Exhibit
10.6


 


API SUPPLY AGREEMENT


 


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


 


RECITALS


 


WHEREAS, the board of directors of Abbott has
determined that it is in the best interests of Abbott and its shareholders to
separate Abbott’s core hospital products business from its other existing
businesses;


 


WHEREAS, in order to effectuate the foregoing, Abbott
and Hospira have entered into a Separation and Distribution Agreement dated as
of April 12, 2004 (the “Separation and Distribution Agreement”), which
provides, among other things, subject to the terms and conditions set forth
therein, for the separation and the distribution to Hospira of certain assets
and the assumption by Hospira of certain liabilities, and for the execution and
delivery of certain other agreements in order to facilitate and provide for the
foregoing; and


 


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


 


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


 


ARTICLE 1- DEFINITIONS


 


1.1           For
the purpose of this Agreement the following terms will have the following
meanings:


 


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


 


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


 


“Agreement” means this API Supply Agreement, including
any 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.


 

















 


“Discretionary Changes” has the meaning set forth in Section
3.6(c).


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Information” means information, whether or not
patentable or copyrightable, in written, oral, electronic or other tangible or
intangible 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, computer
programs or other software, marketing plans, customer names, communications by
or to attorneys (including attorney-client privileged communications), memos
and other materials prepared by attorneys or under their direction (including
attorney work product), and other technical, financial, employee or business
information or data.


 


“Initial Term” has the meaning set forth in Section
4.1.


 


“Parties” means the parties to this Agreement.


 


“Person” means an individual, a general or limited
partnership, a corporation, a trust, a joint venture, an unincorporated
organization, a limited liability entity, any other entity and any Regulatory
Authority.


 


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


 


“Product” and “Products” have the meanings set forth
in the Recitals.


 


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


 


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


 


“Regulatory Authority” means any federal, state or
local or international regulatory agency, department, bureau or other
governmental entity including the FDA which is responsible for issuing
approvals, licenses, registrations or authorizations necessary for the
manufacture, use, storage, import, transport or sale of any Product in a
regulatory jurisdiction.


 


“Required Changes” has the meaning set forth in Section
3.6(b).


 


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


 


“Subsidiary” of any Person means another Person that
is directly or indirectly controlled by such first Person.  As used herein, “control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
ownership of voting securities or other interests, by contract or
otherwise.  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, any
Abbott Subsidiary, Hospira and any Hospira Subsidiary.


 


“Transfer Plan” has the meaning set forth in Section
6.1.


 


ARTICLE 2- ORDERS, PRICING, PAYMENT AND CONFORMANCE


 


2.1           Forecasts
and Orders.


 


(a)                                  Purchase
and Sale of Product.  Pursuant to
the terms and conditions of this Agreement and for the duration of this
Agreement, Abbott shall manufacture, sell and deliver the Products to Hospira
in the quantities requested pursuant to Section 2.1(b) and Hospira shall
purchase and take delivery of its worldwide requirements of the Products from
Abbott.


 


(b)                                 Rolling
Forecast.  Simultaneously with the
execution of this Agreement, Hospira shall provide Abbott with an eighteen (18)
month non-binding forecast of Hospira’s best estimate of its future requirements
of 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, and
quantity of each Product and (ii)


 


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


 


(c)                                  Long-Range
Forecast.  For capacity planning
purposes, Hospira shall also provide Abbott with a three (3) year non-binding
forecast prior to January 1st of each year during the term of this Agreement.


 


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


 


(e)                                  Firm
Order Changes.  If Hospira requests
changes to firm orders within the firm order period specified in Section
2.1(b), Abbott shall attempt to accommodate the changes within reasonable
manufacturing capabilities and efficiencies. 
Abbott shall advise Hospira of the costs associated with making any such
change, and the Parties shall mutually agree upon the amount of such costs
prior to Abbott proceeding to make the change. Upon such mutual agreement,
Abbott shall make such change and Hospira shall be responsible for paying such
costs.


