Document:

Exhibit 10.1

EXECUTION
COPY

MORGAN STANLEY SENIOR FUNDING, INC.

1585 Broadway

New York, New York  10036

September 15, 2006

Hospira,
Inc.

275
N. Field Drive

Lake Forest, Il 60045

Attention:                       Lori O. Carlson

Corporate Vice President and Treasurer

Ladies and Gentlemen:

You (as used in this letter, “you” and the “Company”
refer to Hospira, Inc.) have advised Morgan Stanley Senior Funding, Inc. (“Morgan Stanley”)
regarding your proposed acquisition (the “Acquisition”) of a publicly held Australian
corporation code-named “Corona” (together with its subsidiaries, the “Target”).  In this connection, you have requested that
Morgan Stanley provide you with its financing commitment for up to $2.3 billion
of Senior Bank Financing (as hereinafter defined) as described in this letter
and in the summary of terms and conditions attached as Exhibits A and B (the “Summary of Terms”
and, together with this letter, this “Commitment Letter”).

As we understand the transaction, a
wholly-owned Australian subsidiary (“Merger Co.”) of the Company will acquire by
way of a Scheme of Arrangement (the “Scheme”)
all of the outstanding ordinary shares (including those shares issuable
pursuant to outstanding stock options) of Corona for a purchase price currently
anticipated to be A$4.10 in cash per share. 
The Acquisition and the debt financings contemplated by the foregoing
are collectively referred to as the “Transaction”.

We understand that you or Merger Co. will
enter into certain financing arrangements in order to finance the Acquisition and
that you or Merger Co. will borrow up to US$1.425 billion senior unsecured
short term loans (the “Bridge
Loans”) and up to $500 million senior unsecured medium term
loans (the “Term Loans”) having
substantially the terms set forth in Exhibit A of the Summary of Terms on the
date on which the Acquisition is consummated (the “Closing Date”).  The net cash proceeds from the Bridge Loans
and the Term Loans, together with approximately $100 million cash on hand from
the Company, will provide funds sufficient to (i) consummate the Acquisition
and (ii) pay the fees and expenses incurred in connection with the consummation
of the Transaction, and such proceeds shall be used for that purpose.

The anticipated sources and uses of funds at
closing of the Acquisition and all related transactions are set forth on the
attached Schedule.

 

We further understand that, unless you are
able to amend your existing revolving credit facility (the “Existing Credit Agreement”) as
described below, you will enter into financing arrangements for the ongoing
working capital needs of the Company and the Target, consisting of a senior
unsecured revolving credit facility (the “Revolving Facility”)
having substantially the terms set forth in Exhibit B hereto.  The Bridge Loans, the Term Loans and, if
applicable, the Revolving Facility are, collectively, the “Senior
Bank Financing”.

We are pleased to commit to provide, subject
to and upon the terms and conditions set forth herein and in the Summary of
Terms, 100% of the Senior Bank Financing on the terms and conditions set forth
herein and in the Summary of Terms, provided, that Morgan Stanley’s commitment
with respect to the Revolving Facility is further subject to the Company using
its commercially reasonable efforts to obtain, within five weeks after the
announcement of the Acquisition, an amendment to its existing revolving credit
facility that will permit the Acquisition and that Morgan Stanley’s commitment
with respect to the Revolving Facility will automatically terminate upon the
execution of such amendment.  We agree
that the Company may, with the consent of Morgan Stanley (not to be
unreasonably withheld or delayed) appoint up to two other institutions as lead
arrangers for each of the Bridge Loans and the Term Loans, and in such event
Morgan Stanley and such other institutions will act a joint lead arrangers for
such facilities; provided that only Morgan Stanley and one other such
institution shall be awarded league table credit for so acting with respect to
the Bridge Loans and that only Morgan Stanley and one other such institution
shall be awarded league table credit for so acting with respect to the Term
Loans.  You agree that Morgan Stanley
will have the “left” placement on all marketing materials in connection with
the Senior Bank Financing with the names of any other lead arrangers to appear
to the right of Morgan Stanley.  You
further agree that Morgan Stanley shall be permitted, in its sole discretion,
to designate one or more assignees that actually make or undertake any of the
commitments hereunder (together with Morgan Stanley, the “Lenders”)
as agents or co-agents, as the case may be, with respect to the Senior Bank
Financing and that, except as provided above, no titles may be given, or
compensation paid, to Lenders without Morgan Stanley’s consent.  Fees payable to the syndicate shall be
payable from the amounts payable to Morgan Stanley and any other co-arrangers
as described in the fee letter (the “Fee Letter”) executed simultaneously
herewith.

Morgan Stanley reserves the right, prior to
or after execution of the definitive credit documentation for the Senior Bank
Financing, to syndicate all or part of its commitment for the Senior Bank
Financing to one or more lending institutions that will become parties to such
definitive credit documentation pursuant to a syndication to be managed by
Morgan Stanley in consultation with the Company, and the commitment of Morgan
Stanley hereunder shall be reduced as and when commitments are received from
the Lenders.  Morgan Stanley shall
commence syndication efforts promptly after the announcement of the Acquisition
and you agree actively to assist Morgan Stanley in achieving a syndication that
is satisfactory to Morgan Stanley.  To
assist Morgan Stanley in its syndication efforts, you hereby agree (a) to
provide and cause your advisors to provide Morgan Stanley and the other
syndicate members upon request with all information reasonably deemed necessary
by Morgan Stanley to complete syndication, including but not limited to
information and evaluations prepared by you and your advisors or on your behalf
relating to the transactions contemplated hereby, (b) to assist Morgan Stanley
upon request in the preparation of an Information Memorandum to be used in
connection with the syndication of the Senior Bank Financing, (c) to use
reasonable commercial efforts to ensure that the syndication efforts of Morgan
Stanley benefit materially from your existing lending relationships and (d) to
make available your senior officers and representatives, in each case from time
to time and to attend and make presentations regarding the business and
prospects of the Company at a meeting or meetings of lenders or prospective
lenders.  You hereby agree that the
general bank meeting in respect of the Senior Bank Financing shall be held no
later than 45 days prior to the consummation of the Acquisition.  In addition, you agree that no financing for
you or any of your respective subsidiaries or affiliates shall be syndicated,
privately placed or publicly offered during the syndication of the Senior Bank
Financing, 

 2
 

 

except for (i) credit
facilities permitted by Section 6.2(viii) of the Existing Credit Agreement and
(ii) purchase money and similar financings obtained by you and your domestic
subsidiaries in the ordinary course of business.

