**Exhibit10.6**

 

**API SUPPLY AGREEMENT**

 

This API Supply Agreement (this “Agreement”), dated asof April 16, 2004 and effective as of May 1, 2004 (the “Effective Date”), is byand between Hospira, Inc., a Delaware corporation (“Hospira”), and AbbottLaboratories, an Illinois corporation (“Abbott”).

 

**RECITALS**

 

WHEREAS, the board of directors of Abbott hasdetermined that it is in the best interests of Abbott and its shareholders toseparate Abbott’s core hospital products business from its other existingbusinesses;

 

WHEREAS, in order to effectuate the foregoing, Abbottand Hospira have entered into a Separation and Distribution Agreement dated asof April 12, 2004 (the “Separation and Distribution Agreement”), whichprovides, among other things, subject to the terms and conditions set forththerein, for the separation and the distribution to Hospira of certain assetsand the assumption by Hospira of certain liabilities, and for the execution anddelivery of certain other agreements in order to facilitate and provide for theforegoing; and

 

WHEREAS, in connection with the transactionscontemplated by the Separation and Distribution Agreement, Hospira desiresAbbott to manufacture and supply the products set forth on Exhibit Aattached hereto (individually, the “Product” and collectively, the “Products”)to Hospira, and Abbott is willing to manufacture and supply such Products toHospira in accordance with this Agreement.

 

NOW, THEREFORE, in consideration of the mutualcovenants and undertakings contained herein, and subject to and on the termsand conditions herein set forth, the parties hereto agree as follows:

 

**ARTICLE 1- DEFINITIONS**

 

1.1           Forthe purpose of this Agreement the following terms will have the followingmeanings:

 

“Abbott” has the meaning set forth in the Preamble.

 

“Act” means the United States Food, Drug and CosmeticAct, as amended, including all regulations promulgated thereunder.

 

“Agreement” means this API Supply Agreement, includingany amendments hereto and each of the Exhibits hereto.

 

“cGMP” means the current good manufacturing practices set forth in 21 C.F.R.Parts 210 and 211, as may be amended from time to time, as applicable.

 

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“Discretionary Changes” has the meaning set forth in Section3.6(c).

 

“Effective Date” has the meaning set forth in thePreamble.

 

“Exhibit D Products” means the Products listed on ExhibitD.

 

“Exhibit E Products” means the Products listed on ExhibitE.

 

“Exhibit D Successive Term” has the meaning set forthin Section 4.1.

 

“Exhibit E Successive Term” has the meaning set forthin Section 4.1.

 

“FDA” means the United States Food and DrugAdministration and any successor agency thereto.

 

“Hospira” has the meaning set forth in the Preamble.

 

“Information” means information, whether or notpatentable or copyrightable, in written, oral, electronic or other tangible orintangible forms, including studies, reports, records, books, contracts,instruments, surveys, discoveries, ideas, concepts, know-how, techniques,designs, specifications, drawings, blueprints, diagrams, models, prototypes,samples, flow charts, data, computer data, disks, diskettes, tapes, computerprograms or other software, marketing plans, customer names, communications byor to attorneys (including attorney-client privileged communications), memosand other materials prepared by attorneys or under their direction (includingattorney work product), and other technical, financial, employee or businessinformation or data.

 

“Initial Term” has the meaning set forth in Section4.1.

 

“Parties” means the parties to this Agreement.

 

“Person” means an individual, a general or limitedpartnership, a corporation, a trust, a joint venture, an unincorporatedorganization, a limited liability entity, any other entity and any RegulatoryAuthority.

 

“Prime Rate” means the rate which Citibank N.A. (orits successor or another major money center commercial bank agreed to by theParties) announces as its prime lending rate, as in effect from time to time

 

“Product” and “Products” have the meanings set forthin the Recitals.

 

“Product Specifications” shall mean those product,labeling and performance specifications for the Products filed with the FDA orother appropriate Regulatory Authorities, including Product formula andmaterials required for the manufacture of the Products that are to be purchasedand supplied under this Agreement, which specifications may be amended fromtime to time by the written agreement of the Parties.

 

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“Quality Agreement” means: (i) with respect toProducts manufactured in the United States, the Quality Agreement by andbetween Abbott and Hospira, substantially in the form of Exhibit B, asthe same may be amended; and (ii) with respect to Products manufactured outsideof the United States, the International Technical Agreement by and betweenAbbott and Hospira, consistent with the Product Specifications andsubstantially in the form of Exhibit C, as the same may be amended.

 

“Regulatory Authority” means any federal, state orlocal or international regulatory agency, department, bureau or othergovernmental entity including the FDA which is responsible for issuingapprovals, licenses, registrations or authorizations necessary for themanufacture, use, storage, import, transport or sale of any Product in aregulatory jurisdiction.

 

“Required Changes” has the meaning set forth in Section3.6(b).

 

“Separation and Distribution Agreement” has themeaning set forth in the Recitals.

 

“Subsidiary” of any Person means another Person thatis directly or indirectly controlled by such first Person.  As used herein, “control” means thepossession, directly or indirectly, of the power to direct or cause thedirection of the management and policies of such Person, whether throughownership of voting securities or other interests, by contract orotherwise.  For the avoidance of doubt,TAP Pharmaceutical Products Inc., TAP Finance Inc. and TAP Pharmaceuticals Inc.are not Subsidiaries of Abbott as that term is used in this Agreement.

 

“Third Party” means any Person other than Abbott, anyAbbott Subsidiary, Hospira and any Hospira Subsidiary.

 

“Transfer Plan” has the meaning set forth in Section6.1.

 

**ARTICLE 2- ORDERS, PRICING, PAYMENT AND CONFORMANCE**

 

2.1           Forecastsand Orders.

 

(a)                                  Purchaseand Sale of Product.  Pursuant tothe terms and conditions of this Agreement and for the duration of thisAgreement, Abbott shall manufacture, sell and deliver the Products to Hospirain the quantities requested pursuant to Section 2.1(b) and Hospira shallpurchase and take delivery of its worldwide requirements of the Products fromAbbott.

