**Exhibit 10.1**

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**HOSPIRASUPPLEMENTAL PENSION PLAN**

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**(Effective as of May 1,2004)**

 

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HOSPIRASUPPLEMENTAL PENSION PLAN

 

Section1INTRODUCTION

 

1-1.          Pursuant to a Separationand Distribution Agreement by and between Abbott Laboratories (“Abbott”) andHospira, Inc.  (“Hospira”) dated as ofApril 12 2004, Abbott distributed as a dividend to its shareholders all of theoutstanding shares of common stock, par value $0.01 per share, of Hospira,together with the associated preferred stock purchase rights, owned by Abbott(the “Distribution”).  In connectionwith the Distribution, Hospira established the Abbott/Hospira TransitionalAnnuity Retirement Plan (the “Annuity Plan”) and certain assets and liabilitieswere transferred from the Abbott Laboratories Annuity Retirement Plan (the“Abbott ARP”) to the Annuity Plan with respect to persons who were transferredfrom employment with Abbott to employment with Hospira in connection orcontemporaneously with the Distribution (“Transferred Employees”).  In connection with the Distribution, Hospiraalso assumed certain liabilities with respect to Transferred Employees underthe Abbott Laboratories Supplemental Pension Plan (the “Abbott SERP”).  Hospira now desires to establish this HOSPIRASUPPLEMENTAL PENSION PLAN (the “Supplemental Plan”) to provide (i) the benefitsassociated with the obligations assumed by Hospira with respect to TransferredEmployees under the Abbott SERP, (ii) pension benefits calculated under theAnnuity Plan in excess of those which may be paid under that plan under thelimits imposed by Section 415 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), and the EmployeeRetirement Income Security Act, as amended (“ERISA”), and (iii) the additionalpension benefits that would be payable under the Annuity Plan if deferredawards under the Performance Incentive Plan and, with respect to anyTransferred Employee, under the Management Incentive Plan prior to theEffective Date (as defined below) were included in “final earnings” as defined

 

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inthe Annuity Plan****This SupplementalPlan is established effective as of May 1, 2004 (the “Effective Date”).

 

1-2.          The Supplemental Planshall apply to employees of Hospira and its subsidiaries and affiliatesexisting as of the Effective Date or thereafter created or acquired.  (Hospira and each of such subsidiaries andaffiliates are hereinafter referred to as an “employer” and collectively as the“employers”).

 

1-3.          All benefits providedunder the Supplemental Plan shall be provided from the general assets of theemployers and not from any trust fund or other designated asset.  All participants in the Supplemental Planshall be general creditors of the employers with no priority over othercreditors.

 

1-4.          The Supplemental Planshall be administered by the Hospira, Inc. Employee Benefit Board of Review****appointed by the Board of Directors ofHospira (the “Board of Directors”) and acting under the Charter of the Hospira,Inc. Employee Benefit Board of Review (“Board of Review”).  Except as stated below, the Board of Reviewshall perform all powers and duties with respect to the Supplemental Plan,including the power to direct payment of benefits, allocate costs amongemployers, adopt amendments and determine questions of interpretation.  The Board of Directors shall have the soleauthority to terminate the Supplemental Plan.

 

Section2ERISA ANNUITY PLAN SUPPLEMENTAL BENEFIT

 

2-1.          The benefits describedin this Section 2 shall apply to all participants in the Annuity Plan whoretire, or terminate with a vested pension under that plan, on or after theEffective Date.

 

2-2.          Each Annuity Planparticipant whose retirement or vested pension under that plan would otherwisebe limited by Section 415 of the Internal Revenue Code shall receive a

 

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supplementalpension under this Supplemental Plan in an amount, which, when added to his orher Annuity Plan pension, will equal the amount the participant would beentitled to under the Annuity Plan as in effect from time to time, based on theparticular option selected by the participant, without regard to thelimitations imposed by Section 415 of the Internal Revenue Code.

 

Section31986 TAX REFORM ACT SUPPLEMENTAL BENEFIT

 

3-1.          The benefits describedin this Section 3 shall apply to all participants in the Annuity Plan whoretire, or terminate with a vested pension under that plan after the EffectiveDate.

