Exhibit
10.1


AGREEMENT
REGARDING

CHANGE IN CONTROL


THIS AGREEMENT (“Agreement”), is made and entered into
as of the ___ day of August, 2006 (the “Effective Date”) by and between
Hospira, Inc. (the “Company”) and Thomas E. Werner (the “Executive”);


WITNESSETH THAT:


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


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


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


1.     AGREEMENT TERM. THE INITIAL “AGREEMENT TERM” SHALL BEGIN ON THE
EFFECTIVE DATE AND SHALL CONTINUE THROUGH DECEMBER 31, 2009.  AS OF DECEMBER 31, 2006, AND AS OF EACH
DECEMBER 31 THEREAFTER, THE AGREEMENT TERM SHALL EXTEND AUTOMATICALLY TO THE
THIRD ANNIVERSARY THEREOF UNLESS THE COMPANY GIVES NOTICE TO THE EXECUTIVE
PRIOR TO THE DATE OF SUCH EXTENSION THAT THE AGREEMENT TERM WILL NOT BE
EXTENDED. NOTWITHSTANDING THE FOREGOING, IF A CHANGE IN CONTROL (AS DEFINED IN
SECTION 7 BELOW), OCCURS DURING THE AGREEMENT TERM, THE AGREEMENT TERM SHALL
CONTINUE THROUGH AND TERMINATE ON THE SECOND ANNIVERSARY OF THE DATE ON WHICH
THE CHANGE IN CONTROL OCCURS.


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









 



reason during the 30-day period commencing on the
first date which is six months after the date of the Change in Control.  For purposes of this Agreement:


(a)                                  A
termination of the Executive’s employment shall be treated as a termination by
reason of “Permanent Disability” only if, due to a mental or physical
disability, the Executive is absent from the full time performance of duties
with the Company for a period of at least twelve consecutive months and fails
to return to the full time performance of duties within 30 days after receipt
of a demand by the Company to do so.


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


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


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


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



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


(iv)                              the
failure by the Company to award the Executive an annual bonus in any year which
is at least equal to the annual bonus, awarded to the Executive under the
annual bonus plan of the Company for the year immediately preceding the year of
the Change in Control;


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


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


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


(viii)                        the
failure of the Company to obtain a satisfactory agreement from any successor to
the Company to assume and agree to perform this Agreement as contemplated by
Section 16.



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


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


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


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



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(c)                                  For
any annual incentive (bonus) plan or arrangement in which the Executive
participates for the performance period in which the Executive’s termination of
employment occurs, the Executive shall be entitled to a lump sum payment in
cash no later than twenty (20) business days after the date of termination
equal to the greater of (i) the Executive’s annual incentive (bonus) award for
the performance period that includes the date of termination, with the
determination of the amount of such award based on an assumption that the
target level of performance has been achieved or (ii) the Executive’s average
annual incentive (bonus) award for the three annual performance periods
preceding the performance period that includes the date of termination  (provided that if the Executive was not a
participant in the incentive award arrangement for any of those three prior
years, the averaging period shall be reduced from three years to the number of
years during the three year period in which the Executive was a participant;
and further provided that if the Executive’s award for any such year was
reduced because the Executive was not a participant for the full year, such
amount shall be annualized for purposes of the computation in this clause
(ii)); provided that such payment shall be subject to a pro-rata reduction to
reflect the number of days in the performance period following the date of
termination. The amount payable under this paragraph (c) shall be in lieu of
any amounts that may otherwise be due to the Executive with respect to any
annual incentive (bonus) plan or arrangement in which the Executive
participates for the performance period in which the Executive’s date of
termination occurs.


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


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


(ii)                                  an
amount equal to 2.99 times the greater of (x) the Executive’s annual incentive
(bonus) award for the performance period that includes the date of the
Executive’s termination of employment, with the determination of the amount of
such award based on an assumption that the target level of performance has been
achieved or (y) the Executive’s average 



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annual incentive (bonus)
award for the three annual performance periods preceding the performance period
that includes the date of termination (provided that if the Executive was not a
participant in the incentive award arrangement for any of those three prior
years, the averaging period shall be reduced from three years to the number of
years during the three year period in which the Executive was a participant;
and further provided that if the Executive’s award for any such year was
reduced because the Executive was not a participant for the full year, such
amount shall be annualized for purposes of the computation in this clause (y).