 

(b)                                 RollingForecast.  Simultaneously with theexecution of this Agreement, Hospira shall provide Abbott with an eighteen (18)month non-binding forecast of Hospira’s best estimate of its future requirementsof the Products, which forecast shall be updated by the fifteenth (15th)day of each month during the term of this Agreement.  Such forecast shall (i) specify the Product, the item number, andquantity of each Product and (ii)

 

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be consolidated by month.  For the Exhibit D Products, the first six (6) months of eachrolling eighteen (18) month forecast shall constitute a firm order for suchProduct quantities. For the Exhibit E Products, the first four (4) months ofeach rolling eighteen (18) month forecast shall constitute a firm order forsuch Product quantities. For purposes of clarification of the forecast, thefirm order period described above shall not include the current month (*i.e.* the firm order period for Exhibit DProducts commencing June 2004 would include orders placed through December2004).  As updated by the fifteenth (15th)day of the month, such updated forecast shall restate the balance of the firmorder period remaining prior to such updated forecast and include in the firmorder period the requirements for the next month of such updated forecast.

 

(c)                                  Long-RangeForecast.  For capacity planningpurposes, Hospira shall also provide Abbott with a three (3) year non-bindingforecast prior to January 1st of each year during the term of this Agreement.

 

(d)                                 FirmOrders.  All firm purchase orders,or agreed upon alternative forms of communication, delivered in accordance withthe provisions of Section 2.1(b) shall be for an amount no less thaneighty percent (80%) nor more than one hundred twenty percent (120%) of themost recent forecast for such period; provided, however, in the event such firmorder exceeds one hundred twenty percent (120%) of the most recent forecast forsuch Products, Abbott shall use its commercially reasonable efforts tomanufacture and deliver to Hospira, in addition to the forecasted quantities,such excess of the Products ordered by Hospira exceeding one hundred twentypercent (120%) of the most recent forecast for such Products.  If any such forecast or update exceedsAbbott’s anticipated capacity, Abbott shall so notify Hospira within fourteen(14) days of receipt of the forecast or update.

 

(e)                                  FirmOrder Changes.  If Hospira requestschanges to firm orders within the firm order period specified in Section2.1(b), Abbott shall attempt to accommodate the changes within reasonablemanufacturing capabilities and efficiencies. Abbott shall advise Hospira of the costs associated with making any suchchange, and the Parties shall mutually agree upon the amount of such costsprior to Abbott proceeding to make the change. Upon such mutual agreement,Abbott shall make such change and Hospira shall be responsible for paying suchcosts.

 

(f)                                    PurchaseOrder Terms.  Hospira shall issue apurchase order, or an agreed upon method of communicating its requirements ofthe Products, to Abbott.  Each purchaseorder or any acknowledgment thereof, if any, whether printed, stamped, typed,or written, shall be governed by the terms

 

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of this Agreement and none of the provisions of suchpurchase order or acknowledgment shall be applicable except those specifyingProduct and quantity ordered, delivery dates, special shipping instructions andinvoice information.  All Product ordershereunder shall be in order quantities as agreed between the Parties.  Abbott shall deliver the Products in suchfirm order quantities, subject to yield fluctuations and on such delivery datesas are specified in the applicable purchase order and, if no such purchaseorder is issued, as specified in the firm order period of Hospira’s eighteen(18) month forecasts and monthly updates provided pursuant to Section 2.1(b).  Abbott shall receive Hospira’s prior writtenapproval prior to making any adjustments to Product order quantities and/orshipping dates.

 

2.2           Price;Adjustment Payment; Shipment.

 

(a)                                  InitialTerm Prices.  The prices for eachProduct for the Initial Term of the Agreement shall be those set forth in Exhibit A attached hereto. The prices set forth in Exhibit A shallbe subject to adjustment as provided in Section 2.2(b).

 

(b)                                 PriceAdjustments.  The prices set forthin Exhibit A shall be subject to adjustment as follows:

 

(i)                                     Inthe event Hospira elects to extend the term of this Agreement beyond theInitial Term, as set forth in Section 4.1, (A) the prices for theProducts for the first twelve (12) month period subsequent to the Initial Termshall be adjusted from the prices set forth in Exhibit A, as such pricesmay have been adjusted pursuant to Section 2.2(b)(ii) or Section2.2(c), to reflect the increase in the Producer Price Index for the priortwenty-four (24) month period, and (B) the prices for the Products for thetwelve (12) month period subsequent to the period described in (A) above shallbe adjusted from the prices set forth in Exhibit A, as such prices mayhave been adjusted pursuant to Section 2.2(b)(ii) or Section 2.2(c)and (A) above, to reflect the increase in the Producer Price Index for theprior twelve (12) month period.

 

(ii)                                  Inthe event that due to material unforeseen and unavoidable reasons, theaggregate standard cost of manufacturing the Products hereunder (e.g. rawmaterials or other circumstances outside the control of Abbott, but notincluding labor and overhead costs) increases by five percent (5%) or more,Abbott shall promptly provide notice to Hospira of such increase (which noticeshall document the reasons for such increase)

 

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and the Parties shallmeet within thirty (30) days of Abbott’s notice to negotiate an appropriateprice adjustment.  If the Parties areunable to negotiate an appropriate price adjustment, the Parties shall resolve theconflict in accordance with the procedures set forth in Section 8.6.

 

(c)                                  MaterialsCost Reductions. In the event that Hospira assists Abbott in reducing itscosts of purchasing materials from suppliers in connection with Abbott’smanufacture of Products hereunder, such cost reductions realized by Abbottshall be shared equally by Abbott and Hospira, net of all implementation costs.

 

(d)                                 PaymentTerms.  Abbott shall invoice Hospiraupon delivery of Product or transfer of Product into Hospira’s inventorypursuant to the U.S. Transition Services Agreement between the Parties dated asof the date hereof, as applicable. Hospira shall make payment net thirty (30) days from the date ofAbbott’s invoice; provided, however, that Hospira shall notify Abbott of anydisputed invoice as soon as practicable and a timeline for resolving suchdispute shall be mutually agreed by the Parties within forty-five (45) days ofthe date of the disputed invoice. Failure to pay a disputed invoice shall not be deemed a breach of thisAgreement by Hospira and will not relieve Abbott from its commitment tocontinue to supply Products hereunder. Product invoices that remain unpaid within thirty (30) days after theinvoice date, other than invoices being disputed in accordance with the termsset forth above, shall bear interest at a rate per annum equal to Prime Rateplus two percent (2%); provided however, any invoices disputed by Hospira andresolved in favor of Abbott shall be subject to such late payment fee as of theinvoice date until paid in full.  Allpayments hereunder shall be made in U.S. dollars.

