan that were based upon the financial
performance in the published financial statements that was subsequently
restated;

 

(b)           rescind any exercise, payment or delivery under any Option that
were based upon the financial performance in the published financial statements
that was subsequently restated; and

 

(c)           if any amount has been realized from exercised Options that would
have been lower had the financial results been properly reported, recover all or
any gain realized by the Participant, as determined by the Committee in its sole
discretion, under the Option Terms that resulted from the financial results that
were subsequently restated, and the Participant agrees to repay and return any
such gain realized to the Company.

 

3

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The Committee may, in its sole discretion, effect any such recovery by obtaining
repayment directly from the Participant, setting off the amount owed to the
Company against any amount or award that would otherwise be granted by the
Company to the Participant, reducing any future compensation or benefit to the
Participant or any combination thereof.  “Gain realized” shall be as determined
under Section 5(c).

 

7.             Method of Option Exercise.  Subject to the Option Terms and the
Plan, the Option may be exercised in whole or in part by filing a written notice
with the Secretary of the Company at its corporate headquarters prior to the
Company’s close of business on the last business day that occurs prior to the
Expiration Date.  Such notice shall specify the number of shares of Stock which
the Participant elects to purchase, and shall be accompanied by payment of the
Exercise Price for such shares of Stock indicated by the Participant’s
election.  Payment may be by cash or by check payable to the Company, or except
as otherwise provided by the Committee before the Option is exercised:  (i) all
or a portion of the Exercise Price may be paid by the Participant by delivery of
shares of Stock (by actual delivery or by attestation) owned by the Participant
and acceptable to the Committee having an aggregate Fair Market Value (valued as
of the date of exercise) that is equal to the amount of cash that would
otherwise be required; and (ii) the Participant may pay the Exercise Price by
authorizing a third party to sell shares of Stock (or a sufficient portion of
the shares) acquired upon exercise of the Option and 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.  Except as otherwise provided by
the Committee prior to exercise, payments made with shares of Stock in
accordance with clause (i) above shall be limited to shares held by the
Participant for not less than six months prior to the payment date.  The Option
shall not be exercisable if and to the extent the Company determines that such
exercise would violate applicable state or Federal securities laws or the
rules and regulations of any securities exchange on which the Stock is traded
and shall not be exercisable during any blackout period established by the
Company from time to time.

 

8.             Withholding.  The exercise of the Option is subject to
withholding of all applicable taxes.  At the election of the Participant, and
subject to such rules and limitations as may be established by the Committee
from time to time, such withholding obligations may be satisfied (i) through
cash payment by the Participant; (ii) through the surrender of shares of Stock
by (actual delivery or by attestation) which the Participant already owns
(provided, however, that to the extent shares described in this clause (ii) are
used to satisfy more than the minimum statutory withholding obligation, as
described below, then, except as otherwise provided by the Committee, payments
made with shares of Stock in accordance with this clause (ii) shall be limited
to shares held by the Participant for not less than six months prior to the
payment date); or (iii) through the surrender of shares of Stock to which the
Participant is otherwise entitled under the Plan; provided, however, that such
shares under this clause (iii) may be used to satisfy not more than the
Company’s minimum statutory withholding obligation (based on minimum statutory
withholding rates for Federal and state tax purposes, including payroll taxes,
that are applicable to such supplemental taxable income).

 

9.             Transferability.  The Option is not transferable by the
Participant other than by will or by the laws of descent and distribution, and
during the Participant’s life, may be exercised only by the Participant.  It may
not be assigned, transferred (except as aforesaid), pledged or hypothecated by
the Participant in any way whether by operation of law or otherwise, and shall

 

4

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

 

not be subject to execution, attachment or similar process.  Any attempt at
assignment, transfer, pledge or hypothecation, or other disposition of this
Option contrary to the provisions hereof, and the levy of any attachment or
similar process upon this option, shall be null and void and without effect.

 

10.           Definitions.  For purposes of the Option Terms, words and phrases
shall be defined as follows:

 

(a)           Cause.  The term “Cause” means the willful engaging by the
Participant in illegal conduct or gross misconduct which is demonstrably and
materially injurious to the Company.  For purposes of this Option, no act, or
failure to act, on the Participant’s part shall be deemed “willful” unless done,
or omitted to be done, by the Participant not in good faith and without
reasonable belief that the Participant’s action or omission was in the best
interest of the Company.  Notwithstanding the foregoing, the Participant shall
not be deemed to have been terminated for Cause unless and until the Company
delivers to the Participant a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice to the Participant and an opportunity for the Participant,
together with counsel, to be heard before the Board) finding that, in the good
faith opinion of the Board, the Participant was guilty of conduct set forth
above and specifying the particulars thereof in detail.

 

(b)           Competitive Business.  The term “Competitive Business” means any
business activity in which the Company or any Subsidiary is actively engaged at
the time the Participant’s employment terminates.  For these purposes, entities
deemed to be engaged in Competitive Business include, by way of example and not
limitation, Abraxis BioScience, Inc., Baxter International Inc., Teva
Pharmaceuticals, Becton, Dickinson and Company, B. Braun Melsungen AG, Cardinal
Healthcare Inc., Fresenius Medical Care AG, Terumo Medical Corporation,
Patheon, Inc., and Edwards Lifesciences Corporation.

 

(c)           Date of Termination.  The term “Date of Termination” means the
first day occurring on or after the Grant Date on which the Participant is not
employed by the Company or any Subsidiary, regardless of the reason for the
termination of employment; provided that a termination of employment shall not
be deemed to occur by reason of a transfer of the Participant between the
Company and a Subsidiary or between two Subsidiaries; and further provided that
the Participant’s employment shall not be considered terminated while the
Participant is on a leave of absence from the Company or a Subsidiary approved
by the Participant’s employer.  If, as a result of a sale or other transaction,
the Participant’s employer ceases to be a Subsidiary (and the Participant’s
employer is or becomes an entity that is separate from the Company), and the
Participant is not, at the end of the 30-day period following the transaction,
employed by the Company or an entity that is then a Subsidiary, then the
occurrence of such transaction shall be treated as the Participant’s Date of
Termination caused by the Participant being discharged by the employer.

 

5

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

 

(d)           Disability.  The Term “Disability” means the Participant’s
disability as defined in the Hospira Extended Disability Plan, whether or not
such Participant is a participant in such disability plan, for a period of
twelve (12) consecutive months.

 

(e)           Good Reason.  The Term “Good Reason” means any of the following
events, absent the Participant’s consent: a reduction of the Participant’s base
salary; a material diminution in the Participant’s authorities, duties, or
responsibilities; or a material breach by the Company of any agreement between
the Company and the Participant.  For each event described above, the
Participant must furnish notice to the Board within thirty (30) days of the
occurrence of the event, the Company shall have thirty (30) days after receiving
such notice in which to cure, and if the failure is not cured by the end of the
cure period the Participant must terminate employment within fifteen (15) days
after the expiration of the cure period.

 

(f)            Retirement.  “Retirement” of the Participant means, the
occurrence of the Participant’s Date of Termination on or after the date that
the Participant reaches the age of 55 and has 10 years of combined service with
the Company or its subsidiaries (or with Abbott Laboratories and its affiliates,
provided that the Participant transitioned employment from Abbott to the Company
in conjunction with the distribution of the Company’s common stock to the Abbott
shareholders) (as determined by the Committee).

 

11.           Heirs and Successors.  The Option Terms shall be binding upon, and
inure to the benefit of, the Company and its successors and assigns, and upon
any person acquiring, whether by merger, consolidation, purchase of assets or
otherwise, all or substantially all of the Company’s assets and business.

 

12.           Administration.  The authority to manage and control the operation
and administration of the Option Terms shall be vested in the Committee, and the
Committee shall have all powers with respect to the Option Terms as it has with
respect to the Plan.  Any interpretation of the Option Terms by the Committee
and any decision made by it with respect to the Option Terms is final and
binding on all persons.

 

13.           Plan Governs.  Notwithstanding anything in the Option Terms to the
contrary, the Option Terms shall be subject to the terms of the Plan, a copy of
which may be obtained by the Participant from the office of the Secretary of the
Company; and the Option Terms is subject to all interpretations, amendments,
rules and regulations promulgated by the Committee from time to time pursuant to
the Plan.

 

14.           Not An Employment Contract.  The Option will not confer on the
Participant any right with respect to continuance of employment or other service
with the Company or any Subsidiary, nor will it interfere in any way with any
right the Company or any Subsidiary would otherwise have to terminate or modify
the terms of such Participant’s employment or other service at any time.

 

15.           Notices.  Any written notices provided for in the Option Terms or
the Plan shall be in writing and shall be deemed sufficiently given if either
hand delivered or if sent by fax or

 

6

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

 

overnight courier, or by postage paid first class mail.  Notices sent by mail
shall be deemed received three business days after mailing but in no event later
than the date of actual receipt.  Notices shall be directed, if to the
Participant, at the Participant’s address indicated by the Company’s records, or
if to the Company, at the Company’s principal executive office.

 

16.           Fractional Shares.  In lieu of issuing a fraction of a share upon
any exercise of the Option, resulting from an adjustment of the Option pursuant
to paragraph 3.4 of the Plan or otherwise, the Company will be entitled to pay
to the Participant an amount equal to the fair market value of such fractional
share.

 

17.           No Rights As Shareholder.  The Participant shall not have any
rights of a shareholder with respect to the shares subject to the Option, until
a stock certificate has been duly issued following exercise of the Option as
provided herein.

 

18.           Amendment.  The Option Terms may be amended in accordance with the
provisions of the Plan, and may otherwise be amended by written agreement of the
Participant and the Company without the consent of any other person.

 

IN WITNESS WHEREOF, the Company has caused these presents to be executed in its
name and on its behalf, all as of the Grant Date.

 

 

Hospira, Inc.

 

 

 

 

 

 

By:

 

 

Its:

 

 

7

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Enclosure (3)b

 

HOSPIRA 2004 LONG-TERM STOCK INCENTIVE PLAN

 

RESTRICTED STOCK AGREEMENT

 

This Restricted Stock Agreement (“Agreement”) is made between Hospira, Inc., a
Delaware corporation (the “Company”), and the Participant specified below.  The
Agreement is subject to the provisions of the Hospira 2004 Long-Term Stock
Incentive Plan (the “Plan”), the terms of which are incorporated herein by
reference.

 

1.                                       Terms of Award.  The following terms
used in this Agreement shall have the meanings set forth in this paragraph 1:

 

(a)                                  The “Participant” is
                                            .

 

(b)                                 The “Grant Date” is                   ,
2010.

 

(c)                                  The number of shares of “Covered Shares”
awarded under this Agreement is                     .  “Covered Shares” are
shares of Stock granted under this Agreement and are subject to the terms of
this Agreement and the Plan.

 

Except where the context clearly implies to the contrary, any capitalized term
in this award shall have the meaning ascribed to that term under the Plan. 
Other words and phrases used in this Agreement are defined pursuant to paragraph
8 or elsewhere in this Agreement.

 

2.                                       Award.  The Participant is hereby
granted the number of Covered Shares set forth in paragraph 1.

