Document:

EXHIBIT 4.2

 

$300,000,000

 

ISLE OF CAPRI CASINOS, INC.

 

7.750% Senior Notes due 2019

 

REGISTRATION RIGHTS AGREEMENT

 

March 7, 2011

 

Credit Suisse Securities (USA) LLC

As Representative of the Initial Purchasers

Eleven Madison Avenue

New York, New York 10010-3629

 

Dear Sirs:

 

Isle of Capri Casinos, Inc., a Delaware corporation (the “Issuer”), proposes to issue and sell to Credit Suisse Securities (USA) LLC, Wells Fargo Securities, LLC, Deutsche Bank Securities Inc., Commerz Markets LLC and U.S. Bancorp Investments Inc. (collectively, the “Initial Purchasers”), upon the terms set forth in a purchase agreement dated as of March 2, 2011 (the “Purchase Agreement”), $300,000,000 aggregate principal amount of its 7.750% Senior Notes due 2019 (the “Initial Securities”) to be unconditionally guaranteed by certain of the Company’s subsidiaries listed therein (the “Guarantors,” and together with the Issuer, the “Company”).  The Initial Securities will be issued pursuant to an indenture, dated as of March 7, 2011 (the “Indenture”) among the Company, the Guarantors and U.S. Bank National Association (the “Trustee”).  As an inducement to the Initial Purchasers, the Company agrees with the Initial Purchasers, for the benefit of the holders of the Initial Securities (including, without limitation, the Initial Purchasers), the Exchange Securities (as defined below) and the Private Exchange Securities (as defined below) (collectively the “Holders”), as follows:

 

1.  Registered Exchange Offer.  The Company shall, at its own cost, prepare and, not later than 180 days after (or if the 180th day is not a business day, the first business day thereafter) the date of original issue of the Initial Securities (the “Issue Date”), file with the Securities and Exchange Commission (the “Commission”) a registration statement (the “Exchange Offer Registration Statement”) on an appropriate form under the Securities Act of 1933, as amended (the “Securities Act”), with respect to a proposed offer (the “Registered Exchange Offer”) to the Holders of Transfer Restricted Securities (as defined in Section 6 hereof), who are not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer, to issue and deliver to such Holders, in exchange for the Initial Securities, a like aggregate principal amount of debt securities (the “Exchange Securities”) of the Company issued under the Indenture and identical in all material respects to the Initial Securities (except for the transfer restrictions relating to the Initial Securities and the provisions relating to the matters described in Section 6 hereof) that would be registered under the Securities Act.  The Company shall use all commercially reasonable efforts to cause such Exchange Offer Registration Statement to become effective under the Securities Act within 240 days (or if the 240th day is not a business day, the first business day thereafter) after the Issue Date of the Initial Securities and shall keep the Exchange Offer Registration Statement effective for not less than 30 days (or longer, if required by applicable law) after the date notice of the Registered Exchange Offer is mailed to the Holders (such period being called the “Exchange Offer Registration Period”).

 

If the Company effects the Registered Exchange Offer, the Company will use all commercially reasonable efforts to close the Registered Exchange Offer 30 days after the commencement thereof provided that the Company has accepted all the Initial Securities theretofore validly tendered in accordance with the terms of the Registered Exchange Offer.

 

 

Following the declaration of the effectiveness of the Exchange Offer Registration Statement, the Company shall as promptly as practicable commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder of Transfer Restricted Securities (as defined in Section 6 hereof) electing to exchange the Initial Securities for Exchange Securities (assuming that such Holder is not an affiliate of the Company within the meaning of Rule 405 of the Securities Act (an “Affiliate”), acquires the Exchange Securities in the ordinary course of such Holder’s business and has no arrangements with any person to participate in the distribution of the Exchange Securities and is not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer) to trade such Exchange Securities from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States.

 

The Company acknowledges that, pursuant to current interpretations by the Commission’s staff of Section 5 of the Securities Act, in the absence of an applicable exemption therefrom, (i) each Holder which is a broker-dealer electing to exchange Initial Securities, acquired for its own account as a result of market making activities or other trading activities, for Exchange Securities (an “Exchanging Dealer”), is required to deliver a prospectus containing the information set forth in (a) Annex A hereto on the cover, (b) Annex B hereto in the “Exchange Offer Procedures” section and the “Purpose of the Exchange Offer” section, and (c) Annex C hereto in the “Plan of Distribution” section of such prospectus in connection with a sale of any such Exchange Securities received by such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) an Initial Purchaser that elects to sell Exchange Securities acquired in exchange for Initial Securities constituting any portion of an unsold allotment is required to deliver a prospectus containing the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in connection with such sale.

 

The Company shall use all commercially reasonable efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein, in order to permit such prospectus to be lawfully delivered by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Securities; provided, however, that (i) in the case where such prospectus and any amendment or supplement thereto must be delivered by an Exchanging Dealer or an Initial Purchaser, such period shall be the lesser of 180 days and the date on which all Exchanging Dealers and the Initial Purchasers have sold all Exchange Securities held by them (unless such period is extended pursuant to Section 3(j) below) and (ii) the Company shall make such prospectus and any amendment or supplement thereto, available to any broker-dealer for use in connection with any resale of any Exchange Securities for a period of not less than 90 days after the consummation of the Registered Exchange Offer.

 

If, upon consummation of the Registered Exchange Offer, any Initial Purchaser holds Initial Securities acquired by it as part of its initial distribution, the Company, simultaneously with the delivery of the Exchange Securities pursuant to the Registered Exchange Offer, shall issue and deliver to such Initial Purchaser upon the written request of such Initial Purchaser, in exchange (the “Private Exchange”) for the Initial Securities held by such Initial Purchaser, a like principal amount of debt securities of the Company issued under the Indenture and identical in all material respects (including the existence of restrictions on transfer under the Securities Act and the securities laws of the several states of the United States, but excluding provisions relating to the matters described in Section 6 hereof) to the Initial Securities (the “Private Exchange Securities”).  The Initial Securities, the Exchange Securities and the Private Exchange Securities are herein collectively called the “Securities.”

 

In connection with the Registered Exchange Offer, the Company shall:

 

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(a)  mail or deliver to each Holder of Initial Securities a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents;

 

(b)  keep the Registered Exchange Offer open for not less than 30 days (or longer, if required by applicable law) after the date notice thereof is mailed or delivered to such Holders;

 

(c)  utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York, which may be the Trustee or an affiliate of the Trustee;

 

(d)  permit Holders to withdraw tendered Initial Securities at any time prior to the close of business, New York time, on the last business day on which the Registered Exchange Offer shall remain open; and

 

(e)  otherwise comply with all applicable laws.

 

As soon as reasonably practicable after the close of the Registered Exchange Offer or the Private Exchange, as the case may be, the Company shall:

 

(x)  accept for exchange all the Initial Securities validly tendered and not withdrawn pursuant to the Registered Exchange Offer and the Private Exchange;

 

(y)  deliver to the Trustee for cancellation all the Initial Securities so accepted for exchange; and

 

(z)  cause the Trustee to authenticate and deliver promptly to each Holder of the Initial Securities, Exchange Securities or Private Exchange Securities, as the case may be, equal in principal amount to the Initial Securities of such Holder so accepted for exchange.

 

The Indenture will provide that the Exchange Securities will not be subject to the transfer restrictions set forth in the Indenture and that all the Securities will vote and consent together on all matters as one class and that none of the Securities will have the right to vote or consent as a class separate from one another on any matter.

 

Interest on each Exchange Security and Private Exchange Security issued pursuant to the Registered Exchange Offer and in the Private Exchange will accrue from the last interest payment date on which interest was paid on the Initial Securities surrendered in exchange therefor or, if no interest has been paid on the Initial Securities, from the date of original issue of the Initial Securities.

 

Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Securities received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Securities or the Exchange Securities within the meaning of the Securities Act, (iii) such Holder is not an Affiliate of the Company or, if it is an Affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such Holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of the Exchange Securities and (v) if such Holder is a broker-dealer, that it will receive Exchange Securities for its own account in exchange for Initial Securities that were acquired as a result of market-making activities or other trading activities and

 

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that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities.

 

Notwithstanding any other provisions hereof, the Company will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

2.  Shelf Registration.  If, (i) the Company is not (A) required to file the Exchange Offer Registration Statement or (B) because of any change in law or in applicable interpretations thereof by the staff of the Commission, permitted to effect a Registered Exchange Offer, as contemplated by Section 1 hereof, (ii) any Initial Purchaser so requests in writing with respect to the Initial Securities (or the Private Exchange Securities) not eligible to be exchanged for Exchange Securities in the Registered Exchange Offer and held by it following consummation of the Registered Exchange Offer or (iii) any Holder notifies the Company prior to the 20th business day following the consummation of the Registered Exchange Offer that (A) it is prohibited by applicable law or Commission policy from participating in the Registered Exchange Offer, (B) such Holder may not resell the Exchange Securities acquired by it in the Registered Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Registered Exchange Offer Registration Statement is not appropriate or available for such resales, or (C) such Holder is a broker-dealer and holds Initial Securities acquired directly from the Company or an Affiliate of the Company, the Company shall take the following actions:

 

(a)  The Company shall, at its cost, as promptly as practicable (but in no event more than 60 days after so required or requested pursuant to this Section 2) file with the Commission and thereafter shall use all commercially reasonable efforts to cause to be declared effective within 120 days after so required or requested pursuant to this Section 2 (unless it becomes effective automatically upon filing) a registration statement (the “Shelf Registration Statement” and, together with the Exchange Offer Registration Statement, a “Registration Statement”) on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Securities (as defined in Section 6 hereof) by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act (hereinafter, the “Shelf Registration”); provided, however, that no Holder (other than an Initial Purchaser) shall be entitled to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder.

 

(b)  The Company shall use all commercially reasonable efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus included therein to be lawfully delivered by the Holders of the relevant Securities, for a period of two years (or for such longer period if extended pursuant to Section 3(j) below) from the Issue Date or such shorter period that will terminate when all the Securities covered by the Shelf Registration Statement (i) have been sold pursuant thereto or (ii) have been distributed to the public pursuant to Rule 144 under the Securities Act.  The Company shall be deemed not to have used all commercially reasonable efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Securities covered thereby not being

 

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able to offer and sell such Securities during that period, unless such action is required by applicable law.

 

(c)  Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause the Shelf Registration Statement and the related prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

3.  Registration Procedures.  In connection with any Shelf Registration contemplated by Section 2 hereof and, to the extent applicable, any Registered Exchange Offer contemplated by Section 1 hereof, the following provisions shall apply:

 

(a)  The Company shall (i) furnish to each Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and, in the event that an Initial Purchaser (with respect to any portion of an unsold allotment from the original offering) is participating in the Registered Exchange Offer or the Shelf Registration Statement, the Company shall use all commercially reasonable efforts to reflect in each such document, when so filed with the Commission, such comments as such Initial Purchaser reasonably may propose; (ii) include the information set forth in Annex A hereto on the cover, in Annex B hereto in the “Exchange Offer Procedures” section and the “Purpose of the Exchange Offer” section and in Annex C hereto in the “Plan of Distribution” section of the prospectus forming a part of the Exchange Offer Registration Statement and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer, in each case subject to any change, addition, deletion or moving of such disclosure requested by the staff of the Commission; (iii) if reasonably requested by an Initial Purchaser, include the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement; (iv) include within the prospectus contained in the Exchange Offer Registration Statement a section entitled “Plan of Distribution,” reasonably acceptable to the Initial Purchasers, which shall contain a summary statement of the positions taken or policies made by the staff of the Commission with respect to the potential “underwriter” status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of Exchange Securities received by such broker-dealer in the Registered Exchange Offer (a “Participating Broker-Dealer”), whether such positions or policies have been publicly disseminated by the staff of the Commission or such positions or policies, in the reasonable judgment of the Initial Purchasers based upon advice of counsel (which may be in-house counsel), represent the prevailing views of the staff of the Commission; and (v) in the case of a Shelf Registration Statement, include in the prospectus included in the Shelf Registration Statement (or, if permitted by Commission Rule 430B(b), in a prospectus supplement that becomes a part thereof pursuant to Commission Rule 430B(f)) that is delivered to any Holder pursuant to Sections 3(d) and (f), the names of the Holders, who propose to sell Securities pursuant to the Shelf Registration Statement, as selling securityholders.

 

(b)  The Company shall give written notice to the Initial Purchasers, the Holders of the Securities and any Participating Broker-Dealer from whom the Company has received prior written notice that it will be a Participating Broker-Dealer in the Registered Exchange Offer

 

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(which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made):

 

(i)  when the Registration Statement or any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective;

 

(ii)  of any request by the Commission for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information;

 

(iii)  of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose, of the issuance by the Commission of a notification of objection to the use of the form on which the Registration Statement has been filed, and of the happening of any event that causes the Company to become an “ineligible issuer,” as defined in Commission Rule 405;

 

(iv)  of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and

 

(v)  of the happening of any event that requires the Company to make changes in the Registration Statement or the prospectus in order that the Registration Statement or the prospectus do not contain an untrue statement of a material fact nor omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the prospectus, in light of the circumstances under which they were made) not misleading.

 

(c)  The Company shall make every reasonable effort to obtain the withdrawal at the earliest possible time of any order suspending the effectiveness of the Registration Statement.

 

(d)  If not otherwise available on the Commission’s Electronic Data Gathering, Analysis and Retrieval (“EDGAR”) System or similar system, upon written request of a Holder of Securities, the Company shall furnish to each such Holder of Securities included within the coverage of the Shelf Registration, without charge, at least one copy of the Shelf Registration Statement and any post-effective amendment or supplement thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference).  The Company shall not, without the prior consent of the Initial Purchasers, make any offer relating to the Securities that would constitute a “free writing prospectus,” as defined in Commission Rule 405.

 

(e)  If not otherwise available on the Commission’s EDGAR System or similar system, upon written request of any Holder, the Company shall deliver to each Exchanging Dealer and each Initial Purchaser, and to any other Holder who so requests in writing, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if any Initial Purchaser or any such Holder requests, all exhibits thereto (including those incorporated by reference).

 

(f)  The Company shall, during the Shelf Registration period, deliver to each Holder of Securities included within the coverage of the Shelf Registration, without charge, as many copies of the prospectus (including each preliminary prospectus) included in the Shelf Registration

 

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Statement and any amendment or supplement thereto as such person may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by each of the selling Holders of the Securities in connection with the offering and sale of the Securities covered by the prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement.

 

(g)  The Company shall deliver to each Initial Purchaser, any Exchanging Dealer, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement and any amendment or supplement thereto as such persons may reasonably request.  The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by any Initial Purchaser, if necessary, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer in connection with the offering and sale of the Exchange Securities covered by the prospectus, or any amendment or supplement thereto, included in such Exchange Offer Registration Statement.

 

(h)  Prior to any public offering of the Securities, pursuant to any Registration Statement, the Company shall use all commercially reasonable efforts to register or qualify or cooperate with the Holders of the Securities included therein and their respective counsel in connection with the registration or qualification of the Securities for offer and sale under the securities or “blue sky” laws of such states of the United States as any Holder of the Securities reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities covered by such Registration Statement; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject.

 

(i)  The Company shall cooperate with the Holders of the Securities to facilitate the timely preparation and delivery of global certificates representing the Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders may request a reasonable period of time prior to sales of the Securities pursuant to such Registration Statement.

 

(j)  Upon the occurrence of any event contemplated by paragraphs (ii) through (v) of Section 3(b) above during the period for which the Company is required to maintain an effective Registration Statement, the Company shall promptly prepare and file a post-effective amendment to the Registration Statement or a supplement to the related prospectus and any other required document so that, as thereafter delivered to Holders of the Securities or purchasers of Securities, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.  If the Company notifies the Initial Purchasers, the Holders of the Securities and any known Participating Broker-Dealer in accordance with paragraphs (ii) through (v) of Section 3(b) above to suspend the use of the prospectus until the requisite changes to the prospectus have been made, then the Initial Purchasers, the Holders of the Securities and any such Participating Broker-Dealers shall suspend use of such prospectus, and the period of effectiveness of the Shelf Registration Statement provided for in Section 2(b) above and the Exchange Offer Registration Statement provided for in Section 1 above shall each be extended by the number of days from and including the date of the giving of such notice to and including the date when the Initial Purchasers, the Holders of the Securities and any known Participating Broker-Dealer shall have received such amended or

 

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supplemented prospectus pursuant to this Section 3(j).  During the period during which the Company is required to maintain an effective Shelf Registration Statement pursuant to this Agreement, the Company will prior to the three-year expiration of that Shelf Registration Statement file, and use its best efforts to cause to be declared effective (unless it becomes effective automatically upon filing) within a period that avoids any interruption in the ability of Holders of Securities covered by the expiring Shelf Registration Statement to make registered dispositions, a new registration statement relating to the Securities, which shall be deemed the “Shelf Registration Statement” for purposes of this Agreement.

 

(k)  Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Initial Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, and provide the applicable trustee with printed certificates for the Initial Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, in a form eligible for deposit with The Depository Trust Company.

