Document:

HSP-EX10.9_2013.3.31-10Q

Exhibit 10.9
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-quarter of the Covered Shares subject to these Options (rounded up) may be purchased; on the second anniversary of the Grant Date one-half of the Covered Shares subject to these Options (rounded up) may be purchased; on the third anniversary of the Grant Date three-quarters of the Covered Shares subject to these Options (rounded up) may be purchased; and on the fourth 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 the date of a Change in Control that occurs on or before the Date of Termination if the successor company (or parent thereof) has not either (i) assumed the Option effective on the date of the Change in Control, without any modifications except as provided in the next sentence, or (ii) replaced it with a comparable option as of such date having the same intrinsic value as the Option, and the same vested percentage and vesting schedule as the Option.  The Option (if assumed) or the replacement option shall provide for full vesting if, within the first 24 months following the date of the Change in Control, the Participant is involuntarily terminated for any or no reason or if the Participant terminates 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 under the foregoing schedule, 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 paragraph 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 (as defined in Section 10) or Retirement (as defined in Section 10), 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 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 paragraph 5(a) or paragraph 5(b) above without the written consent of the Committee, the Company, as determined by the Committee in its 

	
			
	 
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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. 
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.

	
			
	 
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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 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, in the sole opinion and discretion of the Committee, the Participant 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 Participant’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 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.
(d)    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.

	
			
	 
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(e)    Good Reason.  The term “Good Reason” means the occurrence of any of the following circumstances without the Participant's express written consent:
		
	(i)
	a significant adverse change in the nature, scope or status of the Participant's position, authorities or duties from those in effect immediately prior to the Change in Control, including, without limitation, if the Participant was, immediately prior to the Change in Control, an executive officer of a public company, the Participant ceasing to be an executive officer of a public company;

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

		
	(iii)
	a reduction in the Participant'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 Participant an annual bonus in any year which is at least equal to the annual bonus, awarded to the Participant under the annual bonus plan of the Company for the year immediately preceding the year of the Change in Control; 

		
	(v)
	the failure by the Company to award the Participant 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 Participant with the welfare benefits, fringe benefits and perquisites enjoyed by the Participant 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 Participant 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 Participant'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 paragraph 3. 

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

	
			
	 
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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 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:     

	
			