 


(f)                                    Purchase
Order Terms.  Hospira shall issue a
purchase order, or an agreed upon method of communicating its requirements of
the Products, to Abbott.  Each purchase
order 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 such
purchase order or acknowledgment shall be applicable except those specifying
Product and quantity ordered, delivery dates, special shipping instructions and
invoice information.  All Product orders
hereunder shall be in order quantities as agreed between the Parties.  Abbott shall deliver the Products in such
firm order quantities, subject to yield fluctuations and on such delivery dates
as are specified in the applicable purchase order and, if no such purchase
order 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 written
approval prior to making any adjustments to Product order quantities and/or
shipping dates.


 


2.2           Price;
Adjustment Payment; Shipment.


 


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


 


(b)                                 Price
Adjustments.  The prices set forth
in Exhibit A shall be subject to adjustment as follows:


 


(i)                                     In
the event Hospira elects to extend the term of this Agreement beyond the
Initial Term, as set forth in Section 4.1, (A) the prices for the
Products for the first twelve (12) month period subsequent to the Initial Term
shall be adjusted from the prices set forth in Exhibit A, as such prices
may have been adjusted pursuant to Section 2.2(b)(ii) or Section
2.2(c), to reflect the increase in the Producer Price Index for the prior
twenty-four (24) month period, and (B) the prices for the Products for the
twelve (12) month period subsequent to the period described in (A) above shall
be adjusted from the prices set forth in Exhibit A, as such prices may
have 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 the
prior twelve (12) month period.


 


(ii)                                  In
the event that due to material unforeseen and unavoidable reasons, the
aggregate standard cost of manufacturing the Products hereunder (e.g. raw
materials or other circumstances outside the control of Abbott, but not
including labor and overhead costs) increases by five percent (5%) or more,
Abbott shall promptly provide notice to Hospira of such increase (which notice
shall document the reasons for such increase)


 


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


 


(c)                                  Materials
Cost Reductions. In the event that Hospira assists Abbott in reducing its
costs of purchasing materials from suppliers in connection with Abbott’s
manufacture of Products hereunder, such cost reductions realized by Abbott
shall be shared equally by Abbott and Hospira, net of all implementation costs.


 


(d)                                 Payment
Terms.  Abbott shall invoice Hospira
upon delivery of Product or transfer of Product into Hospira’s inventory
pursuant to the U.S. Transition Services Agreement between the Parties dated as
of the date hereof, as applicable. 
Hospira shall make payment net thirty (30) days from the date of
Abbott’s invoice; provided, however, that Hospira shall notify Abbott of any
disputed invoice as soon as practicable and a timeline for resolving such
dispute shall be mutually agreed by the Parties within forty-five (45) days of
the date of the disputed invoice. 
Failure to pay a disputed invoice shall not be deemed a breach of this
Agreement by Hospira and will not relieve Abbott from its commitment to
continue to supply Products hereunder. 
Product invoices that remain unpaid within thirty (30) days after the
invoice date, other than invoices being disputed in accordance with the terms
set forth above, shall bear interest at a rate per annum equal to Prime Rate
plus two percent (2%); provided however, any invoices disputed by Hospira and
resolved in favor of Abbott shall be subject to such late payment fee as of the
invoice date until paid in full.  All
payments hereunder shall be made in U.S. dollars.


 


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


 


(f)                                    Delivery.  Abbott shall deliver the Products to Hospira
or into Hospira’s inventory pursuant to the U.S. Transition Services Agreement
between the Parties dated as of the date hereof, as applicable, F.C.A. Abbott’s
manufacturing 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 by
Hospira.  Hospira shall be the importer
of record for all Products imported hereunder, if any, and


 


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


 


(g)                                 No
Set-off.  Hospira’s obligation to
make any required payments under this Agreement shall not be subject to any
right of offset, set-off, deduction or counterclaim, however arising.


 


2.3           Expiration/Retest
Dating.  So long as Hospira
purchases Exhibit D Products in standard batch quantities, with the exception
of Products ordered by Hospira’s Lake County manufacturing facilities, which
shall not order Products in standard batch quantities, such Products, when
shipped to Hospira hereunder, shall have at least two-thirds of their original
shelf life and at least two-thirds of their first retest date remaining at the
date of shipment, unless otherwise agreed in writing by Hospira.