 

3.                                       Dividends and Voting Rights.  The
Participant shall be entitled to receive any dividends paid with respect to the
Covered Shares that become payable during the Restricted Period (defined below);
provided, however, that no dividends shall be payable to or for the benefit of
the Participant for Covered Shares with respect to record dates occurring prior
to the Grant Date, or with respect to record dates occurring on or after the
date, if any, on which the Participant has forfeited those Covered Shares.  Any
such dividends paid with respect to the Covered Shares during the Restricted
Period shall be paid at the same time as they are paid to other shareholders of
common shares of the Company.  The Participant shall be entitled to vote the
Covered Shares during the Restricted Period to the same extent as would have
been applicable to the Participant if the Participant was then vested in the
shares; provided, however, that the Participant shall not be entitled to vote
the shares with respect to record dates for such voting rights arising prior to
the Grant Date, or with respect to record dates occurring on or after the date,
if any, on which the Participant has forfeited those Covered Shares.  Any
additional common shares of the Company issued with respect to the Covered
Shares as a result of any stock dividend, stock split or reorganization, shall
be subject to the restrictions and other provisions of paragraphs 5, 6 and 7.

 

4.                                       Issuance of Certificate.  Each
certificate issued in respect of the Covered Shares granted under this Agreement
shall be registered in the name of the Participant and shall be deposited in a
bank designated by the Committee or retained by the Company.  The

 

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

 

certification of Covered Shares is conditioned upon the Participant endorsing in
blank a stock power for the Covered Shares.  During the Restricted Period, all
certificates evidencing the Restricted Stock will be imprinted with the
following legend:  “The securities evidenced by this certificate are subject to
the transfer restrictions, forfeiture restrictions and other provisions of the
Restricted Stock Agreement dated                      between Hospira and
                  .”  As the Restriction Period lapses, the Participant shall be
entitled to have the legend removed from the certificate representing the
Covered Shares.

 

5.                                       Restricted Period.

 

(a)                                  The Restriction Period shall lapse as to
one-third of the Covered Shares on the first anniversary of the Grant Date,
one-half of the remaining Covered Shares on the second anniversary of the Grant
Date, and the remaining Covered Shares on the third anniversary of the Grant
Date.

 

(b)                                 The date of a Change in Control that occurs
on or before the Date of Termination; or

 

(c)                                  The Date of Termination which occurs due to
any of the following:  the Participant’s death or Disability, the Participant’s
resignation with Good Reason or the involuntary termination of the Participant
without Cause.

 

6.                                       Forfeiture of Shares.  If the Date of
Termination (as defined below) occurs during the Restricted Period, the
Participant will forfeit any and all rights with respect to such unvested
Covered Shares and the Company shall have the right to cancel any such
certificates evidencing such Covered Shares.

 

7.                                       Restriction on Sale.  All Covered
Shares shall be subject to the following restrictions on sale beginning on the
Grant Date and continuing for all periods during the Forfeiture Period (the
“Restricted Period”):

 

(a)                                  The shares may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of.

 

(b)                                 Any additional common shares of the Company
issued with respect to the Covered Shares as a result of any stock dividend,
stock split or reorganization, shall be subject to the restrictions and other
provisions of this Agreement.

 

(c)                                  The Participant shall not be entitled to
receive any shares prior to completion of all actions deemed appropriate by the
Company to comply with federal or state securities laws and stock exchange
requirements.

 

8.                                       Definitions.  For purposes of this
Agreement, the terms used in this Agreement shall be subject to the following:

 

(a)                                  Cause.  The term “Cause” means the willful
engaging by the Participant in illegal conduct or gross misconduct which is
demonstrably and materially

 

2

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

 

injurious to the Company.  For purposes of this Agreement, no act, or failure to
act, on the Participant’s part shall be deemed “willful” unless done, or omitted
to be done, by the Participant not in good faith and without reasonable belief
that the Participant’s action or omission was in the best interest of the
Company.  Notwithstanding the foregoing, the Participant shall not be deemed to
have been terminated for Cause unless and until the Company delivers to the
Participant a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Board at a meeting of
the Board called and held for such purpose (after reasonable notice to the
Participant and an opportunity for the Participant, together with counsel, to be
heard before the Board) finding that, in the good faith opinion of the Board,
the Participant was guilty of conduct set forth above and specifying the
particulars thereof in detail.

 

(b)                                 Date of Termination.  The term “Date of
Termination” means the first day occurring on or after the Grant Date on which
the Participant is not employed by the Company or any of its subsidiaries,
regardless of the reason for the termination of employment.

 

(c)                                  Disability.  The term “Disability” means
the Participant’s disability as defined in the Hospira Long Term Disability
Plan, whether or not such Participant is a participant in such disability plan,
for a period of twelve (12) consecutive months.

 

(d)                                 Good Reason.  The term “Good Reason” means
any of the following events, absent the Participant’s consent: a reduction of
the Participant’s base salary; a material diminution in the Participant’s
authorities, duties, or responsibilities; or a material breach by the Company of
any agreement between the Company and the Participant.  For each event described
above, the Participant must furnish notice to the Board within thirty (30) days
of the occurrence of the event, the Company shall have thirty (30) days after
receiving such notice in which to cure, and if the failure is not cured by the
end of the cure period the Participant must terminate employment within fifteen
(15) days after the expiration of the cure period.

 

9.                                       Heirs and Successors.  This Agreement
shall be binding upon, and inure to the benefit of, the Company and its
successors and assigns, and upon any person acquiring, whether by merger,
consolidation, purchase of assets or otherwise, all or substantially all of the
Company’s assets and business.  If any rights of the Participant or benefits
distributable to the Participant under this Agreement have not been exercised or
distributed, respectively, at the time of the Participant’s death, such rights
shall be exercisable by the Designated Beneficiary, and such benefits shall be
distributed to the Designated Beneficiary, in accordance with the provisions of
this Agreement and the Plan.  The “Designated Beneficiary” shall be the
beneficiary or beneficiaries designated by the Participant in a writing filed
with the Committee in such form and at such time as the Committee shall
require.  If a deceased Participant fails to

 

3

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

 

designate a beneficiary, or if the Designated Beneficiary does not survive the
Participant, any rights that would have been exercisable by the Participant and
any benefits distributable to the Participant shall be exercised by or
distributed to the legal representative of the estate of the Participant.  If a
deceased Participant designates a beneficiary and the Designated Beneficiary
survives the Participant but dies before the Designated Beneficiary’s exercise
of all rights under this Agreement or before the complete distribution of
benefits to the Designated Beneficiary under this Agreement, then any rights
that would have been exercisable by the Designated Beneficiary shall be
exercised by the legal representative of the estate of the Designated
Beneficiary, and any benefits distributable to the Designated Beneficiary shall
be distributed to the legal representative of the estate of the Designated
Beneficiary.

 

10.                                 Administration.  The authority to manage and
control the operation and administration of this Agreement shall be vested in
the Committee, and the Committee shall have all powers with respect to this
Agreement as it has with respect to the Plan.  Any interpretation of the
Agreement by the Committee and any decision made by it with respect to the
Agreement is final and binding.

 

11.                                 Plan Governs.  Notwithstanding anything in
this Agreement to the contrary, the terms of this Agreement shall be subject to
the terms of the Plan, a copy of which may be obtained by the Participant from
the office of the Secretary of the Company.

 

12.                                 Amendment.  This Agreement may be amended in
accordance with the provisions of the Plan, and may otherwise be amended by
written agreement of the Participant and the Company without the consent of any
other person.  Notwithstanding the foregoing, the terms of the Agreement may be
amended by Hospira as it shall deem necessary and appropriate in order to comply
with the requirements of Section 409A of the Internal Revenue Code of 1986, as
amended, and any proposed, temporary or final regulations promulgated
thereunder.

 

* * * * * * *

 

IN WITNESS WHEREOF, the Participant has executed this Agreement, and the Company
has caused these presents to be executed in its name and on its behalf, all as
of the Grant Date.

 

 

Participant

 

 

 

 

 

 

 

 

 

Hospira, Inc.

 

 

 

 

 

By:

 

 

Its:

Chairman and Chief Executive Officer

 

 

4

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Enclosure (3)c.

 

 

 

Hospira, Inc.

Notice of Grant of

 

ID: 20-0504497

Award and Award Agreement

 

275 N. Field Drive

 

 

Lake Forest, IL 60045

 

 

 

 

 

Award Number:

 

 

 

 

 

Plan: Hospira 2004 Long-Term Stock Incentive Plan

 

 

 

 

 

ID:

 

Effective                         , 2011, you have been granted Restricted Stock
Units with respect to                shares of Hospira, Inc. (the Company)
stock.

 

The Restricted Stock Units are subject to the attainment of performance goals
described in the attached Term Sheet and will become fully vested on the date
shown.

 

Units

 

Vest Type

 

Full Vest

 

 

 

 

 

 

 

On Vest Date

 

December 31, 2013

 

By your signature and the Company’s signature below, you and the Company agree
that these Restricted Stock Units are granted under and governed by the terms
and conditions of the Hospira 2004 Long-Term Stock Incentive Plan, the
Restricted Stock Unit Award Agreement and the administrative rules governing the
Restricted Stock Agreement, all of which are attached and made a part of this
document.

 

 

 

 

                               , 2011

 

 

 

Hospira, Inc.
Name: Christopher B. Begley
Title: Chairman & Chief Executive Officer

 

Date

 

 

 

 

 

 

 

 

 

Employee Name

 

Date

 

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

 

RESTRICTED STOCK UNIT AWARD AGREEMENT

 

You have been selected to be a Participant in the Hospira, Inc. 2004 Long-Term
Stock Incentive Plan (the “Plan”), as specified in the attached Notice of Grant
of Award and Award Agreement (the “Notice”):

 

THIS AGREEMENT (“Agreement”), effective as of the date set forth in the attached
Notice, is between Hospira, Inc., a Delaware corporation (the “Company”) and the
Grantee named in the Notice, pursuant to the provisions of the Plan.  Except
where the context clearly implies to the contrary, any capitalized term not
defined in this Agreement shall have the meaning ascribed to that term under the
Plan.

 

The parties hereto agree as follows:

 

1.                                       Award of Restricted Stock Units.  The
Company hereby grants to Grantee the number of restricted stock units (the
“Units”) set forth in the attached Notice subject to the terms and conditions
set forth below and in the attached Term Sheet.  The term “Units” shall include
“Earned Units” as defined in Section 2(a) below.

 

2.                                       Restrictions.  The Units are being
awarded to Grantee subject to the forfeiture conditions set forth below (the
“Restrictions”) which shall, unless otherwise stated, lapse, if at all, as set
forth in the attached Term Sheet.

 

(a)                                  The Units are subject to the attainment of
performance goals during the performance period, as described in the attached
Term Sheet.  The number of Units earned upon the attainment of the performance
goals (the “Earned Units”) shall be determined by the Compensation Committee of
the Board of Directors (the “Committee”) upon completion of the performance
period.

 

(b)                                 Any Units subject to the Restrictions shall
be automatically forfeited upon the earliest to occur of the following: 
(i) except as provided in Section 7, the date of the Grantee’s termination of
employment with the Company or a subsidiary for any reason other than death,
Disability or Retirement; (ii) subject to the provisions of Section 3, the date
the Grantee engages in conduct which constitutes Restricted Activity; or
(iii) as provided in Section 4.