 

(e)                                  Taxes.Any federal, state, county or municipal sales or use tax, excise, customscharges, duties or similar charge, or any other tax assessment (other than thatassessed against income), license, fee or other charge lawfully assessed orcharged on the manufacture, sale or transportation of Product sold pursuant tothis Agreement shall be paid by Hospira.

 

(f)                                    Delivery.  Abbott shall deliver the Products to Hospiraor into Hospira’s inventory pursuant to the U.S. Transition Services Agreementbetween the Parties dated as of the date hereof, as applicable, F.C.A. Abbott’smanufacturing facility and title shall pass to Hospira at such point.  Shipment to Hospira’s designated location,if applicable, shall be at Hospira’s expense and via a carrier designated byHospira.  Hospira shall be the importerof record for all Products imported hereunder, if any, and

 

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shall assume all associated costs and importactivities, whether customs or transportation-related.

 

(g)                                 NoSet-off.  Hospira’s obligation tomake any required payments under this Agreement shall not be subject to anyright of offset, set-off, deduction or counterclaim, however arising.

 

2.3           Expiration/RetestDating.  So long as Hospirapurchases Exhibit D Products in standard batch quantities, with the exceptionof Products ordered by Hospira’s Lake County manufacturing facilities, whichshall not order Products in standard batch quantities, such Products, whenshipped to Hospira hereunder, shall have at least two-thirds of their originalshelf life and at least two-thirds of their first retest date remaining at thedate of shipment, unless otherwise agreed in writing by Hospira.

 

2.4           Rejection. Hospira shall perform such samplings and tests as may be required underthe Quality Agreement to determine whether the Product meets the ProductSpecifications, is not adulterated or misbranded within the meaning of the Actand complies with all applicable statutes, laws, rules and regulations,including without limitation, cGMPs. Any Product not refused pursuant to the terms of the Quality Agreementshall be deemed accepted.  If Hospirawishes to refuse acceptance, Hospira shall inform Abbott of its refusal toaccept the Product, and the reasons therefor. In the event that Hospira refuses acceptance, Abbott, upon confirmationof the reasons for refusal of the Product, shall replace the defective Product.  If Abbott and Hospira do not agree on therefusal or rejection of Product, then either Party may refer the matter forfinal analysis to a specialized laboratory of national reputation acceptable toboth Parties for the purpose of determining the results.  Any determination by such laboratory shallbe binding upon both Parties. If such independent laboratory determines thatthe shipment conformed to the requirements of this Agreement, Hospira shallbear all expenses of shipping, including freight charges, and testing suchshipment samples.  If such independentlaboratory confirms that such shipment did not meet the requirements of thisAgreement, Abbott shall replace,at no cost to Hospira, the portion of the shipment which does not conform andbear all expenses of shipping, including freight charges, and testing the shipmentsamples.

 

2.5           Testing;Certificate of Analysis and Conformance. Abbott shall, pursuant to the terms of the Quality Agreement, performthe necessary testing and provide the required documentation to release theProducts to Hospira, which such documentation may include a certificate ofanalysis for each shipment of the Products.

 

**ARTICLE 3- WARRANTIES, COVENANTS AND INDEMNIFICATION**

 

3.1           GeneralWarranties and Indemnification.

 

(a)                                  AbbottRepresentations and Warranties. Abbott represents and warrants to Hospira that none of the Products Abbott delivers to Hospira pursuant to

 

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this Agreement shall, at the time of delivery, beadulterated or misbranded within the meaning of the Act or within the meaning ofany applicable state or municipal law in which the definitions of adulterationand misbranding are substantially the same as those contained in the Act, asthe Act and such laws are constituted and effective at the time of delivery,and will not be an article which may not under the provisions of Sections 404and 505 of the Act be introduced into interstate commerce. Abbott furtherrepresents and warrants to Hospirathat each of the Products Abbott delivers to Hospira pursuant to this Agreement shall be free from defects inmaterial and workmanship and shall be manufactured:  (a) in accordance and conformity with the Product Specificationsprovided by Hospira; and (b) in compliance with all applicable statutes, laws,rules or regulations, including those relating to the environment, food ordrugs and occupational health and safety, including, without limitation, thoseenforced or promulgated by the FDA (including, without limitation, compliancewith cGMPs).  Abbott further representsand warrants to Hospira thatAbbott’s performance of its obligations under this Agreement will not result ina material violation or breach of any agreement, contract, commitment orobligation to which Abbott is a party or by which it is bound and will notconflict with or constitute a default under its Certificate of Incorporation orcorporate bylaws. ABBOTT MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, WITHRESPECT TO PRODUCT.  ALL OTHERWARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, THE IMPLIEDWARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE HEREBYDISCLAIMED BY ABBOTT.

 

(b)                                 HospiraRepresentations and Warranties.****Hospirarepresents and warrants that it shall provide Product Specifications to Abbottwith respect to the Products.  Hospira further represents andwarrants to Abbott that Hospira’sperformance of its obligations under this Agreement will not result in amaterial violation or breach of any agreement, contract, commitment orobligation to which Hospira is aparty or by which it is bound and will not conflict with or constitute adefault under its corporate charter or bylaws.

