Document:

Exhibit 10.2

 

	
 
    	
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 March 1 2012, 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, 2014
    

 

By accepting this award, the Participant agrees 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.

 

	
 
    	
 
    	
                                  ,   2012
    
	
Hospira, Inc.   
    	
 
    	
Date
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    

 

 

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 Recovery 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 number of shares of Common Stock equal to the number of Earned Units as of the date of such Involuntary Termination of Employment or resignation with Good reason will be delivered to the Grantee, 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.  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

 

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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.

 

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(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
    

 

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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/onesource/hsp

 

or from: Joseph Railey

 

Corporate Compensation,

Hospira, Inc.

Mail Stop H1 South, 275 N. Field Drive,

 Lake Forest, IL  60045

 

phone:  224-212-2662  fax:  224-212-3358; e-mail:  joseph.railey@Hospira.com

 

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2012 — 2014 Total Shareholder Return (TSR) TERM SHEET

 

	
PERFORMANCE   PERIOD:
    	
Beginning   January 1, 2012, and ending December 31, 2014.
    
	
 
    	
 
    
	
PERFORMANCE   GOAL:
    	
·  
    	
Relative   Total Shareholder Return (“RTSR”) compared to peer companies (identified in   Appendix I) is the FY12-14 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 FY11 preceding the FY12-14 Performance Period is $29.27 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
    

 

 

Earnout Opportunities During the Performance Period:

 

·                  The Program provides the opportunity for the interim earnout of up to one-quarter of the Units originally granted both at the end of FY12 and again at the end of the FY 12-13 period (in this case cumulative TSR for a two-year period) based upon the individual percentile ranking for these two distinct measurement periods.  The maximum interim earnout during the Performance Period is capped at one-quarter of Units originally granted for each of the two interim measurement periods, even if the interim measurement period’s performance results are above the 50th percentile.

·                  Any Units earned during the interim measurement periods are effectively converted to service-based restricted stock units (RSUs) and are then subject to the Grantee’s continued employment with Hospira until end of the 3-year Performance Period.

·                  The Program also provides the opportunity for the cumulative earnout of up to 200% of the original Units granted, with the maximum payout level for the entire Performance Period, at end of the full 3-year Performance Period, being the greater of (i) the maximum payout level for the entire 3-year Performance Period or (ii) the total of any Units earned during the interim measurement periods.

 

The following examples show how the interim measurement feature works:

 

Example 1:

Assumptions:

·                  1,500 Units originally granted

·                  Year 1 performance (FY12) = 25th %ile

·                  Years 1 & 2 (FY12-13) cumulative performance = 55th%ile

·                  Years 1 through 3 (FY12-14) cumulative performance = 50th%ile

 

	
 
    	
 
    	
Earned
    	
 
    
	
Earnout:
    	
 
    	
 
    	
 
    
	
·                  Year 1: 25thpercentile results = 25%   interim earnout level based upon actual results during the interim   measurement period
    	
 
    	
 
    	
 
    
	
 
    	
·                  25% X (1/4 of original PSU   grant of 1,500 Units)
    	
 
    	
 
    	
 
    
	
 
    	
·                  25% X 375 = 94 Units   earned and converted to RSUs
    	
 
    	
94
    	
 
    
	
·                  Years   1 & 2: 55thtpercentile   results = 120% earnout level based upon actual results but earnout is capped   at 100% during interim measurement period
    	
 
    	
 
    	
 
    
	
 
    	
·                  100% X (1/4 of original   PSU grant of 1,500 Units)
    	
 
    	
 
    	
 
    
	
 
    	
·                  100%(1) X 375 = 375   Units earned and converted to RSUs
    	
 
    	
375
    	
 
    
	
Cumulative   Subtotal of Interim Earnout
    	
 
    	
469
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
·                  Years 1 - 3:   50thtpercentile   results = 100% earnout level based upon actual results for full 3-year   Performance Period
    	
 
    	
 
    	
 
    
	
 
    	
·                  100% X 1,500 original PSU   grant = 1,500 Units earned
    	
 
    	
 
    	
 
    
	
TOTAL
    	
 
    	
1,500
    	
(2)
    

 

(1)   Interim earnout potential is capped at 100%

(2)  The 469 Units earned over the first two years of the Performance Period are included in this 1,500 PSU Total, i.e., an additional 1,031 Units are earned for the full three-year Performance Period results.

