HSP

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

November 14, 2014

Date of Report (Date of Earliest Event Reported)

HOSPIRA, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction of Incorporation)

275 N. Field Drive
Lake Forest, Illinois 60045
(Address of Principal Executive Offices, including Zip Code)

Registrant’s Telephone Number, Including Area Code:  (224) 212-2000

Not Applicable
(Former Name or Former Address, If Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o                                    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o                                    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o                                    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o                                    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 7.01              Regulation FD

Furnished as Exhibits 99.1 and 99.2 are copies of a Notice of Pendency and Proposed Settlement of Shareholder Derivative Actions (the “Notice”) and a Stipulation of Settlement (the “Stipulation”) relating to pending shareholder derivative lawsuits that is described in Item 8.01 of this Report.

Item 8.01              Other Events

On November 14, 2014, in the U.S. District Court for the Northern District of Illinois, Eastern Division, the Court entered an order preliminarily approving the Stipulation that sets forth the terms of settlement of two shareholder derivative lawsuits (the “Order”), one pending in that court and the other pending in the Delaware Chancery Court.  Pursuant to the Order, the District Court will hold a hearing on January 23, 2015, after which the Court will determine whether to grant final approval of the Stipulation.

The lawsuits name as defendants certain current and former Hospira, Inc. officers and members of Hospira’s Board of Directors. The first case, which consolidated two lawsuits filed in the United States District Court for the Northern District of Illinois in December 2011, is: Lori Ravenscroft Geare and Robert J. Casey, II, Derivatively for the Benefit of Hospira, Inc. v. Christopher B. Begley, et. al. (Case No. 11-cv-09074 (JJT)).  The second case, filed in June 2014 in Delaware Chancery Court, is: International Union of Operating Engineers Pension Plan of Eastern Pennsylvania and Delaware v. Christopher B. Begley, et. al. (C.A. No. 9926-VCP).

The lawsuits were purportedly brought on behalf of and for the benefit of Hospira, and generally allege breaches of fiduciary duties and securities law violations by the individual defendants.  It is anticipated that the settlement will be fully funded by insurance proceeds.  As part of the Order, Hospira must (1) cause copies of the Notice and the Stipulation to be furnished in a Current Report on Form 8-K; and (2) post the Notice and Stipulation on its website, at www.hospirainvestor.com.

Private Securities Litigation Reform Act of 1995 —
A Caution Concerning Forward-Looking Statements

This Form 8-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the impact of the FDA’s actions on the Company’s operations.  The Company cautions that these forward-looking statements are subject to risks, uncertainties and assumptions, many of which are beyond the Company’s control, which may cause actual results to differ materially from those indicated in the forward-looking statements for a number of reasons, including without limitation, additional actions by or requests from the FDA and unanticipated costs or delays associated with resolution of these matters.  Additional information concerning other factors is contained under the headings “Risk Factors” and “Management Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s latest Annual Report on Form 10-K and Forms 10-Q filed with the Securities and Exchange Commission, which are incorporated by reference.  The Company undertakes no obligation to release publicly any revisions to forward-looking statements as the result of subsequent events or developments, unless required by law.

Item 9.01                                           Financial Statements and Exhibits.

(d) Exhibits.

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The Company is furnishing the following exhibits pursuant to Item 7.01 of this Report:

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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EXHIBIT INDEX

Item 9.01                                           Financial Statements and Exhibits.

(d) Exhibits.

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Exhibit 99.1

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF SHAREHOLDER
DERIVATIVE ACTIONS

TO:                           ALL CURRENT HOLDERS OF HOSPIRA, INC. (“HOSPIRA” OR “THE COMPANY”) COMMON STOCK AS OF NOVEMBER 3, 2014 (“HOSPIRA SHAREHOLDERS”).

PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY.  YOUR RIGHTS MAY BE AFFECTED.  THIS NOTICE RELATES TO A PROPOSED SETTLEMENT AND DISMISSAL OF SHAREHOLDER DERIVATIVE LITIGATION AND CONTAINS IMPORTANT INFORMATION REGARDING YOUR RIGHTS.  YOUR RIGHTS MAY BE AFFECTED BY LEGAL PROCEEDINGS IN THE ACTIONS.

IF THE COURT APPROVES THE SETTLEMENT AND DISMISSAL OF THE ACTIONS, YOU WILL BE FOREVER BARRED FROM CONTESTING THE APPROVAL OF THE PROPOSED SETTLEMENT AND FROM PURSUING THE RELEASED CLAIMS.  THE ACTIONS ARE NOT “CLASS ACTIONS.” THE SETTLEMENT TERMS ARE DESIGNED TO BENEFIT HOSPIRA.  THUS, THERE IS NO COMMON FUND UPON WHICH YOU CAN MAKE A CLAIM FOR A MONETARY PAYMENT.

THE COURT HAS MADE NO FINDINGS OR DETERMINATIONS WITH RESPECT TO THE MERITS OF THE ACTIONS.  THE RECITATION OF THE BACKGROUND AND CIRCUMSTANCES OF THE SETTLEMENT CONTAINED HEREIN DOES NOT CONSTITUTE THE FINDINGS OF THE COURT.  IT IS BASED ON REPRESENTATIONS MADE TO THE COURT BY COUNSEL FOR THE PARTIES.

This Notice is given pursuant to a Preliminary Approval Order of the U.S. District Court, for the Northern District of Illinois (the “Court”).  The purpose of the Notice is to advise you that the parties in the consolidated derivative action captioned Casey v. Begley, Case No. 11-cv-09074 (JJT) (the “Illinois Action”), pending in the U.S. District Court for the Northern District of Illinois, and the verified shareholder derivative action captioned International Union of Operating Engineers Pension Plan of Eastern Pennsylvania and Delaware v. Begley, C.A. No. 9926-VCP, pending in the Court of Chancery of the State of Delaware (the “Delaware Action” and collectively, the “Actions”), have agreed to settle the Actions (the “Settlement”) on the terms and conditions set forth in the Stipulation of Settlement dated November 3, 2014 (the “Stipulation”).  A copy of the Stipulation may be inspected at the Clerk of the Court’s Office for the United States District Court, for the Northern District of Illinois, Everett McKinley Dirksen United States Courthouse, 219 South Dearborn Street, Chicago, Illinois 60604.  The Stipulation

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also is available for viewing and/or downloading at the website of Hospira at www.hospira.com.  All capitalized terms used herein, unless otherwise defined, shall have the same meanings as set forth in the Stipulation.

