10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

Commission File Number: 1-31946

HOSPIRA, INC.

(Exact name of registrant as specified in its charter)

Delaware	20-0504497
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)

275 North Field Drive
Lake Forest, Illinois 60045

(Address of principal executive offices, including zip code)

(224) 212-2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Class	Name of Exchange on which each class is registered
Common Stock, par value $0.01 per share	New York Stock Exchange
Preferred Stock Purchase Rights	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: Common Stock: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x  No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o  No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer o Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o  No x

The aggregate market value of registrant’s common stock held by non-affiliates of the registrant on June 30, 2006 (the last business day of the registrant’s most recently completed second fiscal quarter), was approximately $6,738 million.

Registrant had 155,954,485 shares of common stock outstanding as of January 31, 2007.

INCORPORATION OF DOCUMENTS BY REFERENCE

Certain sections of the registrant’s Proxy Statement to be filed in connection with the 2007 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K where indicated.

HOSPIRA, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS

		Page Number
PART I			3
Item 1	Business		3
Item 1A	Risk Factors		16
Item 1B	Unresolved Staff Comments		28
Item 2	Properties		28
Item 3	Legal Proceedings		29
Item 4	Submissions of Matters to a Vote of Security Holders		30
PART II			31
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		31
Item 6	Selected Financial Data		34
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations		35
Item 7A	Qualitative and Quantitative Disclosures About Market Risk		52
Item 8	Financial Statements and Supplementary Data		54
Item 9	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		92
Item 9A	Controls and Procedures		93
Item 9B	Other Information		93
PART III			94
Item 10	Directors, Executive Officers and Corporate Governance		94
Item 11	Executive Compensation		95
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		95
Item 13	Certain Relationships and Related Transactions, and Director Independence		95
Item 14	Principal Accounting Fees and Services		95
PART IV			96
Item 15	Exhibits and Financial Statement Schedules		96

FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements within the meaning of the federal securities laws. Hospira intends that these forward-looking statements be covered by the safe harbor provisions for forward-looking statements in the federal securities laws. In some cases, these statements can be identified by the use of forward-looking words such as “may,” “will,” “should,” “anticipate,” “estimate,” “expect,” “plan,” “believe,” “predict,” “potential,” “project,” “intend,” “could” or similar expressions. In particular, statements regarding Hospira’s plans, strategies, prospects and expectations regarding its business and industry are forward-looking statements. You should be aware that these statements and any other forward-looking statements in this document only reflect Hospira’s expectations and are not guarantees of performance. These statements involve risks, uncertainties and assumptions. Many of these risks, uncertainties and assumptions are beyond Hospira’s control, and may cause actual results and performance to differ materially from its expectations. Important factors that could cause Hospira’s actual results to be materially different from its expectations include (i) the risks and uncertainties described in “Item 1A. Risk Factors” and (ii) the factors described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Accordingly, you should not place undue reliance on the forward-looking statements contained in this annual report. These forward-looking statements speak only as of the date on which the statements were made. Hospira undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I

Item 1. Business

Overview

Hospira is a global specialty pharmaceutical and medication delivery company that is focused on products that improve the productivity, safety and efficacy of patient care. Hospira is a leader in the development, manufacture and marketing of specialty injectable pharmaceuticals and medication delivery systems that deliver drugs and intravenous (“I.V.”) fluids. Hospira is also a leading provider of contract manufacturing services to proprietary pharmaceutical and biotechnology companies for formulation development, filling and finishing of injectable pharmaceuticals. Hospira’s broad portfolio of products is used by hospitals and alternate site providers, such as clinics, home healthcare providers and long-term care facilities.

In 2006, Hospira’s net sales were $2.69 billion, on which it earned net income of $237.7 million. The United States is the largest market for Hospira’s products and accounted for approximately 83% of 2006 sales. Sales outside the United States accounted for the remaining 17% of sales.

Hospira has two reportable segments, U.S. and International, through which its products are sold. For financial information relating to Hospira’s segments and the geographic areas, see Note 11 to the financial statements included in Item 8 of this document. As each reportable segment produces and sells similar products and services, unless the context requires otherwise, the disclosure in Items 1 and 1A relates to both reportable segments.

General Development of Business

Hospira was incorporated in Delaware on September 16, 2003 as a wholly owned subsidiary of Abbott Laboratories. Hospira’s business first began operation as part of Abbott in the 1930s. As part of a plan to spin off its core hospital products business, Abbott transferred the assets and liabilities relating to Hospira’s business to Hospira and, on April 30, 2004, distributed Hospira’s common stock to Abbott’s shareholders. On that date, Hospira began operating as an independent company, and on May 3, 2004,

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Hospira’s common stock began trading on the New York Stock Exchange under the symbol “HSP.” The transfer of assets and liabilities to Hospira, and distribution of Hospira common stock as described above, are sometimes referred to in this document as the “spin-off,” and April 30, 2004 is sometimes referred to as the “spin-off date.” As Hospira’s business was conducted by Abbott before the spin-off, references in this annual report to Hospira’s historical assets, liabilities, products, businesses or activities before the spin-off date are generally intended to refer to the historical assets, liabilities, products, businesses or activities of Hospira’s business as it was conducted as a part of Abbott.

Under the terms of the spin-off, the legal title to certain assets and operations relating to Hospira’s business outside the United States were transferred from Abbott over the two-year period after the spin-off. These transfers were completed during 2006.

On September 20, 2006, Hospira entered into an agreement to acquire Mayne Pharma Limited, an Australian-based specialty injectable pharmaceutical company listed on the Australian Stock Exchange, for approximately $2.0 billion in cash. The acquisition was completed on February 2, 2007. Hospira financed the acquisition through approximately $120 million of cash on hand and $1.925 billion of borrowings under new credit facilities. Hospira’s financial statements included in this report do not include the financial results of Mayne Pharma for any of the periods or at any of the dates presented. Unless the context shall require otherwise, this Item 1 describes Hospira’s business conducted through December 31, 2006, without regard to the Mayne Pharma acquisition. A more detailed description of Mayne Pharma’s business is included in this Item 1 under “—Mayne Pharma.”

Products

Hospira offers the following types of products and services:

Type	Description
Specialty Injectable Pharmaceuticals	·  Approximately 130 injectable generic drugs in more than 600 dosages and formulations ·  Precedex® (dexmedetomidine HCl), a proprietary drug for sedation
Medication Delivery Systems	·  Medication management systems that include electronic pumps and sets for I.V. drug delivery, and patient-controlled analgesia devices for pain management ·  Hospira MedNet® safety software system ·  I.V. solutions, nutritional products and gravity sets
Injectable Pharmaceutical Contract Manufacturing	·  Formulation development, filling and finishing of injectable pharmaceuticals on a contract basis for proprietary pharmaceutical and biotechnology companies
Other	·  Hemodynamic monitoring systems used in the intensive care setting, critical care units to measure cardiac output and blood flow, and brain-function monitoring devices

Specialty Injectable Pharmaceuticals

Hospira’s specialty injectable pharmaceutical products primarily consist of generic injectable pharmaceuticals, which provide customers with a lower-cost alternative to branded products whose patents have expired. As of December 31, 2006, Hospira had approximately 130 generic injectable products in

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more than 600 dosages and formulations. These drugs’ therapeutic areas include analgesia, anesthesia, anti-infective, cardiovascular, oncology and other. All of Hospira’s generic injectable pharmaceuticals include unit-of-use bar-code labels that can be used to support medication management efforts. Hospira procures the active pharmaceutical ingredients in these products from third-party suppliers. During 2006, Hospira launched several new generic injectable pharmaceutical products, including ampicillin sulbactam, carboplatin, ciprofloxacin, foscarnet, ondansetron and propofol.

Hospira believes that novel drug delivery formulations and formats are key points of product differentiation for generic injectable pharmaceuticals. Hospira offers a wide variety of drug delivery options, and believes that its products assist its customers’ efforts to enhance safety, increase productivity and reduce waste. Hospira’s drug delivery formats include standard offerings in ampoules and flip-top vials, which clinicians can use with standard syringes. Hospira’s proprietary drug delivery options include Carpuject® and iSecureTM prefilled syringes, Ansyr® prefilled needleless emergency syringe systems, First Choice® ready-to-use premixed formulations and the ADD-Vantage® system for preparing drug solutions from prepackaged drug powders or concentrates.

Hospira’s specialty injectable pharmaceutical product portfolio also includes Precedex® (dexmedetomidine HCl), a proprietary sedative that is used in the intensive care setting. Precedex® is a registered trademark of Orion Corporation and is licensed to Hospira by Orion.

Medication Delivery Systems

The subgroups of the medication delivery systems market that Hospira serves are (1) medication management systems, which include electronic drug delivery pumps, safety software, administration sets and accessories, and related services; and (2) infusion therapy solutions and products that are used to deliver I.V. fluids and medications to patients.

Medication Management Systems.   Medication management systems include electronic drug delivery pumps, safety software and administration sets that are used to deliver I.V. fluids and medications. Hospira also offers services relating to these products. Worldwide, Hospira estimates that more than 400,000 of its electronic drug delivery pumps were in use as of December 31, 2006.

Hospira’s electronic delivery pumps include its next-generation patient-controlled analgesia device, the LifeCare PCA®; the Plum A+® general infusion pump; the Plum A+®3 (triple-channel) infusion system; the GemStar® ambulatory infusion pump; and the OmniFlow® 4000 Plus multi-channel pump. In late 2006, Hospira launched the Symbiq™ infusion system, designed for ease of use, which can be sold with built-in Hospira MedNet® safety software.  Hospira also offers disposable administration sets designed to fit the specific drug delivery pumps. Consulting services and software maintenance agreements are also offered.

Hospira believes that electronic drug delivery pumps with enhanced systems capabilities have become a key contributor in efforts to improve medication management programs and decrease the incidence of medication errors. Some of Hospira’s pumps use bar coding to read drug labels that are compatible with other Hospira products, reducing the opportunity for drug infusion errors. Hospira offers the Hospira MedNet® safety software system, which has been designed to enable hospitals to customize intravenous drug dosage limits and track drug delivery to prevent medication errors. Through its drug library and programmable drug dosage limits, the system can help ensure that medication is infused within hospital-defined dose guidelines and best practices. The wireless network version of the Hospira MedNet® system establishes real-time send-and-receive capability and can interface with hospital and pharmacy information systems. Hospira continues to work with information technology companies to integrate the Hospira MedNet® system with other systems.

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The Hospira MedNet® system is available in the Symbiq™ infusion system, and also for the Plum A+® infusion pump, the Plum A+®3 (triple-channel) infusion system and the LifeCare PCA® patient-controlled analgesia device, which  together represent the majority of Hospira’s line of electronic drug delivery pumps. Hospira believes that the Hospira MedNet® system had penetrated approximately 42% of the compatible Plum A+® and patient-controlled analgesia installed base by December 31, 2006.

Infusion Therapy Solutions and Supplies.   Hospira offers infusion therapy solutions and supplies that include I.V. solutions for general use, I.V. nutrition products, and solutions for the washing and cleansing of wounds or surgical sites. All of Hospira’s injectable I.V. solutions include unit-of-use bar-code labels that can be used to support medication management efforts. Hospira’s line of infusion therapy supplies includes administration sets used in gravity I.V. administration, I.V. catheters and safety devices that are used to facilitate delivery of I.V. fluids and medications without the use of needles. During 2006, Hospira launched the VisIV™ next-generation non-PVC, non-DEHP I.V. container, an I.V. bag with advanced safety and environmentally friendly features.

Hospira offers needlestick safety products and programs to support its customers’ needlestick prevention initiatives. LifeShield® CLAVE® and MicroCLAVE® connectors are one-piece valves that directly connect syringes filled with medications to a patient’s I.V. line without the use of needles. ICU Medical, Inc.’s (“ICU Medical”) CLAVE® connectors are a component of administration sets sold by Hospira to its customers in the United States and select markets outside the United States.

Injectable Pharmaceutical Contract Manufacturing

Through its One 2 One® manufacturing services group, Hospira provides contract manufacturing services for formulation development, filling and finishing of injectable drugs worldwide. Hospira works with its proprietary pharmaceutical and biotechnology customers to develop stable injectable forms of their drugs, and Hospira fills and finishes those and other drugs into containers and packaging selected by the customer. The customer then sells the finished products under its own label. Hospira’s One 2 One® manufacturing services group does not manufacture active pharmaceutical ingredients, but offers a wide range of filling and finishing services, including solutions preparation, sterile filling, lyophilization (freeze drying), terminal sterilization and packaging, and has expertise in formulation development, analytical development and regulatory services. Client companies can choose from a variety of delivery systems that include vials, flexible containers, prefilled syringes and proprietary drug delivery systems such as ADD-Vantage®. One 2 One® serves numerous customers, including many of the largest global proprietary pharmaceutical companies.

Other

Other sales include critical care devices and the SEDLine® brain-function monitoring system. Critical care devices are used to monitor vital signs as well as specific physiologic functions of key organ systems. Hospira provides hemodynamic monitoring systems that are used to monitor cardiac function and blood flow in critically ill patients. Hospira’s critical care devices include its Transpac® disposable blood-pressure-sensing devices, SafesetÔ Blood Sampling System, and various catheter systems.

Customers, Sales and Distribution

The United States accounted for approximately 83% of Hospira’s 2006 net sales. Hospira’s primary customers in the United States include hospitals, integrated delivery networks and alternate site facilities. A substantial portion of Hospira’s products is sold to group purchasing organization (“GPO”) member hospitals and through wholesalers and distributors. Sales through the four largest wholesalers that supply products to many end-users accounted for approximately 41% of total net sales during 2006. As end-users of Hospira’s products have multiple ways to access Hospira’s products, including through more than one

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wholesaler or distributor, and, in some cases, from Hospira directly, Hospira believes that it is not dependent on any single wholesaler or distributor for distribution of its products. Hospira has pricing agreements for specified products with the major GPOs in the United States, including AmeriNet, Inc.; Broadlane Healthcare Corporation; Consorta, Inc.; HealthTrust Purchasing Group; MedAssets Inc.; Novation, LLC; PACT, LLC; and Premier Purchasing Partners, LP. The scope of products included in these agreements varies by GPO.

Hospira’s sales organization includes sales professionals, who sell across its major product lines, as well as product specialists who detail and promote its medication delivery systems, and sales personnel who market and sell Precedex® and select other products. Hospira also has extensive experience contracting with, marketing to and servicing members of the major GPOs.

In the United States, Hospira’s products are primarily distributed through a network of five distribution facilities as well as through external distributors. The U.S. distribution facilities Hospira operates are located in Atlanta, Georgia; Dallas, Texas; King of Prussia, Pennsylvania; Los Angeles, California; and Pleasant Prairie, Wisconsin.

Sales in markets outside the United States comprised approximately 17% of 2006 net sales. Hospira manages its international operations through four international regional hubs in Amsterdam, The Netherlands; Montreal, Canada; Mexico City, Mexico; and Osaka, Japan. Hospira has direct commercial infrastructure in some countries and operates through distributors in others. Under the terms of the spin-off, the legal title to certain assets and operations relating to Hospira’s business outside the United States were transferred from Abbott over the two-year period after the spin-off. These transfers were completed during 2006.

Hospira’s primary customers in markets outside the United States are hospitals and wholesalers that Hospira serves through its own sales force and its distributors. The majority of Hospira’s business outside the United States is conducted through contracting with individual hospitals or through regional or national tenders whereby Hospira submits bids to sell its products.

Hospira believes that backlogged orders do not represent a material portion of its sales or provide a meaningful indication of future sales.

Product Development

Hospira’s development programs are concentrated in the areas of specialty injectable pharmaceuticals and medication management systems. Hospira also maintains an active development program to support its injectable pharmaceutical contract manufacturing relationships. Hospira primarily engages in programs to bring new products to market that are unique or that enhance the effectiveness, ease of use, productivity, safety and reliability of existing product lines, and that expand the use of Hospira’s products in new markets or new applications. Hospira operates product development facilities located in Clayton, North Carolina; Lake County, Illinois; McPherson, Kansas; Morgan Hill, California; and San Diego, California.

Hospira is actively working to develop and commercialize biosimilar products, which are sometimes referred to as “generic” versions of biopharmaceuticals or biologics. Biosimilar products are large-protein molecules derived from genetically modified cell lines. In 2006, Hospira entered into collaboration agreements with STADA Arzneimittel AG and BIOCEUTICALS Arzneimittel AG relating to the development, manufacturing and distribution of a biosimilar version of erythropoietin. Therapeutic erythropoietin is used primarily in the treatment of anemia in dialysis and in certain oncology applications. During 2006, Hospira acquired BresaGen Limited, a biotechnology company based in Adelaide, South Australia. BresaGen provides protein and peptide manufacturing and cell line development capabilities, which Hospira believes are important competencies to support its biosimilar efforts.

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Hospira’s key programs in the area of medication management systems include the development of advanced infusion platforms and systems, including its Hospira MedNet® safety software system, and systems that emphasize ease of use for clinicians, including its SymbiqTM infusion pump. Hospira has entered into alliances with several leading information technology companies to develop interfaces that enable the Hospira MedNet® system to be used with a variety of hospital information systems and to improve cost efficiencies in patient management. Hospira expects to continue entering into strategic alliances as part of its “open system architecture” strategy for the Hospira MedNet® system.

Hospira’s research and development expenses were $161.6 million in 2006, $138.8 million in 2005 and $119.6 million in 2004.

Manufacturing

As of December 31, 2006, Hospira operated 14 manufacturing facilities globally. Hospira’s principal manufacturing facilities are identified in Item 2 of this report.

Hospira closed its Donegal, Ireland facility in late 2006, and expects to close the Ashland, Ohio facility later in 2007 and the Montreal, Canada facility by the first half of 2008. Hospira expects to phase out production at the North Chicago, Illinois facility, which is leased from Abbott under a 10-year lease expiring in 2014, on an accelerated time frame with most of the phase-out occurring by early 2010. Production of the primary products at these facilities is moving to other Hospira facilities and/or being outsourced to third-party suppliers. During 2006, Hospira began a $60 million expansion of manufacturing capacity at the McPherson, Kansas facility, in part to accommodate some of the production from the North Chicago facility.

Hospira’s two largest facilities, located in Rocky Mount, North Carolina and Austin, Texas account for a significant portion of Hospira’s manufacturing output. While Hospira has not experienced a significant interruption of manufacturing at those facilities, such an interruption could materially and adversely affect Hospira’s ability to manufacture and sell its products.

Raw Materials and Components

While Hospira produces some raw materials and components at its manufacturing sites, the majority of raw materials and components that it uses are sourced externally on a global basis. Hospira procures the active pharmaceutical ingredients in its drug products from third-party suppliers.

Although many of the raw materials and components Hospira uses to produce its products are readily available from multiple suppliers, Hospira relies on supply from a single source for many raw materials and components. For example, Hospira relies on proprietary components available exclusively from ICU Medical. ICU Medical’s CLAVE® and MicroCLAVE® connector products are components of administration sets that represented approximately 14% of Hospira’s 2006 sales. Hospira also purchases a significant portion of its critical care products from ICU Medical, pursuant to its long-term manufacturing, commercialization and development agreement with ICU Medical entered into during 2005. In addition, Hospira purchases some of its raw materials and components from single suppliers for reasons of quality assurance, sole-source availability, cost effectiveness or constraints resulting from regulatory requirements.

In order to manage risk, Hospira continually evaluates alternate-source suppliers, although it does not typically pursue regulatory qualification of alternative sources due to the strength of its existing supplier relationships, the reliability of its current supplier base, and the time and expense associated with the regulatory process. Although a change in suppliers could require significant effort or investment by Hospira in circumstances where the items supplied are integral to the performance of its products or incorporate unique technology, Hospira does not believe that the loss of any existing supply arrangement

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(other than its CLAVE® supply arrangement with ICU Medical, which continues through 2014) would have a material adverse effect on its business.

Quality Assurance

Hospira has developed and implemented quality systems and concepts throughout its organization. Hospira is actively involved in setting quality policies and managing internal and external quality performance. Its quality assurance department provides quality leadership and supervises its quality systems. An active audit program, utilizing both internal and external auditors, monitors compliance with applicable regulations, standards and internal policies. In addition, Hospira’s facilities are subject to periodic inspection by the U.S. Food and Drug Administration (the “FDA”) and other regulatory authorities. In the past, Hospira’s business has received notices alleging violations of applicable regulations and standards, and Hospira has developed definitive action plans, implemented remedial programs and modified its practices to address these issues. These matters have not materially impacted Hospira’s ability to market and sell its products.

Competition

Hospira’s industry is highly competitive. Hospira competes with many companies, both public and private, that range from small, highly focused companies to large diversified healthcare manufacturers. Hospira believes that the most effective competitors in its industry are focused on product quality and performance, breadth of product offering, manufacturing efficiency and the ability to develop and deliver cost-effective products that help hospitals provide high quality care in an environment that requires increasing levels of efficiency and productivity.

Hospira’s most significant competitors in specialty injectable pharmaceuticals include Abraxis BioScience, Inc., Baxter International Inc. and Teva Pharmaceuticals, as well as divisions of several multinational pharmaceutical companies. Local manufacturers of specialty injectable pharmaceuticals also compete with Hospira on a country-by-country basis. Hospira’s most significant competitors in medication delivery systems include Baxter, Becton, Dickinson and Company, B. Braun Melsungen AG, Cardinal Healthcare Inc., Fresenius Medical Care AG and Terumo Medical Corporation. Baxter, Cardinal and Patheon, Inc. are significant competitors of Hospira’s contract manufacturing business. Edwards Lifesciences Corporation is a significant competitor in critical care monitoring devices.

Hospira believes that it is one of the leading competitors, in terms of U.S. market share, in each of its major product lines, and believes that its size, scale, customer relationships and breadth of product line are significant contributors to its market positions. Hospira believes that it must continue to invest significantly in, and successfully execute, its research and product development activities, optimize its manufacturing efficiency and productivity, increase its international presence and successfully integrate Mayne Pharma’s business into its operations to further its competitive position. Particularly, within its specialty injectable product line, Hospira seeks to maximize its opportunity to establish a “first-to-market” position for its generic injectable drugs and, within its medication delivery systems product line, Hospira seeks to differentiate its products through technological innovation and an integrated approach to drug delivery. These efforts will depend heavily on the success of Hospira’s research and development programs.

Patents, Trademarks and Other Intellectual Property

When possible, Hospira seeks patent and trademark protection for its products. Hospira owns, or has licenses under, a substantial number of patents, patent applications, trademarks and trademark applications. However, Hospira does not consider any one or more of these patents, patent applications, trademarks and trademark applications to be material in relation to its business as a whole.

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Employees

As of December 31, 2006, Hospira had approximately 13,000 employees. Approximately 8,000 employees were in the United States. Upon the completion of the Mayne Pharma acquisition, Hospira had approximately 15,000 employees. Employees at the Ashland, Ohio manufacturing facility, and a significant portion of Hospira’s employees outside of the United States, are members of works councils or trade unions.

Hospira believes that it generally has a good relationship with its employees and the works councils and unions that represent them.

Governmental Regulation and Other Matters

Laws and regulations that significantly affect Hospira’s business and operations are described below. Hospira believes that it is in material compliance with applicable laws and regulations, including those described below.

Food and Drug Laws

Most of Hospira’s products and facilities are subject to regulation by the FDA and national and supranational regulatory authorities outside the United States, including Health Canada (Health Products and Foods Branch) and the European Agency for the Evaluation of Medicinal Products for Human Use. Hospira’s marketed drugs and devices are subject to regulation with respect to, among other matters, manufacturing, post-marketing studies in humans, advertising and promotional activities and materials, product labeling, and post-marketing surveillance and reporting of adverse events.

All aspects of the manufacturing of regulated products are subject to substantial governmental oversight. Facilities used for the production, packaging, labeling, storage and distribution of drugs and medical devices must be registered with the FDA and other regulatory authorities. All manufacturing activities for these products must be conducted in compliance with relevant good manufacturing practices. Hospira’s manufacturing facilities are subject to periodic and for-cause inspections to verify compliance with good manufacturing practices. New manufacturing facilities or the expansion of existing facilities will require inspection and approval by the FDA and other regulatory authorities before products produced at that site can enter commercial distribution. If, upon inspection, the FDA or another regulatory agency finds that a manufacturer has failed to comply with good manufacturing practices, it may take various enforcement actions, including, but not limited to, issuing a warning letter or similar correspondence, mandating a product recall, seizing violative product, imposing civil penalties, and referring the matter to a law enforcement authority for criminal prosecution. See “Item 1A. Risk Factors—Hospira and its suppliers and customers are subject to various governmental regulations and it could be costly to comply with these regulations and to develop compliant products and processes.”

Hospira’s sales and marketing activities for regulated products, particularly prescription drugs and certain medical devices, are also highly regulated. Regulatory authorities have the power to mandate the discontinuance of promotional materials, practices and programs if they include information that is beyond the scope of the indications included in the approved or cleared labeling or is not in compliance with specific regulatory requirements.

Some of Hospira’s drug products are considered controlled substances and are subject to additional regulation by the U.S. Drug Enforcement Administration (“DEA”) and various state and international authorities. These drugs, which have varying degrees of potential for abuse, require specialized controls for production, storage and distribution to prevent theft and diversion. Violation of controlled substance statutes and regulations may result in substantial civil and criminal penalties.

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Hospira has begun investing in the development of biosimilar products, which are generic and/or similar versions of currently marketed biologic pharmaceuticals. In November 2005, the European Medicines Agency implemented guidelines directed at the approval pathway for all generic biologic pharmaceuticals in the European Union. In the United States, there is no specific regulatory pathway for abbreviated approval of the majority of biologic pharmaceuticals. For historical reasons, some biologic pharmaceuticals, such as human insulin and human growth hormones, are approved under the Food Drug and Cosmetic Act (the “FDCA”), while most other biologic pharmaceuticals are approved under the Public Health Services Act (the “PHS”). The Drug Price Competition and Patent Term Restoration Act of 1984, which is generally known as the Hatch-Waxman Act, amended the FDCA and established an abbreviated approval pathway for generic versions of referenced drug products approved under FDCA. Although the FDA has been willing to recognize an abbreviated approval pathway for generic versions of biologic pharmaceuticals approved under the FDCA, the FDA has been unwilling to recognize an abbreviated approval pathway for generic versions of biologic pharmaceuticals approved under the PHS. Without a similar “Hatch-Waxman” abbreviated approval pathway in the PHS, it is unlikely the FDA will approve a generic, or off-patent, version of a referenced biologic pharmaceutical without independent clinical studies that support the products’ safety and effectiveness.

Healthcare Fraud and Abuse Laws

As a manufacturer and distributor of prescription drugs and medical products to hospitals and other healthcare providers, Hospira and its customers are subject to the federal anti-kickback statute, which applies to Medicare, Medicaid, and other federal and state programs. This statute prohibits the solicitation, offer, payment or receipt of remuneration in return for referrals or purchase, or in return for recommending or arranging for the referral or purchase, of goods covered by the programs. The anti-kickback law provides a number of exceptions or “safe harbors” for particular types of transactions. Hospira believes that its arrangements with its customers are in material compliance with the anti-kickback statute and relevant safe harbors. While Hospira generally does not file claims for reimbursement from government payors, the federal government has asserted theories of liability against manufacturers under the Federal False Claims Act, which prohibits the submission of false claims to Medicare, Medicaid, and other state and federal programs. Hospira believes that its arrangements with and actions in regard to its claims-filing customers are in material compliance with the Federal False Claims Act. Many states have similar fraud and abuse laws, and Hospira believes that it is in material compliance with those laws. If it were determined that Hospira was not in compliance with those laws, however, Hospira could be subject to criminal and/or civil liability, exclusion from participation in Medicare, Medicaid and other state and federal programs, or other material adverse effects.

Environmental Laws

Hospira’s manufacturing operations are subject to many requirements under environmental laws. In the United States, the U.S. Environmental Protection Agency and similar state agencies administer laws which restrict the emission of pollutants into the air, the discharge of pollutants into bodies of water and the disposal of hazardous substances. Violations of these laws can result in significant civil and criminal penalties, and incarceration. The failure to obtain a permit for certain activities may be a violation of environmental law and subject the owner and operator to civil and criminal sanctions. Most environmental agencies also have the power to shut down an operation if it is operating in violation of environmental law. U.S. laws also typically allow citizens to bring private enforcement actions in some situations. Outside the United States, the environmental laws and their enforcement vary, and can be more burdensome. For example, in some European countries, there are environmental taxes and laws requiring manufacturers to take back used products at the end of their useful life. This does not currently have a significant impact on Hospira’s products, but such laws are expanding rapidly in Europe. Hospira has management systems in place that are intended to minimize the potential for violation of these laws.

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Other environmental laws address the contamination of land and groundwater, and require the clean-up of such contamination. These laws may apply not only to the owner or operator of an on-going business, but also to the owner of land contaminated by a prior owner or operator. In addition, if a parcel is contaminated by the release of a hazardous substance, such as through its historic use as a disposal site, any person or company that has contributed to that contamination, whether or not they have a legal interest in the land, may be subject to a requirement to clean up the parcel. Hospira has been involved with a number of sites at which clean-up has been required, some as the sole owner and responsible party, and some as a contributor in conjunction with other parties. The resulting costs tend to be in the form of legal expenses, contributions to the cost of the investigation or clean-up of the contaminated sites, or settlement payments to reimburse the government for past remedial work.

Safety and Health Laws

In the United States, the Occupational Safety and Health Act sets forth requirements for conditions of the workplace. Hospira’s operations are subject to many of these requirements, particularly in connection with Hospira’s employees’ use of equipment and chemicals at manufacturing sites that pose a potential health or safety hazard. Violation of these laws can result in civil and criminal penalties.

Transportation Laws

Hospira’s operations include transporting materials defined as “hazardous” over land, over sea and through the air. All of these activities are regulated under laws administered by the U.S. Department of Transportation and similar agencies outside the United States. They include complex requirements for packing, labeling and recordkeeping, and the failure to comply can result in civil and criminal sanctions.

Customs Laws

The import and export of many goods across national borders are heavily regulated, especially in the United States. As the importer and exporter of many shipments each year, Hospira must comply with all customs regulations and pay fees and duties on certain shipments. Failure to comply can result in significant financial penalties and criminal sanctions.

Other Laws

The laws of some states and foreign countries regulate the safety of Hospira’s products in the marketplace to a greater extent than FDA requirements. For example, under California’s Safe Drinking Water and Toxic Enforcement Act of 1986, also known as “Proposition 65,” the state has established a list of chemicals considered to be hazardous. If, as a result of the sale in California of a product containing a listed chemical, a person is exposed to the chemical, the seller of that product must provide that person with a warning. Monetary penalties for non-compliance can be substantial, although there are no criminal sanctions.

Hospira is also subject to a variety of state and foreign compliance, disclosure and anti-fraud laws, non-compliance with which can result in significant financial penalties and criminal sanctions. As Hospira operates internationally, Hospira is subject to U.S. regulations that apply to international operations, including trade laws, the Foreign Corrupt Practices Act and anti-boycott laws.

Spin-Off from Abbott

Hospira became an independent public company pursuant to a spin-off from Abbott Laboratories on April 30, 2004. At that time, Hospira and Abbott entered into various agreements, including agreements that defined the parties’ rights and obligations regarding the spin-off, transitional agreements to support Hospira’s business and commercial infrastructure, and lease agreements. The parties also agreed that legal

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title to certain assets and liabilities used in Hospira’s international operations would be transferred to Hospira over the two years after the spin-off. During 2006, Hospira and Abbott completed the transitional agreements and all of the transfers of such international assets and liabilities. Some commercial agreements relating to the supply of products among the parties remain in place through 2008, and the lease of the North Chicago, Illinois manufacturing facility remains in force through 2014.

Except as otherwise agreed by the parties, Hospira assumed all liabilities of Abbott and its subsidiaries to the extent relating to, arising out of or resulting from any matter occurring or existing prior to the spin-off to the extent such liabilities relate to, arise out of or result from Hospira’s business and assets. The liabilities that Hospira assumed include, among other things, liabilities for any claims or legal proceedings related to products that had been part of Hospira’s business, but were discontinued prior to the spin-off. However, Hospira did not assume certain liabilities of Abbott or its subsidiaries relating to allegations in pending or future investigations and lawsuits that Hospira’s business engaged in improper marketing and pricing practices as described in “Item 3. Legal Proceedings—Marketing and Pricing Cases.”  In addition, Abbott is liable generally for all pre-spin-off U.S. federal income taxes, foreign taxes and certain state taxes attributable to Hospira’s business. Hospira generally is liable for all other taxes attributable to its business.

Hospira generally assumed all employment-related obligations and liabilities for all U.S. employees who transferred employment to Hospira in connection with the spin-off, including salaries and vacation, except as otherwise agreed by the parties. Abbott generally retained responsibility for all employment-related obligations and liabilities for U.S. non-union employees who terminated their employment or retired prior to the spin-off or who otherwise did not transfer employment to Hospira in connection with the spin-off, except as otherwise provided in the agreement. Abbott retained liabilities for post-retirement medical, dental and life insurance benefits for U.S. non-union employees who were retired at the time of the spin-off and for those U.S. non-union employees who were eligible to retire as of the time of the spin-off (commencing on or after their retirement with Hospira), for other medical and dental claims which were incurred by employees of Hospira’s business prior to the spin-off, and for certain deferred compensation and supplemental pension obligations, subject in all cases to the terms of the spin-off and the applicable Abbott plans. Hospira assumed and is liable for the pension and other benefits of Hospira’s current and former union employees at its Ashland, Ohio site. Hospira’s obligations with respect to employees outside the United States are governed in accordance with the terms of applicable local plans and local law.

Mayne Pharma

Business Overview

Mayne Pharma is an international specialty injectable pharmaceutical company, and has a portfolio of generic injectable products focused primarily on the treatment of cancer. Therapeutic areas of its products include anti-cancer agents, anti-infective, pain management and other areas. Mayne Pharma also provides contract manufacturing services, and produces and sells oral pharmaceutical products. Mayne Pharma has a direct commercial presence in 20 countries and indirect distribution in over 45 countries. Mayne Pharma had AUD788.9 million of revenues during its fiscal year ended June 30, 2006, as reported under Australian International Financial Reporting Standards (“AIFRS”). References to “AUD” in this report are to Australian dollars. The exchange rate on the closing date of the acquisition was $1.00 to AUD0.775.

On November 21, 2005, Mayne Pharma was established as an independent company listed on the Australian Stock Exchange, upon its demerger from Mayne Group Limited, an Australian health-care company (now Symbion Health Limited). Hospira completed its purchase of Mayne Pharma on February 2, 2007.

References in this subsection to the “2006 fiscal year” refer to Mayne’s fiscal year ended June 30, 2006.

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Products

Mayne Pharma’s key injectable pharmaceutical products in the 2006 fiscal year were:

·paclitaxel, a drug for the treatment of ovarian, breast and non-small cell lung cancer;

·pamidronate, an oncology drug used to treat a condition involving excess calcium in the blood, which may be associated with certain types of cancer;

·irinotecan, a drug for the treatment of cancer of the colon or rectum;

·MVI®, injectable multivitamins for nutrition; and

·carboplatin, a drug for the treatment of ovarian cancer.

Mayne Pharma received marketing authorization in September 2006 for its oxaliplatin product from the United Kingdom Medicines and Healthcare Products Regulatory Agency, which followed a ruling from the United Kingdom High Court, which found in favor of Mayne Pharma in regard to certain patents for its oxaliplatin product. An appeal of the court decision was withdrawn by the innovator in January 2007. Mayne Pharma also has received marketing authorization in other territories, including Germany, France, Sweden and Australia. Oxaliplatin is one of the largest anti-cancer pharmaceutical products in the world by sales.

Commercial Operations

Mayne Pharma has operations in three regions: Europe, Middle East and Africa (“EMEA”), Asia Pacific and the Americas. Mayne Pharma’s primary customers are hospital pharmacists and oncologists. The major distribution channels for Mayne Pharma’s injectable products are hospitals and clinics as well as distributors, group purchasing organizations and governments through tender and bid processes.

As reported under AIFRS, EMEA operations generated AUD391.0 million of sales revenue in the 2006 fiscal year. In Europe, Mayne Pharma has a direct presence in 13 countries, including France, Germany, Italy, Spain and the United Kingdom. Mayne Pharma has distribution arrangements in over 40 other countries across the EMEA.

As reported under AIFRS, Mayne Pharma’s Asia Pacific operations generated AUD194.4 million of sales revenue in the 2006 fiscal year. Mayne Pharma has a direct presence in Australia, Hong Kong, Malaysia, New Zealand and Singapore. Mayne Pharma operates through joint ventures or distributors in several other countries across the region.

As reported under AIFRS, Mayne Pharma’s Americas operations generated AUD203.5 million of sales revenue for the 2006 fiscal year. Mayne Pharma has a direct presence in the United States and Canada.

Research and Development

Mayne Pharma’s research and development activities are focused on oncology and related drugs, and it aims to develop generic products that have one or more characteristics that make it difficult for competitors to develop competing products. Mayne Pharma’s research and development activities are conducted primarily at Mayne Pharma’s facility in Mulgrave, Victoria, Australia. Mayne Pharma also has established relationships with research and development partners in low-cost and generic-friendly environments, such as India. In recent years, Mayne Pharma has also entered into a number of product in-licensing agreements, involving the sale of products under license from third parties, to expand its product portfolio.

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Manufacturing Facilities

Mayne Pharma’s principal manufacturing facilities are identified in Item 2 of this report. Mayne Pharma’s primary injectable drug manufacturing facility is its Mulgrave facility. Products produced at the Mulgrave facility generated a majority of its 2006 fiscal year revenue. A significant disruption to its operations at this site, even on a short-term basis, could materially hinder Mayne Pharma’s ability to produce and ship products on a timely basis.

Raw Materials

Mayne Pharma produces the active pharmaceutical ingredient for paclitaxel at its Boulder, Colorado facility and sources the active pharmaceutical ingredients for its other products from third parties. Mayne Pharma has established relationships with a number of FDA-approved suppliers of active pharmaceutical ingredients and works very closely with them to ensure continuity of supply while maintaining material quality and reliability.

Competition

EMEA.   Generic penetration rates in the EMEA region vary due to wide variations in the structure of health care systems (including purchasing practices) and government policies regarding the use of generic products and pricing, which all lead to differing levels of customer acceptance. Because the European market is fragmented, with different policies and levels of generic penetration in each country, the competition for generic pharmaceuticals is less intense than in the United States, which is a largely homogenous market with a higher level of generic drug usage. In Europe, competitors tend to vary by country and are often smaller than those in the United States, although some consolidation and geographic expansion is now occurring. Teva is the only company that competes with Mayne Pharma in the generic oncology market across the EMEA region. Mayne Pharma’s other key competitors vary from country to country.

Asia Pacific.   In Australia, generic penetration is growing primarily due to changes in government support. Australian laws have been introduced to allow for easier compulsory substitution of generic for branded pharmaceuticals, as a response to pressure to reduce costs, which is believed to have resulted in an increased acceptance of generic pharmaceutical products. Competitors include the Sandoz division of Novartis, a number of smaller competitors and the innovator companies.

In the Asian region, Mayne Pharma sells its products primarily to public and private hospitals. Mayne Pharma’s competition in the Asian region tends to be with the innovator companies rather than local generic competitors.

United States and Canada.   As significantly higher levels of expertise and investment are required for injectable oncology pharmaceutical product manufacturing than for oral dose pharmaceutical manufacturing, there are relatively few companies that compete in this market when compared to the larger oral generics market. Mayne Pharma’s main competitors include Abraxis BioScience, Bedford Laboratories (a division of Boehringer Ingelheim) and Teva.

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Internet Information

Copies of Hospira’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through the Investor Relations section of Hospira’s Web site (www.hospira.com) as soon as reasonably practicable after Hospira electronically files the material with, or furnishes it to, the Securities and Exchange Commission.

Hospira’s corporate governance guidelines, code of business conduct and the charters of its audit, compensation and governance and public policy committees are all available in the Investor Relations section of Hospira’s Web site (www.hospira.com) or by sending a request to: Corporate Governance Materials Request, Hospira General Counsel and Secretary, Hospira, Inc., 275 North Field Drive, Dept. NLEG, Bldg. H1, Lake Forest, Illinois 60045.

Item 1A. Risk Factors

Hospira’s business, financial condition, results of operations and cash flows are subject to various risks and uncertainties, including those described below. These risks and uncertainties may cause (1) Hospira’s sales and results of operations to fluctuate significantly; (2) Hospira’s past performance to not be indicative of future performance; and (3) Hospira’s actual performance to differ materially from Hospira’s expectations or projections. The risks described below apply to Hospira’s business after giving effect to the Mayne Pharma acquisition and may not be the only risks Hospira faces. Additional risks that Hospira does not yet know of or that Hospira currently thinks are immaterial may also impair its business operations.

Risks Relating to the Mayne Pharma Acquisition and Related Transactions

The integration of Mayne Pharma into Hospira’s operations will present significant challenges.

On February 2, 2007, Hospira completed its acquisition of Mayne Pharma Limited. Hospira will face significant challenges in combining its operations and product lines with Mayne Pharma in a timely and efficient manner. The Mayne Pharma acquisition was the largest in Hospira’s history, and successful integration will be important to Hospira’s future success. In connection with the integration, Hospira will identify and eliminate duplicative functions, retain other key functions and personnel, terminate various contractual arrangements and transition its management structure to the new combined company. This integration will be complex and time-consuming, may divert management away from day-to-day operations and may disrupt ordinary operations. If Hospira does not identify the right functions to be eliminated or retained, it may not realize the expected cost savings and synergies from the acquisition. Hospira may not be able to retain key personnel to efficiently operate the business. Integration of Mayne Pharma will also require Hospira to modify its operational and financial systems and cause Mayne Pharma’s internal control over financial reporting to comply with the Sarbanes-Oxley Act of 2002. The integration will result in significant additional expenses, currently estimated to be approximately $95 million to $110 million over the two year period following the acquisition. The substantial majority of such expenses will be incurred in cash. Hospira may incur greater-than-expected costs in connection with the integration if it experiences difficulties or encounters issues not currently known to it. As Hospira and Mayne Pharma offer some similar products in the same markets, Hospira may not be able to retain all historical sales of those products.

The failure to successfully integrate Mayne Pharma’s business into Hospira’s business and manage the challenges presented by the integration process may prevent Hospira from achieving the anticipated potential benefits of the acquisition, may lead to significant costs and may harm Hospira’s future profitability.

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Hospira has incurred significant indebtedness in order to finance the Mayne Pharma acquisition, which may limit its operating flexibility.

To finance the Mayne Pharma acquisition, Hospira has incurred additional borrowings of approximately $1.9 billion in the aggregate under a one-year bridge loan facility and a three-year term loan facility. As a result, as of February 1, 2007, Hospira had approximately $2.6 billion of debt.

This significant indebtedness will require Hospira to dedicate a substantial portion of its cash flow from operations to payments on its debt, thereby reducing the availability of cash flow to fund capital expenditures, to pursue other acquisitions or investments in new technologies and for general corporate purposes. During 2006, Hospira incurred approximately $31.0 million in interest expense. In 2007, interest expense is expected to increase to approximately $130 million to $140 million, assuming Hospira maintains its existing credit ratings and is able to refinance amounts due under the bridge loan facility in market conditions similar to current market conditions. Hospira will also be required to make minimum principal payments under the term loan facility of $50 million in 2007, $200 million in 2008 and $250 million in 2009. These amounts will be reduced if Hospira prepays the principal in earlier periods.

In addition, this significant indebtedness will:

·increase Hospira’s vulnerability to general adverse economic conditions, including increases in interest rates; and

·limit Hospira’s flexibility in planning for, or reacting to, changes in or challenges relating to its business and industry.

The terms of the loan agreements contain restrictions on Hospira’s ability to, among other things:

·incur additional indebtedness;

·create or incur liens;

·sell all or substantially all of its assets; and

·consolidate or merge with another entity.

Hospira must also maintain a minimum interest coverage ratio and is subject to a maximum leverage ratio throughout the life of the loan facilities. If Hospira does not comply with the covenants and restrictions under the agreements governing its indebtedness, Hospira would be in default under the agreements and, if the lenders do not waive such default, the lenders may accelerate the amounts borrowed. If the loans are accelerated, Hospira may be unable to repay the amounts due to the lenders or obtain additional or replacement financing on favorable terms or at all, which would have a material adverse effect on Hospira’s financial condition.

Hospira’s credit rating has been downgraded by Standard and Poor’s and future downgrades are possible. A further downgrade will increase Hospira’s cost of borrowing.

As a result of the Mayne Pharma acquisition, Hospira’s credit rating was downgraded from BBB+ to BBB by Standard & Poor’s. While Moody’s maintained Hospira’s credit rating at Baa3, which is the lowest investment grade rating, the rating outlook was changed from stable to negative. It is possible that Hospira’s credit ratings could be further downgraded and fall below investment grade from both agencies. The credit ratings assigned to Hospira’s indebtedness affect its ability to obtain new financing and the cost of financing and credit. The amount of interest payable under Hospira’s loan facilities depends on Hospira’s credit ratings. If Hospira’s credit ratings were to be further downgraded, its borrowing costs would increase, and its access to unsecured debt markets could be limited.

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Ratings are not recommendations to buy, sell or hold securities and are subject to revision or withdrawal at any time by the rating agencies. Each rating should be evaluated independently of any other rating.

Hospira may not be able to refinance amounts borrowed under its bridge loan facility on favorable terms or at all.

Hospira owes approximately $1.425 billion under the bridge loan facility entered into to finance the Mayne Pharma acquisition. The bridge loan facility matures in January 2008. Hospira intends to refinance the bridge loan facility before it matures through the sale of long-term bonds. Hospira’s ability to refinance the bridge loan facility in a timely manner and at favorable terms depends on several factors, including Hospira’s credit ratings, general economic conditions, capital markets and interest rate levels.

Hospira may not be able to refinance the bridge loan facility. If Hospira is able to refinance the bridge loan facility, the terms of the refinancing may not be as favorable as the terms of the bridge loan facility. If Hospira does not maintain investment grade credit ratings, it may be more difficult to refinance the bridge loan facility, the cost of borrowing would increase substantially and Hospira would become subject to more stringent covenants and restrictions on its business. If Hospira fails to refinance the credit facility on favorable terms or at all, such failure could have a material adverse effect on its business and financial condition.

Hospira will incur substantial charges relating to the Mayne Pharma acquisition.

In addition to integration-related expenses, Hospira will also incur other charges in connection with the Mayne Pharma acquisition. These will include purchase accounting charges, such as the write-off of in-process research and development and the write-up of inventory, as well as the amortization of intangible assets. These charges will negatively affect Hospira’s results of operations.

Risks Related to Hospira’s Business and Industries

Hospira faces significant competition and may not be able to compete effectively.

The healthcare industry is highly competitive. Hospira competes with many companies ranging from small start-up enterprises to multinational companies that are larger than Hospira and have access to greater financial, marketing, technical and other resources than Hospira. Hospira’s present or future products could be rendered obsolete or uneconomical by technological advances by competitors or by the introduction of competing products by one or more of its competitors. Hospira faces strong competition from one or more large competitors in each of its major product lines. To remain competitive and bolster its competitive position, Hospira believes that it must successfully execute various strategic plans, including expanding its research and development initiatives, increasing its international presence and lowering its operating costs. These initiatives may result in significant expenditures and ultimately may not be successful.

Many of Hospira’s products are not protected by patents or other proprietary rights and are therefore not entitled to market exclusivity. In the absence of patent protection, the introduction of competing products is limited primarily by market considerations and the need to obtain necessary regulatory approvals, which may not keep competitors from providing competitive products.

Hospira’s failure to compete effectively could cause it to lose market share to its competitors and/or have a material adverse effect on its sales and profitability.

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If Hospira does not introduce new products in a timely manner, its products may become obsolete over time, customers may not buy its products, and its sales and profitability may decline.

Demand for Hospira’s products may change in ways Hospira may not anticipate because of evolving customer needs, the introduction by others of new products and technologies, and evolving industry standards. A key component to Hospira’s strategy is effective execution of its research and development activities, in part to increase the breadth of Hospira’s specialty injectable product portfolio and to develop new and improved medication delivery systems products. Without the timely introduction of new products and enhancements, Hospira’s products may become obsolete over time, in which case its sales and operating results would suffer.

If Hospira does not continue to develop generic injectable pharmaceuticals in a timely manner, its competitors may develop generic injectable pharmaceutical product portfolios that are more competitive than Hospira’s, and Hospira could find it more difficult to renew or expand GPO pricing agreements or to obtain new agreements. The ability to launch a generic pharmaceutical product at or before generic market formation is important to that product’s profitability. Prices for generic products typically decline, sometimes dramatically, following market formation, as additional companies receive approvals to market that product and competition intensifies. If a company can be “first to market,” such that the branded drug is the only other competition for a period of time, higher levels of sales and profitability can be achieved. With increasing competition in the generic product market, the timeliness with which Hospira can market new generic products will increase in importance. If Hospira is unable to bring its generic products to market on a timely basis, and secure “first to market” positions, its sales and profitability could be harmed.

Hospira faces similar risks if it does not introduce new versions or upgrades to its medication management systems. Innovations generally require a substantial investment in product development before Hospira can determine their commercial viability, and Hospira may not have the financial resources necessary to fund these innovations. Even if Hospira succeeds in creating new product candidates from these innovations, such innovations may still fail to result in commercially successful products. It may take more time and effort for Hospira to sell and implement newer-technology medication management systems to its customers.

The success of Hospira’s new product offerings and enhancements will depend on several factors, including Hospira’s ability to:

·properly anticipate and satisfy customer needs, including increasing demand for lower-cost products that help improve safety and productivity;

·innovate, develop, manufacture and implement new products and technologies in an economical and timely manner;

·differentiate its offerings from competitors’ offerings;

·achieve positive clinical outcomes for new products;

·meet safety and efficacy requirements and other regulatory requirements of government agencies;

·avoid infringing the proprietary rights of third parties; and

·obtain favorable pricing on such products.

Even if Hospira is able to successfully develop new products or enhancements or new generations of its existing products, these new products or enhancements or new generations of its existing products may not produce sales in excess of the costs of development, and they may be quickly rendered obsolete by changing customer preferences or the introduction by competitors of products embodying new technologies or features. Finally, innovations may not be accepted quickly in the marketplace because of,

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among other things, entrenched patterns of clinical practice, the need for regulatory clearance and uncertainty over third-party reimbursement.

Failure to effectively manage efforts under product collaboration agreements may harm Hospira’s business and profitability.

In many cases, Hospira collaborates with other companies for the development, regulatory approval, manufacturing and marketing of new products. For example, during 2006, Hospira entered into collaboration agreements relating to the long-term development and commercialization of biosimilar products, which Hospira views as an important long-term opportunity for its specialty injectable pharmaceutical product line. Hospira’s ability to benefit from these arrangements will depend on its ability to successfully manage these arrangements and the performance of the other parties to these arrangements. Hospira and the other parties to these arrangements may not efficiently work together, leading to higher-than-anticipated costs and/or delays in important activities under the arrangements. The other parties to these arrangements may not devote the resources that Hospira requires for the arrangement to be successful. These arrangements are often governed by complex agreements that may be subject to differing interpretations by the parties, which may result in disputes. These factors are often beyond the control of Hospira, and could harm Hospira’s sales, product development efforts and profitability.

Hospira is subject to the cost-containment efforts of hospital buying groups, wholesalers, distributors, third-party payors and government organizations.

Many existing and potential customers for Hospira’s products have combined to form GPOs, and integrated delivery networks (“IDNs”) in an effort to lower costs. GPOs and IDNs negotiate pricing arrangements with medical supply manufacturers and distributors, and these negotiated prices are made available to a GPO’s or an IDN’s affiliated hospitals and other members. Failure to negotiate advantageous pricing and purchasing arrangements could cause Hospira to lose market share to its competitors and/or have a material adverse effect on its sales and profitability.

Hospira also relies significantly on drug wholesalers to assist in the distribution of its generic injectable pharmaceutical products. In general, drug wholesalers have been attempting to implement, and unilaterally enforce, a fee-for-service model for the distribution of such products. One drug wholesaler continues to unilaterally invoice Hospira for higher fees that it alleges are due for the distribution of Hospira’s generic injectable pharmaceutical products, which Hospira denies are payable. While Hospira has contracts in place with its major drug wholesalers, if Hospira is required to pay fees not contemplated by its existing agreements, Hospira will incur additional costs to distribute its products, which may harm Hospira’s profitability.

Hospira’s products and services are sold to hospitals and alternate site providers, such as clinics, home healthcare providers and long-term care facilities, all of which receive reimbursement for the healthcare services provided to their patients from third-party payors, such as government programs, private insurance plans and managed-care programs. These third-party payors are increasingly attempting to contain healthcare costs by limiting both coverage and the level of reimbursement for medical products and services. Levels of reimbursement, if any, may be decreased in the future, and future legislation, regulation or reimbursement policies of third-party payors may otherwise adversely affect the demand for and price levels of Hospira’s products, which could have a material adverse effect on its sales and profitability.

In markets outside the United States, Hospira’s business has experienced downward pressure on product pricing as a result of the concentrated buying power of governments as principal customers and the use of bid-and-tender sales methods whereby Hospira is required to submit a bid for the sale of its

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products. Hospira’s failure to offer acceptable prices to these customers could have a material adverse effect on its sales and profitability in these markets.

If Hospira is unable to maintain its GPO pricing agreements, sales of its products could decline.

A small number of GPOs influence a majority of sales to Hospira’s hospital customers. GPOs negotiate pricing agreements with providers of medical products, and these negotiated prices are made available to members of GPOs. If Hospira does not have a pricing agreement with a GPO, it may be more difficult for Hospira to sell its products to the GPO’s members.

Hospira has pricing agreements covering certain products with the major GPOs in the United States, including AmeriNet, Inc.; Broadlane Healthcare Corporation; Consorta, Inc.; HealthTrust Purchasing Group; MedAssets Inc.; Novation, LLC; PACT, LLC; and Premier Purchasing Partners, LP. It will be important for Hospira to continue to maintain pricing arrangements with major GPOs. In order to maintain these relationships, Hospira must offer a reliable supply of high-quality, regulatory-compliant products. Hospira also needs to maintain a broad product line and be price-competitive. Several GPO contracts are up for renewal or extension each year. If Hospira is unable to renew or extend one or more of those contracts, and cannot replace lost business, Hospira’s sales and profitability will decline. There has been consolidation among major GPOs, and further consolidation may occur. The effect of consolidation is uncertain, and consolidation may impair Hospira’s ability to contract with GPOs in the future.

The GPOs also have a variety of business relationships with Hospira’s competitors and may decide to enter into pricing agreements for, or otherwise prefer, products other than Hospira’s. While GPOs negotiate incentives for members to purchase specified products from a given manufacturer or distributor, GPO pricing agreements allow customers to choose between the products covered by the arrangement and another manufacturer’s products, whether or not purchased under a negotiated pricing agreement. As a result, Hospira may face competition for its products even within the context of its GPO pricing agreements.

Although some of Hospira’s GPO pricing agreements may not be terminated without breach until the end of their contracted term, others may be terminated on 60 or 90 days’ notice. If Hospira is unable to establish or maintain arrangements with key GPOs and customers, or if GPO members alter their preference for Hospira’s products in favor of those of Hospira’s competitors, Hospira’s sales and profitability could decline.

Hospira and its suppliers and customers are subject to various governmental regulations, and it could be costly to comply with these regulations and to develop compliant products and processes.

Hospira’s products are subject to rigorous regulation by the FDA, and numerous other national, supranational, federal and state governmental authorities. The process of obtaining regulatory approvals to market a drug or medical device, particularly from the FDA and certain governmental authorities outside the United States, can be costly and time-consuming, and approvals might not be granted for future products on a timely basis, if at all.

The FDA recently has been experiencing a backlog of generic drug applications, which may delay approvals of new generic drug products. FDA officials are considering plans to propose user fees in connection with applications by generic drug producers like Hospira for approval of new generic drug products. If enacted, user fees would increase Hospira’s product development costs.

Existing regulations may also delay or prevent generic drug producers such as Hospira from offering certain products, such as biosimilar products, in key territories, which could harm Hospira’s ability to grow its business. If a clear regulatory pathway for the approval of biosimilar products is not fully developed in the United States and other jurisdictions, Hospira may not be able to generate future sales of such

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products in those jurisdictions and may not realize the anticipated benefits of its investments in the development, manufacture and sale of such products. Delays in receipt of, or failure to obtain, approvals for product candidates could result in delayed realization of product revenues and in substantial additional costs.

Hospira may not be able to remain in compliance with applicable FDA and other material regulatory requirements once it has obtained clearance or approval for a product. These requirements include, among other things, regulations regarding manufacturing practices, product labeling, advertising and postmarketing reporting, including adverse event reports and field alerts, some of which are related to manufacturing quality concerns. Hospira may be required by regulatory authorities, or determine on its own, to temporarily cease production and sale of certain products to resolve manufacturing and product quality concerns, which would harm Hospira’s sales, margins and profitability in the affected period(s) and may have a material adverse effect on Hospira’s business.

Many of Hospira’s facilities and procedures and those of its suppliers are subject to ongoing regulation, including periodic inspection by the FDA and other regulatory authorities. For example, manufacturers of pharmaceutical products must comply with detailed regulations governing current good manufacturing practices, including requirements relating to quality control and quality assurance. Hospira must incur expense and spend time and effort in the areas of production, safety, quality control and quality assurance to ensure compliance with these complex regulations. In the past, Hospira’s business has received notices alleging violations of these regulations, and Hospira has modified its practices in response to these notices.

Hospira’s manufacturing facilities and those of its suppliers could be subject to significant adverse regulatory actions in the future. These possible regulatory actions could include warning letters, fines, damages, injunctions, civil penalties, recalls, seizures of its products and criminal prosecution. These actions could result in, among other things, substantial modifications to Hospira’s business practices and operations; refunds, recalls or seizures of its products; a total or partial shutdown of production in one or more of its facilities while Hospira remedies the alleged violation; the inability to obtain future pre-market clearances or approvals; and withdrawals or suspensions of current products from the market.

Any adverse regulatory action, or action taken by Hospira to maintain appropriate regulatory compliance, could disrupt Hospira’s business and have a material adverse effect on its sales, profitability and financial condition. Furthermore, adverse regulatory action with respect to any Hospira product, operating procedure or manufacturing facility could materially harm Hospira’s reputation in the marketplace.

The manufacture of Hospira’s products is highly exacting and complex, and if Hospira or its suppliers encounter problems manufacturing, storing or distributing products, Hospira’s business could suffer.

The manufacture of Hospira’s products is highly exacting and complex, due in part to strict regulatory requirements governing the manufacture of drugs and medical devices. Problems may arise during manufacturing, storage or distribution of Hospira’s products for a variety of reasons, including equipment malfunction, failure to follow specific protocols and procedures, problems with raw materials and environmental factors. If problems arise during the production, storage or distribution of a batch of product, that batch of product may have to be discarded. This could, among other things, lead to increased costs, lost sales, damage to customer relations, time and expense spent investigating the cause and, depending on the cause, similar losses with respect to other batches or products. If problems are not discovered before the product is released to the market, recall and product liability costs may also be incurred. Problems with respect to the manufacture, storage or distribution of its products could materially disrupt Hospira’s business and harm its sales and profitability.

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Hospira is experiencing higher costs to produce its products as a result of rising oil and gas prices.

Hospira uses resins and other petroleum-based materials as raw materials in many of its products. Prices of oil and gas also affect significantly Hospira’s costs for freight and utilities. Oil and gas prices are volatile and fluctuated significantly in 2005 and 2006, and resulted in higher costs to Hospira to produce and distribute its products during certain periods. If costs increase and Hospira is unable to fully recover these costs through price increases or offset these increases through other cost reductions, Hospira could experience lower margins and profitability.

Hospira depends on third parties to supply raw materials and other components and may not be able to obtain sufficient quantities of these materials, which could limit Hospira’s ability to manufacture products on a timely basis and could harm its profitability.

The manufacture of Hospira’s products requires raw materials and other components that must meet stringent FDA and other regulatory requirements. Some of these raw materials and other components are currently available from a limited number of suppliers. For example, the LifeShield® CLAVE® and MicroCLAVE® connector products, which are components of administration sets that represented approximately 14% of Hospira’s 2006 sales, rely on proprietary components that are available exclusively from ICU Medical. CLAVE® and MicroCLAVE® are registered trademarks of ICU Medical. In addition, Hospira purchases from single sources certain compounding material, polyvinyl-chloride resin and laminate film components for Hospira’s production of certain flexible bags that it uses with its intravenous and pre-mixed solutions, as well as rubber components that it uses with some of its injectable pharmaceuticals. Hospira also obtains from single sources certain active pharmaceutical ingredients and finished products. Identifying alternative suppliers and obtaining approval to change or substitute a raw material or component, or the supplier of a finished product, raw material or component, can be time-consuming and expensive, as testing, validation and regulatory approval are necessary.

In the past, Hospira’s business has experienced shortages in some of the raw materials and components of its products. Continuous supply of petroleum-based products is especially risky due to the limited number of capable suppliers, limited production capacity and the effect of natural disasters. If suppliers are unable to deliver sufficient quantities of these materials on a timely basis or if supply is otherwise disrupted, including by suppliers exiting the market, the manufacture and sale of Hospira’s products may be disrupted, and its sales and profitability could be materially adversely affected.

Hospira’s cost-reduction activities have resulted in significant charges and cash expenditures. These activities may disrupt Hospira’s business and may not result in the intended cost savings.

Hospira’s strategy, in part, relies on the establishment of a low-cost operating infrastructure. In order to realize potential savings on future manufacturing and other operating costs, since 2005, Hospira has taken various actions to dispose of, or close, certain manufacturing facilities. These actions included the sale of its Salt Lake City manufacturing facility to ICU Medical and an agreement to purchase critical care products produced there from ICU Medical; the closure of its Donegal, Ireland facility; the planned closures of its Ashland, Ohio and Montreal, Canada manufacturing facilities; and the planned accelerated production phase-out at its North Chicago, Illinois manufacturing facility, which is leased from Abbott. These actions have resulted in, and are expected to continue to result in, significant charges to Hospira’s income and cash expenditures. Future cost reduction activities, if taken, may result in additional charges and cash expenditures, which may be material.

Hospira expects to relocate some of the production at the affected facilities to other Hospira facilities. Relocation of production to other facilities is a complex process requiring, among other things, re-registration of products and modification of the other facilities to accommodate the production. If Hospira does not successfully manage such relocation, its manufacturing operations and business could be

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disrupted and it may incur more costs than anticipated in connection with these activities. Manufacturing at other Hospira facilities, or outsourcing manufacturing to third parties, may not result in the cost savings that Hospira expects. If Hospira does not realize expected savings from its cost-reduction efforts, its profitability may be harmed.

Hospira’s manufacturing capacity could limit its ability to expand its business without significant capital investment.

Although Hospira believes that it has adequate manufacturing capacity for its primary products, it may need to invest substantial capital resources to expand its manufacturing capacity if demand for its products increases significantly or if it is successful in obtaining significant additional customers for its injectable pharmaceuticals contract manufacturing services business. Hospira may not be able to complete any such expansion projects in a timely manner or on a cost-effective basis, and may not realize the desired benefits of any such expansion.

As a result of cost-reduction efforts, Hospira has announced the planned closing of, or has sold, certain of its facilities. While Hospira believes it will have available manufacturing capacity to absorb, or the ability to outsource, the production at these facilities, there may be less available capacity at Hospira’s facilities. If Hospira experiences an interruption in manufacturing at any of its primary manufacturing facilities, it may not be able to produce sufficient products for its customers. As a result, Hospira’s sales, margins and profitability may be materially harmed.

Hospira relies on the performance of its information technology systems, the failure of which could have an adverse effect on Hospira’s business and performance.

Hospira operates in a highly regulated industry that requires the continued operation of sophisticated information technology systems and network infrastructure. These systems are vulnerable to interruption by fire, power loss, system malfunction and other such events, which are beyond Hospira’s control. Systems interruptions could reduce Hospira’s ability to manufacture its products, and could have a material adverse effect on Hospira’s operations and financial performance. Integration of Hospira’s systems with Mayne Pharma’s systems may increase the chance of systems interruptions. The level of Hospira’s protection and disaster-recovery capability varies from site to site, and there can be no guarantee that any such plans, to the extent they are in place, will be totally effective.

Hospira may continue to acquire other businesses, license rights to technologies or products from third parties, or form alliances, which may not be successful.

As part of Hospira’s business strategy, it may continue to pursue acquisitions of complementary businesses and technology licensing arrangements. Hospira also may pursue strategic alliances to expand its product offerings and geographic presence. Hospira may not identify or complete these transactions in a timely manner, on a cost-effective basis or at all, and may not realize the expected benefits of any acquisition, license arrangement or strategic alliance. Other companies, including those with substantially greater financial and sales and marketing resources, may compete with Hospira for these strategic opportunities. Further, if Hospira is successful in securing such opportunities, the products and technologies that Hospira acquires may not be successful or may require significantly greater resources and investments than originally anticipated. In addition, Hospira may enter markets in which it has no or limited prior experience.

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Hospira conducts sales activity outside of the United States and is subject to additional business risks that may cause its sales and profitability to decline.

Because Hospira’s products are sold outside the United States, its business is subject to risks associated with doing business internationally. In 2006, Hospira’s business derived $468.0 million, or 17% of its net sales, from sales of products outside of the United States. With the acquisition of Mayne Pharma, which derives a substantial majority of its revenues outside the United States, a significantly higher percentage of sales will be generated outside the United States in 2007 and beyond. Hospira may continue to pursue growth opportunities in sales of products outside the United States, which could expose Hospira to greater risks. The risks associated with Hospira’s operations outside the United States include:

·changes in medical reimbursement policies and programs;

·multiple regulatory requirements that are subject to change, which may delay or deter Hospira’s international product commercialization efforts;

·differing local product preferences and product requirements;

·fluctuations in foreign currency exchange rates;

·trade protection measures and import or export licensing requirements;

·difficulty in establishing, staffing and managing international operations;

·differing labor regulations;

·complying with U.S. regulations that apply to international operations, including trade laws, the Foreign Corrupt Practices Act and anti-boycott laws;

·potentially negative consequences from changes in tax laws;

·political and economic instability; and

·diminished protection of intellectual property in some countries outside of the United States.

Hospira operates through distributors in many countries outside the United States. Its success will depend on the efforts and performance of such distributors, which is beyond Hospira’s control. The acquisition of Mayne Pharma will increase the dependence of the international business on the performance of distributors. These risks could have a material adverse effect on Hospira’s ability to distribute and sell its products in markets outside the United States and on Hospira’s profitability.

Hospira is subject to healthcare fraud and abuse regulations that could result in significant liability and require Hospira to change its business practices and restrict its operations in the future.

Hospira’s industry is subject to various national, supranational, federal and state laws pertaining to healthcare fraud and abuse, including anti-kickback and false claims laws. Violations of these laws are punishable by criminal and/or civil sanctions, including, in some instances, substantial fines, imprisonment and exclusion from participation in national, federal and state healthcare programs, including Medicare, Medicaid, and Veterans’ Administration health programs and health programs outside the United States. These laws and regulations are broad in scope and are subject to evolving interpretations, which could require Hospira to alter one or more of its sales or marketing practices. In addition, violations of these laws, or allegations of such violations, could disrupt Hospira’s business and result in a material adverse effect on Hospira’s sales, profitability and financial condition.

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State and federal investigations and existing and future lawsuits relating to the alleged reporting of false or misleading pricing information in connection with Medicare and Medicaid programs could have a material adverse effect on Hospira’s business, profitability and financial condition.

Various state and federal agencies, including the U.S. Department of Justice and various state attorneys general, are investigating a number of pharmaceutical companies, including Abbott, for allegedly engaging in improper marketing and pricing practices with respect to certain Medicare- and Medicaid-reimbursable products, including practices relating to average wholesale price (“AWP”). These are civil investigations that are seeking to identify the practices and determine whether those practices violated any laws, including federal and state false claims acts, or constituted fraud in connection with the Medicare and/or Medicaid reimbursement paid to third parties. In addition, Abbott is a defendant in a number of purported class actions on behalf of individuals or entities, including healthcare insurers and other third-party payors, that allege generally that Abbott and numerous other pharmaceutical companies reported false or misleading pricing information in connection with federal, state and private reimbursement for certain drugs. Since the spin-off, Hospira has been named as a defendant in some of these suits, as further described in “Item 3. Legal Proceedings—Marketing and Pricing Cases.” Hospira’s products are involved in these investigations and lawsuits. There may be additional investigations or lawsuits, or additional claims in existing investigations or lawsuits, initiated with respect to these matters in the future. Hospira may be named as a subject or defendant in more of these investigations or lawsuits. Abbott will indemnify Hospira for liabilities associated with pending or future AWP investigations and lawsuits only to the extent that they are of the same nature as the lawsuits and investigations that existed against Abbott as of the spin-off date and relate to the sale of Hospira products prior to the spin-off. Hospira will assume any other losses that may result from these investigations and lawsuits related to Hospira’s products. Hospira has not established any reserves related to these matters, and Hospira does not currently believe insurance coverage will be available for any resulting losses.

These investigations and lawsuits could result in changes to Hospira’s business practices or pricing policies, civil or criminal monetary damages, penalties or fines, imprisonment and/or exclusion of Hospira’s products from participation in federal and state healthcare programs, including Medicare, Medicaid and Veterans’ Administration health programs, any of which could have a material adverse effect on Hospira’s business, profitability and financial condition.

Income taxes can have an unpredictable effect on Hospira’s results of operations and result in greater- than-anticipated liabilities.

Hospira is subject to income taxes in a variety of jurisdictions, and its tax structure is subject to review by both domestic and foreign taxation authorities. Because Hospira’s income tax expense for any period depends heavily on the mix of income derived from the various taxing jurisdictions during that period, which is inherently uncertain, its income tax expense and reported net income may fluctuate significantly, and may be materially different than forecasted.

Hospira is the beneficiary of tax exemptions in certain jurisdictions outside the United States, where a portion of its income is sourced. These tax exemptions have a significant impact on reducing Hospira’s overall effective tax rate. If Hospira is unable to maintain these tax exemptions, Hospira’s future profitability may be reduced. Changes in laws or governmental policies can affect the availability of these exemptions.

Significant judgment is required in determining the provision for income taxes and in evaluating tax positions that are subject to audits and adjustments. Reserves are established when, despite Hospira’s belief that the tax return positions are fully supportable, positions taken by Hospira are likely to be challenged based on the applicable tax authority’s determination of the positions. Although Hospira believes its tax provisions and reserves are reasonable, the ultimate tax outcome may differ from the

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amounts recorded in its financial statements and may materially affect its financial results in the period or periods for which such determination is made.

Hospira may incur product liability losses and insurance coverage could be inadequate or unavailable to cover these losses.

Hospira’s business is subject to potential product liability risks that are inherent in the design, development, manufacture and marketing of drugs and medical devices and products. In the ordinary course of business, Hospira is the subject of product liability claims and lawsuits alleging that its products have resulted or could result in an unsafe condition or injury to patients. Product liability claims and lawsuits, safety alerts or product recalls, regardless of their ultimate outcome, could have a material adverse effect on Hospira’s business and reputation and on its ability to attract and retain customers.

Hospira is responsible for all liabilities, including liabilities for claims and lawsuits, related to its business, whether they arose before or after the spin-off, other than certain liabilities relating to allegations that it engaged in improper marketing and pricing practices in connection with federal, state or private reimbursement for its products. As part of Hospira’s risk management policy, Hospira carries third-party product liability insurance coverage, which includes a substantial retention or deductible that provides that Hospira will not receive insurance proceeds until the losses incurred exceed the amount of that retention or deductible. To the extent that any losses are within these retentions or deductibles, Hospira will be responsible for the administration and payment of these losses. Product liability claims in excess of applicable insurance could have a material adverse effect on Hospira’s profitability and financial condition.

If Hospira is unable to protect its intellectual property rights, its business and prospects could be harmed.

Hospira relies on trade secrets, confidentiality agreements, continuing technological innovation and, in some cases, patent, trademark and service mark protection to preserve its competitive position. A failure to protect Hospira’s intellectual property could harm its business and prospects, and its efforts to protect its proprietary rights may not be adequate.

Most of Hospira’s products are not protected by patents or other proprietary rights, and have limited or no market exclusivity. Patent filings by third parties could render Hospira’s intellectual property less valuable. In addition, intellectual property rights may be unavailable or limited in certain countries outside the United States, which could make it easier for competitors to capture market position. Competitors may also harm sales of Hospira’s products by designing products that mirror the capabilities of those products or technology without infringing Hospira’s intellectual property rights. If Hospira does not obtain sufficient international protection for its intellectual property, Hospira’s competitiveness in international markets could be impaired, which could limit its growth and future sales.

If Hospira infringes the intellectual property rights of third parties, Hospira may face legal action, increased costs and delays in marketing new products.

Hospira seeks to launch generic pharmaceutical products either where patent protection of equivalent branded products has expired, where patents have been declared invalid or where products do not infringe the patents of others. To achieve a “first-to-market” position for generic pharmaceutical products, Hospira may take action, such as litigation, to seek to assert that its products do not infringe patents of existing products or that those patents are invalid or unenforceable. These actions may result in increased litigation, which could be costly and time consuming, and which may not be successful. Hospira and Mayne Pharma have made abbreviated new drug applications and certifications (known as “paragraph IV certifications”) that the relevant patents for existing products would not be infringed by a Hospira or Mayne Pharma product, or were invalid or enforceable, in the United States and equivalent filings in Canada. Claims filed by innovators challenging these paragraph IV certifications may delay or prevent the launch of the relevant products and result in additional costs.

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Third parties may claim that Hospira’s products are infringing their intellectual property rights. Claims of intellectual property infringement could be costly and time-consuming and might require Hospira to enter into costly royalty or license agreements, if Hospira is able to obtain royalty or license agreements on acceptable terms or at all. Hospira also may be subject to significant damages or an injunction preventing it from manufacturing, selling or using some of its products in the event of a successful claim of patent or other intellectual property infringement. Any of these adverse consequences could have a material adverse effect on Hospira’s profitability and financial condition.

Hospira has outstanding stock options, which may dilute the ownership of its existing shareholders.

As of December 31, 2006, Hospira had approximately 13.6 million outstanding stock options and the ability to award approximately 10.0 million additional share-based awards under its equity compensation plan. As of December 31, 2006, Hospira’s outstanding option awards had a weighted average exercise price of $32.52, which was below the market price of Hospira’s stock at that time. Exercises of stock options at a price below the market price of Hospira’s stock will dilute the ownership interest of existing shareholders.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

The locations and uses of Hospira’s principal manufacturing, administrative, and research and development properties as of December 31, 2006 are as follows:

Location	Use	Owned/Leased
Adelaide, South Australia, Australia	Manufacturing/Research and Development	Owned
Ashland, OH	Manufacturing	Owned
Austin, TX	Manufacturing	Owned
Buffalo, NY	Manufacturing	Owned
Clayton, NC	Manufacturing	Owned
Finisklin, Sligo, Ireland	Manufacturing	Leased
La Aurora, Costa Rica	Manufacturing	Owned
Lake Forest, IL	Corporate Headquarters	Owned
Lake Forest, IL	Administration	Leased
Lake Forest, IL	Research and Development	Owned
Liscate, Italy	Manufacturing	Owned
McPherson, KS	Manufacturing	Owned
Montreal, Quebec Canada	Manufacturing	Leased
Morgan Hill, CA	Manufacturing	Owned
North Chicago, IL	Manufacturing	Leased
Rocky Mount, NC	Manufacturing	Owned
San Cristobal, Dominican Republic	Manufacturing	Owned

The North Chicago, Illinois lease between Abbott and Hospira expires in 2014; the Montreal, Canada lease expires in 2008; the Lake Forest, Illinois lease expires in 2016; and the Finisklin, Sligo, Ireland lease expires in 2013.

Hospira closed its Donegal, Ireland facility in late 2006. Hospira expects to close the Ashland facility later in 2007 and the Montreal facility by the first half of 2008. Hospira expects to phase out production at the North Chicago facility on an accelerated time frame, with most of the phase-out occurring by early 2010. Production of the primary products at these facilities is expected to move to other Hospira facilities

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and/or be outsourced to third-party suppliers. In 2006, Hospira began a $60 million expansion of manufacturing capacity at the McPherson facility, in part to accommodate some of the production from the North Chicago facility.

Hospira believes that its facilities and equipment are in good operating condition and are well maintained. Hospira believes that it has adequate capacity to meet its current business needs.

The locations of Mayne Pharma’s principal manufacturing facilities as of December 31, 2006 are as follows:

Location	Owned/Leased
Aguadilla, Puerto Rico	Leased
Boulder, Colorado	Owned
Mulgrave, Victoria, Australia	Owned
Salisbury, South Australia, Australia	Owned
Wasserburg, Germany	Owned

Mayne Pharma has a joint venture with Zydus Cadila, an Indian pharmaceutical company, which is constructing a manufacturing facility in India to produce injectable drugs and process active pharmaceutical ingredients.

Item 3. Legal Proceedings

In addition to the litigation described below, additional legal proceedings may occur that may result in a change in estimated reserves recorded by Hospira. It is not possible to predict the outcome of legal proceedings with certainty and their ultimate disposition may have a material adverse effect on Hospira’s financial position, cash flows, or results of operations.

Marketing and Pricing Cases

Various state and federal agencies, including the U.S. Department of Justice and various state attorneys general, are investigating a number of pharmaceutical companies, including Abbott, for allegedly engaging in improper marketing and pricing practices with respect to certain Medicare- and Medicaid-reimbursable products, including practices relating to average wholesale price (“AWP”). These are civil investigations that are seeking to identify the practices and determine whether those practices violated any laws, including federal and state false claims acts, or constituted fraud in connection with the Medicare and/or Medicaid reimbursement paid to third parties. In addition, Abbott is a defendant in a number of purported class actions on behalf of individuals or entities, including healthcare insurers and other third-party payors, that allege generally that Abbott and numerous other pharmaceutical companies reported false or misleading pricing information in connection with federal, state and private reimbursement for certain drugs. Many of the products involved in these investigations and lawsuits are Hospira products. Hospira is cooperating with the authorities in these investigations. There may be additional investigations or lawsuits, or additional claims in the existing investigations or lawsuits, initiated with respect to these matters in the future. Hospira cannot be certain that it will not be named as a subject or defendant in these investigations or lawsuits. Hospira is a named defendant in two such lawsuits: The State of Texas ex rel. Ven-A-Care of the Florida Keys, Inc. v. Abbott Laboratories Inc., Hospira, Inc., B. Braun Medical Inc. and Baxter Healthcare Corporation, Case No. GV401286, pending in the District Court of Travis County, Texas and State of Hawaii v. Abbott Laboratories, Inc., et al.,Case No. 06-1-0720-04, pending in the Circuit Court of the First Circuit, Hawaii. Hospira has been dismissed as a defendant in the case, United States of America ex rel. Ven-A-Care of the Florida Keys, Inc. v. Abbott Laboratories, Inc., et al Case No. 95-1354, pending in the United States District Court for the Southern District of Florida. Abbott will indemnify Hospira for liabilities associated with pending or future AWP investigations and lawsuits only to the extent that they are of the same nature as the lawsuits and investigations that existed against Abbott as of the spin-off date

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and relate to the sale of Hospira products prior to the spin-off. Hospira will assume any other losses that may result from these investigations and lawsuits related to Hospira’s products, including any losses associated with post-spin-off activities. These investigations and lawsuits could result in changes to Hospira’s business practices or pricing policies, civil or criminal monetary damages, penalties or fines, imprisonment and/or exclusion of Hospira products from participation in federal and state healthcare programs, including Medicare, Medicaid and Veterans’ Administration health programs, any of which could have a material adverse effect on its business, profitability and financial condition.

ERISA Litigation

Hospira has been named as a defendant in a lawsuit alleging generally that the spin-off of Hospira from Abbott Laboratories interfered with employee benefits in violation of the Employee Retirement Security Act of 1974 (“ERISA”). The lawsuit was filed on November 8, 2004 in the United States District Court for the Northern District of Illinois, and is captioned:  Myla Nauman, Jane Roller and Michael Loughery v. Abbott Laboratories and Hospira, Inc. On November 18, 2005, the complaint was amended to assert an additional claim against Abbott and Hospira for breach of fiduciary duty under ERISA. Hospira has been dismissed as a defendant with respect to the new fiduciary duty claim. By Order dated December 30, 2005, the Court granted class action status to the lawsuit. The new claim in the amended complaint is not subject to the class certification ruling. As to the sole claim against Hospira in the original complaint, the court certified a class defined as:  “all employees of Abbott who were participants in the Abbott Benefit Plans and whose employment with Abbott was terminated between August 22, 2003 and April 30, 2004, as a result of the spin-off of the HPD/creation of Hospira announced by Abbott on August 22, 2003, and who were eligible for retirement under the Abbott Benefit Plans on the date of their terminations.”  Hospira denies all material allegations asserted against it in the complaint.

Retractable Technologies

On August 12, 2005, Retractable Technologies, Inc. (“RTI”) filed a lawsuit against Abbott Laboratories, Inc. alleging breach of contract and fraud in connection with a National Marketing and Distribution Agreement (“Agreement”) between Abbott and RTI signed in May 2000. Retractable Technologies, Inc. v. Abbott Laboratories, Inc., Case No. 505CV157, pending in U.S. District Court for the Eastern District of Texas. RTI purported to terminate the contract for breach in 2003. The lawsuit alleges that Abbott misled RTI and breached the Agreement in connection with Abbott’s marketing efforts. RTI seeks unspecified monetary damages as well as punitive damages. Hospira has conditionally agreed to defend and indemnify Abbott in connection with this lawsuit, which involves a contract carried out by Abbott’s former Hospital Products Division. Abbott denies all material allegations in the complaint. Additionally, Abbott maintains that the dispute must be resolved by arbitration, in accordance with the terms of the Agreement. Abbott intends to pursue claims against RTI for breach of the Agreement in arbitration or in federal court. Hospira is entitled, pursuant to its agreements with Abbott, to any amounts recovered due to RTI’s breach of the Agreement.

Item 4. Submission of Matters to a Vote of Security Holders

None.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market for Common Stock

Hospira’s common stock is listed and traded on the New York Stock Exchange under the symbol “HSP.” The following table sets forth the high and low closing prices for Hospira’s common stock on the New York Stock Exchange for each period indicated.

	Market Price Per Share
	2006				2005
For the quarter ended:	High		Low		High		Low
March 31	$	47.63	$	39.10	$	33.08	$	28.45
June 30	45.13		36.94		39.61		31.92
September 30	43.88		34.35		41.52		37.35
December 31	38.64		31.17		44.88		38.01

As of December 31, 2006, Hospira had approximately 43,600 shareholders of record. Hospira has not paid dividends on its common stock.

Equity Compensation Plan Information

The following table gives information, as of December 31, 2006, about Hospira’s common stock that may be issued upon the exercise of options and other equity awards under the Hospira 2004 Long-Term Stock Incentive Plan, which is the only equity compensation plan pursuant to which Hospira’s equity securities are authorized for issuance.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (#)		Weighted-average exercise price of outstanding options, warrants and rights ($)			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)(#)
Equity compensation plans approved by security holders		13,569,466		$	32.52		9,967,489
Equity compensation plans not approved by security holders		—		—			—
Total		13,569,466		$	32.52		9,967,489

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Issuer Purchases of Equity Securities

The following table gives information on a monthly basis regarding purchases made by Hospira of its common stock during the fourth quarter of 2006.

Period	Total Number of Shares Purchased(1)		Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs(2)
October 1 - October 31, 2006		12,179		$	37.63		—		$	100,233,606
November 1 - November 30, 2006		5,629		$	35.01		—		$	100,233,606
December 1 - December 31, 2006		17,774		$	33.37		—		$	100,233,606
Total		35,582		$	35.09		—		$	100,233,606

(1)These shares represent the shares deemed surrendered to Hospira to pay the exercise price and satisfy tax- withholding obligations in connection with the exercise of employee stock options.

(2)In February 2006, Hospira’s board of directors authorized the repurchase of up to $400 million of Hospira’s common stock in accordance with Rule 10b-18 under the Securities Exchange Act of 1934. The repurchase of shares commenced in early March 2006. As of December 31, 2006, Hospira purchased 7,584,400 shares for $299.8 million. Because Hospira must dedicate a substantial portion of its cash to servicing debt and integrating Mayne Pharma into its operations, Hospira does not expect to continue repurchasing shares for the foreseeable future.

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Performance Graph

The following graph compares the performance of Hospira common stock for the periods indicated with the performance of the S&P 500 Stock Index and the S&P Health Care Index.

Comparison of Cumulative Total Return

Assumes $100 was invested on May 3, 2004 (the first date Hospira common stock was traded on the New York Stock Exchange) in Hospira common stock and each index. Values are as of the close of the U.S. stock markets on December 31, 2004, 2005 and 2006, and assume dividends are reinvested. No cash dividends have been declared or paid on Hospira common stock. Returns over the indicated period may not be indicative of future returns.

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Item 6. Selected Financial Data

The following table sets forth Hospira’s selected financial information derived from its audited consolidated financial statements as of, and for the years ended, December 31, 2006, 2005, 2004, 2003 and 2002.

For all periods prior to April 30, 2004, the date of Hospira’s spin-off from Abbott, Hospira operated as a part of Abbott. Hospira’s consolidated financial statements for the year ended December 31, 2004, reflect Hospira’s operations as a separate, stand-alone entity subsequent to the spin-off combined with the historical operations of Hospira when it operated as part of Abbott prior to the spin-off. The historical financial information presented is not indicative of the results of operations or financial position that would have been obtained if Hospira had been an independent company during all periods shown or of future performance as an independent company.

The selected financial information should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Hospira’s audited financial statements included in Item 8.

	For the Years Ended December 31,
	2006		2005		2004		2003		2002
(in thousands, except per share amounts)
Statements of Income Data:
Net sales	$	2,688,505	$	2,626,696	$	2,645,036	$	2,623,737	$	2,602,550
Gross profit	939,243		849,056		786,601		701,051		719,373
Income from operations(1)	339,584		336,615		427,650		360,375		378,197
Income before taxes(1)	324,697		322,075		411,520		359,121		352,426
Net income	$	237,679	$	235,638	$	301,552	$	260,363	$	246,698
Earnings per common share:
Basic	$	1.51	$	1.48	$	1.93	$	1.67	$	1.58
Diluted	$	1.48	$	1.46	$	1.92	$	1.67	$	1.58
Weighted average common shares outstanding (in thousands):
Basic(2)	157,368		159,275		156,187		156,043		156,043
Diluted(2)	160,424		161,634		157,160		156,043		156,043

(1)Includes post-retirement medical and dental curtailment benefit of $64.6 million in 2004.

(2)For periods prior to April 30, 2004, basic and diluted earnings per share are computed using the number of shares of Hospira common stock outstanding on April 30, 2004, the date on which the Hospira common stock was distributed to the shareholders of Abbott in connection with the spin-off.

	December 31,
	2006			2005		2004		2003		2002
(in thousands)
Balance Sheet Data:
Total assets		$	2,847,587	$	2,789,182	$	2,342,790	$	2,250,163	$	2,153,854
Long-term debt		$	702,044	$	695,285	$	698,841	$	—	$	—

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Hospira is a global specialty pharmaceutical and medication delivery company that is focused on products that improve the productivity, safety and efficacy of patient care. Hospira is a leader in the development, manufacture and marketing of specialty injectable pharmaceuticals and medication delivery systems that deliver drugs and intravenous (I.V.) fluids. Hospira is also a leading provider of contract manufacturing services to pharmaceutical and biotechnology companies for formulation development, filling and finishing of injectable pharmaceuticals. Hospira’s broad portfolio of products is used by hospitals and alternate site providers, such as clinics, home healthcare providers and long-term care facilities.

Transition from Abbott

Hospira became a separate public company on April 30, 2004, when it was spun off from Abbott. References to the historical assets, liabilities, products, businesses or activities of Hospira prior to the spin-off are generally intended to refer to the historical assets, liabilities, products, businesses or activities of Hospira’s business as it was conducted as part of Abbott prior to the spin-off. Hospira’s consolidated financial statements for the year ended December 31, 2004 reflect Hospira’s operations as a separate, stand-alone entity subsequent to the spin-off, combined with the historical operations of Hospira when it operated as part of Abbott prior to the spin-off. The financial information in the financial statements included in this annual report does not include all the expenses that would have been incurred, nor does it reflect Hospira’s results of operations, financial position and cash flows, had Hospira been a stand-alone company for all of 2004.

The two-year period after the spin-off was a transition period during which Hospira built its own corporate and international infrastructure and completed its separation from Abbott. From 2004 to 2006, Hospira incurred increased expenses year over year as a result of establishing and operating independent corporate functions; operating, maintaining and supporting information technology systems; and operating internationally on a stand-alone basis. From 2004 to 2006, Hospira also incurred expenses on a non-recurring, transitional basis as a result of the spin-off, including expenses relating to the establishment of new facilities, the build-out of independent information technology systems, and product registration and re-labeling. Hospira incurred $32.4 million of these costs in 2004, $46.0 million in 2005 and $35.0 million in 2006. Hospira does not expect to incur these non-recurring, transitional expenses in future periods.

Under the terms of the spin-off, the legal title to certain assets and operations relating to Hospira’s business outside the United States were transferred from Abbott over the two-year period after the spin-off. These transfers were completed during 2006.  Hospira paid $116.7 million in 2005 and $126.2 million in 2006 to acquire these assets. These transfers were completed during 2006, and Hospira has no further related obligations to Abbott going forward.

Hospira and Abbott entered into various manufacture and supply agreements prior to the spin-off under which Hospira supplied certain products to Abbott that it manufactured prior to the spin-off. These agreements had an initial two-year term (originally scheduled to expire in April 2006), subject to being extended by Abbott for an additional two-year term under substantially similar contractual provisions. Some of these agreements terminated in 2006, resulting in lower sales to Abbott during 2006. Sales to Abbott are expected to continue to decline in 2007.

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Cost-Reduction Activities

As part of its strategy to improve margins and cash flows, beginning in 2005, Hospira has taken a number of actions to reduce operating costs and optimize its manufacturing capabilities and capacity. Expenditures relating to these activities are not included in the transition activities discussed above.

In May 2005, to reduce its costs to produce critical care products, Hospira completed a strategic manufacturing, commercialization and development agreement with ICU Medical and sold its Salt Lake City manufacturing facility and related equipment and inventory to ICU Medical. In connection with these transactions, during 2005, Hospira recorded an impairment charge of $2.4 million and a loss of $13.4 million, which was Hospira’s best estimate of the cost of certain obligations that Hospira was required to reimburse to ICU Medical over the 24-month period after closing. Both the impairment and the loss related to obligations assumed were recorded in cost of products sold. During 2006, Hospira reduced its liability by $6.8 million due to a change in ICU Medical’s strategy for the manufacturing facility that reduced Hospira’s related obligation. For further details regarding the financial impact of these transactions, see Note 2 to the consolidated financial statements included in Item 8.

In August 2005, Hospira announced plans to close its medical device manufacturing plant in Donegal, Ireland. Hospira closed the facility late in 2006. Products produced at the Donegal plant have been moved to Hospira facilities primarily in Costa Rica and the Dominican Republic. At the time of the announcement, Hospira expected to incur $30 million to $40 million of pre-tax charges relating to the plant closure. During 2005 and 2006, Hospira incurred $8.5 million and $21.9 million of these charges, respectively, which are reported in cost of products sold. The costs consist primarily of severance and other employee benefit costs, additional depreciation resulting from the decreased useful lives of the building and certain equipment, and other exit costs. Hospira expects to generate cost savings relating to this activity beginning in 2007. For further details regarding the financial impact of this plant closure, see Note 4 to the consolidated financial statements included in Item 8.

In February 2006, Hospira announced plans to close its plants in Ashland, Ohio and Montreal, Canada over the subsequent 18 to 28 months, respectively, and also provided a timeline for phasing out production at a facility in Abbott Laboratories’ North Chicago, Illinois campus, where it has leased space from its former parent company since the spin-off in April 2004. Hospira intends to transition out of this facility in advance of the lease’s expiration in 2014, with a majority of the product transfers occurring over the four years following the announcement. Hospira will transfer production of the primary products from these facilities to other Hospira facilities and will outsource certain product components to third-party suppliers. The aggregate charges that Hospira will incur related to the plant closings are expected to be in the range of approximately $95 million to $110 million on a pre-tax basis, of which approximately $45 million to $55 million are expected to be reported as restructuring charges. The restructuring costs consist primarily of costs related to severance and other employee benefit costs, additional depreciation resulting from the decreased useful lives of the buildings and certain equipment, and other exit costs. The remaining charges relate to the relocation of production. During 2006, Hospira incurred $21.7 million of restructuring charges, which are recorded in cost of products sold. For further details regarding the financial impact of this plant closure, see Note 4 to the consolidated financial statements included in Item 8.

These cost-reduction activities involve risks and uncertainties as relocating or outsourcing production is a complex process. Hospira may incur more charges than estimated and may not realize the expected cost savings on its planned time frame or at all. See “Item 1A. Risk Factors--Risks Relating to Hospira’s Business and Industry—Hospira’s cost-reduction activities have resulted in significant charges. These activities may disrupt Hospira’s business and may not result in the intended cost savings.”

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Acquisition of Mayne Pharma Limited

On February 2, 2007, Hospira acquired Mayne Pharma Limited (“Mayne Pharma”), an Australia-based specialty injectable pharmaceutical company listed on the Australian Stock Exchange, for approximately $2.0 billion in cash. As Mayne Pharma has strong market positions in Europe and Australia and a significant commercial infrastructure outside the United States, the acquisition is expected to substantially increase Hospira’s international presence. The acquisition is also expected to broaden Hospira’s specialty injectable pharmaceuticals product line.

The results of operations of Mayne Pharma will be included in Hospira’s results for periods on and after February 2, 2007.  In connection with the closing of the acquisition, in 2007, Hospira will incur non-cash charges relating to purchase accounting, including a write-off of in-process research and development and a write-up of inventory. Hospira will also record intangible assets which will be amortized over their useful lives. For the two-year period following the closing, Hospira expects to incur approximately $95 million to $110 million of costs relating to the integration of Mayne Pharma, the substantial majority of which will be in cash.

Hospira borrowed approximately $1.9 billion under a one-year bridge loan facility and a three-year term loan facility, and used approximately $120 million of cash on hand, to finance the acquisition, and as of the closing, had approximately $2.6 billion of total debt. Hospira expects to refinance the borrowings under the bridge loan through the sale of long-term debt securities during 2007. On an ongoing basis, Hospira will incur significantly greater interest expense than it incurred in prior periods, and will be required to dedicate a substantial portion of its cash flow to servicing its debt. Please refer to “Liquidity and Capital Resources—Debt and Capital” later in this Item 7 for further details.

The acquisition of Mayne Pharma is subject to various risks and uncertainties, including risks relating to the integration of Mayne Pharma and risks relating to our incurring substantial indebtedness in connection with the acquisition and the need to refinance the indebtedness. Please see “Item 1A. Risk Factors—Risks Relating to the Mayne Pharma Acquisition and Related Transactions.”

Other Factors

Manufacturing and Quality.   Hospira’s ability to manufacture and sell high-quality, low-cost products in compliance with regulatory requirements is an important factor to the success of its business. Hospira must comply with regulations governing the design, manufacture, marketing and sale of its products, including requirements relating to quality control and quality assurance, and must incur expense, time and effort to ensure compliance with the complex regulations. Hospira must also maintain continuity of supply of raw materials that comply with applicable regulatory requirements. Its business is subject to risks of manufacturing and supply interruptions, and product quality issues, which can lead to product recalls or field actions. Hospira did not experience significant manufacturing or raw material supply interruptions during the periods presented in this report.

Hospira has recalled, and/or conducted field alerts relating to, certain of its products from time to time. While these activities can lead to costs to repair or replace affected products and temporary interruptions in product sales, and can impact reported results of operations in the applicable period, Hospira does not believe that these activities had a material adverse effect on its business or results of operations during the periods presented in this report.

Product Development.   Hospira views investment in research and development as an important driver of sales growth over the longer term. To successfully execute its product development strategy, Hospira must continue to develop cost-competitive products and enhancements that satisfy customer needs, introduce products on a timely basis and successfully market those products. As a part of this strategy, Hospira will also need to identify, and successfully manage, strategic alliances and collaborative arrangements.

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Hospira believes that the ability to grow sales in the specialty injectable pharmaceutical product line will be driven primarily by its ability to launch new generic drug products on a timely basis. Generally, the price and sales volume of a generic drug tend to decline as more competitors enter the market for that particular drug. However, new product launches can offset declines from other portfolio products and generate growth. If a company can be “first to market,” such that the branded drug is the only other competition for a period of time, higher levels of sales and profitability can be achieved. Timely, efficient research and development capabilities and expertise in legal and regulatory matters will be required to be successful in executing a “first to market” strategy. Over the longer term, Hospira views biosimilar products as an important opportunity. In 2006, Hospira invested in biosimilar product development through its collaboration with STADA, under which it made a $21.7 million upfront payment, and its $17.1 million acquisition of BresaGen Limited.

A key component to the product development strategy for medication management systems has been the development and offering of newer-technology drug delivery pumps and related products and services. Hospira expects to achieve sales growth in part due to increased sales of these newer technology products. Hospira believes that the features and functionality offered by these products position it to achieve such growth over the long-term. As a result, Hospira is aggressively competing to upgrade its current customer base as well as to capture competitive business. Because of changes in technology, it may take more time and effort to sell and implement newer-technology products to its customers. Hospira also expects intense competition for existing and potential customers from other competitors. The timing and amount of purchases made by customers cannot be predicted with certainty.

Hospira’s ability to execute on its product development efforts is subject to various risks and uncertainties described in “Item 1A. Risk Factors,” including the ability to timely launch new products and enhancements, the ability to successfully manage collaborative arrangements, actions of competitors and acceptance by customers.

Contract Manufacturing.   Hospira’s contract manufacturing product line has received lower forecasted 2007 volumes from existing customers. In addition, certain drugs being manufactured by Hospira under contract have lost patent protection, which results in lower demand for Hospira’s contract manufacturing services. These factors are expected to negatively impact Hospira’s contract manufacturing product line sales by approximately $50 million. Hospira expects to offset a small portion of this loss through new contracts or volume under other contracts, and expects substantially lower contract manufacturing sales during 2007.

GPO Contracts.   The ability to maintain GPO contracts is an important factor for Hospira to generate sales. Approximately 50% of Hospira’s net sales are made through these contracts. Typically, these contracts cover a portion of Hospira’s product lines, specify the prices for Hospira’s products, and are effective for three to five years. Generally, the contracts are extended or competitively bid prior to contract expiration. In any year, a portion of the various contracts Hospira has with GPO’s expire. While Hospira expects to maintain its business with the GPO’s and has been able to maintain its base business under its GPO contracts during the periods covered by this report, if Hospira is unable to renew or renegotiate any significant GPO contracts in the future, its ability to sell products and its profitability may be harmed.

Share Repurchase.   In February 2006, Hospira’s board of directors approved a $400 million share repurchase program. As of December 31, 2006, Hospira purchased 7,584,400 shares for $299.8 million. Because Hospira must dedicate a substantial portion of its cash to servicing debt and integrating Mayne Pharma into its operations, Hospira does not expect to continue repurchasing shares for the foreseeable future.

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Critical Accounting Policies

Critical accounting policies are those policies that require management to make the most difficult, subjective or complex judgments, often because they must estimate the effects of matters that are inherently uncertain and may change in subsequent periods. Critical accounting policies involve judgments and uncertainties that are sufficiently sensitive to result in materially different results under different assumptions and conditions. Hospira believes its most critical accounting policies are those described below. For a detailed discussion of these and other accounting policies, see Note 1 to the consolidated financial statements.

Revenue Recognition—Hospira recognizes revenues from product sales when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed and determinable, and collectibility is reasonably assured. For other than certain drug delivery pumps and injectable pharmaceutical contract manufacturing, product revenue is recognized when products are delivered to customers and title passes. In certain circumstances, Hospira enters into arrangements in which it provides multiple elements to its customers. In these cases, total revenue is divided among the separate units of accounting (deliverables) based on their relative fair value and is recognized for each deliverable in accordance with the applicable revenue recognition criteria. The recognition of revenue is delayed if there are significant post-delivery obligations, such as installation or customer acceptance.

For drug delivery pumps, revenue is typically derived under one of three types of arrangements: outright sales of the drug delivery pump; placements under lease arrangements; and placements under contracts that include associated disposable set purchases. For lease agreements under which Hospira’s warranty obligation extends through the entire term are accounted for as operating leases. For these, Hospira recognizes revenue over the lease term, which averages five years. For leases under which Hospira’s warranty obligation is limited to approximately one year, Hospira accounts for these as sales-type leases, under which the discounted sales value of the drug delivery pump is recorded as revenue upon placement with the customer. Hospira has contractual arrangements with certain customers whereby it places drug delivery pumps at customer sites, and the customers agree to purchase minimum levels of disposable products (sets) that are used with the pumps. These arrangements do not include any upfront fees or payments. The contractual arrangements generally set forth fixed prices for the purchases of the disposable products, where the prices for the disposables do not change over the term of the arrangement, other than, in some cases, for changes in Consumer Price Index provisions. Title for the pumps is retained by Hospira throughout these arrangements, and the related asset is depreciated over its estimated useful life on a straight-line basis.  In these placement arrangements, revenue is recognized as the disposable products are delivered, in accordance with SFAS No. 48, “Revenue Recognition when Right of Return Exists,” and SAB No. 104, “Revenue Recognition.”

Hospira markets a server-based suite of software applications designed to connect data from a hospital’s drug information library to drug delivery pumps throughout the hospital. The arrangements related to such applications typically include a perpetual software license, software maintenance and implementation services. Hospira recognizes revenue related to these arrangements in accordance with the provisions of Statement of Position (SOP) 97-2, “Software Revenue Recognition,” as amended. Software license revenue and implementation service revenue are generally recognized upon completion of related obligations or customer acceptance and software maintenance revenue is recognized ratably over the contract period.

Injectable pharmaceutical contract manufacturing involves filling customers’ active pharmaceutical ingredients (“API”) into delivery systems. Under these arrangements, customers’ API is often consigned to Hospira and revenue is recorded for the materials and labor provided by Hospira, plus a profit, upon shipment to the customer.

Upon recognizing revenue from a sale, Hospira records an estimate for certain items that reduce gross sales in arriving at its reported net sales for each period. These items include chargebacks, rebates and

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other items (such as cash discounts and returns). Provisions for chargebacks and rebates represent the most significant and complex of these estimates.

Chargebacks—Hospira sells a significant portion of its specialty injectable pharmaceutical products through wholesalers, which maintain inventories of Hospira products and later sell those products to end customers. In connection with its sales and marketing efforts, Hospira negotiates prices with end customers for certain products under pricing agreements (including, for example, group purchasing organization contracts). Consistent with industry practice, the negotiated end customer prices are typically lower than the prices charged to the wholesalers.

When an end customer purchases a Hospira product that is covered by a pricing agreement from a wholesaler, the end customer pays the wholesaler the price determined under the pricing agreement. The wholesaler is then entitled to charge Hospira back for the difference between the price the wholesaler paid Hospira and the contract price paid by the end customer (a “chargeback”). This process is necessary to enable Hospira to track actual sales to the end customer, which is essential information to run the business effectively. Settlement of chargebacks generally occurs between 30 and 40 days after the sale to wholesalers.

To account for the chargeback, Hospira records the initial sale to a wholesaler at the price invoiced to the wholesaler and at the same time, records a provision equal to the estimated amount the wholesaler will later charge back to Hospira, reducing gross sales and trade receivables. This provision must be estimated because the actual end customer and applicable pricing terms may vary at the time of the sale to the wholesaler. Accordingly, the most significant estimates inherent in the initial chargeback provision relate to the volume of sales to the wholesalers that will be subject to chargeback and the ultimate end customer contract price. These estimates are based primarily on an analysis of Hospira’s product sales and most recent historical average chargeback credits by product, estimated wholesaler inventory levels, current contract pricing, anticipated future contract pricing changes and claims processing lag time. Hospira estimates the levels of inventory at the wholesalers through analysis of wholesaler purchases and inventory data obtained directly from certain of the wholesalers. A one percent decrease in end customer contract prices for sales pending chargeback at December 31, 2006 would decrease net sales and income before income taxes by $1.3 million. A one percent increase in wholesale units sold subject to chargebacks at December 31, 2006 would decrease net sales and income before income taxes by $1.4 million.

Hospira regularly monitors the provision for chargebacks and makes adjustments when it believes the actual chargebacks may differ from estimates. At December 31, 2006 and 2005, chargebacks of $42.9 million and $64.2 million, respectively, were recorded as a reduction in trade receivables. The methodology used to estimate and provide for chargebacks was consistent across all periods presented.

Rebates—Hospira primarily offers rebates to direct customers, customers who purchase from certain wholesalers at end customer contract prices and government agencies, which administer various programs such as Medicaid. Direct rebates are generally rebates paid to direct purchasing customers based on a contracted discount applied to the direct customer’s purchases. Indirect rebates are rebates paid to “indirect customers” that have purchased Hospira products from a wholesaler under a pricing agreement with Hospira. Governmental agency rebates are amounts owed based on legal requirements with public sector benefit providers (such as Medicaid), after the final dispensing of the product by a pharmacy to a benefit plan participant. Rebate amounts are usually based upon the volume of purchases. Hospira estimates the amount of the rebate due at the time of sale, and records the liability and a reduction of gross sales at the same time the product sale is recorded. Settlement of the rebate generally occurs from three to 12 months after sale.