Please note that the terms and conditions of
Morgan Stanley’s commitment are not limited to those set forth in this
Commitment Letter.  Those matters that
are not covered or made clear herein or in the attached Summary of Terms are
subject to mutual agreement of the parties. 
The terms and conditions of this commitment may be modified only in
writing.  Morgan Stanley’s commitment set
forth in this Commitment Letter will terminate on the earliest of (i)
consummation of the Acquisition or another transaction or series of
transactions in which the Company or any of its affiliates acquires, directly
or indirectly, any stock or assets of the Target, (ii) termination of the
documentation for the Acquisition and (iii) 5:00 p.m. (New York City time) on
January 31, 2007, unless the Transaction closes on or before such date.

During the period from the date of the
execution of this Commitment Letter until the documentation for the Senior Bank
Financing is executed, the commitments of Lenders for the Bridge Loans and the
Term Loans will be reduced as provided in the Mandatory Prepayment and
Commitment Reduction section of Exhibit A of the Summary of Terms.

To induce Morgan Stanley to issue this
Commitment Letter and to continue with its due diligence efforts, you hereby
agree that all reasonable out-of-pocket fees and expenses (including the
reasonable fees and expenses of counsel and consultants) of Morgan Stanley and
its affiliates arising in connection with this Commitment Letter (and its due
diligence and syndication efforts in connection herewith) and the Senior Bank
Financing and the other transactions described herein shall be for your
account, whether or not the Transaction is consummated, the Senior Bank
Financing is made available or definitive credit documents are executed.  In addition, you hereby agree to pay when and
as due the fees described in the Fee Letter. 
You further agree to indemnify and hold harmless each of the Lenders
(including, in any event, Morgan Stanley) and each director, officer, employee
and affiliate thereof (each an “Indemnified Person”) from and against any and all
actions, suits, proceedings (including any investigations or inquiries),
claims, losses, damages, liabilities or expenses of any kind or nature
whatsoever which may be incurred by or asserted against or involve any such
Indemnified Person as a result of or arising out of or in any way related to or
resulting from this Commitment Letter, the Transaction or the extension or
syndication of the Senior Bank Financing, or in any way arise from any use or
intended use of this Commitment Letter or the proceeds of the Senior Bank
Financing, and you agree to reimburse each Indemnified Person upon demand for
any reasonable and documented legal or other out-of-pocket expenses incurred in
connection with investigating, defending or preparing to defend any such
action, suit, proceeding (including any inquiry or investigation) or claim
(whether or not Morgan Stanley or any such other Indemnified Person is a party
to any action or proceeding out of which any such expenses arise); provided, however,
that you shall not have to indemnify any Indemnified Person against any loss,
claim, damage, expense or liability to the extent finally determined by a court
of competent jurisdiction to have resulted from the gross negligence or willful
misconduct of such Indemnified Person or any of its affiliates.  This Commitment Letter is issued for your
benefit only and no other person or entity may rely hereon.  Neither Morgan Stanley nor any Lender shall
be responsible or liable to the Company or any other person for consequential
damages which may be alleged as a result of this Commitment Letter.

Morgan Stanley reserves the right to employ
the services of its affiliates in providing services contemplated by this
Commitment Letter and to allocate, in whole or in part, to such affiliates
certain fees payable to Morgan Stanley in such manner as Morgan Stanley and
such affiliates may agree in their sole discretion.  You acknowledge that Morgan Stanley may share
with any of its affiliates, and 

 3
 

 

such affiliates may share
with Morgan Stanley, any information related to the Transaction, the Company,
any of its subsidiaries or any of the matters contemplated hereby in connection
with the Transaction.

You further acknowledge and agree that (i) no
fiduciary, advisory or agency relationship between you and us or between us and
the Target has been created in respect of this Commitment Letter and the Senior
Bank Financing, irrespective of whether we and/or any of our respective
affiliates have advised or are advising you on other matters, (ii) Morgan
Stanley, on the one hand, and you, on the other hand, have an arms-length
business relationship that does not directly or indirectly give rise to, nor do
you rely on, any fiduciary duty on the part of Morgan Stanley in connection
with this Commitment Letter or any aspect of the Senior Bank Financing, (iii)
you are capable of evaluating and understanding, and you understand and accept,
the terms, risks and conditions of the transactions contemplated by this
Commitment Letter, (iv) you have been advised that Morgan Stanley and its
respective affiliates are engaged in a broad range of transactions that may
involve interests that differ from your interests and that Morgan Stanley has
no obligation to disclose such interests and transactions to you by virtue of
any fiduciary, advisory or agency relationship, and (v) you waive, to the
fullest extent permitted by law, any claims you may have against Morgan Stanley
for breach of fiduciary duty or alleged breach of fiduciary duty arising out of
this Commitment Letter and the Senior Bank Financing and agree that Morgan
Stanley shall have no liability (whether direct or indirect) to you in respect
of such a fiduciary duty claim or to any person asserting such a fiduciary duty
claim on behalf of or in right of you, including your stockholders, employees
or creditors.

The provisions of the immediately preceding
three paragraphs shall survive any termination of this Commitment Letter.

You represent and warrant that (a) all
information (other than the Projections referred to below) (the “Information”) that
has been or will hereafter be made available by or on behalf of you or by any
of your representatives in connection with the Transaction to Morgan Stanley or
any of its affiliates or representatives or to any Lender or any potential
Lender is and will be, at the time made, complete and correct in all material
respects and does not and will not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
contained therein not misleading in light of the circumstances under which such
statements were or are made and (b) all financial projections (the “Projections”), if
any, that have been or will be prepared by you or on your behalf or by any of
your representatives and made available to Morgan Stanley or any of its
affiliates or representatives or to any Lender or any potential Lender in
connection with the Transaction have been or will be prepared in good faith
based upon reasonable assumptions (it being understood that such projections
are subject to significant uncertainties and contingencies, many of which are
beyond your control, and that no assurance can be given that any particular
projections will be realized).  You agree
to supplement the Information and Projections from time to time so that the
representations and warranties contained in this paragraph remain complete and
correct.

In issuing its commitment, Morgan Stanley is
relying on the accuracy of the information furnished to it by you or on your
behalf.

You are not authorized to show or circulate
this Commitment Letter to any other person or entity (other than (i) to your
legal and financial advisors, directors, officers and employees in connection
with your evaluation hereof and (ii) except as required by law or stock
exchange requirements or as necessary or advisable in disclosure documents
regarding the Acquisition), except that you are authorized to show or circulate
this Commitment Letter to the Target and its legal and financial advisors,
directors, officers and employees after such time as you have accepted this
letter as provided below.  This letter
may be executed in any number of counterparts, and by the different parties
hereto on separate 

 4
 

 

counterparts, each of which
counterparts shall be an original, but all of which shall together constitute
one and the same instrument.

Morgan Stanley hereby notifies you that,
pursuant to the requirements of the USA Patriot Act, Title III of Pub. L.
107-56 (signed into law on October 26, 2001) (the “Patriot Act”), it is
required to obtain, verify and record information that identifies you and, if
it is a Borrower, Merger Co., which information includes names and addresses
and other information that will allow Morgan Stanley to identify you and, if it
is a Borrower, Merger Co., in accordance with the Patriot Act.