As explained below, a Settlement Hearing will be conducted on January 23, 2015 at 10:00 a.m., before the Honorable John J. Tharp, Jr., District Judge of the U.S. District Court, Northern District of Illinois, Everett McKinley Dirksen U.S. Courthouse, 219 South Dearborn Street, Courtroom 1419, Chicago, Illinois 60604 (the “District Court”), to determine whether to approve the settlement of the Illinois Action. If the Stipulation is approved by the District Court, and if the Judgment is entered in the Illinois Action, the releases and the Judgment may preclude any Hospira shareholder from further pursuing the Delaware Action. Further, upon approval by the District Court, the Stipulation of Settlement requires the Delaware Plaintiffs to seek dismissal of the Delaware Action with prejudice by the Delaware Court of Chancery.

You have the right to object to the Settlement in the manner provided herein.  If you fail to object in the manner provided herein at least fourteen (14) calendar days prior to the Settlement Hearing, you will be deemed to have waived your objections and will be bound by the Judgment to be entered and the releases as provided in the Stipulation, unless otherwise ordered by the Court.

This Notice is not an expression of any opinion by the Court with respect to the merits of the allegations or claims made in the Actions, the merits of the defenses asserted, or the fairness or adequacy of the proposed Settlement.  This Notice is merely to advise you of the pendency and terms of the proposed Settlement, and your rights thereto.

I.                                        SUMMARY OF THE ACTIONS AND SETTLEMENT NEGOTIATIONS

The Illinois Action was filed by Plaintiffs solely on behalf of and for the benefit of

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Hospira and against the Individual Defendants.  The first of the actions that were consolidated was filed on December 21, 2011 and subsequent actions were filed and consolidated on August 10, 2012.  Plaintiffs generally allege, among other things, that certain of the Company’s current and former officers and directors breached their fiduciary duties to the Company by, among other things: (1) approving Project Fuel without first obtaining a comprehensive review of the state of Hospira’s FDA compliance; (2) causing Hospira to continue Project Fuel even after it became clear that Hospira was having U.S. Food and Drug Administration (“FDA”) compliance issues; (3) knowingly allowing the Company to publicly disclose improper statements regarding Hospira’s financial results; (4) repurchasing shares at prices they knew were inflated or, alternatively, with awareness that they had not yet gauged the full extent and cost of the Company’s legal compliance issues; and (5) selling personally held Hospira stock (or permitting such sales) on the basis of non-public information.  The Individual Defendants and Hospira deny these allegations.

Counsel for the Plaintiffs and Defendants (the “Illinois Parties”) engaged in arm’s-length negotiations concerning the terms and conditions of a potential resolution of the Action, and the Illinois Parties agreed to participate in and scheduled a mediation session with Mr. Jed Melnick, Esq. (the “Mediator”) on May 23, 2014.  In preparation for the mediation session, the Parties submitted detailed mediation briefs.  Following the May 23, 2014 mediation session and for the next several months, the Illinois Parties continued arm’s-length settlement negotiations through mediation facilitated by the Mediator.  The Delaware Plaintiff filed the Delaware Action on July 22, 2014.  The Delaware Action was based on a review of internal documents obtained from Hospira pursuant to the Delaware Plaintiff’s inspection demand dated May 15, 2013. The Delaware Action asserted claims for breach of fiduciary duty, corporate waste, and insider

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trading based on alleged FDA compliance problems at Hospira. The Delaware Action further asserted that the Delaware Plaintiff’s litigation demand on the Board dated February 7, 2014 had been wrongfully refused.

After the Illinois Parties agreed to key terms of a settlement (excluding attorneys’ fees), Defendants engaged in settlement discussions with the Delaware Plaintiff.  Defendants shared the settlement terms with the Delaware Plaintiff, and subsequently negotiated the inclusion of additional corporate governance reforms.  The Parties and their respective counsel spent significant work preparing, reviewing, negotiating, and ultimately agreeing upon the corporate governance reforms set forth in Exhibit A attached to the Stipulation (the “Reforms”) and attached hereto as Exhibit 1.  After reaching an agreement on the material terms of a settlement with both the Illinois and the Delaware Plaintiffs, the Parties engaged in further arm’s-length negotiations, briefing, and mediation with the Mediator concerning the amount of an attorneys’ fee and expense award.  The Parties subsequently agreed to submit the issue to a binding decision by the Mediator, subject to review and final approval by the Court.  On October 1, 2014, the Mediator recommended the Fee and Expense Award, including Incentive Amount, as set forth below.  Defendants agreed that they would not oppose awards in these amounts.  On November 3, 2014, the Parties agreed to and executed the Stipulation with the terms negotiated.

II.                                   THE SETTLEMENT TERMS

The terms and conditions of the proposed Settlement of the Actions are set forth in the Stipulation.  Hospira shall, within thirty (30) calendar days after entry of the Judgment, formally express and/or implement and maintain in substance the corporate commitments for a period of no less than three (3) years.

The corporate commitments are set forth in Exhibit 1, section II hereto, which is also

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Exhibit A, section II to the Stipulation.  Defendants acknowledge and agree that the commitments confer material benefits upon Hospira and its shareholders.  Defendants acknowledge that the prosecution of the Action was a meaningful factor in the decision to adopt and/or implement the corporate reforms set forth in Exhibit A, section I, and that the corporate commitments in Exhibit A, section II came about through settlement negotiations and Mediation.

