**Exhibit 10.1**

 

**Amendedeffective June 18, 2008**

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**HOSPIRA,INC. NON-EMPLOYEE DIRECTORS’ FEE PLAN**

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SECTION 1PURPOSE

 

Hospira, Inc. Non-Employee Directors’ Fee Plan (the “Plan”) hasbeen established by Hospira, Inc. (the “Company”), effective as of April 30,2004 (the “Effective Date”) to attract and retain as members of its Board ofDirectors persons who are not employees of the Company or any of itssubsidiaries but whose business experience and judgment are a valuable asset tothe Company and its subsidiaries.  ThePlan provides for the payment to Directors of fees in the form of some or allof the following: Annual Retainer Fees, Committee Chairman Fees, Meeting Feesand Restricted Stock awards (generally, the “Director Fees”).

 

SECTION 2DIRECTORS COVERED

 

As used in the Plan, the term “Director” means any person who iselected to the Board of Directors of the Company as of the Effective Date or atany time thereafter, and is not an employee of the Company or any of itssubsidiaries.

 

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 currently set as follows: (i) Seven Thousand and FiveHundred Dollars ($7,500.00) per year for each of the Compensation Committee,Science and Technology Committee, and Government and Public Policy Committee;and (ii) Ten Thousand Dollars ($10,000.00) per year for the AuditCommittee.

 

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 

 

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shall be as determined from time to time in the solediscretion of the Board, with such amount currently set at One Thousand andFive Hundred Dollars ($1,500.00) for each Board or Committee Meeting attendedin person and One Thousand Dollars ($1,000.00) for each meeting attended otherthan in person, in 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           LeadDirector Fees.  A Director who servesas Lead Director of the Board shall be entitled to an additional annualretainer fee (the “Lead Director Fee”) to be paid quarterly, on the lastbusiness day of each calendar quarter for which the Director served in thecapacity as Lead Director (excluding, on a pro rata basis, the partial month inwhich he is first selected to be the Lead Director and any whole months inwhich he did not serve in such capacity). The amount of the Lead Director Fee shall be as determined from time totime in the sole discretion of the Board, with such amount currently set atSeventy-Five Thousand Dollars ($75,000.00) per year.

 

SECTION 4RESTRICTED STOCK

 

4.1           AnnualRestricted Stock Award.

 

(i)            As of January 1,2008, each Director, who is elected a Non-Employee Director at the annualshareholders meeting (or who retains such position if they were not subject toelection at such meeting), shall be granted shares of Company’s Common Stock,par value $0.01 per share (the “Stock”), with such stock subject to certainrestrictions set forth below (the “Restricted Stock”).  The Restricted Stock shall be grantedautomatically to the Director on the last business day of the calendar quarterin which the annual shareholder meeting occurs. 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.

 

(ii)           Thenumber of shares covered by the Restricted Stock award shall be equal to thatnumber of shares whose aggregate value (based on the Fair Market Value of ashare of Stock on the date of grant) equals One Hundred Fifty Thousand Dollars($150,000.00), rounded down to the next whole share. Each Non-Employee Directoras of September 28, 2007 shall be granted automatically a Restricted Stockaward equal to that number of shares whose aggregate value (based on the FairMarket Value of a share of Stock on September 28, 2007) equals FiftyThousand Dollars ($50,000.00), rounded down to the next whole share.

 

(iii)          Notwithstanding anythingcontained in this Section 4.1 to the contrary, a Non-Employee Director,who is elected between any annual shareholders meetings, shall automatically begranted Restricted Stock on the last business day of the calendar quarter inwhich such Director is elected; provided, however, that the number of shares ofthe Restricted Stock granted to such Director shall be equal to that number ofshares (rounded to the next whole share) whose aggregate value 

 

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(based on the Fair MarketValue of a share of Stock on the date of grant) equals One Hundred FiftyThousand Dollars ($150,000.00), multiplied by the fraction 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 certificate issuedin respect of the Restricted Stock Award shall be registered in the name of theDirector and shall be deposited in a bank designated by the Company or retainedby the Company.  The certification ofshares is conditioned upon the Director endorsing in blank a stock power forthe covered shares.  During theRestricted Period, all certificates evidencing the Restricted Stock will beimprinted with the following legend: “The securities evidenced by thiscertificate are subject to the transfer restrictions, forfeiture restrictionsand other provisions of the Restricted Stock Agreement dated                        between Hospira, Inc. and *[insertDirector name]*.”  Upon lapseof the Restriction Period, the Director shall be entitled to have the legendremoved from 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)           The firstregularly scheduled annual shareholders meeting following the date of grant;

 