You acknowledge that Morgan Stanley may
provide debt financing, equity capital or other services (including financial
advisory services) to parties whose interests regarding the transactions
described herein or otherwise may conflict with your interests.  Consistent with Morgan Stanley’s policy to
hold in confidence the affairs of its clients, Morgan Stanley will not furnish
confidential information obtained from you or your affiliates to any of its
other clients.  Furthermore, Morgan
Stanley will not use in connection with the transactions contemplated hereby,
or furnish to you, confidential information obtained by Morgan Stanley from any
other person.

If you are in agreement with the foregoing,
please sign and return to Morgan Stanley (including by way of facsimile
transmission) the enclosed copy of this Commitment Letter, together with the
Fee Letter, no later than 5:00 p.m., New York time, on September 15, 2006.  Our commitment set forth in this Commitment
Letter shall terminate at the time and on the date referenced in the
immediately preceding sentence unless this Commitment Letter and the Fee Letter
are executed and returned by you as provided in such sentence.

This Commitment Letter and the Fee Letter
shall be governed by, and construed in accordance with the laws of the State of
New York, and any right to trial by jury with respect to any claim, action,
suit or proceeding arising out of or contemplated by this Commitment Letter
and/or the related Fee Letter is hereby waived. 
The parties hereto hereby submit to the non-exclusive jurisdiction of
the federal and New York State courts located in the City of New York in
connection with any dispute related to this Commitment Letter or the Fee Letter
or any matters contemplated hereby or thereby. 
Delivery of an executed counterpart of this Commitment Letter by
facsimile transmission shall be effective as delivery of a manually executed
counterpart of this Commitment Letter.

This Commitment Letter is not intended to
confer upon any person other than the parties hereto, their successors
hereunder and their respective affiliates, any benefit or any legal or
equitable right, remedy or claim hereunder.

 5
 

 

Please confirm that the foregoing is in
accordance with your understanding by signing and returning to us an executed
duplicate of this Commitment Letter. 
Upon your acceptance hereof, this Commitment Letter will constitute a
binding agreement between us.

	
  

  	
   

  	
  Very truly yours,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MORGAN STANLEY SENIOR

  
	
   

  	
   

  	
   

  	
  FUNDING, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
  /s/ Jaap Tonckens

  
	
   

  	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Agreed to and Accepted this

  	
   

  	
   

  
	
  15th day of September, 2006

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  HOSPIRA, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
  /s/ Lori O.
  Carlson

  	
   

  	
   

  	
   

  
	
   

  	
  Title: Corporate
  Vice President and Treasurer

  	
   

  	
   

  	
   

  
						

 

 6

 

SCHEDULE

SOURCES AND USES OF FUNDS

	
  Sources

  	
   

  	
   

  	
   

  	
  Uses

  	
   

  	
   

  
	
  Bridge
  Loans

  	
   

  	
  $1,425,000,000

  	
   

  	
  Purchase
  of equity

  	
   

  	
  $1,995,200,000

  
	
  Term
  Loans

  	
   

  	
  $500,000,000

  	
   

  	
  Refinancing
  of existing

  debt of Target

  	
   

  	
  $10,400,000

  
	
  Cash
  on hand

  	
   

  	
  $106,100,000

  	
   

  	
  Transaction
  fees and

  expenses

  	
   

  	
  $25,400,000

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total:

  	
   

  	
  $2,031,100,000

  	
   

  	
  Total:

  	
   

  	
  $2,031,100,000

  

 

 

EXHIBIT
A

SENIOR UNSECURED BRIDGE
LOANS AND TERM LOANS:

SUMMARY OF CERTAIN TERMS AND CONDITIONS*

	
  Borrower:

  	
   

  	
  Hospira, Inc. (the “Company”)
  and/or Merger Co. If Merger Co. is a Borrower, all Loans made to Merger Co.
  will be fully guaranteed by the Company.

  
	
  Sole Book-runner:

  	
   

  	
  Morgan Stanley.

  
	
  Lead Arrangers:

  	
   

  	
  Morgan Stanley and up
  to two additional institutions to be determined.

  
	
  Administrative Agent:

  	
   

  	
  To be determined.

  
	
  Bridge Loan and

  	
   

  	
   

  
	
  Term Loan Facility:

  	
   

  	
  Tranche A: Senior unsecured short-term loans (the “Bridge Loans”) in a
  principal amount of up to US$1.425 billion.

  
	
   

  	
   

  	
  Tranche B: Senior
  unsecured medium-term loans (the “Term Loans”, the Bridge Loans and the Term Loans are, collectively, the
  “Acquisition Loans”) in a principal amount of up to US$500 million.

  
	
  Use of Proceeds:

  	
   

  	
  The proceeds of the
  Acquisition Loans will be used (i) to effect the Acquisition and (ii) to pay
  costs and expenses in connection with the Transaction.

  
	
  Maturity:

  	
   

  	
  Tranche A: One year
  from the date of the borrowing.

  
	
   

  	
   

  	
  Tranche B: Three years
  from the date of the borrowing. The Term Loans shall amortize in quarterly
  amounts to be mutually agreed upon (with the final such installment payable
  on the third anniversary of the Closing Date).

  
	
  Availability:

  	
   

  	
  Acquisition Loans may
  only be borrowed on the Closing Date. No amount of Acquisition Loans once
  repaid may be reborrowed.

  
	
  Security:

  	
   

  	
  The Acquisition Loans
  will be unsecured.

  
	
  Mandatory Prepayment and

  	
   

  	
   

  
	
  Commitment Reduction:

  	
   

  	
  100% of the net cash proceeds received by the
  Company or any of its subsidiaries from (1) all issuances or incurrences of
  debt (including, without limitation, pursuant to a public offering, a private
  placement or a syndicated bank financing (other than borrowings, not used
  directly or indirectly to finance the Acquisition under the Existing Credit
  Agreement (as defined below)) and (2) all issuances of equity securities or
  equity-linked securities, in each case, subject to limited exceptions and
  baskets to be agreed, shall be used to prepay first, the Bridge Loans and, to
  the

   

  

 

*       Capitalized
terms used herein and not defined herein shall have the meanings provided in
the commitment letter (the “Commitment Letter”) to which this summary is attached.

 

 

	
  

  	
   

  	
  extent that such net cash proceeds exceed the
  outstanding Bridge Loans, second, the Term Loans.

  
	
   

  	
   

  	
  100% of the net cash
  proceeds received by the Company or any of its subsidiaries from all sales of
  assets (subject to certain exceptions and baskets) shall be used to prepay
  first, the Term Loans and, to the extent that such net cash proceeds exceed
  the outstanding Term Loans, second, the Bridge Loans.