	 
	6HSP-EX10.10_2013.3.31-10Q

Exhibit 10.10
Amended effective February 27, 2013
HOSPIRA, INC. NON-EMPLOYEE DIRECTORS’ FEE PLAN 
SECTION 1
PURPOSE
Hospira, Inc. Non-Employee Directors’ Fee Plan (the “Plan”) has been established by Hospira, Inc. (the “Company”), effective as of April 30, 2004 (the “Effective Date”) to attract and retain as members of its Board of Directors persons who are not employees of the Company or any of its subsidiaries but whose business experience and judgment are a valuable asset to the Company and its subsidiaries.  The Plan provides for the payment to Directors of fees in the form of some or all of the following: Annual Retainer Fees, Committee Chairman Fees, Meeting Fees and Restricted Stock awards (generally, the “Director Fees”).
SECTION 2
DIRECTORS COVERED
As used in the Plan, the term “Director” means any person who is elected to the Board of Directors of the Company as of the Effective Date or at any time thereafter, and is not an employee of the Company or any of its subsidiaries. 
SECTION 3 
FEES PAYABLE TO DIRECTORS
3.1    Annual Board Retainer Fee.  Each Director shall be entitled to an annual retainer fee (the “Annual Board Retainer Fee”) to be paid quarterly, on the last business day of each calendar quarter for which the Director served in the capacity as a Director (excluding, on a pro rata basis, any portion of the quarter in which he did not serve in such capacity).  The amount of the Annual Board Retainer Fee shall be as determined from time to time in the sole discretion of the Board of Directors of the Company (the “Board”), with such amount currently set at Sixty-Five Thousand Dollars ($65,000) per year.  
3.2    Annual Committee Retainer Fee.  A director who serves on any committee created by the Board shall be entitled to an additional annual retainer fee (the “Annual Committee Retainer Fee”) to be paid quarterly, on the last business day of each calendar quarter for which the Director served in the capacity as a committee member (excluding, on a pro rata basis, any portion of the quarter in which he did not serve in such capacity).  The amount of the Annual Committee Retainer Fee shall be as determined from time to time in the sole discretion of the Board, with such amount currently set as follows: (i) Five Thousand Dollars ($5,000) per year for each of the Science, Technology and Quality Committee, Governance and Public Policy Committee, and any other permanent or temporary committee established by the Board; (ii) Ten Thousand Dollars ($10,000) per year for the Compensation Committee; and (iii) Seventeen Thousand and Five Hundred Dollars ($17,500) per year for the Audit Committee.
3.3    Committee Chairman Fee.  A Director who serves as Chairman of any committee created by the Board shall be entitled to an additional annual retainer fee (the “Committee Chairman Fee”) to be paid quarterly, on the last business day of each calendar quarter for which the Director served in the capacity as a committee chairman (excluding, on a pro rata basis, any portion of the quarter in which he did not serve in such capacity).  The amount of the Committee Chairman Fee shall be as determined from time to time in the sole discretion of the Board, with such amount currently set as follows: (i) Twelve Thousand and Five Hundred Dollars ($12,500) per year for each of the Science, Technology and Quality Committee, Governance and Public Policy Committee, and any other permanent or temporary committee established by the Board; (ii) Twenty Thousand Dollars ($20,000) per year for the Compensation Committee; and (ii) Twenty Five Thousand Dollars ($25,000) per year for the Audit Committee.

	
			
	 
	 
	 

3.4    Global Travel Allowance Fee.  A global travel allowance fee (the “Global Travel Allowance Fee”) shall be paid to compensate a Director for international travel to attend a meeting of the Board or any committee thereof.  The Global Travel Allowance Fee shall be paid on the last business day of the calendar quarter in which the meeting was held.  International travel shall be deemed to occur whenever the Director is required to fly from his or her principal domicile over either the Atlantic Ocean or the Pacific Ocean, or to another country in which the flight is greater than six (6) hours.  The amount of the Global Travel Allowance Fee shall be as determined from time to time in the sole discretion of the Board, with such amount currently set at Two Thousand Dollars ($2,000).  
3.5    Chairman of the Board Fees.  A Director who serves as Chairman of the Board shall be entitled to an additional annual retainer fee (the “Chairman of the Board Fee”) to be paid quarterly, on the last business day of each calendar quarter for which the Director served in the capacity as Chairman of the Board (excluding, on a pro rata basis, any portion of the quarter in which he did not serve in such capacity).  The amount of the Chairman of the Board Fee shall be as determined from time to time in the sole discretion of the Board, with such amount currently set at Forty Five Thousand Dollars ($45,000) per year.  This amount is in addition to the Annual Board Retainer Fee set forth in Section 3.1.
SECTION 4 
RESTRICTED STOCK
4.1    Annual Restricted Stock Award.   
		
	(i)
	Effective as of January 1, 2013, each Director shall be granted shares of the Company’s Common Stock, par value $0.01 per share (the “Stock”), with such stock subject to certain restrictions set forth below (the “Restricted Stock”); and any such Director who also serves as Chairman of the Board shall be granted additional Restricted Stock (“Chairman’s Restricted Stock”), which shall also be subject to the same restrictions set forth below.  The Restricted Stock and Chairman’s Restricted Stock shall be granted automatically to the Director on the later of (a) the fifth business day after the public release of the Company’s earnings for the previous calendar year or (b) the day of completion of the regularly scheduled meeting of the Compensation Committee in February, which shall be a business day (the “Grant Date”).  