 

(l)  The Company will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Registered Exchange Offer or the Shelf Registration and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company’s first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover such 12-month period.

 

(m)  The Company shall cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, in a timely manner and containing such changes, if any, as shall be necessary for such qualification.  In the event that such qualification would require the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture.

 

(n)  The Company may require each Holder of Securities to be sold pursuant to the Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of the Securities as the Company may from time to time reasonably require for inclusion in the Shelf Registration Statement, and the Company may exclude from such registration the Securities of any Holder that unreasonably fails to furnish such information within a reasonable time after receiving such request.

 

(o)  The Company shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as any Holder of the Securities shall reasonably request in order to facilitate the disposition of the Securities pursuant to any Shelf Registration.

 

(p)  In the case of any Shelf Registration, subject to customary confidentiality agreements being executed by all parties to review information, the Company shall (i) make reasonably available for inspection by the Holders of the Securities, any underwriter participating in any disposition pursuant to the Shelf Registration Statement and any attorney, accountant or other agent retained by the Holders of the Securities or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and (ii) cause the Company’s officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders of the Securities or any such underwriter, attorney, accountant or agent in connection with the Shelf Registration Statement, in each case, as

 

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shall be reasonably necessary to enable such persons, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the Initial Purchasers by you and on behalf of the other parties, by one counsel designated by and on behalf of such other parties as described in Section 4 hereof.

 

(q)  In the case of any Shelf Registration, the Company, if requested by any Holder of Securities covered thereby, shall cause (i) its counsel to deliver an opinion and updates thereof relating to the Securities in customary form addressed to such Holders and the Managing Underwriters (as defined below), if any, thereof and dated, in the case of the initial opinion, the effective date of such Shelf Registration Statement, it being agreed that the matters to be covered by such opinion shall include, without limitation, the due incorporation and good standing of the Company and its subsidiaries; the qualification of the Company and its subsidiaries to transact business as foreign corporations; the due authorization, execution and delivery of the relevant agreement of the type referred to in Section 3(o) hereof; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the applicable Securities; the absence of material legal or governmental proceedings involving the Company and its subsidiaries; the absence of governmental approvals required to be obtained in connection with the Shelf Registration Statement, the offering and sale of the applicable Securities, or any agreement of the type referred to in Section 3(o) hereof; the compliance as to form of such Shelf Registration Statement and any documents incorporated by reference therein and of the Indenture with the requirements of the Securities Act and the Trust Indenture Act, respectively; and (A) as of the date of the opinion and as of the effective date of the Shelf Registration Statement or most recent post-effective amendment thereto, as the case may be, the absence from such Shelf Registration Statement and the prospectus included therein, as then amended or supplemented, and from any documents incorporated by reference therein and (B) as of an applicable time identified by such Holders or Managing Underwriters, the absence from such prospectus taken together with any other documents identified by such Holders or Managing Underwriters, in the case of (A) and (B), of an untrue statement of a material fact or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any such incorporated documents, in the light of the circumstances existing at the time that such documents were filed with the Commission under the Exchange Act); (ii) its officers to execute and deliver all customary documents and certificates and updates thereof requested by any underwriters of the applicable Securities; and (iii) its independent public accountants and the independent public accountants with respect to any other entity for which financial information is provided in the Shelf Registration Statement to provide to the selling Holders of the applicable Securities and any underwriter therefor a comfort letter in customary form and covering matters of the type customarily covered in comfort letters in connection with primary underwritten offerings, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72.

 

(r)  In the case of the Registered Exchange Offer, if requested by any Initial Purchaser or any known Participating Broker-Dealer, the Company shall cause (i) its counsel to deliver to such Initial Purchaser or such Participating Broker-Dealer signed opinions in the form set forth in Section 7(c)-(e) of the Purchase Agreement with such changes as are customary in connection with the preparation of a Registration Statement and (ii) its independent public accountants and the independent public accountants with respect to any other entity for which financial information is provided in the Registration Statement to deliver to such Initial Purchaser or such Participating Broker-Dealer a comfort letter, in customary form, meeting the requirements as to the substance thereof as set forth in Section 7(a) of the Purchase Agreement, with appropriate date changes.

 

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(s)  If a Registered Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Initial Securities by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be, the Company shall mark, or caused to be marked, on the Initial Securities so exchanged that such Initial Securities are being canceled in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be; in no event shall the Initial Securities be marked as paid or otherwise satisfied.

 

(t)  The Company will use all commercially reasonable efforts to (a) if the Initial Securities have been rated prior to the initial sale of such Initial Securities, confirm such ratings will apply to the Securities covered by a Registration Statement, or (b) if the Initial Securities were not previously rated, cause the Securities covered by a Registration Statement to be rated with the appropriate rating agencies, if so requested by Holders of a majority in aggregate principal amount of Securities covered by such Registration Statement, or by the Managing Underwriters, if any.

 

(u)  In the event that any broker-dealer registered under the Exchange Act shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or “assist in the distribution” (within the meaning of the Conduct Rules (the “Rules”) of the Financial Industry Regulatory Authority, Inc. (“FINRA”)) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Company will use all commercially reasonable efforts to assist such broker-dealer in complying with the requirements of such Rules, including, without limitation, by (i) if such Rules, including Rule 2720, shall so require, engaging a “qualified independent underwriter” (as defined in Rule 2720) to participate in the preparation of the Registration Statement relating to such Securities, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Securities, (ii) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 5 hereof and (iii) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Rules.

 

(v)  The Company shall use all commercially reasonable efforts to take all other steps necessary to effect the registration of the Securities covered by a Registration Statement contemplated hereby.

 

4.  Registration Expenses.  The Company shall bear all fees and expenses incurred in connection with the performance of its obligations under Sections 1 through 3 hereof (including the reasonable fees and expenses, if any, of Latham & Watkins LLP, counsel for the Initial Purchasers, incurred in connection with the Registered Exchange Offer), whether or not the Registered Exchange Offer or a Shelf Registration is filed or becomes effective, and, in the event of a Shelf Registration, shall bear or reimburse the Holders of the Securities covered thereby for the reasonable fees and disbursements of one firm of counsel designated by the Holders of a majority in principal amount of the Initial Securities covered thereby to act as counsel for the Holders of the Initial Securities in connection therewith.

 

5.  Indemnification.  (a)  The Company agrees to indemnify and hold harmless each Holder of the Securities, any Participating Broker-Dealer and each person, if any, who controls such Holder or such Participating Broker-Dealer within the meaning of the Securities Act or the Exchange Act (each Holder, any Participating Broker-Dealer and such controlling persons are referred to collectively as the “Indemnified Parties”) from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Securities) to which each Indemnified Party may become subject

 

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under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus or “issuer free writing prospectus,” as defined in Commission Rule 433 (“Issuer FWP”), relating to a Shelf Registration, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse, as incurred, the Indemnified Parties for any reasonable legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that (i) the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus or Issuer FWP relating to a Shelf Registration in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein and (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus relating to a Shelf Registration Statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Holder or Participating Broker-Dealer from whom the person asserting any such losses, claims, damages or liabilities purchased the Securities concerned, to the extent that a prospectus relating to such Securities was required to be delivered (including through satisfaction of the conditions of Commission Rule 172) by such Holder or Participating Broker-Dealer under the Securities Act in connection with such purchase and any such loss, claim, damage or liability of such Holder or Participating Broker-Dealer results from the fact that there was not conveyed to such person, at or prior to the time of the sale of such Securities to such person, an amended or supplemented prospectus or, if permitted by Section 3(d), an Issuer FWP correcting such untrue statement or omission or alleged untrue statement or omission if the Company had previously furnished copies thereof to such Holder or Participating Broker-Dealer; provided further, however, that this indemnity agreement will be in addition to any liability which the Company may otherwise have to such Indemnified Party.  The Company shall also indemnify underwriters, their officers and directors and each person who controls such underwriters within the meaning of the Securities Act or the Exchange Act to the same extent as provided above with respect to the indemnification of the Holders of the Securities if requested by such Holders.

 

(b)  Each Holder of the Securities, severally and not jointly, will indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which the Company or any such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus or Issuer FWP relating to a Shelf Registration, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Company for any legal or other expenses reasonably incurred by the Company or any such controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof.  This indemnity agreement will be in addition to any liability which such Holder may otherwise have to the Company or any of its controlling persons.

 

11

 

(c)  Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 5, notify the indemnifying party of the commencement thereof; but the failure to notify the indemnifying party shall not relieve the indemnifying party from any liability that it may have under subsection (a) or (b) above except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided further that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under subsection (a) or (b) above.  In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof the indemnifying party will not be liable to such indemnified party under this Section 5 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof.  No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action, and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

 

(d)  If the indemnification provided for in this Section 5 is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the exchange of the Securities, pursuant to the Registered Exchange Offer, or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations.  The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or such Holder or such other indemnified party, as the case may be, on the other, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this Section 5(d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this Section 5(d).  Notwithstanding any other provision of this Section 5(d), the Holders of the Securities shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Securities pursuant to a Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.  For purposes of this Section 5(d), each person, if any, who controls such indemnified party within the meaning of the Securities Act or the Exchange Act shall

 

12

 

have the same rights to contribution as such indemnified party and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company.

 

(e)  The agreements contained in this Section 5 shall survive the sale of the Securities pursuant to a Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party.

 

6.  Special Interest Under Certain Circumstances.  (a)  Special interest (the “Special Interest”) with respect to the Initial Securities shall be assessed as follows if any of the following events occur (each such event in clauses (i) through (iv) below a “Registration Default”):

 

(i)  If the Company fails to file any of the registration statements required pursuant to Section 1 or Section 2 above on or before the date specified for such filing;

 

(ii)  If any of such registration statements required to be filed pursuant to Section 1 or Section 2 above is not declared effective by the Commission on or prior to the respective date specified in Section 1 or Section 2 above for such effectiveness (the “Effectiveness Target Date”);

 

(iii)  If the Company fails to consummate the Registered Exchange Offer within 30 business days of the Effectiveness Target Date with respect to the Exchange Offer Registration Statement; or

 

(iv)  If after either the Exchange Offer Registration Statement or the Shelf Registration Statement is declared (or becomes automatically) effective (A) such Registration Statement thereafter ceases to be effective; or (B) such Registration Statement or the related prospectus ceases to be usable (except as permitted in subsection (b) below) in connection with resales of Transfer Restricted Securities during the periods specified herein because either (1) any event occurs as a result of which the related prospectus forming part of such Registration Statement would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, (2) it shall be necessary to amend such Registration Statement or supplement the related prospectus to comply with the Securities Act or the Exchange Act or the respective rules thereunder, or (3) such Registration Statement is a Shelf Registration Statement that has expired before a replacement Shelf Registration Statement has become effective.

 

Special Interest shall accrue on the Initial Securities over and above the interest set forth in the title of the Initial Securities from and including the date on which any such Registration Default shall occur to but excluding the date on which all such Registration Defaults have been cured.  With respect to the first 90-day period immediately following the occurrence of the first Registration Default, Special Interest will be paid in an amount equal to 0.25% per annum of the principal amount of Initial Securities outstanding.  The amount of Special Interest will increase by an additional 0.25% per annum with respect tot each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Special Interest for all Registration Defaults of 1.0% per annum of the principal amount of Initial Securities outstanding.

 

(b)  A Registration Default referred to in Section 6(a)(iv)(B) hereof shall be deemed not to have occurred and be continuing in relation to a Shelf Registration Statement or the related prospectus if (i) such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to such Shelf Registration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to

 

13

 

permit Holders to use the related prospectus or (y) other material events, with respect to the Company that would need to be described in such Shelf Registration Statement or the related prospectus and (ii) in the case of clause (y), the Company is proceeding promptly and in good faith to amend or supplement such Shelf Registration Statement and related prospectus to describe such events; provided, however, that in any case if such Registration Default occurs for a continuous period in excess of 30 days, Special Interest shall be payable in accordance with the above paragraph from the day such Registration Default occurs until such Registration Default is cured.

 

(c)  Any amounts of Special Interest due pursuant to clause (i), (ii), (iii) or (iv) of Section 6(a) above will be payable in cash on the regular interest payment dates with respect to the Initial Securities. The amount of Special Interest will be determined by multiplying the applicable Special Interest rate by the principal amount of the Initial Securities, multiplied by a fraction, the numerator of which is the number of days such Special Interest rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months), and the denominator of which is 360.

 

(d)  “Transfer Restricted Securities” means each Security until (i) the date on which such Transfer Restricted Security has been exchanged by a person other than a broker-dealer for a freely transferable Exchange Security in the Registered Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered Exchange Offer of an Initial Security for an Exchange Security, the date on which such Exchange Security is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Initial Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement, (iv) the date on which such Security is distributed to the public pursuant to Rule 144 under the Securities Act, or (v) the earliest date that is no less than two years after the Issue Date and on which such Security (except for Securities held by an affiliate of the Company) may be resold in reliance on paragraph (b)(1) of Rule 144 under the Securities Act.

 

7.  Rules 144 and 144A.  The Company shall use all commercially reasonable efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the request of any Holder of Initial Securities, make publicly available other information so long as necessary to permit sales of their securities pursuant to Rules 144 and 144A.  The Company covenants that it will take such further action as any Holder of Initial Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Initial Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including the requirements of Rule 144A(d)(4)).  The Company will provide a copy of this Agreement to prospective purchasers of Initial Securities identified to the Company by the Initial Purchasers upon written request.  Upon the request of any Holder of Initial Securities, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act.

 

8.  Underwritten Registrations.  If any of the Transfer Restricted Securities covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering (“Managing Underwriters”) will be selected by the Holders of a majority in aggregate principal amount of such Transfer Restricted Securities to be included in such offering.

 

No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person’s Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes

 

14

 

and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements.

 

9.  Miscellaneous.

 

(a)  Amendments and Waivers.  The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, except by the Company and the written consent of the Holders of a majority in principal amount of the Securities affected by such amendment, modification, supplement, waiver or consents.

 

(b)  Notices.  All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, facsimile transmission, or air courier which guarantees overnight delivery:

 

(1)  if to a Holder of the Securities, at the most current address given by such Holder to the Company.

 

(2)  if to the Initial Purchasers:

 

Credit Suisse Securities (USA) LLC

Eleven Madison Avenue

New York, NY 10010

Fax No.:  (212) 325-4296

Attention:  Transactions Advisory Group

 

with a copy, which shall not constitute notice, to:

 

Latham & Watkins LLP

355 South Grand Avenue

Los Angeles, CA 90071

Attention: Pamela B. Kelly

 

(3)          if to the Company, at its address as follows:

 

Isle of Capri Casinos, Inc.

600 Emerson Road, Suite 300

St. Louis, MO 63141

Attention: General Counsel

 

with a copy, which shall not constitute notice, to:

 

Mayer Brown LLP

71 S. Wacker Drive

Chicago, IL 60606

Attention: Paul W. Theiss

 

All such notices and communications shall be deemed to have been duly given:  at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by recipient’s facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery.

 

15

 

(c)  No Inconsistent Agreements.  The Company has not, as of the date hereof, entered into, nor shall it, on or after the date hereof, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof.

 

(d)  Successors and Assigns.  This Agreement shall be binding upon the Company and its successors and assigns.

 

(e)  Counterparts.  This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

(f)  Headings.  The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

 

(g)  Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

 

(h)  Severability.  If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

 

(i)  Securities Held by the Company.  Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities is required hereunder, Securities held by the Company or its affiliates (other than subsequent Holders of Securities if such subsequent Holders are deemed to be affiliates solely by reason of their holdings of such Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.

 

(j)  Agent for Service; Submission to Jurisdiction; Waiver of Immunities.  By the execution and delivery of this Agreement, the Company (i) acknowledges that it has, by separate written instrument, irrevocably designated and appointed the Issuer (and any successor entity), as its authorized agent upon which process may be served in any suit or proceeding arising out of or relating to this Agreement that may be instituted in any federal or state court in the State of New York or brought under federal or state securities laws, and acknowledges that the Issuer  has accepted such designation, (ii) submits to the nonexclusive jurisdiction of any such court in any such suit or proceeding, and (iii) agrees that service of process upon the Issuer  and written notice of said service to the Company shall be deemed in every respect effective service of process upon it in any such suit or proceeding.  The Company further agrees to take any and all action, including the execution and filing of any and all such documents and instruments, as may be necessary to continue such designation and appointment of the Issuer  in full force and effect so long as any of the Securities shall be outstanding.  To the extent that the Company may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, it hereby irrevocably waives such immunity in respect of this Agreement, to the fullest extent permitted by law.

 

16

 

If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Issuer a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the several Initial Purchasers, the Issuer and the Guarantors in accordance with its terms.

 

	
 
    	
Very truly yours,
    
	
 
    	
 
    
	
 
    	
ISLE OF CAPRI CASINOS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Virginia M. McDowell
    
	
 
    	
Name:
    	
Virginia M. McDowell
    
	
 
    	
Title:
    	
President and Chief   Operating Officer
    
	
 
    	
 
    	
 
    
	
 
    	
[Signatures continue on following page]
    

 

[Signature Page to Registration Rights Agreement — Issuer]

 

 

	
 
    	
GUARANTORS:
    
	
 
    	
BLACK HAWK HOLDINGS, L.L.C.
    
