Document:

Exhibit 10.1

 

Summary of
2009 Terms of Employment for Named Executive Officers

 

Salary

 

	
  Officer

  	
   

  	
  Salary

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Christopher B. Begley, Chairman and Chief
  Executive Officer

  	
   

  	
  $

  	
  1,050,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Terrence C. Kearney, Chief Operating
  Officer

  	
   

  	
  625,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Sumant Ramachandra, Senior Vice President
  and Chief Scientific Officer

  	
   

  	
  475,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Thomas E. Werner, Senior Vice President,
  Finance and Chief Financial Officer

  	
   

  	
  445,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Brian J. Smith, Senior Vice President,
  General Counsel and Secretary

  	
   

  	
  425,000

  	
   

  
					

 

The salary for each officer is the same as their prior year’s salary
(except for Dr. Ramachandra, who joined Hospira on July 7,
2008).  The prior year’s salary took
effect on March 24, 2008.

 

Annual Cash Incentive

 

Each is a participant in the Hospira Inc. 2004 Performance Incentive
Plan, which is filed as Exhibit 10.9 to Hospira’s Annual Report on Form 10-K
for the year ended December 31, 2007 (the “2007 Form 10-K”). 
The plan provides for a base award equal to 2.0% of Hospira’s earnings before interest,
taxes, depreciation and amortization for the chief executive officer, 1.5% for
the chief operating officer and 1.0% for the other named executive
officers.  The compensation committee of Hospira’s board of directors has
discretion to reduce, but not increase, the award from the base award. 
The committee will consider Hospira’s adjusted net income, net sales, cash
flows and corporate well-being as factors in exercising such discretion and
determining actual awards payable under such plan for 2009 performance.

 

Equity

 

Each officer is eligible to receive option and performance share awards
under the Hospira 2004 Long-Term Stock Incentive Plan, which is filed as Exhibit 10.8
to Hospira’s 2007 Form 10-K.   Awards are made in the discretion
of the compensation committee of Hospira’s board of directors.

 

Change in Control and Severance Pay

 

Each officer is party to a change-in-control agreement in the forms
filed as Exhibit 10.12 (for each officer other than Mr. Werner and Dr. Ramachandra)
to Hospira’s Quarterly Report on Form 10-Q for the quarter ended March 31,
2004.  The form for Mr. Werner was
filed as Exhibit 10.1 to Hospira’s Current Report on Form 8-K filed
on August 11, 2006.  These agreements were amended in the forms filed
as Exhibit 10.12(a)(i) (for Mr. Begley, Mr. Kearney and Mr. Smith)  and Exhibit 10.12(b)(i) (for Mr. Werner)
to Hospira’s 2007 Form 10-K.  The
form for Dr. Ramachandra is filed as Exhibit 10.6(c) to this
2008 Form 10-K.

 

All of the named executive officers, except the chairman and chief
executive officer, are covered by Hospira’s Corporate Officer Severance Plan,
which provides severance pay and benefits to corporate officers and is filed as
Exhibit 10.10 to this 2008 Form 10-K.

 

Non-qualified Deferred Compensation Plan

 

Each officer is eligible to participate in Hospira’s Non-Qualified
Savings and Investment Plan, a non-qualified deferred compensation plan, which
is filed as Exhibit 4 to Hospira’s Registration Statement on Form S-8,
filed on August 25, 2008.

 

A description of the above-described items is included in Hospira’s
proxy statement for the 2008 Annual Meeting of Shareholders.Exhibit 10.6(c)

 

AGREEMENT REGARDING

CHANGE IN CONTROL

 

THIS AGREEMENT (“Agreement”), is made and
entered into as of the
              
day of
              ,
2008 (the “Effective Date”) by and between Hospira, Inc. (the “Company”)
and
                              
(the “Executive”).