In determining provisions for rebates to direct customers, Hospira considers the volume of eligible purchases by these customers and the rebate terms. In determining rebates on sales through wholesalers, Hospira considers the volume of eligible contract purchases, the rebate terms and the estimated level of inventory at the wholesalers that would be subject to a rebate, which is estimated as described above under

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“Chargebacks.”  Upon receipt of a chargeback, due to the availability of product and customer specific information, Hospira can then establish a specific provision for fees or rebates based on the specific terms of each agreement. Rebates under governmental programs are based on the estimated volume of products sold subject to these programs. Each period the estimates are reviewed and revised, if necessary, in conjunction with a review of contract volumes within the period. Adjustments related to prior period sales have not been material in any period.

Hospira regularly analyzes the historical rebate trends and makes adjustments to recorded reserves for changes in trends and terms of rebate programs. At December 31, 2006 and 2005, accrued rebates of $65.1 million and $83.5 million, respectively, are included in other accrued liabilities. The methodology used to estimate and provide for rebates was consistent across all periods presented.

The following table is an analysis of chargebacks and rebates for 2006 and 2005. In each year, the provisions for chargebacks and rebates relating to prior period sales were not material.

	Wholesaler
(dollars in thousands)	Chargebacks				Rebates
Balance at January 1, 2005		$	76,096			$	74,115
Provisions		628,338				130,951
Payments		(640,250		)		(121,529		)
Balance at December 31, 2005		$	64,184			$	83,537
Provisions		561,101				126,774
Payments		(582,379		)		(145,223		)
Balance at December 31, 2006		$	42,906			$	65,088

Stock-Based Compensation—On January 1, 2006, Hospira adopted SFAS No. 123R, “Share-Based Payment,” which requires, among other changes, that the cost resulting from all share-based payment transactions be recognized as compensation cost over the vesting period based on the fair value of the instrument on the date of grant. Under SFAS No. 123R, Hospira uses the Black-Scholes option valuation model to determine the fair value of stock options. The fair value model includes various assumptions, including the expected volatility and expected life of the awards. These assumptions reflect Hospira’s best estimates, but they involve inherent uncertainties based on market conditions generally outside of Hospira’s control. As a result, if other assumptions had been used, stock-based compensation expense, as calculated and recorded under SFAS No. 123R, could have been materially impacted. Furthermore, if Hospira uses different assumptions in future periods, stock-based compensation expense could be materially impacted in future periods. See Note 14 to the consolidated financial statements included in Item 8 for additional information regarding stock-based compensation.

Pension and Post-Retirement Benefits—Hospira provides pension and post-retirement medical and dental benefits to certain of its employees based both in and outside of the United States. Prior to the spin-off date, Hospira employees participated in Abbott benefit plans that provided pension and post-retirement benefits. For financial reporting purposes, Hospira develops long-term assumptions, the most significant of which are the discount rate, the expected rate of return on plan assets, and healthcare cost trend rate. For these assumptions, management consults with actuaries, monitors plan provisions and demographics, and reviews public market data and general economic information.

The discount rate estimate for the current year is based on a proprietary yield curve developed by third-party actuaries, while prior year estimates used Moody’s Aa corporate bond index, with consideration of differences in duration between the bonds in the index and Hospira’s benefit liabilities. The change in assumption did not have a significant impact on Hospira’s 2006 consolidated financial statements.

The expected rate of return for the pension plan represents the average rate of return to be earned on plan assets over the period the benefits are expected to be paid. The expected rate of return on plan assets

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is developed from the expected future return of each asset class, weighted by the expected allocation of pension assets to that asset class. Hospira considers historical performance for the types of assets in which the plans invest, independent market forecasts, and economic and capital market conditions.

The healthcare cost trend rate for 2006 was 8% for pre-65 and 10% for post-65 years of age employees, with both rates declining to 5% by 2012 and 2011, respectively. A one percentage point increase/(decrease) in the assumed healthcare cost trend rate, with other assumptions held constant, would increase/(decrease) the service and interest component of net post-retirement medical and dental cost for the year ended December 31, 2006 by approximately $1.0/($1.0) million, and would increase/(decrease) the accumulated post-retirement benefit obligation by approximately $6.1/($5.1) million.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (“SFAS No. 158”). One provision of SFAS No. 158 requires full recognition of the funded status of Hospira’s defined benefit and post-retirement plans.The incremental effect of the application of this provision is provided in Note 7 of the consolidated financial statements. Another provision of SFAS No. 158 requires the measurement of Hospira’s defined benefit plan’s assets and its obligations to determine the funded status be made as of the end of the fiscal year. Hospira’s current measurement date is November 30. This provision of SFAS No. 158 is effective for fiscal years ending after December 15, 2008. Hospira is currently evaluating the potential impact of this provision of SFAS No. 158 on its financial statements.

Loss Contingencies—Hospira accounts for contingent losses in accordance with SFAS No. 5, “Accounting for Contingencies” (“SFAS No. 5”). Under SFAS No. 5, loss contingency provisions are recorded for probable losses at management’s best estimate of a loss, or when a best estimate cannot be made, a minimum loss contingency amount is recorded. These estimates are often initially developed substantially earlier than the ultimate loss is known, and the estimates are refined each accounting period, as additional information is known. Accordingly, if Hospira is initially unable to develop a best estimate of loss, the minimum amount, which could be zero, is recorded.

Income Taxes—Hospira’s provision for income taxes is based on taxable income, statutory tax rates, and tax planning opportunities available in the various jurisdictions in which Hospira operates. Significant judgment is required in determining the provision for income taxes and in evaluating tax positions that are subject to audits and adjustments. Reserves are established when, despite Hospira’s belief that the tax return positions are fully supportable, certain positions are likely to be challenged based on the applicable tax authority’s determination of the positions. Such reserves are based on management’s judgment, utilizing internal and external tax advisors, and represent the best estimate as to the ultimate outcome of tax audits. The provision for income taxes includes the impact of changes to reserves. Each quarter, Hospira reviews the anticipated mix of income derived from the various taxing jurisdictions and its reserves in accordance with SFAS No. 5. Deferred income taxes are provided for the tax effect of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements at the enacted statutory rate expected to be in effect when the taxes are paid. Provision for income taxes and foreign withholding taxes are not provided for on undistributed earnings for certain foreign subsidiaries when Hospira intends to reinvest these earnings indefinitely to fund foreign acquisitions or to meet working capital and plant and equipment acquisition needs. See further discussion regarding the impact on undistributed earnings of foreign subsidiaries as a result of the American Jobs Creation Act of 2004 (the “Jobs Act”) in Note 8 to the consolidated financial statements.

Prior to the spin-off date, the provision for income taxes was calculated on a separate return basis. Under the tax sharing agreement executed in conjunction with the spin-off, Abbott will indemnify Hospira for tax liabilities arising for periods prior to the spin-off date. Therefore, no tax liabilities for the periods prior to the spin-off are reflected in the consolidated financial statements.

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Prospectively, Hospira has been providing for income taxes based on its post-separation independent activities. These estimates might change in future periods as Hospira develops its own tax filing history and considers the results of tax authority examinations.

Results of Operations

Net Sales

Net sales increased 2.4% in 2006 compared to 2005. Sales to third parties represented a 2.7% increase in overall sales, driven by favorable volume/mix of 1.5%, which includes the unfavorable impact of the Berlex contract termination of (2.6)%, increased price of 0.9% in the United States, and the impact of exchange of 0.3%. Sales to Abbott had an unfavorable impact of (0.3)% on overall sales, driven primarily by demand, partially offset by increased price. During the first half of 2005, the agreement under which Hospira distributed Berlex imaging agents was terminated, resulting in lower sales from 2004 to 2005 and from 2005 to 2006.

Net sales decreased (0.7)% in 2005 compared to 2004. Sales to third parties represented a (0.3)% decline in overall sales, driven by volume/product mix of (1.9)%, which includes the unfavorable impact of the Berlex contract termination of (4.9)%, partially offset by the impact of exchange of 0.3% and price of 1.3%. Sales to Abbott had an unfavorable impact of (0.4)% on overall sales growth, driven by the exclusion of the bulk drug cost from the pricing for certain products post-spin, partially offset by increased demand.

A comparison of product line sales is as follows:

							Percent change
Years ended December 31 (dollars in thousands)	2006		2005		2004		2006		2005
U.S.—
Specialty Injectable Pharmaceuticals	$	807,557	$	845,291	$	894,190	(4.5	)%	(5.5	)%
Medication Delivery Systems	855,483		796,360		782,703		7.4	%	1.7	%
Injectable Pharmaceutical Contract Manufacturing	183,266		178,777		178,719		2.5	%	0.0	%
Sales to Abbott Laboratories	90,464		104,747		119,814		(13.6	)%	(12.6	)%
Other	283,731		262,600		244,644		8.0	%	7.3	%
Total U.S.	2,220,501		2,187,775		2,220,070		1.5	%	(1.5	)%
International—
Sales to Third Parties	397,677		374,560		364,796		6.2	%	2.7	%
Sales to Abbott Laboratories	70,327		64,361		60,170		9.3	%	7.0	%
Total International Sales	468,004		438,921		424,966		6.6	%	3.3	%
Consolidated Net Sales	$	2,688,505	$	2,626,696	$	2,645,036	2.4	%	(0.7	)%

2006 compared to 2005:

Sales in Specialty Injectable Pharmaceuticals declined, reflecting the 2005 termination of the Berlex imaging agents distribution agreement. Excluding Berlex, sales within this product line increased, driven by the impact of sales of ceftriaxone, launched in the third quarter of 2005; increased sales of certain anti-infective products (which Hospira believes was partially driven by a competitor’s inability to supply product earlier in the year coupled with government orders); increased sales of syringe products; and favorable price. These factors were partially offset by lower sales of ADD-Vantage® diluents due to competitive drug supply issues.

The sales increase in Medication Delivery Systems was driven primarily by growth in medication management systems. The growth in medication management systems was due primarily to increased

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placements of Hospira’s newer technology Plum A+® pumps with Hospira MedNet® coupled with the impact of placements of Hospira’s LifeCare PCA® infusion system, which was launched in the first quarter of 2006.

Sales in Injectable Pharmaceutical Contract Manufacturing were up slightly, driven by growth in demand for several existing and new products, partially offset by the impact of the termination of certain lower-margin contracts.

The decrease in U.S. Sales to Abbott was primarily due to decreased demand by Abbott for several of its products, partially offset by increased price.

The Other product line includes sales of Hospira’s products to alternate site providers such as clinics, home healthcare providers and long-term care facilities, as well as sales of critical care devices and brain function monitoring systems. The increase in Other U.S. sales was primarily due to increased sales to alternate site healthcare customers including higher sales of anesthesia products, including recently introduced propofol, increased sales of pumps and sets, and other adjustments, partially offset by decreased sales of deferoxamine due to a competitive product launch and lower critical care sales.

International Sales to Third Parties were up, primarily reflecting increased sales on a third-party manufacturing contract, growth in Canada, and favorable exchange, partially offset by reduced volumes due to transition-related supply chain disruptions and lower pricing to distributors compared to the prior Abbott direct sales model. International Sales to Abbott increased primarily due to increased price and increased demand by Abbott for several of its products.

2005 compared to 2004:

Sales in Specialty Injectable Pharmaceuticals declined, reflecting the termination of the Berlex imaging agents distribution agreement and the impact of increased generic competition on Hospira’s Corlopam® product. Sales of the remainder of the Specialty Injectable Pharmaceuticals product line were strong, driven by the impact of sales of products launched in 2004 and 2005 (ceftriaxone, deferoxamine and fluconazole), increased volumes of syringe products, certain anti-infectives (which Hospira believes was partially driven by a competitor’s inability to supply product in the third and fourth quarters of 2005); and favorable price.

The sales increase in Medication Delivery Systems was driven by growth in medication management systems, partially offset by a decline in infusion therapy products. The growth in medication management systems was due to placements of Hospira’s newer technology Plum A+® pumps with Hospira MedNet® coupled with a higher mix of sales-type leases and outright sales versus operating leases. The decline in infusion therapy product sales was driven by the expiration of a contract under which Hospira sold product to a competitor, as well as lower pricing on sets, partially offset by other favorable volume/mix.

Sales in Injectable Pharmaceutical Contract Manufacturing were flat, primarily due to favorable price and growth in demand for several existing supply agreements, offset by the impact of the termination of certain contracts.

The decrease in U.S. Sales to Abbott was due to the exclusion of the cost of the bulk drug subsequent to the spin-off for certain products manufactured for Abbott, while 2004 (through April) included the cost of these bulk drugs. This reflects the post spin-off manufacturing arrangement between Hospira and Abbott, under which Abbott transfers the bulk drug to Hospira for processing and Hospira’s sales include only the value-added portion plus a markup for these products. This reduction was partially offset by increased demand by Abbott for several of its products and by the markup on products sold to Abbott after the spin-off.

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The increase in Other U.S. sales was primarily due to increased sales of products launched in 2004 and 2005 (ceftriaxone and deferoxamine) and certain anti-infectives (which Hospira believes was partially driven by a competitor’s inability to supply product in the third and fourth quarters of 2005) to alternate site healthcare customers, partially offset by a decline in sales of critical care products.

International Sales to Third Parties increased primarily due to favorable foreign exchange rates. International Sales to Abbott increased primarily due to volume related to an additional product manufactured for Abbott subsequent to the spin-off, coupled with the impact of the markup on products sold to Abbott after the spin-off, partially offset by reduced demand on other products.

Gross Profit

										Percent change
Years ended December 31 (dollars in millions)	2006			2005			2004			2006		2005
Gross profit	$	939.2		$	849.1		$	786.6		10.6	%		7.9	%
As a percent of sales	34.9		%	32.3		%	29.7		%

2006 compared to 2005:

The increase in gross profit margin in 2006 was primarily the result of volume/product mix improvement of 2.0%, which includes the impact of the termination of the Berlex agreement of 0.7% (as the Berlex agreement involved relatively low-margin products); price in the United States of 0.7%; an asset impairment and obligations assumed in 2005 and reduction of the obligations in 2006 relating to the sale of the Salt Lake City manufacturing facility of 0.9%; higher manufacturing performance of 0.5%; lower project expense of 0.4% and lower non-recurring transition related costs of 0.3%. These improvements were partially offset by costs associated with the planned manufacturing plant closures of (1.4)% and incremental freight and distribution costs in the International segment of (0.8)%.

2005 compared to 2004:

The increase in gross profit margin in 2005 was primarily the result of volume/product mix improvement of 2.6%, which includes the impact of Berlex of 1.2%; reduced benefit costs of 0.8% as a result of the changes in certain post-retirement benefit plans in 2004; price of 0.9%; and other changes of 0.1%. These increases were offset by charges of (0.7)% resulting from the asset impairment and obligations assumed related to the sale of the Salt Lake City manufacturing facility to ICU Medical and charges of (1.1)% resulting from the asset impairments related to the Ashland, Ohio and Montreal, Canada facilities and costs relating to the planned Donegal, Ireland plant shutdown.

Research and Development

										Percent change
Years ended December 31 (dollars in millions)	2006			2005			2004			2006			2005
Research and development expense	$	161.6		$	138.8		$	119.6			16.4	%		16.1	%
As a percent of sales	6.0		%	5.3		%	4.5		%

2006 compared to 2005:

The increase in research and development (“R&D”) expenses in 2006 was primarily due to upfront payments relating to collaboration agreements, spending on new product development and stock option expense as a result of the adoption of SFAS No. 123R. Hospira’s upfront payments relate to collaboration agreements for the development, manufacturing and distribution of biosimilar products. R&D spending on new product development related to new compounds in Hospira’s generic injectable drug pipeline and

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clinical studies on Hospira’s branded sedative, Precedex®. These increases were partially offset by lower spending in 2006 on medication delivery infusion systems as a result of new product launches.

2005 compared to 2004:

The increase in R&D expenses in 2005 was primarily due to spending on new product development related to integrated software for drug delivery devices that help prevent medication errors, a next generation drug delivery infusion system, new compounds added to Hospira’s generic injectable drug pipeline and spending for a Phase IV safety study on Hospira’s branded sedative, Precedex®, as a condition of marketing the product. These increases were partially offset by reduced benefit costs as a result of the changes in benefit plans in 2004.

Selling, General and Administrative

										Percent change
Years ended December 31 (dollars in millions)	2006			2005			2004			2006			2005
Selling, general and administrative expense	$	428.0		$	373.6		$	304.0			14.6	%		22.9	%
As a percent of sales	15.9		%	14.2		%	11.5		%

2006 compared to 2005:

Selling, general and administrative (“SG&A”) expenses increased in 2006 partially related to stock option expense as a result of the adoption of SFAS No. 123R. The remainder of the increase was primarily due to additional costs related to establishment of Hospira’s business infrastructure outside the United States and costs associated with the implementation of Hospira’s new information technology system and related depreciation.

2005 compared to 2004:

SG&A expenses increased in 2005 primarily due to additional costs related to becoming a separate stand-alone public company. These costs include the establishment of corporate functions, information technology and costs relating to establishing Hospira’s business infrastructure outside the United States. A substantial portion of the increase relates to costs associated with the implementation of SAP as Hospira’s global enterprise resource planning system. The increase in costs was partially offset by reduced employee benefit costs as a result of changes in benefit plans in 2004. Hospira’s selling, general and administrative expenses for 2005 reflect the first full year of ongoing, incremental expenses associated with being a separate stand-alone company.

Acquired In-Process Research and Development

In the fourth quarter of 2006, Hospira acquired BresaGen Limited, formerly an Australian public company. As part of the purchase price allocation, Hospira allocated and expensed $10 million to acquired in-process research and development related to BresaGen’s pipeline products.

Curtailment of Post-Retirement Medical and Dental Benefits

In the second quarter of 2004, Hospira announced a series of benefit plan changes, which included the discontinuation of the U.S. non-union post-retirement medical and dental plan. The effect of the discontinuation of the post-retirement medical and dental plan was a non-cash pre-tax benefit of $64.6 million resulting from the reversal of the related liability.

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Interest Expense

Hospira incurred interest expense of $31.0 million in 2006, $28.3 million in 2005 and $18.8 million in 2004. The increase in 2006 compared to 2005 was primarily due to higher interest rates on Hospira’s floating rate debt (as a result of converting some of Hospira’s debt from fixed to floating under the interest rate swap entered into in 2005), partially offset by higher capitalized interest in 2006. The increase in 2005 compared to 2004 was primarily due to Hospira not having any debt prior to the spin-off. Refer to the Liquidity and Capital Resources section below, as well as Note 10 to the consolidated financial statements included in Item 8, for further information regarding Hospira’s debt and credit facilities.

Other (Income) Expense, Net

Other (income) and expense for 2006, 2005 and 2004 primarily includes amounts relating to fluctuations in foreign currency exchange rates, interest income, and other items. Foreign exchange (gains) for 2006, 2005 and 2004 were $(1.1) million, $(0.1) million and $(0.3) million, respectively. Interest (income) for 2006, 2005 and 2004 was $(17.1) million, $(15.1) million and $(2.4) million, respectively. Prior to the spin-off, Hospira did not hold cash.

Income Tax Expense

The effective tax rates were 26.8% in both 2006 and 2005 and 26.7% in 2004. The effective tax rate for 2006 included the impact of a significant unusual item, the expensing of acquired in-process research and development. Excluding the effect of this item, the 2006 effective tax rate was 26.0%. Included in 2005 is tax of $9.1 million related to the repatriation of foreign earnings of $175 million under the Jobs Act. Excluding the effect of the repatriation, the 2005 effective tax rate was 24.0%. The effective tax rate for 2004 included the impact of a significant unusual item, the curtailment of the post-retirement medical and dental plan noted above. Excluding the effect of the curtailment benefit, the 2004 effective tax rate was 24.7%. The increase in the effective tax rate in 2006 compared to 2005, excluding both years’ significant unusual items, was due primarily to increased income generated in the United States, which has a higher tax rate than foreign jurisdictions. The decrease in the effective tax rate in 2005 compared to 2004 was due primarily to increased income generated in foreign jurisdictions, which have lower tax rates than the United States. The effective tax rates are less than the statutory U.S. federal income tax rate principally due to the benefit of tax exemptions, of varying durations, in certain jurisdictions outside the United States.

Liquidity and Capital Resources

Summary of Sources and (Uses) of Cash

Years ended December 31 (dollars in millions)	2006			2005			2004
Operating activities	$	424.2		$	571.1		$	387.0
Investing activities	(251.2		)	(184.4		)	(301.3		)
Financing activities	(377.7		)	8.6			40.6

Operating Activities

Net Cash from Operating Activities continues to be Hospira’s primary source of funds to finance operating needs and capital expenditures. Other capital resources include cash on hand, borrowing availability under Hospira’s $375 million revolving credit facility and access to the capital markets.

In 2006, operating activities provided net cash of $424.2 million, primarily driven by net income of $237.7 million, non-cash depreciation and amortization charges of $156.7 million, non-cash stock-based compensation expense of $35.9 million, and the write-off of acquired in-process research and development

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of $10.0 million, offset by a pre-tax gain on the sale of the Donegal, Ireland facility of $7.9 million, and changes in operating assets and liabilities of $8.2 million. The changes in operating assets and liabilities consisted primarily of an increase in inventories, offset by an increase in trade accounts payable and other liabilities and changes in Other, net. The increase in inventory reflected planned normal inventory builds and additional safety stocks to support the business as manufacturing production transfers occur in connection with planned plant closings.

In 2005, operating activities provided net cash of $571.1 million, primarily driven by net income of $235.6 million, non-cash depreciation and amortization charges of $156.3 million, a non-cash impairment charge of $13.1 million, and changes in operating assets and liabilities of $166.1 million. The changes in operating assets and liabilities consisted primarily of an increase in accruals for employee incentive programs and other accruals, including those resulting from obligations assumed related to the sale of the Salt Lake City manufacturing facility, the planned closure of the Donegal, Ireland plant, an increase in accrued rebates, an increase in accounts payable, and an increase in income taxes payable.

Investing Activities

In 2006, Net Cash Used in Investing Activities of $251.2 million includes capital expenditures of $235.0 million for upgrading and expanding manufacturing and administrative support facilities, and information technology systems. In addition, investing activities includes proceeds from the sale of the Donegal, Ireland and Montreal, Canada facilities of $19.3 million, the use of cash of $17.1 million for the acquisition of BresaGen and $18.4 million for the purchase of certain intangible assets and other investments.

In 2005, Net Cash Used in Investing Activities of $184.4 million includes capital expenditures of $256.1 million for upgrading and expanding manufacturing, research and development and administrative support facilities, and information technology systems. In addition, investing activities include the use of cash of $23.6 million for the acquisition of Physiometrix and purchases of certain intangible assets and other investments of $9.0 million. These are offset by $72.4 million in proceeds from the sales of marketable debt securities and $31.8 million in proceeds from the sale of the Salt Lake City manufacturing facility and related assets.

Financing Activities

Net Cash Used in Financing Activities of $377.7 million in 2006 consists primarily of common stock repurchases of $299.8 million and payments to Abbott for international net assets of $126.2 million, offset by proceeds from employee stock option exercises and related tax benefits of $45.8 million, and an increase in other borrowing, net of $2.5 million.

Net Cash Provided by Financing Activities in 2005 consisted primarily of proceeds from employee stock option exercises of $118.8 million and other borrowing activities, offset by payments to Abbott for international net assets of $116.7 million.

Prior to the spin-off, Hospira, as part of Abbott, did not hold cash, and the related transactions with Abbott were reflected in the consolidated statements of cash flows in the financing section as “Net transactions with Abbott Laboratories prior to spin-off.” Subsequent to the spin-off, Hospira retains cash and cash equivalents, which primarily include demand deposits with banks or other financial institutions.

Summary of Financial Position

Years ended December 31 (dollars in millions)	2006		2005		2004
Cash and cash equivalents	$	322.0	$	520.6	$	127.7
Marketable securities	—		—		72.4
Working capital	916.7		964.9		662.1
Short-term borrowings and long-term debt	706.6		697.9		698.8

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Working Capital

The decrease in working capital in 2006 was primarily due to a decrease in cash and cash equivalents and an increase in income taxes payable. This is offset by an increase in inventory and prepaid expenses and other receivables, and a decrease in current portion of “Due to Abbott, Net,” which is principally related to the liability for the international net assets transferred from Abbott, and decreases in liabilities related to accruals for employee incentive programs.

The increase in working capital in 2005 was primarily due to an increase in cash and cash equivalents and a decrease in the current portion of “Due to Abbott, Net,” which was principally related to the liability for the international net assets to be transferred from Abbott. This is offset by a decrease in marketable securities, increase in liabilities related to accruals for employee incentive programs and other accruals, primarily obligations related to the sale of the Salt Lake City manufacturing facility, the closure of the Donegal, Ireland plant and an increase in income taxes payable.

Hospira believes that its current capital resources, including cash and cash equivalents on hand, cash it generates from operations, funds available from its revolving credit facility, and access to capital markets will be sufficient to finance its operations, including debt service obligations, product development, capital expenditures and acquisitions, for the foreseeable future.

Debt and Capital

Senior Notes.   Hospira has approximately $700 million of senior unsecured notes outstanding, including $300 million of 4.95% notes due 2009 and $400 million of 5.9% notes due 2014. The 4.95% notes were effectively converted to floating rate notes through interest rate swaps with various counterparties. The senior notes contain customary covenants that limit Hospira’s ability to incur secured indebtedness and liens and merge or consolidate with other companies.

Revolving Credit Facility.   Hospira has a five-year $375 million unsecured revolving credit facility (the “Revolver”), which it entered into on December 16, 2005, and which was amended on January 15, 2007 to permit the Mayne Pharma acquisition and to temporarily increase the maximum leverage ratio and lower the minimum interest coverage ratio. This facility is available for working capital and other requirements. The Revolver allows Hospira to borrow funds at variable interest rates as short-term cash needs dictate. Borrowings under the Revolver bear interest at LIBOR plus a margin, plus a utilization fee if borrowings under the Revolver exceed 50% of the aggregate amount of committed loans. Hospira is also required to pay a facility fee on the aggregate amount of committed loans. The annual rates for the LIBOR margin, the utilization fee and the facility fee are currently 0.45%, 0.075% and 0.10%, respectively, and are subject to increase or decrease if there is a change in Hospira’s current credit ratings. The amount of available borrowings may be increased to a maximum of $500 million, and the term may be increased for up to two additional years, under certain circumstances. As of December 31, 2006, Hospira had no amounts borrowed or otherwise outstanding under the Revolver.

The Revolver contains covenants limiting Hospira’s ability to sell assets, incur secured indebtedness and liens, incur indebtedness at the subsidiary level and merge or consolidate with other companies. The agreement includes financial covenants, including requirements to maintain minimum interest coverage ratio and a maximum leverage ratio.

As of December 31, 2006, Hospira was in compliance with all covenants under its debt instruments.

Other Borrowings.   In connection with the acquisition of BresaGen in the fourth quarter of 2006, Hospira assumed a $5.4 million mortgage note that is secured by land and building, of which $0.5 million is classified as short-term. The agreement bears a fixed rate of interest of 7.47%, with payments of principal and interest due quarterly, ending in March 2015.

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In March 2005, Hospira issued economic development promissory notes, the proceeds of which were used for a distribution facility expansion. The $1.75 million ten-year notes bear a fixed rate of interest of 2%, with principal and interest due monthly.

Hospira has entered into various loan agreements related to the legal transfer of certain international operations from Abbott. These borrowings are made by Hospira’s foreign affiliates in their local currency and are used to optimize the capital structure. As of December 31, 2006 and 2005, Hospira had $8.8 million and $5.9 million of such loans outstanding, respectively, of which $3.9 million and $2.4 million was classified as short term, respectively.

Transfer of International Net Assets from Abbott.   In connection with the spin-off, Hospira and Abbott agreed that the legal transfer of certain operations and assets (net of liabilities) outside the United States would occur, and be completed, within two years after the spin-off. During the transition period, these operations and assets were used in the conduct of Hospira’s international business and Hospira was subject to the risks and entitled to the benefits generated by such operations and assets. Hospira was obligated to pay Abbott for these operations and assets, and assume the corresponding liabilities, over a two-year period after the spin-off date as Hospira established its business infrastructure outside the United States and obtained regulatory approval for the transfer of the marketing authorizations for Hospira products to local Hospira affiliates or third-party distributors. The transfers were completed in the second quarter of 2006. The total amounts paid in 2006 and 2005 were $126.2 million and $116.7 million, respectively.

Share Repurchase.   In February 2006, Hospira’s board of directors approved a $400 million share repurchase program. The program authorizes the company to repurchase common shares from time to time through the open market in compliance with securities regulations and other legal requirements. The size and timing of any purchases are at the discretion of company management, based on factors such as alternative uses of cash, and business and market conditions. As of December 31, 2006, Hospira repurchased 7,584,400 shares for $299.8 million. Because Hospira must dedicate a substantial portion of its future cash to servicing its debt and integrating Mayne Pharma into its operations, Hospira does not expect to continue repurchasing shares for the foreseeable future.

Mayne Pharma Acquisition.   On February 1, 2007, Hospira incurred $1.925 billion of bank debt in connection with the Mayne Pharma acquisition. The bank facilities include a $500 million, three-year term loan facility and a $1.425 billion one-year bridge loan facility. Under the term loan facility, Hospira must repay $12.5 million in principal at the end of each quarter in 2007, $50.0 million at the end of each quarter in 2008 and $62.5 million at the end of each quarter in 2009 (with the final payment to be made on the maturity date of January 15, 2010). The entire principal amount under the bridge loan facility is due on the maturity date of January 15, 2008. Hospira expects to refinance the borrowings under the bridge loan through the sale of long-term debt securities during 2007.

Borrowings under the term loan facility and bridge loan facility bear interest at LIBOR plus a margin that is determined based on Hospira’s senior unsecured debt ratings from Standard & Poor’s and Moody’s. Based on Hospira’s ratings of BBB (stable outlook) from Standard and Poor’s and Baa3 (negative outlook) from Moody’s, the margin is currently 0.60%.

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Contractual Obligations and Off-Balance Sheet Arrangements

The following table summarizes Hospira’s estimated contractual obligations as of December 31, 2006 (dollars in millions):

	Payment Due by Period
	Total			2007			2008-2009			2010-2011			2012 and Thereafter
Long-term debt and interest payments		$	931.9		$	43.4		$	376.7		$	49.4		$	462.4
Lease obligations		177.2			26.8			48.4			39.4			62.6
Purchase commitments(1)		368.5			356.0			12.5			—			—
Other long-term liabilities reflected on the consolidated balance sheet(2)		25.9			—			25.9			—			—
Total		$	1,503.5		$	426.2		$	463.5		$	88.8		$	525.0

(1)Purchase commitments consist primarily of inventory purchases made in the normal course of business to meet operational requirements. Contractual capital commitments are also included here, but these commitments represent only a portion of the expected capital spending in 2007 and beyond.

(2)Excludes approximately $149.4 million of other long-term liabilities related primarily to post-retirement benefit obligations. See Note 7 to the consolidated financial statements included in this annual report on Form 10-K regarding benefit payments for post-retirement obligations. Hospira does not expect to contribute to its main U.S. pension plan in 2007.

Hospira’s commercial commitments as of December 31, 2006, representing commitments not recorded on the balance sheet but potentially triggered by future events, primarily consist of non-debt letters of credit to provide credit support for certain transactions as requested by third parties. As of December 31, 2006, Hospira had $11.7 million of outstanding letters of credit, with a majority expiring in 2007. No amounts have been drawn on these letters of credit.

On February 1, 2007, Hospira borrowed $1.925 billion under a bridge loan facility and a term loan facility to finance its acquisition of Mayne Pharma. Please see “—Liquidity and Capital Resources—Debt and Capital—Mayne Pharma Acquisition” above for a description of Hospira’s obligations under those facilities.

Hospira has no material exposures to off-balance sheet arrangements, no special purpose entities, and no activities that include non-exchange-traded contracts accounted for at fair value.

Recently Issued Accounting Standards

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. Hospira is currently evaluating the potential impact of SFAS No. 157 on its financial statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (“SFAS No. 158”). One provision of SFAS No. 158 requires full recognition of the funded status of Hospira’s defined benefit and post-retirement plans.The incremental effect of the application of this provision on individual line items in the Consolidated Balance

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Sheet as of December 31, 2006, is provided in Note 7 of the consolidated financial statements. Another provision of SFAS No. 158 requires the measurement of Hospira’s defined benefit plan’s assets and its obligations to determine the funded status be made as of the end of the fiscal year. Hospira’s current measurement date is November 30. This provision of SFAS No. 158 is effective for fiscal years ending after December 15, 2008. Hospira does not anticipate that the impact from the adoption of this provision of SFAS No. 158 will be significant to its financial statements.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition of uncertain tax positions. The provisions of FIN 48 are effective at the beginning of the first fiscal year that begins after December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings for that year. Hospira is currently evaluating the potential impact of FIN 48 on its financial statements.

Item 7A. Qualitative and Quantitative Disclosures About Market Risk

Financial Instrument and Risk Management

Hospira operates globally, and earnings and cash flows are exposed to market risk from changes in currency exchange rates and interest rates. Upon consideration of management objectives, costs and opportunities, Hospira uses derivative instruments, including foreign currency forward exchange contracts and interest rate swaps to manage these risks. Hospira enters into derivative instrument contracts with a diversified group of major financial institutions to limit the amount of credit exposure to nonperformance by any one institution. Hospira does not utilize derivative instruments for trading or speculative purposes.

Foreign Currency Sensitive Financial Instruments

Hospira’s operations are exposed to currency exchange-rate risk, which is mitigated by Hospira’s use of foreign currency forward exchange contracts (“forward contracts”). The objective in managing exposure to changes in foreign currency exchange rates is to reduce volatility on earnings and cash flows associated with these changes. Currency exposures include third-party trade payables and receivables, and intercompany loans where the asset or liability is denominated in a currency other than the functional currency of the entity. Forward contract gains and losses on these exposures substantially offset the remeasurement of the related asset or liability and both are included in other (income) expense, net. In addition, currency exposures exist for certain subsidiaries for anticipated intercompany purchases, firm commitments, and third-party forecasted transactions expected to be denominated in a foreign currency due to changes in foreign exchange rates. Forward contract gains and losses related to such exposures are also included in other (income) expense, net during the term of the forward contract, as they are not formally designated as hedges under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” Net forward contract expense and the carrying value and fair value of forward contracts were not significant in 2006 and 2005.

Interest Rate Sensitive Financial Instruments

Hospira’s primary interest rate exposures relate to cash and cash equivalents, and fixed and variable rate debt. The objective in managing exposure to changes in interest rates is to reduce volatility on earnings and cash flows associated with these changes.

Hospira’s investment portfolio of $353.4 million at December 31, 2006 consists of cash and cash equivalents, equity investments in affiliated companies, and cost investments, primarily consisting of

52

marketable securities which are classified as “available for sale.” For marketable securities, any gains or losses will not be recognized in Hospira’s statements of income until the investment is sold or if there is a reduction in fair value that is determined to be an other-than-temporary impairment. The carrying value of the investment portfolio approximates fair market value at December 31, 2006 and the value at maturity, as the majority of investments consist of securities with maturities of less than three months. Because Hospira’s investments consist principally of cash and cash equivalents, a hypothetical one percentage point increase/(decrease) in interest rates, based on average cash and cash equivalents during the year, would increase/(decrease) interest income by approximately $4.2 million.

In conjunction with the spin-off from Abbott, on June 15, 2004, Hospira completed an underwritten offering of a consolidated $700 million aggregate principal amount consisting of $300 million five-year senior unsecured notes and $400 million 10-year senior unsecured notes, both of which bear a fixed rate of interest. In addition, the Revolver allows Hospira to borrow up to $375 million for working capital and other requirements. The Revolver allows Hospira to borrow funds at variable interest rates as short-term cash needs dictate. As of December 31, 2006, Hospira had no amounts outstanding under the Revolver.

Hospira has entered into various loan agreements related to the legal transfer of certain international operations from Abbott. These borrowings are made by Hospira’s foreign affiliates in their local currency and are used to optimize the capital structure. As of December 31, 2006 and 2005, Hospira had $8.8 million and $5.9 million of such loans outstanding, respectively, of which $3.9 million and $2.4 million was classified as short-term, respectively.

In January 2005, Hospira entered into interest rate swap transactions whereby the $300 million five-year senior unsecured notes due in June 2009 were effectively converted from fixed to floating rate debt. Hospira records the interest rate swap contracts at fair value and offsets the carrying amount of the fixed-rate debt by the same amount. At December 31, 2006 and 2005, these interest rate swaps had an aggregate fair market value of $(8.2) million and $(8.7) million, respectively. If these derivative instruments had been terminated at December 31, 2006 and 2005, this estimated fair value represents the amount that Hospira would have to pay to counterparties. As a result of converting from fixed to floating rate debt, a hypothetical one percentage point increase/(decrease) in interest rates would increase/(decrease) interest expense by $3.0 million.

Refer to the Liquidity and Capital Resources section above, as well as Notes 5 and 10 to the consolidated financial statements included in this annual report on Form 10-K, for further information.

53

Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

Management Report On Internal Control Over Financial Reporting	55
Reports of Independent Registered Public Accounting Firm	56
Consolidated Statements of Income and Comprehensive Income for the Years Ended December 31, 2006, 2005 and 2004	59
Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004	60
Consolidated Balance Sheets as of December 31, 2006 and 2005	61
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2006, 2005 and 2004	62
Notes to Consolidated Financial Statements	63
Schedule II—Valuation and Qualifying Accounts	99

54

MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Hospira, Inc. (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Company management assessed the effectiveness of its internal control over financial reporting as of December 31, 2006. In making this assessment, it used the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment, we believe that, as of December 31, 2006, Hospira, Inc.’s internal control over financial reporting was effective based on those criteria.

The Company’s independent registered public accounting firm has issued an audit report on our assessment of the Company’s internal control over financial reporting.

/s/ CHRISTOPHER B. BEGLEY	/s/ THOMAS E. WERNER
Chief Executive Officer February 27, 2007	Senior Vice President, Finance, and Chief Financial Officer
	February 27, 2007

55

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Hospira, Inc.

We have audited the accompanying consolidated balance sheets of Hospira, Inc. (the “Company”) as of December 31, 2006 and 2005, and the related consolidated statements of income and comprehensive income, cash flows, and changes in shareholders’ equity for each of the three years in the period ended December 31, 2006. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Hospira, Inc. as of December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 14 to the consolidated financial statements, on January 1, 2006 the Company adopted Statement of Financial Accounting Standards No. 123R, Share-Based Payment, and as discussed in Note 1 to the consolidated financial statements, on December 31, 2006, the Company adopted the recognition and disclosure provisions of Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2007, expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

DELOITTE & TOUCHE LLP

Chicago, Illinois
February 27, 2007

56

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Hospira, Inc.

We have audited management’s assessment, included in the accompanying Management Report on Internal Control Over Financial Reporting that Hospira, Inc. (the “Company”) maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

57

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2006 of the Company and our report dated February 27, 2007, expressed an unqualified opinion on those financial statements and financial statement schedule and included an explanatory paragraph regarding the Company’s adoption of Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, on January 1, 2006, and the Company’s adoption of the recognition and disclosure provisions of Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R), on December 31, 2006.

DELOITTE & TOUCHE LLP

Chicago, Illinois
February 27, 2007

58

Hospira, Inc.
Consolidated Statements of Income and Comprehensive Income
(dollars and shares in thousands, except for per share amounts)

	Year Ended December 31
	2006			2005			2004
Net sales	$	2,527,714		$	2,457,588		$	2,465,052
Net sales to Abbott Laboratories	160,791			169,108			179,984
Total Net Sales	2,688,505			2,626,696			2,645,036
Cost of products sold	1,749,262			1,777,640			1,858,435
Gross Profit	939,243			849,056			786,601
Research and development	161,621			138,834			119,583
Acquired in-process research and development	10,000			—			—
Selling, general and administrative	428,038			373,607			304,004
Curtailment of post-retirement medical and dental benefits	—			—			(64,636		)
Income From Operations	339,584			336,615			427,650
Interest expense	31,024			28,276			18,758
Other (income) expense, net	(16,137		)	(13,736		)	(2,628		)
Income Before Income Taxes	324,697			322,075			411,520
Income tax expense	87,018			86,437			109,968
Net Income	$	237,679		$	235,638		$	301,552
Earnings Per Common Share:
Basic	$	1.51		$	1.48		$	1.93
Diluted	$	1.48		$	1.46		$	1.92
Weighted Average Common Shares Outstanding:
Basic	157,368			159,275			156,187
Diluted	160,424			161,634			157,160
Comprehensive Income:
Foreign currency translation adjustments, net of taxes of $0	$	12,688		$	(11,284	)	$	(29,398	)
Retirement plan adjustments, net of taxes of $(1,458), $21,636 and $(26,045), respectively	2,332			(35,071		)	45,146
Unrealized gains (losses) on marketable equity securities, net of taxes of $(217), $(1,426), and $233, respectively	981			2,442			(380		)
Other comprehensive income (loss)	16,001			(43,913		)	15,368
Less effect of spin-off from Abbott	—			—			(48,475		)
Adjusted other comprehensive income (loss)	16,001			(43,913		)	(33,107		)
Net Income	237,679			235,638			301,552
Comprehensive Income	$	253,680		$	191,725		$	268,445

The accompanying notes are an integral part of these consolidated financial statements.

59

Hospira, Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)

	Year Ended December 31
	2006			2005			2004
Cash Flow From (Used in) Operating Activities:
Net income	$	237,679		$	235,638		$	301,552
Adjustments to reconcile net income to net cash from operating activities—
Depreciation	154,790			154,460			141,245
Amortization of intangibles	1,927			1,831			4,278
Write-off of acquired in-process research and development	10,000			—			—
Stock-based compensation expense	35,900			—			—
Gain on sale of facility	(7,851		)	—			—
Impairment of long-lived assets	—			13,074			—
Curtailment of post-retirement medical and dental benefits	—			—			(64,636		)
Changes in assets and liabilities—
Trade receivables	(1,132		)	(10,707		)	(28,051		)
Inventories	(106,056		)	(9,722		)	22,715
Prepaid expenses and other assets	(19,660		)	(8,094		)	(3,914		)
Trade accounts payable	7,899			28,690			(6,808		)
Other liabilities	88,240			135,506			58,323
Other, net	22,454			30,411			(37,681		)
Net Cash From Operating Activities	424,190			571,087			387,023
Cash Flow From (Used in) Investing Activities:
Acquisitions of property and equipment	(234,961		)	(256,108		)	(228,854		)
Acquisition of businesses	(17,109		)	(23,590		)
Proceeds from sale of facilities	19,283			31,818			—
Purchases of intangibles and other investments	(18,449		)	(8,990		)	—
Purchase of marketable securities, net	—			—			(72,438		)
Sales of marketable securities	—			72,438			—
Net Cash (Used in) Investing Activities	(251,236		)	(184,432		)	(301,292		)
Cash Flow From (Used in) Financing Activities:
Payment to Abbott for international assets	(126,235		)	(116,727		)	—
Common stock repurchased	(299,766		)	—			—
Issuance of long-term debt, net of fees paid	—			5,252			1,393,344
Repayment of long-term debt	(144		)	(124		)	(700,000		)
Other borrowings, net	2,653			1,385			—
Excess tax benefit from stock-based compensation arrangements	3,403			—			—
Proceeds from stock options exercised	42,361			118,819			23,046
Net transactions with Abbott Laboratories prior to spin-off	—			—			24,209
Pre-distribution dividend to Abbott	—			—			(700,000		)
Net Cash (Used in) From Financing Activities	(377,728		)	8,605			40,599
Effect of exchange rate changes on cash and cash equivalents	6,209			(2,345		)	1,365
Net change in cash and cash equivalents	(198,565		)	392,915			127,695
Cash and cash equivalents at beginning of period	520,610			127,695			—
Cash and cash equivalents at end of period	$	322,045		$	520,610		$	127,695
Supplemental Cash Flow Information
Cash paid during the year(1):
Interest	$	43,989		$	37,730		$	22,077
Income taxes, net	$	28,592		$	27,193		$	30,699

(1)Cash payments were made on a combined basis by Abbott prior to April 30, 2004.

The accompanying notes are an integral part of these consolidated financial statements.

60

Hospira, Inc.

Consolidated Balance Sheets

(dollars in thousands)

	December 31
	2006			2005
Assets
Current Assets:
Cash and cash equivalents	$	322,045		$	520,610
Trade receivables, less allowances of $13,688 in 2006 and $16,887 in 2005	335,334			327,146
Inventories:
Finished products	405,781			300,860
Work in process	85,849			71,449
Materials	135,304			137,959
Total inventories	626,934			510,268
Deferred income taxes	139,945			144,124
Prepaid expenses and other receivables	98,632			59,017
Total Current Assets	1,522,890			1,561,165
Property and equipment, at cost	2,273,124			2,181,022
Less: accumulated depreciation	1,233,693			1,190,209
Net Property and Equipment	1,039,431			990,813
Intangible assets, net of amortization	17,103			14,926
Goodwill	91,857			89,197
Deferred income taxes	76,367			17,692
Investments	31,341			13,928
Other assets	68,598			101,461
Total Assets	$	2,847,587		$	2,789,182
Liabilities and Shareholders’ Equity
Current Liabilities:
Short-term borrowings	$	4,532		$	2,579
Trade accounts payable	130,968			129,865
Salaries, wages and commissions	102,037			107,615
Other accrued liabilities	368,689			277,098
Due to Abbott, net	—			79,079
Total Current Liabilities	606,226			596,236
Long-term debt	702,044			695,285
Deferred income taxes	2,936			3,958
Post-retirement obligations and other long-term liabilities	175,292			165,836
Commitments and Contingencies
Shareholders’ Equity:
Common stock	1,635			1,617
Preferred stock	—			—
Treasury stock, at cost	(299,766		)	—
Unearned compensation	—			(263		)
Additional paid-in capital	1,033,345			943,577
Retained earnings	676,639			438,960
Accumulated other comprehensive (loss)	(50,764		)	(56,024		)
Total Shareholders’ Equity	1,361,089			1,327,867
Total Liabilities and Shareholders’ Equity	$	2,847,587		$	2,789,182

The accompanying notes are an integral part of these consolidated financial statements.

61

Hospira, Inc.
Consolidated Statements of Changes in Shareholders’ Equity
(dollars and shares in thousands)

	Common Stock					Accumulated  Other  Comprehensive				Additional  Paid-in			Net Investment in Hospira, Inc. by Abbott				Treasury			Unearned				Retained
	Shares		Amount			Income (Loss)				Capital			Laboratories				Stock			Compensation				Earnings*			Total
Balances at December 31, 2003	—			$	—		$	(27,479	)		$	—		$	1,480,943		$	—			$	—			$	—	$	1,453,464
Net Income	—			—			—				—			98,230			—				—				203,322		301,552
Other comprehensive loss	—			—			(33,107		)		—			—			—				—				—		(33,107		)
Net transactions with Abbott	—			—			48,475				—			(116,974		)	—				—				—		(68,499		)
Pre-distribution dividend to Abbott	—			—			—				—			(700,000		)	—				—				—		(700,000		)
Elimination of reporting lag for international operations	—			—			—				—			5,041			—				—				—		5,041
Issuance of common stock in connection with the distribution	156,043			1,560			—				765,680			(767,240		)	—				—				—		—
Changes in shareholders’ equity related to incentive stock programs	927			10			—				25,572			—			—				(114		)		—		25,468
Balances at December 31, 2004	156,970			$	1,570		$	(12,111	)		$	791,252		$	—		$	—			$	(114	)		$	203,322	$	983,919
Net Income	—			—			—				—			—			—				—				235,638		235,638
Other comprehensive loss	—			—			(43,913		)		—			—			—				—				—		(43,913		)
Changes in shareholders’ equity related to incentive stock programs	4,698			47			—				140,346			—			—				(149		)		—		140,244
Adjustment to deferred taxes existing as of the spin-off date	—			—			—				11,979			—			—				—						11,979
Balances at December 31, 2005	161,668			$	1,617		$	(56,024	)		$	943,577		$	—		$	—			$	(263	)		$	438,960	$	1,327,867
Net Income	—			—			—				—			—			—				—				237,679		237,679
Other comprehensive income	—			—			16,001				—			—			—				—				—		16,001
SFAS No. 158 transition amount, net of tax of $9,376	—			—			(10,741		)		—			—			—				—				—		(10,741		)
Common stock repurchases	(7,584	)		—			—				—			—			(299,766		)		—				—		(299,766		)
Changes in shareholders’ equity related to incentive stock programs	1,800			18			—				89,768			—			—				263						90,049
Balances at December 31, 2006	155,884			$	1,635		$	(50,764	)		$	1,033,345		$	—		$	(299,766	)		$	—			$	676,639	$	1,361,089

*For the period subsequent to April 30, 2004.

The accompanying notes are an integral part of these consolidated financial statements.

62

Hospira, Inc.

Notes to Consolidated Financial Statements

Note 1—Summary of Significant Accounting Policies

Description of Business

Hospira develops, manufactures and markets specialty injectable pharmaceuticals and medication delivery systems, which are focused on improving the productivity, safety and efficacy of patient care. Hospira also provides contract manufacturing services to pharmaceutical and biotechnology companies for formulation development, filling and finishing of injectable pharmaceuticals. Hospira’s broad portfolio of products is used by hospitals and alternate site providers, such as clinics, home healthcare providers and long-term care facilities.

Basis of Presentation

Hospira was incorporated in Delaware as a wholly-owned subsidiary of Abbott Laboratories (“Abbott”) on September 16, 2003, as part of a plan by Abbott to create a separate company relating to the manufacture and sale of hospital products. Most of what was then Abbott’s Hospital Products segment and a portion of Abbott’s International segment were transferred to Hospira as part of its spin-off from Abbott.

On April 30, 2004 (the “spin-off date”), Abbott transferred the assets and liabilities comprising the hospital products business to Hospira, except as noted below, and consummated the spin-off of Hospira by distributing all of the shares of Hospira’s common stock to Abbott shareholders in the form of a dividend of one share of Hospira’s common stock, and the associated preferred stock purchase right, for every ten Abbott common shares.

In connection with the spin-off, Hospira and Abbott agreed that the legal transfer of certain operations and assets (net of liabilities) outside the United States would occur, and be completed, within a two-year period after the spin-off. During the transition period, these operations and net assets were used in the conduct of Hospira’s international business and Hospira was subject to the risks and entitled to the benefits generated by such operations and net assets. Hospira was dependent on Abbott’s international infrastructure until such legal transfers occurred in each international country. These transfers were completed in the second quarter of 2006.

The accompanying consolidated financial statements reflect Hospira’s operations as a separate, stand-alone entity subsequent to April 30, 2004, combined with the historical operations of Hospira when it operated as part of Abbott prior to the spin-off. For the periods prior to April 30, 2004, during which Hospira operated as part of Abbott, Abbott provided Hospira with various services, including finance, legal, internal audit, public affairs, human resources and other services. The historical financial statements include expense allocations related to these services and Hospira considers these allocations to be reasonable reflections of the utilization of services provided. Intercompany accounts with Abbott have been combined with invested capital and reported in the consolidated financial statements as Net Investment in Hospira, Inc. by Abbott Laboratories for periods prior to April 30, 2004.

The financial information in these financial statements does not include all the expenses that would have been incurred and does not reflect Hospira’s results of operations, financial position and cash flows had Hospira been a stand-alone entity prior to April 30, 2004. Because a direct ownership relationship did not exist among all the various units comprising Hospira, Net Investment in Hospira, Inc. by Abbott Laboratories is shown in lieu of shareholders’ equity in the consolidated financial statements prior to April 30, 2004.

63

Reclassification

Certain prior year amounts have been reclassified for comparative purposes. The reclassifications did not affect net income or shareholders’ equity.

Use of Estimates

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States and necessarily include amounts based on estimates and assumptions by management. Actual results could differ from those amounts. Significant estimates include, but are not limited to, provisions for chargebacks and rebates, inventory and accounts receivable exposure reserves, income tax liabilities, pension and other post-retirement benefits liabilities, and loss contingencies.

Revenue Recognition

Hospira recognizes revenues from product sales when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed and determinable, and collectibility is reasonably assured. For other than certain drug delivery pumps and injectable pharmaceutical contract manufacturing, product revenue is recognized when products are delivered and title passes. In certain circumstances, Hospira enters into arrangements in which it provides multiple elements to its customers. In these cases, total revenue is divided among the separate units of accounting (deliverables) based on their relative fair value and is recognized for each deliverable in accordance with the applicable revenue recognition criteria. The recognition of revenue is delayed if there are significant post-delivery obligations, such as installation or customer acceptance.

For drug delivery pumps, revenue is typically derived under one of three types of arrangements: outright sales of the drug delivery pump; placements under lease arrangements; and placements under contracts that include associated disposable set purchases. For lease agreements under which Hospira’s warranty obligation extends through the entire term are accounted for as operating leases. For these, Hospira recognizes revenue over the lease term, which averages five years. For leases under which Hospira’s warranty obligation is limited to approximately one year, Hospira accounts for these as sales-type leases, under which the discounted sales value of the drug delivery pump is recorded as revenue upon placement with the customer. Hospira has contractual arrangements with certain customers whereby it places drug delivery pumps at customer sites, and the customers agree to purchase minimum levels of disposable products (sets) that are used with the pumps. These arrangements do not include any upfront fees or payments. The contractual arrangements generally set forth fixed prices for the purchases of the disposable products, where the prices for the disposables do not change over the term of the arrangement, other than, in some cases, for changes in Consumer Price Index provisions. Title for the pumps is retained by Hospira throughout these arrangements, and the related asset is depreciated over its estimated useful life on a straight-line basis. In these placement arrangements, revenue is recognized as the disposable products are delivered, in accordance with SFAS No. 48, “Revenue Recognition when Right of Return Exists,” and SAB No. 104, “Revenue Recognition.”

Hospira markets a server-based suite of software applications designed to exchange data from a hospital’s drug information library database to drug delivery pumps throughout the hospital. The arrangements related to such applications typically include a perpetual software license, software maintenance and implementation services. Hospira recognizes revenue related to these arrangements in accordance with the provisions of Statement of Position (SOP) 97-2, “Software Revenue Recognition,” as amended. Software license revenue and implementation service revenue are generally recognized upon completion of related obligations or customer acceptance and software maintenance revenue is recognized ratably over the contract period.

64

Injectable pharmaceutical contract manufacturing involves filling customers’ active pharmaceutical ingredients (“API”) into delivery systems. Under these arrangements, customers’ API is often consigned to Hospira and revenue is recorded for the materials and labor provided by Hospira, plus a profit, upon shipment to the customer.

Upon recognizing revenue from a sale, Hospira records an estimate for certain items that reduce gross sales in arriving at its reported net sales for each period. These items include chargebacks, rebates and other items (such as cash discounts and returns). Provisions for chargebacks and rebates represent the most significant and complex of these estimates.

Chargebacks—Hospira sells a significant portion of its specialty injectable pharmaceutical products through wholesalers, which maintain inventories of Hospira products and later sell those products to end customers. In connection with its sales and marketing efforts, Hospira negotiates prices with end customers for certain products under pricing agreements (including, for example, group purchasing organization contracts). Consistent with industry practice, the negotiated end customer prices are typically lower than the prices charged to the wholesalers.

When an end customer purchases a Hospira product that is covered by a pricing agreement from a wholesaler, the end customer pays the wholesaler the price determined under the pricing agreement. The wholesaler is then entitled to charge Hospira back for the difference between the price the wholesaler paid Hospira and the contract price paid by the end customer (a “chargeback”). This process is necessary to enable Hospira to track actual sales to the end customer, which is essential information to run the business effectively. Settlement of chargebacks generally occurs between 30 and 40 days after the sale to wholesalers.

To account for the chargeback, Hospira records the initial sale to a wholesaler at the price invoiced to the wholesaler and at the same time, records a provision equal to the estimated amount the wholesaler will later charge back to Hospira, reducing gross sales and trade receivables. This provision must be estimated because the actual end customer and applicable pricing terms may vary at the time of the sale to the wholesaler. Accordingly, the most significant estimates inherent in the initial chargeback provision relate to the volume of sales to the wholesalers that will be subject to chargeback and the ultimate end customer contract price. These estimates are based primarily on an analysis of Hospira’s product sales and most recent historical average chargeback credits by product, estimated wholesaler inventory levels, current contract pricing, anticipated future contract pricing changes and claims processing lag time. Hospira estimates the levels of inventory at the wholesalers through analysis of wholesaler purchases and inventory data obtained directly from certain of the wholesalers. A one percent decrease in end customer contract prices for sales pending chargeback at December 31, 2006 would decrease net sales and income before income taxes by $1.3 million. A one percent increase in wholesale units sold subject to chargebacks at December 31, 2006 would decrease net sales and income before income taxes by $1.4 million.

Hospira regularly monitors the provision for chargebacks and makes adjustments when it believes the actual chargebacks may differ from estimates. At December 31, 2006 and 2005, chargebacks of $42.9 million and $64.2 million, respectively, were recorded as a reduction in trade receivables. The methodology used to estimate and provide for chargebacks was consistent across all periods presented.

Rebates—Hospira primarily offers rebates to direct customers, customers who purchase from certain wholesalers at end customer contract prices and government agencies, which administer various programs such as Medicaid. Direct rebates are generally rebates paid to direct purchasing customers based on a contracted discount applied to the direct customer’s purchases. Indirect rebates are rebates paid to “indirect customers” that have purchased Hospira products from a wholesaler under a pricing agreement with Hospira. Governmental agency rebates are amounts owed based on legal requirements with public sector benefit providers (such as Medicaid), after the final dispensing of the product by a pharmacy to a benefit plan participant. Rebate amounts are usually based upon the volume of purchases. Hospira

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estimates the amount of the rebate due at the time of sale, and records the liability and a reduction of gross sales at the same time the product sale is recorded. Settlement of the rebate generally occurs from three to 12 months after sale.

In determining provisions for rebates to direct customers, Hospira considers the volume of eligible purchases by these customers and the rebate terms. In determining rebates on sales through wholesalers, Hospira considers the volume of eligible contract purchases, the rebate terms and the estimated level of inventory at the wholesalers that would be subject to a rebate, which is estimated as described above under “Chargebacks.” Upon receipt of a chargeback, due to the availability of product and customer specific information, Hospira can then establish a specific provision for fees or rebates based on the specific terms of each agreement. Rebates under governmental programs are based on the estimated volume of products sold subject to these programs. Each period the estimates are reviewed and revised, if necessary, in conjunction with a review of contract volumes within the period. Adjustments related to prior period sales have not been material in any period.

Hospira regularly analyzes the historical rebate trends and makes adjustments to recorded reserves for changes in trends and terms of rebate programs. At December 31, 2006 and 2005, accrued rebates of $65.1 million and $83.5 million, respectively, are included in other accrued liabilities. The methodology used to estimate and provide for rebates was consistent across all periods presented.

Concentration of Risk

Financial instruments that are subject to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, and trade receivables. Hospira holds cash and invests in cash equivalents and marketable securities financial instruments with a diversified group of major financial institutions to limit the amount of credit exposure to non-performance by any one institution. For 2006 and 2005, four U.S. wholesalers accounted for approximately 38% and 39%, respectively, of net trade receivables. No end customer accounted for more than 10% of net sales (gross sales less reductions for wholesaler chargebacks, rebates and other allowances). Sales through the same four U.S. wholesalers noted above accounted for approximately 41%, 42% and 39% of net sales in 2006, 2005 and 2004, respectively. Sales related to GPO contracts amounted to $1.4 billion in 2006 and $1.3 billion in both 2005 and 2004.

Loss Contingencies

Hospira accounts for contingent losses in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 5, “Accounting for Contingencies” (“SFAS No. 5”). Under SFAS No. 5, loss contingency provisions are recorded for probable losses at management’s best estimate of a loss, or when a best estimate cannot be made, a minimum loss contingency amount is recorded. These estimates are often initially developed substantially earlier than the ultimate loss is known, and the estimates are refined each accounting period, as additional information is known. Accordingly, if Hospira is initially unable to develop a best estimate of loss, the minimum amount, which could be zero, is recorded.

Income Taxes

Hospira’s provision for income taxes is based on taxable income, statutory tax rates, and tax planning opportunities available in the various jurisdictions in which Hospira operates. Significant judgment is required in determining the provision for income taxes and in evaluating tax positions that are subject to audits and adjustments. Reserves are established when, despite Hospira’s belief that the tax return positions are fully supportable, certain positions are likely to be challenged based on the applicable tax authority’s determination of the positions. Such reserves are based on management’s judgment, utilizing internal and external tax advisors, and represent the best estimate as to the ultimate outcome of tax audits. The provision for income taxes includes the impact of changes to reserves. Each quarter, Hospira reviews

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the anticipated mix of income derived from the various taxing jurisdictions and its reserves in accordance with SFAS No. 5. Deferred income taxes are provided for the tax effect of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements at the enacted statutory rate expected to be in effect when the taxes are paid. Provision for income taxes and foreign withholding taxes are not provided for on undistributed earnings for certain foreign subsidiaries when Hospira intends to reinvest these earnings indefinitely to meet working capital and plant and equipment acquisition needs.

Cash and Cash Equivalents

Hospira considers all cash investments purchased with an original maturity of three months or less to be cash equivalents.

Inventories

Inventories are stated at the lower of cost (first-in, first-out basis) or market. Hospira monitors inventory for exposures related to obsolescence, excess and date expiration, non-conformance, and loss and damage, and records a charge to cost of sales for the amount required to reduce the carrying value of inventory to estimated net realizable value. Such reserves were $48.2 million and $39.6 million at December 31, 2006 and 2005, respectively. Inventory cost includes material and conversion costs.

Goodwill and Intangible Assets

Goodwill is not amortized but is tested for impairment at least annually, or more frequently if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying value. Hospira’s reporting units are the same as its reportable operating segments: U.S. and International.

The evaluation is based upon the estimated fair value of Hospira’s reporting units compared to the sum of the carrying value of assets and liabilities. The annual assessment occurs in the third quarter of each year. As of the latest assessment, no impairment was indicated.

Goodwill as of December 31, 2006 and 2005 totaled $91.9 million and $89.2 million, respectively. The increase of $2.7 million in 2006, including the effect of exchange rate changes of $0.8 million, related to the acquisition of BresaGen Limited, formerly an Australian public company. See Note 2 for more details.

Intangible assets, primarily technology and product rights, are as follows:

(dollars in thousands)		2006				2005
Cost	$		44,873		$		40,768
Less: accumulated amortization	(27,770			)	(25,842			)
Intangible assets, net	$		17,103		$		14,926

In the fourth quarter of 2006, Hospira acquired the rights to certain technologies and generic pharmaceutical products for $4.1 million. These intangible assets are amortized over an average life of 5 years and 8 years, respectively.

In the third quarter of 2005, Hospira acquired the rights to certain technologies and generic pharmaceutical products for $5.2 million, including the rights to an Abbreviated New Drug Application filed with the Food and Drug Administration. These intangible assets are amortized over an average life of 8 years.

Intangible assets have definite lives and are amortized on a straight-line basis over their estimated useful lives (3 to 10 years, average 9 years). Intangible asset amortization for each of the five succeeding fiscal years is estimated at $2.7 million for 2007, $2.5 million for 2008, $2.3 million for 2009, $2.2 million for 2010 and $2.2 million for 2011.

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Investments

Investments in companies in which Hospira has significant influence, but less than a controlling voting interest, are accounted for using the equity method. Significant influence is generally deemed to exist if Hospira has an ownership interest in the voting stock of the investee of between 20% and 50%, although other factors, such as representations on the investee’s Board of Directors, are considered in determining whether the equity method of accounting is appropriate.

Investments in companies in which Hospira does not have a controlling interest or is unable to exert significant influence are accounted for at market value if the investments are publicly traded (“available-for-sale investments”). Investments that are not publicly traded are accounted for using the cost method. Unrealized gains and losses on available-for-sale investments accounted for at market value are reported, net-of-tax, in accumulated other comprehensive loss until the investment is sold or considered impaired, at which time the realized gain or loss is charged to other (income) expense, net.

Hospira regularly reviews its investments to determine whether an other-than-temporary decline in market value exists. Hospira considers factors affecting the investee, factors affecting the industry the investee operates in, and general equity market trends. Hospira considers the length of time an investment’s market value has been below carrying value and the near-term prospects for recovery to carrying value. When Hospira determines that an other-than-temporary decline has occurred, the carrying basis of the security is written down to fair value and the amount of the write-down is included in other (income) expense, net.

Property and Equipment

Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets. Property and equipment at cost (in thousands) consists of the following:

Classification	2006			2005			Estimated Useful Life
Land	$	30,609		$	29,934		N/A
Buildings	418,276			390,793			10 to 50 years (average 28 years)
Equipment	1,334,406			1,195,882			3 to 20 years (average 8 years)
Construction in progress	172,111			198,107			N/A
Instruments placed with customers	317,722			366,306			3 to 7 years (average 5 years)
Property and equipment at cost	2,273,124			2,181,022
Less: accumulated depreciation and amortization	(1,233,693		)	(1,190,209		)
Net property and equipment	$	1,039,431		$	990,813

Instruments placed with customers are drug delivery systems placed with or leased to customers under operating leases.

Impairment of Long-Lived Assets

The carrying value of long-lived assets, including intangible assets and property and equipment, are reviewed whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Determining the extent of an impairment, if any, typically requires various estimates and assumptions including cash flows directly attributable to the asset, the useful life of the asset and residual value, if any. When necessary, Hospira uses internal cash flow estimates, quoted market prices and appraisals as appropriate to determine fair value. In addition, the remaining useful life of the impaired asset is revised, if necessary.

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Capitalized Software Costs

Costs incurred during the application development stage of software projects that are developed or obtained for internal use are capitalized. At December 31, 2006 and 2005, unamortized capitalized software costs totaled $85.9 million and $77.8 million, respectively. Such capitalized amounts will be amortized ratably over the expected lives of the projects when they become operational, not to exceed ten years. Amortization was $13.4 million, $7.5 million and $3.2 million for 2006, 2005 and 2004, respectively, and is included in depreciation in the consolidated statements of cash flows. Amortization of capitalized software prior to the spin-off includes amounts allocated from Abbott.

Capitalized Interest

Hospira follows SFAS No. 34, “Capitalization of Interest Cost,” to determine the interest to be capitalized during the construction period for projects under construction. Hospira recorded capitalized interest of $13.4 million, $10.5 million and $5.5 million in 2006, 2005 and 2004, respectively. Capitalized interest prior to the spin-off represents amounts allocated from Abbott.

Research and Development Costs

Internal research and development costs are expensed as incurred. Clinical trial costs incurred by third parties are expensed as the contracted work is performed. Where contingent milestone payments are due to third parties under research and development arrangements, the milestone payment obligations are expensed when the milestone results are achieved. Revenue from third-party research and development is recorded upon completion of all obligations under the contract and is not significant.

Translation Adjustments

For foreign operations in highly inflationary economies, translation gains and losses are included in net foreign exchange (gain) loss. For remaining foreign operations, translation adjustments are included as a component of accumulated other comprehensive loss.

Stock-Based Compensation

On January 1, 2006, Hospira adopted SFAS No. 123R, “Share-Based Payment,” which requires, among other changes, that the cost resulting from all share-based payment transactions be recognized as compensation cost over the vesting period based on the fair value of the instrument on the date of grant. Under SFAS No. 123R, Hospira uses the Black-Scholes option valuation model to determine the fair value of stock options. The fair value model includes various assumptions, including the expected volatility and expected life of the awards. These assumptions reflect Hospira’s best estimates, but they involve inherent uncertainties based on market conditions generally outside of Hospira’s control. As a result, if other assumptions had been used, stock-based compensation expense, as calculated and recorded under SFAS No. 123R, could have been materially impacted. Furthermore, if Hospira uses different assumptions in future periods, stock-based compensation expense could be materially impacted in future periods. Restricted stock awards to non-employee directors are amortized over their vesting period with a charge to compensation expense.

Pension and Post-Retirement Benefits

Hospira develops long-term assumptions, the most significant of which are the discount rate, the expected rate of return on plan assets, and healthcare cost trend rate. For these assumptions, management consults with actuaries, monitors plan provisions and demographics, and reviews public market data and general economic information.

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The discount rate estimate for the current year is based on a proprietary yield curve developed by third-party actuaries, while prior-year estimates used Moody’s Aa corporate bond index, with consideration of differences in duration between the bonds in the index and Hospira’s benefit liabilities. The change in assumption did not have a significant impact on Hospira’s 2006 consolidated financial statements. The expected rate of return for the pension plan represents the average rate of return to be earned on plan assets over the period the benefits are expected to be paid. The expected rate of return on plan assets is developed from the expected future return of each asset class, weighted by the expected allocation of pension assets to that asset class. Hospira considers historical performance for the types of assets in which the plans invest, independent market forecasts, and economic and capital market conditions.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. Hospira  of SFAS No. 157 on its financial statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (“SFAS No. 158”). One provision of SFAS No. 158 requires full recognition of the funded status of Hospira’s defined benefit and post-retirement plans.The incremental effect of the application of this provision on individual line items in the Consolidated Balance Sheet as of December 31, 2006 is provided in Note 7 of the consolidated financial statements. Another provision of SFAS No. 158 requires the measurement of Hospira’s defined benefit plan’s assets and its obligations to determine the funded status be made as of the end of the fiscal year. Hospira’s current measurement date is November 30. This provision of SFAS No. 158 is effective for fiscal years ending after December 15, 2008. Hospira does not anticipate that the impact from adoption of this provision of SFAS No. 158 will be significant to its financial statements.

In July 2006, the FASB, issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition of uncertain tax positions. The provisions of FIN 48 are effective at the beginning of the first fiscal year that begins after December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings for that year. Hospira is currently evaluating the potential impact of FIN 48 on its financial statements.

Note 2—Acquisitions and Dispositions

On October 31, 2006, Hospira completed the acquisition of all outstanding shares of BresaGen Limited (“BresaGen”), formerly an Australian public company listed on the Australian Stock Exchange, for $17.1 million in cash, including transition costs. BresaGen is a biotechnology company that develops protein and peptide therapeutics. The acquisition resulted in the assumption of $5.4 million of debt, non-tax deductible goodwill of $1.9 million, acquired in-process research and development of $10.0 million, and other assets and liabilities, net of $10.6 million. The impact of the acquisition was not material to Hospira’s results of operations in 2006.

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In July 2005, Hospira acquired Physiometrix, Inc., a developer of non-invasive medical devices. The acquisition broadened Hospira’s portfolio of products for the hospital operating room and intensive care unit, providing brain-function monitoring devices used during surgical and diagnostic procedures. Hospira paid $23.6 million in cash for all outstanding shares of Physiometrix, plus transaction costs, and assumed Physiometrix’s debt of $1 million. The acquisition resulted in intangible assets of $9.9 million that will be amortized over 10 years, non-tax deductible goodwill of $8.2 million, net deferred tax assets of $8.0 million and other assets and liabilities, net of $(1.5) million. The impact of the acquisition was not material to Hospira’s results of operations in 2005 and 2006.

In May 2005, Hospira completed a strategic manufacturing, commercialization and development agreement with ICU Medical, Inc. (“ICU”) and sold its Salt Lake City manufacturing facility and related equipment and inventory to ICU for $31.8 million in cash. In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”), Hospira recorded an impairment charge of $2.4 million, representing the amount by which the carrying value of the assets exceeded the fair value less cost to sell. In connection with the closing of the sale, Hospira recorded a loss of $13.4 million, which was Hospira’s best estimate of the cost of certain obligations for which Hospira is required to reimburse ICU over a 24-month period after closing. Both the impairment and the loss related to obligations assumed were recorded in cost of products sold. Through December 31, 2006, cash paid related to these obligations was $6.3 million. During 2006, Hospira reduced its liability by $6.8 million due to a change in ICU’s strategy for the manufacturing facility that reduced Hospira’s related obligation.

Note 3—Investments

Investments consist of the following:

(dollars in thousands)	2006		2005
Investments, at cost(1)	$	17,470	$	13,928
Investments, at equity(2)	13,871		—
	$	31,341	$	13,928

(1)Cost investments consist of marketable securities classified as available-for-sale and investments in companies over which Hospira does not have significant influence or ownership of more than 20%.

(2)Equity investments consist of investments in affiliated companies over which Hospira has significant influence but not the majority of the equity or risks and rewards.

The cumulative net unrealized gains on investments in publicly traded equity securities accounted for as available-for-sale investments was $8.4 million and $6.8 million at December 31, 2006 and 2005, respectively. There were no realized gains or losses for the years ended 2006, 2005 and 2004. Hospira’s share of losses of the investees of equity investments made after the spin-off was $0.5 million for the year ended 2006, and no losses or earnings in 2005 and 2004.

Note 4—Restructuring Plan

Hospira announced plans to close manufacturing plants in Donegal, Ireland in August 2005; and Ashland, Ohio and Montreal, Canada in February 2006. Hospira also provided the planned timeline for phasing out production at a leased facility in Abbott Laboratories’ North Chicago, Illinois campus. Hospira expects to incur aggregate restructuring charges related to these actions in the range of $75 million to $95 million on a pre-tax basis. The restructuring costs are expected to be incurred through 2009 and consist primarily of costs related to severance and certain other employee benefit costs, additional depreciation resulting from the decreased useful lives of the buildings and certain equipment, and other exit costs.

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Hospira recorded pre-tax restructuring charges of $43.6 million in cost of products sold in 2006. Of the total charges, $15.6 million was recorded in the U.S. segment and $28.0 million in the International segment. Hospira has incurred $52.1 million to date for restructuring charges related to these actions. In May 2006, the Donegal, Ireland manufacturing plant was sold for $11.5 million, resulting in a pre-tax gain of $7.9 million, which is reported in cost of products sold in the International segment. Hospira continued to occupy the plant under a short-term lease until all product transfers were completed in November 2006. In September 2006, the Montreal manufacturing plant was sold for $7.8 million, resulting in a pre-tax gain of $3.1 million, of which the full amount is being deferred and will be recognized at the end of the lease-back term. Hospira will continue to occupy the plant under a lease until all product transfers are completed, which is currently anticipated to be in the first half of 2008. Hospira is currently evaluating the potential disposition of its Ashland, Ohio manufacturing plant and has begun to take the steps necessary to prepare for such disposition, including conducting environmental studies. At December 31, 2006, Hospira has estimated and recorded $0.6 million of environmental clean-up costs related to these actions.

In 2005, Hospira incurred pre-tax restructuring charges of $8.5 million, which were recorded in cost of products sold in the International segment.

The following summarizes the restructuring activity:

	Employee-Related				Accelerated
(dollars in thousands)	Benefit Costs(1)				Depreciation				Other			Total
Balance at January 1, 2005		$	—			$	—		$	—		$	—
Costs incurred		7,313				921			313			8,547
Payments		(49		)		—			(313		)	(362		)
Non cash items		—				(921		)	—			(921		)
Balance at December 31, 2005		7,264				—			—			7,264
Costs incurred		35,354				5,822			2,439			43,615
Payments		(25,287		)		—			(1,017		)	(26,304		)
Non cash items		(858		)		(5,822		)	(113		)	(6,793		)
Balance at December 31, 2006		$	16,473			$	—		$	1,309		$	17,782

(1)Includes pension plan curtailment charge of $1.5 million related to the Ashland, Ohio plant shutdown and both a curtailment gain of $0.6 million and a special termination benefits charge of $1.2 million related to the Donegal, Ireland plant shutdown.

Note 5—Financial Instruments and Derivatives

Hospira accounts for derivatives in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”). Hospira’s operations are exposed to currency exchange-rate risk, which is mitigated by Hospira’s use of foreign currency forward exchange contracts (“forward contracts”). Currency exposures include third-party trade payables and receivables, and intercompany loans where the asset or liability is denominated in a currency other than the functional currency of the entity. Forward contract gains and losses on these exposures substantially offset the remeasurement of the related asset or liability, and both are included in other (income) expense, net. In addition, currency exposures exist for certain subsidiaries for anticipated intercompany purchases, firm commitments, and third-party forecasted transactions expected to be denominated in a foreign currency due to changes in foreign exchange rates. Forward contract gains and losses related to such exposures are also included in other (income) expense, net during the term of the forward contract, as they are not formally designated as hedges under SFAS No. 133. Net forward contract expense included in other (income) expense, net in the consolidated statements of income, and the carrying value and fair value of forward contracts were not significant.

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In January 2005, Hospira entered into interest rate swap transactions whereby the $300 million five-year senior unsecured notes due in June 2009 were effectively converted from fixed to floating rate debt. Hospira records the interest rate swap contracts at fair value and offsets the carrying amount of the fixed-rate debt by the same amount. At December 31, 2006 and 2005, these interest rate swaps had an aggregate fair market value of $(8.2) million and $(8.7) million, respectively. If these derivative instruments had been terminated at December 31, 2006 and 2005, this estimated fair value represents the amount that Hospira would have to pay to counterparties.

The carrying values of certain financial instruments, including primarily cash and cash equivalents, and accounts receivable and payable, approximate their estimated fair values due to their short-term nature. Fair value of marketable securities and forward contracts is the quoted market price of the instrument held.

Note 6—Impairment of Long-Lived Assets

In accordance with SFAS No. 144, long-lived assets are reviewed when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. During 2005, Hospira became aware of certain indicators of potential impairment at its Ashland, Ohio and Montreal, Canada plants, the lowest level for which there are identifiable cash flows. These indicators included higher costs of manufacturing and lower expected future production volumes. Hospira considered the future cash flows expected to result from the operation of these facilities and found the sum of the expected future cash flows (undiscounted) to be less than the carrying value of the assets, indicating an impairment. In determining the estimated fair values, Hospira considered external appraisals and quoted market prices. During 2005, Hospira recorded an impairment charge of $13.1 million which is reported in cost of products sold. Of the total impairment, $10.3 million is reported in the U.S. segment and $2.8 million in the International segment. The impairment related primarily to the carrying values of buildings and machinery and equipment. No impairments occurred in 2006. Considerable management judgment is necessary to estimate future cash flows and fair values. Accordingly, actual results could vary significantly from current estimates.

Note 7—Pension and Post-Retirement Benefits

Retirement plans consist of defined benefit (“pension”), defined contribution, and post-retirement medical and dental plans. Plans cover certain employees both in and outside of the United States.

In connection with the spin-off, Hospira and Abbott entered into an Employee Benefits Agreement, which provided that Abbott retain liabilities for pension benefits for U.S. non-union and international employees who were retired as of the spin-off date and liabilities for post-retirement medical and dental benefits for U.S. non-union employees who were retired or eligible to retire as of the spin-off date.

Benefit Plan Changes

The pension plan for employees of the Ashland, Ohio plant was merged with the Hospira Annuity Retirement Plan (Hospira’s primary pension plan) on April 1, 2006. As a result of the merger, the plan obligations of both plans were re-measured. This resulted in a decrease in the additional minimum pension liability of $24.4 million ($12.9 million net-of-tax). The reduction of the minimum pension liability is reflected in accumulated other comprehensive income.

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In 2004, Hospira announced a series of benefit plan changes including the enhancement of the 401(k) defined contribution plan, the freezing of the U.S. non-union pension plan and the discontinuation of the U.S. non-union post-retirement medical and dental plan. The discontinuation of the U.S. non-union post-retirement medical and dental plan was effective May 1, 2004. Effective December 31, 2004, the U.S. non-union pension plan was frozen. Eligible employees covered by the plan will continue to age into their benefits and will be entitled to all benefits earned when they retire. Beginning January 1, 2005, all U.S. non-union employees became eligible to receive an additional company-matching contribution to the 401(k) plan and employees that were age 40 and above, as of December 31, 2004, are eligible to receive an additional company-matching contribution for five years.

Net Pension and Medical and Dental Benefit Cost

Net cost recognized for the three years ended December 31, for Hospira’s major pension and post-retirement medical and dental benefit plans, is as follows:

	Pension Plans									Medical and Dental Plans
(dollars in thousands)	2006			2005			2004(1)			2006		2005		2004(1)
Service cost for benefits earned during the year	$	2,751		$	2,103		$	22,555		$	2,102	$	1,437	$	6,842
Interest cost on projected benefit obligations	24,432			22,070			29,594			3,371		3,154		9,777
Expected return on plans’ assets	(29,861		)	(29,428		)	(35,568		)	—		—		—
Net amortization	3,162			1,219			3,088			1,747		1,932		2,702
Curtailment of benefits(2)	2,070			—			1,571			—		—		(64,636		)
Net cost	$	2,554		$	(4,036	)	$	21,240		$	7,220	$	6,523	$	(45,315	)

(1)Includes costs allocated from Abbott through the spin-off date for all Hospira employees.
Subsequent to the spin-off, Abbott retained net pension costs for U.S. non-union and international employees who were retired as of the spin-off date and net medical and dental costs for U.S. non-union employees who were retired or eligible to retire as of the spin-off date.

(2)The net curtailment charge for pension plans in 2006 relate to the planned shutdown of the Ashland, Ohio and Donegal, Ireland plants, and in 2004 the charge relates to accelerated recognition of previously unrecognized losses and prior service due to the freezing of the U.S. non-union pension plan. The curtailment benefit for medical and dental plans in 2004 relates to the discontinuation of medical and dental benefits for U.S. non-union employees.

Changes in Benefit Obligations and Plan Assets

In 2004, Hospira changed the actuarial valuation measurement date for certain of the pension and post-retirement plans from December 31 to November 30 to facilitate the planning and reporting process. The effect of this change did not have a material impact on the consolidated financial statements.

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Information about the changes in benefit obligations and plan assets for the periods ended December 31, and the funded status as of December 31, for Hospira’s major U.S. and international plans is as follows:

	Pension Plans						Medical and Dental Plans
(dollars in thousands)	2006			2005			2006			2005
Projected benefit obligations at beginning of year	$	426,112		$	370,216		$	59,556		$	53,569
Service cost	2,751			2,103			2,102			1,437
Interest cost	24,432			22,070			3,371			3,154
Losses (gains), primarily changes in discount and medical trend rates, plan design changes, and differences between actual and estimated health care costs	4,555			40,563			(11,377		)	4,135
Benefits paid	(11,976		)	(10,239		)	(2,319		)	(2,739		)
Curtailment	552			—			—			—
Other, primarily foreign currency translation	(302		)	1,399			—			—
Projected benefit obligations at end of year	$	446,124		$	426,112		$	51,333		$	59,556
Plan assets at fair value at beginning of year	$	343,246		$	324,625		$	—		$	—
Actual return on plans’ assets	39,163			24,966			—			—
Company contributions	2,042			1,668			2,319			2,739
Benefits paid	(11,976		)	(10,239		)	(2,319		)	(2,739		)
Other, primarily foreign currency translation	826			2,226			—			—
Plan assets at fair value at end of year	$	373,301		$	343,246		$	—		$	—
Funded status	$	(72,823	)	$	(82,866	)	$	(51,333	)	$	(59,556	)
Unrecognized actuarial losses, net	—			104,153			—			31,937
Unrecognized prior service cost	—			1,573			—			(1,070		)
Net (accrued) prepaid benefit cost	$	(72,823	)	$	22,860		$	(51,333	)	$	(28,689	)
Amount recognized in the consolidated balance sheet:
Prepaid benefit cost	$	3,052		$	4,106		$	—		$	—
Intangible assets	—			1,573			—			—
Accrued benefit cost	(75,875		)	(80,909		)	(51,333		)	(28,689		)
Accumulated other comprehensive loss	—			98,090			—			—
Net (accrued) prepaid benefit cost	$	(72,823	)	$	22,860		$	(51,333	)	$	(28,689	)
Recognized in Accumulated Other Comprehensive Loss:
Net Actuarial Loss	$	95,064					$	18,706
Net Prior Service Cost	50						(963		)
Net transition (Asset) Obligation	—						—
Total Recognized	$	95,114					$	17,743

The estimated actuarial loss that will be amortized from accumulated other comprehensive income into net periodic pension cost during 2007 is $4.6 million.

The estimated actuarial loss and net prior service cost that will be amortized from accumulated other comprehensive income into net periodic medical and dental benefit cost during 2007 are $0.9 million and $(0.9) million, respectively.

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As of December 31, 2005, the accumulated benefit obligation for Hospira’s primary pension plans was approximately $418.0 million. For such pension plans where the accumulated benefit obligations exceeded plan assets at December 31, 2005, the aggregate accumulated benefit obligations were $402.6 million, the projected benefit obligations were $402.6 million, and the aggregate plan assets were $321.7 million. As a result of this, in 2005, minimum pension liabilities were recognized, and charges to accumulated other comprehensive loss were $35.1 million, net of taxes.

Application of SFAS No. 158 as of December 31, 2006

In September 2006, the FASB issued SFAS No. 158. One provision of SFAS No. 158 requires full recognition of the funded status of Hospira’s defined benefit and post-retirement plans. Adoption of this provision did not impact earnings.

The following table indicates the pre-tax incremental effect of the application of SFAS No. 158 on individual line items in the Consolidated Balance Sheet at December 31, 2006 for Hospira’s major U.S. and international plans.

	Before								After
(dollars in thousands)	SFAS No. 158				Adjustment				SFAS No. 158
Pension Plans:
Prepaid benefit cost		$	3,596			$	(544	)		$	3,052
Accrued benefit liability		(75,606		)		(269		)		(75,875		)
Accumulated other comprehensive income		94,301				813				95,114
Medical and Dental Plans:
Prepaid benefit cost		$	—			$	—			$	—
Accrued benefit liability		(33,590		)		(17,743		)		(51,333		)
Accumulated other comprehensive income		—				17,743				17,743

Actuarial Assumptions

Actuarial weighted average assumptions for Hospira’s primary plans used in determining pension and medical and dental plan information are as follows:

	2006			2005			2004
Weighted average assumptions used to determine benefit obligations at the measurement date:
Discount rate		5.7	%		5.7	%		6.0	%
Expected aggregate average long-term change in compensation		3.6	%		3.6	%		3.5	%
Weighted average assumptions used to determine net benefit cost for the year:
Discount rate		5.7	%		6.0	%		6.2	%
Expected long-term rate of return on plan assets		8.4	%		8.5	%		8.6	%
Expected aggregate average long-term change in compensation		3.6	%		3.5	%		4.5	%

The overall expected long-term rate of return on plan assets is developed from the expected future return of each asset class, weighted by the expected allocation of pension assets to that asset class. Hospira considers historical performance for the types of assets in which the plans invest, independent market forecasts, and economic and capital market conditions.

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The assumed healthcare cost trend rates for Hospira’s primary medical and dental plans are as follows:

	2006		2005		2004
Healthcare cost trend rate assumed for the next year:
Pre-65 years of age	8	%	10	%	10	%
Post-65 years of age	10	%	10	%	10	%
Rate that the cost trend rate gradually declines to:
Pre-65 years of age	5	%	5	%	5	%
Post-65 years of age	5	%	5	%	5	%
Year that rate reaches the assumed ultimate rate:
Pre-65 years of age	2012		2010		2009
Post-65 years of age	2011		2010		2009

A one percentage point increase/(decrease) in the assumed healthcare cost trend rate, with other assumptions held constant, would increase/(decrease) the service and interest components of net post-retirement medical and dental cost for the year ended December 31, 2006, by approximately $1,041/($1,049), and would increase/(decrease) the accumulated post-retirement benefit obligation by approximately $6,071/($5,136).

Pension Plan Assets

The weighted average asset allocation for Hospira’s U.S. pension plans at December 31, and target allocation by asset category are as follows:

	Target			Percentage of plan assets at
Asset Category	Allocation			2006			2005
U.S. & international equity securities		60	%		61	%		61	%
Debt securities		40	%		39	%		39	%
Total		100	%		100	%		100	%

The investment mix between equity securities and debt securities is based upon achieving a desired return, balancing higher return, more volatile equity securities, and lower return, less volatile debt securities. In addition, the mix between equity securities and debt securities is consistent with the long-term nature of the plans’ benefit obligations. Investment allocations are made across a range of markets, industry sectors, capitalization sizes, and, in the case of debt securities, maturities and credit quality. The plans hold no direct investments in securities of Hospira or Abbott.

Cash Funding and Benefit Payments

Hospira funds its domestic pension plans according to IRS funding limitations. Hospira did not contribute any amounts to its primary U.S. pension plan in 2006 and 2005.

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Total benefit payments expected to be paid to participants for the next ten years, which include payments funded from company assets for medical and dental benefits as well as paid from the trusts for pensions, are as follows:

(dollars in thousands)	Pension Plans			Medical and  Dental Plans
2007		$	26,269		$	4,223
2008		11,862			2,933
2009		13,188			4,355
2010		14,698			4,410
2011		16,193			4,464
Years 2012 through 2016		107,512			21,337

Defined Contribution Plans

Hospira’s employees participated through the spin-off date in the Abbott Stock Retirement Plan that is Abbott’s principal defined contribution plan, and thereafter in the Hospira 401(k) Retirement Savings Plan. For the years ended December 31, 2006, 2005 and 2004, Hospira’s contributions were $34,798, $48,101 and $19,579, respectively. Included in 2005 is a $13,822 special company contribution that was announced and accrued in 2004.

Note 8—Taxes on Earnings

Earnings before taxes, and the related provisions for taxes on earnings, were as follows:

(dollars in thousands)	2006			2005			2004
Earnings Before Taxes
Domestic	$	191,078		$	187,904		$	271,425
Foreign	133,619			134,171			140,095
Total	$	324,697		$	322,075		$	411,520
Taxes on Earnings
Current:
U.S. Federal	$	99,625		$	78,949		$	51,218
State	8,052			4,045			6,018
Foreign	9,808			9,151			5,658
Total current	117,485			92,145			62,894
Deferred:
Domestic	(26,276		)	(1,945		)	46,606
Foreign	(4,191		)	(3,763		)	468
Total deferred	(30,467		)	(5,708		)	47,074
Total	$	87,018		$	86,437		$	109,968

Prior to the spin-off date, the provision for income taxes was calculated on a separate return basis, while actual tax payments were made on a combined return filing basis by Abbott. Subsequent to the spin-off, Hospira made $30.7 million in tax payments on earnings for the eight-month period ending December 31, 2004. Tax payments, net of refunds, of $28.6 million and $27.2 million were made on earnings for the twelve-month periods ending December 31, 2006 and December 31, 2005, respectively. Hospira has recorded reserves for income tax loss contingencies in accordance with SFAS No. 5. Operating loss carryforwards at December 31, 2006 amounted to $23.1 million, which are subject to expiration in periods from 2020 through 2025. The amount of income taxes that Hospira pays is subject to ongoing

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audits by federal, state and foreign tax authorities. Hospira’s estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts and circumstances existing at that time. Hospira believes that it has adequately provided for the best estimate of the expected outcomes related to these matters. However, Hospira’s future results may include favorable or unfavorable adjustments to the estimated tax liabilities in the period the assessments are revised or resolved. Currently, Hospira’s 2004 and 2005 U.S. income tax returns are the subject of a routine examination.

U.S. income taxes and foreign withholding taxes were not provided for on undistributed earnings of certain foreign subsidiaries of $154.2 million at December 31, 2006 after the repatriation noted below. These undistributed earnings, which are considered to be permanently invested, would be subject to taxes if they were remitted as dividends. The Jobs Act provided for a special one-time dividends received deduction on the repatriation of foreign earnings to a U.S. taxpayer, provided certain criteria were met, including a domestic reinvestment plan for such earnings. In 2005, Hospira recorded an income tax charge of $9.1 million in connection with the repatriation of $175 million of qualified foreign earnings under the Jobs Act.

Differences between the effective income tax rate and the U.S. statutory tax rate were as follows:

	2006		2005		2004
Statutory tax rate	35.0	%	35.0	%	35.0	%
Benefit of tax exemptions in Costa Rica and the Dominican Republic	(14.6	)	(11.9	)	(9.0	)
Repatriated earnings	—		2.8		—
State taxes, net of federal benefit	2.8		1.7		2.3
All other, net	3.6		(0.8	)	(1.6	)
Effective tax rate	26.8	%	26.8	%	26.7	%

The temporary differences that give rise to deferred tax assets and liabilities were as follows:

	2006						2005
(dollars in thousands)	Assets			Liabilities			Assets		Liabilities
Compensation, employee benefits, and benefit plan liabilities	$	76,897			$	—	$	61,437		$	6,750
Trade receivable reserves and chargeback accruals	23,146				48		35,730			—
Inventory	58,167				—		38,847			—
State income taxes	20,426				1,751		17,058			2,659
Property and equipment	14,623				47,154		6,465			55,500
Intangibles	16,308				2,974		8,484			3,924
Investments	6,630				3,195		6,630			2,608
Other, primarily other accruals, net operating loss carryforwards, and reserves not currently deductible	53,600				—		54,648			—
Valuation allowances	(1,300		)		—		—			—
Total	$	268,497			$	55,122	$	229,299		$	71,441

Valuation allowances consists of $1.3 million for certain tax credits.

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The separation and distribution agreement with Abbott allowed a one-time adjustment to distributed deferred taxes based on actual tax return filings by Abbott, which include Hospira’s results through the spin-off date. In addition, during 2005, Hospira performed an analysis of the appropriate state tax rate required based on Hospira’s tax position as a stand-alone taxpayer for the net deferred tax assets transferred from Abbott at the spin-off date. As a result, Hospira determined that its income taxes as a stand-alone taxpayer should be provided at a higher effective rate than the rate used while part of Abbott. The final adjustment for these two items was made in 2005, which resulted in a $12.0 million increase to net deferred tax assets and additional paid-in capital.

Note 9—Sales-Type Leases

The net investment in sales-type leases of certain drug delivery pumps consists of the following:

	December 31
(dollars in thousands)	2006			2005
Minimum lease payments receivable	$	40,944		$	42,195
Unguaranteed residual value of leased equipment	—			—
Unearned interest income	(4,222		)	(5,034		)
Allowance for estimated uncollectible lease receivables	(29		)	(31		)
Net investment in sales-type capital leases	36,693			37,130
Current portion(1)	(10,980		)	(8,302		)
Net investment in sales-type capital leases, less current portion(1)	$	25,713		$	28,828

(1)The current and long-term portions are recorded in trade receivables and other assets, respectively, in the balance sheet.

Future minimum amounts due under customer agreements accounted for as sales-type capital leases as of December 31, 2006 are as follows:

Year ending December 31:	Sales-Type
(dollars in thousands)	Capital Leases
2007		$	12,974
2008		12,286
2009		9,527
2010		4,932
2011		1,200
Thereafter		25
		$	40,944

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Note 10—Short-term Borrowings and Long-term Debt

Hospira’s debt consists of the following at December 31, 2006 and 2005:

(dollars in thousands)	2006			2005
Long-term debt:
Senior unsecured notes due 2009	$	300,000		$	300,000
Senior unsecured notes due 2014	400,000			400,000
Economic development promissory notes due 2015	1,320			1,465
International borrowings due 2008	4,914			3,502
Securitized mortgage note due 2015	4,871			—
Fair value of interest rate swap instruments	(8,181		)	(8,662		)
Total long-term debt	702,924			696,305
Unamortized debt discount on senior unsecured notes	(880		)	(1,020		)
Long-term debt	702,044			695,285
Short-term borrowings	4,532			2,579
Total debt	$	706,576		$	697,864

The aggregate maturities of debt for each of the next five years are as follows: $4.5 million in 2007, $5.6 million in 2008, $300.7 million in 2009, $0.8 million in 2010 and $404.0 million thereafter.

$700 Million Senior Unsecured Notes

On June 15, 2004, Hospira completed an offering of a $700 million aggregate principal amount of notes consisting of $300 million principal amount of five-year senior unsecured notes and $400 million principal amount of ten-year senior unsecured notes. The $300 million five-year notes bear interest at a rate of 4.95% per annum and mature on June 15, 2009, and the $400 million ten-year notes bear interest at a rate of 5.90% per annum and mature on June 15, 2014. The proceeds from this offering, together with cash on hand, were used to repay all amounts outstanding under the short-term senior unsecured credit facility entered into as part of the spin-off from Abbott.

The estimated aggregate fair value of the senior unsecured notes equaled $682.7 million at December 31, 2006. The fair market value is based on quoted market prices. In January 2005, Hospira entered into interest rate swap transactions whereby the $300 million five-year senior unsecured notes due in June 2009 were effectively converted from fixed to floating rate debt. Hospira records the interest rate swap contracts at fair value and offsets the carrying amount of the fixed-rate debt by the same amount. At December 31, 2006, these interest rate swaps had an aggregate fair market value of $(8.2) million. If these derivative instruments had been terminated at December 31, 2006, this estimated fair value represents the amount that Hospira would have to pay to counterparties.

$1.75 Million Economic Development Promissory Notes

In March 2005, Hospira issued economic development promissory notes, the proceeds of which were used for a distribution facility expansion. The $1.75 million ten-year notes bear a fixed rate of interest of 2%, with principal and interest due monthly.

International Borrowings

Hospira has entered into various loan agreements in conjunction with the legal transfer of certain international operations from Abbott. These borrowings are made by Hospira’s foreign affiliates in their local currency and are used to optimize the capital structure. As of December 31, 2006 and 2005, Hospira

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had $8.8 million and $5.9 million of such loans outstanding, respectively, of which $3.9 million and $2.4 million, respectively, was classified as short-term.

Acquired Debt

In connection with the acquisition of BresaGen in the fourth quarter of 2006, Hospira assumed a $5.4 million mortgage note that is secured by land and building, of which $0.5 million is classified as short-term. The agreement bears a fixed rate of interest of 7.47%, with payments of principal and interest due quarterly, ending in March 2015.

$375 Million Unsecured Revolving Credit Facility

Hospira has a five-year $375 million unsecured revolving credit facility (the “Revolver”), which it entered into on December 16, 2005 and was amended on January 15, 2007 to permit the Mayne Pharma acquisition and to temporarily increase the maximum leverage ratio and lower the minimum interest coverage ratio. This facility is available for working capital and other requirements. The Revolver allows Hospira to borrow funds at variable interest rates as short-term cash needs dictate. Borrowings under the Revolver bear interest at LIBOR plus a margin, plus a utilization fee if borrowings under the Revolver exceed 50% of the aggregate amount of committed loans. Hospira is also required to pay a facility fee on the aggregate amount of committed loans. The annual rates for the LIBOR margin, the utilization fee and the facility fee are currently 0.45%, 0.075% and 0.10%, respectively, and are subject to increase or decrease if there is a change in Hospira’s current credit ratings. The amount of available borrowings may be increased to a maximum of $500 million, and the term may be increased for up to two additional years, under certain circumstances. As of December 31, 2006, Hospira had no amounts borrowed or otherwise outstanding under the Revolver.

Debt Covenants

The Revolver and the indenture governing Hospira’s senior unsecured notes contain, among other provisions, covenants with which Hospira must comply while they are in force. The covenants limit Hospira’s ability to allow liens on its properties or assets, or merge or consolidate with other entities. Under the Revolver, among other things, Hospira must also comply with certain financial covenants, including a minimum interest coverage ratio and a maximum leverage ratio. As of December 31, 2006, Hospira was in compliance with all covenants under the Revolver and the Senior Unsecured Notes. Upon the closing of the Mayne Pharma acquisition, the Revolver was amended to permit the acquisition and to temporarily increase the maximum leverage ratio and lower the minimum interest coverage ratio.

Note 11—Segment and Geographic Information

Hospira’s principal business is the development, manufacture and sale of hospital products including specialty injectable pharmaceuticals and medication delivery systems, and the provision of injectable pharmaceutical contract manufacturing services. Hospira has two reportable segments: U.S. and International.

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Hospira’s underlying accounting records are maintained on a legal entity basis for government and public reporting requirements. Segment disclosures are on a performance basis consistent with internal management reporting. Certain immaterial reclassifications have been made to the basis of presentation to facilitate comparable reporting. For internal management reporting, intersegment transfers of inventory are recorded at standard cost and are not a measure of segment income from operations. The costs of certain corporate functions that benefit the entire organization are not allocated. The following segment information has been prepared in accordance with the internal accounting policies of Hospira, as described above.

	Net Sales to External Customers						Income from Operations
(dollars in thousands)	2006		2005		2004		2006			2005			2004
U.S. (1)	$	2,220,501	$	2,187,775	$	2,220,070	$	384,240		$	328,517		$	404,876
International	468,004		438,921		424,966		15,572			68,407			88,723
Total reportable segments	$	2,688,505	$	2,626,696	$	2,645,036	399,812			396,924			493,599
Corporate functions							(60,228		)	(60,309		)	(65,949		)
Income from operations							339,584			336,615			427,650
Other, net							(14,887		)	(14,540		)	(16,130		)
Income before income taxes							$	324,697		$	322,075		$	411,520

(1)2004 U.S. Income from operations includes curtailment benefit of $64.6 million.

	Depreciation and Amortization						Additions to Long-Term Assets						Total Assets
(dollars in thousands)	2006		2005		2004		2006		2005		2004		2006		2005
U.S.	$	116,579	$	118,280	$	110,577	$	183,677	$	209,078	$	187,796	$	2,036,486	$	2,120,174
International	38,211		36,180		30,668		50,961		48,954		41,058		702,141		564,885
Total reportable segments	$	154,790	$	154,460	$	141,245	$	234,638	$	258,032	$	228,854	$	2,738,627	$	2,685,059
Goodwill and net intangible assets	1,927		1,831		4,278								108,960		104,123
Total	$	156,717	$	156,291	$	145,523							$	2,847,587	$	2,789,182

Note 12—Shareholders’ Equity

Common Stock

Hospira is authorized to issue 400 million shares of common stock, par value $0.01 per share, and 50 million shares of preferred stock, par value $0.01 per share, of which four million shares are designated as Series A Junior Participating Preferred Stock for issuance in connection with the exercise of preferred share purchase rights as described below. At December 31, 2006 and 2005, approximately 10.0 million and 12.2 million shares of common stock were reserved for issuance under various employee incentive programs, respectively. As of December 31, 2006 and 2005, 155.9 million and 161.7 million shares are outstanding, respectively.

Treasury Stock

In February 2006, Hospira’s board of directors approved a $400 million share repurchase program. The repurchase of shares commenced in early March 2006, and as of December 31, 2006, Hospira had repurchased 7,584,400 shares for $299.8 million. Because Hospira must dedicate a substantial portion of its future cash to servicing debt and integrating Mayne Pharma into its operations, Hospira does not expect to continue repurchasing shares for the foreseeable future.

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Preferred Share Purchase Rights

Each outstanding share of common stock provides the holder with one Preferred Share Purchase Right (“Right”). Upon exercise, each Right entitles the holder to purchase 1/100th of a share of Series A Junior Participating Preferred Stock of Hospira at a price initially set at $100, subject to amendment or adjustment. The Rights will become exercisable only if a person or group (an “acquirer”) acquires, or obtains the rights to acquire, without prior approval of the Board of Directors, more than 15% of Hospira’s common stock, or an acquirer announces a tender offer that may result in the acquisition of such percentage (a “Triggering Event”). After a Triggering Event, Rights held by an acquirer are not exercisable or exchangeable as described below.

If a Triggering Event occurs, each Right will generally be exercisable for common stock of Hospira having a value equal to twice the exercise price of the Right. If the Triggering Event involves an acquisition of Hospira or over 50% of its assets or earning power, each Right will be exercisable for common stock of the acquirer having a value equal to twice the exercise price of the Right. If a Triggering Event occurs in which the acquirer acquires or obtains the right to acquire less than 50% of Hospira’s common stock, Hospira’s Board of Directors, in its discretion, may require that each Right be exchanged for one share of Hospira’s common stock or for preferred stock having a value equal to one share of common stock.

The Rights will expire on April 11, 2014, unless earlier exchanged or redeemed at $0.01 per Right or unless that date is extended by the Board of Directors. The Board of Directors may amend the rights agreement, and may approve acquisitions of Hospira or its securities such that the Rights would not apply to such approved acquisitions. The Rights are intended to have anti-takeover effects and may have the effect of substantially increasing the cost of acquiring Hospira in a transaction not approved by the Board of Directors.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss, net of taxes consisted of the following:

(dollars in thousands)	2006			2005
Cumulative foreign currency translation gains	$	12,910		$	222
Cumulative retirement plan adjustments, net of tax (1)	(68,840		)	(60,431		)
Cumulative unrealized gains on marketable equity securities, net of tax	5,166			4,185
Accumulated Other Comprehensive Loss	$	(50,764	)	$	(56,024	)

(1)Includes $10.7 million, net of tax relating to the adoption of SFAS No. 158.

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Note 13—Earnings Per Share

Basic earnings per share are computed by dividing net income by the number of weighted average common shares outstanding during the reporting period. Diluted earnings per share are calculated to give effect to all potentially dilutive common shares that were outstanding during the reporting period. The following table shows basic and diluted earnings per share and the effect of stock options on the weighted average number of shares outstanding used in calculating diluted earnings per share as of December 31:

(shares in thousands, except per share amounts)

	2006		2005		2004
Weighted average basic common shares outstanding	157,368		159,275		156,187
Assumed exercise of stock options	3,056		2,359		973
Weighted average dilutive common shares outstanding	160,424		161,634		157,160
Earnings Per Common Share:
Basic	$	1.51	$	1.48	$	1.93
Diluted	$	1.48	$	1.46	$	1.92

For 2006, 2005 and 2004, there were outstanding options to purchase approximately 2.8 million, 0.7 million and 3.0 million shares of Hospira stock, respectively, for which the exercise price of the options exceeded the average stock price. Accordingly, these options are excluded from the diluted earnings per share calculation for these periods.