	
 
    	
CASINO AMERICA OF COLORADO, INC.
    
	
 
    	
CCSC/BLACKHAWK, INC.
    
	
 
    	
GRAND PALAIS RIVERBOAT, INC.
    
	
 
    	
IC HOLDINGS COLORADO, INC.
    
	
 
    	
IOC-BLACK HAWK DISTRIBUTION COMPANY, LLC
    
	
 
    	
IOC-BOONVILLE, INC.
    
	
 
    	
IOC-CAPE GIRARDEAU LLC
    
	
 
    	
IOC-CARUTHERSVILLE, L.L.C.
    
	
 
    	
IOC DAVENPORT, INC.
    
	
 
    	
IOC-KANSAS CITY, INC.
    
	
 
    	
IOC-LULA, INC.
    
	
 
    	
IOC-NATCHEZ, INC.
    
	
 
    	
IOC BLACK HAWK COUNTY, INC.
    
	
 
    	
IOC HOLDINGS, L.L.C.
    
	
 
    	
IOC SERVICES, L.L.C.
    
	
 
    	
IOC-VICKSBURG, INC.
    
	
 
    	
IOC-VICKSBURG, L.L.C.
    
	
 
    	
ISLE OF CAPRI BETTENDORF MARINA CORPORATION
    
	
 
    	
ISLE OF CAPRI BETTENDORF, L.C.
    
	
 
    	
ISLE OF CAPRI BLACK HAWK CAPITAL CORP.
    
	
 
    	
ISLE OF CAPRI BLACK HAWK, L.L.C.
    
	
 
    	
ISLE OF CAPRI MARQUETTE, INC.
    
	
 
    	
PPI, INC.
    
	
 
    	
RAINBOW CASINO-VICKSBURG PARTNERSHIP, L.P.
    
	
 
    	
RIVERBOAT CORPORATION OF MISSISSIPPI
    
	
 
    	
RIVERBOAT SERVICES, INC.
    
	
 
    	
ST. CHARLES GAMING COMPANY, INC.
    
	
 
    	
 
    
	
 
    	
[Signature page for the   Guarantors follows]
    

 

[Signature Page to Registration Rights Agreement — Guarantors]

 

 

	
 
    	
By:
    	
/s/ Virginia M. McDowell
    
	
 
    	
Name:
    	
Virginia M. McDowell
    
	
 
    	
Title:
    	
President and Chief Operating Officer of each of the foregoing   entities
    

 

[Signature Page to Registration Rights Agreement — Guarantors]

 

 

The foregoing Registration

Rights Agreement is hereby confirmed

and accepted as of the date first

above written.

 

CREDIT SUISSE SECURITIES (USA) LLC

WELLS FARGO SECURITIES LLC

DEUTSCHE BANK SECURITIES INC.

COMMERZ MARKETS LLC

U.S. BANCORP INVESTMENTS INC.

 

by:  CREDIT SUISSE SECURITIES (USA) LLC

 

	
By:
    	
/s/ Michael Kamras
    	
 
    
	
Name:
    	
Michael Kamras
    	
 
    
	
Title:
    	
Director
    	
 
    

 

	
Acting on behalf of itself
    
	
and as the Representative
    
	
of the several Initial   Purchasers
    

 

 

ANNEX A

 

Each broker-dealer that receives Exchange Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities.  The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.  This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Initial Securities where such Initial Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities.  The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale.  See “Plan of Distribution.”

 

 

ANNEX B

 

Each broker-dealer that receives Exchange Securities for its own account in exchange for Securities, where such Initial Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities.  See “Plan of Distribution.”

 

 

ANNEX C

 

PLAN OF DISTRIBUTION

 

Each broker-dealer that receives Exchange Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities.  This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Initial Securities where such Initial Securities were acquired as a result of market-making activities or other trading activities.  The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale.  In addition, until                   ,20[  ] ,  all dealers effecting transactions in the Exchange Securities may be required to deliver a prospectus.(1)

 

The Company will not receive any proceeds from any sale of Exchange Securities by broker-dealers.  Exchange Securities received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices.  Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Securities.  Any broker-dealer that resells Exchange Securities that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Securities may be deemed to be an “underwriter” within the meaning of the Securities Act and any profit on any such resale of Exchange Securities and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act.  The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

 

For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal.  The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the Holders of the Securities) other than commissions or concessions of any brokers or dealers and will indemnify the Holders of the Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.

 

(1)  In addition, the legend required by Item 502(e) of Regulation S-K will appear on the back cover page of the Exchange Offer prospectus.

 

 

ANNEX D

 

o            CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.

 

	
Name:
    	
 
    	
 
    
	
Address:
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Securities.  If the undersigned is a broker-dealer that will receive Exchange Securities for its own account in exchange for Initial Securities that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.Exhibit 10.1

 

February 23, 2011

 

Mr. F. Michael Ball
 215 Larkspur Avenue
 Corona del Mar, CA 92625

 

Dear Mike:

 

We are pleased to confirm our offer of employment to you as follows:

 

POSITION

 

Chief Executive Officer. In addition, you will be elected to serve on the Board of Directors effective as of your start date.

 

REPORTING TO

 

Board of Directors.

 

ONE-TIME SPECIAL HIRING INCENTIVE

 

Contingent upon your starting work at Hospira on or before March 28, 2011, you will receive a one-time special hiring incentive consisting of a grant value of $500,000 in Hospira stock options to be effective on the last trading day of the quarter that includes your start date. This grant shall vest ratably over three years, subject to immediate vesting upon your involuntary termination by Hospira without “cause” or your resignation with “good reason” as those terms are defined below. The grant will be governed by the terms of the Hospira 2004 Long-Term Incentive Plan, as amended, and the individual award agreement. The form of award agreement for the grant of the stock options is enclosed for your review. The grant values expressed above will be rounded up or down to the nearest whole share of Hospira stock. To determine the number of option shares, the grant value will be divided by the Black-Scholes value determined as of the last trading day of the calendar quarter (March 31, 2011).

 

BASE SALARY

 

Your initial base salary will be at the annual rate of $975,000. Salaries will generally be reviewed each calendar year and may be increased, but not decreased, by the Board of Directors based on performance, market conditions or other business factors consistent with Hospira’s Compensation Administration Program.

 

SHORT-TERM INCENTIVE COMPENSATION

 

In this position, you will be eligible to receive annual incentive awards under Hospira’s performance incentive plan. For fiscal year 2011, your participation target will be 120% of your full year base salary, regardless of the actual salary paid to you during 2011. The amount of incentive compensation you actually earn is determined by the Board of Directors and is dependent on Hospira’s success in achieving defined goals. Your participation in Hospira’s performance incentive plan will be governed by the terms of the plan.

 

LONG-TERM INCENTIVE COMPENSATION — INITIAL AND ANNUAL GRANTS

 

Contingent upon your starting work at Hospira on or before March 28, 2011, you will receive:

 

(a)          A grant value of $1,950,000 in Hospira stock options to be effective on the last trading day of the quarter that includes your start date.

 

 

	
FMB
    	
 
    	
IWB
    	
 
    
	
F.   Michael Ball
    	
 
    	
Hospira, Inc.
    	
 
    

 

 

(b)         A grant value of $2,925,000 in Hospira performance share units to be effective on the last trading day of the quarter that includes your start date.

 

You will be eligible to participate in future grants under the LTIP, subject to compensation committee approval. All grants will be governed by the terms of the LTIP and individual award agreements. The award agreements for your initial and subsequent grants will provide for immediate vesting upon your involuntary termination by Hospira without “cause” or your resignation with “good reason”. Forms of award agreements for grants of stock options and performance share units are enclosed for your review.

 

For purposes of this Employment Offer and the individual award agreements, the definitions of “cause” and “good reason” will have the following meaning:

 

The term ‘Cause’ shall mean the willful engaging by the Participant 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 Participant’s part shall be deemed ‘willful’ unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that the Participant’s action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Participant shall not be deemed to have been terminated for Cause unless and until the Company delivers to the Participant 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 Participant and an opportunity for the Participant, together with counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Participant was guilty of conduct set forth above and specifying the particulars thereof in detail.”

 

The term “Good Reason” shall mean any of the following events, absent the Participant’s consent: a reduction of the Participant’s base salary; a material diminution in the Participant’s authorities, duties, or responsibilities; or a material breach by the Company of any agreement between the Company and the Participant. For each event described above, the Participant must furnish notice to the Board within thirty (30) days of the occurrence of the event, the Company shall have thirty (30) days after receiving such notice in which to cure, and if the failure is not cured by the end of the cure period the Participant must terminate employment within fifteen (15) days after the expiration of the cure period.

 

The grant values expressed above will be rounded up or down to the nearest whole share of Hospira stock or performance share unit. To determine the number of option shares, the grant value will be divided by the Black-Scholes value determined as of the last trading day of the calendar quarter (March 31st in the case of the initial grants above). The strike price for the options is the average of the high and low on the same final trading day. To determine the number of performance units, the grant value will be divided by the Monte-Carlo value determined as of the last trading day of the calendar quarter.

 

LONG TERM INCENTIVE COMPENSATION — “MAKE-WHOLE” GRANTS

 

Contingent upon your starting work at Hospira on or before March 28, 2011, you will receive:

 

(a)          A grant value of $3,394,208 in shares of Hospira restricted stock to compensate you for the loss of unvested options from your prior employer.

(b)         A grant value of $710,000 in shares of Hospira restricted stock to compensate you for the loss of unvested restricted stock from your prior employer.

(c)          A grant value of $1,929,621 in shares of Hospira restricted stock to compensate you for the loss of retirement benefits with your prior employer.

 

 

	
FMB
    	
 
    	
IWB
    	
 
    
	
F.   Michael Ball
    	
 
    	
Hospira, Inc.
    	
 
    

 

2

 

The foregoing grants of restricted stock shall be effective on the last trading day of the quarter that includes your start date. These restricted stock grants shall vest ratably over three years. By way of illustration, if you remain employed on March 31, 2012, you will become one-third vested in the restricted stock granted under clauses (a), (b) and (c). However, these restricted stock grants shall immediately vest upon your involuntary termination by Hospira without “cause” or your resignation with “good reason” as those terms are defined above. All grants are governed by the terms of the Hospira 2004 Long-Term Stock Incentive Plan, as amended (“LTIP”) and individual award agreements, except that the clawback provisions contained in the standard form of award agreement shall not apply. The form of award agreements for grants of restricted stock is enclosed for your review. The grant values expressed above will be rounded up or down to the nearest whole share of Hospira stock. To determine the number of restricted stock units, the grant values are divided by the closing price of Hospira stock on the last trading day of the calendar quarter (March 31, 2011).

 

RELOCATION

 

Acceptance of our offer requires that you relocate to the metro-Chicagoland area. We will provide assistance to you through the Hospira Relocation Program plan. Information regarding this program will be provided to you by Ken Meyers, Senior Vice President, Organizational Transformation and People Development. In the event you voluntarily or involuntarily (for cause) terminate your employment within 12 months after the date of hire, by your signature below, you acknowledge and agree to immediately pay back to Hospira all relocation benefits expended on your behalf.

 

VACATION

 

You are entitled to four weeks of paid vacation each calendar year under Hospira’s Vacation policy.

 

BENEFITS

 

You will be eligible to participate in Hospira’s benefit programs according to the rules governing each. Hospira’s benefit programs are outlined in the attached booklet.

 

RETIREMENT

 

You will be eligible to participate in Hospira’s 401(k) Retirement Savings Plan and the Hospira Non-Qualified Savings & Investment Plan. The plans provide a company matching contribution of 7% of your salary when you elect to make contributions of 5% or more. Information outlining the details of the plans is attached.

 

REIMBURSEMENT OF ATTORNEYS’ FEES

 

We will reimburse you up to $15,000 for attorneys’ fees incurred by you in connection with the review of this Employment Offer and related documents upon presentation of invoices and evidence of payment in accordance with Hospira’s expense reimbursement policy.

 

SEVERANCE

 

You will be eligible for severance benefits available to corporate officers as described in the Hospira Corporate Officer Severance Plan. Hospira will amend the severance plan to permit your participation in the plan. Moreover, for purposes of your participation in the severance plan, Section 4(b) will be amended with respect to you to read as follows: ‘The Participant’s employment is terminated for other than ‘Cause,” defined as the willful engaging by the Participant 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 Participant’s part shall be deemed ‘willful’ unless

 

 

	
FMB
    	
 
    	
IWB
    	
 
    
	
F.   Michael Ball
    	
 
    	
Hospira, Inc.
    	
 
    

 

3

 

done, or omitted to be done, by the Participant not in good faith and without reasonable belief that the Participant’s action or omission was in the best interest of the Company.’ Your severance benefits will be determined in accordance with the severance plan, and this paragraph, even if not so amended at the time of your termination.

 

CHANGE IN CONTROL

 

You will be eligible for benefits following a change in control in accordance with the terms of the attached form of Agreement Regarding Change in Control, which will expire by its terms as of December 31, 2012 unless a change in control occurs before such date. All similar agreements with corporate officers are set to expire on December 31, 2012 to permit the Compensation Committee to review the current change in control program at Hospira and to consider adoption of a replacement program during 2011.

 

INDEMNIFICATION

 

As CEO, you will be indemnified to the fullest extent permitted under Delaware law in accordance with Hospira’s by-laws.

 

ACKNOWLEDGEMENTS

 

In addition, by your signature below, you acknowledge and agree that you are free of any contractual obligations, including any non-compete agreements, from your current or former employers that will impede your contributions to Hospira.

 

This Employment Offer amends the terms of the Employee Agreement signed concurrently herewith. To the extent that this Employment Offer and the Employee Agreement are in direct conflict, this Employment Offer is controlling. Nothing in this Employment Offer or the Employee Agreement is intended to create an employment contract for any specific duration. You employment is at-will, which means that both you and Hospira have the right to terminate the employment relationship at any time with or without notice, in accordance with the terms of this Employment Offer. The terms of this Employment Offer, including but not limited to position, base salary, other compensation and benefits, can only be modified by an express, written agreement signed by you and Hospira’s Chairman of the Board.

 

This offer will remain in effect for four business days from the date of this Employment Offer, unless extended by Hospira. By signing this letter in the space below, you acknowledge that you have received and read this letter and all the enclosures hereto, and you further acknowledge your acceptance of the terms set forth herein and in the enclosures. Enclosed are two copies of this Employment Offer. If acceptable to you, please sign one copy and return it to Roger Hale in the enclosed pre-paid Federal Express envelope.

 

MISCELLANEOUS

 

We have already received acceptable references and we have completed a background investigation. Our offer of employment is contingent upon our receipt of:

 

·                  Acceptable drug screen results

·                  Receipt of a signed Hospira Employee Agreement (sample enclosed for your review only).

 

 

	
FMB
    	
 
    	
IWB
    	
 
    
	
F.   Michael Ball
    	
 
    	
Hospira, Inc.
    	
 
    

 

4

 

Under the Immigration Reform and Control Act of 1986, as amended by the Immigration Act of 1990, our company is required to verify the identity and employment eligibility of all new hires. In order to comply with this legal obligation, you must successfully complete an Employment Eligibility form (I-9) within three days of hire. We have enclosed a Form I-9 for your review. Please note that you will need to provide either (i) one document from “List A” or (ii) one document from “List B” and one document from “List C” of the form. Only original documents can be accepted.

 

After acceptance of this Employment Offer, you will be contacted by Ken Meyers regarding our benefit programs and other employment-related matters.

 

EARLY TERMINATION

 

If you accept this Employment Offer and if Hospira rescinds it before your start date other than by reason of “cause” (as defined above), then Hospira agrees to make a one-time cash payment to you within 30 days of such rescission in an amount equal to $6,033,829. You and Hospira agree that such payment is made in lieu of any other payment or benefit that is or becomes due under this Employment Offer and related documents.

 

START DATE

 

As agreed, your start date will be Monday, March 28, 2011.

 

Mike, we believe we can provide you with a challenging employment opportunity and that you, in turn, will make significant contributions to the success of Hospira. If you have any questions, please feel free to call Roger Hale at 502-551-3061 or me at 502-759-2741.

 

Sincerely,

 

 

	
/s/   Irving W. Bailey II
    	
 
    
	
Irving   W. Bailey II
    
	
Lead   Director
    
	
Hospira, Inc.
    