In recognition of the benefits conferred upon Hospira as a result of the prosecution and settlement of the Actions, and subject to Court approval and as determined by the Mediator, Defendants have agreed to cause Hospira or its insurance carriers to pay Illinois Plaintiffs’ Counsel attorneys’ fees and expenses for the Action in an aggregate amount not to exceed $2.3  million, and to pay Delaware Plaintiff’s Counsel attorneys’ fees and expenses in the aggregate amount not to exceed $330,000 (together, the “Fee and Expense Amount”).  The Settlement Stipulation also provides that Plaintiffs’ Counsel may apply to the Court for an Incentive Award for each Plaintiff of an amount not to exceed $3,000, which amount shall be paid out of the Fee and Expense Amount.  The Fee and Expense Amount and Incentive Award Amount was negotiated after the Parties had negotiated the material terms of the Settlement and was the result of arm’s-length negotiations between the Parties and a decision from the Mediator.

This Notice provides a summary of some, but not all, of the changes that Hospira has enacted or agreed to enact as consideration for the Settlement as to the Actions.  For a list of all of the changes, please see Exhibit 1 hereto.

III.                              RELEASES

Upon the Effective Date, the Releasing Parties shall be deemed to have, and by operation of the Judgment shall have, fully, finally, and forever settled, released, discharged, extinguished, and dismissed with prejudice the Released Claims against the Released Parties; provided,

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however, that such release shall not affect any claims to enforce the terms of the Stipulation or the Settlement.

Also upon the Effective Date, each of the Released Parties shall be deemed to have, and by operation of the Judgment shall have, fully, finally, and forever settled, released, discharged, extinguished, and dismissed with prejudice all claims (including Unknown Claims), arising out of, relating to, or in connection with the institution, prosecution, assertion, settlement, or resolution of the Actions or the Released Claims against Plaintiffs and Plaintiffs’ Counsel; provided, however, that such release shall not affect any claims to enforce the terms of the Stipulation or the Settlement.  The Delaware Plaintiffs have agreed to seek dismissal of the Delaware Action if Judgment is entered in the Illinois Action and becomes Final.

IV.                               PLAINTIFFS’ CLAIMS AND BENEFITS OF THE SETTLEMENT

Plaintiffs believe that their Actions have substantial merit, and Plaintiffs’ entry into the Stipulation and Settlement is not intended to be and shall not be construed as an admission or concession concerning the relative strength or merit of the claims alleged in the Actions.  However, Plaintiffs and Plaintiffs’ Counsel recognize and acknowledge the significant risk, expense, and length of continued proceedings necessary to prosecute the Actions against Defendants through trial and possible appeals.  Plaintiffs’ Counsel also have taken into account the uncertain outcome and the risk of any litigation, especially in complex cases such as the Actions, as well as the difficulties and delays inherent in such litigation.  Plaintiffs’ Counsel are also mindful of the inherent problems of establishing demand futility, and the possible defenses to the claims alleged in the Actions.

Plaintiffs’ Counsel have conducted extensive investigation and work in the Actions, including, inter alia: (1) reviewing Hospira press releases, public statements, U.S. Securities and Exchange Commission filings, and securities analysts’ reports and advisories about the

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Company; (2) reviewing media reports about the Company; (3) researching the applicable law with respect to the claims alleged in the Actions and the potential defenses thereto; (4) preparing and filing the complaints; (5) obtaining and reviewing highly technical documents via a FOIA request to the FDA; (6) hiring and conferring with an industry expert to advise on the FOIA documents and to advise in the preparation and drafting of the Illinois and Delaware Complaints; (7) conducting extensive damages analyses; (8) drafting an opposition to Defendants’ motion to dismiss; (9) participating in informal conferences with Defendants’ counsel regarding the specific facts of the cases, the perceived strengths and weaknesses of the cases, and other issues in an effort to facilitate negotiations and fact gathering; (10) reviewing approximately 1,000 pages of confidential documents in connection with settlement discussions; (11) thoroughly investigating these matters through an inspection demand pursuant to 8 Delaware Code section 220; (12) reviewing and analyzing documents obtained by the inspection demand for purposes of preparing and filing the Delaware Action; (13) drafting proposed extensive corporate governance reforms for Defendants; and (14) negotiating this Settlement with Defendants, including drafting and submitting extensive mediation briefs.  Based on Plaintiffs’ Counsel’s thorough review and analysis of the relevant facts, allegations, defenses, and controlling legal principles, Plaintiffs’ Counsel believe that the Settlement set forth in the Stipulation is fair, reasonable, and adequate, and is in the best interests of and confers substantial benefits upon Hospira and its shareholders.  Plaintiffs therefore have agreed to settle the Actions upon the terms and subject to the conditions set forth in the Stipulation.

V.                                    DEFENDANTS’ DENIALS OF WRONGDOING

Defendants have denied and continue to deny the claims and contentions alleged in the Actions, along with all allegations of any wrongdoing or liability arising from any conduct, statements, acts, or omissions alleged, or that could have been alleged in the Actions or any

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shareholder demand relating to the events alleged in the Actions.  Defendants maintain that they have consistently fulfilled their fiduciary duties, acted at all times in good faith, and exercised their business judgment in the best interest of Hospira and its shareholders.  They have nevertheless concluded that further litigation would be protracted, expensive, and distracting and that it is desirable to settle the Actions upon the terms and conditions set forth in this Stipulation.  Defendants also have taken into account the uncertainty and risks inherent in any litigation, especially in complex cases like the Actions.  Defendants have also considered that the cost of settlement on the terms set forth in this Stipulation may be less than the estimated cost of continued defense of the Actions.  Defendants have, therefore, determined that it would be beneficial that the Actions be settled in the manner and upon the terms and conditions set forth in the Stipulation.

VI.                               THE SETTLEMENT HEARING

On January 23, 2015 at 10:00 a.m., the Settlement Hearing will be conducted before the Honorable John J. Tharp, Jr., District Judge of the United States District Court, Northern District of Illinois, Everett McKinley Dirksen United States Courthouse, 219 South Dearborn Street, Courtroom 1419, Chicago, Illinois 60604.  At the Settlement Hearing, the Court will: (1) determine whether the proposed Stipulation provides a fair, reasonable, and adequate resolution of the Action and is in the best interests of Hospira and its shareholders, and should be approved by the Court; (2) whether to approve the Fee and Expense Amount and the Incentive Award Amount; and (3) rule upon such other matters as the Court may deem necessary or appropriate.