Note 14—Incentive Stock Program

Plan Overview

Hospira’s 2004 Long-Term Stock Incentive Plan (“2004 Plan”), which became effective April 30, 2004, provides for the grant of up to 31 million shares of stock options, stock appreciation rights, stock awards (restricted stock, restricted stock units, performance shares, performance units), and cash-based awards to employees and non-employee directors. The option exercise price generally may not be less than the underlying stock’s fair market value at the date of grant, and the maximum term of an option is ten years. The amounts granted each calendar year to any one employee or non-employee director is limited depending on the type of award. Stock options comprise the majority of awards granted since inception of the 2004 Plan. As of December 31, 2006, approximately 10.0 million shares remain available for grant.

In May 2006 and 2005, 2.2 million and 2.6 million options were granted to certain employees for the 2006 and 2005 annual stock option grants, respectively. These options were awarded at the fair market value at the time of grant, generally vest over three years and have a ten-year term.

In May 2004, Hospira awarded a Founders Grant of approximately 8.4 million options under the 2004 Plan to substantially all employees in the United States and certain international employees, at the fair market value at the time of grant. These options generally vest in six months and have a five-year term for all employees except corporate officers, whose options vest over three years and have a ten-year term.

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Option Activity and Outstanding Options

A summary of information related to stock options is as follows:

Hospira Stock Options		Shares		Weighted  Average  Exercise  Price			Weighted  Average  Remaining  Life (Years)		Aggregate  Intrinsic  Value  (dollars in  thousands)
Outstanding at December 31, 2004		15,053,202			$	27.55
Granted		3,452,985			34.39
Exercised		(5,161,068	)		26.71
Lapsed		(233,428	)		29.68
Outstanding at December 31, 2005		13,111,691			29.65
Granted		2,819,560			41.68
Exercised		(2,189,566	)		27.05
Lapsed		(172,219	)		33.15
Outstanding at December 31, 2006 (1)		13,569,466			$	32.52		6.20		$	46,116
Exercisable at December 31, 2006		8,514,173			$	30.30		4.78		$	39,314
(1)	The difference between options outstanding and those expected to vest is not significant.

The total intrinsic value of options exercised during 2006, 2005 and 2004 was $34.3 million, $58.5 million and $6.9 million, rspectively.

Summarized information about Hospira stock options outstanding and exercisable at December 31, 2006, which includes options converted from Abbott, is as follows:

	Options Outstanding						Exercisable Options
Range of Exercise Prices	Shares	Weighted  Average  Remaining  Life (Years)		Weighted  Average  Exercise  Price			Shares	Weighted  Average  Exercise  Price
$12.01 - $25.00	887,228		5.0		$	22.85	887,228		$	22.85
$25.01 - $30.00	5,005,544		4.6		27.11		4,200,651		27.04
$30.01 - $35.00	3,194,785		7.5		32.27		1,446,309		31.99
$35.01 - $40.00	1,413,029		5.0		37.39		1,267,788		37.29
$40.01 - $48.00	3,068,880		8.4		42.18		712,197		42.96
$12.01 - $48.00	13,569,466		6.2		$	32.52	8,514,173		$	30.30

Stock-Based Compensation

On January 1, 2006, Hospira adopted SFAS No. 123R, which requires, among other changes, that the cost resulting from all share-based payment transactions be recognized as compensation cost over the vesting period based on the fair value of the instrument on the date of grant. SFAS No. 123R revises SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), which previously allowed pro forma disclosure of certain share-based compensation expense. Further, SFAS No. 123R supercedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” which previously allowed the intrinsic value method of accounting for stock options. Such method was applied by Hospira, and accordingly, Hospira’s reported net income has not included recognition of stock-based compensation expense prior to the adoption of SFAS No. 123R.

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Hospira adopted SFAS No. 123R as of January 1, 2006, using the modified prospective transition method. In accordance with the modified prospective transition method, Hospira’s consolidated financial statements for the prior periods have not been restated to reflect, and do not include, the impact of SFAS No. 123R. Stock-based compensation expense of $35.9 million was recognized under SFAS No. 123R for 2006. The related income tax benefit recognized was $12.5 million. As noted above, there was no stock-based compensation expense related to employee stock options recognized in the statement of income during the year ended December 31, 2005 and 2004.

The following table illustrates the pro forma effect on net income and earnings per share if Hospira had applied the fair value recognition provisions of SFAS No. 123 during 2005 and 2004.

(dollars in thousands, except per share amounts)	2005		2004
Net Income, as reported	$	235,638	$	301,552
Hospira stock-based compensation, net of tax (1)	15,575		41,596
Pro forma net income including Hospira stock-based compensation expense	220,063		259,956
Abbott stock-based compensation, net of tax (2)	—		7,048
Pro forma net income including all stock-based compensation expense	$220,063		$252,908
Basic EPS, as reported	$	1.48	$	1.93
Basic EPS, pro forma	$	1.38	$	1.62
Diluted EPS, as reported	$	1.46	$	1.92
Diluted EPS, pro forma	$	1.36	$	1.61

(1)For 2004, the Hospira pro forma stock-based compensation expense, determined using the fair value method for stock-based awards, net of tax, includes $33.8 million for Founders options granted in May 2004, and $7.8 million for converted options.

(2)For periods prior to the spin-off, these amounts reflect the Abbott stock-based compensation for Hospira employees, whether or not those awards were cancelled and replaced by Hospira awards at the time of the spin-off. For periods subsequent to the spin-off, Abbott awards for Hospira employees who were not retirement eligible were converted to Hospira options, and only the corresponding unvested portion of such awards impacts pro forma income.

SFAS No. 123R requires that cash flows relating to the benefits of tax deductions in excess of recognized compensation cost be reported as financing cash flow, rather than as an operating cash flow, as previously required. For options exercised during 2006, this excess tax benefit was $3.4 million.

As of December 31, 2006, there was $37.9 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements. That cost is expected to be recognized over a weighted average period of 1.4 years. The total fair value of shares becoming fully vested during 2006, 2005 and 2004 was $12.3 million, $14.5 million and $9.4 million, respectively.

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The weighted average fair value for the Hospira options granted in 2006, 2005 and 2004 was $15.82, $11.28 and $6.63, respectively. The weighted average fair value for the Abbott options granted in 2004 was $11.79. The fair value was estimated using the Black-Scholes option-pricing model, based on the average market price at the grant date and the weighted average assumptions specific to the underlying options. Expected volatility assumptions are based on a combination of historical volatility of Hospira’s stock and historical volatility of peer companies. Expected life assumptions for 2006 are based on the “simplified” method as described in SEC SAB No. 107, which is the midpoint between the vesting date and the end of the contractual term. The risk-free interest rate was selected based upon yields of U.S. Treasury issues with a term equal to the expected life of the option being valued. The historical Abbott assumptions relate to Abbott stock and are therefore based on Abbott’s valuation assumptions. The weighted average assumptions utilized for option grants during the periods presented are as follows:

	2006		2005		2004
Hospira Stock Options Black-Scholes assumptions (weighted average):
Volatility	31.0	%	30.0	%	32.0	%
Expected life (years)	5.7		4.9		2.9
Risk-free interest rate	4.9	%	3.9	%	2.9	%
Dividend yield	0.0	%	0.0	%	0.0	%
Abbott Stock Options Black-Scholes assumptions (weighted average):
Volatility	N/A		N/A		32.0	%
Expected life (years)	N/A		N/A		5.4
Risk-free interest rate	N/A		N/A		2.9	%
Dividend yield	N/A		N/A		2.2	%

Note 15—Commitments and Contingencies

Commercial Commitments

Hospira’s commercial commitments as of December 31, 2006, representing commitments not recorded on the balance sheet, but potentially triggered by future events, primarily consist of non-debt letters of credit to provide credit support for certain transactions as requested by third parties. As of December 31, 2006, Hospira had $11.7 million of outstanding letters of credit, with a majority expiring in 2007. No amounts have been drawn under these letters of credit.

Leases

Minimum future operating lease payments, including lease payments for real estate, vehicles, computers and office equipment, as of December 31, 2006, were:

(dollars in thousands)
2007	$	26,811
2008	24,202
2009	24,158
2010	19,922
2011	19,519
Remaining Years	62,574
Total minimum future lease payments	$	177,186

Lease expense under operating leases totaled $22.1 million, $24.6 million and $23.2 million in 2006, 2005 and 2004, respectively. Lease expense prior to the spin-off includes amounts allocated from Abbott.

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Litigation

Hospira, Abbott, or in some instances both, are involved in various claims and legal proceedings, including product liability claims and proceedings related to Hospira’s business.

Various state and federal agencies, including the U.S. Department of Justice and various state attorneys general, are investigating a number of pharmaceutical companies, including Abbott, for allegedly engaging in improper marketing and pricing practices with respect to certain Medicare and Medicaid reimbursable products, including practices relating to average wholesale price (“AWP”). These are civil investigations that are seeking to identify the practices and determine whether those practices violated any laws, including federal and state false claims acts, or constituted fraud in connection with the Medicare and/or Medicaid reimbursement paid to third parties. In addition, Abbott is a defendant in a number of purported class actions on behalf of individuals or entities, including healthcare insurers and other third-party payors, that allege generally that Abbott and numerous other pharmaceutical companies reported false or misleading pricing information in connection with federal, state and private reimbursement for certain drugs. Many of the products involved in these investigations and lawsuits are Hospira products. Hospira is cooperating with the authorities in these investigations. There may be additional investigations or lawsuits, or additional claims in the existing investigations or lawsuits, initiated with respect to these matters in the future. Hospira cannot be certain that it will not be named as a subject or defendant in these investigations or lawsuits. Hospira is a named defendant in two such lawsuits: The State of Texas ex rel. Ven-A-Care of the Florida Keys, Inc. v. Abbott Laboratories Inc., Hospira, Inc., B. Braun Medical Inc. and Baxter Healthcare Corporation, Case No. GV401286, pending in the District Court of Travis County, Texas and State of Hawaii v. Abbott Laboratories, Inc., et al.,Case No. 06-1-0720-04, pending in the Circuit Court of the First Circuit, Hawaii. Hospira has been dismissed as a defendant in the case, United States of America ex rel. Ven-A-Care of the Florida Keys, Inc. v. Abbott Laboratories, Inc., et al Case No. 95-1354, pending in the United States District Court for the Southern District of Florida. Abbott will indemnify Hospira for liabilities associated with pending or future AWP investigations and lawsuits only to the extent that they are of the same nature as the lawsuits and investigations that existed against Abbott as of the spin-off date and relate to the sale of Hospira products prior to the spin-off. Hospira will assume any other losses that may result from these investigations and lawsuits related to Hospira’s products, including any losses associated with post-spin-off activities. These investigations and lawsuits could result in changes to Hospira’s business practices or pricing policies, civil or criminal monetary damages, penalties or fines, imprisonment and/or exclusion of Hospira products from participation in federal and state healthcare programs, including Medicare, Medicaid and Veterans’ Administration health programs, any of which could have a material adverse effect on its business, profitability and financial condition.

Hospira has been named as a defendant in a lawsuit alleging generally that the spin-off of Hospira from Abbott Laboratories interfered with employee benefits in violation of the Employee Retirement Security Act of 1974 (“ERISA”). The lawsuit was filed on November 8, 2004 in the United States District Court for the Northern District of Illinois, and is captioned:  Myla Nauman, Jane Roller and Michael Loughery v. Abbott Laboratories and Hospira, Inc. On November 18, 2005, the complaint was amended to assert an additional claim against Abbott and Hospira for breach of fiduciary duty under ERISA. Hospira has been dismissed as a defendant with respect to the new fiduciary duty claim. By Order dated December 30, 2005, the Court granted class action status to the lawsuit. The new claim in the amended complaint is not subject to the class certification ruling. As to the sole claim against Hospira in the original complaint, the court certified a class defined as:  “all employees of Abbott who were participants in the Abbott Benefit Plans and whose employment with Abbott was terminated between August 22, 2003 and April 30, 2004, as a result of the spin-off of the HPD/creation of Hospira announced by Abbott on August 22, 2003, and who were eligible for retirement under the Abbott Benefit Plans on the date of their terminations.”  Hospira denies all material allegations asserted against it in the complaint.

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On August 12, 2005, Retractable Technologies, Inc. (“RTI”) filed a lawsuit against Abbott Laboratories, Inc. alleging breach of contract and fraud in connection with a National Marketing and Distribution Agreement (“Agreement”) between Abbott and RTI signed in May 2000. Retractable Technologies, Inc. v. Abbott Laboratories, Inc., Case No. 505CV157, pending in U.S. District Court for the Eastern District of Texas. RTI purported to terminate the contract for breach in 2003. The lawsuit alleges that Abbott misled RTI and breached the Agreement in connection with Abbott’s marketing efforts. RTI seeks unspecified monetary damages as well as punitive damages. Hospira has conditionally agreed to defend and indemnify Abbott in connection with this lawsuit, which involves a contract carried out by Abbott’s former Hospital Products Division. Abbott denies all material allegations in the complaint. Additionally, Abbott maintains that the dispute must be resolved by arbitration, in accordance with the terms of the Agreement. Abbott intends to pursue claims against RTI for breach of the Agreement in arbitration or in federal court. Hospira is entitled, pursuant to its agreements with Abbott, to any amounts recovered due to RTI’s breach of the Agreement.

Hospira’s product liability claim exposures are evaluated each reporting period. Hospira’s reserves, which are not significant at December 31, 2006 and 2005, are the best estimate of loss, as defined by SFAS No. 5. Based upon information that is currently available, management believes that the likelihood of a material loss in excess of recorded amounts is remote.

Additional legal proceedings may occur that may result in a change in the estimated reserves recorded by Hospira. It is not possible to predict the outcome of such proceedings with certainty and there can be no assurance that their ultimate disposition will not have a material adverse effect on Hospira’s financial position, cash flows, or results of operations.

Note 16—Relationship with Abbott

In connection with the spin-off, Hospira and Abbott entered into agreements pursuant to which Hospira and Abbott provided the other, on an interim, transitional basis, various services. The agreed-upon charges for such services were generally intended to allow the servicing party to recover all out-of-pocket costs plus a mark up. The services generally commenced on the spin-off date and terminated no later than 24 months following the spin-off date. The net cost of these various services to Hospira was $0.5 million, $4.9 million and $13.3 million for 2006, 2005 and 2004, respectively. As of December 31, 2006, all transition agreements with Abbott have been completed.

In addition, Hospira leases floor space in certain Abbott facilities. The terms of the leases range from two to ten years from the spin-off date, unless terminated earlier by Hospira, and include additional services provided by Abbott. These additional services are integral to the facilities and primarily include manufacturing support functions, quality assurance and information technology systems. As of December 31, 2006, the only remaining lease is for a facility in Abbott Laboratories’ North Chicago, Illinois campus. The cost for the leases and additional services was $21.1 million, $26.1 million and $29.7 million for 2006, 2005 and 2004, respectively.

Both Hospira and Abbott have provided and will continue to provide manufacturing services to the other. For manufacturing services provided to Abbott, Hospira records as revenue its costs plus a third-party manufacturing profit. For certain products, Hospira receives the bulk material from Abbott and the mark up is on the value-added portion only. Inventory that Hospira purchases from Abbott is at Abbott’s cost plus a third-party manufacturing profit. Sales to Abbott amounted to $160.8 million, $169.1 million and $180.0 million for 2006, 2005 and 2004, respectively. Product purchases from Abbott were $76.6 million, $83.8 million and $83.9 million for 2006, 2005 and 2004, respectively.

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In connection with the spin-off, Hospira and Abbott agreed that the legal transfer of certain operations and assets (net of liabilities) outside the United States would occur, and be completed, within two years after the spin-off. During the transition period, these operations and assets were used in the conduct of Hospira’s international business and Hospira was subject to the risks and entitled to the benefits generated by such operations and assets. Hospira was obligated to pay Abbott for these operations and assets, and assume the corresponding liabilities, over a two-year period after the spin-off date as Hospira established its business infrastructure outside the United States and obtained regulatory approval for the transfer of the marketing authorizations for Hospira products to local Hospira affiliates or third-party distributors. The transfers were completed in the second quarter of 2006. The total amounts paid in 2006 and 2005 were $126.2 million and $116.7 million, respectively.

Note 17—Supplemental Financial Information

(dollars in thousands)	2006		2005
Other Accrued Liabilities:
Accrued rebates	$	65,088	$	83,537
Income taxes payable	142,143		47,848
All other	161,458		145,713
Total	$	368,689	$	277,098

		2006		2005
Post-Retirement Obligations and Other Long-Term Liabilities:
Accrued post-retirement medical and dental costs(a)		$	47,357	$	26,189
Pension liabilities(a)		75,539		99,663
All other		52,396		39,984
Total		$	175,292	$	165,836
(a)	See Note 7 regarding changes in accrued pension and post-retirement obligations

(dollars in thousands)	2006			2005			2004
Other (Income) Expense, net:
Interest income	$	(17,074	)	$	(15,052	)	$	(2,357	)
Foreign exchange	(1,057		)	(134		)	(251		)
All other	1,994			1,450			(20		)
Total	$	(16,137	)	$	(13,736	)	$	(2,628	)

Note 18—Subsequent Event

On September 20, 2006, Hospira entered into a scheme implementation agreement (the “Scheme”), with Mayne Pharma Limited (“Mayne Pharma”), an Australian public company listed on the Australian Stock Exchange. Mayne Pharma manufactures and sells primarily specialty injectable pharmaceuticals. The Scheme contemplated that Hospira would acquire Mayne Pharma by means of a scheme of arrangement transaction under Australian law pursuant to which Hospira would pay AUD4.10 per share for all outstanding shares of Mayne Pharma. On January 19, 2007, the Supreme Court of Victoria, Australia, approved the Scheme and on February 2, 2007, Hospira acquired all the outstanding common shares of Mayne Pharma for approximately $2.0 billion. The results of operations of Mayne Pharma will be included in Hospira’s results for periods on and after February 2, 2007.  Valuations of property, plant and

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equipment and intangible assets are currently in process. Developed product rights intangible assets will be amortized over their estimated useful lives. Acquired in-process research and development will be expensed in the first quarter of 2007.

On February 1, 2007, Hospira incurred $1.925 billion of bank debt to finance the Mayne Pharma acquisition. The remainder of the purchase price was funded with cash on hand. The bank facilities include a $500 million, three-year term loan facility and a $1.425 billion one-year bridge loan facility. Under the term loan facility, Hospira must repay $12.5 million in principal at the end of each quarter in 2007, $50.0 million at the end of each quarter in 2008 and $62.5 million at the end of each quarter in 2009 (with the final payment to be made on the maturity date of January 15, 2010). The entire principal amount under the bridge loan facility is due on the maturity date of January 15, 2008.

Borrowings under the term loan facility and bridge loan facility bear interest at LIBOR plus a margin that is determined based on Hospira’s senior unsecured debt ratings from Standard & Poor’s and Moody’s. Based on Hospira’s ratings of BBB (stable outlook) from Standard and Poor’s and Baa3 (negative outlook) from Moody’s, the margin is currently 0.60%.

Note 19—Quarterly Data (Unaudited)

(dollars in thousands, except for per share amounts)	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter
2006
Net Sales		$	664,294		$	671,101		$	646,640		$	706,470
Gross Profit		244,796			225,086			219,028			250,333
Income From Operations		112,001			74,958			79,052			73,573
Net Income		80,183			54,150			55,945			47,401
Earnings per common share, basic		$	0.50		$	0.35		$	0.36		$	0.30
Earnings per common share, diluted		$	0.49		$	0.34		$	0.35		$	0.30
Weighted average common shares outstanding, basic		160,933			156,448			156,359			155,814
Weighted average common shares outstanding, diluted		164,345			159,655			158,781			157,629

	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter
2005
Net Sales		$	662,061		$	661,915		$	656,570		$	646,150
Gross Profit		217,776			218,418			227,562			185,300
Income From Operations		107,510			98,158			100,554			30,393
Net Income		77,175			72,031			59,855			26,577
Earnings per common share, basic		$	0.49		$	0.45		$	0.38		$	0.16
Earnings per common share, diluted		$	0.49		$	0.44		$	0.37		$	0.16
Weighted average common shares outstanding, basic		157,191			158,568			160,103			161,171
Weighted average common shares outstanding, diluted		158,519			160,908			162,842			164,144

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Not applicable.

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Item 9A. Controls and Procedures

Evaluation of disclosure controls and procedures.   The Chief Executive Officer, Christopher B. Begley, and Chief Financial Officer, Thomas E. Werner, evaluated the effectiveness of Hospira’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934) as of the end of the period covered by this report, and concluded that Hospira’s disclosure controls and procedures were effective.

Changes in internal controls.   There have been no changes in internal control over financial reporting that occurred during the fourth quarter of 2006 that have materially affected or are reasonably likely to materially affect Hospira’s internal control over financial reporting.

Item 9B. Other Information

None

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Executive Officers

Christopher B. Begley, age 54, is Hospira’s Chief Executive Officer and a director. He has served in such positions since the spin-off in April 2004. Mr. Begley provided 18 years of service to Abbott Laboratories, a global broad-based healthcare company, and served as Senior Vice President, Hospital Products, from 2000 to April 2004. Prior to his appointment as Senior Vice President, Hospital Products, Mr. Begley served as Senior Vice President, Chemical and Agricultural Products from 1999 to 2000, Vice President, Abbott Health Systems, from 1998 to 1999, and Vice President, MediSense Operations, in 1998. Mr. Begley is a director of Sara Lee Corporation, the Executives’ Club of Chicago, Healthcare Leadership Council and AdvaMed.

Terrence C. Kearney, age 52, is Hospira’s Chief Operating Officer. He has served in such position since April 2006. From April 2004 to April 2006, he served as Hospira’s Senior Vice President, Finance, and Chief Financial Officer, and he served as Acting Chief Financial Officer through August 2006. Mr. Kearney served as Vice President and Treasurer of Abbott from 2001 to April 2004. From 1996 to 2001, Mr. Kearney was Divisional Vice President and Controller for Abbott’s International Division. Mr. Kearney provided 24 years of service to Abbott.

Edward A. Ogunro, Ph.D., age 54, is Hospira’s Senior Vice President, Research and Development, Medical Affairs and Chief Scientific Officer. He has served in such position since the spin-off in April 2004. Dr. Ogunro served as Vice President, Hospital Products Research and Development, Medical and Regulatory Affairs of Abbott from 1999 to April 2004. Dr. Ogunro was Divisional Vice President for Abbott’s Immunodiagnostics and Chemistry R&D Organization from 1995 to 1999 and served with Abbott for 21 years.

Brian J. Smith, age 55, is Hospira’s Senior Vice President, General Counsel and Secretary. He has served in such position since the spin-off in April 2004. Mr. Smith served as Divisional Vice President, Domestic Legal Operations of Abbott from 1995 to April 2004 and served with Abbott for 25 years.

Thomas E. Werner, age 49, is Hospira’s Senior Vice President, Finance, and Chief Financial Officer. He has served in such position since August 2006. Mr. Werner served as Senior Vice President, Finance, and Chief Financial Officer of Böwe Bell + Howell, a service, manufacturing and software company that provides document processing and postal solutions. Prior to joining Böwe Bell + Howell in late 2001, he served as Chief Financial Officer for Xpedior Incorporated, a software developer and integrator; and uBid, Inc., an e-commerce company, and as Corporate Controller for Gateway, Inc., a seller of personal computers and related products and services.

Valentine Yien, age 54, is Hospira’s Corporate Vice President and Controller. She has served in such position since the spin-off in April 2004. Ms. Yien served as Controller of Abbott’s Hospital Products Division from 2001 to April 2004 and Assistant Controller of Abbott’s Corporate Financial Planning and Analysis department from 1999 to 2001. Ms. Yien provided 20 years of service to Abbott.

Hospira has adopted a code of ethics (as defined in Item 406(b) of Regulation S-K under the Securities Act of 1933) that applies to its principal executive officer, principal financial officer, principal accounting officer and controller. That code is part of Hospira’s Code of Business Conduct, which is available free of charge on Hospira’s Web site (www.hospira.com) or by sending a request to: Corporate Governance Materials Request, Hospira General Counsel and Secretary, Hospira, Inc., 275 North Field Drive, Dept. NLEG, Bldg. H1, Lake Forest, Illinois 60045. Hospira intends to include on its Web site any amendment to, or waiver from, a provision of its code of ethics that applies to Hospira’s principal executive officer, principal financial officer and principal accounting officer and controller.

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Directors and Corporate Governance

Incorporated herein by reference is the text to be included under the captions “Election of Directors—Our Board of Directors” (including all sub-captions thereunder), “Election of Directors—Corporate Governance—Committees of the Board of Directors—Audit Committee” and “Election of Directors—Section 16(a) Beneficial Ownership Reporting Compliance” to be included in the 2007 Hospira Proxy Statement. The 2007 Proxy Statement will be filed on or about March 30, 2007.

The certifications by Hospira’s chief executive officer and chief financial officer required by Section 302 of the Sarbanes-Oxley Act of 2002 have been filed as exhibits to this report. During 2006, Hospira’s chief executive officer provided an unqualified certification as to compliance with the New York Stock Exchange corporate governance listing standards.

Item 11. Executive Compensation

Incorporated herein by reference is the text to be included under the captions “Election of Directors—Director Compensation,” “Election of Directors—Compensation Disclosure and Analysis,” (including all sub-captions thereunder), “Election of  Directors—Executive Compensation” (including all sub-captions thereunder and tables and accompanying text and notes included therein) and “Election of Directors—Compensation Committee Report” in the 2007 Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The disclosure contained in Part II. Item 5 under “Equity Compensation Plan Information” is incorporated herein by reference. Incorporated herein by reference is the text to be included under the caption “Ownership of our Stock” in the 2007 Proxy Statement.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Incorporated herein by reference is the text to be included under the caption “Certain Relationships and Related Transactions” in the 2007 Proxy Statement.

Item 14. Principal Accounting Fees and Services

Incorporated herein by reference is the text to be included under the caption “Ratification of Independent Registered Public Accountants—Accounting Matters—Fees to Independent Registered Public Accountants” (including all sub-captions thereunder) in the 2007 Proxy Statement.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)Documents filed as part of this Form 10-K.

1.Financial Statements:   See Item 8, “Financial Statements and Supplementary Data,” for a list of financial statements.

2.Financial Statement Schedules:

Item	Page
Schedule II (Valuation and Qualifying Accounts)	99
Schedules I, III, IV and V are not included because they are not required

3.Exhibits Required by Item 601 of Regulation S-K:   The information called for by this paragraph is incorporated herein by reference to the Exhibit Index included on pages 100 through 102.

(b)Exhibits filed:   See Exhibit Index from pages 100 through 102.

(c)Financial Statement Schedules filed.See page 99.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Hospira, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HOSPIRA, INC.
By	/s/ CHRISTOPHER B. BEGLEY
	Christopher B. Begley
	Chief Executive Officer
	Date: February 28, 2007

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Hospira, Inc. on February 28, 2007 in the capacities indicated below.

/s/ CHRISTOPHER B. BEGLEY

Christopher B. Begley

Chief Executive Officer and Director (Principal Executive Officer)

/s/ THOMAS E. WERNER

Thomas E. Werner

Senior Vice President, Finance, and Chief Financial Officer (Principal Financial Officer)

/s/ VALENTINE YIEN

Valentine Yien

Corporate Vice President and Controller (Principal Accounting Officer)

/s/ DAVID A. JONES

David A. Jones

Chairman of the Board of Directors

/s/ IRVING W. BAILEY, II

Irving W. Bailey, II

Director

/s/ CONNIE R. CURRAN

Connie R. Curran

Director

/s/ ROGER W. HALE

Roger W. Hale

Director

97

/s/ RONALD A. MATRICARIA

Ronald A. Matricaria

Director

/s/ JACQUE J. SOKOLOV

Jacque J. Sokolov

Director

/s/ JOHN C. STALEY

John C. Staley

Director

/s/ MARK F. WHEELER

Mark F. Wheeler

Director

98

Hospira, Inc.
Schedule II—Valuation and Qualifying Accounts
For the Three Years Ended December 31, 2006
(dollars in thousands)

Allowance for doubtful accounts:

Column A	Column B		Column C		Column D			Column E
Description	Balance at  beginning  of period		Additions  charged to  costs and  expenses		Deductions(1)			Balance at  end of  period
Year ended December 31, 2006		16,887		10,590		(13,789	)		13,688
Year ended December 31, 2005		16,083		10,897		(10,093	)		16,887
Year ended December 31, 2004		16,876		4,146		(4,939	)		16,083

(1)Represents accounts written off as uncollectible, net of collections on accounts previously written off.

Inventory reserves:

Column A	Column B		Column C		Column D			Column E
Description	Balance at  beginning  of period		Additions  charged to  costs and  expenses		Deductions			Balance at  end of  period
Year ended December 31, 2006		39,569		30,406		(21,804	)		48,171
Year ended December 31, 2005		41,160		32,560		(34,151	)		39,569
Year ended December 31, 2004		43,738		44,174		(46,752	)		41,160

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EXHIBIT INDEX

Exhibit No.		Exhibit
2.1	Separation and Distribution Agreement, dated as of April 12, 2004, between Abbott Laboratories and Hospira, Inc. (filed as Exhibit 2.1 to the Hospira, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference).
3.1	Restated Certificate of Incorporation of Hospira, Inc. (filed as Exhibit 3.1 to Hospira, Inc.’s Registration Statement on Form 10 (File No. 1-31946) and incorporated herein by reference).
3.2	Amended and Restated Bylaws of Hospira, Inc. (filed as Exhibit 3.1 to Hospira, Inc.’s Current Report on Form 8-K filed on February 23, 2007, and incorporated herein by reference).
4.1	Rights Agreement, dated as of April 12, 2004, between Hospira, Inc. and EquiServe Trust Company, N.A., as Rights Agent (filed as Exhibit 4.1 to the Hospira, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).
4.1(a)	Form of Certificate of Designations of Series A Junior Participating Preferred Stock (attached as Exhibit A to the Rights Agreement filed as Exhibit 4.1 to the Hospira, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).
4.1(b)	Form of Rights Certificate (attached as Exhibit B to the Rights Agreement filed as Exhibit 4.1 to the Hospira, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).
4.2	Indenture, dated as of June 14, 2004, between Hospira, Inc. and LaSalle Bank National Association, as Trustee. (filed as Exhibit 4.2 to Hospira, Inc.’s Registration Statement on Form S-4 (File No. 333-117339) filed with the SEC on July 15, 2004, and incorporated herein by reference).
4.3	Supplemental Indenture No. 1, dated as of June 14, 2004, between Hospira, Inc. and LaSalle Bank National Association, as Trustee. (filed as Exhibit 4.3 to Hospira, Inc.’s Registration Statement on Form S-4 (File No. 333-117339) filed with the SEC on July 15, 2004, and incorporated herein by reference).
10.1	Form of Transition Services Agreement between Abbott Laboratories and Hospira, Inc. (filed as Exhibit 10.1 to the Hospira, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).
10.2	Tax Sharing Agreement, dated as of April 16, 2004, between Abbott Laboratories and Hospira, Inc. (filed as Exhibit 10.2 to the Hospira, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).
10.3	Employee Benefits Agreement, dated as of April 16, 2004, by and among Abbott Laboratories, TAP Pharmaceutical Products Inc. and Hospira, Inc. (filed as Exhibit 10.3 to the Hospira, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).
10.4	Form of Lease between Abbott Laboratories and Hospira, Inc. (filed as Exhibit 10.4 to the Hospira, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).
10.5	Information Technology Agreement, dated as of April 29, 2004, between Abbott Laboratories and Hospira, Inc. (filed as Exhibit 10.5 to the Hospira, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).

100

10.6	Form of Manufacture and Supply Agreement between Abbott Laboratories and Hospira, Inc. (filed as Exhibit 10.6 to the Hospira, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).
10.7	Form of Transition Marketing and Distribution Services Agreement between Subsidiaries of Abbott Laboratories and Hospira, Inc. (filed as Exhibit 10.7 to the Hospira, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).
10.8	Hospira 2004 Long-Term Stock Incentive Plan.*
10.8(a)	Form of Conversion Incentive Option Terms (filed as Exhibit 10.8(a) to the Hospira, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).*
10.8(b)	Form of Conversion Non-Qualified Stock Option Terms (filed as Exhibit 10.8(b) to the Hospira, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).*
10.8(c)	Form of Conversion Replacement Non-Qualified Stock Option Terms (filed as Exhibit 10.8(c) to the Hospira, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).*
10.8(d)	Form of Non-Qualified Stock Option Terms for awards made prior to May 9, 2005 (10-year term) (filed as Exhibit 10.8(d) to the Hospira, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).*
10.8(d)(i)	Form of Non-Qualified Stock Option Terms for awards made on or after May 9, 2005 (filed as Exhibit 10.1 to the Hospira, Inc. Current Report on Form 8-K filed on May 12, 2005, and incorporated herein by reference).*
10.8(e)	Form of Non-Qualified Stock Option Terms (five-year term) (filed as Exhibit 10.8(e) to the Hospira, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).*
10.8(f)	Form of Non-Employee Director Restricted Stock Award Agreement (filed as Exhibit 10.8(f) to the Hospira, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).*
10.8(g)	Form of Non-Employee Director Non-Qualified Stock Option Terms (filed as Exhibit 10.8(g) to the Hospira, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).*
10.9	Hospira, Inc. 2004 Performance Incentive Plan (filed as Exhibit 10.9 to the Hospira, Inc. Annual Report on Form 10-K for the year ended December 31, 2004, and incorporated herein by reference).*
10.10	Hospira, Inc. Non-Employee Directors’ Fee Plan, as amended (filed as Exhibit 10.1 to the Hospira, Inc. Current Report on Form 8-K filed on October 28, 2005, and incorporated herein by reference).*
10.11	Hospira, Inc. 401(k) Supplemental Plan (filed as Exhibit 10.11 to the Hospira, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).*

101

10.12(a)	Form of Agreement between Hospira, Inc. and each of Christopher B. Begley, Terrence C. Kearney, Edward A. Ogunro and Brian J. Smith regarding Change in Control (filed as Exhibit 10.12 to the Hospira, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).*
10.12(b)	Form of Agreement between Hospira, Inc. and Thomas E. Werner regarding Change in Control (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on August 11, 2006, and incorporated herein by reference).*
10.12(c)	Agreement, dated January 15, 2007, between Hospira, Inc. and John Arnott.*
10.13	Form of Grantor Trust Arrangement by and among Abbott Laboratories, Hospira, Inc. and each of Christopher B. Begley, Terrence C. Kearney and Edward A. Ogunro (filed as Exhibit 10.13 to the Hospira, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).*
10.14	The Hospira Supplemental Pension Plan (filed as Exhibit 10.1 to the Hospira, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).*
10.15	Not used.
10.16	Credit Agreement and Guaranty, dated as of December 16, 2005, and amended as of January 15, 2007, by and among Hospira and the Lenders and Agents named therein.
10.17	Term Loan Agreement, dated as of January 15, 2007, by and among Hospira and the Lenders and Agents named therein.
10.18	Bridge Loan Agreement, dated as of January 15, 2007, by and among Hospira and the Lenders and Agents named therein.
12.1	Statement regarding Computation of Ratios.
21.1	List of Subsidiaries of Hospira, Inc.
23.1	Consent of Deloitte & Touche LLP.
31.1	Certification of Christopher B. Begley under Rule 13a-14(a) under the 1934 Act.
31.2	Certification of Thomas E. Werner under Rule 13a-14(a) under the 1934 Act.
32.1	Certification of Christopher B. Begley under 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).
32.2	Certification of Thomas E. Werner under 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).

*Management compensatory plan or arrangement.

102

EX-10.8

Exhibit 10.8

HOSPIRA 2004 LONG-TERM STOCK INCENTIVE PLAN

(As Amended and Restated as of the Effective Date

and as further amended effective as of December 13, 2006)

HOSPIRA 2004 LONG-TERM STOCK INCENTIVE PLAN
(As Amended and Restated as of the Effective Date
and as further amended effective as of December 13, 2006)

SECTION 1

GENERAL

1.1Purpose, Effective Date and Term.  The purpose of this Hospira 2004 Long-Term Stock Incentive Plan (the “Plan”) is to promote the longer-term financial success of Hospira, Inc. (the “Company”) and its subsidiaries by providing a means to attract, retain and reward individuals who can and do contribute to such success and to further identify their interests with those of the Company’s shareholders. The “Effective Date” of the Plan is the date on which the shares of the Company are distributed to the shareholders of Abbott Laboratories pursuant to the Separation and Distribution Agreement entered into between the Company and Abbott Laboratories (the “Distribution”).  The Plan shall be unlimited in duration and, in the event of Plan termination, shall remain in effect as long as any awards under it are outstanding; provided, however, that no awards may be granted under the Plan after the ten-year anniversary of the most recent approval of the Plan by the Company’s shareholders.

1.2Administration.  The authority to control and manage the operation of the Plan shall be vested in a committee of the Company’s Board of Directors (the “Committee”) in accordance with Section 6.1.

1.3Participation.  Each recipient of an Abbott Conversion Award as described in Section 4 and each other employee or director of the Company or any subsidiary of the Company who is granted an award in accordance with the terms of the Plan shall be a “Participant” in the Plan.  Awards under the Plan shall be limited to employees and directors of the Company; provided, however, that an award (other than an award of an ISO) may be granted to an individual prior to the date on which he first performs services as an employee or director (including individuals who it is anticipated will transfer from Abbott to the Company within 24 months following the Distribution) provided that such award does not become vested prior to the date such individual commences such services.

1.4Definitions.  Capitalized terms in the Plan shall be defined as set forth in the Plan (including the definition provisions of Section 9).

SECTION 2

AWARDS

2.1General.  Any award under the Plan may be granted singularly, in combination with another award (or awards), or in tandem whereby the exercise or vesting of one award held by a Participant cancels another award held by the Participant.  Each award under the Plan shall be subject to the terms and conditions of the Plan and such additional terms, conditions, limitations and restrictions as the Committee shall provide with respect to such award.  Subject to Section 2.3, an award may be granted as an alternative to or replacement of an existing award

under the Plan or any other plan of the Company or any subsidiary or as the form of payment for grants or rights earned or due under any other compensation plan or arrangement of the Company or its subsidiaries, including without limitation the Hospira Non-Employee Directors’ Fee Plan and the plan of any entity acquired by the Company or any subsidiary.  The types of awards that may be granted under the Plan include:

(a)Stock Options.  A stock option represents the right to purchase shares of Stock at an Exercise Price established by the Committee.  Any option may be either an incentive stock option (an “ISO”) that is intended to satisfy the requirements applicable to an “incentive stock option” described in section 422(b) of the Code or a non-qualified option that is not intended to be an ISO, provided, that no ISOs may be granted after the ten-year anniversary of the earlier of the date of adoption or shareholder approval of the Plan.  Unless otherwise specifically provided by its terms, any option granted under the Plan shall be a non-qualified option.

(b)Stock Appreciation Rights.  A stock appreciation right (a “SAR”) is a right to receive, in cash or Stock, an amount equal to or based upon the excess of: (a) the Fair Market Value of a share of Stock at the time of exercise, over (b) an Exercise Price established by the Committee.

(c)Stock Awards.  A stock award is a grant of shares of Stock or a right to receive shares of Stock (or their cash equivalent or a combination of both) in the future.  Such awards may include, but shall not be limited to, bonus shares, stock units, performance shares, performance units, restricted stock or restricted stock units.

(d)Cash Incentive Awards.  A cash incentive award is the grant of a right to receive a payment of cash, determined on an individual basis or as an allocation of an incentive pool (or Stock having a value equivalent to the cash otherwise payable) that is contingent on the achievement of performance objectives.

2.2Exercise of Options and SARs.  An option or SAR shall be exercisable in accordance with such terms and conditions and during such periods as may be established by the Committee.  In no event, however, shall an option or SAR expire later than ten years after the date of its grant.  The “Exercise Price” of each option and SAR shall not be less than the par value of a share of Stock; provided however, that the Exercise Price of an ISO shall not be less than 100% of the Fair Market Value of a share of Stock on the date of grant.  The payment of the Exercise Price of an option shall be by cash or, subject to limitations imposed by applicable law, by such other means as the Committee may from time to time permit, including, without limitation, (i) by promissory note, (ii) by tendering, either actually or by attestation, shares of Stock acceptable to the Committee, and valued at Fair Market Value as of the day of exercise, (iii) by irrevocably authorizing a third party, acceptable to the Committee, to sell shares of Stock (or a sufficient portion of the shares) acquired upon exercise of the option and to remit to the Company a sufficient portion of the sale proceeds to pay the entire Exercise Price and any tax withholding resulting from such exercise or (iv) by any combination thereof.

2.3No Repricing.  Except for adjustments pursuant to Section 3.4 (relating to the adjustment of shares), and reductions of the Exercise Price approved by the Company’s

2

stockholders, the Exercise Price for any outstanding option may not be decreased after the date of grant nor may an outstanding option granted under the Plan be surrendered to the Company as consideration for the grant of a replacement option with a lower exercise price.

2.4Performance-Based Compensation. Any award under the Plan which is intended to be “performance-based compensation” within the meaning of section 162(m) of the Code shall be conditioned on the achievement of one or more objective performance measures, to the extent required by Code section 162(m) as may be determined by the Committee.

(a)Performance Measures.  Such performance measures may be based on any one or more of the following: earnings (e.g., earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; or earnings per share); financial return ratios (e.g., return on investment; return on invested capital; return on equity; or return on assets); increase in revenue, operating or net cash flows; cash flow return on investment; total shareholder return; market share; net operating income, operating income or net income; debt load reduction; expense management; economic value added; stock price; and strategic business objectives, consisting of one or more objectives based on meeting specific cost targets, business expansion goals and goals relating to acquisitions or divestitures.  Performance measures may be based on the performance of the Company as a whole or of any one or more business units of the Company and may be measured relative to a peer group or an index.

(b)Partial Achievement.  The terms of any such award may provide that partial achievement of the performance measures may result in a payment or vesting based upon the degree of achievement.

(c)Extraordinary Items.  In establishing any performance measures, the Committee may provide for the exclusion of the effects of the following items, to the extent identified in the audited financial statements of the Company, including footnotes, or in the Management Discussion and Analysis section of the Company’s annual report: (i) extraordinary, unusual, and/or nonrecurring items of gain or loss; (ii) gains or losses on the disposition of a business; (iii) changes in tax or accounting principles, regulations or laws; or (iv) mergers or acquisitions.  To the extent not specifically excluded, such effects shall be included in any applicable performance measure.

2.5Dividends and Dividend Equivalents.  Any award under the Plan, including without limitation any option or SAR, may provide the Participant with the right to receive dividend payments or dividend equivalent payments with respect to Stock subject to the award, which payments may be either made currently or credited to an account for the Participant, and may be settled in cash or Stock.

2.6Deferral of Payment.  To the extent permitted by the Committee or the terms of any award under the Plan, a Participant may defer receipt of the cash or Stock otherwise payable under the award and be credited with interest or dividend equivalents with respect thereto; provided, however, that any award otherwise payable in stock shall continue to be payable only in stock.

3

2.7Non-U.S. Awards.  The Committee may grant awards, in its sole discretion, to employees and directors of the Company and its subsidiaries who are residing in jurisdictions outside of the United States.  For purposes of the foregoing, the Committee may, in its sole discretion, vary the terms of the Plan in order to conform any awards to the legal and tax requirements of each non-U.S. jurisdiction where such individual resides.  The Committee may, in its sole discretion, establish one or more sub-plans of the Plan and/or may establish administrative rules and procedures to facilitate the operation of the Plan in such non-U.S. jurisdictions.  For purposes of clarity, any terms contained herein which are subject to variation in a non-U.S. jurisdiction and any administrative rules and procedures established for a non-U.S. jurisdiction shall be reflected in a written addendum to the Plan.  To the extent permitted under applicable law, the Committee may delegate its authority and responsibilities under this Section 2.7 of the Plan to one or more officers of the Company.

SECTION 3

SHARES SUBJECT TO PLAN

3.1Available Shares.  The shares of Stock with respect to which awards may be made under the Plan shall be shares currently authorized but unissued or currently held or, to the extent permitted by applicable law, subsequently acquired by the Company as treasury shares, including shares purchased in the open market or in private transactions.

3.2Share Limitations.  Subject to the following provisions of this subsection 3.2, the maximum number of shares of Stock that may be delivered to Participants and their beneficiaries under the Plan shall be equal to Thirty One Million (31,000,000) shares of Stock (all of which may be granted as ISOs). The maximum number of shares of Stock that may be issued in conjunction with awards other than options and SARS shall be 25% of that number of shares in the immediately preceding sentence.

(a)Reuse of Shares.  To the extent any shares of Stock covered by an award are forfeited or are not delivered to a Participant or beneficiary for any reason, including because the award is forfeited or canceled, or is settled in cash or used to satisfy the applicable tax withholding obligation, such shares shall not be deemed to have been delivered for purposes of determining the maximum number of shares of Stock available for delivery under the Plan

(b)Net Shares.  If the exercise price of any stock option granted under the Plan is satisfied by tendering shares of Stock to the Company (either actually or by attestation), only the number of shares of Stock issued net of the shares of Stock tendered shall be deemed delivered for purposes of determining the maximum number of shares of Stock available for delivery under the Plan.

3.3Limitations on Grants to Individuals.

(a)Options and SARs.  The maximum number of shares of Stock that may be subject to options or SARs granted to any Participant during any calendar year (excluding any awards intended to constitute Conversion Awards) shall be One Million (1,000,000).

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(b)Stock Awards.  The maximum number of shares of Stock that may be subject to stock awards described under paragraph 2.1(c) which are granted to any Participant during any calendar year and are intended to be “performance-based compensation” (as that term is used for purposes of Code section 162(m)), shall be Five Hundred Thousand (500,000).

(c)Cash Incentive Awards.  The maximum dollar amount that may be payable to a Participant pursuant to cash incentive awards described under paragraph 2.1(d) which are granted to any Participant during any calendar year and are intended to be “performance-based compensation” (as that term is used for purposes of Code section 162(m)), shall be Five Million Dollars ($5 million).

(d)Director Fees. Other than with respect to initial grants to new Directors or one-time grants due to extraordinary circumstances, the maximum number of shares that may be covered by awards granted to any one individual non-employee director pursuant to Section 2.1(a) and 2.1(b) (relating to options and SARs) shall beOne Hundred Thousand (100,000)shares during any calendar year under the terms of the Hospira Non-Employee Director’s Fee Plan and the maximum number of shares that may be covered by awards granted to any one individual non-employee director pursuant to Section 2.1(c) (relating to Other Stock awards) shall be Fifty Thousand (50,000) shares during any calendar year under the terms of the Hospira Non-Employee Director’s Fee Plan.  The foregoing limitations shall not apply to cash-based director fees that the Non-Employee Director elects to receive in the form of Stock or Stock Units.

(e)Dividend, Dividend Equivalents and Earnings.  For purposes of determining whether an award is intended to be qualified as a performance-based compensation, the foregoing limitations of this Section 3.3, (i) the right to receive dividends and dividend equivalents with respect to any award which is not yet vested shall be treated as a separate award, and (ii) if the delivery of any shares or cash under an award is deferred, any earnings, including dividends and dividend equivalents, shall be disregarded.

3.4Corporate Transactions.  Subject to paragraphs (a) and (b) below, in the event of a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), the Committee shall adjust awards to preserve the benefits or potential benefits of the awards and the Plan.  The action required by the Committee may include: (i) adjustment of the number and kind of shares which may be delivered under the Plan; (ii) adjustment of the number and kind of shares subject to outstanding awards; (iii) adjustment of the Exercise Price of outstanding options and SARs; and (iv) any other adjustments that the Committee determines to be equitable (which may include, without limitation, (I) replacement of awards with other awards which the Committee determines have comparable value and which are based on stock of a company resulting from the transaction, and (II) cancellation of the award in return for cash payment of the current value of the award, determined as though the award was fully vested at the time of payment, provided that in the case of an option or SAR, the amount of such payment may be the excess of the value of the Stock subject to the option or SAR at the time of the transaction over the Exercise Price).

5

(a)Notwithstanding any other provision of this Plan, including the terms of any award granted hereunder, if the outstanding common shares of the Company shall be combined, or be changed into, or exchanged for, another kind of stock of the Company, into securities of another corporation, or into property (including cash) whether through recapitalization, reorganization, sale, merger, consolidation, spin-off, business combination or a similar transaction (a “Transaction”), the Company shall cause its successor or acquiror (or ultimate parent of any successor or acquiror), as applicable, to assume each stock option and SAR outstanding immediately prior to the Transaction (or to cause new options or rights to be substituted therefor).  Pursuant to such assumed or substituted option or rights, holders of such option or right shall thereafter be entitled to receive, upon due exercise of any portion of the option or right, (a) in the event of a Transaction in which the outstanding common shares of the Company are combined, or changed into, or exchanged for, solely another kind of stock of the Company or securities of another corporation (disregarding, for this purpose, cash paid in lieu of fractional shares), the securities which that person would have been entitled to receive for common shares acquired through exercise of the same portion of such option or right immediately prior to the effective date of such Transaction, and (b) in the event of a Transaction in which the outstanding common shares of the Company are changed into, or exchanged for, property (including cash) other than solely stock of the Company or securities of another corporation (disregarding, for this purpose, cash paid in lieu of fractional shares), securities the fair market value of which immediately following the effective date of such Transaction (as determined by the Committee) equals the fair market value (as determined by the Committee) of the property which that person would have been entitled to receive for common shares acquired through exercise of the same portion of such option or right immediately prior to the effective date of such Transaction.  In each case such assumed or substituted option or right shall continue to be subject to the same terms and conditions (including, without limitation, with respect to any right to receive “replacement options” upon option exercise) to which it was subject immediately prior to the Transaction.

(b)Notwithstanding the immediately preceding paragraph, upon a Transaction in which the outstanding common shares of the Company are changed into, or exchanged for, property (including cash) other than solely stock of the Company or securities of another corporation (disregarding, for this purpose, cash paid in lieu of fractional shares) and which constitutes a Change in Control, each holder of an option or SAR may elect to receive, immediately following such Transaction in exchange for cancellation of any stock option or SAR held by such person immediately prior to the Transaction, a cash payment, with respect to each common share subject to such option or right, equal to the difference between the value of consideration (as determined by the Committee) received by the shareholders for a common share of the Company in the Transaction, less any applicable purchase price.

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3.5Delivery of Shares.  Delivery of shares of Stock or other amounts under the Plan shall be subject to the following:

(a)Compliance with Applicable Laws.  Notwithstanding any other provision of the Plan, the Company shall have no obligation to deliver any shares of Stock or make any other distribution of benefits under the Plan unless such delivery or distribution complies with all applicable laws (including, without limitation, the requirements of the Securities Act of 1933), and the applicable requirements of any securities exchange or similar entity.

(b)Certificates.  To the extent that the Plan provides for the issuance of shares of Stock, the issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.

SECTION 4

ABBOTT CONVERSION AWARDS

4.1General.  Certain employees transferred to the employ of the Company and its subsidiaries have received awards under the Plan (“Conversation Awards”) as of the Effective Date as replacement awards for awards granted under the Abbott Laboratories 1996 Incentive Stock Program and the Abbott Laboratories 1991 Incentive Stock Program (the “Abbott Plans”) and cancelled in connection with the Distribution.  The number of such Conversion Awards has been determined by applying a conversion ratio established by the committee administering the Abbott Plans in accordance with the terms of such plans on a basis intended to be consistent with Section 424 of the Code and applicable accounting principles.

4.2Share Limitations.  Conversion Awards shall be taken into account in applying the share limitations set forth in Section 3.2, but shall be excluded in calculating the individual limitations under Section 3.3(a).

4.3Replacement Options.  If an option granted under the Plan constitutes a Conversion Award with respect to an option under the Abbott Plans that provided for the grant of replacement stock options if all or a portion of the exercise price or taxes incurred in connection with the exercise of the option are paid with the delivery (or in the case of payment of taxes, the withholding of shares) of other shares of Abbott Laboratories, then the Conversion Award shall provide for a replacement stock option (a “Replacement Option”).  Each Replacement Option shall cover the number of shares of Stock surrendered (by actual delivery or by attestation) to satisfy the Exercise Price, plus the number of shares surrendered (by actual delivery or attestation) or withheld to satisfy the Participant’s tax liability, shall have an Exercise Price equal to 100% of the of the Fair Market Value of Stock on the date such Replacement Option is granted, shall be first exercisable six months from the date of grant of the Replacement Option and shall have the expiration date of the original option.

7

SECTION 5

CHANGE IN CONTROL

5.1Subject to the provisions of Section 3.4 (relating to the adjustment of shares), and except as otherwise provided in the Plan or the terms of any award:

(a)If a Participant who is an employee or Director of the Company or a subsidiary at the time of a Change in Control then holds one or more outstanding options or SARs, all such options and SARs then held by the Participant shall become fully exercisable on and after the date of the Change in Control (subject to the expiration provisions otherwise applicable to the option or SAR), and any Stock purchased by the Participant under such option or acquired under such SAR following such Change in Control shall be fully vested upon exercise.

(b)If a Participant who is an employee or Director of the Company or a subsidiary at the time of a Change in Control then holds one or more stock awards described in paragraph 2.1(c) or cash incentive awards described in paragraph 2.1(d), such awards shall be fully earned and vested (and all performance measures deemed to be achieved).

5.2Change in Control.  For purposes of this Plan, unless otherwise provided in an Award Agreement, the term “Change in Control” shall be deemed to have occurred on the earliest of the following dates:

(a)the date any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities ac­quired directly from the Company or its Affiliates) representing 20% or more of the combined voting power of the Company’s then out­standing securities, excluding any Person who becomes such a Bene­ficial Owner in connection with a transaction described in clause (a) of paragraph 5.2(c) below; or

(b)the date the following individuals cease for any reason to constitute a majority of the number of directors then serving: individ­uals who, on the date hereof, constitute the Board of Directors and any new direc­tor (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of direc­tors of the Company) whose appointment or election by the Board of Directors or nomination for election by the Company’s shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previ­ously so approved or recommended; or

(c)the date on which there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation or other entity, other than (a) a merger or consolidation (I) immediately following which the individuals who comprise the Board of Directors immediately prior thereto constitute at least a majority of the Board of Directors of the Company, the entity surviving such

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merger or consolidation or, if the Company or the entity surviving such merger or consolidation is then a subsidiary, the ultimate parent thereof and (II) which results in the voting securities of the Company outstanding immediately prior to such merger or consolidation contin­uing to represent (either by remaining outstanding or by being con­verted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 50% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (b) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or be­comes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliates) representing 20% or more of the combined voting power of the Company’s then outstanding securities; or

(d)the date the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by shareholders of the Company, in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, in substantially the same proportions as their ownership of the Company immediately prior to such sale.

(e)Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to havesubstantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions.

(f)For purposes of this Plan: “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act; “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act; “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time; and “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their owner­ship of stock of the Company.

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5.3Amendment of Section 5.  The provisions of this Section 5 may not be amended or deleted, nor superseded by any other provision of this Plan during the pendency of a Potential Change in Control.  A “Potential Change in Control” shall exist during any period in which the circumstances described in paragraphs (a), (b), (c) or (d), below, exist (provided, however, that a Potential Change in Control shall cease to exist not later than the occurrence of a Change in Control):

(a)The Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control, provided that a Potential Change in Control described in this Section 5.3 shall cease to exist upon the expiration or other termination of all such agreements.

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

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

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

SECTION 6

COMMITTEE

6.1Administration.  The authority to control and manage the operation and administration of the Plan shall be vested in a committee (the “Committee”) in accordance with this Section 6.  The Committee shall be selected by the Board.  Subject to applicable stock exchange rules, if the Committee does not exist, or for any other reason determined by the Board, the Board may take any action under the Plan that would otherwise be the responsibility of the Committee.  Notwithstanding the foregoing, with respect to any action, determination, interpretation or modification with respect to a specific Award granted to a non-Employee Director, other than ministerial actions, the Committee shall be comprised of the Board.

6.2Powers of Committee.  The Committee’s administration of the Plan shall be subject to the following:

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(a)Subject to the provisions of the Plan, the Committee will have the authority and discretion to select from among the Company’s employees and directors those persons who shall receive awards, to determine the time or times of receipt, to determine the types of awards and the number of shares covered by the awards, to establish the terms, conditions, performance criteria, restrictions, and other provisions of such awards, and (subject to the restrictions imposed by Section 7) to cancel or suspend awards.

(b)To the extent that the Committee determines that the restrictions imposed by the Plan preclude the achievement of the material purposes of the awards in jurisdictions outside the United States, the Committee will have the authority and discretion to modify those restrictions as the Committee determines to be necessary or appropriate to conform to applicable requirements or practices of jurisdictions outside of the United States.

(c)The Committee will have the authority and discretion to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan.

(d)Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons.

(e)In controlling and managing the operation and administration of the Plan, the Committee shall take action in a manner that conforms to the articles and by-laws of the Company, and applicable state corporate law.

6.3Delegation by Committee.  Except to the extent prohibited by applicable law, the applicable rules of a stock exchange or this Plan, or as necessary to comply with the exemptive provisions of Rule 16b-3 under the Exchange Act, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it, including without limitation, (a) delegating to a committee of one or more members of the Board who are not “independent directors” within the meaning of Section 162(m) of the Code, the authority to grant awards under the Plan to eligible persons who are either (i) not then “covered employees,” within the meaning of Section 162(m) of the Code and are not expected to be “covered employees” at the time of recognition of income resulting from such award or (ii) not persons with respect to whom the Company wishes to comply with Section 162(m) of the Code and/or (b) delegating to a committee of one or more members of the Board who are not “non-employee directors,” within the meaning of Rule 16b-3, the authority to grant awards under the Plan to eligible persons who are not then subject to Section 16 of the Exchange Act.  Any such allocation or delegation may be revoked by the Committee at any time.  To the extent permitted by applicable law and resolution of the Board, the Committee may delegate all or any part of its responsibilities to any officer of the Company.

6.4Information to be Furnished to Committee.  As may be permitted by applicable law, the Company and its subsidiaries shall furnish the Committee with such data and information as it determines may be required for it to discharge its duties.  The records of the Company and its subsidiaries as to an employee’s or Participant’s employment, termination of

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employment, leave of absence, reemployment and compensation shall be conclusive on all persons unless determined to be incorrect.  Subject to applicable law, Participants and other persons entitled to benefits under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the terms of the Plan.

SECTION 7

AMENDMENT AND TERMINATION

Subject to the limitations of Section 5.3, the Board may, at any time, amend or terminate the Plan, and may amend any Award Agreement, provided that no amendment or termination may, in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), adversely affect the rights of any Participant or beneficiary under any Award granted under the Plan prior to the date such amendment is adopted by the Board; and further provided, that adjustments pursuant to Section 3.4 (and not in violation of paragraphs (a) and (b) thereof) shall not be subject to the foregoing limitations of this Section 7; and further provided that no amendment may (i) remove the provisions of subsection 2.3 (relating to option repricing), (ii) materially increase the benefits accruing to Participants under the Plan, (iii) materially increase the aggregate number of securities which may be issued under the Plan, or (iv) materially modify the requirements for participation in the Plan, unless the amendment is approved by the Company’s stockholders.

SECTION 8

GENERAL TERMS

8.1No Implied Rights.

(a)No Rights to Specific Assets.  Neither a Participant nor any other person shall, by reason of participation in the Plan, acquire any right in or title to any assets, funds or property of the Company or any subsidiary whatsoever, including, without limitation, any specific funds, assets, or other property which the Company or any subsidiary, in its sole discretion, may set aside in anticipation of a liability under the Plan.  A Participant shall have only a contractual right to the Stock or amounts, if any, payable under the Plan, unsecured by any assets of the Company or any subsidiary, and nothing contained in the Plan shall constitute a guarantee that the assets of the Company or any subsidiary shall be sufficient to pay any benefits to any person.

(b)No Contractual Right to Employment or Future Awards.  The Plan does not constitute a contract of employment, and selection as a Participant will not give any participating employee the right to be retained in the employ of the Company or any subsidiary, nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan.  Except as otherwise provided in the Plan, no award under the Plan shall confer upon the holder thereof any rights as a shareholder of the Company prior to the date on which the individual fulfills all conditions for receipt of such rights.

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8.2Transferability.  The Committee may provide at the time it makes an award under the Plan or at any time thereafter that such award may be transferable by the Participant, subject to such limitations as the Committee may impose.  Except as otherwise so provided by the Committee, awards under the Plan are not transferable except as designated by the Participant by will or by the laws of descent and distribution.

8.3Form and Time of Elections.  Unless otherwise specified herein, each election required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification, or revocation thereof, shall be filed with the Company at such times, in such form, and subject to such restrictions and limitations, not inconsistent with the terms of the Plan, as the Committee shall require.

8.4Evidence.  Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties.

8.5Tax Withholding.  All distributions under the Plan are subject to withholding of all applicable taxes, and the Committee may condition the delivery of any shares or other benefits under the Plan on satisfaction of the applicable withholding obligations.  Except as otherwise provided by the Committee, such withholding obligations may be satisfied (i) through cash payment by the Participant; (ii) through the surrender of shares of Stock which the Participant already owns; or (iii) through the surrender of shares of Stock to which the Participant is otherwise entitled under the Plan; provided, however, that except as otherwise specifically provided by the Committee, such shares under clause (iii) may not be used to satisfy more than the Company’s minimum statutory withholding obligation.

8.6Action by Company or Subsidiary.  Any action required or permitted to be taken by the Company or any subsidiary shall be by resolution of its board of directors, or by action of one or more members of the board (including a committee of the board) who are duly authorized to act for the board, or (except to the extent prohibited by applicable law or applicable rules of any stock exchange) by a duly authorized officer of such company.

8.7Successors.  All obligations of the Company under this Plan shall be binding upon and inure to the benefit of any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business, stock, and/or assets of the Company.

8.8Gender and Number.  Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular.

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SECTION 9

DEFINED TERMS

In addition to the other definitions contained herein, the following definitions shall apply:

(a)Affiliates.  The term “Affiliates” has the meaning ascribed to it in paragraph 5.2(f).

(b)Beneficial Owner.  The term “Beneficial Owner” has the meaning ascribed to it in paragraph 5.2(f).

(c)Board.  The term “Board” means the Board of Directors of the Company.

(d)Change in Control.  The term “Change in Control” has the meaning ascribed to it in Section 5.2.

(e)Code.  The term “Code” means the Internal Revenue Code of 1986, as amended.  A reference to any provision of the Code shall include reference to any successor provision of the Code.

(f)Committee.  The term “Committee” means the Committee acting under Section 6.

(g)Company.  The term “Company” means Hospira, Inc. and its successors and assigns.

(h)Conversion Award.  The term “Conversion Award” means an award described in Section 4.1.

(i)Director.  The term “Director” means a member of the Board.

(j)Distribution.  The term “Distribution” means the distribution of Company shares to shareholders of Abbott Laboratories pursuant to the Separation and Distribution Agreement.

(k)Exchange Act.  The term “Exchange Act” has the meaning ascribed to it by paragraph 5.2(f).

(l)Exercise Price.  The term “Exercise Price” means the price established with respect to an option or SAR pursuant to Section 2.2.

(m)Fair Market Value.  The “Fair Market Value” of the Stock at any time shall be determined in such manner as the Committee may deem equitable, or as required by applicable law or regulation.

(n)ISO.  The term ISO has the meaning ascribed to it in paragraph 2.1(a).

(o)Participant.  The term “Participant” means any individual who has received an award under the Plan.

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(p)Person.  The term “Person” has the meaning ascribed to it by paragraph 5.2(f).

(q)Potential Change in Control.  The term “Potential Change in Control” has the meaning ascribed to it in Section 5.3.

(r)SAR.  The term “SAR” has the meaning ascribed to it in paragraph 2.1(b).

(s)Separation and Distribution Agreement.  The term “Separation and Distribution Agreement” means the agreement entered into between the Company and Abbott Laboratories pursuant to which Abbott Laboratories accomplished the spin-off of the Hospira Business (as defined therein).

(t)Stock.  The term “Stock” means common stock of the Company.

(u)Transaction.  The term “Transaction” has the meaning ascribed to it in paragraph 3.4(a).

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EX-10.12(C)

Exhibit 10.12(c)

January 12, 2007

Mr. John Arnott

1417 Plumwood Drive

Libertyville, IL 60048

Dear John:

This letter will confirm our agreement with you relating to your departure from Hospira, Inc. (“Hospira”).  As used in this Agreement, the term “Hospira” shall mean Hospira, Inc. and all of its subsidiaries and affiliates.

1.Your last day of work for Hospira was January 3, 2007.  Your resignation as an officer of Hospira and director of any Hospira subsidiary or affiliate is effective as of that date.

2.(a)  You agree that through January 3, 2008, you will not engage, directly or indirectly, in any activity (including but not limited to participation on any board of directors or similar governing body of any for-profit or non-profit entity), business or employment which is competitive with any businesses conducted by Hospira, or that were or are under consideration by Hospira.  You agree to notify Hospira’s Corporate Vice President of Global Human Resources, in writing, of any intended activity, business or employment in which you propose to engage and the name and address of any other intended future employer.  Hospira shall have the right to advise such person of your obligations hereunder.  If you so request, Hospira will notify you, in writing, of whether it considers such activity, business or employment to be inconsistent with your obligations hereunder.

(b)  You will not disparage, and will cause your attorneys, financial advisors, agents and members of your immediate family not to disparage Hospira, its products, Board of Directors, personnel or persons representing them with respect to business or personal matters.  You will not engage in activities that negatively affect Hospira’s reputation or its ongoing or planned areas of operations, or its relationships with current or prospective customers and suppliers.

(c)  You agree to cooperate with Hospira with respect to any charge, suit, investigation, claim or question arising regarding any matter of which you had knowledge during your employment with Hospira.  Such cooperation will include, but not be limited to, appearance at depositions, assistance in responding to discovery demands and in preparing for trial, and appearance at trial.  Hospira will reimburse you for all reasonable expenses, including reasonable travel expenses, incurred by you in providing such assistance.

(d)  You agree to make reasonable efforts for an orderly business transition, and to maintain and protect the reputation of Hospira and its affiliates, businesses, products, Board of Directors and personnel.  You agree to return all Hospira property in your possession, including without limitation, computers, blackberry, cellular telephones, fax machines, reports, files, memoranda, keys, identification cards, computer access codes, customer and client lists and other property or materials which you have prepared or to which you have had access, and you shall not retain any reproduction thereof.

(e)  You agree to abide by the terms of your Hospira Employee Agreement.

3.In exchange for the foregoing, Hospira agrees as follows:

(a)  From January 4, 2007 through January 3, 2008, or until you secure other full-time employment, which ever occurs first, you will be on a Pay Continuation Leave (“PCL”).  You may not convert your PCL to any other type of leave of absence (including, but not limited to Short Term Medical Leave and / or participation in the Hospira Long Term Disability Plan).  During your PCL, Hospira will continue to pay your current salary of $375,100.40 (less applicable deductions and amounts it is required by law to withhold).

(b)  Through the period of your PCL, you may continue to participate in those Hospira benefit plans in which you now participate, provided that you continue to make the employee contributions required by those plans.  You may not make contributions (and no employer matching contributions will be made) under the Hospira 401(k) Retirement Savings Plan.  If you are a participant in a Hospira Health Care Plan on the last day of your PCL, you may choose to elect to continue your health coverage at your own expense in accordance with the terms of that plan (COBRA coverage).

(c)  Should you begin other full-time employment prior to January 3, 2008, your PCL will terminate as of the date you begin that employment and Hospira will pay you a lump sum amount equal to the remaining salary that would have otherwise been paid under the PCL.  Your benefits participation will cease on the date you begin this other employment, and you will be eligible for COBRA health care coverage as described in Paragraph 3(b).

(d)  All Hospira stock options held by you as of January 3, 2007 shall continue to vest and to be exercisable in accordance with their terms during the period of your PCL.  Should you begin other full-time employment prior to January 3, 2008 and thus terminate your PCL, there will be no further vesting of stock options after the date you begin such employment.  Options granted under the Hospira Stock Option Program shall continue to be exercisable for 90

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days following the termination of your PCL (either January 3, 2008 or the date you begin other full time employment, whichever is earlier).  All of your options shall continue to be subject to all of the administrative rules and procedures regarding exercise that Hospira imposes upon option exercises generally.  It is recommended that you contact your own tax advisor and Hospira Corporate Compensation Department (224-212-2962) to determine the potential tax impact of the timing of option exercise.

(e)  You are eligible to be paid a bonus under the Hospira Performance Incentive Plan (PIP) for work performed in 2006 as such bonus, if any, will be calculated pursuant to the processes and procedures for PIP currently in place.  You will not be paid any bonus, under PIP or otherwise, for work performed in 2007.

(f)  You are eligible for four (4) weeks of vacation pay for the 2007 calendar year.  This payment will be made in a lump sum within 14 days of you executing this Agreement.  You are not eligible for, and will not be paid for, any vacation benefit for the 2006 and 2008 calendar years.

(g)  Hospira will pay for the use of executive outplacement services for you through January 3, 2008.

(h)  You will be entitled to maintain the use of your company telephone through January 3, 2008, and Hospira agrees to continue to pay for your telephone usage through January 3, 2008.

(i)  No other payments or benefits will be made beyond those described in Paragraphs 3(a)-(h).

4.You will inform Hospira by contacting the Corporate Vice President of Global Human Resources within seven (7) days of accepting other full-time employment.  Should you fail to do so, Hospira is relieved of any obligation to make further payments to you hereunder and you agree to promptly remit to Hospira any amounts received from Hospira for the period of time beginning with the date you began full-time employment forward.

5.Except to the extent limited by subparagraph 6(c) and except for claims, demands, and causes of action (“Claims”) for the nonperformance of this Agreement, Hospira and you hereby forever waive, release and discharge each and the other, as well as the officers, directors, employees, agents and shareholders of Hospira from liability, as follows:

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(a)  With respect to any and all Claims whatsoever, whether known or unknown, related to your employment by Hospira or your resignation and termination of employment, (i) you hereby forever waive, release and discharge Hospira and the officers, directors, employees, agents and shareholders of Hospira from liability from all such Claims or in the future may have, and (ii) Hospira hereby forever waives, releases and discharges you from all such Claims.

(b)  With respect to all other Claims whatsoever, whether known or unknown, (i) you hereby forever waive, release and discharge Hospira and the officers, directors, employees, agents and shareholders of Hospira from liability from all such Claims you may now have and (ii) Hospira hereby forever waives, releases and discharges you from liability from all such Claims Hospira now has.

Both parties agree not to attempt to assert any such Claims at any time.

6.The following provisions are included in compliance with Section 7 of the Federal Age Discrimination in Employment Act of 1967.  You are hereby advised of the following:

(a)  You acknowledge that this Agreement is supported by consideration described in Paragraph 3, to which you would not otherwise be entitled.

(b)  The release and agreement not to sue contained in Paragraph 5 apply to, among other things, any and all claims you have against Hospira under the Federal Age Discrimination in Employment Act.

(c)  This Agreement shall not be deemed to waive any rights or claims relating to age discrimination arising after the date you sign this Agreement.

(d)  You acknowledge that you have been given the opportunity to consult with attorneys of your choosing, financial advisors and members of your immediate family.

(e)  You have 21 days from the date of your receipt of this Agreement to decide whether or not to sign it.  You may take the entire 21 days to decide whether to sign this Agreement and the offer contained in this Agreement will remain open during that 21-day period.

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(f)  You may revoke this Agreement, in writing, at any time within seven days after you sign it, and this Agreement will not become effective or enforceable until the eighth day following your signing of it.  To revoke this Agreement you must notify, in writing, the Corporate Vice President of Global Human Resources for the revocation to be effective.

(g)  You acknowledge that you have not relied on any representation, written or oral, not set forth in this Agreement and that you have entered into this Agreement voluntarily and with full knowledge of its final and binding effect.

7.You will be entitled to indemnification from Hospira to the same extent as other former directors and officers of Hospira, in accordance with Hospira by-laws as they may exist from time to time.  You are also entitled to coverage under the directors and officers liability insurance coverage maintained by Hospira (as in effect from time to time) to the same extent as other former officers and directors of Hospira; provided, however, that nothing in this Paragraph 7 shall be construed to require Hospira to continue to maintain any such directors and officers liability coverage.

8.If any portion of this Agreement should be ruled invalid, the balance of this Agreement shall continue in full force and effect.

9.This Agreement shall be governed by, and construed in accordance with, the laws of Illinois, regardless of the laws that might otherwise apply under applicable conflicts of laws principle.

10.This Agreement constitutes the complete understanding between you and Hospira relating to your departure and supersedes any and all prior agreements, promises, representations, or inducements with the exception of your Hospira Employee Agreement, which remains in full force and effect.  No promises or agreements made subsequent to the execution of this Agreement by these parties shall be binding unless reduced to writing and signed by John Arnott and Hospira’s Corporate Vice President of Global Human Resources.  The Agreement regarding Change in Control dated April 30, 2004 between you and Hospira is terminated effective January 3, 2007.

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If this letter accurately sets forth our understanding, please sign and return this letter.

Sincerely,
HOSPIRA, INC.
/s/ Henry A. Weishaar
Henry A. Weishaar
Corporate Vice President
Global Human Resources
HAW/nae
ACCEPTED:	/s/ John Arnott	Date:  January 15, 2007
	John Arnott

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EX-10.16

Exhibit 10.16

EXECUTION COPY

FIRST AMENDMENT TO CREDIT AGREEMENT

FIRST AMENDMENT, dated as of January 15, 2007 (this “Amendment”), to that certain Credit Agreement, dated as of December 16, 2005 (the “Credit Agreement”), by and among Hospira, Inc., a Delaware corporation (the “Borrower”), the banks and financial institutions listed on the signature pages hereof (collectively, the “Lenders”), Citigroup Global Markets Inc., ABN AMRO Incorporated and Morgan Stanley Senior Funding, Inc. (“MSSF”), as joint lead bookrunners and joint lead arrangers, ABN AMRO Bank N.V. and MSSF, as joint syndication agents, Bank of America, N.A. and Wachovia Bank, National Association, as co-documentation agents, and Citicorp North America, Inc., as administrative agent for the Lenders (in such capacity, the “Administrative Agent”).

PRELIMINARY STATEMENTS

WHEREAS, the Borrower has requested that the Requisite Lenders agree to amend the Credit Agreement as set forth below; and

WHEREAS, subject to the terms and conditions of this Amendment, the Requisite Lenders have agreed to amend the Credit Agreement as set forth below.

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged) the parties hereby agree as follows:

SECTION 1.Defined Terms.  Except as otherwise defined in this Amendment, terms defined in the Credit Agreement are used herein as used therein.

SECTION 2.  Amendments to Credit Agreement.  Effective as of the date hereof, subject to the satisfaction of the conditions precedent set forth in Section 3 of this Amendment, the Credit Agreement is hereby amended in its entirety as set forth in Exhibit A hereto.

SECTION 3.Conditions Precedent to Effectiveness of this Amendment.  This Amendment shall be effective on the date on which all of the following conditions precedent have been satisfied or waived:

(a)The Administrative Agent shall have received a counterpart of this Amendment, executed and delivered by a duly authorized officer of each of (i) the Borrower and (ii) the Requisite Lenders;

(b)The Borrower shall have paid all fees and expenses of the Administrative Agent, including the reasonable fees and expenses of counsel to the Administrative Agent; and

(c)After giving effect to the Amendment, no Potential Event of Default or Event of Default shall have occurred and be continuing.

SECTION 4.Representations and Warranties.

(a) The representations and warranties made by the Borrower in or pursuant to the Loan Documents are true, correct and complete in all material respects on and as of the date hereof as if made as of the date hereof, except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true, correct and complete in all material respects as of such earlier date; provided that each reference to the Credit Agreement therein shall be deemed to be a reference to the Credit Agreement after giving effect to this Amendment.

(b)After giving effect to this Amendment, no Potential Event of Default or Event of Default shall have occurred and be continuing.

SECTION 5.Effect on the Loan Documents.

(a) Except as specifically amended above, the Credit Agreement and all other Loan Documents shall continue to be in full force and effect and are hereby in all respects ratified and confirmed.

(b)The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents.

SECTION 6.Expenses.  The Borrower agrees to pay or reimburse the Administrative Agent for all of its reasonable out-of-pocket costs and expenses incurred in connection with this Amendment, any other documents prepared in connection herewith and the transaction contemplated hereby, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent.

SECTION 7.No Waiver, Cumulative Remedies.  No failure or delay or course of dealing on the part of the Lenders or the Administrative Agent in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.  The rights, powers and remedies herein expressly provided are cumulative and not exclusive of any rights, powers or remedies which the Lenders or the Administrative Agent would otherwise have.  No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Lenders to any other or further action in any circumstances without notice or demand.

SECTION 8.Severability.  In case any provision in or obligation under this Amendment shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

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SECTION 9.Applicable Law.  THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

SECTION 10.Execution in Counterparts; Effectiveness of Facsimile.  This Amendment may be executed by one or more of the parties to this Amendment on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.  Delivery to the Administrative Agent of an executed counterpart hereof (or a signature page hereto) by facsimile shall be effective as delivery of an original executed counterpart hereof.

[Signature Pages Follow]

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written.

HOSPIRA, INC.
By:	/s/ Lori O. Carlson
Name: Lori O. Carlson
Title: Corporate Vice President and Treasurer

CITICORP NORTH AMERICA, INC.,
as Lender and Administrative Agent
By:	/s/ Kevin A. Ege
Name: Kevin A. Ege
Title: Vice President

ABN AMRO BANK N.V., as Lender
By:	/s/ James W. Pierpont
Name: James W. Pierpont
Title: Corporate Managing Director
By:	/s/ Dianne D. Barkley
Name: Dianne D. Barkley
Title: Managing Director

MORGAN STANLEY SENIOR FUNDING, INC., as Lender
By:	/s/ Elizabeth Hendricks
Name: Elizabeth Hendricks
Title: Vice President

BANK OF AMERICA, N.A., as Lender
By:	/s/ Kevin R. Wagley
Name: Kevin R. Wagley
Title: Senior Vice President

WACHOVIA BANK, NATIONAL ASSOCIATION, as Lender
By:	/s/ James S. Conville
Name: James S. Conville
Title: Assistant Vice President

BANK OF MONTREAL, as Lender
By:	/s/ Joseph W. Linder
Name: Joseph W. Linder
Title: Vice President
BANK OF MONTREAL IRELAND PLC, as Lender
By:	/s/ Neil Ward
Name: Neil Ward
Title: General Manager

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., CHICAGO BRANCH (F/K/A THE BANK OF TOKYO—MITSUBISHI LTD., CHICAGO BRANCH), as Lender
By:	/s/ Tsuguyuki Umene
Name: Tsuguyuki Umene
Title: Deputy General Manager

BNP PARIBAS, as Lender

By:

Name:

Title:

SUNTRUST BANK., as Lender
By:	/s/ Gregory M. Ratliff
Name: Gregory M. Ratliff
Title: Vice President

THE NORTHERN TRUST COMPANY, as Lender
By:	/s/ Courtney L. O’Connor
Name: Courtney L. O’Connor
Title: 2nd Vice President

EXHIBIT A

ANNEX A

$375,000,000
CREDIT AGREEMENT AND GUARANTY

dated as of December 16, 2005

as amended as of January 15, 2007

among

HOSPIRA, INC.,
as the Borrower and the Guarantor,

THE SUBSIDIARY BORROWERS
FROM TIME TO TIME PARTY HERETO,

THE BANKS AND FINANCIAL INSTITUTIONS LISTED HEREIN,
as Lenders,

CITIGROUP GLOBAL MARKETS INC.,
ABN AMRO INCORPORATED
and
MORGAN STANLEY SENIOR FUNDING, INC.,
as Joint Lead Bookrunners and Joint Lead Arrangers,

ABN AMRO BANK N.V.
and
MORGAN STANLEY SENIOR FUNDING, INC.,
as Joint Syndication Agents,

and

BANK OF AMERICA, N.A.
and
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Co-Documentation Agents

CITICORP NORTH AMERICA, INC.,
as Administrative Agent

CREDIT AGREEMENT

TABLE OF CONTENTS

		Page
SECTION 1. DEFINITIONS			1
1.1	Certain Defined Terms	1
1.2	Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement	23
1.3	Other Definitional Provisions and Rules of Construction	23
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS AND LOANS			24
2.1	Commitment; Making of Loans; Letters of Credit	24
2.2	Issuance of Letters of Credit and Purchase of Participations Therein	25
2.3	Pro Rata Shares; Availability of Funds; UCP	29
2.4	The Register; Evidence of Debt; Notes	30
2.5	Interest on the Loans	31
2.6	Fees	35
2.7	Provisions Regarding Payments	36
2.8	Increased Costs; Taxes	38
2.9	Special Provisions Governing LIBOR Rate Loans	43
2.10	Matters Relating to Currency Exchange Rates and Conversion of Amounts to Alternative Currencies	44
2.11	Defaulting Lenders	45
2.12	Removal or Replacement of a Lender	46
2.13	Mitigation	46
2.14	Increase in the Aggregate Commitments	47
2.15	Extension of Maturity Date	48
SECTION 3. CONDITIONS PRECEDENT			50
3.1	Conditions to Effectiveness	50
3.2	Conditions Precedent to each Credit Extension	52
3.3	Conditions Precedent to each Commitment Increase and Extension Date	53
SECTION 4. REPRESENTATIONS AND WARRANTIES			53
4.1	Organization, Powers, Qualification, Good Standing, Business and Subsidiaries	53
4.2	Authorization of Borrowing, etc.	54
4.3	Disclosure	54
4.4	Financial Condition	55
4.5	No Material Adverse Change	55
4.6	Intellectual Property Matters	55
4.7	No Litigation; Compliance with Laws	56
4.8	No Default	56

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4.9	Governmental Regulation	56
4.10	Securities Activities	56
4.11	Employee Benefit Plans	57
4.12	Environmental Protection	57
4.13	Pari Passu	58
4.14	Restrictions	58
SECTION 5. AFFIRMATIVE COVENANTS			58
5.1	Financial Statements and Other Reports	58
5.2	Books and Records	61
5.3	Existence	61
5.4	Insurance	61
5.5	Payment of Taxes and Claims	61
5.6	Payment and Performance of Obligations	62
5.7	Maintenance of Properties	62
5.8	Compliance with Laws	62
5.9	Use of Proceeds	62
5.10	Claims Pari Passu	62
5.11	Further Assurances	63
SECTION 6. NEGATIVE COVENANTS			63
6.1	Liens	63
6.2	Indebtedness	65
6.3	Acquisitions	66
6.4	Restrictions on Subsidiary Distributions	66
6.5	Restricted Payments	67
6.6	Restriction on Fundamental Changes and Asset Sales	67
6.7	Conduct of Business	67
6.8	Fiscal Year	67
6.9	Subordinated Indebtedness	68
6.10	Transactions with Shareholders and Affiliates	68
6.11	Financial Covenants	68
6.12	Interest Rate Agreements and Currency Agreements	69
SECTION 7. GUARANTY			69
7.1	Guaranty of the Obligations	69
7.2	Payment by the Borrower	70
7.3	Liability of Guarantor Absolute	70
7.4	Waivers by Guarantor	72
7.5	Guarantor’s Rights of Subrogation, Contribution, etc.	73
7.6	Subordination of Other Obligations	73
7.7	Continuing Guaranty	73
7.8	Authority of Credit Parties	74
7.9	Financial Condition of Credit Parties	74

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7.10	Bankruptcy, etc.	74
SECTION 8. EVENTS OF DEFAULT			75
8.1	Failure to Make Payments When Due	75
8.2	Default in Other Agreements	75
8.3	Breach of Certain Covenants	75
8.4	Breach of Representation or Warranty	76
8.5	Other Defaults Under Loan Documents	76
8.6	Involuntary Bankruptcy; Appointment of Receiver, etc.	76
8.7	Voluntary Bankruptcy; Appointment of Receiver, etc.	76
8.8	Judgments and Attachments	77
8.9	Dissolution	77
8.10	Employee Benefit Plans	77
8.11	Change in Control	77
8.12	Repudiation of Obligations	77
SECTION 9. MISCELLANEOUS			78
9.1	Assignments and Participations in Loans and Letters of Credit	78
9.2	Expenses	80
9.3	Indemnity	81
9.4	Exception for Subsidiary Borrowers	82
9.5	Set-Off	82
9.6	Amendments and Waivers	82
9.7	Independence of Covenants	83
9.8	Notices	83
9.9	Survival of Representations, Warranties and Agreements	85
9.10	Failure or Indulgence Not Waiver; Remedies Cumulative	85
9.11	Marshalling; Payments Set Aside	85
9.12	Severability	86
9.13	Headings	86
9.14	Applicable Law	86
9.15	Successors and Assigns	86
9.16	Consent to Jurisdiction and Service of Process	86
9.17	Waiver of Jury Trial	87
9.18	Confidentiality	88
9.19	Ratable Sharing	88
9.20	Counterparts; Effectiveness	89
9.21	Obligations Several; Independent Nature of Lenders’ Rights	89
9.22	Usury Savings Clause	90
9.23	Judgment Currency	90
9.24	Termination of Existing Credit Agreement	91
SECTION 10. AGENTS			91
10.1	Appointment	91

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10.2	Powers and Duties; General Immunity	91
10.3	Representations and Warranties; No Responsibility For Appraisal of Creditworthiness	93
10.4	Right to Indemnity	93
10.5	Successor Administrative Agent	94
10.6	Agents Under Guaranty	94
10.7	Acknowledgment of Potential Related Transactions	94
SECTION 11. SUBSIDIARY BORROWERS			95
11.1	Joinder of Subsidiary Borrowers	95
11.2	Termination of Status as Subsidiary Borrower	96

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EXHIBITS

I	FORM OF NOTICE OF BORROWING
II	FORM OF CONVERSION/CONTINUATION NOTICE
III	FORM OF NOTE
IV	FORM OF CERTIFICATE RE NON-BANK STATUS
V	FORM OF ASSIGNMENT AGREEMENT
VI	FORM OF ISSUANCE NOTICE
VII	FORM OF SECRETARY’S CERTIFICATE
VIII	FORM OF OFFICER’S CERTIFICATE
IX	FORM OF JOINDER AGREEMENT

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SCHEDULES

2.1A	LENDERS’ COMMITMENTS AND PRO RATA SHARES
6.1	LIENS
6.2	SUBSIDIARY INDEBTEDNESS
6.10	TRANSACTIONS WITH AFFILIATES

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CREDIT AGREEMENT AND GUARANTY

This CREDIT AGREEMENT AND GUARANTY is dated as of December 16, 2005 and entered into by and among Hospira, Inc., a Delaware corporation (the “Borrower”), the Subsidiary Borrowers from time to time party hereto, the banks and financial institutions listed on the signature pages hereof (collectively, the “Initial Lenders”), Citigroup Global Markets, Inc. (“CGMI”), ABN AMRO Incorporated (“ABN AMRO”) and Morgan Stanley Senior Funding, Inc. (“MSSF”) as joint lead bookrunners and joint lead arrangers (in such capacity, the “Lead Arrangers”), ABN AMRO Bank N.V. (“ABN AMRO Bank”) and MSSF as joint syndication agents (in such capacity, the “Syndication Agents”), BANK OF AMERICA, N.A. and WACHOVIA BANK, NATIONAL ASSOCIATION, as co-documentation agents (in such capacity, the “Documentation Agents”) and Citicorp North America, Inc. as administrative agent for the Lenders (“Citicorp” and in such capacity, the “Administrative Agent”).

PRELIMINARY STATEMENTS

The Credit Parties have requested, and the Lenders have agreed to extend, revolving loans and letters of credit in the amount and on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual agreements contained herein, and other good and valuable consideration, the receipt and sufficiency which are hereby acknowledged, the Credit Parties, the Lenders, the Lead Arrangers, the Syndication Agents and the Administrative Agent agree as follows:

SECTION 1.     DEFINITIONS

1.1Certain Defined Terms.

The following terms used in this Agreement shall have the following meanings:

“ABN AMRO” shall have the meaning ascribed to such term in the introduction to this Agreement.

“ABN AMRO Bank” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Acquisition” means the purchase or other acquisition (by merger or otherwise) by a Person of all of substantially all of the assets of, or all of the Capital Stock of, or a business line or unit or a division of, any other Person.

“Administrative Agent” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Affected Lender” shall have the meaning ascribed to such term in Section 2.9B.

“Affiliate” means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, that Person.  For the purposes of this definition, “control” (including, with correlative meanings, the terms

“controlling”, “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power (i) to vote 10% or more of the Securities having ordinary voting power for the election of directors of such Person or (ii) to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise.

“Agents” means the Administrative Agent, the Syndication Agents and the Documentation Agents, collectively, and also means and includes any successor Administrative Agent appointed pursuant to Section 10.5.

“Aggregate Amounts Due” shall have the meaning ascribed to such term in Section 9.19.

“Agreement” means this Credit Agreement and Guaranty as it may be amended, supplemented or otherwise modified from time to time.

“Alternative Currency” means Euros, Canadian dollars or any other currency that is acceptable to all Lenders.

“Alternative Currency Loan” means a LIBOR Rate Loan made in an Alternative Currency pursuant to the applicable Notice of Borrowing or a Canadian Prime Rate Loan.

“Alternative Currency Sublimit” means a Dollar Amount not in excess of $100,000,000; provided that no individual Subsidiary Borrower shall be permitted to borrow Loans in an aggregate Dollar Amount exceeding $50,000,000.

“Applicable Currency” means, as to any particular payment or Loan, the Currency in which it is denominated or payable.

“Applicable Law” means all applicable provisions of constitutions, laws, statutes, ordinances, rules, treaties, regulations, permits, licenses, approvals, interpretations and orders of courts or Governmental Authorities and all orders and decrees of all courts and arbitrators.

“Applicable Margin” means, as of any date, a percentage per annum determined by reference to the applicable Performance Level with respect to the Borrower in effect on such date, as set forth below:

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Performance Level	Level I		Level II		Level III		Level IV		Level V
Base Rate Applicable Margin	0	%	0	%	0	%	0	%	0.25	%
LIBOR Applicable Margin	0.225	%	0.310	%	0.450	%	0.475	%	0.750	%
Facility Fee	0.075	%	0.090	%	0.100	%	0.150	%	0.250	%
Utilization Fee	0.050	%	0.050	%	0.075	%	0.125	%	0.250	%

For purposes hereof, “Performance Level” means, with respect to the Borrower, Performance Level I, Performance Level II, Performance Level III, Performance Level IV or Performance Level V, as identified by reference to the public debt rating of the Borrower, as the case may be, in effect on such date as set forth below:

Performance Level	Public Debt Rating
Level I	Long Term Senior Unsecured Debt rated greater than or equal to A- by S&P or A3 by Moody’s
Level II	Long Term Senior Unsecured Debt rated greater than or equal to BBB+ by S&P or Baa1 by Moody’s
Level III	Long Term Senior Unsecured Debt rated greater than or equal to BBB by S&P or Baa2 by Moody’s
Level IV	Long Term Senior Unsecured Debt rated greater than or equal to BBB- by S&P or Baa3 by Moody’s
Level V	Long Term Senior Unsecured Debt rated less than BBB- by S&P or Baa3 by Moody’s, and at all other times (including if such ratings are not available from both S&P and Moody’s)

For purposes of this definition, the Performance Level shall be determined by the applicable public debt rating for the Borrower as follows:  (i) the public debt ratings shall be determined by the then-current rating announced by either S&P or Moody’s, as the case may be, for any class of non-credit-enhanced long-term senior unsecured debt issued by the Borrower; (ii) if only one of S&P and Moody’s shall have in effect such a public debt rating, the Performance Level shall be determined by reference to the applicable rating; (iii) if neither S&P nor Moody’s shall have in effect such a public debt rating, the applicable Performance Level will be Level V; (iv) if such public debt ratings established by S&P and Moody’s shall fall within different levels, the public debt rating will be determined by the higher of the two ratings, provided that, in the event that the lower of such public debt ratings is more than one level below the higher of such public debt ratings, the public debt rating will be determined based upon the level that is one level above the lower of such public debt ratings; (v) if any such public debt rating established by S&P or Moody’s shall be changed, such change shall be effective as of the

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date on which such change is first announced publicly by the rating agency making such change; and (vi) if S&P or Moody’s shall change the basis on which such public debt ratings are established, each reference to the public debt rating announced by S&P or Moody’s, as the case may be, shall refer to the then-equivalent rating by S&P or Moody’s, as the case may be.

“Applicable Reserve Requirement” means, at any time with respect to any Lender, for any LIBOR Rate Loan, the rate, expressed as a decimal, at which reserves (including any basic marginal, special, supplemental, emergency or other reserves) are required to be maintained by such Lender against “Eurocurrency liabilities” (as such term is defined in Regulation D) under regulations issued from time to time by the Board of Governors of the Federal Reserve System or other applicable banking regulator.  Without limiting the effect of the foregoing, the Applicable Reserve Requirement shall reflect any other reserves required to be maintained by the applicable Lender with respect to (i) any category of liabilities which includes deposits by reference to which the applicable LIBOR rate is to be determined, or (ii) any category of extensions of credit or other assets which include LIBOR Rate Loans.  For purposes hereof, a LIBOR Rate Loan shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credit for proration, exceptions or offsets that may be available from time to time to the applicable Lender.

“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“Asset Sale” means a sale, lease or sub-lease (as lessor or sublessor), sale and leaseback transaction, assignment, conveyance, transfer or other disposition to, or any exchange of property with, any Person, in one transaction or a series of transactions, of all or any part of any Credit Party’s or any of their Subsidiaries’ businesses, properties or assets of any kind, whether real, personal, or mixed and whether tangible or intangible, whether now owned or hereafter acquired, including the Capital Stock of any Subsidiary of such Credit Party, other than such businesses, properties or assets sold in the ordinary course of business and consistent with past business practice of the Borrower and its Subsidiaries.

“Assignment Agreement” means an assignment agreement, substantially in the form of Exhibit V hereto, satisfactory in form and substance to the Administrative Agent.

“Assuming Lender” shall have the meaning specified in Section 2.14B.

“Assumption Agreement” shall have the meaning specified in Section 2.14B.

“Available Amount” of any Letter of Credit means, at any time, the maximum amount available to be drawn under such Letter of Credit at such time (assuming compliance at such time with all conditions to drawing).

“Bahamian Subsidiary” means Hospira Ltd.

“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”, as now and hereafter in effect, or any successor statute.

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“Base Rate” means, for any day, a rate per annum equal to the greater of (i) the Prime Rate in effect on such day and (ii) the Federal Funds Effective Rate in effect on such day plus ½ of 1%.  Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

“Base Rate Loan” means a Loan bearing interest at a rate determined by reference to the Base Rate or, with regard to a Loan denominated in Canadian Dollars, the Canadian Prime Rate.

“Beneficiary” means each Agent, the Issuing Bank and Lender.

“Borrower” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Borrower Commercial Paper Debt” means short-term Indebtedness incurred by the Borrower in the ordinary course of business of the Borrower and pursuant to the Borrower’s commercial paper program.

“Borrowing” means a borrowing consisting of Loans of the same Type that (i) are made to the same Borrower, (ii) are made, continued or converted on the same day and (iii) in the case of LIBOR Rate Loans, have the same Interest Period.

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City, or, with respect to the obligations of any Subsidiary Borrower, Toronto, Canada or London, England, as applicable, are authorized or required by law to remain closed, provided that (a) when used in connection with a LIBOR Rate Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in Dollar deposits in the London interbank market, (b) when used in connection with an Alternative Currency Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in deposits in the applicable Alternative Currency in the London interbank market and (c) when used in connection with any Loan denominated in Euros, the term “Business Day” shall also exclude any day on which the TARGET payment system is not open for the settlement of payment in Euro.

“Canadian Dollars” means the lawful money of Canada.

“Canadian Prime Rate” means, on any day, the annual rate of interest (rounded upwards, if necessary, to the next 1/100 of 1%) equal to the greater of:

(a)the annual rate of interest announced from time to time by Citibank, N.A. as its prime rate in effect on such day for determining interest rates on Canadian Dollar denominated commercial loans in Canada; and

(b)the annual rate of interest equal to the sum of (A) the CDOR Rate in effect on such day and (B) 1%.

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“Canadian Subsidiary” means Hospira Healthcare Corporation, a corporation organized under the Canada Business Corporations Act.

“Capital Lease”, as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person.

“Capital Stock” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation), including partnership interests and membership interests, and any and all warrants, rights or options to purchase or other arrangements or rights to acquire any of the foregoing.

“Cash” means money, currency or a credit balance in any demand or deposit account.

“Cash Equivalents” means, as at any date of determination, (i) marketable securities (a) issued or directly and unconditionally guaranteed as to interest and principal by the United States government or (b) issued by any agency of the United States the obligations of which are backed by the full faith and credit of the United States, in each case maturing within one year after such date; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof, in each case maturing within one year after such date and having, at the time of the acquisition thereof, a rating of at least A 1 from S&P or at least P 1 from Moody’s; (iii) commercial paper maturing no more than one year from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A 1 from S&P or at least P 1 from Moody’s; (iv) certificates of deposit or bankers’ acceptances maturing within one year after such date and issued or accepted by any Lender or by any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia that (a) is at least “adequately capitalized” (as defined in the regulations of its primary Federal banking regulator) and (b) has Tier 1 capital (as defined in such regulations) of not less than $100,000,000; (v) shares of any money market mutual fund that (a) has substantially all of its assets invested continuously in the types of investments referred to in clauses (i) and (ii) above, (b) has net assets of not less than $500,000,000 and (c) has the highest rating obtainable from either S&P or Moody’s; and (vi) in the case of any Credit Party or Subsidiary of a Credit Party doing business outside the United States, any obligation that is substantially similar or comparable to the obligations described above and that is customary in the applicable jurisdiction in which such Subsidiary is doing business.

“CDOR Rate” means, on any date, the annual rate of interest which is the average of the rates of Canadian Dollars bankers’ acceptances for a term of thirty (30) days which appear on the “Reuters Screen CDOR Page” at approximately 10:00 a.m. (Toronto time), on such date, or if such date is not a Business Day, then on the immediately preceding Business Day; provided, that if such rate does not appear on the Reuters Screen CDOR Page as contemplated, the CDOR Rate on any date shall be the annual rate of interest quoted to Citibank, N.A. for such bankers’ acceptances for a term of thirty (30) days.

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“Certificate re Non-Bank Status” means a certificate substantially in the form of Exhibit IV annexed hereto delivered by a Lender to the Administrative Agent pursuant to Section 2.8B(iii)(b).

“CGMI” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Change of Control” means (i) any Person or “group” (within the meaning of Rules 13d 3 and 13d 5 under the Exchange Act) shall have acquired beneficial ownership of 30% or more on a fully diluted basis of the voting and/or economic interest in the Capital Stock of the Borrower; (ii) any Person or “group” (within the meaning of Rules 13d 3 and 13d 5 under the Exchange Act) shall have obtained the power (whether or not exercised) to elect a majority of the members of the board of directors (or similar governing body) of the Borrower; (iii) during any period of up to 24 consecutive months, commencing before or after the date of this Agreement, a majority of the members of the board of directors of the Borrower shall not be Continuing Directors; (iv) any Person or “group” (within the meaning of Rules 13d 3 and 13d 5 under the Exchange Act) shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence over the management or policies of the Borrower or (v) an event of series of events resulting in the Borrower ceasing to (i) beneficially own and control 100% on a fully diluted basis of the economic and voting interests in the Capital Stock of any Subsidiary Borrower (other than directors’ qualifying shares) or (ii) have the power to elect a majority of the members of the board of directors (or similar governing body) of any Subsidiary Borrower.

“Citicorp” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Commitment” means the Dollar Amount of the commitment of a Lender to make or otherwise fund any Loan and to acquire participations in Letters of Credit hereunder and “Commitments” means such commitments of all Lenders in the aggregate.  The amount of each Lender’s Commitment, if any, is set forth on Schedule 2.1A or in the applicable Assumption Agreement or Assignment Agreement, as the case may be, subject to any adjustment, increase or reduction pursuant to the terms and conditions hereof.  The aggregate amount of the Commitments as of the Effective Date is $375,000,000.

“Commitment Date” shall have the meaning specified in Section 2.14B.

“Commitment Increase” means an increase in the aggregate amount of the Commitments pursuant to Section 2.14.

“Commitment Period” means the period from the Effective Date to but excluding the Maturity Date.

“Compliance Certificate” means a certificate of the chief financial officer, treasurer or controller of the Borrower setting forth computations in reasonable detail demonstrating (i) compliance with the covenants set forth in Section 6.11, as at the end of the period covered by such financial statements, and (ii) certifying that such officer has obtained no

7

knowledge of any Potential Event of Default or Event of Default except as specified in such certificate.

“Consenting Lender” shall have the meaning specified in Section 2.15B.

“Consolidated Adjusted EBITDA” means, in respect of the Borrower and its Subsidiaries on a consolidated basis, for any period, an amount equal to (i) the sum, without duplication, of the amounts for such period of (a) Consolidated Net Income, (b) Consolidated Financing Expense, (c) provisions for taxes based on income, (d) total depreciation expense, (e) total amortization expense, and (f) other non-Cash items reducing Consolidated Net Income (excluding any such non-Cash item to the extent that it represents an accrual or reserve for potential Cash items in any future period or amortization of a prepaid Cash item that was paid in a prior period) and (e) Permitted Addbacks, minus (ii) other non-Cash items increasing Consolidated Net Income for such period (excluding any such non-Cash item to the extent it represents the reversal of an accrual or reserve for potential Cash item in any prior period).

“Consolidated Financing Expense” means, in respect of the Borrower and its Subsidiaries on a consolidated basis, for any period, total interest expense (including that portion attributable to Capital Leases in accordance with GAAP and capitalized interest) with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries, including all commissions, discounts and other fees and charges owed with respect to any letters of credit and bankers’ acceptance financing and net costs under Interest Rate Agreements.

“Consolidated Net Income” means, in respect of the Borrower and its Subsidiaries on a consolidated basis, for any period, (i) the net income (or loss) for the Borrower and its Subsidiaries for such period taken as a single accounting period determined in conformity with GAAP, minus (ii) (a) the income (or loss) of any Person (other than a Subsidiary of the Borrower) in which any other Person (other than the Borrower or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to the Borrower or any of its Subsidiaries by such Person during such period, (b) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of the Borrower or is merged into or consolidated with the Borrower or any of its Subsidiaries or that Person’s assets are acquired by the Borrower or any of its Subsidiaries, (c) the income of any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, (d) any after-tax gains or losses attributable to Asset Sales or returned surplus assets of any Pension Plan, and (e) (to the extent not included in clauses (a) through (d) above) any net extraordinary gains or net non-cash extraordinary losses.

“Consolidated Net Worth” means, at any date of determination, all items which in conformity with GAAP would be included under shareholders’ equity on a consolidated balance sheet of the Borrower and its Subsidiaries.

“Consolidated Total Debt” means, in respect of the Borrower and its Subsidiaries on a consolidated basis, as at any date of determination, the aggregate stated balance sheet amount of all Indebtedness, determined on a consolidated basis in accordance with GAAP.

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“Continuing Director” as applied to any Person, means, for any period, an individual who is a member of the board of directors of such Person on the first day of such period or whose election to the board of directors of such Person is approved by a majority of the other Continuing Directors.

“Contractual Obligation”, as applied to any Person, means any provision of any securities issued by that Person or of any indenture, mortgage, deed of trust, or other material contract, undertaking, agreement or other material instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject.

“Conversion/Continuation Date” means the effective date of a continuation or conversion, as the case may be, as set forth in the applicable Conversion/Continuation Notice.

“Conversion/Continuation Notice” means a Conversion/Continuation Notice substantially in the form of Exhibit II.

“Credit Date” means the date of a Credit Extension.

“Credit Exposure” means, with respect to any Lender as of any date of determination, (i) prior to the termination of the Commitments, that Lender’s Commitment; and (ii) after the termination of the Commitments, the sum of (a) the aggregate outstanding principal amount of the Loans of that Lender, (b) in the case of the Issuing Bank, the aggregate Letter of Credit Usage in respect of all Letters of Credit issued by that Lender (net of any participations by Lenders in such Letters of Credit), and (c) the aggregate amount of all participations by that Lender in any outstanding Letters of Credit or any unreimbursed drawing under any Letter of Credit.

“Credit Extension” means the making of a Loan or the issuing of a Letter of Credit.

“Credit Party” means each Person (other than any Agent, Lead Arranger, the Issuing Bank or any Lender or other representative thereof) from time to time party to a Loan Document.

“Currency” means any of Canadian Dollars, Dollars, Euros or any other Alternative Currency.

“Currency Agreement” means any foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap or other similar agreement or arrangement.

“Default Excess” means, with respect to any Defaulting Lender, the excess, if any, of such Defaulting Lender’s Pro Rata Share of the aggregate outstanding principal amount of Loans of all Lenders (calculated as if all Defaulting Lenders (other than such Defaulting Lender) had funded all of their respective Defaulted Loans) over the aggregate outstanding principal amount of all Loans of such Defaulting Lender.