 

(c)                                  Recalls.  Hospira shall, as between the Parties, beresponsible for the handling of all recalls of the Exhibit D Products,including without limitation, withdrawal of the Products from the market andregulatory actions.  Abbott shall, asbetween the Parties, be responsible for the handling of all recalls of theExhibit E Products, including without limitation, withdrawal of the Productsfrom the market and regulatory actions. Costs for recalls of any Product to the extent arising out of, relatingto, or resulting from a breach by Abbott of this Agreement shall be borne byAbbott, including reimbursement to Hospira for costs incurred for the handlingof such recall.  In addition, Abbottshall indemnify

 

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Hospira against any and all costs and expenses whichHospira may incur as a result of any such recall to the extent Abbott isresponsible. Costs for any recalls of any Product to the extent Abbott is notliable under this Agreement or any other agreement between the Parties relatingto the Products shall be borne by Hospira. In addition, Hospira shall indemnify Abbott against any and all costsand expenses which Abbott may incur as a result of any recall to the extentHospira is responsible.  The Partiesshall promptly advise and consult with one another with respect to any recallrelated to the manufacture of any Product, and each Party shall participate, ifrequested by the controlling Party, in all meetings with the FDA and/orequivalent foreign regulatory body regarding such recall.  The expense of each Party’s participation inany such meetings shall be borne by the Party responsible for the recall.

 

(d)                                 Indemnificationby Abbott.  Abbott shall indemnify,defend and hold harmless Hospira,its affiliates, officers, directors and employees from and against all claims,causes of action, suits, costs and expenses (including reasonable attorney’sfees), losses or liabilities pursuant to this Agreement and asserted by ThirdParties to the extent such arise out of, result from or relate to: (i) Abbott’sbreach of any representation or warranty set forth in Section 3.1(a);(ii) any violation or infringement of any proprietary right of any Third Partyto the extent relating to, arising out of or resulting from Abbott’smanufacturing processes used in the manufacture of Products pursuant to thisAgreement (exclusive of the Product Specifications or any Hospira proprietaryrights); and (iii) any negligent, wrongful act, or willful misconduct oromission on the part of Abbott, its officers, directors, employees, agents orrepresentatives relating to Abbott’s performance hereunder.

 

(e)                                  Indemnification****byHospira.  Hospirashall indemnify, defend and hold harmless Abbott, its affiliates, officers,directors and employees from and against all claims, causes of action, suits,costs and expenses (including reasonable attorney’s fees), losses orliabilities pursuant to this Agreement and asserted by Third Parties to theextent such arise out of, result from or relate to: (i) Hospira’s breach of any representation or warranty set forth in Section3.1(b); (ii) any violation or infringement of any proprietary right of anyThird Party to the extent relating to, arising out of or resulting from theExhibit D Products, other than Abbott’s manufacturing processes used in themanufacture of Products pursuant to this Agreement; (iii) the use of or lack ofsafety or efficacy of the Exhibit D Products; and (iv) any negligent, wrongfulact, or willful misconduct or omission on the part of Hospira, its officers, directors, employees, agents orrepresentatives relating to Hospira’sperformance hereunder.

 

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(f)                                    Conditionsof Indemnification.  If either Partyseeks indemnification from the other hereunder, it shall promptly give noticeto the other Party of any such claim or suit threatened, made or filed againstit which forms the basis for such claim of indemnification and shall cooperatefully with the other Party in the investigation and defense of all such claimsor suits.  The indemnifying Party shallhave the option to assume the other Party’s defense in any such claim or suitwith counsel reasonably satisfactory to the other Party.  No settlement or compromise shall be bindingon a Party hereto without its prior written consent, such consent not to beunreasonably delayed or withheld.

 

(g)                                 Limitationson Liability. FOR EACH TWELVE (12) MONTH PERIOD DURING WHICH THIS AGREEMENTIS IN EFFECT, COMMENCING AS OF THE EFFECTIVE DATE, THE MAXIMUM LIABILITY OFABBOTT AND ITS SUBSIDIARIES TO, AND THE SOLE REMEDY OF, HOSPIRA AND ANY OF ITSSUBSIDIARIES WITH RESPECT TO ANY AND ALL CLAIMS ARISING UNDER OR IN CONNECTIONWITH THIS AGREEMENT, REGARDLESS OF THE THEORY UPON WHICH THE LIABILITY ISPREMISED, SHALL NOT EXCEED ABBOTT’S PROFITS HEREUNDER, WHICH SHALL BE DEEMED TOBE EQUAL TO THE AMOUNT OF THE MARK-UP RECEIVED BY ABBOTT DURING SUCH TWELVE(12) MONTH PERIOD AS SET FORTH ON EXHIBIT A AND AS MAY BE ADJUSTEDPURSUANT TO THE TERMS OF SECTION 2.2(b).

 

(h)                                 NoConsequential Damages.  NEITHERPARTY SHALL BE LIABLE TO THE OTHER FOR INDIRECT, EXEMPLARY, INCIDENTAL,CONSEQUENTIAL OR PUNITIVE DAMAGES, INCLUDING WITHOUT LIMITATION, LOST PROFITSAND PUNITIVE DAMAGES RESULTING FROM ANY BREACH OF THIS AGREEMENT, EVEN IF THEPARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND EACH PARTYHEREBY WAIVES ON BEHALF OF ITSELF AND ITS SUBSIDIARIES ANY CLAIM FOR SUCH DAMAGES,INCLUDING ANY CLAIM FOR PROPERTY DAMAGE OR LOST PROFITS, WHETHER ARISING INCONTRACT, TORT OR OTHERWISE.

 

(i)                                     Theforegoing limitations on liability in this Section 3.1 shall not applyto: (i) Abbott’s liability for breaches of confidentiality under Article VII,or (ii) Abbott’s obligations for claims brought by Third Parties arising out ofAbbott’s gross negligence or willful misconduct.

 

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3.2           Manufactureof the Products.

 

(a)                                  ManufacturingStandards.  Abbott shall manufactureand deliver the Products to Hospira at all times in full compliance with theAct, cGMPs, Product Specifications for each Product, any other applicableregulatory requirements and the requirements set forth in the Quality Agreement.  Abbott shall maintain during the term ofthis Agreement and for a period thereafter consistent with Abbott’s policiesand standard cGMP requirements, all records as are necessary or appropriate todemonstrate compliance with the Act, cGMPs, Product Specifications, any otherapplicable regulatory requirements and the Quality Agreement.  If Abbott fails to comply with cGMPs in amaterial manner, as demonstrated by an observation of a Regulatory Authority,Abbott shall use reasonable commercial efforts to remedy such materialdeviation.