 


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


 


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


 


ARTICLE 3- WARRANTIES, COVENANTS AND INDEMNIFICATION


 


3.1           General
Warranties and Indemnification.


 


(a)                                  Abbott
Representations 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, be
adulterated or misbranded within the meaning of the Act or within the meaning of
any applicable state or municipal law in which the definitions of adulteration
and misbranding are substantially the same as those contained in the Act, as
the 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 404
and 505 of the Act be introduced into interstate commerce. Abbott further
represents and warrants to Hospira
that each of the Products Abbott delivers to Hospira pursuant to this Agreement shall be free from defects in
material and workmanship and shall be manufactured:  (a) in accordance and conformity with the Product Specifications
provided by Hospira; and (b) in compliance with all applicable statutes, laws,
rules or regulations, including those relating to the environment, food or
drugs and occupational health and safety, including, without limitation, those
enforced or promulgated by the FDA (including, without limitation, compliance
with cGMPs).  Abbott further represents
and warrants to Hospira that
Abbott’s performance of its obligations under this Agreement will not result in
a material violation or breach of any agreement, contract, commitment or
obligation to which Abbott is a party or by which it is bound and will not
conflict with or constitute a default under its Certificate of Incorporation or
corporate bylaws. ABBOTT MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH
RESPECT TO PRODUCT.  ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE HEREBY
DISCLAIMED BY ABBOTT.


 


(b)                                 Hospira
Representations and Warranties.  Hospira
represents and warrants that it shall provide Product Specifications to Abbott
with respect to the Products.  Hospira further represents and
warrants to Abbott that Hospira’s
performance of its obligations under this Agreement will not result in a
material violation or breach of any agreement, contract, commitment or
obligation to which Hospira is a
party or by which it is bound and will not conflict with or constitute a
default under its corporate charter or bylaws.


 


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


 


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Hospira against any and all costs and expenses which
Hospira may incur as a result of any such recall to the extent Abbott is
responsible. Costs for any recalls of any Product to the extent Abbott is not
liable under this Agreement or any other agreement between the Parties relating
to the Products shall be borne by Hospira. 
In addition, Hospira shall indemnify Abbott against any and all costs
and expenses which Abbott may incur as a result of any recall to the extent
Hospira is responsible.  The Parties
shall promptly advise and consult with one another with respect to any recall
related to the manufacture of any Product, and each Party shall participate, if
requested by the controlling Party, in all meetings with the FDA and/or
equivalent foreign regulatory body regarding such recall.  The expense of each Party’s participation in
any such meetings shall be borne by the Party responsible for the recall.


 


(d)                                 Indemnification
by 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’s
fees), losses or liabilities pursuant to this Agreement and asserted by Third
Parties to the extent such arise out of, result from or relate to: (i) Abbott’s
breach of any representation or warranty set forth in Section 3.1(a);
(ii) any violation or infringement of any proprietary right of any Third Party
to the extent relating to, arising out of or resulting from Abbott’s
manufacturing processes used in the manufacture of Products pursuant to this
Agreement (exclusive of the Product Specifications or any Hospira proprietary
rights); and (iii) any negligent, wrongful act, or willful misconduct or
omission on the part of Abbott, its officers, directors, employees, agents or
representatives relating to Abbott’s performance hereunder.


 


(e)                                  Indemnification  by
Hospira.  Hospira
shall 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 or
liabilities pursuant to this Agreement and asserted by Third Parties to the
extent such arise out of, result from or relate to: (i) Hospira’s breach of any representation or warranty set forth in Section
3.1(b); (ii) any violation or infringement of any proprietary right of any
Third Party to the extent relating to, arising out of or resulting from the
Exhibit D Products, other than Abbott’s manufacturing processes used in the
manufacture of Products pursuant to this Agreement; (iii) the use of or lack of
safety or efficacy of the Exhibit D Products; and (iv) any negligent, wrongful
act, or willful misconduct or omission on the part of Hospira, its officers, directors, employees, agents or
representatives relating to Hospira’s
performance hereunder.


 


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(f)                                    Conditions
of Indemnification.  If either Party
seeks indemnification from the other hereunder, it shall promptly give notice
to the other Party of any such claim or suit threatened, made or filed against
it which forms the basis for such claim of indemnification and shall cooperate
fully with the other Party in the investigation and defense of all such claims
or suits.  The indemnifying Party shall
have the option to assume the other Party’s defense in any such claim or suit
with counsel reasonably satisfactory to the other Party.  No settlement or compromise shall be binding
on a Party hereto without its prior written consent, such consent not to be
unreasonably delayed or withheld.