 

3-2.          Each Annuity Planparticipant shall receive a supplemental pension under this Supplemental Planin an amount equal to the difference, if any, between:

 

(a)           the monthly benefitpayable under the Annuity Plan plus any supplement provided by Section 2; and

 

(b)           the monthly benefitwhich would have been payable under the Annuity Plan (without regard to thelimits imposed by Section 415 of the Internal Revenue Code) if theparticipant’s “final earnings”, as defined in the Annuity Plan, had includedcompensation in excess of the limits imposed by Section 401(a)(17)of the InternalRevenue Code, and any “pre-tax contributions” made by the participant under theHospira Supplemental 401(k) Plan.

 

For purposesof calculating the benefit under this Section 3-2 with respect to anyTransferred Employee, any pre-tax contributions made by the participant underthe Abbott Laboratories Supplemental 401(k) Plan prior to the Effective Dateshall be treated as though made under the Hospira Supplemental 401(k) Plan.

 

Section4DEFERRED COMPENSATION PLAN ANNUITY PLAN SUPPLEMENTAL BENEFIT

 

4-1.          The benefits describedin this Section 4 shall apply to all participants in the Annuity Plan whoretire, or terminate with a vested pension, under that plan, on or after the

 

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EffectiveDate and who made a Deferral Election under the Abbott Laboratories DeferredCompensation Plan (the “Deferred Compensation Plan”) with respect to anycalendar month during the one hundred twenty consecutive calendar monthsimmediately preceding retirement or termination of employment. ** **Forpurposes of calculating the benefit under this Section 4 with respect to anyTransferred Employee, amounts deferred under the Abbott Laboratories DeferredCompensation Plan prior to the Effective Date shall be treated as deferredunder the Deferred Compensation Plan.

 

4-2.          Each Annuity Planparticipant shall receive a supplemental pension under this Supplemental Planin an amount equal to the difference, if any, between:

 

(a)           the monthly benefitpayable under the Annuity Plan plus any supplement provided by Section 2 andSection 3; and

 

(b)           the monthly benefitwhich would have been payable under the Annuity Plan (without regard to thelimits imposed by Section 415 of the Internal Revenue Code) if theparticipant’s “base earnings”, as defined in the Annuity Plan, includeddeferrals made under the Deferred Compensation Plan and any compensation inexcess of the limits imposed by Section 401(a)(17)of the Internal Revenue Code

 

Section5DEFERRED MIP ANNUITY PLAN SUPPLEMENTAL BENEFIT

 

5-1.          The benefits describedin this Section 5 shall apply to all participants in the Annuity Plan whoretire, or terminate with a vested pension, under that plan, on or after theEffective Date and who were awarded Performance Incentive Plan awards for anycalendar year during the ten consecutive calendar years ending with the year ofretirement or termination of employment. For purposes of calculating the benefits under this Section 5 withrespect to any Transferred Employee, awards and payments made prior to theEffective Date under the Management Incentive Plan, Awards for PerformanceExcellence Plan or any Division Incentive Plan maintained by Abbott shall betreated as awards and payments, as applicable, under the

 

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PerformanceIncentive Plan, Awards for Performance Excellence or a Division Incentive Planmaintained by Hospira after the Effective Date.

 

5-2.          Each Annuity Planparticipant shall receive a supplemental pension under this Supplemental Planin an amount determined as follows:

 

(a)           The supplementalpension shall be the difference, if any, between:

 

(i)            the monthly benefitpayable under the Annuity Plan plus any supplement provided by Section 2,Section 3, and Section 4; and

 

(ii)           the monthly benefit whichwould have been payable under the Annuity Plan (without regard to the limitsimposed by Section 415 of the Internal Revenue Code) if the participant’s“final earnings”, as defined in the Annuity Plan, were one-sixtieth of the sumof:

 

(A)          the participant’s total“basic earnings” (excluding any payments under the Performance Incentive Plan,Awards for Performance Excellence Plan or any Division Incentive Plan) receivedin the sixty consecutive calendar months for which his basic earnings(excluding any payments under the Performance Incentive Plan, Awards forPerformance Excellence Plan or any Division Incentive Plan) were highest withinthe last one hundred twenty consecutive calendar months immediately precedinghis retirement or termination of employment; and