 

3.                                       Restricted Activity.

 

(a)                                  Without the prior written consent of the
Committee, the Grantee shall not, while employed by the Company and for a period
of one year following the termination of employment for any reason:

 

(i)                                     directly or indirectly engage or assist
any person engaging in any Competitive Business, individually, or as an officer,
director, employee, agent, consultant, owner, partner, lender, manager, member,
principal, or in any other capacity, or render any services to any entity that
is engaged in any Competitive Business; provided, however, that the Grantee’s
ownership of 1% of any class of

 

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

 

equity security of any entity engaged in any Competitive Business shall not be
deemed a breach of this paragraph 3(a) provided such securities are listed on a
national securities exchange or quotation system or have been registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended;

 

(ii)                                  directly or indirectly divert, take away,
solicit, or assist others in soliciting any current or prospective customer,
supplier, independent contractor or service provider of the Company or any
affiliate or otherwise interfere with the relationship between the Company or
any affiliate and any current or prospective customer, service provider,
supplier, independent contractor or stockholder;

 

(iii)                               directly or indirectly induce any person to
leave employment with the Company, or solicit for employment other than on
behalf of the Company, offer employment to, or employ, any person who was an
employee of the Company, in each case within six months of such inducement,
solicitation, or offer; or

 

(iv)                              engage in conduct which constitutes Cause.

 

(b)                                 If the Grantee engages in any activity
described in paragraph 3(a) above without the written consent of the Committee,
the Company, as determined by the Committee in its sole discretion, may
terminate the Agreement as of the date on which the Grantee engaged in such
Restricted Activity, and (i) the Grantee shall pay to the Company in cash any
Financial Gain the Grantee realized from the vesting of the Units, provided that
such vesting occurred within one year from the date that the Grantee engaged in
such Restricted Activity, and (ii) if the Restricted Activity occurs prior to
the delivery of the Earned Units, the Grantee shall forfeit the Units and this
Agreement shall terminate as of the date on which the Grantee first engaged in
such Restricted Activity.

 

4.                                       Other Right to Correct Payments. 
Subject to the Company’s Executive Compensation Recover Policy, and
notwithstanding anything in the Agreement to the contrary, if the Committee
determines, in its sole discretion, that the number of Units determined to be
delivered under the Agreement or the value of such Units was based on the
Company’s published financial statements that have been restated then, at the
Committee’s discretion, the Company may, but in no case later than 60 months of
such restatement:

 

(a)                                  cancel all Units (whether vested or
unvested) that were based upon the financial performance in the published
financial statements that was subsequently restated;

 

(b)                                 rescind any delivery of Units that were
based upon the financial performance in the published financial statements that
was subsequently restated; and

 

(c)                                  if any amount has been realized from the
vesting of the Units that would have been lower had the financial results been
properly reported, recover all or any Financial Gain realized by the Grantee, as
determined by the Committee in its sole discretion, that resulted from the
financial results that were subsequently restated, and the Grantee agrees to
repay and return any such Financial Gain to the Company.

 

2

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

 

The Committee may, in its sole discretion, effect any such recovery by obtaining
repayment directly from the Grantee, setting off the amount owed to the Company
against any amount or award that would otherwise be granted by the Company to
the Grantee, reducing any future compensation or benefit to the Grantee or any
combination thereof.

 

5.                                       Death, Disability or Retirement.  In
the event of the death, Disability or Retirement of the Grantee at any time
during the performance period, the a number of shares of Common Stock equal to
the number of Earned Units (or cash equal to the value of the shares) will be
delivered to the Grantee or the Grantee’s personal representative, upon the
determination of the number of Earned Units after the end of the performance
period, but no later than 90 days following the end of such performance period.

 

6.                                       Change in Control.  In the event of a
Change in Control of the Company during the performance period, the Grantee will
be deemed to have earned an award based on the target performance goal
established by the Committee and a number of shares of Common Stock equal to the
number of deemed Earned Units (or cash equal to the value of the shares) will be
delivered to the Grantee no later than 90 days following such Change in Control.

 

7.                                       Termination of Employment.  In the
event of the Grantee’s Involuntary Termination of Employment or resignation with
Good Reason during the performance period, the Grantee will be deemed to have
earned an award based on the target performance goal established by the
Committee and a number of shares of Common Stock equal to the number of deemed
Earned Units (or cash equal to the value of the shares) will be delivered to the
Grantee no later than 90 days following such termination of employment.  If
Grantee’s termination of employment during the performance period is for any
reason other than death, Disability, Retirement, Involuntary Termination of
Employment or resignation with Good Reason, all Units shall be forfeited.  The
Company will not be obligated to pay Grantee any consideration whatsoever for
forfeited Units (whether or not earned).

 

8.                                       Dividend Equivalents.  Neither
dividends nor Dividend Equivalents will be paid or accrued on unvested Units.

 

9.                                       Adjustments.  If the number of
outstanding shares of Common Stock is changed as a result of stock dividend,
stock split or the like without additional consideration to the Company, the
number of Units subject to this Award shall be adjusted in accordance with the
applicable provisions of the Plan pertaining to such adjustments.

 

10.                                 Delivery of Certificate.  Subject to
withholding of taxes as provided in Section 11 below, the Company shall deliver
to the Grantee a certificate representing a number of shares of Common Stock
equal to the number of Earned Units on which Restrictions have lapsed plus a
cash payment equal to the value of any fractional Earned Unit then credited to
the Grantee’s account, upon the lapse of Restrictions, or at a later date
specified by the Grantee in a Notice of Deferral Election filed with the
Committee within rules established to comply with section 409A of the Internal
Revenue Code of 1986, as amended, and any regulations promulgated thereunder
(“Section 409A”) and in conformance with such deferral option forms under the
Notice of Deferral Election provided by the Company.

 

3

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

 

11.                                 Withholding Taxes.  The Company is entitled
to withhold an amount equal to the Company’s required statutory withholding
taxes for the respective tax jurisdiction attributable to any share of Common
Stock or property deliverable in connection with the Earned Units.  Subject to
such limitations as the Company may establish from time to time, Grantee may
satisfy any withholding obligation in whole or in part by making a cash payment
equal to the amount required to be withheld.

 

12.                                 Nontransferability.  Grantee may not
directly or indirectly, by operation of law or otherwise, voluntarily or
involuntarily, sell, assign, pledge, encumber, charge or otherwise transfer any
of the Units subject to this Award.

 

13.                                 Voting and Other Rights.

 

(a)                                  Grantee shall have no rights as a
stockholder of the Company in respect of the Earned Units, including the right
to vote and to receive dividends and other distributions, until delivery of
certificates representing shares of Common Stock in satisfaction of the Earned
Units.

 

(b)                                 The grant of Units does not confer upon
Grantee any right to continue in the employ of the Company or a subsidiary or to
limit or interfere with the right of the Company or a subsidiary, to terminate
Grantee’s employment at any time.

 

(c)                                  The grant of an award under the Plan is a
one-time benefit and does not create any contractual or other right to receive
an award in the future.  Future grants, if any, will be at the sole discretion
of the Company, including, but not limited to, the timing of any grant, the
amount of the award and vesting provisions.

 

(d)                                 The Committee retains the right to reduce
the number of Units subject to this Award at any time prior to payment or
delivery based on the performance of the Grantee.

 

14.                                 Funding.  No assets or shares of Common
Stock shall be segregated or earmarked by the Company in respect of any Units
awarded hereunder.  The grant of Units hereunder shall not constitute a trust
and shall be solely for the purpose of recording an unsecured contractual
obligation of the Company.

 

15.                                 Definitions.  For purposes of this
Agreement, the following words shall have the meaning provided below:

 

(a)                                  Cause.  The term “Cause” means the willful
engaging by the Participant in illegal conduct or gross misconduct which is
demonstrably and materially injurious to the Company.  For purposes of this
Agreement, no act, or failure to act, on the Participant’s part shall be deemed
“willful” unless done, or omitted to be done, by the Participant not in good
faith and without reasonable belief that the Participant’s action or omission
was in the best interest of the Company.  Notwithstanding the foregoing, the

 

4

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

 

Participant shall not be deemed to have been terminated for Cause unless and
until the Company delivers to the Participant a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice to the Participant and an opportunity for the
Participant, together with counsel, to be heard before the Board) finding that,
in the good faith opinion of the Board, the Participant was guilty of conduct
set forth above and specifying the particulars thereof in detail.

 

(b)                                 Competitive Business.  The term “Competitive
Business” means any business activity in which the Company or any subsidiary is
actively engaged at the time the Grantee’s employment terminates.  For these
purposes, entities deemed to be engaged in Competitive Business include, by way
of example and not limitation, Abraxis BioScience, Inc., Baxter International
Inc., Teva Pharmaceuticals, Becton, Dickinson and Company, B. Braun Melsungen
AG, Cardinal Healthcare Inc., Fresenius Medical Care AG, Terumo Medical
Corporation, Patheon, Inc., and Edwards Lifesciences Corporation.

 

(c)                                  Date of Termination.  The term “Date of
Termination” means the first day occurring on or after grant of the award under
this Agreement on which the Grantee is not employed by the Company or any
subsidiary, regardless of the reason for the termination of employment; provided
that a termination of employment shall not be deemed to occur by reason of a
transfer of the Grantee between the Company and a subsidiary or between two
subsidiaries; and further provided that the Grantee’s employment shall not be
considered terminated while the Grantee is on a leave of absence from the
Company or a subsidiary approved by the Grantee’s employer.  If, as a result of
a sale or other transaction, the Grantee’s employer ceases to be a subsidiary
(and the Grantee’s employer is or becomes an entity that is separate from the
Company), and the Grantee is not, at the end of the 30-day period following the
transaction, employed by the Company or an entity that is then a subsidiary,
then the occurrence of such transaction shall be treated as the Grantee’s Date
of Termination caused by the Grantee being discharged by the employer.

 

(d)                                 Disability.  The term “Disability” means the
Grantee either is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment that can be expected
to result in death or can be expected to last for a continuous period of not
less than 12 months; or by reason of any medically determinable physical or
mental impairment that can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months, the Grantee is
receiving income replacement benefits for a period of not less than three months
under an accident and health plan covering employees of the Company or a
subsidiary.

 

5

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

 

(e)                                  Dividend Equivalent.  “Dividend Equivalent”
means, with respect to any shares of Hospira common stock that are to be issued
pursuant to an award at the end of the performance period, an amount equal to
cash dividends that are payable to stockholders of record during the performance
period on a like number of shares of Hospira common stock.

 

(f)                                    Financial Gain.  “Financial Gain” means
the Fair Market Value of the Common Stock on the date the Unit is deemed vested,
multiplied by the number of Units actually distributed pursuant to this
Agreement, reduced by any taxes paid in countries other than the United States,
to the extent that such taxes are not otherwise eligible for refund from the
taxing authorities.

 

(g)                                 Good Reason.  “Good Reason” means any of the
following events, absent the Participant’s consent: a reduction of the
Participant’s base salary; a material diminution in the Participant’s
authorities, duties, or responsibilities; or a material breach by the Company of
any agreement between the Company and the Participant.  For each event described
above, the Participant must furnish notice to the Board within thirty (30) days
of the occurrence of the event, the Company shall have thirty (30) days after
receiving such notice in which to cure, and if the failure is not cured by the
end of the cure period the Participant must terminate employment within fifteen
(15) days after the expiration of the cure period.

 

(h)                                 Involuntary Termination of Employment. 
“Involuntary Termination of Employment” means the Grantee’s involuntary
termination by the Company without Cause.