 

Example 2:

Assumptions:

·                  1,500 Units originally granted

 

 

·                  Year 1 performance = 25th %ile

·                  Years 1& 2 cumulative performance = 100th%ile

·                  Years 1-3 cumulative performance = 10th%ile

 

	
 
    	
 
    	
Earned
    	
 
    
	
Earnout:
    	
 
    	
 
    	
 
    
	
·                  Year 1: 25thpercentile results = 25%   earnout level based upon actual results during the interim measurement period
    	
 
    	
 
    	
 
    
	
·                  25% X (1/4 of   original PSU grant of 1,500 Units)
    	
 
    	
 
    	
 
    
	
·                  25% X 375 =   94 Units earned and converted to RSUs
    	
 
    	
94
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
·                  Years   1 & 2: 100thpercentile   results = 100% earnout level based upon actual results during interim   measurement period
    	
 
    	
 
    	
 
    
	
·                  100% X (1/4   of original PSU grant of 1,500 Units)
    	
 
    	
 
    	
 
    
	
·                  100% X 375 =   375 Units earned and converted to RSUs
    	
 
    	
375
    	
 
    
	
 
    	
 
    	
1,000
    	
 
    
	
Cumulative   Subtotal
    	
 
    	
469
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
·                  Years 1-3   :  10thtpercentile results = 0%   earnout level based upon actual results for full 3-year Performance Period
    	
 
    	
 
    	
 
    
	
·                  0% X 1,500   original PSU grant = 0 Units earned
    	
 
    	
 
    	
 
    
	
TOTAL
    	
 
    	
469
    	
(2)
    

 

(2)  Even though the final performance earns a cumulative 0% payout, the Grantee had an interim earnout of 469 Units for year 1 and years 1&2

 

	
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, 2014, 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
    
	
COV
    	
 
    	
Covidien plc
    	
 
    	
Health Care
    
	
CERN
    	
 
    	
Cerner Corp
    	
 
    	
Health Care
    
	
BCR
    	
 
    	
CR Bard Inc.
    	
 
    	
Health Care
    
	
DVA
    	
 
    	
DaVita Inc.
    	
 
    	
Health Care
    
	
XRAY
    	
 
    	
Dentsply International
    	
 
    	
Health Care
    
	
EW
    	
 
    	
Edwards Lifescience Corp
    	
 
    	
Health Care
    
	
ESRX
    	
 
    	
Express Scripts
    	
 
    	
Health Care
    
	
FRX
    	
 
    	
Forest Laboratories
    	
 
    	
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.
    	
 
    	
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
    
	
PRGO
    	
 
    	
Perrigo Company
    	
 
    	
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
    

 

 

HOSPIRA 2004 LONG-TERM STOCK INCENTIVE PLAN

 

NOTICE OF DEFERRAL ELECTION FORM

 

2012- 2014 Performance Cycle

 

Subject to the provisions of the Hospira 2004 Long-Term Stock Incentive Plan (the “Plan”), the Notice of Grant of Award and Award Agreement (“Notice”) and the Restricted Stock Unit Award Agreement (“Agreement”),  I hereby elect to defer the receipt of the Earned Units, that would otherwise be issued as specified in the Agreement,  in accordance with the election below (“Election”). All capitalized terms are as defined herein or as defined in the Plan, the Notice or the Agreement.

 

I.                                        DISTRIBUTION COMMENCEMENT DATE

 

I hereby acknowledge and agree that the distribution of my Earned Units shall begin after the end of the performance period identified in the Agreement (“Performance Period”) but no later than 90 days following the end of such Performance Period (“Distribution Commencement Date”).

 

II.                                   EARNED UNITS DEFERRAL

 

Pursuant to the “Delivery of Certificate” provisions of the Agreement, I hereby elect to defer the receipt of           % of the Earned Units (“Deferred Units”).

 

III.                              DISTRIBUTION METHOD

 

The Deferred Units shall be distributed in accordance with the deferred distribution date (“Deferred Distribution Date”) as follows:

 

	
(   )
    	
 
    	
On   the January 1 that next follows the date that is                      (not to exceed 10 years) year(s) after the Distribution Commencement   Date.
    