(iii)          Thedate of the Director’s death or disability; or

 

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

 

4.5           Forfeiture.  In the event that the Director’s date of terminationoccurs during the Forfeiture Period, the Director shall forfeit any and allrights 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 Stock granted under this Section 4 shallbe subject to the following restrictions on sale beginning on the date of grantand continuing, except as otherwiseprovided below in this Section 4.6, for all periods while theDirector is actively serving as a Director of the Company (the “RestrictedPeriod”):

 

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(i)            The shares may not besold, assigned, transferred, pledged, hypothecated or otherwise disposed of, except to the extent that after theForfeiture Period such sale, assignment, transfer, pledge, hypothecation orother disposal does not cause a Director to fail to meet the minimum holdingrequirements under the Company’s then existing Company share retention andownership guidelines for Directors.

 

(ii)           Except as provided in paragraph (i) of this Section 4.6,any additional common shares of the Company issued with respect to sharescovered by Awards granted under this Section 4 as a result of any stockdividend, stock split or reorganization, shall be subject to the restrictionsand other provisions of this Section 4.

 

(iii)          A Director shall not beentitled to receive any shares prior to completion of all actions deemedappropriate by the Company to comply with federal or state securities laws andstock exchange requirements.

 

SECTION 5CHANGE IN CONTROL

 

In the event of a Change in Control, (i) all Restricted Stockawards shall become fully vested and shall no longer be subject to therestrictions set forth in Section 4 of this Plan, and (ii) allDeferred Fees shall be paid to the Director at such time and in such form asset forth in the Director’s Deferral Election.

 

SECTION 6OPERATION AND ADMINISTRATION

 

6.1           Administration.

 

(i)            The Planand all benefits pursuant hereto shall be administered by the full Board.

 

(ii)           The Boardshall have the authority and discretion to interpret and administer the Plan,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)          Exceptto the extent prohibited by applicable law or the applicable rules of astock exchange, the Board may delegate to the officers or employees of theCompany and its subsidiaries the authority to execute and deliver suchinstruments and documents, to do all such acts and things, and to take all suchother steps deemed necessary, advisable or convenient for the effectiveadministration of the Plan in 

 

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accordance withits terms and purpose, except that the Board may not delegate any discretionaryauthority with respect to substantive decisions or functions regarding the Planor benefits and awards thereunder, including, but not limited to, decisionsregarding the timing, eligibility, pricing, amount or other material terms ofsuch benefits or awards. Any such delegation may be revoked by the Board at anytime.

 

(iv)          To theextent 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.

 

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 of suchperson with or without cause or confer any right on the part of such person tobe nominated for reelection to the Board, to be reelected to the Board or to beappointed to any committee of the Board.

 

6.4           Form andTime 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) bya duly 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 to all of the terms and conditions herein.  Except in the event of conflict, allprovisions of 

 

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the 2004 Plan shall apply to this Plan.  In the event of any conflict between theprovisions of the 2004 Plan and this Plan, this Plan shall control, providedthat the Director Fees granted provided may not exceed the share limitationsset 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 priordesignations by the same Director or former Director, shall be in formprescribed by the Company, and will be effective only when filed by theDirector or former Director in writing with the Secretary of the Company duringhis lifetime. If a deceased Director or former Director shall have failed toname a beneficiary in the manner provided above, or if the beneficiary named bya Director or former Director dies before him or before payment of all theDirector’s or former Director’s Director Fees, the Company, in its discretion,may direct payment in a single sum of any remaining Director Fees to either:

 

(i)            any oneor more or all of the next of kin (including the surviving spouse) of theDirector or former Director, and in such proportions as the Company determines;or

 

(ii)           the legalrepresentative or representatives of the estate of the last to die of the Directoror former Director and his last surviving beneficiary.

 

The person or persons to whom any deceased Director’s or formerDirector’s Director Fees are payable under this section will be referred to ashis “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 or involuntarilysold, 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.

 

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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 context admits, words in any gendershall include any other gender, words in the singular shall include the pluraland the plural shall include the singular.

 

SECTION 8AMENDMENT AND DISCONTINUANCE

 

The Board may, at any time, amend or terminate the Plan, and may amendany Award Agreement, provided that no amendment or termination may, in theabsence of written consent to the change by the affected Director (or, if theDirector is not then living, the affected beneficiary), adversely affect therights of any Director or beneficiary under any Award granted under the Planprior to the date such amendment is adopted by the Board; and further provided,that adjustments pursuant to Section 9.4 shall not be subject to theforegoing limitations of this Section 8. Subject to Section 9.4, 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.