 

(i)                                     Retirement.  “Retirement” of the Grantee
means, the occurrence of the Grantee’s Date of Termination on or after the date
that the Grantee reaches the age of 55 and has 10 years of combined service with
the Company or its subsidiaries (or with Abbott Laboratories and its affiliates,
provided that the Grantee transitioned employment from Abbott to the Company in
conjunction with the distribution of the Company’s common stock to the Abbott
shareholders) (as determined by the Committee).

 

16.                                 Notices.  Any written notice under this
Award shall be deemed given on the date that is two business days after it is
sent in writing, delivered either in hand, by certified mail, return receipt
requested, postage prepaid, or by Federal Express or other recognized delivery
service, which provides proof of delivery, all delivery charges prepaid, and
addressed as follows:

 

To the Company:

 

Hospira, Inc.
275 N. Field Drive
Lake Forest, IL 60045
Attention:  Corporate Secretary

 

6

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

 

To the Grantee or his or her representative at the address of the Grantee at the
time appearing in the employment records of the Company, currently as shown in
the attached Notice or

 

At such other address as either party may designate by notice given to the other
in accordance with these provisions.

 

17.                                 Governing Law.  All questions concerning the
construction, validity and interpretation of this Award shall be governed by and
construed according to the internal law and not the law of conflicts of the
State of Illinois.

 

18.                                 Amendment.  This Agreement may be amended in
accordance with the provisions of the Plan, and may otherwise be amended by
written agreement of the Grantee and the Company without the consent of any
other person; provided that the Committee may amend by the Company as it shall
deem necessary and appropriate in its sole discretion to comply with the
requirements of Section 409A.

 

19.                                 Plan Documents.  The Plan and the Prospectus
for the Hospira, Inc. 2004 Long Term Incentive Plan are available at:

 

http://www.UBS.com/

 

or from:

 

 

Ms. Pam Hannon

 

Corporate Compensation, Hospira, Inc.

 

Mail Stop H1 South, 275 N. Field Drive, Lake Forest, IL  60045

 

phone:  224-212-2661 fax:  224-212-3358; e-mail:  pam.hannon@Hospira.com

 

 

 

 

 

 

 

GRANTEE’S INITIALS

 

INITIALS OF HOSPIRA, INC.’S
General Counsel and Secretary

 

7

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

 

2011 — 2013 Total Shareholder Return (TSR) TERM SHEET

 

PERFORMANCE PERIOD:

 

Beginning January 1, 2011, and ending December 31, 2013.

 

 

 

PERFORMANCE
GOAL:

 

·                                          Relative Total Shareholder Return
(“RTSR”) compared to peer companies (identified in Appendix I) is the FY11-13
performance measure. Relative Total Shareholder Return is defined as the
percentile rank of Hospira’s Total Shareholder Return compared to the Total
Shareholder Return of Hospira’s peer companies over the Performance Period.
Total Shareholder Return is the total rate of return on a share of common stock,
reflecting stock price appreciation plus reinvestment of dividends and the
compounding effect of dividends, adjusted appropriately to reflect stock splits,
spin-offs and similar transactions.

 

The Base Price of Hospira’s common stock, and each peer company’s common stock,
is the average of the closing prices for the last 30 trading days before the
start of Performance Period.  The average closing price for the last 30 trading
days of FY10 preceding the FY11-13 Performance Period is $56.44 and serves as
the base for relative comparisons over the Performance Period.

 

The payment levels at various percentile rankings against the peer companies are
shown in the following table:

 

HOSPIRA
% Percentile Rank

 

% of Units
Earned

 

 

 

 

 

75th

 

200

%

70th

 

180

%

65th

 

160

%

60th

 

140

%

55th

 

120

%

50th

 

100

%

45th

 

85

%

40th

 

70

%

35th

 

55

%

30th

 

40

%

25th

 

25

%

<25th

 

0

%

·  With linear interpolation between percentiles

·  Percentile rank includes HOSPIRA

 

 

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

 

VESTING:

 

Subject to the terms of the Restricted Stock Unit Award Agreement, restrictions
on the restricted stock units earned during the performance period, as
determined above, will lapse on December 31, 2013, if the Grantee is a full-time
active employee of the Company on that date.

 

Final determination and distribution of the number of restricted stock units
earned will be made after the actual TSR growth during the performance period
has been certified by Hospira, Inc.’s independent auditor and the Audit
Committee of the Company’s Board of Directors.

 

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

 

Appendix I

 

Peer Companies for Relative TSR Comparison

 

Ticker

 

Company Name

 

Sector

ABT

 

Abbott Labs

 

Health Care

A

 

Agilent Technologies Inc.

 

Health Care

AGN

 

Allergan Inc.

 

Health Care

ABC

 

AmerisourceBergen Corp.

 

Health Care

AMGN

 

Amgen

 

Health Care

BAX

 

Baxter International Inc.

 

Health Care

BDX

 

Becton Dickinson

 

Health Care

BIIB

 

BIOGEN IDEC Inc.

 

Health Care

BSX

 

Boston Scientific

 

Health Care

BMY

 

Bristol-Myers Squibb

 

Health Care

CAH

 

Cardinal Health Inc.

 

Health Care

CFN

 

CareFusion Corp.

 

Health Care

CELG

 

Celgene Corp.

 

Health Care

CEPH

 

Cephalon Inc

 

Health Care

CERN

 

Cerner Corp

 

Health Care

BCR

 

CR Bard Inc.

 

Health Care

DVA

 

DaVita Inc.

 

Health Care

XRAY

 

Dentsply International

 

Health Care

ESRX

 

Express Scripts

 

Health Care

FRX

 

Forest Laboratories

 

Health Care

GENZ

 

Genzyme Corp.

 

Health Care

GILD

 

Gilead Sciences

 

Health Care

HSP

 

Hospira Inc.

 

Health Care

ISRG

 

Intuitive Surgical Inc.

 

Health Care

JNJ

 

Johnson & Johnson

 

Health Care

LH

 

Laboratory Corp. of America Holding

 

Health Care

LIFE

 

Life Technologies Corp.

 

Health Care

LLY

 

Lilly (Eli) & Co.

 

Health Care

MCK

 

McKesson Corp. (New)

 

Health Care

MHS

 

Medco Health Solutions Inc.

 

Health Care

MDT

 

Medtronic Inc.

 

Health Care

MRK

 

Merck & Co.

 

Health Care

MYL

 

Mylan Inc.

 

Health Care

PDCO

 

Patterson Cos. Inc.

 

Health Care

PKI

 

PerkinElmer

 

Health Care

PFE

 

Pfizer Inc.

 

Health Care

DGX

 

Quest Diagnostics

 

Health Care

STJ

 

St Jude Medical

 

Health Care

SYK

 

Stryker Corp.

 

Health Care

THC

 

Tenet Healthcare Corp.

 

Health Care

TMO

 

Thermo Fisher Scientific

 

Health Care

VAR

 

Varian Medical Systems

 

Health Care

WAT

 

Waters Corporation

 

Health Care

WPI

 

Watson Pharmaceuticals

 

Health Care

ZMH

 

Zimmer Holdings

 

Health Care

 

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

 

Enclosure (3)d

 

[g74931ki11i001.jpg]

 

LONG-TERM INCENTIVE PLAN
PERFORMANCE SHARE UNIT PROGRAM

FISCAL YEARS 2011-2013

 

 

PROGRAM DESCRIPTION

 

 

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

 

This document contains confidential information intended for use only within
Hospira, Inc.

The reproduction or distribution of this document, either electronically or in
hard copy, without the prior approval of the Hospira, Inc. Corporate
Compensation department is prohibited.

 

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

 

Highlights

 

This booklet outlines the terms of the Hospira Performance Share Unit program
(“Program”) for fiscal years 2011-2013 (the “Performance Cycle”) and provides
detailed information relating to the grant of Performance Share Units (“PSUs”).
Awards granted under the Program are made from shares of Hospira common stock
authorized under the Hospira 2004 Long-Term Stock Incentive Plan (the “Plan”).

 

The key features of this Program are summarized below. In some countries other
than the United States, variations in Program design may occur in order to
comply with local laws and tax regulations.

 

Purpose

 

Hospira has created the Program in order to:

 

·                  Focus executive management’s attention on the long-term
performance results of Hospira as measured by total shareholder return (“TSR”)

 

·                  Provide incentive compensation opportunities based upon the
achievement of specific TSR results

 

·                  Provide, in combination with stock options, a competitive
long-term compensation opportunity to Participants and assist in attracting and
retaining highly qualified and motivated executive talent

 

Participation

 

Participation in the Program is limited to individuals elected as corporate
officers and other senior officers designated for participation by the Chairman
and Chief Executive Officer (CEO) of Hospira, Inc.

 

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

 

Performance Share Units (PSU)

 

Performance Share Unit awards are initially granted in the form of a target
number of PSUs at the beginning of the Performance Cycle. At the end of the
Performance Cycle, the number of PSUs earned will be converted to shares of
Hospira common stock. Based upon the actual performance results, the award can
range between 0% and 200% of the target PSUs granted.

 

PSUs have special restrictions that are based upon both the continued service of
Program Participants and Hospira’s performance against the established financial
performance goal. These restrictions include a prohibition against the transfer
of the PSUs during the Performance Cycle to another individual or entity. Any
shares not awarded at the end of the Performance Cycle are forfeited.

 

Hospira may substitute or offer alternative forms of incentive compensation if
it determines that tax or legal regulations in a country provide more favorable
treatment for those alternative forms of incentive compensation or as a
voluntary alternative to PSUs, subject to any applicable requirements of
Section 409A of the Internal Revenue Code.

 

·                  PSUs under this Program are granted only during 2011, the
first fiscal year of the Performance Cycle. At the end of the Performance Cycle,
2013, the target PSUs are converted to shares of Hospira common stock and issued
to Program Participants in stock based upon the actual performance results;
however, fractional shares are paid in cash.

·                  The number of shares earned is dependent upon the extent to
which the pre-established performance goal is achieved during the Performance
Cycle. Participants may earn between 0% - 200% of the target PSUs originally
granted based upon the performance results.

·                  Participants do not have voting rights on PSUs during the
Performance Cycle.

 

Performance Measure

 

Performance under the 2011-2013 Program is measured as follows:

 

·                  Relative Total Shareholder Return (“RTSR”) compared to peer
companies (identified in Appendix I). Relative Total Shareholder Return is
defined as the percentile rank of Hospira’s Total Shareholder Return compared to
the Total Shareholder Return of Hospira’s peer companies over the Performance
Cycle. Total Shareholder Return is the rate of return on a share of common
stock, reflecting stock price appreciation plus reinvestment of dividends and
the compounding effect of dividends, adjusted appropriately to reflect stock
splits, spin-offs and similar transactions.

 

The Performance Cycle begins January 1, 2011 and ends December 31, 2013, and is
aligned with Hospira’s fiscal years 2011 through 2013.

 

The Base Price of Hospira’s common stock, and each peer company’s common stock,
is the average of the closing prices for the last 30 trading days before the
start of the Performance Cycle. The average closing price of Hospira stock for
the last 30 trading days of FY10 preceding the Performance Cycle is $56.44 and
serves as the base for relative comparisons over the Performance Cycle.