 

WITNESSETH THAT:

 

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

 

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

 

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

 

1.     AGREEMENT TERM. THE INITIAL
“AGREEMENT TERM” SHALL BEGIN ON THE EFFECTIVE DATE AND SHALL CONTINUE THROUGH
DECEMBER 31, 2011. AS OF DECEMBER 31, 2008, AND AS OF EACH DECEMBER 31
THEREAFTER, THE AGREEMENT TERM SHALL EXTEND AUTOMATICALLY TO THE THIRD
ANNIVERSARY THEREOF UNLESS THE COMPANY GIVES NOTICE TO THE EXECUTIVE PRIOR TO
THE DATE OF SUCH EXTENSION THAT THE AGREEMENT TERM WILL NOT BE EXTENDED.
NOTWITHSTANDING THE FOREGOING, IF A CHANGE IN CONTROL (AS DEFINED IN SECTION 7
BELOW), OCCURS DURING THE AGREEMENT TERM, THE AGREEMENT TERM SHALL CONTINUE
THROUGH AND TERMINATE ON THE SECOND ANNIVERSARY OF THE DATE ON WHICH THE CHANGE
IN CONTROL OCCURS.

 

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

 

1

 

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

 

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

 

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

 

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

 

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

 

(iii)          a reduction in the
Executive’s annual base salary (or a material change in the frequency of
payment) as in 

 

2

 

effect immediately prior to the Change in
Control as the same may be increased from time to time;

 

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

 

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

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

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

 

(c)           For any annual
incentive (bonus) plan or arrangement in which the Executive participates for
the performance period 

 

4

 

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

 

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

 

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

 

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

 

5

 

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

 

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

 

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

 

If the Executive is a participant in the Hospira Performance Incentive
Plan, the Hospira 2004 Long-Term Stock Incentive Plan, or any successor
thereto, the Executive’s annual incentive (bonus) award for the performance
period which includes the date of termination under paragraphs (c) and (d)(ii) above
and, if applicable, for the period preceding the date of termination under
paragraph (b) shall, be determined under the bonus levels communicated in
writing to the Executive by the Company for such year.

 

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

 

4.     MITIGATION. The Executive
shall not be required to mitigate the amount of any payment provided for in
this Agreement by seeking other employment or 

 

6

 

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

 

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

 

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

 

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

 

(c)           If the Executive gives
written notice to the Company of any objection to the results of the Company’s
calculations within 60 days of the Executive’s receipt of written notice
thereof, the dispute shall be referred for determination to 

 

7

 

independent tax counsel selected by the
Company and reasonably acceptable to the Executive (“Tax Counsel”). The Company
shall pay all fees and expenses of such Tax Counsel. Pending such determination
by Tax Counsel, the Company shall pay the Executive the Make-Whole Amount as
determined by it in good faith. The Company shall pay the Executive any
additional amount determined by Tax Counsel to be due under this Section 5
(together with interest thereon at a rate equal to 120% of the Federal
short-term rate determined under section 1274(d) of the Code) promptly
after such determination.

 

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

 

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

 

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

 

8

 

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

 

(f)            Should a Tax Authority
finally determine that an additional Excise Tax is owed, then the Company shall
pay an additional Make-Whole Amount to the Executive in a 

 

9

 

manner consistent with this Section 5
with respect to any additional Excise Tax and any assessed interest, fines, or
penalties. If any Excise Tax as calculated by the Company or Tax Counsel, as
the case may be, is finally determined by a Tax Authority to exceed the amount
required to be paid under applicable law, then the Executive shall repay such
excess to the Company within 30 days of such determination; provided that such
repayment shall be reduced by the amount of any taxes paid by the Executive on
such excess which is not offset by the tax benefit attributable to the
repayment.

 

(g)           Notwithstanding the
foregoing, the payment of any Make-Whole Amount to an Executive shall be made
no later than the end of the calendar year following the calendar year in which
the Excise Tax is paid.”

 

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

 

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

 

(a)           Change in Ownership

 

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

 

10

 

acquisition of stock for
purposes of this Section. This paragraph (a)(i) applies only when there is
a transfer of the Company’s stock (or issuance of stock of the Company) and
stock in the Company remains outstanding after the transaction.