 

 

	
Accepted:
    	
/s/ F. Michael Ball
    	
 
    	
March 2, 2011
    
	
 
    	
Signature
    	
 
    	
March 2, 2011
    

 

 

Enclosures:

(1)                                  Hospira Employee Agreement

(2)                                  Form I-9 and Lists of Acceptable Documents (provided under separate cover)

(3)                                  Forms of Award Agreements

a.                                       Non-Qualified Stock Option Terms

b.                                      Restricted Stock Agreement

c.                                       Performance Share Unit Agreement

d.                                      Performance Share Unit Program Description

(4)                                  Change in Control Agreement

(5)                                  Hospira Officer Severance Pay Plan

(6)                                  Hospira Your Benefits 2011 (provided under separate cover)

(7)                                  Hospira Non-Qualified Savings & Investment Plan Summary (provided under separate cover)

 

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Enclosure (1)

 

EMPLOYEE AGREEMENT

 

Agreement made between HOSPIRA, INC., a Delaware corporation, on behalf of itself and its Subsidiaries (as defined below) (collectively, “HOSPIRA”), and the undersigned employee (“EMPLOYEE”), WITNESS the following:

 

EMPLOYEE acknowledges that HOSPIRA has the right to protect its good will and interest in Confidential Information (as defined below) and obtain the benefit of certain discoveries, inventions, improvements, and innovations developed by its employees.

 

In consideration of the execution of this Agreement, the mutual agreements contained in this Agreement and the employment of EMPLOYEE by HOSPIRA, the parties agree as follows:

 

1.             EMPLOYEE is engaged by HOSPIRA in a position of trust and confidence in which EMPLOYEE will use, observe, obtain or have access to Confidential Information (as defined below).

 

2.             As used in this Agreement, the following terms have the meanings specified:

 

(a)            “HOSPIRA Customer” means any person, corporation or any other commercial organization or entity that EMPLOYEE called upon or dealt with for purposes of selling, promoting or marketing a service or product on behalf of HOSPIRA during the last two years of EMPLOYEE’s employment with HOSPIRA.

 

(b)           “Competing Products” means any product, process or service that has the same or similar purpose or use as a product, process or service researched, discovered, developed, manufactured, imported, marketed, sold, offered for sale or used by HOSPIRA, which is related in any way to EMPLOYEE’s employment with HOSPIRA.

 

(c)            “Confidential Information” means all discoveries, inventions, improvements and innovations, whether or not patentable or copyrightable, methods, processes, techniques, shop practices, formulae, compounds, compositions, organisms, computer software, equipment, research data, clinical and pharmacological data, marketing, pricing and sales information, personnel data, customer lists, financial data, plans and all other know-how, trade secrets and proprietary information which are in the possession of HOSPIRA and which have not been published or disclosed to the general public.  Confidential Information also includes information received by HOSPIRA under an obligation of confidentiality to any third party.

 

(d)           “Subsidiary” means a corporation or any other commercial organization or entity, and any branch or office of any of the foregoing, thirty percent (30%) or more of the assets or voting securities of which is owned or controlled, directly or indirectly, by HOSPIRA.

 

3.             All identification badges, access cards or keys, automobiles, computers or other equipment, memoranda, notes, records, reports, photographs, drawings, plans, papers, computer software, compounds and other documents, products and materials made or compiled by or made available to EMPLOYEE during the course of employment with HOSPIRA, and any copies, summaries or abstracts thereof, whether in electronic, paper or other form and whether or not they contain Confidential Information, are and shall be the property of HOSPIRA and shall be delivered to HOSPIRA by EMPLOYEE prior to termination of employment with HOSPIRA.

 

4.             All discoveries, inventions, improvements, software, innovations, trademarks, trade dress, or Internet domain names, whether or not patentable, copyrightable, or registerable  (including all data and records pertaining thereto) which EMPLOYEE may invent, discover, originate, or conceive during the term of employment with HOSPIRA or which may arise out of or result from Confidential Information obtained, provided or otherwise acquired, either directly or indirectly, by EMPLOYEE in connection with EMPLOYEE’s employment with HOSPIRA, shall be the sole and exclusive property of HOSPIRA.  EMPLOYEE shall promptly and fully disclose each and all such discoveries, inventions, improvements, software or innovations to HOSPIRA.

 

5.             EMPLOYEE shall, and does hereby, assign to HOSPIRA, EMPLOYEE’s entire right, title, and interest to any of the discoveries, inventions, improvements, software, innovations, trademarks, trade dress, and Internet domain names described in Paragraph 4 of this Agreement and any related U.S. or foreign counterparts, including patents, patent applications, copyrights and registrations; shall execute any instruments considered

 

 

necessary by HOSPIRA to convey or perfect HOSPIRA’s ownership thereof; and shall assist HOSPIRA in obtaining, defending and enforcing its rights therein.  HOSPIRA shall bear all expenses it authorizes be incurred in connection with such activity and shall pay to EMPLOYEE reasonable compensation for any time spent by EMPLOYEE performing such duties at the request of HOSPIRA after termination of employment.  In addition, EMPLOYEE shall maintain in confidence any information, including without limitation documents and communications, disclosed to EMPLOYEE after EMPLOYEE’s term of employment with HOSPIRA in connection with EMPLOYEE’s obligations hereunder.

 

6.             Paragraphs 4 and 5 of this Agreement shall not apply to an invention for which no equipment, supplies, facility or trade secret information of HOSPIRA was used and which was developed entirely on EMPLOYEE’s own time, unless (a) at the time of completion of reduction to practice the invention relates (1) to the business of HOSPIRA or (2) to HOSPIRA’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the EMPLOYEE for HOSPIRA.

 

7.             EMPLOYEE understands that HOSPIRA has hired EMPLOYEE because of EMPLOYEE’s general skills and abilities and not because of EMPLOYEE’s possession, if any, of any former employer’s, customer’s, or other third party’s confidential or proprietary information.  EMPLOYEE hereby certifies that EMPLOYEE has returned all property, data, and documents, whether in electronic, paper, or other form, of any former employer, customer, or other third party.  EMPLOYEE agrees (a) not to disclose or use, directly or indirectly, in furtherance of EMPLOYEE’s employment with HOSPIRA, any confidential or proprietary information, whether in electronic, paper, or other form, that EMPLOYEE obtained through EMPLOYEE’s employment with any previous employer(s) and (b) to comply with and abide by any confidentiality obligations that EMPLOYEE has at the time hired by HOSPIRA.

 

8.             EMPLOYEE shall use all best efforts to protect the secrecy and confidentiality of Confidential Information.  Employee shall not, during the term of employment with HOSPIRA or thereafter, use or disclose, or assist in the disclosure to others, directly or indirectly, any Confidential Information, except as required and authorized in the scope of EMPLOYEE’s job responsibilities and in the furtherance of HOSPIRA’s business.  EMPLOYEE acknowledges that the relationship of EMPLOYEE to HOSPIRA with respect to Confidential Information shall be fiduciary in nature.

 

9.             EMPLOYEE shall not, during the term of employment with HOSPIRA or for a period of one year after the termination of employment with HOSPIRA, in each country in which HOSPIRA conducts business, engage, directly or indirectly, in any activity or employment, for the benefit of Employee or others, in a manner that contributes to any research, discovery, development, manufacture, importation, marketing, promotion, sale or use of one or more Competing Products.  This paragraph shall only apply to the extent permitted by the laws of the state in which EMPLOYEE works or worked on behalf of HOSPIRA immediately prior to the termination of employment.

 

10.           EMPLOYEE shall not, during the term of employment with HOSPIRA or for a period of one year after the termination of employment with HOSPIRA, in each country in which HOSPIRA conducts business, engage, directly or indirectly, for the benefit of EMPLOYEE or others, in any activity or employment in the performance of which any Confidential Information obtained, provided or otherwise acquired, directly or indirectly, during the term of employment with HOSPIRA is likely to be used or disclosed, notwithstanding EMPLOYEE’s undertaking to the contrary.  This paragraph shall apply only to the extent permitted by the laws of the state in which EMPLOYEE works on behalf of HOSPIRA or worked immediately prior to the termination of employment with HOSPIRA, and shall not be construed to limit in any way EMPLOYEE’s obligation not to use or disclose Confidential Information as set forth in Paragraph 8 above.

 

11.           EMPLOYEE shall not, directly or indirectly,  during the term of employment with HOSPIRA or for a period of one year after termination of employment with HOSPIRA, promote or market any Competing Products to any HOSPIRA Customer, or solicit any HOSPIRA Customers for purposes of selling  any Competing Products.

 

12.           EMPLOYEE shall not, during the term of employment with HOSPIRA or for a period of two years after termination of employment with HOSPIRA, directly or indirectly, for the benefit of EMPLOYEE or others, solicit or assist in soliciting to work as an employee, independent contractor, partner, or otherwise, any employee of HOSPIRA about whom EMPLOYEE acquired knowledge through EMPLOYEE’s employment with HOSPIRA.

 

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13.           This Agreement shall not be construed to limit in any way any “shop right,” “fiduciary duty” or other common law or statutory or contractual rights of HOSPIRA, in or to any Intellectual Property or Confidential Information, including without limitation any trade secrets, which HOSPIRA has or may have by virtue of EMPLOYEE’s employment.

 

14.           EMPLOYEE is employed at will, meaning either HOSPIRA or EMPLOYEE may terminate the employment relationship at any time, with or without notice, and for any reason or no reason at all.

 

15.           For a period of two years after termination of employment with HOSPIRA, EMPLOYEE shall communicate EMPLOYEE’s obligations under this Agreement to each subsequent employer(s), including providing to each subsequent employer(s) a copy of this Agreement, and shall advise HOSPIRA of the name and address of EMPLOYEE’s intended future employer. HOSPIRA shall have the right to advise any subsequent employer of EMPLOYEE’s obligations hereunder.

 

16.           If any provision or provisions (or portions thereof) of this Agreement are held to be unenforceable by any court, such provision or provisions (or portions thereof) will be limited or eliminated to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect and be enforceable.  This Agreement shall inure to the benefit of, be binding upon and be enforceable by HOSPIRA, and its successors and assigns and EMPLOYEE and EMPLOYEE’s heirs, executors, and administrators.

 

17.           This Agreement shall be construed, and its enforceability and the relationship of the parties shall be determined, in all respects under the laws of Illinois, without giving effect to conflict of laws.

 

18.           EMPLOYEE agrees to abide by the HOSPIRA Code of Business Conduct.

 

19.           The failure or refusal by HOSPIRA either to insist upon the strict performance of any provision of this Agreement or to exercise any right in any one or more instances or circumstances shall not be construed as a waiver or relinquishment of such provision or right, nor shall such failure or refusal be deemed a custom or practice contrary to such provision or right of this Agreement.

 

20.           This Agreement is the sole, entire, and complete agreement of the parties relating to the subject matter hereof, replaces and supersedes all prior versions and representations, and shall apply, notwithstanding that such employment may include significant changes in responsibilities, location, and other terms and conditions, including nature or scope of Confidential Information to which EMPLOYEE has access.  The  obligations under this Agreement shall survive termination of employment.

 

21.           No statements, promises, or representations have been made by any party to the other, or relied upon, other than as expressly provided in this Agreement with respect to the subject matter of the Agreement.  This Agreement (and any provision thereof) may not be modified, changed, clarified or interpreted by the parties, except in a writing specifying the modification, change, clarification or interpretation, and signed by an HOSPIRA Corporate Officer and EMPLOYEE.

 

	
 
    	
 
    	
 
    
	
Witness
    	
 
    	
EMPLOYEE   Signature
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
HOSPIRA, INC.
    	
 
    	
EMPLOYEE   Printed Name
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
 
    	
 
    	
Address
    
	
 
    	
 
    	
 
    
	
Dated                                        20      
    	
 
    	
 
    
	
 
    	
 
    	
EMPLOYEE   Social Security Number
    
				

 

3

 

Enclosure (3)a

 

HOSPIRA 2004 LONG-TERM STOCK INCENTIVE PLAN

 

NQSO TERMS

 

The Participant specified below has been granted this Option by Hospira, Inc. (the “Company”) under the terms of the Hospira 2004 Long-Term Stock Incentive Plan (the “Plan”).  The Option shall be subject to the following terms and conditions (the “Option Terms”):

 

1.             Terms of Award.  The following words and phrases relating to the grant of the Option shall have the following meanings:

 

(a)           The “Participant” is                                   .

 

(b)           The “Grant Date” is                                         .

 

(c)           The number of “Covered Shares” shall be                  shares of Stock.

 

(d)           The “Exercise Price” is $                         per share.

 

Except where the context clearly implies to the contrary, any capitalized term in this award shall have the meaning ascribed to that term under the Plan.

 

2.             Non-Qualified Stock Option.  The Option is not intended to constitute an “incentive stock option” as that term is used in Code section 422.

 

3.             Date of Exercise.  Subject to the limitations of the Option Terms, on the first anniversary of the Grant Date one-third of the Covered Shares subject to these Options (rounded up) may be purchased; on the second anniversary of the Grant Date two-thirds of the Covered Shares subject to these Options (rounded up) may be purchased; on the third anniversary of the Grant Date these Options may be exercised in full, provided the Expiration Date has not occurred prior to such vesting dates.

 

(a)           Notwithstanding the foregoing provisions of this paragraph 3, the Option shall become fully exercisable upon a Change in Control that occurs on or before the Date of Termination or in the event of your involuntary termination by the Company without Cause or your resignation with Good Reason.

 

(b)           The Option may be exercised (prior to or following the Date of Termination) only as to that portion of the Covered Shares which may be purchased in accordance with this Section 3, as of the date of exercise.

 

(c)           The Covered Shares shall continue to become exercisable pursuant to this Section 3 until the Expiration Date (as defined in Section 4).

 

(d)           Notwithstanding the foregoing provisions of this Section 3, in the event of termination of employment for reasons other than death, Disability or Retirement, the

 

 

Option may only be exercised on or after the Date of Termination only as to that portion of the Covered Shares for which it was exercisable immediately prior to the Date of Termination, or became exercisable on the Date of Termination.

 

4.             Expiration.  The Option shall not be exercisable after the Company’s close of business on the last business day that occurs prior to the Expiration Date.  The “Expiration Date” shall be the earliest to occur of:

 

(a)           the seven-year anniversary of the Grant Date;

 

(b)           if the termination of employment occurs for reasons other than death, Disability, Retirement, involuntary termination without Cause or your resignation with Good Reason, the three-month anniversary of the Date of Termination (as defined in Section 10); provided, however, that if the Participant dies during such three month period following the Date of Termination, then the three-month anniversary of the date of death;

 

(c)           the date on which the Participant engages in conduct which constitutes Cause;

 

(d)           the date on which the Participant, at any time prior to the one-year anniversary of the Date of Termination, engages, directly or indirectly, for the benefit of the Participant or others, in any activity, employment or business which, in the sole opinion and discretion of the Committee, is competitive with the Company or any of its Subsidiaries;

 

(e)           as provided under Restricted Activity in Section 5; or

 

(f)            as provided under Other Right to Correct Payments in Section 6.

 

5.             Restricted Activity.

 

(a)           The Participant shall not, while employed by the Company and for a period of one year following the termination of employment for any reason:

 

(i)            without the prior written consent of the Committee, directly or indirectly engage or assist any person engaging in any Competitive Business (as defined in Section 10), individually, or as an officer, director, employee, agent, consultant, owner, partner, lender, manager, member, principal, or in any other capacity, or render any services to any entity that is engaged in any Competitive Business; provided, however, that the Participant’s ownership of 1% of any class of equity security of any entity engaged in any Competitive Business shall not be deemed a breach of this Section 5(a) provided such securities are listed on a national securities exchange or quotation system or have been registered under Section 12(g) of the Securities Exchange Act of 1934, as amended; or

 

(ii)           directly or indirectly divert, take away, solicit, or assist others in soliciting any current or prospective customer, supplier, independent contractor or

 

2

 

service provider of the Company or any affiliate or otherwise interfere with the relationship between the Company or any affiliate and any current or prospective customer, service provider, supplier, independent contractor or stockholder.

 

(b)           The Participant shall not, while employed by the Company and for a period of two years following the termination of employment for any reason: directly or indirectly induce any person to leave employment with the Company, or solicit for employment other than on behalf of the Company, offer employment to, or employ, any person who was an employee of the Company, in each case within six months of such inducement, solicitation, or offer.

 

(c)           If the Participant engages in any activity described in Section 5(a) or Section 5(b) above without the written consent of the Committee, the Company, as determined by the Committee in its sole discretion, may (i) cancel and terminate all of the Participant’s unexercised, unexpired or unpaid Options (whether vested or unvested) under the Plan, and (ii) rescind any exercise, payment or delivery under any Option occurring within 12 months prior to, or at any time following, the date of the Participant’s termination of employment for any reason.  Upon any such rescission, the Participant shall immediately (A) pay to the Company the amount of any gain realized or payment received, and (B) forfeit to the Company any Shares received as a result of the rescinded exercise, payment or delivery under any Options, in such manner and on such terms and conditions as the Committee shall require, and the Company shall be entitled, as permitted by applicable law, to deduct from any amounts the Company owes the Participant from time to time the amount of any such gain realized or payment received.  “Gain realized” shall be the excess of the Fair Market Value of the Shares on the date of exercise over the Exercise Price, multiplied by the number of Shares purchased.