VII.                          YOUR RIGHT TO BE HEARD AT THE SETTLEMENT HEARING

Any Hospira Shareholder may, but is not required to, appear in person and/or through counsel (at the shareholder’s expense) at the Settlement Hearing if you would like to comment on

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why the Stipulation, including the agreed-to Fee and Expense Amount and the Incentive Award Amount, should not be finally approved as a fair, reasonable, and adequate resolution of the Action, or why the Judgment should not be entered thereon.  If you want to be heard at the Settlement Hearing, you must first comply with the procedures for objecting, which are set forth below.  The Court has the right to change the date or time of the Settlement Hearing without further notice.  Thus, if you are planning to attend the Settlement Hearing, you should confirm the date and time before going to the Court.  HOSPIRA SHAREHOLDERS WHO HAVE NO OBJECTION TO THE STIPULATION DO NOT NEED TO APPEAR AT THE SETTLEMENT HEARING OR TAKE ANY OTHER ACTION.

VIII.                     PROCEDURES FOR OBJECTING TO THE STIPULATION

Hospira Shareholders have the right to object to any aspect of the Stipulation. You must object in writing, and you may request to be heard at the Settlement Hearing.  If you choose to object, then you must follow these procedures.

A.                                    You Must Make Detailed Objections in Writing

No later than fourteen (14) calendar days prior to the Settlement Hearing, such Person shall file with the Clerk of the Court, U.S. District Court, Northern District of Illinois, Everett McKinley Dirksen U.S. Courthouse, 219 South Dearborn Street, Chicago, Illinois  60604, the following information:

1.                                      a written objection to the Stipulation, as well as all documents and writings supporting such position;

2.                                      a written notice of the intention to appear if the Hospira Shareholder does intend to appear at the Settlement Hearing;

3.                                      proof of ownership of Hospira common stock, as well as documentary

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evidence of when such stock ownership was acquired;

4.                                      a detailed statement of the matters to be presented to the Court; and

5.                                      the grounds therefor or the reasons why such Person desires to appear in person or through counsel to be heard, as well as all documents and writings supporting such position.

The Court may not consider any objection that does not comply with these requirements.

B.                                    You Must Timely Deliver Written Objections to the Court, Plaintiffs’ Counsel, and Defendants’ Counsel

YOUR WRITTEN OBJECTIONS MUST BE ON FILE WITH THE CLERK OF THE COURT NO LATER THAN FOURTEEN (14) CALENDAR DAYS BEFORE THE SETTLEMENT HEARING.  The Court Clerk’s address is:

Clerk of the Court

U.S. District Court, Northern District of Illinois

Everett McKinley Dirksen U.S. Courthouse

219 South Dearborn Street

Chicago, IL 60604

On or before filing such papers with the Clerk of the Court, such papers shall be served by hand or overnight mail on the following counsel of record.

George C. Aguilar
ROBBINS ARROYO LLP
600 B Street, Suite 1900

San Diego, CA 92101

Telephone: (619) 525-3990

and

Laurence D. Paskowitz

THE PASKOWITZ LAW FIRM, P.C.

208 East 51st Street, Suite 380

New York, NY 10022

Telephone: (212) 685-0969

Co-Lead Counsel for Illinois Plaintiffs

and

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Robert C. Schubert

SCHUBERT JONCKHEER & KOLBE LLP

Three Embarcadero Center, Suite 1650

San Francisco, CA 94111

Telephone:  (415) 788-4220

and

James E. Miller

SHEPHERD, FINKELMAN, MILLER & SHAH, LLP

65 Main Street

Chester, CT 06412

Telephone: (860) 526-1100

Counsel for the International Union of Operating Engineers Pension Plan of Eastern Pennsylvania and Delaware

and

Joshua Rabinovitz

KIRKLAND & ELLIS LLP

300 North LaSalle Drive

Chicago, IL 60654

Telephone: (312) 862-2000

Counsel for the Defendants

Any Hospira shareholder who fails to object in the manner prescribed above shall be deemed to have waived such objections and shall be forever barred from raising such objection or otherwise contesting the Stipulation, including the Fee and Expense Amount and the Incentive Award Amount, and the Judgment, in this or any other action or proceeding.

IX.                              CONDITIONS FOR SETTLEMENT

The Settlement is conditioned upon the occurrence of certain events described in the Stipulation, which requires, among other things: (i) Court approval of the Stipulation following notice to Hospira Shareholders and the Settlement Hearing; (ii) entry of the Judgment in the Illinois Action; (iii) payment to Plaintiffs’ Counsel of the Fee and Expense Amount approved by the Court; (iv) the Judgment becoming Final; and (v) dismissal of the Delaware Action with

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prejudice.  If, for any reason, any one of the conditions described in the Stipulation does not occur, the Stipulation might be terminated and, if terminated, will become null and void; and the Parties to the Stipulation will be restored to their respective positions as of the date immediately prior to the execution date of the Stipulation.

X.                                   HOW TO OBTAIN ADDITIONAL INFORMATION

This Notice summarizes the Stipulation.  It is not a complete statement of the events of the Actions or the Stipulation.  There is additional information concerning the Settlement available in the Stipulation, which may be inspected during normal business hours at the office of the Clerk of the Court, United States District Court, Northern District of Illinois, Everett McKinley Dirksen United States Courthouse, 219 South Dearborn Street, Chicago, Illinois  60604; on Hospira’s corporate website at www.hospira.com; and on the websites of Robbins Arroyo LLP at https://www.robbinsarroyo.com/notices and Schubert, Jonckheer & Kolbe, LLP at www.schubertlawfirm.com.