 

(B)           the amount of theparticipant’s total awards under the Performance Incentive Plan, Awards forPerformance Excellence Plan and any Division Incentive Plan (whether paidimmediately or deferred) made for the five consecutive calendar years duringthe ten consecutive calendar years ending with the year of retirement ortermination for which such amount is the greatest and (for participants grantedPerformance Incentive Plan awards for less than five consecutive calendar yearsduring such ten year period) which include all Performance Incentive Planawards granted for consecutive calendar years within such ten year period.

 

(b)           That portion of anyPerformance Incentive Plan award which the Compensation Committee hasdetermined shall be excluded from the participant’s “basic earnings” shall beexcluded from the calculation of “final earnings” for purposes of this Section5-2 and that portion of any award under the Management Incentive Plan which,prior to the Effective Date, the Compensation Committee of Abbott haddetermined would be excluded from a Transferred Employee’s “basic earnings”shall be excluded from the calculation of “final earnings” for purposes of thisSection 5-2.  “Final earnings” forpurposes of this subsection 5-2 shall

 

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include anycompensation in excess of the limits imposed by Section 401(a)(17)of theInternal Revenue Code.

 

(c)           In the event the perioddescribed in subsection 5-2(a)(ii)(B) is the final five calendar years of employmentand a Performance Incentive Plan award is made to the participant subsequent toretirement for the participant’s final calendar year of employment, thesupplemental pension shall be adjusted by adding such new award and subtractinga portion of the earliest Performance Incentive Plan award included in thecalculation, from the amount determined under subsection 5-2(a)(ii)(B).  The portion subtracted shall be equal tothat portion of the participant’s final calendar year of employment duringwhich the participant was employed by Hospira; provided, however, that in thecase of any Transferred Employee whose termination occurs in 2004, the portionof the participant’s final calendar year of employment for this purpose shallinclude any portion of 2004 that the participant was employed by Abbott.  If such adjustment results in a greatersupplemental pension, the greater pension shall be paid beginning the firstmonth following the date of such new award.

 

Section6CORPORATE OFFICER ANNUITY PLAN SUPPLEMENTAL BENEFIT

 

6-1.          The benefits describedin this Section 6 shall apply to all participants in the Annuity Plan who arecorporate officers of Hospira as of the Effective Date or who become corporateofficers thereafter, and who retire, or terminate with a vested pension underthat plan on or after the Effective Date. The term “corporate officer” for purposes of this Supplemental Planshall mean an individual elected an officer of Hospira by its Board ofDirectors (or designated as such for purposes of this Section 6 by theCompensation Committee of the Board of Directors of Hospira), but shall notinclude assistant officers. Notwithstanding the foregoing or any other provision of thisSupplemental Plan to the contrary, in the case of any Transferred Employee whowas a corporate officer of Abbott immediately prior to the Effective Date andwho is not a corporate officer of Hospira on or after the Effective Date,benefits shall be provided under this Section 6.

 

6-2.          Subject to thelimitations and adjustments described below, each participant described insubsection 6-1 shall receive a monthly supplemental pension under this

 

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SupplementalPlan commencing on the participant’s normal retirement date under the AnnuityPlan and payable as a life annuity, equal to 6/10 of 1 percent (.006) of theparticipant’s final earnings (as determined under subsection 5-2) for each ofthe first twenty years of the participant’s benefit service (as defined in theAnnuity Plan) occurring after the participant’s attainment of age 35.

 

6-3.          In no event shall thesum of (a) the participant’s aggregate percentage of final earnings calculatedunder subsection 6-2 and (b) of the participant’s aggregate percentage of finalearnings calculated under subsections 5.1(a)(ii)(A) and 5-1(b)(i)of the AnnuityPlan, exceed the maximum aggregate percentage of final earnings allowed undersubsection 5-1****of the Annuity Plan(without regard to any limits imposed by the Internal Revenue Code), as in effecton the date of the participant’s retirement or termination.  In the event the limitation described inthis subsection 6-3 would be exceeded for any participant, the participant’saggregate percentage calculated under subsection 6-2 shall be reduced until thelimit is not exceeded.