		
	(ii)
	The number of shares covered by the Restricted Stock award shall be equal to that number of shares whose aggregate value (based on the Fair Market Value of a share of Stock on the date of grant) equals One Hundred Ninety Thousand Dollars ($190,000), rounded down to the next whole share; and the number of shares covered by the Chairman’s Restricted Stock award shall be equal to that number of shares whose aggregate value (based on the Fair Market Value of a share of Stock on the date of grant) equals One Hundred Ten Thousand Dollars ($110,000), rounded down to the next whole share. 

		
	(iii)
	Notwithstanding anything contained in this Section 4.1 to the contrary: a Non-Employee Director, who is elected between any Grant Dates, shall automatically be granted Restricted Stock on the last business day of the calendar quarter in which such Director is elected; provided, however, that the number of shares of the Restricted Stock granted to such Director shall be equal to that number of shares (rounded to the next whole share) whose aggregate value (based on the Fair Market Value of a share of Stock on the date of grant) equals One Hundred Ninety Thousand Dollars ($190,000), multiplied by the fraction of A over 12, with “A”  being the number of whole calendar months between the first day of the month coinciding with or immediately following such Director’s election and first day of the month during which the next Grant Date is scheduled to occur; and (b) the number of shares of Chairman’s Restricted Stock for a Non-Employee Director who is appointed Chairman of the Board between any Grant Dates shall be equal to that number of shares (rounded to the next whole share) whose aggregate value (based on the Fair Market Value of a share of Stock on the date of grant) equals One Hundred Ten Thousand Dollars ($110,000), 

	
			
	 
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multiplied by the fraction of A over 12, with “A”  being the number of whole calendar months between the first day of the month coinciding with or immediately following such Director’s appointment as Chairman of the Board and the first day of the month during which the next Grant Date is scheduled to occur. The term “Fair Market Value” shall be as defined in the 2004 Plan (as defined in Section 6.6 below).
4.2    Issuance of Certificates.  Each certificate issued in respect of the Restricted Stock Award shall be registered in the name of the Director and shall be deposited in a bank designated by the Company or retained by the Company.  The certification of shares is conditioned upon the Director 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 [insert date] between Hospira, Inc. and [insert Director name].”  Upon lapse of the Restriction Period, the Director shall be entitled to have the legend removed from certificates representing the shares.
4.3    Rights.  Upon issuance of the certificates, the Directors in whose names they are registered shall, subject to the restrictions of this Section 4, have all of the rights of a shareholder with respect to the shares represented by the certificate, including the right to vote such shares and to receive cash dividends and other distributions thereon.
4.4    Forfeiture Period.  All Restricted Stock granted under this Section 4 shall be subject to forfeiture pursuant to Section 4.5 for a period (the "Forfeiture Period") commencing with the date of the award and ending on the earliest of the following events:
		
	(i)
	The one-year anniversary of the date of grant of Restricted Stock; 

		
	(ii)
	The date of the Director’s death or disability; or

		
	(iii)
	The date of a Change in Control (as defined in Section 5 of the 2004 Plan).

4.5    Forfeiture.  In the event that the Director’s date of termination occurs during the Forfeiture Period, the Director shall forfeit any and all rights and interests with respect to such unvested Restricted Stock (or Restricted Stock Units, if a Deferral Election, under Section 10 below, is applicable) and the Company shall have the right to cancel any such certificates evidencing such Restricted Stock.
4.6.      Restrictions on Sale.  All Restricted Stock granted under this Section 4 shall be subject to the following restrictions on sale beginning on the date of grant and continuing, except as otherwise provided below in this Section 4.6, for all periods while the Director is actively serving as a Director of the Company (the “Restricted Period”):
		
	(i)
	The shares may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, except: (a) to the extent that after the Forfeiture Period such sale, assignment, transfer, pledge, hypothecation or other disposal does not cause a Director to fail to meet the minimum holding requirements under the Company’s then existing Company share retention and ownership guidelines for Directors; or (b) if upon the end of the Forfeiture Period of a Director’s Restricted Stock, the Restricted Stock becomes taxable to the Director, the Company may withhold or arrange for the sale of the number of shares of such Stock that have an aggregate Fair Market Value equal to the amount of tax required to be withheld by the Company under applicable law.