PLEASE DO NOT CALL, WRITE, OR OTHERWISE DIRECT QUESTIONS TO THE COURT, THE CLERK’S OFFICE, OR HOSPIRA REGARDING THIS NOTICE.  For more information concerning the Settlement, you may also call or write to: Robbins Arroyo LLP, c/o Darnell R. Donahue, 600 B Street, Suite 1900, San Diego, CA 92101, Telephone: (619) 525-3990; or Schubert Jonckheer & Kolbe LLP, c/o Robert C. Schubert, Three Embarcadero Center, Suite 1650, San Francisco, CA 94111, Telephone: (415) 788-4220.

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Exhibit 99.2

Case: 1:11-cv-09074 Document #: 74 Filed: 11/03/14 Page 1 of 17 PageID #:1084

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

STIPULATION OF SETTLEMENT

This Stipulation of Settlement (“Stipulation”)(1) of the above-captioned action (the “Illinois Action”) and International Union of Operating Engineers Pension Plan of Eastern Pennsylvania and Delaware v. Begley, C.A. No. 9926-VCP, pending in the Court of Chancery of the State of Delaware (the “Delaware Action”), is entered into by: (a) Lori Ravenscroft Geare and Robert J. Casey, II (“Illinois Plaintiffs”) and the International Union of Operating Engineers Pension Plan of Eastern Pennsylvania and Delaware (“Delaware Plaintiff”) (collectively, “Plaintiffs”); (b) nominal defendant Hospira, Inc. (“Hospira” or the “Company”); and (c) Christopher B. Begley, F. Michael Ball, Thomas E. Werner, Irving W. Bailey, II, Jacque J. Sokolov, Barbara L. Bowles, Roger W. Hale, John C. Staley, Connie R. Curran, Heino von Prondzynski, Mark F. Wheeler, Terrence C. Kearney, Ronald A. Matricaria, and Brian J. Smith (collectively, the “Individual Defendants,” and collectively with Hospira, the “Defendants”).(2) This Stipulation is intended by the Parties to fully, finally, and forever compromise, resolve, discharge, and settle the Released Claims, subject to the approval of the U.S. District Court for the Northern District of Illinois (the “Court”).

NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by the Parties that, subject to Court approval, in consideration of the benefits flowing to the Parties from the Settlement, the Actions shall be finally and fully compromised, settled, and dismissed with prejudice, subject to the terms and conditions set forth below:

1.                                      DEFINITIONS

As used in this Stipulation, the following terms have the meanings specified below:

(1) All capitalized terms are defined in section 1 herein, unless immediately defined.

(2) Defendants, collectively with Plaintiffs, shall be referred to as the “Parties.”

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1.1                               “Actions” means the consolidated derivative action captioned, Casey v. Begley, Case No. 11-cv-09074 (JJT), pending in the U.S. District Court for the Northern District of Illinois, and the verified shareholder derivative action captioned, International Union of Operating Engineers Pension Plan of Eastern Pennsylvania and Delaware v. Begley, C.A. No. 9926-VCP, pending in the Court of Chancery of the State of Delaware.

1.2                               “Court” means the U.S. District Court for the Northern District of Illinois.

1.3                               “Effective Date” means the first date on which all of the events and conditions specified in paragraph 6.1 herein have occurred.

1.4                               “Final” means when the last of the following (with respect to the Judgment approving the Settlement, attached hereto as Exhibit D), shall occur: (i) the time to file a motion to alter or amend the Judgment under Federal Rule of Civil Procedure 59(e) has passed without any such motion having been filed; (ii) the expiration of the time in which to appeal the Judgment has passed without any appeal having been taken; and (iii) if a motion to alter or amend is filed or if an appeal is taken, the determination of that motion or appeal in such a manner as to permit the Judgment to remain in force in the form of Exhibit D attached hereto, or as modified by agreement of the Parties and entered by the Court at the time of the Settlement Hearing. For purposes of this paragraph, an “appeal” shall include any petition for a writ of certiorari or other writ that may be filed in connection with approval of this Settlement, but shall not include any appeal that concerns only the issue of attorneys’ fees and expenses or the Incentive Award Amount.

1.5                               “Hospira Shareholder(s)” means, for purposes of this Stipulation, any Person who owned Hospira common stock as of November 3, 2014, the execution date of

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this Stipulation and who continues to hold Hospira common stock as of the date the Judgment is entered, excluding the Individual Defendants, members of their immediate families, and their legal representatives, heirs, successors, or assigns, and any entity in which Individual Defendants have or had a controlling interest.

1.6                               “Judgment” means the Final Order and Judgment entered by the Court in a form of the Proposed Final Order and Judgment attached hereto as Exhibit D or as modified by agreement of the Parties and entered by the Court.

1.7                               “Person” means an individual, business, or legal entity, including any corporation, limited liability corporation, professional corporation, limited liability partnership, partnership, limited partnership, association, joint stock company, estate, legal representative, trust, unincorporated association, government, or any political subdivision or agency thereof, and their spouses, heirs, predecessors, successors, representatives, or assignees.

1.8 “Plaintiffs’ Counsel” means: (a) Robbins Arroyo LLP and the Paskowitz Law Firm, P.C., as Co-Lead Counsel in the Illinois Action; (b) Lasky & Rifkind, Ltd. and the Law Offices of Edward T. Joyce & Associates, P.C., as Co-Liaison Counsel in the Illinois Action; (c) the Grant Law Firm, PLLC, Roy Jacobs & Associates, and the Law Office of Alfred G. Yates, Jr., P.C., as additional counsel in the Illinois Action; and (d) Schubert Jonckheer & Kolbe LLP, Shepherd Finkleman Miller & Shah LLP, and Rosenthal, Monhait & Goddess, P.A., as counsel in the Delaware Action.

1.9                               “Preliminary Approval Order” means an order entered by the Court substantially in the form attached hereto as Exhibit B.