 

6.             Other Right to Correct Payments.  Subject to the Company’s Executive Compensation Recovery Policy, and notwithstanding anything in the Option Terms to the contrary, if the Committee determines, in its sole discretion, that the number of Covered Shares determined to be delivered under the Option Terms or the value of such Options was based on the Company’s published financial statements that have been restated then, at the Committee’s direction, the Company may, but in no case later than 60 months of such restatement:

 

(a)           cancel all unexercised, unexpired or unpaid Options (whether vested or unvested) under the Plan that were based upon the financial performance in the published financial statements that was subsequently restated;

 

(b)           rescind any exercise, payment or delivery under any Option that were based upon the financial performance in the published financial statements that was subsequently restated; and

 

(c)           if any amount has been realized from exercised Options that would have been lower had the financial results been properly reported, recover all or any gain realized by the Participant, as determined by the Committee in its sole discretion, under the Option Terms that resulted from the financial results that were subsequently restated, and the Participant agrees to repay and return any such gain realized to the Company.

 

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The Committee may, in its sole discretion, effect any such recovery by obtaining repayment directly from the Participant, setting off the amount owed to the Company against any amount or award that would otherwise be granted by the Company to the Participant, reducing any future compensation or benefit to the Participant or any combination thereof.  “Gain realized” shall be as determined under Section 5(c).

 

7.             Method of Option Exercise.  Subject to the Option Terms and the Plan, the Option may be exercised in whole or in part by filing a written notice with the Secretary of the Company at its corporate headquarters prior to the Company’s close of business on the last business day that occurs prior to the Expiration Date.  Such notice shall specify the number of shares of Stock which the Participant elects to purchase, and shall be accompanied by payment of the Exercise Price for such shares of Stock indicated by the Participant’s election.  Payment may be by cash or by check payable to the Company, or except as otherwise provided by the Committee before the Option is exercised:  (i) all or a portion of the Exercise Price may be paid by the Participant by delivery of shares of Stock (by actual delivery or by attestation) owned by the Participant and acceptable to the Committee having an aggregate Fair Market Value (valued as of the date of exercise) that is equal to the amount of cash that would otherwise be required; and (ii) the Participant may pay the Exercise Price by authorizing a third party to sell shares of Stock (or a sufficient portion of the shares) acquired upon exercise of the Option and 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.  Except as otherwise provided by the Committee prior to exercise, payments made with shares of Stock in accordance with clause (i) above shall be limited to shares held by the Participant for not less than six months prior to the payment date.  The Option shall not be exercisable if and to the extent the Company determines that such exercise would violate applicable state or Federal securities laws or the rules and regulations of any securities exchange on which the Stock is traded and shall not be exercisable during any blackout period established by the Company from time to time.

 

8.             Withholding.  The exercise of the Option is subject to withholding of all applicable taxes.  At the election of the Participant, and subject to such rules and limitations as may be established by the Committee from time to time, such withholding obligations may be satisfied (i) through cash payment by the Participant; (ii) through the surrender of shares of Stock by (actual delivery or by attestation) which the Participant already owns (provided, however, that to the extent shares described in this clause (ii) are used to satisfy more than the minimum statutory withholding obligation, as described below, then, except as otherwise provided by the Committee, payments made with shares of Stock in accordance with this clause (ii) shall be limited to shares held by the Participant for not less than six months prior to the payment date); or (iii) through the surrender of shares of Stock to which the Participant is otherwise entitled under the Plan; provided, however, that such shares under this clause (iii) may be used to satisfy not more than the Company’s minimum statutory withholding obligation (based on minimum statutory withholding rates for Federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income).

 

9.             Transferability.  The Option is not transferable by the Participant other than by will or by the laws of descent and distribution, and during the Participant’s life, may be exercised only by the Participant.  It may not be assigned, transferred (except as aforesaid), pledged or hypothecated by the Participant in any way whether by operation of law or otherwise, and shall

 

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not be subject to execution, attachment or similar process.  Any attempt at assignment, transfer, pledge or hypothecation, or other disposition of this Option contrary to the provisions hereof, and the levy of any attachment or similar process upon this option, shall be null and void and without effect.

 

10.           Definitions.  For purposes of the Option Terms, words and phrases shall be defined as follows:

 

(a)           Cause.  The term “Cause” means the willful engaging by the Participant in illegal conduct or gross misconduct which is demonstrably and materially injurious to the Company.  For purposes of this Option, no act, or failure to act, on the Participant’s part shall be deemed “willful” unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that the Participant’s action or omission was in the best interest of the Company.  Notwithstanding the foregoing, the Participant shall not be deemed to have been terminated for Cause unless and until the Company delivers to the Participant 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 Participant and an opportunity for the Participant, together with counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Participant was guilty of conduct set forth above and specifying the particulars thereof in detail.

 

(b)           Competitive Business.  The term “Competitive Business” means any business activity in which the Company or any Subsidiary is actively engaged at the time the Participant’s employment terminates.  For these purposes, entities deemed to be engaged in Competitive Business include, by way of example and not limitation, Abraxis BioScience, Inc., Baxter International Inc., Teva Pharmaceuticals, Becton, Dickinson and Company, B. Braun Melsungen AG, Cardinal Healthcare Inc., Fresenius Medical Care AG, Terumo Medical Corporation, Patheon, Inc., and Edwards Lifesciences Corporation.

 

(c)           Date of Termination.  The term “Date of Termination” means the first day occurring on or after the Grant Date on which the Participant is not employed by the Company or any Subsidiary, regardless of the reason for the termination of employment; provided that a termination of employment shall not be deemed to occur by reason of a transfer of the Participant between the Company and a Subsidiary or between two Subsidiaries; and further provided that the Participant’s employment shall not be considered terminated while the Participant is on a leave of absence from the Company or a Subsidiary approved by the Participant’s employer.  If, as a result of a sale or other transaction, the Participant’s employer ceases to be a Subsidiary (and the Participant’s employer is or becomes an entity that is separate from the Company), and the Participant is not, at the end of the 30-day period following the transaction, employed by the Company or an entity that is then a Subsidiary, then  the occurrence of such transaction shall be treated as the Participant’s Date of Termination caused by the Participant being discharged by the employer.

 

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(d)           Disability.  The Term “Disability” means the Participant’s disability as defined in the Hospira Extended Disability Plan, whether or not such Participant is a participant in such disability plan, for a period of twelve (12) consecutive months.

 

(e)           Good Reason.  The Term “Good Reason” means any of the following events, absent the Participant’s consent: a reduction of the Participant’s base salary; a material diminution in the Participant’s authorities, duties, or responsibilities; or a material breach by the Company of any agreement between the Company and the Participant.  For each event described above, the Participant must furnish notice to the Board within thirty (30) days of the occurrence of the event, the Company shall have thirty (30) days after receiving such notice in which to cure, and if the failure is not cured by the end of the cure period the Participant must terminate employment within fifteen (15) days after the expiration of the cure period.

 

(f)            Retirement.  “Retirement” of the Participant means, the occurrence of the Participant’s Date of Termination on or after the date that the Participant reaches the age of 55 and has 10 years of combined service with the Company or its subsidiaries (or with Abbott Laboratories and its affiliates, provided that the Participant transitioned employment from Abbott to the Company in conjunction with the distribution of the Company’s common stock to the Abbott shareholders) (as determined by the Committee).

 

11.           Heirs and Successors.  The Option Terms shall be binding upon, and inure to the benefit of, the Company and its successors and assigns, and upon any person acquiring, whether by merger, consolidation, purchase of assets or otherwise, all or substantially all of the Company’s assets and business.

 

12.           Administration.  The authority to manage and control the operation and administration of the Option Terms shall be vested in the Committee, and the Committee shall have all powers with respect to the Option Terms as it has with respect to the Plan.  Any interpretation of the Option Terms by the Committee and any decision made by it with respect to the Option Terms is final and binding on all persons.

 

13.           Plan Governs.  Notwithstanding anything in the Option Terms to the contrary, the Option Terms shall be subject to the terms of the Plan, a copy of which may be obtained by the Participant from the office of the Secretary of the Company; and the Option Terms is subject to all interpretations, amendments, rules and regulations promulgated by the Committee from time to time pursuant to the Plan.

 

14.           Not An Employment Contract.  The Option will not confer on the Participant any right with respect to continuance of employment or other service with the Company or any Subsidiary, nor will it interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate or modify the terms of such Participant’s employment or other service at any time.

 

15.           Notices.  Any written notices provided for in the Option Terms or the Plan shall be in writing and shall be deemed sufficiently given if either hand delivered or if sent by fax or

 

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overnight courier, or by postage paid first class mail.  Notices sent by mail shall be deemed received three business days after mailing but in no event later than the date of actual receipt.  Notices shall be directed, if to the Participant, at the Participant’s address indicated by the Company’s records, or if to the Company, at the Company’s principal executive office.

 

16.           Fractional Shares.  In lieu of issuing a fraction of a share upon any exercise of the Option, resulting from an adjustment of the Option pursuant to paragraph 3.4 of the Plan or otherwise, the Company will be entitled to pay to the Participant an amount equal to the fair market value of such fractional share.

 

17.           No Rights As Shareholder.  The Participant shall not have any rights of a shareholder with respect to the shares subject to the Option, until a stock certificate has been duly issued following exercise of the Option as provided herein.

 

18.           Amendment.  The Option Terms may be amended in accordance with the provisions of the Plan, and may otherwise be amended by written agreement of the Participant and the Company without the consent of any other person.

 

IN WITNESS WHEREOF, the Company has caused these presents to be executed in its name and on its behalf, all as of the Grant Date.

 

	
 
    	
Hospira, Inc.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Its:
    	
 
    

 

7

 

Enclosure (3)b

 

HOSPIRA 2004 LONG-TERM STOCK INCENTIVE PLAN

 

RESTRICTED STOCK AGREEMENT

 

This Restricted Stock Agreement (“Agreement”) is made between Hospira, Inc., a Delaware corporation (the “Company”), and the Participant specified below.  The Agreement is subject to the provisions of the Hospira 2004 Long-Term Stock Incentive Plan (the “Plan”), the terms of which are incorporated herein by reference.

 

1.                                       Terms of Award.  The following terms used in this Agreement shall have the meanings set forth in this paragraph 1:

 

(a)                                  The “Participant” is                                             .

 

(b)                                 The “Grant Date” is                   , 2010.

 

(c)                                  The number of shares of “Covered Shares” awarded under this Agreement is                     .  “Covered Shares” are shares of Stock granted under this Agreement and are subject to the terms of this Agreement and the Plan.

 

Except where the context clearly implies to the contrary, any capitalized term in this award shall have the meaning ascribed to that term under the Plan.  Other words and phrases used in this Agreement are defined pursuant to paragraph 8 or elsewhere in this Agreement.

 

2.                                       Award.  The Participant is hereby granted the number of Covered Shares set forth in paragraph 1.

 

3.                                       Dividends and Voting Rights.  The Participant shall be entitled to receive any dividends paid with respect to the Covered Shares that become payable during the Restricted Period (defined below); provided, however, that no dividends shall be payable to or for the benefit of the Participant for Covered Shares with respect to record dates occurring prior to the Grant Date, or with respect to record dates occurring on or after the date, if any, on which the Participant has forfeited those Covered Shares.  Any such dividends paid with respect to the Covered Shares during the Restricted Period shall be paid at the same time as they are paid to other shareholders of common shares of the Company.  The Participant shall be entitled to vote the Covered Shares during the Restricted Period to the same extent as would have been applicable to the Participant if the Participant was then vested in the shares; provided, however, that the Participant shall not be entitled to vote the shares with respect to record dates for such voting rights arising prior to the Grant Date, or with respect to record dates occurring on or after the date, if any, on which the Participant has forfeited those Covered Shares.  Any additional common shares of the Company issued with respect to the Covered Shares as a result of any stock dividend, stock split or reorganization, shall be subject to the restrictions and other provisions of paragraphs 5, 6 and 7.

 

4.                                       Issuance of Certificate.  Each certificate issued in respect of the Covered Shares granted under this Agreement shall be registered in the name of the Participant and shall be deposited in a bank designated by the Committee or retained by the Company.  The 

 

 

certification of Covered Shares is conditioned upon the Participant endorsing in blank a stock power for the Covered Shares.  During the Restricted Period, all certificates evidencing the Restricted Stock will be imprinted with the following legend:  “The securities evidenced by this certificate are subject to the transfer restrictions, forfeiture restrictions and other provisions of the Restricted Stock Agreement dated                      between Hospira and                   .”  As the Restriction Period lapses, the Participant shall be entitled to have the legend removed from the certificate representing the Covered Shares.

 

5.                                       Restricted Period.

 

(a)                                  The Restriction Period shall lapse as to one-third of the Covered Shares on the first anniversary of the Grant Date, one-half of the remaining Covered Shares on the second anniversary of the Grant Date, and the remaining Covered Shares on the third anniversary of the Grant Date.

 

(b)                                 The date of a Change in Control that occurs on or before the Date of Termination; or

 

(c)                                  The Date of Termination which occurs due to any of the following:  the Participant’s death or Disability, the Participant’s resignation with Good Reason or the involuntary termination of the Participant without Cause.

 

6.                                       Forfeiture of Shares.  If the Date of Termination (as defined below) occurs during the Restricted Period, the Participant will forfeit any and all rights with respect to such unvested Covered Shares and the Company shall have the right to cancel any such certificates evidencing such Covered Shares.

 

7.                                       Restriction on Sale.  All Covered Shares shall be subject to the following restrictions on sale beginning on the Grant Date and continuing for all periods during the Forfeiture Period (the “Restricted Period”):

 

(a)                                  The shares may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of.

 

(b)                                 Any additional common shares of the Company issued with respect to the Covered Shares as a result of any stock dividend, stock split or reorganization, shall be subject to the restrictions and other provisions of this Agreement.

 

(c)                                  The Participant shall not be entitled to receive any shares prior to completion of all actions deemed appropriate by the Company to comply with federal or state securities laws and stock exchange requirements.

 

8.                                       Definitions.  For purposes of this Agreement, the terms used in this Agreement shall be subject to the following:

 

(a)                                  Cause.  The term “Cause” means the willful engaging by the Participant in illegal conduct or gross misconduct which is demonstrably and materially 

 

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injurious to the Company.  For purposes of this Agreement, no act, or failure to act, on the Participant’s part shall be deemed “willful” unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that the Participant’s action or omission was in the best interest of the Company.  Notwithstanding the foregoing, the Participant shall not be deemed to have been terminated for Cause unless and until the Company delivers to the Participant 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 Participant and an opportunity for the Participant, together with counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Participant was guilty of conduct set forth above and specifying the particulars thereof in detail.

 

(b)                                 Date of Termination.  The term “Date of Termination” means the first day occurring on or after the Grant Date on which the Participant is not employed by the Company or any of its subsidiaries, regardless of the reason for the termination of employment.

 

(c)                                  Disability.  The term “Disability” means the Participant’s disability as defined in the Hospira Long Term Disability Plan, whether or not such Participant is a participant in such disability plan, for a period of twelve (12) consecutive months.

 

(d)                                 Good Reason.  The term “Good Reason” means any of the following events, absent the Participant’s consent: a reduction of the Participant’s base salary; a material diminution in the Participant’s authorities, duties, or responsibilities; or a material breach by the Company of any agreement between the Company and the Participant.  For each event described above, the Participant must furnish notice to the Board within thirty (30) days of the occurrence of the event, the Company shall have thirty (30) days after receiving such notice in which to cure, and if the failure is not cured by the end of the cure period the Participant must terminate employment within fifteen (15) days after the expiration of the cure period.

 

9.                                       Heirs and Successors.  This Agreement shall be binding upon, and inure to the benefit of, the Company and its successors and assigns, and upon any person acquiring, whether by merger, consolidation, purchase of assets or otherwise, all or substantially all of the Company’s assets and business.  If any rights of the Participant or benefits distributable to the Participant under this Agreement have not been exercised or distributed, respectively, at the time of the Participant’s death, such rights shall be exercisable by the Designated Beneficiary, and such benefits shall be distributed to the Designated Beneficiary, in accordance with the provisions of this Agreement and the Plan.  The “Designated Beneficiary” shall be the beneficiary or beneficiaries designated by the Participant in a writing filed with the Committee in such form and at such time as the Committee shall require.  If a deceased Participant fails to 

 

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designate a beneficiary, or if the Designated Beneficiary does not survive the Participant, any rights that would have been exercisable by the Participant and any benefits distributable to the Participant shall be exercised by or distributed to the legal representative of the estate of the Participant.  If a deceased Participant designates a beneficiary and the Designated Beneficiary survives the Participant but dies before the Designated Beneficiary’s exercise of all rights under this Agreement or before the complete distribution of benefits to the Designated Beneficiary under this Agreement, then any rights that would have been exercisable by the Designated Beneficiary shall be exercised by the legal representative of the estate of the Designated Beneficiary, and any benefits distributable to the Designated Beneficiary shall be distributed to the legal representative of the estate of the Designated Beneficiary.

 

10.                                 Administration.  The authority to manage and control the operation and administration of this Agreement shall be vested in the Committee, and the Committee shall have all powers with respect to this Agreement as it has with respect to the Plan.  Any interpretation of the Agreement by the Committee and any decision made by it with respect to the Agreement is final and binding.

 

11.                                 Plan Governs.  Notwithstanding anything in this Agreement to the contrary, the terms of this Agreement shall be subject to the terms of the Plan, a copy of which may be obtained by the Participant from the office of the Secretary of the Company.