  
	
   

  	
   

  	
  All proceeds of any of
  the foregoing received on or prior to the Closing Date shall (subject to the
  agreed-upon exceptions and baskets) be applied to reduce the commitments for
  the Acquisition Loans in the order set forth above.

  
	
  Closing Date:

  	
   

  	
  On or before January
  31, 2007.

  
	
  Interest Rates:

  	
   

  	
  At the option of the
  applicable Borrower, Acquisition Loans may be maintained from time to time as
  (x) Base Rate Loans which shall bear interest at the Base Rate in effect
  from time to time or (y) Eurodollar Loans which shall bear interest at
  the Applicable Margin in excess of the Eurodollar Rate as determined by the
  Administrative Agent for the respective interest period.

  
	
   

  	
   

  	
  “Base Rate”
  shall mean the higher of (x) 1¤2
  of 1% in excess of the federal funds rate and (y) the rate that the
  Administrative Agent announces from time to time as its prime or base
  commercial lending rate, as in effect from time to time.

  
	
   

  	
   

  	
  The “Applicable Margin” means at any
  time the applicable percentage that will vary in accordance with the
  Company’s long term senior unsecured debt rating as set forth on the attached
  pricing grid.

  
	
   

  	
   

  	
  Upon request of the
  requisite lenders during the continuance of any default under the loan
  documentation, the interest rate on all Loans shall increase by 2% per
  annum.

  
	
   

  	
   

  	
  Interest
  periods of 1, 2, 3 and 6 months shall be available in the case of Eurodollar
  Loans, provided that until the earlier to occur of (x) the 30th day
  following the Closing Date and (y) the date upon which Morgan Stanley
  has determined (and notifies the Company) that the primary syndication of the
  Senior Bank Financing (and the resultant addition of institutions as Lenders)
  has been completed, (i) all Eurodollar Loans shall have Interest Periods of
  one week, if such Interest Periods are available by all Lenders or (ii) if
  such Interest Periods are not available by all Lenders, Eurodollar Loans
  shall not be available during such period.

  
	
   

  	
   

  	
  Interest
  in respect of Base Rate Loans shall be payable quarterly in arrears on the
  last business day of each quarter. 
  Interest in respect of Eurodollar Loans shall be payable in arrears at
  the end of the applicable interest period and every three months in the case
  of interest periods in

  

 

 2
 

 

 

	
  

  	
   

  	
  excess of three
  months.  Interest will also be payable
  at the time of repayment of any Loans, and at maturity.  Interest on Base Rate Loans bearing
  interest based on the prime or commercial base rate shall be calculated on
  the basis of a year of 365 or, if applicable, 366 days.  All other interest and fees and other all
  fees shall be calculated on the basis of a year of 360 days.

  
	
  Optional Prepayment:

  	
   

  	
  The
  Acquisition Loans will be prepayable at any time, in whole or in part, upon
  not less than 2 business days written notice in the case of Eurodollar Loans,
  and upon same day notice in the case of Base Rate Loans, at the option of the
  applicable Borrower.  Any such prepayment
  shall be accompanied by accrued and unpaid interest on the Loans being
  prepaid.

  
	
  Conditions to Funding:

  	
   

  	
  The
  execution and closing of the definitive loan documentation and the funding of
  the Acquisition Loans will be subject to satisfaction of the following
  conditions precedent, which shall be tested no later than 8:00 a.m., Sydney
  time, on the second hearing court date for the Scheme (other than the
  conditions which require court approval of such scheme):

  
	
   

  	
   

  	
  (a)

  	
  The final terms and conditions of the Transaction,
  including, without limitation, all legal and tax aspects thereof, shall be as
  described in the Commitment Letter and otherwise consistent with the
  description thereof received in writing as part of the Information.  The documentation of the Acquisition (including all schedules and
  exhibits thereto) and all other material agreements, instruments and
  documents relating to the Acquisition 
  (collectively, the “Acquisition
  Documents”) shall have been executed and delivered by the
  parties thereto; and the Acquisition Documents shall not be altered, amended
  or otherwise changed or supplemented, in each case in any respect materially
  adverse to the Lenders, or any condition therein waived, without the prior
  written consent of Morgan Stanley (it being agreed that the draft copy of the
  Scheme Implementation Agreement dated September 15, 2006 and delivered to
  Morgan Stanley on September 15, 2006 is satisfactory to Morgan Stanley).  The Acquisition shall be consummated
  concurrently with the making of the Acquisition Loans.

  
	
   

  	
   

  	
  (b)

  	
  All documentation relating to the Acquisition Loans, including
  one or more credit agreements incorporating the terms and conditions outlined
  herein shall have been executed and delivered by the Company and, if it is a
  Borrower, Merger Co.

  
	
   

  	
   

  	
  (c)

  	
  There shall not have occurred any event, occurrence or
  matter which individually or when
  aggregated with all such events, occurrences or matters:

  

 

 3
 

 

 

	
  

  	
   

  	
   

  	
  (i)

  	
  diminishes,
  or could reasonably be expected to diminish (whether now or in the future)
  (x) the consolidated net assets of the Target by an amount of at least 10% of
  the consolidated net tangible assets of the Target as disclosed in its
  audited balance sheet as at June 30, 2006; or (y) the consolidated net profit
  after tax of the Target in each of the financial years ending June 30, 2007,
  June 30, 2008 and June 30, 2009 by an amount of at least A$7,000,000 (which
  amount shall be calculated after taking into account any event, occurrence or
  matter not disclosed prior to the date of the primary Acquisition Document which has or could reasonably be expected
  to have a positive effect in each of the three aforementioned financial
  years);

  
	
   

  	
   

  	
   

  	
  (ii)

  	
  has
  the result that the Target is unable to carry on its business in substantially
  the same manner as carried on as at the date of the signing of the primary Acquisition Document; or

  
	
   

  	
   

  	
   

  	
  (iii)

  	
  which
  otherwise materially and adversely affects the prospects of the Target,

  
	
   

  	
   

  	
   

  	
  other
  than an event, occurrence or matter (x) which relates to changes in prices of
  products sold by the Target in response to changes in market conditions
  consistent with past practice, (y) required to be done or procured by the
  Target in connection with the Acquisition or (z) disclosed by the Target in the disclosure letter
  attached to the primary Acquisition Document.

  
	
   

  	
   

  	
  (d)

  	
  The Lenders shall have received (i) satisfactory opinions of
  counsel for the Company and, if it is a Borrower, Merger Co., and of local
  counsel for the Lenders as to the transactions contemplated hereby, (ii)
  customary solvency certificate of an officer of the Company and
  (iii) such corporate resolutions, certificates and other documents as
  the Lenders shall reasonably request.