		
	(ii)
	Except as provided in paragraph (i) of this Section 4.6, any additional common shares of the Company issued with respect to shares covered by Awards granted under this Section 4 as a result of any stock dividend, stock split or reorganization, shall be subject to the restrictions and other provisions of this Section 4.

	
			
	 
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	(iii)
	A Director 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.

SECTION 5 
CHANGE IN CONTROL
In the event of a Change in Control, (i) all Restricted Stock awards shall become fully vested and shall no longer be subject to the restrictions set forth in Section 4 of this Plan, and (ii) all Deferred Fees shall be paid to the Director at such time and in such form as set forth in the Director’s Deferral Election.
SECTION 6 
OPERATION AND ADMINISTRATION
6.1    Administration.
		
	(i)
	The Plan and all benefits pursuant hereto shall be administered by the full Board. 

		
	(ii)
	The Board shall have the authority and discretion to interpret and administer the Plan, to establish, amend and rescind any rules and regulations relating to the Plan and to determine the terms and provisions of any award agreement made pursuant to the Plan.  All questions of interpretation with respect to the Plan, the benefits established herein, the number of shares of Stock, or other security, or rights granted and the terms of any agreements evidencing any of the Director Fees (the “Award Agreements”), including the timing, pricing, and amounts of Awards, shall be determined by the Board, and its determination shall be final and conclusive upon all parties in interest.  In the event of any conflict between an Award Agreement and this Plan, the terms of this Plan shall govern.

		
	(iii)
	Except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the Board may delegate to the officers or employees of the Company and its subsidiaries the authority to execute and deliver such instruments and documents, to do all such acts and things, and to take all such other steps deemed necessary, advisable or convenient for the effective administration of the Plan in accordance with its terms and purpose, except that the Board may not delegate any discretionary authority with respect to substantive decisions or functions regarding the Plan or benefits and awards thereunder, including, but not limited to, decisions regarding the timing, eligibility, pricing, amount or other material terms of such benefits or awards. Any such delegation may be revoked by the Board at any time.

		
	(iv)
	To the extent that the Board determines that the restrictions imposed by the Plan preclude the achievement of the material purposes of the benefit provided herein in jurisdictions outside the United States, if applicable, the Board will have the authority and discretion to modify those restrictions as the Board determines to be necessary or appropriate to conform to applicable requirements or practices of jurisdictions outside of the United States.

6.2    Limits of Liability.  

	
			
	 
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	(i)
	Any liability of the Company or a subsidiary to any Director with respect to an Award shall be based solely upon contractual obligations created by the Plan and the applicable Award Agreement.

		
	(ii)
	Neither the Company nor a subsidiary, nor any member of the Board or any other person participating in any determination of any question under the Plan, or in the interpretation, administration or application of the Plan, shall have any liability to any party for any action taken or not taken in good faith under the Plan except as may be expressly provided by statute.