 

(b)                                 ManufacturingProcess.  Except as otherwiseprovided by Hospira, Abbott shall provide all raw materials, components,packaging, containers, labeling, release testing, quality control, equipment,labor, and other services and materials necessary for the manufacture of theProducts, as part of the price set forth in Exhibit A.  Abbott shall be responsible for vendorquality approval for vendors of such materials all of which shall comply withProduct Specifications.

 

(c)                                  Non-StandardEquipment Costs.  If non-standard,specialized equipment is required to manufacture any Exhibit D Product for Hospira, Hospira shall pay the cost of such equipment, subject to Hospira’s prior approval of suchcosts, which approval shall not be unreasonably withheld.  Abbott shall advise Hospira of specialized equipment required and the estimated costsassociated with the purchase and installation of such equipment.  After Hospira approves such costs, Abbott shall install the equipmentand bill Hospira for theassociated costs.  Hospira shall make payment to Abbottno later than thirty (30) days from the date of Abbott’s invoice.  Title to the equipment shall be in Abbott’sname.  If Abbott wishes to use the specializedequipment for manufacture of a product other than an Exhibit D Product for Hospira, Abbott and Hospira shall meet and discuss thetechnical and practical ramifications of such use and appropriate compensationto Hospira.  Abbott will be responsible for insuring,maintaining and repairing all Hospira-purchased equipment located at Abbott’sfacility to the same level of care of Abbott-owned equipment.  In the event of loss of anyHospira-purchased equipment while in Abbott’s possession during the term ofthis Agreement, Hospira shall receive the replacement funds for such equipmentreceived by Abbott arising from its insurance claim for such equipment.  Upon the termination or expiration of thisAgreement, Abbott shall, as agreed by the Parties, transfer

 

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ownership of any equipment purchased by Abbottpursuant to this Section 3.2(c) to Hospira or maintain ownership of theequipment by paying Hospira the greater of the then current book or fair marketvalue of the equipment.   Hospira shallbear all costs associated with the removal of equipment from Abbott’s facilityif the Parties elect to transfer ownership of such equipment.  This provision shall not apply to anystandard equipment normally used or required for the manufacture of Exhibit DProduct or for additional standard equipment required to increase productioncapacity or efficiency at Abbott’s manufacturing facility. =

 

(d)                                 Audit.  Hospira shall have the right, either byitself or through independent outside auditors or consultants, not more thanonce per year during the term of this Agreement, unless reasonable cause isshown, to inspect and audit any areas of Abbott’s facilities in which anyportion of the manufacturing of the Products is performed for the examinationof production or quality records or to perform cGMP audits, at its soleexpense, on reasonable advance notice, during Abbott’s normal business hours ina manner that does not interfere unreasonably with Abbott’s operations.  Any such auditor or consultant shall enterinto an agreement with the Parties on terms in which such independent auditorshall agree to maintain the confidentiality of the information obtained duringthe course of such audit.

 

3.3           RegulatoryMatters.

 

(a)                                  Permits,Registrations, Licenses and Approvals. Abbott shall be responsible for maintaining all regulatory andgovernmental permits, registrations, licenses and approvals necessary tomanufacture and deliver the Exhibit D Products to Hospira.  To the extent Abbott requires the assistanceof Hospira in order to fulfill its obligations pursuant to this Section3.3(a), Hospira agrees to fully cooperate and assist Abbott. Upon theexpiration or termination of this Agreement, Abbott shall use reasonablecommercial efforts to cooperate with Hospira to transfer and maintain suchpermits, licenses, registrations and approvals.

 

(b)                                 ReportingRequirements.  During the term ofthis Agreement, Abbott will be responsible for any reporting of mattersregarding the manufacture of Products to any applicable Regulatory Authority inaccordance with pertinent laws and regulations.  Abbott shall promptly furnish copies of any such reports toHospira.  Abbott shall also adviseHospira of any occurrences or information that arises out of Abbott’smanufacturing activities that have or could reasonably be expected to haveadverse regulatory compliance and/or reporting consequences concerning theProducts.

 

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(c)                                  Inspections.  Abbott shall be responsible, at Abbott’ssole expense, for handling and responding to any FDA or other governmentalagency inspections with respect to the manufacture of the Exhibit D Productsduring the term of this Agreement. Abbott shall provide to Hospira any Information reasonably requested byHospira and all Information requested by the FDA or any other governmentalagency concerning any governmental inspection related to the Exhibit DProducts. To the extent Abbott requires the assistance of Hospira in order tofulfill its obligations pursuant to this Section 3.3(c), Hospira agreesto fully cooperate and assist Abbott. In the event Abbott or any of theProducts are inspected by any applicable Regulatory Authority, Abbott shallnotify Hospira as soon as practicable of (i) any such inspection withreasonable advance notice, (ii) any written alleged violations or deficienciesrelating to the manufacturing facility at which Products are manufactured,packaged or stored, and (iii) the corrective action to be taken, and shallpromptly contest such alleged violations or deficiencies in good faith or takethe required corrective action, each at Abbott’s sole expense.

 

3.4           Complaintsand Recalls.

 

(a)                                  Hospirashall notify Abbott promptly of any Product complaints involving Abbott’smanufacture in sufficient time to allow Abbott to evaluate the complaints andassist Hospira in responding to such complaints.

 

(b)                                 Inthe event that Abbott should be required to initiate a recall, field alert,Product withdrawal or field correction with respect to any Product providedunder this Agreement, Abbott shall immediately notify Hospira in writing.  In the event that Hospira believes that arecall, field alert, Product withdrawal, or field correction is necessary withrespect to any Product provided under this Agreement, Hospira shall promptly sonotify Abbott.

 

3.5           Insurance.  During the term of this Agreement, Abbottand Hospira shall maintain their own respective product liability insurancewith respect to the Products, insuch amounts and with such scope of coverage as are adequate to cover theirrespective obligations under this Agreement and as are appropriate forcompanies of like size in like industries, taking into account the scope ofactivities contemplated herein.

 

3.6           ManufacturingChanges.

 

(a)                                  ProductChanges.  Abbott shall not make anychanges to the Product Specifications and/or manufacturing that would requireapproval from, or notification to, any Regulatory Authority without the priorwritten consent of Hospira, which such consent shall not be unreasonablywithheld.  The

 

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timing of Abbott’s notice to Hospira of any suchchange shall permit adequate time for Hospira to make any necessary regulatoryfilings and obtain any necessary approval thereof from a Regulatory Authorityprior to the change being implemented.