 

2

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

 

The payment levels at various percentile rankings against the peer companies are
shown in the following table:

 

HOSPIRA

 

% of PSUs

 

%Percentile Rank

 

Earned

 

 

 

 

 

75th

 

200

%

70th

 

180

%

65th

 

160

%

60th

 

140

%

55th

 

120

%

50th

 

100

%

45th

 

85

%

40th

 

70

%

35th

 

55

%

30th

 

40

%

25th

 

25

%

<25th

 

0

%

 

 

 

 

·      With linear interpolation between percentiles

·      Percentile rank includes HOSPIRA

 

Form and Time of Payment

 

Vested awards are paid in shares of Hospira common stock. Any required tax
withholding will be taken from the Hospira shares that have been earned.

 

Except upon a change in control or as a Participant specifies in a Notice of
Deferral Election containing specified forms of deferrals filed within limits
and rules established to comply with section 409A of the Internal Revenue Code,
all payments will be made no later than 90 days after the end of the Performance
Cycle.

 

Dividend Equivalents or Dividends

 

No dividend or Dividend Equivalents will be paid or accrued on behalf of the
Participants during the period when the PSUs have not vested.

 

Award Grant Notice and Agreement

 

Each Participant will receive a PSU Grant Notice and Agreement (“Grant Notice”)
specifying the target grant PSUs and the terms and conditions applicable to the
grant. The Grant Notice and Agreement and this Program Description should be
retained with the Participant’s other important documents.

 

3

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

 

Tax Consequences

 

United States

 

Under current United States tax laws, a Participant does not realize any taxable
income from the PSUs when they are initially granted. The taxable event occurs
on the Transfer Date, except to the extent that a Participant that is subject to
the U.S. federal income tax has elected to defer distribution of the shares
until a later date (“Deferred Payment Date”). The market value of Hospira common
stock on the Transfer Date or the Deferred Payment Date, as the case may be,
will determine the amount of taxable income. When the number of shares actually
earned has been determined, the market value of the shares on the Transfer Date
or the Deferred Payment Date is considered income to the Participant. This
amount is then subject to applicable federal, state and local withholding.
Amounts necessary to settle the tax-withholding obligation will be withheld from
the shares that would otherwise have been distributed to the Participant.
Federal tax will be withheld at the required statutory supplemental federal tax
rate in effect at the time of the distribution.

 

Under U.S. tax law, Participants will not be taxed until the end of the
Performance Cycle.

 

Countries other than the United States

 

Tax laws vary among countries, so Participants are advised to seek counsel
concerning the tax consequences of this grant in their respective countries of
taxation. In most cases, Participants incur no taxable income from PSUs when
initially awarded until the Transfer Date. When the shares are earned, the
market value of the shares on the Transfer Date is typically considered income.
For individuals residing outside the U.S. and not subject to U.S. tax laws,
taxes may still be required to be withheld by Hospira in the U.S. Each
Participant is responsible for compliance with the relevant legal and tax
regulations in his or her tax jurisdiction.

 

Impact on Other Benefits

 

Any shares earned under this Program are not considered compensation for
purposes of any retirement plan, severance arrangement or other benefit plans in
which a Participant currently participates or may become eligible to participate
in at a later date.

 

Forfeiture and Correction

 

Notwithstanding anything contained in this document to the contrary, if the
Participant engages in any activity that constitutes restricted activity,
including but not limited to: (1) competing, directly or indirectly (either as
owner, employee or agent), with any of the businesses of the Company,
(2) violating the Company code of business conduct, (3) committing an act of
fraud, embezzlement or theft in the course of the Participant’s duties or in the
course of employment, (4) soliciting any present or future employees or
customers of the Company to terminate such employment or business
relationship(s) with the Company, (5) disclosing or misusing any confidential
information regarding the Company, (such activities to be collectively referred
to as “wrongful conduct”), then the

 

4

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committee may at its sole discretion terminate this Award, to the extent it
remains restricted, on the date on which the Participant engaged in such
restricted activity, and (i) if the restricted activity occurred within one year
of a PSU Vesting Date, the Participant shall pay to the Company in cash any
financial gain the Participant realized from the vesting of the PSU, and
(iii) if the misconduct occurs prior to the Deferred Payment Date, if
applicable, the Participant shall forfeit the deferred PSU and this Award shall
terminate automatically on the date on which the Participant first engaged in
such wrongful conduct.

 

In addition, if the Participant is an officer required to file reports under
Section 16(a) of the Securities Exchange Act of 1934 or is elected a corporate
officer by Hospira’s Board of Directors (not including assistant officers), the
Participant is subject to the Company’s Executive Compensation Recovery Policy
(“Policy”). Subject to the terms of the Policy, and notwithstanding anything
contained in this document to the contrary, if the number of PSUs to be
delivered or the value of such PSUs was based on the Company’s published
financial statements that have been restated, then the Committee may within 60
months of such restatement: (1) cancel all PSUs (whether vested or unvested)
that were based upon the financial performance in the published financial
statements that was subsequently restated; (2) rescind any delivery of PSUs that
were based upon the financial performance in the published financial statements
that was subsequently restated; and (3) if any amount has been realized from the
vesting of the PSUs that would have been lower had the financial results been
properly reported, recover all or any financial gain realized by the Participant
that resulted from the financial results that were subsequently restated.

 

For purposes of this section, financial gain shall equal, the fair market value
of Hospira common stock on the Vesting Date, multiplied by the number of PSUs
actually distributed pursuant to this Award, reduced by any taxes paid in
countries other than the United States (which taxes are not otherwise eligible
for refund from the taxing authorities). By accepting a PSU grant, the
Participant consents to and authorizes the Company to deduct from any amounts
payable by the Company to the Participant, any amounts the Participant owes to
the Company under this section. This right of set-off is in addition to any
other remedies the Company may have against the Participant for breach of the
terms and conditions of this Program.

 

Administrative Guidelines

 

The following guidelines apply to the Program. Additional Administrative
Guidelines may be adopted, as needed, during the Performance Cycle.

 

·                  The Committee is responsible for administering the Program
and has full power and authority to interpret the Program and to adopt rules,
regulations and guidelines for carrying out the Program, as it deems necessary.

 

·                  The Committee functions as the administrator of the Program
and its decisions are binding on all persons.

 

·                  The Committee reserves the right, in its absolute discretion,
to reduce or eliminate the awards earned by any Participant and to make changes
in the peer group and performance measurement methodology and any such changes
shall be binding on all Participants.

 

·                  The Committee reserves the right to change any of the terms
and conditions of the Program award to the Participants, including the
definition of relative TSR, if deemed

 

5

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necessary on advice of counsel to meet the requirements for a “performance-based
exemption” under the regulations or rulings of §162(m) of the Internal Revenue
Code. In addition, the Committee reserves the right to amend any of the terms
and conditions of the Program award to Participants if deemed necessary in its
sole discretion to comply with § 409A of the Internal Revenue Code.

 

·                  The Committee may, as it deems appropriate, delegate some or
all of its power to the CEO or other executive officer of the Corporation.
However, the Committee may not delegate its power to a Program Participant
concerning the grant, timing, pricing or amount of such Program Participant’s
award. The Incentive Award Committee of the Hospira Board of Directors shall
have the authority to grant Performance Share Unit awards in accordance with the
terms of this Program, except the Incentive Award Committee shall not make any
such grants to any member of the Incentive Award Committee or officers required
to file reports pursuant to Section 16(a) of the Securities Exchange Act of 1934
provided that no such individual award exceeds 200,000 performance shares.

 

·                  The Chief Financial Officer will be responsible for
confirming the financial results under the Program. The Committee will approve
the awards when granted during each fiscal year and approve distributions to be
made at the end of the Performance Cycle for all Program Participants. The
portion of the shares earned will be distributed as soon as practicable after
the completion of the Performance Cycle and the Vesting Date.

 

·                  Awards may be made to new Participants during the first year
of the Performance Cycle. The number of PSUs awarded may be adjusted to reflect
that the individual is not a Participant for the entire Performance Cycle.

 

·                  Awards may be made to Participants who change positions
during the first year of the Performance Cycle, if such a change would have
resulted in the Participant’s qualifying for an increased level of award.

 

·                  In the event of a Participant’s death, Total Disability or if
a Participant retires at age 55 or later and has at least 10 years of service
with Hospira (or with Hospira and Abbott Laboratories if the Participant
transitioned employment from Abbott to Hospira in conjunction with Hospira’s
spin-off from Abbott Laboratories or with an acquired company if service for
that company has been recognized under the Program, all PSUs granted would
continue to vest and be eligible for distribution at the end of the Performance
Cycle based upon proration for performance only, subject to approval of the
Committee. If applicable, this will be distributed at the normal payout time.

 

·                  A Participant who voluntarily resigns or is terminated
without severance benefits during the Performance Cycle forfeits the rights to
all PSUs and RSUs. Participants who are involuntarily terminated and receive
severance benefits are eligible for a prorated distribution, subject to
Committee approval. In order to be considered for any prorated distribution
under this Program provision, a Participant must be actively employed for at
least one-third, i.e. 12 months, of the Performance Cycle. Only periods of
active service will be recognized for purposes of computing any prorated
distribution. This means that any period of time during which services may be
provided to the company but the individual is not then a regular, full-time
employee of the company (for example, if the Participant provides services under
a consulting agreement), that time will be disregarded for purposes of
calculating any prorated distribution.

 

6

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

 

·                  In the event of a sale, closing, spin-off or other
disposition of the Participant’s business unit that results in the termination
of the Participant’s employment with the Company, the Participant will be
eligible for a distribution of shares after the performance period pro-rated
only for performance, subject to approval of the Committee.

 

·                  Should a change in control (as defined in the Plan) occur
during the Performance Cycle, the Participant will be deemed to have earned an
award based on the target performance goal and a number of shares of Hospira
common stock equal to the number of such units earned (or cash equal to the
value of the shares) will be delivered to the Participant no later than 90 days
following the change in control.

 

·                  If any statement in this Program Description or any oral
representation differs from the Plan or the Grant and Notice Agreement, the Plan
and the Grant and Notice Agreement will prevail. The Plan, Grant Notice and
Agreement and Program Description collectively comprise all terms and conditions
applicable to the Program.

 

·                  Any stock dividend, stock split, combination or exchange of
securities, merger, consolidation, recapitalization, spin-off or other
distribution of any or all of the assets of the Hospira will be handled as
provided for in the Plan.

 

·                  Nothing in the Program shall confer on a Participant any
right to continue in the employ of Hospira or in any way affect Hospira’s right
to terminate the Participant’s employment in accordance with applicable laws.

 

7

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APPENDIX I

 

FY 2011 - 2013

Peer Companies for Relative TSR Comparison

 

Ticker

 

Company Name

 

Sector

 

 

 

 

 

ABT

 

Abbott Labs

 

Health Care

 

 

 

 

 

A

 

Agilent Technologies Inc.

 

Health Care

 

 

 

 

 

AGN

 

Allergan Inc.

 

Health Care

 

 

 

 

 

ABC

 

AmerisourceBergen Corp.

 

Health Care

 

 

 

 

 

AMGN

 

Amgen

 

Health Care

 

 

 

 

 

BAX

 

Baxter International Inc.

 

Health Care

 

 

 

 

 

BDX

 

Becton Dickinson

 

Health Care

 

 

 

 

 

BIIB

 

BIOGEN IDEC Inc.

 

Health Care

 

 

 

 

 

BSX

 

Boston Scientific

 

Health Care

 

 

 

 

 

BMY

 

Bristol-Myers Squibb

 

Health Care

 

 

 

 

 

CAH

 

Cardinal Health Inc.

 

Health Care

 

 

 

 

 

CFN

 

CareFusion Corp.