  
	
   

  	
   

  	
  (e)

  	
  There shall exist no default under any of the loan documentation, and
  the representations and warranties of the Company therein shall be true and
  correct in all material respects immediately prior to, and after giving
  effect to, the initial extension of credit under the loan documentation;
  provided that, notwithstanding anything in this Term Sheet, the Commitment
  Letter, the Fee Letter, the Engagement Letter, the loan documentation or any
  other agreement or other undertaking concerning the financing of the
  Transaction to the contrary, (A) the only representations relating to the
  Target, its subsidiaries and their businesses, the making of which shall be a
  condition to availability of the Acquisition Loans on the Closing Date shall
  be such of the representations made by the Target in the Acquisition
  Documents as are material to the 

  

 

 4
 

 

 

	
  

  	
   

  	
   

  	
  interests of the Lenders, but only to the extent that the Company or
  Merger Co. has the right to terminate its obligations under the Acquisition
  Documents as a result of a breach of such representations in the Acquisition
  Documents and (B) the only representations relating to the Company, its
  subsidiaries and their businesses, the making of which shall be a condition
  to availability of the Acquisition Loans on the Closing Date shall be such of
  the representations and warranties that relate to matters which are within
  the control of the Company (which, in any event, shall not include any
  representation or warranty relating to the absence of a material adverse
  change or absence of material litigation).

  
	
   

  	
   

  	
  (f)

  	
  All accrued fees and expenses of the Lead Arrangers, Agents and the
  Lenders (including the reasonable fees and expenses of counsel for the Lead
  Arrangers) shall have been paid (to the extent invoiced prior to the Closing
  Date).

  
	
   

  	
   

  	
  (g)

  	
  None of the Company or any of its subsidiaries shall have offered,
  placed or sold any other debt securities that could reasonably be expected to
  impair the Lenders’ ability to syndicate the Acquisition Loans or the
  refinancing thereof (other than an amendment of the Existing Credit Agreement
  (as defined below)).

  
	
  Representations and

  	
   

  	
   

  	
   

  
	
  Warranties:

  	
   

  	
  The definitive loan
  documentation will contain the following representations and warranties,
  which are currently expected to be substantially similar to those set forth
  in the $375,000,000 Credit Agreement and Guaranty dated as of December 16,
  2005 (the “Existing Credit Agreement”)
  among the Company, the lenders parties thereto and Citicorp North America,
  Inc., as administrative agent, and may include additional representations and
  warranties specific to transactions of this type:

  
	
   

  	
   

  	
  1.

  	
  Organization,
  powers, qualifications, good standing.

  
	
   

  	
   

  	
  2.

  	
  Authorization of
  borrowing, etc.

  
	
   

  	
   

  	
  3.

  	
  Disclosure.

  
	
   

  	
   

  	
  4.

  	
  Financial condition.

  
	
   

  	
   

  	
  5.

  	
  No material adverse
  change.

  
	
   

  	
   

  	
  6.

  	
  Intellectual property matters.

  
	
   

  	
   

  	
  7.

  	
  No material litigation,
  compliance with laws.

  
	
   

  	
   

  	
  8.

  	
  No default.

  
	
   

  	
   

  	
  9.

  	
  Governmental regulation.

  
	
   

  	
   

  	
  10.

  	
  Securities activities.

  
	
   

  	
   

  	
  11.

  	
  Employee benefit plans
  (excluding the warranty set forth in the Existing Credit Agreement that
  pension plans are not underfunded by more than $85,000,000).

  
	
   

  	
   

  	
  12.

  	
  Environmental protection.

  

 

 5
 

 

 

	
  

  	
   

  	
  13.

  	
  Obligations pari passu.

  
	
   

  	
   

  	
  14.

  	
  Contractual restrictions.

  
	
  Covenants:

  	
   

  	
  The
  definitive loan documentation will contain the following covenants, which are
  currently expected to be substantially similar to those set forth in the
  Existing Credit Agreement (provided that the financial covenant levels shall
  be revised as mutually agreed), and may include additional covenants specific
  to facilities of this type and borrowers of the same ratings category:

  
	
   

  	
   

  	
  1.

  	
  Financial
  statements and other reports.

  
	
   

  	
   

  	
  2.

  	
  Books and records.

  
	
   

  	
   

  	
  3.

  	
  Existence.

  
	
   

  	
   

  	
  4.

  	
  Insurance.

  
	
   

  	
   

  	
  5.

  	
  Payment of taxes and
  claims.

  
	
   

  	
   

  	
  6.

  	
  Payment and performance of
  obligations.

  
	
   

  	
   

  	
  7.

  	
  Maintenance of properties.

  
	
   

  	
   

  	
  8.

  	
  Compliance with laws.

  
	
   

  	
   

  	
  9.

  	
  Use of proceeds.

  
	
   

  	
   

  	
  10.

  	
  Claims pari passu.

  
	
   

  	
   

  	
  11.

  	
  Further assurances.

  
	
   

  	
   

  	
  12.

  	
  Limitation on liens.

  
	
   

  	
   

  	
  13.

  	
  Limitation on
  indebtedness.

  
	
   

  	
   

  	
  14.

  	
  Limitation on
  acquisitions.

  
	
   

  	
   

  	
  15.

  	
  Limitation on restrictions
  on subsidiary distributions.

  
	
   

  	
   

  	
  16.

  	
  Limitation on restricted
  payments.

  
	
   

  	
   

  	
  17.

  	
  Restrictions on
  fundamental changes and asset sales.

  
	
   

  	
   

  	
  18.

  	
  Conduct of business.

  
	
   

  	
   

  	
  19.

  	
  Fiscal year.

  
	
   

  	
   

  	
  20.

  	
  Other indebtedness.

  
	
   

  	
   

  	
  21.

  	
  Transactions with
  shareholders and affiliates.

  
	
   

  	
   

  	
  22.

  	
  Financial covenants.

  
	
   

  	
   

  	
  23.

  	
  Interest rate agreements
  and currency agreements.

  
	
  Events of Default:

  	
   

  	
  The
  definitive loan documentation will contain the following events of default,
  which are currently expected to be substantially similar to those set forth
  in the Existing Credit Agreement, as may be modified for transactions of this
  type of the same ratings category:

  
	
   

  	
   

  	
  1.

  	
  Failure
  to make payments when due.

  
	
   

  	
   

  	
  2.

  	
  Default in other
  agreements.

  
	
   

  	
   

  	
  3.

  	
  Breach of certain
  covenants.

  
	
   

  	
   

  	
  4.

  	
  Breach of representation
  or warranty.

  
	
   

  	
   

  	
  5.

  	
  Other defaults under loan
  documents.

  
	
   

  	
   

  	
  6.

  	
  Involuntary bankruptcy,
  appointment of receiver, etc.

  
	
   

  	
   

  	
  7.