 


(g)                                 Limitations
on Liability. FOR EACH TWELVE (12) MONTH PERIOD DURING WHICH THIS AGREEMENT
IS IN EFFECT, COMMENCING AS OF THE EFFECTIVE DATE, THE MAXIMUM LIABILITY OF
ABBOTT AND ITS SUBSIDIARIES TO, AND THE SOLE REMEDY OF, HOSPIRA AND ANY OF ITS
SUBSIDIARIES WITH RESPECT TO ANY AND ALL CLAIMS ARISING UNDER OR IN CONNECTION
WITH THIS AGREEMENT, REGARDLESS OF THE THEORY UPON WHICH THE LIABILITY IS
PREMISED, SHALL NOT EXCEED ABBOTT’S PROFITS HEREUNDER, WHICH SHALL BE DEEMED TO
BE 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 ADJUSTED
PURSUANT TO THE TERMS OF SECTION 2.2(b).


 


(h)                                 No
Consequential Damages.  NEITHER
PARTY SHALL BE LIABLE TO THE OTHER FOR INDIRECT, EXEMPLARY, INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES, INCLUDING WITHOUT LIMITATION, LOST PROFITS
AND PUNITIVE DAMAGES RESULTING FROM ANY BREACH OF THIS AGREEMENT, EVEN IF THE
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND EACH PARTY
HEREBY WAIVES ON BEHALF OF ITSELF AND ITS SUBSIDIARIES ANY CLAIM FOR SUCH DAMAGES,
INCLUDING ANY CLAIM FOR PROPERTY DAMAGE OR LOST PROFITS, WHETHER ARISING IN
CONTRACT, TORT OR OTHERWISE.


 


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


 


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3.2           Manufacture
of the Products.


 


(a)                                  Manufacturing
Standards.  Abbott shall manufacture
and deliver the Products to Hospira at all times in full compliance with the
Act, cGMPs, Product Specifications for each Product, any other applicable
regulatory requirements and the requirements set forth in the Quality Agreement.  Abbott shall maintain during the term of
this Agreement and for a period thereafter consistent with Abbott’s policies
and standard cGMP requirements, all records as are necessary or appropriate to
demonstrate compliance with the Act, cGMPs, Product Specifications, any other
applicable regulatory requirements and the Quality Agreement.  If Abbott fails to comply with cGMPs in a
material manner, as demonstrated by an observation of a Regulatory Authority,
Abbott shall use reasonable commercial efforts to remedy such material
deviation.


 


(b)                                 Manufacturing
Process.  Except as otherwise
provided 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 the
Products, as part of the price set forth in Exhibit A.  Abbott shall be responsible for vendor
quality approval for vendors of such materials all of which shall comply with
Product Specifications.


 


(c)                                  Non-Standard
Equipment 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 such
costs, which approval shall not be unreasonably withheld.  Abbott shall advise Hospira of specialized equipment required and the estimated costs
associated with the purchase and installation of such equipment.  After Hospira approves such costs, Abbott shall install the equipment
and bill Hospira for the
associated costs.  Hospira shall make payment to Abbott
no later than thirty (30) days from the date of Abbott’s invoice.  Title to the equipment shall be in Abbott’s
name.  If Abbott wishes to use the specialized
equipment for manufacture of a product other than an Exhibit D Product for Hospira, Abbott and Hospira shall meet and discuss the
technical and practical ramifications of such use and appropriate compensation
to Hospira.  Abbott will be responsible for insuring,
maintaining and repairing all Hospira-purchased equipment located at Abbott’s
facility to the same level of care of Abbott-owned equipment.  In the event of loss of any
Hospira-purchased equipment while in Abbott’s possession during the term of
this Agreement, Hospira shall receive the replacement funds for such equipment
received by Abbott arising from its insurance claim for such equipment.  Upon the termination or expiration of this
Agreement, Abbott shall, as agreed by the Parties, transfer


 