 

6-4.          Subject to theprovisions of subsection 6.1 with respect to any Transferred Employee who isnot a corporate officer of Hospira on or after the Effective Date, benefitservice occurring during any period that a participant is not a corporateofficer of Hospira or was not a corporate officer of Abbott Laboratories prior to theEffective Date******shall be disregarded in calculating the participant’saggregate percentage under subsection 6-2.

 

6-5.          Any supplemental pensionotherwise due a participant under this Section 6 shall be reduced by the amount(if any) by which:

 

(a)           the sum of (i) thebenefits due such participant under the Annuity Plan and this SupplementalPlan, plus (ii) the actuarially equivalent value of the employer-paid portionof all benefits due such participant under the primary retirement plans of allnon-Hospira employers of such participant; exceeds

 

(b)           the maximum benefitthat would be due under the Annuity Plan (without regard to the limits imposedby Section 415 of the Internal Revenue Code) based on the

 

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participant’sfinal earnings (as determined under subsection 5-2), if the participant hadaccrued the maximum benefit service recognized by the Annuity Plan.

 

The term “primary retirement plan” shall mean anypension benefit plan as defined in ERISA, whether or not qualified under theInternal Revenue Code, which is determined by the Board of Review to be theprimary pension plan of its sponsoring employer.  The term “non-Hospira employer” shall mean any employer otherthan Hospira or a subsidiary or affiliate of Hospira.  A retirement plan maintained by an employer prior to suchemployer’s acquisition by Hospira shall be deemed a retirement plan maintainedby a non-Hospira employer for purposes of this subsection 6-5.

 

6-6.          Any supplemental pensiondue a participant under this Section 6 shall be actuarially adjusted asprovided in the Annuity Plan to reflect the pension form selected by theparticipant and the participant’s age at commencement of the pension, and shallbe paid as provided in subsection 7-2.

 

Section7CORPORATE OFFICER ANNUITY PLANSUPPLEMENTAL EARLY RETIREMENT BENEFIT

 

7-1.          The benefits describedin this Section 7 shall apply to all persons described in subsection 6-1.

 

7-2.          The supplemental pensiondue under Sections 2, 3, 4, 5 and 6 to each participant described in subsection7-1 shall be reduced as provided in subsections 5-3 and 5-6 of the Annuity Planfor each month by which its commencement date precedes the last day of themonth in which the participant will attain age 60.  No reduction will be made for the period between the last day ofthe months the participant will attain age 60 and age 62.

 

7-3.          Each participantdescribed in subsection 7-1 shall receive a monthly supplemental pension underthis Supplemental Plan equal to any reduction made in such participant’sAnnuity

 

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Planpension under subsections 5-3 or 5-6 of the Annuity Plan for the period betweenthe last day of the months the participant will attain age 60 and age 62.

 

Section8MISCELLANEOUS

 

8-1.          For purposes of thisSupplemental Plan, the term “Performance Incentive Plan” shall mean the Hospira2004 Performance Incentive Plan and any successor plans to such plan, and theterm “Management Incentive Plan” shall mean******the Abbott Laboratories Management Incentive Plan andany successor plans to such plan.

 

8-2.          The supplemental pensiondescribed in Sections 2, 3, 4, 5, 6 and 7 shall be paid to the participant orhis or her beneficiary based on the particular pension option elected by theparticipant, in the same manner, at the same time, for the same period and onthe same terms and conditions as the pension payable to the participant or hisbeneficiary under the Annuity Plan.  Inthe event a participant is paid his or her pension under the Annuity Plan in alump sum, any supplemental pension due under Sections 2, 3, 4, 5, 6 or 7 shalllikewise be paid in a lump sum. Notwithstanding the foregoing provision of this subsection 8-2: if themonthly vested supplemental pensions, expressed as a straight life annuity, duea participant or his or her beneficiary under Sections 2, 3, 4, 5, 6 and 7 donot exceed an aggregate of One Hundred Fifty Dollars ($150.00) as of thecommencement date of the pension payable such participant or his or herbeneficiary under the Annuity Plan, then the present value of such supplementalpensions shall be paid such participant or beneficiary in a lump-sum.