 

Health Care

 

 

 

 

 

CELG

 

Celgene Corp.

 

Health Care

 

 

 

 

 

CEPH

 

Cephalon Inc

 

Health Care

 

 

 

 

 

CERN

 

Cerner Corp

 

Health Care

 

 

 

 

 

BCR

 

CR Bard Inc.

 

Health Care

 

 

 

 

 

DVA

 

DaVita Inc.

 

Health Care

 

 

 

 

 

XRAY

 

Dentsply International

 

Health Care

 

 

 

 

 

ESRX

 

Express Scripts

 

Health Care

 

 

 

 

 

FRX

 

Forest Laboratories

 

Health Care

 

 

 

 

 

GENZ

 

Genzyme Corp.

 

Health Care

 

 

 

 

 

GILD

 

Gilead Sciences

 

Health Care

 

 

 

 

 

HSP

 

Hospira Inc.

 

Health Care

 

 

 

 

 

ISRG

 

Intuitive Surgical Inc.

 

Health Care

 

 

 

 

 

JNJ

 

Johnson & Johnson

 

Health Care

 

 

 

 

 

LH

 

Laboratory Corp. of America Holding

 

Health Care

 

 

 

 

 

LIFE

 

Life Technologies Corp.

 

Health Care

 

8

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LLY

 

Lilly (Eli) & Co.

 

Health Care

 

 

 

 

 

MCK

 

McKesson Corp. (New)

 

Health Care

 

 

 

 

 

MHS

 

Medco Health Solutions Inc.

 

Health Care

 

 

 

 

 

MDT

 

Medtronic Inc.

 

Health Care

 

 

 

 

 

MRK

 

Merck & Co.

 

Health Care

 

 

 

 

 

MYL

 

Mylan Inc.

 

Health Care

 

 

 

 

 

PDCO

 

Patterson Cos. Inc.

 

Health Care

 

 

 

 

 

PKI

 

PerkinElmer

 

Health Care

 

 

 

 

 

PFE

 

Pfizer Inc.

 

Health Care

 

 

 

 

 

DGX

 

Quest Diagnostics

 

Health Care

 

 

 

 

 

STJ

 

St Jude Medical

 

Health Care

 

 

 

 

 

SYK

 

Stryker Corp.

 

Health Care

 

 

 

 

 

THC

 

Tenet Healthcare Corp.

 

Health Care

 

 

 

 

 

TMO

 

Thermo Fisher Scientific

 

Health Care

 

 

 

 

 

VAR

 

Varian Medical Systems

 

Health Care

 

 

 

 

 

WAT

 

Waters Corporation

 

Health Care

 

 

 

 

 

WPI

 

Watson Pharmaceuticals

 

Health Care

 

 

 

 

 

ZMH

 

Zimmer Holdings

 

Health Care

 

Note: These peer companies are the companies that comprise the S&P 500 Health
Care index as of December 31, 2010 after removing those companies classified as
Managed Care Companies. These companies will remain a constant measurement group
for the 2011-2013 Performance Cycle. The peer companies will be reestablished
for future three year performance cycles.

 

9

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APPENDIX II

 

Definitions

 

a)              Award Date means the date upon which the Board of Directors or
the Committee approves the granting of an award under this Program.

 

b)             Base Price is $56.44 which is the average of the closing prices
for the last 30 trading days preceding the Performance Cycle.

 

c)              Committee means the Compensation Committee of the Board of
Directors of Hospira, Inc.

 

d)             Company or Corporation means Hospira, Inc. and its subsidiaries.

 

e)              Deferred Distribution Date means the Distribution Date specified
under the Notice of Deferral Election Form, in the event the Participant elected
to defer his or her LTI award.

 

f)                Dividend Equivalents means, with respect to any shares of
Hospira common stock that are to be issued pursuant to an award at the end of
the Performance Cycle, an amount equal to cash dividends that are payable to
stockholders of record during the Performance Cycle on a like number of shares
of Hospira common stock.

 

g)             Fiscal Year (FY) means, for purposes of this Program, each
calendar year beginning on January 1 and ending on December 31.

 

h)             Grant Notice and Agreement means the document provided to each
Participant evidencing the number of Performance Share Units awarded and the
basic terms and conditions of the award.

 

i)                 Notice of Deferral Election Form means an election form filed
with the Committee within rules established to comply with section 409A of the
Internal Revenue Code under which a Participant elects to defer the distribution
of his or her PSU award.

 

j)                 Participant means an individual elected as a corporate
officer and other senior officers designated for participation by the CEO of
Hospira, Inc. who has received a Grant Notice and Agreement specifying the basic
terms of participation in this Program.

 

k)              Performance Cycle is the three-year period consisting of
Hospira’s fiscal years 2011 through and including 2013.

 

l)                 Performance Share Unit means unit awarded to a Participant as
described under “Performance Share Units (PSU)” above.

 

m)           Plan means the 2004 Hospira Long-Term Stock Incentive Plan or any
successor plan or plans.

 

n)             Relative Total Shareholder Return means Hospira, Inc. common
stock price appreciation plus reinvested dividends during the Performance Cycle
relative to the peer companies.

 

o)             Total Disability means the Participant either is unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months; or by
reason of any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months, the Participant is receiving income replacement
benefits for a period of not less than three months under an accident and health
plan covering employees of the Company.

 

10

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

 

p)             Transfer Date means the date after the Committee certifies, after
the Performance Cycle, the number of shares to be distributed to the Program
Participant.

 

q)             Vesting means the determination made at the end of the
Performance Cycle as to how many, if any, of the PSUs that are actually earned
by a Participant based upon actual performance results.

 

r)                Vesting Date means January 1, 2014.

 

This brochure provides a summary of the Program and in the case of a conflict
between this document and the terms of the Plan, the Plan’s terms shall govern.
Hospira, Inc. reserves the right to change or terminate the Plan at any time
through appropriate action of its Board of Directors.

 

11

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

 

Enclosure (4)

 

AGREEMENT REGARDING

CHANGE IN CONTROL

 

THIS AGREEMENT (“Agreement”), is made and entered into as of the               
day of                    2011 (the “Effective Date”) by and between
Hospira, Inc. (the “Company”) and                          (the “Executive”).

 

WITNESSETH THAT:

 

WHEREAS, the Company considers it essential to the best interests of its
shareholders to foster the continuous employment of key management personnel,
and the Company recognizes that, as is the case with many publicly held
corporations, a change in control might occur and that such possibility, and the
uncertainty and questions which it may raise among management, may result in the
departure or distraction of management personnel to the detriment of the Company
and its shareholders; and

 

WHEREAS, the Company has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company’s management, including the Executive, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company;

 

NOW, THEREFORE, to induce the Executive to remain in the employ of the Company
and in consideration of the premises and mutual covenants set forth herein, IT
IS HEREBY AGREED by and between the parties as follows:

 

1.     AGREEMENT TERM. THE TERM SHALL BEGIN ON THE EFFECTIVE DATE AND SHALL
CONTINUE THROUGH DECEMBER 31, 2012. NOTWITHSTANDING THE FOREGOING, IF A CHANGE
IN CONTROL (AS DEFINED IN SECTION 6 BELOW), OCCURS DURING THE AGREEMENT TERM,
THE AGREEMENT TERM SHALL CONTINUE THROUGH AND TERMINATE ON THE SECOND
ANNIVERSARY OF THE DATE ON WHICH THE CHANGE IN CONTROL OCCURS.

 

2.     ENTITLEMENT TO CHANGE IN CONTROL BENEFITS. The Executive shall be
entitled to the Change in Control Benefits described in Section 3 hereof if the
Executive’s employment by the Company is terminated during the Agreement Term
but after a Change in Control (i) by the Company for any reason other than
Permanent Disability or Cause, or (ii) by the Executive for Good Reason.  For
purposes of this Agreement:

 

(a)                                  A termination of the Executive’s employment
shall be treated as a termination by reason of “Permanent Disability” only if,
due to a mental or physical disability, the Executive is absent from the full
time performance of duties with the Company for a period of at least twelve
consecutive months and fails to return to the full time performance of duties

 

1

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

 

within 30 days after receipt of a demand by the Company to do so.

 

(b)                                 The term “Cause” shall mean the willful
engaging by the Executive in illegal conduct or gross misconduct which is
demonstrably and materially injurious to the Company. For purposes of this
Agreement, no act, or failure to act, on the Executive’s part shall be deemed
“willful” unless done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that the Executive’s action or omission was in the
best interest of the Company. Notwithstanding the foregoing, the Executive shall
not be deemed to have been terminated for Cause unless and until the Company
delivers to the Executive a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after reasonable notice
to the Executive and an opportunity for the Executive, together with counsel, to
be heard before the Board) finding that, in the good faith opinion of the Board,
the Executive was guilty of conduct set forth above and specifying the
particulars thereof in detail.

 

(c)                                  The term “Good Reason” shall mean the
occurrence of any of the following circumstances without the Executive’s express
written consent:

 

(i)                                     a significant adverse change in the
nature, scope or status of the Executive’s position, authorities or duties from
those in effect immediately prior to the Change in Control, including, without
limitation, if the Executive was, immediately prior to the Change in Control, an
officer of a public company, the Executive ceasing to be an officer of a public
company;

 

(ii)                                  the failure by the Company to pay the
Executive any portion of the Executive’s current compensation;

 

(iii)                               a reduction in the Executive’s annual base
salary (or a material change in the frequency of payment) as in effect
immediately prior to the Change in Control as the same may be increased from
time to time;

 

(iv)                              the failure by the Company to award the
Executive an annual bonus in any year which is at least equal to the annual
bonus, awarded to the Executive under

 

2

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

 

the annual bonus plan of the Company for the year immediately preceding the year
of the Change in Control;

 

(v)                                 the failure by the Company to award the
Executive equity-based incentive compensation (such as stock options, shares of
restricted stock, or other equity-based compensation) on a periodic basis
consistent with the Company’s practices with respect to timing, value and terms
prior to the Change in Control;

 

(vi)                              the failure by the Company to continue to
provide the Executive with the welfare benefits, fringe benefits and perquisites
enjoyed by the Executive immediately prior to the Change in Control under any of
the Company’s plans or policies, including, but not limited to, those plans and
policies providing pension, life insurance, medical, dental, prescription,
health and accident, disability, vacation, and other executive perquisites;

 

(vii)                           the relocation of the Company’s principal
executive offices to a location more than thirty-five miles from the location of
such offices immediately prior to the Change in Control or the Company requiring
the Executive to be based anywhere other than the Company’s principal executive
offices except for required travel to the Company’s business to an extent
substantially consistent with the Executive’s business travel obligations
immediately prior to the Change in Control; or

 

(viii)                        the failure of the Company to obtain a
satisfactory agreement from any successor to the Company to assume and agree to
perform this Agreement as contemplated by Section 15.

 

For purposes of any determination regarding the existence of Good Reason, any
good faith determination by the Executive that Good Reason exists shall be
conclusive.