 

SECTION 9ELECTIVE DEFERRALS

 

9.1           DEFERRAL ELECTION

 

(i)            Annual Deferral Election.  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”).  Anelection to defer the Director Fees shall be made on an election form (the “DeferralElection”).  The form of distribution ofthe Deferred Fees shall be elected by the Director on the Deferral Electionform, which may be either (a) a lump sum payment on the first business dayfollowing the quarter within which the Director’s service on the Boardterminates (the “Distribution Commencement Date”) or (b) annualinstallments for a number of years, not exceeding 10, payable on the DistributionCommencement Date and each anniversary thereof. Except as provided inparagraphs (ii) and (iii) of this Section 9.1, any DeferralElection shall be made in the calendar year before the year in which theDirector Fees are payable and shall be irrevocable as of the first day of theyear for which it is to be effective. Deferral Elections shall remain in effect with respect to any futureyear 

 

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unless a newelection with respect to such year is filed in accordance with paragraph (iii) ofthis Section 9.1.

 

(ii)           Deferral Election for New Directors.  Notwithstanding the foregoing,a Deferral Election by a Director upon first becoming a member of the Boardmust be submitted within 30 days after becoming a Director and shall beeffective for all fees paid for services performed following the date on whichthe election is received by the Company. Any such Deferral Elections shall beirrevocable as of its effective date and shall remain in effect with respect tothe calendar year in which it was made and any future year unless a newelection with respect to Deferral Election is filed in accordance withparagraph (iii) of this Section 9.1.

 

(iii)          SubsequentChanges to Initial Deferrals.

 

(a)           DeferralElections shall remain in effect with respect to Director Fees to be paid inany future year unless a new election with respect to such year is filed by theDirector making the change prior to the year to which it is intended to apply;and

 

(b)           ADirector may elect to change the timing or form of distribution for his or herDeferred Fees (a “Subsequent Election”), provided the Subsequent Election ismade at least 12 months before the date of the first scheduled payment, if any;the Subsequent Election is not effective for at least 12 months after the dateof the election; and the first payment under the Subsequent Election must bedelayed for at least five years from the date it otherwise would have beenpaid. Notwithstanding the foregoing provisions of this subparagraph (b),payment of the Deferred Fees shall begin under the terms of a Director’s mostcurrent Deferral Election as of first business day following the quarter withinwhich the Director’s services on the Board terminates due to a death ordisability. For this purpose, “disability” shall mean that the Director isunable to engage in any substantial gainful activity by reason of any medicallydeterminable physical or mental impairment that can be expected to result indeath or can be expected to last for a continuous period of not less than 12months.

 

(c)           During 2007 and 2008, a Director may electto change the timing or form of distribution for his Deferred Fees withoutmeeting the foregoing requirements, provided that no Director whoseDistribution Commencement Date occurs (or would otherwise occur) within 2007may make or change a payment election during 2007 and no Director whoseDistribution Commencement Date occurs (or would otherwise occur) within 2008may make or change a payment election during 2008.

 

(iv)          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:

 

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(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 of the Stock as of thedate the Director would have had a right to payment of such Director Fees hadthe Director 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)           The StockUnit Account will be credited with Stock Units as of the date on which theDirector would have been entitled to payment of the cash-based fees or the dateon which the Director would have been granted the Restricted Stock award, bothas if the Director had not made a Deferral Election with respect to such fees.

 

(b)           As ofeach 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 ashare of Stock on the dividend payment date.

 

(c)           As of thedate of any distribution with respect to a Director’s Stock Unit Account under Section 9.3,the Stock Units credited to a Director’s Stock Unit Account shall be reduced bythe 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 form of the distribution of the amounts deferredpursuant to such election.  In the eventthat an election with respect to the timing or form of distribution is not ineffect as of the date of the Director’s termination (including a terminationdue to the Director’s death), the Director’s entire Stock Unit Account shall bedistributed in 

 

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a single lump sumstock payment within 60 days following the first anniversary of the Director’sdate of termination or death.

 

(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 a Director’s right todistributions under this Section 9.3, the vesting provisions of Section 4of the Plan shall apply to the Stock Units credited to the Director’s StockUnit Account as though each unit represented one share of Stock, and with allunits attributable to payment of dividends being fully vested as of the datethey are credited to the Director’s Stock Unit 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 distribute all StockUnit Accounts to Directors provided (i) the Company terminates allnon-qualified deferred compensation arrangements of the same type as this Planat the same time that the Plan is terminated; (ii) except for paymentsthat would be payable if the termination had not occurred, the Company makes nopayments to Directors for 12 months but makes all payments within 24 months;and (iii) the Company adopts no new non-qualified deferred compensationarrangement of the same type as this Plan for five years.

 

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