	
 
    	
 
    	
 
    
	
(   )
    	
 
    	
In   annual installments for   [          ]   year(s) (not to exceed 10 years) beginning on the Distribution   Commencement Date and each anniversary thereof.
    

 

Notwithstanding the foregoing, I understand that, distribution of the Earned Units in connection with my death, Involuntary Termination of Employment, Disability, Retirement or upon a Change in Control during the Performance Period shall be made in accordance with the applicable provisions of the Agreement.

 

ALL DISTRIBUTIONS WILL BE IN THE FORM OF COMPANY STOCK (any fractional shares and Dividend Equivalents, if any, will be paid in cash).

 

 

IV.                               EFFECTIVE DATE AND DEFERRAL CHANGES

 

This Election shall first become effective as of the date submitted to the Company and shall remain in effect for all subsequent years until modified or revoked by filing a new Election form.

 

I understand that the deferral specified above may be changed only by an election completed and filed with the secretary of the Company at least 12 months prior to my Distribution Commencement Date, which will delay commencement of my distribution by 5 years.  Any change to my distribution method will be void if my Distribution Commencement Date actually occurs within 12 months after the date my change is filed with the Company.

 

	
Name:
    	
 
    	
 
    
	
 
    	
(Please   Print)
    	
 
    
	
 
    	
 
    	
 
    
	
Address:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Signature:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    

 

·                  Note:  U.S. Employees - PSUs deferred beyond the 3-year vesting period are subject to FICA (Medicare and Social Security) taxation.  This tax is applicable for all vestings; however the deferred PSU must be cash settled at the time of vesting.Exhibit 10.3

 

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

 

Effective March 1, 2012, 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, 2014
    

 

By accepting this award, the Participant agrees 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.

 

 

	
 
    	
 
    	
                            ,   2012
    
	
Hospira, Inc.  
    	
Date
    
	
 
    	
 
    
	
Name:   F. Michael Ball
    	
 
    
	
 
    	
 
    
	
Title:   Chief Executive Officer
    	
 
    

 

 

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 Recovery 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.

 

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 during the performance period, the number of shares of Common Stock equal to the number of Earned Units as of the date of such Involuntary Termination of Employment will be delivered to the Grantee, 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. If Grantee’s termination of employment during the performance period for reasons other than death, Disability or Retirement does not constitute an Involuntary Termination of Employment, 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.

 

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” shall mean, in the sole opinion and discretion of the Committee, the Grantee has (i) engaged in a material breach of the Company’s code of business conduct, (ii) committed an act of fraud, embezzlement or theft in connection with the Grantee’s duties or in the course of employment, or (iii) wrongfully disclosed secret processes or confidential information of the Company or its subsidiaries.

 

(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.

 

(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)                            Involuntary Termination of Employment.  “Involuntary Termination of Employment” means the Grantee’s position with the Company and its affiliates is eliminated due to a reduction in force or other restructuring or the Grantee’s employment is otherwise terminated for reasons not related to performance, illegal activity, failure to abide by the Company’s Code of Conduct, or other good cause as determined by the Committee and is otherwise considered to be involuntary.

 

(h)                           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
    

 

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/onesource/hsp

 

or from:

 

Ms. Joseph Railey

 

Corporate Compensation, Hospira, Inc.

 

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

 

phone:  224-212-2662  fax:  224-212-3358; e-mail: joseph.railey@Hospira.com

 

 

2012 — 2014 Total Shareholder Return (TSR) TERM SHEET

 

	
PERFORMANCE   PERIOD:
    	
 
    	
Beginning   January 1, 2012, and ending December 31, 2014.
    
	
 
    	
 
    	
 
    
	
PERFORMANCE   GOAL:
    	
 
    	
·                  Relative Total Shareholder   Return (“RTSR”) compared to peer companies (identified in Appendix I) is the   FY12-14 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 FY11 preceding the FY12-14 Performance Period is $29.27 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
    	
 
    

 

Earnout Opportunities During the Performance Period:

 

·                  The Program provides the opportunity for the interim earnout of up to one-quarter of the Units originally granted both at the end of FY12 and again at the end of the FY 12-13 period (in this case cumulative TSR for a two-year period) based upon the individual percentile ranking for these two

 

 

distinct measurement periods.  The maximum interim earnout during the Performance Period is capped at one-quarter of Units originally granted for each of the two interim measurement periods, even if the interim measurement period’s performance results are above the 50th percentile.