  	
  Voluntary bankruptcy,
  appointment of receiver, etc.

  
	
   

  	
   

  	
  8.

  	
  Judgments and attachments.

  
	
   

  	
   

  	
  9.

  	
  Dissolution.

  
	
   

  	
   

  	
  10.

  	
  Employee benefit plans.

  
	
   

  	
   

  	
  11.

  	
  Change in control.

  
	
   

  	
   

  	
  12.

  	
  Repudiation of
  obligations.

  

 

 6
 

 

 

	
  

  	
   

  	
  13.

  	
  Since the date of the execution of the
  Acquisition Documents and on or prior to the Closing Date, the Borrower shall
  have notified the lenders of the occurrence of, or there shall have occurred,
  a material adverse change in the business, operations, properties or
  conditions (financial or otherwise) of Hospira and its subsidiaries, taken as
  a whole, and 30 days shall have elapsed after the Closing Date (it being understood that the interest
  rate on all Loans shall increase by 2% per annum
  from the Closing Date).

  
	
  Indemnification:

  	
   

  	
  The
  Company will indemnify the Lenders against all losses, liabilities, claims,
  damages, or expenses relating to the Acquisition Loans, the loan
  documentation and the use of the Acquisition Loans proceeds or the
  commitments, including but not limited to reasonable and documented
  attorney’s fees and settlement costs, substantially on the terms set forth in
  the Commitment Letter.

  
	
  Expenses:

  	
   

  	
  The
  Company will pay all reasonable and documented legal and other out-of-pocket
  expenses of the Lenders as incurred, including travel costs, document
  production and other expenses of this type, and the reasonable fees of
  outside counsel and reasonable fees of other professional advisors engaged
  with the Company’s consent.

  
	
  Required
  Lenders:

  	
   

  	
  Lenders holding at least a majority of the
  outstanding Acquisition Loans or, if no Acquisition Loans are then
  outstanding, Lenders having at least a majority of the commitments.

  
	
  Assignment/Participation:

  	
   

  	
  Lenders
  will be permitted to assign their loans and commitments under the Acquisition
  Loans to any eligible assignee (as defined in the Existing Credit
  Agreement).  Assignments will be in
  minimum amounts of US$5 million.  There
  will be no minimum assignment amount post default.  Participations will be allowed.

  
	
  Miscellaneous:

  	
   

  	
  Standard
  yield protection (including compliance with risk-based capital
  guidelines, increased costs (including reserve costs under Regulation D),
  payments free and clear of withholding taxes and interest period breakage
  indemnities), eurodollar illegality and similar provisions, defaulting lender
  provisions, waiver of jury trial, submission to jurisdiction provisions and
  other provisions, in each case substantially similar to the Existing Credit
  Agreement.

  
	
  Governing Law:

  	
   

  	
  State
  of New York.

  Shearman
  & Sterling LLP.

  
	
  Counsel to Lenders:

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

The provisions of the Commitment Letter and
Summary of Terms will be superseded and replaced by the provisions of the
Financing Documentation.

 

 7

EXHIBIT
B

SENIOR UNSECURED REVOLVING
CREDIT LOANS:

SUMMARY OF CERTAIN TERMS AND CONDITIONS

	
  Borrower:

  	
   

  	
  Hospira, Inc. (the “Company”).

  
	
  Sole Book-runner:

  	
   

  	
  Morgan
  Stanley.

  
	
  Lead Arrangers:

  	
   

  	
  Morgan Stanley and up
  to two additional institutions to be determined.

  
	
  Administrative Agent:

  	
   

  	
  To
  be determined.

  
	
  Facility:

  	
   

  	
  $375
  million Revolving Credit Facility, with a letter of credit sublimit and a
  sublimit for foreign currency loans to be agreed upon, pursuant to a Credit
  Agreement (the “Credit
  Agreement”) among the Company and the Lenders.  The Revolving Credit Facility will have the
  same structure as the Existing Credit Agreement, including the right to add
  subsidiary borrowers from time to time, the obligations of which will be
  fully guaranteed by the Company.

  
	
  Use of Proceeds:

  	
   

  	
  The
  Revolving Loans shall be utilized solely for the Company’s and its
  subsidiaries’ working capital requirements and other general corporate
  purposes.

  
	
  Maturity:

  	
   

  	
  The
  final maturity of the Revolving Credit Facility shall be December 16,
  2010.  Loans made pursuant to the
  Revolving Credit Facility (the “Revolving Loans”, and together with the
  Term Loans, the “Loans”)
  shall be repaid in full on the fifth anniversary of the effectiveness of the
  Existing Credit Agreement, and all letters of credit issued thereunder shall
  terminate prior to such time.

  
	
  Availability:

  	
   

  	
  Revolving
  Loans may be borrowed, repaid and reborrowed on and after the Closing Date.

  
	
  Unused Commitment Fees:

  	
   

  	
  A
  per annum percentage that will vary in accordance with the Company’s long
  term senior unsecured debt rating as set forth on the attached pricing grid,
  on the unused portion of each Lender’s share of the Revolving Loan
  commitments, payable (a) quarterly in arrears and (b) on the date
  of termination or expiration of the commitments.

  
	
  Utilization Fees:

  	
   

  	
  At
  all times when the aggregate principal amount of the Revolving Loans exceed
  50% of the Revolving Loan commitments, a per annum percentage that will vary
  in accordance with the Company’s long term senior unsecured debt rating as
  set forth on the attached pricing grid, payable (a) quarterly in arrears
  and (b) on the date of termination or expiration of the commitments.

  
	
  Letter of Credit Fees:

  	
   

  	
  Applicable
  Margin for Eurodollar Loans which are Revolving Loans on the aggregate
  outstanding stated amounts of letters of credit plus an 

  

 

                 
 

 

 

	
  

  	
   

  	
  additional 1¤4 of 1% on the aggregate outstanding stated amounts of letters of
  credit to be paid as a fronting fee to the issuing bank.

  
	
  Voluntary Commitment Reductions:

  	
   

  	
  Voluntary
  reductions to the unutilized portion of the Revolving Credit Facility may be
  made from time to time by the Company without premium or penalty.

  
	
  Voluntary Prepayment:

  	
   

  	
  Any
  Borrower may, upon notice prior to 11:00 a.m. (New York time) on any business
  day in the case of Base Rate Loans and upon two business days’ notice in the
  case of Eurodollar Loans, prepay, in full or in part, the Senior Bank
  Financing without premium or penalty; provided,
  however, that (subject to the same exceptions as in the Existing
  Credit Agreement) each partial prepayment shall be in an amount of $5,000,000
  or an integral multiple of $1,000,000 in excess thereof; provided further that any such
  prepayment of Eurodollar Loans made on a day other than the last day of an
  interest period therefor shall be made together with reimbursement for any
  funding losses of the Lenders resulting therefrom.

