Exhibit 10.8


 


HOSPIRA 2004 LONG-TERM STOCK INCENTIVE PLAN
(As
Amended and Restated as of the Effective Date)


 

















 


HOSPIRA 2004 LONG-TERM STOCK INCENTIVE PLAN

(As Amended and Restated as of the Effective Date)


 


SECTION 1


 


GENERAL


 


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


 


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


 


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


 


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


 


SECTION
2


 


AWARDS


 


2.1                                 General.  Any award under the Plan may
be granted singularly, in combination with another award (or awards), or in
tandem whereby the exercise or vesting of one award held by a Participant cancels
another award held by the Participant. 
Each award under the Plan shall be subject to the terms and conditions
of the Plan and such additional terms, conditions, limitations and restrictions
as the Committee shall provide with respect to such award.  Subject to Section 2.3, an award may be
granted as an alternative to or replacement of an existing award under the Plan
or any other plan of the Company or any subsidiary or as the form of payment
for


 

















 


grants or rights earned or due
under any other compensation plan or arrangement of the Company or its
subsidiaries, including without limitation the Hospira Non-Employee Directors’
Fee Plan and the plan of any entity acquired by the Company or any
subsidiary.  The types of awards that
may be granted under the Plan include:


 


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


 


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


 


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


 


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


 


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


 


2.3                                 No Repricing. 
Except for adjustments pursuant to Section 3.4 (relating to the
adjustment of shares), and reductions of the Exercise Price approved by the
Company’s stockholders, the Exercise Price for any outstanding option may not
be decreased after the date


 


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of grant nor may an outstanding
option granted under the Plan be surrendered to the Company as consideration
for the grant of a replacement option with a lower exercise price.


 


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


 


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


 


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


 


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


 


2.5                                 Dividends and Dividend Equivalents.  Any
award under the Plan, including without limitation any option or SAR, may
provide the Participant with the right to receive dividend payments or dividend
equivalent payments with respect to Stock subject to the award, which payments
may be either made currently or credited to an account for the Participant, and
may be settled in cash or Stock.


 


2.6                                 Deferral of Payment.  To
the extent permitted by the Committee or the terms of any award under the Plan,
a Participant may defer receipt of the cash or Stock otherwise payable under
the award and be credited with interest or dividend equivalents with respect
thereto; provided, however, that any award otherwise payable in stock shall
continue to be payable only in stock.


 


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


 


SECTION
3


 


SHARES
SUBJECT TO PLAN


 


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


 


3.2                                 Share Limitations. 
Subject to the following provisions of this subsection 3.2, the maximum
number of shares of Stock that may be delivered to Participants and their
beneficiaries under the Plan shall be equal to Thirty One Million (31,000,000)
shares of Stock (all of which may be granted as ISOs). The maximum number of
shares of Stock that may be issued in conjunction with awards other than
options and SARS shall be 25% of that number of shares in the immediately
preceding sentence.


 


(a)                                  Reuse of Shares.  To the extent any shares of Stock covered by an award are forfeited or
are not delivered to a Participant or beneficiary for any reason, including
because the award is forfeited or canceled, or is settled in cash or used to
satisfy the applicable tax withholding obligation, such shares shall not be
deemed to have been delivered for purposes of determining the maximum number of
shares of Stock available for delivery under the Plan


 


(b)                                 Net Shares.  If the exercise price of any stock option granted under the Plan is
satisfied by tendering shares of Stock to the Company (either actually or by
attestation), only the number of shares of Stock issued net of the shares of
Stock tendered shall be deemed delivered for purposes of determining the
maximum number of shares of Stock available for delivery under the Plan.


 


3.3                                 Limitations on Grants to Individuals.


 


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


 


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


 


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


 


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


 


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


 


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


 