1.10 “Released Claims” means any and all claims, demands, rights, remedies, or causes of action, whether based on federal, state, local, statutory, common, or

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foreign law or any other law, rule, regulation, or principle of equity, whether known or unknown, including, without limitation, Unknown Claims, whether suspected or unsuspected, whether contingent or non-contingent, whether accrued or unaccrued, whether or not concealed or hidden, whether factual or legal, and for any remedy, whether at equity or law, that were, could have been, or might have been asserted from the beginning of time through the date of entry of the Final Order and Judgment, by Hospira or any Hospira Shareholder in the Actions, any shareholder demand, or in any other forum derivatively on behalf of Hospira, against the Released Parties or any other individual named or unnamed, in connection with, arising out of, related to, based upon, in whole or in part, directly or indirectly, any action or omission or failure to act relating to any of the matters, facts, or events set forth, referenced, or alleged in any pleading or other document filed in the Action; provided, however, that nothing herein shall in any way impair or restrict the rights of any Party to enforce the terms of the Stipulation.

1.11 “Released Parties” means Defendants, including each and all individuals named or who could have been named in the Actions, and each and all members of their families, parent entities, affiliates, and subsidiaries and each and all of their respective past or present officers, directors, employees, agents, attorneys, accountants, auditors, insurers, heirs, executors, estates, administrators, predecessors, successors, assigns, and representatives, as well as any entity in which they have a controlling interest or any trust of which they are the settlor or which is for the benefit of them and/or member(s) of their family.

1.12 “Releasing Parties” means the Plaintiffs (individually, and derivatively on behalf of Hospira), Hospira, every Hospira Shareholder, and each and all members of their families, heirs, administrators, predecessors, successors, parent entities, subsidiaries, affiliates, custodians, agents, representatives, executors, assigns, estates, trusts,

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trustees, trust beneficiaries, and all Persons acting in concert with any of the aforementioned Persons.

1.13 “Settlement” means the agreement made and entered into by and among the Parties and set forth in this Stipulation.

1.14 “Settlement Hearing” means the hearing that the Parties will request the Court hold after dissemination of the settlement notice in order to consider and determine, among other things, whether the Settlement should be approved, whether Judgment should be entered dismissing the Illinois Action with prejudice, and whether to approve the proposed Fee and Expense Amount and Incentive Award.

1.15 “Unknown Claims” means any Released Claims that any Plaintiff (individually, and derivatively on behalf of Hospira), Hospira, or any Hospira Shareholder does not know or suspect to exist in his, her, or its favor at the time of the release of the Released Parties that, if known by him, her, or it, might have affected his, her, or its settlement with, and release of, the Released Parties, or might have affected his, her, or its decision not to object to this Settlement, including claims based on the discovery of facts in addition to or different from those which he, she, or it now knows or believes to be true with respect to the Released Claims. The Parties further agree that the Released Claims constitute an express waiver of all rights and protections afforded by California Civil Code section 1542 and all similar federal, state, or foreign laws, rights, rules, or legal principles. Section 1542 states:

A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.

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Plaintiffs, Hospira, and every Hospira Shareholder shall be deemed by operation of the Judgment to have acknowledged that the release of Unknown Claims was separately bargained for and is a key element of the Settlement.

2.                                      SETTLEMENT OF THE ACTIONS

2.1                               Hospira shall, within thirty (30) calendar days after entry of the Judgment by the Court, formally express and/or implement and maintain in substance the corporate governance reforms, additions, amendments, or formalizations identified in Exhibit A, section II attached hereto, for a period of no less than three (3) years.

2.2                               Defendants acknowledge and agree that the corporate governance reforms, additions, amendments, or formalizations identified in Exhibit A attached hereto confer material benefits upon Hospira. Defendants also acknowledge that the prosecution of the Action was a meaningful factor in the decision to adopt and/or implement the corporate governance reforms set forth in Exhibit A, section I, and that the corporate governance reforms in Exhibit A, section II were agreed to through settlement negotiations and mediation.

2.3                               Within three (3) business days after the Judgment approving the Settlement becomes Final, the Delaware Plaintiff shall apply to the Court of Chancery for the State of Delaware to dismiss the Delaware Action with prejudice, and shall take, and cause to take, all actions, and do, and cause to be done, all things reasonably necessary, proper, or advisable under applicable laws, regulations, and agreements to secure such dismissal.

3.                                      PRELIMINARY APPROVAL AND NOTICE

3.1                               Promptly following the execution of this Stipulation, Plaintiffs’ Counsel shall submit this Stipulation, together with its exhibits, to the Court, and shall apply for entry of a Preliminary Approval Order, substantially in the form of Exhibit B hereto.

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3.2                               Notice to Hospira Shareholders shall consist of the Notice of Pendency and Proposed Settlement of Shareholder Derivative Actions (“Notice”), substantially in the form attached hereto as Exhibit C, and shall be provided to Hospira Shareholders as follows with all attendant costs borne by Hospira, except as provided by section 3.2(c) below:

(a)                                 within ten (10) calendar days after the entry of the Preliminary Approval Order, Hospira shall furnish a Form 8-K to the U.S. Securities and Exchange Commission that includes the Notice and Stipulation;

(b)                                 within ten (10) calendar days after the entry of the Preliminary Approval Order, Hospira shall post copies of the Notice and this Stipulation on its website; and

(c)                                  within ten (10) calendar days after the entry of the Preliminary Approval Order, Plaintiffs’ Counsel at Robbins Arroyo LLP and Schubert Jonckheer & Kolbe LLP shall post copies of the Notice and this Stipulation on their websites.

3.3 Prior to the Settlement Hearing, Hospira and Plaintiffs shall file with the Court declarations affirming that they disseminated the Notice as ordered in the Preliminary Approval Order.

3.4                               The Parties believe the content and manner of the Notice constitutes adequate and reasonable notice to Hospira Shareholders pursuant to applicable law.

4. ATTORNEYS’ FEES, REIMBURSEMENT OF LITIGATION EXPENSES, AND INCENTIVE AWARD AMOUNTS

4.1                          In recognition of the material benefits conferred upon Hospira as a direct result of the prosecution and settlement of the Actions, and subject to Court approval, Defendants have agreed to cause Hospira or its insurance carriers to pay Illinois Plaintiffs’ Counsel attorneys’ fees and expenses in an aggregate amount not to exceed $2.3 million, and

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Delaware Plaintiff’s Counsel attorneys’ fees and expenses not to exceed $330,000 (together, the “Fee and Expense Amount”). Amounts awarded to counsel for the Illinois Action shall be paid in the manner directed by Illinois Co-Lead Counsel and amounts awarded to counsel in the Delaware Action shall be paid as directed by Schubert Jonckheer & Kolbe LLP, counsel in the Delaware Action.