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ownership of any equipment purchased by Abbott
pursuant to this Section 3.2(c) to Hospira or maintain ownership of the
equipment by paying Hospira the greater of the then current book or fair market
value of the equipment.   Hospira shall
bear all costs associated with the removal of equipment from Abbott’s facility
if the Parties elect to transfer ownership of such equipment.  This provision shall not apply to any
standard equipment normally used or required for the manufacture of Exhibit D
Product or for additional standard equipment required to increase production
capacity or efficiency at Abbott’s manufacturing facility. =


 


(d)                                 Audit.  Hospira shall have the right, either by
itself or through independent outside auditors or consultants, not more than
once per year during the term of this Agreement, unless reasonable cause is
shown, to inspect and audit any areas of Abbott’s facilities in which any
portion of the manufacturing of the Products is performed for the examination
of production or quality records or to perform cGMP audits, at its sole
expense, on reasonable advance notice, during Abbott’s normal business hours in
a manner that does not interfere unreasonably with Abbott’s operations.  Any such auditor or consultant shall enter
into an agreement with the Parties on terms in which such independent auditor
shall agree to maintain the confidentiality of the information obtained during
the course of such audit.


 


3.3           Regulatory
Matters.


 


(a)                                  Permits,
Registrations, Licenses and Approvals. 
Abbott shall be responsible for maintaining all regulatory and
governmental permits, registrations, licenses and approvals necessary to
manufacture and deliver the Exhibit D Products to Hospira.  To the extent Abbott requires the assistance
of Hospira in order to fulfill its obligations pursuant to this Section
3.3(a), Hospira agrees to fully cooperate and assist Abbott. Upon the
expiration or termination of this Agreement, Abbott shall use reasonable
commercial efforts to cooperate with Hospira to transfer and maintain such
permits, licenses, registrations and approvals.


 


(b)                                 Reporting
Requirements.  During the term of
this Agreement, Abbott will be responsible for any reporting of matters
regarding the manufacture of Products to any applicable Regulatory Authority in
accordance with pertinent laws and regulations.  Abbott shall promptly furnish copies of any such reports to
Hospira.  Abbott shall also advise
Hospira of any occurrences or information that arises out of Abbott’s
manufacturing activities that have or could reasonably be expected to have
adverse regulatory compliance and/or reporting consequences concerning the
Products.


 


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


 


3.4           Complaints
and Recalls.


 


(a)                                  Hospira
shall notify Abbott promptly of any Product complaints involving Abbott’s
manufacture in sufficient time to allow Abbott to evaluate the complaints and
assist Hospira in responding to such complaints.


 


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


 


3.5           Insurance.  During the term of this Agreement, Abbott
and Hospira shall maintain their own respective product liability insurance
with respect to the Products, in
such amounts and with such scope of coverage as are adequate to cover their
respective obligations under this Agreement and as are appropriate for
companies of like size in like industries, taking into account the scope of
activities contemplated herein.


 


3.6           Manufacturing
Changes.


 


(a)                                  Product
Changes.  Abbott shall not make any
changes to the Product Specifications and/or manufacturing that would require
approval from, or notification to, any Regulatory Authority without the prior
written consent of Hospira, which such consent shall not be unreasonably
withheld.  The


 


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timing of Abbott’s notice to Hospira of any such
change shall permit adequate time for Hospira to make any necessary regulatory
filings and obtain any necessary approval thereof from a Regulatory Authority
prior to the change being implemented.


 


(b)                                 Required
Changes.  For changes relating
solely to the Product Specifications or manufacturing of the Products hereunder
that are required by laws and other regulatory requirements (including, without
limitation, cGMP), or by medical or scientific concerns as to the toxicity,
safety and/or efficacy of the Products (collectively, “Required Changes”), the
Parties shall cooperate in making such changes promptly.


 


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


 


(d)                                 Costs
of Changes.  Any and all costs
associated with Required Changes shall be borne by Hospira.  Any Discretionary Changes initiated by
either Party shall be agreed to by the Parties including which Party or Parties
shall be responsible for the funding of such Discretionary Change.