6.3    Rights of Director.  Nothing contained in this Plan or in any Award Agreement (or in any other documents related to this Plan or to any award or Award Agreement) shall confer upon any Director any right to continue in the service of the Company or a subsidiary, constitute any contract or limit in any way the right of the Company or a subsidiary to change such person’s compensation or other benefits or to terminate the service of such person with or without cause or confer any right on the part of such person to be nominated for reelection to the Board, to be reelected to the Board or to be appointed to any committee of the Board.
6.4    Form and Time of Elections.  Any election required or permitted shall be in writing, and shall be deemed to be filed when timely delivered to the Secretary of the Company.
6.5    Action by Company.  Any action required or permitted to be taken by the Company shall be by resolution of the Board, or by action of one or more members of the Board (including a committee of the Board) who are duly authorized to act for the Board or (except to the extent prohibited by the provisions of Rule 16b-3, applicable local law, the applicable rules of any stock exchange, or any other applicable rules) by a duly authorized officer of the Company.
6.6    Hospira, Inc. 2004 Long-Term Stock Incentive Plan.  Any shares of Stock awarded to, or subject to Awards granted to Directors under this Plan as Director Fees shall be issued pursuant to the Hospira, Inc. 2004 Long-Term Stock Incentive Plan (the “2004 Plan”), subject to all of the terms and conditions herein.  Except in the event of conflict, all provisions of the 2004 Plan shall apply to this Plan.  In the event of any conflict between the provisions of the 2004 Plan and this Plan, this Plan shall control, provided that the Director Fees granted provided may not exceed the share limitations set forth in the 2004 Plan. 
SECTION 7 
MISCELLANEOUS
7.1    Beneficiaries.  Each Director or former Director entitled to payment of Director Fees hereunder, from time to time may name any person or persons (who may be named contingently or successively) to whom any Director Fees earned by him and payable to him are to be paid in case of his death before he receives any or all of such Director Fees.  Each designation will revoke all prior designations by the same Director or former Director, shall be in form prescribed by the Company, and will be effective only when filed by the Director or former Director in writing with the Secretary of the Company during his lifetime. If a deceased Director or former Director shall have failed to name a beneficiary in the manner provided above, or if the beneficiary named by a Director or former Director dies before him or before payment of all the Director’s or former Director’s Director Fees, the Company, in its discretion, may direct payment in a single sum of any remaining Director Fees to either:
		
	(i)
	any one or more or all of the next of kin (including the surviving spouse) of the Director or former Director, and in such proportions as the Company determines; or

		
	(ii)
	the legal representative or representatives of the estate of the last to die of the Director or former Director and his last surviving beneficiary.

The person or persons to whom any deceased Director’s or former Director’s Director Fees are payable under this section will be referred to as his “beneficiary.”

	
			
	 
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7.2    Alienation of Rights.  Payment of Director Fees will be made only to the person entitled thereto in accordance with the terms of the Plan, and Director Fees are not in any way subject to the debts or other obligations of persons entitled thereto, and may not be voluntarily or involuntarily sold, transferred or assigned. 
7.3    Facility of Payment.  When a person entitled to a payment under the Plan is under legal disability or, in the Company’s opinion, is in any way incapacitated so as to be unable to manage his financial affairs, the Company may direct that payment be made to such person’s legal representative, or to a relative or friend of such person for his benefit, and with respect to the Director’s Stock Unit Account (defined in Section 9 below), if any, any distribution shall be pursuant to the Director’s beneficiary designation form, as may be on file with the Company. Any payment made in accordance with the preceding sentence shall be in complete discharge of the Company’s obligation to make such payment under the Plan.
7.4    Unfunded Plan.  Any obligation to pay cash or Deferred Fees under this Plan shall constitute an unfunded unsecured obligation of the Company.  The Company may, but shall not be obligated to, establish a trust to hold assets for the purpose of satisfying obligations under this Plan.
7.5    Adjustment Provisions.  In the event of a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), in addition to any adjustments made pursuant to Section 3.4 of the 2004 Plan, the Board may adjust the Director Fees (including Deferred Fees) to preserve the benefits or potential benefits of participation in the Plan.
7.6    Gender and Number.  Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular.