 

(b)                                 RequiredChanges.  For changes relatingsolely to the Product Specifications or manufacturing of the Products hereunderthat are required by laws and other regulatory requirements (including, withoutlimitation, cGMP), or by medical or scientific concerns as to the toxicity,safety and/or efficacy of the Products (collectively, “Required Changes”), theParties shall cooperate in making such changes promptly.

 

(c)                                  DiscretionaryChanges.  Abbott shall consider ingood faith any request by Hospira to make changes to the Product Specificationsor manufacturing that are not Required Changes, including, but not limited to,changes to the existing Product, Product line extensions, or changes to theexisting or additional packaging (collectively, “Discretionary Changes”).  Any analytical improvements shall beconsidered Discretionary Changes unless requested or required by RegulatoryAuthorities in which case such improvements shall be considered a RequiredChange.  Any change requested by Abbottwhich is not a Required Change shall be made only with the written consent ofHospira, which consent shall not be unreasonably withheld.

 

(d)                                 Costsof Changes.  Any and all costsassociated with Required Changes shall be borne by Hospira.  Any Discretionary Changes initiated byeither Party shall be agreed to by the Parties including which Party or Partiesshall be responsible for the funding of such Discretionary Change.

 

**ARTICLE 4- TERM AND TERMINATION**

 

4.1           Term.  This Agreement shall have an initial term oftwo (2) years commencing on the Effective Date (the “Initial Term”).  With respect to the Exhibit D Products,Hospira may extend this Agreement beyond the Initial Term by giving writtennotice of such extension to Abbott not less than twelve (12) months prior toexpiration of the Initial Term.  Suchextension of the Initial Term (the “Exhibit D Successive Term”) shall continuefor a period equal to the amount of time required by Hospira to (i) identifyand qualify an alternative supplier for the Exhibit D Products, or (ii)negotiate a new agreement with Abbott for the supply of such Products;provided, however, that such Exhibit D Successive Term shall not exceed two (2)years.  For the duration of the ExhibitD Successive Term, Hospira shall (i) use reasonable commercial efforts toidentify and qualify such alternative supplier for the Exhibit D Products, or(ii) engage in good faith negotiations with Abbott regarding such newagreement.  Hospira may terminate theExhibit D Successive Term by giving Abbott not less than twelve (12) monthswritten notice of such termination. With respect to the Exhibit E Products, Abbott may extend this Agreementbeyond the Initial Term by giving written notice of such extension to Hospiranot

 

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less than twelve (12) months prior to expiration of the Initial Term.Any such extension of the Initial Term (the “Exhibit E Successive Term”) shallcontinue for a period equal to the amount of time required by Abbott to (i)identify and qualify an alternative source for the finishing of the Exhibit EProducts, or (ii) negotiate a new agreement with Hospira for the finishing ofsuch Products; provided, however, that such Exhibit E Successive Term shall notexceed two (2) years.  For the durationof the Exhibit E Successive Term, Abbott shall (i) use commercially reasonableefforts to identify and qualify such alternative source for finishing theExhibit E Products, or (ii) engage in good faith negotiations with Hospiraregarding such new agreement.  Abbottmay terminate the Exhibit E Successive Term by giving Hospira not less thantwelve (12) months written notice of such termination.  During the Initial Term and any SuccessiveTerm, the Parties may mutually agree to early termination of this Agreement, ona Product-by-Product basis, at any time. 

 

4.2           MaterialBreach.  Either Party may terminatethis Agreement upon sixty (60) days’ prior written notice to the other Party ifthe other Party is in material breach of any term of this Agreement, asdetermined according to the dispute resolution procedures set forth in Section8.6 or as agreed in writing by the breaching party, and such breachingparty fails to cure that breach within such sixty (60) day period.  Any final order of debarment which has amaterial adverse effect on sales of the Products shall constitute a materialbreach of the Agreement for purposes of this Section 4.2.

 

4.3           Insolvency.  This Agreement may be terminated upon thirty(30) days’ prior written notice by either Party at any time during thisAgreement if (a) the other Party shall file in any court pursuant to anystatute of any government in any country a petition in bankruptcy or insolvencyor for reorganization or for an arrangement or for the appointment of areceiver or trustee of the Party or of its assets; (b) any Third Party proposesa written agreement of composition for extension of its debts; (c) the otherParty shall be served with an involuntary petition against it, filed in anyinsolvency proceeding, and such petition shall not be dismissed within sixty(60) days after filing thereof; (d) the other Party shall be a party to anydissolution or liquidation, or (e) the other Party shall make a general assignmentfor the benefit of its creditors.

 

4.4           Divestitureor Closure of Plant.  If Abbottdivests to a Third Party or closes any of its manufacturing facilities used inmanufacturing of any of the Exhibit D Products, Abbott shall continue tomanufacture such Products in an FDA approved alternative facility approved byHospira prior to the transfer of the manufacturing of such Products, suchapproval not to be unreasonably withheld or delayed, or if applicable, obligatethe purchaser of such facility(ies) to assume Abbott’s obligations hereunder asa condition to closing such divestiture. Abbott is solely responsible for all costs associated with any transferof manufacturing pursuant to this Section 4.4.

 

4.5           InventoryTransfer.  Upon the termination ofthis Agreement, Abbott shall transfer all remaining firm orders of Productspursuant to Section 2.1(b), work in process and raw materials relatingto the Products manufactured pursuant to this Agreement to Hospira at Hospira’sexpense, unless such termination shall have been as a result of a breach ofthis

 

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Agreement by Abbott or the early termination of this Agreement pursuantto Section 4.1, in which case such inventory, work in process and rawmaterials shall be returned at Abbott’s expense.

 

4.6           Effectof Termination. Termination of this Agreement shall not affect anyobligations of either Party incurred prior to its termination, including,without limitation, each Party’s obligations with respect to any firm ordersthat have been submitted or deemed to be submitted pursuant to Article 2hereof.