 

12.                                 Amendment.  This Agreement may be amended in accordance with the provisions of the Plan, and may otherwise be amended by written agreement of the Participant and the Company without the consent of any other person.  Notwithstanding the foregoing, the terms of the Agreement may be amended by Hospira 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.

 

* * * * * * *

 

IN WITNESS WHEREOF, the Participant has executed this Agreement, and the Company has caused these presents to be executed in its name and on its behalf, all as of the Grant Date.

 

	
 
    	
Participant
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Hospira, Inc.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Its:   
    	
Chairman   and Chief Executive Officer
    
	
 
    

 

4

 

Enclosure (3)c.

 

	
 
    	
 
    	
Hospira, Inc.
    
	
Notice   of Grant of 
    	
 
    	
ID:   20-0504497
    
	
Award   and Award Agreement
    	
 
    	
275   N. Field Drive
    
	
 
    	
 
    	
Lake   Forest, IL 60045
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Award   Number:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Plan: Hospira 2004   Long-Term Stock Incentive Plan
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
ID:
    

 

Effective                         , 2011, you have been granted Restricted Stock Units with respect to                shares of Hospira, Inc. (the Company) stock.

 

The Restricted Stock Units are subject to the attainment of performance goals described in the attached Term Sheet and will become fully vested on the date shown.

 

	
Units
    	
 
    	
Vest Type
    	
 
    	
Full Vest
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
On Vest Date
    	
 
    	
December 31, 2013
    

 

By your signature and the Company’s signature below, you and the Company agree that these Restricted Stock Units are granted under and governed by the terms and conditions of the Hospira 2004 Long-Term Stock Incentive Plan, the Restricted Stock Unit Award Agreement and the administrative rules governing the Restricted Stock Agreement, all of which are attached and made a part of this document.

 

 

	
 
    	
 
    	
                                 , 2011
    
	
 
    	
 
    	
 
    
	
Hospira, Inc.
   Name: Christopher B. Begley
   Title: Chairman & Chief Executive Officer
    	
 
    	
Date
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Employee   Name
    	
 
    	
Date
    

 

 

RESTRICTED STOCK UNIT AWARD AGREEMENT

 

You have been selected to be a Participant in the Hospira, Inc. 2004 Long-Term Stock Incentive Plan (the “Plan”), as specified in the attached Notice of Grant of Award and Award Agreement (the “Notice”):

 

THIS AGREEMENT (“Agreement”), effective as of the date set forth in the attached Notice, is between Hospira, Inc., a Delaware corporation (the “Company”) and the Grantee named in the Notice, pursuant to the provisions of the Plan.  Except where the context clearly implies to the contrary, any capitalized term not defined in this Agreement shall have the meaning ascribed to that term under the Plan.

 

The parties hereto agree as follows:

 

1.                                       Award of Restricted Stock Units.  The Company hereby grants to Grantee the number of restricted stock units (the “Units”) set forth in the attached Notice subject to the terms and conditions set forth below and in the attached Term Sheet.  The term “Units” shall include “Earned Units” as defined in Section 2(a) below.

 

2.                                       Restrictions.  The Units are being awarded to Grantee subject to the forfeiture conditions set forth below (the “Restrictions”) which shall, unless otherwise stated, lapse, if at all, as set forth in the attached Term Sheet.

 

(a)                                  The Units are subject to the attainment of performance goals during the performance period, as described in the attached Term Sheet.  The number of Units earned upon the attainment of the performance goals (the “Earned Units”) shall be determined by the Compensation Committee of the Board of Directors (the “Committee”) upon completion of the performance period.

 

(b)                                 Any Units subject to the Restrictions shall be automatically forfeited upon the earliest to occur of the following:  (i) except as provided in Section 7, the date of the Grantee’s termination of employment with the Company or a subsidiary for any reason other than death, Disability or Retirement; (ii) subject to the provisions of Section 3, the date the Grantee engages in conduct which constitutes Restricted Activity; or (iii) as provided in Section 4.

 

3.                                       Restricted Activity.

 

(a)                                  Without the prior written consent of the Committee, the Grantee shall not, while employed by the Company and for a period of one year following the termination of employment for any reason:

 

(i)                                     directly or indirectly engage or assist any person engaging in any Competitive Business, individually, or as an officer, director, employee, agent, consultant, owner, partner, lender, manager, member, principal, or in any other capacity, or render any services to any entity that is engaged in any Competitive Business; provided, however, that the Grantee’s ownership of 1% of any class of

 

 

equity security of any entity engaged in any Competitive Business shall not be deemed a breach of this paragraph 3(a) provided such securities are listed on a national securities exchange or quotation system or have been registered under Section 12(g) of the Securities Exchange Act of 1934, as amended;

 

(ii)                                  directly or indirectly divert, take away, solicit, or assist others in soliciting any current or prospective customer, supplier, independent contractor or service provider of the Company or any affiliate or otherwise interfere with the relationship between the Company or any affiliate and any current or prospective customer, service provider, supplier, independent contractor or stockholder;

 

(iii)                               directly or indirectly induce any person to leave employment with the Company, or solicit for employment other than on behalf of the Company, offer employment to, or employ, any person who was an employee of the Company, in each case within six months of such inducement, solicitation, or offer; or

 

(iv)                              engage in conduct which constitutes Cause.

 

(b)                                 If the Grantee engages in any activity described in paragraph 3(a) above without the written consent of the Committee, the Company, as determined by the Committee in its sole discretion, may terminate the Agreement as of the date on which the Grantee engaged in such Restricted Activity, and (i) the Grantee shall pay to the Company in cash any Financial Gain the Grantee realized from the vesting of the Units, provided that such vesting occurred within one year from the date that the Grantee engaged in such Restricted Activity, and (ii) if the Restricted Activity occurs prior to the delivery of the Earned Units, the Grantee shall forfeit the Units and this Agreement shall terminate as of the date on which the Grantee first engaged in such Restricted Activity.

 

4.                                       Other Right to Correct Payments.  Subject to the Company’s Executive Compensation Recover Policy, and notwithstanding anything in the Agreement to the contrary, if the Committee determines, in its sole discretion, that the number of Units determined to be delivered under the Agreement or the value of such Units was based on the Company’s published financial statements that have been restated then, at the Committee’s discretion, the Company may, but in no case later than 60 months of such restatement:

 

(a)                                  cancel all Units (whether vested or unvested) that were based upon the financial performance in the published financial statements that was subsequently restated;

 

(b)                                 rescind any delivery of Units that were based upon the financial performance in the published financial statements that was subsequently restated; and

 

(c)                                  if any amount has been realized from the vesting of the Units that would have been lower had the financial results been properly reported, recover all or any Financial Gain realized by the Grantee, as determined by the Committee in its sole discretion, that resulted from the financial results that were subsequently restated, and the Grantee agrees to repay and return any such Financial Gain to the Company.

 

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The Committee may, in its sole discretion, effect any such recovery by obtaining repayment directly from the Grantee, setting off the amount owed to the Company against any amount or award that would otherwise be granted by the Company to the Grantee, reducing any future compensation or benefit to the Grantee or any combination thereof.

 

5.                                       Death, Disability or Retirement.  In the event of the death, Disability or Retirement of the Grantee at any time during the performance period, the a number of shares of Common Stock equal to the number of Earned Units (or cash equal to the value of the shares) will be delivered to the Grantee or the Grantee’s personal representative, upon the determination of the number of Earned Units after the end of the performance period, but no later than 90 days following the end of such performance period.

 

6.                                       Change in Control.  In the event of a Change in Control of the Company during the performance period, the Grantee will be deemed to have earned an award based on the target performance goal established by the Committee and a number of shares of Common Stock equal to the number of deemed Earned Units (or cash equal to the value of the shares) will be delivered to the Grantee no later than 90 days following such Change in Control.

 

7.                                       Termination of Employment.  In the event of the Grantee’s Involuntary Termination of Employment or resignation with Good Reason during the performance period, the Grantee will be deemed to have earned an award based on the target performance goal established by the Committee and a number of shares of Common Stock equal to the number of deemed Earned Units (or cash equal to the value of the shares) will be delivered to the Grantee no later than 90 days following such termination of employment.  If Grantee’s termination of employment during the performance period is for any reason other than death, Disability, Retirement, Involuntary Termination of Employment or resignation with Good Reason, all Units shall be forfeited.  The Company will not be obligated to pay Grantee any consideration whatsoever for forfeited Units (whether or not earned).

 

8.                                       Dividend Equivalents.  Neither dividends nor Dividend Equivalents will be paid or accrued on unvested Units.

 

9.                                       Adjustments.  If the number of outstanding shares of Common Stock is changed as a result of stock dividend, stock split or the like without additional consideration to the Company, the number of Units subject to this Award shall be adjusted in accordance with the applicable provisions of the Plan pertaining to such adjustments.

 

10.                                 Delivery of Certificate.  Subject to withholding of taxes as provided in Section 11 below, the Company shall deliver to the Grantee a certificate representing a number of shares of Common Stock equal to the number of Earned Units on which Restrictions have lapsed plus a cash payment equal to the value of any fractional Earned Unit then credited to the Grantee’s account, upon the lapse of Restrictions, or at a later date specified by the Grantee in a Notice of Deferral Election filed with the Committee within rules established to comply with section 409A of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (“Section 409A”) and in conformance with such deferral option forms under the Notice of Deferral Election provided by the Company.

 

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11.                                 Withholding Taxes.  The Company is entitled to withhold an amount equal to the Company’s required statutory withholding taxes for the respective tax jurisdiction attributable to any share of Common Stock or property deliverable in connection with the Earned Units.  Subject to such limitations as the Company may establish from time to time, Grantee may satisfy any withholding obligation in whole or in part by making a cash payment equal to the amount required to be withheld.

 

12.                                 Nontransferability.  Grantee may not directly or indirectly, by operation of law or otherwise, voluntarily or involuntarily, sell, assign, pledge, encumber, charge or otherwise transfer any of the Units subject to this Award.

 

13.                                 Voting and Other Rights.

 

(a)                                  Grantee shall have no rights as a stockholder of the Company in respect of the Earned Units, including the right to vote and to receive dividends and other distributions, until delivery of certificates representing shares of Common Stock in satisfaction of the Earned Units.

 

(b)                                 The grant of Units does not confer upon Grantee any right to continue in the employ of the Company or a subsidiary or to limit or interfere with the right of the Company or a subsidiary, to terminate Grantee’s employment at any time.

 

(c)                                  The grant of an award under the Plan is a one-time benefit and does not create any contractual or other right to receive an award in the future.  Future grants, if any, will be at the sole discretion of the Company, including, but not limited to, the timing of any grant, the amount of the award and vesting provisions.

 

(d)                                 The Committee retains the right to reduce the number of Units subject to this Award at any time prior to payment or delivery based on the performance of the Grantee.

 

14.                                 Funding.  No assets or shares of Common Stock shall be segregated or earmarked by the Company in respect of any Units awarded hereunder.  The grant of Units hereunder shall not constitute a trust and shall be solely for the purpose of recording an unsecured contractual obligation of the Company.

 

15.                                 Definitions.  For purposes of this Agreement, the following words shall have the meaning provided below:

 

(a)                                  Cause.  The term “Cause” means the willful engaging by the Participant 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 Participant’s part shall be deemed “willful” unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that the Participant’s action or omission was in the best interest of the Company.  Notwithstanding the foregoing, the

 

4

 

Participant shall not be deemed to have been terminated for Cause unless and until the Company delivers to the Participant 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 Participant and an opportunity for the Participant, together with counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Participant was guilty of conduct set forth above and specifying the particulars thereof in detail.

 

(b)                                 Competitive Business.  The term “Competitive Business” means any business activity in which the Company or any subsidiary is actively engaged at the time the Grantee’s employment terminates.  For these purposes, entities deemed to be engaged in Competitive Business include, by way of example and not limitation, Abraxis BioScience, Inc., Baxter International Inc., Teva Pharmaceuticals, Becton, Dickinson and Company, B. Braun Melsungen AG, Cardinal Healthcare Inc., Fresenius Medical Care AG, Terumo Medical Corporation, Patheon, Inc., and Edwards Lifesciences Corporation.

 

(c)                                  Date of Termination.  The term “Date of Termination” means the first day occurring on or after grant of the award under this Agreement on which the Grantee is not employed by the Company or any subsidiary, regardless of the reason for the termination of employment; provided that a termination of employment shall not be deemed to occur by reason of a transfer of the Grantee between the Company and a subsidiary or between two subsidiaries; and further provided that the Grantee’s employment shall not be considered terminated while the Grantee is on a leave of absence from the Company or a subsidiary approved by the Grantee’s employer.  If, as a result of a sale or other transaction, the Grantee’s employer ceases to be a subsidiary (and the Grantee’s employer is or becomes an entity that is separate from the Company), and the Grantee is not, at the end of the 30-day period following the transaction, employed by the Company or an entity that is then a subsidiary, then  the occurrence of such transaction shall be treated as the Grantee’s Date of Termination caused by the Grantee being discharged by the employer.

 

(d)                                 Disability.  The term “Disability” means the Grantee either is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, the Grantee is receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company or a subsidiary.

 

5

 

(e)                                  Dividend Equivalent.  “Dividend Equivalent” means, with respect to any shares of Hospira common stock that are to be issued pursuant to an award at the end of the performance period, an amount equal to cash dividends that are payable to stockholders of record during the performance period on a like number of shares of Hospira common stock.

 

(f)                                    Financial Gain.  “Financial Gain” means the Fair Market Value of the Common Stock on the date the Unit is deemed vested, multiplied by the number of Units actually distributed pursuant to this Agreement, reduced by any taxes paid in countries other than the United States, to the extent that such taxes are not otherwise eligible for refund from the taxing authorities.

 

(g)                                 Good Reason.  “Good Reason” means any of the following events, absent the Participant’s consent: a reduction of the Participant’s base salary; a material diminution in the Participant’s authorities, duties, or responsibilities; or a material breach by the Company of any agreement between the Company and the Participant.  For each event described above, the Participant must furnish notice to the Board within thirty (30) days of the occurrence of the event, the Company shall have thirty (30) days after receiving such notice in which to cure, and if the failure is not cured by the end of the cure period the Participant must terminate employment within fifteen (15) days after the expiration of the cure period.

 

(h)                                 Involuntary Termination of Employment.  “Involuntary Termination of Employment” means the Grantee’s involuntary termination by the Company without Cause.

 

(i)                                     Retirement.  “Retirement” of the Grantee means, the occurrence of the Grantee’s Date of Termination on or after the date that the Grantee reaches the age of 55 and has 10 years of combined service with the Company or its subsidiaries (or with Abbott Laboratories and its affiliates, provided that the Grantee transitioned employment from Abbott to the Company in conjunction with the distribution of the Company’s common stock to the Abbott shareholders) (as determined by the Committee).

 

16.                                 Notices.  Any written notice under this Award shall be deemed given on the date that is two business days after it is sent in writing, delivered either in hand, by certified mail, return receipt requested, postage prepaid, or by Federal Express or other recognized delivery service, which provides proof of delivery, all delivery charges prepaid, and addressed as follows:

 

	
To   the Company:
    	
 
    	
Hospira, Inc.
   275 N. Field Drive
   Lake Forest, IL 60045
   Attention:  Corporate Secretary
    

 

6

 

To the Grantee or his or her representative at the address of the Grantee at the time appearing in the employment records of the Company, currently as shown in the attached Notice or

 

At such other address as either party may designate by notice given to the other in accordance with these provisions.

 

17.                                 Governing Law.  All questions concerning the construction, validity and interpretation of this Award shall be governed by and construed according to the internal law and not the law of conflicts of the State of Illinois.

 

18.                                 Amendment.  This Agreement may be amended in accordance with the provisions of the Plan, and may otherwise be amended by written agreement of the Grantee and the Company without the consent of any other person; provided that the Committee may amend by the Company as it shall deem necessary and appropriate in its sole discretion to comply with the requirements of Section 409A.

 

19.                                 Plan Documents.  The Plan and the Prospectus for the Hospira, Inc. 2004 Long Term Incentive Plan are available at:

 

http://www.UBS.com/

 

or from:

 

 

Ms. Pam Hannon

 

Corporate Compensation, Hospira, Inc.

 

Mail Stop H1 South, 275 N. Field Drive, Lake Forest, IL  60045

 

phone:  224-212-2661 fax:  224-212-3358; e-mail:  pam.hannon@Hospira.com

 

	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
GRANTEE’S   INITIALS
    	
 
    	
INITIALS   OF HOSPIRA, INC.’S
   General Counsel and Secretary
    

 

7

 

2011 — 2013 Total Shareholder Return (TSR) TERM SHEET

 

	
PERFORMANCE   PERIOD:
    	
 
    	
Beginning   January 1, 2011, and ending December 31, 2013.
    