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


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


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


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



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5.     MAKE-WHOLE PAYMENTS. If any payment or benefit to which the
Executive (or any person on account of the Executive) is entitled, whether
under this Agreement or otherwise, in connection with a Change in Control or
the Executive’s termination of employment (a “Payment”) constitutes a “parachute
payment” within the meaning of section 280G of the Internal Revenue Code of
1986, as amended (the “Code”), and as a result thereof the Executive is subject
to a tax under section 4999 of the Code, or any successor thereto, (an “Excise
Tax”), the Company shall pay to the Executive an additional amount (the “Make-Whole
Amount”) which is intended to make the Executive whole for such Excise Tax. The
Make-Whole Amount shall be equal to (i) the amount of the Excise Tax, plus (ii)
the aggregate amount of any interest, penalties, fines or additions to any tax
which are imposed in connection with the imposition of such Excise Tax, plus
(iii) all income, excise and other applicable taxes imposed on the Executive
under the laws of any Federal, state or local government or taxing authority by
reason of the payments required under clauses (i) and (ii) and this clause
(iii).


(a)                                  For
purposes of determining the Make-Whole Amount, the Executive shall be deemed to
be taxed at the highest marginal rate under all applicable local, state, federal
and foreign income tax laws for the year in which the Make-Whole Amount is
paid. The Make-Whole Amount payable with respect to an Excise Tax shall be paid
by the Company coincident with the Payment with respect to which such Excise
Tax relates.


(b)                                 All
calculations under this Section 5 shall be made initially by the Company and
the Company shall provide prompt written notice thereof to the Executive to
enable the Executive to timely file all applicable tax returns. Upon request of
the Executive, the Company shall provide the Executive with sufficient tax and
compensation data to enable the Executive or the Executive’s tax advisor to
independently make the calculations described in subparagraph (a) above and the
Company shall reimburse the Executive for reasonable fees and expenses incurred
for any such verification.


(c)                                  If
the Executive gives written notice to the Company of any objection to the
results of the Company’s calculations within 60 days of the Executive’s receipt
of written notice thereof, the dispute shall be referred for determination to
independent tax counsel selected by the Company and reasonably acceptable to
the Executive (“Tax Counsel”). The Company shall pay all fees and expenses of
such Tax Counsel. Pending such determination by Tax Counsel, the Company shall
pay the Executive the Make-Whole Amount as determined by it in good faith. The
Company shall pay the Executive any additional amount determined by Tax 



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Counsel to be due under
this Section 5 (together with interest thereon at a rate equal to 120% of the
Federal short-term rate determined under section 1274(d) of the Code) promptly
after such determination.


(d)                                 The
determination by Tax Counsel shall be conclusive and binding upon all parties
unless the Internal Revenue Service, a court of competent jurisdiction, or such
other duly empowered governmental body or agency (a “Tax Authority”) determines
that the Executive owes a greater or lesser amount of Excise Tax with respect
to any Payment than the amount determined by Tax Counsel.


(e)                                  If
a Taxing Authority makes a claim against the Executive which, if successful,
would require the Company to make a payment under this Section 5, the Executive
agrees to contest the claim with counsel reasonably satisfactory to the
Company, on request of the Company subject to the following conditions:


(i)                                     The
Executive shall notify the Company of any such claim within 10 days of becoming
aware thereof. In the event that the Company desires the claim to be contested,
it shall promptly (but in no event more than 30 days after the notice from the
Executive or such shorter time as the Taxing Authority may specify for
responding to such claim) request the Executive to contest the claim. The
Executive shall not make any payment of any tax which is the subject of the
claim before the Executive has given the notice or during the 30-day period
thereafter unless the Executive receives written instructions from the Company
to make such payment together with an advance of funds sufficient to make the
requested payment plus any amounts payable under this Section 5 determined as
if such advance were an Excise Tax, in which case the Executive will act
promptly in accordance with such instructions.