·                  Any Units earned during the interim measurement periods are effectively converted to service-based restricted stock units (RSUs) and are then subject to the Grantee’s continued employment with Hospira until end of the 3-year Performance Period.

·                  The Program also provides the opportunity for the cumulative earnout of up to 200% of the original Units granted, with the maximum payout level for the entire Performance Period, at end of the full 3-year Performance Period, being the greater of (i) the maximum payout level for the entire 3-year Performance Period or (ii) the total of any Units earned during the interim measurement periods.

 

The following examples show how the interim measurement feature works:

 

Example 1:

Assumptions:

·                  1,500 Units originally granted

·                  Year 1 performance (FY12) = 25th %ile

·                  Years 1 & 2 (FY12-13) cumulative performance = 55th%ile

·                  Years 1 through 3 (FY12-14) cumulative performance = 50th%ile

 

	
 
    	
 
    	
Earned
    	
 
    
	
Earnout:
    	
 
    	
 
    	
 
    
	
·                  Year 1: 25thpercentile results = 25%   interim earnout level based upon actual results during the interim   measurement period
    	
 
    	
 
    	
 
    
	
 
    	
·                  25% X (1/4 of original PSU   grant of 1,500 Units)
    	
 
    	
 
    	
 
    
	
 
    	
·                  25% X 375 =   94 Units earned and converted to RSUs
    	
 
    	
94
    	
 
    
	
·                  Years 1 & 2: 55thtpercentile results = 120%   earnout level based upon actual results but earnout is capped at 100% during   interim measurement period
    	
 
    	
 
    	
 
    
	
 
    	
·                  100% X (1/4 of original   PSU grant of 1,500 Units)
    	
 
    	
 
    	
 
    
	
 
    	
·                  100%(1) X 375 = 375   Units earned and converted to RSUs
    	
 
    	
375
    	
 
    
	
Cumulative Subtotal of Interim Earnout
    	
 
    	
469
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
·                  Years 1 - 3: 50thtpercentile results = 100%   earnout level based upon actual results for full 3-year Performance Period
    	
 
    	
 
    	
 
    
	
 
    	
·                  100% X 1,500 original PSU   grant = 1,500 Units earned
    	
 
    	
 
    	
 
    
	
TOTAL
    	
 
    	
1,500
    	
(2)
    

 

(1)   Interim earnout potential is capped at 100%

(2)  The 469 Units earned over the first two years of the Performance Period are included in this 1,500 PSU Total, i.e., an additional 1,031 Units are earned for the full three-year Performance Period results.

 

Example 2:

Assumptions:

·                  1,500 Units originally granted

·                  Year 1 performance = 25th %ile

·                  Years 1& 2 cumulative performance = 100th%ile

·                  Years 1-3 cumulative performance = 10th%ile

 

 

	
 
    	
 
    	
Earned
    	
 
    
	
Earnout:
    	
 
    	
 
    	
 
    
	
·                  Year 1: 25thpercentile results = 25%   earnout level based upon actual results during the interim measurement period
    	
 
    	
 
    	
 
    
	
 
    	
·                  25% X (1/4 of original PSU   grant of 1,500 Units)
    	
 
    	
 
    	
 
    
	
 
    	
·                  25% X 375 =   94 Units earned and converted to RSUs
    	
 
    	
94
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
·                  Years   1 & 2: 100thpercentile   results = 100% earnout level based upon actual results during interim   measurement period
    	
 
    	
 
    	
 
    
	
 
    	
·                  100% X (1/4 of original   PSU grant of 1,500 Units)
    	
 
    	
 
    	
 
    
	
 
    	
·                  100% X 375 = 375 Units   earned and converted to RSUs
    	
 
    	
375
    	
 
    
	
 
    	
 
    	
 
    	
1,000
    	
 
    
	
Cumulative Subtotal
    	
 
    	
469
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
·                  Years 1-3 : 10thtpercentile results = 0%   earnout level based upon actual results for full 3-year Performance Period
    	
 
    	
 
    	
 
    
	
 
    	
·                  0% X 1,500 original PSU   grant = 0 Units earned
    	
 
    	
 
    	
 
    
	
TOTAL
    	
 
    	
469
    	
(2)
    

 

(2)  Even though the final performance earns a cumulative 0% payout, the Grantee had an interim earnout of 469 Units for year 1 and years 1&2

 

	
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, 2014, 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
    
	
CERN
    	
 
    	
Cerner Corp
    	
 
    	
Health Care
    
	
COV
    	
 
    	
Covidien plc
    	
 
    	
Health Care
    
	
BCR
    	
 
    	
CR Bard Inc.
    	