  
	
  Mandatory Prepayment and
  Commitment Reduction:

  	
   

  	
  

  None.

  
	
  Documentation:

  	
   

  	
  Morgan
  Stanley’s commitment will be subject to the negotiation, execution and
  delivery of definitive financing agreements consistent with the terms of this
  letter and substantially similar to the Existing Credit Agreement, in each
  case prepared by counsel to Morgan Stanley.

  
	
  Conditions Precedent to Initial
  Extension of Credit:

  	
   

  	
  Those
  customarily found in credit agreements for similar financings and others
  appropriate in the judgment of Morgan Stanley for the Transaction and
  substantially similar to the Existing Credit Agreement.

  
	
  Conditions Precedent to
  Subsequent Extensions of Credit:

  	
   

  	
  There
  shall exist no default under any of the loan documentation, and the
  representations and warranties of the Company and any applicable subsidiary
  of the Company therein (excluding the representations and warranties
  regarding material adverse change and material litigation) shall be true and
  correct immediately prior to, and after giving effect to, such extension of
  credit.

  
	
  Representations and Warranties:

  	
   

  	
  The
  definitive loan documentation will contain the following representations and
  warranties, which are currently expected to be substantially similar to those
  set forth in the Existing Credit Agreement:

  
	
   

  	
   

  	
  1.

  	
  Organization, powers,
  qualifications, good standing.

  
	
   

  	
   

  	
  2.

  	
  Authorization of
  borrowing, etc.

  
	
   

  	
   

  	
  3.

  	
  Disclosure

  

 

 2
 

 

 

	
  

  	
   

  	
  4.

  	
  Financial condition.

  
	
   

  	
   

  	
  5.

  	
  No material adverse
  change.

  
	
   

  	
   

  	
  6.

  	
  Intellectual property
  matters.

  
	
   

  	
   

  	
  7.

  	
  No litigation, compliance
  with laws.

  
	
   

  	
   

  	
  8.

  	
  No default.

  
	
   

  	
   

  	
  9.

  	
  Governmental regulation.

  
	
   

  	
   

  	
  10.

  	
  Securities activities.

  
	
   

  	
   

  	
  11.

  	
  Employee benefit plans.

  
	
   

  	
   

  	
  12.

  	
  Environmental protection.

  
	
   

  	
   

  	
  13.

  	
  Obligations pari passu.

  
	
   

  	
   

  	
  14.

  	
  Contractual restrictions.

  
	
  Covenants:

  	
   

  	
  The definitive loan documentation will contain the following
  covenants, which are currently expected to be substantially similar to those
  set forth in the Existing Credit Agreement (provided that the financial
  covenant levels shall be revised as mutually agreed), and may include
  additional covenants specific to facilities of this type and borrowers of the
  same ratings category

  
	
   

  	
   

  	
  1.

  	
  Financial
  statements and other reports.

  
	
   

  	
   

  	
  2.

  	
  Books and records.

  
	
   

  	
   

  	
  3.

  	
  Existence.

  
	
   

  	
   

  	
  4.

  	
  Insurance.

  
	
   

  	
   

  	
  5.

  	
  Payment of taxes and
  claims

  
	
   

  	
   

  	
  6.

  	
  Payment and performance of
  obligations.

  
	
   

  	
   

  	
  7.

  	
  Maintenance of properties.

  
	
   

  	
   

  	
  8.

  	
  Compliance with laws.

  
	
   

  	
   

  	
  9.

  	
  Use of proceeds.

  
	
   

  	
   

  	
  10.

  	
  Claims pari passu.

  
	
   

  	
   

  	
  11.

  	
  Further assurances.

  
	
   

  	
   

  	
  12.

  	
  Limitation on liens.

  
	
   

  	
   

  	
  13.

  	
  Limitation on
  indebtedness.

  
	
   

  	
   

  	
  14.

  	
  Limitation on
  acquisitions.

  
	
   

  	
   

  	
  15.

  	
  Limitation on restrictions
  on subsidiary distributions.

  
	
   

  	
   

  	
  16.

  	
  Limitation on restricted
  payments.

  
	
   

  	
   

  	
  17.

  	
  Restrictions on
  fundamental changes and asset sales.

  
	
   

  	
   

  	
  18.

  	
  Conduct of business.

  
	
   

  	
   

  	
  19.

  	
  Fiscal year.

  
	
   

  	
   

  	
  20.

  	
  Other indebtedness.

  
	
   

  	
   

  	
  21.

  	
  Transactions with
  shareholders and affiliates.

  
	
   

  	
   

  	
  22.

  	
  Financial covenants.

  
	
   

  	
   

  	
  23.

  	
  Interest rate agreements
  and currency agreements.

  
	
  Events of Default:

  	
   

  	
  The definitive loan documentation will contain the following events
  of default, which are currently expected to be substantially similar to those
  set forth in the Existing Credit Agreement, as may be modified for
  transactions of this type of the same ratings category:

  
	
   

  	
   

  	
  1.

  	
  Failure
  to make payments when due.

  
	
   

  	
   

  	
  2.

  	
  Default in other
  agreements.

  
	
   

  	
   

  	
  3.

  	
  Breach of certain
  covenants.

  

 

 3
 

 

 

	
  

  	
   

  	
  4.

  	
  Breach of representation
  or warranty.

  
	
   

  	
   

  	
  5.

  	
  Other defaults under loan
  documents.

  
	
   

  	
   

  	
  6.

  	
  Involuntary bankruptcy,
  appointment of receiver, etc.

  
	
   

  	
   

  	
  7.

  	
  Voluntary bankruptcy,
  appointment of receiver, etc.

  
	
   

  	
   

  	
  8.

  	
  Judgments and attachments.

  
	
   

  	
   

  	
  9.

  	
  Dissolution.

  
	
   

  	
   

  	
  10.

  	
  Employee benefit plans.

  
	
   

  	
   

  	
  11.

  	
  Change in control.

  
	
   

  	
   

  	
  12.

  	
  Repudiation of
  obligations.

  
	
  Indemnification:

  	
   

  	
  The
  Company will indemnify the Lenders against all losses, liabilities, claims,
  damages, or expenses relating to the Revolving Facility and the loan
  documentation therefor and the use of the proceeds thereof or the
  commitments, including but not limited to reasonable and documented
  attorney’s fees and settlement costs, substantially on the terms set forth in
  the Commitment Letter.