 


ARTICLE 4- TERM AND TERMINATION


 


4.1           Term.  This Agreement shall have an initial term of
two (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 written
notice of such extension to Abbott not less than twelve (12) months prior to
expiration of the Initial Term.  Such
extension of the Initial Term (the “Exhibit D Successive Term”) shall continue
for a period equal to the amount of time required by Hospira to (i) identify
and 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 Exhibit
D Successive Term, Hospira shall (i) use reasonable commercial efforts to
identify and qualify such alternative supplier for the Exhibit D Products, or
(ii) engage in good faith negotiations with Abbott regarding such new
agreement.  Hospira may terminate the
Exhibit D Successive Term by giving Abbott not less than twelve (12) months
written notice of such termination. 
With respect to the Exhibit E Products, Abbott may extend this Agreement
beyond the Initial Term by giving written notice of such extension to Hospira
not


 


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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”) shall
continue 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 E
Products, or (ii) negotiate a new agreement with Hospira for the finishing of
such Products; provided, however, that such Exhibit E Successive Term shall not
exceed two (2) years.  For the duration
of the Exhibit E Successive Term, Abbott shall (i) use commercially reasonable
efforts to identify and qualify such alternative source for finishing the
Exhibit E Products, or (ii) engage in good faith negotiations with Hospira
regarding such new agreement.  Abbott
may terminate the Exhibit E Successive Term by giving Hospira not less than
twelve (12) months written notice of such termination.  During the Initial Term and any Successive
Term, the Parties may mutually agree to early termination of this Agreement, on
a Product-by-Product basis, at any time. 



 


4.2           Material
Breach.  Either Party may terminate
this Agreement upon sixty (60) days’ prior written notice to the other Party if
the other Party is in material breach of any term of this Agreement, as
determined according to the dispute resolution procedures set forth in Section
8.6 or as agreed in writing by the breaching party, and such breaching
party fails to cure that breach within such sixty (60) day period.  Any final order of debarment which has a
material adverse effect on sales of the Products shall constitute a material
breach 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 this
Agreement if (a) the other Party shall file in any court pursuant to any
statute of any government in any country a petition in bankruptcy or insolvency
or for reorganization or for an arrangement or for the appointment of a
receiver or trustee of the Party or of its assets; (b) any Third Party proposes
a written agreement of composition for extension of its debts; (c) the other
Party shall be served with an involuntary petition against it, filed in any
insolvency proceeding, and such petition shall not be dismissed within sixty
(60) days after filing thereof; (d) the other Party shall be a party to any
dissolution or liquidation, or (e) the other Party shall make a general assignment
for the benefit of its creditors.


 


4.4           Divestiture
or Closure of Plant.  If Abbott
divests to a Third Party or closes any of its manufacturing facilities used in
manufacturing of any of the Exhibit D Products, Abbott shall continue to
manufacture such Products in an FDA approved alternative facility approved by
Hospira prior to the transfer of the manufacturing of such Products, such
approval not to be unreasonably withheld or delayed, or if applicable, obligate
the purchaser of such facility(ies) to assume Abbott’s obligations hereunder as
a condition to closing such divestiture. 
Abbott is solely responsible for all costs associated with any transfer
of manufacturing pursuant to this Section 4.4.


 


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


 


15

















 


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


 


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


 


4.7           Equipment Purchase.  Upon the termination or expiration of this
Agreement or any subsequent agreement between the Parties that replaces this
Agreement with respect to the manufacture of Vancomycin, Hospira may purchase
the equipment listed on Exhibit F, provided that Hospira notifies Abbott
in writing not less than ninety days prior to the termination or expiration of
such 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 to
Hospira and Hospira shall pay Abbott the then current net book value of such
equipment.   Hospira shall bear all costs
associated with the removal of such equipment from Abbott’s facility if Hospira
elects to purchase such equipment pursuant to this Section 4.7.