 

3.     CHANGE IN CONTROL BENEFITS. In the event of a termination of employment
entitling the Executive to benefits in accordance with Section 2, the Executive
shall, subject to the provisions of the last paragraph of this Section 3,
receive the following:

 

3

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

 

(a)                                  The Executive shall be entitled to receive
the following employee welfare benefits: medical, health and accident, dental,
prescription, disability, and life insurance coverage for the Executive (and,
where applicable under the Company’s welfare benefit plans, the Executive’s
family) through the third anniversary of the Executive’s date of termination of
employment, or, if earlier, the date on which the Executive becomes employed by
another employer. The benefits provided by the Company shall be no less
favorable in terms of coverage and cost to the Executive than those provided
under the Company’s welfare benefit plans applicable to the Executive (and,
where applicable, the Executive’s family) prior to the Change in Control,
determined as if the Executive remained in the employ of the Company through
such third anniversary.

 

(b)                                 If the Executive’s date of termination
occurs after the end of a performance period applicable to an annual incentive
(bonus) award, and prior to the payment of the award for the period, the
Executive shall be entitled to a lump sum payment in cash no later than twenty
(20) business days after the date of termination equal to the greatest of
(i) the Executive’s annual incentive (bonus) award for that period, as
determined under the terms of that incentive award arrangement, (ii) the
Executive’s annual incentive (bonus) award for that period, with the
determination of the amount of such award based on an assumption that the target
level of performance had been achieved or (iii) the Executive’s average annual
incentive (bonus) award for the three annual performance periods preceding that
period (provided that if the Executive was not a participant in the incentive
award arrangement for any of those three prior years, the averaging period shall
be reduced from three years to the number of years during the three year period
in which the Executive was a participant; and further provided that if the
Executive’s award for any such year was reduced because the Executive was not a
participant for the full year, such amount shall be annualized for purposes of
the computation in this clause (iii)).

 

(c)                                  For any annual incentive (bonus) plan or
arrangement in which the Executive participates for the performance period in
which the Executive’s termination of employment occurs, the Executive shall be
entitled to a lump sum payment in cash no later than twenty (20) business days
after the date of termination equal to the greater of (i) the Executive’s annual
incentive (bonus) award for the performance period that

 

4

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

 

includes the date of termination, with the determination of the amount of such
award based on an assumption that the target level of performance has been
achieved or (ii) the Executive’s average annual incentive (bonus) award for the
three annual performance periods preceding the performance period that includes
the date of termination  (provided that if the Executive was not a participant
in the incentive award arrangement for any of those three prior years, the
averaging period shall be reduced from three years to the number of years during
the three year period in which the Executive was a participant; and further
provided that if the Executive’s award for any such year was reduced because the
Executive was not a participant for the full year, such amount shall be
annualized for purposes of the computation in this clause (ii)); provided that
such payment shall be subject to a pro-rata reduction to reflect the number of
days in the performance period following the date of termination. The amount
payable under this paragraph (c) shall be in lieu of any amounts that may
otherwise be due to the Executive with respect to any annual incentive (bonus)
plan or arrangement in which the Executive participates for the performance
period in which the Executive’s date of termination occurs.

 

(d)                                 The Executive shall be entitled to a lump
sum payment in cash no later than twenty (20) business days after the
Executive’s date of termination equal to the sum of:

 

(i)                                     an amount equal to 2.99 times the
Executive’s annual salary rate in effect on the date of the Change in Control
or, if greater, as in effect immediately prior to the date of termination; plus

 

(ii)                                  an amount equal to 2.99 times the greater
of (x) the Executive’s annual incentive (bonus) award for the performance period
that includes the date of the Executive’s termination of employment, with the
determination of the amount of such award based on an assumption that the target
level of performance has been achieved or (y) the Executive’s average annual
incentive (bonus) award for the three annual performance periods preceding the
performance period that includes the date of termination (provided that if the
Executive was not a participant in the incentive award arrangement for any of
those three prior years, the averaging period shall be reduced from three years
to the number of years

 

5

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

 

during the three year period in which the Executive was a participant; and
further provided that if the Executive’s award for any such year was reduced
because the Executive was not a participant for the full year, such amount shall
be annualized for purposes of the computation in this clause (y)).

 

The amount payable under this paragraph (d) shall be inclusive of the amounts,
if any, to which the Executive would otherwise be entitled as severance pay
under any severance pay plan, or by law and shall be in addition to (and not
inclusive of) any amount payable under any written agreement(s) directly between
the Executive and the Company or any of its subsidiaries.

 

(e)                                  The Company shall provide the Executive
with outplacement services suitable to the Executive’s position through the
third anniversary of the date of the Executive’s termination of employment, or,
if earlier, the date on which the Executive becomes employed by another
employer.

 

If the Executive is a participant in the Hospira Performance Incentive Plan, the
Hospira 2004 Long-Term Stock Incentive Plan, or any successor thereto, the
Executive’s annual incentive (bonus) award for the performance period which
includes the date of termination under paragraphs (c) and (d)(ii) above and, if
applicable, for the period preceding the date of termination under paragraph
(b) shall, be determined under the bonus levels communicated in writing to the
Executive by the Company for such year.

 

For purposes of this Agreement, the Executive is deemed a “key employee” within
the meaning of section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”) and the regulations thereunder (“Specified Employee”). As a
Specified Employee, notwithstanding any provision in this Agreement, any
payments or benefits under Sections 3(b), (c) or (d) (“Restricted Payments”)
shall be provided to the Executive on the first day of the seventh month
following the date of the Executive’s termination of employment (the “Delay
Period”).  After the Delay Period, any Restricted Payments that constitute
reimbursements to the Executive shall be made in accordance with their payment
terms under this Agreement but no later than the end of the calendar year
following the year in which the expense was incurred.

 

4.     MITIGATION. The Executive shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise. Except as set forth in paragraph 3(a) with respect to benefits, the
Company shall not be entitled to set off against the amounts payable to the
Executive under this Agreement any amounts owed to the Company by the Executive,
any amounts earned by the Executive in other employment after the Executive’s
termination of employment with

 

6

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the Company, or any amounts which might have been earned by the Executive in
other employment had the Executive sought such other employment.

 

5.     TERMINATION DURING POTENTIAL CHANGE IN CONTROL. If a Potential Change in
Control (as defined in Section 7) occurs during the Agreement Term, and the
Company terminates the Executive’s employment for reasons other than Permanent
Disability or Cause during such Potential Change in Control, the Executive shall
be entitled to receive the benefits that the Executive would have received under
Section 3, such benefits to be calculated based upon the Executive’s
compensation prior to the actual termination of employment but paid within 20
business days of the date of such termination.

 

6.     CHANGE IN CONTROL.  For purposes of this Agreement, 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

 

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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.

 

(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 Company’s board of directors is
replaced during any 12-month period by directors whose appointment or election
is not endorsed by a majority of the members of the Company’s board of directors
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

 

8

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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;

 

(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.

 

7.     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 paragraph
(a) shall cease to exist upon the expiration or other termination of all such
agreements;

 

9

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(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);

 

(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.

 

8.     STOCK AND OPTION AWARDS. With respect to any award granted to the
Executive under any of the Company’s stock incentive plans, including the
Company’s 2004 Long-Term Stock Incentive Plan  or any successor program, the
following shall apply:

 

(a)                                  if the award includes a provision
substantially similar to the provision contained in the first paragraph in
Appendix A, then after a Change in Control no forfeiture shall be effected
pursuant to such provision unless the Executive shall have been terminated for
“Cause” within the meaning of paragraph 2(b) above; and

 

(b)                                 if the award includes a provision
substantially similar to the provision contained in the second paragraph in
Appendix A, then after a Change in Control no forfeiture shall be effected
pursuant to such provision unless the Executive shall have been terminated for
“Cause” within the meaning of paragraph 2(b) above.

 

9.     WITHHOLDING. All payments to the Executive under this Agreement will be
subject to withholding of applicable taxes. The Company shall withhold the

 

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applicable taxes in an amount calculated at the minimum statutory rate and shall
pay the amount so withheld to the appropriate tax authority.

 

10.   NONALIENATION. The interests of the Executive under this Agreement are not
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by creditors of the Executive or
the Executive’s beneficiary.

 

11.   AMENDMENT. This Agreement may be amended or canceled only by mutual
agreement of the parties in writing without the consent of any other person. So
long as the Executive lives, no person, other than the parties hereto, shall
have any rights under or interest in this Agreement or the subject matter
hereof.  Any amendment or cancellation of this Agreement shall not accelerate
the payment of any compensation or benefit hereunder and shall not otherwise
modify or change the time or times when compensation or benefits are payable
hereunder.

 

12.   APPLICABLE LAW. The provisions of this Agreement shall be construed in
accordance with the laws of the State of Illinois, without regard to the
conflict of law provisions of any state.

 

13.   SEVERABILITY. The invalidity or unenforceability of any provision of this
Agreement will not affect the validity or enforceability of any other provision
of this Agreement, and this Agreement will be construed as if such invalid or
unenforceable provision were omitted (but only to the extent that such provision
cannot be appropriately reformed or modified).

 

14.   WAIVER OF BREACH. No waiver by any party hereto of a breach of any
provision of this Agreement by any other party, or of compliance with any
condition or provision of this Agreement to be performed by such other party,
will operate or be construed as a waiver of any subsequent breach by such other
party of any similar or dissimilar provisions and conditions at the same or any
prior or subsequent time. The failure of any party hereto to take any action by
reason of such breach will not deprive such party of the right to take action at
any time while such breach continues.

 

15.   SUCCESSORS, ASSUMPTION OF CONTRACT. This Agreement shall be binding upon
and inure to the benefit of the Company and any successor of the Company. The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no succession had taken place. This Agreement is
personal to the Executive and may not be assigned by the Executive without the
written consent of the Company. However, to the extent that rights or benefits
under this Agreement otherwise survive the Executive’s death, the Executive’s
heirs and estate shall succeed to such rights and benefits pursuant to the
Executive’s will or the laws of descent and distribution; provided that the
Executive shall have the right at any time and from time to time, by notice
delivered to the Company, to designate or to change the beneficiary or
beneficiaries with respect to such benefits.

 

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16.   NOTICES. Notices and all other communications provided for in this
Agreement shall be in writing and shall be delivered personally or sent by
registered or certified mail, return receipt requested, postage prepaid
(provided that international mail shall be sent via overnight or two-day
delivery), or sent by facsimile or prepaid overnight courier to the parties at
the addresses set forth below. Such notices, demands, claims and other
communications shall be deemed given:

 

(a)                                  in the case of delivery by overnight
service with guaranteed next day delivery, the next day or the day designated
for delivery;

 

(b)                                 in the case of certified or registered U.S.
mail, five days after deposit in the U.S. mail; or

 

(c)                                  in the case of facsimile, the date upon
which the transmitting party received confirmation of receipt by facsimile,
telephone or otherwise;

 

provided, however, that in no event shall any such communications be deemed to
be given later than the date they are actually received. Communications that are
to be delivered by the U.S. mail or by overnight service or two-day delivery
service are to be delivered to the addresses set forth below:

to the Company:

 

Senior Vice President of  Organizational

Transformation and People Development

Hospira, Inc.

275 North Field Drive

Lake Forest, Illinois 60045

 

with a copy (which shall not constitute notice) to:

 

General Counsel and Secretary

Hospira, Inc.

275 North Field Drive

Lake Forest, Illinois 60045

 

or to the Executive:

 

[INSERT NAME AND ADDRESS]

 

Each party, by written notice furnished to the other party, may modify the
applicable delivery address, except that notice of change of address shall be
effective only upon receipt.