  
	
  Expenses:

  	
   

  	
  The
  Company will pay all reasonable and documented legal and other out-of-pocket
  expenses of the Lenders as incurred, including travel costs, document
  production and other expenses of this type, and the reasonable fees of
  outside counsel and reasonable fees of other professional advisors engaged
  with the Company’s consent

  
	
  Assignment/Participation:

  	
   

  	
  Lenders
  will be permitted to assign their loans and commitments under the Senior Bank
  Financing, subject in certain cases to the consent of the Administrative
  Agent and (unless a default or event of default has occurred and is
  continuing) the Company, which consent will not be unreasonably withheld or
  delayed, to any other entity. 
  Assignments will be in minimum amounts of US$5 million.  There will be no minimum assignment amount
  post default.  Participations will be
  allowed.

  
	
  Miscellaneous:

  	
   

  	
  Standard
  yield protection (including compliance with risk-based capital
  guidelines, increased costs (including reserve costs under Regulation D),
  payments free and clear of withholding taxes and interest period breakage
  indemnities), eurodollar illegality and similar provisions, defaulting lender
  provisions, waiver of jury trial, submission to jurisdiction and other
  provisions, in each case substantially similar to the Existing Credit
  Agreement.

  
	
  Governing
  Law:

  	
   

  	
  State of New York.

  
	
  Counsel
  to Lenders:

  	
   

  	
  Shearman & Sterling
  LLP.

  

 

The provisions of the Commitment Letter and Summary of Terms will be
superseded and replaced by the provisions of the Financing Documentation.

 4

 

PRICING GRID

(basis points per annum)

	
  

  	
   

  	
  Level 

  I

  	
   

  	
  Level

  II

  	
   

  	
  Level

  III

  	
   

  	
  Level

  IV

  	
   

  	
  Level

  V

  
	
   Senior
  Unsecured

  Debt Rating from S&P and/or Moody’s*

  	
   

  	
  ≥ A- or A3

  	
   

  	
  ≥ BBB+ or
  Baa1

  	
   

  	
  ≥ BBB or
  Baa2

  	
   

  	
  ≥ BBB- or
  Baa3

  	
   

  	
  < BBB- or Baa3 and all other times (including if
  ratings are not available from both S&P and Moody’s)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Applicable Margin

  for Bridge Loans and Term
  Loans 

  (LIBOR + bps)

  	
   

  	
  35.0

  	
   

  	
  45.0

  	
   

  	
  60.0

  	
   

  	
  70.0

  	
   

  	
  120.0

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pricing for Revolving Loan Facility

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Facility Fee (bps)

  	
   

  	
  7.5

  	
   

  	
  9.0

  	
   

  	
  10.0

  	
   

  	
  15.0

  	
   

  	
  25.0

  
	
  Applicable Margin

  for LIBOR loans (bps)

  	
   

  	
  22.5

  	
   

  	
  31.0

  	
   

  	
  45.0

  	
   

  	
  47.5

  	
   

  	
  75.0

  
	
  Drawn Cost for LIBOR
  loans (LIBOR + bps)

  	
   

  	
  30.0

  	
   

  	
  40.0

  	
   

  	
  55.0

  	
   

  	
  62.5

  	
   

  	
  100.0

  
	
  Utilization Fee

  (usage >50%, bps)

  	
   

  	
  5.0

  	
   

  	
  5.0

  	
   

  	
  7.5

  	
   

  	
  12.5

  	
   

  	
  25.0

  
	
  Fully Drawn Cost for
  LIBOR loans (LIBOR + bps)

  	
   

  	
  35.0

  	
   

  	
  45.0

  	
   

  	
  62.5

  	
   

  	
  75.0

  	
   

  	
  125.0

  

*                    In
the event of a split rating, the higher of S&P’s and Moody’s ratings shall
apply; in the event of a split rating of two or more gradations, the rating
that is one level above the lowest rating shall be used.Exhibit
10.1

September 18, 2006

Karen Krumeich

Dear Karen:

We are pleased to confirm our offer to
have you join Aksys, Ltd. (the “Company”) as our Interim Chief Financial
Officer.  Your starting base salary will
be $28,000 per month, less applicable withholdings.  If you accept our offer, your employment with
the Company will begin on September 18, 2006.

You will commute from your home in New
Jersey to the Company’s offices in Lincolnshire, Illinois, and you will spend
Monday through Friday (except for holidays) each week working from the Company’s
offices in Lincolnshire.  The Company
will reimburse your reasonable airfare expenses to commute from your New Jersey
residence to Lincolnshire in accordance with the Company’s expense
reimbursement policies.   Naturally, you
are expected to purchase the lowest-priced airline tickets reasonably
available, such as by using low-cost carriers and discount travel sites, and
arranging your travel dates to be as cost-effective as possible (e.g., by
providing for a Saturday night stay where practicable).  The Company will also arrange and pay for
temporary lodging while you are working at the Company’s office in
Lincolnshire.

You will be eligible for paid vacation
and holidays in accordance with the Company’s policies, as amended from time to
time.  The Company will also arrange for
your coverage under its directors’ and officers’ insurance policies, and will
reimburse your reasonable business expenses in accordance with its expense
reimbursement policies.  Aside from the foregoing,
and consistent with the Company’s Interim Executive Services Agreement with
Tatum, LLC, you will not be eligible to participate in any of the Company’s
employee benefit programs (including but not limited to group health coverage,
401(k) participation, stock options, long-term disability or other group
insurance coverage, or any form of bonus or incentive compensation).  Accordingly, you hereby waive any present or
future eligibility to receive such benefits.

This letter and the Interim Executive Services Agreement with Tatum, LLC set forth our entire agreement and understanding regarding the terms of your employment with the Company and supersedes any prior representations or agreements, whether written or oral.  This letter may not be modified in any way except in a writing signed by the Company’s President and you.  Please let us know of your decision to join the Company by signing a copy of this offer letter and returning it to us not later than September 18, 2006.  Your offer is contingent on your execution of the Company’s proprietary information and inventions assignment agreement, a copy of which 

 

is enclosed with this offer letter.  In addition, your offer is contingent upon the Company’s satisfactory completion of a background and reference check.

The Company is an “at-will”
employer.  That means that both employees
and the Company have the right to terminate employment at any time, with or
without advance notice, and with or without cause.  No one other than the Company’s President has
the authority to alter this at-will employment arrangement, to enter into an
agreement for employment for a specified period of time, or to make any
agreement contrary to this policy, and any such agreement must be in writing
and must be signed by the Company’s President and by the affected employee.

You also must establish your identity and
authorization to work as required by the Immigration Reform and Control Act of
1986 (IRCA).  Enclosed is a copy of the
Employment Verification Form (I-9), with instructions required by IRCA.  Please review this document and bring the
appropriate original documentation on your first day of work.

We look forward to the opportunity to
work with you.  If you have any
questions, please feel free to give me a call.

Sincerely,

/s/ Howard J. Lewin

Howard J. Lewin

President and Chief
Executive Officer

ACCEPTED AND AGREED:

/s/ Karen R. Krumeich                                                         

Signature

September 18, 2006                                                              

Date

 

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