 


ARTICLE 5-INTELLECTUAL PROPERTY


 


5.1           Abbott’s
Proprietary Rights.  Abbott has
granted no license, express or implied, to Hospira to use Abbott proprietary technology, know-how or rights
relating to its manufacturing processes for the Products other than for the
purposes of this Agreement.  If Abbott,
in its sole discretion, deems patentable any improvement or invention related
to Abbott’s proprietary technology, know-how or rights relating to its
manufacturing processes made or reduced to practice in the course of this
Agreement and if such improvement or invention relates exclusively to Abbott’s
manufacturing operations in general, then Abbott shall solely own and shall be
entitled to apply for patent protection on such improvements or inventions at
Abbott’s expense and risk.  Subject to
the preceding sentence, Hospira shall be entitled to all such rights relating
to any improvement or invention relating to Abbott proprietary technology,
know-how or rights relating exclusively to the Product or the manufacture
thereof.  Abbott hereby grants (and
shall have deemed to have granted) to Hospira without any further action by
Abbott, a fully-paid, non-exclusive, perpetual, irrevocable, royalty-free
license to use such improvements or inventions of the Product Specification
solely for the purposes of the manufacture of the Products.


 


5.2           Hospira’s Proprietary Rights.  Hospira
has 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 of
this Agreement.  If Hospira, in its sole discretion, deems
patentable 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 patent
protection on such improvements or inventions at its expense and risk.


 


16

















 


ARTICLE 6– TECHNICAL TRANSFER


 


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


 


6.2           Proprietary
Rights Associated with Transfer Plan. 
Hospira shall receive, pursuant to this Section 6.2, the
necessary Product Specifications and know-how and certain intellectual property
developed in the course of this Agreement as described in Section 5.1 to
permit Hospira or Hospira’s designee to manufacture the Products in accordance
with the Product Specifications in place at the time of the transfer.  At any time after the Effective Date, Abbott
shall reasonably cooperate with Hospira’s efforts to qualify a source other
than Abbott to manufacture the Products and obtain necessary approvals for such
qualifications.  The effective date of
such transfer shall be specified by Hospira upon written notice to Abbott
(provided that such transfer shall not relieve Abbott of any obligations
accrued prior to such transfer date, including the responsibility for firm
orders already placed and any remaining inventory).


 


6.3           Costs
of Transfer Plan.  In the event that
this Agreement terminates for any reason except Abbott’s material breach, all
direct actual out-of-pocket costs incurred by Abbott in connection with each
such Transfer Plan, and Abbott’s time (at the current staff rates) incurred in
connection with each such Transfer Plan, shall be the sole responsibility of
Hospira.  In the event that this
Agreement terminates as a result of Abbott’s material breach, all direct actual
out-of-pocket costs incurred by Abbott in connection with each such Transfer
Plan, and Abbott’s time (at the current staff rates) incurred in connection
with each such Transfer Plan, shall be the sole responsibility of Abbott.


 


ARTICLE 7 - CONFIDENTIALITY


 


7.1           Confidentiality.  Subject to Section 7.3, Abbott, on
behalf of itself and each Abbott Subsidiary, and Hospira, on behalf of itself
and each Hospira Subsidiary, agrees to hold, and to cause its respective
directors, officers, employees, agents, accountants, counsel and other advisors
and representatives to hold, in strict confidence, with at least the same
degree of care that applies to Abbott’s confidential and proprietary
information pursuant to policies in effect as of the Effective Date, all
Information concerning the other and the other’s Subsidiaries that is either in
its possession (including Information in its possession prior to the Effective
Date) or furnished by the other or the other’s Subsidiaries or their respective
directors, officers, employees, agents, accountants, counsel and other advisors
and representatives at any time pursuant to this Agreement, and will not use
any such Information other than for such purposes as may be expressly permitted
hereunder, 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 or
any of their respective directors, officers, employees, agents, accountants,
counsel and other advisors and representatives, (ii) later lawfully acquired
from other sources by such Party (or any of its Subsidiaries) which sources are
not themselves bound by a confidentiality obligation, or (iii)


 


17

















 


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


 


7.2           No Release; Return or Destruction.  Each Party agrees not to release or
disclose, or permit to be released or disclosed, any such Information to any
other Person, except its directors, officers, employees, agents, accountants,
counsel and other advisors and representatives who need to know such
Information, and except in compliance with Section 7.3.  Without limiting the foregoing, when any
Information furnished by the other Party after the Effective Date pursuant to
this Agreement is no longer needed for the purposes contemplated by this
Agreement, each Party will promptly after receiving a written request from the
other Party either return to the other Party all such Information in a tangible
form (including all copies thereof and all notes, extracts or summaries based
thereon) 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 its
Subsidiaries either determines on the advice of its counsel that it is required
to disclose any Information pursuant to applicable law or the rules or
regulations of any Regulatory Authority or receives any demand under lawful
process or from any Regulatory Authority to disclose or provide Information of
any other Party that is subject to the confidentiality provisions hereof, such
Party shall notify the other Party prior to disclosing or providing such
Information and shall cooperate at the expense of the requesting Party in
seeking any reasonable protective arrangements requested by such other
Party.  Subject to the foregoing, the
Person that received such request may thereafter disclose or provide
Information to the extent required by such law (as so advised by counsel) or by
lawful process or such Regulatory Authority.