 

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

 

(b)           Change in Effective Control

 

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

 

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

 

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

 

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

 

11

 

(c)           Change in Ownership of Assets

 

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

 

(ii)           Transfers to a related
person—There is no Change in Control event under this paragraph (c) when
there is a transfer to an entity that is controlled by the shareholders of the
transferring corporation immediately after the transfer, as provided in this
paragraph (c)(ii). A transfer of assets by the Company is not treated as a
Change in Ownership of Assets if the assets are transferred to—

 

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

 

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

 

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

 

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

 

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

 

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

 

12

 

change and not with respect to the ownership interest in the other
corporation.

 

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

 

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

 

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

 

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

 

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

 

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

 

(a)           if the award includes a
provision substantially similar to the provision contained in the first
paragraph in Appendix A, 

 

13

 

then after a Change in Control no forfeiture
shall be effected pursuant to such provision unless the Executive shall have
been terminated for “Cause” within the meaning of paragraph 2(b) above;
and

 

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

 

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

 

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

 

12.   AMENDMENT. This Agreement may
be amended or canceled only by mutual agreement of the parties in writing
without the consent of any other person. So long as the Executive lives, no
person, other than the parties hereto, shall have any rights under or interest
in this Agreement or the subject matter hereof. 
Any amendment or cancellation of this Agreement shall not accelerate the
payment of any compensation or benefit hereunder and shall not otherwise modify
or change the time or times when compensation or benefits are payable
hereunder.

 

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

 

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

 

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

 

14

 

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

 

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

 

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

 

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

 

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

 

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

 

to the
Company:

 

Corporate Vice President of Human Resources

Hospira, Inc.

275 North Field Drive

Lake Forest, Illinois 60064

 

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

 

General Counsel and Secretary

Hospira, Inc.

275 North Field Drive

Lake Forest, Illinois 60064

 

or to the Executive:

 

15

 

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

 

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

 

19.   LEGAL AND ENFORCEMENT COSTS.
The provisions of this Section 19 shall apply if it becomes necessary or
desirable for the Executive to retain legal counsel or incur other costs and
expenses in connection with enforcing any and all rights under this Agreement
or any other compensation plan maintained by the Company, including, but not
limited to, Hospira 2004 Long-Term Stock Incentive Plan, the  Hospira, Inc. Incentive Plan, or, in
each case, any trust adopted pursuant thereto:

 

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

 

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

 

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

 

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

 

16

 

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

 

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

 

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

 

17

 

IN WITNESS THEREOF, the Executive has
hereunto set his hand, and the Company has caused these presents to be executed
in its name and on its behalf, and its corporate seal to be hereunto affixed on
this            day of
                      ,
2008, all as of the Effective Date.

 

	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HOSPIRA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  
	
   

  	
   

  
	
   

  	
  Christopher B. Begley

  
	
   

  	
  Its: Chief Executive Officer

  
	
   

  	
   

  
	
  ATTEST:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Brian J.
  Smith

  	
   

  
	
  Secretary

  	
   

  

 

18

 

APPENDIX A

 

AGREEMENT REGARDING CHANGE IN CONTROL

FORFEITURE PROVISION REFERENCED IN SECTION 9

 

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

 

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

 

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

 

1

 

APPENDIX B

 

AGREEMENT REGARDING CHANGE IN CONTROL

ALTERNATIVE DISPUTE RESOLUTION PROCEDURES

 

The parties to the Agreement Regarding Change
in Control dated as of the        day of
                        ,
2008 (the “Agreement”) recognize that a bona fide dispute as to certain matters
may arise from time to time during the term of the Agreement which relates to
either party’s rights and/or obligations. To have such a dispute resolved by
this Alternative Dispute Resolution (“ADR”) provision, a party first must send
written notice of the dispute to the other party for attempted resolution by
good faith negotiations between the Executive and the Company within
twenty-eight (28) days after such notice is received (all references to “days”
in the ADR provision are to calendar days).

 

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

 

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

 

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

 

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

 

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

 

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

 

1

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

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

 

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

 

4

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