4.2                               The Fee and Expense Amount shall be paid in the amounts approved by the Court within ten (10) business days after the Judgment becomes Final. Except for the Fee and Expense Amount, each of the Parties shall bear his, her, or its own fees and costs, and Defendants shall have no obligations or liability with respect to the apportionment or distribution of any attorneys’ fees or expenses approved by the Court.

4.3                               The Parties further stipulate that Plaintiffs’ Counsel may apply to the Court for an incentive award of up to $3,000 for each of the Plaintiffs (the “Incentive Award Amount”), only to be paid upon Court approval, and to be paid from the Fee and Expense Amount, in recognition of Plaintiffs’ participation and effort in the prosecution of the Actions. The failure of the Court to approve any requested Incentive Award Amount, in whole or in part, shall have no effect on the Settlement set forth in this Stipulation.

5.                                      RELEASES

5.1                               Upon the Effective Date, the Releasing Parties shall be deemed to have, and by operation of the Judgment shall have, fully, finally, and forever settled, released, discharged, extinguished, and dismissed with prejudice the Released Claims against the Released Parties; provided, however, that such release shall not affect any claims to enforce the terms of this Stipulation or the Settlement.

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5.2                               Upon the Effective Date, each of the Released Parties shall be deemed to have, and by operation of the Judgment shall have, fully, finally, and forever settled, released, discharged, extinguished, and dismissed with prejudice all claims (including Unknown Claims) arising out of, relating to, or in connection with the institution, prosecution, assertion, settlement, or resolution of the Actions or the Released Claims against Plaintiffs and Plaintiffs’ Counsel; provided, however, that such release shall not affect any claims to enforce the terms of this Stipulation or the Settlement.

6. CONDITIONS OF SETTLEMENT; EFFECT OF DISAPPROVAL, CANCELLATION, OR TERMINATION

6.1                               The Settlement shall be conditioned on the occurrence of all of the following events:

(a)                            Court approval of the Settlement;

(b)                            entry of the Judgment in the Illinois Action;

(c)                             payment to Plaintiffs’ Counsel of the Fee and Expense Amount approved by the Court;

(d)                            the Judgment becoming Final; and

(e)                             dismissal of the Delaware Action with prejudice.

6.2                               If any of the conditions listed in paragraph 6.1 do not occur, this Stipulation and any Settlement documentation shall be null and void and of no force and effect, and the Parties shall be restored to their positions on the date immediately prior to the execution date of this Stipulation. In that event, this Stipulation shall not be deemed to constitute an admission of fact by any Party, and neither the existence of this Stipulation, nor its contents, shall be admissible in evidence or be referred to for any purposes in the Actions or in any

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litigation or judicial proceeding. Further, all releases delivered in connection with the Stipulation shall be null and void.

7. MISCELLANEOUS PROVISIONS

7.1                               The Parties: (i) acknowledge that it is their intent to consummate this Stipulation; and (ii) agree to cooperate to the extent reasonably necessary to effectuate and implement all terms and conditions of this Stipulation and to exercise their best efforts to accomplish the foregoing terms and conditions of this Stipulation.

7.2                               Neither this Stipulation, nor any of its terms or provisions, nor the exhibits hereto, nor any document referred to herein, nor the Judgment, nor any action taken to carry out this Stipulation or the Settlement is, may be construed as, or may be used as, evidence of the validity of any claim or as an admission by or against the Parties of any fault, wrongdoing, or concession of liability whatsoever.

7.3                               Neither this Stipulation, nor any of its terms or provisions, nor the exhibits hereto, nor any document referred to herein, nor the Judgment, nor any action taken to carry out this Stipulation or the Settlement shall be offered or received into evidence in any action or proceeding for any purpose whatsoever other than to enforce the provisions of this Stipulation, except that this Stipulation and the exhibits hereto may be filed as evidence of the Settlement to support a defense of res judicata, collateral estoppel, release, or other theory of claim or issue preclusion or similar defense.

7.4                               The Parties intend this Settlement to be a final and complete resolution of all disputes among them with respect to the Actions. This Stipulation and its exhibits constitute the entire agreement among the Parties concerning the Settlement, and no

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representations, warranties, or inducements have been made by any Party hereto concerning this Stipulation and its exhibits other than those contained and memorialized in such documents.

7.5 The Parties agree that the terms of this Settlement, including the amount of attorneys’ fees and expenses, were negotiated at arm’s-length in good faith by the Parties with the substantial assistance of a mediator, and that the Settlement was reached voluntarily after consultation with experienced legal counsel.

7.6                               The Parties agree that, other than disclosures required by law or the Court, any public comments from the Parties or any of their representatives regarding this Settlement will not substantially deviate from the terms contained in the Notice or words to the effect that the Parties have reached a mutually agreeable resolution that will avoid protracted and expensive litigation, and that the Settlement is in the best interest of Hospira and its shareholders. None of the Parties shall make any public statement regarding the terms of this Stipulation or the Settlement contained herein that is critical of or disparages the Settlement or the conduct of the Parties.

7.7                               The headings used in this Stipulation are used for the purpose of convenience only and are not meant to have legal effect.

7.8                               All of the exhibits to this Stipulation are material and integral parts hereof and are fully incorporated herein by this reference.

7.9                               This Stipulation may be amended or modified only by a written instrument signed by or on behalf of all Parties or their respective successors-in-interest.

7.10 This Stipulation may be executed in one or more counterparts, including by facsimile and PDF counterparts. All executed counterparts, including facsimile and PDF counterparts, shall be deemed to be one and the same instrument.

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7.11 This Stipulation shall be binding upon, and inure to the benefit of, the Parties and their respective successors, assigns, heirs, spouses, marital communities, executors, administrators, and legal representatives.