 

4.7           Equipment Purchase.  Upon the termination or expiration of thisAgreement or any subsequent agreement between the Parties that replaces thisAgreement with respect to the manufacture of Vancomycin, Hospira may purchasethe equipment listed on Exhibit F, provided that Hospira notifies Abbottin writing not less than ninety days prior to the termination or expiration ofsuch agreement of its intention to purchase such equipment.  In the event Hospira so notifies Abbott,Abbott shall, as agreed by the Parties, transfer ownership of such equipment toHospira and Hospira shall pay Abbott the then current net book value of suchequipment.   Hospira shall bear all costsassociated with the removal of such equipment from Abbott’s facility if Hospiraelects to purchase such equipment pursuant to this Section 4.7.

 

**ARTICLE 5-INTELLECTUAL PROPERTY**

 

5.1           Abbott’sProprietary Rights.  Abbott hasgranted no license, express or implied, to Hospira to use Abbott proprietary technology, know-how or rightsrelating to its manufacturing processes for the Products other than for thepurposes of this Agreement.  If Abbott,in its sole discretion, deems patentable any improvement or invention relatedto Abbott’s proprietary technology, know-how or rights relating to itsmanufacturing processes made or reduced to practice in the course of thisAgreement and if such improvement or invention relates exclusively to Abbott’smanufacturing operations in general, then Abbott shall solely own and shall beentitled to apply for patent protection on such improvements or inventions atAbbott’s expense and risk.  Subject tothe preceding sentence, Hospira shall be entitled to all such rights relatingto any improvement or invention relating to Abbott proprietary technology,know-how or rights relating exclusively to the Product or the manufacturethereof.  Abbott hereby grants (andshall have deemed to have granted) to Hospira without any further action byAbbott, a fully-paid, non-exclusive, perpetual, irrevocable, royalty-freelicense to use such improvements or inventions of the Product Specificationsolely for the purposes of the manufacture of the Products.

 

5.2           Hospira’s Proprietary Rights.  Hospirahas granted no license, express or implied, to Abbott to use Hospira’s proprietary technology,know-how or rights relating to the Products, other than for the purposes ofthis Agreement.  If Hospira, in its sole discretion, deemspatentable any improvement or invention related to the Products or to Hospira’s proprietary technology,know-how or rights relating to the Products, then Hospira shall solely own and shall be entitled to apply for patentprotection on such improvements or inventions at its expense and risk.

 

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**ARTICLE 6– TECHNICAL TRANSFER**

 

6.1           TransferPlan.  The Parties hereby agree thateffective at the time of any expiration or termination of this Agreement or atHospira’s request in the event that Hospira desires to qualify a source otherthan Abbott to manufacture a Product, the Parties shall meet and mutually agreeupon a reasonable plan to transfer the Product Specifications from Abbott toHospira or Hospira’s designees (the “Transfer Plan”).

 

6.2           ProprietaryRights Associated with Transfer Plan. Hospira shall receive, pursuant to this Section 6.2, thenecessary Product Specifications and know-how and certain intellectual propertydeveloped in the course of this Agreement as described in Section 5.1 topermit Hospira or Hospira’s designee to manufacture the Products in accordancewith the Product Specifications in place at the time of the transfer.  At any time after the Effective Date, Abbottshall reasonably cooperate with Hospira’s efforts to qualify a source otherthan Abbott to manufacture the Products and obtain necessary approvals for suchqualifications.  The effective date ofsuch transfer shall be specified by Hospira upon written notice to Abbott(provided that such transfer shall not relieve Abbott of any obligationsaccrued prior to such transfer date, including the responsibility for firmorders already placed and any remaining inventory).

 

6.3           Costsof Transfer Plan.  In the event thatthis Agreement terminates for any reason except Abbott’s material breach, alldirect actual out-of-pocket costs incurred by Abbott in connection with eachsuch Transfer Plan, and Abbott’s time (at the current staff rates) incurred inconnection with each such Transfer Plan, shall be the sole responsibility ofHospira.  In the event that thisAgreement terminates as a result of Abbott’s material breach, all direct actualout-of-pocket costs incurred by Abbott in connection with each such TransferPlan, and Abbott’s time (at the current staff rates) incurred in connectionwith each such Transfer Plan, shall be the sole responsibility of Abbott.

 

**ARTICLE 7 - CONFIDENTIALITY**

 

7.1           Confidentiality.  Subject to Section 7.3, Abbott, onbehalf of itself and each Abbott Subsidiary, and Hospira, on behalf of itselfand each Hospira Subsidiary, agrees to hold, and to cause its respectivedirectors, officers, employees, agents, accountants, counsel and other advisorsand representatives to hold, in strict confidence, with at least the samedegree of care that applies to Abbott’s confidential and proprietaryinformation pursuant to policies in effect as of the Effective Date, allInformation concerning the other and the other’s Subsidiaries that is either inits possession (including Information in its possession prior to the EffectiveDate) or furnished by the other or the other’s Subsidiaries or their respectivedirectors, officers, employees, agents, accountants, counsel and other advisorsand representatives at any time pursuant to this Agreement, and will not useany such Information other than for such purposes as may be expressly permittedhereunder, except, in each case, to the extent that such Information has been(i) in the public domain through no fault of such Party or its Subsidiaries orany of their respective directors, officers, employees, agents, accountants,counsel and other advisors and representatives, (ii) later lawfully acquiredfrom other sources by such Party (or any of its Subsidiaries) which sources arenot themselves bound by a confidentiality obligation, or (iii)

 

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independently generated without reference to any proprietary orconfidential Information of the other Party.

 

7.2           No Release; Return or Destruction.  Each Party agrees not to release ordisclose, or permit to be released or disclosed, any such Information to anyother Person, except its directors, officers, employees, agents, accountants,counsel and other advisors and representatives who need to know suchInformation, and except in compliance with Section 7.3.  Without limiting the foregoing, when anyInformation furnished by the other Party after the Effective Date pursuant tothis Agreement is no longer needed for the purposes contemplated by thisAgreement, each Party will promptly after receiving a written request from theother Party either return to the other Party all such Information in a tangibleform (including all copies thereof and all notes, extracts or summaries basedthereon) or certify to the other Party that it has destroyed such Information(and such copies thereof and such notes, extracts or summaries based thereon).