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(a)                                  Notwithstanding any other provision of this
Plan, including the terms of any award granted hereunder, if the outstanding
common shares of the Company shall be combined, or be changed into, or
exchanged for, another kind of stock of the Company, into securities of another
corporation, or into property (including cash) whether through
recapitalization, reorganization, sale, merger, consolidation, spin-off,
business combination or a similar transaction (a “Transaction”), the Company
shall cause its successor, acquiror (or ultimate parent of any successor or
acquiror), as applicable, to assume each stock option and SAR outstanding
immediately prior to the Transaction (or to cause new options or rights to be
substituted therefor).  Pursuant to such
assumed or substituted option or rights, holders of such option or right shall
thereafter be entitled to receive, upon due exercise of any portion of the
option or right, (a) in the event of a Transaction in which the outstanding
common shares of the Company are combined, or changed into, or exchanged for,
solely another kind of stock of the Company or securities of another
corporation (disregarding, for this purpose, cash paid in lieu of fractional
shares), the securities which that person would have been entitled to receive
for common shares acquired through exercise of the same portion of such option
or right immediately prior to the effective date of such Transaction, and (b)
in the event of a Transaction in which the outstanding common shares of the
Company are changed into, or exchanged for, property (including cash) other
than solely stock of the Company or securities of another corporation (disregarding,
for this purpose, cash paid in lieu of fractional shares), securities the fair
market value of which immediately following the effective date of such
Transaction (as determined by the Committee) equals the fair market value (as
determined by the Committee) of the property which that person would have been
entitled to receive for common shares acquired through exercise of the same
portion of such option or right immediately prior to the effective date of such
Transaction.  In each case such assumed
or substituted option or right shall continue to be subject to the same terms
and conditions (including, without limitation, with respect to any right to
receive “replacement options” upon option exercise) to which it was subject
immediately prior to the Transaction.


 


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


 


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


 


(a)                                  Compliance with Applicable
Laws.  Notwithstanding any other provision of the
Plan, the Company shall have no obligation to deliver any shares of Stock or
make any


 


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other distribution of
benefits under the Plan unless such delivery or distribution complies with all
applicable laws (including, without limitation, the requirements of the
Securities Act of 1933), and the applicable requirements of any securities
exchange or similar entity.


 


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


 


SECTION
4


 


ABBOTT
CONVERSION AWARDS


 


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


 


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


 


4.3                                 Replacement Options.  If
an option granted under the Plan constitutes a Conversion Award with respect to
an option under the Abbott Plans that provided for the grant of replacement
stock options if all or a portion of the exercise price or taxes incurred in
connection with the exercise of the option are paid with the delivery (or in
the case of payment of taxes, the withholding of shares) of other shares of
Abbott Laboratories, then the Conversion Award shall provide for a replacement
stock option (a “Replacement Option”). 
Each Replacement Option shall cover the number of shares of Stock surrendered
(by actual delivery or by attestation) to satisfy the Exercise Price, plus the
number of shares surrendered (by actual delivery or attestation) or withheld to
satisfy the Participant’s tax liability, shall have an Exercise Price equal to
100% of the of the Fair Market Value of Stock on the date such Replacement
Option is granted, shall be first exercisable six months from the date of grant
of the Replacement Option and shall have the expiration date of the original
option.


 


SECTION
5


 


CHANGE
IN CONTROL


 


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


 


(a)                                  If a Participant who is an employee or
Director of the Company or a subsidiary at the time of a Change in Control then
holds one or more outstanding options or SARs, all


 


7

















 


such options and SARs then
held by the Participant shall become fully exercisable on and after the date of
the Change in Control (subject to the expiration provisions otherwise
applicable to the option or SAR), and any Stock purchased by the Participant
under such option or acquired under such SAR following such Change in Control
shall be fully vested upon exercise.


 


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


 


5.2                                 Change in Control.  For
purposes of this Plan, unless otherwise provided in an Award Agreement, the
term “Change in Control” shall be 
deemed to have occurred on the earliest of the following dates:


 


(a)                                  the date any Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any securities ac­quired
directly from the Company or its Affiliates) representing 20% or more of the
combined voting power of the Company’s then out­standing securities, excluding
any Person who becomes such a Bene­ficial Owner in connection with a
transaction described in clause (a) of paragraph 5.2(c) below; or


 


(b)                                 the date the following individuals cease for
any reason to constitute a majority of the number of directors then serving:
individ­uals who, on the date hereof, constitute the Board of Directors and any
new direc­tor (other than a director whose initial assumption of office is in
connection with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of direc­tors of
the Company) whose appointment or election by the Board of Directors or
nomination for election by the Company’s shareholders was approved or
recommended by a vote of at least two-thirds (2/3) of the directors then still
in 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 there is consummated a
merger or consolidation of the Company or any direct or indirect subsidiary of
the Company with any other corporation or other entity, other than (a) a merger
or consolidation (I) immediately following which the individuals who comprise
the Board of Directors immediately prior thereto constitute at least a majority
of the Board of Directors of the Company, the entity surviv­ing such merger or
consolidation or, if the Company or the entity surviving such merger or
consolidation is then a subsidiary, the ultimate parent thereof and (II) which
results in the voting securities of the Company outstanding immediately prior
to such merger or consolidation contin­uing to represent (either by remaining
outstanding or by being con­verted into voting securities of the surviving
entity or any parent thereof), in combination with the ownership of any trustee
or other fiduciary holding securities under an employee benefit plan of the
Company or any subsidiary of the Company, at least 50% of the combined voting
power of the securities of the Company or such surviving entity or any parent
thereof outstanding immediately after such merger or consolidation, or (b) a