7.12 This Stipulation shall not be construed more strictly against one Party than another merely by virtue of the fact that it, or any part of it, may have been prepared by counsel for one of the Parties.

7.13 All Persons executing this Stipulation and any of the exhibits hereto, or any related settlement documents, warrant and represent that they have the full authority to do so and that they have the authority to take appropriate action required or permitted to be taken pursuant to the Stipulation to effectuate its terms.

7.14 The waiver by any Party of any breach of this Stipulation shall not be deemed or construed as a waiver of any other breach, whether prior or subsequent to, or contemporaneous with, the execution of this Stipulation.

7.15 The rights and obligations of the Parties shall be construed and enforced in accordance with, and governed by, the substantive laws of the State of Illinois without giving effect to that State’s choice-of-law principles.

IN WITNESS WHEREOF, the Parties hereto have caused this Stipulation to be executed, by their duly authorized attorneys, dated as of November 3, 2014.

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CERTIFICATE OF SERVICE

I hereby certify that on November 3, 2014, I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system, which will send notification of such filing to the email addresses denoted on the Electronic Mail Notice List.

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EXHIBIT A

EXHIBIT A

I.                                        Steps Taken By Hospira Since the Actions Were Filed:

The Parties recognize and acknowledge that, since the filing of the Actions, Hospira has taken steps that strengthen Hospira’s capabilities in the area of quality and compliance, and further enhance oversight and governance, and that the prosecution of the Actions was a meaningful factor in the decision to adopt and implement these capabilities, which include:

A.                      Investments to Strengthen Quality and Compliance

1.                                      Hospira hired many new leaders to strengthen the Company’s quality and compliance capabilities, including:

Senior Vice President (“SVP”), Quality;

Senior Vice President, Operations;

Vice President, U.S. Pharma Operations;

Vice President, Quality, Rocky Mount;

Vice President, Operations and Plant Manager, Rocky Mount;

Vice President, Operations and Plant Manager, McPherson; and

Vice President, Pharma Operations Excellence.

2.                                      Hospira invested more than $200 million in its pharmaceutical manufacturing plant in Rocky Mount, North Carolina, including building a new quality and analytical testing laboratory and making other capital improvements such as installing visual inspection equipment.

3.                                      Hospira added nearly 200 employees at Rocky Mount, primarily in scientific, technical, and quality roles.

B.                      Changes to the Board and Board Committees

1.                                      Hospira separated the Science, Technology and Quality Committee into two separate Board committees: (i) the Science and Technology Committee; and (ii) the Quality Committee.

II.                                                 Additional Corporate Commitments:

In connection with the Stipulation of Settlement, Hospira makes the following additional corporate commitments, each of which will be maintained for a period of at least three years from the date each commitment is implemented:

A.                      Maintain one director with substantial experience with FDA regulations and compliance.

C.                                    Maintain a Corporate Quality Audit function that (1) reports independently and not through manufacturing facilities; and (2) conducts annual audits of the quality processes of all of Hospira’s U.S. pharmaceutical manufacturing facilities.

D.                                    In the event the Company assembles a crisis management team to respond to a potential or actual crisis situation involving quality issues, the SVP, Quality, can designate and appoint additional quality personnel to support that crisis management team.

E.                                     The SVP, Quality, will oversee the Company’s ongoing quality and FDA compliance efforts, and will update Hospira’s senior leadership team, including the CEO, at least twice annually on the status of such efforts.

F.                                      The SVP, Quality, will have the authority to obtain advice and assistance from external advisors and experts as deemed necessary in his/her discretion to assist with, audit, or review the Company’s quality and FDA compliance efforts.

G.                                    The SVP, Quality’s, direct and indirect responsibilities will include the annual review of: (1) staff levels within the Quality organization to ensure they are sufficient to fulfill responsibilities; (2) the adequacy and effectiveness of the Company’s quality training programs; and (3) the adequacy and effectiveness of the Company’s Quality Systems overall.

H.                                   The Company will amend its insider trading policy to enhance and clarify provisions requiring reasonable oversight and approval mechanisms for trades of senior officers. The amended insider trading policy will impose trading restrictions applicable to certain employees and officers who, as a result of their positions, may have or be perceived to have access to material, non-public information. Such trading restrictions will include:

1.                                      Limit trading of Hospira stock to specific permissible periods following the release of quarterly and annual earnings information;

2.                                      Prohibit trading of Hospira stock during regular “blackout periods” in the time leading up to the release of information regarding the Company’s earnings;

3.                                      Prohibit trading of Hospira stock during additional or extended “blackout periods” that may be designated in connection with a significant pending event; and

4.                                      Require pre-clearance of trades from Hospira’s General Counsel for corporate vice presidents and above.

I.                                        Board Provisions:

1.                                      All non-management Board members must satisfy the director independence requirements of the NYSE;

2.                                      At least one member of the Quality Committee shall serve concurrently on the Audit Committee;

3.                                      The Audit Committee shall meet at least four times a year, or more frequently, as circumstances dictate, absent extraordinary circumstances; and

4.                                      The Audit Committee shall review annually with management and any outside professionals (the Audit Committee considers appropriate) important trends and developments in financial reporting practices and requirements and their effect on the Company’s financial statements.

J.                                        Oversight Measures of Quality:

1.                                      The SVP, Quality, will meet with the Quality Committee of the Board at least twice a year to review the Company’s FDA compliance;

2.                                      The SVP, Quality, shall make at least annual presentations to the Quality Committee of the Board addressing quality initiatives at the company’s major manufacturing facilities; and

3.                                      The Quality Committee shall meet at least four times a year, absent extraordinary circumstances.

K.                                   Stock Repurchases:

The Board of Directors will receive reports from management regarding the Company’s authorized stock repurchase programs. Those reports will be made at each Board meeting where share repurchases were made since the preceding Board meeting and will include information regarding any purchases made, their compliance with Board-approved parameters, and their compliance with applicable corporate and securities law requirements, so that the Board can provide oversight as to any future repurchases. All stock repurchases under such programs will be made in accordance with Board-approved parameters and applicable corporate and securities laws.