 


ARTICLE 8 - MISCELLANEOUS


 


8.1           Corporate
Organization and Authority.  Each
Party represents and warrants that it is a company duly organized, validly
existing, and in good standing under the laws of the jurisdiction wherein it is
organized, and that it has all necessary power and authorization to assume its
obligations under this Agreement, and to discharge them pursuant to the terms
hereof.


 


8.2           Public
Announcements.  Neither Party shall
make any publicity releases, interviews, or other dissemination of Information
concerning this Agreement or its terms, or either Party’s performance
hereunder, to communication media, financial analysts or others without the
written approval of the other Party, which approval shall not unreasonably be
withheld.  Either Party may upon notice
to the other make any disclosure in filings with regulatory agencies as
required by law or applicable court order; provided that the other Party shall
have the opportunity to consult on such disclosures and filings.


 


8.3           Force
Majeure.  Neither Party shall be
liable to the other if, and to the extent that, the performance or delay in
performance of any of its obligations under this Agreement is prevented,
restricted, delayed or interfered with due to circumstances beyond the
reasonable


 


18

















 


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


 


8.4           Entire
Agreement.  This Agreement and the
Exhibits hereto contain the entire agreement and understanding between the
Parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, whether written or oral, relating to such
subject matter; provided however, in the event of any conflict between this
Agreement and either of the Quality Agreement attached hereto as Exhibit B
or the International Technical Agreement attached hereto as Exhibit C,
this Agreement shall control.  Except as
otherwise expressly agreed by the Parties, nothing herein shall modify or
supersede the Separation and Distribution Agreement or any of the other
agreements contemplated therein.


 


8.5           Amendment
and Waiver.  This Agreement may be
amended only by a writing which specifically states that such an amendment is
its purpose and which is signed by both Parties.  No course of dealing between the Parties or failure by either
Party to exercise any right or remedy hereunder shall constitute an amendment
to this Agreement or a waiver of any other right or remedy or the later
exercise of any right or remedy.


 


8.6           Governing
Law; Dispute Resolution.  This Agreement
will be governed by and construed and interpreted in accordance with the laws
of the State of Illinois irrespective of the choice of laws principles of the
State of Illinois, as to all matters, including matters of validity,
construction, effect, enforceability, performance and remedies.  Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be resolved
exclusively by the alternative dispute resolution process described in Exhibit
G.


 


8.7           Assignment.  Neither this Agreement nor any of the rights
and obligations of a Party hereunder shall be assignable or transferable by
such Party without the prior written consent of the other Party; provided,
however, that this Agreement shall be assignable by either Party with the prior
written consent of the other Party (which consent shall not be unreasonably
withheld, 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 more
businesses, business units or product lines of the assigning Party.


 


8.8           Nature
of Agreement.  In operating under
this Agreement, each Party shall act independently and this Agreement shall not
be construed as creating any partnership, joint venture or incorporated
business entity.  Neither Party shall
have any authority to incur any liability or obligation whatsoever on behalf of
the other.


 


19

















 


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


 


If to Abbott, to:


 


Abbott Laboratories

100 Abbott Park Road

Building AP6D, Dept. 364

Abbott Park, Illinois  60064-6020

Attn:  General Counsel

Facsimile:  (847) 938-1561


 


If to Hospira to:


 


Hospira, Inc. 

Legal Department 

Dept. NLEG

275 North Field Drive 

P.O. Box 5045 

Lake Forest, IL 60045-5045

Attn:  General Counsel 

Facsimile:  (224) 212-3312


 


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


 


20

















 


IN WITNESS WHEREOF, the
Parties hereto have affixed hereunto their authorized signature as of the date
first 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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