 


8

















 


merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no Person is or be­comes the Beneficial Owner, directly
or indirectly, of securities of the Company (not including in the securities
Beneficially Owned by such Person any securities acquired directly from the
Company or its Affiliates) representing 20% or more of the combined voting
power of the Company’s then outstanding securities; or


 


(d)                                 the date the shareholders of the Company
approve a plan of complete liquidation or dissolution of the Company or there
is consummated an agreement for the sale or disposition by the Company of all
or substantially all of the Company’s assets, other than a sale or disposition
by the Company of all or substantially all of the Company’s assets to an
entity, at least 50% of the combined voting power of the voting securities of
which are owned by shareholders of the Company, in combination with the
ownership of any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any subsidiary of the Company, in
substantially the same proportions as their ownership of the Company
immediately prior to such sale.


 


(e)                                  Notwithstanding the foregoing, a “Change in
Control” shall not be deemed to have occurred by virtue of the consummation of
any transaction or series of integrated transactions immediately following
which the record holders of the common stock of the Company immediately prior
to such transaction or series of transactions continue to have  substantially the same proportionate
ownership in an entity which owns all or substantially all of the assets of the
Company immediately following such transaction or series of transactions.


 


(f)                                    For purposes of this Plan: “Affiliate” shall
have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the
Exchange Act; “Beneficial Owner” shall have the meaning set forth in Rule 13d-3
under the Exchange Act; “Exchange Act” shall mean the Securities Exchange Act
of 1934, as amended from time to time; and “Person” shall have the meaning
given in 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) the Company
or any of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
Affiliates, (iii) an underwriter temporarily holding securities pursuant to an
offering of such securities, or (iv) a corporation owned, directly or
indirectly, by the shareholders of the Company in substantially the same
proportions as their owner­ship of stock of the Company.


 


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


 


(a)                                  The Company enters into an agreement, the
consummation of which would result in the occurrence of a Change in Control,
provided that a Potential Change in Control


 


9

















 


described in this Section
5.3 shall cease to exist upon the expiration or other termination of all such
agreements.


 


(b)                                 Any Person (without regard to the exclusions
set forth in subsections (i) through (iv) of such definition) publicly
announces an intention to take or to consider taking actions the consummation
of which would constitute a Change in Control; provided that a Potential Change
in Control described in this paragraph (b) shall cease to exist upon the
withdrawal of such intention, or upon a determination by the Board of Directors
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 of Directors 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 of Directors that
the reasons that gave rise to the resolution providing for the existence of a
Potential Change in Control have expired or no longer exist.


 


SECTION
6


 


COMMITTEE


 


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


 


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


 


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


 


(b)                                 To the extent that the Committee determines
that the restrictions imposed by the Plan preclude the achievement of the
material purposes of the awards in jurisdictions outside the United States, the
Committee will have the authority and discretion to modify


 


10

















 


those restrictions as the
Committee determines to be necessary or appropriate to conform to applicable
requirements or practices of jurisdictions outside of the United States.


 


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


 


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


 


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


 


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


 


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


 


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SECTION
7


 


AMENDMENT
AND TERMINATION


 


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


 


SECTION
8


 


GENERAL
TERMS


 


8.1                                 No Implied Rights .


 


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


 


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


 


8.2                                 Transferability.  The
Committee may provide at the time it makes an award under the Plan or at any
time thereafter that such award may be transferable by the Participant, subject
to such limitations as the Committee may impose.  Except as otherwise so provided by the Committee, awards under
the Plan are not transferable except as designated by the Participant by will
or by the laws of descent and distribution.


 


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


 


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


 


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


 


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


 


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


 


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


 


SECTION
9


 


DEFINED
TERMS


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(m)                               Fair Market Value.  The
“Fair Market Value” of the Stock at any time shall be determined in such manner
as the Committee may deem equitable, or as required by applicable law or
regulation.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


14

















 


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


 


15