 

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17.   RESOLUTION OF ALL DISPUTES. Any controversy or claim arising out of or
relating to this Agreement (or the breach thereof) (a “Dispute”) shall be
settled by alternative dispute resolution procedures in accordance with Appendix
B hereto.  During the pendency of any Dispute, the Company shall continue to pay
the Executive the full compensation in effect when the notice giving rise to the
Dispute was given (including, but not limited to, salary) and continue the
Executive (and, where applicable, the Executive’s family) as a participant in
all compensation, benefit and insurance plans in which the Executive was
participating when the notice giving rise to the Dispute was given, until such
Dispute is resolved.

 

18.   LEGAL AND ENFORCEMENT COSTS. The provisions of this Section 18 shall apply
if it becomes necessary or desirable for the Executive to retain legal counsel
or incur other costs and expenses in connection with enforcing any and all
rights under this Agreement or any other compensation plan maintained by the
Company, including, but not limited to, Hospira 2004 Long-Term Stock Incentive
Plan, the  Hospira, Inc. Incentive Plan, or, in each case, any trust adopted
pursuant thereto:

 

(a)                                  The Executive shall be entitled to recover
from the Company reasonable attorneys’ fees, costs and expenses incurred in
connection with such enforcement or defense.

 

(b)                                 Payments required under this Section 18
shall be made by the Company to the Executive (or directly to the Executive’s
attorney) promptly following submission to the Company of appropriate
documentation evidencing the incurrence of such attorneys’ fees, costs, and
expenses.

 

(c)                                  The Executive shall be entitled to select
legal counsel; provided, however, that such right of selection shall not affect
the requirement that any costs and expenses reimbursable under this Section 18
be reasonable.

 

(d)                                 The Executive’s rights to payments under
this Section 18 shall not be affected by the final outcome of any dispute with
the Company.

 

19.   SURVIVAL OF AGREEMENT. Except as otherwise expressly provided in this
Agreement, the rights and obligations of the parties to this Agreement shall
survive the termination of the Executive’s employment with the Company.

 

20.   ENTIRE AGREEMENT. Except as otherwise provided herein, this Agreement
constitutes the entire agreement between the parties concerning the subject
matter hereof and supersedes all prior or contemporaneous agreements, between
the parties relating to the subject matter hereof; provided, however, that
nothing in this Agreement shall be construed to limit any policy or agreement
that is otherwise applicable relating to confidentiality, rights to inventions,
copyrightable material, business and/or technical information, trade secrets,
solicitation of employees, interference with

 

13

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relationships with other businesses, competition, and other similar policies or
agreement for the protection of the business and operations of the Company and
the subsidiaries.

 

21.   COUNTERPARTS. This Agreement may be executed in two or more counterparts,
any one of which shall be deemed the original without reference to the others.

 

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IN WITNESS THEREOF, the Executive has hereunto set his hand, and the Company has
caused these presents to be executed in its name and on its behalf, and its
corporate seal to be hereunto affixed on this            day of
                      , 2011, all as of the Effective Date.

 

 

 

 

 

 

[INSERT NAME]

 

 

 

HOSPIRA, INC.

 

 

 

 

 

By

 

 

Christopher B. Begley

 

Its: Chairman and Chief Executive Officer

 

 

ATTEST:

 

 

 

 

 

 

 

 

Brian J. Smith

 

 

Secretary

 

 

 

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APPENDIX A

 

AGREEMENT REGARDING CHANGE IN CONTROL

FORFEITURE PROVISION REFERENCED IN SECTION 8

 

Notwithstanding paragraphs (x*), (y*) and (z*), these options (this restricted
stock award, etc.) shall immediately terminate (be forfeited), if in the sole
opinion and discretion of the Compensation Committee or its delegate, the
employee (a) engages in a material breach of the company’s Code of Business
Conduct; (b) commits an act of fraud, embezzlement or theft in connection with
the employee’s duties or in the course of employment; or (c) wrongfully
discloses secret processes or confidential information of the company or its
subsidiaries.

 

Notwithstanding paragraphs (x*), (y*) and (z*), these options shall immediately
terminate in the event the employee engages directly or indirectly, for the
benefit of the employee or others, in any activity, employment or business
during employment or within twelve (12) months after the date of termination or
retirement which, in the sole opinion and discretion of the compensation
committee or its delegate, is competitive with the company or any of its
subsidiaries.

 

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* Provisions contained in the agreements pertaining to nonforfeiture for death,
disability, etc.

 

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APPENDIX B

 

AGREEMENT REGARDING CHANGE IN CONTROL
ALTERNATIVE DISPUTE RESOLUTION PROCEDURES

 

The parties to the Agreement Regarding Change in Control dated as of the     
day of                    , 2011 (the “Agreement”) recognize that a bona fide
dispute as to certain matters may arise from time to time during the term of the
Agreement which relates to either party’s rights and/or obligations. To have
such a dispute resolved by this Alternative Dispute Resolution (“ADR”)
provision, a party first must send written notice of the dispute to the other
party for attempted resolution by good faith negotiations between the Executive
and the Company within twenty-eight (28) days after such notice is received (all
references to “days” in the ADR provision are to calendar days).

 

If the matter has not been resolved within twenty-eight (28) days of the notice
of dispute, or if the parties fail to meet within such twenty-eight (28) days,
either party may initiate an ADR proceeding as provided herein. The parties
shall have the right to be represented by counsel in such a proceeding.

 

1.             To begin an ADR proceeding, a party shall provide written notice
to the other party of the issues to be resolved by ADR. Within fourteen (14)
days after its receipt of such notice, the other party may, by written notice to
the party initiating the ADR, add additional issues to be resolved within the
same ADR.

 

2.             Within twenty-one (21) days following receipt of the original ADR
notice, the parties shall select a mutually acceptable neutral to preside in the
resolution of any disputes in this ADR proceeding. If the parties are unable to
agree on a mutually acceptable neutral within such period, either party may
request the President of the CPR Institute for Dispute Resolution (“CPR”), 366
Madison Avenue, 14th Floor, New York, New York 10017, to select a neutral
pursuant to the following procedures:

 

(a)                                  The CPR shall submit to the parties a list
of not less than five (5) candidates within fourteen (14) days after receipt of
the request, along with a Curriculum Vitae for each candidate.  No candidate
shall be an employee, director or shareholder of either party or any of their
subsidiaries or affiliates.

 

(b)                                 Such list shall include a statement of
disclosure by each candidate of any circumstances likely to affect his or her
impartiality.

 

(c)                                  Each party shall number the candidates in
order of preference  (with the number one (1) signifying the greatest
preference) and shall deliver the list to the CPR within seven (7) days
following receipt of the list of candidates. If a party believes a conflict of
interest exists regarding any of the candidates, that party shall provide a
written explanation of the conflict to the CPR along with its list showing its
order

 

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of preference for the candidates. Any party failing to return a list of
preferences on time shall be deemed to have no order of preference.

 

(d)                                 If the parties collectively have identified
fewer than three  (3) candidates deemed to have conflicts, the CPR immediately
shall designate as the neutral the candidate for whom the parties collectively
have indicated the greatest preference. If a tie should result between two
candidates, the CPR may designate either candidate. If the parties collectively
have identified three (3) or more candidates deemed to have conflicts, the CPR
shall review the explanations regarding conflicts and, in its sole discretion,
may either (i) immediately designate as the neutral the candidate for whom the
parties collectively have indicated the greatest preference, or (ii) issue a new
list of not less than five (5) candidates, in which case the procedures set
forth in subparagraphs 2(a)-2(d) shall be repeated.

 

3.             No earlier than twenty-eight (28) days or later than fifty-six
(56) days after selection, the neutral shall hold a hearing to resolve each of
the issues identified by the parties. The ADR proceeding shall take place at a
location agreed upon by the parties. If the parties cannot agree, the neutral
shall designate a location other than the principal place of business of either
party or any of the subsidiaries or affiliates.

 

4.             At least seven (7) days prior to the hearing, each party shall
submit the following to the other party and the neutral:

 

(a)                                  a copy of all exhibits on which such party
intends to rely in any oral or written presentation to the neutral;

 

(b)                                 a list of any witnesses such party intends
to call at the hearing, and a short summary of the anticipated testimony of each
witness;

 

(c)                                  a proposed ruling on each issue to be
resolved, together with a request for a specific damage award or other remedy
for each issue. The proposed rulings and remedies shall not contain any
recitation of the facts or any legal arguments and shall not exceed one
(1) page per issue.

 

(d)                                 a brief in support of such party’s proposed
rulings and remedies, provided that the brief shall not exceed twenty (20)
pages. This page limitation shall apply regardless of the number of issues
raised in the ADR proceeding. Except as expressly set forth in subparagraphs
4(a) - 4(d), no discovery shall be required or permitted by any means, including

 

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deposition, interrogatories, requests for admissions or production of documents.

 

5.             The hearing shall be conducted on two (2) consecutive days and
shall be governed by the following rules:

 

(a)                                  Each party shall be entitled to five
(5) hours of hearing time to present its case. The neutral shall determine
whether each party has had the five (5) hours to which it is entitled.

 

(b)                                 Each party shall be entitled, but not
required, to make an opening statement, to present regular or rebuttal
testimony, documents or other evidence, to cross-examine witnesses and to make a
closing argument. Cross-examination of witnesses shall occur immediately after
their direct testimony, and cross-examination time shall be charged against the
party conducting the cross-examination.

 

(c)                                  The party initiating the ADR shall begin
the hearing and, if it chooses to make an opening statement, shall address not
only issues it raised, but also any issues raised by the responding party. The
responding party, if it chooses to make an opening statement, also shall address
all issues raised in the ADR. Thereafter, the presentation of regular and
rebuttal testimony and documents, other evidence and closing arguments shall
proceed in the same sequence.

 

(d)                                 Except when testifying, witnesses shall be
excluded from the hearing until closing arguments.

 

(e)                                  Settlement negotiations, including any
statements made therein, shall not be admissible under any circumstances.
Affidavits prepared for purposes of the ADR hearing also shall not be
admissible. As to all other matters, the neutral shall have sole discretion
regarding the admissibility of any evidence.

 

6.           Within seven (7) days following completion of the hearing, each
party may submit to the other party and the neutral a post-hearing brief in
support of its proposed rulings and remedies, provided that such brief shall not
contain or discuss any new evidence and shall not exceed ten  (10) pages. This
page limitation shall apply regardless of the number of issues raised in the ADR
proceeding.

 

7.             The neutral shall rule on each disputed issue within fourteen
(14) days following completion of the hearing. Such ruling shall adopt in its
entirety the proposed ruling and remedy of one of the parties on each disputed
issue but may adopt one party’s proposed rulings and remedies on some issues and
the other party’s proposed

 

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rulings and remedies on other issues. The neutral shall not issue any written
opinion or otherwise explain the basis of the ruling.

 

8.             The neutral shall be paid a reasonable fee plus expenses by the
Company. The Company shall bear its own fees and expenses. The Executive’s fees
and expenses shall be paid or reimbursed by the Company to the extent provided
by the Agreement.

 

9.             The rulings of the neutral and the allocation of fees and
expenses shall be binding, non-reviewable, and non-appealable, and may be
entered as a final judgment in any court having jurisdiction.

 

10.           Except as provided in Section 9 or as required by law, the
existence of the dispute, any settlement negotiations, the ADR hearing, any
submissions (including exhibits, testimony, proposed rulings, and briefs), and
the rulings shall be deemed Confidential Information. The neutral shall have the
authority to impose sanctions for unauthorized disclosure of Confidential
Information.

 

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