(ii)                                  If
the Company so requests, the Executive will contest the claim by either paying
the tax claimed and suing for a refund in the appropriate court or contesting
the claim in the United States Tax Court or other appropriate court, as
directed by the Company; PROVIDED, HOWEVER, that any request by the Company for
the Executive to pay the tax shall be accompanied by an advance from the 



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Company to the Executive
of funds sufficient to make the requested payment plus any amounts payable
under this Section 5 determined as if such advance were an Excise Tax. If
directed by the Company in writing the Executive will take all action necessary
to compromise or settle the claim, but in no event will the Executive
compromise or settle the claim or cease to contest the claim without the
written consent of the Company; PROVIDED, HOWEVER, that the Executive may take
any such action if the Executive waives in writing the Executive’s right to a
payment under this Section 5 for any amounts payable in connection with such
claim. The Executive agrees to cooperate in good faith with the Company in
contesting the claim and to comply with any reasonable request from the Company
concerning the contest of the claim, including the pursuit of administrative
remedies, the appropriate forum for any judicial proceedings, and the legal
basis for contesting the claim. Upon request of the Company, the Executive
shall take appropriate appeals of any judgment or decision that would require
the Company to make a payment under this Section 5. Provided that the Executive
is in compliance with the provisions of this section, the Company shall be
liable for and indemnify the Executive against any loss in connection with, and
all costs and expenses, including attorneys’ fees, which may be incurred as a
result of, contesting the claim, and shall provide to the Executive within 30
days after each written request therefor by the Executive cash advances or
reimbursement for all such costs and expenses actually incurred or reasonably
expected to be incurred by the Executive as a result of contesting the claim.


(f)                                    Should
a Tax Authority finally determine that an additional Excise Tax is owed, then
the Company shall pay an additional Make-Whole Amount to the Executive in a
manner consistent with this Section 5 with respect to any additional Excise Tax
and any assessed interest, fines, or penalties. If any Excise Tax as calculated
by the Company or Tax Counsel, as the case may be, is finally determined by a
Tax Authority to exceed the amount required to be paid under applicable law,
then the Executive shall repay such excess to the Company within 30 days of
such determination; provided that such repayment shall be 



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reduced by the
amount of any taxes paid by the Executive on such excess which is not offset by
the tax benefit attributable to the repayment.


6.     TERMINATION DURING POTENTIAL CHANGE IN CONTROL. If a Potential
Change in Control (as defined in Section 8) occurs during the Agreement Term,
and the Company terminates the Executive’s employment for reasons other than
Permanent Disability or Cause during such Potential Change in Control, the
Executive shall be entitled to receive the benefits that the Executive would
have received under Section 3, such benefits to be calculated based upon the
Executive’s compensation prior to the actual termination of employment but paid
within 20 business days of the date of such termination.


7.     CHANGE IN CONTROL. For purposes of this Agreement, a “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 (i) of
paragraph (c) below; or


(b)                                 the
date on which 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 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 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 (i) a merger or consolidation (A) immediately
following which the individuals who comprise the Board immediately prior
thereto constitute at least a 



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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 (B) 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 (ii) a
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 on which 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.


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.


 



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For purposes of this
Agreement: “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.


8.     POTENTIAL CHANGE IN CONTROL. A “Potential Change in Control”
shall exist during any period in which the circumstances described in
paragraphs (a), (b), (c) or (d), below, exist (provided, however, that a
Potential Change in Control shall cease to exist not later than the occurrence
of a Change in Control):


(a)                                  The
Company enters into an agreement, the consummation of which would result in the
occurrence of a Change in Control, provided that a Potential Change in Control
described in this paragraph (a) shall cease to exist upon the expiration or
other termination of all such agreements;


(b)                                 Any
Person (without regard to the exclusions set forth in subsections (i) through
(iv) of such definition) publicly announces an intention to take or to consider
taking actions the consummation of which would constitute a Change in Control;
provided that a Potential Change in Control described in this paragraph (b)
shall cease to exist upon the withdrawal of such intention, or upon a
determination by the Board that there is no reasonable chance that such actions
would be consummated;


(c)                                  Any
Person becomes the Beneficial Owner, directly or indirectly, of securities of
the Company representing 10% or more of either the then outstanding shares of
common stock of the Company or the combined voting power of the Company’s then
outstanding securities (not including in the securities beneficially owned by
such Person any securities acquired directly from the Company or its
Affiliates);


(d)                                 The
Board adopts a resolution to the effect that, for purposes of this Agreement, a
Potential Change in Control exists; 



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provided that a
Potential Change in Control described in this paragraph (d) shall cease to
exist upon a determination by the Board that the reasons that gave rise to the
resolution providing for the existence of a Potential Change in Control have
expired or no longer exist.