	
 
    	
 
    	
 
    
	
PERFORMANCE
   GOAL:
    	
 
    	
·                                          Relative   Total Shareholder Return (“RTSR”) compared to peer companies (identified in   Appendix I) is the FY11-13 performance measure. Relative Total Shareholder   Return is defined as the percentile rank of Hospira’s Total Shareholder   Return compared to the Total Shareholder Return of Hospira’s peer companies   over the Performance Period. Total Shareholder Return is the total rate of   return on a share of common stock, reflecting stock price appreciation plus   reinvestment of dividends and the compounding effect of dividends, adjusted   appropriately to reflect stock splits, spin-offs and similar transactions.
    

 

The Base Price of Hospira’s common stock, and each peer company’s common stock, is the average of the closing prices for the last 30 trading days before the start of Performance Period.  The average closing price for the last 30 trading days of FY10 preceding the FY11-13 Performance Period is $56.44 and serves as the base for relative comparisons over the Performance Period.

 

The payment levels at various percentile rankings against the peer companies are shown in the following table:

 

	
HOSPIRA
   % Percentile Rank
    	
 
    	
% of Units
   Earned
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
75th
    	
 
    	
200
    	
%
    
	
70th
    	
 
    	
180
    	
%
    
	
65th
    	
 
    	
160
    	
%
    
	
60th
    	
 
    	
140
    	
%
    
	
55th
    	
 
    	
120
    	
%
    
	
50th
    	
 
    	
100
    	
%
    
	
45th
    	
 
    	
85
    	
%
    
	
40th
    	
 
    	
70
    	
%
    
	
35th
    	
 
    	
55
    	
%
    
	
30th
    	
 
    	
40
    	
%
    
	
25th
    	
 
    	
25
    	
%
    
	
<25th
    	
 
    	
0
    	
%
    
	
·  With linear   interpolation between percentiles 
    
	
·  Percentile   rank includes HOSPIRA 
    

 

 

 

	
VESTING:
    	
 
    	
Subject   to the terms of the Restricted Stock Unit Award Agreement, restrictions on   the restricted stock units earned during the performance period, as   determined above, will lapse on December 31, 2013, if the Grantee is a   full-time active employee of the Company on that date.

 

Final   determination and distribution of the number of restricted stock units earned   will be made after the actual TSR growth during the performance period has   been certified by Hospira, Inc.’s independent auditor and the Audit   Committee of the Company’s Board of Directors.
    

 

 

Appendix I

 

Peer Companies for Relative TSR Comparison

 

	
Ticker
    	
 
    	
Company Name
    	
 
    	
Sector
    
	
ABT
    	
 
    	
Abbott Labs
    	
 
    	
Health Care
    
	
A
    	
 
    	
Agilent Technologies Inc.
    	
 
    	
Health Care
    
	
AGN
    	
 
    	
Allergan Inc.
    	
 
    	
Health Care
    
	
ABC
    	
 
    	
AmerisourceBergen Corp.
    	
 
    	
Health Care
    
	
AMGN
    	
 
    	
Amgen
    	
 
    	
Health Care
    
	
BAX
    	
 
    	
Baxter International Inc.
    	
 
    	
Health Care
    
	
BDX
    	
 
    	
Becton Dickinson
    	
 
    	
Health Care
    
	
BIIB
    	
 
    	
BIOGEN IDEC Inc.
    	
 
    	
Health Care
    
	
BSX
    	
 
    	
Boston Scientific
    	
 
    	
Health Care
    
	
BMY
    	
 
    	
Bristol-Myers Squibb
    	
 
    	
Health Care
    
	
CAH
    	
 
    	
Cardinal Health Inc.
    	
 
    	
Health Care
    
	
CFN
    	
 
    	
CareFusion Corp.
    	
 
    	
Health Care
    
	
CELG
    	
 
    	
Celgene Corp.
    	
 
    	
Health Care
    
	
CEPH
    	
 
    	
Cephalon Inc
    	
 
    	
Health Care
    
	
CERN
    	
 
    	
Cerner Corp
    	
 
    	
Health Care
    
	
BCR
    	
 
    	
CR Bard Inc.
    	
 
    	
Health Care
    
	
DVA
    	
 
    	
DaVita Inc.
    	
 
    	
Health Care
    
	
XRAY
    	
 
    	
Dentsply International
    	
 
    	
Health Care
    
	
ESRX
    	
 
    	
Express Scripts
    	
 
    	
Health Care
    
	
FRX
    	
 
    	
Forest Laboratories
    	
 
    	
Health Care
    
	
GENZ
    	
 
    	
Genzyme Corp.
    	
 
    	
Health Care
    
	
GILD
    	
 
    	
Gilead Sciences
    	
 
    	
Health Care
    
	
HSP
    	
 
    	
Hospira Inc.
    	
 
    	
Health Care
    
	
ISRG
    	
 
    	
Intuitive Surgical Inc.
    	
 
    	
Health Care
    
	
JNJ
    	
 
    	
Johnson & Johnson
    	
 
    	
Health Care
    
	
LH
    	
 
    	
Laboratory Corp. of America Holding
    	
 
    	
Health Care
    
	
LIFE
    	
 
    	
Life Technologies Corp.
    	
 
    	
Health Care
    
	
LLY
    	
 
    	
Lilly (Eli) & Co.
    	
 
    	
Health Care
    
	
MCK
    	
 
    	
McKesson Corp. (New)
    	
 
    	
Health Care
    
	
MHS
    	
 
    	
Medco Health Solutions Inc.
    	
 
    	
Health Care
    
	
MDT
    	
 
    	
Medtronic Inc.
    	
 
    	
Health Care
    
	
MRK
    	
 
    	
Merck & Co.
    	
 
    	
Health Care
    
	
MYL
    	
 
    	
Mylan Inc.
    	
 
    	
Health Care
    
	
PDCO
    	
 
    	
Patterson Cos. Inc.
    	
 
    	
Health Care
    
	
PKI
    	
 
    	
PerkinElmer
    	
 
    	
Health Care
    
	
PFE
    	
 
    	
Pfizer Inc.
    	
 
    	
Health Care
    
	
DGX
    	
 
    	
Quest Diagnostics
    	
 
    	
Health Care
    
	
STJ
    	
 
    	
St Jude Medical
    	
 
    	
Health Care
    
	
SYK
    	
 
    	
Stryker Corp.
    	
 
    	
Health Care
    
	
THC
    	
 
    	
Tenet Healthcare Corp.
    	
 
    	
Health Care
    
	
TMO
    	
 
    	
Thermo Fisher Scientific
    	
 
    	
Health Care
    
	
VAR
    	
 
    	
Varian Medical Systems
    	
 
    	
Health Care
    
	
WAT
    	
 
    	
Waters Corporation
    	
 
    	
Health Care
    
	
WPI
    	
 
    	
Watson Pharmaceuticals
    	
 
    	
Health Care
    
	
ZMH
    	
 
    	
Zimmer Holdings
    	
 
    	
Health Care
    

 

 

Enclosure (3)d

 

 

LONG-TERM INCENTIVE PLAN
 PERFORMANCE SHARE UNIT PROGRAM

FISCAL YEARS 2011-2013

 

 

PROGRAM DESCRIPTION

 

 

 

This document contains confidential information intended for use only within Hospira, Inc.

The reproduction or distribution of this document, either electronically or in hard copy, without the prior approval of the Hospira, Inc. Corporate Compensation department is prohibited.

 

 

Highlights

 

This booklet outlines the terms of the Hospira Performance Share Unit program (“Program”) for fiscal years 2011-2013 (the “Performance Cycle”) and provides detailed information relating to the grant of Performance Share Units (“PSUs”). Awards granted under the Program are made from shares of Hospira common stock authorized under the Hospira 2004 Long-Term Stock Incentive Plan (the “Plan”).

 

The key features of this Program are summarized below. In some countries other than the United States, variations in Program design may occur in order to comply with local laws and tax regulations.

 

Purpose

 

Hospira has created the Program in order to:

 

·                  Focus executive management’s attention on the long-term performance results of Hospira as measured by total shareholder return (“TSR”)

 

·                  Provide incentive compensation opportunities based upon the achievement of specific TSR results

 

·                  Provide, in combination with stock options, a competitive long-term compensation opportunity to Participants and assist in attracting and retaining highly qualified and motivated executive talent

 

Participation

 

Participation in the Program is limited to individuals elected as corporate officers and other senior officers designated for participation by the Chairman and Chief Executive Officer (CEO) of Hospira, Inc.

 

 

Performance Share Units (PSU)

 

Performance Share Unit awards are initially granted in the form of a target number of PSUs at the beginning of the Performance Cycle. At the end of the Performance Cycle, the number of PSUs earned will be converted to shares of Hospira common stock. Based upon the actual performance results, the award can range between 0% and 200% of the target PSUs granted.

 

PSUs have special restrictions that are based upon both the continued service of Program Participants and Hospira’s performance against the established financial performance goal. These restrictions include a prohibition against the transfer of the PSUs during the Performance Cycle to another individual or entity. Any shares not awarded at the end of the Performance Cycle are forfeited.

 

Hospira may substitute or offer alternative forms of incentive compensation if it determines that tax or legal regulations in a country provide more favorable treatment for those alternative forms of incentive compensation or as a voluntary alternative to PSUs, subject to any applicable requirements of Section 409A of the Internal Revenue Code.

 

·                  PSUs under this Program are granted only during 2011, the first fiscal year of the Performance Cycle. At the end of the Performance Cycle, 2013, the target PSUs are converted to shares of Hospira common stock and issued to Program Participants in stock based upon the actual performance results; however, fractional shares are paid in cash.

·                  The number of shares earned is dependent upon the extent to which the pre-established performance goal is achieved during the Performance Cycle. Participants may earn between 0% - 200% of the target PSUs originally granted based upon the performance results.

·                  Participants do not have voting rights on PSUs during the Performance Cycle.

 

Performance Measure

 

Performance under the 2011-2013 Program is measured as follows:

 

·                  Relative Total Shareholder Return (“RTSR”) compared to peer companies (identified in Appendix I). Relative Total Shareholder Return is defined as the percentile rank of Hospira’s Total Shareholder Return compared to the Total Shareholder Return of Hospira’s peer companies over the Performance Cycle. Total Shareholder Return is the rate of return on a share of common stock, reflecting stock price appreciation plus reinvestment of dividends and the compounding effect of dividends, adjusted appropriately to reflect stock splits, spin-offs and similar transactions.

 

The Performance Cycle begins January 1, 2011 and ends December 31, 2013, and is aligned with Hospira’s fiscal years 2011 through 2013.

 

The Base Price of Hospira’s common stock, and each peer company’s common stock, is the average of the closing prices for the last 30 trading days before the start of the Performance Cycle. The average closing price of Hospira stock for the last 30 trading days of FY10 preceding the Performance Cycle is $56.44 and serves as the base for relative comparisons over the Performance Cycle.

 

2

 

The payment levels at various percentile rankings against the peer companies are shown in the following table:

 

	
HOSPIRA
    	
 
    	
% of PSUs
    	
 
    
	
%Percentile Rank
    	
 
    	
Earned
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
75th
    	
 
    	
200
    	
%
    
	
70th
    	
 
    	
180
    	
%
    
	
65th
    	
 
    	
160
    	
%
    
	
60th
    	
 
    	
140
    	
%
    
	
55th
    	
 
    	
120
    	
%
    
	
50th
    	
 
    	
100
    	
%
    
	
45th
    	
 
    	
85
    	
%
    
	
40th
    	
 
    	
70
    	
%
    
	
35th
    	
 
    	
55
    	
%
    
	
30th
    	
 
    	
40
    	
%
    
	
25th
    	
 
    	
25
    	
%
    
	
<25th
    	
 
    	
0
    	
%
    
	
 
    	
 
    	
 
    	
 
    
	
·      With linear interpolation between percentiles
    
	
·      Percentile rank includes HOSPIRA
    

 

Form and Time of Payment

 

Vested awards are paid in shares of Hospira common stock. Any required tax withholding will be taken from the Hospira shares that have been earned.

 

Except upon a change in control or as a Participant specifies in a Notice of Deferral Election containing specified forms of deferrals filed within limits and rules established to comply with section 409A of the Internal Revenue Code, all payments will be made no later than 90 days after the end of the Performance Cycle.

 

Dividend Equivalents or Dividends

 

No dividend or Dividend Equivalents will be paid or accrued on behalf of the Participants during the period when the PSUs have not vested.

 

Award Grant Notice and Agreement

 

Each Participant will receive a PSU Grant Notice and Agreement (“Grant Notice”) specifying the target grant PSUs and the terms and conditions applicable to the grant. The Grant Notice and Agreement and this Program Description should be retained with the Participant’s other important documents.

 

3

 

Tax Consequences

 

United States

 

Under current United States tax laws, a Participant does not realize any taxable income from the PSUs when they are initially granted. The taxable event occurs on the Transfer Date, except to the extent that a Participant that is subject to the U.S. federal income tax has elected to defer distribution of the shares until a later date (“Deferred Payment Date”). The market value of Hospira common stock on the Transfer Date or the Deferred Payment Date, as the case may be, will determine the amount of taxable income. When the number of shares actually earned has been determined, the market value of the shares on the Transfer Date or the Deferred Payment Date is considered income to the Participant. This amount is then subject to applicable federal, state and local withholding. Amounts necessary to settle the tax-withholding obligation will be withheld from the shares that would otherwise have been distributed to the Participant. Federal tax will be withheld at the required statutory supplemental federal tax rate in effect at the time of the distribution.

 

Under U.S. tax law, Participants will not be taxed until the end of the Performance Cycle.

 

Countries other than the United States

 

Tax laws vary among countries, so Participants are advised to seek counsel concerning the tax consequences of this grant in their respective countries of taxation. In most cases, Participants incur no taxable income from PSUs when initially awarded until the Transfer Date. When the shares are earned, the market value of the shares on the Transfer Date is typically considered income. For individuals residing outside the U.S. and not subject to U.S. tax laws, taxes may still be required to be withheld by Hospira in the U.S. Each Participant is responsible for compliance with the relevant legal and tax regulations in his or her tax jurisdiction.

 

Impact on Other Benefits

 

Any shares earned under this Program are not considered compensation for purposes of any retirement plan, severance arrangement or other benefit plans in which a Participant currently participates or may become eligible to participate in at a later date.

 

Forfeiture and Correction

 

Notwithstanding anything contained in this document to the contrary, if the Participant engages in any activity that constitutes restricted activity, including but not limited to: (1) competing, directly or indirectly (either as owner, employee or agent), with any of the businesses of the Company, (2) violating the Company code of business conduct, (3) committing an act of fraud, embezzlement or theft in the course of the Participant’s duties or in the course of employment, (4) soliciting any present or future employees or customers of the Company to terminate such employment or business relationship(s) with the Company, (5) disclosing or misusing any confidential information regarding the Company, (such activities to be collectively referred to as “wrongful conduct”), then the

 

4

 

committee may at its sole discretion terminate this Award, to the extent it remains restricted, on the date on which the Participant engaged in such restricted activity, and (i) if the restricted activity occurred within one year of a PSU Vesting Date, the Participant shall pay to the Company in cash any financial gain the Participant realized from the vesting of the PSU, and (iii) if the misconduct occurs prior to the Deferred Payment Date, if applicable, the Participant shall forfeit the deferred PSU and this Award shall terminate automatically on the date on which the Participant first engaged in such wrongful conduct.

 

In addition, if the Participant is an officer required to file reports under Section 16(a) of the Securities Exchange Act of 1934 or is elected a corporate officer by Hospira’s Board of Directors (not including assistant officers), the Participant is subject to the Company’s Executive Compensation Recovery Policy (“Policy”). Subject to the terms of the Policy, and notwithstanding anything contained in this document to the contrary, if the number of PSUs to be delivered or the value of such PSUs was based on the Company’s published financial statements that have been restated, then the Committee may within 60 months of such restatement: (1) cancel all PSUs (whether vested or unvested) that were based upon the financial performance in the published financial statements that was subsequently restated; (2) rescind any delivery of PSUs that were based upon the financial performance in the published financial statements that was subsequently restated; and (3) if any amount has been realized from the vesting of the PSUs that would have been lower had the financial results been properly reported, recover all or any financial gain realized by the Participant that resulted from the financial results that were subsequently restated.

 

For purposes of this section, financial gain shall equal, the fair market value of Hospira common stock on the Vesting Date, multiplied by the number of PSUs actually distributed pursuant to this Award, reduced by any taxes paid in countries other than the United States (which taxes are not otherwise eligible for refund from the taxing authorities). By accepting a PSU grant, the Participant consents to and authorizes the Company to deduct from any amounts payable by the Company to the Participant, any amounts the Participant owes to the Company under this section. This right of set-off is in addition to any other remedies the Company may have against the Participant for breach of the terms and conditions of this Program.

 

Administrative Guidelines

 

The following guidelines apply to the Program. Additional Administrative Guidelines may be adopted, as needed, during the Performance Cycle.

 

·                  The Committee is responsible for administering the Program and has full power and authority to interpret the Program and to adopt rules, regulations and guidelines for carrying out the Program, as it deems necessary.

 

·                  The Committee functions as the administrator of the Program and its decisions are binding on all persons.