 

8-3.          Notwithstanding anyother provisions of this Supplemental Plan, if employment of any participantwith Hospira and its subsidiaries and affiliates should terminate for anyreason within five (5) years after the date of a Change in Control:

 

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(a)           The present value ofany supplemental pension due the participant under Section 2 (whether or notthen payable) shall be paid to the participant in a lump sum within thirty (30)days following such termination; and

 

(b)           The present value ofany supplemental pension due the participant under Sections 3, 4 or 5 (whetheror not then payable) shall be paid to the participant in a lump sum withinthirty (30) days following such termination.

 

The supplemental pension described in paragraph (a)shall be computed using as the applicable limit under Section 415 of theInternal Revenue Code, such limit as is in effect on the termination date andbased on the assumption that the participant will receive his or her AnnuityPlan pension in the form of a straight life annuity with no ancillarybenefits.  The present values of thesupplemental pensions described in paragraphs (a) and (b) shall be computed asof the date of payment by using an interest rate equal to the applicableinterest rate as defined in section 417(e) of the Code and as determined forpurposes of the Annuity Plan as of the date of payment.

 

8-4.          For purposes ofsubsection 8-3, a “Change in Control” shall be deemed to have occurred on theearliest of the following dates:

 

(a)           the date any Person isor becomes the Beneficial Owner, directly or indirectly, of securities ofHospira (not including in the securities beneficially owned by such Person anysecurities acquired directly from Hospira or its Affiliates) representing 20%or more of the combined voting power of Hospira’s then outstanding securities,excluding any Person who becomes such a Beneficial Owner in connection with atransaction described in clause (i) of paragraph (c) below; or

 

(b)           the date the followingindividuals cease for any reason to constitute a majority of the number ofdirectors then serving: individuals who, on the date hereof, constitute theBoard of Directors and any new director (other than a director whose initialassumption of office is in connection with an actual or threatened electioncontest, including but not limited to a consent solicitation, relating to theelection of directors of Hospira) whose appointment or election by the Board ofDirectors or nomination for election by Hospira’s shareholders was approved orrecommended by a vote of at least two-thirds (2/3) of the directors then stillin office who either were directors on the date hereof or whose appointment,election or nomination for election was previously so approved or recommended;or

 

(c)           the date on which thereis consummated a merger or consolidation of Hospira or any direct or indirectsubsidiary of Hospira with any other corporation or other

 

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entity, other than(i) a merger or consolidation (A) immediately following which the individualswho comprise the Board of Directors immediately prior thereto constitute atleast a majority of the Board of Directors of Hospira, the entity survivingsuch merger or consolidation or, if Hospira or the entity surviving such mergeror consolidation is then a subsidiary, the ultimate parent thereof and (B)which results in the voting securities of Hospira outstanding immediately priorto such merger or consolidation continuing to represent (either by remainingoutstanding or by being converted into voting securities of the survivingentity or any parent thereof), in combination with the ownership of any trusteeor other fiduciary holding securities under an employee benefit plan of Hospiraor any subsidiary of Hospira, at least 50% of the combined voting power of thesecurities of Hospira or such surviving entity or any parent thereofoutstanding immediately after such merger or consolidation, or (ii) a merger orconsolidation effected to implement a recapitalization of Hospira (or similartransaction) in which no Person is or becomes the Beneficial Owner, directly orindirectly, of securities of Hospira (not including in the securitiesBeneficially Owned by such Person any securities acquired directly from Hospiraor its Affiliates) representing 20% or more of the combined voting power ofHospira’s then outstanding securities; or

 

(d)           the date theshareholders of Hospira approve a plan of complete liquidation or dissolutionof Hospira or there is consummated an agreement for the sale or disposition byHospira of all or substantially all of Hospira’s assets, other than a sale ordisposition by Hospira of all or substantially all of Hospira’s assets to anentity, at least 50% of the combined voting power of the voting securities ofwhich are owned by shareholders of Hospira, in combination with the ownershipof any trustee or other fiduciary holding securities under an employee benefitplan of Hospira or any subsidiary of Hospira, in substantially the sameproportions as their ownership of Hospira immediately prior to such sale.