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


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


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


10.   WITHHOLDING. All payments to the Executive
under this Agreement will be subject to withholding of applicable taxes. The
Company shall withhold the applicable taxes in an amount calculated at the
minimum statutory rate and shall pay the amount so withheld to the appropriate
tax authority.


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


12.   AMENDMENT. This Agreement may be amended or
canceled only by mutual agreement of the parties in writing without the consent
of any other person. So long as the Executive lives, no person, other than the
parties hereto, shall have any rights under or interest in this Agreement or
the subject matter hereof.  The parties
agree that this Agreement may be amended by the Company as it shall deem
necessary and appropriate in order to comply with the requirements of Section
409A of the Internal Revenue Code of 1986, as amended, and any proposed,
temporary or final regulations promulgated thereunder.



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


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


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


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


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


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


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



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


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


to the Company:


Corporate Vice President, Human Resources


Hospira, Inc.


275 North Field Drive


Lake Forest Illinois 60064


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


General Counsel and
Secretary


Hospira, Inc.


275 North Field Drive


Lake Forest, Illinois 60064


or to the Executive:


Thomas E. Werner


[Address redacted]


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


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


19.   LEGAL AND ENFORCEMENT COSTS. The provisions
of this Section 19 shall apply if it becomes necessary or desirable for the
Executive to retain legal counsel or incur other costs and expenses in
connection with enforcing any and all rights under this Agreement or any other
compensation plan maintained by the Company, 



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including, but not limited to the Hospira 2004
Long-Term Stock Incentive Plan or the Hospira Performance Incentive Plan, or,
in each case, any trust adopted pursuant thereto:


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


(b)                                 Payments
required under this Section 19 shall be made by the Company to the Executive
(or directly to the Executive’s attorney) promptly following submission to the
Company of appropriate documentation evidencing the incurrence of such
attorneys’ fees, costs, and expenses.


(c)                                  The
Executive shall be entitled to select legal counsel; provided, however, that
such right of selection shall not affect the requirement that any costs and
expenses reimbursable under this Section 19 be reasonable.


(d)                                 The
Executive’s rights to payments under this Section 19 shall not be affected by
the final outcome of any dispute with the Company.


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


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


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



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IN WITNESS THEREOF, the Executive has hereunto set his
hand, and the Company has caused these presents to be executed in its name and
on its behalf, and its corporate seal to be hereunto affixed on this _____ day
of ___________, 2006, all as of the Effective Date.


	
  

  	
   

  	
   

  
	
   

  	
   

  	
  Thomas E. Werner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  HOSPIRA, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
  Christopher B. Begley

  
	
   

  	
   

  	
  Its: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Brian J. Smith

  	
   

  	
   

  
	
  Secretary

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 



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APPENDIX
A


AGREEMENT
REGARDING CHANGE IN CONTROL

FORFEITURE PROVISION REFERENCED IN SECTION 9


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


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




 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 






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


 



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APPENDIX
B


AGREEMENT
REGARDING CHANGE IN CONTROL

ALTERNATIVE DISPUTE RESOLUTION PROCEDURES


The parties to the Agreement Regarding Change in
Control dated as of the __ day of August, 2006 (the “Agreement”) recognize that
a bona fide dispute as to certain matters may arise from time to time during
the term of the Agreement which relates to either party’s rights and/or
obligations. To have such a dispute resolved by this Alternative Dispute
Resolution (“ADR”) provision, a party first must send written notice of the
dispute to the other party for attempted resolution by good faith negotiations
between the Executive and the Company within twenty-eight (28) days after such
notice is received (all references to “days” in the ADR provision are to
calendar days).


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


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


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


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


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


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



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


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


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


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


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


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


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


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



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


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


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


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


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


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


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


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


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



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


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


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


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


 



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