 

·                  The Committee reserves the right, in its absolute discretion, to reduce or eliminate the awards earned by any Participant and to make changes in the peer group and performance measurement methodology and any such changes shall be binding on all Participants.

 

·                  The Committee reserves the right to change any of the terms and conditions of the Program award to the Participants, including the definition of relative TSR, if deemed

 

5

 

necessary on advice of counsel to meet the requirements for a “performance-based exemption” under the regulations or rulings of §162(m) of the Internal Revenue Code. In addition, the Committee reserves the right to amend any of the terms and conditions of the Program award to Participants if deemed necessary in its sole discretion to comply with § 409A of the Internal Revenue Code.

 

·                  The Committee may, as it deems appropriate, delegate some or all of its power to the CEO or other executive officer of the Corporation. However, the Committee may not delegate its power to a Program Participant concerning the grant, timing, pricing or amount of such Program Participant’s award. The Incentive Award Committee of the Hospira Board of Directors shall have the authority to grant Performance Share Unit awards in accordance with the terms of this Program, except the Incentive Award Committee shall not make any such grants to any member of the Incentive Award Committee or officers required to file reports pursuant to Section 16(a) of the Securities Exchange Act of 1934 provided that no such individual award exceeds 200,000 performance shares.

 

·                  The Chief Financial Officer will be responsible for confirming the financial results under the Program. The Committee will approve the awards when granted during each fiscal year and approve distributions to be made at the end of the Performance Cycle for all Program Participants. The portion of the shares earned will be distributed as soon as practicable after the completion of the Performance Cycle and the Vesting Date.

 

·                  Awards may be made to new Participants during the first year of the Performance Cycle. The number of PSUs awarded may be adjusted to reflect that the individual is not a Participant for the entire Performance Cycle.

 

·                  Awards may be made to Participants who change positions during the first year of the Performance Cycle, if such a change would have resulted in the Participant’s qualifying for an increased level of award.

 

·                  In the event of a Participant’s death, Total Disability or if a Participant retires at age 55 or later and has at least 10 years of service with Hospira (or with Hospira and Abbott Laboratories if the Participant transitioned employment from Abbott to Hospira in conjunction with Hospira’s spin-off from Abbott Laboratories or with an acquired company if service for that company has been recognized under the Program, all PSUs granted would continue to vest and be eligible for distribution at the end of the Performance Cycle based upon proration for performance only, subject to approval of the Committee. If applicable, this will be distributed at the normal payout time.

 

·                  A Participant who voluntarily resigns or is terminated without severance benefits during the Performance Cycle forfeits the rights to all PSUs and RSUs. Participants who are involuntarily terminated and receive severance benefits are eligible for a prorated distribution, subject to Committee approval. In order to be considered for any prorated distribution under this Program provision, a Participant must be actively employed for at least one-third, i.e. 12 months, of the Performance Cycle. Only periods of active service will be recognized for purposes of computing any prorated distribution. This means that any period of time during which services may be provided to the company but the individual is not then a regular, full-time employee of the company (for example, if the Participant provides services under a consulting agreement), that time will be disregarded for purposes of calculating any prorated distribution.

 

6

 

·                  In the event of a sale, closing, spin-off or other disposition of the Participant’s business unit that results in the termination of the Participant’s employment with the Company, the Participant will be eligible for a distribution of shares after the performance period pro-rated only for performance, subject to approval of the Committee.

 

·                  Should a change in control (as defined in the Plan) occur during the Performance Cycle, the Participant will be deemed to have earned an award based on the target performance goal and a number of shares of Hospira common stock equal to the number of such units earned (or cash equal to the value of the shares) will be delivered to the Participant no later than 90 days following the change in control.

 

·                  If any statement in this Program Description or any oral representation differs from the Plan or the Grant and Notice Agreement, the Plan and the Grant and Notice Agreement will prevail. The Plan, Grant Notice and Agreement and Program Description collectively comprise all terms and conditions applicable to the Program.

 

·                  Any stock dividend, stock split, combination or exchange of securities, merger, consolidation, recapitalization, spin-off or other distribution of any or all of the assets of the Hospira will be handled as provided for in the Plan.

 

·                  Nothing in the Program shall confer on a Participant any right to continue in the employ of Hospira or in any way affect Hospira’s right to terminate the Participant’s employment in accordance with applicable laws.

 

7

 

APPENDIX I

 

FY 2011 - 2013

Peer Companies for Relative TSR Comparison

 

	
Ticker
    	
 
    	
Company Name
    	
 
    	
Sector
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ABT
    	
 
    	
Abbott Labs
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
A
    	
 
    	
Agilent Technologies Inc.
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
AGN
    	
 
    	
Allergan Inc.
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ABC
    	
 
    	
AmerisourceBergen Corp.
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
AMGN
    	
 
    	
Amgen
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
BAX
    	
 
    	
Baxter International Inc.
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
BDX
    	
 
    	
Becton Dickinson
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
BIIB
    	
 
    	
BIOGEN IDEC Inc.
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
BSX
    	
 
    	
Boston Scientific
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
BMY
    	
 
    	
Bristol-Myers Squibb
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
CAH
    	
 
    	
Cardinal Health Inc.
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
CFN
    	
 
    	
CareFusion Corp.
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
CELG
    	
 
    	
Celgene Corp.
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
CEPH
    	
 
    	
Cephalon Inc
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
CERN
    	
 
    	
Cerner Corp
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
BCR
    	
 
    	
CR Bard Inc.
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
DVA
    	
 
    	
DaVita Inc.
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
XRAY
    	
 
    	
Dentsply International
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ESRX
    	
 
    	
Express Scripts
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
FRX
    	
 
    	
Forest Laboratories
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
GENZ
    	
 
    	
Genzyme Corp.
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
GILD
    	
 
    	
Gilead Sciences
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
HSP
    	
 
    	
Hospira Inc.
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ISRG
    	
 
    	
Intuitive Surgical Inc.
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
JNJ
    	
 
    	
Johnson & Johnson
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
LH
    	
 
    	
Laboratory Corp. of America Holding
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
LIFE
    	
 
    	
Life Technologies Corp.
    	
 
    	
Health Care
    

 

8

 

	
LLY
    	
 
    	
Lilly (Eli) & Co.
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
MCK
    	
 
    	
McKesson Corp. (New)
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
MHS
    	
 
    	
Medco Health Solutions Inc.
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
MDT
    	
 
    	
Medtronic Inc.
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
MRK
    	
 
    	
Merck & Co.
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
MYL
    	
 
    	
Mylan Inc.
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
PDCO
    	
 
    	
Patterson Cos. Inc.
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
PKI
    	
 
    	
PerkinElmer
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
PFE
    	
 
    	
Pfizer Inc.
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
DGX
    	
 
    	
Quest Diagnostics
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
STJ
    	
 
    	
St Jude Medical
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
SYK
    	
 
    	
Stryker Corp.
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
THC
    	
 
    	
Tenet Healthcare Corp.
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
TMO
    	
 
    	
Thermo Fisher Scientific
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
VAR
    	
 
    	
Varian Medical Systems
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
WAT
    	
 
    	
Waters Corporation
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
WPI
    	
 
    	
Watson Pharmaceuticals
    	
 
    	
Health Care
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ZMH
    	
 
    	
Zimmer Holdings
    	
 
    	
Health Care
    

 

Note: These peer companies are the companies that comprise the S&P 500 Health Care index as of December 31, 2010 after removing those companies classified as Managed Care Companies. These companies will remain a constant measurement group for the 2011-2013 Performance Cycle. The peer companies will be reestablished for future three year performance cycles.

 

9

 

APPENDIX II

 

Definitions

 

a)              Award Date means the date upon which the Board of Directors or the Committee approves the granting of an award under this Program.

 

b)             Base Price is $56.44 which is the average of the closing prices for the last 30 trading days preceding the Performance Cycle.

 

c)              Committee means the Compensation Committee of the Board of Directors of Hospira, Inc.

 

d)             Company or Corporation means Hospira, Inc. and its subsidiaries.

 

e)              Deferred Distribution Date means the Distribution Date specified under the Notice of Deferral Election Form, in the event the Participant elected to defer his or her LTI award.

 

f)                Dividend Equivalents means, with respect to any shares of Hospira common stock that are to be issued pursuant to an award at the end of the Performance Cycle, an amount equal to cash dividends that are payable to stockholders of record during the Performance Cycle on a like number of shares of Hospira common stock.

 

g)             Fiscal Year (FY) means, for purposes of this Program, each calendar year beginning on January 1 and ending on December 31.

 

h)             Grant Notice and Agreement means the document provided to each Participant evidencing the number of Performance Share Units awarded and the basic terms and conditions of the award.

 

i)                 Notice of Deferral Election Form means an election form filed with the Committee within rules established to comply with section 409A of the Internal Revenue Code under which a Participant elects to defer the distribution of his or her PSU award.

 

j)                 Participant means an individual elected as a corporate officer and other senior officers designated for participation by the CEO of Hospira, Inc. who has received a Grant Notice and Agreement specifying the basic terms of participation in this Program.

 

k)              Performance Cycle is the three-year period consisting of Hospira’s fiscal years 2011 through and including 2013.

 

l)                 Performance Share Unit means unit awarded to a Participant as described under “Performance Share Units (PSU)” above.

 

m)           Plan means the 2004 Hospira Long-Term Stock Incentive Plan or any successor plan or plans.

 

n)             Relative Total Shareholder Return means Hospira, Inc. common stock price appreciation plus reinvested dividends during the Performance Cycle relative to the peer companies.

 

o)             Total Disability means the Participant either is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, the Participant is receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company.

 

10

 

p)             Transfer Date means the date after the Committee certifies, after the Performance Cycle, the number of shares to be distributed to the Program Participant.

 

q)             Vesting means the determination made at the end of the Performance Cycle as to how many, if any, of the PSUs that are actually earned by a Participant based upon actual performance results.

 

r)                Vesting Date means January 1, 2014.

 

This brochure provides a summary of the Program and in the case of a conflict between this document and the terms of the Plan, the Plan’s terms shall govern. Hospira, Inc. reserves the right to change or terminate the Plan at any time through appropriate action of its Board of Directors.

 

11

 

Enclosure (4)

 

AGREEMENT REGARDING

CHANGE IN CONTROL

 

THIS AGREEMENT (“Agreement”), is made and entered into as of the                day of                    2011 (the “Effective Date”) by and between Hospira, Inc. (the “Company”) and                          (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 Company 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 Company 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 TERM SHALL BEGIN ON THE EFFECTIVE DATE AND SHALL CONTINUE THROUGH DECEMBER 31, 2012. NOTWITHSTANDING THE FOREGOING, IF A CHANGE IN CONTROL (AS DEFINED IN SECTION 6 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, or (ii) by the Executive for Good Reason.  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

 

1

 

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 interest 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 officer of a public company, the Executive ceasing to be an officer of a public company;

 

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

 

(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

 

2

 

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 15.

 

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, subject to the provisions of the last paragraph of this Section 3, receive the following:

 

3

 

(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)).

 

(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

 

4

 

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 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

 

5

 

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 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, the Hospira 2004 Long-Term Stock 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.

 

For purposes of this Agreement, the Executive is deemed a “key employee” within the meaning of section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations thereunder (“Specified Employee”). As a Specified Employee, notwithstanding any provision in this Agreement, any payments or benefits under Sections 3(b), (c) or (d) (“Restricted Payments”) shall be provided to the Executive on the first day of the seventh month following the date of the Executive’s termination of employment (the “Delay Period”).  After the Delay Period, any Restricted Payments that constitute reimbursements to the Executive shall be made in accordance with their payment terms under this Agreement but no later than the end of the calendar year following the year in which the expense was incurred.

 

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

 

6

 

the Company, or any amounts which might have been earned by the Executive in other employment had the Executive sought such other employment.

 

5.     TERMINATION DURING POTENTIAL CHANGE IN CONTROL. If a Potential Change in Control (as defined in Section 7) 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.

 

6.     CHANGE IN CONTROL.  For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred on the earliest of a Change in Ownership, a Change in Effective Control, or a Change in Ownership of Assets, each as defined below.

 

(a)           Change in Ownership

 

(i)            In general. Except as provided in paragraph (b)(ii) of this Section, a Change in Ownership of the Company occurs on the date that any one person, or more than one person acting as a group (as defined in paragraph (a)(ii) of this Section), acquires ownership of the Company’s stock that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the Company’s stock. However, if any one person, or more than one person acting as a group, is considered to own more than 50% of the total fair market value or total voting power of the Company’s stock, the acquisition of additional stock by the same person or persons is not considered to cause a Change in Ownership of the Company (or to cause a Change in Effective Control of the Company (within the meaning of paragraph (b) of this Section)). An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the Company acquires its stock in exchange for property will be treated as an acquisition of stock for purposes of this Section. This paragraph (a)(i) applies only when there is a transfer of the Company’s stock (or issuance of stock of the Company) and stock in the Company remains outstanding after the transaction.

 

(ii) Persons acting as a group. For purposes of paragraph (a)(i) above, persons will not be considered to be acting as a group solely because they purchase or own stock of the Company at the same time. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company. If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with

 

7

 

other shareholders only with respect to the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

 

(b)           Change in Effective Control

 

(i) In general. Notwithstanding that the Company has not undergone a Change in Ownership under paragraph (a) of this Section, a Change in Effective Control of the Company occurs only on either of the following dates:

 

(1) The date any one person, or more than one person acting as a group (as determined under paragraph (a)(ii) of this Section), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 30% or more of the total voting power of the stock of the Company.

 

(2) The date a majority of members of the Company’s board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s board of directors before the date of the appointment or election.

 

(ii) Acquisition of additional control. If any one person, or more than one person acting as a group, is considered to effectively control the Company (within the meaning of this paragraph (b)), the acquisition of additional control of the Company by the same person or persons is not considered to cause a Change in Effective Control of the Company (or to cause a Change in Ownership of the Company within the meaning of paragraph (a) of this Section).

 

(c)           Change in Ownership of Assets

 

(i)            In general. A Change in Ownership of Assets occurs on the date that any one person, or more than one person acting as a group (as determined in paragraph (a)(ii) of this Section), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the Company’s assets immediately before such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

 

(ii)           Transfers to a related person—There is no Change in Control event under this paragraph (c) when there is a transfer to an entity that is

 

8

 

controlled by the shareholders of the transferring corporation immediately after the transfer, as provided in this paragraph (c)(ii). A transfer of assets by the Company is not treated as a Change in Ownership of Assets if the assets are transferred to—

 

(1) A shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock;

 

(2) An entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by the Company;

 

(3) A person, or more than one person acting as a group, that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding stock of the Company; or

 

(4) An entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person described in paragraph (c)(ii)(3) above.

 

For purposes of this paragraph (c)(ii) and except as otherwise provided above, a person’s status is determined immediately after the transfer of the assets.

 

(iii)          Persons acting as a group. Persons will not be considered to be acting as a group solely because they purchase assets of the Company at the same time. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of assets, or similar business transaction with the Company. If a person, including an entity shareholder, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of assets, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only to the extent of the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

 

7.     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;

 

9

 

(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; 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.

 

8.     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  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.

 

9.     WITHHOLDING. All payments to the Executive under this Agreement will be subject to withholding of applicable taxes. The Company shall withhold the

 

10

 

applicable taxes in an amount calculated at the minimum statutory rate and shall pay the amount so withheld to the appropriate tax authority.

 

10.   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.

 

11.   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.  Any amendment or cancellation of this Agreement shall not accelerate the payment of any compensation or benefit hereunder and shall not otherwise modify or change the time or times when compensation or benefits are payable hereunder.

 

12.   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.

 

13.   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).

 

14.   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.

 

15.   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.

 

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16.   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

 

(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:

 

Senior Vice President of  Organizational

Transformation and People Development

Hospira, Inc.

275 North Field Drive

Lake Forest, Illinois 60045

 

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

 

General Counsel and Secretary

Hospira, Inc.

275 North Field Drive

Lake Forest, Illinois 60045

 

or to the Executive:

 

[INSERT NAME AND ADDRESS]

 

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.

 

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17.   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.

 

18.   LEGAL AND ENFORCEMENT COSTS. The provisions of this Section 18 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, including, but not limited to, Hospira 2004 Long-Term Stock Incentive Plan, the  Hospira, Inc. 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 18 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 18 be reasonable.

 

(d)                                 The Executive’s rights to payments under this Section 18 shall not be affected by the final outcome of any dispute with the Company.

 

19.   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.

 

20.   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

 

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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.

 

21.   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                       , 2011, all as of the Effective Date.

 

	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[INSERT NAME]
    
	
 
    	
 
    
	
 
    	
HOSPIRA, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
Christopher B. Begley
    
	
 
    	
Its: Chairman and Chief Executive   Officer
    
	
 
    	
 
    
	
ATTEST:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Brian J. Smith
    	
 
    	
 
    
	
Secretary
    	
 
    	
 
    

 

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APPENDIX A

 

AGREEMENT REGARDING CHANGE IN CONTROL

FORFEITURE PROVISION REFERENCED IN SECTION 8

 

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                    , 2011 (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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