SECTION 8 
AMENDMENT AND DISCONTINUANCE
8.1    The Board may, at any time, amend or terminate the Plan, and may amend any Award Agreement, provided that no amendment or termination may, in the absence of written consent to the change by the affected Director (or, if the Director is not then living, the affected beneficiary), adversely affect the rights of any Director or beneficiary under any Award granted under the Plan prior to the date such amendment is adopted by the Board; and further provided, that adjustments pursuant to Section 9.4 shall not be subject to the foregoing limitations of this Section 8.  Subject to Section 9.4, any amendment or discontinuance of the Plan shall be prospective in operation only, and shall not affect the payment of any Director Fees theretofore earned by any Director, or the conditions under which any such fees are to be paid or forfeited under the Plan.  The Compensation Committee shall have the authority to make “minor amendments” to the Plan.  For purposes of the foregoing, a “minor amendment” is any amendment which is solely designed to achieve compliance with applicable legislation or regulation.  Notwithstanding the foregoing or any provision to the contrary, the Plan shall not be terminated at any time when the Company is experiencing a downturn in its financial health.  
SECTION 9 
ELECTIVE DEFERRALS
9.1    DEFERRAL ELECTION

		
	(i)
	Annual Deferral Election.  A Director who would otherwise be entitled to receive Director Fees in the form of shares of Stock or a cash payment under the terms of the Plan may instead elect to defer delivery of all or a portion of such fees, subject to the following terms of this Section 9 (once deferred, the “Deferred Fees”).  An election to defer the Director Fees shall be made on an election form (the “Deferral Election”).  The form of distribution of the Deferred Fees shall be elected by 

	
			
	 
	6

	 

the Director on the Deferral Election form, which may be either (a) a lump sum payment on the first business day following the quarter within which the Director’s service on the Board terminates (the “Distribution Commencement Date”) or (b) annual installments for a number of years, not exceeding 10, payable on the Distribution Commencement Date and each anniversary thereof. Except as provided in paragraphs (ii) and (iii) of this Section 9.1, any Deferral Election shall be made in the calendar year before the year in which the Director Fees are payable and shall be irrevocable as of the first day of the year for which it is to be effective.  Deferral Elections shall remain in effect with respect to any future year unless a new election with respect to such year is filed in accordance with paragraph (iii) of this Section 9.1. 
		
	(ii)
	Deferral Election for New Directors.  Notwithstanding the foregoing, a Deferral Election by a Director upon first becoming a member of the Board must be submitted within 30 days after becoming a Director and shall be effective for all fees paid for services performed following the date on which the election is received by the Company. Any such Deferral Elections shall be irrevocable as of its effective date and shall remain in effect with respect to the calendar year in which it was made and any future year unless a new election with respect to Deferral Election is filed in accordance with paragraph (iii) of this Section 9.1. 

		
	(iii)
	Subsequent Changes to Initial Deferrals.

		
	(a)
	Deferral Elections shall remain in effect with respect to Director Fees to be paid in any future year unless a new election with respect to such year is filed by the Director making the change prior to the year to which it is intended to apply; and 

		
	(b)
	 A Director may elect to change the timing or form of distribution for his or her Deferred Fees (a “Subsequent Election”), provided the Subsequent Election is made at least 12 months before the date of the first scheduled payment, if any; the Subsequent Election is not effective for at least 12 months after the date of the election; and the first payment under the Subsequent Election must be delayed for at least five years from the date it otherwise would have been paid. Notwithstanding the foregoing provisions of this subparagraph (b), payment of the Deferred Fees shall begin under the terms of a Director’s most current Deferral Election as of first business day following the quarter within which the Director’s services on the Board terminates due to a death or disability. For this purpose, “disability” shall mean that the Director 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.

		
	(c)
	During 2007 and 2008, a Director may elect to change the timing or form of distribution for his Deferred Fees without meeting the foregoing requirements, provided that no Director whose Distribution Commencement Date occurs (or would otherwise occur) within 2007 may make or change a payment election during 2007 and no Director whose Distribution Commencement Date occurs (or would otherwise occur) within 2008 may make or change a payment election during 2008.