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“Default Period” means, with respect to any Defaulting Lender, the period commencing on the date of the applicable Funding Default and ending on the earliest of the following dates:  (i) the date on which all Commitments are cancelled or terminated and/or the Obligations are declared or become immediately due and payable, (ii) the date on which (a) the Default Excess with respect to such Defaulting Lender shall have been reduced to zero (whether by the funding by such Defaulting Lender of any Defaulted Loans of such Defaulting Lender or by the non pro rata application of any voluntary or mandatory prepayments of the Loans in accordance with the terms of Section 2.7B) and (b) such Defaulting Lender shall have delivered to the Credit Parties and the Administrative Agent a written reaffirmation of its intention to honor its obligations hereunder with respect to its Commitment, and (iii) the date on which the Credit Parties, the Administrative Agent and the Requisite Lenders waive all Funding Defaults of such Defaulting Lender in writing.

“Defaulted Loan” shall have the meaning ascribed to such term in Section 2.11.

“Defaulting Lender” shall have the meaning ascribed to such term in Section 2.11.

“Deposit Account” means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit.

“Disclosed Litigation” shall have the meaning ascribed to such term in Section 3.1G.

“Documentation Agents” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Dollar-Denominated Loan” means a Loan that is made in Dollars.

“Dollar Amount” means, at any time:

(a)with respect to any Dollar-Denominated Loan, the principal amount thereof then outstanding;

(b)with respect to any Alternative Currency Loan, the principal amount thereof then outstanding in the relevant Alternative Currency, converted to Dollars in accordance with Section 2.10; and

(c)with respect to any Letter of Credit, the amount thereof.

“Dollars” and the sign “$” mean the lawful money of the United States of America.

“Effective Date” means the date on which the conditions specified in Section 3.1 are satisfied or waived in accordance with Section 9.6.

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“Eligible Assignee” means (A) any Lender and any Affiliate of any Lender; and (B) any commercial bank, savings and loan association, savings bank, insurance company, investment or mutual fund or other entity that is an “accredited investor” (as defined in Regulation D under the Securities Act) and which extends credit or buys loans as one of its businesses; provided that no Affiliate of the Borrower or any of its Subsidiaries shall be an Eligible Assignee.

“Employee Benefit Plan” means any “employee benefit plan” as defined in Section 3(3) of ERISA (other than a Multiemployer Plan) which is or was maintained or contributed to by the Borrower or any of its ERISA Affiliates.

“Environmental Claim” means any investigation, notice, notice of violation, claim, action, suit, proceeding, order, consent decree, settlement, demand, abatement order or other order or directive (conditional or otherwise), by any Governmental Authority or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law, (ii) in connection with any Hazardous Materials or any actual or alleged Hazardous Materials Activity or (iii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment.

“Environmental Laws” means any and all current or future federal, state, local and foreign laws and regulations, statutes, ordinances, orders, rules, guidance documents, judgments, Governmental Authorizations, or any other requirements of Governmental Authorities relating to (i) environmental matters, including those relating to any Hazardous Materials Activity, (ii) the generation, use, storage, transportation or disposal of Hazardous Materials, or (iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto.

“ERISA Affiliate” means, as applied to any Person, (i) any corporation which is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) which is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member.  Any former ERISA Affiliate of the Borrower shall continue to be considered an ERISA Affiliate of the Borrower within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of the Borrower and with respect to liabilities arising after such period relating to the period that such entity was an ERISA Affiliate.

“ERISA Event” means (i) a “reportable event” within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which 30-day notice to the PBGC has been waived); (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any

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Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure to make by its due date a required installment under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by the Borrower or any of its ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability pursuant to Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which might reasonably constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on the Borrower or any of its ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal by the Borrower, any of its Subsidiaries or any of their respective ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential withdrawal liability to the Borrower or any of its ERISA Affiliates as a result of the withdrawal, or the receipt by the Borrower or any of its ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or omission which could give rise to the imposition on the Borrower, any of its Subsidiaries or any of their respective ERISA Affiliates of fines, penalties, taxes or related charges under Chapter 43 of the Internal Revenue Code or under Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any Employee Benefit Plan, in each case in an amount that would be material; (ix) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan or the assets thereof, or against the Borrower or any of its ERISA Affiliates in connection with any Employee Benefit Plan; (x) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan to qualify under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code; or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan.

“Euro” means the single currency of the members of the European Union from time to time that adopt a single, shared currency.

“Event of Default” means each of the events set forth in Section 8.

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute.

“Extension Date” shall have the meaning specified in Section 2.15B.

“Facilities” means any and all real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased, operated or used by the Borrower or any of its Subsidiaries or any of their respective predecessors or Affiliates.

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“Facility Fee” shall have the meaning ascribed to such term in Section 2.6(i)(a).

“Federal Funds Effective Rate” means for any day, the rate per annum (expressed, as a decimal, rounded upwards, if necessary, to the next higher 1/100 of 1%) equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to Administrative Agent, in its capacity as a Lender, on such day on such transactions as determined by the Administrative Agent.

“Fee Letter” means the Fee Letter, dated November 9, 2005, among the Borrower, Citicorp and CGMI, as the same may be amended, supplemented or otherwise modified from time to time.

“Fiscal Quarter” means a fiscal quarter of any Fiscal Year.

“Fiscal Year” means the fiscal year of the Borrower and its Subsidiaries ending on December 31 of each calendar year (excluding any Subsidiary of the Borrower that is acquired after the date hereof that has not yet changed its fiscal year to a calendar year).  For purposes of this Agreement, any particular Fiscal Year shall be designated by reference to the calendar year in which such Fiscal Year ends.

“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

“Funding and Payment Office” means, for each of the Administrative Agent and the Issuing Bank, the office of such Person as set forth under the such Person’s name on the signature pages hereof, or such other office designated in a written notice delivered by the Administrative Agent or the Issuing Bank to the Borrower and each Lender.

“Funding Default” shall have the meaning ascribed to such term in Section 2.11.

“GAAP” means, subject to the limitations on the application thereof set forth in Section 1.2, generally accepted accounting principles set forth in opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the United States accounting profession, in each case as the same are applicable to the circumstances as of the date of determination.

“Governmental Acts” means any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority.

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“Governmental Authority” means any federal, state, municipal, national or other government, governmental department, commission, board, bureau, court, agency or instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government.

“Governmental Authorization” means any permit, license, authorization, plan, directive, registration with, approval of, consent order or consent decree of or from, or notice to any Governmental Authority.

“Guaranteed Obligations” shall have the meaning ascribed to such term in Section 7.1.

“Guarantor” means the Borrower.

“Guaranty” means the guaranty of the Guarantor set forth in Section 7.

“Hazardous Materials” means any chemical, material or substance, (i) exposure to which is prohibited or limited by any Governmental Authority, (ii) which is designated, classified or regulated as “hazardous” or “toxic” or as a “pollutant” or “contaminant” under any Environmental Law or (iii) which may or could pose a hazard to the health and safety of the owners, occupants or any Persons in the vicinity of any Facility or to the indoor or outdoor environment.

“Hazardous Materials Activity” means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing.

“Highest Lawful Rate” shall have the meaning ascribed to such term in Section 9.22.

“Implementation Agreement” means the Scheme Implementation Agreement dated September 20, 2006 among Mayne Pharma, Hospira Holdings (S.A.) Pty Ltd and the Borrower.

“Increase Date” shall have the meaning specified in Section 2.14A.

“Increasing Lender” shall have the meaning specified in Section 2.14A.

“Indebtedness”, as applied to any Person, means (i) all indebtedness for borrowed money; (ii) that portion of obligations with respect to Capital Leases that is classified as a liability on a balance sheet in conformity with GAAP; (iii) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money; (iv) any obligation owed for all or any part of the deferred purchase price of property or services

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(excluding any such obligations incurred under ERISA), which purchase price is (a) due more than six months from the date of incurrence of the obligation in respect thereof or (b) evidenced by a note or similar written instrument; (v) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person; (vi) the face amount of any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; (vii) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another; (viii) any obligation of such Person the primary purpose or intent of which is to provide assurance to an obligee that the obligation of the obligor thereof will be paid or discharged, or any agreement relating thereto will be complied with, or the holders thereof will be protected (in whole or in part) against loss in respect thereof; and (ix) any liability of such Person for an obligation of another through any agreement (contingent or otherwise) (a) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (b) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (a) or (b) of this clause (ix), the primary purpose or intent thereof is as described in clause (viii) above.

“Indemnitees” shall have the meaning ascribed to such term in Section 9.3.

“Indemnified Liabilities” shall have the meaning ascribed to such term in Section 9.3.

“Initial Lenders” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Interest Coverage Ratio” means the ratio as of the last day of any Fiscal Quarter of (i) Consolidated Adjusted EBITDA for the four-Fiscal Quarter period then ended, to (ii) Consolidated Financing Expense for such four-Fiscal Quarter period.

“Interest Payment Date” means with respect to (i) any Base Rate Loan, each March 31, June 30, September 30 and December 31 of each year, commencing on the first such date to occur after the Effective Date, and the Maturity Date and (ii) any LIBOR Rate Loan, the last day of each Interest Period and, if any Interest Period is longer than three months, the date that is three months after the first day of such Interest Period, provided that, if any Interest Payment Date would otherwise fall on a day which is not a Business Day, it shall be postponed to the next day which is a Business Day.

“Interest Period” shall have the meaning ascribed to such term in Section 2.5B.

“Interest Rate Agreement” means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement.

“Interest Rate Determination Date” means, with respect to any Interest Period, the second Business Day prior to the first day of such Interest Period.

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“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute.

“Irish Subsidiary” means Hospira, an organization organized under the laws of Ireland.

“Issuance” with respect to any Letter of Credit means the issuance, amendment, renewal or extension of such Letter of Credit.

“Issuance Notice” means an Issuance Notice substantially in the form of Exhibit VI.

“Issuing Bank” means Citicorp North America, Inc. or any Lender approved as an Issuing Bank by the Administrative Agent and the Borrower, together with its permitted successors and assigns in such capacity.

“Joinder Agreement” means a Joinder Agreement substantially in the form of Exhibit IX, with such amendments or modifications as may be approved by the Administrative Agent.

“Joinder Date” means the date on which the conditions specified in Section 11 are satisfied or waived in accordance with Section 9.6.

“Joint Venture” means a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form; provided that in no event shall any corporate Subsidiary of any Person be considered a Joint Venture to which such Person is a party.

“Lead Arrangers” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Lender” and “Lenders” shall mean the Initial Lenders, each Assuming Lender that shall become a party hereto pursuant to Section 2.14 or 2.15 and each Person that shall become a party hereto pursuant to Section 9.15.

“Letter of Credit” means a commercial or standby letter of credit issued or to be issued by the Issuing Bank pursuant to this Agreement.

“Letter of Credit Agreement” has the meaning specified in Section 2.2B.

“Letter of Credit Sublimit” means the lesser of (i) $100,000,000 and (ii) the aggregate unused amount of the Commitments then in effect.

“Letter of Credit Usage” means, as at any date of determination, the sum of (i) the maximum aggregate amount which is, or at any time thereafter may become, available for drawing under all Letters of Credit then outstanding, and (ii) the aggregate amount of all drawings under Letters of Credit honored by the Issuing Bank and not theretofore reimbursed by or on behalf of the Borrower.

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“Leverage Ratio” means, in respect of the Borrower and its Subsidiaries on a consolidated basis, the ratio of (i) Consolidated Total Debt as of the last day of any Fiscal Quarter to (ii) Consolidated Adjusted EBITDA for the four-Fiscal Quarter period then ended.

“LIBOR” means, for any Interest Rate Determination Date, the offered rate in the London interbank market for deposits in Dollars or the relevant Alternative Currency offered for a term comparable to such Interest Period that appears on Telerate Page 3750 as of approximately 11:00 A.M., London time (or such other page as may replace such page on such service for the purpose of displaying the rates at which such Dollar or Alternative Currency deposits are offered by leading banks in the London interbank deposit market), or if no quotation appears on Telerate Page 3750, the average rate per annum which the offices of four leading banks selected by the Administrative Agent and located in London offer for deposits in Dollars or the relevant Alternative Currency in the London interbank deposit market at approximately 11:00 a.m. (London time).

“LIBOR Rate Loan” means any Loan bearing interest at a rate calculated with respect to LIBOR.

“Lien” means any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing.

“Loan” means a loan made by a Lender to a Credit Party pursuant to Section 2.1A.

“Loan Documents” means this Agreement, the Fee Letter, any Note, any Joinder Agreement and any letter of credit application or reimbursement agreement executed by the Borrower in favor of the Issuing Bank relating to Letters of Credit.

“Margin Stock” shall have the meaning ascribed to such term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time.

“Material Adverse Effect” means a material adverse effect upon (i) the business, operations, properties or condition (financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole, (ii) the ability of the Borrower to perform, or of the Administrative Agent to enforce, any of the Obligations of the Borrower (including the Obligations under Section 7 hereof) or (iii) the legality, validity, binding effect or enforceability against the Borrower (or any Subsidiary Borrower that has outstanding or has requested Alternative Currency Loans) of a Loan Document to which it is a party.  For the avoidance of doubt, changes or effects resulting from items related to Permitted Addbacks shall not be considered in determining whether a Material Adverse Effect has occurred.

“Maturity Date” means the earliest to occur of (i) the fifth anniversary of the Effective Date, subject to the extension thereof pursuant to Section 2.15, (ii) the date the Commitments are permanently reduced to zero pursuant to Section 2.7B, and (iii) the date of the termination of the Commitments pursuant to Section 8; provided, however, that the Maturity Date of any Lender that is a Non-Consenting Lender to any requested extension pursuant to

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Section 2.15 shall be the Maturity Date in effect immediately prior to the applicable Extension Date for all purposes of this Agreement.

“Mayne Pharma” means Mayne Pharma Limited ACN 097 064 330.

“Mayne Pharma Acquisition” means the acquisition by Hospira Holdings (S.A.) Pty Ltd of all of the stock of Mayne Pharma substantially on the terms set forth in the Implementation Agreement.

“Moody’s” means Moody’s Investor Services, Inc. or any successor thereto.

“MSSF” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Multiemployer Plan” means any Employee Benefit Plan which is a “multiemployer plan” as defined in Section 3(37) of ERISA to which the Borrower or any of its ERISA Affiliates is obligated to make contributions.

“Non-Consenting Lender” shall have the meaning specified in Section 2.15B.

“Non-US Lender” shall have the meaning ascribed to such term in Section 2.8B(iii)(a).

“Note” means a promissory note of a Credit Party issued pursuant to Section 2.4C, in substantially in the form of Exhibit III, as amended, supplemented or otherwise modified from time to time.

“Notice of Borrowing” means a notice substantially in the form of Exhibit I annexed hereto delivered by any Credit Party to the Administrative Agent pursuant to Section 2.1B with respect to a proposed Borrowing.

“Obligations” means all obligations of every nature of the Credit Parties from time to time owing to the Agents, the Lead Arrangers and the Lenders or any of them under the Loan Documents.

“Officer’s Certificate” means, as applied to any corporation, a certificate executed on behalf of such corporation by any one of its chairman of the board (if an officer), its president, one of its vice presidents, its chief financial officer or its treasurer or, as applied to any limited partnership, a certificate executed on behalf of such limited partnership by the chairman of the board (if an officer), the president, one of the vice presidents, the chief financial officer or treasurer of the general partner of such limited partnership, or, if the general partner of such limited partnership is an individual, executed by such individual; provided that every Officer’s Certificate with respect to the compliance with a condition precedent to the making of any Borrowing shall include:  (i) a statement that the officer making or giving such Officer’s Certificate has read such condition and any definitions or other provisions contained in this Agreement relating thereto, (ii) a statement that, in the opinion of the signer, he has made or has caused to be made such examination or investigation as is necessary to enable him to express an

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informed opinion as to whether or not such condition has been complied with, and (iii) a statement as to whether, in the opinion of the signer, such condition has been complied with.

“Organizational Documents” means (i) with respect to any corporation, its certificate or articles of incorporation or organization, as amended, and its by laws, as amended, (ii) with respect to any limited partnership, its certificate of limited partnership, as amended, and its partnership agreement, as amended, (iii) with respect to any general partnership, its partnership agreement, as amended, and (iv) with respect to any limited liability company, its articles of organization, as amended, and its operating agreement, as amended.  In the event any term or condition of this Agreement or any other Loan Document requires any Organizational Document to be certified by a secretary of state or similar governmental official, the reference to any such “Organizational Document” shall only be to a document of a type customarily certified by such governmental official.

“PBGC” means the Pension Benefit Guaranty Corporation and any successor thereto.

“Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code or Section 302 of ERISA and which is intended to be qualified under Section 401(a) of the Code.

“Performance Level” shall have the meaning ascribed to such term within the definition of “Applicable Margin”.

“Permitted Addbacks” means, for any period ending on or after March 31, 2007, each of the following to the extent taken into account in determining Consolidated Net Income for such period (all calculated on a consolidated pre-tax basis): (a) any one-time or special non-cash charges or expenses resulting from the Mayne Pharma Acquisition, including charges relating to the write-up of Mayne Pharma’s inventory and the write-off of in-process research and development; (b) the first $115,000,000 of charges and expenses (whether cash or non-cash) incurred before December 31, 2008 related to the integration of Mayne Pharma into the Borrower, including charges and expenses for employee severance or retention, integration of information systems, plant shutdowns, product relocation and relabeling and consulting fees); (c) the first $109,000,000 of restructuring charges and expenses (whether cash or non-cash) incurred after March 31, 2006 and before December 31, 2008 related to the Borrower’s closure of its Ashland, Ohio, Donegal, Ireland and Montreal, Canada facilities and exit from its North Chicago, Illinois facility and related expenses (whether cash or non-cash) for the relocation of production from such facilities to other facilities; and (d) the first $24,000,000 of charges and expenses (whether cash or non-cash) incurred after March 31, 2006 and before December 31, 2006 related to the Borrower’s separation from Abbott Laboratories, including the establishment of new facilities, the build-out of independent information technology systems, and product registration and re-labeling.

“Permitted Foreign Credit Facilities” means those foreign credit facilities permitted pursuant to Section 6.2(viii).

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“Person” means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and Governmental Authorities.

“Potential Event of Default” means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default.

“Prime Rate” means the rate of interest as announced by the Administrative Agent from time to time as its base rate, as in effect from time to time.  The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer.  The Administrative Agent or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate.

“Pro Rata Share” means, with respect any Lender, the percentage obtained by dividing (a) the Credit Exposure of such Lender by (b) the aggregate Credit Exposure of all Lenders.

“Proceedings” shall have the meaning ascribed to such term in Section 5.1(vi).

“Qualified Receivables Transaction” means any transaction or series of transactions that may be entered into by the Borrower or any Subsidiary of the Borrower pursuant to which the Borrower or any such Subsidiary may sell, convey, pledge or otherwise transfer to a newly-formed Subsidiary of the Borrower or other special purpose entity, or any other Person, any accounts receivable (including chattel paper, instruments and general intangibles) or notes receivable and the rights and certain other property related thereto, provided that (i) all of the terms and conditions of such transaction or series of transactions, including the amount and type of any recourse to the Borrower or a Subsidiary of the Borrower with respect to the assets transferred, are acceptable to the Administrative Agent and the Requisite Lenders and (ii) the Receivables Transaction Attributed Indebtedness incurred in all such transactions does not exceed $150,000,000 at any time outstanding.

“Receivables Transaction Attributable Indebtedness” means, with respect to any Qualified Receivables Transaction on any date of determination, the unrecovered purchase price on such date of all assets sold, conveyed, pledged or otherwise transferred by the Borrower or any wholly-owned Subsidiary of the Borrower to the third-party conduit entity or other receivables credit provider under such Qualified Receivables Transaction.

“Register” shall have the meaning ascribed to such term in Section 2.4A.

“Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.

“Reimbursement Date” shall have the meaning ascribed to such term in Section 2.2D.

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“Release” means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of any Hazardous Material into the indoor or outdoor environment (including the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Material), including the movement of any Hazardous Material through the air, soil, surface water or groundwater.

“Replacement Lender” shall have the meaning ascribed to such term in Section 2.12.

“Requisite Lenders” means Lenders having aggregate Pro Rata Shares of more than 50%.

“Responsible Officer” means the Chief Executive Officer, the Chief Financial Officer, the Treasurer or the General Counsel of a Credit Party or any other officer of such Credit Party responsible for overseeing or reviewing compliance with the Agreement.

“Restricted Payment” means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of Capital Stock of the Borrower, except a dividend payable solely in shares of such class of Capital Stock to the holders of such class of Capital Stock; (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of Capital Stock of the Borrower; and (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of Capital Stock of the Borrower, except any repurchase or other acquisition of shares of such Capital Stock, or warrants, options or other rights to acquire such shares, in connection with employee compensation in the ordinary course of business in accordance with plans approved by the board of directors of the Borrower.

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw Hill Corporation or any successor thereto.

“Securities” means any stock, share, partnership interest, membership interest in a limited liability company, voting trust certificates, certificate of interest or participation in any profit-sharing agreement or arrangement, option, warrant, bond, debenture, note, or other evidence of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as “securities” or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing.

“Securities Act” means the Securities Act of 1933, as amended from time to time, and any successor statute.

“Significant Subsidiary” means, at any time, a Subsidiary that has or represents at least 5% of (i) the consolidated gross revenues of the Borrower and its Subsidiaries for the Fiscal Year then most recently ended and/or (ii) the consolidated assets of the Borrower and its Subsidiaries as of the last day of the Fiscal Year then most recently ended.

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“Spot Rate” means, for any Alternative Currency on any day, the average of the Administrative Agent’s spot buying and selling rates for the exchange of such Alternative Currency and Dollars as of approximately 11:00 a.m. (London, England time) on such day.

“Subject Transaction” shall have the meaning ascribed to such term in Section 6.11D.

“Subordinated Indebtedness” means any Indebtedness of the Borrower or any of its Subsidiaries, subordinated in right and time of payment to the Obligations.

“Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof.

“Subsidiary Borrower” means any Subsidiary that is designated as a “Subsidiary Borrower” pursuant to Section 11.

“Surviving Obligations” means contingent indemnification liabilities of the Borrower under the Loan Documents that are not yet due and payable.

“Syndication Agents” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Tax” means any present or future tax, levy, impost, duty, assessment, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed; provided “Tax on the overall net income” of a Person shall be construed as a reference to a tax imposed by the jurisdiction in which that Person is organized or in which that Person’s applicable principal office (and/or, in the case of a Lender, its lending office) is located or in which that Person (and/or, in the case of a Lender, its lending office) is deemed to be doing business on all or part of the net income, profits or gains (whether worldwide, or only insofar as such income, profits or gains are considered to arise in or to relate to a particular jurisdiction, or otherwise) of that Person (and/or, in the case of a Lender, its applicable lending office).

“Terminated Lender” shall have the meaning ascribed to such term in Section 2.12.

“Total Utilization of Commitments” means, as at any date of determination, the sum of (i) the aggregate principal amount of all outstanding Loans plus (ii) the Letter of Credit Usage.

“Type of Loan” means a Base Rate Loan or a LIBOR Rate Loan.

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“Utilization Fee” shall have the meaning ascribed to such term in Section 2.6(i)(b).

1.2Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement.

Except as otherwise expressly provided in this Agreement, all accounting terms not otherwise defined herein shall have the respective meanings assigned to them in conformity with GAAP.  Calculations in connection with the definitions, covenants and other provisions of this Agreement shall utilize accounting principles and policies in effect on the date hereof which are in conformity with those used to prepare the financial statements referred to in Section 4.4.  Financial statements and other information required to be delivered by the Borrower to the Administrative Agent pursuant to clauses (i) and (ii) of Section 5.1 shall be prepared in accordance with GAAP as in effect at the time of such preparation.  In the event that a change in GAAP or other accounting principles and policies after the date hereof affects in any material respect the calculations of the covenants contained herein, the Lenders and the Borrower agree to negotiate in good faith to amend the affected covenants (and related definitions) to compensate for the effect of such changes so that the restrictions, limitations and performance standards effectively imposed by such covenants, as so amended, are substantially identical to the restrictions, limitations and performance standards imposed by such covenants as in effect on the date hereof; provided that, if the Requisite Lenders and the Borrower fail to reach agreement with respect to such amendment within a reasonable period of time following the date of effectiveness of any such change, calculation of compliance by the Borrower and its Subsidiaries with the covenants contained herein shall be determined in accordance with GAAP as in effect immediately prior to such change.

1.3Other Definitional Provisions and Rules of Construction.

A.            Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference.

B.            References to “Sections” and subsections shall be to Sections and subsections, respectively, of this Agreement unless otherwise specifically provided.

C.            The use in any of the Loan Documents of the word “include” or “including”, when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as “without limitation” or “but not limited to” or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter.

D.            Whenever the term “wholly-owned” is used with respect to a Subsidiary of a Person, such term means that all of the Capital Stock (other than directors’ qualifying shares) of such Subsidiary is owned, directly or indirectly, by such Person.

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SECTION 2.     AMOUNT AND TERMS OF COMMITMENTS AND LOANS

2.1Commitment; Making of Loans; Letters of Credit.

A.            Commitments.

(i)            During the Commitment Period, subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of the Credit Parties herein set forth, each Lender severally agrees to make Loans (including, with respect to Alternative Currency Loans, through any Affiliate of such Lender) (i) denominated in Dollars to the Borrower, (ii) denominated in Canadian Dollars to the Canadian Subsidiary, (iii) denominated in Euros to the Irish Subsidiary, (iv) denominated in Dollars to the Bahamian Subsidiary or (v) denominated in the applicable Alternative Currency designated by any other Subsidiary Borrower, in an aggregate amount up to but not exceeding such Lender’s Commitment as set forth opposite its name on Schedule 2.1A annexed hereto; provided that after giving effect to the making of any Loans, (i) the Total Utilization of Commitments shall not exceed the Commitments and (ii) the aggregate Dollar Amount of all Alternative Currency Loans shall not exceed the Alternative Currency Sublimit.

(ii)           Each Lender’s Commitment shall expire on the Maturity Date applicable to such Lender and all Loans and all other amounts owed hereunder with respect to the Loans and the Commitment of such Lender shall be paid in full no later than such date.  Amounts borrowed pursuant to this Section 2.1A may be repaid and reborrowed during the Commitment Period.

B.            Borrowing Mechanics.

(i)            Except pursuant to 2.2D, each Borrowing shall at all times be in minimum amount of $5,000,000 or higher integral multiples of 1,000,000 units of the applicable currency.

(ii)           Whenever any Credit Party desires that the Lenders make Loans, such Credit Party shall deliver to Administrative Agent on behalf of the Lenders a fully executed and delivered Notice of Borrowing (a) in the case of LIBOR Rate Loans denominated in Dollars, not later than 11:00 a.m. (New York City time), at least three (3) Business Days in advance of the proposed Credit Date; (b) in the case of LIBOR Rate Loans denominated in an Alternative Currency, not later than 11:00 a.m. (New York City time), at least four (4) Business Days in advance of the proposed Credit Date; or (c) in the case of Base Rate Loans, not later than 11:00 a.m. (New York City time), on the proposed Credit Date.  Except as otherwise provided herein, a Notice of Borrowing for LIBOR Rate Loans shall be irrevocable on and after the related Interest Rate Determination Date, and the applicable Credit Party shall be bound to borrow such Loans in accordance therewith.  Each Notice of Borrowing shall specify the following information:

(a)           the Currency;

(b)           the aggregate amount (in the Applicable Currency) of such Loans;

(c)           the Credit Date of such Loans, which shall be a Business Day;

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(d)           whether such Loans are to be Base Rate Loans or LIBOR Rate Loans;

(e)           in the case of LIBOR Rate Loans, the initial Interest Period to be applicable thereto; and

(f)            the location and number of the Credit Party’s account, as applicable, to which funds are to be disbursed.

(iii)          Notice of receipt of each Notice of Borrowing, together with the amount of each Lender’s Pro Rata Share thereof, if any, together with the applicable interest rate, shall be provided by the Administrative Agent to each applicable Lender by facsimile with reasonable promptness, but (provided the Administrative Agent shall have received such notice by 11:00 a.m. (New York City time)) not later than 2:00 p.m. (New York City time) on the same day as the Administrative Agent’s receipt of such Notice of Borrowing from the applicable Credit Party.

(iv)          Each Lender (or, if appropriate, with respect to Alternative Currency Loans, an Affiliate of such Lender) shall make the amount of its Loan available to the Administrative Agent on the applicable Credit Date by wire transfer:

(a)           if such Loan is to be made in Dollars, not later than 12:00 p.m. (New York City time), or, if later, not more than one hour after receipt of the Administrative Agent’s delivery of the notice pursuant to clause (iii) above, in same day funds in Dollars at the Funding and Payment Office; or

(b)           if such Loan is to be made in an Alternative Currency, not later than 12:00 p.m. (London, England time), in such Alternative Currency (in such funds as may then be customary for the settlement of international transactions in such Alternative Currency) at the Funding and Payment Office.

(v)           Except as provided herein, upon satisfaction or waiver of the conditions precedent specified in Section 3.1 and Section 3.2, the Administrative Agent shall make the proceeds of such Loans available to the applicable Credit Party on the applicable Credit Date by causing an amount of same day funds in the Applicable Currency equal to the proceeds of all such Loans received by the Administrative Agent from the Lenders to be credited to the account of the applicable Credit Party at the Funding and Payment Office or such other account as may be designated in writing to the Administrative Agent by the Credit Parties.

2.2Issuance of Letters of Credit and Purchase of Participations Therein.

A.            Letters of Credit.  During the Commitment Period, subject to the terms and conditions hereof, the Issuing Bank agrees to issue Letters of Credit for the account of the Borrower in the aggregate amount up to but not exceeding the Letter of Credit Sublimit; provided (i) each Letter of Credit shall be denominated in Dollars; (ii) the stated amount of each Letter of Credit shall not be less than $5,000,000 or such lesser amount as is acceptable to the Issuing Bank; (iii) after giving effect to such issuance, in no event shall the Total Utilization of Commitments exceed the Commitments then in effect; (iv) after giving effect to such issuance, in no event shall the Letter of Credit Usage exceed the Letter of Credit Sublimit then in effect;

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(v) in no event shall any standby Letter of Credit have an expiration date later than the earlier of (1) five Business Days prior to the Maturity Date and (2) the date which is one year from the date of issuance of such standby Letter of Credit; and (vi) in no event shall any commercial Letter of Credit (x) have an expiration date later than the earlier of (1) five Business Days before the Maturity Date and (2) the date which is 180 days from the date of issuance of such commercial Letter of Credit or (y) be issued if such commercial Letter of Credit is otherwise unacceptable to the Issuing Bank in its reasonable discretion.  Subject to the foregoing, the Issuing Bank may agree that a standby Letter of Credit will automatically be extended for one or more successive periods not to exceed one year each, unless the Issuing Bank elects not to extend for any such additional period; provided the Issuing Bank shall not extend any such Letter of Credit if it has received written notice that an Event of Default has occurred and is continuing at the time the Issuing Bank must elect to allow such extension; provided further in the event a Funding Default exists, the Issuing Bank shall not be required to issue any Letter of Credit unless the Issuing Bank has entered into arrangements satisfactory to it and the Borrower to eliminate the Issuing Bank’s risk with respect to the participation in Letters of Credit of the Defaulting Lender, including by cash collateralizing such Defaulting Lender’s Pro Rata Share of the Letter of Credit Usage.

B.            Notice of Issuance.  Each Letter of Credit shall be issued upon notice, given not later than 11:00 A.M. (New York City time) on the fifth Business Day prior to the date of the proposed Issuance of such Letter of Credit (or on such shorter notice as the Issuing Bank may agree), by the Borrower to the Issuing Bank, and such Issuing Bank shall give the Administrative Agent, prompt notice thereof.  Each such Issuance Notice by the Borrower shall be by facsimile or telephone, confirmed immediately in writing, specifying therein the requested (A) date of such Issuance (which shall be a Business Day), (B) Available Amount of such Letter of Credit, (C) expiration date of such Letter of Credit, (D) name and address of the beneficiary of such Letter of Credit and (E) form of such Letter of Credit.  Such Letter of Credit shall be issued pursuant to such application and agreement for letter of credit as the Issuing Bank and the Borrower shall agree for use in connection with such requested Letter of Credit (a “Letter of Credit Agreement”).  If the requested form of such Letter of Credit is acceptable to the Issuing Bank in its reasonable discretion (it being understood that any such form shall have only explicit documentary conditions to draw and shall not include discretionary conditions), the Issuing Bank will, unless any Lender gives prior notice to the Issuing Bank or the Administrative Agent that the applicable conditions of Section 3.2 would not be satisfied at the time of such issuance, upon fulfillment of the applicable conditions set forth in Section 3.2, make such Letter of Credit available to the Borrower at its office referred to in Section 9.8 or as otherwise agreed with the Borrower in connection with such Issuance.  In the event and to the extent that the provisions of any Letter of Credit Agreement shall conflict with this Agreement, the provisions of this Agreement shall govern.

C.            Responsibility of the Issuing Bank With Respect to Requests for Drawings and Payments.  In determining whether to honor any drawing under any Letter of Credit by the beneficiary thereof, the Issuing Bank shall be responsible only to examine the documents delivered under such Letter of Credit with reasonable care so as to ascertain whether they appear on their face to be in accordance with the terms and conditions of such Letter of Credit.  As between the Borrower and the Issuing Bank, the Borrower assumes all risks of the acts and omissions of, or misuse of the Letters of Credit issued by the Issuing Bank, by the respective

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beneficiaries of such Letters of Credit.  In furtherance and not in limitation of the foregoing, the Issuing Bank shall not be responsible for:  (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) failure of the beneficiary of any such Letter of Credit to comply fully with any conditions required in order to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of the Issuing Bank, including any Governmental Acts; none of the above shall affect or impair, or prevent the vesting of, any of the Issuing Bank’s rights or powers hereunder.  Without limiting the foregoing and in furtherance thereof, any action taken or omitted by the Issuing Bank under or in connection with the Letters of Credit or any documents and certificates delivered thereunder, if taken or omitted in good faith, shall not give rise to any liability on the part of the Issuing Bank to the Borrower.  Notwithstanding anything to the contrary contained in this Section 2.2C, the Borrower shall retain any and all rights it may have against the Issuing Bank for any liability arising out of the gross negligence or willful misconduct of the Issuing Bank.

D.            Reimbursement by the Borrower of Amounts Drawn or Paid Under Letters of Credit.  In the event the Issuing Bank has determined to honor a drawing under a Letter of Credit, it shall immediately notify the Borrower and the Administrative Agent, and the Borrower shall reimburse the Issuing Bank on or before the Business Day immediately following the date on which such drawing is honored (the “Reimbursement Date”) in an amount in Dollars and in same day funds equal to the amount of such honored drawing; provided, anything contained herein to the contrary notwithstanding, (i) unless the Borrower shall have notified the Administrative Agent and the Issuing Bank prior to 10:00 a.m. (New York City time) on the date such drawing is honored that the Borrower intends to reimburse the Issuing Bank for the amount of such honored drawing with funds other than the proceeds of Loans, the Borrower shall be deemed to have given a timely Notice of Borrowing to the Administrative Agent requesting the Lenders to make Base Rate Loans on the Reimbursement Date in an amount in Dollars equal to the amount of such honored drawing, and (ii) subject to satisfaction or waiver of the applicable conditions specified in Section 3.2, the Lenders shall, on the Reimbursement Date, make Base Rate Loans in the amount of such honored drawing, the proceeds of which shall be applied directly by the Administrative Agent to reimburse the Issuing Bank for the amount of such honored drawing; and provided further, if for any reason proceeds of Loans are not received by the Issuing Bank on the Reimbursement Date in an amount equal to the amount of such honored drawing, the Borrower shall reimburse the Issuing Bank, on demand, in an amount in same day funds equal to the excess of the amount of such honored drawing over the aggregate amount of such Loans, if any, which are so received.  Nothing in this Section 2.2D shall be deemed to relieve any Lender from its obligation to make Loans on the terms and conditions set forth

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herein, and the Borrower shall retain any and all rights it may have against any Lender resulting from the failure of such Lender to make such Loans under this Section 2.2D.

E.             Lenders’ Purchase of Participations in Letters of Credit.  Immediately upon the issuance of each Letter of Credit, each Lender having a Commitment shall be deemed to have purchased, and hereby agrees to irrevocably purchase, from the Issuing Bank a participation in such Letter of Credit and any drawings honored thereunder in an amount equal to such Lender’s Pro Rata Share (with respect to the Commitments) of the maximum amount which is or at any time may become available to be drawn thereunder.  In the event that the Borrower shall fail for any reason to reimburse the Issuing Bank as provided in Section 2.2D, the Issuing Bank shall promptly notify each Lender of the unreimbursed amount of such honored drawing and of such Lender’s respective participation therein based on such Lender’s Pro Rata Share of the Commitments.  Each Lender shall make available to the Issuing Bank an amount equal to its respective participation, in Dollars and in same day funds, at the office of the Issuing Bank specified in such notice, not later than 12:00 p.m. (New York City time) on the first Business Day (under the laws of the jurisdiction in which such office of the Issuing Bank is located) after the date notified by the Issuing Bank.  In the event that any Lender fails to make available to the Issuing Bank on such Business Day the amount of such Lender’s participation in such Letter of Credit as provided in this Section 2.2E, the Issuing Bank shall be entitled to recover such amount on demand from such Lender together with interest thereon for three Business Days at the rate customarily used by the Issuing Bank for the correction of errors among banks and thereafter at the Base Rate.  Nothing in this Section 2.2E shall be deemed to prejudice the right of any Lender to recover from the Issuing Bank any amounts made available by such Lender to the Issuing Bank pursuant to this Section 2.2E in the event that it is determined that the payment with respect to a Letter of Credit in respect of which payment was made by such Lender constituted gross negligence or willful misconduct on the part of the Issuing Bank.  In the event the Issuing Bank shall have been reimbursed by other Lenders pursuant to this Section 2.2E for all or any portion of any drawing honored by the Issuing Bank under a Letter of Credit, the Issuing Bank shall distribute to each Lender which has paid all amounts payable by it under this Section 2.2E with respect to such honored drawing such Lender’s Pro Rata Share of all payments subsequently received by the Issuing Bank from the Borrower in reimbursement of such honored drawing when such payments are received.  Any such distribution shall be made to a Lender at its notice address set forth on the signature pages hereto or at such other address as such Lender may request.

F.             Obligations Absolute.  The obligation of the Borrower to reimburse the Issuing Bank for drawings honored under the Letters of Credit issued by it and to repay any Loans made by Lenders pursuant to Section 2.2D and the obligations of Lenders under Section 2.2E shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms hereof under all circumstances including any of the following circumstances:  (i) any lack of validity or enforceability of any Letter of Credit; (ii) the existence of any claim, set off, defense or other right which the Borrower or any Lender may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such transferee may be acting), the Issuing Bank, any Lender or any other Person or, in the case of a Lender, against the Borrower, whether in connection herewith, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between the Borrower or one of its Subsidiaries and the beneficiary for which any Letter of Credit was procured); (iii) any draft or other

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document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) payment by the Issuing Bank under any Letter of Credit against presentation of a draft or other document which does not strictly comply with the terms of such Letter of Credit; (v) the occurrence of any Material Adverse Effect; (vi) any breach hereof or any other Loan Document by any party thereto; (vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing; or (viii) the fact that an Event of Default or a Potential Event of Default shall have occurred and be continuing; provided, in each case, that payment by the Issuing Bank under the applicable Letter of Credit shall not have constituted gross negligence or willful misconduct of the Issuing Bank under the circumstances in question.

G.            Indemnification.  Without duplication of any obligation of the Borrower under Section 9.2 or 9.3, in addition to amounts payable as provided therein, the Borrower hereby agrees to protect, indemnify, pay and save harmless the Issuing Bank from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel and, without duplication, allocated costs of internal counsel) which the Issuing Bank may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit by the Issuing Bank, other than as a result of (1) the gross negligence or willful misconduct of the Issuing Bank or (2) the wrongful dishonor by the Issuing Bank of a proper demand for payment made under any Letter of Credit issued by it, or (ii) the failure of the Issuing Bank to honor a drawing under any such Letter of Credit as a result of any Governmental Act.

2.3Pro Rata Shares; Availability of Funds; UCP.

A.            Pro Rata Shares.  All Loans shall be made, and all participations purchased, by the Lenders (or, if applicable, by their Affiliates) simultaneously and proportionately to their respective Pro Rata Shares (determined as of the date of such Loans or such purchases, as the case may be), it being understood that no Lender shall be responsible for any default by any other Lender in such other Lender’s obligation to make a Loan requested hereunder or purchase a participation required hereby nor shall any Commitment of any Lender be increased or decreased as a result of a default by any other Lender in such other Lender’s obligation to make a Loan requested hereunder or purchase a participation required hereby.  Each Lender acknowledges and agrees that its participation in each Letter of Credit will be automatically adjusted to reflect such Lender’s Pro Rata Share of each Letter of Credit at each time such Lender’s Commitment is increased pursuant to Section 2.14, reduced on a date prior to the date to which the Maturity Date may have been extended pursuant to Section 2.15, amended pursuant to an assignment in accordance with Section 9.1 or otherwise changed pursuant to this Agreement.

B.            Availability of Funds.  Unless the Administrative Agent shall have been notified by any Lender prior to the applicable Credit Date that such Lender does not intend to make available to the Administrative Agent the amount of such Lender’s Loan requested on such Credit Date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such Credit Date and the Administrative Agent may, in its sole discretion, but shall not be obligated to, make available to the Borrower a corresponding amount on such Credit Date.  If such corresponding amount is not in fact made available to the Administrative Agent by such Lender or an Affiliate of such Lender, the Administrative Agent

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shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from such Credit Date until the date such amount is paid to the Administrative Agent, at the customary rate set by the Administrative Agent for the correction of errors among banks for three Business Days and thereafter at the Base Rate.  If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent shall promptly notify the Borrower and the Borrower shall immediately pay such corresponding amount to the Administrative Agent together with interest thereon, for each day from such Credit Date until the date such amount is paid to the Administrative Agent, at the rate payable hereunder for Base Rate Loans.  Nothing in this Section 2.3B shall be deemed to relieve any Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that the Borrower may have against any Lender as a result of any default by such Lender hereunder.

C.            Uniform Customs and Practice for Documentary Credits.  It is hereby agreed that, except as otherwise specified in any Letter of Credit, each commercial Letter of Credit shall be subject to the Uniform Customs and Practice for Documentary Credits and each standby Letter of Credit shall be subject to the International Standby Practices (ISP 98).

2.4The Register; Evidence of Debt; Notes.

A.            Register.

(i)            The Administrative Agent shall maintain at its Payment and Funding Office a register for the recordation of the names and addresses of the Lenders and the Commitment and Loans of each Lender from time to time (the “Register”).  The Register shall be available for inspection by the Credit Parties or any Lender at any reasonable time and from time to time upon reasonable prior notice.  The Administrative Agent shall record in the Register the Commitment and the Loans of each Lender, and each repayment or prepayment in respect of the principal amount of such Loans.  Any such recordation shall be prima facie evidence of the amount owed to such Lender hereunder; provided that failure to make any such recordation, or any error in such recordation, shall not affect any Lender’s Commitment or the Obligations in respect of any Loan.  The Credit Parties hereby designate Citicorp to serve as the Credit Parties’ agent solely for purposes of maintaining the Register as provided in this Section 2.4, and the Credit Parties hereby agree that, to the extent Citicorp serves in such capacity, Citicorp and its officers, directors, employees, agents and affiliates shall constitute “Indemnitees” hereunder.

(ii)           The Credit Parties, the Administrative Agent and the Lenders shall deem and treat the Persons listed as Lenders in the Register as the holders and owners of the corresponding Commitments and Loans listed therein for all purposes hereof, and no assignment or transfer of any Commitment or Loan shall be effective, in each case unless and until an Assignment Agreement effecting the assignment or transfer thereof shall have been accepted by the Administrative Agent and recorded in the Register as provided in Section 9.1C.  Prior to such recordation, all amounts owed with respect to the applicable Commitment or Loan shall be owed to the Lender listed in the Register as the owner thereof, and any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, assignee or transferee of the corresponding Commitments or Loans.

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B.            Lenders’ Evidence of Debt.  Each Lender shall maintain on its internal records an account or accounts evidencing the Obligations of each Credit Party to such Lender, including the amounts of the Loans made by it and each repayment and prepayment in respect thereof.  Any such recordation shall be conclusive and binding on the Credit Parties, absent manifest error; provided that the failure to make any such recordation, or any error in such recordation, shall not affect any Lender’s Commitments or the Obligations of the Credit Parties in respect of any applicable Loans; and provided further, in the event of any inconsistency between the Register and any Lender’s records, the recordations in the Register shall govern.

C.            Notes.  If so requested by any Lender by written notice to any Credit Party (with a copy to the Administrative Agent), such Credit Party shall execute and deliver to such Lender, promptly after such Credit Party’s receipt of such notice, a Note or Notes to evidence such Lender’s Loans.

2.5Interest on the Loans.

A.            Rate of Interest; Type of Loan.

(i)            Subject to the provisions of Sections 2.5E, 2.8 and 2.9, each Loan shall bear interest on the unpaid principal amount thereof from the date made through the Maturity Date (whether by acceleration or otherwise) at a rate equal to (a) if a Base Rate Loan, the Base Rate plus the Applicable Margin or (b) if a LIBOR Rate Loan, the sum of LIBOR plus the Applicable Margin.

(ii)           The basis for determining the rate of interest with respect to any Loan and the Interest Period with respect to any LIBOR Rate Loan, shall be selected by the applicable Credit Party and notified to the Administrative Agent and the Lenders pursuant to the applicable Notice of Borrowing or Conversion/Continuation Notice, as the case may be.  If on any day a Loan is outstanding with respect to which a Notice of Borrowing or Conversion/Continuation Notice has not been delivered to the Administrative Agent in accordance with the terms hereof specifying the applicable basis for determining the rate of interest, then for that day such Loan shall be a Base Rate Loan.

(iii)          With respect to Dollar-Denominated Loans or Alternative Currency Loans denominated in Canadian Dollars, in the event the Borrower fails to specify Base Rate Loans or LIBOR Rate Loans in the applicable Notice of Borrowing or Conversion/Continuation Notice, such Loans (if outstanding as a LIBOR Rate Loans) will be automatically converted into Base Rate Loans on the last day of the then current Interest Period for such Loans (or if outstanding as Base Rate Loans will remain as, or (if not then outstanding) will be made as, Base Rate Loans).  As soon as practicable after 11:00 a.m. (New York City time) on each Interest Rate Determination Date, the Administrative Agent shall determine (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) the interest rate that shall apply to the LIBOR Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to the applicable Credit Party and each Lender.

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B.Interest Periods.  The applicable interest period (each an “Interest Period”) of each Borrowing of LIBOR Rate Loans shall be a one (1), two (2), three (3) or six (6) month period, as selected by the applicable Credit Party in the applicable Notice of Borrowing or Conversion/Continuation Notice, initially commencing on the date of the Loan or any Conversion/Continuation Date, as the case may be; provided that

(i)in the case of immediately successive Interest Periods applicable to LIBOR Rate Loans, each successive Interest Period shall commence on the day on which the immediately preceding Interest Period expires;

(ii)if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided that, if any Interest Period would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the immediately preceding Business Day;

(iii)any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (iv) of this Section 2.5B, end on the last Business Day of a calendar month;

(iv)no Interest Period shall extend beyond the latest Maturity Date;

(v)no more than ten (10) Interest Periods shall be outstanding at any time; and

(vi)if the applicable Credit Party fails to specify an Interest Period for any Borrowing of LIBOR Rate Loans in the applicable Notice of Borrowing or Conversion/Continuation Notice, such Credit Party shall be deemed to have selected an Interest Period of one (1) month.

C.Interest Payments. On each Interest Payment Date for a Borrowing, the applicable Credit Party shall pay an amount equal to the aggregate amount of interest that has accrued on such Borrowing since the Effective Date or the last Interest Payment Date for such Borrowing, as applicable.  In addition, interest on each Loan shall be payable upon any prepayment of such Loan (to the extent accrued on the amount being prepaid) and at maturity.

D.Default Rate.  Upon the occurrence and during the continuation of any Event of Default, (i) the Credit Parties shall no longer have the option to request LIBOR Rate Loans, (ii) each LIBOR Rate Loan denominated in Dollars shall convert to a Base Rate Loan at the end of the Interest Period then in effect for such LIBOR Rate Loan, (iii) upon request of the Requisite Lenders, the outstanding principal amounts of all LIBOR Rate Loans shall bear interest (including post-petition interest in any case or proceeding under the Bankruptcy Code) at a rate per annum equal to two percent (2%) plus the rate then applicable to LIBOR Rate Loans until the end of the applicable Interest Period and thereafter at a rate equal to two percent (2%) plus the rate then applicable to Base Rate Loans, and (iv) upon request of the Requisite Lenders, all outstanding Base Rate Loans and, to the extent permitted by applicable law, other Obligations arising hereunder or under any other Loan Document shall bear interest (including post-petition

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interest in any case or proceeding under the Bankruptcy Code) at a rate per annum equal to two percent (2%) plus the rate then applicable to such Base Rate Loans or such other Obligations arising hereunder or under any other Loan Document.  Payment or acceptance of the increased rates of interest provided for in this Section 2.5D is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Agents or Lenders.

E.Computation of Interest.

(i)Interest payable pursuant to Section 2.5A shall be computed (i) in the case of Base Rate Loans on the basis of a 365 day or 366 day year, as the case may be, and (ii) in the case of LIBOR Rate Loans, on the basis of a 360 day year, in each case for the actual number of days elapsed in the period during which it accrues.  In computing interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted from a LIBOR Rate Loan, the date of conversion of such LIBOR Rate Loan to such Base Rate Loan, as the case may be, shall be included, and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted to a LIBOR Rate Loan, the date of conversion of such Base Rate Loan to such LIBOR Rate Loan, as the case may be, shall be excluded; provided, if a Loan is repaid on the same day on which it is made, one day’s interest shall be paid on that Loan.

(ii)For purposes of disclosure pursuant to the Interest Act (Canada), R.S. 1985, c I-15, the annual rates of interest or fees to which the rates of interest or fees provided in this Agreement and each Note (and stated herein or therein as applicable to be computed on the basis of a 365-day year or any other period of time less than a calendar year) are equivalent, and are the rates so determined multiplied by the actual number of days in the applicable calendar year and divided by 365 or such other period of time.

F.Conversion/Continuation.

(i)Subject to Section 2.9 and so long as no Potential Event of Default or Event of Default shall have occurred and then be continuing, each Credit Party shall have the option:

(a)to convert at any time all or any part of any Borrowing of Dollar-Denominated Loans in an aggregate amount of $5,000,000 or a higher integral multiple of $1,000,000 from one Type of Loan to another Type of Loan; provided if any LIBOR Rate Loan is converted on a day other than the last day of an Interest Period therefor, the applicable Credit Party shall pay all amounts due under Section 2.8 in connection with such conversion; or

(b)upon the expiration of any Interest Period applicable to any Borrowing LIBOR Rate Loans, to continue all or any portion of such Loans in a minimum amount of $5,000,000 or a higher integral multiple of 1,000,000 units of the applicable currency as LIBOR Rate Loans.

(ii)The applicable Credit Party shall deliver a Conversion/Continuation Notice to the Administrative Agent no later than 11:00 a.m. (New York City time) at least one

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Business Day in advance of the proposed conversion date (in the case of a conversion to Base Rate Loans) and at least three Business Days in advance of the proposed Conversion/Continuation Date (in the case of a conversion to, or a continuation of, LIBOR Rate Loans).  Except as otherwise provided herein, a Conversion/Continuation Notice for conversion to, or continuation of, LIBOR Rate Loans (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and the applicable Credit Party shall be bound to effect a conversion or continuation in accordance therewith.

G.Letter of Credit Drawings.  The Borrower agrees to pay to the Issuing Bank, with respect to drawings honored under any Letter of Credit, interest on the amount paid by the Issuing Bank in respect of each such honored drawing from the date such drawing is honored to but excluding the date such amount is reimbursed by or on behalf of the Borrower at a rate equal to (i) for the period from the date such drawing is honored to, but excluding, the applicable Reimbursement Date, the Base Rate plus the Applicable Margin, and (ii) thereafter, the Base Rate plus the Applicable Margin plus 2%.

H.Computation of Interest on Reimbursement Obligations.  Interest payable pursuant to Section 2.5G shall be computed on the basis of a 365/366 day year for the actual number of days elapsed in the period during which it accrues, and shall be payable on demand or, if no demand is made, on the date on which the related drawing under a Letter of Credit is reimbursed in full.  Promptly upon receipt by the Issuing Bank of any payment of interest pursuant to Section 2.5G, the Issuing Bank shall distribute to each Lender, out of the interest received by the Issuing Bank in respect of the period from the date such drawing is honored to, but excluding, the date on which the Issuing Bank is reimbursed for the amount of such drawing (including any such reimbursement out of the proceeds of any Loans), the amount that such Lender would have been entitled to receive in respect of the letter of credit fee that would have been payable in respect of such Letter of Credit for such period if no drawing had been honored under such Letter of Credit.  In the event the Issuing Bank shall have been reimbursed by the Lenders for all or any portion of such honored drawing, the Issuing Bank shall distribute to each Lender which has paid all amounts payable by it under Section 2.2E with respect to such honored drawing such Lender’s Pro Rata Share of any interest received by the Issuing Bank in respect of that portion of such honored drawing so reimbursed by the Lenders for the period from the date on which the Issuing Bank was so reimbursed by the Lenders to but excluding the date on which such portion of such honored drawing is reimbursed by the Borrower.

I.Additional Interest on LIBOR Rate Loans.  Each Credit Party shall pay to each Lender, so long as and to the extent such Lender shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including “Eurocurrency liabilities” (as such term is defined in Regulation D), additional interest on the unpaid principal amount of each LIBOR Rate Loan of such Lender, from the date of such Loan until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (a) the LIBOR rate for the applicable Interest Period for such Loan from (b) the rate obtained by dividing such LIBOR rate by a percentage equal to 100% minus the Applicable Reserve Requirement (expressed as a percentage) of such Lender for such Interest Period, payable on each date on which interest is payable on such Loan.  Such Lender shall as soon as practicable provide notice to the

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Administrative Agent and the Borrower of any such additional interest arising in connection with such Loan, which notice shall be conclusive and binding, absent demonstrable error.

2.6Fees.

All fees referred to in this Section 2.6 shall be paid to the Administrative Agent at its Funding and Payment Office and upon receipt, the Administrative Agent shall promptly distribute to each Lender its Pro Rata Share thereof.

(i)The Borrower agrees to pay to each Lender having Credit Exposure the fees listed below.

(a)Facility Fee:  From the Effective Date until the Maturity Date, the Borrower shall pay a facility fee (the “Facility Fee”) to each Lender, ratably in accordance with such Lender’s then current Commitment, determined by reference to the pricing grid set forth in the definition of Applicable Margin.  The Facility Fee shall be paid quarterly in arrears and on the Maturity Date;

(b)Utilization Fee:  From the Effective Date until the Maturity Date, for each day on which the outstanding principal amount of the Loans exceeds 50% of the total Commitments, the Borrower shall pay a utilization fee (the “Utilization Fee”) to each Lender, ratably in accordance with such Lender’s outstanding Loans during the applicable period, determined by reference to the pricing grid set forth in the definition of Applicable Margin.  The Utilization Fee will be paid quarterly in arrears and on the Maturity Date; and

(c)Letter of Credit Fee:  From the Effective Date until the Maturity Date, the Borrower shall pay letter of credit fees to each Lender, ratably in accordance with its then current Commitment, equal to (1) the Applicable Margin for LIBOR Rate Loans, times (2) the average aggregate daily maximum amount available to be drawn under all Letters of Credit (regardless of whether any conditions for drawing could then be met and determined as of the close of business on any date of determination).

(ii)The Borrower agrees to pay directly to the Issuing Bank, for its own account, the following fees:

(a)a fronting fee equal to 0.125% per annum (or such other rate as may be agreed to by the Borrower and the Issuing Bank), times the average aggregate daily maximum amount available to be drawn under all Letters of Credit (determined as of the close of business on any date of determination); and

(b)such documentary and processing charges for any issuance, amendment, transfer or payment of a Letter of Credit as are in accordance with the Issuing Bank’s standard schedule for such charges and as in effect at the time of such issuance, amendment, transfer or payment, as the case may be.

(iii)All fees referred to in Section 2.6(i) and 2.6(ii)(a) shall be calculated on the basis of a 360 day year and the actual number of days elapsed and shall be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year during the

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Commitment Period, commencing on the first such date to occur after the Effective Date, and on the Maturity Date.

(iv)In addition to any of the foregoing fees, the Borrower agrees to pay to the Lead Arrangers and the Agents such other fees in the amounts and at the times separately agreed upon in the Fee Letter.

2.7Provisions Regarding Payments.

A.Voluntary Prepayments.

(i)Any time and from time to time:

(a)the Borrower may prepay any Base Rate Loans on any Business Day in whole or in part, in an aggregate principal amount of $5,000,000 or a higher integral multiple of $1,000,000; provided, that if Loans are made pursuant to Section 2.2D, then during the thirty (30) days after the making of such Loans, the Borrower may make one prepayment of Base Rate Loans in any amount so long as after giving effect thereto, the aggregate principal amount of all Base Rate Loans is an integral multiple of $1,000,000; and

(b)the Borrower may prepay any Borrowing of LIBOR Rate Loans on any Business Day in whole or in part in an aggregate principal Dollar Amount of $5,000,000 or a higher integral multiple of 1,000,000 units of the applicable currency.

(ii)All prepayments shall be made upon prior written or telephonic notice received by the Administrative Agent not later than 11:00 a.m. (New York City time):

(a)In the case of Base Rate Loans, on the date of such prepayment; and

(b)In the case of LIBOR Rate Loans, two (2) Business Days’ prior to the date of such prepayment;

and, if such notice is given by telephone, such notice shall be promptly confirmed in writing to the Administrative Agent (and the Administrative Agent will promptly transmit such telephonic or original notice for the Loans by facsimile or telephone to each Lender).  Upon the giving of any such notice, the principal amount of the Loans specified in such notice shall become due and payable on the prepayment date specified therein.

B.Voluntary Commitment Reductions.

(i)The Credit Parties may, upon not less than three (3) Business Days’ prior written or telephonic notice confirmed in writing to the Administrative Agent (which original written or telephonic notice the Administrative Agent will promptly transmit by facsimile or telephone to each applicable Lender), at any time and from time to time terminate in whole or permanently reduce in part, without premium or penalty, the Commitments in an amount up to the amount by which the Commitments exceed the Total Utilization of Commitments at the time

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of such proposed termination or reduction; provided any such partial reduction of the Commitments shall be in the amount of $5,000,000 or a higher integral multiple of $1,000,000.

(ii)The Credit Parties’ notice to the Administrative Agent shall designate the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction, and such termination or reduction of the Commitments shall be effective on the date specified in the Borrower’s notice and shall reduce the Commitment of each Lender proportionately to its Pro Rata Share thereof.

C.Mandatory Prepayments.  Subject to Section 2.10B, the Credit Parties shall from time to time prepay the Loans to the extent necessary so that the Total Utilization of Commitments shall not at any time exceed the Commitments then in effect.

D.Application of Prepayments/Reductions.  Unless otherwise specified by the applicable Credit Party in a notice of prepayment,

(a) any amount to be applied pursuant to Section 2.7A or C shall be applied as follows:

first, to prepay outstanding reimbursement obligations with respect to Letters of Credit;

second, to prepay Loans to the full extent thereof; and

third, to cash collateralize Letters of Credit; and

(b) considering each Type of Loan being prepaid separately, any prepayment thereof shall be applied first to Base Rate Loans to the full extent thereof before application to LIBOR Rate Loans, in each case in a manner which minimizes the amount of any payments required to be made by the Credit Parties pursuant to Section 2.9C.

E.General Provisions Regarding Payments.

(i)Manner and Time of Payment.  All payments by the Credit Parties of principal, interest, fees and other Obligations shall be made in Dollars or, with respect to Alternative Currency Loans, in the relevant Alternative Currency in same day funds, without defense, set-off or counterclaim, free of any restriction or condition, and delivered to the Administrative Agent not later than 12:00 p.m. (New York City time) on the date due at the Funding and Payment Office for the account of the Lenders; funds received by the Administrative Agent after that time on such due date shall be deemed to have been paid by the applicable Credit Party on the next succeeding Business Day.

(ii)Payments on Business Days.  Subject to the provisions of Section 2.5B with respect to Interest Periods, whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder.

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(iii)Application of Payments to Principal and Interest.  All payments in respect of the principal amount of the Loans shall include payment of accrued interest on the principal amount being repaid or prepaid, and all such payments shall be applied to the payment of interest before application to principal.

(iv)Distribution to Lenders.  The Administrative Agent shall promptly distribute to each Lender at such address as such Lender shall indicate in writing, such Lender’s applicable Pro Rata Share of all payments and prepayments of principal and interest due hereunder, together with all other amounts due thereto, including all fees payable with respect thereto, to the extent received by Administrative Agent.

(v)Withdrawal of Notice.  Notwithstanding the foregoing provisions hereof, if any Conversion/Continuation Notice is withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any LIBOR Rate Loans, the Administrative Agent shall give effect thereto in apportioning payments received thereafter.

(vi)Authorization to Charge Accounts.  Each Credit Party hereby authorizes the Administrative Agent to charge such Credit Party’s accounts with the Administrative Agent in order to cause timely payment to be made to the Administrative Agent of all principal, interest, fees and expenses due hereunder (subject to sufficient funds being available in its accounts for that purpose).

(vii)Non-Conforming Payments.  The Administrative Agent shall deem any payment by or on behalf of any Credit Party hereunder that is not made in same day funds prior to 12:00 p.m. (New York City time) to be a non-conforming payment.  Any such payment shall not be deemed to have been received by the Administrative Agent until the later of (i) the time such funds become available funds, and (ii) the applicable next Business Day.  The Administrative Agent shall give prompt telephonic notice to the applicable Credit Party and each applicable Lender (confirmed in writing) if any payment is non-conforming.  Any non-conforming payment may constitute or become a Potential Event of Default or Event of Default in accordance with the terms of Section 8.1.  Interest shall continue to accrue on any principal as to which a non-conforming payment is made until such funds become available funds (but in no event less than the period from the date of such payment to the next succeeding applicable Business Day) at the rate determined pursuant to Section 2.5D from the date such amount was due and payable until the date such amount is paid in full.

2.8Increased Costs; Taxes.

A.Compensation for Increased Costs and Taxes.  Subject to the provisions of Section 2.8B (which shall be controlling with respect to the matters covered thereby), in the event that any Lender shall determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or Governmental Authority, in each case that becomes effective after the date hereof, or compliance by such Lender with any guideline, request or

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directive issued or made after the date hereof by any central bank or other governmental or quasi-governmental authority (whether or not having the force of law):

(i)subjects such Lender (or its applicable lending office) to any additional Tax (other than any Tax on the overall net income of such Lender) with respect to this Agreement or any of the other Loan Documents or any of its obligations hereunder or thereunder or any payments to such Lender (or its applicable lending office) of principal, interest, fees or any other amount payable hereunder;

(ii)imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, Federal Deposit Insurance Corporation insurance or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender (other than any such reserve or other requirements with respect to LIBOR Rate Loans that are reflected in the definition of LIBOR); or

(iii)imposes any other condition (other than with respect to a Tax matter) on or affecting such Lender (or its applicable lending office) or its obligations hereunder or the London interbank market;

and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining Loans hereunder or to reduce any amount received or receivable by such Lender (or its applicable lending office) with respect thereto; then, in any such case, the Credit Parties shall promptly pay to such Lender, upon receipt of the statement referred to in the next sentence, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as may be necessary to compensate such Lender for any such increased cost or reduction in amounts received or receivable hereunder.  Such Lender shall deliver to the Credit Parties (with a copy to the Administrative Agent) a written statement, setting forth in reasonable detail the basis for, and a calculation in reasonable detail of, the additional amounts owed to such Lender under this Section 2.8A, which statement shall be conclusive and binding upon all parties hereto absent manifest error.

B.Withholding of Taxes.

(i)Payments to Be Free and Clear.  All sums payable by any Credit Party under this Agreement and the other Loan Documents shall (except to the extent required by law) be paid free and clear of, and without any deduction or withholding on account of, any Tax (other than a Tax on the overall net income of any Lender) imposed, levied, collected, withheld or assessed by or within the United States of America or any political subdivision in or of the United States of America or any other jurisdiction from or to which a payment is made by or on behalf of any Credit Party or by any federation or organization of which the United States of America or any such jurisdiction is a member at the time of payment.

(ii)Grossing-up of Payments.  If any Credit Party or any other Person is required by law to make any deduction or withholding on account of any such Tax from any sum

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paid or payable by such Credit Party to the Administrative Agent or any Lender under any of the Loan Documents:

(a)such Credit Party shall notify the Administrative Agent of any such requirement or any change in any such requirement as soon as such Credit Party becomes aware of it;

(b)such Credit Party shall pay any such Tax before the date on which penalties attach thereto, such payment to be made (if the liability to pay is imposed on such Credit Party) for its own account or (if that liability is imposed on the Administrative Agent or such Lender, as the case may be) on behalf of and in the name of the Administrative Agent or such Lender;

(c)the sum payable by such Credit Party in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, the Administrative Agent or such Lender, as the case may be, receives on the due date and retains a net sum equal to what it would have received and retained had no such deduction, withholding or payment been required or made; and

(d)within thirty (30) days after paying any sum from which it is required by law to make any deduction or withholding, and within thirty (30) days after the due date of payment of any Tax which it is required by clause (b) above to pay, such Credit Party shall deliver to the Administrative Agent evidence reasonably satisfactory to the other affected parties of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority.

(iii)Evidence of Exemption from U.S. Withholding Tax.

(a)Each Lender that is not a United States Person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) for U.S. federal income tax purposes (a “Non-US Lender”) shall deliver to the Administrative Agent for transmission to the Credit Parties, on or prior to the Effective Date (in the case of each Lender listed on the signature pages hereof on the Effective Date) or on or prior to the date of the Assumption Agreement or Assignment Agreement, as applicable, pursuant to which it becomes a Lender (in the case of each other Lender), and at such other times as may be necessary in the determination of the Credit Parties or Administrative Agent (each in the reasonable exercise of its discretion), (x) two original copies of Internal Revenue Service Form W-8BEN or W-8ECI (or any successor forms), properly completed and duly executed by such Lender, and such other documentation required under the Internal Revenue Code or reasonably requested by the Credit Parties to establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of principal, interest, fees or other amounts payable under any of the Loan Documents.

(b)Each Lender required to deliver any forms, certificates or other evidence with respect to United States federal income tax withholding matters pursuant to Section 2.8B(iii)(a) hereby agrees, from time to time after the initial delivery by such Lender of

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such forms, certificates or other evidence, whenever a lapse in time or change in circumstances renders such forms, certificates or other evidence obsolete or inaccurate in any material respect, that such Lender shall promptly (1) deliver to Administrative Agent for transmission to the Borrower two new original copies of Internal Revenue Service Form W-8BEN or W-8ECI, or a Certificate re Non-Bank Status and two (2) original copies of Internal Revenue Service Form W-8BEN (or any successor form), as the case may be, properly completed and duly executed by such Lender, and such other documentation required under the Internal Revenue Code and reasonably requested by the Credit Parties to confirm or establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to payments to such Lender under the Loan Documents or (2) notify Administrative Agent and the Borrower of its inability to deliver any such forms, certificates or other evidence.

(c)The Credit Parties shall not be required to pay any additional amount to any Non-US Lender under clause (c) of Section 2.8B(ii) if such Lender shall have failed to satisfy the requirements of clause (a) or (b)(1) of this Section 2.8B(iii); provided that if such Lender shall have satisfied the requirements of Section 2.8B(iii)(a) on the Effective Date or on the date of the Assumption Agreement or Assignment Agreement, as applicable, pursuant to which it became a Lender, as applicable, nothing in this Section 2.8B(iii)(c) shall relieve the Credit Parties of its obligation to pay any additional amounts pursuant to clause (c) of Section 2.8B(ii) in the event that, as a result of any change in any applicable law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender is not subject to withholding as described herein.

(iv)If a payment is made by a Credit Party under the foregoing provisions of this Section 2.8(B) for the account of any Lender and such Lender, in its sole opinion, determines that it has irrevocably received or been granted a credit against, or relief or remission from, or repayment or refund of, any tax paid or payable by it in respect of or calculated with reference to the deduction or withholding giving rise to such additional payment, such Lender shall, to the extent that it determines that it can do so without prejudice to the retention of the amount of such credit, relief, remission or repayment, pay to such Credit Party such amount as such Lender shall, in its sole opinion, have determined is attributable to such deduction or withholding and will leave such Lender (after such payment) in no worse position than it would have been had such Credit Party not been required to make such deduction or withholding.  Nothing contained herein shall (i) interfere with the right of a Lender to arrange its tax affairs in whatever manner it thinks fit, (ii) oblige any Lender to disclose any information relating to its tax affairs or any computations in respect thereof or (iii) require any Lender to take or refrain from taking any action that would prejudice its ability to benefit from any other credit, relief, remission, repayment or refund to which it may be entitled.

(v)Evidence of Exemption from Applicable Withholding Tax.  Any Lender that is entitled to an exemption from or reduction of withholding tax imposed by the jurisdiction in which a Subsidiary Borrower is organized (the “Relevant Jurisdiction”) with respect to payments under this Agreement shall deliver to the relevant Subsidiary Borrower (with a copy to the Administrative Agent) within 15 Business Days following receipt of the written notice referred to below, such properly completed and executed documentation as is reasonably

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requested by such Subsidiary Borrower or the Administrative Agent in order to permit such payments to be made with the benefit of such exemption or reduction (and shall make application to the relevant Governmental Authority for exemption or reduced rates if it is the party required by law to do so), provided that such Lender has received written notice from such Subsidiary Borrower or the Administrative Agent identifying the requirements for such exemption or reduction, supplying all applicable documentation and specifying the time period within which documentation is to be provided under this Section 2.8B(v) (or such application is to be made).  Without limiting the Lenders’ obligations under the preceding sentence, each Lender agrees that it will, without material cost or other material disadvantage (as determined in such Lender’s good faith judgment), cooperate with such Subsidiary Borrower to minimize the applicable withholding tax burdens in the Relevant Jurisdiction.  If any Lender becomes subject to any Tax because it fails to comply with this Section 2.8B(v), each Subsidiary Borrower shall take such steps as such Lender shall reasonably request to assist such Lender to recover such Tax.  The Administrative Agent agrees that it will provide administrative and ministerial assistance to each relevant Subsidiary Borrower with respect to any payments made by such Subsidiary Borrower to the Lenders, and the calculation, reporting, withholding and remitting of any Taxes imposed by Canada or Ireland to the appropriate Governmental Authority.  Notwithstanding the foregoing, (a) the Subsidiary Borrowers shall retain primary responsibility for ascertaining the requirements of Applicable Law and providing to the Lenders the written notice described in the first sentence of this Section 2.8B(v), and (b) no failure by the Administrative Agent to meet any obligations under this Section 2.8B(v) shall operate to excuse any Subsidiary Borrower from its obligations to the Lenders under this Section 2.8B(v).

C.Capital Adequacy Adjustment.  In the event that any Lender shall have determined that the adoption, effectiveness, phase-in or applicability after the Effective Date of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change therein after the Effective Date or in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Lender (or its applicable lending office) with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency issued after the Effective Date, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender’s Loans or Commitment, or participations therein or other obligations hereunder with respect to the Loans to a level below that which such Lender or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, the Credit Parties shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation on an after-tax basis for such reduction.  Such Lender shall deliver to the Credit Parties (with a copy to the Administrative Agent) a written statement, setting forth in reasonable detail the basis for, and calculation in reasonable detail of, the additional amounts owed to the Lender under this Section 2.8C, which statement shall be conclusive and binding upon all parties hereto absent manifest error.

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2.9Special Provisions Governing LIBOR Rate Loans.

Notwithstanding any other provision of this Agreement to the contrary, the following provisions shall govern with respect to LIBOR Rate Loans as to the matters covered:

A.Inability to Determine Applicable Interest Rate.  In the event that the Administrative Agent shall have determined (which determination shall be final and conclusive and binding upon all parties hereto), on any Interest Rate Determination Date with respect to any Borrowing of LIBOR Rate Loans, that by reason of circumstances affecting the interbank LIBOR market adequate and fair means do not exist for ascertaining the interest rate applicable to such Loans on the basis provided for in the definition of LIBOR Rate, the Administrative Agent shall on such date give notice (by facsimile or by telephone confirmed in writing) to the Credit Parties and each Lender of such determination, whereupon (i) no Loans may be made as, or converted to, LIBOR Rate Loans until such time as the Administrative Agent notifies the Credit Parties and the Lenders that the circumstances giving rise to such notice no longer exist, and (ii) any Notice of Borrowing or Conversion/Continuation Notice given by any Credit Party with respect to the Loans in respect of which such determination was made shall be deemed to be rescinded by such Credit Party.

B.Illegality or Impracticability of LIBOR Rate Loans.  In the event that on any date any Lender shall have determined (which determination shall be final and conclusive and binding upon all parties hereto but shall be made only after consultation with Credit Parties and the Administrative Agent) that the making, maintaining or continuation of its LIBOR Rate Loans in Dollars or any Alternative Currency (i) has become unlawful as a result of compliance by such Lender in good faith with any law, treaty, governmental rule, regulation, guideline or order (or would conflict with any such treaty, governmental rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful) or (ii) has become impracticable, or would cause such Lender material hardship, as a result of contingencies occurring after the date of this Agreement which materially and adversely affect the interbank LIBOR market or the position of such Lender in that market, then, and in any such event, such Lender shall be an “Affected Lender” and it shall on that day give notice (by facsimile or by telephone confirmed in writing) to the Credit Parties and the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each other Lender).  Thereafter (a) (i) if such LIBOR Rate Loan is denominated in Dollars, it shall be Converted into a Base Rate Loan and (ii) if such LIBOR Rate Loan is denominated in any Alternative Currency, it shall be exchanged into an Equivalent amount of Dollars and be Converted into a Base Rate Loan and (b) the obligation of the Lenders to make LIBOR Rate Loans in the affected currency or to Convert Loans into LIBOR Rate Loans shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist.

C.Compensation For Breakage.  The Credit Parties shall compensate each Lender upon written request by such Lender (which request shall set forth the basis for requesting such amounts and a calculation thereof in reasonable detail) for all reasonable losses, expenses and liabilities (including any interest paid by such Lender to lenders of funds borrowed by it to make or carry its LIBOR Rate Loans and any loss, expense or liability sustained by such Lender in connection with the liquidation or re-employment of such funds, but excluding lost profits)

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which that Lender may sustain:  (i) if for any reason (other than a default by such Lender) a LIBOR Rate Loan is not made on a date specified therefor in a Notice of Borrowing or a telephonic request for borrowing, or a conversion to or continuation of any LIBOR Rate Loan does not occur on a date specified therefor in a Conversion/Continuation Notice or a telephonic request for conversion or continuation, (ii) if any prepayment or other principal payment of, or any conversion of, any of its LIBOR Rate Loans occurs on a date other than the last day of an Interest Period applicable to such LIBOR Rate Loan or (iii) if any prepayment of any LIBOR Rate Loan made by such Lender is not made on any date specified in a notice of prepayment given by the Borrower.

D.Booking of LIBOR Rate Loans.  Any Lender may make, carry or transfer LIBOR Rate Loans at, to, or for the account of any of its branch offices or the office of an Affiliate of that Lender.

E.Assumptions Concerning Funding of LIBOR Rate Loans.  Calculation of all amounts payable to a Lender under this Section 2.9 and under Section 2.8A shall be made as though that Lender had actually funded each of its relevant LIBOR Rate Loans through the purchase of a LIBOR deposit bearing interest at the rate obtained pursuant to the definition of LIBOR in an amount equal to the amount of such LIBOR Rate Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such LIBOR deposit from an offshore office of that Lender to a domestic office of that Lender in the United States of America; provided, however, that each Lender may fund each of its LIBOR Rate Loans in any manner it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating amounts payable under this Section 2.9 and under Section 2.8A and 2.8C.

2.10Matters Relating to Currency Exchange Rates and Conversion of Amounts to Alternative Currencies.

A.Spot Rate Calculation.  The Administrative Agent shall determine the Dollar Amount of each Alternative Currency Loan as of (x) the first day of each Interest Period applicable thereto and (y) the last Business Day of each calendar month, and such calculation shall remain in effect for purposes of this Agreement until the next date on which an event described in this Section 2.10A occurs and a recalculation is made.  The Administrative Agent shall promptly notify the applicable Credit Party and the Lenders of each Dollar Amount so determined by it.  Each such determination shall be based on the Spot Rate (x) on the date of the related Notice of Borrowing for purposes of the initial such determination for any Alternative Currency Loan and (y) on the fourth Business Day prior to the date as of which such Dollar Amount is to be determined, for purposes of any subsequent determination.

B.Prepayment.  If after giving effect to any such determination of a Dollar Amount, the Total Utilization of Commitments exceeds 105% of the Commitments or the aggregate Dollar Amount of Alternative Currency Loans exceeds 105% of the Alternative Currency Sublimit, the Credit Parties shall, within five Business Days of receipt of notice thereof from the Administrative Agent setting forth such calculation in reasonable detail, prepay outstanding Loans (as selected by the Credit Parties and notified to the Lenders through the Administrative Agent not less than three Business Days prior to the date of prepayment) or take other action (including, in the Credit Parties’ discretion, Dollar cash collateralization of Letters of

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Credit pursuant to documentation reasonably satisfactory to the Administrative Agent in amounts from time to time equal to such excess) to the extent necessary to eliminate any such excess.

C.Conversion of Amounts to Applicable Currencies.  To the extent funds received by the Administrative Agent (or debited from any Person’s account with the Administrative Agent) must be converted into Dollars or an Alternative Currency for any payment required hereunder, the Administrative Agent shall effect such conversion on the applicable payment date on the basis of the Spot Rate then in effect.

2.11Defaulting Lenders.

Anything contained herein to the contrary notwithstanding, in the event that any Lender defaults (a “Defaulting Lender”) in its obligation to fund (a “Funding Default”) any Loan or its portion of any unreimbursed payment under Section 2.2D (in each case, a “Defaulted Loan”), then (a) during any Default Period with respect to such Defaulting Lender, such Defaulting Lender shall be deemed not to be a “Lender” for purposes of voting on any matters (including the granting of any consents or waivers) with respect to any of the Loan Documents; (b) to the extent permitted by Applicable Law, until such time as the Default Excess with respect to such Defaulting Lender shall have been reduced to zero, (i) any voluntary prepayment of the Loans shall, if the applicable Credit Party so directs at the time of making such voluntary prepayment, be applied to the Loans of other Lenders as if such Defaulting Lender had no Loans outstanding and the Credit Exposure of such Defaulting Lender were zero, and (ii) any mandatory prepayment of the Loans shall, if the applicable Credit Party so directs at the time of making such mandatory prepayment, be applied to the Loans of other Lenders (but not to the Loans of such Defaulting Lender) as if such Defaulting Lender had funded all Defaulted Loans of such Defaulting Lender, it being understood and agreed that the applicable Credit Party shall be entitled to retain any portion of any mandatory prepayment of the Loans that is not paid to such Defaulting Lender solely as a result of the operation of the provisions of this clause (b); (c) such Defaulting Lender’s Commitment and outstanding Loans and such Defaulting Lender’s Pro Rata Share of the Letter of Credit Usage shall be excluded for purposes of calculating the Facility Fee payable to Lenders in respect of any day during any Default Period with respect to such Defaulting Lender, and such Defaulting Lender shall not be entitled to receive any Facility Fee pursuant to Section 2.6 with respect to such Defaulting Lender’s Commitment in respect of any Default Period with respect to such Defaulting Lender; and (d) the Total Utilization of Commitments as at any date of determination shall be calculated as if such Defaulting Lender had funded all Defaulted Loans of such Defaulting Lender.  No Commitment of any Lender shall be increased or otherwise affected, and, except as otherwise expressly provided in this Section 2.11, performance by the Credit Parties of their Obligations shall not be excused or otherwise modified as a result of any Funding Default or the operation of this Section 2.11.  The rights and remedies against a Defaulting Lender under this Section 2.11 are in addition to other rights and remedies which the Credit Parties may have against such Defaulting Lender with respect to any Funding Default and which the Administrative Agent or any Lender may have against such Defaulting Lender with respect to any Funding Default.

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2.12Removal or Replacement of a Lender.

Anything contained herein to the contrary notwithstanding, in the event that any Lender shall give notice to the Credit Parties that such Lender is an Affected Lender or that such Lender is entitled to receive payments under Section 2.8 or 2.9, if the circumstances which have caused such Lender to be an Affected Lender or which entitle such Lender to receive such payments shall remain in effect, and such Lender shall fail to withdraw such notice within five (5) Business Days after receipt by such Lender of a written request for such withdrawal from a Credit Party; then, with respect to each such Lender (the “Terminated Lender”), the Credit Parties may, by giving written notice to the Administrative Agent and any Terminated Lender of its election to do so, elect to cause such Terminated Lender (and such Terminated Lender hereby irrevocably agrees) to assign its outstanding Loans in full to one or more Eligible Assignees (each a “Replacement Lender”) in accordance with the provisions of Section 9.1 for a purchase price equal to the outstanding principal amount of the Loans assigned and accrued interest thereon and accrued and theretofore unpaid fees owing to such Terminated Lender under Section 2.6 through the date of assignment, to be paid by the Replacement Lender; provided that concurrently with such assignment, the Credit Parties shall pay any amounts payable to such Terminated Lender to the date of such assignment pursuant to Sections 2.8 or 2.9 or otherwise as if it were a prepayment.  Upon the completion of such assignment and the prepayment of all amounts owing to any Terminated Lender, such Terminated Lender shall no longer constitute a “Lender” for purposes hereof; provided that any rights of such Terminated Lender to indemnification hereunder shall survive as to such Terminated Lender.

2.13Mitigation.

A.Each Lender agrees that, as promptly as practicable after the officer of such Lender responsible for administering the Loans of such Lender becomes aware of the occurrence of an event or the existence of a condition that would cause such Lender to become an Affected Lender or that would entitle such Lender to receive payments under Section 2.8 or 2.9, it will, to the extent not inconsistent with the internal policies of such Lender and any applicable legal or regulatory restrictions, use reasonable efforts (i) to make, issue, fund or maintain the Commitment of such Lender or the affected Loans of such Lender through another lending office of such Lender, or (ii) take such other measures as such Lender may deem reasonable, if as a result thereof the circumstances which would cause such Lender to be an Affected Lender would cease to exist or the additional amounts which would otherwise be required to be paid to such Lender pursuant to Section 2.8 or 2.9 would be materially reduced and if, as determined by such Lender in its sole discretion, the making, issuing, funding or maintaining of such Commitment or Loans through such other lending office or in accordance with such other measures, as the case may be, would not otherwise adversely affect such Commitment or Loans or the interests of such Lender; provided that such Lender will not be obligated to utilize such other lending office pursuant to this Section 2.13 unless the Credit Parties agree to pay all incremental expenses incurred by such Lender as a result of utilizing such other lending office as described in clause (i) above.  A certificate as to the amount of any such expenses payable by the Credit Parties pursuant to this Section 2.13 (setting forth in reasonable detail the basis for requesting such amount and a calculation thereof in reasonable detail) submitted by such Lender to the Credit Parties (with a copy to the Administrative Agent) shall be conclusive absent manifest error.

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B.Notwithstanding the provisions of Section 2.8, if any Lender fails to notify the Borrower of any event or circumstance which will entitle such Lender to compensation pursuant to Section 2.8 within 365 days after such Lender obtains knowledge of such event or circumstance, then such Lender shall not be entitled to compensation from the Borrower for any amount arising prior to the date which is 365 days before the date on which such Lender notifies the Borrower of such event or circumstance.

2.14Increase in the Aggregate Commitments.

A.The Borrower may, at any time but in any event not more than twice in any calendar year prior to the Maturity Date (unless the Administrative Agent otherwise consents), by notice to the Administrative Agent, request that the aggregate amount of the Commitments be increased by (i) increasing the amount of the Commitment of any Lender which has agreed to such increase (any such Lender, an “Increasing Lender”) and/or (ii) adding one or more Eligible Assignees as parties hereto with Commitments in an amount agreed to by such respective Eligible Assignees; provided that (a) the aggregate amount of any such increase (for all Increasing Lenders and Eligible Assignees on any particular day) shall be $25,000,000 or a higher integral multiple of $5,000,000, (b) the amount of the Commitment of any Eligible Assignee that is not already a Lender shall be not less than $5,000,000, (c) any such increase shall be effective as of a date that is at least 90 days prior to the scheduled Maturity Date then in effect (the “Increase Date”) as specified in the related notice to the Administrative Agent; (d) in no event shall the aggregate amount of the Commitments at any time exceed $500,000,000 and (iv) on the date of any request by the Borrower for a Commitment Increase and on the related Increase Date, the conditions set forth in Section 3.3 shall be satisfied.

B.On each Increase Date, each Eligible Assignee that has agreed to participate in the applicable Commitment Increase (each such Eligible Assignee and each Eligible Assignee that agrees to an extension of the Maturity Date in accordance with Section 2.15C, an “Assuming Lender”) shall become a Lender party to this Agreement as of such Increase Date and the Commitment of each Increasing Lender shall be increased by the amount agreed upon by such Lender and the Borrower; provided, however, that the Administrative Agent shall have received on or before such Increase Date the following, each dated such date:

(i)(A) certified copies of resolutions of the Board of Directors of the Borrower or the Executive Committee of such Board approving the Commitment Increase and the corresponding modifications to this Agreement and (B) an opinion of counsel for the Borrower (which may be in-house counsel), in form and substance reasonably satisfactory to the Administrative Agent and its counsel;

(ii)an assumption agreement from each Assuming Lender, if any, in form and substance satisfactory to the Borrower and the Administrative Agent (each an “Assumption Agreement”), duly executed by such Assuming Lender, the Administrative Agent and the Borrower; and

(iii)confirmation from each Increasing Lender of the increase in the amount of its Commitment in a writing satisfactory to the Borrower and the Administrative Agent.

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On each Increase Date, upon fulfillment of the conditions set forth in the immediately preceding sentence, the Administrative Agent shall notify the Lenders (including each Assuming Lender) and the Borrower, on or before 1:00 P.M. (New York City time), by facsimile, of the occurrence of the Commitment Increase to be effected on such Increase Date and shall record in the Register the relevant information with respect to each Increasing Lender and each Assuming Lender on such date.  Each Increasing Lender and each Assuming Lender shall, before 2:00 P.M. (New York City time) on the Increase Date, make available to the Administrative Agent at the Funding and Payment Office, in same day funds, in the case of such Assuming Lender, an amount equal to such Assuming Lender’s ratable portion of the Loans then outstanding (calculated based on its Commitment as a percentage of the aggregate Commitments outstanding after giving effect to the relevant Commitment Increase) and, in the case of such Increasing Lender, an amount equal to the excess of (i) such Increasing Lender’s ratable portion of the Loans then outstanding (calculated based on its Commitment as a percentage of the aggregate Commitments outstanding after giving effect to the relevant Commitment Increase) over (ii) such Increasing Lender’s ratable portion of the Loans then outstanding (calculated based on its Commitment (without giving effect to the relevant Commitment Increase) as a percentage of the aggregate Commitments (without giving effect to the relevant Commitment Increase).  After the Administrative Agent’s receipt of such funds from each such Increasing Lender and each such Assuming Lender, the Administrative Agent will promptly thereafter cause to be distributed like funds to the other Lenders in an amount to each other Lender such that the aggregate amount of the outstanding Loans owing to each Lender after giving effect to such distribution equals such Lender’s ratable portion of the aggregate Loans then outstanding (calculated based on its Commitment as a percentage of the aggregate Commitments outstanding after giving effect to the relevant Commitment Increase).

2.15Extension of Maturity Date.

A.At least 45 days but not more than 60 days prior to the first or second anniversary of the Effective Date (or both), the Borrower, by written notice to the Administrative Agent, may request an extension of the Maturity Date in effect at such time by one year from its then scheduled expiration.  The Administrative Agent shall promptly notify each Lender of such request, and each Lender shall in turn, in its sole discretion, not later than 20 days prior to such anniversary date, notify the Borrower and the Administrative Agent in writing as to whether such Lender will consent to such extension.  If any Lender shall fail to notify the Administrative Agent and the Borrower in writing of its consent to any such request for extension of the Maturity Date at least 20 days prior to the applicable anniversary date, such Lender shall be deemed to be a Non-Consenting Lender with respect to such request.  The Administrative Agent shall notify the Borrower not later than 15 days prior to the applicable anniversary date of the decision of the Lenders regarding the Borrower’s request for an extension of the Maturity Date.

B.If all the Lenders consent in writing to any such request in accordance with Section 2.15A, the Maturity Date in effect at such time shall, effective as at the Maturity Date (the “Extension Date”), be extended for one year; provided that on each Extension Date the conditions set forth in Section 3.3 shall be satisfied.  If less than all of the Lenders consent in writing to any such request in accordance with Section 2.15A, the Maturity Date in effect at such time shall, effective as at the applicable Extension Date and subject to Section 2.15D, be extended as to those Lenders that so consented (each a “Consenting Lender”) but shall not be

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extended as to any other Lender (each a “Non-Consenting Lender”).  To the extent that the Maturity Date is not extended as to any Lender pursuant to this Section 2.15 and the Commitment of such Lender is not assumed in accordance with Section 2.15C on or prior to the applicable Extension Date, the Commitment of such Non-Consenting Lender shall automatically terminate in whole on such unextended Maturity Date without any further notice or other action by the Borrower, such Lender or any other Person; provided that such Non-Consenting Lender’s rights under Sections 2.8 and 9.3, and its obligations under Section 10.4, shall survive the Maturity Date for such Lender as to matters occurring prior to such date.  It is understood and agreed that no Lender shall have any obligation whatsoever to agree to any request made by the Borrower for any requested extension of the Maturity Date.

C.If less than all of the Lenders consent to any such request pursuant to Section 2.15A, the Borrower may arrange for one or more Consenting Lenders or other Eligible Assignees as Assuming Lenders to assume, effective as of the Extension Date, any Non-Consenting Lender’s Commitment and all of the obligations of such Non-Consenting Lender under this Agreement thereafter arising, without recourse to or warranty by, or expense to, such Non-Consenting Lender; provided, however, that the amount of the Commitment of any such Assuming Lender as a result of such substitution shall in no event be less than $5,000,000 unless the amount of the Commitment of such Non-Consenting Lender is less than $5,000,000, in which case such Assuming Lender shall assume all of such lesser amount; and provided further that:

(i)any such Consenting Lender or Assuming Lender shall have paid to such Non-Consenting Lender (A) the aggregate principal amount of, and any interest accrued and unpaid to the effective date of the assignment on, the outstanding Loans, if any, of such Non-Consenting Lender plus (B) any accrued but unpaid facility fees owing to such Non-Consenting Lender as of the effective date of such assignment;

(ii)all additional costs reimbursements, expense reimbursements and indemnities payable to such Non-Consenting Lender, and all other accrued and unpaid amounts owing to such Non-Consenting Lender hereunder, as of the effective date of such assignment shall have been paid to such Non-Consenting Lender; and

(iii)with respect to any such Assuming Lender, the applicable processing and recordation fee required under Section 9.15B for such assignment shall have been paid;

provided further that such Non-Consenting Lender’s rights under Sections 2.8 and 9.3, and its obligations under Section 10.4, shall survive such substitution as to matters occurring prior to the date of substitution.  At least three Business Days prior to any Extension Date, (A) each such Assuming Lender, if any, shall have delivered to the Borrower and the Administrative Agent an Assumption Agreement, duly executed by such Assuming Lender, such Non-Consenting Lender, the Borrower and the Administrative Agent, (B) any such Consenting Lender shall have delivered confirmation in writing satisfactory to the Borrower and the Administrative Agent as to the increase in the amount of its Commitment and (C) each Non-Consenting Lender being replaced pursuant to this Section 2.15 shall have delivered to the Administrative Agent any Note or Notes held by such Non-Consenting Lender.  Upon the payment or prepayment of all amounts referred to in clauses (i), (ii) and (iii) of the immediately preceding sentence, each such

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Consenting Lender or Assuming Lender, as of the Extension Date, will be substituted for such Non-Consenting Lender under this Agreement and shall be a Lender for all purposes of this Agreement, without any further acknowledgment by or the consent of the other Lenders, and the obligations of each such Non-Consenting Lender hereunder shall, by the provisions hereof, be released and discharged.

D.If (after giving effect to any assignments or assumptions pursuant to Section 2.15C) Lenders having Commitments equal to at least 50% of the Commitments in effect immediately prior to the Extension Date consent in writing to a requested extension (whether by execution or delivery of an Assumption Agreement or otherwise) not later than one Business Day prior to such Extension Date, the Administrative Agent shall so notify the Borrower, and, subject to the satisfaction of the conditions in Section 3.3, the Maturity Date then in effect shall be extended for the additional one-year period as described in Section 2.15A, and all references in this Agreement, and in the Notes, if any, to the “Maturity Date” shall, with respect to each Consenting Lender and each Assuming Lender for such Extension Date, refer to the Maturity Date as so extended.  Promptly following each Extension Date, the Administrative Agent shall notify the Lenders (including each Assuming Lender) of the extension of the scheduled Maturity Date in effect immediately prior thereto and shall thereupon record in the Register the relevant information with respect to each such Consenting Lender and each such Assuming Lender.

SECTION 3.     CONDITIONS PRECEDENT

3.1Conditions to Effectiveness.

The obligations of the Lenders to make Credit Extensions on the Effective Date are subject to the satisfaction of the following conditions prior to or on the Effective Date; it being understood that the Lenders shall be under no obligation to make any Loan to any Subsidiary of the Borrower unless and until the conditions set forth in Section 11 with respect to such Subsidiary Borrower have been satisfied:

A.Credit and Organizational Documents.  The Borrower shall deliver or cause to be delivered to the Administrative Agent on behalf of each Lender the following:

(i)sufficient copies of each Loan Document originally executed and delivered by the Borrower for each Lender;

(ii)copies of the Organizational Documents, dated a recent date prior to the Effective Date, certified as of the Effective Date (or a recent date prior to the Effective Date) by the appropriate governmental official or the secretary (or other appropriate officer) of the Borrower, as applicable;

(iii)resolutions of the board of directors (or similar governing body) of the Borrower approving and authorizing the execution, delivery and performance of the Loan Documents to which it is a party and certified as of the Effective Date by the secretary (or other appropriate officer) of the Borrower as being in full force and effect without modification or amendment;

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(iv)signature and incumbency certificates of the officers of the Borrower executing the Loan Documents to which it is a party on behalf of the Borrower;

(v)a good standing certificate or certificate of existence, as applicable, from the Secretary of State (or similar official) from the jurisdiction of formation of the Borrower, certified as of the Effective Date (or a recent date prior to the Effective Date) (the matters referenced in subsections 3.1A(ii)-(v) to be addressed in a secretary’s certificate substantially in the form of Exhibit VII);

(vi)an officer’s certificate from an officer of the Borrower substantially in the form of Exhibit VIII, in form and substance satisfactory to the Administrative Agent, to the effect that all representations and warranties contained in this Agreement and the other Loan Documents are true, correct and complete (other than any such representation or warranty that expressly relates to an earlier date, in which case such representation or warranty shall have been true, correct and complete as of such earlier date); that the Borrower and its Subsidiaries are not in violation of any of the covenants contained in this Agreement and the other Loan Documents; that no event shall have occurred and be continuing or would result from the consummation of the transactions contemplated by this Agreement, that would constitute an Event of Default or a Potential Event of Default; and

(vii)such other documents as the Administrative Agent on behalf of the Lenders may reasonably request.

B.Opinions of Counsel.  The Administrative Agent shall have received originally executed copies of one or more favorable written opinions of (i) Brian J. Smith, Senior Vice President and General Counsel of the Borrower, and (ii) Mayer, Brown, Rowe & Maw, LLP, special New York counsel for the Borrower, each in form and substance reasonably satisfactory to the Administrative Agent and its counsel, dated as of the Effective Date.

C.Payment of Amounts Due.  The Borrower shall have paid to the Lead Arrangers and the Agents, all reasonable out-of-pocket costs, fees (including those fees due on the Effective Date referred to in Section 2.6), expenses (including reasonable legal fees and expenses of a single U.S. counsel) and other compensation payable on the Effective Date.

D.Ratings.  The Lead Arrangers shall have received evidence satisfactory to them that the Borrower’s stand-alone senior unsecured rating shall be at least Baa3 from Moody’s and BBB from S&P, each with at least a stable outlook.

E.Authorizations and Consents.

(i)The Borrower shall have obtained all Governmental Authorizations and all consents of other Persons, in each case that are necessary in connection with the transactions contemplated by the Loan Documents, and each of the foregoing shall be in full force and effect and in form and substance reasonably satisfactory to the Administrative Agent and the Lenders.  All applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose material adverse conditions on the transactions contemplated by the Loan Documents or the financing thereof and no action, request for stay, petition for review or rehearing, reconsideration, or appeal with

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respect to any of the foregoing shall be pending, and the time for any applicable agency to take action to set aside its consent on its own motion shall have expired.

(ii)PATRIOT Act.  Each of the Lenders shall have received, at least two (2) Business Days in advance of the Effective Date, all documentation and other information required by Governmental Authorities under applicable “know-your-customer” and anti-money laundering rules and regulations, including as required by the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001 (the “Patriot Act”).  Each Lender and each Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender or such Agent, as applicable, to identify the Borrower in accordance with the Patriot Act.

F.Material Adverse Effect.  Since December 31, 2005, there shall not have occurred a Material Adverse Effect.

G.No Litigation.  (i) No action, suit, investigation, litigation, arbitration or proceeding (whether administrative, judicial or otherwise) affecting the Borrower or any of its Subsidiaries shall be pending or threatened before any court, Governmental Authority or arbitrator that could be reasonably expected to, individually or in the aggregate, (A) have a Material Adverse Effect, other than the matters set forth in the Borrower’s filings with the Securities and Exchange Commission prior to the Effective Date (the “Disclosed Litigation”), (B) materially impair the transactions contemplated by the Loan Documents or (C) in any manner call into question or challenge this Agreement or the making of the Loans and (ii) no material adverse change in the status, or financial effect on the Borrower or any of its Subsidiaries, of the Disclosed Litigation from that described in the Borrower’s filings with the Securities and Exchange Commission prior to the Effective Date shall have occurred.

3.2Conditions Precedent to each Credit Extension.

Subject to Section 11, the obligations of Lenders to make any Credit Extension hereunder, including any Credit Extension made on the Effective Date, are subject to the satisfaction of the following conditions:

A.Notice of Borrowing.  The Administrative Agent shall have received, in accordance with the provisions of Section 2.1B, originally executed Notice(s) of Borrowing signed by the applicable Credit Party.

B.Outstanding Amounts.  After giving effect to the making of such Credit Extensions, (i) the Total Utilization of Commitments then in effect shall not exceed the Commitments then in effect and (ii) the aggregate Dollar Amount of Alternative Currency Loans shall not exceed the Alternative Currency Sublimit.

C.Representations and Warranties.  The representations and warranties contained herein (excluding, except on the Effective Date, the representations and warranties made in the last sentence of Section 4.4 (Financial Condition), the first sentence of Section 4.5 (Material

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Adverse Effect) and the first sentence of Section 4.7 (Litigation)) shall be true, correct and complete in all material respects on and as of the date of such Credit Extension to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true, correct and complete in all material respects on and as of such earlier date.

D.No Default.  No Event of Default or a Potential Event of Default shall have occurred and be continuing, or would result from, such Credit Extension.

E.Additional Documents.  The Administrative Agent shall have received each additional document, certificate, instrument, legal opinion or other item reasonably requested by it.

3.3Conditions Precedent to each Commitment Increase and Extension Date.

Each Commitment Increase and each extensions of the Maturity Date are subject to the satisfaction of the following conditions:

A.The representations and warranties contained herein shall be true, correct and complete in all material respects on and as of the date of such Commitment Increase or such Extension Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true, correct and complete in all material respects on and as of such earlier date.

B.No Default.  No event shall have occurred and be continuing, or would result from such Commitment Increase or such extension of the Maturity Date, that would constitute an Event of Default or a Potential Event of Default.

C.Additional Documents.  The Administrative Agent shall have received each additional document, certificate, instrument, legal opinion or other item reasonably requested by it.

SECTION 4.     REPRESENTATIONS AND WARRANTIES

In order to induce the Agents and the Lenders to enter into this Agreement and to induce the Lenders to make each Credit Extension hereunder, each Credit Party represents and warrants (solely, in the case of any Subsidiary Borrower, as to itself and its Subsidiaries) to each Agent, each Lender and the Issuing Bank that the following statements are true, correct and complete:

4.1Organization, Powers, Qualification, Good Standing, Business and Subsidiaries.

A.Organization and Powers.  Such Credit Party and each of its Subsidiaries is duly organized, validly existing and in good standing, as applicable, under the laws of its jurisdiction of organization, except, in the case of any Subsidiary that is not a Credit Party, where the failure to be so organized, existing or in good standing has not had and would not reasonably be expected to have a Material Adverse Effect.  Such Credit Party and each of its Subsidiaries has all requisite power and authority to own, lease and operate its properties, to carry on its business

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as now conducted and as proposed to be conducted, to enter into the Loan Documents to which it is a party and to carry out the transactions contemplated thereby.

B.Qualification and Good Standing.  Such Credit Party and each of its Subsidiaries is duly qualified to do business and in good standing, as applicable, in every jurisdiction in which its assets are located and wherever necessary to carry out its business and operations, except in jurisdictions where the failure to be so qualified or in good standing has not had and would not reasonably be expected to have a Material Adverse Effect.

4.2Authorization of Borrowing, etc.

A.Authorization of Borrowing, etc.  The execution, delivery and performance of each Loan Document to which it is a party have been duly authorized by all necessary action on the part of each Credit Party.

B.No Conflict.  The execution, delivery and performance by such Credit Party of each Loan Document to which it is a party and the consummation of the transactions contemplated by each such Loan Document do not and will not (i) violate any provision of any Applicable Law with respect to such Credit Party or any of its Subsidiaries, any of the Organizational Documents of such Credit Party or any of its Subsidiaries or any order, judgment or decree of any Governmental Authority binding on such Credit Party or any of its Subsidiaries, except to the extent such violation would not be reasonably expected to have a Material Adverse Effect, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of such Credit Party or any of its Subsidiaries, except to the extent such conflict, breach or default would not reasonably be expected to have a Material Adverse Effect, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of such Credit Party or any of its Subsidiaries, or (iv) require any approval of stockholders, partners or members or any approval or consent of any Person under any Contractual Obligation of such Credit Party or any of its Subsidiaries, except for such approvals or consents which will be obtained on or before the Effective Date and disclosed in writing to Administrative Agent.

C.Governmental Consents.  The execution, delivery and performance by such Credit Party of each Loan Document to which it is a party and the consummation of the transactions contemplated by such Loan Document do not and will not require any Governmental Authorization.

D.Binding Obligation.  Each of the Loan Documents to which it is a party has been duly executed and delivered by such Credit Party and is the legally valid and binding obligation of such Credit Party, enforceable against such Credit Party in accordance with its respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability.

4.3Disclosure.

No representation or warranty of such Credit Party or any of its Subsidiaries contained in any Loan Document or in any other document, certificate or written statement furnished to any

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Agent or any Lender by or on behalf of such Credit Party or any of its Subsidiaries for use in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state a material fact (known to such Credit Party or any of its Subsidiaries in the case of any document not furnished by any of them) necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which the same were made.  Any projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by the applicable Credit Party to be reasonable at the time made, it being recognized by the Agents and the Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results.

4.4Financial Condition.

The Borrower has heretofore delivered to the Administrative Agent the audited consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 2005 and the related audited consolidated statements of income, stockholders’ equity and cash flows of the Borrower for the Fiscal Year then ended, together with all related notes and schedules thereto.  All such statements were prepared in conformity with GAAP and fairly present, in all material respects, the financial position of the entities described in such financial statements as at the respective dates thereof and the results of operations and cash flows of the entities described therein for each of the periods then ended, subject, in the case of any such unaudited financial statements, to changes resulting from audit and normal year-end adjustments.  Neither the Borrower nor any of its Subsidiaries has any contingent liability or liability for taxes, long-term lease or unusual forward or long-term commitment that is not reflected in the foregoing financial statements or the notes thereto and which in any such case could reasonably be expected to have a Material Adverse Effect.

4.5No Material Adverse Change.

Since December 31, 2005, no event or change has occurred that has caused or evidences, or could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

4.6Intellectual Property Matters.

Except where the failure to do so could not reasonably be expected to have a Material Adverse Effect, each of the Borrower and its Subsidiaries owns or possesses rights to use all franchises, licenses, copyright registrations, copyright applications, issued patents, patent applications, trademarks, trademark applications, trademark registrations, trademark rights, service marks, service mark applications, service mark rights, trade names, trade name rights, copyrights and rights with respect to the foregoing which are required to conduct its business.  No event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any such rights (except for the expiration of patents in the ordinary course), and neither the Borrower nor any Subsidiary thereof is liable to any Person for infringement under Applicable Law with respect to any such rights as a result of its business

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operations except to the extent any such revocation, termination, or infringement could not reasonably be expected to have a Material Adverse Effect.

4.7No Litigation; Compliance with Laws.

Except for the Disclosed Litigation, there are no actions, suits, proceedings (whether administrative, judicial or otherwise), litigations, arbitrations or governmental investigations (whether or not purportedly on behalf of the Borrower or any of its Subsidiaries) at law or in equity, or before or by any Governmental Authority, domestic or foreign (including any Environmental Claims), that are pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries or any property of the Borrower or any of its Subsidiaries and that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.  Neither the Borrower nor any of its Subsidiaries (i) is in violation of any Applicable Laws (including, but not limited to, Environmental Laws) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect or (ii) is subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any Governmental Authority, domestic or foreign, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.

4.8No Default.

Neither the Borrower nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any of its Contractual Obligations, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default, except where the consequences, direct or indirect, of such default or defaults, if any, could not reasonably be expected to have a Material Adverse Effect.

4.9Governmental Regulation.

Neither the Borrower nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940 or under any federal or state statute or regulation which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable.  Neither the Borrower nor any of its Subsidiaries is a “registered investment company” or a company “controlled” by a “registered investment company” or a “principal underwriter” of a “registered investment company” as such terms are defined in the Investment Company Act of 1940.

4.10Securities Activities.

Neither the Borrower nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock.  No part of the proceeds of the Loans will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock in violation of the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System.

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4.11Employee Benefit Plans.

A.Each of the Borrower and its ERISA Affiliates is in material compliance with all applicable provisions and requirements of ERISA and the Internal Revenue Code and the regulations and published interpretations thereunder with respect to each Employee Benefit Plan, and have performed all their obligations under each Employee Benefit Plan in all material respects.  Each Employee Benefit Plan which is intended to qualify under Section 401(a) of the Internal Revenue Code has received a favorable determination letter from the Internal Revenue Service or has submitted or will submit a request for such a determination letter within the applicable remedial amendment period.

B.No material liability to the PBGC (other than required premium payments) or the Internal Revenue Service has been or is expected to be incurred by the Borrower or any of its ERISA Affiliates with respect to any Employee Benefit Plan, and no ERISA Event has occurred or is reasonably expected to occur, other than ERISA Events for which the liability has been satisfied in full or is immaterial in amount.

C.As of the most recent valuation date for each Multiemployer Plan for which the actuarial report is available, the potential liability of the Borrower or any of its ERISA Affiliates for a complete withdrawal from such Multiemployer Plan (within the meaning of Section 4203 of ERISA), when aggregated with such potential liability for a complete withdrawal from all Multiemployer Plans, based on information available pursuant to Section 4221(e) of ERISA is not expected to be material.  The Borrower and each of its Subsidiaries and each of their ERISA Affiliates have complied in all material respects with the requirements of Section 515 of ERISA with respect to each Multiemployer Plan and are not in material “default” (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan.

4.12Environmental Protection.

A.Neither the Borrower nor any of its Subsidiaries nor any of their respective Facilities or operations is subject to any outstanding written order, consent decree or settlement agreement with any Person relating to any Environmental Law, any Environmental Claim, or any Hazardous Materials Activity that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

B.Neither the Borrower nor any of its Subsidiaries has received any letter or request for information under Section 104 of the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9604) or any comparable state law, except to the extent that such letter or request could not reasonably be expected to have a Material Adverse Effect.

C.There are and, to the Borrower’s and each of its Subsidiaries’ knowledge, have been no conditions, occurrences, or Hazardous Materials Activities which could reasonably be expected to form the basis of an Environmental Claim against the Borrower or any of its Subsidiaries that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

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D.Compliance with all current or reasonably foreseeable future requirements pursuant to or under Environmental Laws could not, individually or in the aggregate, reasonably be expected to give rise to a Material Adverse Effect.

E.Neither the Borrower nor any of its Subsidiaries nor, to the knowledge of the Borrower, any predecessor of the Borrower or any Subsidiary of such predecessor, has filed any notice under any Environmental Law indicating past or present treatment of Hazardous Materials at any Facility, and none of the Borrower’s nor any of its Subsidiaries’ operations involves the generation, transportation, treatment, storage or disposal of hazardous waste, as defined under 40 C.F.R.  Parts 260 270 or any state equivalent, except to the extent that any of the foregoing could not reasonably be expected to have a Material Adverse Effect.

F.No event or condition has occurred or is occurring with respect to the Borrower or any of its Subsidiaries relating to any Environmental Law, any Release of Hazardous Materials, or any Hazardous Materials Activity which individually or in the aggregate has had, or could reasonably be expected to have, a Material Adverse Effect.

4.13Pari Passu.

The Obligations and any other claims of the Lead Arrangers, the Agents and the Lenders arising hereunder or under any of the Loan Documents rank at least pari passu with the claims of all of such Credit Party’s other senior unsecured creditors, except those creditors whose claims are preferred by any bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally.

4.14Restrictions.

There are no contractual restrictions on any Credit Party or any of their Subsidiaries which prohibit or otherwise restrict the transfer of cash or other assets from any such Subsidiary to such Credit Party, other than prohibitions or restrictions permitted under Section 6.4.

SECTION 5.     AFFIRMATIVE COVENANTS

The Borrower covenants and agrees that, so long as the Commitments shall remain in effect and until payment in full of all Obligations (other than Surviving Obligations) and cancellation or expiration of all Letters of Credit, unless the provisions of this Section 5 are waived or amended in accordance with Section 9.5, the Borrower shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 5.

5.1Financial Statements and Other Reports.

The Borrower will deliver to Administrative Agent:

(i)Quarterly Financial Statements:  as soon as available, and in any event within 45 days after the end of each of the first three (3) Fiscal Quarters of each Fiscal Year, the unaudited consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such Fiscal Quarter and the related consolidated statements of income, stockholders’ equity and cash flows of the Borrower and its Subsidiaries for such Fiscal Quarter and for the period from the

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beginning of the then-current Fiscal Year to the end of such Fiscal Quarter, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year, all in reasonable detail and certified by the chief financial officer of the Borrower as fairly presenting, in all material respects, the financial condition of the Borrower and its Subsidiaries as at the date indicated and the results of their operations and cash flows for the periods indicated in conformity with GAAP, subject to the absence of footnotes and changes resulting from audit and normal year-end adjustments;

(ii)Annual Financial Statements:  as soon as available, and in any event within 90 days after the end of each Fiscal Year, (i) the consolidated balance sheets of the Borrower and its Subsidiaries as at the end of such Fiscal Year and the related consolidated statements of income, stockholders’ equity and cash flows of the Borrower and its Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the previous Fiscal Year, in reasonable detail and certified by the chief financial officer of the Borrower as fairly presenting, in all material respects, the financial condition of the Borrower and its Subsidiaries as at the date indicated and the results of their operations and cash flows for the periods indicated; and (ii) with respect such consolidated financial statements a report thereon of Deloitte and Touche LLP or other independent certified public accountants of recognized national standing selected by the Borrower, and reasonably satisfactory to the Administrative Agent (which report shall be unqualified as to going concern and scope of audit, and shall state that such consolidated financial statements fairly present, in all material respects, the consolidated financial position of the Borrower and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise disclosed in such financial statements) and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards);

(iii)Compliance Certificate:  together with each delivery of financial statements of the Borrower and its Subsidiaries pursuant to Sections 5.1(i) and 5.1(ii), a duly executed and completed Compliance Certificate;

(iv)Filings:  promptly upon their becoming available, copies of (a) all financial statements, reports, notices and proxy statements sent by any Credit Party to its shareholders or other security holders, and (b) all material information filed by any Credit Party or any of their Subsidiaries with the Securities and Exchange Commission or any national securities exchange;

(v)Notice of Default, etc.:  promptly upon (and in any event within five (5) Business Days after) any Responsible Officer of the Borrower obtaining knowledge (a) of any condition or event that constitutes an Event of Default or Potential Event of Default or that notice has been given to the Borrower or any of its Subsidiaries with respect thereto, (b) that any Person has given any notice to the Borrower or any of its Subsidiaries or taken any other action with respect to a claimed default or event or condition of the type referred to in Section 8.2, or (c) of the occurrence of any event or change that has caused or evidences, either in any case individually or in the aggregate, a Material Adverse Effect, an Officer’s Certificate specifying the nature and period of existence of such condition, event or change, or specifying the notice given

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or action taken by any such Person and the nature of such claimed Event of Default, Potential Event of Default, default, event or condition, and what action the Borrower has taken, is taking and proposes to take with respect thereto;

(vi)Notice of Litigation:  promptly upon (and in any event within five (5) Business Days after) any officer of any Credit Party obtaining knowledge of (a) the institution of, or non-frivolous threat of, any action, suit, proceeding, order, consent decree, settlement (whether administrative, judicial or otherwise), governmental investigation or arbitration against or affecting the Borrower or any of its Subsidiaries or any of their respective property, including of the type described in Section 4.17 (collectively, “Proceedings”) or (b) any material development in any such Proceeding that, in the case of either (a) or (b) if adversely determined, could be reasonably expected to have a Material Adverse Effect, or seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated hereby, written notice thereof together with such other information as may be reasonably available to the Borrower or such Subsidiary to enable Lenders and their counsel to evaluate such matters;

(vii)Change in Rating:  promptly upon (and in any event within five (5) Business Days after) obtaining knowledge thereof, written notice of any changes in the rating given the Borrower by Moody’s or S&P;

(viii)ERISA:  (i) promptly upon becoming aware of the occurrence of or forthcoming occurrence of any ERISA Event, a written notice specifying the nature thereof, what action the Borrower or any of its ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the United States Department of Labor or the PBGC with respect thereto; and (ii) with reasonable promptness, copies of (1) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by the Borrower or any of its ERISA Affiliates with the Internal Revenue Service with respect to each Pension Plan; (2) all notices received by the Borrower or any of its ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA Event; and (3) copies of such other documents or governmental reports or filings relating to any Employee Benefit Plan as the Administrative Agent shall reasonably request;

(ix)Environmental Reports and Audits:  as soon as practicable following receipt thereof, copies of all environmental audits and reports with respect to environmental matters at any property, plant or other Facility or which relate to any environmental liabilities of the Borrower or its Subsidiaries which, in any such case, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect;

(x)Public Filings:  promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any of its Subsidiaries with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of the Securities and Exchange Commission, or distributed by the Borrower to its shareholders generally; and

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(xi)Other Information:  with reasonable promptness, such other information and data with respect to the Credit Parties and their Subsidiaries as from time to time may be reasonably requested by the Administrative Agent or any Lender.

5.2Books and Records.

The Borrower will, and will cause each of its Subsidiaries to keep proper books of records and account in which full, true and correct entries in all material respects in conformity with GAAP consistently applied shall be made of all material dealings and transactions in relation to its business and activities and permit representatives or agents of the Administrative Agent or any Lender to visit and inspect any of its properties or assets and examine and make abstracts from any of its books and records upon reasonable prior notice during normal business hours and as often as may reasonably be desired, and to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with officers and employees of the Borrower and independent public accountants of the Borrower and its Subsidiaries so long as the Borrower is provided the opportunity to participate in such discussions.

5.3Existence.

Except as otherwise permitted by Section 6.6, the Borrower will, and will cause each of its Subsidiaries to, at all times preserve and keep in full force and effect its existence and all rights, privileges, licenses and franchises material to its business; provided that neither the Borrower nor any of its Subsidiaries shall be required to preserve any such right, privilege, license or franchise if management of the Borrower or such Subsidiary shall reasonably determine that the preservation thereof is no longer desirable in the conduct of the business of such Person, and that the loss thereof is not disadvantageous in any material respect to the Borrower or the Lenders.

5.4Insurance.

The Borrower will maintain or cause to be maintained, with financially sound and reputable insurers, such public liability insurance, third party property damage insurance, business interruption insurance and casualty insurance with respect to liabilities, losses or damage in respect of the assets, properties and businesses of the Borrower and its Subsidiaries as may customarily be carried or maintained under similar circumstances by Persons of established reputation engaged in similar businesses, in each case in such amounts (giving effect to self-insurance), with such deductibles, covering such risks and otherwise on such terms and conditions as shall be customary for such Persons.

5.5Payment of Taxes and Claims.

The Borrower will, and will cause each of its Subsidiaries to, pay all federal income Taxes and other material Taxes imposed upon it or any of its properties or assets or in respect of any of its income, businesses or franchises before any penalty or fine accrues thereon; provided no such Tax need be paid (a) if it is being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as adequate reserve or other appropriate provision, as shall be required in conformity with GAAP shall have been made therefor or (b) if

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the aggregate amount of all unpaid Taxes that have not been paid by the Borrower and its Subsidiaries (excluding amounts being contested as provided in clause (a)) does not exceed $5,000,000 and could not reasonably be expected to have a Material Adverse Effect.  The Borrower will not, nor will it permit any of its Subsidiaries to, file or consent to the filing of any consolidated income Tax return with any Person (other than the Borrower or any of its Subsidiaries).

5.6Payment and Performance of Obligations.

The Borrower will, and will cause each of its Subsidiaries to, pay and perform all Obligations under this Agreement and the other Loan Documents.

5.7Maintenance of Properties.

The Borrower will, and will cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of the Borrower and its Subsidiaries and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof.

5.8Compliance with Laws.

The Borrower will, and will cause each of its Subsidiaries to, comply with the requirements of all Applicable Laws, rules, regulations and orders of any Governmental Authority (including, but not limited to, all Environmental Laws), noncompliance with which could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

5.9Use of Proceeds.

A.Proceeds of Loans.  The proceeds of each Loan and each Letter of Credit shall be used for general corporate purposes.

B.Margin Regulations.  No part of the proceeds of the Loans made to a Credit Party will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock in violation of the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System.

5.10Claims Pari Passu.

Each Credit Party shall ensure that at all times the Obligations and any other claims of the Lead Arrangers, the Agents and the Lenders arising hereunder or under any other Loan Document rank at least pari passu with the claims of such Credit Party’s other senior unsecured creditors, except those creditors whose claims are preferred by any bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally.

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5.11Further Assurances.

At any time or from time to time upon the request of the Administrative Agent, the Borrower will, and will cause each of its Subsidiaries to, at its expense, promptly execute, acknowledge and deliver such further documents and do such other acts and things as the Administrative Agent may reasonably request in order to effect fully the purposes of the Loan Documents.  In furtherance and not in limitation of the foregoing, the Borrower shall take, and shall cause each of its Subsidiaries to take, such actions as the Administrative Agent may reasonably request from time to time to ensure that the Guaranteed Obligations are guarantied by the Guarantor.

SECTION 6.     NEGATIVE COVENANTS

The Borrower covenants and agrees that, so long as the Commitments hereunder shall remain in effect and until payment in full of all Obligations (other than Surviving Obligations) and cancellation or expiration of all Letters of Credit, unless the provisions of this Section 6 are waived or amended in accordance with Section 9.6, the Borrower shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 6.

6.1Liens.

The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any kind of the Borrower or any of its Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, except:

(i)Liens existing on the Effective Date and described on Schedule 6.1 hereto and other Liens securing Indebtedness existing on the Effective Date the individual principal amount of which does not exceed $500,000;

(ii)Liens imposed by law for Taxes that are not yet required to be paid pursuant to Section 5.5;

(iii)statutory Liens of landlords, banks (including rights of set-off), carriers, warehousemen, mechanics, repairmen, workmen and material men, and other Liens imposed by law, in each case incurred in the ordinary course of business for amounts not yet overdue or for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of five days) are being contested in good faith by appropriate proceedings, so long as such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts;

(iv)deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money or other Indebtedness) incurred in the ordinary course of business;

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(v)easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title to real property of the Borrower or any Subsidiary of the Borrower, in each case which do not and will not, individually or in the aggregate, interfere in any material respect with the use or value thereof;

(vi)any interest or title of a lessor or sublessor under any operating or true lease of real estate entered into by the Borrower or one of its Subsidiaries in the ordinary course of its business covering only the assets so leased;

(vii)Liens securing Indebtedness pursuant to Capital Leases; provided that (a) such Liens are only in respect of the property or assets subject to, and secure only, such Capital Leases, (b) Indebtedness of Subsidiaries under Capital Leases shall be limited by the provisions of Section 6.2 and (c) the aggregate amount of all Indebtedness of the Borrower under Capital Leases shall not at any time exceed $25,000,000;

(viii)purchase money Liens in real property, improvements thereto or equipment hereafter acquired (or, in the case of improvements, constructed) by the Borrower or one of its Subsidiaries; provided that (a) such Lien secures Indebtedness permitted by Section 6.2), (b) such Lien is incurred, and the Indebtedness secured thereby is created, within ninety (90) days after completion of such acquisition (or construction), (c) the Indebtedness secured thereby does not exceed 100% of the lesser of the cost or the fair market value of such real property, improvements or equipment at the time of such acquisition (or construction) and (d) such Lien does not apply to any other property or assets of the Borrower or any of its Subsidiaries;

(ix)Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

(x)licenses of patents, trademarks and other intellectual property rights granted by the Borrower or any of its Subsidiaries in the ordinary course of business and not interfering in any respect with the ordinary conduct of the business of the Borrower or such Subsidiary; and

(xi)Liens on assets of Persons acquired after the Effective Date subject to the terms of this Agreement; provided that such Liens exist at the time such Person becomes a Subsidiary and were not created in anticipation thereof;

(xii)Liens incurred in connection with Qualified Receivables Transactions;

(xiii)Any Lien incurred to renew, extend or refinance obligations secured by a Lien referred to in clause (viii) or (xi) above, provided that (a) the principal or face amount of the obligations secured by any such Lien does not exceed the outstanding principal or face amount of the obligations so renewed, extended or refinanced immediately prior to such renewal, extension or refinancing and (b) any such Lien attaches solely to the assets that secured the obligations so renewed, extended or refinanced; and

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(xiv)Liens not otherwise permitted by the foregoing clauses of this Section 6.1 securing obligations in an aggregate principal amount at any time outstanding not to exceed 10% of Consolidated Net Worth.

Notwithstanding any of the foregoing exceptions, the Credit Parties will not, and will not permit any of their Subsidiaries to, create, incur, assume or suffer to exist any Lien upon the Capital Stock of any of their Subsidiaries or any Indebtedness owed to it by the Credit Parties or any of their Subsidiaries.

6.2Indebtedness.

The Borrower shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or guaranty, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except:

(i)Indebtedness owing by any wholly-owned Subsidiary of the Borrower to the Borrower or another wholly-owned Subsidiary of the Borrower;

(ii)Indebtedness existing on the Effective Date and set forth on Schedule 6.2, but, in each case, not any extensions, renewals or replacements of such Indebtedness except (a) renewals and extensions expressly provided for in the agreements evidencing any such Indebtedness as the same are in effect on the date of this Agreement and (b) refinancings and extensions of any such Indebtedness if the terms and conditions thereof are not less favorable to the obligor thereon or to the Lenders than the Indebtedness being refinanced or extended or are otherwise on substantially then prevailing market terms, and the average life to maturity thereof is greater than or equal to that of the Indebtedness being refinanced or extended; provided such Indebtedness permitted under the immediately preceding clause (a) or (b) above shall not (A) include Indebtedness of an obligor that was not an obligor with respect to the Indebtedness being extended, renewed or refinanced, (B) exceed in a principal amount the Indebtedness being renewed, extended or refinanced or (C) be incurred, created or assumed if any Potential Event of Default or Event of Default has occurred and is continuing or would result therefrom;

(iii)Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business, provided that such Indebtedness is extinguished within seven (7) Business Days of its incurrence;

(iv)Indebtedness owed to (including obligations in respect of letters of credit or bank guarantees or similar instruments for the benefit of) any Person providing workers’ compensation, health, disability or other employee benefits or property, casualty or liability insurance to the Borrower or any of its Subsidiaries, pursuant to reimbursement or indemnification obligations to such Person, provided that upon the incurrence of Indebtedness with respect to reimbursement obligations regarding workers’ compensation claims, such obligations are reimbursed not later than 30 days following such incurrence;

(v)Indebtedness incurred by any Subsidiary of the Borrower arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from guaranties or letters of credit, surety bonds or performance bonds securing the performance

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of the Borrower or any such Subsidiary pursuant to such agreements, in connection with permitted dispositions of any business or asset (including the stock of any Subsidiary of the Borrower);

(vi)Indebtedness which may be deemed to exist pursuant to any guaranties, performance, surety, statutory, appeal or similar obligations incurred in the ordinary course of business of the Borrower and its Subsidiaries;

(vii)guaranties in the ordinary course of business of the obligations of suppliers, customers, franchisees and licensees of the Borrower and its Subsidiaries;

(viii)Indebtedness (including guarantees of any such Indebtedness) of a Subsidiary located in a country other than the U.S.; provided that the outstanding principal amount of all Indebtedness permitted by this clause (viii) (without double counting guarantees of any such Indebtedness) shall not at any time exceed $100,000,000;

(ix)the Obligations; and

(x)other Indebtedness in an aggregate principal amount (inclusive of the Obligations of the Subsidiary Borrowers) at any time outstanding not to exceed 15% of Consolidated Net Worth.

6.3Acquisitions.

The Borrower will not, and will not permit any of its wholly-owned Subsidiaries to, make any Acquisition (other than the Mayne Pharma Acquisition and (ii) any Acquisition by the Company or a wholly-owned Subsidiary of the Borrower of a wholly-owned Subsidiary of the Borrower) if an Event of Default or Potential Event of Default exists or would result therefrom.

6.4Restrictions on Subsidiary Distributions.

Except as provided herein, the Borrower shall not, and shall not permit any of its Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Subsidiary of the Borrower to (a) pay dividends or make any other distributions on any of such Subsidiary’s Capital Stock owned by the Borrower or any other Subsidiary of the Borrower, (b) repay or prepay any Indebtedness owed by such Subsidiary to the Borrower or any other Subsidiary of the Borrower, (c) make loans or advances to the Borrower or any other Subsidiary of the Borrower, or (d) transfer any of its property or assets to the Borrower or any other Subsidiary of the Borrower, other than restrictions (i) existing under this Agreement, (ii) in agreements evidencing Indebtedness pursuant to Capital Leases permitted by Section 6.2 that impose restrictions on the property so acquired (except that such agreements shall not in any manner limit the ability of the Borrower or any Subsidiary of the Borrower to pay dividends or make any other distribution), (iii) by reason of customary provisions restricting assignments, subletting or other transfers contained in leases, licenses, Joint Venture agreements and similar agreements entered into in the ordinary course of business, (iv) by reason of customary subordination provisions in any guaranty or similar arrangement (including any arrangement of the type described in clause (vii), (viii) or (ix) of the definition of “Indebtedness” or (v) imposed on a Subsidiary pursuant to an agreement

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which has been entered into in connection with the disposition of all of substantially all of the capital stock or assets of such Subsidiary.

6.5Restricted Payments.

The Borrower shall not, and shall not permit any Subsidiary to, directly or indirectly, declare, pay, make or set aside any sum for any Restricted Payment if an Event of Default or a Potential Event of Default exists or would result therefrom.

6.6Restriction on Fundamental Changes and Asset Sales.

The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into any transaction of merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or sub-lessor), exchange, transfer or otherwise dispose of, in one transaction or a series of transactions, all or substantially all of its business, assets or property; provided that (a) the Borrower and its Subsidiaries may make Acquisitions permitted by Section 6.3; and (b) so long as no Event of Default or Potential Event of Default exists or would result therefrom:

(i)any Subsidiary of the Borrower may merge or consolidate with or into, or dispose of assets to, any other Subsidiary or to the Borrower;

(ii)any Subsidiary may merge or consolidate with or into another Person, convey, transfer, lease or otherwise dispose of all or any portion of its assets so long as (A) the consideration received in respect of such merger, consolidation, conveyance, transfer, lease or other disposition is at least equal to the fair market value of such assets and (B) no Material Adverse Effect could reasonably be expected to result from such merger, consolidation, conveyance, transfer, lease or other disposition; and

(iii)the Borrower may merge with any other Person so long as the Borrower is the surviving entity.

6.7Conduct of Business.

From and after the Effective Date, the Borrower shall not, and shall not permit any of its Subsidiaries to, engage in any material business or conduct any activities other than (a) businesses conducted by the Borrower and its Subsidiaries as of the Effective Date, (b) businesses conducted by Mayne Pharma and its Subsidiaries as of September 20, 2006 and (c) and businesses reasonably related to the foregoing.

6.8Fiscal Year.

The Borrower shall not make or permit, nor permit any of its Subsidiaries to make or permit, any change in the Fiscal Year of the Borrower or any of its Subsidiaries; provided that Mayne Pharma or any Subsidiary thereof may make any change that is necessary to appropriate to cause its fiscal year to correspond with the Borrower’s fiscal year.

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6.9Subordinated Indebtedness.

The Borrower shall not, and shall not permit any of its Subsidiaries to, amend or otherwise change the terms of any Subordinated Indebtedness, or make any optional payment or any payment pursuant thereto, if the effect of such amendment or change is to increase the interest rate on such Subordinated Indebtedness, change (to earlier dates) any dates upon which payments of principal or interest are due thereon, change any event of default or condition to an event of default with respect thereto (other than to eliminate any such event of default or increase any grace period related thereto), change the redemption, prepayment or defeasance provisions thereof, change the subordination provisions of such Subordinated Indebtedness (or of any guaranty thereof), or if the effect of such amendment or change, together with all other amendments or changes made, is to increase materially the obligations of the obligor thereunder or to confer any additional rights on the holders of such Subordinated Indebtedness (or a trustee or other representative on their behalf) which would be adverse to any Credit Party or the Lenders.

6.10Transactions with Shareholders and Affiliates.

The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service or the making of any intercompany loan) with any Affiliate of the Borrower or any of its Subsidiaries, any holder of Capital Stock or other interests in the Borrower or any of its Subsidiaries, or any such Affiliate of any such holder, on fair and reasonable terms that are less favorable to the Borrower or such Subsidiary, as the case may be, than those that might be obtained at the time in a comparable arm’s length transaction from a Person who is not such a holder or Affiliate; provided the foregoing restriction shall not apply to (a) any transaction between the Borrower and its Subsidiaries or between such Subsidiaries to the extent otherwise permitted hereunder; (b) reasonable and customary fees paid to members of the board of directors (or similar governing body) of the Borrower and its Subsidiaries; (c) compensation arrangements for officers and other employees of the Borrower and its Subsidiaries entered into in the ordinary course of business; (d) transactions described on Schedule 6.10; and (e) transactions in connection with Qualified Receivables Transactions permitted under this Agreement.

6.11Financial Covenants.

A.Interest Coverage Ratio.  The Borrower shall not permit the Interest Coverage Ratio to be less than (i) as of the last day of any Fiscal Quarter ending prior to the completion of the Mayne Pharma Acquisition, 5.00 to 1.0; and (ii) as of the last day of any subsequent Fiscal Quarter, the ratio shown below opposite such last day:

Fiscal Quarter Ending	Ratio
December 31, 2006	4.00 to 1
March 31, 2007	4.00 to 1
June 30, 2007	4.50 to 1
September 30, 2007	4.75 to 1
December 31, 2007 and thereafter	5.00 to 1

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B.Leverage Ratio.  The Borrower shall not permit the Leverage Ratio to be greater than (i) as of the last day of any Fiscal Quarter ending prior to the completion of the Mayne Pharma Acquisition, 3.25 to 1.0; and (ii) as of the last day of any subsequent Fiscal Quarter, the ratio shown below opposite such last day:

Fiscal Quarter Ending	Ratio
December 31, 2006	4.50 to 1
March 31, 2007	4.50 to 1
June 30, 2007	4.00 to 1
September 30, 2007	3.50 to 1
December 31, 2007 and thereafter	3.25 to 1

C.Certain Calculations.  With respect to any period during which a Permitted Acquisition (excluding the Acquisition by the Borrower or its Subsidiary of Bresagen Limited) or an Asset Sale has occurred (each, a “Subject Transaction”), for purposes of determining compliance with the financial covenants set forth in this Section 6.11, Consolidated Adjusted EBITDA shall be calculated with respect to such period on a pro forma basis using the historical audited financial statements of any business so acquired or to be acquired or sold or to be sold and the consolidated financial statements of the Borrower and its Subsidiaries which shall be reformulated as if such Subject Transaction, and any Indebtedness incurred or repaid in connection therewith, had been consummated or incurred or repaid at the beginning of such period.

6.12Interest Rate Agreements and Currency Agreements.

The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into any Interest Rate Agreement or Currency Agreement after the Effective Date except Interest Rate Agreements and Currency Agreements entered into to hedge or manage bona fide risks to which the Borrower or any such Subsidiary is exposed in the conduct of its business or the management of its liabilities (and, in any event, not for speculative purposes).

SECTION 7.     GUARANTY

7.1Guaranty of the Obligations.

The Guarantor hereby irrevocably and unconditionally guarantees to the Administrative Agent for the ratable benefit of the Beneficiaries the due and punctual payment in full of all Obligations of the Subsidiary Borrowers when the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including

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amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)) (collectively, the “Guaranteed Obligations”).

7.2Payment by the Borrower.

The Guarantor hereby agrees, in furtherance of the foregoing and not in limitation of any other right which any Beneficiary may have at law or in equity against the Guarantor by virtue hereof, that upon the failure of any Subsidiary Borrower to pay any of the Guaranteed Obligations when and as the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)), the Guarantor will upon demand pay, or cause to be paid, in Cash, to the Administrative Agent for the ratable benefit of the Beneficiaries, an amount equal to the sum of the unpaid principal amount of all Guaranteed Obligations then due as aforesaid, accrued and unpaid interest on such Guaranteed Obligations (including interest which, but for such Subsidiary Borrower becoming the subject of a case under the Bankruptcy Code, would have accrued on such Guaranteed Obligations, whether or not a claim is allowed against such Credit Party for such interest in the related bankruptcy case) and all other Guaranteed Obligations then owed to the Beneficiaries as aforesaid.

7.3Liability of Guarantor Absolute.

The Guarantor agrees that its Obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the Guaranteed Obligations.  In furtherance of the foregoing and without limiting the generality thereof, the Guarantor agrees as follows:

(a)this Guaranty is a guaranty of payment when due and not of collectability.  This Guaranty is a primary obligation of the Guarantor and not merely a contract of surety;

(b)the Administrative Agent may enforce this Guaranty upon the occurrence of an Event of Default notwithstanding the existence of any dispute between any Credit Party and any Beneficiary with respect to the existence of such Event of Default;

(c)the Obligations of the Guarantor hereunder are independent of the Obligations of the Borrower and the Subsidiary Borrowers and the obligations of any other guarantor (including any other Guarantor), and a separate action or actions may be brought and prosecuted against the Guarantor whether or not any action is brought against the Borrower or any Subsidiary Borrower or any of such other guarantors and whether or not the Borrower or any Subsidiary Borrower is joined in any such action or actions;

(d)payment by the Guarantor of a portion, but not all, of the Guaranteed Obligations shall in no way limit, affect, modify or abridge the Guarantor’s liability for any portion of the Guaranteed Obligations which has not been paid.  Without limiting the generality of the foregoing, if the Administrative Agent is awarded a judgment in any suit brought to enforce the Guarantor’s covenant to pay a portion of the Guaranteed Obligations, such

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judgment shall not be deemed to release the Guarantor from its covenant to pay the portion of the Guaranteed Obligations that is not the subject of such suit;

(e)any Beneficiary, upon such terms as it deems appropriate, without notice or demand and without affecting the validity or enforceability hereof or giving rise to any reduction, limitation, impairment, discharge or termination of the Guarantor’s liability hereunder, from time to time may (i) renew, extend, accelerate, increase the rate of interest on, or otherwise change the time, place, manner or terms of payment of the Guaranteed Obligations; (ii) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guaranteed Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations; (iii) request and accept other guaranties of the Guaranteed Obligations and take and hold security for the payment hereof or the Guaranteed Obligations; (iv) release, surrender, exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or modify, with or without consideration, any security for payment of the Guaranteed Obligations, any other guaranties of the Guaranteed Obligations, or any other obligation of any Person with respect to the Guaranteed Obligations; (v) enforce and apply any security now or hereafter held by or for the benefit of such Beneficiary in respect hereof or the Guaranteed Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that such Beneficiary may have against any such security, in each case as such Beneficiary in its discretion may determine consistent herewith and any applicable security agreement, including foreclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and even though such action operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of the Guarantor against any Subsidiary Borrower or any security for the Guaranteed Obligations; and (vi) exercise any other rights available to it under the Loan Documents; and

(f)this Guaranty and the obligations of the Guarantor hereunder shall be valid and enforceable and shall not be subject to any reduction, limitation, impairment, discharge or termination for any reason (other than payment in full of the Guaranteed Obligations), including the occurrence of any of the following, whether or not the Guarantor shall have had notice or knowledge of any of them:  (i) any failure or omission to assert or enforce or agreement or election not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy (whether arising under the Loan Documents, at law, in equity or otherwise) with respect to the Guaranteed Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment of the Guaranteed Obligations; (ii) any rescission, waiver, amendment or modification of, or any consent to departure from, any of the terms or provisions (including provisions relating to events of default) hereof, any other Loan Document or any agreement or instrument executed pursuant thereto, or of any other guaranty or security for the Guaranteed Obligations, in each case whether or not in accordance with the terms hereof or such Loan Document or any agreement relating to such other guaranty or security; (iii) the Guaranteed Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect; (iv) the application of payments received from any source (other than payments received pursuant to the other Loan Documents or from the proceeds of any security for the Guaranteed Obligations, except to the extent such security also serves as collateral for Indebtedness other than the Guaranteed Obligations) to the payment of

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Indebtedness other than the Guaranteed Obligations, even though any Beneficiary might have elected to apply such payment to any part or all of the Guaranteed Obligations; (v) any Beneficiary’s consent to the change, reorganization or termination of the corporate structure or existence of the Borrower or any of its Subsidiaries and to any corresponding restructuring of the Guaranteed Obligations; (vi) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guaranteed Obligations; (vii) any defenses, set offs or counterclaims which any Credit Party may allege or assert against any Beneficiary in respect of the Guaranteed Obligations, including failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury; and (viii) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of the Guarantor as an obligor in respect of the Guaranteed Obligations.

7.4Waivers by Guarantor.

The Guarantor hereby waives, for the benefit of Beneficiaries:  (a) any right to require any Beneficiary, as a condition of payment or performance by the Guarantor, to (i) proceed against the Borrower or the Subsidiary Borrowers, any other guarantor of the Guaranteed Obligations or any other Person, (ii) proceed against or exhaust any security held from the Borrower or any Subsidiary Borrower, any such other guarantor or any other Person, (iii) proceed against or have resort to any balance of any Deposit Account or credit on the books of any Beneficiary in favor of the Borrower or any Subsidiary Borrower or any other Person, or (iv) pursue any other remedy in the power of any Beneficiary whatsoever; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of the Borrower or any Subsidiary Borrower including any defense based on or arising out of the illegality, lack of validity or unenforceability of the Guaranteed Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of the Borrower or any Subsidiary Borrower from any cause other than payment in full of the Guaranteed Obligations; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) any defense based upon any Beneficiary’s errors or omissions in the administration of the Guaranteed Obligations, except behavior which amounts to bad faith; (e) (i) any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms hereof and any legal or equitable discharge of the Guarantor’s obligations hereunder, (ii) the benefit of any statute of limitations affecting the Guarantor’s liability hereunder or the enforcement hereof, (iii) any rights to set offs, recoupments and counterclaims, and (iv) promptness, diligence and any requirement that any Beneficiary protect, secure, perfect or insure any security interest or lien or any property subject thereto; (f) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance hereof, notices of default hereunder, notices of any renewal, extension or modification of the Guaranteed Obligations or any agreement related thereto, notices of any extension of credit to any Subsidiary Borrower and notices of any of the matters referred to in Section 7.2 and any right to consent to any thereof; and (g) any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms hereof.

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7.5Guarantor’s Rights of Subrogation, Contribution, etc.

Until the Guaranteed Obligations shall have been indefeasibly paid in full and the Commitments shall have terminated and all Letters of Credit shall have expired or been cancelled, the Guarantor hereby waives any claim, right or remedy, direct or indirect, that the Guarantor now has or may hereafter have against any Subsidiary Borrower or any of its assets in connection with this Guaranty or the performance by the Guarantor of its Obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including (a) any right of subrogation, reimbursement or indemnification that the Guarantor now has or may hereafter have against any Subsidiary Borrower with respect to the Guaranteed Obligations, (b) any right to enforce, or to participate in, any claim, right or remedy that any Beneficiary now has or may hereafter have against any Subsidiary Borrower, and (c) any benefit of, and any right to participate in, any collateral or security now or hereafter held by any Beneficiary.  In addition, until the Guaranteed Obligations shall have been indefeasibly paid in full and the Commitments shall have terminated and all Letters of Credit shall have expired or been cancelled, the Guarantor shall withhold exercise of any right of contribution the Guarantor may have against any other guarantor (including any other Guarantor) of the Guaranteed Obligations.  The Guarantor further agrees that, to the extent the waiver or agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification the Guarantor may have against any Subsidiary Borrower or against any collateral or security, and any rights of contribution the Guarantor may have against any such other guarantor, shall be junior and subordinate to any rights any Beneficiary may have against any Subsidiary Borrower, to all right, title and interest any Beneficiary may have in any such collateral or security, and to any right any Beneficiary may have against such other guarantor.  If any amount shall be paid to the Guarantor on account of any such subrogation, reimbursement, indemnification or contribution rights at any time when all Guaranteed Obligations shall not have been finally and indefeasibly paid in full, such amount shall be held in trust for the Administrative Agent on behalf of the Beneficiaries and shall forthwith be paid over to the Administrative Agent for the benefit of the Beneficiaries to be credited and applied against the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms hereof.

7.6Subordination of Other Obligations.

Any Indebtedness of any Subsidiary Borrower now or hereafter held by the Guarantor is hereby subordinated in right of payment to the Guaranteed Obligations, and any such Indebtedness collected or received by the Guarantor after an Event of Default has occurred and is continuing shall be held in trust for the Administrative Agent on behalf of the Beneficiaries and shall forthwith be paid over to the Administrative Agent for the benefit of the Beneficiaries to be credited and applied against the Guaranteed Obligations but without affecting, impairing or limiting in any manner the liability of the Guarantor under any other provision hereof.

7.7Continuing Guaranty.

This Guaranty is a continuing guaranty and shall remain in effect until all of the Guaranteed Obligations shall have been paid in full and the Commitments shall have terminated

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and all Letters of Credit shall have expired or been cancelled.  The Guarantor hereby irrevocably waives any right to revoke this Guaranty as to future transactions giving rise to any Guaranteed Obligations.

7.8Authority of Credit Parties.

It is not necessary for any Beneficiary to inquire into the capacity or powers of any Credit Party or the officers, directors or any agents acting or purporting to act on behalf of any of them.

7.9Financial Condition of Credit Parties.

Any Credit Extension may be made to any Credit Party or continued from time to time, without notice to or authorization from the Guarantor regardless of the financial or other condition of any Credit Party at the time of any such grant or continuation is entered into, as the case may be.  No Beneficiary shall have any obligation to disclose or discuss with the Guarantor its assessment, or the Guarantor’s assessment, of the financial condition of any Credit Party.  The Guarantor has adequate means to obtain information from the other Credit Parties on a continuing basis concerning the financial condition of the other Credit Parties and their ability to perform their Obligations under the Loan Documents, and the Guarantor assumes the responsibility for being and keeping informed of the financial condition of the other Credit Parties and of all circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations.  The Guarantor hereby waives and relinquishes any duty on the part of any Beneficiary to disclose any matter, fact or thing relating to the business, operations or conditions of any other Credit Parties now known or hereafter known by any Beneficiary.

7.10Bankruptcy, etc.

(a)So long as any Guaranteed Obligations remain outstanding, the Guarantor shall not, without the prior written consent of the Administrative Agent acting pursuant to the instructions of the Requisite Lenders, commence or join with any other Person in commencing any bankruptcy, reorganization or insolvency case or proceeding of or against any other Credit Party.  The Obligations of the Guarantor hereunder shall not be reduced, limited, impaired, discharged, deferred, suspended or terminated by any case or proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of any Credit Party or by any defense which such Credit Party or any other Credit Party may have by reason of the order, decree or decision of any court or administrative body resulting from any such proceeding.

(b)The Guarantor acknowledges and agrees that any interest on any portion of the Guaranteed Obligations which accrues after the commencement of any case or proceeding referred to in clause (a) above (or, if interest on any portion of the Guaranteed Obligations ceases to accrue by operation of law by reason of the commencement of such case or proceeding, such interest as would have accrued on such portion of the Guaranteed Obligations if such case or proceeding had not been commenced) shall be included in the Guaranteed Obligations because it is the intention of the Guarantor and the Beneficiaries that the Guaranteed Obligations which are guaranteed by the Guarantor pursuant hereto should be determined without regard to any rule of law or order which may relieve any other Credit Party of any

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portion of such Guaranteed Obligations.  The Guarantor will permit any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar person to pay the Administrative Agent, or allow the claim of the Administrative Agent in respect of, any such interest accruing after the date on which such case or proceeding is commenced.

(c)In the event that all or any portion of the Guaranteed Obligations are paid by any Credit Party, the Obligations of the Guarantor hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) are rescinded or recovered directly or indirectly from any Beneficiary as a preference, fraudulent transfer or otherwise, and any such payments which are so rescinded or recovered shall constitute Guaranteed Obligations for all purposes hereunder.

SECTION 8.     EVENTS OF DEFAULT

If any of the following conditions or events (each an “Event of Default”) shall occur:

8.1Failure to Make Payments When Due.

Failure by any Credit Party to pay (i) any installment of principal of any Loan when due, whether at stated maturity, by acceleration, by notice of voluntary prepayment, by mandatory prepayment, by demand pursuant to Section 7 or otherwise; (ii) when due any amount payable to the Issuing Bank in reimbursement of any drawing under a Letter of Credit; or (iii) any interest on any Loan or any fee or any other amount due under this Agreement within five (5) days after the date due; or

8.2Default in Other Agreements.

Failure of any Credit Party or any of their respective Subsidiaries to pay when due any principal of or interest on or any other amount payable in respect of one or more items of Indebtedness (other than Indebtedness referred to in Section 8.1 above) in excess of $20,000,000 in the aggregate and in each case beyond the end of any grace period provided therefor, if any; or (ii) breach or default by any Credit Party or any of their respective Subsidiaries with respect to any other material term of (a) one or more items of such Indebtedness or (b) any loan agreement, mortgage, indenture or other agreement relating to such item(s) of Indebtedness, in each case beyond the end of any grace period provided therefor, if any, if the effect of such breach or default is to cause, or to permit the holder or holders of that Indebtedness (or a trustee on behalf of such holder or holders) to cause, that Indebtedness to become or be declared due and payable (or redeemable) prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be; or

8.3Breach of Certain Covenants.

Failure of any Credit Party to perform or comply with any term or condition contained in Sections 5.1(v)(a), 5.3 (solely with respect to (1) the existence of any Credit Party and (2) the failure of the Borrower to preserve or keep in full force and effect its rights, privileges, licenses and franchises if such failure would reasonably be expected to have a Material Adverse Effect), 5.9 or 6 of this Agreement; or

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8.4Breach of Representation or Warranty.

Any representation, warranty, certification or other statement made by any Credit Party in any Loan Document or in any statement or certificate at any time given by such Credit Party in writing pursuant thereto or in connection therewith shall be false in any material respect on the date as of which made; or

8.5Other Defaults Under Loan Documents.

Any Credit Party shall default in the performance of or compliance with any term contained in this Agreement or any other Loan Document (other than those specified in Sections 8.1, 8.2, 8.3 and 8.4) and such default or non-compliance shall not be cured or waived within thirty (30) days after the applicable Credit Party shall have received notice from the Administrative Agent of such default; or

8.6Involuntary Bankruptcy; Appointment of Receiver, etc.

(i) A court of competent jurisdiction shall enter a decree or order for relief in respect of any the Borrower or any of its Significant Subsidiaries in an involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal or state law; or (ii) an involuntary case shall be commenced against the Borrower or any of its Significant Subsidiaries under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, examiner, custodian or other officer having similar powers over the Borrower or any of its Significant Subsidiaries, or over all or a substantial part of their respective property, shall have been entered; or there shall have occurred the involuntary appointment of an interim receiver, trustee, examiner or other custodian of the Borrower or any of its Significant Subsidiaries for all or a substantial part of their respective property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of the Borrower or any of its Significant Subsidiaries, and any such event described in this clause (ii) shall continue for sixty (60) days unless dismissed, bonded or discharged; or

8.7Voluntary Bankruptcy; Appointment of Receiver, etc.

The Borrower or any of its Significant Subsidiaries shall have an order for relief entered with respect to it or commence a voluntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or the Borrower or any of its Significant Subsidiaries shall make any assignment for the benefit of creditors; or the Borrower or any of its Significant Subsidiaries shall be unable, or shall fail generally, or shall admit in writing their respective inability, to pay its debts as such debts become due; or the board of directors (or similar governing body) of the Borrower or any of its Significant Subsidiaries (or any committee thereof) shall adopt any resolution or otherwise

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authorize any action to approve any of the actions referred to in this Section 8.7 or in Section 8.6 above; or

8.8Judgments and Attachments.

Any money judgment, writ or warrant of attachment or similar process involving in excess of $20,000,000 (not adequately covered by insurance as to which a solvent and unaffiliated insurance company has acknowledged coverage) shall be entered or filed against the Borrower or any of its Subsidiaries, or any of their respective assets, and shall remain undischarged, unvacated, unbonded or unstayed for a period of sixty (60) days (or in any event later than five (5) days prior to the date of any proposed sale thereunder); or

8.9Dissolution.

Any order, judgment or decree shall be entered against the Borrower or any of its Subsidiaries decreeing the dissolution or split up of such Person; or

8.10Employee Benefit Plans.

There shall occur one or more ERISA Events which individually or in the aggregate results in or might reasonably be expected to result in liability of the Borrower or any of its Subsidiaries or any of their respective ERISA Affiliates in excess of $10,000,000 during the term of this Agreement; or there shall exist any fact or circumstance that reasonably could be expected to result in the imposition of a Lien or security interest under Section 412(n) of the Internal Revenue Code or under ERISA; or

8.11Change in Control.

A Change of Control shall occur; or

8.12Repudiation of Obligations.

At any time after the execution and delivery thereof, (i) the Guaranty for any reason, other than the satisfaction in full of all Obligations, shall cease to be in full force and effect (other than in accordance with its terms) or shall be declared to be null and void or the Guarantor shall repudiate its Obligations thereunder, (ii) this Agreement for any reason shall cease to be in full force and effect (other than by reason of the satisfaction in full of the Obligations) or shall be declared null and void, or (iii) any Credit Party shall contest the validity or enforceability of any Loan Document, or deny that it has any further liability under any Loan Document to which it is a party;

THEN, (1) upon the occurrence of any Event of Default described in Section 8.6 or 8.7, automatically, and (2) upon the occurrence of any other Event of Default, at the request of (or with the consent of) Requisite Lenders, upon notice to the Borrower by the Administrative Agent, (A) the Commitments, if any, of each Lender having such Commitments and the obligation of the Issuing Bank to issue any Letter of Credit shall immediately terminate; (B) each of the following shall immediately become due and payable, in each case without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by

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each Credit Party:  (I) the unpaid principal amount of and accrued interest on the Loans, (II) an amount equal to the maximum amount that may at any time be drawn under all Letters of Credit then outstanding (regardless of whether any beneficiary under any such Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents or certificates required to draw under such Letters of Credit), and (III) all other Obligations; provided the foregoing shall not affect in any way the obligations of Lenders under Section 2.2E; and (C) the Administrative Agent shall direct the Borrower to pay (and the Borrower hereby agrees upon receipt of such notice, or upon the occurrence of any Event of Default specified in Sections 8.6 and 8.7 to pay) to the Administrative Agent such additional amounts of cash, to be held as security for the Borrower’s reimbursement Obligations in respect of Letters of Credit then outstanding, equal to the Letter of Credit Usage at such time.

SECTION 9.     MISCELLANEOUS

9.1Assignments and Participations in Loans and Letters of Credit.

A.Right to Assign.  Each Lender shall have the right at any time to sell, assign or transfer all or a portion of its rights and obligations under this Agreement, including all or a portion of its Commitment or Loans owing to it or other Obligation (provided, however, that each such assignment shall be of a uniform, and not varying, percentage of all rights and obligations under and in respect of Loans and its Commitment):  (i) to any Person meeting the criteria of clause (A) of the definition of the term of “Eligible Assignee” or to any Approved Fund upon the giving of notice to the Borrower and the Administrative Agent; and (ii) to any Person meeting the criteria of clause (B) of the definition of the term of “Eligible Assignee” and consented to by each of the Borrower and the Administrative Agent (such consent not to be (x) unreasonably withheld or delayed and, (y) in the case of the Borrower, required at any time an Event of Default shall have occurred and then be continuing); provided further each such assignment pursuant to this Section 9.1A shall be in an aggregate amount of not less than $5,000,000, which such amount shall be reduced to $1,000,000 at any time an Event of Default shall have occurred and be continuing (or such lesser amount as may be agreed to by the Borrower and the Administrative Agent or as shall constitute the aggregate amount of the Commitment and Loans of the assigning Lender).

B.Requirements.  The assigning Lender and the assignee thereof shall execute and deliver to the Administrative Agent an Assignment Agreement, together with (i) a processing and recordation fee of $3,500, and (ii) such forms, certificates or other evidence, if any, with respect to United States federal income tax withholding matters as the assignee under such Assignment Agreement may be required to deliver to Administrative Agent pursuant to Section 2.8B(iii).

C.Acceptance and Notice of Assignment.  Upon its receipt of a duly executed and completed Assignment Agreement, together with the processing and recordation fee referred to in Section 9.1B (and any forms, certificates or other evidence required by this Agreement in connection therewith), the Administrative Agent shall record the information contained in such Assignment Agreement in the Register, shall give prompt notice thereof to the Borrower and shall maintain a copy of such Assignment Agreement.

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D.Representations and Warranties of Assignee.  Each Lender, upon execution and delivery hereof or upon executing and delivering an Assignment Agreement, as the case may be, represents and warrants as of the Effective Date or as of the applicable Effective Date (as defined in the applicable Assignment Agreement) that (i) it is an Eligible Assignee; (ii) it has experience and expertise in the making of or investing in commitments or loans such as its Commitment or Loans, as the case may be; and (iii) it will make or invest in, as the case may be, its Commitment or Loans for its own account in the ordinary course of its business and without a view to distribution of its Commitment or Loans within the meaning of the Securities Act or the Exchange Act or other federal securities laws (it being understood that, subject to the provisions of this Section 9.1, the disposition of its Commitment or Loans or any interests therein shall at all times remain within its exclusive control).

E.Effect of Assignment.  Subject to the terms and conditions of this Section 9.1, as of the “Effective Date” specified in the applicable Assignment Agreement:  (i) the assignee thereunder shall have the rights and obligations of a “Lender” hereunder to the extent such rights and obligations hereunder have been assigned to it pursuant to such Assignment Agreement and shall thereafter be a party hereto and a “Lender” for all purposes hereof; (ii) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned thereby pursuant to such Assignment Agreement, relinquish its rights (other than any rights which survive the termination hereof under Section 9.9) and be released from its obligations hereunder (and, in the case of an Assignment Agreement covering all or the remaining portion of an assigning Lender’s rights and obligations hereunder, such Lender shall cease to be a party hereto; provided, anything contained in any of the Loan Documents to the contrary notwithstanding, (y) the Issuing Bank shall continue to have all rights and obligations thereof with respect to such Letters of Credit until the cancellation or expiration of such Letters of Credit and the reimbursement of any amounts drawn thereunder and (z) such assigning Lender shall continue to be entitled to the benefit of all indemnities hereunder as specified herein with respect to matters arising out of the prior involvement of such assigning Lender as a Lender hereunder); (iii) the Commitments shall be modified to reflect the Commitment of such assignee and any Commitment of such assigning Lender, if any; and (iv) if any such assignment occurs after the issuance of any Note to the assigning Lender, the assigning Lender shall, upon the effectiveness of such assignment or as promptly thereafter as practicable, surrender its applicable Notes to the Administrative Agent for cancellation, and thereupon the Credit Parties shall issue and deliver new Notes, if so requested by the assignee and/or assigning Lender, to such assignee and/or to such assigning Lender, with appropriate insertions, to evidence the Loans of the assignee and/or the assigning Lender.

F.Certain Other Permitted Assignments.  In addition to any other assignment permitted pursuant to this Section 9.1, any Lender may assign and/or pledge all or any portion of its Loans, the other obligations owed by or to such Lender, and its Letters of Credit, if any, to secure obligations of such Lender including to any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve Bank; provided that no such assignment or pledge shall release any Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

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G.Participations.  Each Lender shall have the right at any time to sell one or more participations to any Person (other than the Credit Parties, any of their Subsidiaries or any of their Affiliates) in all or any part of its Commitment, Loans or other Obligations.  The holder of any such participation, other than an Affiliate of the Lender granting such participation, shall not be entitled to require such Lender to take or omit to take any action hereunder except with respect to any amendment, modification or waiver that would (i) extend the final scheduled maturity of any Loan or Note in which such participant is participating, or reduce the rate or extend the time of payment of interest or fees thereon (except in connection with a waiver of applicability of any post default increase in interest rates) or reduce the principal amount thereof, or increase the amount of the participant’s participation over the amount thereof then in effect (it being understood that a waiver of any Event of Default or of a mandatory reduction in the Commitment shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan shall be permitted without the consent of any participant if the participant’s participation is not increased as a result thereof) or (ii) consent to the assignment or transfer by any Credit Party of any of its rights and obligations under this Agreement.  The Credit Parties agree that each participant shall be entitled to the benefits of Sections 2.9C and 2.8 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 9.1A; provided (i) a participant shall not be entitled to receive any greater payment under Section 2.8 than the applicable Lender would have been entitled to receive with respect to the participation sold to such participant, unless the sale of the participation to such participant is made with the applicable Credit Party’s prior written consent and (ii) a participant that would be a Non-US Lender if it were a Lender shall not be entitled to the benefits of Section 2.8B unless the applicable Credit Party is notified of the participation sold to such participant and such participant agrees, for the benefit of such Credit Party, to comply with Section 2.8B as though it were a Lender.  To the extent permitted by law, each participant also shall be entitled to the benefits of Section 9.5 as though it were a Lender, provided such participant agrees to be subject to Section 9.19 as though it were a Lender.

9.2Expenses.

Whether or not the transactions contemplated hereby shall be consummated, the Credit Parties agree to pay promptly (i) all the actual and reasonable costs and out-of-pocket expenses of preparation of the Loan Documents; (ii) all the costs of furnishing all opinions by counsel for the Credit Parties; (iii) the reasonable fees, out-of-pocket expenses and disbursements of a single U.S. counsel, a special Canada counsel and a special Ireland counsel to the Lead Arrangers and the Agents in connection with the negotiation, preparation and execution of the Loan Documents and any other documents or matters requested by the Credit Parties; (iv) all the actual and reasonable costs and out-of-pocket reasonable fees, expenses and disbursements of any auditors, accountants, consultants or appraisers; (v) all other actual and reasonable costs and out-of-pocket expenses incurred by each Lead Arranger, the Administrative Agent and each Syndication Agent in connection with the syndication of the Loans and the negotiation, preparation and execution of the Loan Documents and the transactions contemplated thereby; (vi) all actual and reasonable costs and out-of-pocket expenses incurred by the Administrative Agent in connection with any consents, amendments, waivers or other modifications of the Loan Documents (including the reasonable fees, out-of-pocket expenses and disbursements of counsel to the Administrative Agent in connection therewith); and (vii) after the occurrence of an Event of Default, all costs and expenses, including reasonable attorneys’ fees (including, without duplication, allocated

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costs of internal counsel) and costs of settlement, incurred by any Agent or Lender in enforcing any Obligations of or in collecting any payments due from the Credit Parties hereunder or under the other Loan Documents by reason of such Event of Default (including in connection with the sale of, collection from, or other realization upon any collateral) or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a “work-out” or pursuant to any insolvency or bankruptcy cases or proceedings.

9.3Indemnity.

A.In addition to the payment of expenses pursuant to Section 9.2, whether or not the transactions contemplated hereby shall be consummated, the Credit Parties agree to defend (subject to Indemnitees’ selection of counsel), indemnify, pay and hold harmless each of the Lead Arrangers and Agents and each Lender, and the respective partners, officers, directors, employees, agents, attorneys, and affiliates of each of the Lead Arrangers and each of the Agents and each Lender (collectively called the “Indemnitees”), from and against any and all Indemnified Liabilities (as hereinafter defined); provided that the Credit Parties shall not have any obligation to any Indemnitee hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise from the gross negligence or willful misconduct of that Indemnitee or any of its Affiliates as determined by a final judgment of a court of competent jurisdiction.  As used herein, “Indemnified Liabilities” means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, actions, judgments, suits, claims (including environmental claims), costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Credit Party or any other Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby (including the Lenders’ agreements to make the Credit Extensions hereunder or the use or intended use of the proceeds thereof, or any enforcement of any of the Loan Documents (including the enforcement of the Guaranty)).

B.To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in this Section 9.3 may be unenforceable in whole or in part because they are violative of any law or public policy, the Credit Parties shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of them.

C.To the extent permitted by applicable law, the Credit Parties and each of their Subsidiaries shall not assert, and each hereby waives, any claim against the Lenders, the Agents, the Lead Arrangers and their respective Affiliates, officers, directors, employees, attorneys or agents, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) (whether or not the claim therefor is based on contract, tort

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or duty imposed by any applicable legal requirement) arising out of, in connection with, arising out of, as a result of, or in any way related to, this Agreement or any other Loan Document, or any agreement or instrument contemplated hereby or thereby or referred to herein or therein, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof or any act or omission or event occurring in connection therewith, and the Credit Parties and each of its Subsidiaries hereby waives, releases and agrees not to sue upon any such claim or any such damages, whether or not accrued and whether or not known or suspected to exist in its favor.

9.4Exception for Subsidiary Borrowers.

Notwithstanding the foregoing, nothing in Sections 9.2 and 9.3 shall require a payment by a Subsidiary Borrower if such payment would violate any Applicable Law or if any Applicable Law would require minority shareholder approval, a valuation or a discretionary order, provided that the Guarantor shall be liable for any such payment referred to in this Section 9.4.

9.5Set-Off.

In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence and during the continuance of any Event of Default, each of the Agents and each Lender (and each of their respective Affiliates) is hereby authorized by the Credit Parties at any time or from time to time subject, except in the case of an Event of Default under Section 8.1, 8.6 or 8.7, to the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed), without notice to the Credit Parties or to any other Person, any such notice being hereby expressly waived, to set-off and to appropriate and to apply any and all deposits (general or special, including Indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other Indebtedness at any time held or owing by such Agent or such Lender (or such Affiliate), and any of their respective affiliates, as the case may be, to or for the credit or the account of any Credit Party against and on account of the obligations and liabilities of any Credit Party to such Agent or such Lender under this Agreement and the other Loan Documents, including all claims of any nature or description arising out of or connected with this Agreement or any other Loan Document, irrespective of whether or not (i) such Agent or such Lender shall have made any demand hereunder or (ii) the principal of or the interest on the Loans or any other amounts due hereunder shall have become due and payable pursuant to Section 9 and although said Obligations, or any of them, may be contingent or unmatured.

9.6Amendments and Waivers.

No amendment, modification, termination or waiver of any provision of this Agreement or of any other Loan Document, or consent to any departure by the Credit Parties therefrom, shall in any event be effective without the written concurrence of the Requisite Lenders; provided that no amendment, modification, termination, waiver or consent shall, without the consent of each Lender:  (i) except as provided in Section 2.15, extend the scheduled final maturity of any Loan or Note; (ii) waive, reduce or postpone any scheduled repayment (but not prepayment); (iii) reduce the rate of interest on any Loan or any fee or other amount payable hereunder; (iv) extend the time for payment of any such interest, fees or other amounts; (v)

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extend the stated expiration date of any Letter of Credit beyond the Maturity Date; (vi) reduce the principal amount of any Loan; (vii) amend, modify, terminate or waive any provision of this Section 9.6; (viii) amend, modify or replace the definition of “Requisite Lenders” or “Pro Rata Share”, or any provision of this Agreement which would alter the pro rata sharing of payments required hereunder; (ix) consent to the assignment or transfer by any Credit Party of any of its rights and obligations under this Agreement; or (x) release the Guarantor from its Obligations under the Guaranty; provided further that no such amendment, modification, termination or waiver of any provision of the Loan Documents, or consent to any departure by any Credit Party therefrom, shall:  (1) increase the Commitments of any Lender over the amount thereof then in effect without the consent of such Lender; or (2) amend, modify, terminate or waive any provision of this Agreement as the same applies to the rights or obligations of any Agent, in each case without the consent of such Agent.  The Administrative Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of such Lender.  Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given.  No notice to or demand on any Credit Party in any case shall entitle such Credit Party to any other or further notice or demand in similar or other circumstances.

9.7Independence of Covenants.

All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or Potential Event of Default if such action is taken or condition exists.

9.8Notices.

A.Generally.  Unless otherwise specifically provided herein, all notices or other communications provided for hereunder between the Credit Parties and any other Person party hereto shall be in writing (including facsimile or electronic mail) and mailed, sent by overnight courier, telecopied, e-mailed, or delivered to, in the case of each signatory to this Agreement, at its address set forth on the signature pages hereto, or, as to each party, at such other address or to such other person as shall be designated by such party in a written notice to all other parties.  Any notice, request or demand to or upon the Borrower or any other Person party hereto shall not be effective until received.

B.Intralinks.

(i)The Credit Parties hereby agree that they will provide to the Administrative Agent all information, documents and other materials that they are obligated to furnish to the Administrative Agent pursuant to the Loan Documents, including all notices, requests, financial statements, financial and other reports, certificates and other information materials, but excluding any such communication that (i) relates to a request for a new, or a conversion of an existing, borrowing or other Credit Extension (including any election of an interest rate or interest period relating thereto), (ii) relates to the payment of any principal or other amount due under this Agreement prior to the scheduled date therefor, (iii) provides notice

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of any Potential Default or Event of Default or (iv) is required to be delivered to satisfy any condition precedent to the effectiveness of this Agreement and/or any borrowing or other Credit Extension hereunder (all such non-excluded communications being referred to herein collectively as “Communications”), by transmitting the Communications in an electronic/soft medium in a format acceptable to the Administrative Agent to oploanswebadmin@citigroup.com.  In addition, the Credit Parties agree to continue to provide the Communications to the Administrative Agent in the manner specified in the Loan Documents but only to the extent requested by the Administrative Agent.

(ii)The Credit Parties further agree that the Administrative Agent may make the Communications available to the Lenders by posting the Communications on Intralinks or a substantially similar electronic transmission system (the “Platform”).

(iii)THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE”.  THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS, OR THE ADEQUACY OF THE PLATFORM AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN THE COMMUNICATIONS.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY THE AGENT PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM.  IN NO EVENT SHALL THE ADMINISTRATIVE AGENT OR ANY OF ITS AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS OR REPRESENTATIVES (COLLECTIVELY, “AGENT PARTIES”) HAVE ANY LIABILITY TO THE CREDIT PARTIES, ANY LENDER OR ANY OTHER PERSON OR ENTITY FOR DAMAGES OF ANY KIND, INCLUDING DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF THE CREDIT PARTIES’ OR THE ADMINISTRATIVE AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET, EXCEPT TO THE EXTENT THE LIABILITY OF ANY AGENT PARTY IS FOUND IN A FINAL NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FROM SUCH AGENT PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

(iv)The Administrative Agent agrees that the receipt of the Communications by the Administrative Agent at its e-mail address set forth above shall constitute effective delivery of the Communications to the Administrative Agent for purposes of the Loan Documents.  Each Lender agrees that notice to it (as provided in the next sentence) specifying that the Communications have been posted to the Platform shall constitute effective delivery of the Communications to such Lender for purposes of the Loan Documents.  Each Lender agrees to notify the Administrative Agent in writing (including by electronic communication) from time to time of such Lender’s e-mail address to which the foregoing notice may be sent by electronic transmission and (ii) that the foregoing notice may be sent to such e-mail address.

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C.Notices to Subsidiary Borrowers.  Each Subsidiary Borrower hereby designates the Borrower as its representative and agent on its behalf for the purposes of giving and receiving all notices (other than Notices of Borrowing) and any other documentation required to be delivered to it pursuant to this Agreement and any other Loan Document by the Administrative Agent or any Lender.  The Borrower hereby accepts such appointment.  The Agents and the Lenders may regard any notice (other than Notices of Borrowing) or other communication pursuant to any Loan Document from the Borrower as a notice or communication from all borrowers, and may give any notice or communication required or permitted to be given to any Subsidiary Borrower or Subsidiary Borrowers hereunder to the Borrower on behalf of such Subsidiary Borrower or Subsidiary Borrowers.  Each Subsidiary Borrower agrees that each notice, election, representation and warranty, covenant, agreement and undertaking made on its behalf by the Borrower shall be deemed for all purposes to have been made by such Subsidiary Borrower and shall be binding upon and enforceable against such Subsidiary Borrower to the same extent as if the same had been made directly by such Subsidiary Borrower.

9.9Survival of Representations, Warranties and Agreements.

A.All representations, warranties and agreements made herein shall survive the execution and delivery of this Agreement and the making of the Loans hereunder.

B.Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of the Credit Parties set forth in Sections 2.8, 2.9C, 9.2, 9.3 and 9.5 and the agreements of Lenders set forth in Sections 9.19, 10.2C and 10.4 shall survive the payment of the Loans and the termination of this Agreement.

9.10Failure or Indulgence Not Waiver; Remedies Cumulative.

No failure or delay on the part of any Lead Arranger, any Agent or any Lender in the exercise of any power, right or privilege hereunder or under any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege.  The rights, powers and remedies given to each Lead Arranger, each Agent and each Lender hereby are cumulative and shall be in addition to and independent of all rights, powers and remedies existing by virtue of any statute or rule of law or in any other Loan Document.  Any forbearance or failure to exercise, and any delay in exercising, any right, power or remedy hereunder shall not impair any such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy.

9.11Marshalling; Payments Set Aside.

No Agent or Lender shall be under any obligation to marshal any assets in favor of any Credit Party or any other Person or against or in payment of any or all of the Obligations.  To the extent that any Credit Party makes a payment or payments to the Administrative Agent or the Lenders (or to the Administrative Agent, on behalf of the Lenders) or the Administrative Agent or the Lenders enforce any security interests or exercises their rights of set-off, and such payment or payments or the proceeds of such enforcement or set-off or any part thereof are subsequently

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invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or set-off had not occurred.

9.12Severability.

In case any provision in or obligation under any Loan Document shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations of such Loan Document, the other Loan Documents or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

9.13Headings.

Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.

9.14Applicable Law.

THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

9.15Successors and Assigns.

This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of the Lenders (it being understood that each Lender’s rights of assignment are subject to Section 9.1).  The Credit Parties may not assign or delegate its rights or obligations hereunder or any interest therein without the prior written consent of each Lender.  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Indemnitees, and Affiliates of each of the Agents and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

9.16Consent to Jurisdiction and Service of Process.

ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE CREDIT PARTIES ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK.  BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH CREDIT PARTY, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY

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(I)ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS;

(II)WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;

(III)AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO SUCH CREDIT PARTY AT ITS ADDRESS SET FORTH ON THE SIGNATURE PAGES HERETO;

(IV)AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH CREDIT PARTY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT;

(V)AGREES THAT EACH AGENT AND EACH LENDER RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH CREDIT PARTY IN THE COURTS OF ANY OTHER JURISDICTION; AND

(VI)AGREES THAT THE PROVISIONS OF THIS SECTION 9.16 RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.

9.17Waiver of Jury Trial.

EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED.  The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including contract claims, tort claims, breach of duty claims and all other common law and statutory claims.  Each party hereto acknowledges that this waiver is a material inducement to enter into a business relationship, that each has already relied on this waiver in entering into this Agreement, and that each will continue to rely on this waiver in their related future dealings.  Each party hereto further warrants and represents that it has reviewed this waiver with its legal counsel and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel.  THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 9.17 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR

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MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER.  In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.

9.18Confidentiality.

Each Agent and Lender shall hold all confidential, proprietary or non-public information regarding the Credit Parties and their respective Subsidiaries and their respective businesses which has been identified as confidential by any such Credit Party and obtained pursuant to the requirements of this Agreement in accordance with such Agent’s or Lender’s customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices, it being understood and agreed by the Credit Parties that in any event each Lender may make disclosures (i) to Affiliates of such Agent or Lender and the directors, officers, employees, agents, advisors and other representatives of such Agent or Lender and their Affiliates (and to other persons authorized by an Agent or Lender to organize, present or disseminate such information in connection with disclosures otherwise made in accordance with this Section 9.18); (ii) reasonably required by any bona fide or potential assignee, transferee or participant in connection with the contemplated assignment, transfer or participation by any Lender of its Loans or any interest therein; (iii) to any rating agency when required by it, provided that, prior to any disclosure, such rating agency shall undertake in writing to preserve the confidentiality of any confidential information relating to the Credit Parties or their Subsidiaries received by it from any of the Agents or any Lender; (iv) required or requested by any Governmental Authority or representative thereof; provided that unless specifically prohibited by applicable law, court order or similar regulatory process, each Agent and Lender shall make reasonable efforts to notify the Credit Parties of any request by any Governmental Authority or representative thereof (other than any such request in connection with any examination of the financial condition or other routine examination of such Agent or Lender by such Governmental Authority) for disclosure of any such non-public information prior to disclosure of such information; (v) to any other party hereto; (vi) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder; (vii) to any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Credit Parties and their Obligations; (viii) with the consent of the applicable Credit Party or (ix) to the extent such information (x) becomes publicly available other than as a result of a breach of this Section 9.18 or (y) becomes available to any Agent, any Lender or their respective Affiliates on a nonconfidential basis from a source other than the Credit Parties so long as such Agent, such Lender or such Affiliate does not have knowledge that such source has an obligation to any Credit Party to keep such information confidential; provided that in no event shall any Agent or Lender be obligated or required to return any materials furnished by any Credit Party or any of its Subsidiaries.

9.19Ratable Sharing.

The Lenders hereby agree among themselves that if any of them shall, whether by voluntary payment (other than a voluntary prepayment of Loans made and applied in accordance with the terms hereof), through the exercise of any right of set-off or banker’s lien, by

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counterclaim or cross action or by the enforcement of any right under the Loan Documents or otherwise, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal, interest, amounts payable in respect of facility fees or commitment fees and other amounts then due and owing to such Lender hereunder or under the other Loan Documents (collectively, the “Aggregate Amounts Due” to such Lender), which is greater than the proportion received by any other Lender in respect to of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall (i) notify the Administrative Agent of the receipt of such payment and (ii) apply a portion of such payment to purchase (for cash at face value) participations (which it shall be deemed to have purchased from each seller of a participation simultaneously upon the receipt by such seller of its portion of such payment), or such other adjustments as shall be equitable, in the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate Amounts Due to them; provided that, if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender upon the bankruptcy or reorganization of any Credit Party or otherwise, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest.  The Credit Parties and each of their Subsidiaries expressly consents to the foregoing arrangement and agrees that any holder of a participation so purchased may exercise any and all rights of banker’s lien, set-off or counterclaim with respect to any and all monies owing by the Credit Parties or any of their Subsidiaries to that holder with respect thereto as fully as if that holder were owed the amount of the participation held by that holder.

9.20Counterparts; Effectiveness.

This Agreement and any amendments, waivers, consents or supplements hereto or in connection herewith may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument.  This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt by the Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof.

9.21Obligations Several; Independent Nature of Lenders’ Rights.

The obligations of the Lenders hereunder are several and no Lender shall be responsible for the obligations or Commitment of any other Lender hereunder.  Nothing contained herein or in any other Loan Document, and no action taken by the Lenders pursuant hereto or thereto, shall be deemed to constitute the Lenders as a partnership, an association, a joint venture or any other kind of entity.  The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out hereof and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose.

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9.22Usury Savings Clause.

Notwithstanding any other provision herein, the aggregate interest rate charged with respect to any of the Obligations, including all charges or fees in connection therewith deemed in the nature of interest under applicable law shall not exceed the Highest Lawful Rate.  As used herein, “Highest Lawful Rate” means the maximum lawful interest rate, if any, that at any time or from time to time may be contracted for, charged, or received under the laws applicable to any Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow.  If the rate of interest (determined without regard to the preceding sentence) under this Agreement at any time exceeds the Highest Lawful Rate, the outstanding amount of the Loans made hereunder shall bear interest at the Highest Lawful Rate until the total amount of interest due hereunder equals the amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect.  In addition, if when the Loans made hereunder are repaid in full the total interest due hereunder (taking into account the increase provided for above) is less than the total amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect, then to the extent permitted by law, the Credit Parties shall pay to the Administrative Agent an amount equal to the difference between the amount of interest paid and the amount of interest which would have been paid if the Highest Lawful Rate had at all times been in effect.  Notwithstanding the foregoing, it is the intention of the Lenders and the Credit Parties to conform strictly to any applicable usury laws.  Accordingly, if any Lender contracts for, charges, or receives any consideration which constitutes interest in excess of the Highest Lawful Rate, then any such excess shall be cancelled automatically and, if previously paid, shall at such Lender’s option be applied to the outstanding amount of the Loans made hereunder or be refunded to the Credit Parties.

9.23Judgment Currency.

The obligation of the Credit Parties to make payments of the principal of and interest on the Obligations in the Currency specified for such payment shall not be discharged or satisfied by any tender, or any recovery pursuant to any judgment, which is expressed in or converted into any other currency, except to the extent that such tender or recovery shall result in the actual receipt by the Administrative Agent or the applicable Lender of the full amount of the particular Currency expressed to be payable pursuant to the applicable Loan Document.  The Administrative Agent shall, using all amounts obtained or received from the applicable Credit Party pursuant to any such tender or recovery in payment of principal of and interest on the Obligations, promptly purchase the applicable Currency at the most favorable spot exchange rate determined by the Administrative Agent to be available to it.  The obligation of the Credit Parties to make payments in the applicable Currency shall be enforceable as an alternative or additional cause of action solely for the purpose of recovering in the applicable Currency the amount, if any, by which such actual receipt shall fall short of the full amount of the currency expressed to be payable pursuant to the applicable Loan Document.

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9.24Termination of Existing Credit Agreement.

The Borrower and each of the Lenders that is also a “Lender” party to the Credit Agreement and Guaranty dated as of April 30, 2002, as amended, among the Borrower, the lenders party thereto and Citicorp North America, Inc., as administrative agent (the “Existing Credit Agreement”), agrees that the “Commitments” as defined in the Existing Credit Agreement shall be terminated in their entirety on the Effective Date in accordance with the terms thereof.  Each of such Lenders waives any requirement of notice of such termination pursuant to Article II of the Existing Credit Agreement.

SECTION 10.     AGENTS

10.1Appointment.

ABN AMRO Bank and MSSF are hereby appointed as Syndication Agents hereunder, and each Lender hereby authorizes the Syndication Agents to act as its agents in accordance with the terms of this Agreement and the other Loan Documents.  Bank of America, N.A. and Wachovia Bank, National Association are hereby appointed as Documentation Agents hereunder, and each Lender hereby authorizes the Documentation Agents to act as its agents in accordance with the terms of this Agreement and the other Loan Documents.  Citicorp is hereby appointed by each Lender as the Administrative Agent hereunder and under the other Loan Documents and each Lender hereby authorizes the Administrative Agent to act as its agent in accordance with the terms of this Agreement and the other Loan Documents.  Each Agent hereby agrees to act upon the express conditions contained in this Agreement and the other Loan Documents, as applicable.  The provisions of this Section 10 are solely for the benefit of the Agents and the Lenders, and the Credit Parties shall have no rights as a third party beneficiary of any of the provisions thereof.  In performing its functions and duties under this Agreement, each of the Agents shall act solely as an agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for any Credit Party or any of their respective Subsidiaries.

10.2Powers and Duties; General Immunity.

A.Powers; Duties Specified.  Each Lender irrevocably authorizes each Agent to take such action on such Lender’s behalf and to exercise such powers, rights and remedies hereunder and under the other Loan Documents as are specifically delegated or granted to such Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto.  Each Agent shall have only those duties and responsibilities that are expressly specified in this Agreement and the other Loan Documents.  Each Agent may exercise such powers, rights and remedies and perform such duties by or through its agents or employees.  No Agent shall have, by reason of this Agreement or any of the other Loan Documents, a fiduciary relationship in respect of any Lender; and nothing in this Agreement or any of the other Loan Documents, expressed or implied, is intended to or shall be so construed as to impose upon any Agent any obligations in respect of this Agreement or any of the other Loan Documents except as expressly set forth herein or therein.  Anything herein to the contrary notwithstanding, none of the Lead Arrangers, Syndication Agents or Documentation Agents listed on the cover page hereof shall have any powers, duties or responsibilities under this

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Agreement or any of the other Loan Documents, except in its capacity, as applicable, as a Lender or the Issuing Bank hereunder.

B.No Responsibility for Certain Matters.  No Agent shall be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectability or sufficiency of this Agreement or any other Loan Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by any Agent to the Lenders or by or on behalf of the Credit Parties to any Agent or any Lender in connection with the Loan Documents and the transactions contemplated thereby or for the financial condition or business affairs of the Credit Parties or any other Person liable for the payment of any Obligations, nor shall any Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Loan Documents (other than to confirm receipt of items required under this Agreement or any Loan Document to be delivered to such Agent) or as to the use of the proceeds of the Loans or as to the existence or possible existence of any Event of Default or Potential Event of Default (unless and until notice describing such Event of Default or Potential Event of Default is given to such Agent by a Credit Party or any other Agent) or to make disclosures with respect to the foregoing.  Anything contained in this Agreement to the contrary notwithstanding, the Administrative Agent shall not have any liability arising from confirmations of the amount of outstanding Loans or the component amounts thereof.

C.Exculpatory Provisions.  No Agent nor any of its officers, partners, directors, employees or agents shall be liable to the Lenders for any action taken or omitted by any Agent under or in connection with any of the Loan Documents except to the extent caused by such Agent’s gross negligence or willful misconduct.  Each Agent shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection with this Agreement or any of the other Loan Documents or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until such Agent shall have received instructions in respect thereof from the Requisite Lenders (or such other the Lenders as may be required to give such instructions under Section 9.6) and, upon receipt of such instructions from the Requisite Lenders (or such other Lenders, as the case may be), such Agent shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions.  Without prejudice to the generality of the foregoing, (i) each of Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for the Credit Parties and their Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against any Agent as a result of such Agent acting or (where so instructed) refraining from acting under this Agreement or any of the other Loan Documents in accordance with the instructions of the Requisite Lenders (or such other Lenders as may be required to give such instructions under Section 9.6).

D.Agents Entitled to Act as Lenders.  The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, any

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Agent in its individual capacity as a Lender hereunder.  With respect to its participation in the Loans and the Letters of Credit, each Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not performing the duties and functions delegated to it hereunder, and the term “Lender” shall, unless the context clearly otherwise indicates, include each Agent in its individual capacity.  Any Agent and its Affiliates may accept deposits from, lend money to, own Securities of, and generally engage in any kind of banking, trust, financial advisory or other business with the Credit Parties or any of their Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from the Credit Parties for services in connection with this Agreement and otherwise without having to account for the same to Lenders.  No Agent shall have any duty to disclose any information obtained or received by it or any of its Affiliates relating to the Borrower or any of its Subsidiaries to the extent such information was obtained or received in any capacity other than as an Agent under this Agreement.  In the event that Citicorp or any of its Affiliates shall be or become an indenture trustee under the Trust Indenture Act of 1939 (as amended, the “Trust Indenture Act”) in respect of any securities issued or guaranteed by the Borrower, the parties hereto acknowledge and agree that any payment or property received in satisfaction of or in respect of any obligation of the Borrower hereunder or under any other Loan Document by or on behalf of Citicorp in its capacity as the Administrative Agent for the benefit of any Lender under this Agreement or any Note (other than Citicorp or an Affiliate of Citicorp) and which is applied in accordance with this Agreement shall be deemed to be exempt from the requirements of Section 311 of the Trust Indenture Act pursuant to Section 311(b)(3) of the Trust Indenture Act.

10.3Representations and Warranties; No Responsibility For Appraisal of Creditworthiness.

Each Lender represents and warrants that it has made its own independent investigation of the financial condition and affairs of the Credit Parties and their Subsidiaries in connection with the making of the Loans hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of the Credit Parties and their Subsidiaries.  No Agent shall have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of the Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter, and no Agent shall have any responsibility with respect to the accuracy of or the completeness of any information provided to the Lenders.

10.4Right to Indemnity.

Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify each Agent, to the extent that such Agent shall not have been reimbursed by the Credit Parties to the full extent required by this Agreement or any other Loan Document, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against such Agent in exercising its powers, rights and remedies or performing its duties hereunder or under the other Loan Documents or otherwise in its capacity as such Agent in any way relating to or arising out of this Agreement or

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the other Loan Documents; provided that (a) no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent’s gross negligence or willful misconduct and (b) no Lender shall be liable for the payment of any portion of an Indemnified Liability pursuant to this Section 10.4 unless such Indemnified Liability was incurred by such Agent in its capacity as such or by another Person acting for such Agent in such capacity.  If any indemnity furnished to any Agent for any purpose shall, in the opinion of such Agent, be insufficient or become impaired, such Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished.

10.5Successor Administrative Agent.

The Administrative Agent may resign at any time by giving thirty (30) days’ prior written notice thereof to the Lenders and the Credit Parties, and the Administrative Agent may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to the Credit Parties and the Administrative Agent and signed by the Requisite Lenders.  Upon any such notice of resignation or any such removal, the Requisite Lenders shall have the right, with, so long as no Potential Event of Default or Event of Default exists, the consent of the Borrower (which consent shall not be unreasonably withheld or delayed), upon five (5) Business Days’ notice to the Credit Parties, to select a successor Administrative Agent.  Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, that successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Administrative Agent and the retiring or removed Administrative Agent shall be discharged from its duties and obligations under this Agreement.  After any retiring or removed Administrative Agent’s resignation or removal hereunder as Administrative Agent, the provisions of this Section 10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement.

10.6Agents Under Guaranty.

Each Lender hereby authorizes the Administrative Agent on behalf of and for the benefit of the Lenders, to be the agent for and representative of the Lenders with respect to the Guaranty.

10.7Acknowledgment of Potential Related Transactions.

The Credit Parties hereby acknowledge their understanding that each of the Lead Arrangers, each of the Agents and each of the Lenders may from time to time effect transactions (for its own account or the account of customers), and hold positions in loans or options on loans that may be the subject of this arrangement.  In addition, certain Affiliates of the Lenders are full service securities firms and as such may from time to time effect transactions (for its own account or the account of customers), and hold positions, in loans or options on loans or securities or options on securities that may be the subject of this arrangement.  In addition, each of the Lead Arrangers, each of the Agents and each of the Lenders may employ the services of its Affiliates in providing certain services hereunder and may, subject to Section 9.18, exchange with such Affiliates information concerning the Credit Parties and other companies that may be the subject of this arrangement.

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SECTION 11.     SUBSIDIARY BORROWERS

11.1Joinder of Subsidiary Borrowers.

The obligations of the Lenders to make Loans to any Subsidiary Borrower on or after the Effective Date are subject to the satisfaction of the following conditions by such Subsidiary Borrower:

A.Joinder Agreement.  The Subsidiary Borrower requesting such Loan shall deliver or cause to be delivered to the Administrative Agent on behalf of each Lender a Joinder Agreement duly executed by such Subsidiary Borrower (and the other parties thereto).

B.Approval by Lenders.  In the case of any Subsidiary Borrower other than the Bahamian Subsidiary, the Canadian Subsidiary and the Irish Subsidiary, all Lenders shall have approved the addition of such Subsidiary Borrower as a party hereto.

C.Organizational Documents.  The Subsidiary Borrower requesting such Loan shall deliver or cause to be delivered to the Administrative Agent on behalf of each Lender the following:

(i)If requested by any Lender, an originally executed Note substantially in the form of Annex A to the Joinder Agreement to evidence such Lender’s Loans to such Subsidiary Borrower;

(ii)copies of the Organizational Documents, dated a recent date, certified as of such date (or a recent date prior thereto) by the appropriate governmental official or the secretary (or other appropriate officer) of such Subsidiary Borrower, as applicable;

(iii)resolutions of the board of directors (or similar governing body) of such Subsidiary Borrower approving and authorizing the execution, delivery and performance of the Loan Documents to which it is a party and certified as of the Joinder Date by the secretary (or other appropriate officer) of such Subsidiary Borrower as being in full force and effect without modification or amendment;

(iv)signature and incumbency certificates of the officers of such Subsidiary Borrower executing the Loan Documents to which it is a party on behalf of such Subsidiary Borrower;

(v)a good standing certificate or certificate of existence, as applicable, from the Secretary of State (or similar official) from the jurisdiction of formation of such Subsidiary Borrower, certified as of the Effective Date (or a recent date prior to the Effective Date) (the matters referenced in subsections 11C(ii)-(v) to be addressed in a secretary’s certificate substantially in the form of Exhibit VII);

(vi)an officer’s certificate from an officer of such Subsidiary Borrower substantially in the form of Exhibit VIII, in form and substance satisfactory to the Administrative Agent, to the effect that all representations and warranties contained in this Agreement and the other Loan Documents are true, correct and complete; that the Borrower and its Subsidiaries are

95

not in violation of any of the covenants contained in this Agreement and the other Loan Documents; that no Event of Default or Potential Event of Default exists; and that such Subsidiary Borrower has satisfied each of the conditions to effectiveness set forth in this Section 11; and

(vii)such other documents as the Administrative Agent on behalf of the Lenders may reasonably request.

D.Opinions of Counsel.  The Administrative Agent shall have received (i) originally executed copies of one or more favorable written opinions of (x) special New York counsel for such Subsidiary Borrower and (y) counsel for such Subsidiary Borrower in the jurisdiction of its organization and (ii) any additional legal opinions reasonably requested by the Administrative Agent, each in form and substance reasonably satisfactory to the Administrative Agent and its counsel, dated as of the Joinder Date.

E.Payment of Amounts Due.  The Subsidiary Borrower requesting such Loan shall have paid to the Administrative Agent all reasonable out-of-pocket costs, fees and expenses (including reasonable legal fees and expenses of a single U.S. counsel and of a single counsel in the jurisdiction of organization of such Subsidiary Borrower) incurred by the Administrative Agent in connection with the negotiation, preparation and execution of a Joinder Agreement and the transactions contemplated by the joinder of such Subsidiary Borrower as a Credit Party hereunder.

F.Authorizations and Consents.

(i)The Subsidiary Borrower requesting such Loan shall have obtained all Governmental Authorizations and all consents of other Persons, in each case that are necessary in connection with the transactions contemplated by the Loan Documents, and each of the foregoing shall be in full force and effect and in form and substance reasonably satisfactory to the Administrative Agent and the Lenders.  All applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose material adverse conditions on the transactions contemplated by the Loan Documents or the financing thereof and no action, request for stay, petition for review or rehearing, reconsideration, or appeal with respect to any of the foregoing shall be pending, and the time for any applicable agency to take action to set aside its consent on its own motion shall have expired.

(ii)Each of the Lenders shall have received, at least two (2) Business Days in advance of the Effective Date, all documentation and other information required by Governmental Authorities under applicable “know-your-customer” and anti-money laundering rules and regulations, including as required by the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001.

11.2Termination of Status as Subsidiary Borrower

The Borrower may, at any time that any Subsidiary Borrower has no outstanding Loans (and no requests for Loans) hereunder, terminate such Subsidiary’s status as a Subsidiary

96

Borrower by notice to the Administrative Agent (which shall promptly advise each Lender).  Upon receipt of such notice by the Administrative Agent, such Subsidiary shall cease to be a Subsidiary Borrower (and may not become a Subsidiary Borrower again without satisfaction of the requirements set forth in Section 11.1).

[Remainder of page intentionally left blank]

97

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

HOSPIRA, INC.
By:
Name:
Title:
Notice Address:
275 N. Field Road
Lake Forest, IL 60064
Attention:
Tel:	(847)        -
Fax:	(847)        -
email:

CITICORP NORTH AMERICA, INC.,
as Lender and Administrative Agent
By:
Name:
Title:
Notice Address:
390 Greenwich Street
New York, NY 10013
Attention: William E. Clark
Tel:	(212) 816-8183
Fax:	(212) 816-8051
email: william.e.clark@citigroup.com

2

ABN AMRO BANK N.V., as Lender
By:
Name:
Title:
Notice Address:
540 West Madison Street, Suite 2100
Chicago, IL 60661
Attention: Loan Administration
Tel:	(312) 992-5150
Fax:	(312) 992-5155

3

MORGAN STANLEY SENIOR FUNDING, INC., as Lender
By:
Name:
Title:
Notice Address:
1633 Broadway, 25th Floor
New York, NY 10019
Attention: James Morgan/Larry Benison
Tel:	(212) 537-1470 / (212) 537-1439
Fax:	(212) 537-1867 / 1866
email:

4

BANK OF AMERICA, N.A., as Lender
By:
Name:
Title:
Notice Address:
1850 Gateway Blvd.
Concord, CA 94520-3282
Attention: Pamela S. Greer-Tillman
Tel:	(925) 675-8453
Fax:	(888) 969-2786
email:

5

WACHOVIA BANK, NATIONAL ASSOCIATION, as Lender
By:
Name:
Title:
Notice Address:
201 South College Street CP9, NC 1183
Charlotte, NC 28288
Attention: Dianne Taylor
Tel:	(704) 715-1876
Fax:	(704) 715-0094
email:

6

BANK OF MONTREAL, as Lender

By:

Name:

Title:

Notice Address:

115 South LaSalle Street, 12 West

Chicago, IL 60603

Attention: Joseph W. Linder

Tel: (312) 750-3784

Fax: (312) 750-6057

email: joseph.linder@bmo.com

BANK OF MONTREAL IRELAND PLC, as Lender

By:

Name:

Title:

Notice Address:

Attention:

Tel:

Fax:

email:

7

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.,
CHICAGO BRANCH, as Lender
By:
Name:
Title:
Notice Address:
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Chicago Branch
227 W. Monroe St., Suite 2300
Chicago, IL 60606
Attention: Corporate Banking—Ms. Diane Tkach
Tel:	(312) 696-4663
Fax:	(312) 696-4535
email: dtkach@btmna.com

8

BNP PARIBAS, as Lender
By:
Name:
Title:
Notice Address:
919 Third Avenue
3rd Floor
New York, NY 10022
Attention: Gabriel Candamo
Tel:	(212) 471-6626
Fax:	(212) 471-6695
email:

9

SUNTRUST BANK., as Lender
By:
Name:
Title:
Notice Address:
200 South Orange Avenue, MC 1108
Orlando, FL 32801
Attention: Arnette Delaine
Tel:	(407) 237-2436
Fax:	(407) 237-5342
email:

10

THE NORTHERN TRUST COMPANY, as Lender
By:
Name:
Title:
Notice Address:
50 South LaSalle Street
Chicago, IL 60675
Attention: Linda Honda
Tel:	(312) 444-3532
Fax:	(312) 630-1566
email:

11

EX-10.17

Exhibit 10.17

EXECUTION COPY

TERM LOAN AGREEMENT

dated as of January 15, 2007

among

HOSPIRA, INC.,
as the Borrower,

THE BANKS AND FINANCIAL INSTITUTIONS LISTED HEREIN,
as Lenders,

ABN AMRO INCORPORATED,
CITIGROUP GLOBAL MARKETS INC.
and
MORGAN STANLEY SENIOR FUNDING, INC.,
as Joint Lead Bookrunners and Joint Lead Arrangers,

ABN AMRO INCORPORATED
and
MORGAN STANLEY SENIOR FUNDING, INC.,
as Joint Syndication Agents,

BANK OF AMERICA, N.A.
and
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Co-Documentation Agents,

and

CITIBANK, N.A.,
as Administrative Agent

TERM LOAN AGREEMENT

TABLE OF CONTENTS

		Page
SECTION 1. DEFINITIONS		1
1.1	Certain Defined Terms	1
1.2	Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement	19
1.3	Other Definitional Provisions and Rules of Construction	19
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS AND LOANS		20
2.1	Commitment; Making of Loans	20
2.2	Repayment	21
2.3	Pro Rata Shares; Availability of Funds	22
2.4	The Register; Evidence of Debt; Notes	22
2.5	Interest on the Loans	23
2.6	Fees	26
2.7	Provisions Regarding Payments	27
2.8	Increased Costs; Taxes	30
2.9	Special Provisions Governing LIBOR Rate Loans	33
2.10	Defaulting Lenders	35
2.11	Removal or Replacement of a Lender	35
2.12	Mitigation	36
SECTION 3. CONDITIONS PRECEDENT		36
3.1	Conditions to Effectiveness	36
3.2	Conditions Precedent to each Loan	38
SECTION 4. REPRESENTATIONS AND WARRANTIES		40
4.1	Organization, Powers, Qualification, Good Standing, Business and Subsidiaries	40
4.2	Authorization of Borrowing, etc.	40
4.3	Disclosure	41
4.4	Financial Condition	41
4.5	No Material Adverse Change	41
4.6	Intellectual Property Matters	42
4.7	No Litigation; Compliance with Laws	42
4.8	No Default	42
4.9	Governmental Regulation	43
4.10	Securities Activities	43
4.11	Employee Benefit Plans	43
4.12	Environmental Protection	44
4.13	Pari Passu	44

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4.14	Restrictions	45
SECTION 5. AFFIRMATIVE COVENANTS		45
5.1	Financial Statements and Other Reports	45
5.2	Books and Records	47
5.3	Existence	47
5.4	Insurance	48
5.5	Payment of Taxes and Claims	48
5.6	Payment and Performance of Obligations	48
5.7	Maintenance of Properties	48
5.8	Compliance with Laws	48
5.9	Use of Proceeds	49
5.10	Claims Pari Passu	49
5.11	Further Assurances	49
SECTION 6. NEGATIVE COVENANTS		49
6.1	Liens	49
6.2	Indebtedness	51
6.3	Acquisitions	52
6.4	Restrictions on Subsidiary Distributions	52
6.5	Restricted Payments	53
6.6	Restriction on Fundamental Changes and Asset Sales	53
6.7	Conduct of Business	53
6.8	Fiscal Year	54
6.9	Subordinated Indebtedness	54
6.10	Transactions with Shareholders and Affiliates	54
6.11	Financial Covenants	54
6.12	Interest Rate Agreements and Currency Agreements	55
SECTION 7. EVENTS OF DEFAULT		56
7.1	Failure to Make Payments When Due	56
7.2	Default in Other Agreements	56
7.3	Breach of Certain Covenants	56
7.4	Breach of Representation or Warranty	56
7.5	Other Defaults Under Loan Documents	56
7.6	Involuntary Bankruptcy; Appointment of Receiver, etc.	57
7.7	Voluntary Bankruptcy; Appointment of Receiver, etc.	57
7.8	Judgments and Attachments	57
7.9	Dissolution	58
7.10	Employee Benefit Plans	58
7.11	Change in Control	58
7.12	Repudiation of Obligations	58
7.13	Material Adverse Change	58

ii

SECTION 8. MISCELLANEOUS		59
8.1	Assignments and Participations in Loans	59
8.2	Expenses	61
8.3	Indemnity	61
8.4	Set-Off	62
8.5	Amendments and Waivers	63
8.6	Independence of Covenants	63
8.7	Notices	64
8.8	Survival of Representations, Warranties and Agreements	65
8.9	Failure or Indulgence Not Waiver; Remedies Cumulative	65
8.10	Marshalling; Payments Set Aside	65
8.11	Severability	66
8.12	Headings	66
8.13	Applicable Law	66
8.14	Successors and Assigns	66
8.15	Consent to Jurisdiction and Service of Process	66
8.16	Waiver of Jury Trial	67
8.17	Confidentiality	68
8.18	Ratable Sharing	69
8.19	Counterparts; Effectiveness	69
8.20	Obligations Several; Independent Nature of Lenders’ Rights	69
8.21	Usury Savings Clause	70
SECTION 9. AGENTS		70
9.1	Appointment	70
9.2	Powers and Duties; General Immunity	71
9.3	Representations and Warranties; No Responsibility For Appraisal of Creditworthiness	73
9.4	Right to Indemnity	73
9.5	Successor Administrative Agent	73
9.6	Acknowledgment of Potential Related Transactions	74

iii

EXHIBITS
I	FORM OF NOTICE OF BORROWING
II	FORM OF CONVERSION/CONTINUATION NOTICE
III	FORM OF NOTE
IV	FORM OF CERTIFICATE RE NON-BANK STATUS
V	FORM OF ASSIGNMENT AGREEMENT
VI	FORM OF SECRETARY’S CERTIFICATE
VII	FORM OF OFFICER’S CERTIFICATE (SECTION 3.1A(v))
VIII	FORM OF OFFICER’S CERTIFICATE (SECTION 3.1A(vi))

iv

SCHEDULES
2.1A	LENDERS’ COMMITMENTS AND PRO RATA SHARES
6.1	LIENS
6.2	SUBSIDIARY INDEBTEDNESS
6.10	TRANSACTIONS WITH AFFILIATES

v

TERM LOAN AGREEMENT

This TERM LOAN AGREEMENT is dated as of January 15, 2007 and entered into by and among Hospira, Inc., a Delaware corporation (the “Borrower”), the banks and financial institutions listed on the signature pages hereof (collectively, the “Initial Lenders”), ABN AMRO Incorporated (“ABN AMRO”), Citigroup Global Markets, Inc. (“CGMI”) and Morgan Stanley Senior Funding, Inc. (“MSSF”), as joint lead bookrunners and joint lead arrangers (in such capacity, the “Lead Arrangers”), ABN AMRO and MSSF, as joint syndication agents (in such capacity, the “Syndication Agents”), Bank of America, N.A. and Wachovia Bank, National Association, as co-documentation agents (in such capacity, the “Documentation Agents”) and Citibank, N.A., as administrative agent for the Lenders (“Citibank” and in such capacity, the “Administrative Agent”).

PRELIMINARY STATEMENTS

The Borrower has requested, and the Lenders have agreed to extend, term loans in the amount and on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual agreements contained herein, and other good and valuable consideration, the receipt and sufficiency which are hereby acknowledged, the Borrower, the Lenders, the Lead Arrangers, the Syndication Agents, the Documentation Agents and the Administrative Agent agree as follows:

SECTION 1.DEFINITIONS

1.1Certain Defined Terms.

The following terms used in this Agreement shall have the following meanings:

“ABN AMRO” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Acquisition” means the purchase or other acquisition (by merger or otherwise) by a Person of all of substantially all of the assets of, or all of the Capital Stock of, or a business line or unit or a division of, any other Person.

“Administrative Agent” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Affected Lender” shall have the meaning ascribed to such term in Section 2.9B.

“Affiliate” means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, that Person.  For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power (i) to vote 10% or more of the Securities having ordinary voting power for the election of directors of such Person or (ii) to

direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise.

“Agents” means the Administrative Agent and the Syndication Agents, collectively, and also means and includes any successor Administrative Agent appointed pursuant to Section 9.5.

“Aggregate Amounts Due” shall have the meaning ascribed to such term in Section 8.18.

“Agreement” means this Loan Agreement as it may be amended, supplemented or otherwise modified from time to time.

“Applicable Law” means all applicable provisions of constitutions, laws, statutes, ordinances, rules, treaties, regulations, permits, licenses, approvals, interpretations and orders of courts or Governmental Authorities and all orders and decrees of all courts and arbitrators.

“Applicable Margin” means, as of any date, a percentage per annum determined by reference to the applicable Performance Level with respect to the Borrower in effect on such date, as set forth below:

Performance Level	Level I		Level II		Level III		Level IV		Level V
Base Rate Applicable Margin	0	%	0	%	0	%	0	%	0.20	%
LIBOR Applicable Margin	0.350	%	0.450	%	0.600	%	0.700	%	1.200	%
Commitment Fee	0.075	%	0.090	%	0.100	%	0.150	%	0.250	%

For purposes hereof, “Performance Level” means, with respect to the Borrower, Performance Level I, Performance Level II, Performance Level III, Performance Level IV or Performance Level V, as identified by reference to the public debt rating of the Borrower, as the case may be, in effect on such date as set forth below:

Performance Level	Public Debt Rating
Level I	Long Term Senior Unsecured Debt rated greater than or equal to A- by S&P or A3 by Moody’s
Level II	Long Term Senior Unsecured Debt rated greater than or equal to BBB+ by S&P or Baa1 by Moody’s
Level III	Long Term Senior Unsecured Debt rated greater than or equal to BBB by S&P or Baa2 by Moody’s
Level IV	Long Term Senior Unsecured Debt rated greater than

2

	or equal to BBB- by S&P or Baa3 by Moody’s
Level V	Long Term Senior Unsecured Debt rated less than BBB- by S&P or Baa3 by Moody’s, and at all other times (including if such ratings are not available from both S&P and Moody’s)

For purposes of this definition, the Performance Level shall be determined by the applicable public debt rating for the Borrower as follows:  (i) the public debt ratings shall be determined by the then-current rating announced by either S&P or Moody’s, as the case may be, for any class of non-credit-enhanced long-term senior unsecured debt issued by the Borrower; (ii) if only one of S&P and Moody’s shall have in effect such a public debt rating, the Performance Level shall be determined by reference to the applicable rating; (iii) if neither S&P nor Moody’s shall have in effect such a public debt rating, the applicable Performance Level will be Level V; (iv) if such public debt ratings established by S&P and Moody’s shall fall within different levels, the public debt rating will be determined by the higher of the two ratings, provided that, in the event that the lower of such public debt ratings is more than one level below the higher of such public debt ratings, the public debt rating will be determined based upon the level that is one level above the lower of such public debt ratings; (v) if any such public debt rating established by S&P or Moody’s shall be changed, such change shall be effective as of the date on which such change is first announced publicly by the rating agency making such change; and (vi) if S&P or Moody’s shall change the basis on which such public debt ratings are established, each reference to the public debt rating announced by S&P or Moody’s, as the case may be, shall refer to the then-equivalent rating by S&P or Moody’s, as the case may be.

“Applicable Reserve Requirement” means, at any time with respect to any Lender, for any LIBOR Rate Loan, the rate, expressed as a decimal, at which reserves (including any basic marginal, special, supplemental, emergency or other reserves) are required to be maintained by such Lender against “Eurocurrency liabilities” (as such term is defined in Regulation D) under regulations issued from time to time by the Board of Governors of the Federal Reserve System or other applicable banking regulator.  Without limiting the effect of the foregoing, the Applicable Reserve Requirement shall reflect any other reserves required to be maintained by the applicable Lender with respect to (i) any category of liabilities which includes deposits by reference to which the applicable LIBOR rate is to be determined, or (ii) any category of extensions of credit or other assets which include LIBOR Rate Loans.  For purposes hereof, a LIBOR Rate Loan shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credit for proration, exceptions or offsets that may be available from time to time to the applicable Lender.

“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“Asset Sale” means a sale, lease or sub-lease (as lessor or sublessor), sale and leaseback transaction, assignment, conveyance, transfer or other disposition to, or any exchange of property with, any Person, in one transaction or a series of transactions, of all or any part of the Borrower’s or any of its Subsidiary’s businesses, properties or assets of any kind, whether real, personal, or mixed and whether tangible or intangible, whether now owned or hereafter

3

acquired, including the Capital Stock of any Subsidiary of the Borrower, other than such businesses, properties or assets sold in the ordinary course of business and consistent with past business practice of the Borrower and its Subsidiaries.

“Assignment Agreement” means an assignment agreement, substantially in the form of Exhibit V hereto, satisfactory in form and substance to the Administrative Agent.

“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”, as now and hereafter in effect, or any successor statute.

“Base Rate” means, for any day, a rate per annum equal to the greater of (i) the Prime Rate in effect on such day and (ii) the Federal Funds Effective Rate in effect on such day plus ½ of 1%.  Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

“Base Rate Loan” means a Loan bearing interest at a rate determined by reference to the Base Rate.

“Borrower” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Borrowing” means a borrowing consisting of Loans of the same Type that (i) are made, continued or converted on the same day and (ii) in the case of LIBOR Rate Loans, have the same Interest Period.

“Bridge Loans” means the loans to the Borrower under the $1,425,000,000 Bridge Loan Agreement dated January 15, 2007 among the Borrower, the lenders parties thereto and Citicorp North America, Inc., as administrative agent for such lenders.

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed, provided that, when used in connection with a LIBOR Rate Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in Dollar deposits in the London interbank market.

“Capital Lease”, as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person.

“Capital Stock” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation), including partnership interests and membership interests, and any and all warrants, rights or options to purchase or other arrangements or rights to acquire any of the foregoing.

“Cash” means money, currency or a credit balance in any demand or deposit account.

4

“Certificate re Non-Bank Status” means a certificate substantially in the form of Exhibit IV annexed hereto delivered by a Lender to the Administrative Agent pursuant to Section 2.8B(iii)(b).

“CGMI” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Change of Control” means (i) any Person or “group” (within the meaning of Rules 13d 3 and 13d 5 under the Exchange Act) shall have acquired beneficial ownership of 30% or more on a fully diluted basis of the voting and/or economic interest in the Capital Stock of the Borrower; (ii) any Person or “group” (within the meaning of Rules 13d 3 and 13d 5 under the Exchange Act) shall have obtained the power (whether or not exercised) to elect a majority of the members of the board of directors (or similar governing body) of the Borrower; (iii) during any period of up to 24 consecutive months, commencing before or after the date of this Agreement, a majority of the members of the board of directors of the Borrower shall not be Continuing Directors; or (iv) any Person or “group” (within the meaning of Rules 13d 3 and 13d 5 under the Exchange Act) shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence over the management or policies of the Borrower.

“Citibank” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Commitment” means the amount of the commitment of a Lender to make a Loan hereunder and “Commitments” means such commitments of all Lenders in the aggregate.  The amount of each Lender’s Commitment, if any, is set forth on Schedule 2.1A or in the applicable Assignment Agreement, subject to any adjustment, increase or reduction pursuant to the terms and conditions hereof.  The aggregate amount of the Commitments as of the date of this Agreement is $500,000,000.

“Commitment Fee” shall have the meaning ascribed to such term in Section 2.6(i).

“Compliance Certificate” means a certificate of the chief financial officer, treasurer or controller of the Borrower setting forth computations in reasonable detail demonstrating (i) compliance with the covenants set forth in Section 6.11, as at the end of the period covered by such financial statements, and (ii) certifying that such officer has obtained no knowledge of any Potential Event of Default or Event of Default except as specified in such certificate.

“Consolidated Adjusted EBITDA” means, in respect of the Borrower and its Subsidiaries on a consolidated basis, for any period, an amount equal to (i) the sum, without duplication, of the amounts for such period of (a) Consolidated Net Income, (b) Consolidated Financing Expense, (c) provisions for taxes based on income, (d) total depreciation expense, (e) total amortization expense, and (f) other non-Cash items reducing Consolidated Net Income (excluding any such non-Cash item to the extent that it represents an accrual or reserve for

5

potential Cash items in any future period or amortization of a prepaid Cash item that was paid in a prior period) and (e) Permitted Addbacks, minus (ii) other non-Cash items increasing Consolidated Net Income for such period (excluding any such non-Cash item to the extent it represents the reversal of an accrual or reserve for potential Cash item in any prior period).

“Consolidated Financing Expense” means, in respect of the Borrower and its Subsidiaries on a consolidated basis, for any period, total interest expense (including that portion attributable to Capital Leases in accordance with GAAP and capitalized interest) with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries, including all commissions, discounts and other fees and charges owed with respect to any letters of credit and bankers’ acceptance financing and net costs under Interest Rate Agreements.

“Consolidated Net Income” means, in respect of the Borrower and its Subsidiaries on a consolidated basis, for any period, (i) the net income (or loss) for the Borrower and its Subsidiaries for such period taken as a single accounting period determined in conformity with GAAP, minus (ii) (a) the income (or loss) of any Person (other than a Subsidiary of the Borrower) in which any other Person (other than the Borrower or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to the Borrower or any of its Subsidiaries by such Person during such period, (b) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of the Borrower or is merged into or consolidated with the Borrower or any of its Subsidiaries or that Person’s assets are acquired by the Borrower or any of its Subsidiaries, (c) the income of any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, (d) any after-tax gains or losses attributable to Asset Sales or returned surplus assets of any Pension Plan, and (e) (to the extent not included in clauses (a) through (d) above) any net extraordinary gains or net non-cash extraordinary losses.

“Consolidated Net Worth” means, at any date of determination, all items which in conformity with GAAP would be included under shareholders’ equity on a consolidated balance sheet of the Borrower and its Subsidiaries.

“Consolidated Total Debt” means, in respect of the Borrower and its Subsidiaries on a consolidated basis, as at any date of determination, the aggregate stated balance sheet amount of all Indebtedness, determined on a consolidated basis in accordance with GAAP.

“Continuing Director” as applied to any Person, means, for any period, an individual who is a member of the board of directors of such Person on the first day of such period or whose election to the board of directors of such Person is approved by a majority of the other Continuing Directors.

“Contractual Obligation”, as applied to any Person, means any provision of any securities issued by that Person or of any indenture, mortgage, deed of trust, or other material contract, undertaking, agreement or other material instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject.

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“Conversion/Continuation Date” means the effective date of a continuation or conversion, as the case may be, as set forth in the applicable Conversion/Continuation Notice.

“Conversion/Continuation Notice” means a Conversion/Continuation Notice substantially in the form of Exhibit II.

“Credit Date” shall have the meaning ascribed to such term in Section 2.1A.

“Credit Exposure” means, with respect to any Lender as of any date of determination, (i) prior to the termination of the Commitments, that Lender’s Commitment; and (ii) after the termination of the Commitments, the aggregate outstanding principal amount of the Loans of that Lender.

“Currency Agreement” means any foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap or other similar agreement or arrangement.

“Default Excess” means, with respect to any Defaulting Lender, the excess, if any, of such Defaulting Lender’s Pro Rata Share of the aggregate outstanding principal amount of Loans of all Lenders (calculated as if all Defaulting Lenders (other than such Defaulting Lender) had funded all of their respective Defaulted Loans) over the aggregate outstanding principal amount of all Loans of such Defaulting Lender.

“Default Period” means, with respect to any Defaulting Lender, the period commencing on the date of the applicable Funding Default and ending on the earliest of the following dates:  (i) the date on which all the Obligations are declared or become immediately due and payable, (ii) the date on which the Default Excess with respect to such Defaulting Lender shall have been reduced to zero (whether by the funding by such Defaulting Lender of its Defaulted Loan or by the non pro rata application of any voluntary or mandatory prepayments of the Loans in accordance with the terms of Section 2.7A or C) and (iii) the date on which the Borrower, the Administrative Agent and the Requisite Lenders waive all Funding Defaults of such Defaulting Lender in writing.

“Defaulted Loan” shall have the meaning ascribed to such term in Section 2.10.

“Defaulting Lender” shall have the meaning ascribed to such term in Section 2.10.

“Divestiture” means the sale by Borrower of certain assets as required under the Consent Order relating to the Federal Trade Commission’s termination of the waiting period under the Hart Scott Rodino Antitrust Improvements Act of 1976 in connection with the Mayne Pharma Acquisition.

“Documentation Agents” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Dollars” and the sign “$” mean the lawful money of the United States of America.

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“Effective Date” means the date on which the conditions specified in Section 3.1 are satisfied or waived in accordance with Section 8.5.

“Eligible Assignee” means (A) any Lender and any Affiliate of any Lender; and (B) any commercial bank, savings and loan association, savings bank, insurance company, investment or mutual fund or other entity that is an “accredited investor” (as defined in Regulation D under the Securities Act) and which extends credit or buys loans as one of its businesses; provided that no Affiliate of the Borrower or any of its Subsidiaries shall be an Eligible Assignee.

“Employee Benefit Plan” means any “employee benefit plan” as defined in Section 3(3) of ERISA (other than a Multiemployer Plan) which is or was maintained or contributed to by the Borrower or any of its ERISA Affiliates.

“Environmental Claim” means any investigation, notice, notice of violation, claim, action, suit, proceeding, order, consent decree, settlement, demand, abatement order or other order or directive (conditional or otherwise), by any Governmental Authority or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law, (ii) in connection with any Hazardous Materials or any actual or alleged Hazardous Materials Activity or (iii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment.

“Environmental Laws” means any and all current or future federal, state, local and foreign laws and regulations, statutes, ordinances, orders, rules, guidance documents, judgments, Governmental Authorizations, or any other requirements of Governmental Authorities relating to (i) environmental matters, including those relating to any Hazardous Materials Activity, (ii) the generation, use, storage, transportation or disposal of Hazardous Materials, or (iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto.

“ERISA Affiliate” means, as applied to any Person, (i) any corporation which is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) which is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member.  Any former ERISA Affiliate of the Borrower shall continue to be considered an ERISA Affiliate of the Borrower within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of the Borrower and with respect to liabilities arising after such period relating to the period that such entity was an ERISA Affiliate.

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“ERISA Event” means (i) a “reportable event” within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which 30-day notice to the PBGC has been waived); (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure to make by its due date a required installment under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by the Borrower or any of its ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability pursuant to Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which might reasonably constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on the Borrower or any of its ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal by the Borrower, any of its Subsidiaries or any of their respective ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential withdrawal liability to the Borrower or any of its ERISA Affiliates as a result of the withdrawal, or the receipt by the Borrower or any of its ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or omission which could give rise to the imposition on the Borrower, any of its Subsidiaries or any of their respective ERISA Affiliates of fines, penalties, taxes or related charges under Chapter 43 of the Internal Revenue Code or under Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any Employee Benefit Plan, in each case in an amount that would be material; (ix) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan or the assets thereof, or against the Borrower or any of its ERISA Affiliates in connection with any Employee Benefit Plan; (x) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan to qualify under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code; or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan.

“Event of Default” means each of the events set forth in Section 7.

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute.

“Facilities” means any and all real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased, operated or used by the Borrower or any of its Subsidiaries or any of their respective predecessors or Affiliates.

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“Federal Funds Effective Rate” means for any day, the rate per annum (expressed, as a decimal, rounded upwards, if necessary, to the next higher 1/100 of 1%) equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to Administrative Agent, in its capacity as a Lender, on such day on such transactions as determined by the Administrative Agent.

“Fee Letters” means (i) the Fee Letter, dated October 3, 2006, among the Borrower, MSSF, ABN and CGMI, as the same may be amended, supplemented or otherwise modified from time to time and (ii) the Fee Letter, dated October 3, 2006, between the Borrower and MSSF, as the same may be amended, supplemented or otherwise modified from time to time.

“Fiscal Quarter” means a fiscal quarter of any Fiscal Year.

“Fiscal Year” means the fiscal year of the Borrower and its Subsidiaries (excluding any Subsidiary that is acquired after the date hereof that has not yet changed its fiscal year to a calendar year) ending on December 31 of each calendar year.  For purposes of this Agreement, any particular Fiscal Year shall be designated by reference to the calendar year in which such Fiscal Year ends.

“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

“Funding and Payment Office” means the office of the Administrative Agent as set forth under the Administrative Agent’s name on the signature pages hereof, or such other office designated in a written notice delivered by the Administrative Agent to the Borrower and each Lender.

“Funding Default” shall have the meaning ascribed to such term in Section 2.10.

“GAAP” means, subject to the limitations on the application thereof set forth in Section 1.2, generally accepted accounting principles set forth in opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the United States accounting profession, in each case as the same are applicable to the circumstances as of the date of determination.

“Governmental Acts” means any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority.

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“Governmental Authority” means any federal, state, municipal, national or other government, governmental department, commission, board, bureau, court, agency or instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government.

“Governmental Authorization” means any permit, license, authorization, plan, directive, registration with, approval of, consent order or consent decree of or from, or notice to any Governmental Authority.

“Hazardous Materials” means any chemical, material or substance, (i) exposure to which is prohibited or limited by any Governmental Authority, (ii) which is designated, classified or regulated as “hazardous” or “toxic” or as a “pollutant” or “contaminant” under any Environmental Law or (iii) which may or could pose a hazard to the health and safety of the owners, occupants or any Persons in the vicinity of any Facility or to the indoor or outdoor environment.

“Hazardous Materials Activity” means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing.

“Highest Lawful Rate” shall have the meaning ascribed to such term in Section 8.21.

“Implementation Agreement” means the Scheme Implementation Agreement dated September 20, 2006 among Mayne Pharma, Hospira Holdings (S.A.) Pty Ltd and the Borrower.

“Indebtedness”, as applied to any Person, means (i) all indebtedness for borrowed money; (ii) that portion of obligations with respect to Capital Leases that is classified as a liability on a balance sheet in conformity with GAAP; (iii) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money; (iv) any obligation owed for all or any part of the deferred purchase price of property or services (excluding any such obligations incurred under ERISA), which purchase price is (a) due more than six months from the date of incurrence of the obligation in respect thereof or (b) evidenced by a note or similar written instrument; (v) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person; (vi) the face amount of any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; (vii) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another; (viii) any obligation of such Person the primary purpose or intent of which is to provide

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assurance to an obligee that the obligation of the obligor thereof will be paid or discharged, or any agreement relating thereto will be complied with, or the holders thereof will be protected (in whole or in part) against loss in respect thereof; and (ix) any liability of such Person for an obligation of another through any agreement (contingent or otherwise) (a) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (b) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (a) or (b) of this clause (ix), the primary purpose or intent thereof is as described in clause (viii) above.

“Indemnitees” shall have the meaning ascribed to such term in Section 8.3.

“Indemnified Liabilities” shall have the meaning ascribed to such term in Section 8.3.

“Initial Lenders” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Interest Coverage Ratio” means the ratio as of the last day of any Fiscal Quarter of (i) Consolidated Adjusted EBITDA for the four-Fiscal Quarter period then ended, to (ii) Consolidated Financing Expense for such four-Fiscal Quarter period.

“Interest Payment Date” means with respect to (i) any Base Rate Loan, each March 31, June 30, September 30 and December 31 of each year, commencing on the first such date to occur after the Effective Date, and the Maturity Date and (ii) any LIBOR Rate Loan, the last day of each Interest Period therefor and, if any such Interest Period is longer than three months, the date that is three months after the first day of such Interest Period, provided that, if any Interest Payment Date would otherwise fall on a day which is not a Business Day, it shall be postponed to the next day which is a Business Day.

“Interest Period” shall have the meaning ascribed to such term in Section 2.5B.

“Interest Rate Agreement” means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement.

“Interest Rate Determination Date” means, with respect to any Interest Period, the second Business Day prior to the first day of such Interest Period.

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute.

“Joint Venture” means a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form; provided that in no event shall any corporate Subsidiary of any Person be considered a Joint Venture to which such Person is a party.

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“Lead Arrangers” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Lender” and “Lenders” shall mean the Initial Lenders and each Person that shall become a party hereto pursuant to Section 8.1.

“Leverage Ratio” means, in respect of the Borrower and its Subsidiaries on a consolidated basis, the ratio of (i) Consolidated Total Debt as of the last day of any Fiscal Quarter to (ii) Consolidated Adjusted EBITDA for the four-Fiscal Quarter period then ended.

“LIBOR” means, for any Interest Rate Determination Date, the offered rate in the London interbank market for deposits in Dollars offered for a term comparable to such Interest Period that appears on Telerate Page 3750 as of approximately 11:00 A.M., London time (or such other page as may replace such page on such service for the purpose of displaying the rates at which such Dollar deposits are offered by leading banks in the London interbank deposit market), or if no quotation appears on Telerate Page 3750, the average rate per annum which the offices of four leading banks selected by the Administrative Agent and located in London offer for deposits in Dollars in the London interbank deposit market at approximately 11:00 a.m. (London time).

“LIBOR Rate Loan” means any Loan bearing interest at a rate calculated with respect to LIBOR.

“Lien” means any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing.

“Loan” means a loan made by a Lender to the Borrower pursuant to Section 2.1A.

“Loan Documents” means this Agreement, the Fee Letters and any Note.

“Margin Stock” shall have the meaning ascribed to such term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time.

“Material Adverse Effect” means a material adverse effect upon (i) the business, operations, properties or condition (financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole, (ii) the ability of the Borrower to perform, or of the Administrative Agent to enforce, any of the Obligations of the Borrower or (iii) the legality, validity, binding effect or enforceability against the Borrower of a Loan Document.  For the avoidance of doubt, changes or effects resulting from items related to Permitted Addbacks shall not be considered in determining whether a Material Adverse Effect has occurred.

“Maturity Date” means the earlier to occur of (i) the third anniversary of the Effective Date, and (ii) the date of the acceleration of the Loans pursuant to Section 7.

“Mayne Pharma” means Mayne Pharma Limited ACN 097 064 330.

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“Mayne Pharma Acquisition” means the acquisition by Hospira Holdings (S.A.) Pty Ltd of all of the stock of Mayne Pharma substantially on the terms set forth in the Implementation Agreement.

“Moody’s” means Moody’s Investor Services, Inc. or any successor thereto.

“MSSF” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Multiemployer Plan” means any Employee Benefit Plan which is a “multiemployer plan” as defined in Section 3(37) of ERISA to which the Borrower or any of its ERISA Affiliates is obligated to make contributions.

“Net Cash Proceeds” means, with respect to any sale, lease, transfer or other disposition of any asset or the incurrence or issuance of any debt or the sale or issuance of any equity interests (including any capital contribution) by the Borrower or any of its Subsidiaries, the aggregate amount of cash received from time to time (whether as initial consideration or through payment or disposition of deferred consideration) by or on behalf of such Person in connection with such transaction after deducting therefrom only (without duplication) (a) reasonable and customary brokerage commissions, underwriting fees and discounts, legal and accounting fees, filing fees, finder’s fees and other similar fees and commissions, (b) the amount of taxes payable in connection with or as a result of such transaction and (c) the amount of any debt secured by a Lien on such asset that, by the terms of the agreement or instrument governing such debt, is required to be repaid upon such disposition, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid to a Person that is not an Affiliate of the Borrower and are properly attributable to such transaction or to the asset that is the subject thereof.

“Non-US Lender” shall have the meaning ascribed to such term in Section 2.8B(iii)(a).

“Note” means a promissory note of the Borrower payable to the order of any Lender issued pursuant to Section 2.4C, in substantially in the form of Exhibit III, as amended, supplemented or otherwise modified from time to time.

“Notice of Borrowing” means a notice substantially in the form of Exhibit I annexed hereto delivered by the Borrower to the Administrative Agent pursuant to Section 2.1B with respect to the proposed borrowing of the Loans.

“Obligations” means all obligations of every nature of the Borrower from time to time owing to the Agents, the Lead Arrangers and the Lenders or any of them under the Loan Documents.

“Officer’s Certificate” means, as applied to any corporation, a certificate executed on behalf of such corporation by any one of its chairman of the board (if an officer), its president, one of its vice presidents, its chief financial officer or its treasurer or, as applied to any limited partnership, a certificate executed on behalf of such limited partnership by the chairman of the board (if an officer), the president, one of the vice presidents, the chief financial officer or

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treasurer of the general partner of such limited partnership, or, if the general partner of such limited partnership is an individual, executed by such individual; provided that every Officer’s Certificate with respect to the compliance with a condition precedent to the making of any Borrowing shall include:  (i) a statement that the officer making or giving such Officer’s Certificate has read such condition and any definitions or other provisions contained in this Agreement relating thereto, (ii) a statement that, in the opinion of the signer, he has made or has caused to be made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such condition has been complied with, and (iii) a statement as to whether, in the opinion of the signer, such condition has been complied with.

“Organizational Documents” means (i) with respect to any corporation, its certificate or articles of incorporation or organization, as amended, and its by laws, as amended, (ii) with respect to any limited partnership, its certificate of limited partnership, as amended, and its partnership agreement, as amended, (iii) with respect to any general partnership, its partnership agreement, as amended, and (iv) with respect to any limited liability company, its articles of organization, as amended, and its operating agreement, as amended.  In the event any term or condition of this Agreement or any other Loan Document requires any Organizational Document to be certified by a secretary of state or similar governmental official, the reference to any such “Organizational Document” shall only be to a document of a type customarily certified by such governmental official.

“PBGC” means the Pension Benefit Guaranty Corporation and any successor thereto.

“Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code or Section 302 of ERISA and which is intended to be qualified under Section 401(a) of the Code.

“Performance Level” shall have the meaning ascribed to such term within the definition of “Applicable Margin”.

“Permitted Acquisition” means an Acquisition permitted by Section 6.3.

“Permitted Addbacks” means, for any period ending on or after March 31, 2007, each of the following to the extent taken into account in determining Consolidated Net Income for such period (all calculated on a consolidated pre-tax basis): (a) any one-time or special non-cash charges or expenses resulting from the Mayne Pharma Acquisition, including charges relating to the write-up of Mayne Pharma’s inventory and the write-off of in-process research and development; (b) the first $115,000,000 of charges and expenses (whether cash or non-cash) incurred before December 31, 2008 related to the integration of Mayne Pharma into the Borrower, including charges and expenses for employee severance or retention, integration of information systems, plant shutdowns, product relocation and relabeling and consulting fees); (c) the first $109,000,000 of restructuring charges and expenses (whether cash or non-cash) incurred after March 31, 2006 and before December 31, 2008 related to the Borrower’s closure of its Ashland, Ohio, Donegal, Ireland and Montreal, Canada facilities and exit from its North Chicago, Illinois facility and related expenses (whether cash or non-cash) for the relocation of production from such facilities to other facilities; and (d) the first $24,000,000 of charges and

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expenses (whether cash or non-cash) incurred after March 31, 2006 and before December 31, 2006 related to the Borrower’s separation from Abbott Laboratories, including the establishment of new facilities, the build-out of independent information technology systems, and product registration and re-labeling.

“Person” means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and Governmental Authorities.

“Potential Event of Default” means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default.

“Prime Rate” means the rate of interest as announced by the Administrative Agent from time to time as its base rate, as in effect from time to time.  The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer.  The Administrative Agent or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate.

“Pro Rata Share” means, with respect to any Lender, the percentage obtained by dividing (i) the Credit Exposure of such Lender by (ii) the aggregate Credit Exposure of all Lenders.

“Proceedings” shall have the meaning ascribed to such term in Section 5.1(vi).

“Qualified Receivables Transaction” means any transaction or series of transactions that may be entered into by the Borrower or any Subsidiary of the Borrower pursuant to which the Borrower or any such Subsidiary may sell, convey, pledge or otherwise transfer to a newly-formed Subsidiary of the Borrower or other special purpose entity, or any other Person, any accounts receivable (including chattel paper, instruments and general intangibles) or notes receivable and the rights and certain other property related thereto, provided that (i) all of the terms and conditions of such transaction or series of transactions, including the amount and type of any recourse to the Borrower or a Subsidiary of the Borrower with respect to the assets transferred, are acceptable to the Administrative Agent and the Requisite Lenders and (ii) the Receivables Transaction Attributed Indebtedness incurred in all such transactions does not exceed $150,000,000 at any time outstanding.

“Receivables Transaction Attributable Indebtedness” means, with respect to any Qualified Receivables Transaction on any date of determination, the unrecovered purchase price on such date of all assets sold, conveyed, pledged or otherwise transferred by the Borrower or any wholly-owned Subsidiary of the Borrower to the third-party conduit entity or other receivables credit provider under such Qualified Receivables Transaction.

“Register” shall have the meaning ascribed to such term in Section 2.4A.

“Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.

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“Release” means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of any Hazardous Material into the indoor or outdoor environment (including the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Material), including the movement of any Hazardous Material through the air, soil, surface water or groundwater.

“Replacement Lender” shall have the meaning ascribed to such term in Section 2.11.

“Requisite Lenders” means Lenders having aggregate Pro Rata Shares of more than 50%.

“Responsible Officer” means the Chief Executive Officer, the Chief Financial Officer, the Treasurer or the General Counsel of the Borrower or any other officer of the Borrower responsible for overseeing or reviewing compliance with the Agreement.

“Restricted Payment” means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of Capital Stock of the Borrower, except a dividend payable solely in shares of such class of Capital Stock to the holders of such class of Capital Stock; (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of Capital Stock of the Borrower; and (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of Capital Stock of the Borrower, except any repurchase or other acquisition of shares of such Capital Stock, or warrants, options or other rights to acquire such shares, in connection with employee compensation in the ordinary course of business in accordance with plans approved by the board of directors of the Borrower.

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw Hill Corporation or any successor thereto.

“Scheme” means the scheme of arrangement between Mayne Pharma and its shareholders in the form approved by the Court (as defined in the Implementation Agreement) on the Second Court Date (as defined in the Implementation Agreement), pursuant to which the Borrower or a Subsidiary thereof will acquire all of the outstanding ordinary shares of Mayne Pharma.

“Securities” means any stock, share, partnership interest, membership interest in a limited liability company, voting trust certificates, certificate of interest or participation in any profit-sharing agreement or arrangement, option, warrant, bond, debenture, note, or other evidence of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as “securities” or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing.

“Securities Act” means the Securities Act of 1933, as amended from time to time, and any successor statute.

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“Significant Subsidiary” means, at any time, a Subsidiary that has or represents at least 5% of (i) the consolidated gross revenues of the Borrower and its Subsidiaries for the Fiscal Year then most recently ended and/or (ii) the consolidated assets of the Borrower and its Subsidiaries as of the last day of the Fiscal Year then most recently ended.

“Solvent” means, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital.  The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“Subject Transaction” shall have the meaning ascribed to such term in Section 6.11D.

“Subordinated Indebtedness” means any Indebtedness of the Borrower or any of its Subsidiaries, subordinated in right and time of payment to the Obligations.

“Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof.

“Surviving Obligations” means contingent indemnification liabilities of the Borrower under the Loan Documents that are not yet due and payable.

“Syndication Agents” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Tax” means any present or future tax, levy, impost, duty, assessment, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed; provided “Tax on the overall net income” of a Person shall be construed as a reference to a tax imposed by the jurisdiction in which that Person is organized or in which that Person’s applicable principal office (and/or, in the case of a Lender, its lending office) is located or in which that Person (and/or, in the case of a Lender, its lending office) is deemed to be doing business on all or part of the net income, profits or gains (whether worldwide, or only insofar as such income, profits or gains are

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considered to arise in or to relate to a particular jurisdiction, or otherwise) of that Person (and/or, in the case of a Lender, its applicable lending office).

“Terminated Lender” shall have the meaning ascribed to such term in Section 2.11.

“Transaction” means the Mayne Pharma Acquisition and the debt financings contemplated thereby.

“Type of Loan” means a Base Rate Loan or a LIBOR Rate Loan.

1.2Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement.

Except as otherwise expressly provided in this Agreement, all accounting terms not otherwise defined herein shall have the respective meanings assigned to them in conformity with GAAP.  Calculations in connection with the definitions, covenants and other provisions of this Agreement shall utilize accounting principles and policies in effect on the date hereof which are in conformity with those used to prepare the financial statements referred to in Section 4.4.  Financial statements and other information required to be delivered by the Borrower to the Administrative Agent pursuant to clauses (i) and (ii) of Section 5.1 shall be prepared in accordance with GAAP as in effect at the time of such preparation.  In the event that a change in GAAP or other accounting principles and policies after the date hereof affects in any material respect the calculations of the covenants contained herein, the Lenders and the Borrower agree to negotiate in good faith to amend the affected covenants (and related definitions) to compensate for the effect of such changes so that the restrictions, limitations and performance standards effectively imposed by such covenants, as so amended, are substantially identical to the restrictions, limitations and performance standards imposed by such covenants as in effect on the date hereof; provided that, if the Requisite Lenders and the Borrower fail to reach agreement with respect to such amendment within a reasonable period of time following the date of effectiveness of any such change, calculation of compliance by the Borrower and its Subsidiaries with the covenants contained herein shall be determined in accordance with GAAP as in effect immediately prior to such change.

1.3Other Definitional Provisions and Rules of Construction.

A.Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference.

B.References to “Sections” and subsections shall be to Sections and subsections, respectively, of this Agreement unless otherwise specifically provided.

C.The use in any of the Loan Documents of the word “include” or “including”, when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as “without limitation” or “but not limited to” or words of similar import) is used with reference thereto, but rather shall be

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deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter.

D.Whenever the term “wholly-owned” is used with respect to a Subsidiary of a Person, such term means that all of the Capital Stock (other than directors’ qualifying shares) of such Subsidiary is owned, directly or indirectly, by such Person.

E.For purposes of this Agreement, any reference to a “Loan” may be (as the context requires) a reference to (i) the single Loan of Lender made on the Credit Date or purchased in whole or part via an assignment; or (ii) a portion of a Loan referred to in the preceding clause (i) that is of a particular Type and, in the case of a LIBOR Loan, has a particular interest period.

SECTION 2.AMOUNT AND TERMS OF COMMITMENTS AND LOANS

2.1Commitment; Making of Loans.

A.Commitments.

(i)On any Business Day during the period from the Effective Date through February 7, 2007 (such Business Day, the “Credit Date”), subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of the Borrower herein set forth, each Lender severally agrees to make a Loan in an amount up to but not exceeding such Lender’s Commitment as set forth opposite its name on Schedule 2.1A annexed hereto.

(ii)After giving effect to the Loans made on the Credit Date, each Lender’s Commitment shall expire.  Amounts borrowed pursuant to this Section 2.1A and repaid or prepaid may not be reborrowed.

B.Borrowing Mechanics.

(i)Each Borrowing shall at all times be in minimum amount of $5,000,000.

(ii)The Borrower shall deliver to Administrative Agent on behalf of the Lenders a fully executed Notice of Borrowing (a) if any portion of the Loans initially will consist of LIBOR Rate Loans, not later than 11:00 a.m. (New York City time), at least three (3) Business Days in advance of the proposed Credit Date; or (b) otherwise, not later than 11:00 a.m. (New York City time), on the proposed Credit Date.  Except as otherwise provided herein, the Notice of Borrowing for LIBOR Rate Loans shall be irrevocable on and after the initial Interest Rate Determination Date, and the Borrower shall be bound to borrow such Loans in accordance therewith.  The Notice of Borrowing shall specify the following information:

(a)the aggregate amount of such Loans;

(b)the Credit Date, which shall be a Business Day;

(c)whether the Loans initially are to be Base Rate Loans or LIBOR Rate Loans or a combination thereof; and

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(d)the location and number of the Borrower’s account to which funds are to be disbursed.

(iii)Notice of receipt of the Notice of Borrowing, together with the amount of each Lender’s Pro Rata Share thereof, together with the applicable interest rate, shall be provided by the Administrative Agent to each Lender by facsimile with reasonable promptness, but (provided the Administrative Agent shall have received such notice by 11:00 a.m. (New York City time)) not later than 2:00 p.m. (New York City time) on the same day as the Administrative Agent’s receipt of the Notice of Borrowing from the Borrower.

(iv)Each Lender shall make the amount of its Loan available to the Administrative Agent on the Credit Date by wire transfer not later than 12:00 p.m. (New York City time) or, if later, not more than one hour after receipt of the Administrative Agent’s delivery of the notice pursuant to clause (iii) above, in same day funds in Dollars at the Funding and Payment Office.

(v)Except as provided herein, upon satisfaction or waiver of the conditions precedent specified in Section 3.1 and Section 3.2, the Administrative Agent shall make the proceeds of the Loans available to the Borrower on the Credit Date by causing an amount of same day funds equal to the proceeds of all such Loans received by the Administrative Agent from the Lenders to be credited to the account referred to in Section 2.1B(ii)(d).

2.2Repayment.

A.The Borrower shall repay to the Administrative Agent for the ratable account of the Lenders the aggregate outstanding amount of the Loans on the following dates in the amounts indicated (which amounts shall be reduced as a result of the application of prepayments in accordance with the order of priority as set forth in Section 2.7):

Date	Amount
March 31, 2007	$	12,500,000
June 30, 2007	$	12,500,000
September 30, 2007	$	12,500,000
December 31, 2007	$	12,500,000
March 31, 2008	$	50,000,000
June 30, 2008	$	50,000,000
September 30, 2008	$	50,000,000
December 31, 2008	$	50,000,000
March 31, 2009	$	62,500,000
June 30, 2009	$	62,500,000
September 30, 2009	$	62,500,000
Maturity Date	$	62,500,000

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provided, however, that the Loans and all other amounts owed hereunder with respect to the Loans and the Commitment of each Lender shall be paid in full on the Maturity Date.

2.3Pro Rata Shares; Availability of Funds.

A.Pro Rata Shares.  The Loans shall be made by the Lenders simultaneously and proportionately to their respective Pro Rata Shares (determined as of the Credit Date), it being understood that no Lender shall be responsible for any default by any other Lender in such other Lender’s obligation to make its Loan hereunder nor shall any Commitment of any Lender be increased or decreased as a result of a default by any other Lender in such other Lender’s obligation to make its Loan hereunder.

B.Availability of Funds.  Unless the Administrative Agent shall have been notified by any Lender prior to the Credit Date that such Lender does not intend to make available to the Administrative Agent the amount of such Lender’s Loan requested on the Credit Date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on the Credit Date and the Administrative Agent may, in its sole discretion, but shall not be obligated to, make available to the Borrower a corresponding amount on the Credit Date.  If such corresponding amount is not in fact made available to the Administrative Agent by such Lender or an Affiliate of such Lender, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from the Credit Date until the date such amount is paid to the Administrative Agent, at the customary rate set by the Administrative Agent for the correction of errors among banks for three Business Days and thereafter at the Base Rate.  If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent shall promptly notify the Borrower and the Borrower shall immediately pay such corresponding amount to the Administrative Agent together with interest thereon, for each day from the Credit Date until the date such amount is paid to the Administrative Agent, at the rate payable hereunder for Base Rate Loans.  Nothing in this Section 2.3B shall be deemed to relieve any Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that the Borrower may have against any Lender as a result of any default by such Lender hereunder.

2.4The Register; Evidence of Debt; Notes.

A.Register.

(i)The Administrative Agent shall maintain at its Payment and Funding Office a register for the recordation of the names and addresses of the Lenders and the Commitment and Loan of each Lender from time to time (the “Register”).  The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.  The Administrative Agent shall record in the Register the Commitment and the Loan of each Lender, and each repayment or prepayment in respect of the principal amount of such Loans.  Any such recordation shall be prima facie evidence of the

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amount owed to such Lender hereunder; provided that failure to make any such recordation, or any error in such recordation, shall not affect any Lender’s Commitment or the Obligations in respect of any Loan.  The Borrower hereby designates Citibank to serve as the Borrower’s agent solely for purposes of maintaining the Register as provided in this Section 2.4, and the Borrower hereby agrees that, to the extent Citibank serves in such capacity, Citibank and its officers, directors, employees, agents and affiliates shall constitute “Indemnitees” hereunder.

(ii)The Borrower, the Administrative Agent and the Lenders shall deem and treat the Persons listed as Lenders in the Register as the holders and owners of the corresponding Commitments and Loans listed therein for all purposes hereof, and no assignment or transfer of any Commitment or Loan shall be effective, in each case unless and until an Assignment Agreement effecting the assignment or transfer thereof shall have been accepted by the Administrative Agent and recorded in the Register as provided in Section 8.1C.  Prior to such recordation, all amounts owed with respect to the applicable Commitment or Loan shall be owed to the Lender listed in the Register as the owner thereof, and any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, assignee or transferee of the corresponding Commitments or Loans.

B.Lenders’ Evidence of Debt.  Each Lender shall maintain on its internal records an account or accounts evidencing the Obligations of the Borrower to such Lender, including the amounts of the Loans made by it and each repayment and prepayment in respect thereof.  Any such recordation shall be conclusive and binding on the Borrower, absent manifest error; provided that the failure to make any such recordation, or any error in such recordation, shall not affect any Lender’s Commitments or the Obligations of the Borrower in respect of any applicable Loans; and provided further, in the event of any inconsistency between the Register and any Lender’s records, the recordations in the Register shall govern.

C.Notes.  If so requested by any Lender by written notice to the Borrower (with a copy to the Administrative Agent), the Borrower shall execute and deliver to such Lender, promptly after the Borrower’s receipt of such notice, a Note or Notes to evidence such Lender’s Loans.

2.5Interest on the Loans.

A.Rate of Interest; Type of Loan.

(i)Subject to the provisions of Sections 2.5E, 2.8 and 2.9, each Loan shall bear interest on the unpaid principal amount thereof from the date made through the Maturity Date (whether by acceleration or otherwise) at a rate equal to (a) at all times such Loan is a Base Rate Loan, the Base Rate plus the Applicable Margin or (b) at all times such Loan is a LIBOR Rate Loan, the sum of LIBOR plus the Applicable Margin.

(ii)The basis for determining the rate of interest with respect to any Loan, and the Interest Period with respect to any LIBOR Rate Loan, shall be selected by the Borrower and notified to the Administrative Agent and the Lenders pursuant to the Notice of Borrowing or a Conversion/Continuation Notice, as the case may be.

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(iii)As soon as practicable after 11:00 a.m. (New York City time) on each Interest Rate Determination Date, the Administrative Agent shall determine (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) the interest rate that shall apply to the LIBOR Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to the Borrower and each Lender.

B.Interest Periods.  The applicable interest period (each an “Interest Period”) of each Borrowing of LIBOR Rate Loans shall be a one (1), two (2), three (3) or six (6) month period, as selected by the Borrower in the applicable Notice of Borrowing or Conversion/Continuation Notice, initially commencing on the date of the Loan or any Conversion/Continuation Date, as the case may be; provided that

(i)in the case of immediately successive Interest Periods applicable to LIBOR Rate Loans, each successive Interest Period shall commence on the day on which the immediately preceding Interest Period expires;

(ii)if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided that, if any Interest Period would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the immediately preceding Business Day;

(iii)any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (iv) of this Section 2.5B, end on the last Business Day of a calendar month;

(iv)no Interest Period shall extend beyond the Maturity Date;

(v)no more than ten (10) Interest Periods shall be outstanding at any time;

(vi)subject to clause (vii) of this Section 2.5B, if the Borrower fails to specify an Interest Period for any Borrowing of LIBOR Rate Loans in the applicable Conversion/Continuation Notice or fails to give timely notice of the continuation of any outstanding Borrowing of LIBOR Rate Loans, the Borrower shall be deemed to have selected an Interest Period of one (1) month; and

(vii)until the earlier of (x) the date that is 30 days after the Effective Date and (y) the date that the Lead Arrangers notify the Borrower that the primary syndication of the Loans has been completed, all LIBOR Rate Loans shall have an Interest Period of one (1) week, if one week Interest Periods are available from all Lenders or, if one week Interest Periods are not available from all Lenders, all Loans shall be Base Rate Loans during such period.

C.Interest Payments.  On each Interest Payment Date for a Loan, the Borrower shall pay an amount equal to the aggregate amount of interest that has accrued on such Loan since the Effective Date or the last Interest Payment Date for such Loan, as applicable.  In

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addition, interest on each Loan shall be payable upon any prepayment of such Loan (to the extent accrued on the amount being prepaid) and at maturity.

D.Default Rate.  Upon the occurrence and during the continuation of any Event of Default, (i) the Borrower shall no longer have the option to continue or convert into LIBOR Rate Loans, (ii) each LIBOR Rate Loan shall convert to a Base Rate Loan at the end of the Interest Period then in effect for such LIBOR Rate Loan, (iii) upon request of the Requisite Lenders, the outstanding principal amounts of all LIBOR Rate Loans shall bear interest (including post-petition interest in any case or proceeding under the Bankruptcy Code) at a rate per annum equal to two percent (2%) plus the rate then applicable to LIBOR Rate Loans until the end of the applicable Interest Period and thereafter at a rate equal to two percent (2%) plus the rate then applicable to Base Rate Loans, and (iv) upon request of the Requisite Lenders, all outstanding Base Rate Loans and, to the extent permitted by applicable law, other Obligations arising hereunder or under any other Loan Document shall bear interest (including post-petition interest in any case or proceeding under the Bankruptcy Code) at a rate per annum equal to two percent (2%) plus the rate then applicable to such Base Rate Loans or such other Obligations arising hereunder or under any other Loan Document.  Upon the occurrence and during the continuation of any Potential Event of Default under Section 7.13, (i) the outstanding principal amounts of all LIBOR Rate Loans shall bear interest (including post-petition interest in any case or proceeding under the Bankruptcy Code) at a rate per annum equal to two percent (2%) plus the rate then applicable to LIBOR Rate Loans until the end of the applicable Interest Period and thereafter at a rate equal to two percent (2%) plus the rate then applicable to Base Rate Loans, and (ii) all outstanding Base Rate Loans and, to the extent permitted by applicable law, other Obligations arising hereunder or under any other Loan Document shall bear interest (including post-petition interest in any case or proceeding under the Bankruptcy Code) at a rate per annum equal to two percent (2%) plus the rate then applicable to such Base Rate Loans or such other Obligations arising hereunder or under any other Loan Document.  Payment or acceptance of the increased rates of interest provided for in this Section 2.5D is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or Potential Event of Default or otherwise prejudice or limit any rights or remedies of Agents or Lenders.

E.Computation of Interest.  Interest payable pursuant to Section 2.5A shall be computed (i) in the case of Base Rate Loans, on the basis of a 365 day or 366 day year, as the case may be, and (ii) in the case of LIBOR Rate Loans, on the basis of a 360 day year, in each case for the actual number of days elapsed in the period during which it accrues.  In computing interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted from a LIBOR Rate Loan, the date of conversion of such LIBOR Rate Loan to such Base Rate Loan, as the case may be, shall be included, and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted to a LIBOR Rate Loan, the date of conversion of such Base Rate Loan to such LIBOR Rate Loan, as the case may be, shall be excluded; provided, if a Loan is repaid on the same day on which it is made, one day’s interest shall be paid on that Loan.

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F.Conversion/Continuation.

(i)Subject to Section 2.9 and so long as no Potential Event of Default or Event of Default shall have occurred and then be continuing, the Borrower shall have the option:

(a)to convert at any time all or any part of any Borrowing in an aggregate amount of $5,000,000 or a higher integral multiple of $1,000,000 from one Type of Loan to another Type of Loan; provided if any LIBOR Rate Loan is converted on a day other than the last day of an Interest Period therefor, the Borrower shall pay all amounts due under Section 2.8 in connection with such conversion; or

(b)upon the expiration of any Interest Period applicable to any Borrowing LIBOR Rate Loans, to continue all or any portion of such Borrowing for a new Interest Period in a minimum amount of $5,000,000.

(ii)The Borrower shall deliver a Conversion/Continuation Notice to the Administrative Agent no later than 11:00 a.m. (New York City time) at least one Business Day in advance of the proposed conversion date (in the case of a conversion to Base Rate Loans) and at least three Business Days in advance of the proposed Conversion/Continuation Date (in the case of a conversion to, or a continuation of, LIBOR Rate Loans).  Except as otherwise provided herein, a Conversion/Continuation Notice for conversion to, or continuation of, LIBOR Rate Loans (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and the Borrower shall be bound to effect a conversion or continuation in accordance therewith.

G.Additional Interest on LIBOR Rate Loans.  The Borrower shall pay to each Lender, so long as and to the extent such Lender shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including “Eurocurrency liabilities” (as such term is defined in Regulation D), additional interest on the unpaid principal amount of each LIBOR Rate Loan of such Lender, from the date of such Loan until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (a) the LIBOR rate for the applicable Interest Period for such Loan from (b) the rate obtained by dividing such LIBOR rate by a percentage equal to 100% minus the Applicable Reserve Requirement (expressed as a percentage) of such Lender for such Interest Period, payable on each date on which interest is payable on such Loan.  Such Lender shall as soon as practicable provide notice to the Administrative Agent and the Borrower of any such additional interest arising in connection with such Loan, which notice shall be conclusive and binding, absent demonstrable error.

2.6Fees.

(i)Commitment Fee:  The Borrower agrees to pay to each Lender, for the period from the Effective Date until the Credit Date, a commitment fee (the “Commitment Fee”) on such Lender’s then current unused Commitment, determined by reference to the pricing grid set forth in the definition of Applicable Margin.  The Commitment Fee shall be paid quarterly in arrears and on the Credit Date or the date of the termination of the Commitments to the Administrative Agent at its Funding and Payment Office and upon receipt, the Administrative Agent shall promptly distribute to each Lender its Pro Rata Share thereof.  The Commitment Fee shall be calculated on the basis of a 360 day year and the actual number of days elapsed.

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(ii)Lead Arrangers’ Fees.  In addition to the foregoing fees, the Borrower agrees to pay to the Lead Arrangers and the Agents such other fees in the amounts and at the times separately agreed upon in the Fee Letters.

2.7Provisions Regarding Payments.

A.Voluntary Prepayments.

(i)Any time and from time to time:

(a)the Borrower may prepay any Borrowing of Base Rate Loans on any Business Day in whole or in part, in an aggregate principal amount of $5,000,000 or a higher integral multiple of $1,000,000; and

(b)the Borrower may prepay any Borrowing of LIBOR Rate Loans on any Business Day in whole or in part in an aggregate principal amount of $5,000,000.

(ii)All prepayments shall be made upon prior written or telephonic notice received by the Administrative Agent not later than 11:00 a.m. (New York City time):

(a)In the case of Base Rate Loans, on the date of such prepayment; and

(b)In the case of LIBOR Rate Loans, two (2) Business Days’ prior to the date of such prepayment;

and, if such notice is given by telephone, such notice shall be promptly confirmed in writing to the Administrative Agent (and the Administrative Agent will promptly transmit such telephonic or original notice for the Loans by facsimile or telephone to each Lender).  Upon the giving of any such notice, the principal amount of the Loans specified in such notice shall become due and payable on the prepayment date specified therein.  Each prepayment under this Section 2.7A shall be applied ratably to the remaining installments of the Loans.

B.Voluntary Commitment Reductions.

(i)The Borrower may, upon not less than three (3) Business Days’ prior written or telephonic notice confirmed in writing to the Administrative Agent (which original written or telephonic notice the Administrative Agent will promptly transmit by facsimile or telephone to each Lender), at any time and from time to time terminate in whole or permanently reduce in part, without premium or penalty, the unused Commitments; provided any such partial reduction of the Commitments shall be in the amount of $5,000,000 or a higher integral multiple of $1,000,000.

(ii)The Borrower’s notice to the Administrative Agent shall designate the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction, and such termination or reduction of the Commitments shall be effective on the date specified in the Borrower’s notice and shall reduce the Commitment of each Lender proportionately to its Pro Rata Share thereof.

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C.Mandatory Prepayments.  (i)  The Borrower shall, on the date and in the amount of the receipt by the Borrower or any of its Subsidiaries as to which the transfer of funds to the Borrower would not result in adverse tax consequences of Net Cash Proceeds from any Asset Sale (other than the Net Cash Proceeds of the Divestiture in an amount not to exceed $12,000,000 and other than to the extent that (x) the Net Cash Proceeds of such Asset Sale are less than $1,000,000 for any single transaction or series of related transactions or (y) the Net Cash Proceeds of all Asset Sales after the date hereof are less than $30,000,000 in the aggregate), repay the Loans in an aggregate amount equal to the amount of such Net Cash Proceeds (rounded downward to the nearest $5,000,000 increment, with such rounded amount applied in accordance with the proviso to this Section 2.7.C.(i)); provided, that, if the Borrower has previously made a mandatory prepayment of Loans in accordance with this Section 2.7.C.(i), no further mandatory prepayment shall be required until the amount of Net Cash Proceeds of the nature described above again exceed $5,000,000.

(ii)If the Bridge Loans have been, or substantially contemporaneously with the receipt of Net Cash Proceeds as described in this paragraph (ii) will be, repaid or prepaid in full, the Borrower shall, on the date and in the amount of the receipt by the Borrower or any of its Subsidiaries of Net Cash Proceeds from (a) the incurrence or issuance of debt (including pursuant to a public offering, a private placement or a syndicated bank financing (other than borrowings under the Borrower’s Credit Agreement dated as of December 16, 2005 with the lenders parties thereto and CNAI, as administrative agent, not used directly or indirectly to finance the Mayne Pharma Acquisition) or (b) the issuance of equity or equity-linked transactions in the capital markets, repay the Loans in an aggregate amount equal to the amount of such Net Cash Proceeds that are not used by the Borrower to prepay the Bridge Loans.

(iii)Each prepayment pursuant to this Subsection 2.7C shall be applied ratably to the remaining installments of the Loans.

D.Application of Prepayments/Reductions.  Unless otherwise specified by the Borrower in a notice of prepayment,

(a) any amount to be applied pursuant to Section 2.7A or C shall be applied to prepay Loans to the full extent thereof.

(b) considering each Type of Loan being prepaid separately, any prepayment thereof shall be applied first to Base Rate Loans to the full extent thereof before application to LIBOR Rate Loans, in each case in a manner which minimizes the amount of any payments required to be made by the Borrower pursuant to Section 2.9C.

E.General Provisions Regarding Payments.

(i)Manner and Time of Payment.  All payments by the Borrower of principal, interest, fees and other Obligations shall be made in Dollars in same day funds, without defense, set-off or counterclaim, free of any restriction or condition, and delivered to the Administrative Agent not later than 12:00 p.m. (New York City time) on the date due at the Funding and Payment Office for the account of the Lenders; funds received by the

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Administrative Agent after that time on such due date shall be deemed to have been paid by the Borrower on the next succeeding Business Day.

(ii)Payments on Business Days.  Subject to the provisions of Section 2.5B with respect to Interest Periods, whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder.

(iii)Application of Payments to Principal and Interest.  All payments in respect of the principal amount of the Loans shall include payment of accrued interest on the principal amount being repaid or prepaid, and all such payments shall be applied to the payment of interest before application to principal.

(iv)Distribution to Lenders.  The Administrative Agent shall promptly distribute to each Lender at such address as such Lender shall indicate in writing, such Lender’s Pro Rata Share of all payments and prepayments of principal and interest due hereunder, together with all other amounts due thereto, including all fees payable with respect thereto, to the extent received by Administrative Agent.

(v)Withdrawal of Notice.  Notwithstanding the foregoing provisions hereof, if any Conversion/Continuation Notice is withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any LIBOR Rate Loans, the Administrative Agent shall give effect thereto in apportioning payments received thereafter.

(vi)Authorization to Charge Accounts.  The Borrower hereby authorizes the Administrative Agent to charge the Borrower’s accounts with the Administrative Agent in order to cause timely payment to be made to the Administrative Agent of all principal, interest, fees and expenses due hereunder (subject to sufficient funds being available in its accounts for that purpose).

(vii)Non-Conforming Payments.  The Administrative Agent shall deem any payment by or on behalf of the Borrower hereunder that is not made in same day funds prior to 12:00 p.m. (New York City time) to be a non-conforming payment.  Any such payment shall not be deemed to have been received by the Administrative Agent until the later of (i) the time such funds become available funds, and (ii) the applicable next Business Day.  The Administrative Agent shall give prompt telephonic notice to the Borrower and each Lender (confirmed in writing) if any payment is non-conforming.  Any non-conforming payment may constitute or become a Potential Event of Default or Event of Default in accordance with the terms of Section 7.1.  Interest shall continue to accrue on any principal as to which a non-conforming payment is made until such funds become available funds (but in no event less than the period from the date of such payment to the next succeeding applicable Business Day) at the rate determined pursuant to Section 2.5D from the date such amount was due and payable until the date such amount is paid in full.

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2.8Increased Costs; Taxes.

A.Compensation for Increased Costs and Taxes.  Subject to the provisions of Section 2.8B (which shall be controlling with respect to the matters covered thereby), in the event that any Lender shall determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or Governmental Authority, in each case that becomes effective after the date hereof, or compliance by such Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other governmental or quasi-governmental authority (whether or not having the force of law):

(i)subjects such Lender (or its applicable lending office) to any additional Tax (other than any Tax on the overall net income of such Lender) with respect to this Agreement or any of the other Loan Documents or any of its obligations hereunder or thereunder or any payments to such Lender (or its applicable lending office) of principal, interest, fees or any other amount payable hereunder;

(ii)imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, Federal Deposit Insurance Corporation insurance or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender (other than any such reserve or other requirements with respect to LIBOR Rate Loans that are reflected in the definition of LIBOR); or

(iii)imposes any other condition (other than with respect to a Tax matter) on or affecting such Lender (or its applicable lending office) or its obligations hereunder or the London interbank market;

and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining Loans hereunder or to reduce any amount received or receivable by such Lender (or its applicable lending office) with respect thereto; then, in any such case, the Borrower shall promptly pay to such Lender, upon receipt of the statement referred to in the next sentence, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as may be necessary to compensate such Lender for any such increased cost or reduction in amounts received or receivable hereunder.  Such Lender shall deliver to the Borrower (with a copy to the Administrative Agent) a written statement, setting forth in reasonable detail the basis for, and a calculation in reasonable detail of, the additional amounts owed to such Lender under this Section 2.8A, which statement shall be conclusive and binding upon all parties hereto absent manifest error.

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B.Withholding of Taxes.

(i)Payments to Be Free and Clear.  All sums payable by the Borrower under this Agreement and the other Loan Documents shall (except to the extent required by law) be paid free and clear of, and without any deduction or withholding on account of, any Tax (other than a Tax on the overall net income of any Lender) imposed, levied, collected, withheld or assessed by or within the United States of America or any political subdivision in or of the United States of America or any other jurisdiction from or to which a payment is made by or on behalf of the Borrower or by any federation or organization of which the United States of America or any such jurisdiction is a member at the time of payment.

(ii)Grossing-up of Payments.  If the Borrower or any other Person is required by law to make any deduction or withholding on account of any such Tax from any sum paid or payable by the Borrower to the Administrative Agent or any Lender under any of the Loan Documents:

(a)the Borrower shall notify the Administrative Agent of any such requirement or any change in any such requirement as soon as the Borrower becomes aware of it;

(b)the Borrower shall pay any such Tax before the date on which penalties attach thereto, such payment to be made (if the liability to pay is imposed on the Borrower) for its own account or (if that liability is imposed on the Administrative Agent or such Lender, as the case may be) on behalf of and in the name of the Administrative Agent or such Lender;

(c)the sum payable by the Borrower in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, the Administrative Agent or such Lender, as the case may be, receives on the due date and retains a net sum equal to what it would have received and retained had no such deduction, withholding or payment been required or made; and

(d)within thirty (30) days after paying any sum from which it is required by law to make any deduction or withholding, and within thirty (30) days after the due date of payment of any Tax which it is required by clause (b) above to pay, the Borrower shall deliver to the Administrative Agent evidence reasonably satisfactory to the other affected parties of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority.

(iii)Evidence of Exemption from U.S. Withholding Tax.

(a)Each Lender that is not a United States Person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) for U.S. federal income tax purposes (a “Non-US Lender”) shall deliver to the Administrative Agent for transmission to the Borrower, on or prior to the Effective Date (in the case of each Lender listed on the signature pages hereof on the Effective Date) or on or prior to the date of the Assignment Agreement pursuant to which it becomes a Lender (in the case of each other Lender), and at such other times as may be necessary in the determination of the Borrower or Administrative Agent (each in the reasonable exercise of its discretion), (x) two original copies of Internal Revenue Service Form

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W-8BEN or W-8ECI (or any successor forms), properly completed and duly executed by such Lender, and such other documentation required under the Internal Revenue Code or reasonably requested by the Borrower to establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of principal, interest, fees or other amounts payable under any of the Loan Documents.

(b)Each Lender required to deliver any forms, certificates or other evidence with respect to United States federal income tax withholding matters pursuant to Section 2.8B(iii)(a) hereby agrees, from time to time after the initial delivery by such Lender of such forms, certificates or other evidence, whenever a lapse in time or change in circumstances renders such forms, certificates or other evidence obsolete or inaccurate in any material respect, that such Lender shall promptly (1) deliver to Administrative Agent for transmission to the Borrower two new original copies of Internal Revenue Service Form W-8BEN or W-8ECI, or a Certificate re Non-Bank Status and two (2) original copies of Internal Revenue Service Form W-8BEN (or any successor form), as the case may be, properly completed and duly executed by such Lender, and such other documentation required under the Internal Revenue Code and reasonably requested by the Borrower to confirm or establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to payments to such Lender under the Loan Documents or (2) notify Administrative Agent and the Borrower of its inability to deliver any such forms, certificates or other evidence.

(c)The Borrower shall not be required to pay any additional amount to any Non-US Lender under clause (c) of Section 2.8B(ii) if such Lender shall have failed to satisfy the requirements of clause (a) or (b)(1) of this Section 2.8B(iii); provided that if such Lender shall have satisfied the requirements of Section 2.8B(iii)(a) on the Effective Date or on the date of the Assignment Agreement pursuant to which it became a Lender, as applicable, nothing in this Section 2.8B(iii)(c) shall relieve the Borrower of its obligation to pay any additional amounts pursuant to clause (c) of Section 2.8B(ii) in the event that, as a result of any change in any applicable law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender is not subject to withholding as described herein.

(iv)If a payment is made by the Borrower under the foregoing provisions of this Section 2.8(B) for the account of any Lender and such Lender, in its sole opinion, determines that it has irrevocably received or been granted a credit against, or relief or remission from, or repayment or refund of, any tax paid or payable by it in respect of or calculated with reference to the deduction or withholding giving rise to such additional payment, such Lender shall, to the extent that it determines that it can do so without prejudice to the retention of the amount of such credit, relief, remission or repayment, pay to the Borrower such amount as such Lender shall, in its sole opinion, have determined is attributable to such deduction or withholding and will leave such Lender (after such payment) in no worse position than it would have been had the Borrower not been required to make such deduction or withholding.  Nothing contained herein shall (i) interfere with the right of a Lender to arrange its tax affairs in whatever manner it thinks fit, (ii) oblige any Lender to disclose any information relating to its tax affairs or any computations in respect thereof or (iii) require any Lender to take or refrain from taking any

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action that would prejudice its ability to benefit from any other credit, relief, remission, repayment or refund to which it may be entitled.

C.Capital Adequacy Adjustment.  In the event that any Lender shall have determined that the adoption, effectiveness, phase-in or applicability after the Effective Date of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change therein after the Effective Date or in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Lender (or its applicable lending office) with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency issued after the Effective Date, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender’s Loans or Commitment, or participations therein or other obligations hereunder with respect to the Loans to a level below that which such Lender or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation on an after-tax basis for such reduction.  Such Lender shall deliver to the Borrower (with a copy to the Administrative Agent) a written statement, setting forth in reasonable detail the basis for, and calculation in reasonable detail of, the additional amounts owed to the Lender under this Section 2.8C, which statement shall be conclusive and binding upon all parties hereto absent manifest error.

2.9Special Provisions Governing LIBOR Rate Loans.

Notwithstanding any other provision of this Agreement to the contrary, the following provisions shall govern with respect to LIBOR Rate Loans as to the matters covered:

A.Inability to Determine Applicable Interest Rate.  In the event that the Administrative Agent shall have determined (which determination shall be final and conclusive and binding upon all parties hereto), on any Interest Rate Determination Date with respect to any Borrowing of LIBOR Rate Loans, that by reason of circumstances affecting the interbank LIBOR market adequate and fair means do not exist for ascertaining the interest rate applicable to such Loans on the basis provided for in the definition of LIBOR Rate, the Administrative Agent shall on such date give notice (by facsimile or by telephone confirmed in writing) to the Borrower and each Lender of such determination, whereupon (i) no Loans may be made as, or converted to, LIBOR Rate Loans until such time as the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, and (ii) any Notice of Borrowing or Conversion/Continuation Notice given by the Borrower with respect to the Loans in respect of which such determination was made shall be deemed to be rescinded by the Borrower.

B.Illegality or Impracticability of LIBOR Rate Loans.  In the event that on any date any Lender shall have determined (which determination shall be final and conclusive and binding upon all parties hereto but shall be made only after consultation with the Borrower and

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the Administrative Agent) that the making, maintaining or continuation of its LIBOR Rate Loans (i) has become unlawful as a result of compliance by such Lender in good faith with any law, treaty, governmental rule, regulation, guideline or order (or would conflict with any such treaty, governmental rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful) or (ii) has become impracticable, or would cause such Lender material hardship, as a result of contingencies occurring after the date of this Agreement which materially and adversely affect the interbank LIBOR market or the position of such Lender in that market, then, and in any such event, such Lender shall be an “Affected Lender” and it shall on that day give notice (by facsimile or by telephone confirmed in writing) to the Borrower and the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each other Lender).  Thereafter (a) such LIBOR Rate Loan shall be Converted into a Base Rate Loan and (b) the obligation of the Lenders to make LIBOR Rate Loans or to Convert Loans into LIBOR Rate Loans shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist.

C.Compensation For Breakage.  The Borrower shall compensate each Lender upon written request by such Lender (which request shall set forth the basis for requesting such amounts and a calculation thereof in reasonable detail) for all reasonable losses, expenses and liabilities (including any interest paid by such Lender to lenders of funds borrowed by it to make or carry its LIBOR Rate Loans and any loss, expense or liability sustained by such Lender in connection with the liquidation or re-employment of such funds, but excluding lost profits) which that Lender may sustain:  (i) if for any reason (other than a default by such Lender) a LIBOR Rate Loan is not made on a date specified therefor in a Notice of Borrowing or a telephonic request for borrowing, or a conversion to or continuation of any LIBOR Rate Loan does not occur on a date specified therefor in a Conversion/Continuation Notice or a telephonic request for conversion or continuation, (ii) if any prepayment or other principal payment of, or any conversion of, any of its LIBOR Rate Loans occurs on a date other than the last day of an Interest Period applicable to such LIBOR Rate Loan or (iii) if any prepayment of any LIBOR Rate Loan made by such Lender is not made on any date specified in a notice of prepayment given by the Borrower.

D.Booking of LIBOR Rate Loans.  Any Lender may make, carry or transfer LIBOR Rate Loans at, to, or for the account of any of its branch offices or the office of an Affiliate of that Lender.

E.Assumptions Concerning Funding of LIBOR Rate Loans.  Calculation of all amounts payable to a Lender under this Section 2.9 and under Section 2.8A shall be made as though that Lender had actually funded each of its relevant LIBOR Rate Loans through the purchase of a LIBOR deposit bearing interest at the rate obtained pursuant to the definition of LIBOR in an amount equal to the amount of such LIBOR Rate Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such LIBOR deposit from an offshore office of that Lender to a domestic office of that Lender in the United States of America; provided, however, that each Lender may fund each of its LIBOR Rate Loans in any manner it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating amounts payable under this Section 2.9 and under Section 2.8A and 2.8C.

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2.10Defaulting Lenders.

Anything contained herein to the contrary notwithstanding, in the event that any Lender defaults (a “Defaulting Lender”) in its obligation to fund (a “Funding Default”) its Loan (a “Defaulted Loan”), then (a) during the Default Period with respect to such Defaulting Lender, such Defaulting Lender shall be deemed not to be a “Lender” for purposes of voting on any matters (including the granting of any consents or waivers) with respect to any of the Loan Documents; (b) to the extent permitted by Applicable Law, until such time as the Default Excess with respect to such Defaulting Lender shall have been reduced to zero, (i) any voluntary prepayment of the Loans shall, if the Borrower so directs at the time of making such voluntary prepayment, be applied to the Loans of other Lenders as if such Defaulting Lender had no Loan outstanding, and (ii) any mandatory prepayment of the Loans shall, if the Borrower so directs at the time of making such mandatory prepayment, be applied to the Loans of other Lenders (but not to the Loans of such Defaulting Lender) as if such Defaulting Lender had funded the Defaulted Loan of such Defaulting Lender, it being understood and agreed that the Borrower shall be entitled to retain any portion of any mandatory prepayment of the Loans that is not paid to such Defaulting Lender solely as a result of the operation of the provisions of this clause (b); and (c) the aggregate principal amount of all outstanding Loans as at any date of determination shall be calculated as if such Defaulting Lender had funded the Defaulted Loan of such Defaulting Lender.  No Commitment of any Lender shall be increased or otherwise affected, and, except as otherwise expressly provided in this Section 2.10, performance by the Borrower of its Obligations shall not be excused or otherwise modified as a result of any Funding Default or the operation of this Section 2.10.  The rights and remedies against a Defaulting Lender under this Section 2.10 are in addition to other rights and remedies which the Borrower may have against such Defaulting Lender with respect to any Funding Default and which the Administrative Agent or any Lender may have against such Defaulting Lender with respect to any Funding Default.

2.11Removal or Replacement of a Lender.

Anything contained herein to the contrary notwithstanding, in the event that any Lender shall give notice to the Borrower that such Lender is an Affected Lender or that such Lender is entitled to receive payments under Section 2.8 or 2.9, if the circumstances which have caused such Lender to be an Affected Lender or which entitle such Lender to receive such payments shall remain in effect, and such Lender shall fail to withdraw such notice within five (5) Business Days after receipt by such Lender of a written request for such withdrawal from the Borrower; then, with respect to each such Lender (the “Terminated Lender”), the Borrower may, by giving written notice to the Administrative Agent and any Terminated Lender of its election to do so, elect to cause such Terminated Lender (and such Terminated Lender hereby irrevocably agrees) to assign its outstanding Loan in full to one or more Eligible Assignees (each a “Replacement Lender”) in accordance with the provisions of Section 8.1 for a purchase price equal to the outstanding principal amount of the Loan assigned and accrued interest thereon through the date of assignment, to be paid by the Replacement Lender; provided that concurrently with such assignment, the Borrower shall pay any amounts payable to such Terminated Lender to the date of such assignment pursuant to Sections 2.8 or 2.9 or otherwise as if it were a prepayment.  Upon the completion of such assignment and the prepayment of all amounts owing to any Terminated Lender, such Terminated Lender shall no longer constitute a

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“Lender” for purposes hereof; provided that any rights of such Terminated Lender to indemnification hereunder shall survive as to such Terminated Lender.

2.12Mitigation.

A.Each Lender agrees that, as promptly as practicable after the officer of such Lender responsible for administering the Loan of such Lender becomes aware of the occurrence of an event or the existence of a condition that would cause such Lender to become an Affected Lender or that would entitle such Lender to receive payments under Section 2.8 or 2.9, it will, to the extent not inconsistent with the internal policies of such Lender and any applicable legal or regulatory restrictions, use reasonable efforts (i) to make, issue, fund or maintain the Commitment of such Lender or the Loan of such Lender through another lending office of such Lender, or (ii) take such other measures as such Lender may deem reasonable, if as a result thereof the circumstances which would cause such Lender to be an Affected Lender would cease to exist or the additional amounts which would otherwise be required to be paid to such Lender pursuant to Section 2.8 or 2.9 would be materially reduced and if, as determined by such Lender in its sole discretion, the making, issuing, funding or maintaining of such Commitment or Loan through such other lending office or in accordance with such other measures, as the case may be, would not otherwise adversely affect such Commitment or Loan or the interests of such Lender; provided that such Lender will not be obligated to utilize such other lending office pursuant to this Section 2.12 unless the Borrower agrees to pay all incremental expenses incurred by such Lender as a result of utilizing such other lending office as described in clause (i) above.  A certificate as to the amount of any such expenses payable by the Borrower pursuant to this Section 2.12 (setting forth in reasonable detail the basis for requesting such amount and a calculation thereof in reasonable detail) submitted by such Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive absent manifest error.

B.Notwithstanding the provisions of Section 2.8, if any Lender fails to notify the Borrower of any event or circumstance which will entitle such Lender to compensation pursuant to Section 2.8 within 365 days after such Lender obtains knowledge of such event or circumstance, then such Lender shall not be entitled to compensation from the Borrower for any amount arising prior to the date which is 365 days before the date on which such Lender notifies the Borrower of such event or circumstance.

SECTION 3.CONDITIONS PRECEDENT

3.1Conditions to Effectiveness.

The effectiveness of this Agreement is subject to the satisfaction of the following conditions:

A.Credit and Organizational Documents.  The Borrower shall deliver or cause to be delivered to the Administrative Agent on behalf of each Lender the following:

(i)sufficient copies of this Agreement originally executed and delivered by the Borrower for each Lender;

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(ii)copies of the Organizational Documents, dated a recent date prior to the Effective Date, certified as of the Effective Date (or a recent date prior to the Effective Date) by the appropriate governmental official or the secretary or an assistant secretary of the Borrower, as applicable;

(iii)resolutions of the board of directors of the Borrower approving and authorizing the execution, delivery and performance of the Loan Documents and certified as of the Effective Date by the secretary or an assistant secretary of the Borrower as being in full force and effect without modification or amendment;

(iv)signature and incumbency certificates of the officers of the Borrower executing the Loan Documents on behalf of the Borrower;

(v)a good standing certificate or certificate of existence, as applicable, from the Secretary of State (or similar official) from the jurisdiction of formation of the Borrower, certified as of the Effective Date (or a recent date prior to the Effective Date) (the matters referenced in subsections 3.1A(ii)-(v) to be addressed in a secretary’s certificate substantially in the form of Exhibit VII);

(vi)a certificate from an officer of the Borrower substantially in the form of Exhibit VIII, in form and substance satisfactory to the Administrative Agent, to the effect that all representations and warranties contained in this Agreement and the other Loan Documents are true, correct and complete (other than any such representation or warranty that expressly relates to an earlier date, in which case such representation or warranty shall have been true, correct and complete as of such earlier date); that the Borrower and its Subsidiaries are not in violation of any of the covenants contained in this Agreement and the other Loan Documents; that no event shall have occurred and be continuing or would result from the consummation of the transactions contemplated by this Agreement, that would constitute an Event of Default or a Potential Event of Default (excluding a Potential Event of Default under Section 7.13);

(vii)a certificate from the Chief Financial Officer of the Borrower attesting that, before and immediately after giving effect to the Transaction, the Borrower is and will be Solvent; and

(viii)such other documents as the Administrative Agent on behalf of the Lenders may reasonably request.

B.Opinions of Counsel.  The Administrative Agent shall have received originally executed copies of one or more favorable written opinions of (i) Brian J. Smith, Senior Vice President and General Counsel of the Borrower, and (ii) Mayer, Brown, Rowe & Maw, LLP, special New York counsel for the Borrower, each in form and substance reasonably satisfactory to the Administrative Agent and its counsel, dated as of the Effective Date.

C.PATRIOT Act.  Each of the Lenders shall have received, at least two (2) Business Days in advance of the Effective Date, all documentation and other information required by Governmental Authorities under applicable “know-your-customer” and anti-money laundering rules and regulations, including as required by the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA

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PATRIOT ACT) Act of 2001 (the “Patriot Act”).  Each Lender and each Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender or such Agent, as applicable, to identify the Borrower in accordance with the Patriot Act.

D.No Undisclosed Material Adverse Change.  Except as disclosed in writing by the Borrower to the Administrative Agent and the Lenders on or prior to the Effective Date, no event shall have occurred (including (i) the filing of, or any adverse determination in, any action, suit, investigation, litigation, arbitration or proceeding (whether administrative, judicial or otherwise) affecting the Borrower or any of its Subsidiaries before any Governmental Authority or arbitrator, (ii) any event arising under any Environmental Law or relating to any Hazardous Materials Activity or (iii) the assertion of any Environmental Claim) that has had, or could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.

3.2Conditions Precedent to each Loan.

The obligation of each Lender to make its Loan hereunder is subject to the Effective Date having occurred and the satisfaction of the following conditions, which (except for the conditions that require effectiveness of the Scheme and consummation of the Acquisition) shall be conclusively tested no later than 8:00 a.m., Sydney time, on the Second Court Date (as defined in the Implementation Agreement):

A.Notice of Borrowing.  The Administrative Agent shall have received, in accordance with the provisions of Section 2.1B, an originally executed Notice of Borrowing signed by the Borrower.

B.Representations and Warranties.  The representations and warranties set forth in Section 4 shall be true, correct and complete in all material respects on and as of the date of such Loan to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true, correct and complete in all material respects on and as of such earlier date, (it being understood that, notwithstanding that any representation or warranty contained herein with respect to Mayne Pharma, its Subsidiaries or their businesses is not true, correct and complete in all material respects on and as of the relevant date, the Lenders shall be obligated to make their Loans unless the Borrower or the relevant Subsidiary has the right to terminate its obligations under the Implementation Agreement as a result of breach by Mayne Pharma of the corresponding representation or warranty in the Implementation Agreement).

C.No Default.  No Event of Default or a Potential Event of Default (excluding a Potential Event of Default under Section 7.13) shall have occurred and be continuing, or would result from, the Loans.

D.Payment of Amounts Due.  The Borrower shall have paid to the Lead Arrangers and the Agents, all reasonable out-of-pocket costs, fees (including those fees due on the date of

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the Mayne Pharma Acquisition referred to in Section 2.6), expenses (including reasonable legal fees and expenses of a single U.S. counsel) and other compensation payable on the date of the Mayne Pharma Acquisition.

E.The Acquisition.  (i) The Implementation Agreement shall not have been 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 the Lead Arrangers.

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

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

(b)has the result that Mayne Pharma and its Subsidiaries are unable to carry on their business in substantially the same manner as carried on as at the date of the Implementation Agreement; or

(c)which otherwise materially and adversely affects the prospects of Mayne Pharma and its Subsidiaries, other than an event, occurrence or matter (x) which relates to changes in prices of products sold by Mayne Pharma and its Subsidiaries in response to changes in market conditions consistent with past practice, (y) required to be done or procured by Mayne Pharma and its Subsidiaries in connection with the Acquisition or (z) disclosed by Mayne Pharma and its Subsidiaries in the disclosure letter attached to the Implementation Agreement.

(iii)All of the conditions precedent set forth in Section 3.1 of the Implementation Agreement shall have been satisfied and the Scheme shall have become effective in accordance with applicable law.

F.No Undisclosed Material Adverse Change.  Except as disclosed in writing by the Borrower to the Administrative Agent and the Lenders on or prior to the Credit Date, no event shall have occurred (including (i) the filing of, or any adverse determination in, any action, suit, investigation, litigation, arbitration or proceeding (whether administrative, judicial or otherwise) affecting the Borrower or any of its Subsidiaries before any Governmental Authority or arbitrator, (ii) any event arising under any Environmental Law or relating to any Hazardous Materials Activity or (iii) the assertion of any Environmental Claim) that has had, or could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.

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G.Additional Documents.  The Administrative Agent shall have received each additional document, certificate, instrument, legal opinion or other item reasonably requested by it.

SECTION 4.REPRESENTATIONS AND WARRANTIES

In order to induce the Agents and the Lenders to enter into this Agreement and to induce the Lenders to make each Loan hereunder, the Borrower represents and warrants to each Agent and each Lender that the following statements are true, correct and complete:

4.1Organization, Powers, Qualification, Good Standing, Business and Subsidiaries.

A.Organization and Powers.  The Borrower and each of its Subsidiaries is duly organized, validly existing and in good standing, as applicable, under the laws of its jurisdiction of organization, except, in the case of any Subsidiary of the Borrower, where the failure to be so organized, existing or in good standing has not had and would not reasonably be expected to have a Material Adverse Effect.  The Borrower and each of its Subsidiaries has all requisite power and authority to own, lease and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Loan Documents and to carry out the transactions contemplated thereby.

B.Qualification and Good Standing.  The Borrower and each of its Subsidiaries is duly qualified to do business and in good standing, as applicable, in every jurisdiction in which its assets are located and wherever necessary to carry out its business and operations, except in jurisdictions where the failure to be so qualified or in good standing has not had and would not reasonably be expected to have a Material Adverse Effect.

4.2Authorization of Borrowing, etc.

A.Authorization of Borrowing, etc.  The execution, delivery and performance of each Loan Document have been duly authorized by all necessary action on the part of the Borrower.

B.No Conflict.  The execution, delivery and performance by the Borrower of each Loan Document and the consummation of the transactions contemplated thereby do not and will not (i) violate any provision of any Applicable Law with respect to the Borrower or any of its Subsidiaries, any of the Organizational Documents of the Borrower or any order, judgment or decree of any Governmental Authority binding on the Borrower or any of its Subsidiaries, except to the extent such violation would not be reasonably expected to have a Material Adverse Effect, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of the Borrower or any of its Subsidiaries, except to the extent such conflict, breach or default would not reasonably be expected to have a Material Adverse Effect, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of the Borrower or any of its Subsidiaries, or (iv) require any approval of stockholders, partners or members or any approval or consent of any Person under any Contractual Obligation of the Borrower or any of its Subsidiaries, except for such approvals or consents which will be obtained on or before the Effective Date and disclosed in writing to Administrative Agent.

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C.Governmental Consents.  The execution, delivery and performance by the Borrower of each Loan Document and the consummation of the transactions contemplated thereby do not and will not require any Governmental Authorization (other than, prior to the Credit Date, Governmental Authorizations required to complete the Mayne Pharma Acquisition).

D.Binding Obligation.  Each Loan Document has been duly executed and delivered by the Borrower and is the legally valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability.

4.3Disclosure.

No representation or warranty of the Borrower or any of its Subsidiaries contained in any Loan Document or in any other document, certificate or written statement furnished to any Agent or any Lender by or on behalf of the Borrower or any of its Subsidiaries for use in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state a material fact (known to the Borrower or any of its Subsidiaries in the case of any document not furnished by any of them) necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which the same were made.  Any projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by the Borrower to be reasonable at the time made, it being recognized by the Agents and the Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results.

4.4Financial Condition.

The Borrower has heretofore delivered to the Administrative Agent the audited consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 2005 and the related audited consolidated statements of income, stockholders’ equity and cash flows of the Borrower for the Fiscal Year then ended, together with all related notes and schedules thereto.  All such statements were prepared in conformity with GAAP and fairly present, in all material respects, the financial position of the entities described in such financial statements as at the respective dates thereof and the results of operations and cash flows of the entities described therein for each of the periods then ended, subject, in the case of any such unaudited financial statements, to changes resulting from audit and normal year-end adjustments.  Neither the Borrower nor any of its Subsidiaries has any contingent liability or liability for taxes, long-term lease or unusual forward or long-term commitment that is not reflected in the foregoing financial statements or the notes thereto and which in any such case could reasonably be expected to have a Material Adverse Effect.

4.5No Material Adverse Change.

Except as disclosed in the Borrower’s filings with the Securities and Exchange Commission prior to September 20, 2006, no event or change occurred during the period from

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December 31, 2005 through September 20, 2006 that had, or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

4.6Intellectual Property Matters.

Except where the failure to do so could not reasonably be expected to have a Material Adverse Effect, each of the Borrower and its Subsidiaries owns or possesses rights to use all franchises, licenses, copyright registrations, copyright applications, issued patents, patent applications, trademarks, trademark applications, trademark registrations, trademark rights, service marks, service mark applications, service mark rights, trade names, trade name rights, copyrights and rights with respect to the foregoing which are required to conduct its business.  No event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any such rights (except for the expiration of patents in the ordinary course), and neither the Borrower nor any Subsidiary thereof is liable to any Person for infringement under Applicable Law with respect to any such rights as a result of its business operations except to the extent any such revocation, termination, or infringement could not reasonably be expected to have a Material Adverse Effect.

4.7No Litigation; Compliance with Laws.

Except for the matters disclosed in the Borrower’s filings with the Securities and Exchange Commission prior to September 20, 2006, as of such date there were no actions, suits, proceedings (whether administrative, judicial or otherwise), litigations, arbitrations or governmental investigations (whether or not purportedly on behalf of the Borrower or any of its Subsidiaries) at law or in equity, or before or by any Governmental Authority, domestic or foreign (including any Environmental Claims), that were pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries or any property of the Borrower or any of its Subsidiaries and that, individually or in the aggregate, could have reasonably been expected to result in a Material Adverse Effect.  Prior to September 2006 and as of such date, neither the Borrower nor any of its Subsidiaries was subject to or in default with respect to any final judgment, writ, injunction, decree, rule or regulation of any Governmental Authority, domestic or foreign, that, individually or in the aggregate, could reasonably have been expected to result in a Material Adverse Effect.  Neither the Borrower nor any of its Subsidiaries is in violation of any Applicable Laws (including Environmental Laws) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.

4.8No Default.

Neither the Borrower nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any of its Contractual Obligations, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default, except where the consequences, direct or indirect, of such default or defaults, if any, could not reasonably be expected to have a Material Adverse Effect.

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4.9Governmental Regulation.

Neither the Borrower nor any of its Subsidiaries is subject to regulation under the Federal Power Act or the Investment Company Act of 1940 or under any federal or state statute or regulation which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable.  Neither the Borrower nor any of its Subsidiaries is a “registered investment company” or a company “controlled” by a “registered investment company” or a “principal underwriter” of a “registered investment company” as such terms are defined in the Investment Company Act of 1940.

4.10Securities Activities.

Neither the Borrower nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock.  No part of the proceeds of the Loans will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock in violation of the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System.

4.11Employee Benefit Plans.

A.Each of the Borrower and its ERISA Affiliates is in material compliance with all applicable provisions and requirements of ERISA and the Internal Revenue Code and the regulations and published interpretations thereunder with respect to each Employee Benefit Plan, and have performed all their obligations under each Employee Benefit Plan in all material respects.  Each Employee Benefit Plan which is intended to qualify under Section 401(a) of the Internal Revenue Code has received a favorable determination letter from the Internal Revenue Service or has submitted or will submit a request for such a determination letter within the applicable remedial amendment period.

B.No material liability to the PBGC (other than required premium payments) or the Internal Revenue Service has been or is expected to be incurred by the Borrower or any of its ERISA Affiliates with respect to any Employee Benefit Plan, and no ERISA Event has occurred or is reasonably expected to occur, other than ERISA Events for which the liability has been satisfied in full or is immaterial in amount.

C.As of the most recent valuation date for each Multiemployer Plan for which the actuarial report is available, the potential liability of the Borrower or any of its ERISA Affiliates for a complete withdrawal from such Multiemployer Plan (within the meaning of Section 4203 of ERISA), when aggregated with such potential liability for a complete withdrawal from all Multiemployer Plans, based on information available pursuant to Section 4221(e) of ERISA is not expected to be material.  The Borrower and each of its Subsidiaries and each of their ERISA Affiliates have complied in all material respects with the requirements of Section 515 of ERISA with respect to each Multiemployer Plan and are not in material “default” (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan.

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4.12Environmental Protection.  As of September 20, 2006:

A.Neither the Borrower nor any of its Subsidiaries nor any of their respective Facilities or operations was subject to any outstanding written order, consent decree or settlement agreement with any Person relating to any Environmental Law, any Environmental Claim, or any Hazardous Materials Activity that, individually or in the aggregate, could reasonably have been expected to have a Material Adverse Effect.

B.Neither the Borrower nor any of its Subsidiaries had received any letter or request for information under Section 104 of the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9604) or any comparable state law, except to the extent that such letter or request could not reasonably have been expected to have a Material Adverse Effect.

C.There were not and, to the Borrower’s and each of its Subsidiaries’ knowledge, had not been any condition, occurrence, or Hazardous Materials Activity which could reasonably have been expected to form the basis of an Environmental Claim against the Borrower or any of its Subsidiaries that, individually or in the aggregate, could reasonably have been expected to have a Material Adverse Effect.

D.Compliance with all then-current or reasonably foreseeable future requirements pursuant to or under Environmental Laws could not, individually or in the aggregate, reasonably have been expected to give rise to a Material Adverse Effect.

E.Neither the Borrower nor any of its Subsidiaries nor, to the knowledge of the Borrower, any predecessor of the Borrower or any Subsidiary of such predecessor, had filed any notice under any Environmental Law indicating past or present treatment of Hazardous Materials at any Facility, and none of the Borrower’s nor any of its Subsidiaries’ operations involved the generation, transportation, treatment, storage or disposal of hazardous waste, as defined under 40 C.F.R.  Parts 260 270 or any state equivalent, except to the extent that any of the foregoing could not reasonably have been expected to have a Material Adverse Effect.

F.No event or condition had occurred or was occurring with respect to the Borrower or any of its Subsidiaries relating to any Environmental Law, any Release of Hazardous Materials, or any Hazardous Materials Activity which individually or in the aggregate had had, or could reasonably have been expected to have, a Material Adverse Effect.

4.13Pari Passu.

The Obligations and any other claims of the Lead Arrangers, the Agents and the Lenders arising hereunder or under any of the Loan Documents rank at least pari passu with the claims of all of the Borrower’s other senior unsecured creditors, except those creditors whose claims are preferred by any bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally.

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4.14Restrictions.

There are no contractual restrictions on the Borrower or any of its Subsidiaries which prohibit or otherwise restrict the transfer of cash or other assets from any such Subsidiary to the Borrower, other than prohibitions or restrictions permitted under Section 6.4.

SECTION 5.AFFIRMATIVE COVENANTS

The Borrower covenants and agrees that, so long as the Commitments shall remain in effect and until payment in full of all Obligations (other than Surviving Obligations), unless the provisions of this Section 5 are waived or amended in accordance with Section 8.5, the Borrower shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 5.

5.1Financial Statements and Other Reports.

The Borrower will deliver to Administrative Agent:

(i)Quarterly Financial Statements:  as soon as available, and in any event within 45 days after the end of each of the first three (3) Fiscal Quarters of each Fiscal Year, the unaudited consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such Fiscal Quarter and the related consolidated statements of income, stockholders’ equity and cash flows of the Borrower and its Subsidiaries for such Fiscal Quarter and for the period from the beginning of the then-current Fiscal Year to the end of such Fiscal Quarter, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year, all in reasonable detail and certified by the chief financial officer of the Borrower as fairly presenting, in all material respects, the financial condition of the Borrower and its Subsidiaries as at the date indicated and the results of their operations and cash flows for the periods indicated in conformity with GAAP, subject to the absence of footnotes and changes resulting from audit and normal year-end adjustments;

(ii)Annual Financial Statements:  as soon as available, and in any event within 90 days after the end of each Fiscal Year, (i) the consolidated balance sheets of the Borrower and its Subsidiaries as at the end of such Fiscal Year and the related consolidated statements of income, stockholders’ equity and cash flows of the Borrower and its Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the previous Fiscal Year, in reasonable detail and certified by the chief financial officer of the Borrower as fairly presenting, in all material respects, the financial condition of the Borrower and its Subsidiaries as at the date indicated and the results of their operations and cash flows for the periods indicated; and (ii) with respect such consolidated financial statements a report thereon of Deloitte and Touche LLP or other independent certified public accountants of recognized national standing selected by the Borrower, and reasonably satisfactory to the Administrative Agent (which report shall be unqualified as to going concern and scope of audit, and shall state that such consolidated financial statements fairly present, in all material respects, the consolidated financial position of the Borrower and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise disclosed in such financial statements) and that the examination by such accountants in connection with such

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consolidated financial statements has been made in accordance with generally accepted auditing standards);

(iii)Compliance Certificate:  together with each delivery of financial statements of the Borrower and its Subsidiaries pursuant to Sections 5.1(i) and 5.1(ii), a duly executed and completed Compliance Certificate;

(iv)Filings:  promptly upon their becoming available, copies of (a) all financial statements, reports, notices and proxy statements sent by the Borrower to its shareholders or other security holders, and (b) all material information filed by the Borrower or any of its Subsidiaries with the Securities and Exchange Commission or any national securities exchange;

(v)Notice of Default, etc.:  promptly upon (and in any event within five (5) Business Days after) any Responsible Officer of the Borrower obtaining knowledge (a) of any condition or event that constitutes an Event of Default or Potential Event of Default or that notice has been given to the Borrower or any of its Subsidiaries with respect thereto, (b) that any Person has given any notice to the Borrower or any of its Subsidiaries or taken any other action with respect to a claimed default or event or condition of the type referred to in Section 7.2, or (c) of the occurrence of any event or change that has caused or evidences, either in any case individually or in the aggregate, a Material Adverse Effect, an Officer’s Certificate specifying the nature and period of existence of such condition, event or change, or specifying the notice given or action taken by any such Person and the nature of such claimed Event of Default, Potential Event of Default, default, event or condition, and what action the Borrower has taken, is taking and proposes to take with respect thereto;

(vi)Notice of Litigation:  promptly upon (and in any event within five (5) Business Days after) any officer of the Borrower obtaining knowledge of (a) the institution of, or non-frivolous threat of, any action, suit, proceeding, order, consent decree, settlement (whether administrative, judicial or otherwise), governmental investigation or arbitration against or affecting the Borrower or any of its Subsidiaries or any of their respective property, including of the type described in Section 4.17 (collectively, “Proceedings”) or (b) any material development in any such Proceeding that, in the case of either (a) or (b) if adversely determined, could be reasonably expected to have a Material Adverse Effect, or seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated hereby, written notice thereof together with such other information as may be reasonably available to the Borrower or such Subsidiary to enable Lenders and their counsel to evaluate such matters;

(vii)Change in Rating:  promptly upon (and in any event within five (5) Business Days after) obtaining knowledge thereof, written notice of any changes in the rating given the Borrower’s long-term senior unsecured debt by Moody’s or S&P;

(viii)ERISA:  (i) promptly upon becoming aware of the occurrence of or forthcoming occurrence of any ERISA Event, a written notice specifying the nature thereof, what action the Borrower or any of its ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue

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Service, the United States Department of Labor or the PBGC with respect thereto; and (ii) with reasonable promptness, copies of (1) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by the Borrower or any of its ERISA Affiliates with the Internal Revenue Service with respect to each Pension Plan; (2) all notices received by the Borrower or any of its ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA Event; and (3) copies of such other documents or governmental reports or filings relating to any Employee Benefit Plan as the Administrative Agent shall reasonably request;

(ix)Environmental Reports and Audits:  as soon as practicable following receipt thereof, copies of all environmental audits and reports with respect to environmental matters at any property, plant or other Facility or which relate to any environmental liabilities of the Borrower or its Subsidiaries which, in any such case, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect;

(x)Public Filings:  promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any of its Subsidiaries with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of the Securities and Exchange Commission, or distributed by the Borrower to its shareholders generally; and

(xi)Other Information:  with reasonable promptness, such other information and data with respect to the Borrower and its Subsidiaries as from time to time may be reasonably requested by the Administrative Agent or any Lender.

5.2Books and Records.

The Borrower will, and will cause each of its Subsidiaries to keep proper books of records and account in which full, true and correct entries in all material respects in conformity with GAAP consistently applied shall be made of all material dealings and transactions in relation to its business and activities and permit representatives or agents of the Administrative Agent or any Lender to visit and inspect any of its properties or assets and examine and make abstracts from any of its books and records upon reasonable prior notice during normal business hours and as often as may reasonably be desired, and to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with officers and employees of the Borrower and independent public accountants of the Borrower and its Subsidiaries so long as the Borrower is provided the opportunity to participate in such discussions.

5.3Existence.

Except as otherwise permitted by Section 6.6, the Borrower will, and will cause each of its Subsidiaries to, at all times preserve and keep in full force and effect its existence and all rights, privileges, licenses and franchises material to its business; provided that neither the Borrower nor any of its Subsidiaries shall be required to preserve any such right, privilege, license or franchise if management of the Borrower or such Subsidiary shall reasonably determine that the preservation thereof is no longer desirable in the conduct of the business of

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such Person, and that the loss thereof is not disadvantageous in any material respect to the Borrower or the Lenders.

5.4Insurance.

The Borrower will maintain or cause to be maintained, with financially sound and reputable insurers, such public liability insurance, third party property damage insurance, business interruption insurance and casualty insurance with respect to liabilities, losses or damage in respect of the assets, properties and businesses of the Borrower and its Subsidiaries as may customarily be carried or maintained under similar circumstances by Persons of established reputation engaged in similar businesses, in each case in such amounts (giving effect to self-insurance), with such deductibles, covering such risks and otherwise on such terms and conditions as shall be customary for such Persons.

5.5Payment of Taxes and Claims.

The Borrower will, and will cause each of its Subsidiaries to, pay all federal income Taxes and other material Taxes imposed upon it or any of its properties or assets or in respect of any of its income, businesses or franchises before any penalty or fine accrues thereon; provided no such Tax need be paid (a) if it is being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as adequate reserve or other appropriate provision, as shall be required in conformity with GAAP shall have been made therefor or (b) if the aggregate amount of all unpaid Taxes that have not been paid by the Borrower and its Subsidiaries (excluding amounts being contested as provided in clause (a)) does not exceed $5,000,000 and could not reasonably be expected to have a Material Adverse Effect.  The Borrower will not, nor will it permit any of its Subsidiaries to, file or consent to the filing of any consolidated income Tax return with any Person (other than the Borrower or any of its Subsidiaries).

5.6Payment and Performance of Obligations.

The Borrower will, and will cause each of its Subsidiaries to, pay and perform all Obligations under this Agreement and the other Loan Documents.

5.7Maintenance of Properties.

The Borrower will, and will cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of the Borrower and its Subsidiaries and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof.

5.8Compliance with Laws.

The Borrower will, and will cause each of its Subsidiaries to, comply with the requirements of all Applicable Laws, rules, regulations and orders of any Governmental Authority (including all Environmental Laws), noncompliance with which could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

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5.9Use of Proceeds.

A.Proceeds of Loans.  The proceeds of each Loan shall be used (i) to effect the Mayne Pharma Acquisition and (ii) to pay costs and expenses in connection with the Transaction.

B.Margin Regulations.  No part of the proceeds of the Loans made to the Borrower will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock in violation of the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System.

5.10Claims Pari Passu.

The Borrower shall ensure that at all times the Obligations and any other claims of the Lead Arrangers, the Agents and the Lenders arising hereunder or under any other Loan Document rank at least pari passu with the claims of the Borrower’s other senior unsecured creditors, except those creditors whose claims are preferred by any bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally.

5.11Further Assurances.

At any time or from time to time upon the request of the Administrative Agent, the Borrower will, and will cause each of its Subsidiaries to, at its expense, promptly execute, acknowledge and deliver such further documents and do such other acts and things as the Administrative Agent may reasonably request in order to effect fully the purposes of the Loan Documents.

SECTION 6.NEGATIVE COVENANTS

The Borrower covenants and agrees that, so long as the Commitments hereunder shall remain in effect and until payment in full of all Obligations (other than Surviving Obligations), unless the provisions of this Section 6 are waived or amended in accordance with Section 8.5, the Borrower shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 6.

6.1Liens.

The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any kind of the Borrower or any of its Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, except:

(i)Liens existing on the Effective Date and described on Schedule 6.1 hereto and other Liens securing Indebtedness existing on the Effective Date the individual principal amount of which does not exceed $500,000;

(ii)Liens imposed by law for Taxes that are not yet required to be paid pursuant to Section 5.5;

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(iii)statutory Liens of landlords, banks (including rights of set-off), carriers, warehousemen, mechanics, repairmen, workmen and material men, and other Liens imposed by law, in each case incurred in the ordinary course of business for amounts not yet overdue or for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of five days) are being contested in good faith by appropriate proceedings, so long as such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts;

(iv)deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money or other Indebtedness) incurred in the ordinary course of business;

(v)easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title to real property of the Borrower or any Subsidiary of the Borrower, in each case which do not and will not, individually or in the aggregate, interfere in any material respect with the use or value thereof;

(vi)any interest or title of a lessor or sublessor under any operating or true lease of real estate entered into by the Borrower or one of its Subsidiaries in the ordinary course of its business covering only the assets so leased;

(vii)Liens securing Indebtedness pursuant to Capital Leases; provided that (a) such Liens are only in respect of the property or assets subject to, and secure only, such Capital Leases, (b) Indebtedness of Subsidiaries under Capital Leases shall be limited by the provisions of Section 6.2 and (c) the aggregate amount of all Indebtedness of the Borrower under Capital Leases shall not at any time exceed $25,000,000;

(viii)purchase money Liens in real property, improvements thereto or equipment hereafter acquired (or, in the case of improvements, constructed) by the Borrower or one of its Subsidiaries; provided that (a) such Lien secures Indebtedness permitted by Section 6.2), (b) such Lien is incurred, and the Indebtedness secured thereby is created, within ninety (90) days after completion of such acquisition (or construction), (c) the Indebtedness secured thereby does not exceed 100% of the lesser of the cost or the fair market value of such real property, improvements or equipment at the time of such acquisition (or construction) and (d) such Lien does not apply to any other property or assets of the Borrower or any of its Subsidiaries;

(ix)Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

(x)licenses of patents, trademarks and other intellectual property rights granted by the Borrower or any of its Subsidiaries in the ordinary course of business and not interfering in any respect with the ordinary conduct of the business of the Borrower or such Subsidiary; and

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(xi)Liens on assets of Persons acquired after the Effective Date subject to the terms of this Agreement; provided that such Liens exist at the time such Person becomes a Subsidiary and were not created in anticipation thereof;

(xii)Liens incurred in connection with Qualified Receivables Transactions;

(xiii)Any Lien incurred to renew, extend or refinance obligations secured by a Lien referred to in clause (viii) or (xi) above, provided that (a) the principal or face amount of the obligations secured by any such Lien does not exceed the outstanding principal or face amount of the obligations so renewed, extended or refinanced immediately prior to such renewal, extension or refinancing and (b) any such Lien attaches solely to the assets that secured the obligations so renewed, extended or refinanced; and

(xiv)Liens not otherwise permitted by the foregoing clauses of this Section 6.1 securing obligations in an aggregate principal amount at any time outstanding not to exceed 10% of Consolidated Net Worth.

Notwithstanding any of the foregoing exceptions, the Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon the Capital Stock of any of its Subsidiaries or any Indebtedness owed to it by the Borrower or any of its Subsidiaries.

6.2Indebtedness.

The Borrower shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or guaranty, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except:

(i)Indebtedness owing by any wholly-owned Subsidiary of the Borrower to the Borrower or another wholly-owned Subsidiary of the Borrower;

(ii)Indebtedness existing on the Effective Date and set forth on Schedule 6.2, but, in each case, not any extensions, renewals or replacements of such Indebtedness except (a) renewals and extensions expressly provided for in the agreements evidencing any such Indebtedness as the same are in effect on the date of this Agreement and (b) refinancings and extensions of any such Indebtedness if the terms and conditions thereof are not less favorable to the obligor thereon or to the Lenders than the Indebtedness being refinanced or extended or are otherwise on substantially then prevailing market terms, and the average life to maturity thereof is greater than or equal to that of the Indebtedness being refinanced or extended; provided such Indebtedness permitted under the immediately preceding clause (a) or (b) above shall not (A) include Indebtedness of an obligor that was not an obligor with respect to the Indebtedness being extended, renewed or refinanced, (B) exceed in a principal amount the Indebtedness being renewed, extended or refinanced or (C) be incurred, created or assumed if any Potential Event of Default or Event of Default has occurred and is continuing or would result therefrom;

(iii)Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business, provided that such Indebtedness is extinguished within seven (7) Business Days of its incurrence;

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(iv)Indebtedness owed to (including obligations in respect of letters of credit or bank guarantees or similar instruments for the benefit of) any Person providing workers’ compensation, health, disability or other employee benefits or property, casualty or liability insurance to the Borrower or any of its Subsidiaries, pursuant to reimbursement or indemnification obligations to such Person, provided that upon the incurrence of Indebtedness with respect to reimbursement obligations regarding workers’ compensation claims, such obligations are reimbursed not later than 30 days following such incurrence;

(v)Indebtedness incurred by any Subsidiary of the Borrower arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from guaranties or letters of credit, surety bonds or performance bonds securing the performance of the Borrower or any such Subsidiary pursuant to such agreements, in connection with permitted dispositions of any business or asset (including the stock of any Subsidiary of the Borrower);

(vi)Indebtedness which may be deemed to exist pursuant to any guaranties, performance, surety, statutory, appeal or similar obligations incurred in the ordinary course of business of the Borrower and its Subsidiaries;

(vii)guaranties in the ordinary course of business of the obligations of suppliers, customers, franchisees and licensees of the Borrower and its Subsidiaries;

(viii)Indebtedness (including guarantees of any such Indebtedness) of a Subsidiary located in a country other than the U.S.; provided that the outstanding principal amount of all Indebtedness permitted by this clause (viii) (without double counting guarantees of any such Indebtedness) shall not at any time exceed $100,000,000;

(ix)the Obligations; and

(x)other Indebtedness in an aggregate principal amount at any time outstanding not to exceed 15% of Consolidated Net Worth.

6.3Acquisitions.

The Borrower will not, and will not permit any of its wholly-owned Subsidiaries to, make any Acquisition (other than the Mayne Pharma Acquisition and (ii) any Acquisition by the Borrower or a wholly-owned Subsidiary of the Borrower of a wholly-owned Subsidiary of the Borrower) if an Event of Default or Potential Event of Default exists or would result therefrom.

6.4Restrictions on Subsidiary Distributions.

Except as provided herein, the Borrower shall not, and shall not permit any of its Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Subsidiary of the Borrower to (a) pay dividends or make any other distributions on any of such Subsidiary’s Capital Stock owned by the Borrower or any other Subsidiary of the Borrower, (b) repay or prepay any Indebtedness owed by such Subsidiary to the Borrower or any other Subsidiary of the Borrower, (c) make loans or advances to the Borrower or any other Subsidiary of the Borrower, or (d) transfer any of

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its property or assets to the Borrower or any other Subsidiary of the Borrower, other than restrictions (i) existing under this Agreement, (ii) in agreements evidencing Indebtedness pursuant to Capital Leases permitted by Section 6.2 that impose restrictions on the property so acquired (except that such agreements shall not in any manner limit the ability of the Borrower or any Subsidiary of the Borrower to pay dividends or make any other distribution), (iii) by reason of customary provisions restricting assignments, subletting or other transfers contained in leases, licenses, Joint Venture agreements and similar agreements entered into in the ordinary course of business, (iv) by reason of customary subordination provisions in any guaranty or similar arrangement (including any arrangement of the type described in clause (vii), (viii) or (ix) of the definition of “Indebtedness” or (v) imposed on a Subsidiary pursuant to an agreement which has been entered into in connection with the disposition of all of substantially all of the capital stock or assets of such Subsidiary.

6.5Restricted Payments.

The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, declare, pay, make or set aside any sum for any Restricted Payment if an Event of Default or a Potential Event of Default exists or would result therefrom.

6.6Restriction on Fundamental Changes and Asset Sales.

The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into any transaction of merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or sub-lessor), exchange, transfer or otherwise dispose of, in one transaction or a series of transactions, all or substantially all of its business, assets or property; provided that (a) the Borrower and its Subsidiaries may make Acquisitions permitted by Section 6.3; and (b) so long as no Event of Default or Potential Event of Default exists or would result therefrom:

(i)any Subsidiary of the Borrower may merge or consolidate with or into, or dispose of assets to, any other Subsidiary or to the Borrower;

(ii)any Subsidiary may merge or consolidate with or into another Person, convey, transfer, lease or otherwise dispose of all or any portion of its assets so long as (A) the consideration received in respect of such merger, consolidation, conveyance, transfer, lease or other disposition is at least equal to the fair market value of such assets and (B) no Material Adverse Effect could reasonably be expected to result from such merger, consolidation, conveyance, transfer, lease or other disposition; and

(iii)the Borrower may merge with any other Person so long as the Borrower is the surviving entity.

6.7Conduct of Business.

From and after the Effective Date, the Borrower shall not, and shall not permit any of its Subsidiaries to, engage in any material business or conduct any activities other than (a) businesses conducted by the Borrower and its Subsidiaries as of the Effective Date, (b)

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businesses conducted by Mayne Pharma and its Subsidiaries as of September 20, 2006 and (c) and businesses reasonably related to the foregoing.

6.8Fiscal Year.

The Borrower shall not make or permit, or permit any of its Subsidiaries to make or permit, any change in its fiscal year, provided that Mayne Pharma or any Subsidiary thereof may make any change that is necessary or appropriate to cause its fiscal year to correspond with the Borrower’s fiscal year.

6.9Subordinated Indebtedness.

The Borrower shall not, and shall not permit any of its Subsidiaries to, amend or otherwise change the terms of any Subordinated Indebtedness, or make any optional payment or any payment pursuant thereto, if the effect of such amendment or change is to increase the interest rate on such Subordinated Indebtedness, change (to earlier dates) any dates upon which payments of principal or interest are due thereon, change any event of default or condition to an event of default with respect thereto (other than to eliminate any such event of default or increase any grace period related thereto), change the redemption, prepayment or defeasance provisions thereof, change the subordination provisions of such Subordinated Indebtedness (or of any guaranty thereof), or if the effect of such amendment or change, together with all other amendments or changes made, is to increase materially the obligations of the obligor thereunder or to confer any additional rights on the holders of such Subordinated Indebtedness (or a trustee or other representative on their behalf) which would be adverse to the Borrower or the Lenders.

6.10Transactions with Shareholders and Affiliates.

The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service or the making of any intercompany loan) with any Affiliate of the Borrower or any of its Subsidiaries, any holder of Capital Stock or other interests in the Borrower or any of its Subsidiaries, or any such Affiliate of any such holder, on fair and reasonable terms that are less favorable to the Borrower or such Subsidiary, as the case may be, than those that might be obtained at the time in a comparable arm’s length transaction from a Person who is not such a holder or Affiliate; provided the foregoing restriction shall not apply to (a) any transaction between the Borrower and its Subsidiaries or between such Subsidiaries to the extent otherwise permitted hereunder; (b) reasonable and customary fees paid to members of the board of directors (or similar governing body) of the Borrower and its Subsidiaries; (c) compensation arrangements for officers and other employees of the Borrower and its Subsidiaries entered into in the ordinary course of business; (d) transactions described on Schedule 6.10; and (e) transactions in connection with Qualified Receivables Transactions permitted under this Agreement.

6.11Financial Covenants.

A.Interest Coverage Ratio.  The Borrower shall not permit the Interest Coverage Ratio as of the last day of any Fiscal Quarter to be less than the ratio shown below opposite such last day:

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Fiscal Quarter Ending	Ratio
December 31, 2006	4.00 to 1
March 31, 2007	4.00 to 1
June 30, 2007	4.50 to 1
September 30, 2007	4.75 to 1
December 31, 2007 and thereafter	5.00 to 1

B.Leverage Ratio.  The Borrower shall not permit the Leverage Ratio as of the last day of any Fiscal Quarter to exceed the ratio shown below opposite such last day:

Fiscal Quarter Ending	Ratio
December 31, 2006	4.50 to 1
March 31, 2007	4.50 to 1
June 30, 2007	4.00 to 1
September 30, 2007	3.50 to 1
December 31, 2007 and thereafter	3.25 to 1

C.Certain Calculations.  With respect to any period during which a Permitted Acquisition (excluding the Acquisition by the Borrower or a Subsidiary of Bresagen Limited) or an Asset Sale has occurred (each, a “Subject Transaction”), for purposes of determining compliance with the financial covenants set forth in this Section 6.11, Consolidated Adjusted EBITDA shall be calculated with respect to such period on a pro forma basis using the historical audited financial statements of any business so acquired or to be acquired or sold or to be sold and the consolidated financial statements of the Borrower and its Subsidiaries which shall be reformulated as if such Subject Transaction, and any Indebtedness incurred or repaid in connection therewith, had been consummated or incurred or repaid at the beginning of such period.

6.12Interest Rate Agreements and Currency Agreements.

The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into any Interest Rate Agreement or Currency Agreement after the Effective Date except Interest Rate Agreements and Currency Agreements entered into to hedge or manage bona fide risks to which the Borrower or any such Subsidiary is exposed in the conduct of its business or the management of its liabilities (and, in any event, not for speculative purposes).

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SECTION 7.EVENTS OF DEFAULT

If any of the following conditions or events (each an “Event of Default”) shall occur:

7.1Failure to Make Payments When Due.

Failure by the Borrower to pay (i) any installment of principal of any Loan when due, whether at stated maturity, by acceleration, by notice of voluntary prepayment, by mandatory prepayment or otherwise; or (ii) any interest on any Loan or any fee or any other amount due under this Agreement within five (5) days after the date due; or

7.2Default in Other Agreements.

Failure of the Borrower or any of its Subsidiaries to pay when due any principal of or interest on or any other amount payable in respect of one or more items of Indebtedness (other than Indebtedness referred to in Section 7.1 above) in excess of $20,000,000 in the aggregate and in each case beyond the end of any grace period provided therefor, if any; or (ii) breach or default by the Borrower or any of its Subsidiaries with respect to any other material term of (a) one or more items of such Indebtedness or (b) any loan agreement, mortgage, indenture or other agreement relating to such item(s) of Indebtedness, in each case beyond the end of any grace period provided therefor, if any, if the effect of such breach or default is to cause, or to permit the holder or holders of that Indebtedness (or a trustee on behalf of such holder or holders) to cause, that Indebtedness to become or be declared due and payable (or redeemable) prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be; or

7.3Breach of Certain Covenants.

Failure of the Borrower to perform or comply with any term or condition contained in Sections 5.1(v)(a), 5.3 (solely with respect to (1) the existence of the Borrower and (2) the failure of the Borrower to preserve or keep in full force and effect its rights, privileges, licenses and franchises if such failure would reasonably be expected to have a Material Adverse Effect), 5.9 or 6 of this Agreement; or

7.4Breach of Representation or Warranty.

Any representation, warranty, certification or other statement made by the Borrower in any Loan Document or in any statement or certificate at any time given by the Borrower in writing pursuant thereto or in connection therewith shall be false in any material respect on the date as of which made; or

7.5Other Defaults Under Loan Documents.

The Borrower shall default in the performance of or compliance with any term contained in this Agreement or any other Loan Document (other than those specified in Sections 7.1, 7.2, 7.3 and 7.4) and such default or non-compliance shall not be cured or waived within thirty (30) days after the Borrower shall have received notice from the Administrative Agent of such default; or

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7.6Involuntary Bankruptcy; Appointment of Receiver, etc.

(i) A court of competent jurisdiction shall enter a decree or order for relief in respect of any the Borrower or any of its Significant Subsidiaries in an involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal or state law; or (ii) an involuntary case shall be commenced against the Borrower or any of its Significant Subsidiaries under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, examiner, custodian or other officer having similar powers over the Borrower or any of its Significant Subsidiaries, or over all or a substantial part of their respective property, shall have been entered; or there shall have occurred the involuntary appointment of an interim receiver, trustee, examiner or other custodian of the Borrower or any of its Significant Subsidiaries for all or a substantial part of their respective property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of the Borrower or any of its Significant Subsidiaries, and any such event described in this clause (ii) shall continue for sixty (60) days unless dismissed, bonded or discharged; or

7.7Voluntary Bankruptcy; Appointment of Receiver, etc.

The Borrower or any of its Significant Subsidiaries shall have an order for relief entered with respect to it or commence a voluntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or the Borrower or any of its Significant Subsidiaries shall make any assignment for the benefit of creditors; or the Borrower or any of its Significant Subsidiaries shall be unable, or shall fail generally, or shall admit in writing their respective inability, to pay its debts as such debts become due; or the board of directors (or similar governing body) of the Borrower or any of its Significant Subsidiaries (or any committee thereof) shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to in this Section 7.7 or in Section 7.6 above; or

7.8Judgments and Attachments.

Any money judgment, writ or warrant of attachment or similar process involving in excess of $20,000,000 (not adequately covered by insurance as to which a solvent and unaffiliated insurance company has acknowledged coverage) shall be entered or filed against the Borrower or any of its Subsidiaries, or any of their respective assets, and shall remain undischarged, unvacated, unbonded or unstayed for a period of sixty (60) days (or in any event later than five (5) days prior to the date of any proposed sale thereunder); or

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7.9Dissolution.

Any order, judgment or decree shall be entered against the Borrower or any of its Subsidiaries decreeing the dissolution or split up of such Person; or

7.10Employee Benefit Plans.

There shall occur one or more ERISA Events which individually or in the aggregate results in or might reasonably be expected to result in liability of the Borrower or any of its Subsidiaries or any of their respective ERISA Affiliates in excess of $10,000,000 during the term of this Agreement; or there shall exist any fact or circumstance that reasonably could be expected to result in the imposition of a Lien or security interest under Section 412(n) of the Internal Revenue Code or under ERISA; or

7.11Change in Control.

A Change of Control shall occur; or

7.12Repudiation of Obligations.

At any time after the execution and delivery thereof, (i) this Agreement for any reason shall cease to be in full force and effect (other than by reason of the satisfaction in full of the Obligations) or shall be declared null and void, or (ii) the Borrower shall contest the validity or enforceability of any Loan Document, or deny that it has any further liability under any Loan Document; or

7.13Material Adverse Change.

(i) Since September 20, 2006 and on or prior to the Credit 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 condition (financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole, (ii) any representation or warranty made with respect to Mayne Pharma, its Subsidiaries or their businesses is not true, correct and complete in all material respects on and as of the relevant date or (iii) any bona fide action, suit, investigation, litigation or proceeding (whether administrative, judicial or otherwise) affecting the Borrower or any of its Subsidiaries shall be pending or threatened against any court, Governmental Authority or arbitrator that could be reasonably expected to, individually or in the aggregate, materially impair the transactions contemplated by the Loan Documents or in any manner call into question or challenge this Agreement or the making of the Loans, and in each case, 30 days shall have elapsed after the Credit Date;

THEN, (1) upon the occurrence of any Event of Default described in Section 7.6 or 7.7, automatically, and (2) upon the occurrence of any other Event of Default, at the request of (or with the consent of) Requisite Lenders, upon notice to the Borrower by the Administrative Agent, (A) the Commitments, if any, of each Lender having such Commitments shall immediately terminate; (B) each of the following shall immediately become due and payable, in each case without presentment, demand, protest or other requirements of any kind, all of which

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are hereby expressly waived by the Borrower:  (I) the unpaid principal amount of and accrued interest on the Loans and (II) all other Obligations.

SECTION 8.MISCELLANEOUS

8.1Assignments and Participations in Loans.

A.Right to Assign.  Each Lender shall have the right at any time to sell, assign or transfer all or a portion of its rights and obligations under this Agreement, including all or a portion of its Commitment or Loans owing to it or other Obligation (provided, however, that each such assignment shall be of a uniform, and not varying, percentage of all rights and obligations under and in respect of Loans and its Commitment):  (i) to any Person meeting the criteria of clause (A) of the definition of the term of “Eligible Assignee” or to any Approved Fund upon the giving of notice to the Borrower and the Administrative Agent; and (ii) to any Person meeting the criteria of clause (B) of the definition of the term of “Eligible Assignee” and consented to by each of the Borrower and the Administrative Agent (such consent not to be (x) unreasonably withheld or delayed and, (y) in the case of the Borrower, required at any time an Event of Default shall have occurred and then be continuing); provided further each such assignment pursuant to this Section 8.1A shall be in an aggregate amount of not less than $5,000,000, which such amount shall be reduced to $1,000,000 at any time an Event of Default shall have occurred and be continuing (or such lesser amount as may be agreed to by the Borrower and the Administrative Agent or as shall constitute the aggregate amount of the Commitment and Loans of the assigning Lender).

B.Requirements.  The assigning Lender and the assignee thereof shall execute and deliver to the Administrative Agent an Assignment Agreement, together with (i) a processing and recordation fee of $3,500, and (ii) such forms, certificates or other evidence, if any, with respect to United States federal income tax withholding matters as the assignee under such Assignment Agreement may be required to deliver to Administrative Agent pursuant to Section 2.8B(iii).

C.Acceptance and Notice of Assignment.  Upon its receipt of a duly executed and completed Assignment Agreement, together with the processing and recordation fee referred to in Section 8.1B (and any forms, certificates or other evidence required by this Agreement in connection therewith), the Administrative Agent shall record the information contained in such Assignment Agreement in the Register, shall give prompt notice thereof to the Borrower and shall maintain a copy of such Assignment Agreement.

D.Representations and Warranties of Assignee.  Each Lender, upon execution and delivery hereof or upon executing and delivering an Assignment Agreement, as the case may be, represents and warrants as of the Effective Date or as of the applicable Effective Date (as defined in the applicable Assignment Agreement) that (i) it is an Eligible Assignee; (ii) it has experience and expertise in the making of or investing in commitments or loans such as its Commitment or Loans, as the case may be; and (iii) it will make or invest in, as the case may be, its Commitment or Loans for its own account in the ordinary course of its business and without a view to distribution of its Commitment or Loans within the meaning of the Securities Act or the Exchange Act or other federal securities laws (it being understood that, subject to the provisions

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of this Section 8.1, the disposition of its Commitment or Loans or any interests therein shall at all times remain within its exclusive control).

E.Effect of Assignment.  Subject to the terms and conditions of this Section 8.1, as of the “Effective Date” specified in the applicable Assignment Agreement:  (i) the assignee thereunder shall have the rights and obligations of a “Lender” hereunder to the extent such rights and obligations hereunder have been assigned to it pursuant to such Assignment Agreement and shall thereafter be a party hereto and a “Lender” for all purposes hereof; (ii) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned thereby pursuant to such Assignment Agreement, relinquish its rights (other than any rights which survive the termination hereof under Section 8.8) and be released from its obligations hereunder (and, in the case of an Assignment Agreement covering all or the remaining portion of an assigning Lender’s rights and obligations hereunder, such Lender shall cease to be a party hereto; provided, anything contained in any of the Loan Documents to the contrary notwithstanding and (y) such assigning Lender shall continue to be entitled to the benefit of all indemnities hereunder as specified herein with respect to matters arising out of the prior involvement of such assigning Lender as a Lender hereunder); (iii) the Commitments shall be modified to reflect the Commitment of such assignee and any Commitment of such assigning Lender, if any; and (iv) if any such assignment occurs after the issuance of any Note to the assigning Lender, the assigning Lender shall, upon the effectiveness of such assignment or as promptly thereafter as practicable, surrender its Notes to the Administrative Agent for cancellation, and thereupon the Borrower shall issue and deliver new Notes, if so requested by the assignee and/or assigning Lender, to such assignee and/or to such assigning Lender, with appropriate insertions, to evidence the Loans of the assignee and/or the assigning Lender.

F.Certain Other Permitted Assignments.  In addition to any other assignment permitted pursuant to this Section 8.1, any Lender may assign and/or pledge all or any portion of its Loans, the other obligations owed by or to such Lender, if any, to secure obligations of such Lender including to any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve Bank; provided that no such assignment or pledge shall release any Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

G.Participations.  Each Lender shall have the right at any time to sell one or more participations to any Person (other than the Borrower, any of its Subsidiaries or any of its Affiliates) in all or any part of its Commitment, Loans or other Obligations.  The holder of any such participation, other than an Affiliate of the Lender granting such participation, shall not be entitled to require such Lender to take or omit to take any action hereunder except with respect to any amendment, modification or waiver that would (i) extend the final scheduled maturity of any Loan or Note in which such participant is participating, or reduce the rate or extend the time of payment of interest or fees thereon (except in connection with a waiver of applicability of any post default increase in interest rates) or reduce the principal amount thereof, or increase the amount of the participant’s participation over the amount thereof then in effect (it being understood that a waiver of any Event of Default or of a mandatory reduction in the Commitment shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan shall be permitted without the consent of any participant if the participant’s

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participation is not increased as a result thereof) or (ii) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement.  The Borrower agrees that each participant shall be entitled to the benefits of Sections 2.9C and 2.8 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 8.1A; provided (i) a participant shall not be entitled to receive any greater payment under Section 2.8 than the applicable Lender would have been entitled to receive with respect to the participation sold to such participant, unless the sale of the participation to such participant is made with the Borrower’s prior written consent and (ii) a participant that would be a Non-US Lender if it were a Lender shall not be entitled to the benefits of Section 2.8B unless the Borrower is notified of the participation sold to such participant and such participant agrees, for the benefit of the Borrower, to comply with Section 2.8B as though it were a Lender.  To the extent permitted by law, each participant also shall be entitled to the benefits of Section 8.5 as though it were a Lender, provided such participant agrees to be subject to Section 8.18 as though it were a Lender.

8.2Expenses.

Whether or not the transactions contemplated hereby shall be consummated, the Borrower agrees to pay promptly (i) all the actual and reasonable costs and out-of-pocket expenses of preparation of the Loan Documents; (ii) all the costs of furnishing all opinions by counsel for the Borrower; (iii) the reasonable fees, out-of-pocket expenses and disbursements of a single U.S. counsel in connection with the negotiation, preparation and execution of the Loan Documents and any other documents or matters requested by the Borrower; (iv) all the actual and reasonable costs and out-of-pocket reasonable fees, expenses and disbursements of any auditors, accountants, consultants or appraisers; (v) all other actual and reasonable costs and out-of-pocket expenses incurred by each Lead Arranger, the Administrative Agent and each Syndication Agent in connection with the syndication of the Loans and the negotiation, preparation and execution of the Loan Documents and the transactions contemplated thereby; (vi) all actual and reasonable costs and out-of-pocket expenses incurred by the Administrative Agent in connection with any consents, amendments, waivers or other modifications of the Loan Documents (including the reasonable fees, out-of-pocket expenses and disbursements of counsel to the Administrative Agent in connection therewith); and (vii) after the occurrence of an Event of Default, all costs and expenses, including reasonable attorneys’ fees (including, without duplication, allocated costs of internal counsel) and costs of settlement, incurred by any Agent or Lender in enforcing any Obligations of or in collecting any payments due from the Borrower hereunder or under the other Loan Documents by reason of such Event of Default (including in connection with the sale of, collection from, or other realization upon any collateral) or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a “work-out” or pursuant to any insolvency or bankruptcy cases or proceedings.

8.3Indemnity.

A.In addition to the payment of expenses pursuant to Section 8.2, whether or not the transactions contemplated hereby shall be consummated, the Borrower agrees to defend (subject to Indemnitees’ selection of counsel), indemnify, pay and hold harmless each of the Lead Arrangers and Agents and each Lender, and the respective partners, officers, directors, employees, agents, attorneys, and affiliates of each of the Lead Arrangers and each of the Agents

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and each Lender (collectively called the “Indemnitees”), from and against any and all Indemnified Liabilities (as hereinafter defined); provided that the Borrower shall not have any obligation to any Indemnitee hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise from the gross negligence or willful misconduct of that Indemnitee or any of its Affiliates as determined by a final judgment of a court of competent jurisdiction.  As used herein, “Indemnified Liabilities” means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, actions, judgments, suits, claims (including environmental claims), costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by the Borrower or any other Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby (including the Lenders’ agreements to make the Loans hereunder or the use or intended use of the proceeds thereof, or any enforcement of any of the Loan Documents).

B.To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in this Section 8.3 may be unenforceable in whole or in part because they are violative of any law or public policy, the Borrower shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of them.

C.To the extent permitted by applicable law, the Borrower and each of its Subsidiaries shall not assert, and each hereby waives, any claim against the Lenders, the Agents, the Lead Arrangers and their respective Affiliates, officers, directors, employees, attorneys or agents, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) (whether or not the claim therefor is based on contract, tort or duty imposed by any applicable legal requirement) arising out of, in connection with, arising out of, as a result of, or in any way related to, this Agreement or any other Loan Document, or any agreement or instrument contemplated hereby or thereby or referred to herein or therein, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof or any act or omission or event occurring in connection therewith, and the Borrower and each of its Subsidiaries hereby waives, releases and agrees not to sue upon any such claim or any such damages, whether or not accrued and whether or not known or suspected to exist in its favor.

8.4Set-Off.

In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence and during the continuance of any Event of Default, each of the Agents and each Lender (and each of their respective Affiliates) is hereby authorized by the Borrower at any time or from time to time subject, except in the case of an Event of Default under Section 7.1, 7.6 or 7.7, to the consent of the Administrative Agent (such

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consent not to be unreasonably withheld or delayed), without notice to the Borrower or to any other Person, any such notice being hereby expressly waived, to set-off and to appropriate and to apply any and all deposits (general or special, including Indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other Indebtedness at any time held or owing by such Agent or such Lender (or such Affiliate), and any of their respective affiliates, as the case may be, to or for the credit or the account of the Borrower against and on account of the obligations and liabilities of the Borrower to such Agent or such Lender under this Agreement and the other Loan Documents, including all claims of any nature or description arising out of or connected with this Agreement or any other Loan Document, irrespective of whether or not (i) such Agent or such Lender shall have made any demand hereunder or (ii) the principal of or the interest on the Loans or any other amounts due hereunder shall have become due and payable pursuant to Section 7 and although said Obligations, or any of them, may be contingent or unmatured.

8.5Amendments and Waivers.

No amendment, modification, termination or waiver of any provision of this Agreement or of any other Loan Document, or consent to any departure by the Borrower therefrom, shall in any event be effective without the written concurrence of the Requisite Lenders; provided that no amendment, modification, termination, waiver or consent shall, without the consent of each Lender affected thereby:  (i) extend the scheduled final maturity of any Loan; (ii) waive, reduce or postpone any scheduled repayment (but not prepayment); (iii) reduce the rate of interest on any Loan or any fee or other amount hereunder; (iv) extend the time for payment of any such interest, fees or other amounts; (v) reduce the principal amount of any Loan; (vi) amend, modify, terminate or waive any provision of this Section 8.5; (vii) amend, modify or replace the definition of “Requisite Lenders” or “Pro Rata Share”, or any provision of this Agreement which would alter the pro rata sharing of payments required hereunder; or (viii) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement; provided further that no such amendment, modification, termination or waiver of any provision of the Loan Documents, or consent to any departure by the Borrower therefrom, shall:  (1) increase the Commitments of any Lender over the amount thereof then in effect without the consent of such Lender; or (2) amend, modify, terminate or waive any provision of this Agreement as the same applies to the rights or obligations of any Agent, in each case without the consent of such Agent.  The Administrative Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of such Lender.  Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given.  No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances.

8.6Independence of Covenants.

All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or Potential Event of Default if such action is taken or condition exists.

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8.7Notices.

A.Generally.  Unless otherwise specifically provided herein, all notices or other communications provided for hereunder between the Borrower and any other Person party hereto shall be in writing (including facsimile or electronic mail) and mailed, sent by overnight courier, telecopied, e-mailed, or delivered to, in the case of each signatory to this Agreement, at its address set forth on the signature pages hereto, or, as to each party, at such other address or to such other person as shall be designated by such party in a written notice to all other parties.  Any notice, request or demand to or upon the Borrower or any other Person party hereto shall not be effective until received.

B.Intralinks.

(i)The Borrower hereby agree that they will provide to the Administrative Agent all information, documents and other materials that they are obligated to furnish to the Administrative Agent pursuant to the Loan Documents, including all notices, requests, financial statements, financial and other reports, certificates and other information materials, but excluding any such communication that (i) relates to a request for a new, or a conversion of an existing, borrowing or other Loan (including any election of an interest rate or interest period relating thereto), (ii) relates to the payment of any principal or other amount due under this Agreement prior to the scheduled date therefor, (iii) provides notice of any Potential Event of Default or Event of Default or (iv) is required to be delivered to satisfy any condition precedent to the effectiveness of this Agreement and/or any borrowing or other Loan hereunder (all such non-excluded communications being referred to herein collectively as “Communications”), by transmitting the Communications in an electronic/soft medium in a format acceptable to the Administrative Agent to oploanswebadmin@citigroup.com.  In addition, the Borrower agrees to continue to provide the Communications to the Administrative Agent in the manner specified in the Loan Documents but only to the extent requested by the Administrative Agent.

(ii)The Borrower further agrees that the Administrative Agent may make the Communications available to the Lenders by posting the Communications on Intralinks or a substantially similar electronic transmission system (the “Platform”).

(iii)THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE”.  THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS, OR THE ADEQUACY OF THE PLATFORM AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN THE COMMUNICATIONS.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY THE AGENT PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM.  IN NO EVENT SHALL THE ADMINISTRATIVE AGENT OR ANY OF ITS AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS OR REPRESENTATIVES (COLLECTIVELY, “AGENT PARTIES”) HAVE ANY LIABILITY TO THE BORROWER, ANY LENDER OR ANY OTHER PERSON OR

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ENTITY FOR DAMAGES OF ANY KIND, INCLUDING DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF THE BORROWER’S OR THE ADMINISTRATIVE AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET, EXCEPT TO THE EXTENT THE LIABILITY OF ANY AGENT PARTY IS FOUND IN A FINAL NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FROM SUCH AGENT PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

(iv)The Administrative Agent agrees that the receipt of the Communications by the Administrative Agent at its e-mail address set forth above shall constitute effective delivery of the Communications to the Administrative Agent for purposes of the Loan Documents.  Each Lender agrees that notice to it (as provided in the next sentence) specifying that the Communications have been posted to the Platform shall constitute effective delivery of the Communications to such Lender for purposes of the Loan Documents.  Each Lender agrees to notify the Administrative Agent in writing (including by electronic communication) from time to time of such Lender’s e-mail address to which the foregoing notice may be sent by electronic transmission and (ii) that the foregoing notice may be sent to such e-mail address.

8.8Survival of Representations, Warranties and Agreements.

A.All representations, warranties and agreements made herein shall survive the execution and delivery of this Agreement and the making of the Loans hereunder.

B.Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of the Borrower set forth in Sections 2.8, 2.9C, 8.2, 8.3 and 8.4 and the agreements of Lenders set forth in Sections 8.18, 9.2C and 9.4 shall survive the payment of the Loans and the termination of this Agreement.

8.9Failure or Indulgence Not Waiver; Remedies Cumulative.

No failure or delay on the part of any Lead Arranger, any Agent or any Lender in the exercise of any power, right or privilege hereunder or under any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege.  The rights, powers and remedies given to each Lead Arranger, each Agent and each Lender hereby are cumulative and shall be in addition to and independent of all rights, powers and remedies existing by virtue of any statute or rule of law or in any other Loan Document.  Any forbearance or failure to exercise, and any delay in exercising, any right, power or remedy hereunder shall not impair any such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy.

8.10Marshalling; Payments Set Aside.

No Agent or Lender shall be under any obligation to marshal any assets in favor of the Borrower or any other Person or against or in payment of any or all of the Obligations.  To the

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extent that the Borrower makes a payment or payments to the Administrative Agent or the Lenders (or to the Administrative Agent, on behalf of the Lenders) or the Administrative Agent or the Lenders enforce any security interests or exercises their rights of set-off, and such payment or payments or the proceeds of such enforcement or set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or set-off had not occurred.

8.11Severability.

In case any provision in or obligation under any Loan Document shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations of such Loan Document, the other Loan Documents or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

8.12Headings.

Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.

8.13Applicable Law.

THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

8.14Successors and Assigns.

This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of the Lenders (it being understood that each Lender’s rights of assignment are subject to Section 8.1).  The Borrower may not assign or delegate its rights or obligations hereunder or any interest therein without the prior written consent of each Lender.  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Indemnitees, and Affiliates of each of the Agents and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

8.15Consent to Jurisdiction and Service of Process.

ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE,

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COUNTY AND CITY OF NEW YORK.  BY EXECUTING AND DELIVERING THIS AGREEMENT, THE BORROWER, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY

(I)ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS;

(II)WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;

(III)AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE BORROWER AT ITS ADDRESS SET FORTH ON THE SIGNATURE PAGES HERETO;

(IV)AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE BORROWER IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT;

(V)AGREES THAT EACH AGENT AND EACH LENDER RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION; AND

(VI)AGREES THAT THE PROVISIONS OF THIS SECTION 8.15 RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.

8.16Waiver of Jury Trial.

EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED.  The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including contract claims, tort claims, breach of duty claims and all other common law and statutory claims.  Each party hereto acknowledges that this waiver is a material inducement to enter into a business relationship, that each has already relied on this waiver in entering into this Agreement, and that each will continue to rely on this waiver in their related future dealings.  Each party hereto further warrants and represents that it has reviewed this waiver with its legal counsel and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel.  THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN

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WAIVER SPECIFICALLY REFERRING TO THIS SECTION 8.16 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER.  In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.

8.17Confidentiality.

Each Agent and Lender shall hold all confidential, proprietary or non-public information regarding the Borrower and its Subsidiaries and their respective businesses which has been identified as confidential by any the Borrower and obtained pursuant to the requirements of this Agreement in accordance with such Agent’s or Lender’s customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices, it being understood and agreed by the Borrower that in any event each Lender may make disclosures (i) to Affiliates of such Agent or Lender and the directors, officers, employees, agents, advisors and other representatives of such Agent or Lender and their Affiliates (and to other persons authorized by an Agent or Lender to organize, present or disseminate such information in connection with disclosures otherwise made in accordance with this Section 8.17); (ii) reasonably required by any bona fide or potential assignee, transferee or participant in connection with the contemplated assignment, transfer or participation by any Lender of its Loans or any interest therein; (iii) to any rating agency when required by it, provided that, prior to any disclosure, such rating agency shall undertake in writing to preserve the confidentiality of any confidential information relating to the Borrower or its Subsidiaries received by it from any of the Agents or any Lender; (iv) required or requested by any Governmental Authority or representative thereof; provided that unless specifically prohibited by applicable law, court order or similar regulatory process, each Agent and Lender shall make reasonable efforts to notify the Borrower of any request by any Governmental Authority or representative thereof (other than any such request in connection with any examination of the financial condition or other routine examination of such Agent or Lender by such Governmental Authority) for disclosure of any such non-public information prior to disclosure of such information; (v) to any other party hereto; (vi) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder; (vii) to any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and their Obligations; (viii) with the consent of the Borrower or (ix) to the extent such information (x) becomes publicly available other than as a result of a breach of this Section 8.17 or (y) becomes available to any Agent, any Lender or their respective Affiliates on a nonconfidential basis from a source other than the Borrower so long as such Agent, such Lender or such Affiliate does not have knowledge that such source has an obligation to the Borrower to keep such information confidential; provided that in no event shall any Agent or Lender be obligated or required to return any materials furnished by the Borrower or any of its Subsidiaries.

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8.18Ratable Sharing.

The Lenders hereby agree among themselves that if any of them shall, whether by voluntary payment (other than a voluntary prepayment of Loans made and applied in accordance with the terms hereof), through the exercise of any right of set-off or banker’s lien, by counterclaim or cross action or by the enforcement of any right under the Loan Documents or otherwise, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal, interest, amounts payable in respect of commitment fees and other amounts then due and owing to such Lender hereunder or under the other Loan Documents (collectively, the “Aggregate Amounts Due” to such Lender), which is greater than the proportion received by any other Lender in respect to of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall (i) notify the Administrative Agent of the receipt of such payment and (ii) apply a portion of such payment to purchase (for cash at face value) participations (which it shall be deemed to have purchased from each seller of a participation simultaneously upon the receipt by such seller of its portion of such payment), or such other adjustments as shall be equitable, in the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate Amounts Due to them; provided that, if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender upon the bankruptcy or reorganization of the Borrower or otherwise, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest. The Borrower and each of its Subsidiaries expressly consents to the foregoing arrangement and agrees that any holder of a participation so purchased may exercise any and all rights of banker’s lien, set-off or counterclaim with respect to any and all monies owing by the Borrower or any of its Subsidiaries to that holder with respect thereto as fully as if that holder were owed the amount of the participation held by that holder.

8.19Counterparts; Effectiveness.

This Agreement and any amendments, waivers, consents or supplements hereto or in connection herewith may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt by the Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof.

8.20Obligations Several; Independent Nature of Lenders’ Rights.

The obligations of the Lenders hereunder are several and no Lender shall be responsible for the obligations or Commitment of any other Lender hereunder. Nothing contained herein or in any other Loan Document, and no action taken by the Lenders pursuant hereto or thereto, shall be deemed to constitute the Lenders as a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising

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out hereof and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose.

8.21Usury Savings Clause.

Notwithstanding any other provision herein, the aggregate interest rate charged with respect to any of the Obligations, including all charges or fees in connection therewith deemed in the nature of interest under applicable law shall not exceed the Highest Lawful Rate. As used herein, “Highest Lawful Rate” means the maximum lawful interest rate, if any, that at any time or from time to time may be contracted for, charged, or received under the laws applicable to any Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow. If the rate of interest (determined without regard to the preceding sentence) under this Agreement at any time exceeds the Highest Lawful Rate, the outstanding amount of the Loans made hereunder shall bear interest at the Highest Lawful Rate until the total amount of interest due hereunder equals the amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect. In addition, if when the Loans made hereunder are repaid in full the total interest due hereunder (taking into account the increase provided for above) is less than the total amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect, then to the extent permitted by law, the Borrower shall pay to the Administrative Agent an amount equal to the difference between the amount of interest paid and the amount of interest which would have been paid if the Highest Lawful Rate had at all times been in effect. Notwithstanding the foregoing, it is the intention of the Lenders and the Borrower to conform strictly to any applicable usury laws. Accordingly, if any Lender contracts for, charges, or receives any consideration which constitutes interest in excess of the Highest Lawful Rate, then any such excess shall be cancelled automatically and, if previously paid, shall at such Lender’s option be applied to the outstanding amount of the Loans made hereunder or be refunded to the Borrower.

SECTION 9.AGENTS

9.1Appointment.

ABN AMRO and MSSF are hereby appointed as Syndication Agents hereunder, and each Lender hereby authorizes the Syndication Agents to act as its agents in accordance with the terms of this Agreement and the other Loan Documents. Bank of America, N.A. and Wachovia Bank, National Association are hereby appointed as Documentation Agents hereunder, and each Lender hereby authorizes the Documentation Agents to act as its agents in accordance with the terms of this Agreement and the other Loan Documents. Citibank is hereby appointed by each Lender as the Administrative Agent hereunder and under the other Loan Documents and each Lender hereby authorizes the Administrative Agent to act as its agent in accordance with the terms of this Agreement and the other Loan Documents. Each Agent hereby agrees to act upon the express conditions contained in this Agreement and the other Loan Documents, as applicable. The provisions of this Section 9 are solely for the benefit of the Agents and the Lenders, and the

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Borrower shall have no rights as a third party beneficiary of any of the provisions thereof. In performing its functions and duties under this Agreement, each of the Agents shall act solely as an agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for the Borrower or any of its Subsidiaries.

9.2Powers and Duties; General Immunity.

A.            Powers; Duties Specified. Each Lender irrevocably authorizes each Agent to take such action on such Lender’s behalf and to exercise such powers, rights and remedies hereunder and under the other Loan Documents as are specifically delegated or granted to such Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto. Each Agent shall have only those duties and responsibilities that are expressly specified in this Agreement and the other Loan Documents. Each Agent may exercise such powers, rights and remedies and perform such duties by or through its agents or employees. No Agent shall have, by reason of this Agreement or any of the other Loan Documents, a fiduciary relationship in respect of any Lender; and nothing in this Agreement or any of the other Loan Documents, expressed or implied, is intended to or shall be so construed as to impose upon any Agent any obligations in respect of this Agreement or any of the other Loan Documents except as expressly set forth herein or therein. Anything herein to the contrary notwithstanding, none of the Lead Arrangers, Syndication Agents or Documentation Agents listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as a Lender hereunder.

B.            No Responsibility for Certain Matters. No Agent shall be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectability or sufficiency of this Agreement or any other Loan Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by any Agent to the Lenders or by or on behalf of the Borrower to any Agent or any Lender in connection with the Loan Documents and the transactions contemplated thereby or for the financial condition or business affairs of the Borrower or any other Person liable for the payment of any Obligations, nor shall any Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Loan Documents (other than to confirm receipt of items required under this Agreement or any Loan Document to be delivered to such Agent) or as to the use of the proceeds of the Loans or as to the existence or possible existence of any Event of Default or Potential Event of Default (unless and until notice describing such Event of Default or Potential Event of Default is given to such Agent by the Borrower or any other Agent) or to make disclosures with respect to the foregoing. Anything contained in this Agreement to the contrary notwithstanding, the Administrative Agent shall not have any liability arising from confirmations of the amount of outstanding Loans or the component amounts thereof.

C.            Exculpatory Provisions. No Agent or any of its officers, partners, directors, employees or agents shall be liable to the Lenders for any action taken or omitted by any Agent under or in connection with any of the Loan Documents except to the extent caused by such

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Agent’s gross negligence or willful misconduct. Each Agent shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection with this Agreement or any of the other Loan Documents or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until such Agent shall have received instructions in respect thereof from the Requisite Lenders (or such other the Lenders as may be required to give such instructions under Section 8.5) and, upon receipt of such instructions from the Requisite Lenders (or such other Lenders, as the case may be), such Agent shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions. Without prejudice to the generality of the foregoing, (i) each of Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for the Borrower and its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against any Agent as a result of such Agent acting or (where so instructed) refraining from acting under this Agreement or any of the other Loan Documents in accordance with the instructions of the Requisite Lenders (or such other Lenders as may be required to give such instructions under Section 8.5).

D.            Agents Entitled to Act as Lenders. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, any Agent in its individual capacity as a Lender hereunder. With respect to its participation in the Loans, each Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not performing the duties and functions delegated to it hereunder, and the term “Lender” shall, unless the context clearly otherwise indicates, include each Agent in its individual capacity. Any Agent and its Affiliates may accept deposits from, lend money to, own Securities of, and generally engage in any kind of banking, trust, financial advisory or other business with the Borrower or any of their Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from the Borrower for services in connection with this Agreement and otherwise without having to account for the same to Lenders. No Agent shall have any duty to disclose any information obtained or received by it or any of its Affiliates relating to the Borrower or any of its Subsidiaries to the extent such information was obtained or received in any capacity other than as an Agent under this Agreement. In the event that Citibank or any of its Affiliates shall be or become an indenture trustee under the Trust Indenture Act of 1939 (as amended, the “Trust Indenture Act”) in respect of any securities issued or guaranteed by the Borrower, the parties hereto acknowledge and agree that any payment or property received in satisfaction of or in respect of any obligation of the Borrower hereunder or under any other Loan Document by or on behalf of Citibank in its capacity as the Administrative Agent for the benefit of any Lender under this Agreement or any Note (other than Citibank or an Affiliate of Citibank) and which is applied in accordance with this Agreement shall be deemed to be exempt from the requirements of Section 311 of the Trust Indenture Act pursuant to Section 311(b)(3) of the Trust Indenture Act.

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9.3Representations and Warranties; No Responsibility For Appraisal of Creditworthiness.

Each Lender represents and warrants that it has made its own independent investigation of the financial condition and affairs of the Borrower and its Subsidiaries in connection with the making of the Loans hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of the Borrower and its Subsidiaries. No Agent shall have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of the Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter, and no Agent shall have any responsibility with respect to the accuracy of or the completeness of any information provided to the Lenders.

9.4Right to Indemnity.

Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify the Administrative Agent, to the extent that the Administrative Agent shall not have been reimbursed by the Borrower to the full extent required by this Agreement or any other Loan Document, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against such Agent in exercising its powers, rights and remedies or performing its duties hereunder or under the other Loan Documents or otherwise in its capacity as Administrative Agent in any way relating to or arising out of this Agreement or the other Loan Documents; provided that (a) no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent’s gross negligence or willful misconduct and (b) no Lender shall be liable for the payment of any portion of an Indemnified Liability pursuant to this Section 9.4 unless such Indemnified Liability was incurred by the Administrative Agent in its capacity as such or by another Person acting for the Administrative Agent in such capacity. If any indemnity furnished to the Administrative Agent for any purpose shall, in the opinion of the Administrative Agent, be insufficient or become impaired, the Administrative Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished.

9.5Successor Administrative Agent.

The Administrative Agent may resign at any time by giving thirty (30) days’ prior written notice thereof to the Lenders and the Borrower, and the Administrative Agent may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to the Borrower and the Administrative Agent and signed by the Requisite Lenders. Upon any such notice of resignation or any such removal, the Requisite Lenders shall have the right, with, so long as no Potential Event of Default or Event of Default exists, the consent of the Borrower (which consent shall not be unreasonably withheld or delayed), upon five (5) Business Days’ notice to the Borrower, to select a successor Administrative Agent. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, that successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Administrative Agent and the retiring or

73

removed Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring or removed Administrative Agent’s resignation or removal hereunder as Administrative Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement.

9.6Acknowledgment of Potential Related Transactions.

The Borrower hereby acknowledge its understanding that each of the Lead Arrangers, each of the Agents and each of the Lenders may from time to time effect transactions (for its own account or the account of customers), and hold positions in loans or options on loans that may be the subject of this arrangement. In addition, certain Affiliates of the Lenders are full service securities firms and as such may from time to time effect transactions (for its own account or the account of customers), and hold positions, in loans or options on loans or securities or options on securities that may be the subject of this arrangement. In addition, each of the Lead Arrangers, each of the Agents and each of the Lenders may employ the services of its Affiliates in providing certain services hereunder and may, subject to Section 8.17, exchange with such Affiliates information concerning the Borrower and other companies that may be the subject of this arrangement.

[Remainder of page intentionally left blank]

74

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

HOSPIRA, INC.
By:	/s/ Lori O. Carlson
Name: Lori O. Carlson
Title: Corporate Vice President and Treasurer
Notice Address:
275 N. Field Road
Lake Forest, IL 60064
Attention: Vice President and Treasurer
Tel:		(224) 212-2000
Fax:		(224) 212-3284
email: lori.carlson@hospira.com

CITIBANK, N.A.,
as Lender and Administrative Agent
By:	/s/ Kevin A. Ege
Name: Kevin A. Ege
Title: Vice President
Notice Address:
Two Penns Way
New Castle, DE 19720
Attention: Bank Loan Syndications
Tel:		(302) 894-6010
Fax:		(212) 994-0961
with a copy to:
390 Greenwich Street
New York, NY 10013
Attention: Chris Snider
Tel:		(212) 816-8917
Fax:		(212) 816-8051
email: christopher.snider@citigroup.com

2

ABN AMRO BANK N.V., as Lender
By:	/s/ James W. Pierpont
Name: James W. Pierpont
Title: Corporate Managing Director
By:	/s/ Dianne D. Barkley
Name: Dianne D. Barkley
Title: Managing Director
Notice Address:
540 West Madison Street, Suite 2100
Chicago, IL 60661
Attention: Loan Administration
Tel:		(312) 992-5150
Fax:		(312) 992-5155

3

MORGAN STANLEY SENIOR FUNDING, INC., as Lender
By:	/s/ Elizabeth Hendricks
Name: Elizabeth Hendricks
Title: Vice President
Notice Address:
1633 Broadway, 25th Floor
New York, NY 10019
Attention: James Morgan/Larry Benison
Tel:		(212) 537-1470 / (212) 537-1439
Fax:		(212) 537-1867 / 1866
email:

4

BANK OF AMERICA, N.A., as Lender
By:	/s/ Kevin R. Wagley
Name: Kevin R. Wagley
Title: Senior Vice President
Notice Address:
2001 Clayton Road
Concord, CA 94520
Attention: Shashanna Kratz
Tel:		(925) 675-8057
Fax:		(888) 985-9252
email: shashanna.a.kratz@bankofamerica.com

5

WACHOVIA BANK, NATIONAL ASSOCIATION,
as Lender
By:	/s/ James S. Conville
Name: James S. Conville
Title: Assistant Vice President
Notice Address:
201 South College Street CP9, NC 1183
Charlotte, NC 28288
Attention: Anita Johnston
Tel:		(704) 715-9822
Fax:		(704) 715-0095
email: anita.johnston1@wachovia.com

6

SUNTRUST BANK, as Lender
By:	/s/ Gregory M. Ratliff
Name: Gregory M. Ratliff
Title: Vice President
Notice Address:
200 South Orange Avenue, MC 1108
Orlando, FL 32801
Attention: Arnette Delaine
Tel:		(407) 237-2436
Fax:		(407) 237-5342
email: arnette.delaine@suntrust.com

7

BANK OF TOKYO-MITSUBISHI UFJ, LTD.,
CHICAGO BRANCH (F/K/A THE BANK OF
TOKYO—MITSUBISHI, LTD., CHICAGO BRANCH)
as Lender
By:	/s/ Tsuguyuki Umene
Name: Tsuguyuki Umene
Title: Deputy General Manager
Notice Address:
The Bank of Tokyo-Mitsubishi UFJ, Ltd.,
Chicago Branch
227 W. Monroe St., Suite 2300
Chicago, IL 60606
Attention: Corporate Banking—Ms. Diane Tkach
Tel:		(312) 696-4663
Fax:		(312) 696-4535
email: dtkach@us.mufg.jp

8

BMO CAPITAL MARKETS FINANCING, INC., as Lender
By:	/s/ Joseph W. Linder
Name: Joseph W. Linder
Title: Vice President
Notice Address:
115 South LaSalle Street, 12 West
Chicago, IL 60603
Attention: Joseph W. Linder
Tel:		(312) 750-3784
Fax:		(312) 750-6057
email: joseph.linder@bmo.com

9

THE NORTHERN TRUST COMPANY, as Lender
By:	/s/ Courtney L. O’Connor
Name: Courtney L. O’Connor
Title: 2nd Vice President
Notice Address:
50 South LaSalle Street
Chicago, IL 60675
Attention: Linda Honda
Tel:		(312) 444-3532
Fax:		(312) 630-1566
email: LSH@ntrs.com

10

COMMONWEALTH BANK OF AUSTRALIA, as Lender
By:	/s/ Jeff Heazlewood
Name: Jeff Heazlewood
Title: Relationship Executive
Notice Address:
Commonwealth Bank of Australia
599 Lexington Avenue
17th Floor
New York, NY 10022
Tel: (212) 848-9312
Fax: (212) 336-7725
email: joanne.park@cba.com.au

11

NATIONAL AUSTRALIA BANK LIMITED
ABN 12 004 044 937,
as Lender
By:	/s/ Stephen Daniels
Name: Stephen Daniels
Title: Client Director
Notice Address:
245 Park Avenue, Level 28
New York, NY 10167
Attention: Stephen Daniels
Tel:		(212) 916-9509
Fax:		(212) 983-7360
email: sdaniels@nabny.com

12

THE ROYAL BANK OF SCOTLAND PLC, as Lender
By:	/s/ Iain Stewart
Name: Iain Stewart
Title: Senior Vice President
Notice Address:
101 Park Avenue
6th Floor
New York, NY 10178
Attention: Julie Strelchenko
Tel:		(212) 401-1404
Fax:		(212) 401-1494
email: julie.strelchenko@rbos.com

13

EX-10.18

Exhibit 10.18

EXECUTION COPY

BRIDGE LOAN AGREEMENT

dated as of January 15, 2007

among

HOSPIRA, INC.,
as the Borrower,

THE BANKS AND FINANCIAL INSTITUTIONS LISTED HEREIN,
as Lenders,

ABN AMRO INCORPORATED,
CITIGROUP GLOBAL MARKETS INC.
and
MORGAN STANLEY SENIOR FUNDING, INC.,
as Joint Lead Bookrunners and Joint Lead Arrangers,

ABN AMRO INCORPORATED
and
MORGAN STANLEY SENIOR FUNDING, INC.,
as Joint Syndication Agents,

and

CITICORP NORTH AMERICA, INC.,
as Administrative Agent

BRIDGE LOAN AGREEMENT

TABLE OF CONTENTS

		Page
SECTION 1. DEFINITIONS		1
1.1	Certain Defined Terms	1
1.2	Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement	19
1.3	Other Definitional Provisions and Rules of Construction	19
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS AND LOANS		20
2.1	Commitment; Making of Loans	20
2.2	Repayment	21
2.3	Pro Rata Shares; Availability of Funds	21
2.4	The Register; Evidence of Debt; Notes	22
2.5	Interest on the Loans	23
2.6	Fees	26
2.7	Provisions Regarding Payments	26
2.8	Increased Costs; Taxes	29
2.9	Special Provisions Governing LIBOR Rate Loans	32
2.10	Defaulting Lenders	34
2.11	Removal or Replacement of a Lender	34
2.12	Mitigation	35
SECTION 3. CONDITIONS PRECEDENT		36
3.1	Conditions to Effectiveness	36
3.2	Conditions Precedent to each Loan	37
SECTION 4. REPRESENTATIONS AND WARRANTIES		39
4.1	Organization, Powers, Qualification, Good Standing, Business and Subsidiaries	39
4.2	Authorization of Borrowing, etc.	39
4.3	Disclosure	40
4.4	Financial Condition	40
4.5	No Material Adverse Change	41
4.6	Intellectual Property Matters	41
4.7	No Litigation; Compliance with Laws	41
4.8	No Default	42
4.9	Governmental Regulation	42
4.10	Securities Activities	42
4.11	Employee Benefit Plans	42
4.12	Environmental Protection	43
4.13	Pari Passu	44

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4.14	Restrictions	44
SECTION 5. AFFIRMATIVE COVENANTS		44
5.1	Financial Statements and Other Reports	44
5.2	Books and Records	46
5.3	Existence	47
5.4	Insurance	47
5.5	Payment of Taxes and Claims	47
5.6	Payment and Performance of Obligations	47
5.7	Maintenance of Properties	47
5.8	Compliance with Laws	48
5.9	Use of Proceeds	48
5.10	Claims Pari Passu	48
5.11	Further Assurances	48
SECTION 6. NEGATIVE COVENANTS		48
6.1	Liens	49
6.2	Indebtedness	50
6.3	Acquisitions	52
6.4	Restrictions on Subsidiary Distributions	52
6.5	Restricted Payments	52
6.6	Restriction on Fundamental Changes and Asset Sales	52
6.7	Conduct of Business	53
6.8	Fiscal Year	53
6.9	Subordinated Indebtedness	53
6.10	Transactions with Shareholders and Affiliates	53
6.11	Financial Covenants	54
6.12	Interest Rate Agreements and Currency Agreements	55
SECTION 7. EVENTS OF DEFAULT		55
7.1	Failure to Make Payments When Due	55
7.2	Default in Other Agreements	55
7.3	Breach of Certain Covenants	55
7.4	Breach of Representation or Warranty	56
7.5	Other Defaults Under Loan Documents	56
7.6	Involuntary Bankruptcy; Appointment of Receiver, etc.	56
7.7	Voluntary Bankruptcy; Appointment of Receiver, etc.	56
7.8	Judgments and Attachments	57
7.9	Dissolution	57
7.10	Employee Benefit Plans	57
7.11	Change in Control	57
7.12	Repudiation of Obligations	57
7.13	Material Adverse Change	57

ii

SECTION 8. MISCELLANEOUS		58
8.1	Assignments and Participations in Loans	58
8.2	Expenses	60
8.3	Indemnity	61
8.4	Set-Off	62
8.5	Amendments and Waivers	62
8.6	Independence of Covenants	63
8.7	Notices	63
8.8	Survival of Representations, Warranties and Agreements	64
8.9	Failure or Indulgence Not Waiver; Remedies Cumulative	65
8.10	Marshalling; Payments Set Aside	65
8.11	Severability	65
8.12	Headings	65
8.13	Applicable Law	65
8.14	Successors and Assigns	66
8.15	Consent to Jurisdiction and Service of Process	66
8.16	Waiver of Jury Trial	67
8.17	Confidentiality	67
8.18	Ratable Sharing	68
8.19	Counterparts; Effectiveness	69
8.20	Obligations Several; Independent Nature of Lenders’ Rights	69
8.21	Usury Savings Clause	69
SECTION 9. AGENTS		70
9.1	Appointment	70
9.2	Powers and Duties; General Immunity	70
9.3	Representations and Warranties; No Responsibility For Appraisal of Creditworthiness	72
9.4	Right to Indemnity	72
9.5	Successor Administrative Agent	73
9.6	Acknowledgment of Potential Related Transactions	73

iii

EXHIBITS

I	FORM OF NOTICE OF BORROWING
II	FORM OF CONVERSION/CONTINUATION NOTICE
III	FORM OF NOTE
IV	FORM OF CERTIFICATE RE NON-BANK STATUS
V	FORM OF ASSIGNMENT AGREEMENT
VI	FORM OF SECRETARY’S CERTIFICATE
VII	FORM OF OFFICER’S CERTIFICATE (SECTION 3.1A(v))
VIII	FORM OF OFFICER’S CERTIFICATE (SECTION 3.1A(vi))

iv

SCHEDULES

2.1A	LENDERS’ COMMITMENTS AND PRO RATA SHARES
6.1	LIENS
6.2	SUBSIDIARY INDEBTEDNESS
6.10	TRANSACTIONS WITH AFFILIATES

v

BRIDGE LOAN AGREEMENT

This BRIDGE LOAN AGREEMENT is dated as of January 15, 2007 and entered into by and among Hospira, Inc., a Delaware corporation (the “Borrower”), the banks and financial institutions listed on the signature pages hereof (collectively, the “Initial Lenders”), ABN AMRO Incorporated (“ABN AMRO”), Citigroup Global Markets, Inc. (“CGMI”) and Morgan Stanley Senior Funding, Inc. (“MSSF”) as joint lead bookrunners and joint lead arrangers (in such capacity, the “Lead Arrangers”), ABN AMRO and MSSF as joint syndication agents (in such capacity, the “Syndication Agents”), and Citicorp North America, Inc. as administrative agent for the Lenders (“Citicorp” and in such capacity, the “Administrative Agent”).

PRELIMINARY STATEMENTS

The Borrower has requested, and the Lenders have agreed to extend, term loans in the amount and on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual agreements contained herein, and other good and valuable consideration, the receipt and sufficiency which are hereby acknowledged, the Borrower, the Lenders, the Lead Arrangers, the Syndication Agents, the Documentation Agents and the Administrative Agent agree as follows:

SECTION 1. DEFINITIONS

1.1Certain Defined Terms.

The following terms used in this Agreement shall have the following meanings:

“ABN AMRO” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Acquisition” means the purchase or other acquisition (by merger or otherwise) by a Person of all of substantially all of the assets of, or all of the Capital Stock of, or a business line or unit or a division of, any other Person.

“Administrative Agent” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Affected Lender” shall have the meaning ascribed to such term in Section 2.9B.

“Affiliate” means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power (i) to vote 10% or more of the Securities having ordinary voting power for the election of directors of such Person or (ii) to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise.

“Agents” means the Administrative Agent and the Syndication Agents, collectively, and also means and includes any successor Administrative Agent appointed pursuant to Section 9.5.

“Aggregate Amounts Due” shall have the meaning ascribed to such term in Section 8.18.

“Agreement” means this Loan Agreement as it may be amended, supplemented or otherwise modified from time to time.

“Applicable Law” means all applicable provisions of constitutions, laws, statutes, ordinances, rules, treaties, regulations, permits, licenses, approvals, interpretations and orders of courts or Governmental Authorities and all orders and decrees of all courts and arbitrators.

“Applicable Margin” means, as of any date, a percentage per annum determined by reference to the applicable Performance Level with respect to the Borrower in effect on such date, as set forth below:

Performance Level	Level I		Level II		Level III		Level IV		Level V
Base Rate Applicable Margin	0	%	0	%	0	%	0	%	0.20	%
LIBOR Applicable Margin	0.350	%	0.450	%	0.600	%	0.700	%	1.200	%
Commitment Fee	0.075	%	0.090	%	0.100	%	0.150	%	0.250	%

For purposes hereof, “Performance Level” means, with respect to the Borrower, Performance Level I, Performance Level II, Performance Level III, Performance Level IV or Performance Level V, as identified by reference to the public debt rating of the Borrower, as the case may be, in effect on such date as set forth below:

Performance Level	Public Debt Rating
Level I	Long Term Senior Unsecured Debt rated greater than or equal to A- by S&P or A3 by Moody’s
Level II	Long Term Senior Unsecured Debt rated greater than or equal toBBB+ by S&P or Baa1 by Moody’s
Level III	Long Term Senior Unsecured Debt rated greater than or equal to BBB by S&P or Baa2 by Moody’s
Level IV	Long Term Senior Unsecured Debt rated greater than or equal to BBB- by S&P or Baa3 by Moody’s
Level V	Long Term Senior Unsecured Debt rated less than BBB- by S&P or Baa3 by Moody’s, and at all other times (including if such ratings are not available from both S&P and Moody’s)

2

For purposes of this definition, the Performance Level shall be determined by the applicable public debt rating for the Borrower as follows:  (i) the public debt ratings shall be determined by the then-current rating announced by either S&P or Moody’s, as the case may be, for any class of non-credit-enhanced long-term senior unsecured debt issued by the Borrower; (ii) if only one of S&P and Moody’s shall have in effect such a public debt rating, the Performance Level shall be determined by reference to the applicable rating; (iii) if neither S&P nor Moody’s shall have in effect such a public debt rating, the applicable Performance Level will be Level V; (iv) if such public debt ratings established by S&P and Moody’s shall fall within different levels, the public debt rating will be determined by the higher of the two ratings, provided that, in the event that the lower of such public debt ratings is more than one level below the higher of such public debt ratings, the public debt rating will be determined based upon the level that is one level above the lower of such public debt ratings; (v) if any such public debt rating established by S&P or Moody’s shall be changed, such change shall be effective as of the date on which such change is first announced publicly by the rating agency making such change; and (vi) if S&P or Moody’s shall change the basis on which such public debt ratings are established, each reference to the public debt rating announced by S&P or Moody’s, as the case may be, shall refer to the then-equivalent rating by S&P or Moody’s, as the case may be.

“Applicable Reserve Requirement” means, at any time with respect to any Lender, for any LIBOR Rate Loan, the rate, expressed as a decimal, at which reserves (including any basic marginal, special, supplemental, emergency or other reserves) are required to be maintained by such Lender against “Eurocurrency liabilities” (as such term is defined in Regulation D) under regulations issued from time to time by the Board of Governors of the Federal Reserve System or other applicable banking regulator. Without limiting the effect of the foregoing, the Applicable Reserve Requirement shall reflect any other reserves required to be maintained by the applicable Lender with respect to (i) any category of liabilities which includes deposits by reference to which the applicable LIBOR rate is to be determined, or (ii) any category of extensions of credit or other assets which include LIBOR Rate Loans. For purposes hereof, a LIBOR Rate Loan shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credit for proration, exceptions or offsets that may be available from time to time to the applicable Lender.

“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“Asset Sale” means a sale, lease or sub-lease (as lessor or sublessor), sale and leaseback transaction, assignment, conveyance, transfer or other disposition to, or any exchange of property with, any Person, in one transaction or a series of transactions, of all or any part of the Borrower’s or any of its Subsidiary’s businesses, properties or assets of any kind, whether real, personal, or mixed and whether tangible or intangible, whether now owned or hereafter acquired, including the Capital Stock of any Subsidiary of the Borrower, other than such businesses, properties or assets sold in the ordinary course of business and consistent with past business practice of the Borrower and its Subsidiaries.

3

“Assignment Agreement” means an assignment agreement, substantially in the form of Exhibit V hereto, satisfactory in form and substance to the Administrative Agent.

“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”, as now and hereafter in effect, or any successor statute.

“Base Rate” means, for any day, a rate per annum equal to the greater of (i) the Prime Rate in effect on such day and (ii) the Federal Funds Effective Rate in effect on such day plus ½ of 1%. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

“Base Rate Loan” means a Loan bearing interest at a rate determined by reference to the Base Rate.

“Borrower” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Borrowing” means a borrowing consisting of Loans of the same Type that (i) are made, continued or converted on the same day and (ii) in the case of LIBOR Rate Loans, have the same Interest Period.

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed, provided that, when used in connection with a LIBOR Rate Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in Dollar deposits in the London interbank market.

“Capital Lease”, as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person.

“Capital Stock” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation), including partnership interests and membership interests, and any and all warrants, rights or options to purchase or other arrangements or rights to acquire any of the foregoing.

“Cash” means money, currency or a credit balance in any demand or deposit account.

“Certificate re Non-Bank Status” means a certificate substantially in the form of Exhibit IV annexed hereto delivered by a Lender to the Administrative Agent pursuant to Section 2.8B(iii)(b).

“CGMI” shall have the meaning ascribed to such term in the introduction to this Agreement.

4

“Change of Control” means (i) any Person or “group” (within the meaning of Rules 13d 3 and 13d 5 under the Exchange Act) shall have acquired beneficial ownership of 30% or more on a fully diluted basis of the voting and/or economic interest in the Capital Stock of the Borrower; (ii) any Person or “group” (within the meaning of Rules 13d 3 and 13d 5 under the Exchange Act) shall have obtained the power (whether or not exercised) to elect a majority of the members of the board of directors (or similar governing body) of the Borrower; (iii) during any period of up to 24 consecutive months, commencing before or after the date of this Agreement, a majority of the members of the board of directors of the Borrower shall not be Continuing Directors; or (iv) any Person or “group” (within the meaning of Rules 13d 3 and 13d 5 under the Exchange Act) shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence over the management or policies of the Borrower.

“Citicorp” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Commitment” means the amount of the commitment of a Lender to make a Loan hereunder and “Commitments” means such commitments of all Lenders in the aggregate. The amount of each Lender’s Commitment, if any, is set forth on Schedule 2.1A or in the applicable Assignment Agreement, subject to any adjustment, increase or reduction pursuant to the terms and conditions hereof. The aggregate amount of the Commitments as of the date of this Agreement is $1,425,000,000.

“Commitment Fee” shall have the meaning ascribed to such term in Section 2.6(i).

             “Compliance Certificate” means a certificate of the chief financial officer, treasurer or controller of the Borrower setting forth computations in reasonable detail demonstrating (i) compliance with the covenants set forth in Section 6.11, as at the end of the period covered by such financial statements, and (ii) certifying that such officer has obtained no knowledge of any Potential Event of Default or Event of Default except as specified in such certificate.

“Consolidated Adjusted EBITDA” means, in respect of the Borrower and its Subsidiaries on a consolidated basis, for any period, an amount equal to (i) the sum, without duplication, of the amounts for such period of (a) Consolidated Net Income, (b) Consolidated Financing Expense, (c) provisions for taxes based on income, (d) total depreciation expense, (e) total amortization expense, and (f) other non-Cash items reducing Consolidated Net Income (excluding any such non-Cash item to the extent that it represents an accrual or reserve for potential Cash items in any future period or amortization of a prepaid Cash item that was paid in a prior period) and (e) Permitted Addbacks, minus (ii) other non-Cash items increasing Consolidated Net Income for such period (excluding any such non-Cash item to the extent it represents the reversal of an accrual or reserve for potential Cash item in any prior period).

“Consolidated Financing Expense” means, in respect of the Borrower and its Subsidiaries on a consolidated basis, for any period, total interest expense (including that portion

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attributable to Capital Leases in accordance with GAAP and capitalized interest) with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries, including all commissions, discounts and other fees and charges owed with respect to any letters of credit and bankers’ acceptance financing and net costs under Interest Rate Agreements.

“Consolidated Net Income” means, in respect of the Borrower and its Subsidiaries on a consolidated basis, for any period, (i) the net income (or loss) for the Borrower and its Subsidiaries for such period taken as a single accounting period determined in conformity with GAAP, minus (ii) (a) the income (or loss) of any Person (other than a Subsidiary of the Borrower) in which any other Person (other than the Borrower or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to the Borrower or any of its Subsidiaries by such Person during such period, (b) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of the Borrower or is merged into or consolidated with the Borrower or any of its Subsidiaries or that Person’s assets are acquired by the Borrower or any of its Subsidiaries, (c) the income of any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, (d) any after-tax gains or losses attributable to Asset Sales or returned surplus assets of any Pension Plan, and (e) (to the extent not included in clauses (a) through (d) above) any net extraordinary gains or net non-cash extraordinary losses.

“Consolidated Net Worth” means, at any date of determination, all items which in conformity with GAAP would be included under shareholders’ equity on a consolidated balance sheet of the Borrower and its Subsidiaries.

“Consolidated Total Debt” means, in respect of the Borrower and its Subsidiaries on a consolidated basis, as at any date of determination, the aggregate stated balance sheet amount of all Indebtedness, determined on a consolidated basis in accordance with GAAP.

“Continuing Director” as applied to any Person, means, for any period, an individual who is a member of the board of directors of such Person on the first day of such period or whose election to the board of directors of such Person is approved by a majority of the other Continuing Directors.

“Contractual Obligation”, as applied to any Person, means any provision of any securities issued by that Person or of any indenture, mortgage, deed of trust, or other material contract, undertaking, agreement or other material instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject.

“Conversion/Continuation Date” means the effective date of a continuation or conversion, as the case may be, as set forth in the applicable Conversion/Continuation Notice.

“Conversion/Continuation Notice” means a Conversion/Continuation Notice substantially in the form of Exhibit II.

“Credit Date” shall have the meaning ascribed to such term in Section 2.1A.

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“Credit Exposure” means, with respect to any Lender as of any date of determination, (i) prior to the termination of the Commitments, that Lender’s Commitment; and (ii) after the termination of the Commitments, the aggregate outstanding principal amount of the Loans of that Lender.

“Currency Agreement” means any foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap or other similar agreement or arrangement.

“Default Excess” means, with respect to any Defaulting Lender, the excess, if any, of such Defaulting Lender’s Pro Rata Share of the aggregate outstanding principal amount of Loans of all Lenders (calculated as if all Defaulting Lenders (other than such Defaulting Lender) had funded all of their respective Defaulted Loans) over the aggregate outstanding principal amount of all Loans of such Defaulting Lender.

“Default Period” means, with respect to any Defaulting Lender, the period commencing on the date of the applicable Funding Default and ending on the earliest of the following dates:  (i) the date on which all the Obligations are declared or become immediately due and payable, (ii) the date on which the Default Excess with respect to such Defaulting Lender shall have been reduced to zero (whether by the funding by such Defaulting Lender of its Defaulted Loan or by the non pro rata application of any voluntary or mandatory prepayments of the Loans in accordance with the terms of Section 2.7A or C) and (iii) the date on which the Borrower, the Administrative Agent and the Requisite Lenders waive all Funding Defaults of such Defaulting Lender in writing.

“Defaulted Loan” shall have the meaning ascribed to such term in Section 2.10.

“Defaulting Lender” shall have the meaning ascribed to such term in Section 2.10.

“Divestiture” means the sale by Borrower of certain assets as required under the Consent Order relating to the Federal Trade Commission’s termination of the waiting period under the Hart Scott Rodino Antitrust Improvements Act of 1976 in connection with the Mayne Pharma Acquisition.

“Dollars” and the sign “$” mean the lawful money of the United States of America.

“Effective Date” means the date on which the conditions specified in Section 3.1 are satisfied or waived in accordance with Section 8.5.

“Eligible Assignee” means (A) any Lender and any Affiliate of any Lender; and (B) any commercial bank, savings and loan association, savings bank, insurance company, investment or mutual fund or other entity that is an “accredited investor” (as defined in Regulation D under the Securities Act) and which extends credit or buys loans as one of its businesses; provided that no Affiliate of the Borrower or any of its Subsidiaries shall be an Eligible Assignee.

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“Employee Benefit Plan” means any “employee benefit plan” as defined in Section 3(3) of ERISA (other than a Multiemployer Plan) which is or was maintained or contributed to by the Borrower or any of its ERISA Affiliates.

“Environmental Claim” means any investigation, notice, notice of violation, claim, action, suit, proceeding, order, consent decree, settlement, demand, abatement order or other order or directive (conditional or otherwise), by any Governmental Authority or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law, (ii) in connection with any Hazardous Materials or any actual or alleged Hazardous Materials Activity or (iii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment.

“Environmental Laws” means any and all current or future federal, state, local and foreign laws and regulations, statutes, ordinances, orders, rules, guidance documents, judgments, Governmental Authorizations, or any other requirements of Governmental Authorities relating to (i) environmental matters, including those relating to any Hazardous Materials Activity, (ii) the generation, use, storage, transportation or disposal of Hazardous Materials, or (iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto.

“ERISA Affiliate” means, as applied to any Person, (i) any corporation which is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) which is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member. Any former ERISA Affiliate of the Borrower shall continue to be considered an ERISA Affiliate of the Borrower within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of the Borrower and with respect to liabilities arising after such period relating to the period that such entity was an ERISA Affiliate.

“ERISA Event” means (i) a “reportable event” within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which 30-day notice to the PBGC has been waived); (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure to make by its due date a required installment under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by the Borrower or any of its ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the

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termination of any such Pension Plan resulting in liability pursuant to Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which might reasonably constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on the Borrower or any of its ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal by the Borrower, any of its Subsidiaries or any of their respective ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential withdrawal liability to the Borrower or any of its ERISA Affiliates as a result of the withdrawal, or the receipt by the Borrower or any of its ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or omission which could give rise to the imposition on the Borrower, any of its Subsidiaries or any of their respective ERISA Affiliates of fines, penalties, taxes or related charges under Chapter 43 of the Internal Revenue Code or under Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any Employee Benefit Plan, in each case in an amount that would be material; (ix) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan or the assets thereof, or against the Borrower or any of its ERISA Affiliates in connection with any Employee Benefit Plan; (x) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan to qualify under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code; or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan.

“Event of Default” means each of the events set forth in Section 7.

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute.

“Facilities” means any and all real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased, operated or used by the Borrower or any of its Subsidiaries or any of their respective predecessors or Affiliates.

“Federal Funds Effective Rate” means for any day, the rate per annum (expressed, as a decimal, rounded upwards, if necessary, to the next higher 1/100 of 1%) equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to Administrative Agent, in its capacity as a Lender, on such day on such transactions as determined by the Administrative Agent.

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“Fee Letters” means (i) the Fee Letter, dated October 3, 2006, among the Borrower, MSSF, ABN and CGMI, as the same may be amended, supplemented or otherwise modified from time to time and (ii) the Fee Letter, dated October 3, 2006, between the Borrower and MSSF, as the same may be amended, supplemented or otherwise modified from time to time.

“Fiscal Quarter” means a fiscal quarter of any Fiscal Year.

“Fiscal Year” means the fiscal year of the Borrower and its Subsidiaries (excluding any Subsidiary that is acquired after the date hereof that has not yet changed its fiscal year to a calendar year) ending on December 31 of each calendar year. For purposes of this Agreement, any particular Fiscal Year shall be designated by reference to the calendar year in which such Fiscal Year ends.

“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

“Funding and Payment Office” means the office of the Administrative Agent as set forth under the Administrative Agent’s name on the signature pages hereof, or such other office designated in a written notice delivered by the Administrative Agent to the Borrower and each Lender.

“Funding Default” shall have the meaning ascribed to such term in Section 2.10.

“GAAP” means, subject to the limitations on the application thereof set forth in Section 1.2, generally accepted accounting principles set forth in opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the United States accounting profession, in each case as the same are applicable to the circumstances as of the date of determination.

“Governmental Acts” means any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority.

“Governmental Authority” means any federal, state, municipal, national or other government, governmental department, commission, board, bureau, court, agency or instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government.

“Governmental Authorization” means any permit, license, authorization, plan, directive, registration with, approval of, consent order or consent decree of or from, or notice to any Governmental Authority.

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“Hazardous Materials” means any chemical, material or substance, (i) exposure to which is prohibited or limited by any Governmental Authority, (ii) which is designated, classified or regulated as “hazardous” or “toxic” or as a “pollutant” or “contaminant” under any Environmental Law or (iii) which may or could pose a hazard to the health and safety of the owners, occupants or any Persons in the vicinity of any Facility or to the indoor or outdoor environment.

“Hazardous Materials Activity” means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing.

“Highest Lawful Rate” shall have the meaning ascribed to such term in Section 8.21.

“Implementation Agreement” means the Scheme Implementation Agreement dated September 20, 2006 among Mayne Pharma, Hospira Holdings (S.A.) Pty Ltd and the Borrower.

“Indebtedness”, as applied to any Person, means (i) all indebtedness for borrowed money; (ii) that portion of obligations with respect to Capital Leases that is classified as a liability on a balance sheet in conformity with GAAP; (iii) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money; (iv) any obligation owed for all or any part of the deferred purchase price of property or services (excluding any such obligations incurred under ERISA), which purchase price is (a) due more than six months from the date of incurrence of the obligation in respect thereof or (b) evidenced by a note or similar written instrument; (v) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person; (vi) the face amount of any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; (vii) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another; (viii) any obligation of such Person the primary purpose or intent of which is to provide assurance to an obligee that the obligation of the obligor thereof will be paid or discharged, or any agreement relating thereto will be complied with, or the holders thereof will be protected (in whole or in part) against loss in respect thereof; and (ix) any liability of such Person for an obligation of another through any agreement (contingent or otherwise) (a) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (b) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (a) or (b) of this clause (ix), the primary purpose or intent thereof is as described in clause (viii) above.

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“Indemnitees” shall have the meaning ascribed to such term in Section 8.3.

“Indemnified Liabilities” shall have the meaning ascribed to such term in Section 8.3.

“Initial Lenders” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Interest Coverage Ratio” means the ratio as of the last day of any Fiscal Quarter of (i) Consolidated Adjusted EBITDA for the four-Fiscal Quarter period then ended, to (ii) Consolidated Financing Expense for such four-Fiscal Quarter period.

“Interest Payment Date” means with respect to (i) any Base Rate Loan, each March 31, June 30, September 30 and December 31 of each year, commencing on the first such date to occur after the Effective Date, and the Maturity Date and (ii) any LIBOR Rate Loan, the last day of each Interest Period therefor and, if any such Interest Period is longer than three months, the date that is three months after the first day of such Interest Period, provided that, if any Interest Payment Date would otherwise fall on a day which is not a Business Day, it shall be postponed to the next day which is a Business Day.

“Interest Period” shall have the meaning ascribed to such term in Section 2.5B.

“Interest Rate Agreement” means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement.

“Interest Rate Determination Date” means, with respect to any Interest Period, the second Business Day prior to the first day of such Interest Period.

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute.

“Joint Venture” means a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form; provided that in no event shall any corporate Subsidiary of any Person be considered a Joint Venture to which such Person is a party.

“Lead Arrangers” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Lender” and “Lenders” shall mean the Initial Lenders and each Person that shall become a party hereto pursuant to Section 8.1.

“Leverage Ratio” means, in respect of the Borrower and its Subsidiaries on a consolidated basis, the ratio of (i) Consolidated Total Debt as of the last day of any Fiscal Quarter to (ii) Consolidated Adjusted EBITDA for the four-Fiscal Quarter period then ended.

“LIBOR” means, for any Interest Rate Determination Date, the offered rate in the London interbank market for deposits in Dollars offered for a term comparable to such Interest

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Period that appears on Telerate Page 3750 as of approximately 11:00 A.M., London time (or such other page as may replace such page on such service for the purpose of displaying the rates at which such Dollar deposits are offered by leading banks in the London interbank deposit market), or if no quotation appears on Telerate Page 3750, the average rate per annum which the offices of four leading banks selected by the Administrative Agent and located in London offer for deposits in Dollars in the London interbank deposit market at approximately 11:00 a.m. (London time).

“LIBOR Rate Loan” means any Loan bearing interest at a rate calculated with respect to LIBOR.

“Lien” means any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing.

“Loan” means a loan made by a Lender to the Borrower pursuant to Section 2.1A.

“Loan Documents” means this Agreement, the Fee Letters and any Note.

“Margin Stock” shall have the meaning ascribed to such term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time.

“Material Adverse Effect” means a material adverse effect upon (i) the business, operations, properties or condition (financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole, (ii) the ability of the Borrower to perform, or of the Administrative Agent to enforce, any of the Obligations of the Borrower or (iii) the legality, validity, binding effect or enforceability against the Borrower of a Loan Document. For the avoidance of doubt, changes or effects resulting from items related to Permitted Addbacks shall not be considered in determining whether a Material Adverse Effect has occurred.

“Maturity Date” means the earlier to occur of (i) the first anniversary of the Effective Date and (ii) the date of the acceleration of the Loans pursuant to Section 7.

“Mayne Pharma” means Mayne Pharma Limited ACN 097 064 330.

“Mayne Pharma Acquisition” means the acquisition by Hospira Holdings (S.A.) Pty Ltd of all of the stock of Mayne Pharma substantially on the terms set forth in the Implementation Agreement.

“Moody’s” means Moody’s Investor Services, Inc. or any successor thereto.

“MSSF” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Multiemployer Plan” means any Employee Benefit Plan which is a “multiemployer plan” as defined in Section 3(37) of ERISA to which the Borrower or any of its ERISA Affiliates is obligated to make contributions.

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“Net Cash Proceeds” means, with respect to any sale, lease, transfer or other disposition of any asset or the incurrence or issuance of any debt or the sale or issuance of any equity interests (including any capital contribution) by the Borrower or any of its Subsidiaries, the aggregate amount of cash received from time to time (whether as initial consideration or through payment or disposition of deferred consideration) by or on behalf of such Person in connection with such transaction after deducting therefrom only (without duplication) (a) reasonable and customary brokerage commissions, underwriting fees and discounts, legal and accounting fees, filing fees, finder’s fees and other similar fees and commissions, (b) the amount of taxes payable in connection with or as a result of such transaction and (c) the amount of any debt secured by a Lien on such asset that, by the terms of the agreement or instrument governing such debt, is required to be repaid upon such disposition, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid to a Person that is not an Affiliate of the Borrower and are properly attributable to such transaction or to the asset that is the subject thereof.

“Non-US Lender” shall have the meaning ascribed to such term in Section 2.8B(iii)(a).

“Note” means a promissory note of the Borrower payable to the order of any Lender issued pursuant to Section 2.4C, in substantially in the form of Exhibit III, as amended, supplemented or otherwise modified from time to time.

“Notice of Borrowing” means a notice substantially in the form of Exhibit I annexed hereto delivered by the Borrower to the Administrative Agent pursuant to Section 2.1B with respect to the proposed borrowing of the Loans.

“Obligations” means all obligations of every nature of the Borrower from time to time owing to the Agents, the Lead Arrangers and the Lenders or any of them under the Loan Documents.

“Officer’s Certificate” means, as applied to any corporation, a certificate executed on behalf of such corporation by any one of its chairman of the board (if an officer), its president, one of its vice presidents, its chief financial officer or its treasurer or, as applied to any limited partnership, a certificate executed on behalf of such limited partnership by the chairman of the board (if an officer), the president, one of the vice presidents, the chief financial officer or treasurer of the general partner of such limited partnership, or, if the general partner of such limited partnership is an individual, executed by such individual; provided that every Officer’s Certificate with respect to the compliance with a condition precedent to the making of any Borrowing shall include:  (i) a statement that the officer making or giving such Officer’s Certificate has read such condition and any definitions or other provisions contained in this Agreement relating thereto, (ii) a statement that, in the opinion of the signer, he has made or has caused to be made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such condition has been complied with, and (iii) a statement as to whether, in the opinion of the signer, such condition has been complied with.

“Organizational Documents” means (i) with respect to any corporation, its certificate or articles of incorporation or organization, as amended, and its by laws, as amended,

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(ii) with respect to any limited partnership, its certificate of limited partnership, as amended, and its partnership agreement, as amended, (iii) with respect to any general partnership, its partnership agreement, as amended, and (iv) with respect to any limited liability company, its articles of organization, as amended, and its operating agreement, as amended. In the event any term or condition of this Agreement or any other Loan Document requires any Organizational Document to be certified by a secretary of state or similar governmental official, the reference to any such “Organizational Document” shall only be to a document of a type customarily certified by such governmental official.

“PBGC” means the Pension Benefit Guaranty Corporation and any successor thereto.

“Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code or Section 302 of ERISA and which is intended to be qualified under Section 401(a) of the Code.

“Performance Level” shall have the meaning ascribed to such term within the definition of “Applicable Margin”.

“Permitted Acquisition” means an Acquisition permitted by Section 6.3.

“Permitted Addbacks” means, for any period ending on or after March 31, 2007, each of the following to the extent taken into account in determining Consolidated Net Income for such period (all calculated on a consolidated pre-tax basis): (a) any one-time or special non-cash charges or expenses resulting from the Mayne Pharma Acquisition, including charges relating to the write-up of Mayne Pharma’s inventory and the write-off of in-process research and development; (b) the first $115,000,000 of charges and expenses (whether cash or non-cash) incurred before December 31, 2008 related to the integration of Mayne Pharma into the Borrower, including charges and expenses for employee severance or retention, integration of information systems, plant shutdowns, product relocation and relabeling and consulting fees); (c) the first $109,000,000 of restructuring charges and expenses (whether cash or non-cash) incurred after March 31, 2006 and before December 31, 2008 related to the Borrower’s closure of its Ashland, Ohio, Donegal, Ireland and Montreal, Canada facilities and exit from its North Chicago, Illinois facility and related expenses (whether cash or non-cash) for the relocation of production from such facilities to other facilities; and (d) the first $24,000,000 of charges and expenses (whether cash or non-cash) incurred after March 31, 2006 and before December 31, 2006 related to the Borrower’s separation from Abbott Laboratories, including the establishment of new facilities, the build-out of independent information technology systems, and product registration and re-labeling.

“Person” means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and Governmental Authorities.

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“Potential Event of Default” means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default.

“Prime Rate” means the rate of interest as announced by the Administrative Agent from time to time as its base rate, as in effect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. The Administrative Agent or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate.

“Pro Rata Share” means, with respect to any Lender, the percentage obtained by dividing (i) the Credit Exposure of such Lender by (ii) the aggregate Credit Exposure of all Lenders.

“Proceedings” shall have the meaning ascribed to such term in Section 5.1(vi).

“Qualified Receivables Transaction” means any transaction or series of transactions that may be entered into by the Borrower or any Subsidiary of the Borrower pursuant to which the Borrower or any such Subsidiary may sell, convey, pledge or otherwise transfer to a newly-formed Subsidiary of the Borrower or other special purpose entity, or any other Person, any accounts receivable (including chattel paper, instruments and general intangibles) or notes receivable and the rights and certain other property related thereto, provided that (i) all of the terms and conditions of such transaction or series of transactions, including the amount and type of any recourse to the Borrower or a Subsidiary of the Borrower with respect to the assets transferred, are acceptable to the Administrative Agent and the Requisite Lenders and (ii) the Receivables Transaction Attributed Indebtedness incurred in all such transactions does not exceed $150,000,000 at any time outstanding.

“Receivables Transaction Attributable Indebtedness” means, with respect to any Qualified Receivables Transaction on any date of determination, the unrecovered purchase price on such date of all assets sold, conveyed, pledged or otherwise transferred by the Borrower or any wholly-owned Subsidiary of the Borrower to the third-party conduit entity or other receivables credit provider under such Qualified Receivables Transaction.

“Register” shall have the meaning ascribed to such term in Section 2.4A.

“Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.

“Release” means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of any Hazardous Material into the indoor or outdoor environment (including the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Material), including the movement of any Hazardous Material through the air, soil, surface water or groundwater.

“Replacement Lender” shall have the meaning ascribed to such term in Section 2.11.

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“Requisite Lenders” means Lenders having aggregate Pro Rata Shares of more than 50%.

“Responsible Officer” means the Chief Executive Officer, the Chief Financial Officer, the Treasurer or the General Counsel of the Borrower or any other officer of the Borrower responsible for overseeing or reviewing compliance with the Agreement.

“Restricted Payment” means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of Capital Stock of the Borrower, except a dividend payable solely in shares of such class of Capital Stock to the holders of such class of Capital Stock; (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of Capital Stock of the Borrower; and (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of Capital Stock of the Borrower, except any repurchase or other acquisition of shares of such Capital Stock, or warrants, options or other rights to acquire such shares, in connection with employee compensation in the ordinary course of business in accordance with plans approved by the board of directors of the Borrower.

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw Hill Corporation or any successor thereto.

“Scheme” means the scheme of arrangement between Mayne Pharma and its shareholders in the form approved by the Court (as defined in the Implementation Agreement) on the Second Court Date (as defined in the Implementation Agreement), pursuant to which the Borrower or a Subsidiary thereof will acquire all of the outstanding ordinary shares of Mayne Pharma.

“Securities” means any stock, share, partnership interest, membership interest in a limited liability company, voting trust certificates, certificate of interest or participation in any profit-sharing agreement or arrangement, option, warrant, bond, debenture, note, or other evidence of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as “securities” or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing.

“Securities Act” means the Securities Act of 1933, as amended from time to time, and any successor statute.

“Significant Subsidiary” means, at any time, a Subsidiary that has or represents at least 5% of (i) the consolidated gross revenues of the Borrower and its Subsidiaries for the Fiscal Year then most recently ended and/or (ii) the consolidated assets of the Borrower and its Subsidiaries as of the last day of the Fiscal Year then most recently ended.

“Solvent” means, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and

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does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital.  The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“Subject Transaction” shall have the meaning ascribed to such term in Section 6.11D.

“Subordinated Indebtedness” means any Indebtedness of the Borrower or any of its Subsidiaries, subordinated in right and time of payment to the Obligations.

“Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof.

“Surviving Obligations” means contingent indemnification liabilities of the Borrower under the Loan Documents that are not yet due and payable.

“Syndication Agents” shall have the meaning ascribed to such term in the introduction to this Agreement.

“Tax” means any present or future tax, levy, impost, duty, assessment, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed; provided “Tax on the overall net income” of a Person shall be construed as a reference to a tax imposed by the jurisdiction in which that Person is organized or in which that Person’s applicable principal office (and/or, in the case of a Lender, its lending office) is located or in which that Person (and/or, in the case of a Lender, its lending office) is deemed to be doing business on all or part of the net income, profits or gains (whether worldwide, or only insofar as such income, profits or gains are considered to arise in or to relate to a particular jurisdiction, or otherwise) of that Person (and/or, in the case of a Lender, its applicable lending office).

“Term Loans” means the loans to the Borrower under the $500,000,000 Term Loan Agreement dated January 15, 2007 among the Borrower, the lenders parties thereto and Citibank, N.A., as administrative agent for such lenders.

“Terminated Lender” shall have the meaning ascribed to such term in Section 2.11.

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“Transaction” means the Mayne Pharma Acquisition and the debt financings contemplated thereby.

“Type of Loan” means a Base Rate Loan or a LIBOR Rate Loan.

1.2Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement.

Except as otherwise expressly provided in this Agreement, all accounting terms not otherwise defined herein shall have the respective meanings assigned to them in conformity with GAAP.  Calculations in connection with the definitions, covenants and other provisions of this Agreement shall utilize accounting principles and policies in effect on the date hereof which are in conformity with those used to prepare the financial statements referred to in Section 4.4.  Financial statements and other information required to be delivered by the Borrower to the Administrative Agent pursuant to clauses (i) and (ii) of Section 5.1 shall be prepared in accordance with GAAP as in effect at the time of such preparation.  In the event that a change in GAAP or other accounting principles and policies after the date hereof affects in any material respect the calculations of the covenants contained herein, the Lenders and the Borrower agree to negotiate in good faith to amend the affected covenants (and related definitions) to compensate for the effect of such changes so that the restrictions, limitations and performance standards effectively imposed by such covenants, as so amended, are substantially identical to the restrictions, limitations and performance standards imposed by such covenants as in effect on the date hereof; provided that, if the Requisite Lenders and the Borrower fail to reach agreement with respect to such amendment within a reasonable period of time following the date of effectiveness of any such change, calculation of compliance by the Borrower and its Subsidiaries with the covenants contained herein shall be determined in accordance with GAAP as in effect immediately prior to such change.

1.3Other Definitional Provisions and Rules of Construction.

A.Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference.

B.References to “Sections” and subsections shall be to Sections and subsections, respectively, of this Agreement unless otherwise specifically provided.

C.The use in any of the Loan Documents of the word “include” or “including”, when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as “without limitation” or “but not limited to” or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter.

D.Whenever the term “wholly-owned” is used with respect to a Subsidiary of a Person, such term means that all of the Capital Stock (other than directors’ qualifying shares) of such Subsidiary is owned, directly or indirectly, by such Person.

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E.For purposes of this Agreement, any reference to a “Loan” may be (as the context requires) a reference to (i) the single Loan of Lender made on the Credit Date or purchased in whole or part via an assignment; or (ii) a portion of a Loan referred to in the preceding clause (i) that is of a particular Type and, in the case of a LIBOR Loan, has a particular interest period.

SECTION 2.     AMOUNT AND TERMS OF COMMITMENTS AND LOANS

2.1Commitment; Making of Loans.

A.Commitments.

(i)On any Business Day during the period from the Effective Date through February 7, 2007 (such Business Day, the “Credit Date”), subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of the Borrower herein set forth, each Lender severally agrees to make a Loan in an amount up to but not exceeding such Lender’s Commitment as set forth opposite its name on Schedule 2.1A annexed hereto.

(ii)After giving effect to the Loans made on the Credit Date, each Lender’s Commitment shall expire.  Amounts borrowed pursuant to this Section 2.1A and repaid or prepaid may not be reborrowed.

B.Borrowing Mechanics.

(i)Each Borrowing shall at all times be in minimum amount of $5,000,000.

(ii)The Borrower shall deliver to Administrative Agent on behalf of the Lenders a fully executed Notice of Borrowing (a) if any portion of the Loans initially will consist of LIBOR Rate Loans, not later than 11:00 a.m. (New York City time), at least three (3) Business Days in advance of the proposed Credit Date; or (b) otherwise, not later than 11:00 a.m. (New York City time), on the proposed Credit Date.  Except as otherwise provided herein, the Notice of Borrowing for LIBOR Rate Loans shall be irrevocable on and after the initial Interest Rate Determination Date, and the Borrower shall be bound to borrow such Loans in accordance therewith.  The Notice of Borrowing shall specify the following information:

(a)the aggregate amount of such Loans;

(b)the Credit Date, which shall be a Business Day;

(c)whether the Loans initially are to be Base Rate Loans or LIBOR Rate Loans or a combination thereof; and

(d)the location and number of the Borrower’s account to which funds are to be disbursed.

(iii)Notice of receipt of the Notice of Borrowing, together with the amount of each Lender’s Pro Rata Share thereof, together with the applicable interest rate, shall be provided by the Administrative Agent to each Lender by facsimile with reasonable promptness, but (provided the Administrative Agent shall have received such notice by 11:00 a.m. (New York City time)) not later than 2:00 p.m. (New York

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City time) on the same day as the Administrative Agent’s receipt of the Notice of Borrowing from the Borrower.

(iv)Each Lender shall make the amount of its Loan available to the Administrative Agent on the Credit Date by wire transfer not later than 12:00 p.m. (New York City time) or, if later, not more than one hour after receipt of the Administrative Agent’s delivery of the notice pursuant to clause (iii) above, in same day funds in Dollars at the Funding and Payment Office.

(v)Except as provided herein, upon satisfaction or waiver of the conditions precedent specified in Section 3.1 and Section 3.2, the Administrative Agent shall make the proceeds of the Loans available to the Borrower on the Credit Date by causing an amount of same day funds equal to the proceeds of all such Loans received by the Administrative Agent from the Lenders to be credited to the account referred to in Section 2.1B(ii)(d).

2.2Repayment.

A.The Loans and all other amounts owed hereunder with respect to the Loans and the Commitment of each Lender shall be paid in full on the Maturity Date.

2.3Pro Rata Shares; Availability of Funds.

A.Pro Rata Shares.  The Loans shall be made by the Lenders simultaneously and proportionately to their respective Pro Rata Shares (determined as of the Credit Date), it being understood that no Lender shall be responsible for any default by any other Lender in such other Lender’s obligation to make its Loan hereunder nor shall any Commitment of any Lender be increased or decreased as a result of a default by any other Lender in such other Lender’s obligation to make its Loan hereunder.

B.Availability of Funds.  Unless the Administrative Agent shall have been notified by any Lender prior to the Credit Date that such Lender does not intend to make available to the Administrative Agent the amount of such Lender’s Loan requested on the Credit Date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on the Credit Date and the Administrative Agent may, in its sole discretion, but shall not be obligated to, make available to the Borrower a corresponding amount on the Credit Date.  If such corresponding amount is not in fact made available to the Administrative Agent by such Lender or an Affiliate of such Lender, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from the Credit Date until the date such amount is paid to the Administrative Agent, at the customary rate set by the Administrative Agent for the correction of errors among banks for three Business Days and thereafter at the Base Rate.  If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent shall promptly notify the Borrower and the Borrower shall immediately pay such corresponding amount to the Administrative Agent together with interest thereon, for each day from the Credit Date until the date such amount is paid to the Administrative Agent, at the rate payable hereunder for Base Rate Loans.  Nothing in this Section 2.3B shall be deemed to relieve any Lender from its obligation to fulfill its Commitments

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hereunder or to prejudice any rights that the Borrower may have against any Lender as a result of any default by such Lender hereunder.

2.4The Register; Evidence of Debt; Notes.

A.Register.

(i)The Administrative Agent shall maintain at its Payment and Funding Office a register for the recordation of the names and addresses of the Lenders and the Commitment and Loan of each Lender from time to time (the “Register”).  The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.  The Administrative Agent shall record in the Register the Commitment and the Loan of each Lender, and each repayment or prepayment in respect of the principal amount of such Loans.  Any such recordation shall be prima facie evidence of the amount owed to such Lender hereunder; provided that failure to make any such recordation, or any error in such recordation, shall not affect any Lender’s Commitment or the Obligations in respect of any Loan.  The Borrower hereby designates Citicorp to serve as the Borrower’ agent solely for purposes of maintaining the Register as provided in this Section 2.4, and the Borrower hereby agrees that, to the extent Citicorp serves in such capacity, Citicorp and its officers, directors, employees, agents and affiliates shall constitute “Indemnitees” hereunder.

(ii)The Borrower, the Administrative Agent and the Lenders shall deem and treat the Persons listed as Lenders in the Register as the holders and owners of the corresponding Commitments and Loans listed therein for all purposes hereof, and no assignment or transfer of any Commitment or Loan shall be effective, in each case unless and until an Assignment Agreement effecting the assignment or transfer thereof shall have been accepted by the Administrative Agent and recorded in the Register as provided in Section 8.1C.  Prior to such recordation, all amounts owed with respect to the applicable Commitment or Loan shall be owed to the Lender listed in the Register as the owner thereof, and any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, assignee or transferee of the corresponding Commitments or Loans.

B.Lenders’ Evidence of Debt.  Each Lender shall maintain on its internal records an account or accounts evidencing the Obligations of the Borrower to such Lender, including the amounts of the Loans made by it and each repayment and prepayment in respect thereof.  Any such recordation shall be conclusive and binding on the Borrower, absent manifest error; provided that the failure to make any such recordation, or any error in such recordation, shall not affect any Lender’s Commitments or the Obligations of the Borrower in respect of any applicable Loans; and provided further, in the event of any inconsistency between the Register and any Lender’s records, the recordations in the Register shall govern.

C.Notes.  If so requested by any Lender by written notice to the Borrower (with a copy to the Administrative Agent), the Borrower shall execute and deliver to such Lender, promptly after the Borrower’s receipt of such notice, a Note or Notes to evidence such Lender’s Loans.

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2.5Interest on the Loans.

A.Rate of Interest; Type of Loan.

(i)Subject to the provisions of Sections 2.5E, 2.8 and 2.9, each Loan shall bear interest on the unpaid principal amount thereof from the date made through the Maturity Date (whether by acceleration or otherwise) at a rate equal to (a) at all times such Loan is a Base Rate Loan, the Base Rate plus the Applicable Margin or (b) at all times such Loan is a LIBOR Rate Loan, the sum of LIBOR plus the Applicable Margin.

(ii)The basis for determining the rate of interest with respect to any Loan, and the Interest Period with respect to any LIBOR Rate Loan, shall be selected by the Borrower and notified to the Administrative Agent and the Lenders pursuant to the Notice of Borrowing or a Conversion/Continuation Notice, as the case may be.

(iii)As soon as practicable after 11:00 a.m. (New York City time) on each Interest Rate Determination Date, the Administrative Agent shall determine (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) the interest rate that shall apply to the LIBOR Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to the Borrower and each Lender.

B.Interest Periods.  The applicable interest period (each an “Interest Period”) of each Borrowing of LIBOR Rate Loans shall be a one (1), two (2), three (3) or six (6) month period, as selected by the Borrower in the applicable Notice of Borrowing or Conversion/Continuation Notice, initially commencing on the date of the Loan or any Conversion/Continuation Date, as the case may be; provided that

(i)in the case of immediately successive Interest Periods applicable to LIBOR Rate Loans, each successive Interest Period shall commence on the day on which the immediately preceding Interest Period expires;

(ii)if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided that, if any Interest Period would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the immediately preceding Business Day;

(iii)any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (iv) of this Section 2.5B, end on the last Business Day of a calendar month;

(iv)no Interest Period shall extend beyond the Maturity Date;

(v)no more than ten (10) Interest Periods shall be outstanding at any time;

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(vi)subject to clause (vii) of this Section 2.5B, if the Borrower fails to specify an Interest Period for any Borrowing of LIBOR Rate Loans in the applicable Conversion/Continuation Notice or fails to give timely notice of the continuation of any outstanding Borrowing of LIBOR Rate Loans, the Borrower shall be deemed to have selected an Interest Period of one (1) month; and

(vii)until the earlier of (x) the date that is 30 days after the Effective Date and (y) the date that the Lead Arrangers notify the Borrower that the primary syndication of the Loans has been completed, all LIBOR Rate Loans shall have an Interest Period of one (1) week, if one week Interest Periods are available from all Lenders or, if one week Interest Periods are not available from all Lenders, all Loans shall be Base Rate Loans during such period.

C.Interest Payments.  On each Interest Payment Date for a Loan, the Borrower shall pay an amount equal to the aggregate amount of interest that has accrued on such Loan since the Effective Date or the last Interest Payment Date for such Loan, as applicable.  In addition, interest on each Loan shall be payable upon any prepayment of such Loan (to the extent accrued on the amount being prepaid) and at maturity.

D.Default Rate. Upon the occurrence and during the continuation of any Event of Default, (i) the Borrower shall no longer have the option to continue or convert into LIBOR Rate Loans, (ii) each LIBOR Rate Loan shall convert to a Base Rate Loan at the end of the Interest Period then in effect for such LIBOR Rate Loan, (iii) upon request of the Requisite Lenders, the outstanding principal amounts of all LIBOR Rate Loans shall bear interest (including post-petition interest in any case or proceeding under the Bankruptcy Code) at a rate per annum equal to two percent (2%) plus the rate then applicable to LIBOR Rate Loans until the end of the applicable Interest Period and thereafter at a rate equal to two percent (2%) plus the rate then applicable to Base Rate Loans, and (iv) upon request of the Requisite Lenders, all outstanding Base Rate Loans and, to the extent permitted by applicable law, other Obligations arising hereunder or under any other Loan Document shall bear interest (including post-petition interest in any case or proceeding under the Bankruptcy Code) at a rate per annum equal to two percent (2%) plus the rate then applicable to such Base Rate Loans or such other Obligations arising hereunder or under any other Loan Document.  Upon the occurrence and during the continuation of any Potential Event of Default under Section 7.13, (i) the outstanding principal amounts of all LIBOR Rate Loans shall bear interest (including post-petition interest in any case or proceeding under the Bankruptcy Code) at a rate per annum equal to two percent (2%) plus the rate then applicable to LIBOR Rate Loans until the end of the applicable Interest Period and thereafter at a rate equal to two percent (2%) plus the rate then applicable to Base Rate Loans, and (ii) all outstanding Base Rate Loans and, to the extent permitted by applicable law, other Obligations arising hereunder or under any other Loan Document shall bear interest (including post-petition interest in any case or proceeding under the Bankruptcy Code) at a rate per annum equal to two percent (2%) plus the rate then applicable to such Base Rate Loans or such other Obligations arising hereunder or under any other Loan Document.  Payment or acceptance of the increased rates of interest provided for in this Section 2.5D is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or Potential Event of Default or otherwise prejudice or limit any rights or remedies of Agents or Lenders.

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E.Computation of Interest.  Interest payable pursuant to Section 2.5A shall be computed (i) in the case of Base Rate Loans, on the basis of a 365 day or 366 day year, as the case may be, and (ii) in the case of LIBOR Rate Loans, on the basis of a 360 day year, in each case for the actual number of days elapsed in the period during which it accrues.  In computing interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted from a LIBOR Rate Loan, the date of conversion of such LIBOR Rate Loan to such Base Rate Loan, as the case may be, shall be included, and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted to a LIBOR Rate Loan, the date of conversion of such Base Rate Loan to such LIBOR Rate Loan, as the case may be, shall be excluded; provided, if a Loan is repaid on the same day on which it is made, one day’s interest shall be paid on that Loan.

F.Conversion/Continuation.

(i)Subject to Section 2.9 and so long as no Potential Event of Default or Event of Default shall have occurred and then be continuing, the Borrower shall have the option:

(a)to convert at any time all or any part of any Borrowing in an aggregate amount of $5,000,000 or a higher integral multiple of $1,000,000 from one Type of Loan to another Type of Loan; provided if any LIBOR Rate Loan is converted on a day other than the last day of an Interest Period therefor, the Borrower shall pay all amounts due under Section 2.8 in connection with such conversion; or

(b)upon the expiration of any Interest Period applicable to any Borrowing LIBOR Rate Loans, to continue all or any portion of such Borrowing for a new Interest Period in a minimum amount of $5,000,000.

(ii)The Borrower shall deliver a Conversion/Continuation Notice to the Administrative Agent no later than 11:00 a.m. (New York City time) at least one Business Day in advance of the proposed conversion date (in the case of a conversion to Base Rate Loans) and at least three Business Days in advance of the proposed Conversion/Continuation Date (in the case of a conversion to, or a continuation of, LIBOR Rate Loans).  Except as otherwise provided herein, a Conversion/Continuation Notice for conversion to, or continuation of, LIBOR Rate Loans (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and the Borrower shall be bound to effect a conversion or continuation in accordance therewith.

G.Additional Interest on LIBOR Rate Loans.  The Borrower shall pay to each Lender, so long as and to the extent such Lender shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including “Eurocurrency liabilities” (as such term is defined in Regulation D), additional interest on the unpaid principal amount of each LIBOR Rate Loan of such Lender, from the date of such Loan until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (a) the LIBOR rate for the applicable Interest Period for such Loan from (b) the rate obtained by dividing such LIBOR rate by a percentage equal to 100% minus the Applicable Reserve Requirement (expressed as a

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percentage) of such Lender for such Interest Period, payable on each date on which interest is payable on such Loan.  Such Lender shall as soon as practicable provide notice to the Administrative Agent and the Borrower of any such additional interest arising in connection with such Loan, which notice shall be conclusive and binding, absent demonstrable error.

2.6Fees.

(i)Commitment Fee:  The Borrower agrees to pay to each Lender, for the period from the Effective Date until the Credit Date, a commitment fee (the “Commitment Fee”) on such Lender’s then current unused Commitment, determined by reference to the pricing grid set forth in the definition of Applicable Margin.  The Commitment Fee shall be paid quarterly in arrears and on the Credit Date or the date of the termination of the Commitments to the Administrative Agent at its Funding and Payment Office and upon receipt, the Administrative Agent shall promptly distribute to each Lender its Pro Rata Share thereof.  The Commitment Fee shall be calculated on the basis of a 360 day year and the actual number of days elapsed.

(ii)Lead Arrangers’ Fees.  In addition to the foregoing fees, the Borrower agrees to pay to the Lead Arrangers and the Agents such other fees in the amounts and at the times separately agreed upon in the Fee Letters.

2.7Provisions Regarding Payments.

A.Voluntary Prepayments.

(i)Any time and from time to time:

(a)the Borrower may prepay any Borrowing of Base Rate Loans on any Business Day in whole or in part, in an aggregate principal amount of $5,000,000 or a higher integral multiple of $1,000,000; and

(b)the Borrower may prepay any Borrowing of LIBOR Rate Loans on any Business Day in whole or in part in an aggregate principal amount of $5,000,000.

(ii)All prepayments shall be made upon prior written or telephonic notice received by the Administrative Agent not later than 11:00 a.m. (New York City time):

(a)In the case of Base Rate Loans, on the date of such prepayment; and

(b)In the case of LIBOR Rate Loans, two (2) Business Days’ prior to the date of such prepayment;

and, if such notice is given by telephone, such notice shall be promptly confirmed in writing to the Administrative Agent (and the Administrative Agent will promptly transmit such telephonic or original notice for the Loans by facsimile or telephone to each Lender).  Upon the giving of any such notice, the principal amount of the Loans specified in such notice shall become due and payable on the prepayment date specified therein.

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B.Voluntary Commitment Reductions.

(i)The Borrower may, upon not less than three (3) Business Days’ prior written or telephonic notice confirmed in writing to the Administrative Agent (which original written or telephonic notice the Administrative Agent will promptly transmit by facsimile or telephone to each Lender), at any time and from time to time terminate in whole or permanently reduce in part, without premium or penalty, the unused Commitments; provided any such partial reduction of the Commitments shall be in the amount of $5,000,000 or a higher integral multiple of $1,000,000.

(ii)The Borrower’ notice to the Administrative Agent shall designate the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction, and such termination or reduction of the Commitments shall be effective on the date specified in the Borrower’s notice and shall reduce the Commitment of each Lender proportionately to its Pro Rata Share thereof.

C.Mandatory Prepayments.

(i)The Borrower shall, on the date and in the amount of the receipt by the Borrower or any of its Subsidiaries as to which the transfer of funds to the Borrower would not result in adverse tax consequences of Net Cash Proceeds from (a) the incurrence or issuance of debt (including pursuant to a public offering, a private placement or a syndicated bank financing (other than borrowings under the Borrower’s Credit Agreement dated as of December 16, 2005 with the lenders parties thereto and CNAI, as administrative agent, that not used directly or indirectly to finance the Mayne Pharma Acquisition) or (b) the issuance of equity or equity-linked transactions in the capital markets, repay the Loans in an aggregate amount equal to the amount of such Net Cash Proceeds.

(ii)If the Term Loans have been, or substantially contemporaneously with the receipt of Net Cash Proceeds as described in this paragraph (ii) will be, repaid or prepaid in full, the Borrower shall, on the date and in the amount of the receipt by the Borrower or any of its Subsidiaries of Net Cash Proceeds from any Asset Sale (other than the Net Cash Proceeds of the Divestiture in an amount not to exceed $12,000,000 and other than to the extent that (x) the Net Cash Proceeds of such Asset Sale are less than $1,000,000 for any single transaction or series of related transactions or (y) the Net Cash Proceeds of all Asset Sales after the date hereof are less than $30,000,000 in the aggregate), repay the Loans in an aggregate amount equal to the amount of such Net Cash Proceeds that are not used by the Borrower to prepay the Term Loans (rounded downward to the nearest $5,000,000 increment, with such rounded amount applied in accordance with the proviso to this Section 2.7.C.(ii)); provided, that, if the Borrower has previously made a mandatory prepayment of Loans in accordance with this Section 2.7.C.(ii), no further mandatory prepayment shall be required until the amount of Net Cash Proceeds of the nature described above again exceed $5,000,000.

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D.Application of Prepayments/Reductions.  Unless otherwise specified by the Borrower in a notice of prepayment,

(a) any amount to be applied pursuant to Section 2.7A or C shall be applied to prepay Loans to the full extent thereof.

(b) considering each Type of Loan being prepaid separately, any prepayment thereof shall be applied first to Base Rate Loans to the full extent thereof before application to LIBOR Rate Loans, in each case in a manner which minimizes the amount of any payments required to be made by the Borrower pursuant to Section 2.9C.

E.General Provisions Regarding Payments.

(i)Manner and Time of Payment.  All payments by the Borrower of principal, interest, fees and other Obligations shall be made in Dollars in same day funds, without defense, set-off or counterclaim, free of any restriction or condition, and delivered to the Administrative Agent not later than 12:00 p.m. (New York City time) on the date due at the Funding and Payment Office for the account of the Lenders; funds received by the Administrative Agent after that time on such due date shall be deemed to have been paid by the Borrower on the next succeeding Business Day.

(ii)Payments on Business Days.  Subject to the provisions of Section 2.5B with respect to Interest Periods, whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder.

(iii)Application of Payments to Principal and Interest.  All payments in respect of the principal amount of the Loans shall include payment of accrued interest on the principal amount being repaid or prepaid, and all such payments shall be applied to the payment of interest before application to principal.

(iv)Distribution to Lenders.  The Administrative Agent shall promptly distribute to each Lender at such address as such Lender shall indicate in writing, such Lender’s Pro Rata Share of all payments and prepayments of principal and interest due hereunder, together with all other amounts due thereto, including all fees payable with respect thereto, to the extent received by Administrative Agent.

(v)Withdrawal of Notice.  Notwithstanding the foregoing provisions hereof, if any Conversion/Continuation Notice is withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any LIBOR Rate Loans, the Administrative Agent shall give effect thereto in apportioning payments received thereafter.

(vi)Authorization to Charge Accounts.  The Borrower hereby authorizes the Administrative Agent to charge the Borrower’s accounts with the Administrative Agent in order to cause timely payment to be made to the Administrative Agent of all principal, interest, fees and expenses due hereunder (subject to sufficient funds being available in its accounts for that purpose).

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(vii)Non-Conforming Payments.  The Administrative Agent shall deem any payment by or on behalf of the Borrower hereunder that is not made in same day funds prior to 12:00 p.m. (New York City time) to be a non-conforming payment.  Any such payment shall not be deemed to have been received by the Administrative Agent until the later of (i) the time such funds become available funds, and (ii) the applicable next Business Day.  The Administrative Agent shall give prompt telephonic notice to the Borrower and each Lender (confirmed in writing) if any payment is non-conforming.  Any non-conforming payment may constitute or become a Potential Event of Default or Event of Default in accordance with the terms of Section 7.1.  Interest shall continue to accrue on any principal as to which a non-conforming payment is made until such funds become available funds (but in no event less than the period from the date of such payment to the next succeeding applicable Business Day) at the rate determined pursuant to Section 2.5D from the date such amount was due and payable until the date such amount is paid in full.

2.8Increased Costs; Taxes.

A.Compensation for Increased Costs and Taxes.  Subject to the provisions of Section 2.8B (which shall be controlling with respect to the matters covered thereby), in the event that any Lender shall determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or Governmental Authority, in each case that becomes effective after the date hereof, or compliance by such Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other governmental or quasi-governmental authority (whether or not having the force of law):

(i)subjects such Lender (or its applicable lending office) to any additional Tax (other than any Tax on the overall net income of such Lender) with respect to this Agreement or any of the other Loan Documents or any of its obligations hereunder or thereunder or any payments to such Lender (or its applicable lending office) of principal, interest, fees or any other amount payable hereunder;

(ii)imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, Federal Deposit Insurance Corporation insurance or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender (other than any such reserve or other requirements with respect to LIBOR Rate Loans that are reflected in the definition of LIBOR); or

(iii)imposes any other condition (other than with respect to a Tax matter) on or affecting such Lender (or its applicable lending office) or its obligations hereunder or the London interbank market;

and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining Loans hereunder or to reduce any amount received or receivable by such

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Lender (or its applicable lending office) with respect thereto; then, in any such case, the Borrower shall promptly pay to such Lender, upon receipt of the statement referred to in the next sentence, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as may be necessary to compensate such Lender for any such increased cost or reduction in amounts received or receivable hereunder.  Such Lender shall deliver to the Borrower (with a copy to the Administrative Agent) a written statement, setting forth in reasonable detail the basis for, and a calculation in reasonable detail of, the additional amounts owed to such Lender under this Section 2.8A, which statement shall be conclusive and binding upon all parties hereto absent manifest error.

B.Withholding of Taxes.

(i)Payments to Be Free and Clear.  All sums payable by the Borrower under this Agreement and the other Loan Documents shall (except to the extent required by law) be paid free and clear of, and without any deduction or withholding on account of, any Tax (other than a Tax on the overall net income of any Lender) imposed, levied, collected, withheld or assessed by or within the United States of America or any political subdivision in or of the United States of America or any other jurisdiction from or to which a payment is made by or on behalf of the Borrower or by any federation or organization of which the United States of America or any such jurisdiction is a member at the time of payment.

(ii)Grossing-up of Payments.  If the Borrower or any other Person is required by law to make any deduction or withholding on account of any such Tax from any sum paid or payable by the Borrower to the Administrative Agent or any Lender under any of the Loan Documents:

(a)the Borrower shall notify the Administrative Agent of any such requirement or any change in any such requirement as soon as the Borrower becomes aware of it;

(b)the Borrower shall pay any such Tax before the date on which penalties attach thereto, such payment to be made (if the liability to pay is imposed on the Borrower) for its own account or (if that liability is imposed on the Administrative Agent or such Lender, as the case may be) on behalf of and in the name of the Administrative Agent or such Lender;

(c)the sum payable by the Borrower in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, the Administrative Agent or such Lender, as the case may be, receives on the due date and retains a net sum equal to what it would have received and retained had no such deduction, withholding or payment been required or made; and

(d)within thirty (30) days after paying any sum from which it is required by law to make any deduction or withholding, and within thirty (30) days after the due date of payment of any Tax which it is required by clause (b) above to pay, the Borrower shall deliver to the Administrative Agent evidence reasonably satisfactory to the other affected parties

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of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority.

(iii)Evidence of Exemption from U.S. Withholding Tax.

(a)Each Lender that is not a United States Person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) for U.S. federal income tax purposes (a “Non-US Lender”) shall deliver to the Administrative Agent for transmission to the Borrower, on or prior to the Effective Date (in the case of each Lender listed on the signature pages hereof on the Effective Date) or on or prior to the date of the Assignment Agreement pursuant to which it becomes a Lender (in the case of each other Lender), and at such other times as may be necessary in the determination of the Borrower or Administrative Agent (each in the reasonable exercise of its discretion), (x) two original copies of Internal Revenue Service Form W-8BEN or W-8ECI (or any successor forms), properly completed and duly executed by such Lender, and such other documentation required under the Internal Revenue Code or reasonably requested by the Borrower to establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of principal, interest, fees or other amounts payable under any of the Loan Documents.

(b)Each Lender required to deliver any forms, certificates or other evidence with respect to United States federal income tax withholding matters pursuant to Section 2.8B(iii)(a) hereby agrees, from time to time after the initial delivery by such Lender of such forms, certificates or other evidence, whenever a lapse in time or change in circumstances renders such forms, certificates or other evidence obsolete or inaccurate in any material respect, that such Lender shall promptly (1) deliver to Administrative Agent for transmission to the Borrower two new original copies of Internal Revenue Service Form W-8BEN or W-8ECI, or a Certificate re Non-Bank Status and two (2) original copies of Internal Revenue Service Form W-8BEN (or any successor form), as the case may be, properly completed and duly executed by such Lender, and such other documentation required under the Internal Revenue Code and reasonably requested by the Borrower to confirm or establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to payments to such Lender under the Loan Documents or (2) notify Administrative Agent and the Borrower of its inability to deliver any such forms, certificates or other evidence.

(c)The Borrower shall not be required to pay any additional amount to any Non-US Lender under clause (c) of Section 2.8B(ii) if such Lender shall have failed to satisfy the requirements of clause (a) or (b)(1) of this Section 2.8B(iii); provided that if such Lender shall have satisfied the requirements of Section 2.8B(iii)(a) on the Effective Date or on the date of the Assignment Agreement pursuant to which it became a Lender, as applicable, nothing in this Section 2.8B(iii)(c) shall relieve the Borrower of its obligation to pay any additional amounts pursuant to clause (c) of Section 2.8B(ii) in the event that, as a result of any change in any applicable law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender is not subject to withholding as described herein.

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(iv)If a payment is made by the Borrower under the foregoing provisions of this Section 2.8(B) for the account of any Lender and such Lender, in its sole opinion, determines that it has irrevocably received or been granted a credit against, or relief or remission from, or repayment or refund of, any tax paid or payable by it in respect of or calculated with reference to the deduction or withholding giving rise to such additional payment, such Lender shall, to the extent that it determines that it can do so without prejudice to the retention of the amount of such credit, relief, remission or repayment, pay to the Borrower such amount as such Lender shall, in its sole opinion, have determined is attributable to such deduction or withholding and will leave such Lender (after such payment) in no worse position than it would have been had the Borrower not been required to make such deduction or withholding.  Nothing contained herein shall (i) interfere with the right of a Lender to arrange its tax affairs in whatever manner it thinks fit, (ii) oblige any Lender to disclose any information relating to its tax affairs or any computations in respect thereof or (iii) require any Lender to take or refrain from taking any action that would prejudice its ability to benefit from any other credit, relief, remission, repayment or refund to which it may be entitled.

C.Capital Adequacy Adjustment.  In the event that any Lender shall have determined that the adoption, effectiveness, phase-in or applicability after the Effective Date of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change therein after the Effective Date or in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Lender (or its applicable lending office) with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency issued after the Effective Date, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender’s Loans or Commitment, or participations therein or other obligations hereunder with respect to the Loans to a level below that which such Lender or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation on an after-tax basis for such reduction.  Such Lender shall deliver to the Borrower (with a copy to the Administrative Agent) a written statement, setting forth in reasonable detail the basis for, and calculation in reasonable detail of, the additional amounts owed to the Lender under this Section 2.8C, which statement shall be conclusive and binding upon all parties hereto absent manifest error.

2.9Special Provisions Governing LIBOR Rate Loans.

Notwithstanding any other provision of this Agreement to the contrary, the following provisions shall govern with respect to LIBOR Rate Loans as to the matters covered:

A.Inability to Determine Applicable Interest Rate.  In the event that the Administrative Agent shall have determined (which determination shall be final and conclusive and binding upon all parties hereto), on any Interest Rate Determination Date with respect to any Borrowing of LIBOR Rate Loans, that by reason of circumstances affecting the interbank

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LIBOR market adequate and fair means do not exist for ascertaining the interest rate applicable to such Loans on the basis provided for in the definition of LIBOR Rate, the Administrative Agent shall on such date give notice (by facsimile or by telephone confirmed in writing) to the Borrower and each Lender of such determination, whereupon (i) no Loans may be made as, or converted to, LIBOR Rate Loans until such time as the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, and (ii) any Notice of Borrowing or Conversion/Continuation Notice given by the Borrower with respect to the Loans in respect of which such determination was made shall be deemed to be rescinded by the Borrower.

B.Illegality or Impracticability of LIBOR Rate Loans.  In the event that on any date any Lender shall have determined (which determination shall be final and conclusive and binding upon all parties hereto but shall be made only after consultation with the Borrower and the Administrative Agent) that the making, maintaining or continuation of its LIBOR Rate Loans (i) has become unlawful as a result of compliance by such Lender in good faith with any law, treaty, governmental rule, regulation, guideline or order (or would conflict with any such treaty, governmental rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful) or (ii) has become impracticable, or would cause such Lender material hardship, as a result of contingencies occurring after the date of this Agreement which materially and adversely affect the interbank LIBOR market or the position of such Lender in that market, then, and in any such event, such Lender shall be an “Affected Lender” and it shall on that day give notice (by facsimile or by telephone confirmed in writing) to the Borrower and the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each other Lender).  Thereafter (a) such LIBOR Rate Loan shall be Converted into a Base Rate Loan and (b) the obligation of the Lenders to make LIBOR Rate Loans or to Convert Loans into LIBOR Rate Loans shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist.

C.Compensation For Breakage.  The Borrower shall compensate each Lender upon written request by such Lender (which request shall set forth the basis for requesting such amounts and a calculation thereof in reasonable detail) for all reasonable losses, expenses and liabilities (including any interest paid by such Lender to lenders of funds borrowed by it to make or carry its LIBOR Rate Loans and any loss, expense or liability sustained by such Lender in connection with the liquidation or re-employment of such funds, but excluding lost profits) which that Lender may sustain:  (i) if for any reason (other than a default by such Lender) a LIBOR Rate Loan is not made on a date specified therefor in a Notice of Borrowing or a telephonic request for borrowing, or a conversion to or continuation of any LIBOR Rate Loan does not occur on a date specified therefor in a Conversion/Continuation Notice or a telephonic request for conversion or continuation, (ii) if any prepayment or other principal payment of, or any conversion of, any of its LIBOR Rate Loans occurs on a date other than the last day of an Interest Period applicable to such LIBOR Rate Loan or (iii) if any prepayment of any LIBOR Rate Loan made by such Lender is not made on any date specified in a notice of prepayment given by the Borrower.

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D.Booking of LIBOR Rate Loans.  Any Lender may make, carry or transfer LIBOR Rate Loans at, to, or for the account of any of its branch offices or the office of an Affiliate of that Lender.

E.Assumptions Concerning Funding of LIBOR Rate Loans.  Calculation of all amounts payable to a Lender under this Section 2.9 and under Section 2.8A shall be made as though that Lender had actually funded each of its relevant LIBOR Rate Loans through the purchase of a LIBOR deposit bearing interest at the rate obtained pursuant to the definition of LIBOR in an amount equal to the amount of such LIBOR Rate Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such LIBOR deposit from an offshore office of that Lender to a domestic office of that Lender in the United States of America; provided, however, that each Lender may fund each of its LIBOR Rate Loans in any manner it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating amounts payable under this Section 2.9 and under Section 2.8A and 2.8C.

2.10Defaulting Lenders.

Anything contained herein to the contrary notwithstanding, in the event that any Lender defaults (a “Defaulting Lender”) in its obligation to fund (a “Funding Default”) its Loan (a “Defaulted Loan”), then (a) during the Default Period with respect to such Defaulting Lender, such Defaulting Lender shall be deemed not to be a “Lender” for purposes of voting on any matters (including the granting of any consents or waivers) with respect to any of the Loan Documents; (b) to the extent permitted by Applicable Law, until such time as the Default Excess with respect to such Defaulting Lender shall have been reduced to zero, (i) any voluntary prepayment of the Loans shall, if the Borrower so directs at the time of making such voluntary prepayment, be applied to the Loans of other Lenders as if such Defaulting Lender had no Loan outstanding, and (ii) any mandatory prepayment of the Loans shall, if the Borrower so directs at the time of making such mandatory prepayment, be applied to the Loans of other Lenders (but not to the Loans of such Defaulting Lender) as if such Defaulting Lender had funded the Defaulted Loan of such Defaulting Lender, it being understood and agreed that the Borrower shall be entitled to retain any portion of any mandatory prepayment of the Loans that is not paid to such Defaulting Lender solely as a result of the operation of the provisions of this clause (b); and (c) the aggregate principal amount of all outstanding Loans as at any date of determination shall be calculated as if such Defaulting Lender had funded the Defaulted Loan of such Defaulting Lender.  No Commitment of any Lender shall be increased or otherwise affected, and, except as otherwise expressly provided in this Section 2.10, performance by the Borrower of its Obligations shall not be excused or otherwise modified as a result of any Funding Default or the operation of this Section 2.10.  The rights and remedies against a Defaulting Lender under this Section 2.10 are in addition to other rights and remedies which the Borrower may have against such Defaulting Lender with respect to any Funding Default and which the Administrative Agent or any Lender may have against such Defaulting Lender with respect to any Funding Default.

2.11Removal or Replacement of a Lender.

Anything contained herein to the contrary notwithstanding, in the event that any Lender shall give notice to the Borrower that such Lender is an Affected Lender or that such Lender is entitled to receive payments under Section 2.8 or 2.9, if the circumstances which have caused

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such Lender to be an Affected Lender or which entitle such Lender to receive such payments shall remain in effect, and such Lender shall fail to withdraw such notice within five (5) Business Days after receipt by such Lender of a written request for such withdrawal from the Borrower; then, with respect to each such Lender (the “Terminated Lender”), the Borrower may, by giving written notice to the Administrative Agent and any Terminated Lender of its election to do so, elect to cause such Terminated Lender (and such Terminated Lender hereby irrevocably agrees) to assign its outstanding Loan in full to one or more Eligible Assignees (each a “Replacement Lender”) in accordance with the provisions of Section 8.1 for a purchase price equal to the outstanding principal amount of the Loan assigned and accrued interest thereon through the date of assignment, to be paid by the Replacement Lender; provided that concurrently with such assignment, the Borrower shall pay any amounts payable to such Terminated Lender to the date of such assignment pursuant to Sections 2.8 or 2.9 or otherwise as if it were a prepayment.  Upon the completion of such assignment and the prepayment of all amounts owing to any Terminated Lender, such Terminated Lender shall no longer constitute a “Lender” for purposes hereof; provided that any rights of such Terminated Lender to indemnification hereunder shall survive as to such Terminated Lender.

2.12Mitigation.

A.Each Lender agrees that, as promptly as practicable after the officer of such Lender responsible for administering the Loan of such Lender becomes aware of the occurrence of an event or the existence of a condition that would cause such Lender to become an Affected Lender or that would entitle such Lender to receive payments under Section 2.8 or 2.9, it will, to the extent not inconsistent with the internal policies of such Lender and any applicable legal or regulatory restrictions, use reasonable efforts (i) to make, issue, fund or maintain the Commitment of such Lender or the Loan of such Lender through another lending office of such Lender, or (ii) take such other measures as such Lender may deem reasonable, if as a result thereof the circumstances which would cause such Lender to be an Affected Lender would cease to exist or the additional amounts which would otherwise be required to be paid to such Lender pursuant to Section 2.8 or 2.9 would be materially reduced and if, as determined by such Lender in its sole discretion, the making, issuing, funding or maintaining of such Commitment or Loan through such other lending office or in accordance with such other measures, as the case may be, would not otherwise adversely affect such Commitment or Loan or the interests of such Lender; provided that such Lender will not be obligated to utilize such other lending office pursuant to this Section 2.12 unless the Borrower agrees to pay all incremental expenses incurred by such Lender as a result of utilizing such other lending office as described in clause (i) above.  A certificate as to the amount of any such expenses payable by the Borrower pursuant to this Section 2.12 (setting forth in reasonable detail the basis for requesting such amount and a calculation thereof in reasonable detail) submitted by such Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive absent manifest error.

B.Notwithstanding the provisions of Section 2.8, if any Lender fails to notify the Borrower of any event or circumstance which will entitle such Lender to compensation pursuant to Section 2.8 within 365 days after such Lender obtains knowledge of such event or circumstance, then such Lender shall not be entitled to compensation from the Borrower for any amount arising prior to the date which is 365 days before the date on which such Lender notifies the Borrower of such event or circumstance.

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SECTION 3.     CONDITIONS PRECEDENT

3.1Conditions to Effectiveness.

The effectiveness of this Agreement is subject to the satisfaction of the following conditions:

A.Credit and Organizational Documents.  The Borrower shall deliver or cause to be delivered to the Administrative Agent on behalf of each Lender the following:

(i)sufficient copies of this Agreement originally executed and delivered by the Borrower for each Lender;

(ii)copies of the Organizational Documents, dated a recent date prior to the Effective Date, certified as of the Effective Date (or a recent date prior to the Effective Date) by the appropriate governmental official or the secretary or an assistant secretary of the Borrower, as applicable;

(iii)resolutions of the board of directors of the Borrower approving and authorizing the execution, delivery and performance of the Loan Documents and certified as of the Effective Date by the secretary or an assistant secretary of the Borrower as being in full force and effect without modification or amendment;

(iv)signature and incumbency certificates of the officers of the Borrower executing the Loan Documents on behalf of the Borrower;

(v)a good standing certificate or certificate of existence, as applicable, from the Secretary of State (or similar official) from the jurisdiction of formation of the Borrower, certified as of the Effective Date (or a recent date prior to the Effective Date) (the matters referenced in subsections 3.1A(ii)-(v) to be addressed in a secretary’s certificate substantially in the form of Exhibit VII);

(vi)a certificate from an officer of the Borrower substantially in the form of Exhibit VIII, in form and substance satisfactory to the Administrative Agent, to the effect that all representations and warranties contained in this Agreement and the other Loan Documents are true, correct and complete (other than any such representation or warranty that expressly relates to an earlier date, in which case such representation or warranty shall have been true, correct and complete as of such earlier date); that the Borrower and its Subsidiaries are not in violation of any of the covenants contained in this Agreement and the other Loan Documents; that no event shall have occurred and be continuing or would result from the consummation of the transactions contemplated by this Agreement, that would constitute an Event of Default or a Potential Event of Default (excluding a Potential Event of Default under Section 7.13);

(vii)a certificate from the Chief Financial Officer of the Borrower attesting that, before and immediately after giving effect to the Transaction, the Borrower is and will be Solvent; and

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(viii)such other documents as the Administrative Agent on behalf of the Lenders may reasonably request.

B.Opinions of Counsel.  The Administrative Agent shall have received originally executed copies of one or more favorable written opinions of (i) Brian J. Smith, Senior Vice President and General Counsel of the Borrower, and (ii) Mayer, Brown, Rowe & Maw, LLP, special New York counsel for the Borrower, each in form and substance reasonably satisfactory to the Administrative Agent and its counsel, dated as of the Effective Date.

C.PATRIOT Act.  Each of the Lenders shall have received, at least two (2) Business Days in advance of the Effective Date, all documentation and other information required by Governmental Authorities under applicable “know-your-customer” and anti-money laundering rules and regulations, including as required by the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001 (the “Patriot Act”).  Each Lender and each Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender or such Agent, as applicable, to identify the Borrower in accordance with the Patriot Act.

D.No Undisclosed Material Adverse Change.  Except as disclosed in writing by the Borrower to the Administrative Agent and the Lenders on or prior to the Effective Date, no event shall have occurred (including (i) the filing of, or any adverse determination in, any action, suit, investigation, litigation, arbitration or proceeding (whether administrative, judicial or otherwise) affecting the Borrower or any of its Subsidiaries before any Governmental Authority or arbitrator, (ii) any event arising under any Environmental Law or relating to any Hazardous Materials Activity or (iii) the assertion of any Environmental Claim) that has had, or could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.

3.2Conditions Precedent to each Loan.

The obligation of each Lender to make its Loan hereunder is subject to the Effective Date having occurred and the satisfaction of the following conditions, which (except for the conditions that require effectiveness of the Scheme and consummation of the Acquisition) shall be conclusively tested no later than 8:00 a.m., Sydney time, on the Second Court Date (as defined in the Implementation Agreement):

A.Notice of Borrowing.  The Administrative Agent shall have received, in accordance with the provisions of Section 2.1B, an originally executed Notice of Borrowing signed by the Borrower.

B.Representations and Warranties.  The representations and warranties set forth in Section 4 shall be true, correct and complete in all material respects on and as of the date of such Loan to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true, correct and complete in all material respects

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on and as of such earlier date, (it being understood that, notwithstanding that any representation or warranty contained herein with respect to Mayne Pharma, its Subsidiaries or their businesses is not true, correct and complete in all material respects on and as of the relevant date, the Lenders shall be obligated to make their Loans unless the Borrower or the relevant Subsidiary has the right to terminate its obligations under the Implementation Agreement as a result of breach by Mayne Pharma of the corresponding representation or warranty in the Implementation Agreement).

C.No Default.  No Event of Default or a Potential Event of Default (excluding a Potential Event of Default under Section 7.13) shall have occurred and be continuing, or would result from, the Loans.

D.Payment of Amounts Due.  The Borrower shall have paid to the Lead Arrangers and the Agents, all reasonable out-of-pocket costs, fees (including those fees due on the date of the Mayne Pharma Acquisition referred to in Section 2.6), expenses (including reasonable legal fees and expenses of a single U.S. counsel) and other compensation payable on the date of the Mayne Pharma Acquisition.

E.The Acquisition.  (i) The Implementation Agreement shall not have been 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 the Lead Arrangers.

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

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

(b)has the result that Mayne Pharma and its Subsidiaries are unable to carry on their business in substantially the same manner as carried on as at the date of the Implementation Agreement; or

(c)which otherwise materially and adversely affects the prospects of Mayne Pharma and its Subsidiaries,

other than an event, occurrence or matter (x) which relates to changes in prices of products sold by Mayne Pharma and its Subsidiaries in response to changes in market conditions consistent with past practice, (y) required to be done or procured by Mayne Pharma and its Subsidiaries in connection with the Acquisition or (z) disclosed by Mayne

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Pharma and its Subsidiaries in the disclosure letter attached to the Implementation Agreement.

(iii)All of the conditions precedent set forth in Section 3.1 of the Implementation Agreement shall have been satisfied and the Scheme shall have become effective in accordance with applicable law.

F.No Undisclosed Material Adverse Change.  Except as disclosed in writing by the Borrower to the Administrative Agent and the Lenders on or prior to the Credit Date, no event shall have occurred (including (i) the filing of, or any adverse determination in, any action, suit, investigation, litigation, arbitration or proceeding (whether administrative, judicial or otherwise) affecting the Borrower or any of its Subsidiaries before any Governmental Authority or arbitrator, (ii) any event arising under any Environmental Law or relating to any Hazardous Materials Activity or (iii) the assertion of any Environmental Claim) that has had, or could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.

G.Additional Documents.  The Administrative Agent shall have received each additional document, certificate, instrument, legal opinion or other item reasonably requested by it.

SECTION 4.     REPRESENTATIONS AND WARRANTIES

In order to induce the Agents and the Lenders to enter into this Agreement and to induce the Lenders to make each Loan hereunder, the Borrower represents and warrants to each Agent and each Lender that the following statements are true, correct and complete:

4.1Organization, Powers, Qualification, Good Standing, Business and Subsidiaries.

A.Organization and Powers.  The Borrower and each of its Subsidiaries is duly organized, validly existing and in good standing, as applicable, under the laws of its jurisdiction of organization, except, in the case of any Subsidiary of the Borrower, where the failure to be so organized, existing or in good standing has not had and would not reasonably be expected to have a Material Adverse Effect.  The Borrower and each of its Subsidiaries has all requisite power and authority to own, lease and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Loan Documents and to carry out the transactions contemplated thereby.

B.Qualification and Good Standing.  The Borrower and each of its Subsidiaries is duly qualified to do business and in good standing, as applicable, in every jurisdiction in which its assets are located and wherever necessary to carry out its business and operations, except in jurisdictions where the failure to be so qualified or in good standing has not had and would not reasonably be expected to have a Material Adverse Effect.

4.2Authorization of Borrowing, etc.

A.Authorization of Borrowing, etc.  The execution, delivery and performance of each Loan Document have been duly authorized by all necessary action on the part of the Borrower.

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B.No Conflict.  The execution, delivery and performance by the Borrower of each Loan Document and the consummation of the transactions contemplated thereby do not and will not (i) violate any provision of any Applicable Law with respect to the Borrower or any of its Subsidiaries, any of the Organizational Documents of the Borrower or any order, judgment or decree of any Governmental Authority binding on the Borrower or any of its Subsidiaries, except to the extent such violation would not be reasonably expected to have a Material Adverse Effect, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of the Borrower or any of its Subsidiaries, except to the extent such conflict, breach or default would not reasonably be expected to have a Material Adverse Effect, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of the Borrower or any of its Subsidiaries, or (iv) require any approval of stockholders, partners or members or any approval or consent of any Person under any Contractual Obligation of the Borrower or any of its Subsidiaries, except for such approvals or consents which will be obtained on or before the Effective Date and disclosed in writing to Administrative Agent.

C.Governmental Consents.  The execution, delivery and performance by the Borrower of each Loan Document and the consummation of the transactions contemplated thereby do not and will not require any Governmental Authorization (other than, prior to the Credit Date, Governmental Authorizations required to complete the Mayne Pharma Acquisition).

D.Binding Obligation.  Each Loan Document has been duly executed and delivered by the Borrower and is the legally valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability.

4.3Disclosure.

No representation or warranty of the Borrower or any of its Subsidiaries contained in any Loan Document or in any other document, certificate or written statement furnished to any Agent or any Lender by or on behalf of the Borrower or any of its Subsidiaries for use in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state a material fact (known to the Borrower or any of its Subsidiaries in the case of any document not furnished by any of them) necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which the same were made.  Any projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by the Borrower to be reasonable at the time made, it being recognized by the Agents and the Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results.

4.4Financial Condition.

The Borrower has heretofore delivered to the Administrative Agent the audited consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 2005 and the related audited consolidated statements of income, stockholders’ equity and cash flows of the

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Borrower for the Fiscal Year then ended, together with all related notes and schedules thereto.  All such statements were prepared in conformity with GAAP and fairly present, in all material respects, the financial position of the entities described in such financial statements as at the respective dates thereof and the results of operations and cash flows of the entities described therein for each of the periods then ended, subject, in the case of any such unaudited financial statements, to changes resulting from audit and normal year-end adjustments.  Neither the Borrower nor any of its Subsidiaries has any contingent liability or liability for taxes, long-term lease or unusual forward or long-term commitment that is not reflected in the foregoing financial statements or the notes thereto and which in any such case could reasonably be expected to have a Material Adverse Effect.

4.5No Material Adverse Change.

Except as disclosed in the Borrower’s filings with the Securities and Exchange Commission prior to September 20, 2006, no event or change occurred during the period from December 31, 2005 through September 20, 2006 that had, or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

4.6Intellectual Property Matters.

Except where the failure to do so could not reasonably be expected to have a Material Adverse Effect, each of the Borrower and its Subsidiaries owns or possesses rights to use all franchises, licenses, copyright registrations, copyright applications, issued patents, patent applications, trademarks, trademark applications, trademark registrations, trademark rights, service marks, service mark applications, service mark rights, trade names, trade name rights, copyrights and rights with respect to the foregoing which are required to conduct its business.  No event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any such rights (except for the expiration of patents in the ordinary course), and neither the Borrower nor any Subsidiary thereof is liable to any Person for infringement under Applicable Law with respect to any such rights as a result of its business operations except to the extent any such revocation, termination, or infringement could not reasonably be expected to have a Material Adverse Effect.

4.7No Litigation; Compliance with Laws.

Except for the matters disclosed in the Borrower’s filings with the Securities and Exchange Commission prior to September 20, 2006, as of such date there were no actions, suits, proceedings (whether administrative, judicial or otherwise), litigations, arbitrations or governmental investigations (whether or not purportedly on behalf of the Borrower or any of its Subsidiaries) at law or in equity, or before or by any Governmental Authority, domestic or foreign (including any Environmental Claims), that were pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries or any property of the Borrower or any of its Subsidiaries and that, individually or in the aggregate, could have reasonably been expected to result in a Material Adverse Effect.  Prior to September 2006 and as of such date, neither the Borrower nor any of its Subsidiaries was subject to or in default with respect to any final judgment, writ, injunction, decree, rule or regulation of any Governmental Authority, domestic or foreign, that, individually or in the aggregate, could reasonably have been

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expected to result in a Material Adverse Effect.  Neither the Borrower nor any of its Subsidiaries is in violation of any Applicable Laws (including Environmental Laws) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.

4.8No Default.

Neither the Borrower nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any of its Contractual Obligations, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default, except where the consequences, direct or indirect, of such default or defaults, if any, could not reasonably be expected to have a Material Adverse Effect.

4.9Governmental Regulation.

Neither the Borrower nor any of its Subsidiaries is subject to regulation under the Federal Power Act or the Investment Company Act of 1940 or under any federal or state statute or regulation which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable.  Neither the Borrower nor any of its Subsidiaries is a “registered investment company” or a company “controlled” by a “registered investment company” or a “principal underwriter” of a “registered investment company” as such terms are defined in the Investment Company Act of 1940.

4.10Securities Activities.

Neither the Borrower nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock.  No part of the proceeds of the Loans will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock in violation of the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System.

4.11Employee Benefit Plans.

A.Each of the Borrower and its ERISA Affiliates is in material compliance with all applicable provisions and requirements of ERISA and the Internal Revenue Code and the regulations and published interpretations thereunder with respect to each Employee Benefit Plan, and have performed all their obligations under each Employee Benefit Plan in all material respects.  Each Employee Benefit Plan which is intended to qualify under Section 401(a) of the Internal Revenue Code has received a favorable determination letter from the Internal Revenue Service or has submitted or will submit a request for such a determination letter within the applicable remedial amendment period.

B.No material liability to the PBGC (other than required premium payments) or the Internal Revenue Service has been or is expected to be incurred by the Borrower or any of its ERISA Affiliates with respect to any Employee Benefit Plan, and no ERISA Event has occurred or is reasonably expected to occur, other than ERISA Events for which the liability has been satisfied in full or is immaterial in amount.

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C.As of the most recent valuation date for each Multiemployer Plan for which the actuarial report is available, the potential liability of the Borrower or any of its ERISA Affiliates for a complete withdrawal from such Multiemployer Plan (within the meaning of Section 4203 of ERISA), when aggregated with such potential liability for a complete withdrawal from all Multiemployer Plans, based on information available pursuant to Section 4221(e) of ERISA is not expected to be material.  The Borrower and each of its Subsidiaries and each of their ERISA Affiliates have complied in all material respects with the requirements of Section 515 of ERISA with respect to each Multiemployer Plan and are not in material “default” (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan.

4.12Environmental Protection.  As of September 20, 2006:

A.Neither the Borrower nor any of its Subsidiaries nor any of their respective Facilities or operations was subject to any outstanding written order, consent decree or settlement agreement with any Person relating to any Environmental Law, any Environmental Claim, or any Hazardous Materials Activity that, individually or in the aggregate, could reasonably have been expected to have a Material Adverse Effect.

B.Neither the Borrower nor any of its Subsidiaries had received any letter or request for information under Section 104 of the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9604) or any comparable state law, except to the extent that such letter or request could not reasonably have been expected to have a Material Adverse Effect.

C.There were not and, to the Borrower’s and each of its Subsidiaries’ knowledge, had not been any condition, occurrence, or Hazardous Materials Activity which could reasonably have been expected to form the basis of an Environmental Claim against the Borrower or any of its Subsidiaries that, individually or in the aggregate, could reasonably have been expected to have a Material Adverse Effect.

D.Compliance with all then-current or reasonably foreseeable future requirements pursuant to or under Environmental Laws could not, individually or in the aggregate, reasonably have been expected to give rise to a Material Adverse Effect.

E.Neither the Borrower nor any of its Subsidiaries nor, to the knowledge of the Borrower, any predecessor of the Borrower or any Subsidiary of such predecessor, had filed any notice under any Environmental Law indicating past or present treatment of Hazardous Materials at any Facility, and none of the Borrower’s nor any of its Subsidiaries’ operations involved the generation, transportation, treatment, storage or disposal of hazardous waste, as defined under 40 C.F.R.  Parts 260 270 or any state equivalent, except to the extent that any of the foregoing could not reasonably have been expected to have a Material Adverse Effect.

F.No event or condition had occurred or was occurring with respect to the Borrower or any of its Subsidiaries relating to any Environmental Law, any Release of Hazardous Materials, or any Hazardous Materials Activity which individually or in the aggregate had had, or could reasonably have been expected to have, a Material Adverse Effect.

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4.13Pari Passu.

The Obligations and any other claims of the Lead Arrangers, the Agents and the Lenders arising hereunder or under any of the Loan Documents rank at least pari passu with the claims of all of the Borrower’s other senior unsecured creditors, except those creditors whose claims are preferred by any bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally.

4.14Restrictions.

There are no contractual restrictions on the Borrower or any of its Subsidiaries which prohibit or otherwise restrict the transfer of cash or other assets from any such Subsidiary to the Borrower, other than prohibitions or restrictions permitted under Section 6.4.

SECTION 5.     AFFIRMATIVE COVENANTS

The Borrower covenants and agrees that, so long as the Commitments shall remain in effect and until payment in full of all Obligations (other than Surviving Obligations), unless the provisions of this Section 5 are waived or amended in accordance with Section 8.5, the Borrower shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 5.

5.1Financial Statements and Other Reports.

The Borrower will deliver to Administrative Agent:

(i)Quarterly Financial Statements:  as soon as available, and in any event within 45 days after the end of each of the first three (3) Fiscal Quarters of each Fiscal Year, the unaudited consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such Fiscal Quarter and the related consolidated statements of income, stockholders’ equity and cash flows of the Borrower and its Subsidiaries for such Fiscal Quarter and for the period from the beginning of the then-current Fiscal Year to the end of such Fiscal Quarter, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year, all in reasonable detail and certified by the chief financial officer of the Borrower as fairly presenting, in all material respects, the financial condition of the Borrower and its Subsidiaries as at the date indicated and the results of their operations and cash flows for the periods indicated in conformity with GAAP, subject to the absence of footnotes and changes resulting from audit and normal year-end adjustments;

(ii)Annual Financial Statements:  as soon as available, and in any event within 90 days after the end of each Fiscal Year, (i) the consolidated balance sheets of the Borrower and its Subsidiaries as at the end of such Fiscal Year and the related consolidated statements of income, stockholders’ equity and cash flows of the Borrower and its Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the previous Fiscal Year, in reasonable detail and certified by the chief financial officer of the Borrower as fairly presenting, in all material respects, the financial condition of the Borrower and its Subsidiaries as at the date indicated and the results of their operations and cash flows for the periods indicated; and (ii) with respect such consolidated financial statements a report thereon of Deloitte and Touche LLP or other independent certified public accountants of

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recognized national standing selected by the Borrower, and reasonably satisfactory to the Administrative Agent (which report shall be unqualified as to going concern and scope of audit, and shall state that such consolidated financial statements fairly present, in all material respects, the consolidated financial position of the Borrower and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise disclosed in such financial statements) and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards);

(iii)Compliance Certificate:  together with each delivery of financial statements of the Borrower and its Subsidiaries pursuant to Sections 5.1(i) and 5.1(ii), a duly executed and completed Compliance Certificate;

(iv)Filings:  promptly upon their becoming available, copies of (a) all financial statements, reports, notices and proxy statements sent by the Borrower to its shareholders or other security holders, and (b) all material information filed by the Borrower or any of its Subsidiaries with the Securities and Exchange Commission or any national securities exchange;

(v)Notice of Default, etc.:  promptly upon (and in any event within five (5) Business Days after) any Responsible Officer of the Borrower obtaining knowledge (a) of any condition or event that constitutes an Event of Default or Potential Event of Default or that notice has been given to the Borrower or any of its Subsidiaries with respect thereto, (b) that any Person has given any notice to the Borrower or any of its Subsidiaries or taken any other action with respect to a claimed default or event or condition of the type referred to in Section 7.2, or (c) of the occurrence of any event or change that has caused or evidences, either in any case individually or in the aggregate, a Material Adverse Effect, an Officer’s Certificate specifying the nature and period of existence of such condition, event or change, or specifying the notice given or action taken by any such Person and the nature of such claimed Event of Default, Potential Event of Default, default, event or condition, and what action the Borrower has taken, is taking and proposes to take with respect thereto;

(vi)Notice of Litigation:  promptly upon (and in any event within five (5) Business Days after) any officer of the Borrower obtaining knowledge of (a) the institution of, or non-frivolous threat of, any action, suit, proceeding, order, consent decree, settlement (whether administrative, judicial or otherwise), governmental investigation or arbitration against or affecting the Borrower or any of its Subsidiaries or any of their respective property, including of the type described in Section 4.17 (collectively, “Proceedings”) or (b) any material development in any such Proceeding that, in the case of either (a) or (b) if adversely determined, could be reasonably expected to have a Material Adverse Effect, or seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated hereby, written notice thereof together with such other information as may be reasonably available to the Borrower or such Subsidiary to enable Lenders and their counsel to evaluate such matters;

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(vii)Change in Rating:  promptly upon (and in any event within five (5) Business Days after) obtaining knowledge thereof, written notice of any changes in the rating given the Borrower’s long-term senior unsecured debt by Moody’s or S&P;

(viii)ERISA:  (i) promptly upon becoming aware of the occurrence of or forthcoming occurrence of any ERISA Event, a written notice specifying the nature thereof, what action the Borrower or any of its ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the United States Department of Labor or the PBGC with respect thereto; and (ii) with reasonable promptness, copies of (1) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by the Borrower or any of its ERISA Affiliates with the Internal Revenue Service with respect to each Pension Plan; (2) all notices received by the Borrower or any of its ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA Event; and (3) copies of such other documents or governmental reports or filings relating to any Employee Benefit Plan as the Administrative Agent shall reasonably request;

(ix)Environmental Reports and Audits:  as soon as practicable following receipt thereof, copies of all environmental audits and reports with respect to environmental matters at any property, plant or other Facility or which relate to any environmental liabilities of the Borrower or its Subsidiaries which, in any such case, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect;

(x)Public Filings:  promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any of its Subsidiaries with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of the Securities and Exchange Commission, or distributed by the Borrower to its shareholders generally; and

(xi)Other Information:  with reasonable promptness, such other information and data with respect to the Borrower and its Subsidiaries as from time to time may be reasonably requested by the Administrative Agent or any Lender.

5.2Books and Records.

The Borrower will, and will cause each of its Subsidiaries to keep proper books of records and account in which full, true and correct entries in all material respects in conformity with GAAP consistently applied shall be made of all material dealings and transactions in relation to its business and activities and permit representatives or agents of the Administrative Agent or any Lender to visit and inspect any of its properties or assets and examine and make abstracts from any of its books and records upon reasonable prior notice during normal business hours and as often as may reasonably be desired, and to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with officers and employees of the Borrower and independent public accountants of the Borrower and its Subsidiaries so long as the Borrower is provided the opportunity to participate in such discussions.

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5.3Existence.

Except as otherwise permitted by Section 6.6, the Borrower will, and will cause each of its Subsidiaries to, at all times preserve and keep in full force and effect its existence and all rights, privileges, licenses and franchises material to its business; provided that neither the Borrower nor any of its Subsidiaries shall be required to preserve any such right, privilege, license or franchise if management of the Borrower or such Subsidiary shall reasonably determine that the preservation thereof is no longer desirable in the conduct of the business of such Person, and that the loss thereof is not disadvantageous in any material respect to the Borrower or the Lenders.

5.4Insurance.

The Borrower will maintain or cause to be maintained, with financially sound and reputable insurers, such public liability insurance, third party property damage insurance, business interruption insurance and casualty insurance with respect to liabilities, losses or damage in respect of the assets, properties and businesses of the Borrower and its Subsidiaries as may customarily be carried or maintained under similar circumstances by Persons of established reputation engaged in similar businesses, in each case in such amounts (giving effect to self-insurance), with such deductibles, covering such risks and otherwise on such terms and conditions as shall be customary for such Persons.

5.5Payment of Taxes and Claims.

The Borrower will, and will cause each of its Subsidiaries to, pay all federal income Taxes and other material Taxes imposed upon it or any of its properties or assets or in respect of any of its income, businesses or franchises before any penalty or fine accrues thereon; provided no such Tax need be paid (a) if it is being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as adequate reserve or other appropriate provision, as shall be required in conformity with GAAP shall have been made therefor or (b) if the aggregate amount of all unpaid Taxes that have not been paid by the Borrower and its Subsidiaries (excluding amounts being contested as provided in clause (a)) does not exceed $5,000,000 and could not reasonably be expected to have a Material Adverse Effect.  The Borrower will not, nor will it permit any of its Subsidiaries to, file or consent to the filing of any consolidated income Tax return with any Person (other than the Borrower or any of its Subsidiaries).

5.6Payment and Performance of Obligations.

The Borrower will, and will cause each of its Subsidiaries to, pay and perform all Obligations under this Agreement and the other Loan Documents.

5.7Maintenance of Properties.

The Borrower will, and will cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of the Borrower and its Subsidiaries and from

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time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof.

5.8Compliance with Laws.

The Borrower will, and will cause each of its Subsidiaries to, comply with the requirements of all Applicable Laws, rules, regulations and orders of any Governmental Authority (including all Environmental Laws), noncompliance with which could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

5.9Use of Proceeds.

A.Proceeds of Loans.  The proceeds of each Loan shall be used (i) to effect the Mayne Pharma Acquisition and (ii) to pay costs and expenses in connection with the Transaction.

B.Margin Regulations.  No part of the proceeds of the Loans made to the Borrower will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock in violation of the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System.

5.10Claims Pari Passu.

The Borrower shall ensure that at all times the Obligations and any other claims of the Lead Arrangers, the Agents and the Lenders arising hereunder or under any other Loan Document rank at least pari passu with the claims of the Borrower’s other senior unsecured creditors, except those creditors whose claims are preferred by any bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally.

5.11Further Assurances.

At any time or from time to time upon the request of the Administrative Agent, the Borrower will, and will cause each of its Subsidiaries to, at its expense, promptly execute, acknowledge and deliver such further documents and do such other acts and things as the Administrative Agent may reasonably request in order to effect fully the purposes of the Loan Documents.

SECTION 6.     NEGATIVE COVENANTS

The Borrower covenants and agrees that, so long as the Commitments hereunder shall remain in effect and until payment in full of all Obligations (other than Surviving Obligations), unless the provisions of this Section 6 are waived or amended in accordance with Section 8.5, the Borrower shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 6.

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6.1Liens.

The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any kind of the Borrower or any of its Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, except:

(i)Liens existing on the Effective Date and described on Schedule 6.1 hereto and other Liens securing Indebtedness existing on the Effective Date the individual principal amount of which does not exceed $500,000;

(ii)Liens imposed by law for Taxes that are not yet required to be paid pursuant to Section 5.5;

(iii)statutory Liens of landlords, banks (including rights of set-off), carriers, warehousemen, mechanics, repairmen, workmen and material men, and other Liens imposed by law, in each case incurred in the ordinary course of business for amounts not yet overdue or for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of five days) are being contested in good faith by appropriate proceedings, so long as such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts;

(iv)deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money or other Indebtedness) incurred in the ordinary course of business;

(v)easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title to real property of the Borrower or any Subsidiary of the Borrower, in each case which do not and will not, individually or in the aggregate, interfere in any material respect with the use or value thereof;

(vi)any interest or title of a lessor or sublessor under any operating or true lease of real estate entered into by the Borrower or one of its Subsidiaries in the ordinary course of its business covering only the assets so leased;

(vii)Liens securing Indebtedness pursuant to Capital Leases; provided that (a) such Liens are only in respect of the property or assets subject to, and secure only, such Capital Leases, (b) Indebtedness of Subsidiaries under Capital Leases shall be limited by the provisions of Section 6.2 and (c) the aggregate amount of all Indebtedness of the Borrower under Capital Leases shall not at any time exceed $25,000,000;

(viii)purchase money Liens in real property, improvements thereto or equipment hereafter acquired (or, in the case of improvements, constructed) by the Borrower or one of its Subsidiaries; provided that (a) such Lien secures Indebtedness permitted by Section 6.2), (b) such Lien is incurred, and the Indebtedness secured thereby is created, within ninety

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(90) days after completion of such acquisition (or construction), (c) the Indebtedness secured thereby does not exceed 100% of the lesser of the cost or the fair market value of such real property, improvements or equipment at the time of such acquisition (or construction) and (d) such Lien does not apply to any other property or assets of the Borrower or any of its Subsidiaries;

(ix)Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

(x)licenses of patents, trademarks and other intellectual property rights granted by the Borrower or any of its Subsidiaries in the ordinary course of business and not interfering in any respect with the ordinary conduct of the business of the Borrower or such Subsidiary; and

(xi)Liens on assets of Persons acquired after the Effective Date subject to the terms of this Agreement; provided that such Liens exist at the time such Person becomes a Subsidiary and were not created in anticipation thereof;

(xii)Liens incurred in connection with Qualified Receivables Transactions;

(xiii)Any Lien incurred to renew, extend or refinance obligations secured by a Lien referred to in clause (viii) or (xi) above, provided that (a) the principal or face amount of the obligations secured by any such Lien does not exceed the outstanding principal or face amount of the obligations so renewed, extended or refinanced immediately prior to such renewal, extension or refinancing and (b) any such Lien attaches solely to the assets that secured the obligations so renewed, extended or refinanced; and

(xiv)Liens not otherwise permitted by the foregoing clauses of this Section 6.1 securing obligations in an aggregate principal amount at any time outstanding not to exceed 10% of Consolidated Net Worth.

Notwithstanding any of the foregoing exceptions, the Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon the Capital Stock of any of its Subsidiaries or any Indebtedness owed to it by the Borrower or any of its Subsidiaries.

6.2Indebtedness.

The Borrower shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or guaranty, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except:

(i)Indebtedness owing by any wholly-owned Subsidiary of the Borrower to the Borrower or another wholly-owned Subsidiary of the Borrower;

(ii)Indebtedness existing on the Effective Date and set forth on Schedule 6.2, but, in each case, not any extensions, renewals or replacements of such Indebtedness except (a) renewals and extensions expressly provided for in the agreements evidencing any such Indebtedness as the same are in effect on the date of this Agreement and (b) refinancings and

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extensions of any such Indebtedness if the terms and conditions thereof are not less favorable to the obligor thereon or to the Lenders than the Indebtedness being refinanced or extended or are otherwise on substantially then prevailing market terms, and the average life to maturity thereof is greater than or equal to that of the Indebtedness being refinanced or extended; provided such Indebtedness permitted under the immediately preceding clause (a) or (b) above shall not (A) include Indebtedness of an obligor that was not an obligor with respect to the Indebtedness being extended, renewed or refinanced, (B) exceed in a principal amount the Indebtedness being renewed, extended or refinanced or (C) be incurred, created or assumed if any Potential Event of Default or Event of Default has occurred and is continuing or would result therefrom;

(iii)Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business, provided that such Indebtedness is extinguished within seven (7) Business Days of its incurrence;

(iv)Indebtedness owed to (including obligations in respect of letters of credit or bank guarantees or similar instruments for the benefit of) any Person providing workers’ compensation, health, disability or other employee benefits or property, casualty or liability insurance to the Borrower or any of its Subsidiaries, pursuant to reimbursement or indemnification obligations to such Person, provided that upon the incurrence of Indebtedness with respect to reimbursement obligations regarding workers’ compensation claims, such obligations are reimbursed not later than 30 days following such incurrence;

(v)Indebtedness incurred by any Subsidiary of the Borrower arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from guaranties or letters of credit, surety bonds or performance bonds securing the performance of the Borrower or any such Subsidiary pursuant to such agreements, in connection with permitted dispositions of any business or asset (including the stock of any Subsidiary of the Borrower);

(vi)Indebtedness which may be deemed to exist pursuant to any guaranties, performance, surety, statutory, appeal or similar obligations incurred in the ordinary course of business of the Borrower and its Subsidiaries;

(vii)guaranties in the ordinary course of business of the obligations of suppliers, customers, franchisees and licensees of the Borrower and its Subsidiaries;

(viii)Indebtedness (including guarantees of any such Indebtedness) of a Subsidiary located in a country other than the U.S.; provided that the outstanding principal amount of all Indebtedness permitted by this clause (viii) (without double counting guarantees of any such Indebtedness) shall not at any time exceed $100,000,000;

(ix)the Obligations; and

(x)other Indebtedness in an aggregate principal amount at any time outstanding not to exceed 15% of Consolidated Net Worth.

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6.3Acquisitions.

The Borrower will not, and will not permit any of its wholly-owned Subsidiaries to, make any Acquisition (other than the Mayne Pharma Acquisition and (ii) any Acquisition by the Borrower or a wholly-owned Subsidiary of the Borrower of a wholly-owned Subsidiary of the Borrower) if an Event of Default or Potential Event of Default exists or would result therefrom.

6.4Restrictions on Subsidiary Distributions.

Except as provided herein, the Borrower shall not, and shall not permit any of its Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Subsidiary of the Borrower to (a) pay dividends or make any other distributions on any of such Subsidiary’s Capital Stock owned by the Borrower or any other Subsidiary of the Borrower, (b) repay or prepay any Indebtedness owed by such Subsidiary to the Borrower or any other Subsidiary of the Borrower, (c) make loans or advances to the Borrower or any other Subsidiary of the Borrower, or (d) transfer any of its property or assets to the Borrower or any other Subsidiary of the Borrower, other than restrictions (i) existing under this Agreement, (ii) in agreements evidencing Indebtedness pursuant to Capital Leases permitted by Section 6.2 that impose restrictions on the property so acquired (except that such agreements shall not in any manner limit the ability of the Borrower or any Subsidiary of the Borrower to pay dividends or make any other distribution), (iii) by reason of customary provisions restricting assignments, subletting or other transfers contained in leases, licenses, Joint Venture agreements and similar agreements entered into in the ordinary course of business, (iv) by reason of customary subordination provisions in any guaranty or similar arrangement (including any arrangement of the type described in clause (vii), (viii) or (ix) of the definition of “Indebtedness” or (v) imposed on a Subsidiary pursuant to an agreement which has been entered into in connection with the disposition of all of substantially all of the capital stock or assets of such Subsidiary.

6.5Restricted Payments.

The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, declare, pay, make or set aside any sum for any Restricted Payment if an Event of Default or a Potential Event of Default exists or would result therefrom.

6.6Restriction on Fundamental Changes and Asset Sales.

The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into any transaction of merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or sub-lessor), exchange, transfer or otherwise dispose of, in one transaction or a series of transactions, all or substantially all of its business, assets or property; provided that (a) the Borrower and its Subsidiaries may make Acquisitions permitted by Section 6.3; and (b) so long as no Event of Default or Potential Event of Default exists or would result therefrom:

(i)any Subsidiary of the Borrower may merge or consolidate with or into, or dispose of assets to, any other Subsidiary or to the Borrower;

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(ii)any Subsidiary may merge or consolidate with or into another Person, convey, transfer, lease or otherwise dispose of all or any portion of its assets so long as (A) the consideration received in respect of such merger, consolidation, conveyance, transfer, lease or other disposition is at least equal to the fair market value of such assets and (B) no Material Adverse Effect could reasonably be expected to result from such merger, consolidation, conveyance, transfer, lease or other disposition; and

(iii)the Borrower may merge with any other Person so long as the Borrower is the surviving entity.

6.7Conduct of Business.

From and after the Effective Date, the Borrower shall not, and shall not permit any of its Subsidiaries to, engage in any material business or conduct any activities other than (a) businesses conducted by the Borrower and its Subsidiaries as of the Effective Date, (b) businesses conducted by Mayne Pharma and its Subsidiaries as of September 20, 2006 and (c) and businesses reasonably related to the foregoing.

6.8Fiscal Year.

The Borrower shall not make or permit, or permit any of its Subsidiaries to make or permit, any change in its fiscal year, provided that Mayne Pharma or any Subsidiary thereof may make any change that is necessary or appropriate to cause its fiscal year to correspond with the Borrower’s fiscal year.

6.9Subordinated Indebtedness.

The Borrower shall not, and shall not permit any of its Subsidiaries to, amend or otherwise change the terms of any Subordinated Indebtedness, or make any optional payment or any payment pursuant thereto, if the effect of such amendment or change is to increase the interest rate on such Subordinated Indebtedness, change (to earlier dates) any dates upon which payments of principal or interest are due thereon, change any event of default or condition to an event of default with respect thereto (other than to eliminate any such event of default or increase any grace period related thereto), change the redemption, prepayment or defeasance provisions thereof, change the subordination provisions of such Subordinated Indebtedness (or of any guaranty thereof), or if the effect of such amendment or change, together with all other amendments or changes made, is to increase materially the obligations of the obligor thereunder or to confer any additional rights on the holders of such Subordinated Indebtedness (or a trustee or other representative on their behalf) which would be adverse to the Borrower or the Lenders.

6.10Transactions with Shareholders and Affiliates.

The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service or the making of any intercompany loan) with any Affiliate of the Borrower or any of its Subsidiaries, any holder of Capital Stock or other interests in the Borrower or any of its Subsidiaries, or any such Affiliate of any such

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holder, on fair and reasonable terms that are less favorable to the Borrower or such Subsidiary, as the case may be, than those that might be obtained at the time in a comparable arm’s length transaction from a Person who is not such a holder or Affiliate; provided the foregoing restriction shall not apply to (a) any transaction between the Borrower and its Subsidiaries or between such Subsidiaries to the extent otherwise permitted hereunder; (b) reasonable and customary fees paid to members of the board of directors (or similar governing body) of the Borrower and its Subsidiaries; (c) compensation arrangements for officers and other employees of the Borrower and its Subsidiaries entered into in the ordinary course of business; (d) transactions described on Schedule 6.10; and (e) transactions in connection with Qualified Receivables Transactions permitted under this Agreement.

6.11Financial Covenants.

A.Interest Coverage Ratio.  The Borrower shall not permit the Interest Coverage Ratio as of the last day of any Fiscal Quarter to be less than the ratio shown below opposite such last day:

Fiscal Quarter Ending	Ratio
December 31, 2006	4.00 to 1
March 31, 2007	4.00 to 1
June 30, 2007	4.50 to 1
September 30, 2007	4.75 to 1
December 31, 2007 and thereafter	5.00 to 1

B.Leverage Ratio.  The Borrower shall not permit the Leverage Ratio as of the last day of any Fiscal Quarter to exceed the ratio shown below opposite such last day:

Fiscal Quarter Ending	Ratio
December 31, 2006	4.50 to 1
March 31, 2007	4.50 to 1
June 30, 2007	4.00 to 1
September 30, 2007	3.50 to 1
December 31, 2007 and thereafter	3.25 to 1

C.Certain Calculations.  With respect to any period during which a Permitted Acquisition (excluding the Acquisition by the Borrower or a Subsidiary of Bresagen Limited) or an Asset Sale has occurred (each, a “Subject Transaction”), for purposes of determining compliance with the financial covenants set forth in this Section 6.11, Consolidated Adjusted EBITDA shall be calculated with respect to such period on a pro forma basis using the historical audited financial statements of any business so acquired or to be acquired or sold or to be sold

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and the consolidated financial statements of the Borrower and its Subsidiaries which shall be reformulated as if such Subject Transaction, and any Indebtedness incurred or repaid in connection therewith, had been consummated or incurred or repaid at the beginning of such period.

6.12Interest Rate Agreements and Currency Agreements.

The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into any Interest Rate Agreement or Currency Agreement after the Effective Date except Interest Rate Agreements and Currency Agreements entered into to hedge or manage bona fide risks to which the Borrower or any such Subsidiary is exposed in the conduct of its business or the management of its liabilities (and, in any event, not for speculative purposes).

SECTION 7.     EVENTS OF DEFAULT

If any of the following conditions or events (each an “Event of Default”) shall occur:

7.1Failure to Make Payments When Due.

Failure by the Borrower to pay (i) any installment of principal of any Loan when due, whether at stated maturity, by acceleration, by notice of voluntary prepayment, by mandatory prepayment or otherwise; or (ii) any interest on any Loan or any fee or any other amount due under this Agreement within five (5) days after the date due; or

7.2Default in Other Agreements.

Failure of the Borrower or any of its Subsidiaries to pay when due any principal of or interest on or any other amount payable in respect of one or more items of Indebtedness (other than Indebtedness referred to in Section 7.1 above) in excess of $20,000,000 in the aggregate and in each case beyond the end of any grace period provided therefor, if any; or (ii) breach or default by the Borrower or any of its Subsidiaries with respect to any other material term of (a) one or more items of such Indebtedness or (b) any loan agreement, mortgage, indenture or other agreement relating to such item(s) of Indebtedness, in each case beyond the end of any grace period provided therefor, if any, if the effect of such breach or default is to cause, or to permit the holder or holders of that Indebtedness (or a trustee on behalf of such holder or holders) to cause, that Indebtedness to become or be declared due and payable (or redeemable) prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be; or

7.3Breach of Certain Covenants.

Failure of the Borrower to perform or comply with any term or condition contained in Sections 5.1(v)(a), 5.3 (solely with respect to (1) the existence of the Borrower and (2) the failure of the Borrower to preserve or keep in full force and effect its rights, privileges, licenses and franchises if such failure would reasonably be expected to have a Material Adverse Effect), 5.9 or 6 of this Agreement; or

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7.4Breach of Representation or Warranty.

Any representation, warranty, certification or other statement made by the Borrower in any Loan Document or in any statement or certificate at any time given by the Borrower in writing pursuant thereto or in connection therewith shall be false in any material respect on the date as of which made; or

7.5Other Defaults Under Loan Documents.

The Borrower shall default in the performance of or compliance with any term contained in this Agreement or any other Loan Document (other than those specified in Sections 7.1, 7.2, 7.3 and 7.4) and such default or non-compliance shall not be cured or waived within thirty (30) days after the Borrower shall have received notice from the Administrative Agent of such default; or

7.6Involuntary Bankruptcy; Appointment of Receiver, etc.

(i) A court of competent jurisdiction shall enter a decree or order for relief in respect of any the Borrower or any of its Significant Subsidiaries in an involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal or state law; or (ii) an involuntary case shall be commenced against the Borrower or any of its Significant Subsidiaries under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, examiner, custodian or other officer having similar powers over the Borrower or any of its Significant Subsidiaries, or over all or a substantial part of their respective property, shall have been entered; or there shall have occurred the involuntary appointment of an interim receiver, trustee, examiner or other custodian of the Borrower or any of its Significant Subsidiaries for all or a substantial part of their respective property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of the Borrower or any of its Significant Subsidiaries, and any such event described in this clause (ii) shall continue for sixty (60) days unless dismissed, bonded or discharged; or

7.7Voluntary Bankruptcy; Appointment of Receiver, etc.

The Borrower or any of its Significant Subsidiaries shall have an order for relief entered with respect to it or commence a voluntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or the Borrower or any of its Significant Subsidiaries shall make any assignment for the benefit of creditors; or the Borrower or  any of its Significant Subsidiaries shall be unable, or shall fail generally, or shall admit in writing their respective inability, to pay its debts as such debts become due; or the board of directors (or similar governing body) of the Borrower or any of its Significant Subsidiaries (or any committee thereof) shall adopt any resolution or otherwise

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authorize any action to approve any of the actions referred to in this Section 7.7 or in Section 7.6 above; or

7.8Judgments and Attachments.

Any money judgment, writ or warrant of attachment or similar process involving in excess of $20,000,000 (not adequately covered by insurance as to which a solvent and unaffiliated insurance company has acknowledged coverage) shall be entered or filed against the Borrower or any of its Subsidiaries, or any of their respective assets, and shall remain undischarged, unvacated, unbonded or unstayed for a period of sixty (60) days (or in any event later than five (5) days prior to the date of any proposed sale thereunder); or

7.9Dissolution.

Any order, judgment or decree shall be entered against the Borrower or any of its Subsidiaries decreeing the dissolution or split up of such Person; or

7.10Employee Benefit Plans.

There shall occur one or more ERISA Events which individually or in the aggregate results in or might reasonably be expected to result in liability of the Borrower or any of its Subsidiaries or any of their respective ERISA Affiliates in excess of $10,000,000 during the term of this Agreement; or there shall exist any fact or circumstance that reasonably could be expected to result in the imposition of a Lien or security interest under Section 412(n) of the Internal Revenue Code or under ERISA; or

7.11Change in Control.

A Change of Control shall occur; or

7.12Repudiation of Obligations.

At any time after the execution and delivery thereof, (i) this Agreement for any reason shall cease to be in full force and effect (other than by reason of the satisfaction in full of the Obligations) or shall be declared null and void, or (ii) the Borrower shall contest the validity or enforceability of any Loan Document, or deny that it has any further liability under any Loan Document; or

7.13Material Adverse Change.

(i) Since September 20, 2006 and on or prior to the Credit 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 condition (financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole, (ii) any representation or warranty made with respect to Mayne Pharma, its Subsidiaries or their businesses is not true, correct and complete in all material respects on and as of the relevant date or (iii) any bona fide action, suit, investigation, litigation or proceeding (whether administrative, judicial or otherwise) affecting the Borrower or any of its Subsidiaries shall be pending or threatened against any court, Governmental Authority

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or arbitrator that could be reasonably expected to, individually or in the aggregate, materially impair the transactions contemplated by the Loan Documents or in any manner call into question or challenge this Agreement or the making of the Loans, and in each case, 30 days shall have elapsed after the Credit Date;

THEN, (1) upon the occurrence of any Event of Default described in Section 7.6 or 7.7, automatically, and (2) upon the occurrence of any other Event of Default, at the request of (or with the consent of) Requisite Lenders, upon notice to the Borrower by the Administrative Agent, (A) the Commitments, if any, of each Lender having such Commitments shall immediately terminate; (B) each of the following shall immediately become due and payable, in each case without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by the Borrower:  (I) the unpaid principal amount of and accrued interest on the Loans and (II) all other Obligations.

SECTION 8.     MISCELLANEOUS

8.1Assignments and Participations in Loans.

A.Right to Assign.  Each Lender shall have the right at any time to sell, assign or transfer all or a portion of its rights and obligations under this Agreement, including all or a portion of its Commitment or Loans owing to it or other Obligation (provided, however, that each such assignment shall be of a uniform, and not varying, percentage of all rights and obligations under and in respect of Loans and its Commitment):  (i) to any Person meeting the criteria of clause (A) of the definition of the term of “Eligible Assignee” or to any Approved Fund upon the giving of notice to the Borrower and the Administrative Agent; and (ii) to any Person meeting the criteria of clause (B) of the definition of the term of “Eligible Assignee” and consented to by each of the Borrower and the Administrative Agent (such consent not to be (x) unreasonably withheld or delayed and, (y) in the case of the Borrower, required at any time an Event of Default shall have occurred and then be continuing); provided further each such assignment pursuant to this Section 8.1A shall be in an aggregate amount of not less than $5,000,000, which such amount shall be reduced to $1,000,000 at any time an Event of Default shall have occurred and be continuing (or such lesser amount as may be agreed to by the Borrower and the Administrative Agent or as shall constitute the aggregate amount of the Commitment and Loans of the assigning Lender).

B.Requirements.  The assigning Lender and the assignee thereof shall execute and deliver to the Administrative Agent an Assignment Agreement, together with (i) a processing and recordation fee of $3,500, and (ii) such forms, certificates or other evidence, if any, with respect to United States federal income tax withholding matters as the assignee under such Assignment Agreement may be required to deliver to Administrative Agent pursuant to Section 2.8B(iii).

C.Acceptance and Notice of Assignment.  Upon its receipt of a duly executed and completed Assignment Agreement, together with the processing and recordation fee referred to in Section 8.1B (and any forms, certificates or other evidence required by this Agreement in connection therewith), the Administrative Agent shall record the information contained in such

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Assignment Agreement in the Register, shall give prompt notice thereof to the Borrower and shall maintain a copy of such Assignment Agreement.

D.Representations and Warranties of Assignee.  Each Lender, upon execution and delivery hereof or upon executing and delivering an Assignment Agreement, as the case may be, represents and warrants as of the Effective Date or as of the applicable Effective Date (as defined in the applicable Assignment Agreement) that (i) it is an Eligible Assignee; (ii) it has experience and expertise in the making of or investing in commitments or loans such as its Commitment or Loans, as the case may be; and (iii) it will make or invest in, as the case may be, its Commitment or Loans for its own account in the ordinary course of its business and without a view to distribution of its Commitment or Loans within the meaning of the Securities Act or the Exchange Act or other federal securities laws (it being understood that, subject to the provisions of this Section 8.1, the disposition of its Commitment or Loans or any interests therein shall at all times remain within its exclusive control).

E.Effect of Assignment.  Subject to the terms and conditions of this Section 8.1, as of the “Effective Date” specified in the applicable Assignment Agreement:  (i) the assignee thereunder shall have the rights and obligations of a “Lender” hereunder to the extent such rights and obligations hereunder have been assigned to it pursuant to such Assignment Agreement and shall thereafter be a party hereto and a “Lender” for all purposes hereof; (ii) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned thereby pursuant to such Assignment Agreement, relinquish its rights (other than any rights which survive the termination hereof under Section 8.8) and be released from its obligations hereunder (and, in the case of an Assignment Agreement covering all or the remaining portion of an assigning Lender’s rights and obligations hereunder, such Lender shall cease to be a party hereto; provided, anything contained in any of the Loan Documents to the contrary notwithstanding and (y) such assigning Lender shall continue to be entitled to the benefit of all indemnities hereunder as specified herein with respect to matters arising out of the prior involvement of such assigning Lender as a Lender hereunder); (iii) the Commitments shall be modified to reflect the Commitment of such assignee and any Commitment of such assigning Lender, if any; and (iv) if any such assignment occurs after the issuance of any Note to the assigning Lender, the assigning Lender shall, upon the effectiveness of such assignment or as promptly thereafter as practicable, surrender its Notes to the Administrative Agent for cancellation, and thereupon the Borrower shall issue and deliver new Notes, if so requested by the assignee and/or assigning Lender, to such assignee and/or to such assigning Lender, with appropriate insertions, to evidence the Loans of the assignee and/or the assigning Lender.

F.Certain Other Permitted Assignments.  In addition to any other assignment permitted pursuant to this Section 8.1, any Lender may assign and/or pledge all or any portion of its Loans, the other obligations owed by or to such Lender, if any, to secure obligations of such Lender including to any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve Bank; provided that no such assignment or pledge shall release any Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

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G.Participations.  Each Lender shall have the right at any time to sell one or more participations to any Person (other than the Borrower, any of its Subsidiaries or any of its Affiliates) in all or any part of its Commitment, Loans or other Obligations.  The holder of any such participation, other than an Affiliate of the Lender granting such participation, shall not be entitled to require such Lender to take or omit to take any action hereunder except with respect to any amendment, modification or waiver that would (i) extend the final scheduled maturity of any Loan or Note in which such participant is participating, or reduce the rate or extend the time of payment of interest or fees thereon (except in connection with a waiver of applicability of any post default increase in interest rates) or reduce the principal amount thereof, or increase the amount of the participant’s participation over the amount thereof then in effect (it being understood that a waiver of any Event of Default or of a mandatory reduction in the Commitment shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan shall be permitted without the consent of any participant if the participant’s participation is not increased as a result thereof) or (ii) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement.  The Borrower agrees that each participant shall be entitled to the benefits of Sections 2.9C and 2.8 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 8.1A; provided (i) a participant shall not be entitled to receive any greater payment under Section 2.8 than the applicable Lender would have been entitled to receive with respect to the participation sold to such participant, unless the sale of the participation to such participant is made with the Borrower’s prior written consent and (ii) a participant that would be a Non-US Lender if it were a Lender shall not be entitled to the benefits of Section 2.8B unless the Borrower is notified of the participation sold to such participant and such participant agrees, for the benefit of the Borrower, to comply with Section 2.8B as though it were a Lender.  To the extent permitted by law, each participant also shall be entitled to the benefits of Section 8.5 as though it were a Lender, provided such participant agrees to be subject to Section 8.18 as though it were a Lender.

8.2Expenses.

Whether or not the transactions contemplated hereby shall be consummated, the Borrower agrees to pay promptly (i) all the actual and reasonable costs and out-of-pocket expenses of preparation of the Loan Documents; (ii) all the costs of furnishing all opinions by counsel for the Borrower; (iii) the reasonable fees, out-of-pocket expenses and disbursements of a single U.S. counsel in connection with the negotiation, preparation and execution of the Loan Documents and any other documents or matters requested by the Borrower; (iv) all the actual and reasonable costs and out-of-pocket reasonable fees, expenses and disbursements of any auditors, accountants, consultants or appraisers; (v) all other actual and reasonable costs and out-of-pocket expenses incurred by each Lead Arranger, the Administrative Agent and each Syndication Agent in connection with the syndication of the Loans and the negotiation, preparation and execution of the Loan Documents and the transactions contemplated thereby; (vi) all actual and reasonable costs and out-of-pocket expenses incurred by the Administrative Agent in connection with any consents, amendments, waivers or other modifications of the Loan Documents (including the reasonable fees, out-of-pocket expenses and disbursements of counsel to the Administrative Agent in connection therewith); and (vii) after the occurrence of an Event of Default, all costs and expenses, including reasonable attorneys’ fees (including, without duplication, allocated costs of internal counsel) and costs of settlement, incurred by any Agent or Lender in enforcing any Obligations of or in collecting any payments due from the Borrower

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hereunder or under the other Loan Documents by reason of such Event of Default (including in connection with the sale of, collection from, or other realization upon any collateral) or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a “work-out” or pursuant to any insolvency or bankruptcy cases or proceedings.

8.3Indemnity.

A.In addition to the payment of expenses pursuant to Section 8.2, whether or not the transactions contemplated hereby shall be consummated, the Borrower agrees to defend (subject to Indemnitees’ selection of counsel), indemnify, pay and hold harmless each of the Lead Arrangers and Agents and each Lender, and the respective partners, officers, directors, employees, agents, attorneys, and affiliates of each of the Lead Arrangers and each of the Agents and each Lender (collectively called the “Indemnitees”), from and against any and all Indemnified Liabilities (as hereinafter defined); provided that the Borrower shall not have any obligation to any Indemnitee hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise from the gross negligence or willful misconduct of that Indemnitee or any of its Affiliates as determined by a final judgment of a court of competent jurisdiction.  As used herein, “Indemnified Liabilities” means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, actions, judgments, suits, claims (including environmental claims), costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by the Borrower or any other Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby (including the Lenders’ agreements to make the Loans hereunder or the use or intended use of the proceeds thereof, or any enforcement of any of the Loan Documents).

B.To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in this Section 8.3 may be unenforceable in whole or in part because they are violative of any law or public policy, the Borrower shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of them.

C.To the extent permitted by applicable law, the Borrower and each of its Subsidiaries shall not assert, and each hereby waives, any claim against the Lenders, the Agents, the Lead Arrangers and their respective Affiliates, officers, directors, employees, attorneys or agents, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) (whether or not the claim therefor is based on contract, tort or duty imposed by any applicable legal requirement) arising out of, in connection with, arising out of, as a result of, or in any way related to, this Agreement or any other Loan Document, or

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any agreement or instrument contemplated hereby or thereby or referred to herein or therein, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof or any act or omission or event occurring in connection therewith, and the Borrower and each of its Subsidiaries hereby waives, releases and agrees not to sue upon any such claim or any such damages, whether or not accrued and whether or not known or suspected to exist in its favor.

8.4Set-Off.

In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence and during the continuance of any Event of Default, each of the Agents and each Lender (and each of their respective Affiliates) is hereby authorized by the Borrower at any time or from time to time subject, except in the case of an Event of Default under Section 7.1, 7.6 or 7.7, to the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed), without notice to the Borrower or to any other Person, any such notice being hereby expressly waived, to set-off and to appropriate and to apply any and all deposits (general or special, including Indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other Indebtedness at any time held or owing by such Agent or such Lender (or such Affiliate), and any of their respective affiliates, as the case may be, to or for the credit or the account of the Borrower against and on account of the obligations and liabilities of the Borrower to such Agent or such Lender under this Agreement and the other Loan Documents, including all claims of any nature or description arising out of or connected with this Agreement or any other Loan Document, irrespective of whether or not (i) such Agent or such Lender shall have made any demand hereunder or (ii) the principal of or the interest on the Loans or any other amounts due hereunder shall have become due and payable pursuant to Section 7 and although said Obligations, or any of them, may be contingent or unmatured.

8.5Amendments and Waivers.

No amendment, modification, termination or waiver of any provision of this Agreement or of any other Loan Document, or consent to any departure by the Borrower therefrom, shall in any event be effective without the written concurrence of the Requisite Lenders; provided that no amendment, modification, termination, waiver or consent shall, without the consent of each Lender affected thereby:  (i) extend the scheduled final maturity of any Loan; (ii) waive, reduce or postpone any scheduled repayment (but not prepayment); (iii) reduce the rate of interest on any Loan or any fee or other amount hereunder; (iv) extend the time for payment of any such interest, fees or other amounts; (v) reduce the principal amount of any Loan; (vi) amend, modify, terminate or waive any provision of this Section 8.5; (vii) amend, modify or replace the definition of “Requisite Lenders” or “Pro Rata Share”, or any provision of this Agreement which would alter the pro rata sharing of payments required hereunder; or (viii) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement; provided further that no such amendment, modification, termination or waiver of any provision of the Loan Documents, or consent to any departure by the Borrower therefrom, shall:  (1) increase the Commitments of any Lender over the amount thereof then in effect without the consent of such Lender; or (2) amend, modify, terminate or waive any provision of this Agreement as the same applies to the rights or obligations of any Agent, in each case without the consent of such Agent.  The Administrative Agent may, but shall have no obligation to, with the

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concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of such Lender.  Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given.  No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances.

8.6Independence of Covenants.

All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or Potential Event of Default if such action is taken or condition exists.

8.7Notices.

A.Generally.  Unless otherwise specifically provided herein, all notices or other communications provided for hereunder between the Borrower and any other Person party hereto shall be in writing (including facsimile or electronic mail) and mailed, sent by overnight courier, telecopied, e-mailed, or delivered to, in the case of each signatory to this Agreement, at its address set forth on the signature pages hereto, or, as to each party, at such other address or to such other person as shall be designated by such party in a written notice to all other parties.  Any notice, request or demand to or upon the Borrower or any other Person party hereto shall not be effective until received.

B.Intralinks.

(i)The Borrower hereby agree that they will provide to the Administrative Agent all information, documents and other materials that they are obligated to furnish to the Administrative Agent pursuant to the Loan Documents, including all notices, requests, financial statements, financial and other reports, certificates and other information materials, but excluding any such communication that (i) relates to a request for a new, or a conversion of an existing, borrowing or other Loan (including any election of an interest rate or interest period relating thereto), (ii) relates to the payment of any principal or other amount due under this Agreement prior to the scheduled date therefor, (iii) provides notice of any Potential Event of Default or Event of Default or (iv) is required to be delivered to satisfy any condition precedent to the effectiveness of this Agreement and/or any borrowing or other Loan hereunder (all such non-excluded communications being referred to herein collectively as “Communications”), by transmitting the Communications in an electronic/soft medium in a format acceptable to the Administrative Agent to oploanswebadmin@citigroup.com.  In addition, the Borrower agrees to continue to provide the Communications to the Administrative Agent in the manner specified in the Loan Documents but only to the extent requested by the Administrative Agent.

(ii)The Borrower further agrees that the Administrative Agent may make the Communications available to the Lenders by posting the Communications on Intralinks or a substantially similar electronic transmission system (the “Platform”).

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(iii)THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE”.  THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS, OR THE ADEQUACY OF THE PLATFORM AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN THE COMMUNICATIONS.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY THE AGENT PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM.  IN NO EVENT SHALL THE ADMINISTRATIVE AGENT OR ANY OF ITS AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS OR REPRESENTATIVES (COLLECTIVELY, “AGENT PARTIES”) HAVE ANY LIABILITY TO THE BORROWER, ANY LENDER OR ANY OTHER PERSON OR ENTITY FOR DAMAGES OF ANY KIND, INCLUDING DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF THE BORROWER’S OR THE ADMINISTRATIVE AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET, EXCEPT TO THE EXTENT THE LIABILITY OF ANY AGENT PARTY IS FOUND IN A FINAL NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FROM SUCH AGENT PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

(iv)The Administrative Agent agrees that the receipt of the Communications by the Administrative Agent at its e-mail address set forth above shall constitute effective delivery of the Communications to the Administrative Agent for purposes of the Loan Documents.  Each Lender agrees that notice to it (as provided in the next sentence) specifying that the Communications have been posted to the Platform shall constitute effective delivery of the Communications to such Lender for purposes of the Loan Documents.  Each Lender agrees to notify the Administrative Agent in writing (including by electronic communication) from time to time of such Lender’s e-mail address to which the foregoing notice may be sent by electronic transmission and (ii) that the foregoing notice may be sent to such e-mail address.

8.8Survival of Representations, Warranties and Agreements.

A.All representations, warranties and agreements made herein shall survive the execution and delivery of this Agreement and the making of the Loans hereunder.

B.Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of the Borrower set forth in Sections 2.8, 2.9C, 8.2, 8.3 and 8.4 and the agreements of Lenders set forth in Sections 8.18, 9.2C and 9.4 shall survive the payment of the Loans and the termination of this Agreement.

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8.9Failure or Indulgence Not Waiver; Remedies Cumulative.

No failure or delay on the part of any Lead Arranger, any Agent or any Lender in the exercise of any power, right or privilege hereunder or under any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege.  The rights, powers and remedies given to each Lead Arranger, each Agent and each Lender hereby are cumulative and shall be in addition to and independent of all rights, powers and remedies existing by virtue of any statute or rule of law or in any other Loan Document.  Any forbearance or failure to exercise, and any delay in exercising, any right, power or remedy hereunder shall not impair any such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy.

8.10Marshalling; Payments Set Aside.

No Agent or Lender shall be under any obligation to marshal any assets in favor of the Borrower or any other Person or against or in payment of any or all of the Obligations.  To the extent that the Borrower makes a payment or payments to the Administrative Agent or the Lenders (or to the Administrative Agent, on behalf of the Lenders) or the Administrative Agent or the Lenders enforce any security interests or exercises their rights of set-off, and such payment or payments or the proceeds of such enforcement or set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or set-off had not occurred.

8.11Severability.

In case any provision in or obligation under any Loan Document shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations of such Loan Document, the other Loan Documents or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

8.12Headings.

Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.

8.13Applicable Law.

THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

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8.14Successors and Assigns.

This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of the Lenders (it being understood that each Lender’s rights of assignment are subject to Section 8.1).  The Borrower may not assign or delegate its rights or obligations hereunder or any interest therein without the prior written consent of each Lender.  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Indemnitees, and Affiliates of each of the Agents and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

8.15Consent to Jurisdiction and Service of Process.

ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK.  BY EXECUTING AND DELIVERING THIS AGREEMENT, THE BORROWER, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY

(I)ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS;

(II)WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;

(III)AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE BORROWER AT ITS ADDRESS SET FORTH ON THE SIGNATURE PAGES HERETO;

(IV)AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE BORROWER IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT;

(V)AGREES THAT EACH AGENT AND EACH LENDER RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION; AND

(VI)AGREES THAT THE PROVISIONS OF THIS SECTION 8.15 RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.

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8.16Waiver of Jury Trial.

EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED.  The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including contract claims, tort claims, breach of duty claims and all other common law and statutory claims.  Each party hereto acknowledges that this waiver is a material inducement to enter into a business relationship, that each has already relied on this waiver in entering into this Agreement, and that each will continue to rely on this waiver in their related future dealings.  Each party hereto further warrants and represents that it has reviewed this waiver with its legal counsel and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel.  THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 8.16 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER.  In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.

8.17Confidentiality.

Each Agent and Lender shall hold all confidential, proprietary or non-public information regarding the Borrower and its Subsidiaries and their respective businesses which has been identified as confidential by any the Borrower and obtained pursuant to the requirements of this Agreement in accordance with such Agent’s or Lender’s customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices, it being understood and agreed by the Borrower that in any event each Lender may make disclosures (i) to Affiliates of such Agent or Lender and the directors, officers, employees, agents, advisors and other representatives of such Agent or Lender and their Affiliates (and to other persons authorized by an Agent or Lender to organize, present or disseminate such information in connection with disclosures otherwise made in accordance with this Section 8.17); (ii) reasonably required by any bona fide or potential assignee, transferee or participant in connection with the contemplated assignment, transfer or participation by any Lender of its Loans or any interest therein; (iii) to any rating agency when required by it, provided that, prior to any disclosure, such rating agency shall undertake in writing to preserve the confidentiality of any confidential information relating to the Borrower or its Subsidiaries received by it from any of the Agents or any Lender; (iv) required or requested by any Governmental Authority or representative thereof; provided that unless specifically prohibited by applicable law, court order or similar regulatory process, each Agent and Lender shall make reasonable efforts to notify the Borrower of any request by any Governmental Authority or representative thereof (other than

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any such request in connection with any examination of the financial condition or other routine examination of such Agent or Lender by such Governmental Authority) for disclosure of any such non-public information prior to disclosure of such information; (v) to any other party hereto; (vi) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder; (vii) to any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and their Obligations; (viii) with the consent of the Borrower or (ix) to the extent such information (x) becomes publicly available other than as a result of a breach of this Section 8.17 or (y) becomes available to any Agent, any Lender or their respective Affiliates on a nonconfidential basis from a source other than the Borrower so long as such Agent, such Lender or such Affiliate does not have knowledge that such source has an obligation to the Borrower to keep such information confidential; provided that in no event shall any Agent or Lender be obligated or required to return any materials furnished by the Borrower or any of its Subsidiaries.

8.18Ratable Sharing.

The Lenders hereby agree among themselves that if any of them shall, whether by voluntary payment (other than a voluntary prepayment of Loans made and applied in accordance with the terms hereof), through the exercise of any right of set-off or banker’s lien, by counterclaim or cross action or by the enforcement of any right under the Loan Documents or otherwise, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal, interest, amounts payable in respect of commitment fees and other amounts then due and owing to such Lender hereunder or under the other Loan Documents (collectively, the “Aggregate Amounts Due” to such Lender), which is greater than the proportion received by any other Lender in respect to of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall (i) notify the Administrative Agent of the receipt of such payment and (ii) apply a portion of such payment to purchase (for cash at face value) participations (which it shall be deemed to have purchased from each seller of a participation simultaneously upon the receipt by such seller of its portion of such payment), or such other adjustments as shall be equitable, in the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate Amounts Due to them; provided that, if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender upon the bankruptcy or reorganization of the Borrower or otherwise, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest.  The Borrower and each of its Subsidiaries expressly consents to the foregoing arrangement and agrees that any holder of a participation so purchased may exercise any and all rights of banker’s lien, set-off or counterclaim with respect to any and all monies owing by the Borrower or any of its Subsidiaries to that holder with respect thereto as fully as if that holder were owed the amount of the participation held by that holder.

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8.19Counterparts; Effectiveness.

This Agreement and any amendments, waivers, consents or supplements hereto or in connection herewith may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument.  This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt by the Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof.

8.20Obligations Several; Independent Nature of Lenders’ Rights.

The obligations of the Lenders hereunder are several and no Lender shall be responsible for the obligations or Commitment of any other Lender hereunder.  Nothing contained herein or in any other Loan Document, and no action taken by the Lenders pursuant hereto or thereto, shall be deemed to constitute the Lenders as a partnership, an association, a joint venture or any other kind of entity.  The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out hereof and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose.

8.21Usury Savings Clause.

Notwithstanding any other provision herein, the aggregate interest rate charged with respect to any of the Obligations, including all charges or fees in connection therewith deemed in the nature of interest under applicable law shall not exceed the Highest Lawful Rate.  As used herein, “Highest Lawful Rate” means the maximum lawful interest rate, if any, that at any time or from time to time may be contracted for, charged, or received under the laws applicable to any Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow.  If the rate of interest (determined without regard to the preceding sentence) under this Agreement at any time exceeds the Highest Lawful Rate, the outstanding amount of the Loans made hereunder shall bear interest at the Highest Lawful Rate until the total amount of interest due hereunder equals the amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect.  In addition, if when the Loans made hereunder are repaid in full the total interest due hereunder (taking into account the increase provided for above) is less than the total amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect, then to the extent permitted by law, the Borrower shall pay to the Administrative Agent an amount equal to the difference between the amount of interest paid and the amount of interest which would have been paid if the Highest Lawful Rate had at all times been in effect.  Notwithstanding the foregoing, it is the intention of the Lenders and the Borrower to conform strictly to any applicable usury laws.  Accordingly, if any Lender contracts for, charges, or receives any consideration which constitutes interest in excess of the Highest Lawful Rate, then any such excess shall be cancelled automatically and, if previously paid, shall at such Lender’s option be applied to the outstanding amount of the Loans made hereunder or be refunded to the Borrower.

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SECTION 9.     AGENTS

9.1Appointment.

ABN AMRO and MSSF are hereby appointed as Syndication Agents hereunder, and each Lender hereby authorizes the Syndication Agents to act as its agents in accordance with the terms of this Agreement and the other Loan Documents.  Citicorp is hereby appointed by each Lender as the Administrative Agent hereunder and under the other Loan Documents and each Lender hereby authorizes the Administrative Agent to act as its agent in accordance with the terms of this Agreement and the other Loan Documents.  Each Agent hereby agrees to act upon the express conditions contained in this Agreement and the other Loan Documents, as applicable.  The provisions of this Section 9 are solely for the benefit of the Agents and the Lenders, and the Borrower shall have no rights as a third party beneficiary of any of the provisions thereof.  In performing its functions and duties under this Agreement, each of the Agents shall act solely as an agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for the Borrower or any of its Subsidiaries.

9.2Powers and Duties; General Immunity.

A.Powers; Duties Specified.  Each Lender irrevocably authorizes each Agent to take such action on such Lender’s behalf and to exercise such powers, rights and remedies hereunder and under the other Loan Documents as are specifically delegated or granted to such Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto.  Each Agent shall have only those duties and responsibilities that are expressly specified in this Agreement and the other Loan Documents.  Each Agent may exercise such powers, rights and remedies and perform such duties by or through its agents or employees.  No Agent shall have, by reason of this Agreement or any of the other Loan Documents, a fiduciary relationship in respect of any Lender; and nothing in this Agreement or any of the other Loan Documents, expressed or implied, is intended to or shall be so construed as to impose upon any Agent any obligations in respect of this Agreement or any of the other Loan Documents except as expressly set forth herein or therein.  Anything herein to the contrary notwithstanding, none of the Lead Arrangers or Syndication Agents listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as a Lender hereunder.

B.No Responsibility for Certain Matters.  No Agent shall be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectability or sufficiency of this Agreement or any other Loan Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by any Agent to the Lenders or by or on behalf of the Borrower to any Agent or any Lender in connection with the Loan Documents and the transactions contemplated thereby or for the financial condition or business affairs of the Borrower or any other Person liable for the payment of any Obligations, nor shall any Agent be required to

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ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Loan Documents (other than to confirm receipt of items required under this Agreement or any Loan Document to be delivered to such Agent) or as to the use of the proceeds of the Loans or as to the existence or possible existence of any Event of Default or Potential Event of Default (unless and until notice describing such Event of Default or Potential Event of Default is given to such Agent by the Borrower or any other Agent) or to make disclosures with respect to the foregoing.  Anything contained in this Agreement to the contrary notwithstanding, the Administrative Agent shall not have any liability arising from confirmations of the amount of outstanding Loans or the component amounts thereof.

C.Exculpatory Provisions.  No Agent or any of its officers, partners, directors, employees or agents shall be liable to the Lenders for any action taken or omitted by any Agent under or in connection with any of the Loan Documents except to the extent caused by such Agent’s gross negligence or willful misconduct.  Each Agent shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection with this Agreement or any of the other Loan Documents or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until such Agent shall have received instructions in respect thereof from the Requisite Lenders (or such other the Lenders as may be required to give such instructions under Section 8.5) and, upon receipt of such instructions from the Requisite Lenders (or such other Lenders, as the case may be), such Agent shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions.  Without prejudice to the generality of the foregoing, (i) each of Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for the Borrower and its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against any Agent as a result of such Agent acting or (where so instructed) refraining from acting under this Agreement or any of the other Loan Documents in accordance with the instructions of the Requisite Lenders (or such other Lenders as may be required to give such instructions under Section 8.5).

D.Agents Entitled to Act as Lenders.  The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, any Agent in its individual capacity as a Lender hereunder.  With respect to its participation in the Loans, each Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not performing the duties and functions delegated to it hereunder, and the term “Lender” shall, unless the context clearly otherwise indicates, include each Agent in its individual capacity.  Any Agent and its Affiliates may accept deposits from, lend money to, own Securities of, and generally engage in any kind of banking, trust, financial advisory or other business with the Borrower or any of their Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from the Borrower for services in connection with this Agreement and otherwise without having to account for the same to Lenders.  No Agent shall have any duty to disclose any information obtained or received by it or any of its Affiliates relating to the Borrower or any of its Subsidiaries to the extent such information was obtained or received in any capacity other than

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as an Agent under this Agreement.  In the event that Citicorp or any of its Affiliates shall be or become an indenture trustee under the Trust Indenture Act of 1939 (as amended, the “Trust Indenture Act”) in respect of any securities issued or guaranteed by the Borrower, the parties hereto acknowledge and agree that any payment or property received in satisfaction of or in respect of any obligation of the Borrower hereunder or under any other Loan Document by or on behalf of Citicorp in its capacity as the Administrative Agent for the benefit of any Lender under this Agreement or any Note (other than Citicorp or an Affiliate of Citicorp) and which is applied in accordance with this Agreement shall be deemed to be exempt from the requirements of Section 311 of the Trust Indenture Act pursuant to Section 311(b)(3) of the Trust Indenture Act.

9.3Representations and Warranties; No Responsibility For Appraisal of Creditworthiness.

Each Lender represents and warrants that it has made its own independent investigation of the financial condition and affairs of the Borrower and its Subsidiaries in connection with the making of the Loans hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of the Borrower and its Subsidiaries.  No Agent shall have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of the Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter, and no Agent shall have any responsibility with respect to the accuracy of or the completeness of any information provided to the Lenders.

9.4Right to Indemnity.

Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify the Administrative Agent, to the extent that the Administrative Agent shall not have been reimbursed by the Borrower to the full extent required by this Agreement or any other Loan Document, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against such Agent in exercising its powers, rights and remedies or performing its duties hereunder or under the other Loan Documents or otherwise in its capacity as Administrative Agent in any way relating to or arising out of this Agreement or the other Loan Documents; provided that (a) no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent’s gross negligence or willful misconduct and (b) no Lender shall be liable for the payment of any portion of an Indemnified Liability pursuant to this Section 9.4 unless such Indemnified Liability was incurred by the Administrative Agent in its capacity as such or by another Person acting for the Administrative Agent in such capacity.  If any indemnity furnished to the Administrative Agent for any purpose shall, in the opinion of the Administrative Agent, be insufficient or become impaired, the Administrative Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished.

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9.5Successor Administrative Agent.

The Administrative Agent may resign at any time by giving thirty (30) days’ prior written notice thereof to the Lenders and the Borrower, and the Administrative Agent may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to the Borrower and the Administrative Agent and signed by the Requisite Lenders.  Upon any such notice of resignation or any such removal, the Requisite Lenders shall have the right, with, so long as no Potential Event of Default or Event of Default exists, the consent of the Borrower (which consent shall not be unreasonably withheld or delayed), upon five (5) Business Days’ notice to the Borrower, to select a successor Administrative Agent.  Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, that successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Administrative Agent and the retiring or removed Administrative Agent shall be discharged from its duties and obligations under this Agreement.  After any retiring or removed Administrative Agent’s resignation or removal hereunder as Administrative Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement.

9.6Acknowledgment of Potential Related Transactions.

The Borrower hereby acknowledge its understanding that each of the Lead Arrangers, each of the Agents and each of the Lenders may from time to time effect transactions (for its own account or the account of customers), and hold positions in loans or options on loans that may be the subject of this arrangement.  In addition, certain Affiliates of the Lenders are full service securities firms and as such may from time to time effect transactions (for its own account or the account of customers), and hold positions, in loans or options on loans or securities or options on securities that may be the subject of this arrangement.  In addition, each of the Lead Arrangers, each of the Agents and each of the Lenders may employ the services of its Affiliates in providing certain services hereunder and may, subject to Section 8.17, exchange with such Affiliates information concerning the Borrower and other companies that may be the subject of this arrangement.

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73

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

HOSPIRA, INC.
By:		/s/ Lori O. Carlson
Name: Lori O. Carlson
	Title: Corporate Vice President and Treasurer
	Notice Address:
	275 N. Field Road
	Lake Forest, IL 60064
	Attention:  Vice President and Treasurer
Tel:			(224) 212-2000
	Fax:		(224) 212-3284
email: lori.carlson@hospira.com

CITICORP NORTH AMERICA, INC.,
as Lender and Administrative Agent
By:	/s/ Kevin A. Ege
Name: Kevin A. Ege
Title: Vice President
Notice Address:
Two Penns Way
New Castle, DE 19720
Attention: Bank Loan Syndications
Tel:			(302) 894-6010
Fax:			(212) 994-0961
with a copy to:
390 Greenwich Street
New York, NY 10013
Attention:  Chris Snider
Tel:		(212) 816-8917
Fax:		(212) 816-8051
email: christopher.snider@citigroup.com

2

ABN AMRO BANK N.V., as Lender
By:		/s/ Gina Brusatori
Name: Gina Brusatori
	Title: Managing Director
By:		/s/ James W. Pierpont
Name: James W. Pierpont
	Title: Corporate Managing Director
	Notice Address:
	540 West Madison Street, Suite 2100
	Chicago, IL  60661
	Attention:  Loan Administration
Tel:			(312) 992-5150
	Fax:			(312) 992-5155

3

BANK OF AMERICA, N.A., as Lender
By:		/s/ Kevin R. Wagley
Name: Kevin R. Wagley
	Title: Senior Vice President
	Notice Address:
	1850 Gateway Blvd.
	Concord, CA  94520-3282
	Attention:  Pamela S.  Greer-Tillman
Tel:			(925) 675-8453
	Fax:			(888) 969-2786
email:

4

	MORGAN STANLEY SENIOR FUNDING, INC., as
	Lender
By:		/s/ Elizabeth Hendricks
Name: Elizabeth Hendricks
	Title: Vice President
	Notice Address:
	1633 Broadway, 25th Floor
	New York, NY  10019
	Attention:  James Morgan/Larry Benison
Tel:			(212) 537-1470 / (212) 537-1439
	Fax:			(212) 537-1867 / 1866
email:

5

	WACHOVIA BANK, NATIONAL ASSOCIATION, as
	Lender
By:		/s/ James S. Conville
Name: James S. Conville
	Title: Assistant Vice President
	Notice Address:
	201 South College Street CP9, NC 1183
	Charlotte, NC  28288
	Attention:  Dianne Taylor
Tel:			(704) 715-1876
	Fax:			(704) 715-0094
email:

6

EX-12.1

Exhibit 12.1

Hospira, Inc.

Computation of Ratio of Earnings to Fixed Charges

(Unaudited)

(dollars in millions except ratios)

	For the Years Ended December 31,
	2006			2005			2004
Income from Continuing Operations Before Taxes	$	324.7		$	322.1		$	411.5
Add (Subtract):
One-third of rents	7.3			8.2			7.7
Interest on long-term and short-term debt	31.0			28.3			18.8
Interest capitalized, net of amortization	(10.0		)	(7.9		)	(3.8		)
Earnings from Continuing Operations	$	353.0		$	350.4		$	434.2
Fixed charges:
One-third of rents	7.3			8.2			7.7
Interest on long-term and short-term debt	31.0			28.3			18.8
Interest capitalized	13.4			10.5			5.5
Fixed Charges from Continuing Operations	$	51.7		$	47.3		$	32.0
Ratio of Earnings to Fixed Charges from Continuing Operations	6.8			7.4			13.6

For purposes of computing this ratio, “earnings” consist of income from continuing operations before taxes, one-third of rents (deemed by Hospira to be representative of the interest factor inherent in rents), interest expense and interest capitalized, net of amortization.  “Fixed charges” consist of one-third of rents, interest expense as reported in the Company’s consolidated financial statements and interest capitalized.

99

EX-21.1

Exhibit 21.1

Subsidiaries of Hospira, Inc.

The following is a list of subsidiaries of the Company.  Hospira, Inc. is not a subsidiary of any other corporation.  This list includes subsidiaries acquired in connection with Hospira’s acquisition of Mayne Pharma Limited.

SUBSIDIARY NAME	STATE/COUNTRY INCORPORATED
DOMESTIC:
Hospira Worldwide, Inc.	Delaware
Hospira Fleet Services, LLC	Delaware
Hospira Puerto Rico, LLC	Delaware
Hospira Sedation, Inc.	Delaware
Mayne Pharma (PR) Inc.	Delaware
Mayne Pharma (USA) Inc.	Delaware
INTERNATIONAL:
NORTH AMERICA
Hospira Ltd.	Bahamas
Hospira Bahamas International Holdings Ltd.	Bahamas
Hospira Bahamas (Donegal) Corp.	Bahamas
Hospira Bahamas (Ireland) Corp.	Bahamas
Hospira Bahamas (Irish Manufacturing) Ltd.	Bahamas
Hospira Holding Ltd.	Bahamas
Hospira Holdings de Costa Rica Ltd.	Bahamas
Hospira Costa Rica Ltd.	Bahamas
Hospira Healthcare Corporation	Canada

LATIN AMERICA
Hospira Produtos Hospitalares Limitada	Brazil
Hospira Chile Limitada	Chile
Hospira Limitada	Colombia
Hospira, S. de R.L. de C.V.	Mexico
ASIA PACIFIC
BressaGen Pty Ltd.	Australia
Hospira Pty Limited	Australia
Hospira Holdings (S.A.) Pty Ltd.	Australia
Hospira Limited	Hong Kong
Hospira Japan K. K.	Japan
Hospira Philippines, Inc.	Philippines
Hospira Pte. Limited	Singapore
Hospira Hong Kong Limited	Hong Kong
Shanghai Hospira Distribution Co. Ltd. (formerly Hospira China (WOFE)  Shanghai, China	China
EUROPE/MIDDLE EAST
Hospira Healthcare SPRL	Belgium
Hospira SAS	France
Hospira GmbH	Germany
Hospira (non-Resident Limited Co.)	Ireland

2

Hospira Ireland Holdings (Resident Co.)	Ireland
Hospira Ireland Sales Limited (Resident)	Ireland
Hospira S.p.A.	Italy
Hospira Italia S.r.l.	Italy
Hospira Enterprises B.V.	Netherlands
Hospira Healthcare B.V.	Netherlands
Hospira Productos Farmaceuticos y	Spain
Hospira Scandinavia AB	Sweden
Hospira GmbH	Switzerland
Hospira Limited	UK

3

Hospira Bahamas (Australia) Holdings Ltd.	Bahamas
HBAF Ltd.	Bahamas
Hospira Holdings (S.A.) Pty Ltd	Australia
Mayne Pharama Limited	Australia
Ayuda Insurance	Guernsey
Mayne Pharma International Pty Ltd	Australia
DBL Australia Pty Ltd	Australia
Providex Therapeutics Pty Ltd	Australia
Mayne Pharma Services Pty Ltd	Australia
Mayne Pharma Employee Share Acquisition
Plan Pty	Australia
Mayne Pharama (NZ) Ltd	New Zealand
DSU Pty Ltd	Australia
A.C.N. 007 444 322 Pty Ltd	Australia
Mayne Pharma Properties (SA) Pty Ltd	Australia
Mayne Pharma (SEA) Pte Ltd	Singapore
Mayne Pharma Properties (Vic) Pty Ltd	Australia
Mayne Pharma (Philippines) Inc.	Philippines
Mayne Pharma (India) Pty Ltd	Australia
Mayne Pharama (Canada) Inc.	Canada
Mayne Pharma (Mexico) S.A.	Mexico
Mayne Pharma IP Holdings (Euro) Pty Ltd	Australia
Global Pharmaceuticals Limited	Thailand

4

Mayne Pharma (Hong Kong) Ltd	Hong Kong
Mayne Pharma (Taiwan) Co. Ltd.	Taiwan
Mayne Pharma (Malaysia) Sdn Bhd	Malaysia
Mayne Pharma Euro Finance Co. Limited	UK
Mayne Pharma Plc	UK
Mayne Pharma Holdings Limited	UK
Mayne Pharma (Schweiz) GmbH	Switzerland
Mayne Pharma (Espana) S.L.	Spain
Mayne Pharma (Benelux) N.V.	Belgium
Mayne Pharma (Portugal) LDA	Portugal
Mayne Pharma (Nordic) AB	Sweden
Intra-Tech Healthcare Limited	UK
Mayne Pharma (Ireland) Limited	Ireland
Central Laboratories (IRE) Ltd	Ireland
Mayne Pharma (Finland) Oy	Finland
Mayne Pharma (Italia) S.r.l.	Italy
Mayne Pharma (France) S.A.S.	France
Mayne Pharma (Deutschland Holding) GmbH	Germany
Mayne Pharma S.r.l.	Italy
Mayne Pharma (Deutschland) GmbH	Germany
Wasserburger Azneimittelwerk GmbH	Germany
Onkoworks GmbH	Germany

5

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        We consent to the incorporation by reference in Registration Statements No. 333-115056 for the Hospira 2004 Long-Term Stock Incentive Plan; Nos. 333-115058 and 333-120074 for the Hospira 401(k) Retirement Savings Plan and the Hospira Ashland Union 401(k) Plan and Trust; and No. 333-127844 for the Hospira Puerto Rico Retirement Savings Plan, on Form S-8 of our reports dated February 27, 2007 relating to the financial statements and financial statement schedule of Hospira, Inc. (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the Company’s adoption of Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, on January 1, 2006, and the Company’s adoption of the recognition and disclosure provisions of Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R), on December 31, 2006) and management’s report on the effectiveness of internal control over financial reporting, appearing in this Annual Report on Form 10-K of Hospira, Inc. for the year ended December 31, 2006.

Deloitte & Touche LLP

Chicago, Illinois
February 27, 2007

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer
Required by Rule 13a-14(a) (17 CFR 240.13a-14(a))

I, Christopher B. Begley, certify that:

1. I have reviewed this Annual Report on Form 10-K of Hospira, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of Hospira as of, and for, the periods presented in this report;

4. Hospira’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Hospira and have:

(a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Hospira, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of Hospira’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in Hospira’s internal control over financial reporting that occurred during Hospira’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, Hospira’s internal control over financial reporting; and

5. Hospira’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Hospira’s auditors and the audit committee of Hospira’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Hospira’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in Hospira’s internal control over financial reporting.

/s/ Christopher B. Begley

Christopher B. Begley,
Chief Executive Officer

Date: February 28, 2007

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer
Required by Rule 13a-14(a) (17 CFR 240.13a-14(a))

I, Thomas E. Werner, certify that:

1. I have reviewed this Annual Report on Form 10-K of Hospira, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of Hospira as of, and for, the periods presented in this report;

4. Hospira’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Hospira and have:

(a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Hospira, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of Hospira’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in Hospira’s internal control over financial reporting that occurred during Hospira’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, Hospira’s internal control over financial reporting; and

5. Hospira’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Hospira’s auditors and the audit committee of Hospira’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Hospira’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in Hospira’s internal control over financial reporting. 

/s/ Thomas E. Werner

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

Date: February 28, 2007

EX-32.1

Exhibit 32.1

Certification Pursuant To
18 U.S.C. Section 1350
As Adopted Pursuant To
Section 906 of the Sarbanes-Oxley Act of 2002

        In connection with the Annual Report of Hospira, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2006 as filed with the Securities and Exchange Commission (the “Report”), I, Christopher B. Begley, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Christopher B. Begley

Christopher B. Begley
Chief Executive Officer

February 28, 2007

EX-32.2

Exhibit 32.2

Certification Pursuant To
18 U.S.C. Section 1350
As Adopted Pursuant To
Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Hospira, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2006 as filed with the Securities and Exchange Commission (the “Report”), I, Thomas E. Werner, Senior Vice President, Finance and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Thomas E. Werner

Thomas E. Werner
Senior Vice President, Finance and

Chief Financial Officer

February 28, 2007