 
    	
Health Care
    
	
DVA
    	
 
    	
DaVita Inc.
    	
 
    	
Health Care
    
	
XRAY
    	
 
    	
Dentsply International
    	
 
    	
Health Care
    
	
EW
    	
 
    	
Edwards Lifescience Corp
    	
 
    	
Health Care
    
	
ESRX
    	
 
    	
Express Scripts
    	
 
    	
Health Care
    
	
FRX
    	
 
    	
Forest Laboratories
    	
 
    	
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.
    	
 
    	
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
    
	
PRGO
    	
 
    	
Perrigo Company
    	
 
    	
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
    
	
ZM
    	
 
    	
Zimmer Holdings
    	
 
    	
Health Care
    

 

 

HOSPIRA 2004 LONG-TERM STOCK INCENTIVE PLAN

 

NOTICE OF DEFERRAL ELECTION FORM

 

2012- 2014 Performance Cycle

 

Subject to the provisions of the Hospira 2004 Long-Term Stock Incentive Plan (the “Plan”), the Notice of Grant of Award and Award Agreement (“Notice”) and the Restricted Stock Unit Award Agreement (“Agreement”),  I hereby elect to defer the receipt of the Earned Units, that would otherwise be issued as specified in the Agreement,  in accordance with the election below (“Election”). All capitalized terms are as defined herein or as defined in the Plan, the Notice or the Agreement.

 

I.                                        DISTRIBUTION COMMENCEMENT DATE

 

I hereby acknowledge and agree that the distribution of my Earned Units shall begin after the end of the performance period identified in the Agreement (“Performance Period”) but no later than 90 days following the end of such Performance Period (“Distribution Commencement Date”).

 

II.                                   EARNED UNITS DEFERRAL

 

Pursuant to the “Delivery of Certificate” provisions of the Agreement, I hereby elect to defer the receipt of           % of the Earned Units (“Deferred Units”).

 

III.                              DISTRIBUTION METHOD

 

The Deferred Units shall be distributed in accordance with the deferred distribution date (“Deferred Distribution Date”) as follows:

 

(   )                               On the January 1 that next follows the date that is              (not to exceed 10 years) year(s) after the Distribution Commencement Date.

 

(   )                               In annual installments for [            ] year(s) (not to exceed 10 years) beginning on the Distribution Commencement Date and each anniversary thereof.

 

Notwithstanding the foregoing, I understand that, distribution of the Earned Units in connection with my death, Involuntary Termination of Employment, Disability, Retirement or upon a Change in Control during the Performance Period shall be made in accordance with the applicable provisions of the Agreement.

 

ALL DISTRIBUTIONS WILL BE IN THE FORM OF COMPANY STOCK (any fractional shares and Dividend Equivalents, if any, will be paid in cash).

 

IV.                               EFFECTIVE DATE AND DEFERRAL CHANGES

 

This Election shall first become effective as of the date submitted to the Company and shall remain in effect for all subsequent years until modified or revoked by filing a new Election form.

 

I understand that the deferral specified above may be changed only by an election completed and filed with the secretary of the Company at least 12 months prior to my Distribution Commencement Date, which will delay commencement of my distribution by 5

 

 

years.  Any change to my distribution method will be void if my Distribution Commencement Date actually occurs within 12 months after the date my change is filed with the Company.

 

	
Name:
    	
 
    	
 
    
	
 
    	
(Please   Print)
    	
 
    
	
 
    	
 
    	
 
    
	
Address:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Signature:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    

 

·                  Note:  U.S. Employees - PSUs deferred beyond the 3-year vesting period are subject to FICA (Medicare and Social Security) taxation.  This tax is applicable for all vestings; however the deferred PSU must be cash settled at the time of vesting.

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