 

Notwithstanding the foregoing, a “Change in Control” shall not bedeemed to have occurred by virtue of the consummation of any transaction orseries of integrated transactions immediately following which the recordholders of the common stock of Hospira immediately prior to such transaction orseries of transactions continue to have substantially the same proportionateownership in an entity which owns all or substantially all of the assets ofHospira immediately following such transaction or series of transactions.  In no event shall the Distribution beconsidered a Change in Control for purposes of this Supplemental Plan.

 

For purposes of this Supplemental Plan: “Affiliate” shall have themeaning set forth in Rule 12b-2 promulgated under Section 12 of the ExchangeAct; “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 underthe Exchange Act; “Exchange Act” shall mean the Securities Exchange Act of1934, as amended from time to time; and “Person” shall have the meaning givenin Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d)and 14(d) thereof, except that such term shall not include (i) Hospira or anyof its subsidiaries, (ii) a trustee or other fiduciary holding securities underan employee benefit plan of Hospira or any of its Affiliates, (iii) anunderwriter temporarily holding securities pursuant to an offering of suchsecurities, or (iv) a

 

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corporation owned, directly or indirectly, by the shareholders ofHospira in substantially the same proportions as their ownership of stock ofHospira.

 

8-5.          POTENTIAL CHANGE INCONTROL.  A “Potential Change inControl” shall exist during any period in which the circumstances described inparagraphs (a), (b), (c) or (d), below, exist (provided, however, that aPotential Change in Control shall cease to exist not later than the occurrenceof a Change in Control):

 

(a)           Hospira enters into anagreement, the consummation of which would result in the occurrence of a Changein Control, provided that a Potential Change in Control described in thisparagraph (a) shall cease to exist upon the expiration or other termination ofall such agreements.

 

(b)           Any Person (withoutregard to the exclusions set forth in subsections (i) through (iv) of suchdefinition) publicly announces an intention to take or to consider takingactions the consummation of which would constitute a Change in Control; providedthat a Potential Change in Control described in this paragraph (b) shall ceaseto exist upon the withdrawal of such intention, or upon a determination by theBoard of Directors that there is no reasonable chance that such actions wouldbe consummated.

 

(c)           Any Person becomes theBeneficial Owner, directly or indirectly, of securities of Hospira representing10% or more of either the then outstanding shares of common stock of Hospira orthe combined voting power of Hospira’s then outstanding securities (notincluding in the securities beneficially owned by such Person any securitiesacquired directly from Hospira or its Affiliates).

 

(d)           The Board of Directorsadopts a resolution to the effect that, for purposes of this Agreement, aPotential Change in Control exists; provided that a Potential Change in Controldescribed in this paragraph (d) shall cease to exist upon a determination bythe Board of Directors that the reasons that gave rise to the resolutionproviding for the existence of a Potential Change in Control have expired or nolonger exist.

 

In no event shall the Distribution be considered a Potential Change inControl for purposes of this Supplemental Plan.

 

8-6.          The provisions ofsubsections 8-3, 8-4, 8-5 and this subsection 8-6 may not be amended ordeleted, nor superseded by any other provision of this Supplemental Plan, (i)during the pendency of a Potential Change in Control and (ii) during the periodbeginning on the date of a Change in Control and ending on the date five (5)years following such Change in Control.

 

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8-7.          All benefits due underthis Supplemental Plan shall be paid by Hospira and Hospira shall be reimbursedfor such payments by the employee’s employer. In the event the employee is employed by more than one employer, eachemployer shall reimburse Hospira in proportion to the period of time theemployee was employed by such employer, as determined by the Board of Review inits sole discretion.

 

8-8.          The benefits under theSupplemental Plan are not in any way subject to the debts or other obligationsof the persons entitled to benefits and may not be voluntarily or involuntarilysold, transferred or assigned.

 

8-9.          Nothing contained inthis Supplemental Plan shall confer on any employee the right to be retained inthe employ of Hospira or any of its subsidiaries or affiliates.

 

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