		
	(iv)
	Conversion of Cash or Restricted Stock to Stock Units.  Deferred Fees shall be credited to a Stock Unit Account (as defined below) under this Section 9 as follows:

		
	(a)
	Cash-based Deferred Fees shall be converted to Stock Units by dividing the cash-based fees the Director elected to defer by the Fair Market Value of the Stock as of the date the Director would have had a right to payment of such Director Fees had the Director not made a Deferral Election.

	
			
	 
	7

	 

		
	(b)
	Stock-based Deferred Fees shall be converted to that number of Stock Units equal to that number of shares of Restricted Stock the Director elected to defer.

9.2    ACCOUNTS
		
	(i)
	Stock Unit Account.  A “Stock Unit Account” shall be maintained on behalf of each Director who elects to defer all or a portion of his Director Fees under this Section 9, for the period during which delivery of such fees is deferred. A Director’s Stock Unit Account shall be subject to the following adjustments:

		
	(a)
	The Stock Unit Account will be credited with Stock Units as of the date on which the Director would have been entitled to payment of the cash-based fees or the date on which the Director would have been granted the Restricted Stock award, both as if the Director had not made a Deferral Election with respect to such fees.

		
	(b)
	As of each dividend payment date for the Stock, the Director’s Stock Unit Account shall be credited with additional Stock Units (including fractional Stock Units) equal to (i) the amount of the dividend that would be payable with respect to the number of shares of Stock equal to the number of Stock Units credited to the Director’s Stock Unit Account on the dividend record date, divided by (ii) the Fair Market Value of a share of Stock on the dividend payment date. 

		
	(c)
	As of the date of any distribution with respect to a Director’s Stock Unit Account under Section 9.3, the Stock Units credited to a Director’s Stock Unit Account shall be reduced by the amounts distributed to the Director.

		
	(ii)
	Statement of Accounts.  As soon as practicable after the end of each Plan Year, the Company shall provide each Director having an Stock Unit Account under the Plan with a statement of the transactions in his Stock Unit Account during that year and his account balance as of the end of the year.

9.3    DISTRIBUTIONS
		
	(i)
	General.  Subject to the terms of this Section 9.3, a Director shall specify, as part of his Deferral Election with respect to Deferred Fees, the time and form of the distribution of the amounts deferred pursuant to such election.  In the event that an election with respect to the timing or form of distribution is not in effect as of the date of the Director’s termination (including a termination due to the Director’s death), the Director’s entire Stock Unit Account shall be distributed in a single lump sum stock payment within 60 days following the first anniversary of the Director’s date of termination or death. 

		
	(ii)
	If a scheduled distribution date would otherwise occur after a dividend record date but before the payment of the dividend, the distribution may, in the discretion of the Board, be deferred (but not more than 30 days) until the dividend payment date.

		
	(iii)
	In determining a Director’s right to distributions under this Section 9.3, the vesting provisions of Section 4 of the Plan shall apply to the Stock Units credited to the Director’s Stock Unit Account as though each unit represented one share of Stock, and with all units attributable to payment of dividends being fully vested as of the date they are credited to the Director’s Stock Unit Account. 

9.4    Termination of Deferral by Company.  The Board shall retain the right to terminate, at any time, for any reason, or no reason, the deferral provisions under this Section 9 (which may, but need not, be in conjunction with a termination of the Plan), and shall distribute all Stock Unit Accounts to Directors provided (i) the Company terminates all non-qualified deferred compensation arrangements of the same type as this Plan at the same time that the Plan is 

	
			
	 
	8

	 

terminated; (ii) except for payments that would be payable if the termination had not occurred, the Company makes no payments to Directors for 12 months but makes all payments within 24 months; and (iii) the Company adopts no new non‐qualified deferred compensation arrangement of the same type as this Plan for three years. Notwithstanding the foregoing or any provision to the contrary, the Plan shall not be terminated at any time when the Company is experiencing a downturn in its financial health.

	
			
	 
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