MORGAN STANLEY SENIOR FUNDING, INC. 1585 Broadway New York, New York 10036

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

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

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

Closing Date:

On or before January 31, 2007.

Interest Rates:

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

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

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

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

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

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

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

Optional Prepayment:

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

Conditions to Funding:

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

(a)

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

(b)

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

(c)

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

(i)

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

(ii)

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

(iii)

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

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

(d)

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

(e)

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

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

(f)

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

(g)

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

Representations and

Warranties:

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

1.

Organization, powers, qualifications, good standing.

2.

Authorization of borrowing, etc.

3.

Disclosure.

4.

Financial condition.

5.

No material adverse change.

6.

Intellectual property matters.

7.

No material litigation, compliance with laws.

8.

No default.

9.

Governmental regulation.

10.

Securities activities.

11.

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

12.

Environmental protection.

13.

Obligations pari passu.

14.

Contractual restrictions.

Covenants:

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

1.

Financial statements and other reports.

2.

Books and records.

3.

Existence.

4.

Insurance.

5.

Payment of taxes and claims.

6.

Payment and performance of obligations.

7.

Maintenance of properties.

8.

Compliance with laws.

9.

Use of proceeds.

10.

Claims pari passu.

11.

Further assurances.

12.

Limitation on liens.

13.

Limitation on indebtedness.

14.

Limitation on acquisitions.

15.

Limitation on restrictions on subsidiary distributions.

16.

Limitation on restricted payments.

17.

Restrictions on fundamental changes and asset sales.

18.

Conduct of business.

19.

Fiscal year.

20.

Other indebtedness.

21.

Transactions with shareholders and affiliates.

22.

Financial covenants.

23.

Interest rate agreements and currency agreements.

Events of Default:

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

1.

Failure to make payments when due.

2.

Default in other agreements.

3.

Breach of certain covenants.

4.

Breach of representation or warranty.

5.

Other defaults under loan documents.

6.

Involuntary bankruptcy, appointment of receiver, etc.

7.

Voluntary bankruptcy, appointment of receiver, etc.

8.

Judgments and attachments.

9.

Dissolution.

10.

Employee benefit plans.

11.

Change in control.

12.

Repudiation of obligations.

13.

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

Indemnification:

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

Expenses:

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

Required Lenders:

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

Assignment/Participation:

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

Miscellaneous:

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

Governing Law:

State of New York.

Shearman & Sterling LLP.

Counsel to Lenders: