**Exhibit 10.1**

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**Amended effective August 1,2004**

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**HOSPIRA, INC. NON-EMPLOYEEDIRECTORS’ FEE PLAN**

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SECTION 1PURPOSE

 

Hospira, Inc.Non-Employee Directors’ Fee Plan (the “Plan”) has been established by Hospira,Inc. (the “Company”), effective as of April 30, 2004 (the “Effective Date”)to attract and retain as members of its Board of Directors persons who are notemployees of the Company or any of its subsidiaries but whose businessexperience and judgment are a valuable asset to the Company and its subsidiaries.  The Plan provides for the payment toDirectors of fees in the form of some or all of the following: Annual RetainerFees, Committee Chairman Fees, Meeting Fees andRestricted Stock awards (generally, the “Director Fees”).

 

SECTION 2DIRECTORS COVERED

 

As used in the Plan, theterm “Director” means any person who is elected to the Board of Directors ofthe Company as of the Effective Date or at any time thereafter, and is not anemployee of the Company or any of its subsidiaries.

 

SECTION 3FEES PAYABLE TO DIRECTORS

 

3.1                                 AnnualRetainer Fee.  Each Director shall beentitled to an annual retainer fee (the “Retainer Fee”) to be paid quarterly,on the last business day of each calendar quarter for which the Director servedin the capacity as a Director (excluding, on a pro rata basis, the partialmonth in which he is first elected a Director and any whole months in which hedid not serve in such capacity).  Theamount of the Annual Retainer Fee shall be as determined from time to time inthe sole discretion of the Board of Directors of the Company (the “Board”),with such amount initially set at Fifty Thousand Dollars ($50,000.00) per year.

 

3.2                                 CommitteeChairman Fee.  A Director who servesas Chairman of any committee created by the Board shall be entitled to anadditional annual retainer fee (the “Committee Chairman Fee”) to be paidquarterly, on the last business day of each calendar quarter for which theDirector served in the capacity as a committee chairman (excluding, on a prorata basis, the partial month in which he is first selected to be the committeechairman and any whole months in which he did not serve in such capacity).  The amount of the Committee Chairman Feeshall be as determined from time to time in the sole discretion of the Board,with such amount initially set at Five Thousand Dollars ($5,000.00) per year.

 

3.3                                 MeetingFees.  A Director who attends ameeting of the Board or any committee thereof shall be entitled to anadditional fee (the “Meeting Fee”) to be paid on the last business day of eachcalendar quarter in which the meeting was held. The amount of the Meeting Fee shall be as determined from time to timein the sole discretion of the Board, with such amount initially set at OneThousand Dollars ($1,000.00) for each Board or Committee Meeting attended inperson and Five Hundred Dollars ($500.00) for each meeting attended other thanin person, in

 

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a manner acceptable to the Board.  In the event there is held one or morecommittee or Board meetings on the same date, there will be a Meeting Fee paidfor each such meeting for that date.

 

3.4                                 Chairmanof the Board.  As of the EffectiveDate, the non-employee Director serving as the Company’s Chairman of the Boardshall be granted a one-time initial option to purchase such number of sharesand under such terms and conditions as shall be determined by the Board at thetime of grant.

 

SECTION 4RESTRICTED STOCK

 

4.1                                 AnnualRestricted Stock Award.  EachDirector, who is elected a Non-Employee Director at the annual shareholdersmeeting (or who retains such position if they were not subject to election atsuch meeting), shall be granted shares of Company’s Common Stock, par value$0.01 per share (the “Stock”), with such stock subject to certain restrictionsset forth below (the “Restricted Stock”). The Restricted Stock shall be granted automatically to the Director onthe last business day of the calendar quarter in which the annual shareholdermeeting occurs; provided, however, the first annual Restricted Stock grantshall be granted as of the Effective Date. If more than one shareholder meeting occurs in a given calendar year,only a single Restricted Stock award shall be granted for such year and suchaward shall be granted as of the last business day of the calendar quarter inwhich such first shareholder meeting occurs. The number of shares covered by the Restricted Stock award shall beequal to that number of shares whose aggregate value (based on the Fair MarketValue of a share of Stock on the date of grant) equals Fifty Thousand Dollars($50,000.00), rounded down to the next whole share; provided, however, thefirst annual Restricted Stock grant will be equal to that number of shareswhose aggregate value equals Fifty Thousand Dollars ($50,000.00) based on theopening price of the Company’s Common Stock on the first day of regular-waytrading immediately following the Effective Date, rounded down to the nextwhole share.  Notwithstanding anythingcontained in this Section 4.1 to the contrary, a Non-Employee Director,who is elected at any time after the Effective Date but prior to the Company’sfirst annual shareholders meeting or between any annual shareholders meetings,shall automatically be granted Restricted Stock on the last business day of thecalendar quarter in which such Director is elected; provided, however, that thenumber of shares of the Restricted Stock granted to such Director shall beequal to that number of shares (rounded to the next whole share) whoseaggregate value (based on the Fair Market Value of a share of Stock on the dateof grant) equals Fifty Thousand Dollars ($50,000.00), multiplied by thefraction of A over 12, with “A” being the number of whole calendar monthsbetween the first day of the month coinciding with or immediately followingsuch Director’s election and first day of the month during which the nextannual shareholders meeting is scheduled to occur.  The term “Fair Market Value” shall be asdefined in the 2004 Plan (as defined in Section 6.6 below).

 

4.2                                 Issuanceof Certificates.  Each certificateissued in respect of the Restricted Stock Award shall be registered in the nameof the Director and shall be deposited in a bank designated by the Company orretained by the Company.  Thecertification of shares is conditioned upon the Director endorsing in blank astock power for the covered shares. During the Restricted Period, all certificates evidencing the RestrictedStock will be imprinted with the following legend: “The securities evidenced bythis certificate are subject to the transfer restrictions, forfeiture

 

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restrictions and other provisions of theRestricted Stock Agreement dated                   between Hospira, Inc. and *[insert Directorname]*.”  Upon lapse of theRestriction Period, the Director shall be entitled to have the legend removedfrom certificates representing the shares.

 

4.3                                 Rights.  Upon issuance of the certificates, theDirectors in whose names they are registered shall, subject to the restrictionsof this Section 4, have all of the rights of a shareholder with respect tothe shares represented by the certificate, including the right to vote suchshares and to receive cash dividends and other distributions thereon.

 

4.4                                 ForfeiturePeriod.  All Restricted Stock grantedunder this Section 4 shall be subject to forfeiture pursuant to Section 4.5for a period (the “Forfeiture Period”) commencing with the date of the awardand ending on the earliest of the following events:

 

(i)                                     Theone-year anniversary of the date of grant of Restricted Stock

 

(ii)                                  Thefirst regularly scheduled annual shareholders meeting following the date ofgrant;

 

(iii)                               The date of the Director’sdeath or disability; or

 

(iv)                              Thedate of a Change in Control (as defined in Section 5 of the 2004 Plan).

 

4.5                                 Forfeiture.  In the event that the Director’s date oftermination occurs during the Forfeiture Period, the Director shall forfeit anyand all rights and interests with respect to such unvested Restricted Stock (orRestricted Stock Units, if a Deferral Election, under Section 10 below, isapplicable) and the Company shall have the right to cancel any suchcertificates evidencing such Restricted Stock.

 

4.6                                 Restrictionson Sale.  All Restricted Stockgranted under this Section 4 shall be subject to the followingrestrictions on sale beginning on the date of grant and continuing for allperiods while the Director is actively serving as a Director of the Company(the “Restricted Period”):

 

(i)                                     Theshares may not be sold, assigned, transferred, pledged, hypothecated orotherwise disposed of.

 

(ii)                                  Anyadditional common shares of the Company issued with respect to shares coveredby Awards granted under this Section 4 as a result of any stock dividend,stock split or reorganization, shall be subject to therestrictions and other provisions of this Section 4.

 

(iii)                               ADirector shall not be entitled to receive any shares prior to completion of allactions deemed appropriate by the Company to comply with federal or statesecurities laws and stock exchange requirements.

 

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SECTION 5CHANGE IN CONTROL

 

In the event of a Changein Control, (i) all Restricted Stock awards shall become fully vested and shallno longer be subject to the restrictions set forth in Section 4 of thisPlan, and (ii) all Deferred Fees shall be paid to the Director pursuant to suchDirector’s Deferral Election.

 

SECTION 6OPERATION ANDADMINISTRATION

 

6.1                                 Administration.

 

(i)                                     ThePlan and all benefits pursuant hereto shall be administered by the full Board.

 

(ii)                                  TheBoard shall have the authority and discretion to interpret and administer thePlan, to establish, amend and rescind any rules and regulations relating to thePlan and to determine the terms and provisions of any award agreement madepursuant to the Plan.  All questions ofinterpretation with respect to the Plan, the benefits established herein, thenumber of shares of Stock, or other security, or rights granted and the termsof any agreements evidencing any of the Director Fees (the “Award Agreements”),including the timing, pricing, and amounts of Awards, shall be determined bythe Board, and its determination shall be final and conclusive upon all partiesin interest.  In the event of anyconflict between an Award Agreement and this Plan, the terms of this Plan shallgovern.

 

(iii)                               Except to the extentprohibited by applicable law or the applicable rules of a stock exchange, theBoard may delegate to the officers or employees of the Company and itssubsidiaries the authority to execute and deliver such instruments anddocuments, to do all such acts and things, and to take all such other stepsdeemed necessary, advisable or convenient for the effective administration ofthe Plan in accordance with its terms and purpose, except that the Board maynot delegate any discretionary authority with respect to substantive decisionsor functions regarding the Plan or benefits and awards thereunder, including,but not limited to, decisions regarding the timing, eligibility, pricing,amount or other material terms of such benefits or awards. Any such delegationmay be revoked by the Board at any time.

 

(iv)                              Tothe extent that the Board determines that the restrictions imposed by the Planpreclude the achievement of the material purposes of the benefit providedherein in jurisdictions outside the United States, if applicable, the Boardwill have the authority and discretion to modify those restrictions as theBoard determines to be necessary or appropriate to conform to applicablerequirements or practices of jurisdictions outside of the United States.

 

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6.2                                 Limitsof Liability.

 

(i)                                     Anyliability of the Company or a subsidiary to any Director with respect to anAward shall be based solely upon contractual obligations created by the Planand the applicable Award Agreement.

 

(ii)                                  Neitherthe Company nor a subsidiary, nor any member of the Board or any other personparticipating in any determination of any question under the Plan, or in theinterpretation, administration or application of the Plan, shall have anyliability to any party for any action taken or not taken in good faith underthe Plan except as may be expressly provided by statute.

 

6.3                                 Rightsof Director.  Nothing contained inthis Plan or in any Award Agreement (or in any other documents related to thisPlan or to any award or Award Agreement) shall confer upon any Director anyright to continue in the service of the Company or a subsidiary, constitute anycontract or limit in any way the right of the Company or a subsidiary to changesuch person’s compensation or other benefits or to terminate the service ofsuch person with or without cause or confer any right on the part of suchperson to be nominated for reelection to the Board, to be reelected to theBoard or to be appointed to any committee of the Board.

 

6.4                                 Formand Time of Elections.  Any electionrequired or permitted shall be in writing, and shall be deemed to be filed whentimely delivered to the Secretary of the Company.

 

6.5                                 Actionby Company.  Any action required orpermitted to be taken by the Company shall be by resolution of the Board, or byaction of one or more members of the Board (including a committee of the Board)who are duly authorized to act for the Board or (except to the extentprohibited by the provisions of Rule 16b-3, applicable local law, theapplicable rules of any stock exchange, or any other applicable rules) by aduly authorized officer of the Company.

 

6.6                                 Hospira,Inc. 2004 Long-Term Stock Incentive Plan. Any shares of Stock awarded to, or subject to Awards granted toDirectors under this Plan as Director Fees shall be issued pursuant to theHospira, Inc. 2004 Long-Term Stock Incentive Plan (the “2004 Plan”), subject toall of the terms and conditions herein. Except in the event of conflict, all provisions of the 2004 Plan shallapply to this Plan.  In the event of anyconflict between the provisions of the 2004 Plan and this Plan, this Plan shallcontrol, provided that the Director Fees granted provided may not exceed theshare limitations set forth in the 2004 Plan.

 

SECTION 7MISCELLANEOUS

 

7.1                                 Beneficiaries.  Each Director or former Director entitled topayment of Director Fees hereunder, from time to time may name any person orpersons (who may be named contingently or successively) to whom any DirectorFees earned by him and payable to him are to be paid in case of his deathbefore he receives any or all of such Director Fees.  Each designation will revoke all prior designationsby the same Director or former Director, shall be in form prescribed by theCompany, and will be effective only when filed by the Director or formerDirector in writing with the Secretary of the Company during his lifetime. If adeceased Director

 

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or former Director shall have failed to name a beneficiary in themanner provided above, or if the beneficiary named by a Director or formerDirector dies before him or before payment of all the Director’s or formerDirector’s Director Fees, the Company, in its discretion, may direct payment ina single sum of any remaining Director Fees to either:

 

(i)                                     any one or more or all of the next of kin (including thesurviving spouse) of the Director or former Director, and in such proportionsas the Company determines; or

 

(ii)                                  the legal representative or representatives of the estate ofthe last to die of the Director or former Director and his last survivingbeneficiary.

 

The person or persons towhom any deceased Director’s or former Director’s Director Fees are payableunder this section will be referred to as his “beneficiary.”

 

7.2                                 Alienationof Rights.  Payment of Director Feeswill be made only to the person entitled thereto in accordance with the termsof the Plan, and Director Fees are not in any way subject to the debts or otherobligations of persons entitled thereto, and may not be voluntarily orinvoluntarily sold, transferred or assigned.

 

7.3                                 Facilityof Payment.  When a person entitledto a payment under the Plan is under legal disability or, in the Company’sopinion, is in any way incapacitated so as to be unable to manage his financialaffairs, the Company may direct that payment be made to such person’s legalrepresentative, or to a relative or friend of such person for his benefit, andwith respect to the Director’s Stock Unit Account (defined in Section 9below), if any, any distribution shall be pursuant to the Director’sbeneficiary designation form, as may be on file with the Company. Any paymentmade in accordance with the preceding sentence shall be in complete dischargeof the Company’s obligation to make such payment under the Plan.

 

7.4                                 UnfundedPlan.  Any obligation to pay cash orDeferred Fees under this Plan shall constitute an unfunded unsecured obligationof the Company.  The Company may, butshall not be obligated to, establish a trust to hold assets for the purpose ofsatisfying obligations under this Plan.

 

7.5                                 Adjustment Provisions.  Inthe event of a corporate transaction involving the Company (including, withoutlimitation, any stock dividend, stock split, extraordinary cash dividend,recapitalization, reorganization, merger, consolidation, split-up, spin-off,combination or exchange of shares), in addition to any adjustments madepursuant to Section 3.4 of the 2004 Plan, the Board may adjust theDirector Fees (including Deferred Fees) to preserve the benefits or potentialbenefits of participation in the Plan.

 

7.6                                 Genderand Number.  Where the contextadmits, words in any gender shall include any other gender, words in thesingular shall include the plural and the plural shall include the singular.

 

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SECTION 8AMENDMENT AND DISCONTINUANCE

 

The Board may, at anytime, amend or terminate the Plan, and may amend any Award Agreement, providedthat no amendment or termination may, in the absence of written consent to thechange by the affected Director (or, if the Director is not then living, theaffected beneficiary), adversely affect the rights of any Director or beneficiaryunder any Award granted under the Plan prior to the date such amendment isadopted by the Board; and further provided, that adjustments pursuant to Section 9.4shall not be subject to the foregoing limitations of this Section 8.  Any amendment or discontinuance of the Planshall be prospective in operation only, and shall not affect the payment of anyDirector Fees theretofore earned by any Director, or the conditions under whichany such fees are to be paid or forfeited under the Plan, unless the Directoraffected shall expressly consent thereto.

 

SECTION 9ELECTIVE DEFERRALS

 

9.1                                 DEFERRAL ELECTION

 

(i)                                     General.  A Director who would otherwise be entitled toreceive Director Fees in the form of shares of Stock or a cash payment underthe terms of the Plan may instead elect to defer delivery of all or a portionof such fees, subject to the following terms of this Section 9 (oncedeferred, the “Deferred Fees”).

 

(ii)                                  Deferral Election.  Anelection to defer the Director Fees shall be made on an election form asprovided by the Board (the “Deferral Election”).  Any Deferral Election shall be irrevocable asof the first day of the year for which it is to be effective.  Deferral Elections shall remain in effectwith respect to any future year unless a new election with respect to such yearis filed in accordance with rules established by the Board prior to the firstday of the year for which it is to be effective.  Notwithstanding the foregoing, if theelection is being made with respect to the Director first becoming a member ofthe Board, an election submitted within 30 days of becoming a Director shall beeffective for all fees paid following the date on which the election isreceived by the Company.  A director mayelect to convert a Restricted Stock award into a Restricted Stock Unit award bysubmitting a Deferral Election prior to the first day of the calendar year inwhich the Forfeiture Period applicable to the Restricted Stock lapses.

 

The Deferral Election form shall provide forthe types and amounts of the Director Fees to be deferred and shall provide forthe timing and method of distribution at the end of the deferral period.

 

(iii)                               Conversion of Cash orRestricted Stock to Stock Units. Deferred Fees shall be credited to a Stock Unit Account (as definedbelow) under this Section 9 as follows:

 

(a)                                  Cash-basedDeferred Fees shall be converted to Stock Units by dividing the cash-based feesthe Director elected to defer by the Fair Market Value

 

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of the Stock as of the date theDirector would have had a right to payment of such Director Fees had theDirector not made a Deferral Election.

 

(b)                                 Stock-basedDeferred Fees shall be converted to that number of Stock Units equal to thatnumber of shares of Restricted Stock the Director elected to defer.

 

9.2                                 ACCOUNTS

 

(i)                                     Stock Unit Account.  A “Stock Unit Account” shall be maintained onbehalf of each Director who elects to defer all or a portion of his DirectorFees under this Section 9, for the period during which delivery of suchfees is deferred. A Director’s Stock Unit Account shall be subject to thefollowing adjustments:

 

(a)                                  TheStock Unit Account will be credited with Stock Units as of the date on whichthe Director would have been entitled to payment of the cash-based fees or thedate on which the Director would have been granted the Restricted Stock award,both as if the Director had not made a Deferral Election with respect to suchfees.

 

(b)                                 Asof each dividend payment date for the Stock, the Director’s Stock Unit Accountshall be credited with additional Stock Units (including fractional StockUnits) equal to (i) the amount of the dividend that would be payable withrespect to the number of shares of Stock equal to the number of Stock Unitscredited to the Director’s Stock Unit Account on the dividend record date, divided by(ii) the Fair Market Value of a share of Stock on the dividend payment date.

 

(c)                                  Asof the date of any distribution with respect to a Director’s Stock Unit Accountunder Section 9.3, the Stock Units credited to a Director’s Stock UnitAccount shall be reduced by the amounts distributed to the Director.

 

(ii)                                  Statement of Accounts.  As soon as practicable after the end of eachPlan Year, the Company shall provide each Director having an Stock Unit Accountunder the Plan with a statement of the transactions in his Stock Unit Accountduring that year and his account balance as of the end of the year.

 

9.3                                 DISTRIBUTIONS

 

(i)                                     General.  Subject to the terms of this Section 9.3,a Director shall specify, as part of his Deferral Election with respect toDeferred Fees, the time and manner of the distribution of the amounts deferredpursuant to such election.  In the eventthat no election is made with respect to the timing or method of distributionas of the date of the Director’s termination, the Director’s entire Stock UnitAccount shall be distributed in a single lump sum stock payment as of the firstanniversary of the Director’s date of termination.

 

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(ii)                                  Ifa scheduled distribution date would otherwise occur after a dividend recorddate but before the payment of the dividend, the distribution may, in thediscretion of the Board, be deferred (but not more than 30 days) until thedividend payment date.

 

(iii)                               In determining aDirector’s right to distributions under this Section 9.3, the vestingprovisions of Section 4 of the Plan shall apply to the Stock Unitscredited to the Director’s Stock Unit Account as though each unit representedone share of Stock, and with all units attributable to payment of dividendsbeing fully vested as of the date they are credited to the Director’s StockUnit Account.

 

9.4                                 Terminationof Deferral by Company.  The Boardshall retain the right to terminate, at any time, for any reason, or no reason,the deferral provisions under this Section 9 (which may, but need not, bein conjunction with a termination of the Plan), and shall immediatelydistribute all, but not less than all, of the Stock Unit Accounts as of the dateof such termination.

 

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