 

7.3           Protective Arrangements.  In the event that either Party or any of itsSubsidiaries either determines on the advice of its counsel that it is requiredto disclose any Information pursuant to applicable law or the rules orregulations of any Regulatory Authority or receives any demand under lawfulprocess or from any Regulatory Authority to disclose or provide Information ofany other Party that is subject to the confidentiality provisions hereof, suchParty shall notify the other Party prior to disclosing or providing suchInformation and shall cooperate at the expense of the requesting Party inseeking any reasonable protective arrangements requested by such otherParty.  Subject to the foregoing, thePerson that received such request may thereafter disclose or provideInformation to the extent required by such law (as so advised by counsel) or bylawful process or such Regulatory Authority.

 

**ARTICLE 8 - MISCELLANEOUS**

 

8.1           CorporateOrganization and Authority.  EachParty represents and warrants that it is a company duly organized, validlyexisting, and in good standing under the laws of the jurisdiction wherein it isorganized, and that it has all necessary power and authorization to assume itsobligations under this Agreement, and to discharge them pursuant to the termshereof.

 

8.2           PublicAnnouncements.  Neither Party shallmake any publicity releases, interviews, or other dissemination of Informationconcerning this Agreement or its terms, or either Party’s performancehereunder, to communication media, financial analysts or others without thewritten approval of the other Party, which approval shall not unreasonably bewithheld.  Either Party may upon noticeto the other make any disclosure in filings with regulatory agencies asrequired by law or applicable court order; provided that the other Party shallhave the opportunity to consult on such disclosures and filings.

 

8.3           ForceMajeure.  Neither Party shall beliable to the other if, and to the extent that, the performance or delay inperformance of any of its obligations under this Agreement is prevented,restricted, delayed or interfered with due to circumstances beyond thereasonable

 

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control of such Party, including, but not limited to, governmentlegislation, fires, floods, explosions, epidemics, accidents, acts of God,wars, riots, strikes, lockouts or other concerted acts of workers and/or actsof government.  The Party claiming anevent of force majeure shall promptly notify the other Party in writing, andprovide full particulars of the cause or event and the date of first occurrencethereof, as soon as possible after the event and also keep the other Partyinformed of any further developments. The Party so affected shall use its reasonable commercial efforts toremove the cause of non-performance, and both the Parties shall resumeperformance hereunder with the utmost dispatch when such cause is removedunless this Agreement has previously been terminated under Article 4hereof.

 

8.4           EntireAgreement.  This Agreement and theExhibits hereto contain the entire agreement and understanding between theParties with respect to the subject matter hereof and supersede all prioragreements and understandings, whether written or oral, relating to suchsubject matter; provided however, in the event of any conflict between thisAgreement and either of the Quality Agreement attached hereto as Exhibit Bor the International Technical Agreement attached hereto as Exhibit C,this Agreement shall control.  Except asotherwise expressly agreed by the Parties, nothing herein shall modify orsupersede the Separation and Distribution Agreement or any of the otheragreements contemplated therein.

 

8.5           Amendmentand Waiver.  This Agreement may beamended only by a writing which specifically states that such an amendment isits purpose and which is signed by both Parties.  No course of dealing between the Parties or failure by eitherParty to exercise any right or remedy hereunder shall constitute an amendmentto this Agreement or a waiver of any other right or remedy or the laterexercise of any right or remedy.

 

8.6           GoverningLaw; Dispute Resolution.  This Agreementwill be governed by and construed and interpreted in accordance with the lawsof the State of Illinois irrespective of the choice of laws principles of theState of Illinois, as to all matters, including matters of validity,construction, effect, enforceability, performance and remedies.  Any controversy or claim arising out of orrelating to this Agreement, or the breach thereof, shall be resolvedexclusively by the alternative dispute resolution process described in ExhibitG.

 

8.7           Assignment.  Neither this Agreement nor any of the rightsand obligations of a Party hereunder shall be assignable or transferable bysuch Party without the prior written consent of the other Party; provided,however, that this Agreement shall be assignable by either Party with the priorwritten consent of the other Party (which consent shall not be unreasonablywithheld, delayed or conditioned) in connection with a sale, by sale of stock,sale of assets, merger or otherwise, of all or substantially all of one or morebusinesses, business units or product lines of the assigning Party.

 

8.8           Natureof Agreement.  In operating underthis Agreement, each Party shall act independently and this Agreement shall notbe construed as creating any partnership, joint venture or incorporatedbusiness entity.  Neither Party shallhave any authority to incur any liability or obligation whatsoever on behalf ofthe other.

 

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8.9           Notice.  All notices or other communications underthis Agreement must be in writing and will be deemed to be duly given (a) whendelivered in person, (b) upon transmission via confirmed facsimiletransmission, provided that such transmission is followed by delivery of aphysical copy thereof in person, via U.S. first class mail, or via a privateexpress mail courier, or (c) two days after deposit with a private express mailcourier, in any such case addressed as follows:

 

If to Abbott, to:

 

Abbott Laboratories100 Abbott Park RoadBuilding AP6D, Dept. 364Abbott Park, Illinois  60064-6020Attn:  General CounselFacsimile:  (847) 938-1561

 

If to Hospira to:

 

Hospira, Inc. Legal Department Dept. NLEG275 North Field Drive P.O. Box 5045 Lake Forest, IL 60045-5045Attn:  General Counsel Facsimile:  (224) 212-3312

 

Any Party may, by noticeto the other Party, change the address to which such notices are to be given.

 

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IN WITNESS WHEREOF, theParties hereto have affixed hereunto their authorized signature as of the datefirst above written:

 

 
|   | **HOSPIRA,  INC.**                                                    |
|--------|-----------------------------------------------------------------------|
|   |                                                                  |
|   |                                                                  |
|   | By:                                                                   |   |   |
|   | Name: Christopher B.  Begley                                          |
|   | Title: Chief Executive  Officer                                       |
|   |                                                                  |
|   |                                                                  |
|   | **ABBOTT LABORATORIES**                                               |
|   |                                                                  |
|   |                                                                  |
|   | By:                                                                   |   |   |
|   | Name: Thomas C. Freyman                                               |
|   | Title: Executive Vice President, Finance  and Chief Financial Officer |

 

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